2009

Consolidated annual report Key Figures

Balance Sheet (in millions of Euros) 2009 2008 Change in per cent Assets 41,225 41,578 -0.8% Financial assets 14,543 14,367 +1.2% Receivables from customers 21,066 20,697 +1.8% Payables to customers 22,674 22,585 +0.4% Issued securities at cost 3,343 3,703 -9.7% Eligible own funds 2,826 2,180 +29.6%

Income Statement (in millions of Euros) 2009 2008 Change in per cent Net interest income 564.3 652.5 -13.5% Net fee and commission income 154.8 143.9 +7.6% Gains and losses on assets and liabilities adjusted for minority interest 1) 138.9 -406.3 – Administrative expenses -517.3 -617.4 +16.2% Provisions and impairment losses -236.7 -281.4 +15.9% Profit (loss) before tax adjusted for minority interest 1) 45.5 -614.6 –

Key figures 2009 2008 Tier I capital ratio 10.0% 6.6% Own funds ratio 13.6% 9.8% Cost:income ratio 2) 67.3% 174.4%

Resources, as of 31.12. 2009 2008

Workforce (in full-time equivalents) 4,954 5,351 Bank branches 153 166 Post office branches 1,230 1,298

Rating 2009 2008 Moody’s rating 3) Baa1 Baa1

1) Under IFRS, the item Gains and losses on financial assets and liabilities also includes the valuation of securities whose risk is borne by minority shareholders. These securities are subject to substantial fair value fluctuations. In order to improve the comparability of the results, the valuation results attributable to minority shareholders have been excluded in the figures presented on this page. Compared to the income statement presented in the Consolidated Financial Report according to IFRS, the item Gains and losses on financial assets and liabilities is EUR 186.6 million lower (2008: EUR 189.5 million higher). Accordingly, the item Profit (loss) before tax presented above is EUR 186.6 million lower (2008: EUR 189.5 million higher) than the Profit (loss) before tax presented in the Consolidated Financial Report according to IFRS.

2) Operating income: net interest income, income and expenses from fees and commissions, other income and expenses, gains and losses on financial assets and liabilities; Operating expenses: administrative expenses, scheduled amortisation and depreciation on intangible and tangible assets.

3) Rating refers to long-term senior unsecured debt; Moody’s outlook, November 2009: “stable”. ORGANISATIONAL CHART OF BAWAG P.S.K. 2010

Chairman of the Managing Board and CEO / Chief Financial Officer

Accounting Controlling Corporate Office Development & Communications International Corporates Business Development Participations Programme & Project Management Byron Haynes Strategy & Development

Deputy Chairman / Chief Risk Officer

Corporate & Institutional Risk Special Projects Credit Risk Retail & SME Operational Risk Workout Group Economics & Research Legal Market Risk Stephan Koren Personnel Risk Reporting

Remits of the Managing Board as a Body

Compliance Office Internal Audit Central Procurement Customer Service Center Payments Operation Chief Operating Officer Information Technology Business Continuity Planning Operations Commercial Operations Center Retail & Small Business Operations Center SANjay SHARMA Treasury Operations Real Estate & Facility Management

Asset Liability Management Retail & Funding Treasury Controlling Treasury Treasury Investments Treasury Markets

Carsten Samusch

Corporate Business Solutions Corporate Sales Institutional Customers & Public Finance Austrian Banking Direct Sales Internet & Telephone Service Center Marketing & Products Retail Sales Alternative Sales

Regina Prehofer BAWAG Branches Financial Distribution Post Center & Regional Branches Financial Distribution Post Standard Branches & Loans Mobile Sales Retail Services Small Business 2009

Consolidated annual report

CONTENTS

Preface by the Chairman of the Managing Board 4

Group Management Report 11

The Economy 11

Key Events during the Financial Year 14

Notes to the Annual Financial Statements 22

Non-Financial Performance Indicators 32

Events after the Balance Sheet Date 39

Outlook 40

Internal Control and Risk Management System 42

Consolidated Financial Report Prepared in Accordance with IFRS 45

Consolidated Accounts 48

Notes 53

Risk Report 119

Statement of All Legal Representatives 151

Boards and Officers 152

Auditor’s Opinion 154

Supervisory Board’s Report 156 Preface by the Chairman of the Managing Board

PREFACE BY THE CHAIRMAN OF THE MANAGING BOARD

BAWAG P.S.K. delivers strong positive pre-tax operating profit of EUR 46 million1, despite the challenging economic environment BAWAG P.S.K. recorded a significant improvement in overall operating performance with a pre-tax profit of EUR 46 million in 2009 ­compared to a loss of EUR 615 million for 2008.

This improved operating performance was despite the very challenging economic environment with the full-year impact of the global financial crisis resulting in low interest rates, weak asset demand from custom- ers, strong competition for customer deposits and rising risk costs.

Throughout the year the Bank continued to focus successfully on executing its key priorities including:

4 Investing and developing our core Austrian retail and commercial customer franchises to build further sustainable profitability over the medium term; 4 Continuing to build the liquidity position of the Bank and redeploy to support households, small and medium enterprises and commercial customers and companies; 4 Strengthening the capital position of the Bank; 4 Improving productivity and stringent cost optimisation with a focus on non-personnel costs; and 4 Pro-active risk management in response to the challenging market environment.

Successful development and growth of our core Austrian retail and commercial franchises BAWAG P.S.K. launched several initiatives in 2009 in support of our Austrian retail and commercial customer franchises. In particular through our “Unternehmen Österreich” initiative the Bank confirmed its continued commitment in supporting the Austrian economy, providing tailor-made savings and investment products with a clear Austrian focus. In addition, BAWAG P.S.K. also started an initiative offering attractive financing to municipalities using the slogan “BAWAG P.S.K. Kommunalmilliarde” (“BAWAG P.S.K. Billion for Municipali- ties”) which was taken up with huge interest by the public sector market. In this way, the Bank intends to increase support for investments of Austrian federal states, cities and municipalities in infrastructure projects.

1) Adjusted for minority interests.

4 Preface by the Chairman of the Managing Board

Retail customer franchises The Bank’s retail businesses through its three distribution channels – BAWAG, PSK BANK and easybank – ­focused in 2009 on providing products and advisory services meeting the changing needs of our customers in response to the global financial crisis. In particular: 4 The Bank was successful in renewing savings of EUR 5.1 billion following the maturity of capital savings books (Kapitalsparbücher) by providing customers with attractive value for money product alternatives; 4 Sales of securities to private customers increased significantly by EUR 550 million to EUR 1,465 million, a 60 per cent increase; 4 BAWAG P.S.K. Wohnbaubank sold bonds in the amount of EUR 348 million and is therefore the market leader regarding new issues in 2009, with a market share of 28 per cent; 4 BAWAG P.S.K.’s direct bank easybank increased its balance sheet total by 84 per cent to EUR 1.5 billion, and the number of accounts increased by 45,000 to 290,000; 4 BAWAG P.S.K. Invest increased its funds under management by EUR 517 million, a 17 per cent increase; and 4 The Bank’s alternative and mobile distribution channels also developed strongly through the introduction of the “Vorteilswelt” (“World of benefits”) comprising customers with a “Betriebsservice card” or a “VÖS card” (Savings Clubs Association card).

Commercial customer franchises BAWAG P.S.K. commercial businesses developed well in 2009 with our dedicated industry specialists and regionally focused account managers providing our customers with specialised products supporting their banking needs. In particular: 4 New commercial loans amounted to EUR 3.9 billion, a 10 per cent increase compared to 2008 and higher than the overall market despite the weak demand; 4 Lead manager for six new corporate bond issuances in Austria and participating as a member of the ­syndicate in 60 per cent of all new issuances; 4 One of the market leaders in providing financing to the public sector with new volumes in 2009 of more than EUR 1 billion, an increase of 100 per cent compared to 2008; 4 Continued support of the social housing sector with an 11 per cent market share; and 4 BAWAG P.S.K leasing grew its market share in Austria by 2.3 percentage points to over 7 per cent with new business volumes in excess of EUR 400 million.

5 Preface by the Chairman of the Managing Board

BAWAG P.S.K. continued investment in our employees and the community The Bank continues to focus on investing in our people, systems and processes to deliver outstanding service to our customers and other stakeholders, which has resulted in improvement in operational performance and continued financial strength.

Several important successful initiatives were started in 2009 in support of the development of our employees, such as the EMERGE programme for creating and supporting new talent in the organisation, as well as the Women’s Initiative and the Diversity programme. Another key focus was the Leadership Development Initia- tive, where a revised and enhanced “Management by Objectives” process was introduced across the Bank, reflecting the changes introduced to modernise the Bank over the last two years.

Through these programmes BAWAG P.S.K. succeeded in taking important steps on the way to becoming one of Austria’s employers of choice.

BAWAG P.S.K. is also undertaking significant efforts in order to live up to its social responsibility. In 2009, the Bank became a member of the UN Global Compact. Projects and initiatives included the introduction of a current account, the “New Chance Account”, which is a basic account for all customers regardless of their credit standing. This account supports people who otherwise would have no access to the most important banking services. In addition, the Bank has evaluated the compliance with human rights in all areas of its business through which further initiatives were triggered.

BAWAG P.S.K.’s sponsoring activities focus on the areas of the arts, education and social issues with the target to support innovation and sustainability. In 2009, BAWAG P.S.K. was awarded the “maecenas” art sponsoring prize for the best art sponsoring project by a large corporation.

Strong and improved liquidity position The Bank’s overall liquidity position has improved by 39 per cent to EUR 8.6 billion in December 2009 compared to year-end 2008 of EUR 6.2 billion. The Bank has continued to focus on strong pro-active man- agement of its cash and unutilised collateral resources, helping steer the Bank through the global financial crisis. This strong liquidity position allows the Bank to continue to support our Austrian retail and commercial customers as well as the Austrian banking system as a whole in line with the Bank’s overall strategy.

6 Preface by the Chairman of the Managing Board

Capital position strengthened to meet the new regulatory requirements During the year the capital position of the Bank has been strengthened against the background of the new regulatory requirements for financial institutions in response to the global financial crisis.

In the second half of the year, BAWAG P.S.K. successfully raised EUR 80 million Tier II capital and increased Tier I capital by EUR 550 million participation capital issued to the Republic of Austria. A further strengthen- ing of the capital base was achieved by a EUR 205 million contribution received from the shareholders. In addition, the Republic of Austria provided an asset guarantee of EUR 400 million covering certain assets on the Bank’s balance sheet. This guarantee expires on 30 June 2014.

The agreements with the Republic of Austria on the subscription of EUR 550 million participation capital and the issuance of an asset guarantee in the amount of EUR 400 million were concluded following EU Commis- sion preliminary approval. Final EU Commission approval is expected before 30 June 2010.

Year-end 2009 the capital ratios of the Bank have significantly improved with a Group Tier I ratio of 10.0 per cent (year-end 2008: 6.6 per cent) and an own funds ratio of 13.6 per cent (year-end 2008: 9.8 per cent).

Pro-active risk management helps mitigate loan loss provisions and impairments Throughout 2009 the Bank further strengthened and invested in its risk management capabilities and ­infrastructure including enhanced risk-based pricing tools, new behavioural scorecards for mortgages, one- stop credit and overdrafts and new early and late stage collections processes and capabilities. This improved risk capability has helped to reduce the overall risk costs of the Bank in 2009 despite the worsening global economic environment. In particular, the Bank has been pro-active in reducing the embedded risks in the structured credit portfolio.

De-risking of the legacy structured credit portfolio In the period from 2003 to 2005, BAWAG P.S.K. built a sizeable investment in products collectively known as “structured credit”. During 2009, the Bank executed significant actions in further de-risking the structured credit portfolio. These actions included the sale of certain securities and the restructuring of assets as well as adjusting the hedging strategy. Additionally, those investments which matured in 2009, were fully redeemed at par.

These actions led to a significant reduction in the book value of EUR 590 million and underlying risk of the structured credit portfolio. As of 31 December 2009 the book value of the structured credit portfolio was EUR 1.16 billion compared to a book value of EUR 1.75 billion as of 31 December 2008. The total cost of the risk mitigation actions charged to the profit and loss account for 2009 amounted to EUR 128 million (2008: EUR 145 million).

7 Preface by the Chairman of the Managing Board

The Bank will continue to mitigate risk in this legacy structured credit portfolio where possible. However, the Bank does not expect significant defaults in the structured credit portfolio going forward, although BAWAG P.S.K. might continue to be impacted by valuation changes.

2009 financial results satisfactory in light of the global economic crisis – significantly improved compared to 2008 BAWAG P.S.K. recorded an operating profit before tax and minority interests of EUR 46 million for 2009 compared to a loss before tax and minority interests of EUR –615 million for 2008.

The key drivers for this significant improvement in the 2009 results were:

Operating income doubled BAWAG P.S.K. recorded operating income of EUR 888 million for 2009 compared to EUR 404 million for 2008. Net interest income decreased by EUR 88 million to EUR 564 million as the result of significant saving deposit margin compression due to the strong competition for customer deposits. This decrease was more than compensated by net commission income of EUR 155 million, an 8 per cent increase compared to 2008 driven by increased sales of security products and a significantly improved result from financial assets of EUR 139 million.

Operating costs decreased by 15 per cent through improved productivity and stringent cost control Operating costs for 2009 were EUR 598 million, a EUR 107 million decrease compared to 2008 operating costs of EUR 705 million. This cost reduction has been principally achieved by targeting non-personnel costs through process optimisation and improved productivity.

Loan loss provisions and impairments lower than 2008 despite the worsening economic environment Total loan loss provisions and impairments for 2009 were EUR 237 million compared to EUR 281 million for 2008, a 16 per cent reduction. Loan loss provisions of EUR 175 million were in line with the 2008 figure of EUR 166 million, despite the worsening of the global economic environment confirming the overall relatively conservative risk profile of the loan portfolio. Impairments for 2009 were EUR 62 million compared to EUR 115 million for 2008. Impairments for the structured credit portfolio and participations decreased in 2009 to EUR 62 million from EUR 102 million in 2008, following successful actions in the de-risking of this portfolio.

Balance sheet totals remain unchanged in spite of structural changes BAWAG P.S.K.’s consolidated assets totalled EUR 41.2 billion as at 31 December 2009, in line with year-end 2008 of EUR 41.6 billion. Changes in the structure of the assets and liabilities were realised as the Bank started to deploy its liquidity in support of our strategy. Loans to customers increased by 2 per cent despite weak market demand to EUR 21.1 billion, while low yielding assets to credit institutions decreased by 16 per cent to EUR 3.8 billion.

8 Preface by the Chairman of the Managing Board

On the liability side, customer deposits of EUR 22.7 billion were slightly higher than 2008 even though there was strong competition for customer deposits from other financial institutions. The equity position of the Bank significantly increased by 69 per cent, reflecting the successful raising of capital and strengthening the financial position so that the Bank can continue executing its strategy in supporting the Austrian retail and commercial businesses.

Changes in the Managing Board and Supervisory Board The most significant change in the Managing Board occurred in August 2009 when the Chairman at that time, David Roberts, had to announce his resignation due to health problems. On behalf of the Bank, I would like to once more thank him for his efforts and his commitment. David Roberts succeeded in helping build the foundation for a strong bank that can weather the difficult economic conditions. I wish him all the best for his future and his health.

In December 2009 Joseph Laughlin announced his retirement from the Managing Board effective at the end of the year. I would like to thank Joseph Laughlin for his strong commitment and dedication to BAWAG P.S.K. in helping to modernise the Bank. Sanjay Sharma, who has been Managing Director of Operations at BAWAG P.S.K. since August 2008, was appointed Chief Operating Officer on 1 January 2010.

In January 2010, Carsten Samusch announced that he will not ask for a renewal of his management contract which expires in May 2010. He has been responsible for Treasury since 2007 and although there will be more opportunities to thank Carsten Samusch, I would also like to express my gratitude and thanks for his efforts and achievements in Treasury, particularly in helping steer the Bank successfully through the global financial crisis.

With regard to the Supervisory Board, three members changed in 2009: In October 2009, Wulf von Schim- melmann resigned from the Supervisory Board of the Bank as well as from the position as Chairman due to time restrictions following obligations in other supervisory boards. I would like to thank Wulf von Schimmel- mann for sharing his wisdom and experience with the Managing Board in helping steer the Bank through these difficult economic times. Also during the year Mike Rossi retired and Daniel Wolf resigned from the Supervisory Board due to personal reasons. I would also like to thank them for their contributions and shared experiences in discussions at the Supervisory Board.

Cees Maas, former chief risk officer and chief financial officer as well as vice president of ING Group NV joined the Supervisory Board in July 2009 and was elected as Chairman in October. In December 2009, Scott Parker was appointed as a Supervisory Board member of BAWAG P.S.K. I am looking forward to working with the new Supervisory Board members, both of whom bring a wealth of experience and extensive knowledge on international banking.

9 Preface by the Chairman of the Managing Board

The year 2009 was challenging but successful for BAWAG P.S.K., as the Bank steered its way through the global financial crisis while staying focused on executing and realising its key priorities. Going into 2010, BAWAG P.S.K. is well positioned to meet the ongoing economic challenges in the market place with its strong capital and liquidity position. The Bank will continue to focus on servicing its customers, providing value products and being responsive to meet their needs in these difficult economic times, while building sustain- able ­profitability over the medium term.

On behalf of the entire Managing Board, I would like to thank all employees of BAWAG P.S.K. for their ­outstanding commitment and hard work in the past year. It has not been an easy year, but we were working together towards our common goal: To make BAWAG P.S.K. a strong, Austrian bank, a good place to work and a great place for our customers to do banking business.

Byron Haynes m.p. Chairman of the Managing Board and CEO Vienna, March 2010

10 Group Management Report

GROUP MANAGEMENT REPORT OF BAWAG P.S.K.

The Economy

Economic Conditions in 2009

The turning point in the financial and real estate crisis came in 2009. The extensive and concerted action of governments and central banks around the world took effect, demand from the Asian economies helped to reinvigorate global trade, and businesses and consumers slowly began regaining some of the confidence lost due to the crisis. The economies of the industrialised countries began growing again starting in early summer.

In the Eurozone, the recession ended with a moderate contraction of 0.1 per cent in the second quarter of 2009, and the 0.4 per cent quarterly GDP increase in the following three-month period marked the start of an upswing. The recovery process was triggered primarily by awakening global demand and the reversal of the inventory cycle. However, not all countries in the Eurozone proceeded at the same pace. While the strong export orientation of Germany’s economy enabled it to begin growing relatively rapidly again after an especially deep recession, Spain’s economy continued to shrink into the autumn because of the particularly detrimental effects of the real estate crisis. All leading indicators for the Eurozone bottomed out in the spring of 2009 (mostly at record lows), and then began to climb steadily.

Austria’s economic output also began increasing slightly in the second half of 2009, not only thanks to a considerable increase in export demand, but also because of the reversal in the inventory cycle after the nearly complete consumption of existing stocks in the first half of the year. This was a windfall for the manu- facturing industry, where new orders and output rose steadily starting in the middle of the year. The recovery has not yet taken strong hold in the construction industry, but the slide in output was also less drastic than in goods manufacturing. Private consumption grew by 0.3 per cent in the third quarter of 2009, lagging behind overall demand. During the recession, however, consumer spending – contrary to the Eurozone – played a major stabilising role by increasing slowly but steadily and helping to limit the economy’s downside potential. Investment activity did not improve yet in the third quarter. As capacity utilisation levels have fallen seriously over the course of the crisis, there is no immediate need for new investments.

The recovery of the domestic economy continued in the final quarter of the year. Over the year as a whole, however, the economy contracted compared to 2008. Real GDP decreased by roughly 3.5 per cent over the reporting period.

11 Group Management Report

Despite the fact that the situation on the labour market worsened markedly during the recession, the ­economic stimulus packages, part-time working programmes and employment measures for young people helped to slow the decrease in the number of jobs. A general stabilisation in the conditions even became apparent starting in the late summer. However, the seasonally-adjusted number of employed persons (not including the self-employed) at the end of the year was over 50,000 lower than the record peak in the ­summer of 2008. The seasonally-adjusted unemployment rate (as a percentage of the workforce excluding the self-employed) was up by 1.5 per cent to 7.3 per cent at the end of the year.

Interest Rates

The development of interest rates over the reporting period was driven largely by the intense efforts on the part of the central banks to stabilise the financial markets with massive injections of liquidity. As a result, money market rates took a steep dive in the first half of 2009. The decline continued over the year, but slowed starting in the autumn. The three-month Euribor fell by over 200 basis points in a single year, and the money market reference rate has even been below the ECB’s key rate of 1 per cent since the middle of the year. The US Federal Reserve left its target range for the key interest rate at a record low of 0 per cent to 0.25 per cent for the entire year.

Euro Area: Main Refinancing Rate and 3-Month Euribor

6.00

5.00

4.00

3.00

2.00

1.00

0.0 Jul 07 Jul 08 Jul 09 Jan 07 Apr 07 Jan 08 Apr 08 Jan 09 Apr 09 Jan 10 Oct 07 Oct 08 Oct 09

ECB Main Refinancing Rate 3-Month-Euribor

12 Group Management Report

The capital market rates developed much less spectacularly. At the end of 2009, the benchmark for ten-year government bonds was at 3.4 per cent in the Eurozone, roughly 0.5 per cent higher than at the beginning of the year. Ten-year US Treasuries recovered in the first half of the year after a marked slide in the winter months of 2008/09 and stayed more or less flat from the summer onwards. They traded at a yield of 3.8 per cent at the end of the year. After the money market rates had lost so much ground over the course of the year, the yield curve became noticeably steeper in the Eurozone and the USA.

Exchange Rates

The Euro made considerable gains in 2009. The nominal effective exchange rate, which measures changes in the value of a currency compared to its main trading partners, increased by 2.6 per cent over the reporting period. The common currency made particularly hefty gains against the US dollar (+9 per cent) and the Japanese yen (+7 per cent). However, the relationship between the Euro and the dollar reversed at the end of the year. Sentiment on the FX market turned in favour of the US dollar, and the greenback has made steady gains since. Over the course of the reporting period, the British pound regained some of the ground it lost in the final quarter of 2008. In contrast, the Swiss franc was under heavy downside pressure for the whole year, causing a number of interventions by the Swiss National Bank. After losing substantially in value in 2008 and the spring of 2009, the currencies of the new EU member states were able to make in part considerable gains.

Equity Markets

All major securities entered a rally starting in the spring of 2009. However, they were only able to make up for part of the massive losses incurred in 2008. The indexes had simply fallen too quickly and too far in 2008. The Euro Stoxx 50 Index closed 2009 with a plus of 21 per cent year-on-year, and the Dow Jones was 18 per cent higher (both were down by 35 per cent in 2008). The ATX also gained considerable ground (+40 per cent), and the companies on the US NASDAQ 100 even doubled their market capitalisation in 2009. The exchanges in the new EU member states saw very different developments. The PX 50 (Prague) regained one third of its value, while the BUX (Budapest) was even stronger at a gain of over 70 per cent. The weak per- formers in the region included the Slovakian exchange, which fell back to its level from over five years ago.

13 Group Management Report

Key Events during the Financial Year

Changes in the Managing Board

David Roberts, Chairman of the Managing Board, announced at the end of August 2009 that he would be resigning from the Bank for health reasons on 15 September 2009. Byron Haynes, who has been a member of the Managing Board since August 2008, was named as his successor. In addition to his function as the Chief Executive Officer, Byron Haynes currently retains his responsibilities as the Bank’s Chief Financial Officer. Stephan Koren continues to be Deputy Chairman of the Board.

Changes in the Supervisory Board

Mike Rossi stepped down from the Supervisory Board in July 2009. Cees Maas, formerly chief financial officer, chief risk officer and deputy managing board chairman of ING Group NV, was appointed to the Super- visory Board of BAWAG P.S.K. on 27 July 2009.

After Supervisory Board Chairman Wulf von Schimmelmann resigned on 15 October 2009, Cees Maas was elected as Chairman in his place. Von Schimmelmann vacated his post because of obligations in connection with his appointment as chairman of the supervisory board of Deutsche Post AG in January 2009. After Deputy Chairman Daniel Wolf announced his retirement from the Supervisory Board in December, Scott Parker was appointed to the Board effective 15 December 2009. Pieter Korteweg was appointed as the new Deputy Chairman of the Supervisory Board.

Capital and Guarantee Contributions by the Republic of Austria and Shareholders

BAWAG P.S.K., its shareholders and the Republic of Austria agreed to a capital increase and a guarantee from the Republic of Austria for certain assets in 2009. The agreement is in line with the objectives of the Finan- cial Market Stability Act and stipulates the subscription of participation capital issued by BAWAG P.S.K. in the amount of EUR 550 million by the Republic of Austria. The agreement also provides a guarantee from the Republic of Austria for certain assets in a maximum amount of EUR 400 million valid until 30 June 2014. Furthermore, the Bank’s shareholders granted a capital contribution of EUR 205 million in August 2009.

14 Group Management Report

Pre-approval for the assistance package was granted by the EU Commission on 22 December 2009. After this, the contracts were signed by the Bank, its shareholders and the Republic of Austria. Under the agree- ment, BAWAG P.S.K. has undertaken to provide loans amounting to a total of EUR 1.7 billion to small and medium-sized businesses and households in Austria in addition to its currently existing loans over the next three years.

The approval from the EU Commission is limited to six months. In this time, the Commission will review and assess the documents and information submitted by and still to be submitted by the Republic of Austria before coming to a final decision. Any potential compensatory measures deemed necessary by the EU Com- mission will be determined on final approval.

For 2009, the Austrian government is entitled to a guarantee fee and a semi-annual dividend on the participa- tion capital in the amount of 9.3 per cent p.a. The dividend will be disbursed once approval is granted by the Annual General Meeting deciding on the 2009 financial year. The guarantee fee was paid in early 2010.

Basel II – Application for an Internal Rating Based Approach

BAWAG P.S.K. filed an application with the Austrian Financial Market Authority in December 2009 to gain approval for the use of an internal rating based (IRB) approach for calculating its own funds requirements stemming from credit risk instead of the previously used Basel II standardised approach.

Moody’s Rating for BAWAG P.S.K.

The rating agency Moody’s completed a review of its rating for BAWAG P.S.K. in October 2009. Despite the challenging business conditions, the agency confirmed its rating for BAWAG P.S.K. on 2 November 2009 and assigned the Bank a stable outlook. In light of the numerous downgrades announced for other financial institutions, this result is satisfying. Long-term bonds from BAWAG P.S.K. are rated at Baa1, short-term liabilities at P2, and the Bank’s financial strength rating is D. In February 2010, Moody’s completed its review of the outstanding hybrid capital notes due to changes in its rating methodology. The rating for these instru- ments was adjusted to B2.

In its rating explanation, Moody’s specifically recognised the extensive improvements already made by the Bank and noted that BAWAG P.S.K. is on the right path; it also included special praise for the improvements made in the area of risk. However, the Bank’s profitability also has to be improved over the medium term in order to achieve rating improvements, the agency said.

15 Group Management Report

In its justification for the stable outlook, Moody’s noted that the Bank has successfully stabilised its position under its new management. The support being provided by the new shareholder group is also having positive effects, said Moody’s.

Key Sales Initiatives in 2009

Opening of New Flagship Branches Vienna’s first “flagship branch”, the customer centre at the corner of Wipplingerstraße and Tuchlauben in the first district, was opened on 15 December 2009. This centre was created by combining the two branches at Seitzergasse and Fleischmarkt, and offers an entirely new level of modern banking service in a functional and appealing atmosphere. The focus is on providing individual, tailored advice and service.

A branch in Salzburg’s Lehen district was renovated and reopened. At the end of the year, BAWAG’s branch network consisted of 71 outlets in Vienna and 82 in the other provinces. PSK BANK offers its services at 1,230 post offices throughout Austria, including new Postpartner offices.

Kommunalmilliarde (One Billion for Municipalities) In June 2009, an initiative was launched under the motto “One Billion for Municipalities from BAWAG P.S.K.” to assist provincial and municipal governments in Austria in realising targeted infrastructure investments despite the difficult economic conditions. To this end, BAWAG P.S.K. provided financing in a total amount of EUR 1 billion under very attractive terms to stimulate regional growth and to promote the protection and creation of jobs.

The provision of this billion Euros in targeted financing is the logical continuation of BAWAG P.S.K.’s long tradition and close ties with the public sector.

“One Billion for Municipalities” generated a great deal of positive response among public sector entities across the country.

Unternehmen Österreich (“Enterprise Austria”) BAWAG P.S.K. presented its new autumn campaign, “Unternehmen Österreich” (Enterprise Austria), in September 2009. This is a long-term, sustainable initiative that is designed to benefit all Austrians and to strengthen the Austrian economy.

It includes different, custom-tailored services and solutions for private, commercial and municipal customers and offers a range of attractive savings and investment products related to Austria.

16 INVESTMENTSERVICE Group Management Report

Wir investieren in Österreich. In unsere Wirtschaft. In unsere Gemeinden. In unsere Kinder. Und Sie profitieren davon. Das ist das Unternehmen Österreich der BAWAG PSK.

www.unternehmenösterreich.at 17

UnternehmenÖsterreich_230x297.indd 1 04.03.10 17:11 Group Management Report

Security Barometer BAWAG P.S.K. introduced the Security Barometer in October 2009 as a means of labelling all savings, investment and life insurance products in a way that clearly depicts their relationship between security and earnings.

easybank BAWAG P.S.K. Group’s direct bank, easybank, continued on its very successful course, which is based on offering simple and transparent products, in the 2009 financial year. easybank’s free salary account was named the winner of the Chamber of Labour’s comparison test for the fourth time in a row.

Legal Aspects

SPhinX SPhinX companies filed a lawsuit with the Supreme Court of the State of New York in March 2008 against over fifty parties, one of them being BAWAG P.S.K. No amount has been specified for the alleged damages.

Various motions for the dismissal of this suit are still pending. In addition, documents are being collected and reviewed to gather evidence for the case, and witnesses have already been questioned in hearings lasting several days. BAWAG P.S.K. has filed claims with the liquidators of SPhinX for investments in SPhinX funds that have not been redeemed in the amount of roughly USD 29.4 million.

There were no significant developments in this case during the 2009 financial year, and the Bank’s claims have still not been recognised. A draft plan for the distribution of the liquidation proceeds has been drawn up, but no final decision on the plan has yet been made.

Implementation of the Payment Services Directive The Payment Services Act (ZaDiG) came into force on 1 November 2009. The necessary changes in the Bank’s General Terms and Conditions and in its other forms and terms were made in good time, and the necessary approvals were also obtained from the Bank’s customers. The technical changes needed to meet the new regulations (e.g. with regard to the value and posting dates when handling payment transfers) were also made.

