Las modificaciones

Greek sovereign debt having been restructured in the middle of March, developments in the international financial markets during the first few months of the year under review were shaped by optimistic growth forecasts and hope that the obstinate European financial crisis would ease. This was mirrored by growing confidence among investors and a tendency towards narrower yield spreads between the 10-year govern- ment bonds of most eurozone countries and German bunds. Yield premiums on Spanish and Italian govern- ment bonds relative to the German equivalents fell — albeit briefly — to about 300 basis points.

However, the sovereign debt crises on both sides of the Atlantic worsened again the second quarter, and economic indicators in Europe, the United States and China weakened. On the positive side of the coin, the EU finance ministers reached agreement on the European Stability Mechanism (ESM) and the fiscal compact, and the corporate reporting season was better than expected. At the end of June, the euro mem- bers agreed to recapitalize the Spanish banking sector, which had got into massive financial difficulties, as an initial step towards a European banking union. In addition, on 5 July 2012, the European Central Bank cut its headline interest rate to an all-time low of 0.75 per cent and announced that both its main refinanc- ing operations and its one- and three-month-refinancing operations would continue to employ fixed rate tenders with full allotment. In the United States, the Federal Reserve Open Market Committee (FOMC) confirmed at the beginning of August its intention to leave the Fed’s overnight interest rates unchanged in a corridor of between zero and 0.25 per cent until well into 2014. The US Federal Reserve’s ‘Operation Twist’ — which aims to stimulate the economy through the sale of shorter-dated federal bonds and the pur- chase of much longer-dated bonds in their place — was already enlarged by another US$267 billion from its original volume of US$400 million on 20 June and extended until the end of 2012.

Between the middle of August and the middle of September, trading in the international financial markets reflected another reduction in the perceived risk due to extreme scenarios in the eurozone and expecta- tions of an even more generous supply of liquidity by the leading central banks. At the beginning of Sep- tember 2012, the ECB Council launched a new secondary market government bond buying programme. Since then, this OMT (outright monetary transactions) programme has made it possible to buy the govern- ment bonds of euro members that have promised the institutions of the European Stability Mechanism (ESM) that they will undertake reforms. There are no quantitative or duration limits. The financial markets were given another shot of optimism on 12 September in the form of a decision by Germany’s Bundesver- fassungsgericht (federal constitutional court) ruling that the European Stability Mechanism (ESM) does not violate Germany’s constitution. In the United States, the Federal Reserve began buying further mortgage backed securities of government-sponsored mortgage issuers on 13 September as part of its efforts to reduce long-term interest rates.

Although bond yields in the crisis countries fell again, premiums on the corresponding credit default swaps fell and there was progress reducing the big imbalances within the Target 2 European cross border settle- ment system, the key central banks stuck firmly to their low interest policies for the rest of the year. Head- line interest rates were at historically low levels at the end of 2012. The main refinancing operations rate in the eurozone was 0.75 percent, the Fed Funds Rate in the United States was between zero and 0.25 per cent, Japan’s call rate was between zero and 0.1 per cent, Switzerland had an SNB target rate of between zero and 0.25 per cent, England had a bank rate of 0.5 per cent and China had a lending rate of 6.0 per cent. In the course of the year, yields on AAA rated long-term government bonds in the eurozone fell by about

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BASIC INFORMAtION ABOut BKS BANK’S SHARES

2010 2011 2012

Ordinary no-par shares in issue (ISIN AT0000624705) 30,960,000 30,960,000 30,960,000 No-par preference shares in issue (ISIN AT0000624739) 1,800,000 1,800,000 1,800,000

