ANNUAL REPORT 2000 THE EXPORT-IMPORT BANK OF THE SLOVAK REPUBLIC

Transcription

1 ANNUAL REPORT 2000 THE EXPORT-IMPORT BANK OF THE SLOVAK REPUBLIC

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3 Contents 1. Governor s statement 4 2. Review of economic development in Slovakia in Characteristics of EXIMBANKA SR Commercial activities Banking activities Insurance activities Methodology of export support calculation Financial results and internal economy Financial results and internal economy in Selected summary data from financial statements as of Trend of chosen economic ratios from Auditor s report INTERAUDIT Group, s.r.o Auditor s report Arthur Andersen, k.s The financial statements prepared in accordance with International Accounting Standards (IAS) 43

4 Governor s Statement 4 CHAPTER 1

5 Ladies and Gentlemen, The year 2000 was a breakthrough year for the Export- Import Bank of the Slovak Republic. While the Bank stabilised in 1999, the year 2000 yielded unprecedented expansion. Since 1999, our products have grown considerably, resulting in increased export support of Slovak products and services. This has influenced the trade balance of the Slovak Republic positively, helping to create new, and retain old, job opportunities. We extended our product portfolio and made state export support accessible for small and medium-sized enterprises at a time when most Slovak enterprises were in unfavourable financial positions. It was not easy to find suitable export projects while continuing to operate prudently in a competitive business environment. In our core activities we succeeded in preparing products for our exporters which will continue to enhance our effort to support exports in the future and have made us the accepted institution for export support in Slovakia. Our approach to financing and insuring exports resulted in a solid portfolio in both of these primary activities. I am pleased with the dynamic economic growth of our institution, especially the considerable increase in total assets (by more than SKK 1 billion). This advance, through greater efficiency and solid decision-making processes, has built-up our available resources considerably. We participated actively in preparing the amendment of Act No. 80/1997 Coll. on the Export-Import Bank of the Slovak Republic, effective as of 15 July 2000, which influenced our activities to a great extent. Based on the amendment, the Board of Directors was recalled and certain competencies of the Government of the Slovak Republic were transferred to the Board of the Bank, while the powers and duties of the Supervisory Board were strengthened. The amendment, among others, cancelled the obligatory contributions of importers and exporters to our funds, which resulted in an income decrease by approximately SKK 100 million last year. However, the National Council of the Slovak Republic approved a funding increase of SKK 500 million from the state budget for the year In the year 2000, we also concluded important co-operation agreements with foreign export credit agencies. One of these documents is the contract with French Coface which enables us to participate in the Credit Alliance project and benefit from their extensive information database. We are delighted that in the year 2000 we established contractual co-operation with the European Bank for Reconstruction and Development and have prepared to sign a Memorandum of Understanding with the Export-Import Bank of the United States. In the forthcoming period we will continue to adapt our products to the needs of exporters in compliance with EU directives and OECD principles. We will increase the support for small and medium-sized enterprises, including the provision of guaranties for pre-export financing. We will participate in large, medium and long-term projects, maximise our usage of existing contracts with similar institutions, and gradually begin adapting to the growing e-commerce market. The focus of our export support will be based on the territorial concept outlined in the foreign trade policy, which assumes that most Slovak exports will be aimed at the markets of the OECD countries, with EU and CEFTA countries benefitting most. The commodity segmentation of export support will be influenced by the economic policy focused on the support of value-added products and services, especially the products of the machinery, metallurgical, paper, textile, chemical and glass industries. Thank you for your support of EXIMBANKA SR. I look forward to your further co-operation and trust, and assure you that you may continue to relay upon the quality of our services in the future. Sincerely, 5 Governor s Statement Ľudomír Šlahor Governor

6 6 Rewiew of Economic Development in Slovakia in 2000 CHAPTER 2

7 A major milestone of the last year was the acceptance of Slovakia as the 30th regular member of the OECD. Membership in this prestigious international organisation confirms that Slovakia belongs to the countries that respect the values of the democratic political system and market economy. Similarly, a report issued by the European Council asserts that Slovakia can be considered a functioning market economy, although it is imperative that the structural changes currently in progress be completed and that others be commenced, while the pace of the reform process is to be accelerated. Slovakia s economic development in 2000 was characterised by a gradual regaining of economic balance at both the macro and micro levels. The improving macroeconomic situation was reflected in the changed rating of Slovakia when the world-wide rating agencies Standard & Poor s and Moody s revised the rating outlook from stable to positive at the year-end. In the Slovak economy, the gross domestic product (GDP) in current prices reached SKK billion in This was up by 8.8% compared to 1999, while real GDP was actually up by 2.2%. Thanks to the development in the second six months, the slowdown of the year-to-year growth could be turned around. The GDP growth was influenced again principally by growth in foreign demand, whereas domestic demand, with the exception of the last quarter, continued to decline. The positive effect of increased foreign demand on the GDP was reflected in the exports of products and services. Exports in 2000 increased by 29.4% yearon-year, reaching SKK billion. This increase was 17.3% higher than in the previous year. Unlike in 1999, export growth was accompanied by growth in imports. Imports totalled SKK billion and grew by 26.0% during 2000 which is a 24.2% increase compared to The positive developments in exports were influenced by a favourable development of the global economy in On the other hand, the price increases of strategic raw materials and the U.S. Dollar exchange rate movements increased the foreign trade deficit. The combined growth in exports and imports resulted in a trade deficit of SKK 42.4 billion, which represents 93.8% of the balance of the previous year. The ratio of the foreign trade deficit to GDP fell from 5.9% in 1999 to 4.8%. 7 Rewiew of Economic Development in Slovakia in 2000

