Brüll Kallmus Bank AG Annual Accounts as at

Transcription

1 Brüll Kallmus Bank AG Annual Accounts as at

2 DEVELOPMENT AND FIGURES FOR BRÜLL KALLMUS BANK AG in EUR k in EUR k Balance sheet total 17,058 15,948 Receivables due from clients 592 1,009 Liabilities due to clients 1, Operating profit 901 1,243 Profit from ordinary activities 814 1,170 Capital resources creditable in acc. with Article 23 Para. 14 BWG 12,000 12,000 Capital resources required in acc. with Article 22 Para. 1 BWG Capital resources required for operational risk Capital resources surplus 11,150 11,203 Capital resources as % of assessment in acc. with Article 22 Para. 2 BWG % % Client deposits 203, ,880 Assets under management 205, ,279

3 Management Report was the year when the intensification of the sovereign debt crisis and the slowing of the economy not only affected the financial industry, but also placed new and dramatic challenges before numerous governments and the real economy. The actions of the three large ratings agencies were discussed by financial experts, political decision-makers and among the wider public. The ratings reassessment of numerous Eurocountries announced by Standard & Poor s in early December 2011 was particularly memorable. As part of this reassessment of 15 countries with a negative outlook, nine countries, including the former Triple A countries France and Austria, were downgraded. Here we also have to mention the downgrading in early August of the world s largest debtor, the United States. The more negative assessment of creditworthiness led to an increase in refinancing costs. A look at the risk premiums on government bonds shows that these increased again considerably in 2011 for most countries. However, it is not only countries that are affected by these credit spreads, as capital costs in the real economy, and especially in the financial industry, have also increased noticeably, in Europe by an average of between 75 and 100 basis points. It is clear that at present the market classes the risk in the financial industry considerably higher than in the real economy. As at , European banks and insurance companies were paying around 100 basis points more for borrowing than companies in other sectors but with the same rating. This assessment by the market, namely that the financial industry is less crisis-resistant that other sectors of the economy, was countered in 2011, and will also be countered going forward, not least by the pressure from stricter regulations. For banks, a comfortable equity situation is currently one of the highest qualities. Brüll Kallmus Bank AG ( Brüll Kallmus Bank ) is in the comfortable position of having more than enough resources from its owners. Brüll Kallmus Bank is a specialist bank active in the field of corporate banking and is active mainly in the area of bonds sales and brokerage. With branches in Graz, Linz and Vienna, Brüll Kallmus Bank looks after institutional clients and quasiinstitutional clients throughout Austria and partly in neighbouring countries. In 2011, more than EUR 1.56 billion was repositioned (purchase and sale) by the Fixed Income department, thereby contributing critically to the increased efficiency of the domestic bonds market. In addition, the company has been able to develop a good reputation in the market with complex interest structures or illiquid bonds. BK Immo Vorsorge GmbH ( BK Immo ), which was founded in 2009 as a wholly-owned subsidiary of Brüll Kallmus Bank, specialises in the erection of investment apartments, the purchase and renovation of older housing stock and the conception of builder-owner models. In the reporting year 2011, BK Immo was able to improve its revenue and results considerably as a result of the finalisation of various projects. The creation of uniform staff and service departments for the banking holdings of Grazer Wechselseitige Versicherung AG was implemented in Since then, the staff and service departments have been located in organisational terms within the parent company of Brüll Kallmus Bank, Hypo-Bank Burgenland AG, and provide services for Brüll Kallmus Bank and for the other financial institutions and group members. Brüll Kallmus Bank always tries to keep its employees education and training at a very high level. Thanks to the high technical qualification and the willingness to work of our employees, as well as regular investments in their training and education, we are looking forward with confidence to our bank s future challenges. As at , Brüll Kallmus Bank had 10 employees, or 9.7 FTEs respectively.

