ANNUAL REPORT 2010 - DG Hyp

dghyp

ANNUAL REPORT 2010 - DG Hyp

DG HYP Annual Report 2010

Deutsche Genossenschafts-Hypothekenbank AG

ANNUAL REPORT 2010


€ mn 2010 2009 2008

Development of originated new business

Commercial Real Estate Finance 4,613 4,174 3,766

– German originated / Cooperative Financial Services Network 3,322 3,059 2,425

– International and Secondary Market Business 1,291 1,115 1,341

Treasury

– Originated loans to local authorities 634 550 750

– Pfandbrief sales and other refinancing sources 7,353 3,782 7,865

Portfolio development

Total assets 63,443 68,075 76,016

Loans secured by property mortgages 21,437 21,235 21,774

Mortgage Backed Securities (MBS) 3,261 3,686 4,016

Public-sector and local authority loans 33,297 38,643 45,151

Pfandbriefe and other debt securities 44,602 52,424 62,077

Own funds for solvency purposes 1,630 1,538 1,733

Total capital ratio (%) 10.6 9.2 10.2

Core capital ratio (%) 7.6 6.9 7.3

Profit and loss account

Net interest income 204 165 163

Net commission result 20 11 2

Administrative expenses 97 118 127

Net other operating income/expenses 4 9 6

Provisions for loan losses – 74 – 125 – 62

Securities and investment result – 149 – 77 – 111

Operating profit – 92 – 135 – 129

Net extraordinary income/expenses 115 150 187

Taxes – – 2 –

Partial profit transfer 23 17 58

Profit transfer – – –

Number of employees (part-time and full-time)

OVERVIEW

Annual average 454 459 499


CONTENTS

Letter from the Management Board 2

DG HYP: the commercial real estate bank in the

Cooperative Financial Services Network 4

Management Report Economic environment 7

Commercial Real Estate Finance 9

Treasury

Local authority lending and public finance 20

Refinancing 21

Net Assets, Financial Position, and Results of Operations 24

Report on Opportunities and Risks 30

Our Staff 39

Report on Events After the

Balance Sheet Date, and Forecast 41

Financial Statements Balance Sheet 45

Profit and Loss Account 51

Notes to the Financial Statements 57

General notes 57

Notes to the balance sheet 59

Notes to the profit and loss account 71

Coverage 72

Other information on the annual financial statements 79

Responsibility Statement 83

Audit Opinion 84

Report of the Supervisory Board 85

Corporate Bodies And Committees; Executives Supervisory Board 87

Management Board, Department Heads 88

Trustees, Advisory Council 89

DG HYP Offices 91

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

1


Our Management Board: Dr Carsten Meyer-Raven, Dr Georg Reutter (Spokesman) and Manfred Salber

Ladies and Gentlemen, dear business associates,

During 2010 the German economy recovered with surprising speed from the recession experienced

during 2008 and 2009 – posting the strongest growth rate since reunification. This positive development

was driven in particular by the economic momentum in emerging markets, which provided

a strong boost to German exporters. Private consumption – which has been rising for the first

time in many years – has also contributed to the recovery. Economic growth is expected to continue

during the current year, albeit at a somewhat more subdued rate.

Uncertainty ruled on international financial markets, reflecting concerns about the sovereign debt

crisis as well as speculation against the euro. To stabilise the markets, in mid-2010, European

governments resolved to implement a € 750 billion rescue package, set to expire at the end of

2012. Towards the end of the year, an agreement was reached to replace this temporary package

by a permanent safety framework, the details of which are yet to be defined. These measures

helped to ease the ongoing bond market speculation against individual euro member states.

A sustainable stabilisation, however, will require consistent reduction in sovereign debt levels.

We are currently experiencing a wave of additional regulations imposed upon the financial sector

and banks: the primary objective of these stricter rules is to increase the resilience of the financial

system to crises. Whilst the necessity of enhancing financial management tools is evident, it is

worth noting that any additional burdens to bank balance sheets and profit and loss accounts will

also curtail their ability to extend loans.

The German Pfandbrief once again proved its high quality and broad market acceptance as a funding

tool during the period under review. As a Pfandbrief issuer, this allowed us to successfully implement

our refinancing strategy. DG HYP’s Pfandbrief issues have retained their top triple-A rating,

thanks to the high quality of our cover assets pools.

Economic growth momentum triggered a recovery in real estate markets last year, which outperformed

expectations. Transaction volumes in German commercial real estate increased significantly in

2010 – a development that is expected to continue during the current year, even if it slows down to

some extent. Numerous investors have been attracted by the relative stability of the German market

during the crisis.

2 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010


Against this background, our new Commercial Real Estate Finance business continued to grow

year-on-year. In selecting exposures, we focused on high-quality business with a balanced risk/reward

profile. With this new business volume, we have established DG HYP amongst the leading German

real estate finance houses. We have been particularly successful in developing our business within

the Cooperative Financial Services Network, having consistently updated and expanded our range

of products and services targeting cooperative banks during 2010. With a 54% year-on-year in -

crease, we reached the € 1 billion threshold in this business quicker than anticipated. We will continue

to expand this successful cooperation during 2011.

DG HYP’s operating results developed positively across all segments. Both net interest income and

the net commission result showed marked increases, and clearly exceeded both the previous year’s

levels and projections. Improved cost structures led to a sustained reduction in administrative expenses,

whilst provisions for loan losses developed in line with budgeted figures. DG HYP is making

good progress. Nevertheless, our performance is being burdened by legacy, non-strategic portfolios,

particularly the MBS inventory; as a result, a contribution to income from DZ BANK is still

required.

With effect from 1 January 2011, the Supervisory Board of DG HYP has appointed Dr Carsten

Meyer-Raven – previously Senior General Manager – as an ordinary member of the Management

Board. With this appointment, DG HYP’s Management Board now carries the full complement,

safeguarding the continuity required to maintain the bank’s successful development as a commercial

real estate finance provider.

The Basel III regime is expected to involve higher capital requirements, yet even with restricted

resources we need to retain the bank’s ability to provide an optimal service to its domestic clients at

all times. We have therefore decided to focus DG HYP’s business activities in commercial real estate

finance even more strongly on our German home market. Accordingly, we will close our foreign representative

offices by mid-2011. Nonetheless, we will continue to finance selected international

real estate investments for our German clients. In terms of its size and stability, the German commercial

real estate market is attractive to investors, and offers good potential for DG HYP’s future

development. At the same time, international investors are currently focusing on the German market

– a market in which DG HYP has outperformed the trend during the last two years. We want to

consistently expand the bank’s strong position in our home market, in close cooperation with the

Cooperative Financial Services Network.

The Management Board of DG HYP

Hamburg, March 2011

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

3


4

DG HYP: THE COMMERCIAL REAL ESTATE BANK IN THE

COOPERATIVE FINANCIAL SERVICES NETWORK

DG HYP is the specialist for commercial real estate

finance within the Cooperative Financial Services Network,

and thus a key partner to cooperative banks in this business

segment. As part of a comprehensive bancassurance

(“Allfinanz”) offer, commercial real estate finance is an

important segment within the DZ BANK Group. DG HYP’s

business activities are concentrated on client-driven business

that offers an adequate relationship of risk and return.

An additional business segment of DG HYP is public

finance, where the bank supports cooperative banks in

lending to local authorities. As a Pfandbrief issuer, DG HYP

offers institutional investors a high-quality, secure invest-

DG HYP – PART OF A POWERFUL GROUP

16.2 million

shareholders

More than 1,100 cooperative banks

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

ment in the form of Pfandbriefe. DG HYP continuously

develops and expands these business segments, together

with cooperative banks.

Second only to manufacturing industry, the real estate

sector constitutes a key segment of the German economy,

accounting for gross value added of € 390 billion – or just

under 20% of total value added – according to recent estimates.

This means that the real estate sector exceeds the

automotive and engineering industries combined. Consequently,

commercial real estate finance is a business segment

that holds enormous potential for cooperative banks.


Thanks to its high credit quality, notably demonstrated

during the financial crisis, the Cooperative Financial Services

Network is a sought-after financing partner amongst

investors. DG HYP supports cooperative banks in the

commercial real estate finance business with products and

services, and with its expertise in the financing and real

estate markets. Joining forces in market coverage

enhances the opportunities for all parties to further

increase market share in commercial real estate finance.

Cooperative banks are thus in a position to successfully

generate lending business with medium-sized commercial

real estate investors – a key target group for these banks,

winning attractive new clients and exploring high-margin

cross-selling potential. Thus, the close collaboration within

the Cooperative Financial Services Network forms the basis

of a sustainable and successful market presence.

Since the realignment of DG HYP in 2008, it is not only

the specialist bank’s commercial real estate finance volumes

that have increased – the Cooperative Financial Services

Network has also won market share in this business.

With the sharpened focus on its German home market,

DG HYP will expand its successful cooperation with the

cooperative banks.

DG HYP is a member of the DZ BANK Group, which

also comprises home loan savings specialist Bausparkasse

Schwäbisch Hall, DZ PRIVATBANK Group, R+V Insurance,

retail lender TeamBank, fund management specialists

Union Investment Group, VR LEASING, as well as various

other specialist financial services providers. The various

DZ BANK Group entities are the cornerstones of a comprehensive

range of bancassurance products and services

offered by the Cooperative Financial Services Network.

Within this strong network, DZ BANK Group entities work

together to optimise the products and services delivered to

cooperative banks and their roughly 30 million customers.

DZ BANK Group is itself a part of the Cooperative

Financial Services Network, which comprises more than

1,100 individual cooperative banks. In terms of aggregate

total assets, the cooperative banking sector ranks among

the largest private-sector financial services organisations in

Germany. Within the network, DZ BANK AG acts as the

central institution for around 900 cooperative banks with a

total of 12,000 branches, and as a corporate bank.

Combining banking services with insurance products,

home loan savings and a range of investment services has

a long tradition within the cooperative banking sector. The

specialist institutions within the DZ BANK Group each offer

highly competitive, top quality and reasonably-priced products

in their respective area of competence. This allows

Germany’s cooperative banks to offer their customers an

end-to-end range of prime financial services.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

5


ECONOMIC ENVIRONMENT

6 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Ballin-Haus Hamburg


Management Report

ECONOMIC ENVIRONMENT

German economy on the up

The euro zone economy is recovering after the recession

experienced in 2008 and 2009. In some countries,

economic performance rose again strongly during the year

under review. For its part, the German economy has recovered

particularly quickly and robustly from the recession.

The dynamic rise in global trade has been a key factor in

this regard, with especially the German economy drawing

benefit from this improvement. Driven by strong levels of

demand from emerging economies in particular, German

exports practically matched their pre-crisis level during the

year under review. Whilst growth was visibly still reliant on

government stimulus measures during the second half of

2009, demand from abroad was a strong source of impetus

during 2010. Since the spring of 2010, investment in

plant and equipment – and in construction – has also been

contributing to the economic recovery. After a 4.7% fall in

gross domestic product in 2009, the German economy was

able to record a rise of 3.6% in 2010. This means that Germany’s

worst recession of the post-war period has been

followed by the strongest level of growth since reunification.

Unemployment at its lowest level since reunification

Over the reporting period the German labour market

proved itself stable and robust by international standards.

Above all, the use of short-time working and flexible company

rules on working time helped ease the situation: for

the first time in two years, the number of people out of

work dropped back below the three million mark. In dipping

to 7.7%, the unemployment rate is at its lowest level

since 1991. Private consumer spending, which developed

surprisingly positively, was a contributory factor. This positive

development can be attributed to a rise in household

disposable incomes, supported by growing employment

levels and, latterly, above-average increases in collectively

agreed wages.

2011: Economic upturn set to continue

Looking to 2011, the signs are that the global economic

recovery will continue, albeit at a less marked pace.

This slight slowing can be expected to be felt in Germany

too, given that German exporters are heavily dependent on

the state of the European economy. Nevertheless, foreign

trade can also be expected to exert a positive influence on

the economy as a whole in 2011, since good sales

prospects on the global market have made German companies

more inclined to invest again. This will also benefit

domestic demand, which can be expected to account for

just under three quarters of German growth in the current

year. The upturn will also impact on the labour market, the

positive development of which is likely to continue against

this background in 2011. Private consumption is another

area in which a continued positive development can be

anticipated, thanks to a rise in disposable incomes. The

Federal Government is expecting GDP to rise by 2.3% in

the current year.

Clear increase in commercial real estate transaction

volume

The commercial real estate market developed positively

during the 2010 fiscal year. Transaction volumes rose

from € 11 billion in 2009 to approximately € 19 billion in

the year under review. Germany ranks among one of

Europe’s most preferred investment markets thanks to its

good economic prospects, its relatively low level of government

debt (compared with other European countries),

its large and liquid real estate markets, its good refinancing

options and – last but not least – its legal security and political

stability. Against this background there is also a high

level of demand on the German market from foreign

investors. A continued increase in the volume of commercial

real estate transactions can therefore be expected in

2011.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

7


COMMERCIAL REAL ESTATE

FINANCE

8 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Neues Thier-Areal Dortmund


Management Report

COMMERCIAL REAL ESTATE FINANCE –

MARKET DEVELOPMENT

Slide in office and retail rents seems to be over –

residential rents continue their upwards trend

Compared with other markets across the world, the

German real estate market escaped quite lightly during the

recent financial and economic crisis. This was primarily due

to the strong recovery in the German economy during

2010, with the labour market markedly benefiting from

this improvement. The office and logistics property markets,

which are strongly dependent on the overall state of

the economy, still had to cope with falling rent levels,

whilst rents for retail space and residential properties continued

to move upwards.

ROBUST DEVELOPMENT OF OFFICE RENTS

135

130

125

120

115

110

105

100

95

Office rents fall for second year in a row

Compared with the bursting of the ‘new economy’

bubble, the economic collapse in 2009 only had a mild

impact on office rents. Whilst top rental locations in Germany

were still averaging a fall in rents of 4% during the

previous year, this downward trend eased off during the

second half of 2010, with rents for office space in prime

locations falling by only 2 to 3% year-on-year. Effective

rent concessions, however, tended to be higher in practice,

with the more frequent granting of rent-free periods, or

the implementation of renovation work free of charge. In

the case of five-year leases for example, it was common for

a rent-free period of six months to be offered. Less prominent

towns and cities, and less popular locations, were

affected even more markedly.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

DZ BANK Office Rent Index (1997 = 100)

Source: DZ BANK Research; indexed quarterly data for major office locations

Please note that the charts and diagrams depicted do not constitute a part of the Management Report, for the purpose of the Financial Statements.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

2010

9


Frankfurt, alongside Berlin, Hamburg and Munich,

ranks among Germany’s major office markets, with a total

rental space of approximately 11 million square metres.

Whilst in absolute terms, Frankfurt is the smallest of the big

players, with rental space of between 12.5 and 17 million

square metres found in the other major cities – compared

with the size of its population, the Frankfurt market is the

leader, with rental space of 45 square metres per inhabitant.

It is the Frankfurt office market that has had to cope

with the biggest increase in available premises, with a rise

in rental space of almost 15% since 1999. As a result, Germany’s

financial capital not only leads the way in terms of

rent levels, but also in terms of vacancy rates. At around

14%, its vacancy rate is by far the highest.

OFFICES: SHARP RISE IN VACANCY RATES

%

14

12

10

8

6

4

2

0

Frankfurt

Dusseldorf

Munich

Berlin

Hamburg

Stuttgart

Frankfurt Dusseldorf Munich

2000 2010

3.1

5.1

0.8

8.4

3.6

1.6

13.5

10.9

10.6

9.2

9.3

5.0

10 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

The rents being charged in Berlin, Hamburg and

Munich in 2010 were around 3% down on the previous

year’s level. Meanwhile, in Dusseldorf, Stuttgart and

Cologne, each of which has rental space of only approximately

7 million square metres, different developments

were recorded. In Stuttgart, cuts in rents had already been

halted during the previous year (as a result of the very low

vacancy rate of a mere 5% or so) and also due to the fact

that hardly any new office space is being made available

without having been pre-let. The situation is somewhat different

in Dusseldorf and Cologne, where office rents continued

to wane in 2010.

Berlin Hamburg

Stuttgart

Source: Feri


Management Report

Analysis of twelve regional centres across Germany has

revealed that the rents charged for office premises in these

cities have neither risen nor fallen on anything like the scale

experienced by the top locations over the past ten years.

During the last boom phase these locations experienced

only a slight rise in rents, but this also meant that they were

able to maintain their rent levels during the recent recession.

OFFICE RENTS IN THE REGIONAL CENTRES PROVE MORE STABLE

%

15

10

5

0

-5

-10

-15

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Rents in regional centres Rents in top locations

Retail rents up slightly

The German retail property market – at least in the

prime German locations – withstood the latest economic

crisis well, with no fall in rents recorded. In the major economic

centres, in contrast, it was even possible for slight

increases to be pushed through in 2010. The situation

looked somewhat different in the rest of Europe, where

rents fell substantially in some cases. In Germany, however,

there was no collapse in demand in the wake of the economic

crisis. If anything, the outlook for private consumption

as a whole (and thus retailers’ sales figures) has brightened

slightly.

Source: DZ BANK Research

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

2010

11


Sales recorded by German retailers have barely risen

over the space of the past ten years. According to the Federal

Statistical Office, the real increase has been a mere

4% or thereabouts since 1999. Meanwhile, the situation in

France and the UK is entirely different, with retail figures

there growing almost ten times as strongly over the same

period (as illustrated in the graph). In 2009, however, the

French retail sector was hit by a considerable fall in sales,

whilst the decline in Germany was only slight.

