Annual Report 2000.

1

CONTENTS.

Investkredit at a glance. ................................................................................................. 2

Income development of the Investkredit Group 1996 – 2000. .................................... 3

Key figures of the Investkredit Group 1996 – 2000. .................................................... 4

Letter from the Board of Management. ....................................................................... 5

Policy-making bodies. .................................................................................................... 8

Supervisory Board. ..................................................................................................... 8

State Commissioner. .................................................................................................. 9

Board of Management. ............................................................................................. 9

Organizational chart. ................................................................................................... 10

Investkredit shares. ...................................................................................................... 11

Management discussion. ............................................................................................. 13

Investkredit Group. ................................................................................................. 13

Development of earnings. ...................................................................................... 16

Total assets and capital development. ................................................................... 18

Outlook for 2001. .................................................................................................... 19

Segment reporting according to IAS. .......................................................................... 21

Enterprises. .............................................................................................................. 21

Financing and aid. .............................................................................................. 21

Corporate finance, private equity and counselling. ........................................ 26

Financial asset management. ............................................................................ 28

Treasury. .............................................................................................................. 30

Local government. ................................................................................................... 32

Real estate. .............................................................................................................. 34

Financial statements of the Investkredit Group for 2000. ......................................... 36

Balance sheet. .......................................................................................................... 36

Income statement. ................................................................................................... 37

Statement of changes in equity. ............................................................................. 38

Cash flow statement. .............................................................................................. 39

Notes to the financial statements of the Investkredit Group. .............................. 40

Accounting principles. ....................................................................................... 40

Information on the balance sheet. ................................................................... 46

Information on the income statement. ............................................................ 55

Other information. ............................................................................................ 59

Audit certificates pursuant to § 245a of the Austrian Commercial Code. ........... 73

Report of the Supervisory Board. ................................................................................ 74

Glossary of important technical terms. ....................................................................... 75

Our photographic presentation. .................................................................................. 83

2

Investkredit shares.

2000 1999 Change

Earnings per share (in EUR) 42.28 27.33 +55 %

Dividend per share (in EUR) 8.72 8.72

Year-end price (in EUR) 350.00 325.50 +7 %

High 360.25 331.50

Low 325.50 318.73

Market capitalization (in EUR m) 221.6 206.0 +7 %

Price-earnings ratio 8.3 11.9

Investkredit Group.2)

2000 2000 1999 1999 ChangeEUR ATS3) EUR ATS

m m m m

Net interest income 76.4 1,052 62.1 854 +23 %

Profit for the year before tax 32.4 445 24.3 334 +33 %

Profit for the year after tax 30.2 415 19.5 268 +55 %

Total assets 8,703.4 119,762 6,920.4 95,227 +26 %

Financing4) 7,437.8 102,346 5,896.1 81,183 +26 %Core capital (Tier 1) pursuant tothe Austrian Banking Act 272.0 3,742 247.5 3,406 +10 %

Own funds (Tier 1 + 2 + 3) pursuantto the Austrian Banking Act 421.5 5,800 422.0 5,807 - 0 %

Total capital ratio 9.9 % 12.6 %

Number of employees (year-end) 290 269 +8 %

2) In this Annual Report, totals may not add precisely because of rounding3) The 2000 Annual Report has been drawn up in EUR. The ATS figures have been converted4) Loans and advances to customers, provision for guarantees and trust loans as well as bonds and

other fixed-interest securities of other non-bank issuers

Rating.

Moody’s Investors Service long-term short-term

Investkredit Bank AG A1 P-1

Kommunalkredit Austria AG A1 P-1

INVESTKREDIT AT A GLANCE.

3

INCOME DEVELOPMENT OF THEINVESTKREDIT GROUP 1996 – 2000.

65 %

60 %

55 %

50 %

45 %

40 %

35 %

30 %

25 %

16 %

12 %

8 %

4 %

0 %1996 1997 1998 1999 2000

Cost-income ratio Return on equity

Cost-income ratio

Return on equity

53.6

1.7 %

11.8 %

14 %

10 %

6 %

2 %

52.6 52.654.0

42.55.9 %6.3 %

9.9 %

40

35

30

25

20

15

10

5

0

1.2 %

0.9 %

0.6 %

0.3 %

0.0 %1996 1997 1998 1999 2000

in EUR m Return on assets

Profit for the year before tax

Profit for the year after tax

Return on assets

2.5

24.3

3.40.14 %

0.85 %

8.9

0.46 %

10.3

13.7

0.51 %

30.2

19.5

0.80 %

32.4

11.9

4

KEY FIGURES OF THE INVESTKREDIT GROUP1996 – 2000.

HGB HGB HGB IAS IAS

1996 1997 1998 1999 2000

Net interest income (in EUR m) 43.9 49.3 51.1 62.1 76.4

Profit for the year before tax (in EUR m) 3.4 11.9 13.7 24.3 32.4

Profit for the year after tax (in EUR m) 2.5 8.9 10.3 19.5 30.2

Core capital (Tier 1) pursuant to theAustrian Banking Act (in EUR m) 194.2 209.0 227.9 247.5 272.0

Own funds (Tier 1 + 2 + 3) pursuant to theAustrian Banking Act (in EUR m) 286.0 330.4 372.2 422.0 421.5

Total assets (in EUR m) 4,209.6 4,750.1 5,298.4 6,920.4 8,703.4

Employees (year-end) 225 232 244 269 290

Market capitalization (in EUR m) 157.2 187.7 204.7 206.0 221.6

Total capital ratio 11.2 % 12.7 % 13.2 % 12.6 % 9.9 %

Core capital ratio 7.6 % 8.1 % 8.1 % 7.4 % 6.4 %

Interest margin1) 1.09 % 1.10 % 1.02 % 1.02 % 0.98 %

Operating income per employee (in EUR m) 0.26 0.26 0.26 0.24 0.29

Cost-income ratio2) 53.6 % 52.6 % 52.6 % 54.0 % 42.5 %

Return on assets3) 0.25 % 0.46 % 0.53 % 0.80 % 0.85 %

Return on equity4) 1.7 % 5.9 % 6.3 % 9.9 % 11.8 %

Return on equity after tax5) 1.3 % 4.4 % 4.7 % 8.0 % 11.0 %

Earnings per share (in EUR) 10.7 13.6 14.2 27.3 42.3

Owing to the application of IAS, the figures for 1996 to 1998 are only partly comparable

1) Ratio of net interest income to average total assets2) Ratio of administrative expenses to income3) Ratio of net income before tax to average risk-weighted assets4) Ratio of net income before tax to average equity5) Ratio of net income after tax to average equity

5

LETTER FROM THE BOARD OFMANAGEMENT.

This financial statement is a “first” in two respects. To begin with, the results of the

Bank for Corporates are expressed in euros and also, for the first time, the IAS (Inter-

national Accounting Standards) rules have been adopted in the balance sheet. The

significance of these two innovations certainly goes beyond the related accounting

and presentation challenges.

Euro and IAS represent a basic transformation of our financing culture. The European

Union currency creates absolutely new possibilities, because it transforms previously

fragmented capital markets into an extremely liquid all-European financial market.

Thereby, instruments that have been in common use for many years in Anglo-Ameri-

can financing business are now also available in continental Europe.

The intensive growth of the markets for corporate bonds and equity instruments –

ranging from venture capital and subordinated financing (mezzanine capital) to stock

exchange placements – reflects this trend.

Long-term lending, for which a pan-European market is also evolving, also faces new

conditions after the elimination of currency frontiers, including the expectation of

new capital requirements for lending banks. This will in future lead to a more marked

differentiation of risk and capital costs according to customer ratings and the matu-

rity period of commitments.

The significance of external and internal ratings is distinctly increasing and is also

becoming more and more significant for medium-sized manufacturing enterprises, if

they wish to enter the capital market with bonds or planned stock exchange listings.

Fears that the financing of medium-sized enterprises is in jeopardy owing to the

reorientation of banks according to rating categories are in our view, however, just as

unjustified as exaggerated euphoria with regard to the newly accessible financing

products.

A decisive factor in applying the new rules on the European financial market is to

ensure that they are implemented for the benefit of corporate customers. In the final

analysis – as is shown not least by the drastic market movements in the so-called new

economy – the new financing world will in essence not be much different from the

old.

In all individual discussions with our customers, we therefore consistently seek solu-

tions that best support the corporate aims of long-term stability and autonomy, de-

pending on the available scope for risk-taking and financing.

6

Alfred Reiter

The year under review has shown

that this approach by Investkredit

as the Bank for Corporates is fully

accepted by our customers and

market partners. Competency

teams of the Bank have success-

fully translated their skills into

concrete results: from the reorgan-

ized Enterprise Financing Depart-

ment to Corporate Finance, the

Mezzanine Fund and the equity

funds, from Treasury with its risk-

hedging instruments to the coun-

selling services of Europa Consult.

In the international area, we have

continued to expand our struc-

tured bond portfolio both in the

USA and Europe. In parallel, the

high-quality Europolis real estate

portfolio was further developed in

EU candidate country capitals.

Our purpose in developing project financing into a separate business segment is to

assist our customers more systematically than before in their international investment

projects. Also, special bank representative offices are to make the entire range of

bank services available in individual target markets.

New media facilities for our customers have also been distinctly expanded. InvestDirekt

(www.investdirekt.at) provides direct access to accounts and deposits. Up-to-date serv-

icing with data on money and foreign currency has been supplemented with a direct

transaction platform (www.investdirektfx.at). Investkredit’s internet presence

(www.investkredit.at) has also been modernized and enlivened. We regard this as a

major step towards intensifying information for investors, which should improve trad-

ing openings for our shares in the specialist market of the Vienna Stock Exchange. At

the moment, the price movements of Investkredit shares do not adequately reflect

the growth in the value of the Bank because of the low liquidity of these securities.

Nevertheless, at the end of the year, the price-earnings ratio of the share stood at 8.3,

which is an attractive value for bank securities. Not only to Investkredit Bank AG itself

but also, and prominently, Kommunalkredit Austria AG and Investkredit International

Bank p.l.c., Malta, as well as to other successful subsidiaries of the Group produced

the positive performance underpinning this Investkredit Group value.

7

Wilfried Stadler

The capital increase in

Kommunalkredit that was carried

out at an attractive valuation by

the Franco-Belgian Dexia Group,

the market leader in European lo-

cal government financing, is grati-

fying confirmation of the

Investkredit Group’s specialist

bank focus. We welcome the deci-

sion of this strategic partner to ex-

pand its activities in Central and

Eastern Europe in full partnership

with Investkredit. The first result

has been the acquisition of the PBK

bank in Slovakia, in which

Investkredit held an overall

31.36 % investment via a holding

company at the end of the year

2000.

In the reporting year, we also

worked consistently to ensure

greater value for money for our

customers by increasing cost-effectiveness. Thus, the cost-income ratio was improved

despite a larger payroll, and the proportion of personnel and administrative expenses

that were necessary to generate income was reduced. With a new boost in return on

equity before tax (ROE) from 9.9 % to 11.8 %, we are further improving capital yield

in the interests of our shareholders.

Precisely in periods of upheaval in financial markets, specialization proves to be the

right way forward for the Investkredit Group. Together with our staff, whom we thank

for their commitment and personal competence, we intend to continue this develop-

ment to the satisfaction of our customers and shareholders.

Alfred Reiter Wilfried Stadler

8

POLICY-MAKING BODIES.

Supervisory Board.

Geiserich E. Tichy

Chairman

Karl Samstag

Vice-Chairman

Vice-Chairman of the Board of Management

Bank Austria AG

Karl Sevelda

Vice-Chairman

Member of the Board of Management

Raiffeisen Zentralbank Österreich

Aktiengesellschaft

Elisabeth Bleyleben-Koren

Vice-Chairperson (to 24 May 2000)

Vice-Chairperson of the Board of Manage-

ment, Erste Bank der oesterreichischen

Sparkassen AG

Helmut Elsner

Chairman of the Board of Management

Bank für Arbeit und Wirtschaft

Aktiengesellschaft

Max Kothbauer

(to 31 December 2000)

Vice Chairman

(from 24 May 2000 to 31 December 2000)

Chairman of the Board of Management

Österreichische Postsparkasse

Aktiengesellschaft

(to 1 December 2000)

Klaus Haberzettl

Head of Division

Commercial Customers 1, Bank Austria AG

Herwig Hutterer

Manager, Finanzierungsgarantie-

Gesellschaft m.b.H.

(to 30 June 2000)

Heinz Kessler

Chairman of the Board of Management

Nettingsdorfer Papierfabrik AG

Kurt Löffler

Manager, ERP Fund

Regina Prehofer

Head of Division, International

Groups, Corporate Finance and

Foreign Trade, Bank Austria AG

Gerhard Tanew-Iliitschew

Head of Division, Raiffeisen Zentralbank

Österreich Aktiengesellschaft

Klaus Thalhammer

Chairman of the Board of Management

Österreichische Volksbanken-AG

Wolfgang Agler

Employees‘ representative

Gabriele Bauer

Employees‘ representative

Regina Frick

Employees‘ representative

Otto Kantner

Employees‘ representative

Peter Wimmer

Employees‘ representative

9

State Commissioner.

Board of Management.

Alexander Gancz Kurt Bayer

State Commissioner Deputy State Commissioner

Director Head of Department

Federal Ministry of Finance Economic Policy and Integration

Federal Ministry of Finance

Alfred Reiter Wilfried Stadler

CEO and Chairman Member of the Board of Management

“invest.outlook panel“

10

ORGANIZATIONAL CHART.

Member of the Board ofManagement

Wilfried StadlerTel. 53 1 35 Ext. 102stadler@investkredit.at

Enterprise Financing

Claudia Schmied Ext. 350schmied@investkredit.atWalter Riess Ext. 462w.riess@investkredit.at

International Business andFinancial Asset Management

Walter Anscheringer Ext. 352ivg@investkredit.at

International BusinessJohannes Wundsam Ext. 577ivg@investkredit.at

International Project Financingand Representative OfficesMichael Smutny Ext. 652ivg@investkredit.at

Financial Asset ManagementThomas Heinisch Ext. 526veranlagungen@investkredit.at

Business Analysis and Technical Consulting

Klaus Gugglberger Ext. 520k.gugglberger@investkredit.atGerhard Ehringer Ext. 260g.ehringer@investkredit.atBernhard Mayer Ext. 192b.mayer@investkredit.at

Corporate FinanceGerhard Ehringer Ext. 260g.ehringer@investkredit.at

Financial AnalysisBernhard Mayer Ext. 192b.mayer@investkredit.at

Technical Consulting and Real EstateJohann Salzmann Ext. 266j.salzmann@investkredit.at

CEO & Chairmanof the Board of Management

Alfred ReiterTel. 53 1 35 Ext.103a.reiter@investkredit.at

Treasury

Peter Tschusch Ext.140p.tschusch@investkredit.atRita Hochgatterer Ext.141r.hochgatterer@investkredit.at

Money and currency market dealingsAlfred Buder Ext.170a.buder@investkredit.at

Capital marketRita Hochgatterer Ext.141r.hochgatterer@investkredit.at

HandlingFerdinand Dietersdorfer Ext.142f.dietersdorfer@investkredit.at

Legal Department

Stefan Süssenbach Ext.195suessenbach@investkredit.atMatthias Hanzl Ext.191hanzl@investkredit.at

Organization and Controlling

Julius Gaugusch Ext. 330gaugusch@investkredit.atGottfried Grechenig Ext. 126g.grechenig@investkredit.at

User Service andOrganization DevelopmentGottfried Grechenig Ext. 126g.grechenig@investkredit.at

ITHeinz Polke Ext. 136h.polke@investkredit.at

Accounts, Taxation andControllingGerald Stich Ext. 592g.stich@investkredit.at

Board of Management

Internal Audit

Anton Taubenschuss Ext. 133a.taubenschuss@investkredit.atHermann Angerer Ext. 134h.angerer@investkredit.at

Personnel

Karl Öckher Ext. 190k.oeckher@investkredit.atPeter Wimmer DW 331p.wimmer@investkredit.at

Corporate Communications

Hannah Rieger Ext. 112rieger@investkredit.at

Company Secretary andInternational Relations

Margot Binder Ext. 111m.binder@investkredit.at

11

Key data per share As at 31 December 2000

Share capital EUR 46,000,110

Shares outstanding 633,000

Securities code number 74810

ISIN Code AT0000748108

Reuters OIKV.VI

Bloomberg OEIKAVEquity

Shareholders

BA/CA Group 24.8 %

BAWAG/P.S.K. Group 21.3 %

RZB 15.6 %

Erste Bank 11.3 %

Wiener Städtische 7.1 %

ÖVAG 3.4 %

Other Banks 3.1 %

Shares widely held, especially 13.4 %by industrial enterprises

100.0 %

INVESTKREDIT SHARES.

Important information on Investkredit shares. The Investkredit shares are listed in the

specialist market of the Vienna Stock Exchange. The share capital remained unchanged

in the reporting year at some EUR 46 m. Conversion of the ordinary capital to euros

was undertaken in 1999. The Annual General Meeting of 24 May 2000 empowered

Investkredit Bank AG to hold own shares for trading purposes up to a level of 5 %.

Earnings per share were increased in

2000 to EUR 42.3, and the price/earn-

ings ratio – 11.9 at the end of 1999 –

was sharply improved to 8.3 by the end

of 2000. The carrying amount per share

at year-end 2000 was EUR 464.72. As a

result of the increased stock exchange

price, market capitalization rose from

EUR 206 m to EUR 222 m.

Stable shareholder structure. The chief

shareholders of Investkredit are all the

major Austrian banking groups. The

special task of the Bank and its broad-

based shareholder structure determine

its neutral sectoral position towards the

universal banks. Some 13 % of the

shares are held by industrial enter-

prises, private shareholders and staff of

the Bank. More shareholders were won

in the year 2000 through a staff sub-

scription drive.

Share markets 2000. The year 2000 was a turbulent period on the international share

markets. After high gains in the first three months for growth and technology stocks,

telecom and media shares, there was a turnaround against the background of persist-

ent losses by Internet enterprises and costs for UMTS licences and telecom takeovers.

Some “new economy” stocks that had earlier been much overvalued fell dramatically.

For the first time in years, the share markets thereby developed less favourably in

many countries in 2000 than the markets for government bonds. With a share index

performance of minus 11 %, the negative experience of other European bourses has

been echoed in Vienna, though it could not build on a comparably profitable past.