8 In respect to the territorial structure, the development trend of the previous years continued in In 2000, the lion s share of Slovak exports % - went to OECD markets of which 59.1% represented the EU market. Continuous growth of exports to the EU, OECD and CEFTA confirms the orientation of Slovak foreign trade activities towards solvent and demanding markets. This, in turn, provides a feedback in terms of improving of the qualitative parameters of exports and, apart from providing a stable inflow of foreign currency, has a bearing on increasing the competitiveness of Slovak exports. Slovakia s biggest trade surplus continues to be with the CEFTA countries; on the contrary, the biggest trade deficit of SKK 95.7 billion remains with Russia, which is determined by the Slovak economy s high raw material demand. As far as competitiveness of exports is concerned, certain improvement could be observed in the production of the core industries, where the most noteworthy shift occurred in the machinery, power engineering and electronics industries. 8 Rewiew of Economic Development in Slovakia in 2000 The year 2000 saw a breakthrough advance of the Slovak economy in terms of direct foreign investment. According to the preliminary data of the National Bank of Slovakia, the inflow of foreign investment in the Slovak Republic reached its highest level ever - SKK billion. Unemployment has remained one of the most serious problems facing the Slovak economy. The rate was 2.4% higher than in 1999 and it reached 18.6%. The average annual inflation rate was 12.0% in 2000; its major contributors were mainly the deregulatory and tax-related measures of the Slovak Government. Core inflation was 4.6%, which was lower slightly than predicted. The average monthly wage in the Slovak economy increased by 6.5% during 2000 and reached the level of SKK 11,430. The rate of increase was 0.7% lower than in Real average wage declined for the second year running, dropping by 4.9%. The forecast for 2001 depends on GDP growth in fixed prices, which is expected to range from 2.8 to 3.2% and should result from both a growth in foreign demand (even though at a more moderate pace than in 2000) and an upturn in the growth of domestic demand, where the trend of continuous decline has already stopped. In terms of territorial structure of the foreign trade, a stable development is to be expected within the boundaries set in the previous years.

9 The anticipated economic growth in 2001 should also slow down the unemployment. Average annual inflation rate is forecast to range from 6.6% to 8.5% while core inflation should range from 3.2% to 5.3%. It can be said, in conclusion, that the development in 2000 created a basis for recovering the long-term sustainable growth potential for the Slovak economy and established prerequisites for Slovakia to gradually come closer to the economies of the EU countries. 9 Rewiew of Economic Development in Slovakia in 2000

10 10 Characteristics of EXIMBANKA SR CHAPTER 3

11 Bodies of EXIMBANKA SR as of 31/12/2000 The Bank s Council is the statutory body of EXIMBANKA SR. Composition of the Bank s Council of EXIMBANKA SR: Chairman: Ľudomír Šlahor Members: Martin Petríček Milan Milko Michal Borguľa Juraj Topolčány (from May 2000) Rastislav Káčer (from May 2000) The Governor, together with a member of the Bank s Council, is entitled to sign on behalf of the Bank s Council. When the Governor is not present, an authorised Vice-Governor, together with a member of the Bank s Council, is entitled to sign on behalf of the Bank s Council. The Supervisory Board is the supreme control body of EXIMBANKA SR. Composition of the Supervisory Board of EXIMBANKA SR: Chairman: Hana Laudárová (from July 2000) Members: Milan Orešanský Jaroslava Zányiová Oľga Najšlová Štefan Galbáč Imrich Šulák Ján Ježo László Flórián (from May 2000) 11 Management of EXIMBANKA SR: Governor: Ľudomír Šlahor Vice-Governor for Banking Division: Martin Petríček Vice-Governor for Insurance Division: Milan Milko Vice-Governor for Finance & Economics Division: Michal Borguľa The Governor represents EXIMBANKA SR with third parties. The Slovak Government appoints and recalls the Governor and the Vice-Governors based on the proposal of the Finance Minister of the Slovak Republic. Characteristics of EXIMBANKA SR

12 Profile of EXIMBANKA SR EXIMBANKA SR was established by Act. No. 80/1997 Coll. on the The Export - Import Bank of the Slovak Republic, as amended by Act 336/1998 Coll. and Act. No. 214/2000 Coll., and commenced activities on 22 July The commercial name is The Export-Import Bank of the Slovak Republic. The abbreviated commercial name is EXIMBANKA SR. The legal seat of EXIMBANKA SR is Grösslingová 1, Bratislava, EXIMBANKA SR was incorporated in the Commercial Register at the District Court of Bratislava 1 on 22 July Main activities 12 Characteristics of EXIMBANKA SR The scope of activities includes all activities set out in Act No. 80/1997 Coll. on The Export-Import Bank of the Slovak Republic, as amended by subsequent regulations, mainly: a) representation of the Slovak Republic in international institutions and associations whose activities are related to the activities of EXIMBANKA SR, as mandated by the Government, b) financing of export credits, c) financing of import credits, d) insurance of export credits, e) reinsurance of export credits, f) provision of collateral for exports, g) provision of collateral for imports, h) recovery of state receivables mandated by the Finance Minister of the Slovak Republic, i) discount and rediscount of bills of exchange; j) issuance of bonds, k) consultations in matters of granting loans, providing insurance and on issues of foreign trade, l) establishment of legal entities and acquisition of shareholdings in other legal entities with the Government s approval only, m) investment of temporary free funds on domestic or foreign financial markets, as permitted, n) acceptance of financial loans in Slovak or foreign currency from a bank with a legal seat in the Slovak Republic or, as permitted, o) provision of financial loans in Slovak or foreign currency to a domestic or foreignentity, as permitted, p) provision of short-term loans based on the decision of the SR Government by purchasing state treasury bills with a maturity of less than three months from the purchase date to cover fluctuations in the state budget during the year. These purchases may be made from the Bank s own resources and not from funds borrowed internationally, q) in co-operation with exporters, recovery of receivables arising as a consequence