GERMAN RETAIL SALES HAVE

BARELY RISEN

1999 to date (%)

40

35

30

25

20

15

10

5

0

4

17

Germany Italy

France

12 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

37

UK

40

Source: Feri

Management Report

The upwards trend with regard to the number of shopping

centres in Germany is continuing. The German Council

of Shopping Centers (GCSC) estimates that a further

43 new shopping centres will have been built by the end of

2014. At the same time, there are numerous ongoing

measures to modernise and breathe new life into existing

centres that were built some time ago and are beginning

to show their age. Some market participants interpret the

number of newbuilds as a sign that the trend towards

shopping centres is advancing unchecked. However, a closer

look at the figures reveals that this process is in fact

slowing down. Whilst thirteen new centres were being

built every year during the period between 2005 and 2010,

the GCSC’s estimate would indicate that only nine will be

constructed per year over the coming period.

ABOVE-AVERAGE INCREASES IN RETAIL

RENTS IN TOP LOCATIONS

1999 to date (%)

40

35

30

25

20

15

10

5

0

16

32

Top locations Germany

Retail sales Rents for retail property

4

10

Source: DZ BANK Research


Management Report

The total rental space of the top markets for retail properties

in Germany varies greatly, from just under 1 million

square metres in Dusseldorf and Stuttgart to almost

6 million square metres in Berlin. Hamburg, the secondlargest

market, is not even half as big as Berlin. The markets

in Cologne and Frankfurt, in contrast, are almost the

same size. Overall, the top markets referred to here have

tended in the past to put in an above-average performance

in terms of retail rents. The top locations have recorded a

32% increase in rents since 1999, whilst the increase

across the market generally has been a mere 10%.

Residential rents visibly rising in the major economic

centres

In the major economic centres in particular, low levels

of construction activity in the residential segment over the

past few years have created a rosier outlook for residential

rents, with growing levels of demand contrasting with a

relatively low level of supply. The number of newbuilds in

2010 was only slightly up on the record low recorded during

the previous year. Construction activity has remained

below the required level over the past few years; however,

the shortfall should not be overestimated. The 2011

A VISIBLE RISE IN HOUSING DEMAND, IN SOME AREAS

Change in the number of

private households since 2004 (%)

6

5

4

3

2

1

0

Cologne

5.6 5.5

Munich

5.3

Hamburg Berlin Stuttgart

Census due to be carried out by the Federal Statistical

Office will provide up-to-date figures on housing and population

numbers in Germany. To date, the figures gained

from a 1987 census in the Federal Republic of Germany

and a 1981 census in the German Democratic Republic

have simply been extrapolated on the basis of construction

statistics.

Measured in terms of the number of private households,

Berlin is Germany’s largest market for residential

property by some distance, followed by Hamburg and

Munich. Cologne, the fourth-largest location, is only home

to around half a million households. With the exception of

Dusseldorf, the number of private households has grown

above average since 2004 in the cities being considered

here. Whilst a rise of 1.6% was recorded for Germany as a

whole over this period, the number of private households

in Hamburg, Munich and Cologne rose by more than 5%.

In Berlin too, there was an increase in the number of private

households, with the rise just short of the 5% mark.

Growth rates in Frankfurt and Stuttgart, at 1.9 and 2.5%

respectively, were markedly lower but still above the

national average.

4.8

2.5

Frankfurt Dusseldorf

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

1.9

0.6

Source: DZ BANK Research

13


A rise of around 4% in rents for newly-built flats was

recorded on the housing markets in the major economic

centres in 2010. The positive development of the labour

market, but above all the stronger demand for housing –

maintained by an ongoing migration towards the conurbations

– played a major part in this positive development.

HOUSING CONSTRUCTION UP ONLY SLIGHTLY

Residential units (thousands)

550

500

450

400

350

300

250

200

150

14 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

Nevertheless, not all locations were able to keep up with

this upwards trend to the same extent. Cologne and

Stuttgart drifted off the pace, recording a rise of a mere

1%. Whilst the dynamic trend was practically unchanged

in Berlin, Munich and Frankfurt, it waned slightly in Hamburg,

albeit remaining at 3%.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Completed projects

Building permits

Logistics sector benefits from economic recovery

Despite the fact that there was a clear recovery in the

logistics real estate market in 2010, this is a market segment

with little scope for rent increases. The competition

between locations within Germany and with other European

countries has further intensified, since despite a slight

increase in demand for premises, many companies are still

2010

Source: destatis, DZ BANK Research

looking for cost-saving potential. The term of new rental

agreements, at a current duration of around five years, can

be classed as medium-term. Turnover in rented space rose

both inside and outside the conurbations, with urban areas

benefiting from their proximity to airports and ports

whilst non-conurbations offering greater potential for

cost-cutting.


Management Report

COMMERCIAL REAL ESTATE FINANCE –

BUSINESS DEVELOPMENT

A strong partner for commercial real estate

financing

DG HYP engages in commercial real estate finance

business with investors and as a partner to more than

1,100 cooperative banks in Germany, which are consistently

offered a high-quality product that is permanently

being developed and updated. The aim is to support the

cooperative banks, as they work to expand operations in

their regional markets. The bank’s Commercial Real Estate

Finance activities are focused on the core segments of

office, residential and retail properties. DG HYP is also

involved in the specialist segments of hotels, logistics and

real estate for social purposes, within the scope of its credit

risk strategy. Target clients are private and institutional

investors, housing companies, as well as commercial and

residential real estate developers.

Competent advice, backed by a closely-knit market

network

As the real estate bank within the Cooperative Financial

Services Network, DG HYP focuses on traditional lending

business, with the loans it provides laying the foundation

for long-term partnerships. With its six real estate

centres in the country’s major cities, namely Hamburg,

Berlin, Dusseldorf, Frankfurt, Stuttgart and Munich,

DG HYP has a good presence throughout Germany. Competent

advice during the sales stage and local employees’

specialist knowledge of real estate on the ground – combined

with our intensive contacts and good connections

within the market – ensure that DG HYP is a powerful

partner.

Volume of new business successfully increased

DG HYP was once again able to raise its volume of new

commercial real estate finance business originated during

the period under review. In selecting its exposures, the

bank focused on high-quality business with a balanced

risk/reward profile. At € 4,613 million, the volume of

financing provided exceeded last year’s already high level

by 10.5% (2009: € 4,174 million). Financings extended in

domestic direct business and via the Cooperative Financial

Services Network totalled € 3,322 million as at 31 December

2010, up 8.6% year-on-year (2009: € 3,059 million).

New exposures in DG HYP’s international and secondary

market business totalled € 1,291 million (2009: € 1,115

million).

COMMERCIAL REAL ESTATE FINANCE –

NEW BUSINESS

€ mn

5,000

4,000

3,000

2,000

1,000

2006

1,974

2007

2,941

2008

3,766

2009

4,174

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

2010

4,613

15


Focus on the bank’s home market of Germany

Working in close cooperation with the German Cooperative

Financial Services Network, DG HYP will be focusing

its commercial real estate financing business on its home

market of Germany even more strongly in future. Against

this background, the DG HYP representative offices in New

York, London, Paris and Warsaw will be closed by the middle

of 2011. The bank will continue to support its German

clients by financing their commercial real estate projects in

selected international markets. This decision was also

made in light of the tighter capital requirements expected

as a result of Basel III, and to ensure that DG HYP is ready

to provide an optimal service to its domestic clients at all

times. In terms of its size and stability, the German real

estate market is particularly attractive to investors, and

offers good potential for DG HYP’s future development.

MARKET PROXIMITY, PROFESSIONALISM AND PARTNERSHIP

DG HYP’s core expertise

Financing requests reviewed and processed

quickly and without bureaucracy

Requirements regarding property

and credit quality communicated

quickly and clearly

Speed and

Access to decision-makers

flexibility

Specialist finance provider

for commercial real estate

Expert staff, with many years

of market experience

Expertise in structuring large-sized,

complex transactions

Client

proximity

16 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Competitive advantage through

professional funding

High

performance

Professionalism Partnership

Management Report

Ongoing, gradual reduction of the private home

loan financing portfolio

In line with its new business strategy and strategic

realignment, DG HYP ceased to take on new lending business

in the area of private home loan finance – providing

finance for residential property to retail customers, effective

1 January 2008. Within the DZ BANK Group, Bau -

sparkasse Schwäbisch Hall assumed responsibility for private

home loan financing. As at 31 December 2010,

DG HYP’s portfolio included some 116,000 retail customers

accounting for a volume of approximately € 8.8 billion.

The bank also continues to manage non-strategic commercial

real estate lending exposures, which amounted to

a volume of € 1.3 billion as at 31 December 2010. This

section of the portfolio is comprised of small-scale commercial

lending and residual portfolios from the agricultural

lending business that DG HYP has not been pursuing

actively since 2003.

High credit quality of the bank

itself (Pfandbrief rating: AAA;

bank rating: A-)

Big-ticket as well as smallersized

transactions supported

Spirit of partnership

Building a long-term,

sustainable business

relationship

Balance-sheet lending: we will

retain your loan on our books


Management Report

COOPERATION WITH THE COOPERATIVE BANKS

Strongly growing business with the

Cooperative Financial Services Network

DG HYP recorded above-average growth in its business

with cooperative banks. The volume of business transacted

jointly with the cooperative banks expanded by 54% to

€ 1,085 million (2009: € 705 million). Over the past three

years, DG HYP has been able to consistently expand its

joint activities with the cooperative banks: business with

the sector almost tripled in volume. Nonetheless, the bank

continues to see potential for lending on a partnership

basis. The aim is to capture further market share and

expand skills in this field over the coming year.

IMMO META REVERSE + generates keen interest

Developing new products builds the foundations for

such further growth. At the beginning of the 2010 fiscal

year DG HYP, following a successful pilot phase, launched

a new platform for cooperation with the cooperative

banks: IMMO META REVERSE + – a streamlined product

that offers cooperative banks the opportunity to acquire

individual tranches of financings originated by DG HYP.

In this way, the cooperative banks can add low-risk

credit business to their own books, whilst DG HYP retains

a portion of the exposure. This form of joint activity is

a cooperative business model that makes optimum use of

the financing potential inherent within the Cooperative

Financial Services Network.

IMMO META REVERSE + has generated keen interest

amongst cooperative banks. Cooperation is subject to the

conclusion of a framework agreement with DG HYP, which

around 170 cooperative banks signed during the year

under review. A large number of cooperative banks have

become involved in the individual finance deals. DG HYP

provides its partner banks with access to an online platform,

which they can use to gain up-to-date information

on the real estate projects currently being offered. Looking

to 2011, DG HYP’s aim is to increase the placement volume

of IMMO META REVERSE + .

Broad product range for medium-sized real estate

clients

IMMO META is an additional product offered to the

Cooperative Financial Services Network. Via this platform

DG HYP participates on a pari-passu basis in commercial

real estate finance exposures originated by cooperative

banks with medium-sized real estate clients in their region.

The cooperative banks retain their leadership role with

such financings. This product is particularly suited to banks

with regional potential in commercial real estate financing.

Through their cooperation with DG HYP, they can offer

their clients larger finance portions (thereby increasing

client loyalty) and generate additional income – thus consolidating

their market position.

In the form of IMMO META REVERSE, DG HYP offers

cooperative banks the chance to gain exposure to selected

large-volume commercial real estate financings with medium-sized

real estate clients in their region – as early as during

the loan extension phase. The cooperative banks themselves

decide on the level of their involvement. In this way,

they profit from the work done by DG HYP’s experts in

exploring markets in that they can gain new clients with

high development potential, generate cross-selling opportunities

and strengthen their competitive position. In

return, DG HYP benefits in that it is able to supplement and

add value to its services through the regional market

expertise and execution skills of the cooperative banks.

IMMO VR RATING

Through IMMO VR RATING, DG HYP has developed a

web-based rating procedure complementing its product

range, use of which enables the cooperative banks to

measure the default risks associated with commercial real

estate in a uniform way across the Cooperative Financial

Services Network. IMMO VR RATING is aimed at cooperative

banks that focus on commercial real estate finance,

and at those for whom commercial real estate accounts for

a significant proportion of their overall portfolio. The rating

application provides a key foundation for joint lending

business within the Cooperative Financial Services Network

and with DG HYP. The cooperative banks can use the rating

procedures to implement a modern risk management

process that takes account of all of the relevant factors.

The banks also have access to the services of VR WERT,

a wholly-owned subsidiary of DG HYP which provides

expert evaluations of all types of commercial real estate

finance.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

17


PRODUCT DEVELOPMENT IS THE KEY TO GROWING BUSINESS WITH THE

COOPERATIVE FINANCIAL SERVICES NETWORK

Product evolution stages

Loan intermediation

IMMO META

IMMO META

REVERSE

IMMO META REVERSE +

Pilot phase Market launch

2004 2008 2009 2010

Product Description

IMMO META

IMMO META

REVERSE

IMMO META

REVERSE +

Commercial real estate financings originated

by cooperative banks

DG HYP taking a participation in the exposure

Know-how transfer by DG HYP

Commercial real estate financings originated

by DG HYP (project developments)

Cooperative banks taking a participation

in the exposure

Access to attractive clients, with possible

cross-selling potential for cooperative banks

Commercial real estate financing originated

and closed by DG HYP

Low-risk participation in the exposure

for cooperative banks

Core product for all cooperative banks

throughout the network

18 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Application

Regional

Regional

National

Management Report


German Stock Exchange Eschborn

TREASURY

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

19


LOCAL AUTHORITY LENDING AND PUBLIC FINANCE

Local authority lending both saw increased demand

during 2010. This development was accompanied by a

reduction in the number of active providers in this segment.

DG HYP’s local authority lending business is focused on

providing support to the cooperative banks as they

respond to financing enquiries from the public sector. In

this way the cooperative banks are able to reinforce their

presence vis-à-vis their rivals on the market, and build up

further business relationships with the public sector. For its

part, DG HYP is a competent contact within the Cooperative

Financial Services Network for queries relating to public

finance.

During the 2010 fiscal year, DG HYP generated new

business with a volume of € 634 million in the area of local

authority lending. This equates to a year-on-year increase

of 15.3% (2009: € 550 million). Local authority lending

business is brought to DG HYP by the cooperative banks.

DG HYP’s securities portfolios declined – as planned –

during the 2010 fiscal year: as at 31 December 2010, the

public finance portfolio had shrunk by € 5.3 billion, to

€ 33.3 billion.

1,575

20 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

1,165

63

Bremen

North Rhine-

Westphalia

350

Schleswig-Holstein

Mecklenburg-

Western Pomerania

Hamburg

Lower Saxony

Management Report

TOTAL ORIGINATED LOANS TO LOCAL

AUTHORITIES

€ mn

1,206

Hesse

Rhineland-

Palatinate

1,457

324

Saarland

51

1,044

93

Baden-

Württemberg

1,472

87

166

Brandenburg

Berlin

160

Saxony-Anhalt

Thuringia

Bavaria

207

Saxony

€ bn

Local authorities / municipalities / cities 6.93

Special public-sector administrative unions / 2.49

administrative districts / companies under a public-sector guarantee

Total originated loans to local authorities 9.42

31 Dec 2010


Management Report

REFINANCING

Financial markets focus on EU peripheral states

Whilst there was hope in the second half of the 2009

fiscal year that the European financial markets would gradually

find themselves entering calmer waters again, 2010

saw a return to uncertainty concerning the bond markets

of many peripheral euro zone countries. Greece was the

first to come under pressure. Greek government bonds

were hit particularly hard as doubts increased about the

viability of the country’s budget deficit, receiving repeated

downgrades and seeing a doubling of yields to 12% in the

space of just a few months.

The rescue package put together by European governments

and the IMF for Greece in early May 2010, worth

€ 110 billion, and the decision by the ECB to continue to

10-YEAR BENCHMARK GOVERNMENT BONDS

Yield (%)

14

12

10

8

6

4

2

accept Greek government bonds as ECB security in spite of

their external rating, helped to alleviate the situation. Nevertheless,

even the crisis fund worth € 750 billion set up

for euro zone countries (and agreed in the middle of the

year in the face of a growing debt burden in other European

countries) was not enough to prevent Greece and

other countries such as Ireland and Portugal suffering from

a huge loss of confidence as the year progressed. Indeed,

Ireland also subsequently found itself with little choice but

to ask for help from this EU crisis fund.

These challenges notwithstanding, German bonds continued

to benefit from the flight to safe havens. The yield

on 10-year German government bonds briefly reached an

all-time low of close to 2%.

0

12/07 06/08 12/08 06/09 12/09 06/10 12/10

Portugal Italy Ireland

Greece

Spain

Germany

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Source: Reuters

21


Mortgage Pfandbriefe stable –

Public Pfandbriefe continue to decline

The volume of outstanding Mortgage Pfandbriefe

from domestic issuers, at approximately € 150 billion, has

been very stable for some years now. In contrast, the

PFANDBRIEF ISSUES OUTSTANDING

€ mn

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

22 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

volume of Public Pfandbriefe issues has been reduced to

almost one third compared with its high point in 2000 (of

approximately € 685 billion). This demonstrates the reticent

stance of banks, which has been increasingly evident

since the onset of the financial crisis.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Mortgage Pfandbriefe Public Pfandbriefe

Refinancing strategy successfully implemented

Despite the intense competition and historically low

interest rate levels on the Pfandbrief market, DG HYP

succeeded in meeting its funding targets during the 2010

fiscal year. In line with the bank’s core area of activity of

commercial real estate finance, covered refinancing was

carried out almost exclusively by means of the issuing of

Mortgage Pfandbriefe, with total issuance in this segment

amounting to € 4.2 billion.

Source: Deutsche Bundesbank

In view of the good liquidity situation again during the

reporting year within the Cooperative Financial Services

Network and in the DZ BANK Group, uncovered funding of

€ 3.1 billion was once again raised almost exclusively via

these sources.


Europark Frankfurt

NET ASSETS, FINANCIAL POSITION,

AND RESULTS OF OPERATIONS

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010 23


NET ASSETS

Reflecting the ongoing strategic reduction of the

securities portfolios, DG HYP’s total assets decreased by a

further € 4.6 billion (-6.8%) during the 2010 fiscal year, to

€ 63.4 billion.

In line with the bank’s strategy, the real estate lending

portfolio increased slightly, up by € 0.2 billion to € 21.4

billion. A key contributory factor in this regard was the continuing

increase in commercial real estate exposures, which

slightly exceeded the planned reduction in legacy, nonstrategic

real estate lending, particularly retail home loan

financing.

