VZ_EN_15.qxp :37 Stránka 1 Annual Report 2O15

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1 VZ_EN_15.qxp :37 Stráka 1 Aual Report 2O15

2 Se strategií ové vlády, aby státí podiky řídili a kotrolovali odboríci, se obměilo složeí dozorčí rady, do které zamířili experti s dlouholetou praxí v bakovictví ebo se zahraičími zkušeostmi. Zkvalitěí persoálího obsazeí dozorčí rady zesílí pozici České exportí baky jako důvěryhodé a stabilí fiačí istituce, která slouží k podpoře vývozu eje velkých českých podiků, ale ově se také orietuje a segmet malých a středích podiků, jimž pomáhá vstoupit a rozvojové trhy. Sažíme se podporovat český export, ale vedle toho klademe velký důraz a vyřešeí miulosti vyčištěí portfolia toxických pohledávek, které se ashromáždily v předchozích letech. Současě jsme zahájili proces implemetace účiého systému řízeí rizik, který ebyl v bace astave stadardím způsobem. Letoší rok bude ve zameí ových podmíek exportího fiacováí. O jeho budoucosti se diskutuje v médiích, mezi exportéry, ale zejméa se mu itezivě věují akcioáři baky. Dozorčí rada je jedím z lídrů diskuse s cílem, aby se ašlo kostruktiví a efektiví řešeí, které eztíží přístup českých podikatelů a trhy, pro ěž by jiak ezískali fiacováí od klasických komerčích bak. Existuje spousta ázorů, jak astavit exportí fiacováí. Existuje spousta expertů, kteří je prezetují. Dozorčí rada vyvíjí maximálí úsilí, aby Česká exportí baka obhájila své postaveí v systému podpory exportu, který je jedím z hacích motorů české ekoomiky a přispívá ke zvýšeí její kokureceschoposti. JUDr. Marti Pros, Ph.D. předseda dozorčí rady 1

3 z z Opeig Word of the Chairma of the Board of Directors I the year 2015, Česká exportí baka, a.s. celebrated the twetieth aiversary of its existece. Durig its twety year history, the Bak has supported more tha 1,200 projects totallig CZK 380 billio. As such, the Bak has become a itegral compoet of the Czech Republic s export policy. I 2015, Česká exportí baka, a.s. fulfilled the expectatios of exporters, cliets ad shareholders. As may as 44 cotracts i the amout exceedig CZK 4 billio were siged by the Bak. I additio, as part of its busiess activity, the Bak paid icreased attetio to its comprehesive cooperatio with small ad medium-sized busiesses. This is supported by the fact that 79.5% of all cotracts siged i 2015 were cocluded with cliets from this segmet. Česká exportí baka, a.s. wishes to cotiue providig itesive support to small ad medium-sized compaies i the comig years. Curretly, i the Czech Republic there is a great umber of compaies that are able to export partial techologies ad products. Eve though the volume of such trasactios caot be couted i billios, it is always vital to support good ad perspective projects. I additio to idustries that traditioally receive the Bak s support, such as the egieerig idustry, Česká exportí baka, a.s. seeks to better help Czech busiess by supportig prospective sectors, such as techologies, food processig, qualified chemistry, optics, healthcare ad the pharmaceutical idustry. All the idustries amed above have a great potetial of additioal growth. A small ad export-depedet coutry like the Czech Republic eeds to ehace its sales ad exports i the time of ecoomic growth ad sufficiet liquidity, through which also additioal job positios are created. Therefore, it is essetial that the Govermet have its ow istrumet that ca be used i supportig Czech busiesses. Moreover, this kid of support ca be provided i various ways rather tha merely fiacig. The Bak wishes to help Czech exporters target less traditioal ad eve more risk-bearig territories tha the usual export coutries. I am cofidet that we are able to achieve this objective. I my persoal view, this kid of help is the greatest cotributio made by Česká exportí baka, a.s. Ig. Karel Bureš Chairma of the Board of Directors ad CEO 2

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7 TABLE OF CONTENTS Key Idicators 1. Profile of Česká exportí baka, a.s History ad Developmet of Česká exportí baka, a.s Registered Office ad Legal Status of the Issuer ad Legal Regulatios Goverig the Issuer s Activities 1.3. Disclosed Documets 1.4. Additioal Iformatio o Česká exportí baka, a.s Admiistrative, Maagemet ad Supervisory Bodies of ČEB ad Related Committees 1.6. Orgaisatioal Structure of Česká exportí baka, a.s Declaratio of No Coflicts of Iterest Report of the Board of Directors o the Bak s Busiess Activities ad its Assets ad Liabilities i Overview of the Bak s Busiess Activities i Busiess Activities Developmet i the Loa Portfolio Pricipal Volume ad Structure Key Markets o Which the Bak Operates Newly-Implemeted Products ad Activities Fiacial Results, Busiess Results, Assets ad Liabilities 2.2. Factors Impactig ČEB s Ecoomic ad Fiacial Positio i Narrative Part 3.1. Risks to which the Bak is Exposed, Objectives ad Methods of Risk Maagemet Credit Risk Market Risk Refiacig Risk Liquidity Risk Operatioal Risk Capital Requiremets ad Capital Ratios 3.2. Risk Factors Potetially Impactig the Capacity of ČEB to Meet its Liabilities to Ivestors arisig from Securities 3.3. Remueratio of Persos with Maagig Powers 3.4. Received Icome of Directors with Maagig Powers i Cash ad i Kid for Iformatio Regardig Codes 3.6. Descriptio of the Decisio-Makig Process with Regard to the Bak s Bodies ad Committees Geeral Meetig Supervisory Board Board of Directors Audit Committee Credit Committee Assets ad Liabilities Maagemet Commissio (ALCO) Iformatio Techologies Developmet Commissio (ITDC) Operatioal Risk Maagemet Commissio (ORCO) 3.7. Authorised Auditors 3.8. Court ad Arbitratio Proceedigs 3.9. Cotracts of Sigificace 4. Fiacial Part 5. Related Party Trasactios Report

