2017 Annual Report Raiffeisenverband Salzburg

Transcription

1 217 Annual Report Raiffeisenverband Salzburg

2 217 Annual Report 2 KEY FIGURES OF THE GROUP

3 KEY FIGURES OF THE GROUP TEUR Change Total assets 6,286,242 7,15,583 7,49, , % Loans and advances to customers 3,23,71 3,192,586 3,282,838 9, % Liabilities to customers (excl. repo transactions) 2,331,421 2,678,728 2,866, ,751 7.% Total core capital (CET 1) 469, ,636 56,8 28, % Total core capital ratio (CET 1) 11.4% 11.3% 12.2%.9% Total own funds 66,11 6,89 611,944 11,54 1.8% Total own funds ratio (total risk) 14.7% 14.2% 14.7%.5% Operating result 37,137 42,644 44,16 1, % Profit on ordinary activities 19,158 26,917 26, % Cost-Income-Ratio (adjusted for warehousing segment, auditing and ORG/IT) 72.6% 68.8% 68.6% -.2% Return on Equity (RoE, before tax) 3.9% 5.4% 5.1% -.3% 3 Raiffeisenverband Salzburg

4 217 Annual Report 4 CONSOLIDATED FIGURES 217

5 CONSOLIDATED BALANCE SHEET ASSETS (TEUR) Cash in hand, balances with central banks and post office banks 74,546 18, Treasury bills and other bills eligible for refinancing with central banks a) Treasury bills and similar securities b) Other bills eligible for refinancing at central banks 77,477 77, , , Loans and advances to credit institutions a) Repayable on demand b) Other loans and advances 2,38, ,771 1,664,746 2,183, ,5 1,365, Loans and advances to customers 3,282,838 3,192, Debt securities including fixed-income securities a) Issued by public bodies b) Issued by other borrowers showing separately: own debt securities 267, , , , Shares and other variable-yield securities 17,5 28, Participating interests showing separately: Participating interests in credit institutions 8. Shares in affiliated undertakings showing separately: Shares in credit institutions 315,56 81,654 43, ,32 81,654 36,85 9. Intangible fixed assets 4,467 6,16 1. Tangible assets showing separately: Land and buildings occupied by the credit institution for its own activities 191,68 158,46 196, , Own shares as well as shares in a controlling company or in a company holding a majority of shares showing separately: Nominal value 12. Other assets 15,13 9, Subscribed capital called but not paid 14. Prepayments and accrued income 4,712 1, Deferred taxes 14,993 18,436 Total assets 7,49,528 7,15,583 5 Raiffeisenverband Salzburg

6 CONSOLIDATED BALANCE SHEET LIABILITIES (TEUR) Liabilities to credit institutions a) Repayable on demand b) With agreed maturity dates or periods of notice 2. Liabilities to customers (non-banks) a) Saving deposits showing separately: aa) Repayable on demand bb) With agreed maturity dates or periods of notice b) Other liabilities showing separately: aa) Repayable on demand bb) With agreed maturity dates or periods of notice 3. Securitised liabilities a) Debt securities issued b) Other securitised liabilities 2,551,866 1,262,152 1,289,715 2,866, ,766 29,82 651,945 1,923,713 1,597, ,78 1,257,493 1,257,493 2,63,48 1,321,157 1,39,251 2,678, , ,545 66,647 1,86,535 1,455,718 35, , , Other liabilities 49,666 58, Accruals and deferred income 16,96 18,75 6. Provisions a) Provision for severance payments b) Provision for pensions c) Provision for taxation d) Other provisions 71,221 27,568 23, ,28 73,534 27,38 23,799 4,86 18,611 6a. Fund for general banking risks 16,756 16, Supplementary capital pursuant to part 2 titel I capital 4 of regulation (EU) 575/213 5,745 42,4 8. Additional core capital pursuant to part 2 titel I capitel 3 of regulation (EU) 575/213 showing separetely: Mandatory convertible bonds persuant to 26 BWG 8b. Instruments without voting rights pursuant to par. 26a BWG 9. Minority Interests Subscribed capital 62,949 54, Capital reserves a) Committed b) Uncommitted 12. Retained earnings a) Legal reserve b) Statutory reserve c) Other reserves 1,344 1, ,295 68,384 32,911 1,344 1, ,522 68,14 3, Liability reserve pursuant to Article 23 para. 6 BWG 72,58 72, Consolidated net profit for the year 3,5 3, Total liabilities 7,49,528 7,15, Annual Report 6

7 AS OF 31 DECEMBER 217 OFF-BALANCE SHEET ITEMS (TEUR) ASSETS 1. Foreign assets 988,483 94,589 LIABILITIES 1. Contingent liabilities showing separately: a) Acceptances and endorsements b) Guarantees and assets pledged as collateral security 585, , ,459 6,77 2. Commitments showing separately: Commitments arising from repurchase transactions 81,71 631,45 3. Commitments arising from agency services 8,26 72, Eligible capital pursuant to part 2 of regulation (EU) 575/213 showing separately: Own funds pursuant to part 2 title I capital 4 of regulation (EU) 575/ ,944 4,127 6,89 43, Capital requirement pursuant to Article 92 of regulation (EU) 575/213 showing separately: Capital requirement pursuant to Article 92 para. 1 nos. a of regulation (EU) 575/213 (Equity Tier 1 ratio in %) Capital requirement pursuant to Article 92 para. 1 nos. b of regulation (EU) 575/213 (Tier 1 capital ratio in %) Capital requirement pursuant to Article 92 para. 1 nos. c of regulation (EU) 575/213 (Total capital ratio in %) 4,162, % 12.16% 14.7% 4,244, % 11.25% 14.16% 6. Foreign liabilities 718,554 73,92 7 Raiffeisenverband Salzburg