DEVELOPMENT OF LENDING VOLUME

24 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

At the same time, the public finance and local authority

lending portfolio was cut by a further € 5.3 billion in

2010 as a result of scheduled run-offs and repayments. The

investment strategy, which is increasingly geared around

profitability, was limited (as in the previous year) to support

for the cooperative banks.

There have been no new investments in mortgagebacked

securities (MBS) since mid-2007. The portfolio was

reduced by € 0.4 billion to € 3.3 billion during the 2010

fiscal year as a result of ongoing repayments, necessary

write-downs and variations in exchange rates.

Overall, the size of our lending portfolio was reduced

by 8.8% during the 2010 fiscal year.

Change from the previous year

€ mn 31 Dec 2010 31 Dec 2009 € mn %

Real estate lending 21,437 21,235 202 1.0

MBS

Public-sector and

3,261 3,686 – 425 – 11.5

local authority loans 33,297 38,643 – 5,346 – 13.8

Total portfolio 57,995 63,564 – 5,569 – 8.8

Regulatory capital

DG HYP’s own funds for regulatory purposes are

reported in accordance with the requirements of the

German Banking Act, as last amended with effect from

1 January 2007, and pursuant to the terms of the Solvency

Ordinance which fleshes out the detail of the Banking Act.

The Internal Rating-Based Approach (IRBA) is applied for

reporting credit risk, and the standardised approach for

operational risk.

In accordance with the Solvency Ordinance, aggregate

own funds for solvency purposes totalled € 1,630 million

as at 31 December 2010. The rise of € 92 million compared

with the previous year’s figure is due to the inclusion

of € 115 million of subordinated capital and a reduced

deductible item pursuant to section 10 (6a) no. 1 of the

German Banking Act (“KWG”). For 2010, these were offset

by subordinated funds of € 27 million that were no

longer eligible for inclusion, and a higher deductible item

pursuant to section 10 (6a) no. 3 of the KWG.


Management Report

OWN FUNDS FOR SOLVENCY PURPOSES

€ mn 31 Dec 2010 31 Dec 2009

Core capital 1,163 1,161

Supplementary capital 467 377

Total capital 1,630 1,538

The key financial indicators developed as follows in the year under review:

REGULATORY INDICATORS

% 31 Dec 2010 31 Dec 2009

Total figure 10.6 9.2

Core capital ratio 7.6 6.9

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

25


FINANCIAL POSITION

The cash flow statement below shows the development of the financial position during the year under review.

Cash flow statement

The liquidity situation is adequate.

26 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

€ mn 2010 2009

1. Net income for the period

(including minority interests)

excluding extraordinary items and taxes

Non-cash items included in net income and

reconciliation to cash flow from operating activities

– 92 – 135

2. +/– Depreciation, write-downs and write-ups on loans and advances,

tangible fixed assets and financial assets 236 223

3. +/– Increase / decrease in provisions – 3 15

4. +/– Other non-cash expenses/income 1 –

5. –/+ Profits/losses from the disposal of tangible fixed assets and financial assets –2 –1

6. –/+ Other adjustments (net balance) – 207 – 166

7. = Subtotal

Net changes in assets and liabilities

from operating activities

–67 –64

8. Loans and advances

8a. +/– – to banks 447 1,074

8b. +/– – to customers 1,125 1,880

9. +/– Securities (excluding financial assets) – 1,291 892

10. +/– Other assets from operating activities – 224 – 165

11. Liabilities

11a. +/– – to banks 3,397 2,497

11b. +/– – to customers – 670 – 968

12. +/– Securitised liabilities – 7,484 – 8,865

13. +/– Other liabilities from operating activities 237 156

14. + Interest and dividends received 2,483 3,450

15. – Interest paid – 2,392 – 3,409

16. + Extraordinary cash receipts 119 150

17. – Extraordinary cash payments – –

18. +/– Income tax payments – 2

19. = Cash flow from operating activities – 4,320 – 3,370

20. Receipts from the disposal of

20a. + – financial assets 4,426 4,081

20b. + – tangible fixed assets – –

21. Payments for investments in

21a. – – financial assets – 156 – 277

21b. – – tangible fixed assets – 2 – 2

22. +/– Changes in cash funds due to other investing activities (net balance) – – 1

23. = Cash flow from investing activities 4,268 3,801

24. Cash payments to owners and minority shareholders

24a. – – Dividends paid – –

24b. – – Other distributions/cash payments – 23 – 17

25. +/– Changes in cash funds due to other capital movements (net balance) 75 – 468

26. = Cash flow from financing activities 52 – 485

27. Cash funds at the beginning of the period 1 55

28. +/– Cash flow from operating activities – 4,320 – 3,370

29. +/– Cash flow from investing activities 4,268 3,801

30. +/– Cash flow from financing activities 52 – 485

31. = Cash funds at the end of the period 1 1


Management Report

RESULTS OF OPERATIONS

Since the realignment of its business model in 2008,

DG HYP’s operating result has been consistently dominated

by two fundamentally opposed items. Whilst the contribution

to the result from commercial real estate financing

– the strategic target business – has risen, non-strategic

portfolio business, active up until 2007, has continued to

be affected by high levels of credit default, particularly with

regard to the MBS portfolio and subordinated debt. As

expected, these negative effects have continued to outweigh

the clear operating success achieved in the bank’s

target business, with the result that a contribution to bal-

OVERVIEW OF THE PROFIT AND LOSS ACCOUNT

ance the result was again required from DZ BANK in 2010.

This development is in line with our forecasts, with a return

to profitability for DG HYP remaining the planned objective.

For the purposes of analysing the results of operations,

DG HYP’s profit and loss account is provided in condensed

form below using key performance indicators. As the composition

of some elements of the key figures was modified,

the previous year’s figures have been adjusted accordingly.

Change from the previous year

€ mn 2010 2009 € mn %

Net interest income 203.9 165.2 38.7 23.4

Net commission result 20.4 11.3 9.1 80.5

Administrative expenses 97.1 117.7 – 20.6 – 17.5

Net other operating income/expenses 3.8 8.8 – 5.0 – 56.8

Provisions for loan losses – 74.0 – 124.7 50.7 40.7

Securities and investment result – 149.0 – 77.9 – 71.1 – 91.3

Operating profit – 92.0 – 135.0 43.0 31.9

Net extraordinary income/expenses 114.7 149.7 – 35.0 – 23.4

Taxes 0.1 – 2.0 2.1 > 100

Partial profit transfer 22.6 16.7 5.9 35.3

Net income 0.0 0.0 0.0 0.0

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

27


Net interest income

Whilst continuing to refrain from using structural measures

to enhance the result, net interest income totalled

€ 203.9 million and was thus € 38.7 million (or 23.4%)

higher than the previous year’s figure of € 165.2 million.

The positive contribution from interest margins generated

in our target business, which has been intensified since

2008, is sustainably reflected in this figure.

Net commission result

The net commission result, at € 20.4 million, rose by

€ 9.1 million compared with 2009. This positive development

can be attributed, as in the previous year, to rising

commission income for servicing fees, approval and commitment

commissions, as well as commission income from

derivatives business with our commercial real estate customers.

Additionally, there was a further fall in commission

expenditure for loan intermediation, and for hedging credit

risk.

Net other operating income/expenses

Net other operating income/expenses, which are the

difference between other operating income and other

operating expenses, fell by € 5.0 million compared with

the previous year, from € 8.8 million to € 3.8 million. A key

factor in this regard was the expense of € 6.0 million arising

from interest on pension obligations, reported under

this item for the first time. On the income side, there was

a slight rise to € 0.7 million in the income earned from the

rental of office premises in Hamburg the bank no longer

needs for its own purposes.

Administrative expenses

Administrative expenses of € 97.1 million, being the

total of general administrative expenses and depreciation

and write-downs on intangible assets and tangible fixed

assets, were a further € 20.6 million or 17.5% down on

the previous year’s level of € 117.7 million, which was

already a drastically reduced figure. This fall can be attributed

to our consistent restructuring and re-dimensioning.

€ 17.4 million of the savings relate to personnel expenses,

although these were negatively affected by a one-off effect

of € 10.9 million during the previous year. Processing costs

were incurred in relation to private real estate lending.

These were down by € 1.4 million.

28 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

Provisions for loan losses

Provisions for loan losses of € 74.0 million during the

period under review were significantly lower than in the

previous year (2009: € 124.7 million), and thus in line with

our overall projections. Higher levels of credit defaults were

again evident in 2010 particularly with regard to the nonstrategic

portfolio of subordinated debt (‘B’ notes). In contrast,

the risk situation in our strategic target portfolio

remained comparatively free of incident.

Securities and investment result

The securities and investment result of € -149.0 million

(2009: € -77.9 million) was again dominated during the

reporting year by what are expected to be long-term

impairments in the non-strategic portfolio of mortgagebacked

securities (MBS), in which DG HYP ceased to invest

in mid-2007. The write-downs of € 149.5 million implemented

in 2010 took due account – on a conservative basis

– of the discernible risks in this portfolio, which is being

wound down.

Net extraordinary income/expenses

On the basis of the existing profit and loss transfer

agreement, the notable burdens on income during the current

period were compensated for by DZ BANK, in the form

of an extraordinary contribution to income. At € 119.0

million, this contribution was € 30.7 million lower than in

the previous year. DZ BANK has thus further underscored

its readiness to provide support for DG HYP’s consistent

restructuring program designed to deal with the burden of

legacy items. At the same time, the strategic decision to

close foreign representative offices caused extraordinary

restructuring costs of € 4.1 million during the year under

review.

Net income

During the reporting year, DG HYP transferred a partial

profit of € 22.6 million (up € 5.9 million year-on-year, due

to the different interest rate level) to its silent partners, with

the result that the bank reported a balanced result overall.

Overall, DG HYP’s economic situation further improved

during the 2010 fiscal year. The remedied situation regarding

net assets and financial position was once again

accompanied by increasing operational success in the

bank’s strategic commercial real estate business. At the

same time, the contribution by DZ BANK – which was

reduced compared with the previous year – helped to further

ease the burdens emanating from the non-strategic

portfolios.


Augustinum Stuttgart

REPORT ON

OPPORTUNITIES AND RISKS

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010 29


REPORT ON OPPORTUNITIES AND RISKS

I) Risk management – objectives and organisation

a) Objectives of risk management

As an integral part of DG HYP’s strategic and operative

management of the bank as a whole, the bank’s risk management

is closely integrated into the risk management

and risk control systems of DZ BANK Group. DG HYP’s risk

management process is geared towards exploiting the

bank’s business potential within the scope of its risk-bearing

capacity, with a focus on profitability.

b) Responsibilities

The regulatory organisational requirements and the

allocation of risk management responsibilities are set out,

in particular, in the Minimum Requirements for Risk Management

(Mindestanforderungen an das Risikomanagement

– MaRisk).

DG HYP meets these requirements, adapting its relevant

processes to the specific needs of its business model.

DG HYP has also developed and implemented risk management

and risk control systems that fulfil the needs arising

in the market and competitive environment, as well as

the requirements arising from the bank’s integration in the

DZ BANK Group. This forms the basis that ensures the

proper operation and efficiency of the risk management

process.

Management Board. All members of the Management

Board are jointly responsible for risk management at

DG HYP. The Management Board determines the risk policy

with regard to defining the business and risk strategies,

determining the types of business pursued and the scope

of the justifiable overall risk level, in line with the bank’s

capacity to carry and sustain risk.

Risk/Return Management Committee. The

Risk/Return Management Committee is responsible for

managing the risks facing the entire bank at portfolio level

and for equity allocation. The Committee also decides

upon the strategy to be adopted for asset/liability management,

and determines the bank’s liquidity costs to be taken

into account for its lending business. As well as including

the members of the Management Board, the Committee

also comprises the heads of Finance and Treasury.

Credit Committee. The Credit Committee is responsible

for managing and monitoring all of DG HYP’s credit

risks. It comprises the entire Management Board and the

heads of Front Office Credit and Back Office Credit. The

30 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

Credit Committee decides on individual credit risk exposures,

within the scope of authority granted to it. It also

deals with strategic issues regarding the bank’s lending

business: in particular, these include the credit risk strategy,

current risk events and risk provisioning, credit portfolio

management as well as credit workflow optimisation.

Risks and Participations Committee of the Supervisory

Board. This Committee is responsible for decisionmaking

regarding those loan exposures, portfolio transactions

and participating interests that – in line with the

Internal Rules of Procedure – do not fall within the remit of

the Management Board. The Risks and Participations Committee

also oversees risk management and the bank’s overall

strategy within the framework of the MaRisk. It receives

the reports to be submitted to the supervisory body in the

event of ad-hoc reporting that may be required pursuant to

MaRisk.

Audit Committee of the Supervisory Board. The

Audit Committee is responsible for supervisory issues in

relation to accounting, the internal monitoring system and

the requisite independence of the auditor of the financial

statements.

Supervisory Board. The entire Supervisory Board

decides on the acquisition or disposal of participating interests

in the event of changes exceeding € 500,000 in the

carrying amount of such interests, as well as on the establishment

or disposal of business lines, establishing branches

and representative offices, the internal rules of procedure

of the Management Board, the business distribution plan,

and on material issues related to loans or participations

that are not explicitly assigned to the Risk and Participations

Committee of the Supervisory Board. The Supervisory

Board also discusses the bank’s overall strategy, the risk

strategies derived from it, and the operational implementation:

these issues are presented to the Supervisory Board

within the framework of the annual planning submitted

to it.

c) Functions

Risk Planning. Planning, as a bank-wide exercise,

comprises the planning of income and costs, as well as the

risks associated with DG HYP’s individual business activities.

Based on the strategic business orientation as part of a

5-year plan, the bank derives its operative planning on an

annual basis. Within this planning process, risk limits and

earnings projections are determined on the basis of the

bank’s capacity to carry and sustain risk.


Management Report

RISK MANAGEMENT – OBJECTIVES AND EXECUTIVE BODIES

OBJECTIVES

EXECUTIVE BODIES

To exploit the business potential within the scope of the Bank‘s risk-bearing capacity ,

emphasising profitability

To optimise the Bank‘s risk/return profile

To manage the allocation of (risk) capital with a focus on risks and profitability

Management

Board

ARESt

Risk/Return Management

Committee

Credit

Committee

RBA

Risks and Participations

Committee

Supervisory

Board

Holds overall responsibility for risk management: determines the risk policy with regard to defining the business

and risk strategies, determining the types of business pursued, and defining the justifiable overall risk level,

in line with the Bank‘s risk-bearing capacity.

Management Board, plus the heads of Finance and Treasury

> Managing the risks of the entire Bank at a portfolio level, as well as the allocation of capital

and asset/liability management

Management Board, plus the heads of front office and back office / credit department

> Managing the Bank‘s overall credit risk exposure (including current risk exposures, risk provisioning, credit

portfolio management, optimising profitability and credit processes) at single-exposure and portfolio level;

defining the credit risk strategy

(a Supervisory Board committee)

> Decisions regarding loan exposures, portfolio transactions and participating interests that – in line with the

Internal Rules of Procedure – do not fall within the remit of the Management Board; risk management and

overall bank strategy in accordance with MaRisk

> Decisions regarding the acquisition or disposal of participating interests in the event of changes exceeding

€ 500,000 in the carrying amount of such interests, as well as on the establishment or disposal of business

lines, establishing branches and representative offices, the internal rules of procedure of the Management

Board, the business distribution plan, and on material issues related to loans or participations that are not

explicitly assigned to the Risk and Participations Committee; discussion of the overall bank strategy,

risk strategies, and strategic as well as operative planning

Risk Management. As part of the credit risk strategy

defined by the committees detailed above, the back office

– together with Credit Risk Controlling – is responsible for

managing counterparty risk at an individual exposure level,

and controlling risks at a portfolio level. The early identification

of risk potential in lending business and the intensive

handling, restructuring and settlement of loan commitments

are governed by strictly defined processes and

control systems. The management of market and liquidity

risks is the responsibility of Treasury, within the scope of

asset/liability management.

Internal control and risk management system

related to the financial reporting process. As an issuer

of publicly-traded securities (as defined in section 264d of

the HGB), DG HYP is obliged, pursuant to section 289 (5)

of the HGB, to outline the key features of the internal control

and risk management system it has implemented with

regard to the financial reporting process (even though

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

31


there is no statutory definition for such an internal control

and risk management system). DG HYP defines its internal

control system as the principles, procedures and measures

established by management for the purpose of ensuring

that management decisions designed to:

– safeguard the effectiveness and profitability of the

Company’s business activities;

– ensure the proper functioning and reliability of internal

and external accounting and financial reporting

systems; and

– ascertain compliance with legal rules applicable to

the Company are implemented in the Company’s

organisation.

The risk management system encompasses all organisational

rules and measures in place for the detection of

risks, and for dealing with the risks that arise in association

with our commercial activity.

DG HYP has implemented a control and risk management

system with regard to the financial reporting process.

This system comprises measures to identify and assess

material risks (and related risk mitigation measures) to

ensure the proper preparation of the financial statements.

Specifically, this includes:

– measures to ensure proper IT support for the processing

of facts and data related to financial reporting;

– control mechanisms embedded in the accounting

and financial reporting system and in operative business

processes which generate material information

required to prepare the financial statements, including

the management report;

– adequate substitution regulations, control/release

functions, the division of functions, and pre-defined

authorisation processes.

32 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

Risk Controlling. The Controlling units are responsible

for current reporting and – together with the respective

risk management unit – for monitoring risk on a portfolio

level. For this purpose, Credit Risk Controlling prepares a

MaRisk-compliant credit risk report on a quarterly basis

outlining the key structural features of the lending business.

To highlight concentrations of credit risk, portfolio

exposure is broken down by geographical region, type of

property, loan-to-value ratio, remaining term and rating

class. In addition, portfolio evaluations form the basis for

the annual review of the credit risk strategy.

