Annual Report 2014 of the Raiffeisenlandesbank Oberösterreich by Raiffeisen Oberoesterreich

ANNUAL REPORT 2014

ANNUAL REPORT

Europaplatz 1a, 4020 Linz Tel. +43 (0) 732/6596-0 Fax +43 (0) 732/6596-22739 Email: mak @ rlbooe.at www.rlbooe.at

2014

Annual Report 2014

ANNUAL REPORT

2014

GENERAL INFORMATION Contents

CONTENTS General Information Foreword by Heinrich Schaller_____________________________________________________________5 The Managing Board of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft ____________________8 Foreword by Jakob Auer_________________________________________________________________ 10 The Supervisory Board of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft__________________ 12 2014 in retrospect______________________________________________________________________ 14 Sustainability management and corporate social responsibility__________________________________ 18

Raiffeisenlandesbank Oberösterreich Aktiengesellschaft Group Group management report ______________________________________________________________32 IFRS consolidated financial statements 2014_________________________________________________48

Raiffeisenlandesbank Oberösterreich Aktiengesellschaft Management report 2014 of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft ______________ 144 Annual financial statements 2014 of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft ________ 158

Statement of the Managing Board __________________________________________________180 Report of the Supervisory Board ____________________________________________________ 181 Raiffeisen Banking Group Upper Austria Results 2014 (consolidated)_____________________________________________________________ 182

Imprint _____________________________________________________________________________188 Glossary_____________________________________________________________________________189

Annual Report 2014

GENERAL INFORMATION Foreword by Heinrich Schaller_____________________________________________________________________ 5 The Managing Board of Raiffeisenlandesbank Oberรถsterreich Aktiengesellschaft ___________________________8 Foreword by Jakob Auer_________________________________________________________________________ 10 The Supervisory Board of Raiffeisenlandesbank Oberรถsterreich Aktiengesellschaft_________________________ 12 2014 in retrospect______________________________________________________________________________ 14 Sustainability management and corporate social responsibility_________________________________________ 18

GENERAL INFORMATION Foreword by Heinrich Schaller

An impeccable reputation is essential Financial transactions are matters of trust. Trust is therefore our highest and most valued commodity. Raiffeisenlandesbank Oberösterreich earns the trust of its clients through its banking operations, particularly its special focus on customers and its commitment, openness and transparency, as well as its focus on solutions and the quality of the support it provides.

Business strategy provides stability and security In addition, Raiffeisenlandesbank Oberösterreich has a strong investment division. Corporate investments are held not only in leading Austrian companies that are successful globally but also in strong domestic SMEs. This diversification – healthy banking operations and a successful investment division – provides stability and security.

Further expanding strength and stability The European Central Bank (ECB) also gave Raiffeisenlandesbank Oberösterreich very high marks in the fall of 2014 during the bank check of the most important institutions in the euro zone. In all of the calculation scenarios applied by the ECB, the required capital ratios were significantly exceeded. Raiffeisenlandesbank Oberösterreich is committed to presenting itself as strong, resilient and healthy, and also to showing its strength and stability in the future, meeting the highest international standards and, in particular, intensively supporting and advising clients.

Capital, risk-bearing capacity and earnings are the most important resources Raiffeisenlandesbank Oberösterreich has a clear strategy, for instance, in the area of capital and equity ratios. The aim is to significantly exceed the statutory and supervisory requirements in these areas. There are also unique standards for risk-bearing capacity and equity capital formation.

Because Raiffeisenlandesbank Oberösterreich considers capital, risk-bearing capacity and earnings the most important resources for a successful business performance.

Further improving efficiency The stable results in the operational area are also a result of the measures that are continually being implemented to further improve efficiency. High efficiency also ensures that performance continues to improve in the future and that Raiffeisenlandesbank Oberösterreich can act from a position of strength. Further core projects are currently being reviewed.

Collaboration on a broad basis In the intensive implementation phase, the project “Raiffeisen Banking Group Upper Austria 2020” has been driving forward Raiffeisenlandesbank Oberösterreich and the Raiffeisen banks in Upper Austria since the summer of 2014 in conjunction with the Association of Raiffeisen banks. This project provides solutions in the form of service packages, in order to offer clients improved and more efficient services and to justify the trust that clients place in Raiffeisenlandesbank Oberösterreich. Service packages were developed for the areas: Client and market, Processing and production, Bank controlling and regulatory affairs, HR and management

Further strengthening Tier 1 capital ratio In 2014, Raiffeisenlandesbank Oberösterreich reported good and stable growth in its banking operations. For example, the bank was able to increase the investment financing provided to clients by three per cent.

Annual Report 2014

Raiffeisenlandesbank Oberรถsterreich AG is committed to presenting itself in the bank check of the most important institutions in the euro zone as strong, resilient and healthy. It is also committed to highlighting in the future its strength and stability, to meeting the highest international standards and, in particular, to intensively supporting and advising clients. Heinrich Schaller

GENERAL INFORMATION Foreword by Heinrich Schaller

The key results in 2014 in summary Raiffeisenlandesbank Oberösterreich continued to have a stable equity capital base in 2014. In terms of the Austrian Commercial Code, Raiffeisenlandesbank Oberösterreich had, with Tier 1 capital of EUR 2.5 billion, a CET1 ratio (Common Equity Tier 1 = core Tier 1 capital) of 11.6 per cent. Compared to 2013 figures and the policy at that time, this corresponds to an increase of 0.4 percentage points. In the regulatory-relevant CRR group (banking group), we achieved a CET1 ratio of 11.2 per cent. In 2013, the corresponding value was 9.8 per cent (based on the Austrian Commercial Code and the Austrian Banking Act). As such, both Raiffeisenlandesbank Oberösterreich AG, in accordance with the Austrian Commercial Code, as well as CRR (banking group), in accordance with IFRS, were clearly over the 8.5 per cent Tier 1 capital ratios required starting in 2019 under Basel III capital requirements. The total assets remained, in terms of the Austrian Commercial Code, relatively steady in light of the investment financing provided, despite increases. For short-term financing, we continued to be conscious of capital resources and cost efficiency. According to the Austrian Commercial Code, Raiffeisenlandesbank Oberösterreich had total assets of EUR 30.5 billion. The Group's total assets rose to EUR 38.6 billion, which represents an increase of 3.1 per cent. This can be traced particularly to the first-time consolidation of additional Group companies.

Income and loss statement 2014 In 2014, Raiffeisenlandesbank Oberösterreich AG reported an operating profit of EUR 287.2 million (–9.3 per cent), in accordance with the Austrian Commercial Code, and a profit from ordinary operations of EUR 91.0 million (–24.3 per cent). Valuations are one major reason for these results, as well as greatly increased expenses in conjunction with regulatory requirements. For example, the direct costs alone from the Asset Quality Review (AQR) and a Stress Test totalled approx. EUR 6.2 million. The Group reported an operating profit of EUR 269.6 million (–36.2 per cent), in accordance with IFRS. The pre-tax profit for the year fell compared to 2013 by 69.8 per cent to EUR 40.7 million. The main reason for this is the lower results from companies reported under the equity method, in particular, the negative profit for the year of the RZB/RBI Group and subsequently higher loan loss allowances, and gains/ losses on remeasurement of designated financial instruments due to interest rate and spread effects that have had an impact on the result. In contrast, the effects of the initial consolidation are reflected positively in the net income from investments. In the IFRS Group in 2014 we reported comprehensive income of EUR 94.8 million (2013: EUR 103.0 million). The lower after-tax profit for the year could be largely offset, in particular, through positive valuation trends for market-priced financial instruments in the “available for sale” category (mainly securities and investments).

Heinrich Schaller Chairman of the Managing Board of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft

Annual Report 2014

Scope of responsibilities of the Managing Board

Georg Starzer

Michaela Keplinger-Mitterlehner

Stefan Sandberger

Markus Vockenhuber

Reinhard Schwendtbauer

Heinrich Schaller

As of 1 January 2014, a new appointment to the Managing Board was made in the person of Stefan Sandberger, who has been responsible for the areas of GRZ IT Group, Operations, Organisational Development, Cash Management Solutions and Product Stewardship Treasury.

GENERAL INFORMATION Managing Board

Managing Board Area

Office of the Managing Board

Treasury Financial Markets

Treasury Product

Tax Office/ Real estate coordination

Corporates Market

Overall bank risk management

Public Relations and Media

Product Management/Sales Management Private clients and Private Banking/ Group Marketing

Cash Management solutions/ infrastructure

Security

Product management and Corporates Sales

Financing Management

Organisational development

Investment management

Factoring

REAL-TREUHAND Management GmbH

RaiffeisenIMPULS-Leasing

Heinrich Schaller

Legal Office

Michaela KeplingerMitterlehner

Stefan Sandberger

Corporate Governance & Compliance

Raiffeisenlandesbank Oberรถsterreich branches

Operations

Public Affairs

PRIVAT BANK AG

GRZ IT Group

Strategy Raiffeisen Banking Group Upper Austria Corporate customers Raiffeisen banks

Reinhard Schwendtbauer

Georg Starzer

Markus Vockenhuber

RVM Raiffeisen Versicherungsmakler

KEPLER-FONDS KAG

Management of Raiffeisen banks Human resources management

Business areas

Group accounting and controlling

Subsidiaries

Group audit

Staff unit

Annual Report 2014

Raiffeisen Banking Group Upper Austria stands with its strong customer focus for stability, reliability and expertise, as well as integrity in dealings, quality advice and security. Jakob Auer

GENERAL INFORMATION Foreword by President Jakob Auer

With clear strategies, continuity and shared objectives, Raiffeisen Oberösterreich is shaping the challenges of the future.

2014 was a challenging year overall for the banking sector. During such difficult periods, the strong foundation of values at Raiffeisen Oberösterreich is a particularly important anchor. Raiffeisen Banking Group Upper Austria stands with its strong client focus for stability, reliability and expertise, as well as integrity in dealing, quality advice and security. These concepts are ascribed to Raiffeisen in Upper Austria by its customers and are therefore also our unmistakable trade mark. But the trust we enjoy is not given automatically. To continue to be successful, this trust must also be demonstrated and developed in the future.

are impressive. The first results show that we have struck a chord with the Raiffeisen Banking Group Upper Austria 2020 project.

A successful project “Raiffeisen Banking Group Upper Austria 2020”

I would like to say thank you to our customers in particular who put their trust in the Raiffeisen Banking Group Upper Austria. A special thank you also to the members of the Managing Board of Raiffeisenlandesbank Oberösterreich, and especially to Chairman Heinrich Schaller for his focus on teamwork, his human, motivating manner and his clear decisions. I would also like to thank the members of the Supervisory Board at Raiffeisenlandesbank Oberösterreich, the managers and all employees at Raiffeisen Oberösterreich for their commitment to customer satisfaction and the future of our country.

Raiffeisen is known in Upper Austria for having a particularly strong team spirit in the sector. With clear strategies and common goals, we are not only responding to the challenges of the future but we are also actively shaping opportunities that bring challenges with them. Proof of this is the large and extensive Raiffeisen Banking Group Upper Austria 2020 project. The close collaboration and major commitment of everyone taking part in this project

A partner you can count on Even in times of ever increasing regulations, intensified controlling and partly inflated bureaucratic requirements, we are a reliable partner who focuses on placing client relationships, member interests and regional value creation in the foreground.

Jakob Auer President of the Supervisory Board

Annual Report 2014

Supervisory Board of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft Chairman

Registered member

Jakob Auer

Rudolf Binder

Chairman of the Supervisory Board, National Assembly, Chairman of the Austrian Farmers’ Federation, Deputy Advocate General of the Austrian Raiffeisen Association, Chairman of the South Wels Raiffeisenbank Agriculturist

Director, Raiffeisen Association, Upper Austria

Roman Braun

Chairman of Raiffeisenbank Region Schwanenstadt Agriculturist and Engineer, Deputy Mayor

Annemarie Brunner

Deputy Chairman

Volkmar Angermeier

Vice-President of the Supervisory Board, Chairman of Raiffeisenbank Region Eferding, Deputy Chairman of the Upper Austrian Greengrocers’ Cooperative (“EFKO”) Agriculturist

Josef Kinzl

Vice-President of the Supervisory Board, Chairman of Raiffeisenbank Region, Schärding Official expert

Member of the State Parliament, Farmer’s Federation

Alois Buchberger

Chairman of Raiffeisenbank Ennstal, Agriculturist

Manfred Denkmayr

Chairman of the Supervisory Board, Raiffeisenbank Mattigtal Barrister-at-Law

Karl Dietachmair

Director, Manager of Raiffeisenbank Region, Sierning

Karl Fröschl

Director, Manager of Raiffeisenbank Perg

Hannes Herndl

President of the Chamber of Agriculture, retired, State Chairman of the Upper Austrian Farmer's Federation, retired, Chairman of Raiffeisenbank Windischgarsten, Agriculturist

Christian Hofer

Honorary Consul of the Republic of Poland, Director of the Upper Austrian Chamber of Commerce, retired

Alexandra Kaar (until 31 Dec. 2014)

Regional Chairwoman of Raiffeisenbank Region Bad Leonfelden, Vorderweißenbach branch

Walter Mayr

Director of Raiffeisenbank Region Freistadt, Chairman of the Association of Managing Partners of Upper Austrian Raiffeisen banks

Gottfried Pauzenberger

Mayor of Kalham, Chairman of Raiffeisenbank Region Grieskirchen, Agriculturist

Eduard Pesendorfer

Director of the Upper Austria Regional Administrative Office, retired, Deputy Chairman of Raiffeisenbank Salzkammergut, Chairman of the Traunkirchen branch

Josef Pfoser (from 31 Dec. 2014, former non-registered member) Chairman of the Raiffeisenbank Region Rohrbach Master Builder and Carpenter, Managing Director of the Company of Resch Brothers Building Construction GmbH

Gertrude Schatzdorfer

Managing Partner of Schatzdorfer Gerätebau GmbH & Co KG

Johann Stockinger

Chairman of the Association of Chairpeople of Upper Austrian Raiffeisen banks, Chairman of Raiffeisenbank Region Gallneukirchen

Josef Stockinger

Chairman of the Managing Board of OÖ. Versicherung AG

Anita Straßmayr

Councillor of the Chamber of Agriculture, District Representative in the Farmer’s Federation, Deputy Chairwoman of the Supervisory Board of Raiffeisenbank Bad Wimsbach-Neydharting

GENERAL INFORMATION Supervisory Board

Non-registered members

Staff Council Representative:

Klaus Ahammer, MBA

Helmut Feilmair

Walter Lederhilger

Gerald Stutz

Director of Raiffeisenbank Salzkammergut Councillor of the Chamber of Agriculture, Chairman of the Supervisory Board of Raiffeisenbank KremsmuĚ&#x2C6;nster

Johann Moser

Chairman of the Staff Council, Deputy Chairman of the Staff Council

Dorina Bayer

Director of Raiffeisenbank Region Ried i. I.

Dietmar Felber

Robert Oberfrank

Josef Gokl

Deputy Chairman of Raiffeisenbank Inneres Salzkammergut, Chairman of the Bad Ischl branch Manager of the District Office of the Upper Austrian Chamber of Commerce in Gmunden

Franz Penz

Member of the Supervisory Board of the Upper Austrian Credit Guarantee Company, Draper

Karin Hetzmannseder Christoph Huber Albert Ruhmer Authorised representative Hermann Schwarz Authorised representative Richard Seiser

State Commissioners Josef Nickerl

Permanent Secretary, State Commissioner to the Financial Markets Supervisory Authority

Regina ReitbĂśck

Deputy State Commissioner to the Federal Ministry of Finance

Honorary Presidents Gerhard Ritzberger Helmut Angermeier

Annual Report 2014

2014 in retrospect 125 years of Raiffeisen Raiffeisenlandesbank Oberösterreich announces Oberösterreich new Managing Board Some 125 years ago in Weißkirmember chen an der Traun, the first Raiff-

Q1 Q2

At the start of 2014 Stefan Sandberger took over the seat on the Managing Board of Hans Schilcher, who retired after 40 years at Raiffeisenlandesbank Oberösterreich. The board area of Stefan Sandberger includes, for example, the areas of IT, Cash Management and Operations.

eisen bank was founded in Upper Austria. It was the cornerstone for a successful history: Today, Raiffeisen is the most important financial provider in Upper Austria and as a strong regional banking group it is a reliable partner for Verlässlichkeit und individuals and Kompetenz companies in this seit 125 Jahren! country.

Savings volume over 12 billion

Help for flood victims in the Balkans

The savings volume of the Raiffeisen Banking Group Upper Austria exceeded EUR 12 billion for the first time in 2014. Heinrich Schaller, Chairman of the Managing Board of Raiffeisenlandesbank Oberösterreich AG, traces this growth, in particular, to the high level of trust enjoyed by Raiffeisen Oberösterreich.

In mid-May 2014, a once-in-acentury flood did major damage in Bosnia and Serbia. To provide aid in a quick and unbureaucratic fashion, Raiffeisenlandesbank Oberösterreich launched a donation campaign with the charity Caritas. Overall, clients and employees collected some EUR 115,000 in donations. These funds helped families rebuild their livelihoods.

New contacts in Asia Raiffeisenlandesbank Oberösterreich signed a declaration of intent in 2014 to collaborate with the „Board of Investment“ of the Thai government. This agreement will enable us to better support businesses abroad in the future. Thailand is becoming more and more interesting as a market and is a strategically important jumping-off point for the emerging ASEAN region.

GENERAL INFORMATION 2014 in retrospect

Trailblazer of modern financial services

Q3 Q4

Raiffeisen Banking Group Upper Austria is considered a trailblazer in Austria for developing and implementing modern online and mobile solutions. For example, the app “Raiffeisen Meine Bank” offers a solution that was developed specifically for smartphones. Another innovation in Austria is the Maestro-Raiffeisen picture card: customers can design their Maestro-Raiffeisen card themselves by choosing their own personalised picture.

20 Years of INVEST AG In 2014, INVEST AG, the financing company for medium-sized enterprises in the Raiffeisen Banking Group Upper Austria, celebrated its 20th anniversary. Over the past two decades, 134 medium-sized companies have been provided EUR 347 million in equity. This makes INVEST AG the largest company for medium-sized enterprise financing in Austria.

ECB provides Raiffeisen- Traditional World landesbank Oberösterre- Savings Day ich with high marks The European Central Bank gave Raiffeisenlandesbank Oberösterreich very high marks in 2014 during the bank check with asset quality review (ASQ) and stress test. Raiffeisenlandesbank Oberösterreich significantly exceeds the mandatory Tier 1 capital quotas in all relevant calculation scenarios. Raiffeisenlandesbank Oberösterreich was the only bank in Upper Austria that passed this comprehensive check.

World Savings Day is the traditional high point of the savings day held at the end of October at Raiffeisenlandesbank Oberösterreich. Raiffeisenlandesbank Oberösterreich uses this day to thank its clients for the trust they have placed in the bank.

KEPLER-FONDS KAG Multiple award-winning Success for the investment company of Raiffeisenlandesbank Oberösterreich: In the German „Fund Compass“ of CAPITAL, the respected finance magazine, KEPLER-FONDS AG was chosen as the winner in February 2014. In November 2014, KEPLER-FONDS AG was awarded the most important fund prize, three first places and ten additional awards by the German magazine GELD.

ÂŠ Johann Steininger

Annual Report 2014

GENERAL INFORMATION

What does a bank do for society? Innovative ideas and actions go beyond normal banking activities at Raiffeisenlandesbank OberĂśsterreich: We therefore support not only forward-looking companies but also look for inspiration from the fields of culture, sports and education. For instance, we promote universities and technical colleges in Upper Austria, as well as projects, that are known beyond the borders â&#x20AC;&#x201C; as a partner of the Musiktheater Linz and Lentos art museum.

ÂŠ Johann Steininger

Annual Report 2014

As a strong regional bank, Raiffeisenlandesbank OberĂśsterreich is aware of its socio-political responsibility and sees itself as a partner to the individuals who want to help shape positive development in the region on a sustainable basis. Through its activities, Raiffeisenlandesbank OberĂśsterreich is also committed to the values of its founder Friedrich Wilhelm Raiffeisen, and therefore places the well-being of other people at the centre and acts based on the values of solidarity, subsidiarity and sustainability.

GENERAL INFORMATION Social responsibility

Sustainability management and corporate social responsibility 1. Activities in the areas of sustainability and CSR In 2014, a comprehensive sustainability strategy was developed at Raiffeisenlandesbank Oberösterreich. In parallel, the first measures toward implementing legal requirements in the area of sustainability and Corporate Social Responsibility (CSR) were decided on. Raiffeisenlandesbank Oberösterreich based its sustainability strategy on the international standard ISO 26000 combined with its past experience in the Austrian Raiffeisen sector and various professional networks. The sustainability activities of Raiffeisenlandesbank Oberösterreich are based primarily on its

own sense of responsibility toward society and not strictly to legal requirements. To further drive forward the area of sustainability management, an internal work group was created, consisting of representatives from relevant organisational units. This work group supports the development of an enterprise-wide sustainability strategy, as well developing measures derived from this strategy.

Memberships In order to ensure continued advances in the areas of sustainability and CSR, Raiffeisenlandesbank Oberösterreich has been playing an active part in sharing information in sustainability networks. The bank takes part in the following networks:

Raiffeisen Climate Protection Initiative (RKI)

respACT – Austrian business council for sustainable evelopment

The RKI was launched in 2007. It is a platform for 23 member companies from the Austrian Raiffeisen sector that promotes the exchange of shared knowledge and experience in the fields of sustainability and CSR, coordinates joint activities, and raises awareness of climate protection. As a member, Raiffeisenlandesbank Oberösterreich represents the Upper Austrian Raiffeisen banks and actively participates through work groups and exchange of knowledge and experience to shape the activities of the Raiffeisen Climate Protection Initiative.

Since 2007 respACT has been the leading platform for companies in the area of CSR and sustainable development in Austria. The name respACT stands for “responsible action” and comes from the purpose of the association, which is to support – from the smallest to the largest company – the aim of achieving self-defined ecological and social objectives. As a member, Raiffeisenlandesbank Oberösterreich benefits from the information provided, as well as participation in various events.

www.raiffeisen-klimaschutz.at

www.respact.at

CSR Dialogue Forum The CSR Dialogue Forum developed – as one of the more recent sustainability platforms – from an initiative of Upper Austrian entrepreneurs. The vision of the association is to develop an interdisciplinary platform for CSR as a centre of competence for companies in Austria and neighbouring regions. The initiative works, among others, in cooperation with international certification partners on an international CSR and sustainability quality seal. As a charter member, Raiffeisenlandesbank Oberösterreich supports the initiative, in particular, to build and develop the organisational structure.

www.csr-dialogforum.at

Annual Report 2014

2. Sustainability rating Raiffeisenlandesbank Oberösterreich has been rated by the international ratings agency oekom research AG in the area of sustainability efforts. In an interim rating from early 2014, Raiffeisenlandesbank Oberösterreich was able to upgrade its rating from “D+” to “C –”. The measures implemented starting in June 2013 in terms of sustainability have thus borne their first fruit. In the mid-term, our aim is to regain the prime status (grade of “C” or higher).

The rating confirms how important the integration of sustainability aspects in the core business and transparent reporting. In particular, a tight and comprehensive lending policy in terms of environment and social commitment is called for. As strengths, the activities of KEPLER-FONDS KAG – fund subsidiary of Raiffeisenlandesbank Oberösterreich – and the provisions of the code of conduct were highlighted.

3. Value creation report 2013 In 2014, the sustainability management program of Raiffeisen Zentralbank Österreich AG commissioned a report by Economica Institute for Economic Research (www.economica.at) to analyse the financial performance and fiscal contribution of the Raiffeisen Banking Group Austria in 2013. Raiffeisenlandesbank Oberösterreich and the Upper Austria Raiffeisen banks are given particular importance from a regional economic perspective since, in terms of the regional strategy, especially the Upper Austrian Raiffeisen banks meet their basic function as local providers of financing

and thus are an important pillar of the regional and local economy. Raiffeisenlandesbank Oberösterreich is aware of its role in close cooperation with the Upper Austrian Raiffeisen banks and sees itself affirmed in its work by this value creation report. The top objective remains to maintain this contribution to regional business, developing and continuing to be THE local financing provider in Upper Austria. The complete value creation report with all the data is available in the internet at www.rlbooe.at/wertschoepfungsbericht2013.

The most important findings of the report are, for example: “At EUR 750.8 million, the total gross value added of Raiffeisenlandesbank Oberösterreich and the Raiffeisen Banks in Upper Austria is twice as high as that of the whole sector of the Austrian water supply.” “Every 76th euro generated in Upper Austria can be ascribed directly, indirectly or by induction to Raiffeisenlandesbank Oberösterreich and the Raiffeisen Banks in Upper Austria.” “Every 83rd job in Upper Austria can be ascribed directly, indirectly or by induction to Raiffeisenlandesbank Oberösterreich and the Raiffeisen Banks in Upper Austria.” “The Raiffeisenlandesbank Oberösterreich and the Raiffeisen Banks in Upper Austria ensure overall as many jobs in Upper Austria, as Freistadt has inhabitants.” “Raiffeisen banks in Upper Austria strengthen peripheral, often structurally weak areas by creating jobs and added value in the region.” “Austria’s tax and fees revenue from Raiffeisenlandesbank Oberösterreich and the Raiffeisen Banks in Upper Austria amounted to EUR 310 million.”

GENERAL INFORMATION Social responsibility

4. Sustainable ownership structure and shareholding strategy Raiffeisenlandesbank Oberösterreich is owned by 95 Upper Austrian Raiffeisen banks, which are co-operatives held by the co-owners. Based on this ownership structure in which clients and shareholders are largely identical, Raiffeisenlandesbank Oberösterreich is responsible for maintaining and developing added value in the region. On one hand, Raiffeisenlandesbank Oberösterreich is an important employer in Upper Austria and generates, through its business activities, economic added value and employment; on the other hand, it also meets its responsibility indirectly through investments in companies in Upper Austria, as well as a strong key shareholder in Upper Austria of leading Austrian companies. More than 300,000 co-owners are shareholders in the local cooperative banks thanks to the subscription of cooperative shares of the respective local Raiffeisen cooperatives. The 95 Upper Austrian Raiffeisen banks are independent banks and provide the financial support for Austrians with some 440 branches throughout Upper Austria. Yet it is not only important to be present on site but to continually attract clients as co-operative members, and thereby enable clients to participate in each Raiffeisen bank and support people and the regional economy in terms of co-operative spirit.

Raiffeisenlandesbank Oberösterreich is committed, in terms of responsibility to shareholders and society, to the economic development of our state through equity capital financing in Upper Austrian companies. Together with Upper Austrian Raiffeisen banks, the small and mid-sized companies in the region are supported in their development and growth. As the fourth largest bank in Austria, we are also aware of our responsibility to leading Austrian companies, with corporate headquarters in Upper Austria, and we are a strong Austrian key shareholder. This ensures that the status of Upper Austria as a centre for business will be secured and developed in the future. In particular, the corporate headquarters of these leading companies are kept in the state. Raiffeisenlandesbank Oberösterreich is active in the areas of energy and food, for example, with successful investments in voestalpine AG, AMAG Austria Metall AG, Energie AG Oberösterreich, Österreichische Salinen AG, Vivatis Holding AG or efko Frischfrucht und Delikatessen GmbH. This ensures that value creation, jobs and decision-making expertise are retained in these leading companies in Upper Austria and Austria.

Annual Report 2014

5. Sustainable finance products Sustainable investments Raiffeisenlandesbank Oberösterreich places great emphasis on developing sustainable financial products. In this area, the fund subsidiary KEPLER-FONDS KAG is doing pioneering work in the Austrian market and is also gaining respect with its products in Germany. KEPLER Ethical Funds combine social, ecological and economic aspects. Investors in these funds assume responsibility and play an active role in ensuring a liveable future. Ethics and returns are not a contradiction in this regard. These value-oriented portfolios are managed based on a clearly structured approach, combing conventional fundamental ratings and ethical criteria. Institutional investors and private investors have put their trust in KEPLER Ethical Funds since 2000. KEPLER Ethical Funds meet national and international quality standards: The Eurosif transparency logo indicates that KEPLER-FONDS KAG is recognised as a provider of sustainable funds across Europe.

investment universe, which subjects companies and countries to a detailed fundamental rating. This ensures that only financially strong, sustainable companies are held in the portfolios. This excellent work has been verified by the German consumer organisation Stiftung Warentest. KEPLER Ethical Funds was the winner of the test in September 2014 in comparison with ethical-ecological pension funds. The fund impressed, in particular, through its selection criteria and a very high level of transparency. Currently some EUR 800 million are managed sustainably by KEPLER-FONDS AG. Last year alone more than EUR 500 million flowed from institutional investors and private investors into ethical portfolios. On 1 October 2014, the product range was expanded with the KEPLER Ethic Mix fund. In conjunction with this, KEPLER-FONDS KAG donated ten euros to SOS Kinderdorf for every ethics fund purchase order from October to the end of the year. A total of EUR 10,000 for individual sponsorship programs to help pave the way for children and young people in the SOS Kinderdorf family to have a fulfillGradient ing professional life. C 49,5 M 35 K 31 Y 26

KEPLER Ethical Funds also bear the Austrian eco-label for sustainable financial products. It is awarded by the Austrian Ministry of Agriculture and is a guarantee for sustainable products and services.

With the “Principles for Responsible Investment of the United Nations” (UNPRI), KEPLER-FONDS KAG commits to compliance with environmental, social and corporate governance issues (international code: ESG) in all its activities.

C 71,5 C 85 M 50,5 M 60 K 44,5 K 53 Y 37 Y 44

C2 M0 K 47 Y0

C 30 M 38 K 98 Y 3,5

C 17 M 31 K 94 Y0

Industry projects and projects in the area of renewable energies

Flat

Raiffeisenlandesbank Oberösterreich has a professional team with extensive, long-standing experience in the financing of complex structured industry projects and projects in the area of renewable energies. Many industrial nations are faced with a change in energy policy in order Grey to reach the prescribed climate protection objectives, reduce dependence on fossil fuels such as oil and coal, and exit from nuclear energy. The related need for investments requires efficient solutions in financing. C 49,5 M 35 K 31 Y 26

C 71,5 C 85 M 50,5 M 60 K 44,5 K 53 Y 37 Y 44

C2 M0 K 47 Y0

C 30 M 38 K 98 Y 3,5

C 17 M 31 K 94 Y0

N 64,5

N 76

N 49

N 33,5

N 100

Black & White Raiffeisenlandesbank Oberösterreich therefore provides fi-

A strict investment process in KEPLER Ethical Funds ensures that the fund only invests in socially and ecologically responsible companies and countries. Only those companies with the best social and ecological ratings in their sector are taken into consideration (i.e. best-in-class approach). The internationally renowned ratings agency oekom research AG is responsible for what is known as the corporate responsibility rating. Additionally, the traditional financial analysis goes into the composition of the

nancing solutions for projects and investments in biogas/ biomass, hydropower and photovoltaics in the domestic market and supports clients abroad. At the end of 2014, a commitment to 19 projects in Europe and Turkey was reported. These are being financed at a volume of around EUR 190 million. The majority of the projects are being implemented in Austria and Germany.

Please note the detailed information regarding risks and the liability disclaimer in the legal notice on page 188.

GENERAL INFORMATION Social responsibility

6. Responsibility for employees Raiffeisenlandesbank Oberösterreich has numerous initiatives to that ensure its employees enjoy an optimal working environment.

was introduced in the staff restaurant. The main goal is to offer around the year a varied, balanced and quality-conscious menu plan. In collaboration with employees, the breakfast menu was also updated.

Work/life balance

Sports and fitness offering In addition, the bank offers a range of sports and fitness options as part of its health management plan. The works council and management teams are committed to making a wide variety of health and sports available to employees from its own private sports club.

Crèche and kindergarten In 2010, Raiffeisenlandesbank established its own kindergarten with a crèche toddler group in Linz. “Sumsi’s Learning Garden” currently consists of two toddler groups and a kindergarten group and is conducted in German and English. Work time models Employees are also supported by a variety of work schedules in order to combine worker and employer interests. Using valuable work time effectively and efficiently is our aim and standard. Awards and seals of approval Raiffeisenlandesbank Oberösterreich was awarded the national mark of quality for a family-friendly work environment in 2009 (work/ life balance audit certificate), and will aim for re-certification in the coming year. In addition, the project launched in 2013 for developing employer grades “Raiffeisenlandesbank Oberösterreich – Enter your Future” – was developed further in 2014: As a result, Raiffeisenlandesbank Oberösterreich was named “Career's Best Recruiters” and awarded Bronze level and came in at 5th place in the ranking of top Austrian banks.

Healthcare Supplementary health insurance Raiffeisenlandesbank Oberösterreich is particularly concerned with the health of its employees. We offer a very needs-oriented complete package – from subsidised supplementary health insurance through regular vaccination and healthcare check-ups to a broad range of events held often in cooperation with public institutions and the works council, and which are bundled in the VITA health project. GO food offering Starting in 2013, the GO Vital line of GO restaurants, the catering subsidiary of Raiffeisenlandesbank Oberösterreich,

Raiffeisen sustainability challenge First, Raiffeisenlandesbank Oberösterreich and the Upper Austria Raiffeisen banks took part in the Raiffeisen sustainability challenge. This Austria-wide idea competition from the Raiffeisen climate protection initiative was held the second time after 2010 in the fall of 2014. The employees of the member organisations were invited to submit ideas in the categories of “Sustainable Financial Products & Services,” “Sustainable Building, Renovation & Mobility” and “Business-related measures”. The presentation and awards ceremony for the winning projects took place in mid-December at Raiffeisen Zentralbank. For every idea submitted, the Raiffeisen Climate Protection Initiative donated 10 euros for the nature purchase promotion in Raab conservation area (Burgenland) – in the “European Green Belt”. A total of 3,602 m² could be purchased. Now the goal is to implement all the ideas submitted in practice as best as possible.

AFTER.WORK Project The AFTER.WORK project of the Independent Volunteer Centre (ULF) aims to promote active ageing and lifelong learning through volunteering. The participants of the program support social facilities and initiatives during their free time. In 2014, the first group of employees, who were about to retire or had already retired from Raiffeisen Banking Group Upper Austria, started to work on this project. In the future, the aim is to introduce colleagues to the project and motivate them to do voluntary work.

Annual Report 2014

7. Creating added value for society Raiffeisenlandesbank Oberösterreich implements targeted measures aimed at meeting its social and societal responsibilities. With its sponsoring activities, Raiffeisenlandesbank Oberösterreich also puts maximum emphasis on the principles of regionality, community, sustainability, transparency and the focus on the future. Below are a few examples.

Education & science

Raiffeisenlandesbank Oberösterreich champions educational initiatives and institutions at compulsory and secondary schools and supports research and teaching at universities and technical colleges. Financial Literacy Aware of its social responsibility, particularly in the area of financial education, Raiffeisenlandesbank Oberösterreich engages in various activities to promote financial literacy. One of these activities is the stock market game, which was played for the 13th time in collaboration with the Upper Austrian news. Some 15,000 participants took the opportunity to invest virtual start-up capital of EUR 50,000 on international stock markets, trading with a wide range of securities and learning about the exciting world of securities – without risk. Student Olympics With great enthusiasm, every year Upper Austrian primary school students in the fourth grade take part in the reading competition “School Olympics” of the Raiffeisen Banking Group Upper Austria. The competition playfully promotes the reading skills of the young generation. From mid-2013 to April 2014, the competition was held for the ninth time. Science Award On 15 January 2014 the winners of the science award of Raiffeisenlandesbank Oberösterreich were named. The award for excellent scientific work on banking, money or credit specific-topics by students or graduates of the Johannes Kepler University was bestowed for the twelfth time. The science award promotes the interconnection science and business. Journalist Academy Every year Raiffeisenlandesbank Oberösterreich promotes young journalistic talent in Upper Austria in collaboration with the Upper Austrian Journalist Academy. As an education partner for young journalists, in 2014 Raiffeisenlandesbank Oberösterreich once again took on the responsibility of training two journalism students as part of an internship programme.

GENERAL INFORMATION Social responsibility

Society & culture

Raiffeisenlandesbank Oberösterreich supports organisations which serve social order, are concerned with changes in society or which are involved in maintaining and fostering culture and tradition. European Forum Alpbach Raiffeisenlandesbank Oberösterreich organises an annual working group on CSR-related topics as part of the economic discussions in the European Alpbach Forum. In 2014, together with the organisational consultant promitto, a work group was formed on the topic of “Sharing Economy – the co-operative idea in the 21st century”. In advance, they addressed the topic of “Sharing Economy” and the feeling of commonly owning and sharing was further supported by the “Alpbach Umbrella” project (www.facebook.com/alpbachumbrella2014). Cooperation with bluelight organisations Disaster aid network Raiffeisenlandesbank Oberösterreich, together with the Upper Austrian military command and respected Austrian companies, is one of the founding members of the “Network for Disaster Relief in Upper Austria”. The network provides assistance to people in Upper Austria during disasters. As the coordinating unit, the Upper Austrian military command calls for assistance via this network if needed. This can occur if the army deploys aid in a disaster situation. Raiffeisenlandesbank Oberösterreich supports the network with infrastructure, food, drinks and procurement logistics. Participation takes place under the motto “Helping people and the country” and is voluntary, free of charge and without bureaucratic red tape. Raiffeisen Security Day and Raiffeisen Security Prize On 26 November 2014, the 19th Raiffeisen Security Day was held. In the morning, students attended informative lectures and demonstrations of various emergency services. In the afternoon, the day continued with presentations on important security issues such as cyber crime. In the evening, CEO Heinrich Schaller and Minister of the Interior Johanna Mikl-Leitner awarded ten people the Raiffeisen Security Prize for their courageous actions. Folk Culture Prize Every two years, the Folk Culture Prize is awarded by the state of Upper Austria, with the support of the Raiffeisen Banking Group of Upper Austria . This prize not only recognises the best initiatives and projects but also provides a platform for the diversity and quality of Upper Austrian folk culture. The 2014 regional award went to the local youth of Upper Austria for the project “Digital Maypole Map” (www.doris.at). Regional Music Festival 2014 From March to November 2014 concerts, workshops and competitions took place throughout Upper Austria in the context of the local music festival held there. The high point at the end of May was the music parade of the Upper Austrian bands in Linz's stadium, also known as “Auf der Gugl”. Around 6,000 spectators experienced Upper Austria in sound and music, performed by 48 bands with about 2,000 musicians.

Annual Report 2014

Ecology and sustainability

Raiffeisenlandesbank Oberösterreich promotes institutions whose aims include looking after the countryside as well as protecting our environment and which aim to achieve these goals by conveying knowledge and raising awareness as well as through practical project implementation. Continuation in the switch to organic and Fair Trade products One of the first pilot projects within the framework of the sustainability management initiative by Raiffeisenlandesbank Oberösterreich was switching to Biological and Fair Trade types of coffee. The next switch in products has now been introduced: Organic tea has been provided to meet demands for tea in our in-house “Börserie” restaurant and at company catering events since the beginning of March 2014. Green Events In the course of sustainability activities, events conducted by Raiffeisenlandesbank Oberösterreich are also to be designed in ways that are environmentally and socially acceptable. The Design Centre was the first enterprise in Linz to receive certification for holding Green Events and now provides the opportunity to conduct events in its premises. With its celebratory event on the occasion of the Annual General Meeting in May and its “Market Impulses” event in September 2014, the Raiffeisenlandesbank Oberösterreich was able to conduct its first Green Events there. The aim is for every event in the Design Centre to be conducted as a Green Event in future. Sustainable mobility Raiffeisenlandesbank Oberösterreich focused on promoting sustainable mobility in 2014. Within the framework of initial pilot projects, service vehicles were converted to alternative forms of propulsion. The Facility management staff of Real-Treuhand (a real estate subsidiary of Raiffeisenlandesbank Oberösterreich) relies on zero-emission e-scooters in supervising its own operating sites, such as parking garages in the Linz city area. Since the end of July 2014, Raiffeisenlandesbank Oberösterreich employees have really been able to step on the accelerator with a new Gold TGI BlueMotion version, which is available for use on company business and which is equipped with the latest natural gas technology. Further actions have already been planned for the car pool. Both projects are being funded under the Climate and Energy Fund within the framework of the climatically-active mobility promotion programme as a contribution to the protection of the environment and of the climate in traffic.

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Ecological and social measures in catering for employees Since March 2014, GO Catering has been using 100 per cent biologically degradable take-away tableware made by the Bionatic Company in all employee restaurants. Raw materials which are 100 per cent plant-based are used to manufacture packaging. GO Catering is also contributing to social responsibility: FAB, the Association for the Promotion of Work and Occupation, has assumed the entire management of crockery for GO Catering. Older people who are due to retire soon but are still looking for work are once again granted access to the labour market via the “Chance P” Project.

GENERAL INFORMATION Social responsibility

LENTOS Art Museum Linz, photo: Linz City Communications Office

Art

Raiffeisenlandesbank Oberösterreich supports cultural institutions, artists and art projects with the aim of setting a new cultural focus in Upper Austria, and with the focus in particular on promoting the fine arts and music, and also facilitating access to cultural institutions for the population of the area. prima la musica Raiffeisen Oberösterreich continued its long-term participation in the “prima la musica” competition in 2014 as well. Lots of musical talents from among Upper Austrian music pupils appear on stage each year. The participants deliver something special in the music competition and, above all, they convey their joy in playing music. Lentos Art Museum The Lentos Art Museum provides Linz with a modern setting for art and culture. Raiffeisenlandesbank Oberösterreich has been a reliable and strong supporter of the Museum from the start and in so doing has helped Linz to secure its long-term position as a city of culture. Support was provided towards mounting the “Alois Mosbacher” exhibition in 2014. Musiktheater, Linz The Musiktheater, Linz has been able to establish itself since opening in 2013 as THE opera house not only in Upper Austria, but also in the surrounding regions. The Raiffeisenlandesbank Oberösterreich has been its primary sponsor since building began in 2009, making it one of the key supporters of the new building in the Volksgarten area of the city. Brucknerhaus, Linz The Raiffeisenlandesbank Oberösterreich has been a partner of the Brucknerhaus festival and congress centre for years. One of the key events held each year is the annual, internationally renowned Bruckner Festival. Promotion of this event expanded even further and international stars will be invited to visit Linz. The initiative to found the Linz International Cultural and Economic Forum also originated with the Linz Brucknerhaus and has the task of intensifying the level of cooperation between art, politics and economics, developing new networks and promoting cooperation between the cultural institutions of the region.

Annual Report 2014

Sport

Raiffeisenlandesbank Oberösterreich promotes organisations that are committed to sports for all. In doing this, both health promotion policies and also social aspects play crucial roles. For this reason, the focus is placed on working with young people and young talent in promoting team sports. Raiffeisen Banking Group Oberösterreich promotes 17 different types of sport in more than 400 associations. Training the next generation For Raiffeisenlandesbank Oberösterreich, mass sporting activities represent an important means for promoting health. Based on this understanding, focused training for the next generation is promoted in various types of team sports. Successful cooperation continued in projects in 2014, including with the Next Generation Academies of the Upper Austria Football Association, the Siegfried Athletics Sports Club, Linz, and the Ried Football Association, with the Upper Austria Skipool as well as with the next generation teams of Black Wings (ice hockey), Linz HC (handball), Allianz Swans Gmunden (basket ball) and Linz AG Froschberg (table tennis). International top range events help to promote the region International top range events strengthen the Upper Austria region as a sport location, but also provide inspiration for amateur sportsmen and women and motivate people to get active through sport. The Raiffeisenlandesbank Oberösterreich provides support jointly with the other Raiffeisen Banks in Upper Austria for top sporting events such as the WTA Ladies Tennis Tournament in Linz, the International January Rally or the Wels Inner City Radkriterium cycling competition. The success and popularity of the international sporting elite events reveal the outstanding organisation behind these events, which also contribute towards the overall value creation process of our federal state. Sports Day 5 November 2014 was a day devoted to sporting activities. In the morning, school children were offered the chance to try out the most varied kind of sporting activities in the Raiffeisen Forum and received tips from students of the University of Applied Sciences for Sporting Professions of Upper Austria about the right nutritional intake for becoming fit enough to achieve peak sporting performance. The evening event took place in front of 700 guests and dealt with the topic of “The importance of skiing as an indispensable economic factor of significance for Austria”.

GENERAL INFORMATION Social responsibility

Social affairs

Raiffeisenlandesbank Oberösterreich supports projects that help people in humanitarian need or which contribute to improving their social living conditions. There is also support for programmes aimed at raising awareness in the prevention of social risks and in preventive health measures. Upper Austria START scholarships programme Following the successful initial year of the “Upper Austria START” programme, the programme of scholarships for young people with a migration background entered its next phase at the beginning of the 2014/2015 school year. On 23 October 2014, a further six young people were selected to take part in this special funding programme in the Raiffeisenlandesbank Oberösterreich. This means that a total of 13 young people are now receiving support as the beneficiaries of full and partial grants to help them pass their school-leaving exams. The “Upper Austria START” project is supported by the Raiffeisenlandesbank Oberösterreich and the Upper Austria Regional State as structural partners in order to help with financing material and personnel costs. Both companies and institutions act as guardians of the scholarship holders and likewise participate in funding the scheme. A Healthy Upper Austria 28 April 2014 was a day totally devoted to health by Raiffeisenlandesbank Oberösterreich. Already in the morning, around 180 school pupils were welcomed by the company as visiting guests, there to learn about the topics of health, nutrition and sport. In the evening, the Aesculapius Prizes for Humanity of the Upper Austrian Medical Association, supported by Raiffeisenlandesbank Oberösterreich, were awarded to doctors who had demonstrated particular commitment. The prizes were awarded in collaboration with the association for “A Healthy Upper Austria” and the Upper Austria news service Donation campaigns Social responsibility is firmly anchored in the company philosophy of the Raiffeisenlandesbank Oberösterreich. Raiffeisenlandesbank Oberösterreich therefore supports projects that help people in humanitarian need or which contribute to improving their social living conditions. “Flood relief for Serbia and Bosnia” campaign A once-in-a-century flood left a trail of destruction in its wake in large parts of Bosnia and Serbia in mid-May 2014. Due to the enormous consequences of this catastrophic flood, the Upper Austria Raiffeisen Banking Group launched a broad-based donation campaign in collaboration with the Caritas rescue service. A total of 115,000 Euro was collected jointly from company employees and customers. Lighten our Darkness For some years, customers of the Raiffeisen Banking Group of Upper Austria have been making donations to the ORF campaign of “Light in the Darkness”. The Raiffeisenlandesbank Oberösterreich also contributes a matching share towards this total of donations and was thus able to hand over 90,000 Euro on 24 December 2014. Support is also provided to other campaigns calling for donations, such as the Herzkinder Österreich (www.herzkinder.at), the BezirksRundschau-Christkind (www.meinbezirk.at/themen/bezirksrundschau-christkind.html), the “Krone”-Christkindl-Aktion (www.krone.at), the Christmas campaign of the Neues Volksblatt (www.volksblatt.at), the OÖN-Christkindl (www.nachricten.at/oberoesterreich/christkindl), as well as philanthropic organisations.

Annual Report 2014

GENERAL INFORMATION

We are close to you. Being close to your customers is becoming ever more important. This is why Raiffeisenlandesbank Oberรถsterreich provides accompanying services for local companies no matter where their success may lead them. Due to state-of-the-art technology and a world-wide network of cooperation and partner banks, our customers have the benefit of having an experienced and knowledgeable partner at their side in all markets throughout the world.

Annual Report 2014

GROUP MANAGEMENT REPORT 2014 1. Report on business development and the economic situation _______________________________________ 33 2. Report on the companyâ&#x20AC;&#x2122;s prospective trends and risks _____________________________________________ 43 3. Research and development ___________________________________________________________________ 45 4. Report on the most important aspects of the internal control and risk management system ______________ 45

THE GROUP Group management report 2014 l Business development and the economic situation

Group management report 2014 Raiffeisenlandesbank Oberösterreich Aktiengesellschaft These consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRSs), also comply with the additional requirements of section 245a of the Austrian Commercial

Code (UGB) and section 59a of the Austrian Banking Act (BWG). The group management report has been prepared in accordance with section 267 of the Austrian Commercial Code.

1. Business development and the economic situation 1.1. Economic background 2014 Developments in the global economy were more subdued than expected and highly heterogeneous in 2014. Anglo-Saxon countries experienced a robust upturn, but the euro area continued to suffer from persistent economic weakness and major economies such as Japan, Brazil and Russia slid into recession. The economic environment in 2014 was shaped by a number of exceptional factors that it was very difficult to predict. These factors included, for example, the political crises in the Middle East, Russia and Ukraine, and the huge fall in the price of oil after the midpoint in the year. The US achieved a solid rate of growth over 2014 as a whole despite a slump in the first quarter. On one hand, fiscal policy had a stimulating effect and continues to be very expansive, despite the end of the bond repurchase programme in October. In addition, the effects of the fiscal brake caused by the automatic budget cuts known as the sequester came to an end. The recovery of the job market stimulated consumer spending and the level of household debt continued to fall. Growth in the emerging countries continues to be higher than in the industrial nations, yet they cannot attain the high rates of growth from before 2008. In general, their growth potential seemed to weaken due to structural bottlenecks as well as financial and macroeconomic imbalances. The euro zone started 2014 with real optimism, yet lost its momentum in the summer. Developments within the currency area continues to be heterogeneous, whereby the growth dynamic seems to be shifting overall. While a few countries on the periphery turned things around thanks to reforms (Ireland, Spain), other countries are not gaining traction. Countries such as France, Italy and Greece continued

to be weighed down by their difficulties. Germany defended its reputation as the strongest economy in the euro area, achieving GDP growth over the whole of 2014 of 1.6%. This was well above the average for the euro area, provisionally estimated at 0.8% for the year. The main boost for the German economy came from domestic demand, driven by consumer spending and a positive trend in capital investment. The Austrian economy also started 2014 very confidently but lost much of its impetus over the course of the year. This was attributable to a number of factors. Weak growth in real incomes and rising unemployment acted as a brake on household consumption, exports were hampered by the sluggish pace of growth in the euro area and in emerging markets, and businesses returned to a wait-and-see approach, holding back capital investment because of the uncertainty in both domestic and international sales markets. Although the manufacturing and construction sectors in Upper Austria performed somewhat better than the national average in 2014, some industries, notably those heavily dependent on exports, are suffering an adverse impact from the weaker global economy and the consequences of the crisis in Ukraine. To date, Upper Austria has been able to maintain its position of having one of the lowest rates of unemployment in the country, but the current economic weakness is now even having an impact on the labour market in this region.

1.2. Business development In 2014, the strengths of Raiffeisenlandesbank Oberösterreich – its sound financial base, its special customer focus and market penetration as market leader in Upper Austria, its global network and broad range of business areas – enabled the Bank to cope with the persistently challenging global economic environment and associated changes in conditions. As in previous years, Raiffeisenlandesbank

Annual Report 2014

Oberösterreich continued to demonstrate that it was a stable, reliable partner for its customers and the real economy. A large number of different action plans and projects targeted at the proactive management of costs and risks ensure that the Bank is able to meet the current challenges and satisfy additional statutory requirements. Constant efforts aim to exploit synergies with a view to achieving further efficiency enhancements. The Bank is also continuing to step up its customer focus. Careful management of capital Raiffeisenlandesbank Oberösterreich modified its structures in line with the tighter capital requirements under Basel III quite some time ago by converting its total equity – which had previously consisted of ordinary and preferred shares as well as participation capital – into ordinary shares. Nevertheless we pay particular attention to careful management of available equity. As a result of this strategy, Raiffeisenlandesbank Oberösterreich managed to increase its Tier 1 capital ratio even further in 2014. Cautious risk policy Given the general economic situation, 2014 remained challenging for a number of industries. Raiffeisenlandesbank Oberösterreich successfully maintained its cautious risk policy, enabling it to support businesses as a reliable partner and meet its responsibilities to its customers, even in these tougher conditions.

review in which 700 financing cases were assessed for impairment. The test also included the themes of processes and policies, an analysis of portfolio valuation, evaluation of securities, and review of fair value exposures. The tests results were then used as a basis to examine crisis resistance and stability by means of different stress scenarios. Raiffeisenlandesbank Oberösterreich significantly exceeded the Tier 1 capital ratios in all the applied scenarios and demonstrated in both the stress tests and the asset quality review (AQR) that it was sufficiently robust and resilient. The baseline scenario required a minimum Tier 1 capital ratio of 8%. However, in this scenario, Raiffeisenlandesbank Oberösterreich achieved Common Equity Tier 1 (CET1) ratios of 10.55% for 2014, 11.0% for 2015 and 11.31% for 2016. In the adverse scenario, a minimum Tier 1 capital ratio of 5.5% was required. The ratios for Raiffeisenlandesbank Oberösterreich in this scenario were 9.13% for 2014, 8.82% for 2015 and 7.93% for 2016. The requirements for the recognition of loan loss allowances identified in the random sample tests as part of the AQR were analysed in detail. The allowances were recognised to the required extent in 2014 and are included in the annual financial statements. At the suggestion of the auditor carrying out the AQR, the model for recognising portfolio loan loss allowances was modified. Please refer to the accounting policies sections in the notes to the consolidated financial statements for details regarding the impact on the measurement of derivatives, on loan loss allowances and on the recognition of impairment losses for equity investments.

