Annual Report of Euram Bank Vienna 2015/2016

eurambank

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Euram Bank AG


Annual Report 2015/2016

European American Investment Bank AG


Annual Report

Euram Bank AG

20152016


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Annual Report 20152016


FOREWORD

BY THE CHIEF EXECUTIVE OFFICER

The business year 2015/2016 was the first year after initiating a

restructuring and reorganization process for our bank. We have

resolutely pursued our medium- and long-term objectives defined as

follows: focussing on our core competences, cultivating and expanding

the domestic markets of Austria and Germany, developing sustainably

profitable new areas of business and concentrating on solid growth.

Today we are well on track, step by step we have implemented our

strategies and realized our plans. An unforeseeable event and a transaction

that was delayed due to the Brexit referendum prevented us

from reaping the fruits of our reorganization process already this year.

However, we know that we can rely on a very stable structure and on

a growth strategy that will generate solid returns. A comprehensive

assessment of our business development provides sound evidence

that the right measures have been taken – a continuously increasing

number of new clients in the domestic markets, both in traditional and

new business areas.

The shift in direction has proven successful. We have set the sails,

picked up speed and have achieved many milestones despite sometimes

unfortunate circumstances. We invite you to continue with us

on this journey to rewarding destinations!

5

Manfred Huber

Chief Executive Officer

September 2016

Euram Bank AG


“You cannot discover new oceans, unless you have the courage to leave the shore.“

— Ferdinand Magellan

Annual Report 20152016


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Annual Report 20152016


CORPORATE BODIES

Supervisory Board

Adolf Walter Höllmer

Chairman

Dr. Peter Maser

Vice Chairman

Dr. Erik Max Michael Obermayer

Dkfm. Senta Penner

Managing Board

Manfred Huber

Manfred Huber

Chairman

Johannes Langer

Josef Leckel

Johannes Langer

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Josef Leckel

Euram Bank AG


Management Report

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Management Report

MANAGEMENT REPORT

1. Business development and economic environment

Business model

As a small private bank, European American Investment Bank Aktiengesellschaft

(“Euram Bank“) provides banking and other financial

services in Austria, Germany, Central and Eastern Europe, Central

Asia, and in Russia. The focus is on business with private and corporate

clients. Our highly qualified staff are drawn from various nations,

reflecting the cosmopolitan corporate culture of Euram Bank.

Euram Bank is 100% privately owned. Senior management and financial

investors hold a majority stake in the bank through Euram Holding AG.

Business development

The result of the British referendum on the country’s exit from the EU

(“Brexit“) not only surprised the media and bookmakers, but also corporates

and capital markets. Accordingly, this historic ballot in Great

Britain sent currencies, equity markets and risk premiums for bonds

on a roller coaster ride. As the consequences and the implementation

of Brexit can hardly be assessed at present, risk aversion is expected to

persist on the financial markets. Interest rates and returns on government

bonds are going to remain historically low for any length of time,

and the equity markets are going to remain exposed to higher volatility.

In all likeliness, Great Britain will withdraw from the EU budget as a

net payer as of 2019, or pay lower contributions as a member of the

European Economic Area. Once again, private consumption has provided

the most important contribution to the growth of the US economy

in the first half of 2016. Net exports have also positively contributed to

the restrained economic growth. All the other components, however,

have been in decline. The global capital market was greatly influenced

by the FED, the US central bank. Ever since the first interest rate move

in December 2015, the FED has constantly been procrastinating the

next step. Reasons for this lack of activity were a weak 1st quarter and

the Brexit referendum. In the first half of 2016, the equity markets of

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Management Report

the BRIC states (Brazil, Russia, India, China) outperformed the benchmark

at times. However, price fluctuations were similar to the world’s

stock exchanges overall – at least a small rate appreciation remained

around the middle of the year. Generally, the BRIC markets benefited

from a shift of the capital flows from the established to the emerging

markets.

Putting a focus on lines of business that require a high amount of

advisory, quite consciously neglecting retail business, has proven

successful again in the fiscal year 2015/2016 – which applies to private

banking, asset management and card payment services in equal measure.

The experience and commitment of our outstanding staff and the

very good performance in all investment strategies have contributed

to the fact that the confidence and expectations of our clients were not

disappointed in the fiscal year 2015/2016, despite the difficult market

environment. Our competence and many years’ experience in advising

our clients in asset management and investment matters, our confident

and committed way of working, and the risk-aware management of the

assets entrusted to us absolutely proved their worth.

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In February 2012, an Indian enterprise brought an action for declaratory

judgement against Euram Bank before the Commercial Court of

Vienna, based on a dispute as to whether a pledge agreement of March

2010 between the Indian enterprise as pledgor and Euram Bank as

pledgee is genuine. After the Vienna Commercial Court had dismissed

the claim in December 2015, and after the appellate court (Oberlandesgericht

Wien) had denied the appeal lodged by the Indian company in

April 2016, the extraordinary appeal on points of law (Revisionsrekurs)

was dismissed by the Supreme Court (3rd instance) by court order.

Accordingly, this lawsuit has been effectively concluded - and positively

from the point of view of Euram Bank. Subsequently, Euram Bank

has repaid the loan amounting to USD 32.5 million using the pledged

amount of USD 32.5 million that was deposited by the Indian company

as collateral.

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Management Report

In the fiscal year 2015/2016, the balance sheet total of Euram Bank

increased by EUR 29.2 million or 18.8% to EUR 184.4 million (EUR

155.2 million as at 30.6.2015). On the asset side, the cash reserve

increased by EUR 0.5 million to EUR 1.9 million (EUR 1.4 million as at

30.6.2015) year on year, the debt instruments issued by public authorities

increased by EUR 1.3 million to EUR 10.3 million (EUR 9 million

as at 30.6.2015). The claims against credit institutions increased by

41.8% or EUR 20.6 million to a total of EUR 69.8 million (EUR 49.2

million as at 30.6.2015); the increase largely took place with domestic

credit institutions. The loans and advances to customers increased by

12.3% or EUR 9.8 million to EUR 89.4 million (EUR 79.6 million as

at 30.6.2015), with the major part resulting from an increase of real

estate financing in Germany. The debentures and other fixed-income

securities decreased as compared to the previous year by 14.7% or

EUR 1.3 million to EUR 7.7 million (EUR 9 million as at 30.6.2015).

Stocks and other non-fixed income securities decreased by 2.5 million

to EUR 2.3 million (EUR 4.8 million as at 30.6.2015). EUR 1.5 million

result from the reorganization of a securities position (the assets of

the Sharpe Art Segregated Portfolio Fund were transferred to Sharpe

Special Situation Fund Ltd.) as well as their reclassification into “other

assets“. The item “shares in affiliated companies“ remained unchanged

at EUR 159 thousand (EUR 159 thousand as at 30.6.2015). Other assets

increased as compared to the previous year by EUR 1 million to EUR

2.4 million (EUR 1.4 million as at 30.6.2015), the main reason being

the reclassification of the above-mentioned securities position (Sharpe

Special Situation Fund Ltd).

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On the liabilities side, liabilities to credit institutions increased by

EUR 18.4 million to EUR 20.9 million (EUR 2.6 million as at 30.6.2015).

This increase is mainly due to time deposits of Austrian banks. At

11.4% of the balance sheet total, the liabilities to credit institutions

constituted a lower share of the refinancing basis of Euram Bank.

At the balance sheet date, the liabilities to customers amounted to

EUR 147.5 million (EUR 133.9 million as at 30.6.2015), representing

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Management Report

80% of the balance sheet total and accordingly still the largest portion

of the refinancing basis of Euram Bank. As compared to the previous

year, the item “Provisions“ decreased by EUR 0.8 million to EUR 0.7

million (EUR 1.5 million as at 30.6.2015). The release of provisions for

legal expenses as well as for deferred bonuses are decisive for this decrease.

Other liabilities decreased by EUR 1 million to EUR 0.5 million

(EUR 1.5 million as at 30.6.2015).

