Success in 15 Languages

Annual report 2007

SUCCESS IN 1 5 L A N G U AGES english ― eastern european eastern european ― english

than more ds wor 32,000 tional addi and financial y bular voca annual report 2007

SUCCESS IN 1 5 L A N G U A G E S ENGLISH ― EASTERN EUROPEAN EASTERN EUROPEAN ― ENGLISH Summary of key data

RZB Group Monetary values are in €mn 2007 + (-) Change 2006 (-OOEs)1 2006 2005 2004 2003 2002 Income Statement Net interest income after provisioning 2,635 43.2% 1,840 1,840 1,400 928 661 558 Net commission income 1,516 28.8% 1,177 1,177 819 625 479 383 Trading profit 94 (63.4%) 257 257 172 170 173 154 General administrative expenses (2,645) 25.2% (2,113) (2,113) (1,574) (1,196) (1,017) (900) Profit before tax 1,485 15.5% 1,286 1,882 930 692 344 243 Profit after tax 1,190 15.0% 1,035 1,631 705 566 278 181 Consolidated profit 778 3.5% 752 1,169 451 446 216 137 Earnings per share, € 150.7 (5.0) 155.7 239.9 92.6 102.3 48.8 33.4 Balance Sheet Loans and advances to banks 30,910 (3.4%) 32,006 32,006 29,647 22,229 19,152 15,028 Loans and advances to customers 73,071 37.6% 53,106 53,106 39,613 27,957 22,180 19,785 Deposits from banks 48,899 10.8% 44,129 44,129 43,416 32,270 27,423 23,471 Deposits from customers 55,369 23.8% 44,727 44,727 32,158 23,386 16,990 12,673 Equity (including minorities and profit) 8,422 26.9% 6,637 6,637 4,950 3,343 2,445 2,275 Balance sheet total 137,402 18.8% 115,629 115,629 93,863 67,864 56,053 46,405 Regulatory Information Basis of assessment (including market risk) 93,638 32.5% 70,656 70,656 55,783 38,492 30,389 27,973 Total own funds 10,297 35.2% 7,614 7,614 5,199 4,120 3,097 2,869 Total own funds requirement 7,491 32.5% 5,652 5,652 4,463 3,079 2,431 2,238 Excess cover 37.5% 2.8 ppt 34.7% 34.7% 16.5% 33.8% 27.4% 28.2% Core capital ratio (banking book, tier 1) 8.8% (0.2 ppt) 9.0% 9.0% 8.3% 9.2% 7.5% 7.4% Own funds ratio 11.0% 0.2 ppt 10.8% 10.8% 9.3% 10.7% 10.2% 10.3% Performance Return on equity before tax 22.2% (4.5 ppt) 26.7% 39.1% 23.9% 29.9% 15.5% 12.5% Return on equity after tax 17.8% (3.7 ppt) 21.5% 33.9% 18.1% 24.4% 12.5% 9.3% Consolidated return on equity 16.5% (5.4 ppt) 21.9% 34.0% 15.5% 22.8% 12.1% 9.9% Cost/income ratio 56.9% 0.2 ppt 56.7% 56.7% 58.9% 59.8% 64.1% 67.2% Return on assets before tax 1.17% (0.07 ppt) 1.25% 1.83% 1.17% 1.11% 0.67% 0.53% Net provisioning ratio (% of average risk assets in banking book) 0.41% (0.22 ppt) 0.63% 0.63% 0.52% 0.64% 0.72% 0.60% Risk/earnings ratio 10.5% (5.4 ppt) 15.8% 15.8% 12.9% 17.4% 23.4% 21.3% Resources Number of staff on balance sheet date 61,351 10.7% 55,434 55,434 46,243 25,323 21,119 16,700 of which in Austria 2,858 10.9% 2,577 2,577 2,529 2,373 2,513 2,528 of which in the CEE region 58,111 10.6% 52,528 52,528 43,430 22,707 18,368 13,944 Business outlets 3,036 5.9% 2,866 2,866 2,461 932 740 651

Ratings Long-term Subordinated Short-term fin. strength outlook Moody’s Investors Service Aa2 Aa3 P-1 C Stable Standard & Poor’s A+ A A-1 — Stable 1 -OOEs: Without one-off effects of the sale Raiffeisenbank Ukraine and of a minority stake in Bank TuranAlem. Contents

Success in 15 Languages ...... 6 Segment Reports ...... 120 Corporate Customers ...... 120 Preface by the Managing Board ...... 46 Financial Institutions and Public Sector ...... 134 The Managing Board of Raiffeisen Zentralbank ...... 50 Retail Customers ...... 139 Proprietary Trading ...... 143 Supervisory Board’s Report ...... 54 Participations and Other ...... 151

Obituary of Franz Hummel ...... 56 Consolidated Financial Statements (Financial Statements Prepared in Accordance with IFRSs) ...... 158 Overview of RZB ...... 58 Income Statement ...... 158 Vision and Mission ...... 64 Results of Operations ...... 160 Corporate Social Responsibility ...... 66 Balance Sheet ...... 162 Statement of Changes in Equity ...... 164 The Raiffeisen Banking Group in 2007 ...... 70 Cash Flow Statement ...... 168 Interview with CEO Walter Rothensteiner ...... 76 Segment Reports ...... 170 Notes ...... 180 Group Management Report ...... 81 Notes to the Income Statement ...... 203 Economic Conditions in General ...... 81 Notes to the Balance Sheet ...... 214 Developments in the Banking Industry in RZB’s Principal Markets ...... 84 Notes to Financial Instruments with Risk Report ...... 252 Business Performance in 2007 ...... 86 Other Notes ...... 300 Summary of Consolidated Results ...... 88 Boards ...... 306 Detailed Review of Items in the Income Statement ...... 95 Organizational Structure ...... 310 The Balance Sheet ...... 102 Unqualified Auditors’ Report ...... 312 Equity ...... 105 Human Resources ...... 107 Scope of Consolidation and Overview of Equity Participations ...... 314 Information Technology ...... 111 Glossary (Important Terms and Abbreviations) ...... 320 Risk Management ...... 112 Addresses and Contacts ...... 324 Outlook for 2008 ...... 116 Material Events after the Balance Sheet Date ...... 118 Publication Details ...... 330

Throughout this report, “RZB” is used to refer to the RZB Group. “Raiffeisen Tables may contain minor rounding errors. Statements of rates of change (per- Zentralbank” is used whenever statements refer solely to Raiffeisen Zentralbank centages) are based on actual figures and not on the rounded figures provided Österreich AG. in the tables. Norway

Estonia Sweden

Denmark Latvia

Lithuania Russia Ireland

United Kingdom Belarus The Netherlands Poland Germany Belgium Russia Luxembourg Czech Republic Ukraine Slovakia Kazakhstan

Liechtenstein Austria France Switzerland Slovenia Hungary Moldova Croatia Romania Italy Bosnia and Herzegovina Serbia

Kosovo Bulgaria Montenegro Georgia Macedonia Portugal Spain Albania Armenia Azerbaijan Greece Turkey

Tunesia Iran Algeria Malta Syria Iraq Morocco Cyprus

Our native languages – the official languages in the countries of our home market: Poland Hungary Croatia Albania Bulgaria Belarus Polish Hungarian Croatian Albanian Bulgarian Belarusian, Czech Republic Austria Bosnia and Kosovo Romania Russian Czech German Herzegovina Albanian, Serbian Romanian Russia Bosnian, Croatian, Russian Slovakia Slovenia Serbian Serbia Ukraine Slovakian Slovenian Serbian Ukrainian

6 7 WE SPEAK THE local LANGUAGE.

The success of our customers is an essential part of Come with us into our world of languages. Join us in our own success story. a brief language class and learn how to order a cup of coffee in Vienna, how to withdraw money from an Among other things, this requires that we speak the lan ATM in Moscow, how to apply for a home construction guage of our customers. Our home market includes loan in Zagreb or how to negotiate lease financing in Austria as well as Central and Eastern Europe — which Hungary. Join us in experiencing success in means that our business involves 15 different languages, 15 languages! our mother tongues.

This language guide is intended to help make you more Vocabulary: success successful. After all, knowledge of local languages is the sukses – Albanian sukces – Polish key to long-term success in the fast-growing markets of поспех – Belarusian succes – Romanian the region. uspjeh – Bosnian yспех – Russian успех – Bulgarian uspeh – Serbian With RZB, you already have the best possible local uspjeh – Croatian úspech – Slovakian partner on site. We speak both your language and úspěch – Czech uspeh – Slovenian siker – Hungarian yспіх – Ukrainian the respective local language. More than 60,000 staff members in over 3,000 branch offices are available to serve you. No other institution is as well established in Austria and Central and Eastern Europe as we are.

8 9 Poland Vocabulary: At Frédéric Chopin Airport expensive – drogi easy – proste, łatwe cheap – tani stop – przystanek costs – koszty to travel – podróżować travel budget – budżet na podróż airport – lotnisko signpost – drogowskaz stay – pobyt Lesson Grammar: The comparative form: expensive – more expensive, cheap – cheaper, fast – faster, nice – nicer; but: good – better! Mr Kacper lands at Warsaw Airport for the Forma porównawcza: drogi – droższy, tani – tańszy, szybki – szybszy, 1 piękny – piękniejszy; ale: dobry – lepszy! first time. He asks at the information desk for a transfer to Sobieski Hotel in the city centre:

K: Hello, what is the best way to the K: Dzień dobry, jak najlepiej doje- I: No, take the line 175, it will take I: Nie, niech Pan wsiądzie w 175, on Sobieski Hotel? chać do Hotelu Sobieski? you right to the centre. jedzie do samego centrum. I: Would you prefer to take the bus I: Woli Pan jechać autobusem czy K: Many thanks. K: Bardzo dziękuję! or a taxi? wziąć taksówkę? I: You’re welcome. Have a nice stay I: Proszę bardzo. Miłego pobytu w K: This depends on the costs. K: To zależy od kosztów. Czy in Warsaw! Warszawie! Is the taxi very expensive? taksówka jest bardzo droga? I: Are you travelling alone? I: Czy podróżuje Pan sam czy w towarzystwie? K: Yes, but that is a different matter ... K: Sam, ale to już inna historia ... I: In that case the bus is a lot I: To autobus jest naturalnie o wiele cheaper. But the bus takes 20 tańszy. Ale autobusem jedzie się minutes longer. 20 minut dłużej. K: In times of a limited travel K: W czasach ograniczonych budget I prefer to travel by bus. budżetów na podróż wolę Where is the stop? autobus. Gdzie jest przystanek? I: That’s easy to find. Taxi and bus I: To całkiem proste. Miejsce are signposted. The signs are dla taksówek i autobusów behind you. jest oznaczone. Z tyłu za sobą zobaczy Pan znaki. K: Do all buses travel to the city K: Czy wszystkie autobusy jadą do centre? Śródmieścia?

10 11 Czech Republic Vocabulary: In a restaurant on business – obchodně menu – jídelní lístek restaurant – restaurace wine – víno waiter – číšník soup – polévka table – stůl dessert – dezert to reserve – rezervovat beer – pivo Lesson Grammar: The possessive pronoun: my coat, your coat, his coat, her coat, our coat, your coat, their coat. Přivlastňovací zájmeno: můj plášť, tvůj plášť, jeho plášť, její plášť, náš plášť, 2 váš plášť, jejich plášť.

Mrs H: I would like a glass of Paní H: Pro mne prosím sklenici prosecco. Prosecca. The Hovorkas are spending a long weekend in Prague on business. They have booked a table in the famous Mucha restaurant in the Mr H: I will have a small Pilsner beer. Pan H: Já si dám malý Plzeňský Prazdroj. old town. The Chef de Rang shows them to their table. Mrs H: I will have the special, but Paní H: Já si dám menu, ale bez Ch: We have reserved a nice table Vrchní číšník: Zde jsme pro vás without Bramboracka. bramboračky. for you here. rezervovali pěkný stůl. Mr H: The opposite for me, please: Pan H: Pro mne přesně totéž, ale Mr H: Many thanks, do you like Pan H: Mnohokrát děkuji, líbí se ti ten I will have Bramboracka, but no obráceně: Dám si bramboračku, the table, dear? stůl, miláčku? Pardubitz gingerbread. zato si ale nedám pardubický perník. Mrs H: The one over there would Paní H.: Ten naproti by mi byl milejší. be nicer. W: Would you like the wine menu? Číšník: Mohu vám přinést vinný lístek? Ch: We can arrange that. Vrchní číšník: To by se určitě dalo Mr H: Yes, please. Pan H: Ano. Děkujeme. zařídit. Mrs H: Great, many thanks. Paní H: Výborně, mnohokrát děkuji. Ch: Please take a seat. My colleague Vrchní číšník: Posaďte se prosím. will be right round with the menu. Můj kolega vám hned přinese jídelní lístek. W: Good evening, here is the menu. Číšník: Dobrý večer, tady je jídelní At the start you will find today’s lístek. Na začátku najdete special. Would you like an menu dne. Mohu vám již přinést aperitif? aperitiv?

12 13 Slovakia Vocabulary: At the travel agency package – paušál directions – príjazd offer – ponuka description – opis to pay – (za)platiť double room – dvojlôžková hotel – hotel izba excursion – výlet travel agency – cestovná Lesson weekend – víkend kancelária Grammar: Direct and indirect speech: Ms Z. says, “I like the hotel very much.” Ms Z. says she likes the hotel very much. / Mr Z. said, “We will travel by car.“ 3 Mr Z. said they would travel by car. Priama a nepriama reč: Pani Z. hovorí: „Mne sa ten hotel veľmi páči.“ Pani Z. hovorí, že sa jej ten hotel veľmi páči. / Pán Z. povedal: „Pôjdeme autom.“ Pán Z. povedal, že pôjdu autom.

A: You stay from Thursday to Sunday, CK: Zostanete od štvrtku do nedele, but only pay for two nights. ale zaplatíte len za dve noci! Mr Z: That sounds excellent. Pán Z: To znie vynikajúco! Ms Z: Please book a double room for Pani Z: Zarezervujte nám prosím the next weekend. dvojlôžkovú izbu na budúci víkend. Mr and Ms Zabavnik are planning an excursion to the high Tatra. A: You are lucky, there is just one CK: Máte šťastie, už je voľná len They go to a travel agency in Bratislava to arrange everything. room left. Here is your order jedna izba. Tu je vaše potvrdenie confirmation. Will you be driving? o rezervácii. Pôjdete vlastným A: Take a seat. Where would you CK: Posaďte sa. Kam by ste chceli autom? like to travel to? ísť? Mr Z: Yes. Pán Z: Áno. Mr Z: We want to go skiing in Pán Z: Cez víkend by sme chceli ísť Tatranska Lomnica for a weekend. lyžovať do Tatranskej Lomnice. A: You will find directions in the hotel CK: V prospekte o hoteli nájdete plán brochure. príjazdu. A: I would recommend the Kolowart CK: Tak by som vám odporúčala hotel. It offers low-price hotel Kolowart. Obzvlášť mimo packages in the close season in sezóny ponúka výhodné paušály. particular. Ms Z: That looks nice. What offer Pani Z: Vyzerá veľmi pekne. Akú can you make us? ponuku nám môžete urobiť?

14 15 Hungary Vocabulary: Leasing a warehouse businessman – üzletember cost estimate – költségbecslés account – tanácsadó investment – beruházási manager costs költségek leasing – lízing documents – iratok real estate – ingatlan address – cím Lesson central – központi raktár business card – névjegykártya warehouse suggestion – javaslat Grammar: Present – future: we supply – we will supply, I fly – I will fly, he sends – 4 he will send, she goes – she will go. jelen idö – múlt idö: szállítunk – szállítani fogunk, repülök – repülni fogok, küld – küldeni fog, megy – menni fog. A businessman discusses with his Raiffeisen-Leasing account manager a lease structure for a real estate project. A: That would be helpful. I can then T: Az tényleg nagyon hasznos lenne. A: Do you want to setup a central T: Egy központi raktárt szeretne draw up a suggestion for a lease Így holnapig össze tudok állítani warehouse in Györ? létesíteni Györben? structure for you by tomorrow. Önnek egy lízing-finanszírozási B: Yes. After all, we have already Ü: Igen. Már nyolc éve sikeresen javaslatot. been operating successfully in the jelen vagyunk a magyar piacon. B: That’s ideal. Ü: Ez így teljesen megfelel. Hungarian market for eight years. Eddig Bécsböl szolgáltuk ki So far we have supplied our ügyfeleinket. customers from Vienna. A: And do you know how big it is T: És tudja már, hogy mekkora lesz? to be? B: We need a surface of at least Ü: A szükségletek középtávú 10,000 square metres to meet the kielégítésére legalább 10.000 need in the medium term. At least négyzetméter raktározási from today’s perspective, that is. területre van szükségünk. Legalábbis a jelen állás szerint. A: Have you already got an initial T: Készítettek már költségbecslést? cost estimate? B: Our construction department Ü: Építési osztályunk összesen estimates a total of three million hárommillió euróra becsüli a euros in investment costs for the beruházási költségeket. Szívesen development. I will be happy to elküldöm Önnek a pontos send you the precise plan. tervszámításokat.

16 17 Slovenia The letter Mr Benigini thanks his business partner for an invitation to Maribor. He writes him a letter.

Dear Mr Krivko, Spoštovani gospod Krivko, I arrived back in Milan safely potem ko sem se varno vrnil v Lesson and would like to again take the Milano, bi se vam rad ponovno za- opportunity to thank you for the hvalil za prijetne dni, ki sem jih preži- pleasant days in Slovenia. vel v Sloveniji. Z vašo prijazno po- močjo sem v nekaj dneh zbral zelo Thanks to your help I managed veliko vtisov o vaši deželi. Zelo sem to gain many impressions of your prevzet nad tem, s kakšnim tempom country in the few days. se razvija vaše gospodarstvo. O ta- 5 kšnih stopnji rasti lahko na zasiče- I am very impressed at what speed your economy is growing. We nem trgu seveda le sanjamo. Mislim, can all but dream of such growth da ima naše novo partnerstvo odlič- rates in a saturated market. I no perspektivo v prihodnosti. am convinced that our partnership Veselim se že podrobnejših pogovo- holds excellent future prospects. I rov z vami. Ko boste imeli pripravljen already look forward to negotiating proračun, bi morali na Dunaju sku- the details with you. When you have paj pregledati številke. Tako bom Vocabulary: created your budget, we should look imel priložnost, da se vam oddolžim through the figures together. This za vaše gostoljubje. Ob lepšem vre- business – poslovni budget – proračun will also give me the opportunity to menu, upam! partner partner figures – številke return your hospitality. economy – gospodarstvo help – pomoč Veselim se že ponovnega snidenja With better weather conditions z vami. growth rate – stopnja rasti impression – vtis I hope! saturated – zasičen trg country – država S prijaznimi pozdravi, market hospitality – gostoljubje I look forward to seeing you again. H. B. prospect – perspektiva future – prihodnost Kind regards Grammar: Your H. B. Present – past: can – he could, think – I thought, collect – he collected, dream – she dreamed, have – we had, be – they were, have – I had, write – you wrote. Sedanjik – preteklik: moči – on je lahko, misliti – jaz sem mislil, zbirati – on je zbiral, sanjati – ona je sanjala, imeti – mi smo imeli, biti – oni so bili, imeti – jaz sem imel, pisati – ti si pisal.

18 19 Croatia B: All right, I can prepare for you B: U redu, napravit ću Vam dvije two simulations of the loan simulacije izračuna iznosa Taking out a mortgage calculation. The first simulation kredita. Prva je bazirana na is based on your current salary sadašnjoj plaći a druga na and the second on the expected očekivanom povećanju. salary increase. H: Great. H: Odlično. Lesson B: We can discuss the documents B: Za nekoliko dana možemo in a few days. raspraviti o dokumentaciji.

Mr Horvat recently started working for a major 6 construction company. He now wants to take out Vocabulary: a mortgage with Raiffeisenbank Austria to build rise – povećanje plaće to need – potreba a holiday home on the island of Krk. monthly salary – mjesečna plaća to get – dobiti loan – kredit to expand – proširiti H: Hello. I would like to take out a H: Dobar dan! Ja bih kod Vas repayment – otplata quiet – tiho, tišina mortgage with you. podigao stambeni kredit. week – tjedan documents – dokumenti B: Please take a seat, then we can B: Izvolite sjesti pa da u miru discuss all details in-depth. dogovorimo detalje. Adverbs: today, immediately, with, there, never, often, always, where, when, here. H: I have been working with a major H: Već tri mjeseca radim u velikom construction company for the građevinskom poduzeću, primam Prilozi: danas, odmah, pri tome, tamo, nikada, često, uvijek, gdje, kada, ovdje. last 3 months and am now also veću plaću i želim izgraditi kuću earning a higher salary and za odmor na Krku. would like to build a holiday home on Krk. B: Would you prefer a long-term B: Dajete li prednost dugoročnom loan with low repayments or kreditu sa manjom, ili a short-term loan with higher kratkoročnom kreditu sa većom monthly repayments? mjesečnom ratom? H: A long-term loan. H: Dugoročnom kreditu! B: How much is your monthly B: Kolika Vam je mjesečna plaća? salary? H: HRK 4,700, but I have been H: 4.700 HRK, ali za sljedeću promised a rise for next year. godinu mi je obećano povećanje plaće!

20 21 Bosnia aNd Vocabulary, Bosnian: business trip – poslovno vitamins – vitamini herzegovina putovanje nose – nos drugstore – apoteka mouth – usta At the drugstore cold – prehlada time – vrijeme cough – kašalj to soothe – smiriti Lesson cold – hunjavica to aggravate – nadražiti drops – kapi to help – pomoći

Adjectives: strong – weak, big – small, old – young, beautiful – ugly, fat – thin, long – short, loud – quiet, a lot – a little, soft – rough. Pridjevi: jako – slabo, veliko – malo, staro – mlado, lijepo – ružno, 7 debelo – mršavo, dugo – kratko, glasno – tiho, puno – malo, nježno – grubo.

D: Yes, take these drops, before you A: Da, uzimajte ove kapi prije go to bed. spavanja. Ms Zekirović travels a lot for business. She has caught a cold on the plane and is now visiting a drugstore in Sarajevo. Z: And what about my cold? Z: A moja hunjavica? D: A cold takes some time to pass. A: Da bi Vas prehlada popustila Z: Hello. I have caught a cold. Z: Dobar dan! Prehladila sam se. You will see, in two days time potrebno je da prođe određeno Probably on a flight. Unfortunately, Najvjerovatnije u avionu. Nažalost you will already feel a lot better. vrijeme. Vidjet ćete, za dva I don’t have the time to go to bed. nemam vremena da odležim. Unless the next flight is waiting! dana ćete se osjećati puno bolje. Naravno, ukoliko Vas već ne D: Do you also have a fever? A: Imate li temperaturu? čeka sljedeći let! Z: No. I took my temperature this Z: Ne. Jutros sam je mjerila. morning. D: Right. What are your symptoms? A: Dobro. Koji su Vaši simptomi? Z: At first it started to scratch in my Z: Počelo je sa nadraženošću grla, a throat, then a cough was added kasnije sam počela kašljati i od to this and my nose has been jutros mi curi nos. running since this morning. D: I have a good substance with A: Propisat ću Vam jedno dobro vitamin C to strengthen defensive sredstvo sa vitaminom C za forces. jačanje Vaše otpornosti. Z: Do you also have something for Z: Imate li i nešto protiv nadraženosti the tickle in my throat? grla?

22 23 Lesson There are three official languages in Bosnia and Herzegovina. In alphabetical order, they are Bosnian, ... and in Serbian: Z: Ne. Jutros sam je mjerila. 7 Croatian and Serbian. Z: Dobar dan! Prehladila sam se. A: Dobro. Koji su Vaši simptomi? Najvjerovatnije u avionu. Naj- Z: Počelo je sa nadraženošću grla, The dialogue series in Croatian ... Z: A moja hunjavica? verovatnije u avionu. Nažalost nemam vremena da odležim. a kasnije sam počela kašljati i od Z: Dobar dan! Prehladila sam se. L: Da bi Vas prehlada popustila jutros mi curi nos. A: Imate li temperaturu? Najvjerojatnije u zrakoplovu. Na- potrebno je da prođe određeno A: Propisat ću Vam jedno dobro žalost nemam vremena da odležim. vrijeme. Vidjet ćete, za dva dana sredstvo sa vitaminom C za ćete se osjećati puno bolje. jačanje Vaše otpornosti. L: Imate li vrućicu? Naravno, ukoliko Vas već ne Z: Ne. Jutros sam je mjerila. čeka sljedeći let. Z: Imate li i nešto protiv nadraženosti grla? L: Dobro. Koji su Vaši simptomi? A: Da, uzimajte ove kapi prije spa- Z: Počelo je sa nadraženošću grla, vanja. a kasnije sam počela kašljati i od jutros mi curi nos. Z: A moja kijavica? L: Propisat ću Vam jedno dobro A: Da bi prehlada popustila potreb- sredstvo sa vitaminom C za jača- no je određeno vrijeme. Vidjet nje Vaše otpornosti. ćete, za dva dana ćete se puno bolje osjećati. Naravno, ukoliko Z: Imate li i nešto protiv nadraženo- Vas već ne čeka sljedeći let. sti grla? L: Da, uzimajte i ove kapi prije spavanja.

Vocabulary, Croatian: Vocabulary, Serbian: business trip – poslovno vitamins – vitamini business trip – poslovno vitamines – vitamini putovanje nose – nos putovanje nose – nos drugstore – ljekarna mouth – usta drugstore – apoteka mouth – usta cold – prehlada time – vrijeme cold – prehlada time – vrijeme cough – kašalj to soothe – smiriti cough – kašalj to soothe – smiriti cold – hunjavica to aggravate – razdražiti cold – kijavica to aggrevate – razdražiti drops – kapi to help – pomoći drops – kapi to help – pomoći

Adjectives: strong – weak, big – small, old – young, beautiful – ugly, Adjectives: strong – weak, big – small, old – young, beautiful – ugly, fat – thin, long – short, loud – quiet, a lot – a little, soft – rough. fat – thin, long – short, loud – quiet, a lot – a little, soft – rough. Pridjevi: snažno – slabo, veliko – malo, staro – mlado, lijepo – ružno, Pridjevi: snažno – slabo, veliko – malo, staro – mlado, lijepo – ružno, debelo – mršavo, dugo – kratko, glasno – tiho, puno – malo, nježno – grubo. debelo – mršavo, dugo – kratko, glasno – tiho, puno – malo, nježno – grubo.

24 25 AlbaniA Vocabulary: Exchanging money in the bank bank – bankë note – kartëmonedhë exchange – zyrë kembim exchange rate – kursi i këmbimit office valute, ndërrim wallet – portofol parash business trip – udhëtim pune desk – arka, sporteli today – sot Lesson euros – Euro to leave – lë, largohem, iki lek – Lek customer – klient Grammar: Singular – plural: receipt – receipts, bank – banks, note – notes, 8 problem – problems, day – days, customer – customers. Ms Shala is on a business trip to Albania. Njëjës – shumës: llogari – llogaritë, bankë – bankat, kartëmonedhë – In Tirana she goes to the bank to exchange money. kartëmonedhat, problem – problemet, ditë – ditët, klient – klientët. A customer just leaves the desk and it is immediately Ms Shala’s turn.

K: Hello, what can I do for you? A: Mirëdita, si mund t’ju ndihmoj? S: I would like to exchange euros. S: Dua të këmbej Euro. Sa është What is the current exchange kursi i sotëm i këmbimit? rate? K: Today’s rate is 124.12 lek for A: Sot kursi i këmbimit është një one euro. Euro 124,12 Lek. S: Right. I would like to exchange S: Mirë, do të doja të këmbeja 300 euros. 300 Euro. K: No problem. At today’s rate that A: Në regull, me kursin* e sotëm makes* 37,236 lek. What size of vlera është 37,236 Lek. A i doni notes would you like? në kartëmonedha të mëdha? S: Please give me half in big notes S: Gjysmën në kartëmonedha të and the rest in small ones. mëdha dhe pjesën tjetër në And here is your receipt. Urdhëroni faturën. kartëmonedha të vogla. S: Actually, maybe you could give S: Nëse mendohem mirë a është K: Five thousand, ten thousand, A: Pesë mijë, dhjetë mijë, me more big notes after all? e mundur të më jepni vetëm twenty thousand and the pesëmbëdhjetë mije, njëzet mijë, Otherwise my wallet will be kartëmonedha të mëdha? remaining 17,236 lek in small dhe 17,236 Lek që mbeten në too full! Ndryshe me fryhet portofoli! notes ... kartëmonedha të vogla. K: Here you are. A: Urdhëroni.

26 27 *Approximate rate at the time of printing. Kosovo Vocabulary, Albanian: A visit from Austria to invest – investoj taste – shije refurbishment – kredi për compliment – kompliment, loan rinovim lavdërim repayment – këste meal – darkë house – shtëpi charm – sharm Lesson Grammar: Subjunctive: he says – he would say, she stays – she would stay, I go – I would go, she lies – she would lie, she has – she would have, I give – I would give, he comes – he would come. 9 Mënyra kushtore: ai thotë – të thotë, ajo qëndroi – të qëndrojë, unë shkoj – Mr and Mrs Gashi are invited to dine at the të shkoj, ajo është shtrirë – të jetë shtrirë, ajo ka – të ketë, unë jap – të jap, Kastrioti family in Pristina. ai vjen – të vijë.

Mr K: Good evening. Please come in. Z. K: Mirëmbrëma, urdhëroni. Këtu You can leave your coats here. mund të lini xhaketat tuaja. Mrs K: That is why we decided to Znj. K: Ndaj kemi vendosur më Mrs G: Many thanks. You have a Znj. G: Shumë faleminderit. Ju keni me renovate and not to rebuild from parë për një rinovim sesa për really nice house. të vërtetë një shtëpi të bukur. scratch. But I’m not sure that I të ndërtuar një shtëpi të re. would make the same decision Por nuk e di nëse sot do ta merrja Mrs K: Thank you for the compliment. Znj. K: Faleminderit shumë për again today. të njëjtin vendim përsëri. But you should have seen it before. komplimentin. Sikur ta shihnit si ka We renovated it for a whole year. qenë më parë. E kemi rinovuar për një vit të tërë. Mr G: Did you have to invest a lot? Z. G: Duhej të investonit shumë? Mrs K: Yes, especially time and nerves. Znj. K: Po, sidomos kohë dhe nerva. Mr K: Thankfully we had a Z. K: Për fat patëm një kredi rinovimi refurbishment loan from nga Raiffeisen Bank me kushte Raiffeisenbank with very good shumë të favorshme. Këstet e conditions. The repayment rates kthimit nuk e rëndojnë shumë are not a great strain on our buxhetin e familjes sonë. household budget. Mrs G: You have shown a lot of Znj. G: Rinovimin e keni bërë me shije. good taste for the renovation. Shtëpitë e vjetra gjithmonë kanë Old houses always have a very diçka të veçantë. special charm.

28 29 Lesson Albanian and Serbian – in alphabetical order – are the official languages of Kosovo. Here is the Serbian version of 9 the dialogue.

Mr K: Good evening. Please come in. Gospodin K: Dobro veče! Izvolite ući! Vocabulary, Serbian: You can leave your coats here. Ovde možete da ostavite stvari. Mrs G: Many thanks. You have a Gospođa G: Mnogo Vam hvala! to invest – investirati, house – kuća really nice house. Uistinu imate mnogo lepu kuću. uložiti taste – ukus refurbishment – kredit za compliment – kompliment, Mrs K: Thank you for the compliment. Gospođa K: Hvala na komplimentu. loan renoviranje pohvala But you should have seen it before. Trebalo je da je vidite pre. Godinu repayment – otplaćivanje meal – večera We renovated it for a whole year. dana smo je renovirali! Mr G: Did you have to invest a lot? Gospodin G: Jest li morali puno Grammar: investirati? Subjunctive: he says – he would say, she stays – she would stay, I go – I Mrs K: Yes, especially time and nerves. Gospođa K: Da, vremena i nerava pre svega. would go, she lies – she would lie, she has – she would have, I give – I would give, he comes – he would come. Mr K: Thankfully we had a Gospodin K: Na svu sreću smo refurbishment loan from dobili kredit za renoviranje Potencijal: on kaže – on bi rekao, ona ostaje – ona bi ostala, ja idem – ja bih Raiffeisenbank with very good od Raiffeisen banke, sa veoma otišao, ona leži – ona bi ležala, ona ima – ona bi imala, ja dajem – ja bih conditions. The repayment rates povoljnim uslovima. Otplaćivanje dao/la, on dolazi – on bi došao. are not a great strain on our rata ne opterećuje baš mnogo household budget. naš kućni budžet. Mrs G: You have shown a lot of Gospođa K: Dokazali ste da imate good taste for the renovation. mnogo ukusa. Stare kuće uvek Old houses always have a very imaju neki poseban šarm. special charm. Mrs K: That is why we decided to Gospođa K: Zbog toga smo se i renovate and not to rebuild from odlučili za renoviranje a ne za scratch. But I’m not sure that I novu gradnju. Ali ne znam da li would make the same decision bih i danas odlučila tako. again today.

30 31 SerbiA V: Oh dear, how did I miss the V: O, nisam primetila tako uočljiv notice? This is unbelievable: natpis! Neverovatno! Ovde je What time is it? Raiffeisenbank is even open here Raiffeisen banka čak i subotom on Saturdays. And is there no otvorena. Zar nema pauze za lunch break? ručak?

P: Yes, exactly. Raiffeisenbank is P: Tačno. Raiffeisen banka je Lesson open all day until 7pm. neprekidno otvorena do 19:00 časova.

Vocabulary: 10 account – konto, račun hour – čas transfer – doznaka, day – dan doznačivanje closed – zatvoreno to withdraw – podići pare morning – jutro money passer-by – prolaznik bank branch – banka way – put all day – neprekidno work – posao open otvoreno

Ms Vuković is standing outside a Raiffeisenbank branch in The time: one o’clock, two o’clock, ten o’clock (in the morning), ten o’clock (in the evening), half past seven, a quarter past eight, twenty past eight, Belgrade. It is early in the morning. She speaks to a passer-by on a quarter to eleven, midnight, noon. his way to work. Vreme: jedan čas, dva časa, deset časova (pre podne), deset časove V: Can you tell me what time it is? V: Izvinite, možete li mi reći koliko je (naveče), pola osam, osam i petnaest, osam i dvadeset, petnaest do jeda- časova? naest, ponoć, podne.

P: Of course. It is now exactly P: Rado, tačno je sedam časova i 7. 30 a m . trideset minuta. V: That is a great service. In that V: To je odlična usluga. Idem da V: Do you know when this bank V: Znate li kada se otvara banka? case I will do some shopping and obavim još jednu nabavku opens? I would like to withdraw Želela bih da podignem pare come back around 11am. Thank i vraćam se oko 11:00 money from my account and sa moga računa i da uradim you for the information. časova. Mnogo Vam hvala na make a transfer. transfer. informacijama.

P: Look, there’s the notice with the P: Pogledajte, ovde je natpis sa P: My pleasure, have a nice day! P: Rado sam Vam pomogao, želim opening hours: Monday to Friday radnim vremenom: Vam ugodan dan! 8:30am to 7:00pm* Od ponedeljka do petka od Saturday 10:00am to 6:00pm. 8:30 do 19:00* časova, subotom od 10:00 do 18:00.

32 33 *Standard opening hours, regional differences may occur! BulgariA Mr Svetlinov has moved with his family out of town. He now needs Purchasing a car a second car. He wants to buy a low-cost small car from a second- hand car dealer.

D: You are looking for a small car? Т: Малка кола ли търсите? Would you also consider older Може ли да не е нова? Lesson models? S: It shouldn’t be older than three C: Не бива да е по-стара от три years and have more than години и да е изминала повече 50,000 km on the clock by any от 50 000 километра според means. километража. D: Well, I have an interesting offer for Т: Тогава имам за Вас интересна 11 you. This car may be older than оферта. Този автомобил е на three years, but it only has 37,000 повече от три години, но е едва km on the clock. на 37 000 километра. S: How many owners has the car C: Колко предишни собственици е had? имал автомобилът? D: Just one. Non-smoker of course. Т: .: Колата е от първи собственик. I will give you a two-year Разбира се, непушач! Ще ви guarantee on the car. дам две години гаранция за Vocabulary: автомобила. asking price – База за kilometres – Километри S: Red is not my favourite colour, but C: Червеният цвят не ми е любим, преговори guarantee – Гаранция the car looks very well looked но колата изглежда много cash payment – Плащане в colour – Цвят after. How much does it cost? добре поддържана. Колко брой service log – Сервизна книжка струва? purchase – Покупка car dealer – Търговец на D: 9,500 lev with guarantee. Т: 9 500 лева с гаранция! small car – Малка кола автомобили winter tires – Зимни гуми second hand – Автомобил на S: Asking price? Well, for 9,000 C: Може ли да се преговаря? year of – Година на cars старо lev I would take the car. Е, ще взема колата за 9 000 manufacture производство лева. D: Remember that the car is a Т: Не забравяйте, че колата е Grammar: garage car from first hand. You с гаранция от първа ръка! hardly come across this anymore. Днес такова нещо почти не се Prepositions: to the car, into the car, at the car, on the car, in front of the car, намира. behind the car. S: 9,000 lev. I’ll pay cash. C: 9 000 лева. Плащам в брой. Предлози: към автомобила, в автомобила, до автомобила, на автомобила, пред автомобила, зад автомобила. D: Right, in that case I think we can Т: Добре, тогава мисля, че можем finalize the purchase. перфектно да уредим сделката.

34 35 Romania T: Yes, the butter is very expensive, T: Da, şi untul este foarte scump. too. They have good butter in this Aici poţi găsi unt bun din produc- In the supermarket store from local production, 200 g ţie autohtonă, iar 200 de grame only cost 2.50 lei. costă doar 2,50 lei. S: Sometimes I buy butter and milk S: Câteodată cumpăr unt şi lapte de on the market at the farmer’s. la un ţăran din piaţă. Acolo pre- Lesson Prices are about a third lower ţurile sunt cu o treime mai mici! there. T: I also go to the market a lot. T: Şi eu mă duc des la piaţă. Le- The vegetables, in particular, are gumele, în special, sunt mereu always fresh and cheaper there. proaspete şi mai ieftine acolo. S: But the choice on the market is S: Dar oferta din piaţă nu este la fel 12 not so big. de variată. T: Do you think so? Well, I just T: Aşa credeţi? Ei bine, tocmai am bought some cabbage. Only 1 cumpărat nişte varză. O căpăţâ- leu a piece. nă costă doar 1 leu. S: In that case I will take some too S: Atunci o să cumpăr şi eu şi o să and make sarmale out of it. fac din ea sarmale. T: Good idea! T: Bună idee!

Two women meet in a supermarket and discuss the prices. Vocabulary: S: Have you already seen the S: Aţi văzut detergentul din ofertă? washing powder on offer? offer – ofertă supermarket – supermarket price – preţ washing powder – detergent T: Yes, really cheap. A 5-kg bag for T: Da, e chiar ieftin! Un pachet de reduced – redus butter – unt only 25 lei.* 5 kilograme pentru numai 25 quantity – reducere pentru milk – lapte de lei.* discount cantităţi mari bread – pâine S: I took two bags, they only cost S: Am cumpărat două pachete şi quantity – cantitate fruit – fructe 45 lei with a quantity discount. costă doar 45 de lei, cu reducere market – piaţă vegetables – legume pentru cantităţi mari. expensive – scump idea – idee T: In that case I will take another T: Atunci o să cumpăr şi eu încă un bag, too. pachet. The numbers: one, two, three, four, five, six, seven, eight, nine, ten; twenty. S: The milk has gone up. One litre S: Laptele s-a scumpit. Un litru costă Numerele: unu, doi, trei, patru, cinci, şase, şapte, opt, nouă, zece; douăzeci. now costs 3 lei. acum 3 lei.

36 37 *Approximate prices at the time of printing. Ukraine Are you paying by credit card 20 відсотків знижки від вартості or cash? номера. Ви платитимете кредит- Arrival at the hotel ною карткою чи готівкою? P: By credit card. П: Кредитною карткою. R: Please fill in the registration form. P: Заповніть, будь ласка, бланк реєстрації. Lesson P: Can I have a pen? П: Не могли б Ви дати мені ручку? R: Of course, here you are! P: Ось, будь ласка! 13 Vocabulary: to pay – платити passport – паспорт room price – вартість reception – стійка номера реєстрації per cent – відсоток pen – ручка discount – знижка form – бланк credit card – кредитна name – Прізвище картка taxi – Таксі

Phrases: We wish you a pleasant stay. Many thanks! Here you are. As you wish. Please be so kind ... Mr Pazenko is visiting Kiev. He pays for the taxi and a bellboy Вирази: Бажаємо приємного перебування. Дуже дякую! Ось, будь ласка. accompanies him to the reception. Як забажаєте. Зробіть ласку ...

R: Hello, have you reserved? P: Доброго дня! Чи заброньовано для Вас номер? P: Yes, under the name Pazenko. П: Так, на прізвище Пазенко. R: I’m sorry, we have no reservations P: Перепрошую, але на прізвище under the name Bazenko. Базенко, жодних номерів не заброньовано. P: I did say Pazenko and not П: Але ж я назвав прізвище Bazenko. Пазенко, а не Базенко. R: Oh sorry, there we are. Four P: Ой, перепрошую, вже знайшов- nights are reserved in your name. ся. На Ваше ім’я заброньовано I see, your company has a 20 per номер на чотири доби. Як я бачу, cent discount on the room price. Ваша фірма отримує у нас

38 39 Belarus S: With pleasure. How about С: З задавальненнем. Як наконт On the telephone Wednesday, 4pm? серады,а 4 гадзiне. T: That’s ideal. I will expect you at T: Такi час вельмi зручны для мяне. our head office in Khoruzhey Прыходзьце да нас у галаўны street 31-A. офiс па вулiцы Харужай 31-A. S: Great. See you on Wednesday, С: Вельмі добра. Да пабачэння. Lesson bye-bye. Да серады.

Mr Sokolov would like to set up the first branch 14 of a trade chain in Minsk. He makes a telephone call to arrange an appointment with the bank.

PB: Priorbank, RZB Group, hello! П: Прiорбанк, RZB-Група, добры What can I do for you? дзень! Чым я магу Вам дапа магчы? S: Hello! My name is Sokolov, could С: Добры дзень! Маё iмя Сакалоў, you please connect me to an злучыце мяне, калi ласка, з account manager, who can talk супрацоўнiкам, якi можа пра- to a corporate client? кансультаваць карпаратыўнага клiента? PB: Certainly, what area? П: З задавальненнем. У якой сферы дзейнасцi? Vocabulary: S: Foods trading. С: Гандаль прадуктамi харчавання. trade chain – Гандлёвая financing – Фінансаванне PB: You should speak to Mr Tarasov. П: Тады Вам лепш за ўсё пагава- сетка telephone call – Тэлефонная One moment, I will connect you. рыць са спадаром Тарасавым. branch – Фiлiял размова Адзiн момант, злучаю. account – Супрацоўнiк appointment – сустрэча manager to connect – злучыць T: Hello Mr Sokolov, how can I T: Добры дзень, спадар Сакалоў! corporate – Карпаратыўны moment – момант help you? Чым я магу Вам дапамагчы? client клiент to help – дапамагчы S: I am interested in setting up a С: Я хацеў бы заснаваць у branch for my trade chain in Мiнску фiлiял для маёй гандлё- The days of the week: Monday, Tuesday, Wednesday, Thursday, Friday, Minsk and would like to discuss вай сеткi i абмеркаваць тэму Saturday, Sunday. the financing. фінансавання. Днi тыдня: панядзелак, аўторак, серада, чацьвер, пятніца, субота, нядзеля. T: It would be better if you came T: Будзе найлепшым, калi Вы змо- to see us. жаце зайсцi да нас.

40 41 russia Vocabulary: The cash machine cash machine – Банкомат currency – Валюта card – Банковская parking lot – Стоянка карточка meeting – Совещание code – Код chauffeur – Водитель amount – Сумма денег car – Машина Lesson receipt – Квитанция language – Язык

Directions: left, right, above, below, straight ahead, in front of, behind, right next to. 15 Инструкции: налево, направо, сверху, снизу, прямо, перед, за, возле. Receipt yes/no – Please take Выберите валюту: Рубли/долла- card and money. ры США/Евро – Введите желае- Ms Sobolewa has arrived in Moscow at Leningrad Station. мую сумму денег – Печать кви- She is met by her business partners’ chauffeur. Before she goes танции: да/нет – Заберите, по- to the meeting, she wants to withdraw money from a жалуйста, карточку и деньги. cash machine. S: Everything worked great. But С: Всё в порядке. Вот только где же where have I put my card? моя карточка? S: Where is the next cash machine? С: Где здесь ближайший банко- мат? Ch: Don’t worry, it can’t be far away. В: Не волнуйтесь, она никуда не денется. Ch: Let’s go to the car, the next cash В: Пойдёмте со мной к машине, machine is on the way to the ближайший банкомат находится S: Here it is. Let us go. С: А вот и она! Мы можем ехать. parking lot. Over there, to the left на пути к стоянке. Вот там, слева of the news-stand. от журнального киоска. Ch: I’m relieved. It isn’t far to the car. В: Вот теперь я спокоен. До машины недалеко. S: Thanks, that’s great. С: Спасибо, это очень удобно. Ch: Here you go, I will wait for you. В: Вот здесь, пожалуйста. Я подо- жду Вас. Ms Sobolewa inserts her card in the cash machine.

B: Welcome! – Please insert card б: Добро пожаловать! – Для for new order. – Please select новой транзакции вставьте, по- your language – Enter your жалуйста, Вашу банковскую PIN code – Press OK – Press карточку – Выберите, пожалуй- Cancel if incorrect – Please select ста, язык – Введите код PIN – currency roubles/US dollars/ Нажмите клавишу подтвержде- euros – enter requested amount – ния – При неправильном вводе нажмите клавишу „Отмена“ –

42 43 Ms Maier is visiting Vienna for the first time and goes into a Austria typical Viennese café in the central part of the city. She would like In a Viennese café to give the waiter her order. W: Good afternoon, madam, what Ms M: I would like a strong cup of may I bring you? coffee with a bit of cream. Ms M: A cup of coffee, please. W: A Großer Brauner, certainly. Lesson Would you care for a pastry as W: Would you like a Melange, well? Apple strudel, cream cheese a Verlängerter, a Kaisermelange, strudel, Sacher-torte, apricot cake a Mokka, a Großer Brauner, or warm yeast dumpling with a Kleiner Brauner, a Cappuccino, custard? an Einspänner, a Kapuziner, a Fiaker, a Franziskaner or Ms M: Please bring me your cream 16 a Konsul? cheese strudel. Ms M: I beg your pardon? W: With or without whipped cream? W: Those are the types of coffee Ms M: You decide! we offer.

Vocabulary: Waiter – Ober Cup – Häferl Café – Café Whipped cream – Schlag Pastry – Mehlspeise Madam – gnä’ Frau Apricot cake – Marillenkuchen Cream cheese strudel – Topfenstrudel Types of Viennese Coffee: “Brauner” (large or small): Black coffee that achieves its gold brown colour by the addition of cream. “Verlängerter”: Black coffee with cream that has been diluted with additional hot water. “Melange”: Coffee with milk in a cup or glass, also with whipped cream. “Capuccino”: Espresso with frothy, hot milk. “Ein spänner”: Black coffee in a glass topped with whipped cream. “Fiaker”: Strong black coffee with a shot of rum or fruit schnapps served in a glass. “Franzis kaner”:Small strong black coffee with a lot of milk, cream and chocolate sprin kling. “Kaffee verkehrt”: More milk than coffee (white coffee). “Kaisermelange”: Black coffee with egg yolk. “Kapuziner”: A small cup of black coffee with a drop of cream, sprinkled with cocoa or grated chocolate. “Konsul”: Black coffee with a small shot of cream. “Mocca” (large or small): A cup of strong black cof fee, can be diluted if desired with more hot water.

44 45 Contacts Glossary Consolidated Financial Statements Segment Reports Management Report Interview Raiffeisen Banking Group Overview of RZB Supervisory Board’s Report Managing Board Preface Consequently, the second half was marked usadn poi fo oeaig activi operating from profit outstanding vr fnnil er s i is w way, own its in is, year financial Every Madam, or Sir Dear o ak a imn t tee phenom these to immune was bank No However,agoodbusiness model and the unique. unique. ena. growth,increases inmarket share, growth dynamic — year RZB an of features usual effects. a a er f nxetd ublne in turbulence unexpected of year a was banks. by volatility and uncertainty. and volatility by in the customer base, profit growth — 2007 2007 — growth profit base, customer the in the the capital markets. h pifl ebcs ht fetd many affected that setbacks painful the from RZB protected it with went that ties thestorm thathit themarkets, itdid feelits

Although RZB was not in the eye of eye the in not was RZB Although

Disregarding for a moment the the moment a for Disregarding Managing Managing Prefaceby the - - 46 eta ad atr Eu Eastern and Central We can take great pleasure from what we Without one-off effects, our profit before profit our effects, one-off Without orientation is sound. orientation emns croae utmr business customer corporate — segments business core its in position market strong sets an ambitious target, but an achiev an but target, ambitious an sets In Austria, those foundations are RZB’s are foundations those Austria, In uig 07 RB ae vn lsr to closer even came 2007, RZB During n drvtv isrmns nelzd at unrealized instruments derivative and able able one. rmral aheeet n ht strong that in achievement remarkable a economic headwinds increased our fund our increased headwinds economic were able to achieve: to able were leading Banking Group in Austria and and Austria in Group Banking leading realizing its long-term vision: vision: long-term its realizing ing on solid foundations and its strategic strategic its and foundations solid on ing ing costs and caused losses on securities securities on losses caused and costs ing € at year previous the reporting date. reporting the tax was roughly 15.5 per cent up on the on up cent 15.5roughlyper was tax B

In the final analysis, RZB is In RZB the analysis, build final oard 1,485 million. rope. Z i the is RZB

hs vision This

This was was This - - - choice banking provider to small and me and small to provider banking choice ship. ship. In Central and Eastern Europe (the CEE CEE (the Europe Eastern and Central In RZB remained true to its growth strategy strategy growth its to true remained RZB ued to expand faster than the market as a contin and review under year the during dium-sized dium-sized enterprises. Raiff the and — banking investment and tos o adi-ad ih h uncom the with hand-in-hand go ations eisen Banking Group’s status as the coun the as status Group’s Banking eisen de nesoe u cam o leader to claim our underscore edge whole. market share both in Austria and in Cen in and Austria in both share market rmsn mntrn o rss n RZB’s and risks of monitoring promising ning product and service quality. quality. service and product award-win ning offer and network banking densest region’s the operate we region), noaie tegh n technological and strength innovative tral and Eastern Europe. Eastern and tral r’ lae i rti bnig n first and banking retail in leader try’s those risks. those of evaluation conservative traditionally

At the same time, our business oper business our time, same the At

As a result,a Asrecorded gainsRZB in

Our Our - - - - - - - - 47 100,000 new customers a month. a customers new 100,000 Austria. Austria. We expect the advance in profit from from profit in advance the expect We over 30 per cent, and it well acquired over our overall profit for the year before tax. before year the for profit overall our 2008, in continue to activities operating RZB continued to reinforce its position in position its reinforce to continued RZB However,thecapital markets environment and a leader in the investment banking banking investment the in leader a and o custos ok lc t acceler to place took acquisitions No group. ate our expansion in the CEE region dur region CEE the in expansion our ate wasremarkable.again market. market. remains troubled, making further forecasts forecasts further making troubled, remains in growth double-digit nearly in resulting impossible at present. impossible n 2007.ing far and away Austria’s largest banking banking largest Austria’s away and far the country’s foremost banker to banks banks to banker foremost country’s the tional ’s balance sheet total increased by by increased total sheet balance ’s

It is is It

At the same time, time, same the At

oee, u ognc growth organic ourHowever, the Austrian corporate bank, bank, corporate Austrian

Raiffeisen Interna Raiffeisen Raiffeisen is is - - -

After all, RZB is moving in dynamic dynamic in moving is RZB all, After

s n h ps, h calne in challenge the past, the in As

At the same time, its own its time, same the At

Thiswasalsothe

RZB RZB - - - 48 Austria. Austria. We are pleased with the positive feedback We also reaffirm that RZB will not veer veer not will RZB that reaffirm also We capital, and we will be performing active performing be will we andcapital, survey also confirmed RZB's quality, exper quality, RZB's confirmed also survey incustomers banking corporate of survey RZB will, in addition, continue to use the use to continue addition, in will, RZB ie wti te cp o a satisfaction a of scope the within given se ad iblt mngmn t opti to management liability and asset partnership, especially compared with its its with compared especially partnership, isfied” or “satisfied” with our services. relationships. striving our alongside success, our in part mize our employment of capital. including in particular the praisewerewethe including particular in million. 8 just of population ity. nentoa fnnil akt t raise to markets financial international for sustained, partnership-based customer sustained,partnership-based for rm t cnitn cmimn t qual to commitment consistent its from tise, value for money and commitment to commitment and money for value tise, thatwe have received from our customers,

We believe that it plays an important an plays it thatbelieve We Ninety-six per cent were “very sat “very were cent per Ninety-six

Consequently,

The - - - - We thank our customers for the trust they they trust the for customers our thank We u acsoe rsle t rmi the remain to — resolve accustomed our competitors’ offerings. work together. together. work with customers in the CEE region speaks speaks region CEE the in customers with have placed in RZB and for our successful successful our for and RZB in placed have best possible bank for our customers. for itself.for to our shareholders, to their representatives to our to shareholders, their representatives Patrick Butler Karl Sevelda Johann Strobl Manfred Url Manfred Strobl Johann Sevelda Karl Butler Patrick

We will continue to strive — with —Westrive continuetowill We extend the same thanks thanks same the extend We

And our popularity Walter Rothensteiner Herbert Stepic Herbert Rothensteiner Walter 49 61,000 and whose excellent work and and work excellent whose and 61,000 u seil hns aual g ot to out go naturally thanks special Our on on our employees, who now number over over number now who employees, our successful path in 2008. path successful enormous dedication made our outstand our made dedication enormous ing results possible in the first place. place. first the in possible results ing those who do business with us. with business do who those look forward to continuing together on our our on together continuing to forward look Raiffeisen Zentralbank Raiffeisen ’sboards and to

We -

Johann Strobl, Manfred Url, Walter Rothensteiner, Herbert Stepic, Karl Sevelda, Patrick Butler. Patrick Sevelda, Karl Stepic, Herbert Rothensteiner, Walter Url, Johann Manfred Strobl, R aiffeisen Zentralbank aiffeisen 51

Agrana ; joined joined ; and Raiffeisen Wiener Wiener ne eisen reich- Leip ral - - -

52 1973, where he developed the Raiffeisen 1973,Raiffeisen the developed he where Zentralbank Zentralbank & Co. Privatgeschäftsbank AG, Raiffeisen etoak G Rifie International Raiffeisen AG, Centrobank Co Selected supervisory board posts: RZB RZB posts: board supervisory Selected Global Treasury, Global Markets, Eco Markets, Global Treasury, Global Selected supervisory board posts and and posts board supervisory Selected Global Treasurer of of Treasurer Global Oxford; began his banking career in 1979 1979 in career banking his began Oxford; ( akHlig G Rifie Wohnbau Raiffeisen AG, Bank-Holding Kathrein (C), AG Holding Equity Private Kon Raiffeisen Zentralbank Zentralbank Raiffeisen International Business Units, Branches Branches Units, Business International Patrick H other positions: chairman of the super the of chairman positions: other work Banks; member of the supervisory supervisory the of member Banks; Net work RZB numerous of boards visory Deputy to the CEO since 1995. since to CEO the Deputy on n 97 ra Mdr Hsoy at History Modern 1957; read in Born New York; later joined the the joined later York; New Foreign Trade Service; was also Manag also was Service; Trade Foreign in RZB joined Administration; Business Science 1946;Commercial in read Born at at the Vienna of University Economics and and Representative Offices; Chairman of Chairman RepresentativeOffices; and with with bank AG.bank bank AGbank boards of OMV AG, Oesterreichische Oesterreichische AG, OMV of boards nomic and Financial Markets Research. national Bank-Holding AG. national Bank-Holding ber of the Managing Board of of Board Managing the of ber most recently as Group Treasurer; later later Treasurer; Group as recently most ing Director of ing house Director trading h Mngn Bad f afesn Inter Raiffeisen of Board Managing the NatWest Group NatWest erbert erbert ; a member of the Managing Board of Board Managing of the ; a member troll hmcl Bank Chemical bank AG bank B and and S utler tepic since October 2004. October since Wiener Wiener Börse AG. ), working in London and and and rb Bank Arab and and Raiffeisen Centro Raiffeisen since 1987 and and 1987 since BACA Group BACA County Bank Bank County F.J. Elsner F.J. & Elsner Raiffeisen a mem a ; , - - - - - - G Ri Cro uti A, Z Pri RZB AG, Austria Cargo Rail AG, utin oprt Custo Corporate Austrian Chart of Raiffeisen Zentralbank.. of Raiffeisen Chart etoak G Rifie International Raiffeisen AG, Centrobank See page 310 for an Organizational Organizational an for 310 page See Selected supervisory board posts and and posts board supervisory Selected (C) = Chairman. Depisch Privatstiftung (ManagingBoard). Privatstiftung Depisch Bank-Holding AG, Raiffeisen Investment Investment Raiffeisen AG, Bank-Holding Raiffeisen AG, Bundesbahnen-Holding Finance Finance Products. Raiffeisen ZentralbankRaiffeisen Institut K te pstos HA wi Mittelstands Zwei HFA positions: other senior positions at at positions senior the at staff-member Note: ae qiy odn A, ee Privatstif Bene AG, Holding Equity vate Economics at the Vienna University of Eco and Science Social read 1950; in Born quently worked for banks abroad and held ein held and abroad banks for worked quently stiftung (Managing Board) (Managing stiftung bank AG (C), Bene AG, Österreichische AG, Bene (C),AG bank rate, Trade and Export Finance, Global Finance, Export and Trade rate, Corpo Customers, Corporate national nomics and Business Administration and and Administration Business and nomics iazeug-G C, afesn Factor Raiffeisen (C), finanzierungs-AG then became freelance researcher and and researcher freelance became then ug Mngn Bad, ei Privat Fepia Board), (Managing tung arl ; a member of the Managingof Boardtheof member a ; S eooi plc isiue; subse institute); policy (economic evelda Creditanstalt-Bankver Wirtschaftspolitisches Wirtschaftspolitisches since 1998.since es Multi mers, and and Herbert Herbert ------53 1989, where he held management posts in Johann Johann Transaction Services, Mar Services, Transaction Administration; joined joined Administration; Manfred UrlManfred Chief Risk Officer: Credit Management, Management, Credit Officer: Risk Chief Group), Group Head Office/Executive Office/Executive Head Group Group), ertra (onl wt Wle Rothen Walter with (jointly Secretariat eetd uevsr bad ot: Raiff posts: board supervisory Selected Service Bank AG, PayLife Bank GmbH and and GmbH Bank AG,PayLife Bank Service CenterService GmbH (C), card complete aaig or of Board Managing zation/IT, Verbund (Raiffeisen Banking Banking (Raiffeisen Verbund zation/IT, BACA Hypo Landesbank Steiermark Landesbank nomtk mH C, afesn Vermö Raiffeisen (C), GmbH Informatik Raiffeisen International Bank-Holding AG. Bank-Holding International Raiffeisen Risk Management. University of Economics and Business Business and Economics of University since October 2007. October since school in Angers and and Angers in school gensverwaltungsbank AG (C), RSC Daten iaca Ofcr a ebr f h Man the of member a Officer; Financial a member of the managing board of of board managing the of member a aging Board of of Board aging Paris); held several senior positions — most a by followed Administration, Business Science Commercial1956; read in Born ver Vienna the 1959; from in graduated Born at the Vienna University of Economics and and Economics of University Vienna the at eisen Datennetz Ges.m.b.H. (C), Raiff steiner). bank bank n diin lo Ha o Dvso at Division of Head a also addition in recently in management — at at — management in recently business (ESSCA France in abroad period the treasury and risk management fields; management risk and treasury the ein Vereinsbank since 1998.since (subsequently the the (subsequently as Chief Risk Officer and Chief Chief and Officer Risk Chief as S trobl , Munich; most recently recently most Munich; , afesn Zentralbank Raiffeisen Banque Indosuez Indosuez Banque afesn Zentral Raiffeisen Creditanstalt-Bank ; a member of the memberofa ; BACA Group BACA ke ting, Organi ting, Raiffeisen- eisen ) in ) in - - -

h Ana Fnnil State Financial Annual The Raiffeisen Zentralbank Raiffeisen afesn Zentralbank Raiffeisen ra mH Wirtschaftsprü GmbH tria ) was, in regular meetings, meetings, regular in was, )

n atclr a o 1 Oc 1 of as particular, In (Austrian stock corpo stock (Austrian Satzung Satzung afesn Zentral Raiffeisen (memoran Raiffeisen Raiffeisen Raiffeisen Raiffeisen . .

That That for

The The , ------

55 Wien The Supervisory Board To a large extent, our good results are are results good our extent, large a To success, business sustained our mark To Chairman Christian Konrad Group Managing Board as well as the manage the as well as Board Managing afesnadsak Niederösterreich- Raiffeisenlandesbank cial thanks and warm appreciation to the toappreciation warm and thanks cial of CEO the co-opted 2007 June 20 on icmtne dictate. circumstances rtvl ognzd afesn Banking Raiffeisen organized eratively gic framework. framework. gic work and unremitting dedication during during dedication unremitting and work bank bank bank bank ment and other staff of of staff other and ment Board. Supervisory ny’s boards and has been steadily refined as as refined steadily been has and boards ment. ment. one o or owr-okn strate forward-looking our on founded en has who Püspök, Peter CEO former throughout Austria. the year under review. under year the spe its extends Board Supervisory the tered hisretirement. well-earned h bod osnu o te Company’s the of consensus broad the plays a leadership role in the coop the in role leadership a plays with responsibility for risk manage Ewn aeee, o h Compa the to Hameseder, Erwin , and the entire Group for their hard hard their for Group entire the and

Meeting General Annual The as well as in the the in as well as

It was developed with with developed was It

afesn Zentral Raiffeisen Raiffeisen Zentral Raiffeisen Raiffeisen

He is replacing replacing is He family held held ------

Vice President Franz Hummel

passed away after a lengthy illness on 25 September 2007 at the age of 55.

Franz Hummel had worked for Raiffeisen Zentralbank since 1980. He was initially in Account Management, which he helped to develop and upon which he left his mark. From May 2001 until the time of his death, he was Chairman of the Staff Council of Raiffeisen Zentralbank. His thinking and actions were always directed at achieving what he described as “a more humane workplace”.

We have lost a valued interlocutor, colleague and friend.

Franz Hummel was laid to rest in Zwettl, Lower Austria, on 6 October 2007.

Christian Konrad Walter Rothensteiner Martin Prater

On behalf of the Supervisory Board, Managing Board, Staff Council and Staff of Raiffeisen Zentralbank Contacts Glossary Consolidated Financial Statements Segment Reports Management Report Interview Raiffeisen Banking Group Overview of RZB Supervisory Board’s Report Managing Board Preface As a result of its expansion in Central and and Central in expansion its of result a As ( (RBG). (RBG). afesn etabn Ötrec AG Österreich Zentralbank Raiffeisen B of Asia. Asia. of markets emerging the in and centres cial central institution, institution, central onr’ lret oprtos n institu and corporations largest country’s RZB Group (RZB). (RZB). Group RZB and Eastern Europe, RZB also has a pres a has also RZB Europe, Eastern and and Eastern Europe (the CEE region) as as region) CEE (the Europe Eastern and ne n nme o itrainl finan international of number a in ence growth and its strong commitment to Cen to commitment strong its and growth Eastern Europe and with the help of gains gains of help the with and Europe Eastern and sustainably in recent years. recent in sustainably and with Austrian origins that also sees Central Central sees also that origins Austrian with ing group. roughly € roughly popularity with its customers, its resultant its customers, its with popularity its home market. market. home its banks in Austria, where it services the the services it where Austria, in banks aey 9 e cn cmae wt year- with compared cent per 19 mately balance sheet total has grown rapidly rapidly grown has total sheet balance n 1927. in it advanced to € RZB’s Austria, within share market its in functions as the core enterprise within the withinenterprise core the asfunctions top player in the region. region. the in player top a it made have Europe Eastern and tral tions. tions. h frms croae n investment and corporate foremost the Group Banking Raiffeisen Austrian the ae it a tog nrae f approxi of increase strong a into lates afesn Zentralbank Raiffeisen alancesheet total of

In addition to its role as the Group’s the as role its to addition In

afesn Zentralbank Raiffeisen

RZB is Austria’s third-largest bank Austria’sthird-largest is RZB

It is the central institution of of institution central the is It 137billion O

137.4 billion, which trans

The Group’s exceptional Group’sexceptional The RZB is a banking group group banking a is RZB Raiff vervie ie Zentralbank eisen ) was founded founded was )

Besides Central Central Besides

s n of one is

In 2007,In w

------58 47 per cent in 2007. in cent per 47 R G Network Banks Banks Network organic growth. growth. organic €bn Europe and uninterrupted growth in its cus its in growth uninterrupted and Europe driven being is growth vigorous RZB’s a fifth in 2000, it already came to about to came already it 2000, in fifth a RZB thus doubled its balance sheet total, sheet balance its doubled thus RZB and it did so predominantly through through predominantly so did it and n 2006. end foundations risen steadily. steadily. risen the by for accounted total sheet balance in-hand with a keen awareness of costs costs of awareness keen a with in-hand Eastern and Central in expansion its by tomer base. base. tomer Z of 2003 rowth based on solid solid on based rowth 56.1 B’s B alance alance 2004 68.0

n ut he fnnil years, financial three just In

t dvlpet os hand- goes development Its

Having come to just under under just to come Having R

The proportion of RZB’s of proportion The S in the CEE region has has region CEE the in 2005 heet heet 93.9 Z B T otal 2006 115.0

2007 3.4 137. - 2007 Moody’s T 88 per cent of the share capital of of capital share the of cent per 88 S Landeszentralen Banks Raiffeisen Regional afesn Zentralbank Raiffeisen R outlets,consisting of 2,260 branches. of financial services as a so-called so-called a as services financial of range complete a customers its offering It has a market share of about one quarter quarter one about of share market a has It entitled € about andaconsolidated balance sheet total of a stock exchange. exchange. stock a Zentralbank eisen ates Austria’s densest network of banking banking of network densest Austria’s ates RBG is Austria’s foremost banking group, banking foremostAustria’s is RBG Long-term A+,Long-term Stable Outlook. foundations. solid financially RZB’s Financial Strength C, Stable Outlook. eisen Zentralbank abroad. abroad. and risks. risks. and sal bank sal is provided in the chapter of this report report this of chapter the in provided is approximatelyof € equity ble n h Asra bnig etr n oper and sector banking Austrian the in ing agencies have repeatedly confirmed confirmed repeatedly have agencies ing n ainl atr ad ersns it represents and matters national in for RBG. for tral institution, it renders central services services central renders it institution, tral adr ad Poor’s: and tandard he central institution of the the of institution central he aiffeisen aiffeisen

from page 70. page from The Raiffeisen Banking Group in Group Banking Raiffeisen The 236.3 billion.