An even more efficient organisation The objective of exploiting synergies and thereby reducing costs was also consistently pursued in 2014. The consolidation of all processing and settlement activities, such as those relating to securities, treasury, payments and lending, into one central “operations” unit was completed on 1 Jan. 2014. The corporate customer divisions at Raiffeisenlandesbank Oberösterreich were also brought together under one area of Managing Board responsibility and reorganised. This reorganisation created a new sales and product division for corporate customers intended to support corporate customer relationship managers in their product and sales activities. ECB gives Raiffeisenlandesbank Oberösterreich a good report Raiffeisenlandesbank Oberösterreich was the only bank in Upper Austria classified as one of the euro area's “significant” banks by the European Central Bank (ECB) in the sizebased classification required under the Single Supervisory Mechanism (SSM). This is why as of March 2014 the ECB subjected Raiffeisenlandesbank Oberösterreich to an intensive

Furthermore, the ECB, in cooperation with the Oesterreichische Nationalbank (OeNB), conducted data surveys for the Supervisory Review and Evaluation Process (SREP). The findings will be used to specify a required CET1 ratio and a Total capital (TC) ratio for Raiffeisenlandesbank Oberösterreich at consolidated level. Managing Board changes At a meeting held on 24 June 2013, the Supervisory Board of Raiffeisenlandesbank Oberösterreich AG chaired by Jakob Auer agreed the successor to Deputy Chairman of the Managing Board Hans Schilcher, who was to retire at the end of 2013. The member of the Managing Board appointed to be deputy to Chairman of the Managing Board Heinrich Schaller from 1 Jan. 2014 was Michaela Keplinger-Mitterlehner. Stefan Sandberger was also appointed to the Managing Board. He took over from Hans Schilcher the remit for the following from the beginning of 2014: GRZ IT Group, the Cash Management and Operations divisions (including Treasury Services, Credit Services, Securities Services and Fund Management).

THE GROUP Group management report 2014 l Business development and the economic situation

Group structure As a superordinated banking institute, starting with financial year 2007, Raiffeisenlandesbank Oberösterreich has been obliged to prepare and publish consolidated financial statements in accordance with the IAS Regulation (EC) 1606/2002, abiding by the regulations of the International Financial Reporting Standards (IFRSs). In addition, disclosures and notes are required in accordance with the regulations of the Austrian Banking Act and the Austrian Commercial Code. The consolidated financial statements for the year ended 31 Dec. 2014, including Raiffeisenlandesbank Oberösterreich as the Group parent, consisted of 154 (previous year: 154) fully consolidated Group companies and seven (previous year: nine) companies consolidated using the equity method. Of the fully consolidated companies, five are banks, 100 are financial institutions (based on business activities), 19 are financial institutions (based on functions as holding entities), one is a finance holding entity, one a provider of ancillary services and 28 are other miscellaneous entities. Please refer to the basis of consolidation section in the notes for details.

information is regularly presented to the members of the Managing Board to help them make decisions, manage the Bank and allocate resources. Segment reporting is divided into the following four segments: Corporates & Retail Financial Markets Investments Corporate Center For details on the relevant figures, please refer to the segment reporting in the disclosures. Corporates & Retail segment The Corporates & Retail segment comprises the Corporates Market division (the main units in which are Corporates, Institutions, International Finance, Real Estate Projects, Industry Projects, Correspondent Banking and Southern Germany) and the Retail division, which in turn comprises the branches of Raiffeisenlandesbank Oberösterreich. The segment generated a pre-tax loss of EUR 8.3 million in the 2014 financial year (previous year: EUR 13.2 million). The reasons for the loss included an increase in portfolio loan loss allowances and the higher stability levy payable by banks.

Effects of the Basel III implementation Financial Markets segment The new European supervisory provisions for banks (Basel III implementation in the form of the Capital Requirements Regulation (CRR), Capital Requirements Directive (CRD) and resulting EBA standards) mean that reports required by the supervisory authorities must be submitted at consolidated level in accordance with the provisions of IFRS. However, the group of entities to be included in these consolidated reports is determined by the CRR. Essentially, this group of entities only includes banks, financial institutions, financial institutions on the basis of business activity or holding entity function, financial holding entities and providers of ancillary services, but it does not include any other entities that are also included in the IFRS consolidated financial statements of Raiffeisenlandesbank Oberösterreich.

Business development in the segments Segment reporting in accordance with IFRS 8 is based on the market segment approach in the internal management accounts submitted to the Managing Board. This approach is based on graduated contribution margin accounting, reflecting customer responsibility at Raiffeisenlandesbank Oberösterreich, the parent and largest entity in the Group. For Group purposes, segment reporting also includes the equity investments segment, which comprises the figures for the subsidiaries, equity investments accounted for using the equity method and associated consolidation effects. As part of the overall reporting system, the segment

The Financial Markets segment – in which the trade and service results from retail and institutional customer transactions in foreign exchanges, securities and derivatives are grouped, and which also contains revenues from the central interest rate and liquidity management from the banking and trading books – reached a positive contribution to pretax profit for the year of EUR 79.6 million in 2014. (previous year: EUR 59.7 million). Investments segment The Equity Investments segment is organised into four portfolios: Banks and Financial Institutions, Outsourcing and Banking-Related Services, Real Estate and Venture/ Partner Capital. However, the management and reporting of equity investments is generally based on analyses of individual investments and/or subgroups. Please refer to the accounting policies section for a qualitative description of the analysis of individual investments and/or subgroups. Quantitative information is presented in the table under segment reporting; figures and disclosures relating to entities accounted for using the equity method can be found in the notes. Overall, the Equity Investments segment generated pre-tax profit of EUR 18.9 million in the 2014 financial year. (previous year: EUR 92.1 million).

Annual Report 2014

The Banks and Financial Institutions portfolio encompasses Raiffeisenlandesbank Oberösterreich's equity investments in banks and other financial institutions (leasing, factoring, asset management entities). These strategic equity investments in financial institutions substantially strengthen the market position of Raiffeisenlandesbank Oberösterreich. Equity investments in entities involved in IT services (procurement, insurance brokers, etc.) and tourism are allocated to the Outsourcing and Banking-Related Services portfolio. Banking-related services represent an important add-on to conventional banking services for Raiffeisenlandesbank Oberösterreich and its customers. These services are provided by subsidiaries. Among other benefits, the GRZ IT Group – which comprises GRZ IT Center Linz GmbH, RACON Software GmbH and PROGRAMMIERFABRIK GmbH, delivered a positive contribution to the segment result. The year under review saw a continuation of the intensive efforts to harmonise the Raiffeisen banking software under the umbrella of the “One IT” project. The Real Estate portfolio brings together all the equity investments in the real estate sector (real estate service providers, investment-property companies, housing development entities, etc.) The OÖ Wohnbau Group (comprising OÖ Wohnbau gemeinnützige Wohnbau Beteiligung GmbH, OÖ Wohnbau Gesellschaft für den Wohnungsbau gemeinnützige GmbH and Bauen und Wohnen Beteiligungs GmbH) was consolidated for the first time as at 1 Jan. 2014 and this resulted in a positive one-off item of EUR 45.0 million in the segment result. The performance of the equity-accounted Beteiligungs- und Wohnungsanlagen Group (Beteiligungs- und Wohnungsanlagen GmbH and WAG Wohnungsanlagen GmbH) was in line with forecasts, the contribution to earnings remaining static compared with the previous year. The Venture/Partner Capital portfolio comprises equity investments in industrial and foodstuffs sectors, complemented by equities/securities issued by various private equity entities. Once again in 2014, voestalpine AG had to face challenging market conditions. Performance across individual economic regions (Europe, US, China) as well as across individual customer industries (automotive, construction, consumer goods, transport systems, energy) was somewhat inconsistent. Given the voestalpine Group's market position and high degree of diversification, profitability and earnings across the group remained largely steady or rose slightly in 2014.

AMAG Austria Metall AG also faced tough market conditions in 2014, especially because of the persistently low price of aluminium. The company reached a significant initial milestone in its strategy for profitable growth with the commissioning of its new hot rolling mill in the fourth quarter of 2014. The new plant increased the company's total capacity in the rolling segment by approximately 50 per cent to 225,000 tonnes. In a seamless transition, the next stage in the growth plan (AMAG 2020) has already been agreed. This stage provides for capital investment of more than EUR 300 million in a new cold rolling mill together with ancillary plant, raising capacity in the rolling segment once again, this time to more than 300,000 tonnes. Despite the difficult market environment and up-front costs for the commissioning of the new hot rolling mill, AMAG was able to maintain stable earnings after tax in 2014. Sales revenue and earnings generated by the companies in the foodstuffs division – consisting of the VIVATIS Holding AG Group and the efko Frischfrucht und Delikatessen GmbH Group – were affected by a competitive market environment and margins that remained static or in some cases contracted. Despite the challenging market conditions, a modest increase in sales revenue is expected in the coming years. Corporate Center segment The Corporate Center segment comprises income and expenses that, based on substance, cannot be attributed to any other segment. One-off items that would distort the various segment results and are not allocated to individual market segments in the internal management reporting system are also reported in this segment, if applicable. In 2014, this segment produced a negative contribution of EUR –49.5 million (previous year: negative contribution of EUR 30.3 million) to pre-tax profit for the year.

Income statement Net interest income without the share of profit or loss of equity-accounted investments rose slightly year-on-year by EUR 2.7 million, or 0.6 %, to EUR 424.2 million. In addition to interest income from loans and advances to customers and banks as well as from fixed-income securities, this figure also reflects yields from shares and other variable-yield securities as well as from equity investments. Interest expenses arise in connection with amounts owed to customers and banks, liabilities evidenced by certificates and subordinated capital. The share of profit or loss of equity-accounted investments showed a fall of EUR 136.2 million, or 97.1%, to EUR 4.1 million. This was mainly due to the share of the loss incurred by the RZB Group amounting to EUR 47.3 million (previous year: profit of EUR 61.8 million) caused by increased

THE GROUP Group management report 2014 l Business development and the economic situation

Interest and interest–related income/expenses Share of profit or loss of equity–accounted investments

2014

2013

in EUR m

424.2

421.5

Net fee and commission income increased marginally by 0.6% to EUR 126.1 million.

Change in EUR m

in %

2.7

0.6

–97.1

4.1

140.3

–136.2

Net interest income

428.3

561.8

–133.5 –23.8

Loan loss allowances

–180.8

–145.9

Net interest income after Loan loss allowances

247.5

415.9

Net fee and commission income

126.1

125.3

0.8

0.6

15.5

11.2

4.3

38.4

–97.1

–59.0

–38.1

–

49.0

–83.0

132.0

–

Net trading income Net income from designated financial instruments Net income from investments Other net financial income/other net finance costs

–34.9

23.9

–168.4 –40.5

–32.6

–130.8

98.2

–

General administrative expenses

–402.4

–365.6

–36.8

10.1

General administrative expenses OÖ Wohnbau

–36.6

0.0

–36.6

–

General administrative expenses VIVATIS/efko

–252.1

–238.5

–13.6

5.7

Other net operating income

83.6

79.8

3.8

4.8

Other net operating income OÖ Wohnbau

45.6

0.0

45.6

–

261.6

248.6

13.0

5.2

Pre–tax profit for the year

40.7

134.7

Taxes on income and earnings

–4.3

28.8

–33.1

–

After–tax profit for the year

36.4

163.5

–127.1

–77.7

Operating profit

269.6

422.6

–153.0 –36.2

Other net operating income Net income VIVATIS/efko

–94.0 –69.8

loan loss allowances (resulting, among other things, from a change in the law in Hungary relating to foreign currency loans and consumer finance) and by other one-off items, such as impairment losses on goodwill and deferred taxes. In comparison to the previous year, loan loss allowances rose by EUR 34.9 million or 23.9% to EUR 180.8 million. This included the loan loss allowance of EUR 15.5 million recognised by Salzburger Landes-Hypothekenbank Aktiengesellschaft as a consequence of the moratorium on payments in connection with the debts of HETA ASSET RESOLUTION AG (HETA). Portfolio loan loss allowances were also increased following a review and updating of the parameters used for accounting purposes in the IFRS consolidated financial statements. For details on the above effects, please refer to the accounting policies section and to the description of provisions in the notes.

Other net finance costs – consisting of net trading income, net income from designated financial instruments and net income from investments – amounted to a net cost of EUR –32.6 million in 2014. Net income from designated financial instruments reflected the narrowing of credit spreads causing remeasurement losses on own issues recognised at fair value. A generally flatter yield curve also led to further remeasurement losses, although it did result in remeasurement gains on AfS financial assets. For details, please refer to the description below covering the recognition in the statement of comprehensive income of gains and losses on the remeasurement of AfS financial assets. The change in other net finance costs was attributable to impairment losses of EUR 33.6 million (previous year: impairment losses of EUR 78.0 million) and a higher net gain of EUR 33.3 million (previous year: EUR 3.7 million) on the disposal of available-for-sale (AfS) securities and equity shares. It should also be noted that the figure included a positive impact of EUR 45.0 million from the initial consolidation of OÖ Wohnbau entities. Personnel expenses, other administrative expenses, depreciation and amortisation are recognised in the income statement under “general administrative expenses”. The general administrative expenses from the OÖ Wohnbau entities totalled EUR 36.6 million in 2014. There is no corresponding expense for the previous year because these entities were consolidated for the first time on 1 Jan. 2014. The general administrative expenses of the companies in the foodstuffs division – consisting of the VIVATIS Holding AG Group and the efko Frischfrucht und Delikatessen GmbH Group – climbed year-on-year by 5.7% or EUR 13.6 million. The general administrative expenses of the other Group companies rose by 10.1% or EUR 36.8 million. The overall increases arose primarily because of the inclusion of additional entities in the basis of consolidation and because of expenses incurred in connection with regulatory requirements. The total direct costs incurred as a consequence of the AQR and stress tests amounted to approximately EUR 6.2 million. Other net operating income largely consists of the gross profit (sales revenue less cost of sales) earned by non-bank Group companies. The OÖ Wohnbau entities generated other net operating income of EUR 45.6 million. No comparative figures are available for the previous year because these entities were only consolidated for the first time on 1 Jan. 2014. At the companies in the foodstuffs division (VIVATIS/efko), other net operating income rose by EUR 13.0 million, or 5.2% to EUR 261.6 million and, at the other consolidated Group companies, by EUR 3.8 million or 4.8% to EUR 83.6 million.

Annual Report 2014

The reported taxes on income amounted to EUR 4.3 million in 2014 (previous year: EUR 28.8 million). The year-on-year change of EUR 33.1 million was largely attributable to the change in deferred taxes. The pre-tax profit for the year generated by the Group in 2014 amounted to EUR 40.7 million. The after-tax profit for the year totalled EUR 36.4 million, a decline of EUR 127.1 million (77.7%) compared with the previous year. The operating profit of EUR 269.6 million in 2014 was EUR 153.0 million or 36.2% lower than in the previous year.

Statement of comprehensive income

After-tax profit for the year Change in value of AfS reserves Share of other comprehensive income of equity-accounted investments Actuarial gains and losses Additional other profit or loss Taxes recognised in respect of these amounts

2014

2013

Change

in EUR m

36.4

163.5

–127.1

243.4

55.3

188.1

–106.1

–98.4

–7.7

–23.2

–8.2

–15.0

–0.5

3.6

–4.1

–55.2

–12.8

–42.4

Total other comprehensive income

58.4

–60.5

118.9

Comprehensive income

94.8

103.0

–8.2

Other comprehensive income was reported at EUR 58.4 million in 2014. This positive figure was largely accounted for by the net gain or loss on the remeasurement of available-for-sale (AfS) assets (which consist of securities, mainly bonds), although the share of other comprehensive income of equity-accounted investments and actuarial losses had an adverse impact. The AfS reserve increased significantly as a result of remeasurement gains in the securities portfolio. The critical factors in this regard were a significant fall in interest rates, credit spread contractions and the positive impact on equity investments measured at fair value. One of the main factors affecting the share of other comprehensive income of equity-accounted investments was currency differences, particularly in the RZB Group. The main reason behind the change in actuarial gains and losses was the change in discount rates. Miscellaneous other comprehensive income – consisting of gains or losses on hedges of a net investment in a foreign operation, currency differences and further items of other comprehensive income – amounted to a loss of EUR 0.5 million in 2014.

The taxes recognised in respect of other comprehensive income rose by EUR 42.4 million to EUR 55.2 million (previous year: EUR –12.8 million). In total, comprehensive income in 2014 amounted to EUR 94.8 million.

Changes in the balance sheet Total assets reported by Raiffeisenlandesbank Oberösterreich as at 31 Dec. 2014 came to EUR 38,574 million. This represented a year-on-year increase of EUR 1,161 million or 3.1%. ASSETS

31 Dec. 2014 31 Dec. 2013 *) in EUR m

in %

in EUR m

in %

Change in EUR m

in %

Loans and advances to banks

6,779

17.6

6,364

17.0

(of which to Raiffeisen banks)

(1,124)

(2.9)

(1,163)

(3.1)

(–39) (–3.4)

Loans and advances to customers

415

6.5

19,167

49.7

19,694

52.6

–527

–2.7

Trading assets

2,951

7.7

1,996

5.3

955

47.8

Financial assets

6,174

16.0

6,084

16.3

1.5

Companies accounted for using the equity method

1,800

4.7

2,037

5.4

–237

–11.6

Other assets

1,703

4.4

1,238

3.3

465

37.6

37,413 100.0

1,161

3.1

Total

38,574 100.0

*) The previous year has been re-stated in accordance with IAS 8. Please refer to the accounting policies section in the notes for details.

Over the course of 2014, loans and advances to banks rose by EUR 415 million to EUR 6,779 million. As at 31 Dec. 2014, loans and advances to customers totalled EUR 19,167 million, which equated to a year-on-year decline of EUR 527 million or 2.7%. Given the reduction in the volume of loans and advances to customers, the liquidity was made available to other banks in the Raiffeisen sector in Austria. One of the consequences of this was an increase in the loans and advances to banks. As at 31 Dec. 2014, the volume of trading assets – consisting of bonds and other fixed-income securities plus positive fair values on derivatives – was EUR 2,951 million, which equated to a year-on-year increase of EUR 955 million or 47.8%. The carrying amount of equity-accounted investments fell by EUR 237 million (11.6%) in 2014 to EUR 1,800 million. This decline was attributable to the disposal and associated deconsolidation of ZRB Beteiligungs GmbH and to the fall in the IFRS carrying amount for the RZB Group.

THE GROUP Group management report 2014 l Business development and the economic situation

Other assets – which comprise cash and cash equivalents, intangible assets, property and equipment, investment property, current and deferred tax assets as well as miscellaneous other assets – rose by EUR 465 million (37.6%) year on year to EUR 1,703 million. This increase was mainly accounted for by the first-time consolidation of the OÖ Wohnbau entities. EQUITY AND LIABILITIES

in EUR m

Amounts owed to banks

11,305

(of which to Raiffeisen banks) Amounts owed to customers Liabilities evidenced by certificates Trading liabilities Other liabilities

31 Dec. 2014 31 Dec. 2013 *) in %

in EUR m

29.3

10,256

in %

Change in EUR m

in %

27.4

1,049

10.2

(4,603) (11.9)

(4,372) (11.7)

(231)

(5.3)

10,516

27.3

11,174

29.8

–658

–5.9

8,642

22.4

8,696

23.2

–54

–0.6

2,202

5.7

1,564

4.2

638

40.8

806

2.1

650

1.7

156

24.0

Subordinated capital

1,537

4.0

1,532

4.1

0.3

Equity

3,566

9.2

3,541

9.5

0.7

37,413 100.0

1,161

3.1

Total

38,574 100.0

*) The previous year has been re-stated in accordance with IAS 8. Please refer to the accounting policies section in the notes for details.

1.3. Bank branches Branches The Raiffeisenlandesbank Oberösterreich Group had a total of 58 (previous year: 59) branches as at 31 Dec. 2014. The branch network is equipped to state-of-the-art standards for banking operations and offers its customers maximum user-friendliness in dealing with their banking transactions. The goal is to be able to offer a high level of quality and discretion in customer support in addition to highly developed self-service components. International branches Since 1991, Raiffeisenlandesbank Oberösterreich has maintained a presence in southern Germany. As at the end of 2014, this presence consisted of a total of eight branches situated in Munich, Regensburg, Passau, Ulm, Nuremberg, Heilbronn, Würzburg and Augsburg. The main focus is on corporate banking. PRIVAT BANK AG also has a very successful operation in southern Germany and in the Czech Republic with its own separate branches. In southern Germany, PRIVAT BANK AG has a total of four branches located in Regensburg, Munich, Passau and Würzburg. The head office of the branch in the Czech Republic is in Prague.

The amounts owed to banks rose by EUR 1,049 million or 10.2% compared with 31 Dec. 2013 to EUR 11,305 million, while amounts owed to customers fell by EUR 658 million or 5.9% to EUR 10,516 million.

1.4. Financial and non-financial performance indicators

As at the 2014 reporting date, liabilities evidenced by certificates had declined by EUR 54 million or 0.6% to EUR 8,642 million. Other liabilities – consisting of provisions, current and deferred tax liabilities, and miscellaneous other liabilities – had increased by EUR 156 million or 24.0% to EUR 806 million.

The key figures used in international comparisons are as follows: The consolidated operating profit – calculated as the difference between operating income and operating expenses – stood at EUR 269.6 million in the financial year 2014 (previous year: EUR 422.6 million). The Group's return on equity – calculated as the ratio of after-tax profit for the year to average equity – was 1.0% for 2014 (previous year: 4.7%).

The volume of trading liabilities – consisting of interest-rate, foreign exchange, equity-/index-related and other transactions – was EUR 2,202 million as at 31 Dec. 2014, which equated to a year-on-year increase of EUR 638 million or 40.8%.

Key income figures

Regulatory own funds Own funds

Share capital Participation capital Capital reserves Retained earnings Non-controlling interests Total

31 Dec. 2014

31 Dec. 2013

in EUR m

276.5

1.0

972.1

2,165.0

2,140.0

151.7

151.4

3,566.3

3,541.0

The breakdown of equity as at the last two balance sheet date was as follows:

The total eligible own funds at the highest-level financial holding company (Raiffeisenbankengruppe OÖ Verbund eGen) in accordance with the CRR amounted to EUR 3,701.4 million as at 31. Dec. 2014. The statutory own funds requirement was EUR 2,013.5 million. The Group therefore had an own funds surplus of EUR 1,687.9 million as at the reporting date. The total capital ratio as at 31 Dec. 2014 was 14.7%.

Annual Report 2014

Tier 1 capital totalled EUR 2,827.8 million, on the basis of which the Group was able to report that its Tier 1 ratio as at the reporting date in accordance with the CRR was 11.2%. The own funds situation at Raiffeisenlandesbank Oberösterreich will remain stable for the next few years. The Bank will significantly exceed the regulatory ratios under Basel III and will comply with the SREP ratio set by the ECB, enabling the Bank to continue to provide close support for its customers over the long term. Basel III As of 1 January 2014, Regulation (EU) No. 575/2013 (Capital Requirements Regulation, CRR) and Directive (EU) No. 36/2013 (Capital Requirement Directive, CRD IV) went into force to implement Basel III. In addition, the supplementary Austrian CRR Implementing Regulation specifies how the CRR's transitional provisions are to be implemented in Austria. The Basel III provisions mean that banks will have to comply with significantly higher capital ratios and tighter liquidity requirements. Raiffeisenlandesbank Oberösterreich has undertaken various projects in this regard over the past few years and is well prepared for the changes.

case, Österreichische Einlagensicherung eGen has assumed the role of trustee. Under article 113 (7) of the CRR, and subject to consent from the relevant regulatory authorities, banks may give a risk weighting of 0% to risk exposures in respect of counterparties with whom the bank has signed an IPS, although this does not apply to risk exposures that make up items of CET1 capital, additional Tier 1 capital or Tier 2 capital as specified by the CRR. The Austrian Financial Market Authority (FMA) has issued a decision approving both IPSs of which Raiffeisenlandesbank Oberösterreich is a member and allowing the exemptions under articles 49 (3) and 113 (7) of the CRR. Human resources management Well-trained and committed employees contribute substantially to securing and expanding the long-term success of the Raiffeisen Banking Group Oberösterreich. During financial year 2014, the fully consolidated companies employed an average workforce of 5,338 (previous year: 4,989). Of these, 2,560 (previous year: 2,500) employees worked for the company in the foodstuffs sector (VIVATIS/efko). Strong positioning with the career portal enteryourfuture.at

Institutional protection scheme These regulatory changes have also given rise to the need for additional adjustments in decentralised banking groups. The existing institutional protection scheme (IPS) for Upper Austria had to be modified in line with the new requirements under European law. An IPS is a liability or indemnity agreement – created by means of a contractual agreement or through articles of association, statutes or charters – that provides protection for member banks in a decentralised banking group. Such an agreement sets out the terms on which the member banks stand together and provide mutual solidarity. Under article 49 of the CRR, banks must, when determining their capital adequacy, deduct the equity instruments of other banks that they hold unless there is the exemption pursuant to article 49 (3) of the CRR in conjunction with article 113 (7) of the CRR based on an IPS signed with the banks concerned. Raiffeisenlandesbank Oberösterreich is a member of the regional state IPS, whose members also include all Raiffeisen banks in Upper Austria and Raiffeisen-Kredit-Garantiegesellschaft m.b.H. Raiffeisen-Einlagensicherung OÖ reg. Gen. m.b.H. acts as the trustee and manages the assets of the scheme. In addition, Raiffeisenlandesbank Oberösterreich is a member of the federal IPS, whose members also include Raiffeisen Zentralbank Österreich AG (RZB), all Austrian Raiffeisenlandesbanks, Raiffeisen Wohnbaubank AG, Raiffeisen-Holding Niederösterreich-Wien reg. Gen. m.b.H., Zveza Bank and Raiffeisen Bausparkasse GmbH. In this

Qualified and committed employees are the most important capital at Raiffeisenlandesbank Oberösterreich. The Bank has adopted a professional employer branding approach with the objective of attracting potential new employees and positioning itself as an employer of choice in the competition to attract the brightest minds. This approach involves a strong website and a presence on job platforms. The careers portal enteryourfuture.at has also been revised as part of this process. The enteryourfuture.at portal enables job applications to be submitted and processed transparently and rapidly; it also allows the Bank to communicate with applicants clearly and with respect. Regional, and even local, websites facilitate direct contact between the Bank and applicants. Virtual employer branding is absolutely essential nowadays. and Raiffeisenlandesbank Oberösterreich has set off down this very promising avenue too. With the enteryourfuture.at portal, it is offering a contemporary medium for the recruitment of valuable employees. Manifold educational and training opportunities Raiffeisenlandesbank Oberösterreich also offers a wealth of different options and opportunities in the training it provides for young employees. These options include training based on a job rotation programme, training combined with the higher education entrance qualification, trainee programmes and e-learning modules. One successful example of our forward-looking internal human resources policies is the Raiffeisen Oberösterreich Academy, which

THE GROUP Group management report 2014 l Business development and the economic situation

uses individually designed training programmes to prepare tomorrow’s managers for rewarding responsibilities. Training and professional development is offered at the state-ofthe-art Raiffeisen Training Centre, which opened in 2012 in the BlumauTower. In addition, the online teaching platform Raiffeisen@Learning is used extensively for internal training and professional development. Work/life balance Raiffeisenlandesbank Oberösterreich also emphasises the importance of a work-life balance and is a certified family-friendly organisation, offering its own kindergarten and toddler group/crèche known as “Sumsi's Learning Garden” in which the working languages are both German and English. The bank also offers a special summer kindergarten which is being continuously expanded because of the huge demand for places. Additional features of the family-friendly approach at Raiffeisenlandesbank Oberösterreich include flexible working hours and measures taken to actively support those returning from parental leave. Cooperation within the Raiffeisen association providing strength Close cooperation between the Raiffeisen banks in Upper Austria, whose skills are available locally, and the specialists at Raiffeisenlandesbank Oberösterreich, results in Raiffeisen Oberösterreich combining its strengths in the interests of its customers. This healthy, strong structure enables an extraordinary focus on the customer and highly dynamic assistance to customers with creative financial services. Successful through the practise of subsidiarity and solidarity The Raiffeisen banking group in Upper Austria is a strong community. The Raiffeisenbanks in Upper Austria, as owners of Raiffeisenlandesbank Oberösterreich, are also able to exercise their proprietary rights over the registered cooperative society Raiffeisenbankengruppe OÖ Verbund eingetragene Genossenschaft. The decisive factor here is the founding idea of co-operation at Raiffeisen: every co-operative company has a voice, regardless of its size. Raiffeisen Oberösterreich relies on the subsidiarity principle: the superordinated co-operative society should not take over what the local Raiffeisen banks can do on their own. As a public limited company (Aktiengesellschaft), Raiffeisenlandesbank Oberösterreich therefore assumes responsibility for more extensive global functions, but also sees itself as a coordinating hub within the cooperative network. It advises the Raiffeisen banks in operational, organisational and legal affairs, supports them in their sales work, and provides a training and further education system.

Bundling our strengths Our focus on the requirements and needs of our customers is unique. It is the theme that runs from local roots through to global customer support. This networked approach is made possible by the state-of-the-art structure at Raiffeisenlandesbank Oberösterreich. The cooperative network can step in and become proactive where the Raiffeisenbanks need assistance, so that customers can be offered the best possible support with all their projects. This means that regional strengths and direct relationships with the customer remain intact and are maintained. Furthermore, the collaboration within the network ensures that Raiffeisen will have a secure future as a growing organisation and powerful force in Upper Austria. Raiffeisen Banking Group Upper Austria 2020 The Raiffeisen Banking Group Upper Austria 2020 is a comprehensive, far-reaching programme of action that the Raiffeisenbanks in Upper Austria and Raiffeisenlandesbank Oberösterreich are continuing to drive forward in a highly successful joint project. A large number of measures have already been initiated and implemented on the basis of an even greater level of collaboration within Raiffeisenlandesbank Oberösterreich. The aim is to simplify structures, take advantage of synergies and potential, and further improve efficiency, enabling the Bank not only to maintain its position as the clear market leader in Upper Austria but also to continue to build on this advantage. Raiffeisen climate protection initiative Raiffeisenlandesbank Oberösterreich attaches huge importance to climate protection and sustainability. As part of the Raiffeisen Climate Protection Initiative, the Bank ran a competition for employees during the year under review. In the Sustainability Challenge 2014, employees were invited to submit ideas and concepts for innovative, sustainability projects in three different categories (sustainable financial products and services, sustainable construction and renovation, company-related action plans). The main assessment criteria were the innovation value, the sustainability of the project and the positive effects of the project on the organisation and/or the environment. Other aspects assessed included practical relevance, direct benefit and the potential applications of the project. Every submitted project benefited climate protection and therefore the environment. This is because the Raiffeisen Climate Protection Initiative donated €10 to a carefully selected external climate project for every submitted concept, regardless of category. This is meant to make a positive contribution to CO2 reduction. The Raiffeisen Climate Protection Initiative is defined as an open platform that aims to bring together ideas and

Annual Report 2014

activities from its members as well as encourage and “provoke” new courses of action. Conventional, straightforward economic options are complemented by criteria relating to sustainability, environmental protection, climate protection, energy efficiency and the use of renewables.

1.5. Events of particular significance after the balance sheet date Significant events that occurred after the balance sheet date are described below. On 15 January 2015, the Swiss National Bank (SNB), in a surprise move, abolished the minimum exchange rate of 1.20 EUR/CHF that had been in place for over three years. At the same time, it lowered the target range for the threemonth Libor by 0.5 percentage points, taking interest rates even further into negative territory. This was meant to provide a cushion against the effects from the removal of the exchange rate cap. This surprising announcement by the SNB caused real shock waves, with the Swiss franc exchange rate skyrocketing to an all-time high of 0.85 EUR/ CHF. In terms of fundamentals, the Swiss franc has long been a strong currency due to the strength of the Swiss economy and strong demand for investments in francs. Without official intervention from the SNB it will be quoted at stronger rates in the foreseeable future than the pegged rate of 1.20 EUR/CHF that was being defended until the beginning of the year. Forecasts for exchange rates are difficult to make due to an internationally divergent monetary policy environment, and elevated geopolitical and economic risks. Correspondingly, we anticipate increased volatility in the coming months. Because Raiffeisenlandesbank Oberösterreich is only exposed to a minor degree to currency risk related to the CHF, this event has not had any material impact. After the foreign exchange turmoil at the end of 2014 involving the Russian rouble (RUB), there were devaluations in early 2015 of the Ukrainian hryvnia (UAH) and the Belarusian rouble (BYR), which is likely to have an impact on the quality of the credit portfolio – but only a slight impact on the capital – of the RZB Group for the financial year 2015. In February 2015, Raiffeisenbank International (RBI) decided to take a series of measures to increase its capital buffer. This should lead to an improvement in the CET1 ratio (fully loaded) up to 12% by the end of 2017 (2014: 10%). The planned steps will especially affect those business fields within the RBI Group that generate low profits, have high capital requirements, or are of secondary strategic importance. The measures include the sale of units in Poland and Slovenia, as well as the direct bank Zuno. It is planned to reduce risk-weighted assets in Russia by about 20%, and in Ukraine by about 30%. Business activities in Asia and the USA will be significantly reduced or closed by the end

of 2016. Some of these cutbacks are being offset by growth in other business fields. On 1 March 2015, the Austrian federal government decided to initiate the resolution of HETA ASSET RESOLUTION AG (HETA) – the “bad bank” previously established in March 2014 to take over parts of Hypo Alpe Aldria – under the European resolution regime for banks. A provision in the amount of EUR 15.5 million had been recognised in the consolidated financial statements of Raiffeisenlandesbank Oberösterreich as at 31 Dec. 2014 in connection with these circumstances. For details on the effects referred to above, please refer to the description concerning provisions in the notes. On 25 Mar. 2015, Raiffeisenbank International AG (RBI) announced its results for the 2014 financial year, together with details of the restructuring measures that it was planning to take subsequently. The measures that are being set in place by RBI in individual Eastern European markets have shortand medium-term character. Because the majority of the associated restructuring costs will most likely be posted in 2015, the Group results for RBI may turn out to be negative, which will then affect the results of the Raiffeisen Zentralbank AG as the majority shareholder of RBI. There were no further events of particular significance after the reporting date.

THE GROUP Group management report 2014 | Outlook and risks

2. Outlook and risks

2.1. Outlook In 2015, the global economy will continue to be rather weak and subject to risk. The International Monetary Fund (IMF) is forecasting growth in real global GDP of 3.5%, but the forecast by the World Bank is less optimistic at 3.0%. In the euro area, leading indicators and other indicators of sentiment have been improving again since the start of 2015. This is because of numerous economically stimulating factors, such as lower oil prices, a weaker euro, the ECB’s extremely expansive monetary policy, EU investment programmes, and regressive fiscal braking effects. The recovery will be weak nevertheless and will materialise in the euro zone in very different ways. Germany and a number of peripheral countries such as Spain and Ireland are have started 2015 with real confidence. In the case of Germany, in particular, leading indicators such as consumer spending and business climate indices are reflecting a mood of optimism. Growth forecasts for 2015 are very positive, averaging around 1.5%, with a predominance of potential on the upside. Italy, France and Greece will remain the problem children in the euro area. The inflation rate in the euro zone may remain significantly below the ECB target and justify its extremely loose monetary policy. This is resulting both from internal (continued under-utilisation of production capacity) and external factors (low prices for raw materials and food). We must consider however that the basic effect of the fall in oil prices will take hold beginning in the second half of the year. Because the economic stimulus factors mentioned above for the euro zone also apply of course to Austria, the forecasts for the Austrian economic year in 2015 are cautiously optimistic, yet beneath the expectations for average growth in the euro zone. Austria is suffering under a subdued mood among consumers and businesspeople. This heightened uncertainty, which is acting as a brake on capital investment and consumer spending, is being caused by the weak growth in key European export markets such as Italy and France, the perceived greater proximity and rising unemployment. Although Austria is likely to benefit from stronger growth, the forecast average growth in GDP for 2015 of 0.7% is substantially lower than the forecast for Germany. On the one hand, Upper Austria's export-based economy with its close ties to German industry will benefit from the stronger growth in its northern neighbour. On the other hand however, it will still continue to feel the effects of weaker global demand.

The economies of the central European EU countries, such as Poland, Hungary, the Czech Republic and Slovakia, are performing well on the back of robust domestic demand. The economies of the Balkan states, however, are continuing to flatline. Russia and Ukraine have slid into recession, a consequence of the military conflict and the associated economic sanctions. In the US, the extremely sound, broadly based economic growth is turning the country into the engine of the global economy. Nearly the entire palette of leading indicators are pointing to an extremely positive outlook: optimism among consumers and companies is high, fiscal policy has taken its hand off the brake, employment is rising, expected salary hikes and lower energy prices are igniting private consumption, and climbing demand and high corporate profits are invigorating investment. Despite the humming economy, the expansionary monetary policy is only being tightened very slowly because – thanks also to the low commodity prices – there is still no risk of inflation in sight. The World Bank and IMF are forecasting growth of between 4.3 and 4.8% in the emerging markets in 2015 (2014: 4.4%). Even in this group of countries, the pace of growth is expected to continue at just a modest level, although it is becoming increasingly difficult to make one single assessment for all emerging markets. While oil-importing countries like India profit powerfully from lower oil prices, this affects oil-exporting countries such as Venezuela and Russia. In other countries such as Brazil and South Africa, fundamental structural problems are increasingly damping down economic growth. China is continuing to undergo a slowdown in growth, which is partly cyclical and partly the result of a deliberate strategy. Further efficiency increases, forward-looking measures and outlook Based on the Bank's strengths – such as efficient, targeted liquidity planning and control, comprehensive risk management combined with detailed control – and the close collaboration with the Raiffeisenbanks in Upper Austria, Raiffeisenlandesbank Oberösterreich has put in place the prerequisites to enable it to continue to justify the confidence of customers in the future and to provide comprehensive support for businesses, institutions and retail customers in their various projects. In addition, the successful completion of the ECB stress tests and the active implementation of the “Raiffeisen Banking Group Upper Austria 2020” project have established the foundations that

Annual Report 2014

will enable Raiffeisenlandesbank Oberösterreich to successfully meet the challenges of the future. The forward-looking measures and the outlook for the key subsidiaries and equity-accounted investments are also positive: Salzburger Landes-Hypothekenbank Aktiengesellschaft (Hypo Salzburg) will continue to be a reliable partner for its customers in the future. It has a stable ownership structure and possesses the successful business model of a regional bank. It will continue to focus on increasing customer numbers, consolidating customer relationships, growing and maintaining customer wealth, and generating risk-conscious growth in lending. Hypo Salzburg has sound capital adequacy and has made sufficient provision in terms of liquidity to ensure that it can achieve qualitative growth in its customer business. IMPULS-LEASING Group (ILG) predicts that there will be a stable trend in new business in 2015 in its home markets of Austria and southern Germany and in Central and Eastern Europe (CEE). It will retain its conservative business policy strategy in terms of income and risk. As part of efficiency enhancement measures, interfaces with Raiffeisenlandesbank Oberösterreich are being continuously evaluated and optimised. ILG plans to support and build on its excellent market positioning in its home markets by implementing a leasing campaign for corporate and retail customers of Raiffeisenlandesbank Oberösterreich. The VIVATIS Holding AG Group has set up an IT strategy process with the objective of leveraging synergies from the use of standard business management software in the subsidiaries of the VIVATIS Group. Given the challenging market environment, the budgets for the VIVATIS Holding AG Group and the efko Frischfrucht und Delikatessen GmbH Group are based on a modest increase in sales revenue from the foodstuffs sector in 2015. These groups aim to generate organic growth, notably by increasing the innovation rate and by attracting new customers. Selective acquisitions in the core segments also form part of the corporate strategy. Capital investment of approximately EUR 31 million is planned for the foodstuffs division in 2015. The OÖ Wohnbau Group has planned a construction volume of EUR 74 million for 2015. In the housing management business, the group plans to expand its portfolio of approximately 40,000 management units by adding units that it constructs itself and by acquiring other housing management portfolios. In the voestalpine Group, the outlook remains unchanged based on steady full capacity utilisation in all the main areas of business: It is likely that both EBITDA and EBIT for the

group in the 2014/15 financial year (even excluding positive one-off items) will be somewhat higher than the level achieved in the previous year. AMAG Austria Metall AG is predicting attractive growth rates in 2015 for primary aluminium and aluminium rolling products. One of the key growth drivers is the transport sector, which is expected to grow by approximately 14% in 2015, mainly because of the increased use of aluminium in the automotive industry. Taking into account the current hedging structure for 2015, earnings in the Metals segment are to a large degree exposed to fluctuations in the price of aluminium. The continued high level of premiums and the lower euro exchange rate could prove to be beneficial for earnings growth. Further increases in volume are expected to be achieved in the Rolling segment following the successful commissioning of the new hot rolling mill and sheet production facility; this will lead to additional contributions to earnings. Taking into account all current conditions, the Managing Board is generally upbeat about the prospects for the 2015 financial year.

2.2. Significant risks and uncertainties The long-term success of Raiffeisenlandesbank Oberösterreich is largely dependent upon active risk management. To achieve this overall objective, the Bank has implemented a risk management system with structures that enable it to identify, measure and actively manage all risks (credit, market, equity, liquidity, macroeconomic and operational risks). The overall risk strategy approved by the Managing Board ensures that the risks assumed by the Bank are consistent with the corporate strategy. The Managing Board and the Supervisory Board are kept regularly informed. For more detailed information on all the risks in the Raiffeisenlandesbank Oberösterreich Group and on the objectives and methods used in the risk management system, please refer to the comprehensive risk report in the notes.

THE GROUP Group management report 2014 | R&D | Internal control and risk management system

3. Research and development Raiffeisenlandesbank Oberösterreich is widely regarded throughout Austria as a trailblazer in banking industry IT systems and is therefore also the leader in the project known as “One IT system for Raiffeisen Österreich”. The harmonisation of IT systems for Raiffeisen banks in Austria is a ground-breaking project. Once implemented, it will not only deliver numerous synergies and corresponding cost savings, but will also spawn a range of technical innovations. In addition, Raiffeisenlandesbank Oberösterreich is improving its services for its customers and is implementing numerous pioneering developments in relationship management for businesses, retail customers and institutions. These services are being continuously enhanced and improved through technical innovation. These include, for example, modern electronic banking systems (ELBA), as well as card-based products and new payment options (e.g., smartphone). As part of its training and professional development activities, Raiffeisenlandesbank Oberösterreich is investing in e-learning, blended-learning modules and web-based training opportunities. Raiffeisenlandesbank Oberösterreich has developed its own e-learning platform and serves as a competence centre in this regard for Raiffeisen Österreich. The GRZ IT Group is a general IT service provider, primarily for financial service providers, and mainly covers areas such as software engineering, systems engineering, IT security, standard software and operating systems. For many of its research projects, the GRZ IT Group relies on external networks and inter-institutional forms of cooperation – for example with the Johannes Kepler University in Linz and the software park in Hagenberg. The GRZ IT Group comprises

GRZ IT Center Linz GmbH, RACON Software GmbH and PROGRAMMIERFABRIK GmbH. GRZ IT Center further consolidated its position as one of the leading Austrian data-processing centres focusing on the banking sector, not least as a result of the long-term positive effects from the TOKIO partnership (with the Raiffeisen Banking Groups Tyrol and Carinthia) and in particular as a result of the collaboration with major customers such as Raiffeisenverband Salzburg eG (RVS), with all the Raiffeisenbanks in the federal state of Salzburg and with DREI-BANKEN-EDV Gesellschaft m.b.H., the data-processing centre and software house for 3-Banken-Gruppe (“Open IT Center Initiative”). The year under review saw a continuation of the intensive efforts to harmonise the Raiffeisen banking software under the umbrella of the “One IT” project. In the VIVATIS Holding AG Group, a group innovation management system was installed back in 2013 to safeguard and support the further development of the group's market position. One of the key areas of management focus in the foodstuffs division is on continuous improvement in recipes and processing technologies as well as on ongoing development of new products and services. In the efko Frischfrucht und Delikatessen GmbH Group, new products and new and refined production technologies represent a key area of development activity. The core tasks and challenges requiring intensive work in this division are primarily the development of innovative products and production lines, the further development of plant, production technologies and production systems, and the improvement of production processes.

4. Main aspects of the internal control and risk management system The recording, assessment, management and monitoring of risks arising in connection with the banking business and banking operations and of the entire accounting and financial reporting process must be supported by an internal control system that meets the requirements of the Group. Compliance with all relevant statutory provisions is an obvious basic requirement. The Managing Board bears responsibility for the establishment and design of the internal control system, which comprises three core elements: control environment, regular risk assessments and control activities.

Balanced and complete financial reporting is an important goal for Raiffeisenlandesbank Oberösterreich and its board members. The aim of this internal control system is to support management in such a way that it guarantees effective and constantly improving internal controls, including in connection with accounting and financial reporting. The basis on which annual financial statements are prepared is derived from the relevant Austrian legislation, primarily the Austrian Commercial Code (UGB) and the Austrian Banking Act (BWG), which govern the composition of separate annual financial statements. International Financial Reporting

Annual Report 2014

Standards (IFRSs), as adopted by the EU, are the accounting standards that must be used as the basis for the consolidated financial statements. Control environment Raiffeisenlandesbank Oberösterreich has a comprehensive internal control system, the main elements of which are: 1. Authority allocation and instructions 2. IT and user authorisations 3. Process descriptions. Risk evaluation Material banking business and banking operation risks, together with risks in relation to the accounting and financial reporting process, are assessed and monitored by the Managing Board. This is important to avoid misstatements, for example where complex accounting principles are involved. It is also important that there are uniform principles for measurement, especially measurement of the essential financial instruments used in the Group. Control measures relating to the accounting and financial reporting process Separate financial statements are prepared on a decentralised basis in the respective Group units according to the guidelines issued by Raiffeisenlandesbank Oberösterreich. The employees responsible for accounting and the executive managers of the Group units are responsible for the complete disclosure and correct measurement of all transactions.

The consolidated financial statements, together with the management report, are discussed in the Supervisory Board’s accounting committee. The consolidated financial statements are also submitted to the Supervisory Board. They are published in the annual report, on the company’s own website and in the official gazette of the Wiener Zeitung; finally, they are entered into the Company Register. Information and communication Standardised forms that are uniform throughout the Group form the basis for the consolidated financial statements. Accounting and measurement standards are defined and explained by Raiffeisenlandesbank Oberösterreich, and are binding for the preparation of statement data. Monitoring The monitoring of the processes is the responsibility of the Managing Board and the relevant heads of the organisational units. The internal control system (ICS) is defined as the process for monitoring and controlling the effectiveness and profitability of operating activities, the reliability of financial reporting and compliance with the statutory provisions relevant to the business. The entire Raiffeisenlandesbank Oberösterreich Group has at its disposal effective and reliable control, information and communication systems that encompass all key business activities and, in particular, that are consistent with the organisational and internal control requirements for IT and with the need for an appropriate audit trail. These systems and organisational structures are continuously evaluated and improved.

Consolidation The transmission of financial statement data, which are audited by an external auditor, is done primarily through direct entry into the IDL Konsis consolidation system. For IT security purposes, the issue of authorisations is restricted to protect the system. The financial statements data received from the Group units is first checked in the group accounting system by the employee responsible for the Group unit concerned. The general control environment includes the middle management level (heads of organisational units) in addition to the Managing Board. All control measures are applied in ongoing business processes to ensure that potential misstatements or deviations in financial reporting are prevented or identified and corrected. Controlling measures range from examination of period results by management and the specific reconciliation of accounts and an analysis of ongoing accounting processes.

The internal auditing function is also involved in the monitoring process. Raiffeisenlandesbank Oberösterreich’s Internal Auditing unit is responsible for the internal auditing function. Group-wide, auditing-specific policies apply for all auditing activities, and these policies are minimum standards for internal auditing according to Austrian financial market oversight as well as international best practices. Group auditing performs independent and regular checks for compliance with internal guidelines within the Group units of Raiffeisenlandesbank Oberösterreich. The head of the Internal Auditing area reports directly to the Managing Boards of Raiffeisenlandesbank Oberösterreich.

THE GROUP Group management report 2014

Linz, 7 April 2015 Raiffeisenlandesbank Oberรถsterreich Aktiengesellschaft Europaplatz 1a, 4020 Linz THE MANAGING BOARD

Heinrich Schaller Chief Executive and Chairman of the Managing Board

Michaela Keplinger-Mitterlehner Deputy Chief Executive

Stefan Sandberger Member of the Managing Board

Reinhard Schwendtbauer Member of the Managing Board

Georg Starzer Member of the Managing Board

Markus Vockenhuber Member of the Managing Board

Annual Report 2014

IFRS CONSOLIDATED FINANCIAL STATEMENTS 2014 Income statement_____________________________________________________________________________49 Statement of comprehensive income______________________________________________________________50 Balance sheet_________________________________________________________________________________ 51 Statement of changes in equity___________________________________________________________________52 Cash flow statement____________________________________________________________________________53 Disclosures ___________________________________________________________________________________54 The company_________________________________________________________________________________54 Basics of the consolidated accounts according to IFRS_________________________________________________54 Accounting policies ___________________________________________________________________________ 64 Segment reporting ____________________________________________________________________________73 Income statement disclosures ___________________________________________________________________76 Balance sheet disclosures_______________________________________________________________________82 Risk report___________________________________________________________________________________ 111 Other disclosures _____________________________________________________________________________ 125 Disclosures required under Austrian accounting standards ____________________________________________ 131 Events after the balance sheet date ______________________________________________________________ 136 The members of the boards of Raiffeisenlandesbank Oberรถsterreich Aktiengesellschaft ____________________ 136 Audit certificates______________________________________________________________________________ 138

THE GROUP IFRS consolidated financial statements | Income statement

Income statement Disclosure Interest and interest-related income Interest and interest-related expenses Share of profit or loss of equity-accounted investments

2014

2013

in EUR '000

933,503 –509,327 4,074

976,148 –554,622 140,270

Net interest income

(1)

428,250

561,796

Loan loss allowances Net interest income after loan loss allowances

(2)

–180,744 247,506

–145,940 415,856

169,579 –43,531 126,048

176,073 –50,714 125,359

Fee and commission income Fee and commission expenses Net fee and commission income

(3)

Net trading income Net income from designated financial instruments Net income from investments Other net financial income/other net finance costs

(4) (5) (6)

15,546 –97,129 48,958 –32,625

11,185 –59,036 –82,960 –130,811

General administrative expenses Other net operating income Pre-tax profit for the year

(7) (8)

–690,983 390,776 40,722

–604,094 328,423 134,733

Taxes on income and earnings After-tax profit for the year of which attributable to equity holders of the parent of which attributable to non-controlling interests

(9)

–4,353 36,369 43,388 –7,019

28,746 163,479 153,596 9,883

Annual Report 2014

Statement of comprehensive income Disclosure After-tax profit for the year Items that cannot be reclassified to profit or loss Actuarial gains and losses on defined benefit plans Amounts recognised in other comprehensive income Taxes recognised in respect of this amount Other share of profit or loss of equity-accounted investments Amounts recognised in other comprehensive income Taxes recognised in respect of this amount Items that can be reclassified to profit or loss Gain or loss on remeasurement of AfS securities Amounts recognised in other comprehensive income Amounts reclassified to profit or loss Taxes recognised in respect of this amount Gain or loss from the hedging of net investments Amounts recognised in other comprehensive income Amounts reclassified to profit or loss Taxes recognised in respect of this amount Currency differences Amounts recognised in other comprehensive income Amounts reclassified to profit or loss Taxes recognised in respect of this amount Other share of profit or loss of equity-accounted investments Amounts recognised in other comprehensive income Amounts reclassified to profit or loss Taxes recognised in respect of this amount Other changes Total other comprehensive income Comprehensive income of which attributable to equity holders of the parent of which attributable to non-controlling interests

(17)

(29)

(17)

2014

2013

in EUR '000

36,369

163,479

–17,412 –23,159 5,747 –4,994 –4,994 0

–6,115 –8,154 2,039 –10,722 –10,722 0

182,510 249,558 –6,202 –60,846 366 488 0 –122 –970 –970 0 0 –101,127 –101,127 0 0 0 58,373 94,742 97,950 –3,208

41,438 54,457 793 –13,812 3,055 4,074 0 –1,019 –22 –22 0 0 –87,657 –87,657 0 0 –485 –60,508 102,971 93,276 9,695

Since the 2014 financial year, the share of other comprehensive income of equity-accounted investments has been reported directly in the statement of comprehensive income. The total reported amount is subdivided into two sections, depending on whether or not amounts can be reclassified (recycled) to profit or loss at some point in the future. The prior-year figures have been re-stated accordingly without any change to total comprehensive income.

THE GROUP IFRS consolidated financial statements | Statement of comprehensive income | Balance sheet

Balance sheet ASSETS

Disclosure

31 Dec. 2014

31 Dec. 2013 *)

in EUR '000

Cash and cash equivalents (10), (11) Loans and advances to banks (10), (12), (14) Loans and advances to customers (10), (13), (14) Trading assets (10), (15) Financial assets (10), (16) Companies accounted for using the equity method (17) Intangible assets (18), (21) Property and equipment (19), (21) Investment property (19), (21) Current tax assets (9) Deferred tax assets (9) Other assets (20)

89,086 6,779,138 19,166,752 2,951,476 6,173,604 1,800,077 47,900 405,852 759,767 5,536 26,762 368,228

91,019 6,363,558 19,693,620 1,995,634 6,084,082 2,037,271 53,621 398,557 284,756 13,162 37,887 359,498

Total

38,574,178

37,412,665

131,813 7,358,542 20,498,280 2,801,803 6,168,580 2,071,958 53,013 269,604 102,868 18,922 33,818 291,564 39,800,765

*) The previous year has been restated in accordance with IAS 8. The details can be found in the section on accounting policies.

EQUITY AND LIABILITIES

Disclosure

Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates Provisions Current tax liabilities Deferred tax liabilities Trading liabilities Other liabilities Subordinated capital Equity of which attributable to equity holders of the parent of which attributable to non-controlling interests

(10), (22) (10), (23) (10), (24) (14), (25) (9) (9) (10), (26) (27) (10), (28) (29)

Total

31 Dec. 2014

31 Dec. 2013 *)

in EUR '000

11,304,925 10,516,033 8,642,403 259,352 5,948 61,690 2,202,349 478,716 1,536,491 3,566,271 3,414,530 151,741

10,255,878 11,174,460 8,695,702 228,069 7,080 23,642 1,563,625 391,527 1,531,679 3,541,003 3,389,587 151,416

12,654,078 9,885,150

38,574,178

37,412,665

39,800,765

*) The previous year has been restated in accordance with IAS 8. The details can be found in the section on accounting policies.