The market capitalization of the Vienna Stock Exchange (A-market and specialist mar-

ket), namely, some EUR 27 bn as at 28 December 2000, indicates the bourse’s subordi-

12

1st quarter result 23 May 2001

AnnualGeneral Meeting 23 May 2001

Ex-date 30 May 2001

Dividend payment date 30 May 2001

1st half-year result 3 August 2001

1st -3rd quarter results 23 November 2001

Financial market calendar 2001

Investkredit Bank AG shares (EUR)*

ATX index (EUR)*

112.00

110.00

108.00

106.00

104.00

102.00

100.00

98.00

96.00

94.00

92.00

90.00

88.00

86.00

84.00

1/00 2/00 3/00 4/00 5/00 6/00 7/00 8/00 9/00 10/00 11/00

1.1.2000 - 31.12.2000

* Standardized presentation

12/00

nate importance in the European context. The profit outlook for some financial shares

remained positive, however, even in a difficult environment. With a price increase of

7 %, Investkredit shares performed better in the year 2000 than the overall share

index on the Vienna Stock Exchange.

EUR 5,687,414.54, be used to pay a

dividend of EUR 8.72 per share. The

resulting total distribution is

EUR 5,519,760.00, or some 12 % of

the 2000 dividend-bearing capital

of EUR 46,000,110.00. By reference

to the Investkredit share price of

EUR 350.00 as of 28 December

2000, that gives a 2.5 % dividend

yield.

Proposal for the distribution of the profit. The Board of Management proposes to the

Annual General Meeting of 23 May 2001 that the net annual profit for 2000, namely,

13

MANAGEMENT DISCUSSION.

Investkredit Group.

Enterprises Local GovernmentINVESTKREDIT

Board of ManagementAlfred ReiterWilfried Stadler

INVEST EQUITY

Board of ManagementHelmut BousekMartin Prohazka

INVEST EQUITYEARLY STAGE

Board of ManagementBurkhard FeursteinMartin Prohazka

INVEST MEZZANIN

ManagersGerhard EhringerOliver Grabherr

INVESTKREDITINTERNATIONAL BANK

Board of DirectorsJohn ButtigiegWalter AnscheringerThomas HeinischJoseph Said

VBV AG

Board of ManagementJulius GauguschStefan Süssenbach

VBV HOLDING

ManagersJulius GauguschKlaus GugglbergerStefan Süssenbach

EUROPA CONSULT

ManagersGerhard EhringerKlaus GugglbergerHeike Jandl

EUROTECHMANAGEMENT

ManagersJosef ErnstAndreas Gotwald

KOMMUNALKREDIT

Board of ManagementReinhard PlatzerGerhard Gangl

PRVA KOMUNALNABANKA A.S.

Board of ManagementJozef MihalikGernot DaumanFrancis Teynier

Real EstateEUROPOLISINVEST

ManagersWolfgang LunardonEduard KornfeldBernhard Mayer

EUROPOLIS CEHOLDING

ManagersEduard KornfeldWolfgang LunardonBernhard Mayer

Investkredit Bank AG 53 %

Kommunalkredit Austria AG 37 %

Investkredit International Bank p.l.c. 4 %

VBV AG 1 %

Other 5 %

Shares of the most important companiesin total assets for 2000

The Investkredit Group. Through

the activities of Investkredit and

its subsidiaries in the areas of spe-

cialist banking, equity invest-

ment financing, corporate fi-

nance and consultancy as well as

real estate, the Investkredit

14

Group covers practically all aspects of medium- and long-term enterprise and local

government financing. Investkredit Bank AG holds about 53 % of the Group’s total

assets. The International Accounting Standards (IAS) were adopted in the Investkredit

Group’s accounting in 2000. The relevant figures for the previous year were calculated

and verified. Also, accounts were changed from schillings to euros.

Strategy. Investkredit regards itself as a Bank for Corporates and as an independent

financial services provider. The Group is primarily concerned with Austrian enterprises

and local government bodies, but opportunities in the international financial markets

are also grasped. As a specialist bank, Investkredit combines the functions of a financ-

ing bank, an equity investor, a financial assets management bank, a treasury bank and

a real-estate bank. The Investkredit Group’s strategy is to expand existing business

segments, while retaining its specialization as a Bank for Corporates. Its aim is to

provide continuous high-quality service for existing customers and to enlarge its cus-

“invest.outlook panel“

15

tomer base among enterprises with turnover higher than EUR 8 m. Simultaneously, it

aspires to further refine credit risk control, consistently seeking appropriate combina-

tions of risk and income profiles.

Our customers. The latest regular survey commissioned by Austrian banks in the year

2000, conducted by the independent financial consultant Schwabe, Ley & Greiner

among 1,100 large enterprises with a turnover of more than EUR 40 m, shows that

Investkredit is the second-largest long-term loan financier for this customer group.

The Bank’s services are used not only in long-term financing but also, increasingly, in

asset management and foreign currency dealings. The survey also confirmed the ex-

cellent reputation of Investkredit, whose customers rated it first among the 21 banks

surveyed in the categories of “technical competence”, “flawless conduct of business”

and “action on complaints”. In the overall assessment of all six factors, which also

included “decisiveness”, “openness/partnership” and “price”, Investkredit is first among

all banks. These customer assessments show that Investkredit is awarded top marks

for quality. If one also takes into account the results of the latest TOP 2000 study,

conducted in 1999 and covering enterprises above EUR 7.3 m, Investkredit is the third-

largest source of long-term financing in Austria. The consistent expansion of its fields

of business as a Bank for Corporates thus finds a positive echo in Investkredit’s main

target group.

The market environment. 2000 was a good year for the Austrian economy. Under the

favourable influence of a stable world economy, the development of the euro and a

positive unit wage costs situation, export dynamism was extremely high, at a real

+12 % on the average for the year. Domestic consumption also developed encourag-

ingly and reached +2.7 % owing to the effects of the 1999 tax reform. In parallel with

the vigorous cyclical upswing in the EU, economic growth in Austria attained a real

+3.3 %. The year began on a dynamic note, but the international economy weakened

from mid-2000 and the sharp rise in petroleum prices caused a drift of purchasing

power to the oil-producing countries. As compared with the first half of the year,

economic growth in Austria almost halved. Manufacturing output reflected a spe-

cially favourable business situation. The growth in output almost trebled as compared

with the year before – against the background of a strong improvement in the rela-

tive unit wage costs position and extremely dynamic foreign demand. Total exports

achieved a new record high. Expectations regarding the business situation and pro-

duction development have deteriorated somewhat since the middle of the year. Over-

all, the mood is, however, upbeat following one of the best years in recent history. As

the earnings situation remains favourable, but also taking into account a major mod-

ernization requirement, enterprises are continuing the rapid renewal of their capital

equipment. Capital investment in the economy as a whole rose by some 6 % in the

year 2000. As a result of growing uncertainty as to future cyclical development, capi-

tal investment activity recently lost some of its momentum. Capital spending over the

entire year amounted to some EUR 7 bn in manufacturing and to some EUR 5.5 bn in

16

industry in the narrower sense, so that the investment ratio in industry will have reached

6.7 %, a typical value for boom phases.

Increase in earnings. The Bank’s consistent expansion of business segments in recent

years – while retaining its specialization – also led to improved earnings in the report-

ing year. The Investkredit Group recorded distinct growth in net interest income, the

net trading result and profit for the year as compared with 1999.

Net interest income. Net interest income rose by EUR 14.4 m or 23 % to EUR 76.4 m.

The increase was primarily due to the expansion of business in the year. Income from

lending business in the narrower sense was increased not only through the expansion

of lending business but also through the improvement of margins. Income from vari-

able-yield securities, equity investments and real-estate assets management also rose.

Margit Poglits-Raffetseder Johann Salzmann

Development of earnings.

17

It was not possible to avoid the effect of higher refinancing costs and a decline in

interest contributions caused by the flatter interest curve. The interest margin – i.e.

the ratio of net interest income to average total assets – thus dipped overall from

1.02 % to 0.98 %.

Other operating results. Net fee and commission income at EUR 5.9 m rose slightly

over 1999. The most significant items of income came from environmental aid admin-

istered by Kommunalkredit for the Republic of Austria on a trust basis. The net result

of risk provisions in lending business remained relatively stable in the reporting year

at EUR 6.6 m. Overall, total risk provision for loans in lending business decreased by

some EUR 7.7 m to EUR 64.3 m owing to the more relaxed risk situation. The net

trading result at EUR 3.0 m was distinctly higher than in the previous year, when losses

occurred. Within trading activities, profits were achieved in bonds and shares trading

and in derivatives. Only currency business showed a negative result. In the case of

financial investments, there were write-offs, particularly among securities held as in-

vestments available for sale, whereas sales of equity investments had a positive effect.

On the whole, the net financial investments result at minus EUR 10.9 m was distinctly

below expectations.

General administrative expenses. Personnel expenses fell to EUR 20.9 m, despite the

increase in staff by 21 to 290 (disregarding the Board of Management and maternity

leave). The reason was the reduction in provisions expenses. Other administrative ex-

penses rose 47 % in the year from EUR 9.1 m to EUR 13.4 m – chiefly in connection

with consultancy costs. Depreciation and write-downs of property and equipment re-

mained practically unchanged at EUR 2.5 m. Overall, general administrative expenses

rose 5 % from EUR 34.6 m to EUR 36.2 m, proportionately less than income. Accord-

ingly, the cost-income ratio in the reporting year was sharply reduced from 54 % to

42 %.

Profit for the year. Other operating results amounting to EUR 0.8 m comprised prima-

rily the increase in the value of derivatives that do not serve for trading purposes. The

profit for the year before tax improved by 33 % or EUR 8.1 m to EUR 32.4 m, as

compared with 1999. Taking into account taxes of EUR 2.2 m, the profit for the year

after tax rose 55 % from EUR 19.5 m to EUR 30.2 m. Accordingly, earnings per share

jumped from EUR 27.3 to EUR 42.3.

18

Balance sheet structure. The Investkredit

Group recorded a 26 % expansion in to-

tal assets to some EUR 8.7 bn, its strong-

est growth since 1980. The greatest con-

tributions came from loans and advances

to customers. In particular, local govern-

ment business expanded greatly in rela-

tion with bidding for loans auctioned by

the Republic of Austria. Furthermore, se-

curities financing in financial investments

also rose. Loans and advances to custom-

ers continue to represent the largest share

on the assets side at 57 %. On the liabili-

ties side, debts evidenced by certificates re-

main the largest item at 59 %. Amounts

owed to banks declined to 27 %. Risk-

weighted assets did not rise as distinctly as

total assets, since the Investkredit Group

continues to adopt a low-risk business

policy.

Capital resources. The core capital of the

Investkredit Group rose to EUR 272.0 m

through the formation of reserves. The to-

tal capital resources to be taken into account according to § 23 of the Austrian Bank-

ing Act declined to EUR 421 m owing to higher deductions following new equity

investments in the Group. As at 31 December 2000, the solvency ratio had fallen from

12.6 % of the assessment basis to 9.9 % as a result of the expansion. The Tier 1 capital

ratio also fell, namely, from 7.4 % to 6.4 %.

Rating. Moody’s Investors Service fixed the ratings for Investkredit and Kommunalkredit

in 2000 at A1 in the long-term and Prime 1 in the short-term area. The financial strength

ratings were unchanged at D+ for Investkredit and C for Kommunalkredit.

Kommunalkredit was reviewed for a “possible upgrade” at the beginning of 2001.

Staff. The proportion of female employees is 52 % and that of part-time staff – with

contracts covering between 50 % and 90 % of normal working hours – is 38 persons

or 13 %. In terms of normal working hours, this represents a staff of 278, in compari-

son with 258 the year before. The average age of employees in the Investkredit Group

is just under 39.

Volume in EUR m10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

019991997 200019981996

4,2104,750

5,298

6,920

8,701

2,550 2,5922,812

3,343

4,276

Total assets

Risk-weighted assets

Total assets and capital development.

Loans and advancesto customers 57 %

Financial investments 31 %

Other assets 12 %

Debts evidenced bycertificates 59 %

Amounts owed to banks 27 %

Other liabilites 14 %

19

Latest developments. The capital of Kommunalkredit Austria AG was increased at the

beginning of 2001. The related rise in the share held by Dexia PFB will further inten-

sify the international involvement of Kommunalkredit. Shortly after the publication

of the new shareholder structure, the Moody’s rating was reviewed positively. Up-

grading to the AA segment could take place in the first half of 2001.

Market development. The weakening of the international economy, the consequences

of the oil-price increase and the restrictive effects of the Government’s package will

lead to a slowdown in economic growth this year. The real growth rate of GDP will

still be 2.2 % in 2001, and will be approximately the same in 2002. The situation on the

labour market will continue to develop favourably in 2001. With a declining oil price

and dollar exchange rate, the rate of inflation will again fall to 1.7 %. The slowdown

of the world economy in 2001 will have a negative effect on Austrian exports, which

will rise by a real 6%. Furthermore, the competitive advantages derived from the

euro-dollar relationship will no longer apply, so that relative unit wage costs will rise

slightly as compared with those of trading partners (+0.4 %). This will also retard the

expansion of manufacturing output, which can be expected to achieve a real produc-

tion increase of +3.8 % in 2001. Nevertheless, capital investment by industry will

remain high in 2001. Enterprises recently reported a planned volume of some

EUR 6.1 bn, in nominal terms some 10 % more than in 2000. In that context, expansive

plans are chiefly to be found among enterprises in the basic sector and technical process-

ing, while building sub-con-

tractors and producers of

traditional consumer goods

may perceptibly restrict their

capital investment.

Preview. Continuing its busi-

ness strategy, Investkredit

plans additional increases in

results in 2001. Earnings per

share are planned to rise to

over EUR 45, as against EUR

42.3 in the year 2000. This is

to be achieved by further

growth and the improvement

of margins in business with

domestic enterprises. In the

wake of reorganization of the

European capital markets

through the introduction ofHelmut Hinek Sabine Dungl

Outlook for 2001.

20

the euro, Investkredit plans to utilize its securities competence in the field of corpo-

rate bonds and to develop its market position. In the local government and real estate

areas, investments in Central and Eastern Europe are to be continued. Further aims

are to achieve a sustained increase in the return on equity by broadening and deepen-

ing customer relations. An expansion of the existing business segments, coupled with

the maintenance of specialization is expected to contribute to further improvement

of the cost-income ratio to less than 40 % by the year 2004.

Bedrija Ismaili

21

Enterprises.

SEGMENT REPORTING ACCORDING TO IAS.

FINANCING AND AID.

Core service. Demand for long-term financing was high in Austrian industry, against

the background of excellent cyclical development. Our most important concerns as a

Bank for Corporates in the year 2000 were the structuring of enterprise financing in

the M&A area and project financing in the energy sector. Services to the Austrian SME

sector were also important. Family enterprises are an important customer group of

the Bank for Corporates, since their busi-

ness development and innovative power

make important contributions to the

sustained prosperity of Austria as a busi-

ness location. In the structured financ-

ing, the Investkredit Group’s services

range from the provision of equity capi-

tal to borrowings and consultancy serv-

ices related to aid. Interest rate and cur-

rency risk management instruments are

in increasing demand. In line with in-

ternational capital market develop-

ments, interest in capital market prod-

ucts such as private placements and cor-

porate bonds is also growing in Austria.

Our customer service officers work out

individual solutions for all financing

problems, in collaboration with the en-

terprises and experts. They are reliable

advisers in entrepreneurial matters. Con-

tinuity and dependability in customer

relations contributed to our success in

the year 2000, as before. Investkredit

contracted EUR 553 m of financial loans

in 2000 (see table: Financing transac-

tions with enterprises). An important

area in enterprise financing is capital in-

vestment financing. In the year 2000 a

volume of EUR 2.3 bn of investments

was co-financed by Investkredit (see ta-

ble: Financing transactions with enter-Hannah Rieger Claudia Schmied

22

prises). The average amount of loans in 2000 was EUR 2.9 m, which was considerably

higher than the average for 1999 (EUR 1.9 m). Maturity at 10.1 years has on average

risen from 1999 (8.7 years). The trend towards long-term liquidity provision was thus

continued in the reporting year. Against the background of portfolio control by banks,

syndicated financing is growing in importance. Investkredit was much in demand as a

syndicate partner in the year 2000, primarily by Austrian banks. It also played a lead-

ing role in syndicates for major projects.

The following table shows the regional breakdown of cumulative lending business.

Enterprises with their domicile outside Austria account for an aggregate 10 % of fi-

nancing. This share of financing is concentrated in enterprises in the European Union

and in the countries of Central and Eastern Europe. In terms of cumulative regional

financing, Vienna, Lower Austria and Upper Austria are still in the lead.

In 2000, Vienna had the largest share of financing, partly because many enterprises

have their registered domicile in Vienna. Tyrol came second. 56 % of new financing

transactions concluded in the year 2000 was accounted for by industrial enterprises

(1999: 52 %). This shows the importance of Investkredit as a financier for industry. The

Financing transactions with enterprises

Annual 1996 1997 1998 1999 2000 2000 (cumulative from 1957)

Financing (in EUR m) 337 415 308 500 553 8,943

Investments (in EUR m) 1,048 1,135 1,090 1,323 2,296 32,229

Regional breakdown of financing transactions with enterprises, 1957 – 2000

Regions Financingin EUR m Share

Vienna 2,283 26 %

Lower Austria 1,557 17 %

Upper Austria 1,348 15 %

Styria 830 9 %

Tyrol 749 8 %

Salzburg 462 5 %

Carinthia 416 5 %

Vorarlberg 367 4 %

Burgenland 42 1 %

Total – Austria 8,054 90 %

Europe 830 9 %

Rest of world 59 1 %

Total – international business 889 10 %

Grand total 8,943 100 %

23

branches that received the largest shares of financing in the year 2000 were the

papermaking industry, electrical engineering and the petroleum and chemical engi-

neering industries. In the reporting year, business was considerably expanded in the

energy sector. The liberalization of the markets for electricity and gas ushered in di-

versification projects, among other things in the field of renewable energy.

The total volume of financing outstanding in the Investkredit Group in the year 2000,

including guarantees, trust loans and securities financing, grew by 13 % to some EUR

4.6 bn. The following table shows the structure of financing in the enterprise seg-

ment, broken down into domestic loans with and without aid, and international busi-

ness.

Domestic enterprise financing without aid. Loans and advances to domestic custom-

ers without a public aid component rose 5 % in the reporting year to EUR 1.9 bn. In

the domestic sector, special attention is devoted to margins in risk and earnings policy.

The income margins in domestic business improved in the year 2000, but are below

those in foreign business. Financing without aid also includes guarantee loans, which

declined in the reporting year by 4 % to EUR 381 m. Guarantee loans were mostly

related to the ERP Fund and are thus induced by aid-related business.