8 CONSOLIDATED PROFIT AND LOSS ACCOUNT TEUR Interest receivable and similar income showing separately: From fixed-income securities 88,379 22,995 97,48 25, Interest payable and similar expenses -34,516-39,62 I. NET INTEREST INCOME 53,863 57, Income from securities and participating interests a) Income from shares and other variable-yield securities b) Income from participating interests c) Income from shares in companies stated as associates 11,9 1,15 9, , , Commissions receivable 44,86 43,28 5. Commissions payable -8,995-8,14 6. Net profit on financial operations 2,64 3,55 7. Other operating income 9,439 87,139 II. OPERATING INCOME 193, , General administrative expenses a) Staff costs showing separately: aa) Wages and salaries bb) Expenses for statutory social contributions and compulsory contributions related to wages and salaries cc) Other social expenses dd) Expenses for pensions and assistance ee) Allocations to provision for pensions ff) Expenses for severance payments and contributions to severance and retirement funds b) Other administrative expenses -134,787-96,834-71,227-19, , ,68-37, ,36-96,378-69,695-19, ,166 1,193-4,66-35, Value adjustments in respect of asset items 9 and 1-1,548-1, Other operating expenses -4,367-4,137 III. OPERATING EXPENSES -149,71-146,729 IV. OPERATING RESULT 44,16 42, Annual Report 8

9 TEUR Value adjustments and re-adjustments in respect of loans and advances and provisions for contingent liabilities and for commitments -15,58-13, Value adjustments and re-adjustments in respect of transferable securities held as financial fixed assets, participating interests and shares in affiliated undertakings -1,967-1,974 V. PROFIT ON ORDINARY ACTIVITIES 26,612 26, Extraordinary income showing separately: Withdrawals from the fund for general banking risks 16. Extraordinary expenses showing separately: Allocations to the fund for general banking risks 17. Extraordinary result (subtotal of items 15 and 16) 18. Tax on profit or loss -1,225 1, Other taxes not reported under item 18-1,887-13,418 VI. PROFIT FOR THE YEAR AFTER TAX 23,5 14, Minority interests 21. Changes in reserves showing separately: Allocation (-) / Reversal (+) liability reserve -2, -11,833 VII. CONSOLIDATED NET INCOME FOR THE YEAR 3,5 3, 22. Profit or loss brought forward VIII. CONSOLIDATED NET PROFIT FOR THE YEAR 3,5 3, 9 Raiffeisenverband Salzburg

10 217 Annual Report 1 NOTES TO THE CONSOLIDATED ACCOUNTS

11 NOTES TO THE CONSOLIDATED ACCOUNTS According to 265 UGB (Austrian Commercial Code) the consolidated balance sheet as well as the consolidated profit and loss account and the methods of accounting and valuation applied herein have to be commented. The notes were drawn up in due consideration of the provisions of the Austrian Commercial Code (UGB) and of the special provisions of the Austrian Banking Act (BWG). The consolidated financial statements were prepared pursuant to annex 2 to 43 BWG, BGBl 532/1993, relevant version. A. CONSOLIDATION PRINCIPLES AND METHODS a) Full consolidation Capital consolidation was conducted in accordance with 254(1) (1) UGB. Until the book value method was used, with the acquisition costs for the investments in subsidiaries charged against the respective proportionate equity at the time of initial inclusion. The initial consolidation took place on the effective date stated in the table on page 2. In 217 there were no initial consolidations. Receivables and liabilities existing between the consolidated subsidiaries were eliminated as part of debt consolidation. Equally, intra-group revenues and expenses were set off by means of consolidation of revenues and expenses. the significant date for determining the difference between the book value of the respective investment and the respective proportionate equity. The initial consolidation of Heimat Österreich gemeinnützige Wohnungs- und Siedlungsgesellschaft m.b.h. took place on the effective date of December 31st, 2, the initial inclusion of Bergbahnen Aktiengesellschaft Wagrain on June 3th, 215. As per Aberg-Hinterthal Bergbahnen AG, Hobex AG and the sub Verbund group Techno-Z have been added to the at-equity consolidation. As per Bergbahnen Flachau Gesellschaft m.b.h. has been added to the at-equity consolidation. Consolidation according to the at-equity method occurred based on the last available financial statement. Any variations in valuation methods of the parent company were not adjusted. B. SCOPE OF CONSOLIDATION 1. Change of the scope of consolidation In 217 the scope of fully consolidated companies has not changed. Amongst companies subject to at-equity consolidation Bergbahnen Flachau Gesellschaft m.b.h. was added to the scope of atequity consolidation as per June 3th, 217. b) At-equity consolidation At-equity consolidation was conducted in accordance with 264(1)(1) UGB (book value method). The date of the subsidiary s initial inclusion in the consolidated financial statements was chosen as 2. Disclosures on investments a) Fully consolidated companies The companies included in the Group are as follows (participation percentages from Raiffeisenverband Salzburg s perspective): 11 Raiffeisenverband Salzburg

12 NOTES TO THE CONSOLIDATED ACCOUNTS Name and registered office Share of capital in % direct indirect Initial consolidation Deconsolidation Agroconsult Austria Gesellschaft m.b.h., Sbg. 1.% Industriebeteiligungs-GmbH, Sbg. 1.% Unternehmensbeteiligung GmbH, Sbg. Inclusion according to 3 (1) Z. 5 BWG Fremdenverkehrs GmbH, Sbg. 1.% West Consult Objekterrichtungs- und Verwaltungs II Gesellschaft m.b.h., Sbg. West Consult Objekterrichtungs- und Verwaltungs III Gesellschaft m.b.h., Sbg. 99.% 1.% % 1.% West Consult Leasing GmbH, Sbg. 99.% 1.% WECO FH Holztechnikum GmbH, Sbg. 1.% West Consult Revitalisierung Gesellschaft m.b.h., Sbg. 1.% WECO REHA Leasing GmbH 1.% Kienberg Panoramastraße Errichtungs-GmbH, Sbg. 1.% SABAG Schulen Errichtungs- und Vermietungs-GmbH, Sbg. 99.% 1.% SABAG Projekterrichtungs- und Vermietungs-GmbH GmbH, Sbg. 99.% 1.% Tinca-Beteiligungs-GmbH, Sbg. 1.% vis-vitalis Lizenz- und Handels GmbH 1.% PMN Beteiligungs- u. Finanzberatungs Gesellschaft m.b.h., Sbg. 1.% BVG Liegenschaftsverwaltung GmbH, Sbg. 1.% Annual Report 12

