annual report - Hypo Real Estate Holding AG

2007
DEPFA BANK plc
annual
report

Group Figures and Ratings
Group Figures
Earnings
2007 (1) 2006 (2) Change
. m . m %
Net interest income 392 425 -8%
Net fee and commission income 41 32 28%
Net trading income -52 140 - 137%
Gains less losses from financial assets 348 277 26%
Other operating income 20 34 -41%
Total operating income 749 908 -18%
Operating expenses -417 -269 55%
of which personnel expenditure -235 -138 70%
of which other administrative expenditure -141 -78 81%
of which depreciation and amortisation -13 -9 44%
of which other expenditure -28 -44 -36%
Net operating profit before impairment losses 332 639 -48%
Impairment losses on loans and advances - -
Profit before taxation 332 639 -48%
Taxation -23 -113 -80%
Group Net Income 309 526 -41%
Balance Sheet Items 31/12/2007 31/12/2006 %
Financing volume 198,119 218,927 -10%
of which drawn 171,168 194,586 -12%
of which undrawn 26,951 24,341 11%
Shareholder´s capital 2,951 2,777 6%
Total assets 217,900 222,945 -2%
Key Ratios 2007 2006
Cost/Income ratio (including exceptional items) 55.7% 29.6%
Cost/Income ratio (excluding exceptional items) 40.9% (3) 26.1% (4)
RoE after taxes 10.8% 20.7%
(1) 2007 Results include DEPFA Deutsche Pfandbriefbank AG which is classified as discontinued operations in the financial statements
(2) Including 2006 results from discontinued operations
(3) 2007 exceptional costs include 388 million in personnel costs arising on the change of control of the Group and 323 million arising on the loss on disposal of
DEPFA Deutsche Pfandbriefbank AG
(4) 2006 exceptional costs include 334 million in other income and 341 million in other expenditure arising on tax refunds and related interest from discontinued
operations
Ratings
(short-term/long-term/Financial Strength)
Fitch Moody’s S&P
DEPFA BANK plc F1+/AA-/B P-1/Aa3/C+ A-1/A+/--
DEPFA Deutsche Pfandbriefbank F1/A/-- P-1/Aa3/C+ A-1/A/--
DEPFA ACS BANK F1+/AA-/-- P-1/Aa3/C+ A-1/A+/--

Profile
❚ The only globally operating bank that focusses
exclusively on public sector clients and related business
❚ Operates from 29 locations throughout Europe, America
and Asia
❚ Covers all financial requirements of the public sector
❚ Has extensive experience with the specific financial,
political and social requirements of the public sector
❚ Provides tailor-made solutions for central and regional
governments, municipalities and cities
❚ Is a strong financial partner and independent advisor to
its clients
❚ Has a strong entrepreneurial spirit and a corporate
culture that promotes diversity

DEPFA BANK plc worldwide
Dublin
Albany
Amsterdam
Athens
Boston
Chadds Ford
Chicago
Copenhagen
Dallas
Dortmund
Frankfurt
Glen Allen
Hong Kong
Houston
■ North America (New York City) ■ South America (São Paulo) ■ India (Mumbai)

■ Europe incl. EMEA and
CIS (London/Dublin
/European Offices)
Istanbul
London
Luxembourg
Madrid
Milan
Mumbai
New York
Nicosia
Paris
Rome
Sacramento
San Francisco
Sao Paulo
Tokyo
Warsaw
■ Asia ex-Japan (Hong Kong) ■ Japan (Tokyo)

Content
2
Profile 1
Content 2
Business Principles 9
Corporate Highlights 2007 10
Executive Directors 14
Management Discussion 18
Business Performance 66

Risikoberichtbericht
Accounts 76
Directors and other information 76
Directors’ Report 78
Statement of Directors’ responsibilities 84
Independent Auditors’ Report to the Members of DEPFA BANK plc 85
Consolidated income statement 88
Consolidated balance sheet 89
Company balance sheet 90
Consolidated statement of changes in equity – Group 91
Consolidated statement of changes in equity – Company 92
Consolidated cash flow statement 93
Notes to the consolidated financial statements 95
Addresses 186
3

Damien Legrand:
“One of the key innovative features of DEPFA's refinancing
proposal was the use of an inflation-linked bank
loan, which enabled the borrower to hedge its natural
exposure to inflation on the tolls. The long concession
length together with the fact that traffic figures have
constantly exceeded initial forecasts since the last 2
years have been strong features for the transaction”.
Clients: Eiffage and Caisse des Dépôts et Consignations
Need: To bridge the highway gap on the A10-A71-A75 route, the shortest route between the
North and the South of France, by building the tallest vehicular bridge in the world
Solution: DEPFA BANK acted as Mandated Lead Arranger for the 3573 million refinancing of the toll
viaduct, which is successfully operated by Compagnie Eiffage du Viaduc de Millau under
a 78-year concession granted by the French State
People: Damien Legrand, Managing Director, Head of Infrastructure Finance, France/Benelux
Julien Touzot, Director, Infrastructure Finance, France/Benelux

Millau Viaduct, France

Giancarlo Campagnani:
“ABS issue on healthcare receivables for Region of
Campania has been the benchmark transaction for the
sector in 2007. DEPFA’s underwriting capabilities and
Joint Lead role, indeed helped to turn the deal into a
success story.
Our commitment and performance on that deal allowed
us to become a reference financial institution for the
Region, the third biggest in Italy”

Client: The Region of Campania, Italy
The Region of Campania, Italy
Need: Payment of past due receivables by Local Healthcare Units (LHU) across the Region. LHU have
experienced in the past significant delays and cash flow strains following delayed payments
due from the National Healthcare System to the Region
Solution: DEPFA BANK acted as Joint Lead Manager in the ABS transaction launched to finance the
payment of the above mentioned receivables, backed by the unconditional payment obligation
from the Region of Campania, for an amount of 3452 m
People: Giancarlo Campagnani, Managing Director, Public Sector Organisation (PSO) Italy
Mauro Ferone, Managing Director, Structured Asset Finance

Business Principles
Risikoberichtbericht
Clients DEPFA BANK is a leading provider of financial services
to the Public Sector worldwide. With this comes a unique respon-
si bility towards the respective communities within which we ope-
rate. Our success depends on putting our clients’ interests first
People Our people are the key to our success. Employees must
reflect the integrity, honesty and reputation of our franchise and
the diversity of the communities and cultures we serve. Given the
wholesale nature of our business we strongly believe in flat
hierarchies, entrepreneurial spirit and teamwork. All segments
and all teams work closely together towards our common goals.
Responsibility We are committed to support long-term econo-
mic growth and social responsibility. Therefore we promote vario-
us social projects in the interests of some of the most
disadvantaged people in the world. We encourage our people to
join in with these efforts. We follow a strict policy of neutrality in
political matters, and we try to avoid operating in regions
exposed to military conflicts and refrain from financing offensive
military projects in general.

Corporate Highlights 2007
10
10
Q1:
Q2:
Q3:
Q4:
Hybrid Capital: Tier I Capital; 3500 million perpetual executed March 2007
Long-Term Funding: ACS US$1.25 billion; 5.125% due 16/3/2037
Business Expansion: DEPFA BANK plc agrees to acquire US municipal capital
markets business of First Albany Capital Inc.
Financials: DEPFA BANK reports 2006 net profit of 3526 million (+11%)
Social Responsibility: Support of Concern Livelihood Projects in Rwanda, Sierra
Leone, Liberia
Financials: DEPFA BANK with solid start in 2007: net profit of 3123 million in Q1
Long-Term Funding: ACS 31 billion; 4.75% due 15/12/2009
Share: Capital Markets Day for Institutional Investors in Dublin and
New York
Management: DEPFA BANK plc appoints Cyril Dunne as Chief Operating
Officer and Member of the Executive Committee.
Infrastructure Finance: Successfully closes the 3280 million Dublin Conference Centre
transaction (Infrastructure Journal Global PPP Deal of the Year).
Business Expansion: DEPFA BANK completes its acquisition of the US Municipal
Capital Markets Group of former First Albany Capital, Inc.
Geographic expansion: Opened Istanbul Representative Office and Hong Kong Branch
Share: Recommended Merger of Hypo Real Estate Holding AG and
DEPFA BANK plc; DEPFA EGM in Dublin
Financials: DEPFA BANK reports cumulative half year result of 3 249 million
– Q2 result of 3126 million
Securitisation: DEPFA closes third EPIC CLO of infrastructure assets
Geographic expansion: Opening of Madrid and Nicosia Branch Offices; opening of
Athens Representative Office
Share: DEPFA BANK becomes 100% subsidiary of Hypo Real Estate
Holding AG
Long-Term Funding: DEPFA US$2 billion; 4.75% due 12/10/2010
Infrastructure Finance: The Millau Viaduct won the “Transport Refinancing Deal of the
Year 2007 EMEA” by Project Finance magazine.

Julia Hoggett, Global Head of Capital Markets, Dublin
“The Capital Markets team had a successful
year in 2007, generating the lowest cost of
long-term funding for the Bank in recent his -
tory notwithstanding the more challenging
market environment. The highlights of the year
included the first ever 30yr US$ Covered Bond
and the largest ACS US$ benchmark ever issued.
The 30 year issue in particular reflected
the continued globalisation of DEPFA's investor
base with 88% being sold into the United
States.”
Brian Farrell, Global Head of Money Markets, Dublin
“Throughout 2007 DEPFA Global Money Market
funding platforms performed robustly, despite
sustained dislocation in the funding markets in
the second half of the year. All of our Money
Market funding platforms continued to operate
during this period of market turbulence, sourcing
liquidity in 2007 in significant amounts. Our
cost of funding improved as we were a direct
beneficiary of the significant repricing of the
sovereign and sub-sovereign repo market,
which enabled us to improve our overall funding
spread for 2007.”
11
11

John Kirwan:
“This award winning and landmark transaction incorporates
a unique financial structure which was influenced by
DEPFA as Mandated Lead Arranger. It is also a successful
example of the application of the PPP model to a new
sector aswell as advancing the use of private finance in
Irish public projects.”
Client: Treasury Holdings
Need: The development of a world class convention centre in the Irish capital which, as well as
adding strategic capability to Ireland's business tourism industry, the building when complete,
will make a spectacular impact on the Dublin skyline. The centre is designed by Pritzker Prize
winner, Kevin Roche, the internationally renowned, Irish-born architect who also designed
New York’s Metropolitan Museum of Art.
Solution: DEPFA was mandated to arrange 3280 million of loan facilities to finance the construction and
operation of the convention centre capable of accommodating up to 2,000 delegates under
a 25 year (plus 42 months construction) PPP concession granted by the Irish Government
through the Commissioners of Public Works.
People: John Kirwan, Managing Director, Head of Infrastructure Finance (UK and Ireland)
Dermot Malone, Director · Jason Murphy, Director
Awards: Global PPP Deal of the Year 2007 (Infrastructure Journal)
Global Leisure Deal of the Year 2007 (Project Finance Magazine)

The National Conference Centre, Dublin

Executive Directors
14
Paul Leatherdale, Chief Executive Officer
Paul Leatherdale joined DEPFA Group in September 1999 to set up the Infrastructure
Finance team in Dublin with specialist local teams based in most of the Group's offices
worldwide. Previously, after completing a business degree, he qualified as a Chartered
Accountant and then spent 15 years at Sumitomo Bank in London specialising in Real
Estate, Construction and International Project Finance. He is directly responsible for the
Bank’s origination of new business in Public Sector and Infrastructure Finance.
Angus Cameron, Executive Director and Chief Financial Officer
Angus Cameron joined DEPFA BANK plc as CFO in January 2007. He previously worked
for the Bank of New York Europe where he was also CFO. Prior to that, he held a number
of senior finance roles at Scottish Widows and Barclays Bank. As CFO he is responsible
for all Finance, Accounting and Financial Controls. By mutual agreement he will leave the
Bank on 31 March 2008.
Bo Heide-Ottosen, Executive Director, Public Sector and Infrastructure Finance
Since October 2007 Bo Heide-Ottosen, has been a member of the Management Board of
Hypo Real Estate Holding AG where he has overall responsibility for the Public Sector and
Infrastructure Finance business segment, and in particular for all Treasury and Balance
Sheet Management activities. He joined DEPFA in October 2004 as Head of Treasury. He
previously held senior management positions in Scandinavia and worked as Executive VP
and CFO at the Nordic Investment Bank in Helsinki.

James Campbell, Executive Director and Chief Operating Officer
James Campbell joined Hypo Real Estate Group in September 2003, where he was
responsible for establishing the Internal Audit function within Hypo Real Estate Bank International
and then at a Group level. Since October 2005, he has been a member of the
Board of Directors of Hypo Public Finance Bank plc as Chief Operating Officer. In October
2007 he was appointed to the Board of DEPFA BANK plc as an Executive Director, and
also in the capacity of Chief Operating Officer. Prior to joining the Group, he worked in
practice for 14 years, firstly with Ernst and Young in London, and then with KPMG in Hong
Kong and Ireland. With effect from 1 April 2008, he will also assume the responsibility for
Finance, Accounting, and Financial Controls.
Tom Glynn, Executive Director, Capital Markets and Asset Management
Tom Glynn was appointed to the Board of DEPFA BANK plc in October 2007 as Executive
Director responsible for the Capital Markets and Asset Management business. He is a
member of the Management Board of Hypo Real Estate Holding AG, in charge of the
Capital Markets and Asset Management segment, having joined the Group in January
2004. Since October 2005 he has been Deputy CEO of Hypo Public Finance Bank plc.
Before that he held senior positions at HypoVereinsbank as Head of the Management
Committee in New York and as Global Head of Credit Markets for the HypoVereinsbank
Group in charge of securitization, credit trading and structuring.
Non-Executive Members of the Board of Directors
Georg Funke (Chairman)
Dr. Markus Fell (Deputy Chairman)
Dr. John Bourke
Patrick Ryan
Bettina von Oesterreich
Cyril Dunne
15

Dr. Christian Kummert:
“Probably the first PPP transportation project which combines
project finance with purchase of receivables.”
Clients: BAM PPP, Berger Bau, Egis, Volker Wessel, Fluor
Need: To ease traffic congestion on the A8 Motorway between Munich and Augsburg, Germany
Solution: 3241 million of debt financing for the widening of the motorway by one lane in each direction as
well as operation and maintenance under a 30 year concession
People: Dr. Christian Kummert, Managing Director, Infrastructure Finance Unit, Europe
Dr. Ruprecht von Heusinger, Associate Director, Infrastructure Finance Unit, Germany

A8 Motorway, Germany

Management Discussion – Segments
Management Discussion
2007 was a momentous year for the Bank* in a number
of ways, not least because of the acquisition by
Hypo Real Estate Group AG (“HRE Group”), which was
recommended by the Board of Directors and was
overwhelmingly approved by the shareholders at the
EGM held on 24 September 2007, and finally closed
on 2 October 2007.
DEPFA’s* new strategic position, as the public finance
arm of the enlarged HRE Group (having now acquired
HRE Group’s own specialist public finance subsidiary
(Hypo Public Finance Bank plc (“HPFB”)), brings increased
stability to the Bank and new opportunities for
diversification of the product range being delivered to
its public sector client base – principally in the area of
specialist real estate structuring skills and credit
appetite for the type of high quality transaction that is
often underpinned by the involve ment of public sector
entities.
Not only will DEPFA absorb HPFB’s total assets of
approximately €31 billion, reinforcing its status as one
of the leading public sector lending institutions in the
world, but the enlarged capital base will bolster
DEPFA’s ability to undertake large scale transactions.
An integration process was launched soon after the
closing of the transaction, which has already delivered
good results in terms of identifying and implementing
cost savings, streamlining certain operations and
reducing the extent of non-core activities such as
proprietary trading.
But despite this major change in ownership, and the
resultant changes to the senior management team,
DEPFA’s clear and undiluted focus on serving the financial
needs of governments and public sector entities
worldwide remains unaltered. The benefits of this specialist
focus and strictly applied business policy were
clearly demonstrated during the second half of the year
when the problems of the US sub-prime residential
mortgages which had been securitised and widely
distributed to international investors through structured
CDO products, created widespread market disruption
18
globally and led to a severe restriction of liquidity in the
financial markets. However, during this turbulent
period, the Bank’s short-term unsecured funding cost
actually decreased. DEPFA benefited from a “flight to
quality”, as debt investors and depositors demonstrated
they had confidence in the quality and public
finance focus of DEPFA’s asset portfolio.
The Bank has not been able to escape entirely
unscathed from changes in the financial market landscape
over the year and this has resulted in some
material losses being recognised in the Global Markets
Segment (now part of Capital Markets and Asset
Management from 1 January 2008). However, decisive
action has been implemented to limit further exposure
to adverse market movements, and in co-ordination
with HRE Group, the Bank’s policy on the level of
trading volatility it is willing to accept has been
reassessed so that trading activity will principally be in
conjunction with the need to support the client businesses
of the Bank rather than being an end in itself.
The origination of new business slowed in the last
quarter of 2007, partly as a result of deteriorating credit
markets, but also because, in order to meet target
capital ratios, risk weighted asset volumes had to be
managed carefully. This had less impact on public
sector business (which has commensurately low
capital requirements) than the more capital intensive
infrastructure and utility sectors. It was pleasing that
even in such a difficult market environment, DEPFA
was still able to securitise infrastructure assets in
December which is a testament to the quality of the
underlying asset portfolio, and the placement and
structuring capability of the staff responsible.
* References in this management discussion section to
“DEPFA”, “DEPFA BANK” or “the Bank” refer to the
DEPFA Group excluding HYPO Public Finance Bank
and including DEPFA Deutsche Pfandbriefbank AG,
unless other wise stated.

On another positive note, DEPFA has continued to
expand its activities, both in global presence (with new
offices being established during the year in Greece and
Turkey), and is seeking to penetrate its core markets
more deeply. The important acquisition of a US
municipal finance broker-dealer operation (First Albany
Securities, now “DEPFA First Albany”) was closed in
September 2007 and gives the Bank improved access,
scale and new skill sets to increase its capability to
service the US public finance sector in a number of
different ways.
In the drive for improved cost efficiency, and also
reflective of the need to resource the Bank appropriately
within the revised business scope and the overall
context of the support and resources available from
the HRE Group, headcount was reduced during
the latter part of the year. The Bank would like to
acknowledge the contribution of all former management
and staff colleagues in helping to position DEPFA
proudly as the world’s pre-eminent public finance
bank.
Going forward DEPFA’s business model continues to
be one based principally on intermediating between
the increasingly sophisticated financial requirements of
the global public sector, and the institutional investing
market’s growing appetite for high quality and stable
assets. This is mainly done through the origination of
public sector and infrastructure assets in bond or loan
format, which are held on the Bank’s balance sheet
and refinanced through the issuance of AAA rated
covered bonds (Pfandbriefe in Germany and Asset
Covered Securities (ACS) in Ireland).
One of the expected synergies resulting from the
merging of HPFB into DEPFA BANK (which will be -
come fully effective in the early part of 2008) is the
opportunity to further diversify the Bank’s funding
sources, by utilising HPFB’s covered bond bank in
Luxembourg (which issues AAA rated “Lettre de Gage”
covered bonds).
The Bank expects to be able to continue to take
advantage of some of the more positive effects of the
“sub-prime crisis” – such as improved pricing for credit
availability, and an increased investor requirement for
clarity and understanding of what risks they are
actually taking which should benefit institutions such
as DEPFA with a very clear business focus, while
managing the challenges of the present liquidity
environment.
DEPFA has established an outstanding track record in
public sector finance and places great emphasis on
growing its valuable relationships with its core public
sector clients. As the public sector’s financial needs
continue to evolve the Bank is very well positioned to
respond to the new opportunities and intends to make
sure that it is able to assist, and of course thereby
benefit from, its clients’ requirements.
Budget Finance
Introduction
The Budget Finance segment produces a large proportion
of the Bank’s revenues. This is generated from
the wide range of products provided to the public sector
client base, as well as from the realisation of profits
from the active management of the asset portfolio. The
segment is staffed by specialist teams involved in the
origination of public (“on-budget”) finance assets (both
directly from clients through the Bank’s international office
network (Public Sector Origination “PSO”), and
from the market through the Balance Sheet Management
“BSM” team).
Distribution of products is controlled by the Global
Sales team, which concentrates on providing both
short and long-term products (both assets and
liabilities), to end investors such as central banks,
financial institutions and asset management companies,
as well as the Global Syndications team, which
works closely on the pricing, structuring and placement
of potential transactions with the originators.
The funding of such assets that are retained on the
Bank’s balance sheet is managed by the Money
Markets and Capital Markets teams, who together
19

Management Discussion – Segments
constitute the Funding function for all Public Sector
and Infrastructure related financing. [Note: with effect
from 1 January 2008, the Budget Finance and Infrastructure
Finance segments will be reported together
under a new combined segment, “Public Sector and
Infrastructure Finance” which reflects the more closely
integrated management structure from that date].
Main achievements
Generally the Bank’s high quality public sector asset
portfolio, the diversified global funding platforms and
investor base, and the broad range of products
available and markets accessed mean that DEPFA can
normally achieve sub-LIBOR funding levels, and this
competitive advantage continued to be demonstrated
throughout 2007, and in particular the second half of
the year, even when the difficult financial market
conditions, and the resultant restricted availability of
liquidity in the banking market, presented major
challenges for all banks.
In addition to DEPFA’s exclusive public sector focus,
another important element underpinning the Bank’s
continuing ability to access competitive funding
sources is that DEPFA procures over 50% of its money
market funding directly itself, which has enabled the
Bank to increase the amount of direct deposits
when necessary. Another important component of the
funding model is the repo market, and again the Bank
has benefited from repo margins for its high quality
public sector assets improving during the crisis period.
20
Balance Sheet Management (BSM)
Balance Sheet Management invests in highly rated,
low risk assets across the government, municipal, regional
and government related issuer sectors globally.
Because of the exclusive public sector focus, DEPFA
managed to avoid direct negative impact from the
problems triggered by the U.S. sub-prime real estate
crisis during 2007. Indeed, and especially during the
fourth quarter, the Bank made use of the favourable
volatility in credit pricing to add assets to the portfolio
at attractive margins while achieving funding at better
levels than in previous years, thus demonstrating the
soundness of the business model.
Credit spreads in public finance tightened considerably
in the first half of 2007 which facilitated an optimisation
of the public finance portfolio and a realisation of gains
on legacy exposures. The subsequent market volatility
and ensuing flight to quality over the second half of the
year provided further opportunity to realise gains but
also simultaneously enabled the Bank to rebuild exposures
in certain asset classes at wider credit spreads.
Transaction highlights in 2007 included a Co-Manager
position on a US$5 billion, 16 year, AAA rated Sallie
Mae US government guaranteed bond, the largest
ever Student Loan issue, as well as a Joint Lead
Manager position on a €750 million, 10 year bond
issue for the Export-Import Bank of Korea (KEXIM),
and a Joint Lead Manager position on a €500 million,
18 year Posillipo Finance (Region of Campania,
Italy).
Total drawn financing volume rose by almost €10
billion from €195 billion in 2006 to €205 billion in 2007.
The Bank purchased €64 billion of assets in terms of
net new commitments, and managed to increase the
all-in margin to more than 20bps, while still maintaining
a very high asset quality level of AA2. The geographic
diversification of the portfolio increased, with the USA
share rising to 23% of portfolio allocation, and
Germany decreasing to 15%.

Funding
DEPFA’s Funding Team is split into two units: Money
Markets (which raises funding with a duration of up to
two years) and Capital Markets (responsible for longterm
funding i.e. duration greater than 2 years). The
Bank’s diversified funding model is based on both
long-term e.g. covered bond issues (which represent
approximately half of the funding liabilities); repo of
eligible collateral (which represents roughly a quarter of
funding); and short-term unsecured funding from the
money markets which represents the remainder. Both
teams have a similar mandate: to minimise liquidity risk
and maximise investor access. The Funding Teams are
responsible for optimising the maturity and cost of
funding for the Bank. DEPFA’s attractive funding levels
are made possible by diversifying across funding
platforms, currencies, structures, investors and geographies.
Money Markets
The Money Markets team is responsible for short-term
funding. 2007 was considered to be a successful year
against the background of a challenging environment.
The team provided DEPFA with a stable and diversified
funding platform across the wholesale primary and
secondary markets in a wide range of Money Market
products.
Clients demonstrated throughout the year that they
recognised the quality of the DEPFA name in the everincreasingly
credit sensi tive global market. DEPFA
sourced flows across 28 currencies in 2007. The overall
average cost of funding improved significantly, as
DEPFA’s overall credit risk and high quality asset portfolio
became factors given greater weighting by counterparties.
Outstanding liabilities gradually increased
throughout the year by 20% from €95 billion to €113
billion.
A significant portion of this growth is attributed to the
secured borrowing markets. The market saw improved
funding levels over the year due to the increased
demand for high grade collateralised lending levels
available on bilateral and triparty repo.
The primary Money Market platforms contributed significant
flows to the Balance Sheet throughout the year,
across bilateral and triparty repo, Euro Commercial
Paper, French CDs, Swedish CP, US CP, Yankee CD
and Canadian CP. The majority of these funding platforms
remained generally stable even in the most difficult
times; and the Bank was pleased to see minimal
changes to the funding mix throughout the market
turmoil.
Triparty repo had reduced flows but at normal pricing
levels. Bilateral repo enjoyed a significantly lower cost
of funding, as investors and banks sought sovereign
and sub-sovereign high grade assets. 2007 also saw
banks and institutional investors reduce credit lines
across the credit spectrum.
Capital Markets
The Capital Markets team is responsible for DEPFA’s
long-term funding activities. This is done by using a
broad range of funding instruments including public
benchmarks, private placements and loan transac -
tions. The coordination and execution of hybrid capital
issuance for DEPFA also falls under the team’s remit.
DEPFA enjoys a leading position in the covered bond
market through its AAA rated public sector covered
bonds, Irish Asset Covered Securities (ACS) and
German Pfandbriefe, which are the principal sources of
long-term funding for the Bank. These liquid instruments
are collateralised by high quality, widely diversified
public sector assets and trade on a variety of
electronic platforms including EuroMTS, EuroCredit
MTS, Tradeweb, Marketex and Bond Vision.
In 2007 DEPFA executed two US$ benchmarks. In
March, DEPFA ACS BANK brought a US$1.25 billion
30-year transaction to the market. This was the first,
and so far only, ultra-long US$-denominated covered
bond ever issued. In October this was followed by a
US$2 billion 3 year issue. Both of these transactions
served to further build the Bank’s US$ benchmark
curve, which now has 6 outstanding issues with
maturities ranging from October 2008 to March 2037.
Currently the total outstanding volume of DEPFA ACS
21

Management Discussion – Segments
benchmarks is slightly in excess of €24.5 billion equivalent.
DEPFA’s activities in the primary markets this year led
to the Bank being recognised by EUROMONEY as
“Best Covered Bond Borrower 2007”.
DEPFA’s US$ benchmarks are largely placed outside
Europe (on average 70%), reflecting the strength of
DEPFA’s global investor name recognition. As the USA
is a region where the Bank has seen, and anticipates
further, significant asset growth, DEPFA is committed
to further expanding its US$ funding base with other
capital markets products, including the recently
established AAA 144A USMTN programme.
Investors in DEPFA’s ACS benchmarks are attracted by
the high quality and liquidity of these instruments and
the positive spread to sovereign and agency paper.
Despite the global credit and liquidity crisis, the secondary
market for public sector-backed covered bonds
22
has remained remarkably stable in contrast to other
asset classes. DEPFA was a beneficiary of the stability
in this asset class and was therefore well positioned to
access the primary markets during the second half of
2007.
DEPFA is also an active issuer of EMTN notes, both
secured and unsecured in a wide variety of structures,
currencies and maturities either as private placements
or as public transactions. 2007 was a very strong year
for these markets, with two-thirds of DEPFA’s longterm
funding being sourced in the private placement
markets.
The success of the funding strategy employed by
DEPFA in 2007 is reflected in the fact that the Bank
raised its targeted €13.5 billion of long-term funding at
deeper sub-LIBOR levels than were achieved in 2006
or at any stage in recent years. This was achieved
whilst maintaining an average weighted tenor of new
borrowings of approximately 9 years.
Group currency breakdown of non-benchmark long-term funding transactions
EUR
USD
JPY
GBP
Other
BRL
HKD
ZAR
TRY
CHF
0 10% 20% 30% 40% 50% 60% 70%

Secured MTNs/
Registered Notes
ACS Benchmarks
Unsecured
MTNS/Loans
Structured
Plain Vanilla
Structure of Group primary sale of long-term instruments
0 10% 20% 30% 40% 50% 60% 70%
Group breakdown according to structure type* of non-benchmark long-term transactions
0 20% 40% 60% 80% 100%
* All structures can be provided with cap, floor and call features:
Floating and Fixed Rate Notes, Zero Coupons
Fixed Rate Step-Up Notes, Flip-Flops
Reverse Floaters
Range Accruals
CMS-Structures (e.g. CMS-Spreads, Steepeners)
Power Reverse Dual Currency Notes
Reverse Dual Currency Notes
FX-Digital Notes
TARNs
Equity-Linked Notes
Inflation-Linked
Ratchets (Snowballs)
Volatility Bonds
Quantos
SIFMA-Linked
We can also issue with restructuring options
23

Management Discussion – Segments
Distribution
DEPFA’s Global Sales team consolidated their position
as a leading provider of liquidity to the Group, in both
short-term and long-term products. Against a backdrop
of shrinking liquidity and declining investor
appetite, the Bank directly placed over €232 billion (vs.
€190 billion in 2006) in short-term liquidity instruments
across 8 funding platforms. Meanwhile, the Bank also
increased its sale of long-term covered bonds and
public sector assets from €3.2 billion in 2006 to €3.4
billion in 2007. Participating in over 10 roadshows,
DEPFA attracted over 40 new clients, to enhance its
client base, diversified across Central Banks, Private
Banks, Asset Managers and Building Societies as well
as Corporate Treasuries. For the first time, the Bank
achieved a #1 position on its own Capital Markets
dealer group, distributing €1.45 billion (almost double
the volume of 2006 at €745 million.)
Results*
Net interest income, generated through DEPFA’s
stable, long-term asset and liability base, amounted to
€348 million in 2007, (compared to €356m in 2006), a
2 % decrease on the previous year. This change is
partly because of increased asset sales (taking advantage
of favourable market prices), which accordingly
Budget Finance
24
removed the contribution to net interest income from
such assets sold. Non-interest revenues, generated
through fees from US Liquidity Facilities, the active
management of the Budget Finance asset portfolio
and other activities increased to €368 million in 2007,
(compared to €283 million in 2006), a 30% increase
on the previous year. New business in the mature
markets, most notably in the USA and Italy was
particularly strong. The U.S. now contributes 25% of
the overall budget financing volume of DEPFA whilst
also enhancing the credit quality of the portfolio.
DEPFA’s funding activities remained strong, meeting
and exceeding the Bank’s targets for its long- and
short-term funding mix and enhancing/reducing the
overall cost of funding in 2007. Profit before taxes in
this segment totaled €613 million in 2007.
Outlook
The outlook for 2008 is volatile but not without profitable
opportunities. For those institutions like DEPFA,
which have the ability to utilise their reputation as a
balance sheet investor, operating within high quality
credit (Government and tax-revenue backed) markets,
there may indeed be opportunities to further enhance
the portfolio’s efficient frontier in terms of risk adjusted
return.
€ m 2007 2006 Change Change %
Net interest income 348 356 -8 -2%
Non interest revenues 368 283 85 30%
Total operating income 716 639 77 12%
Operating expenses -103 -84 -19 23%
Profit before taxation 613 555 58 10%
Key Balance sheet items**
Financing volume (on-balance sheet) 125,577 167,438 -41,861 -25%
Financing volume (off-balance sheet) 22,086 21,885 201 1%
Total commitments 147,663 189,323 -41,660 -22%
* For reconciliation of the results to the published in come statement, see page 62.
** For comparability with the financial statements, 2007 volumes include HPFB and exclude DEPFA Deutsche Pfandbriefbank
AG.

DEPFA’s Funding team stands to benefit from the
stable platform which was proven in 2007, by using the
consistent demand for Public Sector Repos (in Money
Markets) enhanced by the premium that professional
investors are willing to pay to access AAA Covered
Bonds (in Capital Markets). Further building out the
distribution platform as the Global Sales team grows
will allow DEPFA to distribute products even more
widely to consolidate and grow its franchise as the
leading specialist bank in Public Sector Finance.
Infrastructure Finance
Introduction
2007 was characterised by rapid growth in the Bank’s
infrastructure finance business. This growth however
took place in the first three quarters of the year. In the
final quarter, in part responding to the deterioration in
credit markets, and in part in fulfilment of its securiti -
sation, sales and syndication plans, the Bank concentrated
on managing down its risk-weighted assets.
Revenues and financing commitments doubled, reflecting
both successful closing of a number of significant
PPP and PFI loan transactions and the continuation of
the initiative begun in 2006 to offer long-term funding
to UK utility companies providing essential services
to the public such as water, electricity and gas. In
addition to the growth in loan margin and commitment
fee income from the arranging and provision of direct
funding, 2007 also saw significant advisory fee and
derivatives income (booked in the CPS segment).
DEPFA maintained its investment in the Infrastructure
Finance Unit (IFU) franchise, increasing headcount
from 53 to 60 employees (of which 15 are based in
Dublin, 13 in New York and 10 in London). All of these
new colleagues are dedicated to the origination and
structuring of new business. In Structured Export
Finance the team established in late 2006 enhanced
the Bank’s capacity to advise on, and arrange the
senior debt financing for industrial and infrastructure
products globally.
Main achievements
During the year IFU made over €10.6 billion of commitments
in 72 transactions across a wide range of sectors
and countries, such as the following:
Eurotunnel – DEPFA invested in a significant portion
of the AAA monoline wrapped refinancing of the debt of
Eurotunnel. This was the largest of several long-dated
index-linked transactions with UK utilities and infrastructure
companies, which will benefit from very favourable
risk-weighted asset treatment under Basel II.
Borealis Healthcare Corporation – in October the
Bank provided Borealis Infrastructure, which is owned
by the Ontario Municipal Employees Retirement
System, with financing for the purchase of MDS
Diagnostics (now called “LifeLabs”), Canada’s largest
laboratory services company, whose principal revenue
stream is payments from public sector health
authorities. Borealis paid C$1.34 billion in total for this
acquisition.
Guardian Digital Communications – again in
October DEPFA concluded, as Mandated Lead
Arranger and Bookrunner, the €2.7 billion (£1.8 billion)
transaction for the purchase and ongoing capital
funding of O2 Airwave, a purpose built digital communications
network for the exclusive use of Britain’s
emergency and public safety services.
Capital Beltway – this €1.3 billion (US$1.9 billion)
“landmark” project is the first dynamic pricing toll road
to close in the US (and only the second in the world),
the first use of Private Activity Bonds in the US and the
largest “TIFIA” loan (under a special Federal Government
loan program enacted to boost private sector
involvement in the development of US transportation
25

Management Discussion – Segments
infrastructure) ever secured. IFU’s New York team
acted as financial advisor to the private sector consortium
led by Transurban USA earning a significant
success fee.
In other countries significant lead arranging mandates
were executed for inter alia the Millau Viaduct refinancing
in France, the A8 Toll Road in Germany and the
National Conference Centre in Ireland.
Risk-weighted assets, securitisation and sales
DEPFA has already shown, through the EPIC I and
EPIC II synthetic PPP CLO transactions, the ability of
IFU to successfully carry out variations on DEPFA’s
“on-balance sheet securitisation” model. Now that the
Bank has established itself as a lead arranger and
underwriter in the infrastructure finance market, its
ability to manage its risk-weighted assets and, by
extension, capital commitment, through not only securitisation,
but also syndication and sales, is important.
This was especially the case in the fourth quarter, as
the deterioration in the credit markets reduced investor
appetite for credit risk generally, and structured and
asset backed products in particular. Despite these
difficult circumstances, DEPFA was able to securitise
c. €900 million of AAA rated monoline wrapped infra-
Infrastructure Finance
26
structure and utility bond exposures in its EPIC III
transaction in December. It should be noted that in all
of the EPIC issues, the Bank has certain call rights
which can be exercised, for example, when the Bank
can fully avail of the benefits of Basel II. The Bank also
syndicated and sold down over €500 million of commitments
without any form of discounting during the
year. This not only demonstrates its ability to manage
down underwriting exposures, but also that the in -
herent credit quality of these long-dated and seemingly
less-liquid assets is recognised by other banks and
institutional investors.
Asset quality
The rapid growth in the IFU portfolio has not been
achieved at the cost of asset quality. At the end of
2006 the weighted average rating of the portfolio was
A1, and remained unchanged at the end of 2007.
DEPFA will continue to take the prudent approach
towards the management of credit risk in this area
which has served it well to date.
Results*
The infrastructure segment shows a substantial increase
in revenues to €121 million (2006: €55 million) and
financing commitments to €18 billion at the year end
€ m 2007 2006 Change Change %
Net interest income 97 39 58 149%
Non interest revenues 24 16 8 50%
Total operating income 121 55 66 120%
Operating expenses -31 -19 -12 63%
Loan loss provisions - - -
Profit before taxation 90 36 54 150%
Key Balance sheet items**
Financing volume (on-balance sheet) 15,572 5,741 9,831 171%
Financing volume (off-balance sheet) 2,780 2,456 324 13%
Total commitments 18,351 8,197 10,154 124%
* For reconciliation of the results to the published in come statement, see page 62.
** For comparability with the financial statements, 2007 volumes include HPFB and exclude DEPFA Deutsche Pfandbriefbank
AG.