Financing with aid. The persistent year-long trend towards financing without aid is

clearly revealed in the declining share of aid-related business in the total volume from

23 % in 1999 to 16 % in 2000. The outstanding volume of loans with aid fell by 21 %

to EUR 749 m. This distinct decline was caused by extraordinary premature public-

sector repayments totalling EUR 160 m. The category of aid-related financing includes

ERP trust loans amounting to EUR 423 m. That shows the position of Investkredit as an

ERP Trust Bank. Disbursements in aid-related lending amounted to EUR 70 m in the

year 2000.

Aid management. Aid management from application to final settlement is a special

task of the Bank. The aim is to reduce enterprises’ financing costs by making use of

interest support, low-interest loans, grants, EU co-financing and guarantees by the

Domestic, without aid Domestic, with aid International business Total

1) Loans and advances to customers, trust loans and provision for guarantees2) Bonds and other fixed-income securities of other non-bank issuers

Financing in the enterprise segment

in EUR m2000 1999 Chan- 2000 1999 Chan- 2000 1999 Chan- 2000 1999 Chan-

ge ge ge ge

Loans1) 1,745 1,680 +4 % 749 950 -21 % 932 755 +24 % 3,426 3,385 +1 %

Securitiesfinancing 2) 196 174 +13 % - - 952 501 +90 % 1,148 676 +70 %

Total finan-cing 1,941 1,854 +5 % 749 950 -21 % 1,884 1,256 +50 % 4,574 4,061 +13 %

24

Federal, Provincial and local authorities. With the advent of the new Structural Fund

period 2000-2006, procedures and European rules for aid to enterprises have funda-

mentally changed. In the reporting year, the relevant objective programmes for EU

co-financing, except for the Objective 1 programme for Burgenland, had not yet been

approved by the European Commission. Application could therefore not yet be made,

so that it was not possible to apply for EU co-financing funds for new Objective 2

projects. The “Handbuch EU-konformer Förderungen” (Handbook of EU-conforming

aid measures), Hannah Rieger and Claudia Schmied, Wirtschaftsverlag Ueberreuter,

5th edition, Vienna, 2000) is a concise presentation of aid regulations. The “EU-

Förderdatenbank” and “EU-konform interaktiv” online services (www.investkredit.at)

support the Bank’s counselling in aid questions. There is a perceptible trend towards

direct grants in Austrian aid instruments. It is to be expected that decisions on aid

with regard to co-financing will shift noticeably towards the Provincial level. Domes-

tic partners in the field of aid are the ERP Fund, the BÜRGES-Förderungsbank, the

Austrian Industrial Research Fund (FFF), the Financing Guarantee Company (FGG), and

Bedrija Ismaili Hans-Michael Schania Johannes Wundsam

25

the aid institutions at Provincial level. Under the Environmental Aid Act,

Kommunalkredit is responsible for Federal environmental aid schemes. Applications

under the Austrian export financing and guarantee system are processed by the

Oesterreichische Kontrollbank AG.

European aid. At European level, cooperation with the European Investment Bank

(EIB), Luxembourg, was continued in the year in the context of the global loan. This

loan covers investments by SMEs as well as environmental protection and energy in-

vestments and is awarded either as an EIB bonus loan or – through close cooperation

with the customer banks of the enterprises – in the context of an EIB Europe loan.

Under that scheme, the partner banks provide guarantees to Investkredit, which makes

the funds available. Investkredit operates as a financial intermediary for the Euro-

pean Commission’s Joint European Venture Initiative (JEV). In the summer of 2000, a

loan agreement for EUR 150 m to refinance investment projects of medium-sized

enterprises in Austria, Slovenia, Hungary, the Slovakian Republic and the Czech Re-

public was concluded with the Kreditanstalt für Wiederaufbau (KfW), Frankfurt – the

largest aid bank in Germany. Investkredit’s counselling subsidiary EuroTech Manage-

ment provides Austrian enterprises with access to EU research and technology promo-

tion programmes, particularly under the EU Framework V Programme. A special Bank

technical team helps enterprises in the evaluation and submission of projects.

International business. As before, the focus of international business in the year un-

der review lay in the area of asset backed securities (ABS). The worldwide issue of this

type of security reached a volume of about USD 370 bn in the year 2000 and European

transactions had a 20 % share, a perceptible increase over the year before. In the

expansion of its ABS portfolio, the Bank concentrated on low-risk and high-rating

tranches. For margin reasons, investment was chiefly made in transactions on the US

market. Overall, the quality of the ABS portfolio was improved over 1999 in terms of

the average weighted rating factor. To control return in international risk business,

transactions with a higher risk profile were concluded in the area of internationally

syndicated loans, in addition to the ABS portfolio – though at a far lower level. The

risk/gains profile in international risk business also improved in the past financial year

with better overall quality owing to repayments but also to positive rating migra-

tions.

Leasing. In the leasing area, movable and real property was held with an aggregate

financing volume of some EUR 74 m. The lessees are Investkredit corporate custom-

ers. In the year 2000, there was a decline in volume and the Investkredit Group con-

centrated on servicing existing projects.

26

CORPORATE FINANCE, PRIVATE EQUITY AND COUNSELLING.

Corporate finance. The corporate finance field continued to develop dynamically in

the year. The growing demand for corporate finance services reflects a change in the

financing culture that is now also increasingly taking hold among Austrian enter-

prises. The Investkredit Group has stimulated the proactive shaping of this change by

means of new structured financing instruments. In the corporate finance field, the

Group now has a comprehensive range of services for enterprises throughout their

lives, from the early phases to pre-IPO financing. Thereby, the Bank for Corporates can

provide instruments suited to all financing situations. The enterprise finance field is

served by Investkredit Bank AG itself and by the subsidiaries INVEST EQUITY, Invest

Mezzanin and Europa Consult.

INVEST EQUITY. INVEST EQUITY Beteiligungs-AG expanded and strengthened its position

in the Austrian private equity and venture capital market. Cooperation with the found-

ing shareholder, Investkredit, the shareholder bank EIB and with shareholders from

the venture capital industry, namely, Parnib Holding BV and Financière Natexis Inter-

national S.A., strengthened its position. Companies in the INVEST EQUITY portfolio were

further developed both in the technology area and in the transaction-oriented sec-

tors of established production enterprises. In December 1999, CyberTron Telekom AG,

Vienna, was the first Austrian telecom enterprise to be listed on the Vienna Stock

Exchange; the second stock market venture from the INVEST EQUITY portfolio,

update.software AG, Vienna, also distributed dividends to INVEST EQUITY. New capital

investments made in 2000 in the technology companies TIANI MEDGRAPH GmbH, Brunn

am Gebirge, Viviance new media AG, St. Gallen and INFONIQA Informationstechnik

GmbH, Wels, strengthened the involvement of INVEST EQUITY in the B2B segment of

“Internet-enabling technology”. The portfolio enterprise Lomographische AG, Vienna,

is active both in the lifestyle branded goods area and the B2C market. These enter-

prises have the qualifications for necessary organic growth as well as for the strategic

development of their position in their respective market segments by means of acqui-

sitions. They can therefore be regarded as potential stock market candidates. Chemson

Polymer-Additive AG, Arnoldstein, was spun off from the Metallgesellschaft Group,

Frankfurt, and was acquired in 2000 by the management jointly with Leman Capital

and INVEST EQUITY. Chemson is the second-largest producer of additives for the PVC

industry world-wide; it also produces additives for the glass industry. At the end of the

year, INVEST EQUITY disposed of its stake in the Salzburg medical technology enter-

prise Anthos Labtec Instruments GmbH. INVEST EQUITY early stage Beteiligungs-AG

also established itself on the market in the year as an early-phase technology investor.

Invest Mezzanin. At the end of 1999, Investkredit established an EUR 40 m mezzanine

capital fund (Invest Mezzanin) in cooperation with FGG, as the first of its kind in Aus-

tria. This innovative financing instrument offers Austrian enterprises access to a form

of financing that has proved itself for many years internationally. It is chiefly regarded

27

as subordinated financing and has

the function of equity mezzanine

capital. Mezzanine capital has a

higher risk than loans but is serv-

iced before equity and thus occu-

pies an intermediate position be-

tween equity and borrowing in

the financing structure. Invest

Mezzanin had a very dynamic start

to the year. An autonomous risk

financing profile was created for

mezzanine capital, and incentives

were created for new and exist-

ing Investkredit customers in market development. In 2000, Invest Mezzanin analysed

and evaluated over 200 projects. Four investments were carried out in Austria in 2000,

for both “old-” and “new-economy” enterprises. With the establishment of Invest

Mezzanine Capital Management GmbH in December 2000, Investkredit laid the foun-

dation for the management of other funds.

Europa Consult. The growing demand among Austrian enterprises for corporate fi-

nance services was also felt by Europa Consult. Europa Consult – a wholly owned sub-

sidiary of Investkredit – concentrates on advisory services to medium-sized enterprises.

The range of services available for consulting on mergers and acquisitions (M&A) was

successfully expanded in the year. Against the background of a rapidly growing M&A

market, the combination of innovative financing instruments and a comprehensive

advisory service is becoming more and more important. Europa Consult assists its cus-

tomers in assembling structured financing packages and also in the acquisition and

disposal of enterprises, management buy-outs (MBOs), management buy-ins (MBIs)

and cooperation arrangements. Consultancy services in 2000 focused specially on the

solution of problems of succession in Austrian family enterprises. Europa Consult also

acted as an adviser on several sales assignments related to the privatization of public-

sector enterprises.

EuroTech Management. This Investkredit consultancy subsidiary, founded in 1996, has

two main fields of activity: EU projects, and technical consultancy on R&D projects.

EuroTech Management had a gratifying increase in orders in the year, 34 Austrian and

EU projects for Austrian enterprises and ministries being successfully processed. In

that context, EuroTech Management concentrates on the preparation, submission and

management of aid projects in research and technology (EU Framework V Programme)

and in EU environmental technology programmes (e.g. the ASIA Urbs programme).

EuroTech Management submitted project proposals to the European Commission jointly

with Austrian and international partners in large and small-scale industry, in research

centres and with the Municipality of Vienna. Through close personal cooperation with

Heike Jandl Oliver Grabherr

28

Investkredit technical experts, EuroTech advises enterprises on access to Austrian aid

programmes focusing on environmental protection and production technology. The

range of services on offer comprises the analysis, structuring and submission of projects

and the coordination of aid when several institutions are involved. In addition to aid

consultancy, EuroTech Management provides enterprises with technological, product

and market analysis and also with ongoing technical project controlling in implement-

ing investment projects and in the assessment of real estate, buildings and plant – if

necessary with the assistance of sworn court experts.

FINANCIAL ASSET MANAGEMENT.

Investkredit investment funds. Financial asset management services in the year con-

tinued to focus on the Investkredit investment funds. These are specially tailored to

the asset management needs of enterprises and institutional investors. With their

very conservative approach (dynamic asset allocation), the Investkredit floor funds

Julius Wallner Christian Doppler Thomas Heinisch

29

(i2F, i2-bond and i2-dollar), managed by UBS AG, are particularly suitable for enter-

prises that have high risk-awareness. By means of its prudential funds (i2V-

Vorsorgefonds, i2V-Euro, i2V-Select and i2V-Protect), the Bank takes into account the

expanded possibilities of corporate provision, among other things for severance

payment and pension commitments. Since October 2000, the Bank Vontobel Öster-

reich AG has taken over from UBS AG as fund manager for i2V-Protect. In the first half

of 2000, the Mercury Europäischer High Yield Anleihefonds – as the first foreign fund

– was included in the Investkredit marketing programme. This fund invests in corpo-

rate bonds from West European countries and is also suitable for corporate provident

schemes.

Performance and development by volume. In the year 2000, the value development

of the funds could not escape the effect of trends on the international securities mar-

kets. While the floor funds were all able to achieve positive returns, thanks to their

hedging approach, some provident funds with share components (i2V-Vorsorgefonds)

ended the year on a negative note. Therefore, the dynamic growth in the funds area

of recent past years could not be continued. Since the Investkredit investment funds

have a mainly short-term orientation, repurchasing of fund holdings exceeded sales.

The two funds chiefly affected were i2F and i2-bond. The total volume of Investkredit

investment funds as at year-end 2000 was EUR 230 m – see chart. Despite this decline

in volume, current income from the financial assets management segment topped

EUR 1.3 m, which was higher than in the year before. That was due to a natural delay-

ing effect in the disbursement of commissions. Accordingly, a decline is to be expected

in the current year.

350

300

250

200

150

100

50

0

12/96

EUR m

06/97 12/97 06/98 12/98 06/99 12/99 06/00 12/00

i2V-Select

i2V-Protect

i2V-Euro

i2V-Vorsorgefonds

i2-dollar

i2-bond

i2F

Investkredit investment funds: development by volume

30

Deposit business. The fi-

nancial asset management

requirements of corporate

customers were chiefly met

in the year 2000 by the use

of Investkredit’s and

Kommunalkredit’s own se-

curities holdings, own bond

issues and by Investkredit

investment funds. Deposit

business rose further in the

year to EUR 3.5 bn (assets

under management).

The InvestDirekt Internet

p r o g r a m m e

(www.investdirekt.at) ,

which was established in

2000, is already being used

by every fourth deposit cus-

tomer. This programme

makes it possible to create

charts presenting price

changes for individual secu-

rities holdings. The charts

also show the development of selected indices, for instance, ATX. With InvestDirekt,

users can individually create the charts that best meet their information needs.

Time deposits. Deposits by corporate customers are accepted via Investkredit Interna-

tional Bank p.l.c., Malta, which was founded in 1996 with an onshore banking licence

from the Maltese central bank and is a wholly owned Investkredit subsidiary. The

volume of time deposits by Austrian corporate customers shot up 23 % from the year

before to EUR 96 m. The total assets of Investkredit International were just under EUR

320 m.

TREASURY.

Refinancing. Bond issues for the refinancing of new business by enterprises in 2000

reached a volume of EUR 921 m. Investkredit launched a total of six issues during the

year. The largest transactions were three EUR floating rate notes (issue volumes: EUR

100 m, EUR 250 m and EUR 300 m). Prominent among the USD issues was the variable

basis USD 200 m transaction. Private placements were also launched to supplement

activity in the USD area. The facility for strengthening the capital resources basis was

Gernot Rux Josef Bernhard

31

used by means of a 20-year subordinated EUR 5 m issue. All new bond issues are listed

on European bourses. In the unsecuritized area, funds were raised chiefly by means of

note loans.

Securities management and derivatives. In the year 2000, securities management fo-

cused mainly on the euro capital market and on the United States economic area.

Trading activities concentrated on liquid bond markets. In addition, the Bank engaged

in trading on selected West European share markets. Even under difficult market con-

ditions, it was possible to achieve positive contributions to results in the year. Demand

by corporate customers for derivative instruments strengthened. The use of treasury

services thus makes a lasting contribution to optimizing the financial structure of en-

terprises. In the foreign exchange field, Investkredit has created a new Internet serv-

ice, InvestDirektFX (www.investdirektfx.at), an online currency trading system that has

been available since the spring of 2001. Its most important features are the availability

of tradable real-time currency cash and futures rates on PC and the possibility of hedg-

ing against currency risks by mouse-click. Derivatives are used in the Investkredit Group

for the fine tuning of interest and currency risk management. Trading with derivatives

also made important contributions to revenue.

32

The business approach. Kommunalkredit Austria AG is the investment bank for local

authorities. It specializes in financing infrastructural investments by public-sector and

similar institutions (local authorities, cities, associations, provinces, regions, States, etc.),

both in Austria and internationally. In the domestic market, 60 % of Austrian local

authorities are Kommunalkredit customers, while the chief international customers

are public-sector entities in Euroland, the other EU States, Switzerland and East Euro-

pean countries carefully selected in the light of risk assessment. A further important

field of business is management on a trust basis (aid processing and consulting serv-

ices for public-sector customers). In the framework of its internationalization strat-

egy, Kommunalkredit seeks investments in Central and East European financial serv-

ices providers that also have a communal/public-sector customer structure. The larg-

est investment so far – in the Slovakian bank Prvá Komunálna Banka, PKB – was car-

ried out in the year 2000.

Financing. 1,364 new loan agreements with an aggregate volume of EUR 893.4 m

were concluded in 2000. The related project costs (investment costs) amounted to

EUR 1.4 bn. Despite a difficult initial situation, Kommunalkredit succeeded in substan-

tially increasing its market share in the financing of local government infrastructural

projects in Austria. That became possible through successful bidding for Environmen-

tal and Water Management Fund loans. In the year, the Austrian Government under-

took its fifth sale of Fund loans (1,461 loans to a nominal amount of EUR 1.3 bn).

Kommunalkredit was awarded 844 loans. Development in the international financing

area is gratifying: overall in the year 2000, 145 projects with a volume of EUR 261.9 m

were financed (just under one-third of the entire volume of loans for the year). The

group of customers comprises local authorities, cities, regions and also States (Euroland,

EU States, East European States selected in the light of risk assessment). Switzerland,

with a share of some 80 % of new international business, became Kommunalkredit’s

second “home market”. In addition, Kommunalkredit financed projects in Greece,

Iceland, Lithuania, Norway, Poland, Slovakia, Spain and Cyprus. The following table

shows the dynamic development of local government financing business:

2000 1999 Chan- 2000 1999 Chan- 2000 1999 Chan-ge ge ge

Loans1) 2,140 1,529 +40 % 416 134 +211 % 2,557 1,663 +54 %

Securitiesfinancing2) 48 42 +13 % 104 56 +86 % 151 98 +55 %

Totalfinancing 2,188 1,571 +39 % 520 190 +174 % 2,708 1,760 +54 %

Austria Abroad Total

1) Loans and advances to customers, trust loans and provision for guarantees2) Bonds and other fixed-income securities of other non-bank issuers

in EUR m

Financing in the local government segment

Local government.

33

Management of Trust Funds. In the year Kommunalkredit carried out projects for the

following institutions: the Federal Ministry of Agriculture and Forestry, Environment

and Water Management, the Province of Upper Austria, the Federal Ministry of For-

eign Affairs, and Oesterreichische Kontrollbank AG, as well as for international part-

ners (such as the World Bank, the European Commission, or the European Bank for

Reconstruction and Development). 2000 was a record year for the management of

Federal and Provincial aid. More than 3,000 applications were filed with

Kommunalkredit. Concrete awards were made for 2,624 projects.

