2007 Annual Report The art experience 2007 was a key year for the bank’s international cultural activities. It was a year that saw intense involvement in all the countries in which we operate. We believe that culture, when viewed as a strategic resource, can bring tremendous value and foster new ideas. These new ideas are fundamental to innovation and sustainable social and economic growth. In this year’s annual report we have decided to focus on images of the international events which comprised our work with important partners in art and culture rather than on individual pieces from our collection. These included events organised together with the Education Department of the Castello di Rivoli Contemporary Art Museum. These initiatives involving the broader public in art experiences illustrate the importance UniCredit Group attaches to entertaining and promoting an active dialogue with the communities in which our group operates. The large gatherings pictured in this report were held in city squares and museums and involved thousands of people. What you see is a single, spontaneously generated expression of thousands of hands united together in a joyful and creative concert. Contact with international artists and leading facilitators of culture, through diverse languages, styles and techniques, shows how art stimulates the development of relational and cognitive skills and the potential of the individual. Art, above all, generates significant positive energy which can connect people, bridge differences and promote dialogue. It offers an extraordinary repertoire for learning, exploring, experimenting and interpreting the present to build the future. Art brings people together. Which is why we say: ART TALKS. 2007 Annual Report Bank Austria at a Glance Income statement figures (in € m) 2007 2006 + / – Net interest income 3,936 2,681 46.8% Net fees and commissions 2,124 1,667 27.4 % Net trading, hedging and fair value income 141 348 – 59.6 % Operating income 6,414 4,762 34.7 % Operating expenses – 3,346 – 2,757 21.4 % Operating profit 3,069 2,005 53.0 % Profit before tax 2,745 3,272 1) – 16.1 % Consolidated profit 2,258 3,022 1) – 25.3 % 1) The income statement for 2006 includes one-off effects totalling € 1,758 m (capital gains of € 2,267 m; provisioning charge adjustment of € 278 m; integration costs of € 231 m) Volume figures (in € m) 31 DEC. 2007 31 DEC. 2006 + / – Total assets 209,170 154,255 35.6 % Loans and receivables with customers 115,341 80,104 44.0 % Primary funds 119,699 80,316 49.0 % Shareholders’ equity (excluding minority interests) 14,676 9,927 47.8 % Risk-weighted assets (banking book) 110,418 73,136 51.0 % Key performance indicators 2007 2006 2) Return on equity after tax (ROE) 17.0 % 15.8 % Return on assets (ROA) 1.18 % 0.70 % CEE contribution to profit before tax 48.9 % 44.9 % Cost / income ratio 52.2 % 57.9 % Net interest income / avg. risk-weighted assets (banking book) 4.08 % 3.50 % Risk / earnings ratio 12.3 % 14.9 % Provisioning charge / avg. risk-weighted assets (banking book) 0.50 % 0.52 % Total capital ratio 11.4 % 14.7 % Tier 1 capital ratio 8.8 % 11.6 % 2) Adjusted for one-off effects Staff 31 DEC. 2007 31 DEC. 2006 + / – Bank Austria Creditanstalt (full-time equivalent) 54,387 21,087 157.9 % Central and Eastern Europe 43,648 8,973 386.4 % Austria and other subsidiaries 10,739 12,114 – 11.4 % Offices 31 DEC. 2007 31 DEC. 2006 + / – Bank Austria Creditanstalt 2,343 1,070 119.0 % Central and Eastern Europe 1,977 681 190.3 % Austria and other subsidiaries 366 389 – 5.9 % 2 2007 Annual Report · Bank Austria Contents Introduction 5 UniCredit Group Profile 6 Strategy, Results and Business Model 19 Preface by Alessandro Profumo 20 Preface by Erich Hampel 22 Development and Strategy of Bank Austria 24 Bank Austria’s Divisions 36 Retail Division 38 Private Banking & Asset Management Division 44 Corporates Division 50 Markets & Investment Banking Division 56 Central Eastern Europe Division 62 Global Banking Services Division 86 Human Resources and Corporate Social Responsibility 93 Human Resources 94 Sustainable Business Management 100 Consolidated Financial Statements: Management Report of the Group 107 The Banking Environment in 2007 108 Management Report of Bank Austria Creditanstalt *) for 2007 110 Consolidated Financial Statements in accordance with IFRSs 133 Contents 133 Income statement, balance sheet, 134 statement of changes in equity, 136 cash flow statement 137 Notes to the consolidated financial statements incl. risk report 139 Concluding Remarks of the Management Board 207 Report of the Auditors 208 Report of the Supervisory Board 210 Corporate Governance, Statement by Management, Supervisory Board and Management Board of Bank Austria Creditanstalt AG 213 Corporate