(2006: €8.2 billion). 72 infrastructure and PPP transactions
were closed during the year (2006: 63) across a
wide range of sectors and countries. Despite the
substantial growth in funding commitments during the
year, the quality of the portfolio remains good with no
impairment provisions in 2007. Profit before taxes in
this segment totalled €90 million in 2007.
Outlook
The global requirement for new infrastructure financing
and development continues to grow strongly. The
Bank has positioned itself in all the major markets with
strong, locally based teams (supported from other
locations such as Dublin and London as necessary)
who can originate and transact advisory and lending
opportunities for private sector clients bidding for
infrastructure/PPP concessions and for the acquisition
of essential infrastructure assets being privatised
(wholly or partly) by public sector owners in an effort to
“monetise” the present values of future revenue
streams and thereby generate an important alter native
source of public funding.
Furthermore, the current restrictions in credit markets,
the increased attention paid by investors in structured
products to understand the underlying risk of the
assets they are buying into and the resultant rising
credit spreads, provide increased opportunities for the
Bank and the prospect of improved risk structures and
return profiles.
In some targeted emerging market countries,
DEPFA’s newly established Structured Export Finance
team can assist government and public sector clients
to procure new infrastructure assets through using the
credit enhancement provided by Export Credit Agencies
(ECA’s, such as NEXI in Japan or Hermes in
Germany), or multilateral development banks (such as
the World Bank/IFC and the Inter-American Development
Bank). Financing structures using such products
result in substantial mitigation of the political and
commercial risks of the underlying project (typically a
minimum of 95% or more) for the lenders. The insured
and/or guaranteed part of the loan is sovereignbacked
and therefore such exposures are of the
highest credit quality, and are eligible for DEPFA’s
cover pools, and this is obviously a good way in
which DEPFA can assist clients with infrastructure
development in countries which may not yet be investment
grade but which offer good future growth
potential, without taking large exposures to lower-rated
risks.
As a result of the acquisition of DEPFA by Hypo Real
Estate and the subsequent merging of HPFB into
DEPFA, the Bank absorbed the infrastructure and
asset finance teams of HPFB based in London and
New York. These teams bring expertise in new areas in
which the Group intends to continue to invest: energy,
including oil and gas, and asset finance (e.g. aircraft,
rolling stock and ship finance). In developing these
lines, as in all of our infrastructure finance business,
DEPFA will adhere to its credit focus on providing
funding for “essential” assets and infrastructure which
are important to the success of the national and
regional economy.
27

Capital Beltway HOT Lanes in Virginia, USA

Clients: Transurban (USA) Inc. and Fluor Enterprises Inc.
Conor Kelly:
“The financing for this pioneering transaction was de -
signed by DEPFA as Financial Advisor to the project
sponsors.”
Need: The Capital Beltway is a vital link in the surface transportation network along the East Coast.
It provides connections to other roadways within the Virginia-Maryland-Washington DC region
and carries more traffic than any other road in Virginia. Although there have been incremental
improvements to correct specific safety and operational problems during its 40+ years of
operation, the last major improvements to the Beltway were completed in 1977, when it was
widened from four to eight lanes.
The Capital Beltway is at the center of a growing transportation crisis in the Washington D.C.
region. According to the Texas Transportation Institute, commuters in the region experience
the third worst congestion in the United States and spend an average of 69 hours a year
sitting in traffic, which translates to a cost to the local economy of $5.5 billion per year.
Solution: Under the terms of a concession from the Virginia DOT, Transurban and Fluor will widen the
Capital Beltway from 8 to 12 lanes over a 14-mile section of the roadway. They will convert
the four existing inner lanes to High Occupancy Toll Lanes (“HOT Lanes”) which Transurban
and Fluor will operate for a period of 75 years. Tolls in the HOT Lanes will fluctuate throughout
the day to reflect real-time traffic conditions and to maintain free-flow conditions in the HOT
Lanes at all times – even during peak periods.
This is the first private transportation project to be financed with Private Activity Bonds and
only the third private project to utilize a TIFIA Loan provided by the US DOT. DEPFA's financial
advisory team orchestrated financial close in the most challenging credit environment in
recent history. All agreements governing the project and its financing were executed by all
relevant parties on December 20, 2007. These agreements included a forward bond
purchase agreement, a forward swap, and a forward LC commitment from DEPFA to
enhance the bonds.
People: Conor Kelly, Managing Director, Head of Infrastructure Finance - Americas
Michael Uhouse, Managing Director · Yann Megret, Associate Director
Victoria Taylor, Associate

Aguas de Portugal (AdP), Portugal

José Manuel Casares:
“We consider Aguas de Portugal a very special trans -
action for us in the Portuguese market, since it was the
company’s first stand alone bond issue. It is also an
important reference for us of a Government Related Institution
financing in the water sector”
Client: Aguas de Portugal (AdP), Lisbon, Portugal, 100% owned by the Portuguese State
Need: Aguas de Portugal Group has responsibility for the design, construction, operation and
management of water supply systems, wastewater sanitation, solid domestic/industrial waste
treatment, and the recovery systems and is engaged in a 3 3 billion investment program.
Solution: DEPFA BANK acted as Mandated Lead Arranger and Sole Underwriter for the first 3 200
million stand alone 15 year bullet bond.
People: Jose Manuel Casares, Managing Director, Public Sector Origination, Spain & Portugal
Carlos Figueiredo, Director, PSO Portugal
Marta Olivares, Client Transaction Management, Dublin

Public Sector and Infrastructure Finance Regional Commentary
Regional Trends: Europe
Benelux countries
In both Belgium and the Netherlands DEPFA provides
long-term lending and interest rate hedging products
to the public sector. The Bank is also a well recognised
market player in infrastructure finance and is supporting
various consortia bidding for the larger con -
cession projects currently being tendered. Both
markets continue to be very competitive.
Croatia
DEPFA has pursued a policy of increasing its activities
in the Balkans and former Yugoslavian countries, and
particularly in Croatia in view of the advanced stage of
its EU accession negotiations. The Bank has established
close contact with key public sector enterprises
involved in various activities linked to the socio-economic
development of the country and has become an
important partner bank assisting in the financing of development
programmes. Even though DEPFA does
not have a physical presence in the country, it has
steadily established a good reputation as a professional
and competitive bank in the public sector.
32
France
The French public finance market remains highly
competitive with many banks competing for a share
of public sector business. Although the market is
relatively expensive compared to other European markets,
it is very sophisticated and offers cross selling
opportunities. In this environment, DEPFA has been
able to increase business origination volumes, both
with existing and new clients. The Bank has achieved
a leading position in the PPP area, both as a lead arranger
of senior debt financing and as a financial advisor
both to public and private sector entities. Key
achievements in this area include among others the
refinancing of the Millau Viaduct, the tallest vehicular
bridge in the world, and the completion of several
smaller PPPs, together with Challenger Investissement
and the Bouygues Group for which DEPFA acted
as lead arranger and financial advisor.
Germany and Austria
Despite a lowering of state funding requirements on
account of higher than expected tax revenues, DEPFA

successfully captured attractive new business in the
form of closed tailor-made transactions in both Germany
and Austria. As well as strengthening its relationships
with existing key clients, the Bank also
entered into promising new public sector related areas
including medical services, education and transportation
infrastructure projects being procured using the
PPP financing framework.
Although the structure of the federal government
system does not lend itself easily to a standardisation
of PPP procedures and contracts, the establishment
of regional PPP units by the Länder (i.e. regional
governments) is an encouraging initiative which will
provide a formal platform for the Länder to pool their
respective experiences with PPP, to harmonise
procedures, and to support local authorities in the
procurement of PPP projects.
The German PPP market continues to grow: the project
pipeline has increased significantly and according
to internal estimates the level of planned PPP
investments was approximately 320 billion at the end
of 2007. During the year DEPFA obtained mandates
as lead arranger for transactions such as the A8 Motor -
way in Southern Germany and for the refinancing of
the Midlum Windpark in Northern Germany and also
participated in the financing of several infrastructure
transactions such as a waste to energy plant and a
prison project. DEPFA is well placed to take advantage
of further opportunities and has strong links with different
consortia involved with all major transactions.
Greece
2007 was a milestone year for DEPFA’s global footprint
with the establishment of a new office in Athens.
This development was in line with the Bank’s clear
strategy to further enhance its local presence in EU
member states and to actively pursue opportunities with
the Greek public sector. In 2007 DEPFA successfully
arranged a 3265 million bond transaction for Hellenic
Railways (HRO) and for the first time targeted direct
origination of new business with Greek municipalities.
As a result, in 2007 DEPFA was appointed as the credit
rating advisor for the City of Athens and the jointarranger
and joint-underwriter for a 3200 million loan
for the City of Amaroussion (to be completed in 2008).
Hungary, Czech Republic and Slovakia
The market for public finance is dominated by a handful
of foreign owned commercial banks. The funding
requirements of local authorities stem from local infrastructure
projects in connection with transportation,
social and leisure facilities. Projects of national relevance
are financed through PPP’s and budget financing.
In addition to the above funding instruments, municipalities
and regions are currently endeavouring to exploit
EU Structural Funds to the fullest extent possible
as such funds have an availability period window of
2007-2013.
Besides offering continued support to its larger clients
at sovereign level (deals were successfully closed with
government agencies in all three countries) and in
33

Public Sector and Infrastructure Finance Regional Commentary
assisting the debt restructuring effort of a Slovakian
government owned company, DEPFA has initiated an
effort to support the investment needs of municipalities
and regions.
Ireland
New business lending volumes remained buoyant in
2007. DEPFA's product range utilised by its Irish
customers expanded to include commercial paper, interest
rate restructuring and infrastructure financing.
The customer base was enlarged in 2007 with several
new government related entities. DEPFA concluded its
first transactions with the university sector and also lead
arranged the 3200 million financing of the new National
Conference Centre in Dublin for Treasury Holdings.
Italy
2007 was an important year for consolidating
DEPFA’s position in Italy. The office in Milan was officially
opened (mid-March 2007), existing client coverage
was enhanced, a number of new clients were
acquired and new products were developed to complete
the range of services offered by DEPFA to the
public sector.
Italian public sector net borrowing needs were much
lower than in the previous year, mainly following stricter
rules arising from the Internal Stability Pact imposed
by the State. Notwithstanding this, DEPFA acted
as Joint Lead on deals such as the 32.1 billion securitization
of healthcare receivables from the Region of
Campania, and the 3164.5 million Eurobond issue for the
Region of Friuli-Venezia Giulia. However, the reduced
34
amount of new borrowing was more than compensated
for by the business opportunities resulting from the
renegotiation of clients’ existing debt obligations, both
on a bilateral basis and on a “consent solicitation” basis.
As part of a much wider advisory mandate, DEPFA
arranged the first ever consent solicitation for the City
of Naples. Much work has also been done on im -
proving the contribution of the Rome Branch to the
Bank’s funding position. The procedure to make Italian
domestic loans eligible as collateral for ECB funding is
now fully in place, and plans for the usage of Italian
domestic bonds as collateral for domestic repos are
being made.
Nordic and Baltic countries
Denmark, Finland, Iceland, Sweden and the Baltic
countries are covered from DEPFA’s Copenhagen
Representative Office. In this region the Bank has seen
a general trend of fewer but larger and more complex
transactions. A typical example of this was Energinet.dk’s
acquisition of a gas storage facility from
DONG. This transaction included a DKK1.5 billion
acquisition financing plus a 30 year guarantee of
DKK1 billion.
Iceland has for many years been a very attractive market
for DEPFA, but due to fewer investments and a
strong ISK, borrowing in EUR by public sector entities
has declined. In addition to this there has been tough
competition from the multilateral banks such as the
Nordic Investment Bank (NIB), the European Investment
Bank (EIB) and the Council of Europe Development
Bank (CEB).

Likewise DEPFA has seen the Swedish state owned
bank Swedish Export Kredit targeting new business
aggressively outside their traditional home market (e.g.
in Iceland, Finland and Estonia). Despite this strong
competition, DEPFA has continued to make progress
in all the Baltic countries. The activity is targeted both
at central and local governments. Besides the traditional
on-budget lending, DEPFA sees good opportunities
in infrastructure project financing, particularly in
the property and transportation sectors, where the
Bank’s financial structuring and securitisation skills
can assist its clients to monetise the value of public
capital tied up in infrastructure and property assets.
Sweden and Finland have been characterised by a
vast surplus of liquidity within the financial sector,
which has led the Bank to focus on risk management
and derivatives sales. DEPFA does this both on a portfolio
basis and on a loan by loan basis. Accordingly,
DEPFA has managed to establish a group of core
clients in these two countries, where it plays an important
role in their ongoing debt portfolio management
decisions.
The Bank has successfully established a good track
record with its clients over many years and it believes
their confidence in its capabilities will enable it to expand
this business activity even further in the future.
Portugal
Following the trend of 2006, the first half of the year
was marked by further spread compression; nevertheless
DEPFA was able to successfully close a 355
million bond issue for Transtejo guaranteed by the Por-
tu guese State. The second half of the year witnessed
some spread widening following the sub-prime financial
crisis. During the year DEPFA won the mandate to
issue 3200 million bonds to partly finance the investments
of Águas de Portugal (a non-Government guaranteed
transaction) and the mandate to refinance
part of the short-term debt of Metro do Porto (a 3100
m, non- Government guaranteed loan). Metro do Porto
has also mandated DEPFA to advise on the financing
structure for the extension of the network and the
refinancing of the current debt stock.
Romania & Bulgaria
DEPFA continued to see good opportunities in both
Romania and Bulgaria, particularly with Bulgarian municipalities,
where the Bank provided funding for essential
infrastructure related developments (e.g. in the
transportation, water treatment and distribution and
sewerage systems). Many of these projects are also
supported by EU regional development, structural and
cohesion funds. This represents a sound opportunity
for DEPFA to substantially expand its involvement in
both the budget finance and infrastructure areas.
Russia
Russia is going through a phase of accelerated investment
in infrastructure, some of which has been carried
out in the the form of PPP structures. The Ministry of
Regional Development which now has a greater say in
how the State Infrastructure Fund is managed, coupled
with an active State policy of encouraging regions
to pursue infrastructure related projects, has created
a very favourable backdrop for DEPFA’s business acti-
35

Public Sector and Infrastructure Finance Regional Commentary
vities. DEPFA's advisory, budget finance and infrastructure
finance teams are actively developing good
relationships with all key parties in the transaction process,
including the newly established State Development
Corporation (Vnesheconombank), as well as the
private sector consortia bidding for the PPP projects in
the country.
The growing influence of the State in the economy is
supported by the strategic decision of the Russian Federation
to manage the extraction and distribution of
its huge natural resources, as well as to launch several
state-sponsored programmes in areas such as agricultural
development, affordable housing and other
public infrastructure investment. This process will lead
to greater demand for financing from various government-related
institutions, utility companies and state
controlled banks, as well as greater and more transparent
state support for such entities, at both the level of
central federal authorities and regional authorities.
Therefore there are good opportunities for specialist
institutions like DEPFA to provide the requisite advisory
services and financing arrangements for this client
category.
Spain
Despite the financial turmoil and credit crunch experienced
in the last quarter of 2007 the Spanish public
sector in general, and the Spanish regions in particular,
were able to refinance maturing liabilities with only
slight increases in their margins. DEPFA won Lead
36
Manager mandates for bond issues with Castilla La
Mancha, repeating the success of the previous year,
and the Region of Andalucía.
In relation to loans, DEPFA continued to be very active
in the financing of infrastructure projects such as hospitals
in the Region of Catalunya and the Instituto Catalan
de Finanzas, where DEPFA was in the winning
group for the second consecutive year. DEPFA was
particularly active in 2007 in the financing of regional
television companies including Baleares, Valencia and
Catalunya. Another recent trend which is positive for
DEPFA is the more frequent acceptance of the
Schuldschein loans format under German Law, not
only by regions but also by cities like Madrid.
DEPFA has also helped in the restructuring of municipal
loan portfolios such as that for the City of Jerez in
order to enhance not only the financial health of the
City but also the quality of the risk for its bank counterparties.
In this regard, DEPFA designed an innovative
financing structure with the involvement of the Region
of Andalucía and the City itself. In the PPP sector
DEPFA won the MLA mandate for the 390 million
Barbanza shadow-toll road in the Region of Galicia.
Switzerland
In Switzerland, DEPFA continues its development
in the long-term financing of local authorities and
the health sector, providing tailor-made structured
financing as well as derivatives. The Bank’s client base

continues to expand despite a very competitive
environ ment impacted by new market entrants and
regulatory changes. In the future, the Bank also
expects to see more PPP opportunities in this
market.
Turkey
DEPFA established a representative office in Istanbul
in the summer of 2007. Turkey is a growing economy
with a young population; therefore, the infrastructure
investment requirements are substantial. At the same
time, central government imposes strict borrowing
and deficit controls under its standby arrangements
with the IMF. During the year, the Bank was mandated
as Lead Arranger for the funding activities of the major
state-owned bank Vakifbank, and more recently, the
Turkish Eximbank.
DEPFA has also been active in cultivating the relationship
with the National Treasury, and the City of Istanbul,
and initiated discussions with the larger cities in the
country, especially with a view to providing rating
advisory services to those entities who have not yet
been rated. As well as developing contacts with major
government related institutions, the Bank is actively
pursuing large infrastructure project financings, particularly
the toll motorways.
The devolution trend is increasing the political and
economic weight of the metropolitan municipalities in
infrastructure investments in Turkey as well, parti -
cularly in urban mass transportation, water supply,
and health, and there is a new PPP law under
discussion to facilitate concessions to develop infrastructure
projects.
United Kingdom
The public finance market in the UK is unique, as
there is a State funded provider of cheap funding to
local authorities (the Public Works Loan Board, or
PWLB). However, by lending to local authorities for
long periods (with commitments of up to 70 years,
albeit with pre-agreed break options), DEPFA has
been able to provide funding at a lower level than the
PWLB.
2007 was only DEPFA's second full year of marketing
directly to the UK public sector, and it was another
strong year of both new lending opportunities and
restructuring existing obligations, both with new and
existing clients. In addition, 2007 saw the strong
emergence of DEPFA as a counterparty for cash rich
local authorities looking to place deposits with well
rated financial institutions.
DEPFA’s business was given a welcome boost in the
final months of the year as the PWLB changed the
rules on rescheduling loans, meaning that new borrowing
by local authorities from the PWLB in the future
would be far less attractive than before. DEPFA expects
good flows of new local authority business in
2008 as a result.
37

Vincent Matrone:
“We were the lead bookrunner on this unique financing.
Our ability to react quickly in an unfavorable market
environment allowed us to leverage our relationships
both internally and with the financial advisor to under -
write the whole issue. The results were a very favorable
interest cost for the ratepayers of West Virginia.”

Public Service Commission, West Virginia, USA
Client: Public Service Commission of West Virginia
Need: The pollution control facility was in need of equipment which would aid the local economy
by allowing them to use local coal without negatively impacting the environment.
Solution: Even before the closing of DEPFA BANK’s acquisition of First Albany’s Municipal Capital
Markets Division, cross-selling synergies were underway. First Albany served as the lead
bookrunner on a US$459.3 million taxable financing, the first ever done for a pollution control
facility using ratepayer charges, and DEPFA BANK acquired approximately US$ 285 million of
the bonds in three tranches
People: DFAS · Vincent Matrone, Managing Director · Mark Kim, Associate Director
Thomas Jacobs, Managing Director · McKim deGuzman, Managing Director
Peter Tindell, Director Budget Finance · DEPFA BANK: Jim Ryan, Managing Director, BSM
Andrew Cree, Director

Marnin Lebovits:
“The State of Michigan is a very high profile and credit
worthy Borrower in the US market, with whom the Bank
has had a strong and growing relationship. The Bank
views the State as a very important customer to the
DEPFA organization. This large transaction closed during
a very challenging period in the credit markets and highlighted
the Bank’s commitment to the US market and our
dedication to meeting the needs of our customers”.
Client: State of Michigan
Need: Credit support needed quickly for one year public debt offering to finance the State's
US$1.4 billion cash flow
Solution: As the sole provider of credit enhancement for this transaction – which was very important
to the State, DEPFA helped the State close the transaction quickly while lowering its total
borrowing costs in the public market. The transaction helped the State of Michigan, one
of PSO Americas’ largest clients in the United States and represented the single largest
individual credit support transaction completed by the Bank in the US market.
People: DEPFA BANK · Marnin Lebovits, Managing Director · Hiromi Suzuki, Associate

State of Michigan, USA

Public Sector and Infrastructure Finance Regional Commentary
Regional Trends: The Americas
United States of America
2007 was a very interesting year, to say the least, in
the capital markets globally, as well as in the United
States. The two halves of the year were distinct. Pre–
liquidity crunch, investment bond issuance was strong
in most of the Bank’s chosen sectors, while margins
continued to contract. This was particularly noticeable
in the FFELP (US government-backed) student loan
market where benchmark deals from the likes of Sallie
Mae and Nelnet tested the tightest spread levels seen
this decade. However, from August onwards, primary
issuance dried up, and secondary market offerings
were made at historically wide spreads as some investors
sought to liquidate their holdings of high quality
rated paper. DEPFA benefited significantly from this
situation in the second part of the year, as new asset
purchases were made at attractive spreads.
Toward the end of the first quarter of 2007, DEPFA announced
its acquisition of First Albany Capital’s municipal
securities business. The acquisition was closed
during the third quarter and DEPFA First Albany Securities
LLC, a brokerage firm specializing in the origination,
distribution and secondary trading of U.S.
municipal securities and in advising large municipal
issuers on their capital financings, was established.
During 2007 the team, working as First Albany and
then DEPFA First Albany, seamlessly made the tran -
sition and underwrote, as lead or co-manager, 218
municipal financings totalling more than US$50 billion
and advised issuers on 27 debt and/or derivative
transactions totalling US$5.2 billion.
42

DEPFA First Albany’s origination and distribution team
includes 71 professionals. Highlights of DEPFA First
Albany’s 2007 activities include ongoing advisory work
for the Port Authority of New York and New Jersey,
Denver International Airport and other major airports
around the US, participation in the State of Ohio’s
US$5.5 billion securitization of tobacco settlement
revenues and participation in US$12.6 billion financings
for the City of New York and the State of New York.
In 2007 DEPFA purchased a total of US$12.5 billion of
US originated bonds with a continued focus on high
credit quality (the average rating of these investments
was AA1) with a weighted average life of c. 10 years.
The two main investment categories were government-backed
student loans and taxable municipal
bonds; these two sectors represented over 80% of
purchased paper during the year.
Overall the government-guaranteed student loans
market totaled c. US$60 billion in 2007, and DEPFA
continued to play a significant role with close to US$7
billion of direct purchases. The Bank particularly enhanced
its reputation in this market by acting as both
an investor and co-manager in the ‘SLMA 2007-4’
US$5 billion ‘AAA’ student loan deal. In common with
other asset classes after the liquidity crunch/subprime
contagion, there has been a widening of student
loan spreads since August, but it is important to recognise
that there has been no change to the credit
quality of the underlying collateral. Having said that,
this market does face challenges in 2008, mainly due
to new government legislation (the Higher Education
Act), which has reduced considerably the fee income
generation potential in this sector and therefore the
general level of profitability. Despite the challenges in
this market, the cost of education and enrollment continues
to increase, and hence the need for educational
loans will remain strong throughout the year.
Taxable municipal issuance was largely in line with
2006 at US$27.4 billion, and DEPFA’s share of that primary
market was c.11% in 2007. Overall issuance of
larger deals was scarce, and at times the Bank found
it difficult to source paper. Despite the fact that a
number of US states have material under-funded
pension deficits, few states chose to tackle this situation
through term bonding in 2007. Given the lower interest
rate environment in the US, the Bank would
anticipate that this will become a more attractive
option in 2008, and would expect more issuance. Its
specialist pension advisory business is well positioned
to assist its clients in determining the optimal strategies
to follow.
As DEPFA had forecast, there was continued strong
growth in the stranded asset sector as utility companies
chose to finance environmental costs for equipment
and build reserves through the issuance of
securitized bonds. A number of issuers came with
state-supported bonds in 2007, including Texas, West
Virginia and Florida – and DEPFA was able to increase
its exposure to these highly rated state backed bonds.
The Bank continues to research new product invest-
43

Public Sector and Infrastructure Finance Regional Commentary
ments in the US public sector. Also in 2007, tax-exempt
new issuance volume remained strong. Yield
curve and interest rate dynamics during the year along
with this exempt volume by municipal issuers saw
aggressive use of derivatives. Accordingly the Bank
saw an improvement in its 2007 client derivatives business
activity over 2006 by growing the total notional
volume executed, the number of transactions executed
and diversifying the client base. A key highlight of
this diversification was a US$453 million forward
starting swap for the Puerto Rico Sales Tax Financing
Corporation (COFINA).
Canada
Demand for Canadian public sector assets was strong
in the first half of 2007. Swap spreads remained wide
resulting in a tightening of margins. DEPFA has strong
client relationships in the Canadian market and secured
attractive private placement business in 2007.
Deals concluded included transactions with two
principal Canadian cities. The Bank’s product offering
increased to customers with several customers
purchasing the Bank’s liability products.
Latin and South America
Formal representative office status was granted by the
Central Bank of Brazil for DEPFA BANK Representações
Ltda. in Sao Paolo, Brazil in February 2007. At
the same time the Bank entered into an exclusive cooperation
agreement for Argentina and Uruguay with
BAICO Buenos Aires Investment Company. DEPFA is
also at present in the process of applying for a representative
office license and Sociedad Financiera de
44
Objecto Multiple (SOFOM) authorization in Mexico.
The overriding objective is to roll out the Bank’s core
product lines of public sector and infrastructure-finance
in selected countries in the region to be complemented
gradually with Hypo Real Estate’s commercial
property activities. These activities come in addition to
DEPFA’s traditionally strong presence in the region as
a deposit taking institution.
Given that the region is new for the Bank in terms of
business origination and the higher risk profile of many
of the countries (albeit improving in most cases) compared
to DEPFA’s traditional markets, emphasis has
been placed in most countries on entering into transactions
alongside multilateral institutions active in the
region (both for public sector and infrastructure finance),
to seek coverage of the Bank’s credit exposure
through Export Credit Agencies, to get exposures collateralized
(for example through reverse repurchases
of public sector assets in the capital markets area) and
to closely tie in the origination of new business with its
strengthened syndication function.
In Brazil the Bank has acted as Lead Arranger alongside
the Interamerican Development Bank (IDB) in a Petrobras
related oil and gas platform financing and it is
presently working with the IDB on a number of different
projects at different stages (from short-listed bidder
stage to documentation) in the areas of
infrastructure (e.g. ports, roads) and public sector lending
(water utility sector).
In Chile DEPFA participated in the structuring and
financing (on an A/B-loan structure with the IDB) for

Transchile for a transmission line linking the regions of
Temuco and Charrua. Other financings include Metro
de Santiago and motorway concessions for Autopista
del Maipo and Autopista Central.
In both Colombia and Uruguay, DEPFA participated at
the primary level in Japan Bank for International
Co-operation (JBIC) guaranteed transactions for the
sovereigns and selectively has built up a small port -
folio of sovereign/public sector assets in Peru and
Colombia.
In Argentina the Bank established a sustainable business
platform with various banks – both public and
private sector – consisting of financial structures with
relatively short-term maturities. Additionally, and taking
advantage of DEPFA’s expertise, the Bank is in close
contact with leading local and international firms involved
with the infrastructure development program.
Throughout the region (and particularly in Brazil, Chile
and Argentina) DEPFA is actively involved in repo/
reverse repurchase transactions through its Capital
Markets Group mostly with public sector-owned and
central banks and in all cases with government bonds
as collateral. Unlike as recently as 2 years ago, when
DEPFA was totally unknown in the region, the Bank
has managed to establish an active presence in a
number of key countries in South America in its
chosen fields with important client relationships
developing and an active deal pipeline built up.
For 2008 DEPFA has a series of significant transac -
tions coming (partly mandated pending implementa -
tion) on the origination-distribution side for public sector
assets (infrastructure related, sovereign and subsovereign),
through the Structured Export Finance
group (particularly in Brazil) with untied transactions
through JBIC (which is owned by the Japanese
Government) which guarantees a significant part of
the exposure, as well as in the area of infrastructure
finance, here particularly on the advisory side and
related to road projects.
The establishment of DEPFA’s Mexican presence is set
to be completed by mid-year and it will provide the
Bank with an entry into a country where there already
is a solid finance market for the public and infrastructure
sectors and where substantial growth is expected
in the next few years. The Bank’s Mexican office will
also serve as a platform for the origination of business
in Central America and the Caribbean basin.
Last but not least DEPFA is involved in a number of socalled
private finance and PPP initiatives throughout
the region in the context of which the Bank is supporting
major international contractors at a very early
stage in the development of proposals for infrastructure
projects at state or sovereign level putting the Bank
in a good position to get involved in the advisory work
and the arrangement and ultimate financing of these
projects when they materialize.
Thus, combined with the Bank’s new initiative for
Mexico and the mix of current, pipeline and longerterm
prospective business, it believes that it is well
positioned for doing profitable, value added business
in Latin and South America in the coming years.
45

Export-Import Bank of Korea

Client: Export-Import Bank of Korea (KEXIM)
Need: KEXIM needed to adopt an execution strategy that delivered price and size certainty. In 2006,
KEXIM’s previous international benchmark was badly received by the market and criticized for
generous concessions that had to be made to key investors to complete the offering. Despite
these concessions, the final offering still ultimately fell short of the market’s expected size. In
the context of the market's bad experience with KEXIM's previous offering, it was imperative
that this time round in 2007, KEXIM completed an extremely successful offering.
Solution: In February 2007, KEXIM surprised the market by mandating DEPFA to act as Bookrunner for
its 3750 million 10 year offering. DEPFA’s anchor order played a critical role in transforming
KEXIM’s pre-launch tactics: for the first time KEXIM was able to launch definitive guidance
on the price and size of the issue, from which bookbuilding could progress. In response to
KEXIM’s clear communication, over 31.4 billion of orders were received from 63 investors
in 21 countries enabling KEXIM to complete the largest EUR offering by a South Korean
borrower. DEPFA’s significant lead order helped KEXIM achieve a US$-equivalent price of
27bp over US$ mid-swaps which was 4bp through its existing US$ yield curve.
People: Stephen Diao, Managing Director, PSO, Asia · Evelina Wang, Director, PSO, Asia
Stephen Diao:
“DEPFA leveraged its anchor order to win a role as Bookrunner
and Joint Lead Manager on KEXIM's 3750 million
10 year benchmark offering in February 2007. By extending
the strength of DEPFA’s balance sheet, DEPFA was
able to deliver momentum early in the bookbuilding
process to provide the utmost certainty of successful and
aggressive execution”

Public Sector and Infrastructure Finance Regional Commentary
Regional Trends: Asia
Korea
DEPFA’s 2007 origination efforts in Asia focused on
furthering its market penetration in Korea, and diversifying
its regional footprint to capture strategic business
opportunities in the rest of Asia. On both
accounts, and in the context of challenging market
conditions in the second half of 2007, DEPFA has
been successful.
In Korea, DEPFA significantly increased its share of
total issuance by the public sector, originating US$2
billion or approximately 45% of the total US$4.47
billion issued in the international debt capital markets
in 2007. To accomplish this, DEPFA leveraged its
balance sheet early in 2007, before markets capitulated,
to capture important Bookrunner and Joint Lead
Manager mandates for 2 global bond offerings by
the Export-Import Bank of Korea and the Korea
Development Bank.
48
In the second half of 2007, the deteriorating conditions
in the global markets sidelined investors and undermined
borrowers’ plans to fund in the international
capital markets. International benchmarks were cancelled
or postponed, with borrowers choosing instead
to seek out alternative sources of funding. DEPFA’s
ability to work directly with borrowers and address
their balance sheet requirements without relying on
end investors enabled us to meet the Korea Development
Bank’s funding needs directly with a US$300
million private placement.
Korea will continue to be a key market for DEPFA in
2008. In Asia, it has the deepest pool of public sector
borrowers who are large users of the international
capital markets, and its OECD country status and
20% risk weighting (under Basel I rules) at the state
policy bank level make it an attractive asset for
DEPFA’s portfolio. In the current environment, widening
spreads present a good opportunity for DEPFA to
accumulate assets for the portfolio faster than previously
anticipated.