9,355,752 167,508 3,558 29,790 2,124,595 428,038 1,674,674 3,477,622 3,337,275 140,347

Annual Report 2014

Statement of changes in equity

Equity 1 Jan. 2014 Change in the basis of consolidation

Share capital

Participation capital

Capital reserves

Retained earnings

Subtotal

Noncontrolling interests

Total

in EUR '000

276,476 0

Comprehensive income

After-tax profit for the year

Total other comprehensive income

Dividends

1,032 0

972,095 0

2,139,984 0

3,389,587 0

151,416 10,777

3,541,003 10,777

97,950

–3,208

94,742

43,388

–7,019

36,369

54,562

3,811

58,373

–28,702

–2,782

–31,484

Capital increases/adjustments

Other changes in capital

–44,305

–4,462

–48,767

Equity 31 Dec. 2014

276,476

1,032

972,095

2,164,927

3,414,530

151,741

3,566,271

Equity 1 Jan. 2013 Change in the basis of consolidation Comprehensive income

After-tax profit for the year

Total other comprehensive income

Share capital

Participation capital

Capital reserves

Retained earnings

Subtotal

Noncontrolling interests

Total

in EUR '000

253,000 0

298,765 0

697,838 0

2,087,672 –1

3,337,275 –1

140,347 6,402

3,477,622 6,401

93,276

9,695

102,971

153,596

9,883

163,479

–60,320

–188

–60,508

–38,384

–1,934

–40,318

23,476

–297,733

274,257

Other changes in capital

–2,579

–3,094

–5,673

Equity 31 Dec. 2013

276,476

1,032

972,095

2,139,984

3,389,587

151,416

3,541,003

Dividends Capital increases/adjustments

THE GROUP IFRS consolidated financial statements | Statement of changes in equity | Cash flow statement

Cash flow statement Profit for the year Non-cash items included in the profit for the year and reconciliation to cash flow from operating activities: Depreciation and impairment losses on property and equipment and on investment property, amortisation and impairment losses on intangible assets, impairment losses on financial assets and trading securities, reversals of impairment losses Reversals of/additions to reserves and risk provisions Gain or loss on disposal of property, equipment, financial assets, trading securities, intangible assets and investment property Dividends received Interest received Interest paid Share of profit or loss of equity-accounted investments Effects from initial consolidation and deconsolidation Other adjustments due to non-cash items Subtotal Change in assets and liabilities from operating activities after adjusting for non-cash items: Loans and advances to banks and customers Trading assets Other assets Amounts owed to banks and customers Trading liabilities Liabilities evidenced by certificates Other liabilities Dividends received Interest received Interest paid Taxes paid on income Cash flow from operating activities

2014

2013

in EUR '000

36,369

163,479

8,536 244,380

213,217 149,676

–38,676 –112,285 –908,121 529,928 64,468 –43,801 291,245 72,043

14,791 –105,092 –922,626 619,991 –59,661 2,953 12,512 89,240

–178,261 –16,841 –12,357 9,643 20,907 –313,003 –50,728 112,285 908,121 –529,928 –3,324 18,557

1,715,830 –63,830 –10,112 –1,149,916 50,281 –346,591 –169,610 105,092 922,626 –619,990 –9,538 513,482

1,959,203 50,753

1,212,204 16,741

–1,838,826 –128,661 –33 42,436

–1,549,395 –75,674 0 –396,124

Capital increase Receipt/repayment of subordinated capital Purchase of non-controlling interests Dividends Cash flow from financing activities

0 –31,442 0 –31,484 –62,926

0 –117,834 0 –40,318 –158,152

Cash at the end of the previous period Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash and cash equivalents at the end of the period

91,019 18,557 42,436 –62,926 89,086

131,813 513,482 –396,124 –158,152 91,019

Cash proceeds from the sale of: Financial assets and shares in companies Property and equipment, investment property and intangible assets Payments to acquire: Financial assets and shares in companies Property and equipment, investment property and intangible assets Acquisition of subsidiaries (net of acquired cash and cash equivalents) Cash flow from investing activities

Cash and cash equivalents comprise cash in hand and balances at central banks re-payable on demand.

Annual Report 2014

Disclosures The company Raiffeisenlandesbank Oberösterreich Aktiengesellschaft (hereinafter: Raiffeisenlandesbank Oberösterreich) acts as a regional central institution of the Raiffeisen Banking Group Upper Austria and is recorded in the Commercial Register at the District Court in Linz under the number FN247579m. The headquarters is in Austria, at Europaplatz 1a, 4020 Linz.

the shares of RLB Holding registered liability cooperative, making it the uppermost parent company. The Upper Austrian Raiffeisen banks make up the most important owner groups of the two co-operatives. Both of these are supported by Raiffeisenlandesbank Oberösterreich in its function as Upper Austrian headquarters in all banking matters.

As of the end of 2014 Raiffeisenlandesbank Oberösterreich is owned by the registered co-operative society Raiffeisen Banking Group Oberösterreich (Raiffeisenbankengruppe OÖ Verbund eingetragene Genossenschaft, hereinafter RBG OÖ Verbund eGen.) with 98.92% ordinary shares. The RLB Holding registrierte Genossenschaft m.b.H. Oberösterreich (hereinafter: RLB Holding reg. Gen.) owns 1.08% of the ordinary shares in Raiffeisenlandesbank Oberösterreich. As of 31 Dec. 2014, the registered cooperative society Raiffeisen Banking Group Oberösterreich held over 50% of

As a superordinate banking institute, starting from the financial year 2007 onwards, Raiffeisenlandesbank Oberösterreich has been obliged to prepare and publish consolidated financial statements in accordance with the IAS Regulation (EC) 1606/2002, abiding by the regulations of the International Financial Reporting Standards (IFRS). In addition, disclosures and notes are required in accordance with the regulations of the Austrian Banking Act and the Austrian Commercial Code.

The basics of the consolidated accounts according to IFRS Principles These consolidated financial statements for the 2014 financial year, as well as the comparative figures from 2013 were prepared in compliance with the applicable International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB) and international accounting and financial reporting standards

based on the IAS Regulation (EC) 1606/2002 as adopted by the EU. During the preparation of these statements, attention was paid to the additional disclosures required in accordance with the regulations of the Austrian Banking Act and the Austrian Commercial Code. Unless noted otherwise, the figures in these financial statements are quoted in EUR thousands.

THE GROUP IFRS consolidated financial statements | Disclosures | Basics of the consolidated accounts

First-time adoption of new and revised standards and interpretations The following new or amended standards and interpretations must be taken into account for the first time in

compiling IFRS financial statements which relate to the reporting period for a financial year starting on 1 Jan. 2014. The accounting policies applied are, with the exception of the amendments and reforms listed here, the same as those of the previous financial year. Mandatory for Financial year beginning

Already adopted by the EU

IFRS 10 (“Consolidated financial statements”)

1 Jan. 2014

yes

IFRS 11 (“Joint arrangements”)

1 Jan. 2014

yes

IFRS 12 (“Disclosure of interests in other entities”)

1 Jan. 2014

yes

Amendment to IAS 27 (“Separate financial statements”) (2011)

1 Jan. 2014

yes

Amendment to IAS 28 (“Investments in associates and joint ventures”) (2011)

1 Jan. 2014

yes

Amendment to IFRS 10, IFRS 11 and IFRS 12 – Transition requirements

1 Jan. 2014

yes

Amendment to IFRS 10, IFRS 12 and IFRS 27 – Investment companies

1 Jan. 2014

yes

Amendments to IAS 32 – Offsetting financial assets and financial liabilities

1 Jan. 2014

yes

Amendments to IAS 36 – Recoverable amount disclosures for non-financial assets

1 Jan. 2014

yes

Amendment to IAS 39 – Novation of derivatives and continuation of hedge accounting

1 Jan. 2014

yes

Standard/Interpretation

There are no material effects on these consolidated financial statements as a result of the first time application of the standards (with the exception of IFRS 12) and interpretations mentioned. IFRS 10 defines new and standardised content related to the concept of control for all entities. Applying the new concept of control resulted in the need to reassess the basis of consolidation. Taking the new criteria

into account did not result in any need for amendments related to the group of fully consolidated subsidiaries. IFRS 12 contains a summary overview of the disclosures related to data in the appendices on investments in subsidiaries, joint enterprises and associates and on structured entities. Application of this standard resulted in an amendment or expansion to the data in the appendices.

Annual Report 2014

Not yet mandatory application of IFRSs The following new or modified standards and interpretations were already published as at the balance sheet date,

however, they have not yet come into effect with regard to the financial year starting on 1 January 2014 and were not applied in these consolidated financial statements:

Standard/Interpretation

Mandatory for Financial year beginning

Already adopted by the EU

IFRIC 21 (“Contributions”)

1 July 2014

yes

Amendment to IAS 19 – Defined benefit plans: employee contributions

1 July 2014

yes

Improvements to IFRSs 2010-2012 (December 2013)

1 July 2014

yes

Improvements to IFRSs 2011-2013 (December 2013)

1 July 2014

yes

Improvements to IFRSs 2012-2014 (September 2014)

1 Jan. 2016

Amendments to IAS 1 – Disclosure Initiative

1 Jan. 2016

Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment Entities: application of the consolidation exception

1 Jan. 2016

Amendments to IFRS 10 and IAS 28 – Sale or deposit of assets in associates or joint enterprises

1 Jan. 2016

Amendments to IFRS 11 – Accounting for Acquisitions of Interests in Joint Operations

1 Jan. 2016

Amendments to IAS 27 – Application of the equity method in separate financial statements

1 Jan. 2016

Amendments to IAS 16 and IAS 41 – Agriculture: fruit-bearing plants

1 Jan. 2016

Amendments to IAS 16 and IAS 38 – Clarification of acceptable methods of depreciation and amortisation

1 Jan. 2016

IFRS 14 (“Regulatory Deferral Accounts”)

1 Jan. 2016

IFRS 15 (“Revenue from Contracts with Customers”)

1 Jan. 2017

IFRS 9 (“Financial instruments”)

1 Jan. 2018

No material effects are expected on future consolidated financial statements as a result of the application of the standards (except those given below) and interpretations mentioned. The IFRS 9 published replaces the existing guidelines in IAS 39 Financial Instruments: (Recognition and Measurement). IFRS 9 contains revised guidelines on the classification and measurement of financial instruments, including a new model for expected loan defaults in order to measure

the decrease in value of financial assets, along with the new general accounting policies for hedging transactions. It also incorporates the guiding principles for recognition and derecognition of financial instruments from IAS 39. IFRS 9 must be applied as of the 2018 financial year. The Group is currently assessing the potential effects that the accounting policies under IFRS 9 could have on future financial statements. No final assessment can currently be made on the effects as a result of outstanding implementation queries.

THE GROUP IFRS consolidated financial statements | Disclosures | Basics of the consolidated accounts

Consolidation methods The starting point for preparing the consolidated balance sheet and the group income statement is the sum of the separate financial statements of the subsidiaries included in the consolidated financial statements. The individual financial statements of the fully consolidated subsidiaries are prepared in accordance with IFRS regulations and are based on the uniform accounting principles applied throughout the group. The balance sheet date of the fully consolidated companies is 31 December with the exception of 43 companies that are included as of 30 September, one company with 31 October as a balance sheet date and one project company with 30 November a balance sheet date. The selection of a date for these companies that differs from that of the parent company guarantees that the financial statements can be prepared and audited without delay. Two subsidiaries prepare their financial statements as at 28Â February and 30 June and report as at 31 December with an IFRS interim report. The Group accounts for business combinations using the acquisition method in accordance with IFRS 3 if the Group has acquired control. The net assets assessed at fair value are to be calculated against the amounts paid, at most with shares already owned and assessed at fair value and the value of non-controlling shares at the time at which control is obtained. The valuation method for shares held by non-controlling shareholders is typically calculated as their share of fair value net assets of the acquired company. Transaction costs are recognised immediately as expense, unless they are associated with the issue of bonds or equity instruments. A positive difference is applied as goodwill. Goodwill is not subject to scheduled depreciation but rather is subject to an annual impairment test according to IAS 36. Any profit from an acquisition at a price below the value of the net assets is recognised directly in the group income statement. Subsidiaries are entities controlled by the Group in accordance with IFRS 10. The Group controls an entity if it is exposed to fluctuating returns from its commitment to an entity or has rights to this and is able to influence these returns using its power of disposal over the entity. The consolidated financial statements of subsidiaries are included in the consolidated financial statements from the point in time at which the control begins and until the point in time that the control ends. Associates are companies on which the group exercises a significant influence on business and financial policy but has no control or joint leadership in relation to this. There is usually a significant influence when the holdings amount

to between 20% and 50%. There may also be an essential influence with a lower stake, e.g. through representation in the relevant companyâ&#x20AC;&#x2122;s executive management or supervisory bodies in an individual case. Material investments in associates are reported under the equity method and recorded in a separate balance sheet item. The proportionate profit and losses from companies reported under the equity method are also shown separately in the income statement. When applying the equity method, the same basic approach is used in accounting for acquisitions as is used for a fully consolidated company. Equity carrying amounts are, when there are indications that there could be impairment in the sense of IAS 39, subjected to an impairment test according to IAS 36. The analysis is usually done by applying a valuation method based on future financial surplus funds and/or based on share prices, if they are available. If there is a disposal of the associate then it is derecognised via the group income statement. Structured companies are companies which are structured in such a way that voting or similar rights are not pivotal in the decision as to who controls the company. This is the case for instance if voting rights only relate to administrative tasks and the relevant activities are controlled through contractual agreements. Project companies and leasing property companies with restricted areas of activity and public funds are viewed as structured entities in particular. Disclosures on structured companies in accordance with IFRS 12 also take the type of business relationship between these and the Group into consideration. Intercompany profits are eliminated if they are not of minor significance for the items of the income statement. Banking transactions between the individual companies of the group are performed according to market conditions. In the course of the debt consolidation, loans and advances within the group are set off against internal liabilities. Expenses and income resulting from transactions between companies in the full basis of consolidation are eliminated in the course of the expense and income consolidation.

Basis of consolidation The basis of consolidation was determined according to the terms of IAS 10, taking the principle of materiality into consideration. Materiality in this sense is determined according to criteria applied uniformly throughout the group, focussing on the effect of the inclusion or non-inclusion of a subsidiary on the representation of the groupâ&#x20AC;&#x2122;s assets, financial position and profitability. Because of their minor significance for assets, financial position and profitability, 121 subsidiaries were not included and 51 associates were not accounted for at equity.

Annual Report 2014

For the IFRS financial statements as at 31 December 2014, the basis of consolidation of Raiffeisenlandesbank Oberösterreich includes 154 fully consolidated companies (incl. Raiffeisenlandesbank Oberösterreich). Seven other companies were reported under the equity method. Of the 161 companies, 119 are based in Austria and 42 abroad. Of the fully consolidated companies, five are banks, 100 are financial institutions based on business activities, 19 are financial institutions based on function as a holding, one is a finance holding, one a provider of ancillary services and 28 are other miscellaneous companies. In terms of dividends and capital repayments of fully consolidated

Name Fully consolidated companies Raiffeisenlandesbank Oberösterreich Aktiengesellschaft activ factoring AG Am Ölberg Liegenschaftsverwertungs GmbH bankdirekt.at AG Bauen und Wohnen Beteiligungs GmbH BHG Beteiligungsmanagement und Holding GmbH Burgenländische Tierkörperverwertungsgesellschaft m.b.H. & Co KG DAILY SERVICE Tiefkühllogistik Gesellschaft m.b.H. & Co.KG DAILY Tiefkühlhaus ErrichtungsgmbH EFIS s.r.o. efko Frischfrucht und Delikatessen GmbH Eurolease finance d.o.o. EUROPASTEG Errichtungs- und Betriebs GmbH 1) Eurotherme Bad Schallerbach Hotelerrichtungsgesellschaft m.b.H. Finance & Consulting GmbH Franz Reiter Ges.m.b.H. & Co. OG. Gesellschaft zur Förderung agrarischer Interessen in Oberösterreich GmbH Gesellschaft zur Förderung des Wohnbaus GmbH GMS GOURMET GmbH (previously Kulinarik Gastronomie und Frischküche GmbH) GOURMET Beteiligungs GmbH (previously Gourmet Menü-Service GmbH) Grundstücksverwaltung Steyr GmbH Grundstücksverwaltung Villach-Süd GmbH GRZ IT Center GmbH H. Loidl Wurstproduktions- und vertriebsgesellschaft m. b. H. & Co KG Heimo Loidl + Johann Loidl Gesellschaft m.b.H. HYPO Beteiligung Gesellschaft m.b.H. HYPO Grund- und Bau-Leasing Gesellschaft m.b.H. HYPO Holding GmbH HYPO-IMPULS-Alpha Immobilien GmbH HYPO-IMPULS Immobilien GmbH HYPO IMPULS Immobilien Leasing GmbH HYPO IMPULS Immobilien Rif GmbH HYPO IMPULS Mobilien Leasing GmbH HYPO IMPULS Vital Leasing GmbH HYPO Liegenschaftsverwertungs Gesellschaft m.b.H.

financial institutions or ones accounted for at equity there are restrictions based on legal banking standards and regulatory regulations, connected with minimum capital ratios in particular. The following list shows the material subsidiaries and associates. An overview of all investments of the Raiffeisenlandesbank Oberösterreich Group (information according to section 265 (2) of the Austrian Commercial Code) has been prepared separately. This list is available at the headquarters of the parent company.

Calculated share of capital in % Group parent 100.00% 100.00% 100.00% 99.97% 100.00% 85.50% 95.00% 100.00%

Country

Balance sheet date

100.00% 51.00% 100.00% 46.79% 51.00% 100.00% 100.00%

Austria Germany Austria Austria Austria Austria Austria Austria Austria Czech Republic Austria Slovenia Austria Austria Austria Austria

31 Dec. 31 Dec. 30 Sept. 31 Dec. 31 Dec. 28 Feb. 31 Dec. 31 Dec. 30 Sept. 31 Dec. 31 Dec. 31 Dec. 30 Sept. 31 Dec. 31 Dec. 31 Dec.

95.00% 56.52%

Austria Austria

31 Dec. 30 Sept.

95.00%

Austria

31 Dec.

95.00% 95.00% 51.49% 89.39% 95.00% 95.00% 56.52% 56.52% 79.37% 51.00% 51.00% 91.74% 91.74% 100.00% 91.74% 56.52%

Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria

31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 30 Sept. 30 Sept. 30 June 31 Dec. 31 Dec. 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30 Sept.

Assimilation 2014

THE GROUP IFRS consolidated financial statements | Disclosures | Basics of the consolidated accounts

Name

Calculated share of capital in %

Country

Balance sheet date

HYPO Salzburg IMPULS Leasing GmbH IB-RT IMMOBILIEN Beteiligungs Real-Treuhand Portfoliomanagement GmbH & Co KG IL 1 Raiffeisen-IMPULS-Mobilienleasing Gesellschaft m.b.H.

91.74%

Austria

30 Sept.

100.00% 100.00%

31 Dec. 30 Sept.

IMPULS Bilina s.r.o. IMPULS-DELTA d.o.o. IMPULS-Immobilien GmbH & Co. Objekt Eitorf KG IMPULS-Immobilien GmbH & Co. Objekt Gersthofen KG IMPULS-Immobilien GmbH & Co. Objekt Gilching KG IMPULS-Immobilien GmbH & Co. Objekt Karlstein KG 2) IMPULS-Immobilien GmbH & Co. Objekt Laupheim KG 2) IMPULS-Immobilien GmbH & Co. Objekt Offingen KG 2)

100.00% 100.00% 51.00% 81.00% 100.00% 5.10% 5.10% 5.40%

IMPULS-Leasing-AUSTRIA s.r.o.

100.00%

Austria Austria Czech Republic Croatia Germany Germany Germany Germany Germany Germany Czech Republic

IMPULS-LEASING d.o.o. IMPULS-Leasing GmbH & Co. Objekt Hengersberg KG IMPULS-Leasing GmbH & Co. Objekt Schkeuditz KG IMPULS-LEASING International GmbH IMPULS-LEASING Polska Sp.z o.o.

100.00% 100.00% 94.90% 100.00% 100.00%

31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec.

IMPULS-Leasing-Real-Estate s.r.o. IMPULS-LEASING Romania IFN S.A. IMPULS-LEASING Services SRL IMPULS-LEASING Slovakia s.r.o.

100.00% 90.00% 90.00% 100.00%

IMPULS Malvazinky s.r.o.

100.00%

IMPULS Milovice s.r.o.

100.00%

IMPULS Modletice s.r.o.

100.00%

IMPULS Plzen s.r.o.

100.00%

IMPULS – Praha spol. s r.o.

100.00%

IMPULS Rakovnik s.r.o.

100.00%

IMPULS Sterboholy s.r.o.

100.00%

IMPULS Teplice s.r.o. IMPULS Trnavka s.r.o. INCOM Private Equity GmbH INPROX CSP Kft.

100.00% 100.00% 100.00% 100.00%

INPROX Plzen s.r.o.

100.00%

INPROX Tabor, s.r.o. Invest Holding GmbH IVH Unternehmensbeteiligungs GmbH & Co OG Kapsch Financial Services GmbH KARNERTA GmbH KEPLER-FONDS Kapitalanlagegesellschaft m.b.H. LABA-IMPULS-Gebäudeleasing Gesellschaft m.b.H. LABA-IMPULS-Gebäudeleasing GmbH & Co KG LABA-IMPULS-IT-Leasing GmbH & Co KG LANDHOF GesmbH & Co KG LKW-Zentrum Radfeld Liegenschaftsverwaltung GmbH machland obst- und gemüsedelikatessen gmbh

100.00% 100.00% 100.00% 74.00% 95.00% 64.00% 100.00% 100.00% 100.00% 95.00% 100.00% 51.98%

Croatia Germany Germany Austria Poland Czech Republic Romania Romania Slovakia Czech Republic Czech Republic Czech Republic Czech Republic Czech Republic Czech Republic Czech Republic Czech Republic Slovakia Germany Hungary Czech Republic Czech Republic Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria

31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec.

31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Oct. 30 Sept. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 30 Sept. 31 Dec.

Assimilation 2014

Annual Report 2014

Name MARESI Austria GmbH MARESI Trademark GmbH & Co KG MH53 GmbH & Co OG Oberösterreichische Kfz-Leasing Gesellschaft m.b.H. OÖ HYPO-IMPULS Leasing GmbH O.Ö. Kommunal-Immobilienleasing GmbH 3) O.Ö. Kommunalgebäude-Leasing Gesellschaft m.b.H. 3) OÖ Wohnbau gemeinnützige Wohnbau und Beteiligung GmbH OÖ Wohnbau Gesellschaft für den Wohnungsbau gemeinnützige GmbH PRIVAT BANK AG der Raiffeisenlandesbank Oberösterreich Privatstiftung der Raiffeisenlandesbank Oberösterreich Aktiengesellschaft 4) Projekt Blumau Tower Immobilien GmbH Projekt Eberstalzell Immobilien GmbH RACON Software Gesellschaft m.b.H. Raiffeisen-IMPULS-Alpha Immobilien GmbH Raiffeisen-IMPULS-Bautenleasing Gesellschaft m.b.H. Raiffeisen-IMPULS-Beta Immobilien GmbH Raiffeisen-IMPULS-Delta Immobilien GmbH Raiffeisen-IMPULS-Delta Mobilienleasing GmbH Raiffeisen-IMPULS-Epsilon Immobilien GmbH Raiffeisen-IMPULS-Eta Immobilien GmbH Raiffeisen-IMPULS Finance & Lease GmbH Raiffeisen-IMPULS-Fuhrparkmanagement GmbH Raiffeisen-IMPULS Fuhrparkmanagement GmbH & Co. KG Raiffeisen-IMPULS-Gamma Immobilien GmbH Raiffeisen-IMPULS-Immobilien GmbH Raiffeisen-IMPULS-Immobilien GmbH & Co. Objekt Gunzenhausen KG 5) Raiffeisen-IMPULS-Immobilien GmbH & Co. Objekt Hilpoltstein KG Raiffeisen-IMPULS-Immobilienleasing GmbH Raiffeisen-IMPULS-Immobilienvermögensverwaltung GmbH Raiffeisen-IMPULS-Jota Immobilien GmbH Raiffeisen-IMPULS Kfz und Mobilien GmbH Raiffeisen-IMPULS-Leasing Gesellschaft m.b.H. Raiffeisen-IMPULS-Leasing GmbH & Co KG Raiffeisen-IMPULS-Leasing Schönau GmbH Raiffeisen-IMPULS-Liegenschaftsverwaltung Gesellschaft m.b.H. Raiffeisen-IMPULS-Mobilienleasing GmbH Raiffeisen-IMPULS-My Immobilien GmbH Raiffeisen-IMPULS-Projekt Atzbach GmbH Raiffeisen-IMPULS-Projekt Gänserndorf GmbH Raiffeisen-IMPULS-Projekt Graz-Webling GmbH Raiffeisen-IMPULS-Projekt Kittsee GmbH Raiffeisen-IMPULS-Projekt Lehen GmbH Raiffeisen-IMPULS-Projekt Ort GmbH Raiffeisen-IMPULS-Projekt Straßwalchen GmbH Raiffeisen-IMPULS-Projekt Traunviertel GmbH Raiffeisen-IMPULS-Projekt Urstein GmbH Raiffeisen-IMPULS-Projekt Wien-Nord GmbH Raiffeisen-IMPULS-Projekt Wolfsberg GmbH Raiffeisen-IMPULS-Rankweil Immobilien GmbH Raiffeisen-IMPULS-Realitätenleasing GmbH Raiffeisen-IMPULS-Rho Immobilien GmbH Raiffeisen-IMPULS-Rho Immobilien GmbH & Co KG Raiffeisen-IMPULS-Vermietungsgesellschaft m.b.H.

Calculated share of capital in %

Country

Balance sheet date

Assimilation 2014

88.07% 95.00% 100.00% 51.00% 51.00% 40.00% 40.00% 83.56%

Austria Austria Austria Austria Austria Austria Austria Austria

31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec.

83.29% 100.00%

Austria Austria

31 Dec. 31 Dec.

n/a 100.00% 100.00% 76.00% 100.00% 100.00% 51.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Germany Austria Germany Austria Austria

31 Dec. 30.11. 30 Sept. 31 Dec. 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30 Sept. 31 Dec. 30 Sept. 31 Dec. 30 Sept. 30 Sept.

5.10% 100.00% 75.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 75.00% 100.00% 100.00% 100.00% 100.00% 100.00% 95.00% 95.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Germany Germany Austria Austria Austria Austria Austria Germany Germany Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria Austria

31 Dec. 31 Dec. 31 Dec. 30 Sept. 30 Sept. 30 Sept. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30 Sept. 31 Dec. 31 Dec. 30 Sept. 30 Sept. 30 Sept. 30 Sept. 31 Dec. 30 Sept. 30 Sept. 30 Sept. 31 Dec. 31 Dec. 31 Dec.

THE GROUP IFRS consolidated financial statements | Disclosures | Basics of the consolidated accounts

Name

Calculated share of capital in %

Country

Balance sheet date

Raiffeisen-IMPULS-Zeta Immobilien GmbH RB Prag Beteiligungs GmbH RealRendite Immobilien GmbH REAL-TREUHAND Management GmbH RLB OÖ Alu Invest GmbH RLB OÖ Sektorholding GmbH RLB OÖ Unternehmensbeteiligungs GmbH RLB OÖ Unternehmensholding GmbH RVD Raiffeisen-Versicherungsdienst Gesellschaft m.b.H. SALZBURGER LANDES-HYPOTHEKENBANK AKTIENGESELLSCHAFT SANCTOR Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Germering KG

60.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 75.00%

Austria Austria Austria Austria Austria Austria Austria Austria Austria

30 Sept. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec.

56.52%

Austria

31 Dec.

94.00%

31 Dec.

SEKUNDA-spolecnost pro správu nemovitosti, s.r.o. SENNA Nahrungsmittel GmbH & Co KG Steirische Tierkörperverwertungsgesellschaft m.b.H. & Co KG TKV Oberösterreich GmbH VIVATIS Capital Invest GmbH VIVATIS Capital Services eGen VIVATIS Holding AG vivo Leasing GmbH & Co KG WDL Infrastruktur GmbH

100.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 75.00% 51.00%

Germany Czech Republic Austria Austria Austria Austria Austria Austria Austria Austria

Companies reported under the equity method AMAG Austria Metall AG Beteiligungs- und Wohnungsanlagen GmbH Oberösterreichische Landesbank Aktiengesellschaft Österreichische Salinen Aktiengesellschaft Raiffeisen Zentralbank Österreich Aktiengesellschaft

16.50% 46.00% 38.57% 41.25% 14.64%

Raiffeisenbank a.s. Raiffeisenlandesbank Oberösterreich Invest GmbH & Co OG

25.00% 49.00%

Austria Austria Austria Austria Austria Czech Republic Austria

Assimilation 2014

31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 30 Sept.

31 Dec. 31 Dec. 31 Dec. 30 June 31 Dec. 31 Dec. 30 Sept.

1) Control based on majority voting rights 2) Control based on general partnership with majority vote 3) Control based on majority of management directors and agreement binding voting right 4) Control based on the right to appoint members to the foundation’s management board 5) Control based on general partnership with majority vote

Changes in the basis of consolidation and their effects The number of fully consolidated companies reported under the equity method developed during the financial year as follows: Fully consolidated

Equity method

2014

2013

2014

2013

154 5

63 96

9 –

8 1

Merged in the reporting year

–

Deconsolidated during the reporting year

–

154

As at 1 Jan. Included for the first time during the reporting year

As at 31 Dec.

Annual Report 2014

The new European supervisory provisions for banks (Basel III implementation in the form of Capital Requirements Regulation CRR, Capital Requirements Directive CRD and the estimates based on EBA standards) have meant that, as of 2014, supervisory information must be made on a consolidated basis in accordance with the provisions of IFRS, while the circle of underlying companies is governed by the CRR. Essentially, this group only includes banks, financial institutions, financial institutions based on business operations, financial institutions based on holding function, financial holding companies and providers of ancillary services, but it does not include any other companies that are also represented in the IFRS group of Raiffeisenlandesbank Oberösterreich. In preparation of these regulatory changes, all relevant companies in the CRR circle which were not previously included in the IFRS group were – irrespective of the previous assessment of their significance for accounting purposes – included in this circle as of 31 Dec. 2013. As of the 2014 financial year this will serve to ensure the greatest harmony possible between the published IFRS consolidated figures for capital market participants and the IFRS figures for the CRR circle, which are identified in the framework of supervisory law – and are in some cases, to be published based on the third pillar of Basel III.

changes within the framework of restructuring. “OÖ Wohnbau gemeinnützige Wohnbau und Beteiligung GmbH” is a subsidiary and “OÖ Wohnbau Gesellschaft für den Wohnungsbau gemeinnützige GmbH” a second-tier subsidiary from the point of view of the holding first mentioned. Both companies are public house building companies which are subject to the restrictions of the Austrian Public House Building Act (WGG) both in terms of distributions of profits as well as access to the assets. The following table shows the newly assessed assets and liabilities as of the date of first-time inclusion: 1 Jan. 2014 in EUR '000

Cash and cash equivalents Loans and advances to banks Financial assets Intangible assets Property and equipment Investment property Other assets Total Assets

1 38,255 5,882 269 2,609 475,055 35,068 557,140

1 Jan. 2014 in EUR '000

In the 2014 financial year the companies OÖ Wohnbau gemeinnützige Wohnbau und Beteiligung GmbH, OÖ Wohnbau Gesellschaft für den Wohnungsbau gemeinnützige GmbH, Bauen und Wohnen Beteiligungs GmbH, Raiffeisen-IMPULS-Projekt Kittsee GmbH und RaiffeisenIMPULS-Projekt Wolfsberg GmbH were included in the basis of consolidation for the first time – see also the relative indications of first-time consolidations in the consolidated group list above. The changes as compared with 31 December 2013 are the result of the deconsolidation of the previously fully consolidated IMPULS-LEASING Hungaria Kft. and IMPULS-Leasing Hungaria Zrt. Further changes are based on the merger of Saphir Beteiligungs GmbH, and the absorption of Saphir Beteiligungs GmbH & Co OG into Invest Holding GmbH as well as the merger of Gourmet Menü-Service GmbH & Co KG with GMS Gourmet GmbH. In the 2014 financial year the company accounted for at equity ZRB Beteiligungs GmbH was sold and the company accounted for at equity Salzburger Siedlungswerk Gemeinnützige Wohnungswirtschafts-Gesellschaft m.b.H. was deconsolidated in connection with a capital increase and the share dilution resulting from this. By itself the first time consolidation of the Upper Austrian property development companies can be cited as a transaction with crucial effects – this is detailed below. The first-time consolidation of Bauen und Wohnen Beteiligungs GmbH was the result of gaining the controlling interest as at 1 Jan. 2014 following company law and contractual

Amounts owed to banks Provisions Other liabilities Total liabilities Proportionate net assets Minorities Equity Total equity and liabilities

392,933 16,385 82,087 491,405 54,964 10,770 65,734 557,140

With a comparison of the carrying amount held amounting to EUR 10.0 million as compared with the proportionate net assets amounting to EUR 55.0 million, a negative difference of EUR 45.0 million results from the first-time consolidation which is recognised as income in the income statement. The item is stated in the financial fixed assets under “Profit/ loss from initial consolidation and deconsolidation”

Foreign currency translation The consolidated financial statements are presented in euros, reflecting the national currency. Financial statements of fully consolidated companies whose functional currency differs from the group currency are translated into euros employing the modified current rate method in accordance with IAS 21. In principle, the national currency corresponds to the functional currency. The euro has been used in the past as the functional currency for the Romanian leasing companies. Following the essential change in the economic environment, effective 1 Jan. 2014 the prospective change

THE GROUP IFRS consolidated financial statements | Disclosures | Basics of the consolidated accounts

was made in the functional currency from the euro to the Romanian national currency the lei (RON), which was combined with a negligible translation effect. In applying the modified current rate method, equity is translated at historical rates while all other assets and liabilities are translated using the corresponding rates prevailing on the reporting date (middle rate of the European Central Bank (ECB) as at the group balance sheet date). The items

on the income statement are translated using the average currency exchange rates of the ECB. Currency differences resulting from the translation of the equity components using historical rates and the translation of the income statement using average rates compared to the translation using rates prevailing on the reporting date are recognised in the statement of comprehensive income with no effect on the income statement.

The following prices were used within the scope of the consolidation for the currency translation: Prices in currency per euro Croatian kuna (HRK) Polish zloty (PLN) Czech crowns CZK Hungarian forint (HUF) Romanian lei (RON)

2014 Rate on prevailing date 7.6580 4.2732 27.7350 – 4.4828

2013 Average rate 7.6342 4.1909 27.5418 – 4.4410

Rate on prevailing date 7.6265 4.1543 27.4270 297.0400 –

Average rate 7.5769 4.2027 25.9596 297.5000 –

Annual Report 2014

Accounting policies Statement change in the group balance sheet Income tax assets and liabilities are netted out in the consolidated financial statements if there is a right of setoff in relation to the taxes and the taxes relate to taxable items within the same fiscal corporate group. Tax assets were previously offset with tax liabilities for each subsidiary.

Balance sheet items

Advance

The changes resulted in the following adjustments to the previous method: The effect on the balance sheet total is EUR 18.8 million as at 31 Dec. 2013. (31 Dec. 2013: EUR 21.9 million).

Adjustment

Adjusted

31 Dec. 2013 31 Dec. 2013 31 Dec. 2013

Advance

Adjustment

Adjusted

1 Jan. 2013

Current tax assets

18,840

–5,678

13,162

28,022

–9,100

18,922

Deferred tax assets

51,037

–13,150

37,887

46,600

–12,782

33,818

Current tax liabilities

17,758

–10,678

7,080

14,333

–10,775

3,558

Deferred tax liabilities

31,792

–8,150

23,642

40,897

–11,107

29,790

In this context detail disclosures in the appendices on temporary differences were not netted out.

Financial instruments A financial instrument is a contract that is a financial asset for the first company and, at the same time, results in a financial liability or an equity instrument in the other company. In accordance with IAS 39, all financial assets and liabilities including all derivative financial instruments must be included in the balance sheet. A difference is made between the following categories: Financial assets or liabilities that are assessed at fair value with an effect on income; and this category is subdivided into: Financial instruments held for trading Designated financial instruments Financial assets available for sale Financial investments held-to-maturity Loans and receivables Financial liabilities that are stated at amortised cost. The purchase and sale of financial instruments is always balanced on the day of trading. The prices quoted on the market are used to determine the fair value of financial instruments on an active market (level 1 in the valuation hierarchy). Essentially, stock exchange prices or external data sources (quotes from traders and brokers in liquid markets) are used for these financial instruments. If there is no active market available or market prices of the financial instruments are only partially available, the fair value is determined based on quotes of individual traders or by means of accepted valuation models based on observed market data (level 2 in the valuation hierarchy).

Should there be neither listed prices nor sufficient observable market data available for determining the value of the financial instruments, then the valuation parameters that are not observable on the market are estimated using appropriate assumptions (level 3 in the valuation hierarchy). Financial instruments held for trading The category “financial instruments held for trading” includes trading securities and derivative financial instruments. They are assessed at fair value. A credit value adjustment (CVA) and debt value adjustment (DVA) were determined as part of the inclusion of credit risk in the mark-to-model measurement of derivatives. The main factors used in determining the CVA and DVA were the term to maturity and counterparty default risk. In the 2014 financial year an improvement was implemented to the methodology used for accounting purposes in determining the CVA in connection with the AQR review by the European supervisory bodies, with Monte-Carlo modelling used for calculating future price developments and credit spreads derived predominantly from the market used for the counterparty default risk. The change on the previous year resulting from this of EUR 4,017 thousand was recognised as expense. An expense of EUR 6,334 thousand was also recognised from the consideration of the liquidity components with collateralised derivatives. The financial instruments in this category are used to take advantage of short-term price fluctuations on the market or are purchased for the purpose of economic security.

THE GROUP IFRS consolidated financial statements | Disclosures | Accounting policies

Valuation procedures and input factors in determining fair values

Level

III

Instrument

Types

III I

Derivatives

Input factors

capital value oriented

cashflows already fixed or determined using forward rates; interest yield curve; cost of risk premiums based on internal calculations for the credit risk of the contract partners* The input factors which cannot be observed involve credit spreads for the designated loans. These range within a bandwidth of 0 to 328 basis points – the capital-weighted average value is 64 basis points.

capital value oriented

publicly traded

market value oriented

Stock market price cashflows already fixed or determined using forward rates; interest yield curve; credit risk of the contract partners; own credit risk

Loans and advances to banks

Loans and advances to customers

Valuation procedure

Derivatives

Over the counter

capital value oriented

Financial assets

Listed securities

market value oriented

Stock market prices; prices quoted by market participants

non-listed securities

market value oriented

Prices quoted by market participants for equivalent financial instruments; cashflows already fixed or determined using forward rates; interest yield curve; credit risk of the contract partners; refinancing curves

Financial assets

III

Financial assets

non-listed securities

capital value oriented

Expected returns derived from internal calculations; interest yield curve; credit risk of the contract partners* The input factors which cannot be observed involve credit spreads for corporates. These range within a bandwidth of 65 to 827 basis points – the capital-weighted average value is 70 basis points.

Financial assets

market value oriented

Stock market price

earned value oriented

Risk-free base rate: interest rate structure of German government bonds using the Svensson method Market price premium: based on the recommendation of the working group corporate valuation of the expert senate for business administration and organisation Beta factor: the basis is the assessment of the beta factors of the peer group companies Smell stock premium: additional risk premium of a maximum 3% growth factor; maximum 2% growth rate

Net asset value

This assessment method is used for holding companies and their investments. With this the hidden reserves in the investments are added to the asset value of the parent company. With real estate project companies the company value is generally determined using an expert market value report.

III

Financial assets

Shares in non-consolidated subsidiaries, other investments and participation rights

Financial assets

Shares in non-consolidated subsidiaries, other investments and participation rights

Financial assets

Shares in non-consolidated subsidiaries, other investments and participation rights

assessed at acquisition costs minus any impairments, since no reliable determination is possible of the future cashflow

Amounts owed to banks

capital value oriented

cashflows already fixed or determined using forward rates; interest yield curve; liquidity costs of own refinancing

Amounts owed to customers

capital value oriented

cashflows already fixed or determined using forward rates; interest yield curve; liquidity costs of own refinancing

Liabilities evidenced by certificates

capital value oriented

cashflows already fixed or determined using forward rates; interest yield curve; liquidity costs of own refinancing

Subordinated capital

capital value oriented

cashflows already fixed or determined using forward rates; interest yield curve; liquidity costs of own refinancing

* The risk premiums are determined depending on the average probability of default (PD, through-the-cycle) for each rating and original maturity and on the loss given default (LGD). The probabilities of default and migration for corporate and retail customers are determined every quarter and are based on the Group’s own default data since 2004. The maturity component of the imputed risk cost rates is depicted through matrix multiplication of the migration matrices produced.

Annual Report 2014

If there are positive market values including deferred interest (“dirty price”), the financial instruments are included in the trading assets. If there are negative fair values then they are recorded under the balance sheet item of “trading liabilities”. Interest and dividend income, refinancing costs, provisions and changes in value of dealing securities are recorded as part of the net trading income with effect on the income statement. Changes in the value of derivatives effect the income statement and are shown in the net income from designated financial instruments. Interest payments connected with such financial instruments are included in the interest income or interest expenses from designated and derivative financial instruments in the net interest income. Designated financial instruments (Designated at fair value) Designated financial instruments refer to those financial assets and liabilities that, at the point in time that they are first stated in the balance sheet, are categorised or designated as a fair value assessment with effect on the balance sheet (the so-called fair value option). Such a categorisation can only be made if: The categorisation eliminates or considerably reduces incongruences in the assessment or the approach, The management and the performance measurement of a portfolio of financial assets and /or financial liabilities are done on a fair value basis according to a documented risk management or investment strategy, A contract contains an embedded derivative that must be separated. The following balance sheet items contain designated financial instruments:

Loans and advances to banks Loans and advances to customers Financial assets Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates Subordinated capital

These financial instruments are assessed at fair value. Unrealised and realised profits and losses are recorded with effect on the income statement as net income from designated financial instruments. Interest income or expenses from designated financial instruments are recorded under the net interest income.

Financial assets available for sale (AfS) These include bonds and other fixed-income securities, shares and other variable-yield securities as well as shares in companies. Equity instruments are classified in this category if they are neither classified as held for trading nor accounted for as financial assets at fair value. For debt capital instruments that are classified as available for sale, the intention is to hold them for an indefinite period. However, they can be sold if market conditions change or liquidity is needed. Financial assets in this category are evaluated in accordance with IAS 39 at fair value. The balance sheet item is recorded under the balance sheet item “financial assets”. Changes in fair value are shown without effect on the income statement. Interest income from available-for-sale debt securities and other fixed-income securities is recognised using the effective interest rate method. Changes in value that are recognised directly in the equity are transferred to the income statement if the financial asset in question is derecognised. The same applies in the case of impairment; the difference between the fair value and the cost of purchase (less any repayments and amortisation) is to be recorded with effect on income. If the reasons for impairment no longer apply, a reversal of the impairment loss is to be carried out with effect on the income statement if it is a debt capital instrument. However, any increases in fair value that go beyond the amount of the reversal of the impairment loss are recorded with no effect on the income statement. If an equity instrument is held, the impairment is not retracted with effect on the income statement. Increases in value in later periods are therefore accounted for with no effect on the income statement. If the fair value of an equity instrument held cannot be reliably determined, the cost of purchase is used minus any possible impairment losses. Financial investments held-to-maturity (HtM) This category contains non-derivative financial assets with fixed or determinable payments and a fixed term, that are quoted on an active market and held to maturity, with the exception of those financial assets that are evaluated and designated at their initial recognition at fair value with effect on the income statement, and those that are determined to be available for sale. Financial assets in this category are stated at amortised cost, using the effective interest method. Impairment in the sense of IAS 39 is recorded according to its effect on the income statement. Financial

THE GROUP IFRS consolidated financial statements | Disclosures | Accounting policies

investments that are included in this category are listed under the balance sheet item “financial assets”. Loans and receivables Financial assets in the category “loans and receivables” are stated at amortised cost as long as they are not placed in the category of “designated financial instruments”. Securities labelled as “loans and receivables” are deferred using the effective interest method. They are mainly recorded under the balance sheet items “loans and advances to banks” and “loans and advances to customers”. Securities in the category “loans and receivables” are shown in the balance sheet item “financial assets”. Loan loss allowances: Allowances for losses on loans and advances are recognised primarily if a debtor is experiencing economic or financial difficulties, fails to make interest payments or repayments of principal, or other circumstances arise that indicate a probability of default based on regulatory standards. Within the internal risk management system, ongoing monitoring of the counterparty and the specific case involved is used to determine whether relevant circumstances

exist. In the case of significant customer exposures in the lending business, each individual case is analysed as the basis for recognising specific loan loss allowances or provisions for contingent liabilities and lending commitments. The calculation for the amount of the allowance for losses on loans and advances takes into account the discounted cash inflows expected from interest payments and repayments of principal together with any inflows that can be obtained from the recovery of collateral. Findings from circumstances connected with the AQR by the European supervisory bodies were evaluated accordingly for accounting purposes in the loan loss allowances process in the 2014 financial year. A standardised method is used for customer exposures that are not deemed to be significant. Non-defaulted exposures are subjected to a portfolio examination that looks for incurred but not reported losses; in the calculation of portfolio impairments, among other things statistical loss experience is taken into consideration. A revision or update to the parameters used for IFRS accounting purposes in determining the portfolio value adjustment in the IFRS Group was implemented in the 2014 financial year in connection with the AQR, to the effect that the Loss Identification Period (LIP)

Presentation of the Balance sheet items by form of measurement and category Essential form of measurement Assets

Amortised Cost

Other

Cash and cash equivalents

Nominal

Loans and advances to banks

Fair value

Loans and advances to banks

Loans and receivables Loans and receivables

Loans and advances to customers

Category according to IAS 39

Fair Value Option x

Loans and receivables

Loans and advances to customers

Fair Value Option

Trading assets

Held for Trading

Designated financial assets Financial assets in the category “available for sale” (AfS) Financial assets in the category “held-to-maturity” (HtM) Financial assets in the category “loans and receivables”

Fair Value Option

at cost

Financial assets – Available for sale

Financial assets – Held to Maturity

Loans and receivables

Essential form of measurement Equity and liabilities Fair value Amounts owed to banks Amounts owed to banks

x x

Amounts owed to customers Amounts owed to customers

x x

Trading liabilities

Subordinated capital

Financial liabilities Financial liabilities Financial liabilities Fair Value Option Held for Trading

x x

Category according to IAS 39

Fair Value Option x

Liabilities evidenced by certificates

Other

Fair Value Option x

Liabilities evidenced by certificates

Subordinated capital

Amortised Cost

Financial liabilities Fair Value Option

Annual Report 2014

was generally set at one year for the entire portfolio, and values from the Austrian Raiffeisen deposit protection eGen (ÖRE) are used for the parameter Loss Given Default (LGD). With all other conditions remaining the same, this resulted in an increase in the level of the portfolio value adjustment of around 24%. Financial liabilities that are Stated at amortised cost If financial instruments on the liabilities side are neither “financial instruments held for trading” nor attributed to the category “designated financial instruments”, they are stated at amortised cost. The emissions included in the financial liabilities are measured using the effective interest rate method. Financial liabilities are mainly recorded under the balance sheet items “amounts owed to banks”, “amounts owed to customers”, “liabilities evidenced by certificates” and “subordinated capital”. Accounting policies for hedge accounting (Hedge Accounting) In Raiffeisenlandesbank Oberösterreich fair value hedge accounting is applied in accordance with the terms of IAS 39. Hedge accounting essentially means using hedging activity (typically involving a derivative) to offset the risk of changes in the fair value of a balanced underlying transaction. By reporting the fair value hedge on the balance sheet in this manner, one-sided effects in the context of economic risks can be avoided. An essential prerequisite is the prospectively and retrospectively traceable and documented effectiveness of hedge accounting. The main area of application in the group is the hedging of underlying transactions with fixed interest rate risks in relation to the basic parameters of primarily identical, yet opposed derivative financial instruments (i.e., issue with fixed coupons and receiver swap). The objective is to reduce the volatility of results that could occur without hedge accounting, as well as one-sided market appraisals of derivatives that affect the results, and a market appraisal of the derivative and underlying transaction (under the exercise of the fair value option) based on spread changes in the underlying transaction. The hedging transactions in the context of fair value hedge accounting are recorded – as are the other derivative financial instruments – under the balance sheet items “Trading assets” and “Trading liabilities”.

Underlying transactions in the context of fair value hedge accounting are recorded above all in the following balance sheet items:

Loans and advances to customers Financial assets Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates

The gains and losses arising from hedge accounting are presented on the income statement under the item “net income from investments”.

Repurchase transactions In the course of real repurchase transactions (repo) the group sells assets to a contract party, at the same time agreeing to buy them back on a certain date at a certain price. These assets remain on the balance sheet and are evaluated according to the rules of the various balance sheet items. An obligation in the amount of the liquidity received is posted. In a reverse repo transaction assets are purchased together with the obligation to sell in future. A loan in the amount of the paid liquidity is posted. Interest expenses from repo transactions and interest income from reverse repo transactions are accrued by the straight-line method throughout the term and recorded under net interest income. For non-real repurchase transactions, the debtor bank has the obligation to take the assets back but it does not have the right to demand them back. The creditor bank makes the decision alone as to whether it wants a retrocession.

Leasing transactions The group differentiates between finance leases and operating leases. According to IFRS, a finance lease is essentially when the risks associated with the property and the opportunities of an asset are transferred to the lessee. An operating lease is a lease that is not a financing lease. For the evaluation, substance over form at the beginning of the lease is decisive. Changes of the lease agreement can lead to a new evaluation. In accordance with IAS 17, the lessor in finance lease agreements records the future leasing payments and any remaining amounts as loans and advances to lessees. Under a finance lease, the lessor reports the assets under the respective item of property, plant and equipment balanced by a corresponding leasing liability on the liabilities side.

THE GROUP IFRS consolidated financial statements | Disclosures | Accounting policies

With operating leases, the leasing contracts are recognised with an effect on income by both the lessee and the lessor. The lessor capitalises the asset being leased less the amount of depreciation. The group companies are both lessors and, on occasion, lessees.

Property and equipment and investment property Property and equipment is measured at purchase or production costs less depreciation. The following terms of useful life are usually taken as the basis for straight-line depreciation:

Intangible assets

Movable assets

Years 1 – 25

Immovable assets

3 – 67

The paid acquisition of intangible assets is accounted for initially at the cost of purchase or production. As part of the impact assessment, a distinction is made between intangible assets with finite or indefinite useful life.

Investment property

5 – 67

Intangible assets with a finite useful life are subject to straight-line amortisation over this period. In addition, an impairment test is done if there are indications of any impairment. The amortisation period and method are reviewed at least as often as at the end of each financial year end and adjusted if necessary. Amortisation of intangible assets with finite useful lives is recognised in the income statement under “general administrative expenses”. Intangible assets with indefinite useful lives are reviewed annually – and whenever there is an indication of impairment – subject to an impairment test. As part of the impairment test, the carrying amount of the intangible asset is compared with the recoverable amount. The recoverable amount of an asset is the higher of the two amounts of the fair value less costs to sell, and value in use. If the carrying amount of an intangible asset or a cash-generating unit exceeds the recoverable amount, the asset is impaired and must be written off to the recoverable amount. In addition, once a year we check whether the assessment of an indefinite useful life is still justified or whether a corresponding adjustment must be made. Any impairment loss is recognised in the income statement under “general administrative expenses”. All intangible assets (except goodwill) exhibit a limited useful life. The amortisation of intangible assets is based on the following useful lives:

Years Goodwill Brand

unlimited 15

Customer base

3 – 15

Other intangible assets

1 – 25

Method of depreciation/ amortisation Impairment test using the straightline method using the straightline method using the straightline method

In the event of impairment, the greater of the two comparable values (fair value less the cost of disposal and value in use) are amortised pursuant to IAS 36. If the reasons for impairment cease, then appreciation up to the cost of purchase carried forward shall occur. Under “real estate held as financial investments (investment property)”, property is reported that is held for rental and lease or for capital appreciation. If the real estate is used in part by the enterprise it is only classified as an investment property if the part used by the owner is insignificant. Buildings under construction that have the same expected purpose as investment property are treaded as investment property. Investment property is also stated at amortised purchase or production cost or according to the relevant option in IAS 40. Sector-specific evaluations and present value calculations are created for the investment property classified in Level 3. The market value is determined according to the use of the investment property, using earned value, property value or comparative value method. Depending on which valuation method is considered appropriate, the main input factors are income and expenses attributable to the property, condition and location of the property, similar assets and interest rates.

Annual Report 2014

Provisions All social provisions (provisions for pensions, severance obligations and bonuses) are determined pursuant to IAS 19 – Employee Benefits – following the “projected unit credit method”. The Raiffeisenlandesbank Oberösterreich Group has made commitments to a group of employees concerning old-age pension, occupational disability pension, widow’s pension and/or orphan’s pension. Defined benefit pension plans guarantee the employees a specific retirement benefit that depends on years of employment and a certain percentage of remuneration. Employees are entitled to an invalidity pension when they become permanently disabled according to the General Social Security Act and comply with the requirements of section 271/1 of the Social Security Act. Widow’s/widower’s or orphan’s pension is paid when an employee or pension recipient dies. For some of the beneficiaries the obligations were transferred out to a fund (pension fund). For the obligations that will be financed through a pension fund, the amount of the claim is determined once at the time of retirement, after that no further contributions are to be paid. In one subsidiary, employees have been compensated for pension commitments originally made. These employees are entitled to a so-called Social Security Act (ASVG) equivalent which will be provided to the employees or their dependents for a limited period and covers the following: the employee is entitled to a disability and old-age pension; in case of death, the surviving dependents are entitled to a widow's or orphan's pension. The ASVG equivalent is paid after retirement and after the period covered by the severance package, up until the ASVG pension has been awarded and is paid. The pension provisions include provisions for pensions allowances. The beneficiaries receive in the event of disability or upon retirement and after the end of the period covered by the severance package, a family allowance and/or a supplementary insurance covering an allowance. The precondition for payment is that they have a right to one or both of these allowances at the time of retirement. Employees of Austrian companies whose employment began before 1 January 2003 have a right to a severance payment if the employer ends the employment and when they retire. This right depends on the number of years they worked for the company and their final salary. In Austria, employees receive anniversary bonuses after a certain number of years of employment.