8 z z Key Idicators Table 1 Uit Fiacial results Net iterest icome CZK millio Net fee ad commissio icome CZK millio Net tradig icome icludig state subsidies CZK millio Asset impairmet CZK millio (3 730) (638) Total operatig costs CZK millio (535) (509) Icome tax CZK millio (927) (381) Net profit CZK millio (141) 168 Balace sheet Total assets CZK millio Amouts due from customers CZK millio Amouts due from baks CZK millio Cliet deposits CZK millio Bak deposits CZK millio Issued bods CZK millio Total equity CZK millio Ratios ROAE % (2,70) 3,29 ROAA % (0,15) 0,17 Capital adequacy % 24,26 41,68 Assets per employee CZK millio 557,77 529,85 Admiistrative expeses per employee CZK millio (2,33) (2,04) Net profit per employee CZK millio (0,88) 0,91 Other iformatio Average headcout employees Headcout (as of 31 December) employees Guaratees issued CZK millio Loa commitmets CZK millio Ratig log-term payables Moody s A1 A1 Stadard & Poor s AA- AA- 7

9 z z 1. PROFILE OF ČESKÁ EXPORTNÍ BANKA, A.S History ad Developmet of Česká exportí baka, a.s. Česká exportí baka, a.s. (hereiafter ČEB or the Bak ) is registered i the Commercial Register maitaied by the Muicipal Court i Prague, Sectio B, File No The Bak is a issuer of securities uder the Agreemet o the Maiteace of Records Regardig the Issue of Securities i the Cetral Securities Record withi the Cetral Securities Depository Prague (Cetrálí depozitář ceých papírů, a.s.) with its registered office i Prague 1, Rybá 14, ; Issuer s Registratio No Based o a bakig licece1 issued by the Czech Natioal Bak uder Ref. No. 2003/3966/520, dated 19 September 2003, which became effective o the same date, a chage i the bakig licece issued by the Czech Natioal Bak uder Ref. No. 2003/4067/520, dated 30 September 2003, which became effective o 2 October 2003, a chage i the bakig licece issued by the Czech Natioal Bak uder Ref. No. 2005/3982/530, dated 16 December 2005, which became effective o 10 Jauary 2006, a chage i the bakig licece issued by the Czech Natioal Bak uder Ref. No. 2011/141/570, dated 6 Jauary 2011, which became effective o 25 Jauary 2011, ad a chage i the bakig licece issued by the Czech Natioal Bak uder Ref. No. 2013/6197/570, dated 27 May 2013, which became effective o 7 Jue 2013, the pricipal busiess activities of Česká exportí baka, a.s. are defied as follows: Pursuat to Sectio 1 (1) of Act 21/1992 Coll., o Baks, as ameded: a) Acceptace of deposits made by geeral public; ad b) Provisio of loas. Pursuat to Sectio 1 (3) of Act 21/1992 Coll., as ameded a) Ivestig i securities o the Bak s ow accout to the extet of egotiable securities issued by the Czech Republic, the Czech Natioal Bak, ad foreig govermets, ivestig i foreig bods ad mortgage bods, ad ivestig i securities issued by legal etities with registered offices i the territory of the Czech Republic; c) Paymet systems ad clearig; e) Provisio of guaratees; f) Opeig of letters of credit; g) Collectio services; l) Provisio of bakig iformatio; m) Tradig o the Bak s ow accout or o the cliet s accout i foreig currecies that are ot ivestmet istrumets ad i gold to the extet of the followig: Tradig o the Bak s ow accout i foreig bods; Tradig o the Bak s ow accout i fuds deomiated i foreig currecies; Tradig o the Bak s ow accout or o its cliets accout i egotiable securities issued by foreig govermets; Tradig o the Bak s ow accout or o its cliets accout i moetary rights ad obligatios derived from the above-metioed foreig currecies; Tradig o its cliets accout i fuds deomiated i foreig currecies; ad o) Activities directly related to the activities metioed i Česká exportí baka s bakig licece: Provisio of ivestmet services i lie with Act 256/2004 Coll., o Capital Market Udertakigs, as ameded (hereiafter the Act o Capital Market Udertakigs ); the services iclude the followig: Major ivestmet services I lie with Sectio 4 (2) (a) of the Act o Capital Market Udertakigs receivig ad givig istructios o ivestmet istrumets, specifically ivestmet istrumets pursuat to Sectio 3 (1) (d) of this Act; I lie with Sectio 4 (2) (b) of the Act o Capital Market Udertakigs implemetatio of istructios related to ivestmet istrumets o the accout of cliets, specifically ivestmet istrumets pursuat to Sectio 3 (1) (d) of this Act; I lie with Sectio 4 (2) (c) of the Act o Capital Market Udertakigs tradig of ivestmet istrumets, o the Bak s accout, specifically ivestmet istrumets pursuat to Sectio 3 (1) (a) of this Act, with the exceptio of shares ad other securities represetig a equity ivestmet i a compay or aother legal etity, specifically ivestmet istrumets pursuat to Sectio 3 (1) (c) ad (d) of the Act o Capital Market Udertakigs; I lie with Sectio 4 (2) (e) of the Act o Capital Market Udertakigs ivestmet advisory o ivestmet istrumets, specifically istrumets pursuat to Sectio 3 (1) (d) of this Act; ad 1 The bakig licece replaced the permit issued by the Czech Natioal Bak to Česká exportí baka, a.s., based o which ČEB was allowed to perform its activities as a bak; the permit was issued o 6 February 1995 ad the chage was made o 27 Jue