13 of unpredictable events caused by resolutions of the state in the country of the customer or in a third country, r) investment in securities from the Bank s own funds, s) performance of other activities related to the Bank s objectives as specified by the law, t) provision of consulting services to the Government in matters of foreign trade, industrial development, credit policy for the support of exports, and domestic and foreign investment, u) insurance of foreign banks which have provided export loans at favourable rates up to a level equal to the share of Slovak components in the item supplied, v) act on its behalf on the world financial markets when securing funds necessary to fulfill the Bank s objectives. Human resources Human resources related work developed significantly during the year Building on the work begun in 1999, activities focused primarily on organisational changes, employee motivation and the improvement in quality of the Bank s services. The organisational structure did not undergo significant changes in 2000, and the number of employees settled from the original 116 to the final 106. As part of its social care programme for employees, EXIMBANKA SR concluded employer contracts with three supplementary pension insurers as of 1 January This received a positive response from the employees. The position of EXIMBANKA SR within the financial institution network in the Slovak Republic, together with the Bank s development, depend first and foremost on the quality of the employees and their continuous and extensive development. Therefore, EXIMBANKA SR has paid great attention to the training and preparation of its employees. It has adopted a system of periodical employee evaluation, the results of which are incorporated into the education plan of each employee. In 2000, the employees of EXIMBANKA SR benefited from the Institute of Banking Education of National Bank of Slovakia (IBV NBS) distance study and also from courses and seminars organised by other training companies. The foundations for co-operation with Sporiteľničná Akadémia were laid at year-end when the first contracts were signed. Great emphasis was given to improving the English language skills of employees, the result of which should be the successful completion of exams with The British Council in Throughout the year, the employees were engaged in professional training abroad, attending courses at the invitation of major world-wide banks. EXIMBANKA SR is committed to ensuring that employees benefit from professional and personal development throughout their careers with the Bank. 13 Characteristics of EXIMBANKA SR

14 Information systems The main priorities of EXIMBANKA SR for the year 2000 included stabilising the banking and insurance systems, improving electronic communication and security, and the identification of development areas in the Bank s information systems. The IT section prepared a proposal on further development of the Bank s information systems, which was approved by the Bank s top bodies. The main objective is to define the orientation of development in the short-term. This work is currently in the preparation stage and realisation will take place in Co-operation with the public 14 Characteristics of EXIMBANKA SR EXIMBANKA SR has organised a number of presentations and activities in order to better inform the wider professional and non-professional public; starting with existing and potential clients. These activities are linked with the contract of co-operation between EXIMBANKA SR and The Slovak Chamber of Commerce and Industry (SOPK), and EXIMBANKA SR and The Slovak Building Entrepreneurs Union (Zväz stavebných podnikateľov Slovenska). One of the results of these contracts was a total of nine seminars held with the regional chambers of SOPK in Košice, Prešov, Spišská Nová Ves, Nitra, Trenčín, Banská Bystrica, Lučenec, Žilina and Bratislava. The seminars dealt with EXIMBANKA SR s banking products, mainly with discount loans and products aimed at small and medium-sized enterprises, and the insurance activities of EXIMBANKA SR. Using contracts of co-operation when insuring export loans contributed to a further extension of indemnity arising from short-term insurance as collateral for the financing bank, and to extending the co-operation when insuring short-term political risks and medium and long-term risks using mainly buyers credits. The banking activities and products of EXIMBANKA SR were also presented at a number of international events, e.g. the UN seminar held in Riga dealing with the elimination of barriers in international trade, and the international trade conference INTRACO EXIMBANKA SR has organised several seminars which were tailor-made to client requirements and held directly on the client s premises. These include the seminars organised in commercial banks for their employees. The traditional co-operation with the Entrepreneur Financiers Association, part of which is joint training, maintains its high standard.