A risk report for the bank as a whole is drafted monthly,

illustrating credit risks as well as market price risks, operational

risk, equity investment risk, as well as business and

strategic risks. The measured risks are standardised for

each risk type on the basis of a confidence level of 99.95%

and a holding period of one year. The risk capital requirement

calculated in this way for the bank as a whole is then

contrasted against economic risk capital limits (maximum

loss threshold) and DG HYP’s capacity to carry and sustain

risk.

The consideration of scenarios for all risk types (economic

stress testing) and their impact on the bank as a

whole, as required by MaRisk, is carried out regularly. The

results are reported to senior management and the Supervisory

Board; at present, they indicate no threat to

DG HYP’s risk-bearing capacity. During 2010, the procedures

and methods for modelling stress scenarios were

adjusted to bring them in line with the 2009 amendments

to MaRisk. Specifically, this involved developing and implementing

extended credit risk scenarios.

Compared to 2009, DG HYP’s risk capital requirements

were lower during the 2010 fiscal year, providing risk

capital relief.

31 Dec 2010 31 Dec 2009

Maximum loss Risk capital Maximum loss Risk capital

€ mn threshold requirement threshold requirement

Credit risk 593 390 636 447

Market risk 57 7 57 8

Operational risks 37 33 40 38

Equity investment risk 1 0 0 0

Strategic and business risks 54 39 37 25

Total 742 469 770 517


Management Report

In addition to this economic risk perspective, DG HYP

calculates its aggregate regulatory risk position (in accordance

with the German Solvency Ordinance – “SolvV”) on

a monthly basis, and submits it to the responsible bodies.

Furthermore, Risk Controlling also carries out daily risk

reporting on the market risks and existing liquidity risks to

which DG HYP is exposed, in accordance with MaRisk. The

key findings are regularly reported to the Supervisory

Board, or to the Risk and Participations Committee of the

Supervisory Board.

Risks arising from investments in other companies are

only of minor significance to DG HYP.

Internal Audit. As an independent unit, Internal Audit

examines whether the demands on the internal controlling

systems, the risk management and risk controlling systems,

and the necessary reporting, are adequately met.

d) Basel II

The Basel Capital Accord (commonly referred to as

“Basel II”), which came into force as of 1 January 2007 in

the form of the Solvability Ordinance, is focused on securing

the stability of the banking system and promoting

banking supervision with greater qualitative focus. The

core element of Basel II is greater risk-adjusted differentiation

of the regulatory capital requirements for loans,

depending on the credit quality of the borrower.

The change in the total capital ratio was largely due to

higher own funds, following the raising of additional subordinated

capital; it also reflected a decline in capital

requirements for counterparty risk, due to the lower volume

of business and the adjustments made to the MBS

portfolio.

Regulatory capital requirements (pursuant to the SolvV) as at 31 Dec 2010 31 Dec 2009

€ mn € mn

Counterparty risks 1,195 1,294

Market risk positions 5 8

Operational risk 28 35

Total portfolio 1,228 1,337

Total capital ratio (%) 10.6 9.2

DG HYP has implemented the Foundation Internal Rating

Based Approach (FIRB) as part of Basel II. The exit

threshold (92% coverage for IRBA positions and riskweighted

IRBA positions) is almost achieved at the current

time with a level of just under 90%, although this is not

actually required until 2012.

The development of our internal rating systems to

implement the requirements of the Basel II Accord remains

on schedule. All of the Basel II projects are implemented in

close coordination with the DZ BANK Group. The bankwide

Basel II projects are also implemented with the

National Association of German Cooperative Banks [Bundesverband

der Deutschen Volksbanken und Raiffeisenbanken

(BVR)] and the Association of German Pfandbrief

Banks [Verband deutscher Pfandbriefbanken (vdp)].

All told, the regulations of the Basel Committee confirm

our approach to a risk/return-oriented business and

portfolio management. The FIRB admission and the ongoing

further developments affirm the high performance of

our risk management system.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

33


e) Requirements pursuant to section 27 of the

German Pfandbrief Act

The risk management system, which DG HYP had

already implemented prior to the German Pfandbrief Act

(Pfandbriefgesetz – “PfandBG”) coming into force, fulfils

all requirements under section 27 of the PfandBG.

The Electronic Coverage (Elektronische Deckungsrechnung

– “EDR”) application is used to determine the market

risk exposure of cover assets pools, using a coverage concept

using present values, as set out in the Present Value

Cover Regulation (“PfandBarwertV”) promulgated by

BaFin. Stress scenarios simulating the impact of standardised

interest rate shocks on the present value of cover

assets pools are used to quantify the market risk exposure.

BaFin has prescribed some structural parameters for these

interest rate shock scenarios, as well as for the maximum

impact these scenarios may have on the present value of

the cover assets pools. A report on the present values and

liquidity status of the cover assets pools is prepared on a

daily basis.

In addition, a quarterly report is submitted to the

Risk/Return Management Committee, which covers the

more extensive PfandBG requirements regarding historical

and future performance and credit risk exposure of the

cover assets pools.

Internal rules regarding the commencement of business

in new products or markets comply with the requirements

of the MaRisk as well as with those under section 27

of the PfandBG.

II) Counterparty risk

Risk management in the real estate lending sector

focuses on the risk of counterparty default. Counterparty

risk denotes the risk that a business partner has defaulted

on a major liability for more than 90 days, or can only repay

liabilities by way of recourse to pledged collateral. Valuing

the collateral is of particular importance due to the fact

that real estate is involved.

34 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

a) Lending process

The front and back offices for commercial real estate

finance in Germany are located in DG HYP’s Real Estate

Centres. Key workflow stages include the credit rating,

which is identified using rating procedures that comply

with Basel II, and also property and project assessments. In

the latter case, DG HYP benefits from the proximity of its

Real Estate Centres and surveyors – who are also decentralised

– to its clients. The loan application is authorised on

the basis of lending volume and risk classification, observing

the separation of functions prescribed by MaRisk.

Credit analysis and the processing of foreign commitments,

domestic secondary market transactions in the

banking market and small-scale commercial commitments

are dealt with centrally in Hamburg by specialist backoffice

departments.

With regard to capital market products, the existing

portfolio of mortgage backed securities (MBS) is also

looked after centrally in Hamburg by a specialist backoffice

department. The bank no longer enters into new

business in this type of product.

b) Limit system

DG HYP has a limit system in place to manage and

monitor counterparty risks and country risks. This system

calculates the utilisation of external limits (country risk

limits in the DZ BANK Group, and default risk limits in

accordance with section 13 of the KWG), setting internal

limits for country and default risks simultaneously and

independently of one another. The respective limits can be

viewed at any time via an online system.

Back office units monitor the utilisation of individual

limits on a daily basis, and initiate escalation procedures in

the event of any limit transgressions. These procedures are

designed to restore limit compliance.


Management Report

Internal individual risk limits are identified depending

on the individual counterparty risk of the business partner.

Essentially, this is carried out in cooperation with the parent

company DZ BANK, which calculates an individual

VR rating per counterparty risk and makes this available to

DG HYP. Additionally, as part of Group risk management,

limits and ceilings on counterparty risks are taken into

account, whilst an agreed traffic light system for the early

detection of risks is also in place.

c) Credit rating

In order to take the particular demands on the commercial

real estate lending business into account, DG HYP

has developed (in cooperation with the central institutions

of the Cooperative Financial Services Network and BVR)

and implemented a special Basel-II compliant rating system

for specialised lending (SLRE – Specialised Lending Real

Estate). These rating procedures apply to the following customer

groups: real estate developers, residential property

developers, development companies, closed-end funds,

project developers and commercial real estate investors.

The procedures underwent comprehensive end-to-end validation,

updates and optimisation processes during the

period under review. Leveraging the high quality of its rating

processes, DG HYP has been offering a web-based rating

application to the Cooperative Financial Services Network

since mid-2009. IMMO VR RATING provides member

banks with a uniform measurement tool for default risk

exposure of commercial real estate projects – a feature that

did not exist previously. Cooperative banks can apply the

results for their internal risk management system (VR-Control).

DG HYP applied for approval to apply a new IRB rating

procedure for the SLRE International rating segment, with

a view to implementation from 2011 onwards. The related

audit took place during the fourth quarter of 2010, with

the results expected in early 2011.

For local authority lending, credit ratings are also estimated

based on a rating method that complies with

Basel II. DG HYP played a major role in developing the

municipal rating system, particularly within the scope of a

project where vdp joined forces with S&P Risk Solutions.

We use the VR rating procedures implemented in DZ BANK

within the framework of a ‘rating desk’ solution for the rating

of sovereigns, banks and key accounts.

As part of the implementation of Basel II, the review of

loan exposure required under section 18 of the KWG –

which must be carried out at least once a year, and

includes a rating update – has been expanded for all

customer categories registered for IRBA. In addition,

monitoring documents are prepared regularly for exposures

exceeding € 2.5 million per primary obligor group.

The monitoring comprises the rating analysis and other

customer records, an assessment of the current rental situation,

and the tenant rating(s). The property or other

collateral is revalued if deemed necessary.

d) Management of problem loans

DG HYP uses what is known as an individual risk management

(IRM) system for the purposes of early warning

and the management of problem loans, this being used in

a similar way at the parent company DZ BANK.

Cases with early warning indicators are assigned to a

so-called ‘yellow list’. Loans with regard to which a subsequent

loss cannot be excluded are kept on a ‘watch list’.

Where there is clear negative trend, coupled with an existing

requirement for risk provisioning in the form of individual

value adjustments, the cases are included on the list of

individual write-downs. The processing rules and requirements

on the transfer from one IRM list to another are

subject to defined criteria.

Problem loans that are judged to have a favourable

outlook are passed on to the Restructuring department for

further processing. As a basis for a restructuring decision a

concept is submitted that must comprise a differentiated

analysis and assessment of the overall situation of the

exposure and a cost-benefit analysis, as well as a comprehensive

restructuring plan. Loan exposures are transferred

to workout if restructuring has failed or if this is deemed to

be fruitless from the outset.

Detailed reporting on ailing exposures is carried out

quarterly.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

35


III) Market risks

For us, the concept of ‘market risks’ comprises the risks

associated with fluctuations in market prices (market risks

in the narrower sense), and liquidity risk. Market price risk

is the impact of interest rate fluctuations on the money and

capital markets, and changes in exchange rates. Liquidity

risk comprises the threat that DG HYP is unable to borrow

the funds required to maintain payments, or the risk of

only being able to do so at considerably less favourable

terms.

a) Risks associated with market price fluctuations

DG HYP uses various hedging tools in its dynamic management

of interest rate risk and currency risk for the bank

as a whole. This consists mainly of interest-rate swaps,

cross-currency swaps and caps; options on interest-rate

swaps (so-called swaptions) are also entered into, albeit to

a limited extent.

Each derivative hedge forms part of the overall management

of the banking book; no segregated sub-portfolios

are managed on an individual basis.

In order to quantify the bank’s market price risk exposure,

DG HYP calculates VaR figures daily using a variance/co-variance

procedure for all positions in each of the

portfolios. This is done with due account being taken of

the provisions of section 315 of the Solvency Ordinance

with regard to internal risk models.

The forecasting quality of our internal VaR model is

checked daily. We apply the requirements of section 318 of

the SolvV for this back-testing.

Market Risk Controlling compares the projected

changes in present value that are calculated according to

these parameters, with the negative changes in present

value that actually occur the following day. On this basis,

we determine how often the actual negative changes in

the present value exceeded the VaR figures in the risk

model. The results from back-testing in 2010 confirm the

quality of our calculations.

36 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

Market Risk Controlling informs the Management

Board (as well as the Treasury) on the day-to-day performance

of the Treasury and the bank as a whole, and on the

utilisation of the VaR limit and the sensitivity limits implemented.

A multi-level escalation plan, comprising escalation

paths and measures to be taken, has been implemented

to deal with the breach of defined thresholds.

Stress scenarios incorporating both shifts in the yield

curve and changes to market parameters assumed to occur

in the event of a crisis are calculated on a monthly basis.

The crisis scenarios used for this purpose also include those

defined by BaFin (pursuant to the SolvV) for the purposes

of monitoring interest rate risk exposures of investments.

The defined escalation plan also provides for the monitoring

of these calculation results. No escalation was required

in the business year under review.

DG HYP brought its Treasury management into line

with its new business model in 2008. This involved a

stronger focus on managing profit and loss, taking into

account the intent to hold investment securities permanently.

Following this realignment, the Treasury unit was no

longer regarded as an independent profit centre. Daily calculations

include a report on present-value contributions to

results, as well as on the preceding day’s contributions

realised in income. This analysis also contains a breakdown

of contributions into the share of interest income that is

attributable to credit units of the business divisions, and

the structural contribution generated by the Treasury. This

approach also facilitates the management of profitability

clusters within the bank.

The conservative management of market risk exposures

is also reflected in the reported market risk parameters:

based on a 99% confidence interval and a 10-day holding

period, the bank’s average Value at Risk (VaR) over the year

under review was € 1.1 million, with a maximum of

€ 2.2 million and a minimum of € 0.4 million. VaR as at

the reporting date was € 0.85 million.


Management Report

b) Liquidity risks

The bank’s liquidity situation is determined daily in line

with the regulatory and daily business requirements. For

this purpose, Market Risk Controlling provides Treasury

with a differentiated overview on a daily basis, indicating

future liquidity flows (comprising cash flows as well as a

gap analysis of principal repayments and fixed interest mismatches)

resulting from the individual positions in the portfolio.

Additionally, at its meetings the Risk/Return Management

Committee is provided with an overview of the shortand

long-term liquidity projection. Liquidity is managed on

the basis of this overview, with the dual objectives of securing

the bank’s long-term liquidity and achieving compliance

with the Liquidity Ordinance.

A suitable liquidity controlling system is already in place

in line with the requirements of MaRisk for measuring and

reporting on liquidity risk. On the basis of the short- and

long-term liquidity projection, a limit system is implemented

on a daily basis and integrated into the risk monitoring

process. The results from the scenario analyses – which

comply with the requirements set out in the relevant sections

of MaRisk – are fed into the risk analysis process.

IV) Operational risks

The Basel Committee defines operational risk as “the

risk of direct or indirect losses resulting from inadequate or

failed internal processes, people and systems, or from

external events”. DG HYP has adopted this definition,

albeit with marginal changes to detail in order to adjust it

to the bank’s own requirements. According to the Basel II

regulations, DG HYP has been subject to capital requirements

for operational risks since 1 January 2007.

DG HYP has adopted the standardised approach for

quantification, and has notified BaFin accordingly.

A system for collecting and recording loss data has

already been in place since 2002. Incoming loss reports are

collected systematically in a database arranged according

to predefined categories: they are subsequently used as

indicators for further improving the operating processes,

and hence for reducing operational risks.

In addition, all of DG HYP’s organisational units have

regularly conducted self-assessments since 2004.

Current risks are estimated using a standardised electronic

questionnaire. In addition, Risk Controlling carries

out continuous plausibility and consistency checks. In order

to also be able to identify operational risks in good time, an

early warning system regularly records various risk indicators

(such as system failures, fraud, staff fluctuation). The

agreed risk indicators and the collated reports are submitted

anonymously within the scope of group-wide reporting

to DZ BANK.

From an organisational perspective, DG HYP’s Controlling

unit is responsible for measuring operational risks. It

reports regularly on operational risk issues to DG HYP’s

Management Board, and on the activities for further developing

the quantification approach, within the scope of the

Risk/Return Management Committee meetings.

V) Business risks and strategic risks

DG HYP defines business risk as the threat of losses

arising from unexpected fluctuations in the bank’s results

which cannot be offset by cutting costs; assuming an

unchanged business strategy, such fluctuations usually

materialise on a short-term horizon (within a one-year period)

due to changed external circumstances (e.g. in the

business or product environment, or due to customer

behaviour). Since 2010 DG HYP has modelled this risk

using a so-called earnings volatility approach, and analysed

the bank’s exposure within the scope of its risk-bearing

capacity.

In contrast, strategic risk is defined as the risk of future

(erroneous) strategic management decisions, which are

taken in response to, or to counter business risk or other

types of risk. DG HYP manages this risk generally via investment

calculations and projections, business plans including

scenario-based simulations, cost/benefit analyses, and risk

analyses. The regular review of business unit strategies is

also a core element of the continuous process of business

unit planning and control. The results of this review are

regularly discussed with the Supervisory Board of DG HYP.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

37


38

OUR STAFF

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Germania-Arkaden Kiel


Management Report

OUR STAFF

Personnel levels

Following the strategic realignment of DG HYP

launched back in 2008, more adjustments to job and personnel

planning were required in 2010, particularly in relation

to the optimisation of back office functions. Overall,

DG HYP has succeeded in filling vacancies in Sales and in

Credit Risk Analysis with well-qualified employees from

other areas of the bank, thereby retaining existing talent

whilst at the same time abolishing unnecessary posts. The

staff turnover rate fell considerably compared with the previous

year, down from 8% to 4%.

The total number of staff, with 435 actively employed

employees (corresponding to 415.6 full-time equivalents),

was down on the planned staffing level for the 2010 calendar

year, which was for 420.9 full-time equivalents. The

slightly lower level is attributable to a small number of

unstaffed positions in divisions such as Sales (international)

and Credit Risk Analysis. The renewed adjustment of the

DG HYP business model means that further changes to

staffing levels will be required in 2011. DG HYP will be

closing its foreign representative offices by 30 June 2011,

with a resulting fall in staff numbers.

Personnel development

The ongoing market changes have impacted on the

requirements made of employees at the workplace. The

acquisition and further development of key skills, and thus

equipping employees to meet the requirements of the

workplace, are a key factor for success. With this in mind,

DG HYP focuses on hands-on professional development

measures, which are offered to employees and executive

staff in-house and also externally. In terms of content,

DG HYP provides training in subject-specific skills, as well as

interpersonal and methodological skills. During the 2010

fiscal year 166 members of staff took part in continued

professional development. On average, employees spent

1.5 days in training over the course of the year. 17 training

events were held in-house at DG HYP. This range of courses

is currently supplemented by 17 different small groups

for regular language courses and tailored IT training.