Emerging market issuers in the region faced a challenging
environment in 2007 with markets effectively
closed for issuers in the second half year, against a
deteriorating market backdrop.
Despite this challenging environment, in the rest of
Asia, DEPFA managed to diversify its regional footprint
by winning a role as Mandated Lead Arranger for Vietnam
National Shipbuilding Corporation’s US$600 million
loan in May. This was DEPFA’s debut mandate in
Vietnam. DEPFA also acted as an anchor investor for
the Republic of Indonesia’s US$1.5 billion international
benchmark in February.
India
The Mumbai Representative office was opened in February
2007 to communicate and channel DEPFA’s
global products and services into India, the world's
largest democracy and home to, arguably, the world's
largest number of public sector entities.
During the year DEPFA quickly worked on establishing
its local presence and the Bank acted as Mandated
Lead Arranger and Bookrunner on two high profile public
sector transactions: DEPFA assisted Hindustan
Petroleum Corp Limited (HPCL), one of India’s largest
oil and gas companies in successfully raising US$150
million equivalent in Japanese Yen for 5 years from the
syndicated loan market, with the size being increased
from US$100 million equivalent as a result of successful
road shows held in Singapore, Taipei and London.
DEPFA also worked with Standard Chartered Bank as
Mandated Lead Arranger and Joint Bookrunner on a 5
year Japanese Yen denominated (US$200 million
equivalent) syndicated loan for the Rural Electrification
Corporation, a first time borrower in the hard currency
markets.
India's funding needs are substantial, especially within
the infrastructure sector (estimated to be in the region
of US$500 billion over the next five years). A large part
of this borrowing requirement is being (and will continue
to be) financed through the domestic financial
markets due to regulatory concerns over an apprecia-
ting currency and significant liquidity generated as a
result of an economy that has grown at more than 8%
p.a . However, the effects of tighter global liquidity
conditions during the fourth quarter of 2007 are being
felt locally, resulting in a greater willingness by local entities
to tap international products and thereby generating
interesting financing opportunities for the Bank
going forward.
Japan
In 2007, DEPFA’s Japanese activity focused mainly on
primary market business with public sector borrowers
and/or depositors. Meanwhile, the Bank continued to
seek alternative opportunities arising from the slow but
steady reform of the central (and local government)
financing structure.
Origination activity was very healthy in a difficult pricing
environment with 31.9 billion worth of business concluded
consisting of over 170 transactions. Market
conditions were characterised by continued fierce
competition among lending institutions and tight spreads
for public sector issuance, which was exacerbated
by strong liquidity from the huge amount of net
financial assets of domestic households (amounting to
3 9 trillion equivalent) as well as the flight to quality by
institutional investors caused by the turmoil in the international
financial markets. The ability of the Bank to
still capture good quality new business can be attributed
to its strong client relationships and consistency in
meeting financing needs. As a designated member of
21 local governments’ underwriting syndicates (out of
the 42 local governments who issue public bonds) the
Bank has a valuable access point in securing business.
In addition, the Tokyo Branch played an important role
as a funding vehicle for the Bank, most notably in the
second half of 2007 in which public entities as well as
local governments placed considerable amounts of
term deposits with the Bank. This high degree of investor
confidence enjoyed by the Bank in Japan underlines
the advantages of having a global profile, which
enable it to benefit from different regional and national
market circumstances.
49

Sam Miller:
“The transaction with Dauphin County represented my
first opportunity to work with the professionals at DEPFA
as a swap counterparty. The execution of the transaction
was flawless and the County was able to achieve its
financing goals in a timely fashion.”
David Burke:
“DEPFA’s execution of the Dauphin County SIFMA index
swaption was a direct result of DEPFA BANK’s acquisition
of the municipal capital markets business of First Albany
Capital and the creation of DEPFA First Albany
Securities. With the long-standing and strong relationship
between Sam Miller from DFAS and Dauphin County, our
team demonstrated quickly how the bank and the broker-dealer’s
complementary product and relationship
strengths could and will bring greater value to our clients
and to our shareholders.”
Client: Dauphin County, Pennsylvania
Need: Dauphin County wanted to lower its debt costs by converting a portion of its debt structure to
a variable interest rate basis. The County anticipated there would be long-term benefit to
having variable text exempt rates. A portion of its portfolio was already synthetically converted
to fixed rate through an interest rate swap. The County contemplated reversing this transaction
to return to variable rate but was concerned about the long-term implications of having this
debt unhedged.
Solution: DEPFA had a unique understanding of the County’s needs due to its long standing relationship
with First Albany. The newly created DEPFA First Albany team was able to work with the
County to develop a financing strategy that met Dauphin’s requirements. DEPFA implemented
a SIFMA Index swaption that gave the County upfront debt service savings through variable
rate exposure while addressing their long-term concerns.
People: DFAS · DEPFA BANK · Sam Miller, Managing Director · David Burke, Managing Director
Tom Jacobs, Managing Director · Brian Nevel, Director · Richard Pengelly, Associate Director
David Atkins, Associate

Dauphin County, Pennsylvania, USA

Puerto Rico Sales Tax Financing Corporation

Client: Puerto Rico Sales Tax Financing Corporation (COFINA)
Need: COFINA was created with the purpose of refinancing a portion of the Commonwealth of
Puerto Rico’s debt. COFINA’s debt would be supported by a new sales tax. To lock in the
cost of its anticipated inaugural bond issuance, COFINA needed a forward starting interest
rate hedge.
Solution: In August of 2007 COFINA awarded DEPFA an interest rate swap through a competitive pro-
cess. DEPFA competed among the leading banks in the municipal derivatives market and
provided the best execution level for the interest rate swap. This was a one of the largest
municipal swap transactions done in 2007.
People: DEPFA BANK · David Burke, Managing Director · Brian Nevel, Director
Brittanie Schmieder, Associate Director
David Burke:
“Originally planned as a negotiated swap away from us,
COFINA’s financial advisor asked DEPFA to participate
in a competitive bid as COFINA believed it was not
getting efficient pricing or best execution. DEPFA was
approached because of being known for our singular
client-focus and efficient execution.”

Energinet, Denmark

Clients: Energinet.dk & DONG Energy A/S on behalf of Energinet.dk.
Need: Energinet.dk is a utility controlled by the Danish government, which manages and operates
the electricity transmission grid in Denmark.
Solution: DEPFA BANK arranged and underwrote an acquisition finance loan to an SPV owned by
Energinet.dk for the latter to purchase a gas storage facility and also structured and provided
a standalone contingent guarantee facility regarding future acquisition cashflows.
People: Ole Witmeur, Managing Director, PSO Nordic & Baltic countries
Joe Hughes, Director, Structured Asset Finance
Fiona Sheil, Director, Client Transaction Management
Ole Witmeur:
“A milestone transaction as it highlighted DEPFA’s
detailed understanding of the utility sector and ability to
provide structured finance solutions, particularly when it
comes to monetizing future revenues. We believe the
transaction will boost DEPFA’s efforts to do similar types
of transactions going forward across the region.”

Management Discussion – Segments
Client Product Services (CPS)
Note: with effect from 1 January 2008 the CPS and
Global Markets segments (see below) will be reported
together in a new segment “Capital Markets and Asset
Management” which reflects the integrated way in
which these areas are now being managed.
Introduction
The CPS segment encompasses products such as
derivatives and structured transactions that provide
added value to clients.
Main achievements
In its second full year of operation, the segment focused
on consolidating the excellent performance of
2006 by expanding the product offering to the existing
client base while also providing structured solutions to
a range of new clients. The client derivatives business
provided the base for this. After scaling their staffing requirements
to the appropriate levels, the other product
groups in the segment placed increased focus on originating
new business and contributed regular revenue
streams to the overall performance.
Client Derivatives and Structuring
The client derivative business continues to be a success
story for DEPFA. The derivatives team has again
provided significant revenues for the CPS segment
throughout 2007 with the internal relationships between
the derivatives team and the public sector and
infrastructure finance origination teams continuing to
provide the main pipeline for new derivative business
opportunities.
56
The establishment of locally based specialist product
teams (alongside the general business originators) has
also facilitated an increase in the geographical spread
of the client base. Central Europe and the US have
produced the main revenue flows, with Asia focusing
on building its product delivery capabilities.
2007 showed a consistent level of transactions closed
throughout the year. The seasonality of the Public
Sector business resulted in the expected reduced
flow of transactions in the third quarter. Despite the
uncertainty and turbulence in the global credit markets
in quarter four, the Public Sector business demonstrated
its relative safety with the derivative
transaction flow during this period not being severely
restricted.
While the Group continues to target trades which make
large contributions to income, the broadened client
base offers a more diversified and dependable income
stream.
The derivative team concluded transactions with 125
clients with the transaction notional volumes reaching
€6.2 billion. This also points towards more consistent
and diversified revenue sources and is a trend the
Bank would wish to continue into 2008. Additionally
the derivatives team enhanced their reputation as
market leaders in providing quality structured solutions
directly to the client by restructuring €1.3 billion in
existing client debt throughout 2007.

Structured Asset Finance (SAF)
DEPFA continued to build its Structured Asset Finance
operation focusing on the Iberian Peninsula and
Southern Europe. The mandate of the team is to
identify, structure and monetize the cash flows of
public sector assets.
The focus of the team is on bilateral transactions where
increased value added can be produced. The team
has been particularly active in offering bespoke solutions
to Italian public sector health care providers. Also of
significance was the team’s activity in supporting the
capital funding requirements of government related institutions,
in particular the Energinet finance deal as
profiled in this report.
Strong asset growth was recorded over 2007; how -
ever, quarter four activity was restricted by the market
turbulence. With a solid pipeline in place the team is
well placed to deliver a strong performance in 2008,
where two of the main areas of focus will be consolidation
in the new markets entered, and on bespoke
bilateral transactions.
Guaranteed Investment Contracts (GIC)
This product is unique to the US market and allows
municipal issuers a flexible way to invest proceeds
raised from bond issues. As the GIC provider, DEPFA
gains an attractive additional source of funding. Additionally,
as this product is principally focused on the
municipal market, it provides DEPFA with increased
access to new public sector clients.
The team was enlarged at the beginning of 2007 and
this translated immediately into an increased level of
mandates being won. The contribution in 2007 was
impressive with the desk winning almost US$8.5 billion
in new funds from 127 municipal clients and delivering
substantial savings to the Bank’s cost of funding.
Pension Finance (PF)
2007 was the first full year of operation for the Pension
Finance team. The team’s mandate is to advise
DEPFA’s clients on the impact of policy choices on the
funding costs and affordability of pension and other
social benefits and provides alternatives in the area of
structuring, financing and investing reserves for clients.
The planning and analysis is carried out using proprietary
quantitative models with the results used as a starting
point for determining a long-term financial plan for
the sustainability of social benefits.
With a firm pipeline of transactions in place, 2008 is expected
to be a key year for the PF team, particularly in
the US market where the combination of the specialist
PF product knowledge, combined with DEPFA First Albany’s
public sector origination network will provide
good opportunities.
57

Management Discussion – Segments
DEPFA First Albany Securities LLC (DFAS)
In September 2007, DEPFA completed the acquisition
of the Municipal Capital Markets Group from First Albany
Capital. Post the acquisition DEPFA has established
DEFPA First Albany Securities LLC.
This acquisition has been a key element in DEPFA’s
expansion plans for the US market and provides
DEPFA with a team that has a wealth of experience in
the US municipal markets. Coupled with the newly
established broker dealer operation and the expanded
network of local offices, DEPFA’s US presence is now
very well positioned to significantly increase its US
market penetration and to contribute strong growth to
the Group.
Despite the short period of operation of DFAS in 2007,
they closed some significant transactions that point the
way to how this acquisition will be of benefit to DEPFA
in the future.
Client Product Services
58
Results*
The main driver of non-interest revenues is the profit
recognised on interest rate swaps for clients, with the
majority of transactions connected with the Bank’s
financing activities (in Infrastructure and Budget
Finance). In addition to a number of first time CPS
clients for DEPFA, there is already an important element
of repeat business with a rising proportion of trans -
actions arranged with the same public sector clients.
Revenue streams from newly started businesses will
help to sustain this segment’s earnings growth in the
future.
Outlook
The acquisition of DEPFA by HRE Group will see
changes in the focus of some of the CPS operations in
2008. As stated above, from 2008 on the CPS segment
will become part of the Capital Markets and
Asset Management segment of the enlarged HRE
Group. The acquisition will provide significant oppor -
€ m 2007 2006 Change Change %
Net interest income 27 2 25 1,250%
Non interest revenues 33 59 -26 -44%
Total operating income 60 61 -1 -2%
Operating expenses -51 -24 -27 113%
Profit before taxation 9 37 -28 -76%
Key Balance sheet items**
Financing volume (on-balance sheet) 13,349 2,372 10,977 463%
Financing volume (off-balance sheet) 401 0 401
Total commitments 13,750 2,372 11,378 480%
* For reconciliation of the results to the published in come statement, see page 62.
** For comparability with the financial statements, 2007 volumes include HPFB and exclude DEPFA Deutsche Pfandbriefbank
AG.

tunities to expand the CPS product offering into the
Public Sector Real Estate area. Servicing the needs of
Public Sector clients in the Real Estate area is now
within the DEPFA mandate and helping the Group
access business opportunities in this developing
market is a key priority throughout 2008, although for
the avoi dance of doubt, it is intended that any ex -
posure to residual real estate market risk will be booked
in another appropriate HRE Group entity (i.e. outside of
the Bank).
The core derivatives and structuring operations will
continue to expand and the Bank expects the increasing
demand for tailored products and structured
transactions from its public sector clients in its established
markets to continue. The Bank will broaden its
product range and place an increased focus on developing
its targeted growth countries by building its presence
in these target markets to ensure increased
revenue and diversified revenue sources.
In 2008 the GIC team will continue to be an important
source of USD funding and a strong revenue stream.
The DEPFA GIC team will be merged into the HRE
Group GIC team with the combined and expanded
team initially focused on consolidating the current
position and then expanding the existing programmes
that are in place.
In Pension Finance the Bank will focus on building on
the client relationships developed throughout 2007
and executing some key transactions to firmly
establish the team as a key product line in the Group
structure.
Global Markets
Introduction
The Global Markets segment encompasses the Bank’s
proprietary trading activities and its legacy interest rate
carry book. In 2007, Global Markets contributed a loss
to the Bank’s results. From 1 January 2008, the results
from the legacy interest rate carry book will be reported
in Corporate Centre.
Main achievements
Due to adverse market conditions in the wake of the
sub-prime crisis in the U.S. the trading performance
was disappointing across the board in 2007. In order
to limit the downside effect from possible further
market deteriorations, the Bank had decided to de-risk
its books in Global Markets. Accordingly, Global
Markets has significantly reduced the overall segmental
Value at Risk from €95 million to €37 million (- 61%)
at the year-end.
59

Management Discussion – Segments
Results*
Net interest income from the Bank’s legacy interest
rate carry book was negative in 2007. This is a result of
adverse market conditions and of hedging expenses to
eliminate the legacy book’s interest rate exposure.
Trading income was also negative. The weak trading
performance is mainly the result of the US sub-prime
mortgage crisis spilling over to other markets in which
the Bank operates. Global Markets’ result before
taxes was negative at -€147 million (including DEPFA
Deutsche Pfandbriefbank AG).
Global Markets
60
Outlook
The Bank’s decision to de-risk the books in Global
Markets was reaffirmed after its acquisition by HRE
Group. Following the change of ownership trading
activities are being reduced or run off in these
areas and results from the “legacy positions” will be
reported in the Corporate Centre from 1 January
2008.
These legacy positions are expected to continue to
have a negative impact on the net interest income
result in the corporate centre segment.
€ m 2007 2006 Change Change %
Net interest income -50 59 -109
Non interest revenues -74 85 -159
Total operating income -124 144 -268
Operating expenses -23 -22 -1 5%
Profit before taxation -147 122 -269
Key Balance sheet items**
Financing volume (on-balance sheet) 16,253 14,445 1,808 13%
Financing volume (off-balance sheet) 1,684 0 1,684
Total commitments 17,937 14,445 3,492 24%
* For reconciliation of the results to the published in come statement, see page 62.
** For comparability with the financial statements, 2007 volumes include HPFB and exclude DEPFA Deutsche Pfandbriefbank
AG.

Corporate Centre
Introduction
The Corporate Centre consists of various cost and revenue
items that, due to their special character, do not
fit into any particular business segment or can be seen
as supporting the entire organization as a whole rather
than individual segments.
For example, support related costs cover Group
functions like group accounting and reporting, opera -
tions, corporate communications, internal audit and
compliance among others. Items of special character
include charitable donations and sponsorships, such
as DEPFA’s ongoing relationship as corporate sponsor
to the Irish charity Concern. The segment also includes
residual property assets which have been a non-core
activity since DEPFA decided to focus exclusively on
public finance in 2002.
Corporate Centre
Results*
The negative net interest income results from interest
expenditure relating to subordinated debt (lower Tier II
and profit participation certificates) which is charged in
its entirety to the Corporate Centre. Non-interest
revenues showed a positive result, mainly due to
interest on tax refunds.
The significant increase in operating expenses was due
to exceptional merger related costs of €88 million and
€23 million of a loss on disposal of DEPFA Deutsche
Pfandbriefbank AG and also, to a lesser extent, higher
direct costs. Included in the prior year are exceptional
impacts relating to tax refunds and related interests
from discontinued operations, consisting of €34 million
under operating income and €41 million under
operating expenses.
€ m 2007 2006 Change Change %
Net interest income -30 -31 1 -3%
Non interest revenues 6 40 -34 -85%
Total operating income -24 9 -33 -367%
Operating expenses -209 -120 -89 74%
Profit before taxation -233 -111 -122 110%
Key Balance sheet items**
Financing volume (on-balance sheet) 416 4,590 -4,174 -91%
Financing volume (off-balance sheet) 0 0 0
Total commitments 416 4,590 -4,174 -91%
* For reconciliation of the results to the published in come statement, see page 62.
** For comparability with the financial statements, 2007 volumes include HPFB and exclude DEPFA Deutsche Pfandbriefbank
AG.
61

Management Discussion – Segments
The table below presents a reconcilation of the segmental results for continuing and discontinued operations as
presented in the financial statements to the segmental results presented in the management discussion:
Continuing Operations* 2007 € m
Infra- Client
Budget structure product Global Corporate
€ m Finance Finance services markets Centre Total
Net interest income 268 97 27 -50 -33 309
Non interest revenues 239 24 33 -72 -4 220
Total Revenues 507 121 60 -122 -37 529
Total Expenditure -92 -30 -48 -23 -179 -372
Impairment losses on loans and advances - - - - - -
Profit before tax 415 91 12 -145 -216 157
Taxation -29
Profit for the year 128
Continuing Operations* 2006 € m
Infra- Client
Budget structure product Global Corporate
€ m Finance Finance services markets Centre Total
Net interest income 247 39 2 59 -33 314
Non interest revenues 169 16 59 85 7 336
Total Revenues 416 55 61 144 -26 650
Total Expenditure -73 -18 -21 -22 -66 -200
Impairment losses on loans and advances - - - - - -
Profit before tax 343 37 40 122 -92 450
Taxation -107
Profit for the year 343
Discontinued Operations** 2007 € m
Infra- Client
Budget structure product Global Corporate
€ m Finance Finance services markets Centre Group
Net interest income 80 - - - 3 83
Non interest revenues 129 - - -2 20 147
Total Revenues 209 - - -2 23 230
Total Expenditure -11 -1 -3 - -40 -55
Impairment losses on loans and advances - - - - - -
Profit before tax 198 -1 -3 -2 -17 175
Taxation 6
Profit for the year 181
Discontinued Operations** 2006 € m
Infra- Client
Budget structure product Global Corporate
€ m Finance Finance services markets Centre Group
Net interest income 109 - - - 2 111
Non interest revenues 114 - - - 38 152
Total Revenues 223 - - - 40 263
Total Expenditure -11 -1 -3 - -59 -74
Impairment losses on loans and advances - - - - - -
Profit before tax 212 -1 -3 - -19 189
Taxation -6
Profit for the year 183
* Presented in note 5 of the financial statements ** Presented in note 14 of the financial statements
62

Consolidation 2007 € m
Infra- Client
Budget structure product Global Corporate
€ m Finance Finance services markets Centre Total
Net interest income - - - - - -
Non interest revenues - - - - -10 -10
Total Revenues - - - - -10 -10
Total Expenditure - - - - 10 10
Impairment losses on loans and advances - - - - - -
Profit before tax - - - - - -
Taxation -
Profit for the year -
Consolidation 2006 € m
Infra- Client
Budget structure product Global Corporate
€ m Finance Finance services markets Centre Total
Net interest income - - - - - -
Non interest revenues - - - - -5 -5
Total Revenues - - - - -5 -5
Total Expenditure - - - - 5 5
Impairment losses on loans and advances - - - - - -
Profit before tax - - - - - -
Taxation -
Profit for the year -
Group* 2007 € m
Infra- Client
Budget structure product Global Corporate
€ m Finance Finance services markets Centre Group
Net interest income 348 97 27 -50 -30 392
Non interest revenues 368 24 33 -74 6 357
Total Revenues 716 121 60 -124 -24 749
Total Expenditure -103 -31 -51 -23 -209 -417
Impairment losses on loans and advances - - - - - -
Profit before tax 613 90 9 -147 -233 332
Taxation -23
Profit for the year 309
Group* 2006 € m
Infra- Client
Budget structure product Global Corporate
€ m Finance Finance services markets Centre Group
Net interest income 356 39 2 59 -31 425
Non interest revenues 283 16 59 85 40 483
Total Revenues 639 55 61 144 9 908
Total Expenditure -84 -19 -24 -22 -120 -269
Impairment losses on loans and advances - - - - - -
Profit before tax 555 36 37 122 -111 639
Taxation -113
Profit for the year 526
* Presented in the management discussion on pages 18 to 65
63

Project Omega, Northern Ireland

John Kirwan:
“DEPFA's first Mandated Lead Arranger role on a
Northern Ireland PPP was to arrange the finance for this
important environmental project. Project Omega is not
only the largest NI PPP to close to date it is also one of
the largest ever European Waste Water PPP deals. This
PPP transaction is now deemed a template for
similar projects across Europe driven by the growing
need to comply with EU waste water requirements.”
Client: Thames Water Services Limited/Laing O'Rourke Portfolio Solutions Limited
Need: The Project involves the financing of the installation and operation of wastewater and sludge
treatment facilities at four separate sites across Ulster. When completed, the new facilities will
be responsible for providing around 20% of Northern Ireland’s wastewater treatment capacity
and 100% of its sludge disposal. As pressure mounts on countries to fully comply with the
European Urban Wastewater Directive, the need for this type of project will naturally increase.
Solution: DEPFA arranged a Stg £170 million financing backed by a 25 year PPP Concession granted by
the NI Water Services. The payment structure is complex and unique in that it is based entirely
on the volume of wastewater and weight of sludge arriving at the facilities for treat ment. This
structure provides greater risk transfer for the public sector, however for the Client and the
funders it is appropriately mitigated under the project's contractual and financial structure.
People: John Kirwan, Managing Director, Head of Infrastructure Finance (UK and Ireland)
Dermot Malone, Director · Niall McInerney, Associate Director

Business Performance
Business Performance 2007
Overall DEPFA BANK’s result in 2007 was characte -
rised by several notable and contrasting factors: on the
one hand the core Budget Finance and Infrastructure
Finance businesses performed strongly and made a
record combined contribution of approximately €700
million to the Group pre-tax result. These activities will
continue to be one of the main profit drivers within the
enlarged HRE Group. On the other hand, deterioration
in the trading performance, caused in large part by the
negative impact of widening credit spreads on valuations
of public sector instruments held in the trading
book, weighed on the overall result. In addition, costs
associated with the merger with HRE Group amounting
to €88 million were recog nised in the 2007
accounts and this must be taken into consideration in
the yearly comparison. The net in come of the Group in
2007 totalled €309 million compared to €526 million
in 2006.
Net interest income declined by 8% to €392 million.
The interest income contribution generated by the
public finance portfolio was virtually flat in 2007, which
was to be expected in a cycle of narrowing spread levels
still prevailing for a good part of the year. In such
an environment it was considered more appropriate to
take advantage of gains in the valuation of assets in the
portfolio, which is reflected in the strong sale of assets
contribution. Losses from the legacy interest rate carry
book in Global Markets started to have an adverse
impact on the interest income result in the second half
of the year. Action taken by the Bank has limited further
exposure to adverse market developments. HRE Group
has given high priority to closing down these interest
positions entirely by the early part of 2008 and the interest
rate risk exposure had by the end of 2007 already
been successfully managed down to significantly lower
levels.
Net fee and commission income rose by 28% to €41
million. This increase is the result of higher contri -
butions from two main sources: the Bank’s liquidity
support and letter of credit business in the US muni -
cipal bond market as well as higher advisory and
66
success fees from DEPFA’s infrastructure financing
activity.
Net trading income was negative at -€52 milllion,
which represents a significant swing from the 2006
level (€140 million). The growing scarcity of liquidity in
the global debt markets that became dramatically evident
in the latter period of 2007, has also led to spread
widening in the public sector asset class, with negative
consequences for the valuation of debt instruments
held in DEPFA’s trading book such as investment grade
CDS instruments. The Bank anticipates that these valuation
losses are only of a temporary nature and can
be expected to reverse over time when the reference
issues mature at par value. A further reason for the
weakness in the trading result was the impact of in -
efficient hedges that had to be treated as trading
derivatives for accounting purposes. The proprietary
trading activities have been scaled back significantly as
part of a reordering of strategic priorities within the new
HRE Group and the focus of the Bank going forward
will be very much on its traditional strengths in public
sector and infrastructure financing.
Gains from sale of assets increased by 26% to €348
million, which reflects a continuation of the favourable
conditions in the spread environment that continued
well into the year. As part of the Bank’s long-term approach
to portfolio management, substantial efforts
were made to replenish the asset base with sufficient
volumes of new business origination (amounting to
€64 billion in 2007). The contribution of asset sales is
expected to fall sharply in 2008 due to a new cycle of
spread widening, which will shift the balance of re -
venues generated from public sector assets towards
interest income as the Bank takes advantage of opportunities
to originate new business at higher locked-in
margins.
Operating expenses increased by 55% to €417
million. This development was exaggerated by the
one-off impact of €88 million of merger related costs,
which were fully absorbed into the 2007 accounts.
These costs related to such items as the costs for
shares in the employee share compensation scheme

that were brought forward as a result of the purchase
of DEPFA’s share capital by HRE Group, as well as to
other legal and investment banking expenses. Another
factor in the above average cost growth was the consolidation
of the Municipal Capital Markets unit of First
Albany that became effective in September 2007. In
order to achieve the planned merger synergies certain
cost reduction measures, including cutbacks in staffing
levels across all DEPFA’s operations and locations,
were introduced in the fourth quarter. Costs for these
measures were also partly reflected in the 2007 financial
statements. In the medium-term such measures
together with the concentration of capacity with Hypo
Public Finance Bank that has been integrated into DEPFA,
are expected to generate important cost savings.
Income Statement € m
Profit before taxation amounted to €332 million. Net
income after taxes amounted to €309 million. It is
important to mention that in the accompanying overview
DEPFA Deutsche Pfandbriefbank AG has been included
in the individual line items whereas in the
consolidated income statement this entity has been
classified as a ‘discontinued operation’ as this legal
entity has been transferred within the new Group
structure to now be a subsidiary of Hypo Real Estate
Holding as of 31 December 2007.
Future financial statements of DEPFA will reflect the
contribution to income of Hypo Public Finance Bank
which was acquired by DEPFA effective as of 31 December
2007.
Earnings 2007* 2006** % Change
Net interest income 392 425 -8%
Net fee and commission income 41 32 28%
Net trading income -52 140 -137%
Gains less losses from financial assets 348 277 26%
Other operating income 20 34 -41%
Total operating income 749 908 -18%
Operating expenses -417 -269 55%
of which personnel expenditure -235 -138 70%
of which other administrative expenditure -141 -78 81%
of which depreciation and amortisation -13 -9 44%
of which other expenditure -28 -44 -36%
Net operating income before impairment losses 332 639 -48%
Impairment losses on loans and advances - -
Profit before taxation 332 639 -48%
Taxation -23 -113 -80%
Group net income 309 526 -41%
* 2007 results include DEPFA Deutsche Pfandbriefbank AG which is classified as a discontinued operation in the financial statements
** 2006 results include the gross up of the result from discontinued operations for consistency with the current year presentation.
67

Business Performance
Balance Sheet
The on-balance sheet commitments fell by 12% to
€171 billion. However this includes a net reduction of
€34 billion as at 31 December 2007 from the disposal
of DEPFA Deutsche Pfandbriefbank AG, net of the
acquisition of HPFB. Excluding this exceptional effect,
the on-balance sheet commitments grew by 6%.
This shows that the Bank has been able to maintain its
overall public sector financing volume at a virtually
constant level despite significant asset sales activity
during the course of the year involving over €30 billion
of assets. Almost 50% of the drawn financing volume
is made up of 0% risk-weighted sovereign borrowers,
including central governments, government agencies,
multilateral institutions as well as certain local and
regional authorities.
There has been a perceptible shift in 2007 towards
20% risk-weighted borrowers reflecting the growth
especially in the municipal business in the United
States where local and regional authorities are
assigned a 20% risk weighting, as well as the quasisovereign
student loan market. The volume of 100%
risk-weighted assets has grown to €19 billion but still
represents a small portion (11%) of the drawn total.
68
Typi cally, this category refers in particular to public
sector related concession based lending under Public
Private Partnership (PPP) financing arrangements in
which the Bank’s debt is often serviced by cash flows
from the public sector (subject to satisfactory performance
by the private sector partner).
The Bank’s treasury management activities have continued
to provide very stable support for the Bank’s
asset side even in the very difficult market environment,
which were evident since the summer. The success of
the funding strategy employed by DEPFA in 2007 is
reflected in the fact that the Bank raised its targeted
€13.5 billion of long-term funding at deeper sub-LIBOR
levels than was achieved in 2006 or at any stage in
recent years. This was achieved whilst maintaining an
average weighted tenor of new borrowings of approximately
9 years. The public sector asset base of DEPFA
was deployed to an increasing degree in the repo
markets during the latter half of the year given the
strong appetite among market participants for this
asset class during the ongoing credit crisis, reflecting
the flight to quality. The Bank’s total secured funding
including covered bond issuance and repo finance
amounted to 69% of total funding.
2007* % 2006
Change from
previous year
Drawn Financing Volume – Group € m € m € m %
Total 171,168 100% 194,585 -23,417 -12%
of which loans with 0% weighting 83,199 49% 134,507 -51,308 -38%
of which loans with 10% weighting 640 0% 110 530 482%
of which loans with 20% weighting 66,577 39% 51,943 14,634 28%
of which loans with 50% weighting 1,900 1% 826 1,074 130%
of which loans with 100% weighting 18,852 11% 7,199 11,653 162%
* Consisting of DEPFA including HPFB and excluding DEPFA Deutsche Pfandbriefbank AG

2007* % 2006
Change from
previous year
New Commitments – Group € m € m € m %
Total 72,061 100% 67,413 4,648 7%
of which loans with 0% weighting 24,209 34% 30,767 -6,558 -21%
of which loans with 10% weighting 3,572 5% 3,782 -210 -6%
of which loans with 20% weighting 29,530 41% 21,338 8,192 38%
of which loans with 25% weighting 183 0% - 183
of which loans with 50% weighting 5,064 7% 4,864 200 4%
of which loans with 100% weighting 9,503 13% 6,662 2,841 43%
* Consisting of DEPFA excluding HPFB and excluding DEPFA Deutsche Pfandbriefbank AG
Regulatory Capital and Capital Adequacy Ratios
in accordance with BIS
The regulatory capital and capital adequacy ratios
were produced in accordance with the Bank for International
Settlements (BIS), Basle Accord regulations to
facilitate international comparisons.
DEPFA BANK plc is regulated by the Irish Financial
Regulator. On a group level, DEPFA BANK plc has to
conform to the regulations of the Irish Financial Regulator,
which applies a capital /risk assets framework for
measuring capital adequacy based on the European
Union Solvency Ratio Directive (SRD) and the Capital
Adequacy Directive (CAD). Both the BIS and the Irish
Financial Regulator require banks to maintain a minimum
Core Capital ratio of 4% and a Total Capital ratio
of 8%.
With a Core Capital ratio of 9.3% and a Total Capital
ratio of 11.6% the Group comfortably exceeds the
minimum required ratios.
The Irish Financial Regulator uses the term Alternative
Capital Instruments (ACIs) to describe non-standard
Regulatory Capital (€ million) 31.12.2007 31.12.2006
Core capital (Tier I) 4,181 3,144
Supplementary (Tier II) 1,053 1,350
Total Regulatory Capital 5,234 4,494
Capital Adequacy Ratios 31.12.2007 31.12.2006
BIS Risk Weighted Assets (€million) 44,938 33,351
Core capital ratio (Tier I) 9.3% 9.4%
Total capital ratio (Tier I +II) 11.6% 13.5%
69

Business Performance
forms of capital that are generally referred to in the
market as “hybrid capital”. The following structures
qualify as ACI’s under Notice BSD S1/04, ‘Alternative
Capital Instruments: Eligibility as Tier I Capital’, an
amendment to the implementation of EC Own Funds
and Solvency Ratio Directives BSD S 1/00 of the Irish
Financial Regulator.
70
Under the terms and conditions of the ACI’s issued out
of DEPFA Funding II LP as listed below, DEPFA BANK
plc (as the General Partner) has certain call rights.
DEPFA BANK plc will not exercise any call right if such
exercise would breach any of the eligibility criteria for
Tier I Capital set out in Notice BSD S1/04 quoted
above.
Nominal amount
Year of issue . million Issuer Instrument Coupon
Guaranteed Non-voting
Non-cumulative Perpetual
2003/2004 400 DEPFA Funding II LP Preferred Securities 6.5%
Guaranteed Non-voting 7% until 08/06/2008,
Non-cumulative Perpetual 10yr CMS
2005 300 DEPFA Funding III LP Preferred Securities +0.1% thereafter
Guaranteed Non-voting 5.029% until 21/03/
Non-cumulative Perpetual 2017, 3m EURIBOR
2007 500 DEPFA Funding IV LP Preferred Securities +1.87% thereafter
Total 1,200

Jack Angelides:
“This transaction highlights DEPFA’s commitment to
support key public sector entities in Bulgaria. DEPFA’s
expertise in assessing the company and its role in the
Bulgarian economy was a vital component in concluding
this important transaction. This deal is another example
of the premier position DEPFA has in the public sector
domain and its desire to expand its involvement in
Bulgaria.”

Client: Bulgarian State Railways (BDZ EAD)
Bulgarian State Railways
Need: BDZ is on the list of strategically important companies in Bulgaria. It is fully owned by the
Bulgarian government and is one of the largest companies in Bulgaria. Its main activities
include freight and passenger transportation and maintenance and repair of rolling stock.
Solution: DEPFA BANK plc was Joint Arranger on this 3120 million bond issue – the second by BDZ
and the largest domestic bond issue for Bulgaria – the proceeds of which will be used for
the restructuring of existing debt and the rolling stock finance.
People: Jack Angelides, Managing Director, Public Sector Origination, South East Europe
Catalin Voloseniuc, Managing Director, Public Sector Origination, Central Eastern Europe
Desislava Gaytanikova, Associate, Client Transaction Management

John Kirwan:
“Central to DEPFA securing the sole arranging mandate
to fund the construction of four secondary schools, was
our delivery of a tailored funding solution. The project
structure successfully combines traditional and PFI
procurement techniques and accommodates the
differing needs of multiple school authorities under a
single financial package."