10 Additioal Ivestmet Services I lie with Sectio 4 (3) (a) of the Act o Capital Market Udertakigs escrow ad admiistratio of ivestmet istrumets icludig the relatig services, specifically ivestmet istrumets pursuat to Sectio 3 (1) (a), (c) ad (d) of this Act; I lie with Sectio 4 (3) (c) of the Act o Capital Market Udertakigs advisory o the capital structure, idustrial strategies ad related issues, advisory ad services o compay trasformatios ad compay trasfers. Summary of Activities Performed by the Bak: a) Acceptace of deposits made by the geeral public; b) Provisio of loas; c) Ivestig i securities o the Bak s ow accout to the extet of egotiable securities issued by the Czech Republic, the Czech Natioal Bak, ad foreig govermets, ivestig i foreig bods ad mortgage bods, ad ivestig i securities issued by legal etities with registered offices i the territory of the Czech Republic; d) Paymet systems ad clearig; e) Provisio of guaratees; f) Opeig of letters of credit; g) Collectio services; h) Advisory activities related to capital structures, idustrial strategies ad related issues, as well as the provisio of advisory services ad services related to compay trasformatios ad trasfers; i) Provisio of bakig iformatio; j) Tradig o the Bak s ow accout or o the cliet s accout i foreig currecies ad i gold to the extet of: Tradig o its ow accout i foreig bods; Tradig o its ow accout i fuds deomiated i foreig currecies; Tradig o its ow accout i egotiable securities issued by foreig govermets; Tradig o its ow accout i moetary rights ad obligatios derived from the above-metioed foreig currecies; Tradig o its cliets accout i fuds deomiated i foreig currecies; ad k) Activities directly related to the activities metioed i Česká exportí baka s bakig licece. Summary of Activities the Performace or Provisio of which was Limited or Elimiated by the Czech Natioal Bak durig 2015: No activities have bee limited or elimiated Registered Office ad Legal Status of the Issuer ad Legal Regulatios Goverig the Issuer s Activities Registered office: Prague 1 Vodičkova 34/ Legal status: Joit Stock Compay Corporate ID: Telephoe: Fax: ceb@ceb.cz Website: The pricipal Czech legal regulatios uder which Česká exportí baka performed its activities i 2015: Act 101/2000 Coll., o Persoal Data Protectio; Act 200/1990 Coll., o Offeces; Act 284/2009 Coll., o Paymets; Act 21/1992 Coll., o Baks; Act 280/2009 Coll., the Tax Code; Act 190/2004 Coll., o Bods; 9

11 Act 235/2004 Coll., Act 253/2008 Coll., Act 254/2008 Coll., Act 69/2006 Coll., Act 256/2004 Coll., Act 499/2004 Coll., Act 563/1991 Coll., Act 89/2012 Coll., Act 90/2012 Sb., Act 58/1995 Coll., Act 229/2002 Coll., Act 586/1992 Coll., Act 589/1992 Coll., Act 592/1992 Coll., Act 93/2009 Coll., Act 304/2013 Coll., Regulatio 307/2004 Coll., Regulatio 163/2014 Coll., Regulatio 231/2009 Coll., Regulatio 233/2009 Coll., Regulatio 234/2009 Coll., Regulatio 281/2008 Coll., Regulatio 303/2010 Coll., Regulatio 276/2010 Coll., Regulatio 143/2009 Coll., Regulatio 58/2006 Coll., Regulatio 71/2011 Coll., o Value Added Tax; o Certai Measures agaist Moey Lauderig ad Terrorism Fiacig; through which Certai Acts are Ameded i respect of the Adoptio of the Ati-moey Lauderig ad Terrorism Fiacig Act; o the Implemetatio of Iteratioal Sactios; o Capital Market Udertakigs; o Archivig ad Record Maagemet; o Accoutig; Civil Code; o Busiess Corporatios ad Cooperatives (Act o Busiess Corporatios) o Isurig ad Fiacig of Exports with State Support; o the Fiacial Arbiter; o Icome Taxatio; o Social Security Cotributios ad Cotributios to the State Employmet Policy; o Public Health Isurace; o Auditors; o Public Registers of Legal ad Natural Etities; o Submittig Iformatio ad the Uderlyig Documets to the Czech Natioal Bak by Etities icluded i the Fiacial Istitutio Sector; o Rules i the Prudetial Busiess of Baks, Savigs Baks ad Credit Associatios ad Securities Brokers; o the Requisites ad Maer of Keepig the Trasactios ad Orders Books for Ivestmet Firms, ad o the Priciples for Keepig Records of Received ad Trasmitted Orders for Ivestmet Itermediaries; o Applicatios, Approval of Persos ad the Maer of Provig Professioal Qualificatios, Trustworthiess ad Experiece of Persos; o Ati-market Abuse Protectio ad Trasparecy; o Certai Requiremets for the System of Iteral Priciples, Procedures ad Review Measures for Ati-moey Lauderig ad Terrorism Fiacig; o Detailed Provisios for Certai Rules related to the Provisio of Ivestmet Services; o the Submissio of Statemets ad Other Iformatio by Ivestmet Firms to the Czech Natioal Bak; o the Professioalism of Idividuals Performig Activities related to Securities for Traders; o Keepig Separate Records o Ivestmet Istrumets ad Records related to the Separate Records o Ivestmet Istrumets; ad o the Form, Structure ad Method i Keepig ad Providig Data that is Compulsory for Baks ad Foreig Bak Braches to Report ad that is to be Provided to the Ivestmet Isurace Fud Disclosed Documets ČEB s Articles of Associatio i Czech are publicly available ad the hard-copy versio thereof ca be ispected i the Bak s registered office. The electroic versio of the Bak s Articles of Associatio i Czech is publicly available i the Collectio of Deeds of the Commercial Register file No. B 3042/SL 128 of the Muicipal Court i Prague. O the website of the Commercial Register Collectio of Deeds, the updated versio of ČEB s Articles of Associatio is available uder the followig address: I additio, ČEB s website makes publically available all documets ad iformatio o its activities, through which it meets its iformatioal obligatio arisig from the relevat legal regulatios that the Bak is to follow i performig its busiess. 10