The calculations are based on a calculative pensionable age of 60 for women and 65 for men with adherence to the legal transitional regulations pursuant to the Budget Supplementary Law of 2003 as well as individual contractual particularities. Furthermore the pensionable age for women was set in consideration of the “BVG age limits” (Federal Law Gazette 1992/832). The actuarial calculation of pension obligations during the candidature phase are based on a discount rate of 1.75% p.a. (previous year: 3.25% p.a.) and a pension-relevant salary increase of 2.0% to 3.0% p.a. (previous year: 2.0% to 4.0% p.a.). The parameters for the benefit phase are calculated with a discount rate of 1.75% p.a. (previous year: 3.25% p.a.) and an expected pension increase of 2.0% to 3.0% p.a. (previous year: 2.0% to 4.0% p.a.). The actuarial calculation of severance obligations and bonuses takes place using a valuation interest rate of 1.75% p.a. (previous year: 3.25 p.a.) and an average sector-specific salary increase of 3.0% to 4.0% p.a. (previous year: 3.0% to 4.0% p.a.). In addition to the disability rates, mortality rates and the factors resulting from the termination of employment on attaining retirement age, annual period of service-dependent turnover rates based on internal statistics are applied for early terminations of employment. In accordance with IAS 19, actuarial gains and losses on pension and severance provisions are directly recognised in other comprehensive income or the actuarial gains and losses of jubilee benefits immediately in the income statement as personnel expenses. The net interest expense and service costs are charged to income in personnel expenses. Further provisions are made for contingent liabilities towards third parties at the amount of anticipated utilisation if it is likely that the liability will ensue. If interest rates play a significant role, then the rates of such provisions shall be reduced and assessed at their cash value.

Defined contribution plans Pursuant to IAS 19, the defined contribution plans are to be distinguished from the defined benefit plans – for which provisions for pensions and severance payments must be made. For a group of employees certain payments are transferred to a pension fund that manages the funds and makes the pension payments. For employees whose employment commenced after 31 December 2002, provisions for severance payment claims are made to a defined contribution system.

THE GROUP IFRS consolidated financial statements | Disclosures | Accounting policies

In the context of such defined contribution plans, specified payments are made to an independent institution (pension fund, employee pension fund). Within this scheme, the company only guarantees the contributions, not the amount of the later benefits. These payments are recognised as personnel expenses with effect on the income statement.

Taxes on income Taxes on income are accounted for in accordance with IAS 12. Deferred taxes based on the country-specific tax rates are calculated for temporary differences that result from the settlement of consolidated carrying amounts and tax values, which balance out in the following period. Tax losses carried forward are recorded as deferred taxes under assets if it seems probable that there will be taxable profits in the future in a similar amount in the same company or in the same corporate group. See the point “Statement change in the group balance sheet” under the accounting policies on the changes to the statements from the previous year. Raiffeisenlandesbank Oberösterreich, as head of the group, has formed a corporate group with diverse financially affiliated companies in the sense of section 9 of the Corporation Tax Act since 2005. Income tax assets and liabilities are netted out in the Group if there is an enforceable right of setoff in relation to the taxes and the taxes relate to taxable items within the same tax unit or corporate group. Future tax obligations from allowances for losses from foreign subsidiaries are recognised without discounting in the consolidated financial statements.

Interest expenses arise mainly from amounts owed to customers and banks, with securitised liabilities and with subordinated capital, as well as interest-dependent derivatives. Interest income and expenses are subject to accrual accounting, dividends are recognised as soon as legal entitlement arises.

Loan loss allowances This item on the income statement shows the creation and the reversal of risk provisions (revaluations and provisions for the lending business). Direct impairment losses and retroactive payments to loans that have already been written off are also included in this item.

Net fee and commission income Net fee and commission income is the result of the expenses and income recorded as accrued in connection with the service business. This mainly includes payment transactions, foreign exchange, currency and precious metal transactions, the securities business, and loan processing and the financial guarantee business.

Net income from investments

Net interest income

Net income from investments shows the valuation results and net gains from disposals recorded with an effect on the income statement which were realised in the case of securities of the categories “financial investments held-to-maturity”, “financial assets available for sale” (AfS) and “loans and receivables”. In addition, this also includes the net income from the valuation and disposal of assets of affiliated companies and other investments that are neither fully consolidated nor accounted for under the equity method. Profits and losses from the available-for-sale assets that are recorded directly under equity or that were transferred from equity to the income statement can be found under their own heading in the Disclosures. Furthermore, the gains and losses arising from hedge accounting are recorded in this item of the income statement.

Interest and interest-related income includes, on the one hand, interest income from loans and advances to customers and banks, as well as bonds and interest-dependent derivatives. On the other hand, it includes current earnings from shares, profit participation rights, shares in mutual funds as well as from associated companies and other investments that are neither fully consolidated nor reported under the equity method. Proportional profits or losses from companies reported under the equity method are also reported in a separate item within net interest income.

Creditworthiness-related price declines in securities of the categories “financial assets available for sale (AfS)”, “financial assets held to maturity” and “loans and receivables” are recognised with effect on income. Triggering events include substantial financial difficulties of the issuer, significant worsening of ratings and the default of interest payments or repayments. In the case of equity instruments, an impairment loss with effect on income is also recognised in cost of purchase in the event of permanent or significant price declines.

Trust fund transactions Business operations based on the administration or placement of assets for third party accounts are not shown on the balance sheet. Commission payments from these operations are shown under net fee and commission income.

Annual Report 2014

Net income from designated financial instruments Unrealised and realised profits and losses in conjunction with designated financial instruments that are recorded on the balance sheet under financial assets are not shown as net income from investments but rather in a separate item on the income statement called “net income/loss from designated financial instruments”. The latter item also includes the net income from valuation and disposal of all other designated financial instruments and derivatives.

General administrative expenses The general administrative expenses include personnel and administrative expenses as well as depreciation and impairment of property and equipment, investment property and intangible assets.

Exercising judgement and making estimates When applying the accounting policies in the consolidated financial statements, the management exercises judgement, keeping in mind the goal of the financial statements to provide meaningful information about the company’s assets, financial position and profitability as well as about any changes in the assets, financial position or profitability of the company. Assumptions and estimates are performed with special consideration of market-related input factors, statistical data, experience and expert opinions. Important areas where judgement is exercised and estimates are made: Fair value of financial instruments If the fair value of the financial assets and liabilities accounted for cannot be determined based on the data of an active market there are various alternative methods that can be used. If there is no observable data from which to derive parameters for a calculation model, the fair value is determined on the basis of estimates. Investments and participation rights are generally classified as financial assets in the category “Financial assets available for sale (AfS)” and must therefore be assessed at fair value. If there are no market prices which can be observed, the earning power method or suitable other forms of determining the value of the company are used based on the data available (e.g. net asset value or sum-of-the-assets methods). If the fair value cannot be reliably determined then the acquisition costs are used. There is not generally any intention to sell with these investments. If there are indications that the acquisition costs are impaired then an

expected value is determined and this value is tested for impairment as necessary. Findings from circumstances connected with the AQR by the European supervisory bodies were evaluated accordingly for accounting purposes with this in the 2014 financial year. Accounting policies for loan loss allowances The financial assets which are not valued at fair value with an effect on the income statement are checked at each balance sheet date for impairment to determine whether an impairment needs to be recognised in profit or loss. In particular, we decide whether there is objective evidence of impairment as a result of a loss event that occurred after the initial recognition of the loss event. Moreover, in the course of determining the impairment loss, it is necessary to estimate the amount and timing of future cash flows. Provisions for pensions, severance payments and bonuses The actuarial valuation is based essentially on assumptions about discount rates and future personnel cost developments. Furthermore, estimates of demographic developments are necessary. The appropriate quantitative sensitivity analyses are presented in the disclosures. Impairment of debt instruments and equity securities The basis for the impairment is the ongoing review as to whether there are any indicators of impairment in accordance with IAS 36.12. Indicators of impairment can be deduced from internal and external sources of information. If there is an indicator of a potential loss in value in accordance with IAS 39.59, then an impairment test must be carried out. In accordance with IAS 39.61, a significant or permanent decrease in the fair value below the acquisition costs is also an objective indicator of impairment for equity instruments held. A significant impairment is generally assumed if there is a downward trend of more than 20% below the acquisition costs. If the price of equity securities is continuously and permanently below the acquisition costs within twelve months then this counts as a permanent indicator of impairment. Additional disclosures are provided in the “Financial instruments” section. Leasing The extent to which the risks and opportunities associated with the property leased lie with the lessor or lessee provides the basis for classifying leases. There is an estimate with this of the essential transfer of risk and opportunity, which may also differ with contractual amendments and

THE GROUP IFRS consolidated financial statements | Disclosures | Segment reporting

require an adjustment. Detailed explanations are provided in the “Leasing transactions” section. Assessment and valuation of deferred taxes Deferred taxes are assessed and valued based on current evaluations and legislation. Deviations from the expected future results from business operations or changes to tax law may impact the tax position and result in a change to the deferred taxes. More detailed explanations are provided in the “Income taxes” section. Accounting for uncertain obligations and uncertain tax items The use of estimated values is important when determining the need for reserves for uncertain obligations and uncertain tax items. To the extent that they are likely and can be

estimated, the Group assesses these potential losses in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” or IAS 12 “Income Taxes”. Putting a figure on provisions requires estimates to be made to a large extent. The final liabilities may ultimately differ from these. Further disclosures are provided in the “Provisions” section. Useful lives of long-term assets Determination of the useful lives for property, plant, and equipment is based on assumptions, estimates and empirical values with regard to long-term assets. Further descriptions are available in the “Property, plant and equipment and investment property” section. The amounts that actually result may be different from the estimates.

Segment reporting Segment reporting in accordance with IFRS 8 is based on the market segment approach in the internal management accounts submitted to the Managing Board. This is a graduated breakeven analysis that illustrates customer responsibility in Raiffeisenlandesbank Oberösterreich – as head and the most crucial company in the Group. For group purposes there is also a presentation of the subsidiaries, the investments accounted for at equity and the consolidation effects in this regard in the investments segment. The segments are presented to the Managing Board on a regular basis in order to support the decision-making and management processes or resource distribution. The entire Managing Board is considered the chief operating decision maker for the purposes of IFRS 8. Income and expenses are initially allocated to the individual segments in line with the costs-by-cause principle as part of the breakeven analysis described. Net interest income is calculated using the market interest rate method. The general administrative expenses include direct and indirect costs. The direct costs (personnel and material costs) are the responsibility of the market segments, the indirect costs are assigned based on certain keys. The results per segment also include results from transactions with other

segments. The assessment of services exchanged between the segments is always done at market price, the segments are positioned to each other like external suppliers. The segment reporting is divided into the following four segments:

Corporates & Retail The segment Corporates & Retail includes the “Market Corporates” business division with the crucial units Corporates, Institutions, International Finance, Real Estate Projects, Industrial Projects, Correspondent Banking and Southern German, as well as the “Retail” in the form of the branches of Raiffeisenlandesbank Oberösterreich.

Financial Markets In the Financial Markets segment, the trade and service results are summarised from customer transactions in foreign exchange, securities and derivatives. Furthermore, the result from the central interest rate and liquidity management of the banking and trading books is included in this segment.

Annual Report 2014

Equity Investments The Investments segment includes all direct and indirect holdings of Raiffeisenlandesbank Oberösterreich. Aside from the most important fully consolidated subsidiaries, this segment also includes associates and other investments that are reported under the equity method or at fair value, or at the cost of purchase if fair value cannot be reliably determined. The Investments segment is sub-divided into four investment portfolios from an organisational perspective. These are “Banks and financial institutions”, “Outsourcing and bank-related investments”, “Real estate” and “Venture and partner capital”. However, reporting and control within the Investments segment generally takes place based on individual company and/or sub-group considerations. Within the scope of the expansion of the basis of consolidation as of 31 Dec. 2013 for the purposes of concordance with supervisory regulations (CRR basis of consolidation), a sub-group structure was introduced with regard to the related reporting purposes, consisting of the sub-groups Hypo Salzburg, IMPULS-LEASING Group, VIVATIS and the Upper Austrian

property development companies (first time consolidation 1 Jan. 2014). The additional subsidiaries not included in sub-groups are also allocated to the Investments segment. Aside from the sub-groups, the companies accounted for under the equity method influence the Investments segment - this involves the essential investments in the RZB Group, RLB OÖ Invest GmbH & Co OG (voestalpine AG), Raiffeisenbank Prague, Oberösterreichische Landesbank AG (Hypo OÖ) and AMAG Austria Metall AG in particular. For a quantitative presentation, reference is made on the one hand to the supplementary chart as of the 2014 financial year in connection with the segment reporting and to the related figures and disclosures in the notes for the companies accounted for under the equity method on the other.

Corporate Center This includes revenue and expenses where the content does not fit into any other segment. Special effects that would distort the various segment results and are not distributed to individual market segments in the internal management reporting are also recorded here when applicable.

Reporting by segment 2014

Interest and interest-related income/expenses Share of profit or loss of equity-accounted investments Loan loss allowances Net interest income after loan loss allowances Net fee and commission income Net trading income Net income from designated financial instruments Net income from investments General administrative expenses Other net operating income Pre-tax profit for the year

Corporates & Retail

Financial Markets

Investments

Corporate Center

Total

in EUR '000

188,608

146,782

84,982

3,804

424,176

0 –145,772 42,836 53,297 1,785 –5,361 –1,468 –83,312 –16,085

0 0 146,782 20,394 14,101 –90,417 36,592 –38,656 –9,184

4,074 –34,972 54,084 46,320 –340 –1,351 13,834 –510,299 416,655

0 0 3,804 6,037 0 0 0 –58,716 –610

4,074 –180,744 247,506 126,048 15,546 –97,129 48,958 –690,983 390,776

–8,308

79,612

18,903

–49,485

40,722

THE GROUP IFRS consolidated financial statements | Disclosures | Segment reporting

Reporting by segment 2013

Corporates & Retail

Financial Markets

Investments

Corporate Center

Total

in EUR '000

204,587

134,327

75,153

7,459

421,526

0 –147,568 57,019 50,616 2,325 –3,615 –1,122 –83,081 –8,933

0 0 134,327 23,788 6,932 –49,440 –16,692 –35,358 –3,831

140,270 1,628 217,051 46,892 1,928 –5,981 –65,146 –439,659 336,998

0 0 7,459 4,063 0 0 0 –45,996 4,189

140,270 –145,940 415,856 125,359 11,185 –59,036 –82,960 –604,094 328,423

13,209

59,726

92,083

–30,285

134,733

The negative contribution to the pre-tax profit for the year by the Corporates & Retail segment in the 2014 financial year is attributable inter alia to an increase in the portfolio value adjustment as well as to the considerably higher stability tax for banks. The deterioration in the Corporate Center segment in the 2014 financial year as compared with the 2013 financial year is inter alia attributable to the increase in audit and consultation costs as well as internal staff costs associated with the AQR and the stress test by the European banking authorities.

Further details on the “Investments” segment in the 2014 financial year Sub-group Hypo Salzburg

IMPULSLEASING Group

VIVATIS/efko

OÖ Wohnbau

in EUR '000

43,750 –3,426 –19,152 21,172 14,768 –1,100 –143 –833 –44,391 –2,390

41,858 0 –9,459 32,399 –753 581 0 –3,549 –62,823 48,597

2,102 0 0 2,102 –281 0 –666 171 –251,999 261,528

–4,251 0 0 –4,251 –23 0 0 8 –36,592 45,617

Pre-tax profit for the year

–12,917

14,452

10,855

4,759

The results of the sub-groups or sub-areas are presented in the higher-level companies without allocation of any imputed or actual refinancing costs or of any general administrative expenses. The negative earnings of Hypo Salzburg are in connection with the developments based on the debt moratorium for HETA ASSET RESOLUTION AG (see also the descriptions related to provisions on this).

Annual Report 2014

Income statement disclosures 1. Net interest income

Interest income From financial instruments in the category “loans and receivables” From financial instruments in the category “available for sale” From financial instruments in the category “held-to-maturity” Subtotal From designated and derivative financial instruments From lease financing Total interest income

2014

2013

in EUR '000

482,010 79,898 14,546 576,454 209,935 88,420 874,809

523,248 69,973 19,519 612,740 243,133 56,771 912,644

Current income From shares and other variable-yield securities From investments in affiliated companies From other investments Current income

18,373 14,643 12,994 46,010

23,210 20,929 11,912 56,051

Other interest-related income

12,684

7,453

933,503

976,148

–255,277 –249,902 –505,179

–278,245 –275,185 –553,430

–4,148

–1,192

–509,327

–554,622

4,074

140,270

428,250

561,796

Interest and interest-related income Interest expenses For financial liabilities that are stated at amortised cost For designated and derivative financial instruments Total interest expenses Other interest-related expenses Interest and interest-related expenses Share of profit or loss of equity-accounted investments Net interest income

The interest income includes interest income from value adjusted loans and advances to customers and credit institutions amounting to EUR 21,997 thousand. Interest income from essential value adjusted loans and advances to customers and credit institutions are recognised using the interest rate which was used in determining the impairment loss for discounting the future cash flow.

2. Loan loss allowances 2014

2013

in EUR '000

–346,392 156,649

–393,664 268,382

Direct impairment losses

–3,282

–31,423

Amounts received against loans and advances written off

12,281

10,765

–180,744

–145,940

Allocation to loan loss allowances Reversal of risk provisions

Total

THE GROUP IFRS consolidated financial statements | Disclosures | Income statement disclosures

3. Net fee and commission income

From payment transactions From funding transactions From securities business From foreign exchange, currency and precious metals transactions From other service business Total

2014

2013

in EUR '000

27,157 27,119 53,389 3,840 14,543

25,901 28,351 49,268 3,898 17,941

126,048

125,359

4. Net trading income 2014

2013

in EUR '000

Interest-rate related business Currency related business Stock and index related business Other business

11,585 2,523 0 1,438

5,158 4,929 0 1,098

Total

15,546

11,185

5. Net income from designated financial instruments

Net gain or loss on designated financial instruments and derivatives

2014

2013

in EUR '000

–97,129

–59,036

6. Net income from investments

Securities in the category “held-to-maturity” Gain or loss on remeasurement Gain or loss on disposal Securities in the category “loans and receivables” Gain or loss on remeasurement Gain or loss on disposal Securities in the category “available for sale” Gain or loss on remeasurement Gain or loss on disposal Shares in companies in the category “available for sale” Gain or loss on remeasurement Gain or loss on disposal Gains and losses arising from hedge accounting Gains and losses arising on hedging transactions Valuation from underlying transactions Gain or loss from initial consolidation and deconsolidation Total

2014

2013

in EUR '000

0 0

0 –209

–2,172 2,422

–2,660 811

–10,309

–37,970

31,188

2,717

–23,272 2,129

–40,051 941

208,364 –203,193 43,801

–74,115 70,529 –2,953

48,958

–82,960

Annual Report 2014

The gain or loss on remeasurement of assets from securities in the category “available for sale” includes impairments of EUR –10,309 thousand (previous year: EUR –37,970 thousand) and reversals of impairment losses amounting to EUR 0 thousand (previous year: EUR 0 thousand). The remaining gain or loss on the remeasurement of assets reflect the impairment losses recognised in profit or loss. The carrying amount of equity instruments measured at acquisition cost which were sold during the reporting period amounted to EUR 57,414 thousand (previous year: EUR 10,657 thousand). The gain or loss on disposal resulting from this is EUR 2,401 thousand (previous year: EUR 3,606 thousand). Gain or loss from initial consolidation and deconsolidation comes to a total of EUR 43,801 thousand. The greatest effects of absorption or disposal were in the following companies: First-time consolidations: OÖ Wohnbau gemeinnützige Wohnbau und Beteiligung GmbH EUR 34,179 thousand OÖ Wohnbau Gesellschaft für den Wohnungsbau gemeinnützige GmbH EUR 10,446 thousand

7. General administrative expenses

Personnel expenses Wages and salaries Compulsory social security contributions Voluntary social security contributions Expenses for severance payments and pensions Administrative expenses Rent and leasing expenses Expenses for office space (operation, maintenance) IT and communications Legal and consulting expenses Advertising and representation expenses Other administrative expenses Depreciation and impairment losses on property and equipment and on investment property, amortisation and impairment losses on intangible assets Property and equipment Investment property Goodwill Other intangible assets Total

2014

2013

in EUR '000

–269,961 –68,439 –4,909 –15,573

–247,175 –63,239 –4,352 –15,212

–20,841 –69,168 –27,207 –28,589 –29,081 –78,469

–23,484 –50,517 –23,634 –20,820 –26,731 –76,385

–53,684 –16,231 –2,500 –6,331

–42,616 –3,330 0 –6,599

–690,983

–604,094

Breakdown of expenses for defined contribution plans for severance and pension payments: 2014

2013

in EUR '000

Pension fund Employee pension fund

–3,759 –1,865

–3,394 –1,685

Total

–5,624

–5,079

In the 2014 financial year the “general administrative expenses” included about EUR 252.0 million (previous year: EUR 238.5 million) – from companies in the foodstuff sector (“VIVATIS Holding AG” Group and “efko Frischfrucht und Delikatessen GmbH” Group). The companies are in the food and beverage sector and, as their business is unrelated to banking, they are mainly reported in the income statement under “other operating income” and “general administrative expenses”. The “General administrative expenses” from the OÖ Wohnbau companies were around EUR 36.6 million in the 2014 financial year (previous year: EUR 0.0 million). The increases predominantly result from the inclusion of additional entities in the consolidated companies.

THE GROUP IFRS consolidated financial statements | Disclosures | Income statement disclosures

8. Other net operating income

Other operating income Income from non-banking activities

Miscellaneous operating income

2014

2013

in EUR '000

969,124

885,960

95,905

82,816

–506,685

–493,550

Other operating expenses

Expenses from non-banking activities

Other tax and fees

Miscellaneous operating expenses Total

–39,719

–23,829

–127,849

–122,974

390,776

328,423

From the “Revenue from non-banking activities” by far the largest portion – i.e. EUR 713.2 million (previous year: EUR 716.8 million) – is from companies in the foodstuff sector (“VIVATIS Holding AG” Group and “efko Frischfrucht und Delikatessen GmbH” Group). The related cost of sales of these companies amounts to EUR 457.1 million (previous year: EUR 475.5 million) and is reported under “expenses from non-banking activities”. In total, the “other operating income” of the companies in the “VIVATIS Holding AG” Group and the “efko Frischfrucht und Delikatessen GmbH” Group amounts to about EUR 261.5 million (previous year: EUR 248.6 million). The companies are in the food and beverage sector and, as their business is unrelated to banking, they are mainly reported in the income statement under “other operating income” and “general administrative expenses”. The Upper Austrian residential building companies (OÖ Wohnbau) contribute about EUR 45.6 million to the “Other operating income” (previous year: EUR 0.0 million).

9. Taxes on income and earnings Taxes on income and earnings by cause:

Current taxes on income and earnings Actual ongoing tax expenditure for the current year

Tax adjustments from the previous year

Consideration of tax losses from earlier periods

Deferred taxes

Formation/reversal of temporary differences

Effects of tax rate changes

Change in the usability of losses carried forward

Total

2014

2013

in EUR '000

–10,395 5,286

–389 14,399

–1,376

418

–14,305

–15,206

6,042

29,135

19,872

9,817

–24

–13,806

19,318

–4,353

28,746

Taxes on income and earnings by origin:

Current taxes on income and earnings of which in Austria

of which foreign

Deferred taxes Total

2014

2013

in EUR '000

–10,395 –7,839

–389 1,653

–2,556

–2,042

6,042

29,135

–4,353

28,746

Annual Report 2014

The following calculation of translation reserves shows the relationship between the profit for the year and the actual tax burden: 2014

2013

in EUR '000

Pre-tax profit for the year Income tax expense expected for the financial year at the statutory tax rate (25%) Tax increases/reductions due to tax-exempt earnings of investments Tax reductions due to at-equity profit from companies reported under the equity method Tax reductions due to tax-exempt other earnings Tax increase due to non-deductible expenses Tax credit/burden from previous years Effect of deviating foreign tax rates Change in the usability of losses carried forward Other

40,722 –10,181 26,336

134,733 –33,683 28,656

–16,117 1,943 –4,224 –1,376 197 –13,806 12,875

14,915 1,195 –5,777 418 688 19,319 3,015

Actual tax burden

–4,353

28,746

2014

2013*)

in EUR '000

5,536 26,762

13,162 37,887

32,298

51,049

Changes in tax assets

Regular tax assets Deferred tax assets Total

*) The previous year has been re-stated in accordance with IAS 8. The details can be found in the section on accounting policies.

Changes in tax liabilities 2014

2013*)

in EUR '000

Current tax liabilities Deferred tax liabilities

5,948 61,690

7,080 23,642

Total

67,638

30,722

*) The previous year has been re-stated in accordance with IAS 8. The details can be found in the section on accounting policies.

THE GROUP IFRS consolidated financial statements | Disclosures | Income statement disclosures

Temporary differences between the valuation rates in the IFRS consolidated financial statements and the tax valuation rates have the following effect on the deferred taxes recorded on the balance sheet:

Financial assets in the category “available for sale” Financial assets in the category “held-to-maturity” Securities in the category “loans and receivables”

Deferred tax assets 2014

Deferred tax liabilities 2014

Recognised in profit or loss 2014

in EUR '000

143,576 10,970

–6,293 –425

20,477 930 24

8,338

1,045

Designated financial instruments and derivatives

242,205

222,718

34,523

Leasing transactions

10,509

405,282

405,385

Social provisions

22,067

824

Loan loss allowances

29,130

3,900

Other provisions Tax losses carried forward, not yet utilised Other temporary differences Netting out of deferred taxes Total

Financial assets in the category “available for sale” Financial assets in the category “held-to-maturity” Securities in the category “loans and receivables”

1,047

243

–2,628

42,490

–30,914

15,569 –752,459

22,906 –752,459

–4,499 0

26,762

61,690

6,042

Deferred tax assets 2013*)

Deferred tax liabilities 2013*)

Recognised in profit or loss 2013

in EUR '000

13,565 1,544

69,764 10,913

7,792 4,096

9,383

1,781

Designated financial instruments and derivatives

106,029

121,065

12,344

Leasing transactions

1,130

366,627

377,239

Social provisions

15,897

440

299

Loan loss allowances

25,261

–5,875

Other provisions Tax losses carried forward, not yet utilised Other temporary differences Netting out of deferred taxes Total

3,432

162

73,404

–1,577

3,725 –571,634

6,442 –571,634

8,983 0

37,887

23,642

29,135

*) The previous year has been re-stated in accordance with IAS 8. The details can be found in the section on accounting policies.

The consolidated financial statements include capitalised gains from tax losses carried forward which have not yet been utilised amounting to EUR 16,564 thousand (previous year: EUR 24,186 thousand). The tax losses carried forward are overwhelmingly capable of being carried forward without limitation in time. For tax losses carried forward in the amount of EUR 121,578 thousand (previous year: EUR 90,729 thousand), no deferred tax assets were recognised, as a tax benefit does not currently appear to be feasible within a reasonable period of time. The deferred tax assets do not include amounts for open sevenths from tax current value depreciations on investments in accordance with Section 12 sub-section 3 No. 2 of the Austrian Corporation Tax Act. No deferred tax liabilities were assessed on temporary differences from shares in subsidiaries amounting to EUR 113,252 thousand (previous year: EUR 134,799 thousand) and associates amounting to EUR 887,878 thousand (previous year: EUR 1,103,228 thousand) held by Group companies, since the temporary differences are not likely to be reversed in the foreseeable future. Dividends paid by Raiffeisenlandesbank Oberösterreich to owners did not result in any income tax consequences.

Annual Report 2014

Disclosures on the balance sheet 10. Financial instruments disclosure Categories of financial assets and financial liabilities as at 31 December 2014:

ASSETS

Cash and cash equivalents Loans and advances to banks Loans and advances to customers Trading assets Financial assets Carrying amount total 31 Dec. 2014

Financial instruments held for trading

Designated financial instruments

Financial assets available for sale (AfS)

Financial assets “held-tomaturity”

Loans and receivables

in EUR '000

Total carrying Total fair amount as at value 31 Dec. 2014 31 Dec. 2014 in EUR ‘000

in EUR '000

89,086

14,730

6,764,408

6,779,138

6,773,186

0 2,951,476 0

853,060 0 748,579

0 0 4,223,902

0 0 489,115

18,313,692 0 712,008

19,166,752 2,951,476 6,173,604

19,533,615 2,951,476 6,229,495

2,951,476

1,616,369

4,223,902

489,115

25,879,194

35,160,056

35,576,858

The fair value carrying amounts in the category “Financial assets available for sale (AfS)” contain equity instruments to the amount of EUR 269,106 thousand that are valued at the cost of purchase because their fair value cannot be reliably determined. The amount of the change in fair value of designated loans and receivables with a reduction in the portfolio that was due to changes in ratings in 2014 was EUR 6,312 thousand (aggregate amount of EUR 20,490 thousand with a reduction in the portfolio). This figure was obtained by applying the changes in credit spread due to rating changes. The credit exposure for these designated loans and receivables as at 31 December 2014 was EUR 867,790 thousand.

EQUITY AND LIABILITIES

Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates Trading liabilities Subordinated capital Carrying amount total 31 Dec. 2014

Financial instruments held for trading

Designated financial instruments

Financial liabilities stated at amortised cost

Carrying amount total 31 Dec. 2014

Fair value Total 31 Dec. 2014

in EUR '000

in EUR ‘000

1,433,814

9,871,111

11,304,925

11,402,041

1,005,629

9,510,404

10,516,033

10,587,196

0 2,202,349 0

4,578,404 0 995,082

4,063,999 0 541,409

8,642,403 2,202,349 1,536,491

8,674,115 2,202,349 1,552,026

2,202,349

8,012,929

23,986,923

34,202,201

34,417,727

In the 2014 financial year Raiffeisenlandesbank Oberösterreich was given an Baa1 rating (previous year: A2) by Moody’s. Of the fair value changes in designated financial liabilities in the 2014 financial year, a EUR 56,129 thousand increase in the portfolio (aggregate amount of EUR 98,969 thousand reduction in the portfolio) is attributable to changes in credit risk. In order to calculate the fair value change cause by creditworthiness, the fair value at the balance sheet date is compared with a fair value which is determined using historic premiums on the yield curves caused by credit risk on the one hand at the start of the transaction and at the balance sheet date from the previous year on the other. The business data and yield curves from the balance sheet date are used. The carrying amount of these designated loans and receivables as at 31 December 2014 was EUR 8,012,929 thousand. The carrying amount of designated financial liabilities as at 31 December 2014 was EUR 535,800 thousand higher than the repayment sum contractually agreed on.

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

Categories of financial assets and financial liabilities as at 31 December 2013:

ASSETS

Cash and cash equivalents Loans and advances to banks Loans and advances to customers Trading assets Financial assets Carrying amount total 31 Dec. 2013

Financial instruments held for trading

Designated financial instruments

Financial assets available for sale (AfS)

Financial assets “held-tomaturity”

Loans and receivables

in EUR '000

Total carrying Total fair amount as at value 31 Dec. 2013 31 Dec. 2013 in EUR ‘000

in EUR '000

91,019

118,757

6,244,801

6,363,558

6,333,489

0 1,995,634 0

811,994 0 872,868

0 0 3,732,616

0 0 614,068

18,881,626 0 864,530

19,693,620 1,995,634 6,084,082

19,711,334 1,995,634 6,126,210

1,995,634

1,803,619

3,732,616

614,068

26,081,976

34,227,913

34,257,686

The fair value carrying amounts in the category “Financial assets available for sale (AfS)” contain equity instruments to the amount of EUR 622,744 thousand that are valued at the cost of purchase because their fair value cannot be reliably determined. The amount of the change in fair value of designated loans and receivables with a reduction in the portfolio that was due to changes in ratings in 2013 was EUR 5,412 thousand (aggregate amount of EUR 10,273 thousand with a reduction in the portfolio). This figure was obtained by applying the changes in credit spread due to rating changes. The credit exposure for these designated loans and receivables as at 31 December 2013 was EUR 930,751 thousand.

EQUITY AND LIABILITIES

Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates Trading liabilities Subordinated capital Carrying amount total 31 Dec. 2013

Financial instruments held for trading

Designated financial instruments

Financial liabilities stated at amortised cost

Carrying amount total 31 Dec. 2013

Fair value Total 31 Dec. 2014

in EUR '000

in EUR ‘000

1,562,998

8,692,880

10,255,878

10,226,334

1,271,155

9,903,305

11,174,460

11,203,160

0 1,563,625 0

4,580,359 0 924,128

4,115,343 0 607,551

8,695,702 1,563,625 1,531,679

8,718,753 1,563,625 1,546,506

1,563,625

8,338,640

23,319,079

33,221,344

33,258,378

In the 2013 financial year Raiffeisenlandesbank Oberösterreich was given an A2 rating (previous year: A1) by Moody’s. Of the fair value changes in designated financial liabilities in the 2013 financial year, a EUR 14,910 thousand increase in the portfolio is attributable to changes in credit risk. The carrying amount of these designated loans and receivables as at 31 December 2013 was EUR 8,338,640 thousand. The carrying amount of designated financial liabilities as at 31 December 2013 was EUR 350,113 thousand higher than the repayment sum contractually agreed on.

Annual Report 2014

Breakdown of the fair value of financial instruments in 2014:

Financial instruments held for trading Designated financial instruments Financial assets available for sale (AfS) Total financial assets measured at fair value Financial instruments held for trading Designated financial instruments Total financial liabilities measured at fair value

Financial instruments measured at fair value 31 Dec. 2014

Thereof market prices listed in active markets (Level I)

in EUR '000

2,951,476 1,616,369 3,954,796

50,635 456,455 2,954,429

2,900,841 113,167 501,547

0 1,046,747 498,820

8,522,641 2,202,349 8,012,929

3,461,519 0 0

3,515,555 2,202,349 8,012,929

1,545,567 0 0

10,215,278

Thereof measure- Thereof measurement methods ment methods based on not based on Market data market data (Level II) (Level III) in EUR '000

Reclassifications between Level I and Level II 2014:

Reclassifications from Level I to Level II

Reclassifications from Level II to Level I

in EUR '000

23 0 3,432 3,455 0 6,352 6,352

0 0 3,116 3,116 0 0 0

The reclassifications from Level I to Level II were the result of the elimination of prices for identical assets listed on active exchanges. The reclassifications from Level II to Level I were the result of the appearance of prices listed on active exchanges that previously did not exist. Reclassifications between Level I and Level II take place at Raiffeisenlandesbank Oberösterreich as soon as there is a change in the input factors that are relevant for the classification in the measurement hierarchy.

The calculation of translation reserves in 2014 of financial instruments measured at fair value in Level III: Available for sale financial assets available for sale (AfS) in EUR '000

As at 1 Jan. Purchases Divestments Change in the consolidated companies Effective results Effect-neutral results Revalued at fair value Breakdown in Level III Breakdown from Level III As at 31 Dec.

119,431 105 –3,700 0 –19,623 83,613 275,509 43,485 0 498,820

Designated financial assets in EUR '000

1,134,699 97,404 –228,109 0 42,753 0 0 0 0 1,046,747

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

The reclassification to Level III in the 2014 financial year essentially results from the valuation of an investment which was previously valued based on a previous transaction, and has been revalued in accordance with the earning power method effective 31 Dec. 2014. The amount of income-statement related gains and losses recorded from recurring measurements of the fair value in Level III of the assets and liabilities found in the portfolio on the reporting date amounts to EUR 30,078 thousand. Effective results from financial assets are essentially recognised in the income statement in the following items: Net income from designated financial instruments Net income from investments Effect-neutral results are recognised in the equity item “Aggregate net income”. This does not include impairments, disposal results and currency valuations from monetary financial instruments (debt instruments) which are recognised in Net income from investments.

Sensitivity analysis 2014 Carrying amount corresponds with fair value (Level III)

Fair-value gain –100 basis points

in EUR '000

in %

Loans and advances Securities

867,790 383,984

2.91 10.20

Equity Investments

167,930

25.71

Carrying amount corresponds with fair value (Level III)

Fair-value loss +100 basis points

in EUR '000

in %

Loans and advances Securities

867,790 383,984

5.26 8.22

Equity Investments

167,930

16.73

For the sensitivity analysis, credit spreads are modified in each case by 100 basis points with all fixed-interest securities and loans and advances valued at fair value. Fair values were determined again based on these shifts in credit spreads, which were used either as an addition or a deduction in the valuation. The difference with the original fair value determined is shown in the above table in % values. In the case of fixed-interest securities and investments the discount rate underlying the company valuation (e.g. earning power method) was also modified by 100 basis points. No sensitivity analysis was carried out for insignificant investments or profit participation rights (based on the earning power method) or for investments assessed at NAV (net asset value). The carrying amount or fair value of these assets (amounting to EUR 125,863 thousand) is not included in the above table.

Annual Report 2014

Breakdown of the fair value of financial instruments not measured at fair value in 2014:

Financial investments held-to-maturity Loans and receivables Total financial assets not measured at fair value Financial liabilities stated at amortised cost Total financial liabilities not measured at fair value

Thereof Thereof meas- Thereof measmarket prices urement meth- urement methlisted in ods based on ods not based active markets Market data on market data (Level I) (Level II) (Level III)

Carrying amounts as at 31 Dec. 2014

Fair value 31 Dec. 2014

in EUR '000

489,115 25,790,108

513,796 26,182,229

466,400 0

47,396 690,538

0 25,491,691

26,279,223 23,986,923

26,696,025 24,202,449

466,400 0

737,934 24,202,449

25,491,691 0

23,986,923

24,202,449

in EUR '000

Breakdown of the fair value of financial instruments in 2013:

Financial instruments measured at fair value 31 Dec. 2013

Thereof market prices listed in active markets (Level I)

Thereof measurement methods based on Market data (Level II)

Thereof measurement methods not based on market data (Level III)

in EUR '000

1,995,634 1,803,619 3,109,872

49,051 448,491 2,430,416

1,946,583 220,429 560,025

0 1,134,699 119,431

6,909,125 1,563,625 8,338,640

2,927,958 0 7,070

2,727,037 1,563,625 8,331,570

1,254,130 0 0

9,902,265

7,070

9,895,195

Reclassifications between Level I and Level II 2013:

Reclassifications from Level I to Level II

Reclassifications from Level II to Level I

in EUR '000

2,890 40,010 123,917 166,817 0 0 0

0 0 22,621 22,621 0 0 0

Reclassifications between Level I and Level II take place at Raiffeisenlandesbank Oberรถsterreich as soon as there is a change in the input factors that are relevant for the classification in the measurement hierarchy.

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

The calculation of translation reserves in 2013 of financial instruments measured at fair value in Level III: Available for sale financial assets available for sale (AfS)

Designated financial assets

in EUR '000

As at 1 Jan. Purchases Divestments Change in the consolidated companies Effective results Effect-neutral results Revalued at fair value Breakdown in Level III Breakdown from Level III As at 31 Dec.

in EUR '000

12,462 2 –2 0 –10,840 41,775 76,034 0 0 119,431

The amount of income-statement related gains and losses recorded from recurring measurements of the fair value in Level III of the assets and liabilities found in the portfolio on the reporting date amounts to EUR –73,221 thousand. Participation rights in the amount of EUR 76.0 million that up until now were carried at cost were, due to the availability

1,429,063 31,039 –184,009 –64,112 –77,282 0 0 0 0 1,134,699

of reliable reviews in 2013, upgraded from the category “Available-for-sale financial assets (AFS)” to the determined fair value (Level III) of EUR 118.1 million. If the discount rate of underlying the respective company valuations were changed by 1% or +1% this would lead to an increase of 2.57% or a reduction of 2.28% in the fair value of the respective participation rights.

Breakdown of the fair value of financial instruments not measured at fair value in 2013:

Thereof Thereof meas- Thereof measmarket prices urement meth- urement methlisted in ods based on ods not based active markets Market data on market data (Level I) (Level II) (Level III)

Carrying amounts as at 31 Dec. 2013

Fair value 31 Dec. 2013

in EUR '000

614,068 25,990,957

638,479 25,996,319

579,562 0

58,917 807,102

0 25,189,217

26,605,025 23,319,079

26,634,798 23,356,114

579,562 0

866,019 23,356,114

25,189,217 0

23,319,079

23,356,114

in EUR '000

In light of IFRS 13, there was a reassignment to Level III in the breakdown of the holdings accounted for at fair value, which are valued based on internal credit ratings. Redesignations of financial assets In financial year 2008, securities in the category “financial assets available for sale (AfS)” in the amount of EUR 125,421 thousand were redesignated to the category “loans and advances”. The carrying amount of the redesignated securities as at 31 December 2014 was EUR 10,032 thousand (previous year: EUR 9,975 thousand; their fair value as at 31 December 2014 was EUR 10,625 thousand (previous year: EUR 10,521 thousand). In financial year 2014, interest income on the redesignated securities to the amount of EUR 516 thousand (previous year: EUR 780 thousand) and impairments of EUR 0 thousand (previous year: EUR 0 thousand) were reported in the income statement. If no redesignation had been carried out, fair value changes in the amount of EUR 104 thousand (previous year: EUR –196 thousand) would have been recognised in the AfS reserve with no effect on the income statement in financial year 2014.

Annual Report 2014

The following derivative financial instruments existed on the 2014 balance sheet date: Nominal amount Term to maturity

over 1 year up to 1 year up to 5 years in EUR '000

in EUR '000

Fair value

over 5 years

Total

Positive

Negative

in EUR '000

Interest rate-dependent futures OTC products

Forward rate agreements

Interest rate swaps

Interest rate options – purchases

Interest rate options – sales

Other interest rate swaps

3,096,273

13,398,721

16,824,994

33,319,988

2,824,489

2,134,299

234,028

1,127,403

522,119

1,883,550

23,676

1,029

47,768

654,288

1,048,619

1,750,675

2,879

37,594

Exchange-traded products

Interest rate futures

Interest rate options – purchases

Interest rate options – sales

Total

91,521

3,469,590

15,180,412

18,395,732

37,045,734

2,851,044

2,172,922

339,613

57,118

396,731

13,982

4,153

1,434,190

132,754

7,006

1,573,950

22,534

23,506

Foreign exchange futures OTC products

Spot exchange and forward transactions Currency and interest rate swaps with several currencies Foreign exchange options – purchases

40,741

3,555

44,296

1,587

Foreign exchange options – sales

40,741

3,555

44,296

1,590

Other foreign exchange contracts

Exchange-traded products

Foreign exchange futures

Foreign exchange options

1,855,285

196,982

7,006

2,059,273

38,103

29,249

Total Other futures OTC products

Structured shares/index products

Shares options – purchases

20,734

3,578

0 172

Shares options – sales

1,000

Credit derivatives

10,000

Precious metal transactions

Commodity options – purchases

Commodity options – sales

Other business

Exchange-traded products

Shares futures

Shares options

Other futures

Other options

31,734

3,578

178

Total OTC products Total exchange-traded products

5,233,354 91,521

15,409,128 0

18,402,738 0

39,045,220 91,521

2,892,725 0

2,202,349 0

Total

5,324,875

15,409,128

18,402,738

39,136,741

2,892,725

2,202,349

Total

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

The following derivative financial instruments existed on the 2013 balance sheet date: Nominal amount Term to maturity

over 1 year up to 1 year up to 5 years in EUR '000

in EUR '000

Fair value

over 5 years

Total

Positive

Negative

in EUR '000

Interest rate-dependent futures OTC products

Forward rate agreements

Interest rate swaps

3,789,543

12,419,424

18,272,631

34,481,598

1,832,791

1,493,677

Interest rate options – purchases

53,539

1,291,843

480,960

1,826,342

29,210

1,124

Interest rate options – sales

60,475

657,746

1,566,062

2,284,283

1,280

35,360

Other interest rate swaps

Exchange-traded products

Interest rate futures

Interest rate options – purchases

Interest rate options – sales

Total

77,749

3,981,306

14,369,013

20,319,653

38,669,972

1,863,281

1,530,161

568,207

70,438

638,645

6,457

8,042

1,981,322

118,368

2,099,695

31,023

21,345

Foreign exchange futures OTC products

Spot exchange and forward transactions Currency and interest rate swaps with several currencies Foreign exchange options – purchases

95,853

23,437

119,290

3,826

Foreign exchange options – sales

95,853

23,437

119,290

3,840

Other foreign exchange contracts

Exchange-traded products

Foreign exchange futures

Foreign exchange options

2,741,235

235,680

2,976,920

41,306

33,227

Total Other futures OTC products

Structured shares/index products

Shares options – purchases

Shares options – sales

Credit derivatives

36,710

10,734

5,000

52,444

19,990

1,000

136

10,000

20,000

101

Precious metal transactions

Commodity options – purchases

5,000

637

Commodity options – sales

Other business

Exchange-traded products

Shares futures

Shares options

Other futures

Other options

46,710

26,734

5,000

78,444

20,663

237

Total OTC products Total exchange-traded products

6,691,502 77,749

14,631,427 0

20,324,658 0

41,647,587 77,749

1,925,250 0

1,563,625 0

Total

6,769,251

14,631,427

20,324,658

41,725,336

1,925,250

1,563,625

Total

Annual Report 2014

Possible effects of netting agreements The following tables contain information on the offsetting effects on the consolidated balance sheet and the financial implications of a set-off in the case of derivative instruments which are subject to a framework netting agreement or similar agreement. Assets Unrecognised amounts Financial assets Offsetting (gross) = recognised effect of framework financial assets (net) agreements in EUR '000

in EUR '000

Cash collateral

Net amount

in EUR '000

Loans and advances to banks Positive market value from derivative financial instruments

6,779,138

–693,512

6,085,626

2,892,725

–1,589,504

–669,293

633,928

Total 31 Dec. 2014

9,671,863

–2,283,016

–669,293

6,719,554

Unrecognised amounts Financial assets Offsetting (gross) = recognised effect of framework financial assets (net) agreements in EUR '000

in EUR '000

Cash collateral

Net amount

in EUR '000

Loans and advances to banks Positive market value from derivative financial instruments

6,363,558

–761,515

5,602,043

1,925,250

–1,162,301

–419,563

343,386

Total 31 Dec. 2013

8,288,808

–1,923,816

–419,563

5,945,429

Liabilities Unrecognised amounts Financial liabilities Offsetting (gross) = recognised effect of framework financial liabilities (net) agreements in EUR '000

Cash collateral

Net amount

in EUR '000

Amounts owed to banks Negative market values from derivative financial instruments

11,304,925

–693,512

10,611,413

2,202,349

–1,589,504

–510,519

102,326

Total 31 Dec. 2014

13,507,274

–2,283,016

–510,519

10,713,739

Unrecognised amounts Financial liabilities Offsetting (gross) = recognised effect of framework financial liabilities (net) agreements in EUR '000

Cash collateral

Net amount

in EUR '000

Amounts owed to banks Negative market values from derivative financial instruments

10,255,878

–761,515

9,494,363

1,563,625

–1,162,301

–244,753

156,571

Total 31 Dec. 2013

11,819,503

–1,923,816

–244,753

9,650,934

The column “Offsetting effect of framework agreements” shows the amounts which are subject to a framework netting agreement, but that are not set off due to fulfilment of the conditions. The “Cash collateral” column contains the amounts of cash collateral received or given.

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

11. Cash and cash equivalents 31 Dec. 2014

31 Dec. 2013

in EUR '000

Cash in hand Balances at central banks

34,586 54,500

38,167 52,852

Total

89,086

91,019

12. Loans and advances to banks 31 Dec. 2014

31 Dec. 2013

in EUR '000

Loans and advances payable on demand Money market transactions Loans to banks Purchased loans and advances Lease financing Other

3,453,848 1,933,013 970,463 421,814 0 0

3,188,403 1,532,020 1,259,786 383,349 0 0

Total

6,779,138

6,363,558

In Austria Abroad

5,521,128 1,258,010

5,265,499 1,098,059

Total

6,779,138

6,363,558

31 Dec. 2014

31 Dec. 2013

in EUR '000

1,262,205 14,777,387 233,534 436,096 373,194 2,039,374 44,962

1,199,747 15,500,099 305,988 321,554 219,373 2,101,584 45,275

Total

19,166,752

19,693,620

In Austria Abroad

12,525,046 6,641,706

12,701,272 6,992,348

Total

19,166,752

19,693,620

13. Loans and advances to customers

Money-market transactions Loan transactions Mortgage loans Covering loans Purchased loans and advances Lease financing Other

Annual Report 2014

14. Loan loss allowances Loan loss allowances 2014 Change in As at basis of con- Currency 1 Jan. 2014 solidation differences

Allocations

Reversals

Utilised

As at 31 Dec. 2014

in EUR '000

896 0 896 978,194 639,661 338,533

0 0 0 –22,363 0 –22,363

0 0 0 –450 0 –450

29 0 29 248,289 154,647 93,642

12 0 12 66,515 35,840 30,675

0 0 0 207,228 117,302 89,926

913 0 913 929,927 641,166 288,761

Revaluations in the portfolio Subtotal Provision for credit risks Risks for off-balance-sheet transactions

80,664 1,059,754 46,845

–183 –22,546 0

–28 –478 0

58,158 306,476 21,019

45,120 111,647 31,809

0 207,228 1,291

93,491 1,024,331 34,764

21,581

18,897

13,193

27,285

Total

1,128,180

–22,546

–478

346,392

156,649

208,519

1,086,380

Allocations

Reversals

Utilised

As at 31 Dec. 2013

Loans and advances to banks of which in Austria of which foreign Loans and advances to customers of which in Austria of which foreign

Loan loss allowances 2013 Change in As at basis of con- Currency 1 Jan. 2013 solidation differences Loans and advances to banks of which in Austria of which foreign Loans and advances to customers of which in Austria of which foreign Revaluations in the portfolio Subtotal Provision for credit risks Risks for off-balance-sheet transactions Total

in EUR '000

2,134 1,111 1,023 939,331 624,579 314,752

0 0 0 58,611 49,924 8,687

0 0 0 –1,339 0 –1,339

0 0 0 307,614 214,834 92,780

127 0 127 210,662 158,741 51,921

1,111 1,111 0 115,361 90,935 24,426

896 0 896 978,194 639,661 338,533

102,111 1,043,576 16,846

2,162 60,773 0

–29 –1,368 0

23,264 330,878 41,205

46,844 257,633 10,749

0 116,472 457

80,664 1,059,754 46,845

21,581

1,060,422

60,773

–1,368

393,664

268,382

116,929

1,128,180

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

15. Trading assets

Bonds and other fixed-income securities Municipal bonds that can be refinanced Other public-sector debt instruments Bonds and debt securities from other issuers Shares and other variable-yield securities Shares Investment fund units/shares Other variable yield securities Positive market value from derivative transactions Interest rate transactions Currency exchange transactions Stock and index related business Other business Total

31 Dec. 2014

31 Dec. 2013

in EUR '000

29,724 1,132 27,895

26,727 1,109 42,548

0 0 0

2,851,044 38,103 3,578 0

1,863,281 41,306 19,990 673

2,951,476

1,995,634

The (positive) fair value of derivative financial instruments that were employed under fair value hedge accounting as hedging transactions amounted to EUR 273,060 thousand as at 31 December 2014 (previous year: EUR 43,148 thousand).

16. Financial assets Designated financial assets

Bonds and other fixed-income securities Municipal bonds that can be refinanced

31 Dec. 2014

31 Dec. 2013

in EUR '000

267,206

235,360

Other public-sector debt instruments Bonds and debt securities from other issuers Shares and other variable-yield securities Shares Investment fund units/shares Other variable yield securities

7,930 436,860

7,944 424,924

5,671 0 30,912

6,201 0 198,439

Total

748,579

872,868

Financial assets in the category â&#x20AC;&#x153;available for saleâ&#x20AC;? (AfS)

Bonds and other fixed-income securities Municipal bonds that can be refinanced Other public-sector debt instruments Bonds and debt securities from other issuers Shares and other variable-yield securities Shares Investment fund units/shares Other variable yield securities Shares in companies Investments in affiliated companies Other investments Total

31 Dec. 2014

31 Dec. 2013

in EUR '000

1,479,148 0 1,858,599

1,256,835 0 1,559,632

26,172 4,246 401,929

20,867 8,194 445,283

162,138 291,670

156,940 284,865

4,223,902

3,732,616

Annual Report 2014

Financial assets in the category “held-to-maturity” (HtM) 31 Dec. 2014

31 Dec. 2013

in EUR '000

Bonds and other fixed-income securities Municipal bonds that can be refinanced Other public-sector debt instruments Bonds and debt securities from other issuers

192,365 0 296,750

217,546 133 396,389

Total

489,115

614,068

Financial assets in the category “loans and receivables” 31 Dec. 2014

31 Dec. 2013

in EUR '000

Bonds and other fixed-income securities Bonds and debt securities from other issuers

712,008

864,530

Total

712,008

864,530

17. Companies accounted for using the equity method 31 Dec. 2014 Banks Non-banks Total

31 Dec. 2013

in EUR '000

1,124,899 675,178

1,384,058 653,213

1,800,077

2,037,271

Banks reported under the equity method as at 31 December 2014 include the share in the RZB Group of about 14.64%. The CEO of Raiffeisenlandesbank Oberösterreich – Heinrich Schaller – is a member of the supervisory boards of both RZB and RBI. RZB has for its part around 60.7% of the shares in the stock exchange-listed Raiffeisen Bank International AG (RBI) as at 31 Dec. 2014. With the capital increase of RBI in the amount of EUR 2.78 billion in February 2014 which involved participation by RZB at a disproportionately low level, this share of 78.5% decreased to approximately 60.7% in 2013 and the free float of RBI increased accordingly to approximately 39.3%. This dilutive effect led to a reduction in the proportional equity in RZB and therefore to a reduction in the equity carrying amount within the Raiffeisenlandesbank Oberösterreich Group. Based on increased costs of loan loss allowances, e.g. through a change in the law related to loans in foreign currencies and consumer loans in Hungary, along with further one-off effects such as value adjustments to goodwill and deferred taxes, RBI and therefore also the RZB Group is posting a net loss for 2014, which is reflected proportionately in the profit and loss for Raiffeisenlandesbank Oberösterreich accounted for under the equity method and - as a result of negative foreign currency developments and the dilutive effects stated above in association with the capital increase - in lower proportionate equity for the RZB Group. RZB was subject to an impairment test as a result of these effects and of further negative developments linked to the political tensions in Russia and Ukraine. A value in use was determined as an achievable value and this was compared with the carrying amount at the RZB Group accounted for under the equity method. This did not result in any need for a value adjustment, although risks and uncertainties persist as a result of the events in these countries which could have potential effects on future valuations (see also the section “Exercising judgement and making estimates” under accounting policies).