. : Additionally, as the Group’s cen Group’s the as Additionally,

hr-em -, ogtr Aa2, Long-term P-1, Short-term At year-end 2007, it had eligi had 2007, it year-end At

h laig nentoa rat international leading The B anking anking ) collectively hold nearly nearly hold collectively ) ’s current ratings are: ratings ’s current , which is not listed on listed not is which ,

An overview of RBG RBG of overview An G acts for RBG RBG for acts hr-em A-1, Short-term roup roup

12.8billion ( Raiffeisen- univer

Raiff Raiff

The - - - - -

59 ** 1,000” corporates. corporates. 1,000” * Raiffeisenlandesbank Burgenland Raiffeisenlandesbank Kärnten Raiffeisenlandesbank Salzburg Raiffeisenverband S R Raiffeisen-Landesbank Tirol Raiffeisen-Landesbank OÖ Raiffeisenlandesbank Steiermark Raiffeisen-Landesbank NÖ-Wien Raiffeisenlandesbank T T AG Bank Tirol Hypo AG Steiermark Landeshypothekenbank AG Hypothekenbank NÖ Landesbank- RWAAustria Ware Raiffeisen AG Versicherungen UNIQA AG Volksbanken Österreichische R T Zveza Bank Raiffeisenlandesbank Vorarlberg One of Austria’sof One corpo leading R Within Austria, Austria, Within operates as a specialist corporate and and corporate specialist a as operates f utin let i toe ra o busi of areas those in clients Austrian of investment bank serving the country’s “Top “Top country’s the serving bank investment ment and as a leadingprovider export aas of andment seg customer that in bank finance porate rate and investment banks investment and rate finance. finance.

otal other shareholders otal R otal hareholders aiffeisen Zentralbank’s aiffeisen aiffeisen aiffeisen 11 pretg pit o wih ed y R-Landesbanken-Beteiligungs- by held which of points percentage 81.18 Ordinary and preference shares held directly and/or indirectly. GmbH. Z B

’s products and services and ’sproducts egional Besides servicing a large number number a large servicing Besides

B anks

Raiffeisen Zentralbank Zentralbank Raiffeisen **

It sees itself as as itself sees It

100.00%

12.35% 87.65% 31.34% 14.91% 14.91% S the the 4.59% 5.79% 0.63% 0.04% 2.57% 2.63% 4.62% 5.83% 5.62% 0.17% 5.14% 1.21% take* cor - - - -

Specialist subsidiaries round off off round subsidiaries Specialist Raiffeisen Zentralbank Raiffeisen

hy r bcmn increas becoming are They afesn Zentralbank Raiffeisen , s ie wih also which line, ’s Raiffeisen Zentral Raiffeisen

Those outposts Those

However, they they However,

In addition,In also has

It is the the is It s ser ’s Raiff

See See ------ - 60 A Zhuhai, Seoul, Mumbai, Ho Chi Minh City City Minh Chi Ho Mumbai, Seoul, Zhuhai, Asian presence of any Austrian bank, with York, a branch in London, a bank in Malta Malta in bank a London, in branch a York, C

afesn Zentralbank Raiffeisen Zentralbank Raiffeisen Stockholm, Chicago, Los Angeles and and Angeles Los Chicago, Stockholm, ie i 19 t dvlp uies with business develop to 1999 in cided Frankfurt am Main, Madrid, Milan, Paris, Milan, Madrid, Main, am Frankfurt Houston — underscoring its role as a linch a as role its underscoring — Houston Z rcgie Cnrl n Esen Eu Eastern and Central recognized RZB RZB RZB now as operates a so-called and representative offices in Brussels, Brussels, in offices representative and and Tehran (UNICO). Kong, Hong in offices representative as gion, it initially focused solely on servicing n mdu-ie etrrss cos the across enterprises medium-sized and ern European markets that it serves. serves. it that markets European ern er base in this segment now exceeds 13.6 pin between East and West. and East between pin rope’s enormous long-term growth poten growth long-term enormous rope’s key accounts, but it has since greatly en greatly since has it but accounts, key bank in every one of the Central and East and Central the of one every in bank branches in Singapore and Beijing as well region. region. small and customers banking personal million. its tial at an early stage. stage. early an at tial rs wt a iac cmay n New in company finance a with — tres cen financial international other in tioned ticipating the market trend, the Group de Group the trend, market the ticipating larged its line of products and services. These two groups of customers make up up make customers of groups two These leading banking group in in group banking leading entral and entral Retail Customers Retail E astern astern segment.

a te strongest the has Within the CEE re CEE the Within s lo el posi well also is E urope

The custom The universal

------C O Curtain were still far from foreseeable. foreseeable. from far still were Curtain Western standards. corporate customers in their efforts to pen to efforts theircustomersin corporate sonal banking customers in selected mar selected in customers banking sonal ntal, h sl proe f h Group’s the of purpose sole the Initially, the when time a to back dates Europe Eastern and Central ininvolvement RZB’s also acquired local corporates as custom as corporates local acquired also foreign and Austrian aid to was Europe ers and subsequently strove to acquire per acquire to strove subsequently and ers xesv o-h-pt ult srie to services quality on-the-spot extensive etrate the region and to provide them with 1986. in back gary political upheavals and the fall of the Iron Iron the of fall the and upheavals political uies oe i Cnrl n Eastern and Central in model business Europe. Eastern and Central in banking in experience of years 20 over had now founded its first banking subsidiary in Hun subsidiary banking first its founded entral and entral ver 20 years of experience in in experience of years 20 ver E astern astern

At the same time, RZB

Consequently, it has has it Consequently, E urope

It It - - - - - 61 eta ad atr Erp wnig to wanting Europe Eastern and Central CEE markets. The most comprehensive comprehensive mostThe cerned. f n Wsen ak n h CE region, CEE the in bank Western any of the had years some for has RZB outlets, opne fo te aiu cutis in countries various the from companies sequence in which it has taken place have In addition, RZB smoothes the way for for way the smoothes RZB addition, In y ite f t 16 its of virtue By always depended on legal conditions and and conditions legal on depended always and global financial centres, thus making making thus centres, financial global and gain access to neighbouring countries countries neighbouring to access gain clients international service to it enabling kets. most comprehensive market coverage coverage market comprehensive most ainie n cmrhniey n 17 in comprehensively and nationwide finance leasing firms and 3,015 business and firms leasing finance marketcoverage the potential for reform in the country con country the in reform for potential the

The time scale for expansion and the ewr Banks Network

, its its , -

B’s eisen International Bank-Holding AG holding company holding CEE R CEE aiffeisen aiffeisen Raiffeisenbank Raiffeisen banka Raiffeisen Raiffeisenbank epublic: eBanka epublic: Raiffeisen Bank Bank Polska Raiffeisen Raiffeisen Bank Bank Kosovo Raiffeisen Austria Raiffeisenbank Priorbank

Aval Bank Raiffeisen Raiffeisenbank (Bulgaria) Raiffeisen Banka Raiffeisen Tatra banka Bank Raiffeisen Bank Raiffeisen anks N (Sub-group) I erzegovina: etwork (under the umbrella of of umbrella the (under etwork nternational: I nternational

Because of movements in euro exchange rates, growth in local-currency terms may differ. may terms local-currency in growth rates, exchange euro in movements of Because

S heet T heet B -

72,767 67,531 11,663 62 alance 4,385 8,056 5,268 6,079 4,801 1,054 3,768 1,260 2,671 7,508 1,964 5,610 4,815 1,947 1,011 436 473 otal ( ae o civn poe Wsen man Western proven achieving to came years of its development of new markets markets new of development its of years RZB also began opening up new markets markets new up opening began also RZB acquisitions. agement and product standards. with the help of carefully targeted bank bank targeted carefully of help the with numberof advantages, especially whenit set on was focus RZB’s region, CEE the in ting up subsidiaries of its own. own. its of subsidiaries up ting c €m Raiff R

aiffeisen aiffeisen ie International eisen 30.3% 28.9% 54.7% 34.4% 20.0% 24.0% 30.3% 54.6% 28.0% 26.4% 22.5% 23.4% 20.9% 13.6% 27.2% 31.5% 41.9% o hange* 21.1% 41.1% 9.2% + ( - I b ) nternational)

usiness 2,955 3,015 1,180 s utlets 433 237 153 137 151 ). 92 53 82 38 42 57 57 97 94 91 14 7

In the early early the In

This had a a had This

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100,000 new customers choose to bank bank to choose customers new 100,000 At the same time, time, same the At Another record result thanks to to thanks result record Another hns o ih evc sadrs prod standards, service high to Thanks Raiffeisen International Raiffeisen Raiffeisen International International Raiffeisen zation of the sales network, network, International sales the of zation customers a month a customers organicgrowth Well over 100,000 new retail newWellretail over 100,000 at year-end 2007. year-end at bank personal million 12.1 had Having and Eastern Europe. Eastern and ucts that are closely aligned with demand demand with aligned closely are that ucts alent figure for the previous year (factor year previous the for figure alent grow strongly in 2007.in strongly grow p n ered 06 t € at 2006 year-end on up with with which was 38.9 per cent up on the equiv the on up cent 38.9 was per which million of these so-called so-called of these million numerous new customers in 2007. ing and SME customers at year-end 2006, n h mrepae n frhr optimi further and marketplace the in before before tax in 2007 came to € result. record another posted total was € was total afesn International Raiffeisen

16.8 billion or 30.2 per cent cent per 30.2 or 16.8billion a aan be o acquire to able again was Raiffeisen International Raiffeisen

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, Southeast 2007 72.7 Raiff - - -

The principles and values that have that values and principles The p D orate orate oing

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R Z i cmitd o utial man sustainable to committed is RZB sees RZB citizen, corporate global a As of more than 60,000 employees. 60,000 than more of a pioneering role in this field. this in role pioneering a social its to up lives and agement ecological awareness with its workforce responsibility; it has, moreover, taken on tunity tocontribute tunity globalona scale to oppor an as moreover, and, society to duty its as resources of use efficient the aiffeisen Way aiffeisen

hs icue t saeodr, em shareholders, its include These R es p on ------A A lnsd is ebrhp f NP FI UNEP of membership its Alongside h “e r Rifie” campaign Raiffeisen” are “We The We are Weare Council for Sustainable Development: an Development:Sustainable for Council UE FI). (UNEP tf nvr oe no otc wt the with contact into come never staff of members many years, recent in sion EnvironmentProgrammeInitiativeFinance Nations United the of signatory a is RZB ues. ues. workforce. the at general public. the and governments authorities, groups, upin1997. set was institutions financial for gramme association for the promotion of social social of promotion the for association and be iac i Cnrl n Esen Eu Eastern and Central in finance able unepfi.org). vironmental and sustainability focus (www. rest of the world the of rest municate municate hasactivebeenasfounding a memberof en an with banks of network international prises), RZB is currently assessing the mer the assessing currently is RZB prises), enter in and of part the on responsibility region). CEE (the rope mentsin 1998. t o jiig te ntoa ad interna and national other joining of its h UE F CE ak oc fr sustain for Force Task CEE FI UNEP the tional tional standards and organizations. launched at the end of 2007 is directed directed is 2007 of end the at launched sustained commitment in in commitment sustained ustria,the respact/abcsd

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(the Austrian BusinessAustrian(the t proe s o com to is purpose Its s rnils n val and principles ’s region and the FI state FI ------67 The The The goals of the the of goals The CEO Walter Rothensteiner. Raiffeisen R considerations into account in everything everything in account into considerations omy. econ the of sectors other with conjunction ciency ciency and renewable resources fields. of the Raiff capable of making a significant contribu significant a making of capable November 2007. November in exert can it leverage the of aware is RZB alone do not have as direct an impact as as impact an direct as have not do alone applies applies equally to personal loans and proj od xml o lvd omtet to commitment lived of example good ect finance. finance. ect abroad. and Austria in loans granting eisen within its sphere of action. of sphere its within protection initiative protection paign aims to help make up for this deficit. this for up make help to aims paign requisites that will enable the members of members the enablewill requisites that ing environmentcolleagues,ingtheirbecause it makes, especially when investing and and investing when especially makes, it decisions business the all in and does it in the association’s managing board by its its by board managing association’s the in represented is and member founding a is form for the activities of the Austrian Austrian the of activities the for form the setting of a good example. example. good a of setting the too, are new to RZB. RZB. to new are too, tainability, climate protection, energy effi energy protection, climate tainability, plat shared a as act to is association this in being into called was initiative tection tion to climate protection; to create the pre the create to protection; climate to tion action suitable take to are initiative tion aiffeisenlaunches itsclimate Raiffeisen Klimaschutz Klimaschutz Raiffeisen organization,even beyond limits the

It endeavours to take environmental environmental take to endeavours It ’s values in their immediate work immediate their ’sin values eisen Banking Group, in the sus

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Raiffeisen Zentralbank Raiffeisen Rules and regulations regulations and Rules climate protec climate

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Con ------68 S Many staff-members welcome and make and welcome staff-members Many R Raiffeisen Raiffeisen Zentralbank of greater flexibility and an improved infra improved an and flexibility greater of u ay oe or o work. of hours core any out close cooperation with Human Resources. structure (e.g.structure child care facilities). standards before the end of this year. this of end the before standards RZB is thus creating a basicframeworkthuscreatingaisto RZB agement staff, who enjoy the advantages theenjoy who staff, agement man female young benefits directly also more enjoy to staff-members male allow Report in accordance with international international with accordance in Report Sustainability a prepare to intends RZB does a great deal to help both men and and men both help to deal great a does use of the option of working flexibly with flexibly working of option the of use n peae te fr implementation in for them prepares and up newsuggestionsuprecommendations and womentheirfam reconciletheirworkwith family life family bution to enhancing staff satisfaction. ily lives. lives. ily keyrole. family life; and a better work-life balance work-life better a life;and family and wishes their concerns. ustainability ustainability econcilingwork and

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hs option This - - - - - Bosnia and Herzegovina“ “Bank of the Year – – Year the of “Bank “Bank of the Year – – Year the of “Bank “Bank of the Year – – Year the of “Bank – Year the of “Bank “Bank of the Year – – Year the of “Bank Slovakia“ Ukraine“ Austria“ Kosovo“

“Best Bank Risk Management – Risk Management Bank “Best S “M&A Advisor of the Year – Year the of Advisor “M&A Central and Eastern Europe“ elected Major elected “Bank of the Year – – Year the of “Bank Eastern Europe“ Serbia“

Central and Eastern Europe“ Bosnia and Herzegovina“ “Best Regional Bank in Bank Regional “Best “Best “Best Bank in Slovakia“ “Best “Best Bank in Albania“ “Best “Best Bank in Serbia“ “Best “Best Bank in A wards

Cash Management Provider for for Provider Cash Management Central and Eastern Europe“ Central and Eastern Europe“ “Best “Best Bank in Austria“ “Best “Best Bank in Serbia“ “Best Treasury and Treasury “Best “Best “Best Bank in “Best in CEE“ in “Best

Oesterreichische Nationalbank (these data relate exclusively to business carried on in Austria by Raiff by Austria in on carried business to exclusively relate data (these Nationalbank Oesterreichische S eisen Banking Group has some some has Group Banking eisen hares of the the of hares

RBG has developed its strong strong its developed has RBG R Group

Raiffeisen aiffeisen aiffeisen R aiffeisen aiffeisen 45 billion of of billion 45 boasts Aus boasts B anking anking

Its Its ------in 2007 in 70 The Austrian Raiffeisen Banking Group is is Group Banking Raiffeisen Austrian The Working together for a stronger Raiff years. of the autonomous, locally active active locally autonomous, the of achieved under its own steam. steam. own its under achieved a three-tiered organization. organization. a three-tiered eisen Banks eisen ket shares have grown steadily in recent recent in steadily grown have shares ket growth healthy through position market people in Austria. people position in the market the in position tralen G roup in in roup eisen Zentralbank ( B

Regional Raiffeisen Banks Raiffeisen Regional RBG employs roughly 22,700roughly employs RBG anking anking A , the the , ustria €m €m €m €m €m €m % % % % % % Raiffeisen-Landeszen

It It is up made 45,065 16,657

47,452 71,758 67,979 t mar Its 8,789 2007 ) and and ) 24.3 23.8 23.0 30.9 29.0 27.8 Raiff - - companies), and Oesterreichische Kontrollbank with regard to securities funds (data for investment fund companies companies fund investment for (data funds securities to regard with Kontrollbank Oesterreichische and companies), 1,695). Raiffeisen Raiffeisen KAG, Kepler Fonds KAG and Wertpapierfonds KAG).Salzburg-München S The The autonomous an extensive, nationwide network of bank of network nationwide extensive, an ih ,0 aflae bace (2006: branches affiliated 1,702 with nearly 44 per cent of all banking outlets in in outlets banking all of cent per 44 nearly ing outlets in Austria. Austria. in outlets ing tonomous 48,565 42,083 bank, Kontrollbank, PayLife, PayLife, Kontrollbank, bank, companies, building society, society, building companies, 63,719 15,087 64,188 tructure of the the of tructure Kathrein & Co., National &Co., Kathrein 6,240 fund companies, leasing leasing companies, fund 2006 Raiffeisen Centrobank, Investments inAustrian 23.2 24.3 24.7 30.1 29.0 27.8 Insurers, investment investment Insurers, card complete, etc. financial institutions

As a result, RBG accounts for for accounts RBG result, a As afesn Banks Raiffeisen Raiffeisen Raiffeisen Banks R

- aiffeisen aiffeisen 60,928 59,477 42,661 13,377 39,998 R 5,357 2005 aiffeisenlandesbanken: 8Regional Raiffeisen Banks, Zveza Bank

hr ae 4 au 548 are There 24.2 23.0 26.9 29.2 23.1 27.4 Raiffeisen International: The Network inCentral Leasing International, and Eastern Europeand Eastern other subsidiaries (2006: 557) Network Banks, B R anking anking anks: 548Raiffeisenaiffeisen Banks: Banks make up up make 1.7 millionmembers 54,635 G 55,786 33,265 39,064 11,936 - - 3,164 2004 roup 71 22.2 26.7 28.7 25.9 15.5 23.1 Austria. Austria. Raiffeisen Banks Banks Raiffeisen owners of the the of owners called called ince offer customers the services of a so- a of services the customers offer ince ticular province. ticular line of banking products and services. and equity participations and equity Foreign branches, offices representative offices, Branches, universal banks

The The Raiffeisen Banks Banks Raiffeisen 30,625 53,375 53,184 Landeszentrale Landeszentrale 11,671 37,815 3,149 bank selling a complete a selling bank 2003 22.3 26.5 24.2 26.6 28.6 are at the same time the time same the at are 17.5 Payment settlers, andsecurities IT companies, property and IT companies, property trading companies, private Specialist andback-officeSpecialist equity companies, etc. equity companies within a prov a within in their par their in 23,445 36,036 48,956 51,941 9,652 2,928 2002 25.5 28.2 23.6 25.9 22.1 14.1

The - -

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ssociation RB R RLB aiffeisen RB

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As in 2006 as a whole, the economic cli economic the whole, a as 2006 in As . pr et n 2007. in cent per 2.6 3 GDP growth in the eurozone averaged averaged eurozone the in growth GDP (ECB) increased increased (ECB) Bank Central European cond half. se the during slowdown impending the of that sky economic an in gathered clouds stayed below the 2 per cent mark, the the mark, cent per 2 the below stayed Inflation rose sharply and passed the the passed and sharply rose Inflation However, the tide turned in July as storm storm as July in turned tide However, the economic survey results were the first hint first the were results survey economic development went through two distinct distinct two through went development was good. good. was basis points each. ment. employ rising despite average below persuaded the ECB not to carry out any any out carry to not ECB the persuaded and internationally and Europe in both uncertainty economic that, despite but cloudless. been then, until had, mate mate during the first six months of the year its key rate to 4 per cent in two hikes of 25 25 of hikes two in cent per 4 to rate key its periods. further hikes in interest rates. interest in hikes further the growth of private consumption was was consumption private of growth the turbulence in the world’s financial markets markets financial world’s the in turbulence

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Weaker e onditions in in onditions p - - - 81 ort Austrian provinces. provinces. Austrian Austria as the second half progressed. progressed. half second the as Austria was cent per 3.4 of growth Austria’sGDP T S Bund suffered a sharp fall in prices during the during prices in fall sharp a suffered sulting in full employment in a number of number a in employment full in sulting and mortgage sector. gered by distortions in the US property property US the in distortions by gered Because the mood of the economy remai economy the of mood the Because asing signs of an impending downturn in downturn impending an of signs asing with the advent of the problems in the inter the in problems the of advent the with abruptly declined risks take to willingness was driven mainly by exports and invest and exports by mainly driven was well above average. national financial and credit markets trig markets credit and financial national beginning of the year to a peak of 4.7 4.7 of per cent in June. peak a to year the of beginning ned good to begin with, the bond marketbond thewith, begin to good ned rian rian economy’s best year since 1999. re year, the throughout improved market the notwithstanding, situation in the labour ment. ment. first half.first he capital markets capital he trong growth in growth trong rose from roughly 4 per cent at the at cent per 4 roughlyfrom rose

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Contacts Glossary Consolidated Financial Statements Segment Reports Management Report Interview Raiffeisen Banking Group Overview of RZB Supervisory Board’s Report Managing Board Preface Preface cent in 2007 was primarily attributable to Preface European Interest Rates Consumption and investment 5.0% drive growth in CEE crop failures in Romania.

4.5% Economic growth in Central and Eastern The European members of the Common- Managing Board Managing Europe (the CEE region) nearly matched wealth of Independent States — Russia, Board Managing 4.0% the record rates of growth achieved in the Ukraine and Belarus (the CIS region) — 2006. Real GDP growth in Poland, the recorded average growth of 7.5 per cent, 3.5% Czech Republic, Slovakia, Hungary and as against 6.8 per cent in 2006. Slovenia (the CE region) averaged 5.8 per 3.0% cent, which was only just below the previ- The motors of growth were brisk con- Supervisory Board’s Report Supervisory Board’s Report 2.5% ous year’s record figure of 6.1 per cent. sumer demand and a robust increase in investment activity. In addition, sustained

2.0% The tempo of growth in Southeastern strong economic growth in the EU-15 Europe (the SEE region), comprising new countries also had a beneficial impact, as Overview of RZB Overview of RZB 1.5% EU member states Romania and Bul- those countries are by far the most impor- 1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 garia as well as Serbia, Croatia, Bosnia tant trading partners of and foreign inves- 3-month money (EURIBOR) 10-year German Bund and Herzegovina and Albania, declined tors in the CEE region. Although export somewhat. growth in the CEE region was strong, imports grew even faster, the fall in net

Raiffeisen Banking Group Against this background, the euro bond investors) by the weakness of the US dol- The fall in real GDP growth from 6.6 per exports being the only downside factor Raiffeisen Banking Group market enjoyed a renaissance in the sec- lar and Japanese yen. The driving force cent in 2006 to an average of 5.8 per affecting the economy.

Interview ond half of 2007. Given perceptible eco- behind price gains was the corporate sec- Interview nomic uncertainty on both sides of the tor’s solid profit development combined Atlantic, investors increasingly rushed into with sustained good P/E numbers. low-risk financial securities. The trend was Economic Maturity of the Countries of the CEE Region encouraged by negative reports from a Sentiment at the beginning of the year (Per Capita GDP in Per Cent of the EU average) Management Report Management Report Management

number of companies directly or indirectly having suffered from uncertainty regard- Greece 98% affected by the US property crisis. As ing developments in China, the mortgage 90% a result, nearly all the price losses in the crisis cast a renewed shadow on the finan- bond markets that occurred in the first half cial sector and the economy in the second 81% Segment Segment Reports Segment Reports

had been reversed by year-end. half. Portugal 73% 67% 64% Having delivered growth of record di- 54% 53% The stock markets develop mensions the year before, the Austrian 50% unevenly equity market recorded just minimal 41% 38% gains in 2007. Investors’ increased 36% The global stock markets recorded price risk aversion weakened the ATX — 24% 23% Consolidated Financial Statements Financial Consolidated Vienna’s key index — during the second 22% Statements Financial Consolidated

gains for the fifth year in succession during 2007, even though a large part of their half, limiting its overall whole-year per- Slovenia Republic Czech Slovakia Hungary Poland Croatia Russia Romania Bulgaria Serbia and Bosnia Herzegovina Ukraine Albania Glossary performance was eroded (for eurozone formance to 1.1 per cent. Glossary

Contacts Contacts 82 83 Preface While the Central European currencies European average, and branch density is Preface The effect of the US property Developments in the banking crisis on the CEE region rapidly recovered from the losses they significantly higher. Combined with stiff industry in the CEE region had suffered, in Southeastern Europe, the competition in the over-populated domes- The US property crisis and its aftermath Romanian leu (RON), to name one exam- tic banking market, this means that the Banks’ assets continued to grow strongly Managing Board Managing cast a shadow over the international ple, stabilized at about 15 per cent below national average return on equity is much throughout the CEE region in 2007. The Board Managing financial markets during the second its 2007 high. lower and the cost/income ratio higher sustained growth of the banking sector half. Although this did not have a direct than Western European averages. thus largely withstood restrictive measures impact on CEE countries in 2007, a pre- Overall, however, the effect of the global imposed in a number of Southeastern cise analysis of movements in the CEE cur- increase in risk premiums on CEE countries According to OeNB statistics, the Austrian European countries and the funding prob- rencies does reveal indirect effects. remained within reasonable limits. banking industry’s aggregate profit from lems of CIS banks that were dependent on Supervisory Board’s Report ordinary activities advanced by nearly the financial markets in the wake of the US Supervisory Board’s Report 15 per cent to € 6.66 billion. However, property crisis. Developments in the Banking Industry profit from ordinary activities in the banking industry as a whole (applying Austrian The uptrend was again driven by con- Overview of RZB Overview of RZB in RZB’s Principal Markets financial reporting standards) is estimated sumer and mortgage loan business, which to have fallen by nearly 24 per cent (profit profited from expectations of rising prop- Following turbulence in the Austrian bank- the year under review. Once again, RZB from ordinary activities being the indica- erty prices and growing incomes. ing market in 2006, 2007 began very far outstripped the market’s growth to tor that most closely resembles IFRS profit well. In particular, the dynamism of 2006 record a 19 per cent increase in its bal- before tax). Moreover, as in 2006, corporate bank-

Raiffeisen Banking Group lasted into the first half of 2007. ance sheet total. ing operations grew strongly. Small and Raiffeisen Banking Group This was largely the result of exceptionally medium-sized enterprises are becoming

Interview However, recurring public debate about The industry’s foreign assets grew even large proceeds from the sale of investments increasingly important in these markets. Interview the banking sector triggered by a parlia- more impressively than bank assets in (sale of Polish bank Bank BPH by Bank mentary committee of enquiry on finan- Austria, increasing by 19.6 per cent to Austria Creditanstalt to UniCredit, sale of Finally, portfolios of open investment and cial market supervision had a damaging € 351 billion (2006: € 294 billion). They Raiffeisenbank Ukraine to OTP and sale pension funds also showed very high effect. The takeover of a majority stake in accounted for 39 per cent of Austrian of a minority stake in Kazakhstan’s Bank rates of growth, albeit from a low abso- Management Report Management Report Management

Hypo Group Alpe Adria by Bayerische banks’ total assets. TuranAlem by RZB) booked in 2006. lute base. Landesbank was one notable event in the Austrian banking market’s year. The disproportionately large increase in Personal Loans in Per Cent of GDP vs. Per Capita GDP (PPP Basis) in € foreign assets clearly illustrates the high 60%

Segment Segment Reports Personal loans in per cent of GDP Segment Reports Eurozone and still rising importance that foreign busi- 50% Growth of the Austrian ness has for the Austrian banking industry. 40% banking industry accelerates Croatia

The Austrian banking sector continued Decline in the Austrian banking 30% to grow strongly during 2007. Statistics Bosnia and Herzegovina industry’s profit Hungary 20% Kazakhstan Bulgaria Poland Slovenia published by Oesterreichische National- Ukraine Slovakia

Consolidated Financial Statements Financial Consolidated Romania Czech Republic Statements Financial Consolidated Serbia 10%

bank (OeNB) show that following strong Like most markets in Western Europe, the Russia Albania growth of 9.9 per cent in 2006, the aggre- Austrian banking industry suffers from Belarus 0% Glossary gate balance sheet total of Austria’s banks structural deficits. For instance, its net 5,000 10,000 15,000 20,000 25,000 Glossary

grew by 12.8 per cent to € 900 billion in interest margin is well below the Western Central Europe Southeastern Europe CIS Per capita GDP (PPP basis) in € At 31 December 2007; Sources: Thomson Financial Datastream, wiiw, Raiffeisen Research. Contacts Contacts 84 85 Preface tors. Raiffeisen International’s free float customers in the CEE region. Having still Preface The Course of Business in 2007 increased from 30 to 31.5 per cent as a had 12.1 million of these personal bank- Moody’s improves RZB’s financial markets, conscientious prepara- result. Disregarding subscription rights, the ing and SME customers at year-end 2006, long-term rating tion and ideal transaction timing enabled issued was subscribed twice over. Given Raiffeisen International already had 13.6 Managing Board Managing it to issue securities on the best possible that market conditions were already million at the end of 2007. In other words, Board Managing At the end of April 2007, rating agency terms in October. Its 8NC5 Upper Tier adverse, this was a great success. each month, well over 100,000 new cus- Moody’s Investors Service — having intro- 2 Ergänzungskapitalanleihe (supplemen- tomers decided to do business with RZB’s duced a new rating model and taking tary capital bond) was issued with a vol- banking network in Central and Eastern account of RZB’s deep rootedness in Aus- ume of € 600 million. It has a maturity of Network in the CEE region Europe. tria — raised its long-term rating on Raiff eight years and can only be called after enlarged and densified Supervisory Board’s Report eisen Zentralbank by two notches from A1 five years. Supervisory Board’s Report to Aa2 with a stable outlook. RZB continued to densify its network in “Best Bank” in Austria and This issue was the first ever publicly placed the CEE region, which operates under Central and Eastern Europe In accordance with the new methodology, upper tier 2 issue of this size by an Austrian the umbrella of Raiffeisen International Overview of RZB Overview of RZB Raiffeisen Zentralbank’s financial strength bank. It was priced at 115 basis points Bank-Holding AG. Its purposeful expan- RZB continued to win numerous awards rating was changed from C+ to C. above the reference rate (mid-swaps). sion during 2007 was based on organic from major business magazines dur- growth and enlargement of the branch ing 2007. Among others, it was named network. At year-end 2006, the network Best Regional Bank in Central and East- Successful issuances of the Capital increases in the region comprised 2,848 business ern Europe by Euromoney and Global

Raiffeisen Banking Group Bank’s own securities outlets. At the close of 2007, it had 3,015, Finance. Raiffeisen Banking Group Capital increases by Raiffeisen Zentral- which means that roughly three new

Interview At the beginning of the year, Raiffeisen bank and Raiffeisen International took branches opened each week. At year- It also won a raft of other awards for the Interview Zentralbank had its successful debut in place in the last third of the year. All the end, RZB was operating in 17 markets in CEE region (Treasury, Cash Manage- sterling. Demand for its senior GBP 500 equity holders of Raiffeisen Zentralbank the region, where it had 16 banking sub- ment, Risk Management, Trade Finance, million five-year bond with a yield of Libor participated fully in the capital increase sidiaries, numerous specialist companies Sub-Custodian, etc.) as well as the title plus 11 basis points was particularly brisk completed in December by exercising their and three representative offices. of Best Bank or Bank of the Year in the Management Report Management Report Management

among investors from the UK, Continental subscription rights. 240,465 new ordi- following countries: Albania, Austria, Europe and Asia. nary shares and 24,550 new preference Belarus, Bosnia and Herzegovina, Bul- shares were subscribed to and paid up at Strong growth in the garia, Croatia, Kosovo, Poland, Serbia, A € 500 million subordinated bond issu- a price of € 600 per share. This increased customer base Slovakia and the Ukraine. In addition, Segment Segment Reports Segment Reports

ance in February was followed by two Raiffeisen Zentralbank’s capital base by Raiffeisen Zentralbank won a Finan- more benchmark bond issuances in the another € 159 million (prior to the deduc- Enlargement of the branch network com- cial Times Sustainable Banking Award, course of the year: In June, RZB issued a tion of issuing costs). bined with high product and service qual- namely the first ever special prize for € 500 million 5-year senior bond. It is a ity also increased the number of retail Achievement in Carbon Finance. fixed rate security with a coupon of 4.75 In October, Raiffeisen International com- per cent. Developing signs of a forth- pleted a capital increase of € 1.24 billion coming widening of spreads made its (11,897,500 shares at € 104 each). Raiff

Consolidated Financial Statements Financial Consolidated price of mid-swaps plus 10 basis points eisen Zentralbank subscribed to 50 per Statements Financial Consolidated

very attractive. Although market condi- percent of the issued total, among other

Glossary tions were extremely difficult, RZB’s sound things to make the Raiffeisen Interna- Glossary business model, its solid reputation in the tional share even more attractive for inves- Contacts Contacts 86 87 Preface income. Operating income was € 924 RZB’s balance sheet total again grew sub- Preface Summary of Consolidated Results million or nearly 25 per cent up on 2006 stantially, increasing by nearly 19 per cent The Consolidated Financial Statements of from the acquisition of Impexbank in May at a total of € 4,648 million. Including the to € 137.4 billion. Over 90 per cent of this RZB are prepared on the basis of the Inter- and eBanka in November and the sale of net effects of consolidating investments advance was attributable to growth in the Managing Board Managing national Financial Reporting Standards Raiffeisenbank Ukraine at the beginning in subsidiaries, the changes in the scope loan portfolio. Board Managing (IFRSs). The legal position in Austria is of November. The reader is referred to the of consolidation described above added that consolidated financial statements pre- chapter in the Notes regarding the scope roughly € 42 million to profit before tax, The compound annual growth rate over pared in accordance with internationally of consolidation on page 185. or approximately 3 per cent of total profit the past five years has been no less than accepted accounting principles have an for 2007. 24 per cent, underscoring RZB’s growth exempting effect in that consolidated finan- To facilitate comparison as far as possible, momentum. Supervisory Board’s Report cial statements prepared in conformity with two one-off effects in 2006 have been fac- Movements in the exchange rates of Cen- Supervisory Board’s Report Austria’s BWG/UGB (banking act/enter- tored out of comparative figures in the fol- tral and Eastern European currencies var- The table on the following page provides prises code) are no longer required. Raiff lowing presentation of RZB’s results. They ied during the year under review. Central an overview of the year-on-year develop- eisen Zentralbank also prepares separate were the sale of Raiffeisenbank Ukraine European currencies tended to become ment of RZB’s operating numbers. Overview of RZB Overview of RZB financial statements in conformity with Aus- (€ 486 million) and of a minority stake in firmer, but the CIS currencies depreci- trian business law that provide the formal Kazakhstan’s Bank TuranAlem (€ 110 mil- ated because of their ties to the US dol- Turbulence in the financial markets had basis of assessment for calculating divi- lion) that had generated total proceeds of lar. Overall, these movements slightly little effect on Profit from operating activ- dend distributions and tax. € 596 million before minorities and € 418 increased Profit before tax, adding about ities. Operating income grew by a quar- million after minorities in 2006. € 10 million. ter to € 4,648 million. The increase was

Raiffeisen Banking Group The majority of RZB is held indirectly by primarily due to a strong advance in net Raiffeisen Banking Group Raiffeisen-Landesbanken-Holding GmbH, Twenty per cent of Profit before tax was interest income as well as higher net com-

Interview Vienna, which is non-operational, and Outstanding profit from accounted for by Raiffeisen Zentralbank mission income. Interview is thus accounted for in that company’s operating activities and its excluded subsidiaries, while Raiff consolidated financial statements. In turn, eisen International accounted for 80 per Raiffeisen-Landesbanken-Holding GmbH RZB’s Profit before tax of € 1,485 million cent. is owned by eight Regional Raiffeisen in 2007 was 16 per cent or € 199 mil- Growth in RZB’s Balance Sheet Total Management Report Management Report Management

Banks. lion up on the prior-year figure of € 1,286 Raiffeisen Zentralbank’s relative contribu- €bn million. Profit was seriously dented by tion was reduced by the unrealized losses 13 7. 4 On the balance sheet date, RZB’s Consoli- the international financial crisis. This cri- on securities and other financial instru- dated Group was made up of 335 com- sis caused unrealized losses on securities ments described above. Without them, the 115.6 Segment Segment Reports Segment Reports

panies, comprising 22 banks and 202 and derivative instruments totalling about distribution would have been the same CAGR 5 of 24% other financial institutions. Sixty-six com- € 312 million. The portfolios concerned as in 2006, namely one third Raiffeisen 93.9 panies were consolidated for the first time were measured on a mark-to-market Zentralbank and two thirds Raiffeisen in the 2007 financial year. They included basis. They mirrored the volatility and un- International. 67.9 47 project-specific leasing subsidiaries. At certainties affecting the financial markets, the beginning of the year, a number of which have lasted into 2008. The burdens on profit and the strong 56.1 asset management companies already set increase in RZB’s capital base reduced its

Consolidated Financial Statements Financial Consolidated up in prior years and four insurance bro- RZB’s unbroken, strong organic growth Return on equity before tax by 4.5 per- Statements Financial Consolidated

kers were consolidated for the first time was more satisfactory. It was mainly centage points to 22.2 per cent. Includ-

Glossary on the grounds of their growing impor- fuelled by an increase in net interest ing one-off effects, the return on equity in Glossary tance. The changes in 2006 had resulted income and an advance in net commission 2006 had been 39.1 per cent. 2003 2004 2005 2006 2007 Contacts Contacts 88 89 Preface million. RZB’s good credit risk position Preface RZB’s Profit from Operating Activities Structure of Profits was reflected by its lowest ever Risk/earn- + ( -) €m or % €k 2007 Change 2006 2005 4,648 ings ratio of 10.5 per cent (previous year: 2% Net interest income 2,942,219 34.6% 2,186,493 1,606,223 2% 15.8 per cent). The Retail Customers seg- Managing Board Managing 33% ment accounted for nearly 70 per cent of Board Managing Net commission income 1,515,671 28.8% 1,177,018 818,842 3,724 3% total Provisioning for impairment losses of Trading profit 94,482 (63.2%) 256,685 172,448 CAGR 5 of 28% 7% € 308 million, namely € 210 million. 31% Other operating profit 95,814 ( 8.1%) 104,228 72,737 2,670 3% 63% Operating income 4,648,187 24.8% 3,724,423 2,670,249 6% Other earnings consists primarily of Net 2,014 31% Staff expenses (1,375,553) 26.3% (1,089,006) (817,152) 4% 59% income from financial investments and Supervisory Board’s Report 1,583 9% Supervisory Board’s Report 4% current financial assets, which came to Other administrative outlay (1,003,953) 25.0% (803,028) (590,874) 31% 11% 60% a loss of € 214 million because, above Depreciation/amortization/ 30% 56% all, of unrealized losses on structured write-offs (265,536) 20.1% (221,061) (166,001) 55% products, and Net income from decon- Overview of RZB General administrative Overview of RZB expenses (2,645,042) 25.2% (2,113,095) (1,574,027) solidations of € 26 million (i.e. the pro- 2003 2004 2005 2006 2007 ceeds from the sale of two subsidiaries in Profit from operating activities 2,003,145 24.3% 1,611,328 1,096,222 Other operating profit Trading profit Hungary). Net commission income Net interest income Because of the unrealized losses de-

Raiffeisen Banking Group Net interest income grew by 35 per cent in 2006. Because of an increase in non- scribed above, Profit before tax failed to Raiffeisen Banking Group from € 2,186 million to € 2,942 million. income taxes, Other operating profit fell match the 24 per cent advance in Profit

Interview Its relative contribution to operating in- slightly by 8 per cent to € 96 million. resulting effects on General administra- Interview come rose by 4 percentage points to tive expenses — and the unrealized losses 63 per cent. Besides improved margins General administrative expenses i n - that dented Trading profit, RZB’s Cost/ Cost/income Ratio in a number of markets, higher dividend creased by a quarter in 2007. As in prior income ratio — the gauge of efficiency €m or % income also contributed to this in- years, this mirrored the Group’s sustained that expresses general administrative 4,648 Management Report Management Report Management

crease. Net commission income too grew capital expenditure on its retail operations expenses as a percentage of operating 64.1% significantly, advancing by 29 per cent to in the CEE region. Operating expenses income — rose marginally by 0.2 percent- 3,724 € 1,516 million. increased by € 532 million to € 2,645 mil- age points to 56.9 per cent. lion. Here too, the increase in individual Segment Segment Reports Segment Reports

Net commission income’s relative con- items of expenditure was relatively evenly Impairment losses on loans and advances 2,670 2,645 tribution to operating income thus in- balanced at between 20 and 26 per developed very well, with Provisioning for 59.8% 58.9% 2,113 creased by 2 percentage points to 33 per cent. In the CIS region (including above all impairment losses in 2007 11 per cent 2,000 1,583 1,574 cent. Trading profit was dented by the Russia), the high level of demand for skilled down on the previous year. The reduction 56.9% 1,196 56.7% calamities in the interest markets as a workers increased staff expenses. Overall, in Provisioning for impairment losses to 1,017 result of severe unrealized losses in the they accounted for the biggest slice of the € 308 million resulted from a net reversal securities portfolio and on derivative inter- rise in operating expenses, namely 26 per of € 51 million at Raiffeisen Zentralbank

Consolidated Financial Statements Financial Consolidated est rate instruments. Consequently, it fell cent. and a cut of € 26 million in provisioning in Statements Financial Consolidated

from € 257 million to € 94 million and Southeastern Europe. Group members in 2003 2004 2005 2006 2007 Operating income Glossary accounted for just 2 per cent of profit from Despite RZB’s strategic focus on the devel- the CIS region had to increase their pro- General administrative expenses Glossary

operating activities, as against 7 per cent opment of its sales network — with the visioning for impairment losses by € 42 Cost/income ratio Contacts Contacts 90 91 Preface Preface

Consolidated Profit History Results by business segment Profit and Return on Equity

+(-) 2006 €m or % An analysis of results by business seg- 39.2% €k 2007 Change (-OOEs)* 2005 6,689 Profit from ment shows two contrasting develop- Managing Board Managing operating activities 2,003,145 24.3% 1,611,328 1,096.222 ments. On the one hand, growth — and Board Managing with it, advances in profit — continued in 29.9% Provisioning for 4,812 impairment losses (307,588) (11.2%) (346,431) (206,620) the Corporate Customers and Retail Cus- tomers segments. On the other, devel- 3,885 26.8% Other earnings (210,734) — 21,026 40,262 23.9% opments in the world’s financial markets 22.2% Profit before tax 1,484,824 15.5% 1,285,923 929,863 caused losses in the Proprietary Trading 15.5% Supervisory Board’s Report Supervisory Board’s Report Income tax (294,749) 17.5% (250,917) (225,220) segment and, in part, in the Financial Insti- 2,221 2,317 Profit after tax 1,190,074 15.0% 1,035,006 704,644 1, 8 8 2 tutions and Public Sector segment. 1,484 1, 286 Minority interests in profit (411,795) 45.4% (283,288) (253,780) 930 692 Corporate Customers 344 Overview of RZB Consolidated profit 778,280 3.5% 751,719 450,864 Overview of RZB Although RZB faces stiff competition, Profit *-OOEs: Without one-off effects of the sale of Raiffeisenbank Ukraine and of a minority stake in Bank TuranAlem. before tax in its biggest business seg- 2003 2004 2005 2006 2007 Average equity ment — Corporate Customers — grew by Profit before tax from operating activities, growing by Accordingly, the Consolidated profit half to € 848 million. Since the seg- Profit before tax including one-off effects 15 per cent to € 1,485 million. attributable to Raiffeisen Zentralbank ment’s profit increased by more than the Return on equity before tax Return on equity before tax without one-off effects Raiffeisen Banking Group was just 4 per cent up on the previous equity allocated to it, its Return on equity Raiffeisen Banking Group Income tax grew by slightly more, increas- year at € 778 million. The Earnings per advanced by 1.9 percentage points to

Interview ing by 18 per cent to € 295 million. This share (EPS) derived from Consolidated 28.8 per cent. The increase in profit was Interview was the result of an increase in deferred profit fell from € 155.7 to € 150.7. the result of 28 per cent growth in operat- and advances (compared with a net allo- tax liabilities, recognized above all ing income to € 1,493 million — above all cation of € 45 million in 2006). in Poland and Russia, resulting from a They were virtually unaffected by capi- thanks to a 38 per cent rise in net interest change in the method of recognizing unre- tal increases at Raiffeisen International income — and a disproportionately small, Financial Institutions and Management Report Management Public Sector Report Management alized gains and losses in the respective in October 2007 and Raiffeisen Zentral- 22 per cent increase in General adminis- tax bases. The computed tax ratio was bank in November 2007. Including one- trative expenses to € 556 million. The con- Developments in the Financial Institutions unchanged at nearly 20 per cent. off effects, they had come to € 239.9 in sequence was another improvement in the and Public Sector segment varied. Profit 2006. The number of shares in issue in segment’s Cost/income ratio of 1.8 per- from operating activities grew satisfacto- Segment Segment Reports Segment Reports

Minority interests in profit grew dispro- 2007 averaged 5,080,334. centage points to 37.2 per cent. rily thanks to a volume-related advance in portionately, increasing by 45 per cent Net interest income, growing by 18 per to € 412 million. This was mainly attribut- Ploughed-back prior-year profit and the Another key factor was the segment’s low cent to € 414 million. However, turbulence able to an increase in the free float of the capital increases in the fourth quarter of provisioning for impairments losses of € 91 in the marketplace triggered falls in the fair Group’s listed Central and Eastern Euro- 2007 increased average equity by no million. It was kept low by a combination values of securities issued by financial insti- pean holding company Raiffeisen Inter- less than 39 per cent. This growth in the of macroeconomic factors and strict cost tutions. This led to unrealized losses that national from 30 to 31.5 per cent. Profit capital base reduced the Return on Equity management. This figure corresponds to a dented segment profit by € 53 million. As

Consolidated Financial Statements Financial Consolidated attributable to Raiffeisen International before tax by 4.5 percentage points to Risk/earnings ratio of just 9.4 per cent. The a result, this segment’s Profit before tax Statements Financial Consolidated

rose. The unrealized losses were mainly 22.2 per cent. improvement was mainly generated in Aus- fell by nearly € 10 million to € 198 million,

Glossary recorded at Raiffeisen Zentralbank. tria, where it proved possible to reverse and its ROE dropped sharply from 31.1 Glossary € 51 million of impairment losses on loans to 20.5 per cent. General administrative Contacts Contacts 92 93 Preface expenses increased by slightly less than to € 1,561 million. The segment’s Cost/ million. The segment recorded a Net Preface

Participations and Other operating income, namely by 17 per cent, income ratio thus fell from 72.9 to 68.6 loss on financial investments and current Profit before tax in the Participations further improving an already low Cost/ per cent. Because RZB continued to force financial assets of € 160 million. It was a and Other segment came to € 47 mil- income ratio to 39.3 per cent. the pace of the segment’s development consequence of unrealized losses on cur- lion, following a loss of € 36 million in Managing Board Managing in Central and Eastern Europe, this ratio rent financial assets, including above all 2006 (excluding one-off effects). The Board Managing Retail Customers remained relatively high due to expendi- structured credit products, and derivative improvement was mainly attributable to The Retail Customers segment exhibited ture on enlarging the branch and sales interest rate instruments. Portfolios were a dividend-driven increase in Net interest impressive rates of growth. Risk-weighted network, advertising activities, new prod- measured on a mark-to-market basis. On income. Including one-off effects, profit assets in this segment increased by a uct launches and process enhancements. the other hand, General administrative before tax in 2006 came to € 561 mil- third to € 19,7 billion. The growth in its expenses in this segment were static on lion. New fields of business fuelled a sig- Supervisory Board’s Report Profit before tax was the highest of any Proprietary Trading the previous year at € 160 million. nificant increase in Operating income. Supervisory Board’s Report segment, at 92 per cent. Totalling € 495 Turbulence in the financial markets also million, it accounted for exactly one third affected the Proprietary Trading seg- of the Group’s consolidated profit. The ment, where Profit before tax fell by

Overview of RZB Detailed Review of Items in the Overview of RZB increase in Provisioning for impairment € 393 million. The result was a pre-tax losses was disproportionately small, at loss for the financial year of € 103 mil- Income Statement 9 per cent, giving a net total of € 210 lion.With the exception of earnings from million. This reduced the segment’s Risk/ foreign exchange and commission busi- 35 per cent advance in also grew strongly, increasing by 65 per earnings ratio by 4.0 percentage points ness transacted on behalf of custom- net interest income cent to € 130 million. A large part of the

Raiffeisen Banking Group to 14.6 per cent. Operating income grew ers, profits slumped in practically every total was accounted for by RZB’s stake in Raiffeisen Banking Group by 38 per cent to € 2,274 million, exceed- area. Net interest income fell by 30 RZB’s Net interest income increased by UNIQA Versicherung AG.

Interview ing the increase in General administra- per cent to € 157 million, and Trading 35 per cent or € 756 million to € 2,942 mil- Interview tive expenses, which rose by 30 per cent profit declined by 77 per cent to € 50 lion. This growth exceeded the 19 per cent Interest expenses rose more, increasing increase in RZB’s balance sheet total, con- by 50 per cent to € 4,575 million. This in- Profit Before Tax: Segment Review siderably improving the Group’s interest crease was mainly due to a rise in the costs margin (which is calculated in relation to associated with deposits from customers as €m Management Report Management 848 Report Management

average balance sheet total) by 21 basis a result of higher interest rates in a number points from 2.12 per cent in 2006 to 2.33 of markets. In addition, interest expenses per cent. RZB’s Interest income increased on liabilities evidenced by paper and 565 561 by 43 per cent to € 7,387 million. Inter- higher outlay on subordinated debt capi- Segment Segment Reports 495 Segment Reports 449 est income from Loans and advances tal also contributed to the increase. Av- to customers grew by 45 per cent and erage funds held in deposits grew by 320 290 accounted for the biggest slice of interest about 30 per cent, while interest expenses 238 258 238 208 income, namely 60 per cent. However, the in that area rose by 52 per cent. 198 174 147 129 142 average balance of Loans and advances 96 52 25 51 47 to customers rose by less, namely 36 per The biggest advance in Net interest cent, underscoring the increase in interest income took place in the Retail Custom-

Consolidated Financial Statements Financial Consolidated (19) (43) (34)(36)* margins. Dividend income from equity par- ers segment, where it grew by 40 per Statements Financial Consolidated (103) ticipations and shares increased by € 64 cent. Net interest income in the Corpo- Corporate Financial Institutions Retail Proprietary Participations Glossary Customers and Public Sector Customers Trading and Other million to € 99 million. Earnings from enti- rate Customers segment advanced too, Glossary

2003 2004 2005 2006 2007 *Without one-off effects. ties accounted for using the equity method by 38 per cent, due to a sharp increase in Contacts Contacts 94 95 Preface Preface

Interest Margins Provisioning for impairment Regional Breakdown of provision- Net commission income losses ing for impairment losses 2.33% Net commission income depends greatly €m 2.12% Although RZB’s balance sheet total grew on the number of transactions. Its steady 2.02% Managing Board Managing Board Managing significantly, increasing by 19 per cent, 169 growth continued in 2007 as it advanced 1.79% 1.69% RZB reduced its Provisioning for impair- by 29 per cent or € 339 million to € 1,516 ment losses by 11 per cent or € 39 million 122 million. to € 308 million. This improved its Risk/ earnings ratio — provisioning for impair- Payment transfers remained the biggest

ment losses as a percentage of net inter- 60 contributor to Net commission income, Supervisory Board’s Report est income — to the lowest ever figure of accounting for € 582 million or 38 per cent Supervisory Board’s Report 10.5 per cent. It had still been 15.8 per- 7 thereof. There was a sizeable increase in cent, or 5.3 percentage points more, in commission from foreign exchange busi- 2006. Pleasingly, the Net provisioning ness, where Net commission income grew Overview of RZB Overview of RZB ratio (calculated on the basis of average (51) by 24 per cent to € 393 million, and Net 2003 2004 2005 2006 2007 risk-weighted assets in the banking book) commission income from securities busi- also fell, namely by 22 basis points to CIS ness grew by 23 per cent to € 161 million. 0.41 per cent. Central Europe Southeastern Europe business volumes, and an increase in vol- Other

Raiffeisen Banking Group umes also increased it by 29 per cent in The development of Provisioning for Austria Net Commission Income Raiffeisen Banking Group the Financial Institutions and Public Sec- impairment losses varied from one seg- €m or % 1,516

Interview tor segment. ment to the next. In the Corporate Cus- Interview tomers segment, it was down on the pre- number of larger specific allowances, 10% Broken down into regions, Net interest vious year to just € 91 million. Whereas resulting in a net release of € 51 mil- 26% 1,177 income advanced most in Central Europe, provisioning in the Retail Customers seg- lion. The Loss rate, which expresses genu- 9% where it grew by 35 per cent or € 207 mil- ment increased by 10 per cent to € 210 ine loan losses (use of loan loss provisions 27% Management Report Management 11% Report Management lion and, above all, the CIS region, where million, it fell by 65 per cent to € 1 million and direct write-offs) in relation to total 819 8% it grew by 47 per cent or € 273 million. in the Financial Institutions and Public Sec- loans outstanding, fell by 4 basis points to 15% tor segment. 0.10 per cent. 625 30% 12% 10% 17% These were also the regions where lend- 479 28% 38% Segment Segment Reports 12% 13% Segment Reports ing to personal banking customers and The decrease in the Corporate Custom- Provisioning for impairment losses in the 29% 12% 20% 36% small and medium-sized enterprises grew ers segment was due to the fact that it Retail Customers segment grew by less 12% 23% most. proved possible to reverse general port- than the loan portfolio. The increase was 19% 29% 28% 27% folio-based allowances not related to any particularly marked in CIS retail markets, Net interest income in Austria grew by 20 concrete troubled loan. The biggest single but those were at the same time the mar- 2003 2004 2005 2006 2007 Other banking services per cent as loans and advances to custom- impairment in Austria totalled € 14 million, kets offering the biggest margins. The Risk/ FX, notes/coin, precious metals business ers likewise grew by 20 per cent and RZB the biggest in the CEE region € 10 million. earnings ratio in the CIS region remained Securities business

Consolidated Financial Statements Financial Consolidated recorded good earnings from equity par- high but improved to 19.8 per cent. Credit and guarantee business Statements Financial Consolidated Payment transfers ticipations accounted for using the equity Indeed, the healthy state of the economy

Glossary method. in Austria made it possible to reverse a Glossary

Contacts Contacts 96 97 Preface The main reason for these increases was consequence of the international finan- Preface Trading Profit Gains (losses) from derivative further growth in the number of customers, financial instruments cial markets crisis that began in the third €m or % 257 especially in the personal banking market quarter of 2007. Because of movements 13% and the SME sector (which is also counted RZB recorded a Loss from derivative finan- in interest rates and, above all, widen-

Managing Board Managing 76% Board Managing as part of the Retail Customers segment) 175 cial instruments of € 23 million in the year ing spreads, the prices of many securi- 170 172 81% in the CEE region. These customer groups 13% 15% 15% under review (previous year: loss of € 42 ties fell sharply. The prices of securities made a particularly large contribution of 68% 65% 46% million). that entailed credit risk were particularly 116% 81 cent to the advance in Net commis- 94 hard hit. sion income. Net commission income It resulted essentially from unrealized grew especially strongly in Southeastern 39% losses on hedges, most of which did not Supervisory Board’s Report 19% 20% Supervisory Board’s Report Europe, where it advanced by 41 per cent 11% 9% meet the requirements of IFRSs so that General administrative expenses or € 107 million. they had to be recognized in the Income Statement. General administrative expenses in- (106%) creased by 25 per cent or € 532 million to Overview of RZB Overview of RZB Trading profit € 2,645 million. 2003 2004 2005 2006 2007 Net income from financial Share-related Trading profit fell by 63 per cent or € 162 Currency-related and FX valuations investments Although General administrative expenses million to € 94 million. This item includes Interest-rate and credit products increased by slightly more than operating both realized and unrealized gains and Other Net income from financial investments income, RZB’s Cost/income ratio was vir-

Raiffeisen Banking Group losses arising from all positions in the trad- and current financial assets was negative, tually unchanged, increasing by 2 basis Raiffeisen Banking Group ing portfolio net of the funding costs asso- at a loss of € 214 million. This translates points from 56.7 to 56.9 per cent.

Interview ciated with asset items in the trading port- Net income from interest-related trading into a significant decline of € 142 million Interview folio and exchange gains and losses on all fell by € 127 million, resulting in a loss of compared with 2006. This loss had two Staff expenses foreign-currency positions. € 100 million. components: Staff expenses increased by 26 per cent or € 287 million to € 1,376 million, accounting Net income from currency-related trans- This figure includes unrealized losses Net income from held-to-maturity secu- for an unchanged 52 per cent of General Management Report Management Report Management

actions is an important element of Trad- on the securities portfolio and derivative rities and equity participations declined administrative expenses. The Average num- ing profit. Although it fell by 44 per cent instruments, including in particular losses at from a gain of € 3 million to a loss of € 3 ber of staff working for the Group (full-time to € 109 million, most of the decline was RZB’s London branch. Trading assets grew million. This item was made up of unreal- equivalent basis) increased by 13 per cent a result of a one-off effect in 2006 — by 10 per cent to € 10.8 billion. Structured ized losses of € 26 million and realized or 6,643 to 58,408. Because of bonus Segment Segment Reports Segment Reports

which naturally no longer applied in products in the trading book were worth gains on equity participations of € 23 mil- payments and the increase in wage levels 2007 — when earnings from hedges of € 377 million. Most were residential mort- lion, most of which derived from the sale of in the CIS region, the workforce increased RZB’s investments in the CEE region were gage-backed securities. a property project. by less than Staff expenses. As a result of booked. These did not qualify for capi- the slower rise in the average number of tal hedge accounting for the purposes of On the other hand, Net income from Net income from securities at fair value staff during the year, operating income per IFRSs and were, therefore, recognized in share-/index-related trading grew strong- through profit or loss was negative in member of staff rose to € 80 thousand, as the Income Statement. ly. It was 125 per cent up on the previ- the 2007 financial year at a loss of against € 72 thousand in 2006.