18 Group Management Report Wann, wenn nicht jetzt?

Schluss mit den hohen Kontokosten Ihrer alten Bank! Sparen Sie jetzt bis zu € 100,– jährlich mit easy gratis, dem Gehalts- und Pensionskonto der easybank. Wann, wenn nicht jetzt zu den gratis-Vorteilen wechseln:

• GRATIS Kontoführung • GRATIS Bankomatkarte • GRATIS Kreditkarte Gleich Infopaket anfordern unter www.easybank.at oder unter 05 70 05-507. *Quelle: wien.arbeiterkammer.at/konsument, April 2009. Getestet wurden 41 Produkte von 20 Banken in Wien. Das Gratis-Gehaltskonto ist an keine weiteren Bedingungen wie Mindestumsatz oder Nutzung weiterer Bankprodukte geknüpft. 19

easybank_GGG_230x297.indd 1 02.03.10 15:25 Group Management Report

Changes in the Group’s Holdings

Sparda Bank Vienna SPARDA Bank Aktiengesellschaft was incorporated into BAWAG P.S.K. by way of an upstream merger with retroactive effect as of 30 June 2008. This merger was entered into the commercial register on 23 January 2009, bringing the merger process to a legal conclusion. The Sparda Bank brand is being maintained.

Merger of ÖVKB’s Retail Business In May 2009, BAWAG P.S.K. decided to merge the retail business operations of Österreichische Verkehrs­ kreditbank (ÖVKB) into BAWAG P.S.K. This merger became effective on 1 October 2009.

This transfer of business activities was decided to leverage synergies, especially with BAWAG P.S.K.’s own retail banking franchise, and to gain access to ÖVKB’s very attractive rail station outlets for all of the Group’s retail customers.

Other Material Changes in the Group’s Holdings The liquidation of the Irish subsidiary BAWAG International Finance Ltd. was initiated in the first half of 2009. The liquidation of BAWAG Capital Advisors was begun in November 2009. Liquidation was also initi- ated for a number of companies in Jersey and one in Luxembourg.

In the second half of 2009, the Bank sold its shares in Athena Erste Beteiligungen AG and in IPO Beteili- gungs-Management AG, and increased its stake in Athena Zweite Beteiligungen AG. A group of properties was also sold by way of transfer of the properties into project companies and the subsequent sale of these companies.

20 PSK_Maerz_09_230x297 04.03.10 12:13 Seite 1

Group Management Report

Jetzt bis zu * Trari, Trara, € 240,- sparen! der Superschnell-Kredit ist da! Holen Sie sich jetzt im März den Superschnell-Kredit und schon ersparen Sie sich die komplette Rechtsgebühr*. Und beim schnellsten Kredit bekommen Sie Ihr Geld in Rekordzeit. Nähere Informationen bei Ihrem PSK BANK Berater in Ihrer Postfiliale.

*) Rückvergütung der Rechtsgebühr in Höhe von 0,8% der Kreditsumme (z.B. E 240,- bei E 30.000,-) nur im Aktionszeitraum März 2009. Der Betrag wird bei Kreditgewährung dem Kreditkonto angelastet und von der BAWAG P.S.K. an das zuständige Finanzamt weitergeleitet.

21 www.pskbank.at Group Management Report

Notes to the Annual Financial Statements

The Group’s reports were prepared in accordance with the International Financial Reporting Standards (IFRS). All reports were made using the Guidelines on Financial Reporting (FINREP) framework required for reporting to Oesterreichische Nationalbank (the Austrian National Bank, OeNB), which conforms to the framework recommended by the Committee of European Banking Supervisors (CEBS) for uniform financial reporting by internationally active banks. This framework clearly depicts the measurement categories stipulated in IAS 39.

The Group consists of 57 entities in Austria and abroad (2008: 48). The following material changes occurred during the reporting period:

As part of the reorganisation of the structured credit portfolio, four new companies were established, which are held indirectly (via four holding companies) by the Group parent company. As these eight companies are fully consolidated and no new investments were made, these transactions resulted in no changes for the Group.

Aside from BAWAG P.S.K., the other credit institutions in the Group are easybank, Österreichische Verkehrs­ kreditbank, BAWAG P.S.K. Wohnbaubank, BAWAG P.S.K. Invest, BAWAG Banka d.d. in Slovenia, and BAWAG Malta Bank. Material non-credit institutions are the leasing group, the BAWAG P.S.K. real estate sub-group, the shoe retailer Stiefelkönig and the newly founded entities mentioned above. BAWAG P.S.K. Versicherung is now accounted for using the equity method after a majority stake in the company was sold in 2007.

22 Group Management Report

The Bank’s consolidated assets totalled EUR 41,225 million as of 31 December 2009, and remained at virtually the same level as at the end of the prior financial year.

Assets

in millions of Euros 2009 2008 Change Cash reserves 615 717 -102 -14.2% Financial assets 14,543 14,367 +176 +1.2% Fair value through profit or loss 2,980 4,048 -1,068 -26.4% Available for sale 3,250 2,492 +758 +30.4% Held to maturity 6,560 5,366 +1,194 +22.3% Held for trading 1,753 2,461 -708 -28.8% Loans and receivables 24,879 25,246 -367 -1.5% Customers 21,066 20,697 +369 +1.8% Credit institutions 3,813 4,549 -736 -16.2% Hedging derivatives 33 27 +6 +22.2% Tangible non-current assets 287 379 -92 -24.3% Intangible non-current assets 266 295 -29 -9.8% Other assets 602 547 +55 +10.1% Total assets 41,225 41,578 -353 -0.8%

The reduction in the cash reserve by EUR 102 million (–14.2 per cent) to EUR 615 million is due to lower OeNB minimum reserve requirements on the reporting date.

Financial assets measured at fair value through profit or loss amounted to EUR 2,980 million on 31 Decem- ber 2009, which is equivalent to a reduction of EUR 1,068 million or 26.4 per cent compared to the end of 2008. In addition to scheduled redemptions and the planned disposal of assets in the structured credit portfolio, this decline was primarily due to a shift to a longer-term investment strategy. Only a negligible EUR 63 million of these assets are measured using Level 3 methodologies.

As a result of this longer-term investment strategy, the available-for-sale financial assets totalled EUR 3,250 million on 31 December 2009, up from EUR 2,492 million at the end of the prior year. In addition to equity holdings totalling EUR 281 million, this item consists primarily of investments in liquid bank bonds.

Investments in the category held to maturity rose by EUR 1,194 million or 22.3 per cent to EUR 6,560 million due to the change of our investment strategy. The Bank primarily invested in Austrian corporate bonds and liquid international bank and corporate bonds.

23 Group Management Report

Held for trading covers not only the positions in the trading book, but also all positive fair values of derivative financial instruments, including those held to hedge positions in the banking book but for which hedge accounting is not applied. The decrease of EUR 708 million (–28.8 per cent) to EUR 1,753 million was due to a reduction in our credit derivative holdings as well as to lower values of other derivatives. A similar trend was seen for the trading liabilities.

The item loans and receivables contains loans to customers and credit institutions that are valued at amor- tised cost. Receivables from customers were virtually unchanged at EUR 21,066 million in the reporting period. The slight increase in this item can be attributed to the roughly EUR 680 million increase in loans to corporates and other large customers.

Receivables from credit institutions fell from EUR 4,549 million in 2008 to EUR 3,813 million at the end of 2009. This was due to the fact that BAWAG P.S.K. invested a greater share of its liquidity in asset classes with medium-term maturities.

The fair values of derivatives in fair-value hedges are recognised in the item hedging derivatives (assets and liabilities). When using a fair-value hedge, an asset or liability is protected against changes in its fair value, and changes in the value of the hedging instrument and the hedged item are recognised as a profit or loss in the income statement in the same period in which they are incurred. For this, the hedging instrument is recognised at its fair value through profit or loss, and all changes in the fair value of the hedged item arising from the risk against which is being hedged are also recognised as a profit or loss in the income statement.

Tangible non-current assets totalled EUR 287 million on 31 December 2009, down from EUR 379 million at the end of 2008. This can be attributed to scheduled depreciation and to the sale of properties no longer used by the Group.

24 FINANZIERUNGSSERVICE Group Management Report WIR UNTERSTÜTZEN ÖSTERREICHS GEmEINdEN. UNd SIE PRoFITIEREN dAVoN.

Die Kommunalmilliarde für Projektfinanzierungen in Österreichs Gemeinden. Damit investieren wir in die Zukunft der Menschen unseres Landes. Denn was für Österreich gut ist, ist für uns alle gut.

Mehr dazu auf www.unternehmenösterreich.at 25

BW_AZ_KommMilliarde_230x297_RZ.indd 1 04.03.10 12:02 Group Management Report

Liabilities

in millions of Euros 2009 2008 Change Financial liabilities 38,054 39,336 -1,282 -3.3% Fair value through profit or loss 6,371 6,854 -483 -7.0% Held for trading 2,198 2,526 -328 -13.0% At amortised cost 29,485 29,956 -471 -1.6% Customers 22,674 22,585 +89 +0.4% Credit institutions 3,468 3,668 -200 -5.5% Issued securities 3,343 3,703 -360 -9.7% Hedging derivatives 60 50 +10 +20.0% Provisions 441 462 -21 -4.5% Other obligations 378 404 -26 -6.4% Equity 1,919 1,138 +781 +68.6% Minorities 373 188 +185 +98.4% Total equity and liabilities 41,225 41,578 -353 -0.8%

The item fair value through profit or loss under Financial liabilities comprises the Bank’s issued securities and deposits that are reported at fair value and that are not assigned to the category held for trading. These liabilities totalled EUR 6,371 million on 31 December 2009, EUR 483 million or 7.0 per cent less than at the end of the prior year. This decline is due primarily to the redemption of securities issued by BAWAG P.S.K. Deposits in savings products with interest paid depending not only on the general interest rate level, but also on other factors such as the inflation rate or the development of specific indexes, grew by EUR 90 million. Because these products are hedged against the relevant risks using derivative financial instruments, they are recognised at fair value through profit or loss to ensure that they are reported properly.

The held-for-trading financial liabilities fell by EUR 328 million or 13.0 per cent to EUR 2,198 million in 2009. As on the assets side of the balance sheet, this decrease is primarily the result of the reduction in our credit derivative holdings.

Payables to customers came in at EUR 22,674 million, the same level as last year. Savings deposits de- creased by EUR 865 million, however, this was more than compensated by a EUR 954 million increase in other deposits, including current accounts and commercial and retail deposits.

Thanks to the growth in customer deposits, payables to credit institutions were reduced by EUR 200 million or 5.5 per cent to EUR 3,468 million in 2009.

The Bank’s issued securities that are recognised at amortised cost totalled EUR 3,343 million, EUR 360 million less than at the end of the prior year as a result of redemptions.

26 Group Management Report

The Bank’s provisions were down by EUR 21 million to EUR 441 million on 31 December 2009.

Equity increased by EUR 781 million to EUR 1,919 million. The largest factors behind this were the sub- scription of EUR 550 million in participation capital by the Republic of Austria and the shareholders’ contri- bution of EUR 205 million. The reserves from the valuation of the assets classified as available for sale also increased by EUR 48.3 million.

Income statement (adjusted for valuation results attributable to minority interests)

in millions of Euros 2009 2008 Change Net interest income 564.3 652.5 -88.2 -13.5% Net fee and commission income 154.8 143.9 +10.9 +7.6% Gains and losses on financial assets and liabilities adjusted for minority interests1) 138.9 -406.3 +545.2 – Other operating income and expenses 29.9 14.1 +15.8 >+100% Operating income 887.9 404.2 +483.7 >+100% Administrative expenses -517.3 -617.4 +100.1 +16.2% Depreciation and amortisation on tangible and intangible non-current assets -80.4 -87.5 +7.1 +8.1% Operating expenses -597.7 -704.9 +107.2 +15.2% Operating profit 290.2 -300.7 +590.9 >+100% Provisions and impairment losses -236.7 -281.4 +44.7 +15.9% Share of the profit or loss of associates accounted for using the equity method -8.0 -32.5 +24.5 +75.4% Profit (loss) before tax adjusted for minority interests1) 45.5 -614.6 +660.1 – Income taxes -59.2 89.3 -148.5 – Gains and losses on financial assets ­attributable to minorities1) 186.6 -189.5 376.1 – Profit (loss) after tax 172.9 -714.8 887.7 – Thereof attributable to owners of the parent -22.2 -547.5 +525.3 +95.9% Thereof attributable to minority interests 195.1 -167.3 362.4 –

1) Under IFRS, the item Gains and losses on financial assets and liabilities also includes the valuation of securities whose risk is borne by minority shareholders. These securities are subject to substantial fair value fluctuations. In order to improve the comparability of the results, the valuation results attributable to minority shareholders are shown in a separate line. Compared to the income statement presented in the Consolidated Financial Report according to IFRS, the item Gains and losses on financial assets and liabilities is EUR 186.6 million lower (2008: EUR 189.5 million higher). Accordingly, the item Profit (loss) before tax presented above is EUR 186.6 million lower (2008: EUR 189.5 million higher) than the Profit (loss) before tax presented in the Consolidated Financial Report according to IFRS.

27 Group Management Report

Net interest income fell by EUR 88.2 million or 13.5 per cent to EUR 564.3 million in the reporting period, primarily due to lower interest rates, a significant saving deposit margin compression as well as the sale of banking subsidiaries in the previous year.

Net commission income increased by a significant 7.6 per cent compared to the prior year, coming in at EUR 154.8 million. This can be attributed above all to increased commission income from payment transac- tions and an increase in income from the conclusion of insurance policies and building association savings agreements. Commission income was also up in annual comparison in the Bank’s securities and custody business.

The item gains and losses on financial assets and liabilities was influenced primarily by the narrowing of credit spreads, and also by the ongoing restructuring of our investments.

As part of the further de-risking of the structured credit portfolio, high-risk securities were sold in 2009. Due to our conservative valuation as of 31 December 2008 these transactions generated realised profits compared to book value of EUR 45.9 million. Restructuring costs in the amount of EUR 10.0 million were also recog- nised in the income statement. In addition, the Bank’s structured credit portfolio generated fair value gains in the amount of EUR 145.4 million.

Due to the improved risk assessment the spreads narrowed, which caused the fair values of the Bank’s issued securities to rise and resulted in expenses of EUR 55.1 million from the securities that are designated at fair value through profit and loss.

Other operating income and expenses totalled EUR 29.9 million in the 2009 financial year. This comprises inter alia proceeds from the sale of no-longer used properties and proceeds from settlements of indemnities.

Administrative expenses totalled EUR 517.3 million in the reporting period, down by EUR 100.1 million or 16.2 per cent compared to 2008. The decrease can be attributed in large part to a EUR 63.5 million reduc- tion in material costs.

Depreciation and amortisation fell by EUR 7.1 million to EUR 80.4 million because of the sale of further properties.

Expenses for provisions and impairment losses amounted to EUR 236.7 million in 2009. This item includes impairments in the amount of EUR 48.1 million for the parts of the structured credit portfolio that are categorised as held to maturity which is 41.2 per cent lower than in 2008.

28 TraraTag_Okt09_230x297 04.03.10 17:15 Seite 1

Group Management Report

09! Nur am 7.10.20

Sichern Sie sich Ihr topverzinstes Kapitalsparbuch mit sechs Monaten Laufzeit und € 20,- Startbonus in Kombination mit der gleichzeitigen Eröffnung eines neuen PSK BANK Kontos*. Nur am 7. Oktober!

Nähere Informationen bei Ihrem PSK BANK Berater.

*) Jeder Kunde, der am 7.10.2009 gleichzeitig eine PSK BANK Konto-Box Neu, ein PSK BANK Komplett-Konto oder ein PSK BANK Zinsvorteils-Konto UND ein Kapitalsparbuch (Laufzeit 6 Monate, Maximaleinlage € 20.000,-) neu eröffnet, erhält € 20,- auf seinem neu eröffneten PSK BANK Konto gutgebucht.

29 www.pskbank.at Group Management Report

The result from the associates accounted for using the equity method (EUR –8.0 million) primarily contains the proportionate loss of BAWAG P.S.K. Versicherung AG and of ZEUS Recovery Fund S.A., which is due to the valuation of investments.

BAWAG P.S.K. achieved a profit before tax of EUR 45.5 million in 2009, after a loss of EUR 614.6 million in 2008.

The tax expenses in the amount of EUR 59.2 million are above all due to a reduction in deferred tax assets. The decline compared to the prior financial year is the result of different measurement approaches according to tax law and IFRS.

Gains and losses on financial assets attributable to minorities refers to fair value fluctuations which are allocated to minorities. In the IFRS income statement presented in the notes, these fair value fluctuations are shown in the item Gains and losses on financial assets and liabilities. In order to improve the comparability of the results, the valuation results attributable to minority shareholders are shown separately in the income statement above.

Profit after tax amounted to EUR 172.9 million compared to a loss after tax of EUR 714.8 million in 2008. Profit (loss) attributable to minority interests (including gains and losses from the valuation of financial assets) amounted to EUR 195.1 million (2008: –167.3 million). Losses attributable to owners of the parent signifi- cantly reduced from EUR 547.5 million to EUR 22.2 million.

Consolidated own funds of the BAWAG P.S.K. bank group pursuant to the Austrian Banking Act (BWG)

in millions of Euros 2009 2008 Share and participation capital 800 250 Reserves (including fund for general banking risks) 954 1,007 Goodwill, minorities and deductions 346 232 Core capital (Tier I) 2,100 1,489 Less shareholdings held for investment purposes -51 -56 Core capital (Tier I) after deductions 2,049 1,433 Reserve under § 57 BWG, revaluation reserve 85 13 Supplementary and subordinated debt capital 746 790 Additional items (Tier II) 831 803 Less shareholdings held for investment purposes -51 -56 Eligible own funds 2,829 2,180 Tier III 67 55 Own funds 2,896 2,235

30 Group Management Report

Own funds are calculated on the basis of the results of the members of the bank group according to UGB and BWG. The considerable increase in equity is primarily the result of the subscription of EUR 550 million in participation capital by the Republic of Austria and the EUR 205 million capital contribution from share­ holders. As of 31 December 2009, BAWAG P.S.K. recognised a fund for general banking risks according to article 57 paragraph 3 BWG in the amount of EUR 28 million (prior year: EUR 80 million).

Own funds requirement

in millions of Euros 2009 2008 Credit risk 1,579 1,667 Market risk 67 55 Operational risk 150 131 Capital requirements 1,796 1,853

This results in a Tier I capital ratio of 10.0 per cent (2008: 6.6 per cent) and an own funds ratio of 13.6 per cent (2008: 9.8 per cent). Both ratios are well above the minimum legal standards. The Tier I capital ratio based on credit risk (excluding operational risk) amounts to 10.4 per cent (2008: 6.9 per cent).

31 Group Management Report

Non-Financial Performance Indicators

Corporate Governance

Supervisory Board The Supervisory Board of BAWAG P.S.K., which is responsible for supervising but also supporting the Manag- ing Board, consists of six national and international representatives elected by the Shareholder Meeting (currently only five persons are appointed). An additional three members are delegated by the Works Council. (The members of the Supervisory Board and the composition of its committees are listed in the section Boards and Officers.)

The Rules of Procedure of the Supervisory Board comprise the rights and obligations of this board and also define the individual committees of the Supervisory Board and their responsibilities. As part of the amend- ment of the Supervisory Board’s Rules of Procedure, some of the provisions were simplified and harmonised.

Responsibility for the approval of loans and other forms of financing and credit to individual borrowers or groups of connected customers for the purposes of section 27 of the Banking Act (exposures that equal 10 per cent or more of the Bank’s eligible own funds) has been delegated to the Credit Committee that was set up by the Supervisory Board. An annual report about the large exposures approved by the Credit Commit- tee is submitted to the Supervisory Board. The Credit Committee is also responsible for approving transactions with the Bank’s affiliated parties (except for transactions with members of the Supervisory Board or Managing Board that are delegated to the Remuneration Committee) and for approving material credit policies. It also advises the Managing Board in basic credit risk policy issues.

The Audit Committee is responsible for reviewing the Bank’s accounts and the annual financial statements, and monitoring the Bank’s risk management and internal control systems. This committee is also in regular contact with the external auditor, the Internal Audit division and the Compliance Office. The annual audit plans and reports about the activities of the Internal Audit division and the Bank’s Compliance Office are also submitted to the Audit Committee.

While the Nomination Committee deals with succession planning and selecting suitable candidates for the Managing Board, the Remuneration Committee deals with relationships between the Bank and the members of the Managing Board. For example, it decides the performance targets for the Managing Board and also the remuneration paid to and contracts signed with the members of the Managing Board. The Remuneration Committee is also responsible for approving transactions with members of the Supervisory Board and Manag- ing Board.

32 Wohnkredit_März_09_230x297 10.03.10 10:55 Seite 1

FINANZIERUNGSSERVICE Group Management Report

RENOVIERT UND TROTZDEM NICHT RUINIERT.

Der Wohnkredit zu Top-Konditionen. Finanzieren Sie jetzt die Renovierung oder Sanierung Ihrer vier Wände und nutzen Sie den Förderungsservice in Ihrer BAWAG Filiale.

Die neue Bank. Die neue BAWAG. www.bawag.com

33 *) Während des vereinbarten tilgungsfreien Rückzahlungszeitraumes sind nur die anfallenden Zinsen des Kreditbetrages zu begleichen. Group Management Report

The Related Parties Special Audit Committee reviews all financing commitments and transactions above a certain amount involving companies with controlling influence as defined in IAS 24 or companies related to these controlling companies. The Related Parties Special Audit Committee is intended to ensure transparency in all transactions involving the Bank’s shareholders.

Managing Board At the beginning of 2009, the Managing Board consisted of six members. Currently, the Board has five members, following the retirement of Chairman David Roberts.

The Rules of Procedure of the Managing Board define the responsibilities and tasks of this board. According to these Rules of Procedure, the Managing Board has the right to form committees and to issue statutes for these committees. The following executive committees have been formed: 4 The Enterprise Risk Meeting for managing risk for the entire Bank; 4 The Credit Policy Committee, which focuses on credit guidelines and strategies; 4 The Credit Approval Committee, which decides on financing agreements above a certain amount; 4 The strategic Asset Liability Committee, which deals with strategic capital and liquidity planning issues; 4 The tactical Asset Liability Committee; and 4 The Retail & SME Committee.

The Bank also established a series of additional non-executive committees. These include: 4 The Exposure Review Committee, which was set up in 2009 for the ongoing analysis of certain credit exposures; 4 The Capital Management Meeting, which monitors the development of the regulatory capital ratios and the changes in the risk-weighted assets; and 4 The Capital Expenditure Committee, which decides on investments above a certain amount.

Proactive Risk Management Top priority was again assigned to risk management in 2009. After the credit risk management system was divided into two groups, Retail and SME Risk and Corporate and Institutional Risk, in the prior financial year, the focus in 2009 was placed on improving the relevant systems and processes. In response to the difficult economic environment, the systems for monitoring credit exposures were expanded significantly. Additionally, forward-looking monitoring mechanisms were also introduced for the portfolio. A number of measures were implemented to lower the level of risk in the structured credit portfolio, including the sale of assets, restruc- turing and hedging.

34 Group Management Report

Code of Corporate Governance BAWAG P.S.K. voluntarily adopted the Austrian Code of Corporate Governance for listed companies in 2006. In the 2009 financial year, amendments were made to the Austrian Code of Corporate Governance which were subsequently incorporated into BAWAG P.S.K.’s individual Code.

The Bank prepared its first-ever annual corporate governance report for the 2009 financial year which will published on the Internet.

Compliance with the Code of Corporate Governance was audited by independent third parties in 2009 and revealed that all key provisions of the Code were fulfilled with the exception of those that do not apply to a bank with a closed shareholder structure.

Compliance The Compliance Office is a sub-unit of BAWAG P.S.K.’s Legal division but reports directly to the Managing Board. Regular reports are also submitted directly to the Bank’s Audit Committee.

The key responsibilities of the Compliance Office are preventing money laundering, monitoring compliance with sanctions, securities compliance, as well as the prevention of insider trading, market abuse and conflicts of interest. A series of detailed guidelines have been put into place to ensure compliance with all legal requirements.

In addition to all relevant laws such as the Securities Supervision Act, all employees are also bound by a Code of Conduct that contains, among other things, guidelines for business conduct and customer service, for how conflicts of interest are to be handled, and for preventing market abuse and money laundering.

Personnel Development

Management and Personnel Development; Succession and Career Planning A key focus in the Bank’s personnel development activities in 2009 was the Leadership Development Initia- tive. Under this initiative, the Bank held workshops for all of its managers with the goal of discussing what is expected of these managers and how they see their own roles, and to introduce the revised “Management by Objectives” (MBO) process as a key leadership and management instrument.

In addition to continuously improving the skills of its management personnel, the Bank also attaches consid- erable importance to providing development paths for talented individuals so that it can fill key positions from within its staff. One measure to this end was the creation of the EMERGE programme for potential managers and specialists who are to be given new positions with greater responsibilities in the coming years.

35 Group Management Report

The programme began with a careful selection process, and a number of candidates are now completing a one-year programme that will significantly improve their professional and personal skills. EMERGE is built up around the completion of strategic business projects to facilitate learning by doing. Flanking measures include mentoring, leadership and technical specialist training, 360-degree feedback with subsequent coaching, and an internal career workshop that is designed to show the specific advancement paths available in the Bank and that ends with the creation of individual career and development plans.

In addition to this, the retail sales programme for future managers, “TopTeam Vertrieb”, was launched in December 2009, and a succession planning project was started in Operations.

Personnel Training The Bank adapted and updated its personnel training system in 2009 to bring it in line with the changed operating conditions resulting from various restructuring efforts, process improvements and modified job profiles. Specifically developed seminars were held in the larger organisational units to fill gaps in the staff’s qualifications and to better enable people to fill new roles in some cases. At the same time, the foundation was laid for a new, structured training system at BAWAG P.S.K.

Corporate Social Responsibility

Every business enterprise strives to achieve success and to create value. For BAWAG P.S.K., success also means meeting its social responsibility.

To this end, the sustainability and corporate social responsibility programme the Bank launched in 2007 was continued and expanded throughout the organisation in 2009.

In April 2009, the Bank’s first CSR report was published in tandem with the 2008 annual report. We are releasing our second CSR report this year together with the 2009 annual report to document our work and achievements in the area of sustainability.

The CSR Report 2009 can be accessed at www.bawagpsk-annualreport.com. We decided to forgo a printed version of this report to save paper.

The following is an overview of some of the efforts we undertook in 2009. More extensive information can be found in the CSR Report 2009.

36 Group Management Report

New Chance Account On 1 April 2009, PSK BANK became the first bank in the country to offer a basic current account to any ­customer regardless of their credit rating. This “New Chance Account” (Neue Chance Konto) does not include an overdraft facility and is available in all of Austria. This product is designed for the roughly 50,000 people in Austria who otherwise have no access to one of the most important banking services, electronic payment transactions, because of their credit history.

The “New Chance Account” has generated a great deal of positive response. At the end of 2009, only nine months after the launch, an impressive 3,500 customers were already using this product. The “New Chance Account” is one of the fruits of our proactive commitment to human rights, and for us is a way to counter discrimination and social exclusion.

Human Rights Matrix To the best of our knowledge, BAWAG P.S.K. is the first bank in Austria that has evaluated the issue of human rights in connection with its area of business in such an extensive manner and that also systematically takes human rights into account and incorporates their protection into its daily operations.

Human rights are the only binding system of rules that are valid around the world and that apply not only to governments, but also to business enterprises. At BAWAG P.S.K., we decided to assess where the Bank actually stands in these terms. To this end, we drew up a human rights matrix and completed a gap analysis to identify the areas in which we need to improve. For example, our credit policies now also include ethical and antidiscriminatory guidelines for the awarding of loans. A Supplier Code of Conduct has also been devel- oped which requires BAWAG P.S.K.’s service providers and suppliers to commit themselves to respecting human rights in their operations, in addition to other obligations.

The BAWAG P.S.K. Human Rights Matrix was presented to the UN’s special envoy on human rights and business, Prof. John Ruggie, and the human rights activist and former president of Ireland, Mary Robinson, during a workshop in June 2009.

UN Global Compact BAWAG P.S.K. joined the UN Global Compact in the middle of March 2009. As a result of this, the CSR Report 2009 also includes a Communication on Progress (COP). Our CSR officer is also a member of the UN Global Compact Network Austria.

37 Group Management Report

BAWAG P.S.K. Women’s Initiative The BAWAG P.S.K. Women’s Initiative was launched in May 2009 under the patronage of Managing Board member Regina Prehofer and Works Council Chairwoman Ingrid Streibel-Zarfl. The goal of this initiative is to create a working environment in which every female employee can achieve success in accordance with her own abilities and performance. Key focuses in this are the harmonisation of salaries and training opportuni- ties, as well as increasing the number of women in key, specialist and management positions.

Diversity Throughout the 2009 financial year, a number of different campaigns, workshops, podium discussions and a diversity survey were conducted and a newsletter distributed to increase awareness for the issue of diversity – social variety – within BAWAG P.S.K. One project was launched to examine all aspects of diversity and to define concrete measures by the beginning of 2010 that will enable the Bank to derive benefits from the diversity within it and to ensure equal opportunities for all.

Temporary Assistance for Unemployment after Bankruptcies When a business goes bankrupt, this not only affects the company’s owners and suppliers, but also all of its employees. Such employees are entitled to benefits from the bankruptcy compensation fund, but it can take several months for these benefits to be paid out. Based in part on advice provided by the Austrian Trade Union Federation and in response to the economic crisis, BAWAG P.S.K. created an unbureaucratic and nationwide aid package in 2009 for people who have lost their job because of the bankruptcy of their employer.

Sponsoring

BAWAG P.S.K.’s focus on the areas of the arts, education and social issues and the ways in which it combines these areas with its business activities make it a pioneer in sponsoring. The objective of these activities is to reposition the Bank through projects focusing on innovation and sustainability, and through the promotion of contemporary art. BAWAG P.S.K.’s support for the renowned jazz club Porgy&Bess earned it the 2009 “mae- cenas” art sponsoring prize for the best art sponsoring project by a large corporation. We will continue on this path in 2010.

38 Group Management Report

Events after the Balance Sheet Date

Changes in the Managing Board

In December 2009, Joseph Laughlin announced that he would be retiring at the end of the year. Sanjay Sharma took over as Chief Operating Officer on 1 January 2010. Sanjay Sharma can draw on many years of experience at Barclays Bank plc and has been Managing Director of Operations at BAWAG P.S.K. since August 2008.

Carsten Samusch, who assumed responsibility for the Treasury division as a Board member in August 2007, announced in January 2010 that he would not be seeking the extension of his contract, which expires in May 2010, for personal reasons. The search for a suitable successor is underway.

Equity Holdings

BAWAG P.S.K. Versicherung In January 2010, the Bank sold 24.99 per cent of its stake in BAWAG P.S.K. Versicherung AG, thus reducing its stake from 49.99 per cent to 25 per cent plus one share.

39 Group Management Report

Outlook

The recovery of the global economy will continue this year. The emerging Asian countries will be a key source of impetus for reinvigorating international trade. Economic growth is projected to be faster in the US than in the Eurozone this year. However, consumer spending is likely to suffer as US households continue reducing their levels of debt, and the poor labour market situation in the Eurozone will dampen consumer confidence even further into the future. The effects of the crisis will hamper the pace of recovery in the medium term, but the concerted efforts undertaken by governments around the world to manage the crisis significantly reduced the extent and duration of the recession.