15 International co-operation The year 2000 was an extraordinarily successful year in terms of establishing and developing the international co-operation of EXIMBANKA SR with foreign partner institutions. Seven contracts of co-operation were agreed upon and signed. This considerable increase proves that EXIMBANKA SR has been steadily building it s good reputation and has now secured its place among international export credit agencies. In April 2000, contracts were signed with the Israeli credit insurer IFTRIC, the Hungarian credit insurer MEHIB, and the Polish credit insurer KUKE. In August 2000, an additional contract was concluded with the Czech credit insurer EGAP, and a contract was signed on EXIMBANKA SR s entry into Credit Alliance France. EXIMBANKA SR is effectively and actively taking advantage of its contractual contacts with credit insurers, mainly in the area of insurance claims and information collection on foreign buyers. In September 2000, another contract was signed with the Czech Export Bank, and in November a contract with the European Bank for Reconstruction and Development was signed. The contract with Credit Alliance France is of particular importance as it gives EXIMBANKA SR access to COFACE databases, which are among the largest in the world and provide information about some tens of millions of business entities world-wide. Another proof of EXIMBANKA SR s success is the contract with EBOR, which enables us to participate in its guarantee programme, and is the result of a positive valuation during the due diligence, performed by EBOR. At the close of the year, EXIMBANKA SR held negotiations with the Export-Import Bank of the United States. The outcome is a Memorandum of Understanding, to be signed in Sponsorship activities The net result achieved in the previous period enabled EXIMBANKA SR to allocate funds to sponsorship activities. In 2000, the financial support of almost SKK 2 million went exclusively to health care, based on the recommendations of the SR Ministry of Health. The contributions purchased essential equipment for health care centres. Apart from financial contributions, EXIMBANKA SR donated used computer equipment and accessories to elementary schools. Characteristics of EXIMBANKA SR

16 Commercial Activities 16 CHAPTER 4

17 4.1 Banking Activities Upon review of the results of the preceding period, it is safe to say the year 2000 saw further progress in our activities with a view to supporting and promoting Slovak exports by banking products. The amended Act on EXIMBANKA SR, effective from 15 July 2000, simplified the approval process and enabled us to adapt the products of EXIMBANKA SR to market conditions in a more flexible manner, mainly in terms of setting the price of premium rate financing and modifying the terms and conditions for provision of loans and guarantees. Another factor which will undoubtedly influence the development of the institution as a whole - and banking activities in particular - was the acceptance of the Slovak Republic to the OECD. This fact will find its reflection primarily in the opportunities for co-operation with foreign export credit agencies (ECA) and also in the recognition of the institution on foreign financial and capital markets. 17 Refinancing loans remained our main product also in Besides that, we continued in providing bill-of-exchange and promissory note-based loans. Also, we saw an expansion in guarantees which are to become the core product line of EXIMBANKA SR in the long-term. The Bank s capital base was given a boost by a contribution from the state budget, increasing the funds available to export financing by SKK 500 million. Our financing, however, was not provided at the expense of compromising the principles of prudence and safe operation - in line with meeting the strategic objectives of the institution, EXIMBANKA SR strives to find a balance between maximising the volume of supported exports (which topped the SKK 15 billion mark) while minimising the risk exposure. Compared to the previous year, the year 2000 was characterised by the increased volume of loans and guarantees granted, intensification of activities related to verification of the funds being put to export-related purposes, reduction of interest rates under an interest rate rebate system and by the preparation of new conditions for a universal decrease in our interest rates following up on the approval of the amended Act on EXIMBANKA SR. Commercial Activities

18 Loan products Refinancing the commercial-banking sector by means of providing loans at favourable rates is one of the basic forms of supporting and promoting exports practised by peer financial institutions in developed countries. Therefore, in terms of credit products, EXIMBANKA SR focused its attention on refinancing loan facilities. EXIMBANKA SR provides short-term funding for up to one year implemented through a commercial bank on-lending scheme in the form of a three-party contractual loan relationship between the client, the commercial bank and EXIMBANKA SR. Specific-purpose refinancing loan facility agreements were used in co-operation with creditworthy commercial banks in the Slovak Republic including Bank Austria Creditanstalt Slovakia, a.s., Banka Slovakia, a.s., ING Bank N.V., Istrobanka, a.s., Komerční banka Bratislava, a.s., Poľnobanka, a.s., Poštová banka, a.s., Prvá komunálna banka, a.s., Slovenská sporiteľňa, a.s., and Všeobecná úverová banka, a.s. (in alphabetical order). 18 The increase in the volume of loans was underscored by the growth in refinancing loan facilities and was accompanied by a contemporaneous decrease in direct loans due to the gradual loan amortisation of existing exposures and a prepayment of a direct import loan. Activities related to export support through refinancing loan facilities are progressing in conformance with the strategy of EXIMBANKA SR. A sustained overall growth trend can be observed, while in terms of industry and commodity segmentation, exports supported by EXIMBANKA SR are in line with the export priorities as set forth by the Slovak Ministry of Economy. In 2000, total exports of SKK 14,091 million were supported by loan products, of which refinancing loan facilities accounted for SKK 13,960 million. In term of the territorial structure of exports, a major portion of support was routed to the EU and other OECD countries (together 53%), while the rest went to CEFTA (29.5%), Southeast Asia (6.3%) and to the former CIS (5%). Bill of exchange and promissory note-based loans Commercial Activities In the area of bill of exchange and promissory note-based loans, the focus was on bills discounting activities which were performed under a time-proven scenario (discounting of bills of exchange drawn by commercial banks to their own order to cover export-supporting loans granted to the manufacturer exporter). As far as providing discount bills of exchange loans to support small and medium-sized businesses is concerned (funding up to SKK 10 million), it is necessary to note that, in spite of intensive acquisition activity, the expectations for 2000 could not be fulfilled entirely. This is on one hand attributable to the lack of quality projects and absence of eligible collateral on the part of exporters and, on the other hand, to the lack of interest by commercial banks to provide low value loans.

