EXIM AJ FIN 07 · origin in the consignment • investing the bank’s own funds in securities • founding legal persons and acquiring capital interests in other legal persons, subject

A N N U A L R E P O R T

2 0 0 7 E X I M B A N K A S R

TABLE OF CONTENTS

1 Foreword by CEO

2 Profi le of EXIMBANKA SR 6

3 Governing Bodies of EXIMBANKA SR 7

4 Mission, Vision and Shared Values 8

5 Development of Macroeconomic Environment 9

6 Selected Substantive and Financial Indicators 10

7 Humanely Activities and Communication with the Public 15

8 International Cooperation 16

9 Environmental Considerations in Operations of EXIMBANKA SR 17

10 Business Performance in 2007 – Banking Activities 18

11 Business Performance in 2007 – Insurance Activities 22

12 Codes of Ethics 29

13 Human Resources Policy 30

14 Organisational Structure of EXIMBANKA SR 31

15 Objective for further Development of EXIMBANKA SR 32

Financial Statements as of 31 December 2007 prepared in accordance

with International Financial Reporting Standards, as adopted by the European Union 33

FOREWORD BY CEO

ANNUAL REPORT 2007 EXIMBANKA SR

Dear clients and business partners,

It’s my pleasure to have this opportunity to summarize the

performance of EXIMBANKA SR for the year 2007.

In 2007, the Slovak Republic again achieved favourable results

in terms of its economic growth. One extremely positive fact

was that the total growth of gross economic product of

10.4% was largely contributed to by the growth of exports.

Exports rose 15%, thus reconfi rming the fact that the Slovak

economy is to a great extent an open market, which further

extends the room for development of EXIMBANKA SR’s

operations.

The overall growth of exports in 2007 was also contributed to

by the insurance and lending operations of EXIMBANKA SR,

and the share of exports supported in Slovakia’s total exports

accounted for 6 %. The value of exports supported totalled

SKK 85.5 billion, a moderate increase in the support for

exports on 2006. The overall volume of credits grew by 7.1%

compared with the previous year. Another pleasing fact is the

overall growth of fi nancing through direct loans, primarily

for small and medium-sized businesses, which increased

on a year-to-year basis by almost 35 %. Again in 2007, a

signifi cant part of the lending portfolio took the form of

loans granted via commercial banks. Direct fi nancing of

export support in foreign currencies relied on external credit

facilities to a larger extent than in 2006. Despite the fact that

the planned gross written premium revenues from insurance

activities were not achieved, the total amount of exports

supported by insurance activities rose 4.7% compared to

2006. As regards the territorial structure, support for exports

to markets of the European Union and OECD countries

continued to predominate, accounting for over 91 % of the

total.

After-tax profi ts totalled SKK 74.3 million, yielding an

increase of SKK 13.2 million against the 2006 fi gure. From

the perspective of EXIMBANKA SR’s business policy, and with

regard to projections for upcoming years, one positive fact is

1

FOREWORD BY CEO

that the increased generation of profi t, as compared to 2006,

was to a larger extent contributed to by interest received

on direct fi nancing, while the amount of refi nancing via

commercial banks was retained.

In 2007, EXIMBANKA SR actively continued its cooperation

with international institutions associating export insurance

and credit agencies. Representatives of EXIMBANKA SR, in

conjunction with the Ministry of Finance and the Ministry

of Economy of the Slovak Republic, represented Slovakia’s

interests in the Working Group on Export Credits in Brussels,

as well as the OECD Working Party on Export Credits and

Credit Guarantees in Paris. In 2007, EXIMBANKA SR also

intensively cooperated with organisations within the Berne

Union, primarily in the area of export credit insurance.

Another signifi cant initiative of EXIMBANKA SR during the

last year was the development of a medium-term strategy

for the territorial and commodity structure of export support.

This document, prepared by the new management of

EXIMBANKA SR and approved by the Slovak government,

outlines systematic changes in the strategic direction of

EXIMBANKA SR for the next years. The principal objectives

of this medium-term strategy include, fi rst of all, territorial

redirection of export support to emerging markets with high

growth potential, in parallel with retaining the existing level of

support for exports to European Union markets; a shift from

the prevailing short-term fi nancing to medium- and long-term

forms of fi nancing; an increased share of non-marketable risk

insurance; support for small and medium-sized businesses;

and export support for products and services with a higher

added value.

Bearing in mind the increased requirements resulting from

the new strategy, the management started to build up a

stronger team to lead key operations within the business, and

in particular the risk management area. Despite the declared

focus on support for exports to territories involving higher

risk exposures, this approach is expected to yield a clearer risk

quantifi cation and minimisation of risks.

The professional approach and expertise of the staff of

EXIMBANKA SR in the implementation of its business and

strategic objectives is one of the top priorities of the new

management of EXIMBANKA SR, and I would like to use this

opportunity to thank all my colleagues and associates.

Dear clients and business partners please let me thank you for

the cooperation and good business relationships, thanks to

which 2007 was another year of successful performance for

EXIMBANKA SR. I would also like to express my wish that we

enjoy mutually benefi cial cooperation in 2008 as well.

Finally, let me express my gratitude to members of the

Bank Board and the Supervisory Board for their year-round

active contribution to the achievement of EXIMBANKA

SR’s objectives in export support. Further, my thanks also

go to the cooperating government authorities, namely the

Ministry of Finance and the Ministry of Economy of the

Slovak Republic for their assistance in the process of making

and implementing strategic decisions on the direction of

the Slovak Republic’s pro-export policy and the institutional

position of EXIMBANKA SR.

Igor Lichnovský

Chairman of the Bank Board and CEO

PROFILE OF EXIMBANKA SR

COMPANY NAME:

Export-Import Bank of the Slovak Republic, abbreviated as

EXIMBANKA SR.

BASIC INFORMATION:

The Export-Import Bank of the Slovak Republic was founded

under Act No.80/1997 on the Export-Import Bank of the

Slovak Republic, as amended.

The founder of EXIMBANKA SR is the state, which exercises

its owner’s rights via decisions of the appropriate authorities

– the Government and the Ministry of Finance of the Slovak

Republic, as well as the Bank Board and the Supervisory Board

of EXIMBANKA SR.

Pursuant to Act 36 No. 80/1997 on EXIMBANKA SR,

as amended, state supervision over the operations of

EXIMBANKA SR is exercised by the Ministry of Finance of the

Slovak Republic, and its use and management of budgetary

funds are subject to control by the Supreme Audit Offi ce

of the Slovak Republic. EXIMBANKA SR has no ownership

interests in other entities.

Inception Date: 22. 07. 1997.

Legal form: legal person, registered with the Register of

Companies of Bratislava I District Court, Section Po, File No.

651/B under Act No. 80/1997

Registered offi ce: Grösslingová 1, 813 50 Bratislava

Organisation ID: 35 722 959

VAT ID: SK 202 099 0796

Rating: the rating assigned by Moody’s Investors Services

(as of 30 November 2006) is A1/P1, with a stable outlook (the

rating corresponds to that of the Slovak Republic).

SCOPE OF ACTIVITY:

The scope of activity of EXIMBANKA SR encompasses the

operations defi ned in the Act No. 80/1997 on the Export-

Import Bank of the Slovak Republic, as amended, including

without limitation:

• export credit fi nancing

• import credit fi nancing for imports intended to support

production for export

• export credit insurance

• export credit reinsurance

• provision of guarantees

• recovery of debts consequential upon unforeseen events

caused by decisions of the state of a customer, or a

customer

• bill discounts and rediscounts

• issuance of bonds

• representation of the Slovak Republic, under authorisation

from the Government of the Slovak Republic (hereinafter

“Government”), in international institutions and

associations whose scope of operations is related to

operations of EXIMBANKA SR, and management of

performance of duties arising from such representation

• advisory activity to the extent of the scope of business

• operation, in its own name, in the world’s international

markets so as to raise funds required for performance of

its tasks

• investing temporarily available funds in national or

international fi nancial markets

• provision, upon the government’s decision, of short-term

credits from funds of EXIMBANKA SR, other than funds

raised in international fi nancial markets, through purchase

of treasury notes with maturity after three months from

purchase in order to cover fl uctuations in the national

budget performance in the course of a year

• insuring a foreign bank that has provided a credit to an

exporter at favourable terms, up to the share of the Slovak

origin in the consignment

• investing the bank’s own funds in securities

• founding legal persons and acquiring capital interests

in other legal persons, subject to the government’s

approval

6 / 7

2


GOVERNING BODIES OF EXIMBANKA SR

3

BANK BOARD OF EXIMBANKA SR

The Bank Board of EXIMBANKA SR is the statutory body

of EXIMBANKA SR. The CEO is the Chairperson of the

EXIMBANKA SR’s Bank Board and he represents EXIMBANKA

SR in its external relationships. On 16 May 2007, the Slovak

Government appointed new members of the EXIMBANKA

SR’s Bank Board and Supervisory Board.

MEMBERS OF THE BANK BOARD OF EXIMBANKA SR

Chairperson: Igor Lichnovský (from 16 May 2007)

CEO

Ladislav Vaškovič (till 16 May 2007)

CEO

Members: Alena Longauerová

Deputy CEO

Štefan Veselovský (from 16 May 2007)

Deputy CEO

Marián Šedo (from 16 May 2007)

Deputy CEO

Miroslav Šmál (from 16 May 2007)

Peter Žiga (from 16 May 2007)

Dagmar Repčeková

(from 16 May 2007 to 13 December 2007)

Martin Petríček (till 16 May 2007)

Deputy CEO

Peter Vlkolinský (till 16 May 2007)

Deputy CEO

Roman Bužek (till 15 March 2007)

Jozef Horváth (till 16 May 2007)

Petr Papanek (till 31 January 2007)

SUPERVISORY BOARD OF EXIMBANKA SR

The EXIMBANKA SR’s Supervisory Board is the supreme audit

body of EXIMBANKA SR, supervising its operations.

MEMBERS OF THE SUPERVISORY BOARD

OF EXIMBANKA SR

Chairperson: Jaroslav Mikla

Members: Katarína Kaszasová

Marián Podolák

Janka Černá (from 16 May 2007)

Mária Kováčová (from 16 May 2007)

Tatiana Šilhánková (from 16 May 2007)

Tibor Gregor (from 16 May 2007)

Karol Melocík (from 16 May 2007)

Pavol Ochotnický (from 16 May 2007)

Erika Csiziová (till 16 May 2007)

Liliana Bolemant (till 16 May 2007)

Boris Balog (till 16 May 2007)

Günter Furín (till 16 May 2007)

Tibor Katocs (till 16 May 2007)

Ján Marušinec (till 16 May 2007)

MISSION, VISION

AND SHARED VALUES

MISSION

The mission of EXIMBANKA SR is to support Slovak exports

through banking and insurance operations.

The Export-Import Bank of the Slovak Republic (hereinafter

“EXIMBANKA SR“) is a specialized government agency

which was established for the purpose of supporting Slovak

producers and service providers in foreign markets. Its

principal objective is to enhance the competitiveness of

Slovak exporters and support the mutual economic exchange

of the Slovak Republic with foreign countries in accordance

with its state and foreign-trade policies, and in compliance

with commitments by which it is bound.

Credit and insurance government agencies, having a similar

scope of operation that support exports within the frame of

offi cially authorised state aid, have been established in a great

majority of member states of the European Union and the

Organisation for Economic Cooperation and Development

(hereinafter “OECD”).

VISION

In accordance with its business policy, EXIMBANKA SR focuses

its efforts on extending support for the export activities of

small, medium-sized and large businesses with the intention

to reduce the extensive dependence of the Slovak economy’s

export performance on a relatively small number of fi rms.

One characteristic feature of Slovak export policy is the

strong concentration of its foreign trade on EU countries. The

government-approved document “Pro-export Policy of the

Slovak Republic for 2007 – 2013” in the section concerning

the territorial direction of exports establishes - in addition

to the priority orientation to the traditional EU markets

– diversifi cation of export activities to markets with high

potential for growth.

From a territorial perspective, EXIMBANKA SR will place

a stronger emphasis on support for exports to countries

outside the European Economic Area, and its product

portfolio is being adopted accordingly.

SHARED VALUES

In its operations, EXIMBANKA SR fully respects the rules

of the Arrangement on Offi cially Supported Export Credits

of the OECD concerning state-supported export credits,

and observes principles of the World Trade Organisation

(hereinafter “WTO”). It abides by rules that apply as a result

of Slovakia’s membership of the EU and takes part in the

preparation of regulatory rules. EXIMBANKA SR respects

regulations concerning assessment of environmental

impacts of supported exports, as well as directives related to

combating corruption and bribery of foreign public offi cials in

international business transactions.

8 / 9

4


DEVELOPMENT

OF MACROECONOMIC ENVIRONMENT

5

Slovakia is a stabilised country in terms of macroeconomics,

and its development, both current and expected, is perceived

as favourable.

In 2007, it reconfi rmed its position as the fastest developing

economy of the Central-European region. Overall

macroeconomic development was infl uenced by favourable

trends in the real economy, resulting primarily from continuing

dynamic economic growth, low infl ation levels and a growing

employment rate, as well as positive development in public

fi nance.

Gross domestic product grew year-to-year by 10.4% in

2007. Essential factors in this growth were household

consumption, growth of exports and the continuing high

rate of foreign investments. Investments thus began to

signifi cantly contribute to an improved trade balance and

the increased performance of the economy. Also, the rate

of private spending rose as a result of wage development in

the economy, which was refl ected in the gradually improving

living standards of the population. It is precisely this strong

and sustainable development that is expected to eliminate

differences in living standards against the most developed

countries of the European Union. A high GDP growth rate can

be also expected in 2008.

The annual rate of infl ation in 2007, measured by the

harmonized consumer price index, was 2.5%. The infl ation

trend was affected by external conditions and factors that

also impacted on the rise in world prices, as well as by

the restrictive policy of the National Bank of Slovakia. The

general infl ation level resulted primarily from the volatility of

prices in world oil markets, the growing prices of foodstuffs,

particularly in the second half of 2007, and the continuing

appreciation of the exchange rate of the Slovak koruna,

particularly against the Euro.

Slovakia is one of the most open economies in the region.

The share of foreign trade in gross domestic product was

the highest not only among the Visegrad Group countries

(Czech Republic, Poland, Hungary and Slovak Republic). In

2007, Slovak exports grew 15.2% to SKK 1,420.7 billion.

The increase in the foreign trade defi cit resulted mainly from

the increase in the price of oil as well as from the import of

investment assemblies to launch new production capacities

in the next period. In terms of territorial structure, a major

portion of the foreign trade exchange was conducted, as in

the preceding year, with the European Union, with 87.4% of

total Slovak exports directed to, and 69.2% of total Slovak

imports coming from the EU.

The average unemployment rate in the Slovak economy

in 2007 (pursuant to the selective labour force survey

methodology) was 11%. This meant a 2.3% year-to-year

decrease against 13.3% seen in 2006. As regards the

unemployment structure, Slovakia reports one of the highest

shares of the long-term unemployed within the EU. However,

the employment rate was on the rise for the sixth year in a

row. Persistent differences between regions remain a major

issue, though.

The Slovak economy has been preparing for entry into the

Eurozone and the adoption of the Euro as of 1 January

2009.

The favourable foreign trade performance, record rate of

economic growth and low infl ation have pushed the Slovak

currency to its historically maximum levels against both the

Euro and the US dollar, and in the case of the US dollar this

trend is even more pronounced due to its drop against other

currencies and the consequences of the American mortgage

crisis.

Macroeconomic projections confi rm that Slovakia meets the

Maastricht criteria in terms of both current and sustainable

development, which has created the expectation of the

smooth entry of Slovakia into the European Monetary

Union.

SELECTED SUBSTANTIVE

AND FINANCIAL INDICATORS

BASIC ECONOMIC PERFORMANCE INDICATORS

10 / 11

6


Actual results for Actual results for Actual results for

2005 2006 2007

Exports supported by EXIMBANKA SR (SKK million) 70,222 85,115 85,448

of which – banking operations 51,067 57,319 56,307

– insurance operations 19,155 27,796 29,141

Registered capital (SKK million) 3,000 3,000 3,000

Balance value (SKK million) 7,708 8,596 8,697

Total volume of loans at nominal value (SKK million) 6,148 7,228 7,742

Total volume of guarantees issued (SKK million) 2,351 1,905 2,424

Risks underwritten from insurance activities (SKK million) 15,578 17,166 18,598

Headcount 84 79 91

Administrative expenses (SKK million) 109 131 147

Profi t after tax (SKK million) 33 61 74

Capital adequacy (%) 165.73 154.34 133.47

In line with its business policy, EXIMBANKA SR continued

business operations related to the support for exports of

Slovak enterprises also in 2007. All basic performance

indicators, including export support, lending volumes and

insurance exposure, showed growth on the preceding year.

0

20,000

40,000

60,000

80,000

100,000

EXIMBANKA SR totalBanking operationsInsurance operations

2005

70,222

51,067

19,155

85,115

57,319

27,796

85,448

56,307

SKK million

29,141

2006 2007

EXPORTS SUPPORTED BY BANKING AND INSURANCE

OPERATIONS OF EXIMBANKA SR SINCE 2005

In 2007, banking and insurance operations of EXIMBANKA SR

supported exports totalling SKK 85.448 billion, which was a

slight increase of 0.4% on 2006.

Exports supported by banking and insurance operations of

EXIMBANKA SR in 2007 were worth SKK 85.4 billion, which is an

increase of SKK 0.3 billion (i.e. 0.4%) on 2006. The share of banking

operations in this amount was SKK 56.3 billion (1.8% decrease),

and the share of insurance operations was SKK 29.1 billion (4.8%

increase).

For insurance operations, compared to year-end 2006,

EXIMBANKA SR’s total insurance exposure rose by nearly

8.5%, totalling SKK 18.190 billion.

As at the end of 2007, total loans amounted to SKK 7.74 billion,

and rose SKK 0.51 billion on 2006, which was a 7.1% increase.

The major loan type was refi nance loans, totaling SKK 5.89 billion,

which was similar to the 2006 level. On the other hand, direct

loans (including bill-of-exchange loans and purchases of receivables)

increased year-to-year by 34.5 % and reached SKK 1.85 billion. The

total value of guarantees issued to clients as of 31 December 2007

was SKK 2.42 billion, and the year-to-year increase on 2006 was SKK

0.52 billion, i.e. 27.2%.

LOAN AND GUARANTEE AMOUNTS SKK million

2005 2006 2007

Direct loans to clients (purchase of bills of exchange and receivables) 964 1,380 1,853

Refi nance loans (incl. of bill-of-exchange refi nance loans) 5,179 5,829 5,889

Loans TOTAL 6,143 7,228 7,742

Guarantees issued 2,351 1,905 2,424

EXPORTS SUPPORTED

SKK million

2005 2006 2007

EXIMBANKA SR total 70,222 85,115 85,448

• banking operations 51,067 57,319 56,307

• insurance operations 19,155 27,796 29,141

Compared to 2006, the total amount of loans granted to

clients grew 7.1% to SKK 7,742 million. Direct loans to clients

(in the form of purchase of bills of exchange and receivables)

increased 34.5% to SKK 1,853 million. Refi nance loans to

commercial banks, including bill-of-exchange refi nance loans,

remained at the overall level of 2006.

In addition to its lending operations, EXIMBANKA SR also

supported exports by issuance of guarantees (off-balance-

sheet items), which totalled SKK 2,424 million at the end of

2007, increasing by 27.2% on 2006.