Equity investments. For the purpose of joint strategic action in Central European coun-

tries, Dexia and Kommunalkredit established Dexia Kommunalkredit Holding in the

year 2000. The ownership ratio is 40 % Kommunalkredit and 60 % Dexia. Through this

new holding company, Dexia and Kommunalkredit acquired 78.4 % of the Slovakian

Prvá Komunálna Banka (PKB) – registered office in Zilina – in May 2000. With a staff of

614 and 47 branch offices, PKB has more than 70 % of the Slovakian market. Since

Dexia and Kommunalkredit joined PKB, its strategic approach has been aligned with

that of the parent enterprises and initial action to optimize its organization has been

taken.

Treasury. Kommunalkredit raised some EUR 1.1 bn on the capital market in 2000 for

the financing of local government environmental projects. Twelve issues were launched

in all, and were documented under the debt issuance programme established in 1998.

Six of the twelve were public-sector syndicated environmental bond issues and the

remainder were private placements. In December 2000, the volume of this programme

was increased from EUR 2 bn to EUR 3 bn.

34

Business approach. The Investkredit Group’s activities with regard to commercial real-

estate are concentrated in Europolis Invest, which has specialized in three fields:

real-estate investments, real-estate project development and real-estate portfolio

management. It is company policy in Europolis Invest to focus on office properties,

and the aims are long-term safeguarding of revenue and the expansion of volume.

Accordingly, the main factors in project selection are the quality of buildings, the

credit rating of tenants and the long-term contractual safeguarding of rentals. A nu-

cleus of high-yield properties in Vienna was the starting base for the first activities in

Central Europe. The success achieved since 1997 has now led to concentration on mar-

kets in Central and Eastern Europe, in order to benefit from the extremely advanta-

geous relationship between revenue and risk in those markets. The continuous rev-

enue achievable in this area is 3-4 % higher than in Austria, legal and economic con-

ditions are stable and there are concrete prospects of entry into the EU. Accordingly,

current revenue should be accompanied by an increase in value, which will be antici-

pated by the markets before formal entry takes place. The real-estate segment there-

fore meaningfully supplements the financing business of Investkredit Bank AG.

Real-estate project development. Europolis Invest has so far carried out three real-

estate project developments in Vienna. After the completion of the Akademiehof

Karlsplatz in Vienna, activities were switched in 1997 towards former Eastern-bloc

States in Central and Eastern Europe. The decisive factors in this policy shift were not

only the positive economic developments in some of these countries, with an attend-

ant increase in the interest shown by many international enterprises, but also the

stable legal environment and the availability of first-class advisers. The first target

markets defined were Budapest, Prague and Warsaw. In Prague, Europolis developed

a project with a town-planning component, situated directly on the bank of the Vltava

(www.rivercity.cz). The first project stage of River City Prague will comprise two office

buildings, a hotel and an apartment hotel. The internationally renowned Kohn Petersen

Fox group of architects was commissioned to design the project complex. Planning

and construction of the advanced energy installations are in the hands of a team of

2000 1999 Chan- 2000 1999 Chan- 2000 1999 Chan-ge ge ge

Loans1) 9 13 -34 % 5 19 -73 % 14 32 -57 %

Securitiesfinancing2) 42 8 +417 % - - 42 8 +417 %

Buildings 55 35 +58 % 45 - 100 35 +187 %

Totalfinancing 105 56 +88 % 50 19 +163 % 155 75 +107 %

Austria Abroad Total

1) Loans and advances to customers, trust loans and provision for guarantees2) Bonds and other fixed-income securities of other non-bank issuers

in EUR m

Real estate.

Financing in the real-estate segment

35

leading enterprises in this highly specialized field. In the reporting period, Investkredit

took over all the project companies, in agreement with the previous project partner,

in order to safeguard the entire potential revenue for the Group. Building permission

has already been granted for the first office building (“Danube House”), which will

have a gross floor area of some 30,000 m2. Building work commenced at the turn of

the year. A further landmark project is being started in Budapest. The project is for a

high-rise office building with a floor area of some 30,000 m2 meeting international

technical and architectural standards. The project is being carried out in cooperation

with a developer with years of experience in this market.

Real-estate investments. Investkredit has founded a company, Europolis CE Holding

GmbH with the task of assembling a high-quality real-estate portfolio in Central and

Eastern Europe. The aim is to invest in first-class fully rented properties in top loca-

tions in Warsaw, Prague and Budapest, with amenities that meet Western investment

standards. Four investments have already been carried out, to a volume of some EUR

175 m, for two properties in Budapest (City Gate and Info-Park Research Center), one

in Prague (Hadovka Office Park), and one in Warsaw (Warsaw Towers). Europolis CE

thus has some 70,000 m2 of office space available for rental. A factor of decisive impor-

tance in these dynamic markets is to have a tenant structure that ensures stable long-

term revenue. The long-term value generated through this strategy should give a

distinct boost to growth through the entry of these countries into the European Un-

ion. The projects have already been almost entirely let, enterprises such as Nokia,

Siemens, Sun Microsystems, Ernst & Young, IBM and HP being among the largest ten-

ants. It is our constant concern to sustain and improve services to all our tenants. The

investment focus of Europolis CE has been expanded both regionally and substantively

in a second phase. Investment opportunities are being examined not only in office

properties but also in industrial and logistic parks. Assuming appropriate return and

suitable properties, commitments are possible in Bratislava, Polish regional centres

and in the capitals of the Baltic States.

Real-estate portfolio management. The portfolio so far assembled by Europolis CE is

one of the largest in the region. A locally staffed management company was set up in

the context of expanding activities in Prague.

36

FINANCIAL STATEMENTS OF THEINVESTKREDIT GROUP FOR 2000.

Balance sheet.

Assets Notes 31.12.2000 31.12.1999 Changein EUR 1,000

Cash and balances with central banks 18 4,780 69,367 -93 %

Loans and advances to banks 19 661,866 934,395 -29 %

Loans and advances to customers 20 4,950,232 3,869,844 28 %

Risk provisions for loans and advances 7, 22 -64,310 -71,977 -11 %

Trading assets 8, 23 187,169 118,578 58 %

Financial investments 24 2,689,824 1,898,629 42 %

Property and equipment 25 214,839 66,964 221 %

Other assets 27 59,007 34,602 71 %

Total assets 8,703,408 6,920,402 26 %

Liabilities 31.12.2000 31.12.1999 Changein EUR 1,000

Amounts owed to banks 28 2,357,201 2,419,734 -3 %

Amounts owed to customers 29 328,155 397,597 -17 %

Debts evidenced by certificates 30 5,139,159 3,477,785 48 %

Provisions 31 40,675 43,614 -11 %

Other liabilities 33 324,429 112,971 187 %

Subordinated capital 34 197,087 190,245 4 %

Minority interests 22,532 22,785 -1 %

Equity 35 294,168 255,671 15 %

Total liabilities and equity 8,703,408 6,920,402 26 %

37

Income statement.

Income statement Notes 31.12.2000 31.12.1999 Changein EUR 1,000

Interest and similar income 835,221 500,592 67 %

Interest and similar expenses -758,773 -438,501 73 %

Net interest income 36 76,448 62,091 23 %

Fee and commission income 10,369 9,193 13 %Fee and commission expenses -4,511 -3,523 28 %

Net fee and commission income 37 5,857 5,670 3 %

Net credit risk result 38 -6,586 -7,401 -11 %

Trading result 39 2,968 -3,699 -180 %

Net financial investments result 40 -10,861 14,974 -173 %

General administrative expenses 41 -36,227 -34,605 5 %

Other operating results 42 770 -12,779 -106 %

Extraordinary result 0 0 -

Profit for the year before tax 32,369 24,251 33 %

Tax on income 43 -2,193 -4,758 -54 %

Profit for the year after tax 30,176 19,492 55 %

Minority interests -3,415 -2,191 56 %

Net profit for the year 26,760 17,301 55 %

38

Statement of changes in equity.

Changein EUR 1,000 31.12.2000 31.12.1999 2000

Subscribed capital 46,000 46,000 0

Capital reserve 61,047 61,047 0

Profit reserves in the strict sense 157,038 128,231 28,807

Hedging reserve 8,842 8,611 231

Net profit for the year 26,760 17,301 9,459

Dividend paid by Investkredit Bank AG -5,520 -5,520 0

Aggregate 294,168 255,671 38,498

39

in EUR 1,000 2000 1999

Profit for the year (before minority interests) 30,176 19,492

Non-cash items included in profit for the year, and adjustments to reconcileprofit for the year to cash flows from operating activities

Depreciation/revaluation gains on property and equipment and financial investments 2,002 429 Transfer to/release of provisions and risk provisions for loans and advances -10,606 -3,030

Profit/loss from the disposal/valuation of financial assets, property and equipment 10,861 -14,974

Other adjustments (net) -72,977 -37,638

Changes in assets and liabilities from operating activities after adjustments for non-cash components

Loans and advances to banks 272,529 -134,644 Loans and advances to customers -1,080,389 -345,627 Trading portfolio -68,592 48,694 Currents assets -707,079 -141,576 Other assets from operating activities -24,405 3,079 Amounts owed to banks -62,533 205,658 Amounts owed to customers -69,441 48,625 Debts evidenced by certificates 1,661,373 1,113,438 Other liabilities from operating activities 211,458 -22,459

Interest and dividends received 835,221 500,592 Interest paid -758,773 -438,501 Extraordinary proceeds 0 0 Extraordinary payments 0 0 Income tax payments -2,493 -3,169

Cash flow from operating activities 166,333 798,391

Proceeds from the disposal of Financial investments 335,844 132,591 Tangible and intangible fixed assets 7,873 496

Payments for the acquisition of Financial investments -411,316 -892,836 Tangible and intangible fixed assets -162,806 -1,593

Currency translation adjustments -1,586 -2,283

Cash flow from investing activities -231,991 -763,625

Proceeds from capital increases 0 0 Dividend payments -5,520 -5,520 Changes in resources from other financing activities 6,843 29,967

Cash flow from financing activities 1,323 24,447

Cash holdings at the end of the previous period 69,367 6,150

Cash flow from operating activities 166,333 798,391Cash flow from investing activities -231,991 -763,625Cash flow from financing activities 1,323 24,447Effects of Exchange rate fluctuations 0 0 Changes in the group of consolidated enterprises -252 4,003

Cash holdings at the end of the period 4,780 69,367

Cash flow statement.

40

ACCOUNTING PRINCIPLES.

(1) General principles. The consolidated financial statements of Investkredit Bank AG

(the Investkredit Group) were prepared on the basis of the International Accounting

Standards (IAS) adopted and published by the International Accounting Standards

Committee (IASC). The statements qualify under the relevant legislation for exemption

from the requirement to present a Group Financial Statement according to Austrian

commercial law. In its accounting, the Investkredit Group is guided in principle by all

interpretations adopted and published as at the balance sheet date by the Standing

Interpretations Committee (SIC), even though they may not enter into force until later.

The principles of IAS 39 (Financial Instruments: Recognition and Measurement) and

IAS 40 (Investment Property) are therefore already being applied. Accounts are

presented according to uniform Group methods. The financial statements of the

Investkredit Group are based on the following relevant International Accounting

Standards:

IAS 1 Presentation of Financial Statements

IAS 4 Depreciation Accounting

IAS 7 Cash flow Statements

IAS 8 Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies

IAS 10 Events After the Balance Sheet Date

IAS 12 Income Taxes

IAS 14 Segment Reporting

IAS 16 Property, Plant and Equipment

IAS 17 Leases

IAS 18 Revenue

IAS 19 Employee Benefits

IAS 21 The Effects of Changes in Foreign Exchange Rates

IAS 22 Business Combinations

IAS 23 Borrowing Costs

IAS 24 Related Party Disclosures

IAS 27 Consolidated Financial Statements and Accounting for Investments in Subsidiaries

IAS 28 Accounting for Investments in Associates

IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions

IAS 32 Financial Instruments: Disclosures and Presentation

IAS 33 Earnings per Share

IAS 36 Impairment of Assets

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IAS 38 Intangible Assets

IAS 39 Financial Instruments: Recognition and Measurement

IAS 40 Investment Property

Notes to the financial statements of the Investkredit Group.

41

(2) Consolidated enterprises. A list of all enterprises included in the Financial State-

ments of the Investkredit Group is presented under point 66 (Disclosure of equity

investments). The group of fully consolidated enterprises includes not only the parent

company Investkredit Bank AG (”Investkredit”) but also 21 Austrian and foreign

enterprises, the most important of which are Kommunalkredit Austria AG, Vienna

(”Kommunalkredit”) and Investkredit International Bank p.l.c., Sliema/Malta. In the

financial year, the following companies were included for the first time:

Acquisition cost in EUR m Investment

Europolis Hadovka s.r.o., Prague 17,9 100 %

Europolis Holding Sp. z. o.o., Warsaw 25,2 100 %

Warsaw Tower s.p.z.o.o., Warsaw 27,2 100 %

Infopark Research Center I Kft, Budapest 11,0 100 %

RCP Holding GmbH, Vienna 12,4 100 %

RCP Beteiligungsverwaltungs-Gesellschaft mbH, Vienna 7,6 100 %

In the financial year, one company, i2B Holding Aktiengesellschaft, Vienna, was no

longer included among the fully consolidated enterprises. 29 enterprises whose overall

influence on the financial position of the Group is of minor significance were not

consolidated. The total assets of these enterprises together amount to less than 2.0 %

of the Group’s total assets. In the Investkredit Group’s financial statements, 10 associates

were accounted for under the equity method. In the financial year, the following

companies were included for the first time:

Dexia Kommunalkredit Holding Gesellschaft mbH, Vienna

Prvá Komunálna Banka a.s., Zilina, Slovak Republic

Nine investments in associates are accounted for at cost because of their overall minor

significance.

(3) Consolidation principles. The consolidation action taken in the context of preparing

the Group Financial Statements includes capital consolidation, consolidation under

the equity method, debt consolidation, the consolidation of expenses and income

and the elimination of intra-Group results. The fully consolidated enterprises present

their annual financial statements uniformly as of 31 December. Capital consolidation

is carried out at cost. In that process, the acquisition costs for investments in the Group

company are offset against the proportionate equity capital of the subsidiary at the

time of acquisition. Differences on the assets side arising as from 1 January 1995 – if

significant – are added to the assets of the subsidiary. Any remaining amounts on the

assets side are capitalized as goodwill and amortized over a period of 15 years. They

are reported as intangible assets under other assets. Differences arising up to 31

December 1994 are offset against retained earnings. Intra-Group receivables, liabilities,

expenses and income as well as intra-Group profits are eliminated, unless they are of

42

minor significance. Associates are accounted for under the equity method and are

reported under financial investments as investments in enterprises accounted for under

the equity method. Local financial statements are used for valuation under the equity

method. Alignment with the uniform Group valuation methods is undertaken only in

the event of significant measurement differences in leasing business, but not otherwise.

The annual results of associates are taken from the latest annual financial statements

available, allowing for current forecasting, so that changes in equity are reflected in

the same year. Dividends distributed are cancelled. Annual profits are shown in the

income statement under Other investment earnings.

(4) Currency translation. In the case of the euro-currencies, the exchange rates

correspond to those published by the European Commission on 31 December 1998.

Assets and liabilities in other currencies (third currencies) are translated at the rate

recommended by the European Central Bank as at the balance sheet date.

(5) Loans and advances. Loans and advances to banks and customers are entered at

nominal value or at cost. Individual valuation adjustments or provisions are made to

take into account recognizable credit and sovereign risks. Valuation adjustments are

not offset against the corresponding loans and advances but are shown openly in the

balance sheet. Premiums and discounts are distributed over the maturity period of the

debt and are entered under Other assets or Other liabilities.

(6) Leasing business. Fixed assets serving for leasing purposes are classified as Finance

leases and are entered in the consolidated balance sheet in accordance with IAS 17

under the individual categories of receivables and at the present value of the discounted

leasing claims.

(7) Risk provisions. Risk provisions cover impairment losses and reserves for all

recognizable credit and sovereign risks. In its credit risk management, Investkredit

uses a financial standing assessment system and an internal rating procedure. Every

borrower is thus assigned an external or internal rating. Internal ratings correspond

to the standard scale of Standard & Poor’s and are made in several stages. The business

development of all enterprises is continuously analysed and the credit risk is regularly

evaluated. That makes it possible to classify assets in the banking book and off-balance-

sheet business fully according to criteria of soundness and collateralization. In the

case of problem commitments, intensive services are provided by a special management

team.

(8) Trading assets. Securities, derivative financial instruments and other items of the

trading portfolio are entered at the fair value on the balance sheet date, using IAS 39.

In the case of listed products, the stock exchange price is taken as the fair value. Unlisted

products are measured by the present value method (present value of discounted

future payment flows) or by the use of suitable option price models (value resulting

43

from the application of option price formulae according to the Garman-Kohlhagen,

Black-Scholes or the Hull-White models). All results under these items are presented in

the Income statement under the Net trading result. To measure the market risk, value

at risk (VAR) is calculated according to a model based on a confidence level of 99 %

and a holding period of 1 day. There are VAR limits for the interest rate risk, the share

price risk and the currency risk. The standard procedure is applied for the regulatory

reporting system. Interest rate risks arising outside of trading activities are analysed

continuously, using the value at risk of the banking book and interest simulations.

(9) Financial investments. All fixed-interest and variable-yield securities, investments

in unconsolidated subsidiaries and associates and other investments not attributed to

the trading book are entered in this item. The items are either ”held to maturity” or

are ”available for sale”.

1. Held to maturity: Fixed-interest securities are valued at cost. If the cost differs

from the repayment amount, the difference is written back, affecting current

results proportionately over time. If the credit standing of the security debtor

indicates a permanent impairment, the item is written off as necessary. Effects

on current results are shown under the Net financial investments result. Vari-

able-yield securities are valued at the fair price. Significant associates are

accounted for under the equity method. Investments in unconsolidated

subsidiaries as well as other investments are valued at cost. In the event of

permanent impairment, the relevant item is written down.

2. Available for sale: Securities that are attributed neither to fixed assets nor to

the trading portfolio have the function of a liquidity reserve (available for

sale) and are entered at the fair value on the balance sheet date. They are

recorded in the balance sheet under financial investments, and effects on results

are shown in the Net financial investments result.

(10) Derivatives. The fair value of derivatives is calculated according to recognized

methods in every case. Derivatives are treated differently according to their category,

applying IAS 39:

1. Derivatives in the trading portfolio are recognized as trading assets or trading

liabilities. If they show positive fair values, including deferred interest (dirty

price), they are recognized as trading assets. Trading liabilities include negati-

ve market values. Trading assets are not offset against trading liabilities

(netting). The change in the dirty price is shown as affecting results under the

Net trading result.