19 A new product was launched during the year: discounting of exporters shortterm accounts receivable, implemented through a scheme based on purchasing of export-support bills of exchange. A wider acceptance and application by exporters of this product, which essentially represents a modified variety of recourse factoring, can be expected next year. At the year-end, a loan agreement in the equivalent of DEM 29.5 million was signed with Slovenské lodenice Komárno, a.s. Bratislava. The granting of this loan is backed by an explicit government guarantee. Statistically, bill of exchange-related supported exports totalled SKK 356 million, industry-wise, mainly exports of light, machinery, food processing and power engineering industries, primarily directed to the countries of the EU (53.6%), Middle East (20.6%) and Southeast Asia (13.7%). Guarantees and bonds The amended Act on EXIMBANKA SR merged the import fund and the guarantee fund into a single fund for guarantees which essentially enabled a wider use of guarantee products. During 2000, a number of contract bonds and counter-guarantees for such bonds were issued (i.e. bid, advance payment and performance bonds). EXIMBANKA SR provided a guarantee for a foreign currency denominated export loan to support exports of technologies and issued also its first guarantee for offset programmes. Guarantee deeds were issued to beneficiaries in the countries of the EU, Southeast Asia and Middle Asia (former CIS), supporting exports in the amount of SKK 609 million. Future plans in the area of guarantee activities count with the option of extending of the guarantees scope to cover also import loans used for financing imports of technologies for utilised to manufacture sophisticated and advanced products with high value added. 19 Main indicators in 2000 Funds channelled through our banking activities supported exports totalling SKK 15,055 million. Of the total, 92.7% was attributable to refinancing loans, 4% to guarantees, 2% to classical bill-ofexchange loans, 0.9% to direct loans and 0.3% to the discounting of receivables. Inter alia, EXIMBANKA SR financed 25 of the top 100 hundred largest Slovak exporters measured by the volume of exports. Commercial Activities

20 Other activities Under the umbrella of banking activities, REPO transactions were used to put temporarily free funds to efficient use. Also, in terms of management of the security portfolio held by EXIMBANKA SR, given the market interest yield conditions, we opted for hold-to-maturity strategy on bonds. As part of the acquisition and promotion activities, which were focused mainly on small and medium-sized businesses, prospective clients were contacted directly or through the media. Changes in the framework conditions of refinancing loan agreements brought about changes in the verification system where the core control activity was taken over by the staff of EXIMBANKA SR. More than 70 inspections were carried out examining the use of funds and adherence to the conditions of the refinancing agreements with commercial banks, the loan agreements and the agreements on bills of exchange deals. Analytical activities were performed in order to control the potential business risks; within the context of these activities, EXIMBANKA SR produces analyses of domestic and foreign banking entities on which credit exposure limit setting decisions are made; also, analyses of strategic factors related to the financed projects, industry analyses, analyses of commodities and territorial analyses of countries are produced. These analyses are either periodically updated as standalone documents (classification of countries into risk groups and determination of the insurance conditions, analyses of banking entities for setting credit exposure limits) or as supporting documents for the approve/reject decision on individual loan, guarantee, bills of exchange and insurance transactions. Breakdown by analysis type is provided in the following table: 20 Type of Analysis Analyses produced Analyses of banking entities 152 Strategic, industry and commodity analyses 32 Territorial analyses 29 Total 203 Eximbank SR s objectives in respect to banking products Commercial Activities The strategic goal of the Bank s activities further continues to be defined in terms of supporting the maximum possible volume of exports of sophisticated products, primarily to EU and OECD countries, while ensuring that the loan funds are recovered by mitigating the associated risks. For 2001 and beyond, the Bank intends to extend its activities and the scope of guarantee transactions and, potentially, raise foreign currency denominated funds for specific projects.

21 Export Support by Banking Activities in % 4.0% 0.9% 2.0% 0.3% Refinancing loans Bank guarantees Direct loans Bills of exchange Repurchase of receivables SKK 13,960,805 thousand SKK 608,510 thousand SKK 129,725 thousand SKK 306,489 thousand SKK 49,624 thousand Territorial Analyses of Export Support by Banking Activities in % 4.2% 0.4% 1.5% 6.5% 4.9% 0.5% 29.0% European Union CEFTA Other OECD Former Soviet Union/CIS Southeast Asia Other EFTA Middle East SKK 7,983,863 thousand SKK 4,361,534 thousand SKK 74,970 thousand SKK 744,422 thousand SKK 972,023 thousand SKK 225,995 thousand SKK 53,625 thousand SKK 638,721 thousand Commercial Activities

22 Sectoral Analyses of Export Support by Banking Activities in % 1.2% 3.2% 0.1% 6.7% 6.1% 19.2% 7.8% 16.3% 1.6% Light industry Electrotechnical industry Wood processing Other industries Metallurgical industry Chemical industry Food-stuff industry Building industry Engineering industry Agriculture SKK 5,686,839 thousand SKK 183,324 thousand SKK 485,579 thousand SKK 1,011,729 thousand SKK 914,211 thousand SKK 2,457,086 thousand SKK 233,500 thousand SKK 1,180,218 thousand SKK 2,891,667 thousand SKK 11,000 thousand 22 Commercial Activities