Consolidated Financial Statements Financial Consolidated ous year to € 76 million (2006: € 34 mil- € 211 million, compared with a profit Statements Financial Consolidated

In the adverse market environment created lion). This income was generated almost of € 31 million in 2006. Nearly all Following RZB’s acquisitions in 2006, the

Glossary by the turbulence in the financial markets exclusively by equity products specialist the unrealized losses were booked at biggest slice of the workforce by far was Glossary emanating from the US in the third quarter, Raiffeisen Centrobank. Raiffeisen Zentralbank. They were a working in the CIS region, where the Contacts Contacts 98 99 Preface Retail Customers segment, or 2 percent- of € 7 million) and Other non-profit- Preface General Administrative Expenses Breakdown of Other age points more than in 2006. Administrative Outlay dependent taxes of € 43 million (down €m or % 2,645 € 12 million). 10% Other administrative outlay 8

Managing Board Managing 38% Board Managing 2,113 Other administrative outlay increased by It likewise includes a net loss on allocations 10% 25 per cent or € 201 million to € 1,004 to and releases from Other provisions for 38% million, accounting for 38 per cent of total 1 liabilities and charges in the amount of 1,574 Operating expenses. A large part of the 7 € 20 million (2006: € 30 million). The 11% increase was attributable to the Group’s 6 decrease in this loss was due to the cre- 1,196 37% 52% 1,017 13% retail strategy for the CEE region and the 5 ation of a provision for an operational loss Supervisory Board’s Report 2 Supervisory Board’s Report 12% 37% 52% associated enlargement of the branch net- incurred in the payments field in 2006. 37% 52% work as per schedule. The main items of 4 3 50% 51% expenditure were facility rents, the costs Finally, Other operating income net of of implementing settlement systems and 1 Buildings and rents: 24% Other operating expenses came to € 50 Overview of RZB Overview of RZB marketing. 2 IT: 13% million, as against € 55 million in the pre- 3 Communication: 9% 2003 2004 2005 2006 2007 vious year. Depreciation/amortization/write-offs 4 Legal and consultancy: 8% Other administrative outlay Facility costs was the largest cost cate- 5 Advertising: 13% Staff expenses gory within Other administrative outlay. It 6 Deposit guarantees: 5% 7 Security: 4% increased by 31 per cent to € 249 mil- 8 Other items: 24% Net income from Raiffeisen Banking Group lion and accounted for 24 per cent of the deconsolidations Raiffeisen Banking Group Group employed an average of 28,197 total. Outlay on Information technology

Interview people. However, the relative increase of and Communication was also important, Net income from deconsolidations came Interview 9 per cent in the CIS region was compara- growing by 21 per cent to a total of € 227 of intangible fixed assets — mainly soft- to € 26 million in 2007, compared with tively small. It was bigger in Southeastern million. Costs were increased among ware and similar licences — accounted € 31 million in the previous year. Most Europe (increase of 20 per cent) and Cen- other things by system changes and pro- for another € 88 million (2006: € 64 mil- of this total derived from the sale of two tral Europe (increase of 16 per cent). This cess optimizations. Advertising costs rose lion). This total also included the write-off consolidated project companies in Hun- Management Report Management Report Management

was a result of the Group’s deeper mar- by 30 per cent to € 130 million, reflecting of the eBanka brand, which will no lon- gary: Energy generating company SIN ket penetration in a number of countries in the work being done to acquire customers ger be used as a result of the planned ESCO Energiaszolgáltató Kft., Budapest, those regions. The average workforce in in newly developed local markets. absorption of eBanka a.s. by Raiffeisen- was sold at the end of March 2007, giv- Austria grew by 20 per cent to 2,976. bank a.s., Prague. ing the Group net proceeds of € 11 mil- Segment Segment Reports Segment Reports

lion, and a property project called Arena Most of the growth in the workforce Depreciation/amortization/ Corner Ingatlanfejlesztõ Kft. in Buda- took place in the Retail Customers seg- write-offs Other operating profit pest, was sold in July 2007. The Group’s ment, where staffing increased by 16 per income from the latter deconsolidation cent. This was because the creation of Depreciation/amortization/write-offs of Other operating profit fell by 8 per cent came to € 15 million. Including the sale of customer centres and the opening of new tangible and intangible fixed assets rose from € 104 million to € 96 million. This Raiffeisenbank Ukraine, net income from branches necessitated a corresponding by an average of 20 per cent or € 44 mil- item includes net income from Non-bank- deconsolidations had come to € 517 mil-

Consolidated Financial Statements Financial Consolidated increase in human resources. lion in 2006. Statements Financial Consolidated

lion to € 266 million. Depreciation/write- ing activities of € 81 million (increase offs of tangible fixed assets increased

Glossary Seventy-two per cent of the Group’s total by 12 per cent from € 139 million to Glossary workforce was already working in the € 155 million. Amortization/write-offs Contacts Contacts 100 101 Preface Preface

The Balance Sheet Breakdown of Loans and Advances Equity and liabilities to Customers Development of assets Exchange differences (i.e. the net effects There was little change in the structure of movements in exchange rates in the of the Group’s equity and liabilities com- Managing Board Managing RZB’s strong expansion was again CEE region) came to minus € 0.6 bil- pared with year-end 2006. Deposits Board Managing reflected by growth in its balance sheet lion. In other words, the Group achieved from customers continued to dominate assets during the 2007 financial year. Its organic growth in its balance sheet total the equity and liabilities side of the Bal- consolidated balance sheet total grew by of € 22.4 billion, or more than 19 per cent, ance Sheet, accounting for 40 per cent of 19 per cent or € 21.8 billion to €137. 4 b i l - versus year-end 2006. the total, this proportion having risen by lion. Almost all of the increase was due to another percentage point. Supervisory Board’s Report organic growth. In line with the trend of recent years, there Supervisory Board’s Report was another shift in balance sheet assets Deposits from banks accounted for about As no first-time consolidations or decon- in favour of Loans and advances to cus- 36 per cent of the balance sheet total solidations taking place during 2007 tomers. These were the major drivers Corporate customers: 67% (down 2 percentage points), and the Overview of RZB Overview of RZB had a material impact on the Balance of growth at RZB, increasing by 38 per Personal banking customers: 21% remainder was accounted for by Other Small and medium-sized enterprises: 10% Sheet, the amount of the increase in the cent or € 20.0 billion to a total of € 73.1 Public sector: 2% liabilities (15 per cent) and Own funds (9 balance sheet total that was attributable billion. per cent). to changes in the scope of consolidation was negligible. Adjusted by the balance of Impairment mercial banks. Time deposits with central Deposits from customers continued to

Raiffeisen Banking Group losses on loans and advances of € 1.5 bil- banks accounted for € 4.4 billion. grow, increasing by 24 per cent or Raiffeisen Banking Group lion, Loans and advances to customers € 10.6 billion to € 55.4 billion. As a result,

Interview now accounted for over 50 per cent of Holdings of Securities and equity partici- they remained RZB’s biggest source of Interview Breakdown of Balance Sheet Assets assets on the balance sheet, or 7 percent- pations increased by 8 per cent to € 21.5 funds. Nearly 32 per cent of the abso- age points more than at year-end 2006. billion. There were minor shifts between lute increase was attributable to corpo- €bn or % 137. 4 the different valuation classes. Holdings rate customers (increase of € 7.8 billion 8% Lending to Retail Customers increased of Other current financial assets grew by to € 32.6 billion), and about 17 per cent

Management Report Management 115.6 17% Report Management

by 41 per cent, resulting in a portfo- 26 per cent as the result of an increase was accounted for by personal banking 9% lio of € 17.8 billion at year-end. Lend- in investments in fixed-interest securi- customers (increase of € 3.1 billion to 93.9 18% 52% ing to Corporate Customers grew by € 21.4 billion). 9% ties. Holdings of Securities held for trad- 19% 45% € 15.1 billion or 39 per cent to end the ing increased by 10 per cent. Holdings of Segment Segment Reports 67.9 Segment Reports year at € 53.8 billion. The larger part of Financial investments fell by 17 per cent. Time deposits grew by 30 per cent to 8% 56.1 19% 41% Loans and advances to customers was € 31.1 billion. Sight deposits increased by 12% 16% 40% attributable to customers in the Group’s On the balance sheet date, the total 18 per cent to € 23.0 billion. There was a 38% Central Europe region, namely 28 per exposure to structured products came to small drop in Savings deposits, which fell 28% 31% 23% cent of the loan portfolio. € 1,036 million, € 24 million of which was by 6 per cent to € 1.3 billion. € 38.9 billion 33% 34% in the so-called subprime segment. Over- or roughly 70 per cent of deposits came Loans and advances to banks fell by all, the proportion of the balance sheet from the CEE region. The level of cover for

Consolidated Financial Statements Financial Consolidated 2003 2004 2005 2006 2007 3 per cent to end the year at € 30.9 bil- total accounted for by securities fell from customer deposits provided by Loans and Statements Financial Consolidated Other assets Securities, equity participations lion. Most of the decline resulted from a 18 to 16 per cent. advances to customers fell by 8 percent-

Glossary Loans and advances to customers (net) cut in the volume of money market busi- age points from 84 to 76 per cent. Glossary Loans and advances to banks ness transacted with international com- Contacts Contacts 102 103 Preface Deposits from banks increased by 11 per increased slightly by one percentage Preface Equity cent or € 4.8 billion to € 48.9 billion, but point to 9 per cent. Own funds grew by the proportion of the Group’s balance nearly € 2.7 billion to € 12.2 billion. The Equity on the Balance Sheet RZB’s Earned capital — comprising Re- sheet total accounted for by Deposits from increase was due to issuances of subordi- tained earnings and Consolidated profit — Managing Board Managing banks declined further from 38 to 36 per nated debt capital and profit during the During the year under review, RZB in- increased by 21 per cent or € 766 million Board Managing cent. Austrian banks accounted for about 2007 financial year. creased its Equity by 27 per cent or to € 4,338 million, € 778 million of the in- 43 per cent of Deposits from banks (year- € 1,785 million. It thus came to € 8,422 crease being accounted for by Consoli- end 2006: 44 per cent), whereas major million on the balance sheet date (year- dated profit in the year under review. international banks outside Austria and Breakdown of Balance Sheet Equity end 2006: € 6,637 million). Most of the CEE region contributed more than and Liabilities the increase was due to profit in 2007, The remainder of the change resulted Supervisory Board’s Report half. Funding within the scope of money which came to € 1,190 million, some from various elements: The positive fac- Supervisory Board’s Report €bn or % market transactions accounted for the 137. 4 € 412 million thereof being attributable to tors were the capital increase at Raiffeis- majority of RZB’s funding base, namely 9% minorities. en International, which, taking dilution 72 per cent or € 35 billion. 115.6 15% into account, contributed a total of € 157 Overview of RZB 8% Overview of RZB Paid-in capital — comprising subscribed million. Furthermore, unrealized gains 93.9 15% 40% The proportion of total equity and lia- 7% capital and capital reserves — increased, and losses on available-for-sale financial bilities accounted for by Other equity 13% 39% after the deduction of issuing costs, by assets contributed € 16 million. and liabilities was unchanged at 15 per 67.9 34% € 157 million to € 1,329 million. This ad- 56.1 7% cent. Liabilities evidenced by paper 6% 11% vance was due to the capital increase at On the other hand, equity attributable

Raiffeisen Banking Group 15% 34% Raiffeisen Banking Group within this total, that is funding through the 36% Raiffeisen Zentralbank carried out in De- to RZB was reduced by Exchange differ- capital markets within the scope of debt 30% 46% 38% cember 2007. ences, which, netted against unrealized 48% Interview issuances, grew by 30 per cent to € 14.7 49% gains and losses on capital hedges , came Interview billion. The increase was essentially due to € 36 million. In addition, unrealized to new issuances by RZB. Breakdown of Equity gains and losses on entities accounted for 2003 2004 2005 2006 2007 using the equity method reduced equity €m or % Own funds in the broader sense 8,422 The proportion of the balance sheet total Other equity and liabilities by € 16 million, unrealized gains and

Management Report Management 33% Report Management

accounted for by Own funds, compris- Deposits from customers losses on the cash-flow hedge reduced Deposits from banks ing equity and subordinated debt capital, 6,637 equity by € 8 million, and the dividend dis- 28% tributed in respect of the previous year’s profit came to € 110 million. Segment Segment Reports 4,950 51% Segment Reports

29% 54% Minority interests in equity increased by 3,343 45 per cent or € 861 million to € 2,755 20% 50% 2,445 million. Alongside profit in 2007 attribut- 22% 49% able to other shareholders in the amount 42% of € 412 million, the principal reason for 18% 16% the increase was inpayments from other 36% 31% 21% Consolidated Financial Statements Financial Consolidated equity holders of Group members. The Statements Financial Consolidated

2003 2004 2005 2006 2007 net effect of changes in interests within the Minority interests Glossary Earned capital scope of capital increases at Group mem- Glossary

Paid-in capital bers, including in particular Raiffeisen Contacts Contacts 104 105 Preface International, was € 699 million. The cap- to new issuances of supplementary cap- open currency positions, which increased funds requirement for the banking book, Preface

ital increase at Raiffeisen International — ital. The deduction for interests held in by 37 per cent to € 219 million made up by 0.2 percentage points from 9.0 to 8.8 during which Raiffeisen Zentralbank exer- banks, other financial institutions and RZB’s total regulatory Own funds require- per cent. cised only 50 per cent of its subscription insurers increased slightly by 0.8 per cent ment. At year-end, RZB had Excess own Managing Board Managing rights — had a diluting effect of € 157 mil- to € 211 million. funds of 37.5 per cent or € 2,806 million. Because of the increase in its supplemen- Board Managing lion. Finally a dividend of € 82 was dis- The rapid growth in business volumes in tary own funds, RZB’s Own funds ratio tributed to non-Group equity holders. These Own funds compared with an Own 2007 reduced RZB’s Core capital ratio, rose from 10.8 per cent in 2006 to 11.0 funds requirement pursuant to BWG — which is measured in relation to the own per cent in 2007. which was growing steadily as a result of Regulatory own funds the Group’s rapid expansion — of € 7,491 Supervisory Board’s Report pursuant to BWG million. This was 33 per cent or € 1,839 Human Resources Supervisory Board’s Report million up on the previous year. The In the 2007 financial year, RZB made use increase in business volumes was clearly 2007 was another year of strong growth equivalents). Of this total, 1,328 people of the transitional provision regulating the reflected by a 32 per cent increase in Risk- in the workforce. At the same time, were working at Raiffeisen Zentralbank’s Overview of RZB Overview of RZB calculation of own funds requirements in weighted assets (banking book), which demand for skilled staff rose sharply in Head Office in Vienna. accordance with Basel I. totalled € 83.0 billion at year-end. the labour market, making it increasingly difficult to recruit suitable employees. As Sixty-seven per cent of RZB’s staff mem- At year-end, the consolidated Own funds The resulting own funds requirement for the before, operational human resources bers were women, as were 45 per cent of the RZB Credit Institution Group (RZB- banking book of € 6,647 million together (HR) management was carried out by of the staff at Raiffeisen Zentralbank. The

Raiffeisen Banking Group Kreditinstitutsgruppe) within the meaning with the own funds requirement for mar- local HR departments. The HR Division of average at the Network Banks was Raiffeisen Banking Group of Austria’s Bankwesengesetz came to ket risk, which increased by 35 per cent Group parent Raiffeisen Zentralbank still

Interview € 10,297 million, which was 35 per cent to € 625 million, and the requirement for has a coordinating role and ensures that Staffing on the Balance Sheet Date Interview or € 2,683 million more than the previous the Group pursues one shared HR strat- Human resources at year-end (FTE) year’s figure of € 7,614 million. Own Funds egy. It does so by issuing suitable guide- 61,351 382 lines and defining a general regulatory 55,434 28,614 €m or % 10,297 329 Core capital accounted for € 7,341 million framework. In addition, further common 27, 620

Management Report Management 46,243 Report Management

thereof, which was 30 per cent or € 1,689 standards were applied and cross-border 284 million more than in 2006. The increase HR projects carried out. 21,942 was primarily due to profit for the year 7, 614 7, 491 under review and the capital increase of

Segment Segment Reports 25,323 16,663 Segment Reports

€ 157 million (less issuing costs) carried 5,652 A growing workforce 21,119 243 13,481 5,199 3,718 out in the 2007 financial year. 238 11,834 3,079 4,463 3,282 10,292 3,097 4,120 35% During 2007, the workforce grew by 7, 241 2,431 34% 38% 12,834 11, 427 In contrast to these positive factors, move- 5,917 or 11 per cent to total 61,351 (full- 9,654 7,8 4 5 8,697 ments in exchange rates in the CEE region 27% time equivalents) on the balance sheet diminished RZB’s own funds by € 106 mil- date. All of this growth was organic. The 2,513 2,373 2,529 2,577 2,858 17% lion. Network Banks in the CEE region ac- 2003 2004 2005 2006 2007 Rest of world Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

counted for 5,196 or 88 per cent of the CIS Additional own funds increased by 2003 2004 2005 2006 2007 increase. The workforce at Raiffeisen Southeastern Europe Required own funds Central Europe Glossary 58 per cent or € 999 million to € 2,722 Actual own funds Zentralbank, including branches, increased Glossary Austria million. This was essentially attributable Excess own funds by 182 or 13 per cent to 1,598 (full-time Contacts Contacts 106 107 Preface programmes were launched in 2006 and training programme remained high dur- Preface Staffing, by Group Member New HR programmes took full effect in 2007. Assessment centre for Group Leaders ing the year under review. Since RZB is During the year under review, RZB devel- an internationally active and networked Performance Management oped an assessment centre (AC) for future enterprise, most of the training courses Managing Board Managing The Performance Management Process Group Leaders. A Group or Team is the are held in English, which is the Group’s Board Managing was developed out of the Management smallest organizational unit at RZB. The official language. by Objectives Process. It was fully imple- ACs are designed to gauge where a staff mented for the first time during 2007. The member stands at the very beginning of Employees at Raiffeisen Zentralbank intention of performance management his or her management career. ACs are spent an average of 4.7 working days in is to ideally coordinate corporate goals followed up by a Basic Leadership pro- training during the 2007 financial year. Supervisory Board’s Report and individuals’ targets. The process also gramme based on the Group’s proven Supervisory Board’s Report includes transparent goal-setting, regular Group Leader course, which hones key Seventy per cent of the staff at Raiffeisen Raiffeisen Zentralbank and other: 4% feedback and acknowledgement of per- leadership skills. Zentralbank took part in at least one Raiffeisen International, Central Europe: 21% formance, an objective system for evalu- course during the year under review. At Overview of RZB Raiffeisen International, Southeastern Overview of RZB Europe: 26% ating individual performance and a clear International Acceleration Pool the Network Banks, this figure averaged Raiffeisen International, CIS: 49% relationship between further development RZB began developing an International 3.6 days in a range of between one work- and reward. Acceleration Pools to give motivated top ing day (Russia) and nearly seven work- performers in all Group units easier access ing days (Slovakia, Poland). 69 per cent in a range of between 47 per Additional enhancements were imple- to international career paths.

Raiffeisen Banking Group cent in Kosovo and 78 per cent in Croatia mented following extensive management In addition to outward postings to other Raiffeisen Banking Group and Romania. training and analysis of the initial results Group units lasting several years, brief

Interview and feedback from interviews. Personnel development training visits have also proven very Interview The low average age of staff remains an worthwhile. Besides facilitating the shar- RZB trademark. It has stayed this low Expert career track The outstanding professional and per- ing of banking skills, the resulting encoun- because of the bank’s vigorous growth The Expert Development Programme sonal qualifications of RZB’s staff are key ters also — and above all — help foster the and intensive recruiting work in recent (EDP) was successfully launched. It spe- to its exceptional quality of service and continuing development of a shared cor- Management Report Management Report Management

years. cially trains Experts and Professional give the Group its decisive competitive porate culture and the evolution of pro- Experts for their roles. Another important edge. Personnel development is therefore ductive networks within the Group. The average age of the workforce at Raiff aspect of the programme is improving net- a high priority for RZB. Because a large eisen Zentralbank was 36, and the aver- working and the exchange of experience proportion of the people working for RZB Making it easy to combine working with Segment Segment Reports Segment Reports

age within the banking network in the between experts. are university or college graduates, per- having a family is a particularly important CEE region was low by industry standards sonnel development work can build on aspect of RZB’s HR policies. At Raiffeisen at 34. A member of staff at Raiffeisen “Young Professional excellent initial qualifications. Specifi- Zentralbank, this is, above all, achieved Zentralbank had an average period of Potentials” (YPPs) cally, 56 per cent of employees at Raif- with the help of flexible working hours. service of slightly over 6 years. The YYP programme is designed specially feisen Zentralbank are university or col- for young staff-members aged between lege graduates, and the average at the In addition to flexitime, employees in 25 and 30 who have been identified as Network Banks in the CEE region is 71 Vienna have also been able to opt for

Consolidated Financial Statements Financial Consolidated per cent. part-time and teleworking models for a Statements Financial Consolidated HR programmes having special potential. The programme was launched in 2007 and completed its number of years. 10.6 per cent of the

Glossary The results of the staff survey carried out first cycle in the year under review. The ini- The number of people wanting to par- workforce were working part-time in Glossary in 2005 were very positive. Three new HR tial results have been positive. ticipate in the Group-wide management 2006. Contacts Contacts 108 109 Preface Preface

University and College Graduates at Raiffeisen Zentralbank and the Information Technology Network Banks, by country The main focuses of RZB’s IT management region. Launches of further new products 88% 85% activities during 2007 were payments are already planned for 2008 to provide Managing Board Managing 81% services, Basel II, trading systems and easier access to the Group’s cash manage- Board Managing 77% 77% 76% the standardization of IT systems within ment services in the CEE region. 69% 66% the Group. 61% 56% Basel II 49% 49% Increasing differentiation in

Supervisory Board’s Report 42% 42% Supervisory Board’s Report 40% the payment services field 2007 was a year of comprehensive integration tests and data quality offensives 24% RZB’s active role in European payments designed to achieve an effective inter- traffic within the Single Euro Payment Area play between the data warehouse’s risk Overview of RZB Overview of RZB (SEPA) was underscored by the success- management application and the Group’s RaiffeisenZentralbank Poland Ukraine Bulgaria Albania Romania Belarus Hungary Kosovo Russia Republic Czech Slovakia and Bosnia Herzegovina Serbia Croatia Slovenia ful launch of its first SEPA product — SEPA banking applications. Approval by the Credit Transfer — at the beginning of 2008. regulatory authorities is currently pending.

The company kindergarten with its particu recruiting activities outside Austria’s bor- Other products, namely SEPA Direct

Raiffeisen Banking Group larly employee-friendly opening hours is very ders last year. The Group visited fairs at Debit, SEPA Beleg (statements) and Prior- Continuing rollout of the Raiffeisen Banking Group popular with Raiffeisen Zentralbank staff. major universities in Italy, France and Eng- ity Payments, are at an advanced stage of treasury trading system

Interview land to establish Raiffeisen Zentralbank development. Moreover, RZB successfully Interview as an attractive employer. In addition, it planned the migration of 15 national real- The ongoing rollout of the Global Trea- Recruitment began developing alliances with these uni- time gross settlement systems to Europe’s sury System (GTS) at the Network Banks versities that will allow students, among shared Target 2 platform during the peri- and branches continued to go well in Responding to the growing internation- other things, to complete traineeships at od under review. Production began in 2007. The expansion of operations at Management Report Management Report Management

alization of the banking industry, Raiff RZB. This cooperation is to be deepened November 2007. RZB’s London branch was supported by eisen Zentralbank further extended its and extended to Germany and Spain. the installation of the GTS Securities mod- Accompanying further centralization of ule, and the Raiffeisen Bank S.A., Bucha- RZB’s liquidity management activities, the rest, project was successfully complet- Segment Segment Reports Segment Reports

requisite number of account relationships ed. In addition, the system’s rollout at Raiff was minimized. In addition, major new eisen Bank Zrt., Budapest, began. features were added to Cash Manage- ment International, which is one of the mar- The Global Treasury System is now in ket’s most extensive Web-based electronic operation at the London and Singapore banking packages for multinational corpo- branches and in Russia, Croatia and Ro- rate customers and financial institutions. mania. Further installations are planned

Consolidated Financial Statements Financial Consolidated for years to come. The projects that have Statements Financial Consolidated

Supplementing these activities, RZB been successfully completed have not

Glossary launched a flexible, central conversion solu- just been a technical leap forward for Glossary tion for all payments in Austria and the CEE the banks that are connected to the sys- Contacts Contacts 110 111 Preface tem. They have also created the prereq- operational risk) and RZB’s risk manage- lations as well as the risk-orientated allo- Preface Ongoing IT standardization uisites for the continuing implementation ment structure (page 252). cation of remits. of the Group’s Global Treasury business RZB completed projects connected with ■ Conservative allowances for impair- strategy. the implementation of a Group-wide man- ment risks: Impairment provisions are Managing Board Managing agement information system in Poland Risk management principles created conservatively. In particular, im- Board Managing and Hungary and launched similar proj- pairment provisions for corporate loans Extending trading system ects in other countries. The Standard Col- Risk management is an integral part of are created on a case-by-case basis. support lection System was rolled out in another RZB’s overall bank management proce- Network Bank, and implementation of dures. For this purpose, RZB has an ex- A new commodities application feature the new Loan Application Processing Sys- tensive system of risk principles and pro- Risk position Supervisory Board’s Report was introduced to support business devel- tem was completed in a number of Net- cedures in place for measuring and mon- Supervisory Board’s Report opment in the trading environment. Numer- work Banks and begun in several others. itoring risk. Its aim is to control and man- A number of developments kept the inter- ous system enhancements were carried out The core banking systems of the Network age risks at all banks and specialist com- national financial markets in suspense dur- to allow the more precise assessment of Banks were enhanced through the release panies within the RZB Credit Institution ing 2007. While the economies of RZB’s Overview of RZB Overview of RZB any risk. Extended system functions were of new software versions and the addition Group. This is done with the help of ap- home markets performed well, the inter- introduced to automate the management of new functions. In the core systems field, propriate organizational structures. The national picture was more varied. of netting agreements and monitoring of implementation of the new version of the underlying risk policies and risk manage- mutual compensatory payments. Midas Plus banking system was success- ment principles are laid down by the Man- Volatile equity markets and rising short- fully completed in New York and begun in aging Board of Raiffeisen Zentralbank. term interest rates dominated events in

Raiffeisen Banking Group RZB continued to extend its existing ser- the Ukraine and Russia. Furthermore, work the first half. In the second half, they were Raiffeisen Banking Group vice platform for custody customers. One began on the development of a banking ■ Relevant risk categories: As the main dominated by the liquidity squeeze and

Interview main focus was the personalized delivery system hub for RZB’s business outlets in risk categories, credit, country, market, rising risk premiums in the money markets. Interview of information about corporate actions. Singapore, Beijing and New York. liquidity and operational risks are managed on a Group-wide basis. RZB’s outstanding position in its growing ■ Homogeneous methodologies: markets and its application of risk manage- Risk Management Homogenous methods of risk assessment processes to suit conditions in those Management Report Management Report Management

ment and risk limitation are applied to markets were reflected by this year’s up- RZB’s banking operations in the CEE mar- account in particular the nature, scale and ensure a consistent and coherent ap- grading of Raiffeisen Zentralbank’s long- kets, where levels of market maturity differ, complexity of RZB’s business activities. proach to risk management. term Moody’s rating to Aa2. rely on the highly developed risk manage- ■ Continuous planning: Risk policy is re- Segment Segment Reports Segment Reports

ment skills of Raiffeisen Zentralbank. The The key tasks within this process are to en- viewed and approved in the course of Credit risk members of the RZB Credit Institution sure the continuous quantification and limi- the annual budgeting and planning pro- In the case of credit risk, which is RZB’s Group (Kreditinstitutsgruppe) are perma- tation of the risks that have been incurred cess, special attention also being paid biggest single risk category, the benign nently integrated into risk management and their ex ante and ex post manage- to risk concentrations. economic environment during 2007 led processes. ment within the scope of day-to-day busi- ■ Independent control: There are clear to another fall in risk costs. Loss rates were ness operations. personal and functional firewalls be- lower than ever before, so despite the As a result, the Group’s future growth tween business operations and all risk rapid development of RZB’s retail banking

Consolidated Financial Statements Financial Consolidated will also be taking place on a risk-aware The Notes to the Consolidated Financial operations in the CEE region, provisioning Statements Financial Consolidated management and controlling activities. basis. Active risk management is one of Statements contain a detailed overview ■ Calculations before and after the fact: for impairment losses grew by less than

Glossary RZB’s core responsibilities. In addition to of the various risk categories (credit risk, Risks are consistently captured within lending throughout the Group. Glossary regulatory requirements, it also takes into country risk, market risk, liquidity risk and the scope of ex ante and ex post calcu- Contacts Contacts 112 113 Preface One of the material risks that affects RZB securitized loan products with great cau- functions at Raiffeisen Zentralbank were had already been put in place in prior Preface

is connected with economic growth in the tion and within manageable limits. united under his control. years. The result was the introduction of CEE markets and the associated political a comprehensive risk management frame- risk. The Central and Eastern European RZB’s exposure in the US subprime seg- Following this optimization of the Group’s work that subdivides the various domains Managing Board Managing countries continued to record much higher ment came to about € 24 million. It did risk management structure, Strobl is the (e.g. organization, portfolio management Board Managing rates of growth than Western Europe in not hold any off-balance-sheet special central point of contact for every area of and fraud prevention) into three levels 2007, and continuing improvements and investment vehicles (SIVs) or conduits for risk management within the Group. He of complexity. At the top level, general stabilization in this economic area were the short-term funding of long-term obliga- is increasingly moving Group-orientated, guidelines and concepts are prescribed reflected by the positive outlooks given to tions. active portfolio management — including centrally. The activities of the local risk all those countries in the international rat- above all management of the loan portfo- management units (including, in particular, Supervisory Board’s Report ing agencies’ country ratings. Nonethe- Liquidity risk lio — to centre stage. product introduction, scorecard validation Supervisory Board’s Report less, these emerging markets could react The general tightening of liquidity in the and reporting) are monitored at the sec- more strongly to a deterioration of the capital markets had little effect on RZB’s Active management of the ond level, and likewise centrally. Finally, at global economy or local problems in indi- funding operations in 2007. Nonetheless, loan portfolio the third level, concepts are put into effect Overview of RZB Overview of RZB vidual countries. tighter liquidity did increase funding costs, RZB’s expected future growth will neces- within individual Group units. and this gradually knocked on to the inter- sitate a continuous increase in capital Among other things, the foreign-currency nal prices charged to customers. resources and the raising of additional liq- The programme continued in 2007 with loans that are popular among retail cus- uid funds. Mobilizing assets is an impor- a particular focus on managing portfolio tomers in the region are creating risks If the liquidity squeeze lasts and liquidity tant part of reducing regulatory and growth. In addition, the forecasting qual-

Raiffeisen Banking Group by exposing borrowers to currency costs continue to rise, a general slowdown internal capital requirements at Group ity of the key performance indices was Raiffeisen Banking Group risk. Depreciation of a local currency in RZB’s markets is to be expected. level. Securitizing assets reduces equity subjected to continuous analysis and the

Interview diminishes borrowers’ ability to repay requirements at the same time as making it revised Basel II concepts were put into Interview loans and often leads to an increase in Operational risk easier to manage liquidity and risks. effect in conjunction with extensive instruc- loss rates. In the interests of prudent lend- The major challenge when one is manag- tions for individual network units with a ing, the Bank therefore always imposes ing operational risks is to improve settle- Consequently, RZB stepped up its expen- view to achieving approval of the Group’s higher collateral requirements and insists ment processes and procedures and com- diture on active management of the loan internal rating based (IRB) approach. Management Report Management Report Management

on a lower level of indebtedness in rela- bat fraud both inside and outside the orga- portfolio during 2007, the aim being to tion to a borrower’s available income. nization. Risk events are either recognized achieve the efficient and cheap manage- Basel II directly as losses in the Income Statement ment of transactions undertaken by RZB, 2007 also saw further development of Market risk or, for instance, in the case of litigation, by as originator, to secure its assets. the Group’s risk management infrastruc- Segment Segment Reports Segment Reports

Despite more volatile markets, RZB’s mar- creating provisions for probable losses. ture as a basis for implementing the ket risk remained much less important The success of this investment and the qual- revised regulatory standards introduced than its credit risk. Market risk is reflected ity of the loan portfolio were demonstrated by Basel II. This process was completed directly by changes in the prices of secu- Risk management initiatives by the fact that, despite difficult market for the time being at the end of 2007 fol- rities. In 2007, considerably wider credit conditions, RZB was able to successfully lowing the expiry of the transitional provi- spreads and other changes in interest rates In October 2007, Johann Strobl joined complete one of the biggest-ever securiti- sions. Further action to implement Basel II caused another perceptible drop in unreal- the Managing Board of Raiffeisen Zentral- zations in Russia in 2007. will be taken in connection with the pro-

Consolidated Financial Statements Financial Consolidated ized gains on financial instruments in RZB’s cess of obtaining approval for RZB’s IRB Statements Financial Consolidated bank in the newly created post of Chief trading and investment books. While RZB Risk Officer (CRO). During the rearrange- Retail risk management approach, which has already begun, and

Glossary continued to force the pace of its activ- ment of remits that accompanied his An extensive programme created to refine the implementation of separate models for Glossary ities as an originator, it only invested in appointment, all credit risk management RZB’s retail risk management activities other risk categories. Contacts Contacts 114 115 Preface Besides systematically assessing such have few direct economic ties, allowance However, given the anticipated increase Preface

Business processes Operational risk remains an important risks, RZB is working on the development must be made for the indirect knock-on in inflation, real wages are likely to grow focus. The careful examination of business of further qualitative and quantitative ear- effects of a weaker US economy on third by slightly less in 2008 than in 2007. In processes and operational procedures ly-warning indicators and suitable preven- countries. addition, the price of personal loans will Managing Board Managing led to a series of enhancements during tative measures to help it guard against increase as a result of higher funding costs Board Managing the year under review. risks. Following its best year since 1999, Aus- in the banking industry. tria can therefore be cautiously optimistic about 2008. In the wake of growth of 3.4 On the other hand, a slowdown in pri- Outlook for 2008 per cent in 2007, its economic growth can vate demand in a number of countries be expected to slow to 2.5 per cent in the in Southeastern Europe, where the credit Supervisory Board’s Report The poor mood in the financial markets violent movements than the US Federal current year. boom triggered a big increase in cur- Supervisory Board’s Report in the second half of 2007 lasted into the Reserve. Even so, the cyclical slowdown rent account deficits, may have a posi- early months of 2008. While players in should restrain inflation enough to give tive impact when it comes to sustainable the financial markets were plagued by the ECB some leeway to cut interest rates. Slightly slower growth in medium to long-term economic growth. Overview of RZB Overview of RZB fears of recession, there was considerably Central and Eastern Europe more confidence in the eurozone’s devel- We expect its key rate to be cut by 50 Furthermore, in the past, the Central opment in the real economy. basis points by mid-year. If the uncer- Following record rates of growth during and Eastern European economies have tainty in the financial system persists and the past two years, the Central and East- already demonstrated their ability to For instance, survey results at the beginning risk premiums stay unusually high, anoth- ern European economies are likely to cool escape the detrimental effects of a tempo-

Raiffeisen Banking Group of the current year were much better than er rate cut of 25 basis points to 3.25 per off a little in 2008. Real GDP in the CEE rary economic slowdown in the eurozone. Raiffeisen Banking Group had generally been expected. Indeed, im- cent may take place in the third quarter. region having grown by 6.8 per cent in

Interview portant European business climate indices 2007, robust growth of 5.3 per cent is still Consequently, the pace of the catch-up Interview like Germany’s Ifo Index, rose. expected this year. process in the region should be maintained Cautious optimism despite weaker consumer demand. Sub- Nonetheless, a weaker global economy, about Austria Growth is likely to be weaker because the sequently, continuation in the medium term the relatively strong euro, high commodi- peak of the business cycle has probably of the real and, in part, nominal apprecia- Management Report Management Report Management

ty prices and, above all, a restrictive finan- During the first half of 2008, Austria been passed. Moreover, the economic tion of the Central and Eastern European cial environment that is affecting compa- should continue to profit from the econo- slowdown that is being predicted for the currencies should be assured. nies and consumers alike will burden the my’s momentum in 2007, at least partly eurozone could also have an impact in European economy. bucking the international trend. This as- this region. Segment Segment Reports Segment Reports

sumption is based on indicators like levels A sustained growth path Against this background, the expectation of incoming orders and the positive mood Besides foreign demand and investment is that the eurozone will lose some momen- in the Austrian corporate sector. by the corporate sector, private consump- As in prior years, the sustained catch- tum but will not suffer a slump or reces- tion began to make an increasingly impor- up process in the CEE region will have sion. As things stand at the moment, we However, Austria too can expect rougher tant contribution to economic growth in the a decisive impact on RZB’s business per- expect average GDP growth of 1.6 per times. Not only is the eurozone economy CEE region last year. formance in 2008. RZB’s strategic posi- cent in the eurozone. likely to cool off considerably, with GDP tioning as one of Austria’s leading corpo-

Consolidated Financial Statements Financial Consolidated growth of 1.6 per cent being forecast for It was stimulated by rising employment, Statements Financial Consolidated

rate banks and its intensive and broadly The European Central Bank (ECB) is 2008. The signals coming from the US faster wage growth and a sustained based activities as a so-called universal

Glossary steering its way through the present turbu- give little reason to expect stimulus from strong advance in lending to private indi- bank in the CEE region combined with the Glossary lence in the financial markets with less that quarter. Even if Austria and the US viduals. high proportion of its business activities Contacts Contacts 116 117 Preface accounted for by retail banking activities In the Group’s growth markets, this will go ing Group in 2007. It will commence oper- Preface Raiffeisen Factor Bank make it more resistant to present uncertain- hand in hand with the active acquisition of commences operations ations at the beginning of April 2008. ties in the international financial markets. market shares so as to secure the Group’s profitability on a sustained basis. Raiffeisen Zentralbank set up Raiffeisen This company will reinvigorate the Aus- Managing Board Managing RZB will remain on its growth path Factor Bank AG in cooperation with Raiff trian factoring market, Raiffeisen Zentral- Board Managing and is likely to grow more strongly As in prior years, Profit before tax is eisenlandesbank Niederösterreich-Wien bank having sold its minority stake in Fac- than its competitors. We expect roughly expected to show close to double-digit and other members of the Raiffeisen Bank- tor Bank AG in 2007. double-digit growth in our balance sheet growth in 2008. Because of the capital total. We will continue to systematically increases carried out in 2007, RZB’s Return follow the same successful course as in the on equity is likely to be roughly static on Supervisory Board’s Report past, focusing on qualitative growth and the previous year despite higher profit. Supervisory Board’s Report the achievement of adequate profits.

Overview of RZB Material Events After the Overview of RZB Balance Sheet Date

Vehicle leasing securitization Iceland and Switzerland — have agreed

Raiffeisen Banking Group successfully placed on one, shared process. Raiffeisen Banking Group

Interview In January 2008, Raiffeisen-Leasing Pol- The extensive preparations for SEPA at Interview ska S. A. successfully completed the issu- RZB lasted for more than three years. RZB ance of its “ROOF Poland 2008-1” motor was ready for the launch from the summer vehicle leasing securitization worth a of 2007, and it began telling its customers billion Polish zloty (roughly € 280 mil- about SEPA back in the first half of 2007. Management Report Management Report Management

lion). This was the year’s first such issu- SEPA’s inauguration at RZB went corre- ance in the CEE region. spondingly smoothly. RZB’s SEPA-Über- weisung (SEPA Transfer) service is the first Given persistent turbulence in the market, product for the single European payments Segment Segment Reports Segment Reports

the issuance was a remarkable success. area to be available to Raiffeisen customers in both the ELBA-Internet and ELBA- Business digital banking applications. SEPA gets off to a good start Further SEPA products like Raiffeisen The Single Euro Payments Area (SEPA) be- SEPA-Einzug (collections), its new SEPA- came reality on 28 January 2008. Thirty- Beleg product (statements) and Raiffeisen

Consolidated Financial Statements Financial Consolidated SEPA-Eilüberweisung (express payments) Statements Financial Consolidated

one countries in Europe — all the EU member states as well as Liechtenstein, Norway, will follow before the end of this year. Glossary Glossary

Contacts Contacts 118 119 Preface - +(-) Preface Segment Reports €k 2007 2006 Change Net interest income 966,077 702,663 37.5% Provisioning for impairment losses (90,851) (147,652) (38.5%) Managing Board Managing Board Managing The basis for primary segment reporting The customer segments upon which RZB Net interest income after provisioning 875,227 555,011 57.7% within the meaning of IAS 14 is RZB’s inter- reports are to be found as organiza- Net commission income 488,536 413,865 18.0% nal management reporting system. RZB’s tional units in the organizational charts Trading profit 21,314 21,136 0.8% primary segment reporting takes place of all material Group units. In addition, along customer segment lines. Customer Proprietary Trading is also a reporting Net income from derivative financial segmentation at RZB takes place as fol- segment. instruments 319 440 (27.5%) Supervisory Board’s Report lows: Net income from financial investments Supervisory Board’s Report At a secondary reporting level, income and current financial assets 737 1,164 (36.7%) ■ Corporate Customers and costs are segmented according General administrative expenses (555,530) (454,028) 22.4% ■ Financial Institutions and Public Sector to geographical origin (Austria, Cen- Other operating profit 17,023 27,527 (38.2%) Overview of RZB Overview of RZB ■ Retail Customers tral Europe, Southeastern Europe, CIS, Profit before tax 847,626 565,116 50.0% ■ Proprietary Trading Other). Detailed comparisons are pro- Segment’s contribution to profit before tax 57.1% 43.9% 13.2 ppt ■ Participations and Other. vided from page 170. Basis of assessment (including market risk) 39,747,699 29,060,851 36.8% Average number of staff 8,642 8,311 4.0%

Raiffeisen Banking Group Corporate Customers Cost/income ratio 37.2% 39.0% (1.8 ppt) Raiffeisen Banking Group Average equity 2,839,521 1,979,168 43.5%

Interview The Corporate Customers segment en- per cent. The growth in profit was driven Return on equity (before tax) 28.8% 26.8% 1.9 ppt Interview compasses business with Austria’s “Top by a 28 per cent increase in Operating 1,000” enterprises, multinational groups income — including in particular a 38 per and medium-sized and large companies cent advance in Net interest income — to sible to reverse € 51 million of loan loss Raiffeisen Zentralbank’s Gross earn- in Central and Eastern Europe (the CEE € 1,493 million and by a disproportion- provisions (following an allocation of € 45 ings (net interest income, net commission Management Report Management Report

region). This segment also includes smaller ately small increase in General adminis- million in 2006). income and trading profit) from business subsidiaries of larger enterprises and profit- trative expenses of 22 per cent to € 556 with customers serviced from Vienna rose orientated state-owned enterprises. The million. The result was another improve- by nearly 12 per cent to € 263.7 million. small corporate customers serviced by the ment in the segment’s Cost/income ratio of Record profit in the Corporate Segment Reports Segment Reports Segment

Network Banks are included in the Retail 1.8 percentage points to 37.2 per cent. Customers segment This increase was primarily attributable to Customers segment. three factors: Firstly, the demand for credit The segment’s low Provisioning for impair- Raiffeisen Zentralbank’s earnings from in 2007 was up on the previous year. Sec- Corporate Customers is the Group’s ment losses of € 91 million was another business with Austrian and foreign corpo- ondly, Raiffeisen Zentralbank continued largest business segment. Although RZB contributing factor. The healthy state of rate customers continued to outstrip the to enlarge its customer base. Finally, it faces very tough competition in this seg- the economy and strict risk management market average. Once again, the prin- stepped up its cross-selling activities. ment, its Profit before tax grew by € 848 helped keep it low. The result was an cipal reason for their strong growth was

Consolidated Financial Statements Financial Consolidated million. Since profit grew by more than excellent Risk/earnings ratio of 9.4 per This segment’s average Risk-weighted Statements Financial Consolidated

brisk investment activity on the part of cus- the equity allocated to this segment, its cent. The improvement was, above all, tomers. Specifically, the growth in RZB’s assets continued to grow strongly to end

Glossary Return on equity again increased, advanc- attributable to RZB’s Corporate Customer operations in Central and Eastern Europe 2007 up 20.8 per cent to € 13.17 billion. Glossary ing by 1.9 percentage points to 28.8 operations in Austria, where it proved pos- was unbroken. Contacts Contacts 120 121 Preface modity risk hedging and hybrid bonds as many. Since the representative office Preface Gross Earnings from Corporate Average RWAs: Corporate Customers Serviced from Vienna well as additions to the line through RZB’s Customers Serviced from Vienna in Frankfurt opened in 2005, RZB has founding of and investment in Raiffeisen acquired more than 100 new customers €m €bn Factor Bank AG. in the German medium-sized enterprise Managing Board Managing 263.7 13.2 sector. Board Managing 236.6 10.9 Developments in the financial markets since 202.8 Multinational corporate customers mid-2007 have caused a sharp rise in the 176.5 8.8 168.7 cost of financing large transactions. None- 7.8 Raiffeisen Zentralbank’s Multinational 7.6 theless, even in these turbulent times, RZB Supervisory Board’s Report Corporate Customers Division handles has been able to successfully place the Supervisory Board’s Report business with enterprises operating in financial instruments associated with such the CEE region whose Head Offices are transactions in the CEE region. One typi- located outside Austria. When servicing cal example was the € 16.2 billion acquisi- Overview of RZB Overview of RZB these enterprises, it is particularly impor- tion finance loan floated to pay for the take- tant to offer them services that help them over of Hanson Plc by HeidelbergCement, 2003 2004 2005 2006 2007 operate across national borders. As the 2003 2004 2005 2006 2007 Germany. Raiffeisen Zentralbank par- bank with the greatest product depth and ticipated in the syndicate as Mandated largest number of baking outlets in the Lead Arranger. Moreover, RZB brought its

Raiffeisen Banking Group Austrian corporate customers CEE region, RZB is a popular supplier to in international markets, having been strong local presence in the CEE region to Raiffeisen Banking Group these customers. arranged in close cooperation with local bear when it arranged the technical imple-

Interview Raiffeisen Zentralbank commissioned Raiffeisen Banks. Industrial extension and mentation of a cash management solution Interview Schwabe, Ley und Greiner to carry out The pace of growth of enterprises in the modernization projects were one impor- in 12 Central and Eastern European coun- a customer satisfaction survey in the first construction, car and consumer product tant focus. They were often arranged with tries for Germany’s Beiersdorf AG. half of 2007. As the survey showed, the industries and wholesaling and retailing the help of local export credit agencies proportion of very satisfied and satis- in the CEE region is particularly appar- (ECAs). Management Report Management Report

fied customers already came to 96 per ent in this sub-segment. A few years ago, RZB in Asia and the cent. The fact that the proportion of very this growth was driven by low-wage pro- In recent years, internationally orien- United States satisfied customers had risen from 43 to duction, but in recent years, sales oppor- tated medium-sized enterprises have also 59 per cent since 2005 underscored the tunities in the CEE region have become an grown in importance. This has been the 2007 was a good year for RZB’s Asian Segment Reports Segment Reports Segment

quality of RZB’s advisory services. These increasingly important factor. case, for instance, in Scandinavia, whose branches in Beijing and Singapore. Despite results confirmed RZB’s positioning as the economies have, thanks to their proximity greatly increased competition from both corporate bank with the greatest exper- RZB helps both companies from Central to the growth regions within Central and Chinese and foreign banks, RZB’s Beijing tise in every area of banking. and Eastern Europe and Western enter- Eastern Europe, benefited more than oth- branch was able to stand its ground. Con- prises expand in these growth markets. In ers from these markets’ successful develop- ditions in China became tougher when For Raiffeisen Zentralbank’s customers, it particular, customers benefit from the ment. RZB’s representative office in Stock- macroeconomic restrictions and more strin- is important to be able to chose from the RZB Network Banks’ strong presence in holm, opened in 2006, also stepped up gent credit regulations were put into force

Consolidated Financial Statements Financial Consolidated broadest possible line of products. RZB the CEE region. During the year, finan- its offerings of RZB’s services for medium- to cool off the overheated economy. Nev- Statements Financial Consolidated

therefore continued to enlarge its line in cial instruments issued to finance direct sized enterprises. Medium-sized enter- ertheless, because business developed

Glossary 2007, supplementing it with products like investments and corporate mergers and prises were likewise at the centre of RZB’s well in local-currency terms, the branch’s Glossary top-down receivables purchasing, com- acquisitions were successfully placed efforts to acquire new customers in Ger- earned income grew. During 2008, RZB Contacts Contacts 122 123 Preface plans to open another branch in Xiamen Preface Average Risk-Weighted Assets: Managing commodity risks New Business and Export Loans and a representative office in Harbin. Trade Finance Outstanding In 2007, Raiffeisen Zentralbank launched €m €m The Singapore branch performed simi- a new project to help customers who 5,823 Managing Board Managing larly well as RZB stepped up local sales of 1,145 are particularly dependent on commodi- Board Managing 5,005 structured products. The core business seg- ties. Commodities can be affected by vio- ments of RZB Finance LLC, New York, are lent movements in prices, so they often trade and corporate finance. In the hotly have a decisive impact on a company’s contested US market, RZB is also pressing 771 profits. After in-depth analysis and assess- 680 ahead with the development of business ment of its commodity risks, RZB works 2,990 2,880 Supervisory Board’s Report operations in Latin America. with the customer to develop a hedging Supervisory Board’s Report 487 481 2,060 solution that is precisely tailored to the par- 1,9061,855 1,600 ticular enterprise. Strong in trade finance 845 Overview of RZB Overview of RZB This risk management approach uses for- 155 RZB’s activities in the structured trade ward transactions (swaps) and option finance field have long since spread far 2003 2004 2005 2006 2007 strategies. Since hedges are financial con- 2003 2004 2005 2006 2007 New business beyond its home markets. In recent years, tracts, physical delivery of the particular Loans outstanding Asia has become an increasingly impor- commodity cannot take place.

Raiffeisen Banking Group tant additional sales market, and trade In addition to classical commodities like Raiffeisen Banking Group finance in the United States is also a key oil, oil products, metals, coal, coke and

Interview segment for RZB Finance LLC. fertilizers, transactions in the renewable Export finance: continuing Project and acquisition finance Interview fuels (e.g. biodiesel) and soft commodi- growth Commodity markets were extremely vol- ties segments also became increasingly As in prior years, Raiffeisen Zentralbank atile last year, pushing prices up to all- important. During the financial year under As in prior years, there were sizeable played a leading role in numerous proj- time highs. Despite this, Raiffeisen Zen review, RZB mainly focused on developing increases in both new business volumes ect and acquisition finance transactions Management Report Management Report

tralbank was able to reinforce its leader- customer relationships with manufacturers and loans outstanding in the export during 2007. Geographically, transac- ship as a settler and financier of commod- and processors, but it also stepped up its finance field. Raiffeisen Zentralbank’s tions with a Central and Eastern European ity trades in Austria and the CEE region trade and transport finance activities. export loan portfolio thus grew by another connection dominated. Long-standing cus- and increase its markets share in Asian 16.4 per cent. tomer relationships and in-depth familiar- Segment Reports Segment Reports Segment

markets. RZB’s risk-weighted assets in the trade ity with the market were particularly impor- finance field grew from € 771 million As for products, the focus in the 2007 tant contributors to the Group’s success in Raiffeisen Zentralbank won a particularly at year-end 2006 to € 1,145 million at financial year was on investment and the corporate finance field in the difficult large number of syndicated loan man- the end of the period under review. This acquisition finance, financial loans and market conditions that prevailed during dates in the metallurgy sector, not least translates into growth of over 48 per soft loans. The geographical focuses were the year under review. thanks to its long-standing and excellent cent. Despite serious erosion of margins the CEE region and, above all, the countries relations with primary producers in the in the CEE region and the unfavourable of Southeastern Europe. The principal soft The financing of the truck toll system for

Consolidated Financial Statements Financial Consolidated CEE region. In all, they topped € 6 billion rate of exchange between the euro and loan targets were China, Vietnam and the the Czech motorway system realized by Statements Financial Consolidated

for the first time. the US dollar, gross earnings advanced Philippines. Kapsch Traffic Com AG was one par-

Glossary by another 6 per cent. ticularly interesting project. Raiffeisen Glossary

Contacts Contacts 124 125 Preface Zentralbank and two other banks ar- cent of the total Central and Eastern Euro- commercial property finance sector, set- RZB’s Cross Border Zero Balancing ser- Preface

ranged finance totalling CZK 2.6 billion pean syndications market, which grew to ting another record. The main geographi- vice offers the customer international (roughly € 93 million) for this project. USD 127 billion in 2007. Most of the mar- cal focuses of its activities were its home liquidity management without value date ket’s growth occurred in Russia (USD 79.9 markets in Austria and the CEE region, but losses. The key feature of this form of Managing Board Managing In February 2007, Raiffeisen Zentralbank billion), Kazakhstan (USD 8.6 billion) and it also significantly increased its activities pooling is that accounts no longer have Board Managing and other international banks signed a the Ukraine (USD 5.7 billion). in Western Europe and North America to be held at one bank or a group of finance agreement worth USD 275 mil- d u r i n g 20 07. banks. Every bank that is willing to sup- lion for Severstal North America — the Successes in Austria … port the system can be included. fourth-largest integrated steel company Although the market had been harmed The spotlight in business terms was on the in the United States — which is a wholly by the US property crisis and its after- financing of residential and commercial With the launch of CMI@Web, RZB cre- Supervisory Board’s Report owned subsidiary of OAO Severstal in math, Raiffeisen Zentralbank won a properties, offices, shopping centres and ated an Internet-based product for the Supervisory Board’s Report Russia. Raiffeisen Zentralbank acted as series of (joint) lead management man- hotels. One special focus was the financ- transmission of transactions and account Mandated Lead Arranger of the deal dates for Austrian corporate bond issuing of retirement and care homes, includ- information. This electronic banking solu- alongside two other banks. The signifi- ances. The largest syndicated bonds ing for instance a portfolio transaction in tion offers customers way of managing Overview of RZB Overview of RZB cant feature of this transaction is that RZB in Austria were issuances by Klausner Germany with a volume of € 300 million. accounts around the world and accessing was helping a customer from the CEE Vermögensverwaltungs GmbH, worth account information around the clock. region expand in the West. € 125 million with a maturity of seven Raiffeisen Zentralbank arranged 62 prop- years, by Allgemeine Baugesellschaft – erty finance transactions, 42 of which took CMI@Web’s modular design allows the In this field, Raiffeisen Zentralbank co- A. Porr AG, worth € 70 million with a place abroad. It also gained a foothold in simple creation or importing of payment

Raiffeisen Banking Group financed eight loans with the European maturity of 5 years, and by STRABAG SE, the North American project finance mar- orders for the intended countries. Both Raiffeisen Banking Group Bank for Reconstruction and Develop- worth over € 75 million. ket with a series of hotel, residential and domestic and foreign payments and inter-

Interview ment (EBRD), again making Raiffeisen logistical property finance transactions national transfers between accounts can Interview Zentralbank the EBRD’s most active proj- … and in the CEE region in the US and Canada. Both the Trump therefore be carried out online. ect co-financing partner, followed by a One of the year’s most successful trans- Tower deal in Toronto, which caught the major French bank and a major Dutch actions in this field was the structuring attention of the general public and had a bank. One of the most exciting projects and syndication of a 10-year € 120 mil- volume of roughly CAD 393 million, and Corporate Customer business Management Report Management Report

was the financing of a supply base for an lion loan for a Romanian rail freight Raiffeisen Zentralbank’s role in the financ- in the CEE region oil rig on the Kazakh coast in the north of operator. The loan — the first transac- ing of a Marriott resort in Canada drew the Caspian Sea. tion of this kind for the borrower — was attention to RZB. RZB’s business with corporate customers used to refinance a eurobond issued in in the CEE region is carried on primarily Segment Reports Segment Reports Segment

2002. Response to this transaction was by the Network Banks and leasing units RZB: the most active arranger very positive, and the issue was massively Cash management: operating under the umbrella of Raiffeisen of syndicated loans in CEE oversubscribed despite difficult market one account, worldwide International. They service both local cor- conditions. porate customers and multinational com- RZB continued to assert its leadership in the RZB is increasingly in demand as a cash pany groups, services for the latter being Central and Eastern European syndicated management bank, settling the global rendered mainly in cooperation with loans market during 2007, again handling Strong growth in earnings from payment flows of multinational enter- Raiffeisen Zentralbank. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

more transactions than any other bank property finance prises. One of its key cash management in the region with 86 mandates. Loans products is cash pooling. Cross-bor- As in prior years, the line of products for

Glossary arranged by RZB totalled USD 16.7 mil- Raiffeisen Zentralbank generated new der, multi-bank cash pooling is most in corporate customers continued to broaden Glossary lion. This gave it a share of over 13 per loan volumes of over € 1.3 billion in the demand. and improve during 2007. The Group’s Contacts Contacts 126 127 Preface acquisition activities remained intensive, The associated return on equity before new ones. The customer base grew by Preface

Hungary resulting in steady enlargement of the cus- tax was 30.2 per cent. This translates into over a fifth to 3,550. The bank’s assets Raiffeisen Bank’s market shares in the tomer base in this segment. a fall of 1.5 percentage points caused increased by 27 per cent to € 2.3 billion, corporate customers segment increased mainly by an increase in equity gener- and its profit before tax came to € 32 mil- to 12.1 and 12.2 per cent, respectively, of Managing Board Managing Generally, the bandwidth of the prod- ated by ploughing back profits. The cost/ lion, or 31 per cent more than in 2006. total market assets and liabilities. Board Managing ucts and services on offer will of course income ratio in this segment improved by depend on the maturity of the particular 0.9 percentage points to 35.8 per cent. Raiffeisenbank also sustained its strong This bank became the country’s third- economy and banking landscape. How- growth of prior years in the project finance largest lender to corporates (with a total ever, significant technical progress has Poland field, especially in property finance, rein- portfolio of € 3.4 billion, or 26 per cent been made, due not least to the Group- Raiffeisen Bank Polska consolidated its forcing its position as one of the country’s more than at year-end 2006). It remained Supervisory Board’s Report wide interchange of know-how. As a result, position as a leading provider of banking three strongest players in this area, where the market leader in deposits, recording Supervisory Board’s Report RZB is now, in effect, able to provide its services to large companies. Deposits in its assets grew by over half to € 611 mil- growth of 40 per cent to € 2.1 billion. complete line of internationally available this segment were 26 per cent up on 2006 lion. To further eBanka’s integration, financial services even in small, compara- at € 1.9 billion, while the portfolio of loans Raiffeisenbank refinanced most of eBan- Its corporate customer base grew to nearly Overview of RZB Overview of RZB tively immature markets. to corporate customers grew by a total of ka’s portfolio of loans to large customers. 6,800. The acquisition of the Hankook over 29 per cent to € 2.6 billion. Tyre Group — the country’s largest foreign Risk-weighted assets in Raiffeisen Interna- Slovakia direct investor in 2007 — was a particu- tional’s Corporate Customers segment Raiffeisen Bank Polska was still strongly Tatra banka in Slovakia reaffirmed its larly pleasing confirmation of the bank’s grew by nearly 30 per cent to € 24.7 bil- positioned as an arranger during issu- leadership in the corporate customer mar- quality standards and good reputation.

Raiffeisen Banking Group lion. The sub-group’s profit before tax in ances of corporate bonds, handling cor- ket. Its loan portfolio grew by over a quar- Raiffeisen Banking Group this business segment came to € 669 mil- porate issuances for a number of first-time ter to € 2.5 billion. This was mainly attribut- Slovenia

Interview lion (increase of 43 per cent). issuers. According to Fitch Polska, it was able to the company’s sustained success in Despite the stiff competition and nar- Interview one of the country’s 10 leading banks in the project finance field and strong growth row margins that prevailed in Slovenia, this field in terms of the volume of issued in its lending to medium-sized enterpris- Raiffeisen Banka recorded good results RWAs: Raiffeisen International’s and outstanding securities (€ 200.6 mil- es. Deposits in that sub-segment grew by from its corporate customer operations Corporate Customer Operations lion, or 37 per cent more than in 2006). a fifth to € 2.1 billion. Tatra banka ac- (which include business with SMEs). Management Report Management Report

quired a large number of new foreign cus- €m Czech Republic tomers — above all Korean, German and Its assets in this segment grew by nearly 24,742 Raiffeisenbank in the Czech Republic Spanish investors — enlarging its customer 100 per cent to € 733 million, while recorded outstanding results in the corpo- base by 13 per cent to over 3,600. deposits advanced by 23 per cent to Segment Reports Segment Reports Segment

rate customers segment, building on its suc- € 246 million. 19,067 cesses in prior years. For instance, depos- In the project finance field, Tatra banka its grew by over 44 per cent, giving a total concentrated primarily on office build- A marketing campaign aimed at SMEs 14,356 of € 1,717 million at year-end. ings, shopping centres and residential proj- that offered them a package of products ects. To support environmental projects, it including accounts, short-term credit and 9,982 In the credit field, this bank concentrated signed a credit agreement for € 15 million company credit cards proved particularly 8,232 on high-profit transactions and was able with the European Bank for Reconstruc- successful. Within two months, the asso-

Consolidated Financial Statements Financial Consolidated to increase its portfolio by 75 per cent tion and Development (EBRD). This money ciated foreign-currency loans had added Statements Financial Consolidated

to € 1,509 million. Its outstanding perfor- will mainly be lent to small and medium- CHF 16 million to the loan portfolio.

Glossary mance was the fruit of nurturing existing sized enterprises (SMEs). Glossary 2003 2004 2005 2006 2007 customer relationships and developing Contacts Contacts 128 129 Preface Preface

Croatia Albania Serbia Romania Despite tough competition, Raiffeisenbank The assets of Raiffeisen Bank in the corpo- Raiffeisen banka continued to increase its Raiffeisen Bank increased its lending to Austria’s corporate loan portfolio grew rate customers segment grew by two thirds market leadership in the corporate custom- customers by no less than a third to € 1.7 by 20 per cent to € 1.2 billion. At the to € 264 million. It remained the market ers segment and returned excellent results billion. At the same time, corporate cus- Managing Board Managing same time, deposits by corporate custom- leader in Albania, with a market share of in every product category. One of its most tomer deposits grew by 9 per cent to Board Managing ers increased by 46 per cent to € 1.4 bil- 30 percent, as well as the country’s lead- successful product groups was documen- € 1.5 million. Raiffeisen Bank successfully lion. The corporate customer base grew ing corporate bank in the car and fuel, liq- tary business, demonstrating the growth arranged the first forfaiting agreement in by 18 per cent to 1,730. uefied natural gas, construction and cook- in volumes of international trade. Quanti- the Romanian secondary market, for € 64 ing oil manufacturing sectors. ties of both guarantees and letters of credit million. In addition, there was a big increase in the increased by about 70 per cent to a total Supervisory Board’s Report number of IPOs in 2007. Raiffeisenbank Raiffeisen Bank had 530 corporate cus- of nearly € 200 million. It was also Lead Arranger of the most Supervisory Board’s Report Austria was one of Croatia’s three lead- tomers at year-end, namely Albania’s big- important syndicated loan in the local mar- ing banks in the equity finance market and gest and most prestigious corporates, and At year-end, outstanding corporate loans ket, namely to CFR Marfa, Romania’s larg- was involved in most of the country’s IPOs. it was the main provider of banking ser- in the portfolio came to € 814 million, est rail freight operator, in the amount of Overview of RZB Overview of RZB vices to about a third of them. It more than or over a fifth more than at the end of € 120 million. Similarly, the bank played For instance, it acted as Manager and tripled its turnover from foreign exchange 2006. Raiffeisen banka’s image as a a key role in the property finance market, Selling Agent during the IPOs of Ingra, transactions to € 25 million a month. strong and trustworthy bank led to fur- where its loan portfolio grew by 63 per Veterina and Atlantic Grupa. These ther rapid growth in deposits from corpo- cent, giving it a market share of 10 per transactions were worth a total of Thanks to further improvements in the prod- rate customers, which increased by 36 per cent at year-end.