The economic upswing in Austria should continue into the near future. A number of temporary factors are responsible for this. The economic stimulus package and the tax reform are still having observable effects, and the reversal in the inventory cycle is causing a temporary rise in overall economic output. Exports will play a major role this year as a driver of growth, and investment activity will only begin to ramp up again slowly because of the low levels of capacity utilisation. The outlook on the domestic labour market will not improve for the time being. The number of available jobs should begin increasing again soon, but not strongly enough to lower the unemployment rate because the Austrian economy will continue to perform at a level below its growth potential, and the supply of workers will grow steadily. As a result, wage increases this year will be low which will curtail private consumption. However, the low inflation rate will help to improve disposable in- comes.

Following successful measures in raising capital in 2009, it is expected that the Bank will be able to deploy its liquidity to generate profits in the medium term. In light of this, a key focus will be placed on identifying promising investment opportunities that offer attractive margins and that are in line with the Bank’s risk strategy. We will also invest in further expanding our core business in Austria. We intend to reach our market share targets in retail and commercial banking through the campaigns and initiatives that we launched last year, as well as through the measures we have implemented to improve and standardise our back-office processes, which are a significant source of competitive advantage for the Bank. Continued stringent cost management is of course also necessary in order for the Bank to remain competitive.

We are likely to see a further increase in the level of private bankruptcies and business failures in the coming months as a consequence of the economic downturn. We also cannot rule out negative impacts from changes in market values. As the result of the Bank’s financial position, the development of our core businesses and our strong level of liquidity, BAWAG P.S.K. is well positioned to deal with any such events. As loans to domes- tic customers make up the majority of our credit portfolio, its ongoing performance will depend largely on the development of the Austrian economy.

40 Group Management Report

The Bank is employing rigorous risk management to mitigate the negative effects of the continued adverse market conditions. In addition to continuous, forward-looking monitoring on a portfolio basis in the retail and mid-market segment and on an individual basis in the large corporates segment, the arrears notice and collection processes are also to be improved further.

A key project in 2010 will be the switch to an IRB approach for determining credit risk, which will further strengthen the management of risk within the Bank. This change is not expected to have significant effects on the risk-weighted assets or the expected loss calculations.

Overall, we expect to see continued poor credit demand and high pressure on margins for savings products in 2010 as interest rates remain very low. However, the Bank has made all necessary preparations for the new financial year, and is well positioned to counter potential macro-economic difficulties thanks to its strong liquidity and capital position.

41 Group Management Report

Internal Control and Risk Management System

Introduction

The designation “internal control system” refers to all processes designed by management and executed within the Bank to facilitate the monitoring and control of: 4 The effectiveness and efficiency of its operating activities (including protecting assets against losses resulting from damages or misconduct); 4 The reliability of the financial reports; and 4 The Bank’s compliance with material legal regulations to which it is subject.

The risk management system covers all processes that serve to identify, analyse and measure risks and that serve to determine and implement appropriate measures that will ensure that the Bank can still reach its objectives when risks are incurred.

According to the internationally recognised COSO framework for the design of risk management systems, the internal control system is one part of an organisation-wide risk management system. Other aspects include the management and monitoring of risks that can affect the correctness and reliability of the accounting records.

The Bank’s management is responsible for the fundamental design, implementation and ongoing adaptation and refinement of the internal control and risk management system as well as for the alignment of these systems and processes with the existing requirements in a way that takes account of the Bank’s strategy, the scope of its business and other relevant economic and organisational aspects.

Characteristics of the Internal Control and Risk Management System

Control Environment The Code of Conduct that has been adopted by the Bank and the fundamental values described in it apply to every employee in the Group. The Code of Conduct creates a climate rooted in focus on the customer, achieve- ment, mutual respect, teamwork and trust.

42 Group Management Report

The Accounting division is responsible for maintaining the Bank’s accounting records. Material subsidiaries also operate their own accounting departments, which work in close cooperation with the Accounting division. The primary responsibilities of the Accounting division are preparing the annual and interim financial state- ments of BAWAG P.S.K. AG, the Group and certain subsidiaries; maintaining the financial and consolidated accounts; managing taxes; and supervisory reporting.

The Accounting division is responsible for setting directives on all matters of accounting and exercises the power to ensure the application of uniform standards across the entire Group. To support the operational implementation, corporate guidelines were drawn up partly in the form of manuals, such as The Group accounting manual. This policy applies to all consolidated subsidiaries. For all other holdings, the adherence to these principles and standards is realised as far as possible.

Risk Assessment and Control Measures Our internal control and risk management systems contain instructions and processes for the accounting workflows: 4 To ensure the correct and appropriate documentation of business activities, including the use of Group assets; 4 To record all information required for the preparation of the period-end financial statements; and 4 To prevent unauthorised purchases or sales that could have a material effect on the financial statements.

The Accounting division is integrated into the Bank’s entire organisational, structural and operational ­workflows. Customer and transaction data is generally collected in the market and operating units, and supplementary information is entered by the risk units. The elements of this information that are needed for the accounting records are usually transferred automatically into the Bank’s electronic accounting systems. In this, the Accounting division fulfils a control and monitoring function to ensure that this automatically trans- mitted data is handled properly in accordance with the applicable accounting rules, and also completes the various item entry and other steps needed to prepare the financial statements.

The accounting of BAWAG P.S.K. AG and the significant domestic subsidiaries according to Austrian GAAP (UGB) of the corporation are contained in SAP-FI. The preparation of the consolidated financial statements under IFRS is done in SAP-ECCS, which receives the values of the individual financial statements of consoli- dated companies through interfaces. The accounting and all upstream systems are protected by access permissions, and automatic and obligatory manual control steps provided for in the process.

43 Group Management Report

Information and Communication A comprehensive report about the balance sheet, the income statement and other controlling and risk data is submitted to the Supervisory Board at least every quarter. Highly detailed reports about this information are also submitted to the Managing Board on a regular (monthly or more frequent) basis. The Managing Board has also set up its own committees that collect, analyse and monitor this information.

Monitoring The Operational Risk division documents all identified risks and control gaps in the accounting system and implements measures to mitigate or entirely eliminate these risks and gaps. Damage incidents are document- ed separately, and are also used to identify necessary improvements in the systems and in the monitoring and control measures.

The Group’s Internal Audit division conducts regular accounting system audits. The findings of these audits are also used to make ongoing improvements in the internal control and risk management systems as they pertain to the accounting process.

Vienna, 9 March 2010

Byron Haynes, CEO m.p. Chairman of the Managing Board

Stephan Koren m.p. Deputy Chairman of the Managing Board

Regina Prehofer m.p. Carsten Samusch m.p. Sanjay Sharma m.p. Member of the Managing Board Member of the Managing Board Member of the Managing Board

44 Consolidated Financial Report Prepared in Accordance with IFRS

CONSOLIDATED FINANCIAL REPORT PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

Contents Consolidated Accounts Consolidated Balance Sheet as of 31 December 2009 Consolidated Income Statement for the Financial Year 2009 Consolidated Statement of Comprehensive Income for the Financial Year 2009 Consolidated Statements of Changes in Equity for the Financial Year 2009 Cash Flow Statement Notes Key Events during the Financial Year Notes to the Consolidated Financial Statements 1 | Recognition and measurement principles

Details of the Consolidated Balance Sheet 2 | Cash reserves 3 | Financial assets designated at fair value through profit or loss 4 | Available-for-sale financial assets 5 | Held-to-maturity investments 6 | Assets held for trading 7 | Loans and receivables 8 | Receivables from credit institutions and customers 9 | Asset maturities 10 | Tangible non-current assets 11 | Intangible non-current assets 12 | Other assets 13 | Financial liabilities designated at fair value through profit or loss 14 | Liabilities held for trading 15 | Financial liabilities at amortised cost 16 | Payables to credit institutions and customers 17 | Liabilities maturities 18 | Provisions 19 | Other obligations 20 | Hedging derivatives 21 | Equity

45 Consolidated Financial Report Prepared in Accordance with IFRS

Details of the Consolidated Income Statement 22 | Net interest income 23 | Net fee and commission income 24 | Gains and losses on financial assets and liabilities 25 | Other operating income and expenses 26 | Administrative expenses 27 | Depreciation and amortisation on tangible and intangible non-current assets 28 | Provisions and impairment losses 29 | Share of the profit or loss of associates accounted for using the equity method 30 | Income taxes

Further Disclosures Required by IFRS 31 | Fair value 32 | Segment reporting 33 | Receivables from and payables to subsidiaries and associates 34 | Related parties 35 | Assets pledged as collateral 36 | Total collateralised debt 37 | Subordinated assets 38 | Contingent assets, contingent liabilities and commitments 39 | Foreign currency amounts 40 | Genuine repurchase agreements 41 | Leasing 42 | List of consolidated subsidiaries 43 | Capital management

Risk Report 44 | Credit risk 45 | Market risk 46 | Liquidity risk 47 | Participation risk 48 | Operational risk

46 Consolidated Financial Report Prepared in Accordance with IFRS

Disclosures Required by the Austrian Banking and Financial Reporting Acts (Österreichisches Bankwesen- und Rechnungslegungsgesetz) 49 | Fiduciary assets 50 | Breakdown of securities pursuant to Austrian Banking Act (BWG) 51 | Collateral received for contractual liabilities 52 | Hybrid capital 53 | Human resources 54 | Other disclosures required by BWG and UGB 55 | Events after the balance sheet date

Statement of All Legal Representatives

Boards and Officers

Note: Differences in the tables are the result of rounding.

47 Consolidated Financial Report Prepared in Accordance with IFRS

Consolidated Accounts

Consolidated Balance Sheet as of 31 December 2009

Assets

in millions of Euros (Notes) 31.12.2009 31.12.2008 Cash reserves (2) 615 717 Financial assets designated at fair value through profit or loss (3) 2,980 4,048 Available-for-sale financial assets (4) 3,250 2,492 Held-to-maturity investments (5) 6,560 5,366 Assets held for trading (6) 1,753 2,461 Loans and receivables (7) 24,879 25,246 Customers 21,066 20,697 Credit institutions 3,813 4,549 Hedging derivatives (20) 33 27 Tangible non-current assets (10) 287 379 Intangible non-current assets (11) 266 295 Other assets (12) 602 547 Total assets 41,225 41,578

Equity and liabilities

in millions of Euros (Notes) 31.12.2009 31.12.2008 Financial liabilities designated at fair value through profit or loss (13) 6,371 6,854 Liabilities held for trading (14) 2,198 2,526 Financial liabilities at amortised cost (15) 29,485 29,956 Customers 22,674 22,585 Credit institutions 3,468 3,668 Issued bonds, subordinated and supplementary capital 3,343 3,703 Hedging derivatives (20) 60 50 Provisions (18) 441 462 Other obligations (19) 378 404 Equity (21) 1,919 1,138 Minorities 373 188 Total equity and liabilities 41,225 41,578

48 Consolidated Financial Report Prepared in Accordance with IFRS

Consolidated Income Statement for the Financial Year 2009 in millions of Euros (Notes) 2009 2008 Net interest income (22) 564.3 652.5 Net fee and commission income (23) 154.8 143.9 Gains and losses on financial assets and liabilities (24) 325.5 -595.8 Other operating income and expenses (25) 29.9 14.1 Administrative expenses (26) -517.3 -617.4 Depreciation and amortisation on tangible and intangible ­non-current assets (27) -80.4 -87.5 Provisions and impairment losses (28) -236.7 -281.4 Share of the profit or loss of associates accounted for using the equity method (29) -8.0 -32.5 Profit (loss) before tax 232.1 -804.1 Income taxes (30) -59.2 89.3 Profit (loss) after tax 172.9 -714.8 Thereof attributable to owners of the parent -22.2 -547.5 Thereof attributable to minority interests 195.1 -167.3

Under IFRS, the item Gains and losses on financial assets and liabilities also includes fair value adjustments of securities whose risk is borne by minorities. In financial year 2009, valuation gains of EUR 186.6 million that have been shown in the item Gains and losses on financial assets and liabilities have been passed on to minorities in the item Minority interests. In 2008, valuation losses which were borne by minorities in the amount of EUR 189.5 million have been included in the item Gains and losses on financial assets and liabilities.

Excluding the valuation results borne by minorities, the item Gains and losses on financial assets and liabili- ties would amount to EUR 138.9 million in 2009 (2008: EUR –406.3 million.). The item Profit (loss) before tax would amount to EUR 45.5 million (2008: EUR –614.6 million).

49 Consolidated Financial Report Prepared in Accordance with IFRS

Consolidated Statement of Comprehensive Income for the Financial Year 2009

in millions of Euros (Notes) 2009 2008 Profit (loss) recognised in the Income Statement 172.9 -714.8 Other comprehensive income Change in scope of consolidation – -0.5 Foreign exchange differences – -29.2 AFS reserve 63.5 -49.1 Deferred taxes on items recognised directly in equity (30) -15.2 12.3 Income and expenses recognised directly in equity 48.3 -66.5 Total comprehensive income 221.2 -781.3 Thereof attributable to owners of the parent 26.1 -614.0 Thereof attributable to minority interests 195.1 -167.3

Consolidated Statements of Changes in Equity for the Financial Year 2009

Partici­ Foreign Equity Subscribed Capital Retained Equity w/o Minority pation AFS reserve exchange ­including in millions of Euros capital ­reserves reserves2) minorities interests capital1) differences minorities Balance as of 1.1.2008 250.0 – 1,498.9 -33.0 6.7 29.2 1,751.8 378.3 2,130.1 Transactions with owners – – – – – – – -22.5 -22.5 Dividends – – – – – – – -22.5 -22.5 Total comprehensive income – – -456.5 -91.5 -36.8 -29.2 -614.0 -167.3 -781.3 Balance as of 31.12.2008 250.0 – 1,042.4 -124.5 -30.1 – 1,137.8 188.5 1,326.3 Balance as of 1.1.2009 250.0 – 1,042.4 -124.5 -30.1 – 1,137.8 188.5 1,326.3 Transactions with owners – – 205.0 – – – 205.0 -10.6 194.4 Dividends – – – – – – – -10.6 -10.6 Owner’s contribution – – 205.0 – – – 205.0 – 205.0 Issuance of participation capital – 550.0 – – – – 550.0 – 550.0 Total comprehensive income – – – -22.2 48.2 – 26.0 195.1 221.1 Balance as of 31.12.2009 250.0 550.0 1,247.4 -146.7 18.1 – 1,918.8 373.0 2,291.8

1) Participation capital according to section 23(4) BWG. 2) Thereof revaluation reserve in accordance with IFRS 3: EUR 0.8 million.

50 Consolidated Financial Report Prepared in Accordance with IFRS

Cash Flow Statement in millions of Euros 2009 2008 I. Profit (loss) (after tax, before minorities) 173 -715 Non-cash items included in the profit (loss) and reconciliation to net cash from operating activities Depreciation, amortisation, impairment losses, write-ups 330 332 Changes in provisions -21 -56 Changes in other non-cash items 154 -103 Proceeds from the sale of financial investments, tangible non-current assets, intangible non-current assets and subsidiaries -7 -250 Other adjustments -570 -622 Subtotal 59 -1,414 Change in assets and liabilities arising from operating activities after corrections for non-cash items Loans and advances to customers and credit institutions 147 1,050 Other financial assets (not including investing activities) 1,325 693 Other assets -120 72 Payables to customers and credit institutions -16 663 Other financial liabilities (not including investing activities) -1,302 -876 Other obligations -26 18 Interest and dividend receipts 1,691 2,046 Interest paid -1,121 -1,427 Income taxes paid – – II. Net cash from operating activities 637 825

51 Consolidated Financial Report Prepared in Accordance with IFRS

in millions of Euros 2009 2008 Cash receipts from sales of Financial investments 3,173 1,224 Tangible and intangible non-current assets 63 11 Cash paid for Financial investments -4,773 -2,606 Tangible and intangible non-current assets -23 -32 Cash receipts from sales of subsidiaries – 423 Changes resulting from the inclusion of cash and cash equivalents in the non-current assets and disposal groups held for sale – 30 Other changes – – III. Net cash used in investing activities -1,560 -950 Capital contributions 755 – Dividends paid -11 -23 Subordinated liabilities (including those designated at fair value through profit or loss) and other financing activities 77 -79 IV. Net cash from financing activities 821 -102 Cash and cash equivalents at end of previous period 717 945 Net cash from operating activities 637 825 Net cash used in investing activities -1,560 -950 Net cash from financing activities 821 -102 Effect of exchange rate changes – – Cash and cash equivalents at end of period 615 717

The cash flow statement provides information about the current state and development of the Group’s cash and cash equivalents as of the reporting date. It shows inflows and outflows of cash broken down by opera- tional activities, investing activities and financing activities. The amount of cash and cash equivalents report- ed comprises cash on hand and balances at central banks.

52 Consolidated Financial Report Prepared in Accordance with IFRS

Notes

Key Events during the Financial Year

Please see the Group management report for information on key events during the financial year.

Notes to the Annual Financial Statements

1 | Recognition and measurement principles

The consolidated financial statements were prepared applying section 59a BWG, according to Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, and in conformity with the provisions of the standards (IFRS) published by the International Accounting Standards Board (IASB) and the interpretations by the International Financial Reporting Interpretations Committee (IFRIC/SIC) as applicable on the balance sheet date. All standards contained in the International Financial Reporting Standards pub- lished by the IASB and adopted by the EU and mandatory with respect to the annual financial statements as of 31 December 2009 were applied.

These consolidated financial statements for BAWAG P.S.K. according to IFRS are based on the individual annual financial statements for all fully consolidated Group companies according to IFRS as of 31 December 2009. All material associates are accounted for using the equity method.

The preparation of consolidated financial statements according to IFRS requires that assumptions and esti- mates be made about factors that have a material influence on the Bank’s business operations. These as- sumptions are regularly reviewed and adjusted whenever needed. Such adjustments are taken into account in the current period and also for future periods when the adjustment has long-term effects.

The recognition and measurement principles described below have been applied uniformly with respect to all of the financial years stated in these consolidated financial statements.

The reporting currency is Euro. Unless indicated otherwise, all figures are rounded to millions of Euros.

All figures in foreign currencies are translated at the middle exchange rate on the reporting date. Financial statements from foreign subsidiaries are included in the consolidated financial statements using the functional currency method.

53 Consolidated Financial Report Prepared in Accordance with IFRS

Scope of Consolidation and Consolidation Principles The scope of consolidation includes all direct and indirect material equity investments of BAWAG P.S.K.

As of 31 December 2009, the consolidated financial statements included 57 (2008: 48) fully consolidated companies and 2 (2008: 2) companies that are accounted for using the equity method. In the interest of materiality, the criteria for inclusion are both the amount of an entity’s assets and its relative contribution to the Group’s consolidated profit. All non-consolidated subsidiaries had only a minor influence on the Group’s assets, financial position and the results of its operations. Note 42 List of consolidated subsidiaries contains a list of all fully consolidated subsidiaries and subsidiaries accounted for using the equity method. The carrying amount of the associates that are not accounted for using the equity method totalled EUR 72 million (2008: EUR 79 million) on 31 December 2009. Controlled companies with a carrying amount of EUR 59 million (2008: EUR 61 million) were not consolidated because they did not have a material effect on the Group’s assets, financial position or the results of its operations.

One subsidiary has been deconsolidated due to immateriality and eight subsidiaries founded in 2009 in the course of the restructuring process of our structured credit portfolio have been integrated into the consolida- tion basis. Due to materiality two additional subsidiaries, P.S.K. Zahlungsverkehrsabwicklungs GmbH and Vindobona Finance Beta S.A., have been consolidated for the first time in 2009.

The acquisition method according to IFRS 3 is used for capital consolidation. Under this method, the acquisi- tion costs for the entity in question must be compared with the value of the net assets at the time of acquisi- tion. The value of the net assets is the fair value of all identifiable assets, liabilities and contingent liabilities assumed at the time of acquisition.

All intragroup receivables and payables, expenses and income and interim profits are eliminated unless they are insignificant.

Capitalised goodwill is recognised under Intangible non-current assets on the balance sheet. In accordance with IFRS 3 in conjunction with IAS 36 and IAS 38, the recognised goodwill of all cash generating units (CGUs) is subject to annual impairment testing in accordance with IAS 36.

All other equity investments were also tested for impairment.

Details on these impairment tests can be found in the section Recognition and Measurement Principles. All non-consolidated equity instruments are measured according to IAS 39 and categorised as available-for- sale financial assets.

54 Consolidated Financial Report Prepared in Accordance with IFRS

Recognition and Measurement Principles Financial Instruments Financial instruments are recognised on the date of transaction. a) Held-to-Maturity Investments This category includes all financial instruments with fixed terms or determinable payments, which are intend- ed to be held to maturity. If securities are assigned to this category, BAWAG P.S.K. has the positive intention and the ability to hold the instruments to maturity.

Held-to-maturity investments are carried at amortised cost. The recoverable amount of the asset is determined at the end of every reporting period, and a corresponding impairment is recognised if this amount is lower than the carrying amount. The recoverable amount is calculated by discounting the expected future cash flows with the original interest rate of the financial instrument. If this impairment decreases in subsequent periods, a write-up is recognised up to the amortised cost valid at that time.

Premiums and discounts on securities classified as financial investments are recognised pro rata temporis via the effective interest rate. Expenses and revenues, respectively, were set off against interest income from the same securities. b) Financial Assets Recognised at Fair Value through Profit or Loss Held for trading This category covers financial assets held for trading purposes. These financial instruments are recognised at their fair value. All derivatives in the trading and banking book that are not part of a hedging transaction are assigned to this category.

Financial assets designated at fair value through profit or loss Certain financial assets and liabilities that do not meet the definition of trading assets and liabilities are designated at fair value through profit or loss using the fair value option. To be designated at fair value through profit or loss, financial assets and liabilities must meet one of the following criteria: (1) The designation eliminates or significantly reduces a measurement or recognition inconsistency; (2) A group of financial assets or liabilities or both is managed and its performance is evaluated on a fair value basis in accordance with a documented risk management or investment strategy; or (3) The instrument contains one or more embedded derivatives.

In addition, the Group allows the fair value option to be designated only for those financial instruments for which a reliable estimate of fair value can be obtained.

55 Consolidated Financial Report Prepared in Accordance with IFRS

BAWAG P.S.K. exercised the fair value option in the following cases: 4 To avoid an accounting mismatch – For fixed-income own issues, securities held as current financial assets and loans whose fair value on the date of acquisition has been hedged; – Savings deposits whose fair value changes have been hedged with derivatives. 4 Management on a fair value basis – The securities and loans that are managed on a fair value basis by the Asset Liability Committee, which also prepares decisions on the extent of the open interest rate risk exposures. The Managing Board is informed about these positions regularly. 4 Presence of embedded derivatives – Structured financial instruments with embedded derivatives that have to be separated according to IAS 39

c) Loans and Receivables Receivables are recognised on the balance sheet at amortised cost inclusive of deferred interest following deduction of impairment allowances. The fair value is usually computed by determining the present values of the contractually agreed cash flows with a risk-adjusted interest rate.

d) Available-for-Sale Financial Assets This category covers financial assets which are not classified as 4 Loans and receivables; 4 Held-to-maturity investments; or 4 Financial assets recognised at fair value through profit or loss.

In addition to the securities that BAWAG P.S.K. has assigned to the category Available-for-sale financial assets, this item also includes shares in non-consolidated subsidiaries.

The Available-for-sale financial assets are measured at fair value. Changes in the fair value are recognised directly in equity (AFS reserve) until the asset is sold or repaid. Impairments are recognised on the income statement under Impairment provisions for financial assets.

If a fair value cannot be reliably measured for unlisted equity instruments, it is measured at cost according to IAS 39.

Premiums and discounts are recognised pro rata temporis via the effective interest rate. Expenses and ­revenues, respectively, were set off against interest income from the same securities.

56 Consolidated Financial Report Prepared in Accordance with IFRS

e) Financial Liabilities In accordance with IAS 39, financial liabilities not held for trading or designated as Financial liabilities at fair value through profit or loss are measured at amortised cost.

Hedge Accounting BAWAG P.S.K. uses fair value hedge accounting for effective hedging relationships that reduce market risk. In a fair value hedge, an asset or liability is hedged against changes in its fair value, whereby changes in the value of the hedged item and the hedging instrument are recognised in the income statement in the same period. The fair value changes of the hedging instrument as well as the changes in the fair value of the hedged item resulting from the hedged risk are recognised in profit or loss.

As soon as the hedging instrument is sold, exercised or comes due, or when the eligibility requirements for hedge accounting are no longer met, the hedging relationship is no longer recognised on the balance sheet. Any changes in the value of the hedged item are recognised through profit or loss distributed over the remain- der of the term.

Impairment Provisions The impairment provisions cover provisions for potential loan defaults and are formed as individual and general provisions on the basis of past experience. The impairment provisions from lending are netted off against the corresponding receivables on the balance sheet. Provisions for off-balance-sheet loans are reported as provisions.

Impairment provisions are formed for material credit risks in accordance with the risk analysts’ estimates, whereby these estimates are based on the expected future repayments. The approval procedure for impair- ments is described in the handbook on competencies and authorisations. Receivables are derecognised in coordination with the respective divisions when all attempts to collect the debt have failed.

An impairment provision was formed on a portfolio basis in accordance with IAS 39 AG 89 for losses incurred but not detected as of the reporting date. The amount of this provision is calculated on the basis of the Basel II Expected Loss Model. The actual loss that has been incurred is extrapolated from the expected loss, taking into account the duration from occurrence to detection of the loss (the loss identification period or the recognition period).

Treatment of One-Time Fees BAWAG P.S.K. charges a processing fee when awarding a loan to a customer. For the Bank, this is compensa- tion for the costs incurred in awarding the loan. According to IAS 39.9, processing fees must be deferred and recognised over the term of the loan after deducting the directly attributable costs.

57 Consolidated Financial Report Prepared in Accordance with IFRS

Methods for Determining the Fair Value of Financial Instruments To measure exchange-traded instruments such as futures and options on futures, exchange prices are updated on a daily basis.

The basic valuation model used for plain vanilla OTC options is the Black-Scholes option price model, which varies according to the underlying instrument. Currency options are measured using the Garman-Kohlhagen model (adapted Black-Scholes model) and interest rate options are measured using the Black or Hull-White models.

The total value of an interest rate swap is derived from the present values of its fixed and variable rate legs. Similarly, the total value of a cross currency swap is derived from the present values of the two cash flows expressed in terms of the Group’s functional currency.

In the case of foreign currency forwards and futures – i.e. agreements to exchange currency amounts at a future date – the agreed forward rate, which depends on movements in exchange and interest rates for both currencies, is compared with the forward rate on the balance sheet date and the result is used to calculate the instrument’s value.

Valuations by outside experts are also used when measuring complex structures. Appropriate tests and verifi- cations are carried out.

Measurement for the Structured Credit Portfolio Wherever an active market for a transaction exists, quoted market prices are used as fair values.

For structured credit transactions where no active markets exist, fair values are determined by applying a valuation model. The models are, however, calibrated to market data, e.g. liquid indices such as the ABX1), iTraxx2), CDX3) and LCDX4).

For ABS-CDOs (asset backed securities – collateralised debt obligations) with subprime exposure no reliable market prices are available. The model assumptions on cumulative losses and discount rates are extracted from ABX prices (the only liquid market prices for comparable transactions). A cash flow projection model was developed coupled with collateral performance analyses using data on loan level and general market informa- tion (ABX indices, house price indices). The model generates forecasts on each ABS within a CDO, i.e. scenarios on future delinquencies, defaults (CDR – constant default rate), prepayments (CPR – constant prepayment rate) and severities (LGD – loss given default).

1) ABX is a series of marketable indices, each of which references 20 residential mortgage backed securities of subprime loans. 2) iTRAXX is a marketable index composed of credit default swaps of the 125 most liquid investment grade rated European companies. 3) CDX is a marketable index composed of credit default swaps of the 125 most liquid investment grade rated US companies. 4) LCDX is a marketable index referencing 100 US first lien loans.

58 Consolidated Financial Report Prepared in Accordance with IFRS

These scenarios are obtained from historical ABS pool performances and are calibrated to ABX levels as of 31 December 2009, i.e. model prices for ABX indices reflect observed market prices and thus implicitly reflect the default rates and losses anticipated on the market. The applied discount rate is also derived from the ABX indices. BAWAG P.S.K. uses valuation models for its ABS CDOs with subprime exposure which comply with market standards. Nevertheless, it should be noted that any model has inherent limitations.

The valuation model for (synthetic) corporate transactions (e.g. corporate CDOs, CDO²) was developed in compliance with market standards. The model uses market information (iTraxx, CDX, CDS spreads, ratings, interest rates) as of 31 December 2009 to determine the value of a transaction. A single-factor Gaussian copula model is used to extract asset-value correlations from market data; the Monte Carlo method is applied to simulate default events and calculate expected cash flows. To obtain a fair value, the corresponding spot rates are used to discount the calculated expected cash flows of the transaction.

A valuation model for CLOs (collateralised loan obligations) was developed by analogy with the model for synthetic corporate transactions. Current market prices of the loans within the CLOs are used to determine market implied default rates (default intensities) and recovery rates (severities, LGD – loss given default) taking into account a discount margin. Application of a single-factor Gaussian copula model to LCDX tranches yields market implied default correlation. Based on these parameters, market consistent default scenarios are generated for every CLO transaction (Monte Carlo simulation) and the corresponding CLO cash flows are projected. The fair value of the CLO transactions is then derived by discounting the expected cash flows with the reference rate plus a discount margin, where the latter is derived from calibration of the model to actual current CLO trade levels. All market data that are used in the model (loan prices and spreads, LCDX prices, interest rates) are as of 31 December 2009.

Transfers of Financial Instruments Financial instruments are derecognised as soon as the Group is no longer entitled to receive the financial rewards from the instruments. As a rule, this occurs when the rights and obligations under the financial instru- ments pass to a third party by exercise, lapse, sale or assignment or if the Group has lost its right of disposal.

When financial assets are transferred but BAWAG P.S.K. has significant continuing rights and obligations under them, such assets are still reported on the consolidated balance sheet.

Repurchase agreements, also known as “repos” or “sale and repurchase agreements”, are contracts under which financial assets are transferred to a transferee (lender) in return for a cash payment while also specify- ing that the financial assets must later be transferred back to the transferor (borrower) for an amount of money agreed in advance. The financial assets transferred out by BAWAG P.S.K. Group under repurchase agreements remain on the Group’s balance sheet and are measured according to the rules applicable to the respective balance sheet item. The cash received under repo arrangements is recorded within trading liabilities.

59 Consolidated Financial Report Prepared in Accordance with IFRS

Conversely, under agreements to resell, known as “reverse repos”, financial assets are acquired for a consid- eration while at the same time committing to their future resale. Cash outflows under reverse repos are recorded within trading assets.