12 1.4. Additioal Iformatio o Česká exportí baka, a.s. ČEB is ot a member of ay group. Act 58/1995 Coll., o Isurig ad Fiacig Exports with State Support, authorised the Bak to fiace exports with state support i lie with iteratioal rules of public support applied i fiacig medium-term ad log-term export loas (predomiatly i lie with Regulatio (EU) No. 1233/2011 of the Europea Parliamet ad of the Coucil ad the OECD Cosesus ). Uder Sectio 8 (1) (b) of Act 58/1995 Coll., o Isurig ad Fiacig Exports with State Support, the state is held liable for the obligatios of ČEB arisig from paymets of fuds received by ČEB ad for obligatios arisig from other ČEB s operatios o the fiacial markets. No specific evet that could have a material impact o the evaluatio of ČEB s solvecy has occurred sice the last publicatio of the Aual Report of ČEB as a issuer of securities. Whe providig export loas with a maturity period of at least two years, ČEB complies with the rules for assessig the impacts the fiaced export projects may have o the eviromet of the export destiatio. ČEB complies with the procedures set out i OECD Coucil Recommedatio o Commo Approaches for Officially-Supported Export Credits ad Evirometal ad Social Due Diligece (2012) providig guidace o the applicatio of some rules i state-supported export credits. ČEB does ot perform ay evirometal activities o its ow. Represetative office of Česká exportí baka, a.s. abroad: Česká exportí baka, a.s. has a represetative office established i the Russia Federatio. The agecy is a idepedet office of the Bak ad has o legal persoality. The represetative office s activities are delieated by the statutes of the represetative office as ameded by the Cetral Bak of the Russia Federatio s Order No. RF dated 7 October Address: Mashi Poryvaevoy Moscow Russia Federatio Telephoe, fax: I compliace with Sectio 41 (a) of Act 21/1992 Coll., o Baks, Česká exportí baka, a.s. cotributes to the system of isurace of receivables from deposits, amely to the Deposit Isurace Fud. The cotributios to the system amouted to CZK 1,584,848 i Česká exportí baka, a.s., as a securities trader, is obliged to cotribute to the Deposit Guaratee Fud of the Securities Traders i compliace with Act 265/2004 Coll., o Capital Market Udertakigs. I compliace with Sectio 129 (2) of the Act, the cotributio of Česká exportí baka, a.s. amouted to CZK 10,000 i

13 1.5. Admiistrative, Maagemet ad Supervisory Bodies of ČEB ad Related Committees Geeral Meetig the supreme bak body that decides by the majority of preset shareholders i the issues that are etrusted to its authority by Act 90/2012 Coll., ad the Bak s Articles of Associatio. Supervisory Board supervises the performace of the Board of Directors activities ad the performace of the Bak s busiess activities, ad presets its opiios to the Geeral Meetig. Chairma JUDr. Marti Pros, Ph.D. Member sice 30 April 2014, Chairma sice 26 Jue 2014 Deputy Miister of Fiace of the Czech Republic util May 2015 Miistry of Fiace of the Czech Republic Deputy Miister of Foreig Affairs sice Jue 2015 Miistry of Foreig Affairs of the Czech Republic Vice-chairma Ig. Ja Gregor Member sice 26 April 2012, Vice-chairma sice 24 May 2012 Deputy Miister of Fiace Miistry of Fiace of the Czech Republic Members Ig. Vladimír Bärtl Member sice 23 Jue 2014 Deputy Miister of Idustry ad Trade Miistry of Idustry ad Trade of the Czech Republic doc. PhDr. Petr Teplý, Ph.D. Member sice 23 Jue 2014 Idepedet expert Represetative of the Miistry of Idustry ad Trade of the Czech Republic Ig. Vladimír Pikora, Ph.D. Member sice 30 April 2015 Idepedet Expert Represetative of the Miistry of Agriculture of the Czech Republic Tomáš Pubrdle, MA Replacemet member sice 27 November 2015 Project ad Programme Seior Maager Česká exportí baka, a.s. JUDr. Marti Draslar, Ph.D. Member from 23 Jue 2014 to 14 October 2015 Director of the Legal Divisio util 14 October 2015 Deputy of the CEO ad Member of the Board of Directors sice 15 October 2015 Česká exportí baka, a.s. Board of Directors as the Bak s statutory body, maages the operatios of the Bak, acts i its ame, esures the busiess maagemet icludig accoutig, ad takes decisios related to all bak issues uless otherwise stipulated by law or by regulatios defied as competeces of the Geeral Meetig or the Supervisory Board. The Board of Directors makes decisios that may be subject to the Supervisory Board s additioal approval i accordace with the Bak s Articles of Associatio. Chairma Ig. Karel Bureš Member of the Board of Directors sice 1 Jauary 2014, Chairma sice 1 Jue 2014 CEO of ČEB i charge of executive maagemet sice 1 Jue

14 Vice-chairme Ig. Miroslav Tym Member sice 24 July 2014, Vice-chairma sice 1 August 2014 i terms of executive maagemet, Deputy CEO of ČEB i charge of trade Ig. David Marek Member sice 1 December 2014, Vice-chairma sice 18 Jue 2015 i terms of executive maagemet, Deputy CEO of ČEB i charge of risk-bearig debt maagemet Members Ig. Jaroslav Výborý, MBA Member sice 1 July 2015 i terms of executive maagemet, Deputy CEO of ČEB i charge of risk maagemet JUDr. Marti Draslar, Ph.D. Member sice 15 October 2015 i terms of executive maagemet, Deputy CEO of ČEB i charge of legal issues ad operatios Mgr. Luboš Vaěk Member sice 14 February 2011, Vice-chairma from 15 February 2011 to 17 Jue 2015, Member util 30 Jue 2015 i terms of executive maagemet, Deputy CEO of ČEB i charge of IT ad trade admiistratio Audit Committee set up by a decisio of the Geeral Meetig of ČEB, held o 10 December 2009 ad effective as of 4 Jauary The Audit Committee focuses mostly o the process of preparig the Bak s fiacial statemets, evaluates the effectiveess of the iteral cotrols of the Bak, the iteral audit ad/or risk maagemet systems, moitors the procedure of obligatory audits of the fiacial statemets, recommeds the auditor, ad sets up the remueratio regulatios uder the capacity of the Head of the Iteral Audit Sectio. The Compositio of the Audit Committee i 2015 was as follows: Chairma Ig. Ladislav Lagr Member of the Audit Committee sice 23 November 2014, Chairma sice 1 December 2014 Members Ig. Vladimír Bártl, MBA Member of the Audit Committee sice 26 April 2012 Ig. Adrea Káňová Member of the Audit Committee sice 11 November 2014 Other Decisio-Makig Bodies of ČEB Withi the scope of its activities, the Board of Directors set up the followig decisio-makig bodies: Credit Committee a permaet decisio-makig ad advisory body of the Board of Directors for decidig o ad evaluatig all issues related to selected trasactios ad credit risk maagemet, ad the advisory body of the leadig employees of ČEB. The Credit Committee is part of the maagemet ad cotrol system of the Bak. Assets ad Liabilities Maagemet Commissio (ALCO) permaet decisio-makig ad advisory body of the Board of Directors for decidig o ad evaluatig all issues related to assets ad liabilities maagemet ad miimisatio of market risks related to bak trasactios ad operatios of ČEB o fiacial markets; ad the advisory body of the other leadig departmets. ALCO is a part of the maagemet ad cotrol system of the Bak. 13