13 b) Companies consolidated at-equity In order to evaluate the materiality of the associated companies, a materiality calculation was carried out based on quantitative indicators (Equity, operating result) as well as qualitative indicators (one-time effect, sustainability). Companies that are not consolidated at-equity due to immateriality are shown in the Group s list of shareholdings. The at-equity consoldiated companies are now as follows: Name and registered office Share of capital in % direct indirect Financial statements dated Heimat Österreich ge meinnützige Wohnungs- und Siedlungsgesell schaft m.b.h., Sbg. 25.% Bergbahnen Aktiengesellschaft Wagrain 45.81% sub group Techno-Z Verbund, Sbg. 1.% Aberg-Hinterthal Bergbahnen AG, Maria Alm 26.82% 14.2% Bergbahnen Flachau Gesellschaft m.b.h. 25.1% Hobex AG, Sbg % c) Other companies These are subsidiaries not included in the consolidated financial statements due to their status of having only minor importance in providing a true and fair view of the Group s financial conditions. Name and registered office Share of capital in % direct indirect Equity in TEUR Operating result in TEUR Balance sheet Value Holdings Vermögensmanagement GmbH, München Value-Holding Fondsvermittlung GmbH, München Raiffeisenverband Salzburg Anteils- und Beteiligungsverwaltung GmbH, Salzburg 67.5% / % /16 1.% 2, /16 13 Raiffeisenverband Salzburg

14 NOTES TO THE CONSOLIDATED ACCOUNTS C. ACCOUNTING AND VALUATION PRINCIPLES General principles The consolidated financial statements were prepared according to the regulations of the Austrian Banking Act (BWG), the EU regulation No. 575/213 (CRR Capital Requirements Regulation) and the Corporate Code (UGB in its latest version). The consolidated financial statements were prepared under consideration of the principles of proper accounting and the general requirement to present a true and fair view of the company s assets as well as of its financial and earnings situation. The consolidated financial statements were compiled according to the principle of completeness and balance sheet continuity. Securities Fixed Assets Regarding long-term fixed-income securities admitted to listing on a recognised stock exchange according to Article 4 clause 72 of Regulation (EU) No 575/213, the option of write-ups and writedowns according to 56(2-3) BWG was applied. Regarding long-term fixed-income securities not listed on a recognised stock exchange according to Article 4 clause 72 of Regulation (EU) No 575/213, the positive difference between the acquisition costs and the amount repayable at maturity was recognised as expense immediately. Securities used as cover funds for ward money were valued according to the strict lower of cost method pursuant to 2(3) Mündelsicherheitsverordnung (Austrian Trustees Securities Directive). The valuation of assets and liabilities was based on the principle of individual evaluation assuming the company s ability as a going concern. In accordance with prudent commercial practices only realised gains as well as all identifiable risks and anticipated losses were taken into the profit and loss account at closing date. Foreign currency translation Foreign currencies were converted at the reference rate, published by the European Central Bank according to the provisions of 58(1) BWG. In cases where no reference rate was available, foreign currencies were converted at the middle rate of reference banks. All other securities reported under fixed assets were recognised according to 56(1) BWG in compliance with the rules for the valuation of fixed assets, stipulated in the Austrian business law. Current Assets Securities held for trading and listed at a recognised exchange pursuant to Article 4 clause 72 of Regulation (EU) No 575/213, were valued at their market price. A market price, determined under liquid market conditions at the respective valuation date, is used as the valuation rate. All other trading securities were valued according to 27 UGB. Investment funds were valued at their calculated value. 217 Annual Report 14

15 Loans and advance In the valuation of loans and advances to banks as well as loans and advances to customers, specific value adjustments and provisions were made for identifiable risks. As in the previous year, this occurred only in the event of a default event. permanent impairment no longer exist. The value of the shares held at Raiffeisen Bank International AG was reviewed on the basis of an expert opinion. The book value of Raiffeisen Bank International AG is assessed as being of value as per December 31st, 217. For non-default claims on customers, as well as loans and advances to credit institutions, general loan loss provisions were made. In addition, an additional reserve within the framework of the assessment scope pursuant to section 57 para. 1 Austrian Banking Act was formed for claims on customers. Additional charges are recognised as income in the year of the credit allocation. The general loan loss provision is calculated on the basis of the expected loss approach. Individual customers are grouped into homogeneous pools and assessed on the basis of risk parameters (HDR, LGD). The horizon for the calculation is one year. These homogenous pools are based on the risk measurement systems used (rating models) and on the regulatory structure of customers (states, banks, corporates and retail). This method of calculation is applied to the entire credit-risk-bearing receivables portfolio and to open-ended maturities. Participations Investments and shares in affiliated companies are valued at acquisition costs, unless sustained losses or a reduced equity require a depreciation on the pro rata equity, the income value or the exchange rate. Write-ups up to a maximum of the acquisition costs are made when the reasons for the Tangible Assets Property and equipment were recognised at cost less scheduled depreciation. Assets are depreciated on a straightline basis. Depreciation on property and plant ranges between 1.67% and 2.%, between 5.% and 33.3% on equipment. Extraordinary depreciation is made in the case of value impairments which are likely to be of a permanent nature. The low-value assets were fully written-off in the year of acquisition according to 226(3) UGB. Capital expenses Premiums and discounts (Agios/Disagios) were distributed over the term of debt. Other capital expenses were recognised in the income statement of the year of issuance. Goods on stock Stock was valued in accordance with the strict lower of cost or market principle. Relating to agricultural machinery the identity pricing method was applied, the FIFO-method for other inventory. Care was taken to ensure a loss-free valuation. Liabilities Liabilities were recognised at their nominal value or at their higher redemption amount. 15 Raiffeisenverband Salzburg