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

Among other banks that are accounted for under the equity method is the 39% stake in the Oberösterreichische Landesbank AG Group (Hypo Oberösterreich), which is held by the fully consolidated Hypo Holding GmbH. Raiffeisenlandesbank Oberösterreich sees itself as a long-term strategic partner to the regional bank headquartered in Linz in which the State of Upper Austria owns a majority stake. The investment in Oberösterreichische Landesbank AG was written down in the 2014 financial year by EUR 39,578 thousand (previous year: EUR 0 thousand) to the value in use. The increase in the stability fee effective 2014, tougher equity requirements under supervisory law and effects linked to the debt moratorium for HETA ASSET RESOLUTION AG were the triggers for the impairment. In January 2014 Raiffeisenlandesbank Oberösterreich also decided to sell the shares in ZRB Beteiligungs GmbH to Raiffeisenlandesbank Styria, which is the reason for the deconsolidation of the investment in ZRB Beteiligungs GmbH in January 2014 accounted for under the equity method. As regards non-bank holdings, the participation in Raiffeisenlandesbank Oberösterreich Invest GmbH & Co OG is worth particular mention. According to the financial statements as of 30 September 2014, they also own 13.46% of the shares in the voestalpine AG group and have, as the largest individual shareholder, the opportunity to exercise a considerable influence on the financial and business policies of the most important steel company in Austria. The price per share as at 31 December 2014 amounted to EUR 32.80. In his function as Managing Director of RLB OÖ Invest GmbH & Co OG and Deputy Chairman of the Supervisory Board, the CEO of Raiffeisenlandesbank Oberösterreich, Heinrich Schaller, is an active participant in the strategic decisions made at voestalpine AG. He also has a significant influence on Aluminiumkonzern AMAG Austria Metall AG because Raiffeisenlandesbank Oberösterreich, even after B & C Alpha Holding GmbH’s syndication agreements, still holds 16.5% and remains the second largest single shareholder; he also has a seat on the Supervisory Board. There are also standard banking relations in place with AMAG Austria Metall AG. The price per share as at 31 December 2014 amounted to EUR 27.50. The investment in the company accounted for under the equity method Salzburger Siedlungswerk Gemeinnützige Wohnungswirtschafts-Gesellschaft m.b.H. was also deconsolidated in the 2014 financial year in connection with a capital increase and the share dilution resulting from this. A list of the companies that reported under the equity method can be found under the heading “Basis of consolidation”. The following table is a summary of the financial data on the companies reported under the equity method. The figures are a sum of the information contained in the various financial statements. Operating income was included as earnings for banks. 2014

2013

in EUR '000

Assets Liabilities

165,176,886 153,240,058

166,019,894 151,702,020

Earnings

5,342,956

7,512,772

-201,586

946,543

Result

Annual Report 2014

Companies accounted for using the equity method at 31 Dec. 2014 RaiffeisenOther Oberlandesbank companies österreichische Raiffeisen Oberösterreich accounted AMAG Austria LandesZentralbank Raiffeisenbank Invest GmbH for using the Metall AG banken AG Österreich AG a.s., Prague & Co OG equity method in EUR '000

Assets Liabilities Equity Earnings Result Other net operating income Comprehensive income Equity (own shares) Proportionate net assets Adjustments** Carrying amount in Raiffeisenlandesbank Oberösterreich* Market value (Stock Market value) Dividends received*

in EUR '000

1,092,501 468,611 623,890 822,956 59,212 1,400 60,612

9,400,500 9,045,582 354,918 71,562 5,998 8,869 14,867

144,928,901 135,597,301 9,331,600 3,898,702 –432,293 –1,223,478 –1,655,771

8,149,577 7,324,927 824,650 316,722 74,397 –7,620 66,777

602,219 16,552 585,667 0 71,583 9 71,593

1,003,188 787,086 216,103 233,014 19,516 0 19,516

623,890 102,942 34,536

354,986 172,488 –39,578

5,327,545 779,782 7,416

754,902 188,726 16,067

585,667 437,142 23,893

137,478

132,910

787,198

204,792

461,035

76,664

160,010 3,491

427

35,708

7,885

599,688 17,346

4,095

* at RLB OÖ Invest GmbH & Co OG: values presented include shares in voestalpine AG directly held in the Group ** at RLB OÖ Invest GmbH & Co OG: adjustments from consideration of shares held directly

Companies accounted for using the equity method at 31 Dec. 2013 RaiffeisenOther Oberlandesbank companies österreichische Raiffeisen Oberösterreich accounted AMAG Austria LandesZentralbank Raiffeisenbank Invest GmbH for using the Metall AG banken AG Österreich AG a.s., Prague & Co OG equity method in EUR '000

in EUR '000

Assets Liabilities Equity Earnings Result Other net operating income Comprehensive income

933,470 349,034 584,437 786,445 56,028 5,484 61,512

8,614,412 8,273,483 340,929 79,381 25,670 5,789 31,486

147,324,090 135,535,974 11,788,116 6,022,404 755,533 –570,047 185,486

7,172,849 6,484,178 688,671 363,297 35,223 –59,030 –23,807

551,799 15,703 536,095 0 55,926 –25,581 30,345

Equity (own shares) Proportionate net assets Adjustments** Carrying amount in Raiffeisenlandesbank Oberösterreich*

584,437 96,432 34,536

340,929 165,657 2,633

6,968,306 1,019,937 7,416

688,671 172,168 16,247

536,095 400,141 21,874

130,968

168,291

1,027,353

188,415

422,015

100,229

126,146 3,491

427

35,708

10,000

638,728 16,457

14,936

Market value (Stock Market value) Dividends received*

1,423,275 1,043,647 376,421 261,245 18,163 0 18,163

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

Two of the companies have a balance sheet date that is different from that of Raiffeisenlandesbank Oberösterreich. Both in the application of the equity method and for the list above, Raiffeisenlandesbank Oberösterreich Invest GmbH & Co OG was taken into consideration with values in accordance with its reporting date of 30 September. The data for Österreichische Salinen AG (reporting date 30 June) is based on an interim report as at 31 December. The following table is a summary of the financial data on the associated companies not reported under the equity method. The figures are a sum of the information contained in the various most recent financial statements. Operating income was included as earnings for banks. 2013/2014

2012/2013

in EUR '000

Assets Liabilities

1,456,958 984,689

1,416,997 940,688

Earnings

778,255

711,060

2,433

12,943

Result

18. Intangible assets

Customer base

31 Dec. 2014

31 Dec. 2013

in EUR '000

388

1,069

Brand

20,751

22,896

Goodwill

13,622

16,122

Other intangible assets

13,139

13,534

Total

47,900

53,621

IAS 36.90 requires that those cash-generating units to which a figure for good will is allocated must be subjected to an impairment test every year and whenever there is cause to suspect any impairment. Under the terms of this regulation, Raiffeisenlandesbank Oberösterreich carries out an annual impairment test in the fourth quarter or in January for the goodwill of the “IMPULS-LEASING International” Group, which were distributed across individual countries, as well as for goodwill capitalised in 2012 on the first-time consolidation of the “TKV Oberösterreich GmbH”. Under the impairment test, with due regard to the item being valued, the most suitable method to establish the value in use is employed. The discounted cashflow method is applied as the impairment test for the goodwill-bearing, cash-generating unit of “TKV Oberösterreich GmbH”. For this the assets and liabilities attributed to the cash-generating unit including the attributable goodwill are compared with the company value (value in use). In determining the value in use of the goodwill-bearing cash-generating units of “TKV Oberösterreich GmbH”, a distinction is made between the detailed forecast for the reporting period and a period thereafter when the figure is carried forward. The reporting period for the detailed forecast covers a period of three years and is based on the current medium-term budgeting. The free cashflows were determined indirectly with inclusion of the working capital change. The cashflows beyond the period for the detailed planning are determined with a perpetual annuity. The perpetual annuity was determined based on a sustainable growth rate of 1% to the 2017 financial year. To measure the cash-generating unit “TKV Oberösterreich GmbH”, a WACC of 8.38% (before taxes) is applied in accordance with the Capital Asset Pricing Model (CAPM). A 1% point higher equity cost rate would result in a EUR 4.1 million higher impairment requirement and a 1% point lower equity cost rate would result in no need for impairment. The goodwill of “TKV Oberösterreich GmbH” was written down by around EUR 2.5 million to the value in use in the 2014 financial year on account of a significant decline in sales prices for significant product segments which took place as a result of the general fall in prices on the energy markets.

Annual Report 2014

The earning power method is applied as the impairment test for the goodwill-bearing, cash-generating unit “IMPULS-LEASING International”. For this the value of the company (value in use) determined at amortised cost is compared with the equity plus goodwill allocated to the cash-generating unit. In determining the value in use of the goodwill-bearing units of “IMPULS-LEASING International”, a distinction is made between the detailed forecast for the reporting period and a period thereafter when the figure is carried forward. The reporting period for the detailed forecast covers a period of five years and is based on the current medium-term budgeting, which is then discounted back in the course of the impairment test to the reporting date as at 31 December 2014. In contrast, the continuing value is based on the figures for the fifth planning year of the medium-range planning and is determined using the present value of the perpetual annuity without taking possible growth rates into account. The sum of the present values arising from the detailed forecast and the continuing value give the value in use, which is then compared with the equity plus the goodwill of the goodwill-bearing, cash-generating unit to test for any impairment. The medium-term planning used as the basis for this calculation is based on data from the past taking future market developments into account. Internal expectations from within the group are supplemented by external market expectations. To measure the goodwill-bearing, cash-generating units of the “IMPULS-Leasing International” Group, the following equity cost rates are applied in accordance with the Capital Asset Pricing Model (CAPM) at 15.52% for Romania. The goodwill of “IMPULS-LEASING International” Group still has value.

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

19. Property and equipment and investment property

Land and buildings used for bank operations Other property and equipment Investment property Total

31 Dec. 2014

31 Dec. 2013

in EUR '000

239,733 166,119 759,767

244,584 153,973 284,756

1,165,619

683,313

The fair value of investment property amounts to EUR 791,530 thousand (previous year: EUR 293,904 thousand). There are contractual duties for real estate held as financial investments amounting to EUR 2,100 thousand (previous year: EUR 23,100 thousand). From the Investment property by far the largest portion – i.e. EUR 490.6 million (previous year: EUR 0.0 million) originates from the Upper Austrian residential building companies (OÖ Wohnbau). Access to this investment property is restricted as a result of the Austrian Public House Building Act (WGG).

20. Other assets

Receivables from non-bank activities Prepaid expenses Other assets Total

31 Dec. 2014

31 Dec. 2013

in EUR '000

132,489 20,088 215,651

114,865 19,994 224,639

368,228

359,498

The proportion of “Other assets” attributable to the “OÖ Wohnbau” companies amounts to EUR 36.7 million. Because this was a first-time consolidation as of 1 Jan. 2014 there was no corresponding income in the same period in the previous year.

100

Annual Report 2014

21. Schedule of changes in non-current assets Schedule of changes in non-current assets 2014 Purchase and production costs

As at 1 Jan. 2014 in EUR ‘000

Change in the basis of consolidation in EUR '000

Additions

Disposals

(in EUR '000)

in EUR '000

–157 0

3,372 0

4,102 0

Intangible assets Goodwill Other intangible assets

124,124 32,474 91,650

169

–157

3,372

4,102

Property and equipment

897,151

3,164

–697

85,468

67,171

Land and buildings used for operations

429,619

1,292

–512

5,710

3,447

Other property and equipment

458,061

1,872

–185

76,676

63,724

Property under construction

169 0

Currency differences

9,471

3,082

Investment property

373,331

540,097

–88

49,982

42,631

Investment property

373,331 0

540,097 0

–88 0

49,982 0

42,631 0

1,394,606

543,430

–942

138,822

113,904

Property under construction Total

Schedule of changes in non-current assets 2013 Purchase and production costs

As at 1 Jan. 2013 in EUR ‘000

Change in the basis of consolidation in EUR '000

Additions

Disposals

(in EUR '000)

in EUR '000

–26 0

6,388 0

1,262 0

Intangible assets Goodwill Other intangible assets

116,625 32,474 84,151

2,264

–26

6,388

1,262

Property and equipment

704,781

175,878

–562

55,808

38,631

Land and buildings used for operations

317,123

111,850

5,233

812

Other property and equipment

385,126

64,014

–562

41,291

37,819

Property under construction

2,264 0

Currency differences

2,532

9,284

Investment property

133,735

234,398

13,479

8,270

Investment property Property under construction

133,567 168

234,398 0

0 0

13,479 0

8,270 0

Total

955,141

412,540

–588

75,675

48,163

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

Purchase and production costs

Appreciation and depreciation Unscheduled Scheduled depreciation/ depreciation/ amortisation in amortisation in the financial year the financial year

Reclassifications

As at 31 Dec. 2014

Aggregate depreciation

in EUR '000

in EUR ‘000

in EUR '000

230 0

123,636 32,474

75,488 18,852

2,500 2,500

Carrying amount Change in Basis of consolidation

As at 31 Dec. 2014

in EUR '000

in EUR ‘000

6,331 0

248 0

47,900 13,622

230

91,162

56,636

6,331

248

34,278

9,688

927,603

521,116

53,606

635

405,852

14,561

447,223

208,052

12,227

–5

239,176

5,381

478,081

313,064

41,379

640

164,377

–10,254

2,299

920,691

95,882

16,270

65,042

759,767

0 0

920,691 0

95,882 0

0 0

16,270 0

65,042 0

759,767 0

9,918

1,971,930

692,486

2,539

76,207

65,925

1,213,519

Purchase and production costs

Appreciation and depreciation Unscheduled Scheduled depreciation/ depreciation/ amortisation in amortisation in the financial year the financial year

Reclassifications

As at 31 Dec. 2013

Aggregate depreciation

in EUR '000

in EUR ‘000

in EUR '000

135 0

124,124 32,474

68,992 16,352

0 0

Carrying amount Change in Basis of consolidation

As at 31 Dec. 2013

in EUR '000

in EUR ‘000

6,599 0

1,511 0

53,621 16,122

135

91,650

52,640

6,599

1,511

37,499

–124

897,151

448,096

166

42,449

50,498

398,557

–3,775

429,619

164,959

8,722

25,059

239,601

6,011

458,061

283,137

166

33,727

25,439

149,485

–2,359

9,471

–11

373,331

31,840

3,330

56,735

284,756

157 –168

373,331 0

31,840 0

0 0

3,330 0

56,735 0

284,756 0

1,394,606

548,928

166

52,378

108,744

736,934

101

102

Annual Report 2014

22. Amounts owed to banks 31 Dec. 2014 Liabilities payable on demand Money market transactions Long-term financing

31 Dec. 2013

in EUR '000

3,601,607 3,886,277 3,533,598

3,309,091 3,286,017 3,652,129

Other

283,443

8,641

Total

11,304,925

10,255,878

8,130,969 3,173,956

7,316,790 2,939,088

11,304,925

10,255,878

31 Dec. 2014

31 Dec. 2013

in EUR '000

4,571,852 4,160,350 1,574,341 209,490

4,415,612 4,921,164 1,599,812 237,872

10,516,033

11,174,460

7,455,701 3,060,332

8,185,255 2,989,205

10,516,033

11,174,460

31 Dec. 2014

31 Dec. 2013

In Austria Abroad Total

23. Amounts owed to customers

Demand deposits Term deposits Savings deposits Other Total In Austria Abroad Total

24. Liabilities evidenced by certificates

in EUR '000

Bonds issued Listed mortgage bonds/ public sector certificates Non-listed mortgage bonds/municipal bonds Other securitised liabilities

3,693,441 90,134 258,026 4,600,802

3,856,508 46,220 185,947 4,607,027

Total

8,642,403

8,695,702

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

25. Provisions

Provisions for personal expenses of which severance provisions of which pension provisions of which bonus fund provisions Other provisions Total

31 Dec. 2014

31 Dec. 2013

in EUR '000

173,783 95,968 59,509 18,306 85,569

145,993 78,052 53,341 14,600 82,076

259,352

228,069

Changes in severance provisions 2014

2013

in EUR '000

Present value (DBO) 1 Jan. Change in basis of consolidation Current service cost Past service cost Interest cost Payments Actuarial profit/loss of which adjustments based on past experience of which changes in demographic assumptions of which changes in financial assumptions

78,052 607 3,624 –65 2,468 –4,084 15,366 224 –157 15,299

70,447 315 3,232 0 2,717 –4,367 5,708 –931 54 6,585

Present value (DBO) 31 Dec. (= provisions)

95,968

78,052

Changes in pension provisions 2014

2013

in EUR '000

Present value (DBO) 1 Jan. Change in basis of consolidation Current service cost Interest cost Payments Actuarial profit/loss of which adjustments based on past experience of which changes in financial assumptions

54,821 299 487 1,758 –4,147 7,863 62 7,801

53,658 –101 328 1,963 –3,473 2,446 –768 3,214

Present value (DBO) 31 Dec.

61,081

54,821

Change in plan assets 2014

2013

in EUR '000

Fair value 1 Jan. Interest income Contributions Payments Other profits/losses

1,480 49 71 –98 70

1,338 55 78 0 9

Fair value 31 Dec.

1,572

1,480

103

104

Annual Report 2014

Change in pension provisions

Present Value (DBO) of the pension obligations as at 31 Dec. Fair value of plan assets as at 31 Dec. Net obligations 31 Dec. (= provisions)

2014

2013

in EUR '000

61,081 1,572

54,821 1,480

59,509

53,341

Classification of pension obligations by beneficiaries

Present Value (DBO) of the pension obligations as at 31 Dec. of which obligations to active beneficiary employees of which obligations to retired beneficiary employees with vested claims of which obligations to pensioners

2014

2013

in EUR '000

61,081 11,079 88 49,914

54,821 8,528 34 46,259

Investment of plan assets

Bonds and other fixed-income securities Shares and other variable-yield securities Other Total

2014

2013

in %

48.3 33.2 18.5

52.7 35.3 12.0

100.0

The plan assets are overwhelmingly invested in an active market. The plan assets do not include own financial instruments or other assets used by the Raiffeisenlandesbank Oberรถsterreich Group. For 2015, defined benefit payments (adjusted for the payments made from the plan assets) amounting to EUR 69 thousand are scheduled in the plan.

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

Sensitivities The following sensitivity analysis shows a change in the present value of the liability (DBO) as of 31 Dec. 2014 when one of each of the actuarial parameters is changed that are considered to be essential. The calculations for the sensitivity analysis is analogous to the calculation of provisions pursuant to IAS 19 - Employee Benefits - using the projected unit credit method. Change in the parameter of Severance provisions Interest rate

Change in the parameter of

Effect on DBO in %

Increasing the bases for assessment

+ 1.0 % + 0.5 %

11.7 6.5

–1.0% –0.5%

14.0 –6.0

Fluctuation

+ 0.5 %

–3.5

–0.5%

1.1

Interest rate

+ 1.0 %

–6.8

–1.0%

8.5

Increasing the bases for assessment

+ 0.5 %

0.6

–0.5%

–0.5

–0.5%

–2.9

Pension provisions

Increase in future pensions

+ 0.5 %

3.3

Mortality table/Life expectancy

+ 1 year

3.3

Weighted residual maturity of the financial liabilities 2014 in years

Severance obligations Pension obligations

13 8

Changes in staff anniversary provisions

Present value (DBO) 1 Jan. Change in basis of consolidation Current service cost Past service cost Interest cost Payments Actuarial profit/loss Present value (DBO) 31 Dec. (= provisions)

2014

2013

in EUR '000

14,600

13,078

394

1,299

1,065

–9

471

516

–918 2,460

–885 835

18,306

14,600

105

106

Annual Report 2014

Changes in other provisions Loan loss allowances

As at 1 Jan. Allocations Reversals Utilised Change in basis of consolidation As at 31 Dec.

Other provisions

2014

2013

2014

2013

in EUR '000

68,426 39,916 –45,002 –1,291 0

16,846 62,786 –10,749 –457 0

13,650 10,216 –647 –14,783 15,084

14,817 3,251 –1,471 –2,947 0

62,049

68,426

23,520

13,650

The remaining provisions, with the expected maturities, are composed of approximately 60% (previous year: 75%) shortterm to medium-term provisions. Aside from the provisions for off-balance-sheet transactions as at 31 Dec. 2014, the other provisions in connection with loan loss allowances also include a provision amounting to EUR 15.5 million related to the debt moratorium for HETA ASSET RESOLUTION AG (“HETA”) as outlined in detail below. In accordance with Section 2 of the Pfandbriefstelle Act (PfBrStG) the member institutions and the relevant guarantors of the member institutions are jointly and severally liable for the liabilities of the Pfandbriefstelle. As at 31 Dec. 2014 the Pfandbriefstelle has liabilities from issues amounting to EUR 5,484.9 million, with EUR 1,239.1 million of this related to HETA. In correspondence dated 1 Mar. 2015 the Federal Finance Minister stated that no further capital or liquidity measures would be implemented in relation to HETA by the Republic of Austria in accordance with the Financial Market Stability Act (FinStaG). In a decision dated 1 Mar. 2015 the Financial Market Authority (“FMA”) in its role as a settlement authority in accordance with Section 3 sub-section 1 of the Restructuring and Settlement Act (BaSAG) ordered that the due dates of all debt instruments issued by HETA and the liabilities arising from these must be deferred until 31 May 2016 with immediate effect as the settlement conditions under Section 49 BaSAG were met. Reserves have been formed for the aforementioned amount (EUR 15.5 million) for the risk that the Pfandbriefstelle is unable to meet the obligation to service the relevant debt instrument in full and that claims are asserted against HYPO Salzburg, the remaining state mortgage banks and the relevant guarantors by the creditors of Pfandbriefbank AG or the Pfandbriefstelle. In setting the amount for the reserve the asset-based indebtedness of HETA (average value) announced in the FMA decision dated 1 Mar. 2015, the guarantee of the state of Carinthia and the per capita rate of the potential obligation were taken into account at one-sixteenth. The amount of an outward flow of funds and the collectability of potential claims against HETA and the state of Carinthia are fraught with uncertainties.

26. Trading liabilities 31 Dec. 2014 Interest rate transactions Currency exchange transactions Stock and index related business Other transactions Total

31 Dec. 2013

in EUR '000

2,172,922 29,249 172 6

1,530,161 33,227 136 101

2,202,349

1,563,625

The (negative) fair value of derivative financial instruments that were employed under fair value hedge accounting as hedging transactions amounted to EUR 141,278 thousand as at 31 December 2014 (previous year: EUR 125,406 thousand).

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

27. Other liabilities 31 Dec. 2014

31 Dec. 2013

in EUR '000

Liabilities from non-bank activities Deferred income Other liabilities

117,467 12,452 348,797

119,202 10,063 262,262

Total

478,716

391,527

31 Dec. 2014

31 Dec. 2013

in EUR '000

28. Subordinated capital

Supplementary capital and subordinated liabilities Profit-sharing rights Silent investments Hybrid capital instruments Total

1,519,191 17,300

1,514,329 17,300

0 0

50 0

1,536,491

1,531,679

31 Dec. 2014

31 Dec. 2013

in EUR '000

276,476 1,032 972,095 2,164,927 151,741

276,476 1,032 972,095 2,139,984 151,416

3,566,271

3,541,003

29. Equity

Share capital Participation capital Capital reserves Aggregate net income Non-controlling interests Total

In accordance with its articles, Raiffeisenlandesbank Oberösterreich Aktiengesellschaft’s share capital as at 31 December 2014 was EUR 276,476 thousand (previous year: EUR 276,476 thousand). It consists of 1,933,965 ordinary shares (previous year: 1,933,965 ordinary shares). Capital reserves amounting to EUR 410,859 thousand were set aside in conjunction with the transfer of bank business from the former Raiffeisenlandesbank Oberösterreich reg. Gen.m.b.H. to Raiffeisenlandesbank Oberösterreich Aktiengesellschaft in financial year 2004, and EUR 136,987 thousand resulting from a premium for a new issue of preferred shares in 2007. In connection with an additional payment in accordance with section 229 (2) line 5 of the Austrian Commercial Code, capital reserves increased by EUR 149,992 thousand in financial year 2008. Capital reserves rose by EUR 274,257 thousand due to the increase in share capital in the form of ordinary shares in 2013. In the first half of 2014, dividends of EUR 27,810 thousand were paid on the ordinary shares and EUR 892 thousand on participation capital of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft, in accordance with the decision made at the annual general meeting on 12 May 2014 concerning the use of the profit from 2013. This means that the planned dividend for each ordinary share will be EUR 14.38. The recommendation of the Managing Board as to the use of the profit from 2014 will be to pay dividends of EUR 23,374 thousand on ordinary shares and EUR 892 thousand on the participation capital. This means that the planned dividend for each ordinary share will be EUR 12.09. In addition to the reinvested profit from the previous financial years, the item headed “Accumulated profits” contains the share of changes in equity recognised with no effect on the income statement and the share of the current net profit for the year that is attributable to the owners of the parent company.

107

108

Annual Report 2014

Changes in AfS reserves 2014

2013

in EUR '000

As at 1 Jan. Change in basis of consolidation Changes in the valuation of AfS securities Amounts transferred into the income statement of which through impairment loss of AfS assets of which through sale of AfS assets of which from redesignated AfS assets Taxes recognised in respect of this amount

112,670 0 249,558 –6,202 336 –7,577 1,039 –60,846

71,188 44 54,457 793 –1,446 194 2,045 –13,812

As at 31 Dec.

295,180

112,670

The AfS provisions reflect changes in valuation recorded under equity with no effect on the consolidated income statement of financial instruments in the category “Financial assets available for sale (AfS)” in accordance with IAS 39.

Hedging of net investments in a foreign business 2014

2013

in EUR '000

As at 1 Jan. Gain or loss from the hedging of net investments Taxes recognised in respect of this amount

1,014 488 –122

–2,041 4,074 –1,019

As at 31 Dec.

1,380

1,014

Exchange rate hedging transactions for investments in economically independent entities are recorded as hedging of net investments, in accordance with IAS 39.102. Hedge positions represent refinancing in foreign currency.

Changes in foreign currency translation reserves 2014

2013

in EUR '000

–949 –970

–927 –22

–1,919

–949

As at 1 Jan. Gain or loss from foreign currency translation As at 31 Dec.

Changes in the reserves of actuarial gains/losses on defined benefit plans

As at 1 Jan. Change in basis of consolidation Changes in the valuation of reserves of actuarial gains/losses on defined benefit plans Taxes recognised in respect of this amount As at 31 Dec.

2014

2013

in EUR '000

–6,536 0

–419 –2

–23,159 5,747

–8,154 2,039

–23,948

–6,536

THE GROUP IFRS consolidated financial statements | Disclosures | Balance sheet disclosures

Companies with substantial minority interests Share of minority interests Company

Country of registration

Hypo Holding subgroup OÖ Wohnbau gemeinnütziger Wohnbau subgroup Gesellschaft zur Förderung agrarischer Interessen in Oberösterreich GmbH Other

Income

Equity

2014

2013

2014

2013

2014

2013

in %

in EUR '000

Austria

20.63

–11,929

7,562

103,664

116,660

Austria

16.44

n.a.

744

n.a.

11,310

n.a.

Austria

5.00

445 3,721

338 1,983

4,556 32,211

3,504 31,252

–7,020

9,883

151,741

151,416

Total

Companies with substantial minority interests 2014 Hypo Holding subgroup in EUR '000

Assets Liabilities and provisions

Gesellschaft zur Förderung OÖ Wohnbau agrarischer Interessen in gemeinnütziger Wohnbau Oberösterreich GmbH subgroup in EUR '000

in EUR '000

4,926,009 4,651,856

404,587 221,484

579,101 509,562

170,489 103,664 274,153

178,547 4,556 183,103

58,229 11,310 69,539

Earnings

90,808

648,075

64,727

Profit for the year – own share Profit for the year – minority interests After-tax profit for the year

35,632 –11,929 23,703

6,123 445 6,568

3,974 744 4,718

5,054 3,983 9.037

14,833 751 15.584

–161 0 –161

40,686 –7,946 32,740

20,956 1,196 22,152

3,813 744 4,557

Dividends paid to minority interests

999

144

Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities

100,943 –100,866 –3,010

8,678 –8,348 –278

24,990 –24,608 –381

–2,933

Equity (own shares) Equity and minority interests Equity

Other net operating income, own shares Other net operating income, minority interests Other net operating income Comprehensive income, own shares Comprehensive income, minority interests Comprehensive income

Change in cash levels

109

110

Annual Report 2014

Companies with substantial minority interests 2013

Assets Liabilities and provisions

Hypo Holding subgroup

Gesellschaft zur Förderung agrarischer Interessen in Oberösterreich GmbH

in EUR '000

5,046,535 4,727,002

397,934 236,755

202,873 116,660 319,533

157,675 3,504 161,179

Earnings

63,023

653,995

Profit for the year – own share Profit for the year – minority interests After-tax profit for the year

15,036 7,562 22,598

–6,930 –338 –7,268

1,417 812 2,229

–1,390 –97 –1,487

16,453 8,374 24,827

–8,320 –435 –8,755

995

124

Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash flow effect from change in the basis of consolidation

70,678 –101,471 –16,500

17,127 –16,994 –271

–6

Change in cash levels

–47,293

–144

Equity (own shares) Equity and minority interests Equity

THE GROUP IFRS financial statements | Disclosures | Risk report

Risk report Summary Raiffeisenlandesbank Oberösterreich Group’s long-term success has largely been due to active risk management. In order to achieve this target, Raiffeisenlandesbank Oberösterreich, as the dominant group company, has implemented risk management with structures that facilitate the identification and measurement of all risks in the group (credit risks, market risks, equity risks, liquidity risks, macroeconomic risks, and operational risks) and their active managerial counteraction. The risk policy that has been sanctioned by the Raiffeisenlandesbank Oberösterreich Managing Board serves as a guideline for the other group companies. The Managing Board and all employees act in accordance with these risk policy principles and make decisions on the basis of these guidelines. Risk management is organised in such a way that conflicts of interest both on a personal level and at the organisation units level are avoided. For the main types of risks, the Raiffeisenlandesbank Oberösterreich strives to operate a risk management system on a level which at least corresponds to that of institutions of a similar structure and size (best practice principle) and is primarily aimed at the continuation of the company as a going concern (going concern principle). The Raiffeisenlandesbank Oberösterreich in general only aims its work at areas of the business in which it has the requisite expertise in the assessment of the specific risks. Before it moves into new areas of business or products, the group always carries out an adequate analysis of the risks posed by that specific business. The Managing Board and the Supervisory Board of Raiffeisenlandesbank Oberösterreich are informed promptly of the bank’s risk situation by means of comprehensive, objective reports. All the quantifiable risks (credit risks, market risks, equity risks, liquidity risks, macroeconomic risks, and operational risks) to which Raiffeisenlandesbank Oberösterreich is exposed are monitored and coordinated with the group’s overall strategy. All the quantifiable risks are monitored on the basis of the group-wide risk-bearing capacity. The aim of the risk early identification and risk monitoring systems is to ensure the qualified and timely identification of all major risks. Risk Controlling analyses all risks and examines adherence to the defined risk limits by means of ongoing variance

analyses. Internal/Group Auditing assesses the effectiveness of working procedures, processes and internal controls. Modifications and enhancements of risk management are continuously documented in the Risk Management Manual.

Risk management organisation The Managing Board of Raiffeisenlandesbank Oberösterreich bears responsibility for all risk management activities. It approves the risk policy in accordance with the business strategies, the risk principles, procedures and methods of risk measurement and the risk limits. The Chief Risk Officer (Managing Board member) is responsible for controlling all the quantifiable risks, including in particular credit risk, market risk, equity risk, liquidity risk, macroeconomic risk and operational risks that Raiffeisenlandesbank Oberösterreich is exposed to and for developing and implementing the overall risk strategy. The organisational unit for overall bank risk management is in charge of identifying and measuring risks in cooperation with the organisational units that have been given these tasks. Risk Management is also responsible for the development and provision of risk measurement methods and IT systems and provides the result and risk information required for active risk management. The Committee for Product Approval ensures that the risks have been adequately portrayed for new products as well, and that they have been handled in accordance with the regulations. During the approval process, the committee not only reviews the risk measurement but also market topics, legal admissibility, supervisory stipulations and general questions about carrying out business. The result of the approval process must be recorded in writing by the responsible organisational units. New products /product variants must be submitted to the Managing Board of Raiffeisenlandesbank Oberösterreich for approval before the first transaction is completed – together with all necessary statements and opinions. The Country Risk Committee is responsible for managing the country risk. Business transactions that result in a country risk/country exposure may only be carried out when the resulting country risk/country exposure is within the approved limit.

111

112

Annual Report 2014

The further development of the existing risk management system (identification, measurement, control) is the responsibility of the Risk Management business area in coordination with the Chief Risk Officer, the Managing Board and the employees responsible for assessing operating risk. Legally independent group units and their boards are responsible for the risk policy of their business unit and only enter into risks if they are in harmony with the established risk policy of Raiffeisenlandesbank Oberösterreich. To assess the group risks, the Risk Management organisational unit identifies and measures the risks in cooperation with the group members. Business-related manifestations in the risk measurement procedure are coordinated with the Risk Management organisational unit. A high degree of standardisation has the purpose of ensuring a comparable consolidation of the group risks. Risk management for the subgroup Gesellschaft zur Förderung agrarischer Interessen in Oberösterreich GmbH is decentralised among the individual group companies. In addition to credit risk, the subgroup is confronted with purchasing and sales related price risks. These result from the global supply and demand situation in the commodities markets and the industry-related intensity of competition.

Market risks Market risks take the form of changes in interest rates, currency and exchange rates relating to securities, interest rates and foreign exchange items. The basis for all business is a balanced risk/reward ratio. The Raiffeisenlandesbank Oberösterreich Group also uses the principle of diversification on the basis of business partners, products, regions and sales channels to reduce its risks. In addition, derivative transactions are conducted almost exclusively with banks with which collateral agreements are in place. The strict division of labour between front, middle and back office and risk controlling ensures that risks can be described comprehensively, transparently and objectively to the Managing Board and supervisory authorities. New products and markets are evaluated in an approval process and then authorised by the Managing Board. Customer business has been set as the priority focus for trading activities in the organisational unit Treasury Financial Markets. The trades and the market price risk are limited by an extensive limit system. All trading positions are valued every day at market prices.

The strategic alignment and positioning in the banking book are presented to the Managing Board on a weekly basis and further procedure is then agreed. No open liquidity positions are entered into for deadline transformation purposes. Raiffeisenlandesbank Oberösterreich only enters into foreign currency risks on a very limited basis. All market price risks from customer transactions are recorded and measured in the banking book. The market risks are measured every day with the value-atrisk index for the trading and banking books. This indicates a possible loss which, with 99% probability, will not be exceeded during a one-month holding period. The market risks are managed using a limit system based on the value at risk. All market risk activities are assigned a risk limit which is included in full in the risk-bearing capacity analysis. In addition to value-at-risk, stop-loss limits and scenario analyses are used to limit risk. The value-at-risk figures for Raiffeisenlandesbank Oberösterreich and Hypo Salzburg are calculated on a daily basis. Reports are presented to the Managing Board on a monthly basis; both the member of the Managing Board responsible for Treasury and the Chief Risk Officer receive daily reports. The other fully consolidated group companies minimise their market risks through maturity-matched funding via Raiffeisenlandesbank Oberösterreich. Shifts in the interest, credit spread, currency, volatility and share price landscape can have a major influence on results and the risk situation. Therefore, Raiffeisenlandesbank Oberösterreich simulates possible changes in risk parameters and reports the consequences the Managing Board. The following table shows the value-at-risk figures for the Raiffeisenlandesbank Oberösterreich Group (confidence level 99%, holding period one month) as at 31 December 2014. 31 Dec. 2014 in EUR '000

31 Dec. 2013 in EUR '000

Total Interest

100,210 83,936

96,720 84,628

Spread

46,732

45,959

Raiffeisenlandesbank Oberösterreich Group

Currency

693

418

2,895

2,314

Volatility

1,392

11,067

As at 31 December 2014, total value at risk was EUR 100.21 million which was EUR 3.49 million higher than on 31 December 2013.

THE GROUP IFRS financial statements | Disclosures | Risk report

To check the forecast quality of the value-at-risk figures, back-testing is carried out on a daily basis. This means that the actual results are compared to the values forecast by the value-at-risk model. This back-testing confirms the validity of the statistical methods used. In addition, stress tests are conducted to take account of risks in the event of extreme market movements. The crisis scenarios include the simulation of large fluctuations in the risk factors and are designed to highlight potential losses which are not covered by the value-at-risk model. The stress scenarios comprise both the extreme market fluctuations which have actually occurred in the past and also a series of standardised shock scenarios involving interest rates, credit spreads, share prices, currency exchange rates and volatility. A stress test with a 200 basis point interest rate shift was performed for the banking book. The valuation functions of the financial instruments based on full valuation were used to measure the individual financial instruments. This procedure precisely takes into account the gamma risk of interest rate options. Termination rights of the customers or Raiffeisenlandesbank Oberösterreich are depicted as options in the calculation. For example, the probability of early repayment by the customer rises in direct proportion to a reduction of the market interest level compared to the customer-specific conditions. If financing is cancelled early – without a corresponding right of termination – the resulting costs are charged to the customers. Deposits of indefinite duration are treated like deposits repayable on demand. The following table shows the results of the stress test as at 31 December 2014:

(in EUR ‘000)

31 Dec. 2014 + 200 BP –200 BP

31 Dec. 2013 + 200 BP –200 BP

EUR USD

–335,174 –2,052

328,191 2,416

–315,221 –888

122,812 1,101

GBP

2,001

–2,140

2,713

–2,098

CHF JPY

–4,249 –465

4,854 485

–5,516 –933

1,952 62

–11,020

13,404

–10,945

10,453

–382

477

–1,581

1,965

CZK Other currencies

The stress test shows the change in present value when the yield curve is shifted in parallel by one and two percentage points respectively.

Credit risk The credit risk constitutes the risk to the bank that a loss will occur as a result of the non-fulfilment of the contractual obligations of customers or contractual partners. Credit risk is mainly generated by the loans and advances to customers and banks and from securities from the banking book. In terms of the risk associated with the debt moratorium for HETA ASSET RESOLUTION AG (“HETA”) and the related provisions established in the Group for this purpose on 31 Dec. 2014 in the amount of EUR 15.5 million, we refer to the descriptions in the provisions. A report on the credit risk is given to the Managing Board once each quarter, or as needed. For this risk report, the Group takes into account all elements of credit risk claims, such as the risk of insolvency of individual debtors, country and sector risks. The industry distribution of the credit portfolio is checked for concentration risks four times a year. The maximum exposure of individual borrowers or groups of associated customers is only permitted up to the upper limit for large-volume investments. The prerequisites are business policy and strategic interests of the Raiffeisenlandesbank Oberösterreich Group along with the an investment grade credit rating for the borrower. The credit volume in foreign currency is also limited. For risk management purposes, the securities in the trading book are handled separately; they are included in the report on market risk. The principles of the customers’ credit ratings are incorporated in the “Rating Standards” manual. This set of regulations is a compact representation of the standards valid for Raiffeisenlandesbank Oberösterreich, which are in accordance with the international “Basel III” standards. An organisational separation between front and back offices has been implemented. In order to measure the credit risk, the bank carries out its own internal ratings and classifies financing transactions into credit rating and risk classes. The risk class of a borrower accordingly comprises two dimensions – recording and assessing their financial situation and measuring the collateral provided. Both hard and soft facts are employed as creditworthiness criteria. In corporate customer business, soft facts are also defined systematically during discussions with the company and then adjudged.

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Annual Report 2014

Rating systems are differentiated according to the customer segments Corporates, Retail Customers, Projects, Banks, Issuers of Securities, States and Funds. A scoring system

is used to automatically classify small volume business with employed retail customers. This credit rating system is also utilised by subsidiaries in this customer segment.

The following rating classes are used for internal rating in the Raiffeisenlandesbank Oberösterreich Group: S&P

Moody’s

AAA

Aaa

AA+

Aa1

Aa2

AA-

Aa3

A+

A A-

BBB+

BBB

Baa1

BBB-

Baa2 Baa3

BB+

Ba1

Ba2

BB-

Ba3

B+

B-

CCC+

Caa1

CCC

Caa2

CCC-

Caa3

CC C D

10 point scale

Subclasses

0.5

risk-free

1.0

outstanding creditworthiness

1.5

very good creditworthiness

2.0 2.5 3.0 3.5

4.0

2+ 2.0 2– 2.5 3+ 3.0

Text

good creditworthiness average creditworthiness satisfactory creditworthiness

3–

mediocre creditworthiness (–)

3.5

poor creditworthiness

very poor creditworthiness (+)

4.0 4.5

4.5

5.0

5.1

in danger of default

5.0

Default criteria reached

5.2

In June 2014, the default classes were redefined according to the reason for the default. The default category is therefore now divided into three sub-ratings: 5.0, 5.1 and 5.2 Individual rating classes are defined and delineated by means of calculations which assess statistical default probabilities. The descriptions in words are simply for illustrative purposes. The above reconciliation to external ratings reflects the bank’s internal experience to date, on the basis of default probabilities.

Credit value at risk The overall risk of all assets exhibiting counterparty default risk is assessed on a monthly basis. Risk may arise due to credit default or worsening of creditworthiness – and it is communicated through the key figures expected loss, unexpected loss and credit value at risk. The expected loss represents the most probable value decrease of a given portfolio. This specified decrease in value should be expected each year. This loss is covered by the calculated risk costs. The unexpected loss represents a portfolio’s possible loss beyond the expected loss. Thus, it communicates possible

negative deviation from the expected loss. The unexpected loss is covered by the equity capital and is the maximum loss that can possibly arise within a single year, and which – with a certain amount of probability – will not be exceeded. Raiffeisenlandesbank Oberösterreic calculates unexpected loss at probabilities of 95%, 99% and 99.9%. The calculation is carried out by the credit manager software from the RiskMetrics company. The risks/opportunities from loan defaults or changes in creditworthiness are determined using a market valuation model. The market data required for the portfolio value distribution (interest rates, credit spreads and sector indices) are updated every month.

THE GROUP IFRS financial statements | Disclosures | Risk report

Overall structure by balance sheet item Maximum credit risk exposure pursuant to IFRS 7.36 a

Cash and cash equivalents (credit balance at central banks) Loans and advances to banks Loans and advances to customers Trading assets Financial assets Total Contingent liabilities Credit risks Total Total maximum credit exposure

31 Dec. 2014

31 Dec. 2013

in EUR '000

54,500 6,779,138 19,166,752 2,951,476 5,255,112 34,206,978

52,852 6,363,558 19,693,620 1,995,634 4,971,486 33,077,150

3,424,218 4,594,948 8,019,166

3,657,051 5,044,214 8,701,265

42,226,144

41,778,415

Collateral for overall structure The stated collateral values correspond to the values determined within internal risk management. They reflect a conservative estimate of receipts in the event of any necessary non-performing loan workout. Collateral values pursuant to IFRS 7.36 b

Loans and advances to banks Loans and advances to customers Trading assets Financial assets Total Contingent liabilities* Credit risks Total Total collateral values

31 Dec. 2014

31 Dec. 2013

in EUR '000

1,582,149 9,878,994 2,074,056 997,295 14,532,494

1,437,542 10,069,555 1,689,975 945,859 14,142,931

1,605,632 920,595 2,526,227

1,653,098 1,303,823 2,956,921

17,058,721

17,099,852

As at 31 December 2014, the total collateral values consisted of 44.6%* (previous year: 48.4%*) collateral on immovable goods (i.e. mortgages, rankings). * Taking into consideration shares held as collateral in housing loans from Oberรถsterreichische Landesbank Aktiengesellschaft

115

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Annual Report 2014

Industry structure/Concentration risk Maximum credit risk exposure by industry 31 Dec. 2014

31 Dec. 2013

in EUR '000

Banks Real estate projects, property management and residential building management Public households and non-profit organisations Retail (natural persons) Engine and plant construction Supplementary construction trade Finance holdings Transport (goods, people, on land, on water) Construction Consumer goods Metal production and processing Motor vehicles Energy and utilities Electronic/electrical Foodstuffs Tourism Chemicals and rubber Health, veterinary and social work

12,179,730 5,873,663 3,506,826 2,997,884 1,623,864 1,472,630 1,147,828 1,111,171 919,259 897,904 883,426 828,883 780,301 755,213 673,543 619,041 492,171 469,423

10,702,469 6,098,370 3,339,641 3,003,013 1,577,415 1,632,201 995,193 980,618 1,085,029 939,053 890,106 868,595 772,299 854,772 747,069 600,009 564,026 445,365

Legal, corporate and tax consultancy, other consultancy Subtotal

379,151 37,611,911

364,368 36,459,611

Subtotal other TOTAL

4,614,233

5,318,804

42,226,144

41,778,415

In the CRR scope of finance holding (Raiffeisenbankengruppe OĂ&#x2013; Verbund eGen) there were 22 major loans* (without loans to Group members) as at 31 Dec. 2014. Of these, 10 major loans were in the commercial sector, 4 major loans to the banking sector, and 8 major loans to the public sector. * Exposure value before application of exemptions and CRM greater than 10 % of equity eligible for inclusion for major loans according to CRR

Geographic distribution of the loans and advances to customers Austria: 65.3% (prev. yr. 64.5%) Germany: 20.2% (prev. yr. 20.8%) Czech Republic: 4.2% (prev. yr. 4.2%) Croatia: 1.8% (prev. yr. 1.8%) Hungary: 1.4% (prev. yr. 1.6%) Romania: 1.4% (prev. yr. 1.3%) Slovakia: 1.1% (prev. yr. 1.1%) Poland: 1.1% (prev. yr. 1.0%) Other: 3.5% (prev. yr. 3.7%)

THE GROUP IFRS financial statements | Disclosures | Risk report

Disclosures on government bonds from selected European countries

Carrying amounts

Designated financial instruments 2014

Financial assets available for sale (AfS)

2013

2014

in EUR m

Financial assets “held-to-maturity”

2013

2014

in EUR m

Total

2013

2014

in EUR m

2013

in EUR m

Spain Greece Ireland Italy Ukraine Portugal

0 0 0 87.2 0 0

0 0 0 71.2 0 0

0 0 12.5 0 0.8 0

0 0 11.3 0 0.4 0

0 0 49.9 0 0 15.1

0 0 62.4 87.2 0.8 15.1

0 0 61.2 71.2 0.4 15.1

Total

87.2

71.2

13.3

11.7

65.0

165.5

147.9

The government bonds listed in the category “financial assets available for sale” as of 31 December 2014 contained a total positive AfS reserve of about EUR 2.6 million (previous year: EUR 1.3 million). The fair value of the government bonds listed in the category “financial assets held to maturity” was about EUR 4.3 million as at 31 Dec. 2014, in total about EUR 4.3 million (previous year: EUR 4.2 million) over the carrying amount. Beyond that we held no credit default swaps (CDS) in connection with the aforementioned countries.

Rating structure for credit risk exposure which is neither overdue nor impaired The quality of the financial assets which are neither overdue nor impaired are depicted as follows on the basis of the internal rating classification: Very low / low risk: Normal risk: Increased risk:

Rating classes 0.5 to 1.5 Rating classes 2 + to 3 + Rating classes 3 and poorer Very low / low risk 2014

2013 in EUR '000

Cash and cash equivalents Loans and advances to banks Loans and advances to customers Trading assets Financial assets Contingent liabilities Credit risks Total

Normal risk 2014

2013 in EUR '000

Increased risk 2014

2013 in EUR '000

54,500 6,056,733 5,183,445 1,781,413 4,047,649 1,063,466 1,613,970

52,852 2,992,492 4,532,535 1,173,322 3,727,006 938,622 1,538,428

0 689,976 9,213,344 1,156,297 1,146,480 2,000,106 2,437,239

0 3,298,634 9,753,453 813,185 1,074,425 2,319,292 2,704,419

0 30,867 3,243,067 13,766 58,405 301,078 457,328

0 72,423 3,631,573 9,127 164,798 385,291 771,770

19,801,176

14,955,257

16,643,442

19,963,408

4,104,511

5,034,982

Structure of overdue or impaired credit risk exposure Carrying amounts of overdue or impaired financial assets:

Loans and advances to banks Loans and advances to customers Financial assets Contingent liabilities Credit risks Total

31 Dec. 2014

31 Dec. 2013

in EUR '000

1,562

1,526,896

1,776,059

2,578

5,257

59,568 86,411

13,846 29,597

1,677,015

1,824,768

117

118

Annual Report 2014

Collateral relating to overdue or impaired credit risk exposure The following value-based collateral applies to the overdue or impaired financial assets: 31 Dec. 2014

31 Dec. 2013

in EUR '000

Loans and advances to customers

885,380

1,023,038

24,473 10,051

8,072 7,393

919,904

1,038,503

Contingent liabilities Credit risks Total collateral values

Collateral values for impaired credit risk exposures are reviewed without delay â&#x20AC;&#x201C; and correspond to a conservative estimate of the proceeds that could be expected over the long term from recovery of the collateral. As at 31 December 2014, 53.9% (31 Dec. 2013: 62.3%) of the total collateral values relating to overdue or impaired credit exposure consisted of collateral on immovable goods (e.g. mortgages, rankings). Appropriated collateral Collateral taken into possession by Raiffeisenlandesbank OberĂśsterreich or related companies is sold in an orderly and proper manner and the proceeds from the sale applied to the repayment of the loan or advance concerned. Appropriated collateral is not generally used in the bank's own operations. These acquired securities generally take the form of commercial property. Other types of property collateral may also be prepossessed. The principle objective is to dispose of these properties within an appropriate timeframe. In cases where the disposal of a property proves difficult, alternative uses will be considered, especially letting the property. The carrying amount of these assets at 31 December 2014 amounted to EUR 8,247 thousand (previous year: EUR 8,456 thousand) and was broken down as follows: 31 Dec. 2014 Carrying amount (in EUR '000)

31 Dec. 2013

Number

Carrying amount (in EUR '000)

Number

Undeveloped land

146

144

Residential buildings

603

539

6,411

6,351

Commercial properties

Mixed use buildings

1,087

1,422

Total of collateral taken into possession

8,247

8,456

In 2014 no securities were taken into possession by the Raiffeisenlandesbank OberĂśsterreich Group or its related companies.

Age structure of overdue credit risk exposure The financial assets which were overdue but not impaired as at the reporting date had the following age structure: 31 Dec. 2014

31 Dec. 2013

in EUR '000

up to 30 days 31 to 60 days 61 to 90 days over 90 days

565,763 89,251 13,715 32,367

675,565 156,113 10,582 86,586

Total

701,096

928,846

The ageing structure is accounted for on the basis of individual accounts without consideration of the materiality thresholds, as in accordance with Article 178 CRR.

THE GROUP IFRS financial statements | Disclosures | Risk report

Impaired credit risk exposure The financial assets that were determined to be impaired on the reporting date exhibit the following structure:*)

Loans and advances to banks 2014

2013

2014

in EUR '000

Gross value

Loans and advances to customers 2013 in EUR '000

Contingent liabilities 2014

Credit risks

2013 in EUR '000

2014

2013 in EUR '000

922

905

1,757,280

1,825,407

67,527

33,283

97,716

57,005

–913

–896

–929,927

–978,194

–7,959

–19,437

–11,305

–27,408

Carrying amount

827,353

847,213

59,568

13,846

86,411

29,597

Collateral

476,452

544,433

24,473

8,072

10,051

7,393

Loan loss allowances

*) Amounts without portfolio value adjustment

Allowances for losses on loans and advances are recognised primarily if a debtor is experiencing economic or financial difficulties, fails to make interest payments or repayments of principal, or other circumstances arise that indicate a probability of default based on regulatory standards. Within the internal risk management system, ongoing monitoring of the counterparty and the specific case involved is used to determine whether relevant circumstances exist. In the case of significant customer exposures in the lending business, each individual case is analysed as the basis for recognising specific loan loss allowances or provisions for contingent liabilities and lending commitments. The calculation for the amount of the allowance for losses on loans and advances takes into account the discounted cash inflows expected from interest payments and repayments of principal together with any inflows that can be obtained from the recovery of collateral. A standardised method is used for customer exposures that are not deemed to be significant. A portfolio loan loss allowance is recognised for potential losses on loans and advances that cannot be individually assigned. This portfolio loan loss allowance takes into account probabilities of default. Raiffeisenlandesbank Oberösterreich’s definition of default includes payments overdue by more than 90 days in addition to insolvency, pending insolvency, legal cases, deferments, restructuring, significant loan risk modifications, debt waivers, direct impairment losses, creditworthiness-related interest exemptions, repayments with an expected financial loss, and moratoria/payment stoppage/withdrawal of licence for banks. Customers with a default on their record are assigned a credit rating of 5.0, 5.1 or 5.2 (corresponds to Moody’s Ca and C ratings or Standard & Poor’s CC, C and D ratings). The new definition of default is also the basis for calculating the non-performing loans ratio (NPL ratio). The NPL ratio among the loans and advances to banks and customers amounted to 9.32% as at 31 Dec. 2014 (31 Dec. 2013: 10.46%). Credit-rating-related impairment of securities in the category “financial assets available for sale (AfS),” “financial assets held to maturity” and “loans and receivables” are recognised as valuation allowances. In 2014, these valuation allowances on debt capital securities came to EUR 3,194 thousand (previous year: EUR 3,500 thousand). The carrying amount of these securities which have already been amortised was EUR 2,565 thousand as at 31 Dec. 2014 (31 Dec. 2013: EUR 5,250 thousand). Triggering events include substantial financial difficulties of the issuer, significant worsening of ratings and the default of interest payments or repayments. The reversal of allowances on the previous year’s impaired debt portfolio amounted to EUR 0 in 2014 (previous year: EUR 0). Credit risk also results from the debtor default risk of the subgroup Gesellschaft zur Förderung agrarischer Interessen in Oberösterreich GmbH. From the perspective of the group as a whole, however, its debtor portfolios are of minor significance and are also partially covered by credit insurance.