In securities lending transactions, the lender transfers ownership of securities to the borrower on the condition that the borrower will retransfer, at the end of the agreed loan term, ownership of instruments of the same type, quality and quantity and will pay a fee determined by the duration of the loan. Securities lent to coun- terparties are accounted for in the same way as repos: They are retained in the Group’s financial statements and are measured in accordance with IAS 39. Securities lending and borrowing transactions are generally collateralised. Collateral furnished by the securities borrower continues to be recorded in the borrower’s financial statements.

Intangible Non-Current Assets, Tangible Non-Current Assets Intangible non-current assets consist mainly of acquired goodwill and other acquired intangible assets (in particular software) and projects recognised in accordance with IAS 38.

Intangible non-current assets with an unlimited useful life are measured at cost. Intangible and tangible non-current assets with limited useful lives are measured at cost less straight-line amortisation or deprecia- tion. Buildings are depreciated at an annual rate of between 2.5 and 4 per cent, while other tangible non- current assets are depreciated at annual rates between 5 and 20 per cent. Purchased and self-produced intangible assets (other than goodwill) are amortised at annual rates of 10 per cent and 20 per cent.

Land and buildings held for investment purposes (investment property) are measured at cost less straight-line depreciation which ranges between 2.5 and 4 per cent per year (IAS 40). In addition to reviewing the method of depreciation and useful lives, impairment tests are also performed as of each balance sheet date.

Impairment Testing In accordance with IFRS 3 in conjunction with IAS 36 and IAS 38, the recognised goodwill of all cash generating units (CGUs) is subject to annual impairment testing in accordance with IAS 36. All other equity investments were also tested for impairment.

To calculate CGUs’ expected cash flows for valuation purposes, the present value of the projected pre-tax profit of each CGU or individual entity was determined and discounted using the risk-weighted pre-tax dis- count rate in the market applicable to the CGU in question. As a rule, the planning horizon used for valuation purposes is between three and five years. If there are tax loss carryforwards, the present value of the tax savings is taken into account, increasing the entity’s valuation. Long-term growth rates used in the calculation vary between 2 and 4 per cent.

60 Consolidated Financial Report Prepared in Accordance with IFRS

The discount rate applied is based on yields on long-term Austrian treasury bonds (risk-free base rate of 4.21 per cent). Asset-specific risk premiums, which reflect the risks inherent to a particular asset, are determined individually by sector or industry (beta) and country. Items which were already considered in our planning assumptions are not taken into account in these calculations.

Based on the aforementioned assumptions, the value in use of the CGU or equity investment was calculated for the year under review, in accordance with IAS 36. Value in use represents the present value of the esti- mated future cash flows expected from a cash generating unit. If there is a net realisable value (fair value less costs to sell), such is determined on the basis of exchange prices, offers from third parties or expert assess- ments of the value of the entity. The recoverable amount of an asset is the higher of the net selling price and the value in use.

Leasing For finance leases, the rights of claims against the lessee are recognised in the amount of the present value of the contractually agreed payments, taking any residual value into account. By contrast, operating leases, where BAWAG P.S.K. Group retains all risks and rewards incidental to ownership of the leased asset, are reported under Tangible non-current assets. Each leased asset is depreciated as appropriate. Lease payments received are recognised in the income statement.

Income Taxes and Deferred Taxes According to IAS 12, income taxes must be computed and reported using the balance sheet liability method. The computation is based on the local tax rates that are legally binding at the time the consolidated financial statements are prepared.

Deferred tax assets and liabilities result from the different methods used to measure assets and obligations on the balance sheet under IFRS and the respective tax code. This generally leads to positive or negative differ- ences in the income tax to be paid for future periods (temporary differences). A deferred tax asset is recog- nised for the carryforward of unused tax losses when it is probable that future taxable profit will be generated by the same taxable unit. Deferred tax assets and liabilities are not discounted.

Tax expenses allocable to the taxable profit were recognised in the income statement under Income taxes and broken down into current and deferred income taxes. Other taxes that are not attributable to profit are recog- nised under Other operating income and expenses.

According to IAS 12.34, a deferred tax asset is recognised for tax loss carryforwards if it is probable that future taxable profit will be available against which the unused tax losses can be utilised. As of 31 December 2009 the sum of unused tax losses amount to EUR 2,236 million at the level of BAWAG P.S.K.

61 Consolidated Financial Report Prepared in Accordance with IFRS

The utilisability of unused tax losses by BAWAG P.S.K. was tested on the basis of the Bank’s long-term plan applying an additional contingency charge. The expected utilisation of unused tax losses is projected to amount to EUR 1,130 million. In total, deferred tax assets for tax loss carryforwards in the amount of roughly EUR 283 million (2008: EUR 284 million) are recognised within BAWAG P.S.K. Group.

Provisions According to IAS 19, provisions for post-employment and termination benefits and for jubilee benefits are calculated using the Projected Unit Credit Method.

The present values of obligations outstanding as of the measurement date are calculated on the basis of actuarial assumptions applying an appropriate discount rate and taking into account the expected rates of increase in salaries and post-employment benefits. They are recognised as a provision in the consolidated balance sheet. Actuarial gains and losses are recognised in full in the year in which they are incurred.

The principal parameters underlying the actuarial calculations are:

For post-employment obligations: Interest rate 5.25% p.a. Yield growth 2% p.a. Fluctuation discount individual calculation

For termination benefits and anniversary bonuses: Interest rate 5.25% p.a. Wage growth 4% p.a. Fluctuation discount individual calculation Retirement age 57–65 years *)

*) The earliest possible individual retirement age as per ASVG was assumed.

The parameters used have not been changed compared to 2008.

The generation mortality tables Pensionsversicherung AVÖ 2008-P-Angestellte were used when calculating the social capital reserves.

The post-employment benefit rights of some employees were covered by Allianz Pensionskasse AG and APK-Pensionskasse AG in 2009. The contributions that are made to these pension funds are recognised as expenses in the current period; there are no further obligations.

62 Consolidated Financial Report Prepared in Accordance with IFRS

For one group of BAWAG P.S.K. employees, amounts were transferred to a pension fund in 2005. The eligible pension fund assets from this were used against existing obligations from the defined benefit plan. For this reason, the gross defined benefit obligation for this group of employees is reduced by the eligible assets in the pension fund on 31 December 2009 and 31 December 2008.

The existing post-employment benefit plans in BAWAG P.S.K. Group that are financed entirely through re- serves because they are defined benefit obligations pertain primarily to post-employment benefit rights and future rights of employees of the parent company, BAWAG P.S.K. AG.

The allocated assets disclosed by the pension fund are set off against the determined amounts of provisions for post-employment benefits.

Other long-term employee benefits pertain to reserves for anniversary bonuses.

Other reserves for uncertain obligations to third parties are formed in accordance with the expected amount of the obligation.

Equity Equity is the capital provided by the Bank’s owners (issued capital and capital reserves), participation capital and the capital generated by the Bank (retained earnings, reserves from currency translation, AFS reserve, profit brought forward and the profit for the period). BAWAG P.S.K. has share capital of EUR 250 million divided into 250,000,000 shares.

Participation capital in the amount of EUR 550 million, which comprises of 11,000 participation certificates with a face value of EUR 50,000, is presented in equity.

Latitude of Judgement and Uncertainty of Estimates The measurement of financial instruments and the related estimates in respect of measurement parameters, in particular the future development of interest rates, have a material effect on the results of operations. The parameter values applied by the Bank are derived largely from market conditions prevailing as of the reporting date.

The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in Note 1 Recognition and Measurement Principles. For financial instruments that trade infrequently, calculation of fair value requires varying degrees of judgement depending on liquidity, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

63 Consolidated Financial Report Prepared in Accordance with IFRS

Assessments as to whether or not cash generating units CGUs were unimpaired are based on planning calcula- tions. These naturally reflect the management’s evaluations, which are in turn subject to a degree of predic- tive uncertainty. Similarly, assessments of the recoverability of long-term loans are based on assumptions regarding the borrower’s future cash flows, and these too are subject to a degree of predictive uncertainty.

In these consolidated financial statements for the period ended 31 December 2009, goodwill and deferred tax assets have been recognised, the value of which will depend crucially on the occurrence of projected results in the future. Amounts recognised in connection with the Allegro software system are based on estimates of its future value in use.

Effects of Adopting Amended and New Standards The following standards, amendments and interpretations to existing standards were mandatory for the first time for the 2009 consolidated financial statements: IFRS 8 Operating Segments stipulates the use of the management approach within the framework of segment reporting. IFRS 8 now requires data on the segments which are regularly reported to the chief operating decision maker within the framework of internal reporting for the assessment of the performance of the segments and the allocation of resources. In prior periods, the segments were presented by business areas and geographical regions. Due to the application of the management approach, BAWAG P.S.K. only presents its segment information on the basis of business areas.

The amendment of IAS 1 Presentation of Financial Statements introduces the term “comprehensive income”, which covers all changes in equity not arising from transactions with the owner. Comprehensive income must be presented either in a single statement or in two separate statements (a separate income statement and a statement of all changes in equity not attributable to transactions with the shareholders). The amendment resulted in changes in the income statement and the statement of changes in equity. Comparative information has been represented so that it also is in conformity with the revised standard.

IFRS 7 Financial Instruments – Disclosures requires enhanced disclosures about fair value measurement and liquidity risk. The amendment requires disclosure of the fair value measurement using a fair value measure- ment hierarchy. This amendment only results in additional disclosures and therefore will not have an effect on BAWAG P.S.K.’s consolidated financial statements. The Group has elected not to provide comparative informa- tion for these expanded disclosures in the current year in accordance with the transitional reliefs offered in these amendments.

64 Consolidated Financial Report Prepared in Accordance with IFRS

Amendment of IAS 23 Borrowing Costs has eliminated the option of immediately recognising borrowing costs as expenses and stipulates that borrowing costs which are directly allocable to the acquisition, construction or production of a qualified asset must be capitalised as a part of the asset’s cost. Initial application of the revised standard is mandatory for borrowing costs for qualified assets which are capitalised for the first time on or after 1 January 2009. This amendment has no effect on BAWAG P.S.K.’s consolidated financial state- ments.

IFRS 2 Share-based payment – Vesting Conditions and Cancellations was expanded and now includes further explanations on the vesting conditions. These amendments had no effect on BAWAG P.S.K.’s consolidated financial statements.

IFRIC 13 Customer Loyalty Programmes addresses the accounting methods used by companies which offer their customers bonus programmes or which participate in such. IFRIC 13 does not have an impact on the consolidated financial statements.

IFRIC 15 Agreements for the Construction of Real Estate addresses how entities should determine whether an agreement for the construction of real estate is within the scope of IAS 11 Construction Contracts or IAS 18 Revenue and when revenue from the construction of real estate should be recognised. These requirements have no effect on BAWAG P.S.K.’s consolidated financial statements.

IFRIC 16 Hedges of a Net Investment in a Foreign Operation provides guidance on the detailed requirements for net investment hedging for certain hedge accounting designations.

The amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial State- ments – Puttable Financial Instruments and Obligations Arising on Liquidation allow puttable financial instruments to be classified as equity under certain circumstances. This amendment had no effect on BAWAG P.S.K.’s consolidated financial statements.

The amendments of IFRS 3 Business Combinations have expanded the definition of a “business”. Portions of the purchase price that are contingent on future events are recognised at their fair value. Acquisition-related costs must be recognised immediately as expenses. Shares already held in the business must be remeasured at their fair value at the point at which control is assumed. Non-controlling interests can either be recognised at their fair value or as the non-controlling interest’s proportionate share of the net identifiable assets. This amendment had no effect on BAWAG P.S.K.’s consolidated financial statements.

The following standards, amendments and interpretations to existing standards were approved and endorsed by the International Accounting Standards Board (IASB) and the EU but are not yet mandatory for the pre­ paration of IFRS financial statements for the period ended 31 December 2009:

65 Consolidated Financial Report Prepared in Accordance with IFRS

The amended IAS 27 Consolidated and Separate Financial Statements (2008) requires that changes in the ownership structure are reported as equity transactions as long as the entity retains control of the subsidiary. If the entity loses control of the subsidiary, the remaining interest in the subsidiary must be remeasured at its fair value at the time the sale is effected. IAS 27 (2008) becomes mandatory for the 2010 consolidated financial statements. This standard will be applied prospectively and will therefore have no effect on prior periods.

IFRIC 17 Distributions of Non-cash Assets to Owners provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders. The application has no effect on BAWAG P.S.K.’s consolidated financial statements.

IFRIC 18 Transfers of Assets from Customers addresses the accounting by recipients for transfers of property, plant and equipment from customers and concludes that when the item of property, plant and equipment transferred meets the definition of an asset from the perspective of the recipient, the recipient should recog- nise the asset at its fair value on the date of the transfer, with the credit recognised as revenue in accordance with IAS 18 Revenue.

The following standard has not yet been endorsed by the European Union: The IASB has published IFRS 9 Financial Instruments: Classification and Measurement which is part of the wider project to replace IAS 39 Financial Instruments: Recognition and Measurement over 2010. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impair- ment of financial assets, and on hedge accounting continues to apply. Initial application of IFRS 9 is manda- tory for annual periods beginning on or after 1 January 2013. The standard generally requires retrospective application; however, if an entity adopts the standard for reporting periods beginning before 1 January 2012 it is not required to restate prior periods.

BAWAG P.S.K. plans to apply IFRS 9 before 1 January 2012 and will therefore not restate prior periods. The prospective impact of IFRS 9 is expected to be material but has not yet been determined.

The European Union has not yet endorsed IFRS 9 as the EFRAG has decided to take more time to consider the output from the IASB project to improve accounting for financial instruments.

66 Consolidated Financial Report Prepared in Accordance with IFRS

Details of the Consolidated Balance Sheet

2 | Cash reserves

in millions of Euros 31.12.2009 31.12.2008 Cash on hand 245 279 Balances at central banks 370 438 Cash reserves 615 717

3 | Financial assets designated at fair value through profit or loss

in millions of Euros 31.12.2009 31.12.2008 Bonds and other fixed income securities 1,611 2,396 Public sector debt instruments 19 53 Bonds of other issuers 1,592 2,343 Shares and other variable rate securities 173 218 Investment certificates 51 55 Other 122 163 Loans and advances to customers 1,196 1,434 Customers 1,196 1,434 Designated at fair value through profit or loss 2,980 4,048

The category Financial assets designated at fair value through profit or loss contains all financial instruments that are carried at their fair value on the income statement because the fair value option defined in IAS 39 has been exercised for them. Further information on the fair value option can be found in Note 1.

The maximum default risk of loans and advances to customers equals book value.

67 Consolidated Financial Report Prepared in Accordance with IFRS

4 | Available-for-sale financial assets

in millions of Euros 31.12.2009 31.12.2008 Debt instruments 2,971 2,208 Bonds and other fixed income securities 2,968 2,189 Public sector debt instruments – 104 Bonds of other issuers 2,968 2,085 Other variable rate securities 3 19 Equity investments 279 284 Recognised at cost Investments in non-consolidated subsidiaries 58 61 Interests in associates 72 79 Other shareholdings 149 144 Available-for-sale financial assets 3,250 2,492

Fair value changes on bonds in the amount of EUR 64 million (2008: EUR –49 million) were recognised directly in equity in the AFS reserve.

The following table shows key financial indicators for the Bank’s associates:

Associates not accounted for using the equity method

Cumulated Cumulated Cumulated in millions of Euros assets equity net profit 2009 1,373 174 23 2008 1,020 205 29

68 Consolidated Financial Report Prepared in Accordance with IFRS

5 | Held-to-maturity financial investments

in millions of Euros 31.12.2009 31.12.2008 Bonds and other fixed income securities Public sector debt instruments 2,814 2,553 Bonds of other issuers 3,746 2,813 Held-to-maturity investments 6,560 5,366

6 | Assets held for trading

in millions of Euros 31.12.2009 31.12.2008 Bonds and other fixed income securities 160 248 Public sector debt instruments – 32 Bonds of other issuers 160 216 Positive fair values of derivative financial instruments 1,493 2,213 Derivatives trading book 822 871 Foreign currency derivatives 223 325 Interest rate derivatives 590 505 Credit related derivatives 9 41 Derivatives banking book 671 1,342 Foreign currency derivatives 6 157 Interest rate derivatives 614 723 Credit related derivatives 51 462 Other trading assets 100 – Thereof repurchase agreements 100 – Assets held for trading 1,753 2,461

69 Consolidated Financial Report Prepared in Accordance with IFRS

7 | Loans and receivables

The following breakdown depicts the composition of the item Loans and receivables. The financial assets in this category are recognised at amortised cost.

Allowances Allowances Impaired assets Total 31.12.2009 Unimpaired for ­individually for ­collectively (total gross net carrying assets impaired financial impaired financial in millions of Euros carrying amount) amount assets assets 1) Receivables from credit institutions 3,812 34 -33 – 3,813 Receivables from customers 20,668 1,217 -470 -349 21,066 Central governments 409 – – – 409 Corporates 10,693 353 -180 -2 10,864 Retail 6,405 864 -290 -312 6,667 Other customers 3,161 – – – 3,161 Portfolio impairment provision – – – -35 -35 Total 24,480 1,251 -503 -349 24,879

1) Includes allowances for incurred but not reported losses.

Allowances Allowances Impaired assets Total 31.12.2008 Unimpaired for ­individually for ­collectively (total gross net carrying assets impaired financial impaired financial in millions of Euros carrying amount) amount assets assets 1) Receivables from credit institutions 4,546 37 -34 – 4,549 Receivables from customers 20,444 926 -359 -314 20,697 Central governments 337 – – – 337 Corporates 10,599 187 -126 -1 10,659 Retail 6,825 739 -233 -284 7,047 Other customers 2,683 – – – 2,683 Portfolio impairment provision – – – -29 -29 Total 24,990 963 -393 -314 25,246

1) Includes allowances for incurred but not reported losses.

The Receivables from customers are broken down into the receivables classes specified in the OeNB reporting structure according to the requirements of Basel II.

The category Central governments includes payables from central governments, primarily from the Republic of Austria in the case of BAWAG P.S.K.

The Corporates include larger enterprises with an exposure in excess of EUR 1 million or revenue of over EUR 50 million, and special financing agreements (project finance) as defined in Basel II.

70 Consolidated Financial Report Prepared in Accordance with IFRS

The Retail category covers payables from retail banking. This segment comprises jobholders and small and medium-sized enterprises with an exposure of less than EUR 1 million or revenue of less than EUR 50 million.

The category Other customers covers public sector entities, churches and religious groups, political parties, and securities trading houses without a banking licence.

The Portfolio impairment provision represents a provision for losses incurred but not detected.

Changes in impairment provisions

Impairment provisions Individual and in millions of Euros for incurred but not Total ­collective impairment reported losses Balance as of 1.1.2009 678 29 707 Additions Provisions created through profit or loss 238 6 244 Disposals Changes in the scope of consolidation – – – Used as intended -29 – -29 Provisions released through profit or loss -70 – -70 Balance as of 31.12.2009 817 35 852

Impairment provisions Individual and in millions of Euros for incurred but not Total ­collective impairment reported losses Balance as of 1.1.2008 724 22 746 Additions Provisions created through profit or loss 203 7 210 Disposals Changes in the scope of consolidation -39 – -39 Used as intended -130 – -130 Provisions released through profit or loss -80 – -80 Balance as of 31.12.2008 678 29 707

71 Consolidated Financial Report Prepared in Accordance with IFRS

The impairment provision for significant individual counterparty risks was created on the basis of expected future recoveries. Provisions for counterparty risks that were not individually of significance were created generally, on a percentage basis, depending on the amounts overdue and based on our historical loss experi- ence.

The consolidated financial statements of BAWAG P.S.K. as of and for the period ended 31 December 2009 contain an impairment provision of EUR 34.6 million (2008: EUR 28.8 million) for loan losses incurred but not yet reported. The calculation of these impairment provisions is explained in Note 1.

The impairment provisions break down by region as follows:

in millions of Euros 31.12.2009 31.12.2008 Austria 699 627 Abroad 153 80 Western Europe 83 67 Central and Eastern Europe 65 7 North America 1 1 Asia/Pacific – – Rest of the world 4 5 Impairment provisions 852 707

72 Consolidated Financial Report Prepared in Accordance with IFRS

8 | Receivables from credit institutions and customers

The following breakdown depicts the regional distribution of the receivables from customers and credit institu- tions as of the balance sheet date, based on the location of the counterparty’s registered domicile.

Receivables from credit institutions – Regional breakdown

Designated at fair value At amortised cost Total in millions of Euros through profit or loss 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Austria – – 2,273 3,073 2,273 3,073 Abroad – – 1,540 1,476 1,540 1,476 Western Europe – – 1,275 970 1,275 970 Central and Eastern Europe – – 108 211 108 211 North America – – 41 137 41 137 Asia/Pacific – – 62 50 62 50 Rest of the world – – 54 108 54 108 Receivables from credit ­institutions – – 3,813 4,549 3,813 4,549

Receivables from customers – Regional breakdown

Designated at fair value At amortised cost Total in millions of Euros through profit or loss 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Austria 1,196 1,434 17,184 17,395 18,380 18,829 Abroad – – 3,882 3,302 3,882 3,302 Western Europe – – 1,962 1,329 1,962 1,329 Central and Eastern Europe – – 1,382 1,516 1,382 1,516 North America – – 250 221 250 221 Asia/Pacific – – 7 9 7 9 Rest of the world – – 281 227 281 227 Receivables from customers 1,196 1,434 21,066 20,697 22,262 22,131

73 Consolidated Financial Report Prepared in Accordance with IFRS

The following table depicts the breakdown of receivables from customers and credit institutions by credit type.

Receivables from credit institutions – Breakdown by credit type

Designated at fair value At amortised cost Total in millions of Euros through profit or loss 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Demand deposits – – 183 117 183 117 Time deposits – – 3,238 3,786 3,238 3,786 Loans – – 385 637 385 637 Other – – 7 9 7 9 Receivables from credit institutions – – 3,813 4,549 3,813 4,549

Receivables from customers – Breakdown by credit type

Designated at fair value At amortised cost Total in millions of Euros through profit or loss 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Current accounts – – 1,758 1,967 1,758 1,967 Cash advances – – 728 745 728 745 Loans 1,196 1,434 17,470 16,568 18,666 18,002 One-off loans 1,196 1,434 17,249 16,351 18,445 17,785 Current account loans – – 28 26 28 26 Other – – 193 191 193 191 Debt instruments 1) – – – 5 – 5 Leasing – – 1,110 1,412 1,110 1,412 Receivables from customers 1,196 1,434 21,066 20,697 22,262 22,131

1) Not traded on an active market.

74 Consolidated Financial Report Prepared in Accordance with IFRS

9 | Asset maturities

The following table contains a breakdown of financial assets with a defined maturity by remaining period to maturity:

Up to 3 months 1–5 years Over 5 years Total in millions of Euros 3 months up to 1 year Designated at fair value through profit or loss 31.12.2009 Receivables from customers 4 13 1,085 94 1,196 Receivables from credit institutions – – – – – Bonds and other fixed-income securities 58 419 797 337 1,611 31.12.2008 Receivables from customers 5 14 66 1,349 1,434 Bonds and other fixed-income securities 127 440 1,239 590 2,396 Available-for-sale financial assets 31.12.2009 Bonds and other fixed-income securities 226 1,064 1,627 51 2,968 31.12.2008 Bonds and other fixed-income securities – 51 2,103 35 2,189 Held-to-maturity investments 31.12.2009 Bonds and other fixed-income securities 196 689 3,174 2,501 6,560 31.12.2008 Bonds and other fixed-income securities 708 1,016 1,982 1,660 5,366 Loans and receivables 31.12.2009 Receivables from customers 4,044 1,670 6,250 9,102 21,066 Receivables from credit institutions 3,527 148 68 70 3,813 Bonds and other fixed-income securities – – – – – 31.12.2008 Receivables from customers 4,187 1,472 5,857 9,176 20,692 Receivables from credit institutions 3,990 219 274 66 4,549 Bonds and other fixed-income securities – – – 5 5

75 Consolidated Financial Report Prepared in Accordance with IFRS

10 | Tangible non-current assets

Changes in tangible non-current assets 2009

Depreciation Change in Change in Change (-), impair­ Carrying Acquisition scope of scope of Carrying in foreign Write-downs ments (-) and amount cost ­consolidation ­consolidation Additions Disposals Reallocations amount in millions of Euros exchange cumulative reversal of im- 31.12.2008 01.01.2009 Acquisition Cumulative 31.12.2009 differences pairments (+) cost depreciation Financial year Tangible non-current assets 379 1,052 5 -4 – 21 -153 – -638 287 -43 Land and buildings used by the enterprise for its own operations 186 293 – – – – -51 – -103 139 -3 Investment properties 82 149 – – – 7 -29 – -63 64 -4 Office furniture and equipment 110 609 5 -4 – 14 -73 – -472 83 -35 Plant under construction 1 1 – – – – – – – 1 -1

Changes in tangible non-current assets 2008

Depreciation Change in Change in Change (-), impair­ Carrying Acquisition scope of scope of Carrying in foreign Write-downs ments (-) and amount cost ­consolidation ­consolidation Additions Disposals Reallocations amount in millions of Euros exchange cumulative reversal of im- 31.12.2007 01.01.2008 Acquisition Cumulative 31.12.2008 differences pairments (+) cost depreciation Financial year Tangible non-current assets 493 1,192 -127 52 10 23 -46 – -673 379 -63 Land and buildings used by the enterprise for its own operations 255 368 -83 20 7 4 -3 – -107 186 -15 Investment properties 94 154 -2 1 – 2 -5 – -67 82 -8 Office furniture and equipment 143 669 -42 31 3 16 -38 1 -499 110 -40 Plant under construction 1 1 – – – 1 – -1 – 1 –

The line item Investment properties include the real estate that met the criteria for designation as investment real estate within the meaning of IAS 40.5. These were properties primarily held to earn rentals. To a small degree, the Bank also used some of these properties itself. However, because these portions could not be sold separately and were insignificant for the purposes of IAS 40.10, the entirety of such properties was included in Investment properties (100 per cent of most of these properties being used by third parties).

76 Consolidated Financial Report Prepared in Accordance with IFRS

11 | Intangible non-current assets

The core banking system Allegro is one of the Bank’s most important intangible assets. Of the total carrying amount for all intangible non-current assets, EUR 155 million can be attributed to Allegro projects carried out in this context. Allegro’s remaining average useful life is 4.5 years.

Changes in intangible non-current assets 2009

Change in Change in Amortisation (-), Change Carrying Acquisition scope of scope of Carrying impairments (+) in foreign Write-downs amount cost ­consolidation ­consolidation Additions Disposals Reallocations amount and reversal of in millions of Euros exchange cumulative 31.12.2008 01.01.2009 Acquisition Cumulative 31.12.2009 impairments (+) differences cost amortisation Financial year Intangible non- current assets 295 526 10 -4 – 5 – – -275 266 -40 Goodwill 88 116 – – – – – – -31 85 -2 Software and other intangible non-­ current assets 207 410 10 -4 – 4 – – -244 180 -38 Thereof purchased 139 270 10 -4 – 4 – – -160 124 -26 Thereof internally generated 68 140 – – – – – – -84 56 -12 Intangible non-­ current assets in development – – – – – 1 – – – 1 – Thereof purchased – – – – – 1 – – – 1 –

Changes in intangible non-current assets 2008

Change in Change in Amortisation (-), Change Carrying Acquisition scope of scope of Carrying impairments (+) in foreign Write-downs amount cost ­consolidation ­consolidation Additions Disposals Reallocations amount and reversal of in millions of Euros exchange cumulative 31.12.2007 01.01.2008 Acquisition Cumulative 31.12.2008 impairments (+) differences cost amortisation Financial year Intangible non-­ current assets 383 571 -66 20 6 9 -3 – -222 295 -50 Goodwill 131 146 -33 – 3 – – – -28 88 -12 Software and other intangible non-­ current assets 248 423 -29 20 3 7 -3 – -194 207 -38 Thereof purchased 168 292 -29 20 3 7 -3 – -131 139 -25 Thereof internally generated 80 140 – – – – – – -72 68 -13 Intangible non-­ current assets in development 4 2 -4 – – 2 – – – – – Thereof purchased 4 2 -4 – – 2 – – – – –

77 Consolidated Financial Report Prepared in Accordance with IFRS

The following table shows the goodwill recognised as of 31 December 2009:

Goodwill

in millions of Euros 31.12.2009 31.12.2008 BAWAG P.S.K. Fuhrparkleasing GmbH, Vienna 1 1 BAWAG P.S.K. Invest GmbH, Vienna 75 75 easybank AG, Vienna 1 1 Österreichische Verkehrskreditbank AG, Vienna 8 11 Goodwill 85 88

12 | Other assets

in millions of Euros 31.12.2009 31.12.2008 Tax assets 292 366 Thereof for current taxes 29 27 Thereof for deferred taxes 263 339 Associates accounted for using the equity method 30 24 Accruals 34 41 Leasing objects not in operation 49 – Other items 170 81 Merchandise inventories 27 35 Other assets 602 547

The following table shows key financial indicators for the Bank’s associates:

Associates accounted for using the equity method

in millions of Euros Cumulated assets Cumulated equity Cumulated net profit 2009 1,688 34 -19 2008 1,597 -3 -65

78 Consolidated Financial Report Prepared in Accordance with IFRS

The deferred tax assets reported on the balance sheet are the result of temporary differences between the carrying amounts pursuant to IFRS and the valuations of the following items according to the tax require- ments:

Net deferred tax assets on balance sheet

in millions of Euros 31.12.2009 31.12.2008 Financial assets designated at fair value through profit or loss 47 141 Available-for-sale financial assets – 4 Held-to-maturity investments 1 2 Loans and receivables 10 9 Hedging derivatives 7 6 Financial liabilities designated at fair value through profit or loss 22 4 Provisions 29 26 Tax loss carryforwards 283 284 Other 5 3 Deferred tax assets 404 479 Financial assets designated at fair value through profit or loss 21 13 Available-for-sale financial assets 27 16 Held-to-maturity investments 2 3 Assets held for trading 66 76 Loans and receivables – 2 Internally generated intangible assets 14 17 Tangible non-current assets 11 13 Other – – Deferred tax liabilities 141 140 Net deferred tax assets on balance sheet 263 339

For each Group member, the deferred tax assets and liabilities pertaining to the same local tax authority were offset against each other and reported under Other assets or Tax provisions.

79 Consolidated Financial Report Prepared in Accordance with IFRS

13 | Financial liabilities designated at fair value through profit or loss

in millions of Euros 31.12.2009 31.12.2008 Payables to customers 435 441 Savings deposits 435 346 Other deposits – 95 Issued bonds, subordinated and supplementary capital 5,936 6,413 Issued bonds 3,566 4,321 Subordinated capital 847 836 Supplementary capital 31 29 Other obligations evidenced by paper 1,492 1,227 Financial liabilities designated at fair value through profit or loss 6,371 6,854

The savings deposits concern savings products whose fair value is hedged by derivatives.

The Issued bonds are listed issues, the Other obligations evidenced by paper are short-term notes and non- listed private placements.