Raiffeisen Banking Group € 172 million. In the debt capital mar- uct line, Raiffeisen Bank handled over 65 cent to € 563 million. Raiffeisen Banking Group ket, Raiffeisenbank was Joint Agent and per cent of all government spending as

Interview Bookrunner for the corporate bond of well as helping the government introduce Bulgaria Ukraine Interview Hrvatska elektroprivreda (HEP), which an electronic payment system. Raiffeisenbank (Bulgaria) confirmed its Raiffeisen Bank Aval ranks third in the was worth € 96 million. position as one of the country’s leading Ukrainian corporate customer market with Kosovo banks in the corporate customers mar- a market share of 7 per cent. Its corpo- Bosnia and Herzegovina Raiffeisen Bank Kosovo successfully ket. Its corporate loan portfolio grew by rate loan portfolio grew by 72 per cent Management Report Management Report

Raiffeisen Bank Bosna i Hercegovina defended its position as the country’s lead- no less than 93 per cent to € 733 mil- to more than € 2.1 billion, outstripping the reported growth in its loan portfolio ahead ing banker to the corporate sector. Its lion. Deposits from corporate customers market’s overall growth by 26 percentage of the industry average in every area of its lending to corporate customers grew by increased by 44 per cent to € 881 mil- points. Deposits from corporate customers corporate customer operations. Its corpo- 77 per cent to € 92 million, and deposits lion. The bank strengthened its market also grew, advancing by 38 per cent to Segment Reports Segment Reports Segment

rate loan portfolio grew by a total of 37 from these customers increased by 11 per presence by setting up a network of 12 € 465 million. per cent to € 455 million, while deposits cent to € 102 million. regional corporate centres and introduc- in this segment advanced by 6 per cent ing factoring services. Raiffeisenbank’s This bank successfully launched new prod- to € 515 million. The bank had 2,400 cor- The bank had 479 corporate customers at main thrust in this segment was financing ucts that included factoring and project porate customers at year-end 2007, or year-end, or a third more than at the end medium-sized enterprises and property finance. It opened six regional corpo- 8 per cent more than a year earlier. It set of 2006. This total also includes custom- projects. These activities included pro- rate customer centres and acquired some up centres of excellence for cash manage- ers that were previously part of its SME viding funds totalling € 44 million for the 2,500 new corporate customers, over

Consolidated Financial Statements Financial Consolidated ment, standard credit products and project segment but developed so well — not least, construction of the biggest shopping cen- half of which were medium-sized enter- Statements Financial Consolidated

finance so as to broaden the scope of its thanks to the support of Raiffeisen Bank — tre in Plovdiv and a loan of € 13 million prises. The foreign customer base doubled

Glossary product line and ideally meet the needs of that they are now serviced as corporate to Immobilia to finance a chain of PLUS to more than 600, and the assets attribut- Glossary its various customer groups. customers. hypermarkets. able to it tripled to € 115 million. Contacts Contacts 130 131 Preface ployed within the leasing network, whose via as customers. Another representative Preface Belarus A record year for By letting banks take up risk participations Raiffeisen-Leasing balance sheet total grew by 50 per cent office in Spain will be added to its exist- in assets in its corporate customer loan to € 4,608 million. ing branches and offices, helping further portfolio, Priorbank was able to achieve The Raiffeisen-Leasing Group’s new busi- extend RZB’s business activities. Managing Board Managing even brisker growth in this field. ness volumes in Europe grew by roughly Board Managing € 4,860 million, topping its previous Goals for 2008 New Business at This bank’s corporate loan portfolio record set in 2006 by 42 per cent. As a Raiffeisen-Leasing International grew by 16 per cent to total € 441 mil- result, it remained the most successful Aus- The primary goal is to continue to increase €m lion at year-end. Deposits from corpo- trian lease provider operating in the Euro- the number of corporate customers using 2,995 rate customers increased by 6 per cent pean market. RZB as their principal provider of bank- 337 Supervisory Board’s Report Supervisory Board’s Report to € 281 million. The corporate customer ing services, including above all customers 593 base also grew, namely by 30 per cent to This financial year, it intends to continue to in Austria’s “Top 1,000” segment. More- 1,949 over 1,100. work the Austrian market as efficiently and over, RZB’s core products in the corporate 2,065 effectively as possible. Abroad, it will be finance, investment banking, cash man- 204 Overview of RZB 390 Overview of RZB Russia steadily expanding its eco-energy project agement, treasury and export finance 1,353 1,117 105 Raiffeisenbank had an extraordinary year, operations through its subsidiary Raiffeisen fields are to be made accessible to more 1,037 1,355 61 235 successfully mastering the strategic chal- Energy & Environment, which it set up in corporates. 90 215 225 1,013 lenge of integrating Impexbank. The 2007. It will be forcing the pace of growth 841 result was the introduction of uniform ser- in its property project development oper- In addition, Raiffeisen Zentralbank will 722

Raiffeisen Banking Group vice and credit standards throughout the ations both inside Austria and abroad. In be using its leadership as a corporate Raiffeisen Banking Group bank’s regional network. In addition, the addition, it is making preparations for fur- bank, above all as a corporate bank serv- 2003 2004 2005 2006 2007

Interview integration of Impexbank enlarged and ther expansion into new markets. ing enterprises with a strong presence in Interview Motor vehicle diversified the customer base as it gave the CEE region, to acquire more compa- Movable property Raiffeisenbank better access to medium- nies based in Germany and Scandina- Real estate sized enterprises and micro-businesses. Sustained growth in leasing operations in the CEE region Management Report Management Report

Every regional branch offers a complete range of services for every corporate cus- The Group’s international leasing network tomer from the smallest local business to in the CEE region expanded rapidly dur- the largest Russian enterprise and multina- ing the 2007 financial year. New busi- Segment Reports Segment Reports Segment

tional. The corporate customer base (with- ness grew by 53 per cent to € 2,995 mil- out SMEs) grew by 42 per cent to over lion. Growth was fastest in the movable 11, 20 0. property and real estate leasing segments, which grew by 52 per cent and 66 per The bank’s assets in this segment grew cent, respectively. by over half, reaching a record total of € 6.2 billion. Corporate customer depos- Raiffeisen-Leasing International GmbH

Consolidated Financial Statements Financial Consolidated its increased by 24 per cent to total over has 17 subsidiaries in 16 CEE countries. At Statements Financial Consolidated

€ 2.7 million at year-end. year-end, nearly 1,400 people were em- Glossary Glossary

Contacts Contacts 132 133 Preface The development of the Financial Institu- was the biggest single market, account- Preface Financial Institutions and tions and Public Sector was uneven during ing for a total of 31 mandates. This meant Public Sector 2007 and must therefore be looked at in that RZB had a market share of nearly 40 some detail. Because of an increase in net per cent in Russia in terms of numbers of Managing Board Managing The Financial Institutions and Public Sec- Financial service providers includes bro- interest income driven by higher volumes, transactions. Board Managing tor segment encompasses business with kers and asset managers such as invest- Operating income in this segment grew banks, funds, financial service providers, ment banks, investment fund companies, by 18 per cent to € 414 million. insurers and public sector entities. Banks leasing companies and other companies Brisk demand in Turkey and includes all Austrian and foreign banks. that perform activities connected with the One of the focuses of RZB’s acquisition the Gulf region credit industry. The Insurers sub-segment activities during 2007 was the funds and Supervisory Board’s Report This segment also encompasses suprana- encompasses all kinds of insurer and re- asset managers market. The increase in Thanks to prolonged and intensive culti- Supervisory Board’s Report tional institutions like the World Bank, the insurer. They include property insurers, the customer base proved particularly ben- vation of the market, RZB has been able European Bank for Reconstruction and health insurers, life insurers and pension eficial in the second half. However, the to establish itself as a capable and reli- Development (EBRD), the European Invest- insurers. Public sector includes public growth in operating income was accom- able partner to financial service providers Overview of RZB Overview of RZB ment Bank (EIB), the International Mone- sector entities such as ministries, prov- panied by unrealized losses on securities in the Arab countries. Nearly every fifth tary Fund (IMF) and the Kreditanstalt für inces, municipalities and similar public as a result of mark-to-market valuations loan syndication in 2007 was carried out Wiederaufbau (KfW). bodies. that totalled € 53 million. for banks in Turkey and the Gulf Coopera- tion Council, whose members are Bahrain, In all, the segment’s Profit before tax came Kuwait, Oman, Qatar, Saudi Arabia and

Raiffeisen Banking Group +(-)- to € 198 million, which was nearly € 10 the United Arab Emirates. Raiffeisen Banking Group €k 2007 2006 Change less than in 2006. The result was a Return

Interview Net interest income 233,398 180,831 29.1% on equity of 20.5 per cent. General ad- Strongly growing demand for Islam-com- Interview Provisioning for impairment losses (992) (2,825) (64.9%) ministrative expenses grew by slightly less patible financial solutions was notewor- Net interest income after provisioning 232,405 178,006 30.6% than operating income, namely by 17 per thy in this connection. RZB caters for this cent, slightly improving the segment’s Cost/ demand with its appropriately designed Net commission income 154,961 140,083 10.6% income ratio from 39.7 to 39.3 per cent. Islamic financial products, including Mura

Management Report Trading profit 23,360 21,306 9.6% Management Report

baha Finance and an Islamic account. Net income from derivative financial instruments 76 (30) — The world’s leader in Net income from financial investments (52,600) (439 >500% loan syndications Transactions Segment Reports Segment Reports Segment

General administrative expenses (162,613) (138,872) 17.1% Other operating profit 2,228 7,531 (70.4%) RZB reasserted its position as the world’s Transactions for which RZB acted as Man- Profit before tax 197,817 207,586 (4.7%) most active arranger of bank loans in 2007, dated Lead Arranger in 2007 included arranging a total of 106 transactions. In the following: a € 700 million loan for Segment’s contribution to profit before tax 13.3% 16.1% (2.8 ppt) terms of numbers of transactions, RZB had Slovenia’s Nova Ljubljanska Banka; a Basis of assessment (including market risk) 15,006,492 10,611,175 41.4% a global market share of 23 per cent. Its USD 550 million loan for Russia’s MDM Average number of staff 2,408 2,129 13.1% market share in terms of transaction vol- Bank; a € 400 million loan for Iceland’s

Consolidated Financial Statements Financial Consolidated Cost/income ratio 39.3% 39.7% (0.4 ppt) umes was 17.5 per cent.The CEE region Straumur-Burdaras Investment Bank; and Statements Financial Consolidated

Average equity 1,072,043 722,666 48.3% accounted for over half of those transac- a USD 1.5 million loan for Emirates Bank

Glossary tions, namely 58. Once again, Russia International in the United Arab Emirates. Glossary

Return on equity (before tax) 20.5% 31.1% (10.6 ppt) Contacts Contacts 134 135 Preface Besides public capital market transac- Preface Assets under custody set Custody Volumes The investment bank for tions, RZB also laid the foundations for a new record €bn top-of-the-line issuers other transactions in the capital markets RZB Custody is an acknowledged quality 158.7 In the fixed income field, RZB acts as an in the future by structuring and arrang- Managing Board Managing Board Managing leader in the custody and management of 136.0 investment bank for other financial institu- ing so-called warehouse facilities. assets in the Austrian market and the CEE tions. It enjoys an excellent global repu- region. tation as a connecting link between East 106.0 and West. This is reflected by the many Financial sales develop well in

Deposits under management by RZB for 83.1 bookrunner and arranger mandates that a difficult market environment customers in this segment grew by 16.7 78.1 it wins. Supervisory Board’s Report per cent or € 22.7 billion versus the end RZB’s activities in the financial sales field Supervisory Board’s Report of 2006 to set a new record of € 158.7 During 2007, RZB acted as partner to included placing the corporate bonds of million at year-end 2007. The method of numerous high-end Western and Eastern Austrian issuers and the eurobonds of for- calculating the total was changed in 2007, European issuers. They included Italian eign financial institutions. Another focus Overview of RZB Overview of RZB so the figure now only includes customer banks like Banco Popolare and Banca during the year under review was on the assets through profit or loss. As a result, 2003 2004 2005 2006 2007 delle Marche, French private bank Oddo placement of asset-backed securities. In the numbers reported here differ from et Cie and Belarusan Network Bank the light of turbulence in the financial mar- those contained in the Annual Report for Priorbank, for which RZB arranged a kets, there was growing demand for war- 2006. in Eastern European equities developed USD 100 million bond with a maturity of rants among both issuers and investors.

Raiffeisen Banking Group particularly well, growing by 46 per cent two years as Joint Lead Manager. Raiffeisen Banking Group The increase in funds under custody also to € 4.2 billion. In response to steadily rising business vol-

Interview boosted earnings from the associated cus- umes, RZB further enlarged its financial Interview tody fees. The principal driver of growth in Structured products remained a key build- Strong in securitization sales capacities in 2007. To optimize its 2007 was the increase in new business. ing block of Raiffeisen Centrobank’s suc- in Russia development of the market, it carried out cess during 2007. In all, it recorded a rise an organizational separation between in issued volumes of about 20 per cent to RZB’s securitization sub-segment is still rel- German-speaking and international cus- Management Report Management Report

Jump in profit at € 1.5 billion. The range of offerings broad- atively new. It encompasses asset-backed tomer groups. At the same time, addi- Raiffeisen Centrobank ened and sales markets expanded during transactions, underwriting and the provi- tional human resources were assigned to the year under review. sion of credit enhancements. the German, Italian and CEE markets. In As Austria’s foremost broker, Raiffeisen a challenging market environment, new Segment Reports Segment Reports Segment

Centrobank — RZB’s equity house — is Besides its existing markets — Austria, Ger- Although the environment was very hostile records were achieved in the Financial a provider of choice to institutional cli- many, Italy and Switzerland — Raiffeisen to securitizations in 2007, RZB recorded Sales sub-segment in terms of numbers of ents. The main focus of its business activi- Centrobank also put parts of its product growing demand for securitizations of transactions, business volumes and profit. ties is on trading in equities and equity line on the market in Poland, Hungary, the third-party customer assets. The main derivatives from Germany, Italy, Austria Czech Republic, Slovakia and Slovenia. focus was on collateralized assets origi- and the CEE countries. nated in Russia such as mortgage and Structured products for RZB’s equity house had a very successful car loans. RZB had a market share of 25 retail banks Consolidated Financial Statements Financial Consolidated In addition, during the year under review, year. Its profit before tax came to roughly per cent in Russia in terms of numbers of Statements Financial Consolidated

Raiffeisen Centrobank was a direct mem- € 45 million, which was nearly 84 per cent transactions and 28 per cent in terms of In the fourth quarter, RZB set up a new

Glossary ber of 12 foreign stock exchanges. Trade more than in 2006. volumes. unit called Third Party Sales, which sells Glossary

Contacts Contacts 136 137 Preface structured financial products for retail institutions’ funding costs rose sharply in prevailed in the early months of 2008, the Preface Domestic Payments banks in Western Europe and the CEE the first few months of 2008. Although we trend is likely to be one of a decline in capi- Millions region. This new unit supplies made-to- expect these costs to even out as the year tal market transactions in favour of interbank measure solutions both within the scope 349.4 progresses at a slightly lower level than still transactions. Managing Board Managing of the Raiffeisen Banking Group’s retail Board Managing 297.0 operations and to banks outside the organization. 251.6 Retail Customers

This unit develops financial products to 190.7 197. 2 This segment encompasses business with exactly one third of the Group’s consoli- suit conditions in the market on the basis personal banking customers and small dated profit. Provisioning for impairment Supervisory Board’s Report of customer requirements in collaboration and medium-sized enterprises (SMEs) losses in this segment increased by 9 per Supervisory Board’s Report with the Treasury Division of Raiffeisen with annual revenues of less than € 5 mil- cent to € 209 million. This was a dispro- Zentralbank. lion. Nearly all of RZB’s activities in the portionately small increase. As a result, Retail Customers segment are accounted the segment’s Risk/earnings ratio fell by Overview of RZB Overview of RZB In addition, it also identifies opportunities for by the Network Banks, which operate 4.0 percentage points to 14.6 per cent. in markets and passes them on to retail 2003 2004 2005 2006 2007 under the umbrella of Raiffeisen Interna- banks in the forms of standardized finan- tional. Operating income in this segment cial products. It offers its clients structured Cross-border Payments increased by 38 per cent to € 2,274 mil- financial products for the purposes of both The biggest exception is the private bank- lion. This was a bigger increase than in Millions Raiffeisen Banking Group investment in a variety of asset classes ing activities of Kathrein & Co., Vienna, General administrative expenses, which Raiffeisen Banking Group and risk hedging for personal banking 9.9 whose profit after tax applying IFRSs was rose by 30 per cent to € 1,561 million, 8.9 Interview customers. up 9 per cent on the previous year to € 6.3 reducing the segment’s Cost/income ratio Interview million. from 72.9 to 68.6 per cent. 7.1 An important clearing partner Otherwise, RZB does not carry on retail Since RZB is still forcing the pace of this in Austria and the CEE region 5.8 banking business in Austria. However, it segment’s development in the CEE region,

Management Report 5.1 Management Report

supports the Raiffeisen Banking Group’s its cost/income ratio is being kept high by Cash management is a core area of activities in this segment by rendering development of the branch and sales net- RZB’s operations in its role as a banker central services — for instance within work, advertising activities, the introduc- to banks. In the course of 2007, it con- the scope of nationwide marketing cam- tion of new products and process enhance- Segment Reports Segment Reports Segment

siderably expanded its clearing opera- paigns — and by providing products via its ments. tions in both euros and US dollars. There specialist subsidiaries. was another sharp increase in transaction 2003 2004 2005 2006 2007 numbers. The Retail Customers segment too Enormous potential for growth recorded impressive rates of growth in Central and Eastern Europe RZB has established itself as a major Outlook during the year under review. The Risk- clearing house in the CEE region. Thanks weighted assets attributable to this busi- The Group’s Retail Customers operations

Consolidated Financial Statements Financial Consolidated to the growing number of banks mak- ness segment grew by a third to € 19.7 bil- Statements Financial Consolidated Since the effects of the subprime crisis did in Central and Eastern Europe will con- ing payments through RZB, more and not leave Europe completed unscathed, we lion. Profit before tax grew by more than tinue to grow rapidly over the next few

Glossary more payments were being transacted expect the situation in the market to remain in any other segment, advancing by 92 years. The spending power of a broad Glossary by way of in-house clearing during 2007. tense this year. For instance, financial per cent to € 495 million to account for section of society will increase in the Contacts Contacts 138 139 Preface +(-)- During the year under review, a net total of Preface Three new branches opened €k 2007 2006 Change each week 167 new branches (i.e. deducting closed Net interest income 1,441,582 1,030,327 39.9% branches and disregarding relocated Provisioning for impairment losses (209,838) (191,709) 9.5% In many Central and Eastern European ones) was opened. This translates into an Managing Board Managing Board Managing Net interest income after provisioning 1,231,744 838,618 46.9% markets, RZB is seen as a pioneer when average of three new branches a week. it comes to technology usage and inno- Net commission income 814,384 603,647 34.9% vative banking services. Nonetheless, The priorities were the rapidly growing Trading profit 5,265 1,913 175.3% the branch is and will remain at the cen- markets of Bulgaria, Romania and Ser- Net income from derivative financial tre of its customer relationships. This is bia. Following the acquisitions undertaken instruments (8,620) 1,249 — where advice is provided and sales take in prior years, RZB worked to optimize Supervisory Board’s Report Net income from financial investments place, and branches also play a key role its branch networks in Russia, the Czech Supervisory Board’s Report and current financial assets 77 — — in brand positioning. For these reasons, republic and the Ukraine. Raiffeisen Bank General administrative expenses (1,560,952) (1,204,399) 29.6% RZB will continue to focus on the region- Aval boasts one of the Ukraine’s biggest Other operating profit 12,984 17,309 (25.0%) wide development and optimization of its sales networks for banking services, com- Overview of RZB Overview of RZB Profit before tax 494,881 258,336 91.6% branch network. prising 1,180 branches. Segment’s contribution to profit before tax 33.3% 20.1% 13.2 ppt RZB has the biggest branch network of The systematic enlargement of RZB’s net- Basis of assessment (including market risk) 19,715,221 14,846,100 32.8% any Western bank operating in the CEE work of bank branches in the CEE region Average number of staff 41,818 36,153 15.7% region. In the autumn of 2007, it opened will continue in 2008. The intention is

Raiffeisen Banking Group Cost/income ratio 68.6% 72.9% (4.2 ppt) its 3,000th branch in Tyumen, Russia. At to enlarge the sales network to roughly Raiffeisen Banking Group Average equity 1,408,428 1,011,083 39.3% year-end 2007, the network in the CEE 3,750 branches by the end of 2010.

Interview Return on equity (before tax) 38.6% 28.4% 10.2 ppt region consisted of 3,015 business outlets, Interview which was 5.9 per cent more than at the end of 2006. Over 100,000 new customers a month course of economic development and the European markets in which it operates Business Outlets in the CEE Region Management Report Management Report

convergence process, generating higher a bank. In doing so, it profits from the Ongoing investment in developing an consumption and investment and, conse- strength and public profile of the Raiffeisen extensive and optimized branch presence 3,015 quently, increasing the demand for finan- brand. For this reason, it cultivates its mar- 2,848 have had a positive impact, generating cial services. Most of the markets in which ket presence under the well-established powerful growth in the customer base. The Segment Reports Segment Reports Segment

RZB operates are still far from completing Raiffeisen banner virtually everywhere in 2,443 number of retail customers serviced by the that developmental process. the region. Network Banks continued to grow during the year under review to total about 13.6 RZB launched an extensive retail banking One exception is Slovakia, where RZB million at year-end 2007. programme in 1999 in order to systemat- trades as Tatra banka. This name looks ically exploit the associated potential for back on a long tradition in Slovakia and is At year-end 2006, RZB’s customers base growth. Since then, it has been steadily very well known. In Belarus too, Priorbank 916 in the CEE region had still numbered 12.1

Consolidated Financial Statements Financial Consolidated extending its retail banking presence both will continue to use its old name for the 722 million. In other words, roughly 1.5 million Statements Financial Consolidated

geographically and in terms of the prod- time being, but as a rule, acquired banks new customers opted to do business with

Glossary uct line. RZB now provides retail bank- are given the Raiffeisen name at the earli- RZB in the CEE region in 2007, or an aver- Glossary ing services in all the Central and Eastern est possible opportunity. 2003 2004 2005 2006 2007 age of over 100,000 a month. Contacts Contacts 140 141 Preface to optimize the effectiveness of advisory clear indicator of the enormous long-term faster than those of its competitors in 2008, Preface Retail Customers in the CEE Region and selling activities. The programme was potential for growth that exists in the East- thus enlarging its market share. Its main fo- launched in Russia and the Ukraine at the ern European investment funds market. cuses during 2008 will be on continuing Millions end of 2007 and beginning of 2008. It to expand, above all in the CIS region; on Managing Board Managing 13.6 was in place in every other RZB market continuing to develop its operations in the Board Managing 12.1 in the CEE region on the balance sheet Goals for this year field of short-term credit products, includ- date. The entire project should be rolled ing above all consumer loans and mort- 9.7 out by the end of 2008. Having reached break-even in this segment gage finance; on accelerating the expan- in 2004 and after further improvements in sion of its leasing activities and operations results in the years thereafter, RZB also in- in the SME market; and on continuing to Supervisory Board’s Report Asset management products tends its profits from its Retail Customers enhance risk and receivables management Supervisory Board’s Report 5.0 are booming in the CEE region operations to continue to grow substantially processes.

3.2 Investment funds find themselves at the Overview of RZB Overview of RZB beginning of a lengthy boom in Central Proprietary Trading and Eastern Europe. The region’s speedy 2003 2004 2005 2006 2007 economic development is generating a The Proprietary Trading segment encom- dition, it encompasses securities lending rapid rise in the living standards of broad passes proprietary trading in the glob- and repurchase transactions with foreign sections of the population and, therefore, al Treasury and Investment Banking divi- counterparties. Most of this business is

Raiffeisen Banking Group The goal: increasing sales altering saving patterns. As in Austria, sions of Raiffeisen Zentralbank, Raiffeisen driven by customer orders and so-called Raiffeisen Banking Group effectiveness more and more people in Eastern Europe Centrobank, the Network Banks and the flow business and is unaffected by market

Interview are discovering investment funds as an Group’s investment firms in Central and positionings. Interview Besides steadily enlarging the sales net- attractive alternative to deposit accounts. Eastern Europe. work, RZB is also attaching special impor- Turbulence in the financial markets obvi- tance to optimizing the quality of ser- During the year under review, investment The Treasury sub-segment encompasses ously left their mark in the Proprietary vice offered by its branches in the CEE and pension funds under management RZB’s proprietary positions in on-balance- Trading segment. Profit in this segment Management Report Management Report

region. For this reason, it launched a by RZB in the CEE region grew by 48 per sheet products such as money-market de- was € 393 million down on the previous region-wide Sales Force Effectiveness cent to € 4.84 billion (2006: € 3.28 bil- posits, foreign exchange and notes and financial year, resulting in a Loss before programme in 2005. lion). Investment funds accounted for coin and off-balance-sheet interest-rate tax of € 103 million. There was growth in about € 3.6 billion of the total, and the rest and price-based products such as for- earnings from foreign exchange and com- Segment Reports Segment Reports Segment

The process is tailored directly to the comprised assets in pension funds. wards, futures and options. In addition, mission business transacted on behalf of maturity of the particular market when it this sub-segment encompasses proprie- customers, but profits in the other sub-seg- comes to product standards. For instance, In the eurozone, assets held in investment tary portfolio management activities in the ments slumped. in some countries, insurance products funds came to about 66 per cent of GDP equity, bond and fund fields and the man- (which also generate commission income) at year-end 2006. The equivalent figure in agement of short-term and long-term alter- Net interest income fell by 30 per cent to are automatically offered to the customer Bulgaria and Romania at that time was not native investments. € 157 million, and Trading profit dropped when consumer or mortgage loans are even 1 per cent, and it was a little below by 77 per cent to € 50 million.

Consolidated Financial Statements Financial Consolidated granted. 1.6 per cent in Russia. Even in Hungary, The Investment Banking sub-segment en- Statements Financial Consolidated

which is the CEE region’s most mature mar- compasses the management of the pro- Net income from financial investments

Glossary Customer advisors are offered both spe- ket for investment funds, the figure was only prietary securities positions in RZB’s and current financial assets was negative, Glossary cial information systems and incentives 10.6 per cent at the end of 2006. This is a books as well as market making. In ad- at € 160 million. This item comprised unre- Contacts Contacts 142 143 Preface Preface

+(-) +(-) The euro touches the Balance Sheet Management €k 2007 2006 Change USD 1.50 mark Net interest income 156,928 223,422 (29.8%) Raiffeisen Zentralbank’s Balance Sheet The US dollar depreciated steadily dur- Management Department handles the Provisioning for impairment losses (470) 24 — Managing Board Managing ing 2007. This led to an almost unprece- active and central management of RZB’s Board Managing Net interest income after provisioning 156,458 223,446 (30.0%) dented rally by the euro versus the dollar market and liquidity risks and funding Net commission income 26,405 16,237 62.6% in September. Fuelled by concern about operations. An integrated view of risks is Trading profit 49,725 215,088 (76.9%) the economy in the US and correspond- used to evaluate the effects of develop- Net income from derivative ing interest rate cuts by the Fed, the US ments in the market and initiate appropri- financial instruments (15,184) (42,756) (64.5%) dollar’s decline versus the euro reached ate management action. Supervisory Board’s Report Supervisory Board’s Report Net income from financial investments its climax towards the end of Novem- and current financial assets (159,813) 35,745 — ber with an exchange rate of just below In recent years, RZB has continuously General administrative expenses (160,257) (159,973) 0.2% USD 1.50 to the euro; at the beginning of increased its use of the capital markets 2007, the euro had still been trading at to raise funds. During the year under Overview of RZB Other operating profit 90 2,752 (96.7%) Overview of RZB USD 1.32. review, the cornerstones of its successful Profit (loss) before tax (102,576) 290,539 — activities as an issuer were once again — Segment’s contribution to profit before tax (6.9%) 22.6% (29.5 ppt) Thanks to better numbers coming in from in a market environment that became very Basis of assessment (including market risk) 14,306,580 12,555,160 13.9% the US, there was a small countermove- difficult from the second half — a clear cor- Average number of staff 2,148 2,119 1.4% ment towards year-end that took the euro porate strategy and responsible risk strat- Raiffeisen Banking Group Cost/income ratio 68.7% 35.0% 33.8 ppt to USD 1.46. egy, the development of innovative cap- Raiffeisen Banking Group ital market instruments and proactive Average equity 1,022,042 855,060 19.5%

Interview Movements in the exchange rate of the debt investor relations activities. Interview Return on equity (before tax) (8.9%) 33.0% (41.9 ppt) Japanese yen (JPY) more-or-less mirrored the price development of risky forms of investment during 2007. Until July, when Perfectly timed RZB issuances alized losses on securities designated as 4 per cent at the beginning of the year to gains in the equity markets were big, the Management Report Management Report

current assets, including in particular struc- a peak of 4.7 per cent in June. However, Japanese yen depreciated massively At the beginning of the year, RZB had its tured credit products, and derivative inter- the trend reversed at the beginning of July. against the euro. successful debut in the sterling (GBP) mar- est rate instruments. Portfolios were mea- ket. There was particularly brisk demand sured on a mark-to-market basis. The crisis mood in the international finan- The yen rate fell to JPY 169/€. However, for this senior bond — with its yield of Libor Segment Reports Segment Reports Segment

cial and credit markets in the wake of in the second half, the yen became one plus 11 basis points, volume of GBP 500 problems in the US mortgage market of the main beneficiaries of the crisis that million and maturity of five years — among Bond yields roller coaster caused a sudden change in the willing- was developing in the financial mar- investors from the UK, Continental Europe ness of players in the financial markets to kets. Indeed, in August, the rate reached and Asia. As the eurozone economy passed its peak, take risks. JPY 149.2/€. The yen’s exchange rate the euro bond market had a turbulent year against the US dollar ranged between A € 500 million subordinated bond issu- in 2007. Yields rode a roller coaster. The Government bond prices profited greatly JPY 107 and JPY 124 during the year, and ance in February was followed by two

Consolidated Financial Statements Financial Consolidated from the resulting flight into quality, making it ended 2007 at the lower end of the more benchmark issuances in the course Statements Financial Consolidated

healthy state of the economy during the first six months of the year led to significant up for almost all of the price losses that oc- range, at JPY 111. of the year. In June, RZB issued a senior

Glossary price losses. For instance, the yield on a curred during the first half. 10-year yields bond worth € 500 million with a maturity Glossary 10-year German Bund rose from about ended the year at nearly 4.3 per cent. of five years. It is a fixed-rate security with Contacts Contacts 144 145 Preface RZB’s US commercial paper programme Preface Euro Exchange Rates New products for corporate 20% was launched in 2006, creating another customers pillar of its funding strategy. Responding 15% to stable demand for US dollar funds, the Raiffeisen Zentralbank’s Fixed Income Managing Board Managing programme’s volume was increased from Department trades credit risks by way of Board Managing 10% USD 4 to USD 5 million in April 2007. It bonds and credit derivatives and interest- was soon fully utilized. rate and structured products. As the economic effects of problems in the US mort- 5% As turbulence in the market worsened over gage market became more apparent in the the rest of the year, terms in the US deterio- second half of 2007, pressure on the bond Supervisory Board’s Report 0% rated. Since raising funds in the US money markets increased. Bond volumes traded Supervisory Board’s Report market was becoming more expensive, in the interbank market fell and prices -5% RZB resorted increasingly to other exist- dropped. Nonetheless, the Fixed Income ing sources of funds. On average, this Department secured trading opportunities Overview of RZB Overview of RZB -10% resulted in 80 per cent utilization of the for its customers as a market maker. This 1/1/2007 1/4/2007 1/7/20 07 1/10/2007 1/1/2008 USCP programme. department’s contribution to profit fell as € / USD € / JPY € / PLN € / RUB € / HUF a result.

Securities finance: a broader Notwithstanding difficult conditions in

Raiffeisen Banking Group a coupon of 4.75 per cent. Growing signs Asset liability management customer base the market, Fixed Income recorded rising Raiffeisen Banking Group of a forthcoming widening of spreads demand for made-to-measure, structured

Interview made its price of mid-swaps plus 10 basis Since 2007, the Asset Liability Manage- Raiffeisen Zentralbank’s Securities Fi- fixed-income products. To cater for grow- Interview points very attractive. ment Team has been strengthening its man- nance Team is its central point of contact ing customer demand, it considerably agement of the banking book in a process for interbank securities lending and financ- enlarged its human resources and infra- Although market conditions had already that spans multiple risk classes. In doing ing. The customer base in both estab- structure. Business volumes in Southeast become extremely difficult, RZB’s sound so, it identifies the possible effects of turbu- lished and emerging markets continued Asia increased particularly strongly. This Management Report Management Report

business model, its solid reputation in the lence in the financial markets in good time to grow. Raiffeisen Zentralbank ruled out region is serviced in close cooperation financial markets, conscientious prepara- and initiates appropriate countermeasures, the use of subprime securities as a way with the Treasury team at RZB’s branch in tion and ideal transaction timing enabled including above all hedging against the of hedging financial transactions in good Singapore. it to issue securities on excellent terms in risks associated with wider spreads. time. Moreover, in the fourth quarter, it set Segment Reports Segment Reports Segment

October, when it issued a supplementary limits on the durations and sizes of individ- During the first half, structured products capital bond worth € 600 million. ual transactions. were increasingly placed not just in Austria, USCP programme is extended Germany and Eastern Europe but also out- This bond has a maturity of eight years Optimizations carried out in 2006, for side those core markets. In addition, Fixed and can only be called after five years. It High volatility created difficult conditions instance with regard to the central man- Income made it possible to extend the was the first-ever public placement of sup- in the money markets, making 2007 a very agement of securities portfolios, were product line for corporate customers by plementary capital on this scale by an difficult year for market players. RZB’s rewarded by a sharp rise in productivity offering them commodity hedges. Enor-

Consolidated Financial Statements Financial Consolidated Austrian bank. The bond is priced at 115 during 2007. Against this background, mous fluctuations in the markets for com- Statements Financial Consolidated

Money Markets Department ensures that basis points above the reference interest RZB always has an adequate supply of Securities Finance was able to achieve modities like oil and oil products as well

Glossary rate (mid-swaps). liquidity. another record year by adjusting risks at as industrial and precious metals increase Glossary the right moment. many companies’ market risks. Contacts Contacts 146 147 Preface By offering its corporate customers com- products and markets specialist — pro- distribution of capacities between Head products led to unexpectedly low fair val- Preface

modity risk management services, Raiff vides operational support for the manage- Office in Vienna and its branches in London ues. The dislocations in the international eisen Zentralbank is successfully under- ment of credit and sovereign default risks and Singapore. In addition to trade in the financial markets created a very difficult scoring its position as Austria’s leading within RZB. British Commonwealth currencies (GBP, environment in 2007. Managing Board Managing supplier of high-quality treasury solutions. AUD, NZD), trade in the Russian ruble Board Managing It began reducing financial sector posi- has also been processed through London At the end of 2007, RZB’s proprietary The Order Execution Desk set up in 2006 tions at an early stage when market uncer- since the year under review. structured credit portfolio consisted pre- acts as a central hub for customer enqui- tainty started to increase. As credit markets dominantly of asset-backed securities ries. It generated another improvement in came under pressure in the second half in Thanks to the timely adjustment of risks (ABSs), collateral loan obligations (CLOs) efficiency and boosted customer satisfac- the wake of the US property market, most to allow for growing volatility in the mar- and collateral debt obligations (CDOs). It Supervisory Board’s Report tion with RZB’s bond trading activities dur- of the negative impact on RZB’s credit risk kets, the Foreign Exchange Department had a volume of about € 1,036 million, Supervisory Board’s Report i n g 20 07. portfolio was cushioned by carrying out was able to profit from the way markets some € 24 million of which was attribut- appropriate adjustments in the portfolio developed during the second half of able to the subprime mortgage mar- and making greater use of suitable hedg- 20 07. Raiffeisen Zentralbank can there- ket investments segment and a total Overview of RZB Overview of RZB Collateral and Agreement ing instruments. fore look back on a very good year in the of € 4 million of which was accounted Management foreign currency trading field. Raiffeisen for by indirect investments in so-called Zentralbank’s excellent reputation in monoliners. The structured credit portfo- Increasing the efficiency of business rela- A prime broker in the currency the marketplace has made it one of the lio was measured on the basis of market tions is the task of the Collateral and trading field world’s providers of choice for trade in prices. The uncertainty affecting the finan-

Raiffeisen Banking Group Agreement Management unit newly cre- CEE bank notes. Outside its home market, cial markets that still persists is also being Raiffeisen Banking Group ated in 2007. The primary thrusts are miti- Raiffeisen Zentralbank was connected to this also generated further growth in its reflected by market values, but it is impos-

Interview gating the credit risk associated with trad- the electronic spot trading system (EBS) trading activities in the Middle East. sible to make a more precise statement Interview ing partners and reducing the burden on for prime brokerage services in the fourth regarding future loan losses. existing lines of credit. To this end, the unit quarter. RZB, as a prime broker, thus continuously measures the current fair val- became the first Austrian bank to offer AI portfolio hit by conditions ues of mutual trading portfolios on the smaller regional banks as well as inter- in the market The hedge fund portfolio Management Report Management Report

basis of a joint agreement and allocates national banks access to the interbank FX stands its ground collateral for any shortfalls. As a result, a market. In the alternative investments (AI) field, large part of the credit risks associated RZB invested on a long-term basis in secu- Raiffeisen Zentralbank’s hedge fund port- with cross-border derivative transactions As a market maker dealing in 10 ten most rities with as low a correlation as possible folio was worth an average of € 180 mil- Segment Reports Segment Reports Segment

were appropriately hedged during the important global currencies and the curren- with traditional investment classes so as to lion during 2007. Because the equity mar- year under review. cies of its home market — Central and East- enhance efficiency and diversify the loan kets were already mature, a very conserva- ern Europe — Raiffeisen Zentralbank has portfolio. tive investment strategy was pursued. This for years been a leader in the global cur- risk-minimizing approach already paid The credit risk portfolio rency market and in demand as a trading The repercussions of the problems in the off in the second half. Because of the low partner. Its daily turnover in 2007 ranged US property market spread further and correlation of the hedge fund portfolio of Raiffeisen Zentralbank’s Credit Value between € 2.5 billion and € 3 billion. further during the second half. In the end, conventional assets, it stood its ground

Consolidated Financial Statements Financial Consolidated it was no longer limited to the US prop- well against the downtrend in the equity Statements Financial Consolidated Book team manages the credit risk portfolio created in 2006. It consists of interna- As RZB’s development work in this field erty market and products that contained a markets. It delivered a gross performance

Glossary tional corporate, financial and sovereign continued across the entire spectrum of subprime risk. The major investment banks’ of over 6 per cent during the year as a Glossary risks. At the same time, this team — as a currencies, RZB continued to optimize the refusal to actively trade in structured credit whole. Contacts Contacts 148 149 Preface 30 per cent in the Austrian derivatives mar- Preface Record turnover on the Participations and Other Vienna stock exchange ket and 50 per cent in the market in East- ern European derivatives traded in Vienna, Besides non-banking activities, this seg- improvement was mainly attributable to a During the year under review, Raiffeisen so here too, it is one of the Austrian baking ment mainly encompasses RZB’s extensive dividend-driven increase in Net interest Managing Board Managing Centrobank — RZB’s equity house — con- industry’s leaders. portfolio of equity participations. These income. Including one-off effects, profit Board Managing tinued to develop its leadership in its core also include interests in associates ac- before tax in 2006 came to € 561 mil- segment as a supra-regional Austrian counted for using the equity method. lion. New fields of business fuelled a sig- investment bank. Outlook nificant increase in the segment’s Operat- In addition, it encompasses other cross- ing income. Its turnover of Austrian equities on the The cost of raising funds in the market segment activities, including in particular Supervisory Board’s Report Vienna stock exchange grew by 30 per rose sharply during the second half of those of Raiffeisen Zentralbank as par- The process of setting up Raiffeisen Factor Supervisory Board’s Report cent to a total of over € 18 million during 2007. Although it should stabilize at a ent company and of downstream manage- Bank AG was successfully completed in the year. This all-time high gave Raiffeisen slightly lower level, funding costs will be ment holding companies. December 2007. In the future, Raiffeisen Centrobank a market share of about 10 much higher in 2008 than they still were in Factor Bank AG will handle factoring Overview of RZB Overview of RZB per cent in Vienna, making it one of this the first half of 2007. Consequently, RZB’s Profit before tax in the Participations and operations within the Raiffeisen Banking stock exchange’s most important players. growing reputation as a solid and stable Other segment came to € 47 million, fol- Group. It is owned by RZB and the Re- It was clear leader in the specialist market, issuer in conjunction with further diversifi- lowing a loss of € 36 million in 2006. The gional Raiffeisen Banks. winning 50 per cent of all mandates. In cation of its investor base will play a key addition, it has a market share of about role during the current financial year. - +(-)

Raiffeisen Banking Group €k 2007 2006 Change Raiffeisen Banking Group Net interest income 144,235 49,251 192.9%

Interview Provisioning for impairment losses (5,437) (4,269) 27.3% Interview Net interest income after provisioning 138,798 44,981 208.6% Net commission income 31,385 3,186 885.0% Trading profit (5,183) (2,758) 87.9%

Management Report Net income from derivative financial Management Report instruments 383 ( 436) — Net income from financial investments and current financial assets (2,563) 105,080 — Segment Reports Segment Reports Segment

General administrative expenses (205,689) (155,823) 32.0% Other operating profit 63,490 49,108 29.3% Net income from deconsolidations 26,455 517,401 (94.9%) Profit before tax 47,076 560,739 (91.6%) Segment’s contribution to profit before tax 3.2% (2.8%) (6.0 ppt) Basis of assessment (including market risk) 4,861,821 3,582,952 35.7%

Consolidated Financial Statements Financial Consolidated Average number of staff 3,392 3,053 11.1% Statements Financial Consolidated

Cost/income ratio 87.9% — —

Glossary Average equity 347,322 244,014 42.3% Glossary

Return on equity (before tax) 13.5% 225.9% (212.4 ppt) Contacts Contacts 150 151 Preface There follows a description of the equity the Raiffeisen Banking Group support and 5.6 per cent to € 5.5 million (market share: with the provisions of UGB, came to € 6.2 Preface

participations in this segment that are of supplement each other as they develop 31 per cent). Lendings grew by 6.5 per billion (2006: € 6.2 billion). It recorded most significance to business policy and their activities in Eastern and Southeast- cent overall to € 5.4 billion (market share: Equity of € 192.0 million (2006: € 161.5 that make the biggest contribution to prof- ern Europe within the scope of a preferred 34 per cent). million). Profit before tax of € 41.1 million Managing Board Managing its. The list of material participations in the partnership, treading new paths in the resulted in a Return on equity before tax Board Managing Notes (page 314 et seq) provides an over- bancassurance market. In the Czech Republic, where Raiffeisen of 23.3 per cent. Raiffeisen Bausparkasse view of material investments as well as Bausparkasse has had a presence since employed some 300 people in Austria. their size and structure (direct and indirect According to provisional figures, the 1993 in the form of Raiffeisen Stavebni stakes). UNIQA Group’s accounted premium Sporitelna, a.s., it acquired Hypo Sta Raiffeisen Kapitalanlage-Gesellschaft income in 2007 was 3.3 per cent up on vebni Sporitelna, a.s. in 2007, further m.b.H. (Raiffeisen Capital Manage- Supervisory Board’s Report UNIQA Versicherungen AG. UNIQA the previous year at € 5,259 million. For- strengthening its position in the market. In ment). This company trades under the Supervisory Board’s Report Group Austria is one of Central Europe’s eign subsidiaries accounted for € 1,744 addition, it also operates in Slovakia, Cro- umbrella of the Raiffeisen Capital Man- leading insurance groups. It operates million of this total (increase of 4.4 per atia and Romania. It concluded some agement (RCM) brand together with its under the umbrella of listed company cent). Growth was strongest in Eastern 363,000 new contracts in those coun- three wholly-owned subsidiaries Raiffeisen Overview of RZB Overview of RZB UNIQA Versicherungen AG. It provides and Southeastern Europe, where pre- tries. As a result, new business gener- Immobilien Kapitalanlage-GmbH, Raiff a complete range of insurance products mium grew by 25.6 per cent to € 803 mil- ated by its foreign subsidiaries exceeded eisen Vermögensverwaltungsbank AG via every sales channel in Austria and 19 lion. As a result, the group’s foreign pre- new business in Austria. The portfolio in and foreign sales company Raiffeisen insurance markets in the CEE region. In mium income accounted for over 33 per those countries contained roughly two International Fund Advisory (RIFA). 2007, it entered the markets of Albania, cent of its consolidated premium. The million contracts. The balance sheet total

Raiffeisen Banking Group Macedonia and Kosovo. UNIQA and group’s accounted premium income in of Raiffeisen Bausparkasse, whose finan- RCM’s successful development rests on Raiffeisen Banking Group Austria grew by 2.8 per cent to € 3.516 cial statements are prepared in conformity three pillars: institutional business (funds

Interview million. According to provisional figures, under management at year-end 2007: Interview Accounted Premium Income of the UNIQA Group’s profit from ordinary € 21.4 billion); public operations (funds UNIQA Group Austria activities in 2007 was 43 per cent up on Raiffeisen Bausparkasse: Loan under management: € 16.6 billion); and the previous year to € 340 million (2006: Allocations and Lendings in Austria foreign business (funds under manage- € m* 5,259 5,091 € 238.5 million). ment: € 6.5 billion). The latter pillar is

Management Report 1,744 €m Management Report 4,730

1,671 becoming ever stronger. 1,345 Raiffeisen Bausparkasse Gesellschaft 5,350 5,025 4,854 3,778 m.b.H. Raiffeisen Bausparkasse recorded At year end, RCM had funds under man- 4,474 4,586 701 strong growth in both savings and loans agement of € 38 billion in Austria, giving it Segment Reports Segment Reports Segment

during the year under review. It concluded a market share of 23.2 per cent and mar- 3,133 a record total of 308,400 new build- ket leadership. Numerous awards bore 402 ing society contracts (increase of 12 per witness to RCM’s superb quality standards 1,139 cent), giving it a market share of 33 per 1,020 1,053 in every business segment. cent. Loan allocations came to € 1.14 bil- 796 655 lion, which was 8.3 per cent up on 2006 According to provisional figures, Raiffeisen and corresponds to a market share of Capital Management’s revenues grew

Consolidated Financial Statements Financial Consolidated 32 per cent. Demand for redevelopment by 8.3 per cent to € 262 million, and it Statements Financial Consolidated

2003 2004 2005 2006 2007 and renovation finance was particularly reported profit before tax (applying UGB) International component 2003 2004 2005 2006 2007 Glossary brisk. Because large numbers of building of € 10 million. Its balance sheet total Glossary

*Includes savings components of premium income from Total lendings unit-linked and index-linked life insurance. society contracts matured, deposits fell by Annual loan allocations grew to € 146 million (2006: € 140 mil- Contacts Contacts 152 153 Preface a Belarusan brewery for Heineken, the subsidiary called snack+co GmbH, and ÖVK Vorsorgekasse AG (ÖVK). ÖVK is Preface Market Shares in the Austrian Investment Fund Market acquisition of an Italian steelworks for a it created the necessary fresh food logis- a staff benefit fund that offers staff benefit Ukrainian steel maker, acting as consul- tics system. LLI entered the Russian market products within the scope of Austria’s new tant during the acquisition of Hungary’s and began developing subsidiaries of its termination benefits system Abfertigung Managing Board Managing MAV by Austria’s RailCargo, advising own in Serbia and Romania. LLI is market neu to all companies operating in Austria Board Managing Oesterreichische Nationalbank during leader in its two core business segments — and to their employees via the sales net- the sale of Austria Card, advising Mattoni Flour and Milling and Vending — in Aus- works of the Raiffeisen Banking Group during the acquisition of Waldquelle, tria and in a number of neighbouring coun- and UNIQA, and since 2008, it has also and advising Raiffeisen Bausparkasse tries. Where it is not, it intends to become been offering employers benefit products during the acquisition of Hypo Stavebni market leader. intended for the self-employed. At the end Supervisory Board’s Report Sporitelna, as, in the Czech Republic. of 2007, ÖVK had € 339 million of funds Supervisory Board’s Report The group’s consolidated revenues in- under management, or 44 per cent more RIAG had 71 employees in 2007. Accord- creased to € 836.7 million in its 2006/07 than at the end of 2006. ÖVK’s customer Raiffeisen Capital Management: 23.19% ing to provisional figures, it recorded financial year (2005/06: € 678.7 mil- base grew by 7 per cent to approximate- Overview of RZB Overview of RZB Competitor #1: 18.47% gross fees of € 31.8 million (2006: € 18.6 lion). Its profit before tax came to € 36.7 ly 92,000 companies, giving it a market Competitor #2 15.23% Other*: 43.1% million) and profit from ordinary activi- million (2005/06: € 35.5 million). The LLI share of about 28 per cent. *Of which 5.79 ppt accounted for by other investment ties of € 10.0 million (2006: € 6.0 mil- Group prepares its financial statements in fund companies in the Raiffeisen Banking Group. lion). Its return on equity came to 108 per conformity with IFRSs. It had an average The number of persons entitled in expec- cent. RIAG’s balance sheet total grew to of 3,599 employees (487 of whom were tancy grew by a good 20 per cent to

Raiffeisen Banking Group € 29.9 million at year-end. working in Austria). Its balance sheet total 1,124,000. ÖVK thus reinforced its posi- Raiffeisen Banking Group lion). Its equity was unchanged on the grew by 30.1 per cent to € 958.1 mil- tion as Austria’s second-largest staff bene-

Interview previous year at € 25 million. Its return LLI (Leipnik-Lundenburger Invest Beteili lion. Its return on equity before tax came fit fund. In a generally bad year for invest- Interview on equity before tax came to 40 per gungs AG). This holding company’s core to 10.7 per cent. ments, it achieved performance of 1.5 per cent (2006: 35 per cent). The company business is the management of its stra- cent. employed an average of 287 people, an tegic interests in the food and beverage ÖPAG Pensionskassen AG. ÖPAG is average of 277 of whom were working in industries in Austria and the CEE region, also among Austria’s leaders in every one Raiffeisen Wohnbaubank AG (RWBB). Management Report Management Report

Austria. namely in the Flour and Milling segment, of its performance numbers. Since 2007, it This specialist bank was set up in 1994. It the Vending segment (hot beverages and has been offering new customers a newly issues tax-privileged home construction Raiffeisen Investment AG (RIAG). RIAG food from vending machines) and in the created pension fund model that lets them bonds. Proceeds from their sale in 2007 operates in both domestic and interna- Other segment (sugar, specialities, fruit choose between three investment groups exceeded € 358 million (increase of Segment Reports Segment Reports Segment

tional M&A markets. It recorded its best- and casinos). with different equity allocations and, there- 111 per cent versus 2006). This was the ever result, arranging a total of 40 M&A fore, different levels of risk and returns. biggest issued volume in the company’s and privatization transactions in Aus- In July 2007, LLI completed its entry into the history, greatly strengthening its position tria, Central and Eastern Europe and Tur- Southeastern European milling market. At The company had market shares of about as a key partner of the Raiffeisen Banking key (transaction volume: € 20 billion). The the same time, it set up a new milling hold- a quarter in terms of beneficiaries (per- Group in the home construction project most important transactions involved ing company called LLI Euromills GmbH sons entitled in expectancy and benefit re- refinancing field. advising American financial group AIG so as to be able to more efficiently man- cipients) and pension fund contributions. It

Consolidated Financial Statements Financial Consolidated during its acquisition of Bulgarian Telekom, age its steadily growing milling group. In had a much higher market share of 40 per The company prepares its financial state- Statements Financial Consolidated

the privatizations of Telekom Srpske, Tur- the Vending segment, it supplemented its cent in terms of numbers of contracts. ments in conformity with UGB. Accord-

Glossary key’s petrochemical refinery Petkim and former main product, coffee, with fresh ing to provisional figures, it had a year- Glossary Hungary’s FHB-Bank, the acquisition of snacks delivered daily by a newly founded end balance sheet total of € 1,479 million Contacts Contacts 154 155 Preface (2006: € 1,176 million) and eligible own terminal solutions for businesses and, since offices, shopping centres and residential and it ranks second in Austria in competi- Preface

funds of € 5.72 million (2006: € 5.70 mil- 2008, holiday cancellation insurance. structures are to be built on the proper- tion with foreign service providers. Includ- lion) and recorded profit from ordinary ties that it has purchased. The company is ing the staff of subsidiaries, it had a total of activities of € 0.76 million (2006: € 1.03 PayLife Bank GmbH. This company was aiming for a total ongoing project volume 1,282 employees at year-end. Raiffeisen Managing Board Managing million). This resulted in a return on equity renamed from Europay Austria in Septem- (proprietary projects and projects commis- Informatik recorded revenues of € 214.8 Board Managing before tax of 12.0 per cent (2006: 16.9 ber 2007. It is a universal supplier of cash- sioned by third parties) in Austria and Cen- in the year under review. per cent). fee payment solutions in Austria. PayLife tral and Eastern Europe of about € 1,500 services roughly 97,600 contractual part- to 2,000 million and annual output of Notartreuhandbank AG. This special- ners and 8.4 million payment cards in Aus- about € 300 to € 400 million. Strategic goals and outlook ist bank for the fiduciary deposits of nota- tria with its Maestro, Quick, MasterCard, Supervisory Board’s Report ries is certified by the Österreichische VISA, JCB and CUP products and its new During 2007, Raiffeisen evolution e m - In line with the principles currently underly- Supervisory Board’s Report Notariatskammer (Austrian chamber of POS terminal. ployed an average of 189 people (106 ing RZB’s equity participations strategy, the notaries). It celebrated its 10th anniver- of whom were working in Austria) and principal focus in the Participations and sary in the year under review. It had a All its business segments (MasterCard, posted revenues of € 175 million. It had Other segment during the 2008 financial Overview of RZB Overview of RZB balance sheet total of € 937 million at Maestro and Quick) continued to grow a balance sheet total of € 300 million. It year will again be on entering into and year-end 2007. Averaged over the year, strongly during the year under review. The posted profit before tax of € 9.7 mil- holding long-term investments in compa- it had deposits under management of Prepaid segment with its top-up card has lion and a return on equity before tax of nies whose activities lie within RZB’s core € 879 million in approximately 56,300 been attracting a great deal of interest 7.3 per cent (all provisional figures). areas of business or which are able, by vir- accounts. That was 8 per cent or € 66 mil- both in Austria and abroad. The number tue of their business activities, to support

Raiffeisen Banking Group lion more than in 2006. of Maestro cards passed seven million in Raiffeisen Informatik GmbH. For over RZB in those areas. Another focus in this Raiffeisen Banking Group 2007, and PayLife products were used to 35 years, this company has been rendering segment will be on the subsidiaries and

Interview card complete Service Bank AG (card pay for 880.7 million transactions. The professional IT services for the Raiffeisen associates that make products and render Interview complete). This is the banner under which cards were used 441.7 million times to Banking Group and key accounts custom- services for the Raiffeisen Banking Group VISA-SERVICE Kreditkarten AG has been pay for transactions totalling € 15.9 billion. ers. Its product line ranges from IT opera- as a whole. This must be seen against the operating since September 2007. card tions to outsourcing, security services, soft- background of Raiffeisen Zentrabank’s complete reported aggregate turnover of Raiffeisen evolution project develop- ware solutions and output services to client role as the central institution within the Management Report Management Report

€ 6.4 billion generated by over a million ment GmbH. This company and its sub- management. During 2007, it took over Raiffeisen Banking Group in Austria. If suit- cardholders at approximately 100,000 sidiaries are leading property develop- the IT operations of the regional hospi- able opportunities arise, RZB will consider points of sale. € 3.3 billion of that turnover ers operating in Austria and Central and tals in Lower Austria. Raiffeisen Informatik acquiring purely financial investments on was generated in Austria. Eastern Europe. Besides developing and is Austria’s largest provider of IT services, a case-by-case basis. Segment Reports Segment Reports Segment

managing its own real estate projects, The company has a market share of about Raiffeisen evolution also accepts commis- 44 per cent (in terms of cards issued), sions within the scope of which it performs and card complete’s VISA cards are still project management and project control the highest-turnover credit cards in Aus- functions. tria. Prepaid cards for the Austrian and German market have been added to the During 2007, it both sold finished projects

Consolidated Financial Statements Financial Consolidated extensive product line. Besides traditional (for instance in Poland and Austria) and Statements Financial Consolidated

VISA products, the company now also pro- acquired subsidiaries. The main targets

Glossary vides settlement services for all the other of its activities were Hungary, Poland, the Glossary major payment cards, tailor-made POS Ukraine (market entry) and Austria, where Contacts Contacts 156 157 Preface Preface Consolidated

Managing Board Managing Financial Statements Board Managing Income statement

1/1–31/12 1/1–31/12 €000 Notes 2007 2006 Change Supervisory Board’s Report Supervisory Board’s Report Interest income 7,387,011 5,166,127 43.0% Current income from associates 130,214 78,892 65.1% Interest expenses (4,575,006) (3,058,526) 49.6%

Overview of RZB Net interest income (2) 2,942,219 2,186,493 34.6% Overview of RZB Provisioning for impairment losses (3) (307,588) (346,431) (11.2%) Net interest income after provisioning 2,634,631 1,840,062 43.2% Commission income 1,778,109 1,372,801 29.5% Commission expense (262,438) (195,783) 34.0% Raiffeisen Banking Group Net commission income (4) 1,515,671 1,177,018 28.8% Raiffeisen Banking Group Trading profit (5) 94,482 256,685 (63.2%) Interview Interview Valuation result from derivatives (6) (23,026) (41,533) (44.6%) Net income from financial investments (7) (214,162) 141,551 – General administrative expenses (8) (2,645,042) (2,113,095) 25.2% Other operating profit/(loss) (9) 95,815 104,228 (8.1%) Management Report Management Report Income from disposal of group assets (10) 26,455 517,401 (94.9%) Profit before tax 1,484,824 1,882,316 (21.1%) Income taxes (11) (294,749) (250,917) 17.5% Segment Reports Segment Reports

Profit after tax 1,190,075 1,631,399 (27.1%) Minority interests in profit (411,795) (461,967) (10.9%) Consolidated profit 778,280 1,169,432 (33.4%)

1/1–31/12 1/1–31/12 €000 Notes 2007 2006 Change Earnings per share (12) 150.7 239.9 (89.2) Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

There were no conversion or option rights outstanding, so undiluted earnings per share

Glossary are equal to diluted earnings per share. Glossary

Contacts Contacts 158 159 Preface Preface

Profit development

Interim results Managing Board Managing €000 H1/2004 H2/2004 H1/2005 H2/2005 €000 H1/2006 H2/2006 H1/2007 H2/2007 Board Managing Net interest income 515,651 608,216 732,835 873,388 Net interest income 998,656 1,187,837 1,313,514 1,628,705 Provisioning for Provisioning for impairment losses (93,689) (102,034) (110,997) (93,623) impairment losses (160,353) (186,078) (150,531) (157,056) Net interest income Net interest income after provisioning 421,962 506,182 621,838 777,765 after provisioning 838,303 1,001,759 1,162,983 1,471,649 Supervisory Board’s Report Supervisory Board’s Report Net commission income 299,686 325,773 382,392 436,450 Net commission income 531,704 645,314 699,272 816,399 Trading profit 56,329 113,517 40,300 132,147 Trading profit 148,355 108,330 109,451 (14,969) Valuation result from Valuation result from Overview of RZB derivatives 2,297 (11,720) 10,986 3,239 derivatives (54,325) 12,792 (407) (22,619) Overview of RZB Net income from Net income from financial investments 26,070 67,882 21,855 4,182 financial investments (8,796) 150,347 282 (214,444) General administrative General administrative expenses (533,504) (662,556) (688,713) (885,314) expenses (936,933) (1,176,162) (1,214,215) (1,430,827)

Raiffeisen Banking Group Other operating Other operating Raiffeisen Banking Group profit/(loss) 35,660 44,728 44,123 28,613 profit/(loss) 60,685 43,543 73,854 21,961

Interview Income from disposal Income from disposal Interview of group assets – – – – of group assets – 517,401 14,348 12,107 Profit before tax 308,500 383,806 432,782 497,082 Profit before tax 578,992 1,303,324 845,567 639,256 Income taxes (44,542) (81,982) (110,446) (114,774) Income taxes (98,596) (152,321) (163,135) (131,614) Profit after tax 263,958 301,824 322,336 382,308 Profit after tax 480,396 1,151,003 682,432 507,642 Management Report Management Report Minority interests Minority interests in profit (39,323) (80,780) (104,992) (148,788) in profit (124,221) (337,746) (201,645) (210,150) Consolidated profit 224,636 221,043 217,344 233,520 Consolidated profit 356,175 813,257 480,787 297,493

Segment Reports > Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 160 161 Preface Preface

Balance sheet

Assets Managing Board Managing €000 Notes 31/12/2007 31/12/2006 Change Board Managing Cash reserve (14,35) 5,748,189 5,017,028 14.6% Loans and advances to banks (15,35,36) 30,910,100 32,005,923 (3.4%) Loans and advances to customers (16,35,36) 73,070,577 53,105,675 37.6% Impairment losses on loans and advances (17) (1,452,505) (1,289,251) 12.7% Supervisory Board’s Report Trading assets (18,35,36) 10,820,305 9,854,848 9.8% Supervisory Board’s Report Derivatives (19,35,36) 1,255,042 1,022,277 22.8% Financial investments (20,35,36) 11,731,629 11,028,576 6.4%

Overview of RZB Investments in associates (21,35,36) 765,913 633,187 21.0% Overview of RZB Intangible fixed assets (22,24,35) 1,283,833 1,350,342 (4.9%) Tangible fixed assets (23,24,35) 1,431,436 1,316,963 8.7% Other assets (25,35,36) 1,837,480 1,583,281 16.1% Total assets 137,401,999 115,628,849 18.8% Raiffeisen Banking Group Raiffeisen Banking Group Equity and liabilities

Interview €000 Notes 31/12/2007 31/12/2006 Change Interview Deposits from banks (26,35,36) 48,899,185 44,129,411 10.8% Deposits from customers (27,35,36) 55,368,996 44,727,489 23.8% Liabilities evidenced by paper (28,35,36) 14,677,509 11,322,460 29.6%

Management Report Provisions for liabilities and charges (29,35,36) 583,774 509,152 14.7% Management Report Trading liabilities (30,35,36) 3,090,841 3,141,250 (1.6%) Derivatives (31,35) 1,305,139 943,578 38.3% Other liabilities (32,35,36) 1,226,751 1,322,701 (7.3%) Segment Reports Segment Reports Subordinated capital (33,35,36) 3,827,432 2,895,608 32.2% Equity (34,35) 8,422,372 6,637,200 26.9% Consolidated equity 4,888,619 3,573,721 36.8% Consolidated profit 778,280 1,169,432 (33.4%) Minority interests 2,755,473 1,894,047 45.5% Total equity and liabilities 137,401,999 115,628,849 18.8% Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 162 163 Preface Preface

Statement of changes in equity

Subscribed Capital Retained Consolidated minority Managing Board Managing €000 capital reserves earnings profit interests Total Board Managing Equity as of 1/1/2006 386,114 635,769 2,046,612 450,864 1,430,361 4,949,721 Capital increases 18,349 131,631 – – 50,806 200,786 Transferred to retained earnings – – 344,426 (344,426) – – Dividend payments – – – (106,438) (71,658) (178,096) Supervisory Board’s Report Comprehensive income – – (7,693) 1,169,432 489,538 1,651,276 Supervisory Board’s Report Other changes – – 18,513 – (5,000) 13,513 Equity as of 31/12/2006 404,463 767,400 2,401,858 1,169,432 1,894,047 6,637,200 Overview of RZB Overview of RZB Subscribed Capital Retained Consolidated minority €000 capital reserves earnings profit interests Total Equity as of 1/1/2007 404,463 767,400 2,401,858 1,169,432 1,894,047 6,637,200 Capital increases 19,259 138,160 – – 698,843 856,262

Raiffeisen Banking Group Transferred to retained earnings – – 1,059,447 (1,059,447) – – Raiffeisen Banking Group Dividend payments – – – (109,985) (82,373) (192,358)

Interview Comprehensive income – – (40,076) 778,280 395,004 1,133,208 Interview Dilution – – 157,038 – (157,038) – Other changes – – (18,930) – 6,990 (11,940) Equity as of 31/12/2007 423,722 905,560 3,559,337 778,280 2,755,473 8,422,372 Management Report Management Report Further details to the above mentioned changes are reported under note (34) equity. Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 164 165 Preface Items booked directly in retained earnings (exchange differences, capital hedge, cash Preface Comprehensive income flow hedge, valuation of a-f-s financial assets) developed as follows: Comprehensive income comprises consolidated profit as well as income and expenses recognised directly in equity. Valuation of

Managing Board Managing Exchange Capital Cash flow a-f-s financial Board Managing Group equity Minority interests €000 differences hedge hedge assets €000 2007 2006 2007 2006 As of 1/1/2006 (12,349) (26,003) (88,398) – Consolidated Net changes in profit 778,280 1,169,432 411,795 461,967 financial period (26,495) 55,174 (79,299) 13,352 Exchange differences (112,286) (26,495) (51,602) 3,874 As of 31/12/2006 (38,844) 29,171 (167,697) 13,352 Supervisory Board’s Report Supervisory Board’s Report Capital hedge 75,933 55,174 34,917 23,598 Cash flow hedge (8,168) (79,299) – – Valuation of Exchange Capital Cash flow a-f-s financial Changes in equity €000 differences hedge hedge assets Overview of RZB of companies valued Overview of RZB at equity (15,801) 10,409 – – As of 1/1/2007 (38,844) 29,171 (167,697) 13,352 Valuation result Net changes in of available-for-sale financial period (112,286) 75,933 (8,168) 15,923 financial assets 15,923 13,352 (105) 99 As of 31/12/2007 (151,130) 105,104 (175,865) 29,275 Sundry income and Raiffeisen Banking Group expenses directly Raiffeisen Banking Group recognised in equity (346) (687) – – Dilution

Interview Deferred taxes on Interview income and expenses Dilution comprises the effects of Raiffeisen Zentralbank’s waiver of rights in the course of directly recognised capital increases at Raiffeisen International Bank-Holding AG. in equity 4,670 19,853 – – Comprehensive Management Report income 738,204 1,161,739 395,004 489,538 Other changes Management Report

Capital hedges comprise hedges for investments in economically independent sub-units Other changes in retained earnings are due to changes in shares of group units and in conformity with IAS 39.102. currency differences between the income statement and the balance sheet. Segment Reports Segment Reports

The item changes in equity of companies valued at-equity comprises the net measure- ments assignable to RZB on a proportionate basis that require recognition in equity but not in the income statement. They derive predominantly from available-for-sale portfolios of companies valued at-equity.

The item valuation result of available-for-sale financial assets mainly contains net valua-

Consolidated Financial Statements Financial Consolidated tions of participations without effecting the income statement. Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 166 167 Preface Preface

Cash flow statement

€000 2007 2006 €000 2007 2006 Profit after tax 1,190,075 1,631,399 Capital increases 856,262 200,786 Managing Board Managing Board Managing Non-cash positions in profit and transition to Inflows/outflows of subordinated capital 931,823 1,264,970 net cash from operating activities: Dividends paid (192,358) (178,097) Write-downs/write-ups of tangible fixed Net cash from financing activities 1,595,727 1,287,659 assets and financial investments 285,368 199,984 Net provisioning for liabilities and charges €000 2007 2006 and impairment losses 505,389 553,521 Supervisory Board’s Report Cash and cash equivalents at the end Supervisory Board’s Report Gains (losses) from disposals of tangible of previous period 5,017,028 3,305,203 fixed assets and financial investments 3,943 (90,363) Net cash from operating activities (761,980) 853,326 Other adjustments (net) 370,684 (85,076)

Overview of RZB Net cash from investing activities (51,598) (503,491) Overview of RZB Subtotal 2,355,459 2,209,465 Net cash from financing activities 1,595,727 1,287,659 Changes in assets and liabilities arising from operating activities after corrections for Effect of exchange rate changes (50,988) 74,331 non-cash positions: Cash and cash equivalents at the end of period 5,748,189 5,017,028 Loans and advances to banks and customers (27,237,846) (21,594,475)

Raiffeisen Banking Group Trading assets/trading liabilities (net) (1,116,570) (1,558,282) The cash flow statement shows the structure and changes in cash and cash equivalents Raiffeisen Banking Group Other assets/other liabilities (net) (1,957,221) (1,505,364) during the financial year and is broken down into three sections: operating activities,

Interview Deposits from banks and customers 21,076,517 15,932,848 investing activities and financing activities. Interview Liabilities evidenced by paper 3,618,754 5,208,145 Net cash from operating activities comprises inflows and outflows from loans and advan- Interest received 7,179,118 4,714,647 ces to banks and customers, from deposits from banks and customers as well as liabilities Dividends received 26,096 23,835 evidenced by paper. Further, inflows and outflows from trading assets and liabilities, Management Report Interest paid (4,577,040) (2,491,426) from derivatives, as well as from other assets and other liabilities are shown in operating Management Report Income taxes paid (129,247) (86,066) activities. Interest and dividends received from operating activities are also reflected in Net cash from operating activities (761,980) 853,326 net cash from operating activities.

Segment Reports Proceeds from sale of: Segment Reports

Net cash from investing activities shows inflows and outflows from financial investments, Financial investments and equity participations 2,975,746 2,884,941 tangible and intangible assets, proceeds from disposal of group assets, and payments for Tangible and intangible fixed assets 255,768 146,159 acquisition of subsidiaries. Proceeds from disposal of group assets 31,530 569,369 Payments for purchase of: Net cash from financing activities consists of inflows and outflows of equity and subordi- Financial investments and equity participations (2,633,538) (3,091,402) nated capital. This covers capital increases, dividend payments, and changes in subordi- Tangible and intangible fixed assets (675,817) (538,573) nated capital. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Payments for acquisition of subsidiaries (5,287) (473,985) Cash and cash equivalents include the cash reserve recognised in the balance sheet, Net cash from investing activities (51,598) (503,491) Glossary which consists of cash in hand and balances at central banks due at call. It does not in- Glossary > clude loans and advances to banks that are due at call, which are assigned to operating

Contacts activities. Contacts 168 169 Preface Retail customers are all private individuals (consumers) as well as small and medium- Preface Segment reporting sized enterprises with annual revenues of less than € 5 million (small entities), whereby Segment reporting by business segment country specific deviations may occur – other than those engaged in project or trade The basis for primary segment reporting according to IAS 14 is RZB’s internal manage- finance related activities. The segment also includes micro customers with annual revenues Managing Board Managing ment reporting system which is mainly customer-oriented. Business is divided into the of less than € 1 million and a loan exposure of less than € 100 thousand. Customers are Board Managing following segments: offered standardised products such as saving books and saving deposits, time deposits, current and salary accounts, consumer credits, overdraft lines, credit cards and mortgage ■ Corporate customers loans, as well as other earmarked loans. ■ Financial institutions and public sector ■ Retail customers The retail customers segment encompasses retail banking in the CEE region, the retail Supervisory Board’s Report Supervisory Board’s Report ■ Proprietary trading operations of Raiffeisen-Leasing in Austria and the CEE region and private banking ope- ■ Participations and other rations in Austria and the CEE region. According to the prescribed allocation of tasks and responsibilities within the Raiffeisen Banking Group (RBG), Raiffeisen Zentralbank The corporate customers segment encompasses business with Austria’s “Top 1,000”, does not engage in retail banking activities in Austria. Earnings arising from private Overview of RZB Overview of RZB with large corporates and mid-market companies from Central and Eastern Europe (CEE) banking provided by a number of Group units are also included in this customer seg- as well as with companies from other countries that are operating in the CEE region, ment. In Austria, private banking operations are the domain of Kathrein & Co. Privatge- including especially multinationals. The criteria are key ratios like revenues, profit and schäftsbank AG. In the CEE region, this sub-segment is handled by some Network Banks number of employees. Small and medium-sized companies are considered corporate offering an individualised advisory approach for high-net-worth individuals and asset- customers if their annual sales exceed € 5 million or if their business clearly relates to management services.