23 4.2 Insurance Activities Insurance of Short-term Commercial Risks The priority of EXIMBANKA SR is to meet the exporters needs, which result from the conditions of export contracts. Therefore, the Bank offers the option of insuring the risks associated with the nonpayment of short-term export credits, for which the payment can be delayed for up to one year in the case of revolving and single exports. Regarding the insurance of short-term commercial risks in 2000, a notable increase in the exporters interest was observed in the insurance services rendered. Mostly, the following two major insurance products were carried out: insurance of short-term export credits against commercial risk, and insurance of short-term export credits against commercial risk with additional insurance against political and other non-commercial risks (the so-called insurance against combined risks). The introduction of a new product, the repurchase of receivables through the discounting of bills by the Banking Division of EXIMBANKA SR, which uses fully the interconnection of the Bank s finance and insurance related activities, started in 2000 to be of interest to mainly small and medium-sized entrepreneurs in export credit insurance. This insurance allows these entrepreneurs to benefit from EXIMBANKA SR s wide-ranging services in order to obtain pro-export funding under favourable terms. 23 In 2000, EXIMBANKA SR supported Slovak exports worth SKK 7,066,283 thousand, which is a 19% increase compared to 1999, by insuring short-term commercial and combined risks. There was an increase in the use of credit limits to cover the risk of foreign debtors, which influenced the growth of declared exports by 306% compared with the level in 1999 (index 2000/1999 is 4.06). Declared exports in 2000 amounted to SKK 6,014,418 thousand. The trend that started at the end of 1999 became fully evident as a boom in insured exports which continued throughout the next year. This contributed to the fulfillment of the planned objectives related to export support and insurance premiums. In comparison with declared exports, the growth in insurance premiums was relatively low because EXIMBANKA SR re-evaluated and reduced the insurance premium rates considerably in This reduction contributed to the creation of preconditions for Slovak exporters enabling them to use credit insurance to a larger extent. Commercial Activities

24 Short-term Commercial and Combined Risks Index Index 1999/ /1999 Declared Exports ,25 4,06 Export Support ,82 1,19 Short-term Commercial and Combined Risks Comparison of Declared Export and Export Support (in SKK thousand) for the Years Declared export Export support Commercial Activities The territorial structure of export support, insured against short-term commercial risks, directs the Slovak exports to the EU and CEFTA countries markets. The structure of declared exports ensures the recoverability of payments related to exports with unsecured payment terms and longer payment delays to CEFTA countries using credit insurance. The share of such exports to CEFTA countries reached 64% in 2000, and 45% and 30% in 1999 and 1998, respectively. There have been significant increases in the insurance of exports to Poland and Romania. Contrary to the previous period, the delivery of insured exports to traditional Slovak business partners the Czech Republic and Hungary - have notably increased. Of all EU countries, Italy and Germany have the biggest share of export insurance. Export insurance for the USA has also increased. The commodity structure of supported exports and declared exports corresponds to the use of export credit insurance by individual sectors. While in the past there was an increase in absolute value in all categories, the greatest increase was recorded in metal and paper products, especially graphic and sanitary paper. Exports of transport vehicles and machinery also have a high share, which is increasing the share of high value-added products.

25 Insurance of political risks The insurance of short-term political risks supported exports amounting to SKK 565,309 thousand. Insured exports went into Iran, India, Bosnia and Herzegovina, the Federal Republic of Yugoslavia, and Italy. Declared exports amounted to SKK 318,910 thousand (index 2000/1999 is 1.96). The insurance of medium and long-term political and commercial risks supported exports totalling SKK 701,050 thousand by covering exports to Indonesia. During the year, further projects were initiated whose completion is expected in The most significant of these were export transactions with the Federal Republic of Yugoslavia, Indonesia and the Republic of Cuba related to exports of capital goods and agricultural machinery. Of the total export support from the insurance of risks for 2000, the value of exports to various groups and areas was as follows: OECD: SKK 6,249.8m CEFTA: SKK 3,817.1m EU: SKK 2,397.5m Middle East: SKK 416.0m EFTA: SKK 360.2m Southeast Asia: SKK 60.8m Other countries (not included in any group): SKK 891.2m Reinsurance Subscribed short-term risks from insurance activities covered by EXIMBANKA SR in 2000 were reinsured in the international reinsurance markets based on the conditions of the quota share reinsurance programme valid for that year. In several cases involving the insurance of short-term commercial and combined risks, the facultative method of reinsurance was applied. 25 Insurance Claims and Recovery of Receivables In 2000, insured exporters reported claims amounting to SKK million. Out of this, SKK million resulted from the insurance of short-term export credits against commercial risks and SKK 2.03 million from the insurance of short-term export credits against political risks. In terms of territorial structure, they included the countries where the debtors were seated: Germany, the Czech Republic, Slovenia, and also Lithuania and Uzbekistan. The preventive measures of EXIMBANKA SR, which contributed to the recovery of these receivables from debtors prior to the date of insurance indemnity, represent SKK 1.49 million. The insurance indemnity paid out in 2000 was SKK 3.68 million, which related exclusively to the insurance of short-term export credits against commercial risks. Open insurance claims, whose losses covered by insurance totalled SKK million, were transferred to the following year. In the year 2000 reported potential insurance claims of SKK million were linked to the insurance of short-term commercial risks. From outstanding receivables, SKK million was paid by debtors based on EXIMBANKA SR s involvement, which dissolved the insurance claims. The remaining amount of SKK 0.11 million was transferred to the following year. Commercial Activities