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In the fiscal year 2015/2016, the net interest earnings of Euram Bank

increased markedly by 83.7% or EUR 1 million to EUR 2.1 million

(EUR 1.1 million as at 30.6.2015). This increase was essentially due to

higher interest earnings based on the increased volume of real estate

financing in Germany. The balance between earnings from commissions

and expenditures from commissions also increased substantially

by EUR 1.4 million or 61.2% to EUR 3.8 million (EUR 2.4 million as at

30.6.2015), with the main share in the commission result of 51% being

accounted for by securities business (EUR 1.9 million) followed by

lending business at 31.6% (EUR 1.2 million). The balance of earnings/

expenditures from financial transactions returned a negative result in

the amount of EUR 205 thousand, almost unchanged as compared to

the previous year (minus EUR 211 thousand as at 30.6.2015). However,

the result of the fiscal year 2015/2016 was negatively influenced by

the liquidation of the Sharpe Art Segregated Portfolio Fund. The entire

assets of the Sharpe Art Segregated Portfolio Fund (consisting of works

of art and a cash reserve) was transferred to a new structure in December

2015 (Sharpe Special Situation Fund Ltd.). The transfer resulted

in a depreciation of EUR 0.6 million; the other operating earnings

decreased by EUR 2.5 million to EUR 0.7 million (EUR 3.3 million as at

30.6.2015) as compared to the previous year. In the previous year, this

item included earnings in the amount of EUR 3 million from the sale of

an innovative and customized card-based payment processing product,

developed jointly with an international partner, to an international

partner. In the fiscal year 2015/2016, earnings from various services

to Euram Holding AG were reported, as were earnings from the release

of provisions. In the fiscal year 2015/2016, the operating earnings

reached an amount of EUR 6.5 million – a decrease of EUR 0.2 million

as compared to the previous year (EUR 6.7 million as at 30.6.2015

with the result being strongly affected by the above-mentioned sales

proceeds amounting to EUR 3 million).

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Management Report

The entire operating expenditures amounted to EUR 6.4 million and

improved by EUR 0.3 million as compared to the previous year

(EUR 6.7 million as at 30.6.2015). At EUR 3.5 million, personnel

expenditures have hardly changed as compared to the previous year

(EUR 3.4 million as at 30.6.2015). Material expenses decreased by

EUR 0.3 million to EUR 2.7 million (EUR 3 million as at 30.6.2015).

This item essentially included the expenditure on IT, rent, advertising

as well as consultancy and audit fees. The depreciation of tangible

fixed assets and intangible assets decreased slightly by EUR 14 thousand

to EUR 95 thousand (EUR 109 thousand as at 30.6.2015); the

other operating expenditures decreased by EUR 48 thousand to EUR

137.9 thousand (EUR 186 thousand as at 30.6.2015).

After deduction of all operating expenditures from the operating

earnings, accordingly, the operating result for the fiscal year

2015/2016 amounted to EUR 58 thousand, constituting an increase

of EUR 112 thousand as compared to the fiscal year 2014/2015

(minus EUR 54 thousand as at 30.6.2015).

The earnings/expenditure balance from the sale and valuation of

receivables and certain securities was minus EUR 1 million (EUR 87

thousand as at 30.6.2015). This negative development resulted from

the forced closing down of the German Maple Bank GmbH (“Maple

Bank“) as ordered by the Bundesanstalt für Finanzdienstleistungsaufsicht

(“BaFin“, Federal Financial Supervision Authority in Germany)

in February 2016. Moreover, BaFin has declared the occurrence of the

compensation case, and the local court of Frankfurt has opened insolvency

proceedings over Maple Bank upon request by the supervisory

authority. Maple Bank has carried out equity transactions (Cum-Ex)

in the years 2006 to 2010 that are controversial from today’s point

of view. Euram Bank had invested USD 13 million with Maple Bank.

Euram Bank’s claim was reported in time and acknowledged by the

liquidator. For due diligence reasons, a provision amounting to 10% of

the outstanding amount (EUR 1 million) was formed. The earnings/

expenditure balance from the sale and valuation of financial assets

changed by EUR 34.8 thousand to minus EUR 23.2 thousand (minus

EUR 59 thousand as at 30.6.2015).

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Management Report

Accordingly, the result of ordinary business operation for the fiscal

year 2015/2016 amounted to minus EUR 1 million (minus EUR

26 thousand as at 30.6.2015).

The taxes on income and earnings amounted to EUR 32.8 thousand

(plus EUR 219.2 thousand as at 30.6.2015). The result includes

expenditure from deferred tax in the amount of EUR 32.8 thousand.

The annual deficit of the fiscal year 2015/2016 accordingly amounted

to minus EUR 1 million (annual profit of EUR 0.2 million as at

30.6.2015). The change of reserves amounted to EUR 0.3 million (EUR

0 million as at 30.6.2015) in the fiscal year 2015/2016. The liability

reserve was increased by EUR 0.3 million due to higher risk-weighted

assets (mainly due to the cover of the defaulted position of Maple Bank

at 150% acc. to Article 127 (1) a CRR). This caused an annual loss of

EUR 1.3 million (annual profit of EUR 0.2 million as at 30.6.2015).

Taking account of the profit carried forward of EUR 0.2 million, the net

loss of the fiscal year 2015/2016 amounts to EUR 1.1 million (net profit

0.2 million as at 30.6.2015).

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Financial and non-financial performance indicators

The capital resources of Euram Bank continue to be excellent. The

bank’s eligible capital to be taken into account acc. to Part 2 Regulation

(EU) No. 575/2013 amounted to EUR 14.6 million (EUR 15.4 million

as at 30.6.2015) and by far exceeded the required capital according

to Article 92 of Regulation (EU) 575/2013 of EUR 7.9 million (EUR

5.2 million as at 30.6.2015). The total capital ratio ((eligible capital /

(required capital * 12.5)) amounted to 14.7% (23.5% as at 30.6.2015),

thus clearly exceeding the legal minimum. The equity capital reported

consists entirely of hard core capital. The cost/income ratio (operating

expenditures / operating earnings) amounted to 99.1% (100.8% as at

30.6.2015).

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Management Report

Retaining experienced, committed staff is a fundamental precondition

for any enterprise’s long-term success. The qualification of its staff

is thus of utmost concern to Euram Bank. Euram Bank offers its

em ployees the opportunity of ongoing training and development to

achieve their personal and career goals by systematically developing

their competencies.

Events of particular importance after the balance sheet date of

30 June 2016

Euram Bank is a wholly owned subsidiary of Euram Holding AG. After

30 June 2016, two shareholders of Euram Holding AG sold their shares

held in Euram Holding AG to international investors.

After 30 June 2016, Euram Bank issued a supplementary capital bond

in the amount of EUR 3 million.

In August 2016, the Indian company whose claim was denied by the

Supreme Court (3rd instance) by court order on 14 June 2016

as mentioned above – filed a complaint against Euram Bank with the

International Arbitral Tribunal of the Austrian Economic Chamber.

2. Anticipated trends and risks

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Prospects for 2016/2017

We expect a slow recovery of the growth of the global economy in the

OECD area in the second half of 2016 and throughout 2017. Macroeconomic

political measures to support economic activity and low commodity

prices are likely to continue to contribute to a cautious recovery

of the advanced economies, provided that the growth of wages and

corporate investments picks up and no new tensions on the financial

markets arise. However, the poor import demand of the emerging

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Management Report

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markets continues to put a drag on the advanced economies. In the

United States, moderate recovery is expected to continue, since

the drag effects associated with the strong dollar and the decline of

investments in the energy sector are abating. Domestic demand is

likely to receive some impetus through a gradual stimulation of wage

growth, as the labour market is increasingly approximating full

employment, with a slow increase of productivity growth mitigating

the imminent tensions on the labour market. In Japan, GDP growth is

likely to remain cautious, and the tense situation on the labour market

is not expected to have more than a minor effect on nominal wage

growth, with substantial budget consolidation being forecast for 2017.