15 Iformatio Techologies Developmet Commissio (ITDC) permaet decisio-makig ad advisory body of the Board of Directors of ČEB dealig with issues i relatio to ICT maagemet. ITDC is part of the maagemet ad cotrol system of the Bak. Operatioal Risk Maagemet Commissio (ORCO) permaet decisio-makig ad advisory body of the Board of Directors. Makes decisios ad evaluates operatioal risks icludig all areas related to the iformatio security maagemet of ČEB; ad advisory body of the leadig employees of the Bak. ORCO is part of the maagemet ad cotrol system of the Bak. 14

16 1.6. Orgaisatioal Structure of Česká exportí baka, a.s Audit Committee Supervisory Board Board of Directors Chief Executive Officer Fiace & Maagemet Support Divisio / 0100 Iteral Audit / 0400 Compliace / 0500 Represetatio Office i the Russia Federatio / 9000 CEO Office / 0101 Huma Resources / 0120 Iteratioal Relatios ad Commuicatio / 0130 Chage Maagemet / 0151 Treasury / 0160 Fiace ad Accoutig / 4040 Fiace / 4041 Accoutig / 4042 Workout Divisio / 1000 Risk Maagemet Divisio / 2000 Commercial Divisio / 3000 Legal ad Operatios Divisio / 4000 Debt Restructurig / 1010 Bakig Risk Maagemet / 2010 Export Fiacig Corporate & SME / 3010 Paymets Departmet / 4002 Legal Departmet / 0140 Debt Workout / 1020 Credit Risk Maagemet / 2020 Export Fiacig 2/3012 Bakig IS Developmet Departmet / 4010 Techical Project Moitorig / 2030 Export Fiacig 3/3013 Bakig IS Operatios / 4020 Credit Aalyses / 2040 Sydicatios ad Project Fiacig / 3030 Iteral Admiistratio / 4021 Trade Fiace / 3050 Trasactio Admiistratio / 4030 Special Projects ad Iteratioal Acquisitios / 3060 Divisio Sectio Departmet Orgaisatioal Structure of Česká exportí baka, a.s., as of 15 October

17 1.7. Declaratio of No Coflicts of Iterest The members of the Bak s bodies, committees ad coucils declare that i 2015: a) They have ot abused their positio i the Bak or the iformatio that they had i place to gai profit that could ot otherwise have bee gaied, either for themselves or for other persos; b) They have ot cocluded ay trasactios usig the ivestmet istrumets of the Bak s cliets o their ow accout or o the accout of a perso closely related to them; c) They have ot provided istructios or recommedatios to other persos related to the trasactios with ivestmet istrumets of the Bak s cliets that could be used by the persos i tradig with the ivestmet istrumets o their ow accout; ad d) They have avoided all activities that may potetially expose them to a coflict of iterests. 16

18 z z 2. REPORT OF THE BOARD OF DIRECTORS ON THE BANK S BUSINESS ACTIVITIES AND ITS ASSETS AND LIABILITIES IN Overview of the Bak s Busiess Activities i Busiess Activities For the last few years, the demad for products of supported export fiacig has show a decreasig tedecy i the Czech Republic. The drop was pricipally apparet i I terms of the volume of ew trasactios cocluded i 2015, the Bak s activity reflects this tred sigificatly. I 2015, the Bak s ew trasactios totalled CZK 4,039 millio (which represets a year-o-year drop of 59.7%). New Commitmets i (i CZK millio) / Graph Source: ČEB As part of its busiess activities, the Bak sigificatly focuses o its priority sector, ie small ad medium-sized busiesses ( SME ). Idividual trasactios of this type are traditioally cocluded at low amouts, which does ot critically cotribute to meetig the volume idicator. However, the priority of the Bak s activities related to SME is pricipally the provisio of comprehesive support to busiesses. As such, ot oly the trasactio volume is of sigificace. I additio to this, advisory o the structure ad implemetatio of export projects ad deliveries for large Czech exporters is importat. This is supported by the fact that out of the total of 44 cotracts cocluded i 2015, 35 cotracts (ie 79.55%) were agreed i order to support the SME segmet. The loas ad guaratees provided i relatio to this segmet s support totalled CZK 64 millio i The remaiig portio of 20.45% out of the total umber of cocluded cotracts amouts to CZK 3,975 millio ad icludes ie loa ad guaratee trasactios that are large i terms of their amout. These cotracts are either bilateral or multilateral (where the Bak is icluded i a sydicate of commercial baks). The aggregate amout of large trasactios reflects the results arisig from the successful implemetatio of the Bak s strategy. This strategy focuses o trasactio implemetatio as part of sydicated loas where the Bak s goal is sigificatly lower participatio. Proportio betwee Cotracts with SME ad Cotracts for Large Trasactios i 2015 / Graph % SME 20.45% Large trasactios Source: ČEB 17

19 The Bak s missio pricipally icludes activities related to the fiacig of export to coutries that are subject to the Czech Republic s export iterest. This covers both coutries with a icreased ad a high degree of territorial risk, as well as coutries with low territorial risk. A importat factor resultig from the Bak s efforts to achieve territorial diversificatio is the wide rage of target export coutries i Table 2 Coutries of Export by New Cotracts Cocluded i 2015 Azerbaija 67.05% Iraq 20.48% The Isle of Ma 7.50% Mauritius 3.21% Germay 0.35% Egypt 0.33% Polad 0.32% Russia 0.23% Idia 0.23% Netherlads 0.17% Mexiko 0.07% Chile 0.04% Tuisia 0.02% Source: ČEB Developmet i the Loa Portfolio Pricipal Volume ad Structure The total pricipal amout of provided loas ad purchased receivables deomiated i CZK decreased by CZK 6,139 millio, year-o-year, to CZK 79,933 millio, i.e. by 7.1% as of 31 December The total pricipal amout of the loas provided i EUR dropped by EUR 116 millio to EUR 2,658 millio i The total pricipal amout of the loas provided i USD decreased by USD 60 millio to USD 254 millio i The impact of loas deomiated i CZK o the loa pricipal balace is low, as these loas comprise solely 2.2% of the total loa pricipal. As of 31 December 2015, the total pricipal amout of provided loas ad purchased receivables represeted 89.2% of total assets. Loa Pricipal Balace i (i CZK millio) / Graph Source: ČEB 18