16 NOTES TO THE CONSOLIDATED ACCOUNTS Provisions Pension obligations The approach in the company s balance sheet has been made in accordance with the provisions of 198 and 211 of the Austrian Commercial Code (UGB) as amended by the Accounting Amendment Act 214 and taking account of the AFRAC Opinion 27 Provisions for pensions, severance payments, anniversary bonuses and similar long-term obligations according to the requirements of the company code of June 216. The partial value method was used as a method of financing the claims. The overall expense of an obligation is determined and distributed evenly over the entire period from the start of financing to the end of financing. The interest rate is based on the 7-year average rate as at , based on the German BilMoG; the interest rate is 2.79%. The average maturity of the portfolio at the current balance sheet date was assumed to be 13 years. The annual increase was based on the average of the past 7 years at 1.89%. A fluctuation margin was not applied. The AVÖ 28-P Basis of calculation for pension insurance Pagler & Pagler was used as a biometric basis for the employees. The present value is set as a provision for those entitled to benefits with a dormant or current entitlement and for claimants who have already reached the imputed retirement age. The calculations are based on a calculable pension age of 65 for two men and 62 for all other active employees. The pension obligations are individually designed and partly value-protected. Severance Obligations Provisions for severance payments were calculated according to financial principles. The calculatory pension age was 6 to 65 for women (6 born until and 65 born from ) and 65 for men in compliance with the provisions of AFRAC Opinion 27 Provisions for pensions, severance payments, anniversary bonuses and similar long-term obligations according to the requirements of the company code of June 216. The interest rate is based on the 7-year average rate as at , based on the German BilMog; The interest rate is 2.91%. The average maturity of the portfolio at the current balance sheet date was assumed to be 15 years. The annual valuation (1.99%), future increases (.76%) as well as fluctuations were calculated from the average of the previous years. Anniversary Bonuses Provisions for obligations to pay anniversary bonuses were calculated according to financial mathematical principles and by applying an interest rate of 2.91%, considering the life expectancy according to the Austrian General Mortality Table. The average maturity of the portfolio at the current balance sheet date was assumed to be 15 years. The annual valuation (1.99%), future increases (.9%) as well as fluctuations were calculated from the average of the previous years. 217 Annual Report 16

17 Derivative financial instruments For derivative financial instruments the fair value is calculated. The fair value is the amount at which the financial instruments can be sold or purchased on the balance sheet date at fair market conditions. Market values were applied in the assessment, if available. Internal assessment methods with current market parameters, particularly the present value technique and the option pricing model, were used for financial instruments without a market value. Generally, interest rate options (Caps, Floors) concluded with customers are squared with other banks, whereby the paramters of the client deal must be identical with the bank deal. This is a micro-hedge. In case of a micro-hedge, the spread between the premium received and the premium paid is recognised in the profit and loss statement entirely at the time the micro-hedge is formed. All purchased or sold interest rate options are valued at fair value and the assessed premium payments are capitalized as other assets or the premiums received are carried as other liabilities. Open positions are valued imparitularly according to the prudence principle. All swap contracts have been concluded for hedging reasons. No macro or cashflow hedges were used. The following interest rate swaps were used to hedge the fixed interest rate risks: own issues (micro hedge) nostro securities (micro hedge) loans (micro- and portfolio hedge) time deposits (portfolio hedge) The hedge is carried out in accordance with the maturity of the underlying transaction, or the maturity of the portfolio. These hedges form a valuation unit with a particular underlying transaction as the particular future payment flows will even out. The effectiveness of the portfolio hedges is controlled by special effectiveness tests. In the course of preparing the annual accounts, the hedging relationship is tested by means of prospective effectiveness test. Based on a present value simulation with a planning horizon of one year, an interest rate change of +/- 1 basis points is assumed. Thereby, the capital payment flow from the underlying business, as well as the hedging products (interest rate swap) are analysed separately. The present value of the interest rate is additionally assessed with the counterparty risk. These two present value results are set in relation to each other and may lie between.8 and 1.25 pursuant to AFRAC. At the end of the financial year a unique retrospective effectiveness test is carried out. In this connection, the changes in the present value of the underlying business and the hedging products (interest rate swap) are analysed on the basis of a modern historical simulation. The relations between the present values are allowed to range between.8 and 1.25 according to AFRAC. Interest rate swaps that are not used for hedging purposes were valued based on the imparity principle. Exchange rate risks are hedged with: currency swaps forward exchange transactions 17 Raiffeisenverband Salzburg

18 NOTES TO THE CONSOLIDATED ACCOUNTS E. NOTES TO THE CONSOLIDATED BALANCE SHEET 1. Assets and liabilities Maturity breakdown Receivables from banks and non-banks, not available on demand, and payables to banks and non-banks, not available on demand are classified according to the remaining time to maturity: Receivables from banks, not available on demand TEUR TEUR (PY) up to 3 months 918, ,962 more than 3 months to 1 year 355,771 26,678 more than 1 to 5 years 323, ,62 more than 5 years 66,747 1,899 Receivables from non-banks, not available on demand TEUR TEUR (PY) up to 3 months 21,96 254,52 more than 3 months to 1 year 42,441 37,754 more than 1 to 5 years 1,87,914 1,28,855 more than 5 years 1,25,139 1,156,95 Payables to banks, not available on demand TEUR TEUR (PY) up to 3 months 534, ,283 more than 3 months to 1 year 325, ,959 more than 1 to 5 years 28,776 2,659 more than 5 years 54,136 13,35 Payables to non-banks incl. savings deposits, not available on demand TEUR TEUR (PY) up to 3 months 282, ,848 more than 3 months to 1 year 568, ,653 more than 1 to 5 years 125, ,481 more than 5 years 1,3 1, Annual Report 18