Client: Royal BAM (BAM PPP Limited)
Solihull Schools BSF, England
Need: This project involves the financing of the building of 3 new secondary schools and 1 new
special needs school in Birmingham for the Solihull Metropolitan Borough Council. The
'Building Schools for the Future' or BSF is a major part of the UK Government's future
funding of capital projects in the secondary school sector which is now replacing the Private
Finance Initiative (PFI) as a method of procurement.
Solution: DEPFA solely arranged a long term financing package for this project under a 28 year BSF PPP
contract. The financial structure accommodates the requirement for one of the four schools to
opt out of the long term BSF arrangements but at the same time benefit from the efficiencies
derived from bundling 4 seperate projects under a single larger contractual package.
People: John Kirwan, Managing Director, Head of Infrastructure Finance (UK and Ireland)
Garret Tynan, Director · Fiona O'Driscoll, Associate

Group Accounts
Directors and other information
Board of Directors
Mr. G. Funke* (Chairman) (appointed 5th October 2007)
Mr. G. Bruckermann (Chairman) (resigned 2nd October 2007)
Dr. M. Fell* (Deputy Chairman) (appointed 5th October 2007)
Dr. T. M. Kolbeck* (Deputy Chairman) (resigned 5th October 2007)
Mr. H. Reich* (Deputy Chairman) (resigned 5th October 2007)
Ms. B. von Oesterreich* (appointed 5th October 2007)
Dr. J. Bourke* (appointed 5th October 2007)
Mr. P. Ryan* (appointed 5th October 2007)
Mr. C. Dunne* (appointed 5th October 2007)
Mr. A. Cameron (appointed 5th October 2007)
Mr. P. Leatherdale (appointed 5th October 2007)
Mr. A. Readinger (appointed 5th October 2007, resigned 13th March 2008)
Mr. J.W. Campbell (appointed 24th October 2007)
Mr. T. Glynn (appointed 24th October 2007)
Mr. B. Heide-Ottosen (appointed 7th November 2007)
Dr. R. Brantner* (resigned 5th October 2007)
Mr. D. M. Cahillane (resigned 5th October 2007)
Dr. R. Grzesik (resigned 20th April 2007)
Prof. Dr. A. Hemmelrath* (resigned 5th October 2007)
Mr. M. O’Connell* (resigned 5th October 2007)
Mr. J. Poos* (resigned 5th October 2007)
Prof. Dr. Dr. h.c. mult. H. Tietmeyer* (resigned 5th October 2007)
*Non-Executive
Audit Committee
Dr. J. Bourke (Chairman) (appointed 5th October 2007)
Mr. M. O’Connell (Chairman) (resigned 5th October 2007)
Mr. P. Ryan (appointed 5th October 2007)
Mr. G. Funke (appointed 5th October 2007)
Dr. M. Fell (appointed 5th October 2007)
Dr. R. Brantner (resigned 5th October 2007)
Prof. Dr. Dr. h.c. mult. H. Tietmeyer (resigned 5th October 2007)
76

Risk Committee
Ms. B. von Oesterreich (Chairperson) (appointed 5th October 2007)
Dr. T. Kolbeck (Chairman) (resigned 5th October 2007)
Ms. F. Flannery (appointed 5th October 2007)
Mr. J. Van der Ende (resigned 5th October 2007)
Mr. D.M. Cahillane (resigned 5th October 2007)
Secretary & Registered Office
Ms. E. Tiernan
1 Commons Street
Dublin 1
Ireland
Solicitors
McCann Fitzgerald
Riverside One
Sir John Rogerson's Quay
Dublin 2
Ireland
Auditors
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
One Spencer Dock
North Wall Quay
Dublin 1
Ireland
Registered Number
348819
Risikoberichtbericht
77

Group Accounts
Blindtext Directors’ strategische Report und sonstige Risiken
nterdum The Directors volgus of rectum DEPFA videt, BANK est plc ubi present peccat. their Si report veteres and ita miratur the audited laudatque financial poetas, statements ut nihil for anteferat, the year nihil ended illis
comparet, 31 December errat. 2007. Si quaedam nimis antique, si peraque dure dicere credit eos, ignave multa fatetur, et sapit et
mecum facit et Iova iudicat aequo. Non equidem insector delendave carmina Livi esse reor, memini quae plagosum
Principal mihi parvo activities Orbilium dictare; sed emendata videri pulchraque et exactis minimum distantia miror. Inter quae
verbum DEPFA BANK emicuit plc si forte and decorum, its subsidiary et si undertakings versus paulo concinnior (“the Group”)*, unus operating et alter, iniuste in Ireland totum and ducit in venditque other parts poema. of the
world, provide a comprehensive range of banking, financial and related services.
Indignor quicquam reprehendi, non quia crasse compositum illepedeve putetur, sed quia nuper, nec veniam antiquis,
Ownership sed honorem et praemia posci. Recte necne crocum floresque perambulet Attae fabula si dubitem, clament
periisse On 2 October pudorem 2007 cuncti the entire paene ordinary patres, share ea cum capital reprehendere of the Company coner, quae was acquired gravis Aesopus, by Hypo quae Real doctus Estate Roscius Holding
egit; AG (“HRE vel quia Group”). nil rectum, DEPFA nisi BANK quod placuit plc shareholders sibi, ducunt, received vel quia cash turpe consideration putant parere of minoribus, €6.80 and et .189 quae shares imberbes in Hypo didicere
Real Estate senes.Quod Holding si AG tam for Graecis each DEPFA novitas share invisa held. fuisset quam nobis, quid nunc esset vetus? Aut quid haberet quod
legeret tereretque viritim.
Business Review
Kreditportfolio-Entwicklung
The information that satisfies the requirements of the business review can be found in the management discussion
Ut section primum on pages positis 18 nugari to 65 Graecia and in the bellis business coepit et performance in vitium fortuna section labier on pages aequa, 66 nunc to 75. athletarum studiis, nunc arsit
equorum, marmoris aut eboris fabros aut aeris amavit, tibicinibus, nunc est gavisa tragoedis; sub nutrice puella. Interdum
Dividends volgus rectum videt, est ubi peccat. Si veteres ita miratur laudatque poetas, ut nihil anteferat, nihil illis comparet,
A dividend errat. of Si €138 quaedam million nimis was paid antique, in 2007 si peraque in respect dure of dicere the year credit ended eos, 31 ignave December multa 2006. fatetur, The et Directors sapit et mecum do not
propose facit et Iova a dividend iudicat aequo. in respect of the year ended 31 December 2007.
Non Directors equidem insector delendave carmina Livi esse reor, memini quae plagosum mihi parvo Orbilium dictare; sed
emendata The names videri of the pulchraque Directors in et office exactis at 25 minimum March 2008 distantia are miror. set out Inter on page quae 76. verbum emicuit si forte decorum, et si
versus paulo concinnior unus et alter, iniuste totum ducit venditque poema.
Indignor In accordance quicquam with reprehendi, the Articles non of Association, quia crasse Georg compositum Funke, illepedeve Markus Fell, putetur, Bettina sed von quia Oesterreich, nuper, nec John veniam Bourke, antiquis,
Patrick sed Ryan, honorem Cyril Dunne, et praemia Bo Heide-Ottosen, posci. Paul Leatherdale, Tom Glynn and James Campbell retire by rotation
Recte at the necne 2008 Annual crocum General floresque Meeting perambulet and, being Attae fabula eligible si and dubitem, recommended clament periisse by the Directors, pudorem cuncti offer themselves paene patres, for
ea re-election. cum reprehendere coner, quae gravis Aesopus, quae doctus Roscius egit; vel quia nil rectum, nisi quod placuit
sibi, ducunt, vel quia turpe putant parere minoribus, et quae imberbes didicere senes.Quod si tam Graecis novitas
invisa fuisset quam nobis, quid nunc esset vetus? Aut quid haberet quod legeret tereretque viritim.
Ut primum positis nugari Graecia bellis coepit et in vitium fortuna labier aequa, nunc athletarum studiis, nunc arsit
equorum, marmoris aut eboris fabros aut aeris amavit, tibicinibus, nunc est gavisa tragoedis; sub nutrice puella. Interdum
volgus rectum videt, est ubi peccat. Si veteres ita miratur laudatque poetas, ut nihil anteferat, nihil illis comparet,
errat. Si quaedam nimis antique, si peraque dure dicere credit eos, ignave multa fatetur, et sapit et mecum
facit et Iova iudicat aequo. Non equidem insector delendave carmina Livi esse reor, memini quae plagosum mihi
parvo Orbilium dictare; sed emendata videri pulchraque et exactis minimum distantia miror. Inter quae verbum emicuit
si forte decorum, et si versus paulo concinnior unus et alter, iniuste totum ducit venditque poema.
Indignor * References quicquam in the reprehendi, financial statements non quia crasse to “the compositum Group”, “DEPFA” illepedeve or to “the putetur, Bank” sed refer quia to nuper, DEPFA nec BANK veniam plc anti- and
quis, its subsidiary sed honorem undertakings. et praemia posci. Recte necne crocum floresque perambulet Attae fabula si dubitem, clament
periisse pudorem cuncti paene patres, ea cum reprehendere coner, quae gravis Aesopus, quae doctus Roscius
egit; vel quia nil rectum, nisi quod placuit sibi, ducunt, vel quia turpe putant parere minoribus, et quae imberbes didicere
senes.Quod si tam Graecis novitas invisa fuisset quam nobis, quid nunc esset vetus? Aut quid haberet quod
legeret tereretque viritim.
Ut primum positis nugari Graecia bellis coepit et in vitium fortuna labier aequa, nunc athletarum studiis, nunc arsit
78

Directors’ and Secretary’s interest in the share capital
The interests of the Directors and Company Secretary, in office at 31 December 2007 and of their spouses and
minor children in the shares of the Company or Group undertakings are set out below:
Interest in Shares Interest in Shares
in Hypo Real Estate in Hypo Real Estate Interest in Shares
Holding AG Holding AG in DEPFA BANK plc
31 December at appointment date 31 December
2007 (see page 76) 2006
Georg Funke 40,876 40,876 n/a
Markus Fell 5,188 5,188 n/a
Bettina von Oesterreich - - n/a
Patrick Ryan - - n/a
John Bourke - - n/a
Cyril Dunne 36,079 36,079 n/a
Bo Heide-Ottosen 55,546 55,546 n/a
Paul Leatherdale 16,293 16,293 n/a
Angus Cameron 14,000 26,500 n/a
James Campbell - - n/a
Tom Glynn 3,032 3,032 n/a
Andrew Readinger 30,083 35,990 n/a
Company Secretary
Ms. E. Tiernan - - 1,624
No Directors held any options on Hypo Real Estate Holding AG shares at 31 December 2007 (2006: nil).
Own Shares
Details of own shares transactions are disclosed in note 36 to the financial statements.
Going concern
After making enquiries, the Directors have a reasonable expectation that the Bank has adequate resources to
continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern
basis in preparing the financial statements.
Political donations
The Electoral Act, 1997 requires companies to disclose all political donations over €5,079 in aggregate made
during the financial year. The Directors, on enquiry, have satisfied themselves that no such donations have been
made by the Bank during the financial year.
79

Group Accounts
Accounting records
The Directors have taken appropriate measures to secure compliance with the Bank’s obligation to keep proper
books of account through the use of appropriate systems and procedures and employment of competent persons.
The books of account are kept at 1 Commons Street, IFSC, Dublin 1, Ireland.
Subsidiary undertakings
Details of subsidiary undertakings are shown in note 22 to the financial statements.
Measurement and management of the various types of risk
The Group has established a comprehensive system for the identification, measurement, early recognition and
control of risk as an integral part of its business process. The Group applies policies and procedures to the
management of credit risk, market risk, operational risk and liquidity risk. The following is an overview of these
policies and procedures:
Credit Risk
Credit risk is the risk of impairment and partial or total loss of a receivable due to deterioration of credit quality on
the part of a counterparty. The relevant receivable may be based on traditional on-balance sheet lending business
or derivative business. Whereas in traditional lending business, risk arises from the creditworthiness of the borrower
and the value of the collateral, for derivative transactions counterparty risk is a function of the counterparty’s ability
to perform in accordance with its contractual obligations as well as the market value of the future cash flows,
which – only if positive for DEPFA – would lead to a loss when executing a substitute transaction in the market at
less favourable terms.
The Bank’s business is focused on sovereign and sub-sovereign borrower and public sector supported specialist
entities.
Credit scoring of counterparties is critical to the Group’s business. The scoring model of the Group is reviewed
continuously. In recent years, the Group moved to a unitary scoring system for its four main credit risk pools
(sovereign, sub-sovereign, financial institutions and infrastructure finance). The unitary scoring has 22 grades. The
Group’s 22-grade internal rating system is similar to the grading system used by the External Credit Assessment
Institutions (“ECAI”). All counterparties across all risk groups are graded in accordance with this system.
Within the Group, exposure to financial institutions from the Treasury business arises from securities transactions,
money market transactions and OTC (over-the-counter) derivatives entered into with bank counterparties.
The Group operates an independent credit approval process, which includes assessments by and formal limit
recommendations from those not involved in the business areas.
The allocation of an internal rating defines both, a desirable minimum return and a corridor for the maximum
acceptable exposure limit. The Group Credit Committee operates on authority devolved to it by the CEO and ultimately
the Board of Directors and is empowered to set limits up to prudent levels taking into account regulatory
lending limits. DEPFA subsidiaries operate their own credit committees, which act on individual counterparty limits
once Group approval is in place.
80

Risikoberichtbericht
The credit process centres on an independent Credit Committee which presides over the four borrowers and
counter party risk pools, and which is provided with both rating and limit recommendations from the dedicated
independent risk teams.
The heads of the risk units report directly to their respective Executive Committee Member as well as the Credit
Committee.
The monitoring of sub-sovereign and country limits, tenor limits, large exposures and default events is carried out
on a Group-wide basis by monitoring staff dedicated to this function.
To monitor the counterparty risk arising from Treasury business, the Group has a Group-wide counterparty limit
system that directly accesses the front-office system, providing real-time information on limits and limit utilisation.
The credit exposure resulting from these transactions is calculated on a mark-to-market basis, taking into
consideration the regulatory add-ons.
Market Risk
Market risk refers to the risk of potential loss arising from changes in market data such as interest rates, credit
spreads, foreign currency exchange rates, equity prices, price or rate volatilities. The Group defines its market risk
as changes in fair value of financial instruments as a result of market data movements.
The Group’s market risk policies and procedures follow three core principles:
Policy framework for all key market risk activities approved by the Board.
Market risk management is centralized in the Asset & Liability Committee and the treasury and product units,
managed by specialized personnel and monitored using appropriate systems and controls.
Market risk control function measures and monitors the risks independently of the risk-taking units.
The Market risk control function has sub-categorized market risk into risk factors. The relevant risk factors for the
Group are interest rate, credit spread and foreign exchange. As a bank focusing on public sector finance, the
Group is not generally exposed to equity or commodity risk. With regard to foreign exchange risk, the Group has a
policy that Treasury must match all foreign currency assets with liabilities in the same currency or swap out the
foreign exchange exposure. Only a limited foreign currency exposure is accepted in the emerging markets port folio.
Hence, the primary risk factors for the Bank are interest rate and credit spread risk.
For the quantification and control of these risks, the Group determines daily Value at Risk (VaR) figures in line with
industry wide practice using the variance/covariance methodology for both trading and banking books. The VaR
monitoring is based on a comprehensive risk factor set, consolidated across the Group, as well as broken down to
legal entity, portfolio and desk level. A ten-day holding period with a 99% confidence interval is used to derive the
calculation. Correlations and volatilities are calculated based on a history of 250 trading days. The choice of a tenday
holding period was selected to give a conservative VaR measure in relation to hedging the risk of the port -
folio’s positions.
81

Group Accounts
The Group recognizes that variance/covariance VaR has certain inherent limitations. The past may not always
provide a reliable indicator of future market movements and moreover the statistical assumptions employed may
understate the probability of very large market moves. For this reason, additional management tools such as
sensitivity measures and stress testing are used to supplement VaR. Moreover, historical simulation VaR was
introduced in the prior year for trading portfolios to supplement variance/covariance VaR.
Liquidity Risk
Liquidity risk is defined as the risk of being unable to fulfil current or future payment obligations in full on or at the
due date.
The objective of the Group’s liquidity management is to ensure that sufficient funds are available to meet the
Group’s commitments to its customers and counterparties, both in terms of demand for loans and repayment of
liabilities and in terms of satisfying the operational liquidity needs of the Group. The Group is assisted in this task
by the fact that a substantial portion of both its assets and liabilities are long-term and that it maintains a continuing
presence in the European money markets.
The underlying aim is to minimise the liquidity risks for both the Bank and the Group as a whole. It is the task of
liquidity management to control the cash flow of the business in such a manner as to ensure that efficient use of
cash flows is maintained. To this extent, the Group primarily funds its assets through the issuance of covered asset
securities and through money market transactions. Liquidity balance sheets and cash flow forecasts are used to
manage the liquidity of the Group and to control future liquidity risks.
Hedging
The Group’s policy is to hedge (accounting or economic) the following banking book exposures:
interest rate risk – using interest rate swaps
currency exposures – using cross-currency swaps and forward foreign exchange swaps
The following table provides examples of certain activities undertaken by the Group, the related risks associated
with such activities and the types of derivatives used in managing such risks. Such risks may also be managed by
using on-balance sheet instruments as part of an integrated approach to risk management.
Activity Risk Type of Hedge
Fixed rate lending/borrowing Sensitivity to increases/decreases Pay/receive fixed interest
in interest rates rate swaps
Investment in foreign currency Sensitivity to Cross-currency swaps
assets/liabilities strengthening/weakening of Euro Foreign exchange swaps
against other currencies Foreign currency funding
Derivatives which meet the hedging criteria of IAS 39 are accounted for as fair value hedges or cash flow hedges.
82

Risikoberichtbericht
Branches outside the State
The Group has established branches within the meaning of Regulation 25 of the European Communities
(Accounts) Regulations, 1993, in Germany, Italy, France, United Kingdom, Spain, Cyprus, Hong Kong, United
States of America and Japan.
Auditors
In accordance with section 160(2) of the Companies Act 1963, the auditors PricewaterhouseCoopers will continue
in office.
On behalf of the Board
Georg Funke John Bourke Angus Cameron Elaine Tiernan
Director Director Director Company Secretary
25 March 2008
83

Group Accounts
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements of DEPFA BANK plc in
accordance with International Financial Reporting Standards (“IFRSs”) and IFRIC interpretations endorsed by the
European Union, and with those parts of the Companies Acts, 1963 to 2006 applicable to companies reporting
under IFRS, Article 4 of the IAS Regulation and the European Communities (Credit Institutions : Accounts) Regulations,
1992.
Irish company law requires the Directors to prepare financial statements for each financial year. Under that law the
Directors have prepared the Group and Parent company financial statements in accordance with IFRS as adopted
by the European Union. The financial statements are required by law to give a true and fair view of the state of
affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these
financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state that the financial statements comply with IFRS as adopted by the European Union;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group
will continue in business, in which case there should be supporting assumptions or qualifications as necessary.
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
The Directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any
time the financial position of the company and enable them to ensure that the financial statements are prepared in
accordance with IFRS and IFRIC interpretations endorsed by the European Union, with those parts of the Companies
Acts, 1963 to 2006 and, as regards the Group financial statements Article 4 of the IAS Regulation and the
European Communities (Credit Institutions : Accounts) Regulations, 1992. They are also responsible for safeguarding
the assets of the Company and the Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The maintenance and integrity of the DEPFA website is the responsibility of the directors; the work carried out by
the auditors does not involve consideration of these matters and accordingly, the auditors accept no responsibility
for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the Republic of Ireland concerning the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Georg Funke John Bourke Angus Cameron Elaine Tiernan
Director Director Director Company Secretary
25 March 2008
84

Risikoberichtbericht
Independent Auditors' Report to the Members of DEPFA BANK plc
We have audited the Group and Parent company financial statements (the “financial statements”) of DEPFA BANK
plc for the year ended 31 December 2007 which comprise the Consolidated Income Statement, the Group and
Company Balance Sheets, the Group and Company Cash Flow Statements, the Group and Company Statement
of Change in Shareholders' Equity and the related notes. These financial statements have been prepared under the
accounting policies set out therein.
Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the Annual Report and the financial statements, in accordance with
applicable Irish law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, are
set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements
and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for
and only for the company’s members as a body in accordance with Section 193 of the Companies Act, 1990 and
for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
We report to you our opinion as to whether the Group financial statements give a true and fair view, in accordance
with IFRSs as adopted by the European Union. We report to you our opinion as to whether the parent financial
statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance
with the provisions of the Companies Acts 1963 to 2006. We also report to you whether the financial
statements have been properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to
2006, Article 4 of the IAS Regulation and European Communities (Credit Institutions : Accounts) Regulations, 1992.
We state whether we have obtained all the information and explanations we consider necessary for the purposes
of our audit, and whether the financial statements are in agreement with the books of account.
We also report to you our opinion as to:
whether the company has kept proper books of account;
whether the Directors’ Report is consistent with the financial statements; and
whether at the balance sheet date there existed a financial situation which may require the company to convene
an extraordinary general meeting of the company; such a financial situation may exist if the net assets of the company,
as stated in the company balance sheet, are not more than half of its called-up share capital.
85

Group Accounts
We also report to you if, in our opinion, any information specified by law regarding Directors’ remuneration and
Directors’ transactions is not disclosed and, where practicable, include such information in our report.
We read the other information contained in the Annual Report and consider whether it is consistent with the
audited financial statements. The other information comprises only: Business Principles, Corporate Highlights
2007, Management Discussion, Business Performance and the Directors’ Report. We consider the implications for
our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.
Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements
made by the Directors in the preparation of the financial statements, and of whether the accounting policies are
appropriate to the Group’s and company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion
we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European
Union, of the state of the Group’s affairs as at 31 December 2007 and of its profit and cash flows for the year then
ended;
the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the
European Union as applied in accordance with the provisions of the Companies Acts 1963 to 2006, of the state
of the parent company’s affairs as at 31 December 2007 and of its cash flows for the year then ended;
the financial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2006 and
Article 4 of the IAS Regulation and the European Communities (Credit Institutions : Accounts) Regulations, 1992.
86

Risikoberichtbericht
We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
In our opinion proper books of account have been kept by the company and proper returns adequate for our audit
have been received from branches of the company not visited by us. The company balance sheet is in agreement
with the books of account.
In our opinion, the information given in the Directors’ Report is consistent with the financial statements.
The net assets of the company, as stated in the company balance sheet, are more than half of the amount of its
called-up share capital and, in our opinion, on that basis there did not exist at 31 December 2007 a financial situation
which, under Section 40 (1) of the Companies (Amendment) Act, 1983, would require the convening of an
extraordinary general meeting of the company.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Dublin, Ireland
25 March 2008
87

Group Accounts
Consolidated income statement
88
Note Year ended 31 December
2007 2006
€ m € m
Interest and similar income 6 6,826 5,597
Interest expense and similar charges 6 -6,517 -5,283
Net interest income 309 314
Fee and commission income 7 49 40
Fee and commission expense 7 -7 -6
Net fee and commission income 42 34
Net trading income 8 -50 141
Gains less losses from financial assets 9 218 159
Other operating income 10 10 2
Total operating income 529 650
Operating expenses 11 -372 -200
Net operating profit before impairment losses 157 450
Impairment losses on loans and advances - -
Operating Profit / Profit before taxation 157 450
Taxation 13 -29 -107
Profit for the year continuing operations 128 343
Operating result from discontinued operations 14 204 183
Loss on disposal of discontinued operations 14 -23 -
Result from discontinued operations 181 183
Profit for the year 309 526
Attributable to:
Equity holders of the parent 309 526
The notes on pages 95 to 185 are an integral part of these consolidated financial statements.
Georg Funke John Bourke Angus Cameron Elaine Tiernan
Director Director Director Company Secretary
25 March 2008

Risikoberichtbericht
Consolidated balance sheet Note As at 31 December
ASSETS
2007 2006
€ m € m
Cash and balances with central banks 15 8,426 1,743
Loans and advances to banks 16 28,996 34,708
Trading assets 17 13,574 1,311
Derivative financial instruments 18 8,444 6,880
Other financial assets at fair value through profit or loss 19 4,417 2,075
Loans and advances to customers 20 110,648 125,247
Investment securities – available-for-sale 21 43,120 50,833
Intangible assets 23 38 53
Property, plant and equipment 24 20 26
Deferred income tax assets 32 180 39
Other assets 25 37 30
Total assets 217,900 222,945
LIABILITIES
Deposits from banks 26 89,845 63,199
Other deposits 27 30,226 31,118
Derivative financial instruments and other trading liabilities 18 18,903 12,583
Due to customers 28 10,532 7,904
Debt securities in issue 29 62,876 102,857
Other borrowed funds 30 2,271 2,133
Other liabilities 31 124 100
Current income tax liabilities 10 69
Deferred income tax liabilities 32 161 141
Retirement benefit obligations 33 1 64
Total liabilities 214,949 220,168
EQUITY
Equity attributable to equity holders of the Company
Share capital 37 106 106
Share premium 37 1,142 1,142
Capital reserve 38 200 -
Retained earnings 39 1,520 1,402
Other reserves 40 -17 127
Total equity 2,951 2,777
Total equity and liabilities 217,900 222,945
The notes on pages 95 to 185 are an integral part of these consolidated financial statements.
Georg Funke John Bourke Angus Cameron Elaine Tiernan
Director Director Director Company Secretary
25 March 2008
89

Group Accounts
Company balance sheet
ASSETS
90
Note As at 31 December
2007 2006
€ m € m
Cash and balances with central banks 15 8,334 1,699
Loans and advances to banks 16 40,309 45,020
Trading assets 17 547 747
Derivative financial instruments 18 8,890 6,223
Other financial assets at fair value through profit or loss 19 2,708 1,846
Loans and advances to customers 20 59,519 39,026
Investment securities – available-for-sale 21 30,654 32,475
Shares in Group undertakings 22 1,281 2,278
Intangible assets 23 22 9
Property, plant and equipment 24 17 16
Deferred income tax assets 32 20 21
Other assets 25 30 60
Total assets 152,331 129,420
LIABILITIES
Deposits from banks 26 87,999 71,037
Other deposits 27 29,487 31,118
Derivative financial instruments and other trading liabilities 18 10,628 9,264
Due to customers 28 10,909 7,327
Debt securities in issue 29 9,243 6,976
Other borrowed funds 30 1,160 971
Other liabilities 31 78 51
Current income tax liabilities 3 12
Deferred income tax liabilities 32 15 19
Retirement benefit obligations 33 1 3
Total liabilities 149,523 126,778
EQUITY
Capital and reserves attributable to equity holders of the company
Share capital 37 106 106
Share premium 37 1,142 1,142
Capital reserve 38 1,103 903
Retained earnings 39 472 433
Other reserves 40 -15 58
Total equity 2,808 2,642
Total equity and liabilities
The notes on pages 95 to 185 are an integral part of these consolidated financial statements.
152,331 129,420
Georg Funke John Bourke Angus Cameron Elaine Tiernan
Director Director Director Company Secretary
25 March 2008

Consolidated statement of changes in equity - Group
Other reserves
Risikoberichtbericht
Unrealised
Unrealised
gains/
gains/ losses on Accumulated
losses on available- effects of Total
Share Share Capital Retained cash flow for-sale currency Shareholders’
€ m
Balance at
capital premium reserve earnings hedges securities translations Equity
1 January 2006 106 1,142 - 940 2 114 - 2,304
Profit for the year
Net change in
available-for-sale
- - - 526 - - - 526
investments, net of tax
Net changes in
cash flow hedges,
- - - - - 11 - 11
net of tax - - - - - - - -
Total recognised income - - - 526 - 11 - 537
Dividends - - - -86 - - - -86
Purchase of own shares - - - -9 - - - -9
Share based payments
Balance at
- - - 31 - - - 31
31 December 2006 106 1,142 - 1,402 2 125 - 2,777
Profit for the year
Net change in availablefor-sale
investments,
- - - 309 - - - 309
net of tax
Net changes in
cash flow hedges,
- - - - - -140 - -140
net of tax - - - - -2 - - -2
Net changes in currency
translation reserve - - - - - - -2 -2
Total recognised income - - - 309 -2 -140 -2 165
Dividends - - - -138 - - - -138
Purchase of own shares - - - -9 - - - -9
Share based payments
Re-issue of shares under
- - - 73 - - - 73
scheme of arrangement - - - 16 - - - 16
Capital contribution
Acquisition under
- - 200 - - - - 200
common control
Balance at
- - - -133 - - - -133
31 December 2007 106 1,142 200 1,520 - -15 -2 2,951
The notes on pages 95 to 185 are an integral part of these consolidated financial statements.
91

Group Accounts
Consolidated statement of changes in equity – Company
Unrealised
gains/
losses on
available- Total
Share Share Capital Retained for-sale Shareholders’
€ m capital premium reserve earnings securities Equity
Balance at 1 January 2006 106 1,142 903 97 26 2,274
Profit for year
Net change in available-
- - - 400 - 400
for-sale investments, net of tax - - - - 32 32
Total recognised income - - - 400 32 432
Dividends - - - -86 - -86
Purchase of own shares - - - -9 - -9
Share based payments - - - 31 - 31
Balance at 31 December 2006 106 1,142 903 433 58 2,642
Profit for the year
Net change in available-
- - - 97 - 97
for-sale investments, net of tax - - - - -73 -73
Total recognised income - - - 97 -73 24
Dividends - - - -138 - -138
Purchase of own shares - - - -9 - -9
Share based payments
Re-issue of shares under
- - - 73 - 73
scheme of arrangement - - - 16 - 16
Capital contribution - - 200 - - 200
Balance at 31 December 2007 106 1,142 1,103 472 -15 2,808
The notes on pages 95 to 185 are an integral part of these consolidated financial statements.
92

Consolidated cash flow statement
Cash flows from operating activities
Risikoberichtbericht
Group Company
2007 2006 2007 2006
€ m € m € m € m
Net profit before taxation 332 639 116 474
Adjustments for non-cash movements:
Depreciation and amortisation of tangible and intangible assets 13 9 10 5
Foreign exchange (gain)/loss -2 4 -2 7
Net (increase)/decrease in accrued interest income -1,314 -884 -1,372 -753
Net increase/(decrease) in accrued interest expenditure 955 1,046 929 724
Provisions for losses on loans - - - -
(Gains)/losses on sale of investment securities and loans -349 -277 -108 -147
Other non cash items 47 -41 202 -38
Net (increase)/decrease in loans and advances to banks 3,483 -1,904 9,299 -10,488
Net (increase)/decrease in loans and advances to customers -15,822 -16,027 -20,567 -7,323
Purchase of investment securities -28,212 -13,767 -22,654 -12,098
Sale/maturity of investment securities 29,962 18,989 22,385 14,445
Net (increase)/decrease in other assets -25 -6 21 -12
Net increase/(decrease) in deposits from other banks 18,693 -2,110 19,218 11,613
Net increase in other deposits 351 3,182 351 3,223
Net increase in amounts due to customers 4,094 585 4,317 360
Net increase in debt securities issued 1,370 6,017 2,559 174
Net increase/(decrease) in other liabilities 73 -495 22 -484
Net (increase) in trading assets and other receivables -2,184 -1,257 -2,885 -1,920
Net (increase)/decrease in derivatives and trading liabilities 106 -347 2 -391
Net cash from operating activities 11,571 -6,644 11,843 -2,629
Tax paid -73 -61 -21 -55
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and cash equivalents acquired
Disposal of subsidiaries and capital repayments,
1,385 - -949 -
net of cash and cash equivalents acquired 711 - 1,946 -
Purchase of property and equipment -9 -13 -8 -4
Sale of property and equipment 3 3 1 2
Purchase of intangible assets -15 -1 -16 -
Net cash from investing activities 2,075 -11 974 -2
93

Group Accounts
Consolidated cash flow statement (continued)
Cash flows from financing activities
94
Group Company
Note 2007 2006 2007 2006
€ m € m € m € m
Purchase of own shares -9 -9 -9 -9
New issues of other borrowed funds 500 - 155 -
Repayments of other borrowed funds - -220 - -95
Capital contribution received 200 - 200 -
Re-issue of ordinary shares under scheme of arrangement 16 - 16 -
Dividends paid -138 -86 -138 -86
Net cash from financing activities 569 -315 224 -190
Net increase in cash and cash equivalents 14,142 -7,031 13,020 -2,876
Cash and cash equivalents at the beginning of the year 43 4,948 12,049 3,904 6,843
Effect of exchange rate changes on cash and cash equivalents -176 -70 -168 -63
Cash and cash equivalents at the end of the year 43 18,914 4,948 16,756 3,904
Included in the cash flows for the year are the following amounts:
Group Company
2007 2006 2007 2006
€ m € m € m € m
Interest income received 5,512 7,624 3,690 3,306
Interest expense paid -5,535 -7,037 -3,959 -3,160
Dividend income received - - 109 162
The notes on pages 95 to 185 are an integral part of these consolidated financial statements.