4 Prevailing economic conditions 2011 was dominated in particular by two subjects, the good economic performance in the first half of the year and the sudden collapse in the economy in the second, as well as the continuing shadow of the sovereign debt crisis. The global economy was not able to repeat the good growth of 3.98 % in 2010 and in 2011 achieved growth in the region of 2.7 %. Even China, with estimated growth of 9.2 %, was not able to reach its double-digit growth from the previous year and according to current forecasts will have to cope with further slowing growth rates in the coming years. Growth in the Eurozone and the United States is expected to be around 1.6 % and 1.8 % respectively for 2011, according to current estimates. While the economic outlook for the USA is positive, growth in 2012 is expected to increase to 2.3 %, experts are expecting the Eurozone to fall back into a slight recession. For the Eurozone in particular, it is feared that economic stimulus investments by the state will be restrained because of the planned consolidation measures. With annual growth of more than 3.0 %, Austria was able to considerably exceed most forecasts and according to current forecasts will be able to achieve a small, positive growth rate for the coming year, in contrast to the Eurozone. Reinforced by the so-called basis effect among oil products and food, the inflation rate on a monthly basis reached a new high of 3.6 % in November In 2011 as a whole, the average inflation rate in Austria was 3.3 %, the highest level since it joined the EU in In the Eurozone and in the EU27, the consumer price index increased around 2.7 %. The unemployment rate in the European Union and in the Eurozone reached a new high at the end of 2011; the average unemployment rate in the 17 countries of the Eurozone in December 2011 was around 10.4 %. With 4.1 %, Austria continues to have the lowest rate in the EU. The extremely high unemployment rate of 22.1 % (young people under 25) represents a large problem for the EU. The performance of the international financial markets revealed extremely different pictures in the last financial year. The markets doubted the problemsolving competence of European politicians to get a grip on the subject of the escalating national indebtedness, and as a result numerous indices fell to two-year lows. The EUROSTOXX 50 Index recorded a year-on-year fall of 17.1 % and the most important national indices also end the year down: FTSE 100, -5.6 %; CAC 40, %, and DAX, %. Because of the large banking representation in the Austrian shares index and the eastern European commitments of domestic banks, which is currently being looked at critically, the domestic ATX fell considerably by %. In 2011, institutional investors overwhelmingly preferred the American market and were able to enjoy a performance (in USD) of 5.5 % by the Dow Jones Index and 0.9 % by the S&P 500 Index. European investors with US dollar investments were able to achieve addition returns as a result of the strength of the US dollar. The EUR/USD exchange rate fell over the year by around 3.2 % to below the 1.30 level. The Euro also fell compared to other important currencies, the Japanese yen, Swiss franc, and Chinese renminbi. In the bonds asset class, the risk premiums increased on average in all categories (government and corporate bonds); an expression of the uncertainty dominating the markets. The commodities markets performed very differently during the last financial year. The price for crude oil increased over the year from USD to just below USD and the price of gold by around 9.2 %, after a volatile performance. By contrast, the price for numerous precious metals fell, above all aluminium, lead, copper and nickel,

5 and at the end of the year agricultural products such as wheat and cocoa were also cheaper than at the same time in the previous year. For the first time since May 2009, the European Central Bank (ECB) turned the interest screw and increased the base rate in April from 1.0 % to 1.25 % and by another 25 basis points in July to 1.5 %. Under the new ECB president Mario Draghi, who replaced Jean-Claude Trichet at the head of the bank on 01 November, the base rate has been reduced again in two steps back to 1.0 %. In the United States, the base rate remained unchanged since late 2007 at its low level of %. Development of the business Balance sheet The total assets of Brüll Kallmus Bank increased in the last financial year by EUR 1.1 million (+7.0 %) from EUR 15.9 million to EUR 17.1 million. This is due to the increase in liabilities payable to clients of around EUR 1.1 million in combination with reporting date-related considerations. Receivables due from clients fell considerably over the course of the year by EUR 0.42 million to approx. EUR 0.59 million at the end of the year. As in previous years, the bank did not hold any securitised liabilities. The return on equity based on profit on ordinary activities (ROE: 2010: 9.8 %; 2011: 6.8 %) decreased compared to the previous year s level by 3.0 percentage points. The return on assets based on profit on ordinary activities also fell in the period from 6.8 % in 2010 to 4.9 % in the 2011 financial year. Because of the limited required equity of Brüll Kallmus Bank compared to the income earned, the bank has a high return on capital employed of 95.8 % for Income statement In the reporting year 2011, Brüll Kallmus Bank was able to achieve profit on ordinary business of EUR million. Compared with the profit on ordinary business for the previous year, this corresponds to a fall of EUR million. In accordance with the object of the company, the focus lies on the company s income from commission business. The commission and financial results decreased, due to the fall in the number of employees, by 26.4 % from EUR 4.1 million to EUR 3.0 million. Sources: OeNB, Konjunktur Aktuell, December 2011 EUROSTAT, European Economic Indicators 2011 OECD, World Economic Outlook, November 2011 IMF, World Economic Outlook, October 2011 ROE = Profit from ordinary activities in relation to capital resources excluding net profit and allocation to reserves ROA = The relation of profit from ordinary activities to the average balance sheet total ROCE = The relation of profit from ordinary activities to the required capital resources The staff turnover led to a fall in personnel costs. They decreased by 36.5 % to EUR 1.1 million. Material costs increased slightly over the course of the year from EUR 1.2 million to EUR 1.3 million. Overall, the operating costs decreased considerably (-18.3 %) and at the end of the year totalled EUR 2.4 million. The operating results for 2011 are just above EUR 0.9 million, which corresponds to a