2. Derivatives intended to protect the fair value of banking book items (fair value

hedges) are also shown at their fair value (dirty price) under Financial

investments or Other liabilities. Changes in the fair value of the items to be

protected are entered with an effect on the current results in the Net financial

investments result in the same way as the derivatives in this category.

3. Derivatives intended to protect payment flows arising out of balance sheet

44

items (cash flow hedges) are also shown under Financial investments or Other

assets at their banking book fair value (dirty price). The change in fair value is,

however, entered against the valuation reserve without effect on the results.

4. Other derivatives are intended to protect against banking book market risks,

but it is not possible to show a microhedge because hedging is conducted in

relation with a whole portfolio (macrohedge). In application of IAS 39, the

fair values in this category are recorded in the balance sheet, namely, dirty

prices under Financial investments and negative dirty prices under Other

liabilities. The change in the value of these derivatives on a clean-price basis is

presented in the Income statement under Other operating results. Since the

Bank uses derivatives to control the interest rate risk at a global level, but

since the fair value changes of items protected at a macro level according to

IAS 39 cannot be shown with an effect on the results, this part of the result is

of only limited informative value.

(11) Goodwill. Positive differences arising from capital and equity consolidation taking

place after 1995 are entered as goodwill under Other assets and are written off over

15 years. Such differences arising up to 1994 were offset against Profit reserves.

Depreciation of goodwill is shown under Other operating results. Negative differences

arising out of capital and equity consolidation were attributed to Profit reserves, if

the negative effects on results expected at the time of acquisition had already occurred

on the date of the first presentation of IAS consolidated financial statements. Because

of their minor significance, all other negative differences were accounted for under

Profit reserves, with a neutral effect on results.

(12) Property and equipment. Property and equipment comprises land and buildings

used by the Bank and by outside parties as well as office furniture and equipment.

Land and buildings used by the Bank serve mainly for the Bank’s own operations. The

item of land and buildings used by outside parties includes those that function as

investments and are let to outside parties.

1. Land and buildings used by the Bank as well as office furniture and equipment

are entered at acquisition cost less planned straight-line depreciation. The

assumed projected periods of use are:

Buildings 50 years

Office furniture and equipment 2.5 to 10 years

IT investments 2.5 to 5 years

2. Minor value assets up to an individual acquisition cost of EUR 363.36 are written

off in the year of purchase.

3. Land and buildings used by outside parties that function as investments are

recognized at their fair value in accordance with IAS 40. Land and buildings

inside Austria are valued internally according to the Royal Institution of Charte-

red Surveyors (RICS) Standard. Land and buildings abroad are valued by external

45

experts according to guidelines that are recognized not only by the IVSC (In-

ternational Valuation Standards Committee) but also by TEGOVA (The

European Group of Valuers’ Associations). The gross rental method is used in

calculations, on the basis of current rental lists and assumptions concerning

market developments and interest rates. The change in the value of buildings

between balance sheet dates is carried in the Income Statement.

(13) Intangible assets. Intangible assets include not only the Bank’s logo but also

goodwill as well as software purchases. The Bank’s logo was written off over 10 years

and is now entered in the books at the pro memoria value of ATS 1. Goodwill purchased

after 1 January 1995 is written off over 15 years by the straight-line method, and

similar items arising before that date are offset against equity. Software is written off

by the straight-line method over 4 years. Intangible investments are presented under

Other assets.

(14) Liabilities. Liabilities are entered at cost. Premiums and discounts are distributed

over the maturity period of the debt.

(15) Trading liabilities. Trading liabilities include the negative fair values arising out of

derivative financial instruments and are shown under Other liabilities. They are ente-

red at the fair value.

(16) Provisions. Provisions for pensions, severance payments and jubilee bonus

obligations are calculated annually by an independent actuary according to the

projected unit credit method, in accordance with IAS 19. The biometric basis was the

”Calculation bases for pension insurance (Salaried employees, Generation table)” by

F.W. Pagler – unpublished – using prediction factors (for salaried employees) taken

from the ”Calculation bases for occupational disability insurance in Austria” by Pagler

& Pagler. The most important parameters are a 5.75 % discount rate, a 2 % incremental

rate of active salary and pension payments, a 1.5 % career trend and pensionable ages

of 56.5 years for women and 61.5 years for men.

In earlier years, staff pension entitlements were transferred to a pension fund. The

provisions now contain entitlements of staff who were already on pension at the time

of transfer as well as the entitlements of active staff for invalidity and widows’ pensions.

The difference between the amount required for coverage and the proportionate

pension provision at the time of transfer is entered in the balance sheet under deferred

assets and is written back evenly over 10 years. Reserves for severance payments are

formed to cover legal and contractual entitlements. A jubilee bonus reserve is formed

for the payment of bonuses to long-serving staff. Other reserves are formed in the

amount of projected use in each case.

46

(20) Loans and advances to customers.

Repayable on demand Otherin EUR m 31.12.2000 31.12.1999 31.12.2000 31.12.1999

Austrian customers 92 57 1,708 1,828 Enterprises 76 42 1,586 1,535 Public sector 1 4 0 160 Other 14 11 122 133

Foreign customers 34 13 3,116 1,970 Enterprises 25 13 1,233 943 Public sector 9 0 1,830 1,007 Other 0 0 53 20

Aggregate 126 70 4,824 3,799

(17) Current and deferred taxes. Taxes on income are accounted for and calculated in

accordance with IAS 12. Current income tax assets and liabilities are stated according

to local tax rates. Tax assets are shown under Other assets, and tax liabilities under

Other liabilities or Reserves. The liability concept is used for the calculation of deferred

taxes, and all temporary differences in amount are taken into consideration. Under

this concept, the values of assets and liabilities in the IAS balance sheet are compared

with the values that are applicable to taxation of the consolidated company in question.

Differences between these values lead to temporary differences in value, for which

deferred taxation items must be formed on the assets or liabilities side – irrespective

of the time of their release. Deferred tax assets and deferred tax liabilities are then

offset, if they exist for each company against the same tax creditor. Deferred tax assets

or unused tax losses carried forward are recorded in the balance sheet if they will

probably be used in relation with future profits.

INFORMATION ON THE BALANCE SHEET.

(18) Cash and balances with central banks. This item consists solely of cash and balances

with central banks. In the previous year, credit balances with post office banks were

also included.

The amount of EUR 79 m (1999: EUR 102 m) included in this item represents the

refinancing shares of customer banks in the TOP scheme, an aid plan of the Republic

of Austria that was discontinued in 1995.

This item includes loans and advances of EUR 1.1 m (1999: EUR 8.2 m) in respect of

finance lease contracts. The total of leasing instalments outstanding and residual values

(19) Loans and advances to banks.

Repayable on demand Otherin EUR m 31.12.2000 31.12.1999 31.12.2000 31.12.1999

Austrian Banks 18 39 270 353

Foreign Banks 22 226 352 316

Aggregate 40 265 622 669

47

not guaranteed is EUR 1.2 m (1999: EUR 8.5 m), and the aggregate of the interest

components not yet earned is EUR 0.1 m (1999: EUR 0.2 m).

(22) Risk provisions. Risk provisions are related exclusively to loans and advances to

customers. They include only credit risks as well as a litigation risk in relation with a

financing transaction. The assessment basis for valuation adjustment also includes

deferred interest as at the balance sheet date. Provisions for sovereign risks did not

have to be formed. Global valuation adjustments were not undertaken. The amount

of loans and advances bearing no interest and earnings was EUR 79 m (1999: EUR 89

m) before valuation adjustment.

(21) Loans and advances to related enterprises and enterprises in which an equity

investment is held.

Related enterprises Enterprises in which an equity investment is held

in EUR m 31.12.2000 31.12.1999 31.12.2000 31.12.1999

Loans and advances to banks 0 0 0 0

Loans and advances to customers 46 36 110 102

Other assets 342 195 50 18

Aggregate 388 231 160 120

(23) Trading assets.

in EUR m 31.12.2000 31.12.1999

Bonds and otherfixed-income securities 110 63 Money market paper 0 0 Loans and bonds 110 63thereof:Listed bonds 83 63Own bonds 0 10

Shares and other variable-yield securities 6 8 Shares 5 6 Investment certificates 0 2 Other 0 0thereof:Listed shares and other variable-yield securities 6 8Own shares and other variable-yield securities 0 0

Positive fair values from derivative financial instruments 72 47

Other trading portfolio items 0 0

Aggregate 187 119

in EUR m 31.12.2000 31.12.1999As at 1 January 72 74Additions Allocation to risk provisions for loans and advances 13 13

Disposals Earmarked use -13 -10 Release of risk provisions for loans and advances -9 -5

Currency adjustments 1 0

As at 31 December 64 72

48

Financial investments include Other current assets amounting to EUR 1,015 m (1999:

EUR 554 m). No investments in banks were contained in investments in unconsolidated

related enterprises. Investments in enterprises accounted for under the equity method

include an EUR 9 m bank investment. The development and composition of financial

investments is disclosed under point 26 (Schedule of fixed asset transactions). The

Schedule in point 66 (Disclosure of equity investments) contains a complete list and

classification of all holdings in unconsolidated related enterprises, enterprises accounted

for under the equity method and other investments. That list also gives information

about the proportionate investments, equity and annual results. The Investkredit Group

investments include chiefly banks and financial institutions as well as real-estate

enterprises. There is a single-entity relationship with VBV beta Anlagen Vermietung

Gesellschaft mbH in the field of corporation tax and turnover tax.

The development and composition of property and equipment is presented under

point 26 (Schedule of fixed asset transactions). Minor value assets are entered in the

schedule of fixed asset transactions as additions and disposals in the year of acquisition.

(25) Property and equipment.

in EUR m 31.12.2000 31.12.1999

Land and buildings used by the Group 24 24

Land and buildings used by outside parties 185 38

Office furniture and equipment 6 6

Aggregate 215 67

(24) Financial investments.

in EUR m 31.12.2000 31.12.1999

Bonds and other fixed-incomesecurities 2,287 1,786 Money market paper 0 0 Loans and bonds 1,958 1,519 Treasury bills 328 267thereof:Listed bonds 2,280 1,599Own bonds 0 8

Shares and other variable-yield securities 66 43 Shares 11 8 Investment certificates 55 35thereof:Listed shares and other variable-yield securities 55 37Own shares and other variable-yield securities 0 0

Other securities and derivativesfor hedging purposes 259 33

Investments in unconsolidatedrelated enterprises 32 9

Investments in enterprises accounted for under the equity method44 21Other investments 2 7

Aggregate 2,690 1,899

49

(26) Schedule of fixed asset transactions.

Property and equipment 82 0 157 -8 231 Land and buildings 69 0 155 -7 216 Office furniture and equipment 13 0 2 -1 14

Intangible assets 5 0 12 0 17 Goodwill 3 0 11 0 14 Other 1 0 1 0 2

Financial investments 1,291 2 411 -336 1,368 Other related enterprises 69 0 23 0 92 Enterprises accounted for under the equity method 50 0 25 0 74 Other investments 13 0 0 -8 5 Fixed-income securities 1,159 2 363 -327 1,197 Variable-yield securities 0 0 0 0 0 Other financial investments 0 0 0 0 0

Aggregate 1,378 2 580 -344 1,616

The balance sheet item of Land and buildings used by the Group includes a land value

of EUR 4 m (1999: EUR 4 m). The increase by EUR 148 m to EUR 185 m in the item of

land and buildings used by outside parties is due to the acquisition of three office

properties in Prague, Budapest and Warsaw. The difference between the fair value

and the carrying amount in the individual balance sheets items covering all land and

buildings used by outside parties is EUR 55 m (1999: EUR 6 m). The increase is due to

the three above-mentioned real-estate properties.

Current depreciation includes extraordinary depreciation amounting to EUR 1.8 m.

Additions related to land and buildings contain additions of EUR 148.0 m arising

through purchases of enterprises.

Property and equipment -19 3 215 -7 4 67 Land and buildings -11 3 209 -6 4 61 Office furniture and equipment -8 0 6 -2 0 6

Intangible assets -2 0 15 -1 0 3 Goodwill -1 0 14 -1 0 3 Other -1 0 1 0 0 0

Financial investments -127 10 1,251 -1 3 1,213 Other related enterprises -60 0 32 0 0 9 Enterprises accounted for under the equity method -31 1 44 -1 0 21 Other equity interests -3 0 2 0 0 7 Fixed-income securities -33 9 1,173 0 3 1,176 Variable-yield securities 0 0 0 0 0 0 Other financial investments 0 0 0 0 0 0

Aggregate -148 13 1,481 -9 7 1,283

in EUR m

Accumulateddepreciation

Accumulatedwrite-ups

Carryingamount

31.12.

Currentdepre-ciation

Currentwrite-ups

Carryingamount

1.1.

Currencytranslation

in EUR m

DisposalsAt costas of

1 January

Additions At costas of 31

December

50

(27) Other assets.

in EUR m 31.12.2000 31.12.1999

Intangible assets 15 3

Other assets 31 20

Deferred items 13 11

Deferred interest 0 0

Aggregate 59 35

The development and composition of intangible assets is shown under point 26

(Schedule of fixed asset transactions). The intangible assets include goodwill amounting

to EUR 14 m (1999: EUR 3 m). Other assets include deferred tax assets of EUR 2 m

(1999: EUR 5 m). A breakdown and explanation of deferred taxes is contained in point

32. The difference between the pension reserve at the time of transfer recorded in the

balance sheet and the pension fund capital requirement of EUR 1.9 m (1999: EUR 2.4

m) is recorded in deferred items on the assets side.

(29) Amounts owed to customers.

Repayable on demand Other liabilities

in EUR m 31.12.2000 31.12.1999 31.12.2000 31.12.1999

Austrian customers 39 54 170 199

Enterprises 24 30 146 162 Public sector 0 0 0 0 Other 14 23 24 36

Foreign customers 9 91 110 55 Enterprises 9 79 27 19 Public sector 0 0 20 4 Other 0 12 63 32

Aggregate 48 144 280 254

(28) Amounts owed to banks.

Repayable on demand Other liabilities

in EUR m 31.12.2000 31.12.1999 31.12.2000 31.12.1999

Austrian banks 14 6 884 877

Foreign banks 128 102 1,331 1,435

Aggregate 143 107 2,215 2,312

51

(31) Provisions.

in EUR m 31.12.2000 31.12.1999

Provisions for current tax 8 7

Provisions for personnel expenses 30 33

Other provisions 3 4

Aggregate 41 44

(30) Debts evidenced by certificates.

thereof listed

in EUR m 31.12.2000 31.12.1999 31.12.2000 31.12.1999

Bonds issued 5,046 3,379 4,749 1,689

Money market paper issued 0 0 0 0

Other debts evidenced by certificates 93 99 0 0

Aggregate 5,139 3,478 4,749 1,689

Bonds issued amounting to EUR 287 m will fall due next year.

As a consequence of mergers in the years 1998 and 1999, tax provisions of merged

enterprises that were formed following inspections in previous years, amounting on

the balance sheet date to EUR 4.3 m, were taken over without any effect on results.

A breakdown and explanation of deferred taxes is contained under point 32.

Provisions for personnel expenses developed as follows:

in EUR m Pension Severance Jubilee bonus Total

Present value of defined benefitobligations - DBO - as at 1.1.2000 52 5 1 58

- Plan assets -27 0 0 -27

Provisions as of 1.1.2000 25 5 1 31

Service cost 1 0 0 1

Interest cost 3 0 0 3

Payments -2 0 0 -2

Change in plan assets -1 0 0 -1

Actuarial result 5 0 0 5

Definded benefit obligations - DBO - as at 31.12.2000 49 5 1 55

- Plan assets -28 0 0 -28

Actuarial provision requirementas at 31.12.2000 21 5 1 27

Vacation provisions 3

Provisions for personnel expenses as at 31.12.2000 30

52

The pension provisions are the result of obligations arising from direct promises or

individual contracts. In previous years, staff pension entitlements were transferred to

a pension fund and are shown as Plan assets in the Table. The provisions now contain

entitlements of staff who were already on pension at the time of transfer and

entitlements of active staff for invalidity and widows’ pensions. The full actuarially

calculated obligation for pensions is EUR 49.0 m (1999: EUR 52.4 m), of which

entitlements amounting to EUR 28.1 m (1999: EUR 27.4 m) have been transferred to

the pension fund, resulting in provisions of EUR 20.8 m (1999: EUR 25.0 m).

(32) Deferred tax assets and liabilities. Deferred tax assets and liabilities include taxes

arising out of temporary differences between valuation according to IAS and amounts

from the tax-based profit calculations of the Group enterprises.

No deferred tax items were formed for temporary differences in relation with

investments of EUR 7.7 m in subsidiaries, since the requirements under IAS 12.39 were

satisfied.

As at Reclassi- As at1.1.2000 Use Release Allocation fication 31.12.2000in EUR m

The provisions developed as follows:

Provisions forcurrent tax 7 0 0 1 0 8

Provisions for personnel expenses 33 0 -4 1 0 30

Other provisions 4 -4 0 3 0 3

Aggregate 44 -4 -4 5 0 41

Deferred tax were related to the following items:

Deferred tax assets Deferred tax liabilitiesin EUR m 31.12.2000 31.12.1999 31.12.2000 31.12.1999

Financial investments 6 2 8 2

Property and equipment 0 0 1 2

Leasing 0 0 0 0

Provisions for personnel expenses 4 4 0 0

Other provisions 0 0 0 0

Risk provisions 0 0 0 0

Trading portfolio 0 0 0 0

Other items 0 0 1 0

Tax losses carried forward 2 3 0 0

Aggregate 12 9 10 4

Net 2 5

53

The negative fair values from derivative financial instruments in the trading portfolio

are presented under trading liabilities. The deferred liabilities chiefly contain premiums

from long-term loans and bonds as well as deferred items related to interest support for

the TOP schemes. Other liabilities include EUR 10.4 m of tax debts (1999: EUR 9.8 m),

most of which are deferrals arising out of a tax inspection.

Expenses related to all subordinated liabilities in the financial year amounted to EUR

11.9 m (1999: EUR 9.3 m). Claims of creditors to the repayment of these liabilities are

subordinated in relation with other creditors and, in the event of bankruptcy or

liquidation, may be paid back only after all non-subordinated creditors have been

satisfied.