EXIMBANKA SR’S LENDING

AND ISSUANCE OF GUARANTEES

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Direct loans to clients (purchase of bills of exchange and receivables)Refinance loans (including bill-of-exchange refinance loans)LOANS totalBills of exchange issued

2005 2006 2007

964

5,179

6,143

2,351

1,380

5,829

7,228

1,905 1,853

5,889

7,742

2,424

SKK million





12 / 13


INSURANCE EXPOSURE

SKK million

2005 2006 2007

Short-term risk 7,500 8,130 9,617

Medium-term and long-term risk 7,800 8,630 8,573

Insurance exposure TOTAL 15,300 16,760 18,190

INSURANCE EXPOSURE OF EXIMBANKA SR

Insurance exposure of EXIMBANKA SR as at the end of 2007

amounted to SKK 18.19 billion, and thus grew 8.5% on 2006.

A signifi cant increase was seen in the short-term risk insurance

exposure, which totaled SKK 9.62 billion as of 31 December 2007

(18.3% year-to-year increase). Medium-term and long-term risk

insurance exposure slightly dropped, and amounted to SKK 8.57

billion as at the end of 2007.

The total balance of EXIMBANKA SR as of 31 December 2007

was SKK 8,696,814 thousand, which represents a year-to-

year increase of SKK 101,300 thousand. The most signifi cant

assets were receivables from banks (comprising primarily

refi nance loans to banks, including bill-of-exchange refi nance

loans to banks), totalling SKK 5,966,793 thousand with

an increase of 68.6%. Receivables from clients (comprising

primarily direct loans to clients), amounted to SKK 1,752,606

thousand, and thus accounted for 20.2% of total assets. In

2007, EXIMBANKA SR fi nanced its active operations with

clients primarily from its equity, which amounted to SKK

6,419,078 thousand. The value of registered capital in 2007

0

5,000

10,000

15,000

20,000

Short-term riskMedium-term and long-term riskInsurance exposure TOTAL

2005

7,500 7,800

15,300

8,1308,630

16,760

9,617

8,573

18,190

SKK million

2006 2007

was SKK 3,000,000 thousand, remaining unchanged. At the

end of 2007, capital funds totalled SKK 3,295,483 thousand

and thus increased year-to-year by SKK 61,000 thousand,

which was linked with the subsidisation of funds to cover

marketable risks and non-marketable medium- and long-term

risks from profi t allocations of 2006. In 2007, EXIMBANKA

SR again made use of external funds obtained from credit

facilities (liabilities to banks) to fi nance its active operations

(solely for purposes of funding export credits in foreign

currencies). The balance of these as of year-end 2007 was

SKK 1,283,945 thousand, and it increased by SKK 395,897

thousand on 2006.

EQUITY OF EXIMBANKA SR

In 2007, EXIMBANKA SR achieved profi t after tax of SKK

74,247 thousand, which was 21.7% higher than 2006, and

income tax paid to the state budget amounted to SKK 23,855

thousand.

A major portion of the total revenues of EXIMBANKA SR

worth SKK 297,188 thousand came from interest income,

which totalled SKK 211,432 thousand and grew year-to-year

11.1%. This comprised interest income on loans to banks

and clients, term deposits and current accounts in banks,

and securities. Interest paid on loans from banks totalled SKK

42,818 thousand, and it grew 80.8% on 2006. This growth

EXIMBANKA SR’s equity as of year-end 2007 amounted to SKK 6.4

billion, thus showing a slight increase of 1.2% on 2006. One factor

in the growth of equity was an increase in capital funds by SKK 61

million (1.9%) as of 31 December 2007, (resulting from subsidization

of funds to cover marketable risks and non-marketable medium- and

long-term risks from profi t allocations of 2006. Retained profi ts also

grew 12 % to SKK 124 million. Liabilities totaled SKK 2.278 billion as

at the end of 2007, with a year-to-year increase of SKK 0.028 billion,

i.e. 1.2%. As for liabilities, a signifi cant increase was seen in liabilities

to banks which amounted to SKK 1.284 billion at the end of 2007,

thus growing year-to-year by SKK 0.396 billion (44.6 %).

EQUITY AND LIABILITIES OF EXIMBANKA SR FOR 2005- 2007

SKK million

2005 2006 2007

Equity 6,285 6,345 6,419

Registered capital 3,000 3,000 3,000

Capital funds 3,234 3,235 3,295

Security revaluation reserves 2 0 0

Retained earnings 49 110 124

Liabilities 1,423 2,250 2,278

was linked to the increased drawing of credit facilities to

fi nance export credits in foreign currencies.

Revenue from gross earned premium amounted to SKK

129,356 thousand. The reinsurers’ share of gross earned

premium was SKK 37,937 thousand. Net earned premium,

comprising premium written and a change in the unearned

premium reserve, less the reinsurers’ share, reached SKK

91,419 thousand, which was an annual increase of 29.8%.

The revenues achieved in 2007 were bolstered also by revenues

from charges and commissions (SKK 19,510 thousand),

trading profi t (SKK 4,757 thousand), other insurance revenues

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

EquityLiabilities

2005

6,285 6,345 6,419

1,423

2,250 2,278

SKK million

2006 2007




14 / 15

TRENDS OF SOME INDICATORS OF EXIMBANKA SR FOR 2005 – 2007

SKK million

2005 2006 2007

Net interest income 158 166 169

Net earned premium 73 70 91

Administrative expenses 109 131 147

Profi t after tax 33 61 74

Also in 2007, economic performance, as evidenced by

the rise in basic indicators, and among them primarily

the growing lending, guarantee and insurance business,

export support and higher trading revenue, reconfi rmed

the position of EXIMBANKA SR as an institution supporting

the export efforts of Slovak producers. 2008 will be the fi rst

year of implementation of the medium-term strategy for the

territorial and commodity structure of export support, when

its business objectives will be fully developed.



(SKK 12,888 thousand) and use of technical reserves for

claim payments (SKK 34,520 thousand).

A major component of operating expenses incurred

by EXIMBANKA SR, totalling SKK 153, 800 thousand,

was Administrative expenses amounting to SKK 147,289

thousand, which increased 12.8% on 2006. The most

signifi cant increases within Administrative expenses were

employee costs and costs of purchased services and products.

Creation of provisions for liabilities amounted to SKK 6,544

thousand, and creation of value adjustments to receivables to

SKK 38,742 thousand.

HUMANELY ACTIVITIES

AND COMMUNICATION WITH THE PUBLIC

7

EXIMBANKA SR as a socially responsible institution is fully

aware of the need for its contribution to address social prob-

lems within society. Every year since its inception, in addition

to its regular operations, EXIMBANKA SR has taken part in

humane and charitable efforts.

In 2007, EXIMBANKA SR provided fi nancial assistance aimed

at supporting the school system, education, culture, sports,

youth care, and mitigating the consequences of a heavily im-

paired health situation. Its support is also directed to projects

and activities of a regional nature.

Examples of projects supported by EXIMBANKA SR in 2007

include a fi nancial donation for reconstruction of a children’s

home; partial reconstruction of a kindergarten; payment of a

portion of the cost of a compensation device – a stair-climber

for a severely disabled citizen; the implementation of a project

intended to support the education of up and coming artists;

purchase of an interactive blackboard for a school; payment

of a portion of the expenses incurred in the reconstruction

of a sports and traffi c playground; purchase of a device for

making DVD fairytales for children in sign language; organi-

sation of the “Danube Children’s Cup” festival; purchase of

heavyweight karate jackets for karate practice; publication of

an almanac of a high school to commemorate the anniver-

sary of its inception; donation for the purchase of an anti-

decubital mattress for a severely disabled child. As a part of

its measures substituting the statutory obligation to employ

disabled persons, EXIMBANKA SR placed a job order with

a protected workshop.

EXIMBANKA SR used the option to donate 2% of its tax

liability to community activities, and distributed SKK 436,400

among a non-profi t organisations, a foundation and two

civil associations to support the health service and the school

system.

16 / 17


In 2007, just as in previous years, EXIMBANKA SR took an

active part in the work of commissions of foreign institutions

involved in the development and assessment of rules and

procedures in the area of offi cially supported export credits.

Among these, the prime position is held by the EU’s Council

Working Group on Export Credits operating at the European

Commission in Brussels, and the OECD Working Party on

Export Credits and Credit Guarantees in Paris.

The Slovak Republic as a member of the Organisation for

Economic Cooperation and Development is a party to the

so called “Arrangement” (Arrangement on Guidelines for

Offi cially Supported Export Credits). In 2007, the regular

participation of EXIMBANKA SR’s representatives in the work

of various working groups again helped in the practical im-

plementation of best practices in the area of supported export

fi nancing. The groups included in particular the Working Party

on Export Credits and Credit Guarantees (hereinafter “ECG”);

a working group dealing with determination of interest and

premium rates for offi cially supported exports credits; an

expert working group on country-specifi c risk assessment; a

working group on the environment; and a working group on

detecting and deterring corruption in connection with offi -

cially supported export credits.

As of 1 November 2006, EXIMBANKA SR as a full member

of the Berne Union has been attending its general meetings.

This global organization, grouping export insurers and reinsu-

rers, provides a suitable forum for the sharing of experience,

particularly in the areas of creditworthiness assessment of

business entities, new credit insurance trends, and exchange

of information in the fi eld of insurance claims.

EXIMBANKA SR’s representatives also attend sessions of the

Prague Club, whose development was begun at the initiative

of the Berne Union in the early 1990’s. Its aim is to support

and facilitate experience sharing amongst emerging export-

credit agencies in new member States of the EU as well as de-

veloping countries. In 2007, as a member of the CreditAliance

Group, EXIMBANKA SR made signifi cant use of a system of

extensive on-line databases providing fast access to informa-

tion on foreign partners. Practical advantages stemming from

such membership have been refl ected in the signifi cantly

improved effectiveness of insurance services, as well as risk

management and debt recovery.

With a view to entering some additional territories and the-

reby expanding exporting opportunities for Slovak exporters,

in 2007 EXIMBANKA SR continued its proactive bilateral and

multilateral cooperation with international fi nance and insu-

rance companies. This bilateral cooperation, primarily with

foreign banks, insurance companies and export-credit agen-

cies, taking the form of general loan agreements, generated

more space for fi nancing exports from Slovakia to territories

of interest. In 2007, EXIMBANKA SR extended the total of

46 existing bilateral cooperation agreements with institutions

from 28 countries worldwide to 47 by adding a cooperation

agreement with the export agency for the development of in-

ternational cooperation operating at the Cabinet of Ministers

of the Republic of Tatarstan.

INTERNATIONAL

COOPERATION

8

ENVIRONMENTAL CONSIDERATIONS

IN OPERATIONS OF EXIMBANKA SR

9

The environmental principle of sustainable development calls

for mitigation of adverse impacts of the economic activity

of humans on the environment. The environmental impact

assessment of exports and investments is a standard process

in a majority of advanced countries and is one of the essential

preconditions for fi nancing and ensuring export projects.

In line with the OECD’s “Recommendation on Common

Approaches on Environment and Offi cially Supported Export

Credits”, EXIMBANKA SR requests reviews of environmental

impacts for destination countries of exports where adverse

effects on the environment can be reasonably expected. The

assessment applies to all projects where the payment time

exceeds 2 years and the exporter applies for state-supported

credit insurance, as well as investments in foreign countries.

All EXIMBANKA SR’s procedures comply with effective in-

ternational rules relating to environmental protection. The

liability for environmental friendliness of a project always rests

with the main contractor. Where the Slovak exporter acts as a

subcontractor, submission of an assessment report prepared

for the main contractor is suffi cient.

The assessment starts with delivery of a completed questi-

onnaire, annexed to the insurance application. After a re-

view of the severity of environmental impact of the export,

EXIMBANKA SR classifi es the export into one of three catego-

ries (A, B, C) and decides whether or not the export project

should be made subject to an expert Environmental Impact

Assessment. EXIMBANKA SR is allowed to enter an insurance

contract only insofar as the assessment report has confi rmed

that the export project’s environmental impact is within ap-

plicable limits and satisfi es criteria applying to the industry or

sector in question. Thereafter, the insured, working together

with EXIMBANKA SR, is required to inform the public of the

environmental impact of its export, subject to respecting the

trade secrets, intellectual and industrial property rights and

know-how.

18 / 19


Product structure SKK million Percentage

Export support total 56,307 100.0

Refi nance loans 45,147 80.2

• out of that: bill-of-exchange refi nance loans to banks 126 0.2

Direct loans 5,207 9.2

(bill-of-exchange loans and purchase of receivables)

Guarantees total 5,953 10.6

10. 1 General Results

In 2007, EXIMBANKA SR achieved further growth in the

fi nancing of export activities in terms of both total amount of

granted loans and guarantees and export support indicators.

The total amount of granted loans was SKK 7,742,252

thousand, and this grew nearly 7.1% compared to 2006.

Bank guarantees and counter-guarantees issued to clients

amounted to SKK 2,423,783 thousand, which represents

a 27.2% increase. EXIMBANKA SR’s banking operations

supported exports worth SKK 56,307 million in 2007. The

major contributor to the aggregate export support was

refi nance loans (80.2%), followed by bank guarantees

(10.6%), and direct fi nancing via discount loans to clients and

purchase of receivables (9.2%).

In 2007, the number of clients grew particularly in the

small and medium-sized enterprise segment. One gratifying

development was the increase in the amount of direct lending

in the form of bill-of-exchange loans.

BUSINESS PERFORMANCE IN 2007

– BANKING OPERATIONS

10

EXPORTS SUPPORTED THROUGH LOANS AND GUARANTEES GRANTED BY EXIMBANKA SR

SKK thousand Percentage

Loans total 7,742,252 100.0

Refi nance loans 5,889,739 76.1

• out of that: bill-of-exchange refi nance loans to banks 72,647 0.9

Direct loans 1,852,513 23.9

(bill-of-exchange loans and purchase of receivables)

Guarantees total 2,423,783 -

AMOUNTS OF LOANS AND GUARANTEES

Refinance loans 80.2%Direct loans 9.2%Guarantees total 10.6%

Exports supported through loans

and guarantees granted by EXIMBANKA SR

Refinance loans 76.1%Direct loans 23.9 %

76,1 %

23,9 %

Amounts of loans and guarantees



Territory SKK million Percentage of export support

European Union 49,942 88.7

CIS countries 2,690 4.8

Other OECD countries 1,363 2.4

EFTA countries 815 1.5

South-East Asia 235 0.4

Middle East 116 0.2

Other countries 1,146 2.0

Total 56,307 100.0

10. 2 Exports Supported through Lending

Operations

In terms of territorial structure, a major amount

of exports supported was directed to EU countries

(nearly 89%), member states of the Commonwealth of

Independent States (4.8%), and other OECD countries

(2.4%). As regards the commodity structure, the

most signifi cant support was directed to the chemical

industry (23.5%), light industry (22.3%), and machinery

engineering (22.7%).

EXPORTS SUPPORTED BY LOANS AND GUARANTEES BY EXIMBANKA SR

AS OF 31.12.2007 BY TERRITORY

European Union 88.7 %

CIS countries 4.8 %

OOther OECD countries 2.4 %

EFTA countries 1.5 %

South-East Asia 0.4 %

Middle East 0.2 %

Other countries 2.0 %

88,7%

4,8 %

2,4 %1,5 %

0,4 % 2,0 %0,2 %

Exports supported by loans and guarantees by EXIMBANKA SR

as of 31.12.2007 by territory

20 / 21





AS OF 31.12.2007 BY SITC

Commodity SKK million Percentage of export support

Market products 23,768 42.2

Machinery and equipment 10,965 19.5

Chemicals 10,203 18.1

Industrial products 7,203 12.8

Foodstuffs 2,828 5.0

Raw materials 567 1.0

Oils and fats 474 0.9

Other commodities 299 0.5

Total 56,307 100.0

Market products 42.2 %

Machinery and equipment 19.5 %

Chemicals 18.1 %

Industrial products 12.8 %

Foodstuffs 5.0 %

Raw materials 1.0 %

Oils and fats 0.9 %

Other commodities 0.5 %


AS OF 31.12.2007 BY INDUSTRIAL SECTOR


Chemicals 13,216 23.5

Machinery engineering 12,746 22.6

Light industry 12,551 22.3

Metallurgy 6,158 10.9

Wood-processing 4,151 7.4

Food-processing 3,520 6.3

Electrical engineering 2,260 4.0

Construction industry 1,021 1.8

Other industries 684 1.2

Total 56,307 100.0

Light industry 22.3 %

Electrical engineering 4.0 %

Wood-processing 7.4 %

Other industries 1.2 %

Metallurgy 10.9 %

Chemicals 23.5 %

Food-processing 6.3 %

Construction industry 1.8 %

Machinery engineering 22.6 %

Exports supported by loans and guarantees

by EXIMBANKA SR as of 31.12.2007 by SITC

Exports supported by loans and guarantees

by EXIMBANKA SR as of 31.12.2007 by industrial sector

10. 3 Lending Products

The main focus of operations of EXIMBANKA SR’s banking

division in 2007 was fi nancing export activities by means of

refi nance loans, direct bill-of-exchange loans and purchase or

receivables before due dates, and issuance to clients of bank

guarantees and counter-guarantees.

10. 3. 1 Refi nance Loans

Refi nance loans are intended for short-term funding of

exporters’ operating needs within a one-year term, and

EXIMBANKA SR provides them through commercial banks.

Deals take the form of a trilateral relationship between

the exporter, a commercial bank and EXIMBANKA SR. The

granting of refi nance loans is benefi cial for EXIMBANKA SR

in two ways. First, as regards the general business risk, the

risk is assumed by the commercial bank. Second, as regards

export support, it multiplies the amount of support granted

in a given year. In 2007, refi nance loans generated export

support worth SKK 45,147 million. Despite the overall decline

against 2006, it is still the major component of export support

granted through lending transactions, accounting for as

much as 80.2%. The total value of refi nance loans was SKK

5,889,739 thousand (out of that, loans taking the form of

discount of bank’s bills of exchange amounted to SKK 72,647

thousand), so it did not exceed the limit of SKK 6,100,000

thousand. EXIMBANKA SR cooperated on the trilateral

agreement basis with the following 10 commercial banks and

foreign bank branches operating in the Slovak Republic: Tatra

bank; ING Bank N.V. ; ČSOB, a.s.; VÚB, a.s.; UniCredit Bank

Slovakia, a.s.; OTP Bank, a.s.; Istrobanka, a.s.; Citibank, a.s.;

Slovenská sporitelňa, a.s., and Dexia banka Slovensko, a.s..

EXIMBANKA SR intends to make increased use of direct

forms of fi nancing exporters, and gradually reduce amounts

of refi nance loans in the upcoming years. Nevertheless,

refi nance loans will remain one of the most signifi cant tools

for supporting exporters in cooperation with commercial

banks.

10. 3. 2 Forms of Direct Financing

In 2007, EXIMBANKA SR increased the amount of use of its

direct export fi nancing tools. They include bill-of-exchange

loans with a term of up to 1 year, or from 1 to 5 years; and

purchase of receivables with short payment times of not more

than 1 year. For discount loans, in addition to fi nancing the

export needs of its clients, EXIMBANKA SR often provides

what is referred to as pre-production fi nancing of exporters.

The total increase in direct loans, as compared to 2006, was

nearly 35%, amounting to SKK 1,852,513 thousand. Export

support taking the form of direct fi nancing totalled SKK

5,207 million. A gratifying increase was seen not only in the

total amount of direct loans granted to clients, but also in the

number of clients, particularly in the segment of small and

medium-sized enterprises. EXIMBANKA SR will continue to

pay special attention to the extension of its range of products

intended for this segment also in 2008.

10. 3. 3 Guarantees

As of year-end 2007, guarantees issued amounted to SKK

2,423,783 thousand, and thus grew year-to-year by SKK

518,423 thousand. Over 11% of these guarantee transactions

(SKK 266,844 thousand) were effected with a group of small

and medium-sized businesses. The most frequent types

of guarantee transactions included various non-payment

guarantees, such as bid bonds, down-payment bonds,

performance bonds; as well as payment guarantees, such

as for pre-export fi nancing or purchase of technologies. The

issuance of guarantees and counter-guarantees assists Slovak

exporters in establishing their operations in new territories

and, together with other forms of fi nancing and insurance,

facilitates better adaptation to competitive environment.



