annual financial statement 2011 - conwert Immobilien Invest SE

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CONWERT IMMOBILIEN INVEST SE ANNUAL FINANCIAL STATEMENT 2011 34 REPORT ON SIGNIFICANT FEATURES OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM WITH RESPECT TO THE FINANCIAL REPORTING PROCESS The Executive Board is responsible for the risk management of the conwert Group. With a view to the accounting process, risk management falls under the responsibility of the CFO, who is operationally supported in risk management by his staff. The ongoing internal reporting system is particularly important for a functioning risk management in the conwert Group. Risks can thus be identified at an early stage and countermeasures can be taken. Timely, quarterly reporting within a Risk-Jour-Fixe, in which the individual risk owners participate, forms the basis for this. The parent company has provided uniform standards for the implementation and documentation of the accounting process for its subsidiaries. The objective is to prevent the risks of incomplete or incorrect financial reporting. In addition, the head office reviews the internal reports prepared by the subsidiaries for plausibility and compares them with the budget plans. Hence, appropriate measures can be taken rapidly in the case of deviations. In order to maintain the process described above, the subsidiaries are required to provide annual budgets for the following year in November of the current year. These budgets are subject to approval by the Executive Board. At regular meetings of the Executive Board with the regional and operating managers, the current business development and foreseeable opportunities and risks resulting from changed framework conditions are discussed. International accounting standards are complemented by internal guidelines in the preparation of the consolidated financial statements. This ensures a consistent presentation of the subsidiaries included in the consolidated financial statements in terms of measurement and presentation. The cornerstones of the existing internal control system and the risk management system with respect to the (group) accounting process at conwert can be described as follows: + The conwert Group has a clearly defined structure of management and corporate operations. Cross-departmental requirements are specified by the central group management and administration. + With a view to the accounting process, the functions of the accounting department are clearly separated from other areas such as payment transactions and group treasury. + The finance systems are protected against unauthorised access by IT facilities. + The finance systems employed use standard software wherever possible. + An adequate system of guidelines (accounting guidelines, payment guidelines, etc.) is in place and is updated on a regular basis. + Accounting data received and passed on is checked for completeness and correctness by the persons responsible, for example by taking random samples. + The four-eye principle is applied to all processes relevant to financial accounting. + The consolidation software MIS is used for the purpose of consolidation. For the principles of accounting and valuation refer to the notes to the consolidated financial statements. + Processes relevant to accounting are audited by the (process-independent) internal audit department on a regular basis. The control and risk management system described ensures that all business transactions are correctly entered, processed and evaluated in the balance sheet and included in the accounting process. Qualified employees, the use of specific software and clear legal and internal regulations provide the basis for an appropriate, uniform and continuous accounting process. A clear separation of responsibilities as well as different control and verification mechanisms are to ensure a correct and responsible accounting process. Business transactions can thus be recorded, processed and documented in accordance with legal requirements, the articles of association and internal guidelines.
INTRO | | CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL STATEMENTS MANAGEMENT REPORT Risk management report OUTLOOK OVERALL ECONOMY IN THE EURO AREA INCLUDING GERMANY The overall economic situation in the euro area is still tense and early economic indicators suggest a mild recession. In its forecast for the year 2012 from February of the current year, the EU Commission expects GDP to decline by 0.3% in the euro area. The Commission thus predicts a stagnation in economic growth for the year 2012, but sees indications that the European economy will stabilise. Inflation is expected to amount to 2.3% in the European Union (EU27) in the current year. Moreover, the Monetary Council of the European Central Bank again decided to maintain the base rate at 1% at its regular meetings on 9 February and on 8 March 2012. However, several experts assume that, with determined actions, a turnaround is possible in the course of the year 2012 and the European Union will be able to achieve growth and increasing employment figures through the stabilisation. The agreement to a further development of the crisis instruments throughout the EU and the financial pact for fiscal policy coordination in the euro zone creates new framework conditions, which are designed to contribute to decreasing the existing uncertainty in the economy. However, financial experts believe that – aside from temporary phases of recovery – negative influences will be the prevailing element until spring 2012, which indicates further declines in share prices. Only with a new start in the euro periphery and first signs of economic stabilisation, the development should level out and could introduce a turnaround in the second half of the year 2012. (EU Commission, Interim Forecast February 2012, Peter Brezinschek, Raiffeisen Research, Q4/2011) According to a forecast by the German Institute for Economic Research (DIW) in Berlin on the development of the real gross domestic product in Germany in the year 2012, GDP growth is expected to amount to 0.6% compared with the previous year. In contrast, a 2.2% change in GDP is forecasted for the year 2013. (DIW Berlin; Federal Statistical Office) AUSTRIA Although from today’s perspective it is not yet certain whether the measures taken so far by the EU and the ECB will suffice, many financial experts assume that the euro area has the means to end the crisis. Therefore, they still do not expect another recession of the Austrian economy. However, the confidence crisis is likely to leave massive traces on the real economy in Austria in the year 2012. The EU Commission therefore only expects an increase by 0.7% in the Austrian GDP. Moreover, it assumes that demand by the public sector will decline also in Austria in 2012, which may lead to a reduction of investment activities. The Commission predicts an inflation rate of approx. 2.4% in Austria in the year 2012. Despite overcoming the confidence crisis, growth prospects will remain subdued as the reins will be tightened significantly in terms of fiscal policy, but thanks to a more robust global upswing, a higher increase in GDP should be possible again in 2013. (Unicredit Research, 15 December 2011; EU Commission, Interim Forecast February 2012) Wiener Börse AG also expects a volatile year on the stock exchange in 2012. Should the market climate take an unexpected turn and develop positively, the management of the stock exchange expect stocks to return to pre-crisis levels and new initial public offerings. In early 2012, a trend towards short IPO windows was visible. Several candidates for the stock exchange are in the waiting loop. International investors continue to be very important for the domestic capital market. As in the past, major investors will come from the USA and Great Britain in the year 2012. (Vienna Stock Exchange, 30 December 2011, Statement of the Management Board Vienna Stock Exchange) PROPERTY MARKETS RESIDENTIAL PROPERTIES VIENNA The residential property boom in Vienna will continue in 2012 despite, or rather because of, the weak economic prospects, according to experts. Freehold flats are considered an ideal investment in the debt crisis. In 2011, freehold flats recorded price increases between 7% and 9% in individual submarkets. Especially in the sixth, seventh and ninth districts, prices per square meter exceeded 5,000 €. The fifth and the adjacent twelfth district, previously less popular, are expected to outperform the market average in 2012, according to experts’ forecasts. This upward trend will not prevail in terms of rental prices. Competition from municipal and non-profit housing with legally defined upper limits for rents and the strong demand for freehold flats should dampen an upward development for rents. The increase will roughly correspond to the inflation rate in the experts’ opinion. (EHL, Report on investment properties 2012) 35
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