20 I respect of the pricipal structure of the provided loas by cotractual currecy, the loas deomiated i EUR represet 89.9% (2014: 89.4%) ad the portio of loas provided i USD represets 7.9% (2014: 8.3%). The year-o-year portio of loas provided i CZK remaied at almost the same level, i.e. 2.2% (2014: 2.3%). Loa Portfolio Structure by Currecy Proportio Developmet / Graph 4 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007/3 2007/6 2007/9 2007/ /3 2008/6 2008/9 2008/ /3 2009/6 2009/9 2009/ /3 2010/6 2010/9 2010/ /3 2011/6 2011/9 2011/ /3 2012/6 2012/9 2012/ /3 2013/6 2013/9 2013/ /3 2014/6 2014/9 2014/ /3 2015/6 2015/9 2015/12 CZK USD EUR Source: ČEB I respect of the cotractual maturity of loas, the breakdow of loa pricipal amouts remaied almost the same from a year-o-year perspective. This parameter is iflueced by the type of exported goods fiaced by the Bak, ad the paymet terms that are commo o iteratioal markets. The fiacig structure, costituted by all products used i the fiacig trasactios is based o both the factors amed above ad reflects a high degree of fiaced export of machiery ad asset groups with log maturities. Table 3 Loa Portfolio Broke Dow by Maturity as of 31 December 2015 Log-term (more tha 5 years) 98.50% Medium-term (4 5 years) 0.65% Medium-term (2 4 years) 0.66% Medium-term (1 2 years) 0.18% Short-term (up to 1 year) 0.02% Source: ČEB Key Markets o Which the Bak Operates a) The Bak s Positio i the Local Bakig Sector Compared to other baks operatig i the Czech bakig sector, ČEB is cosidered a medium-sized bak. ČEB s share of the total assets of baks i the Czech Republic slightly decreased, year-o-year. Durig 2015, the share dropped from 1.82% to 1.59%. Table Total ČEB Share Total ČEB Share baks of ČEB baks of ČEB Total balace assets i CZK mil % % Sources: ČEB ad Czech Natioal Bak 19

21 Developmet i ČEB s Share i Czech Bakig Sector (Assets i 1996 = 100%) / Graph % 1 700% 1 500% 1 300% 1 100% 900% 700% 500% 300% 100% Share of ČEB s assets i total bak assets 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Total bak assets developmet ČEBęs assets developmet Source: Czech Natioal Bak ad ČEB The Bak s role withi the Czech bakig sector is compared to commercial baks specialised, maily for the followig reasos: ČEB s positio i the area of the officially supported export fiacig is stipulated by Act 58/1995 Coll., o Isurig ad Fiacig Exports with State Support. The Act determies the supported fiacig methods offered by ČEB icludig the provisio of fiacial services related to exports uder the coditios stipulated by this Act. I respect of the activities performed by the Bak (as outlied i Sectio 1.1. above), the provisio of loas ad guaratees represets the most-performed activity. Export fiacig ca be used by etities applyig for supported fiacig that have a registered office i the Czech Republic or, i the evet of re-fiacig loas, their local baks. I additio, these exporters have to be able to sell their goods o iteratioal markets, prevailig over their competitors through the high quality of product ad timeliess of delivery. I respect of pricig, ČEB offers fiacig of exports uder the coditios set out by iteratioal treaties based o CIRR rates. The Czech Republic accepted the commitmet to fiace exports of Czech exporters i lie with iteratioal rules, pricipally Regulatio (EU) No. 1233/2011 of the Europea Parliamet ad of the Coucil o the Applicatio of Certai Guidelies i the Field of Officially Supported Export Credits (Appedix II icludes the OECD Cosesus ), which stipulate the provisio of medium-term ad log-term export loas. For this reaso, the fiacig of export loas uder Regulatio (EU) No. 1233/2011 is aturally the decisive segmet of ČEB s activities. Fiacig of other loa types is offered by ČEB uder commercial coditios. Iformatio o ČEB s positio i the local bakig sector ca be obtaied from the statistical data o cliet loas published by the Czech Natioal Bak. This iformatio evideces the fact that due to ČEB s specific positio of a domiat bak egaged i export fiacig, its positio o the Czech bakig market is i may aspects a lot more sigificat tha what ca be iferred from the Bak s share i the total assets of all baks i the Czech Republic. 20

22 Table Cliet loas by maturity Baks ČEB ČEB Baks ČEB ČEB (i CZK millio) total share total share Balace of cliet loas ad receivables % % of which i CZK % % of which short-term loas (up to 1 year) % % medium-term loas (1 5 years) % % log-term loas (over 5 years) % % of which i foreig currecy % % of which short-term loas (up to 1 year) % % medium-term loas (1 5 years) % % log-term loas (over 5 years) % % Table Cliet loas to residets by purpose Baks ČEB ČEB Baks ČEB ČEB (i CZK millio) total share total share Total i CZK + foreig currecy, oly residets ČNB ČEB ČNB ČEB ARAD reports ARAD reports Balace of residet loas ad receivables % % of which Total other loas % % of which ivestmet loas % % total curret assets, seasoal costs, export, import % % total other loas (fiacial ad special purpose) % % total for trade receivables % % Table Cliet loas to o-residets by purpose Baks ČEB ČEB Baks ČEB ČEB (i CZK millio) total share total share Total i CZK + foreig currecy, oly o-residets ČNB výkazy ČNB výkazy ARAD ČEB ARAD ČEB Balace of o-residet loas ad receivables % % of which Total other loas % % of which ivestmet loas % % total curret assets, seasoal costs, export, import % % total other loas (fiacial ad special purpose) % % total for trade receivables % % 21