26 New Products The updating of the terms and conditions of credit insurance and the extension of the portfolio of insurance products in 1999 created preconditions for providing and widening the scope of top quality services for exporters and their commercial banks. In 2000, a proposal of conditions was prepared to insure working capital loans for the productions aimed at export against risks when a loan is not repaid due to the inability of the exporter to meet the terms of the export contract. Territorial Structure of Export Supported by Insurance Activities in % 8.1% 21.0% 8.1% 19.5% 8.0% 6.8% 3.9% 5.0% 6.0% 5.2% 26 Poland Indonesia Hungary Czech Republic Germany Romania Italy Belgium Iran USA Other countries SKK 1,749,192 thousand SKK 701,050 thousand SKK 677, 309 thousand SKK 675,722 thousand SKK 667,198 thousand SKK 567,358 thousand SKK 498,315 thousand SKK 432,888 thousand SKK 416,000 thousand SKK 320,506 thousand SKK 1,627,104 thousand Commodity Structure of Export Supported by Insurance Activities in % 2.4% 0.9% 2.0% 2.4% 2.8% 16.3% 18.3% Commercial Activities Basic metals and metal products Vehicles and transport equipment Pulp, paper Glasss and glassware Machinery and equipment Miscellaneous products Textiles and textile products Other commodities SKK 4,571,797 thousand SKK 1,521,877 thousand SKK 1,361,213 thousand SKK 235,087 thousand SKK 202,084 thousand SKK 167,714 thousand SKK 74,020 thousand SKK 198,849 thousand

27 4.3 Methodology of Export Support Calculation Export support is calculated on the basis of adopted internal procedures incorporated in internal regulations. Principally, it depends on each type of export, which is supported. When insuring short term credit risks, it is the value of the declared export that is taken into consideration, when insuring medium and long-term risks, it is the insurance amount of the particular export. With banking products, either the contracted amount of the declared export or the value of the funded investment is the basis for calculation. 27 Commercial Activities

28 Financial Results and Internal Economy 28 CHAPTER 5

29 5.1 Financial Results and Internal Economy in 2000 The results achieved in 2000 were the outcome of continued improvement in the financial management of EXIMBANKA SR. The instruments of risk, assets and liability management and regular controls were implemented more rigorously. Analysing the budget performance systematically throughout the year played an active role in ensuring that the budget was followed and that the Bank s economy was developing positively. There was continuous improvement in the financial decision-making on the effective allocation of resources into individual activities. Funds were optimally and effectively used for the Bank s operations. In 2000, EXIMBANKA SR played an active role in the inter-bank financial market. As a result, EXIMBANKA SR achieved an average revenue of 7.95% on temporarily free funds. The favourable dynamics of the economy s development in 2000 was characterised by the growth of EXIMBANKA SR s total assets. The balance as of 31 December 2000 reached SKK 6,424,322 thousand. Receivables from loans granted to banks comprised the priority assets of EXIM- BANKA SR, amounting to SKK 2,253,480 thousand at year-end, which represents a 35.1% share of the total assets. This amount consisted of: - Refinancing loans to commercial banks for the total sum of SKK 2,227,730 thousand. These loans were the core products of EXIMBANKA SR. Compared to the previous year, they increased by SKK 704,480 thousand (about 46.2%). - Discount loans to banks totalled SKK 25,750 thousand, which related to bill of exchange transactions. EXIMBANKA SR also supported exports through the direct funding of exports, imports and discount loans whose balance at year-end totalled SKK 64,109 thousand. Receivables from direct insurance and reinsurance of export loans amounted to SKK 7,531 thousand. Financial assets totalling SKK 2,438,719 thousand made up the largest share of total assets, which consisted of accounts held with the NBS and commercial banks, term deposits and cash balances. The term deposits of SKK 2,433,502 thousand held in commercial banks retained their important position in the financial assets group. They consisted mainly of resources that were allocated to liquid assets to cover risk from insurance activities. 29 Financial results and internal Economy in 2000

30 The purchased state bonds also comprised an important part of assets in the portfolio of EXIM- BANKA SR, amounting to SKK 699,936 thousand at year-end. It is necessary to associate the allocation of free funds to this asset component with the objective of achieving adequate interest revenues, optimising liquidity and strengthening the stabilisation of EXIMBANKA SR. EXIMBANKA SR also invested part of its temporarily free funds into securities. The total volume of securities included in the portfolio of EXIMBANK SR amounted to SKK 313,513 thousand with the deposit certificates of commercial banks having significant importance. 30 Financial results and internal Economy in 2000 The value of tangible and intangible investment assets decreased compared to the previous year by SKK 59,707 thousand and at year-end amounted to SKK 278,569 thousand. The decrease was due to depreciation. In 2000, as in 1999, the funds consisted solely of EXIMBANKA SR s own funds (registered capital, other capital funds, reserve fund, other funds, profit) and trusted resources. Compared to 1999, capital increased by SKK 347,890 thousand to reach a level of SKK 4,215,038 thousand. This growth was primarily due to contributions to the import and guaranty funds (SKK 101,464 thousand) and to profit for the year (SKK 275,053 thousand). In 2000, there was also an increase in trusted resources of SKK 500,000 thousand through subsidies to the Fund for financing of export loan from the state budget. At year-end, the trusted resources amounted to SKK 1,840,013 thousand. The volume of costs in 2000 decreased by 30.1% and reached a level of SKK 340,319 thousand, which was due to effective measures and to costs saving spending. General operating expenses amounting to SKK 173,058 thousand had the greatest share in total costs (50.9%). However, they decreased compared to 1999 by SKK 25,837 thousand (13%). In structure, there was a decrease in wage expenses (by SKK 14,630 thousand) and also in expenses for services purchased (by SKK 16,101 thousand). Enhancing the quality of receivables administration resulted in a decrease of costs for reserves and adjustments by SKK 35,724 thousand compared to 1999, to a balance of SKK 96,409 thousand. This decrease corresponds to the methodological changes according to Act. No. 368/1999 on the creation of reserves and adjustments to assess the tax base for corporate income tax. The revenues of EXIMBANK SR for 2000 totalled SKK 615,372 thousand with the dominant portion of SKK 477,455 thousand from financial activities. Total revenues were comprised mainly from the placement of free resources on the financial market and revenues from loan granting activities, although they did not achieve the budgeted amount. Compared to 1999, there was a 3.57-fold increase in revenues from insurance activities, which amounted to SKK 47,544 thousand and was largely comprised of accepted insurance premiums arising from the insurance of export credits. The Bank s activities and economic development in 2000 resulted in a profit of SKK 275,053 thousand, reflecting the positive trend in revenues as well as cost savings.