19 Receivables from customers include notes receivable for TEUR (PY TEUR 175). 2. Securities The following bonds and other fixed-income securities on the assets side are due in 218: TEUR TEUR (PY) Fixed-income securities 77,78 126,49 The securities admitted to exchange trading that are included in the asset items bonds and other fixed-income securities, shares and other non-fixed-income securities, participations and shares in affiliated companies are divided into stock exchange-listed ones and unlisted securities as follows: a) stock exchange-listed securities TEUR TEUR (PY) Bonds / fixed-income securities 264, ,461 Shares / other securities Participations 26,757 b) unlisted securities TEUR TEUR (PY) Shares / other securities 14,56 25,74 Participations 54, ,32 Affiliated companies 43,143 36,85 The book value of the bonds including fixed-income securities admitted to exchange trading amounts to TEUR 264,745 (PY TEUR 295,461). Thereof securities with a nominal value of TEUR 261,55 (PY TEUR 295,25) were recognised as fixed assets. The book value of the shares and other non-fixedincome securities admitted to the exchange trading amounts to TEUR 88 (previous year TEUR 193). Securities with a nominal value of TEUR 1 (previous year TEUR 2) were considered as fixed assets. The allocation to the fixed assets was accomplished by intention of the Management Board. The difference between the acquisition cost and the higher market value of the securities of the trading portfolio / current assets admitted to exchange trading amounted to TEUR 1 (previous year TEUR 1) as per December 31st, 217. The small securities trading book consists of the following positions: 19 Raiffeisenverband Salzburg

20 NOTES TO THE CONSOLIDATED ACCOUNTS TEUR TEUR (PY) Bonds, convertible bonds 2 Investment certificates / Certificates Interest rate futures sales Information on securities in the inactive market Exchange rates or market prices in an active market are to be taken into account when determining market values. If no active market exists, the securities concerned are valued separately. Indicators for an inactive market are: Derivative financial instruments acc. 238 (1) Z 1 UGB and 64 (1) Z 3 BWG For purchased interest options, TEUR 524 (PY TEUR 544) was capitalized in the balance sheet item Other assets, while TEUR 725 (PY TEUR 633) were recorded as liabilites for sold interest options in the balance sheet item Other liabilities. Significant slump in trade volume or trade activities Available exchange rates or market prices vary substantially over time or between market participants Exchange rates or market prices are not up-to-date Significant increases in bid / ask spreads These indicators do not necessarily have to mean that a market is inactive. The following procedure was used for the assessment of the securities nostro portfolio according to the inactive market criterion: In the course of the assessment process, securities which, according to estimates by Raiffeisenverband Salzburg egen, provide evidence for an inactive market, are individually reviewed. The negative fair values of the interest rate swaps were not included in the profit and loss account because there is a hedging relationship with underlying transactions (valuation units). The effectiveness of the hedging relationship was tested and confirmed by means of effectiveness tests. A provision for contingent losses of TEUR 327 (PY TEUR 391) was formed for negative fair values from interest rate swaps that are not included in a hedge. Credit risk was taken into account in the model valuation of derivatives. Collateral agreements were concluded with the key counterparties. An insignificant credit value adjustment (CVA) was determined for the remaining customer derivative portfolio based on factors such as, in particular, residual term and counterparty default risk. 217 Annual Report 2

21 Classification of book value/fair value pursuant to 238 (1) (2) UGB in TEUR Balance sheet item Market value 217 Book value 217 Market value 216 Book value 216 Treasury bills 64,64 64,762 13,734 14,834 Loans and advances to banks 29,811 3, Loans and advances to customers Debt securities / fixed-incomes securities 35,138 35,268 78,167 78,353 Total 99,778 1,3 211, ,187 The bonds and securities in the books come from issuers with good creditworthiness. Therefore, a full repayment according to schedule is anticipated. Subordinated liabilities pursuant to 64 (1) 5 BWG The securitised subordinated liabilities which amounted to more than 1% of all subordinated liabilities on the are: Salzburger Nachranganleihe 8-218/17, TEUR 3, (PY TEUR 3,), due on , fixed interest rate 4,75% until , an interest rate of 125 basis points above 3-month-EURIBOR will follow, the right of termination at rate 1 as per was not used. Fixed interest bond Salzburger Fixzinsanleihe /NR/6, TEUR 8,5 (PY TEUR 8,5), due on , interest rate: 4,% fixed, no right of termination. Fixed interest bond Salzburger Fixzinsanleihe /NR/15, TEUR 1, (PY TEUR ), due on , interest rate: 4,% fixed, no right of termination. In addition, there is one securitised subordinated bond with an issuing volume of TEUR 2,245 (due on ), which does not exceed 1% of the sum of all subordinated liabilities. In the year under review, TEUR 1,168 (PY TEUR 695) was spent on subordinated liabilities. Ward Money The ward money at the reporting date amounted to TEUR 7,779 (PY TEUR 6,349). Gilt-edged securities with a total nominal value of TEUR 9,85 were attributed to backing. 21 Raiffeisenverband Salzburg

22 NOTES TO THE CONSOLIDATED ACCOUNTS 3. Shareholdings and relationships with related parties The information on participations pursuant to Art. 238 (2) of the Austrian Commercial Code (UGB) are set out in the supplement to this appendix. On the basis of the Banking Act, the companies in which the parent company owns at least 2% of the shares are listed in the shareholding table. Profit and loss transfer agreements exist for the following affiliated companies: Raiffeisen Immobilien Salzburg egen Raiffeisen Salzburg Vorsorge GmbH LGH Obertrum reg. GenmbH BVG Liegenschaftsverwaltung GmbH 4. Fixed Assets The land value of all developed properties is TEUR 9,65 (PY 92,329). 5. Other Assets Classification and illustration of other assets according to the most significant individual amounts, as far as these amounts are material for the assessment of the financial statements. TEUR TEUR (PY) Receivables from goods business 23,92 2,285 Goods in stock 3,852 29,442 Accrued interest for derivative financial instruments 4,965 4,166 Fiduciary claims State-IPS 7,56 5,555 Compensation RWS 2,12 2,8 Accrued taxes result from the following differences: provisions for social capital general provisions general value adjustments for loans and advances to banks and customers securitized claims from banks fixed assets In addition, the deferred tax item contains amounts for open sevenths from partial write-downs on participations in accordance with Section 12 (3) 2 KStG and amounts from the untaxed tax relief resulting from the transitional provisions of Section 124b Z 271 EStG in conjunction with Section 96 Abs. 31 UGB. Deferred taxes result from the following differences fixed assets financial assets. The deferred tax assets exceed the deferred tax liabilities so that on balance a tax relief results. Deferred taxes are calculated using a tax rate of 25%. 217 Annual Report 22