6 year-on-year fall of 27.5 %. No particular subsequent events worth reporting have occurred since the reporting date. Client deposits As at , client deposits totalled EUR million, which is a considerable increase from EUR million in the previous year. Proposed dividend In the financial year 2011, a profit on ordinary business of EUR million and a balance sheet profit of EUR million were achieved. After a successful resolution passed by the General Meeting, Brüll Kallmus will pay a dividend estimated to be EUR 1.45 million to its owner, Capital Bank - GRAWE Gruppe AG. Outlook The global economy and, in particular, that of the Eurozone had to cope with a large slowing in the third quarter of It can be assumed that the capacity utilisation in Europe will reduce further while it starts to recover in other regions. A mild recession is expected for Europe for the first half of With the recently published economic figures, the United States was able to give a slightly positive surprise, the consensus data from the information network Bloomberg expects growth in the USA of around 2.3 % for Some strong growth rates are only expected for the emerging markets, as in the last year. The inflation forecasts have stabilised over the last few months and in some regions have been revised down. The monetary policy measure selected by the ECB so far has not led to increasing inflation and this is not expected either going forward, as the additional liquidity is not entering circulation in the form of loans. The risk of higher inflation can therefore currently be assessed as low. The currently perceptible inflation is largely due to the increase in crude oil products and is not a result of the relaxed monetary policy. Brüll Kallmus Bank therefore expects the erratic development on the financial markets to continue. As a result, 2012 will also see attractive opportunities for Fixed Income Sales, which will have to be taken advantage of. In the coming financial year, the Fixed Income area should be expanded further and there are plans to be increasingly active in Germany and Switzerland as well as in the Austrian market, which is already fully served. The bank s customer focus remains unchanged on suitable counterparties and professional clients according to MiFID. Alongside Austrian and international institutions, this also includes medium-sized companies which need to access the capital market. Additionally, through its wholly-owned subsidiary BK Immo, Brüll Kallmus Bank will further drive forwards the erection of investment apartments, the purchase and renovation of older housing stock and the conception of builder-owner models. Here, in particular, it will be necessary to react to the planned tax changes resulting from the savings package presented in early In the 2012 financial year, six projects are underway and at least one or two client models should also be added to this. The search for suitable property for sheltered housing is currently underway in Vienna. Another positive result can be expected for As a result of the high technical qualifications and capacity of our employees, along with the regular investments in their training and education, we see the future development of our bank very confidently, both for the coming financial year and also for the longer-term.

7 Brüll Kallmus Bank AG RISK REPORT Brüll Kallmus Bank AG is the bank within the banking group of the HYPO Bank Burgenland AG that specialises in institutional clients. As a wholly-owned subsidiary of Capital Bank GRAWE Gruppe AG, Brüll Kallmus Bank is integrated into the HYPO Bank Burgenland AG banking group, which draws up group accounts for the bank group as a higher institution. In accordance with the statutory provisions of Article 30 Para. 7 Austrian Banking Act (BWG), HYPO Bank Burgenland AG as the parent bank is obliged to satisfy the ICAAP provisions at the consolidated level. In addition to Capital Bank GRAWE Gruppe AG and its banking subsidiaries, the consolidation group also comprises Bank Burgenland Leasing as well as the Sopron Bank as a bank subsidiary abroad in the EU. Disclosure according to Section 26 and Section 26a BWG in conjunction with OffV is performed at the consolidated level of the HYPO Bank Burgenland AG banking group in a single document on our bank s homepage. Risk management The objective of Risk Management is to identify, quantify and actively control all the risks in the banking business (credit, market, interest and liquidity risks along with operational risks). In accordance with the statutory provisions of Article 30 Para. 7 BWG, Bank Burgenland AG as the parent bank is obliged to satisfy the ICAAP provisions at the consolidated level or rather, Risk Management must take place at the consolidated level. The aim is to maximise profits at a given risk load factor. This is underlined by the principle that through careful management a profit appropriate to the risk should be obtained for every bank transaction. Measurements of the actual risk are compared with the actual profits in a risk profile. In addition to the aim of optimising a balanced relationship between risk and profit, HYPO Bank Burgenland AG group follows the objective of recognising early the risks arising from operating a bank and managing and limiting them actively using effective risk control. At the centre of these risk control activities is the most efficient use of the capital available taking the medium and long term strategic aims and growth prospects into consideration. The further development of the range of instruments and processes for risk identification, quantification and steering for guaranteeing an adequate riskchance ratio are considered as sustainable strategic components. Brüll Kallmus Bank AG s Risk Management is geared to recognising, recording and controlling all the risks connected with the business model under the points of an appropriate risk/earnings situation referred to above. Apart from the their full recording, control of the banking business and banking operating risks requires risk to be measured using operational systems and action to be taken with awareness of risk in strategic business. This also means that the principle of caution has to be taken into consideration where an opaque risk situation exists. Only those risks are taken on which can also be evaluated. Group standards are laid down for the risk management plan by the group parent HYPO Bank Burgenland AG. These are based on the general statutory provisions and on the regulatory requirements needed for a professional management of credit, market, liquidity and operational and other risks. The aim is to define uniform standards or rather codes throughout the group to identify, measure and monitor risks along with the use of suitable methods for measuring risk. Risk management units have been set up in the HYPO Bank Burgenland AG group to implement a uniform risk management process. Brüll Kallmus Bank AG s risk management is realised by Capital Bank GRAWE Gruppe AG Risk Management, which in turn is integrated into HYPO Bank Burgenland AG s risk management cycle.