The carrying amount of the securities issued by BAWAG P.S.K. and recognised at their fair value as of 31 December 2009 was EUR 33 million above their nominal value (2008: EUR 58 million below the nominal value). The carrying amount of the savings deposits recognised at their fair value was EUR 13 million above their nominal value (2008: EUR 2 million).

14 | Liabilities held for trading

in millions of Euros 31.12.2009 31.12.2008 Negative fair values of derivative financial instruments 1,372 1,878 Derivatives trading book 861 903 Foreign currency derivatives 235 326 Interest rate derivatives 611 528 Credit related derivatives 15 49 Derivatives banking book 511 975 Foreign currency derivatives 180 231 Interest rate derivatives 228 284 Credit related derivatives 103 460 Other trading liabilities 826 648 Thereof repurchase agreements 826 643 Liabilities held for trading 2,198 2,526

80 Consolidated Financial Report Prepared in Accordance with IFRS

15 | Financial liabilities measured at amortised cost in millions of Euros 31.12.2009 31.12.2008 Payables to credit institutions 3,468 3,668 Payables to customers 22,674 22,585 Savings deposits 1) 14,220 15,085 Other deposits 8,454 7,500 Issued bonds, subordinated and supplementary capital 3,343 3,703 Issued bonds 1,808 1,919 Subordinated capital 256 175 Supplementary capital 325 316 Other obligations evidenced by paper 954 1,293 Financial liabilities at amortised cost 29,485 29,956

1) Excluding savings deposits recognised at fair value which are disclosed in Note 13 (Financial liabilities designated at fair value through profit or loss).

The bonds issued by BAWAG P.S.K. were listed securities. The Other obligations evidenced by paper were short-term notes and unlisted private placements.

16 | Payables to credit institutions and customers

The following breakdown depicts the regional distribution of the payables to customers and credit institutions as of the balance sheet date, based on the location of the counterparty’s registered domicile.

Payables to credit institutions – Regional breakdown

Designated at fair value At amortised cost Total in millions of Euros through profit or loss 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Austria – – 2,226 2,209 2,226 2,209 Abroad – – 1,242 1,459 1,242 1,459 Western Europe – – 814 567 814 567 Central and Eastern Europe – – 22 6 22 6 North America – – 20 238 20 238 Asia/Pacific – – – 88 – 88 Rest of the world – – 386 560 386 560 Payables to credit institutions – – 3,468 3,668 3,468 3,668

81 Consolidated Financial Report Prepared in Accordance with IFRS

Payables to customers – Regional breakdown

Designated at fair value At amortised cost Total in millions of Euros through profit or loss 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Austria 429 337 22,095 22,029 22,524 22,366 Abroad 6 104 579 556 585 660 Western Europe 4 103 298 341 302 444 Central and Eastern Europe 2 1 201 146 203 147 North America – – 21 22 21 22 Asia/Pacific – – 8 11 8 11 Rest of the world – – 51 36 51 36 Payables to customers 435 441 22,674 22,585 23,109 23,026

The following table depicts the breakdown of payables to customers and credit institutions by sector.

Payables to customer – Breakdown by sector

Designated at fair value At amortised cost Total in millions of Euros through profit or loss 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Savings deposits 435 346 14,220 15,085 14,655 15,431 Savings accounts – – 6,651 6,681 6,651 6,681 Savings associations – – 416 402 416 402 Fixed-term investment savings accounts 435 346 7,153 8,002 7,588 8,348 Other deposits – 95 8,454 7,500 8,454 7,595 Central governments – – 412 377 412 377 Non credit institutions – – 489 583 489 583 Corporates – 95 3,137 2,909 3,137 3,004 Customers – – 4,416 3,631 4,416 3,631 Payables to customers 435 441 22,674 22,585 23,109 23,026

82 Consolidated Financial Report Prepared in Accordance with IFRS

17 | Liabilities maturities

The following table depicts a breakdown of the financial liabilities by maturity.

Up to 3 months 1–5 years Over 5 years Total in millions of Euros 3 months up to 1 year Liabilities designated at fair value through profit or loss 31.12.2009 Payables to customers 43 40 27 325 435 Bonds, subordinated and supplementary capital 39 1,217 2,495 2,185 5,936 31.12.2008 Payables to customers 133 34 24 250 441 Bonds, subordinated and supplementary capital 68 748 2,441 3,156 6,413 Liabilities at amortised cost 31.12.2009 Payables to customers 10,721 2,586 4,175 5,192 22,674 Payables to credit institutions 1,553 1,075 333 507 3,468 Bonds, subordinated and supplementary capital 101 848 912 1,482 3,343 31.12.2008 Payables to customers 9,310 5,736 2,469 5,070 22,585 Payables to credit institutions 2,243 511 332 582 3,668 Bonds, subordinated and supplementary capital 289 225 1,636 1,553 3,703

Of the three hybrid notes issued to date (BCF, BCF II, BCF III), the terms of one (BCF) provide for a coupon step-up at its first calling date, whereas no changes in the terms of the other two notes (BCF II, BCF III) are provided for during their maturity. In the case of the BCF and BCF III notes, the coupon will change from fixed to variable on the first calling date. Only the issuer has an ordinary right of redemption. The calling dates of the notes are as follows:

4 BCF: the first calling date is 31 October 2010, and quarterly thereafter 4 BCF II: callable quarterly 4 BCF III: first calling date is 5 April 2014, and semi-annually thereafter

83 Consolidated Financial Report Prepared in Accordance with IFRS

18 | Provisions

in millions of Euros 31.12.2009 31.12.2008 Severance payments 89 92 Pension provision 236 240 Jubilee benefits 31 30 Tax provisions 19 22 Thereof for current taxes 4 5 Thereof for deferred taxes 15 17 Anticipated losses on pending business 17 27 Credit promises and guarantees 2 12 Provisions for troubled contracts 15 15 Other items 49 51 Provisions for pending litigation 43 45 Other 6 6 Provisions 441 462

84 Consolidated Financial Report Prepared in Accordance with IFRS

Changes in social capital

Provisions for post- Provisions for Provisions for Total social in millions of Euros employment benefits ­severance payments jubilee benefits capital Defined benefit obligation as of 01.01.2009 245 92 30 367 Service cost 1 5 2 8 Interest cost 12 4 1 17 Payments -13 -4 -1 -18 Others 5 – – 5 Actuarial gain as of 31.12.2009 -3 -8 -1 -12 Defined benefit obligation as of 31.12.2009 247 89 31 367 Fair value of plan assets -11 – – -11 Balance as of 31.12.2009 236 89 31 356

Provisions for post- Provisions for Provisions for Total social in millions of Euros employment benefits ­severance payments jubilee benefits capital Balance as of 01.01.2008 242 96 34 372 Service cost 1 6 2 9 Interest cost 11 4 2 17 Payments -12 -4 -1 -17 Actuarial gain as of 31.12.2008 5 -10 -7 -12 Elimination from scope of ­consolidation -2 – – -2 Defined benefit obligation as of 31.12.2008 245 92 30 367 Fair value of plan assets -5 – – -5 Balance as of 31.12.2008 240 92 30 362

85 Consolidated Financial Report Prepared in Accordance with IFRS

Assignable unit-linked pension fund assets

in millions of Euros 2009 2008 Pension fund assets as of 1 January 5 6 Additions 5 – Fair value changes 1 -1 Pension fund assets as of 31 December 11 5

The Fair value changes contain expected return on plan assets, actuarial gains and losses, contributions by the employer, contributions by plan participants and benefits paid.

Changes in tax and other provisions

Disposal Balance Balance in millions of Euros Added Used Released scope of 01.01.2009 31.12.2009 ­consolidation Tax provisions 22 2 -1 -4 – 19 Current taxes 5 1 – -2 – 4 Deferred taxes 17 1 -1 -2 – 15 Other provisions 78 6 -4 -14 – 66 Anticipated losses from ­pending business 27 1 – -11 – 17 Other items 51 5 -4 -3 – 49

Disposal Balance Balance in millions of Euros Added Used Released scope of 01.01.2008 31.12.2008 ­consolidation Tax provisions 31 2 -2 -8 -1 22 Current taxes 12 2 -1 -8 – 5 Deferred taxes 19 – -1 – -1 17 Other provisions 121 14 -49 -7 -1 78 Anticipated losses from ­pending business 24 9 -1 -5 – 27 Other items 97 5 -48 -2 -1 51

Other items mainly comprise provisions for pending legal proceedings.

86 Consolidated Financial Report Prepared in Accordance with IFRS

Provisions for deferred taxes

The deferred tax liabilities reported on the balance sheet are the result of temporary differences between the carrying amounts pursuant to IFRS and the valuations of the following items according to the tax require- ments:

in millions of Euros 31.12.2009 31.12.2008 Financial assets designated at fair value through profit or loss – 1 Available-for-sale financial assets 7 7 Loans and receivables 1 1 Tangible non-current assets 3 4 Other 4 4 Deferred tax liabilities 15 17 Net deferred tax liabilities on Balance Sheet 15 17

Temporary differences for which no deferred tax liabilities were recognised, as permitted by IAS 12.39, came to EUR 458 million (2008: EUR 706 million).

19 | Other obligations

in millions of Euros 31.12.2009 31.12.2008 Other liabilities 347 372 Accruals 31 32 Other obligations 378 404

20 | Hedging derivatives

in millions of Euros 31.12.2009 31.12.2008 Hedging derivatives in fair value hedges Positive market values 33 27 Negative market values 60 50

87 Consolidated Financial Report Prepared in Accordance with IFRS

BAWAG P.S.K. uses fair value hedge accounting to account for hedges of interest rate risk inherent in fixed- rate financial instruments. Interest rate swaps are usually used as hedging instruments. The hedged items are securities in the category Available-for-sale financial assets as well as the Bank’s own issues and savings accounts that are recognised at amortised cost.

The effects of changes in the value of the hedging instrument and the hedged item are described under item 24 Gains and losses on financial assets and liabilities.

21 | Equity

Participation Capital Pursuant to the agreement in principle concluded with the Republic of Austria on the subscription of partici- pation capital and the subscription agreement, the Republic of Austria subscribed 11,000 participation certificates with a nominal value of EUR 50,000 each, for total participation capital of EUR 550 million in 2009.

The holders of the participation certificates are entitled to a dividend of 9.3 per cent p.a., which will increase by 0.5 per cent in both 2014 and 2015, by 0.75 per cent in 2016, and by 1.0 per cent every financial year starting in 2017. This dividend is capped at the amount of the twelve-month Euribor plus 10.0 per cent p.a.

A dividend may only be paid on participation certificates when it is covered by the profit for the prior financial year after changes in reserves in accordance with UGB and a corresponding motion is passed by the Annual General Meeting of BAWAG P.S.K. The dividend shall be paid at the discretion of BAWAG P.S.K.; the presence of distributable profits does not obligate the Bank to pay a dividend.

The participation certificates are issued for an indefinite period of time, but can be redeemed by the issuer in accordance with the legal requirements. The holders of the participation certificates waive their right to the ordinary and extraordinary termination of the certificates.

The participation capital will be reported as equity capital in BAWAG P.S.K.’s consolidated financial state- ments; dividend disbursements for the participation capital will be reported as appropriation of profits. The participation capital will be recognised as supervisory core capital for the purposes of calculating the Bank’s own funds pursuant to the Austrian Banking Act.

In 2010, BAWAG P.S.K. plans to pay a dividend of EUR 25.6 million to the holders of the participation capital related to the performance in 2009.

88 Consolidated Financial Report Prepared in Accordance with IFRS

Changes in reserves

Foreign Equity Capital Retained Equity w/o Minority AFS reserve exchange ­including in millions of Euros 2009 ­reserves reserves minorities ­interests ­differences minorities Total comprehensive income – -22.2 48.2 – 26.0 195.1 221.1 Consolidated profit/loss – -22.2 – – -22.2 195.1 172.9 Income and expenses recognised directly in equity Changes in AFS reserves – – 63.5 – 63.5 – 63.5 Income and expenses ­recognised directly in equity (before taxes) – – 68.2 – 68.2 – 68.2 Reclassified due to realised profit/loss (before taxes) – – -4.7 – -4.7 – -4.7 Income taxes – – -15.3 – -15.3 – -15.3

Foreign Equity Capital Retained Equity w/o Minority AFS reserve exchange ­including in millions of Euros 2008 ­reserves reserves minorities ­interests ­differences minorities Total comprehensive income -456.5 -91.5 -36.8 -29.2 -614.0 -167.3 -781.3 Release of capital reserves -456.5 456.5 – – – – – Change in scope of consolidation – -0.5 – – -0.5 – -0.5 Consolidated profit/loss – -547.5 – – -547.5 -167.3 -714.8 Income and expenses recognised directly in equity Foreign exchange differences – – - -29.2 -29.2 – -29.2 Changes in AFS reserves – – -49.1 – -49.1 – -49.1 Income and expenses ­recognised directly in equity (before taxes) – – -49.1 – -49.1 – -49.1 Reclassified due to realised profit/loss (before taxes) – – – – – – – Income taxes – – 12.3 – 12.3 – 12.3

89 Consolidated Financial Report Prepared in Accordance with IFRS

Details of the Consolidated Income Statement

22 | Net interest income

in millions of Euros 2009 2008 Interest income 1,584.8 2,205.1 Cash reserves 5.7 17.8 Financial assets held for trading 202.9 190.7 Financial assets designated at fair value through profit or loss 134.0 285.9 Available-for-sale financial assets 103.2 60.9 Loans and receivables 886.9 1,406.2 Held-to-maturity investments 252.1 243.6 Interest expenses -1,028.1 -1,559.7 Financial liabilities held for trading -99.9 -231.4 Financial liabilities designated at fair value through profit or loss -288.1 -319.7 Financial liabilities measured at amortised cost -640.1 -1,006.3 Other liabilities – -2.3 Dividend income 7.6 7.1 Available-for-sale financial assets 7.6 7.1 Net interest income 564.3 652.5

Insofar as receivables were likely to be collectible, interest income and similar income were recognised on an accrual basis. Interest income also includes premiums on securities classified as financial investments on the accrual basis of accounting. Interest income on impaired receivables during 2009 came to EUR 10.8 million (2008: EUR 14.3 million).

23 | Net fee and commission income

Net fee and commission income can be broken down by BAWAG P.S.K. operations as follows:

in millions of Euros 2009 2008 Payment transfers 151.1 146.0 Lending 26.1 26.1 Securities and custody business 36.2 33.9 Foreign business, currency and notes-and-coin business 0.4 0.9 Payments to Österreichische Post AG -80.5 -79.5 Other services 21.5 16.5 Net fee and commission income 154.8 143.9

90 Consolidated Financial Report Prepared in Accordance with IFRS

24 | Gains and losses on financial assets and liabilities

in millions of Euros 2009 2008 Realised gains and losses on financial assets and liabilities not measured at fair value through profit or loss, net -27.1 262.8 Available-for-sale financial assets 10.0 -0.7 Loans and receivables (including finance leases) -2.1 – Held-to-maturity investments -35.1 -4.3 Financial liabilities measured at amortised cost 0.1 0.5 Gain from the sale of consolidated subsidiaries – 267.3 Gains (losses) on financial assets and liabilities held for trading, net 96.1 4.0 Interest rate instruments and related derivatives -46.0 97.9 Foreign exchange trading 4.8 4.2 Credit risk instruments and related derivatives 137.3 -98.1 Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net 266.1 -872.6 Gains (losses) from fair value hedge accounting -10.2 -1.7 Fair value adjustment of hedged item -6.7 22.0 Fair value adjustment of hedging instrument -3.5 -23.7 Exchange differences revaluations, net 0.6 11.7 Gains and losses on financial assets and liabilities 325.5 -595.8

The item Realised gains and losses on financial assets and liabilities is driven primarily by the ongoing restructuring of our investments and the narrowing of credit spreads.

In 2009, the Bank’s structured credit portfolio generated fair value gains in the amount of EUR 145.4 million. This item also includes valuation gains that are attributed to minority shareholders in the amount of EUR 186.6 million.

As part of the further de-risking of the structured credit portfolio, high-risk securities were sold in 2009. Due to our conservative valuation as of 31 December 2008, these transactions generated realised profits compared to book value of EUR 45.9 million. Restructuring costs in the amount of EUR 10.0 million were also recognised in the income statement.

Because of the narrower spreads, the fair values of the Bank’s issued securities rose and caused expenses of EUR 55.1 million (after netting with the valuation results of the associated derivatives) from the Bank’s issued securities designated at fair value through profit or loss.

91 Consolidated Financial Report Prepared in Accordance with IFRS

25 | Other operating income and expenses

in millions of Euros 2009 2008 Net income from investment properties 3.8 5.0 Net income from the sale of tangible and intangible non-current assets 7.0 0.1 Net income from operating leasing – 0.3 Net income from retailing -9.2 -5.7 Other income and expenses 28.3 14.4 Other operating income and expenses 29.9 14.1

Other operating income increased mainly due to a payment received after the settlement of an indemnity claim.

Income from investment properties amounted to EUR 6.8 million in 2009 (2008: EUR 7.5 million); expenses rose to EUR 2.5 million in 2009 (2008: EUR 2.2 million). Vacancy costs amounted to EUR 0.4 million (2008: EUR 0.4 million).

92 Consolidated Financial Report Prepared in Accordance with IFRS

26 | Administrative expenses

in millions of Euros 2009 2008 Staff costs -338.5 -375.1 Wages and salaries -259.6 -287.4 Statutory social security contributions -60.5 -65.7 Voluntary fringe benefits -3.8 -4.3 Post-employment benefit costs -6.0 -6.5 (Increase) decrease of pension provision -8.7 -16.5 (Increase) decrease of provision for severance payments 2.6 1.9 (Increase) decrease of provision for jubilee benefits -1.4 4.1 Staff benefit fund costs -1.1 -0.7 Other administrative expenses -178.8 -242.3 Administrative expenses -517.3 -617.4

Post-employment benefit costs include payments to pension funds under defined contribution plans.

Other administrative expenses include, among others, advertising expenses, advisory fees, rental expenses and IT costs.

Administrative expenses were reduced by optimising the cost base in the Bank and its subsidiaries, by reducing costs for third-party services, IT costs, real estate and legal expenses as well as by optimising our advertising strategy.

27 | Depreciation and amortisation on tangible and intangible non-current assets

in millions of Euros 2009 2008 Depreciation and amortisation Intangible non-current assets -37.8 -37.7 Tangible non-current assets -42.6 -49.8 Depreciation and amortisation -80.4 -87.5

93 Consolidated Financial Report Prepared in Accordance with IFRS

28 | Provisions and impairment losses

in millions of Euros 2009 2008 Changes in provisions 7.9 -6.6 Impairment losses on financial assets -241.5 -249.0 Impairment losses on non-financial assets -3.1 -25.8 Provisions and impairment losses -236.7 -281.4

Impairment losses on financial assets

in millions of Euros 2009 2008 Financial assets measured at cost -8.8 -7.1 Held-to-maturity investments at amortised cost -50.3 -82.4 Loans and receivables at amortised cost (including finance leases) -182.4 -159.5 Direct write-downs and charges for losses on loans and advances to credit institutions and customers -252.9 -241.4 Released from loan loss provisions for loans and advances to credit ­institutions and customers 69.5 80.4 Recoveries on loans previously written off 1.0 1.5 Impairment losses on financial assets not measured at fair value through profit or loss -241.5 -249.0

Of the impairment losses on held-to-maturity investments, EUR 48.1 million (2008: EUR 82.1 million) can be attributed to the structured credit portfolio.

94 Consolidated Financial Report Prepared in Accordance with IFRS

Impairment losses on non-financial assets

The following table depicts the impairments and reversal of impairments made on individual non-financial assets.

in millions of Euros 2009 2008 Property, buildings and equipment 0.5 -7.8 Investment property -1.0 -5.4 Intangible non-current assets -2.6 -12.6 Goodwill -2.6 -12.8 Other intangible non-current assets – 0.2 Impairment losses on non-financial assets -3.1 -25.8

29 | Share of the profit or loss of associates accounted for using the equity method

The loss reported for the current year is primarily due to the proportionate share in BAWAG P.S.K. ­Versicherung AG and ZEUS Recovery Fund S.A.

The unrecognised share of the losses of entities that were accounted for using the equity method as provided by IAS 28.37 (g) came to EUR 0.0 million (2008: EUR 0.0 million).

30 | Income taxes

Income taxes recognised in profit or loss

in millions of Euros 2009 2008 Current tax income / expense 0.6 2.8 Deferred tax income / expense -59.8 86.5 Income taxes -59.2 89.3

95 Consolidated Financial Report Prepared in Accordance with IFRS

The following reconciliation shows the relationship between computed tax expenses and reported tax ­expenses:

in millions of Euros 2009 2008 Profit (loss) before tax 232.1 -804.1 Tax rate 25% 25% Computed tax credits (expenses) -58.0 201.0 Reductions in tax Due to tax-exempt income from equity investments – 1.2 Due to gains on disposal of equity investments – 55.6 Due to tax neutral revaluations 51.8 – Due to other tax-exempt income 2.6 2.7 Due to differing foreign tax rates 4.1 8.3 Due to other tax effects 8.1 5.1 Increases in tax Due to the sale of equity investments – – Due to gains and losses from the valuation of equity investments -1.4 -12.4 Due to unrecognised deferred taxes on tax loss carryforwards -64.7 -178.1 Due to non-allowable expenses -1.5 -0.5 Due to other tax effects -1.4 -0.1 Income tax in the period -60.4 82.8 Out-of-period income tax 1.2 6.5 Reported income tax -59.2 89.3

The Group’s assets included deferred tax assets accounted for on the grounds of the recognised benefits arising from as yet unused tax losses in the amount of EUR 283 million (2008: EUR 283 million). The majority of the tax losses could be carried forward for an unlimited period. The untaxed portion of the liability reserve was EUR 317.6 million (2008: EUR 317.6 million).

Income taxes recognised directly in equity

Before Income After Before Income After in millions of Euros taxes taxes taxes taxes taxes taxes 1–12/2009 1–12/2008 Foreign exchange differences – – – -29.2 – -29.2 Change in scope of consolidation – – – -0.5 – -0.5 AFS reserve 63.5 -15.3 48.2 -49.1 12.3 -36.8 Income and expenses recognised directly in equity 63.5 -15.3 48.2 -78.8 12.3 -66.5

96 Consolidated Financial Report Prepared in Accordance with IFRS

Further Disclosures Required by IFRS

31 | Fair value

The following table depicts the fair values of the balance sheet items. These are the amounts for which assets could have been exchanged, or liabilities settled, between knowledgeable, willing parties in an arm’s length transaction on the balance sheet date. If market prices were available on a stock exchange or other function- ing market, they were used.

If no current, liquid market values were available, generally accepted, standard state-of-the-art methods of measurement were used. This applies to the category liabilities evidenced by paper (issued by BAWAG P.S.K.), structured credit transactions for which there are no active markets, and, in individual cases, other current financial assets in the Bank’s trading portfolio where the valuation of plain vanilla securities was performed on the basis of the yield curve plus the current credit spread.

The measurement to fair value of customers’ business was carried out by applying credit spreads for each customer category. The blanket credit spreads are applied for the following customer categories: credit institutions, commercial customers, public sector, and private customers, for which mortgage loans and other loans are considered separately. The credit spreads in customer business are derived by analysing both external data (market developments and OeNB statistics) and internal default statistics.

Linear derivative financial instruments containing no optional components (such as interest rate swaps, currency forwards and futures), were also recognised using a present value technique (discounting of future cash flows applying the current swap curve).

Optional instruments were measured using option price models such as Black Scholes (swaptions, caps, floors), Garman-Kohlhagen (currency options) or the Hull-White model (swaps with multiple cancellation rights), which were implemented and applied consistently in the front office systems.

The basic parameters on which the models are based (yield curves, volatilities, and exchange rates) are input into the system by the Market Risk unit independently of the Treasury division, which ensures the separation of front office functions from back office processing and control.

For more complex derivatives that are held for hedging purposes and that are concluded back to back, exter- nal valuations are obtained by the Market Risk unit in isolated cases and input into the systems for correct processing.

97 Consolidated Financial Report Prepared in Accordance with IFRS

Standard providers such as Bloomberg (spreads from benchmark bonds) and Markit (to evaluate the term structure) are used to evaluate the spreads of issued securities recognised at fair value through profit or loss. The securities prices for BAWAG P.S.K. issues are then calculated by discounting the swap curve adapted by the spread.

In 2009, the portion of the change in the fair values of the securities issued by BAWAG P.S.K. accounted for solely by changes in our credit spreads (following the netting of asset and liability portfolios) was EUR –58 million. As of 31 December 2009 the cumulative fair value change resulting from changes in our credit rating amounted to EUR 240 million.

In the year thereafter, a one basis point narrowing of the credit spread would have been expected to reduce their fair value by EUR 1.5 million.

The cumulative fair value change of receivables recognised at fair value through profit or loss that was recog- nised due to changes in credit spreads amounted to EUR 0 million as of 31 December 2009 (EUR 2 million as of 31 December 2008).

The carrying amount was used as the fair value for part of the interest-bearing receivables and payables without fixed interest periods.

98 Consolidated Financial Report Prepared in Accordance with IFRS

Fair values of selected items on the balance sheet The following table depicts a comparison of the carrying amounts and fair values for selected items on the balance sheet.

Carrying Carrying Fair value Fair value in millions of Euros amount amount 12/2009 12/2008 12/2009 12/2008 Assets Cash reserves 615 615 717 717 Financial assets designated at fair value through profit or loss 2,980 2,980 4,048 4,048 Available-for-sale financial assets 3,250 3,250 2,492 2,492 Held-to-maturity investments 6,560 6,632 5,366 4,956 Assets held for trading 1,753 1,753 2,461 2,461 Loans and receivables 24,879 25,160 25,246 25,592 Hedging derivatives 33 33 27 27 Tangible non-current assets 287 n/a 379 n/a Investment properties 64 70 82 92 Intangible non-current assets 266 n/a 295 n/a Other assets 602 n/a 547 n/a Total assets 41,225 41,578

Equity and liabilities Financial liabilities designated at fair value through profit or loss 6,371 6,371 6,854 6,854 Liabilities held for trading 2,198 2,198 2,526 2,526 Financial liabilities designated at amortised cost 29,485 29,669 29,956 29,817 Hedging derivatives 60 60 50 50 Provisions 441 n/a 462 n/a Other obligations 378 n/a 404 n/a Equity 1,919 n/a 1,138 n/a Minorities 373 n/a 188 n/a Total equity and liabilities 41,225 41,578

The Available-for-sale financial assets include equity investments in the amount of EUR 279 million (2008: EUR 284 million). The carrying amount was used as the fair value because a market value cannot be deter- mined reliably.

99 Consolidated Financial Report Prepared in Accordance with IFRS

Fair value hierarchy

The following table depicts an analysis of the financial instruments recognised at their fair values on the basis of the fair value hierarchy in IFRS 7. The breakdown consists of the following groups: 4 Level 1: The value of financial instruments is measured using a quoted price without adjustment. This includes government bonds, bonds with quoted prices and exchange-traded derivatives; 4 Level 2: The value is measured by using input factors (default rates, costs, liquidity, volatility, interest rates, etc.) to derive values from quoted prices (Level 1). This pertains to prices that are calculated using internal models or using valuation methods, as well as to external price quotes for securities that are traded on markets with limited liquidity and that are demonstrably based on observable market prices. This category includes a large share of the structured credit portfolio. It also includes the majority of the OTC derivative contracts, corporate bonds and other bonds for which no quoted price is available, as well as the Group’s own issues that are recognised at their fair values; 4 Level 3: The value measurement is based on unobservable input factors that have a material influence on the market value. This pertains primarily to illiquid structured securitisation instruments whose value is determined by unobservable assumptions (the outcome of litigation, investor decisions, trigger events, etc.); 4 Other: This pertains to stakes in non-consolidated subsidiaries that are classified as “available for sale”.

Level 1 Level 2 Level 3 Others 1) Total in millions of Euros 12/2009 12/2009 12/2009 12/2009 12/2009 Assets Financial assets designated at fair value through profit or loss 2,212 705 63 – 2,980 Available-for-sale financial assets 2,749 222 – 279 3,250 Assets held for trading 460 1,293 – – 1,753 Hedging derivatives – 33 – – 33 Total assets 5,421 2,253 63 279 8,016 Liabilities Financial liabilities designated at fair value through profit or loss 159 6,212 – – 6,371 Liabilities held for trading 942 1,256 – – 2,198 Hedging instruments – 60 – – 60 Total liabilities 1,101 7,528 – – 8,629

1) Investments in equity that are measured at cost in accordance with IAS 39.AG80-81 because its fair value cannot be measured reliably.

The current result includes fair value losses of EUR 1 million relating to Level 3 securities.

100 Consolidated Financial Report Prepared in Accordance with IFRS

32 | Segment reporting

This information is based on the Group structure as of 31 December 2009. The segment results presented here are based on internal management reports.

In the management’s reporting, the segments are presented using the principles of the market interest rate method, according to which the Group’s net interest income is allocated to the individual units of the Bank. According to this method, it is assumed that asset and liability items are refinanced by means of money and capital market transactions with corresponding maturities, and that there is therefore no interest rate risk.

Retail Corporate Financial Real estate Other Total in millions of Euros customers customers markets and leasing

Net interest income 2009 329.8 168.7 35.9 48.1 -18.2 564.3 2008 436.5 145.9 69.1 31.0 -30.0 652.5 Net fee and commission income 2009 103.8 53.0 – 4.5 -6.5 154.8 2008 83.3 59.4 -6.8 3.3 4.7 143.9 Gains and losses on financial 2009 3.5 4.6 313.4 1.4 2.6 325.5 assets and liabilities 2008 6.7 25.6 -922.1 5.7 288.2 -595.8 Other operating income 2009 -1.2 -0.1 -0.4 13.7 17.9 29.9 (expenses) 2008 0.3 0.2 0.8 23.7 -10.9 14.1 Administrative expenses 2009 -356.8 -92.5 -26.6 -19.7 -21.7 -517.3 2008 -399.0 -90.3 -36.6 -28.1 -63.4 -617.4 Depreciation and amortisation on tangible and intangible 2009 -38.4 -10.3 -2.8 -5.9 -23.0 -80.4 non-current assets 2008 -43.5 -9.6 -3.0 -5.7 -25.6 -87.5 Provisions and impairment 2009 -89.1 -79.8 -48.0 -14.3 -5.5 -236.7 losses 2008 -77.2 -70.8 -102.2 -21.6 -9.5 -281.4 Share of profit or loss of associates accounted for using 2009 – – – – -8.0 -8.0 the equity method 2008 – – – – -32.5 -32.5 Profit (loss) before tax 2009 -48.4 43.6 271.5 27.8 -62.4 232.1 2008 7.0 60.3 -1,000.6 8.4 121.0 -804.1 Risk-weighted assets 2009 3,924.8 7,789.9 4,589.7 2,370.3 989.0 19,663.7 2008 4,268.6 7,086.4 6,422.0 2,207.1 1,132.7 21,116.9 Assets 2009 6,938.5 14,404.8 13,596.5 3,502.7 2,782.0 41,224.5 2008 7,023.8 13,563.5 13,805.4 3,512.7 3,672.7 41,578.0 Liabilities 2009 19,606.4 3,980.9 12,787.6 270.0 4,579.7 41,224.5 2008 18,695.8 4,171.1 14,282.4 502.6 3,926.2 41,578.0

101 Consolidated Financial Report Prepared in Accordance with IFRS

The Retail Banking segment covers banking services provided through the BAWAG branches, post office outlets and the Small Business unit.