In the euro zone, the expectation for growth is expected to be slow

and favoured by the gradually felt effects of the most recent monetary

expansion on credit growth. However, the continuing situation of substantial

under-utilization on the labour market, a high debt burden and

non-performing loans are going to continue to impede recovery in some

countries. A possible exit of Great Britain from the European Union

might trigger a massive shrinkage of the country’s economy. The direct

economic consequences of the Brexit vote, however, are still highly

uncertain at present. Outside the OECD region, GDP is likely to pick up

as the drastic decline in many commodity-exporting countries is going

to end by and by. However, due to differences relating to the scope of

political business cycle impulses, to the effect of low commodity prices,

the implementation of structural reforms and the extent of financial

risks, the development in the emerging markets is expected to be

rather diverse. In China, GDP growth will gradually decrease to 6.25%

in 2017 in the course of reorientation of the processing trades towards

the service sector. In India and Indonesia, strong growth is likely to

continue, which is supported in India through plans to substantially

increase public-sector wages and in Indonesia by a marked increase in

public spending on infrastructure. The prospects for Brazil and Russia

are still difficult, as incomes are affected by the low commodity prices,

the still high inflation rate, budget policy issues, as well as - in Brazil -

increased political uncertainty.

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The Power of Vision.


Global trading and a worldwide financial industry are

taken for granted today. At the time of Ferdinand

Magellan it was not even proven yet that the earth is

a globe and not a disc. Nevertheless the Spanish king

funded Magellan’s project to sail around the world.

The first journey yielded a mere 4%. Magellan’s vision

however paved the way for Spain’s predominance in

worldwide trade for many years to come.

Euram Bank AG


OCÉANO

PACÍFICO

OCÉANO

ATLANTÍCO

Tenerife

09–10|19

Ilha de Santiago

07|22

Sanlúcar de

Barrameda

Partida 09|19

Llegada 09|22

Isla Caroline

01|21

Pukapuka

01|21

Cabo de Santo

Agostinho

11|19

Rio de Janeiro

12|19

Rio de la Plata

01|20

Cabo Deseado

11|20

Puerto San Julián

3–10|20

The first circumnavigation of the globe by Ferdinand Magellan and Juan Sebastian Elcano (20.09.1519 – 06.09.1522)

Magellan was actually looking for an alternative route to the Spice Islands. The route itself was too complicated,

the circumnavigation of the globe and its consequences turned out to be one of the greatest achievements of its time.

Annual Report 20152016


OCÉANO

PACÍFICO

OCÉANO

ÍNDICO

Palawan

05-07|21

Muerte de

Magellanes

Brunéi

07|21 Tidore

11–12|21

Timor

01–02|22

Guam

03|21

Cabo de Buena

Esperanza

05|22

Isla de Ámsterdam

03|22

Made with Natural Earth.

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Management Report

For the Private Banking division, the fiscal year 2016/2017 will bring a

clear focus – as in the previous year – on the development of integrated

strategies to maintain capital and assets, based on individual planning,

combined with first-class customer service. The expansion of its

product range for clients from Austria and Germany – the financing

of residential and commercial real estate projects – should remain

the focus. Considering high demand, especially in large cities and

conurbations, we expect housing prices to increase even further,

unless the supply of real estate is extended. With our competence in

financing matters, swift processing and transparent communication,

we intend to use these market opportunities successfully also in the

future. The Asset Management division is going to consistently pursue

the conservative investment approach, thus striving again for a positive

performance of Euram Bank’s public funds. In the Card Payment

Services division, we are currently developing further projects in the

field of card-based payment transactions together with our international

partners. In this area we see a marked trend towards electronic

payment methods, such as Near Field Communication (NFC), via bank

cards (smart cards) for micropayments or mobile payments using

smartphones.

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Essential risks and uncertainties

An order issued by the Securities and Exchange Board of India (SEBI)

dated 22 September 2011, accusing Euram Bank of infringing the code

of conduct of the Indian stock exchange as an FII licensee, remains

in force. In October 2015, Euram Bank made another comprehensive

statement vis-à-vis SEBI in this respect; the bank continues to cooperate

with all the authorities involved, seeking rapid resolution.

Euram Bank has applied to a UNCITRAL arbitration tribunal in respect

of an escrow investment in Slovakia on account of infringement

of the bilateral investment treaty. The arbitration tribunal dismissed

Euram Bank’s action against the Slovak Republic in June 2014 as being

outside its jurisdiction. A civil action brought by Euram Bank before a

Slovakian court has been withdrawn by Euram Bank. In response, the

Slovakian Republic has sued Euram Bank for reimbursement of costs.

The complaint filed by the Slovakian Republic was dismissed by the

local court of Bratislava (2nd instance) in May 2016.

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Management Report

3. Research and development

Euram Bank undertakes no research and development activities.

4. Risk reporting

Euram Bank continuously develops its risk management in order to

effectively identify, assess and control risks. Risk management is a

component of overall bank management, and takes into account the

nature, extent and complexity of transactions, and the resultant risks,

in addition to the legal and regulatory framework. The Managing Board

has defined a risk strategy that is consistent with the business strategy

and the risks resulting therefrom. The risk strategy comprises the

targets of risk management in all essential business activities as well

as the measures to accomplish those targets. In particular, risk tolerances

have been determined for all essential risks, taking account of

risk concentrations. In this context, risk concentrations have also been

accounted for with respect to the earnings situation of the bank.

Risk-bearing capacity

On the basis of the overall risk profile, care is being taken that the

essential risks are covered by the risk covering potential on a current

basis, taking into account risk concentrations, and accordingly ensuring

the risk-bearing capacity of the bank. Euram Bank has established

an internal process to ensure its risk-bearing capacity. The risk-bearing

capacity is being considered on defining strategies as well as their

modifications. Adequate risk control and controlling processes have

been established to implement the strategies and/or to ensure the

organisation’s risk-bearing capacity. For risks that are incorporated in

the the risk-bearing capacity but for which no suitable quantification

method is available, a risk amount (risk buffer) is determined on

the basis of a plausibility check. The plausibility check is carried out

on the basis of a qualified expert estimate. The choice of the methods

and procedures for assessing the risk-bearing capacity is the responsibility

of the Managing Board. The determination of essential elements

of the risk-bearing capacity control as well as of essential underlying

assumptions is approved by the Managing Board. The adequacy of

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Management Report

the methods and procedures is checked by the respective competent

employees every year. The procedures used to control the risk-bearing

capacity take account of the aim to manage the bank on a goingconcern

basis, but also the protection of creditors against economic

loss. Euram Bank disposes of a process for the planning of future

capital requirements. The planning horizon comprises an adequately

long period of several years (3 years). In this context, account is taken

of the effects that changes of the bank’s own business activity or of

the strategic targets as well as changes to the economic environment

will have on the capital requirement - beyond the risk assessment

horizon of the risk-bearing capacity concept.

Internal control system

In line with the type, scope, complexity and degree of risk of the

bank’s business activities,

- arrangements were made with respect to the organizational structure

and process organization,

- risk management and controlling processes were put in place, and

- a risk management function was implemented.

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Organizational structure and process organization

The characteristics of the organizational structure and process organization

ensure that incompatible activities are carried out by different

employees and that conflicts of interest are avoided. Processes and the

associated tasks, competencies, responsibilities, controls and communication

channels are clearly defined and geared to each other. This

includes the regular and ad-hoc review of IT authorizations, signatory

powers and other authorities granted. The same applies with respect to

interfaces with key outsourcing partners.

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Risk control and controlling process

Euram Bank has put in place adequate risk control and controlling

processes that ensure the identification, assessment, control as well as

monitoring and communication of essential risks and of the associated

risk concentrations. These processes are integrated in a joint management

and risk control system (overall bank management). Suitable

measures ensure that the risks and associated risk concentrations are

effectively limited and monitored taking account of the risk-bearing

capacity and of the risk tolerances. The risk management and controlling

processes ensure that essential risks – also from outsourced

activities and processes – can be identified at an early stage, measured

in full and presented adequately. Reports on the risk situation are

presented to the Managing Board at suitable intervals. Risk reporting

must be effected in a comprehensible and meaningful way. Apart from

the relevant presentation, it will also include an assessment of the risk

situation. If necessary, risk reporting will also include proposed action,

e.g. for a reduction of risk. Moreover, risk concentrations and their

potential consequences are dealt with separately. As a complement to

regular reporting, annual stress tests are carried out. The results of the

stress tests and the potential effects on the risk situation and the risk

covering potential, as well as the essential assumptions underlying

the stress tests are presented in a separate report. Information that

is crucial from a risk point of view will be passed on to the Managing

Board, the respective officers and the Internal Audit function without

delay, for suitable measures or audits to be initiated at an early stage.