8 What is understood by the term risk management is a process, based on the division of labour, of identifying, measuring, monitoring and controlling various risks. The basis for risk management in the HYPO-Bank Burgenland AG Group is the strict separation between trading and back office. The risk management functions are carried out according to the risk policy guidelines specified by the Board of Directors, which define the risk steering and the qualified and contemporary monitoring of the risks in interaction with the individual business divisions and the independent risk function. In accordance with the principle of proportionality, the organisation of the risk management corresponds in terms of quality and quantity to the internal requirements, business activities, strategy and risk situation. Risk management is located at the Group level and therefore is performed by the parent company HYPO-Bank Burgenland AG. The requirements of the Group risk management are implemented through operative risk management units in the various subsidiaries. Apart from risk steering, the tasks of risk management in Capital Bank - GRAWE Gruppe AG include market, strategic credit and operational risks, as well as risk monitoring in Private Banking and risk steering for the banking subsidiaries of Capital Bank - GRAWE Gruppe AG and the overall bank steering. The operative credit risk management is carried out in the Credit Management department. As part of the implementation of the Group risk management, there is close cooperation between risk management at HYPO-Bank Burgenland AG and Capital Bank - GRAWE Gruppe AG. Risk management is taken into consideration specifically through the creation of decision-making groups set up especially for this for the Board of Directors ( Committees ). Principles of risk management Risks in Brüll Kallmus Bank AG are monitored and controlled by a system of risk principles, risk measurement procedures, limit structures and supervision procedures. Within the framework of the risk management process, a significant principle is the risk policy. It is an integral part of overall bank control and defines part of company strategy along with the bank s readiness to take risks and risk orientation. The risk policy is determined in Brüll Kallmus Bank AG by its board of directors, taking into account group developments and guidelines alongside the business strategy. The risk policy includes the planned development of the entire business in several dimensions. The setting of limits for relevant risks and restricting cluster risks is also undertaken by the board of directors or the Supervisory Board in the form of large investment limits, taking the guidelines and limits set by the group parent into account. The principles of risk policy represent a fundamental integral part of risk management principles. The following risk policy principles are defined across the Group:»» The management and all employees are committed to risk policy principles and also take their decisions adhering to these guidelines.»» Risk control and controlling processes correspond to the current legal requirements and are adapted to changing conditions.»» The bank s risks must be actively controlled in the context of overall bank risk management.»» The procedures and measures in the context of risk management must be appropriate according to the principle of the proportionality of the degree and complexity of the risks. A continual further development and refining of the methods must also be worked towards. The methods of risk assessment and measurement are arranged and applied according to the respective extent, complexity and content of the transactions. In principle, not only are trading risks recorded, the risks resulting from an overall consideration of the bank are taken into account.»» In its dealings and behaviour towards third

9 parties, such as clients, lenders of last resort or business partners, the bank must consider building up confidence. In this sense the bank s risk culture must be actively steered in the direction of increased sensitivity to risk. Employees must be informed about how the bank understands risk and the requirements of them arising from this.»» Risk management is taken care of at group level. To complement this every employee is encouraged to recognise and initiate appropriate measures.»» Regular reports about the bank s risk situation must be presented to the board of directors or rather the committees taking the decisions.»» A suitable limit system must be deployed in the context of risk control and constantly monitored.»» The development of new business fields and products generally requires an adequate analysis of the business-specific risks (product approval process). Only understood, calculable, controllable risks that can be represented in the systems may be entered into. Another significant principle of risk management is the product authorisation process associated with the launch of new products or entry into new markets. Capital Bank - GRAWE Gruppe AG is committed in principle to those business fields where specialist knowledge and experts are available and where there is a corresponding monitoring or the possibility to assess specific risks. The development of new business fields or new products requires an adequate analysis of the business-specific risks. To this end, a product authorisation process has been defined for this point in Capital Bank GRAWE Gruppe AG which defines the process-organisation regulations which determine the procedures for issues or investments in new products or the entrance into new markets and which identifies the main opportunities and risks as the basis for a decision. Risk management of special types of risk As part of the risk management of Brüll Kallmus Bank AG, concentration is on the risks close to the focus of the business model. In the specific case these are the credit and market risk and the operational and other risks, which are particularly important within the framework of the monitoring and steering process. Credit risk The settlement risk above all represents the most fundamental risk in the field of credit risk in Brüll Kallmus Bank AG. The settlement risk defines the risk that during the handling of a transaction one of the contracting parties will not meet its obligation to pay or to deliver. Strict guidelines for releasing contracting parties are defined in Brüll Kallmus Bank AG to minimise this risk. In addition, the individuals acting are encouraged to process transactions one after another so as to thus minimise the risk. The risk of default arises chiefly in Brüll Kallmus Bank AG in the field of loan and security dealings. Risks in this field are continuously reported to the risk committee. The standard estimate of credit risk is applied to credit risk calculation in Brüll Kallmus Bank AG. Market risk Market risks describe potential losses which may arise from negative changes in market value of positions due to exchange rates (currency risks), share prices, indices and fund prices (share risk), the credit spread (spread risk) and volatilities (volatility risks). These risky positions arise either through customer transactions or through the deliberate assumption of positions in the bank s own portfolio. The most significant risk factors among the market risks are the interest rate change risks, foreign currency risks, the price risk of variable interest securities, and credit spreads caused by price risks for interest-bearing securities.