In terms of the Bank’s core business of commercial real

estate finance, the DG HYP Training Academy, which was

launched in September 2010, made an important contribution.

The focus, in cooperation with the IRE|BS Immobilienakademie,

is on offering subject-specific content from

the field of real estate economics.

Supporting the next generation

As a result of the highly intense competition on the

market and demographic change, a further challenge for

DG HYP is to tap into the potential of an ever-decreasing

target group of qualified university graduates. Since April

2010, four young people have been participating in the

newly created trainee programme. Their training will last

for 18 months and combines on-the-job and off-the-job

elements, preparing the trainees for a position in what is a

demanding working environment. Additionally, together

with its partners, DG HYP was represented at the university

graduate congress in Cologne during the reporting year,

with a view to securing future recruitment of young individuals.

Process optimisation – further development

of SAP system

During the 2010 fiscal year DG HYP further developed

its workflows with the external service provider for payroll

accounting. HR reporting has been optimised by the

creation of an enterprise data warehouse, and electronic

personnel files have been successfully introduced.

Cooperation with the Works Council

Cooperation with the Works Council continued to be

positive and based on mutual trust during the year under

review, with various different company agreements being

negotiated. These included, in particular, a framework

agreement on SAP systems and company agreements on

employee appraisals and variable remuneration. These

were concluded in December 2010 after intensive and constructive

negotiations with the Works Council, and comply

both with in-house requirements and the requirements of

the banking regulator.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

39


REPORT ON EVENTS

AFTER THE BALANCE SHEET DATE,

AND FORECAST

40 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

NINO-Hochbau Nordhorn


Management Report

REPORT ON EVENTS AFTER THE BALANCE SHEET DATE,

AND FORECAST

Report on material events after the reporting date

Events after 31 December 2010

No events occurred between 1 January and 10 February

2011 that would have had a material impact on our

2010 results.

Report on expected developments

Cautionary forward-looking statement

The forecast and other parts of the Annual Report

include expectations and forecasts that relate to the future.

These forward-looking statements, in particular those

regarding DG HYP’s business and earnings growth, are

based on forecasts and assumptions, and are subject to

risks and uncertainties. As a result, the actual results may

differ materially from those currently forecast. There are a

large number of factors that impact on our business, and

which are beyond our control. These factors primarily

include changes to the general economic situation, the

competitive arena, and developments on the national and

international real estate and capital markets. In addition,

results can be impacted by borrowers defaulting or by

other risks, some of which are discussed in detail in the risk

report.

In this regard we should point out that the global problem

of high levels of government debt in particular, and

with it the waning trust in some countries’ long-term

ability to remain solvent, are issues that have yet to be

resolved. The payment defaults and haircuts on public

finance exposures that are being discussed in the public

domain are not included in our forecasts.

Anticipated business development

In an economic environment that stabilised more

strongly than expected, DG HYP grew its market share further

in its capacity as one of Germany’s leading providers

of real estate finance during the 2010 fiscal year. Business

within the Cooperative Financial Services Network was

particularly successful. Looking to 2011, there are signs,

particularly on our domestic market in Germany, of a continued

rise in transaction volumes for commercial real

estate, with a slower-paced economic recovery. The regulatory

demands made of banks during this period will be

challenging, with more stringent equity requirements.

Based on these expectations, we have decided to focus

our core business even more strongly on the German real

estate market, and on domestic business within the Cooperative

Financial Services Network. This automatically

means following a reduced growth path, striving to

achieve the perfect balance between profitability targets

and a raised capital requirement whilst consistently adhering

to our cautious investment policy.

Against this background, we expect to stabilise our

solid market position in 2011. At the same time, we are

confident of being able to further expand our business

with the Cooperative Financial Services Network, having

already exceeded the € 1 billion threshold during the period

under review.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

41


Earnings forecast

The successful core business of commercial real estate

finance is, as planned, increasingly helping DG HYP to scale

back its non-strategic portfolios. In the 2010 fiscal year, the

required contribution from DZ BANK, at € 119.0 million, was

some € 30.5 million less than the required write-downs on

the non-strategic MBS portfolio. Meanwhile, the once

again heightened credit risks from the portfolio of subordinated

debt (‘B’ Notes), which is being professionally administered

and phased out, have already been fully handled

using the bank’s own resources.

Net interest income is predicted to be relatively constant

for the next few years on the basis of a reduction in plans

for new business due to the stricter equity requirements,

and combined with the stronger focus on domestic business.

The expected reduction in risk-weighted assets contrasts

with lower knock-on effects from earlier structural

measures. At the same time, non-strategic private real

estate lending will continue to be successively replaced

with commercial real estate lending, an area of business

with higher margins. This forecast is based on a slight drop

in interest rate margins compared with the current market

level.

NOMINAL CAPITAL

42 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Management Report

The improvement in the net commission result already

recorded during the reporting year will be maintained at

this adequate level. Net fee and commission income will be

in the double-digit million ranges, and will continue to

make a sustainable contribution to DG HYP’s overall return.

The greatly improved cost structure, with an administrative

expense of € 97.1 million for 2010, will be further optimised

as our non-strategic credit portfolio is further scaled

back.

Provisions for loan losses will continue to be negatively

impacted by the fallout from the financial crisis and the

subordinated debt portfolio during 2011, and are hence

budgeted at a higher level compared to the year under

review. This forecast conservatively accounts for all

conceivable default risks which may occur during the 2011

fiscal year.

DG HYP’s securities portfolio also includes bonds issued

by the so-called PIIGS countries (euro zone members Portugal,

Ireland, Italy, Greece and Spain), acquired within the

scope of the public finance business which the Bank generally

discontinued in 2008.

€ mn 31 Dec 2010 31 Dec 2009 Change from the previous year

Portugal 923 1,051 – 128

Italy 2,264 2,662 – 398

Ireland 165 165 0

Greece 688 882 – 194

Spain 5,346 6,455 – 1,109

Total 9,386 11,215 – 1,829

In principle, these securities were purchased as cover

assets for our Public Pfandbriefe, with a view to holding

them over a long-term period, and are carried at amortised

cost. As before, we do not anticipate any permanent impairment

to this portfolio. This is reliant in particular on a credible,

proven willingness (and of course ability) on the part of

the peripheral states to balance their budgets.

Overall, we are convinced that DG HYP is on the right

path and we firmly believe in the long-term profitability of

our business model. The stricter capital requirements

imposed by the new Basel III regime represent a challenge,

but are achievable based on our current forecasts. By defining

our business focus even more closely, we have consistently

taken account of the challenges that lie ahead.

Increases in write-downs in non-strategic legacy portfolios

are likely to postpone DG HYP’s turnaround until

2012. Accordingly, our projections for 2011 still encompass

a contribution to income by DZ BANK, but at a further

reduced level. By then, DG HYP’s operational result will

increasingly be offsetting the burden of legacy items, with

the result that we anticipate sustained positive results from

2012 onwards.


FINANCIAL STATEMENTS

Financial Statements

Page

Balance as at 31 December 2010 45

Profit and Loss Account

for the period from 1 January to 31 December 2010 51

Notes to the Financial Statements

General Notes 57

Notes to the Balance Sheet 59

Notes to the Profit and Loss Account 71

Coverage 72

Other information

on the annual financial statements 79

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

43


BALANCE SHEET

AS AT 31 DECEMBER 2010

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

45


ASSETS

BALANCE SHEET

31 Dec 2009

€ 000’s Note # € 000’s € 000’s € 000’s

Cash funds 671 921

a) Cash on hand 9 4

b) Balances with central banks 662 917

of which: with Deutsche Bundesbank 662 (917)

Loans and advances to banks (4) 2,778,343 3,230,764

a) Loans secured by property mortgages 73,929 100,456

b) Loans to local authorities 1,525,030 1,696,039

c) Other loans and advances 1,179,384 1,434,269

of which: Payable on demand 196,962 (417,519)

Loans and advances to customers (4) 35,806,739 37,042,527

a) Loans secured by property mortgages 21,362,953 21,134,679

b) Loans to local authorities 13,546,658 14,798,047

c) Other loans and advances 897,128 1,109,801

Debt securities and other fixed-income securities (7) 23,218,310 26,272,910

a) Bonds and debt securities (21,701,738) (26,045,934)

aa) Public-sector issuers 9,681,033 11,624,694

of which: Securities eligible as collateral

with Deutsche Bundesbank 9,138,949 (10,903,426)

ab) Other issuers 12,020,705 14,421,240

of which: Securities eligible as collateral

with Deutsche Bundesbank 9,174,383 (11,332,959)

b) Own bonds issued 1,516,572 226,976

Nominal amount 1,513,193 (224,337)

Equities and other non-fixed income securities (7) 1,316 111,825

Investments in affiliated companies (7) 1,566 2,569

Trust assets (6) 1,105,773 792,050

of which: Trustee loans 1,073,063 (759,340)

Intangible fixed assets (7) 428 717

a) Concessions, industrial property rights

and similar rights and assets as well as

licences in such rights and assets 408 717

b) Advance payments made 20 0

Tangible fixed assets (7) 152,155 153,100

Other assets (23) 125,164 158,783

Prepaid expenses (9) 252,862 309,142

a) From new issues and lending 251,434 307,642

b) Other 1,428 1,500

Total assets 63,443,327 68,075,308


AS AT 31 DECEMBER 2010

LIABILITIES AND EQUITY

31 Dec 2009

€ 000’s Note # € 000’s € 000’s € 000’s

Liabilities to banks (11) 15,860,269 12,455,728

a) Outstanding Registered Mortgage Pfandbriefe

(Hypotheken-Namenspfandbriefe) 1,179,933 950,659

b) Outstanding Registered Public Pfandbriefe

(öffentliche Namenspfandbriefe) 1,959,053 2,010,504

c) Other liabilities 12,721,283 9,494,565

of which: Payable on demand 295,574 (228,552)

Registered Mortgage Pfandbriefe 1 (2)

and Registered Public Pfandbriefe 1,425 (2,951)

surrendered to lenders as collateral for borrowings

Liabilities to customers (11) 15,324,193 16,015,914

a) Outstanding Registered Mortgage Pfandbriefe

(Hypotheken-Namenspfandbriefe) 2,586,817 2,608,896

b) Outstanding Registered Public Pfandbriefe

(öffentliche Namenspfandbriefe) 10,237,142 10,563,705

c) Other liabilities 2,500,234 2,843,313

of which: Payable on demand 232,301 (302,693)

Registered Mortgage Pfandbriefe 0 (5,113)

and Registered Public Pfandbriefe 5,113 (7,113)

surrendered to lenders as collateral for borrowings

Securitised liabilities (11) 28,638,942 36,290,184

Bonds issued

a) Mortgage Pfandbriefe (Hypothekenpfandbriefe) 11,072,793 10,804,906

b) Public Pfandbriefe (öffentliche Pfandbriefe) 14,871,714 19,212,800

c) Other debt securities 2,694,435 6,272,478

Trust liabilities (6) 1,105,773 792,050

of which: Trustee loans 1,073,063 (759,340)

Other liabilities (24) 40,307 56,486

Deferred income (9) 207,141 246,874

a) From new issues and lending 207,095 246,812

b) Other 46 62

Provisions 122,645 125,954

a) Provisions for pensions and similar obligations 93,475 92,055

b) Other provisions 29,170 33,899

Subordinated liabilities (12) 680,557 609,700

Profit-participation certificates (13) 56,242 56,242

of which: Due within two years 5,113 (5,113)

Equity capital 1,407,258 1,426,176

a) Subscribed capital (14) (725,000) (743,918)

aa) Share capital 90,000 90,000

ab) Silent partnership contributions 635,000 653,918

b) Capital reserves 589,113 589,113

c) Retained earnings (93,145) (93,145)

ca) Legal reserves 945 945

cb) Other retained earnings 92,200 92,200

Total equity and liabilities 63,443,327 68,075,308

Contingent liabilities (15)

Liabilities from guarantees and indemnity agreements 467,735 531,527

Other commitments (16)

Irrevocable loan commitments 2,039,272 2,210,186


PROFIT AND LOSS ACCOUNT

FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2010

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

51


PROFIT AND LOSS ACCOUNT

FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2010

2009

€ 000’s Note # € 000’s € 000’s € 000’s

Interest income from

a) Lending and money market transactions 1,650,040 2,297,512

b) Fixed-income securities and debt register claims 762,127 969,603

2,412,167 3,267,115

Interest expense 2,209,125 3,103,031

203,042 164,084

Current income from

equities and other non-fixed-income securities 34 18

Income from profit-pooling, profit transfer,

and partial profit transfer agreements 830 1,114

Commission income 35,796 30,020

Commission expenses 15,384 18,685

Net commission result 20,412 11,335

Other operating income

General administrative expenses

a) Personnel expenses

(27) 15,362 13,867

aa) Wages and salaries

ab) Compulsory social security contributions and

33,411 34,170

expenses for pensions and other employee benefits 6,189 22,829

39,600 56,999

of which: Pension expenses 1,186 (18,212)

b) Other administrative expenses 54,612 57,466

94,212 114,465

Amortisation/depreciation and write-downs of

intangible and tangible fixed assets 2,896 3,234

Other operating expenses (28) 11,611 5,103

Amortisation and write-downs of loans

and advances and specific securities,

as well as additions to loan loss provisions 74,570 115,534

Amortisation and write-downs on participations,

interests in affiliated companies,

and investment securities 147,907 87,065

Expenses for losses assumed under profit-transfer

and similar agreements 498 0

Result from ordinary activities – 92,014 – 134,983

Extraordinary income (29) 118,951 149,708

Extraordinary expenses (30) 4,224 0

Net extraordinary income/expenses 114,727 149,708

Taxes on income

Other taxes not disclosed under

0 – 2,174

“Other operating expenses” 145 216

145 – 1,958

Profits transferred under

partial profit transfer agreements 22,568 16,683

Net income 0 0


Notes to the Financial Statements

NOTES TO THE FINANCIAL STATEMENTS

General notes

(1) General information on the preparation of

financial statements

The financial statements of DG HYP for the fiscal year

2010 have been prepared in accordance with the provisions

of the German Commercial Code (Handelsgesetzbuch –

“HGB”). The provisions of the German Accounting Law

Modernisation Act (Bilanzrechts modernisierungsgesetz –

“BilMoG”), enacted on 25 May 2009, were implemented.

Pursuant to section 67 (8) sentence 2 of the Introductory Law

to the German Commercial Code (“EGHGB”), the bank did

not exercise its option to adjust the previous year’s figures,

since the related overall changes would have been immaterial.

Furthermore, the financial statements are prepared in

accordance with the Regulation on the Accounting of Credit

Institutions and Financial Services Institutions (Verordnung

über die Rechnungslegung der Kreditinstitute und Finanz -

dienstleistungsinstitute – “RechKredV”); they fulfil the

requirements of the Stock Corporation Act (Aktiengesetz –

“AktG”) and the German Pfandbrief Act (Pfandbriefgesetz –

“PfandBG”).

Given the non-materiality of all subsidiaries, in accordance

with section 290 (5) of the HGB in conjunction with

section 296 (2) of the HGB, the company has not prepared

consolidated financial statements.

All amounts have been quoted in euros, in accordance

with section 244 of the HGB.

(2) Accounting policies

The present financial statements are generally based on

the same accounting policies as were applied in the financial

statements as at 31 December 2009. Any differences (which

were related to net other operating income/expenses and

personnel expenses) are the result of the changes made to

the German Commercial Code following the implementation

of the BilMoG.

Loans and advances to banks/to customers

Loans and advances to banks and customers are recognised

at nominal value, in accordance with section 340e (2)

of the HGB. Where their stated value differs from the

amount disbursed, or cost, the amount of the difference is

reported under prepaid expenses or deferred income and

amortised in interest income over the term of the transaction.

Loans and advances which are fully classified as current

assets are valued strictly at the lower of cost or market. All

existing individual lending risks are covered by specific loan

loss provisions. As prescribed by international accounting

standards, changes over time in the value of real estate col-

lateral recognised for the purposes of determining the value

of receivables are reported in net interest income. In the previous

year, this so-called ‘unwinding effect’ was still reported

under provisions for loan losses; it amounted to € 5.8 million

as at 31 December 2010 (2009: € 3.7 million).

Besides this policy, no income received on commercial

real estate financings for which a specific provision has been

recognised is reported in net interest income: receipts for

such exposures are set off against the provision for loan losses.

In case of a settlement of private real estate financing,

interest income is not recognised any more where it becomes

obvious during execution proceedings that the realisable proceeds

will fall short of the carrying amount.

Existing risks of default in the retail lending business are

covered by recognising specific provisions at a flat rate. Taxdeductible

general loan loss provisions are formed to cover

expected loan losses which have been incurred but not identified

as such at the balance sheet date. Specific provisions

for possible loan losses related to country risk exposure under

claims to foreign borrowers are recognised in the form of a

lump-sum allowance. Country risks emanating from pending

claims under contingent liabilities are recognised via provisions

for impending losses.

Early repayment penalties charged for loan repayments

or extensions during the fixed-interest term of a loan are fully

recognised in interest income.

Debt securities and other fixed-income securities

At the balance sheet date, all debt securities and other

fixed-income securities are carried as fixed assets (investment

securities), at amortised cost, except repurchased own issues

which are valued strictly at the lower of cost or market. Premiums

and discounts are amortised in net interest income

over the term of the securities.

The fair value of bank bonds and other fixed-income

securities as at the balance sheet date 2010 was generally

determined on the basis of external market prices. If a valid

market price for securities already held could not be determined

as at the balance sheet date, due to a lack of transaction

volume, the internal validation mechanisms were used

to determine the relevant price on the basis of the discounted

cash flow method. Future cash flows from interest and

principal were projected and discounted to their present

value, using market interest rates in line with the risks and

maturities concerned, and applying adequate liquidity yield

add-ons. Yield add-ons to reflect risk and liquidity are determined

on the basis of most recent values observed on an

active market, taking into account current market developments.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

57


Given the improved liquidity situation which could be

observed particularly in parts of Europe, residential mortgagebacked

securities (RMBS) in a volume of € 1.6 billion were

measured subject to current liquidity premiums. The resulting

conversion to measurement using liquidity premiums derived

from liquid bond markets increased the write-downs which

were not recognised (pursuant to section 253 (3) sentence 4

of the HGB) to € 160.4 million as at the balance sheet date.