Raiffeisen Banking Group project or trade finance. All other small and medium-sized enterprises are included in the Raiffeisen Banking Group small enterprises sub-segment of the retail customers segment. The proprietary trading segment encompasses proprietary trading in the Treasury and

Interview Investment Banking divisions of Raiffeisen Zentralbank, Raiffeisen Centrobank AG and Interview The financial institutions and public sector segment encompasses business with banks, the Network Banks in the CEE region. financial service providers, insurers and public sector entities. This excludes transactions connected to proprietary trading with financial instruments and investments within Treasury encompasses the Group’s own positions in on-balance-sheet and off-balance- the asset and liability management, as those are allocated to the proprietary trading sheet interest-based and currency-based products (forwards, futures, options). These Management Report segment. encompass interest-rate business, foreign-exchange business, liquidity management and Management Report asset liability management (covering with matching assets). The treasury sub-segment The banks sub-segment encompasses national and international commercial, retail and also encompasses portfolio management of equities, bonds and funds, short-term and private banks. Banks also include supranational institutions like the World Bank, the Euro- long-term alternative investments (combinations of securities products with derivative pro- Segment Reports Segment Reports

pean Bank for Reconstruction and Development (EBRD), the European Investment Bank ducts) and hybrid securities. In addition, the Group does securities lending and repo busi- (EIB), and the International Monetary Fund (IMF). Financial service providers include ness with foreign counterparties in this sub-segment. Pure trading in financial instruments brokers and asset managers such as investment banks, investment fund companies, is centrally steered and subject to strictly controlled limits. In addition, the Group has a leasing companies as well as companies operating in businesses related to the credit portfolio of medium-term and long-term financial investments. Whereas the entirety of the industry. Insurance companies consist of all kind of insurers and reinsurers. They include Group's proprietary trading activities are included in this segment, contributions to profit property, health, life and pension insurers. made by some treasury transactions carried out on customer's account are recognised in the corporate and retail customers segments: Components of proceeds that exceed

Consolidated Financial Statements Financial Consolidated The public sector comprises all public sector entities such as ministries, provinces, munici- prices attainable in the market are assigned to those customer segments. Statements Financial Consolidated

palities and similar public corporations. Embassies and trade representations also belong

Glossary to this segment. The investment banking sub-segment encompasses transactions in securities and equity Glossary participations – in particular accompanying issuances – and market making. Contacts Contacts 170 171 Preface Besides non-banking activities, the participations and other segment mainly includes The segment reporting is based on RZB’s internal management income statement which Preface

the management of RZB's extensive portfolio of equity participations, which also compri- is similar to a multi-stage contribution margin calculation. Income and expenses are al- ses interests in associates valued at-equity. In addition, this segment encompasses other located according to the causative principle. Income items are net interest income, net cross-segment activities, including in particular those carried out by Raiffeisen Zentral- commission income, trading profit and other operating profit/loss. Net interest income Managing Board Managing bank as parent company and by subordinate management holding companies. is calculated using the market interest rate method. Net interest received from equity is Board Managing apportioned to individual segments on the basis of regulatory capital requirements and RZB applies two central steering benchmarks: recognised under net interest income.

■ The return on equity before tax correlates profit before tax to average equity emplo- Provisioning for impairment losses on loans and advances consists of net allocations of yed and expresses the return on capital employed. individual and portfolio-based impairment losses on credit risks, direct write-downs as Supervisory Board’s Report well as income received from written-down claims. General administrative expenses Supervisory Board’s Report ■ The cost/income ratio represents the cost efficiency of business segments. It is calcula- include direct and indirect costs. Direct costs (staff expenses and other administrative ted as quotient of general administrative expenses and the sum of net interest income, expenses) are incurred by business segments while the indirect costs are allocated accor- net commission income, trading profit/loss and other operating income/loss. ding to agreed ratios. Overview of RZB Overview of RZB

The risk-weighted assessment base pursuant to Section 22 of the Austrian Banking Act (BWG) serves as sector-specific substitute for segment assets (including market risk).

Financial year 2007 Financial

Raiffeisen Banking Group Corporate institutions and Retail Proprietary Participations Raiffeisen Banking Group €000 customers public sector customers trading and other Total Net interest income 966,077 233,398 1,441,582 156,928 144,235 2,942,219 Interview Interview Provisioning for impairment losses (90,851) (992) (209,838) (470) (5,437) (307,588) Net interest income after provisioning 875,227 232,405 1,231,744 156,458 138,798 2,634,631 Net commission income 488,536 154,961 814,384 26,405 31,385 1,515,671

Management Report Trading profit/(loss) 21,314 23,360 5,265 49,725 (5,183) 94,482 Management Report Valuation result from derivatives 319 76 (8,620) (15,184) 383 (23,026) Net income from financial investments 737 (52,600) 77 (159,813) (2,563) (214,162) General administrative expenses (555,530) (162,613) (1,560,952) (160,257) (205,689) (2,645,042) Segment Reports Segment Reports

Other operating profit/(loss) 17,023 2,228 12,984 90 63,490 95,815 Income from disposal of group assets – – – – 26,455 26,455 Profit before tax 847,626 197,817 494,881 (102,576) 47,076 1,484,824 Risk-weighted assets (incl. market risk) 39,747,699 15,006,492 19,715,221 14,306,580 4,861,821 93,637,813 Own funds requirement 3,179,816 1,200,519 1,577,218 1,144,526 388,946 7,491,025 Average number of staff 8,642 2,408 41,818 2,148 3,392 58,408 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Cost/income ratio 37.2% 39.3% 68.6% 68.7% 87.9% 56.9% Average equity 2,839,521 1,072,043 1,408,428 1,022,042 347,322 6,689,356 Glossary Glossary

Return on Equity before tax 28.8% 20.5% 38.6% – 13.5% 22.2% Contacts Contacts 172 173 Preface Preface

Financial year 2006 Financial Corporate institutions and Retail Proprietary Participations €000 customers public sector customers trading and other Total Net interest income 702,663 180,831 1,030,327 223,422 49,251 2,186,493 Managing Board Managing Provisioning for impairment losses (147,652) (2,825) (191,709) 24 (4,269) (346,431) Board Managing Net interest income after provisioning 555,011 178,006 838,618 223,446 44,981 1,840,062 Net commission income 413,865 140,083 603,647 16,237 3,186 1,177,018 Trading profit/(loss) 21,136 21,306 1,913 215,088 (2,758) 256,685 Valuation result from derivatives 440 (30) 1,249 (42,756) (436) (41,533) Supervisory Board’s Report Net income from financial investments 1,164 (439) – 35,745 105,080 141,551 Supervisory Board’s Report General administrative expenses (454,028) (138,872) (1,204,399) (159,973) (155,823) (2,113,095) Other operating profit/(loss) 27,527 7,531 17,309 2,752 49,108 104,228

Overview of RZB Income from disposal of group assets – – – – 517,401 517,401 Overview of RZB Profit before tax 565,116 207,586 258,336 290,539 560,739 1,882,316 Risk-weighted assets (incl. market risk) 29,060,851 10,611,175 14,846,100 12,555,160 3,582,952 70,656,238 Own funds requirement 2,324,868 848,894 1,187,688 1,004,413 286,636 5,652,499 Average number of staff 8,311 2,129 36,153 2,119 3,053 51,765

Raiffeisen Banking Group Cost/income ratio 39.0% 39.7% 72.9% 35.0% – 56.7% Raiffeisen Banking Group Average equity 1,979,168 722,666 1,011,083 855,060 244,014 4,811,991 Interview Return on Equity before tax 26.8% 31.1% 28.4% 33.0% 225.9% 39.1% Interview

Segment report by region ■ Southeastern Europe (SEE) Secondary segment reporting shows earnings components and portfolio figures by regio- Southeastern Europe includes Albania, Bosnia and Herzegovina, Bulgaria, Kosovo, Management Report nal aspects. Allocation criterion is the head office of the respective company. In addition Croatia, Serbia, Moldova and Romania. Management Report to direct results, funding costs, capital hedging costs and direct management costs are ■ Commonwealth of Independent States (CIS) apportioned to regions according to their causes. The regional segments under review This segment contains the members of the Commonwealth of Independent States – are described below: created from parts of the former Soviet Union – where RZB is active, namely Belarus, Segment Reports Segment Reports

Kazakhstan, Russia and Ukraine. ■ Austria ■ Other Austria encompasses business done at the head office of Raiffeisen Zentralbank and This segment encompasses RZB's branches in London, Singapore and Beijing and the results generated by the Group's numerous subsidiaries in Austria. the Group units located in other countries such as Malta, the USA, Germany and ■ Central Europe (CE) Switzerland. This segment contains the five countries that joined the EU on 1 May 2004, and in which RZB operates. They are the Czech Republic, Hungary, Poland, Slovakia and Income items and head-office costs in Austria, most of which accrue within RZB, are ap-

Consolidated Financial Statements Financial Consolidated portioned between the above segments according to the causative principle. If a direct Statements Financial Consolidated Slovenia. allocation is impossible, allocation is based on other criteria such as risk-weighted assets

Glossary (i.e. the basis of assessment including market risk). Glossary

Contacts Contacts 174 175 Preface Regional allocation by respective head offices considering refinancing costs: Preface

Financial year 2007 €000 Austria CE SEE CIS Other Total Managing Board Managing Net interest income 504,941 805,165 707,749 850,493 73,871 2,942,219 Board Managing Provisioning for impairment losses 51,238 (122,306) (60,280) (168,793) (7,447) (307,588) Net interest income after provisioning 556,179 682,859 647,469 681,700 66,424 2,634,631 Net commission income 272,374 465,518 370,142 385,385 22,252 1,515,671 Trading profit 31,839 46,798 31,473 30,662 (46,290) 94,482 Supervisory Board’s Report Valuation result from derivatives (5,420) (978) (284) (17,865) 1,520 (23,026) Supervisory Board’s Report Net income from financial investments (198,084) (6,551) 104 68 (9,700) (214,162) General administrative expenses (392,955) (819,930) (665,491) (709,231) (57,434) (2,645,042)

Overview of RZB Other operating profit/(loss) 58,463 10,330 27,246 (17,132) 16,908 95,815 Overview of RZB Income from disposal of group assets (62) 23,806 – 2,711 – 26,455 Profit before tax 322,336 401,852 410,658 356,298 (6,320) 1,484,824 Total assets 58,528,370 28,428,660 21,752,920 18,639,608 10,052,441 137,401,999 Risk-weighted assets (including market risk) 34,164,464 21,437,936 13,611,444 15,981,370 8,442,599 93,637,813

Raiffeisen Banking Group Own funds requirement 2,733,157 1,715,035 1,088,915 1,278,510 675,408 7,491,025 Raiffeisen Banking Group Average number of staff 2,976 12,079 15,045 28,197 111 58,408 Interview Cost/income ratio 45.3% 61.8% 58.6% 56.8% 86.1% 56.9% Interview Average equity 2,440,662 1,531,497 972,383 1,141,687 603,127 6,689,356 Return on Equity before tax 13.2% 26.2% 42.2% 31.2% – 22.2% Management Report Management Report Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 176 177 Preface Preface

Financial year 2006 €000 Austria CE SEE CIS Other Total Net interest income 421,942 597,823 542,366 577,642 46,720 2,186,493 Provisioning for impairment losses (45,027) (93,150) (86,160) (127,049) 4,955 (346,431) Managing Board Managing Board Managing Net interest income after provisioning 376,915 504,673 456,206 450,593 51,675 1,840,062 Net commission income 220,421 343,813 263,220 322,143 27,421 1,177,018 Trading profit 69,058 41,347 50,339 83,515 12,426 256,685 Valuation result from derivatives (42,849) 3,878 143 1,639 (4,344) (41,533) Net income from financial investments 26,306 (1,252) 874 110,550 5,072 141,551 Supervisory Board’s Report Supervisory Board’s Report General administrative expenses (363,950) (608,750) (527,688) (560,629) (52,077) (2,113,095) Other operating profit/(loss) 99,765 (505) 11,638 (17,508) 10,838 104,228 Income from disposal of group assets 10,847 20,075 – 486,479 – 517,401

Overview of RZB Profit before tax 396,514 303,279 254,730 876,781 51,012 1,882,316 Overview of RZB Total assets 52,203,217 22,087,761 17,905,331 13,562,279 9,870,261 115,628,849 Risk-weighted assets (including market risk) 26,297,598 16,075,784 12,010,344 11,055,935 5,216,577 70,656,238 Own funds requirement 2,103,807 1,286,063 960,828 884,475 417,326 5,652,499 Average number of staff 2,476 10,403 12,579 25,997 310 51,765 Raiffeisen Banking Group Raiffeisen Banking Group Cost/income ratio 44.9% 62.0% 60.8% 58.0% 53.5% 56.7% Average equity 1,872,343 1,036,858 819,908 700,525 382,356 4,811,991 Interview Interview Return on Equity before tax 21.2% 29.2% 31.1% 125.2% 13.3% 39.1% Management Report Management Report Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 178 179 Preface Financial Reporting Standards (IFRS) published by the International Accounting Stan- Preface Notes dards Board (IASB) and the international accounting standards adopted by the EU on the basis of IAS Regulation (EC) 1606/2002 including the interpretations of the Inter- Company national Financial Reporting Interpretations Committee (IFRIC/SIC) that were already Managing Board Managing applicable. All standards published by the IASB to be applied to financial statements for Board Managing Raiffeisen Zentralbank Österreich Aktiengesellschaft acts as the central institution of the 2007 and adopted by the EU, have been applied. The consolidated financial statements Austrian Raiffeisen Banking Group. It is registered in the companies register at Handels- satisfy the requirements of Section 245a UGB (Austrian commercial code) and Section gericht Wien (Vienna commercial court) under number FN 58.882 t. The company's 59a BWG (Austrian banking act) regarding exempting consolidated financial statements address is Am Stadtpark 9, A-1030 Vienna, Austria. that comply with internationally accepted accounting principles.

Supervisory Board’s Report The Regional Raiffeisen Banks hold shares in Raiffeisen Zentralbank under the umbrella The consolidated financial statements are based on the IASB framework and on the Supervisory Board’s Report of a non-operational holding company called Raiffeisen-Landesbanken-Holding GmbH following relevant IAS/IFRS: (RLBHOLD). This company holds 81 per cent of Raiffeisen Zentralbank via its subsidiary R-Landesbanken-Beteiligung GmbH and must thus be regarded as the ultimate parent of IAS 1 Presentation of Financial Statements Overview of RZB Overview of RZB the whole Group. The consolidated financial statements of RLBHOLD are lodged in the IAS 2 Inventories companies register in accordance with Austrian disclosure regulations and published in IAS 7 Cash Flow Statements the Wiener Zeitung newspaper. IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies Within Austria, Raiffeisen Zentralbank specialises in corporate and investment banking. It IAS 10 Events after the Balance Sheet Date Raiffeisen Banking Group is one of Austria's foremost corporate finance and export and trade finance banks. Cash Raiffeisen Banking Group and asset management and treasury operations are further fields of activity. RZB's princi- IAS 12 Income Taxes IAS 14 Segment Reporting Interview pal focus as a highly specialized financial engineer is on servicing Austrian and foreign Interview key accounts, multinationals and providers of financial services. The companies within IAS 16 Property, Plant and Equipment the Group are also active in the private banking, capital investment, finance leasing, real IAS 17 Leases estate, and bank-related IT service fields. IAS 18 Revenue IAS 19 Employee Benefits Management Report RZB also operates in Central and Eastern Europe (the CEE region) through banking sub- Management Report sidiaries known as Network Banks. There were 16 Network Banks as of the balance- IAS 21 The Effects of Changes in Foreign Exchange Rates sheet date. They have a network of branches that spans the region. In addition, RZB has IAS 23 Borrowing Costs branches, specialist subsidiaries and representative offices in the world's major financial IAS 24 Related Party Disclosures Segment Reports Segment Reports

centres, at selected locations in Western Europe and in a number of focal Asian markets. IAS 26 Accounting and Reporting by Retirement benefit Plans IAS 27 Consolidated and Separate Financial Statements These consolidated financial statements were signed by the Managing Board on 12 IAS 28 Investments in Associates March 2008 and subsequently submitted to the Supervisory Board for review. IAS 29 Financial Reporting in Hyperinflationary Economies IAS 32 Financial Instruments: Presentation Principles underlying the consolidated financial statements IAS 33 Earnings per Share Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

IAS 34 Interim Financial Reporting Policies IAS 36 Impairment of Assets

Glossary The consolidated financial statements for the financial year 2007 and the comparative Glossary

IAS 37 Provisions, Contingent Liabilities and Contingent Assets figures for the financial year 2006 were prepared in accordance with the International > Contacts Contacts 180 181 Preface Preface

IAS 38 Intangible Assets Published IFRS not in effect and hence not yet applied IAS 39 Financial Instruments: Recognition and Measurement IFRS 8 will be effective for annual periods beginning on or after 1 January 2009 and will IAS 40 Investment Property lead to changes in external reporting as IFRS 8 is superseding IAS 14 completely. IFRS 8 has not yet been applied in the consolidated financial statements. IFRIC 11, also adopted

Managing Board Managing IFRS 1 First-time Adoption of International Financial Reporting Standards Board Managing by the EU, will have no material effects on future consolidated financial statements. IFRS 2 Share-based Payment IFRS 3 Business Combinations Consolidation methods IFRS 5 Non-current Assets Held for Sale and Discontinued Operations RZB consolidates all material subsidiaries, in which Raiffeisen Zentralbank Österreich IFRS 7 Financial Instruments: Disclosures Aktiengesellschaft either directly or indirectly holds more than 50 per cent of the voting rights or otherwise has control over the financial and operating policies. Supervisory Board’s Report IAS 11, IAS 20, IAS 31, IAS 41, IFRS 4 and IFRS 6 are not applied as there were no Supervisory Board’s Report relevant business transactions in the Group. Material interests in associated companies – in which the Group exerts a significant influence on financial and operating policies – are valued at-equity and reported under The consolidated financial statements are based on the reporting packages of all fully investments in associates. Profits or losses occurring in companies valued at-equity are Overview of RZB Overview of RZB consolidated Group members which are prepared according to uniform Group stan- shown net in current income from associates. The same rules apply to companies valued dards and IFRS rules. With the exception of seven subsidiaries accounted for with interim at-equity (offsetting acquisition costs against proportional fair net asset value) as apply financial statements as of and for the period ended 30 September or 31 October, all to fully consolidated companies. Usually, IFRS financial statements of associated com- fully consolidated companies prepared their annual financial statements as of and for the panies are used. Changes in equity of companies valued at-equity are also treated as period ended 31 December. Figures in these financial statements are stated in thousands changes in equity in the consolidated accounts.

Raiffeisen Banking Group of euros. Raiffeisen Banking Group Shareholdings in subsidiaries not included in the consolidated financial statements because

Interview If estimates or assessments are necessary for accounting and measuring under IAS/IFRS of their minor significance and shareholdings in companies which have not been valued Interview rules, they are made in accordance with the respective standards. They are based on at-equity are shown under financial investments and are measured at amortised cost. past experience and other factors such as planning and expectations or forecasts of future events that appear likely from the current perspective. Business combinations In the course of capital consolidation, all identifiable assets, liabilities and contingent Management Report Deferred taxes were not accounted for separately in the Income Statement and on the liabilities of the subsidiary are measured at their fair values on the acquisition date Management Report Balance Sheet. Details are provided under the appropriate headings in the Notes. according to IFRS 3. The acquisition costs are offset with the proportional net assets. The resulting positive differences are capitalised as goodwill. The goodwill is tested annually IFRS 7 is effective for annual periods beginning on or after 1 January 2007 and leads for impairment, or more frequently, if events or changes in circumstances indicate impair- Segment Reports Segment Reports

to changes in external reporting requirements. The changes mainly concern the disclo- ment. Impairment tests were carried out on the basis of the updated calculation model of sure requirements related to significance of financial instruments for an entity's financial the individual subsidiaries. Negative differences arising within initial consolidation are position and performance and new disclosure requirements related to quantitative and recognised immediately in profit. qualitative information about exposure to risks arising from financial instruments. The new quantitative and qualitative disclosure requirements include credit risk, liquidity risk and market risk which are mainly reported in the risk report. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 182 183 Preface Companies of RZB use brands to differentiate their services from the competition. Accor- Consolidated group Preface

ding to IFRS 3, brands of acquired companies have been recognised separately under The number of fully consolidated companies and companies valued at-equity changed the item intangible fixed assets. Brands have an undeterminable useful life and are there- as follows: fore not subject to scheduled amortisation. Brands have to be tested annually for impair- Managing Board Managing ment and additionally whenever indications of impairment arise. The value of brands was Fully consolidated Equity method Board Managing determined using the comparable historical cost approach, because neither immediately Number of units 2007 2006 2007 2006 comparable transactions nor a market with observable prices were available at the time As of 1/1 287 228 14 14 of purchase price allocation. Documentation of brand-related marketing expenses in the Included for the previous years was used as basis for the historical cost approach. first time in the financial period 66 67 – – Supervisory Board’s Report Supervisory Board’s Report If customer contracts and associated customer relationships are acquired in a business Merged in the combination, they must be recognised separately from goodwill if based on contractu- financial period (3) (1) – – al or other rights. The acquired companies meet the criteria for a separate recognition Excluded in the of non-contractual customer relationships for existing customers. The customer base is

Overview of RZB financial period (15) (7) (1) – Overview of RZB valued using the multi-period excess earnings method based on projected future income As of 31/12 335 287 13 14 and expenses allocable to the respective customer base. The projections are based on planning figures for the corresponding years. Of the 335 entities in the Group, 164 were domiciled in Austria (2006: 158) and 171 Consolidation entries abroad (2006: 129). They comprised 22 banks, 202 financial institutions, 19 companies

Raiffeisen Banking Group Intra-group balances between parent company and subsidiaries and intra-group balan- rendering bank-related ancillary services, 13 financial holding companies and 79 other Raiffeisen Banking Group ces between subsidiaries are eliminated in the consolidated accounts. Remaining tem- companies.

Interview porary differences are recognised under other assets/other liabilities. Interview Because of their minor importance for the Group’s assets and its financial and earnings po- Intra-group income and expenses are off-set and timing differences resulting from bank sition, 277 subsidiaries were not included in the consolidated financial statements (2006: business transactions are shown in net interest income. Other differences are shown in 257). They were recognised at amortised cost under financial investments as interests other operating profit/loss. in affiliated companies. The balance sheet total of the companies not included in the Management Report Group came to less than two per cent of the Group’s aggregated balance sheet total. Management Report Intra-group results are eliminated if they have a material effect on the items of the income statement. Bank business transactions between Group members are usually executed at A list of fully consolidated companies, associated companies and other equity participa- arm's-length. tions can be found on page 314 et seq. Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 184 185 Preface The following companies were included for the first time in the financial year 2007: Included Preface

Name Share as of Fact Included Raiffeisen Insurance and Reinsurance Name Share as of Fact Broker S.R.L., Bucharest (RO) 75.0% 1/4 Acquisition Managing Board Managing Financial institutions RAIFFEISEN INSURANCE BROKER Board Managing Foundation, EOOD, Sofia (BG) 100.0% 1/1 Materiality 33 project companies of Raiffeisen- several Materiality, Other companies Leasing Gesellschaft m.b.H., Vienna (AT) dates Acquisition RLP Csórsz u. Kft., Budapest (HU) 73.0% 1/6 Foundation “K-SPV” d.o.o., Mostar (BiH) 85.8% 1/5 Foundation SCT Krautland Ingatlanforgalmazó Kft., Cristal Palace Real Estate s.r.o., Prague (CZ) 69.0% 1/10 Acquisition Erd (HU) 73.2% 1/5 Materiality Supervisory Board’s Report Supervisory Board’s Report Dione Property s.r.o., Prague (CZ) 69.0% 1/10 Foundation SCT Milfav Ingatlanfejlesztö és Gaia Property, s.r.o., Prague (CZ) 69.0% 1/10 Foundation Ingatlanhasznosito Kft., Budapest (HU) 73.6% 1/5 Materiality Hera Property, s.r.o., Prague (CZ) 69.0% 1/8 Foundation SCTS Szentendre Kft., Budapest (HU) 74.5% 1/6 Materiality Overview of RZB ICS Raiffeisen Leasing s.r.l., Chisinau (MD) 87.2% 1/11 Foundation Financial holdings Overview of RZB Iris Property, s.r.o., Prague (CZ) 69.0% 1/10 Foundation Cembra Beteiligungs GmbH, Vienna (AT) 100.0% 1/6 Materiality Perseus Property, s.r.o., Prague (CZ) 69.0% 1/3 Foundation Extra Year Investments Limited, Tortola (VG) 100.0% 1/6 Materiality Raiffeisen Equipment Leasing Kft., Golden Rainbow International Limited, Budapest (HU) 72.7% 1/3 Foundation Tortola (VG) 100.0% 1/6 Materiality Raiffeisen Banking Group Raiffeisen Factoring Ltd., Zagreb (HR) 73.7% 1/11 Materiality Raiffeisen International Beteiligungs GmbH, Raiffeisen Banking Group Vienna (AT) 100.0% 1/6 Foundation Raiffeisen Invest d.o.o., Zagreb (HR) 73.7% 1/1 Materiality Interview Interview Raiffeisen Investment Fund Management Zrt., Budapest (HU) 70.3% 1/1 Materiality Business combinations REAL ESTATE RENT 1 DOO, Belgrade (RS) 75.0% 1/5 Foundation The following table shows assets and liabilities revalued as of the acquisition date: REAL ESTATE RENT 2 DOO, Belgrade (RS) 75.0% 1/10 Foundation Management Report RLRE Carina Property, s.r.o., Prague (CZ) 74.4% 1/6 Foundation €000 RIARO1 RLRECP 2 sZOMBA3 total Management Report ROOF Russia S.A., Luxembourg (L) 3.1% 1/5 Foundation Assets 704 7,077 6,420 14,201 Sirius Property, s.r.o., Prague (CZ) 69.0% 1/8 Foundation Liabilities (610) (6,269) (3,025) (9,904)

Segment Reports Tatra Asset Management, správ. spol. a.s., Net assets 94 808 3,395 4,297 Segment Reports

Bratislava (SK) 64.5% 1/1 Materiality Acquisition cost 278 1,030 3,978 5,286 Themis Property, s.r.o., Prague (CZ) 69.0% 1/8 Foundation Goodwill 184 222 583 989 Companies rendering bank-related 1 Raiffeisen Insurance and Reinsurance Broker S.R.L., Bucharest (RO) ancillary services 2 Cristal Palace Real Estate s.r.o., Prague (CZ) Harmadik Vagyonkezelö Kft., Erd (HU) 74.5% 1/6 Foundation 3 FMZ SZOMBA Ingatlanfejlesztö kft., Budapest (HU) Negyedik Vagyonkezelö Kft., Erd (HU) 74.5% 1/5 Foundation The effect of acquired subsidiaries on liquidity corresponds to the acquisition cost as there Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Raiffeisen Biztosításközvetítö Kft., were no liquid funds in the acquired subsidiaries. Budapest (HU) 72.7% 1/6 Materiality

Glossary Raiffeisen Insurance Agency Sp.z.o.o., Glossary Warsaw (PL) 87.5% 1/1 Materiality

Contacts > Contacts 186 187 Preface Preface

Other included units Excluded units As of 1 January 2007, the following three fund management companies were included Included in the consolidated financial statements for the first time due to the increasing importance Name Share as of Fact for the Group: Tatra Asset Management sprav.spol., a.s., Bratislava, Raiffeisen Invest

Managing Board Managing Financial institutions Board Managing d.o.o., Zagreb, and Raiffeisen Investment Fund Management Zrt., Budapest. Due to an CARNA Raiffeisen-Immobilien-Leasing accurate reporting of commission income arising from insurance agency services, two Gesellschaft m.b.H., Vienna (AT) 100.0% 31/12 Sold insurance brokers rendering services to network companies and external customers were integrated as of 1 January 2007: Raiffeisen Insurance Agency Sp.z.o.o., Warsaw, and MB Leasing a.s., Mlada Boleslav (CZ) 51.0% 30/11 Immaterial Raiffeisen Biztosításközvetítö Kft., Budapest. As of 1 April 2007, Raiffeisen Insurance Raiffeisen Lux SRL, Bucharest (RO) 100.0% 30/9 Immaterial and Reinsurance Broker S.R.L., Bucharest, was acquired and firstly integrated. Raiffeisen Non-Government Pension Fund, Supervisory Board’s Report Moscow (RU) 100.0% 1/1 Immaterial Supervisory Board’s Report Roof Russia S.A., Luxembourg, was founded in connection with a securitisation of car RLRE & EUBE OC – TERRONIC I., s.r.o., receivables and therefore consolidated for the first time as of 1 May 2007 due to the Prague (CZ) 69.0% 20/4 Verkauf control principle. The remaining shares are held by external investors. RLRE Taurus Property, s.r.o., Prague (CZ) 69.0% 2/5 Verkauf Overview of RZB Overview of RZB RLRE Theta Property, s.r.o., Prague (CZ) 69.0% 19/12 Immaterial In the second quarter 2007, the financial holding Raiffeisen International Beteiligungs Companies rendering bank-related GmbH, Vienna, and its subsidiary Cembra Beteiligungs GmbH, Vienna, which holds ancillary services the shares in Raiffeisen International Bank-Holding AG, Vienna, were integrated for the RISP Beteiligungs- und Finanzierungs- first time. Moreover, two financial holdings Extra Year Investment Limited, Tortola, and management GmbH, Vienna (AT) 100.0% 31/12 Immaterial

Raiffeisen Banking Group Golden Rainbow International Limited, Tortola, which investin real-estate projects, were Raiffeisen Banking Group Other companies firstly consolidated. Arena Corner Ingatlanfejlesztõ Kft., Interview Budapest (HU) 75.3% 14/7 Sold Interview In the fourth quarter 2007, a project-leasing company, Cristal Palace Real Estate s.r.o., BAILE Handels- und Beteiligungs- Prague, was acquired and firstly integrated as of 1 October 2007. gesellschaft m.b.H., Vienna (AT) 100.0% 31/12 Immaterial As of 1 November 2007, Raiffeisen Factoring Ltd., Zagreb, started with factoring business FURIAE Raiffeisen-Immobilien-Leasing

Management Report GmbH, Vienna (AT) 100.0% 30/9 Immaterial Management Report in Croatia and the company was consolidated for the first time due to materiality. Ratio Holding Gesellschaft mit beschränkter Haftung, Vienna (AT) 100.0% 31/12 Immaterial Mergers As of 1 June 2007, a Hungarian leasing company – Második Ingatlan Vagyonkezelö Kft., SINESCO Energiaszolgáltató Kft., Segment Reports Budapest (HU) 72.7% 1/3 Sold Segment Reports Budapest – was merged into Raiffeisen Financial Services Company Zrt., Budapest. SCT Milfav Ingatlanfejlesztö és A further merger took place in the third quarter: RLRE Omega Property, s.r.o., Prague, was Ingatlanhasznosito Kft., Budapest (HU) 73.6% 31/12 Sold merged into Sirius Property, s.r.o., Prague, as of 1 August 2007. SPC Vagyonkezelö Kft., Budapest (HU) 74.8% 30/6 Immaterial

As of 23 November 2007, OAO Impexbank, Moscow, was merged into ZAO Raiffeisen- In the first quarter 2007, Raiffeisen Lízing Zrt., Budapest, sold its 100 per cent share in bank Austria, Moscow. Since this date, the company trades under the name ZAO Raiffeisen SINESCO Energiaszolgáltató Kft., Budapest. The company was excluded as of 1 March

Consolidated Financial Statements Financial Consolidated bank. Statements Financial Consolidated 2007; the result of deconsolidation amounted to € 11,038 thousand.

Glossary In the third quarter 2007, Raiffeisen Financial Services Company Zrt., Budapest, sold its Glossary shares in Arena Corner Ingatlan-fejlesztõ Kft., Budapest, to OROC Group Endurance Contacts Contacts 188 189 Preface Asset S.a r.l., Luxembourg. The company was excluded as of 1 July 2007 and the resul- In the case of seven subsidiaries not headquartered in the euro-zone, the euro was the Preface

ting profit amounted to € 14,559 thousand. reporting currency for measurement purposes given the economic substance of the underlying transactions, and the US-dollar was the reporting currency in the case of two com- Due to the fact that Raiffeisen Non-Government Pension Fund, Moscow, became immate- panies. Roof Russia S.A., Luxembourg, carries out its business transactions and refinan- Managing Board Managing rial, the company was excluded from the consolidated group as of 1 January 2007, resul- cing in US-dollars, therefore the functional currency is the US-dollar. Due to refinancing in Board Managing ting in a profit of € 2,672 thousand. euro, the euro is the functional currency for the two newly integrated companies, Golden Rainbow International Limited, Tortola, and Extra Year Investments Limited, Tortola. The following table shows the income arising from disposal of group assets of the two largest transactions: The following exchanges rates were used for currency translation:

Supervisory Board’s Report €000 SINESCO1 aRENAC2 total 2007 2006 Supervisory Board’s Report Assets (25,878) (44,689) (70,567) Rates in units per € as of 31/12 average as of 31/12 average Liabilities 25,653 43,434 69,087 Albanian lek (ALL) 121.780 123.647 123.850 123.079

Overview of RZB Net assets (225) (1,255) (1,480) Belarusian ruble (BYR) 3,149.320 2,945.327 2,817.310 2,689.745 Overview of RZB Minority interests – 310 310 Bosnian marka (BAM) 1.956 1.956 1.956 1.956 Net assets after minority interests (225) (945) (1,170) Bulgarian lev (BGN) 1.956 1.956 1.956 1.956 Goodwill – 4,594 4,594 Croatian kuna (HRK) 7.331 7.335 7.350 7.325 Selling price 11,263 20,098 31,361 Czech koruna (CZK) 26.628 27.713 27.485 28.322 Raiffeisen Banking Group Income from disposal of group assets 11,038 14,559 25,597 Hungarian forint (HUF) 253.730 251.405 251.770 263.247 Raiffeisen Banking Group 1 SINESCO Energiaszolgáltató Kft., Budapest (HU) Kazakh tenge (KZT) 177.170 168.613 167.120 158.429 Interview 2 Arena Corner Ingatlanfejlesztõ Kft., Budapest (HU) Moldavian leu (MDL) 16.644 16.657 – – Interview Polish zloty (PLN) 3.594 3.779 3.831 3.897 The effect of sold subsidiaries on liquidity is equal to the selling price as there were no liquid funds. Romanian leu (RON) 3.608 3.344 3.384 3.525 Russian ruble (RUB) 35.986 35.076 34.680 34.148 Management Report Serbian dinar (RSD) 79.236 80.002 79.000 84.169 Management Report Foreign currency translation Slovenian tolar (SIT) – – 239.640 239.588 Slovak koruna (SKK) 33.583 33.821 34.435 37.149 Financial statements of fully consolidated companies prepared in foreign currencies were Segment Reports Swedish krona (SEK) 9.442 9.247 9.040 9.264 Segment Reports translated into euros employing the modified current rate method in accordance with IAS 21. Equity was translated at its historical exchange rates while all other assets, liabilities Ukrainian hryvna (UAH) 7.419 6.932 6.651 6.327 and the notes were translated at the prevailing foreign exchange rates as of the balance US-Dollar (USD) 1.472 1.375 1.317 1.257 sheet date. Differences arising from the translation of equity (historical exchange rates) were offset against retained earnings and not recognised in the income statement. Capital hedge Hedges of investments in economically independent sub-units (IAS 39.102) are carried out The items of the income statement were translated at the average exchange rates during in the Group in order to reduce differences arising from the translation of equity. Liabilities

Consolidated Financial Statements Financial Consolidated the year calculated on the basis of month-end rates. Differences arising between the ex- Statements Financial Consolidated in foreign currency, currency options, currency futures and currency swaps are mainly change rate as of the balance sheet date and the average exchange rate applied in the used as hedging instruments. The resulting gains and losses from currency translation are

Glossary income statement were offset against equity and not recognised in the income statement. shown in equity without affecting profit and are separately disclosed in the statement of Glossary

Contacts Contacts 190 191 Preface changes in equity insofar as the hedging relation is effective. The ineffective part of this Derivative financial instruments held for trading are also shown under trading assets or Preface

hedge relation is recognised in profit. The related interest components are shown in net trading liabilities. Positive fair values including accrued interest (dirty price) are shown interest income. There are no deferred taxes calculated due to the applied exception under trading assets. Negative fair values are recorded under trading liabilities. Positive regulations according to IAS 12.39. and negative fair values are not netted. Changes in dirty prices are recognised in the Managing Board Managing income statement under trading profit/loss. Board Managing

Accounting and valuation principles b) Designated financial instruments at fair value This category comprises mainly those financial assets and liabilities irrevocably desig- Financial instruments: Recognition and measurement (IAS 39) nated as financial instrument at fair value (so called fair value option) upon initial reco- A financial instrument is defined as any contract that gives rise to a financial asset of one gnition in the balance sheet irrespective of the intention to trade. An entity may use this Supervisory Board’s Report entity and a financial liability or equity instrument of another. In IFRS balance sheets, the designation only when doing so results in more relevant information for the reader of the Supervisory Board’s Report following five categories are distinguished: financial report. On the one hand, this is the case when a portfolio of financial assets is managed and its performance is evaluated on a fair value basis. Instruments included in 1. Financial assets or liabilities at fair value through profit and loss such a portfolio may be debt securities and other fixed-interest securities or equities and Overview of RZB Overview of RZB a. Trading assets/liabilities other variable-yield securities. On the other hand, financial liabilities are designated as b. Designated financial instruments at fair value financial instrument at fair value in order to avoid measurement inconsistencies with the 2. Financial assets held-to-maturity connected derivatives. 3. Loans and advances 4. Financial assets available-for-sale These instruments are measured at fair value according to IAS 39. They are stated under

Raiffeisen Banking Group 5. Liabilities the balance sheet items financial investments and liabilities evidenced by paper, current Raiffeisen Banking Group income is shown under net interest income, and valuation gains and losses and proceeds

Interview 1. Financial assets or liabilities at fair value through profit and loss from sale are stated in net income from financial investments. Valuation gains and los- Interview ses on liabilities designated as financial instrument at fair value are disclosed in valuation a) Trading assets/liabilities result from derivatives. Trading assets/liabilities are acquired or incurred principally for the purpose of generating profit from short-term fluctuations in market prices. Securities (including short selling of 2. Financial assets held-to-maturity Management Report securities) and derivative financial instruments held for trading are recognised at their fair Non-derivative financial assets (securities with fixed or determinable payments and fixed Management Report values. If securities are listed, the fair value is based on stock exchange prices. Where maturities) purchased with the intention and ability to hold them to maturity are reported such prices are not available, internal prices based on present value calculations for under the balance sheet item financial investments. They are recognised at amortised originated financial instruments and futures or option pricing models for options are cost and differences are amortised over the term to maturity and recognised in the income Segment Reports Segment Reports

applied. Present value calculations are based on the zero-coupon curve. As option price statement under net interest income. Coupon payments are also recognised under net formulas, Black-Scholes 1972, Black 1976 or Garman-Kohlhagen are applied depen- interest income. A sale of these financial instruments is only allowed in cases as stated in ding on the kind of option. IAS 39. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 192 193 Preface 3. Loans and advances changes in the fair value of a hedged item will be nearly completely offset by a change in Preface

Loans and advances are recognised at their nominal value without deduction of impair- the fair value of the hedging instrument and that the actual outcome will lie within a band- ment losses. Accrued interest is recognised in the income statement if there is a high pro- width of 80 to 125 per cent. bability that it will be received. Moreover, debt instruments are also stated there if there Managing Board Managing is no active market. De-recognition of a financial asset within the framework of securitisa- Derivative instruments held to hedge the fair values of individual balance sheet items Board Managing tions is done on a risk and rewards test or a control test, respectively, according to IAS 39 (except trading assets/liabilities) are recognised at their fair values (dirty prices) under after verification whether the special purpose vehicle used for the securitisation has to be derivatives (on the assets side: positive dirty prices; on the liabilities side: negative dirty integrated into the consolidated accounts. However, this results in a loss of control over prices). Changes in the carrying amounts of hedged items (assets or liabilities) are the contractual rights arising from this financial asset. allocated directly to the corresponding balance sheet items and reported separately in valuation result from derivatives. Both the effect of changes in the carrying values of Supervisory Board’s Report 4. Financial assets available-for-sale positions requiring hedging and the effects of changes in the clean prices of the derivati- Supervisory Board’s Report The category of financial assets available-for-sale contains those financial instruments ve instruments are recorded under valuation result from derivatives (net result from hedge that did not qualify for any of the other three categories (mainly equity participations accounting). for which there is no active market). They are stated at fair value, if a fair value is reliably Overview of RZB Overview of RZB measurable. Valuation differences are shown directly in equity and only recognised in b) Cash flow hedge according to IAS 39 the income statement if there is an objective indication of impairment. Only in the case Cash flow hedge accounting according to IAS 39 applies for derivatives used to hedge of debt instruments is a reversal of impairment recognised in the income statement. In the against the risk of fluctuating future cash flows. Variable-interest balance sheet items – case of equity instruments, such reversals of impairment are booked versus equity. This loans and securities as well as liabilities – are especially subject to such cash flow risks. kind of financial instruments is reported under financial investments.

Raiffeisen Banking Group Interest rate swaps used to hedge against the risk of fluctuating cash flows arising from Raiffeisen Banking Group 5. Liabilities specific variable interest-rate items, are recognised as follows: The hedging instrument

Interview Liabilities are recognised at amortised cost, and differences to the settlement value are is recognised at fair value; changes in its clean price are recorded as separate item in Interview amortised over the term to maturity and recognised in the income statement under net equity without affecting income. interest income. Discounted debt securities and similar obligations are measured at their present value. c) Other derivative instruments Derivative instruments held to hedge against market risks (except trading assets/liabili- Management Report Hedging ties) that are based on an inhomogeneous portfolio do not satisfy the requirements for Management Report Derivative instruments not held for trading because acquired for hedging purposes are hedge accounting according to IAS 39. They are captured as follows: Dirty prices are subdivided into the following categories reflecting differing modes of recognition on the recognised under derivatives (on the assets side: positive market values; on the liabilities IFRS-compliant balance sheet: side: negative market values. The effect of re-measuring those derivative instruments on a Segment Reports Segment Reports

clean-price basis is recognised under valuation result from derivatives (net income from a) Fair value hedge according to IAS 39 other derivative instruments); interest is recorded under net interest income. Hedge Accounting according to IAS 39 applies for those derivatives used to hedge the fair values of financial assets and liabilities. Especially the credit business is subject to such fair value risks in case of fixed-interest loans. Interest-rate swaps that satisfy the pre- requisites for hedge accounting are contracted to hedge against interest-rate risks arising from loans. Those hedges are formally documented, continuously assessed, and rated to

Consolidated Financial Statements Financial Consolidated be highly effective. In other words, throughout the term of a hedge, one can assume that Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 194 195 Preface transaction are recognised in the balance sheet as deposits from banks or deposits from Preface

Offsetting In the case of identity of borrower and lender, offsetting of loans and liabilities with mat- customers, depending on the counterparty. ching maturities and currencies occurs only if a legal right, by contract or otherwise, exists and offsetting is in line with the actually expected course of the business. Under reverse repurchase agreements, assets are acquired with the obligation to sell Managing Board Managing them in the future. Cash outflows arising from reverse repurchase agreements are recor- Board Managing ded in the balance sheet under loans and advances to banks or loans and advances to Cash reserve customers. Interest expense from sale and repurchase agreements and interest income The cash reserve includes cash in hand and balances at central banks that are due on from reverse sale and repurchase agreements are accrued in a straight line over their call. They are shown with their nominal value. term to maturity and are shown under net interest income.

Supervisory Board’s Report Impairment losses on loans and advances Finance lease business Supervisory Board’s Report Credit risk is accounted for by making specific impairment provisions and portfolio-based A finance lease is a lease that transfers all risks and rewards incident to ownership of impairment provisions. The latter comprise impairment provisions for portfolios of loans an asset to the lessee. Pursuant to IAS 17, the present value of all future lease payments with identical risk profiles that may be composed under certain conditions. In the retail and any residual values are shown as loans and advances to banks or customers in the Overview of RZB Overview of RZB segment, provisions are built according to product portfolio and past due days. Specific balance sheet of the lessor. The lessee recognises the assets as tangible fixed assets to and portfolio-based impairment provisions are not netted against corresponding receiva- which a corresponding leasing liability relates. bles but are stated separately in the balance sheet. Equity participations For credit risks related to loans and advances to customers and banks, provisions are made Shareholdings in subsidiaries not included in the consolidated financial statements be-

Raiffeisen Banking Group in the amount of expected loss according to homogeneous Group-wide standards. Risk cause of their minor significance and shareholdings in companies that are not valued at- Raiffeisen Banking Group of loss is deemed to exist if the discounted projected repayment amounts and interest pay- equity are shown under financial investments and are measured at amortised cost if no

Interview ments are below the carrying value of the loans, taking collateral into account. Portfolio- shares prices are available. Interview based impairments are calculated according to valuation models that estimate expected future cash flows for the loans in the respective loan portfolio based on loss experience Other shareholdings are categorised as designated financial instruments at the balance history., Peer group benchmark figures serve as a comparative basis for retail portfolios sheet date if reliably measurable market prices are available, and are measured at fair without a documented loss history of their own. value. Changes in value are therefore recognised in profit. If there is no active market Management Report for other shareholdings or if a fair value is not reliably measurable, they are categorised Management Report The total provision for impairment losses arising from on-balance-sheet loans (specific as available-for-sale. The changes in value are directly shown in equity without effecting loan loss provisions and portfolio-based provisions) is shown as a separate item on the income statement. assets side of the balance sheet, below loans and advances to banks and customers. The Segment Reports Segment Reports

provision for impairment losses arising from off-balance-sheet transactions is recorded Intangible fixed assets under provisions for liabilities and charges. Internally developed and acquired software, brand rights, acquired customer bases and especially goodwill are stated under this item. Goodwill and other intangible fixed assets Genuine sale and repurchase agreements (e.g. brand rights) without definable useful lives are tested for impairment at every balan- In a genuine sale and repurchase transaction, the transferor sells assets to a third party ce sheet date. Whenever events or changes in circumstances indicate that the expected and at the same time agrees to repurchase these assets at an agreed price and time. The benefit no longer exists, impairment must be made pursuant to IFRS 3. assets remain in the balance sheet of the transferor and are measured like the balance Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

sheet item under which they are shown. Cash inflows arising from a sale and repurchase Glossary Glossary

Contacts Contacts 196 197 Preface Acquired intangible fixed assets with determinable useful lives (software and customer Preface

Operating leasing base) are capitalised at acquisition cost and amortised over their estimated useful lives. An operating lease exists if the lessor bears all risks and enjoys the rewards of ownership. The leased assets are reported by the lessor under fixed assets and depreciated in Internally developed intangible fixed assets exclusively comprise software. Software is accordance with the principles applicable to the type of fixed assets involved. Managing Board Managing capitalised if it is probable that the future economic benefits attributable to the asset will Board Managing accrue to the enterprise and the cost of the asset can be measured reliably. The useful Inventory life of software is between four and six years and may be longer for major software pro- Inventories are measured at the lower of cost or net realisable value. Write-downs are jects. The useful life of the acquired customer base was set at seven years for corporate made if the acquisition cost is above the net realisable value as of the balance sheet date customers, and in the retail segment at 20 years for Raiffeisen Bank Aval and five years or if limited usage or longer periods for storage have impaired the value of the inventory. for both Impexbank (meanwhile merged with ZAO Raiffeisenbank) and eBanka. Supervisory Board’s Report Provisions for liabilities and charges Supervisory Board’s Report Tangible fixed assets All defined benefit plans relating to so-called social capital (provisions for pensions, seve- Tangible fixed assets are measured at cost of acquisition or conversion less scheduled de- rance payments and anniversary bonuses) are measured using the Projected Unit Credit preciation. The straight-line method is used for depreciation and is based on the following Method in accordance with IAS 19 – Employee Benefits. Overview of RZB Overview of RZB useful life figures: The actuarial calculation of pension obligations for active employees is based on the Useful life Years following assumptions: Buildings 25–50 Office furniture and equipment 5–10 Per cent 2007 2006 Raiffeisen Banking Group Raiffeisen Banking Group Hardware 3–5 Interest rate 5.0 4.5 Effective salary increase for active employees 3.0 3.0

Interview Individual career trend for active employees 2.0 1.5 Interview If a permanent impairment is to be expected, extraordinary write-downs are carried Expected increase in retirement benefits 2.0 2.0 out. Should the reason for the write-down no longer apply, a write-up takes place up to the amount of the amortised cost of the asset. Expected return on plan assets 4.25 4.25

Management Report Investment property Calculations are based on an assumed retirement age of 65 years and are subject to Management Report Investment property is reported at amortised cost using the cost model permitted by IAS transitional statutory regulations and special arrangements in individual contracts. 40 and is shown under fixed assets because of minor importance. Income resulting from investment property is shown in other operating profit/loss. Actuarial gains or losses calculated for pension obligations are recognised immediately Segment Reports Segment Reports

in profit. The right to vote according to IAS 19.92 (corridor method) was not applied. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 198 199 Preface The actuarial computation of severance payments and anniversary bonuses is based on tional, managing board members of associated bank subsidiaries, and selected upper Preface

the following assumptions: management personnel of Raiffeisen International and its affiliated enterprises are eligible to participate. Per cent 2007 2006 Managing Board Managing Interest rate 5.0 4.5 The number of common shares in Raiffeisen International to be actually transferred Board Managing Average increase in salary 3.0 3.0 depends on meeting two performance indicators, namely the targeted average return on equity (ROE) and the total shareholder return (TSR) for Raiffeisen International shares Individual career trend 2.0 1.5 in relation to TSRs of shares in the DJ EURO STOXX BANKS index after a three-year holding period. Moreover, beneficiaries have to be in active service for Raiffeisen Inter- The biometrical basis for the calculation of provisions for pensions, severance payments national. SIP participation is voluntary. Supervisory Board’s Report and anniversary bonuses of Austrian companies is provided by AVÖ 1999-P-Rech- Supervisory Board’s Report nungsgrundlagen für die Pensionsversicherung (Computational Framework for Pension All share-based remunerations are recognised according to IFRS 2 (Share-based Insurance) – Pagler & Pagler, using the variant for salaried employees and considering P a y m e n t ) as staff expenses and booked directly against equity. a long-life factor. In other countries, similar actuarial parameters are used for calculation. Overview of RZB Overview of RZB Net interest income Other provisions are made to uncertain liabilities to third parties in the amount of the Interest and similar income mainly includes interest income on loans and advances to expected claim. These provisions are not discounted because the resulting interest effect banks and customers and from fixed-interest securities. In addition, current income from is immaterial. shares and other variable-yield securities (especially dividends), income from equity participations and from investments accounted for at equity as well as similar income calcu-

Raiffeisen Banking Group Defined contribution plans lated as interest are also reported under interest and similar income. Interest paid and Raiffeisen Banking Group Under defined contribution plans, the company pays fixed contributions into a separate similar charges mainly include interest paid on deposits from banks and customers and

Interview entity (a fund). These payments are recognised as staff expense in the income statement. on liabilities evidenced by paper and subordinated capital. Interest income and interest Interview expenses are accrued. Subordinated capital This balance sheet item comprises subordinated capital and supplementary capital. Lia- Net commission income bilities, documented or undocumented, are subordinated if, in the event of liquidation or Net commission income mainly includes income and expenses arising from payment trans- Management Report bankruptcy, they can be met only after the claims of the other – not subordinated – credi- fers, credit business and foreign exchange business. Commission income and expenses Management Report tors have been satisfied. Supplementary capital contains all paid in own funds which are are accrued in the reporting period. available for the company for more than eight years with the creditor renouncing prior notice, for which interest is paid only from the profit (before reserve transactions) and Trading profit Segment Reports Segment Reports

which can be repaid only after all other debtors are satisfied in the case of insolvency. Trading profit comprises the customer margins resulting from foreign exchange business, results due to foreign exchange revaluations and all realised and unrealised gains and Share-based remuneration losses from financial assets and liabilities at fair value. In addition, it includes all interest In the subsidiary Raiffeisen International Bank-Holding AG, the Managing Board ob- and dividend income attributable to trading activities and related refinancing costs. tained Supervisory Board approval to institute a share incentive program (SIP) offering performance-based allotments of company shares for eligible employees in Austria and abroad for a given period of time. All Managing Board members of Raiffeisen Interna- Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 200 201 Preface Preface

General administrative expenses Notes to the income statement General administrative expenses include staff and other administrative expenses as well as amortisation/depreciation and impairment losses on fixed and intangible fixed assets. (1) Income statement according to valuation categories Managing Board Managing Income taxes Board Managing Deferred taxes are recognised and calculated in accordance with IAS 12 applying the The following table shows income statement according to IAS 39 valuation categories: liability method. Deferred taxes are based on all temporary differences that result from comparing the carrying amounts of assets and liabilities in the IFRS accounts with the tax 1/1-31/12 1/1-31/12 bases of assets and liabilities and will reverse in the future. Deferred taxes are calcula- €000 2007 2006 Change ted by using tax rates applicable in the countries concerned. A deferred tax asset should Net gains (losses) on financial assets Supervisory Board’s Report also be recognised on tax-loss carry- forwards if it is probable that sufficient taxable profit and liabilities held-for-trading (168,585) 69,982 – Supervisory Board’s Report will be available against which the tax-loss carry-forwards can be utilised within the same Financial assets and liabilities at entity or tax group. Deferred tax assets and deferred tax liabilities within the same entity fair value through profit or loss 108,103 205,577 (47.4%) are netted. Net interest income 318,496 174,263 82.8% Overview of RZB Overview of RZB Net gains (losses) on financial Income tax credits and income tax obligations are recorded separately under other assets assets and liabilities at fair value and provisions for liabilities and charges, respectively. through profit or loss (210,393) 31,314 – Financial assets available-for-sale 89,016 137,262 (35.1%) Fiduciary business Net interest income 91,892 28,972 217.2% Raiffeisen Banking Group Transactions arising from the holding and placing of assets on behalf of third parties are Raiffeisen Banking Group Net realised gains (losses) on not shown in the balance sheet. Fees arising from these transactions are shown under net financial assets available- for-sale 22,729 117,221 (80.6%)

Interview commission income. Interview Impairment on financial assets available-for-sale (25,605) (8,931) 186.7% Financial guarantees Loans and receivables 6,442,420 4,325,929 48.9% According to IAS 39, a financial guarantee is a contract under which the guarantor is obliged to make payments that compensate the party to whom the guarantee is issued for Net interest income 6,750,010 4,672,363 44.5% Management Report a loss arising in case a particular debtor does not meet payment obligations on time Net realised gains (losses) on Management Report as stipulated in the original terms of the debt instrument. At the date of recognition of a financial assets not measured at fair financial guarantee, the initial fair value corresponds under market conditions to the pre- value through profit or loss 549 26 >500% mium at the date of signature of the contract. For subsequent valuations, the financial Impairment on financial assets Segment Reports not measured at fair value through Segment Reports guarantee is recognised at the initial value or according to IAS 37. The higher of the two profit and loss (308,140) (346,460) (11.1%) amounts has to be recognised. > Credit derivatives Credit derivatives are derivative financial instruments whose price or value derives from the expected future occurrence or non-occurrence of a specific credit event. Changes in value are recognised in the income statement. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 202 203 Preface Preface

1/1-31/12 1/1-31/12 (2) Net interest income €000 2007 2006 Change Financial assets held-to-maturity 223,039 237,620 (6.1%) The net interest income position includes income and expense from items of banking Net interest income 222,835 235,669 (5.4%) business, dividend income and commissions with interest-like characteristics. Managing Board Managing Board Managing Net realised gains (losses) on financial assets not measured at fair €000 2007 2006 value through profit or loss 203 1,974 (89.7%) Interest income 7,275,513 5,120,357 Impairment on financial assets from balances at central banks 219,170 149,944 not measured at fair value through from loans and advances to banks 1,747,908 1,210,367 profit and loss – (24) (100.0%) Supervisory Board’s Report from loans and advances to customers 4,451,643 3,065,944 Supervisory Board’s Report Financial liabilities measured at amortised cost (4,510,856) (3,058,526) 47.5% from financial investments 534,385 404,246 Interest expenses (4,510,856) (3,058,526) 47.5% from leasing claims 322,407 234,997 from derivative financial instruments Overview of RZB Derivatives (hedging) (114) 3,211 (103.6%) Overview of RZB (non-trading), net – 54,859 Net interest income (183) 3,127 – Current income 98,839 34,658 Net gains (losses) from hedge accounting 69 83 (17.6%) from shares and other variable-yield securities 6,947 5,687 Net revaluations from from shares in affiliated companies 77,522 9,564 exchange differences 178,689 196,818 -9.2%) from other interests 14,370 19,407 Raiffeisen Banking Group Raiffeisen Banking Group Other operating Interest-like income 12,660 11,111 income/expenses (876,888) (235,557) 272.3%

Interview Interest and interest-like income, total 7,387,011 5,166,127 Interview Total profit before tax from Current income from associates 130,214 78,892 continuing operations 1,484,824 1,882,316 (21.1%) Interest expenses (4,542,946) (3,045,778) on deposits from central banks (3,777) (1,183)

Management Report on deposits from banks (1,940,974) (1,452,678) Management Report on deposits from customers (1,713,975) (1,129,067) on liabilities evidenced by paper (659,464) (348,317) on subordinated capital (164,384) (114,533) Segment Reports Segment Reports

on derivative financial instruments (non-trading), net (60,372) – Interest-like expenses (32,060) (12,748) Interest expenses and interest-like expenses, total (4,575,006) (3,058,526) Net interest income 2,942,219 2,186,493 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 204 205 Preface The interest margin on the respective averages of the stated base was as follows: Preface (4) Net commission income

Per cent 2007 2006 €000 2007 2006 Interest margin (balance sheet total) 2.33 2.12 Payment transfer business 581,528 424,210 Managing Board Managing Board Managing Interest margin (risk-weighted assets Loan administration and guarantee business 235,276 198,121 in the banking book) 3.90 3.98 Securities business 161,169 130,764 Foreign currency and precious-metals business 392,650 316,941 (3) Provisioning for impairment losses Management of investment and pension funds 44,082 9,914 Other banking services 100,996 97,068 Supervisory Board’s Report Supervisory Board’s Report Provisioning for impairment losses on balance sheet and off-balance Total 1,515,671 1,177,018 sheet items was made as follows:

€000 2007 2006 (5) Trading profit Overview of RZB Overview of RZB Specific loan loss provisions (231,674) (190,348) Allocation to provisions for impairment losses (560,618) (430,813) The position trading profit also includes interest and dividend income, refinancing costs, commissions and any changes in fair value of trading portfolios. Release of provisions for impairment losses 363,677 278,449 Direct write-downs (53,094) (69,719) €000 2007 2006

Raiffeisen Banking Group Income received on written-down claims 18,361 31,735 Interest-based transactions (99,566) 27,043 Raiffeisen Banking Group Portfolio-based loan loss provisions (76,463) (156,108) Currency-based transactions 108,885 195,892

Interview Allocation to provisions for impairment losses (163,581) (211,428) Equity-/index-based transactions 75,628 33,764 Interview Release of provisions for impairment losses 87,118 55,320 Credit derivative transactions 5,287 – Gains from the sales of loans 549 25 Other transactions 4,248 (14) Total (307,588) (346,431) Total 94,482 256,685 Management Report Management Report Details on risk provisions are shown under note 17 impairment losses on loans and advances. (6) Valuation result from derivatives Segment Reports Segment Reports

Ratios 2007 2006 €000 2007 2006 Net provisioning ratio (Ø risk-weighted assets Net result from hedge accounting 69 83 of the banking book) 0.41% 0.63% Net result from other derivatives (185) (6,134) Net provisioning ratio (total loans outstanding) 0.28% 0.40% Net result from credit derivatives (24,004) (35,482) Loss rate 0.10% 0.14% Net result from liabilities designated at fair value 1,094 – Portfolio rate (total loans outstanding) 1.35% 1.58% Total (23,026) (41,533)

Consolidated Financial Statements Financial Consolidated Risk/earnings ratio 10.45% 15.84% Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 206 207 Preface Derivative instruments held to hedge against market risks (except trading assets/liabilities) In the financial year 2007, turbulences on the capital market lead to spread expansi- Preface

that are based on an inhomogeneous portfolio do not satisfy the requirements for hedge ons. These price changes resulted in valuation losses of securities, especially in structured accounting according to IAS 39. The item net result from other derivatives includes valu- products. ation results of this category of derivatives. Moreover, the valuation result from liabilities Managing Board Managing designated at fair value in order to avoid measurement inconsistencies with the connec- In 2006, net proceeds from sales of equity participations mainly contained the profit from Board Managing ted derivatives are reported under valuation result from derivatives. the sale of the minority share in JSC Bank TuranAlem, Almaty.

Net result from hedge accounting comprises on the one hand a valuation result of derivatives in fair value hedges amounting to €59,624 thousand (2006: € 40,005 thousand) (8) General administrative expenses and on the other hand changes in the carrying amounts of the fair value hedged items Supervisory Board’s Report totalling minus € 59,693 thousand (2006: minus € 40,088 thousand). General administrative expenses contain staff expenses, other administrative expenses Supervisory Board’s Report and depreciation on tangible and intangible assets. They break down as follows: Net result from credit derivatives includes a realised result amounting to minus € 1,908 thousand. €000 2007 2006 Overview of RZB Overview of RZB Staff expenses (1,375,553) (1,089,006) Wages and salaries (1,061,167) (835,996) (7) Income from financial investments Social security costs and staff related taxes (252,766) (202,047) The position net income from financial investments comprises valuation results and net Other voluntary social expenses (32,834) (27,545)

Raiffeisen Banking Group proceeds from disposals of the financial investment portfolio, from securities at fair value Expenses on severance payments and Raiffeisen Banking Group through profit and loss as well as equity participations including shares in affiliated retirement benefits (21,075) (19,912) Expenses on share incentive program (SIP) (7,711) (3,506) Interview companies, companies valued at-equity, and other equity investments. Interview Other administrative expenses (1,003,953) (803,028) €000 2007 2006 Office space expenses (248,896) (190,676) Net income from financial investments IT costs (135,630) (112,841) held-to-maturity and equity participations (2,673) 110,240

Management Report Communication expenses (91,150) (74,627) Management Report Net valuations of financial investments Legal, advisory and consulting expenses (83,809) (67,846) held-to-maturity – (24) Advertising, PR and promotional expenses (130,377) (100,147) Net proceeds from sales of financial investments held-to-maturity 203 1,974 Deposit insurance fees (51,228) (42,905) Segment Reports Segment Reports Net valuations of equity participations (25,605) (8,931) Office supplies (35,801) (27,570) Net proceeds from sales of equity participations 22,729 117,221 Car expenses (21,037) (15,722) Net income from securities at fair value Security expenses (42,847) (33,885) through profit and loss (211,489) 31,311 Travelling expenses (27,719) (20,329) Net valuations of securities at fair value Training expenses for staff (19,599) (14,748) through profit and loss (209,574) 25,905 Sundry administrative expenses (115,860) (101,732)

Consolidated Financial Statements Financial Consolidated Net proceeds from sales of securities Statements Financial Consolidated

> at fair value through profit and loss (1,915) 5,406 Total (214,162) 141,551 Glossary Glossary

Contacts Contacts 208 209 Preface Preface

€000 2007 2006 €000 2007 2006 Depreciation on intangible and Sales revenues from non-banking activities 1,056,123 846,248 tangible fixed assets (265,536) (221,061) Expenses arising from non-banking activities (975,112) (772,262) Tangible fixed assets (155,343) (138,746)

Managing Board Managing Revenues from additional leasing services 71,701 67,621 Board Managing Intangible fixed assets (88,036) (63,691) Expenses from additional leasing services (74,629) (66,960) Leased assets (operating leasing) (22,156) (18,624) Rental income from real estate 3,650 4,934 Total (2,645,042) (2,113,095) Rental income from other operating lease 25,861 20,592 Net proceeds from disposal of tangible Legal, advisory and consulting expenses include audit fees of the group companies and intangible fixed assets (4,146) 1,199 Supervisory Board’s Report Supervisory Board’s Report which comprise expenses paid for the audit of financial statements amounting to € 8,391 Other taxes (43,317) (30,947) thousand (2006: € 6,693 thousand) and tax advisory as well as other additional consul- Impairment of goodwill (7,890) – ting services provided by the auditors amounting to € 1,645 thousand (2006: € 1,517 Income from release of negative goodwill 13,026 8,244 thousand). Overview of RZB Net expense from allocation and release Overview of RZB of other provisions (19,893) (29,687) Amortisation of intangible fixed assets capitalised in the course of initial consolidation was € 11,998 thousand (2006: € 10,531 thousand). This is due to scheduled amorti- Sundry operating income 94,600 90,401 sation of the acquired customer base and an impairment loss on the eBanka brand of Sundry operating expenses (44,158) (35,154) € 4,268 thousand because of the decision taken in 2007 to merge the bank with Total 95,815 104,228

Raiffeisen Banking Group Raiffeisenbank a.s., Prague. Raiffeisen Banking Group In the financial year 2007, impairment on goodwill amounted to € 7,890 thousand. Interview Interview (9) Other operating profit/loss (10) Income from disposal of group assets The position other operating profit/loss captures, among other things, sales revenues and expenses from non-banking activities, income and expenses from disposal as well as Income from disposal of group assets amounting to € 26,455 thousand (2006: Management Report income from the revaluation of tangible and intangible fixed assets. € 517,401 thousand) was mainly due to income arising from the disposal of SINESCO Management Report Energiaszolgáltató Kft., Budapest (€ 11,038 thousand), and Arena Corner Ingatlan fejlesztõ Kft., Budapest (€ 14,559 thousand). The largest transaction in the previous year was the sale of JSCB Raiffeisenbank Ukraine, Kiev, resulting in an income from disposal Segment Reports Segment Reports

of group assets of € 485,479 thousand. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 210 211 Preface Last year, the tax rate was influenced by tax-exempted income from the sales of two Preface (11) Income taxes equity participations. The tax rate would have been 19.5 per cent without consideration Income taxes break down as follows: of this tax-exempted income.