10 The market risks are managed in Group Treasury, in the Active-Passive Committee (APK) and by the Risk Management, which are responsible for the identification, measuring, monitoring and steering of market risks in the trading and banking book. The organisation of the treasury transactions is characterised by the separation of the market and back office. Market risks can only be entered into within the framework of existing limits and only in approved products. The limits are defined annually by the Board of Directors after taking into account the risk capacity and the Group limits. A desired degree of diversification in the portfolios, and the trading strategy, are important factors for developing the limit structure. Apart from volume and positions limits, sensitivity limits and country limits are taken into account when setting limits. Brüll Kallmus Bank AG defines the interest rate risk as the risk of price fluctuations of interestbearing securities that result from changes in capital market interest rates. The interest rate risk is managed Group-wide in Group Treasury and in the active-passive-committee, which steers the interest structure taking into account the risks. Based on the OeNB interest risk statistics, it can be stated that compared to the regulatory limit of 20 % of the available equity, the interest rate risk is at a low level. It can also be seen that the interest rate risk in Brüll Kallmus Bank AG makes up a small proportion of the overall banking risk because of the current business strategy. Operational risk By operational risk, Brüll Kallmus Bank AG means losses which come about due to the inappropriateness or the failure of in-house procedures, people and systems or of external events. Legal risks are similarly defined under operational risks. The measurement of capital in the risk measurement systems derives from the regulatory base indicator method. Errors from operational risks are gathered in a database throughout the group to control strategic risks. Legal risk is accorded particular importance in the field of operational risk because risks in the legal field can mainly arise due to Brüll Kallmus Bank AG s trading activity. Product approval processes are undertaken and external advisors/ lawyers are called upon to minimise this risk when introducing new products or classes of business. Sufficient analysis of the risks specific to a business is a fundamental component in the context of the product approval process when including new fields of business or products. Other risks Liquidity risk and the general business risk appear in the context of other risks. On one hand, liquidity is the risk that current and future payment obligations cannot be met in full or on time and on the other hand the risk that the procurement of liquid funds can only take place under conditions which are not advantageous. Liquidity control at Brüll Kallmus Bank AG is undertaken within the group treasury by the HYPO Bank Burgenland AG s Treasury Department. The regulatory liquidity requirements were met at all times by Brüll Kallmus Bank AG in The possibility of an unforeseeable, increased liquidity requirement or a short-term liquidity procurement is secured in Brüll Kallmus Bank AG through the use of open refinancing lines held with other banks and through the sale of securities held on the books which are not pledged. Serious or unquantifiable risks are taken into consideration as risk buffers within the risk bearing capacity calculation.

11 Summary and outlook Measures are taken within Brüll Kallmus Bank AG to limit and minimise all significant risks. As part of the group consideration, all risks of Brüll Kallmus Bank AG are taken into account in the risk capacity analysis and in the group limits of HYPO Bank Burgenland AG. The risk capacity calculation by Brüll Kallmus Bank AG shows that the risk capacity of Brüll Kallmus Bank AG is only used to a very limited extent by risks and that there is a sufficient buffer for the available risk coverage capacity. In 2012, Brüll Kallmus Bank AG will continue its business according to its selected risk strategy. As a result of the expansion of the business activity in existing business areas of Brüll Kallmus Bank AG, and by opening up new business areas, there will be new tasks and challenges for Risk Management for Furthermore, the increasing harmonisation of risk methods and of the risk systems and controlling with the group parent form further topics for Risk Management. Apart from these projects, the continual ICAAP process, adapting the reporting and the constant improvement of existing risk management activities represent further tasks for Risk Management for the coming year. Graz, 2 March 2012 The Board of Directors.... Christian Jauk, MBA, Director.... Mag. Constantin Veyder-Malberg. Director

12 BRÜLL KALLMUS BANK AG STATEMENT OF FINANCIAL POSITION AS AT ASSETS EUR EUR EUR k EUR k 1. Cash and balances at central banks 55, Public authority debt instruments, authorised for refinancing at the central bank Public authority debt instruments and similar securities 1,296, Receivables due from banks 6,163, ,431 a) due daily 2,160, b) other receivables 4,002, , Receivables due from clients 592, , Debenture stocks and other fixed interest securities 7,923, , Shares and other non-fixed interest securities Investments of which: in banks Shareholdings in affiliated companies 35, of which: in banks Intangible fixed assets Tangible assets 67, Other assets 887, Prepayments 37, Total Assets 17,058, ,948 Below-the-line items 1. Foreign assets 5,680, ,306