Notes to the consolidated financial statements
1. General information
Risikoberichtbericht
DEPFA BANK plc is a provider of financial services to public sector clients worldwide. The Bank serves public
sector authorities by providing for their financial needs with a broad range of products and services. It is a Dublinbased
public limited company, incorporated under Irish law, with a network of subsidiaries and branch offices
across Europe, as well as in Asia and the Americas. The Group is regulated by the Irish Financial Regulator and the
German Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”).
On 2 October 2007 the entire ordinary share capital of the Company was acquired by Hypo Real Estate
Holding AG, which is also the ultimate parent company of the Group.
2. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
These consolidated financial statements have been prepared in accordance with European Union (EU) endorsed
International Financial Reporting Standards (“IFRSs”), IFRIC interpretations and the Companies Acts, 1963 to 2006
applicable to companies reporting under IFRS and the European Communities (Credit Institutions: Accounts)
Regulations, 1992. The consolidated financial statements have been prepared under the historical cost conven tion
as modified by the revaluation of available-for-sale investments, financial assets and liabilities at fair value through
the profit or loss and derivatives.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements are disclosed in Note 4.
Consolidation
Subsidiaries
Subsidiaries comprise all entities (including special purpose entities) over which the Group has the power to govern
the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls an entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group and cease to be consolidated from the date that
control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition
is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed
at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value
of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less
than the net fair value of the identifiable assets, liabilities, and contingent liabilities of the subsidiary acquired, the
difference is recognised directly in the income statement.
95

Group Accounts
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset
transferred.
The financial statements and group reporting of all subsidiaries are drawn up to the year ended 31 December, and
the accounting policies applied in their preparation are consistent with the Group accounting policies.
Minority interests comprise minority shareholders’ proportionate share in shareholders’ equity and net income.
The Group applies the parent company method of consolidation. Therefore, goodwill can arise on the acquisition
of minority interests and the sale of such interests can give rise to a profit or loss in the income statement.
Common control transactions
Common control transactions are business combinations involving businesses or entities under common control.
These transactions are accounted for at book value. Consequently, any differences between consideration
paid/received and the book value are transferred directly to shareholders equity and no goodwill arises.
In 2002, the Group was reorganised, the purpose of which was to de-merge the Property Finance and IT Services
activities from the Public Finance business and which resulted in the formation of the current parent company,
DEPFA BANK plc. This de-merger was treated as a discontinued operation.
DEPFA BANK plc was created by a share for share exchange with the previous parent company, DEPFA Deutsche
Pfandbriefbank AG. This share for share exchange and other transfers of assets and property as part of the re orga -
nisation were treated as a transaction under common control and accounted for at book value.
Under Irish company law, a share premium was created on the above share for share exchange. A merger adjustment
arose being the difference between the fair value of the shares issued and the book value of the net assets
acquired. The merger adjustment was transferred to retained earnings.
The Group availed of the exemption in IFRS 1 to apply IFRS to business combinations, including common control
transactions, from 15 March 2002, the date of the Group restructuring.
On 31 December 2007 the Company acquired Hypo Public Finance Bank from Hypo Real Estate Holding AG. This
was accounted for as a transaction under common control. A merger adjustment arose being the difference between
the fair value of the shares acquired and the book value of the net assets acquired. The merger adjustment
was transferred to retained earnings.
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business segments. A geographical segment is
engaged in providing products or services within a particular economic environment that are subject to risks and
returns that are different from those of segments operating in other economic environments.
The Group’s primary segments are based on the nature of the products provided (“business segment”) whereas
the secondary segments are based on the geographical location of the booking entity (“geographical segment”).
96

Risikoberichtbericht
Expenses incurred centrally, including expenses incurred by support, administrative and back-office functions are
charged to the business segments as far as they are reasonably attributable to the business segments’ activities
in accordance with their estimated proportionate share of overall activities.
Segment assets and liabilities are those assets and liabilities that are directly attributable to the operating activities
of the segment.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the functional currency”).
The consolidated financial statements are presented in Euro, which is the functional and presentation currency of
the parent.
(b) Transactions and balances
Foreign currency transactions are translated into Euro using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement, except when deferred in equity as qualifying cash flow hedges.
Translation differences on equities held at fair value through the profit and loss account are reported as part of the
fair value gain or loss in the income statement. Translation differences on equities classified as available-for-sale are
included in the fair value reserve in equity.
(c) Group companies
The results and financial position of all the Group entities that have a functional currency other than Euro are translated
into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
(iii) all resulting exchange differences are recognised as a separate component of equity.
Interest income and expense
Interest income and expense are recognised in the income statement for all interest bearing financial instruments
using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial
liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate
is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial
instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial
liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual
97

Group Accounts
terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The
calculation includes all fees and points paid or received between parties to the contract that are an integral part of
the effective interest rate, transaction costs and all other premiums or discounts.
The interest element of all derivative and fair valued financial instruments is included in net interest income.
Fee and commission income
Fees and commissions which are not part of the effective interest rate calculation are generally recognised on an
accruals basis when the service has been provided. Loan syndication fees are recognised as income when the
syndication has been completed and the Group has retained no part of the loan package for itself or retained a part
at the same effective interest rate as the other participants.
Commitment fees, together with related direct costs, for loan facilities where draw down is probable are deferred
and recognised as an adjustment to the effective interest on the loan once drawn. Commitment fees in relation to
facilities where draw down is not probable are recognised over the term of the commitment in fee and commis sion
income.
Other advisory and service fees are recognised when the service has been provided.
Financial assets and liabilities
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or
loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Financial Liabilities
are held at fair value through profit or loss or at amortised cost. Management determines the classification
of its financial instruments at initial recognition or in accordance with the transition rules set out in IFRS 1, as
appropriate.
(a) Financial assets and financial liabilities at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value through
profit or loss prior to 1 September 2005 or, if later, at inception. A financial asset is classified as fair value through
profit or loss if acquired principally for the purpose of selling in the short term (held for trading) or if so designated
by management in accordance with the fair value rules as set out in IAS 39 “Financial Instruments: Recognition and
Measurement”, namely:
The designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise
arise from measuring assets and liabilities or the gains and losses arising on them on different bases; or
A group of financial assets or liabilities is managed and its performance is evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy, and information about the Group is
provided internally on that basis to management.
Derivatives are also categorised as held for trading unless they are designated as hedges. Interest on financial
assets and financial liabilities at fair value through profit or loss and interest on trading derivatives is included in net
interest income. Other gains and losses arising from changes in fair value are included directly in the income statement
within the trading result.
98

Risikoberichtbericht
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market.
On initial recognition, each financial asset is assessed, based on observable market data and judgement where
appropriate, as to whether it is quoted in an active market.
(c) Held-to-maturity
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group’s management has the positive intention and ability to hold to maturity. Were the Group
to sell other than an insignificant amount of held-to-maturity assets, the entire category would be tainted and
reclassified as available-for-sale.
(d) Available-for-sale
Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in
response to needs for liquidity or changes in interest rates or exchange rates.
Regular-way purchases and sales of financial assets at fair value through profit or loss, held to maturity and availablefor-sale
are recognised on trade-date – the date on which the Group commits to purchase or sell the asset.
Financial instruments at fair value through profit or loss are initially recognised at fair value with transaction costs
being taken to the income statement. Other financial instruments are initially recognised at fair value plus transaction
costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have
expired or where the Group has transferred substantially all risks and rewards of ownership.
Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the
effective interest rate method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at
fair value.
Gains and losses arising from changes in the fair value of financial assets at fair value through profit or loss are included
in the income statement in the period in which they arise. Gains and losses arising from changes in the fair
value of available-for-sale financial assets are recognised directly in equity, until the financial asset is derecognised
or impaired at which time the cumulative gain or loss previously recognised in equity is recognised in the income
statement. However, interest calculated using the effective interest method and foreign currency gains and losses
on monetary assets classified as available-for-sale are recognised in the income statement. Dividends on availablefor-sale
equity instruments are recognised in the income statement when the entity’s right to receive payment is
established.
The fair values of financial instruments in active markets are based on current bid prices for assets and offer prices
for liabilities. If the market for a financial instrument is not active (and for unlisted securities), the Group establishes
fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted
cash flow analysis or other valuation techniques commonly used by market participants.
99

Group Accounts
Financial liabilities are derecognised when they are extinguished – that is when the obligation is discharged,
cancelled or expires.
Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance
with the terms of a debt instrument.
Financial guarantees are initially recognised in the financial statements at fair value on the date the guarantee
was given. Subsequent to initial recognition, the Group’s liabilities under such guarantees are measured at the
higher of the initial measurement, less amortization calculated to recognize in the income statement the fee
income earned on a straight line basis over the life of the guarantee and the best estimate of the expenditure
required to settle any financial obligation arising at the balance sheet date. These estimates are determined
based on experience of similar transactions and history of past losses, supplemented by the judgement of
management.
Derivative financial instruments and hedge accounting
Derivatives
Derivatives are used for trading and hedging purposes. They include, in particular, interest rate swaps, crosscurrency
swaps, interest rate options, foreign exchange forwards, interest rate futures and credit derivatives.
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently remeasured at their fair value. Fair values are obtained from quoted market prices in active markets,
including recent market transactions and valuation techniques, including discounted cash flow models and options
pricing models, as appropriate.
All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of
the consideration given or received) unless the fair value of that instrument is evidenced by comparison with other
observable current market transactions in the same instrument (i.e. without modification or repackaging) or based
on a valuation technique whose variables include only data from observable markets. Where such evidence exists,
the Group recognises profits on day one being the difference between the transaction price and fair value at initial
recognition. Where such evidence does not exist, day one profit is deferred and recognised in the income statement
to the extent that it arises from a change in a factor (including time) that market participants would consider
in setting a price. Straight line amortisation is used where it approximates the above. Subsequent changes in fair
value are recognised immediately in the income statement without reversal of deferred day one profits or losses.
Embedded derivatives
Certain derivatives embedded in other financial instruments are treated as separate derivatives when their economic
characteristics and risks are not closely related to those of the host contract and the host contract is not
carried at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in
fair value recognised in the income statement.
100

Risikoberichtbericht
Hedging derivatives
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as
a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as
either:
(a) hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge); or,
(b) hedges of highly probable future cash flows attributable to a recognised asset or liability, or a forecast trans -
action (cash flow hedge).
Hedge accounting is used for derivatives designated in this way provided certain criteria are met.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy for undertaking various hedge transactions. The
Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives
that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of
hedged items.
(a) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
income statement, together with any changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk. The ineffective portion is included in the trading result with the remainder of the fair value
movement on the underlying and the derivative being included in interest.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged
item for which the effective interest method is used is amortised to the income statement over the period to
maturity.
(b) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cashflow hedges
are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income
statement in the trading result.
Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will
affect profit or loss (for example, when the forecast sale that is hedged takes place). The transfer is to the income
statement account which includes the hedged item.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
101

Group Accounts
Derivatives that do not qualify for hedge accounting
The Group maintains trading positions in a variety of financial instruments including derivatives. Trading transac -
tions arise both as a result of activity generated by customers and from proprietary trading with a view to generating
incremental income.
Some derivatives, while being economic hedges, do not meet detailed hedge accounting criteria under IFRS.
Derivatives that do not qualify for hedge accounting are accounted for as part of the trading portfolio.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the
asset and settle the liability simultaneously.
Sale and repurchase agreements
Securities sold subject to repurchase agreements (“repos”) are carried as assets in the financial statements when
the transferee has the right by contract or custom to sell or repledge the collateral; the counterparty liability is included
in deposits from banks or deposits due to customers, as appropriate. Securities purchased under agreements
to re-sell (“reverse repos”) are recorded as loans and advances to banks or loans and advances to
customers, as appropriate. The difference between sale and repurchase price is treated as interest and accrued
over the life of the agreements using the effective interest method.
Impairment of financial assets
(a) Assets carried at amortised cost
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group
of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are
incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred
after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated
future cash flows of the financial asset or group of financial assets that can be reliably estimated. Objective
evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention
of the Group about the following loss events:
(i) significant financial difficulty of the issuer or obligor;
(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
(iii) the Group granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty,
a concession that the lender would not otherwise consider;
(iv) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
(v) the disappearance of an active market for that financial asset because of financial difficulties; or
102

Risikoberichtbericht
(vi) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group
of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified
with the individual financial assets in the Group, including:
– adverse changes in the payment status of borrowers in the Group; or
– national or local economic conditions that correlate with defaults on the assets in the Group.
If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments
carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the
income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for
measuring any impairment loss is the current effective interest rate determined under the contract.
When a loan is uncollectable, it is written off against the related provision for loan impairment. Such loans are written
off after all the necessary procedures have been completed and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan impairment
in the income statement.
(b) Assets carried as available-for-sale
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a
group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant
or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets
are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as
the difference between the acquisition cost and the current fair value, less any impairment loss on that financial
asset previously recognised in the income statement – is removed from equity and recognised in the income statement.
Impairment losses recognised in the income statement on equity instruments are not reversed through the
income statement. If, in a subsequent period, the fair value of a debt instrument as available-for-sale increases and
the increase can be objectively related to an event occurring after the impairment loss was recognised in the
income statement, the impairment loss is reversed through the income statement.
Property, plant and equipment
Land and buildings comprise mainly branches and offices. All property, plant and equipment is stated at historical
cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the
assets.
Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All repairs and maintenance are charged to the income statement during the
financial period in which they are incurred.
103

Group Accounts
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to write-down
their cost to their residual values over their estimated useful lives, as follows:
Estimated useful life, in years
Buildings 50
IT-equipment 3
Furniture, fixtures and office equipment 5
Machinery and equipment 5
Vehicle fleet 5
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less
costs to sell and value in use.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised
in the income statement.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired entity at the date of acquisition. Goodwill on acquisitions of subsidiaries is included
in “intangible assets”. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal
of an entity include the carrying amount of goodwill relating to the entity sold.
(b) Computer software
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use
the specific software. These costs are amortised on a straight line basis based on their expected useful lives (three
years).
Leases
The leases entered into by the Group are operating leases. The total payments made under operating leases are
charged to the income statement on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to
the lessor by way of penalty is recognised as an expense in the period in which termination takes place.
104

Risikoberichtbericht
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three
months’ maturity from the date of acquisition, including: cash and non restricted balances with central banks, treasury
bills and other eligible bills, and loans and advances to banks, excluding loans and advances to other Group
entities.
Employee benefits
(a) Pension obligations
The Group operates two types of pension schemes – defined benefit schemes and defined contribution schemes.
A defined contribution scheme is a pension plan under which the Group pays fixed contributions into a separate
fund. In these plans the Group has no legal or constructive obligations to pay further contributions if the fund does
not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior
periods. A defined benefit scheme is a pension plan that is not a defined contribution scheme. Typically, defined
benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent
on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the
defined benefit obligation at the balance sheet date, together with adjustments for past service costs. The defined
benefit obligation, which is unfunded, is calculated annually by independent actuaries using the projected unit credit
method. The present value of the defined benefit obligation is determined by discounting the estimated future
cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which
the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged
or credited to the income statement as they are identified. Past-service costs are recognised immediately in
income, unless the changes to the pension plan are conditional on the employees remaining in service for a
specified period of time (“the vesting period”). In this case, the past-service costs are amortised on a straight-line
basis over the vesting period.
For defined contribution plans, the Group pays contributions to privately administered pension insurance plans on
a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions
have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(b) Share compensation scheme
The Group operates an incentive compensation programme under which share awards are made to employees
and Directors of the Group for no consideration. The fair value of employee services received is measured by
reference to the fair value of the share award at the award date and is recognised as an expense in the income
statement over the vesting period with a corresponding credit to equity. At each balance sheet date, the entity
revises its estimate of the number of shares that are expected to vest. It recognises the impact of the revision of
the original estimates, if any, in the income statement, and a corresponding adjustment to equity over the
remaining vesting period.
105

Group Accounts
Income tax
Current income tax payable on profits, based on the applicable tax law in each jurisdiction, is recognised as an
expense in the period in which profits arise. The tax effects of income tax losses available for carry forward are
recognised as an asset when it is probable that future taxable profits will be available against which these losses
can be utilised.
Deferred income tax is provided in full on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected
to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting, nor taxable profit
or loss.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising from investments in subsidiaries, except where
the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference
will not reverse in the foreseeable future.
Deferred income tax related to the fair value re-measurement of available-for-sale investments and cash flow
hedges, which are charged or credited directly to equity, is also credited or charged directly to equity and is
subsequently recognised in the income statement together with the deferred gain or loss.
Issued debt and borrowings
The classification of instruments as a financial liability or an equity instrument is dependent upon the substance of
the contractual arrangement. Instruments which carry a contractual obligation to deliver cash or another financial
asset to another entity are classified as financial liabilities and are presented under deposits from banks, due to
customers, debt securities in issue, or other borrowed funds as appropriate. The dividends on these instruments
are recognised in the income statement as interest expense.
If the Group purchases its own debt, it is removed from the balance sheet and the difference between the carrying
amount of the liability and the consideration paid is included in other operating income or operating expenses.
106

Risikoberichtbericht
Share capital
(a) Share issue costs
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax,
from the proceeds.
(b) Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company’s
shareholders or paid (if declared by the Directors). Dividends for the year that are declared after the balance sheet
date are dealt with in the subsequent events note.
(c) Own shares
Where the Company or other members of the consolidated Group purchases the Company’s equity share capital,
the consideration paid is deducted from total equity as own shares until they are cancelled. Where such shares are
subsequently sold or reissued, any consideration received is included in equity.
Discontinued operations
A discontinued operation is a component of the Group’s business which represents a separate major line of
business or geographical area of operations and has been disposed of or is held for sale. When an operation is
classified as a discontinued operation, the comparative income statement is re-stated as if the operation had been
discontinued from the start of the earliest period presented.
Exceptional items
The Group seeks to highlight significant items within the Group results for the year. Such items may include
restructuring, profit or loss on disposal of significant items of property, plant and equipment, profit or loss on
disposal of investments and impairment of assets. Judgement is used by the Group in assessing the particular
items, which by virtue of their scale and nature, should be disclosed in the notes to the financial statements.
Comparatives
The comparative figures for the 2006 income statement have been re-stated to reflect the classification of
DEPFA Deutsche Pfandbriefbank AG as a discontinued operation.
Where necessary, other comparative figures have been adjusted to conform with changes in presentation in the
current year.
107

Group Accounts
Standards, amendment and interpretations effective in 2007
IFRS 7, This new standard revises and enhances the disclosure requirements of IAS 32, “Financial instruments:
disclosure and presentation”, and IAS 30, “Disclosures in the financial statements of banks and similar financial
institutions”, and combines them in one document. On the same date, the IASB published an amendment to IAS 1,
“Presentation of financial statements”, relating to capital disclosures. The amendment requires an entity to disclose
certain qualitative and quantitative data about its capital (equity resources).
IFRS 7 and the amendment to IAS 1 are effective for the year ended 31 December 2007.
IFRIC 8, “Scope of IFRS 2” requires consideration of transactions involving the issuance of equity instruments,
where the identifiable consideration received is less than the fair value of the equity instruments issued in order to
establish whether or not they fall within the scope of IFRS 2. This standard does not have a material impact on the
Company´s financial statements.
IFRIC 9, “Re-assessment of embedded derivatives” requires an entity to assess whether an embedded derivative
is required to be separated from the host contract and accounted for as a derivative when the entity first becomes
a party to the contract. Subsequent re-assessment is prohibited unless there is a change in the terms of the
contract that significantly modifies the cash flows that otherwise would be required under the contract, in which
case re-assessment is required.
IFRIC 10, “Interim financial reporting and impairment”, prohibits the impairment losses recognised in an interim
period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at
a subsequent balance sheet date. This standard does not have a material impact on the Company’s financial
statements.
108

Risikoberichtbericht
Standards, amendments and interpretations effective in 2007 but not relevant
The following standards, amendment and interpretations to published standards are mandatory for accounting
periods beginning on or after 1 January 2007 but they are not relevant to the Company’s operations:
IFRIC 7 “Applyling the re-statement approach under IAS 29, Financial reporting in hyperinflationary economies”.
Prospective accounting standards
The Group has chosen not to early adopt the following standard and interpretations that were issued but not yet
effective for accounting periods beginning on 1 January 2007.
IFRS 8, “Operating segments” (effective 1 January 2009)
IFRIC 11, “IFRS 2 – Group Treasury Share Transactions” (effective for annual periods beginning on or after 1 March
2007)
IFRIC 12, “Service Concession Arrangements” (effective 1 January 2009)
IFRIC 13, “Customer loyalty programmes” (effective 1 July 2008)
IFRIC 14, “IAS 19 – The limit on a defined benefit asset, minimum funding requirements and
their interaction” (effective from 1 January 2008).
IAS 23 (Amendment), “Borrowing costs” (effective 1 January 2009)
IAS 1 (Amendment), “Presentation of Financial Statements” (effective 1 January 2009)
The Company is currently considering the impact of these accounting standards on its financial statements. Once
adopted, it does not expect that they will have a material impact on the Company’s financial position.

Group Accounts
3. Risk Management
1. Risk Management Structure
The prudent taking of risk is fundamental to the business of DEPFA. The primary objectives of risk management are
to protect the financial strength and the reputation of the Bank, while looking to ensure that capital is well deployed
to support business activities and grow shareholder value.
Throughout 2007, the Group maintained a comprehensive system for identification, measurement and control of
risk as an integral part of its business.
DEPFA Risk Governance Structure (effective January 2007 to October 2007)
In October 2007, DEPFA BANK plc became a wholly-owned subsidiary of Hypo Real Estate Holding AG. Prior
to the acquisition of the Bank by Hypo Real Estate Holding AG in October 2007, the Bank’s Risk Governance
structure included the following key Board and executive committees:
Risk Committee of the Board of Directors
Chaired by Dr. Thomas Kolbeck, the Non-Executive Vice-Chairman of the Board.
Objectives: responsible for DEPFA’s risk policy statement and provides strategic direction in relation to the nature
and scale of risk that the Group may assume.
In addition to the Risk Committee, the Board of Directors had established an Audit Committee and a Compen -
sation Committee. These committees were comprised of Non-Executive Directors. The Board of Directors is responsible
for the overall Group strategy.
Additionally, the following executive committees were in place:
Executive Committee
The Executive Committee is responsible for the cross functional management of the Bank. It is responsible for
implementing strategies and controls and cross functional coordination.
Asset & Liability Committee
The Asset & Liability Committee implements the market risk and liquidity strategies of the Bank and allocates
capital by setting related risk limits. It is responsible for managing interest rate and liquidity risk, and minimising
funding costs.
110

Risikoberichtbericht
Credit Committees
The Credit Committees are responsible for counterparty credit risk. They focus on credit review and approval of
individual obligors and on portfolio and country limits.
Transaction Committee
The Transaction Committee acts on its own behalf under delegated authority from the Credit Committee. It
presides over a class of structured transactions, where the credit risk is overlapped by liquidity, volatility and
market risk and the ability to sell down in addition to the pure credit risk. Limits set by the Transaction Committee
provide the basis for underwriting approvals for the Bank, which are not intended to be held to maturity and where
special consideration must be given to the economic value of a trade to enable sell-down.
The chart below sets out DEPFA’s Risk Governance structure effective from January 2007 to October 2007:
Group Govemance: Committee Structure
Executive
Committee
▲▼
Compensation
Committee
Compliance
Asset & Liability
Management
Committee
Board of Directors of DEPFA BANK plc
▼
▲▼ ▲▼
Risk
Committee
Strategic
Planning
Committee
Chairman´s Office
Audit
Committee
Credit
Committee
▼
Country Risk
Committee
▼
Group Internal
Audit
Asset
Management
Committee
111

Group Accounts
HRE Group Risk Governance Structure (effective October 2007 to December 2007)
Since the acquisition of DEPFA BANK plc by Hypo Real Estate Holding AG in October 2007, DEPFA’s risk
management structure has been consolidated into the HRE Group risk management structure. The HRE Group risk
governance structure includes the following key committees:
Group Management Board
The Group Management Board is the decision making body for all strategic and operational decisions.
With regards to risk management, it is responsible for:
Ensuring the proper organisation of credit business (and for the ongoing development of such organisation) as
well as for the proper management and monitoring of the risks arising from credit business
Defining, communicating and reviewing business and risk strategies (based on ICAAP calculations), setting the
frame for all entities in HRE Group taking on credit risks, approving risk strategies and portfolio guidelines. The
Supervisory Boards regularly review the strategies and the risk profile of HRE Group
Approving Credit Authority guidelines setting the frame for every decision required along the credit process chain.
Based on the Credit Authority guideline, individual authorities are assigned as personal credit authorities according
to individual qualification, experience and training
Deciding on strategies concerning market and liquidity risk as well as performance developments in Capital
Markets, Treasury, refinancing business and asset liability management. It acts as point of escalation in combination
with Group ALCO for controversial issues concerning processes as well as for basic principles regarding
asset-liability-management, funding and liquidity management.
Group Risk Management Committee
This committee is the main risk decision making group and is chaired by the Group Chief Risk Officer. It has the
following objectives:
Reviews the overall risk situation of the Group and approves the ICAAP calculation
Reviews the divisions’ credit portfolios, the Group’s country risk exposure and the Group’s market and liquidity
risk exposure
Discusses the Group’s risk position in the context of market developments
Proposes sub-portfolio strategies on risk/return basis to Management Board (Active Credit Portfolio Management
– ACPM)
Proposes Group-wide and divisional (credit) risk strategies and guidelines (annually) to Management Board
Approves limits, e.g. country risk, credit and market risk limits
Approves principles for managing Credit, Country and Market Risk
Approves new concepts regarding methods for risk measurement or the implementation of regulatory
requirements. In combination with Group ALCO decides whether to start business in new product groups, new
business units and/or markets where the risk profile (including reputational risks) possibly has an impact on the
whole HRE Group. It also defines minimum requirements for new product processes.
Reviews the Group’s operational risk profile
112

Risikoberichtbericht
Asset and Liability Committee
The Asset and Liability Committee is chaired by the Group Chief Financial Officer. Its objective is to optimise the
asset/liability mix of the Group and to manage the market and liquidity risk.
The chart below sets out the key HRE Group risk governance structures under which DEPFA’s activities have been
managed effective from October 2007:
Risk Management
Committee
Credit Risk
Management
Commercial
Real Estate
Credit Risk
Management
Public Sector
& Infra struc ture
Finance
Hypo Real Estate Holding Supervisory Board
Hypo Real Estate Holding Management Board
(CEO, CFO, CRO...)
Credit Risk
Management
Capital Markets
& Asset
Management
Chief Risk Officer
Market
Risk
Management
Group
Operational
Risk
Group Risk
Management
Operating
Office
Audit
Committee
Asset and Liability
Committee
Group Risk
Control
113

Group Accounts
2. Credit Risk
Credit risk is defined as the risk of impairment and partial or total loss of a receivable due to deterioration of credit
quality on the part of a counterparty. The relevant receivable may be based on traditional on-balance sheet lending
business or off-balance sheet business, e.g. counterparty risk arising from derivative financial instruments.
Through adhering to very conservative lending principles, over the years DEPFA has built a zero default track
record in managing credit risk in lending to the public sector. These principles can be summarised as follows:
Thorough and careful analysis of each individual credit risk by specialist teams of independent Credit Analysts
supported by quantitative rating models for determining default risk of the borrower and use of early warning
systems.
Ongoing active observation of the market and adjustment of the lending policy where necessary.
Avoiding concentration risks and enforcing systematic diversification of the portfolio by way of credit portfolio
management which draws up appropriate recommendations for action.
Ensuring that the loans can be resold or syndicated.
These principles have been used as the basis for implementing specific credit risk strategies; the general character
of these strategies is the focus on individual borrower/transaction risk and maintaining a very high average port folio
rating. The credit principles also require the banks within DEPFA to carry out cash-flow simulations and stress
tests; particularly in infrastructure and asset finance transactions. Additionally through the continuous monitoring
of covenants, increased credit risks can be identified, and managed at an early stage. These analyses relating to
individual transactions are complemented by scenario observations at the portfolio level.
DEPFA adopts best-practice approaches by way of organizational measures and functional segregation of credit
processes right through to management board level into market risk and back office. This allows DEPFA to meet
regulatory requirements such as MaRisk (German Minimum Requirements for Risk Management).
Internal rating tools are used for all significant customer segments: sovereigns and sub sovereign public sector
entities, entities with public sector support, financial institutions, project finance and asset based finance. The
quality of the valuation methods which are used is continuously monitored by risk control.
Public Sector Credit Risk
Public Sector lending accounts for 78% of DEPFA’s total consolidated on-balance sheet exposures. The business
is focused on sovereign and sub-sovereign borrowers and public sector supported financial and specialist entities.
This is reflected in the risk weightings of the Group’s total public sector portfolio amounting to €158 billion of onbalance
sheet interest-earning assets (amount includes IAS 39 adjustments) at 31 December 2007. A BIS risk
weighting of 0% applies to 55% of these assets, reflecting the focus on sovereign and the upper level of subsovereign
entities. The next largest category is counterparties with a 20% risk weighting, these constitute 36% of
on-balance sheet assets. These are mainly municipalities and credit institutions without explicit central government
guarantees.
114

Risikoberichtbericht
The portfolio is broadly diversified with counterparties in over 40 countries. In order to ensure the top rating for the
Pfandbriefe and Asset Covered Security (“ACS”) cover pools and a high rating for the Bank, business is focused
on clients and counterparties with the highest credit standings. The geographical split of the assets of the Group
is as presented below.
Geographical concentrations of assets, liabilities and off-balance sheet items
At 31 December 2007 € m
Group Company
Total Total Credit Total Total Credit
assets liabilities commit- assets liabilities commitments
ments
Germany 28,002 18,119 440 13,776 11,119 411
Italy 26,600 183 1,794 18,484 185 1,794
France 7,575 15,486 673 3,846 13,303 254
United Kingdom 28,053 45,902 1,695 22,936 39,497 1,562
Spain 12,876 436 431 4,392 396 231
Austria 4,056 484 - 996 485 -
Greece 4,057 3 27 2,788 - -
Ireland 9,885 11,418 1,951 28,880 27,162 210
Other European countries 31,857 25,853 1,545 14,644 22,990 1,312
USA 40,445 27,339 18,383 19,210 20,422 18,202
Canada 6,865 479 182 4,650 453 185
Japan 7,941 9,350 133 7,399 9,534 133
Other Asian countries 1,273 863 68 915 874 18
Other countries 8,415 2,501 200 8,134 2,501 178
Shares in Group undertakings - - - 1,281 - -
Unallocated assets/ liabilities - 56,533 - - 602 -
Total 217,900 214,949 27,522 152,331 149,523 24,490
115

Group Accounts
At 31 December 2006 € m
The above noted information gives the amounts that the Group and Company regard as being their maximum
exposure to credit risk.
In preparing the above information, assets have been allocated geographically based on the location of the credit
risk. Liabilities are allocated on the basis of the location of the counterparty where this can be identified. Credit
commitments are allocated based on the location of the credit risk.
Included in unallocated liabilities are all debt securities in issue where the counterparty cannot be specifically
identified as the securities are transferable.
116
Group Company
Total Total Credit Total Total Credit
assets liabilities commit- assets liabilities commitments
ments
Germany 53,261 19,485 238 10,401 6,729 217
Italy 36,769 592 1,893 22,271 587 1,776
France 12,212 7,268 463 3,642 6,752 159
United Kingdom 16,278 40,222 1,258 11,854 35,267 1,258
Spain 12,818 384 535 4,460 384 157
Austria 8,235 152 - 1,074 98 -
Greece 9,235 95 - 3,939 95 -
Ireland 767 15,221 90 26,523 30,309 5
Other European countries 30,950 15,795 946 13,890 15,631 580
USA 25,177 21,250 18,501 17,244 20,286 18,501
Canada 5,387 2,281 313 3,333 2,281 313
Japan 6,726 4,712 19 5,913 4,712 19
Other Asian countries 2,545 1,143 - 1,839 1,010 -
Other countries 2,585 2,175 85 759 1,974 85
Shares in Group undertakings - - - 2,278 - -
Unallocated assets / liabilities - 89,393 - - 663 -
Total 222,945 220,168 24,341 129,420 126,778 23,070

Risikoberichtbericht
Assessing credit risk – the internal rating system in DEPFA
Credit scoring of counterparties is critical to DEPFA’s business, as a significant part of DEPFA’s population of
borrowers is unrated externally. The scoring model of the Bank is reviewed continuously. In recent years, DEPFA
moved to a unitary scoring system for its four main credit risk pools (sovereign, sub-sovereign, financial institutions
and infrastructure finance). Originally the unitary scoring model had 12 rating grades. The grading has now been
extended to 22 grades.
Internal ratings introduce a more accurate risk evaluation and specifically have been designed in preparation for the
implementation of the New Basel Accord. It is the intention of DEPFA to adopt the Internal Ratings Based Advanced
Approach and in this regard, the Bank has established an Internal Ratings Modeling team, who are
responsible for developing scoring models, individually tailored by country and exposure type, to help estimate
credit scores, and determine probability of default, for all DEPFA credit exposures.
DEPFA has developed four core 22-grade internal rating systems in line with each of its credit risk pools. Whilst the
scores are comparable to the grading system used by the External Credit Assessment Institutions (“ECAI”) and
DEPFA’s models map with a high level of significance to the ratings assigned by the ECAI, the equivalent risk of the
rating assigned from each of the four models is not comparable, but trans late into their own unique default and
recovery scales. Such unique default and recovery statistics have been validated through various default studies
provided by the ECAI.
All counterparties across all risk groups are graded in accordance with this system. The steps to assign and test
the robustness of the internal rating involve:
Grading individual counterparties through the analysis of balance sheet strength, the historic and budgeted
relationship of direct tax and central allocation (grant) revenues with expenses, the relationship of debt to
operating surpluses, indebtedness per capita, political stability and guarantee structures.
The analysis of the sub-sovereign legal framework including the delegation of powers from the sovereign and
financial and regulatory support of its activities.
Mapping internally derived ratings against the ECAI ratings for externally rated borrowers.
The rated clients and counterparties account for a very high proportion of DEPFA’s (excluding Hypo Public
Finance Bank (“HPFB”)) public sector asset volumes. Almost 33% of the portfolio of on-balance sheet interest
earning assets relates to counterparties with triple-A ratings by ECAI while a further 17% of assets relate to double-
A ratings by ECAI. 18% of the total portfolio is unrated by ECAI.
117

Group Accounts
The makeup of both the on-balance sheet and off-balance sheet exposures of both the Group and Company by
internal ratings categories is as illustrated below:
Group On-Balance Sheet December 2007
118
Financial Infrastructure Sub-
Institutions Finance Sovereign Sovereign Other* Total
AAA 0% 1% 2% 29% 2% 34%
AA1 1% 0% 0% 6% 0% 7%
AA2 1% 0% 11% 12% 0% 24%
AA3 2% 0% 0% 7% 0% 9%
A1 1% 0% 2% 4% 0% 7%
A2 1% 0% 2% 2% 0% 5%
A3 3% 0% 1% 1% 0% 5%
BBB1 0% 0% 0% 1% 0% 1%
BBB2 0% 1% 0% 0% 1% 2%
BBB3 0% 2% 0% 0% 0% 2%
Below BBB3 1% 1% 0% 1% 1% 4%
Group Off-Balance Sheet December 2007
Financial Infrastructure Sub-
Institutions Finance Sovereign Sovereign Other* Total
AAA 0% 1% 5% 23% 8% 37%
AA1 1% 0% 2% 5% 0% 8%
AA2 3% 0% 2% 9% 0% 14%
AA3 5% 0% 0% 10% 1% 16%
A1 6% 0% 0% 3% 1% 10%
A2 1% 0% 1% 1% 0% 3%
A3 1% 0% 0% 1% 1% 3%
BBB1 0% 2% 0% 0% 0% 2%
BBB2 1% 1% 0% 0% 0% 2%
BBB3 0% 2% 0% 0% 0% 2%
Below BBB3 0% 1% 0% 2% 0% 3%
* The “Other” category above comprises mainly those HPFB assets acquired which have not been allocated to the
other main DEPFA asset classes as at 31 December 2007.