119

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Annual Report 2014

Forbearance Financial assets that were subjected to forbearance-relevant measures as at the reporting date were structured as follows: Performing

1 Jan. 2014

Absorption 2014

Disposal 2014

31 Dec. 2014

in EUR '000

Loans and advances to customers Credit risks

299,700 12,004

55,752 11,794

–88,566 –10,566

266,886 13,232

Total

311,704

67,546

–99,132

280,118

Loan loss allowances

Non-performing

1 Jan. 2014

Absorption 2014

Disposal 2014

31 Dec. 2014

in EUR '000

Loans and advances to customers Credit risks

792,964 97,766

81,495 25,596

–305,369 –64,864

569,090 58,498

Total

890,730

107,091

–370,233

627,588

Loan loss allowances

686,915

147,874

–230,468

604,321

“Forbearance” refers to measures that are characterised by an alteration of conditions included in the credit agreement to the borrower’s advantage (i.e., deferments) or the refinancing of the loan because the borrower can no longer fulfil the existing conditions due to financial hardship. A borrower’s financial hardship and alterations to the credit agreement do not necessarily result in losses for the lending institution in every case. The designation refers to financial instruments that have forbearance measures applied to them in accordance with the EBA’s concept. This is primarily a matter of deferring interest or instalment payments or of bridge financing. Should the lending institution experience losses as a result of forbearance measures, appropriate value adjustment measures in accordance with IAS 39 will be undertaken. Other changes to credit agreements that are not related to the borrower’s experience of financial hardship will not be considered forbearance measures.

Liquidity risk The liquidity risk encompasses the risk of not being able to fulfil one’s payment obligations by the due date or, in the case of a liquidity shortage, of not being able to acquire enough liquidity at the terms expected (structural liquidity risk). Ensuring that there is sufficient liquidity takes top priority at Raiffeisenlandesbank Oberösterreich as the central institution for the Raiffeisen Banking Group Upper Austria. Liquidity has to be safeguarded at all times. Liquidity and liquidity risk is managed under a standardised model which, besides normal circumstances, also

encompasses stress scenarios arising from reputational risk, systemic risk, a non-performing loan or a crisis involving several risks. To this end the following key figures are determined: The operational liquidity maturity transformation ratio (abbreviated in German to “O-LFT”) for operational liquidity for up to 18 months is formed from the ratios of assets to liabilities accumulated from the beginning over the maturity band. For the structural liquidity maturity transformation (“S-LFT”), the key figure is formed by taking the ratios of assets to liabilities calculated by going backwards from the end of the maturity band. The GBS (German abbreviation for the gap between the ratio total and total assets) ratio is formed by taking the ratios of the net positions per maturity band to total assets and shows any excessive funding risks. The following are the key pillars for managing liquidity and liquidity risk at Raiffeisenlandesbank Oberösterreich: Operational liquidity is also measured, in addition to the aforementioned O-LFT, against liquidity-at-risk. Funding risk gauges the loss of assets related to increased liquidity costs associated with closing liquidity gaps as a result of a price increase for funding, which will not – with 99.9% certainty – be exceeded within 60 days. Raiffeisenlandesbank Oberösterreich has a broad basis of funding. It proceeds in accordance with the principles of diversification and balance. A quantitative liquidity emergency plan is prepared on a monthly basis. The Liquidity Coverage Ratio (LCR) as at 31 Dec. 2014 stood at 104% and therefore significantly exceeded the 60% level that is required for the introduction of LCR on

THE GROUP IFRS financial statements | Disclosures | Risk report

1Â October 2015. In addition, this value also already exceeds the 100% limit that will apply as of 1 January 2018. This demonstrates the good liquidity situation of the Raiffeisenlandesbank OberĂśsterreich Group The Net Stable Funding Ratio (NSFR) is currently still in the observation phase from the perspective of the regulator. The NSFR as at 31 Dec. 2014 stood at 106% and therefore significantly exceeded the 100% level that is required upon introduction as a minimum standard on 1 January 2018.

The moratorium imposed by the financial supervisory authority also affects the liabilities of HETA owed to the Austrian Pfandbriefstelle (the bond division of the association of Austrian state mortgage banks). Due to liability provisions, mortgage banks and the federal states are required to put up advance liquidity to service liabilities from the Pfandbriefstelle. EUR 800.0 million in HETA bonds issued via the Pfandbriefstelle are due at the expiration of the moratorium; they were distributed by per capita rates in proportion to involvement in the scheme. Hypo Salzburg has sufficient liquidity reserves to cover payment obligations should they arise.

The following table summarises the maturities of the non-discounted liabilities including the respective interest payments and depicts the earliest possible utilisation of guarantees and credit approvals: Payable on demand/ no term

up to 3 months

3 months to 1 year

1 to 5 years

more than 5 years

Total

in EUR '000

Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates Trading liabilities Subordinated capital Total

3,943,515 4,686,206 10,000 0 0 8,639,721

1,074,262 1,261,724 499,400 157,623 5,007 2,998,016

968,990 1,368,045 1,172,842 280,461 203,970 3,994,308

3,628,214 1,396,271 4,236,934 1,377,239 987,960 11,626,618

2,015,589 2,202,531 3,335,643 2,567,135 486,934 10,607,832

11,630,570 10,914,777 9,254,819 4,382,458 1,683,871 37,866,495

Contingent liabilities Credit risks

3,424,218 4,594,948

0 0

3,424,218 4,594,948

31 Dec. 2014

31 Dec. 2013

Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates Trading liabilities Subordinated capital Total Contingent liabilities Credit risks

Payable on demand/ no term

up to 3 months

3 months to 1 year

1 to 5 years

more than 5 years

Total

in EUR '000

3,593,640 4,610,290 0 0 0 8,203,930

672,128 1,829,176 278,001 177,442 37,671 2,994,418

970,117 1,478,147 1,264,505 331,147 71,344 4,115,260

3,625,426 1,859,648 5,153,794 1,865,886 1,180,834 13,685,588

1,904,845 2,021,776 2,910,044 3,478,659 430,415 10,745,739

10,766,156 11,799,037 9,606,344 5,853,134 1,720,264 39,744,935

3,657,051 5,044,214

0 0

3,657,051 5,044,214

121

Annual Report 2014

From the gap analysis below it can be seen that there is no substantial liquidity risk in the individual maturity periods. There is a large amount of potential collateral available for tender transactions with the ECB and the Swiss National Bank for ongoing liquidity equalisation as well as for other repurchase transactions. Gap in EUR m 1) 31 Dec. 2014

31 Dec. 2012 Excess assets (long position)

3,000 2,000 1,000 0

Excess liabilities (short position)

122

–1,000 –2,000 up to 1 year

1 to 3 years

3 to 5 years

5 to 7 years

7 to 10 years

over 10 years

1) Items without fixed capital commitment are analysed in light of more realistically described historical developments and are modelled as at 31 December 2014; values as at 31 December 2013 are also described using this new method.

Investment portfolio risk Investment portfolio risk covers potential losses caused by dividends not paid, adjustments, disposal losses, regulatory funding obligations, strategic financial restructuring responsibilities, and the reduction of hidden reserves. In the course of acquiring a new investment, the assessment made by investment risk management is supported as much as possible by due diligence performed by external experts. In addition, the organisational unit Financing Management Projects & Structured Financing provides a risk evaluation statement regarding the proposed acquisition. The operative business activities of the investments is closely monitored by sending members of the board at Raiffeisenlandesbank Oberösterreich to Managing Boards, Supervisory Boards, and other committees.

Periodic controlling of investments includes the analysis and testing of financial statement and planning figures, as well as the evaluation of strategic positioning in the form of SWOT analyses (Strengths/Weaknesses/Opportunities/Threats). The Raiffeisenlandesbank Oberösterreich Group has a broadly diversified investment portfolio. The investment rating is a central component when measuring equity risk in the risk-bearing capacity analysis. The equity risk is determined on the basis of expert assessments that take into account the current rating classification of the respective investment company. The basis for the determination of equity risk are the risk factors (= haircuts) that are derived from the rating classification of the respective investment company, and the exposure value of the investment. The investment portfolio risk results from the respective exposure and the haircuts applied to it.

The following table presents the carrying amount of equity investments held by the Raiffeisenlandesbank Oberösterreich Group as at 31 December 2014 and 31 December 2013, organised by risk classes: Very low / low risk

Banks Non-banks Total

Normal risk

Increased risk

2014

2013

2014

2013

2014

2013

in EUR '000

1,189,202 617,705

449,144 719,539

12,025 831,902

1,039,340 791,821

5,675 56,365

5,527 83,320

1,806,907

1,168,683

843,927

1,831,161

62,040

88,847

On a quarterly basis, the risk potentials determined by expert evaluations (in problematic and extreme cases) and risk coverage from investment companies are used in the

risk-bearing capacity analyses conducted periodically at the overall bank level. The Risk Controlling organisational unit produces a quarterly report on equity risk.

THE GROUP IFRS financial statements | Disclosures | Risk report

Macroeconomic risk

maintains production and quality assurance programs and is insured against natural perils or product liability.

Macroeconomic risk measures the effects of a slight or severe recession on the risk situation at Raiffeisenlandesbank Oberösterreich. To this end, a macroeconomic model analyses the correlation between macroeconomic factors (e. g. GDP, real wages index) and the probability of default. The simulated economic downturn in the model is used to determine the additional risk.

Operational risk The group defines operational risk as being the risk of losses derived from the inadequacies or failure of internal procedures, people and systems, or external events. Raiffeisenlandesbank Oberösterreich uses the basis indicator approach to quantify operational risk. The group has used organisational and technical computing measures in order to restrict this type of risk. A high degree of protection is attained by limit systems, authority regulations, a risk-adequate internal control system, as well as scheduled and unscheduled audits by Internal / Group Auditing in the individual group companies. The goal of the self assessments done in the group is to make an appraisal of the operational risks and to increase the awareness of operational risks (early warning system). To limit operational risks, the subgroup Gesellschaft zur Förderung agrarischer Interessen in Oberösterreich GmbH

Other risk Raiffeisenlandesbank Oberösterreich takes into account other, non-quantifiable risks in terms of risk-bearing capacity by means of a risk buffer. These include: strategic risk, reputation risk, equity risk, systemic risk, income and business risk, risk of excessive indebtedness, remaining risk from techniques used to reduce credit risks, risks from money laundering and the financing of terrorism.

Risk-bearing capacity analysis The risk-bearing capacity analysis compares the aggregated overall bank risk of the group, organised by credit risks, market risks, equity risks, refinancing risks, macroeconomic risks, operational risks and other risks (= strategic risks, reputation risks, equity capital risks, and profit risks) to risk coverage (= operating profit, hidden reserves, reserves, and equity capital). This comparison of the group risks with the available coverage depicts the risk-bearing capacity. With this comparison, the Raiffeisenlandesbank Oberösterreich Group is able to guarantee that it can cover extremely unexpected losses from its own funds without major negative effects. Economic capital is the measurement of risk used to calculate extremely unexpected losses. It is defined as the minimum amount of capital necessary to cover unexpected losses with a probability of 99.9% within one year.

Details regarding risk capital

Type of risk

Segment

Corporates & Retail

Financial Markets

Equity investments

Corporate Center

2014

in EUR '000

35.1

1,828.3

Market risks 1) Credit risks 2)

1,385.6

469.4

38.9

144.9

262.7

Investment portfolio risk Operational risk 4) Macroeconomic risks Others risks/buffers Total

508.3 931.3

931.3

0.0

Refinancing risks 3)

Total

43.3

23.2

29.6

1.8

97.9

299.4

16.3

52.9

3.6

372.2

4.4

2.4

3.0

0.2

10.0

1,732.7

656.2

1,318.4

40.7

3,748.0

The assignment of risk capital and equity requirements follow asset allocation as it is done in the IFRS consolidated financial statements of Raiffeisenlandesbank. 1) Market risks are incurred in the Financial Markets and Investments segments. The reason: in the IFRS financial statements Hypo Salzburg is completely contained in the Investments area. 2) Credit risks are also incurred in Corporate Center, because financing is also allocated to this segment in the IFRS statements. 3) No risks from scheduled refinancing 4) Operational risks and the risk buffer were distributed aliquot to income.

123

124

Annual Report 2014

Institutional protection scheme

To ensure the security of the money our customers have entrusted in us, we have also created additional institutions:

Raiffeisen Banking Group Upper Austria The Austrian Raiffeisen Banking Group (RBG Ö) is the largest banking group in Austria with about 504 locally operating Raiffeisen branches, eight regional Raiffeisen headquarters, and Raiffeisen Zentralbank Österreich AG as central institution in Vienna. Some 1.7 million Austrians are members and thus owners of Raiffeisen banks. The Raiffeisen Banking Group Upper Austria (RBG OÖ) is made up of a central institution, Raiffeisenlandesbank Oberösterreich AG, and 95 Raiffeisen banks with a total of 442 bank branches. About 303,000 Upper Austrians are co-owners of the Upper Austrian Raiffeisen banks. As credit institutions within the network of a co-operative society the Raiffeisen banks are bound to the principles of subsidiarity, solidarity, and regionalism. Based on Articles 49 (3) and 113 (7) CRR all Raiffeisen banks in the Raiffeisen Banking Group Upper Austria have signed an agreement to set up an institutional guarantee scheme together with Raiffeisenlandesbank Oberösterreich AG, the Aid Association of the Raiffeisen Banking Group Upper Austria as well as Raiffeisen-Kredit-Garantiegesellschaft mbH. This institutional guarantee scheme is aimed at guaranteeing members’ holdings and securing their liquidity and solvency in order to avoid bankruptcy. There is an early detection system in place to fulfil these tasks which requires the basic principle of uniform and common risk assessment in accordance with Raiffeisen deposit guarantee (ÖRE) regulations. The risk council that has been established monitors and guides the development of the individual members within the institutional guarantee system at state level. The institutional guarantee system is represented at state level by the Chief Executive of Raiffeisenlandesbank Oberösterreich AG, Heinrich Schaller. Approval for the institutional guarantee system was obtained from the FMA by a decision dated 3 November 2014.

Raiffeisen Customer Guarantee Association Austria (Raiffeisen-Kundengarantiegemeinschaft Österreich, RKÖ) This association, whose members comprise participating Raiffeisen banks and Raiffeisenlandesbanks, Raiffeisen Zentralbank Österreich AG (RZB) and Raiffeisen Bank International AG (RBI), guarantees all customer deposits and securities issues of participating banks, regardless of the individual amounts involved, up to the joint financial risk-bearing capacity of the participating banks. The structure of the Customer Guarantee Association has two tiers: first, the Raiffeisen Customer Guarantee Fund Upper Austria at state level, and then the Raiffeisen Customer Guarantee Association Austria at federal level. Thus, the Customer Guarantee Association guarantees protection for customers that goes beyond the legal deposit guarantee. Deposit guarantee institutions All member institutions of RBG Upper Austria are, together with the Raiffeisen-Einlagensicherung Oberösterreich eGen, members of the Austrian Raiffeisen-Einlagensicherung eGen. This deposit guarantee institution is the liability institution for the entire Raiffeisen banking group in accordance with sections 93 through 93c of the Austrian Banking Act. An early warning system has been implemented in the Raiffeisen Banking Group Austria for the purpose of guaranteeing the deposits. This early warning system calls for ongoing analyses and monitoring on the basis of an extensive reporting system about revenue and risk development in all member institutions. Given the size structure of the Raiffeisen banks and their integration in the Raiffeisen banking group as described above (protection schemes, shared models, systems and procedures), the banks in the Raiffeisen Banking Group Upper Austria apply the principle of appropriateness as provided for in the Austrian Banking Act. Hypo-Haftungsgesellschaft m.b.H

Aid association of the Raiffeisen Banking Group Upper Austria Raiffeisen-Kredit-Garantiegesellschaft m.b.H. Together, the Upper Austrian Raiffeisen banks have established a joint aid association with Raiffeisenlandesbank Oberösterreich AG (Hilfsgemeinschaft der RBG Oberösterreich und Raiffeisen-Kredit-Garantiegesellschaft m.b.H.). It ensures that in case of economic problems the distressed institutions receive help through adequate measures.

Raiffeisenlandesbank Oberösterreich holds a minority interest in Oberösterreichische Landesbank AG (Hypo OÖ) and a majority interest in Salzburger Landes-Hypothekenbank AG (Hypo Salzburg), which belongs to the protection scheme “Hypo Haftungsgesellschaft m.b.H.” under the framework of the association of mortgage banks, as required by law. Furthermore, Hypo Oberösterreich and Hypo Salzburg are also affected because of their membership in the

THE GROUP IFRS financial statements | Disclosures | Other information

Pfandbriefstelle by the FMA mandate of 1 March 2015, which imposed a debt moratorium on HETA ASSET RESOLUTION AG (“HETA”) that will be in force until 31 May 2016. Hypo Oberösterreich and Hypo Salzburg are jointly liable, under Section 2 of the Pfandbriefstelle Law, along with other mortgage banks and their respective guarantors, to the creditors of the Pfandbriefstelle for their liabilities.

Since the debts of the Pfandbriefstelle for HETA are recorded by the debt moratorium, and the Pfandbriefstelle does not have sufficient funds to service the HETA bonds, Hypo Oberösterreich and Hypo Salzburg will participate in liquidity aid for the Pfandbriefstelle. Provisions were created in this context. For details, please refer to the description of provisions in the Disclosures.

Other information Breakdown of remaining maturities Breakdown of remaining maturities as at 31 Dec. 2014 Payable on demand/ no term

up to 3 months

3 months to 1 year

1 to 5 years

more than 5 years

Total

in EUR '000

Cash and cash equivalents Loans and advances to banks

89,086

3,436,390

1,008,250

626,142

995,394

712,962

6,779,138

Loans and advances to customers

19,166,752

1,878,355

2,308,114

3,101,689

6,564,975

5,313,619

Trading assets

223,445

20,308

43,548

664,188

1,999,987

2,951,476

Financial assets

930,131

235,606

260,809

1,642,487

3,104,571

6,173,604

Companies accounted for using the equity method Amounts owed to banks

1,800,077

3,992,837

1,038,858

910,032

3,417,559

1,945,639

11,304,925

Amounts owed to customers

4,599,508

1,333,401

1,238,948

1,228,930

2,115,246

10,516,033

93,833

498,349

1,065,135

3,907,394

3,077,692

8,642,403

118,918

15,576

31,983

386,656

1,649,216

2,202,349

20,024

5,003

160,589

893,657

457,218

1,536,491

Payable on demand/ no term

up to 3 months

3 months to 1 year

1 to 5 years

more than 5 years

Total

in EUR '000

Liabilities evidenced by certificates Trading liabilities Subordinated capital

Breakdown of remaining maturities as at 31 Dec. 2013

Cash and cash equivalents

91,019

Loans and advances to banks

3,177,749

1,235,308

745,905

614,601

589,995

6,363,558

Loans and advances to customers

19,693,620

2,064,145

2,323,951

3,318,197

6,561,193

5,426,134

Trading assets

267,483

25,881

55,684

552,968

1,093,618

1,995,634

Financial assets

964,917

275,986

341,697

1,824,451

2,677,031

6,084,082

Companies accounted for using the equity method Amounts owed to banks

2,037,271

3,658,591

632,391

886,782

3,325,432

1,752,682

10,255,878

Amounts owed to customers

4,440,702

1,938,660

1,360,486

1,641,116

1,793,496

11,174,460

Liabilities evidenced by certificates

112,334

275,009

1,098,072

4,786,315

2,423,972

8,695,702

Trading liabilities

111,970

12,954

29,299

344,885

1,064,517

1,563,625

37,543

28,511

1,053,387

412,238

1,531,679

Subordinated capital

125

126

Annual Report 2014

Loans and advances as well as amounts owed to related companies Loans and advances and amounts owed to related companies as at 31 December 2014 Loans and advances as well as amounts owed by of Raiffeisenlandesbank Oberรถsterreich to parent companies and companies in which Raiffeisenlandesbank Oberรถsterreich holds shares are as follows:

Loans and advances to banks Loans and advances to customers of which loan loss allowances Trading assets Financial assets Companies accounted for using the equity method Other assets Amounts owed to banks Amounts owed to customers Provisions Trading liabilities Other liabilities

Companies accounted for using the equity method

Subsidiaries not fully consolidated

Other related companies

in EUR '000

4,331,263 393,346 0 423,440

0 554,119 16,670 43,373

15 400,032 2,595 5,002 104,077

559,322

250,625

1,800,077

49,314

30,489

1,299,383

44,063

72,406

136,182

39,811

198

1,124

93,140

1,920

509

4,707

Guarantees given

336,897

21,599

20,104

Guarantees received

346,098

Loans and advances and amounts owed to related companies as at 31 December 2013

Companies accounted for using the equity method

Subsidiaries not fully consolidated

Other related companies

in EUR '000

3,858,952 354,095 128 269,572

0 543,754 9,995 31,842

191 369,755 2,718 1,572 87,369

550,563

273,271

2,037,271

59,183

36,275

245

1,031,701

48,750

4,154

152,355

135,852

162

1,733

98,135

1,260

130

481

2,405

2,117

92,459

56,595

39,233

358,624

THE GROUP IFRS financial statements | Disclosures | Other information

The ultimate parent company is a cooperative registered as Raiffeisenbankengruppe OĂ&#x2013; Verbund which is not, aside from its function as a holding company, operationally active. As at the balance sheet date there were no material loans and advances or amounts owed to the parent company. As at 31 December 2014 EUR 23,482 thousand (previous year: EUR 46,534 thousand) were pledged to companies reported under the equity method. From business transactions with companies reported under the equity method and other related companies, the net interest income (without the share of profit or loss of equity-accounted investments) included EUR 79,478 thousand (previous year: EUR 82,864 thousand) and EUR 89,307 thousand (previous year: EUR 44,626 thousand), respectively. Standard market conditions are applied in business relationships with related companies.

Non-consolidated structured companies The following describes all relevant Group business activities with non-consolidated structured companies: Mutual funds The Group founds structured units to fulfil various customer requirements related to investments in specific assets. Carrying amounts of assets and debts of Raiffeisenlandesbank OberĂśsterreich to non-consolidated structured companies as at 31 Dec. 2014 2014 in EUR '000

Assets

12,929

Trading assets

5,880

Loans and advances to customers

7,049

Liabilities

148,847

Trading liabilities

Amounts owed to customers

87,209

Liabilities evidenced by certificates

60,559

Subordinated capital

1,016

Scope of non-consolidated structured companies as at 31 Dec. 2014 The type of business activities in a structured unit determine their scope. For mutual funds for which transactions exist, they are reported as assets administered by the fund. Due to fluctuations in fund assets, an average is reported on the basis of daily asset levels. 2014 in EUR '000

Scope

3,533,866

127

128

Annual Report 2014

Maximum exposure of companies in terms of losses from shares in non-consolidated structured companies as at 31 Dec. 2014 The maximum possible risk of loss is determined by the carrying amounts presented in the statement of financial position (balance sheet). 2014 in EUR '000

Trading assets

5,880

Loans and advances to customers

7,049

Remuneration of the Managing Board and the Supervisory Board Expenses for the remuneration of members of the Managing Board of Raiffeisenlandesbank Oberรถsterreich were broken down out during the financial year as follows: 2014

2013

in EUR '000

Ongoing payments Post-employment benefits Other long-term benefits due

3,791 1,788 44

2,965 2,153 11

Total

5,623

5,129

In 2014, remuneration (including reimbursements for travel expenses) of EUR 543 thousand (previous year: EUR 572 thousand) were paid to members of the Supervisory Board.

Advances and loans to members of the Managing Board and the Supervisory Board Advances and loans to members of the Raiffeisenlandesbank Oberรถsterreich Managing Board and the Supervisory Board consisted of EUR 569 thousand (previous year: EUR 568 thousand) to members of the Managing Board, and EUR 846 thousand (previous year: EUR 1,046 thousand) to members of the Supervisory Board.

Loans to members of the Managing Board and the Supervisory Board are granted on standard banking industry terms. Repayments are made as agreed.

Contingent liabilities and credit risks As at the balance sheet date the following off-balance-sheet obligations existed: 31 Dec. 2014

31 Dec. 2013

in EUR '000

Contingent liabilities

3,424,218

3,657,051

of which endorsed bills sold of which other indemnity agreements

0 3,420,966

0 3,652,484

of which other contingent liabilities

3,252

4,567

Credit risks

4,594,948

5,044,214

of which loan approvals/stand-by facilities

4,594,948

5,044,214

of which non-real repurchase transactions

of which other credit risks

Furthermore, there is a recourse liability to the Salzburger Landeshypothekenbank AG for liabilities from the Pfandbriefstelle for the state mortgage banks (see also the descriptions of the provisions).

THE GROUP IFRS financial statements | Disclosures | Other information

Collateral As at 31 December 2014, securities to the amount of EUR 11,449 thousand (previous year: EUR 11,084 thousand) were held as cover for trust fund deposits of EUR 16,696 thousand (previous year EUR 14,773 thousand). Securities to the amount of EUR 64,301 thousand (previous year: EUR 69,557 thousand) and loans and advances to customers to the amount of EUR 1,759,022 thousand (previous year: EUR 1,384,389 thousand) were held as cover for mortgage bonds, municipal bonds and covered bonds. Loans and advances to customers and banks amounting to EUR 296,750 thousand (previous year: EUR 34,344 thousand) were used as collateral for third-party obligations.

In addition, loans and advances with a carrying amount of EUR 150,000 thousand (previous year: EUR 0) and securities in the amount of EUR 358,244 thousand (previous year: EUR 241,222 thousand) were pledged as collateral at banks and stock exchanges. An amount of EUR 687,315 thousand (previous year: EUR 409,849 thousand) had been lodged with banks and customers under collateral agreements, Loans and advances to banks amounting to EUR 2,015,016 thousand (previous year: EUR 1,881,097 thousand) were ceded. The related contractual provisions are customary in the industry.

Transfers of financial assets 31 Dec. 2014

31 Dec. 2013

Carrying amount of transferred assets

Carrying amount of affiliated liabilities

Carrying amount of transferred assets

Carrying amount of affiliated liabilities

in EUR '000

Repurchase transactions Designated financial instruments Financial assets available for sale (AfS) Financial assets “held-to-maturity”

6,059 66,831 9,340

6,128 67,597 9,447

0 10,594 20,054

0 10,498 19,874

Total

82,230

83,172

30,648

30,372

Liabilities from repurchase transactions in the amount of EUR 83,172 thousand (previous year: EUR 30,372 thousand), which were valued at amortised cost, represent the obligation to return the securities for cash received. The following table shows the fair values of transferred financial assets and affiliated liabilities. 31 Dec. 2014

31 Dec. 2013

Fair value of transferred assets

Fair value of affiliated liabilities

Fair value of transferred assets

Fair value of affiliated liabilities

in EUR '000

Repurchase transactions Designated financial instruments Financial assets available for sale (AfS) Financial assets “held-to-maturity”

6,059 66,831 11,766

6,129 67,603 9,448

0 10,594 20,259

0 10,501 19,879

Total

84,656

83,180

30,853

30,380

129

130

Annual Report 2014

Lease financing (lessor) Receivables from lease financing (finance leases) were as follows: 31 Dec. 2014 Investment (gross) Minimum lease payments up to 1 year 1-5 years over 5 years Non-guaranteed residual values Unrealised net financial income up to 1 year 1-5 years

over 5 years

Investment (net)

31 Dec. 2013

in EUR '000

2,345,452 2,168,976 670,278

2,422,791 2,218,800 708,864

1,064,822 433,876 176,476 227,751 63,537 103,605

1,099,315 410,621 203,991 235,201 69,867 107,138

60,609

58,196

2,117,701

2,187,590

Valuation allowances for uncollectible, outstanding minimum lease payments amounted to EUR 65,056 thousand (previous year: EUR 78,529 thousand). The breakdown of assets leased out under finance leases was as follows:

Vehicle leasing Real estate leasing Equipment leasing Total

31 Dec. 2014

31 Dec. 2013

in EUR '000

863,659 695,324 558,718

898,062 717,868 571,660

2,117,701

2,187,590

Lease financing (lessee) The assets and future minimum lease payments below refer to finance lease agreements in which group companies are the lessees:

Minimum lease payments up to 1 year 1-5 years over 5 years Interest portion Investment (net)

31 Dec. 2014

31 Dec. 2013

in EUR '000

26,970 4,566

27,870 4,865

15,084 7,320

12,844 10,161

1,088

1,126

25,882

26,744

THE GROUP IFRS financial statements | Disclosures | Other information

Operating leases (lessor) The future minimum lease payments shown below refer to non-cancellable operating leases where the group companies are the lessors: 31 Dec. 2014

31 Dec. 2013

in EUR '000

up to 1 year 1-5 years over 5 years

32,431 86,546 108,944

35,229 87,501 122,088

Total

227,921

244,818

Other operating revenues from operating leases amounted to EUR 27,528 thousand for the financial year 2014 (previous year: EUR 26,630 thousand).

Disclosures required under Austrian accounting standards Foreign currency volumes The following volumes of assets and liabilities included in the consolidated financial statements are denominated in foreign currency: 31 Dec. 2014 Assets Equity and liabilities

31 Dec. 2013

in EUR '000

2,267,680 2,143,949

2,369,954 1,810,918

Securities admitted for trading pursuant to section 64 of the Austrian Banking Act Listed

Bonds and other fixed-income securities Shares and other variable fixed-income securities

Non-listed

31 Dec. 2014

31 Dec. 2013

31 Dec. 2014

31 Dec. 2013

in EUR '000

2,178,952

2,119,598

29,981

83,529

80,742

Of the bonds and other fixed-income securities admitted to trading, EUR 2,102,383 thousand (previous year: EUR 2,036,335 thousand) can be allocated to the fixed assets. Of the shares and other variable-yield securities admitted to trading, EUR 43,787 thousand (previous year: EUR 43,940 thousand) can be allocated to the fixed assets.

131

132

Annual Report 2014

Volume of securities trading book in accordance with section 22 of the Austrian Banking Act 31 Dec. 2014

31 Dec. 2013

in EUR '000

Securities Other financial instruments

60,494 1,856,343

73,818 1,683,542

Total

1,916,837

1,757,360

Regulatory equity requirements pursuant to section 64 (1)(17) of the Austrian Banking Act As of 1 January 2014, Regulation (EU) No. 575/2013 (Capital Requirements Regulation, CRR) and Directive (EU) No. 36/2013 (Capital Requirement Directive, CRD IV) went into force to implement Basel III. In addition, the supplementary CRR regulation defines the implementation of transitional provisions of CRR for Austria. The Basel III provisions mean that banks will have to comply with significantly higher equity ratios and tighter liquidity requirements. Consolidated capital at the level of the uppermost finance holding (Raiffeisen Banking Group Upper Austria eGen., a registered co-operative society) breaks down as follows according to CRR: 31 Dec. 2014 in EUR '000

Capital instruments eligible for inclusion as capital equity Tier 1 Aggregate net income and reserves Regulatory adjustments (adjustment items, deductions, minority interests and transitional adjustments) Common Equity Tier 1 (CET1)

1,018,857 1,947,040 â&#x20AC;&#x201C;138,051 2,827,846

Additional Tier 1 capital (AT 1) Tier 1 capital (Tier 1 = CET1 + AT 1) Instruments issued by subsidiaries that count towards Tier 2 capital Regulatory adjustments (adjustment items, deductions and transitional adjustments)

â&#x20AC;&#x201C; 2,827,846 643,443 230,142

Tier 2 capital

873,585

Total capital

3,701,431

The overall risk value (risk-weighted assets, RWA) is divided up as follows: 31 Dec. 2014 in EUR '000

Capital requirements for credit, counterparty, or dilution risk Capital requirements for item, foreign currency, and commodity risks Capital requirements for operational risks Capital requirements for adjustments to credit evaluation (CVA) Total risk value

23,493,875 259,006 1,223,177 193,245 25,169,303

THE GROUP IFRS financial statements | Disclosures | Other information

The capital ratios according to CRR are as follows and are calculated against the total risk value in accordance with Art. 92 CRR: 31 Dec. 2014 Common Equity Tier 1 (CET1 ratio) in % Surplus CET1 (in EUR ‘000) Tier 1 capital ratio in % Surplus Tier 1 capital (in EUR ‘000) Total capital ratio (TC ratio) in % Surplus in total capital (in EUR ‘000)

11.24 1,821,074 11.24 1,443,535 14.71 1,687,887

Raiffeisenlandesbank Oberösterreich will be in a stable equity situation for the next few years – during which the regulatory ratios under Basel III will be exceeded significantly while the SREP ratio prescribed by the ECB will be complied with – enabling the bank to continue providing close support to its customers over the long term. The equity breakdown of the capital of Raiffeisenlandesbank Oberösterreich banking group in accordance with the Austrian Banking Act as of 31 December 2013 under Basel II was as follows: 31 Dec. 2013 in EUR '000

Tier 1 capital Tier 2 capital (supplementary equity) Deduction of equity investments in banks/financial institutions Equity eligible for inclusion Tier 3 capital (short-term supplementary capital) Total capital

2,696,514 1,334,650 –225,970 3,805,194 7,106 3,812,300

The total capital requirement is divided up as follows: 31 Dec. 2013 in EUR '000

Total back-calculated assessment basis

26,363,085

Capital requirement for the credit risk pursuant to section 22 (1) 1 of the Austrian Banking Act Capital requirement for the types of risk in the trading book pursuant to section 22 (1) 2 of the Austrian Banking Act Capital requirement for the operational risk pursuant to section 22 (1) 4 of the Austrian Banking Act

1,988,887

Total capital requirement

2,109,047

Requisite capital, banking book Requisite capital, trading book

1,988,887 7,106

Requisite capital, operational risk Capital surplus Coverage Ratio in % Tier 1 capital in % Capital ratio in %

7,106 113,054

113,054 1,703,253 80.8 9.8 14.5

133

134

Annual Report 2014

The Tier 1 capital ratio refers to the “total back-calculated assessment basis”. Within the framework of equity management, the main focus lies on securing adequate capital resources for the group and ensuring compliance with regulatory capital requirements for the Group. Equity capital is a crucial factor in managing a bank. The minimum value is prescribed by Regulation (EU) No. 575/2013 (Capital Requirements Regulation, CRR) in combination with Directive (EU) No. 36/2013 (Capital Requirements Directive, CRD IV). Accordingly, banks and banking groups must currently back at least 8% of their risk-weighted assets (RWA) with capital. As a securitisation of RWA with Tier 1 capital they are currently required to set aside at least 5.5%. For its internal management, Raiffeisenlandesbank Oberösterreich applies target values that cover all risk types (including from the trading book, currency risk and operational risk). At the same time, Raiffeisenlandesbank Oberösterreich has also set target ratios that are sufficiently above the core Tier 1 capital as required by Basel III so as to avoid any regulatory limitations in its managerial decision-making process. The main focus of attention in this process is on core Tier 1 capital. At the same time, the risk-bearing capacity is determined on the basis of regulatory and economic criteria. It is equal to the maximum losses that the bank or the group could incur without falling below the minimum capital requirements. Because there are constraints on capital eligibility, internal management also focuses on the composition of the equity instruments. In accordance with section 8 of the Capital Requirements Regulations (CRR), this information is published on Raiffeisenlandesbank Oberösterreich’s website (www.rlbooe.at).

Average number of employees pursuant to section 266 of the Austrian Commercial Code 2014

2013

Salaried employees of which VIVATIS/efko

3,539 781

Other employees of which VIVATIS/efko

1,799

1,741

1,779

1,720

Total of which VIVATIS/efko

5,338 2,560

4,989 2,500

3,248 780

Auditors’ fees pursuant to section 266 of the Austrian Commercial Code 2014

Audit of the financial statements Other attestation services Tax consultancy services Other services

KPMG Austria GmbH Wirtschaftsprüfungsund Steuerberatungsgesellschaft* in EUR '000

1,600 34

2013

Österreichischer Raiffeisenverband

KPMG Austria GmbH Wirtschaftsprüfungsund Steuerberatungsgesellschaft*

Österreichischer Raiffeisenverband

in EUR '000

632 88

1,358 88

554 25

275

163

* incl. network companies

In accordance with section 237 (14) of the Austrian Commercial Code, the fee for auditing the financial statements of subsidiary companies is published in the notes to the consolidated financial statements. This is the cumulative fee for auditing the group's financial statement (gross amounts) and those of the subsidiaries.

THE GROUP IFRS financial statements | Disclosures | Other information

Additional information on maturities as required by section 64 of the Austrian Banking Act In 2015, bonds and other fixed-income securities held by the bank to the amount of EUR 224,319 thousand (2014: EUR 341,958 thousand) will mature, along with bond issues of EUR 975,916 thousand (2014: EUR 493,413 thousand).

Expenses for subordinated liabilities Expenses for subordinated liabilities in the 2014 financial year totalled EUR 52,486 thousand (previous year: EUR 50,701 thousand).

Subordinated liabilities In the case of subordinated liabilities, the subordination is always agreed separately in writing pursuant to § 51 Section 9 of the Austrian Banking Act.

Information on branches pursuant to section 64 (1) 18 of the Austrian Banking Act Germany

Czech Republic

Raiffeisenlandesbank Oberösterreich Branch in Southern Germany

PRIVAT BANK AG Raiffeisenlandesbank OÖ Branch in Southern Germany

PRIVAT BANK AG Raiffeisenlandesbank OÖ Branch in Prague

in EUR '000

Division

Bank

Private Banking

Net interest income

32,098

Operating income

16,564

2,807

1,523

31 Dec. 2014

Number of full-time employees

Pre-tax profit for the year

1,082

131

107

Taxes on income

2,113

Public grants received

Return on total capital employed As at 31 December 2014, the return on total capital employed (ratio of after-tax profit for the year to total assets) was 0.09% (previous year: 0.44%).

135

136

Annual Report 2014

Events after the balance sheet date Significant events that occurred after the balance sheet date are described below. On 15 January 2015, the Swiss National Bank (SNB), in a surprise move, abolished the minimum exchange rate of 1.20 EUR/CHF that had been in place for over three years. At the same time, it lowered the target range for the threemonth Libor by 0.5 percentage points, taking interest rates even further into negative territory. This was meant to provide a cushion against the effects from the removal of the exchange rate cap. This surprising announcement by the SNB caused real shock waves and a short-term explosion of the exchange rate to an all-time high of 0.85 EUR/CHF. In terms of fundamentals, the Swiss franc has long been a strong currency due to the strength of the Swiss economy and strong demand for investments in francs. Without official intervention from the SNB it will be quoted at stronger rates in the foreseeable future than the pegged rate of 1.20 EUR/CHF that was being defended until the beginning of the year. Forecasts for exchange rates are difficult to make due to an internationally divergent monetary policy environment, and elevated geopolitical and economic risks. Correspondingly, we anticipate increased volatility in the coming months. Because Raiffeisenlandesbank Oberösterreich is only exposed to a minor degree to currency risk related to the CHF, this event has not had any material impact. After the currency exchange turbulence at the end of 2014 with the Russian rouble (RUB), there were devaluations in early 2015 of the Ukrainian hryvnia (UAH) and the Belarusian rouble (BYR), which will likely have effects on the quality of the credit portfolio – yet only slight effect on capital – of the RZB Group for the financial year 2015. In February 2015, Raiffeisenbank International (RBI) decided to take a series of measures to increase its capital buffer. This should lead to an improvement in the CET1 ratio (fully loaded) up to

12% by the end of 2017 (2014: 10%). The planned steps will especially affect those business fields within the RBI Group that generate low profits, have high capital requirements, or are of secondary strategic importance. The measures include the sale of units in Poland and Slovenia, as well as the direct bank Zuno. We are planning a reduction of risk-weighted assets in Russia by about 20%, and in the Ukraine by about 30%. Business activities in Asia and the USA will be significantly reduced or closed by the end of 2016. Some of these cutbacks are being offset by growth in other business fields. On 1 March 2015, the Austrian federal government decided to phase out the HETA ASSET RESOLUTION AG (HETA) – the wind-down company for Hypo Alpe Aldria that has existed since March 2014 – under the European bank-dismantling regime. In this context, a provision in the amount of EUR 15.5 million was created within the Raiffeisenlandesbank Oberösterreich Group on 31 December 2014 (see also the descriptions of the provisions). On 25 Mar. 2015, Raiffeisenbank International AG (RBI) announced its results for the 2014 financial year, together with details of the restructuring measures that it was planning to take subsequently. The measures that are being set in place by RBI in individual Eastern European markets have shortand medium-term character. Because the majority of the associated restructuring costs will most likely be posted in 2015, the Group results for RBI may turn out to be negative, which will then affect the results of the Raiffeisen Zentralbank AG as the majority shareholder of RBI. There were no further events of particular significance after the reporting date. The consolidated financial statements were compiled on 7 April 2015 and presented to the Supervisory Board.

The members of the boards of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft CEO and Chairman of the Managing Board Heinrich Schaller, Chief Executive and Chairman of the Managing Board Deputy Chairwoman of the Managing Board Michaela Keplinger-Mitterlehner, Deputy Chief Executive Members of the Managing Board Stefan Sandberger, Member of the Managing Board Reinhard Schwendtbauer, Member of the Managing Board Georg Starzer, Member of the Managing Board Markus Vockenhuber, Member of the Managing Board Information on the members of the Raiffeisenlandesbank Oberösterreich Supervisory Board can be found on pages 12 and 13.

THE GROUP IFRS financial statements | Disclosures | Other information

Linz, 7 April 2015 Raiffeisenlandesbank Oberรถsterreich Aktiengesellschaft Europaplatz 1a, 4020 Linz THE MANAGING BOARD

Heinrich Schaller Chief Executive and Chairman of the Managing Board

Michaela Keplinger-Mitterlehner Deputy Chief Executive

Stefan Sandberger Member of the Managing Board

Reinhard Schwendtbauer Member of the Managing Board

Georg Starzer Member of the Managing Board

Markus Vockenhuber Member of the Managing Board

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Audit Certificate Report on the consolidated financial statements I have audited the attached consolidated financial statements of Raiffeisenlandesbank OberĂśsterreich Aktiengesellschaft, Linz, for the financial year from 1 January 2014 to 31 December 2014, taking into consideration the accounting. These consolidated financial statements include the consolidated balance sheet as at 31 December 2014, the statement of comprehensive income, the group cash flow statement and the group statement of changes in equity for the financial year ending 31 December 2014, plus the disclosures to the consolidated financial statements.

Responsibility of the legal representatives for the consolidated financial statements The legal representatives of the company are responsible for the Group accounting and for compiling consolidated financial statements that present a true and fair view of the assets, financial position and earnings of the company in accordance with the International Financial Reporting Standards (IFRSs) as they are applied in the EU as well as with additional requirements stipulated in sections 245a of the Austrian Commercial Code and 59a of the Austrian Banking Act. This responsibility includes: the design, implementation and maintenance of an internal control system, to the extent that this is necessary for the preparation of the consolidated statements and to present as true a picture as possible of the group's net assets, financial position and profit situation so that these consolidated statements are free from material misrepresentations, whether due to intentional or unintentional mistakes. It also includes choosing and applying suitable accounting and valuation methods and making estimates that appear appropriate under the existing circumstances.

Responsibility of the auditor and a description of the type and scope of the statutory audit My responsibility lies in the submission of an audit opinion on these consolidated financial statements on the basis of my inspection. My audit was conducted in accordance with the prevailing statutory provisions and the international

standards on auditing (ISA) as published by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). These standards require that I plan and perform the audit in such a manner that I can form a reasonable opinion as to whether the consolidated financial statements are free of material misstatement. An audit includes the implementation of auditing actions to obtain auditing proof in respect of the amounts and other details given in the consolidated financial statements. The choice of auditing actions is left to the obligatory discretion of the auditor of the consolidated financial statements, taking into account his assessment of the risk of material misstatements occurring, whether due to intended or unintended errors. In assessing this risk, the auditor of the consolidated financial statements takes into account the internal control system, insofar as it is important for compiling the consolidated financial statements and presenting a true and fair view of the assets, financial position and earnings of the company, in order to determine suitable auditing actions taking account of the framework conditions, not however to submit an auditing opinion about the effectiveness of the companyâ&#x20AC;&#x2122;s internal control system. The audit also included my evaluation of the adequacy of the applied accounting and valuation methods and the essential estimates made by the legal representatives of the company as well as an assessment of the overall tenor of the consolidated financial statements. I believe that I have obtained sufficient and suitable auditing proof, so that my audit provides a reasonable basis for my opinion.

Auditorâ&#x20AC;&#x2122;s opinion The results of my audit gave no reason for objection. On the basis of the knowledge gained during the audit, in my judgement the consolidated financial statements comply

THE GROUP Audit Certificate

with the legal regulations and present a true and fair view of the group’s assets and financial position as at 31 December 2014 and the group’s earnings and cash flow in the financial year from 1 January 2014 to 31 December 2014, in accordance with the International Financial Reporting Standards (IFRSs), as they are applied in the EU.

Statement concerning the Group management report According to the Austrian legal regulations, the group management report is to be audited as to whether it is consistent with the consolidated financial statements and whether

or not other details given in the group management report give a misleading impression of the group’s financial position. The audit certificate must also include a statement as to whether the group management report is consistent with the consolidated financial statements and whether or not the details according to section 243a (2) of the Austrian Commercial Code apply. In my opinion, the group management report is consistent with the consolidated financial statements. The details according to section 243a (2) of the Austrian Commercial Code apply.

Vienna, 7 April 2015 As auditor for Österreichischer Raiffeisenverband:

Alexandra Wurm Chartered Accountant and Auditor

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Audit Certificate Report on the consolidated financial statements We have examined the attached consolidated financial statements of Raiffeisenlandesbank OberĂśsterreich Aktiengesellschaft, Linz, for the financial year from 1 January to 31 December 2014, taking the accounting into consideration. These consolidated financial statements include the consolidated balance sheet as at 31 December 2014, the group income statement, the group cash flow statement and the group statement of changes in equity for the financial year ending 31 December 2014, plus the disclosures to the consolidated financial statements. In terms of our responsibility and liability as auditors to the company and to third parties, section 275 of the Austrian Commercial Code shall apply.

Responsibility of the legal representatives for the consolidated financial statements The legal representatives of the company are responsible for the Group accounting and for compiling consolidated financial statements that present a true and fair view of the assets, financial position and earnings of the company in accordance with the International Financial Reporting Standards (IFRSs) that are applicable in Austria, as they are applied in the EU. This responsibility includes: the design, implementation and maintenance of an internal control system, to the extent that this is necessary for the preparation of the consolidated statements and to present as true a picture as possible of the group's net assets, financial position and profit situation so that these consolidated statements are free from material misrepresentations, whether due to intentional or unintentional mistakes. It also includes choosing and applying suitable accounting and valuation methods and making estimates that appear appropriate under the existing circumstances.

Responsibility of the group auditor and a description of the type and scope of the statutory audit Our responsibility lies in the submission of an audit opinion on these Group financial statements on the basis of our inspection. Our audit was conducted in accordance with

the prevailing statutory provisions and the international standards on auditing (ISA) as published by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). These standards require that we plan and perform the audit in such a manner that we can form a reasonable opinion as to whether the consolidated financial statements are free of material misstatement. An audit includes the implementation of auditing actions to obtain auditing proof in respect of the amounts and other details given in the consolidated financial statements. The choice of auditing actions is left to the obligatory discretion of the auditor of the consolidated financial statements, taking into account his assessment of the risk of material misstatements occurring, whether due to intended or unintended errors. In assessing this risk, the auditor of the consolidated financial statements takes into account the internal control system, insofar as it is important for compiling the consolidated financial statements and presenting a true and fair view of the assets, financial position and earnings of the company, in order to determine suitable auditing actions taking account of the framework conditions, not however to submit an auditing opinion about the effectiveness of the companyâ&#x20AC;&#x2122;s internal control system. The audit also included my evaluation of the adequacy of the applied accounting and valuation methods and the essential estimates made by the legal representatives of the company as well as an assessment of the overall tenor of the consolidated financial statements. We believe that we have obtained sufficient and suitable auditing proof, so that our audit provides a reasonable basis for our opinion.

Auditorâ&#x20AC;&#x2122;s opinion The results of our audit gave no reason for objection. On the basis of the knowledge gained during the audit, in our

THE GROUP Audit Certificate

judgement the consolidated financial statements comply with the legal regulations and present a true and fair view of the group’s assets and financial position as at 31 December 2014 and the group’s earnings and cash flow in the financial year from 1 January 2014 to 31 December 2014, in accordance with the International Financial Reporting Standards (IFRSs), as they are applied in the EU.

Statement concerning the group management report According to the Austrian legal regulations, the group management report is to be audited as to whether it is

consistent with the consolidated financial statements and whether or not other details given in the group management report give a misleading impression of the group’s financial position. The audit certificate must also include a statement as to whether the group management report is consistent with the consolidated financial statements and whether or not the details according to section 243a (2) of the Austrian Commercial Code apply. In our opinion, the group management report is consistent with the consolidated financial statements. The details according to section 243a (2) of the Austrian Commercial Code apply.

Linz, 7 April 2015 KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Martha Kloibmüller Chartered accountant and auditor

Cäcilia Gruber Chartered accountant and auditor

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Annual Report 2014

GENERAL INFORMATION

143

If you believe in the future you have to help shape it. Progress, prosperity and a regionâ&#x20AC;&#x2122;s attractiveness are inseparable from competent financial services. As an important component of the infrastructure of society, Raiffeisenlandesbank OberĂśsterreich believes that it is responsible for securing the competitiveness of our business location over the long term. As a partner for forward-looking companies and as a reliable employer.

144

Annual Report 2014

MANAGEMENT REPORT 2014 1. Business development and the economic situation_______________________________________________ 145 2. Outlook and risks___________________________________________________________________________ 152 3. Research and development___________________________________________________________________ 155 4. Report on the most important aspects of the internal control and risk management system with regard to the accounting process__________________________________________________________ 156

RAIFFEISENLANDESBANK OBERÖSTERREICH Management Report 2014 l Business development and the economic situation

Management Report 2014 of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft 1. Business development and the economic situation 1.1. Economic background 2014 Developments in the global economy were more subdued than expected and highly heterogeneous in 2014. While the Anglo-Saxon countries experienced a robust recovery, the euro zone could not find its way out of continued economic weakness, while major national economies such as those of Japan, Brazil, and Russia fell into a recession. Several less calculable special factors determined economic events in 2014, such as political crises in the Middle East and Russia, and the significant fall in oil prices in the second half of the year. The USA posted solid growth in 2014, aside from a slump in the first quarter. On one hand, fiscal policy had a stimulating effect and continues to be very expansive, despite the end of the bond repurchase programme in October. On the other hand, the fiscal braking effects of the automatic spending cuts (“sequester”) also ran out. The recovery in the labour market is supporting private consumption. The indebtedness of private households continued to decline. Growth in the emerging countries continues to be higher than in the industrial nations, yet they cannot attain the high rates of growth from before 2008. In general, their growth potential seemed to weaken due to structural bottlenecks as well as financial and macroeconomic imbalances. The euro zone started 2014 with real optimism, yet lost its momentum in the summer. Developments within the currency area continues to be heterogeneous, whereby the growth dynamic seems to be shifting overall. While a few countries on the periphery turned things around thanks to reforms (Ireland, Spain), other countries are not gaining traction. Countries such as France, Italy and Greece were not able to shake off their problematic situation. Germany defended its title as the strongest national economy in the euro area; GDP growth of 1.6% for 2014 was significantly above the average for the currency union at 0.8%. The positive stimuli in the German economy came primarily from

domestic demand; consumer spending was buoyant and investment activities developed positively. The Austrian economy also had a very confident start, yet lost significant momentum throughout 2014, a development that was due to several factors: The weak development in real income and rising unemployment are slowing down private consumption, exports are languishing under the absence of economic dynamism in the euro area and in the emerging countries, and companies have again adopted a wait-and-see attitude regarding investments due to uncertain developments in domestic and international sales markets. The Upper Austrian manufacturing industry and the construction industry developed in 2014 somewhat more dynamically than the national Austrian average, though. Above all, however, the highly export-focused industry is being impacted by the weaker economic situation and the consequences of the Ukraine crisis. Upper Austria was able to defend its position as one of the federal states with the lowest unemployment rate, also the currency economic environment has also had effects on the labour market.

1.2. Business development As in previous years, Raiffeisenlandesbank Oberösterreich proved in 2014 to be a very stable and reliable partner for its customers in these continuing challenging global economic conditions and the framework conditions caused by them. A number of different measures and projects are ensuring that we meet current challenges and additional legal regulations in the context of active cost and risk management. We are constantly thinking about utilising synergies and further intensifying our focus on the customer, thereby improving our efficiency even more. Furthermore, based on the bank's strengths – a sound financial base, special customer focus and market penetration as market leader in Upper Austria, a global network and the breadth of the business areas offered – Raiffeisenlandesbank Oberösterreich maintained its position as a stable, reliable partner both for customers and for the real economy.