13 BRÜLL KALLMUS BANK AG STATEMENT OF FINANCIAL POSITION AS AT LIABILITIES EUR EUR EUR k EUR k 1. Liabilities due to banks 154, a) due daily b) with agreed duration or notice period 154, Liabilities due to clients 1,494, a) Savings deposits aa) due daily bb) with agreed duration or notice period b) Other liabilities 1,494, aa) due daily 1,494, bb) with agreed duration or notice period Securitised liabilities Other securitised liabilities Other liabilities 1,184, Deferrals Provisions 327, a) Provisions for severance payments 16, b) Provisions for pensions c) Tax provisions d) Other 311, Subscribed capital 6,000, ,000 Nominal value 6,000, , Capital reserves 2,335, ,335 a) fixed 1,335, ,335 b) not fixed 1,000, , Retained income 2,309, ,309 a) legal provision 14, b) other provisions 2,294, , Liable reserve in acc. with Art. 23 Para. 6 Austrian Banking Act 1,355, , Net earnings 1,896, ,471 a) Accumulated earnings 471, b) Annual earnings 1,424, Total Liabilities 17,058, ,948 Below-the-line items 1. Contingent liabilities Liabilities from guarantees furnished and liability from the provision of collateral Credit risks 217, Equity to be taken into account in accordance with Art. 23 Para. 14 BWG (Austrian Banking Act) 12,000, , Equity required in accordance with Art. 22 Para 1 BWG. 849, of which: Equity required in accordance with Art. 22 Para. 1 (1) and (4) BWG 849, Foreign liabilities ,010

14 BRÜLL KALLMUS BANK AG INCOME STATEMENT FOR THE FINANCIAL YEAR EUR EUR EUR k EUR k 1. Interest and similar earnings 393, of which: From fixed interest securities 290, Interest and similar expenses -50, I. NET INTEREST REVENUE 343, Revenue from securities and investments a) Income from shares, other equity interests and non-fixed interest securities b) Income from investments c) Income from shareholdings in affiliated companies Commission earnings 2,874, , Commission expenses -60, Revenue/expenses from financial transactions 168, Other operating revenue 2, II. OPERATING INCOME 3,328, , General administrative expenses -2,398, ,956 a) Payroll costs -1,132, ,784 aa) Wages and salaries -933, ,469 bb) Expenses for statutory social charges and for income-based charges and compulsory contributions -150, cc) Other social security expenses -10, dd) Expenses for retirement benefits and support -9, ee) Allocation to the pensions reserve ff) Expenses for severance payments and payments to operational company pension funds -27, b) Other administrative expenses (operating expenses) -1,266, , Value adjustments on the assets listed under asset items 9 and 10-27, Other operating expenses III. OPERATING COSTS -2,426, ,969 IV. OPERATING PROFIT 901, , Value adjustments on receivables and allocation to reserves for contingent liabilities and credit risks Revenue from the release of value adjustments on receivables and from reserves for contingent Eventual verbindlichkeiten und für Kreditrisiken Wertberichtigungen auf Wertpapiere, die wie Finanzanlagen bewertet sind, sowie auf Anteile liabilities and credit risks -95, Revenue from the sale of securities evaluated as financial assets and on shareholdings in affiliated companies 8, V. PROFIT FROM ORDINARY ACTIVITIES 814, , Tax on income 611, Other tax, if not to be entered under item VI. ANNUAL NET PROFIT / LOSS 1,424, Allocation to or liquidation of reserves of which: Transfer to liability reserve VII. ANNUAL PROFIT 1,424, Accumulated profit 471, VIII. BALANCE SHEET PROFIT 1,896, ,471

15 EQUITY AND EQUITY REQUIREMENTS IN EUR K BRÜLL KALLMUS BANK AG Core capital (Tier 1) 12,000 12,000 Paid-up capital 6,000 6,000 Capital reserve 2,335 2,335 Retained income 2,309 2,309 Liability reserve 1,356 1,356 Consolidation in accordance with Art. 24 Para. 2 BWG (Austrian Banking Act) 0 0 Intangible fixed assets 0 0 Non-core elements (Tier 2) 0 0 Reserve as specified in Art. 57 Para. 1 BWG 0 0 Revaluation reserve 0 0 Deductions 0 0 Eligible equity capital 12,000 12,000 Assessment basis (banking book) 3,513 4,563 Core capital ratio (banking book) % % Aggregated capital ratio (banking book) % % Equity requirements (banking book) Equity requirements (trading book) - - Equity requirements for operational risk Equity surplus 11,150 11,204

16 SCHEDULE OF ASSETS FOR BRÜLL KALLMUS BANK AG AS AT Procurement and production costs As at EUR Additions EUR Disposals EUR As at EUR Public authority debt instruments ,279, ,279, Receivables from banks (securities) 515, , Receivables from clients (securities) 529, , Loan stock and other fixed interest securities Investments 9,341, ,004, ,296, ,049, Shareholdings in affiliated companies Intangible assets 35, , Tangible fixed assets 42, , , Low value items , , Total fixed assets 10,463, ,366, ,828, ,001, Depreciation cumulative EUR Book value EUR Book value EUR Depreciation 2011 EUR Public authority debt instruments 10, ,269, , Receivables from banks (securities) 12, , , Receivables from clients (securities) , Loan stock and other fixed interest securities Investments 270, ,779, ,223, , Shareholdings in affiliated companies Intangible assets , , Tangible fixed assets 54, , , , Low value items , Total fixed assets 348, ,653, ,294, ,704.86