23 The distribution of the difference amounting to TEUR 19,979 over four years on the basis of the exercise of the option pursuant to Section 96 (34) UGB amounts to approximately TEUR 4,995 in the current financial year. For tax loss carryforwards, no deferred tax assets are recognized. at 31 December 217. Deferred tax liabilities that are reported under tax provisions increased by TEUR 186 and amounted to TEUR 189 as at 31 December Equity and equity-related liabilities Accrued tax assets decreased by TEUR 3,444 in the current year and amounted to TEUR 14,993 as Classification of the core capital and the additional own funds: TEUR TEUR (PY) Subscribed capital 56,815 48,951 Fund for banking risks 16,756 16,756 Retained earnings 359, ,2 Risk reserves 72,58 72,58 Capital reserves 1,344 1,344 Deductions from core tier 1 capital Common equity tier 1 capital 56,8 477,636 Additional tier 1 capital Core tier 1 capital 56,8 477,636 Additional tier 2 capital 15, ,254 Deductions from additional tier 2 capital Total own funds 611,944 6,89 23 Raiffeisenverband Salzburg

24 NOTES TO THE CONSOLIDATED ACCOUNTS 7. Disclosures concerning various items in the balance sheet a) List of assets, provided as collateral pursuant to 64 (1) No. 8 of the Austrian Banking Act: TEUR TEUR (PY) Covered bond stock 665,85 457,47 CreditClaims 347,327 EIB loans 53,647 5,35 Collateral Management 3,56 63,957 Raiffeisen Public Finance 31,842 33,786 Various bond depots 18,955 24,23 Bavarian subsidised loans 17,165 19,729 German state-aided loans 3,618 4,48 Export finance 21,872 3,879 Retaind bond at OeNB 37,5 85, b) The book-value of repos as of December 31 st, 217 amounted to TEUR 6,812 (PY 127,556 TEUR). c) Total amount of assets and liabilities in foreign currency: TEUR TEUR (PY) Foreign currency assets 296, ,342 Foreign currency liabilities 163,33 224, Annual Report 24

25 8. Off-Balance Sheet Items Among off-balance sheet transactions are information on positive fair values of derivative transactions. For negative fair values a provision for contingent losses was made, provided it is not part of hedging transactions. Furthermore, hedging transactions are entered into in the course of lending, that do not appear in the balance sheet. Mortgages, guarantees or rather loan guarantees, cash collaterals and other eligible assets mainly serve as collateral. In the disclosure report, according to Part 8 in the Regulation (EU) 575/213, information is presented on collaterals valued from the supervisory point of view. The disclosure report can be found on consolidated basis at (Investor Relations Offenlegung). E. NOTES TO THE CONSOLIDATED INCOME STATEMENT 1. Other operating income and expenses consist of the following significant individual items: TEUR TEUR (PY) Total amount operating income 9,439 87,139 - thereof net earnings from goods operations 5,593 48,635 - thereof income from the IT centre 1,213 1,279 TEUR TEUR (PY) Total amount operating expenses 4,367 4,137 - thereof allocation to deposit protection and winding-up funds 3,518 3, The total amount of income from administrative and agency services are TEUR 1,293 (PY TEUR 9,961). 3. The expenses for the auditor amount to TEUR 515 (PY TEUR 521). Breakdown of the auditors fees are as follows: 25 Raiffeisenverband Salzburg

26 NOTES TO THE CONSOLIDATED ACCOUNTS TEUR ÖRV KPMG Multicont PwC Audit of financial statements Tax advisory services 24 4 Other confirmation services 32 Other services 5 Total The expenses listed under ÖRV refer to the auditor appointed by the ÖRV. loss transfer agreements are reported under personnel expenses and charged separately. 4. Profit and Loss item 3b shows earnings of TEUR 75 (PY TEUR 75), resulting from a participation with a guaranteed dividend. G. OTHER INFORMATION 1. In the 217 financial year the average number of staff employed was (PY 1,622). Thereof, 1,41 (PY 1,365) were employees and 257 (PY 257) workers. Included in these figures is an average of 66 (PY 64) persons employed at subsidiaries with profit and loss transfer agreements. Thereof, 62 (PY 6) were employees and 4 (VJ 4) workers. Staff costs of subsidiaries with profit and 2. Loans to members of the Supervisory Board amounted to TEUR 3,31 (PY TEUR 3.118) as at December 31st, 217. Repayments to these loans totalling TEUR 39 (PY TEUR 46) were made during the 217 financial year. 3. Expenses for severance payments and pensions in the reporting year for directors and senior managers amounted to TEUR 1,96 (PY TEUR 1,438) and TEUR 3,167 (PY TEUR 5,141) for other employees. 4. There were no material or off-market transactions between related parties and Raiffeisenverband Salzburg egen pursuant to 28 Banking Act and 238(1) Z 12 and 266 Z 5 UGB. 217 Annual Report 26