It also covers the subsidiaries easybank (our direct bank), Wohnbaubank and BAWAG P.S.K. Invest. Broken down by customer, this segment covers jobholders and small-sized enterprises using traditional retail ­products.

As this business segment is driven largely by customer deposits, the effects of the international financial crisis and the resulting key interest rate cuts had a significant negative impact. BAWAG P.S.K. was confronted with narrowing interest rate margins for fixed- and variable-rate savings deposits, and saw a corresponding decline in net interest income. However, the increase in securities sales to customers and the resulting boost in net fee and commission income compared to the prior year partially compensated for this trend. BAWAG P.S.K. was especially pleased by a significant increase in primary deposits in the fourth quarter of the reporting period. Demand for financing products was limited throughout the financial year. Because of this, it was not possible to increase the lending volume in this segment compared to the prior financial year. The sizeable reduction in costs also had a positive effect on the segment’s result. Especially noticeable savings were achieved in the area of administrative expenses compared to the prior year. A reduction in overtime and provisions for holiday entitlements also lowered the segment’s costs.

The Corporates segment consists of the profit centres Corporate Sales, Financial Institutions and International Corporates. The Austrian subsidiary bank ÖVKB and the Slovenian subsidiary bank Banka d.d. are also included in this segment. Most of the customers in this segment are located in Austria, and BAWAG P.S.K. offers a broad range of products to meet their needs. These include standard products as well as tailor-made financing and investment solutions that make BAWAG P.S.K. a particularly valuable and reliable partner for Austria’s economy.

Business in this segment increased significantly compared to the prior year. This growth is in part the result of the investing activities of the International Corporates profit centre, which began in 2008 and were expanded in 2009. International Corporates maintains a selected portfolio of investment and non-investment grade corporate bonds and corporate loans denominated in Euros and US dollars. At the end of 2009, the carrying amount of this portfolio was roughly EUR 1.1 billion.

The increase in net interest income in this segment can be attributed to the growth of the International Corporates portfolio, to the satisfactory development of business with Austrian customers, as well as to the increased application of risk-adjusted prices in connection with the implementation of Basel II. The marked decrease in gains and losses on financial assets and liabilities reported for this segment is primarily the result of valuation effects related to purchased loans. As demand was also down for foreign currency products, a decline in income from currency exchange also had an impact here. As was the case with retail customers, the level of defaults in the Corporates segment was lower than expected. An increase of EUR 9 million compared to the prior year was reported.

102 Consolidated Financial Report Prepared in Accordance with IFRS

The Financial Markets segment covers the Group’s treasury activities, our subsidiary bank in Malta and the structured credit portfolio. The majority (EUR 367.9 million) of the gains and losses on financial assets and liabilities can be attributed to positive valuation effects from the structured credit portfolio. Of this, EUR 186.6 million were passed on to minority shareholders. In addition, this item also contains negative valuation effects from securities issued by BAWAG P.S.K. in the amount of EUR 55.1 million. The trading book contributed EUR 18.8 million to the result. Impairments identified for the positions in the structured credit portfolio that are classified as held to maturity amounted to EUR 48.1 million and are included under provisions and impairment losses. The Financial Markets segment is also responsible for the investment books in the banking book, which contain top-rated bonds, and asset and liability management.

The Real Estate and Leasing segment covers our real estate project financing and management activities, as well as our leasing activities. Thanks to an increase in net interest income combined with a reduction in administrative expenses and impairments, the segment’s profit for the period grew by EUR 19.5 million.

The Other Activities segment consists primarily of income from equity interests that are not part of the Bank’s core business, consolidation effects and other profits or losses.

103 Consolidated Financial Report Prepared in Accordance with IFRS

33 | Receivables from and payables to subsidiaries and associates

BAWAG P.S.K. Group’s receivables from and payables to non-consolidated subsidiaries and associates were as shown below. Business relationships with these entities were subject to normal banking terms and conditions.

Receivables from and payables to subsidiaries

in millions of Euros 31.12.2009 31.12.2008 Receivables from credit institutions – – Receivables from customers 169 121 Receivables from subsidiaries 169 121 Payables to credit institutions – – Payables to customers 62 108 Payables to subsidiaries 62 108 Other obligations 48 –

This table only depicts receivables and payables (no securities).

Interest income from business with subsidiaries in 2009 totalled EUR 4 million (2008: EUR 5 million) and interest expenses EUR 1 million (2008: EUR 5 million).

Receivables from and payables to associates

in millions of Euros 31.12.2009 31.12.2008 Receivables from credit institutions – – Receivables from customers 227 229 Impairment provisions – – Receivables from associates 227 229 Payables to credit institutions 1 – Payables to customers 74 181 Payables to associates 75 181

This table only depicts receivables and payables (no securities).

104 Consolidated Financial Report Prepared in Accordance with IFRS

34 | Related parties

Owners 99.62 per cent by BAWAG Holding GmbH 0.38 per cent by Pa-Zweiundsechzigste WT Beteiligungsverwaltungs GmbH

Pa-Zweiundsechzigste WT Beteiligungsverwaltungs GmbH is a wholly owned subsidiary of BAWAG Holding GmbH (formerly Pa-Zweiundfünfzigste WTP Beteiligungsverwaltungs GmbH).

BAWAG Holding GmbH (BAWAG Holding in short below) is wholly owned by the Dutch financial holding company Promontoria Sacher Holding N.V., which is in turn a wholly owned subsidiary of the Dutch financial holding company Promontoria Sacher Coöperatie U.A. The Dutch financial holding company BAWAG Holdings Coöperatie U.A. holds 51.25 per cent of the latter. BAWAG Holdings Coöperatie U.A. is owned directly and indirectly by a consortium, including Österreichische Post AG, Generali Holding AG and Wüstenrot Verwal- tungs- und Dienstleistungen GmbH, and led by several private investment funds and accounts affiliated with Cerberus and under the control of Stephen A. Feinberg, Cerberus’ ultimate control party.

The Bank also has business relations with the following companies that are associated with Cerberus: 4 Ableco (agent) 4 AC Austro Car Handelsgesellschaft m.b.H. & Co OHG (cargo clearing) 4 BAWAG Holding GmbH (account, deposit) 4 Bank Leumi Le (account, account overdraft limit, settlement limit, bank guarantee) 4 Cerberus Operations and Advisory Company, LLC (advisor) 4 Chrysler Management Austria GmbH (account, deposit, bank guarantee) 4 GMAC Bank GmbH (account) 4 GMAC Leasing GmbH (account, depot, car leasing) 4 GMAC Leasing Services GmbH (account, depot) 4 GMAC International Finance BV (account) 4 Komagata Holding B.V. (CLN of Ströer Out-of-Home Media AG (Ströer Turkey) loan)

Due to BAWAG P.S.K.’s insufficient annual profits in the financial year 2008, coupon payments for supple- mentary capital for BAWAG P.S.K. were taken over by BAWAG Holding GmbH in 2009. Since BAWAG P.S.K. has an obligation to compensate BAWAG Holding for these coupon payments if sufficient profits are available in the future, a corresponding liability has been recognised in the consolidated financial statements.

Since 1 January 2010 these payments have been settled directly by BAWAG P.S.K.

105 Consolidated Financial Report Prepared in Accordance with IFRS

Subsidiaries, Joint Ventures and Equity Investments of BAWAG P.S.K.

BAWAG P.S.K. Versicherung Aktiengesellschaft The business dealings between BAWAG P.S.K. and BAWAG P.S.K. Versicherung AG, which is a majority-owned subsidiary of the Generali Group, comprise securities accounts and current accounts, whereby these accounts are offered at arm’s length terms. Cooperation agreements, licence agreements, commission agreements and other contracts were concluded between BAWAG P.S.K. Group and Generali at arm’s length terms to regulate and secure the collaboration between these two entities. BAWAG P.S.K. Versicherung AG’s shareholders injected additional capital into the company and also subscribed supplementary capital in financial year 2009 to strengthen its equity position in light of the financial market crisis.

Versicherungsdienst BAWAG P.S.K. GmbH A minority share in BAWAG P.S.K.’s insurance broker, Versicherungsdienst BAWAG P.S.K. GmbH, was sold to Generali in 2007. BAWAG P.S.K. is paid standard market commissions for brokering insurance policies.

Omnitec Informationstechnologie-Systemservice GmbH BAWAG P.S.K. owns 50 per cent of Omnitec Informationstechnologie-Systemservice GmbH through a subsidi- ary. The remaining 50 per cent is held by Österreichische Post Aktiengesellschaft. This company plans, installs and operates a uniform IT system for Austria’s post offices; the applications in this system can be used by the postal service and by BAWAG P.S.K.

BAWAG Allianz Vorsorgekasse AG This staff benefit fund is owned by BAWAG P.S.K. Group and Allianz Elementar Versicherungs-Aktiengesell­ schaft at a ratio of 50 per cent to 50 per cent. The assets under management totalled EUR 426.3 million on the balance sheet date, and have been managed in equal parts by BAWAG P.S.K. Invest GmbH and Allianz Investment Bank at arm’s length terms.

Associated but not consolidated companies in the real estate group and in the leasing group The following companies are indirect 100 per cent subsidiaries of BAWAG P.S.K.: 4 BAWAG Leasing & fleet Kft (Hungary) 4 BAWAG Leasing & fleet Sp.z.o.o. (Poland) 4 BAWAG Leasing & fleet s.r.o. (Czech Republic) 4 BAWAG Leasing & fleet s.r.o. (Slovakia) 4 BAWAG Leasing Zrt. (Hungary) 4 BAWAG Real Estate Leasing s.r.o. (Czech Republic) 4 BAWAG Leasing s.r.o. (Slovakia) 4 BPLCZ One s.r.o. (Czech Republic)

106 Consolidated Financial Report Prepared in Accordance with IFRS

4 CVG Immobilien GmbH 4 Gara RPK Grundstücksverwaltungsgesellschaft m.b.H. 4 PT Immobilienleasing GmbH 4 RF BAWAG Leasing Gesellschaft m.b.H. 4 REAL ESTATE Leasing s.r.o. (Slovakia) 4 IDG Immobilien Development GmbH & Co KG 4 IDG Immobilien Development GmbH 4 Ingebe Immobilienhandels- und Vermittlungs GmbH 4 MARVE Immobilienentwicklungsgesellschaft m.b.H. 4 Plato Grundstücksverwertungs GmbH

The following leasing companies are indirect subsidiaries of BAWAG P.S.K. and one cooperation partner in each case: Kommunalleasing GmbH (50 per cent), Realplan Beta Liegenschaftsverwertung GmbH (50 per cent), HFE Alpha Handels-GmbH (50 per cent), Immoconsult Uriah Leasinggesellschaft m.B.H. (45 per cent) and Generali Leasing GmbH (25 per cent).

The real estate company B.A.O. Immobilienvermietungs GmbH is held together with two cooperation partners; all partners hold a third of the company each.

BAWAG P.S.K. provides refinancing without a risk premium or profit margin. BAWAG P.S.K. Leasing GmbH charges a fee to cover its administrative expenses for its management services.

Foreign Companies BAWAG P.S.K. has a material influence on the following foundations in Liechtenstein through a management agreement with a foundation in Liechtenstein: 4 Bensor Stiftung 4 Biamo Foundation 4 Glen Star Foundation 4 Treval Stiftung

These foundations conduct no business activities, but must remain in existence because of earn-out agree- ments with the following companies (with the exception of Glen Star Foundation): 4 Austost Anstalt, Liechtenstein 4 Shrivenham Ltd., Ireland 4 Austinvest Anstalt, Liechtenstein 4 Austost Handels und Treuhand Limited, Guernsey

107 Consolidated Financial Report Prepared in Accordance with IFRS

Austost Anstalt (Liechtenstein), Austinvest Anstalt (Liechtenstein), Austost Handels und Treuhand Ltd. (Guernsey), Polestar Ltd. (Liechtenstein, Ireland), and Celeste Trust reg. (Liechtenstein) are dormant and are to be liquidated over the medium term.

Rail Trans Invest Ltd. (Ireland) and BAWAG Finance Holding Ltd. (Ireland) were liquidated in fiscal year 2009. BAWAG International Finance Ltd. (Ireland) is now dormant and is to be liquidated in 2010.

Shrivenham Ltd. (Ireland) and Datchet Ltd. (Ireland) are not equity investments of BAWAG P.S.K. There is a call option for the purchase of the companies’ shares and an authorisation and release declaration from BAWAG P.S.K. for the current shareholders and managing directors from Liechtenstein.

BAWAG Investments Ltd. (Jersey) is an indirect 100 per cent subsidiary of BAWAG P.S.K. The company’s primary business is investments, which are conducted at arm’s length terms.

A number of companies were founded in financial year 2008 to support the new business activities. In fiscal year 2009 it was decided not to continue with the further development of those business activities. In this connection BAWAG P.S.K. Capital Advisors Ltd., BAWAG P.S.K. Jersey Auto Finance Ltd., Auto Finance Jersey I Ltd. and Auto Finance Jersey II Ltd. have been put in liquidation.

The following entities are not consolidated: 4 Vindobona alpha S.a.r.l. (Luxembourg, 100 per cent); this company was founded to provide private medical insurance to foreign employees, members of BAWAG P.S.K.’s Managing Board and their families; 4 BAWAG P.S.K. Equity Finance Ltd. (Jersey, 100 per cent, no business activity yet).

In the fiscal year Vindobona Gamma S.a.r.l. (Luxembourg) was liquidated.

Other Contractual Relationships with Related Entities Since 2001, B.I.S. BAWAG Internet Services GmbH has had a letter of comfort from BAWAG P.S.K. whose amount and duration are unlimited. BAWAG P.S.K. has also issued a comprehensive declaration of indemnity against damages, legal disputes and asset impairments to Plato Grundstücksverwertungs GmbH.

BAWAG P.S.K. issued a letter of comfort to Lethe Leasing GmbH as part of the sale of the electronic retailer Cosmos Elektrohandels GmbH und Co KG. Lethe Leasing GmbH is an indirect subsidiary of BAWAG P.S.K.

108 Consolidated Financial Report Prepared in Accordance with IFRS

Private Equity and Venture Capital Companies In addition to a number of minority stakes, this category also includes the 50 per cent stake in Athena Wien Beteiligungen AG and the 100 per cent stake in uni venture Beteiligungs AG.

All business relations with BAWAG P.S.K. are conducted at arm’s length terms with the following exception: No staff charges are billed to uni venture for services provided by BAWAG P.S.K. employees.

Sale of Shares in MKB Bank Zrt. P.S.K. Beteiligungsverwaltung GmbH sold 70,472 shares (at that time representing a stake of 0.5 per cent) in the Hungarian bank MKB Bank Zrt to Saberasu Japan Investments II B.V. in December 2008. The latter is controlled by CERBERUS CAPITAL MANAGEMENT, L.P. The shares were sold for the proportionate carrying amount of the MKB shares under UGB on P.S.K. Beteiligungsverwaltung GmbH’s books. In July 2009 ­Saberasu Japan Investments II B.V. sold these 70,472 shares to Antoinette Holding Ltd.

The Members of the Managing Board and Supervisory Board The remuneration expenses for active members of the Managing Board during the financial year under review came to EUR 6,662 thousand (2008: EUR 7,108 thousand). No bonus payments were made to the members of the Managing Board for 2009 and for 2008. Payments for post-employment benefits to former members of the Managing Board and their surviving dependants came to EUR 2,414 thousand. Since some beneficiaries died we liquidated provisions, which resulted in a profit of EUR 1,669 thousand (2008: expenses of EUR 2,765 thousand). Remuneration expenses to members of the Supervisory Board totalled EUR 308 thousand (2008: EUR 289 thousand).

Expenditure on termination and post-employment benefits for the Managing Board and key management personnel came to EUR 11,549 thousand (2008: EUR 16,760 thousand). Expenditure with respect to other employees came to EUR 39,400 thousand (2008: EUR 35,214 thousand).

Post-employment benefit arrangements were in force with five Managing Board members as of 31 December 2009. Provisions for direct benefit promises were recognised on the balance sheet. The post-employment benefit rights of the Managing Board members were transferred to a pension fund for the most part.

Two members of the Managing Board decided to leave the Bank during the year.

There were no outstanding loans to Managing Board members on the reporting date (2008: no outstanding loans). Loans to members of the Supervisory Board totalled EUR 66 thousand (2008: EUR 42 thousand). All loans to board members were repaid or serviced according to the agreed terms during the reporting period.

109 Consolidated Financial Report Prepared in Accordance with IFRS

Post-employment benefit promises have not been made to all key management personnel. Key management personnel with post-employment benefit promises have claims on the basis of the 1961 pension reform or on the basis of an individual agreement. All employees are eligible to receive benefits from a pension fund on the basis of the collective pension fund bargaining agreement.

The following table shows the business relationships with related parties and members of their families. The conditions reflect sector and group standards for employees or are conducted at arm’s length terms.

in thousands of Euros 31.12.2009 31.12.2008 Current account 5,243 4,889 Savings account 3,789 3,081 Loans 1,468 1,294 Leasing 142 190

The remuneration scale for members of the Supervisory Board approved by the General Meeting provides for payments for each calendar year of EUR 60,000 to the Chairman of the Supervisory Board, EUR 40,000 to the Deputy Chairman of the Supervisory Board, and EUR 30,000 to each capital representative of the Super- visory Board. The chairmen of the Credit and Audit Committees each receive EUR 20,000, and all other members of the Credit and Audit Committees receive EUR 10,000 each.

In 2008 some members of the Supervisory Board and Managing Board entered into a long-term incentive plan with BAWAG Holdings Coöperatie U.A., an affiliated company of the BAWAG P.S.K. Group. This plan provides long-term incentive remuneration linked to the creation of shareholder value. The awards vest over an average period of four years based partially on the members’ continued employment and partially on the attainment of performance-based targets of BAWAG P.S.K. The conditions are such that the awards have no value at incep- tion and therefore no liabilities have been recorded in the 2009 financial statements (2008: 0). The future value of the long-term incentive plan is also uncertain in light of the current economic environment.­

110 Consolidated Financial Report Prepared in Accordance with IFRS

35 | Assets pledged as collateral

in millions of Euros 31.12.2009 31.12.2008 Receivables and securities assigned to Oesterreichische Kontrollbank AG 993 1,112 Collateral pledged to the European Investment Bank 329 519 Cover pool for trust savings deposits 47 38 Cover pool for covered bonds 2,802 3,210 Other collateral 43 35 Assets pledged as collateral 4,214 4,914

36 | Total collateralised debt

The collateral listed in the table above corresponded to the following payables of BAWAG P.S.K.:

in millions of Euros 31.12.2009 31.12.2008 Liabilities to Oesterreichische Kontrollbank secured with assigned ­receivables 993 1,112 Payables arising due to refinancing by the European Investment Bank 378 414 Trust savings deposits 33 36 Payables secured by the cover pool for covered bonds 2,177 2,533 Total collateralised debt 3,581 4,095

111 Consolidated Financial Report Prepared in Accordance with IFRS

37 | Subordinated assets

Line items on the assets side of the balance sheet included the following subordinated assets:

in millions of Euros 31.12.2009 31.12.2008 Loans and receivables 36 56 Subordinated assets designated at fair value through profit or loss 7 26 Subordinated assets designated as available for sale 14 – Subordinated assets 57 82

38 | Contingent assets, contingent liabilities and commitments

in millions of Euros 31.12.2009 31.12.2008 Contingent assets – – Contingent liabilities 1,479 1,600 Arising from guarantees 1,466 1,586 Other contingent liabilities 13 14 Commitments 7,440 10,300

The most important component of the item Commitments is unused lines of credit.

112 Consolidated Financial Report Prepared in Accordance with IFRS

39 | Foreign currency amounts

BAWAG P.S.K. Group had assets and liabilities in the following foreign currencies on 31 December 2009:

in millions of Euros 31.12.2009 31.12.2008 USD 1,770 2,088 CHF 3,226 3,400 JPY 192 282 SKK – 6 CZK 126 101 Other 268 398 Foreign currency 5,582 6,275 EUR 35,643 35,303 Total assets 41,225 41,578

in millions of Euros 31.12.2009 31.12.2008 USD 756 1,533 CHF 1,843 1,531 JPY 599 693 SKK – 6 CZK 4 5 Other 561 1,000 Foreign currency 3,763 4,768 EUR 37,462 36,810 Total liabilities 41,225 41,578

This table includes only balance sheet items and provides no information about open currency positions.

113 Consolidated Financial Report Prepared in Accordance with IFRS

40 | Genuine repurchase agreements

in millions of Euros 31.12.2009 31.12.2008 Repurchaser – receivables from credit institutions 100 – Repurchaser – payables to credit institutions -826 -643 Repurchase agreements -726 -643

41 | Leasing

The following table shows reconciliation between gross investment value and present value, broken down according to maturity:

31.12. 2009 Up to 1–5 Over 5 Total in millions of Euros 1 year years years Total outstanding leasing instalments (gross investment value) 312 580 301 1,193 As yet unrealised financial income 31 54 31 116 Receivables from finance leases (net investment value) 281 526 270 1,077

31.12. 2008 Up to 1–5 Over 5 Total in millions of Euros 1 year years years Total outstanding leasing instalments (gross investment value) 175 763 707 1,645 As yet unrealised financial income 3 77 185 265 Receivables from finance leases (net investment value) 172 686 522 1,380

As of 31 December 2009 the non-guaranteed residual value amounts to EUR 11 million.

Impairments recognised in respect of irrecoverable minimum lease instalments came to EUR 0.0 million (2008: EUR 0.0 million).

114 Consolidated Financial Report Prepared in Accordance with IFRS

42 | List of consolidated subsidiaries

The following table shows the consolidated subsidiaries of BAWAG P.S.K. Group:

Method Entities consolidated in accordance with IFRS as of 31.12.2009 Stake of inclusion Banks BAWAG Banka d.d., Ljubljana F 100.00% BAWAG Malta Bank Limited, Sliema F 100.00% BAWAG P.S.K. Invest GmbH, Vienna F 100.00% BAWAG P.S.K. Wohnbaubank Aktiengesellschaft, Vienna F 100.00% easybank AG, Vienna F 100.00% Österreichische Verkehrskreditbank AG, Vienna F 100.00%

Real estate BAWAG P.S.K. IMMOBILIEN AG, Vienna F 100.00% BPI Holding GmbH & Co KEG., Vienna F 100.00% BPI Holding GmbH & Co. Immobilien und Anlagen KG., Vienna F 99.65% BPI Holding GmbH, Vienna F 100.00% CARNI Industrie-Immobiliengesellschaft m.b.H., Vienna F 100.00% R & B Leasinggesellschaft m.b.H., Vienna F 100.00% RVG Realitätenverwertungsgesellschaft m.b.H., Vienna F 100.00%

Leasing BAWAG P.S.K. Fuhrparkleasing GmbH, Vienna F 100.00% BAWAG P.S.K. IMMOBILIENLEASING GmbH, Vienna F 100.00% BAWAG P.S.K. Kommerzleasing GmbH, Vienna F 100.00% BAWAG P.S.K. LEASING GmbH & Co. MOBILIENLEASING KG., Vienna F 100.00% BAWAG P.S.K. LEASING GmbH, Vienna F 100.00% BAWAG P.S.K. MOBILIENLEASING GmbH, Vienna F 100.00% BAWAG P.S.K. Vermietungs- und Leasing GmbH, Vienna F 100.00% B.L.H. BAWAG Leasing Holding GmbH, Vienna F 100.00% Gara Feuerwehrzentralen Leasing Gesellschaft m.b.H., Vienna F 100.00% Hafner See-Liegenschaftsverwaltungsgesellschaft m.b.H., Vienna F 100.00% HBV Holding und Beteiligungsverwaltung GmbH, Vienna F 100.00% KLB Baulandentwicklung GmbH, Vienna F 100.00% M. Sittikus Str. 10 Errichtungs GmbH., Vienna F 100.00% P.S.K. IMMOBILIENLEASING GmbH, Vienna F 100.00% RF 17 BAWAG Immobilienleasing GmbH, Vienna F 100.00% RF elf Realitätenverwertungsgesellschaft m.b.H., Vienna F 100.00% RF fünfzehn BAWAG Mobilien-Leasing Gesellschaft m.b.H., Vienna F 100.00% RF sechs BAWAG P.S.K. LEASING GmbH & Co. KG., Vienna F 100.00% RF zwölf BAWAG Leasing Gesellschaft m.b.H., Vienna F 100.00% START Immobilienleasing GmbH, Vienna F 100.00%

115 Consolidated Financial Report Prepared in Accordance with IFRS

Method Entities consolidated in accordance with IFRS as of 31.12.2009 Stake of inclusion Other non credit institutions A.U.S. Alpha Holding GmbH, Vienna F 100.00% A.U.S. Alpha Vermögensverwaltung GmbH, Vienna F 100.00% A.U.S. Beta Holding GmbH, Vienna F 100.00% A.U.S. Beta Vermögensverwaltung GmbH, Vienna F 100.00% A.U.S. Delta Holding GmbH, Vienna F 100.00% A.U.S. Delta Vermögensverwaltung GmbH, Vienna F 100.00% A.U.S. Gamma Holding GmbH, Vienna F 100.00% A.U.S. Gamma Vermögensverwaltung GmbH, Vienna F 100.00% BAWAG CAPITAL FINANCE II LIMITED, Jersey F 100.00% BAWAG CAPITAL FINANCE III LIMITED, Jersey F 100.00% BAWAG CAPITAL FINANCE LIMITED, Jersey F 100.00% BAWAG Finance Malta Ltd., Sliema F 100.00% BAWAG Investments Ltd., Jersey F 100.00% BAWAG P.S.K. Jersey Capital Limited, Jersey F 100.00% BAWAG P.S.K. Versicherung AG, Vienna E 49.99% Bodensee Limited, Sliema F 51.00% BV Holding GmbH, Vienna F 100.00% BV Vermögensverwaltung GmbH, Vienna F 100.00% FCH beta Finanzierungsvermittlung GmbH, Vienna F 100.00% P.S.K. Beteiligungsverwaltung GmbH, Vienna F 100.00% P.S.K. Zahlungsverkehrsabwicklungs GmbH, Vienna F 99.71% Rhein Limited, Grand Cayman F 51.00% Stiefelkönig Schuhhandels Gesellschaft m.b.H., Graz F 100.00% Vindobona Finance Beta S.A., Luxembourg F 100.00% ZEUS Recovery Fund S.A., Luxembourg E 50.00%

116 Consolidated Financial Report Prepared in Accordance with IFRS

43 | Capital management

The Austrian Banking Act (BWG) requires the Bank to maintain a minimum amount of own funds that is calculated on the basis of its risk-weighted assets and operational risk. The capital management system employed by BAWAG P.S.K. is based on own funds as defined by the BWG. The supervisory own funds are broken down into the three categories Tier I to III in accordance with their quality, whereby there are recogni- tion limits for Tier II and III.

The supervisory authority for the Austrian banking sector verifies compliance with these funds requirements for BAWAG P.S.K. AG as an individual entity and for the credit institution group as a whole.

The Bank has instituted a monthly Capital Management Meeting to handle its capital management. The main responsibilities of this function are to continuously monitor the development of the Bank’s business, to analyse changes in its risk-weighted assets and to reconcile these assets with the available regulatory own funds. The budgeted business volumes are also compared with the expected changes in the eligible own funds at the beginning of every financial year. Stress tests (sensitivity analyses) are also conducted to assess the Bank’s ability to meet the minimum requirements and to maintain the ratios defined for BAWAG P.S.K. so that it can reach and maintain its target rating. In addition to the risk-weighted assets, the calculation also in- cludes the own funds requirement for the securities trading book (using an internal value-at-risk model) and the own funds requirement to cover operational risk. Planned changes in the Bank’s equity holdings (changes in the scope of consolidation) are also simulated.

The results of these analyses are discussed in the Capital Management Meeting, which then gives recommen- dations to the Managing Board for increasing the own funds coverage when necessary.

BAWAG P.S.K. continually monitors its compliance with the stipulated own funds ratios on the basis of the notifications sent to Oesterreichische Nationalbank (the Austrian national bank) at the end of every month and on the basis of current business developments. Changes and the current status are reported regularly to the Managing Board.

117 Consolidated Financial Report Prepared in Accordance with IFRS

The following table presents our own funds requirements within the meaning of BWG and the composition of the own funds of the credit institution group at the level of BAWAG P.S.K.

in millions of Euros 31.12.2009 31.12.2008 Share capital, participation capital 800 250 Reserves (including fund for general banking risks) 954 1,007 Goodwill, minorities and deductions 346 232 Core capital (Tier I) 2,100 1,489 Less shareholdings held for investment purposes -51 -56 Core capital (Tier I) after deductions 2,049 1,433 Reserve under § 57 BWG, revaluation reserve 85 13 Supplementary and subordinated debt capital 746 790 Additional items (Tier II) 831 803 Less shareholdings held for investment purposes -51 -56 Eligible own funds 2,829 2,180 Tier III 67 55 Own funds 2,896 2,235

Our own funds compared with the following own funds requirement:

Credit risk 1,579 1,667 Market risk 67 55 Operational risk 150 131 Capital requirements 1,796 1,853

The significant increase of own funds in the current financial year resulted in particular from the issuance of EUR 550 million in participation capital subscribed by the Republic of Austria and a EUR 205 million capital ­contribution from shareholders.

As of 31 December 2009 BAWAG P.S.K. recognised a fund for general banking risks according to section 57 para- graph 3 BWG in the amount of EUR 28 million (2008: EUR 80 million).

The core capital ratio (Tier I) of 10.0 per cent (2008: 6.6 per cent) and the own funds ratio of 13.6 per cent (2008: 9.8 per cent) are both higher compared to the prior year and are well above the legally stipulated minimum require- ments. The Tier I capital ratio based on credit risk (excluding operational risk) is 10.4 per cent (2008: 6.9 per cent).

118 Consolidated Financial Report Prepared in Accordance with IFRS

Risk Report

Introduction and Overview

BAWAG P.S.K. identifies, measures, monitors and manages all risks to which BAWAG P.S.K. Group is exposed. Because the Bank employs financial instruments, it is subject to the following risks that are addressed by means of clear monitoring and management processes within its risk management system: 4 Credit risk 4 Market risk 4 Liquidity risk 4 Participation risk 4 Operational risk

This risk report provides information on the Group’s exposure to each of the risks listed above.

Risk Management Framework – Risk Organisation

BAWAG P.S.K.’s Managing Board defines the Bank’s risk strategy, and the principles of risk management, limits for all relevant risks and procedures for monitoring these risks are documented in risk manuals and work guidelines. The Managing Board is informed of the overall risk situation and the situation regarding specific risks on a monthly basis, and quarterly risk reports are submitted to the Supervisory Board’s monitor- ing and control committees.