145

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Careful management of equity Raiffeisenlandesbank Oberösterreich adapted to the higher equity regulations under Basel III quite some time ago, by converting its total equity – which had previously consisted of ordinary and preferred shares as well as participation capital – into ordinary shares. Nevertheless we pay particular attention to careful management of available equity. As a result of this strategy, Raiffeisenlandesbank Oberösterreich managed to increase its Tier 1 capital ratio even further in 2014. Cautious risk policy The general economic situation continued to present challenges to a few sectors in 2014. Raiffeisenlandesbank Oberösterreich successfully continued its cautious risk policy in order to allow it to fulfil its role as an important partner to companies and meet its responsibilities to its customers in this more difficult environment. An even more efficient organisation The objective of using synergies and thereby reducing costs was also consistently pursued further in 2014. Following the consolidation of the all the processing divisions, including securities processing, treasury processing and the processing of payment transactions and loans into one central “Operations” unit, the Corporate Customers divisions at Raiffeisenlandesbank Oberösterreich have now been consolidated and reorganised under one Managing Board area. A new sales and product division was also created for corporate customers which will support corporate customer representatives in their product and sales work. ECB issues a good rating to Raiffeisenlandesbank Oberösterreich Raiffeisenlandesbank Oberösterreich was the only Upper Austrian bank to be classified as a “significant” institution in the currency union by the European Central Bank (ECB) because of currency classes. This is why as of March 2014 the ECB subjected Raiffeisenlandesbank Oberösterreich to an intensive review in which 700 financing cases were assessed for impairment. The test also included the themes of processes and policies, an analysis of portfolio valuation, evaluation of securities, and review of fair value exposures. The tests results were then used as a basis to examine crisis resistance and stability by means of different stress scenarios. Raiffeisenlandesbank Oberösterreich was able to exceed by a significant margin the Tier 1 capital ratio in all applied calculation scenarios, thereby proving itself to

be robust and resistant in this stress test and Asset Quality Review (AQR). In the “normal” stress scenario (baseline scenario), a minimum Tier 1 capital ratio of 8% was required. In this test, Raiffeisenlandesbank Oberösterreich attained a Common Equity Tier 1 (CET1) ratio of 10.55% in 2014, as well as 11.0% in 2015 and 11.31% in 2016. An adverse stress scenario required a minimum Tier 1 capital ratio of 5.5%. Raiffeisenlandesbank Oberösterreich came in here at 9.13% for 2014, 8.82% for 2015, and 7.93% for 2016. The impairment potentials identified in the random samples taken for the AQR were analysed thoroughly, taken into account to a considerable degree in the ongoing financial year 2014, and included in the annual financial statements. For details on the effects, see the sections “1.3. Loan loss allowances”, “1.5. Investments”, and “1.12. Derivative financial instruments” in the Disclosures. Furthermore, the ECB, in cooperation with the Oesterreichische Nationalbank (OeNB), conducted data surveys for the Supervisory Review and Evaluation Process (SREP). On the basis of these results, a CET1 and TC (Total capital) ratio was assigned to Raiffeisenlandesbank Oberösterreich at the Group level. Source of funds/capital structure

Amounts owed to banks Savings and giro deposits Own issues Equity Other liabilities Total capital

31 Dec. 2014

31 Dec. 2013

in EUR m

in %

12,565

41.1

7,384 7,619 2,595 380

in %

Change in EUR m

in %

11,577

37.8

988

24.2

8,033

26.3

–649

–8.1

25.0 8.5

8,043 2,572

26.3 8.4

–424 23

–5.3 0.9

1.2

361

1.2

5.2

–43

–0.1

30,543 100.0

30,586 100.0

8.5

Amounts owed to banks rose year-on-year by EUR 988 million, or 8.5 %, to EUR 12,565 million. Increased inflows from the Upper Austrian Raiffeisen banks and subsidiary banks (Privat Bank AG and bankdirekt.at AG), as well as participation in the long-term tender (TLTRO) of the ECB, contributed to this increase. The amounts owed to banks with a fixed maturity or notice period amounted to EUR 8,068 million as at 31 December 2014. Of this total, an amount of EUR 2,542 million was accounted for by long-term funding from the Upper Austrian

RAIFFEISENLANDESBANK OBERÖSTERREICH Management Report 2014 l Business development and the economic situation

Raiffeisen banks. In addition, there are long-term refinancing instruments totalling EUR 4,653 million from borrower's notes and subsidy providers (such as the Oesterreichische Kontrollbank and the European Investment Bank).

to customers, liquidity in the Austrian Raiffeisen sector was extended further. This led to an increase in loans and advances to banks. Increase in investment finance

Of the liabilities repayable on demand owed to banks in the amount of EUR 4,497 million, an amount of EUR 2,823 million was accounted for by deposits from Raiffeisen banks in Upper Austria. Own issues and customer deposits fell by 6.7% year-on-year: Issuing volumes fell year-on-year by EUR 424 million or 5.3% and amounted to a total of EUR 7,619 million on 31 December 2014. This can be attributed to the fact that, in 2014, there was on one hand a high concentration of maturities; on the other hand, due to a good liquidity position according to planning guidelines, issuances were performed only selectively in longer maturity ranges. Customer deposits, comprising savings deposits of EUR 869 million as well as fixed-term deposits and deposits repayable on demand of EUR 6,515 million, amounted to EUR 7,384 million on the 2014 reporting date. Due to the good liquidity situation at the Upper Austrian Raiffeisen banks and subsidiary banks, as well as the generally low level of interest rates, Raiffeisenlandesbank Oberösterreich was only active in this market on a very selective basis. Equity capital rose year-on-year by EUR 23 million or 0.9% to EUR 2,595 million. Application of funds/assets structure

Loans and advances to customers Loans and advances to banks Securities Investments and shares in affiliated companies Other assets Total assets

31 Dec. 2014

31 Dec. 2013

in EUR m

in %

in EUR m

in %

16,267

53.2

16,737

54.7

–470

–2.8

7,331 4,858

24.0 15.9

6,700 4,971

21.9 16.2

631 –113

9.4 –2.3

1,803 284

5.9 1.0

1,887 291

Change in EUR m

in %

6.2 1.0

–84 –7

–4.5 –2.4

30,543 100.0 30,586 100.0

–43

–0.1

Loans and advances to customers declined year-on-year by EUR 470 million to EUR 16,267 million as at the 2014 reporting date. Due to a reduction in loans and advances

Raiffeisenlandesbank Oberösterreich has enough liquidity to be able to continue actively and aggressively supporting its customers with their successful projects. Investment finance provided by Raiffeisenlandesbank Oberösterreich increased by 3.0% in 2014. Loans and advances to banks increased during the course of 2014 by EUR 631 million to EUR 7,331 million. Of the loans and advances at the end of the year, EUR 1,230 million was refinanced to Raiffeisen banks in Upper Austria. The total included loans and advances to Raiffeisen Zentralbank in the amount of EUR 3,142 million. High level of liquidity and credit quality in the securities portfolio Securities held by the bank diminished by 2.3% to EUR 4,858 million in 2014. As at the end of the year, these securities comprised EUR 1,079 million in public-sector debt instruments and similar securities, EUR 1,776 million in bonds and other fixed-income securities, and EUR 2,003 million in shares and other variable-yield securities (e.g. fixed-income funds). As an additional liquidity reserve, Raiffeisenlandesbank Oberösterreich holds a large portfolio of unrestricted loan collateral instruments which are recognised by the Österreichische Nationalbank as eligible collateral and can therefore be used at any time to obtain central bank funding. As in previous years, all securities held as fixed assets were measured according to the strict lower of cost or market principle. Equity investments and shares in affiliated companies fell by EUR 84 million compared with the previous year. This decrease is attributed to disposals and amortisation. Other assets, consisting of cash and cash on hand and balances at central banks, intangible fixed assets, property and equipment, other fixed assets and prepaid expenses, fell year-on-year by 2.4% to EUR 284 million. Results of operations The operating result of Raiffeisenlandesbank Oberösterreich fell by 9.3% to EUR 287.2 million in 2014.

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Annual Report 2014

The prudent risk policy pursued in previous years was maintained because of the generally challenging economic conditions faced by the bank.

General administrative expenses in 2014 comprised EUR –101.2 million in personnel expenses and EUR –94.3 million in other administrative expenses.

The underlying reason for the profit on ordinary activities at Raiffeisenlandesbank Oberösterreich of EUR 91 million was a net allowance and provision expense of EUR 137.8 million arising from the reversals and additions in respect of allowances for losses on loans and advances and in respect of provisions for contingent liabilities and credit risk.

Other expenses totalled EUR 65.3 million, a year-on-year increase of 28.8%. This is attributable to the valuation of derivatives, among other factors.

Profit on ordinary activities also included a net expense of EUR –58.4 million arising from value adjustment and income from value adjustments to securities measured as financial assets, as well as investments and shares in affiliated companies. 2014 in EUR m

2013 in EUR m

in % Ø BS

240.8

0.77

7.3

0.47

–10.0

0.51

–2.2

1.74

–0.1 5.5

Net interest income Income from securities and equity investments Other income

258.4

0.85

132.3

0.43

157.3

0.51

Operating income

548.0

1.79

–101.2

–0.33

–95.9

–0.30

Personnel expenses Administrative expenses Other expenses Operating expenses Operating profit Profit from ordinary activities Other taxes and taxes on income and earnings Profit for the year Ø Total assets

160.9 548.7

in %

–94.3

–0.31

–85.4

–0.27

10.4

–65.3

–0.21

–50.7

–0.16

28.8

–260.8

–0.85

–232.0

–0.74

12.4

287.2

0.94

316.7

1.01

–9.3

91.0

0.30

120.2

0.38

–24.3

–38.9

–0.13

–24.1

0.08

61.4

52.1

0.17

0.31

–45.8

30,564

96.1

Other taxes and taxes on income were up by 61.4%. This increase over 2013 was caused by a higher stability fee of EUR 31.7 million, which was a year-on-year increase of EUR 13.9 million or 78%.

Change

in % Ø BS

147.0

Total operating expenditure rose by 12.4% compared with 2013. A major reason for this were the expenses associated with regulatory requirements. The direct costs from AQR and the stress test totalled up to about EUR 6.2 million.

31,476

Net interest income in 2014 was EUR 258.4 million, 7.3% higher than in the previous year.

Overall, profit for the year fell year-on-year by about 46% to EUR 52.1 million for the past financial year.

1.3. Branches and regional branch offices Branches The financial services on offer, as well as flexibility in consultancy and management, are adapted on an ongoing basis to the current needs of our customers. Along with the constant further development of technological abilities in customer service, for example, we also offer customer appointments outside of regular banking hours. In order to pool the bank's advisory expertise in Linz and the surrounding region, the customer business was relocated on 31 July 2014 from the Franckstrasse branch to the Raiffeisenlandesbank Oberösterreich branch at the Südbahnhofmarkt. Raiffeisenlandesbank Oberösterreich therefore had, in addition to its headquarters, 17 bank branches in Upper Austria as of 31 December 2014. The bank branches had a total of 80,376 customers, which was a 27.6% share of customers in the market area. Roughly 200 employees with appropriate skills and qualifications are available to provide comprehensive support for retail and business customers.

Income from securities and equity investments amounted to EUR 132.3 million, which equated to a year-on-year decrease of 10.0%.

Branches in Southern Germany

Other income amounted to EUR 157.3 million, down by 2.2% compared with the previous year’s figure. In 2014, the net income from fee and commission business included within other income came to EUR 80.1 million, up by 1.5% year on year.

In addition, Raiffeisenlandesbank Oberösterreich has been operating its own southern Germany office since 1991. At the end of 2014, Raiffeisenlandesbank Oberösterreich had a total of eight locations in Augsburg, Passau, Nuremberg, Munich, Regensburg, Würzburg, Ulm and Heilbronn. The main focus of activities at the regional branch office in southern Germany is on corporate banking.

Operating income continued at a high level of EUR 548.0 million in 2014.

RAIFFEISENLANDESBANK OBERÖSTERREICH Management Report 2014 l Business development and the economic situation

1.4. Financial and non-financial performance indicators Key income figures The main key performance indicators, as used in international comparisons, are as follows: The cost-income ratio, i.e. the ratio of operating expenses to operating income, was 47.6% in 2014 (2013: 42.3%). Return on equity for 2014, calculated as the ratio of after-tax profit for the year to average equity for the year, came to 2.0% (2013: 3.8%). Equity Total Raiffeisenlandesbank Oberösterreich equity eligible as own funds in accordance with Capital Requirements Regulations (CRR) amounted to EUR 3,334.8 million at the end of 2014. The statutory capital requirement was EUR 1,712.2 million. This resulted in a capital surplus of EUR 1,622.6 million as at the reporting date. The total capital ratio at the end of 2014 was 15.6%. Overall, Tier 1 capital amounted to EUR 2,481.8 million, corresponding to a Tier 1 capital ratio of 11.6% according to CRR for 2014. Raiffeisenlandesbank Oberösterreich will be in a stable equity situation for the next few years – in which the regulatory ratios under Basel III were exceeded significantly – enabling the bank to continue providing close support to its customers over the long term. Basel III As of 1 January 2014, Regulation (EU) No. 575/2013 (Capital Requirements Regulation, CRR) and Directive (EU) No. 36/2013 (Capital Requirement Directive, CRD IV) went into force to implement Basel III. In addition, the supplementary CRR regulation defines the implementation of transitional provisions of CRR for Austria. The Basel III provisions mean that banks will have to comply with significantly higher equity ratios and tighter liquidity requirements. Raiffeisenlandesbank Oberösterreich has however prepared itself well with various projects in past years. Institutional protection scheme These regulatory changes have also given rise to the need for additional adjustments in decentralised banking groups. The previously existing Institutional Protection Scheme (IPS) for Upper Austria had to be adjusted to the particulars of newly promulgated European law. An IPS is a liability or

indemnity agreement – created by means of a contractual agreement or through articles of association, statutes or charters – that provides protection for member banks in a decentralised banking group. Such an agreement sets out the terms on which the member banks stand together and provide mutual solidarity. Under Article 49 of the Capital Requirements Regulation (CRR) banks must, when determining their capital adequacy, deduct the equity instruments of other banks that they hold unless there is the exemption pursuant to Article 49 (3) of the CRR in connection with Article 113 (7) of the CRR based on an IPS signed with the banks concerned. Raiffeisenlandesbank Oberösterreich is a member of the regional state IPS, whose members also include all Raiffeisen banks in Upper Austria, as well as the Raiffeisen-Kredit-Garantiegesellschaft m.b.H. Raiffeisen-Einlagensicherung OÖ reg. Gen. m.b.H. acts as the trustee and manages the assets of the scheme. In addition, Raiffeisenlandesbank Oberösterreich is a member of the federal IPS, whose members also include Raiffeisen Zentralbank Österreich AG (RZB), all of the Austrian Raiffeisenlandesbanks, Raiffeisen Wohnbaubank AG, Raiffeisen-Holding Niederösterreich-Wien reg. Gen. m.b.H., Zveza Bank and Raiffeisen Bausparkasse GmbH. In this case, Österreichische Einlagensicherung eGen has assumed the role of trustee. Under Section 113 (7) of the CRR, and subject to consent from the relevant regulatory authorities, banks may give a risk weighting of 0% to risk exposures in respect of counterparties with whom the bank has signed an IPS, although this does not apply to risk exposures that make up items of Core Tier 1 capital, additional Tier 1 capital or Tier 2 capital as specified by the CRR. The Austrian financial market regulator has issued approval for both of the IPSs in which Raiffeisenlandesbank Oberösterreich is a member and recognised its privileges under Article 49 (3) and Article 113 (7) of CRR. Human resources management In the financial year 2014, Raiffeisenlandesbank Oberösterreich had on average a banking staff of 918 and thus offered a large number of top quality, attractive full- and part-time jobs (part-time quota: 11.7%). Strong positioning with the career portal enteryourfuture.at Qualified and committed employees are the most important capital at Raiffeisenlandesbank Oberösterreich. To appeal to new employees and position ourselves as a more attractive employer in the battle for top talent, Raiffeisenlandesbank Oberösterreich has conducted an “employer branding”, overhauled its strong Internet presence, and established a presence on job platforms such as the career portal, enteryourfuture.at. enteryourfuture.at facilitates a

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transparent and quick application process, as well as clear and respectful communication with applicants. Regional and local career pages on the Internet enable direct contact between Raiffeisenbank and applicants. Virtual employer branding is practically unavoidable today. This is why Raiffeisenlandesbank Oberösterreich is joining the promising path that enteryourfuture.at, as a contemporary medium, offers for the recruiting of valuable employees. Manifold educational and training opportunities Raiffeisenlandesbank Oberösterreich provides its staff with all kinds of opportunities in the training of its young employees – such as apprenticeships based on job rotation programmes, school-leaver apprenticeships, trainee programmes, and e-learning modules on various campaigns and opportunities. One successful example of our forward-looking internal human resources policies is the Raiffeisen Oberösterreich Academy, which uses individually designed training programmes to prepare tomorrow’s managers for interesting tasks. Training and professional development is offered at the state-of-the-art Raiffeisen Training Centre, which opened in 2012 in the BlumauTower. In addition, the online teaching platform Raiffeisen@Learning is used extensively for internal training and professional development. Work/life balance Raiffeisenlandesbank Oberösterreich also emphasises the importance of a work-life balance and is a certified family-friendly organisation, offering its own kindergarten and toddler group/crèche known as “Sumsi's Learning Garden” in which the working languages are both German and English. The bank also offers a special summer kindergarten which is being continuously expanded because of the huge demand for places. Additional features of the family-friendly approach at Raiffeisenlandesbank Oberösterreich include flexible working hours and measures taken to actively support those returning from parental leave. Cooperation within the Raiffeisen association providing strength Close cooperation between the Raiffeisen banks in Upper Austria, whose skills are available locally, and the specialists at Raiffeisenlandesbank Oberösterreich, results in Raiffeisen Oberösterreich combining its strengths in the interests of its customers. This healthy, strong structure enables an extraordinary focus on the customer and highly dynamic assistance to customers with creative financial services.

Successful through the practise of subsidiarity and solidarity The Raiffeisen banking group in Upper Austria is a strong community. The Upper Austrian Raiffeisen banks, as owners of the Raiffeisenlandesbank Oberösterreich, exercise their ownership rights over the Raiffeisen Banking Group Upper Austria. The decisive factor here is the founding idea of co-operation at Raiffeisen: every co-operative company has a voice, regardless of its size. Raiffeisen OÖ relies on the subsidiarity principle: the superordinated co-operative society should not take over what the local Raiffeisen banks can do on their own. Raiffeisenlandesbank Oberösterreich takes on global functions in its capacity as an incorporated company, yet views itself as a coordinating hub within the co-operative society. It advises the Raiffeisen banks in operational, organisational and legal affairs, supports them in their sales work, and provides a training and further education system. Bundling our strengths Our focus on the requirements and needs of our customers is unique. The Raiffeisen Banking Group Upper Austria achieves a balance between local roots and global support for customers. This networked method of work is possible thanks to the contemporary, modern structure of Raiffeisen OÖ. The co-operative society goes into action wherever Raiffeisen banks need support so that they can offer their customers the best possible support for all of their projects. This preserves regional strength and a direct customer relationship. As a supplement, working together within the co-operative society also guarantees security, strength and dynamism for Raiffeisen in Upper Austria. Raiffeisen Banking Group Upper Austria 2020 The “Raiffeisen Banking Group Upper Austria 2020” project on the Group’s future orientation was continued in 2014. Under a new form of organisation in Raiffeisenlandesbank Oberösterreich and with even greater cooperation within the Raiffeisen Banking Group Upper Austria, this involved a large number of measures being initiated, some of which have already been initiated and implemented. The aim is to simplify structures, take advantage of synergies and potential, and further improve efficiency: this will enable us not just to hold, but to expand, our position as the market leader in Upper Austria in the future.

RAIFFEISENLANDESBANK OBERÖSTERREICH Management Report 2014 l Business development and the economic situation

Raiffeisen climate protection initiative Climate protection and sustainability are very important at Raiffeisenlandesbank Oberösterreich. This is why employees were called upon in Raiffeisen’s climate protection initiative in the “Sustainability Challenge 2014” to submit innovative and sustainable project ideas and concepts in three different categories (sustainable financial products and services, sustainable building and renovation, and company-related measures). Evaluation criteria were above all innovation value, the sustainability of projects, and their positive effects on the company and the environment. Additional points for evaluation were relevance to everyday practices, direct utility, and the project’s potential for application. Every concept that was submitted benefits climate protection and therefore the environment. This is because for every project, regardless of the category, the Raiffeisen climate protection initiative pays ten euros to a selected external climate project. This is meant to make a positive contribution to CO2 reduction. The Raiffeisen climate protection initiative is an open platform that bundles the stimuli and activities of its members and favours and challenges new measures. This supplements conventional purely economic criteria with such factors as sustainability, environmental and climate protections, energy efficiency, and renewable resources.

1.5. Events of particular significance after the balance sheet date On 15 January 2015, the Swiss National Bank (SNB), in a surprise move, abolished the minimum exchange rate of 1.20 EUR/CHF that had been in place for over three years. At the same time, it lowered the target range for threemonth Libor by 0.5 percentage points further into the negative range, which was meant to cushion slightly against the effects of the abolition of the minimum rate. This surprising announcement by the SNB caused real shock waves and a short-term explosion of the exchange rate to an all-time high of 0.85 EUR/CHF. In terms of fundamentals, the Swiss franc has long been a strong currency due to the strength of the Swiss economy and strong demand for investments in francs, and without official intervention from the SNB it will be quoted at stronger rates in future than the minimum rate of 1.20 EUR/CHF that was being defended until the beginning of the year. Forecasts for exchange rates are difficult to make due to an internationally divergent monetary policy

environment, and elevated geopolitical and economic risks. Correspondingly, we anticipate increased volatility in the coming months. Because Raiffeisenlandesbank Oberösterreich is only exposed to a minor degree to foreign currency risks related to the CHF, this event does not exercise a major influence on the bank. On 1 March 2015, the Austrian federal government decided to phase out the HETA ASSET RESOLUTION AG (HETA) – the wind-down company for Hypo Alpe Aldria that has existed since March 2014 – under the European bank dismantling regime. The reason for this was new data from the latest asset review, which uncovered a capital gap of between EUR 4 and 7.6 billion. The Austrian Financial Supervisory Authority (FMA), which is responsible for the winding up of HETA, has issued an immediate measure: a payment moratorium that will be in place until the end of May 2016. This affects in particular creditors of bonds that are endowed with liability by the state of Carinthia. The form in which creditors will be affected by this winding up is still a matter under negotiation, and we cannot make any sufficiently sure predictions at this time. The degree to which the winding up of HETA will affect the Pfandbriefstelle, and thereby the mortgage banks in Upper Austria (the state of Upper Austria is the majority shareholder; Raiffeisenlandesbank Oberösterreich holds a minority interest) and Salzburg (Raiffeisenlandesbank Oberösterreich holds a minority interest) is not yet clear. A provision was incorporated though in the respective annual financial statements. This same applies to KEPLER-FONDS KAG, which has these kinds of bonds in some of its funds. These bonds, which are about 0.5% of KEPLER’s total volume, are guaranteed by the state of Carinthia and the Republic of Austria. On 25 March 2015, Raiffeisenbank International AG (RBI) announced the results for the financial year 2014 as well as planned measures for the future. The measures that are being set in place by RBI in individual Eastern European markets have short- and medium-term character. Because the majority of the associated restructuring costs will most likely be posted in 2015, the Group results for RBI may turn out to be negative, which will then affect the results of the Raiffeisen Zentralbank AG as the majority shareholder of RBI. There were no further events of particular significance after the close of the business year.

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2. Outlook and risks 2.1. Outlook The global economy will also be rather weak and fraught with risk in 2015. The International Monetary Fund (IMF) is assuming growth in real-world GDP of 3.5%, and the World Bank’s forecast is a bit less optimistic at 3.0%. Early indicators and sentiment indicators have improved in the euro zone since the beginning of 2015. This is because of numerous economically stimulating factors, such as lower oil prices, a weaker euro, the ECB’s extremely expansive monetary policy, EU investment programmes, and regressive fiscal braking effects. The recovery will be weak nevertheless and will materialise in the euro zone in very different ways. Germany and a few peripheral countries, such as Spain and Ireland, are also looking with confidence to the business year in 2015. Especially for Germany, leading indicators such as the consumer and business climate indices are optimistic, growth predictions are very positive for 2015 at 1.5%, whereby there are strong chances that there will be an upward correction. Italy, France and Greece will remain the problem children of the currency union. The inflation rate in the euro zone may remain significantly below the ECB target and justify its extremely loose monetary policy. This is resulting both from internal (continued under-utilisation of production capacity) and external factors (low prices for raw materials and food). We must consider however that the basic effect of the fall in oil prices will take hold beginning in the second half of the year. Because the economic stimulus factors mentioned above for the euro zone also apply of course to Austria, the forecasts for the Austrian economic year in 2015 are cautiously optimistic, yet beneath the expectations for average growth in the euro zone. Austria is suffering under a subdued mood among consumers and businesspeople. This increased insecurity, which slows investment and consumption, is resulting from the weak development of important European export markets such as Italy and France, a sense of increased proximity, and rising unemployment. Austria will still benefit from stronger development, but the GDP forecast for 2015, at an average of +0.7 per cent, is significantly weaker than the forecast for Germany. Upper Austria, as an exporting state with strong connections with German industry, will profit on one hand from the stronger development of its neighbour to the north, and on the other hand will continue to feel the effects of weaker global demand.

The economies of Central European EU states such as Poland, Hungary, Czech Republic and Slovakia are doing well because of robust domestic demand, while the Balkan countries continue to stagnate. Russia and the Ukraine are currently in a recession because of their military conflict and the economic sanctions associated with it. The USA are developing with very solid, broadly situated economic growth into the engine of the world economy. Nearly the entire palette of leading indicators are pointing to an extremely positive outlook: optimism among consumers and companies is high, fiscal policy has taken its hand off the brake, employment is rising, expected salary hikes and lower energy prices are igniting private consumption, and climbing demand and high corporate profits are invigorating investment. Despite a humming economy, expansive monetary policy is being ratcheted down very slowly because – thanks to low prices for raw materials – there is still no danger of inflation. The World Bank and the IMF expect the emerging countries to exhibit growth between 4.3 and 4.8% in 2015 (2014: 4.4%). This set of countries is experiencing only moderate economic dynamism; however, it will become increasingly difficult to evaluate emerging countries en masse. While oil-importing countries like India profit powerfully from lower oil prices, this affects oil-exporting countries such as Venezuela and Russia. In other countries such as Brazil and South Africa, fundamental structural problems are increasingly curbing economic development. China is still in a partially cyclic, partially desired strategic slowing of growth. Additional efficiency improvements and forward-looking measures The strengths of Raiffeisenlandesbank Oberösterreich – such as the efficient, goal-oriented planning and management of liquidity, comprehensive risk management in combination with precise controlling, and close co-operation between the Upper Austrian Raiffeisen banks and Raiffeisenlandesbank Oberösterreich – have created the conditions that justify its customers continuing to have confidence in it and for it to be able to provide comprehensive support to companies, institutions as well as private customers in pursuing their projects. Furthermore, the successful completion of the ECB stress test and the active implementation of the “Raiffeisen Banking Group Upper Austria 2020” project represent the foundation for Raiffeisenlandesbank Oberösterreich to successfully navigate the challenges of the future.

RAIFFEISENLANDESBANK OBERÖSTERREICH Management Report 2014 | Outlook and risks

2.2. Significant risks and uncertainties The Managing Board’s overall risk strategy ensures that risks remain synchronised and in line with the strategic orientation of the company. The Managing Board and the Supervisory Board are regularly informed. Market risks Market risks are defined as changes in interest rates, currency, volatility and exchange rates relating to securities, interest-rate and foreign exchange items. This risk is measured using the key risk indicator known as value at risk (VaR). This indicates a possible loss which, with 99% probability, will not be exceeded over a one-month holding period. The value at risk is calculated daily for both trading and banking books. In addition to value-at-risk, stop-loss limits and scenario analyses are used to limit risk. The Raiffeisenlandesbank Oberösterreich Group also uses the principle of diversification on the basis of business partners, products, regions and sales channels to reduce its risks. In addition, derivative transactions are conducted almost exclusively with banks with which collateral agreements are in place. Derivatives are used to hedge against interest rate risks at the micro-hedge and macro-hedge levels. Open derivative items are taxed and valued as assets. The strict division of labour between front, middle and back office and risk controlling ensures that risks can be described comprehensively, transparently and objectively to the Managing Board and supervisory authorities.

scenarios comprise both the extreme market fluctuations which have actually occurred in the past and also a series of standardised shock scenarios involving interest rates, share prices, currency exchange rates and volatility. Credit risk The principles of the customers’ credit ratings are incorporated in the “Rating Standards” and “Collateral Standards” manuals. These regulations provide a compact representation of the standards valid for Raiffeisenlandesbank Oberösterreich. They are oriented on international standards (Basel) and on supervisory recommendations. An organisational separation between front and back offices in risk management has been implemented, up to the level of the Managing Board. Moreover, when awarding credit, following an internal bank rating, financing is divided into creditworthiness and security classes. The risk class of a borrower therefore assumes two dimensions, recording and assessing their financial situation and their provision of collateral. Both hard and soft facts are employed as creditworthiness criteria. In corporate customer business, soft facts are systematically ascertained during discussions with the company and then assessed. A scoring system is used to automatically classify low-volume retail business with employed private customers. This credit rating system is also utilised by subsidiaries in this customer segment.

These risk management methods are also used in hedging.

Equity risk

The total limit for these risks is decided on by the Managing Board after taking the risk-bearing capacity of the bank into consideration. The risk management system includes continuous checks on compliance with these limits.

Equity risk describes the danger of potential future value reductions for investments. The following types of risk are considered under equity risk: Risk of dividend default Risk of current value depreciation Rusk of impairment losses Risk of additional regulatory contributions Risk of strategic (ethical) responsibility for restructuring Risks resulting from the reduction of hidden reserves

Shifts in the interest, spread, currency and share price landscape can have a major influence on results and the risk situation. Therefore, possible shifts in risk parameters are simulated and the consequences reported to the Managing Board. In addition, stress tests are conducted to take account of risks in the event of extreme market movements. The crisis scenarios include the simulation of large fluctuations in the risk factors and are designed to highlight potential losses which are not covered by the value at risk model. The stress

The basis for the determination of equity risk are the risk factors (= haircuts) that are derived from the rating classification of the respective investment company, and the exposure value of the investment. The investment portfolio risk results from the respective exposure and the haircuts applied to it.

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Liquidity risk Liquidity risk means not being able to fulfil one's payment obligations by the due date or, in the case of a liquidity shortage, of not being able to acquire enough liquidity at terms in line with the market.

capacity by means of a risk buffer. These include: strategic risk, reputation risk, equity risk, systemic risk, income and business risk, risk of excessive indebtedness, remaining risk from techniques used to reduce credit risks, risks from money laundering and the financing of terrorism. Risk-bearing capacity analysis

Maturity-matching refinancing has a high priority in Raiffeisenlandesbank Oberösterreich. Liquidity and liquidity risk is managed under a standardised model which, besides normal circumstances, also encompasses stress scenarios arising from reputational risk, systemic risk, a non-performing loan or a crisis involving several risks. The sufficient supply of short- and medium-term liquidity for the event of bottleneck situations is presented in the liquidity emergency plan.

A risk-bearing capacity analysis compares the group risk with the available risk coverage (operating profit, hidden reserves, equity), in order to be certain that in the event of a problem (going concern – confidence level of 95%), or even in the very unlikely case of an extreme situation (gone concern – confidence level of 99.9%), sufficient capital for risk coverage would be available. The risk-bearing capacity is calculated by comparing the group risk with the available coverage.

Operational risk Raiffeisen Customer Guarantee Fund Upper Austria Raiffeisenlandesbank Oberösterreich defines operational risk as the risk of loss caused by the inappropriateness or failure of internal processes, people or systems, or caused by external events. Raiffeisenlandesbank Oberösterreich uses the basis indicator approach to quantify operational risk. Raiffeisenlandesbank Oberösterreich uses both organisational measures and IT systems to limit this type of risk as far as possible. A high degree of security is attained by means of limit systems, competence regulations, a risk-adequate internal control system, a comprehensive security manual as a behaviour code and directive, as well as scheduled and unscheduled audits by Internal Auditing. The operative management of this type of risk involves risk discussions and analyses with managers (early warning system). And the systematic recording of errors in a database for analysis (ex-post analysis).

One of the top priorities at Raiffeisen Banking Group Upper Austria is to protect customer deposits. The Raiffeisen Customer Guarantee Fund Upper Austria ensures that the deposits of our customers at Raiffeisenlandesbank Oberösterreich are secure to an extent well beyond statutory deposit protection. All members of the Customer Guarantee Fund have undertaken to use their financial reserves to ensure that all deposits and issues are honoured in a timely manner. The name Raiffeisen Banking Group Upper Austria, backed by the financial strength of the entire group, is therefore a byword for customer and co-owner security and confidence. Even then, there is a further level of protection at federal level from the Raiffeisen Customer Guarantee Association Austria (Raiffeisen-Kundengarantiegemeinschaft Österreich, RKÖ), which protects customer deposits if the regional (state) protection proves to be inadequate.

Macroeconomic risk Macroeconomic risk measures the effects of a slight or severe recession on the risk situation at Raiffeisenlandesbank Oberösterreich. To this end, a statistics-based macroeconomic model analyses the correlation between macroeconomic factors (e.g. GDP, real wages index) and the probability of default. The simulated economic downturn in the model is used to determine the additional risk based on the CVaR figures. Other risk Raiffeisenlandesbank Oberösterreich takes into account other, non-quantifiable risks in terms of risk-bearing

RAIFFEISENLANDESBANK OBERÖSTERREICH Management Report 2014 | Outlook and risks | R&D

Guarantee Association Austria at federal level. Thus, the Customer Guarantee Association guarantees protection for customers that goes beyond the legal deposit guarantee. Deposit guarantee institutions All member institutions of RBG Upper Austria are, together with the Raiffeisen-Einlagensicherung Oberösterreich eGen, members of the Austrian Raiffeisen-Einlagensicherung eGen. This deposit guarantee institution is the liability institution for the entire Raiffeisen banking group in accordance with sections 93 through 93c of the Austrian Banking Act. An early warning system has been implemented in the Raiffeisen Banking Group Austria for the purpose of guaranteeing the deposits. This early warning system calls for ongoing analyses and monitoring on the basis of an extensive reporting system about revenue and risk development in all member institutions.

Due to the size structure of the Raiffeisen banks and their described integration in the Raiffeisen banking group (protection scheme, shared models, systems and procedures), the institutions of Raiffeisen Baking Group Upper Austria call upon the principle of adequacy as laid down by the Austrian Banking Act. Deposit guarantee NEW The deposit security guideline was published in 2014 in the official gazette of the EU and must be implemented in Austrian law by July 2015. The guideline anticipates the establishment of a deposit guarantee fund that is stocked by contributions from banks. The target volume amounts to 0.8% of covered deposits. The implementation law does not exist at the current point in time. Neither the structure nor the timing of the first contribution payment by banks are known, which is why we cannot yet estimate the specific expense for Raiffeisenlandesbank Oberösterreich.

These services are being continuously enhanced and improved through technical innovation. Example innovations include cutting-edge electronic banking systems (ELBA), card products, new payment options (e.g. smartphone and contactless payment facilities) and the option to amend credit card PINs at Raiffeisen ATMs. As part of its training and professional development activities, Raiffeisenlandesbank Oberösterreich is investing in e-learning, blended-learning modules and web-based training opportunities. Raiffeisenlandesbank Oberösterreich has developed its own e-learning platform and serves as a competence centre in this regard for Raiffeisen Österreich.

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4. Report on the most important aspects of the internal control and risk management system with regard to the accounting process

The recording, evaluation, control and monitoring of risks related to bank transactions and bank operations, and the entire accounting process, are supported by an internal control system that corresponds to the company’s requirements. Compliance with all relevant regulatory provisions is an obvious basic requirement. The Managing Board bears the responsibility for the establishment and design of the internal control system, which is defined by the elements of the control environment, regular evaluation of risks, and control activities.

The second management level (director of the organisational units) also includes the general monitoring environment in addition to the Managing Board. All monitoring measures are applied in an ongoing transaction process. This ensures that potential errors or deviations in the financial reporting are prevented, or discovered in a timely manner and corrected. Controlling measures range from examination of period results by management to specific analysis of individual transactions and an analysis of ongoing accounting processes.

Balanced and complete financial reporting is an important goal for Raiffeisenlandesbank Oberösterreich and its board members. The goal of this internal control system is to support management in such a way that it guarantees effective and constantly improving internal controls in the context of accounting. The basis for producing the financial statements are the relevant Austrian laws, above all the Austrian Commercial Code (UGB) and the Austrian Banking Act (BWG), which governs the composition of financial statements.

Information and communication

Control environment There is a comprehensive internal control system for Raiffeisenlandesbank Oberösterreich comprised of the following elements: 1. Competency allocation and instructions 2. IT and user authorisations 3. Process descriptions Risk evaluation Major bank transaction risks, operational bank risks, and risks related to accounting procedures are assessed and monitored by the Managing Board. Control measures related to the accounting process The preparation of the annual financial statements is done by group accounting with the support of the respective organisational units. The employees responsible for accounting and the manager of the organisational unit for group accounting are responsible for the complete and correct evaluation of all transactions.

The basis for single financial statements are processes that are standardised and uniform throughout the company. Balancing and evaluation standards are defined by Raiffeisenlandesbank Oberösterreich and are binding for the preparation of statement data. Monitoring measures The responsibility for monitoring process workflows rests with the Managing Board and the directors of the respective organisational units. The operational responsibility for ICS activities in the Group is currently being focused in an ICS organisational unit that is being developed at the present time. Internal auditing is also involved in the monitoring process. Raiffeisenlandesbank Oberösterreich’s Internal Auditing division is responsible for auditing. Auditing-specific policies apply for all auditing activities, and these policies are minimum standards for internal auditing according to Austrian financial market oversight as well as international best practices. All this ensures that our principle of only taking risks that can be calculated continues to have the highest priority.

RAIFFEISENLANDESBANK OBERร STERREICH Management Report 2014 | Report on the internal control and risk management system

Linz, 7 April 2015 Raiffeisenlandesbank Oberรถsterreich Aktiengesellschaft Europaplatz 1a, 4020 Linz THE MANAGING BOARD

Heinrich Schaller Chief Executive and Chairman of the Managing Board

Michaela Keplinger-Mitterlehner Deputy Chief Executive

Stefan Sandberger Member of the Managing Board

Reinhard Schwendtbauer Member of the Managing Board

Georg Starzer Member of the Managing Board

Markus Vockenhuber Member of the Managing Board

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FINANCIAL STATEMENTS 2014 Balance sheet as at 31 December 2014____________________________________________________________ 159 Income statement 2014________________________________________________________________________ 162 Disclosures to the 2014 financial statements_______________________________________________________ 164 1. Information concerning the reporting and valuation methods used in the balance sheet and the income statement____________________________________________ 164 2. Disclosures on the balance sheet____________________________________________________________ 167 3. Disclosures on the income statement_________________________________________________________ 173 4. Other information__________________________________________________________________________174 Audit certificates_______________________________________________________________________________176

RAIFFEISENLANDESBANK OBERĂ&#x2013;STERREICH Financial statements 2014 | Balance sheet

Balance sheet as at 31 December 2014 31 Dec. 2014

ASSETS in EUR

1. Cash in hand and balances at central banks 2. Public-sector debt instruments and bills of exchange eligible for refinancing at the Austrian Central Bank: a) Public sector debt issues and similar securities b) Bills of exchange eligible for refinancing at central banks 3. Loans and advances to banks: a) payable on demand b) Other loans and advances 4. Loans and advances to customers 5. Bonds and other fixed-income securities: a) from public issuers b) from other issuers including: own debt securities 6. Shares and other variable-yield securities 7. Equity investments including: in banks 8. Investments in affiliates including: in banks 9. Intangible assets 10. Property and equipment Including: Land and buildings used by the bank in the course of its own operations 11. Own shares or interests and shares in companies with a controlling or majority holding including: Nominal values 12. Other assets 13. Subscribed capital for which payment has been requested but not yet paid 14. Prepaid expenses Total assets 1. Foreign assets

31 Dec. 2013 in EUR

in EUR '000

45,656,128.39

1,079,197,080.85 0.00 3,789,278,261.60 3,541,904,911.62

8,045,577.10 1,767,509,438.12

in EUR '000

44,764

1,061,711 1,079,197,080.85

7,331,183,173.22 16,266,648,541.53

1,775,555,015.22

2,387,070.24

0 3,551,385 3,148,759

8,023 1,815,952

1,061,711

6,700,144 16,737,258

1,823,975

3,267 2,002,868,490.05 161,084,559.68

6,647,909.84

2,085,060 196,481 7,557

1,642,022,220.08 54,714,255.26

1,690,850 54,714

6,000,000.00 18,974,177.20

13,120,922.69

0 19,372

13,349

0.00 0.00

0 0

185,533,112.60

192,554

0.00 27,917,911.57

0 33,695

30,542,640,410.39

30,585,864

8,984,395,604.06

8,991,304

159

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31 Dec. 2014

EQUITY AND LIABILITIES in EUR

1. Amounts owed to banks: a) Payable on demand b) With fixed term or withdrawal date 2. Amounts owed to customers: a) savings deposits including: aa) payment on demand ab) with a fixed term or withdrawal date b) other liabilities including: ba) payable on demand bb) with a fixed term or withdrawal date 3. Liabilities evidenced by certificates: a) debt securities b) other liabilities evidenced by certificates 4. Other liabilities 5. Deferred income 6. Provisions: a) Provisions for severance payments b) Provisions for pensions c) Tax provisions d) Other Fund for general bank risks 7. Supplementary capital according to Part 2 Title I Chapter 4 of EU Regulation No. 575/2013 8. Additional Tier 1 capital according to Part 2 Title I Chapter 3 of EU Regulation No. 575/2013 Compulsory convertible bonds in accordance with Section 26 of the Austrian Banking Act Instruments without voting rights according to Section 26a of the Austrian Banking Act 9. Subscribed capital 10. Capital reserves: a) non-distributable b) distributable 11. Retained earnings: a) legal reserve b) reserves under articles of association c) other retained earnings 12. Liability reserve pursuant to section 57

in EUR

4,497,141,214.55 8,068,235,960.29

Total equity and liabilities

in EUR '000

12,565,377,174.84

in EUR '000

4,028,562 7,548,301

868,877,432.83

866,554

83,184,321.78 785,693,111.05 6,515,172,850.79

73,215 793,339 7,166,515

7,384,050,283.62

2,700,713,920.63 3,533,463,908.44

6,234,177,829.07 189,886,177.75

2,917,003 3,718,896

21,909,079.10 25,498,308.18 18,496,118.77 21,652,426.39 101,243,897.23

824,353,524.45 149,991,600.00 0.00 0.00 983,119,239.37

8,033,069

166,890,750.57 0.00

6,635,899 170,090 22,597

22,724 18,067 13,099 114,176

168,066 0

1,384,954,846.92

1,407,282

0.00

0.00 277,507,626.25

0 277,508

974,345,124.45

983,119,239.37 326,255,842.72

824,354 149,991 0 0 938,997

25,051,744.72

9,114,691.01 0.00

11,576,863

2,991,712 4,174,803

3,164,768,367.50 3,350,404,483.29

13. Net income for the year 14. Untaxed reserves: a) valuation reserve due to special depreciation b) other untaxed reserves including: ba) investment tax credit under Section 10 of the Austrian Income Tax Act 1988 bb) Transfer reserves pursuant to Section 12 of the Austrian Income Tax Act 1988

31 Dec. 2013

9,114,691.01

938,997 326,256 45,037

9,855 0

0.00

0 30,542,640,410.39

974,345

9,855

30,585,864

RAIFFEISENLANDESBANK OBERÖSTERREICH Financial statements 2014 | Balance sheet

31 Dec. 2014

EQUITY AND LIABILITIES in EUR

1. Contingent liabilities including: a) Acceptances and endorsed bills sold b) Liabilities from indemnity agreements and guarantees from the ordering of collateral 2. Credit risks including: Liabilities from repurchase transactions 3. Liabilities from trust fund transactions 4. Eligible capital according to Part 2 of EU Regulation No. 575/2013 including: supplementary capital pursuant to Part 2 Title I Chapter 4 of EU Regulation No. 575/2013 5. Equity requirements according to Article 92 of Regulation (EU) No. 575/2013 including: a) equity requirements pursuant to Art. 92 (1) ref. a of EU Regulation No. 575/2013 b) equity requirements pursuant to Art. 92 (1) ref. b of EU Regulation No. 575/2013 b) equity requirements pursuant to Art. 92 (1) ref. c of EU Regulation No. 575/2013 6. Foreign liabilities

31 Dec. 2013 in EUR

in EUR '000

3,370,152,457.45 0.00

3,463,809 0

3,370,005,616.75

3,463,663 4,749,703,005.04

0.00

4,368,249 0

13,998,124.25

14,039

3,334,819,552.24

852,982,614.43

3,552,7221)

n.v.

21,402,369,682.00

1,728,9042)

11.60%

n.v.

11.60%

n.v.

15.58%

n.v. 6,662,197,705.88

1) The previous year’s figure correspond to eligible equity according to Section 23 (14) of the Austrian Banking Act as amended on 31 December 2013. 2) The previous year’s figure correspond to required equity according to Section 22 (1) of the Austrian Banking Act as amended on 31 December 2013.

6,749,459

161

162

Annual Report 2014

Income statement 2014 2014 in EUR

1. Interest and interest-related income including: from fixed-interest securities 2. Interest and interest-related expenses I. NET INTEREST INCOME 3. Income from securities and investments: a) Income from shares, other equity interests and variable-yield securities b) Income from investments c) Income from equity investments in affiliates 4. Fee and commission income 5. Fee and commission expenses 6. Income/expenses from financial operations 7. Other operating income II. OPERATING INCOME 8. General administrative expenses: a) Personnel expenses including: aa) wages and salaries ab) expenses for statutory social contributions and mandatory contributions linked to remuneration ac) other social expenses ad) expenses for pension schemes and support payments ae) allocations to the provisions for pensions af) expenses for severance payments and contributions to company employee pension funds b) Other administrative expenses (administrative expenses) 9. Valuation allowances for assets in asset items 9 and 10 10. Other operating expenses III. OPERATING EXPENSES IV. OPERATING PROFIT

2013 in EUR

in EUR '000

701,349,435.14 93,040,473.39

732,674 97,858

–442,969,100.23

–491,844

258,380,334.91

240,830

58,239,206.44 5,387,952.57 68,650,842.17

75,421 17,392 132,278,001.18 116,081,950.87 –35,959,959.26

54,193

147,006 111,113 –32,243

9,260,615.29 67,984,605.15

7,676 74,350

548,025,548.14

548,732

–101,206,037.04

95,905

–73,731,793.51

–70,301

–16,563,929.57 –1,177,668.55

–15,929 –1,131

–4,985,155.98

–5,629

–429,478.63

328

–4,318,010.80

–3,243

94,260,206.48

in EUR '000

195,466,243.52

–85,382

–181,287

–1,931,377.98 –63,401,402.56

–1,935 –48,838

–260,799,024.06

–232,060

287,226,524.08

316,671

RAIFFEISENLANDESBANK OBERÖSTERREICH Financial statements 2014 | Income statement

2014 in EUR

in EUR

IV. OPERATING PROFIT Carryover 11./ Balance from reversals/additions, or 12. value adjustments to loans and certain securities and provisions for contingent liabilities and credit risks 13./ Balance from value adjustments or 14. income from value adjustments to securities measured as financial assets, as well as to investments and shares in associated companies V. PROFIT FROM ORDINARY ACTIVITIES 15. Extraordinary income including: Withdrawals from the fund for general bank risks 16. Extraordinary expenses including: Allocations to the fund for general bank risks 17. Extraordinary result (subtotal from items 15 and 16) 18. Taxes on income and earnings 19. Other taxes, unless reported under item 18 VI. PROFIT FOR THE YEAR 20. Movements in reserves including: Allocation to the liability reserve Reversal from the liability reserve VII. NET PROFIT FOR THE YEAR 21. Profit/loss carried forward VIII. NET INCOME FOR THE YEAR

2013 in EUR '000

in EUR '000

287,226,524.08

316,671

–137,828,343.12

–165,113

–58,422,949.91

–31,315

90,975,231.05 0.00

120,243 0

0.00

0 0.00

0.00

0 0.00

–5,631,146.74

–4,725

–33,245,816.11

–19,400

52,098,268.20 –27,046,523.48

96,118 –51,081

0.00 0.00

0 0 25,051,744.72 0.00

45,037 0

25,051,744.72

45,037

163

164

Annual Report 2014

Disclosures to the 2014 Financial Statements 1. Information concerning the reporting and valuation methods used in the balance sheet and the income statement These 2014 financial statements have been prepared in accordance with the provisions of the Austrian Banking Act (BWG) and the Austrian Commercial Code (UGB), insofar as they are applicable to banks, as well as EU Regulation No. 575/2013 (CRR), insofar as this is relevant for these financial statements. The balance sheet and the income statement are prepared according to the breakdown of Appendix 2 to Section 43 (1) and (2) of the Austrian Banking Act. The annual financial statements have been based on generally accepted accounting principles and on the standard requirement to provide a true and fair view of the net assets, financial position and results of operations of the company. The principle of complete disclosure of all assets, liabilities, income and expenses has been observed. Assets and liabilities have been measured individually and on the basis of the continued existence of the company as a going concern. In accordance with the principle of prudence, only those gains realised as at the balance sheet date have been reported. All identifiable risks and impending losses have been recognised in the financial statements.

1.1. Foreign currency translation Amounts denominated in foreign currency are translated at the middle exchange rate published by the European Central Bank (ECB) pursuant to section 58 (1) of the BWG. If there are no ECB reference rates, middle exchange rates from reference banks are used.

1.2. Securities Securities held as fixed assets, and also those held as current assets, are measured strictly at the lower of cost or market. If bonds and other fixed-income securities held as fixed assets are purchased at a price that is more than the face value, in accordance with section 56 (2) of the Austrian Banking Act the premium is amortised on a pro rata basis over the life of the security concerned.

In the case of securities purchased at a price below face value, the discount is not unwound on a pro rata basis. Securities used as cover funds for trust money are regarded as fixed assets and measured according to the strict lower of cost or market method pursuant to section 2 (3) of the Austrian Trust Fund Protection Regulation. Stock market prices or trader quotes observable on the market are used as the basis for determining the value of securities. If adequate market quotes are not available, prices are determined with internal valuation models in which premiums or discounts are applied depending on credit rating, marketability and features of the issue. Trading securities are measured on a â&#x20AC;&#x153;mark to marketâ&#x20AC;? basis.

1.3. Loan loss allowances Allowances for losses on loans and advances are recognised primarily if a debtor is experiencing economic or financial difficulties, fails to make interest payments or repayments of principal, or other circumstances arise that indicate a probability of default based on regulatory standards. Within the internal risk management system, ongoing monitoring of the counterparty and the specific case involved is used to determine whether relevant circumstances exist. In the case of significant customer exposures in the lending business, each individual case is analysed as the basis for recognising specific loan loss allowances or provisions for contingent liabilities and lending commitments. The calculation for the amount of the allowance for losses on loans and advances takes into account the discounted cash inflows expected from interest payments and repayments of principal together with any inflows that can be obtained from the recovery of collateral. In this process in the 2014 financial year, knowledge of matters related to the AQR audit by the European supervisory authorities was evaluated accordingly for accounting purposes. A standardised method is used for customer exposures that are not deemed to be significant.

RAIFFEISENLANDESBANK OBERĂ&#x2013;STERREICH Disclosures to the 2014 financial statements | Accounting policies

1.4. Special valuation pursuant to section 57 (1) and (2) of the Austrian Banking Act

of 2 per cent (previous year: 2.5 per cent) and an assumed rate of employment termination.

No use has been made of the measurement flexibility offered by sections 57 (1 and 2) of the BWG.

A provision is also recognised to cover long-service bonus obligations. The provision as at 31 December 2013 was calculated using accrual and actuarial measurement methods, a discount rate of 2 per cent (previous year: 2.5 per cent) and an assumed rate of employment termination.

1.5. Investments Equity investments and shares in affiliated companies are measured at cost. Write-downs are applied if an equity investment is impaired and the impairment is likely to be of a permanent nature due to sustained losses, a reduction in equity and/or a fall in discounted earnings. In this process in the 2014 financial year, knowledge of matters related to the AQR audit by the European supervisory authorities was evaluated accordingly for accounting purposes.

1.6. Property and equipment Pursuant to section 55 (1) of the Austrian Banking Act in conjunction with section 204 of the Austrian Commercial Code, property and equipment, as well as intangible fixed assets, is carried at cost and reduced by depreciation. Lowvalue assets are written off in full in the year of acquisition. The useful economic lives used as the basis for depreciation are as follows: 20 to 50 years for immovable fixed assets and 3 to 20 years for movable assets. If an item of property or equipment is expected to be permanently impaired, a write-down is recognised.

1.7. Liabilities Liabilities are carried at the higher of the notional amount or settlement amount.

1.8. Own issues Issue costs, add-on fees and commissions, premiums and discounts are amortised/unwound on a pro rata basis over the maturity of the instrument concerned.

1.9. Pension provisions Defined benefit obligations are calculated using the Austrian entry-age normal method based on the AVĂ&#x2013; 2008 P. Pagler & Pagler mortality tables. A discount rate of 2 per cent was used to calculate the obligation (previous year: 2.5 per cent).

1.10. Provisions for severance and similar obligations A provision is recognised for severance obligations. The provision as at the reporting date was calculated using accrual and actuarial measurement methods, a discount rate

An employee turnover markdown in the amount of 5 per cent (previous year: 5 per cent) is applied to both the severance payment obligation and the long-service bonus provision. The calculations are based on an imputed pensionable age of 60 for women and 65 for men and factor in the transitional provisions as specified in the Austrian Budget Accompanying Act of 2003.

1.11. Other provisions In application of the principle of prudence, other provisions are recognised for all risks identifiable on the date the financial statements are prepared and for present obligations, the amount of which is contingent on a number of factors and cannot be reliably determined. These other provisions are recognized in an amount dictated by prudent business practice.