High: ordinary/preference share, € 18.4/15.4 18.6/15.6 17.6/15.5

Low: ordinary/preference share, € 15.9/13.7 17.6/14.8 17.2/14.9

Closing price: ordinary/preference share, € 18.4/15.4 17.6/15.5 17.3/15.0

Market capitalization, €m 595.8 572.8 562.6

IFRS earnings per share in issue, € 1.44 1.13 1.25

Dividend per share, € 0.25 0.25 0.251

P/E: ordinary/preference share (basis: BKS Bank AG) 12.9/10.9 15.9/14.0 14.2/12.3

Dividend yield: ordinary no-par share, % 1.36 1.42 1.45

Dividend yield: no-par preference share, % 1.62 1.61 1.67

1 _{Proposal to the 74}th _{AGM on 15 May 2013.}

INVEStOR RELAtIONS

PERFORMANCE OF tHE KEY StOCK INDICES

29.1

DJ Euro

Stoxx 50 in US$MSCI MSCI in €

Sources: Yahoo, OnVista .

Percentage movement in the index versus the end of the previous year

2011 2012 New York 12,217.56 13,104.14 1,257.60 1,426.19 London 5,572.30 5,897.80 Hong Kong 18,434.39 22,656.92 Zurich 2,316.55 2,635.93 Vienna 1,891.68 2,401.21 tokyo 8,455.35 10,395.18 Worldwide 93.02 103.67 1,182.60 1,338.50 Frankfurt 5,898.35 7,612.39 Close of Year 40 30 20 10 0

DAX Hang Seng FtSE 100 DJIA S&P 500 Nikkei 225 AtX

% 22.9 5.8 7.3 13.4 22.9 26.9 13.8 13.2 _11.4

Headline rate Source: OeNB.

EuRO INtERESt RAtES

% 6 2 3 4 5 0 1 2008 Source: Bloomberg. Germany

LONG-tERM GOVERNMENt BOND YIELDS

% 10 4 6 8 0 2 H2 2012 H1 2012

Spain Italy United States

2012 2011

2010 2009

3-month Euribor

BKS Bank no-par preference share, € BKS Bank ordinary no-par share, €

PERFORMANCE OF BKS BANK’S SHARES

H2 2012 € H1 2012 14 17 16 15 18 H2 2012 € H1 2012 14 17 16 15 18

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50 basis points to 1.32 per cent. After a largely stable year, the yield on comparable US bonds had fallen to about 1.75 per cent by the end of 2012. The 3-month Euribor fell from 1.343 per cent at year-end 2011 to 0.188 per cent at the end of 2012. Because there were sizeable amounts of surplus liquidity in the call money market, the EONIA (Euro OverNight Index Average) for unsecured overnight interbank lendings fell by 25 basis points to 0.13 per cent.

The MSCI World Index in US dollar terms — the barometer of prices in the global equity markets — rose from 1,182.6 to 1,338.5 points during the year under review. Based on the year-end closing of the DAX, which stood at 7,612 points at the close of 2012, standard German stocks gained 29.1 per cent. The Dow Jones Industrial Average — the most important US equity index — gained 7.3 per cent to 13,104 points. The big Asian markets followed the same trend. Having gained 22.9 percent during the year, Japan’s NIKKEI Index ended December at 10,395 points. The Vienna Stock Exchange’s ATX rose by 26.9 per cent to end the year at 2,401 points following a low of 1,855 in June, making up for part of the sobering losses during the 2011 stock market year. The market capitalization of all the 157 issuers listed in the official Amtlicher Handel segment and the Geregelter Freiverkehr regulated OTC segment on the Vienna Stock Exchange increased by 19.4 per cent to €104.3 billion.

BKS Bank’s ordinary no-par share, which is also listed on the Vienna Stock Exchange, closed the 2012 stock market year at €17.3, and the BKS Bank no-par preference share reached €15.0. IFRS earnings per share were up on the previous year to €1.25. Based on year-end prices, the ordinary no-par share had a P/E of 14.18 and the no-par preference share’s P/E was 12.30. BKS Bank’s market capitalization was €562.6 million, which was only just below the figure of €572.8 million recorded at the end of 2011.