Risk management policies and systems are reviewed regularly to reflect changes in market conditions and in the products and services offered. BAWAG P.S.K. maintains a disciplined, constructive control environment in which all employees understand their roles and obligations.

Over the course of 2009, the Group’s risk management framework was enhanced and adapted to the needs of the specific risk types to which the Bank is exposed.

The risk management organisation comprises the following units: 4 Corporate & Institutional Risk 4 Credit Risk Retail & SME 4 Market Risk 4 Operational Risk 4 Risk Reporting 4 Workout Group 4 Special Projects

119 Consolidated Financial Report Prepared in Accordance with IFRS

Specific Risks of BAWAG P.S.K. Group

44 | Credit risk

Credit risk is the general risk that a customer will not be able to meet its payment obligations. For risk ­management purposes, BAWAG P.S.K. considers and consolidates all elements of credit risk exposures, such as individual obligor default risk, country risk and business segment risk.

In the retail segment, the creditworthiness of private and small business customers is assessed by means of an automated scoring method. This consists of initial application scoring on the basis of proven and recog- nised mathematical and statistical models, and behavioural scoring on the basis of the customer’s account use that updates the customer’s credit rating every month.

No ratings are available from external agencies for the majority of BAWAG P.S.K.’s commercial customers. Before new commitments are made (or when existing commitments are to be expanded or risk assessments need to be updated), the borrower’s credit rating is assessed using an internal rating method for the custom- er’s specific business segment. The rating methods that have been developed by BAWAG P.S.K. for this are based on a broad spectrum of quantitative and qualitative factors. The specific risk categories from the uniform BAWAG P.S.K. master scale are assigned to the customer on this basis and represent its individual estimated probability of default.

All non-consumer exposure components that exist in BAWAG P.S.K. Group are aggregated at the customer and customer group level using a specific software application. Duties requiring that exposures be reported to the Managing Board and Supervisory Board are defined for customers/groups of affiliated customers by risk grades to identify the concentration of risk exposure.

Revised Risk Policy for Retail and Small Business Customers The framework for the granting of loans to consumers and business customers is defined in the Bank’s credit guidelines. These guidelines were revised, and have been in force in their new form since March 2009.

In addition to the current economic environment and the increased risk costs, a key focus of the revised guidelines was the creation of objective and transparent decision-making rules and procedures for all sales channels and risk centres.

The most important changes concern assessing the borrower’s ability to service the line of credit as well as the provision of collateral with stable value to cover provided financing.

120 Consolidated Financial Report Prepared in Accordance with IFRS

Introduction of New Credit Processes in the Small Business Segment New credit processes were put into place in the small business segment in November 2009. These processes were aimed at achieving the following objectives in the interests of designing simpler and quicker processes while ensuring the more uniform and more traceable collection and storage of data: 4 Increased efficiency and reduced workload for the sales units by moving information collection and ­processing tasks to a central unit; 4 Significantly improved data quality through the centralised collection of financial and business documents; 4 Creation of a uniform stock of data about commercial and SME customers’ financial and business situation; 4 Reduction of the manual effort required for risk assessment for new applications and extension applications by means of the automated calculation of indicators; 4 Full compliance with all regulatory requirements (Basel II); 4 Increased customer satisfaction through faster decisions in sales and shorter processing times for ­applications through the implementation of a direct decision recommendation in the scoring system; and 4 A reduction in the level of resources required for extensions through longer terms for extension agreements while ensuring correct risk assessments, thereby providing considerable advantages for the Bank and the customer.

Timely Management in the SME Segment (Middle Market) The monitoring processes in the small and medium-sized enterprise segment are based on a software system that analyses exposures for which the customer is in arrears or that exhibit irregularities and prepares them for processing by a customer agent. The individual processing steps for this are documented in writing, and the Commercial Customer risk centre is responsible for reviewing the processing status, the duration of processing and the current results of the efforts to correct the problems with the exposure on a monthly basis.

This control mechanism ensures the timely processing of troubled SME commitments, whereby the applicable risk costs can be reduced and the rapid processing of such troubled commitments enables customers to avoid fees for late notices or possible changes in credit terms resulting from rating downgrades.

Valuation of Residential and Commercial Properties The value of all residential properties in Austria is determined by the central real estate valuation department on the basis of a largely standardised method and using a valuation tool. Roughly 40,000 residential proper- ties have been pledged to BAWAG P.S.K. as collateral in total. In the 2009 financial year, 70 per cent of residential properties that were offered as collateral were appraised. Starting in 2010, the legally required periodic review and updating of the property values will be automated on the basis of the changes in the real estate price index published by the Association of Real Estate and Asset Trustees of the Austrian Federal Economic Chamber (Fachverband der Immobilien- und Vermögenstreuhänder der Wirtschaftskammer ­Österreich).

121 Consolidated Financial Report Prepared in Accordance with IFRS

Commercial properties are appraised individually by experts in the central real estate valuation department, by selected external appraisers commissioned by the Bank, or by a syndicate partner after an inspection of the property and completion of a full report. Roughly 2,800 commercial properties have been pledged to BAWAG P.S.K. as collateral.

Improvement and Refinement of the Scorecards and Rating Systems The following measures were taken as part of the periodic revision of the scorecards: 4 The existing application scorecards for a large share of the SME customers were validated and revised in the second and third quarters of 2009, significantly improving the granularity. At the same time, an automated decision recommendation was implemented that allows a larger number of approvals to be granted directly in the sales units, which shortens the processes and saves a great deal of time for the customers. 4 The behavioural scorecards for loans (monthly assessment of repayment behaviour for credit products) were also revised. In addition, the algorithm for deriving a customer rating from individual product ratings was refined further.

Portfolio Development in 2009 The portfolio volume in the corporate segment remained virtually unchanged in 2009, while the volumes of loans in the retail segment and to the public sector declined slightly.

Credit risk by customer segment, in millions of Euros 1)

Book value credits 2) Bonds Off-balance business Total risk Segment 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Banks 2,640 2,382 5,006 4,384 802 2,264 8,448 9,030 Public sector 6,199 6,542 3,258 2,717 692 723 10,149 9,982 Corporates 10,391 10,553 2,862 2,725 2,411 1,590 15,664 14,869 Small business 1,377 1,487 16 – 132 75 1,525 1,562 Retail private customers 5,467 5,661 – – 88 63 5,555 5,724 Others 1 55 – 145 36 661 37 861 Total 26,075 26,680 11,142 9,972 4,161 5,377 41,378 42,028

1) Total risk includes book values and off-balance-sheet items like guarantees and committed but currently unutilised limits. 2) Including fair value assets.

122 Consolidated Financial Report Prepared in Accordance with IFRS

Number of customers by size as of 31 December 2009

22,000 20,000 19,679 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 1,378 2,000 447 149 70 66 3 0 100–1,000 5,000 20,000 50,000 100,000 500,000 500,000 in thousands of Euros

Geographical distribution of the loan portfolio as of 31 December 2009, in millions of Euros

30,000

25,000 23,585 20,000

15,000

10,000

3,853 5,000 2,091 507 233 0 Austria Western Europe CEE North America Others

The overview shows the net exposure in each region by ultimate risk, which means that the outstanding volumes are assigned to the country of ultimate risk. An export promotion loan that is guaranteed by the Republic of Austria is allocated to Austria, for example.

The majority of BAWAG P.S.K. Group’s outstanding loans can be attributed to Austrian customers, followed by outstanding loans to Western European borrowers. After the sale of Istrobanka in Slovakia and BAWAG Bank CZ in the Czech Republic, the Bank only has low net exposures in Central and Eastern Europe, primarily in connection with a minority share in a Hungarian bank and with its subsidiary BAWAG Banka d.d. in Slovenia.

123 Consolidated Financial Report Prepared in Accordance with IFRS

Geographical distribution of the loan portfolio: CEE

Net exposure 1) Bank Non-bank Sovereign in millions of Euros 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Slovenia 843 834 27 32 817 802 – – Slovakia 51 63 0 7 51 56 – – Eurozone 895 897 27 39 868 858 – – Hungary 310 288 169 175 131 104 10 9 Czech Republic 136 142 6 3 123 139 7 – Romania 20 37 16 19 5 18 – – Poland 16 21 3 – 13 11 0 10 Latvia 10 20 10 20 – – – – Estonia 8 6 0 – 8 6 – – Bulgaria – 1 – – – 1 – – Non Eurozone 500 515 203 217 279 279 17 19 Russia 166 235 7 44 159 191 – – Croatia 100 52 1 7 100 19 – 26 Turkey 5 22 2 4 2 18 1 – Kazakhstan – 9 – 6 – 3 – – Serbia 2 7 – – 2 7 – – Montenegro – 5 – – – 5 – – Bosnia and Herzegovina 1 1 – – 1 1 – – Ukraine – 1 – – – 1 – – Non EU 274 332 10 61 264 245 1 26 Total 1,669 1,744 240 317 1,411 1,382 17 45

1) The net exposure values include, as opposed to prior years, equity investments in non-consolidated CEE subsidiaries.

124 Consolidated Financial Report Prepared in Accordance with IFRS

Impaired Loans Impairment provisions are formed for loans for which it can be assumed that the open claims will not be entirely fulfilled. These correspond to the estimated incurred but not yet detected losses in the credit port­ folio. The primary components are: 4 Specific loss provisions that are formed manually after detailed analysis based on the estimates of the Credit Risk unit and under responsibility of the Workout Group; and 4 Loss provisions that are formed automatically by the core banking system in the case of more than two unpaid instalments, when limits are continuously exceeded on current accounts, as well as when legal action is initiated.

IFRS Portfolio Impairments pursuant to IAS 39 AG 89 A general impairment provision is formed on a portfolio basis for incurred but not detected losses in the Group’s credit portfolio as of the reporting date. For this, it is assumed that a certain percentage of customers that have not been identified as being in default are in fact in default on the reporting date.

To calculate these loss provisions, the receivables are grouped into homogeneous portfolios with comparable risk characteristics. The provisions are quantified on the basis of the expected loss, taking into account the loss identification period. This is determined individually for each customer segment on the basis of the average time until the next expected payment. As of 31 December 2009, the IFRS portfolio impairment amounted to EUR 34.6 million, compared to EUR 28.8 million on 31 December 2008.

125 Consolidated Financial Report Prepared in Accordance with IFRS

Credit quality overview: Outstanding loan book amounts in different categories

Book value loan book Provisions Book value Collateral in millions of Euros before provisions 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 31.12.2009 31.12.2008 Outstandings with specific provisions Banks 34 37 33 34 1 3 – – Public sector – – – – – – – – Corporates 339 186 180 126 159 60 32 38 Retail SME 179 164 144 133 35 31 16 11 Retail private customers 180 123 146 100 34 23 11 8 Total 732 510 504 393 228 117 58 56 Outstandings with general provisions Public sector – – – – – – – – Corporates 14 1 2 1 12 – 10 – Retail SME 73 60 33 25 39 35 21 17 Retail private customers 432 392 279 259 153 133 33 22 Portfolio provision – – 35 29 -35 -29 – – Total 519 453 348 314 171 139 64 39 Outstandings past due unprovisioned Days past due 30–60 days 73 78 – – 73 78 20 32 60–90 days 10 76 – – 10 76 3 38 90–180 days 42 49 – – 42 49 19 30 More than 180 days 98 74 – – 98 74 58 49 Total 223 277 – – 223 277 99 149 Normal outstandings (not past due/not provisioned) Not rated 75 915 – – 75 915 19 223 Rating 1 5,808 6,937 – – 5,808 6,937 771 719 Rating 2 2,500 2,204 – – 2,500 2,204 842 341 Rating 3 5,251 5,846 – – 5,251 5,846 2,263 2,320 Rating 4 5,191 5,790 – – 5,191 5,790 1,868 2,295 Rating 5 4,198 2,025 – – 4,198 2,025 1,996 930 Rating 6 1,322 813 – – 1,322 813 606 371 Rating 7 967 1,417 – – 967 1,417 473 639 Rating 8 139 202 – – 139 202 73 125 Total 25,453 26,147 – – 25,453 26,147 8,911 7,962 Total book value 26,927 27,387 852 707 26,075 26,680 9,133 8,207

126 Consolidated Financial Report Prepared in Accordance with IFRS

Past Due Loans with No Provisions No provisions are formed for past due loans when the creditworthiness of the customer appears to be stable, when sufficient collateral has been provided or when the outstanding amount will be paid in the near future.

Collateral All types of collateral that are accepted by BAWAG P.S.K. are listed in the Group Collateral Handbook. Prudent discounts are defined for each type of collateral. The amounts in the table above show the recognised values of the collateral held by the Bank after application of these discounts.

Workout Group and Collections The Workout Group and Collections unit is responsible for working out and closing out troubled credit commit- ments. The primary objectives here are minimising losses by providing restructuring expertise, and maximising the amount collected if collection is required.

Early Recognition of Troubled Assets Customers that must be monitored especially closely for different reasons such as declines in stock prices, a rise in CDS spreads, deterioration in creditworthiness, negative reports in the news, particular risk concentra- tion or other relevant reasons are placed on a review list. Customers on this list are subject to review and monitoring in shorter intervals.

Structured Credit Portfolio BAWAG P.S.K.’s securities portfolio includes a portfolio of structured credit instruments with a nominal value of EUR 1.93 billion and a current book value pursuant to IFRS of EUR 1.16 billion (excluding portions attributable to minority shareholders, including EUR 20 million in cash collateral). The resulting risk position is detailed in the following tables by rating, maturity and origin.

127 Consolidated Financial Report Prepared in Accordance with IFRS

Structured credit portfolio as of 31 December 2009 – Breakdown by rating (IFRS book value)

BB and in millions of Euros AAA AA A BBB Not rated Total below CDO-of-ABS – 19 8 1 2 – 30 CDO-of-ABS w/ subprime 11 0 – 19 42 – 72 CLO 54 86 115 73 18 – 347 CLO² – – – – 0 – 0 CMBS 9 21 2 – – 4 36 Corporate CDO 27 23 9 – 83 48 190 Corporate CDO² – 98 – – – 73 170 Corporate CPDO – – 20 – 12 48 80 Corporate LSS 49 – – – – 125 174 European RMBS 31 8 8 – – – 47 US RMBS – – – – 14 – 14 Total 181 254 161 94 171 298 1,159

Structured credit portfolio as of 31 December 2008 – Breakdown by rating (IFRS book value)

BB and in millions of Euros AAA AA A BBB Total below CDO-of-ABS 10 36 – – – 46 CDO-of-ABS w/ subprime 29 23 24 2 30 107 CLO 197 224 4 – – 425 CLO² – – 4 – – 4 CMBS 24 18 – – 4 46 Consumer CDO – – 5 – – 5 Corporate CDO 71 44 22 11 35 182 Corporate CDO² 85 273 8 261 41 668 Corporate CPDO – – – – 41 41 Corporate LSS 119 – – – 27 146 European RMBS 33 16 8 – – 58 Non performing loans CDO 0 – 1 – – 2 US RMBS 15 – – – 2 17 Total 583 634 75 274 180 1,745

128 Consolidated Financial Report Prepared in Accordance with IFRS

Structured credit portfolio as of 31 December 2009 – Breakdown by maturity (IFRS book value)

until end of in millions of Euros 2012 – 2014 2015 – 2017 2018 and later Total 2011 CDO-of-ABS – 30 – – 30 CDO-of-ABS w/ subprime 16 14 23 19 72 CLO – 184 163 – 347 CLO² 0 – – – 0 CMBS 11 24 – – 36 Corporate CDO 57 76 57 – 190 Corporate CDO² 98 73 – – 170 Corporate CPDO – – 80 – 80 Corporate LSS 94 80 – – 174 European RMBS 5 14 6 22 47 US RMBS 1 4 10 – 14 Total 281 499 337 41 1,159

Structured credit portfolio as of 31 December 2008 – Breakdown by maturity (IFRS book value)

until end of in millions of Euros 2011– 2013 2014 – 2016 2017 and later Total 2010 CDO-of-ABS – 18 3 25 46 CDO-of-ABS w/ subprime 10 2 7 89 107 CLO 11 – 114 300 425 CLO² 2 – 2 – 4 CMBS 12 28 – 5 46 Consumer CDO – – – 5 5 Corporate CDO 63 61 45 14 182 Corporate CDO² 515 152 1 – 668 Corporate CPDO – – 19 22 41 Corporate LSS 67 79 – – 146 European RMBS 15 27 2 14 58 Non performing loans CDO 0 – 1 – 2 US RMBS 0 11 0 4 17 Total 695 378 193 479 1,745

129 Consolidated Financial Report Prepared in Accordance with IFRS

Structured credit portfolio as of 31 December 2009 – Breakdown by origin (IFRS book value)

Continental in millions of Euros USA UK Other Total Europe CDO-of-ABS 1 23 6 0 30 CDO-of-ABS w/ subprime 43 9 20 0 72 CLO 163 151 33 0 347 CLO² 0 0 – 0 0 CMBS 22 14 0 0 36 Corporate CDO 82 92 16 0 190 Corporate CDO² 86 64 20 0 170 Corporate CPDO 37 38 5 0 80 Corporate LSS 102 48 24 0 174 European RMBS – 42 5 0 47 US RMBS 14 – – – 14 Total 550 481 128 0 1,159

Structured credit portfolio as of 31 December 2008 – Breakdown by origin (IFRS book value)

Continental in millions of Euros USA UK Other Total Europe CDO-of-ABS 3 36 7 – 46 CDO-of-ABS w/ subprime 74 9 24 0 107 CLO 197 186 41 2 425 CLO² 2 2 – – 4 CMBS 28 16 2 – 46 Consumer CDO – 5 – – 5 Corporate CDO 77 86 19 – 182 Corporate CDO² 318 265 84 – 668 Corporate CPDO 19 19 3 – 41 Corporate LSS 100 29 16 – 146 European RMBS – 53 5 – 58 Non performing loans CDO – 2 – – 2 US RMBS 17 – – – 17 Total 835 705 202 2 1,745

Abbreviations: ABS Asset backed security CDO Collateralised debt obligation CLO Collateralised loan obligation CMBS Commercial mortgage backed security CPDO Constant proportion debt obligation LSS Leveraged super senior RMBS Residential mortgage backed security

130 Consolidated Financial Report Prepared in Accordance with IFRS

BAWAG P.S.K. again took steps to reduce the market risk and credit risk in its structured credit portfolio in 2009. In June, CDO² worth a nominal amount of EUR 367 million were sold, and in July a number of AA CLOs were sold that were considered to be too risky on the basis of their structures or their contract terms. For the remaining synthetic CDOs and one CDO², credit derivatives were purchased to neutralise the mark-to- market risk. Substantial repayments were made in June and September in the amount of EUR 400 million in CDO².

BAWAG P.S.K. uses internal valuation models to determine the fair values of transactions for which there is no active market. Such models are used for CDOs of ABS with subprime exposure, corporate CDOs and CDO², corporate CPDOs, corporate LSS, CLOs and corresponding micro hedges. All of BAWAG P.S.K.’s models are calibrated to actively traded instruments such as ABX, tranched iTraxx and CDX, and tranched LCDX and use all available market data (such as yield curves, CDS spreads, prices for leveraged loans, etc.).

Due to the narrowing of credit spreads in 2009, the Bank’s structured credit portfolio as a whole saw fair value gains of EUR 349 million (of which EUR 145 million are reported under gains and losses on financial assets and liabilities and EUR –48 million under impairment provisions for financial assets. The difference of EUR 252 million is the unrecognised increase in the fair values of securities held to maturity).

As part of the further de-risking of the structured credit portfolio, high-risk securities were sold in 2009. Due to our conservative valuation as of 31 December 2008, these transactions generated realised profits compared to book value of EUR 45.9 million. Restructuring costs in the amount of EUR 10.0 million were also recog- nised in the income statement.

Stress Tests and Sensitivity Analysis of the Structured Credit Portfolio The Market Risk division conducts quarterly stress tests and sensitivity analyses for the structured credit portfolio. In this the effects of various adverse scenarios on the recovery value, fair value and risk-weighted assets are analysed. The results are reported to the Managing Board.

For each asset class in the structured credit portfolio, the first step is the identification of the material risk factors and the creation of a base case scenario for these risk values that reflects the current loss expecta- tions. Individual or multiple risk factors are then worsened to simulate various stress scenarios.

The base case is the scenario that is based on the expected recovery value. “Recovery value” defines the net present value of expected cash flows (discounted with the risk premium fixed when the transaction is final- ised). A recovery value below par means that the expected cash flows are lower than the contracted cash flows. In December 2009, different base case assumptions were made, including about the probable develop- ment of corporate default rates and the LGDs of various securities.

131 Consolidated Financial Report Prepared in Accordance with IFRS

All assumptions apply in addition to the losses already incurred in the portfolio, and all rating downgrades are also taken into account.

The assumptions made in the base case scenario are also compared with analyses by rating agencies and investment banks and with current performance figures (if observable) to ensure that they are appropriate.

The following stress scenarios are analysed (relative changes compared to the base case scenario): 4 Defaults: the default and arrears rates are increased by 20 and 30 per cent; 4 LGDs: the losses given default are increased by 20 per cent; 4 Correlation: default correlations are adjusted by 10 per cent (in the direction disadvantageous for the respective asset class); 4 Prepayments: prepayment rates are reduced by 20 per cent; 4 Interest rates: spot rates are frozen at their current levels; 4 Rating downgrade: the default assumptions for the next-lower rating class are applied for 50 per cent of all corporate loans; 4 Historical worst case: the highest probabilities of default per rating class observed since 1970 are applied for corporate loans; 4 Combined scenario: the simultaneous worsening of the default, arrears, LGD and prepayment rates by 20 per cent and a 10 per cent worsening of the correlation.

To assess the effects that the stress scenarios could have on the fair values, the current implied discount margins are increased to match the level of risk in the scenario and the expected market overreaction. In the case of transactions for which no separate LGD assumptions are available, safety margins are deducted on the basis of indicative external rates.

The following tables show the effects that the stress scenarios have on the IFRS value and the recovery value of the portfolio. The result represents the difference between the IFRS value and the recovery value, as the majority of the portfolio is marked to market, where market prices are lower than recovery values due to currently higher risk premiums.

132 Consolidated Financial Report Prepared in Accordance with IFRS

Effects of stress scenarios on the IFRS value of the structured credit portfolio

Scenario p.d. Combined in millions of Euros +20% scenario CDO-of-ABS -3 -7 CDO-of-ABS w/ subprime -26 -34 CLO -20 -45 CLO2 – – CMBS -6 -11 Corporate CDO -13 -22 Corporate CDO² -16 -23 Corporate CPDO -14 -28 Corporate LSS -24 -70 European RMBS -6 -7 US RMBS -1 -3 Macro hedge +20 +40 Total -108 -209

Recovery value of the structured credit portolio; effects of stress scenarios on the recovery value of the structured credit portfolio

Change of recovery value Recovery Diff. btwn. recovery in millions of Euros Scenario p.d. Combined value value and IFRS value +20% scenario CDO-of-ABS 36 +6 -5 -9 CDO-of-ABS w/ subprime 110 +39 -17 -26 CLO 356 +9 -17 -42 CLO2 – -0 – – CMBS 53 +18 -5 -11 Corporate CDO 190 +1 -5 -10 Corporate CDO² 165 -5 -7 -11 Corporate CPDO 117 +37 -2 -4 Corporate LSS 195 +21 – – European RMBS 54 +7 -1 -2 US RMBS 18 +4 -1 -3 Macro hedge – – +8 +13 Total 1,295 +137 -52 -104

133 Consolidated Financial Report Prepared in Accordance with IFRS

45 | Market risk

Market risk is the risk of loss caused by taking open risk positions in the market and the adverse development of market risk factors (interest rates, foreign exchange rates, equity prices, volatilities). Market risk can pertain to trading and non-trading activities.

At BAWAG P.S.K. particular emphasis is placed upon market risk identification, measurement, analysis and management performed by the Market Risk division for all market risks at the Group level.

Market risk is bounded by the BAWAG P.S.K. Managing Board’s approved market risk limits which consist of value-at-risk, sensitivity, volume and worst-case limits.

For risk management purposes, the Managing Board is informed of the Bank’s market risk position, the utilisation of limits and the profit and loss situation. These reports are provided on a daily basis for the most part for BAWAG P.S.K. as an individual institution and on a monthly basis for the Group.

All strategies, organisational procedures, principles of risk management and monitoring and market risk limits approved by the Managing Board are documented in an internal Group market risk manual and in a specific BAWAG P.S.K. Treasury manual.

Market Risk in the Trading Book Since 1998, BAWAG P.S.K. has used the value-at-risk (VaR) of an internal model that has been assessed by Oesterreichische Nationalbank (the Austrian national bank) and approved by the Federal Ministry of Finance to control and limit the market risk arising from trading activities. It includes the risk categories interest rate, equity market and foreign exchange risk (there was no active equity desk in the trading book in 2009) and the linear and non-linear gamma and vega risks broken down by risk type.

Because of the uniform depiction of the market risk, the VaR results are used for internal risk control purpos- es and are also included in the reports to the supervisory authorities. The regulatory capital requirements for each specific risk in the trading book are calculated using the legally specified standard procedure.

The model is based on a variance-covariance approach in which the value-at-risk is calculated for all trading positions at a confidence level of 99 per cent taking into account the correlations for a holding period of one day and ten days using the computer system PMS. In order to test the reliability of the model, the trading book is also subjected to a Monte Carlo simulation, and the results of both analyses are compared.

The VaR limits are supplemented by sensitivity limits and worst-case limits.

134 Consolidated Financial Report Prepared in Accordance with IFRS

On 31 December 2009, the value-at-risk (with gamma and vega risk included) was measured at EUR 1.26 million (30 December 2008: EUR 1.48 million), based on a confidence interval of 99 per cent and a holding period of one day.

The result of the aggregated VaR, which takes the diversification effect into consideration, differs from the sum of the individual VaR results of the risk categories as follows:

VaR (99 per cent, one-day holding period), financial year 2009, in millions of Euros

Risk class Minimum Maximum Average 31.12.2009 FX risk 0.23 1.22 0.65 0.37 Interest rate risk 0.75 1.96 1.15 0.99 Total (without correlations) 1.20 2.75 1.80 1.36 Total (with correlations) 1.05 2.32 1.52 1.26 Diversification n/a n/a -0.27 -0.10

The accuracy and reliability of the model is verified by means of daily backtesting by comparing the hypotheti- cally realised gains and losses for two consecutive trading days with the value-at-risk of the first day. If a nega- tive backtesting result is lower than the VaR, this is designated as an “exception”.

There were no exceptions at BAWAG P.S.K. during the reporting period, which confirms the high quality of the model and which means that the best-possible multiplier of 3 for the calculation of own funds as specified by the Federal Ministry of Finance (which has been applied continuously since 1998) can be maintained.

135 Consolidated Financial Report Prepared in Accordance with IFRS

The daily VaR (99 per cent, one-day holding period) values are compared with the backtesting results (delta) for the reporting period in the following chart:

VaR (99 per cent, one-day holding period) compared with the backtesting results (delta), financial year 2009, in thousands of Euros

2,000

1,500

1,000

500

0

-500

-1,000

-1,500

-2,000

-2,500 Jul 09 Jan 09 Apr 09 Oct 09 Jun 09 Feb 09 Sep 09 Mar 09 Nov 09 Dec 09 Aug 09 May 09

Delta VaR

As a measure of risk, value-at-risk quantifies the potential loss under normal market conditions. VaR method- ology is based on the assumption that the price data from the recent past can be used to predict future market events. If market conditions differ substantially from past market developments, then the risk predict- ed by value-at-risk may be too conservative or too liberal. It is not intended to cover losses associated with unusually severe market movements. These are intended to be covered by stress tests.

Stress tests are performed, in the course of which the trading book is stressed by scenarios simulating ­extreme market conditions which are not covered by the confidence interval. The results of these tests are compared with the worst-case foreign exchange and interest rate limits.

A distinction is made between time-based and event-based stress tests, whereby statistical methods (changes in correlations, higher confidence level, etc.) and extreme market movements of risk factors are assumed and applied. The results are reported to the Managing Board, the Asset Liability Committee (ALCO), trading management and the responsible group heads.

136 Consolidated Financial Report Prepared in Accordance with IFRS

Market Risk in the Banking Book The primary components of market risk for BAWAG P.S.K. Group result from interest rate risk, foreign currency risk, alternative investments and liquidity risk.

Interest rate risk in the banking book Interest rate risk in the banking book is the potential loss resulting from net asset value changes and the future development of net interest income due to adverse interest rate shifts.

The Asset Liability Committee (ALCO) has assigned interest rate risk limits to the Treasury division to manage the interest rate risk and to ensure an optimal risk/return ratio. The Market Risk division reports to the ALCO on a daily basis for some areas and monthly at the Group level on limit utilisation as well as on the distribu- tion of risk.

Every two weeks, alternating meetings are held by the Strategic ALCO (full Managing Board) and the ALCO (CFO, CRO and Managing Board member responsible for the Treasury). In addition to the members of the Managing Board, the ALCO meetings are also attended by the heads of the Treasury divisions, Market Risk, Controlling and Accounting. On the basis of the risk reports and also using the results of scenario analyses and stress tests, the market risk and its effects are analysed and steering measures are decided to reduce risk and optimise earnings for the Bank as a whole.

The risks are also presented to the Managing Board as a whole as part of an overall risk report submitted to the Enterprise Risk Committee on a monthly basis.

For the purpose of interest rate analysis, all interest-bearing instruments are assigned to corresponding time buckets based upon their contractual repricing periods (in the case of fixed and variable rate instruments) or assumptions regarding these (in the case of accounts with undefined maturity profiles or when interest rate and minimum commitment periods are not contractually agreed).

Interest rate risk is measured using the present value of a basis point (PVBP) concept. The PVBP is an absolute value that is derived from the duration of interest-bearing financial instruments. It indicates in monetary units the change in the net cash value of the instrument that will occur when the market yield curves shift by one basis point (0.01 per cent).

The following table depicts the Group’s interest rate risk as of 31 December 2009 on the basis of the PVBP concept. The net asset value changes of all financial positions in the Group’s banking book due to a yield curve shift of one basis point are assigned to the corresponding time buckets as follows:

137 Consolidated Financial Report Prepared in Accordance with IFRS

PVBP

in thousands of Euros < 1Y 1Y – 3Y 3Y – 5Y 5Y – 7Y 7Y – 10Y > 10Y Total EUR -60 -135 73 41 154 -34 40 USD 10 2 -6 1 -17 -26 -35 CHF -16 -2 -5 -12 -19 -62 -116 JPY 3 – -1 – – 9 11 Other currencies 1 6 -1 1 – – 6 Total 31.12.2009 -62 -130 61 31 118 -112 -94

Total 31.12.2008 84 193 -109 57 – -64 162

The PVBP of all positions whose market value changes arising from interest rate changes impact the income statement or AFS reserve is calculated, limited and monitored separately. Profit and loss as well as equity-­ relevant PVBPs of the Group by time bucket are as follows:

P&L and equity-relevant PVBP

in thousands of Euros < 1Y 1Y – 3Y 3Y – 5Y 5Y – 7Y 7Y – 10Y > 10Y Total 31.12.2009 16 -313 275 90 240 16 323

31.12.2008 -4 -62 104 43 -70 1 12

In addition to the traditional approaches to measuring interest rate risk, a value-at-risk calculation for the Group is conducted within the framework of the internal capital adequacy assessment process on a monthly basis (ICAAP).