27 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FOR 217, Raiffeisenverband Salzburg egen BUSINESS PERFORMANCE AND ECONOMIC ENVIRONMENT The financial year that just ended was a successful one for all segments and went largely according to plan. Business performance was very satisfying, associated with a risk situation in line with the general economic environment. The result for the year 217 shows the continously positive development of the past years. The result of Raiffeisenverband Salzburg egen (hereinafter called Raiffeisenverband Salzburg) played a major role in this trend, as it clearly dominates the consolidated financial statements in its position as the parent company. using the equity method. In 217 the investment in Bergbahnen Flachau GmbH, which is now also accounted for by using the equity method, was acquired. Investments and shares in the affiliated companies that are neither fully consolidated nor included in the consolidated financial statements with measurement according to the equity method, were reported at the carrying amount from the individual financial statements of Raiffeisenverband Salzburg. Balance sheet development As of 31 December 217 Raiffeisenverband Salzburg s consolidated total assets increased by 5.6% and amounted to EUR 7,49.5 million. The Group s total assets are only EUR 17.7 million larger than the total assets of the Group s parent individual financial statements. NOTES TO THE FINANCIAL AND EARNINGS POSITIONS Group structure The Raiffeisenverband Group comprises the parent company Raiffeisenverband Salzburg egen and 17 subsidiaries, thereof 16 financial institutions pursuant to Art. 4 para. 1 Z 26 CRR and one provider of ancillary services pursuant to Art. 4 para. 1 Z 18 CRR. These companies are included in the consolidated financial statement according to the full consolidation method. The investments in the non-profit housing association Heimat Österreich, in Aberg-Hinterthal Bergbahnen, Hobex AG, Bergbahnen Aktiengesellschaft Wagrain and the sub Verbund group Techno-Z were accounted for by Due to a higher cash balance at the Austrian National Bank, cash in hand increased by EUR 56.3 million to EUR 74.5 million. The item treasury bills and other bills amounted to EUR 77.5 million at year-end 217 and increased by about EUR 77.6 million. Loans and advances to banks increased by EUR million to EUR 2,38.5 million at year-end 217. Loans and advances to customers increased by 2.8%, from EUR 3,192.6 million to EUR 3,282.8 million. Debt securities, including fixed-income securities, decreased by 1.3% and amounted to EUR 268. million. The balance sheet item shares and other variable-yield securities decreased by EUR 11.1 million to EUR 17.1 million.participating interests and shares in affiliated undertakings amounted to EUR million. In total this means an increase of the portfolio of EUR 27 Raiffeisenverband Salzburg

28 MANAGEMENT REPORT 7. million. Tangible and intangible assets, held as fixed assets with a book value of EUR million at year-end 217, showed a decrease of EUR 6.6 million in comparison to the previous year. Other assets amounted to EUR 15.1 million and increased by EUR 14.5 million compared to the previous year. Accrued income was EUR 1.7 million and deferred tax assets amounted to EUR 15. million. Liabilities to credit institutions amounted to EUR 2,551.9 million at year-end 217 and therefore increased by EUR 78.5 million in comparison to the previous year. Liabilities to customers (non-banks) increased by EUR million or 7.% to EUR 2,866.5 million at year-end 217. The main reasons for this development were, amongst others, increases in savings deposits by EUR 7.6 million and in demand deposits by EUR million. Securitised liabilities increased by 26.1% to EUR 1,257.5 million. Other liabilities decreased by EUR 9.1 million to EUR 49.7 million. Provisions amounted to EUR 71.2 million. Deferred income amounted to EUR 16.1 million and decreased by EUR 2. million in comparison to the previous year. Supplementary capital, in accordance with Chapter 4 of Title I of Part 2 of Regulation (EU) No 575/213, increased by EUR 8.3 million to EUR 5.7 million. Equity (not considering the reserves for the state IPS-fund) grew due to an increase in retained earnings and an increase in subscribed capital by EUR 27.9 million to EUR million and was composed of subscribed capital, capital reserves, retained earnings, liability reserve, net profit for the year and the fund for general banking risks. Income statement Raiffeisenverband Salzburg dominated the Group s income statement as well. The operating result of the Group was only.6% lower than the result shown in the individual financial statement. Net interest income decreased year-on-year by EUR 4.1 million to EUR 53.9 million. The reasons for the decline were in particular the low interest rate policy of the ECB and the passing on of negative interest rates to consumers. Income from securities and participating interests increased mainly due to higher distributions from participations by EUR 5.1 million to EUR 11.1 million. Net commissions, as a result of commissions receivable minus commissions payable, increased by EUR.7 million to EUR 35.9 million. Net profit on financial operations declined by EUR.5 million to EUR 2.6 million and other operating income increased by EUR 3.3 million to EUR 9.4 million as per year-end 217. Total operating income amounted to EUR million in 217, which is an increase of EUR 4.5 million or 2.4% in comparison to 216. Operating expenses increased by EUR 3. million in comparison to the previous year and amounted to EUR million. The operating result as the balance of operating income and operating expenses increased by EUR 1.5 million, resulting in EUR 44.2 million for 217. The value adjustments in respect of accounts receivable, securities held as current assets as well as equity interests and securities held as fixed as- 217 Annual Report 28