23 b) Factors Impactig Bak s Busiess Activities ad Fiacial Results i 2015 Gross Domestic Product ad Export The year 2015 saw cotiuous growth of exports, which has bee almost the oly positive compoet i geeratig the coutry s GDP i the past years. GDP Developmet (at regular prices) ad Developmet i Export of Goods / Graph % ,1 % 64,9 % 61,6 % 54,5 % 64,1 % 71,4 % 75,7 % 77,7 % 84,8 % 86,5 % 90.0% 80.0% 70.0% 60.0% % 40.0% 30.0% 20.0% % 0 0.0% Export of goods i CZK billio GDP i CZK billio, at regular prices (forecast) Share of export i GDP (i %) Source: Czech Statistical Office, Czech Miistry of Fiace A additioal icrease i the exports for 2015, as expressed i absolute values, was achieved i all groups of coutries icluded i our statistics, with the exceptio of the CIS ad Europea trasitory ecoomies, where the export figures saw a declie, primarily due to a complicated political situatio throughout The share of coutries o which ČEB s export support is primarily focused CIS coutries, Europea trasitory ecoomies, developig coutries ad other advaced market ecoomies also slightly decreased, year-o-year. Table 8 Czech Republic s exports i CZK billio Share i Czech Republic s exports Neighbourig coutries % 51.2% EU 15 coutries % 62.4% EU 28 coutries % 83.3% CIS coutries % 2.9% Europea trasitory ecoomies % 0.5% Developig coutries % 4.5% Other advaced market ecoomies % 5.4% Source: Czech Statistical Office Based o the aalysis of the Czech exporters performace with regard to the target coutries whose share of the aggregate Czech exports exceeds 1%, it should be oted that most of them saw a year-o-year icrease i exports. A rather sigificat year-o-year decrease was related to exports to the Russia Federatio (a drop of 1.1%). The Russia Federatio, Slovakia, Turkey ad Azerbaija are the coutries that costitute the greatest proportio of the total loa pricipal provided by the Bak (86.8%). The share of these coutries o the Czech Republic s total exports was 12.2%. 22

24 Table 9 Coutries with a share i Czech Republic s Czech Republic s Year-o-year chages i the Czech Republic s export exports i 2014 exports i 2015 share i Czech Republic s over 1 % i 2015 (i %) (i %) exports i 2015 (i %) Germay Slovakia Polad (0.1) Uited Kigdom Frace Austria (0.2) Italy Russia Federatio (1.1) Hugary Netherlads Belgium (0.1) Spai The Uited States of America Switzerlad Swede Romaia Turkey Chia Demark (0.1) Source: Czech Statistical Office The Coutry Risk Classificatio published by the OECD remais to be importat for the activities of the Bak. The structure of the credit portfolio documets how the Bak fulfils its missio to fiace exports maily to the coutries with medium ad high territorial risk, which are ot a group of coutries primarily targeted by export fiacig provided by commercial baks. Compariso betwee the Structure of Czech Republic s Exports ad ČEB s Loa Portfolio i 2015 by OECD Coutry Risk Classificatio 0 7 / Graph * 84,60% 24,20% 0.30% 0.0% 2.20% 0.20% 2.60% 0.20% 7.30% 56.30% 0.60% 10.30% 0.90% 5.70% 1.40% 3.10% * ot classified Czech Republic s exports ČEB s loa portfolio Note: I 2015, Russia was reclassified from category 3 to category 4 Source: ČEB, Czech Statistical Office ad OECD 23

25 Situatio o Fiacial Markets Opportuities to Obtai Fudig To raise fuds o fiacial markets, the Bak uses the Euro Medium Term Note Programme (hereiafter the EMTN Programme ), which is iteded for obtaiig fuds exceedig oe year. For a short-term fiacig up to oe year, the Bak uses the Euro Commercial Paper Programme (hereiafter the ECP Programme ). Both programmes are combied i order to always provide the Bak with sufficiet fuds i a coveiet structure to secure its offer of fiacig to Czech exporters ad to settle its liabilities o a cotiuous basis. I additio to the required fiacig time, the curret situatio o fiacial markets is take ito accout. The EMTN Programme curretly amouts to EUR 4 billio ad is used to refiace maturig previously obtaied fudig ad to cover ew loas deomiated i EUR, USD ad CZK. Thaks to the advatageous qualities of the EMTN Programme (such as expediet implemetatio of idividual trasactios, flexibility, ad opportuity to diversify the ivestor portfolio), i 2015 the Bak was able to obtai fudig uder favourable price coditios, regardless of frequet market turbuleces. Uder the EMTN Programme, three ew issues (i the programme s history sice 2007, it has bee the 43rd, 44th ad 45th issue) i the amout of EUR 100 millio (ie USD 120 millio) were implemeted. I total, there was a equivalet of EUR 2.87 billio draw uder the EMTN Programme as of 31 December The issue deomiated i EUR which was performed i March 2015, was made uder a sydicate, which eabled both a broader geographical ad istitutioal distributio, as opposed to traditioal private allocatio. I 2015, the Bak cooperated with two ew maagers i charge of idividual issues. Amog other thigs, this step was positively reflected by the market, showig that it is worth payig attetio to the Bak s good reputatio ad its presetatio to the ivestor commuity. I order to optimise liquidity maagemet, i 2011 the Bak established the ECP Programme for the issuace of short-term securities. Its framig amout remais at EUR 400 millio. This programme allows for very flexible coverage of short-term liquidity eeds of the Bak usig favourable price coditios o the market. I 2015, five issues of such short-term bods were performed. To icrease the degree of diversity ad prevet the depedece o limited fudig resources, to a certai degree the Bak icreases the resources of fudig by deposits received from other baks ad its ow cliets. Through such diversificatio, the Bak s flexibility is secured. Moreover, the Bak s depedecy o solely oe type of fudig resource is limited. I this respect the Bak gradually assesses the liquidity risk, pricipally by moitorig the chages i the fudig structure. The Bak s bods are listed o the Luxembourg Stock Exchage. The list of the Bak s bods outstadig as of 31 December 2015 is disclosed i the otes to the fiacial statemets. The ratig of ČEB ad its issued bods is set by Stadard & Poor's Credit Market Services Europe Limited ad Moody's Ivestors Service Ltd o a cotractual basis. ČEB ackowledges that both agecies are ratig agecies registered i accordace with Regulatio (EC) No.1060/2009, o Credit Ratig Agecies, ameded by Regulatio (EC) No. 462/2013. The Bak decided ot to authorise ay ratig agecy with a market share below 10% to perform its ratig assessmets. ČEB discloses iformatio o the curret ratig of the bods issued by it o its website. As of 31 December 2015, the Bak s outstadig bods have the followig ratigs: Table 10 Stadard & Poor's Moody's Foreig currecy log-term payables AA- Foreig currecy log-term payables A1 Local currecy log-term payables AA Local currecy log-term payables A1 Short-term payables A-1+ Short-term payables P-1 Outlook stable Outlook stable 24