The Managing Board will inform the Supervisory Board in writing

about the risk situation at quarterly intervals. Information that is essential

for the Supervisory Board under a risk aspect will be passed on

by the Managing Board without delay. The risk control and controlling

processes are promptly adjusted to changing conditions.

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Management Report

Risk Management

Euram Bank disposes of a Risk Management function responsible for

the independent monitoring and communication of risks.

Risk Management has the following tasks in particular:

- Assistance of the Managing Board in all risk policy matters, in particular

in the development and implementation of the risk strategy,

as well as in devising a system for the limitation of risks

- Assistance of the Managing Board in establishing and developing

risk management and controlling processes

- Implementing and developing a system of key risk figures and of

early warning processes for risks

- Ongoing monitoring of the bank’s risk situation and risk-bearing

capacity as well as of compliance with the risk limits established

- Regular preparation of the risk reports for the Managing Board

- Responsibility for implementing the processes to immediately pass

on any information that is essential from a risk aspect to the

Managing Board, to the respective officers and to Internal Audit

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The staff of Risk Management have been granted the necessary powers

and unlimited access to all information that is required for the performance

of their tasks.

Management of special types of risk

Euram Bank’s scope of business encounters risks especially in the field

of credit and counterparty risk, liquidity risk, operational risk as well

as other risks.

Credit and counterparty risk

Euram Bank limits the credit and counterparty risk by primarily granting

collateralized loans (with only few exceptions). For the calculation

of the credit and counterparty risk, Euram Bank applies the standard

approach acc. to Art. 111–141 CRR.

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Management Report

Euram Bank measures and controls the credit risk in line with the

following principles:

- In all divisions, uniform standards are applied to the respective

credit decisions.

- The approval of credit limits for business partners and the control

of the individual credit exposures must take place within the scope

of the credit strategy. Moreover, each decision includes a risk-return

analysis.

- Each loan granted to a business partner and any material change of

a credit component (such as term, collateral structure or important

contractual provisions) is subject to renewal of the credit approval.

- Credit exposures to a certain group of borrowers are consolidated by

Euram Bank. Euram Bank considers borrowers that are associated

with each other by the same beneficial owners beyond legal requirements

or that are jointly and severally liable for all or essential parts

of the loans granted as a “group of borrowers“.

An important element of the credit approval process is a detailed risk

assessment of each credit exposure of a borrower or group of borrowers.

In assessing the risk, Euram Bank will consider both the creditworthiness

of the business partner and the risks relevant to credit

exposure. The resulting risk classification will not only influence

the structure of the transaction and the credit decision, but will also

determine the degree of monitoring for the respective exposure.

27

Operational risk

Risk Management has adopted guidelines for the identification, assessment,

reporting and monitoring of operational risks. It is responsible

for the definition of the operational risk framework and of the pertinent

guidelines, while the responsibility for implementation of the

framework and day-to-day operational risk management lies with the

divisions and the administrative function. This business partnership

model results in strict control and an increased awareness of operational

risks. For the calculation of operational risk, Euram Bank applies

the basic indicator approach acc. to Art. 315-316 CRR. The aim is to

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Management Report

proactively control operational risks. For this reason, the Risk Management

function has prepared a framework for operational risks that is

used to determine the operational risk profile of Euram Bank and to

define measures as well as priorities with a view to risk reduction. The

staff responsible for the implementation of the framework will inform

Risk Management in writing on a quarterly basis about the risk situation

in their department. The individual reports are summarized by

Risk Management in an overall report. Euram Bank has implemented

an incident database, which is kept by Risk Management. All business

and organizational divisions are instructed to report any mistakes that

have occurred (irrespective of a monetary value) to Risk Management,

thus enabling their analysis in a first step and to derive arrangements

to prevent further mistakes.

Liquidity risk

Liquidity management ensures that Euram Bank will always be in a

position to settle its payment obligations on time and that asset

positions can be liquidated at any time without having to accept significant

discounts on the market.

28

The Asset Liability Committee (ALCO) is responsible for liquidity management.

It is the task of liquidity management to identify, measure

and control liquidity risk positions. The ALCO consists of employees

from Asset Management, Accounting and Reporting, Back Office and

Risk Managment departments.

Other risks

General business risk:

Generally Euram Bank is in a position to achieve a positive result on

the basis of its existing business model. In the course of the annual

accounts, a risk strategy is defined for the new fiscal year which also

serves as a basis for the allocation of economic capital. Based on

the preliminary balance sheet figures of the annual accounts and on

the risk strategy adopted by the joint Management Board, a financial

forecast will be prepared for the new fiscal year. A Profit Center

account is prepared monthly. The result is compared with the target

Annual Report 20152016


Management Report

values, which were calculated according to the same criteria, on a

monthly basis. Strategic risks, business and yield risks are consolidated

with the credit, market and interest rate risks and supplemented

by operational risks. The result will be discussed and analyzed promptly

by the joint Management Board. This process ensures that general

business risks are identified immediately.

Reputational risk:

Risk management is effected via a comprehensive due diligence process

within the scope of the account opening process, as well as through

the continuous monitoring of all customer activities using an analytical

software product (“kdprevent”). kdprevent, an analytical software

solution for the prevention of money laundering, economic crime and

terrorist financing, allows for the identification of unusual, unexpected

and suspicious transactions effected by customers. Significant

suspicious facts (based on the risk analysis effected by Euram Bank)

will automatically trigger an alert at previously defined contact points.

Vienna, dated 12 September 2016

The Managing Board

Manfred Huber

Johannes Langer

Josef Leckel

29

Euram Bank AG


30

The Merit of Foresight.


Iwan Fjodorowitsch Krusenstern was entrusted with the

command of the first Russian circumnavigation of the

globe. With his exceptional planning skills and

his foresight he turned the three-year expedition into a

long-lasting success. Commissioned by the Czar

he initiated trade relations between Russia and Japan and

explored the island of Sakhalin, where Russia’s largest

oil and gas resources are located.

Annual Report 20152016


31

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

0 m

50 m

Named after the great explorer and admiral,

the sailing ship “Krusenstern” is still in use for

training Russian sailors.