29 sets amounted to EUR 17.5 million, which is a decrease of EUR 1.8 million compared to 215. Profit on ordinary activities declined slightly in 217 by EUR.3 million to EUR 26.6 million. Due to the discontinuation of the one-time advance payment of the stability fee, net income increased by EUR 8.7 million to EUR 23.5 million. of own funds was 14.7% (previous year 14.2%) and thus above the minimum legal requirement of 9,25% (incl. capital maintenance buffer). Development of core capital (CET1) in million EUR : +9 Mio. EUR In addition to Raiffeisenverband Salzburg, which dominates the Group, the following four CRR-Financial Institutions are seen as significant for the Group: The operation of Agroconsult Austria Gesellschaft m.b.h. includes the shareholder activity towards RBI AG. Participations in companies in the tourism and energy sectors are held by the Fremdenverkehrs GmbH and Unternehmensbeteiligung GmbH, the Industriebeteiligungs-GmbH invests in a non-profit residential- and housing company ,2% 3 11,4% 11,4% 11,3% 1,2% 2 9,3% Core capital (CET1) Core capital ratio (CET1) 15% 13% 11% 9% FINANCIAL PERFORMANCE INDICATORS Capital resources and profitability Total core capital (CET1) amounted to EUR 56. million at the end of 217 (previous year EUR million). As no additional core capital (AT1) has been issued, core capital amounted to EUR 56. million and increased by EUR 28.4 million in comparison to the previous year. This increase is mainly attributable to the growth in retained earnings. The total core capital ratio (CET1) was 12.2%. Since 212, CET1 capital has increased by EUR 89.8 million. This corresponds to an increase of 21.6%. Total own funds amounted to EUR million and increased by EUR 11. million. The level The cost-income-ratio (CIR) as a ratio of operating expenses to operating income (excluding the goods business, auditing and ORG/IT) was 68.6%, thereby slightly lower than the previous year (by.2%-points). The return on equity (ROE) before tax, a key figure showing the relation of profit of ordinary activities to average equity, was 5.1% for the financial year 217. RISK MANAGEMENT An active management of identified risks is the prerequisite of a sustainably successful corporate development and therefore of central importance for Raiffeisenverband Salzburg. In the interests of customers and shareholders, Raiffeisenverband 29 Raiffeisenverband Salzburg

30 MANAGEMENT REPORT Salzburg ensures the long-term security and stability of the company by using most modern methods and systems in the fields of risk management and risk controlling. Management considers the risk management systems used and anchored in the risk manual to be appropriate and in line with the business model and strategy of Raiffeisenverband Salzburg. Risk strategy The management of Raiffeisenverband Salzburg is responsible for all essential elements of risk management and defines the (risk) strategy for Raiffeisenverband Salzburg and its affiliates on the basis of the initial business policy, taking into account the risk-bearing capacity, personnel and technicalorganisational equipment. It defines the corporate goals and the requirements to reach them. The risk strategy, derived from the corporate strategy, encompasses the planned development of all significant business activities and is subdivided into sub-strategies. In addition, the responsibility of the management also includes the establishment of appropriate internal control procedures. Before starting with a new business by this Raiffeisenverband Salzburg understands especially new products, services, markets, business types, distribution channels and currencies or in case of substantial changes as well as in case of outsourcing of existing or new businesses, a comprehensive analysis of all business-related risks takes place as part of the product introduction process. The risk strategy provides a basis for the risk culture of the group of Raiffeisenverband Salzburg. The strategy is published in the risk manual, revised continuously and provided in a concerted fashion for all identified risk types. Resolutions on necessary adjustments and changes to the risk strategy are the sole responsibility of the Executive Board. The risk strategy is supplemented by detailed descriptions of procedural and explanatory notes on methodological regulations in the risk manual. In particular, the risk measurement methods for the risk types quantified for Raiffeisenverband Salzburg are defined in the risk manual. In addition, the organizational charts and risk-relevant business processes as well as the associated operational-, management- and effectiveness checks are evaluated and mapped centrally in the Raiffeisenverband Salzburg Process Portal. Raiffeisenverband Salzburg generally pursues a cautious risk policy. This is evident from the conservative management of lending and investment positions, the very low trading volume (small trading book) and the extremely low market price risk. Derivative financial instruments are generally used for hedging purposes only. This hedging strategy for interest rate swaps is documented by the valuation guidelines of hedge accounting. Risk management organisation Raiffeisenverband Salzburg avoids conflicts of interest by consequently separating the organisational and operational functions of front- and back-office units up to senior management level. The risk management function is carried out by the Risk Management department and the Director of Corporate Management. The risk management 217 Annual Report 3

31 department performs the function of centralized and independent risk management in accordance with 39 (5) BWG. The Head of Risk Management reports to the Director of Corporate Management and together with the latter to the Audit and Risk Committee of the Supervisory Board. The OE Risk Management (Risk Management department), which is independent of the market segments, ensures the transparency of all identified risk types of Raiffeisenverband Salzburg and monitors the risks at the portfolio level and at the overall bank level. In addition, OE Risk Management performs a consulting function for all risk-relevant issues and is responsible for the process of risk planning and capital allocation of the Raiffeisenverband Salzburg CI Group. Within the framework of the annual 3-year revolving planning, the definition and limitation of the planned risk structure is carried out. To detect any undesirable development in time and make appropriate decisions, the results of the ongoing risk monitoring are included in the risk reporting. In addition to daily risk reports, a central element of the reporting system is the monthly risk report issued by the Raiffeisenverband Salzburg CI Group. This monthly risk report analyses the risk bearing capacity and describes the use of limits of all quantified risk types and selected control units. The risk report of the Raiffeisenverband Salzburg CI Group is reported monthly to the management by the risk management department. The Head of Risk Management and the Director of Corporate Management report semi-annually on the current risk situation in the Audit- and Risk-Committee of the Supervisory Board. In addition, the Head of Risk Management reports every six months to the Chairman of the Supervisory Board on the current risk situation. The internal audit department monitors the operating and business processes as well as the risk management as an independent internal company division. Internal audit, which reports directly to the management, thus ensures the independent review of the effectiveness and appropriateness of the risk management system. The Risk Committee of the Supervisory Board advises the Executive Board on current and future risk appetite and risk strategy. It monitors the implementation of this risk strategy in connection with the management, monitoring and limitation of risks in accordance with section 39 (2b) items 1 to 14 BWG, the capital adequacy and liquidity. The risk management process of Raiffeisenverband Salzburg is based on a comprehensive list of instruments to identify, analyse, evaluate, steer, supervise and report risks. These methods and systems used comprise all activities for the systematic exposure to risks and are enhanced continuously according to economic and regulatory criteria. Risk bearing capacity As part of overall bank management, the quantified risks are compared with both economic (gone concern / substance concern) and going concern (ensuring the going concern of the company) risk coverage potential. The overarching goal of both views is to ensure that the risk coverage potential 31 Raiffeisenverband Salzburg