31 5.2 Selected summary data from financial statements of EXIMBANKA SR as of 31 December 2000 BALANCE SHEET (in SKK thousand) Assets 1. Cash in hand Bank deposits Term deposits Receivables from other valuables - 5. Receivables from securities - 6. Acquired state treasury bills Acquired short-term treasury bills and other similar valuables - 8. Standard receivables from loans to clients Classified receivables from loans Receivables from direct insurance and reinsurance of export loans Classified receivables from insurance and reinsurance Settlement with state budget Investment shareholdings and deposits Intangible fixed assets Tangible fixed assets Other assets Prepayments, accruals Arrangement accounts Trade securities Total assets Financial results and internal Economy in 2000

32 Liabilities 1. Liabilities against banks - 2. Liabilities from other assets - 3. Liabilities from securities - 4. Liabilities from direct insurance and reinsurance of export loans Reserves Other liabilities Deferred income, acrruals Arrangement accounts Trusted funds Own resources Registered capital and capital funds Funds created from profit and other funds Retained earnings of previous years Total liabilities Financial results and internal Economy in 2000

33 INCOME STATEMENT Expenses 1. Expenses from financial activities Expenses from insurance activities General operating expenses Creation of reserves and adjustments Other operating expenses Income tax Profit for the financial period Total expenses Revenues Revenues from financial activities Revenues from insurance activities Release of reserves and adjustments Other operating revenues Loss for the financial period Total revenues Financial results and internal Economy in 2000

34 34 Financial results and internal Economy in 2000

35 5.3 Trend of Chosen Economic Ratios from 1998 Total balance sheet value of EXIMBANKA SR for the years The total balance sheet value of EXIMBANKA SR amounted to SKK 6,424 million in 2000, which is a 19% increase from 1999 (SKK 1,025 million). The increase resulted mainly from the state budget subsidy to the fund for financing export credits (SKK 500 million) and profit for the year 2000 (SKK 275 million) Exports supported by banking and insurance activities of EXIMBANKA SR for the years In 2000 EXIMBANKA SR supported exports totalling SKK 23,387,795 thousand, which represents a 15.25% increase compared to The export support by banking activities amounted to SKK 15,055,153 thousand (57.1% increase) and insurance activities to SKK 8,332,642 thousand (22.2% decrease). The decrease was due to the changed methodology in 2000, based on which the insured exports are divided according to the valid term of the particular business transaction in the relevant year. Banking activities Insurance activities Financial results and internal Economy in 2000 EXIMBANKA SR in total

36 Total amount of credit activities and guarantees of EXIMBANKA SR for the years The total amount of credit activities and guarantees as of the year-end 2000 amounted to SKK 2,933.5 million, which is a 57% increase compared to the previous year. This amount consists of refinancing loans, direct loans to clients, discount credits and provided guarantees amounting to SKK 2,227.7 million, SKK 81 million, SKK 60.7 million and SKK million, respectively , , ,6 36 Revenues from insurance activities of EXIMBANKA SR for the years Financial results and internal Economy in 2000 Revenues from insurance activities amounted to SKK 47.5 million in 2000, which is almost a 357% increase compared to The increase was influenced mainly by the insurance of medium-term political and commercial risks. 47,5 26,9 10,4

37 Expenses of EXIMBANKA SR for the years The total expenses of EXIMBANKA SR incurred in 2000 amounted to SKK million, which is a decrease of 30.1% compared to the previous year. The total expenses were influenced mainly by the operating expenses of SKK million (12.8% decrease compared to 1999). Wage expenses amounted to SKK 41.1 million, which represents a decrease of 26.3% ,4 487, ,8 340, ,2 201,0 55,7 175, ,1 Total expenses Operating expenses Wage expenses Headcount of EXIMBANKA SR for the years As of year-end 2000, the total number of employees at EXIMBANKA SR had decreased by 13 from the level in 1999 to /12/ /12/ /12/2000 Export support of EXIMBANKA SR per employee for the years As of year-end 2000, the export support of EXIMBANKA SR per employee amounted to SKK million, which is an increase of SKK 50.1 million (by 29.4%) compared to the previous year. in SKK million ,6 170, , Financial results and internal Economy in

38 38 Auditor s Report INTERAUDIT Group, s.r.o. CHAPTER 6

39 39 Auditor s Report INTERAUDIT Group, s.r.o.

40 Auditor s Report Arthur Andersen, k.s. 40 CHAPTER 7

41 41 Auditor s Report Arthur Andersen, k.s.

42 42 IAS Financial Statements