Company On-Balance Sheet December 2007
Risikoberichtbericht
Financial Infrastructure Sub-
Institutions Finance Sovereign Sovereign Total
AAA 1% 2% 2% 30% 35%
AA1 1% 0% 0% 2% 3%
AA2 2% 0% 19% 8% 29%
AA3 1% 0% 0% 5% 6%
A1 1% 0% 2% 4% 7%
A2 0% 0% 2% 3% 5%
A3 4% 0% 1% 1% 6%
BBB1 0% 0% 1% 1% 2%
BBB2 1% 1% 0% 0% 2%
BBB3 0% 1% 0% 1% 2%
Below BBB3 1% 2% 0% 0% 3%
Company Off-Balance Sheet December 2007
Financial Infrastructure Sub-
Institutions Finance Sovereign Sovereign Total
AAA 0% 2% 7% 28% 37%
AA1 2% 0% 0% 5% 7%
AA2 3% 0% 2% 12% 17%
AA3 1% 0% 0% 12% 13%
A1 6% 0% 1% 3% 10%
A2 0% 0% 1% 1% 2%
A3 1% 0% 1% 1% 3%
BBB1 0% 0% 1% 1% 2%
BBB2 1% 1% 0% 1% 3%
BBB3 0% 1% 0% 1% 2%
Below BBB3 0% 1% 0% 3% 4%
119

Group Accounts
Group On-Balance Sheet December 2006
120
Financial Infrastructure Sub-
Institutions Finance Sovereign Sovereign Total
AAA 1% 0% 5% 33% 39%
AA1 1% 0% 0% 4% 5%
AA2 1% 0% 9% 18% 28%
AA3 1% 0% 1% 11% 13%
A1 0% 0% 4% 4% 8%
A2 0% 0% 2% 2% 4%
A3 0% 0% 1% 1% 2%
BBB1 0% 0% 0% 0% 0%
BBB2 0% 0% 0% 0% 0%
BBB3 0% 0% 0% 0% 0%
Below BBB3 0% 1% 0% 0% 1%
Group Off-Balance Sheet December 2006
Financial Infrastructure Sub-
Institutions Finance Sovereign Sovereign Total
AAA 0% 3% 0% 39% 42%
AA1 0% 0% 0% 7% 7%
AA2 0% 0% 2% 25% 27%
AA3 0% 1% 0% 12% 13%
A1 0% 0% 0% 2% 2%
A2 0% 0% 0% 1% 1%
A3 0% 1% 0% 2% 3%
BBB1 0% 2% 0% 0% 2%
BBB2 0% 0% 0% 0% 0%
BBB3 0% 2% 0% 0% 2%
Below BBB3 0% 1% 0% 0% 1%

Company On-Balance Sheet December 2006
Risikoberichtbericht
Financial Infrastructure Sub-
Institutions Finance Sovereign Sovereign Total
AAA 0% 1% 2% 32% 35%
AA1 1% 0% 0% 3% 4%
AA2 2% 0% 14% 14% 30%
AA3 1% 0% 3% 10% 14%
A1 0% 0% 4% 4% 8%
A2 0% 0% 3% 3% 6%
A3 0% 0% 1% 1% 2%
BBB1 0% 0% 0% 0% 0%
BBB2 0% 0% 0% 0% 0%
BBB3 0% 0% 0% 0% 0%
Below BBB3 0% 1% 0% 0% 1%
Company Off-Balance Sheet December 2006
Financial Infrastructure Sub-
Institutions Finance Sovereign Sovereign Total
AAA 0% 3% 0% 41% 44%
AA1 0% 0% 0% 7% 7%
AA2 0% 0% 2% 24% 26%
AA3 0% 1% 0% 11% 12%
A1 0% 0% 0% 2% 2%
A2 0% 0% 0% 1% 1%
A3 0% 1% 0% 2% 3%
BBB1 0% 2% 0% 0% 2%
BBB2 0% 0% 0% 0% 0%
BBB3 0% 2% 0% 0% 2%
Below BBB3 0% 1% 0% 0% 1%
121

Group Accounts
Financial Institutions Exposure
Included in the on-balance sheet interest earning assets portfolio descriptions above is an amount of €22 billion
relating to Group exposures to financial institution counterparties. Within the Group, on-balance sheet financial
institution counterparty risk arises from securities, money market transactions, sale and repurchase agreements
and derivatives.
Any existing netting master agreements and collateral agreements with business partners are taken into account
to adequately map counterparty risk. These agreements are used to reduce both the capital cover required and the
utilisation of bank-internal counterparty limits. DEPFA has a Group-wide counterparty limit system that directly
accesses the front-office system used by Treasury, providing real-time information on limits and limit utilisations.
Within the Group, financial institution counterparty business is geared towards high credit-quality counterparties.
The Credit Approval Process
The Group operates an independent credit approval process, which includes assessments by, and formal limit
recommendations from, those not involved in the business areas. The chart below sets out the initiation and
approval process for DEPFA for all four risk pools.
The allocation of an internal rating determines both the pricing and the potential exposure amount. The Credit
Committee operates on authority devolved to it by the Board of Directors and is empowered to set limits up to
prudent levels taking into account large exposure parameters. DEPFA subsidiaries operate their own credit
committees, which act on individual counterparty limits once Group approval is in place.
The Credit Process
122
Sovereign/
Country Risks
Sub-Sovereign Risks
Financial Institution
Risks
Infrastructure Finance
Risks
Country Risk Committee, Credit Risk Unit, Special Risk Unit: Assess, assign rating and
make recommendation for pre-approval limit, taking risk mitigation into account
Group Credit Committee: 5 voting members, not drawn from business area
Credit limit and Duration decision
Decision advised to various Group
entities and business units
Group Subsidiary Credit Committee decision
Minimum annual review of limit decision
(more frequent reviews as required)
Limits monitored for utilisation

DEPFA’s Counterparty Risk Pools
Risikoberichtbericht
1. Sovereign/Country Risk
Sovereign/Country risks are managed by the Country Risk Committee. Reviews of sovereign risks are carried out
at least annually, with detailed reports on the social, political and economic situation of all countries presented to
the Group Credit Committee for approval. All sovereign/countries are rated in accordance with the Group internal
rating grades. DEPFA currently has 94 countries rated for international business of which a limit has been established
for 90. Of these, 61 fall into A-rated cohorts. The Bank’s country exposure for countries rated below single-A
stood at 1.48% of the Group’s total cross border exposure as at 31 December 2007, with maximum limits available
of 1.5% of total Group country limits.
2. Sub-Sovereign Risk
The Credit Risk Unit, a specialised team of professionals based in Dublin, carries out sub-sovereign risk analysis.
This team is independent from business origination/relationship management. This unit is responsible for assessing
and rating (in accordance with the DEPFA internal grading system) the credit risk for all sub-sovereign entities.
The unit assesses the distinct characteristics of the country in which the sub-sovereign is located, especially those
characteristics related to intergovernmental arrangements. The unit also assesses political, demographic, economic,
fiscal and financial factors.
3. Financial Institution Risk
The Credit Risk Unit also carries out assessment of DEPFA’s exposure to financial institutions. Specialised professionals
work with the front office personnel to evaluate the credit risks involved in these counterparties. The approval
process applied is the same as for sub-sovereign counterparties. In addition, all financial institutions are rated
internally. All counterparties must have pre-approval limits in place as a prerequisite to conducting transactions with
DEPFA.
4. Infrastructure Finance Credit Risk
The Infrastructure Finance Unit (“IFU”), a team of project finance specialists and support staff, carries out trans -
action execution and portfolio management of all infrastructure loan assets. Project finance transactions are often
carried out in conjunction with other similarly experienced lenders (e.g. as a member of a syndicate of banks), thus
limiting DEPFA’s exposure on any one particular transaction.
A standard pre-condition for IFU participation in an infrastructure financing transaction is the ongoing involvement
of the public sector, most typically as the grantor of a long-term concession to a privately financed special purpose
company, and often as the payer of revenues (paid in return for the successful provision of the required service),
typically the main source of the loan repayment; or as a regulator (e.g. for utility companies).
In addition, the purpose of the financing must be for the provision of an essential public asset or service, which
could be reasonably expected to continue to be required even in times of budgetary cutbacks (such as schools,
hospitals, prisons, roads and water supply and treatment facilities).
Credit proposals put forward by the IFU are subject to an independent review by the Credit Risk Management
team. This unit makes an independent recommendation to the Credit Committee.
123

Group Accounts
When financing infrastructure projects, DEPFA generally requires the involvement of international financial institu -
tions, such as the European Investment Bank (“EIB”) or the European Bank for Reconstruction and Development
(“EBRD”) and leading local banks. While these institutions do not necessarily provide DEPFA with formal guarantees
for commercial or political risk, they do provide an implicit comfort that purely politically motivated
discriminatory action by the host government is unlikely due to the consequential damage to that government’s
ability to access future funding support from the international financial institutions.
There are standard internal procedures for the monitoring of, and reporting on, current loan transactions: for
projects during the construction phase, a report on progress is submitted to the Credit Committee every 6 months;
operational projects are subject to an annual review. The respective account managers in IFU liaise closely with an
independent engineer who is usually appointed by the lenders to monitor the project. This allows the Group to
follow progress closely and take remedial action, if necessary, to ensure that the project is completed on time and
to budget. IFU’s monitoring reviews are independently checked by the SRU to ensure that objectivity is maintained.
The concentration of credit risk by counterparty type for loans and advances to banks and customers, securities
and derivatives is summarised below:
Group Company
31 December 2007 31 December 2007
€ m Loans Securities Derivatives Total Loans Securities Derivatives Total
Public Authorities
Banks and Financial
116,901 41,168 132 158,201 64,240 30,237 130 94,607
institutions 14,619 7,186 7,858 29,663 30,158 2,871 8,631 41,660
Other 11,091 9,790 454 21,335 6,231 - 129 6,360
142,611 58,144 8,444 209,199 100,629 33,108 8,890 142,627
Group Company
31 December 2006 31 December 2006
€ m Loans Securities Derivatives Total Loans Securities Derivatives Total
Public Authorities
Banks and Financial
144,906 50,441 71 195,418 47,490 32,895 71 80,456
institutions 11,039 1,658 6,745 19,442 36,096 327 6,088 42,511
Other 5,856 274 64 6,194 2,306 - 64 2,370
161,801 52,373 6,880 221,054 85,892 33,222 6,223 125,337
124

Risikoberichtbericht
Credit Risk Management
The credit risk of DEPFA’s credit exposures is constantly monitored using tools such as “pre calculation models”.
Pre-calculation models are used to set management impetus in the individual financial statements which enable
risk-adequate margins to be established for new business or refinancing of existing transactions. These models
take into account funding cost, capital cost and general administrative expenses as well as potential credit risk
costs to cover expected and unexpected losses. For this purpose, for each individual exposure, an estimate is
made of the probability of default (PD) and also the loss ratio to be expected in the event of a default, the loss given
default (LGD).
Early recognition of potential problem loans can be described as a fundamental principle of our credit risk culture.
In addition, existing problem loans (sub-performing or non-performing loans) are intensively monitored and regularly
analysed. Early warning systems have been installed in order to ensure that loans which may be exposed to an
enhanced level of credit risk can be identified at an early stage. Affected exposures are placed on a “watch” list in
order to ensure that they are the subject of greater attention. The following table sets out the performance of loans
in the segments Budget Finance including Global Markets and Infrastructure Finance that are exposed to an
increased level of risk in relation to the overall credit portfolio as of 31 December 2007.
Budget Finance and Global Markets € m Infrastructure Finance € m
Watchlist 164 184
– Sub-performing 2 -
– Non-performing - 7
Loan loss provisions are made for all those assets where there is objective evidence that the asset or group of assets
is impaired due to a “loss event” and that event has an impact on the estimated future cash flows to be generated
by the asset or group of assets. No new loan loss provisions were created by DEPFA in 2007. An impairment
provision of €3m is carried against the above noted non-performing or impaired exposure.
125

Group Accounts
Loans and advances past due but not impaired
At 31 December 2007, the following amounts were noted by the Group as being past due. However, no impairment
provision was made against these amounts as the Group does not consider that there is any issue regarding their
recoverability. Such timing issues in receipts of payments due occur frequently in the normal course of business
and do not, by themselves impair the quality of the receivable. The total book value in relation to the amounts has
also been disclosed to put the size of the amounts in question into context.
Loans past due Loans and Loans and Available-
advances to advances to for-sale
Banks Customers Assets
€ m € m € m
Assets: past due but not impaired (due amount)
Past due but not impaired less than 90 days 5 19 4
Past due but not impaired between 3 months and 6 months 2 3 1
Past due but not impaired between 6 months and 1 year - 7 2
Past due but not impaired greater than 1 year - 1 1
Total 7 30 8
Assets: past due but not impaired (total investment)
Past due but not impaired less than 90 days 311 2,612 2,379
Past due but not impaired between 3 months and 6 months 412 2,394 25
Past due but not impaired between 6 months and 1 year - 1,258 483
Past due but not impaired greater than 1 year - 275 1,625
Total 723 6,539 4,512
Carrying amount of the individually assessed
impaired financial assets
Loans - 4 -
Other financial assets - - -
Total - 4 -
The Group has no assets that would have been impaired had they not been re-negotiated.
The Group did not obtain any assets by taking possession of collateral or calling on any other credit enhancements
in relation to the above outstanding amounts.
As at the date of signing the Financial Statements, the Group had received in full approximately 80% of the above
amounts outstanding. This evidences the Group´s view that such overdue amounts are the results of operational
timing issues and administrative difficulties in allocating payments and do not in any way represent credit concerns
on these assets.
126

Risikoberichtbericht
Further Credit risk mitigation techniques
The Group restricts its exposure to credit losses by entering into collateral support agreements and master netting
arrangements with counterparties with which it undertakes a significant volume of transactions. Under the terms of
the Collateral Support Agreement, in the event that the value of a counterparty’s derivative exposure to the Group
exceeds a defined limit, the counterparty must post collateral to the amount of the excess with the Group. In the
event of a default by the counterparty, the Group then has recourse to the collateral, up to the amount of the loss
suffered. Master netting arrangements do not generally result in an offset of balance sheet assets and liabilities, as
transactions are usually settled on a gross basis. However, the credit risk associated with favourable contracts is
reduced by a master netting arrangement to the extent that if an event of default occurs, all amounts with the
counterparty are terminated and settled on a net basis. The Group’s overall exposure to credit risk on derivative
instruments subject to master netting arrangements can change substantially within a short period, as it is
affected by each transaction subject to the arrangement.
The Group has transacted a number of credit derivatives that provide an economic hedge, to some of its public
sector credit exposure. As such instruments meet the accounting definition of a derivative, they have been
accounted for at fair value and the change in their fair value has been recognised through profit or loss.
The Group has also, as disclosed in note 34, accepted collateral in the form of securities to reduce the credit risk
on derivative assets with a positive market value.
3. Market Risk
Market risk refers to the risk of potential loss arising from changes in market data such as interest rates, credit
spreads, foreign currency exchange rates, equity prices, price or rate volatilities. DEPFA defines its market risk as
changes in fair value of financial instruments as a result of market related movements.
The Bank’s market risk policies and procedures follow three core principles:
Policy framework for all key market risk activities approved by the Board,
Market risk management is centralised in the Risk Management Committee (since DEPFA’s acquisition by the
HRE Group; until then in the Asset & Liability Committee) and the Treasury and product units, managed by
specialised personnel and monitored using appropriate systems and controls,
Market risk control function measures and monitors the risks independently of the risk-taking units.
The market risk control function has sub categorised market risk into risk factors. The relevant risk factors for
DEPFA are interest rate, credit spread and foreign exchange risk. As a bank focusing on public sector finance,
DEPFA is not generally exposed to equity or commodity risk. With regard to foreign exchange risk, DEPFA has a
policy that Treasury must match all foreign currency assets with liabilities in the same currency or swap out the foreign
exchange exposure. Only a limited foreign currency exposure is accepted in the emerging markets portfolio.
Hence, the primary risk factors for the Bank are interest rate and credit spread risk.
127

Group Accounts
For the quantification and control of these risks, DEPFA determines daily Value at Risk (VaR) figures in line with
industry wide practice using the variance/covariance methodology for both trading and banking books. The VaR
monitoring is based on a comprehensive risk factor set, consolidated across the Group, as well as broken down to
legal entity, portfolio and desk level. A ten-day holding period with a 99% confidence interval is used to derive the
calculation. Correlations and volatilities are calculated based on a history of 250 trading days. The ten-day holding
period was chosen to give a conservative VaR measure in relation to hedging the risk of the portfolio’s positions.
DEPFA recognises that variance/covariance VaR has certain inherent limitations. The past may not always provide
a reliable indicator of future market movements and moreover the statistical assumptions employed may understate
the probability of very large market moves. For this reason, additional management tools such as sensitivity
measures and stress testing are used to supplement VaR. Moreover, historical simulation VaR is used in trading
portfolios to supplement variance/covariance VaR. The VaR figures for DEPFA in 2007, with comparative figures for
2006 are as illustrated below.
2007 2006 2007 2006 2007 2006 2007 2006
Group € m 31 Dec 31 Dec Low Low Avg Avg High High
Interest Rate VaR 14 101 9 73 51 130 100 183
Foreign Exchange VaR 21 12 2 1 6 6 25 31
Credit Spread VaR 43 26 22 17 34 25 45 41
Total VaR 49 96 38 84 61 129 98 182
At 31 December 2007, DEPFA BANK plc sold DEPFA Deutsche Pfandbriefbank AG to Hypo Real Estate Holding
AG. At the same date, DEPFA BANK plc acquired Hypo Public Finance Bank (“HPFB”) from Hypo Real Estate
Holding AG. The above Group VaR numbers for the year ended 31 December 2007 include VaR contributed by
DEPFA Deutsche Pfandbriefbank AG and do not include VaR that would have been contributed by HPFB during
this time. For comparability the year end VaR numbers have also been presented on this basis. At 31 December
2007, the stand alone VaR of both HPFB and DEPFA Deutsche Pfandbriefbank AG was as noted below:
HPFB €m
Interest Rate VaR 5
Foreign Exchange VaR 2
Credit Spread VaR 43
Total VaR 44
128

DEPFA Deutsche Pfandbriefbank AG €m
Interest Rate VaR 3
Foreign Exchange VaR 0
Credit Spread VaR 1
Total VaR 4
Risikoberichtbericht
In relation to the above VaR figures for the Group, they do not include a credit spread VaR measure for the core
banking book assets. The VaR disclosed above, accords with the measures used to manage credit risk in the
Bank, as while credit spread VaR is used to manage credit spread risk on the trading portfolios, it is not used to
manage credit spread risk on the core banking book. In terms of the sensitivity of either profit or loss or equity to a
move in the credit spread of the core banking book assets, a 1 basis point change in the credit spread level of the
banking book counterparties, would have a nil effect on profit or loss and an effect on equity of €38 million. It
should be noted however, that such a calculation assumes that all assets experience a similar change in credit
spread moving in the same direction and at the same time.
DEPFA Trading book VaR
DEPFA introduced segmental reporting in 2006, grouping its business activities into Budget Finance, Infrastructure
Finance, Client Product Services and Global Markets. DEPFA’s trading portfolios belong to the Client Product
Services and the Global Markets segments. The table below shows VaR statistics for the year 2007 and the VaR
exposure on 31 December 2007 relating to the consolidated trading books of the Group. The average exposure in
the consolidated trading books of the Group amounted to €12.2 million and the total consolidated trading expo -
sure did not exceed €18.5 million throughout the year 2007. The table also compares the trading related VaR
exposure of the Group at the end of 2007 to the respective VaR exposure at the end of 2006. For consistency of
presentation, the trading book VaR figures below, include the VaR of DEPFA Deutsche Pfandbriefbank AG and
exclude that of HPFB.
Trading Book Risk
10 Day 99% VaR (. m)
Average 12.2
High 18.5
Low 6.5
31 December 2007 9.5
31 December 2006 8.0
129

Group Accounts
The following graph shows the evolution of the consolidated trading VaR profile of DEPFA’s trading books,
during 2007.
15
10
5
0
As can be seen above, the average monthly VaR (10 day, 99% confidence, in million EUR) varies around an overall
average of €12.2 million. Reports detailing the local and Group VaR as well as the limit utilisation are distributed
daily to senior management. The setting of risk limits is the responsibility of Risk Management Committee since the
acquisition of DEPFA by Hypo Real Estate Holding AG in October 2007, previously the responsibility of the Asset &
Liability Committee.
Validity of the VaR model – back testing for the trading books in DEPFA
The accuracy of the Group’s VaR model is calibrated by means of back testing to ensure the quality of the statistical
process. This process entails the comparison of changes in portfolio value incurred against the most likely
range of such changes forecast by the VaR model. Backtesting is based on 1 day 99 % VaR figures. In this case,
actual losses would not be expected to exceed the forecast by the VaR model on more than four occasions in any
one year (250 trading days). The graphical representation below shows the consolidated back-testing results for
DEPFA’s trading books in 2007.
130
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Risikoberichtbericht
As can be seen from the graph below there were only 2 backtesting exceptions for the trading books in 2007 (28
August and 21 December). Therefore, the number of observed exceptions did not exceed the number of 4 permissible
exceptions in a 1 year time range.
8
6
4
2
0
-2
-4
-6
-8
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
daily P&L VaR 1 day -VaR 1 day
On balance sheet exposure to foreign exchange rate risk
The Group is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its
financial position and cash flows. The table below summarises the Group’s exposure to foreign currency exchange
rate risk at 31 December. Included in the table are the Group’s assets and liabilities at carrying amounts, categorised
by currency.
131

Group Accounts
Concentrations of assets and liabilities
EUR USD JPY GBP Other Total
As at 31 December 2007 – Group . m
Total assets 126,325 52,832 9,963 16,512 12,268 217,900
Total liabilities 123,607 52,649 9,955 16,474 12,264 214,949
Net on-balance sheet position 2,718 183 8 38 4 2,951
EUR USD JPY GBP Other Total
As at 31 December 2006 – Group . m
Total assets 153,696 34,505 6,430 15,598 12,716 222,945
Total liabilities 150,927 34,492 6,420 15,548 12,781 220,168
Net on-balance sheet position 2,769 13 10 50 -65 2,777
EUR USD JPY GBP Other Total
As at 31 December 2007 – Company . m
Total assets 95,228 26,628 8,912 13,335 8,228 152,331
Total liabilities 92,468 26,622 8,914 13,319 8,200 149,523
Net on-balance sheet position 2,760 6 -2 16 28 2,808
EUR USD JPY GBP Other Total
As at 31 December 2006 – Company . m
Total assets 76,151 26,879 5,662 12,605 8,123 129,420
Total liabilities 73,538 26,862 5,664 12,595 8,119 126,778
Net on-balance sheet position 2,613 17 -2 10 4 2,642
4. Liquidity Risk
Liquidity risk is the risk that DEPFA will not have access to funding without incurring an excessive cost and as a
consequence will be unable to meet maturing liabilities, fund asset growth, meet contractual obligations or fund
unanticipated events. Liquidity risk arises from mismatches in the timing of cash flows between assets and the
liabilities funding those positions. Funding risk (which is a significant sub component of liquidity risk) arises when
the bank cannot access funding at a reasonable rate, with which to fund illiquid or non transferable asset positions.
Liquidity risk management
The management of the liquidity risk of the HRE Group is the joint responsibility of the HRE Group Asset and Liability
Committee (“ALCO”) as defined on page 113 and the HRE Group Risk Management Committee on page 112.
With specific regard to liquidity risk, the ALCO is responsible for:
The development and implementation of the HRE Group’s liquidity policy
The review and management of HRE Group liquidity
The review of liquidity scenario stress testing results
The review and approval of contingency funding plans
The setting of targets for the long and short term funding mix
The preparation of the annual funding and liquidity plan
132

The HRE Group risk management committee is responsible for:
The review of ALCO reports detailing compliance with liquidity limits
The review of the HRE Group’s liquidity policy
The review of the HRE Group’s funding position
Risikoberichtbericht
Liquidity risk management policies
The liquidity management process of the Group, that has been developed by the above risk management
framework includes the following liquidity policies:
DEPFA will, as a minimum, comply with limits set down by the Financial Regulator.
The notional amount of liquidity support facilities must not exceed EUR €20 billion.
The Bank must maintain sufficient liquid assets, to enable it to access funding sufficient to continue to fund the
balance sheet activities for a minimum of 20 days, should access to unsecured money markets or capital
markets be disrupted.
DEPFA has put in place and will continue to update contingency plans that address the strategy for handling
liquidity crises and include procedures for emergency situations.
Liquidity Risk Management through the DEPFA business model
Aspects of the business model of DEPFA, as they impact liquidity risk, are summarised through review of the
following characteristics of the Group’s balance sheet:
Credit quality of the Bank’s assets
Diversity of the sources of funds
Increased demand for collateral
Credit quality of the bank’s assets
DEPFA’s balance sheet is predominantly composed of highly rated assets of high credit quality. Some 34% of the
assets of DEPFA as at 31 December 2007 are AAA rated using internal ratings models whilst a further 40% are
AA rated. This reflects the concentration on public sector lending to the top tier of sovereigns and sub-sovereigns
(as defined in the credit risk section above). In general, the higher the rating of the asset base, the better the
access the Bank has to the secured short term funding markets, such as bilateral and tri-party repo markets and
the long term covered security market.
Diversity of the sources of funds
DEPFA has developed an extremely diversified source of funding, diversified both across maturities and currencies.
This reduces the reliance of the Group on any one source of funding and allows it flexibility in the event of an un -
anticipated market event in any one funding segment. DEPFA is a large issuer of Pfandbriefe and Asset Covered
Securities, which provide significant medium to long term financing to the Bank. The Group has also issued a
number of unsecured medium term notes (“MTNs”).
In the short term, the Bank is also active in the issuance of unsecured bearer bonds, promissory notes and
commercial paper (“CP”), repurchase agreements (“repos”) as well as participating in money market transactions.
Such products are traded across a variety of currencies. The Bank also receives deposits from other banks and
directly from institutional investors worldwide. Investor categories include central banks, state agencies,
supranationals, fund managers, insurance companies and corporates.
133

Group Accounts
Increased demand for collateral
As noted above, DEPFA has a comprehensive holding of highly rated unencumbered securities, which are
available for repo with financial counterparties or central banks. A surplus buffer of these assets is also available to
cover additional collateral calls that might be made on OTC derivative contracts.
The tables below analyse the Group’s assets and liabilities into relevant maturity groupings based on the remaining
period at balance sheet date to the contractual maturity date.
As at 31 December 2007 Up to 3 3-12 1-5 Over 5 Non-financial
– Group . m
Assets
months Months years years instruments Total
Cash and balances with central banks 8,388 29 9 - - 8,426
Loans and advances to banks 11,296 2,074 4,351 11,275 - 28,996
Trading assets 2,974 2,723 3,750 4,127 - 13,574
Derivative financial instruments
Other financial assets
639 476 991 6,338 - 8,444
at fair value through profit or loss 56 133 1,105 3,123 - 4,417
Loans and advances to customers 1,208 2,074 16,377 90,989 - 110,648
Investment securities – available-for-sale 700 2,569 4,760 35,091 - 43,120
Intangible assets - - - - 38 38
Property, plant and equipment - - - - 20 20
Deferred income tax assets - - - - 180 180
Other assets - - - - 37 37
Total assets 25,261 10,078 31,343 150,943 275 217,900
Deposits from banks 67,578 19,296 2,414 557 - 89,845
Other deposits
Derivative financial instruments
25,818 4,373 4 31 - 30,226
and other trading liabilities 2,616 1,646 4,251 10,390 - 18,903
Due to customers 5,964 1,017 2,743 808 - 10,532
Debt securities in issue 288 10,224 22,601 29,763 - 62,876
Other borrowed funds - - - 2,271 - 2,271
Other liabilities - - - - 124 124
Current income tax liabilities - - - - 10 10
Deferred income tax liabilities - - - - 161 161
Retirement benefit obligations - - - - 1 1
Total liabilities 102,264 36,556 32,013 43,820 296 214,949
Net liquidity gap -77,003 -26,478 -670 107,123 -21 2,951
134

Risikoberichtbericht
As at 31 December 2006 Up to 3 3-12 1-5 Over 5 Non-financial
– Group . m months Months years years instruments Total
Assets
Cash and balances with central banks 1,712 31 - - - 1,743
Loans and advances to banks 8,286 4,300 7,477 14,645 - 34,708
Trading assets 8 76 869 358 - 1,311
Derivative financial instruments
Other financial assets
572 230 1,702 4,376 - 6,880
at fair value through profit or loss 456 153 1,295 171 - 2,075
Loans and advances to customers 3,934 7,347 21,894 92,072 - 125,247
Investment securities – available-for-sale 840 2,112 6,531 41,350 - 50,833
Intangible assets - - - - 53 53
Property, plant and equipment - - - - 26 26
Deferred income tax assets - - - - 39 39
Other assets - - - - 30 30
Total assets 15,808 14,249 39,768 152,972 148 222,945
Deposits from banks 53,354 7,175 1,225 1,445 - 63,199
Other deposits
Derivative financial instruments
27,125 3,989 - 4 - 31,118
and other trading liabilities 690 430 2,085 9,378 - 12,583
Due to customers 4,786 1,186 1,379 553 - 7,904
Debt securities in issue 6,089 9,432 43,791 43,545 - 102,857
Other borrowed funds 1 - 851 1,281 - 2,133
Other liabilities - - - - 100 100
Current income tax liabilities - - - - 69 69
Deferred income tax liabilities - - - - 141 141
Retirement benefit obligations - - - - 64 64
Total liabilities 92,045 22,212 49,331 56,206 374 220,168
Net liquidity gap -76,237 -7,963 -9,563 96,766 -226 2,777
135

Group Accounts
As at 31 December 2007 Up to 3 3-12 1-5 Over 5 Non-financial
– Company . m months Months years years instruments Total
Assets
Cash and balances with central banks 8,305 29 - - - 8,334
Loans and advances to banks 25,068 4,243 3,876 7,122 - 40,309
Trading assets 27 8 422 90 - 547
Derivative financial instruments
Other financial assets
791 352 810 6,937 - 8,890
at fair value through profit or loss - - 112 2,596 - 2,708
Loans and advances to customers 939 993 6,579 51,008 - 59,519
Investment securities – available-for-sale 667 2,032 2,412 25,543 - 30,654
Shares in Group undertakings - - - - 1,281 1,281
Intangible assets - - - - 22 22
Property, plant and equipment - - - - 17 17
Deferred income tax assets - - - - 20 20
Other assets - - - - 30 30
Total assets 35,797 7,657 14,211 93,296 1,370 152,331
Deposits from banks 63,222 18,166 2,863 3,748 - 87,999
Other deposits
Derivative financial instruments
25,386 4,066 4 31 - 29,487
and other trading liabilities 281 338 1,047 8,962 - 10,628
Due to customers 6,156 1,058 2,855 840 - 10,909
Debt securities in issue 235 1,288 5,399 2,321 - 9,243
Other borrowed funds - - - 1,160 - 1,160
Other liabilities - - - - 78 78
Current income tax liabilities - - - - 3 3
Deferred income tax liabilities - - - - 15 15
Retirement benefit obligations - - - - 1 1
Total liabilities 95,280 24,916 12,168 17,062 97 149,523
Net liquidity gap -59,483 -17,259 2,043 76,234 1,273 2,808
136

Risikoberichtbericht
As at 31 December 2006 Up to 3 3-12 1-5 Over 5 Non-financial
– Company . m
Assets
months Months years years instruments Total
Cash and balances with central banks 1,673 26 - - - 1,699
Loans and advances to banks 28,974 3,132 2,605 10,309 - 45,020
Trading assets - - 461 286 - 747
Derivative financial instruments
Other financial assets
335 132 514 5,242 - 6,223
at fair value through profit or loss 227 153 - 1,466 - 1,846
Loans and advances to customers 1,029 1,231 6,254 30,512 - 39,026
Investment securities – available-for-sale 636 1,522 2,043 28,274 - 32,475
Shares in Group undertakings - - - - 2,278 2,278
Intangible assets - - - - 9 9
Property, plant and equipment - - - - 16 16
Deferred income tax assets - - - - 21 21
Other assets - - - - 60 60
Total assets 32,874 6,196 11,877 76,089 2,384 129,420
Deposits from banks 61,778 6,216 1,273 1,770 - 71,037
Other deposits
Derivative financial instruments
27,125 3,989 - 4 - 31,118
and other trading liabilities 415 149 839 7,861 - 9,264
Due to customers 4,559 1,001 1,334 433 - 7,327
Debt securities in issue 578 2,150 2,477 1,771 - 6,976
Other borrowed funds - - - 971 - 971
Other liabilities - - - - 51 51
Current income tax liabilities - - - - 12 12
Deferred income tax liabilities - - - - 19 19
Retirement benefit obligations - - - - 3 3
Total liabilities 94,455 13,505 5,923 12,810 85 126,778
Net liquidity gap -61,581 -7,309 5,954 63,279 2,299 2,642
The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental
to the liquidity management of the Group. The maturities of assets and liabilities and the ability to replace, at an
acceptable cost, interest-bearing liabilities as they mature are important factors in assessing the liquidity of the
Group and its exposure to changes in interest rates and exchange rates.
137

Group Accounts
The following tables provide a maturity analysis of the cash flows contractually due on financial liabilities of the
Bank, as at 31 December 2007 and 31 December 2006. The analysis has been performed on the basis of gross
cashflows due in the future. The effects of taking into account the time value of money by discounting these flows
are not reflected
Up to 3 3-12 1-5 Over 5
As at 31 December 2007 – Group months Months years years
Debt securities in issue 1,388 11,336 29,325 42,895
Deposits from banks 70,077 19,795 3,062 764
Due to customers 6,267 1,214 3,133 1,650
Other borrowed funds 96 55 604 6,603
Other deposits 25,856 4,380 9 63
Derivative financial instruments and other trading liabilities 5,949 1,797 677 11,246
Total Cash Flows 109,633 38,577 36,810 63,221
Up to 3 3-12 1-5 Over 5
As at 31 December 2006 – Group* months Months years years
Debt securities in issue 6,112 3,768 21,001 36,373
Deposits from banks 48,144 6,874 1,347 1,711
Due to customers 4,603 1,109 1,488 882
Other borrowed funds 5 62 266 3,247
Other deposits 27,241 4,071 - 4
Derivative financial instruments and other trading liabilities 493 620 2,445 13,547
Total Cash Flows 86,598 16,504 26,547 55,764
* For comparability with current year figures, the prior year figures have been presented excluding DEPFA Deutsche Pfandbriefbank
AG.
Up to 3 3-12 1-5 Over 5
As at 31 December 2007 – Company months Months years years
Debt securities in issue 349 1,472 5,922 4,056
Deposits from banks 63,771 18,551 3,250 4,124
Due to customers 6,216 1,214 3,130 1,609
Other borrowed funds 15 49 253 1,839
Other deposits 25,485 4,144 9 63
Derivative financial instruments and other trading liabilities 404 -244 -394 13,121
Total Cash Flows 96,240 25,186 12,170 24,812
Up to 3 3-12 1-5 Over 5
As at 31 December 2006 – Company months Months years years
Debt securities in issue 599 2,322 2,817 4,877
Deposits from banks 61,815 7,219 1,489 1,861
Due to customers 4,603 1,103 1,488 882
Other borrowed funds 7 39 184 1,510
Other deposits 27,241 4,071 - 4
Derivative financial instruments and other trading liabilities 884 -303 -1,135 15,735
Total Cash Flows 95,149 14,451 4,843 24,869
138

Risikoberichtbericht
5. Operational Risk
The Basel Committee on Banking Supervision defines Operational Risk for regulatory and supervisory purposes as:
"the risk of loss resulting from inadequate or failed internal processes, people and systems or from external
events".
The Group has adopted this definition.
The risk is associated with human error, systems failure, and inadequate controls and procedures. The definition
includes legal risk but excludes strategic and reputational risk.
Operational risk, if unmitigated, may result in unavailability of service, information deficiencies, financial loss,
increased costs, loss of professional reputation and failure to retain or increase market share.
Increasingly, banking regulators require management to be in a position to demonstrate to them that they have
implemented a structured and formal approach to the management and measurement of operational risk. The
specific requirements for this are incorporated in the Basel II Accord and the EU Capital Requirements Directive.
The Bank’s primary aim is the early identification, recording, assessment, monitoring, prevention and mitigation of
operational risk, as well as timely and meaningful management reporting. The Bank’s approach to operational risk
is not designed to completely eliminate risk per se but, rather, to try and minimise unexpected loss. The Bank’s
approach aims to ensure that it has sufficient information to make informed decisions about additional controls,
adjustments to controls, or other risk responses. The HRE Group CRO and the HRE Group Head of Operational
Risk, who reports to her, are responsible for the independence, objectivity and effectiveness of the Group’s
operational risk framework.
Operational risk is inherent in most aspects of the Bank’s activities and comprises a large number of disparate
risks. Whilst market and credit risk are often chosen for the prospect of gain, operational risk is normally accepted
as a necessary consequence of doing business. In comparison to market or credit risk, the sources of operational
risk are difficult to identify comprehensively and the amount of risk is also intrinsically difficult to measure. The Bank
therefore manages operational risk differently from market and credit risk. The Bank believes that effective management
of operational risks requires ownership by the management responsible for the relevant business process.
Operational risk is thus controlled through a network of controls, procedures, reports and responsibilities. Within
the Bank, each individual business area and management level takes responsibility for its own operational risks and
provides adequate resources and procedures for the management of those risks.
In addition, the Bank has established a central function that focuses on the coordination of consistent policy, tools
and practices throughout DEPFA for the management, measurement, monitoring and reporting of relevant operational
risks. This function is also responsible for the overall operational risk measurement methodology, and
knowledge and experience are shared throughout the Bank to maintain a coordinated approach. The Bank uses a
risk-based approach to the design and implementation of its internal control framework, and this prioritises its
focus on risks that are potentially high impact.
139