Euram Bank AG


Balance Sheet

BALANCE SHEET AS OF JUNE 30, 2016

32

Assets 30.6.2016 30.6.2015

EUR EUR TSD EUR

1. Cash in hand, balances with

central banks 1,866,102.48 1,439

2. Debt instruments issued by

public authorities 10,344,056.47 8,984

3. Claims against credit institutions

a) repayment on demand

b) other loans and advances

45,435,427.05

24,368,579.11

69,804,006.16 49,238

49,238

0

4. Loans and advances to customers 89,354,348.05 79,561

5. Debentures and other fixed-income

securities of public issuers 7,656,468.06 8,980

6. Stocks and other non fixed-income

securities 2,260,404.96 4,801

7. Participations 70.00 0

8. Shares in affiliated companies 159,000.00 159

9. Intangible fixed assets 63,245.13 87

10. Tangible Assets 105,690.40 139

11. Other Assets 2,364,665.82 1,369

12. Prepayments and accrued income 387,167.03 444

184,365,224.55 155,201

1. Foreign Assets 96,987,748.48 99,486

Annual Report 20152016


Balance Sheet

BALANCE SHEET AS OF JUNE 30, 2016

Liabilities 30.6.2016 30.6.2015

EUR EUR TSD EUR

1. Liabilities to credit institutions

a) repayable on demand

b) with agreed maturity dates or

period of notice

2. Liabilities to customers

a) Other liabilities

aa) repayable on demand

bb) with agreed maturity dates or

period of notice

3. Securitized liabilities

a) self-issued bond

b) other recuritized liabilities

310,992.11

20,620,733.61

91,727,917.19

20,931,725.72 2,565

65

2,500

147,535,668.24 133,853

125,316

55,807,751.05

8,537

23,646.98 25

15,572.52

15

8,074.46

10

4. Other liabilities 515,737.84 1,524

5. Accruals and deferred income 12,500.00 84

6. Provisions

a) provisions for severance payments

b) other provisions

381,348.74

308,330.08

689,678.82 1,467

381

1,086

7. Subscribed capital 10,045,712.61 10,046

8. Capital reserves

a) tied-up

b) free

1,886,813.16

33,537.61

1,920,350.77 1,920

1,887

33

9. Profit reserves, other reserves 2,859,904.17 2,860

10. Liability reserve pursuant to

§57 para 5 Banking Act 979,100.00 660

11. Net Profit / Loss -1,148,800.60 197

184,365,224.55 155,201

33

1. Contingent liabilities 6,185,341.57 6,757

2. Own funds to be taken into account pursuant

to Part Two Regulation (EU) 575/2013 14,593,021.82 15,404

3. Required own funds pursuant to Article 92

regulation (EU) 575/2013

a) CET 1 capital ratio

b) T1 capital ratio

c) Total capital ratio

99,113,108.94

14.7%

14.7%

14.7%

65,523

23.5%

23.5%

23.5%

4. Liabilities abroad 134,026,187.59 126,423

Euram Bank AG


Profit and Loss account

PROFIT AND LOSS ACCOUNT AS OF JUNE 30, 2016

34

Profit- and Loss Account 30.6.2016 30.6.2015

EUR EUR TSD EUR

1. Interest and interest-like earnings

hereof: fixed interest securities 366,308.46

2,469,171.17 1,347

178

2. Interest and interest-like expenditures -347,380.77 -192

I. NET INTEREST EARNINGS 2.121,790.40 1,155

3. Earnings from securities and participations

a) Earnings from shares, other share rights

and non fixed-income securities 61,841.41 132

4. Earnings from commissions 4,967,797.27 95,875

5. Expentitures from commissions -1,181,790.67 -93,526

6. Earnings/Expenditures from

financial transactions -204,729.33 -211

7. Other operating earnings 739,606.75 3,271

II. OPERATING EARNINGS 6,504,515.83 6,696

8. General administrative expenditures

a) personnel expenditures

aa) wages and salaries

bb) payment of legal social levies

and compulsory contributions

cc) other social expenditures

dd) expenditures for retirement provisions

and support

ee) Endowment of the severence

payment provisions

b) other administrative expenditures

(overhead)

-2,630,779.54

-612,975.46

-47,655.63

-131,209.45

-40,338.81

-3,462,958.89

-3,439

-2,554

-605

-53

-112

-115

-2,749,778.06

-3,016

-6,212,736.95 -6,455

Annual Report 20152016


Profit and Loss account

PROFIT AND LOSS ACCOUNT AS OF JUNE 30, 2016

Profit- and Loss Account 30.6.2016 30.6.2015

EUR EUR TSD EUR

9. Value adjustments of the assets listed

in assets items 9 and 10 -95,436.67 -109

10. Other operating expenditures -137,935.06 -186

III. OPERATING EXPENDITURES -6,446,108.68 -6,750

IV. OPERATING RESULT 58,407.15 -54

11. Value adjustments of claims and

allocations to provisions for contingent

liabilities and for credit risk -1,029,912.23 0

12. Earnings from the release of value adjustments

of claims and from provisions for

contingent liabilities and for credit risk 0.00 87

13. Value adjustments of securities valued like

financial investments as well as

of participations and shares held in

affiliated companies -23,200.00 -59

V. RESULT OF ORDINARY BUSINESS OPERATION -994,705.08 -26

14. Income and earnings tax -32,871.38 219

VI. ANNUAL DEFICIT / SURPLUS -1,027,576.46 193

15. Change of reserves

hereof: allocation to the liability reserve 318,600.00

-318,600.00 0

0

VII. ANNNUAL LOSS / PROFIT -1,346,176.46 193

16. Profit carryforward 197,375.86 4

VIII. NET LOSS / PROFIT -1,148,800.60 197

35

Euram Bank AG


36

The Reward for Persistence.


When Jacques Cartier explored the St. Lawrence River

in 1535 he named a mountain close to the river

“Mont Royal” and eventually gave today’s major city

Montreal its name. For over ten years and in numerous

journeys - opposed many disbelievers - he laid the

foundation for France’s overseas territory, thus securing

sustainable profits for over 200 years to follow.

Annual Report 20152016


1 er Voyage 1534

2 nd Voyage 1535–36

CANADA

Golfe du

Saint-Laurent

TERRE-NEUVE

Québec

Montréal

Océan Atlantique

du nord

37

USA

N

The name “Canada“ is attributed to the Indian word for

village, “Canata“. Jacques Cartier used the name for

the entire area alongside the St. Lawrence River, which he

explored on several occasions.

Euram Bank AG


Notes

38

Annual Report 20152016


Notes

NOTES

to the annual accounts of European American

Investment Bank Aktiengesellschaft (“Euram

Bank“) for the year ending 30 June 2016.

The annual accounts for the year ending 30

June 2016 were prepared in accordance with

the regulations of the Accounting Act, taking

account of the special requirements of the

Banking Act.

1. General principles and information

on accounting and valuation

General principles

The annual accounts for the year ending

30 June 2016 are prepared in compliance with

generally accepted accounting principles,

and with the general standard of conveying a

true and fair view of the company’s assets,

financial situation and results of operation.

The principle of completeness and accounting

continuity was observed in preparing the

annual accounts. With respect to accounting

consistency, the option to account for deferred

tax assets under section 198 (10) Austrian

Business Code (UGB) was newly exercised

in the fiscal year 2014/15, and a deferred tax

asset was formed for the first time.

The principle of itemised valuation was

applied in valuing the individual assets and

liabilities, on a going-concern basis.

The principle of prudence was observed by

reporting only profits realised on the reporting

date, and recognising all discernible risks

and impending losses in the balance sheet.

Under the provisions of section 9 of the

Corporate Income Tax Act (KStG) relating to

group taxation, a corporate group exists as

at 30.06.2016 comprising Euram Holding AG

as group parent and Euram Bank as group

member. The tax sharing agreements stipulate

the stand-alone method.

The bank is organised as a stock corporation.

Euram Bank is wholly owned by Euram

Holding AG.

Foreign currency amounts

Foreign currency amounts are translated at

the middle rates set on the reporting date, in

accordance with section 58 (1) Banking Act.

Financial investments

Holdings are valued at cost of purchase. Lower

values are recognised in the case of material,

sustained impairments.

Securities held as fixed assets are measured

at the lower of fair value and cost of purchase

on the balance sheet date. Non-scheduled

depreciation of a fair value that is lower on

the reporting date is applied where the impairments

seem likely to be enduring.

39

Euram Bank AG


Notes

40

Write-ups of fixed assets are effected where

the reasons for the non-scheduled depreciation

no longer apply, unless the lower value

can be retained for determining taxable income,

provided that it also remains unchanged

in the annual accounts.

For holdings write-ups are applied in the event

of recovery, regardless of the reasons responsible

for the non-scheduled depreciation.

Current assets

Items classified as current assets were reported

at cost of purchase less value adjustments for

discernible individual risks or possibly a lower

share price, market value, or market value

derived from a similar financial instrument,

on the reporting date.

Financial instruments in the bank book

In the bank book, shares in hedge funds in the

amount of EUR 24 thousand (EUR 2.2 million

as at 30.6.2015) are held.

Lending risks

Loans and advances to customers amount to

EUR 89.4 million (EUR 79.6 million as at

30.6.2015), loans and advances to customers

with a volume of EUR 11.7 million (EUR 35.1

million as at 30.6.2015) are secured by deposits;

loans and advances to customers with a

volume of EUR 76.8 million (EUR 43.9 million

as at 30.6.2015) are largely secured through

mortgages, deposits and/or securities, and

unsecured loans receivable amount to EUR

0.8 million (EUR 0.6 million as at 30.6.2015).

The loans and advances to customers include

amounts due from issuers with a volume of

EUR 3.9 million (30.06.2015: EUR 2.9 million).

Loans and advances

to customers:

million

secured by deposits EUR 11.7

secured by mortgages,

deposits and securities EUR 76.8

unsecured EUR 0.8

Shares in affiliated companies

Hedge fund shares:

thousand

CFS I EUR 24

Sharpe Futures Fund EUR 0

Sharpe Art Segregated

Portfolio Fund EUR 0

Euram Bank has a 100% holding in Euram

Invest Holdings 3 GmbH headquartered

in Munich, Germany (line of business of the

GmbH: management of investments).