1.12. Derivative financial instruments The fair value is determined for derivatives. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly arm's-length transaction between knowledgeable, willing and independent parties. Where stock exchange prices are available, these prices are used to determine fair value. Internal valuation models using current market parameters, in particular the discounted cash flow method and option price models, are used for financial instruments if no market price is available. A credit value adjustment (CVA) was determined and recognised as part of the inclusion of credit risks in the mark-tomodel measurement of derivatives. The main factors used in determining the CVA were the term to maturity and counterparty default risk. In the financial year 2014, an improvement in the methodology incorporated for balancing purposes in the determination of CVA was applied in connection with the AQR audit by European supervisory authorities, whereby a Monte Carlo simulation and credit spreads derived as much as possible from the market for counterparty default risk were used for the calculation of future market price developments. The year-on-year change that resulted from this process was recognised as an expense in the amount of EUR 5,389

165

166

Annual Report 2014

Functional unit

EURO fixed interest rate payer position

Positive Fair values

Negative Fair values

Gain or loss on remeasurement 2014

in EUR '000

Aggregate gain or loss on remeasurement in EUR '000

16,156

–14,592

–8,809

49,337

74,044

–14,154

–10,441

Foreign exchange steepener

4,696

976

4,061

Quanto convergence swaps

1,071

423

3,980

1,540,829

1,541,906

20,882

12,493

EURO steepener position

Derivative macro

thousand. In addition, an expense in the amount of EUR 6,334 was recognised from the inclusion of liquidity components for collateralised derivatives. Derivative financial instruments in the trading book are recorded at their fair value, with effect on the income statement. The positive fair value of all trading book derivatives amounted to EUR 9,876 thousand. Banking book derivatives that are not used for interest-rate management or that do not form part of a hedge are generally recognised in profit or loss if the fair value is negative. For those derivative financial instruments in the banking book that serve to manage interest rates, if there was a negative surplus for a functional unit per currency, then the change was recognised as income at the fair value from the previous year. The functional units serve in RLB OÖ for the detailed output of basic transactions (i.e., loans and bond issues) in the investment book and must therefore be observed in the aggregate portfolio. The reduction of interest-rate risk by means of derivative strategies at non-lucrative interest rate curve points enables holding open basic transactions on steep curve points with a high roll-down effect, thereby yielding, at constant interest-rate risk utilisation, a significant optimisation of the chance-to-risk ratio for the entire position. The uncoupled total risk of functional units amounted on 31 December 2014 to an interest basis point value of EUR 275 thousand and therefore countered the aggregate interest-rate risk in the investment book. The EUR fixed interest rate payer position BPV EUR +110 thousand and/or the EUR steepener position BPV EUR +161 thousand represent the majority of opposed interest risk of the functional units; the remaining sub-portfolios are either completely or nearly closed. A flattening of the interest rate structure curve caused valuation losses in valued interest control derivatives in the financial year 2014. This was countered by a positive effect through the narrowing of the valuation spread.

Description Item hedge against rising interest rates Interest-rate position hedge against a steeper yield curve Positioning in terms of steeper foreign currency yield curves Swap positions, effect of which offset by reverse swaps Hedging of derivative positions using derivatives

In addition, derivative financial instruments in the banking book are assigned to micro-hedges. The main area of application is the hedging of underlying transactions with fixed interest-rate risk by means of countervailing derivatives that are largely identical in terms of key parameters (e.g. issue with fixed coupons and receiver swap). The objective of such hedge accounting is to reduce the earnings volatility that, if the micro-hedges were not recognised, would occur as a result of the measurement of derivative financial instruments on the basis of the imparity principle without having the option to recognise equal and opposite effects in the underlying transactions. The effectiveness of each hedge is primarily assessed by providing evidence of harmonisation between the key parameters of the underlying transaction and the hedge (Critical Term Match). The fair value of all derivatives used in micro-hedges amounted to EUR 255,639 thousand (previous year: EUR 35,399 thousand). In addition, banking book derivatives are used to hedge the fixed-interest-rate risk in certain underlying transaction portfolios on a global basis. Suitable hedging instruments (mainly interest rate swaps) are used to hedge underlying transactions both on the assets-side of the balance sheet (in particular, loans and bonds) and on the liabilities side (mainly deposits and issues). To analyse the portfolio risk, the open item is presented using a weekly assessment for each portfolio and currency. When open risk gap thresholds are exceeded in a portfolio within a maturity band, derivatives are used as a corrective measure. Effectiveness is also measured by means of interest-rate hedging simulations for each maturity band. The accounting objective in turn is to reduce the earnings volatility that would occur as a result of the measurement of derivatives on the basis of the imparity principle. The negative fair value of derivatives used for the assets-side portfolio of underlying transactions amounted to EUR 229,818 thousand (previous year: EUR 141,732 thousand); the positive fair value of derivatives used for the liabilities-side portfolio of underlying transactions amounted to EUR 473,748 thousand (previous year: EUR 296,829 thousand).

RAIFFEISENLANDESBANK OBERÖSTERREICH Disclosures to the 2014 financial statements | Balance sheet disclosures

2. Balance sheet disclosures 2.1. Presentation of maturities The maturity structure of both loans and advances to banks and non-banks and amounts owed to banks and non-banks not repayable on demand was as follows:

Term to maturity

Loans and advances to banks Carrying amount Carrying amount 31 Dec. 2014 31 Dec. 2013 in EUR '000

in EUR ‘000

Loans and advances to non-banks Carrying amount Carrying amount 31 Dec. 2014 31 Dec. 2013 in EUR ‘000

in EUR ‘000

up to 3 months 3 months to 1 year

1,099,356 651,375

1,102,441 748,927

2,139,230 2,677,986

2,214,929 2,841,973

1 year to 5 years

1,019,556

639,020

5,536,584

5,487,668

771,618

658,371

4,104,306

4,164,657

3,541,905

3,148,759

14,458,106

14,709,227

more than 5 years Total

Term to maturity

Amounts owed to banks Carrying amount Carrying amount 31 Dec. 2014 31 Dec. 2013 in EUR '000

up to 3 months 3 months to 1 year

1,329,947 1,316,097

in EUR ‘000

Amounts owed to non-banks Carrying amount Carrying amount 31 Dec. 2014 31 Dec. 2013 in EUR ‘000

in EUR ‘000

893,302 1,113,144

1,595,457 1,694,124

1,970,316 2,115,790

1 year to 5 years

3,812,236

3,811,995

3,826,976

4,544,792

more than 5 years

1,609,956

1,729,860

3,184,451

2,875,417

8,068,236

7,548,301

10,301,008

11,506,315

Total

In 2015, bonds and other fixed-income securities held by Raiffeisenlandesbank Oberösterreich to the amount of EUR 188,275 thousand (2014: 274,990 thousand) will mature, along with debt securities issued in the amount of EUR 687,120 thousand (2014: EUR 471,374 thousand).

2.2. Securities and investments The securities admitted to trading shown in asset items 5 and 6 consist of listed bonds and other fixed-income securities amounting to EUR 1,747,929 thousand (previous year: EUR 1,760,493 thousand) and listed shares and other variable-yield securities totalling EUR 74,304 thousand (previous year: EUR 63,269 thousand). The securities admitted to trading shown in asset items 5 and 6 also include unlisted bonds and other fixed-income securities amounting to EUR 0 thousand (previous year: EUR 29.427 thousand). The items do not include any unlisted shares and other variable-yield securities, nor do they include any equity investments or shares in affiliated companies that are admitted to trading.

The securities admitted to trading in asset items 5 and 6 break down into bonds and other fixed-income securities held as fixed assets with a value of EUR 1,722,992 thousand (previous year: EUR 1,749,722 thousand) and bonds and other fixed-income securities held as current assets with a value of EUR 24,937 thousand (previous year: EUR 40,198 thousand). The shares and other variable-yield securities consist of fixed assets amounting to EUR 35,805 thousand (previous year: EUR 35,805 thousand) and current assets in an amount of EUR 38,499 thousand (previous year: EUR 27,464 thousand). Asset items are allocated to fixed assets because the purpose of the securities concerned is to generate higher returns through the long-term investment of liquid funds.

167

168

Annual Report 2014

Securities held as current assets are acquired for the purposes of trading, to generate capital gains and to provide a liquidity reserve. Raiffeisenlandesbank Oberösterreich maintains a securities trading book as defined by Section 92 of the CRR. The trading book contained securities totalling EUR 60,494 thousand (previous year: EUR 73,818 thousand) and other financial instruments amounting to EUR 1,856,343 (previous year: EUR 1,683,542). Securities with a carrying amount of EUR 73,498 thousand (previous year: EUR 30,106 thousand) were sold under repurchase agreements and an amount of EUR 9,580 thousand (previous year: EUR 0) were purchased under agreement to resell.

The political crisis in Russia and the Ukraine has not had an immediate effect on the business activity of Raiffeisenlandesbank Oberösterreich. In the evaluation and further development of Raiffeisen Zentral Bank AG – which holds a 60.7 per cent share of Raiffeisenbank International AG – events in these countries continued to cause risks and uncertainties. Raiffeisenbank International AG has already adjusted its strategy in these markets. Business activity in both of these countries will be reduced in the next two years, and subsidiary banks in Poland and Slovenia, as well as a direct bank in Slovakia, will be sold. Furthermore, business activity in Asia and the USA has been reduced.

2.3 Fixed assets The changes in the fixed assets held by Raiffeisenlandesbank Oberösterreich were as follows: Acquisition cost Cost of goods

Balance sheet items

Public-sector debt instruments and similar securities Other loans and advances to Banks Loans and advances to customers Bonds and other fixed-income securities from the public sector Bonds and other fixed-income securities from other issuers including: Own debt securities Shares and other variable-yield securities Equity investments including: in banks Investments in affiliates including: in banks Intangible assets Property and equipment including: Land and buildings used by the bank in the course of its own operations

Total

Depreciation

Carrying amounts

Depreciation

As at As at 31 Dec. of 31 Dec. of the financial the previous year year

in the financial year

As at 1 Jan.of the financial year

Additions in the financial year

Disposals in the financial year

Total

in EUR '000

1,048,651

274,337

261,439

37,373

1,024,176

1,009,448

9,934 379,657

5,100 1,000

5,100 48,944

13 31,837

9,922 299,876

9,922 352,241

0 6,307

7,500

589

6,911

1,800,664

548,753

582,269

51,067

1,716,082

1,742,811

3,406

(0)

2,157,296 206,209

95,401 0

181,234 24,712

141,936 20,413

1,929,527 161,085

2,023,322 196,481

9,288 10,685

(7,905) 1,697,550

(0) 7,885

(222) 0

(1,036) 63,413

(6,648) 1,642,022

(7,557) 1,690,850

(688) 56,713

(54,714) 0 77,916

(0) 6,000 1,679

(0) 0 1,250

(0) 0 59,371

(54,714) 6,000 18,974

(54,714) 0 19,372

(0) 0 1,931

(56,380)

(541)

(533)

(43,267)

(13,121)

(13,349)

(677)

7,385,377

940,155

1,104,946

406,012

6,814,574

7,051,358

88,331

RAIFFEISENLANDESBANK OBERÖSTERREICH Disclosures to the 2014 financial statements | Balance sheet disclosures

2.4. Equity and equity-related liabilities

2.5. Supplementary information

In the case of subordinated liabilities, the subordination is always agreed separately in writing pursuant to § 51 Section 9 of the Austrian Banking Act. The previous years’ numbers in the liability-side items 7 and 8 according to the breakdown scheme of the Austrian Banking Act as amended on 31 Dec. 2013 were presented together in liability item 7 this financial year. The liabilities from the previous year that still existed as of 31 December 2014 almost completely corresponded to the guidelines for supplementary capital according to Part 2 Title I Chapter 4 of EU Regulation No. 575/2013.

The balance sheet includes asset items denominated in foreign currency amounting to EUR 1,991,824 thousand (previous year: EUR 2,134,100 thousand) and liabilities items denominated in foreign currency amounting to EUR 2,004,739 thousand (previous year: EUR 1,635,351 thousand).

Eligible capital instruments Retained earnings including allocation to retained earnings 2014 Other reserves Deductions and transitional adjustments Common Equity Tier 1 capital Supplementary capital Deductions and transitional adjustments supplementary capital Eligible capital

31 Dec. 2014

31 Dec. 2013

in EUR '000

1,100,829

1,101,861

975,232

938,997

485,362

486,103

–79,586

–101,451

2,481,837

2,425,510

844,152

1,221,556

8,831

–94,344

3,334,820

3,552,722

Required equity

1,712,190

1,728,904

Equity surplus

1,622,630

1,823,818

Tier 1 capital ratio

11.60%

Common Equity Tier 1 capital ratio

11.60%

Total Capital Ratio

15.58%

Return on total capital employed

0.17%

0.31%

A presentation of the consolidation of equity pursuant to Section 64 (1)(17) of the Austrian Banking Act is given in the consolidated financial statements of Raiffeisenlandesbank Oberösterreich.

169

170

Annual Report 2014

The following derivative financial instruments were held as at 31 December 2014: Nominal amount up to 1 year

over 1 year to 5 years

over 5 years

Total

positive

negative

in EUR ‘000

EUR '000

in EUR ‘000

21,717 3,264,805 234,028 47,768

34,000 14,536,843 1,124,403 660,288

0 18,143,094 522,119 1,055,582

55,717 35,944,742 1,880,550 1,763,638

0 2,927,357 23,676 2,879

4,470 2,378,298 1,029 37,616

91,521 3,659,839

0 16,355,534

0 19,720,795

91,521 39,736,168

0 2,953,912

0 2,421,413

339,604

57,118

396,722

13,980

4,160

1,471,731 40,741 40,741 1,892,817

169,230 3,555 3,555 233,458

14,522 0 0 14,522

1,655,483 44,296 44,296 2,140,797

30,328 1,587 0 45,895

28,219 0 1,590 33,969

0 0 0 0 0 0 0 0 5,461,135 91,521

10,000 0 20,734 19,575 0 0 0 50,309 16,639,301 0

0 0 0 0 0 0 0 0 19,735,317 0

10,000 0 20,734 19,575 0 0 0 50,309 41,835,753 91,521

0 0 3,578 0 0 0 0 3,578 3,003,385 0

6 0 0 3,299 0 0 0 3,305 2,458,687 0

5,552,656

16,639,301

19,735,317

41,927,274

3,003,385

2,458,687

Term to maturity

Interest rate-dependent futures OTC products Forward rate agreements Interest rate swaps Interest rate options – purchases Interest rate options – sales Exchange-traded products Interest rate futures Total Foreign exchange Futures OTC products Spot exchange and forward transactions Currency and interest rate swaps with multiple currencies Foreign exchange options – purchases Foreign exchange options – sales Total Other futures OTC products Credit derivatives Structures share/index products Shares options – purchases Shares options – sales Transactions in precious metals Commodity options – purchases Commodity options – sales Total Total OTC products Total exchange-traded products Total 1) including accrued interest

Fair value 1)

RAIFFEISENLANDESBANK OBERÖSTERREICH Disclosures to the 2014 financial statements | Balance sheet disclosures

The following derivative financial instruments were held as at 31 December 2013: Nominal amount up to 1 year

over 1 year to 5 years

over 5 years

Total

positive

negative

in EUR ‘000

EUR '000

in EUR ‘000

0 3,975,499 53,539 60,475

0 13,524,175 1,288,843 663,746

375,853 19,822,274 480,960 1,573,899

375,853 37,321,948 1,823,342 2,298,120

1,319 1,916,491 29,209 1,280

126 1,687,264 1,124 35,419

77,749 4,167,262

0 15,476,764

0 22,252,986

77,749 41,897,012

0 1,948,299

0 1,723,933

568,384

70,438

638,822

6,458

8,042

2,008,902 95,853 95,853 2,768,992

191,996 23,437 23,437 309,308

0 0 0 0

2,200,898 119,290 119,290 3,078,300

37,914 3,826 0 48,198

26,691 0 3,840 38,573

10,000 0 36,710 36,710 0 0 0 83,420 6,941,925 77,749

10,000 0 10,734 9,448 0 5,000 5,000 40,182 15,826,254 0

0 0 5,000 5,000 0 0 0 10,000 22,262,986 0

20,000 0 52,444 51,158 0 5,000 5,000 133,602 45,031,165 77,749

36 0 19,990 0 0 638 0 20,664 2,017,161 0

101 0 0 19,906 0 0 638 20,645 1,783,151 0

7,019,674

15,826,254

22,262,986

45,108,914

2,017,161

1,783,151

Term to maturity

Interest rate-dependent futures OTC products Forward rate agreements Interest rate swaps Interest rate options – purchases Interest rate options – sales Exchange-traded products Interest rate futures Total Foreign exchangeFutures OTC products Spot exchange and forward transactions Currency and interest rate swaps with multiple currencies Foreign exchange options – purchases Foreign exchange options – sales Total Other futures OTC products Credit derivatives Structures share/index products Shares options – purchases Shares options – sales Transactions in precious metals Commodity options – purchases Commodity options – sales Total Total OTC products Total exchange-traded products Total 1) including accrued interest

Fair value 1)

171

172

Annual Report 2014

The derivative financial instruments are recognised in the balance sheet with the following carrying amounts:

2014

Carrying amounts of trading book/banking book derivatives a) Interest rate contracts b) Exchange-rate-related agreements c) Securities transactions

2013

Carrying amounts of trading book/banking book derivatives a) Interest rate contracts b) Exchange-rate-related agreements c) Securities transactions

Prepaid exPropenses and Deferred credits visions deferred to income derivatives charges

Loans and advances to banks

Amounts owed to banks

Other assets

Other liabilities

in EUR ‘000

255,335 0 0

165,139 0 0

21,177 17,469 0

25,284 5,963 0

Loans and advances to banks

Amounts owed to banks

Other assets

Other liabilities

in EUR ‘000

293,517 0 0

191,254 0 0

31,179 15,318 0

18,138 5,754 0

15,352 0 0

15,879 0 0

50,574 0 0

As at 31 December 2014, securities to the amount of EUR 7,321 thousand (previous year: EUR 7,211 thousand) were held as cover for trust fund deposits of EUR 8,893 thousand (previous year EUR 8,590 thousand). Loans and advances to customers and banks amounting to EUR 286,339 thousand (previous year: EUR 34,344 thousand) were used as collateral for third-party obligations. Securities amounting to EUR 64,263 thousand (previous year: EUR 69,516 thousand) and loans and advances to customers in the amount of EUR 1,140,248 (previous year: EUR 813,714 thousand) were pledged as collateral for

in EUR ‘000

9,798 0 0

in EUR ‘000

14,169 0 0

62,055 0 0

Prepaid exPropenses and Deferred credits visions deferred to income derivatives charges

funded issues of securities. Additionally, receivables with a book value of EUR 150,000 thousand (previous year: EUR 0) and securities amounting to EUR 312,640 thousand (previous year: EUR 216,835 thousand) were deposited as collateral at banks and stock exchanges. An amount of EUR 687,315 thousand (previous year: EUR 409,849 thousand) had been lodged with banks and customers under collateral agreements, Loans and advances to banks amounting to EUR 2,000,184 thousand (previous year: EUR 1,871,772 thousand) were ceded. Raiffeisenlandesbank Oberösterreich has entered into netting agreements with correspondent banks.

RAIFFEISENLANDESBANK OBERĂ&#x2013;STERREICH Disclosures to the 2014 financial statements | Income statement disclosures

3. Income statement disclosures 3.1. Expenses for subordinated liabilities

3.3. Other operating expenses

Expenses for subordinated liabilities in the 2014 financial year totalled EUR 49,400 thousand (previous year: EUR 46,817 thousand).

The other operating income shown in Item 10 of the profit and loss account amounting to EUR 22,769 thousand (previous year: EUR 22,058 thousand) relates to non-bank personnel expenses.

3.2. Other operating income The other operating income shown in Item 7 of the profit and loss account amounting to EUR 22,884 thousand (previous year: EUR 22,056 thousand) relates to non-bank subsidiary offsetting.

3.4. Tax savings As in the previous year, the change in untaxed reserves did not result in any material change in taxes on income.

173

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Annual Report 2014

4. Other information 4.1. Information on employees An average of 918 employees worked in banking operations during the 2014 financial year (previous year: 841).

4.2. Advances and loans to members of the Managing Board and the Supervisory Board Advances and loans to members of the Raiffeisenlandesbank Oberรถsterreich Managing Board and the Supervisory Board consisted of EUR 569 thousand (previous year: EUR 568 thousand) to members of the Managing Board, and EUR 846 thousand (previous year: EUR 1,046 thousand) to members of the Supervisory Board. Loans to members of the Managing Board and the Supervisory Board are granted on standard banking industry terms. Repayments are made as agreed.

4.3. Expenses for severance payments and pensions The personnel expenses contain expenses for severance payments amounting to EUR 3,821 thousand (previous year: EUR 2,798 thousand) and contributions to employee pension funds of EUR 497 thousand (previous year: EUR 445 thousand). Expenses for severance payments (including provisions) and pensions (including provisions) in 2014 amounted to EUR 408 thousand (previous year: EUR 202 thousand) for members of the Managing Board and to EUR 5,759 thousand for other employees (previous year: EUR 4,193 thousand). Further expenditure of EUR 1,322 thousand (previous year: EUR 2,049 thousand) was used for Managing Board pensions and EUR 2,244 thousand (previous year: EUR 2,100 thousand) for other employees.

4.4. Remuneration paid to the members of the Managing Board and the Supervisory Board In 2014, the remunerations and reimbursements paid to members of the Managing Board (including payments in kind and expenses in connection with pensions) totalled EUR 5,113 thousand (previous year: EUR 5,013 thousand). Section 241 (4) of the Austrian Commercial Code was applied with regard to the expenses for former executive managers (severance and pension payments) (previous year: EUR 313 thousand).

In 2014, remuneration (including reimbursements for travel expenses) of EUR 543 thousand (previous year: EUR 572 thousand) were paid to members of the Supervisory Board.

4.5. Members of the Managing Board and the Supervisory Board In the financial year 2014, the following were Members of the Managing Board and the Supervisory Board: CEO and Chairman of the Managing Board Heinrich Schaller, Chief Executive and Chairman of the Managing Board Deputy Chairpeople of the Managing Board Deputy Chief Executive Michaela Keplinger-Mitterlehner Members of the Managing Board Stefan Sandberger, Member of the Managing Board Reinhard Schwendtbauer, Member of the Managing Board Georg Starzer, Member of the Managing Board Markus Vockenhuber, Member of the Managing Board

Information on the members of the Raiffeisenlandesbank Oberรถsterreich Supervisory Board can be found on pages 12 and 13.

RAIFFEISENLANDESBANK OBERร STERREICH Disclosures to the 2014 financial statements | Other information

Linz, 7 April 2015 Raiffeisenlandesbank Oberรถsterreich Aktiengesellschaft Europaplatz 1a, 4020 Linz THE MANAGING BOARD

Heinrich Schaller Chief Executive and Chairman of the Managing Board

Michaela Keplinger-Mitterlehner Deputy Chief Executive

Stefan Sandberger Member of the Managing Board

Reinhard Schwendtbauer Member of the Managing Board

Georg Starzer Member of the Managing Board

Markus Vockenhuber Member of the Managing Board

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Annual Report 2014

Audit Certificate Report on the annual financial statements I examined the attached annual financial statements of Raiffeisenlandesbank OberĂśsterreich Aktiengesellschaft, Linz, for the financial year from 1 January to 31 December 2014, taking the accounting into consideration. These financial statements include the balance sheet as at 31 December 2014, the income statement for the financial year ending on 31 December 2014, and the Disclosures.

Responsibility of the legal representatives of the consolidated financial statements and the accounts The legal representatives of the company are responsible for the accounts and also the compilation of the financial statements, presenting a true and fair view of the assets, financial position and earnings of the company in compliance with Austrian business and banking laws. This responsibility includes the design, implementation and maintenance of an internal control system, to the extent that this is necessary for the preparation of the annual statements, and to present as true a picture as possible of the group's net assets, financial position and profit situation so that these financial statements are free from material misrepresentations, whether due to intentional or unintentional mistakes. This also includes choosing and applying suitable accounting and valuation methods and making estimates that appear appropriate under the existing circumstances.

Responsibility of the auditor of the consolidated financial statements and a description of the type and scope of the statutory audit My responsibility lies in the submission of an audit opinion on these financial statements on the basis of my inspection. My audit was conducted in accordance with the applicable Austrian legal regulations and fundamental auditing principles. These standards require that I plan and perform the

audit in such a manner that I can form a reasonable opinion as to whether the financial statements are free of material misstatement. An audit includes the implementation of auditing actions to obtain auditing proof in respect of the amounts and other details given in the annual financial statements. The choice of auditing actions is left to the obligatory discretion of the auditor of the annual financial statements, taking into account his assessment of the risk of material misstatements occurring, whether due to intended or unintended errors. In assessing this risk, the auditor of the annual financial statements takes into account the internal control system, insofar as it is important for compiling the annual financial statements and presenting a true and fair view of the assets, financial position and earnings of the company, in order to determine suitable auditing actions taking account of the framework conditions, not however to submit an auditing opinion about the effectiveness of the companyâ&#x20AC;&#x2122;s internal control system. The audit also included an evaluation of the adequacy of the applied accounting and valuation methods and the essential estimates made by the legal representatives of the company as well as an assessment of the overall tenor of the financial statements. I believe that I have obtained sufficient and suitable auditing proof, so that my audit provides a reasonable basis for my opinion.

Auditorâ&#x20AC;&#x2122;s opinion The results of my audit gave no reason for objection. On the basis of the legal knowledge gained during the audit, in my judgement the financial statements comply with the legal regulations and present a true and fair view of

RAIFFEISENLANDESBANK OBERĂ&#x2013;STERREICH Audit Certificate

the company's assets and financial position as of 31 December 2014 and the company's earnings and cash flow in the financial year from 1 January 2014 to 31 December 2014, in accordance with the Austrian principles of orderly accounting.

Statement concerning the Management Report According to the Austrian legal regulations, the management report is to be audited as to whether it is consistent with the financial statements and whether or not other

details given in the management report give a misleading impression of the companyâ&#x20AC;&#x2122;s financial position. The auditor's opinion must also include a statement as to whether the management report is consistent with the financial statements and whether or not the details according to section 243a (2) of the Austrian Commercial Code apply. In my opinion, the management report is consistent with the financial statements. The details according to section 243a (2) of the Austrian Commercial Code apply.

Vienna, 7 April 2015 As auditor for Ă&#x2013;sterreichischer Raiffeisenverband:

Alexandra Wurm Chartered Accountant and Auditor

177

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Annual Report 2014

Audit Certificate Report on the annual financial statements We examined the annual financial statements of Raiffeisenlandesbank OberĂśsterreich Aktiengesellschaft, Linz, for the financial year from 1 January to 31 December 2014, taking the accounting into consideration. These financial statements include the balance sheet as at 31 December 2014, the income statement for the financial year ending on 31 December 2014, and the Disclosures. In terms of our responsibility and liability as auditors to the company and to third parties, section 275 of the Austrian Commercial Code shall apply.

Responsibility of the auditor of the consolidated financial statements and a description of the type and scope of the statutory audit Our responsibility lies in the submission of an audit opinion on these financial statements on the basis of our inspection. Our audit was conducted in accordance with the

applicable Austrian legal regulations and fundamental auditing principles. These standards require that we plan and perform the audit in such a manner that we can form a reasonable opinion as to whether the financial statements are free of material misstatement. An audit includes the implementation of auditing actions to obtain auditing proof in respect of the amounts and other details given in the annual financial statements. The choice of auditing actions is left to the obligatory discretion of the auditor of the annual financial statements, taking into account his assessment of the risk of material misstatements occurring, whether due to intended or unintended errors. In assessing this risk, the auditor of the annual financial statements takes into account the internal control system, insofar as it is important for compiling the annual financial statements and presenting a true and fair view of the assets, financial position and earnings of the company, in order to determine suitable auditing actions taking account of the framework conditions, not however to submit an auditing opinion about the effectiveness of the companyâ&#x20AC;&#x2122;s internal control system. The audit also included an evaluation of the adequacy of the applied accounting and valuation methods and the essential estimates made by the legal representatives of the company as well as an assessment of the overall tenor of the financial statements. We believe that we have obtained sufficient and suitable auditing proof, so that our audit provides a reasonable basis for our opinion.

Auditorâ&#x20AC;&#x2122;s opinion The results of our audit gave no reason for objection. On the basis of the knowledge gained during the audit, in our judgement the financial statements comply with the legal

RAIFFEISENLANDESBANK OBERÖSTERREICH Audit Certificate

regulations and present a true and fair view of the company's assets and financial position as of 31 December 2014 and the company's earnings and cash flow in the financial year from 1 January 2014 to 31 December 2014, in accordance with the Austrian principles of orderly accounting.

details given in the management report give a misleading impression of the company’s financial position. The auditor's opinion must also include a statement as to whether the management report is consistent with the financial statements and whether or not the details according to section 243a (2) of the Austrian Commercial Code apply. In our opinion, the management report is consistent with the financial statements. The details according to section 243a of the Austrian Commercial Code apply.

Linz, 9 April 2015 KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Martha Kloibmüller Chartered accountant and auditor

Cäcilia Gruber Chartered accountant and auditor

179

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Annual Report 2014

Statement of the Managing Board We confirm that, to the best of our knowledge, these consolidated financial statements, prepared according to proper accounting standards, present a true and fair view of the groupâ&#x20AC;&#x2122;s assets, financial position and earnings and that the Group management report presents the business development, performance and position of the Group so as to give a true and fair view of its net assets, financial position and earnings, and the Group management report provides a description of the principal risks and uncertainties to which the Group is exposed.

We confirm to the best of our knowledge that these financial statements of the parent company, prepared according to proper accounting standards, present a true and fair view of the companyâ&#x20AC;&#x2122;s assets, financial position and earnings and that the management report presents the business development, performance and position of the company so as to give a true and fair view of its net assets, financial position and earnings, and the management report provides a description of the principal risks and uncertainties to which the company is exposed.

Linz, 07 April 2015 Raiffeisenlandesbank OberĂśsterreich Aktiengesellschaft Europaplatz 1a, 4020 Linz THE MANAGING BOARD

Heinrich Schaller Chief Executive and Chairman of the Managing Board

Michaela Keplinger-Mitterlehner Deputy Chief Executive

Stefan Sandberger Member of the Managing Board

Reinhard Schwendtbauer Member of the Managing Board

Georg Starzer Member of the Managing Board

Markus Vockenhuber Member of the Managing Board

The responsibilities of the individual Board members are shown on pages 12 and 13.

RAIFFEISENLANDESBANK OBERÖSTERREICH Statement of the Managing Board | Report of the Supervisory Board

Report of the Supervisory Board pursuant to section 96 of the Austrian Stock Corporation Act (AktG) The Supervisory Board of Raiffeisenlandesbank Oberösterreich Aktiengesellschaft has fulfilled the tasks for which it is responsible according to the law and the company articles for the financial year 2014. The Managing Board has reported regularly, promptly and comprehensively about important business transactions and the situation and performance of the bank and the group. Seven committees (nomination, approval, information, auditing, risk, accounting, and personnel & remuneration committees) have effectively supported the entire Supervisory Board in the completion of its work. The Österreichischer Raiffeisenverband and KPMG Austria AG have audited the bookkeeping system, the annual financial statements in accordance with the provisions of the Austrian Commercial Code (UGB) and Austrian Banking Act (BWG), the consolidated financial statements according to the International Financial Reporting Standards (IFRS) for the year ended 31 December 2014 and the management report and the group management report for the 2014 financial year. The audits did not give cause for any reservations and all legal regulations were complied with in full. Consequently, the independent auditors issued an unqualified audit opinion. The accounting committee has audited the annual financial statements and the consolidated financial statements for the year ended 31 December 2014, the management report and the group management report for the 2014 financial year. The audit did not give cause for any reservations

in any way whatsoever. The outcome of the audit by the accounting committee is therefore a recommendation that the Supervisory Board concur with the findings of the independent auditors and approve the annual financial statements for the year ended 31 December 2014 pursuant to section 96 (4) of the Austrian Stock Corporation Act (AktG), agree to the proposal of the Managing Board concerning the appropriation of earnings and note with approval the consolidated financial statements for the year ended 31 December 2014, including the group management report. At a meeting held on 29 April 2015, the Supervisory Board itself also reviewed the annual financial statements and consolidated financial statements for the year ended 31 December 2014 as well as the management report and the group management report for the 2014 financial year. The Supervisory Board agreed with the accounting committee's audit findings and the Managing Board's recommendations regarding the appropriation of profit, approved the 2014 annual financial statements for Raiffeisenlandesbank Oberösterreich, which were thereby formally adopted pursuant to section 96 (4) of the AktG, and noted with approval the consolidated financial statements for the year ended 31 December 2014 including the group management report. The Supervisory Board would like to thank the Managing Board and all employees of the Raiffeisenlandesbank Oberösterreich Aktiengesellschaft and the whole group for their commitment and successful performance in the 2014 financial year.

Linz, 29 April 2015 The Supervisory Board

Jakob Auer Chairman of the Supervisory Board

181

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Annual Report 2014

RAIFFEISEN BANKING GROUP UPPER AUSTRIA 2014 RESULTS (CONSOLIDATED) Report on business performance 2014____________________________________________________________ 183 Consolidated balance sheet_____________________________________________________________________ 185 Consolidated income statement_________________________________________________________________186

RAIFFEISEN BANKING GROUP UPPER AUSTRIA Report on business performance

Report on business performance 2014 The Raiffeisen Banking Group Upper Austria – consisting of Raiffeisenlandesbank Oberösterreich AG and 95 independent Upper Austrian Raiffeisen banks with 442 bank branches, the PRIVAT BANK AG of Raiffeisenlandesbank Oberösterreich, and bankdirekt.at AG – is the most important local supplier of financial services in Austria and a crucial driver of modern bank services.

Synergy effects from close cooperation Private, corporate and institutional customers benefit from the close cooperation of the Upper Austrian Raiffeisen banks, which offer their services throughout Austria, and the Raiffeisenlandesbank Oberösterreich, which as a coordinating entity realises creative financial services in Upper Austria as well as the rest of the country. With its special network of expertise, the Raiffeisen Banking Group Upper Austria achieves a balance between local roots and global support for customers. The resulting synergy effects are, in times of challenging conditions, the prerequisite for, and foundation of, our ability to act quickly, cost-consciously, and in a goal-oriented way for our customers.

Successful associate activities The power and agility of the Raiffeisen Banking Group Oberösterreich lies primarily in its strong, modern associate work, which focuses on co-operative action. Taking decisions together, and then implementing them as well, is a strength throughout the entire Raiffeisen Banking Group Oberösterreich. This is the only way to remain capable of meeting the constantly changing challenges of the global economy, now and in future.

Further expanding market leadership To increase further the collaboration between the Raiffeisen banks and Raiffeisenlandesbank Oberösterreich in the interests of customers, design our services so that they are even better and more efficient, and in this way ensure that we work together to remain successful, we initiated the “Raiffeisen Banking Group Upper Austria 2020 – Shaping the future together” project in 2012. Several project teams are working on streamlining structures and being able to utilise synergies and potentials even better to expand further our clear market leadership in Upper Austria.

On average throughout the year, 3,580 people were employed by the Raiffeisen Banking Group Upper Austria.

Balance sheet The consolidated total assets of the Raiffeisen Banking Group Upper Austria were EUR 42.4 billion as at 31 December 2014. This equated to a year-on-year increase of EUR 0.6 billion or 1.4 per cent. Of the total assets, assets worth EUR 27.7 billion (65.3 per cent) were accounted for by loans and advances to customers. There was a slight decline year-on-year of 0.2 per cent. The proprietary possession of securities amounting in total to EUR 5.9 billion is held primarily in order to ensure liquidity and as security for central bank refinancing initiatives. Overall, at the end of the year, 14.0 per cent of total assets were invested in securities. The largest item on the liabilities side was the amounts owed to customers at EUR 24.1 billion or 56.9 per cent of the total equity and liabilities. This equated to a year-onyear increase in this item of EUR 0.2 billion or 1.0 per cent. Liabilities evidenced by certificates and subordinated liabilities amounted to EUR 7.3 billion or 17.2 per cent of the total equity and liabilities. These items contribute significantly towards long-term liquidity protection. At the end of 2014, the total equity eligible for inclusion under IPS (Institutional Protection Scheme) for Upper Austria according to the CRR (Capital Requirements Regulations) amounts to EUR 3,294.5 million. The statutory capital requirement was EUR 2,683.6 million as at 31 December 2014. The banking group was able, therefore, to report a capital surplus as at the balance sheet date amounting to EUR 610.9 million.

Income statement The 2014 income statement of the Raiffeisen Banking Group Upper Austria was very pleasing, given the general economic conditions. Consolidated operating income amounted to EUR 1,060.5 million and total operating expenses of EUR 617.4 million. Operating profit of EUR 443.1 million was reported for 2014.

183

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Annual Report 2014

In 2014, Raiffeisen Banking Group Upper Austria achieved an operating profit of 1.05 per cent of the average total assets and thereby a very good result which was above the average for Austrian banks.

Based on a rigorously implemented risk policy and a tightly operated risk management system, the Raiffeisen Banking Group Upper Austria has kept risk under control and been able to generate a profit from ordinary activities (POA) of EUR 229.2 million or 0.54 per cent of the average total assets.

RAIFFEISEN BANKING GROUP UPPER AUSTRIA Report on business performance

Consolidated balance sheet as at 31 December 2014 ASSETS Cash in hand and balances at central banks Public-sector debt instruments and bills of exchange eligible for refinancing at the central bank Loans and advances to banks Loans and advances to customers

31 Dec. 2014

31 Dec. 2013

in EUR m

220.7

212.7

1,080.1

1,063.7

6,159.0

5,349.5

27,684.6

27,731.6

Bonds and other fixed-income securities

1,857.7

1,909.7

Shares and other variable-yield securities

2,998.3

3,086.3

Equity investments Investments in affiliated companies Intangible assets

184.8

220.1

1,622.2

1,655.8

7.1

0.3

Property and equipment

282.5

273.3

Own shares or interests and shares in companies with a controlling or majority holding Other assets

0.0 243.0

1.6 258.3

28.8

34.6

42,368.8

41,797.5

Prepaid expenses Total assets

EQUITY AND LIABILITIES Amounts owed to banks Amounts owed to customers a) of which savings deposits b) of which term deposits Liabilities evidenced by certificates Other liabilities Deferred income

31 Dec. 2014

31 Dec. 2013

in EUR m

7,282.3 24,124.9 10,410.2 5,416.9 6,169.9

6,704.4 23,888.7 10,313.7 6,116.5 6,549.7

251.5

234.9

23.1

24.2

303.0

294.3

1,123.8

1,180.2

13.7 11.9

0.0 11.7

2,419.2

2,282.9

530.9

530.3

Net income for the year

75.7

55.6

Untaxed reserves

38.9

40.6

42,368.8

41,797.5

Provisions Supplementary capital according to Part 2 Chapter 4 of EU Regulation No. 575/2013 Instruments without voting rights according to section 26a of the Austrian Banking Act Subscribed capital Retained earnings Liability reserve pursuant to section 57 (5) of the Austrian Banking Act

Total equity and liabilities

185

186

Annual Report 2014

Consolidated income statement 2014 2014

2013

in EUR m

NET INTEREST INCOME Income from securities and equity investments

554.6 173.3

510.8 188.6

Fee and commission income

278.6

262.9

Fee and commission expenses

–42.7

–38.7

Income/expenses from financial operations

11.1

9.2

Other operating income

85.6

90.9

OPERATING INCOME

1,060.5

1,023.7

Personnel expenses

–325.9

–317.8

Other administrative expenses (cost of materials)

–205.3

–192.2

Valuation allowances for assets in asset items 9 and 10

–17.0

–18.0

Other operating expenses

–69.2

–55.5

OPERATING EXPENSES

–617.4

–583.5

OPERATING PROFIT

443.1

440.2

Reversals/additions of value adjustments to liabilities

–163.8

–196.8

Reversals/additions of value adjustments to securities and equity investments PROFIT ON ORDINARY ACTIVITIES

–50.1 229.2

–41.9 201.5

PROFIT FOR THE YEAR (prior to movements in reserves)

165.5

158.3

RAIFFEISEN BANKING GROUP UPPER AUSTRIA Report on business performance

187

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Annual Report 2014

IMPRINT

Owner, editor and publisher: Raiffeisenlandesbank Oberösterreich Aktiengesellschaft Europaplatz 1a, 4020 Linz Phone: +43(0)732/6596-0 FN 247579 m, District Court, Linz DVR: 2110419 www.rlbooe.at Responsible for content: Harald Wetzelsberger Michael Huber Otto Steininger Florian Brunner Claudia Feizlmayr Carola Berer with contributions from virtually every department at Raiffeisenlandesbank Oberösterreich Layout: GDL GmbH, Linz Typesetting: GDL GmbH, Linz Photography: Erwin Wimmer (Kutzler Wimmer Stöllinger FotogmbH, Pasching); Foto Strobl, Linz Print: Trauner, Linz Translation: Interlingua Language Services GmbH, Vienna Notes Gender-neutral language: In order to facilitate legibility, we have dispensed with gender-specific differentiation. The content refers to both genders equally, in accordance with equal treatment. ©: 2014 Raiffeisenlandesbank Oberösterreich Aktiengesellschaft This annual Financial Report of Raiffeisenlandesbank Oberösterreich 2014 is an English translation. If there are discrepancies, the German original shall apply. No liability is assumed for typographical or printing errors.

This document is a marketing communication that was prepared by Raiffeisenlandesbank Oberösterreich AG exclusively for informational purposes. It was not prepared in compliance with legal regulations regarding the independence of investment research, and it is not subject to any prohibition on trade connected with the dissemination of investment research. This marketing communication represents neither investment advice, nor an offer or invitation to make an offer for the purchase or sale of financial instruments or investments. The information, analyses and forecasts contained herein are based on the knowledge and market assessment at the time of its preparation – subject to amendments and additions. Raiffeisenlandesbank Oberösterreich AG assumes no liability for the accuracy, timeliness or completeness of the contents, or for the accuracy of forecasts. The contents are non-binding and do not represent a recommendation to buy or sell. Because every investment decision requires an individual determination based on the investor’s personal characteristics (such as risk tolerance), this information is no substitute for the personalised advice and risk disclosure provided by a customer advisor in the course of a consulting meeting. We expressly note that financial instruments and investments have major inherent risks. Performance is determined in accordance with the OeKB method, based on data from the custodian bank. We explicitly note that the composition of fund assets can change in accordance with legal regulations. Information about performance is related to the past and therefore does not represent a reliable indicator of future performance. Currency fluctuations in non-euro currencies can affect performance positively and negatively. Investments may result in tax obligations that depend on the customer’s personal circumstances and can be subject to changes in future. This information cannot replace, therefore, the personalised support provided to an investor by a tax advisor. The limited tax obligations imposed by Austria on non-resident taxpayers does not imply freedom from taxation in the investor’s state of residence. Prospectuses as well as any prospectus supplements of the issue of shares in Raiffeisenlandesbank Oberösterreich AG, which must be published in accordance with the KMG (Austrian Capital Market Act), are available from the offices of Raiffeisenlandesbank Oberösterreich AG. In the event of other share issues, the prospectus and any endorsements are available from the respective issuer of shares. Investment strategies for investment funds can focus primarily on investment funds, bank deposits and derivatives, or the emulation of an index. Funds may exhibit significant fluctuations in value (volatility). In the funds regulations approved by the Financial Supervisory Authority (FMA), issuers can be identified if more than 35% of the fund's assets can be attributed to them. The current sales prospectus, as well as the Key Investor Information – Customer Information Document (KID) are available in German and English at the respective capital investment company (KAG), the payment authority, or the tax representative in Austria. More information on risk and liability exclusion is available at www.boerse-live.at/Disclaimer; disclosure in accordance with section 48 of the Stock Exchange Act [Börsegesetz] at www.boerse-live.at/Offenlegung

RAIFFEISEN BANKING GROUP UPPER AUSTRIA Glossary

189

GLOSSARY A

CRD: The Capital Requirements Directive is the portion of the →Basel III regulations that must

Additional Tier 1 capital (AT1): Additional be implemented in national law in each country. IASB: The International Accounting Standards Rating (external): Assessment of creditwor-

Tier 1 (AT1) describes supplementary Tier 1 cap- The Directive lays down rules for the internal corporate assessment of capital adequacy and ital under CRR. mechanisms for supervisory cooperation. Like AfS: “Available for Sale” refers to a category of the →CRR, it is part of the “Single Rulebook” for financial assets in accordance with IAS 39. Avail- European banking supervisory law. able for Sale assets include all non-derivative financial assets which have been explicitly allo- Credit risk: The risk that one party of a financial cated to this category or are not allocated to any instrument will cause a financial loss to another party by not fulfilling an obligation. other categories.

AfS reserves: Financial assets in the “Available for sale” (→AfS) category are principally assessed at → fair value and have no effect on the income statement. Changes in fair value which are not due to → impairment are reflected directly in equity under the AfS reserves.

CRR: The Capital Requirements Regulation re-

fers to a regulation of the EU that deals with the central capital and liquidity requirements according to →Basel III. It contains the quantitative requirements for the capital adequacy of banks and disclosure requirements. Like the →CRD, it is part of the “Single Rulebook” for European bankAQR: Asset Quality Review (AQR) is a risk-ori- ing supervisory law. ented audit of the balance sheet in which selected balance sheet items are reviewed for impairment. CVA: The Credit Value Adjustment is the difference between the risk-free portfolio value and the Associates: Companies on whose business true portfolio value that takes into account the and financial policies significant influence can be possibility of a counterparty’s default. exercised.

Austrian Banking Act (BWG): The Austrian Banking Act is the legal basis for the organisation and supervision of Austrian banking and, as a result, a special set of trading regulations for the operation of banking businesses.

D DBO: Defined Benefit Obligation (DBO) is the ob-

ligation relating to estimated future payments under defined benefit pension plans. The cash value of the obligations determines the total amount of provisions, taking into account any further factors Austrian Commercial Code: On 1 Jan- (e.g. plan assets). uary 2007, the Handelsgesetzbuch (HGB) was renamed Unternehmensgesetzbuch (UGB), both Derivatives: Derivatives are financial instruare now generally known in English as the Austri- ments whose value changes as a result of changan Commercial Code. The Austrian Commercial es to the underlying basic instrument (e.g. interest Code regulates the legal relationships of entre- rate, securities price, exchange rate, among othpreneurs, contains stipulations about company ers). They require no or minimal initial net investstructures and accounting standards. ment, and are settled at a later date (→forward transactions). →swaps, →options and →futures are among the most well-known derivatives. B

Board (IASB) is a private sector organisation that passes international financial reporting standards (→ IFRSs). The aim is to create high-quality, enforceable and globally applicable accounting standards.

IFRIC: Interpretations passed by the Internation-

Rating (internal): Assessment of creditworthiness of borrowers by banks.

al Financial Reporting Interpretations Committee Risk-weighted assets (RWA): Risk-weight(IFRIC) on important issues of →IFRS accounting. ed assets (RWA) refer to the total risk value according to CRR, including components from IFRS: International Financial Reporting Stand- Article 92 (3) of CRR. The most important comards (IFRSs) is the general term for international ponents are risk-weighted exposure amounts for accounting standards (IFRSs, formerly IAS) and credit; counterparty default and dilution risks; their interpretations (→ IFRIC, formerly SIC). total exposure amounts for risks related to items, foreign currencies, wind-ups and commodities; Impairment: Impairment refers to the de- risk positions for operational risks; and risk posicrease in value of financial assets with effect on tions for adjustment of credit scores. the income statement and of (long term) intangible assets, property and equipment, and investment RoAA: Return on Average Assets (RoAA) is a key property, as long as the latter are valued at amor- profitability figure that compares income (pre- or after-tax profit for the year) against average astised cost. sets. Interest margin: The interest margin is calculated from the net interest income (IFRS, Austrian RoAE: Return on Average Equity (RoAE) is a key Commercial Code) for the financial year in relation profitability figure that compares income (pre- or to the average assets. after-tax profit for the year) to average equity (including minority interests). Interest rate risk: The risk that the → fair value or future cash flow of a financial instrument will S fluctuate due to changes in the market interest rate. Securities trading book: In accordance with the Austrian Banking Act (BWG), the securities IPO: Initial Public Offering (IPO) describes a trading book includes items which are held by a company’s first flotation on the stock exchange bank for the purpose of short-term resale, in order to exploit price and interest-rate fluctuations. where shares can be bought by the public.

IPS: An Institutional Protection Scheme (IPS) is SREP: Supervisory Review and Evaluation Pro-

a liability or indemnity agreement – created by means of a contractual agreement or through articles of association, statutes or charters – that provides protection for member banks in a decentralised banking group. A distinction can be Banking book: All items not allocated to the Dirty Price: The dirty price is the price of an drawn between an institutional protection system →securities trading book. interest-rate instrument including accumulated at the state level (L-IPS) and federal level (B-IPS). interest claims (accrued interest). Basel III: Basel III refers to the changes and L supplements to the framework created in 2004 for DVA: Debt Value Adjustment considers the efcapital adequacy requirements for banks (Basel II) fect of the bank’s own creditworthiness when do- LGD: Loss Given Default describes the ratio of by the Basel Committee on Banking Supervision. ing the fair value measurement of derivatives and the loss on an exposure due to default. The reforms regulate both the capital base and shows the difference between the risk-free value liquidity And are in effect in the European Union and the value when taking the own creditworthi- LIP: Loss Identification Period describes the avas of 1 January 2014. ness risk into consideration. erage length of time between the occurrence and recognition of a loss event.

thiness of issuers and debt issues by international rating agencies (e.g. Moody’s, Standard & Poor’s).

cess – this is the supervisory process for review and monitoring by the →EBA.

Subsidiaries: Companies on whose business and financial policies a controlling influence can be exercised. Supplementary capital (T2): Under CRR, supplementary capital is referred to as Tier 2 (T2). Swaps: Swaps are derivatives in which future payment flows are exchanged. The most important examples are the exchange of interest obligations (interest swap) and/or foreign currency items (foreign currency swap).

Liquidity risk: The risk that a company has difCash flow statement: Calculation and pres- EBA: The task of the European Banking Authority ficulty in fulfilling its obligations resulting from its Tier 1 capital (T1): Tier 1 (T1) capital accordentation of cash flows achieved and utilised from operational transactions, investment and financing activities as well as reconciliation of cash and cash equivalents at the beginning and end of the financial year.

CDS: A Credit Default Swap (CDS) is a credit de-

rivative where the buyer pays a premium to the seller of the CDS and the seller agrees to compensate the buyer in the event of certain credit events (e.g. loan default) in respect of one or more assets.

is to develop effective and consistent regulations financial liabilities. for the supervision of the European banking sector. The overall objectives are to safeguard financial N stability in the EU, protect integrity and ensure the proper functioning of the banking sector. NPL: Non-performing loans are loans where it is assumed that the customer will not be able to pay Exchange rate risk: The risk that the →fair the debt back to the bank in full. Various indicavalue or future cash flow of a financial instrument tors are used to determine the exposure, such as will fluctuate due to exchange rate changes. that the customer has filed for bankruptcy or has not made a payment in at least 90 days.

Tier 1 Ratio: The Tier 1 ratio results from the

→Tier 1 capital expressed as a percentage of →the total risk amount.

Total Capital (TC): Total capital as defined by CRR includes →Tier 1 capital (T1) as well as →Tier 2 capital (T2) after adjustments and corrections.

Total Capital Ratio (TC Ratio): The total CIR: The cost/income ratio (CIR) is an impor- an asset can be exchanged or a debt paid be- Operating profit: The operating profit is the capital ratio is →total capital expressed as a pertant key figure in assessing the cost efficiency of banks. At group level, it is calculated by comparing general administrative expenses with the sum of net interest income, net fee and commission income, net trading income, and other operating income.

Common Equity Tier 1 (CET1): Common

Equity Tier 1 (CET1) according to CRR includes certain capital instruments as well as associated premiums, retained earnings, accumulated other comprehensive income, other reserves, funds for general bank risks, and adjustments and corrections.

Common Equity Tier 1 Ratio (CET1 ratio): The CET1 ratio is →Common Equity Tier 1 capital expressed as a percentage of the →total risk amount.

Companies accounted for using the equity method: The equity method is used to account for → associates in consolidated financial statements. Essentially, the proportionate equity of companies accounted for under the equity method is shown in the consolidated balance sheet and the proportionate profit in the consolidated income statement.

Fair Value: The fair value is the amount at which

ing to CRR describes core capital and includes → Common Equity Tier 1 capital (CET1) as well as → Additional Tier 1 capital (AT1).

tween competent, contractually willing and mu- difference between operating income and opertually independent business partners, at market ating expenses. At group level, it is calculated by conditions. deducting general administrative expenses from the sum of net interest income, net fee and comForward: Forwards are individually developed mission income, net trading income, and other futures which are not traded on the stock ex- operating income. change and with an obligation to be fulfilled. Operational risk: Operational risk refers to Forward transactions: In a forward transac- the risk of losses caused by the inadequacies or tion a mutual contractual fulfilment takes place at failure of internal procedures, people, systems or a later date and at a previously agreed price. One external events. differentiates between unconditional forward exchange transactions (e.g. → futures) and condi- Options: The buyer of an option acquires the right to purchase (call option) or sell (put option) tional futures (→ options). the underlying option object from a contract partFully consolidated companies: Fully con- ner at a certain price and at a certain time agreed solidated companies include the parent company in advance, or during a particular period, i.e. it is a and important → subsidiaries that are presented conditional future. in the consolidated financial statements as if they were one single company. OTC: Over The Counter (OTC) describes transactions between financial market participants Futures: Futures are standardised, future trans- which are not settled on the stock exchange. actions which are traded on the stock market and have an obligation to be fulfilled. A particular price P and point in time is agreed in advance at which the object that is traded (from the money, capi- PD: Probability of Default describes the likelital, precious metals or foreign exchange market) hood that a receivable will go into default. must be delivered or accepted.

centage of the →total risk amount.

V VaR: Value at Risk (VaR) is the potential future

loss which, with a certain probability (e.g. 99%), will not be exceeded within a certain time period.

ANNUAL REPORT 2014

ANNUAL REPORT

Europaplatz 1a, 4020 Linz Tel. +43 (0) 732/6596-0 Fax +43 (0) 732/6596-22739 Email: mak @ rlbooe.at www.rlbooe.at

2014