For a particular portfolio, the value-at-risk measures the worst expected future loss (in terms of market value) over a given time horizon with a specific confidence level. The calculation of value-at-risk is based on the variance-covariance approach and uses a confidence level of 99 per cent and a time horizon of ten days. As of 31 December 2009, the value-at-risk for interest rate risk in the Group’s banking book amounted to EUR 4.2 million (compared to EUR 9.6 million as of 31 December 2008).

Net interest income is one of the key parameters in periodic income management and consists of the differ- ence between interest income and interest expenses in a given period. To determine the net interest income for a specific future period, the average volume and average interest rates of all interest-bearing assets and liabilities that are subject to interest are compared. A software-based dynamic interest rate simulation model is used to determine the interest income and expense at the individual contract level using the interest rate characteristics extracted from the core banking system.

138 Consolidated Financial Report Prepared in Accordance with IFRS

Additional inputs required for this model include expected future product margins as well as estimates of the volume of new contracts and the extension of existing contracts. The market yield curve is kept constant in the model for the entire simulation period, and plays a key role in determining future interest rates for the individual products. This base projection is known as the “stable rates scenario”.

The possible effects of shifts in the yield curve (both standardised interest rate scenarios as well as forward rates and internal projections from the Economics and Research division) are calculated using this base projection. The results of these simulations are analysed and presented on a monthly basis to the Asset Liability Committee and to the Enterprise Risk Meeting as part of the overall risk report.

The significant quality improvements achieved in terms of managing interest rate risk in the banking book in 2009 include the expansion and improvement of the limit system for managing market price risks at the Group level as well as the qualitative and quantitative refinement of the dynamic net interest income ­simulation.

139 Consolidated Financial Report Prepared in Accordance with IFRS

Derivative financial transactions as of 31 December 2009

Nominal amount/maturity* Fair value* in millions of Euros Up to 1 year 1–5 years Over 5 years Total Positive Negative Interest-rate related business 11,582 27,691 14,096 53,369 1,274 -952 Thereof interest rate swaps banking book 4,013 11,068 3,502 18,582 616 -340 interest rate options banking book 1,896 163 16 2,075 2 -1 forward rate agreements ­banking book 20 – – 20 – – interest rate swaps trading book 4,950 10,790 6,716 22,456 528 -476 interest rate options trading book 684 5,670 3,863 10,217 128 -135 forward rate agreements trading book 20 – – 20 0 -0

Currency related business 9,951 4,748 953 15,653 174 -337 Thereof currency swaps banking book 269 774 60 1,104 14 -17 foreign currency forward ­transactions and options ­banking book 1,745 72 233 2,051 3 -86 currency swaps trading book – 2,101 5 2,106 4 -70 foreign currency forward ­transactions and options trading book 7,937 1,800 655 10,392 153 -165

Securities related business 569 1,355 1,233 3,158 78 -143 Thereof securities related business banking book 539 630 1,013 2,183 69 -128 securities related business trading book 30 725 220 975 9 -15

Total 22,103 33,794 16,283 72,180 1,526 -1,432 Thereof banking book business 8,482 12,708 4,824 26,014 704 -571 trading book business 13,621 21,086 11,459 46,166 822 -861

* Banking book derivatives include fair value hedging instruments.

140 Consolidated Financial Report Prepared in Accordance with IFRS

Derivative financial transactions as of 31 December 2008

Nominal amount/maturity Fair value in millions of Euros Up to 1 year 1–5 years Over 5 years Total Positive Negative Interest-rate related business 12,198 21,816 15,672 49,686 1,268 -897 Thereof interest rate swaps banking book 4,577 6,114 5,435 16,126 704 -360 interest rate options banking book 16 137 12 165 2 – forward rate agreements ­banking book 532 – – 532 – – interest rate swaps trading book 3,975 10,363 6,361 20,699 432 -404 interest rate options trading book 2,128 5,202 3,864 11,194 130 -133 forward rate agreements trading book 970 – – 970 – –

Currency related business 8,991 1,971 3,419 14,381 430 -466 Thereof currency swaps banking book 9 133 205 347 20 -16 foreign currency forward ­transactions and options ­banking book 3,050 – 248 3,298 143 -133 currency swaps trading book – 69 2,066 2,135 5 -53 foreign currency forward ­transactions and options trading book 5,932 1,769 900 8,601 262 -264

Securities related business 60 4,247 1,614 5,921 514 -515 Thereof securities related business banking book 50 3,498 1,349 4,897 473 -466 securities related business trading book 10 749 265 1,024 41 -49

Total 21,249 28,034 20,705 69,988 2,212 -1,878 Thereof banking book business 8,234 9,882 7,249 25,365 1,342 -975 trading book business 13,015 18,152 13,456 44,623 870 -903

141 Consolidated Financial Report Prepared in Accordance with IFRS

Alternative Investments The year 2009 saw the gradual recovery of the financial markets, which had a positive effect on the ­alternative investments portfolio and which brought a net performance of 6.4 per cent after funding costs for the year. Thus, the portfolio surpassed its target (4 per cent above the refinancing rate). The main drivers of this positive performance in the reporting period were global macro strategies, the remaining multi-strategy fund and an event-driven fund.

In November 2009, the Managing Board of BAWAG P.S.K. decided to discontinue the Bank’s alternative investments strategy. As a result of this decision, BAWAG P.S.K. submitted notice of the termination of all funds in its alternative investments portfolio as of 30 November 2009.

As of 31 December 2009, 71 per cent of the portfolio was still invested. According to current plans, it is expected that close to 90 per cent of the portfolio will be repaid by the third quarter of 2010.

FX Risk in the Banking Book The extent of the open foreign exchange positions in BAWAG P.S.K.’s banking book is constrained by ­conservative limits to ensure that only marginal FX risks are carried in the banking book.

Compliance with these limits is observed by means of a daily process. Another reconciliation routine compares the outstanding FX positions according to Treasury applications with the positions in the accounts and ­initiates analysis and clearing activities in the case of differences.

142 Consolidated Financial Report Prepared in Accordance with IFRS

46 | Liquidity risk

In addition to the risk of not being able to fulfil payment obligations when they become due (liquidity risk in a narrow sense), this risk type also includes the danger that it will not be possible to obtain sufficient liquidity at the expected terms when it is needed (refinancing risk). Liquidity risk also includes the risk that trans­ actions cannot be closed or sold, or that they can only be closed or sold at a loss because of insufficient market depth or due to market interruptions (market liquidity risk).

BAWAG P.S.K.’s liquidity remained well over the minimum legal requirements during the 2009 financial year, and the restructuring of the securities portfolio increased the extent of the already large collateral pool. This further improved the Bank’s independence from the interbank and capital markets.

The Risk Manual for Liquidity Risks specifies how liquidity risks are to be handled and includes a contingency liquidity plan. Asset Liability Management is responsible for daily liquidity management, while Controlling is responsible for liquidity planning and conducting stress tests and back tests. Scenarios are based on histori- cal events, case studies and hypothetical models, and the data are updated continuously with current infor- mation from the market reports. Reports on the stress tests and scenarios are submitted monthly, and the results of the tests are discussed by the Strategic Asset Liability Committee on a quarterly basis. Market Risk prepares a monthly capital commitment report that includes scenario calculations for changes in the balance sheet structure and various assumptions about customer behaviour and presents it to the ALCO to facilitate structural liquidity management.

The following table shows 4 The consolidated nominal (non-discounted) cash flows including interest payments on financial liabilities in the banking book on the basis of the earliest contractual maturities with the exception of variable savings deposits with a volume of EUR 4.9 billion, for which the next contractually agreed interest adjustment dates were used; 4 Capital savings accounts in the amount of EUR 7.6 billion, despite the fact that these deposits are usually extended on maturity and generally increase over time. The expected cash flow dates in BAWAG P.S.K. Group deviate considerably from the dates in this analysis in other areas as well; 4 Under Deposits from customers, current accounts with a volume of EUR 6.6 billion; and 4 Other demand deposits with a volume of EUR 2.8 billion are reported in the Less than 1 month time period, but the expected investment duration is considerably longer on the basis of years of historical experience.

143 Consolidated Financial Report Prepared in Accordance with IFRS

Liability maturities as of 31 December 2009

Gross nominal Less than 3 months More than 1–3 months 1–5 years in millions of Euros inflow/outflow 1 month to 1 year 5 years Non-derivative liabilities Deposits from banks -5,210 -2,642 -209 -1,305 -531 -523 Deposits from customers -23,470 -14,683 -1,676 -2,532 -4,330 -248 Debt securities issued -12,466 -14 -169 -2,485 -4,641 -5,157 Subtotal -41,146 -17,339 -2,055 -6,322 -9,501 -5,929 Derivative liabilities Net inflow/outflow +534 -19 +68 +95 +177 +213 Other off-balance-sheet financial obligations -1,479 -1,479 – – – – Total -42,091 -18,837 -1,987 -6,227 -9,325 -5,716

Liability maturities as of 31 December 2008

Gross nominal Less than 3 months More than 1–3 months 1–5 years in millions of Euros inflow/outflow 1 month to 1 year 5 years Non-derivative liabilities Deposits from banks -5,001 -2,583 -747 -534 -530 -608 Deposits from customers -23,948 -12,917 -2,031 -5,771 -3,005 -224 Debt securities issued -12,164 -82 -186 -1,167 -5,170 -5,559 Subtotal -41,113 -15,582 -2,964 -7,471 -8,705 -6,391 Derivative liabilities Net inflow/outflow +327 -48 +60 +72 +110 +133 Total -40,786 -15,629 -2,904 -7,400 -8,595 -6,258

47 | Participation risk

Participation risk includes potential losses in the fair value of non-consolidated equity investments, potential impairments and low profitability of non-consolidated equity investments. Participation risk does not include operating Group subsidiaries because their risks are assessed separately according to the specific risk types and are already accounted for in this way.

144 Consolidated Financial Report Prepared in Accordance with IFRS

Impairment tests are conducted every year to validate the values of the equity investments in the Bank’s portfolio and to determine the hidden reserves in the equity investment portfolio. These impairment tests are completed on the basis of the planning projections (budgeted income statements, budgeted balance sheets, budgeted cash flows) prepared for future periods by the management of each entity. The free cash flows indicated in the projections are discounted using risk-adjusted rates. The total of the discounted free cash flows from the detailed planning period and perpetuity as of the reporting date is taken as the value of the company. The proportionate value of the company based on the Bank’s shareholding is then compared with the carrying amount of the investment. If the current proportionate value of the company is lower than the carrying amount, the equity investment is written down by the corresponding amount. If the current propor- tionate value of the company is higher than the carrying amount, this is recognised as a hidden reserve. The results of the impairment tests are reviewed by the Participation Risk Management division.

Shares in non-consolidated companies

in millions of Euros 31.12.2009 31.12.2008 Shares categorised as “Available-for-sale assets” 279 284 Shares in credit institutions 177 169 Subsidiaries – – Associates 36 36 Other shares 141 133 Shares in other companies 102 115 Subsidiaries 58 61 Associates 36 43 Other shares 8 11 Shares accounted for using the equity method 30 24 Associates 30 24 Total shares in non-consolidated companies 309 308

48 | Operational risk

BAWAG P.S.K. defines operational risk as the risk of loss resulting from insufficient or failed internal ­processes, external events, misconduct or staff errors. This definition of operational risk includes legal risks, but not strategic risks or risks to the Bank’s reputation, which are assessed and managed directly by the Managing Board.

145 Consolidated Financial Report Prepared in Accordance with IFRS

BAWAG P.S.K.’s Managing Board specifies Group-wide principles for managing operational risk in its Enter- prise Risk Meeting. In order to ensure that measures and principles are applied uniformly throughout the Group, these activities are coordinated by the central Operational Risk unit. The detailed management of operational risks in the individual business segments is completed locally in the respective units by the division heads and their operational risk agents.

BAWAG P.S.K. uses the basis indicator approach pursuant to sections 182ff SolvaV to calculate its own funds requirements in connection with operational risk at the Group level and for itself as an individual institution.

Losses incurred in the business segments and divisions as a result of operational risks are continuously documented in a central loss database through an institutionalised loss reporting system to collect data for the internal management of operational risks. Subsequent central analysis allows the clustering of losses to be identified early and further losses to be prevented.

Additional information is collected through Risk Control Self Assessments (RCSAs). All units and subsidiaries assess their material operational risks and the effectiveness of their control measures on a yearly basis using a uniform framework. This includes the assessment of individual control measures, the estimation of probabili- ties and the extent of losses arising from individual risks.

BAWAG P.S.K. has created an effective basis for limiting operational risks with a compartmentalised organisa- tional structure, clear authorisation levels and working instructions. Additionally, consistent guidelines ­regarding authority levels and a risk-adequate internal control system including computer-assisted plausibility reviews is designed to allow the Bank to maintain a controlled risk situation.

Application filed for switch from Basel II to IRB approach

BAWAG P.S.K. uses the standardised approach according to Basel II to calculate its risk-weighted assets, which are needed to calculate the core capital and own funds ratios. Over the past years, BAWAG P.S.K. has completed all preparations necessary to begin calculating its credit risk using an internal rating based ­approach (IRB) in accordance with the requirements of the Financial Market Authority’s Solvency Regulation starting in 2010. BAWAG P.S.K. filed an application for the approval of this system pursuant to section 21a paragraph 1, paragraph 7 and paragraph 8 BWG and section 22b paragraph 9 BWG with the Austrian ­Financial Market Authority in 2009.

146 Consolidated Financial Report Prepared in Accordance with IFRS

Disclosures Required by the Austrian Banking and Financial Reporting Acts

49 | Fiduciary assets

in millions of Euros 31.12.2009 31.12.2008 Fiduciary assets 216 523 Receivables from customers 216 523 Fiduciary liabilities 216 523 Payables to credit institutions 33 42 Payables to customers 183 481

50 | Breakdown of securities pursuant to the Austrian Banking Act (BWG)

The following table breaks securities down in accordance with section 64 paragraph 1 line 10 and line 11 BWG as of 31 December 2009:

Listed BAWAG P.S.K. Not in millions of Euros Held to Other Group listed Total maturity valuation Total 2009 Bonds and other fixed income securities 1,265 10,034 5,487 4,547 11,299 Shares and other variable income securities 127 49 – 49 176 Shares in associates and other shares 221 – – – 221 Shares in non-consolidated subsidiaries 58 – – – 58 Total securities 1,671 10,083 5,487 4,596 11,754

The difference between carrying amounts and lower repayment amounts for the purposes of section 56 paragraph 2 BWG was EUR 66 million. The difference between carrying amounts and higher repayment amounts for the purposes of section 56 paragraph 3 BWG was EUR 65 million.

Liabilities and subordinated capital amounting to a nominal EUR 2,035 million will come due under the corresponding contracts in 2010.

147 Consolidated Financial Report Prepared in Accordance with IFRS

51 | Collateral received for contractual liabilities

Different types of collateral have been pledged to the Bank as part of its business transactions. The following breakdown is based on the Basel II collateral management system.

Collateralised Collateralised in millions of Euros on-balance-sheet off-balance-sheet Total claims claims Financial collateral Stocks 67 190 257 Cash deposits 107 549 656 Bonds 128 3 131 Real estate Commercial properties 561 25 586 Private properties 3,540 22 3,562 Personal collateral Guarantees 3,193 73 3,266 Credit derivatives 56 – 56 Other forms of collateral Life insurance policies 40 – 40 Collateral received 7,692 862 8,554

To reduce credit risk for derivative instruments, the Bank received consideration (collateral deals) in the amount of EUR 368 million and paid consideration (collateral deals) in the amount of EUR 393 million.

148 Consolidated Financial Report Prepared in Accordance with IFRS

52 | Hybrid capital

The consolidated financial statements recognise hybrid capital within the meaning of section 24 paragraph 2 line 5 and line 6 BWG in the amount of EUR 404 million (2008: EUR 404 million). The entirety of this amount was reported on the IFRS balance sheet in the line item Supplementary capital and subordinated debt capital.

53 | Human resources

The Group had 5,659 employees (head count) as of 31 December 2009 (2008: 6,103 employees). Averaged over the year 2009, the Group’s human resources included 5,879 (2008: 6,673) salaried employees.

54 | Other disclosures required by BWG and UGB

The balance sheet entry for Land and buildings shows property with a carrying amount of EUR 56 million (2008: EUR 70 million).

Obligations arising from the use of tangible non-current assets not recognised on the balance sheet were expected to come to EUR 22 million in 2010 (2009: EUR 21 million); the expected amount in the five years following the year under review was EUR 100 million (2009: EUR 97 million).

The balance sheet as of 31 December 2009 contains deferred interest on supplementary capital bonds in the amount of EUR 16 million (2008: EUR 18 million).

Expenses for subordinated liabilities amounted to EUR 86 million (2008: EUR 85 million).

Expenses for BAWAG P.S.K.’s group auditor in the current financial year amount to EUR 2.9 million and comprise audit fees in the amount of EUR 2.3 million, tax advisory fees of EUR 0.3 million as well as other advisory fees in the amount of EUR 0.3 million.

BAWAG P.S.K. uses the Internet as the medium for publishing disclosures under section 26 Banking Act and the Disclosure Regulation. Details are available on the website of BAWAG P.S.K. at: www.bawagpsk-annualreport.com/en/2009/basel-2.

149 Consolidated Financial Report Prepared in Accordance with IFRS

55 | Events after the balance sheet date

Please see the management report for information on key events after the end of the reporting period.

Vienna, 9 March 2010

Byron Haynes, CEO m.p. Chairman of the Managing Board

Stephan Koren m.p. Deputy Chairman of the Managing Board

Regina Prehofer m.p. Carsten Samusch m.p. Sanjay Sharma m.p. Member of the Managing Board Member of the Managing Board Member of the Managing Board

150 Consolidated Financial Report Prepared in Accordance with IFRS

Statement of All Legal Representatives

“We confirm to the best of our knowledge that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group as required by the applicable ­accounting standards and that the group management report gives a true and fair view of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties the group faces.”

Vienna, 9 March 2010

Byron Haynes, CEO m.p. Chairman of the Managing Board

Stephan Koren m.p. Deputy Chairman of the Managing Board

Regina Prehofer m.p. Carsten Samusch m.p. Sanjay Sharma m.p. Member of the Managing Board Member of the Managing Board Member of the Managing Board

151 Consolidated Financial Report Prepared in Accordance with IFRS

Boards and Officers of BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft

The Managing Board of BAWAG P.S.K. as of 31 December 2009

Byron HAYNES, Member of the Managing Board (from 1 August 2008), Chairman of the Managing Board and CEO (from 16 September 2009) Stephan KOREN, Deputy Chairman of the Managing Board (from 1 October 2005) Joseph LAUGHLIN (from 13 August 2007 to 31 December 2009) Carsten SAMUSCH (from 13 August 2007) Regina PREHOFER (from 15 September 2008)

The Supervisory Board of BAWAG P.S.K. as of 31 December 2009

Chairman Cees MAAS (from 15 October 2009, Member of the Supervisory Board from 27 July 2009 to the Annual General Meeting 2011*)

Deputy Chairman Pieter KORTEWEG (from 15 December 2009, Member of the Supervisory Board from 27 August 2007 to the Annual General Meeting 2011*)

Members Marius J.L. JONKHART (from 18 July 2007 to the Annual General Meeting 2011*) Rudolf JETTMAR (from 15 May 2007 to the Annual General Meeting 2011*) Scott PARKER (from 15 December 2009 to the Annual General Meeting 2011*)

Works Council Delegates Ingrid STREIBEL-ZARFL Brigitte JAKUBOVITS Beatrix PRÖLL

State Commissioner Beate SCHAFFER (Deputy State Commissioner from 1 March 2007 to 1 August 2009)

Deputy State Commissioner Susanne SPIESZ (from 1 August 2009)

* Until the end of the Annual General Meeting adopting the Annual Financial Statements for 2010.

152 Consolidated Financial Report Prepared in Accordance with IFRS

Committees of BAWAG P.S.K. as of 31 December 2009

Credit Committee Cees MAAS, Chairman Marius J.L. JONKHART Rudolf JETTMAR Ingrid STREIBEL-ZARFL, Works Council Delegate Beatrix PRÖLL, Works Council Delegate

Audit Committee Marius J.L. JONKHART, Chairman Scott PARKER, Deputy Chairman Rudolf JETTMAR Cees MAAS Ingrid STREIBEL-ZARFL, Works Council Delegate Brigitte JAKUBOVITS, Works Council Delegate

Nomination Committee Cees MAAS, Chairman Scott PARKER, Deputy Chairman Pieter KORTEWEG Ingrid STREIBEL-ZARFL, Works Council Delegate Brigitte JAKUBOVITS, Works Council Delegate

Remuneration Committee Cees MAAS, Chairman Pieter KORTEWEG, Deputy Chairman Scott PARKER

Related Parties Special Audit Committee Marius J.L. JONKHART, Chairman Cees MAAS, Deputy Chairman Pieter KORTEWEG Rudolf JETTMAR Ingrid STREIBEL-ZARFL, Works Council Delegate Brigitte JAKUBOVITS, Works Council Delegate

153 Auditor’s Opinion

Auditor’s Opinion

We have audited the accompanying consolidated financial statements of BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft, Vienna, for the fiscal year from 1 January 2009 to 31 December 2009. These consolidated financial statements comprise the consolidated statement of financial position as of 31 December 2009, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the cash flow statement for the fiscal year ended 31 December 2009, and the notes.

Management’s Responsibility for the Consolidated Financial Statements and for the Accounting Records The Company’s management is responsible for the Group accounting records and for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. This responsibility includes: designing, implementing and main­ taining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility and Description of Type and Scope of the Statutory Audit Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with laws and regulations applicable in Austria and Austrian Standards on Auditing, as well as in accordance with International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC).

These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

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 misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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 the purpose of expressing an opinion on the effective- ness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

154 Auditor’s Opinion

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the consolidated financial statements are in accordance with legal requirements and present fairly, in all material respects, the financial position of the Group as of 31 December 2009 and of its financial performance and its cash flows for the financial year from 1 January 2009 to 31 December 2009, in accordance with International Financial Reporting Standards as adopted by the EU.

Comments on the Management Report for the Group Laws and regulations require us to perform audit procedures to determine whether the consolidated manage- ment report is consistent with the consolidated financial statements and whether the other disclosures made in the consolidated management report do not give rise to misconception of the position of the Group. The auditor’s report has to state whether the consolidated management report for the Group is consistent with the consolidated financial statements and whether the disclosures made according to section 243a para 2 UGB (Austrian Enterprise Code) are appropriate.

In our opinion, the consolidated management report for the Group is consistent with the consolidated finan- cial statements. The disclosures made according to section 243a para 2 UGB (Austrian Enterprise Code) are appropriate.

Vienna, 9 March 2010

Deloitte Audit Wirtschaftsprüfungs GmbH

Dr. Peter Bitzyk m.p. Mag. Thomas Becker m.p. Certified Public Accountants

The publication or transfer of the financial statements in a form different from the one we have audited is only permitted after our consent if in the course of doing so reference is made to our audit opinion or our audit. The auditor’s opinion only refers to the German version of the consolidated financial statements including the management report. Regarding alternative versions we refer to section 281 para 2 UGB.

155 Supervisory Board’s Report

Supervisory Board’s Report

Supervisory Board

BAWAG P.S.K.’s Supervisory Board duly fulfilled all of its obligations as set forth in the law, in the Articles of Association and in its Rules of Procedure. In addition, regular advice and support were given to the Managing Board while at the same time the actions of the management were closely monitored. The Managing Board reported all relevant issues to the Supervisory Board in a timely and comprehensive manner. There was an open discussion in the Supervisory Board as well as between the Supervisory and Managing Board at all times. Individual issues and topics were discussed on an ongoing basis between the Chairman of the Managing Board and the Chairman of the Supervisory Board.

Supervisory Board Members In 2009, three members resigned from the Supervisory Board. In October, the Chairman at the time, Wulf von Schimmelmann, resigned due to his obligations for other supervisory board mandates. Also, Mike Rossi and Daniel Wolf left the Supervisory Board.

I would like to use this opportunity to thank all of them for their valuable contributions to the discussions and wish them all the best on behalf of the entire Supervisory Board.

Scott Parker and myself were elected as new Supervisory Board members in the past year. I am looking forward to constructive and challenging discussions in the upcoming years.

Supervisory Board Meetings The Supervisory Board held six meetings in 2009.

In each of those meetings, the development of business as well as of capital was discussed and an update was given on the issuance of participation capital to the Republic of Austria. The main focus of the meeting in April lay on the illustration and discussion of the Bank’s financial statements for the year 2008.

The Supervisory Board was also regularly informed about the market position of the Bank, about implications for the Bank of changes in legal regulations and of personnel issues. Further, a presentation on the most significant subsidiaries, an update on issues raised in the Management Letter as well as the adoption of the updated Code of Corporate Governance and the review of the Rules of Procedure of the Supervisory and ­Managing Board were on the agenda of the Supervisory Board in 2009.

The committees of the Supervisory Board reported regularly on their discussions at the Supervisory Board meetings.

156 Supervisory Board’s Report

Meetings of the Supervisory Board Committees The Audit Committee held six meetings in 2009. The focus of the meetings in February and April lay on the review of the financial statements of the Bank. The semi-annual report was the main topic of the meeting in August. In October, the recommendation for the appointment of the auditor was discussed, among other things. There was a quarterly report by the Bank’s Internal Audit division. Further, the annual audit plan of Internal Audit and the Compliance department was presented and approved.

There were regular reports on business development as well as on issues with supervisory authorities. Addi- tionally, the Bank’s risk report, which among other things comprises the risk bearing capacity, corporate and retail risk, and market risk issues, was a regular agenda item for the Audit Committee.

The external auditors were present at all meetings and were involved in the discussions.

The Credit Committee met five times in 2009. In addition, a number of credit proposals were decided by circular resolution. Besides deciding on credit applications, the Credit Committee also discussed general credit risk topics. At the meeting in October, a focus lay on industry limits. Further, the development of the credit portfolio was monitored on an ongoing basis.

There was one meeting of the Related Parties Committee in 2009, in which a credit transaction was ­discussed which was subsequently decided by circular resolution. This was the only decision taken by the committee in 2009.

The Nomination Committee met three times. The main discussion topics besides the mandates of ­Managing Board members and succession planning were the recommendation to appoint Byron Haynes as Chief ­Executive Officer of BAWAG P.S.K. in August as well as the recommendation for the appointment of ­ Sanjay Sharma in December 2009.

The Remuneration Committee held three meetings in 2009, where the remuneration, targets and contracts of Managing Board members were discussed.

157 Supervisory Board’s Report

Managing Board

In September 2009, CEO David Roberts had to resign due to health problems.

David Roberts had significant influence on the development of the Bank. He succeeded in building a strong senior leadership team and boosting efficiency throughout the organisation while at the same time success- fully weathering the worldwide financial crisis. On behalf of the entire Supervisory Board, I would like to thank David Roberts for all his achievements and wish him the best for the future. At the same time, I would like to wish Byron Haynes all the best for the upcoming challenges in leading the Bank.

Byron Haynes, an experienced international banking expert, who has been a member of the Managing Board since August 2008, was appointed as the new CEO by the Supervisory Board. He will continue to act as the Chief Financial Officer of the Bank until an appropriate successor has been found. During his time as CFO of the Bank, Byron Haynes has managed to significantly improve the financial reporting systems in order to support the ­operational and financial performance of the Bank.

Joseph Laughlin resigned in December 2009 due to personal reasons. He had been Chief Operating Officer of the Bank since 2007 and was responsible for boosting process efficiency and leading the back office transfor- mation of the Bank. Carsten Samusch declared in January 2010 that he would not be renewing his contract, which will expire at the end of May 2010. He has been the Board member responsible for Treasury since 2007. Under Carsten Samusch’s leadership, the Treasury of the Bank has been successfully reorganised.

I would like to thank both Joseph Laughlin and Carsten Samusch for their valuable contributions to the Bank’s development and wish them all the best for the future.

While the search for a successor for Carsten Samusch is still under way, Sanjay Sharma was appointed as Chief Operating Officer of the Bank effective 1 January 2010. He had been the Managing Director of ­Operations since August 2008. Before that, he worked at Barclays Bank plc, where he gained international experience. Sanjay Sharma has a track record of strategy execution as well as of driving operational and structural change.

I am looking forward to the cooperation with the Bank’s management team and to constructive discussions­ at the Supervisory Board meetings.

158 Supervisory Board’s Report

Annual Financial Statements

The accounts, the 2009 annual financial statements and the management report were audited by Deloitte Audit Wirtschaftsprüfungs GmbH. The audit revealed no cause for objection. The legal requirements were met in full, and an unqualified auditor’s opinion was issued.

After lengthy discussion, the Supervisory Board concurred with the results of the audit, raised no objections against the annual financial statements and management report including the proposal for the appropriation of profits submitted by the Managing Board and hereby approves the annual financial statements for 2009 pursuant to section 125 paragraph 2 Aktiengesetz.

The consolidated annual financial statements for 2009 including the notes pursuant to the International Financial Reporting Standards (IFRS) and the Group management report were audited by Deloitte Audit Wirtschaftsprüfungs GmbH. The audit revealed no reasons for objection, and the legal requirements were met in full. The auditor confirmed that the consolidated annual financial statements provide a true and accurate picture of the financial position of the Group as of 31 December 2009 and of the earnings position and cash flows for the financial year started on 1 January 2009 and ended 31 December 2009 in accordance with the International Financial Reporting Standards.

The auditors also confirmed that the Group management report is congruent with the consolidated financial statements and that the legal requirements for exemption from the preparation of consolidated annual finan- cial statements according to Austrian law have been met in full.

The Supervisory Board agreed with the opinion of the auditor after extensive discussion.

In conclusion, I would like to sincerely thank all of the Bank’s employees for their hard work and dedication in 2009 in the name of the entire Supervisory Board.

Vienna, 9 March 2010

The Supervisory Board Cees Maas m.p. Chairman of the Supervisory Board

159 Owner and Publisher

BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft Georg-Coch-Platz 2, A-1018 Vienna, Austria Companies Registry number: 205340x Data Protection Authority number: 1075217 EU VAT number: ATU51286308 Telephone: +43 (0)5 99 05-0 E-mail: [email protected] Internet: www.bawagpsk.com

Editors: Christian Mader, Karin Mattes, Caroline Pranzl, Stefan Rossmanith, Julia Wiesinger-Knie (BAWAG P.S.K.) Translation: LanguageLink Sprachdienste, Vienna Layout and production: Gottfried Neubauer, Helmut Wernbacher (BAWAG P.S.K.) Typesetting and printing by: AV+Astoria Druckzentrum, Vienna

www.bawagpsk.com www.bawagpsk-annualreport.com