In the fiscal year 2015/2016, as already

in fiscal year 2014/2015, no dividends were

distributed to Euram Bank.

Annual Report 20152016


Notes

According to section 238 (2) of the UGB, the

equity capital and results of the last fiscal year

of the affiliated undertakings are as follows:

Euram Invest Holdings 3 GmbH

(in EUR thousand)

Equity 249.6

Share of Equity 100%

Result last FY -11.4

Participations

This item includes the share in the deposit

guarantee scheme (Einlagensicherung der

Banken und Bankiers GmbH), Vienna,

in the amount of EUR 70.0 (EUR 70.0 as at

30.6.2015).

Intangible and tangible assets

Intangible fixed assets and tangible assets are

valued at cost of acquisition or production,

less scheduled depreciation. Low-value assets

are capitalized and written off in full in the

year of acquisition. Assets are depreciated on

a straight-line basis.

The following useful life is assumed for the

purposes of scheduled depreciation:

Company cars

Office equipment

Fixtures

Office machines

Software

Hardware

8 years

5 years

5 years

5 years

5 years

5 years

The tax regulations permit a full year’s

depreciation for acquisitions in the first half

of the year, and half a year’s depreciation

for acquisitions in the second half of the year.

Severance pay obligations

The provisions for severance pay are determined

according actuarial principles applying

the interest rate of 1% (previous year: 1%)

and on the basis of an imputed retirement age

of 60 years for women and 65 years for men.

A staff fluctuation discount is not applied.

Other provisions

In the remaining provisions, all risks discernible

at the time of preparation of the accounts

as well as liabilities, uncertain in terms of

amount and substance, are accounted for

in amounts dictated by prudent commercial

judgement.

Contingent liabilities

The contingent liabilities include financing

guarantees granted, that are secured by

credit institutions, securities or in cash in the

amount of EUR 0.1 million (EUR 0.1 million as

at 30.6.2015) as well as an unsecured financing

guarantee given in the amount of EUR 0.6

million (EUR 0.7 million as at 30.6.2015).

41

Euram Bank AG


Notes

42

Credit risks

This item includes undrawn credit facilities

amounting to EUR 3.1 million (EUR 3.6

million as at 30.6.2015) as well as guarantees

vis-à-vis credit card companies for credit

lines granted to Euram Bank customers in the

amount of EUR 2.4 million (EUR 2.4 million

as at 30.6.2015).

Fiduciary Receivables

Fiduciary Receivables are contained in the

following items:

- Shares and other non-fixed interest securities:

EUR 23.6 thousand (EUR 1.1 million as

at 30.6.2015)

Fiduciary Liabilities

Fiduciary Liabilities are contained in the

following items:

- Liabilities to customers: EUR 0.0 thousand

(EUR 1.1 million as at 30.6.2015)

- Securitized liabilities: EUR 23.6 thousand

(EUR 25.3 thousand as at 30.6.2015)

2. Notes to the accounts

A. Maturities analysis

Receivables from banks:

thousand

up to 3 months EUR 24,369

more than 3 months

up to 1 year EUR 0

more than 1 year up

to 5 years EUR 0

over 5 years EUR 0

Receivables from customers: thousand

up to 3 months EUR 0

more than 3 months

up to 1 year EUR 21,556

more than 1 year up

to 5 years EUR 61,579

over 5 years EUR 2,151

Payables to banks:

thousand

up to 3 months EUR 20,506

more than 3 months

up to 1 year EUR 114

more than 1 year up

to 5 years EUR 0

over 5 years EUR 0

Payables to customers:

thousand

up to 3 months EUR 12,993

more than 3 months

up to 1 year EUR 28,022

more than 1 year up

to 5 years EUR 14,792

over 5 years EUR 0

Amounts due to and from banks and customers

other than repayable on demand are

structured according to remaining maturity

as follows:

Annual Report 20152016


Notes

B. Securities

In the fiscal year 2015/2016, securities were

held in the following asset items:

- Debt instruments issued by public authorities:

EUR 10.3 million (EUR 9.0 million as

at 30.6.2015)

- Loans and advances to customers: EUR 3.9

million (EUR 2.9 million as at 30.6.2015)

- Debentures and other fixed-interest securities:

EUR 7.7 million (EUR 9.0 million as at

30.6.2015)

- Shares and other non-fixed interest securities:

EUR 2.3 million (EUR 4.8 million as at

30.6.2015)

Fixed assets:

thousand

CPI Immobilien AG

30.11.2013-30.11.2033 EUR 1,910

Current assets:

thousand

ADLER Real Estate AG

08.04.2015-08.04.2020 EUR 0

7,5 DEMIRE

Dt.Mittelst.R.Est.AG

16.09.2014-16.09.2019 EUR 1,983

B.3. Debentures and other fixed-interest

securities

B.1. Debt instruments issued by public

authorities that are admitted for refinancing

with the Central Bank

In the fiscal year 2015/2016, a non-fixed

interest listed security (regulated market)

and a fixed-interest listed security (regulated

market) were held in current assets.


thousand

Land Niederösterreich

FRN 01.10.2014-01.10.2019 EUR 8,988

0.875 Denmark, Kingdom

18.03.2014-20.03.2017 EUR 1,356

B.2. Amounts due from customers - of

which other issuers

In the fiscal year 2015/2016, a fixed-interest

unlisted security was held in the fixed assets

and a fixed-interest listed security (open market)

was held in current assets.

In the fiscal year 2015/2016, three fixed-interest

listed securities (regulated market) and

two non-fixed interest listed securities (regulated

market) were held in current assets.

Current assets:

thousand

Republic of Austria

17.06.2011-17.06.2016 EUR 0

Asian Development Bank

30.05.2012-17.08.2015 EUR 0

Asian Development Bank

19.03.2013-20.06.2016 EUR 0

Kommunalbanken AS

19.01.2011-19.01.2016 EUR 0

The Netherlands

24.02.2012-24.02.2017 EUR 1,810

Sweden, Kingdom of

29.10.2012-22.12.2015 EUR 0

0.75 OeKB AG Global Note

05.11.2013-15.12.2016/USD EUR 2,028

0.5 European Investment

Bank 15.05.2013-15.08.2016 EUR 1,353

0.6801% Inter-American

D.Bk.FRN 17.07.15-15.10.19 EUR 1,793

0.6746% Asian Development

Bk.FRN 10.07.2015-2019 EUR 672

43

Euram Bank AG


Notes

44

B.4. Shares and other non-fixed interest

securities

This item contains investment fund shares

allocated to fixed assets in the amount of

EUR 1,689 thousand (EUR 1,712 thousand as

at 30.6.2015).

Hedge fund shares in the amount of EUR 24

thousand (EUR 0.7 million as at 30.6.2015)

and a special fund in the amount of EUR 0.0

million (EUR 1.5 million as at 30.6.2015)

are reported in current assets. Current assets

also include investment fund shares of the

Euram public funds in the amount of EUR 0.5

million (EUR 0.9 million as at 30.6.2015). Furthermore,

shares in “Petrocapital Resources

PLC” in the amount of EUR 10.00 (EUR 10.00

as at 30.6.2015) are held. All securities shown

in the asset item “Shares and other non-fixedinterest

securities“ are unlisted.

Fixed assets:

thousand

Europportunity Bond EUR 1,689

Current assets:

thousand

CFS I EUR 24

Sharpe Futures Fund EUR 0

Sharpe Art Segregated

Portfolio Fund EUR 0

Europportunity Bond EUR 185

USD Convergence Bond EUR 282

Advantage Stock EUR 80

Petrocapital

Resources PLC EUR 0.01

No securities trading book was kept in the

fiscal year 2015/2016.

One share (“Petrocapital Resources PLC“)

was held in the fiscal year 2015/2016. “Petrocapital

Resources PLC“ was delisted in 2010.

In the fiscal year 2015/2016, the company

managed a customer securities portfolio to a

value of EUR 224.1 million (EUR 160.3 million

as at 30.6.2015).

C. Fixed assets

The fixed assets movement schedule and the

breakdown of the annual depreciation by

individual items are presented as a separate

schedule.