22 / 23



– INSURANCE OPERATIONS

11

11. 1 General Results

In 2007, EXIMBANKA SR also saw positive performance

results in the insurance business. The total insurance exposure

increased by 8.5%. While revenue from written premiums in

the marketable and non-marketable risk insurance business

dropped by half as compared to 2006, export support through

insurance operations grew by 4.8% to SKK 29,141 million.

The decrease in written premiums (of SKK 107,431 thousand)

resulted from changes in the territorial structure and payment

terms of export insurance; the total number of clients invoiced

by EXIMBANKA SR for premiums remained in 2007 at the same

level as previous periods.

Similar to the lending operations, also in the export credit

insurance business EXIMBANKA SR pays increased attention to

the small and medium-sized segment of exporters (hereinafter

“SME”) on a long-term basis; the aim behind that is an overall

increase in the number of insured clients. In 2007, more than

three quarters of all clients used the insurance of short-term

receivables with repayment periods ranging from 30 to 360

days. Compared to 2006, the share of SME’s in export support

grew 9.4% and in written premiums 11.1% in 2007.

11. 2 Insurance Exposure

Insurance exposure as the aggregate sum of the actual amount

of insurance risk assumed under valid insurance contracts and

insurance promise agreements shows a growing trend. As of

year-end 2007, the total insurance exposure of EXIMBANKA SR

grew by nearly 9% and amounted to SKK 18,190 million. For

short-term risk, an increase of as much as 18.3% was reported,

and nearly 78.5% of underwritten short-term risks related to EU

countries with the lowest rate of risk. Medium-term and long-

term insurance risk (SKK 8,573 thousand) slightly declined, as

compared to 2006.

OVERVIEW OF TOTAL INSURANCE EXPOSURE FOR 2005 – 2007

SKK billion

2005 2006 2007

Short-term risks 7.5 8.1 9.6

Medium-term and long-term risks 7.8 8.6 8.6

Total 15.3 16.7 18.2

0

5

10

15

20

Short-term risksMedium-term and long-term risksTotal

2005 2006 2007

7.87.5

15.3

8.1 8.6

16.7

9.6

8.6

18.2

SKK billion



11. 3 Export Support through Insurance

Operations

In 2007, the aggregate insurance business of EXIMBANKA SR

generated a 4.8% increase in export support, which totalled

SKK 29,141 million. For marketable risk, export support

increased 9.0%, and for non-marketable risks export support

dropped.

STRUCTURE OF EXPORTS SUPPORTED

THROUGH INSURANCE OPERATIONS

SKK million

Product 2006 2007 2007 (percentage of export support)

Marketable risks insurance 23,942 26,093 89.5%

Non-marketable risks insurance 3,854 3,048 10.5%

Total 27,796 29,141 100.0%

Marketable risks insurance 89.5 %

Non-marketable risks insurance 10.5 %

Structure of exports supported

through insurance operations

24 / 25




11. 3. 1 Exports Supported through Insurance

Operations Structured by Territory

In 2007, EXIMBANKA SR insured trade receivables from

export and domestic credits for a total of 57 countries.

OVERVIEW OF EXPORTS SUPPORTED THROUGH INSURANCE OPERATIONS FOR YEARS 2005 – 2007,

STRUCTURED BY COUNTRY

Territory SKK million Percentage of export support

European Union 21,930 75.3

Other OECD countries 2,103 7.2

EFTA countries 2,047 7.0

CIS countries 1,890 6.5

South-East Asia 257 0.9

Middle East 66 0.2

Other countries 848 2.9

Total 29,141 100.0

2005 2006 2007

Italy 10.1 % Slovak Republic 13.7 % Slovak Republic 17.0 %

Germany 9.6 % Germany 11.5 % Germany 11.3 %

Russian Federation 8.9 % Turkey 8.8 % Italy 7.2 %

Belgium 7.6 % Italy 8.1 % Czech Republic 7.0 %

Poland 7.3 % Poland 6.0 % Poland 6.5 %

Ukraine 7.2 % Ukraine 5.9 % Switzerland 5.8 %

Czech Republic 5.4 % Czech Republic 5.7 % Turkey 5.3 %

Slovak Republic 4.7 % Sweden 3.8 % Netherlands 4.5 %

Hungary 4.0 % Belgium 3.7 % Ukraine 3.6 %

Switzerland 3.7 % Netherlands 3.7 % Sweden 3.4 %

Other countries (47) 31.5 % Other countries (47) 29.1 % Other countries (47) 28.4 %

TOTALSKK 19.2 billion

(100 %)CELKOM

SKK 27.8 billion

(100 %)TOTAL

SKK 29.1 billion

(100 %)

TERRITORIAL STRUCTURE OF EXPORT SUPPORT THROUGH INSURANCE OPERATIONS



European Union 75.3 %

Other OECD countries 7.2 %

EFTA countries 7.0 %

CIS countries 6.5 %

South-East Asia 0.9 %

Middle East 0.2 %

Other countries 2.9 %

11. 3. 2 Export Support through Insurance

Operations Structured by Commodity

Exports supported by insurance from resources of

EXIMBANKA SR as of 31.12.2007 by SITC


Market products 19,321 66.3

Machinery and equipment 5,159 17.7

Chemicals 2,311 7.9

Industrial products 1,634 5.6

Foodstuffs 322 1.1

Mineral fuels and greases 157 0.6

Other commodities 237 0.8

Total 29,141 100.0

Market products 66.3 %

Machinery and equipment 17.7 %

Chemicals 7.9 %

Industrial products 5.6 %

Foodstuffs 1.1 %

Mineral fuels and greases 0.6 %

Other commodities 0.8 %

Exports supported by insurance from resources

of EXIMBANKA SR as of 31.12.2007 by SITC

Territorial structure of export support through

insurance operations

26 / 27


11. 4 Marketable Risk Insurance

In the marketable risk segment, EXIMBANKA SR insures

receivables of Slovak entrepreneurs against commercial,

combined and political risks involved in the supply of goods

and services to the corporate sector abroad, and exporters’

domestic receivables related to export against commercial

risks. In 2007, the growth of Slovak exports, particularly to

the EU countries, was positively refl ected also in the amount

of insured supplies; export support through insurance of

receivables against the risk of debtor’s default rose in

respect of both EU countries and territories involving higher

exposures. In 2007, export support through marketable

risk insurance amounted to SKK 26,093 million, and thus

increased 9.0% on 2006.

As of mid-2005, EXIMBANKA SR started to offer insurance of

domestic receivables within the marketable risk segment, and

this business saw a signifi cant growth. EXIMBANKA SR offers

this type of insurance to its permanent clients.

EXPORTS SUPPORTED – MARKETABLE RISK

SKK billion

2005 2006 2007

Export receivables 16.2 20.1 21.1

Domestic receivables 0.9 3.8 5.0

Total 17.1 23.9 26.1

In the long term, the marketing and acquisition efforts of

EXIMBANKA SR have concentrated on stabilisation and

expansion of its portfolio of insured clients, since it is allowed

to provide its insurance services to exporters only. Full service

is of a particular importance for SME’s, and EXIMBANKA

SR provides it through an integrated offer of advice on

foreign-trade operations and insurance and fi nancing of their

export contracts. Companies from the large client segment

continuously work with their receivables, making use of

different forms of security, including insurance against the

risk of buyer’s default. They therefore enjoy specifi c care in

the insurance acquisition and management work and, as a

result, this segment of the client portfolio is relatively stable

and balanced.

11. 5 Non-marketable Risk Insurance

Export support through non-marketable risk insurance, which

comprises medium- and long-term risk insurance and short-

term non-marketable risk insurance, dropped nearly SKK 806

million to SKK 3,048 million in 2007.





11. 5. 1 Medium-term and Long-term Risk

Insurance

For insurance of medium-term and long-term non-marketable

risks, exports supported in 2007 totalled SKK 1,904 million.

Insurance contracts were made with both domestic and

foreign commercial banks for insurance of medium- and

long-term buyer’s export credits for export fi nancing, and a

number of insurance contracts was made with exporters for

insurance of medium-term supplier’s credits.

Exports were largely supported by insurance of buyer’s

export credits, with a signifi cant increase in the number

of underwritten insurance contracts, which had a positive

impact on diversifi cation of the underwritten risk. A majority

of exports thus supported was directed to Turkey, the Russian

Federation and Belarus. From the commodity structure

point of view, exports involved primarily power engineering

equipment, cogeneration units, production plant for the

rubber and food-processing industries.

Exporters’ interest in insurance of medium- and long-term

supplier’s export credits was focused mainly on Switzerland,

the Ukraine and the Russian Federation. These export projects

involved primarily power engineering equipment and gas-

fuelled radiators.

During 2007, a number of projects were commenced and

are expected to be completed in 2008. They include exports

to the Russian Federation, Kazakhstan, Armenia and the

Ukraine.

11. 5. 2 Short-term Risk Insurance

For the short-term non-marketable risk insurance business,

exports supported in 2007 amounted to SKK 1,144 million,

which was an increase of over 100% on 2006. This increase

confi rmed the global tendency towards shorter payment

terms. Export support took the form of short-term insurance

against commercial and political risks and pre-shipment risks.

From the territorial point of view, exports headed primarily

to such countries as Algeria, Turkey, Cuba, Argentina,

Kazakhstan and China. In terms of commodity structure,

exported goods included machinery, metallurgical materials,

refractory materials, cogeneration units, fl ight simulators,

etc.

28 / 29




11. 6 Claims Settlement and Debt Recovery

In 2007, claims made to EXIMBANKA SR involved insured

losses worth SKK 30.7 million, of which 93.8% related to

short-term marketable risks and the remaining 6.2% to

short-term non-marketable risks. Of the total overdue debts

reported, SKK 20.6 million (67.1%) was recovered in the loss

investigation process. Compared to previous years, the rate

of debt recovery prior to loss payment is remarkably higher,

and results from more effi cient cooperation with reputable

collection agencies, as well as direct work with EXIMBANKA

SR’s clients. The share of insolvency and protracted defaults of

the total of notifi ed claims accounted for 25.8% and 74.2%,

respectively.

In terms of territorial structure, the largest volumes of losses

involved debtors from Italy, Germany, Austria, Hungary,

Croatia and Greece; as for sectors of economy, those

featuring the highest risk included the wood-processing, steel

and food-processing industries.

11. 7 Reinsurance

In insurance of short-term export receivables EXIMBANKA SK

applies risk-hedging in the form of obligatory proportional

reinsurance and domestic receivables through cooperation

with reputable international reinsurers. This continuity was

also retained in 2007, and executed reinsurance contracts

provided facilitating conditions for short-term insurance even

for territories involving higher risk.

With a view to extending the portfolio of insurable territories,

in 2007 EXIMBANKA SR also made use of facultative

reinsurance which suitably supported and complemented the

available insurance coverage and enabled the offer of a more

comprehensive coverage for clients’ trade receivables.

11. 8 New Insurance Products

During 2007, the insurance product range in the non-

marketable risk business was further extended in response

to exporters’ and commercial banks’ requirements. This

involved renewed use of the product referred to as ‘insurance

of pre-export fi nancing against risk of inability of exporter

to repay loan due to non-fulfi lment of the export contract’.

Furthermore, new Terms and Conditions were adopted for

the insurance of a bank guarantee issued in connection with

conditions of acquiring or performing the export contract,

which extend coverage to fair calling on the guarantee, and

the Terms and Conditions of Insurance for the insurance of

a confi rmed irrevocable documentary letter of credit were

updated. These products are offered by export credit insurers

as standard.

CODES OF ETHICS

On 1 January 2001 EXIMBANKA SR as a member of the

Banking Association actively cooperating with the Association

on principal issues of development of activities promoting the

security of business and provision of services and the security

of banks and their clients, made an explicit declaration of its

agreement with, and thereby committed itself to abiding by

and following the principles of the Code of Banking Ethics in

its operations.

The Code of Banking Ethics lays down fundamental ethical

principles, standards and rules of conduct to be applied by

banks and their employees in their business operations and

mutual relationships with their partners.

The purpose of the Code of Banking Ethics is to enhance

awareness of the existence of and the need for respecting

the principles of conduct in day-to-day activities, and foster

the system of corporate internal ethical values, standards and

forms of appropriate professional conduct.

At EXIMBANKA SR, the fundamental ethical principles and

rules of conduct codifi ed in the Code are regulated by its

internal operating regulations concerning interactions and

communication in the following areas:

- General principles of conduct of EXIMBANKA SR

- Relationships within EXIMBANKA SR and mutual relations-

hips among banks

- Relations between an employee and the employer at

EXIMBANKA SR

- Mutual relationships among employees

- Relationships between employees and the client constitu-

ency

12

EXIMBANKA SR consistently performs its obligations under

the Collective Agreement and agreements made with repre-

sentatives of unions to protect the interests of its employees

with a view to satisfying material, cultural and social needs of

its employees and facilitating the growth of their professional

skills.

Employees of EXIMBANKA SR strictly respect the confi dentia-

lity of the trade secrets and affairs of EXIMBANKA SR, as well

as client information, and technological data and methods.

Employees of EXIMBANKA SR are required to refrain from any

activity that may involve the confl ict of their own interests

with those of EXIMBANKA SR, and do not personally conduct

any business or perform any activity in corporations whose

operations are or may be in the future in confl ict with the

interests of EXIMBANKA SR.

Employees of EXIMBANKA SR must not abuse, or use for bu-

siness purposes, any information or advantage they may gain

at EXIMBANKA SR, and provide to clients complete, undis-

torted, accurate and comprehensible information and advice

concerning the commercial relationship between a client and

EXIMBANKA SR.

EXIMBANKA SR respects the principle of confi dentiality in

commercial and fi nancial relations with both existing and for-

mer clients. In terms of publicity, acquisition and promotional

and advertising activities, EXIMBANKA SR presents its services

in a responsible, serious and truthful manner, and refrains

from communicating any misleading information on the ser-

vices it provides to its clients, at all times adhering to a high

professional level and quality of services.

30 / 31


HUMAN RESOURCES POLICY

13

As of 31 December 2007, EXIMBANKA SR employed 91 pe-

ople, within an age structure from 24 to 59.

Women accounted for 56% of the total workforce.

The employee structure by education level as of 31 December

2007 was as follows:

University education 75

Secondary education with GCSE 14

Secondary education without GCSE 2

University education 75

Secondary education with GCSE 14

Secondary education without GCSE 2

The employee structure by education level

as of 31 December 2007 was as follows:

ORGANISATIONAL STRUCTURE OF EXIMBANKA SR

14

*1 As of 1 April 2008 integrated into the “Credits and Guarantees Department”

*2 As of 1 April 2008 integrated into the “Strategy and Communication Department”

Bank Board Supervisory Board

CEO

Advisory BodyControl and Internal

Audit Unit

CEO

Offi ce Department

Legal Services and Debt

Recovery Department

Strategy *2

Department Communication *2

Department

Information Technology

Department

Deputy CEO

Banking Division

Deputy CEO

Insurance Division

Deputy CEO

Finance - Economic Division

Secretariat Secretariat Secretariat

Large Clients Department *1

Small and Medium-sized Clients

Department *1

Bill-of-Exchange

Transactions Department

Claims Settlement

Offi ce

Marketable Risk Insurance

Department

Non-marketable

Risk Insurance Department

Underwriting Department

Budget and Payment

Transactions Department

Dealing Department

Accounting and Taxation

Department

Asset

Management

Risk Management

Department

HR and Payroll

Department

32 / 33


OBJECTIVE FOR FURTHER DEVELOPMENT

OF EXIMBANKA SR

15

The main objective of EXIMBANKA SR for 2008 in terms of its

business policy will be further continuation of business operations

to foster support for exports of Slovak producers. Their overall

range will be based on the open business cases of 2007 and

previous years. 2008 is predicted to see partial implementation

of the objectives of the Pro-export Policy of the Slovak Republic

for 2007 – 2013, as approved by the Slovak government in early

2007. The above government document, developed after the

accession of the new management in May 2007, was the basis of

the EXIMBANKA SR’s medium-term strategy for the territorial and

commodity direction of export support for the coming years.

The medium-term strategy, entitled “The Update of the Territorial

and Commodity Direction of Export Support, Options for Further

Use of the Insurance Capacity and Optimisation of the Share

of External Resources in the Financing of the Export-Import

Bank of the Slovak Republic” defi nes the direction and goals of

EXIMBANKA SR for the medium term of 2007 to 2013. It specifi es

export support tools, while endeavouring to accommodate

clients’ needs as well as the objectives of the Slovak government’s

economic policy for the foreign trade to the maximum extent

possible.

The main objectives defi ned in the medium-term strategy are the

following:

- extend the range of insurance services and export credits to

cover emerging territories and countries involving a higher

level of risk;

- establish conditions to facilitate direct export fi nancing with

the state support, using medium- and long-term funding

resources

- increase the share of the non-marketable risk insurance

business

- extend the portfolio of products with a focus on the produce

of small and medium-sized enterprises

- extend export support to products and services with a high

added value

For 2008, EXIMBANKA SR predicts that the year-to-year growth

trend of the share of supported exports in aggregate exports of

the Slovak Republic should be maintained. Given the dynamic

growth of exports of products where EXIMBANKA SR has no

signifi cant room for fi nancing, particularly those of the automotive

and electronics industries, this would mean an overall increase in

export support in the lending and insurance operations compared

to 2007. For the banking operations, in order to overcome its

current funding limitations, EXIMBANKA SR intends to make

a more intensive use of credit facilities with a view to adding

dynamics to the direct fi nancing of export support and gradually

increasing the share of fi nancing granted in foreign currencies and

with longer payment times. A more remarkable increase in the

direct fi nancing in form of bill-of-exchange loans and purchase

of exporters’ receivables is expected in the segment of small

and medium-sized enterprises. Also in 2008, refi nance loans will

remain the major form of export support in terms of amounts,

though the total amount of refi nance loans is not expected to

grow. Another important export support tool in 2008 will be

issuance of a wide range of both payment and non-payment

bonds and guarantees.

For insurance operations, the business is expected to grow in the

non-marketable risk insurance segment through modifi cation

of insurance and banking products according to clients’

requirements.

In terms of territorial structure, export support will be aligned with

the structure of overall exports of the Slovak Republic, with a focus

on the EU countries and the countries of the European Free Trade

Association (hereinafter “EFTA”). 2008 is expected to see a greater

shift of EXIMBANKA SR’s export support efforts towards emerging

countries involving higher risk exposure levels, such as countries

of the Commonwealth of Independent States, e.g. the Russian

Federation, the Ukraine, Belarus, Kazakhstan, and the countries of

South-East Asia and South America. For the non-marketable risk

insurance, in 2008 EXIMBANKA SR will concentrate on insurance

of political risks borne by Slovak exporters to the countries of

South-East Asia and South America, and some countries of the

Commonwealth of Independent States (Belarus, Kazakhstan). For

countries like the Russian Federation, the Ukraine, recently joined

by Bosnia and Herzegovina, Serbia and Montenegro, EXIMBANKA

SR will provide insurance using quota-share and facultative

reinsurance under cooperation arrangements with reputable

credit insurers established in those territories.

As regards the sectoral structure, support for exports will be

directed primarily to the chemical, machinery engineering, wood-

processing, metallurgical and electrical engineering industries; and

fi nancing will be provided mainly for market products, chemicals,

industrial products, machinery and equipment. However, the

structure of fi nancing may be modifi ed according to clients’ and

exporters’ interests.

FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 PREPARED

IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING

STANDARDS, AS ADOPTED BY THE EUROPEAN UNION

34 / 35

FINANCIAL STATEMENTS AS OF 31 DECEMBER 2007 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS, AS ADOPTED BY THE EUROPEAN UNION

Assets Notes 2007 2006

SKK ‘000 SKK ‘000

Cash and cash equivalents 7 702,428 562,344

Loans and advances to banks 8 5,966,793 6,238,481

Loans and advances to customers 9 1,752,606 1,303,483

Insurance receivables 11 7,525 128,280

Reinsurance assets 11 72,076 131,890

Investment securities 12 47,769 48,113

Property and equipment 13 135,814 148,850

Intangible assets 14 8,699 7,530

Corporate income tax receivable - 9,326

Other assets 15 884 15,184

Prepayments and accrued income 2,220 2,033

8,696,814 8,595,514

Liabilities

Loans from banks 16 1,283,945 888,048

Reinsurance payables 11 8,526 7,478

Insurance technical provisions 11 543,636 636,918

Liability funds 17 3,528 5,590

Other liabilities 18 120,941 400,011

Tax liability 2,901 -

Provisions 19 311,599 310,079

Accruals and deferred income 2,660 2,339

2,277,736 2,250,463

Shareholder’s equity

Registered capital 20 3,000,000 3,000,000

Capital funds 21 3,295,483 3,234,483

Revaluation reserve 40 260

Retained earnings 22 123,555 110,308

6,419,078 6,345,051

8,696,814 8,595,514

Off balance sheet items 23 2,701,870 1,987,853

The fi nancial statements, which include the notes on pages 39 to 91, were approved on behalf of the Bank Board on

31 March 2008 and signed by:

Ing. Igor Lichnovský Ing. Marián Šedo

General director Deputy general director

Balance sheet as at 31 December 2007


36 / 37

Notes 2007 2006

SKK ‘000 SKK ‘000

Interest income 24 211,432 189,979

Interest expense 25 (42,818) (23,684)

Net interest income 168,614 166,295

Gross earned premium 26 129,356 107,845

Gross earned premium ceded 26 (37,937) (37,440)

Net earned insurance income 91,419 70,405

Fee and commission income 19,510 19,427

Net trading income 4,757 20,834

Other income from insurance 12,888 11,524

Other operating expenses - (9)

Operating income 297,188 288,476

Insurance expenses, net of reinsurance 26 (6,729) (8,552)

Creation of technical provisions for premium defi ciency 26 (15,208) -

Release of technical provisions for outstanding

claims, net of reinsurance 26 34,520 49,175

Administrative expenses 27 (147,289) (130,524)

Depreciation and amortisation 13,14 (19,094) (22,961)

Operating expenditure (153,800) (112,862)

Operating profi t before impairment losses and provisions 143,388 175,614

Impairment losses 10 (38,742) (4,043)

Provisions 19 (6,544) (88,724)

Profi t before taxation 98,102 82,847

Income tax 28 (23,855) (21,820)

Profi t after taxation 74,247 61,027

The notes on pages 39 to 91 form part of these fi nancial statements.

Income statement

Year ended 31 December 2007




Statement of changes in shareholder’s equity


Registered Capital Revaluation Retained

capital funds reserve earnings Total

SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000

At 1 January 2006 3,000,000 3,234,483 1,538 49,281 6,285,302

Net loss on available-for-sale assets - - (1,278) - (1,278)

Profi t for the year 2006 - - - 61,027 61,027

At 31 December 2006 3,000,000 3,234,483 260 110,308 6,345,051

Transfers to capital funds - 61,000 - (61,000) -

Net loss on available-for-sale assets - - (220) - (220)

Profi t for the year 2007 - - - 74,247 74,247

At 31 December 2007 3,000,000 3,295,483 40 123,555 6,419,078


38 / 39

Notes 2007 2006

SKK ‘000 SKK ‘000

Cash fl ows from operating activities

Profi t before changes in operating assets and liabilities 29 121,439 243,659

Decrease/(increase) in loans and advances to banks 271,688 (903,225)

Increase in loans and advances to customers (474,977) (429,774)

Decrease/(increase) in insurance receivables 120,716 (106,099)

Decrease/(increase) in reinsurance assets 1,789 (1,948)

Decrease/(increase) in other assets 2,290 (2,173)

(Increase)/decrease in prepayments and accrued income (187) 677

Increase/(decrease) in reinsurance payables 1,048 (1,597)

(Decrease)/increase in other liabilities (279,114) 218,186

Increase/(decrease) in accruals and deferred revenue 321 (223)

Corporate income tax paid (11,628) (27,193)

Net cash used in operating activities (246,615) (1,009,710)

Cash fl ows from investing activities

Purchase of investment securities (2,084) (2,143)

Proceeds from sale of investment securities 2,208 28,208

Purchase of property and equipment (2,538) (328)

Purchase of intangible assets (4,722) -

Net cash (used in)/from investing activities (7 136) 25 737

Cash fl ows from fi nancing activities

Loans received from banks 4,324,920 2,574,345

Repayment of loans from banks (3,929,023) (2,053,758)

Payments from liability funds (2,062) (5,575)

Net cash from fi nancing activities 393,835 515,012

Net increase/(decrease) in cash and cash equivalents 140,084 (468,961)

Cash and cash equivalents at beginning of year 562,344 1,031,305

Cash and cash equivalents at end of year 7 702,428 562,344


Cash fl ow statement



NOTES TO THE FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2007


1. GENERAL INFORMATION

The Export-Import Bank of the Slovak Republic with its registered offi ce at Grösslingová 1, 813 50 Bratislava; IČO: 35722959;

DIČ: 2020990796 (hereinafter referred to as ‘EXIMBANKA SR’ or ‘Eximbanka’) was established on 1 July 1997 as a legal entity

under Act No. 80/1997 and was registered with the Commercial Register of District Court Bratislava I., section Po, fi le No. 651/B

on 22 July 1997. Eximbanka is wholly owned by the State.

The members of the Bank Board are as follows:

Ing. Igor Lichnovský from 16.5.2007

Ing. Štefan Veselovský from 16.5.2007

Doc. Ing. Alena Longauerová, CSc.

Ing. Marián Šedo from 16.5.2007

Ing. Dagmar Repčeková from 16.5.2007 to 13.12.2007

Ing. Miroslav Šmál from 16.5.2007

Ing. Peter Žiga from 16.5.2007

JUDr. Roman Bužek until 15.3.2007

RNDr. Jozef Horváth until 16.5.2007

Mgr. Petr Papanek until 31.1.2007

Ing. Martin Petríček, CSc. until 16.5.2007

Ing. Ladislav Vaškovič, CSc. until 16.5.2007

Ing. Peter Vlkolinský until 16.5.2007

The members of the Supervisory Board are as follows:

Ing. Jaroslav Mikla

Ing. Marián Podolák

Ing. Katarína Kaszasová

Ing. Janka Černá, CSc. from 16.5.2007

Ing. Tatiana Šilhánková from 16.5.2007

Ing. Mária Kováčová from 16.5.2007

Ing. Mgr. Tibor Gregor from 16.5.2007

Ing. Karol Melocík from 16.5.2007

Doc. Ing. Pavol Ochotnický, CSc. from 16.5.2007

Ing. Ján Marušinec until 16.5.2007

Ing. Tibor Katocs until 16.5.2007

Mgr. Liliana Bolemant until 16.5.2007

Mgr. Erika Csíziová until 16.5.2007

JUDr. Boris Balog until 16.5.2007

Ing. Günter Furin until 16.5.2007

Eximbanka does not have any subsidiaries or associates.

The primary role of Eximbanka is to support exports and imports based on the requirements of the government’s foreign, trade,

monetary and industrial policies. Eximbanka’s principal activities are the fi nancing of export and import credits, insuring of

export credits and issuing of guarantees.

Eximbanka is not a bank within the defi nition of Article 2 of the Act on Banks No 483/2001 as amended and is not subject to

the supervision of the National Bank of Slovakia.

Financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European

Union (“IFRS”) for the year ended 31 December 2006 were approved by the Bank Board on 30 March 2007 and approved by

Ministry of Finance of the Slovak Republic on 22 May 2007.

40 / 41


2. BASIS OF PREPARATION

(a) Statement of compliance

The fi nancial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the

European Union.

These fi nancial statements are prepared as the fi nancial statements required by Section 17(a) of the Slovak Act on Accounting

431/2002, as amended.

(b) Basis of measurement

The fi nancial statements have been prepared on the historical cost basis except for the following:

• derivative fi nancial instruments are measured at fair value;

• fi nancial instruments at fair value through profi t or loss are measured at fair value;

• available-for-sale fi nancial assets are measured at fair value.

(c) Functional and presentation currency

These fi nancial statements are presented in Slovak crowns, which is Eximbanka’s functional currency. Except as indicated,

fi nancial information presented in Slovak crowns has been rounded to the nearest thousand.

(d) Use of estimates and judgements

The preparation of fi nancial statements requires management to make judgements, estimates and assumptions that affect the

application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ

from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in

the period in which the estimate is revised and in any future periods affected.

In particular, information about signifi cant areas of estimation uncertainty and critical judgements in applying accounting policies

that have the most signifi cant effect on the amounts recognised in the fi nancial statements is provided in notes 4 to 6.

(e) Classifi cation of insurance and investment contracts for reporting purposes

Contracts under which Eximbanka accepts signifi cant insurance risk from another party (the policyholder) by agreeing to

compensate the policyholder if a specifi ed uncertain future event (the insured event) adversely affects the policyholder are

classifi ed as insurance contracts.

Eximbanka offers the following insurance products to exporters:

- Insurance of Short-term Export Credits against Commercial Risks,

- Insurance of Short-term Export Supplier’s Credits against Political Risks,

- Insurance of Medium-term and Long-term Export Suppliers Credits against Political and Commercial Risks,

- Insurance of Export Buyer’s Credit against Political and Commercial Risks,

- Insurance of Pre-Credit Production Risk,

- Insurance of Pre-Export Financing against Risk of Inability to Repay Loan,

- Insurance of Foreign Investments of Slovak Legal Entities,

- Insurance of Credit for the Financing of Investment of Slovak Legal Entities abroad against non-payment Risk,

- Insurance of a Confi rmed Irrevocable Export Documentary Letter of Credit,

- Insurance of Export-Related Short-term Domestic Receivables against Commercial Risks,

- Insurance of Export Contract Bonds.



(e) Classifi cation of insurance and investment contracts for reporting purposes continued

Insurance risk is risk other than fi nancial risk. Financial risk is the risk of a possible future change in interest rate, fi nancial

instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating, credit index or other variable

independent from contractual parties. Insurance contracts may contain also certain fi nancial risk. Contracts under which

transfer of insurance risk from the policyholder to Eximbanka is not signifi cant, containing fi nancial risk, are classifi ed as

investment contracts. Contracts, which do not contain nor signifi cant insurance nor fi nancial risk, are considered as so called

service contracts.

Insurance risk is signifi cant if, and only if, an insured event could cause Eximbanka to pay signifi cant additional benefi ts

(additional to payments settled by the policyholder to Eximbanka increased by the respective interest rate). A contract that

qualifi es as an insurance contract remains an insurance contract until all rights and obligations are extinguished or expire.

Eximbanka does not apply IFRS 4 to fi nancial guarantees contracts, since it has not previously asserted such contracts as

insurance contracts. Financial guarantees are recognised and measured in accordance with IAS 39 and presented in accordance

with IFRS 7.

(f) Comparative fi gures

The comparative fi gures have been regrouped or reclassifi ed, where necessary, on a basis consistent with the current period.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these fi nancial statements.

(a) Foreign currency

Transactions denominated in foreign currencies are translated into Slovak crowns at the exchange rates ruling on the date of

the transaction. Monetary assets and liabilities are translated at the rates of exchange ruling on the balance sheet date. All

resulting gains and losses are recorded in Net trading income in the income statement.

(b) Interest income and expense

Interest income and expense are recognised in the income statement using the effective interest method. The effective interest

rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the fi nancial

asset or liability (or, where appropriate, a shorter period) to the carrying amount of the fi nancial asset or liability. The effective

interest rate is established on initial recognition of the fi nancial asset and liability and is not revised subsequently.

The calculation of the effective interest rate includes all fees paid or received, transaction costs and discounts or premiums that

are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the

acquisition, issue or disposal of a fi nancial asset or liability.

Interest income and expense on all trading assets and liabilities are considered to be incidental to Eximbanka’s trading operations

and are presented, together with all other changes in the fair value of trading assets and liabilities, in Net trading income.

42 / 43


(c) Fee and commission

Fee and commission income and expenses that are integral to the effective interest rate on a fi nancial asset or liability are

included in the measurement of the effective interest rate. Reinsurance commission is recognised consistently with recognising of

reinsurance premium. Profi t commission from reinsurance contracts is recognized on an accrual basis.

Other fee and commission income, sales commission, placement fees and syndication fees, are recognised as the related services

are performed. When a loan commitment is not expected to result in the drawn-down of a loan, loan commitment fees are

recognised on a straight-line basis over the commitment period. Other fee and commission expense relates mainly to transaction

and service fees, which are expensed as the services are received.

(d) Net trading income

Net trading income comprises gains less losses related to trading assets and liabilities, and includes all realised and unrealised fair

value changes, dividends and foreign exchange differences.

(e) Lease payments made

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.

Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under the fi nance leases are apportioned between the fi nance expense and the reduction of the

outstanding liability. The fi nance expense is allocated to each period during the lease term so as to produce a constant periodic

rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum

lease payments over the remaining term of the lease when the lease adjustment is confi rmed.

(f) Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it

relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on

the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment

to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of

assets and liabilities for fi nancial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at

the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been

enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profi ts will be available against which

the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer

probable that the related tax benefi t will be realised.

(g) Insurance technical provisions and claims

Incurred claims represent claim costs and cost of claim settlement for settled and open claims incurred during the current

accounting period, together with adjustments to (changes of) claims provisions to prior and current period. Provisions are created

to cover losses and unexpired risks arising from insurance of commercial and political risks on short, medium and long term export

credits.

Provisions are created for the following:

Unearned premium

The unearned premium reserve (‘UPR’) is created in respect of premiums written before year-end relating to insurance coverage

provided after the balance sheet date. This provision is calculated using the pro-rata-temporis method.



(g) Insurance technical provisions and claims continued

Claim provisions

Claim provision represents estimate of ultimate claim costs for all claims incurred and not settled at the balance sheet date

regardless they were reported or not. It consists of external costs of settlement. Claims not settled are measured by assessment

of individual claims and by creation of provision for reported but not settled claims (‘RBNS’), by creation of provision on incurred,

but not reported claims (‘IBNR’) and by taking into account internal and also external foreseeable events, such as change in claim

settlement system, infl ation, trends in litigations related to claims, changes in legislation and historical experiences and trends.

Claim provisions are not discounted.

Adjustments to (changes of) claim provisions created in prior periods are recognised in the fi nancial statements in the period,

when the adjustments were done and if they are signifi cant, are disclosed separately. Methods used and estimates made are

regularly reassessed.

Provision for premium defi ciency

The provision is created for unexpired risks arising from insurance contracts, when anticipated amount of future claim settlements,

which are covered by valid insurance contracts and other costs relating to future periods, is higher than provision for unearned

premium created for respective insurance contracts after deduction of deferred acquisition costs and other technical assets.

Premium defi ciency provision is created separately for insurance lines managed together, after taking into account future revenues

from investments held for coverage of unearned premium and opened insured events. Premium defi ciency provision is result of

test of adequacy of provisions.

The reinsurers’ share on technical provisions is recognised as an asset.

The change in UPR is included in profi t or loss as earned or unearned premium. Changes in IBNR and RBNS are included in profi t

or loss as release or creation of technical provisions for outstanding claims, net of reinsurance.

Eximbanka performs liability adequacy test (on insurance liabilities less relating deferred acquisition costs and other technical

assets) at each balance sheet date. Test is designed to examine adequacy of amount of provisions. When provisions are not

adequate, Eximbanka releases respective deferred acquisition costs and other respective technical assets, or creates additional

provision. Part of test is test on adequacy of insurance premium, which could result into creation of provision defi ciency reserve.

When assessing the adequacy of provisions also run-off test is considered, where initially estimated amounts (RBNS and IBNR) of

ultimate claim costs are compared to actual claim settlements. Based on this result adequacy of estimate of provisions in the past

and quality of estimates used for preparation of fi nancial statements in prior periods can be assessed. Any eventual change to the

defi ciency of provisions is recognised in the income statement in the respective reporting period.

(h) Financial assets and liabilities

(i) Recognition

Eximbanka initially recognises loans and advances, loans received and debt securities in issue on the date that they are originated.

All other fi nancial assets and liabilities (including assets and liabilities designated at fair value though profi t or loss) are initially

recognised on the trade date at which Eximbanka becomes a party to the contractual provisions of the instrument.

44 / 45


(ii) Derecognition

Eximbanka derecognises a fi nancial asset when the contractual rights to the cash fl ows from the asset expire, or it transfers the

rights to receive the contractual cash fl ows on the fi nancial asset in a transaction in which substantially all the risks and rewards of

ownership of the fi nancial asset are transferred. Any interest in transferred fi nancial assets that is created or retained by Eximbanka

is recognised as a separate asset or liability.

Eximbanka derecognises a fi nancial liability when its contractual obligations are discharged, cancelled or expire.

Eximbanka enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all risks and

rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred

assets are not derecognised from the balance sheet. Transfers of assets with retention of all or substantially all risks and rewards

include, for example, securities lending and repurchase transactions.

Eximbanka also derecognises certain assets when it writes off balances pertaining to assets deemed to be uncollectible.

(iii) Offsetting

Financial assets and liabilities are set off and the net amount presented in the balance sheet when, and only when, Eximbanka

has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability

simultaneously.

Income and expenses are presented on a net basis only when permitted by the reporting standards, or for gains and losses arising

from a group of similar transactions such as in Eximbanka’s trading activity.

(iv) Amortised cost measurement

The amortised cost of a fi nancial asset or liability is the amount at which the fi nancial asset or liability is measured at initial

recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any

difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

(v) Fair value measurement

The determination of fair values of fi nancial assets and fi nancial liabilities is based on quoted market prices or dealer price

quotations for fi nancial instruments traded in active markets. For all other fi nancial instruments, fair value is determined by using

valuation techniques. Valuation techniques include the discounted cash fl ow method, comparison to similar instruments for which

market-observable prices exist and valuation models. Eximbanka uses widely recognised valuation models for determining the fair

value of the more common fi nancial instruments like options and interest rate and currency swaps. For these fi nancial instruments,

inputs into models are market observable.

(vi) Identifi cation and measurement of impairment

At each balance sheet date, Eximbanka assesses whether there is objective evidence that fi nancial assets not carried at fair value

through profi t or loss are impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has

occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash fl ows of the asset that

can be reliably estimated.

Eximbanka considers evidence of impairment at a specifi c asset level. All individually signifi cant fi nancial assets are assessed for

specifi c impairment.

Objective evidence that fi nancial assets (including equity securities) are impaired can include default or delinquency by a borrower,

restructuring of a loan or advance by Eximbanka on terms that Eximbanka would not otherwise consider, indications that

a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating

to a group of assets such as adverse changes in the payment status of borrowers or issuers in group or economic conditions that

correlate with defaults in group.

Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the fi nancial

asset and the present value of estimated future cash fl ows discounted at the asset’s original effective interest rate. Losses are



recognised in the income statement and refl ected in an allowance account against loans and advances. Interest on the impaired

asset continues to be recognised through the unwinding of the discount.

When a subsequent event causes the amount of impairment loss to decrease, the impairment loss is reversed through the income

statement.