Group Accounts
The Bank utilises a number of firm-wide risk processes and tools for the management, measurement, monitoring
and reporting of operational risk. These include:
Operational risk self-assessments - based on the identification of threats to business processes, the impact of
those threats and the subsequent evaluation of controls in place to mitigate the risk;
Risk event management - the collection, reporting and analysis of internal risk event data enables the Bank to
identify weak controls, ineffective processes or activities, and poor systems; and ensures that the Bank takes
appropriate action to mitigate any exposures;
Key risk indicator reporting - provide potential early warning of increased risk associated with non-attainment of
control objectives.
Targeted risk reviews – in partnership with the business, examine in depth predefined key areas of risk and
provide recommendations for risk mitigation;
New Business - The Group’s New Business Process is key to the assessment and management of risks pertaining
to potential new business initiatives and is co-ordinated by the New Business function within HRE Group
Operational Risk.
The totality of this information is reviewed to determine the operational risk profile of the organisation and the
actions required to address specific issues. Regular reports are made to the HRE Group CRO and the HRE Group
Risk Management Committee to allow senior management and the HRE Management Board to assess DEPFA’s
overall operational risk profile.
6. Internal Audit
The Group Internal Audit (“GIA”) function of HRE Group is an independent organisational function whose purpose
is to promote a culture of efficient and effective management and controls within all entities and functions of the
HRE Group.
GIA helps the HRE Group accomplish its objectives by bringing a systematic and disciplined approach to evaluating
and improving the effectiveness of risk management procedures, internal control systems, information systems
and governance processes. GIA is responsible for carrying out audits worldwide in line with the Audit Charter and
the Annual Audit Plan.
GIA is split on a divisional basis, with the main DEPFA activities falling under the Public Sector & Infrastructure
Finance business line. The Divisional Head of GIA for Public Sector & Infrastructure Finance reports to the Head of
GIA and also acts as the Head of Internal Audit for DEPFA Bank plc and in this capacity reports to the Audit Committee
of DEPFA Bank plc.
GIA has staff based in Munich, Dublin, Eschborn and New York and as a result has good local knowledge of the
business and being part of a larger department is better able to share skills and expertise. All auditors are obliged
to follow professional standards on Internal Auditing.
140

Risikoberichtbericht
7. Compliance
The Compliance department in DEPFA oversees the adherence to the principles set out by the Irish Financial
Regulator in relation to the Code of Practice of Credit Institutions and any relevant requirements from regulators
in other jurisdictions. The department also supports the implementation of certain internal governance rules and
policies set by the Board of Directors.
The department is managed by the Head of Compliance who is based in Dublin, and who reports directly to the
Board of Directors. In addition to this reporting line, the Compliance department is strongly embedded in the Group
Compliance function of HRE Group to ensure a group wide approach on all Compliance affairs and to ensure the
adherence to German laws which are applicable for subsidiaries of a German regulated institution. Compliance
Officers located in each of DEPFA’s legal entities report directly to the Head of Compliance.
The Compliance department is responsible for ensuring compliance with the various rules, guidance and legislation
pertaining to an Irish regulated bank. In addition, as a subsidiary of a Bank located and regulated in Germany,
DEPFA must comply with all relevant regulations applicable to a subsidiary of a German-regulated bank.
The Compliance function is also responsible for compliance with regulations such as the Markets in Financial
Instruments Directive, and the Anti-Money Laundering and Counter Terrorist Financing policy of the Group. The
policy aims to reduce the risk of regulatory sanction and reputational risk inherent in the discovery of money
laundering within a bank.
Compliance is also responsible for monitoring the regulatory agenda of the Irish Financial Regulator and any
impending regulatory changes.
141

Group Accounts
4. Critical accounting estimates and judgements
The Group believes that of its significant accounting policies and estimates, the following may involve a higher
degree of judgement and complexity.
Fair value of financial instruments
Some of the Group’s financial instruments are carried at fair value, including derivatives, available-for-sale investments
and loans and assets and liabilities at fair value through profit or loss. Fair values are based on quoted
market prices or appropriate pricing models. Where models are used, the methodology is to calculate the expected
cash flows and discount these back to a present value. The models use independently sourced parameters
including interest rate yield curves, equity prices, option volatility and currency rates. The calculation of fair value for
any instrument may require adjustment to reflect credit and other risk (where not embedded in the model used)
which may not be directly observable in the market place. The valuation model used for a specific instrument, the
quality, timeliness and liquidity of market data and the source and quantum of other adjustments, all require the
exercise of judgement. The use of different models or other assumptions could result in changes in reported
financial results.
Investment securities
Investment securities are included as either available-for-sale investments or loans and receivables.
Available-for-sale investments are valued at fair value using market values where available. Where market values
are not available, fair values are represented by the use of other means such as price quotations for similar investments,
or pricing models.
Loans and receivables have fixed or determinable payments, recover substantially all of their initial investment other
than for reasons of credit and must not be quoted in an active market. Due to the specialised market in which the
Group operates and the fact that the majority of the Group’s securities trades are done on a bilateral basis,
judgement is required as to whether an active market may be held to exist in a security. Details of the fair value of
financial assets not carried at fair value in the financial statements are disclosed in Note 46. If an active market was
held to exist for these assets, the movement in fair value, net of tax, would be posted to equity.
The Group conducts regular impairment reviews of its available-for-sale portfolio and considers indicators such as
downgrades in credit ratings or breaches of covenants as well as the application of judgement in determining
whether creation of a provision is appropriate. The use of different models or other assumptions and methods with
respect to the valuation of investment securities could result in changes in reported financial results.
142

Risikoberichtbericht
Taxation
The taxation charge includes for amounts due to fiscal authorities in the various territories in which the Group
operates and includes estimates based on a judgement of the application of law and practice in certain cases to
determine the quantification of any liabilities arising. In arriving at such estimates, management assesses the
relative merits and risks of tax treatments assumed, taking into account statutory, judicial and regulatory guidance
and, where appropriate, external advice.
Impairment provisions
Where there is a risk that the Group will not receive full repayment of the amount advanced, provisions are made
in the financial statements to reduce the carrying value of loans and receivables to the amount expected to be
recovered. The estimation of credit losses is inherently uncertain and depends on many factors such as general
economic conditions, cash flows, structural changes and other external factors.
The calculation of specific provisions is based on discounted cash flows. Certain aspects of this process may
require estimation, such as the amounts and timing of future cash flows.
The Group considers that the provisions for impairment were adequate based on information available at that time.
However, actual losses may differ as a result of changes in the timing and amounts of cash flows or other economic
events.
Securitisations and special purpose vehicles
The Group sponsors the formation of special purpose vehicles (“SPVs”) primarily for the purpose of allowing clients
to hold investments, for securitisations transactions, and for buying or selling credit protection. The Group does not
consolidate SPVs that it does not control. As it can sometimes be difficult to determine whether the Group controls
the SPV, it makes judgements about its exposure to the risks and rewards, as well as its ability to make operational
decisions for the SPV in question.
143

Group Accounts
5. Business segments
The Group is organised on a worldwide basis into the following main business segments:
Budget Finance
The Budget Finance segment incorporates the traditional public finance lending business of DEPFA in the form of
bond and loan financing with public sector authorities. The Group does not take any interest rate risks within this
segment. It also includes all of the Group’s funding positions which are recharged to other segments at agreed
rates. Unhedged public sector loans and bonds are included in Global Markets.
Client Product Services
This area of business comprises the provision of various forms of balance sheet financing as well as off-balance
sheet products and services to customers. This segment relates specifically to derivative products, structured
transactions, securitisation and advisory services.
Global Markets
Global Markets consists of the Group´s unhedged loan and bond books and the Group´s trading activities.
Infrastructure Finance
Infrastructure Finance relates to financing of infrastructure projects. DEPFA focuses on essential infrastructure i.e.
roads, bridges, tunnels and public buildings.
Corporate Centre
This area contains overhead costs, project costs as well as surplus capital. In addition, the corporate centre
segment under discontinued operations includes the residual property portfolio of DEPFA Deutsche Pfand -
briefbank AG.
Segment assets and liabilities are those assets and liabilities that are directly attributable to the operating activities
of the segment.
Expenses incurred centrally, including expenses incurred by support, administrative and back office functions are
charged to the business segments where practical in accordance with their estimated proportionate share of overall
activities. Unallocated expenses are retained at the corporate centre.
The presentation below is for continuing operations. Discontinued operations segmental result is disclosed in Note
14 to the financial statements.
144

Risikoberichtbericht
Corporate
Infra- Client Centre/
Budget structure Product Global Consolida-
€ m Finance Finance Services Markets tion items Group
Net interest income 268 97 27 -50 -33 309
Non interest revenues 239 24 33 -72 -4 220
Total revenues 507 121 60 -122 -37 529
Total expenditure -92 -30 -48 -23 -179 -372
Impairment losses on loans and advances - - - - - -
Profit before tax 415 91 12 -145 -216 157
Taxation -29
Profit for the year 128
Balance sheet
Assets 162,163 12,505 14,141 28,740 351 217,900
Liabilities 160,723 11,716 14,037 28,152 321 214,949
Corporate
Infra- Client Centre/
Budget structure Product Global Consolida-
€ m Finance Finance Services Markets tion items Group
Net interest income 247 39 2 59 -33 314
Non interest revenues 169 16 59 85 7 336
Total revenues 416 55 61 144 -26 650
Total expenditure -73 -18 -21 -22 -66 -200
Impairment losses on loans and advances - - - - - -
Profit before tax 343 37 40 122 -92 450
Taxation -107
Profit for the year 343
Balance sheet
Assets 192,256 5,895 2,589 17,074 5,131 222,945
Liabilities 190,737 5,502 2,512 16,506 4,911 220,168
2007
2006
145

Group Accounts
The Group’s secondary segments are geographical in nature. For this purpose, a distinction is made between
”Ireland”, “Germany” and “Other” based on the registered office or location of the respective Group company or
branch office.
The calculation of results is based on the assumption that the Group companies in the region are legally independent
units responsible for their respective operations.
€ m
Revenues 2007
Ireland Germany Other Consolidation Total
(continuing operations) 523 9 155 -158 529
Total assets at 31 December 2007 209,299 4 31,454 -22,857 217,900
€ m
Revenues 2006
Ireland Germany Other Consolidation Total
(continuing operations) 503 1 152 -6 650
Total assets at 31 December 2006 154,936 63,916 22,657 -18,564 222,945
146

6. Net interest income
Interest and similar income
Risikoberichtbericht
Interest and similar income and interest expense and similar charges are generated by the following classes of
financial instruments
Interest income on impaired loans amounted to nil (2006: nil).
2007 2006
€ m € m
Loans and advances 4,809 3,618
Other lending business and money market transactions 850 545
Fixed income securities 1,167 1,434
Interest expense and similar charges
6,826 5,597
Asset covered bonds -1,429 -1,303
Other debt securities -442 -380
Borrowings -268 -152
Subordinated debt -89 -46
Other banking transactions -4,289 -3,402
Interest and similar income
-6,517 -5,283
2007 2006
€ m € m
Financial assets at fair value through profit or loss 120 21
Available-for-sale investment securities 1,167 1,434
Loans and advances 5,539 4,142
Interest expense and similar charges
6,826 5,597
Other financial liabilities -6,720 -4,918
Derivatives (net) 203 -365
-6,517 -5,283
147

Group Accounts
7. Net fee and commission income
Fee and commission income
None of the above fees arose on either trust or fiduciary activities that result in the holding or investing of assets on
behalf of individuals, trusts, retirement benefit plans, and other institutions.
None of the above fee income arose on instruments that have been designated at fair value through profit or loss.
8. Net trading income
9. Gains less losses from financial assets
Gain less losses from financial assets reflect income from the sale of non-trading book financial assets and
amounted to €218 million (2006: €159 million).
Gains and losses from financial assets can be split by IAS 39 category as follows:
148
2007 2006
€ m € m
Commission income from liquidity facilities 20 22
Other fees 29 18
Fee and commission expense
49 40
Fees paid -7 -6
-7 -6
2007 2006
€ m € m
Securities and derivatives held for trading -49 144
Foreign exchange transaction gains less losses -1 -3
-50 141
2007 2006
€ m € m
Financial assets at fair value through profit or loss - -
Available-for-sale investment securities 143 112
Loans and receivables 75 47
218 159

10. Other operating income
Other operating income consists mainly of gains on buy-backs of debt securities issued.
11. Operating expenses
Risikoberichtbericht
2007 2006
€ m € m
Other operating income 10 2
10 2
2007 2006
€ m € m
Staff costs (Note 12) -223 -127
Administrative expenses -135 -66
Depreciation and amortisation -10 -7
Other operating expenditure -4 -
-372 -200
Included in operating expenses are exceptional costs of €88 million (2006: nil) arising on the change of control
which took place during the year, analysed as follows:
Other administrative expenses consist mainly of professional fees incurred in relation to the change of control.
Operating expenses also include auditors’ remuneration of €2 million (2006: €2million) and operating lease rentals
of €12 million (2006: €11 million).
2007
Staff costs (note 12) 56
Administrative expenses 32
€ m
88
149

Group Accounts
12. Staff costs
The average number of persons employed by the Group during the year was 707 (2006: 580).
Included under wages and salaries is share compensation cost amounting to €73 million (2006: €31 million), of
which €39 million relates to the accelerated share scheme expense arising on the change of control.
In addition, included in staff costs for the current year are restructuring expenses of €17 million arising on the
change of control.
13. Taxation
2007 2006
€ m € m
Current tax -24 -79
Deferred tax -5 -28
-29 -107
Further information about deferred income tax is presented in Note 32. The tax on the Group’s profit before tax
differs from the theoretical amount that would arise using the basic tax rate of the parent as follows:
150
2007 2006
€ m € m
Wages and salaries -198 -115
Social security costs -17 -5
Pension costs:
– defined contribution plans -6 -4
– defined benefit plans (Note 33) -2 -3
-223 -127
2007 2006
€ m € m
Profit before tax 157 450
Tax calculated at a tax rate of 12.5% (2006: 12.5%) -20 -56
Effect of different tax rates in Ireland 11 -8
Effect of different tax rates in other countries -20 -43
Income tax expense -29 -107

Risikoberichtbericht
14. Result from discontinued operations
On 31 December 2007, the Group sold its wholly owned subsidiary DEPFA Deutsche Pfandbriefbank AG to
another HRE Group entity as part of a group restructuring. Cash consideration of €1,218 million was received for
net assets with a book value of €1,241 million, resulting in a loss on disposal of €23 million. This loss is not tax
deductible for Irish tax purposes so there is no related tax charge or credit.
2007 2006
€ m € m
Interest and similar income 2,676 3,069
Interest expense and similar charges -2,593 -2,958
Net interest income 83 111
Fee and commission income 2 1
Fee and commission expense -3 -3
Net fee and commission income -1 -2
Net trading income -2 -1
Gains less losses from financial assets 131 118
Other operating income 19 37
Total operating income 230 263
Operating expenses -32 -74
Net operating profit before impairment losses 198 189
Impairment losses on loans and advances - -
Operating Profit/Profit before taxation 198 189
Taxation 6 -6
Operating result from discontinued operations 204 183
Loss on disposal of discontinued operations -23 -
Result from discontinued operations 181 183
151

Group Accounts
The above income statement is analysed as follows:
Net interest income
152
2007 2006
Interest and similar income € m € m
Loans and advances 1,896 2,177
Other lending business and money market transactions 262 267
Fixed income securities 518 625
Interest expense and similar charges
2,676 3,069
Asset covered bonds -2,077 -2,224
Other debt securities -77 -92
Borrowing -28 -32
Subordinated debt -63 -65
Other banking transactions -348 -545
Net fee and commission income
-2,593 -2,958
2007 2006
Fee and commission income € m € m
Other fees 2 1
Fee and commission expense
2 1
Fees paid -3 -3
-3 -3
Net trading income 2007 2006
€ m € m
Securities and derivatives held for trading -1 1
Foreign exchange transaction gains less losses -1 -2
-2 -1
Other operating income 2007 2006
€ m € m
Intercompany recharges 4 2
Other operating income 15 35
19 37

Risikoberichtbericht
Operating expenses 2007 2006
€ m € m
Staff costs -13 -11
Administrative expenses -15 -17
Depreciation and amortisation -3 -2
Other operating expenditure -1 -44
-32 -74
Staff costs 2007 2006
€ m € m
Wages and salaries -12 -7
Social security costs
Pension costs
-1 -1
- defined benefit plans - -3
-13 -11
Taxation 2007 2006
€ m € m
Current tax 10 28
Deferred tax -4 -34
6 -6
153

Group Accounts
The segmental result from discontinued operations is analysed as follows:
2007
Infra- Client
Corporate
Centre/
Budget structure Product Global Consolida-
€ m Finance Finance Services Markets tion items Group
Net interest income 80 - - - 3 83
Non interest revenues 129 - - -2 20 147
Total revenues 209 - - -2 23 230
Total expenditure -11 -1 -3 - -40 -55
Impairment losses on loans and advances - - - - - -
Profit before tax 198 -1 -3 -2 -17 175
Taxation 6
Profit for the year 181
2006
Infra- Client
Corporate
Centre/
Budget structure Product Global Consolida-
€ m Finance Finance Services Markets tion items Group
Net interest income 109 - - - 2 111
Non interest revenues 114 - - - 38 152
Total revenues 223 - - - 40 263
Total expenditure -11 -1 -3 - -59 -74
Impairment losses on loans and advances - - - - - -
Profit before tax 212 -1 -3 - -19 189
Taxation -6
Profit for the year 183
154

Cashflows from discontinued operations consisted of the following:
The effects of the disposal on the financial position of the Group are as follows:
Risikoberichtbericht
2007 2006
€ m € m
Net cash from operating activities -66 -893
Net cash from investing activities 710 -6
Net cash from financing activities - -
644 -899
Cash and balances with central banks 42
Loans and advances to banks 11,220
Derivative financial instruments 2,161
Loans and advances to customers 31,168
Investment securities – available-for-sale 11,097
Intangible assets 46
Property, plant and equipment 5
Deferred income tax assets 9
Other assets 20
Deposits from banks -3,353
Derivative financial instruments and other trading liabilities -2,734
Due to customers -356
Debt securities in issue -45,703
Other borrowed funds -2,156
Other liabilities -24
Current income tax liabilities -60
Deferred income tax liabilities -82
Retirement benefit obligations -59
Net identifiable assets and liabilities 1,241
Consideration received in cash 1,218
Loss on disposal of discontinued operation -23
€ m
155

Group Accounts
15. Cash and balances with central banks
Balances with central banks other than
156
Group Company
2007 2006 2007 2006
€ m € m € m € m
mandatory reserve deposits 8,312 808 8,305 804
Mandatory reserve deposits with central banks 114 935 29 895
8,426 1,743 8,334 1,699
Mandatory reserve deposits are not available for use in the Group’s day to day operations.
16. Loans and advances to banks
Group Company
2007 2006 2007 2006
€ m € m € m € m
Public sector loans 15,017 23,669 10,383 8,924
Term deposits 484 2,641 4,362 1,955
Reverse repurchase agreements 6,242 1,574 6,264 1,371
Cash collateral 3,416 5,938 2,842 3,655
Other loans and advances 3,837 886 16,458 29,115
28,996 34,708 40,309 45,020
Of which due from group companies 1,824 - 16,209 28,582
Balances due from group companies in the Group balance sheet include amounts receivable from other HRE
Group entities.

17. Trading assets
18. Derivative financial instruments and other trading liabilities
Risikoberichtbericht
Group Company
2007 2006 2007 2006
€ m € m € m € m
Loans and advances 2,398 - 232 -
Debt securities 11,176 1,311 315 747
Total trading assets 13,574 1,311 547 747
Debt securities are analysed by counterparty as follows:
Group Company
2007 2006 2007 2006
Debt securities € m € m € m € m
Government and other public sector securities 2,187 1,311 197 747
Other securities 8,989 - 118 -
Total trading debt securities 11,176 1,311 315 747
Assets
Group Company
2007 2006 2007 2006
€ m € m € m € m
Derivatives 8,444 6,880 8,890 6,223
Liabilities
8,444 6,880 8,890 6,223
Derivatives 11,370 11,995 10,532 8,704
Short positions 7,533 588 96 560
18,903 12,583 10,628 9,264
157

Group Accounts
Derivatives are contracts or agreements whose values are determined on the basis of changes in an underlying,
such as interest rates, foreign exchange rates, securities prices, financial and commodity indices or other variables.
The timing of cash receipts and payments for derivatives is generally determined by contractual agreement.
Derivatives are either standardised contracts traded on exchanges or over-the-counter (OTC) contracts agreed
individually by the parties to the contract. Futures and certain options are examples of standard exchange-traded
derivatives. Forwards, swaps, and other option contracts are examples of OTC derivatives. OTC derivatives are not
freely tradable. In the normal course of business, however, they may be terminated or assigned to another
counterparty if the current party to the contract agrees.
Derivatives may be used for trading purposes or for risk management purposes. The Group uses derivative financial
instruments primarily as a means of hedging the risk associated with asset/liability management in the context
of interest bearing transactions. Interest rate derivatives are primarily entered into to hedge the fair value interest
rate risk in fixed-rate available-for-sale securities, loans extended, promissory note loans and debt securities in
issue. Derivatives are also entered into, to a smaller extent, for the purpose of hedging foreign currency risks.
Foreign exchange risks are primarily hedged by means of suitable fair value hedges for available-for-sale securities,
loans extended and debt securities in issue. However, some derivatives used for risk management purposes do not
qualify for hedge accounting and are therefore classified as part of the “trading portfolio” in the Group financial
statements.
Derivatives used by the Group include:
Interest rate and currency swaps
Interest rate futures, FRAs and interest rate options
Forward foreign exchange contracts
Credit default swaps
Interest rate swaps involve the exchange of fixed and variable rate interest payments between two parties at
specified times based on a common nominal amount and maturity date. The nominal amounts are normally not
exchanged.
Cross currency swaps have nominal amounts in two different currencies. The interest is paid in these two currencies.
An exchange of the nominal amount often takes place at the beginning and at the end of the contract.
Interest rate options are contracts that allow the purchaser to enter into contracts on financial instruments or to buy
or sell an underlying, at a specified price at a specified point of time. The option writer is obligated to buy, sell or
enter into a financial instrument, if the purchaser chooses to exercise the option. Option contracts purchased or
written by the Group include caps and floors, which are interest rate hedging instruments, as the agreed payment
covers the difference in interest between the agreed interest rate and the market rate. Exposure to current and
future movements in interest rates and the ability of the counterparties to meet the terms of the contracts represent
the primary risks associated with interest rate options.
158

Risikoberichtbericht
Futures are standardised exchange-traded contracts to receive or sell a specific financial instrument at a specific
future date and price. FRAs (forward rate agreements) provide for the payment or receipt of the difference between
a specified interest rate and reference rate at a future trade date. Interest rate risks reflect the material risks associated
with such contracts. Where these are OTC transactions, counterparty default risk also exists.
Forward foreign exchange contracts involve an agreement to exchange two currencies at a specific price and date
agreed in advance. Exposure to changes in foreign currency exchange rates and foreign interest rates and the
counterparty default risk are the primary risks associated with forward foreign exchange contracts.
Credit default swaps are contracts which transfer credit risk on an underlying reference asset or group of assets
from one party to another in exchange for a fee. The material risk from credit default swaps is exposure to changes
in the credit risk of the underlying reference asset and the ability of the counterparties to meet the terms of the
contracts.
The notional amounts of certain types of financial instruments provide a basis for comparison with instruments
recognised on the balance sheet but do not necessarily indicate the amounts of future cash flows involved or the
current fair value of the instruments and, therefore, do not indicate the Group’s exposure to credit or price risks.
The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in
market factors such as interest rates or foreign exchange rates relative to their terms. The aggregate contractual or
notional amount of derivative financial instruments on hand, the extent to which instruments are favourable or
unfavourable, and thus the aggregate fair values of derivative financial assets and liabilities, can fluctuate
significantly from time to time. The fair values of derivative instruments held are set out below.
159

Group Accounts
At 31 December 2007 Group Company
1) Derivatives held for trading
160
Fair values Fair values
Contract/ Contract/
notional notional
amount Assets Liabilities amount Assets Liabilities
€ m € m € m € m € m € m
Interest rate and currency swaps 203,106 4,275 3,974 269,450 6,787 6,515
Interest rate futures 4,685 10 1 2,453 4 -
Interest forward rate agreements 459 - - 459 - -
Interest rate options purchased 3,464 15 13 2,138 1 -
Interest rate options written 3,929 - 4 79 - 4
Other interest rate derivative contracts 6,093 18 14 286 2 -
Foreign exchange contracts 30,761 369 267 30,230 355 261
Credit derivatives 49,919 518 444 17,251 63 91
Other derivatives 1,601 7 50 - - -
2) Derivatives held for hedging
a) Derivatives designated as fair value hedges
304,017 5,212 4,767 322,346 7,212 6,871
Interest rate and currency swaps 162,355 3,184 6,098 68,536 1,678 3,169
Interest rate options purchased 221 - 1 - - -
Foreign exchange contracts 2,995 48 12 - - -
b) Derivatives designated as cash flow hedges
165,571 3,232 6,111 68,536 1,678 3,169
Interest rate and currency swaps 1,533 - 492 1,533 - 492
1,533 - 492 1,533 - 492
Total derivative assets/
(liabilities) held for hedging 167,104 3,232 6,603 70,069 1,678 3,661
Total recognised
derivative assets/(liabilities) 471,121 8,444 11,370 392,415 8,890 10,532

Risikoberichtbericht
At 31 December 2006 Group Company
1) Derivatives held for trading
Fair values Fair values
Contract/ Contract/
notional notional
amount Assets Liabilities amount Assets Liabilities
€ m € m € m € m € m € m
Interest rate and currency swaps 97,149 2,906 2,847 219,893 4,773 4,756
Interest rate futures 6,286 1 5 6,286 1 5
Interest rate options purchased 4,645 23 3 4,601 22 3
Interest rate options written 5,777 1 32 5,722 1 32
Other interest rate derivative contracts 3,043 18 3 2,822 18 3
Foreign exchange contracts 13,457 66 196 11,079 56 179
Credit derivatives 14,513 57 10 15,206 17 3
2) Derivatives held for hedging
a) Derivatives designated as fair value hedges
144,870 3,072 3,096 265,609 4,888 4,981
Interest rate and currency swaps 217,566 3,806 8,468 61,123 1,333 3,298
b) Derivatives designated as cash flow hedges
217,566 3,806 8,468 61,123 1,333 3,298
Interest rate and currency swaps 1,936 2 431 1,906 2 425
1,936 2 431 1,906 2 425
Total derivative assets/
(liabilities) held for hedging 219,502 3,808 8,899 63,029 1,335 3,723
Total recognised
derivative assets/(liabilities) 364,372 6,880 11,995 328,638 6,223 8,704
161

Group Accounts
19. Other financial assets at fair value through profit or loss
The loans and advances consist of a portfolio of loans that have been designated as at fair value through profit or
loss to reduce the measurement inconsistency with the relevant offsetting derivative, which is an economic hedge
of the position.
The portfolio of debt securities have also been designated at fair value through profit or loss to reduce the
measurement inconsistency with the relevant offsetting derivative, which is an economic hedge of the position.
In 2007, the loans and advances designated as at fair value through profit or loss had a fair value change of -€4
million attributable to a change in the credit risk of the asset (2006: nil). This was offset by a fair value move on the
credit derivative of €4 million.
The above change in the fair value of the loans and advances that is attributable to credit risk has been
determined as the amount of the change in the fair value that is not attributable to changes in market conditions
that give rise to market risk.
The Group regards the book value of the above loans and advances as the maximum exposure to credit risk on
these assets. This credit exposure is reduced by €564 million by the related credit derivative noted above.
20. Loans and advances to customers
162
Group Company
2007 2006 2007 2006
€ m € m € m € m
Loans and advances 569 551 569 569
Debt securities 3,848 1,524 2,139 1,277
4,417 2,075 2,708 1,846
Group Company
2007 2006 2007 2006
€ m € m € m € m
Public sector and infrastructure loans 109,696 123,417 59,503 39,028
Term deposits 671 1 10 1
Reverse repurchase agreements 9 6 9 -
Property loans 279 1,846 - -
110,655 125,270 59,522 39,029
Allowances for losses on loans and advances -7 -23 -3 -3
110,648 125,247 59,519 39,026
Of which due from group companies - - - -

Allowance for losses on loans and advances
Movement in allowance for losses on loans and advances:
The total allowance for losses on loans and advances is made up as follows:
Interest accrued on impaired loans at 31 December 2007 amounted to nil (2006: nil).
21. Investment securities available-for-sale
Risikoberichtbericht
Group Company
2007 2006 2007 2006
€ m € m € m € m
Balance at 1 January -23 -26 -3 -3
Impairment losses - - - -
Loan transfers - -3 - -
Disposal of discontinued operations 20 - - -
Acquisition under common control -4 - - -
Balance at 31 December -7 -23 -3 -3
Group Company
2007 2006 2007 2006
€ m € m € m € m
Public sector and infrastructure loans 7 3 3 3
Property loans - 20 - -
Securities available-for-sale
Debt securities – at fair value :
7 23 3 3
Group Company
2007 2006 2007 2006
€ m € m € m € m
– listed 37,228 41,276 27,346 27,047
– unlisted 5,891 9,537 3,307 5,408
Equity securities – at fair value:
– listed 1 - 1 -
– unlisted - 20 - 20
Total securities available-for-sale 43,120 50,833 30,654 32,475
Net gains on disposal of investment securities for the year amounted to €182 million (2006: €213 million).
163

Group Accounts
The movement in investment securities may be summarised as follows:
The investment securities balance at 31 December is analysed by counterparty risk below:
22. Shares in Group undertakings
164
Group Company Group Company
Available-for-sale
2007 2007 2006 2006
€ m € m € m € m
At 1 January 50,833 32,475 58,776 34,718
Exchange differences on monetary assets -1,060 -767 -1,250 -930
Additions 28,212 22,654 13,767 12,098
Acquisitions under common control (note 47) 8,332 - - -
Disposals (sale and redemption) -29,962 -22,385 - 18,989 -14,445
Gains/(losses) from changes in fair value -2,138 -1,323 -1,471 1,034
Disposal of discontinued operations -11,097 - - -
At 31 December 43,120 30,654 50,833 32,475
Group
2007 2006
€ m € m
AFS-debt AFS-equity Total AFS AFS-debt AFS-equity Total AFS
securities securities securities securities securities securities
Government bonds 34,025 - 34,025 45,820 - 45,820
Local government bonds 2,196 - 2,196 3,795 - 3,795
Other bonds and notes 6,898 1 6,899 1,198 20 1,218
Total 43,119 1 43,120 50,813 20 50,833
Company
2007 2006
€ m € m
AFS-debt AFS-equity Total AFS AFS-debt AFS-equity Total AFS
securities securities securities securities securities securities
Government bonds 28,188 - 28,188 30,352 - 30,352
Local government bonds 1,582 - 1,582 1,788 - 1,788
Other bonds and notes 883 1 884 315 20 335
Total 30,653 1 30,654 32,455 20 32,475
Company
2007 2006
€ m € m
At 1 January 2,278 2,305
Additions 949 -
Capital repayments -728 -
Impairment of investment - -27
Disposals -1,218 -
At 31 December 1,281 2,278

Shares in Group undertakings are included in the financial statements on a historical cost basis.
The Group undertakings at 31 December 2007 were:
Risikoberichtbericht
Name Principal Activity Country of Registered Office Share in
Incorporation Capital
DEPFA Bank Europe plc Public Finance Banking Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA Investment Bank Ltd Advisory services and placement of securities Cyprus 10 Diomidous Street, 2024 Nicosia, Cyprus 100%
DEPFA ACS Bank Issuance and ongoing administration
of asset covered securities
Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA First Albany Securities LLC Securities Broker/Dealer USA 623 Fifth Avenue,22nd Floor NY 10022, USA 100%
DEPFA Bank plc Purchase of shares for Incentive Jersey 1 Commons Street, Dublin 1, Ireland -
Deferred Stock Trust Compensation Programme
DEPFA Asset Management Asset management Romania 155 Calea Victoriei Street, 90%
Romania S.A. Building D1, Bucharest, Romania
DEPFA Royalty Management Ltd
(formerly DEPFA Asset
Management Ireland Ltd)
Dormant Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA International Holdings GmbH
(in liquidiation)
Holding Company Germany An der Welle 5, 60322 Frankfurt, Germany 100%
DEPFA Erste GmbH Dormant Germany An der Welle 5, 60322 Frankfurt, Germany 100%
Nebra Hold One Ltd
(formerly DEPFA Assurance Ltd)
Financial Guaranty (dormant) Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA Hold Six Ltd Holding Company Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA Ireland Holding Holding Company Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA Funding II LP Special purpose vehicle for Tier I Capital raising UK 105 Wigmore Street London W1U 1QY, UK 100%
DEPFA Funding III LP Special purpose vehicle for Tier I Capital raising UK 105 Wigmore Street London W1U 1QY, UK 100%
DEPFA Funding IV LP Special purpose vehicle for Tier I Capital raising UK 105 Wigmore Street London W1U 1QY, UK 100%
DEPFA Hold One Ltd Holding Company Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA Hold Two Ltd Holding Company Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA Hold Three Ltd Holding Company Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA Hold Four Ltd Holding Company Ireland 1 Commons Street, Dublin 1, Ireland 100%
DEPFA Holdings B.V Holding Company Netherlands Herengracht 551,1017 BW Amsterdam,Netherlands 100%
DBE Property Holdings Ltd Procurement of office equipment Ireland 1 Commons Street, Dublin 1, Ireland -
Depfa Bank Representaçoes Ltda Representation of Depfa Bank plc Brazil Av. Brig. Faria Lima, 201 13th Floor – 100%
in Brazil Suite 131, 05426-100 Sao Paulo, SP, Brazil
The India Dept Opportunities Investing in public sector Mauritius c/o International Fund Services Limited, IFS 100%
Fund Ltd securities in India Court, Twenty Eight, Cybercity, Ebene, Mauritius
Green Finance S.r.l Special purpose vehicle for Italy Via Eleonora Duse 53, 00197 Rome, -
lending business Italy
Third Essential Public Infrastructure Special purpose vehicle Germany c/o Wilmington Trust SP Services (Frankfurt) -
Capital GbmH for securitisation GmbH, Steinweg 3-5, 60313 Frankfurt, Germany
Hypo Public Finance Bank Public Finance Banking and Ireland 3 Harbourmaster Place, IFSC, Dublin 1, 99.99%
Capital Markets activities Ireland
Collineo Asset Asset management Germany Beishhoffstrasse 4, Dortmund 44137, 100%
Management GmbH Germany
Hypo Dublin Properties Ltd Property Management Services Ireland 3 Harbourmaster Place, IFSC, Dublin 1, Ireland 100%
Hypo Public Finance USA Inc. Public Finance Banking USA 522 Third Avenue, New York, NY 10017, USA 100%
Collineo Asset Management USA Inc. Asset management USA 522 Third Avenue, New York, NY 10017, USA 100%
Hypo Capital Markets Inc. Securities Broker/Dealer USA 522 Third Avenue, New York, NY 10017, USA 100%
Hypo Pfandbrief Bank International S.A. Public Finance Banking Luxembourg 4 Rue Alphonse Weicker, 2099 Luxembourg 99.99%
165

Group Accounts
23. Intangible assets
Other Other
intangible intangible
€ m Goodwill assets Total Goodwill assets Total
Cost Group Group Group Company Company Company
At 1 January 2006 51 4 55 7 3 10
Additions - 1 1 - - -
Disposals - -3 -3 - -1 -1
At 31 December 2006 51 2 53 7 2 9
Accumulated depreciation
At 1 January 2006 - - - - - -
Disposals - - - - - -
Amortisation charge for year - - - - - -
At 31 December 2006 - - - - - -
Net book value
At 31 December 2006 51 2 53 7 2 9
€ m
Cost
At 1 January 2007 51 2 53 7 2 9
Additions 9 6 15 10 6 16
Acquisition under common control 10 20 30 - - -
Disposals of discontinued operations -45 -1 -46 - - -
At 31 December 2007 25 27 52 17 8 25
Accumulated depreciation
At 1 January 2007 - - - - - -
Acquisition under common control - 10 10 - - -
Disposals of discontinued operations - - - - - -
Amortisation charge for year - 4 4 - 3 3
At 31 December 2007 - 14 14 - 3 3
Net book value
At 31 December 2007 25 13 38 17 5 22
166