(35) Equity. The share capital of EUR 46,000,110.00 is divided into 633,000 no par value

shares issued to bearer. With the consent of the Supervisory Board, the Board of Ma-

(33) Other liabilities.

in EUR m 31.12.2000 31.12.1999

Trading liabilities 52 57

Deferred items 41 21

Leasing liabilities 0 0

Other liabilities 226 30

Dividend paid by Investkredit Bank AG 5 5

Aggregate 324 112

The most important subordinated liabilities are:

Nominal in EUR InterestCurrency in m m rate Issuer/type

ATS 400.0 31.4 8.250 % Investkredit bond issue 1995-2005

ATS 300.0 23.2 6.500 % Investkredit bond issue 1997-2012

ATS 300.0 22.8 7.500 % Investkredit bond issue 1993-2005

USD 20.0 21.9 6.655 % Subordinated collared floating rate notes 1994-2004

EUR 20.0 20.7 5.465 % Subordinated Investkredit floater 1999-2014

(34) Subordinated capital.

thereof listedin EUR m 31.12.2000 31.12.1999 31.12.2000 31.12.1999

Profit participation rights capital 0 0 0 0

Supplementary capital 49 49 37 7

Other subordinated liabilities 148 141 148 141

Aggregate 197 190 185 148

54

nagement is empowered to increase the share capital up to 15 May 2002 by issuing

not more than 42,280 new no par value bearer shares, in one or more operations, and

by at most EUR 3,072,487.60. During the financial year, Investkredit traded in its own

shares for market-making reasons. As at 31 December 2000, it was not holding any of

its own shares. The maximum number of own shares held in the financial year was

30,651.

The consolidated own funds to be taken into account pursuant to the Austrian Ban-

king Act (§ 24) amounted to EUR 421.5 m as at 31 December 2000. The consolidated

assessment basis was EUR 4,276 m. That gives a consolidated solvency ratio of 9.9 %,

as compared with 12.6 % in 1999. The consolidated Tier 1 capital ratio was 6.4 %. The

composition and development of the Investkredit Group’s own funds calculated

according to the Austrian Banking Act are shown in the following table:

Assessment basis pursuant to § 22 (2) Banking Trading Total Pro- ComparedAustrian Banking Act (in EUR m) book book 2000 portion to 1999

Risk-weighted assets 3,402 3,402 84.0 % 2,760Risk- and counterpart-weightedoff-balance-sheet transactions 471 471 11.6 % 500Special off-balance-sheet transactions 175 175 4.3 % 84

Assessment basis, aggregate 4,048 4,048 100.0 % 3,344

Own funds requirement, Banking book1) 324 324 80.2 % 265Own funds requirement, Trading book2) 18 18 4.5 % 10

Own funds requirement, Currency risk2) 0 0 0.0 % 1

Total = Required own funds 324 18 342 84.7 % 276

Actual own fundsCore capital 272 272 248

Supplementary capital 163 163 172

Carrying amount of investments(holdings of more than 10 %) -31 -31 -8

Own funds (Tier 1 and Tier 2) 404 404 412

Tier 3 18 18 10

Total own funds to be taken into account 404 18 421 422

Free own funds 79 146

1) 8 % of the assessment basis2) According to capital adequacy regulations, standard procedure

55

INFORMATION ON THE INCOME STATEMENT.

Environmental aid transactions are services rendered by Kommunalkredit on behalf

of the Republic of Austria.

(38) Net credit risk result.

in EUR m 31.12.2000 31.12.1999

Allocation to risk provisions -13.4 -12.5

Release of risk provisions 8.8 5.5

Direct write-offs -0.5 0.0

Amounts received against loans and advances written off 0.1 0.1

Currency adjustments -1.6 -0.4

Aggregate -6.6 -7.4

(37) Net fee and commission income.

in EUR m 31.12.2000 31.12.1999

Lending business -0.3 0.4

Securities business 0.8 0.7

Payment transactions -0.4 -0.1

Environmental aid transactions 5.1 5.1

Other services business 0.8 -0.5

Aggregate 5.9 5.7

(36) Net interest income.

in EUR m 31.12.2000 31.12.1999Interest income 814.8 494.1

Lending business and money market 680.3 418.3 Fixed-income securities 124.4 73.5 Shares and other variable-yield securities 1.7 1.4 Interests in unconsolidated related enterprises 0.3 0.2 Investments in associates 4.0 0.1 Investments in other enterprises 4.1 0.6

Interest expenses -755.2 -433.8

Deposits -501.5 -203.6 Debts evidenced by certificates -241.8 -220.9 Subordinated capital -11.9 -9.3

Earnings from rental and leasing business 16.8 1.8

Leasing earnings 4.8 4.4 Earnings from rentals 15.6 2.1 Depreciation of property leased and other leasing expenses -3.0 -4.1 Depreciation of property rented -0.6 -0.6

Aggregate 76.4 62.1

56

(39) Trading result.

in EUR m 31.12.2000 31.12.1999

Securities trading 3.2 -0.2

Currency trading -3.1 -1.5

Interes derivatives 2.1 -2.2

Currency derivatives 0.2 -0.3

Securities derivatives 0.5 0.4

Other financial instruments 0.0 0.0

Aggregate 3.0 -3.7

The net trading result contains net results from the disposal and valuation of items in

the trading portfolio, interest and dividend earnings in the trading portfolio as well

as refinancing expenses for the trading portfolio. The trading portfolio is assessed on

a fair value basis.

(40) Net financial investments result. This item includes the results from the disposal

and valuation of securities in financial investments, investments in subsidiaries and

associates and other investments.

The net result from securities includes disposal gains amounting to EUR 1.5 m (1999:

EUR 1.5 m).

The amount also includes expenses for the real-estate sector amounting to EUR 4.2 m.

Expenses for unlet property were negligible.

(41) General administrative expenses.

in EUR m. 31.12.2000 31.12.1999Personnel expenses Salaries 16.4 14.7 Compulsory social security contributions 4.4 4.1 Expenses for retirement and employee benefits -0.6 4.2

Total personnel expenses 20.3 23.0

Other administrative expenses 13.4 9.1

Depreciation and amortization of property and equipment 2.5 2.5

Aggregate 36.2 34.6

in EUR m 31.12.2000 31.12.1999

Net result from securities -11.9 14.9

Net result from investments insubsidiaries and associates andother investments 1.1 0.1

Aggregate -10.9 15.0

57

(43) Tax on income.

in EUR m 31.12.2000 31.12.1999

Current tax expense 2.5 3.2

Deferred tax expense -0.3 1.6

Aggregate 2.2 4.8

Other operating expenses in the year 1999 are due to the depreciation of derivatives

that were not used as microhedges.

The actual taxes are calculated on the basis of the tax results for the financial year at

the local tax rates applicable to the Group company in question. The following table

shows the relation between the expected and actual taxes on income:

(44) Appropriation of the profit. The Board of Management will propose to the Annual

General Meeting on 23 May 2001 that the net profit for the year 2000 in the separate

financial statements for Investkredit, amounting to EUR 5,687,414.54, be used to pay

a dividend of EUR 8.72 per share. The total distribution is EUR 5,519,760.00. That is

some 12 % of the dividend-bearing share capital for 2000, amounting to EUR

46,000,110.00. After payment of the Supervisory Board emoluments, the remainder

of some EUR 0.05 m will be carried forward.

in EUR m 31.12.2000 31.12.1999

Profit for the year before tax 32.4 24.3

Income tax expense expected for the financialyear at the statutory tax rate (34 %) 11.0 8.3

Effects of other tax rates 0.1 0.0

Tax reductions due to tax-exemptearnings of investments -3.7 -1.4

Tax reductions due to othertax-exempt income -2.1 -3.2

Tax increases due to non-deductibleexpenses 0.2 1.4

Tax expense/income not attributable to the reporting period -3.3 -0.3

Reported income tax 2.2 4.8

(42) Other operating results.

in EUR m 31.12.2000 31.12.1999

Other operating earnings 3.2 0.0

Depreciation of intangible assets -0.8 -0.4

Other tax -0.8 0.0

Other operating expenses -0.9 -12.4

Aggregate 0.8 -12.8

58

(45) Earnings per share. According to IAS 33, earnings per share are calculated by

dividing the Group profit for the year by the number of shares outstanding:

The adjusted earnings per share take into account the potential dilution effect arising

out of the exercise of conversion and option rights. The adjusted earnings per share

for 2000 and 1999 show no deviation from the above figures.

31.12.2000 31.12.1999

Profit for the year in EUR m 26.8 17.3

Average number of no par value shares issued 633,000 633,000

Profit per share in EUR 42.3 27.3

59

OTHER INFORMATION.

(46) Information on the Cash flow statement. The Cash flow statement shows the

status and development of cash flows of the Investkredit Group. The cash holdings

recorded include cash in hand and balances with central banks, strictly interpreted.

(47) Segment reporting. The purpose of segment reporting is to present the components

of net results of the Investkredit Group in the following segments:

Enterprises (financing and aid, corporate finance, private equity and

counselling, financial asset management, Treasury)

Local government (local government financing)

Real estate (real-estate project development, investments and portfolio

management)

Consolidation bookkeeping entries are shown under ”Other”.

Disclosure of results by segments 2000

Enter- Local go- Realin EUR m prises vernment estate Other Total

Interest and similar income 498.1 331.1 18.7 -0.9 846.9

Interest and similar expenses -447.4 -312.4 -10.8 0.1 -770.5

Net interest income 50.7 18.7 7.9 -0.8 76.4

Fee and commission income 4.2 6.1 0.0 0.0 10.4Fee and commission expenses -3.9 -0.4 -0.3 0.0 -4.5Net fee and commission income 0.3 5.7 -0.2 0.0 5.9

Net credit risk result -4.5 -0.5 -1.5 0.0 -6.6

Trading result 1.7 1.3 0.0 0.0 3.0

Net financial investments result -10.8 -0.1 0.2 -0.1 -10.9

General administrative expenses -19.4 -12.6 -4.2 0.0 -36.2

Other operating results 2.9 -0.9 -1.0 -0.2 0.8

Extraordinary result 0.0 0.0 0.0 0.0 0.0

Profit for the year before tax 20.9 11.5 1.1 -1.1 32.4

Tax on income -0.6 -1.4 -0.2 0.0 -2.2

Profit for the year after tax 20.3 10.1 0.9 -1.1 30.2

Segment assets 5,349.4 3,365.7 377.2

Segment liabilities 5,070.4 3,265.3 71.4

Average equity 162.0 53.9 59.0 0.0 274.9

Cost-income ratio 36.7 % 49.0 % 55.3 % 42.5 %

Return on equity before tax 12.9 % 21.4 % 1.9 % 11.8 %

Return on equity after tax 12.5 % 18.8 % 1.5 % 11.0 %

60

In the real-estate segment, investments of EUR 101 m were made in three office

properties. Ancillary costs are therefore charged to the net segment result.

Business activities are conducted preponderantly in Austria. Therefore, a breakdown

of revenue by regions does not seem to be meaningful. The regional breakdown of

assets and liabilities is as follows:

31.12.2000 31.12.1999in EUR m Assets Liabilities Assets Liabilities

Austria 4,759 7,387 4,343 5,628

Rest or European Union 1,464 1,015 1,174 882

Rest of Western Europe 448 147 193 377

Rest of Central and Eastern Europe 599 127 355 20

North America 1,120 28 633 12

Rest of world 313 0 223 0

Total outside Austria 3,945 1,317 2,578 1,292

Aggregate 8,703 8,703 6,920 6,920

Presentation of net results by segments 1999 (Comparative figures)

Enter- Local go- Realin EUR m prises vernment estate Other Total

Interest income 351.8 167.2 4.9 -23.2 500.6

Interest and similar expenses -301.4 -151.2 -1.2 15.3 -438.5

Net interest income 50.4 15.9 3.7 -7.9 62.1

Fee and commission income 3.9 5.2 0.1 0.0 9.2Fee and commission expenses -3.3 -0.2 0.0 0.0 -3.5Net fee and commission income 0.6 5.0 0.0 0.0 5.7

Net credit risk result -6.7 -0.4 -0.4 0.0 -7.4

Trading result -6.0 2.3 0.0 0.0 -3.7

Net financial investments result -2.7 13.6 0.0 4.0 15.0

General administrative expenses -20.8 -13.2 -0.5 -0.1 -34.6

Other operating results 1.9 -14.4 -0.1 -0.2 -12.8

Extraordinary result 0.0 0.0 0.0 0.0 0.0

Profit for the year before tax 16.7 8.9 2.8 -4.2 24.3

Tax on income -2.5 -2.5 0.3 0.0 -4.8

Profit for the year after tax 14.2 6.4 3.1 -4.2 19.5

Cost-income ratio 46.3 % 56.6 % 13.8 % 54.0 %

61

Remaining maturity is the period between the balance sheet date and the date on

which the claim or liability becomes contractually due, and, in the case of partial

amounts, is calculated separately for each part. Deferred interest is accounted for

under the period ”Up to 3 months”.

Breakdown by remaining maturity as at 31 December 1999 (Comparative figures):

Repayable Up to 3 months 1 to 5 More thanin EUR m on demand 3 months to 1 year years 5 years

Loans and advances to banks 265 244 44 203 178

Loans and advances to customers 70 153 148 1,174 2,324

Securities – trading assets 8 3 3 27 24

Securities – available for sale 45 2 9 97 313

Securities – held to maturity 19 0 18 281 722

Securities – microhedges 0 0 0 43 45

Aggregate 423 388 222 1,825 3,606

Amounts owed tobanks 107 1,312 654 164 184

Amounts owed tocustomers 184 58 20 54 82

Debts evidenced by certificates 121 172 148 1,350 1,688

Subordinated capital 0 0 0 35 156

Aggregate 411 1,542 821 1,602 2,109

(48) Breakdown by remaining maturity.

Breakdown by remaining maturity as at 31 December 2000 (Comparative figures):

Repayable Up to 3 months 1 to 5 More thanin EUR m on demand 3 months to 1 year years 5 years

Loans and advances to banks 40 169 69 211 173

Loans and advances to customers 127 85 83 1,269 3,385

Securities – trading assets 6 0 0 35 75

Securities – available for sale 77 9 11 194 713

Securities – held to maturity 205 1 35 286 657

Securities – microhedges 0 8 14 36 36

Aggregate 455 274 211 2,032 5,040

Amounts owed tobanks 143 1,346 528 143 198

Amounts owed tocustomers 48 77 20 71 113

Debts evidenced by certificates 80 136 130 2,567 2,227

Subordinated capital 0 0 0 91 107

Aggregate 270 1,558 678 2,872 2,644

62

(51) Assets assigned as collateral. Investkredit has assigned claims amounting to EUR

114 m (1999: EUR 113 m) as security for global loans by the European Investment

Bank, Luxembourg.

(52) Contingent liabilities and other off-balance-sheet liabilities.

in EUR m 31.12.2000 31.12.1999

Contingent liabilities ERP bills 197 196 Guarantees 570 412 Other 0 0

Aggregate 767 608

Other liabilities Credit lines and promises 316 174 Liabilities from repurchase agreements 0 0 Other 0 0

Aggregate 316 174

(50) Subordinated assets. The assets shown on the balance sheet include the following

subordinated assets:

in EUR m 31.12.2000 31.12.1999

Loans and advances to banks 12 11

Loans and advances to customers 0 0

Fixed-income securities 35 34

Variable-yield securities 0 0

Aggregate 46 45

(49) Loans and advances to, and amounts owed to, related enterprises and enterprises

in which an equity investment is held.

in EUR m 31.12.2000 31.12.1999

Loans and advances to banks Related enterprises 0 0 Investments 0 0

Loans and advances to customers Related enterprises 46 36 Investments 110 102

Amounts owed to banks Related enterprises 0 0 Investments 0 0

Amounts owed to customers Related enterprises -10 -84

Investments -9 -8

63

31.12.2000 31.12.1999

(54) Assets and liabilities in foreign currencies. Foreign currencies are those outside

the euro area.

in EUR m Assets Liabilities Assets Liabilities

USD 1,272 1,382 610 755

GBP 75 118 87 67

CHF 553 123 167 194

JPY 111 2 102 39

Other 427 169 1,770 1,089

Total foreign currency 2,437 1,795 2,736 2,144

EUR 6,266 6,909 4,185 4,777

Aggregate 8,703 8,703 6,920 6,920

(53) Trust activities. The breakdown of trust activities not shown in the balance sheet

is as follows:

in EUR m 31.12.2000 31.12.1999

Loans and advances to banks 1 1

Loans and advances to customers 202 209

Financial investments 21 22

Trust assets 224 233

Amounts owed to banks 0 0

Amounts owed to customers -226 -242

Trust liabilities -226 -242

64

Total1999

Up to 1year

1 to 5years

Over 5years

in EUR m Total2000

Marketvalue

positive

Marketvalue

negative

Nominal amount at 31.12.2000Trading

portfolio2000

Remaining maturity

(55) Derivative financial transactions. The structure of open derivative financial transactions

is as follows:

Interest-rate related business 1,507 5,633 6,661 13,802 158 -121 8,496 2,493

OTC products

FRAs 58 80 - 138 0 -1 621 80

Interest swaps 1,415 4,877 6,300 12,592 155 -110 5,919 2,379

Interest-rate options – purchase - 7 124 131 2 - 441 -

Interest-rate options – sale 0 669 238 908 - -10 1,512 -

Other interest contracts - - - - - - - -

Products traded on the stock exchange

Interest-rate futures 33 - - 33 - - 2 33

Currency related business 1,089 1,401 766 3,256 95 -37 1,926 593

OTC products

Currency futures 35 0 - 35 1 -1 3 35

Currency swaps 956 1,400 766 3,123 93 -36 1,860 459

Currency options – purchase 53 - - 53 1 - 30 53

Currency options – sale 45 - - 45 - -1 33 45

Other currency contracts - - - - - - - -

Securities related business 1 - 4 5 - -0 17 1

OTC products

Shares-/Index futures – purchase - - - - - - - -

Shares-/Index futures – sale - - - - - - - -

Shares-/Index options – purchase - - 4 4 - - - -

Shares-/Index options – sale 1 - - 1 - -0 17 1

Products traded on the stock exchange

Shares-/Index futures - - - - - - - -

Shares-/Index options - - - - - - - -

Other business 2,387 7 - 2,395 28 -63 86 -

OTC products

Options 2,387 7 - 2,395 28 -63 86 -

Total 4,985 7,042 7,431 19,457 281 -221 10,526 3,086

65

in EUR mAvailable

for sale

Fair value

Value ofitem

Bankingbook

Tradingbook

Micro-hedge Total

(56) Fair value balance sheet.