Impairment losses on available-for-sale investment securities are recognised by transferring the difference between the amortised

acquisition cost and current fair value out of equity to income. When a subsequent event causes the amount of impairment loss

on an available-for-sale debt security to decrease, the impairment loss is reversed through the income statement. However, any

subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised directly in equity. Changes in

impairment provisions attributable to time value are refl ected as a component of interest income.

(i) Cash and cash equivalents

Cash and cash equivalents comprises cash, unrestricted balances held with the National Bank of Slovakia and highly liquid

fi nancial assets with contractual maturities of less than three months, which are subject to insignifi cant risk of changes in their fair

value and are used by Eximbanka in the management of short-term commitments.

Cash and cash equivalents are carried at amortised cost in the balance sheet.

(j) Trading assets and liabilities

Trading assets and liabilities are those assets and liabilities that Eximbanka acquires or incurs principally for the purpose of selling or

repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profi t or position taking.

Trading assets and liabilities are initially recognised and subsequently measured at fair value in the balance sheet with transaction

costs taken directly to income. All changes in fair value are recognised as part of Net trading income in the income statement.

Trading assets and liabilities are not reclassifi ed subsequent to their initial recognition.

(k) Loans and advances

Loans and advances are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active

market and that Eximbanka does not intend to sell immediately or in the near term.

When Eximbanka is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership

of an asset to the lessee, the agreement is presented within loans and advances.

When Eximbanka purchases a fi nancial asset and simultaneously enters into an agreement to resell the asset (or a substantially

similar asset) at a fi xed price on a future date (‘reverse repo or stock borrowing’), the agreement is accounted for as a loan or

advance, and the underlying asset is not recognised in Eximbanka’s fi nancial statements.

Loans and advances are initially measured at fair value plus incremental direct transaction costs and subsequently measured at

their amortised cost using the effective interest method.

Insurance and reinsurance receivables

Receivables and payables to policyholders, intermediaries and reinsurers are fi nancial instruments and are disclosed as receivables

and payables from insurance and not as part of technical provisions or reinsurance assets.

Eximbanka’s receivables arising from claims towards guilty parties and other parties related to claim settlements (recourses and

subrogations) are accounted for in the moment of identifi cation such claim and are recognized as revenues. Recognised amounts

do not decrease liability to policyholders, as Eximbanka’s liability to settle claims to policyholders in full amount is not affected.

46 / 47


(l) Investment securities

Investment securities are initially measured at fair value plus incremental direct transaction costs and subsequently accounted for

depending on their classifi cation as either held-to-maturity or available-for-sale.

(i) Held-to-maturity

Held-to-maturity investments are non-derivative assets with fi xed or determinable payments and fi xed maturity that Eximbanka

has the positive intent and ability to hold to maturity and which are not designated at fair value through profi t and loss or

available-for-sale.

Held-to-maturity investments are carried at amortised cost using the effective interest method. Any sale or reclassifi cation of

a signifi cant amount of held-to-maturity investments not close to their maturity would result in the reclassifi cation of all held-to-

maturity investments as available-for-sale and prevent Eximbanka from classifying investments securities as held-to-maturity for

the current and the following two fi nancial years.

(ii) Available-for-sale

Available-for-sale investments are non-derivative investments that are not designated as another category of fi nancial assets.

Unquoted equity securities whose fair value cannot be reliably measured are carried at cost. All other available-for-sale investments

are carried at fair value.

Interest income is recognised in income using the effective interest method. Dividend income is recognised in income when

Eximbanka becomes entitled to the dividend. Foreign exchange gains or losses on available-for-sale debt security investments are

recognised in income.

Other fair value changes are recognised directly in equity until the investment is sold or impaired and the balance in equity is

recognised in income.

(m) Property and equipment

(i) Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the

functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property or equipment

have different useful lives, they are accounted for as separate items (major components) of property and equipment.

(ii) Subsequent costs

The cost of replacing part of an item of property or equipment is recognised in the carrying amount of the item if it is probable

that the future economic benefi ts embodied within the part will fl ow to Eximbanka and its cost can be reliably measured. The

costs of the day-to-day servicing of property and equipment are recognised in expense as incurred.

(iii) Depreciation

Depreciation is recognised in income on a straight-line basis over the estimated useful lives of each part of an item of property and

equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

Buildings 20 years, straight line

Furniture, fi ttings and equipment 4 to 12 years, straight line

Motor vehicles 4 years, straight line

Depreciation commences when the asset is put in use. Depreciation methods, useful lives and residual values are reassessed at

the reporting date.



(n) Intangible assets

Software

Software is stated at cost less accumulated amortisation and impairment losses.

Amortisation is recognised on a straight line basis over the 2 to 4 year estimated useful life of the software.

(o) Leased assets

Leases under which Eximbanka assumes substantially all the risks and rewards of ownership, are classifi ed as fi nance leases. On

initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the

minimum lease payments.

Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

All other leases are operating leases and the leased assets are not recognised on Eximbanka’s balance sheet.

(p) Impairment of non-fi nancial assets

The carrying amounts of Eximbanka’s non-fi nancial assets, other than deferred tax assets, are reviewed at each reporting date

to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount

is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

A cash-generating unit is the smallest identifi able asset group that generates cash fl ows that largely are independent from other

assets and groups.

Impairment losses are recognised in income. Impairment losses recognised in respect of cash-generating units are allocated

fi rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other

assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less cost to sell. In

assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that

refl ects current market assessments of the time value of money and the risk specifi c to the asset.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased

or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable

amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount

that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(q) Insurance premiums

Insurance premiums are recognised when the premium is written, regardless when it is due or collected. Gross written premiums

comprise all premiums receivable during the period including amounts relating, in whole or in part, to future accounting

periods. An unearned premium provision is created for the premium amounts related to future periods.

All insurance contracts for credit risk insurance provided by Eximbanka were tested as required by IFRS 4 and they meet the

defi nition of an insurance contract.

48 / 49


(r) Reinsurance

Eximbanka cedes reinsurance in the normal course of business for the purpose of limiting its net loss potential through the

diversifi cation of its risks. Assets, liabilities and income and expense arising from ceded reinsurance contracts are presented (in

the notes) separately from the related assets, liabilities, income and expense from the related insurance contracts because the

reinsurance arrangements do not relieve Eximbanka from its direct obligations to its policyholders. Only rights under contracts

that give rise to a signifi cant transfer of insurance risk are accounted for as reinsurance assets.

Reinsurance premiums for ceded reinsurance are recognised as an expense on a basis that is consistent with the recognition

basis for the premiums on the related insurance contracts and are expensed over the period that the reinsurance cover is

provided based on the expected pattern of the reinsured risks. The unexpensed portion of ceded reinsurance premiums is

included in reinsurance assets.

Reinsurer’s share on technical provisions is measured on a basis that is consistent with the measurement of the provisions held

in respect of the related insurance contracts.

Reinsurance assets include also recoveries due from reinsurance companies in respect of claims paid. These are included within

reinsurance receivables.

Reinsurance assets are assessed for impairment at each balance sheet date. An asset is deemed impaired if there is objective

evidence, as a result of an event that occurred after its initial recognition, that Eximbanka may not recover all amounts due, and

that the event has a reliably measurable impact on the amounts that Eximbanka will receive from the reinsurer.

(s) Loans from banks

Loans from banks are Eximbanka’s main sources of debt funding.

When Eximbanka sells a fi nancial asset and simultaneously enters into a ‘repo’ or ‘stock lending’ agreement to repurchase the

asset (or a similar asset) at a fi xed price on future date, the arrangement is accounted for as a loan received, and the underlying

asset continues to be recognised in Eximbanka’s fi nancial statements.

Loans from banks are initially measured at fair value plus transaction costs, and subsequently measured at their amortised cost,

including accrued interest, using the effective interest method.

(t) Provisions

A provision is recognised if, as a result of a past event, Eximbanka has a present legal or constructive obligation that can be

estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. Provisions

are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the

time value of money and, where appropriate, the risks specifi c to the asset.

A provision for onerous contracts is recognised when the expected benefi ts to be derived by Eximbanka from a contract are

lower than the unavoidable cost of meeting the obligations under the contract. The provision is measured at the present value

of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before

a provision is established, Eximbanka recognises any impairment loss on the assets associated with that contract.

(u) Employee benefi ts

(i) Defi ned contribution plans

Obligations for contributions to defi ned contribution pension plans are recognised as an expense in the income statement

when they are due.

(ii) Termination benefi ts

Termination benefi ts are recognised as an expense when Eximbanka is demonstrably committed, without realistic possibility of

withdrawal, to a formal detailed plan to terminate employment before the normal retirement date.



(iii) Short-term benefi ts

Short-term employee benefi ts obligations are measured on an undiscounted basis and are expensed as the related service is

provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profi t-sharing plans if Eximbanka

has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the

obligation can be reliably estimated.

(iv) Other long-term benefi ts

The Company’s obligation arising from other long-term benefi ts, i.e. other than pension plans, represents estimate of present

value of benefi ts that employees earned in return for their service in the current and prior years. Other long-term employee

benefi ts are retirement benefi ts according to Act No. 311/2001 as amended (Labour Code).

The liability is calculated by method of projected unit credit method for each employee and is discounted to its present value.

Discount rate used for calculation of present value of the liability is derived from yield curve of state bonds as at the balance

sheet date.

(v) New standards and interpretations not yet adopted

The following recently issued standards, amendments to standards and interpretations are not yet effective for the year

ended 31 December 2007, and have not been applied in preparing these fi nancial statements:

• IFRS 8 Operating Segments requires segment disclosure based on the components of the entity that management monitors

in making decisions about operating matters. Operating segments are components of an entity about which separate

fi nancial information is available that is evaluated regularly by management in deciding how to allocate resources and in

assessing performance. IFRS 8 will become mandatory from 1 January 2009 and Eximbanka does not expect to fall within

the scope of the new Standard.

• Revised IAS 23 Borrowing Costs. The revised Standard will require the capitalisation of borrowing costs that relate to assets

that take a substantial period of time to get ready for use or sale. Revised IAS 23 will become effective from 1 January 2009,

but is not relevant to the Eximbanka’s operations as Eximbanka does not have any qualifying assets for which borrowing

costs would be capitalised.

• Revised IAS 1 Presentation of Financial Statements will require information in fi nancial statements to be aggregated on the

basis of shared characteristics and introduces a statement of comprehensive income. Items of income and expense and

components of other comprehensive income may be presented either in a single statement of comprehensive income with

subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income).

Revised IAS 1 will become effective from 1 January 2009. Eximbanka is currently evaluating the impact.

• IFRIC 11 IFRS 2 Group and Treasury Share Transactions will require a share-based payment arrangement in which an entity

receives goods or services as consideration for its own equity-instruments to be accounted for as an equity-settled share-

based payment transaction, regardless of how the equity instruments needed are obtained. It also provides guidance

on whether share-based payment arrangements, in which suppliers of goods or services of an entity are provided with

equity instruments of the entity’s parent should be accounted for as cash-settled or equity-settled in the entity’s fi nancial

statements. It becomes mandatory for Eximbanka’s 2008 fi nancial statements but is not expected to have any impact on

those statements.

• IFRIC 12 Service Concession Arrangements. The Interpretation provides guidance to private sector entities on certain

recognition and measurement issues that arise in accounting for public-to-private service concession arrangements. IFRIC 12

will become mandatory from 1 January 2008 and is currently not relevant to Eximbanka’s operations as Eximbanka has not

entered into any service concession arrangements.

50 / 51


• IFRIC 13 Customer Loyalty Programmes. The Interpretation explains how entities that grant loyalty award credits to customers

who buy other goods or services should account for their obligations to provide free or discounted goods or services

(‘awards’) to customers who redeem those award credits. Such entities are required to allocate some of the proceeds of the

initial sale to the award credits and recognise these proceeds as revenue only when they have fulfi lled their obligations. The

Interpretation will become effective from 1 July 2008 and Eximbanka does not expect the Interpretation to have any impact

on the fi nancial statements.

• IFRIC 14 IAS 19 The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their interactions will be effective

for annual periods beginning on or after 1 January 2008. Eximbanka does not have any Defi ned Benefi t Assets and therefore

this Interpretation should have no impact on Eximbanka’s fi nancial statements.

4. USE OF ESTIMATES AND JUDGEMENTS

These disclosures supplement the commentary on fi nancial risk management.

Key sources of estimation uncertainty

Allowances for impairment

Assets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy 3 (h) (iv).

The specifi c counterparty component of the total allowances for impairment applies to claims evaluated individually for

impairment and is based on management’s best estimate of the present value of the cash fl ows that are expected to be

received. In estimating these cash fl ows, management makes judgements about counterparty’s fi nancial situation and the net

realisable value of any underlying collateral. Each impaired asset is assessed on its merits and the workout strategy and estimate

of cash fl ows considered recoverable are independently approved by the Bank Board.

Determining fair values

The determination of fair value for fi nancial assets and liabilities including collateral for which there is no observable market

price requires the use of valuation techniques as described in accounting policy 3 (h) (v). For fi nancial instruments that trade

infrequently and have little price transparency, fair value is less objective and requires varying degrees of judgement depending on

liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specifi c instrument.

Critical accounting judgements in applying Eximbanka’s accounting policies

Financial asset and liability classifi cation

Eximbanka’s accounting policies provide scope for assets and liabilities to be designated on inception into different accounting

categories in certain circumstances:

• In classifying fi nancial assets or liabilities as ‘trading’, management has determined that Eximbanka meets the description of

trading assets and liabilities set out in accounting policy 3 (j).

• In classifying fi nancial assets as held-to-maturity, management has determined that Eximbanka has both the positive intention

and ability to hold the assets until their maturity date as required by accounting policy 3 (l) (i).

Classifi cation of contracts

Contracts under which signifi cant insurance risk is transferred from the policyholder to Eximbanka are classifi ed as insurance

contracts. For some contracts Eximbanka considers whether amount of transferred insurance risk is signifi cant. Extent of

insurance risk depends on, whether there is possibility, that Eximbanka will be obliged to settle signifi cant additional claims

compared to similar investment product.



When considering possibility that these additional settlements will be due and signifi cant, whole duration of contract and

all insurance risks transferred by the contract are considered. A contract that qualifi es as an insurance contract remains an

insurance contract until all rights and obligations are extinguished or expire.

Contracts are classifi ed at level of homogeneous portfolios of contracts of individual products. If whole portfolio typically contains

contracts transferring insurance risk, Eximbanka does not examine individual contracts in order to identify not signifi cant group

of those transferring only not signifi cant insurance risk.

5. FINANCIAL RISK MANAGEMENT

(a) Introduction

Eximbanka has exposure to the following risks from its use of fi nancial instruments:

• credit risk

• liquidity risk

• market risk

• operational risk

Information on the exposure to each of the above risks; the objectives, policies and processes for measuring and managing risk

and on the management of Eximbanka’s capital is set out below.

Risk management framework

The Bank Board has overall responsibility for the establishment and oversight of the risk management framework. The Board

has established the Asset and Liability Committee (ALCO), which is responsible for developing and monitoring risk management

policies in its specifi c areas.

The risk management policies of Eximbanka are established to identify and analyse the risk faced by Eximbanka, to set

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems

are reviewed regularly to refl ect changes in market conditions, products and services offered. Eximbanka aims to develop a

disciplined and constructive control environment, in which all employees understand their roles and obligations.

The Supervisory Board is responsible for monitoring compliance with the risk management policies and procedures, and for

reviewing the adequacy of the risk management framework in relation to the risks faced by Eximbanka. The Supervisory Board

is assisted in these functions by Internal Audit. Internal Audit regularly reports to both the Supervisory Board and the Bank

Board about procedures and fi ndings relating to risk management.

(b) Credit risk

Credit risk represents risk of default of debtor’s loan on time and in full amount as a consequence of that fi nancial loss to

Eximbanka might arose. For risk management reporting purposes, Eximbanka considers all elements of credit risk exposure.

The risk management department coordinates management of credit risk. This department is also responsible for evaluation of

level and quality of risk management.

The risk management department reports to the Bank Board and Supervisory Board and is responsible for oversight of the credit

risk, including:

• Formulating credit policies and requirements, covering collateral requirements, credit assessment, setting up risk level and

reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements.

• Establishing the authorisation structure for the approval and renewal of the credit facilities. All facilities and individual loans

require approval by the Business committee or the Bank Board as appropriate.

52 / 53


• Reviewing and assessing credit risk. The Credit department assesses all credit exposures in excess of designated limits and

conditions, prior to facilities being committed to customers. Renewals and reviews of facilities are subject to the same review

process.

• Proposals of limiting concentration of exposure to counterparties, geographies and industries.

• Developing and maintaining of Eximbanka’s risk grading in order to categorise the exposures according to the degree of risk

of fi nancial loss faced and to focus management to the attendant risks. The risk grading system is used in determining where

impairment provisions may be required against specifi c credit exposures. The current risk grading consist of three grades

refl ecting varying degrees of risk of default and the availability of collateral or other credit risk mitigation.

• The responsibility on setting the risk grades and overall evaluation of a risk.

• Providing advices and specialist skills to business units to promote best practice in the management of credit risk.

• Regular report is provided to the Business committee on the credit quality of the portfolio and if necessary appropriate corrective

actions are proposed and taken to minimise potential losses.

Eximbanka prepares several reports to monitor credit risks. It focuses mainly on the monitoring of exposures, delinquencies and

losses from individual products, evaluation of effectiveness of receivables recoveries, monitoring of selected indicators of selected

clients during the loan relationship, monitoring of development of unauthorised debit balances.

Eximbanka monitors concentrations of credit risk by sector and by geographic location. An analysis of concentrations of credit

risk is shown below:

Loans and advances Loans and advances Investment

to customers to banks securities

2007 2006 2007 2006 2007 2006

SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000

Concentration by sector

Government - - - - 47,769 48,113

Corporate 1,752,606 1,303,483 - - - -

Bank - - 5,966,793 6,238,481 - -

1,752,606 1,303,483 5,966,793 6,238,481 47,769 48,113

Loans and advances Loans and advances Investment

to customers to banks securities

2007 2006 2007 2006 2007 2006


Concentration by location

Slovak Republic 1,752,606 1,303,483 5,966,793 6,238,481 47,769 48,113

Credit risk is against Eximbanka’s direct clients.

Guarantees issued to customers of SKK 2,424 million (2006: SKK 1,905 million) are for corporate clients in the Slovak Republic.

Concentration by location for loans and advances is measured based on the location of the entity holding the assets, which has

a high correlation with the location of the borrower. Concentration by location of the investment securities is measured based on

the location of the issuer of the security.



Classifi cation of receivables

Individual receivables are assessed individually and Eximbanka classifi es them based on characteristics of impairment into the

following categories:

• Non-impaired – 0-90 days overdue, no trigger of impairment

• Impaired – receivables 0-90 days overdue with triggers of impairment and in level of impairment not more than 50%

• Default – overdue days more than 90 days or level of impairment more than 50%

Loans and advances to Loans and advances to Investment

customers banks securities

2007 2006 2007 2006 2007 2006


Individually impaired

Grade 2: impaired 338,718 448,084 - - - -

Grade 3: defaulted 48,720 79,220 - - - -

Of which: loans with renegotiated terms 7,399 17,591 - - - -

Gross amount 387,438 527,304 - - - -

Allowance for impairment (121,043) (95,189) - - - -

Carrying amount 266,395 432,115 - - - -

Standard

Grade 1: standard 1,486,211 871,368 5,966,793 6,238,481 47,769 48,113

Of which: loans with renegotiated terms 24,361 5,964 - - - -

Gross amount 1,486,211 871,368 5,966,793 6,238,481 47,769 48,113

Total carrying amount 1,752,606 1,303,483 5,966,793 6,238,481 47,769 48,113

Non-impaired loans and securities

Some loans and securities, with principal and interest overdue, Eximbanka does not consider appropriate to evaluate as impaired

loans and securities based on collateral received or payment history. Those loans and securities are included in the grade 1 of the

internal risk grading system. The level of these loans in 2007 is in amount SKK 504 thousand. (2006: SKK 0).