24. Property, plant and equipment
Risikoberichtbericht
Land and Fixtures Land and Fixtures
€ m property and fittings Total property and fittings Total
Cost Group Group Group Company Company Company
At 1January 2006 2 43 45 - 28 28
Additions - 13 13 - 4 4
Disposals - -6 -6 - -2 -2
At 31 December 2006 2 50 52 - 30 30
Accumulated depreciation
At 1January 2006 - 21 21 - 10 10
Disposals - -4 -4 - -1 -1
Charge for year - 9 9 - 5 5
At 31 December 2006 - 26 26 - 14 14
Net book value
At 31 December 2006 2 24 26 - 16 16
€ m
Cost
At 1January 2007 2 50 52 - 30 30
Additions - 9 9 - 8 8
Acquisition under common control - 4 4 - - -
Disposals -2 -1 -3 - -1 -1
Disposal of discontinued operations - -11 -11 - - -
At 31 December 2007 - 51 51 - 37 37
Accumulated depreciation
At 1January 2007 - 26 26 - 14 14
Acquisition under common control - 2 2 - - -
Disposal of discontinued operations - -6 -6 - - -
Charge for year - 9 9 - 6 6
At 31 December 2007 - 31 31 - 20 20
Net book value
At 31 December 2007 - 20 20 - 17 17
167

Group Accounts
25. Other assets
Balances due from group companies in the Group balance sheet include amounts receivable from other entities in
the HRE Group.
26. Deposits from banks
Balances due to group companies in the Group balance sheet include amounts owed to other HRE Group entities.
27. Other deposits
Money market securities consist primarily of commercial paper issues and certificates of deposit.
28. Due to customers
168
Group Company
2007 2006 2007 2006
€ m € m € m € m
Accounts receivable and prepayments 2 2 1 20
Accrued income 2 1 1 1
Other 33 27 28 39
37 30 30 60
Of which due from group companies 3 - 16 20
Group Company
2007 2006 2007 2006
€ m € m € m € m
Term deposits 12,163 13,782 12,637 10,859
Call deposits 257 1,757 257 1,582
Repurchase agreements 60,777 42,477 50,389 39,345
Other liabilities 16,648 5,183 24,716 19,251
89,845 63,199 87,999 71,037
Of which due to group companies 2,714 - 11,494 15,501
Group Company
2007 2006 2007 2006
€ m € m € m € m
Money market securities 30,226 31,118 29,487 31,118
30,226 31,118 29,487 31,118
Group Company
2007 2006 2007 2006
€ m € m € m € m
Term deposits 6,700 4,728 6,700 4,421
Call deposits - 689 - 689
Repurchase agreements 255 85 204 85
Other liabilities 3,577 2,402 4,005 2,132
10,532 7,904 10,909 7,327
Of which due to group companies - - - -

29. Debt securities in issue
30. Other borrowed funds
Risikoberichtbericht
Group Company
2007 2006 2007 2006
€ m € m € m € m
Public sector covered bonds 51,359 93,440 - -
Other covered bonds 1,332 392 598 -
Other debt securities in issue 10,185 9,025 8,645 6,976
62,876 102,857 9,243 6,976
Group Company
2007 2006 2007 2006
€ m € m € m € m
Subordinated debt 2,271 1,186 1,160 971
Profit participation certificates - 947 - -
2,271 2,133 1,160 971
Of which due to group companies 511 - 630 471
The subordinated debt and profit participation certificates are analysed by nominal, maturity and interest rate
below:
Group
Interest rate % 2007 2006
Nominal € m Nominal € m
Subordinated notes
DEPFA Bank plc 15/12/15 Euribor + 0.2% 500 500
DEPFA Funding II LP, perpetual note 6.5% 400 400
DEPFA Funding III LP, perpetual note 7% until 2008, thereafter CMS 10 yr + 0.1% 300 300
DEPFA Funding IV LP, perpetual note 5.029% until 2017, thereafter Euribor + 1.87% 500 -
Hypo Public Finance Bank, perpetual note Euribor + 1% 360 -
Hypo Public Finance Bank, 28/11/16 Euribor + 0.52% 40 -
Hypo Public Finance Bank, 21/11/16 Euribor + 0.52% 110 -
Hypo Public Finance Bank, 18/05/26 6.800% 25 -
2,235 1,200
Profit participation certificates
1986 DEPFA Deutsche Pfandbriefbank AG 31/12/10 7.5% - 102
1994 DEPFA Deutsche Pfandbriefbank AG 31/12/08 6.5% - 256
1996 DEPFA Deutsche Pfandbriefbank AG 31/12/11 7.65% - 383
2000 DEPFA Deutsche Pfandbriefbank AG from 31/12/09 7.44-7.56% - 45
2003 DEPFA Deutsche Pfandbriefbank AG from 31/12/09 7.75-7.82% - 77
- 863
2,235 2,063
The Group has not had any defaults of principal, interest or redemption amounts during the period on its borrowed
funds (2006: nil).
169

Group Accounts
31. Other liabilities
Balances due to group companies in the Group balance sheet include amounts payable to other entities in the HRE
Group.
32. Deferred income tax
Deferred income taxes are calculated on all temporary differences under the liability method using the effective tax
rate in the relevant jurisdiction.
Deferred tax balances consist of the following:
The movement on the deferred income tax account is as follows:
170
Group Company
2007 2006 2007 2006
€ m € m € m € m
Creditors 1 64 1 38
Accruals 87 15 59 3
Other 36 21 18 10
124 100 78 51
Of which due to group companies 2 - 1 3
Group Company
2007 2006 2007 2006
€ m € m € m € m
Deferred tax assets 180 39 20 21
Deferred tax liabilities -161 -141 -15 -19
Net deferred tax balance 19 -102 5 2
Group Company
2007 2006 2007 2006
€ m € m € m € m
At 1 January -102 -58 2 7
Income statement charge -9 -62 -5 -7
Acquisition under common control 19 - - -
Disposal of subsidiary 73 - - -
Fair value measurement on AFS securities 37 18 8 2
Fair value measurement on cash-flow hedges 1 - - -
At 31 December 19 -102 5 2

Deferred income tax assets and liabilities are attributable
to the following items:
The deferred tax charge in the income statement comprises
the following temporary differences:
Risikoberichtbericht
Deferred income tax assets are recognised for tax losses carried forward only to the extent that realisation of the
related tax benefit is probable.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
There are no unremitted earnings of subsidiaries (2006: €576 million) on which withholding taxes or other taxes would
be payable and as such, no deferred income tax liabilities have been established at 31 December 2007 (2006: nil).
33. Retirement benefit obligations
Amounts recognised in the balance sheet:
The amounts recognised in the balance sheet are
determined as follows:
Group Company
2007 2006 2007 2006
€ m € m € m € m
Fair value hedges 1 -3 - -
Derivatives valuation -4 -95 -4 -3
Unrealised (gains)/losses on AFS securities 26 -20 13 4
Pensions - 6 - -
Cash-flow hedges - -1 - -
Tax losses carried forward 6 1 - -
Other temporary differences -10 10 -4 1
19 -102 5 2
2007 2006
€ m € m
Fair value hedges -1 8
Derivatives 6 -43
Cash-flow hedges - -
Pensions -2 -1
Tax losses carried forward 1 -3
Other temporary differences -13 -23
-9 -62
Group Company
2007 2006 2007 2006
€ m € m € m € m
Pension schemes – defined benefit 1 64 1 3
1 64 1 3
Group Company
2007 2006 2007 2006
€ m € m € m € m
Present value of unfunded obligations 1 64 1 3
Liability in the balance sheet 1 64 1 3
171

Group Accounts
The amounts recognised in the income statement are as follows:
Group
2007 2006
€ m € m
Current service cost 1 1
Interest cost 3 2
Net actuarial (gains)/ losses recognised in year -2 3
Total included in staff costs 2 6
Movement in the liability recognised in the balance sheet:
The principal actuarial assumptions used were as follows:
An actuarial valuation of the scheme is undertaken annually. Mortality rates are calculated based on the Heubeck
tables of 2005.
34. Contingent liabilities and commitments
(a) Contingent liabilities
172
Group Company
2007 2006 2007 2006
€ m € m € m € m
At 1 January 64 63 3 5
Total expense 2 6 3 1
Transfer from group company - - - -3
Transfer to group company -59 - -5 -
Contributions paid -6 -5 - -
At 31 December 1 64 1 3
Group Company
2007 2006 2007 2006
Discount rate 5.30% 4.25% 5.30% 4.50%
Future salary increases 2.50% 2.00% 2.50% 2.00%
Inflation rate 2.00% 1.75% 2.00% 1.75%
Group Company
2007 2006 2007 2006
€ m € m € m € m
Contingent liabilities & indemnity agreements 60 23 - -

(b) Loan commitments
Risikoberichtbericht
(c) Assets pledged
Pledged assets for which the counterparty has the right to sell or re-pledge the assets are disclosed in note 35.
In addition, at the balance sheet date, restricted assets consisting of investment securities and loans in the amount
of €57 billion (2006: €98 billion) were entered on a trustee register as collateral for covered bonds.
The Group has accepted collateral that it is permitted to sell or re-pledge in connection with reverse repurchase
transactions and as collateral for swap agreements. The fair value of the collateral accepted is €8,162 million (2006:
€1,408 million).
The Group has also accepted cost collateral as disclosed in note 16.
(d) Operating lease commitments
Where a group company is the lessee, the future minimum lease payments under non-cancellable building operating
leases are as follows:
Group Company
2007 2006 2007 2006
€ m € m € m € m
No later than 1 year 10 10 10 8
Later than 1 year and no later than 5 years 32 29 32 24
Later than 5 years 51 56 51 56
93 95 93 88
35. Pledged assets
Group Company
2007 2006 2007 2006
€ m € m € m € m
Irrevocable undrawn loan commitments 9,306 8,833 8,082 7,562
Revocable undrawn loan commitments 18,216 15,508 16,408 15,508
Total loan commitments 27,522 24,341 24,490 23,070
Group
2007 2006
Related Related
Asset liability Asset liability
€ m € m € m € m
Loans and advances to banks 7,729 7,629 5,349 4,979
Trading assets 3,230 3,128 - -
Loans and advances to customers 22,459 22,405 10,000 9,778
Investment securities 32,081 29,848 30,649 28,573
Total 65,499 63,010 45,998 43,330
173

Group Accounts
Pledged assets consist of assets pledged under repurchase agreements and as collateral for swap agreements.
36. Own shares and Incentive Compensation Programme
In 2002, the Group established an Incentive Compensation Programme (“the scheme”) under which its Compensation
Committee was entitled to make awards of restricted shares to employees and Directors of DEPFA. In
conjunction with the formation of the scheme, the Group established a Trust that was used to purchase shares of
DEPFA BANK plc with funds provided by the Group. Shares purchased were held for the benefit of employees until
the satisfaction of the associated vesting requirements. The rules of the scheme were that the shares vested over
a specified period or on change of control of the Group.
As a result of the acquisition of the Group by Hypo Real Estate Holding AG on 2nd October 2007, all shares awarded
to employees of the Group vested in full. However there were 1,115,871 DEPFA BANK plc shares held in the
Trust which were not allocated under share awards to Group employees. On the change of control, the Trust received
€6.80 and .189 shares in Hypo Real Estate Holding AG for each of the DEPFA shares held by Trust. As a result,
the Trust acquired 211,896 shares in Hypo Real Estate Holding AG. Of these shares 181,820 were awarded to
employees of the Group. These shares will vest in full in February 2009.
These shares are held by the Trust until the specified vesting conditions are satisfied. The restricted shares carry
no voting rights, but are entitled to receive dividends as and when declared. Restricted shares are awarded for no
consideration, and are subject only to continued employment over the vesting period.
On 31 December 2007 the Trust held 211,896 Hypo Real Estate Holding AG shares (2006: 8,736,288 DEPFA
BANK plc shares) on behalf of the Group employees and Directors. These shares had a fair value of €8 million at
31 December 2007 (2006: €118 million for shares held in DEPFA BANK plc).
Details of the share awards of DEPFA BANK plc shares under the compensation scheme are as follows:
Award date No. of DEPFA BANK plc Weighted average grant date fair value
shares awarded € m
2003 4,521,000 18
2004 3,280,100 38
2005 2,539,344 31
2006 1,965,505 27
2007 4,191,171 57
Total 16,497,120 171
174
Company
2007 2006
Related Related
Asset liability Asset liability
€ m € m € m € m
Loans and advances to banks 7,340 7,232 4,427 4,111
Loans and advances to customers 21,401 21,390 9,537 9,343
Investment securities 28,447 26,225 28,960 26,868
Total 57,188 54,847 42,924 40,322

Details of the share awards of Hypo Real Estate Holding AG shares are as follows:
The total compensation cost recognised to date amounts to:
Risikoberichtbericht
Award date No. of Hypo Real Estate Holding AG Weighted average grant date fair value
shares awarded € m
2007 181,820 8
Total 181,820 8
Year ended Compensation cost recognised
The fair value of employee services received is measured by reference to the fair value of the shares awarded at the
award date.
Included in the share expense for the current year is an amount of €39 million arising from an acceleration of the
share expense due to the change of control during the year.
The movement on own shares held in the Trust during the year is as follows:
DEPFA BANK plc Hypo Real Estate Holding AG
shares shares
€ m € m
2003 10 -
2004 27 -
2005 32 -
2006 31 -
2007 73 1
Total 173 1
No. of shares Cost of shares
€ m
Own shares held 1 January 2007 8,736,288 94
Purchased in year 725,390 9
Vested in year -8,345,807 -88
Reissued in year -1,115,871 -15
Own shares held 31 December 2007 - -
175

Group Accounts
37. Share capital and share premium
The total authorised number of ordinary shares at year end was: 433,333,340 (2006: 433,333,340) with a par value
of €0.30 per share (2006: €0.30 per share). All issued shares are fully paid.
The total authorised number of non-cumulative redeemable preference shares at year end was 10,000,000 (2006:
10,000,000) with a par value of €0.01 per share (2006: €0.01 per share). No non-cumulative redeemable
preference shares have been issued to date.
On 2 October 2007, the Group was party to a scheme of arrangement under Section 201 of 1963 Companies Act.
The scheme involved an application by the Company to the Irish Court to sanction the scheme where by the
existing shares of the Company were cancelled pursuant to Sections 72 and 74 of the Act. The reserve arising from
the cancellation of these shares was capitalised by being used to issue fully paid new shares in the Group to Hypo
Real Estate Holding AG.
38. Capital reserve
The capital reserve is non-distributable.
39. Retained earnings
The Group has availed of the exemption in Regulation 5 of the European Communities (Credit Institution: accounts)
Regulations 1992. Accordingly, the income statement of the Group is not shown.
176
Group and Company
Number of Ordinary Share
shares in issue shares premium Total
€ m € m € m € m
At 31 December 2006 353,019,720 106 1,142 1,248
At 31 December 2007 353,019,720 106 1,142 1,248
Group Company
2007 2006 2007 2006
€ m € m € m € m
At 1 January - - 903 903
Capital contribution 200 - 200 -
At 31 December 200 - 1,103 903
Group Company
2007 2006 2007 2006
€ m € m € m € m
At 1 January 1,402 940 433 97
Net profit for year 309 526 97 400
Dividends -138 -86 -138 -86
Purchase of shares for compensation scheme -9 -9 -9 -9
Share compensation scheme 73 31 73 31
Reissue of shares 16 - 16 -
Merger reserve on acquisition under common control (note 47) -133 - - -
At 31 December 1,520 1,402 472 433

40. Other reserves
Unrealised gains/(losses) from available-for-sale
investment securities
Risikoberichtbericht
Group Company
2007 2006 2007 2006
€ m € m € m € m
At 1 January 125 114 58 26
Net gain/(loss) from changes in fair value, net of tax 37 173 59 122
Net (gains)/losses transferred to net profit, net of tax -177 -162 -132 -90
At 31 December -15 125 -15 58
Accumulated currency translation reserve
Group Company
2007 2006 2007 2006
€ m € m € m € m
Unrealised gains/(losses) from cash flow hedges
Unrealised gains/(losses) from available-for-sale
- 2 - -
investment securities -15 125 -15 58
Accumulated currency translation reserve -2 - - -
Total other reserves at 31 December -17 127 -15 58
Group Company
2007 2006 2007 2006
€ m € m € m € m
Unrealised gains/(losses) from cash flow hedges
At 1 January 2 2 - -
Net gain/(loss) from changes in fair value, net of tax -63 -206 -62 -162
Net (gains)/losses transferred to net profit, net of tax 61 206 62 162
At 31 December - 2 - -
Group Company
2007 2006 2007 2006
€ m € m € m € m
At 1 January - - - -
Net gain/(loss) from currency translation -2 - - -
At 31 December -2 - - -
177

Group Accounts
41. Deferred day one profit or loss
Movements of deferred day one profit and loss from the acquisition of certain derivatives were as follows:
42. Dividends per share
Final dividends are not accounted for until they have been ratified at the Annual General Meeting.
No dividend is proposed for the year ended 2007.
43. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less
than three months’ maturity from the date of acquisition.
44. Hedges
Fair value hedges
The Group hedges substantially all of the fixed interest rate risk in its long term financial assets and financial liabilities,
through fair value hedges using a variety of interest rate derivatives. The Group also hedges foreign exchange
risk using a variety of foreign exchange derivatives. The net fair value of these derivatives at 31 December 2007
was -€2,879 million (2006: -€4,462 million).
Cash flow hedges
The Group also hedges a portion of the cash flow interest rate and foreign currency risk, arising on future payments
and receipts on variable rate assets and liabilities. The Group manages this risk through the use of cross currency
interest rate swaps. The net fair value of these derivatives at 31 December 2007 was -€492 million (2006: -€429
million). The ineffectiveness recognised in profit or loss from the application of hedge accounting to these positions
was nil (2006 nil).
The Group’s policies and objectives in managing the risks that arise in connection with the use of financial
instruments are set out in the Directors’ Report on pages 78 to 83.
178
Group Company
2007 2006 2007 2006
€ m € m € m € m
At 1 January 15 - 15 -
Arising from new transactions 45 48 45 48
Released to profit or loss during the period -18 -33 -18 -33
At 31 December 42 15 42 15
Group Company
2007 2006 2007 2006
€ m € m € m € m
Cash and balances with central banks 8,312 808 8,305 804
Loans and advances to banks 10,602 4,140 8,451 3,100
18,914 4,948 16,756 3,904

Risikoberichtbericht
45. Fair values of financial assets and liabilities
The following table summarises the carrying amounts and fair values of those financial assets and liabilities not
presented on the Group’s balance sheet at their fair value. Bid prices are used to estimate fair values of assets,
whereas offer prices are applied for liabilities.
Group
Carrying value Fair value
2007 2006 2007 2006
€ m € m € m € m
Financial assets
Cash and balances with central banks 8,426 1,743 8,426 1,743
Loans and advances to banks 28,996 34,708 28,496 34,679
Loans and advances to customers 110,648 125,247 109,979 125,663
Financial liabilities
Deposits from banks 89,845 63,199 89,844 63,202
Other deposits 30,226 31,118 30,226 31,118
Due to customers 10,532 7,904 10,539 7,900
Debt securities in issue 62,876 102,857 62,667 103,086
Other borrowed funds 2,271 2,133 2,052 2,189
Company
Carrying value Fair value
2007 2006 2007 2006
€ m € m € m € m
Financial assets
Cash and balances with central banks 8,334 1,699 8,334 1,699
Loans and advances to banks 40,309 45,020 39,856 44,916
Loans and advances to customers 59,519 39,026 59,149 39,005
Financial liabilities
Deposits from banks 87,999 71,037 87,999 71,038
Other deposits 29,487 31,118 29,487 31,118
Due to customers 10,909 7,327 10,916 7,327
Debt securities in issue 9,243 6,976 9,115 6,975
Other borrowed funds 1,160 971 1,139 971
a) Deposits from banks/due to customers
The fair value of floating due to customers rate placements and overnight deposits is their carrying amount. The
estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money
market interest rates for debts with similar credit risk and remaining maturity.
179

Group Accounts
b) Loans and advances to banks and customers
Loans and advances are net of provisions for impairment. The estimated fair value of loans and advances represents
the discounted amount of estimated future cash flows expected to be received. Expected cash flows are
discounted at current market rates to determine fair value.
c) Deposits and borrowings
The estimated fair value of deposits with no stated maturity, which includes non interest bearing deposits, is the
amount repayable on demand. The estimated fair value of fixed interest bearing deposits and other borrowings
without a quoted market price is based on discounted cash flows using interest rates for new debts with similar
remaining maturity.
d) Debt securities in issue
The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market
prices are not available, a discounted cash flow model is used based on a current yield curve appropriate for the
remaining term to maturity for a similar credit rating.
46. Gains and losses from fair value adjustments for recognised assets and liabilities
The following table details the gains and losses from fair value adjustments relating to available-for-sale investment
securities, financial assets at fair value through profit or loss, and from hedge accounting:
Group 2007
Financial
Fair value AFS instruments Total fair
hedge investment at fair value value
accounting securities through P&L adjustments
Assets € m € m € m € m
Loans and advances to banks -491 - - -491
Other financial instruments at fair value through profit or loss - - -634 -634
Loans and advances to customers 1,303 - - 1,303
Investment securities – available-for-sale -420 -188 - -608
Total assets 392 -188 -634 -430
Liabilities
Deposits from banks 63 - - 63
Other deposits 5 - - 5
Due to customers -426 - - -426
Debt securities in issue -589 - - -589
Other borrowed funds -27 - - -27
Total liabilities -974 - - -974
Hedging instruments -1,336 - 620 -716
Net equity (pre-tax) 30 -188 -14 -172
180

Company 2007
Risikoberichtbericht
Financial
Fair value AFS instruments Total fair
hedge investment at fair value value
accounting securities through P&L adjustments
Assets € m € m € m € m
Loans and advances to banks -379 - - -379
Other financial instruments at fair value through profit or loss - - -634 -634
Loans and advances to customers 1,882 - - 1,882
Investment securities – available-for-sale 177 -84 - 93
Total assets 1,680 -84 -634 962
Liabilities
Group 2006
Financial
Fair value AFS instruments Total fair
hedge investment at fair value value
accounting securities through P&L adjustments
Assets € m € m € m € m
Loans and advances to banks 70 - - 70
Other financial instruments at fair value through profit or loss - - 3 3
Loans and advances to customers -3,383 - - -3,383
Investment securities – available-for-sale -2,941 -6 - -2,947
Total assets -6,254 -6 3 -6,257
Liabilities
Deposits from banks -11 - - -11
Other deposits 3 - - 3
Due to customers -25 - - -25
Debt securities in issue -2,959 - - -2,959
Other borrowed funds -8 - - -8
Total liabilities -3,000 - - -3,000
Hedging instruments 3,257 - 3 3,260
Net equity (pre-tax) 3 -6 6 3
Deposits from banks 21 - - 21
Other deposits 5 - - 5
Due to customers -2 - - -2
Debt securities in issue -121 - - -121
Other borrowed funds - - - -
Total liabilities -97 - - -97
Hedging instruments -1,757 - 620 -1,137
Net equity (pre-tax) 20 -84 -14 -78
181

Group Accounts
182
Company 2006
Financial
Fair value AFS instruments Total fair
hedge investment at fair value value
accounting securities through P&L adjustments
Assets € m € m € m € m
Loans and advances to banks 408 - - 408
Other financial instruments at fair value through profit or loss - - -3 -3
Loans and advances to customers -969 - - -969
Investment securities - available-for-sale -1,495 30 - -1,465
Total assets -2,056 30 -3 -2,029
Liabilities
Deposits from banks 30 - - 30
Other deposits 2 - - 2
Due to customers -6 - - -6
Debt securities in issue -7 - - -7
Other borrowed funds - - - -
Total liabilities 19 - - 19
Hedging instruments 2,080 - 3 2,083
Net equity (pre-tax) 5 30 - 35

Risikoberichtbericht
47. Acquisition under common control
On 31 December 2007 the Group acquired 99.99% of the ordinary share capital of Hypo Public Finance Bank from
Hypo Real Estate Holding AG as part of a HRE Group restructuring. This was accounted for as a transaction under
common control. A merger adjustment arose being the difference between the fair value of the shares acquired and
the book value of the net assets acquired. The merger adjustment was transferred to retained earnings.
The effects of the acquisition on the financial position of the Group are as follows:
Cash and balances with central banks
€ m
70
Loans and advances to banks 3,309
Trading assets 12,944
Derivative financial instruments 1,098
Other financial assets at fair value through profit or loss 2,034
Loans and advances to customers 3,018
Investment securities – available-for-sale 8,332
Intangible assets 20
Property, plant and equipment 2
Deferred income tax assets 159
Other assets 8
Deposits from banks -13,760
Other deposits -738
Derivative financial instruments and other trading liabilities -8,628
Due to customers -51
Debt securities in issue -6,535
Other borrowed funds -539
Other liabilities -31
Current income tax liabilities -5
Deferred income tax liabilities -140
Net identifiable assets and liabilities acquired 567
Consideration paid in cash 700
Consideration less book value of net assets acquired (“merger reserve”) 133
183

Group Accounts
48. Related-party transactions
(a) Group
Transactions with companies in which a participating interest is held amount to:
2007 2006
Group € m € m
Investment securities – available-for-sale - 20
2007 2006
Key management compensation € m € m
Short term employee benefits 23,862,607 10,118,424
Post employee benefits 444,014 2,001,923
Share awards 28,470,991 16,125,972
52,777,612 28,246,319
Key management include the Board of Directors and Executive Committee members.
Included above is Directors’ compensation as follows:
2007 2006
Directors’ compensation € m € m
Directors’ fees 756,018 964,934
Other remuneration 21,836,889 15,947,766
22,592,907 16,912,700
Loans to directors of DEPFA BANK plc
There were no loans to members of the Board at 31 December 2007 (2006: € nil)
DEPFA BANK plc, as the parent company of the Group, has issued letters of comfort to certain of its subsidiaries.
These letters of comfort set out that parent will ensure that DEPFA ACS BANK, Dublin, DEPFA Bank Europe plc, Dublin,
DEPFA Investment Bank Ltd, Nicosia, and DEPFA Funding II LP, London are able to fulfil their contractual obligations.
(b) Company
Balances due to and from group companies are disclosed in the notes to the balance sheet. Transactions with
group companies consisted of:
2007 2006
Company € m € m
Interest and similar income 968 795
Interest expense and similar charges -318 -312
Net trading income -1 -11
Gains less losses from financial assets - 1
Other operating income 19 22
Other operating expenditure -7 -6
These amounts arise on intercompany borrowings and lending and transfers of assets between DEPFA BANK plc
and other group companies as well as recharges for certain services provided.
184

Risikoberichtbericht
49. Capital management
The Group’s objectives when managing capital, which is a broader concept than the “equity” on the face of
balance sheets, are:
To comply with the capital requirements set by the regulators of the banking markets where the companies
within the Group operate;
To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
To maintain a strong capital base to support the development of its business.
Capital adequacy and the use of regulatory capital are monitored daily by the Group’s management, employing
techniques based on the guidelines developed by the Basel Committee and the European Community Directives,
as implemented by the Irish Financial Regulator (the “Authority”), for supervisory purposes. The required informa -
tion is filed with the Authority on a quarterly basis.
The Authority requires each bank or banking group to: (a) hold the minimum level of the regulatory capital of €6
million, and (b) maintain a ratio of total regulatory capital to the risk-weighted assets (the “Basel ratio”) at or above
the internationally agreed minimum of 8.5% for the Group or 8% for the Company. In addition, those individual
banking subsidiaries or similar financial institutions not incorporated in the European Union are directly regulated
and supervised by their local banking supervisor, which may differ from country to country.
The Group’s regulatory capital as managed by its central Group Treasury is divided into two tiers:
Tier I Capital: share capital (net of any book values of the treasury shares), minority interests arising on consolidation
from interests in permanent shareholders’ equity, retained earnings and reserves created by appropriations of
retained earnings. The book value of goodwill is deducted in arriving at Tier I Capital; and
Tier II Capital: qualifying subordinated loan capital, collective impairment allowances and unrealised gains arising
on the fair valuation of equity instruments held as available-for-sale.
The risk-weighted assets are measured by means of a hierarchy of five risk weights classified according to the
nature of and reflecting an estimate of credit, market and other risks associated with each asset and counterparty,
taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-balance sheet exposure,
with some adjustments to reflect the more contingent nature of the potential losses.
50. Events after the balance sheet date
There have been no significant events after the balance sheet date which require disclosure.
51. Approval of financial statements
The financial statements were approved by the directors on 25 March 2008.
185

Addresses
DEPFA BANK plc
1 Commons Street Phone: +353 1 792 2222
Dublin 1, Ireland Fax: +353 1 792 2211
Amsterdam Representative Office
World Trade Centre Amsterdam, Zuidplein 58 - Tower H, 6th Floor Phone: +31 20 794 0340
1077 XV Amsterdam, The Netherlands Fax: +31 20 794 0349
Athens Representative Office
4, Gravias & Granikou Street Phone: +30 210 610 7390 399
15124 Amaroussion, Athens, Greece Fax: +30 210 610 8949
Chicago Representative Office
30 North LaSalle Street, Suite 1510 Phone: +1 312 332 9100
Chicago, IL 60602, USA Fax: +1 312 332 9192
Copenhagen Representative Office
Frederiksgade 7 Phone: +45 33 93 7571
1265 Copenhagen K, Denmark Fax: +45 33 93 7579
Frankfurt Representative Office
Neue Mainzer Straße 75 Phone: +49 69 92882 0
60311 Frankfurt, Germany Fax: +49 69 92882 100
Hong Kong Branch
1106-7 ICBC Tower, Citibank Plaza, 3 Garden Road Phone: + 852 2509 9100
Central, Hong Kong Fax: + 852 2509 9099
Istanbul Representative Office
Harmanci Solak 5, Harmanci Giz Plaza, Kat 18/35 Phone: +90 212 317 9393
34394 Levent Istanbul, Turkey Fax: +90 212 269 5868
London Branch
105 Wigmore Street Phone: +44 20 7290 8400
London W1U 1QY, United Kingdom Fax: +44 20 7495 0580
Madrid Branch
Monte Esquinza, 30, 4th Floor Phone: +34 91 7004 640
28010 Madrid, Spain Fax: +34 91 3100 791
Milan Representative Office
Largo Augusto, 7 Phone: +39 2 778 7111
20122 Milan, Italy Fax: +39 2 778 7112 16
Mumbai Representative Office
204 Ceejay House, Dr. Annie Besant Road - Worli Phone: +91 22 66191400
Mumbai 400018, India Fax: +91 22 66191415
New York Branch
623 Fifth Avenue, 22nd Floor Phone: +1 212 796 9200
New York, NY 10022, USA Fax: +1 212 796 9217
186

Nicosia Branch
10 Diomidous Street, 3rd Floor Phone: +357 22 396 300
2024 Nicosia, Cyprus Fax: +357 22 396 399
Paris Branch
1, Rue Saint-Georges Phone: +33 1 44 94 8270
75009 Paris, France Fax: +33 1 42 66 4698
Rome Branch
Via di Torre Argentina, 21 (Palazzo Origo) Phone: +39 06 6840 2801
00186 Rome, Italy Fax: +39 06 6840 2831
Sacramento Representative Office
Esquire Plaza, 1215K Street, 17th Floor Phone 916-503-2277
Sacramento, CA 95814, USA
São Paulo Representative Office
Av. Brigadeiro Faria Lima, 201, 13th Floor - Suite 131 Phone: +55 11 3554 7569
05426-100 - São Paulo, SP – Brazil Fax: +55 11 3816 1631
Tokyo Branch
Atago Green Hills MORI, Tower, 41F, 2-5-1 Atago, Minato-ku Phone: +81 3 5402 9000
Tokyo 105-6241, Japan Fax: +81 3 5402 9010
Warsaw Representative Office
Centrum Gieldowe, ul. Książęca 4 Phone: +48 22 537 7600
00-498 Warsaw, Poland Fax: +48 22 537 7601
DEPFA ACS BANK
1 Commons Street Phone: +353 1 792 2222
Dublin 1, Ireland Fax: +353 1 792 2211
DEPFA First Albany Securities LLC
New York Office
Public Finance, 623 Fifth Avenue, 22nd Floor Phone +1 212 461-9421
New York, NY 10022, USA Fax +1 212 461-9621
Underwriting/Trading and Sales, 444 Madison Avenue, Suite 400 Phone: +1 212 461 9500
New York, NY 10022, USA Fax: +1 212 461 9622
Albany Office
Public Finance, 677 Broadway, 12th Floor Phone: +1 518 447 7941
Albany, NY 12207-2990, USA Fax: +1 518 447 8074
187

Addresses
Boston Office
Public Finance and Sales, 60 State Street, Suite 700 Phone: +1 617 854 7403
Boston, MA 02109, USA Fax: +1 617 854 745
Chadds Ford Office
Public Finance, 9 Orchard View, First Floor Phone: +1 610 388 0533
Chadds Ford, PA 19317, USA Fax: +1 610 388 0531
Chicago Office
Public Finance, 200 South Wacker Drive, Suite 3100 Phone: +1 312 242 3224
Chicago, IL 60606, USA Fax: +1 312 242 3766
Dallas Office
Public Finance, 15950 Dallas Parkway, Suite 525, Tollway Plaza II, 5th Floor Phone: +1 972 341 8210
Dallas, TX 75248, USA Fax: +1 972 341 8215
Glen Allen Office
Taxable Trading, Highwoods Plaza, 4470 Cox Road, Suite 225 Phone: +1 804 747 0648
Glen Allen, VA 23060, USA Fax: +1 804 747 1183
Houston Office
Public Finance, 12 Greenway Plaza, Suite 1100 Phone: +1 713 425 4907
Houston, TX 77046, USA Fax: +1 713 425 4917
Sacramento Office
Public Finance, Esquire Plaza, 1215 K Street, Suite 1728 Phone: +1 916 503 2277
Sacramento, CA 95814, USA Fax: +1 916 503 3244
Hypo Public Finance Bank
Hypo Public Finance Bank
Collineo Asset Management GmbH, Brinkhoffstr. 4 Phone: +49 (0) 231 1082 1
44137 Dortmund, Germany Fax: +49 (0) 231 1082 468
Hypo Public Finance Bank
International House, 3, Harbourmaster Place Phone: +353 1 611 6000
IFSC, Dublin 1, Ireland Fax: +353 1 611 6001
Hypo Public Finance Bank
London Branch, 105 Wigmore Street Phone: +44 20 7290 8400
London W1U 1QY, United Kingdom Fax: +44 20 7495 0580
Hypo Pfandbrief Bank International S.A
4, rue Alphonse Weicker Phone: +352 26 41 4700
L- 2099 Luxembourg, Luxembourg Fax: +352 26 41 4799
Hypo Public Finance USA, Inc.
Hypo Capital Markets, Inc.
Collineo Asset Management USA, Inc., 622 Third Avenue Phone: +1 212 905 4600
New York, NY 10017, USA Fax: +1 212 905 4700
188

DEPFA BANK plc
Member of Hypo Real Estate Group
1, Commons Street
Dublin 1, Ireland
Tel.: +353 1 792 2222
Fax: +353 1 792 2211
www.depfa.com