Governance 214 Consolidated Financial Statements of the BA-CA Group for 2007 Statement by Management 217 Supervisory Board and Management Board of Bank Austria Creditanstalt AG 218 Supervisory Board 218 Management Board 219 Committees of the Supervisory Board 219 Additional Information 221 Income Statement of the Consolidated Banking Subsidiaries in CEE 222 Glossary 224 Office Network 230 Investor Relations, Notes 234 *) Part of the consolidated financial statements in accordance with IFRSs Bank Austria · 2007 Annual Report 3 Introduction UniCredit Group Profile 6 Bank Austria · 2007 Annual Report 5 Introduction UniCredit Group Profile At a Glance: our Unique Franchise Highlights UniCredit Group is a major international financial institution with strong roots in Europe. It has a strong presence in 23 European countries, as well as representative offices in 27 other international markets, and employs around 170,000 people throughout the Group. It provides a powerful combination of distribution and production capabilities as well as the full spectrum of financial services, financial products, and investment vehicles. Over the years it has demonstrated its ability to generate profitable, sustainable growth and create significant value for its stakeholders. UniCredit Group is well-positioned as one of the top European players in the global banking industry. -ARKET¬#APITALISATION¬(€ billion)ååååååååååååååååååååååååååååååååASåATåå$ECEMBER ¬ "ANKING¬3ECTOR¬'LOBAL¬-ARKET¬#APITALISATION¬ (€ billion)ååååååååååååå å åååååååååååååååååASåATåå$ECEMBERå ¬ )#"# å å åååååååååååå (3"# åååååååååååååååååååååååååååå ##" å åååå "ANKåOFå!MERICA å åå "ANKåOFå#HINA åååååååååååååååå Countries where the UniCredit Group has #ITIGROUP åååååååååååå banking subsidiaries or banks in which it *0å-ORGANå#HASE åååååååååååå has a significant equity interest. 3#( åååååååååå 5NI#REDIT ååå Countries in which the UniCredit Group operates -ITSUBISHIå5&* via its own branches, representative offices, small banking 7ELLSå&ARGOåå#O subsidiaries, or investment centres (Pioneer). 6 2007 Annual Report · Bank Austria Customers: 40 million Employees1: 170,000 Branches2: 9,714 1. “Full time equivalent” data, calculated according to a new methodology which does not include unpaid leave. These figures include all employees of subsidiaries consolidated proportionately, such as Koç Financial Services Group employees. 2. These figures include all branches of subsidiaries consolidated proportionately, such as Koç Financial Services Group branches. Bank Austria · 2007 Annual Report 7 Introduction UniCredit Group Profile (CONTINUED) Strengthening our Home Markets A Powerful Network Focus on Austria, Germany and Italy UniCredit Group has its roots and a leading position in one of the wealthiest regions of Western Europe: Austria, Germany and Italy. That position was strengthened in 2007 by its integration in Italy with the Capitalia Group. This move strengthened UniCredit Group’s presence in one of its core markets, providing a very attractive outlook for the future. 4OTAL¬ASSETS¬(€ billion) "RANCHES 8 2007 Annual Report · Bank Austria Focus on Central and Eastern European countries UniCredit Group is the undisputed leader in Central and Eastern Europe with a market share that is double that of its closest competitors. In 2007 UniCredit Group extended its operations in this area to 20 countries (including Central Asia). Through the acquisition of ATF Bank, UniCredit Group has entered three new markets: Kazakhstan, Kyrgyzstan and Tajikistan. UniCredit Group has also moved to strengthen its presence in the Ukraine through the acquisition of Ukrsotsbank. 4OTAL¬ASSETS¬(€ billion) "RANCHES Bank Austria · 2007 Annual Report 9 Introduction UniCredit Group Profile (CONTINUED) Business Model The Pillars UniCredit Group has adopted a divisional business model. 30%#)!,)3%$ The goal is to fully ',/"!, 02/$5#4å leverage its network "53).%33å,).%3å &!#4/2)%3 by generating /.å',/"!,å3#!,%å value in all of the businesses in which UniCredit Group is involved and by capitalising on growth opportunities as they occur. -5,4) ,/#!, #%.42!,)3!4)/. !002/!#( /&å3500/24 3%26)#%3åå 10 2007 Annual Report · Bank Austria This business model is based upon four pillars: Delineating clear 30%#)!,)3%$ business lines – such ',/"!, 02/$5#4å as retail, corporate, private banking, investment banking "53).%33å,).%3å &!#4/2)%3 and asset management – which are all common to the /.å',/"!,å3#!,%å markets in which UniCredit Group operates. These are differentiated by client segment to address customer needs and to maximise their satisfaction. Creating specific global “factories” for the development of products such as credit cards, consumer loans, mortgages and leasing in order to leverage the growing