Impaired loans and securities

Impaired loans and securities are loans and securities for which Eximbanka does not expect collection of principal and interest rate

according to the contractual terms of the loan/securities or expects only partly collection of principal and interest due according

to the contractual terms of the loan/securities agreement(s). These loans are graded 3 and 2 in the internal credit risk grading

system.

Loans and guarantees with renegotiated terms

Renegotiated loans and guarantees are loans and guarantees with renegotiated terms as a consequence of worsen fi nancial

position of debtor and Eximbanka agreed with pronouncement in favour of debtor that would not be considered under common

conditions. If loans and guarantees are renegotiated, they remain in that group even favourable outcomes occur after the

renegotiation.

Allowances for impairment

Eximbanka establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The

main components of this allowance are a specifi c loss component that relates to individually signifi cant exposures. Creation of

allowances for impaired receivables is based on internal regulations.

Creation of allowances on impaired receivables is in compliance with IFRS. Allowance for impairment represents loss arising from

impaired receivable in amount of difference between carrying value of receivable and actual value of expected future cash fl ows

discounted by initial effective interest rate considering the realisation of collateral.

54 / 55


Write-off policy

Eximbanka writes off a loan/security balance and any related allowances for impairment losses, when it determines that the

loans/securities are uncollectible. This determination is reached after considering information such as the occurrence of signifi cant

changes in the borrower/issuer’s fi nancial position such that the borrower/issuer can no longer pay the obligation, or that proceeds

from collateral will not be suffi cient to pay back the entire exposure. For smaller balance standardised loans, charge off decisions

generally are based on a product specifi c past due status.

Set out below is an analysis of the gross and net of allowance for impairment amounts of individually impaired assets by risk

grade.

Loans and advances to Loans and advances to Investment

customers banks securities

Gross Net Gross Net Gross Net


31 December 2007

Grade 2: Individually impaired 338,718 258,992 - - - -

Grade 3: Defaulted 48,720 7,403 - - - -

387,438 266,395 - - - -

31 December 2006

Grade 2: Individually impaired 448,084 424,844 - - - -

Grade 3: Defaulted 79,220 7,271 - - - -

527,304 432,115 - - - -

Provisions for guarantees issued for customers are created when there is a present obligation and also the probability of an

outfl ow of resources embodying economic benefi ts to settle that obligation.

2007 2006

SKK ‘000 SKK ‘000

Guarantees issued for customers with provisions 1,527,091 1,400,737

Guarantees issued for customers with no provisions 896,692 504,623

2,423,783 1,905,360

Provision for guarantees issued for customers 164,180 173,704

Eximbanka holds collateral against loans and advances to customers and guarantees issued for customers in the form of mortgage

interests over property, other registered securities over assets and guarantees. Estimates of fair values are based on the value of

collateral assessed at the time of borrowing and are regularly updated. Collateral generally is not held over loans and advances

to banks, except when securities are held as part of reverse repurchase and securities borrowing activity.

Collateral

Before providing loans to corporate clients, Eximbanka generally requires collateral. The following collateral types are used:

• Cash

• State guarantees

• Bank guarantees

• Guarantee issued by a third party

• Mortgage over property

• Movables – property, plant and equipment

• Inventory

• Receivables

• Securities

• Bill of exchange

• Insurance pledge



The assessment of the net realisable value of the collateral is based on independent expert appraisals reviewed by the specialists

or internal evaluations prepared by Eximbanka.

An estimate of the fair value of collateral and other security enhancement held against loans and advances to customers is shown

below:

2007 2006

SKK ‘000 SKK ‘000

Against individually impaired

Mortgages 216,849 82,067

Movables 23,791 164,167

Receivables - -

Inventory - -

Against past due but not individually impaired

Receivables 509 -

Mortgages - -

Against neither past due nor impaired

Accounts and term deposits 1,500 -

Receivables 436,235 169,818

Movables 200,383 51,674

Mortgages 610,371 489,068

Inventory 55,150 52,058

1,544,788 1,008,852

An estimate of the fair value of collateral held against guarantees issued for customers is shown below:

2007 2006

SKK ‘000 SKK ‘000

Against guarantees issued for customers with provisions

Mortgages 159,514 128,305

Movables 15,634 125,648

Inventory 97,681 38,140

Against guarantees issued for customers with no provisions

Mortgages 431,431 424,966


Movables 469,824 516,649

Inventory 114,701 56,416

1,540,853 1,403,855

56 / 57


The exposure to the various business segments according to main product types is as follows:

31 December 2007 31 December 2006

Gross Impairment Carrying Gross Impairment Carrying

amount allowance amount amount allowance amount


Corporate customers

Large business 1,013,259 100,861 912,398 901,491 44,381 857,110

Small business 860,390 20,182 840,208 497,181 50,808 446,373

1,873,649 121,043 1,752,606 1,398,672 95,189 1,303,483

The group of large corporate customers comprise clients with yearly turnover over SKK 600 million. The group of small corporate

customers comprise clients with yearly turnover lower than SKK 600 million.

Recovery of delinquent receivables

Eximbanka manages and administers receivables with doubtful recovery. Legal and workout department takes legal steps with

the aim to achieve maximum recovery of defaulted receivables, including the realisation of collateral and acts as a representative

of Eximbanka in creditor committees when the debtor is bankruptcy.

Reinsurance

In 2007, Eximbanka reinsured short term risks by obligatory quota share treaty. SWISS RE, Switzerland operated as a main

reinsurer in that reinsurance scheme. Export loans to countries with higher risk (Russian federation, the Ukraine) were reinsured

facultative.

Good, long time cooperation with reinsurers in the claim settlement process, rating of reinsurers (Eximbanka monitors their rating

using international agencies annually) and their claim prevention activities are the base for recoverability of reinsurance assets.

Rating of re-insurance is in the following table:

SKK ‘000

31 December 2007 A+ A BB BB and lower Not rated Total

Reinsurer’s share of outstanding

claims reported but not yet

settled 3,055 954 - 184 120 4,313

Reinsurer´s share of

claims incurred but not

reported 15,081 4,574 - - 516 20,171

SKK ‘000

31 December 2006 A+ A BB BB and lower Not rated Total

Reinsurer’s share of outstanding

claims reported but not yet

settled 1,084 265 - - 225 1,574

Reinsurer’s share of claims

incurred but not reported 53,640 11,884 - - 9,431 74,955

According to agency AM Best



Settlement risk

The activities of Eximbanka may give rise to risk at the time of settlement of transactions and trades. Settlement risk is the

risk of loss due to the failure of a company to honour its obligations to deliver cash, securities or other assets as contractually

agreed.

For certain types of transactions Eximbanka mitigates this risk by conducting settlements through a clearing agent to ensure

that a trade is settled only when both parties have fulfi lled their contractual obligations. Settlement limits form part of the

credit approval / limit monitoring process. Acceptance of settlement risk on free settlement trades requires transaction specifi c

of counterparty specifi c approval from Risk Management Department.

(c) Liquidity risk

Liquidity risk is the risk that Eximbanka will encounter diffi culty in meeting obligations from its fi nancial liabilities. It relates to

ability of Eximbanka to obtain cash or cash equivalents as soon and effi ciently as possible.

Liquidity risk arises from the type of fi nancing of Eximbanka’s activities and the management of its positions. It includes

fi nancing the Eximbanka’s assets with instruments of appropriate maturity and the Eximbanka’s ability to dispose of its assets

for acceptable prices within acceptable time periods.

Management of liquidity risk

The Eximbanka’s approach to managing liquidity is to ensure, as far as possible, that it will always have suffi cient liquidity to

meet its liabilities when due, under both normal and stressed conditions (low liquidity with fi nancial instruments in the market,

permanent increase of interest rates during longer period, etc.), without incurring unacceptable losses or risking damage to the

Eximbanka’s reputation.

Dealing department receives information from other departments regarding the liquidity profi le of their fi nancial assets and

liabilities and details of other projected cash fl ows arising from projected future business. This information is subsequently used

for management of liquidity risk in Eximbanka.

The liquidity position is monitored on a daily basis. All liquidity policies and procedures are subject to review and approval of

ALCO. Reports on the liquidity position are submitted to the ALCO meeting.

Exposure to liquidity risk

Exposure of liquidity risk is assessed and managed within the process of assets and liabilities management of Eximbanka and

internal rules require regular monitoring of assets and liabilities maturity within defi ned time bands and internal indicators of

liquidity. Daily management of Eximbanka liquidity is performed by the Dealing department and assessed by the ALCO.

The key measure used by Eximbanka for managing liquidity risk is the ratio of net liquid assets to liabilities with a maturity up

to 7 days. Details of the reported liquidity ratio at the reporting date and during the reporting period were as follows:

31 December 31 December

2007 2006

monthly monthly

End of period 1.71 7.97

Average for the period 4.97 7.72

Maximum for the period 8.57 13.85

Minimum for the period 1.71 4.51

58 / 59


The remaining period to maturity of assets and liabilities at 31 December 2007 was as follows:

Within 1-5 More than Not

1 year years 5 year specifi ed Total


Assets

Cash and cash equivalents 702,428 - - - 702,428

Loans and advances to banks 5,946,598 20,195 - - 5,966,793

Loans and advances to customers 1,353,038 399,568 - - 1,752,606

Insurance receivables 7,525 - - - 7,525

Reinsurance assets 2,435 - - 69,641 72,076

Investment securities 1,570 46,199 - - 47,769

Property and equipment - - - 135,814 135,814

Intangible assets - - - 8,699 8,699

Other assets 258 - - 626 884

Prepayments and accrued income 2,182 38 - - 2,220

8,016,034 466,000 - 214,780 8,696,814

Liabilities

Loans from banks 1,257,443 26,502 - - 1,283,945

Reinsurance payables 8,526 - - - 8,526

Insurance technical provisions - - - 543,636 543,636

Liability funds 590 2,938 - - 3,528

Other liabilities 120,941 - - - 120,941

Tax liability 2,901 - - - 2,901

Provisions - - - 311,599 311,599

Accruals and deferred income 2,660 - - - 2,660

1,393,061 29,440 - 855,235 2,277,736

The remaining period to maturity of assets and liabilities at 31 December 2006 was as follows:




Assets

Cash and cash equivalents 562,344 - - - 562,344

Loans and advances to banks 6,238,481 - - - 6,238,481

Loans and advances to customers 1,165,488 137,995 - - 1,303,483

Insurance receivables 128,280 - - - 128,280

Reinsurance assets - - - 131,890 131,890

Investment securities 1,570 46,543 - - 48,113



Corporate income tax receivable 9,326 - - - 9,326

Other assets 14,522 - - 662 15,184

Prepayments and accrued income 2,029 4 - - 2,033

8,122,040 184,542 - 288,932 8,595,514

Liabilities

Loans from banks 888,048 - - - 888,048

Reinsurance payables 7,478 - - - 7,478


Liability funds 3,750 1,840 - - 5,590

Other liabilities 400,011 - - - 400,011

Provisions - - - 310,079 310,079

Accruals and deferred income 2,339 - - - 2,339

1,301,626 1,840 - 946,997 2,250,463



The remaining period to maturity on off balance sheet items at 31 December 2007 was as follows:




Off balance sheet

Guarantees issued to customers 1,104,709 1,097,832 33,794 187,448 2,423,783

Irrevocable credit lines 278,087 - - - 278,087

1,382,796 1,097,832 33,794 187,448 2,701,870

The remaining period to maturity on off balance sheet items at 31 December 2006 was as follows:




Off balance sheet

Guarantees issued to customers 851,293 1,020,852 - 33,215 1 905,360

Irrevocable credit lines 82,493 - - - 82,493

933,786 1,020,852 - 33,215 1,987,853

(d) Market risk

Management of market risks

Eximbanka manages market risk only in relation to interest rate risk and to foreign exchange risk.

Eximbanka uses different fi nancial instruments to management of market risk; these include forward agreements, swaps and

options. During the year 2007, Eximbanka entered into a currency swap.

The primary aim of market risk management is compliance with stipulated limits that are defi ned in Eximbanka’s internal

regulations. Market risk is the risk that changes in market prices, such as interest rate, equity prices, foreign exchange rates and

credit spreads (not relating to changes in the debtor’s/issuer’s credit standing) will affect the Eximbanka’s income or the value

of its assets.

Eximbanka estimates the impact of changes of signifi cant market variables on its insurance technical provisions (provision for

premium defi ciency resulting from the liability adequacy test performed on unearned premium provision – for detail see note

11 (e)).

The impact of change (sensitivity) of foreign currency exchange rates (change of central rate for EUR conversion) on would be

as follows:

SKK ‘000

Increase/(decrease) of profi t for the year

Expected rate of 33,000 SKK/EUR (7,449)

Expected rate of 32,500 SKK/EUR (8,974)

Foreign countries market risk arising from insurance activities is managed and measured as described in note 6.

60 / 61


Interest rate risk

Interest rate risk is the potential impact on the value of fi nancial assets and liabilities arising from changes in market interest

rates.

Interest rate risk is regularly monitored by the Dealing department. Most of the fi nancial instruments used are short term in nature

and have fi xed interest rates.

The main source of the interest rate risk results from reassessment of interest rates (fi xed and variable), which is due to timing

differences in maturity dates of assets and liabilities and off-balance sheet positions.

Exposure to interest rate risk

Limits, measurements and methods of market risk management are defi ned in the internal regulations of Eximbanka. Interest

rate risk is regularly evaluated and monitored by the Dealing department. GAP analyses is used for interest rate risk monitoring.

The impact of interest rate risk is measured by categorising assets and liabilities according to maturity and assessing the impact of

possible or expected changes in interest rate.

The Bank Board is responsible for setting interest rates for Eximbanka’s products.

The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the

Eximbanka’s fi nancial assets and liabilities to rate changes. Change of net interest income is calculated on the monthly basis for

whole year change of net interest income for change of interest rate by 1, 10, 20, 50, 100 and 200 basis points. In the following

table possible change of net interest income by the change of interest rate by 50, 100 basis points is shown.

100 bp 50 bp parallel income increase parallel income increase

SKK ‘000 SKK ‘000

2007

At 31 December 25,785 12,893

Average for the period 35,975 17,988

Maximum for the period 42,295 21,148

Minimum for the period 25,785 12,893

2006

At 31 December 29,741 14,871

Average for the period 35,850 17,925

Maximum for the period 40,270 20,135

Minimum for the period 29,741 14,871

The average effective interest rates at 31 December 2007 and the periods in which interest-bearing assets and liabilities denomi-

nated in Slovak crowns reprice were as follows:

Effective 3 months 1 year or less but 1 – 5 over

interest rate or less over 3 months years 5 years Total

% SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000

Interest-bearing asset

Cash and cash equivalents 3.90 674,247 - - - 674,247

Loans and advances to banks 1.80 1,088,753 4,788,653 20,195 - 5,897,601

Loans and advances to customers 3.88 125,319 301,296 108,532 - 535,147

Investment securities 4.42 - 1,570 46,199 - 47,769

1,888,319 5,091,519 174,926 - 7,154,764

Interest-bearing liabilities

Loans from banks - - - - -

Interest rate repricing gap 1,888,319 5,091,519 174,926 - 7,154,764

Cumulative interest rate repricing gap 1,888,319 6,979,838 7,154,764 7,154,764 -



The average effective interest rates at 31 December 2007 and the periods in which interest-bearing assets and liabilities

denominated in Euro reprice were as follows:




Interest-bearing assets


Loans and advances to banks 0.60 62,998 - - - 62,998

Loans and advances to customers 6.11 379,125 422,330 291,036 - 1,092,491

470,090 422,330 291,036 - 1,183,456


Loans from banks 4.82 435,150 699,527 26,502 - 1,161,179

Interest rate repricing gap 34,940 (277,197) 264,534 - 22,277

Cumulative interest rate repricing gap 34,940 (242,257) 22,277 22,277 -

The average effective interest rates at 31 December 2006 and the periods in which interest-bearing assets and liabilities in Slovak

crowns reprice were as follows:






Loans and advances to banks 1.71 803,248 5,065,518 - - 5,868,766


Investment securities 4.23 - 1,570 46,543 - 48,113

1,479,753 5,349,485 66,461 - 6,895,699


Loans from banks - - - - -

Interest rate repricing gap 1,479,753 5,349,485 66,461 - 6,895,699

Cumulative interest rate repricing gap 1,479,753 6,829,238 6,895,699 6,895,699 -

62 / 63


The average effective interest rates at 31 December 2006 and the periods in which interest-bearing assets and liabilities

denominated in Euro reprice were as follows:

Effective 3 months 1 year or less but 1 – 5 over 5

interest rate or less over 3 months years years Total




Loans and advances to banks 0.60 362,668 - - - 362,668


919,404 198,449 119,351 - 1,237,204


Loans from banks 3.81 849,775 26,068 - - 875,843

Interest rate repricing gap 69,629 172,381 119,351 - 361,361

Cumulative interest rate repricing gap 69,629 242,010 361,361 361,361 -

Foreign exchange risk

Foreign exchange risk arises from the impact on the value of fi nancial assets and liabilities of changes in foreign exchange rates.

The main source of foreign exchange risk is from loans provided in foreign currency, while Eximbanka obtains the necessary

resources on the inter-bank market from money market fi nancial instruments. Eximbanka reduces its foreign exchange risk through

limits on unsecured foreign exchange positions and maintains on acceptable level adequate to its size and business activities.

The main currency excluding the Slovak crown in which Eximbanka holds positions is Euro.

Eximbanka uses method of “Value at risk” (VAR) for the calculation of foreign exchange risk from unsecured positions. Eximbanka

uses linear parametric model which describes mutual dependency among risk factors using covariation matrix. In case of Eximbanka,

VAR is calculated 1 day before with the probability level of 99% considering two year old data. Value of risk relating to the above

mentioned parameters as at 31 December 2007 amounted SKK 497 thousand that represents 0.83% from the value of opened

foreign exchange position.



Eximbanka had the following foreign currency-denominated assets and liabilities at 31 December 2007:

EUR CZK GBP Other SKK Total


Assets

Cash and cash equivalents 27,967 12 - 202 674,247 702,428

Loans and advances to banks 62,998 5 - 6,189 5,897,601 5,966,793

Loans and advances to customers 1,092,491 50,031 54,378 20,559 535,147 1,752,606

Insurance receivables - - - - 7,525 7,525

Reinsurance assets 103 - - 2,332 69,641 72,076

Investment securities - - - - 47,769 47,769

Property and equipment - - - - 135,814 135,814

Intangible assets - - - - 8,699 8,699

Other assets - 4 - 19 861 884

Prepayments and accrued income - - - - 2,220 2,220

1,183,559 50,052 54,378 29,301 7,379,524 8,696,814

Liabilities

Loans from banks 1,161,179 48,201 54,347 20,218 - 1,283,945

Reinsurance payables 518 - - 8,008 - 8,526

Insurance technical provisions - - - - 543,636 543,636

Liability funds - - - - 3,528 3,528

Other liabilities 82,664 1,622 - 5,725 30,930 120,941

Tax liability - - - - 2,901 2,901

Provisions 159,353 1,286 - 3,542 147,418 311,599

Accruals and deferred income 67 - - 49 2,544 2,660

1,403,781 51,109 54,347 37,542 730,957 2,277,736

Exposure in the Slovak crowns includes refi nancing loans provided to banks fi nanced by the own sources of Eximbanka.