Managing Board Managing €000 2007 2006 Board Managing Current income taxes (288,221) (285,394) (12) Earnings per share Austria (18,034) (34,402) €000 2007 2006 Foreign (270,187) (250,992) Consolidated profit 778,456 1,169,432 Deferred taxes (6,528) 34,477

Supervisory Board’s Report Less preference dividend (12,506) (10,675) Supervisory Board’s Report Total (294,749) (250,917) Adjusted consolidated profit 765,950 1,158,757 Raiffeisen Zentralbank Österreich Aktiengesellschaft is the hub of a tax group whose Average number of ordinary shares outstanding (in 1,000 units) 5,080,334 4,829,359 members are six fully consolidated subsidiaries close to Raiffeisen International and three Overview of RZB Overview of RZB subsidiaries not fully consolidated (Raiffeisen Research Gesellschaft m.b.H., RZB Private Earnings per share in € 150.7 239.9 Equity Holding AG, RZB PE Handels- und Beteiligungs GmbH). There were no conversion or option rights outstanding, so undiluted earnings per share The following transition shows the relation between profit before tax and the effective tax are equal to diluted earnings per share. burden:

Raiffeisen Banking Group Last year, earnings per share were influenced by income from the sales of two equity Raiffeisen Banking Group €000 2007 2006 participations. Discounting this income, earnings per share would have been € 155.7.

Interview Profit before tax 1,484,824 1,882,316 Interview Theoretical income tax expense in the financial year based on the domestic income tax rate of 25 per cent (371,206) (470,579) Effect of divergent foreign tax rates 70,899 45,342 Tax deductions because of tax-exempted income Management Report Management Report from equity participations and other income 94,955 180,008 Tax increases because of non-deductible expenses (87,898) (32,620) Other tax deductions and tax increases (1,500) 26,930 Segment Reports Segment Reports

Effective tax burden (294,750) (250,917) Tax rate in per cent 19.9% 13.3% Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 212 213 Preface Preface

Notes to the balance sheet

(13) Balance sheet according to valuation categories Managing Board Managing Board Managing The following table shows the balance sheet according to IAS 39 valuation categories:

Assets according to Assets according to valuation categories valuation categories €000 31/12/2007 31/12/2006 Change €000 31/12/2007 31/12/2006 Change

Supervisory Board’s Report Trading assets 11,192,392 10,030,851 11.6% Loans and advances 110,068,799 90,357,815 21.8% Supervisory Board’s Report Positive fair values of derivative Loans and advances to banks 36,658,289 37,022,951 (1.0%) financial instruments 1,755,705 1,043,363 68.3% Loans and advances to customers 73,025,535 53,040,833 37.7% Shares and other Overview of RZB Other non-derivative financial assets 1,837,480 1,583,282 16.1% Overview of RZB variable-yield securities 1,399,300 1,242,920 12.6% Impairment losses on loans Bonds, notes and other and advances (1,452,505) (1,289,251) 12.7% fixed-interest securities 8,023,495 7,685,656 4.4% Financial assets held-to-maturity 3,668,650 4,453,233 (17.6%) Call/time deposits for trading purposes 13,892 3,224 330.9% Bonds, notes and other fixed-interest securities 3,623,608 4,388,392 (17.4%) Raiffeisen Banking Group Loans held for trading – 55,687 (100.0%) Raiffeisen Banking Group Purchased loans 45,042 64,842 (30.5%) Financial assets at fair value Derivatives (hedging) 882,954 846,274 4.3% Interview through profit or loss 7,478,407 5,940,147 25.9% Interview Shares and other Positive fair values of derivatives variable-yield securities 627,394 490,422 27.9% from hedge accounting 882,954 846,274 4.3% Bonds, notes and Other assets 3,689,013 3,597,132 2.6% otherfixed-interest securities 6,851,013 5,449,725 25.7% Investments in associates Management Report Management Report Financial assets available-for-sale 421,782 403,397 4.6% and other affiliated companies 973,744 929,827 4.7% Other interests 411,886 403,397 2.1% Intangible and tangible fixed assets 2,715,269 2,667,305 1.8% Shares and other Total assets 137,401,999 115,628,849 18.8%

Segment Reports variable-yield securities 9,896 – Segment Reports

> Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 214 215 Preface Preface

Equity and liabilities according (15) Loans and advances to banks to valuation categories €000 31/12/2007 31/12/2006 Change €000 2007 2006 Trading liabilities 3,558,714 3,342,995 6.5% Giro and clearing business 1,455,314 1,644,091 Managing Board Managing Board Managing Negative fair values of derivative Money market business 20,884,276 23,872,243 financial instruments 3,309,793 2,527,309 31.0% Loans to banks 7,858,594 5,948,349 Short-selling of trading assets 201,900 677,332 (70.2%) Purchased loans 130,512 262,709 Call/time deposits for Leasing claims 56,550 78,610 trading purposes 47,021 138,354 (66.0%) Claims evidenced by paper 524,854 199,921

Supervisory Board’s Report Liabilities at amortised cost 123,932,189 104,397,669 18.7% Supervisory Board’s Report Total 30,910,100 32,005,923 Deposits from banks 48,899,185 44,129,411 10.8% Deposits from customers 55,368,996 44,727,489 23.8% Purchased loans are fully attributable to the valuation category “loans and advances”. Liabilities evidenced by paper 14,609,825 11,322,460 29.0% Overview of RZB Overview of RZB Subordinated capital 3,827,432 2,895,609 32.2% Loans and advances to banks, classified by region (counterparty’s domicile), Other non-derivative break down as follows: financial liabilities 1,226,751 1,322,701 (7.3%) Liabilities at fair value €000 2007 2006 through profit and loss 67,684 – 100.0% Austria 6,607,478 8,607,475 Raiffeisen Banking Group Liabilities evidenced by paper 67,684 – 100.0% Central Europe (CE) 2,364,084 1,698,885 Raiffeisen Banking Group Derivatives (hedging) 837,265 741,833 12.9% Southeastern Europe (SEE) 3,139,568 1,858,179 Interview Negative fair values of derivates Commonwealth of Independent States (CIS) 1,050,834 680,849 Interview for hedge accounting 837,265 741,833 12.9% Other countries 17,748,136 19,160,535 Provisions for liabilities and charges 583,774 509,152 14.7% Total 30,910,100 32,005,923 Equity 8,422,372 6,637,200 26.9%

Management Report Total equity and liabilities 137,401,999 115,628,849 18.8% Loans and advances break down into the following bank segments: Management Report

€000 2007 2006 (14) Cash reserve Central banks 4,359,935 2,525,284 Segment Reports Segment Reports Commercial banks 26,493,360 29,468,282 €000 2007 2006 Multinational development banks (MDB) 56,805 12,357 Cash in hand 1,393,488 1,203,904 Total 30,910,100 32,005,923 Balances at central banks 4,354,701 3,813,124 Total 5,748,189 5,017,028 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 216 217 Preface Loans and advances to customers, classified by region (counterparty’s domicile), break Preface (16) Loans and advances to customers down as follows: €000 2007 2006 Credit business 45,385,170 32,900,181 €000 2007 2006 Managing Board Managing Board Managing Money market business 8,850,167 7,752,822 Austria 9,371,960 7,812,211 Mortgage loans 12,543,560 7,400,135 Central Europe (CE) 20,339,170 15,116,303 Purchased loans 1,044,993 1,049,698 Southeastern Europe (SEE) 11,002,184 8,421,907 Leasing claims 4,977,707 3,775,818 Commonwealth of Independent States (CIS) 14,179,621 9,728,562 Claims evidenced by paper 268,980 227,021 Other countries 18,177,642 12,026,692 Supervisory Board’s Report Supervisory Board’s Report Total 73,070,577 53,105,675 Total 73,070,577 53,105,675

Purchased loans amounting to € 45,042 thousand (2006: € 64,842 thousand) are assigned to the valuation category “held-to-maturity“. Purchased loans classified as “loans (17) Impairment losses on loans and advances Overview of RZB Overview of RZB and advances” totalled € 999,951 thousand (2006: € 984,856 thousand). Provisions for impairment losses are formed in accordance with uniform Group stan- Loans and advances to customers break down into business segments according to Basel II dards and cover all recognisable counterparty risks. A table with the development of definition as follows: the impairment losses on loans and advances can be found in the risk report on page 267. Provisions for impairment losses are allocated to the following asset classes accor-

Raiffeisen Banking Group €000 2007 2006 ding to Basel II definition: Raiffeisen Banking Group Sovereigns 1,538,421 1,872,026

Interview Corporate customers – large 48,724,999 34,485,197 €000 2007 2006* Interview Corporate customers – small business 4,831,394 3,952,053 Sovereigns 1,769 192 Retail customers – private individuals 15,090,436 10,405,872 Banks 8,908 12,042 Retail customers – small and medium-sized enterprises 2,654,335 2,187,503 Corporate customers – large 787,622 771,159

Management Report Other 230,992 203,024 Corporate customers – small business 137,285 108,294 Management Report Total 73,070,577 53,105,675 Retail customers – private individuals 428,411 307,905 Retail customers – small and medium-sized enterprises 88,510 89,659 Total 1,452,505 1,289,251 Segment Reports Segment Reports

* The previous year figures were adapted according to the new asset classes Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 218 219 Preface Preface

(18) Trading assets (19) Derivatives

The trading assets consist of the following securities and derivative instruments €000 2007 2006 held for trading: Positive fair values of derivatives in fair Managing Board Managing value hedges (IAS 39) 60,134 40,401 Board Managing €000 2007 2006 Interest-based transactions 60,134 40,401 Bonds, notes and other fixed-interest securities 7,883,318 7,685,656 Positive fair values of derivatives in Treasury bills and bills of public authorities cash flow hedges 822,821 805,872 eligible for refinancing 921,261 1,062,790 Interest-based transactions 822,821 805,872

Supervisory Board’s Report Other securities issued by the public sector 745,246 915,574 Positive fair values of banking book Supervisory Board’s Report Bonds and notes of non-public issuers 6,216,811 5,707,292 derivatives without hedge accounting 360,376 166,924 Shares and other variable-yield securities 1,237,965 1,074,137 Interest-based transactions 167,877 52,991 Shares 604,675 469,535 Currency-based transactions 192,075 83,189 Overview of RZB Overview of RZB Mutual funds 118,083 155,042 Equity-/index-based transactions 424 30,744 Other variable-yield securities 515,207 449,560 Positive fair values of credit derivatives 11,711 9,079 Positive fair values of derivative Total 1,255,042 1,022,277 financial instruments 1,383,617 867,361 Interest-based transactions 547,304 210,182 Insofar as the conditions for hedge accounting according to IAS 39 are fulfilled, deriva- Raiffeisen Banking Group tive financial instruments are measured at their fair values (dirty prices) in their function Raiffeisen Banking Group Currency-based transactions 694,983 537,086 as hedging instruments. The hedged items in connection with fair value hedges are loans Equity-/index-based transactions 133,467 119,597

Interview and advances to customers and liabilities evidenced by paper. The hedged risks are Interview Credit derivative transactions 6,942 – interest rate risks. The changes in the carrying amount of the hedged underlying transac- Other transactions 921 496 tions in IAS 39 fair value hedges are included in the respective balance sheet items. Call/time deposits for trading purposes 13,892 3,224 Loans held for trading – 55,687 The item also includes the positive fair values of derivative financial instruments that are Management Report neither held for trading nor constitute fair value hedging instruments under article 39 Management Report Pledged securities ready to be sold/repledged by transferee 301,513 168,783 of IAS. Total 10,820,305 9,854,848 Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 220 221 Preface Preface

(20) Financial investments (21) Investments in associates

This item comprises securities available-for-sale, financial assets at fair value through pro- Financial information on associated companies – mainly unaudited and preliminary figu- fit or loss and securities held-to-maturity as well as strategic equity participations held on res due to the fact that the financial statements of the companies mentioned below have Managing Board Managing a long-term basis. not yet been published – is shown in the following table: Board Managing

€000 2007 2006 Share- Bonds, notes and other fixed-interest securities 10,377,787 9,838,117 Total total Profit holders €000 assets revenues after tax equity Treasury bills and bills of public authorities eligible for refinancing 1,983,689 2,170,894 card complete Service Bank, Supervisory Board’s Report Vienna (AT) 360,105 86,726 37,975 65,142 Supervisory Board’s Report Other securities issued by the public sector 1,759,600 1,421,840 LEIPNIK-LUNDENBURGER INVEST Bonds and notes of non-public issuers 6,608,047 6,241,436 Beteiligungs AG, Vienna (AT)* 958,132 859,527 25,141 250,976 Money market instruments 23,980 1,477 NOTARTREUHANDBANK Overview of RZB Others 2,471 2,470 AG, Vienna (AT) 937,234 15,086 6,840 20,693 Overview of RZB Shares and other variable-yield securities 594,516 485,381 Österreichische Hotel- und Touris- Shares 55,214 20,235 musbank Ges.m.b.H., Wien (AT) 891,162 4,076 1,048 25,390 Raiffeisen stavebni sporitelna, Mutual funds 523,421 451,511 a.s., Prague (CZ) 1,691,646 40,957 7,250 45,205 Other variable-yield securities 15,882 13,635 Raiffeisen Banking Group Raiffeisen Bausparkasse Raiffeisen Banking Group Pledged securities ready to Gesellschaft m.b.H., Vienna (AT)* 8,066,700 170,500 22,100 275,156 be sold/repledged by transferee 96,835 5,041

Interview Raiffeisen Banca pentru Interview Equity participations 662,491 700,037 Locuinte S.A., Bucharest (RO) 76,460 4,201 (4,277) 14,667 Interests in affiliated companies 207,831 296,640 Raiffeisen evolution project Other interests 454,660 403,397 development GmbH, Vienna (AT)* 300,000 167,000 7,000 137,334 Total 11,731,629 11,028,576 Raiffeisen Informatik GmbH, Management Report Vienna (AT) 94,179 215,074 (2,456) 33,704 Management Report Equity participations valued at amortised cost for which fair values could not be reliably Raiffeisen Kapitalanlage- measured amounted to € 358,463 thousand (2006: € 381,788 thousand). Gesellschaft m.b.H., Vienna (AT)* 146,548 76,230 6,875 32,445 Raiffeisen stambena štedionica d.d., Segment Reports Segment Reports

Zagreb (HR) 277,814 11,926 (4,178) 11,044 Raiffeisen Wohnbaubank Aktiengesellschaft, Vienna (AT) 1,479,439 1,733 567 7,008 UNIQA Versicherungen AG, Vienna (AT)** 24,587,131 4,532,137 151,900 1,122,485 * Consolidated financial statements, profit and equity are before deduction of minority interests. ** Consolidated figures 2006, because UNIQA is a listed company and has not yet published its consolidated financial statements 2007 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Further information regarding associated companies is stated on page 317. Glossary Glossary

Contacts Contacts 222 223 Preface Preface

(22) Intangible fixed assets (23) Tangible fixed assets

€000 2007 2006 €000 2007 2006 Goodwill 783,234 865,195 Land and buildings used by the Group Managing Board Managing Board Managing Software 301,200 257,637 for own purposes 608,015 590,835 Other intangible fixed assets 199,399 227,510 Other land and buildings (investment property) 25,760 23,161 Total 1,283,833 1,350,342 Office furniture and equipment as well as other tangible fixed assets 557,277 553,031 Leased assets (operating lease) 240,384 149,936 The item software comprises acquired software amounting to € 257,610 thousand (2006:

Supervisory Board’s Report Total 1,431,436 1,316,963 Supervisory Board’s Report € 223,265 thousand) and developed software amounting to € 43,590 thousand (2006: € 34,371 thousand). The fair value of investment property totalled € 64,783 thousand (2006: € 59,294 thousand). Overview of RZB Overview of RZB

(24) Development of fixed assets

Intangible and tangible fixed assets developed as follows in the financial year 2007: Raiffeisen Banking Group Raiffeisen Banking Group Cost of acquisition or conversion Change in Interview Interview As of consolidated Exchange as of €000 1/1/2007 group differences additions disposals transfers 31/12/2007 Intangible fixed assets 1,686,553 2,149 (61,198) 149,212 (71,061) 80 1,705,735 Goodwill 921,713 1,851 (39,816) 1 (38,563) – 845,187 Management Report Software 503,020 298 (809) 135,821 (31,973) 324 606,682 Management Report Other intangible fixed assets 261,819 – (20,573) 13,390 (525) (244) 253,867 Tangible fixed assets 2,092,219 (50,812) (63,221) 524,456 (170,749) (80) 2,331,813

Segment Reports Land and buildings used by the Group Segment Reports for own purposes 798,250 – (46,026) 108,833 (32,145) 2,102 831,015 Other land and buildings 38,221 (488) (451) 9,719 (1,176) 2,899 48,723 of which land value of developed land 12,314 – (738) 657 – – 12,233 Office furniture and equipment as well as other tangible fixed assets 1,048,383 (59,950) (19,298) 252,264 (98,522) (6,962) 1,115,915 Leased assets (operating lease) 207,365 9,626 2,554 153,640 (38,906) 1,881 336,160 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Total 3,778,772 (48,663) (124,419) 673,668 (241,810) – 4,037,548 Glossary Glossary

Contacts Contacts 224 225 Preface Write-ups, amortisation, depreciation, impairment Book value Write-ups, amortisation, depreciation, impairment Book value Preface

as of as of €000 Cumulative Write-ups depreciation 31/12/2007 €000 Cumulative Write-ups depreciation 31/12/2007 Intangible fixed assets (421,902) 53 (95,926) 1,283,833 Other land and Managing Board Managing Goodwill (61,953) – (7,890) 783,234 buildings (22,964) – (8,575) 25,760 Board Managing Software (305,481) 42 (64,032) 301,200 of which land value of developed Other intangible land – – – 12,233 fixed assets (54,468) 11 (24,005) 199,399 Other tangible Tangible fixed assets (900,376) 23 (177,500) 1,431,436 fixed assets (558,637) 23 (121,579) 557,277 Supervisory Board’s Report Land and buildings Leased assets Supervisory Board’s Report used by the Group for (operating lease) (95,776) – (22,156) 240,384 own purposes (223,000) – (25,189) 608,015 Total (1,322,279) 76 (273,426) 2,715,269 (This table continues at page 227.) Overview of RZB Overview of RZB

Intangible and tangible fixed assets developed as follows

Raiffeisen Banking Group in the financial year 2006: Raiffeisen Banking Group

Interview Cost of acquisition or conversion Change in Interview As of consolidated Exchange as of €000 1/1/2006 group differences additions disposals transfers 31/12/2006 Intangible fixed assets 1,254,839 408,655 (61,203) 126,211 (32,601) (9,348) 1,686,553 Goodwill 613,503 355,995 (47,784) – – – 921,713 Management Report Software 380,678 25,483 7,204 115,925 (30,826) 4,556 503,020 Management Report Other intangible fixed assets 260,658 27,177 (20,623) 10,286 (1,775) (13,904) 261,819 Tangible fixed assets 1,614,499 206,430 905 412,292 (151,255) 9,348 2,092,219

Segment Reports Land and buildings used by the Group Segment Reports

for own purposes 569,387 168,841 (6,116) 71,752 (19,289) 13,675 798,250 Other land and buildings 24,279 525 (415) 3,588 (7,443) 17,687 38,221 of which land value of developed land 3,302 9,052 (48) 8 – – 12,314 Office furniture and equipment as well as other tangible fixed assets 875,391 45,953 7,478 233,450 (112,168) (1,721) 1,048,383 Leased assets (operating lease) 145,442 (8,889) (42) 103,502 (12,355) (20,293) 207,365 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Total 2,869,338 615,085 (60,298) 538,503 (183,856) – 3,778,772 Glossary Glossary

Contacts Contacts 226 227 Preface Write-ups, amortisation, depreciation, impairment Book value Assets held for sale according to IFRS 5 amounting to € 41,030 thousand (2006: € 3,685 Preface

as of thousand) were recognised in other assets. €000 Cumulative Write-ups depreciation 31/12/2006 Intangible fixed assets (336,211) 23 (63,691) 1,350,342 Deferred taxes break down as follows: Managing Board Managing Goodwill (56,518) – – 865,195 Board Managing Software (245,384) 23 (48,691) 257,637 €000 2007 2006 Other intangible Deferred tax assets 108,796 97,441 fixed assets (34,310) – (15,001) 227,510 Provisions for deferred taxes 56,509 43,255 Tangible fixed assets (775,256) 5,023 (157,370) 1,316,963 Net deferred taxes 52,287 54,186

Supervisory Board’s Report Land and buildings Supervisory Board’s Report used by the Group Net deferred taxes result from the following items: for own purposes (207,416) 49 (22,191) 590,835 Other land and €000 2007 2006 Overview of RZB buildings (15,060) – (4,900) 23,161 Overview of RZB Loans and advances to customers 69,398 43,765 of which land value of developed land – – – 12,314 Impairment losses on loans and advances 32,958 34,450 Other tangible Other assets 31,899 68,640 fixed assets (495,352) 1,405 (111,655) 553,031 Provisions for liabilities and charges 29,985 34,942

Raiffeisen Banking Group Leased assets Other liabilities 41,736 20,166 Raiffeisen Banking Group (operating lease) (57,429) 3,569 (18,624) 149,936 Tax loss carry-forwards 17,721 16,343 Total (1,111,467) 5,045 (221,061) 2,667,305 Interview Other balance sheet items 112,675 69,504 Interview Deferred tax assets 336,372 287,810 Additions to intangible and tangible assets did not include major individual investments. Loans and advances to banks 23,369 430 Loans and advances to customers 3,823 16,554

Management Report (25) Other assets Trading assets 43,560 30,244 Management Report Financial investments 20,469 22,460 €000 2007 2006 Tangible and intangible fixed assets 84,756 59,871 Tax assets 243,301 145,646

Segment Reports Other liabilities 26,259 31,049 Segment Reports Current tax assets 134,505 48,205 Other balance sheet items 81,849 73,017 Deferred tax assets 108,796 97,441 Deferred tax liabilities 284,085 233,625 Receivables arising from non-banking activities 248,285 170,363 Net deferred taxes 52,287 54,186 Prepayments and other deferrals 415,769 441,442 Clearing claims from securities and payment Deferred income tax assets are recognised for unused tax loss carry-forwards and amoun- transfer business 197,577 143,331 ted to € 17,721 thousand (2006: € 16,343 thousand). The tax loss carry-forwards are

Consolidated Financial Statements Financial Consolidated Lease in progress 265,766 242,393 Statements Financial Consolidated

mainly without any time limit. The Group did not recognise deferred income tax assets Any other business 466,782 440,106 of € 8,345 thousand (2006: € 6,697 thousand) because from the present point of view

Glossary there is no prospect to realise them within a reasonable period of time. Glossary

Total 1,837,480 1,583,281

Contacts Contacts 228 229 Preface Deposits break down as follows according to Basel II definition: Preface (26) Deposits from banks

€000 2007 2006 €000 2007 2006 Giro and clearing business 2,680,648 2,633,392 Sovereigns 1,427,147 1,691,722 Managing Board Managing Board Managing Money market business 34,993,604 32,782,662 Corporate customers – large 28,960,299 22,111,894 Long-term loans 11,224,933 8,713,357 Corporate customers – small business 2,965,115 2,014,350 Total 48,899,185 44,129,411 Retail customers – private individuals 17,853,856 15,897,403 Retail customers – small and medium-sized enterprises 3,500,463 2,396,400 Deposits from banks, classified by region (counterparty’s domicile), Others 662,116 615,720 Supervisory Board’s Report Supervisory Board’s Report break down as follows: Total 55,368,996 44,727,489

€000 2007 2006 Deposits from customers, classified by region (counterparty’s domicile), Austria 21,007,836 19,550,062 break down as follows: Overview of RZB Overview of RZB Central Europe (CE) 1,620,452 1,427,102 €000 2007 2006 Southeastern Europe (SEE) 451,518 501,216 Austria 6,916,040 4,360,256 Commonwealth of Independent States (CIS) 750,192 556,031 Central Europe (CE) 17,005,426 14,197,744 Other countries 25,069,187 22,095,000 Southeastern Europe (SEE) 12,867,902 10,300,625

Raiffeisen Banking Group Total 48,899,185 44,129,411 Raiffeisen Banking Group Commonwealth of Independent States (CIS) 9,070,943 7,344,326 Other countries 9,508,685 8,524,538

Interview The deposits break down into the following bank segments: Interview Total 55,368,996 44,727,489 €000 2007 2006 Central banks 6,771,208 521,856 Commercial banks 40,803,035 42,534,019 (28) Liabilities evidenced by paper Management Report Management Report Multinational development banks (MDB) 1,324,942 1,073,536 €000 2007 2006 Total 48,899,185 44,129,411 Bonds and notes issued 11,377,864 8,243,459 Money market instruments issued 2,586,250 2,559,761 Segment Reports Segment Reports Other liabilities evidenced by paper 713,395 519,240 (27) Deposits from customers Total 14,677,509 11,322,460 €000 2007 2006 Sight deposits 22,993,163 19,464,463 Time deposits 31,119,245 23,920,407 Savings deposits 1,256,588 1,342,619 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Total 55,368,996 44,727,489 Glossary Glossary

Contacts Contacts 230 231 Preface Preface

(29) Provisions for liabilities and charges

Change in transfers, As of consolidated exchange as of

Managing Board Managing €000 1/1/2007 group Allocation Release Usage differences 31/12/2007 Board Managing Severance payments 48,337 79 9,926 (933) (292) 1,963 59,080 Retirement benefits 64,781 0 2,919 (1,806) (176) 425 66,143 Taxes 85,607 968 105,796 (8,767) (67,332) (3,682) 112,590 Current taxes 42,352 27 82,139 (922) (65,203) (2,312) 56,081

Supervisory Board’s Report Deferred taxes 43,255 941 23,657 (7,845) (2,129) (1,370) 56,509 Supervisory Board’s Report Contingent liabilities and commitments 72,540 – 48,313 (45,242) (218) (217) 75,175 Restructuring 3,035 – – (2,759) – (22) 254 Pending legal issues 78,182 – 16,490 (3,960) (37,995) 174 52,891 Overview of RZB Overview of RZB Overdue vacation 24,580 27 25,302 (11,016) – (986) 37,907 Others 132,091 (352) 115,798 (15,006) (49,064) (3,733) 179,734 Total 509,152 722 324,544 (89,489) (155,077) (6,078) 583,774

Raiffeisen Banking Group Provisions for severance payments and similar obligations developed as follows: Provisions for retirement benefits developed as follows: Raiffeisen Banking Group

Interview €000 2007 2006 €000 2007 2006 Interview Defined benefit obligationD ( BO) as of 1/1 48,337 43,901 Defined benefit obligationD ( BO) as of 1/1 100,786 96,511 Exchange differences 2 1 Change in consolidated group 287 – Changes in consolidated group 79 (1,176) Current service cost 1,676 3,207

Management Report Transfers 2,062 – Interest cost 4,356 4,077 Management Report Service cost 7,864 4,371 Benefit payments (4,874) (4,607) Interest cost 2,278 1,903 Transfer to contribution plan – (251) Payments (1,913) (2,427) Actuarial gain/(loss) 91 1,849 Segment Reports Segment Reports Actuarial gain/(loss) 371 1,763 Defined benefit obligationD ( BO) as of 31/12 102,322 100,786 Defined benefit obligationD ( BO) as of 31/12 59,080 48,337 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 232 233 Preface Plan assets developed as follows: Preface (30) Trading liabilities

€000 2007 2006 €000 2007 2006 Plan assets at fair value as of 1/1 36,005 35,584 Negative fair values of derivative financial instruments 2,841,919 2,325,564 Managing Board Managing Expected Return on plan assets 1,523 1,503 Interest-based transactions 566,614 224,619 Board Managing Contributions to plan assets 545 518 Currency-based transactions 697,834 631,266 Plan payments (1,037) (933) Equity-/index-based transactions 1,572,664 1,468,947 Actuarial gain/(loss) (857) (464) Credit derivative transactions 3,976 – Transfer to contribution plan – (203) Other transactions 831 732 Supervisory Board’s Report Plan assets at fair value as of 31/12 36,179 36,005 Short-selling of trading assets 201,901 677,332 Supervisory Board’s Report Call/time deposits for trading purposes 47,021 138,354 The reconciliation of DBO to provision is as follows: Total 3,090,841 3,141,250

Overview of RZB €000 2007 2006 Overview of RZB Defined benefit obligationD ( BO) 102,322 100,786 (31) Derivatives Plan assets at fair value 36,179 36,005 Provision as of 31/12 66,143 64,781 €000 2007 2006 Negative fair values of derivatives Raiffeisen Banking Group The structure of plan assets (asset classes) breaks down as follows: in fair value hedges (IAS 39) 81,200 26,460 Raiffeisen Banking Group Interest-based transactions 81,200 26,460

Interview Share in plan assets 2007 2006 Negative fair values of derivatives Interview Bonds 63% 62% in cash flow hedges (IAS 39) 756,065 715,373 Equities 30% 31% Interest-based transactions 756,065 715,373 Alternative investments 6% 6% Negative fair values of bankbook

Management Report Property 1% 1% derivatives without hedge accounting 432,444 196,923 Management Report Interest-based transactions 205,630 175,122 The plan assets do not contain own financial instruments. Currency-based transactions 223,814 21,801 Actual return on plan assets was as follows: Equity-/index-based transactions 3,000 – Segment Reports Segment Reports €000 2007 2006 Negative fair values of credit derivatives 35,430 4,821 Actual return on plan assets 663 1,038 Total 1,305,139 943,578 Insofar as the conditions for hedge accounting according to IAS 39 are fulfilled, deriva- The partition of DBO into wholly/partly funded or wholly unfunded is as follows: tive financial instruments are measured at their fair values (dirty prices) in their function as hedging instruments. The hedged items in connection with fair value hedges are loans €000 2007 2006 and advances to customers and liabilities evidenced by paper. The hedged risks are

Consolidated Financial Statements Financial Consolidated Wholly funded 11,729 9,916 Statements Financial Consolidated

interest rate risks. As of 31 December 2007, variable-interest financial assets and refinan- Partly funded 51,446 48,150 cing was hedged against the risk of changes in future cash flows by applying interest rate

Glossary Wholly unfunded 39,147 42,720 swaps which are reported as cash flow hedge. The effective part of this hedge amounts Glossary

Defined benefit obligationD ( BO) 102,322 100,786 to minus € 8,168 thousand and was recognised directly in equity. Contacts Contacts 234 235 Preface In 2007, expenses on subordinated liabilities totalled € 164,384 thousand (2006: Preface (32) Other liabilities € 114,525 thousand). €000 2007 2006 Liabilities from non-banking activities 224,095 143,470 Managing Board Managing Board Managing Accruals and deferred items 366,208 361,553 (34) Equity and minorities Liabilities arising from dividends 169 112,341 €000 2007 2006 Clearing claims from securities and payment Consolidated equity 4,888,619 3,573,721 transfer business 397,887 199,804 Subscribed capital 423,722 404,463 Any other business 238,392 505,533

Supervisory Board’s Report Capital reserves 905,560 767,400 Supervisory Board’s Report Total 1,226,751 1,322,701 Retained earnings 3,559,337 2,401,858 Consolidated profit 778,280 1,169,432 (33) Subordinated capital Minority interests 2,755,473 1,894,047 Overview of RZB Overview of RZB Total 8,422,372 6,637,200 €000 2007 2006 Subordinated liabilities 3,145,628 2,789,195 The issued share capital of Raiffeisen Zentralbank Österreich Aktiengesellschaft was Supplementary capital 681,804 74,996 subdivided into 5,830,764 no-par shares. 5,290,494 were registered ordinary shares and 540,270 were non-voting bearer preferences shares. The company’s total nominal Profit-sharing certificates – 31,417 Raiffeisen Banking Group share capital as stated in its Memorandum and Articles of Association was € 423,722 Raiffeisen Banking Group Total 3,827,432 2,895,608 thousand. Interview Interview The following table contains borrowings which exceed 10 per cent According to the resolution of the Annual General Meeting held on 20 June 2007, the of the subordinated capital. authorization to increase the share capital up to € 23,723 thousand was revoked and at the same time, the Managing Board was authorized, subject to the consent of the Super- €000 Amount Currency Interest rate1 due visory Board, to increase the share capital by up to € 101,738 thousand for cash or con- Management Report RZB Callable Subordinated 3M tributions in kind by not later than 14 August 2012, if necessary in several tranches, by Management Report Capital FRN 2006-2016/ EURIBOR issuing up to 1,400,000 shares while preserving shareholders’ rights as conferred by the Series 38 400,000 € +0.33% 22.6.2016 particular stock category. Non-cumulative Segment Reports Segment Reports

Subordinated Perpetual In the financial year 2007, this authorization – with resolution of the Managing Board as Callable Step-up Fixed of 17 September 2007 and the approval of the Supervisory Board as of 20 September to Floating Rate Capital 2007 – was partly used and the share capital was increased by 240,465 ordinary Notes 500,000 € 5.169% – shares amounting to € 17,475 thousand and 24,550 preference shares amounting to Subordinated Capital € 1,784 thousand. Considering the share premium less cost of issue, the proceeds of this fixed to floating rate 5 March issue totalled € 157,419 thousand and strengthened the equity capital accordingly. callable /Series 54 500,000 € 4.50% 2019

Consolidated Financial Statements Financial Consolidated Subordinated The authorization granted in the Annual General Meeting held on 20 June 2007 to Statements Financial Consolidated Supplementary Capital increase the share capital is still effective up to an amount of € 82,479 thousand. Fixed to Floating Rate 29 October Glossary Glossary

Callable Notes /Series 74 600,000 € 5.77% 2015 1 Current interest rate, interest clauses are agreed Contacts Contacts 236 237 Preface The holders of non-voting preference shares received a preference shareholders’ dividend Preface

on the amount of share capital attributable to their shares. The preference shareholders´ dividend for the financial year 2007 came to € 24.25 per preference share, resulting in a distribution of € 12,506 thousand. Managing Board Managing Board Managing The Managing Board intends to propose at the Annual General Meeting that a dividend of € 24.25 per ordinary share be distributed from Raiffeisen Zentralbank Österreich Aktiengesellschaft’s profit for the financial year 2007, which would represent a distribution of € 122,463 thousand.

Supervisory Board’s Report The statement of changes in equity and other disclosures are shown on page 164. Supervisory Board’s Report

(35) Breakdown of remaining terms to maturity Overview of RZB Overview of RZB

As of 31/12/2007 more than more than Due at call or 3 months 1 year more than €000 without maturity up to 3 months up to 1 year up to 5 years 5 years Cash reserve 5,748,189 – – – –

Raiffeisen Banking Group Loans and advances to banks 1,956,008 19,074,356 5,716,404 3,650,210 513,122 Raiffeisen Banking Group Loans and advances to customers 6,108,149 13,901,526 13,745,957 24,438,368 14,876,577

Interview Trading assets 936,836 938,021 1,160,746 5,723,819 2,060,882 Interview Financial investments 1,284,972 568,866 1,557,492 6,254,407 2,077,602 Investments in associates 765,913 – – – – Sundry assets 2,302,473 1,221,561 348,933 443,369 27,239 Management Report Total assets 19,102,541 35,704,329 22,529,532 40,510,174 19,555,423 Management Report Deposits from banks 2,825,826 30,373,166 4,399,946 8,586,669 2,713,577 Deposits from customers 21,645,091 24,025,259 6,205,012 2,348,155 1,145,479

Segment Reports Liabilities evidenced by paper – 4,255,285 1,746,079 7,515,033 1,161,112 Segment Reports

Trading liabilities 91,951 513,822 447,222 1,300,556 737,290 Subordinated capital 819,200 155,325 254,477 480,145 2,118,284 Sundry liabilities 763,093 862,348 342,829 770,476 376,918 Subtotal 26,145,162 60,185,205 13,395,565 21,001,035 8,252,661 Equity 8,422,372 – – – –

Consolidated Financial Statements Financial Consolidated Total equity and liabilities 34,567,533 60,185,205 13,395,565 21,001,035 8,252,661 Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 238 239 Preface Preface

As of 31/12/2006 more than more than Due at call or 3 months 1 year more than €000 without maturity up to 3 months up to 1 year up to 5 years 5 years Cash reserve 5,017,028 – – – – Managing Board Managing Loans and advances to banks 1,901,523 22,786,904 3,904,693 2,895,259 517,544 Board Managing Loans and advances to customers 4,651,479 10,008,548 9,920,568 18,975,814 9,549,266 Trading assets 832,538 728,447 1,403,526 4,633,766 2,256,571 Financial investments 1,183,670 914,435 1,669,703 5,637,534 1,623,234 Investments in associates 633,187 – – – – Supervisory Board’s Report Sundry assets 1,955,868 961,261 238,002 569,001 259,480 Supervisory Board’s Report Total assets 16,175,293 35,399,594 17,136,493 32,711,374 14,206,094 Deposits from banks 2,735,604 28,731,506 3,508,852 7,196,060 1,957,389

Overview of RZB Deposits from customers 18,901,234 18,157,363 4,776,883 1,959,565 932,444 Overview of RZB Liabilities evidenced by paper – 2,890,302 698,719 6,749,492 983,947 Trading liabilities 226,160 1,071,800 529,457 783,432 530,401 Subordinated capital 819,133 135,190 118,936 732,280 1,090,069 Sundry liabilities 1,135,420 637,586 130,497 549,935 321,993

Raiffeisen Banking Group Subtotal 23,817,551 51,623,746 9,763,344 17,970,765 5,816,243 Raiffeisen Banking Group Equity 6,637,200 – – – – Interview Total equity and liabilities 30,454,751 51,623,746 9,763,344 17,970,765 5,816,243 Interview

(36) Related parties Management Report Management Report Companies can carry out business with related parties that may affect the entity’s asset, derösterreich-Wien AG, Vienna, as largest indirect shareholder and its parent company, financial and earnings position. The following related companies have been identified Raiffeisen-Holding Niederösterreich-Wien registrierte Genossenschaft mit beschränk- mainly as related parties: ter Haftung, Vienna. Under affiliated companies all relations to those 277 subsidiaries Segment Reports Segment Reports

are reported which were not included in the consolidated group because of their minor Parent companies are Raiffeisen-Landesbanken-Holding GmbH, a non-operational importance. equity holding company and its subsidiary R-Landesbanken-Beteiligung GmbH, Vienna, which is the majority shareholder of Raiffeisen Zentralbank Österreich Aktiengesellschaft, Disclosures on RZB’s relations to key management are reported under note (55) relations Vienna. Companies exercising a significant influence are mainly Raiffeisen-Holding Nie to key management.

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 240 241 Preface As of 31 December 20 07, transactions with related parties broke down as follows: Preface

Companies Companies with significant affiliated valued Other

Managing Board Managing €000 Parent companies influence companies at-equity interests Board Managing Loans and advances to banks – 156,391 143 202,887 315,693 Loans and advances to customers – 16,518 456,404 31,162 796,805 Trading assets – – – 127,846 19,666 Financial investments – – 210,081 13,148 487,924

Supervisory Board’s Report Investments in associates – – – 765,913 – Supervisory Board’s Report Other assets including derivatives – 332 20,271 70 303 Deposits from banks – 2,187,595 69,211 724,521 9,546,064 Deposits from customers 582 – 245,858 3,664 290,091 Overview of RZB Overview of RZB Provisions for liabilities and charges – – 3 – 1,908 Trading liabilities – – – – 3,961 Other liabilities including derivatives – – 2,633 297 257 Subordinated capital – 22,945 – – –

Raiffeisen Banking Group Guarantees given – – 2,435 9,992 2,147 Raiffeisen Banking Group Guarantees received – 182,013 7,959 135,421 37,982 Interview Interview Management Report Management Report Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 242 243 Preface As of 31 December 2006, transactions with related parties broke down as follows: Preface

Companies Companies with significant affiliated valued Other

Managing Board Managing €000 Parent companies influence companies at-equity interests Board Managing Loans and advances to banks – 1,598,899 – 251,138 270,496 Loans and advances to customers – – 353,084 27,446 427,275 Trading assets – 18,835 – 8,532 16,324 Financial investments – – 296,640 7,208 443,499

Supervisory Board’s Report Investments in associates – – – 633,187 – Supervisory Board’s Report Other assets including derivatives 9 – 1,840 6 14,021 Deposits from banks – 2,026,419 42,543 646,770 9,877,003 Deposits from customers 108 – 271,763 2,794 236,436 Overview of RZB Overview of RZB Provisions for liabilities and charges – – 643 – 4,458 Trading liabilities – – – 749 4 Other liabilities including derivatives – – 463 32 3,082 Subordinated capital – – – – –

Raiffeisen Banking Group Guarantees given – 10,903 1,778 315,498 269,959 Raiffeisen Banking Group Guarantees received – 145,580 8,600 65,354 54,937 Interview Interview

(37) Foreign currency volumes (38) Foreign assets/liabilities

Management Report The consolidated financial statements consist of the following volumes of assets Assets and liabilities with counterparties outside Austria are as follows: Management Report and liabilities denominated in foreign currencies: €000 2007 2006 €000 2007 2006 Assets 111,895,185 90,744,624 Segment Reports Segment Reports Assets 73,238,674 58,736,841 Liabilities 83,944,718 71,584,702 Liabilities 62,325,004 53,989,381 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 244 245 Preface Preface

(39) Securitisation

RZB as originator Securitisation is the packaging of designated portfolios of loans or leasing claims with an unit and hence cleared with the corresponding intragroup loans as a intragroup positi- Managing Board Managing appropriate level of credit enhancement and the redistribution of these portfolios to inves- on. A credit default swap is used as securitisation in the Synthetic transaction ROOF CEE Board Managing tors. The objective of RZB´s securitisation is to ease the strain on the Group's regulatory 2006-1 concluded between Raiffeisenbank Polska S. A., Warsaw (PL), and Raiffeisen- own funds and to use additional refinancing sources. bank a.s., Prague (CZ), as well as German Kreditanstalt für Wiederaufbau (KfW). T h e credit default swap serves as financial guarantee, as is often the case in synthetic transac- In financial year 2007, the true sale transaction ROOF Russia 2007-1 with a volume of USD tions. Both Raiffeisenbanks are beneficiaries and KFW takes the credit risks arising from 400 million was executed for ZAO Raiffeisenbank a.s., Moscow, as seller of claims. In the portfolio of company loans at agreed terms. Supervisory Board’s Report this transaction, car loans of retail customers were securitised and transferred to Roof Supervisory Board’s Report Russia S.A., Luxembourg. As the portfolio’s significant chances and risks remain within the Due to the three securitisation programs placed up to now, the intended relief of the risk Group, the special purpose vehicle is integrated into the consolidated group. Therefore, weighted assets was achieved. both securitised loans and securitised liabilities towards external investors are disclosed Overview of RZB Overview of RZB in the consolidated financial statements. The junior tranche was purchased by a group The following transactions were executed in 2007 and 2006:

Seller of claims or date Volume Volume Junior €000 secured party of contract End of maturity 2007 2006 Portfolio tranche

Raiffeisen Banking Group True Sale Transaction ZAO Raiffeisenbank Austria, Raiffeisen Banking Group ROOF Russia 2007-1 Moscow (RU) May 2007 May 2017 297,000 – Car loans 1.9%

Interview True Sale Transaction Raiffeisen Leasing Polska S.A., January Car-leasing Interview ROOF Poland 2006 Warsaw (PL) 2006 December 2014 – 167,000 contracts 1.3% Synthetic Transaction R Raiffeisenbank Polska S.A., Warsaw (PL) Company OOF CEE 2006-1 Raiffeisenbank a.s., Prague (CZ) March 2006 March 2019 – 450,000 loans 1.8% Management Report Management Report Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 246 247 Preface Own funds requirements for the junior tranche (first loss piece) were taken by group Preface (40) Genuine repurchase agreements companies in all transactions. The following repurchase and redelivery commitments are shown as of the Within the scope of synthetic securitisations, the non-derecognised loans came up to balance sheet date: Managing Board Managing € 402,204 thousand at year-end (2006: € 463,906 thousand). The fluctuation of Board Managing amounts in comparison to the volumes at the beginning of the transactions is due to €000 2007 2006 volumes maturing in the meantime and to currency fluctuations. Furthermore, originators Genuine repurchase agreements as borrower Raiffeisenbank Polska S.A., Warsaw, and Raiffeisenbank a.s., Prague, differently exer- Deposits from banks 5,038,986 4,358,939 cised the option to refill the volumes in a marginal extent or to exceed the original values Deposits from customers 641,408 163,821 slightly. Supervisory Board’s Report Total 5,680,394 4,522,760 Supervisory Board’s Report From a Group view, the non-derecognised loans arising from the true sale transaction ROOF Poland 2006 amounted to € 178,149 thousand (2006: € 164,517). In this case, €000 2007 2006 the fluctuation is mainly due to currency fluctuations as matured volumes have been Genuine repurchase agreements as lender Overview of RZB Overview of RZB refilled during the period. (reverse repurchase agreements) Loans and advances to banks 5,495,202 3,305,462 Regarding the true sale transaction ROOF Russia 2007-1, the non-derecognised loans Loans and advances to customers 1,477,963 1,414,182 from a Group view totalled € 254,199 thousand, whereas the decrease of the value in Loans held for trading – 55,687 comparison to the original transaction value is due to the volumes matured meanwhile. Total 6,973,165 4,775,331 Raiffeisen Banking Group Raiffeisen Banking Group RZB as investor

Interview Beside the above-mentioned kind of refinancing and packaging of designated portfolios Securities sold in a genuine sale and repurchase agreement amounted to € 3,701,529 Interview of loans or leasing claims, RZB acts as investor in ABS-structures. Essentially, it deals with thousand (2006: € 2,224,415 thousand). Securities purchased in a genuine sale and investments in structured investment vehicles. As of 31 December 2007, RZB reported an repurchase agreement totalled € 7,135,233 thousand (2006: € 4,958,887 thousand). investment exposure of about € 1,035,609 thousand. Due to the known turbulences on € 1,074,767 thousand of the securities accepted as collateral was sold or repledged the capital market and the spread expansion in this asset class, price changes lead to a (2006: € 444,143 thousand). Management Report valuation loss of about € 130 million in 2007. Management Report

(41) Assets pledged as collateral Segment Reports Segment Reports

The following liabilities are secured by assets shown in the balance sheet:

€000 2007 2006 Deposits from banks 9,232,171 8,282,577 Deposits from customers 19,105 49,592 Liabilities evidenced by paper 153,324 206,654

Consolidated Financial Statements Financial Consolidated Other liabilities 224,599 157,594 Statements Financial Consolidated

Contingent liabilities and commitments – 4,253

Glossary Total 9,629,199 8,700,670 Glossary

Contacts Contacts 248 249 Preface The following balance sheet assets are provided as collateral for the Assets under finance leases broke down as follows: Preface

above mentioned obligations: €000 2007 2006 €000 2007 2006 Vehicles leasing 2,351,857 1,633,660 Managing Board Managing Board Managing Loans and advances to banks 2,856,136 2,604,991 Real estate leasing 1,840,108 1,473,194 Loans and advances to customers 2,853,033 2,357,572 Equipment leasing 818,841 568,575 Trading assets 520,969 245,140 Total 5,010,806 3,675,429 Financial investments 3,691,763 2,281,429 Total 9,921,901 7,489,132 Supervisory Board’s Report (43) Operating leases Supervisory Board’s Report

(42) Finance leases Operating leases from the lessor’s view: Future minimum lease payments under non-cancellable operating leases are as follows: Overview of RZB Overview of RZB €000 2007 2006 Gross investment value 6,348,410 4,589,267 €000 2007 2006 Minimum lease payments 5,860,745 4,150,814 Up to 1 year 33,899 27,260 Up to 3 months 449,063 308,936 More than 1 year, up to 5 years 57,246 83,075 More than 5 years 34,219 15,646

Raiffeisen Banking Group More than 3 months, up to 1 year 1,137,591 746,205 Raiffeisen Banking Group More than 1 year, up to 5 years 2,963,523 1,988,109 Total 125,364 125,981

Interview More than 5 years 1,310,568 1,107,564 Interview Non-guaranteed residual value 487,665 438,453 Operating leases from the lessee’s view: Unearned finance income 1,337,604 913,838 Future minimum lease payments under non-cancellable operating leases are as follows: Up to 3 months 82,198 53,599 €000 2007 2006

Management Report More than 3 months, up to 1 year 218,268 137,322 Management Report Up to 1 year 75,979 51,442 More than 1 year, up to 5 years 596,759 378,711 More than 1 year, up to 5 years 210,628 203,273 More than 5 years 440,379 344,206 More than 5 years 60,397 143,556 Net investment value 5,010,806 3,675,429 Segment Reports Total 347,004 398,271 Segment Reports

Write-offs on unrecoverable minimum lease payments outstanding totalled € 3,109 thousand (2006: € 13,502 thousand). Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 250 251 Preface red profit on a transaction should be for each member of the RZB Group. Specific risk Preface Notes on financial instruments policies are an integral part of all business operations and in this context also establish a systematic link between earnings and risks in all business segments. (44) Risks arising from financial instruments (Risk Report) Managing Board Managing Furthermore, the members of the Managing Board of Raiffeisen Zentralbank ensure Board Managing Being an active player in the world’s financial markets inherently means taking risks. For the proper organisation and ongoing development of effective internal risk manage- this reason, the ability of Raiffeisen Zentralbank to identify and measure risks, to monitor ment. They decide which procedures are to be employed in identifying, measuring and and to manage them is a decisive competitive factor. To ensure the long-term success of monitoring risks, and make steering decisions according to risk reports and analyses. In RZB and to permit selective growth in the targeted markets – Austria, Central and Eastern all this, the Managing Board is supported by independent risk management and risk con- Europe, and regional centres in Asia – RZB’s risk management and risk controlling acti- trolling units and specially-appointed committees. Supervisory Board’s Report vities are designed to ensure the professional management of credit (including country), Supervisory Board’s Report participation, market, liquidity, and operational risks. Organisational structure Basically, the implementation of risk management is structured in several levels. Raiffeisen Risk management is an integrated part of the overall bank management in RZB. Via the Zentralbank as the parent credit institution of the Group develops and implements risk Overview of RZB Overview of RZB different risk management units within different organizational levels of the Group, it management in close cooperation and coordination with its subsidiaries. ensures that all material risks are measured and limited, and that business in general is evaluated under a risk/return perspective. For this purpose and in addition to legal and regulatory requirements, risk management takes into account the particular nature, scale, RZB Group and complexity of RZB’s business activities and the resulting risks. Raiffeisen Banking Group Raiffeisen Banking Group Credit Risk Management Central risk management Group Risk Committee (GRC) (Corp/FI/Sov/Retail/ functions and committees Group Asset Liability Committee (ALCO) Country) ■ for different risk types Market Risk Committee (MACO) Interview Organization of risk management Market Risk Management Interview ■ for all Group members Credit/Country Risk/Investment Committees Risk management starts at the top management level. First of all, the Managing Board of Risk Controlling Raiffeisen Zentralbank suggests risk and capital targets which are approved by the Super- visory Board of Raiffeisen Zentralbank. They define the risk appetite, set limits for all mate- Raiffeisen Raiffeisen rial risks, and demand a minimum risk-adjusted return in the Group’s risk strategy. Special Local risk management others*

Management Report Zentralbank International Management Report attention is paid to concentration risks and therefore the targets also define limits on large functions and committees ■ for different risk types exposures, product/sector/industry weights and regional concentrations. The Managing ■ for each legal entity Head Office and Banks and Leasing other Board is also responsible for implementing these targets and for the adequate monitoring Branches in CEE Group units and controlling of the risks incurred. Segment Reports Segment Reports Managed Portfolios *no separate legal entity In particular, the Managing Board of Raiffeisen Zentralbank defines and implements Group Functions RZB’s risk policies. A specific risk policy defines the plans for the development of the Decision bodies/support units bank’s business in a certain business segment for a given period. For example, the credit risk policies for Corporates and SMEs regulate which industries will be targeted, restric- ted, or excluded from lending or what the minimum rating, amount of collateral or requi- Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 252 253 Preface The central risk management and controlling functions are accountable for the adequate The Market Risk Committee (MACO) is responsible for controlling market risks of trading Preface

and appropriate implementation of all aspects of the Group’s risk management pro- and banking book activities and for establishing appropriate limits and relevant proces- cess. In particular, they establish common risk management principles and set business- ses. For this purpose, the committee evaluates daily results, the amount of risks taken and specific standards, tools, and practices which are to be followed in all Group entities. This the limit utilisation, as well as the results from stress tests. Managing Board Managing serves the purpose of creating a common risk culture and fostering the use of state-of-the- Board Managing art risk management tools in the Group. The Credit Committee (CC), which is made up of members from the Front Office and Back Office divisions, assesses credit risk and the effectiveness of credit risk management. For example, Basel II calculations for credit risks in non-retail portfolios are performed centrally. For retail portfolios, where the calculation is done on a local level, the diffe- Quality assurance and auditing rent concepts for the Basel II implementation are developed at the Group’s head office Quality assurance with respect to risk management and controlling refers to ensuring the Supervisory Board’s Report as well. This ensures that definitions, parameters and processes are the same for all units integrity, soundness, and accuracy of processes, models, calculations, and data sources Supervisory Board’s Report and that knowledge gained from implementing advanced risk measurement approaches in the bank. It makes sure that the bank adheres to legal requirements and achieves the (i.e. the IRB approach) is shared among different Group members. highest standards in risk management related operations. Overview of RZB Overview of RZB Local risk management units are established in the different legal entities of RZB. They Probably the two most important functions in assuring independent oversight are the implement the risk policies for specific risk types and take active risk steering decisions internal auditing and compliance functions. Independent internal auditing is a legal within the approved risk budgets in order to achieve the targets set in these policies. For requirement as well as a sound operational concept for prudential bank management. The this purpose, they monitor risks using standardized measurement tools and communicate independent Audit unit periodically and objectively assesses the bank’s processes and them to central risk management units via defined reporting interfaces. considerably contributes to securing, improving and enhancing all business processes. It

Raiffeisen Banking Group sends its reports directly to the Managing Board of Raiffeisen Zentralbank which discusses Raiffeisen Banking Group The independent risk controlling function required in the Austrian Banking Act is assumed them in board meetings.

Interview by the central division Risk Management. Amongst others, this division is responsible for Interview developing the Group-wide framework for risk controlling for all types of risk and prepa- The Compliance Office is responsible for all issues concerning compliance. It is supplemen- res independent and impartial risk reports for the Managing Board and those responsible tary to and at the same time integral part of the internal control system. It is responsible for for individual business segments. It also measures required risk capital for different busi- preventing and detecting shortcomings in daily operations. ness units and calculates the utilization of established limits for risk taking based on these Management Report capital amounts in the internal capital adequacy framework. Moreover, an independent and objective audit free of potential conflicts is done during the Management Report audit of the annual financial statements by the auditing companies. Risk committees Committees bring together decision makers from different units involved in risk manage- Segment Reports Segment Reports

ment activities. The Group Risk Committee (GRC) secures coherent regulations within RZB with respect to definition and measurement of risks. As a cross-divisional and Group- wide body, it is responsible for establishing methods and parameters for risk quantification models and risk management processes. It also analyses the risk situation of the Group with respect to the internal capital adequacy of the Group and the corresponding risk limits. Furthermore, it approves risk management/controlling activities like the allocation of risk capital and advises the Managing Board of Raiffeisen Zentralbank in these

Consolidated Financial Statements Financial Consolidated matters. Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 254 255 Preface Liquidation perspective Preface

Internal capital adequacy Maintaining a sufficient level of capital is a core objective of risk management in Risk in the liquidation perspective is measured as economic capital presenting a compara- RZB. Sufficient capital needs to be held in order to fulfil legal requirements, for achieving ble risk measure across all types of risks. It is calculated as the sum of unexpected losses the targeted external rating, and for supporting future business growth. stemming from different members of RZB and different risk categories (credit incl. country Managing Board Managing risk, participation, market, and operational risk). In addition, a separate risk buffer for Board Managing Capital adequacy according to internal standards is monitored based on the Group’s other risks not explicitly quantified is held on an overall Group level. actual risk level on a quarterly basis. It takes into account capital requirements both from a regulatory point of view (going concern perspective) and from an economic point of RZB defines economic capital as the Risk contribution of individual risk view (liquidation perspective). In both views, risks for all material risk types are measured amount of unexpected losses on an annual types to economic capital in RZB on on a consolidated basis and for all relevant members of RZB in a value-at-risk framework. basis using a confidence interval of 99.95 31. December 2007 Supervisory Board’s Report per cent. This confidence level is based on Supervisory Board’s Report Measurement the probability of default implied by RZB’s 8 Objective description of risk technique Confidence level target rating. The purpose of calculating 7 Going Risk of not meeting Risk taking capacity 99% reflecting the economic capital is to ensure that the bank Overview of RZB Overview of RZB concern the regulatory (projected earnings owners’ willingness to has enough capital (so-called internal 6 perspektive capital requirement plus capital excee- inject fresh capital capital) which would be required for servi- 5 ding regulatory (1 excess in 100 years) cing the claims of customers and creditors 4 requirements) must 3 even in the case of such an extremely rare not fall below the 1 annualised value- event. Raiffeisen Banking Group at-risk 2 Raiffeisen Banking Group Liquidation Risk of not being Unexpected losses 99,95% as derived from The economic capital measure shows –

Interview perspektive able to satisfy on an annual basis the default probability as in the last year – that credit risk due 1 Credit risk Corporate 36% Interview claims of senior debt (economic capital) of RZB’s target rating to corporate customers remains the domi- 2 Credit risk Financial Institution 21% 3 Credit risk Retail 14% holders must not exceed the (1 excess on 2,000 nant risk category in RZB. Its share in total 4 Country risk 3% presence value of the years) risk (36 per cent), however, is decreasing 5 Participation risk 1% bank’s equity and steadily. Credit risk in total makes up 71 6 Market risk 3% 7 Operational risk 8% Management Report subordinated liabilities Management Report per cent of economic capital. Participa- 8 Other risk 14% tion, market, and operational risks each Stress tests show the impact of significant negative shocks in risk factors which might not account for less than 8 per cent of econo- be adequately captured in a value-at-risk model. They can be based on historical events mic capital, and in addition, a general risk Segment Reports Segment Reports

(e.g. the Russian crisis in 1998) or hypothetical scenarios. Thus they allow the analysis of buffer is allocated for other risks. risk concentrations (i.e. in size, industry, and region) and deliver a deep insight into the profitability, solvability, and survival probability of the bank in extreme situations. Decis- The overall risk amount is compared to internal capital, which basically consists of equity ions on the required capital ratios take into account those scenarios, keeping in mind the and subordinated capital of the Group and is available to compensate losses from risk likelihood of the scenario and the possible countermeasures that would be taken by the events (its consumption would not cause losses to senior debt holders). Total utilisation bank in such a scenario. of available risk coverage capital (the ratio of economic capital to internal capital) is less than 73 per cent (as of 31 December 2007), indicating very comfortable capitalisation.

Consolidated Financial Statements Financial Consolidated This capital adequacy framework also satisfies the requirement for an internal capital Statements Financial Consolidated

adequacy assessment process (ICAAP) as required by Basel II (Pillar 2) regulations. Glossary Glossary

Contacts Contacts 256 257 Preface Economic capital is used as a parameter in overall bank management and for the pur- In RZB credit riskis analysed and monitored both on an individual loan (and customer-by- Preface

pose of capital allocation. Economic capital budgets are allocated to business units du- customer basis) and on a portfolio basis. Credit risk management and lending decisions ring the annual budgeting process and transformed into operative volume, sensitivity, or are based on the respective credit risk manuals and policies and the corresponding tools value-at-risk limits. In RZB this sort of planning is done on a revolving basis for the upco- and processes which have been developed for this purpose. Managing Board Managing ming three years and incorporates the future evolution of economic capital as well as the Board Managing available internal capital. The internal credit risk controlling system includes different types of monitoring measures which are tightly integrated into the work processes that lead from the customer’s initial Based on these calculations, RZB also carries out risk-adjusted performance measure- credit application, to the bank’s credit approval, and finally to the repayment of the ment. The profitability of business units is set in relation to the amount of economic capi- loan. Against the background of the new capital adequacy framework for banks (Basel II), tal attributed to these units (risk-adjusted return on risk-adjusted capital, RORAC) which the seamless management, monitoring and control of credit risk is thus assured. Supervisory Board’s Report yields a comparable performance measure for all business units of the bank. The RORAC Supervisory Board’s Report measure in turn is a key figure for overall bank management and influences future capital RZB will apply the standardized approach (STA) for calculating risk weighted assets allocations to business units. according to Basel II regulations. In addition, the Internal Ratings Based approach (IRB) will be used for Group members, where the approval process is expected to be comple- Overview of RZB Overview of RZB Going concern perspective ted in 2008. In parallel to that procedure, risk is calculated as value-at-risk on the basis of a confidence interval of 99 per cent as well. This capital requirement is likewise weighed against a cor- Limit application process responding estimate of risk-taking capacity which is derived from the bank’s available No lending transaction in the non-retail segments is performed without running through the capital based on a going concern basis (with respect to regulatory capital adequacy). limit application process. This process is also consistently applied – besides new lending –

Raiffeisen Banking Group to overdrafts, increases in existing limits, extensions, and if changes in the risk profile of a Raiffeisen Banking Group RZB manages regulatory capital on Group level according to Austrian regulations whe- borrower occur (e.g. with respect to the financial situation, the terms and conditions, or col-

Interview reas additional local regulatory capital requirements are met by adequate structural lateral) compared to the time an original lending decision was made. In addition it is used Interview balance sheet measures. The target for regulatory capital is intentionally set higher than when setting limits for particular borrowers in treasury and investment banking operations, the minimum regulatory requirement in order to assure sufficient regulatory capital at all and for equity participations. times and to account for other or higher risks not considered in the regulatory requirements. Thus the banking group ensures going-concern and the distribution of a minimum Limits are granted within the context of a hierarchical decision making process depen- Management Report profit with a defined confidence level as well. ding on the type and size of a loan. It always requires the approval of the business and Management Report the credit risk management divisions when granting new loans or when performing limit Credit risk re-evaluations in the regular reassessments of counterparty risks. If the individual decision- Credit risk within RZB consists mainly of default risk that arises from business with perso- making parties disagree, the potential transaction will have to be considered by the next Segment Reports Segment Reports

nal banking and corporate customers, other banks and sovereign borrowers. Default risk decision-making level is defined as the risk that a customer will not be able to fulfil contractually agreed financial obligations. Credit risks, however, also arise from migration risks (caused by deterio- Generally speaking, this four-eyes-principle also applies to credit decisions in the retail rations in customers’ creditworthiness), concentration risks of creditors or due to credit risk segments. For retail customers, however, the result of automated scoring applications can mitigation techniques, and country risk. serve as the necessary second vote as well. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 258 259 Preface The rating models in the main non-retail asset classes – corporate customers, financial institu- Preface Lending to corporate customers, by internal rating and region 15,000 tions and sovereigns – rank creditworthiness in ten classes. € mn

12,500 Corporate customers Managing Board Managing The internal rating model for corporate customers takes into account qualitative factors as Board Managing 10,000 well as several business and performance figures (e.g. interest cover, ordinary income margin, EBTDA margin, equity ratio, return on assets, debt amortization period), which are tailored to the various industries and financial reporting standards. 7, 50 0

The following table provides a breakdown of the credit exposure (including off-balance Supervisory Board’s Report 5,000 sheet items) according to the internal rating in the corporate customers segment in Supervisory Board’s Report thousands of euros. These figures are based on the customer rating only. Collateral must 2,500 also be taken into account in the overall assessment of credit risk: Overview of RZB Overview of RZB 0 Internal rating 2007 Proportion 2006* Proportion 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 NR Other 0.5 Minimal risk 360,279 0.5% 464,319 0.7% CIS 1.0 Excellent Southeastern Europe credit standing 8,845,414 11.4% 5,605,691 8.8% Central Europe Austria 1.5 Very good Raiffeisen Banking Group credit standing 7,533,861 9.7% 7,718,045 12.1% Raiffeisen Banking Group The current values of collateral and other risk mitigation effects are calculated with each 2.0 Good credit

Interview credit assessment as well. For the calculation of risk mitigation effects, the value accoun- standing 10,371,521 13.3% 7,422,149 11.7% Interview ted for is the value RZB expects to receive when selling the collateral within a reasonable 2.5 Sound credit liquidation period. Eligible collaterals are defined in RZB’s collateral catalogue and the per- standing 12,155,390 15.6% 8,441,276 13.3% taining evaluation guidelines. The respective value of the collateral is calculated via speci- 3.0 Acceptable fied methods, which include standardised calculations based on market values, predefined credit standing 14,183,456 18.2% 10,074,786 15.9% Management Report discounts or expert assessments. Management Report 3.5 Marginal credit standing 12,649,211 16.3% 10,783,996 17.0% The whole limit application process is supported by efficient computer-based systems. 4.0 Weak credit Account management, for example, where multinational customers do business simultane-

Segment Reports standing/ Segment Reports ously with more than one member of RZB, is supported by the Global Account Manage- sub-standard 7,065,738 9.1% 6,685,610 10.5% ment System (GAMS). Limit management applications enforce the dual control principle 4.5 Very weak and allow sharing lending applications between different entities according to the defi- credit standing/ ned competence schemes. All these applications benefit from unique customer account doubtful 1,865,281 2.4% 2,155,634 3.4% numbers for corporate customers in the Group. 5.0 Default (acc. to Basel II Rating models and credit exposures definition) 727,932 0.9% 555,507 0.9% Consolidated Financial Statements Financial Consolidated The rating process is the process of determining the counterparty’s creditworthiness. RZB Statements Financial Consolidated NR Not rated 2,004,673 2.6% 3,639,658 5.7% uses internal ratings for assessing credit risk employing different risk-classification procedu- Total 77,762,756 100.0% 63,546,671 100.0%

Glossary res (rating and scoring models) for different asset classes. All rating and scoring models Glossary are used throughout the whole Group and are based on specific software tools (e.g. for * 2006 figures still include exposures from asset class project finance

Contacts business valuation and calculating rating grades; rating database). Contacts 260 261 Preface All in all, the overall credit quality of corporate customers improved in 2007. Compared In 2007, a new rating model for project finance has been introduced. Thus, RZB does not Preface

to the previous year, the portfolio share of the best rating categories (up to rating class include this kind of exposure in the table for corporate customers for the year 2007 any- 2.0) increased by 1.5 percentage points to 34.9 per cent. Likewise, the proportion of more, but shows it separately below (in thousands of euros): exposures having a moderate credit standing (up to rating class 3) rose by 4.8 percent Managing Board Managing age points to 33.9 per cent. Consequently, the portfolio weight of lower rating categories Project rating 2007 Proportion Board Managing decreased by 3.1 percentage points to 27.8 per cent; defaulted exposures (customers 6.1 Excellent project risk profile – very low risk 998,223 43.5% with credit rating 5.0), finally, account for 0.9 per cent of total exposure, similar to the 6.2 Good project risk profile – low risk 915,805 39.9% previous year. The internal rating shown in this table only reflects the borrowers’ credit 6.3 Acceptable project risk profile – average risk 326,356 14.2% standing and does not take into account the amount of collateral provided in individual transactions. 6.4 Poor project risk profile – high risk 50,946 2.2% Supervisory Board’s Report 6.5 Default 1,729 0.1% Supervisory Board’s Report Total 2,293,059 100.0%

Retail customers Overview of RZB Overview of RZB The retail customers segment is divided into private individuals and small and medium- sized enterprises (SMEs). For retail customers, a two-fold scoring system is used – consisting of the (initial and ad-hoc) scoring based on customer data and behavioural scoring based on account data.