17 NOTES BY BRÜLL KALLMUS BANK AG ON THE ANNUAL ACCOUNTS AS AT A. General information B. Accounting policies Brüll Kallmus Bank AG (hereinafter referred to as Brüll Kallmus) is a bank according to the Austrian Banking Act with its prime focus on institutional clients. Bank Burgenland has the function of a superordinate bank in the banking group. Capital Bank GRAWE Gruppe AG was included by GRAWE in Bank Burgenland. Within Capital Bank the holdings in Brüll Kallmus Bank AG and in Security Kapitalanlage Aktiengesellschaft as significant subsidiaries must be mentioned. The parent company which draws up the group accounts for the largest circle of companies is Grazer Wechselseitige Versicherung AG, Graz. Publication of the group accounts takes place at the parent company s registered office. The parent company which draws up the group accounts for the banking circle of companies is HYPO-BANK BURGENLAND Aktiengesellschaft, Eisenstadt. THE HYPO-BANK BURGENLAND Aktiengesellschaft group accounts are deposited at the Eisenstadt regional court. The comparative figures given come from the Annual Accounts 2009 and were placed in brackets. The Statement of Financial Position and Income Statement are divided according to the forms contained in Annex 2 to Section 43 BWG. The Annual Accounts of Brüll Kallmus Bank AG were drawn up according to the principles of proper accounting and preparation of a Statement of Financial Position adhering to the general standard of conveying as true a picture as possible of the assets position, financial position and earnings. The principle of completeness was adhered to when drawing up the Annual Accounts. The principle of individual valuation was applied to assets and debts. All recognisable risks and impending losses which arose in the financial year 2010 or in an earlier financial year were taken into consideration. The valuation methods applied hitherto were retained. The principle of conservatism was taken into account by recognising only profits realised on the reporting date. All recognisable and impending losses were taken into consideration. The ECB reference rates (average rates) published on were used to value the foreign currency liabilities. The securities in fixed assets are recognised at procurement cost or the lower market value (strict lowest value principle). The time-rated impairment option according to Section 56 (2) BWG is applied. The criterion for categorising fixed assets was the sustained earning of income or the existence of restrictions on disposal. As at the year-end, there were no current assets. The bank has a large trading book, although as at the year s end no securities were held in the portfolio.

18 Receivables due from banks and clients are assessed in principle at face value. All the risks recognised in credit transactions were taken into account by creating appropriate individual adjustments. Investments and shareholdings in associated companies are assessed at procurement costs or, where there was sustained value reduction, at the reduced value as at the balance sheet date. Plant, property and equipment are valued at procurement cost reduced by normal depreciation. Normal depreciation was carried out on a straightline basis. Assets of minor value were written off in full in the year purchased. The depreciation rates for moveable assets were % to 50 % p.a. The full annual depreciation was applied to additions purchased in the first half of the year and half the annual depreciation was applied to additions purchased in the second half of the year. The statutory provisions in accordance with all identifiable risks and anticipated losses along with the amount of liabilities not yet ascertainable were taken into consideration when assessing provisions. Liabilities were reported at the repayment amount. Brüll Kallmus Bank AG is part of a group of companies in accordance with Article 9 KStG (Austrian Corporation Tax Act). HYPO-Bank Burgenland AG is the group leader. Disclosure in accordance with Article 26 Austrian Banking Act is undertaken by the superordinate bank HYPO-Bank Burgenland AG. C. Notes on the Annual Accounts The breakdown of fixed assets and their development in the year under review is given in the schedule of assets (cf. Appendix 1 to Notes). Just as in the previous year the bank did not have either developed or undeveloped real estate in tangible fixed assets on the reporting date. The bank s fixed assets as at 31 December 2011 include securities with a book value of EUR 9.6 million (EUR 10.2 million). The difference between acquisition costs and the higher market value totals EUR 147 k (EUR 29 k). The difference between the book value and the lower repayment amount of fixed income securities in the fixed assets is EUR 83 k. Securities in fixed assets (including rateable interest) are included in the following line items: in A2 bond from public issuers EUR 1.3 million (EUR 0.0 million) in A3, receivables due from banks EUR 0.5 million (EUR 0.5 million) in A4, receivables due from non-banking clients, none (EUR 0.5 million) in A5, debenture bonds and other fixed-income securities, EUR 7.9 million (EUR 9.2 million) Please also refer to the enclosed Schedule of Assets, Annex 1. Receivables due from and liabilities due to banks and clients Receivables due from banks include EUR 0.5 million (EUR 0.5 million) for securitised receivables not licensed for stock market trading, and from clients of EUR 0.0 million (EUR 0.5 million) for securitised receivables not licensed for stock market trading.