64 / 65


Eximbanka had the following foreign currency-denominated assets and liabilities at 31 December 2006:

EUR USD Other SK Total


Assets

Cash and cash equivalents 30,284 169 31 531,860 562,344

Loans and advances to banks 362,668 6,585 462 5,868,766 6,238,481

Loans and advances to customers 844,252 12,271 - 446,960 1,303,483

Insurance receivables 106,881 - - 21,399 128,280

Reinsurance assets 123 - 4,101 127,666 131,890

Investment securities - - - 48,113 48,113



Corporate income tax receivable - - - 9,326 9,326

Other assets 1,353 540 4 13,287 15,184

Prepayments and accrued income - - - 2,033 2,033

1,345,561 19,565 4,598 7,225,790 8,595,514

Liabilities

Loans from banks 875,843 12,205 - - 888,048

Reinsurance payables 655 - 6,823 - 7,478


Liability funds - - - 5,590 5,590

Other liabilities 356,602 6,425 458 36,526 400,011

Provisions 166,199 1,894 5,611 136,375 310,079

Accruals and deferred income 94 - - 2,245 2,339

1,399,393 20,524 12,892 817,654 2,250,463

Exposure in the Slovak crowns includes refi nancing loans provided to banks fi nanced by the own sources of Eximbanka.

(e) Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Eximbanka’s pro-

cesses, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as

those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour.

Eximbanka’s objective is to manage operational risk so as to balance the avoidance of fi nancial losses and damage to its reputa-

tion with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The basic goal of the operational risk management is mitigation or reduction of losses caused by operational risk.



The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior

management in each department. This responsibility is supported by the development of overall standards for the management

of operational risk in the following areas:

• requirements for the reconciliation and monitoring of transactions

• compliance with regulatory and other legal requirements

• documentation of controls and procedures

• requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address

the risks identifi ed

• requirements for the reporting of operational losses and proposed remedial action

• development of contingency plans

• training and professional development

• ethical and business standards

• risk mitigation, including insurance where this is effective.

Compliance with internal guidelines is supported by a program of periodic reviews undertaken by Internal Audit. The results of

Internal Audit reviews are discussed with the relevant managers, with summaries submitted to the Supervisory Board and the

Bank Board.

(f) Capital management

The Ministry of Finance of the Slovak Republic (‘MFSR’) issued the rules of prudent conduct of business for Eximbanka.

By implementation of current capital requirements, the MFSR requires Eximbanka to maintain a preset ratio of total capital to

the total risk-weighted assets. Eximbanka calculates the requirements based upon internal regulation on capital adequacy.

The equity capital is defi ned as the difference between balances contributing to the equity and balances decreasing its value:

• balances contributing to the equity comprise share capital, reserve funds and other funds created from profi t, capital funds,

retained earnings

• balances decreasing the value of equity comprise accumulated losses from previous years, loss for the current year, the part

of expected loss on assets, by which the valuation of these assets had not been modifi ed, and a part of off-balance sheet

balances against which the provisions had not been created, set up costs, net book value of software.

Eximbanka has complied with all externally imposed capital requirements throughout the period.

(g) Capital management

There have been no material changes in Eximbanka’s management of capital during the period.

66 / 67


Eximbanka’s capital position was as follows:

2007 2006

SKK ‘000 SKK ‘000

Regulatory capital

Tier 1 capital

Ordinary share capital (note 20) 3,000,000 3,000,000

Reserve funds and other funds created from profi t (note 21) 1,601,247 1,540,247

Other capital funds (note 21) 1,694,236 1,694,236

Retained earnings (note 22) 49,308 49,281

Less: intangible assets (8,699) (7,530)

Total 6,336,092 6,276,234

Tier 2 capital

Subordinated debt - -

Other reserves - -

Total 6,336,092 6,276,234

Risk-weighted assets (RWA)

RWA - weight 20% 1,343,048 1,378,787

RWA - weight 50% 895,986 745,208

RWA - weight 100% (loans and advances to customers, insurance

receivables, reinsurance assets, property and equipment, other assets,

payment guarantees) 2,507,633 1,932,077

Other risk weighted assets 7,464 10,525

Total RWA include also off –balance sheet items 4,754,131 4,066,597

Capital ratios

Total regulatory capital expressed as a percentage of total risk-weighted assets 133.28% 154.34%

6. INSURANCE RISK

The primary insurance activity of Eximbanka relates to credit insurance, i.e. the risk of loss resulting from credit risk is subject to

the insurance contract. As such it is exposed to uncertainty about timing, frequency and severity of claims covered by respective

contract. Eximbanka uses several methods (included in its underwriting and reinsurance activities) to manage this insurance risk,

which are set and described by its:

– rules for prudence of operations (“Pravidlá obozretného podnikania”) as set by Ministry of Finance of Slovak republic in

2004,

– internal norms governing insurance capacity, management of insurance-related risks and other.

(a) Concentration risk in insurance

Short term risks

The total sum insured by Eximbanka related to short-term risks insurance amounts to SKK 9.62 billion as at 31 December 2007

(2006: SKK 8.13 billion). Out of it the 5 largest clients represent 60.1% of the total short term risks portfolio.



The structure of sum insured based on the risk category *

At 31 December At 31 December

2007 2006

Category 0 55.2% 58.6%

Category I 15.5% 14.2%

Category II 9.2% 11.5%

Category III 9.1% 1.0%

Category IV 1.9% 4.8%

Category V 6.9% 1.6%

Category VI 0.0% 5.0%

Category VII 2.2% 3.3%

Total 100.0% 100.0%

* countries included in categories as per OECD classifi cation, category 0 represents the lowest and category VII the highest risk.

Majority of the risks accepted as at 31 December 2007 relates to the countries included in the categories with lowest risks (EU:

78.4 %, OECD 80.9 %).

Out of the total sum insured 93.2% was reinsured either through quota share treaties or facultative treaties and only 6.8% relates

to short term non-reinsured risks

Medium and long term risks

As at 31 December 2007 Eximbanka recorded medium and long-term risks insurance amounts to SKK 8.57 billion (2006: SKK

8.63 billion).

The risks were reassessed on a monthly basis in 2007 based on the payments made (principal plus interest) and as at year-end no

claim relating to the medium and long-term risks was recorded.

(b) Estimates related to insurance activities

Assumptions used for estimates of assets and liabilities related to insurance contracts are selected in order to ensure suffi cient

amount of provisions to cover liabilities resulting from insurance contracts to the extent in which the claim settlement can be

appropriately anticipated.

Despite of this, with reference to uncertainty at creation of claim provisions, it is probable, that fi nal result will be different to the

originally determined liability.

At the balance sheet date provision for expected ultimate claim costs of all insured events incurred to the date is created,

regardless they were reported or not, which includes also expenses for settlement of insured events and from which sum of

already paid settlements is deducted.

Provision for these claims is not discounted.

Source data used as inputs for assumptions is mostly internal data of Eximbanka, obtained though detail analysis performed

at least once a year. Assumptions are examined in order to avoid inconsistencies with available market information or other

published data. For some claims external information is used. Eximbanka thoroughly observes current trends and development.

In case suffi cient information for determination of reliable development of claims is not available, mostly in fi rst years, prudent

assumptions are used.

68 / 69


Estimate of incurred, but not reported claims (IBNR) is generally affected by higher rate of uncertainty than estimate of reported

damages, for which more information is available. IBNR claim do not have to be obvious during many years after the event, which

was cause of damage, occurred.

Each reported claim is assessed separately, with respect of origination circumstances of damage, information available to

adjusters and historical experiences with similar insured events. Estimate of individual damages is adjusted after obtaining of new

information.

Problems with estimates differ according to individual types of insurance due to different reasons, for example:

• Variances in terms of insurance contracts;

• Variances in complexity of claims;

• Amount of individual damages;

• Delay between origination and reporting of insured events.

Large claims are mostly assessed separately and valued individually, in order to avoid unacceptable bias of statistical data.

Using of historical data on claims development assumes, that past claims experience will repeat in future. There are reasons, why

this does not have to be valid. These have been taken into account through modifi cation of methods to the extent, they were

anticipated. These reasons include for example:

• Economic, legal, political and social trends (resulting from differences in anticipated infl ation rate);

• Changes in composition of insurance contracts;

• Infl uence of insured events of extraordinary extent.

Due to low frequency of reported claims and their high severity, as well as due to relatively short claim history in Eximbanka,

the statistical methods do not give reliable results. Consequently, the IBNR provision was determined based on the professional

judgement. In 2008, Eximbanka expects to have more past data to use statistical methods to re-assess the IBNR by more

sophisticated method.

IBNR and RBNS provisions are estimated in gross amount and shares of reinsurer are quantifi ed through separate calculation.

Eximbanka has entered several reinsurance contracts (quota reinsurance and excess of loss), which should decrease risk resulting

from incurred insured events. Eximbanka assesses credit rating of individual reinsurers at primary measurement of reinsurance

assets.

7. CASH AND CASH EQUIVALENTS

2007 2006

SKK ‘000 SKK ‘000

Loans and advances to banks with original

contractual maturity up to 3 months (note 8) 702,428 562,344



8. LOANS AND ADVANCES TO BANKS

2007 2006

SKK ‘000 SKK ‘000

Repayable on demand 15,947 72,694

Other loans and advances by remaining maturity:

- 3 months or less 1,770,570 1,292,897

- 1 year or less but over 3 months 4,807,324 5,059,305

Cash collateral received (note 18) 75,380 375,929

6,669,221 6,800,825

Less amounts with original contractual maturity

up to 3 months (note 7) (702,428) (562,344)

5,966,793 6,238,481

Loans and advances to banks include amounts totalling SKK 5,889,739 thousand (2006: SKK 5,829,707 thousand) which were

provided for the purpose of fi nancing the export and import activities of designated customers of those banks. The credit risk on

these loans is borne by the counterparty banks.

Cash collateral received comprises amounts received as security for loans (see also note 18).

9. LOANS AND ADVANCES TO CUSTOMERS

2007 2006

SKK ‘000 SKK ‘000

Repayable on demand 48,291 61,630

Other loans and advances to customers by remaining maturity:

- 3 months or less 580,087 655,430

- 1 year or less but over 3 months 775,385 543,617

- 5 years or less but over 1 year 469,886 137,995

1,873,649 1,398,672

Allowances for impairment (note 10) (121,043) (95,189)

1,752,606 1,303,483

70 / 71


10. IMPAIRMENT LOSSES

The movements on allowances for impairment losses were as follows:

Loans and

advances to Insurance Other

customers receivables assets

(note 9) (note 11) (note 15) Total

SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000

At 1 January 2006 93,539 1,956 92 95,587

Charge for the year 3,951 92 - 4,043

Exchange rate movements (2,301) - - (2,301)

At 31 December 2006 95,189 2,048 92 97,329

At 1 January 2007 95,189 2,048 92 97,329

Charge for the year 26,644 39 12,010 38,693

Exchange rate movements (790) - - (790)

Release of impairment losses on insurance

receivables written off - (311) - (311)

At 31 December 2007 121,043 1,776 12,102 134,921

Impairment losses – charge for the year 2007 38,693

Write-off of receivables with no allowances for impairment 49

Impairment losses 38,742

11. INSURANCE ACTIVITIES

a) Insurance receivables

2007 2006

SKK ‘000 SKK ‘000

Receivables from insurance activities 7,437 114,513

Other receivables from insurance activities 88 13,767

Impaired receivables from insurance activities 1,776 2,048

9,301 130,328

Value adjustment to doubtful insurance receivables (note 10) (1,776) (2,048)

7,525 128,280

b) Reinsurance assets

2007 2006

SKK ‘000 SKK ‘000

Reinsurance receivables 2,433 4,221

Other receivables from reinsurance 3 3

Reinsurers’ share on technical provisions 69,640 127,666

72,076 131,890

As in prior periods, Eximbanka used an obligatory proportional reinsurance treaty (Quota Share) to reinsure short-term risks in

2007. The treaty was concluded with major European reinsurance companies and the leading reinsurer is Swiss Re, Switzerland.

Loans for exports to countries with a higher risk rate, i.e. Russian federation and Ukraine, were reinsured facultatively.



c) Analysis of movements in technical provisions

The movements in the technical provisions were as follows:

Reported but not settled claims provision (RBNS)

2007 2006

Gross Reinsurance Net Gross Reinsurance Net


At 1 January 3,392 1,574 1,818 41,954 5,924 36,030

Claims paid in current year (2,513) (1,327) (1,186) (9,676) (6,386) (3,290)

Change of provisions 19,861 12,508 7,353 17,812 11,342 6,470

Other movements (14,124) (8,442) (5,682) (46,698) (9,306) (37,392)

At 31 December 6,616 4,313 2,303 3,392 1,574 1,818

Incurred but not reported claims provision (IBNR)

2007 2006



At 1 January 198,251 74,955 123,296 242,553 104,294 138,259

Claims paid in current year (19,150) (12,267) (6,883) (14,302) (9,439) (4,863)

Change of provisions 60,000 16,500 43,500 30,000 16,500 13,500

Other movements (130,639) (59,017) (71,622) (60,000) (36,400) (23,600)

At 31 December 108,462 20,171 88,291 198,251 74,955 123,296

Unearned premium reserve (UPR)

2007 2006



At 1 January 435,275 51,137 384,138 325,191 57,210 267,981

Premiums written during the year 107,431 31,956 75,475 217,929 31,367 186,562

Premiums earned during the year (52,352) (31,838) (20,514) (57,052) (31,314) (25,738)

Other movements (77,004) (6,099) (70,905) (50,793) (6,126) (44,667)

At 31 December 413,350 45,156 368,194 435,275 51,137 384,138

72 / 73


Provision for premium defi ciency

2007 2006



At 1 January - - - - - -

Creation during the year 15,208 - 15,208 - - -

Release during the year - - - - - -

Other movements - - - - - -

At 31 December 15,208 - 15,208 - - -

d) Payables arising out of reinsurance operations

2007 2006

SKK ‘000 SKK ‘000

Payables arising out of reinsurance operations 8,493 7,458

Other payables arising out of reinsurance operations 33 20

8,526 7,478

e) Insurance technical provisions

During 2007 following movements were recorded on the account of insurance technical provisions:

At 1 January Creation Release At 31 December

2007 2007 2007 2007

SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000

Unearned premium reserve 435,275 55,079 (77,004) 413,350

Provision for premium defi ciency - 15,208 - 15,208

Creation of provision for incurred but not yet

reported claims 198,251 60,000 (149,789) 108,462

Creation of provision for reported but not yet

settled claims 3,392 19,861 (16,637) 6,616

636,918 150,148 (243,430) 543,636

During 2006 following movements were recorded on the account of insurance technical provisions:

At 1 January Creation Release At 31 December

2006 2006 2006 2006

SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000

Unearned premium reserve 325,191 160,876 (50,792) 435,275

Creation of provision for incurred but not yet

reported claims 242,553 30,000 (74,302) 198,251

Creation of provision for reported but not yet

settled claims 41,954 17,812 (56,374) 3,392

609,698 208,688 (181,468) 636,918

Eximbanka performed an adequacy test for insurance technical provisions as at 31 December 2007. This test was performed

separately for short term and separately for mid and long term risks based on two criteria:

a) no loss from insurance activities has been recorded during Eximbanka’s activities, which indicate adequacy of pricing of

insurance products (adequate premium rates) and consequently that the related provision for unearned premium represents

adequate coverage for liabilities resulting from insurance contracts,

b) based on the loss ratio development, claims paid, creation and release of provisions for claims, a run off test as at 31 December

2007 for the previous 7 years was prepared. The test confi rmed the suffi ciency of claim provisions for expected liabilities from

insurance activities. Therefore, no additional creation of provisions is required.



74 / 75


Claims development analysis - gross amount at 31 December 2007

Short term risks

Underwriting year

2001 2002 2003 2004 2005 2006 2007 Total * SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 0 18,320 53,130 76,767 75,502 72,265 25,309 27,548 1 47,909 87,487 73,569 68,835 63,239 14,784 2 49,091 87,487 73,569 64,176 26,257 3 49,091 69,930 18,569 6,484 4 47,484 36,649 12,569 5 47,484 36,249 6 47,484

Estimate of cumulative claims 47,484 36,249 12,569 6,484 26,257 14,784 27,548 Cumulative claim payments (47,161) (36,249) (12,569) (2,370) (18,257) (4,691) -

Gross claim provisions as at 31 December 2007 323 - - 4,114 8,000 10,093 27,548 50,078 Run-off result (29,164) 16,881 64,198 69,018 46,008 10,525 -

Underwriting year (UY)

0 = given UY

1 = UY + 1 year

2 = UY + 2 years

* The difference to the total claim provisions in amount of SKK 115,078 thousand (includes RBNS of SKK 6,616 thousand and IBNR of 108,462

thousand) represents provision to medium and long term risk of SKK 65,000 thousand described below in this note.



Claims development analysis – reinsurers’ share at 31 December 2007

Short term risks

Underwriting year

2001 2002 2003 2004 2005 2006 2007 Total * SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000 0 12,124 34,089 46,706 44,551 41,095 12,990 14,882 1 32,837 34,089 44,596 40,151 35,138 6,786 2 33,664 34,089 44,596 39,926 15,350 3 33,664 28,049 11,596 3,619 4 33,239 24,649 8,296 5 33,239 24,649 6 33,239

Estimate of cumulative claims 33,239 24,649 8,296 3,619 15,350 6,786 14,882 Cumulative claim payments (33,013) (24,649) (8,296) (1,565) (12,050) (2,764) -

Reinsurers’ share on provisions as at 31 December 2007 226 - - 2,054 3,300 4,022 14,882 24,484 Run-off result (21,115) 9,440 38,410 40,932 25,745 6,204 -

Underwriting year (UY)

0 = given UY

1 = UY + 1 year

2 = UY + 2 years

Estimate of cumulative claims – total of claims paid and outstanding claims provision.

Run-off result – difference between the initial estimate of cumulative claims and the most current estimate of cumulative claims.

The negative run-off result in 2001 was caused by one-off large claims that were related to the respective UYs and reported one year later.

76 / 77


The test of adequacy of UPR resulted in creation of additional defi ciency provision in amount of SKK 15,208 thousand. The

amount was related to a medium/long term contracts which were concluded with standard insurance conditions valid at that

time. However, due to the increased diffi culties in collecting of payments of insured receivables and signifi cant movements of

exchange rates of related currencies, the UPR related to these contracts was no longer adequate to cover arising future risks.

As a result, Eximbanka recorded a provision for premium defi ciency in the respective amount.

Medium and long term risks

Eximbanka recorded a provision for the long and medium term risks for the claims incurred, but not reported, of SKK 65,000

thousand as at 31 December 2007 (2006: SKK 65,000 thousand).

f) Creation of provision for unearned premium (note 26).

Reinsurers’ share

Provisions for on provisions for

unearned premium unearned premium

2007 2007

SKK ‘000 SKK ‘000

Increase in 2007 55,079 118

Decreases in 2007 (77,004) (6,099)

(21,925) (5,981)

Reinsurers’ share

Provisions for on provisions for

unearned premium unearned premium

2006 2006

SKK ‘000 SKK ‘000

Increase in 2006 160,876 52

Decreases in 2006 (50,792) (6,125)

110,084 (6,073)

12. Investment securities

2007 2006

SKK ‘000 SKK ‘000

Available-for-sale securities

Slovak government bonds 47,769 48,113

All investment securities are included in available-for-sale portfolio.