Raiffeisen Banking Group The table below provides a breakdown of the credit exposure (including off-balance sheet Raiffeisen Banking Group items) for this segment by region in thousands of euros: Interview Interview 2007 Total Proportion Austria Ce see CIs other Retail – Private individuals 16,436,396 84.4% 81,822 6,320,011 5,442,682 4,588,579 3,303 Retail – SME 3,041,094 15.6% 79,147 1,412,136 1,078,599 469,933 1,278

Management Report Total 19,477,490 100.0% 160,969 7,732,147 6,521,281 5,058,512 4,581 Management Report

2006 Total Proportion Austria Ce see CIs other Retail – Private individuals 11,261,294 81.9% 115,212 4,136,754 3,978,032 3,031,296 Segment Reports Segment Reports

Retail – SME 2,489,994 18.1% 86,396 1,123,625 751,997 527,828 147 Total 13,751,288 100.0% 201,608 5,260,379 4,730,029 3,559,124 147 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 262 263 Preface From year-end 2006 to year-end 2007, the total retail portfolio increased substantially The following table shows the credit exposure for financial institutions by rating class (inclu- Preface

by 42 per cent to € 19.5 billion. The growth was mainly driven by private individuals (46 ding off-balance sheet items but excluding central banks) in thousands of euros: per cent increase), whereas the growth rate of SMEs was 22 per cent. From a geographical point of view, the largest increase of retail exposures (by 47 per cent) took place in Internal rating 2007 Proportion 2006 Proportion Managing Board Managing the Central European region (CE). A1 Minimal risk 1,115,198 2.5% 846,539 1.9% Board Managing A2 Excellent Financial institutions credit standing 11,109,531 25.0% 8,517,765 18.8% The customer segment financial institutions mainly contains exposures to banks and A3 Very good securities firms. The internal rating model for financial institutions is based on a peer- credit standing 16,006,160 36.0% 19,232,307 42.5% group approach that takes both qualitative and quantitative information into account. A

Supervisory Board’s Report B1 Good credit Supervisory Board’s Report ceiling is set on the final rating for financial institutions by the respective country rating. standing 5,487,856 12.4% 5,165,197 11.4% B2 Average The rating distribution of Financial Institutions shows a large shift between rating classes credit standing 4,298,471 9.7% 4,041,792 8.9% A2 (increase from 19 to 25 per cent) and A3 (decrease from 42 to 36 per cent). The num- Overview of RZB B3 Mediocre Overview of RZB ber and exposure of unrated financial institutions was further decreased to below 2 per credit standing 1,198,692 2.7% 1,434,080 3.2% cent. This exposure is mainly due to short-term loans to small banks, where the rating pro- B4 Weak credit cess has not been completed yet, or stems from companies that have been added to the standing 2,941,845 6.6% 3,403,788 7.5% scope of consolidation recently. B5 Very weak credit standing 1,062,110 2.4% 582,114 1.3% Raiffeisen Banking Group Exposure to financial institutions (excluding central banks), Raiffeisen Banking Group by internal rating and region C Doubtful/high 17, 50 0 default risk 414,714 0.9% 388,482 0.9% Interview € mn D Default 31,266 0.1% 9,279 0.0% Interview 15,000 NR Not rated 750,966 1.7% 1,640,515 3.6% Total 44,416,809 100.0% 45,261,858 100.0% 12,500 Management Report Management Report 10,000

7, 50 0 Segment Reports Segment Reports 5,000

2,500

0 A1 A2 A3 B1 B2 B3 B4 B5 C D NR Other CIS Consolidated Financial Statements Financial Consolidated Southeastern Europe Statements Financial Consolidated

Central Europe Austria Glossary Glossary

Contacts Contacts 264 265 Preface Sovereigns if an impairment provision has been allocated or a direct write-off has been carried out, if Preface

Another rating model in this segment is used for central governments, central banks, and credit risk management has judged a customer account receivable to be not wholly reco- regional municipalities as well as other public sector entities. The table below provides a verable, or the workout unit considers stepping in to help a company restore its financial breakdown of the credit exposure to sovereigns (including central banks and off-balance soundness. Managing Board Managing sheet items) based on the internal rating in thousands of euros: Board Managing The lending portfolio and individual borrowers are subject to constant monitoring. The Internal rating 2007 Proportion 2006 Proportion main purposes of monitoring are to ensure that the borrower meets the terms and condi- A1 Minimal risk 3,902,299 22.8% 2,522,067 17.8% tions of the contract as well as following the obligor’s economic development. A review A2 Excellent is conducted at least once annually for corporate customers, financial institutions and credit standing 261,226 1.5% 591,300 4.2% sovereigns. This includes rating validation and the re-evaluation of financial and tangible Supervisory Board’s Report Supervisory Board’s Report A3 Very good collaterals. credit standing 3,524,591 20.6% 2,496,015 17.6% B1 Good credit In case of default, customers are recorded in the Group-wide default database which has been created within the scope of the Basel II project. The database tracks recoveries

Overview of RZB standing 1,468,171 8.6% 902,840 6.4% Overview of RZB B2 Average and work-out costs as well, which makes it suitable for calculating and validating PDs and credit standing 4,218,889 24.7% 4,840,937 34.1% LGDs (the probability of default, PD, and loss given default, LGD, are parameters in both the regulatory Internal Ratings Based approach and the bank’s internal risk quantification B3 Mediocre credit standing 794,980 4.6% 150,254 1.1% models). B4 Weak credit Raiffeisen Banking Group standing 2,184,250 12.8% 782,878 5.5% Impairments and provisioning Raiffeisen Banking Group Troubled loans (where debtors are expected to run into material financial difficulties or B5 Very weak Interview credit standing 410,998 2.4% 1,610,204 11.3% delayed payment) need special handling. In the non-retail segments, Problem Loan Com- Interview mittees (PLCs) of each Group member review problematic exposures and decide on provi- C Doubtful/high default risk 7,448 0.0% 843 0.0% sioning. In case of need for intensified handling and workout, the troubled loans are assigned either to a designated specialist or to a restructuring unit (workout department), both D Default 87,813 0.5% 38,898 0.3% part of the credit risk management divisions. Employees of workout units are specially trai- Management Report NR Not rated 254,231 1.5% 256,389 1.8% ned and experienced. They typically handle medium-sized to large cases and are assis- Management Report Total 17,114,896 100.0% 14,192,624 100.0% ted by in-house legal counsel and/or by external specialists. Workout units play a decisive role in accounting and analysing as well as booking provisions for impairment losses (write- The proportion of the rating class A1 at year-end 2007 was significantly higher than offs, value adjustments, provisioning) and become involved early on in order to reduce Segment Reports Segment Reports

in 2006 due to a larger credit exposure against Oesterreichische Nationalbank. Other losses caused by troubled loans. Cases involving restructuring or liquidation proceedings exposure shifts can be mainly attributed to rating migrations: while Albania’s internal are analysed to find out their causes. Lending processes are then adapted as necessary rating was upgraded from B5 to B4, Bulgaria was downgraded from B2 to B3. on the basis of these results.

Default and handling procedures In the retail area, provisioning and intensive treatment is performed by retail risk depart- Default is defined in RZB as the event where a specific debtor is unlikely to pay its credit ments of individual Group members. They compute loan loss provisions (mostly portfolio- obligations to RZB from primary sources, or the debtor is overdue more than 90 days on based) according to defined calculation schemes on a monthly basis. The provisioning

Consolidated Financial Statements Financial Consolidated any material credit obligation. RZB has defined twelve default indicators which are used amount is then approved by local accounting departments. Statements Financial Consolidated

to identify a default event including the insolvency or similar proceedings of a customer, Glossary Glossary

Contacts Contacts 266 267 Preface The following charts show the regional breakdown of non-performing loans and provisi- Preface Breakdown of Breakdown of ons, with non-performing loans defined according to Basel II default criteria. Provisions non-performing loans by region provisions by region for impairment losses are formed on the basis of Group-wide standards according to IFRS accounting principles and cover all identifiable credit risks. Managing Board Managing Board Managing The following table shows the corresponding loans outstanding in the defined asset classes within loans and advances to banks and loans and advances to customers on the balance sheet and the corresponding proportion of non-performing loans (without taking into account any collateral) and impairment provisions split by region: Supervisory Board’s Report Supervisory Board’s Report

Austria 24% Austria 22% Overview of RZB CE 40% CE 28% Overview of RZB SEE 15% SEE 16% CIS 18% CIS 32% Others 3% Others 2%

Raiffeisen Banking Group Financial year 2007 Raiffeisen Banking Group €000 Austria CE SEE CIS Others Total

Interview Corporate customers 20,578,538 13,602,117 6,912,495 9,637,828 3,056,575 53,787,553 Interview Non-performing 316,787 344,583 90,404 78,332 35,043 865,149 Impairment losses on loans 309,768 239,335 85,243 269,098 21,461 924,905

Management Report Retail customers 147,660 6,832,934 5,989,058 4,775,118 – 17,744,770 Management Report Non-performing 6,232 226,292 128,234 180,278 – 541,036 Impairment losses on loans 8,346 158,579 139,351 210,645 – 516,921

Segment Reports Segment Reports Financial institutions 21,230,335 1,050,370 1,230,591 1,106,591 1,875,474 26,493,361 Non-performing 20,139 – 145 – 1,536 21,820 Impairment losses on loans 6,726 – 645 – 1,536 8,907

Sovereigns 569,316 1,700,363 3,347,721 297,557 40,204 5,955,161 Non-performing – 420 – – – 420 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Impairment losses on loans – 1,733 36 – – 1,769 Glossary Glossary

Contacts Contacts 268 269 Preface In the Corporate customers segment the absolute amount of non-performing loans With respect to retail customers, 3.0 per cent of the total exposure is classified as non- Preface

did not increase due to prudent lending standards and the positive economic environ- performing (an increase by 0.4 percentage points from the previous year). By regional ment. Nonetheless, impairment provisions – which are also based on portfolio loss pro- breakdown, the CIS region shows the highest NPL ratio (3.8 percent) and also the highest visioning to a certain amount – have been increased. A substantial raise has been made coverage ratio. All in all, the total amount of credit risk provisions for retail exposures was Managing Board Managing e.g. for the CIS region, which resulted in the increased coverage ratio of 107 per cent in increased by 28 per cent to € 517mn. Board Managing total for corporate customers.

Financial year 2006 €000 Austria CE SEE CIS Others Total Corporate customers 14,922,768 10,280,243 5,069,337 6,451,725 1,916,202 38,640,275 Supervisory Board’s Report Supervisory Board’s Report Non-performing 414,238 216,638 100,183 96,995 39,553 867,607 Impairment losses on loans 357,088 179,962 108,304 187,531 38,959 871,844

Overview of RZB Retail customers 180,173 4,683,906 4,320,801 3,408,495 – 12,593,375 Overview of RZB Non-performing 385 152,138 78,125 90,762 – 321,410 Impairment losses on loans 9,272 123,659 97,174 174,271 – 404,376

Financial institutions* 23,032,038 1,259,785 1,156,538 1,244,506 2,775,414 29,468,282 Raiffeisen Banking Group Raiffeisen Banking Group Non-performing 25,024 1,642 161 – 8,996 35,823 Impairment losses on loans 9,210 – 161 – 2,671 12,042 Interview Interview

Sovereigns* 589,462 1,315,397 1,937,338 154,888 412,582 4,409,667 Non-performing – 534 – – – 534 Impairment losses on loans – 170 22 – – 192 Management Report Management Report * In 2006, central banks were shown under financial institutions. In 2007, they are reported under sovereigns and the previous year’s figures were adapted accordingly Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 270 271 Preface The following table summarizes the development of impairment losses on loans and Preface

advances in the fiscal year and that of the underlying balance sheet items:

Change in transfers, Managing Board Managing As of consolidated exchange as of Board Managing €000 1/1/2007 group Allocations* Releas Usage** differences 31/12/2007 Specific loan loss provisions 1,016,455 (9) 595,350 (363,678) (113,033) (15,767) 1,119,318 Loans and advances to banks 12,043 – 569 (1,466) (2,052) (685) 8,409 Loans and advances to customers 937,968 (9) 560,258 (317,645) (110,763) (15,150) 1,054,659

Supervisory Board’s Report Off-balance-sheet obligations 66,444 – 34,523 (44,567) (218) 68 56,251 Supervisory Board’s Report Portfolio-based provisions 345,335 – 163,581 (87,118) – (13,437) 408,361 Loans and advances to banks – – 494 – – 5 499 Loans and advances to customers 339,240 – 149,297 (86,442) – (13,157) 388,938 Overview of RZB Overview of RZB Off-balance-sheet obligations 6,095 – 13,790 (676) – (285) 18,924 Total 1,361,790 (9) 758,931 (450,795) (113,033) (29,204) 1,527,679 * Allocation including direct write-downs and income on written down claims ** Usage includes direct write-downs and income on written-down claims.

Raiffeisen Banking Group Change in transfers, Raiffeisen Banking Group As of consolidated exchange as of €000 1/1/2006 group Allocations* Releas Usage** differences 31/12/2006 Interview Interview Specific loan loss provisions 955,842 10,250 468,798 (278,450) (123,267) (16,718) 1,016,455 Loans and advances to banks 15,005 – 1,862 (33) (3,981) (809) 12,043 Loans and advances to customers 890,345 10,184 430,080 (255,071) (118,066) (19,504) 937,968 Off-balance-sheet obligations 50,492 66 36,856 (23,346) (1,219) 3,595 66,444 Management Report Management Report Portfolio-based provisions 173,200 21,282 211,428 (55,320) – (5,256) 345,335 Loans and advances to customers 173,200 21,282 204,621 (54,353) – (5,511) 339,240 Off-balance-sheet obligations – – 6,807 (967) – 255 6,095 Segment Reports Segment Reports

Total 1,129,042 31,533 680,226 (333,770) (123,267) (21,974) 1,361,790 * Allocation including direct write-downs and income on written down claims ** Usage includes direct write-downs and income on written-down claims. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 272 273 Preface The following table shows the geographic breakdown of provisioning Preface

by the customers’ home country:

Change in transfers,

Managing Board Managing As of consolidated exchange as of Board Managing €000 1/1/2007 group Allocations* Releas Usage** differences 31/12/2007 Specific loan loss provisions 1,016,455 (9) 595,350 (363,678) (113,033) (15,767) 1,119,318 CE 248,918 – 174,659 (98,988) (30,901) 8,615 302,303 SEE 166,543 (9) 126,803 (69,354) (32,374) 1,093 192,701

Supervisory Board’s Report CIS 202,701 – 241,623 (91,813) (23,314) (19,102) 310,094 Supervisory Board’s Report Other countries 398,294 – 52,266 (103,521) (26,443) (6,375) 314,221 Portfolio-based provisions 345,335 – 163,581 (87,118) – (13,437) 408,361 CE 78,863 – 78,467 (31,283) – (24) 126,023 Overview of RZB Overview of RZB SEE 57,465 – 29,425 (19,519) – (1,091) 66,280 CIS 167,614 – 54,322 (35,316) – (11,559) 175,062 Other countries 41,394 – 1,367 (1,000) – (764) 40,997 Total 1,361,790 (9) 758,931 (450,795) (113,033) (29,204) 1,527,679 * Allocation including direct write-downs and income on written down claims Raiffeisen Banking Group Raiffeisen Banking Group ** Usage includes direct write-downs and income on written-down claims.

Interview Change in transfers, Interview As of consolidated exchange as of €000 1/1/2006 group Allocations* Releas Usage** differences 31/12/2006 Specific loan loss provisions 955,842 10,250 468,798 (278,450) (123,267) (16,718) 1,016,455 CE 227,778 4,000 169,671 (113,247) (44,563) 5,279 248,918 Management Report Management Report SEE 113,445 7 104,437 (28,340) (22,461) (546) 166,543 CIS 170,365 6,243 139,467 (81,212) (17,343) (14,819) 202,701 Sonstige 444,253 0 55,223 (55,651) (38,900) (6,632) 398,294 Segment Reports Segment Reports

Portfolio-based provisions 173,200 21,282 211,428 (55,320) – (5,256) 345,335 CE 37,220 521 50,485 (12,989) – 3,612 78,850 SEE 44,225 6 29,174 (16,765) – 825 57,465 CIS 86,341 20,756 94,082 (25,566) – (7,986) 167,626 Sonstige 5,414 – 37,687 – – (1,707) 41,394 Total 1,129,042 31,532 680,226 (333,770) (123,267) (21,974) 1,361,790

Consolidated Financial Statements Financial Consolidated * Allocation including direct write-downs and income on written down claims Statements Financial Consolidated

** Usage includes direct write-downs and income on written-down claims. Glossary Glossary

Contacts Contacts 274 275 Preface Loans and advances as well as impairment provisions per Basel II asset class Preface

are shown in the following table:

31/12/2007 cross carrying specific loan Portfolio-based loan net carrying individually

Managing Board Managing €000 amount loss provisions loss provisions amount impaired assets Fair value Board Managing Financial institutions 30,910,100 8,409 499 30,901,193 16,050 30,930,661 Sovereigns 1,538,421 1,769 – 1,536,652 32,130 1,495,984 Corporate customers – large corporates 48,724,999 638,450 149,172 47,937,377 1,609,915 48,145,182 Corporate customers – small business 4,831,394 107,886 29,399 4,694,110 283,567 4,750,609

Supervisory Board’s Report Retail – private individuals 15,090,436 243,038 185,374 14,662,025 302,127 14,899,994 Supervisory Board’s Report Retail – SME 2,654,335 63,517 24,993 2,565,825 266,075 2,701,483 Others 230,992 – – 230,992 – 231,746 Total 103,980,677 1,063,069 389,437 102,528,174 2,509,864 103,155,659 Overview of RZB Overview of RZB

31/12/2006 cross carrying specific loan Portfolio-based loan net carrying individually €000 amount loss provisions loss provisions amount impaired assets Fair value Financial institutions 32,005,923 12,042 – 31,993,881 71,485 31,687,008 Sovereigns 1,872,026 411 – 1,871,615 1,345 1,876,144 Raiffeisen Banking Group Raiffeisen Banking Group Corporate customers – large corporates 34,485,198 626,033 143,150 33,716,016 2,078,300 33,714,435

Interview Corporate customers – small business 3,952,053 91,305 13,803 3,846,945 226,029 3,808,708 Interview Retail – private individuals 10,405,872 135,945 192,115 10,077,812 214,191 10,155,853 Retail – SME 2,187,503 84,274 6,680 2,096,548 209,167 2,240,251 Others 203,024 – – 203,024 2,458 200,672

Management Report Total 85,111,598 950,011 355,747 83,805,840 2,802,977 83,683,072 Management Report Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 276 277 Preface Overdue financial assets Preface

The definition of default and the assessment of the expected recovery value are heavily influenced by the number of days payments are late. The following table shows the amount of overdue financial assets for different time bands. Managing Board Managing Board Managing 31/12/2007 Overdue €000 Current < 30 days 31 – 90 days 91 – 180 days 181 days – 1 year > 1 year Financial institutions 30,979,715 2,224 117 – – 153 Sovereigns 1,407,724 97,174 530 130 139 708

Supervisory Board’s Report Corporate customers – large corporates 45,300,723 1,207,170 659,015 28,646 47,789 44,201 Supervisory Board’s Report Corporate customers – small business 4,016,658 384,403 55,832 13,042 17,000 60,893 Retail – private individuals 12,904,734 1,087,937 278,551 153,915 116,069 247,946 Retail – SME 2,021,732 205,583 71,284 23,294 18,830 47,537 Overview of RZB Overview of RZB Others 230,255 93 505 40 35 253 Total 96,861,541 2,984,584 1,065,834 219,067 199,862 401,691

31/12/2006 Overdue €000 Current < 30 days 31 – 90 days 91 – 180 days 181 days – 1 year > 1 year Raiffeisen Banking Group Raiffeisen Banking Group Financial institutions 31,923,390 641 10 – – 159

Interview Sovereigns 1,713,359 51,226 64,343 41,561 3,353 12,087 Interview Corporate customers – large corporates 30,156,878 1,643,921 202,639 62,568 128,724 207,023 Corporate customers – small business 3,161,239 301,036 39,683 23,284 39,395 174,226 Retail – private individuals 8,740,921 902,717 246,106 94,573 58,893 154,698

Management Report Retail – SME 1,724,537 143,824 36,873 13,120 14,343 46,587 Management Report Others 189,052 13,023 15 91 67 184 Total 77,609,376 3,056,388 589,669 235,197 244,775 594,964 Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 278 279 Preface Impaired assets Preface

The following table shows the gross carrying amount of impaired assets, the amount of specifically allocated provisions, and the corresponding net value of available collateral:

Managing Board Managing 31/12/2007 Impairments and collaterals Board Managing Individually impaired assets Collaterals for Interest Individually Specific loan loss after deduction individually on individually €000 impaired assets provisions (ILLP) of ILLP impaired assets impaired assets Financial institutions 16,050 8,409 7,641 690 – Supervisory Board’s Report Sovereigns 32,130 1,769 30,361 16,481 1,398 Supervisory Board’s Report Corporate customers – large corporates 1,609,915 638,450 971,465 992,742 24,005 Corporate customers – small business 283,567 107,886 175,681 206,877 7,803

Overview of RZB Retail – private individuals 302,127 243,038 59,089 218,153 8,714 Overview of RZB Retail – SME 266,075 63,517 202,558 220,887 6,577 Total 2,509,864 1,063,069 1,446,795 1,655,830 48,497

31/12/2006 Impairments and collaterals

Raiffeisen Banking Group Individually Raiffeisen Banking Group impaired assets Collaterals for Interest Individually Specific loan loss after deduction individually on individually Interview €000 impaired assets provisions (ILLP) of ILLP impaired assets impaired assets Interview Financial institutions 71,328 12,042 59,286 – – Sovereigns 1,127 411 716 3,870 45 Corporate customers – large corporates 1,932,574 626,033 1,306,541 608,540 31,860 Management Report Corporate customers – small business 189,567 91,305 98,262 60,796 2,761 Management Report Retail – private individuals 162,532 135,945 26,587 717,779 7,341 Retail – SME 151,857 84,274 67,583 71,176 4,307

Segment Reports Others 36 – 36 29 – Segment Reports

Total 2,509,021 950,010 1,559,011 1,462,190 46,314 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 280 281 Preface The maximum credit risk exposure (including revocable and irrevocable credit lines) and Country risk Preface

the fair values of collateral are shown in the following table: Country risk includes transfer and convertibility risks as well as political risk. It arises from cross-border transactions and direct investments in foreign countries. As country risk is 31/12/2007 Maximum credit exposure Fair value of collaterals closely associated with the risk of sovereign institutions, it is measured based on the same Managing Board Managing Comittments/ Reselling/ ten-class rating model. This rating model includes a quantitative analysis of the econo- Board Managing guarantees repledging mic risk of a particular country and a qualitative analysis of the political risk that a par- €000 Net exposure issued allowed ticular country represents. Country risk management in RZB is based on the country risk Financial institutions 30,901,193 3,542,402 5,436,438 policy. The country risk policy is reviewed on a semi-annual basis by the Managing Board Sovereigns 1,536,652 1,169,581 1,054,409 as prepared by the Country Risk Committee. This committee includes representatives of Corporate customers – the various business segments and risk management departments. This policy consequent- Supervisory Board’s Report large corporates 48,004,839 24,738,139 7,277,624 ly leads to a strict limitation of risk exposure to foreign countries which do not have the best Supervisory Board’s Report Corporate customers – sovereign rating. small business 4,707,567 1,501,667 1,494,779 In day to day work involving cross-border transactions, business units have to submit

Overview of RZB Retail – private individuals 14,652,845 1,600,816 3,022,755 Overview of RZB limit applications for the respective countries in addition to the limit application for the Retail – SME 2,564,877 335,773 1,419,973 counterparties. Country risk is also measured separately when assessing internal capital Others 231,180 20,051 20,340 adequacy and is reflected in product pricing as well as in the risk-adjusted performance Total 102,599,153 32,908,429 19,726,318 evaluation. Business units therefore get rewarded for mitigating country risk by seeking insurance (e.g. from export credit insurance organisations) or guarantors in third-coun-

Raiffeisen Banking Group 31/12/2006 maximum credit exposure Fair value of collaterals tries. Stress tests which simulate the impact of severe crises in selected countries and Raiffeisen Banking Group Comittments/ Reselling/ regions on the bank’s performance round off country risk management procedures. All

Interview guarantees repledging this shows the special importance which is paid to country risks in RZB. Interview €000 Net exposure issued allowed Financial institutions 31,993,881 4,535,737 3,584,224 Concentration risk Sovereigns 1,871,615 1,079,604 21,881 RZB’s lending portfolio is broad and well diversified in terms of region and industry. Gra- Corporate customers – nularity has improved further, although, as a leading commercial bank, Raiffeisen Zentral- Management Report large corporates 33,716,016 22,303,911 4,077,605 bank focuses on the top 1,000 enterprises in Austria as well as medium and large-scale Management Report Corporate customers – enterprises in CEE. The ten largest corporate exposures, with an excellent average rating small business 3,846,945 703,098 1,010,207 between 1.5 and 2.0, account for 4 per cent of the corporate portfolio.

Segment Reports Retail – private individuals 10,077,812 983,344 1,557,264 Segment Reports

Retail – SME 2,096,548 335,533 1,011,267 Others 203,024 38,260 5,729 Total 83,805,841 29,979,487 11,268,177 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 282 283 Preface The regional breakdown of credit exposure reflects RZB’s broad diversification in European Participation risk Preface

markets. The following table shows the regional distribution of credit exposure from banks and The banking book also contains risks arising from listed and unlisted equity participa- customers (incl. credit exposure from off-balance sheet contracts) by domicile of borrower: tions. They are managed separately under this risk heading. Risks stemming from strate- gically and operatively controlled Group subsidiaries are not considered as participation Managing Board Managing €000 2007 Proportion 2006* Proportion risk because these risks are calculated with precision under the other risk headings during Board Managing European Union – consolidation. Most of the direct and indirect participations of Raiffeisen Zentralbank are EU(12) 50,925,456 31.6% 35,756,141 26.1% fully consolidated (e.g. Network Banks, Leasing companies) in the Group’s balance sheet European Union – and therefore subject to this “look through” approach. Specific risks which occur from EU(15) 27,313,595 16.9% 28,810,126 21.1% these participations are thus managed by applying standard Group methodologies for Austria 27,190,072 16.8% 28,103,473 20.6% risk measurement and monitoring as described for the other risk categories. Supervisory Board’s Report Supervisory Board’s Report CIS 22,605,475 14.0% 14,329,570 10.5% Participation risk and counterparty credit risk have similar roots: a deteriorating financial SEE 14,126,617 8.8% 11,029,389 8.1% situation of an equity participation is usually reflected in its rating downgrade (or default). North America 4,756,811 2.9% 5,489,345 4.0% The methodology used for the value-at-risk measurement and internal capital requirement Overview of RZB Overview of RZB Far East 4,815,181 3.0% 5,157,414 3.8% assessment of equity participations is comparable to the methodology used to capture Others 9,685,822 6.0% 8,076,983 5.9% the price risk arising from shareholdings. However, in the light of the longer-term strategic Total 161,419,029 100.0% 136,752,441 100.0% nature of equity participations, annual volatilities based on observation periods of several * EU-27 excluding member states listed in this table. The exposure of the new member states Bulgaria and years (instead of daily checks) are used in the calculation. Romania is now shown in EU-12 instead of SEE. Figures in 2006 have been changed accordingly

Raiffeisen Banking Group Participations of the parent company are managed by the Participations division. It is Raiffeisen Banking Group Within the scope of its risk policy and assessments of creditworthiness, RZB also consi- responsible for controlling risks arising from long-term equity investments (and also for

Interview ders the borrower’s industry. The following table covers the customer credit exposure (off- returns generated by these investments). Investments in RZB’s participations are made by Interview balance sheet items included, but without banks and central banks): the Managing Board of Raiffeisen Zentralbank on the basis of individual due diligence only. Indirect participations held by different members of RZB are often managed by local €000 2007 Proportion 2006 Proportion units in coordination with the parent company. Raiffeisen International Bank-Holding AG, Retail and the holding company for activities in Central and Eastern European countries, plays a Management Report wholesale trade 20,168,711 18.4% 14,687,577 17.0% major role in this regard. Management Report Manufacturing 19,684,753 17.9% 16,544,963 19.2% Real estate 17,537,971 16.0% 11,758,521 13.6% Market risk RZB defines market risk as the risk of possible losses arising from changes in the market

Segment Reports Private households 17,771,330 16.2% 12,136,527 14.1% Segment Reports

due to fluctuating or changing interest rates, foreign exchange rates, share prices and pri- Banking and insurance 9,174,730 8.3% 10,049,486 11.6% ces in general. This risk category encompasses both trading book and banking book positions. Risky positions are either the result of business done for customers or of proprietary Public administration and social insurance investments. In Raiffeisen Zentralbank, the Global Treasury and Global Markets divisions institutions 8,802,338 8.0% 8,904,280 10.3% manage these risks by organizing proprietary trading and by closing internal contracts Construction 5,318,503 4.8% 3,509,909 4.1% with customer divisions.

Consolidated Financial Statements Financial Consolidated Transport and Statements Financial Consolidated

communication 4,596,297 4.2% 3,832,666 4.4% Sonstige 6,827,140 6.2% 4,954,145 5.7% Glossary Glossary

Total 109,881,773 100.0% 86,378,074 100.0% Contacts Contacts 284 285 Preface RZB approves, measures, monitors and manages all market risks by setting a variety of Interest rate risk and price risks (e.g. stocks and funds) are also important, whereas commo- Preface

limits. The overall limit is set by the Managing Board as a whole on the basis of the dity risk is not material at all. The table below provides value-at-risk figures (99%, 10-day) bank’s risk-bearing capacity and income budget. This limit is apportioned on the basis of by risk type for market risk in the trading book of the RZB-Kreditinstitutsgruppe: a coordinated proposal made by the treasury department, market risk management and Managing Board Managing the responsible member of the Managing Board. The individual limits set at book level VaR as of average minimum maximum Board Managing vary according to the different risk factors. Besides value-at-risk (VaR) limits, those limits €000 31/12/2007 VaR VaR VaR may include volume and position limits as well as sensitivity limits (basis-point value, delta, Interest rate risk 7,953 8,319 5,525 12,172 gamma, vega) and stop-loss limits, depending on the type of transaction. All treasury Currency risk 37,967 31,846 22,883 38,790 products in which open positions can be held by the bank are listed in the product cata- Price risk 20,468 19,013 16,567 21,302 logue. New products are added to this list only after running through the Product Appro- Supervisory Board’s Report val Process. Options may only be entered into by appropriately trained dealers. Positions Supervisory Board’s Report and limits undergo daily scrutiny throughout the Group. VaR as of average minimum maximum €000 31/12/2006 VaR VaR VaR Value-at-risk is of central importance in setting limits. It is calculated daily for Raiffeisen Interest rate risk 9,663 5,149 1,711 11,586 Overview of RZB Overview of RZB Zentralbank and weekly for the RZB-Kreditinstitutsgruppe using a variance-covariance Currency risk 33,052 31,290 18,272 48,454 matrix approach. In this calculation a confidence level of 99 per cent is applied, with Price risk 18,514 19,830 16,405 26,406 the holding period set to 10 days, and volatilities and correlations derived from historical market data of one business year. The accuracy and reliability of this value-at-risk ap- RZB uses the standardised approach as defined in Austria’s Solvability Directive to calcu proach, which is based on past market developments, is checked daily at Raiffeisen Zent- late its own funds requirement for the trading book.

Raiffeisen Banking Group ralbank using appropriate backtesting. Raiffeisen Banking Group Market risk in the banking book

Interview Value-at-risk figures forecast maximum losses that will not be exceeded with a certain Alongside value-at-risk calculations, interest-rate risk in the banking book is also estima- Interview confidence level under normal market conditions but do not provide any specific informa- ted using well-established tools of capital and interest maturity analysis. Furthermore, tion about the effects of exceptional extreme market movements. To take such events into because of the special importance and complexity of interest-rate risk in the banking book, account, RZB carries out weekly defined stress tests focusing on the biggest daily market RZB also employs interest-income scenarios and simulations. Managing the structure of movements in the preceding five years. With stress scenarios we simulate crisis situations balance sheets is a core task of Global Treasury and of the local banks, which receive Management Report and major fluctuations in market parameters and compute their effect on the Group’s assistance from Asset Liability Management Committees. Management Report current positions. Stress tests consequently deliver important results for the management of risks (especially on hidden market risk concentrations). Since 2002, interest-rate risk has been the subject of quarterly reporting within the scope of the interest-rate risk statistics submitted to the supervisory authorities. These reports also Segment Reports Segment Reports

Market risk in the trading book shows the change in the present value of the banking book as a percentage of own funds Market risk in RZB’s trading books depends primarily on currency risk, which results from in line with the requirements of Basel II. Maturity assumptions needed in this analysis are hedging positions entered by the Asset Liability Management Committee offsetting the defined as specified by regulatory authorities or based on internal statistics and empirical risk of changes in the value of foreign-currency denominated equity investments made in values. foreign Group units. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 286 287 Preface The change in the present value of RZB’s banking book in the year ending 31 December Preface

Liquidity risk 2007 is provided in € thousands, given a simultaneous increase of one basis point in RZB defines liquidity risk as the risk that the bank could be unable to meet its current and interest rates: future financial obligations in full or in good time. Liquidity risk therefore results from the risk that, for example, refinancing can only be carried out at disadvantageous conditions Managing Board Managing Change of or not at all (funding liquidity risk). Other examples are situations in which assets have to Board Managing present value 6-12 months > 1-2 years > 2-5 years > 5 years be sold at short notice at a large discount or in which customer repayments in the lending EUR 30.3 53.8 246.9 (23.7) business are not made on schedule. Also many committed lines might be unexpectedly USD (96.8) (9.2) 110.2 (117.1) drawn at once or deposits could be unexpectedly withdrawn on a large scale (short-term JPY (1.1) (0.1) (2.2) 0.0 liquidity risk).

Supervisory Board’s Report CHF (1.7) (1.7) 3.5 (22.5) Supervisory Board’s Report Short-term liquidity risk Other (24.4) (67.4) (170.6) (172.6) The tasks of managing liquidity and liquidity risk and, in turn, of ensuring the bank’s solvency at all times are performed both centrally by Global Treasury in Vienna and on a The change in the present value of RZB’s banking book in the year ending 31 December decentralised basis by the local banks. An internal monitoring system records and analy- Overview of RZB Overview of RZB 2006 is provided in € thousands, given a simultaneous increase of one basis point in ses cash flows by currency both for each location and globally on a weekly basis. Based interest rates: on these data, the bank creates liquidity balances and analyses whether the Group’s short and medium-term liquidity situation always conforms to legal regulations on liquidity levels Change of and defined internal liquidity limits. Liquidity analyses also include simulations on the sen- present value 6-12 months > 1-2 years > 2-5 years > 5 years sitivity of liabilities and the liquidity of assets as well as defined liquidity crises in scenario-

Raiffeisen Banking Group EUR 95.3 (41.6) (428.2) (49.8) based cash flow forecasts. All these analyses are discussed in the Group’s Asset Liability Raiffeisen Banking Group USD (60.2) 10.9 16.3 (44.8) Management Committee.

Interview JPY (0.9) 0.0 (3.0) 0.0 Interview CHF (3.9) 0.2 3.0 (26.9) Other (21.2) (35.3) (90.8) (24.5) Management Report Management Report Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 288 289 Preface The following report shows cumulative excess liquidity and the ratio of due assets to liabili- Preface

ties (liquidity ratio) for selected maturities, taking into account balance sheet items and off- balance-sheet transactions. Based on expert opinions, statistical analyses and country specifics, this process also incorporates cautious estimates on the liquidation of defined Managing Board Managing assets or on the so-called sediment of customer deposits. Board Managing

€000 2007 2006 Maturity 1 week 1 month 1 year 1 week 1 month 1 year Liquidity gap 11,597,717 7,288,334 (1,376,565) 13,843,721 13,068,377 7,739,691

Supervisory Board’s Report Liquidity ratio 135% 116% 99% 149% 135% 111% Supervisory Board’s Report

Internal limits have been established for each Group unit to limit liquidity risk. They require guideline has been established which coordinates and optimises the funding efforts of all a positive short-term liquidity gap (subject to conservative assumptions regarding the RZB Group members. In these plans, special attention is paid to a diversified funding struc- Overview of RZB Overview of RZB saleability of liquid assets and withdrawals on the liabilities side of the balance sheet). The ture to mitigate funding liquidity risk. Moreover, RZB enables medium and long-term borro- bank maintains extensive holdings of liquid securities to ensure its liquidity in various cur- wing activities of Group members through syndicated loans, bilateral funding agreements rencies. In the case of a liquidity shortage, emergency plans come into force. In particu- with banks and financing facilities of supranational institutions. These funding sources are lar, prioritised action lists for handling liquidity shortages (also with regard to the publicity based on long-term business relationships and provide much more stable conditions than impact) exist for all major Group members. bond or credit derivative markets. Raiffeisen Banking Group Raiffeisen Banking Group Funding liquidity risk Operational risk

Interview Funding liquidity risk is mainly driven by changes in the risk appetite of lenders or by In line with Basel II, operational risk is defined as the risk of unexpected losses resulting Interview rating migrations of a bank. Refinancing costs would rise in case of a rating downgrade, from inadequate or failed internal processes, people and systems or from external events, and RZB would have to pay higher risk premiums to refinance its assets. Funding and including legal risk. In this risk category, RZB manages internal risk drivers like unautho- long-term refinancing is also driven by money supply. Sometimes funds are cheap as rized activities, fraud or theft, execution and process errors, or business disruption and risk premiums are low. In other times, they are more expensive as credit spreads have system failures. External factors are managed as well and include damage to physical Management Report widened. assets or consciously conducted human fraud. Management Report

RZB's banking activities are refinanced by combining the wholesale strengths and Operational risk is analysed and managed on the basis of the Group’s own historical know-how of Raiffeisen Zentralbank with the retail franchise of deposit-taking network loss data and the results of risk self assessments. As with other risk types, the principle Segment Reports Segment Reports

banks. Raiffeisen Zentralbank is the central liquidity source for both the Raiffeisen Ban- of firewall between risk management and risk controlling is also applied to operational king Group and the local network banks in Central and Eastern Europe. In the RZB Group, risk in RZB. The Group implements a centralised/decentralised system for operational risk funds are not only raised by Raiffeisen Zentralbank, the parent credit institution of the management and controlling: operational risk controlling units in different Group members Group, but also individually by different subsidiary banks. Therefore, a common funding are mainly responsible for the implementation and refinement of methods for operational Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 290 291 Preface risk management (e.g. performing self assessment, defining and monitoring KRIs, etc.) Loss data are collected in a central database called ROCO (Raiffeisen Operational Risk Preface

and for reporting to the central operational risk controlling function. Business line mana- Controlling) in a structured and homogeneous Group-wide form by event type and busi- gers are responsible for managing and mitigating operational risks. They decide on pro- ness segment. Collecting losses from operational risks is a prerequisite for implementing active operational risk steering actions such as buying insurance and the use of further a statistical loss distribution model and a minimum requirement for implementing the statu Managing Board Managing risk mitigating instruments. tory Standardized Approach. Furthermore, loss data (and near misses) are used to create Board Managing and validate operational risk scenarios and to exchange information with international Risk identification data pools to develop advanced operational risk management tools. An important task for controlling operational risks is identifying and evaluating risky areas which might endanger the bank’s existence if a loss occurs (but where losses are unlikely A general risk report presented to the Group Risk Committee semi-annually provides a to be realised) and also areas where losses are more likely to happen frequently (but are comprehensive overview on operational risks. Supervisory Board’s Report not threatening the bank’s existence). Supervisory Board’s Report Quantification and mitigation Self assessment is executed on the corporate level for each Group member, where all The Standardised Approach within the meaning of Basel II is employed to calculate the operational risk categories and business functions are assessed in a two-dimensional statutory own funds requirement for operational risk. This approach is based on gross ear- Overview of RZB Overview of RZB matrix. All Group members assign ratings for each combination of operational risk cate- nings in each business segment. gory and business function according to their estimation of the total annual loss for high probability/low-impact events and low probability/high-impact incidents. Business managers decide whether preventive actions like risk mitigation or risk transfer should be initiated to further reduce operational risk. They also define contingency plans Low probability/high-impact events are quantified by a Group-wide scenario analysis if these scenarios would become real and nominate responsible persons and departments

Raiffeisen Banking Group framework that includes the simulation of up to ten specific scenarios. Each entity is fur- for initiating defined actions. RZB is also executing an extensive staff training programme Raiffeisen Banking Group thermore required to run additional scenarios depending on the individual risk profile and and has different emergency plans and back-up systems in place. Finally, the SixSigma

Interview local specifics. method for business process improvement is also being applied. Interview

Monitoring Key Risk Indicators (KRIs) are measurable quantities used to monitor and predict operational risk events. Due to the RZB Group's decentralised structure, they are specifically Management Report tailored to all credit institutions of the Group, with a common catalogue of key risk indi- Management Report cators been derived from the KRI Library (developed by RMA/RiskBusiness) being used throughout the Group. All Group members then select relevant KRIs and define thresholds (two levels of thresholds have to be defined for implementing an early warning system) as Segment Reports Segment Reports

most appropriate for their business. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 292 293 Preface The total volume of unsettled financial instruments as of 31 December 2007 Preface (45) Derivative financial instruments breaks down as follows:

2007 Nominal amount by maturity Fair values Managing Board Managing more than 1 year, Board Managing €000 Up to 1 year up to 5 years More than 5 years Total Positive negative Total 138,823,022 93,901,229 31,956,394 264,680,646 2,638,660 (4,147,059) Interest rate contracts 68,555,695 77,448,508 30,548,122 176,552,324 1,582,695 (1,611,492) OTC products

Supervisory Board’s Report Interest rate swaps 53,846,739 67,423,319 27,543,347 148,813,406 1,497,454 (1,546,968) Supervisory Board’s Report Interest rate futures 8,018,500 5,551,937 279,431 13,849,868 13,018 (13,066) Interest rate options – purchased 3,808,880 1,774,564 992,414 6,575,858 55,521 – Interest rate options – sold 525,899 1,194,387 1,266,195 2,986,480 – (44,840) Overview of RZB Overview of RZB Other similar contracts 297,377 411,924 145,531 854,831 3,771 (2,544) Products trading on stock exchange Interest rate futures 2,058,300 1,078,577 317,204 3,454,081 12,780 (4,063) Interest rate options – 13,800 4,000 17,800 151 (11)

Raiffeisen Banking Group Foreign exchange rate contracts 66,172,348 9,416,067 230,443 75,818,860 890,257 (931,241) Raiffeisen Banking Group OTC products

Interview Cross-currency interest rate swaps 1,042,088 6,130,650 200,369 7,373,108 146,576 (198,575) Interview Forward foreign exchange contracts 50,906,507 1,880,791 1,052 52,788,350 637,931 (627,133) Currency options – purchased 5,457,786 697,062 7,262 6,162,111 89,996 – Currency options – sold 4,734,406 476,434 3,418 5,214,258 – (84,944)

Management Report Other similar currency contracts 3,627,422 231,130 18,342 3,876,894 11,759 (19,728) Management Report Products traded on stock exchange Currency contracts (Futures) 404,139 404,139 3,995 (861) Equity/index contracts 1,311,431 1,002,624 734,945 3,049,001 144,214 (1,545,417) Segment Reports Segment Reports OTC products Equity-/index-based options – purchased 181,333 107,363 166,398 455,094 53,478 – Equity-/index-based options – sold 124,857 91,188 113,728 329,773 – (23,725) Other similar contracts 716,888 786,126 439,586 1,942,601 55,733 (1,481,367) Products traded on stock exchange Equity/index futures 121,660 2,469 15,233 139,362 776 (7,154) Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Equity-/index-based options 166,693 15,478 – 182,171 34,227 (33,171) Credit derivatives 2,736,909 6,022,765 429,075 9,188,748 19,839 (41,203) Glossary Glossary

Commodity futures 46,639 11,265 13,809 71,713 1,655 (17,706) Contacts Contacts 294 295 Preface The negative fair values of other equity-based transactions (OTC products) The total volume of unsettled financial instruments as of 31 December 2006 Preface

are covered by adequate assets items, especially trading assets. breaks down as follows:

2006 Nominal amount by maturity Fair values

Managing Board Managing more than 1 year, Board Managing €000 Up to 1 year up to 5 years More than 5 years Total Positive negative Total 102,108,964 86,855,296 24,529,969 213,494,229 1,933,059 (3,270,876) Interest rate contracts 52,863,769 81,740,213 23,412,367 158,016,349 1,156,257 (1,186,565) OTC products

Supervisory Board’s Report Interest rate swaps 42,104,786 65,593,040 20,562,823 128,260,649 1,060,512 (1,138,904) Supervisory Board’s Report Interest rate futures 5,443,828 2,419,684 – 7,863,512 5,663 (5,403) Interest rate options – purchased 1,867,093 6,421,224 905,606 9,193,923 56,774 – Interest rate options – sold 354,738 1,201,050 1,257,221 2,813,009 – (26,101) Overview of RZB Overview of RZB Other similar contracts 858,684 2,620,908 275,165 3,754,757 9,651 (5,727) Products trading on stock exchange Interest rate futures 2,196,675 2,891,107 341,353 5,429,135 23,416 (8,197) Interest rate options 37,965 593,200 70,200 701,365 240 (2,232)

Raiffeisen Banking Group Foreign exchange rate contracts 48,164,995 4,011,949 101,922 52,278,865 613,426 (620,596) Raiffeisen Banking Group OTC products

Interview Cross-currency interest rate swaps 2,181,848 2,344,976 99,771 4,626,594 75,041 (29,303) Interview Forward foreign exchange contracts 42,158,146 560,930 2,133 42,721,209 474,866 (530,778) Currency options – purchased 1,591,899 540,973 18 2,132,889 62,538 – Currency options – sold 1,776,885 565,070 – 2,341,955 – (59,487)

Management Report Other similar currency contracts 449,904 – – 449,904 159 (327) Management Report Products trading on stock exchange Currency contracts (Futures) 6,314 – – 6,314 822 (700) Equity/index contracts 1,032,399 1,103,134 1,015,680 3,151,213 163,377 (1,462,200) Segment Reports Segment Reports OTC products Equity-/index-based options – purchased 166,518 73,324 152,828 392,670 78,916 – Equity-/index-based options – sold 38,483 44,801 106,939 190,222 – (15,993) Other similar contracts 442,216 920,037 755,913 2,118,166 66,065 (1,441,287) Products trading on stock exchange Equity/index futures 172,523 64,389 – 236,912 14,222 (3,080) Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Equity-/index-based options 212,659 583 – 213,242 4,174 (1,839) Commodity futures 47,801 – – 47,801 – (1,515) Glossary Glossary

Contacts Contacts 296 297 Preface Preface

(46) Fair values of financial instruments

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction. As far as market Managing Board Managing prices are available (mainly securities and derivatives quoted on stock exchanges or active Board Managing markets), this quotation represents the fair value.

All other financial instruments are valued using internally accepted calculation models, especially discounted cash flow analysis and option pricing models. Fair values different from the carrying amount are calculated for fixed-interest loans and advances to and Supervisory Board’s Report deposits from banks or customers, if the remaining maturity is more than one year. Variable- Supervisory Board’s Report interest loans and advances and deposits are taken into account if they have an interest rollover period of more than one year. The effect of discounting by using a computational interest rate that reflects the market rates is only material in those cases. Overview of RZB Overview of RZB

2007 2006 €000 Fair value Carrying amount Difference Fair value Carrying amount difference Assets Loans and advances to banks 30,912,460 30,910,100 2,360 31,730,777 32,005,923 (275,146) Raiffeisen Banking Group Raiffeisen Banking Group Loans and advances to customers 73,190,251 73,070,577 119,674 53,094,879 53,105,675 (10,796) Financial investments 5,040,343 5,052,012 (11,669) 5,741,366 5,721,616 19,750 Interview Interview Liabilities Deposits from banks 48,886,720 48,899,185 (12,465) 44,084,345 44,129,411 (45,066) Deposits from customers 55,369,483 55,368,996 487 44,741,545 44,727,489 14,056 Liabilities evidenced by paper 14,660,591 14,677,509 (16,918) 11,348,920 11,322,460 26,460 Management Report Management Report Subordinated capital 3,699,301 3,827,432 (128,131) 2,649,998 2,895,608 (245,610) Segment Reports Segment Reports

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 298 299 Preface Preface

Other disclosures (48) Fiduciary business

Fiduciary business not recognised in the balance sheet was concluded with the following (47) Contingent liabilities and commitments volumes: Managing Board Managing Board Managing €000 2007 2006 €000 2007 2006 Contingent liabilities 10,365,978 11,304,393 Loans and advances to banks 8,696 6,285 Acceptances and endorsements 37,530 16,628 Loans and advances to customers 446,899 375,769 Credit guarantees 5,656,534 7,308,265 Financial investments 36,464 37,803

Supervisory Board’s Report Other guarantees 2,454,098 1,867,664 Other fiduciary assets 40,028 5,687 Supervisory Board’s Report Letters of credit (documentary business) 2,212,795 2,082,530 Fiduciary assets 532,087 425,544 Other contingent liabilities 5,020 29,306 Deposits from banks 236,411 253,021 Commitments 13,987,569 12,154,342 Deposits from customers 249,107 156,827 Overview of RZB Overview of RZB Irrevocable credit lines and stand-by facilities 13,987,569 12,125,215 Other fiduciary liabilities 46,569 15,696 Up to 1 year 5,359,796 4,965,697 Fiduciary liabilities 532,087 425,544 More than 1 year 8,627,773 7,159,518 Non-genuine repurchase agreements – 29,127 Fees income from fiduciary business amounted to € 12,663 thousand (2006: € 6,436

Raiffeisen Banking Group thousand). Fees expenses totalled € 1,839 thousand (2006: € 818 thousand). Raiffeisen Banking Group Commitments exclusively include irrevocable credit lines and stand-by facilities. Due to a

Interview more precise disclosure, other contingent liabilities similar to guarantees are shown under Moreover, RZB managed funds of € 3,997,027 thousand (2006: € 800,883 thousand) Interview other guarantees. The previous year's figures were adapted accordingly. as of the balance sheet date. It solely deals with investment funds for retail customers.

The following table contains revocable credit lines currently bearing no credit risk: (49) Subordinated assets Management Report €000 2007 2006 Management Report Revocable credit lines 8,554,882 6,512,144 €000 2007 2006 Up to 1 year 4,495,030 4,531,162 Loans and advances to banks 36,326 28,640

Segment Reports More than 1 year 4,059,852 1,980,982 Loans and advances to customers 51,623 44,998 Segment Reports Trading assets 102,059 65,071 Raiffeisen Zentralbank is a member of Raiffeisen-Kundengarantiegemeinschaft Öster- Financial investments 346,759 398,419 reich. The members of this association have a contractual obligation to guarantee jointly Total 536,767 537,128 and severally the punctual fulfilment of the entirety of an insolvent association member’s commitments arising from customer deposits and its own issues up to the limit of the sum of the individual capacities of the remaining association members. The individual capacity

Consolidated Financial Statements Financial Consolidated of an association member is measured on the basis of its freely available reserves subject Statements Financial Consolidated

to the pertinent provisions of BWG. Glossary Glossary

Contacts Contacts 300 301 Preface Preface

(50) Securities admitted for trading on a stock exchange pursuant €000 2007 2006 to Section 64 BWG Total own funds requirement 7,491,025 5,652,499 Excess own funds 2,806,039 1,961,727 2007 2006

Managing Board Managing Excess cover ratio 37.5% 34.7% Board Managing €000 listed unlisted listed unlisted Core capital ratio (Tier 1), banking book 8.8% 9.0% Bonds, notes and other fixed-interest Own funds ratio 11.0% 10.8% securities 15,253,784 672,688 13,480,896 733,376 Shares and other The total own funds requirement is as follows: variable-yield Supervisory Board’s Report securities 735,460 81,168 1,028,653 – €000 2007 2006 Supervisory Board’s Report Equity participations 175,564 21,109 88,884 – Risk-weighted basis of assessment according to Sec. 22 BWG 83,090,533 62,908,300

Overview of RZB of which 8 per cent minimum own Overview of RZB (51) Volume of the trading book pursuant to Section 22b BWG funds requirement 6,647,243 5,032,664 Own funds requirement for the trading book €000 2007 2006 according to Sec. 22b (1) BWG 625,116 460,192 Securities 10,401,649 9,196,620 Own funds requirement for open currency Other financial instruments 190,722,343 140,520,975 positions according to Sec. 26 BWG 218,666 159,643 Raiffeisen Banking Group Raiffeisen Banking Group Total 201,123,992 149,717,595 Total own funds requirement 7,491,025 5,652,499

Interview The risk weighted assets (including market risk) amounted to € 93,637,813 thousand Interview (2006: € 70,656,238 thousand). (52) Regulatory own funds

RZB made use of the transformation regulations for the calculation of own funds require- (53) Average number of staff Management Report ments according to Basel I. The own funds of the RZB-Kreditinstitutsgruppe pursuant to Management Report the Austrian Banking Act (BWG) break down as follows: The average number of staff employed during the financial year (full-time equivalents) broke down as follows: €000 2007 2006 Segment Reports Segment Reports

Tier 1 capital (core capital) 7,340,592 5,651,645 Full-time equivalents 2007 2006 Tier 2 capital (additional own funds) 2,722,418 1,723,495 Salaried employees 56,483 49,324 Less interests in banks and financial institutions (211,103) (209,371) Wage earners 1,925 2,441 Eligible own funds 9,851,907 7,165,769 Total 58,408 51,765 Tier 3 capital (short-term subordinated own funds) 445,157 448,457 Total own funds 10,297,064 7,614,226 Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 302 303 Preface The average number of staff employed during the financial year (full-time equivalents) The following table shows relations of close family members of key management to RZB: Preface

breaks down as follows: €000 2007 2006 Full-time equivalents 2007 2006 Sight deposits – 138 Managing Board Managing Board Managing Austria 2,732 2,476 Shares 145 – Central Europe 12,079 10,403 Beyond that, there are no further relations of RZB to key management. CIS 28,197 25,997 Southeastern Europe 15,045 12,579 Remuneration of members of the Managing Board Other countries 355 310 The members of the Managing Board of Raiffeisen Zentralbank Österreich Aktiengesell- Supervisory Board’s Report Total 58,408 51,765 schaft are remunerated as follows: Supervisory Board’s Report

€000 2007 2006 (54) Expenses on severance payments and retirement benefits Overview of RZB Fixed and performance-based remunerations 7,637 9,118 Overview of RZB Payments to pension funds and business insurances 118 315 €000 2007 2006 Total 7,755 9,433 Members of the Managing Board and senior staff 16,696 12,669 Other employees 16,892 12,091 The table contains fixed remunerations and performance-based remunerations as well as Total 33,588 24,760 Raiffeisen Banking Group remunerations for membership of boards of subsidiaries, bonuses and payments in kind. In Raiffeisen Banking Group the financial year 2007, the share of performance-based remuneration components was

Interview 30.3 per cent. Last year, it was 68.0 per cent due to a special bonus. Interview (55) Relations to Key Management Performance-based remuneration components of the Managing Board are linked to achie- Group relations of key management ve the objectives regarding profit after tax, return on standard capital and cost/income Key management refers to the Managing Board of Raiffeisen Zentralbank Österreich ratio as well as to achieve the personal objectives that are agreed annually. There were Management Report Aktiengesellschaft and the management of Raiffeisen-Landesbanken-Holding GmbH. no material changes in the principle for profit-sharing against the previous year. Management Report Relations of key management to RZB are as follows (respective fair values): In 2006, a pension plan was granted to a member of the Managing Board having a €000 2007 2006 function in the Managing Board of a subsidiary. A provision was made in the amount of Segment Reports Segment Reports

Sight deposits 81 9 € 2,000 thousand in 2006. Moreover, the same member of the Managing Board recei- Shares 6,449 7,109 ved a bonus promise in connection with the acquisitions made, resulting in a provision of € 2,458 thousand in 2006. The planned payments are due not before 2009. These pay- Time deposits 761 1,016 ments are mainly dependent on achieving the targeted objectives of the acquired com- Savings deposits 7 – panies (return on standard capital, cost/income ratio and profit after tax). There were no Other claims – 155 such promises in 2007. Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 304 305 Preface Remunerations to former members of the Managing Board and their dependents amoun- ■ The Personnel Committee has the responsibility for legal relationships between the Preface

ted to € 838 thousand (2006: € 813 thousand). Company and active and retired members of the Managing Board except in matters of the appointment or dismissal of members of the Managing Board. Remuneration of members of other bodies ■ The Supervisory Board’s Audit Committee reviews and audits the annual financial state- Managing Board Managing The following remunerations are paid to members of the Supervisory Board and other ments and the Company’s management report together with any consolidated financial Board Managing boards: statements and the Group’s management report. The committee prepares the formal approval of the annual financial statements by the Supervisory Board and in addition, it €000 2007 2006 makes a recommendation to the Supervisory Board regarding the choice of auditor and Supervisory Board 437 451 group auditor. Federal Advisory Board (Länderkuratorium) 170 170 ■ The Supervisory Board’s Working Committee exercises its supervisory and approving Supervisory Board’s Report powers above all when banking risks are assumed (including acquisition and sale of Supervisory Board’s Report On top of this, no contracts subject to approval in the meaning of Section 95 (5) item 12 securities) or risk limits are granted to customers or group of related customers at the Austrian Joint Stock Companies Act (AktG) were concluded with members of the Super amount of or in excess of a specific ceiling as laid down in the memorandum and artic visory Board in the financial year 2007. les of association and with the respect to the setting up, deactivation or closure of sub Overview of RZB Overview of RZB sidiaries and the acquisition or disposal of equity participations, whether directly or indirectly by way of a subsidiary pursuant to Section 244 (2) Austrian Commercial (56) Bodies Code (UGB), insofar as ceilings as laid down in the memorandum and articles of association are exceeded. Pursuant to Section 70 (1) Stock Corporation Act (AktG), the Managing Board shall

Raiffeisen Banking Group manage the enterprise on its own responsibility in such a way as is necessary for the Finally, it also approves appointments of members of the Managing Board or of emplo- Raiffeisen Banking Group good of Raiffeisen Zentralbank and its Group taking into account the interests of the yees of the bank as members of boards of subsidiaries and, with regard to the Managing

Interview shareholders and employees as well as the public interest. Board, approves the lifting of the restraint on competition so as to allow the acceptance of Interview posts on the supervisory boards of companies that are not related to this Company within According to Stock Corporation Act, the Supervisory Board is responsible for monitoring the scope of the Group or in which this Company does not have a shareholding pursuant the activities of the Managing Board and supporting it in connection with fundamental to Section 228 (1) Austrian Commercial Code. In addition, it must approve the conclusion strategic enterprise decisions. The Supervisory Board established the Personnel Commit- of special contracts of employment under which retirement benefit promises are made Management Report tee, the Audit committee and the Working Committee from its midst. except in the case of the legal relationship specified in Section 6 (2) of the Supervisory Management Report Board’s standing orders.

The Federal Advisory Committee (Länderkuratorium) is another statutory body estab Segment Reports Segment Reports

lished by the Supervisory Board. It has an advisory function and is entitled to make suggestions to the Supervisory Board at any time.

Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 306 307 Preface ■ Karl Waltle, Preface

Managing Board Supervisory Board Federal Advisory Board ■ Walter Rothensteiner, (12 April 1985), Chairman of the Managing Board (Länderkuratorium) of Raiffeisenlandesbank Vorarlberg Waren- und Chairman and CEO (1 January 1995) Presiding Committee ■ Revisionsverband regGenmbH Jakob Auer, ■ Herbert Stepic, ■ Christian Konrad, Chairman since 20 June 2007, previously ■ Gottfried Wanitschek, Managing Board Managing Vice-Chairman and Deputy to the President, P, A, W, (24 April 1990), Deputy Chairman; Chairman of the Supervisory Board Managing CEO (28 April 1987) Generalanwalt of Österreichischer Raiffeisen (25 June 1997), Member of the Managing Board Board of Raiffeisenlandesbank Oberösterreich AG of UNIQA Versicherungen AG ■ Patrick Butler, (1 October 2004) verband and Chairman of the Supervisory Board of ■ Wilfried Thoma, Raiffeisenlandesbank Niederösterreich-Wien AG Deputy Chairman since 20 June 2007, previous- ■ Karl Sevelda, (1 March 1998) All mentioned members of the Supervisory ■ Markus Mair, ly member; President of the Supervisory Board of ■ (1 October 2007) Johann Strobl, Vice-President, P, A, W, (26 June 2006), Board are appointed until the Annual Ge- Raiffeisen-Landesbank Steiermark AG ■ neral Meeting 2009. Manfred Url, (1 March 1998) CEO of Raiffeisen-Landesbank Steiermark AG ■ Walter Zandanell,

Supervisory Board’s Report Supervisory Board’s Report ■ Julius Marhold, Deputy Chairman, Chairman of the Supervisory Staff Council delegates All mentioned members of the P, A, W, Vice-President, (2 April 1982), Board of Österreichische Volksbanken-AG ■ Franz Hummel, Managing Board are appointed until CEO of Raiffeisenlandesbank Burgenland und ■ Kurt Amann, Revisionsverband regGenmbH A, W, (9 January 1997), Chairman of the Staff Chairman (til 20 June 2006, thereafter member), 10 March 2012. Council until 25 September 2007 ■ Chairman of the Supervisory Board of Raiffeisen Overview of RZB Ludwig Scharinger, Overview of RZB P, A, W, (22 April 1986), Vice-President, CEO ■ Martin Prater, landesbank Vorarlberg Waren- und Revisions of Raiffeisenlandesbank Oberösterreich AG A, W, (11 January 1991), Deputy to the Chairman verband regGenmbH of the Staff Council, from 11 October 2007 on, ■ Peter Greiderer, Members Chairman of the Staff Council Member, Chairman of the Supervisory Board ■ of Raiffeisen-Landesbank Tirol AG ■ Klaus Buchleitner, Helge Rechberger, (20 June 2003), Chairman of the Managing Board A, W, (26 January 2002), from 11 October 2007 on, ■ Hans Malliga, Raiffeisen Banking Group of RWA Raiffeisen Ware Austria AG Deputy-Chairman of the Staff Council, Member, Chairman of the Supervisory Board Raiffeisen Banking Group ■ of Raiffeisenlandesbank Kärnten – Rechenzentrum ■ Erwin Hameseder, Peter Anzeletti-Reikl, W, (1 January 2004), from 11 October 2007 on, und Revisionsverband, regGenmbH

Interview (20 June 2007), CEO of Raiffeisenlandesbank Interview Niederösterreich-Wien AG Deputy-Chairman of the Staff Council ■ Franz Romeder, ■ Member, Vice-Chairman of Raiffeisen-Holding ■ Klaus Pekarek, Hildegard Svejda, Niederösterreich-Wien regGenmbH (25 April 1989), CEO of Raiffeisenlandesbank (9 January 1997), Deputy-Chairman of the Kärnten – Rechenzentrum und Revisionsverband, Staff Council ■ Sebastian Schönbuchner, regGenmbH ■ Heidrun Mössner, (1 September 2005) Member, Chairman of Raiffeisenverband Management Report Salzburg regGenmbH Management Report ■ Franz Pinkl, ■ Günter Plachy, (11 October 2007) (23 June 2004), CEO of Österreichische ■ Helmut Thrackl, Volksbanken-AG State Commissioners Member from 20 June 2007on; Chairman of Raiffeisenlandesbank Burgenland und Revisions ■ Peter Püspök, ■ Alfred Lejsek,

Segment Reports verband regGenmbH (from 14 June 2007 on) Segment Reports (1 September 1998 til 20 June 2007), CEO of

(1 September 1996), State Commissioner Raiffeisenlandesbank Niederösterreich-Wien AG ■ Christian Riemer, (til 30 June 2007) (1 September 1993), Deputy State Commissioner ■ Günther Reibersdorfer, til 31 July 2007 (23 June 2005), CEO of Raiffeisenverband ■ Johann Palkovitsch Salzburg regGenmbH (1 August 2007), Deputy State Commissioner ■ Hannes Schmid, (23 June 2005), Chairman of the Managing Board of Raiffeisen-Landesbank Tirol AG Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

P – Member of the Personnel Committee A – Member of the Audit Committee

Glossary W – Member of the Working Committee Glossary (Date) – Date of first assignment Contacts Contacts 308 309 Preface (57) Organizational structure of Raiffeisen Zentralbank Preface

Service divisions ■ Audit, 1, Robert Tinauer Customer and product segments mesh ■ Group Control, 1, Wolfgang Forster Customer Divisions within a matrix at Raiffeisen Zentralbank. ■ Human Resources, 1, Josef Dellinger Managing Board Managing That facilitates customer-orientated trans- ■ Legal and Compliance, 1, Friedrich Sommer Board Managing action processing and cooperation be- ■ Management Services, 1, Gerhard Tanew tween divisions. In addition, there are ser- ■ Participations, 1, Christian Teufl vice departments that serve all other divi- ■ Public Relations, 1, Andreas Ecker-Nakamura sions. The various divisions report to mem- ■ Tax, 1, Horst Bergmann bers of the Managing Board as follows: ■ Group Head Office/Executive Secretariat, 1, 6, Johannes Schuster Supervisory Board’s Report Supervisory Board’s Report ■ International Business Units, 2, Eberhard Winkelbauer ■ Product Divisions 1 – Walter Rothensteiner Economic and Financial Market Research, 3, Peter Brezinschek 2 – Herbert Stepic ■ Credit Management, 5, Hubert Figl 3 – Patrick J.S.Butler ■ Risk Management, 5, Johann Strobl Overview of RZB Overview of RZB Service Divisions 4 – Karl Sevelda ■ Marketing, 6, Leodegar Pruschak 5 – Johann Strobl ■ Organisation/IT, 6, Jens Wirsching 6 – Manfred Url

Customer divisions

Raiffeisen Banking Group ■ Austrian Corporate Customers, 4, Joseph Eberle We hereby confirm that the consolidated financial statements have been prepared in ac- Raiffeisen Banking Group ■ Multinational Corporate Customers, 4, Peter Bazil cordance with the applicable accounting standards and to the best of our knowledge fair- ■ Interview Global Markets, 3, Martin Czurda ly represent the consolidated financial condition and profit situation of the companies of Interview ■ Branches, 2 the Raiffeisen Zentralbank Österreich Aktiengesellschaft group. Furthermore, we confirm ■ Verbund (Raiffeisen Banking Group, 6 that the annual management report fairly represents the financial condition and profit situation based on the information required for annual reports in compliance with IFRS, adopt- Product divisions ed pursuant to the Regulation 1606/2002/EG. Management Report ■ Global Finance Products, 4, Günter Kreuzhuber Management Report ■ Global Treasury, 3, Nicolaus Hagleitner Vienna, 12 March 2008 ■ Corporate, Trade and Export Finance, 4, Helmut Breit ■ Transaction Services, 6, Günther Gall The Managing Board Segment Reports Segment Reports

Walter Rothensteiner Herbert Stepic Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Patrick Butler Johann Strobl Karl Sevelda Manfred Url Glossary

Contacts Contacts 310 311 Preface trol. An audit also includes evaluation of the appropriateness of accounting policies Preface Unqualified auditor’s report used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Report on the Consolidated Financial Statements Managing Board Managing We believe that the audit evidence we have obtained is sufficient and appropriate to Board Managing We have audited the accompanying consolidated financial statements of Raiffeisen provide a basis for our audit opinion. Zentralbank Österreich Aktiengesellschaft, Vienna, for the financial year from 1 Janua- ry to 31 December 2007. These consolidated financial statements comprise the balan- Opinion ce sheet as at 31 December 2007, and the income statement, statement of changes in Our audit did not give rise to any objections. Based on the results of our audit in our opi- equity and cash flow statement for the year ended 31 December 2007, and a summary nion, the consolidated financial statements present fairly, in all material respects, the fi- Supervisory Board’s Report of significant accounting policies and other explanatory notes. nancial position of the group as of 31 December 2007 and of its financial performance Supervisory Board’s Report and its cash flows for the year then ended in accordance with International Financial Re- Management’s Responsibility for the Consolidated Financial Statements porting Standards (IFRS) as adopted by the EU. Management is responsible for the preparation and fair presentation of these consoli- Overview of RZB Overview of RZB dated financial statements in accordance with International Financial Reporting Stan- dards (IFRS) as adopted by the EU. This responsibility includes: designing, implemen- Report on Other Legal and Regulatory Requirements ting and maintaining internal control relevant to the preparation and fair presentation Laws and regulations applicable in Austria require us to perform audit procedures to ve- of financial statements that are free from material misstatement, whether due to fraud or rify whether the consolidated management report is consistent with the consolidated fi- error; selecting and applying appropriate accounting policies; and making accounting nancial statements and whether the other disclosures made in the consolidated manage-

Raiffeisen Banking Group estimates that are reasonable in the circumstances. ment report do not give rise to misconception of the position of the group. Raiffeisen Banking Group

Interview Auditor’s Responsibility In our opinion, the consolidated management report for the group is consistent with the Interview Our responsibility is to express an opinion on these consolidated financial statements consolidated financial statements. based on our audit. We conducted our audit in accordance with laws and regulations applicable in Austria and with International Standards on Auditing, issued by the Inter- national Auditing and Assurance Standards Board (IAASB) of the International Federa- Vienna, 14 March 2008 Management Report tion of Accountants (IFAC). Those standards require that we comply with ethical requi- Management Report rements and plan and perform the audit to obtain reasonable assurance whether the KPMG Austria GmbH financial statements are free from material misstatement. Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Segment Reports Segment Reports

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material mis- Wilhelm Kovsca Rainer Hassler statement of the consolidated financial statements, whether due to fraud or error. In Wirtschaftsprüfer Wirtschaftsprüfer making those risk assessments, the auditor considers internal control relevant to the (Austrian Chartered Accountants) entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for

Consolidated Financial Statements Financial Consolidated the purpose of expressing an opinion on the effectiveness of the entity’s internal con- Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 312 313 Preface Preface

List of fully consolidated companies

The following table shows a selection of operating companies of the consolidated group. The complete list of Raiffeisen Zentralbank’s interests has been lodged at the parent Managing Board Managing company’s Head Office. Board Managing

Subscribed capital Indirectly Subscribed capital Indirectly Company, domicile (country) in local currency share* held 1 type2 Company, domicile (country) in local currency share* held 1 type2 Austria Leasing GmbH, Raiffeisen Biztosításközvetítö Kft., Frankfurt/Main (DE) 1,000,000 EUR 51.0% OT Budapest (HU) 5,000,000 HUF 56.5% BR

Supervisory Board’s Report Centrotrade Chemicals AG, Zug (CH) 5,000,000 CHF 100.0% 100.0% OT Raiffeisen Car Leasing Ltd., Budapest (HU) 20,000,000 HUF 56.5% FI Supervisory Board’s Report Centrotrade Deutschland GmbH, Raiffeisen Centrobank AG, Vienna (AT) 47,598,850 EUR 100.0% BA Eschborn (DE) 410,000 EUR 100.0% OT Raiffeisen Equipment Leasing Zrt. Centrotrade Holding AG, Vienna (AT) 3,000,000 EUR 100.0% OT Budapest (HU) 50,000,000 HUF 56.5% FI Centrotrade Investment AG, Zug (CH) 5,900,000 CHF 100.0% OT Raiffeisen Factoring Ltd., Zagreb (HR) 15,000,000 HRK 50.9% FI Overview of RZB Centrotrade Minerals & Metals Inc., Raiffeisen Financial Services Company Zrt., Overview of RZB Cheasapeak (US) 3,002,000 USD 100.0% OT Budapest (HU) 20,000,000 HUF 48.5% FI eBanka, a.s., Prague (CZ) 1,184,500,000 CZK 35.2% BA Raiffeisen Insurance Agency Sp.z.o.o, Extra Year Investments Limited, Tortola (VG) 50,000 USD 100.0% FH Warsaw (PL) 200,000 PLN 66.8% BR F.J. Elsner & Co. Gesellschaft mbH, Raiffeisen Insurance and Reinsurance Innsbruck (AT) 436,037 EUR 100.0% OT Broker S.R.L, Bucharest (RO) 180,000 RON 64.5% BR

Raiffeisen Banking Group F.J. Elsner Trading Gesellschaft m.b.H., RAIFFEISEN INSURANCE BROKER Raiffeisen Banking Group Vienna (AT) 35,000 EUR 100.0% OT EOOD, Sofia (BG) 5,000 BGN 69.0% BR Golden Rainbow International Limited, Raiffeisen International Bank-Holding AG, Interview British Virgin Islands (VG) 1 USD 100.0% FH Vienna (AT) 471,735,875 EUR 69.0% FH Interview Kathrein & Co. Privatgeschäftsbank Raiffeisen International GROUP IT GmbH, Aktiengesellschaft, Vienna (AT) 20,000,000 EUR 100.0% BA Vienna (AT) 37,000 EUR 69.0% BR Kathrein & Co. Vermögensverwaltung Raiffeisen Invest d.o.o., Zagreb (HR) 8,000,000 HRK 50.9% FI GmbH, Vienna (AT) 125,000 EUR 80.0% FI Raiffeisen Investment Aktiengesellschaft,

Management Report Limited Liability Company „Raiffeisen Vienna (AT) 730,000 EUR 100.0% FI Management Report Leasing Aval“, Kiev (UA) 11,758,092 UAH 65.4% FI Raiffeisen Investment Fund Management OAO Priorbank, Minsk (BY) 102,801,217,650 BYR 43.5% BA Zrt., Budapest (HU) 100,000,000 HUF 48.5% FI OOO “Raiffeisen Capital” Asset- Raiffeisen Leasing Bulgaria OOD, Sofia (BG) 5,900,000 BGN 65.6% FI Management Company, Moscow (RU) 150,000,000 RUB 69.0% FI Raiffeisen Leasing d.o.o., Belgrade (RS) 226,544,550 RSD 66.8% FI Segment Reports Segment Reports

OOO Raiffeisen-Leasing, Moscow (RU) 491,000,000 RUB 66.8% FI Raiffeisen Leasing d.o.o., Ljubljana (SI) 895,800,000 SIT 64.5% FI Raiffeisen Auto Leasing Bulgaria EOOD, Raiffeisen Leasing d.o.o., Sarajevo (BA) 3,008,000 BAM 65.7% FI Sofia (BG) 5,000 BGN 65.6% FI Raiffeisen Leasing IFN S.A., Bucharest (RO) 14,935,400 RON 66.6% FI Raiffeisen Bank d.d. Bosna i Hercegovina, Raiffeisen Leasing sh.a., Tirana (AL) 123,000,000 ALL 67.9% FI Sarajevo (BA) 168,933,750 BAM 66.9% BA Raiffeisen Lízing Zrt., Budapest (HU) 225,620,000 HUF 56.5% BA Raiffeisen Bank Kosovo J.S.C., Prishtina (RS) 44,000,000 EUR 51.8% BA Raiffeisen Malta Bank plc, Sliema (MT) 210,000,000 EUR 100.0% BA Raiffeisen Bank Polska S.A., Warsaw (PL) 661,161,150 PLN 69.0% BA Raiffeisen Mandatory Pension Fund Raiffeisen Bank S.A., Bucharest (RO) 1,196,258,639 RON 68.7% BA Management Company d.d., Zagreb (HR) 110,000,000 HRK 50.9% FI Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Raiffeisen Bank Sh.a., Tirana (AL) 34,592,965 EUR 69.0% BA Raiffeisen Real Estate Management Zrt., Raiffeisen Bank Zrt., Budapest (HU) 45,129,140,000 HUF 48.5% BA Budapest (HU) 105,440,000 HUF 56.5% BR

Glossary Raiffeisen banka a.d., Belgrade (RS) 24,702,667,580 RSD 69.0% BA Raiffeisen Rent DOO, Belgrade (RS) 43,513 RSD 64.5% FI Glossary Raiffeisen Banka d.d., Maribor (SI) 14,133,667 EUR 59.1% BA Raiffeisenbank (Bulgaria) EAD, Sofia (BG) 310,073,452 BGN 69.0% BA > Contacts Contacts 314 315 Preface Subscribed capital Indirectly Preface List of equity participations Company, domicile (country) in local currency share* held 1 type2 Raiffeisenbank a.s., Prague (CZ) 4,889,000,000 CZK 35.2% BA The following tables show a selection of equity participations. The complete list of Raiff Raiffeisenbank Austria d.d., Zagreb (HR) 2,194,132,000 HRK 50.9% BA eisen Zentralbank’s interests has been lodged at the parent company’s Head Office.

Managing Board Managing Raiffeisen-Leasing Bank Aktiengesellschaft, Board Managing Vienna (AT) 5,000,000 EUR 51.0% BA Raiffeisen-Leasing d.o.o., Zagreb (HR) 30,000,000 HRK 57.7% FI Companies valued at-equity Raiffeisen-Leasing Gesellschaft m.b.H., Vienna (AT) 363,364 EUR 51.0% FI Subscribed capital Group Indirectly Raiffeisen-Leasing Österreich Company, domicile (country) in local currency share held 1 type2 Gesellschaft m.b.H., Vienna (AT) 35,000 EUR 51.0% FI card complete Service Bank AG, Vienna (AT) 6,000,000 EUR 25.0% BA

Supervisory Board’s Report Raiffeisen-Leasing Polska S.A., Warsaw (PL) 22,301,000 PLN 66.8% FI LEIPNIK-LUNDENBURGER INVEST Beteiligungs Supervisory Board’s Report Raiffeisen-Leasing Real Estate, s.r.o., Prague (CZ) 10,000,000 CZK 57.2% FI Aktiengesellschaft, Vienna (AT) 24,247,333 EUR 35.5% OT Raiffeisen-Leasing, spolecnost s.r.o., Prague (CZ) 50,000,000 CZK 49.9% FI NOTARTREUHANDBANK AG, Vienna (AT) 8,030,000 EUR 26.0% BA RALT Raiffeisen-Leasing Gesellschaft m.b.H. & Österreichische Hotel- und Tourismusbank Co. KG, Vienna (AT) 20,348,394 EUR 100.0% BR Gesellschaft m.b.H., Vienna (AT) 11,627,653 EUR 31.3% BA Overview of RZB Overview of RZB RALT Raiffeisen-Leasing Raiffeisen Banca pentru Locuinte S.A., Gesellschaft m.b.H., Vienna (AT) 218,500 EUR 100.0% FI Bucharest (RO) 96,000,000 RON 33.3% BA RI Eastern European Finance B.V., Raiffeisen Bausparkasse Gesellschaft m.b.H., Amsterdam (NL) 400,000 EUR 69.0% FI Vienna (AT) 35,000,000 EUR 37.0% BA RL-Nordic AB, Stockholm (SE) 50,000,000 SEK 51.0% FI Raiffeisen evolution project development RSC Raiffeisen Daten Service Center GmbH, GmbH, Vienna (AT) 43,750 EUR 40.0% OT Raiffeisen Banking Group Vienna (AT) 2,000,000 EUR 71.9% BR Raiffeisen Informatik GmbH, Vienna (AT) 1,460,000 EUR 46.4% BR Raiffeisen Banking Group RZB Finance (Jersey) II Ltd, St. Helier (JE) 100,000,002 EUR <0.1% FI Raiffeisen Kapitalanlage-Gesellschaft m.b.H., RZB Finance (Jersey) III Ltd, St. Helier (JE) 200,001,000 EUR <0.1% FI Vienna (AT) 15,000,000 EUR 50.0% BA Interview Interview RZB Finance (Jersey) IV Limited, St. Helier (JE) 500,002,000 EUR <0.1% FI Raiffeisen stambena stedionica d.d., RZB Finance LLC, New York (US) 1,510,000 USD 100.0% FI Zagreb (HR) 106,500,000 HRK 17.1% BA Tatra Asset Management sprav.spol., a.s., Raiffeisen stavebni sporitelna, a.s., Prague (CZ) 650,000,000 CZK 25.0% BA Bratislava (SK) 50,000,000 SKK 44.5% FI Raiffeisen Wohnbaubank Aktiengesellschaft, Tatra banka a.s., Bratislava (SK) 1,127,274,500 SKK 44.5% BA Vienna (AT) 5,100,000 EUR 25.0% BA Management Report Management Report Tatra Leasing spol. s r.o., Bratislava (SK) 200,000,000 SKK 54.7% FI UNIQA Versicherungen AG, Vienna (AT) 119,777,808 EUR 31.9% IN Ukrainian Processing Center, JSC, 1 Equity participations held via companies that are not included in the consolidated financial statements (pro-rata share) Kiev (UA) 180,000 UAH 69.0% BR 2 Company type ZAO Raiffeisenbank, Moscow (RU) 24,793,849,000 RUB 69.0% BA BA Bank BR Company rendering banking-related Segment Reports ZHS Office- & Facilitymanagement GmbH, IN Insurer ancillary services Segment Reports

Vienna (AT) 36,336 EUR 100.0% BR OT Other company * Computed effective share of Raiffeisen Zentralbank 1 Equity participations held via companies that are not included in the consolidated financial statements (pro-rata share) 2 Company type BA Bank BR Company rendering banking-related FI Financial institution ancillary services OT Other company FH Financial holding Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 316 317 Preface Preface

Other non-consolidated subsidiaries Other equity participations

Subscribed capital Group Indirectly Subscribed capital Group Indirectly Company, domicile (country) in local currency share held 1 type2 Company, domicile (country) in local currency share held 1 type2

Managing Board Managing CENTRUM BÝVANIA, s. r. o., Bratislava (SK) 27,100,000 SKK 100.0% 100.0% BR A-Leasing SpA, Treviso (IT) 10,000,000 EUR 49.0% FI Board Managing CP Inlandsimmobilien-Holding GmbH, Vienna (AT) 364,000 EUR 100.0% OT Austria Immobilien Leasing (Schweiz) AG, Doplnková dôchodková spoločnosť Tatra St. Gallen (CH) 5,000,000 CHF 50.0% FI banky, a.s., Bratislava (SK) 50,000,000 SKK 100.0% FI Austrian Airlines AG, Vienna-Flughafen (AT) 468,928,000 EUR 3.4% OT ELIOT, s. r. o., Bratislava (SK) 48,610,000 SKK 100.0% BR Bucharest Stock Exchange, Bucharest (RO) 49,439,090 RON 1.5% 1.5% SC Raiffeisen Asset Management (Bulgaria) Budapest Stock Exchange, Budapest (HU) 541,348,100 HUF 6.4% SC EAD, Sofia (BG) 250,000 BGN 100.0% FI Cards & Systems EDV-Dienstleistungs GmbH, Supervisory Board’s Report Raiffeisen BROKERS doo, Sarajevo (BA) 1,000,000 BAM 100.0% FI Vienna (AT) 75,000 EUR 42.0% OT Supervisory Board’s Report Raiffeisen Capital & Investment S.A., CJSC Areximbank “Armenian-Russian Bucharest (RO) 1,600,000 RON 100.0% FI Export-Import Bank”, Erevan (AM) 2,497,248,000 AMD 19.9% FI Raiffeisen Capital a.d. Banja Luka, Medicur - Holding Gesellschaft m.b.H.,

Overview of RZB Banja Luka (BA) 100,000 BAM 100.0% 100.0% BR Vienna (AT) 4,360,500 EUR 25.0% OT Overview of RZB Raiffeisen consulting Ltd., Zagreb (HR) 14,900,000 HRK 100.0% FI Oesterreichische Kontrollbank AG, Vienna (AT) 130,000,000 EUR 8.1% BA Raiffeisen Energy Service Ltd., Budapest (HU) 20,000,000 HUF 100.0% OT Oesterreichische Nationalbank AG, Vienna (AT) 12,000,000 EUR 8.8% BA Raiffeisen Factoring Ltd., Sofia (BG) 1,000,000 BGN 100.0% FI ÖPAG Pensionskassen Aktiengesellschaft, Raiffeisen Faktoring Sp. z.o.o., Warsaw (PL) 3,847,500 PLN 100.0% FI Vienna (AT) 10,200,000 EUR 16.3% OT RAIFFEISEN FUTURE AD, Belgrade (RS) 1,700,000 EUR 100.0% FI Österreichische Raiffeisen Einlagensicherung Raiffeisen Investment Fund Management reg. Gen.m.b.H., Vienna (AT) 2,800 EUR 10.7% OT Raiffeisen Banking Group Raiffeisen Banking Group A.D. Belgrade (RS) 750,000 EUR 100.0% FI Österreichische Volksbanken-Aktiengesellschaft, Raiffeisen Ost Invest Unternehmens- Vienna (AT) 311,095,412 EUR 5.7% BA

Interview beteiligungsges.m.b.H., Vienna (AT) 40,000 EUR 100.0% 100.0% OT Österreichische Wertpapierdaten Interview Raiffeisen Pensii - Broker de Pensii Private SRL, Service GmbH, Vienna (AT) 36,336 EUR 25.5% OT Bucharest (RO) 25,000 RON 100.0% BR Raiffeisen Datennetz Gesellschaft m.b.H., Raiffeisen Pension Insurance d.o.o., Vienna (AT) 145,346 EUR 25.0% OT Zagreb (HR) 14,400,000 HRK 100.0% FI Raiffeisen Factor Bank AG, Vienna (AT) 10,000,000 EUR 40.0% BA RAIFFEISEN TRAINING CENTER LTD., Raiffeisen Software Solution und Management Report Management Report Zagreb (HR) 20,000 HRK 80.0% 20.0% BR Service GmbH, Vienna (AT) 773,000 EUR 16.5% OT RZB Private Equity Holding AG, Vienna (AT) 100,000 EUR 100.0% 100.0% OT Raiffeisen-Leasing Mobilien und Raiffeisen Voluntary Pension Fund Manage- KFZ GmbH, Vienna (AT) 35,000 EUR 15.0% FI ment d.o.o., Zagreb (HR) 33,445,300 HRK 100.0% FI PayLife Bank GmbH, Vienna (AT) 13,234,665 EUR 11.2% BA

Segment Reports RLKG Raiffeisen-Leasing GmbH, Vienna (AT) 40,000 EUR 12.5% OT Segment Reports

S.A.I. Raiffeisen Asset Management S.A., Bucharest (RO) 5,670,000 RON 100.0% FI W 3 Errichtungs- und Betriebs-Aktien- TATRA Residence, s.r.o., Bratislava (SK) 25,053,000 SKK 100.0% 100.0% BR gesellschaft, Vienna (AT) 1,020,000 ATS 20.0% OT TG Strom, s.r.o., Bratislava (SK) 5,600,000 SKK 100.0% BR Wiener Börse AG, Vienna (AT) 14,000,000 EUR 6.1% SC 1 Equity participations held via companies that are not included 1 Equity participations held via companies that are not included in the consolidated financial statements (pro-rata share) in the consolidated financial statements (pro-rata share) 2 Company type 2 Company type FI Financial institution BR Company rendering banking-related BA Bank SC Securities company; OT Other company ancillary services FI Financial institution recognised stock exchange OT Other company Consolidated Financial Statements Financial Consolidated Statements Financial Consolidated

Glossary Glossary

Contacts Contacts 318 319 Contacts Glossary Consolidated Financial Statements Segment Reports Management Report Interview Raiffeisen Banking Group Overview of RZB Supervisory Board’s Report Managing Board Preface Associated companies Associated Affiliated companies Affiliated date of the exchange transaction. exchange the of date est in the fair values of assetsand the identifiable liabili crued interest. interest. crued ciliation of cash and cash-equivalents held at the begin the at held cash-equivalents and cash of ciliation equivalents. commitments). (guarantees, exposures Clean price CIS CE CEE statement flow Cash – flow Inflows Cash and outflows of cash and cash Creditexposure ures with actual results to test the quality of a model. of a model. quality to the test results actual with ures prises the basis of assessment within the meaning of sec of meaning the within assessment of basis the prises predominantly of territories of the former Soviet Union. Union. Soviet of former the of territories predominantly year. financial the of end the and ning off-balance-sheet and securities) debt (loans, posures Czech Republic, Hungary, Poland, Slovakia and Slovenia. and Slovakia Poland, Hungary, Republic, Czech Back testing Back BWG Com – risk) market (including assessment of Basis book Banking Badwill ing policies). ing ing the financial year arising from operating activities, investingactivities, activitiesandfinancing activitiesandrecona operating from arising year financial the ing times the own funds required as cover for the trading trading the for cover as required funds own the times 12.5 plus (BWG) Act Banking Austrian the of 22 tion book. trading the the at as acquisition the of cost the over acquired ties has significant influence. book and open currency positions. positions. currency open and book operat and financial the govern to (power control has – Central Europe. For RZB it is defined as total of of total as defined is it RZB For Europe. Central – – Central and Eastern Europe. Eastern and Central – – Commonwealth of Independent States, consisting G – Austrian Banking Act. Banking Austrian – – Any remaining excess of the acquirer’s inter lossar – Price of a financial instrument without ac without instrument of a financial – Price and – The backward comparison of VaR fig – All positions that are not assigned to to assigned not are that positions All – – Comprises all on-balance sheet ex – Entity over which the investor investor the which over Entity – – Statement of cash flows dur – Entity over which the investor investor the which over Entity –

abbre y k of ------320 en Zentralbank. It is calculated by consolidated profit in profit by consolidated It is calculated en Zentralbank. gible and intangible fixed assets) with operating income income fixed assets) with gible operating and intangible credit risk arising from loans, bonds and other risk as risk other and bonds loans, from arising risk credit employee service in the current and prior periods. periods. and prior in current the service employee Core capital Country risk es, and the carry forward of unused tax credits. credits. tax unused of forward carry the and es, tem deductible of respect in periods future in coverable ROE Consolidated Cost/income ratio Credit derivatives Credit Corecapital ratio sets or market risk items to another party. another to items risk market or sets ures and does not include current year profit. profit. year current not include and does ures relation to average balance sheet equity (without minor (without equity sheet balance average to relation ess cmrsn saf xess n ohr adminis other and expenses staff (comprising penses risk and political risk. payments required to settle the obligation resulting from from resulting obligation the settle to required payments (including market risk). risk). market (including profit (loss) and other operating profit (loss)). (loss)). profit operating other and (loss) trading profit income, commission net income, interest (net porary differences, the carry forward of unused tax loss tax unused of forward carry the differences, porary without deducting any plan assets, of expected future future expected of assets, plan any deducting without DBO eal risk Default Deferred tax assets ity interests).ity fig Average is based on equity month-end to of the shareholder Raiffeis i.e. attributable the equity s acltd y oprn gnrl diitaie ex administrative general comparing by calculated is ing the other party a financial loss. loss. financial a party other the ing trative expenses and depreciation/amortisationtan and expensesof trative transaction will not be able to fulfil an obligation, caus obligation, an fulfil to able be not will transaction tal tal (tier 1) is and the basis its of denominator assessment losses during the current financial year. year. financial current the during losses ble fixed assets and balance sheet losses and material material and losses sheet balance and assets fixed ble ficiency based on the ratio of expenses to earnings. It It earnings. to expenses of ratio the on based ficiency v – Defined benefit obligation = The present value, value, present The = obligation benefit Defined – ia e – This comprises transfer and convertibility and convertibility transfer – This comprises – Risk that counterparties in a financial financial a in counterparties that Risk – – Paid-in capital and reserves less intangi less reserves and capital – Paid-in y t y t – This ratio’s numerator is core capi – Indicator of an enterprise’s cost ef cost enterprise’s an of – Indicator – Instruments, designed to transfer to designedInstruments, – – Return on Consolidated Equity, Equity, Consolidated on Return – ions – The amounts of income taxes re erms

------cruing to the lessor. the to cruing able assets and liabilities acquired as at the date of the the of date the at as acquired liabilities and assets able exchange transaction. transaction. exchange identifi the of value fair the in interest acquirer’s the over a money, capital, precious metal or currency market is is market currency or metal precious capital, money, a in traded commodity a which under exchange stock a asset. an of ownership to incidental rewards and risks the all – The aggregate of minimum minimum of aggregate The – value investment Gross environment. change ac on but name count of own the beneficiary. on banks, often trustee, by out knowledgeable, between settled, liability a or changed accrued interest. interest. accrued Goodwill average weighted the by divided shareholders) erence credit index, or other variable, that requires no initial net net initial no requires that variable, other or index, credit or rating credit a rates, or prices of index rate, change es in response to the change in a specified interest rate, rate, interest specified a in change the to response in es ments so that their change in fair value is an offset, in in offset, an is value fair in change their that so ments ac value residual unguaranteed any and lease nance whole or in part, to the change in fair value or cash cash or value fair in change the to part, in or whole riod. pe the during outstanding shares ordinary of number nary equity holder (profit adjusted by dividends to pref to dividends by adjusted (profit holder equity nary willing parties in an arm’s length transaction. transaction. length arm’s an in parties willing rary differences. differences. rary tempo taxable of respect in periods future in payable Hedging iac lease Finance business Fiduciary Futures Fair Fair value to funds own excess of Relation – ratio cover Excess –(EPS) Profit share per attributableEarnings to ordi Dirty Price Dirty Derivatives liabilitiestax Deferred es pyet rcial b te esr ne a fi a under lessor the by receivable payments lease investment or small initial net investment and that is set is that and investment net initial small or investment to be delivered or accepted at a price fixed in an ex an in fixed price a at accepted or delivered be to total own funds requirement. funds own total tled at a future date. date. at a tled future flows of a hedged item. item. hedged a of flows financial instrument price, commodity price, foreign ex foreign price, commodity price, instrument financial Sadrie frad otat tae on traded contracts forward Standardised – – Designating one or more hedging instru – Any excess of the cost of the acquisition – The amount for which an asset could be ex be could asset an which for amount The – – Price of a financial instrument including – Financial instruments whose value chang value whose instruments Financial – – A lease that transfers substantially substantially transfers that lease A – – Transactions which are carried carried are which Transactions – – The amount of income taxes taxes income of amount The – ------321 Market risk capitalisation Market all securities traded in the market. in market. the traded all securities dards or International Accounting Standards are report or part of buildings – or both) which are held to earn earn to held are which both) or – buildings of part or total. sheet balance erage achieving of goal the with Board) Standards counting inn fr maret oss iie b aeae risk- average by divided losses impairment for sioning ment losses divided by the total credit exposure. credit total the by divided losses ment ment will fluctuate because of changes in market prices prices market in changes of because fluctuate will ment by price. share the multiplied minable payments and fixed maturity that an entity has has entity an that maturity fixed and payments minable nancing can only be obtained at very disadvantageous disadvantageous at very be obtained only can nancing nancial Reporting Standards, formerly also SIC (Stand SIC also formerly Standards, Reporting nancial meet its current and future financial obligations in full or or in full obligations financial future and current its meet rentals or for capital appreciation or both. or appreciation capital for or rentals valuation ratio. Is calculated by provisioning for impair for provisioning by calculated Is ratio. valuation book. of banking the assets weighted whether those changes are caused by factors specific specific factors by caused are changes those whether exposure. credit total by divided claims written-down on received income and write-downs direct plus visions – Risk – exposure) credit (total ratio provisioning Net Held-for-trading Net provisioning ratio (Ø risk-weighted assets bank assets risk-weighted (Ø ratio provisioning Net Held-to-maturity IFRIC, SIC IFRIC, HGB/UGB Loss rate Liquidity risk Liquidity IPO property Investment margin Interest IAS IFRS, ingbook) in good time. This arises from the danger that e.g. refi e.g. that danger the from arises This time. good in ing Interpretations Committee). ing standards published by the IASB (International Ac (International IASB the by published standards ing to the individual security or its issuer or factors affecting affecting factors or issuer its or security individual the to to take advantage of short-term market fluctuations. market short-term of advantage take to the positive intention and ability to hold to maturity. to to hold maturity. and ability intention positive the terms or is entirely impossible. impossible. or is entirely terms Fi International the of Interpreter – Committee tation tional basis. interna an on accounting comparable and transparent – Initial public offering. – Usage of previously allocated loan loss pro loss loan allocated previously of Usage – – Risk valuation ratio. Is calculated by provi – The International Financial Reporting Stan FinancialReportingInternational The – – International Financial Reporting Interpre Financial–InternationalReporting – (Austrian) Commercial Code. – The risk that the value of a financial instru financial a of value the that risk The – – Risk that the bank could be unable to – Net interest income in relation to av – Securities held for trading purposes purposes for held trading – Securities – Financial assets with fixed or deter – Property (Land or buildings – – The number of issued shares shares issued of number The – ------

Contacts Glossary Consolidated Financial Statements Segment Reports Management Report Interview Raiffeisen Banking Group Overview of RZB Supervisory Board’s Report Managing Board Preface Contacts Glossary Consolidated Financial Statements Segment Reports Management Report Interview Raiffeisen Banking Group Overview of RZB Supervisory Board’s Report Managing Board Preface are traded directly between market participants “over- participants market between directly traded are quired as cover for the trading book and open currency currency open and book trading the as for cover quired pursuant assessment of basis the is denominator its and (tier 3). 2 tier capital dedicated agreed price and price at agreed an time or agreed an within agreed risk. legal including events, external from or systems and core capital (tier 1), additional and subordinated capi subordinated 1),and(tier additionalcapital core Own shares or within an agreed period (put option). period an agreed or within administrative expenses comprise staff expenses and and expenses staff comprise expenses administrative al administrative expenses. Operating income compris incomeadministrativeOperating expenses.al divided by total credit exposure. exposure. credit total by divided funds own is numerator ratio’s The – ratio funds Own O Options te amnsrtv epne ad depreciation/amor and expenses administrative other es net interest income, net commission income, trading trading income, commission net income, interest net es Operationalrisk prtn profit/loss Operating Operating lease statements, it consists of operating income net of gener of net income operating of consists it statements, positions. positions. period (call option) or to sell the underlying to a con a to underlying the sell to or option) (call period an at party contracting a from underlying the purchase provisions for portfolios of loans with identical risk pro risk identical with loans of portfolios for provisions profit (loss) and other operating profit (loss). General General (loss). profit operating other and (loss) profit method defined by IAS 19 that sees each period of ser of Consist – BWG of meaning the within funds Own within the meaning of the Austrian Banking Act (BWG) Act Banking Austrian the of meaning the within vice as giving rise to an additional unit of benefit entitle benefit of unit additional an to rise giving as vice Plan assets Plan otoi-ae la ls provisions loss loan Portfolio-based Projected unit method credit Projected Portfolio rate Portfolio the-counter”. nor on traded a They exchange. ther standardised stock to section 22 BWG plus 12.5 times the own funds re funds own the times 12.5 plus BWG 22 section to re and capital subordinated short-term and 2) (tier tal tracting party at and at an price an time agreed agreed party tracting held by the issuing entity itself or by its subsidiaries. subsidiaries. its by or itself entity issuing the by held tisation of tangible and intangible fixed assets. that the lessor must show the asset on its balance sheet. sheet. balance its on asset the show must lessor the that effect the with lessor the with remains ownership legal benefit benefit fund. from inadequate or failed internal processes, people people processes, internal failed or inadequate from files that may be compiled under certain conditions. certain under compiled be may that files T C instruments C – Instruments that give the holder the right to – Assets held by a long-term employment – Repurchased equity instruments (shares) instruments equity – Repurchased – Total provisions for impairment losses losses impairment for provisions Total – – Lease under which commercial and and commercial which under – Lease – Risk of unexpected losses resulting resulting losses unexpected of Risk – – Financial instruments that are nei – In IFRS-compliant financial financial IFRS-compliant In – – An actuarial valuation valuation actuarial An – – Impairment Impairment – ------322 According to the Austrian Banking Act (BWG) these are are these (BWG) Act Banking Austrian the to According Zentralbank Österreich AG. Österreich Zentralbank ldn mnrt itrss ie poi bfr tx respec tax before profit i.e. interests, minority cluding net by divided losses impairment for provisioning by ed assets at an agreed time and at an agreed price. price. agreed an at and time agreed an at assets ordinate institution. institution. ordinate RZB-Kreditinsti (BWG), Act Banking Austrian the of ed by business and counterparty risk, respectively. risk, counterparty and business by ed weight positions asset book banking off-balance-sheet special and sheet off-balance assets, sheet on-balance the reacquire to agrees concurrently and counterparty a to assets sells enterprise the (repo), transaction chase method). of service efit/years ben the as or service on pro-rated prorated method efit areas (secondary). (secondary). areas geographical and (primary) segments business for data port these of redistribution the and enhancement credit of level appropriate an with claims leasing or loans of create a European wide standardized payment area. In area. payment standardized wide a create European of Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Bulgaria, Herzegovina, and Bosnia Albania, of sheet equity. Average equity is calculated on month-end on is sheet equity. month-end Average equity calculated euiis opne ad opne rneig bank rendering companies and companies securities Securitisation SEPA Segment reporting SEE ment and measures each unit separately to build up the up the to build separately unit each measures and ment – Returnequity) on on(return the ROE total equity in RZB- RZB Risk/Earnings-Ratio – “RWA” book banking the of assets Risk-weighted agreement Repurchase International Raiffeisen Kosovo, Romania and Serbia. interest income. ing-related services in which Raiffeisen Zentralbank Zentralbank Raiffeisen which in services ing-related tively after tax in relation to weighted average balance balance average weighted to relation in tax after tively tutsgruppe is made up of all banks, financial institutions, institutions, financial banks, all of up is made tutsgruppe ternational Bank-Holding AG. this payment area there is no distinction between cross- between distinction no is there area payment this holds direct or indirect interests or has control as a super- a as control has or interests indirect or direct holds border and national payments for customers anymore. figures and does not include current year profit. profit. year current include not does and figures financing and the packaging of designated portfolios portfolios designated of packaging the and financing final obligation (sometimes known as the accrued ben accrued the as known (sometimes obligation final folios to investors. – Southeastern Europe. For Europe. RZB it – is Southeastern asdefined total – Throughout this report the Group of Raiffeisen K – Single Euro Payments Area. This is a project to to project a is This Area. Payments Euro Single – reditinstitutsgruppe – Securitisation is a special type of re – Disclosure of earnings and asset asset and earnings of Disclosure – – Risk valuation ratio. Is calculat – The Group of Raiffeisen In – During a genuine repur – Pursuant to section 30 30 section to Pursuant – ------

and/or currency positions (currency swap). (currency positions and/or currency a given period of time. of period given a shares or share certificates. under normal market conditions). conditions). market normal under SPO Swap tes tests Stress hr-ae remuneration Share-based Splitting in U.S. investment banking where equities that have have that equities where banking investment U.S. in tured by VaR models (VaR forecasts maximum losses losses maximum forecasts (VaR models VaR by tured treme fluctuations in market parameters. They are used used are They parameters. market in fluctuations treme because such fluctuations are usually inadequately cap lotments of company shares for eligible employees for employees eligible for shares company of lotments become very highly priced are split into two or more more or two into split are priced highly very become – Secondary public offering; capital increase. capital offering; public Secondary – – Exchange of interest obligations (interest swap) (interest of obligations – interest Exchange – A procedure that is particularly common common particularly is that procedure A – – S t r e s s t e s t s e n d e a v o u r t o s i m u l a t e e x Promnebsd al Performance-based – - - - 323 due to their low creditworthiness. Subprime loans are are loans Subprime creditworthiness. low their to due characterised by a relatively high risk of loss. of risk high relatively a by characterised rate interest market prime the for qualify not do who ers question. VaR upie loans Subprime T T T prices and interest rates. interest and prices velopment of a share investment over a period consider period a over investment share a of velopment with a 99 per cent probability, not be exceeded within within exceeded be not probability, cent per 99 a with ing the dividends and increases in share price. price. share in increases and dividends the ing the period for which an asset is held in the portfolio in in portfolio the in held is asset an which for period the by a bank for short-term resale to exploit fluctuations in in fluctuations exploit to resale short-term for bank aby otalshareholder return ax rate rading book rading – Value at risk expresses the potential loss that will, will, that loss potential the – Valueexpresses at risk – Relation of income taxes to profit before tax. before profit to taxes income of Relation – – Bank regulators’ term for assets held assets for term regulators’ Bank – – Mortgage loans given to borrow – is a ratio illustrating the de - - -

ADDRESSES AND AND ADDRESSES

CON 100020 Beijing Xiamen Branch [email protected] [email protected] [email protected] Am Stadtpark 9, Vienna 1030 Stadtpark Am Zhongmin Building 52, Il-Piazzetta, Tower Road, Tower Il-Piazzetta, 52, China Contact: Anthony C. Schembri C. Anthony Contact: Contact: Andreas Werner Andreas Contact: Contact: Roman Hager Contact: Alice Li Alice Contact: 21, Jianguomenwai Dajie [email protected] 361012 Xiamen, Provinz Fujian Malta Sliema SLM16, Malta SWIFT/BIC: SWIFT/BIC: RZBACNBJ www.ri.co.at Fax: +356-2132Fax: 0954 0000 +356-2260 Phone: Fax: +43-1-71 707-1377 +43-1-71 Fax: +43-1-71 707-3504 Phone: Fax: +86-592-2623 998 +86-592-2623 Fax: Phone: +86-592-2623 988 Road, North 72 No. Hubin 32/F 01-02, Unit 5926 +86-10-6532 Fax: 3388 +86-10-6532 Phone: Beijing International Club, Suite 200 Raiffeisen Raiffeisen Malta Bank plc Beijing Branch Bank-Holding AG Raiffeisen International International 324 TAC T S 16 Americas the of 1133, Avenue 10, King William Street [email protected] #38-01 North Tower North #38-01 Contact: Dieter Beintrexler Contact: Contact: Rainer Šilhavý Contact: Mark Bowles Mark Contact: [email protected] [email protected] [email protected] [email protected] Singapore Singapore 048583Singapore SWIFT/BIC: SWIFT/BIC: RZBAGB2L www.rzbfinance.com One Raffles Quay Raffles One U.S.A. United Kingdom www.london.rzb.at Singapore Branch Branch Singapore Fax: +1-212-944Fax: 2093 Phone: +1-212-845 4100 Fax: +65-6305 6001 +65-6305 Fax: Phone: 6000 +65-6305 Fax: +44-20-7933 8099 +44-20-7933 Fax: 8000 +44-20-7933 Phone: London EC4N 7TW RZB Finance LLC Finance RZB London Branch th floor, New York, N.Y. 10036 N.Y. York, New floor, 1504 Sofia Gogol N. 18/20 Ulica 71000 Sarajevo Central and Eastern Eastern and Central [email protected] [email protected] Albania Europe BankingNetwork Tirana Tirana Contact: Oliver Whittle Contact: Momtchil Andreev Andreev Momtchil Contact: Contact: Michael G. Mueller Contact: Olga Gelakhova [email protected] rbb-sarajevo.raiffeisen.at michael.mueller@ 31–A, V. Khoruzhey Str. 31–A, V. Khoruzhey SWIFT/BIC: SGSBALTX SWIFT/BIC: SGSBALTX SWIFT/BIC: RZBBBGSF SWIFT/BIC: RZBBBGSF SWIFT/BIC: RZBABA2S SWIFT/BIC: PJCBBY2X www.raiffeisen.al www.rbb.bg www.raiffeisenbank.ba www.priorbank.by Minsk, 220002 Bulgaria and Herzegovina Bosnia Belarus Fax: +355-4-275 599 +355-4-275 Fax: 669 +355-4-222 Phone: Curri” Bulevardi “Bajram European Trade Center Fax: Fax: +359-2-943 4528 Phone: +359-2-9198 5101 Fax: +387-33-213 851 Phone: +387-33-287 100 3 Ozme Danijela Hercegovina i Bosna 9191 +375-17-289 Fax: Phone: +375-17-289 9090 Raiffeisen Bank Sh.a. Sh.a. Bank Raiffeisen Raiffeisenbank (Bulgaria) EAD EAD (Bulgaria) Raiffeisenbank d.d. Bank Raiffeisen Priorbank, OAO

1054 Budapest 14021 Praha 4 11719 Praha 1 10000 Zagreb Akadémia utca 6 [email protected] eBanka, a.s. [email protected] Czech Republic Croatia Contact: Contact: Lubor Žalman Contact: Vesna Contact: Ciganek-Vukovic Contact: Shukri Mustafa Shukri Contact: Mustafa Contact: Frank Daniel Contact: Pavla Pasekova Pavla Contact: SWIFT/BIC: SWIFT/BIC: UBRTHUHB SWIFT/BIC: RZBCCZPP SWIFT/BIC: SWIFT/BIC: RBKOCS22 SWIFT/BIC: EBNKCZPP SWIFT/BIC: RZBHHR2X Olbrachtova 2006/9Olbrachtova [email protected] www.raiffeisen.hu www.rb.cz www.raiffeisen-kosovo.com www.ebanka.cz www.rba.hr Kosovo Hungary Fax: +36-1-484 4444 Phone: +36-1-484 4400 111 -221-142 +420 : x Fa Phone: +420-221-141 111 Fax: Fax: +381-38-2030 1130 +381-38-222 222 143Phone: Priština 10000 51 UÇK Rruga +420-222-115Fax: 500 Phone: +420-222-115 222 19 Příkopě Na Fax: +385-1-481 1624 Phone: +385-1-456 6466 59 Petrinjska [email protected] Raiffeisen Bank Kosovo J.S.C. KosovoBank J.S.C. Raiffeisen Raiffeisen Bank Zrt. Raiffeisenbank a.s. d.d. Austria Raiffeisenbank [email protected]

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11070 Novi Beograd [email protected] [email protected] [email protected] [email protected] Contact: Igor Vida Contact: 2000 Maribor Maribor 2000 Contact: Klemens Nowotny Rögl Oliver Contact: Contact: Steven C. van Groningen van C. Steven Contact: Piotr Czarnecki Contact: 81106 1 Bratislava Slovenia Slovakia Serbia SWIFT/BIC: SWIFT/BIC: TATRSKBX Slovenska ulica 17 SWIFT/BIC: SWIFT/BIC: RZBRROBU SWIFT/BIC: KREKSI22 SWIFT/BIC: RZBSRSBG SWIFT/BIC: RCBWPLPW www.tatrabanka.sk www.raiffeisen.ro www.raiffeisen.si www.raiffeisenbank.co.yu www.raiffeisen.pl Tatra banka, a.s. Tatra banka, a.s. Hodžovo námestie 3 Hodžovo námestie Fa x : +421-2- 5919 1110 1110 5919 +421-2- : x Fa Phone: +421-2-5919 1111 Romania Poland Fax: +40-21-230 0700 +40-21-230 Fax: Phone: +40-21-306 1000 15 Gaulle de Charles Piaţa 4779 +386-2-252 Fax: Phone: +386-2-229 3100 +381-11-220 Fax: 7080 Phone: +381-11-320 2100 Bulevar Zorana Djindjica 64a Fax: +48-22-585 2585 Phone: +48-22-585 2000 20 Piękna Ul. [email protected] [email protected] [email protected] Raiffeisen Raiffeisen Bank S.A. Raiffeisen Banka d.d. Raiffeisen banka a.d. Polska Bank S.A. Raiffeisen 011857 1 Bucureşti Warszawa 00-549

14, Pereulok Pretchistensky [email protected] 65 cel Stefan Mare blvd. Representative svyatoslav.bulanenkov@ China Contact: Contact: Victor Bodiu Contact: Contact: Miriam Korsic 20131 Milano Contact: Svyatoslav Contact: BulanenkovSvyatoslav Contact: Contact: Lars Bergström Contact: Contact: Edmond Wong [email protected] [email protected] raiffeisen.ru Sweden/ Moldova Chisinau (Raiffeisen Bank S.A.) [email protected] SE-103 96 Stockholm 96 SE-103 Chi www.rzb.it www.raiffeisen.ru Moscow Milan Via Andrea Via Costa Andrea 2 and Asia and Stockholm officesinAmerica Fax: +373-22-279 343 Fax: +373-22-279 331Phone: Italy Fax: +39-02-2804 0658 +39-02-2804 Fax: Phone: +39-02-2804 0646 Fax: +7-495-721Fax: 9907 +7-495-721Phone: 9905 1, 119034 Moskwa Building Russia Fax: +46-8-440 5089 +46-8-440 Fax: 5086Phone: +46-8-440 7810P.O. Box Norrlandsgatan 12 Fax: Fax: +85-2-2730 6028 Phone: +85-2-2730 2112 Hong Kong Centre, Lippo 89 Queensway Unit 2001, 20 2001, Unit Nordic Nordic Countries [email protected] Hong Kong ș inãu, MD-2001 th floor, Tower 1 Tower floor, 326

16, Ladan Str., 19917 Str., Tehran 16, Ladan 150 N. Martingale Road, Suite 840 Suite Road, Martingale 150 N. 10777, Westheimer, Suite 1100 Suite 10777, Westheimer, 188, Jingshan Road, Jida 146-1, Soosong-dong

[email protected] [email protected] [email protected] [email protected] [email protected] Tel: +86-756-323 3500 Tel: +86-756-323 519015 Zhuhai Contact: Gerd Wolf Contact: Contact: Charles T. Hiatt T. Charles Contact: Contact: Stephen A. Plauche A. Stephen Contact: Contact: Contact: Anupam Johri Contact: Contact: Susanne Zhang-Pongratz Contact: KunContact: II Chung Zhuhai 87, Maker Chambers VI Chambers 87, Maker South Korea South Group) Schaumburg, IL 60173 IL Schaumburg, LLC) Finance (RZB Chicago Chongro-ku, Chongro-ku, 110-755 Seoul U.S.A. Mumbai Vanak, North Shirazi Avenue Shirazi North Vanak, Seoul Tehran (UNICO Banking Banking Tehran (UNICO Iran India Fax: +98-21-803 6788 +98-21-803 Fax: 6767-2 +98-21-804 Phone: Fax: +1-847-995 8880 +1-847-995 Fax: Phone: +1-847-995 8884 Fax: +1-713-260 9602 +1-713-260 Fax: Phone: +1-713-260 9697 77042 TX Houston, Fax: +91-22-663 21982 +91-22-663 Fax: 01700 +91-22-663 Phone: 021 400 Mumbai Point, Nariman Room 2404, Yue Cai Building Fax: +86-756-323 3321 +86-756-323 Fax: Leema Building, 8 Fax: +822-398 5807 +822-398 Fax: Phone: +822-398 5840 [email protected] Houston (RZB Finance LLC) Finance (RZB Houston th floor 16 Americas the of 1133, Avenue

dieter.beintrexler@ Austria 6, Phung Khac Khoan Str. Khoan Khac Phung 6, Investment Banking Investment Vietnam Agoura Hills, CA 91301 CA Hills, Agoura Am Stadtpark 9, Vienna 1030 Stadtpark Am Tegetthoffstraße 1, 1015 Vienna Tegetthoffstraße Contact: Ta Thi Kim Thanh Kim Thi Ta Contact: Contact: Dieter Beintrexler 29556 Fountainwood St. Fountainwood 29556 Contact: JDee Contact: Christensen Contact: Contact: Eva Marchart Czurda Martin Contact: rzb-newyork.raiffeisen.at [email protected] [email protected] Österreich AG SWIFT/BIC: SWIFT/BIC: CENBATWW Global Markets Markets Global www.rcb.at www.rzb.at [email protected] Fax: +84-8-8221 318 +84-8-8221 Fax: 934 +84-8-8297 Phone: City Minh Chi Ho District1, Room G6 Fax: +1-212-593Fax: 9870 +1-212-593Phone: 7593 Fax: Fax: +1-818-706-7305 Phone: +1-818-706-7385 Fax: +43-1-513 4396 +43-1-513 Fax: 520-0 +43-1-51 Phone: Equity 707-3813 +43-1-71 Fax: 707-1120 +43-1-71 Phone: Los Angeles (RZB Finance LLC) Finance (RZB Angeles Los Raiffeisen Zentralbank Zentralbank Raiffeisen City Minh Chi Ho York New Raiffeisen Centrobank AG [email protected] th floor, New York, NY 10036 NY York, New floor, 10000 10000 Zagreb 1504 Sofia Gogol N. 18/20 Ulica dragomir.grgic@ offices in Bosnia and Herzegovina, in and Bosnia Herzegovina, offices Advisory Montenegro, Poland, Romania, Poland, Romania, Montenegro, or 287 121 287 or Subsidiaries and representative and representative Subsidiaries Tegetthoffstraße 1, 1015 Vienna Tegetthoffstraße Croatia Contact: Contact: Ivan Žižic Contact: Contact: Mihail Atanasov Contact: Dragomir Grgi Contact: Heinz Sernetz [email protected] raiffeisen-investment.com rbb-sarajevo.raiffeisen.at www.rba.hr www.ram.bg www.raiffeisenbank.ba Russia, Serbia, Turkey and Ukraine. Hungary, Republic, Czech Bulgaria, www.raiffeisen-investment.com Management EAD EAD Management Bulgaria Bosnia and Herzegovina Fax: Fax: +385-1-456 6490 Phone: +385-1-456 6466 59 Petrinjska Fax: +359-2-943 4528 Phone: +359-2-919 85 632 Fax: +387-33-213 851 100 +387-33-287 Phone: Sarajevo 71000 3, Ozme Danijela 5400-39 +43-1-710 Fax: 5400-0 +43-1-710 Phone: [email protected] h.sernetz@ Raiffeisenbank Austria d.d. d.d. Austria Raiffeisenbank Asset Raiffeisen Bosna i Hercegovina Raiffeisen Bank d.d. Raiffeisen Investment AG

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´ c 1054 Budapest 14021 Praha 4 [email protected] [email protected] Akadémia utca 6 Czech Republic Contact: Marzena Bielecka Bielecka Marzena Contact: Contact: Contact: Gábor Liener Bláha Martin Contact: Contact: Contact: Mihail Ion Contact: Contact: Dana Mirela Ionescu [email protected] [email protected] [email protected] www.raiffeisen.hu www.rb.cz 2006/9Olbrachtova www.raiffeisenfonduri.ro www.rciro.ro Sp.z o.o. Sp.z Romania Poland Hungary Fax: Fax: +48-22-585 2901 Phone: +48-22-585 2900 20 Piękna Ul. Fax: +36-1-484 4444 Phone: +36-1-484 4400 804 +420-221-143 Fax: Phone: +420-221-141 863 Fax: +40-21-312 0533 +40-21-312 Fax: Phone: +40-21-306 1711 IV 15, et. Gaulle de Charles Piaţa Fax: +40-21-230 0684 +40-21-230 Fax: 1233 +40-21-306 Phone: 15 Gaulle de Charles Piaţa Investment S.A. România Management Asset Raiffeisen Polska Investment Raiffeisen Raiffeisen Bank Zrt. Raiffeisenbank a.s. Raiffeisen Capital & Capital Raiffeisen 00-549 Warszawa 00-549 011857 1 Bucureşti 011857 1 Bucureşti

1050 Vienna 1010 Vienna Vienna 1010 1029 Vienna 1029 Selected [email protected] [email protected] Austria Austria Am Schwarzenbergplatz 3 [email protected] [email protected] [email protected] Czech Republic, Hungary, Kosovo, Hungary, Republic, Czech Claudio Cantele Contact: Contact: Contact: Monika Riedel Contact: Sonja Hochreiter Hochreiter Sonja Contact: which has further subsidiaries subsidiaries has which further member of member Group, the UNIQA [email protected] SWIFT/BIC: KTBKATWW SWIFT/BIC: KTBKATWW SWIFT/BIC: RBSKAT W1SWIFT/BIC: RBSKAT Ges.m.b.H. Ges.m.b.H. Ges.m.b.H.) Ges.m.b.H.) Herzegovina, Bulgaria, Croatia, Croatia, Bulgaria, Herzegovina, is Versicherung a Raiffeisen www.kathrein.at 25, 1010Wipplingerstraße Vienna www.rcm.at www.raiffeisen-versicherung.at Republic, Romania and Slovakia. in Czech Croatia, interests Equity www.wohnbausparen.at Wiedner Hauptstraße 94 companies (Raiffeisen Kapitalanlage Kapitalanlage (Raiffeisen Fax: +43-1-53 451-599 451-599 +43-1-53 Fax: Phone: +43-1-53 451-600 Fax: Fax: +43-1-546 46-2359 Phone: +43-1-546 46-1420 Fax: Fax: +43-1-71 170-76-1250 Phone: +43-1-71 170-1250 ax:+3--119-1134 119 -1-21 +43 : x Fa 119-0 +43-1-21 Phone: 21 Untere Donaustraße in Austria, Albania, Bosnia and Bosnia Albania, in Austria, Privatgeschäftsbank AG & Kathrein Co. Raiffeisen Bausparkasse Bausparkasse Raiffeisen Raiffeisen Versicherung AG Management Capital Raiffeisen specialist Raiffeisen Raiffeisen specialist

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1029 Vienna Vienna 1029 1020 Vienna 1020

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Am Stadtpark 9, Am Stadtpark 1030 Vienna Macedonia, Montenegro, Poland, Poland, Montenegro, Macedonia, Slovenia and Ukraine. Belarus, in Albania, Subsidiaries Switzerland. and Slovenia as Ukraine well as in Subsidiaries in Germany, Finland, Subsidiaries Croatia, Czech Republic, Hungary, Hungary, Republic, Czech Croatia, Contact: Dieter Scheidl Contact: Johannes Ziegelbecker Ziegelbecker Johannes Contact: Contact: Andrea Weber Contact: Bernhard Breunlich Bernhard Contact: Germany, Italy, Liechtenstein and Germany, Italy, Liechtenstein GmbH GmbH ÖVK Vorsorgekasse AG ÖPAG Pensionskassen ÖPAGAG Pensionskassen Slovakia, Russia, Serbia, Romania, Poland, Moldova, Kazakhstan, Bulgaria, and Bosnia Herzegovina, Slovakia, Serbia, Romania, Italy, Sweden and Switzerland. and Sweden Italy, www.oevk.co.at www.oepag.at www.raiffeisen-leasing.at [email protected] Fax: +43-1-71 707-762966 +43-1-71 Fax: Phone: +43-1-71 707-2966 Fax: +43-810-530 098 +43-810-530 Fax: Phone: +43-810-530 099 21 Untere Donaustraße Fax: Fax: +43-1-316 48-66100 Phone: +43-1-316 48-100 22 Ernst-Melchior-Gasse Fax: +43-1-71 601-98448 Phone: +43-1-71 601-8440 11–13,Hollandstraße 1020 Vienna Raiffeisen-Leasing International International Raiffeisen-Leasing Raiffeisen-Leasing GmbH GmbH Raiffeisen-Leasing

1020 Vienna 1020 and Ukraine. development GmbH Serbia, Slovakia, Romania, Russia Romania, Slovakia, Serbia, Croatia, in Bulgaria, Subsidiaries Contact: Markus Contact: Neurauter Czech Republic, Hungary, Poland, Poland, Hungary, Republic, Czech raiffeisenevolution.com markus.neurauter@ www.raiffeisenevolution.com Fax: +43-1-71 706-410 +43-1-71 Fax: Phone: +43-1-71 706-600 22 Ernst-Melchior-Gasse Data accurate on Raiffeisen evolution project project evolution Raiffeisen

1 March 2008. March 1

1010 Vienna Vienna 1010 Arab Emirates and the USA. the and Emirates Arab Am Heumarkt 10, 1030 Vienna 1030 10, Heumarkt Am [email protected] Subsidiaries in China, India, United in United China, India, Subsidiaries Contact: Siegfried Purrer Purrer Siegfried Contact: Contact: Karl Grünberger Karl Grünberger Contact: www.elsner.at www.notar.at Fax: + 43-1-79 736-9142+ 43-1-79 Fax: 736-0 + 43-1-79 Phone: Fax: +43-1-535 68 86-250 +43-1-535 Fax: Phone: +43-1-535 68 86-208 Landesgerichtstraße 20 [email protected] F.J. Elsner Trading GesmbH Notartreuhandbank Notartreuhandbank AG

329 [email protected] [email protected] [email protected] Contact: Contact: Christian Teufl Contact: Ursula Freiseisen-Pfneiszl www.raiffeiseninformatik.at www.lli.at Fax: +43-1-99 399-1011 399-1011 +43-1-99 Fax: Phone: +43-1-99 399-1010 7-9,Lilienbrunngasse 1020 Vienna Fax: Fax: +43-1-535 11 24-33 Phone: +43-1-535 11 24-0 9,Börsegasse 1010 Vienna Raiffeisen Informatik GmbH Beteiligungs AG Beteiligungs Invest Leipnik-Lundenburger

Published by: Notes: Raiffeisen Zentralbank Österreich AG In this report, “RZB” refers to the RZB Editor, coordination: Group and “Raiffeisen Zentralbank” is Andreas Ecker-Nakamura used wherever statements refer solely to Editorial team: Gregor Bitschnau, Ger Raiffeisen Zentralbank Österreich AG. traud Hannauer-Pichlmayr, Lars Hofer, Gerhard Karasek, Gebhard Kawalirek, Adding and subtracting rounded amounts Thomas Kollenz, Karin Lanzer, Ulf Leich- in tables may have led to minor discrep- senring, Michael Höllerer, Isabella Schie ancies. Statements of rates of change fer, Martin Schreiber, Wilfried Stöckl; (percentages) are based on actual figures with the help of virtually every depart- and not on the rounded figures provided ment at Raiffeisen Zentralbank. in tables.

Graphic concept, introduction and This is a translation of the original German design: gantnerundenzi.at report. Illustrations: Ander Pecher Photos of the Managing Board: You will find the online version Klaus Vyhnalek of the Annual Report at Typesetting: Rainer Kumpfhuber http://ar2007.rzb.at. Printing: AV+Astoria Druckzentrum GmbH If you have any questions about the Published and manufactured in: Annual Report, please contact Vienna Andreas Ecker-Nakamura ([email protected]; Phone: +43-1-71 707-1753; Fax: +43-1-71 707-3802).

Debt investors should contact Manuel Vaid ([email protected]; Phone: +43-1-71 707-1626).

Raiffeisen Zentralbank Österreich AG Am Stadtpark 9, A-1030 Vienna Phone +43-1/717 07-0 Fax +43-1/717 07-1715 www.rzb.at

330 “After revealing unfamiliar aspects of Eastern Euro- pean cuisine last year, RZB provides an introduction to the languages of the region. An annual report for bean counters and linguists alike.” Morning Mirror

“RZB once again proves that an annual report does not live on numbers alone. This time, it pokes some fun at the dead-serious dialogues of language guides and showcases its Eastern expertise with tongue in cheek.” The Financial Herald

“Language guides reflect the triteness of everyday life without the fear of embarrassment. Just as fear- lessly, RZB now satirizes this genre and pulls us into their linguistic realm.” Bankenspiegel