D. Other assets

Other assets essentially contain

- a pending repayment: EUR 0.2 million

(EUR 0.4 million as at 30.6.2015)

- fees charged from investment fund management:

EUR 0.3 million (EUR 0.3 million as

at 30.6.2015)

- outstanding receivables: EUR 1.6 million

(EUR 0.2 million as at 30.6.2015)

- a real estate property not intended to be

held in the long term: EUR 240 thousand

(EUR 240 thousand as at 30.6.2015).

Other receivables with a remaining term to

maturity of more than one year amounting

to EUR 0.0 million (EUR 0.2 million as at

30.6.2015) were reported in the fiscal year

2015/2016.

The material revenue included in the item

“Other assets“ in the fiscal year 2015/2016

that becomes payable only after the reporting

date amounts to EUR 1.3 million (EUR 0.7

million as at 30.6.2015).

Annual Report 20152016


Notes

E. Prepayments and accrued income

Apart from current salary payments in the

amount of EUR 128.5 thousand (EUR 115.4

thousand as at 30.6.2015), this item includes

prepaid insurance premiums as well as information

and maintenance costs in the

amount of EUR 159.1 thousand (EUR 160.3

thousand as at 30.6.2015) and other prepayments

amounting to EUR 11.9 thousand

(EUR 48.3 thousand as at 30.6.2015). At the

balance sheet date, prepayments according

to section 198 (10) UGB amount to EUR 87.5

thousand (previous year: EUR 120.4 thousand).

The option to capitalize deferred taxes

was exercised.

F. Securitized liabilities

amounting to EUR 0.0 thousand (EUR 234.6

thousand as at 30.6.2015), and liabilities

to the tax authorities amounting to EUR

279.5 thousand (EUR 367.1 thousand as at

30.6.2015).

The material expenses included in the item

“Other liabilities“ in the fiscal year 2015/2016

that become payable only after the reporting

date amount to EUR 0.2 million (EUR 0.4 million

as at 30.6.2015).

H. Deferred income

This item mainly includes commissions already

received but allocated to the fiscal year

2016/2017 amounting to EUR 12.5 thousand

(EUR 84 thousand as at 30.6.2015).

This item includes a self-issued certificate:


thousand

CFS Alternative

Investment Note I EUR 24

The amount of securitized liabilities becoming

due in the year following the balance sheet

date is EUR 24 thousand (EUR 25 thousand as

at 30.6.2015).

G. Other liabilities

Other liabilities include invoices received,

but not yet paid, relating to the 2015/2016

fiscal year in the amount of EUR 0.2 million

(EUR 0.2 million as at 30.6.2015), liabilities

to a data acquisition company amounting

to EUR 0.0 million (EUR 0.7 million as at

30.6.2015), liabilities arising from tax

allocations with an affiliated undertaking

I. Equity capital

1.) The share capital amounting to EUR

10,045.7 thousand is divided into 270,000

no-par shares, each with an equal portion of

the share capital.

2.) The equity capital is made up as follows:


thousand

Subscribed capital EUR 10,045.7

(Appropriated) capital

reserve EUR 1,886.8

(Free) capital reserve EUR 33.5

Retained Earnings EUR 2,859.9

Liability reserve as

per section 57 (5)

Banking Act EUR 979.1

3.) The net profit/loss for the fiscal year

2015/2016 amounts to EUR -1,148.8 thousand

(EUR 197.4 thousand as at 30.6.2015).

45

Euram Bank AG


Notes

4.) In the fiscal year 2015/2016, Euram Bank

effected allocations to a liability reserve in the

amount of EUR 318.6 thousand (EUR 0 thousand

as at 30.6.2015).

J. Required own funds

Euram Bank uses the following methods to

calculate its required own funds:

Credit risk: standard approach

Operational risk: basic indicator approach

Risk of adjustment to credit valuation

(CVA risk): standard method

In the fiscal year 2015/2016, the total amount

of risk under Article 92 of CRR – EU Regulation

no. 575/2013 amounts to EUR 99,113

thousand (EUR 65,522 thousand as at

30.6.2015).

The total amount of risk due to Credit valuation

adjustment (CVA risk) is EUR 0.00 (EUR

856.53 as at 30.6.2015).

The total amount of risk of the exposure to

Operational risks is EUR 13,462 thousand

(EUR 17,959 thousand as at 30.6.2015).

K. Additional disclosures

1.) Total amount of assets and liabilities in

foreign currency:


million

Assets in foreign

currency EUR 88.2

Liabilities in foreign

currency EUR 88.1

The foreign currency assets and liabilities

essentially concern USD.

46

The risk weighted item amounts for the credit

risk are EUR 85,651 thousand (EUR 47,562

thousand as at 30.6.2015) and comprise the

following:

thousand

Exposures to central governments or central banks EUR 0

Exposures to regional or local administrative bodies EUR 0

Exposures to multilateral development banks EUR 0

Exposures to institutes EUR 7,861

Exposures to corporates EUR 30,530

Exposures from retail business EUR 3,561

Defaulted exposures EUR 13,988

Exposures secured by real estate property EUR 8,988

Exposures to institutes and corporates with short-term credit ratings EUR 10,825

Exposures in the form of investment fund units (UCI) EUR 1,493

Investment exposures EUR 159

Other positions EUR 8,246

Annual Report 20152016


47

The fruits of cooperation.


Today the polar research conducted by the International

Council for Science serves global scientific and

economic purposes. This joint research project in the

Arctic and Antarctic is based on an initiative by the

German-Austrian Carl Weyprecht. He suggested the

first International Polar Year in 1882, when 11 countries

including Austria, Germany and Russia built and operated

research stations around the North Pole.

Euram Bank AG


The archipelago Franz-Josef-Land, about 900 kilometers away from the geographic North Pole, belongs to Russia.

It is named after the Austrian Emperor Franz Josef, who together with many others co-financed the Arctic expeditions

of Carl Weyprecht and Julius Payer and supported the international polar research.

Annual Report 20152016


Euram Bank AG


Notes

2.) In the fiscal year 2015/2016, Euram Bank

had a restraint on disposal for an asset

amounting to EUR 0.4 million (EUR 3.0 million

as at 30.6.2015).

3.) Amounts due from affiliated companies

amount to EUR 1.1 million (EUR 1.7 million

as at 30.6.2015).

4.) Amounts payable to affiliated companies

amount to EUR 0.9 million (EUR 1.6 million

as at 30.6.2015).

5.) In the fiscal year 2015/2016, Euram Bank

had no material transactions with other

“related parties“ (no material transactions

with other “related parties“ as at 30.6.2015).

8.) In the fiscal year under report, the company

did not conclude any forward exchange

transactions (3 as at 30.6.2015). These are

basically used to secure foreign currency

positions. The term of the foreign exchange

transactions is less than one year.

9.) In the fiscal year 2015/2016, Euram Bank

issued one loan to officers and related persons

(one such loan as at 30.6.2015) amounting to

EUR 665 thousand (EUR 665 thousand as at

30.6.2015).

10.) In the fiscal year 2015/2016, Euram Bank

reports a return on assets (annual result after

tax / total assets) in the amount of -0.56%.

50

6.) Other provisions in the amount of EUR

0.3 million (EUR 1.1 million as at 30.6.2015)

include:


thousand

Legal, auditing and

consultancy fees EUR 48.9

Vacation entitlements

not consumed yet EUR 174.7

Bonuses EUR 84.7

7.) From today’s perspective, obligations

arising from using plant and equipment not

reported in the balance sheet amount to

EUR 428.1 thousand (EUR 411.5 thousand as

at 30.6.2015) for the next year, EUR 2 million

for the following five years, and exclusively

concern rental expenses for the use of office

space.