Due to the continued illiquid market, the remaining MBS continued

to be measured on the basis of the liquidity premiums

derived when bond markets were still liquid. In order to take

into account the partially evolving market activity for these

transactions, the relevant MBS asset classes included in the

portfolio were classified by region and rating category, and

the measurement bases adjusted, if necessary, using a

weighting factor model.

Equities and other non-fixed income securities

Equities and other non-fixed income securities are carried

at amortised cost.

Participations and interests in affiliated companies

Participations and interests in affiliated companies are carried

at amortised cost. The shares held in IMMOFORI,

Gesellschaft für Immobilien Forderungsinkasso mbH, Hamburg,

were sold as at 1 January 2010, resulting in a gain of

€ 647,000.

Intangible and tangible fixed assets

Tangible fixed assets are carried at cost less regular depreciation,

where applicable. Where necessary, extraordinary

write-downs are taken into account in accordance with section

253 (3) sentence 3 of the HGB. Depending on the

expected value erosion, movable fixed assets are depreciated

on a straight-line basis, or degressively with a subsequent

transfer to straight-line depreciation. Low-value assets are

written off in full during their year of purchase. Standard software

is reported under intangible assets, as prescribed by

accounting standard HFA 11 issued by the Main Committee

of the IDW (IDW RS HFA 11).

Liabilities

Liabilities are shown on the balance sheet at the amount

due for repayment. The difference between the nominal

value and the initial carrying amount of liabilities is recognised

under prepaid expenses or deferred income and amortised

over the term of the transaction.

Liabilities classified as structured products (as defined in

Accounting Standard 22 issued by the Auditing and Accounting

Board of the IDW) are accounted for as uniform liabilities,

since they only contain embedded interest rate derivatives.

Provisions

Contingent liabilities are covered by provisions equalling

the anticipated amount of the liability, on the basis of pru-

58 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

dent business judgement. Provisions for pensions are recognised

in accordance with actuarial principles and determined

on the basis of the projected unit credit method, using the

actuarial tables 2005 G by Dr Klaus Heubeck. The calculation

of the provisions takes into account future salary increases of

2.5% p.a. as well as pension increases of 2.0% p.a., pursuant

to the BilMoG. The discount rate of 5.15% as determined by

Deutsche Bundesbank was used.

The addition to provisions for pensions due to interest

rate effects was recognised in other operating expenses for

the first time for the fiscal year under review; in the previous

year, this was included in personnel expenses. The resulting

reclassification amounts to € 5.9 million.

Derivative financial instruments

Financial derivatives are accounted for separately in auxiliary

ledgers. These instruments are generally used as hedging

against the interest rate and currency risk exposure of on-balance

sheet transactions. Each derivative transaction forms

part of the overall management of the banking book; segregated

sub-portfolios (valuation units) are not managed on an

individual basis. Accordingly, section 254 of the HGB (as

amended) is not applicable.

Current interest payments are amortised and recorded in

net interest income.

Income from the disposal of interest rate-based derivative

financial instruments is generally recognised in interest income.

Premiums paid or received for credit default swaps are

amortised in commission income over the terms of the transactions.

Compensation payments received under Credit

Default Swaps are set off against provisions for loan losses.

Premium payments for swaptions entered into as a hedge

against the impact of statutory loan termination rights pursuant

to section 489 of the German Civil Code (Bürgerliches

Gesetzbuch – “BGB”) are allocated to the investment portfolio

and carried at cost.

(3) Currency translation

Assets and liabilities from foreign exchange transactions

are translated in line with section 340h in conjunction with

section 256a of the HGB and the Draft Statement IDW ERS

BFA 4 issued by the Banking Committee of the Institute of

Public Auditors in Germany (IDW). Book receivables, securities,

liabilities and unsettled spot transactions are generally

translated using the ECB reference rate prevailing on the balance

sheet date. Due to the specific coverage of all foreigncurrency

items (by way of managing exchange rate risks for

each currency), all currency translation effects have been

recognised in income, in accordance with the BilMoG, with

effect from the fiscal year under review. Accordingly, an

equity/liabilities item of € 11.3 million which had been recognised

in the previous year (under the principle of imparity),

was reversed through profit and loss during the fiscal year

under review. Currency translation effects are reported in net

other operating income/expenses.


Notes to the Financial Statements

Notes to the balance sheet

(4) Lending business

Principal Carrying amount

Mortgage loans € mn € mn

to banks 74 74

to customers 21,210 21,363

Total 21,284 21,437

Portfolio development (principal) € mn € mn

Balance at 31 Dec 2009 21,158

Additions during the fiscal year 2010 3,827

through Disbursements 3,666

Reclassifications –

Other additions 161

Disposals during the fiscal year 2010 3,701

through Scheduled repayments 2,214

Unscheduled repayments 1,257

Reclassifications 230

Other disposals –

Balance at 31 Dec 2010 21,284

Principal Carrying amount

Loans to local authorities € mn € mn

to banks 1,503 1,525

to customers 13,433 13,547

Total 14,936 15,072

Portfolio development (principal) € mn € mn

Balance at 31 Dec 2009 16,312

Additions during the fiscal year 2010 697

through Disbursements 652

Reclassifications –

Other additions 45

Disposals during the fiscal year 2010 2,073

through Scheduled repayments 1,919

Unscheduled repayments 154

Reclassifications –

Other disposals –

Balance at 31 Dec 2010 14,936

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

59


(5 ) Negotiable securities

60 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

Balance sheet item Listed Unlisted Carrying amount of negotiable

securities not valued at

the lower of cost or market

31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009

€ 000’s € 000’s € 000’s € 000’s € 000’s € 000’s

Debt securities

and other fixed-

income securities 21,431,838 24,310,413 1,786,472 1,962,497 12,917,810 12,315,342

Equities and

other non-fixed

income securities – – 1,316 111,825 – –

As at 31 December 2010, we did not recognise an extraordinary write-down in the aggregate amount of € 1,421.6 million for

negotiable securities with a fair value of € 11,496.2 million not measured at the lower of cost or market due to the expected

temporary nature of the impairment, pursuant to section 253 (3) sentence 4 of the HGB.

Taking into account the compensating effects from hedges within the context of the overall management of the bank, these hidden

liabilities in relation to the entire non-trading portfolio increased to € 2,013.4 million. Since impairments of interest and principal

payments are not expected to occur – in our view – with respect to the securities concerned and the hedges, no write-downs

pursuant to section 253 (3) sentence 4 of the HGB were recognised based on such a high-level portfolio view.

We had to recognise extraordinary write-downs on mortgage-backed securities (MBS) in the amount of € 149.5 million, pursuant

to section 253 (3) sentence 3 of the HGB, because we expected the impairment of the securities to be of a permanent nature.

The carrying amount of securities held as liquidity reserve, valued strictly at the lower of cost or market, amounted to € 1,511.9

million.

(6) Trust business

31 Dec 2010 31 Dec 2009

€ 000’s € 000’s

Assets held in trust comprise:

– Loans and advances to customers 1,073,063 759,340

– Participations 32,710 32,710

1,105,773 792,050

Trust liabilities are carried vis-à-vis:

– Banks 1,027,819 706,572

– Customers 77,954 85,478

1,105,773 792,050


Notes to the Financial Statements

(7) Breakdown of, and statement of changes in fixed assets

Purchase or production cost Depreciation and amortisation Carrying amounts

1 Jan 2010 Additions Reclassi- Disposals in the Reclassi- Disposals Total 31 Dec 2010 1 Jan 2010

fications fiscal

year

fications

€ 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s

I. Intangible

assets

1. Software

2. Advance

payments

on intangible

32,181 173 – – 482 – – 31,946 408 717

assets – 20 – – – – – – 20 –

32,181 193 – – 482 – – 31,946 428 717

II. Property and

equipment

1. Land and

buildings 176,737 1,558 – 296 2,090 – 89 26,502 151,4971) 2. Office furniture

and

152,236

equipment 2) 9,135 172 – 3,124 324 – 3,070 5,525 658 864

185,872 1,730 – 3,420 2,414 – 3,159 32,027 152,155 153,100

Net change

III. Financial assets

1. Investments in

affiliated

companies

2. Equities and

other non-fixed

income

2,569 – 1,003 1,566 2,569

securities

3. Investment

111,825 – 110,509 1,316 111,825

securities 25,754,969 – 4,053,231 21,701,738 26,045,934

1) Owner-occupied properties: € 62.3 million; used by third parties: € 89.2 million.

2) Fully used for the bank’s own operations.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

61


(8) List of investments pursuant to sections 285 no. 11 and 340a of the HGB

62 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

Minimum stake of 20% Equity interest Shareholders’ equity Result 2009

Name/registered office % € 000’s € 000’s

VR WERT Gesellschaft für

Immobilienbewertungen mbH, Hamburg 100.0 100 830 *)

VR HYP GmbH, Hamburg 100.0 25 –

VR REAL ESTATE GmbH, Hamburg 100.0 25 –

*) Profit and loss transfer agreement with DG HYP

(9) Prepaid expenses and deferred income

Assets

Sub-item a) From new issues

and lending comprises:

31 Dec 2010 31 Dec 2009

€ 000’s € 000’s

– Difference between the nominal amount

and the higher disbursement amount

of receivables 5,498 10,086

– Difference between the nominal amount

and the lower issuing amount

of liabilities 45,172 59,623

Liabilities and equity

Sub-item a) From new issues

and lending comprises:

– Difference between the nominal amount

and the lower disbursement amount

and receivables 45,435 45,143

(10) Securities repurchase agreements

31 Dec 2010 31 Dec 2009

€ 000’s € 000’s

Carrying amount of securities pledged under repo agreements 3,557,853 1,649,244

Repurchase amount 3,567,029 1,654,719


Notes to the Financial Statements

(11) Breakdown of, and statement of changes

in debt securities and borrowed funds

Carrying

Principal amount

€ mn € mn

Registered Mortgage Pfandbriefe

to banks 1,159 1,180

to customers 2,534 2,587

Mortgage Pfandbriefe 10,955 11,073

14,648 14,840

Registered Public Pfandbriefe

to banks 1,923 1,959

to customers 10,001 10,237

Public Pfandbriefe 14,544 14,872

26,468 27,068

Other debt securities 2,660 2,694

Borrowed funds

from banks 5,609 5,633

from customers 2,206 2,267

7,815 7,900

Total 51,591 52,502

Development (principal)

Balance on Additions Disposals Reclassifications Balance on

31 Dec 2009 and other 31 Dec 2010

adjustments

€ mn € mn € mn € mn € mn

Mortgage Pfandbriefe and

Registered Mortgage Pfandbriefe 14,075 4,205 3,632 – 14,648

Public Pfandbriefe

and Registered Public Pfandbriefe 31,144 50 4,788 62 26,468

Other debt securities 6,206 104 3,651 1 2,660

Borrowed funds 5,407 2,994 605 19 7,815

Total 56,832 7,353 12,676 82 51,591

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

63


(12) Subordinated liabilities

64 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

31 Dec 2010 31 Dec 2009

€ 000’s € 000’s

Subordinated

other debt securities 145,000 160,000

borrowed funds 535,557 449,700

680,557 609,700

Expenses incurred 21,078 24,961

On the basis of the requirements of section 10 (5a) of the German Banking Act (Kreditwesengesetz –“KWG“), an amount of € 659,304,000

is included as modified available capital for solvency purposes. Early repayment obligations are not provided for in all cases. There are no

provisions or plans for a conversion of such funds to capital, or into another form of debt.

Subordinated liabilities carry an average interest of 3.8%, and have original maturities of between 5 and 20 years.

Disclosures on subordinated liabilities amounting to 10.0% or more of the aggregate amount of subordinated liabilities:

(13) Profit-participation certificates

Amount Currency Coupon Maturity

€ mn %

100.0 EUR 1.63 7 Dec 2015

100.0 EUR 1.59 23 Nov 2016

90.0 EUR 1.58 23 Jan 2017

Issuer Year of issue Amount Coupon Repayment*

€ mn %

DG HYP 1993 51.1 7.00 1 Jun 2014

DG HYP 1999 5.1 6.79 1 Jun 2011

56.2

* The term of profit-participation certificates ends on 31 December of the preceding year.

An amount of € 51.1 million of the profit-participation certificates represents supplementary capital pursuant to section 10 (5) of the KWG.

The holders of profit-participation certificates receive an annual distribution in the amount of the respective coupon, which takes precedence

over the profit entitlements of shareholders.


Notes to the Financial Statements

(14) Statement of changes in equity

Balance Issue Dividends Net Transfers Other Balance

on of paid income/ to/from changes on

31 Dec 2009 shares loss retained 31 Dec 2010

earnings

€ 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s

Subscribed capital 90,000 – – – – – 90,000

Silent partnership contributions 653,918 – – – – –18,918 635,000

Capital reserves 589,113 – – – – – 589,113

Retained earnings (93,145) – – – – – (93,145)

– Legal reserves 945 – – – – – 945

– Other retained earnings 92,200 – – – – – 92,200

Equity 1,426,176 – – – – –18,918 1,407,258

The share capital amounts to € 90,000,000 and is divided into 3,500,000 notional no-par value shares (“unit shares”). DZ PB-Beteiligungsgesellschaft

mbH, Frankfurt/Main holds 3,321,500 shares (94.9%), of which 1,131,320 shares are held in trust on behalf of

DZ PB-Beteiligungsgesellschaft mbH. The remaining 178,500 shares (5.1%) are held by DZ BANK AG Deutsche Zentral-Genossenschaftsbank,

Frankfurt/Main.

The silent partnership contributions are partial profit transfer agreements within the meaning of section 292 (1) no. 2 of the AktG.

Of the silent partnership contributions, € 635.0 million are unlimited, and comply with the provisions of section 10 (4) of the KWG

on the balance sheet date.

(15) Contingent liabilities

This item mainly includes € 297.2 million in guarantees extended to DZ BANK for commercial real estate loans. The bank‘s

credit risk management is responsible for monitoring contingent liabilities.

(16) Other commitments

Irrevocable loan commitments of € 2,039.3 million relate primarily to mortgage loans.

(17) Obligations

The bank is a member of the deposit insurance scheme of the National Association of German Cooperative Banks [Bundesverband

der Deutschen Volksbanken und Raiffeisenbanken (BVR)]. This scheme consists of a guarantee fund and a guarantee

network. As a result of its membership in the guarantee network, DG HYP is required, if appropriate, to issue a letter of

indemnity in an amount of up to € 30,171,000.

(18) Revaluation reserves

No revaluation reserves pursuant to section 10 (2b) sentence 1 no. 6 of the KWG were included in liable capital.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

65


(19) Relationships with affiliated enterprises and subsidiaries

Affiliated enterprises

66 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

31 Dec 2010 31 Dec 2009

€ 000’s € 000’s

Loans and advances to

– banks 288,575 641,290

– customers 32,780 35,458

Debt securities and other

fixed-income securities – –

Liabilities to

– banks 13,176,302 9,590,460

– customers 852,155 920,284

Securitised liabilities 6,579,846 9,234,152

Subordinated liabilities 411,000 308,271

Subsidiaries

There were no loans and advances, or liabilities, to subsidiaries at the reporting date.

(20) Related-party transactions

There were no related-party transactions entered into at terms not in line with prevailing market terms, which would give

rise to a disclosure duty pursuant to section 285 no. 21 of the HGB.


Notes to the Financial Statements

(21) Breakdown of maturities for receivables and liabilities

31 Dec 2010 31 Dec 2009

€ 000’s € 000’s

Assets

Loans and advances to banks

Remaining term – payable on demand 196,962 417,519

– up to three months 1,047,984 1,128,411

– between three months and one year 109,952 98,043

– between one year and five years 1,151,840 1,230,520

– more than five years 271,605 356,271

2,778,343 3,230,764

Loans and advances to customers

Remaining term – payable on demand 155,901 365,894

– up to three months 1,094,848 1,277,314

– between three months and one year 2,355,201 1,968,002

– between one year and five years 12,207,749 12,171,646

– more than five years 19,993,040 21,259,671

35,806,739 37,042,527

Bonds and other fixed-income

securities maturing

in the following year 3,071,301 4,270,451

Liabilities

Liabilities to banks

Remaining term – payable on demand 295,574 228,552

– up to three months 5,480,969 5,242,717

– between three months and one year 1,361,946 1,627,924

– between one year and five years 4,727,563 2,902,319

– more than five years 3,994,217 2,454,216

15,860,269 12,455,728

Liabilities to customers

Remaining term – payable on demand 232,301 302,693

– up to three months 687,343 537,631

– between three months and one year 751,390 389,305

– between one year and five years 3,604,171 4,309,070

– more than five years 10,048,988 10,477,215

15,324,193 16,015,914

Certificated liabilities maturing

in the following year 6,130,434 11,149,051

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

67


(22) Assets and liabilities in foreign currencies

68 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

31 Dec 2010 31 Dec 2009

€ 000’s € 000’s

Assets include foreign-currency receivables

in the total amount of 5,454,064 5,118,022

Liabilities and equity include foreign-currency liabilities

in the total amount of 760,335 743,684

(23) Other assets

Other assets include loans and advances to fiscal entity subsidiaries in the amount of € 120 million.

(24) Other liabilities

This item consists mainly of € 24.1 million in profits to be transferred under partial profit transfer agreements, as well as

interest for subordinated liabilities in the amount of € 9.5 million.