19 Statement of maturities Receivables / liabilities not due daily Total banks and clients (in EUR k) Receivables Liabilities Up to 3 months From 3 months to 1 year From 1 year to 5 years More than 5 years Total The receivables due from banks include receivables due from affiliated banks and total EUR million (EUR million). Other assets primarily include prepayments on corporation tax amounting to EUR 868 k (EUR 706 k), which have a maturity of less than one year. Liabilities due to banks of EUR 155 k (EUR 150 k) are due in full to affiliated banks. Other liabilities primarily include group liabilities of EUR 677 k (EUR 628 k) from tax reallocations. Other provisions mainly include provisions for other personnel costs amounting to EUR 225 k (EUR 110 k). The company s equity capital remains unchanged at EUR 6.0 million and divided into 60,000 ordinary shares of a nominal 100 EUR. The credit risks reported below-the-line are loans totalling EUR 217 k (EUR 132 k) which have not yet been used. D. Notes on the Income Statement A breakdown of the earnings according to geographical markets in accordance with Article 64 (1) line 9 BWG was omitted since the geographical markets are not different in the main from the location of the bank s organisation. As at the reporting date, there was no possible profits tax deferral in accordance with Article 198 Para. 10 UGB (Austrian Business Code). The costs for severance payments include costs to the employee insurance funds totalling EUR 28 k (EUR 22 k). Liabilities from use of fixed assets not shown on the Statement of Financial Position (without value guarantee): Liabilities 2012: EUR 110 k 2011: EUR 130 k Liabilities : EUR 600 k : EUR 700 k The tax results according to Article 237 para. 6 lit. b UGB of EUR 210 k (EUR 290 k) relate to the current financial year. EUR 821 k (EUR 0) represents taxes from previous periods. The details regarding the costs incurred for the auditor for the financial year are omitted, as these are incurred at the group level of the Bank Burgenland.

20 E. Supplementary information Assets in the Statement of Financial Position in foreign currency totalled EUR 277 k (EUR 144 k) as at the reporting date. Liabilities in foreign currency totalled EUR 277 k (EUR 150 k) as at the reporting date. An obligation exists arising from the membership of the deposit insurance scheme of Banken und Bankiers Gesellschaft mbh prescribed in accordance with Article 93 Austrian Banking Act. In the event of a claim being made on the deposit insurance scheme, according to Article 93a BWG, for an individual bank this amounts to a maximum of 0.93 % of the basis of assessment according to Article 22 BWG plus 12.5 times the capital resources requirements for the items in the account book on the most recent reporting date. Thus this works out at an upper limit of EUR 53 k (EUR 68 k). F. Other information An average of 10 (15) white-collar employees and no blue-collar workers were employed in the financial year No advance payments and loans to members of the board of directors and of the supervisory board existed on the reporting date. The members of the board of directors and of the supervisory board working during the financial year did not receive any remuneration. As at the reporting date there were no transactions with derivative financial instruments.

21 Board of Directors Christian Jauk, MBA Chairperson of the Board of Directors Mag. Constantin Veyder-Malberg Member of the Board of Directors Supervisory Board Mag. Dr. Othmar Ederer Chief Executive Officer of Grazer Wechselseitige Versicherung AG Chairman of the Supervisory Board Dr. Siegfried Grigg Deputy Chief Executive Officer of Grazer Wechselseitige Versicherung AG Deputy Chairman of the Supervisory Board DDIng. Mag. Dr. Günther Puchtler Member of the Board of Directors of Grazer Wechselseitige Versicherung AG Member of the Supervisory Board Dr. Franz Hörhager Member of the Supervisory Board

22 Audit report The auditor chosen provided the complete Annual Accounts of Brüll Kallmus Bank AG at with the following unqualified audit certificate: We have audited the enclosed Annual Accounts of Brüll Kallmus Bank AG, Graz, for the financial year from 01 January 2011 to 31 December 2011 including the bookkeeping. These Annual Accounts include the Statement of Financial Position as at 31 December 2011, the Income Statement for the financial year ending as at 31 December 2011, and the Notes. Responsibility of the statutory representations for the Annual Accounts and the bookkeeping The statutory representatives of the company are responsible for the bookkeeping and the preparation of Annual Accounts, which provide a true and fair view of the assets, financial position and income situation of the company in accordance with Austrian company and banking law provisions. This responsibility includes: organisation, implementation and maintenance of an internal control system, insofar as this is important for preparing the Annual Accounts and providing a true and fair view of the assets, financial position and income situation of the company so that these are free of significant errors, whether due to intended or inadvertent errors; selecting and applying appropriate accounting policies; making estimates that appear reasonable taking into account the given marginal conditions. Responsibility of the bank s auditor and description of the type and extent of the statutory audit It is our responsibility to provide an audit assessment of these Annual Accounts. We carried out our audit in accordance with the statutory provisions and principles of proper auditing applicable in Austria. These principles require that we plan and carry out the audit in such a way that we can make a sufficiently reliable judgement as to whether the Annual Accounts are free from significant errors. An audit includes actions to obtain audit evidence in respect of the amounts and other information in the Annual Accounts. The activities of the audit are selected at the auditor s discretion, taking into account their assessment of the risk of significant errors, whether due to intended or inadvertent errors. When undertaking this risk assessment, the bank auditor takes into account the internal control system, insofar as this is important for preparing the Annual Accounts and providing a true and fair view of the assets, financial position and income situation of the company in order to determine appropriate audit activities according to the marginal conditions, but not to provide an audit judgement of the effectiveness of the company s internal controls.. The audit also includes an assessment of the appropriateness of the accounting principles applied and the significant estimates made by the statutory representatives, as well as an assessment of the overall usefulness of the Annual Accounts. Our view is that we obtained sufficient and appropriate audit evidence so that our audit represents a sufficiently reliable basis for our audit assessment.