3. Notes to the profit and loss account

In the fiscal year 2015/2016, the breakdown

of income by geographical markets as per

section 64 (1) (9) Banking Act is essentially

the following:

Interest income:


thousand

The Caribbean EUR 63.6

Asia EUR 66.4

Europe - EU EUR 1,804.6

CEE EUR 515.7

America EUR 9.3

Africa EUR 0.2

Australia EUR 9.3

Income from securities and investments:


thousand

Europe - EU EUR 111.2

America EUR -49.4

Annual Report 20152016


Notes

Fees earned:


thousand

The Caribbean EUR 284.3

Asia EUR 146.4

Europe - EU EUR 4,254.6

CEE EUR 198.7

America EUR 37.7

Africa EUR 31.3

Australia EUR 14.7

Income/expenses from financial transactions:


thousand

The Caribbean EUR -613.9

Asia EUR 5.1

Europe - EU EUR 374.5

CEE EUR 26.3

America EUR -1.6

Africa EUR 4.6

Australia EUR 0.3

Other operating income:


thousand

Asia EUR 265.0

Europe - EU EUR 474.6

With reference to section 237 of the Business

Code (UGB), the itemisation of other operating

income and other operating expenditure

in accordance with section 64 (1) (12) of the

Banking Act is as follows:

- Apart from costs recharged to customers

amounting to EUR 0.5 million (EUR 0.2

million as at 30.6.2015), the other operating

income includes the proceeds of an innovative

payment processing product amounting

to EUR 0.0 million (EUR 3.0 million as at

30.6.2015), as well as a value-added tax

credit amounting to EUR 15.5 thousand (EUR

10.9 thousand as at 30.6.2015) and income

from the release of provisions amounting

to EUR 0.2 million (EUR 0.0 million as at

30.6.2015).

- The other operating expenditure reported in

the fiscal year 2015/2016 in the amount of

EUR 137.9 thousand (EUR 186.0 thousand as

at 30.6.2015) essentially concerns expenses

for external consultants.

51

The operating expenses of EUR 2.7 million

(EUR 3.0 million as at 30.6.2015) essentially

comprise the following:

IT and information

expense EUR 982

Office and operating

expense EUR 100

Rental expense EUR 428

Advertising expense EUR 362

Insurance EUR 179

Legal and consultancy

expense EUR 256

Supervisory board EUR 127

Recruitment and

training EUR 68

Travel expenses

and motor vehicle

operating costs EUR 122

Other costs EUR 76

In the fiscal year 2015/2016, value adjustments

for accounts receivable were recognized

in the amount of EUR 1,030 thousand (EUR

0 thousand as at 30.6.2015), relating to the

insolvency of Maple Bank GmbH, Germany.

Value adjustments for securities and for participations

and investments and shares

in affiliated companies amount to EUR 23.2

thousand (EUR 59.0 thousand as at 30.6.2015)

and concern the value adjustment of the

Europportunity Bond fund held in fixed assets

in the amount of EUR 23.2 thousand (EUR

59.0 thousand as at 30.6.2015).

Euram Bank AG


Notes

The expenditure for auditors attributable

to the fiscal year is disclosed in the group

accounts of Euram Holding AG.

The “taxes on income and earnings“ reported

in the profit and loss account, taking into

account tax allocations in the amount of

EUR -32.8 thousand (EUR +219.2 thousand

as at 30.6.2015), affect the “result of ordinary

activities“ at a rate of -3.3% (+845.6% as at

30.6.2015).

In the fiscal year 2015/2016, a liability reserve

amounting to EUR 318.6 thousand (EUR 0.0

thousand as at 30.6.2015) was formed.

4. Other notes

1.) In the fiscal year 2015/2016, the headcount

was 33 on average (32 as at 30.6.2015).

3.) The total remuneration of 3 (3 as at

30.6.2015) Managing Board members that was

granted for their services in the fiscal year

2015/2016 amounts to EUR 1.0 million (EUR

1.1 million as at 30.6.2015), the amounts

granted to the members of the Supervisory

Board in the fiscal year 2015/2016 amount

to EUR 0.1 million (EUR 0.1 million as at

30.6.2015).

4.) No loans were granted to senior staff in

the fiscal year 2015/2016 (EUR 0.0 as at

30.6.2015).

5.) The company’s Managing Board consisted

of the following members during the fiscal

year 2015/2016:

Manfred Huber (Chairman)

Johannes Langer

Josef Leckel

52

2.) In the fiscal year 2015/2016, expenditure

for severance pay amounted to EUR 172.5

thousand for executives (EUR 178.7 thousand

as at 30.6.2015) and to EUR 201.0 thousand

for other employees (EUR 202.2 thousand as

at 30.6.2015). Moreover, contributions in

the amount of EUR 131.2 thousand (EUR 120.9

thousand as at 30.6.2015) were paid to the

company pension fund.

6.) The Supervisory Board consisted of the

following members during the fiscal year

2015/2016:

Adolf Walter Höllmer (Chairman)

Dr. Peter Maser (Vice Chairman since

29.07.2015)

Dr. Erik Max Michael Obermayer (Vice Chairman

until 29.07.2015)

Dkfm. Senta Penner

Annual Report 20152016


Notes

7.) Euram Bank is included in the consolidated

accounts of the following company:

Euram Holding AG

Wallnerstrasse 4

1010 Vienna, Austria

5. Additional disclosures

In order to comply with the company’s disclosure

obligations under Articles 431 to 435 of CRR –

EU Regulation no. 575/2013, it is pointed out

that the publication is made available on the website

of Euram Bank (www.eurambank.com) under

Euram Bank / publications and disclosures“.

Vienna, dated 12 September 2016

The Managing Board

Manfred Huber

Johannes Langer

Josef Leckel

53

Euram Bank AG


Audit Opinion

54

Annual Report 20152016


Audit Opinion

AUDIT OPINION

Report on the Financial Statements

We have audited the accompanying financial statements of European

American Investment Bank Aktiengesellschaft, Vienna, comprising

the balance sheet as of June 30, 2016, the income statement for the

fiscal year ended June 30, 2016, and the notes.

Management’s Responsibility for the Financial Statements

The company’s management is responsible for the preparation and

fair presentation of these financial statements in accordance with

the Austrian Generally Accepted Accounting Principles and banking

regulations and for applying and implementing appropriate internal

control relevant to the preparation and presentation of the financial

statements, that are free from material misstatement, whether due

to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements

based on our audit. We conducted our audit in accordance with

the laws and regulations applicable in Austria and Austrian Standards

on Auditing. Those standards require that we comply with international

auditing standards (International Standards on Auditing – ISA) and

that we adhere to professional guidelines and plan and perform the

audit to obtain reasonable assurance whether the financial statements

are free from material misstatement.

55

Euram Bank AG


Audit Opinion

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the financial statements. The

procedures selected depend on the auditor’s judgment, including

the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control systems relevant to the

company’s preparation and fair presentation of the financial statements

in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the company’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by management, as well

as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

Opinion

56

Our audit did not give rise to any objections. In our opinion, which is

based on the results of our audit, the financial statements comply with

legal requirements and give a true and fair view of the net assets and

financial position of the company as of June 30, 2016 and of its results

of operations for the fiscal year ending on June 30, 2016 in accordance

with Austrian Generally Accepted Accounting Principles and special

legal provisions.

Annual Report 20152016


Audit Opinion

Comments on the Management Report

Pursuant to statutory provisions, the management report is to be audited

as to whether it is consistent with the financial statements and as

to whether the other disclosures are not misleading with respect to the

company’s position. The audit opinion also has to contain a statement

as to whether the management report is consistent with the financial

statements.

In our opinion, the management report is consistent with the financial

statements.

Vienna, September 12, 2016

KPMG Austria GmbH

Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Mag. Bernhard Gruber

Certified Public Accountant

57

Euram Bank AG


58

The Art of Navigation.


The sextant was revolutionary in its time, comparable

to today’s Global Positioning System. Reaching a

destination with GPS is the easiest thing in the world –

one would think. Albeit a technical device only

foresees the predictable and can only calculate the

calculable. Navigation however means to pursue

a successful path, even on unstable terrain and in the

midst of constant change.

Annual Report 20152016


59

Euram Bank AG


Euram Bank AG

Palais Esterházy

Wallnerstrasse 4

1010 Vienna, Austria

Tel. +43 1 512 38 80 0

Fax +43 1 512 38 80 888

office@eurambank.com

www.eurambank.com

This is a translation from German. In case of any discrepancies

between the English and the German version the German text

shall prevail.

Concept, design and production

die3 Agentur für Werbung und Kommunikation GmbH

Photographs

Jürgen Eichardt p. 31; Kurth Keinrath p. 9; Natural Earth p. 20f;

shutterstock p. 19, 58, 59; Tate Images p. 6f; Wiki Commons

p. 30, 36, 47ff

Print

Druckerei Thurnher


64

Annual Report 20152016