Notes to the Financial Statements

(25) Forward contracts not reflected in the balance sheet

The following types of forward transactions based on foreign currencies, interest rates or other underlying instruments were

outstanding as at the balance sheet date:

Nominal amounts by Fair value

residual term Total 2010 2009

€ mn _< 1 year > 1–5 yrs > 5 yrs 2010 2009 positive negative positive negative

Interest rate instruments 20,407 51,130 57,845 129,382 139,641 4,187 5,366 3,841 5,089

OTC products

Interest rate swaps*) 20,393 51,118 57,845 129,356 139,491 4,187 5,364 3,823 5,089

including: Forward swaps – 30 350 380 566 17 7 11 28

including: With embedded

caps/floors – 70 51 121 121 3 17 3 15

including: With embedded

puts/calls – 95 398 493 533 32 7 20 10

Interest rate options 14 12 – 26 150 – 2 18 –

including: Swaptions bought 4 12 – 16 140 – – 18 –

including: Swaptions sold 10 – – 10 10 – 2 – –

Exchange-traded products – – – – – – – – –

Currency-related instruments 480 3,234 1,244 4,958 4,808 148 237 352 91

Cross-currency swaps 480 3,234 1,244 4,958 4,773 148 237 352 90

Foreign exchange forwards – – – – 35 – – – 1

Foreign exchange swaps – – – – – – – – –

Credit-related transactions – 269 966 1,235 1,705 22 4 22 4

Credit default swaps – 269 591 860 1,357 – 1 5 1

including: Protection seller – 24 50 74 161 – – – –

including: Protection buyer – 245 541 786 1,196 – 1 5 1

Total Return Swaps – – 375 375 348 22 3 17 3

including: Protection seller – – 375 375 348 22 3 17 3

including: Protection buyer – – – – – – – – –

Forward transactions exposed

to other price risks – – – – – – – – –

Total 20,887 54,633 60,055 135,575 146,154 4,357 5,607 4,215 5,184

including: Contracts used to hedge investment securities

within the framework of overall bank management.**) – 1,067 10 957

*) Including interest rate swaps with identical foreign currency

**) The negative market value of € 1,067 million is included in the write-downs which were not recognised in accordance with section 253 (3) sentence 4 of

the HGB (as mentioned in Note (5)).

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

69


70 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

The breakdown of the carrying amounts of forward contracts not reflected on the balance sheet by balance sheet items pursuant to

section 285 no. 19 of the HGB is as follows:

Carrying Carrying Balance sheet item Carrying Carrying Balance sheet item

amount amount amount amount

2010 2009 Assets 2010 2009 Liabilities and equity

€ mn € mn € mn € mn

Interest rate swaps 329 360 Loans and advances to banks, 353 368 Liabilities to banks,

loans and advances to customers, Liabilities to customers,

prepaid expenses deferred income

Interest rate options – 2 Other assets – – Other liabilities

Cross-currency swaps 44 321 Loans and advances to banks 116 13 Liabilities to banks,

deferred income

Foreign exchange – – Other assets – 2 Other liabilities

forwards

Credit default swaps – 1 Other assets, prepaid expenses 1 1 Other liabilities

Total return swaps 25 26 Loans and advances to banks,

prepaid expenses

The forward transactions identified above are used to manage interest rate, currency and counterparty risk exposure. As a rule, counterparties

are OECD banks, OECD financial services institutions or OECD central governments. In addition, borrowers also appear as counterparties

(market value € 17.4 million) in connection with loan agreements. Interest rate swaps are valued using present values, determined

by discounting cash flows using market interest rates in line with the credit risk and maturities concerned, as indicated by the yield

curve prevailing on the balance sheet date.

Options are valued using option pricing models. These are applied on the basis of generally recognised assumptions regarding valuation

parameters; in particular, the value and volatility of the underlying instrument, the agreed exercise price (interest rate), the remaining lifetime

of the contract, as well as the risk-free interest rate for that lifetime.

Credit derivatives are valued on an individual basis, predominantly on the basis of the default probability of the reference obligations concerned.

Market values are determined without consideration of netting agreements. No add-ons or credit quality weightings – as defined pursuant

to methodology of the German Solvency Ordinance (Solvabilitätsverordnung) – are taken into account. Negative market values of derivatives

are offset by positive market values of the related hedged balance sheet items at overall bank level.


Notes to the Financial Statements

Notes to the profit and loss account

(26) Breakdown of income by geographic markets within the meaning of section 34 (2) no. 1 of the RechKredV

The breakdown of interest income, current income from equities and other non-fixed income securities, commission income

and other operating income is as follows:

% 2010 2009

Germany 64.5 65.4

International 35.5 34.6

(27) Other operating income

Other operating income totalling € 15.4 million is mostly due to gains from currency translation totalling € 5.6 million pursuant

to section 340h in conjunction with section 256a of the HGB, as well as rental income of € 4.0 million. This item also

includes service income and the reversal of provisions amounting to € 1.4 million each.

(28) Other operating expenses

Other operating expenses totalling € 11.6 million include expenses of € 6.0 million for the discounting of provisions for pensions

and similar obligations, and expenses for buildings not directly used for bank business of € 2.9 million. In addition, the

item includes € 1.4 million in expenses from currency translation as well as purchases of goods of € 0.8 million.

(29) Extraordinary income

Portfolios that are not part of the strategic business, the impact of which was intensified as a result of the crisis on the international

capital markets, have weighed on DG HYP’s earnings in the year under review. In order to compensate for these

effects, and to support the future business model of DG HYP, DZ BANK made a contribution to income of € 119.0 million,

which was derived from the existing profit and loss transfer agreement and was recognised as extraordinary income in fiscal

year 2010.

(30) Extraordinary expenses

Extraordinary expenses largely comprise the deferred expenses for the closure of foreign representative offices of

€ 4.1 million.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

71


Coverage

(31) Coverage by balance sheet item

72 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

Mortgage Mortgage Public Public

Pfandbriefe Pfandbriefe Pfandbriefe Pfandbriefe

31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009

€ mn € mn € mn € mn

Ordinary cover 15,504 15,431 26,026 29,881

Loans and advances to customers 15,504 15,431 13,701 14,952

Loans secured by property mortgages to customers 15,504 15,431 1,287 *) 1,377 *)

Loans to local authorities, to customers – – 12,414 13,575

Loans and advances to banks – – 1,327 1,492

Loans secured by property mortgages to banks – – – –

Loans to local authorities, to banks – – 1,327 1,492

Own bonds issued – – 10,998 13,437

Extended cover 1,564 2,959 3,121 3,587

Loans and advances to banks – – 2,066 2,532

Monetary claims – – 2,066 2,532

Own bonds issued 1,564 2,959 1,055 1,055

Bank buildings in cover 85 – – –

Total 17,153 18,390 29,147 33,468

*) under a municipal guarantee

(32) Details pursuant to section 28 of the German Pfandbrief Act

Outstanding Pfandbriefe and related cover assets

Nominal amount Present value Risk-adjusted present value*)

a) Total amount 31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009

of outstanding € mn € mn € mn € mn € mn € mn

Mortgage Pfandbriefe 14,403 14,080 14,910 14,759 14,560 14,419

Cover assets pool 17,153 18,390 18,521 19,745 17,715 18,888

of which: Derivatives – – – – – –

Excess cover 2,750 4,310 3,611 4,986 3,155 4,469

Excess cover in % 19.1 30.6 24.2 33.8 21.7 31.0

*) When calculating stress scenarios, the static method is used for currencies and the dynamic method for interest rates.

ad a) Maturity structure Mortgage Pfandbriefe Cover assets pool

31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009

€ mn € mn € mn € mn

up to 1 year 2,748 3,460 2,657 4,174

> 1 year – 5 years 8,573 7,203 9,754 8,747

of which > 1 year – 2 years 1,400 2,743 2,441 1,632

> 2 years – 3 years 3,221 1,496 2,854 1,972

> 3 years – 4 years 2,115 1,902 2,463 2,756

> 4 years – 5 years 1,837 1,062 1,996 2,387

> 5 years – 10 years 2,838 3,346 4,126 4,611

> 10 years 244 71 616 858

Total 14,403 14,080 17,153 18,390


Notes to the Financial Statements

Nominal amount Present value Risk-adjusted present value*)

b) Total amount 31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009

of outstanding € mn € mn € mn € mn € mn € mn

Public Pfandbriefe 26,431 31,073 28,555 32,972 26,866 31,104

Cover assets pool 29,147 33,468 31,580 35,783 29,711 33,769

of which: Derivatives – – – – – –

Excess cover 2,716 2,395 3,025 2,811 2,845 2,665

Excess cover % 10.3 7.7 10.6 8.5 10.6 8.6

*) When calculating stress scenarios, the static method is used for currencies and the dynamic method for interest rates.

ad b) Maturity structure Public Pfandbriefe Cover assets pool

31 Dec 2010 31 Dec 2009 31 Dec 2010 31 Dec 2009

€ mn € mn € mn € mn

up to 1 year 2,129 4,685 3,187 3,120

> 1 year – 5 years 10,971 11,062 13,749 17,080

of which > 1 year – 2 years 3,124 2,099 3,115 3,908

> 2 years – 3 years 2,939 3,129 3,570 4,115

> 3 years – 4 years 2,905 2,939 5,195 3,905

> 4 years – 5 years 2,003 2,895 1,869 5,152

> 5 years – 10 years 8,263 9,350 5,767 6,538

> 10 years 5,068 5,976 6,444 6,730

Total 26,431 31,073 29,147 33,468

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

73


Assets included in cover for Mortgage Pfandbriefe, by loan amount

74 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

Mortgages serving as cover

31 Dec 2010 31 Dec 2009

€ mn € mn

up to € 300,000 8,064 9,579

> € 300,000 to € 5 million 2,140 2,091

> € 5 million 5,385 6,720

Total 15,589 18,390

In contrast to the previous year, the disclosures do not take into account extended cover.


Notes to the Financial Statements

Assets included in cover for Mortgage Pfandbriefe,

by country where real property collateral is located, and by type of property

€ mn

Commercial

properties

Residential properties

Single-family homes

Multi-family homes

Office buildings

Commercial buildings

Industrial buildings

Other commercial

properties

Unfinished new buildings

not yet yielding

returns (commercial

properties)

Unfinished new buildings

not yet yielding

returns (housing

properties)

Bank-owned property

Securities

Total

Fiscal Year

Belgium

Federal Republic of Germany

Denmark

Finland

France

United Kingdom and

Channel Islands

Italy

Canada

Luxembourg

2010 – 2 – – – – – – – – – – – – – – – – 2

2009 – 3 – – – – – – – – – – – – – – – – 3

2010 – 1,373 – – 1 – – – – – – – – – – – – – 1,374

2009 – 1,625 – – 1 – – – – – – – – – – – – – 1,626

2010 – 4,851 – – 10 – – – – 1 – – – – – – – – 4,862

2009 – 5,740 – – 12 – – – – 1 – – – – – – – – 5,753

2010 – 2,136 – – – – – – – – – – – – – – – 35 2,171

2009 – 2,412 – – – – – – – – – – – – – – – 31 2,443

2010 – 1,838 – 10 385 386 – – 48 132 9 12 – – 70 – – 524 3,414

2009 – 1,465 – – 322 444 – – – 62 – 12 – – 41 – – 398 2,744

2010 – 1,280 – – 61 175 – – 10 46 – – – – 150 – – 12 1,734

2009 – 966 – – 41 – – – 10 31 – 77 – – 32 – – 11 1,168

2010 – 87 – – – – – – – – – – – – – – – – 87

2009 – 81 – – – – – – – – – – – – – – – – 81

2010 – 1,602 – – 52 26 – – – 13 – – 10 – 43 – – 4 1,750

2009 – 1,493 – – 36 – – – – – – – – – – – – 4 1,533

2010 – 105 – – – – – – – – – – – – – – – – 105

2009 – 64 – – – – – – – – – – – – – – – – 64

2010 – 6 – – – – – – – – – – – – – – – – 6

2009 – 16 – – – – – – – – – – – – – – – – 16

2010 – 85 – – – – – – – – – – – – – – – – 85

2009 – – – – – – – – – – – – – – – – – – –

2010 40 1,323 – – – – – – – – – – – 80 – 5 115 – 1,563

2009 – 1,819 10 – 33 – 233 110 – – – – – 125 – – 629 – 2,959

2010 40 14,688 – 10 509 587 – – 58 192 9 12 10 80 263 5 115 575 17,153

2009 – 15,684 10 – 445 444 233 110 10 94 – 89 – 125 73 – 629 444 18,390

Netherlands

Norway incl. Svalbard

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Austria

Poland

Portugal

Sweden

Slovenia

Spain

USA

Total

75


Aggregate payments in arrears by at least 90 days

on cover assets for Mortgage Pfandbriefe

76 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

31 Dec 2010 31 Dec 2009

€ mn € mn

Germany 31.80 42.20

France 0.15 0.11

UK – 0.01

Total 31.95 42.32

Assets included in cover for Mortgage Pfandbriefe

Forced sales/forced administration

No. 3a

Commercial properties Housing properties

2010 2009 2010 2009

Number Number Number Number

Forced sales pending 95 134 886 894

Forced administrations pending 43 67 346 384

of which: Included in forced sales pending 35 61 322 367

Forced sales executed 126 78 652 743

No. 3b

Number Number Number Number

Purchases of properties to prevent losses

(foreclosed assets) – – – –

of which: Still part of cover assets – – – –

No. 3c

€ mn € mn € mn € mn

Total arrears 12.0 11.9 42.4 62.8

of which: on interest due 2.1 2.4 4.1 7.1


Notes to the Financial Statements

Assets included in cover for Public Pfandbriefe,

by country of domicile of the borrower and, in the case of full guarantee, of the guarantor

Regional Local

Sovereign public-sector public-sector

€ mn borrowers entities entities Other Total

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Belgium 30 70 91 93 – – – – 121 163

Federal Republic of Germany 22 2 5,550 6,434 8,798 9,499 3,980 5,196 18,350 21,131

Denmark – – – – – – 40 60 40 60

France – – 100 100 – – 276 580 376 680

Greece 450 880 – – – – – – 450 880

United Kingdom and

Channel Islands 75 – – – – – 239 229 314 229

Ireland 50 50 – – – – – – 50 50

Italy 843 844 538 516 230 230 201 263 1,812 1,853

Canada – – 486 394 – – – – 486 394

Luxembourg – – – – – – 180 180 180 180

Netherlands – – – – – – 230 230 230 230

Norway incl. Svalbard – – – – – – 20 20 20 20

Austria 370 370 155 7 – – 465 622 990 999

Poland 100 100 – – – – – – 100 100

Portugal 745 825 75 75 – – – – 820 900

Switzerland – – 229 192 – – 210 200 439 392

Slovakia 35 35 – – – – – – 35 35

Slovenia 70 70 – – – – – – 70 70

Spain – – 2,963 3,586 97 97 1,020 1,200 4,080 4,883

Czech Republic 50 50 – – – – – – 50 50

USA – – 121 112 6 5 – 45 127 162

Cyprus 7 7 – – – – – – 7 7

Total 2,847 3,303 10,308 11,509 9,131 9,831 6,861 8,825 29,147 33,468

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

77


Aggregate payments in arrears by at least 90 days

on cover assets for Public Pfandbriefe

Germany

78 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

31 Dec 2010 31 Dec 2009

€ mn € mn

Sovereign states – –

Regional public-sector entities – –

Local public-sector entities – –

Other 2.96 9.27

Total 2.96 9.27


Notes to the Financial Statements

Other information on the annual financial statements

(33) Audit and consulting fees within the meaning of Section 285 no. 17 of the HGB

Auditors’ fees are recognised in the consolidated financial statements of DZ BANK AG Deutsche Zentral-Genossenschaftsbank,

Frankfurt/Main.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

79


(34) Executive bodies of DG HYP

Supervisory Board

Hans-Theo Macke

Member of the Management Board,

DZ BANK AG Deutsche

Zentral-Genossenschaftsbank,

Frankfurt/Main

– Chairman –

Dagmar Mines

Bank employee,

Deutsche Genossenschafts-

Hypothekenbank AG

– Deputy Chairwoman –

Peter Bade

Member of the Management Board,

Volksbank Lüneburger Heide eG

– Deputy Chairman –

Maik Brammer

Bank employee,

Deutsche Genossenschafts-

Hypothekenbank AG

(until 5 Mar 2010)

Hans-Jürgen Buhlert

Bank employee,

Deutsche Genossenschafts-

Hypothekenbank AG

(until 5 Mar 2010)

Carl-Christian Ehlers

Chairman of the Management Board,

Kieler Volksbank eG

Ralph Gruber

Bank employee,

Deutsche Genossenschafts-

Hypothekenbank AG

Management Board

Dr Georg Reutter

– Spokesman –

Jürgen Handke

Chairman of the Management Board,

VR Bank Hof eG

Peter Heinrich

Chairman of the Management Board,

Münchner Bank eG

Olaf Johnert

Bank employee,

Deutsche Genossenschafts-

Hypothekenbank AG

(since 5 Mar 2010)

Rainer Kattinger

Spokesman of the

Management Board,

Volksbank Stuttgart eG

Dr Reinhard Kutscher

Chairman of the Management Board,

Union Investment

Real Estate GmbH

Ulrike Marcusson

Bank employee,

Deutsche Genossenschafts-

Hypothekenbank AG

(since 5 Mar 2010)

Thomas Müller

Spokesman of the

Management Board,

Dresdner Volksbank

Raiffeisenbank eG

Manfred Nüssel

President,

Deutscher Raiffeisenverband e.V.

Manfred Salber

80 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

Herbert Schindler

Director,

Baden-Württembergischer

Genossenschaftsverband e.V.