Cash and balances with central banks 5 5 0 0 0 5

Loans and advances to banks 662 653 14 0 0 667

Loans and advances to customers 4,950 4,439 448 0 98 4,984

Risk provisions -64 -64 0 0 0 -64

Trading assets 187 0 0 187 0 187

Financial investments 2,690 1,561 1,015 0 94 2,670

Tangible fixed assets 215 215 0 0 0 215

Other assets 59 59 0 0 0 59

Aggregate 8,703 6,867 1,476 187 192 8,722

Amounts owed tobanks 2,357 2,036 0 0 328 2,364

Amounts owed to customers 328 275 0 0 52 326

Debts evidenced by certificates 5,139 4,258 0 0 920 5,178

Provisions 41 41 0 0 0 41

Other liabilities 324 219 0 52 20 292

Subordinated capital 197 157 0 0 43 199

Minority interests 23 23 0 0 0 23

Equity 294 301 0 0 0 301

Aggregate 8,703 7,308 0 52 1,362 8,722

(57) Market risks arising out of trading activities. Market risks arising out of trading

activities are calculated continuously – broken down by interest rate risk, share price

risk and currency risk – and are assessed daily after close of business. With a confidence

level of 99 % and a holding period of 1 day, a variance/covariance approach is applied

for the interest rate risk and the currency risk; in the case of the share price risk,

volatility shown by market data or figures calculated by the Bank is taken as the basis.

The strict rules of an internal risk management handbook are applied to the conduct

of trading activities. These rules also contain limits for value at risk. The breakdown of

risk is as follows:

Averagein EUR m 2000 31.12.2000 31.12.1999

Debt issues 0.6 0.4 0.1

Share price risks 0.4 0.2 0.1

Currency 0.1 0.1 0.1

Aggregate 1.1 0.7 0.4

66

31.12.2000in EUR m Volume Proportion

AAA 1,886 20 %

AA 2,242 23 %

A 2,882 30 %

BBB 1,428 15 %

BB 753 8 %

B 192 2 %

CCC 188 2 %

D 18 0 %

Aggregate 9,590 100 %

(58) Interest rate risks. The interest rate risk is assessed continuously (confidence level

99 %, holding period 1 month) in the light of the interest risk item (gap analysis using

the RiskMetrics scenarios and calculation of value at risk).

(59) Credit risk report. The Bank’s rating system is oriented initially according to the

credit risk of the debtors. Every borrower is assigned an internal or external rating.

There are eight internal classes for non-defaulting loans and two classes for defaulting/

doubtful loans. The internal classification corresponds to the standard rating scale of

Moody’s Investors Service or Standard & Poor’s and is carried out in several steps.

Changes in key balance sheet figures or other information, such as the level of

indebtedness in the case of Federal and local government authorities, can lead to

continuous changes in ratings. Ratings must be reassessed at least once a year. Where

an external rating by S & P, Moody’s or FITCH/IBCA is available, the least favourable

rating of these agencies is used. Thus, the assets in the banking book and off-balance-

sheet transactions are classified completely by credit standing and collateralization.

Furthermore, the credit risk is presented as value at risk and the return on risk-adjusted

capital (RORAC) is calculated for individual asset classes. The following table shows

the portfolio composition (assets and contingent liabilities in the form of guarantees

and other off-balance-sheet commitments) classified by rating categories – before

taking into account collateral and the netting of balance sheet items:

(60) Other liabilities. Investkredit and Kommunalkredit are required pursuant to § 93 of

the Austrian Banking Act to undertake proportionate safeguarding of depositors’

accounts in the framework of the relevant programme of Banken und Bankiers GmbH,

Vienna. On the basis of leasing agreements, liabilities in the amount of EUR 0.2 m will be

incurred in the year 2001 (previous year for 2000: EUR 0.2 m). The corresponding

liabilities for the years 2001-2005 are EUR 0.6 m (previous year for 2000-2004: EUR 0.5 m).

(61) Events after the balance sheet date. Kommunalkredit made a capital increase

in January 2001, and Investkredit’s share of Kommunalkredit’s capital was reduced to

51 %.

67

(62) The transition to IAS. The primary objective of IAS financial statements is to provide

investors with information regarding an enterprise’s financial position and

performance. On the other hand, the main emphasis in financial statements pursuant

to the Austrian Commercial Code is on the protection of creditors. These differing

goals result in differences in accounting methods and also in reporting.

Risk provisions. Risk provisions are shown openly on the assets side as a reduction,

according to usual international practice.

Trading assets and liabilities. Trading portfolio items which are contained in several

different balance sheet items pursuant to the Austrian Commercial Code are

summarized under IAS rules in Trading assets or Trading liabilities. These items also

contain the fair values of derivative financial instruments. According to IAS, items in

the trading portfolio are stated at their fair value, but according to HGB at the lower

of cost or market value.

Financial investments. The item of financial investments covers equity investments,

securities serving as financial assets as well as securities in the liquidity reserve. Securities

in current assets which are valued under the Austrian Commercial Code at the lower

of cost and market value are stated under IAS at fair value.

Derivative transactions. By application of IAS 39, derivatives are treated differently

according to their category. Derivatives in the trading portfolio are attributed to trading

assets or liabilities. They are accounted for at their fair value, which is a deviation

from the practice under the Austrian Commercial Code. Derivatives in the banking

book are treated, depending on their purpose, as fair value hedges, cash flow hedges

or macrohedges, and considerable differences arise vis-à-vis the Austrian Commercial

Code through accounting at fair value.

Reserves for personnel purposes. Reserves for pensions and similar commitments are

based according to the Austrian Commercial Code on the statistical accumulation

procedure and under the IAS on the dynamic defined benefit obligations procedure.

Future developments of salaries and pensions are taken into account in the calculation.

The discount factor is oriented according to the capital market.

Deferred taxes. According to the Austrian Commercial Code, deferred tax liabilities

that arise through differences between the result under commercial law and the tax

result are entered as liabilities, while there is an option for the entry of deferred

assets on the assets side. Pursuant to IAS 12, deferred taxes are formed according to

temporary balance sheet differences. Deferred tax assets or liabilities therefore arise

differently under the IAS balance sheet approach and the Austrian tax assessment

system – irrespective of the time of their release.

68

(63) Information on employees.

2000 1999

Employees of the Group Austria 268 246 Abroad 3 2

Aggregate 271 248

Equity capital. Equity held by outside parties is entered in a separate balance sheet

item. The Bank’s own shares are shown in the trading portfolio, but are deducted

from equity capital for the calculation of profit per share. The equity capital item

includes the hedge reserve, which contains the changes in derivative transactions of

the banking book. Changes in the fair value of real-estate investments with a neutral

effect are shown in equity capital pursuant to IAS 40.

Real-estate investment. Real estate that is not used for the Bank’s own business

operations and is not leased is entered according to the Austrian Commercial Code at

acquisition cost and according to IAS 40 at fair value. Changes in fair values are shown

in equity capital without any effect on the results.

The table shows the average number of staff during the financial year, part-time staff

being weighted according to the extent of employment.

(64) Information on emoluments of and loans to members of the policy-making bodies.

The following table contains information on the total emoluments of members of the

Board of Management and the Supervisory Board as well as on severance payments

and pensions for members of the Board of Management, senior officers and other

staff (including changes in provisions and reserves):

As at 31 December 2000, no loans to members of the Board of Management and the

Supervisory Board were outstanding. Also there were no Investkredit guarantees for

such persons.

in EUR m 2000 1999

Total emoluments of: Active Management Board members 0.8 0.7 Former Management Board members 0.5 0.5 Supervisory Board members 0.1 0.1

Severance payments for: Board of Management, Senior Officers 0.7 0.3 Other employees 0.3 0.2

Pensions for: Board of Management, Senior Officers -0.9 1.6 Other employees 2.2 0.3

69

(65) Information concerning policy-making bodies.

Members of the Board of Management.

Alfred Reiter CEO and Chairman of the Board of Management

Wilfried Stadler Member of the Board of Management

Members of the Supervisory Board

Geiserich E. Tichy Chairman

Karl Samstag Deputy Chairman

Karl Sevelda Deputy Chairman

Elisabeth Bleyleben-Koren Deputy Chairperson (to 24 May 2000)

Helmut Elsner

Max Kothbauer Deputy Chairman (from 24 May 2000 to 31 December 2000)

Klaus Haberzettl

Herwig Hutterer

Heinz Kessler

Kurt Löffler

Regina Prehofer

Gerhard Tanew-Iliitschew

Klaus Thalhammer

Employees’ Representatives on the Supervisory Board.

Wolfgang Agler

Gabriele Bauer

Regina Frick

Ing. Otto Kantner

Peter Wimmer

State Commissioner.

Alexander Gancz State Commissioner

Kurt Bayer Deputy State Commissioner

70

(66) Disclosure of equity investments.

in EUR m BWG Investment Extent of investment Information on the annual financial statement

Category without with Most recent Equity Profit fordormant dormant holding annual financial the year

Name and registered office 1) direct indirect 2) % 3) % statement 4) 5)

1. Related enterprises

1.1. Fully consolidated relatedenterprisesKommunalkredit Austria AG, Vienna CI x 61.62 % 31.12.00 60.92 8.76Investkredit International Bank p.l.c., Sliema/Malta CI x x 100.00 % 31.12.00 31.45 2.41VBV Anlagenvermietungs- und Beteiligungs-Aktiengesellschaft, Vienna FI x 100.00 % 31.12.00 54.16 5.20VBV Holding Gesellschaft mbH, Vienna FI x x 100.00 % 31.12.00 8.83 6.04VBV Vermögensanlagen und BeteiligungenVerwaltungs-GmbH Investitionsgüter-Vermietungs OHG, Vienna FI x x 100.00 % 31.12.00 65.13 0.24E.I.A. eins Immobilieninvestitionsgesellschaft mbH,Vienna OE x x x 100.00 % 100.00 % 31.12.00 3.11 0.11E.I.P. Beteiligungs Gesellschaft mbH, Vienna OE x 100.00 %EUROPOLIS CE Holding GmbH, Vienna AB x 100.00 %Europolis Hadovka s.r.o., Prague OE x 100.00 %Europolis Holding Kft, Budapest OE x 100.00 %Europolis Holding Sp. z o.o., Warsaw OE x 100.00 %Europolis Holding s.r.o., Prague OE x 100.00 %Europolis Invest Immobilieninvestitions GmbH, Vienna OE x 100.00 %Infopark Research Center I Kft, Budapest OE x 100.00 %RCP Holding GmbH, Vienna OE x 100.00 %RCP Beteiligungsverwaltungs-Gesellschaft mbH,Vienna OE x 100.00 %VBV drei Anlagen Vermietung Gesellschaft mbH,Vienna OE x 100.00 %VBV fünf Anlagen Vermietung Gesellschaft mbH,Vienna OE x 100.00 %Warsaw Tower s.p.z.o.o., Warsaw OE x 100.00 %„VBV iota“ - IEB Holding Gesellschaft mbH, Vienna OE x 86.96 %Kommunalkredit Beteiligungs- und ImmobilienGmbH, Vienna AB x 61.62 %

1.2. Included at cost

Europa Consult GmbH, Vienna OE x 100.00 % 31.12.99 0.83 -0.24i2B Holding Aktiengesellschaft, Vienna OE x 100.00 % 31.12.00 -0.04 0.00INVEST EQUITY early stage Beteiligungs-AG, Vienna OE x 100.00 % New companyInvest Mezzanine Capital ManagementGesellschaft mbH, Vienna OE x 100.00 % New companyVBV beta Anlagen Vermietung Gesellschaft mbH,Vienna (Organschaft) FI x 100.00 % 31.12.00 0.02 0.22VBV sechs Anlagen Vermietung Gesellschaft mbH,Vienna FI x x x 100.00 % 31.12.99 0.05 0.02VBV vier Anlagen Vermietung Gesellschaft mbH,Vienna OE x x x 100.00 % 31.12.99 -1.32 -1.02CALG Secunda Grundstückverwaltung GmbH, Vienna FI x x x 75.00 % 98.53 % 31.12.99 0.35 0.08VBV acht Anlagen Vermietung Gesellschaft mbH,Vienna FI x x x 75.00 % 96.09 % 31.12.99 0.12 0.00ETECH Management Consulting Gesellschaft mbH,Vienna OE x 100.00 % 31.12.99 -0.03 0.08CALG Vomido Grundstückverwaltung GmbH, Vienna FI x x x 50.00 % 92.42 % 31.12.99 0.16 -0.01EUROPOLIS INVEST Management s.r.o., Prague OE x 100.00 %RCP Alfa s.r.o., Prague OE x 100.00 %RCP Beta s.r.o., Prague OE x 100.00 %

71

in EUR m BWG Investment Extent of investment Information on the annual financial statement

Category without with Most recent Equity Profit fordormant dormant holding annual financial the year

Name and registered office 1) direct indirect 2) % 3) % statement 4) 5)

RCP Delta s.r.o., Prague OE x 100.00 %RCP Epsilon s.r.o., Prague OE x 100.00 %RCP Gama s.r.o., Prague OE x 100.00 %RCP Omega s.r.o., Prague OE x 100.00 %RCP ISC s.r.o., Prague OE x 100.00 %Schloß Gabelhofen Hotelbetriebsgesellschaft mbH,Vienna OE x 100.00 %Schloß Krumbach Hotelbetriebsgesellschaft mbH,Vienna OE x 100.00 %VBV elf Anlagen Vermietung Gesellschaft mbH, Vienna OE x 100.00 %VBV gamma Anlagen Vermietung Gesellschaft mbH,Vienna FI x 100.00 %VBV Holding GmbH & Co Anlagen Leasing OHG, Vienna OE x 100.00 %VBV neun Anlagen Vermietung Gesellschaft mbH, Vienna FI x 100.00 %Immo-Lease Grundstücksverwaltungs-GmbH, Vienna FI x 99.69 %LBL eins Grundstückverwaltung Gesellschaft mbH, Vienna FI x 75.00 %VBV zwölf Anlagen Vermietung Gesellschaft mbH, Vienna OE x 75.00 %WIKA Leasing-Gesellschaft mbH, Vienna FI x 75.00 %Cesky Komunalny Leasing s.r.o., Prague FI x 61.62 %

2. Associates

2.1. Included at equity

IMMORENT-BUSTA Grundverwertungsgesellschaft mbH,Vienna FI x x x 50.00 % 99.44 % 31.12.99 2.36 0.14Immorent-VBV Grundverwertungs-Gesellschaft mbH,Vienna FI x 100.00 %International Business Center Rt, Budapest OE x 50.00 %VBV delta Anlagen Vermietung Gesellschaft mbH,Vienna OE x 40.00 %INVEST EQUITY Beteiligungs-AG, Vienna OE x 29.85 %„Die Erste“ Büro- und Gewerbezentren Errichtungs-und Betriebs-Gesellschaft mbH, Linz OE x 25.50 %Tisi Leasinggesellschaft mbH, Vienna FI x x 25.00 % 99.26 %Dexia Kommunalkredit Holding Gesellschaft mbH,Vienna OE x 24.65 %Leasing 431 Grundstückverwaltung Gesellschaft mbH,Vienna FI x 21.95 %Prva Komunalna Banka a.s., Zilina/Slovak Republic CI x 19.32 %

2.2. Included at cost

IMMORENT-IBA Leasinggesellschaft mbH, Vienna FI x x x 50.00 % 93.59 % 31.12.99 0.05 0.02Invest Equity Management ConsultingGesellschaft mbH, Vienna OE x x 47.39 % 31.12.99 0.11 0.04APCS Power Clearing and Settlement GmbH, Vienna OE x 20.00 % New companyBetriebsanlagen & Wirtschaftsgüterleasing GmbH,Vienna FI x 50.00 %CALG 435 Grundstückverwaltung Gesellschaft mbH,Vienna FI x 50.00 %LBL drei Grundstückverwaltung-GmbH, Vienna FI x 33.20 %Informationszentrum für umweltgerechte ProduktionGesellschaft mbH, Graz OE x 30.81 %Ing. Rudolf Kaiser Gesellschaft mbH, Sattledt OE x 28.57 %

6)

72

The Board of Management of Investkredit Bank AG

Alfred Reiter Wilfried Stadler

Vienna, February 2001

in EUR m BWG Investment Extent of investment Information on the annual financial statement

Category without with Most recent Equity Profit fordormant dormant holding annual financial the year

Name and registered office 1) direct indirect 2) % 3) % statement 4) 5)

3. Other investmentsincluded at cost

Venture Capital in treuhändiger Verwaltung derVenture FinanzierungsgmbH, Vienna OE x 5.78 %Venture Finanzierungsgesellschaft mbH, Vienna CI x 5.78 %WED Holding GmbH, Vienna OE x 5.77 %Europolis Invest SA, Paris OE x 5.00 %Kasberg Lift - GmbH & Co KG, Wels OE x 4.88 %Euro Synergies Investment S.C.A., Luxembourg OE x 1.51 %Österreichisches Forschungszentrum SeibersdorfGmbH, Vienna OE x 0.93 %

Aviation Holdings plc, London OE x 0.37 %Einlagensicherung der Banken und BankiersGmbH, Vienna OE x 0.10 %

1) CI = Credit Institution, FI = Financial Institution, AB = Auxiliary Banking Service, OE = Other Enterprise2) Capital includes a dormant equity holding3) Including indirect investments without dormant equity holdings4) Equity capital including untaxed reserves and secret deposits5) Profit for the year before movement on reserves6) No controlling influence

73

We have audited the accompanying Consolidated Financial Statements of Investkredit Bank AG,

which comprise the Balance Sheets as at 31 December 2000 and 31 December 1999, and the

Income Statements, the Cash flow Statements, the Statements of Changes in Equity and the

Notes for the financial years from 1 January 2000 to 31 December 2000 and from 1 January 1999

to 31 December 1999. These consolidated financial statements are the responsibility of the

management. Our responsibility is to express an opinion on these Consolidated Financial State-

ments based on our audit.

We have conducted our audit in conformity with accounting principles applicable in Austria.

Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the Consolidated Financial Statements are free of material misstatements. An

audit includes examining, on a test basis, evidence supporting the amounts and disclosures in

the Consolidated Financial Statements. An audit also includes assessing the accounting principles

used and significant estimates made by management, as well as evaluating the overall

consolidated financial statement presentation. We believe that our audit provides a reasonable

basis for our opinion.

In our opinion, the Consolidated Financial Statements give a true and fair view in all material

respects of the financial position of Investkredit and its subsidiaries as at 31 December 2000 and

31 December 1999 and of the results of its operations and its cash flows for the financial years

1 January 2000 to 31 December 2000 and 1 January 1999 to 31 December 1999 in accordance

with the International Accounting Standards (IAS).

Under Austrian law, an audit of the Consolidated Management Report has to be conducted and

it has to be certified whether the legal requirements for the exemption from the preparation of

consolidated accounts according to Austrian law are met.