26 Newly-Implemeted Products ad Activities I 2015, the Bak cotiued developig ad adjustig its products i order to reflect the eeds of Czech exporters ad their suppliers, pricipally i the SME segmet. As part of its edeavour to support the growth of small ad medium-sized exporters share of total Czech exports, also i 2015 the Bak cotiued customisig its products so as to esure that selected types of fudig become a efficiet tool takig ito accout the specific features of this busiess segmet, ad thus cotributig to the fulfilmet of oe of the Bak s strategic goals of supportig small ad medium-sized busiesses. Major adjustmets of products provided by the Bak made i 2015 icluded the itroductio of the followig: the cocept of the co-debtor, the guaratee framework, a sigificat extesio i the purpose of the bak guaratee product, ad productio fiacig for export reasos. The Bak will cotiue reviewig its product portfolio also i For istace, this will iclude the plaed product lauch of accouts receivable factorig with recourse Fiacial Results, Busiess Results, Assets ad Liabilities Assets ad Liabilities ČEB s total assets amouted to CZK 88,686 millio i 2015, which represets a year-o-year decrease of 9.5%. The balace sheet structure has bee stable i the log term. The balace sheet items are derived from the plaed estimate of the developmet i asset trasactios to which liabilities are adjusted. Fudig ČEB fiaces its busiess activities maily through liabilities i the form of payables to fiacial istitutios ad o-bakig etities, which represet 94% of the total volume of its fuds. I 2015, the key source of fudig was agai the issuace of bods deomiated i foreig currecies ad i Czech crows. As of 31 December 2015, the bods amouted to CZK 78,619 millio. I 2015, the Bak cotiued to use its EMTN Programme for the issuace of bods, which, i combiatio with the ECP Programme, icreases the borrowig efficiecy ad flexibility eve durig periods of potetial fiacial istability. The Bak icreases its fudig base by received loas i the form of liability deposit trasactios, repurchase trasactios ad log-term borrowigs from credit istitutios. As of 31 December 2015, the fuds raised from those sources amouted to CZK 1,823 millio. Deposits received from cliets amouted to approximately CZK 1,055 millio ad played a secodary role i the Bak s supported fudig process. The reported total volume of the Bak s equity was CZK 4,933 millio at the ed of Ay gais ad losses from the revaluatio of liabilities arisig from iterest rate swaps used by ČEB to maage its iterest rate ad currecy risks are recogised as part of equity uder IFRS. 25

27 Table 11 Liabilities Balace at Balace at Year-o-year i CZK millio 31 Dec Dec 2015 idex i % Colum 1 Colum 2 Col. 2/ Col. 1*100 Fiacial liabilities held for tradig Fiacial liabilities at amortised cost of which: payables to fiacial istitutios payables to cliets payables ot classified by sector payables from issued debt securities Hedgig derivatives with egative fair value Other liabilities Reserves for liabilities Curret icome tax liabilities Total liabilities Share capital Revaluatio gais ad losses (508) (242) Reserve fuds Other special fuds from profit Retaied earigs 168 (141) (83.93) Total equity Total equity ad liabilities Structure of Liabilities 2015 / Graph 8 88,65% Issue of bods 5,56% Equity 2,54% Other liabilities 2,06% Loas received 1,19% Deposits received from cliets Source: ČEB Developmet i Mai Categories of Liabilities i / Graph CZK millio Loas received 2 Issue of bods 3 Other liabilities 4 Equity 5 Deposits received from cliets vlastí kapitál 5 přijaté vklady klietů 26

28 Use of Fuds The major part of the assets icludes receivables arisig from loas. Their share i the total volume of assets is 82.2%. The value of all receivables i the loa portfolio reported i the balace sheet decreased year-o-year by 11.7% to CZK 76,447 millio. Receivables from the loas provided to o-bakig cliets decreased by CZK 5,858 millio, receivables from loas provided to fiacial istitutios decreased by CZK 91 millio. Temporarily available fuds deomiated i foreig currecies that were ot used for loas are placed o the iterbak market i the form of short-term deposits ad repurchase operatios, part of which is used for the fiacig of the holdigs of liquid reserve composed of foreig securities. I lie with the Bak s strategy, fuds from equity represet a liquid reserve, i the form of high-quality ad liquid securities, primarily local ad also foreig. The volume of the held liquid reserve at the ed of 2015 amouted to CZK 6,163 millio. No-ivested capital fuds are beig valorised o the iterbak market ad through reverse repurchase trasactios with the cetral bak. Table 12 Assets Balace at Balace at Year-o-yea i CZK millio 31 Dec Dec 2015 idex i % sl. 1 sl. 2 sl. 2/ sl. 1*100 Cash ad deposits with the cetral bak Fiacial assets held for tradig Fiacial assets available for sale Loas ad other receivables of which: receivables from loas other receivables Fiacial ivestmets held to maturity of which: pledged assets Positive fair value hedgig derivatives Tagible fixed assets Itagible fixed assets Other assets Curret tax receivable (100.00) Deferred tax asset Total assets Structure of Assets i 2015 / Graph 10 86,20% Loas ad other receivables 5,60% Fiacial assets for tradig 6,85% Other assets 1,35% Fiacial assets held to maturity Source: ČEB 27