The movements on available-for-sale securities during the year were as follows:

2007 2006

SKK ‘000 SKK ‘000

As at 1 January 48,113 75,456

Additions 2,084 2,143

Disposals (2,208) (28,208)

Losses from changes in fair value (220) (1,278)

As at 31 December 47,769 48,113



13. PROPERTY AND EQUIPMENT

Furniture Assets

Land and fi ttings & Motor not yet

buildings equipment vehicles in use Total


Cost

At 1 January 2006 202,018 89,200 14,381 5,440 311,039

Additions - - - 328 328

Transfers 91 5,677 - (5,768) -

Disposals - (8,669) - - (8,669)

At 31 December 2006 202,109 86,208 14,381 - 302,698

At 1 January 2007 202,109 86,208 14,381 - 302,698

Additions - - - 2,538 2,538

Transfers 77 285 2,176 (2,538) -

Disposals - (3,775) (594) - (4,369)

At 31 December 2007 202,186 82,718 15,963 - 300,867

Depreciation

At 1 January 2006 55,437 79,097 11,509 - 146,043

Depreciation 9,606 5,757 1,111 - 16,474

Disposals - (8,669) - - (8,669)

At 31 December 2006 65,043 76,185 12,620 - 153,848

At 1 January 2007 65,043 76,185 12,620 - 153,848

Depreciation 9,609 4,313 1,619 - 15,541

Disposals - (3,742) (594) - (4,336)

At 31 December 2007 74,652 76,756 13,645 - 165,053

Net book value

At 31 December 2007 127,534 5,962 2,318 - 135,814

At 31 December 2006 137,066 10,023 1,761 - 148,850

Property, plant and equipment is insured against theft and natural disaster up to SKK 320 million (2006: SKK 320 million).

At 31 December 2006 and 2007, no assets were held under fi nance leases. Eximbanka’s property is not pledged as security.

78 / 79


14. INTANGIBLE ASSETS

Assets

Software not yet in use Total

SKK ‘000 SKK ‘000 SKK ‘000

Cost

At 1 January 2006 161,070 5,151 166,221

Transfers 5,151 (5,151) -

Disposals (425) - (425)

At 31 December 2006 165,796 - 165,796

At 1 January 2007 165,796 - 165,796

Additions - 4,722 4,722

Transfers 4,722 (4,722) -

At 31 December 2007 170,518 - 170,518

Amortisation

At 1 January 2006 152,204 - 152,204

Amortisation 6,487 - 6,487

Disposals (425) - (425)

At 31 December 2006 158,266 - 158,266

At 1 January 2007 158,266 - 158,266

Amortisation 3,553 - 3,553

At 31 December 2007 161,819 - 161,819

Net book value

At 31 December 2007 8,699 - 8,699

At 31 December 2006 7,530 - 7,530



15. OTHER ASSETS

2007 2006

SKK ‘000 SKK ‘000


Other 660 1,967

12,986 15,276

Impairment losses (note 10) (12,102) (92)

884 15,184

16. LOANS FROM BANKS

2007 2006

SKK ‘000 SKK ‘000

Loans received by remaining maturity

- 3 months or less 557,916 561,624

- 1 year or less but over 3 months 699,527 326,424

- 5 years or less but over 1 year 26,502 -

1,283,945 888,048

Loans from banks include a loan from ING Bank totalling € 30,950 thousand at year end (2006: € 22,441 thousand) which

was drawn down in various tranches. These tranches were drawn down as part of a contract that was amended on 3 August

2006 with a total facility of € 35,000 thousand. The loan, which was obtained to fi nance export loans to Eximbanka’s clients,

is unsecured and bears interest at an annual rate of EURIBOR plus 0.20% p.a.

17. LIABILITY FUNDS

2007 2006

Interest rate equalisation fund: SKK ‘000 SKK ‘000

At 1 January 5,590 11,165

Payments (2,062) (5,575)

At 31 December 3,528 5,590

The purpose of the interest rate equalisation fund is to equalise differences between the interest rate on loans received on the

capital market and the interest rate on loans provided.

The fund was created from allocations from annual net profi ts, as evaluated by the Supervisory Board and approved by the

Ministry of Finance of the Slovak Republic. After allocation of outstanding balance the fund will be cancelled.

Payments of SKK 2,062 thousand were made from this fund on behalf of exporters during the year ended 31 December 2007

(2006: SKK 5,575 thousand).

80 / 81


18. OTHER LIABILITIES

2007 2006

SKK ‘000 SKK ‘000

Cash collateral received (note 8) 75,380 375,929

Loans overpayments 21,233 3,621

Social fund, bonuses and other amounts payable to employees 15,177 10,508

Other liabilities 9,151 9,953

120,941 400,011

The movements on the Social fund were as follows:

2007 2006

SKK ‘000 SKK ‘000

At 1 January 795 668

Creation 1,599 1,370

Drawings (1,420) (1,243)

At 31 December 974 795

19. PROVISIONS

Creation/ Foreign

At 1 January (release) exchange At 31 December

2007 for the year difference 2007

SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000

Provisions for guarantee liabilities 173,704 (4,500) (5,024) 164,180

Provisions for litigation and claims 136,375 11,044 - 147,419

310,079 6,544 (5,024) 311,599

20. REGISTERED CAPITAL

At 31 December 2007, Eximbanka’s total registered capital, which is wholly-owned by the State, amounted to SKK 3,000

million (2006: SKK 3,000 million).

There were no movements in registered capital during the year.



21. CAPITAL FUNDS

At 1 At 31

January December

2007 Transfers 2007

SKK ‘000 SKK ‘000 SKK ‘000

(a) Reserve fund 540,910 - 540,910

(b) Guarantee fund 587,736 - 587,736

(c) Commercial risks fund 391,601 20,000 411,601

(d) Export fund 500,000 - 500,000

(e) Non-commercial risk fund 1,194,236 - 1,194,236

(f) Non-commercial fund for medium term and long term risks 20,000 41,000 61,000

3,234,483 61,000 3,295,483

At 1 At 31

January December

2006 Transfers 2006

SKK ‘000 SKK ‘000 SKK ‘000

(a) Reserve fund 540,910 - 540,910

(b) Guarantee fund 587,736 - 587,736

(c) Commercial risks fund 391,601 - 391,601

(d) Export fund 500,000 - 500,000

(e) Non-commercial risk fund 1,194,236 - 1,194,236

(f) Non-commercial fund for medium term and long term risks 20,000 - 20,000

3,234,483 - 3,234,483

The funds have been established in accordance with the requirements of Article 30 of Act No. 80/1997 as amended which

outlines their sources and purposes. The Act makes no provision for any distribution from funds to the shareholder.

(a) The reserve fund is used to cover any losses or future adverse fi nancial conditions.

The reserve fund is created from allocations of annual net profi ts, after evaluation by the Supervisory Board and approval by

the Ministry of Finance of the Slovak Republic.

(b) The guarantee fund is to be used to guarantee exports or imports in accordance with conditions approved by the Bank

Board.

The fund is created from allocations of annual net profi ts, after evaluation by the Supervisory Board and approval by the

Ministry of Finance of the Slovak Republic.

(c) The commercial risks fund is to be used to cover reinsurable commercial and other risks arising on insuring short term export

credits in accordance with the conditions approved by the Bank Board.

The fund is created from allocations from annual net profi ts after evaluation by the Supervisory Board and approval by the


(d) The export fund is to be used to fi nance export loans provided by Eximbanka to fi nance export loans under loan conditions

approved by the Bank Board.

The fund is created from specifi cally designated contributions from the State.

82 / 83


(e) The non-commercial risk fund is to be used to cover non-reinsurable political and other risks arising on insuring short term

export credits and political and commercial risks arising on insuring medium and long term export credits in accordance with

the conditions of credit insurance approved by the Bank Board.

The fund is created from specifi cally designated contributions from the State.

(f) The non-commercial fund for medium term and long term risks is to be used to cover medium term and long term risks in

accordance with the credit insurance conditions approved by the Bank Board.

The fund is created from allocations from annual net profi ts, after evaluation by the Supervisory Board and approval by the


22. RETAINED EARNINGS

2007 2006

SKK ‘000 SKK ‘000

At 1 January 110,308 49,281

Transfer to commercial risks fund (20,000) -

Transfer to non-commercial fund for medium term and long term risks (41,000) -

Profi t for the year 74,247 61,027

At 31 December 123,555 110,308

The Bank Board will propose the following allocation of the profi t for the year ended 31 December 2007:

SKK ‘000

Transfer to commercial risks fund 32,000

Transfer to non-commercial medium term and long term risks fund 42,000

Profi t retained 247

74,247

23. OFF-BALANCE SHEET ITEMS

2007 2006

SKK ‘000 SKK ‘000

Contingent liabilities:

Guarantees issued to customers 2,423,783 1,905,360

Irrevocable loan committments 278,087 82,493

2,701,870 1,987,853



24. INTEREST INCOME

2007 2006

SKK ‘000 SKK ‘000

Loans and advances to banks 128,884 129,455

Loans and advances to customers 80,464 58,381

Debt securities 2,084 2,143

211,432 189,979

Included in the various captions of interest income for the year ended 31 December 2007 is interest income accrued on

impaired loans of SKK 14,574 thousand (2006: SKK 7,048 thousand).

Included in interest income for the year ended 31 December 2007 is interest income of SKK 2,084 thousand relating to

available-for-sale debt securities (2006: SKK 2,143 thousand).

25. INTEREST EXPENSE

2007 2006

SKK ‘000 SKK ‘000

Loans from banks 42,818 23,684

26. INCOME AND EXPENSES RELATING TO INSURANCE ACTIVITIES

a) Gross earned premium

2007 2006

SKK ‘000 SKK ‘000

Gross written premium 107,431 217,929

Change in reserve for unearned premium (note 11) 21,925 (110,084)

129,356 107,845

b) Gross earned premium ceded

2007 2006

SKK ‘000 SKK ‘000

Gross written premium ceded 31,956 31,367

Reinsurers‘ share on change in provision for unearned premium (note 11) 5,981 6,073

37,937 37,440

84 / 85


c) Insurance expenses, net of reinsurance

2007 2006

SKK ‘000 SKK ‘000

Claims paid (2,513) (9,676)

Claims paid ceded to reinsurers 1,327 6,386

Other insurance expenses (5,605) (5,328)

Other reinsurance expenses 62 66

(6,729) (8,552)

d) Creation of technical provisions for premium defi ciency

2007 2006

SKK ‘000 SKK ‘000

Creation of technical provisions for premium defi ciency (note 11) 15,208 -

e) Release of technical provisions for outstanding claims

2007 2006

SKK ‘000 SKK ‘000

Creation of provisions for incurred but not yet reported claims (note 11 (e) (60,000) (30,000)

Creation of provisions for reported, but not yet settled claims (note 11 (e) (19,861) (17,812)

Creation of technical provisions for outstanding claims during the year (79,861) (47,812)

Reinsurers’ share on creation of provisions for incurred

but not yet reported claims (note 11 (c) 16,500 16,500

Reinsurers’ share on creation of provisions for reported,

but not yet settled claims (note 11 (c) 12,508 11,342

Less reinsurers’ share 29,008 27,842

Release of provisions for incurred but not yet reported claims (note 11 (e) 149,789 74,302

Release of provisions for reported, but not yet settled claims (note 11 (e) 16,637 56,374

Release of technical provisions for outstanding claims paid during the year 166,426 130,676

Less reinsurers’ share on release of provisions for incurred

but not yet reported claims (note 11 (c) (71,284) (45,839)

Less reinsurers’ share on release of provisions for reported,

but not yet settled claims (note 11 (c) (9,769) (15,692)

Less reinsurers’ share (81,053) (61,531)

34,520 49,175



27. ADMINISTRATIVE EXPENSES

2007 2006

SKK ‘000 SKK ‘000

Employee costs:

Wages and salaries 49,543 44,944

Social insurance 15,121 13,736

Bonuses and other benefi ts 17,962 15,445

82,626 74,125

Other administrative expenses 64,663 56,399

147,289 130,524

The average number of employees during the year was 84 (2006: 82), including 4 members of top management.

28. INCOME TAX

2007 2006

SKK ‘000 SKK ‘000

Corporate income tax

Current year 23,855 21,820

Deferred tax - -

23,855 21,820

As there are no temporary differences, no deferred tax was recognised.

The accounting profi t before taxation is reconciled to the tax base as follows:

2007 2006

SKK ‘000 SKK ‘000


Non-deductible expenses:

Creation of provisions to guarantees provided - 26,951

Creation of provisions to litigations and claims 12,018 61,773

Creation of impairment to other assets 12,010 -

Creation of impairment to banking activities - 6,021

Other non-deductible expenses 9,737 10,454

Non-taxable income:

Release of provisions to guarantees provided (4,500) -

Release of technical reserves (400) (7,109)

Release of impairment to banking activities - (44,769)

Release of provisions to litigations and claims (974) -

Other non-taxable income (438) (21,326)

Tax base 125,555 114,842

Tax at 19% (2006: 19% ) 23,855 21,820

86 / 87


29. PROFIT BEFORE CHANGES IN OPERATING ASSETS AND LIABILITIES

2007 2006

SKK ‘000 SKK ‘000


Adjustments for non-cash items:

Depreciation and amortisation 19,094 22,961

Impairment losses 38,742 4,043

Change in provision for unearned premium (21,925) 110,084

Reinsurers’ share on change in provision for unearned premium 5,981 6,073

Creation of outstanding claims provision, net (34,520) (49,175)

Creation of technical provisions for premium defi ciency 15,208 -

Provisions 6,544 88,724

Loss on disposal of property and equipment 33 -

Write-off of advances (6) -

Translation difference on impairment losses and provisions (5,814) (21,898)

121,439 243,659

2007 2006

SKK ‘000 SKK ‘000

Net cash (used in)/from operating activities includes the following cash fl ows:

Interest received 217,028 175,853

Interest paid (36,189) (18,424)

180,839 157,429



30. RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability to control or exercise signifi cant infl uence over the other party

in making fi nancial or operational decisions. Eximbanka is wholly owned by the State.

In the normal course of business, Eximbanka is engaged in transactions with related parties. These transactions, which include

the taking and placing of deposits, loans and foreign currency operations are conducted on an arm’s length basis.

(a) Founder

Eximbanka did not enter into any transactions with its founder during the year.

(b) Enterprises related to the founder

Amounts due from companies related to the founder:

2007 2006

SKK ‘000 SKK ‘000

Assets

Investment securities 47,769 48,113

Loans and advances to customers 6,600 -

Impairment losses - -

Insurance receivables 7 13

Liabilities

Provisions - -

Off balance sheet

Guarantees issued - -

Transactions during the year were as follows:

Interest received and receivable 3,402 4,314

88 / 89


(c) Directors and senior management and Supervisory Board

Eximbanka did not enter into any transactions with directors or senior management, their close relatives or companies in which

they have a substantial interest during the year.

(d) Remuneration

Compensation paid to directors, senior management and members of the Supervisory Board during the year was as follows:

2007 2006

SKK ‘000 SKK ‘000

Bank Board

Short-term employee benefi ts 16,903 14,175

Post employment benefi ts 275 204

17,178 14,379

Supervisory Board

Short-term employee benefi ts 922 406

Post employment benefi ts - -

18,100 14,785

In addition to their salaries, Eximbanka also provides non-cash benefi ts to the management and contributes to a supplementary

annuity insurance plan (see note 31).



31. SUPPLEMENTARY RETIREMENT ANNUITY INSURANCE PLAN

Since 2000, Eximbanka has participated in a supplementary retirement annuity insurance plan for its employees. Supplementary

retirement annuity insurance is voluntary and is based on the contractual relationship between employee, employer and the

supplementary retirement annuity insurance plan.

Contributions for both the employee and Eximbanka are fi xed and defi ned in the benefi t plan.

For the year ended 31 December 2007, Eximbanka paid SKK 1,477 thousand (2006: SKK 1,256 thousand) and employees paid

SKK 1,136 thousand (2006: SKK 996 thousand) under this plan.

Two employees will retire in 2008. This will potentially result in retirement benefi ts in amount SKK 191 thousand.

32. FAIR VALUES

Fair value is the amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties

in an arm’s length transaction. The estimated fair values of Eximbanka’s fi nancial assets and liabilities at year end were as

follows:

Carrying Fair Carrying Fair

value value value value

2007 2007 2006 2006

SKK ‘000 SKK ‘000 SKK ‘000 SKK ‘000

Financial assets

Cash and cash equivalents 702,428 702,428 562,344 562,344

Loans and advances to banks 5,966,793 5,897,087 6,238,481 6,163,903

Loans and advances to customers 1,752,606 1,764,422 1,303,483 1,292,580

Insurance receivables 7,525 7,525 128,280 128,280

Reinsurance assets 72,076 72,076 131,890 131,890

Investment securities 47,769 47,769 48,113 48,113

Financial liabilities

Loans from banks 1,283,945 1,284,962 888,048 888,019

Reinsurance payables 8,526 8,526 7,478 7,478

90 / 91


The following methods and assumptions were used in estimating the fair values of the fi nancial assets and liabilities:

Loans and advances to banks

The fair value of current accounts with other banks approximates to book value. For amounts with a remaining maturity of less

than three months, it is also reasonable to use book value as an approximation of fair value. The fair values of other loans and

advances to banks are calculated by discounting the future cash fl ows using current interbank rates.

Loans and advances to customers

Loans and advances are stated net of allowances for impairment. For loans and advances to customers with a remaining

maturity of less than three months, it is reasonable to use book value as an approximation of fair value. The fair values of other

loans and advances to customers are calculated by discounting the future cash fl ows using current market rates.

Insurance receivables

As receivables from insurance are short-term in nature, their fair value approximates to the carrying value.

Reinsurance assets

As reinsurance assets are short-term in nature, their fair value approximates to the carrying value.

Investment securities

Debt securities available-for-sale are stated at quoted market prices.

Loans from banks

The fair value of loans from banks is calculated by discounting the future cash fl ows using current interbank rates.

Reinsurance payables

As reinsurance payables are short-term in nature, their fair value approximates to the carrying value.

33. SUBSEQUENT EVENTS

Amendment to Income Tax Act

According to Income tax Act valid until 31 December 2007 all impairment loss provisions on loan receivables recognized

accordance to IFRS were considered as tax deductible. Amendment to the Income tax Act effective from 1 January 2008

implements new criteria for tax deductibility of impairment loss provisions on loans and receivables. These criteria are applicable

also on impairment loss provisions on loans and receivables existing as at 31 December 2007.

A further amendment to the Income Tax Act effective from 1 January 2008, requires the inclusion of the IBNR balance as at 31

December 2007 into Eximbanka’s tax base in the following two years.

Management estimates that due to these amendments to the Income tax Act, its current tax liability will increase by SKK 34,079

thousand.

Employee responsible for accounting Employee responsible for preparation of fi nancial statements

Ing. Želmíra Príkazská Ing. Milota Kocmundová

Director of Accounting and Tax Department Accounting and Tax Department



EXPORT-IMPORT BANK OF THE SLOVAK REPUBLIC

(EXIMBANKA SR)

Grösslingová 1

813 50 Bratislava

CONTACT DETAILS:

tel.: +421-2-59398 111

Fax: +421-2-52931 624

E-mail: [email protected]

Internet: www.eximbanka.sk

CEO

Secretariat to the CEO

tel.: +421-2-59398 511

fax: +421-2-52965 595

BANKING DIVISION

Secretariat to the Deputy CEO

tel.: +421-2-59398 205

fax: +421-2-52965 624

Credits and Guarantees Department

tel.: +421-2-59398 709

Bill of Exchange Transactions Department

tel.: +421-2-59398 322

INSURANCE DIVISION


tel.: +421-2-59398 603

fax: +421-2-52965 621

Marketable Risk Insurance Department

tel.: +421-2-59398 302

Non-Marketable Risk Insurance Department

tel.: +421-2-59398 214

Underwriting Department

tel.: +421-2-59398318

FINANCE AND ECONOMIC DIVISION


tel.: +421-2-59398 204

fax: +421-2- 52965 598

www.eximbanka.sk

Documents

EXIM AJ FIN 07 · origin in the consignment • investing the bank’s own funds in securities • founding legal persons and acquiring capital interests in other legal persons, subject