We confirm that the Management Report is consistent with the Consolidated Financial State-

ments and that the legal requirements for exemption from the presentation of consolidated

accounts according to Austrian law are met.

KPMG Austria GmbH

Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Wilhelm Kovsca Martin Wagner

Chartered Accountants and Tax Consultants

Vienna, 2 March 2001

Audit certificates pursuant to § 245a of theAustrian Commercial Code

74

In the year 2000, the Supervisory Board and its Committees performed the duties entrusted to

them under the law and the Statutes. The Board of Management informed the Supervisory

Board regularly on the progress of business and the situation of the Bank. The resolutions

submitted for adoption and important principles and individual questions were discussed in

detail in five meetings of the Supervisory Board, eight meetings of the Loans Committee and

one meeting of the Accounts Review Committee in preparation for approval of the annual

financial statements.

The accompanying annual financial statements and the management discussion have been

examined by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna.

The final result of the audit gave no cause for objection, so that the auditor has issued an

unqualified opinion.

The financial statements 2000 including the Notes, in keeping with International Accounting

Standards (IAS), and the management discussion have been examined by KPMG Austria GmbH

Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna. The audit gave no cause for

objection and the legal requirements were fully met. In the opinion of the auditors, the financial

statements give a true and fair view in all material respects of the financial position of Investkredit

and its subsidiaries as of 31 December 2000 and 31 December 1999 and of the profit or loss and

cash flows in the financial years 2000 and 1999, in conformity with the International Accounting

Standards. The auditors confirm that the consolidated financial statements meet the legal

requirements for exemption from the obligation to present a consolidated financial statement

under Austrian law. The representatives of the auditors took part in the Supervisory Board meeting

of 25 April 2001 that was convened for approval of the financial statements and were available

to answer questions from members of the Supervisory Board.

The Supervisory Board has noted and given its assent to the results of the audit, has endorsed

the 2000 financial statements, the management discussion and the proposal for the distribution

of the profit and has thus given its approval pursuant to § 125 (2) of the Austrian Stock

Corporations Act. The Supervisory Board has also noted and given its assent to the result of the

audit of the consolidated financial statements.

The Supervisory Board

Geiserich E. Tichy

Chairman

Vienna, 25 April 2001

REPORT OF THE SUPERVISORY BOARD.

75

Assessment basis according to the Austrian Banking Act (BWG). Total of the risk-

weighted assets, off-balance-sheet and special off-balance-sheet items of the banking

book, calculated according to the Austrian Banking Act. See Risk assets.

Asset backed securities (ABS). Documentary evidence of payment entitlements in

tradable securities. Asset backed securities arise through the combination of certain

financial assets (securitization).

Associates. Enterprises on whose business policy decisive influence can be exercised.

They are accounted for under the equity or the cost method.

Austrian Banking Act (BWG). The Austrian Banking Act, as amended by Federal Law

Gazette BGBl. I No. 2/2001 and BGBl. II No. 5/2001.

Austrian Commercial Code (HGB). The Austrian Commercial Code as amended by

Federal Law Gazette BGBl. I No. 142/2000.

Available for sale. A category of securities that function as a liquidity reserve.

B2B. Business-to-business. E-commerce transactions between enterprises.

B2C. Business-to-consumer. E-commerce transactions between enterprises and

consumers.

Banking book. Includes all items not attributed to the trading book.

BlS capital ratio. Index of internationally active banks for underpinning their credit

risks (risk-weighted assets including off-balance-sheet transactions) and market risks

with the capital required under banking supervisory regulations (core capital,

supplementary own funds and Tier 3 capital; capital as defined by the Bank for Inter-

national Settlements – BIS). The minimum standard for the ratio of equity capital to

risk-weighted assets and the market risk items multiplied by the factor of 12.5 is 8 %.

A minimum standard of 4 % is prescribed for the ratio of core capital to risk-weighted

assets.

Capital Adequacy Directive. EU Directive on the appropriate provision of equity capital,

in particular with regard to market risks arising out of the trading activities of banks

and securities firms.

Glossary of important technical terms.

76

Capital resources. Capital resources as defined

in the Austrian Banking Act comprise paid-in

capital, capital generated as well as differences

and minority interests of other shareholders

resulting from capital consolidation (= core

capital / Tier 1), supplementary and

subordinated capital (Supplementary elements

/ Tier 2) and reclassified Tier 2 capital (= Tier 3

capital, chiefly short-term subordinated

liabilities).

Cash flow hedge. Microhedge for the

protection of cash flows out of balance-sheet

items.

Cash flow statement. Calculation and

disclosure of flows of payment resources which

a bank has generated or consumed in a

financial year out of current business activity,

investment activity and financing activity. In

addition, the cash holdings at the beginning

of the financial year are compared with the

amount at the end of the year.

Categories of equity investments. Equity

investments are classified as fully consolidated enterprises if they are controlled and

significant. If they are not controlled but are significantly influenced and are significant,

they are accounted for under the equity method, while all other equity investments

are recognized in the balance sheet at the carrying amount and in the income statement

at the dividend distributed.

Clean price. Price of a financial instrument without provision for deferred interest.

Confidence level. Probability that a potential loss lies within a range that is stated as

value at risk; the Investkredit Group calculates it at 99 %.

Core capital (Tier 1). Paid-in capital and capital generated as well as differences arising

on capital consolidation, less intangible assets.

Core capital ratio. Core capital divided by the assessment basis (including 12.5 times

the trading book requirement).

Cost-income ratio. Index of the cost-efficiency of enterprises under IAS: general admi-

Harald Reismüller

77

nistrative expenses as a proportion of income (the total of net interest income, net fee

and commission income, net trading result and net financial investment result).

Credit derivatives. Instruments with which credit risks are transferred. They neither

change nor re-establish the original credit relations of the counterparts (the parties

disposing of the credit risks).

Credit equivalent. Also called credit risk equivalent. Procedure for translating volatile

claims against customers for purposes of comparability into an equivalent, constant

claim over time with regard to the risk content. The credit equivalent consists of the

current commitment, a share of unused credit lines and, in the case of derivatives,

sometimes a surcharge for the possible future increase in the claim. It also corresponds

to the amount for the relevant regulatory credit risk (risk-weighted assets), which

must be underpinned with equity capital.

Credit risk. The danger that customers will not meet their contractually agreed payment

commitments. The credit risk includes credit, sovereign and settlement risks.

Derivatives. Derivative instruments: financing instruments whose valuation is mainly

derived from the price, price fluctuations and price expectations of a basic instrument

(for example, shares, bond issues, foreign currency, indices). The chief derivatives are

swaps, options and futures.

Dirty price. Price of a financial instrument including provision for deferred or accrued

interest.

Dividend per share. The dividend per share proposed to the Annual General Meeting.

Early stage financing. Financing of the early phase in the development of an enterprise,

from financing the basic concept to the commencement of production and marketing.

Earnings per share. According to IAS, an index that compares the profit for the year

after tax (less the result accounted for by shareholders outside the Group) to the average

number of ordinary shares. In addition to earnings per share, adjusted earnings per

share are shown if the number of shares has increased or can increase owing to the

recognition of drawing rights (”dilution effect”). In its trading portfolio, Investkredit

temporarily holds its own shares only in its capacity as a market-maker to ensure the

Vienna Stock Exchange’s ability to function. Therefore, such shares are treated as shares

outstanding.

Electronic banking. Banking transactions via the Internet or other electronic networks

or through the exchange of data carriers.

78

Enterprise financing. Services of Investkredit in the segments of financing and aid,

corporate finance, equity investment financing and counselling as well as financial

assets management.

Expected default frequency (EDF). The probability of default of a debtor within a

particular period of time (as a rule, 1 year).

Exposure. The amount that can be lost by a bank in connection with a loss from a risk

incurred, for example, the default of a borrower.

Fair value. The amount or price at which assets or liabilities could be traded between

knowledgeable, willing parties in an arm’s length transaction. The fair value is regularly

identical with the market price.

Fair value hedge. Microhedge to protect the fair value of balance-sheet items.

Foreign exchange swap. Agreement between two contracting parties to exchange

capital and interest payments in different currencies.

Forward rate agreements (FRAs). Agreements between two contracting parties fixing

the interest rate for a future period and an agreed nominal amount (not an exchange

of capital).

Fully consolidated enterprises. Related enterprises are fully consolidated if they are

not insignificant. In the context of full consolidation, assets, liabilities, earnings and

expenses are fully incorporated in the consolidated financial statement after deduction

of consolidation items.

Fund of funds. Securities fund that invests in other funds. For reasons of risk

diversification, a fund of funds may not invest more than 20 % of its assets in a single

target fund (among the Investkredit investment funds, i2V-Select is a fund of funds).

Futures. Listed contracts standardized with regard to amount, quality and date of

delivery in which an item traded in the money, capital, precious metals or foreign

exchange market is to be delivered or purchased at the price determined by the stock

exchange. Frequently, in such contracts (for example, on the basis of share indices), an

adjusting payment is due in order to fulfil the existing commitment (instead of the

physical delivery or purchase of securities).

Hedging. Procedure under which an existing risk item is neutralized by a countervailing

transaction.

Held to maturity. Category of securities that are assigned to fixed assets and are held

79

until they fall due.

IAS. International Accounting Standards: accounting rules in the development of which

international associations of accountants and experts cooperate under the leadership

of the International Accounting Standards Committee. The purpose is comparable

worldwide accounting and publicity and the processing of relevant information for a

broad public, in particular, investors. The rules include not only general accounting

principles but also, currently, 40 standards, and are becoming accepted as an EU-wide

system for financial statements.

Interest rate swap. Agreement between two contracting partners to exchange interest

payments in one and the same country or currency over a particular period of time

(not an exchange of capital).

Investments accounted for under the equity method. Significant but not controlled

equity investments are recognized in the consolidated balance sheet at the share of

own funds. The share of profits or losses for the year is entered in the consolidated

income statement.

Liability concept. Under the balance-sheet-oriented liability method, deferred taxes

are regarded as liabilities to or claims against the tax authorities.

Macrohedge. Protection of a portfolio of financial instruments that as a rule contains

several derivatives.

Market-to-market valuation. Valuation of financial instruments at current fair prices,

independently of acquisition costs and including unrealized price gains.

Market capitalization. Value of all shares as at year-end.

Market risk. Danger of a loss in value arising through unexpected changes in fair

prices (interest, share prices, exchange rates, prices of goods), before the items affected

can be closed or protected.

MBI. Management Buy-In. Acquisition of a business by an external management with

the support of a financing bank and usually of a financing investor.

MBO. Management Buy-Out. Acquisition of an enterprise by the management with

the support of a financing bank and usually of a financial investor.

Mergers and acquisitions (M&A). Combinations or purchases and sales of enterprises.

Mezzanine financing. Chiefly, subordinated financing that takes on functions similar

80

to equity capital. Mezzanine capital occupies a position between equity and borrowing

in the financing structure.

Microhedge. Protection of a financial instrument by a derivative.

Net trading result. Balance of earnings and expenses from a bank’s own trading in

securities, financial instruments (in particular, derivatives), foreign currency and precious

metals that are valued at fair prices (market-to-market valuation). This item also includes

that part of current interest, dividends and refinancing components that is to be

attributed to trading activities.

Online banking. Transaction of banking business via electronic networks (Internet)

also known as electronic banking.

Option. The right to purchase (purchase option/call) a particular item (for example,

securities or currency) from a contracting party or to sell such item to him (selling

auction/put) at a previously agreed price, at a particular time and over a particular

period of time.

OTC derivatives. Financial instruments (derivatives) that are not standardized and are

not listed on a stock exchange but are traded directly between market participants -

over the counter.

Own funds to be taken into account. Total of core capital (Tier 1) and supplementary

capital resources (Tier 2), excluding deductions. This item covers the capital resources

required for the banking book (solvency) and is used as a regulatory measure for

limiting large exposures and for other regulatory standards. Tier 3 capital is not part

of own funds to be taken into account, and can be used only to cover the regulatory

capital requirement for the trading book and for the open foreign exchange position

pursuant to the Austrian Banking Act.

Portfolio. Part or total set of assets (for example, securities, loans, equity investments

or real estate). The primary purpose of portfolio formation is the diversification of

risk. Securities: combination of like transactions, in particular of securities and/or deri-

vatives, according to price-risk considerations.

Price/earnings ratio. The price of an ordinary share as at year-end, divided by earnings

per share.

Private equity. Equity capital financing that is directed towards enterprises in more

mature markets during a period of change and growth.

Projected unit credit method. Present value pension entitlement procedure. It is a

81

capital accumulation procedure under IAS 19 (revised 1998), according to which the

commitment must be recognized at the actuarial present value of the pension

entitlement existing on the financial statements date. A characteristic is that trend

assumptions (for example, expected salary increases) must be taken into account in

the case of dynamic pension commitments. The discounting rate is oriented in the

light of the interest rates for bonds issued by enterprises with high credit standing.

Rating. Standardized assessment of the credit standing of an issuer and its securities

by specialized rating agencies, such as Moody’s Investors Service or Standard & Poor’s.

Related enterprises. Enterprises on whose business policy a controlling influence can

be exercised.

Return on assets (ROA). Total return on capital, profit for the year (before tax) divided

by average risk-weighted assets.

Return on equity (ROE). Index of the income situation of an enterprise, consisting of

the profit for the year divided

by average equity.

Risk assets. Total of the assets

in the banking book weighted

by counterpart risk. See

Assessment basis according to

the Austrian Banking Act

(BWG).

RORAC (Return on risk-adjusted

capital). Returns divided by the

economic capital used.

Securitization. Embodiment of

rights (e.g. claims) in securities

(e.g. shares and bonds).

Securitized money and capital

market financing. Securitized

financing instruments as an al-

ternative to large-volume

industrial loans.

Seed capital. Capital for the

translation of an idea into Franz Neckl

82

realizable results, covering the period up to the determination of the business concept

for an enterprise at the establishment stage.

Segment reporting. Disclosure of assets and earnings of an enterprise, classified by

segments and geographical areas (regions).

Shareholder value. Management concept that is geared to creating sustained increases

in the value of an enterprise. Strategic and operational decisions are expected to lead

to returns higher than the equity capital costs and thus to increase value for

shareholders.

Standard risk costs for credit risks. Risk premiums calculated in advance for lending

business. They cover the loss through credit defaults to be expected within a year, on

the basis of historical experience.

Structured financing. Optimization of maturity periods and financing costs with a

high degree of individuality, the coordinated use of loan financing (with the

incorporation of aid programmes and interest and exchange rate risk management

instruments), equity capital and mezzanine financing or securitized financing

instruments, taking into account tax and company law instruments.

Swap. The exchange of payment flows.

Syndication. Action by Investkredit in relation with structured financing; project-related

coordination of syndicate partners (consortia).

Trading book. Items of a bank’s own trading with financial instruments that it holds

for the purpose of resale or has taken over in order to make short-term use of existing

or expected differences between purchase and selling prices or fluctuations in prices

and interest rates. Items outside the trading book are counted in the banking book.

Value-at-risk concept. Procedure for the calculation of a potential for loss arising out

of changes in fair prices. Value at risk states the loss that will not be exceeded under

normal market conditions on the assumption of previously determined probability

(confidence level) within a defined liquidity period (for example, one day).

Venture capital. Equity financing directed towards young or newly established

businesses with extraordinary growth potential.

Volatility. Index of the change of interest rates or prices over time, in mathematical

terms the annualized standard deviation of interest rates or prices.

83

Our photographic presentation.

Page 19

Helmut Hinek, Sabine Dungl, Legal Department

Page 16

Margit Poglits-Raffetseder, Enterprise Financing;Johann Salzmann, Technical Consulting and Real Estate

Page 14

The ”invest.outlook panel”: Klaus Gugglberger, Business Analysisand Technical Consulting; Thomas Heinisch, Financial Asset Manage-ment; Walter Anscheringer, International Business and FinancialAsset Management; Wilfried Stadler, Member of the Board of Ma-nagement; Julius Gaugusch, Organization and Controlling

Page 9

The ”invest.outlook panel”: Walter Riess, Enterprise Financing;Stefan Süssenbach, Legal Department; Anton Taubenschuss,Internal Audit; Bernhard Mayer, Business Analysis and TechnicalConsulting; Hannah Rieger, Corporate Communications; AlfredReiter, Chairman of the Board of Management

Page 7

Wilfried Stadler,Member of theBoard of Management

Page 6

Alfred Reiter,Chairman of theBoard of Management

Title page

Walter Riess, Enterprise Financing

The central photographic theme is the staff of Investkredit Bank AG. In a style reminiscent of an

informal reporting assignment, the photographer Stefan Badegruber has presented snapshots

illustrating day-to-day working life in the various departments of the Investkredit Group. Of-

fices are not seen as static workplaces. The mixture of sharp focus, blurred focus and movement

creates a particularly dynamic note. Care was taken to portray people in natural, unforced poses.

Artificial casting und styling were intentionally avoided.

84

Page 81

Franz Neckl, Internal Service

Page 76

Harald Reismüller, User Service

Page 30

Gernot Rux, Josef Bernhard, Money and currency market dealings

Page 28

Julius Wallner, Financial Asset Management; Christian Doppler, Enterprise Financing;Thomas Heinisch, Financial Asset Management

Page 27

Heike Jandl, Europa Consult GmbH; Oliver Grabherr, Invest MezzanineCapital Management GmbH

Page 24

Bedrija Ismaili, International Business and Financial Asset Management;Hans-Michael Schania, International Business; Johannes Wundsam, International Business

Page 21

Hannah Rieger, Corporate Communications; Claudia Schmied, Enterprise Financing

Page 20

Bedrija Ismaili, International Business and Financial Asset Management

85

Published by:

Investkredit Bank AG

1013 Vienna, Renngasse 10

Tel.: +43/1/53 1 35-0

Fax: +43/1/53 1 35-983

www.investkredit.at

e-mail: invest@investkredit.at

Information:

Hannah Rieger

Tel. +43/1/53 1 35-112

e-mail: rieger@investkredit.at

Julius Gaugusch

Tel. +43/1/53 1 35-330

e-mail: gaugusch@investkredit.at

Graphic design and layout:

CCP, Heye Werbeagentur GmbH

1160 Vienna, Thaliastraße 125B

Photographs:

Stefan Badegruber, Vienna

Printed by:

Agens-Werk Geyer + Reisser Druck- und Verlagsgesellschaft m.b.H.,

1051 Vienna, Arbeitergasse 1 – 7

The English translation is provided for information, the German original being the authentic text.