Martin Schmitt

Chairman of the Management Board,

Kasseler Bank eG

Oliver Schwier

Employee,

IMMOFORI AG

(until 5 Mar 2010)

Diedrich Taaken

Spokesman of the

Management Board,

Volksbank Esens eG

(until 5 Mar 2010)

Thorsten Wenck

Bank employee,

Deutsche Genossenschafts-

Hypothekenbank AG

Frank Westhoff

Member of the Management Board,

DZ BANK AG Deutsche

Zentral-Genossenschaftsbank,

Frankfurt/Main

Gerd Wittkop

Bank employee,

Deutsche Genossenschafts-

Hypothekenbank AG


Notes to the Financial Statements

(35) Remuneration of the executive bodies

(36) Loans to members of executive bodies

2010 2009

€ 000’s € 000’s

Supervisory Board 274 268

Management Board 1,065 1,665

Former members of the Management Board

or their surviving dependants 1,954 1,821

Provisions for current pensions

and pension commitments for former members

of the Management Board

or their surviving dependants 25,642 26,326

31 Dec 2010 31 Dec 2009

€ 000’s € 000’s

Management Board – –

Supervisory Board 816 796

Advisory Council 1,447 1,453

(37) Offices held by members of the Management Board or members of staff in supervisory bodies of large limited

companies

As at 31 December 2010, the members of the Management Board or members of staff held no offices in supervisory bodies

of large limited companies.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

81


(38) Average number of employees

82 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Notes to the Financial Statements

2010 2009

Male Female Total Male Female Total

Total number of employees 262 192 454 262 197 459

of which: Full-time employees 256 150 406 255 156 411

Part-time employees

Number 6 42 48 7 41 48

weighted (3) (23) (26) (4) (22) (26)

Vocational trainees

(not included in total) – – – – 1 1

(39) Information about the parent company pursuant to section 285 no. 14 of the HGB

DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt/Main, prepares consolidated financial statements

which incorporate the financial statements of DG HYP. The consolidated financial statements of DZ BANK are

pub lished in the electronic German Federal Gazette (elektronischer Bundesanzeiger).

Hamburg, 10 February 2011

Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft

Dr Georg Reutter Dr Carsten Meyer-Raven Manfred Salber


RESPONSIBILITY STATEMENT

To the best of our knowledge, and in accordance with the

applicable reporting principles, the annual financial statements

give a true and fair view of the assets, liabilities,

financial position and profit or loss of the company, and the

management report of the company includes a fair review

Hamburg, 10 February 2011

Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft

Dr Georg Reutter Dr Carsten Meyer-Raven Manfred Salber

of the development and performance of the business and

the position of the company, together with a description of

the principal opportunities and risks associated with the

expected development of the company.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

83


The following is an English translation of the Audit Opinion, which has been prepared on the basis of the German language version of

the Financial Statements and the Management Report. The translation of the Financial Statements, the Management Report, and the

Audit Opinion are provided for convenience; the respective German versions shall be exclusively valid for all purposes.

AUDIT OPINION

We have issued the following opinion on the financial

statements and management report:

“We have audited the annual financial statements, comprising

the balance sheet, the income statement and the

notes to the financial statements, together with the bookkeeping

system, and the management report of Deutsche

Genossenschafts-Hypothekenbank AG, Hamburg, for the

fiscal year from 1 January, 2010 to 31 December, 2010. The

maintenance of the books and records and the preparation

of the annual financial statements and management report

in accordance with German commercial law are the responsibility

of the Company’s management. Our responsibility is

to express an opinion on the annual financial statements,

together with the bookkeeping system, and the management

report based on our audit.

We conducted our audit of the annual financial statements

in accordance with Sec. 317 HGB (“Handelsgesetzbuch”:

“German Commercial Code”) and German generally

accepted standards for the audit of financial statements

promulgated by the Institut der Wirtschaftsprüfer (Institute

of Public Auditors in Germany) (IDW). Those standards

require that we plan and perform the audit such that misstatements

materially affecting the presentation of the net

assets, financial position and results of operations in the

annual financial statements in accordance with (German)

Hamburg, 17 February 2011

Ernst & Young GmbH

Wirtschaftsprüfungsgesellschaft

Lösken Bühring

Wirtschaftsprüfer Wirtschaftsprüfer

(German Public Auditor) (German Public Auditor)

84 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

principles of proper accounting and in the management

report are detected with reasonable assurance. Knowledge

of the business activities and the economic and legal environment

of the Company and expectations as to possible

misstatements are taken into account in the determination

of audit procedures. The effectiveness of the accountingrelated

internal control system and the evidence supporting

the disclosures in the books and records, the annual financial

statements and the management report are examined

primarily on a test basis within the framework of the audit.

The audit includes assessing the accounting principles used

and significant estimates made by management, as well as

evaluating the overall presentation of the annual financial

statements and management report. We believe that our

audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the

annual financial statements comply with the legal requirements

and give a true and fair view of the net assets, financial

position and results of operations of the Company in

accordance with (German) principles of proper accounting.

The management report is consistent with the annual

financial statements and as a whole provides a suitable

view of the Company’s position and suitably presents the

opportunities and risks of future development.”


REPORT OF THE SUPERVISORY BOARD

Hans-Theo Macke

Chairman of the Supervisory Board

In the 2010 fiscal year, the Supervisory Board and its committees monitored

the Management Board’s management of the bank according to statutory

regulations and those set out in the bank’s Articles of Association, and also took

decisions on those transactions required to be presented to the Supervisory

Board. In fulfilling its tasks, and in accordance with statutory requirements, the

Supervisory Board formed a Human Resources Committee, an Audit Committee

and a Risk and Participations Committee.

By virtue of a resolution passed by the Annual General Meeting of DG HYP on

29 October 2009 – which amended the Memorandum and Articles of Association

– the Supervisory Board has comprised 18 members since its new election

on 5 March 2010. In connection with this reduction and the re-elections,

Messrs Maik Brammer, Hans-Jürgen Buhlert, Oliver Schwier and Diedrich Taaken

retired from the Supervisory Board on 5 March 2010. On 17 February 2010,

and with effect from 5 March 2010, the bank‘s employees elected Ms Ulrike

Marcusson and Mr Olaf Johnert as new members of the Supervisory Board. In

its constituting meeting on 5 March 2010, the Supervisory Board elected

Mr Hans-Theo Macke as its Chairman, and Ms Dagmar Mines and Mr Peter

Bade as Deputy Chairmen of the Supervisory Board.

The Management Board reported to the Supervisory Board on the bank’s situation

and business development, on general business and risk exposure regularly,

in good time and comprehensively, both in writing and in verbal reports. The Management

Board also reported regularly to the Supervisory Board on ongoing business, the development of

the bank‘s risk situation (including the MBS exposure, and risks from bank and sovereign issues,

and the impact of such securities on the bank), on material credit exposures, and on the bank‘s

future business as well as the implementation of its strategic and organisational orientation. In the

context of the bank‘s risk situation, developments of its typical risk exposures were discussed in

detail. Furthermore, the Supervisory Board concerned itself with the bank‘s development and planning

regarding its capitalisation, also against the background of Basel III.

The Supervisory Board discussed these issues with the Management Board; it advised the Management

Board and supervised the management of the Company. The Supervisory Board was involved

in all decisions that were of fundamental importance to the enterprise.

During its meeting on 17 November 2010, the Supervisory Board discussed the Management

Board’s proposal regarding the further focusing of the bank‘s business. Specifically, the Management

Board proposed that DG HYP cease to originate new purely international business with effect

from 1 January 2011, but continue to assist selected institutional clients in their international business,

from Germany. The proposal also called for the closure and wind-down of DG HYP’s representative

offices abroad. The Supervisory Board of DG HYP approved the proposal submitted by the

Management Board.

During the year under review, the Supervisory Board held three scheduled meetings, plus one constituting

meeting. During the scheduled meetings, the chairmen of the Supervisory Board committees

regularly informed the plenary meeting of the Supervisory Board about the work of the committees,

which met on several occasions during 2010.

Between meetings of the Supervisory Board, the Management Board informed it in writing of key

events and transactions. In cases of urgency, the Supervisory Board approved key transactions outside

of its meetings by passing written resolutions.

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

85


In regular discussions with the Management Board outside Supervisory Board meetings, the Chairman

of the Supervisory Board and the Chairmen of the Audit Committee and the Risk and Participations

Committee also discussed key decisions, particular transactions, the bank’s business development,

and – in particular – its future strategic positioning.

All members of the Supervisory Board took part in the meetings and written resolutions of the

Supervisory Board during the 2010 fiscal year, with very few exceptions.

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Hamburg, presented a declaration of independence

to the Supervisory Board and audited the annual financial statements as at 31 December

2010, including the accounting and management report of DG HYP for the fiscal year from 1 January

2010 to 31 December 2010 presented to it by the Management Board, and found these to be

in line with statutory requirements. It issued an unqualified audit opinion. The audit report was submitted

to the members of the Supervisory Board, and was discussed in detail. The Supervisory Board

agreed to the results of the audit by the auditors.

The Supervisory Board, and the Audit Committee formed from amongst its number, reviewed in

detail the annual financial statements of DG HYP and the management report of DG HYP in their

meetings. The auditor’s representatives participated in the Supervisory Board Meeting to adopt the

annual financial statements according to section 171 (1) sentence 2 of the AktG, and in the

preparatory meetings of the Audit Committee and the Risk and Participations Committee, and

reported on the key audit findings. They were available to answer questions by Supervisory Board

members. The Supervisory Board raised no objections against the accounts.

The Supervisory Board approved the financial statements of DG HYP as at 31 December 2010, prepared

by the Management Board, in its meeting on 4 March 2011. The financial statements are

thus confirmed.

Dr Carsten Meyer-Raven was appointed to the bank’s Management Board as an ordinary member,

effective 1 January 2011.

The Supervisory Board would like to thank the Management Board and all of the company’s

employees for their work during 2010, which was shaped by the consequences of the financial crisis.

Hamburg, 4 March 2011

Deutsche Genossenschafts-Hypothekenbank

Aktiengesellschaft

The Supervisory Board

Hans-Theo Macke

Chairman of the Supervisory Board

86 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010


Corporate Bodies And Committees; Executives

CORPORATE BODIES AND COMMITTEES; EXECUTIVES

Supervisory Board

Frank Westhoff

Member of the Management Board,

DZ BANK AG Deutsche

Zentral-Genossenschaftsbank,

Frankfurt/Main

– Chairman –

(since 4 Mar 2011)

Dagmar Mines

Deutsche Genossenschafts-

Hypothekenbank AG,

Hamburg

– Deputy Chairwoman –

Peter Bade

Member of the Management Board,

Volksbank Lüneburger Heide eG,

Soltau

– Deputy Chairman –

Carl-Christian Ehlers

Chairman of the Management Board,

Kieler Volksbank eG,

Kiel

Ralph Gruber

Deutsche Genossenschafts-

Hypothekenbank AG,

Hamburg

Jürgen Handke

Chairman of the Management Board,

VR Bank Hof eG,

Hof

Updated: 7 March 2011

Peter Heinrich

Chairman of the Management Board,

Münchner Bank eG,

Munich

Olaf Johnert

Deutsche Genossenschafts-

Hypothekenbank AG,

Hamburg

Rainer Kattinger

Spokesman of the

Management Board,

Volksbank Stuttgart eG,

Stuttgart

Dr Reinhard Kutscher

Chairman of the Management Board,

Union Investment

Real Estate GmbH,

Hamburg

Ulrike Marcusson

Deutsche Genossenschafts-

Hypothekenbank AG,

Hamburg

Thomas Müller

Spokesman of the

Management Board,

Dresdner Volksbank

Raiffeisenbank eG,

Dresden

Manfred Nüssel

President,

Deutscher Raiffeisenverband e.V.,

Berlin

Herbert Schindler

Director,

Baden-Württembergischer

Genossenschaftsverband e.V.,

Stuttgart

Martin Schmitt

Chairman of the Management Board,

Kasseler Bank eG,

Kassel

Thomas Ullrich

Member of the Management Board,

DZ BANK AG Deutsche

Zentral-Genossenschaftsbank,

Frankfurt/Main

(since 4 Mar 2011)

Thorsten Wenck

Deutsche Genossenschafts-

Hypothekenbank AG,

Hamburg

Gerd Wittkop

Deutsche Genossenschafts-

Hypothekenbank AG,

Hamburg

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

87


Management Board, Department Heads

Management Board

(and distribution of responsibilities)

Dr Georg Reutter

Spokesman

– Real Estate Financing 1

– Real Estate Financing 2

– Treasury

– Management Board Office /

Legal / Communication /

Investor Relations

– Human Resources

Department Heads

Heike Bausch

Human Resources

Steffen Günther

Real Estate Financing 2

Thomas Mirow

Restructuring / Recovery

Peter Vögelein

Internal Audit

Updated: 7 March 2011

Dr Carsten Meyer-Raven Manfred Salber

– Finance

– Organisation and IT

Patrick Ernst

Treasury

Jörg Hermes

Finance

Peter Ringbeck

Organisation and IT

Eckhard Wulff

Management Board Office / Legal /

Communication / Investor Relations

88 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Corporate Bodies And Committees; Executives

– Internal Audit

– Credit Risk Management

– Restructuring / Recovery

– Securities and Loan Processing

Norbert Grahl

Credit Risk Management

Axel Jordan

Real Estate Financing 1

Siegfried Schneider

Securities and Loan Processing


Corporate Bodies And Committees; Executives

Trustees, Advisory Council

Trustees

Dr Michael Labe

Judge at the Hamburg Higher

Regional Court (Hanseatisches

Oberlandesgericht Hamburg),

Hamburg

Advisory Council

Horst Weyand

Chairman of the Management Board,

Volksbank Rhein-Nahe-Hunsrück eG,

Bad Kreuznach

– Chairman –

Wolfgang Eckert

Chairman of the Management Board,

VR-Bank eG,

Regen

– Deputy Chairman –

Andreas Mertke

Member of the Management Board,

Berliner Volksbank eG,

Berlin

– Deputy Chairman –

Brigitte Baur

Deputy Chairwoman of the

Management Board,

Volksbank Raiffeisenbank

Nürnberg eG,

Nuremberg

Dr Michael Brandt

Member of the Management Board,

Volksbank Lübeck eG,

Lübeck

Updated: 7 March 2011

Florian Degenhardt

Deputy Trustee

Solicitor,

Hamburg

Willi Braun

Member of the Management Board,

Aachener Bank eG,

Aachen

Bernhard Carl

Deputy Chairman of the

Management Board,

Volksbank Kurpfalz H+G Bank eG,

Heidelberg

Rolf Domikowsky

Spokesman of the

Management Board,

Volksbank Münster eG,

Münster

Walter Geser

Member of the Management Board,

VR Bank Rosenheim-Chiemsee eG,

Rosenheim

Klaus Geurden

Chairman of the Management Board,

Volksbank Krefeld eG,

Krefeld

Volker Thilo

Deputy Trustee

German Public Auditor,

Hamburg

Dietmar Herderich

Spokesman of the

Management Board,

Raiffeisenbank Mutlangen eG,

Mutlangen

Andreas Hof

Chairman of the Management Board,

VR Bank Main-Kinzig-Büdingen eG,

Büdingen

Michael Joop

Member of the Management Board,

Volksbank Hameln-Stadthagen eG,

Stadthagen

Klaus-Werner Kroll

Member of the Management Board,

Volksbank Rhein-Wehra eG,

Bad Säckingen

Andreas Mann

Member of the Management Board,

Volksbank Regensburg eG,

Regensburg

Hubert Meier

Member of the Management Board,

Volksbank Karlsruhe eG,

Karlsruhe

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

89


Advisory Council

Astrid Piela

Member of the Management Board,

Volksbank Ulm-Bieberach eG,

Ulm

Jürgen Pütz

Spokesman of the Management

Board,

Volksbank Bonn Rhein-Sieg eG,

Bonn

Wilhelm Rippen

Member of the Management Board,

Raiffeisenbank Wesermarsch-Süd eG,

Brake

Updated: 7 March 2011

Matthias Schröder

Member of the Management Board,

Hamburger Volksbank eG,

Hamburg

Rainer Staffa

Member of the Management Board,

Volksbank Mittelhessen eG,

Gießen

90 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

Corporate Bodies And Committees; Executives

Gerd Streuber

Member of the Management Board,

Volksbank Hildesheimer Börde eG,

Söhlde-Hoheneggelsen

Günther Wainowski

Member of the Management Board,

Vereinigte Volksbank AG,

Sindelfingen


DG HYP ADDRESSES

Deutsche Genossenschafts-Hypothekenbank AG

20095 Hamburg

Rosenstrasse 2

PO Box 10 14 46

20009 Hamburg, Germany

Telephone +49 40 33 34-0

Fax +49 40 33 34-11 11

Internet: www.dghyp.de

Real Estate Centres for Commercial Investors

DG HYP

Real Estate Centre Berlin

Pariser Platz 3

10117 Berlin, Germany

Telephone +49 30 3 19 93-51 01

Fax +49 30 3 19 93-50 36

DG HYP

Real Estate Centre Hamburg

Rosenstrasse 2

20095 Hamburg, Germany

Telephone +49 40 33 34-37 78

Fax +49 40 33 34-11 02

Institutional Investors

Hamburg

Rosenstrasse 2

20095 Hamburg, Germany

Telephone +49 40 33 34-21 59

Fax +49 40 33 34-12 60

Updated: 7 March 2011

DG HYP

Real Estate Centre Dusseldorf

Ludwig-Erhard-Allee 9

40227 Dusseldorf, Germany

Telephone +49 211 22 04 99-10

Fax +49 211 22 04 99-40

DG HYP

Real Estate Centre Munich

Türkenstrasse 16

80333 Munich, Germany

Telephone +49 89 51 26 76-0

Fax +49 89 51 26 76-30

DG HYP

Real Estate Centre Frankfurt

CITY-HAUS 1, Platz der Republik 6

60325 Frankfurt/Main, Germany

Telephone +49 69 75 06 76-21

Fax +49 69 75 06 76-99

DG HYP

Real Estate Centre Stuttgart

Heilbronner Strasse 41

70191 Stuttgart, Germany

Telephone +49 711 12 09 38-0

Fax +49 711 12 09 38-30

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2010

91


Production

This Annual Report is climate-neutral and printed on PEFC-certified

paper. The greenhouse gas emissions caused by the production

and distribution of this publication have been offset by investments

in an additional climate protection project.

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