the austrian fianancial markets - startseite847bfb6d-7c14-4075-a666-9b9fdd66eff3/... · financial...

Oesterre i ch i s che Nat ionalbank

&

Financial Markets Austria Services Ltd.

The Austrian Fianancial Markets

A Survey of Austria�s Capital Markets

Facts and Figures

Revised Edit ion 2003

Published and produced by:Oesterreichische Nationalbank in cooperation

with Financial Markets Austria Services Ltd.

Editor in chief:Wolfdietrich Grau

Secretariat of the Governing Board and Public Relations

Oesterreichische Nationalbank

Edited by:Ulrike Oschischnig

Financial Markets Analysis and Surveillance Division


Karl Wagner

Oesterreichische Kontrollbank AG / Financial Markets Austria Services Ltd.

Printed and produced by:Oesterreichische Nationalbank

Printing Office

Inquiries:Oesterreichische Nationalbank


Otto-Wagner-Platz 3, A-1090 Vienna, Austria

Postal address: P. O. Box 61, A-1011 Vienna, Austria

Telephone: +43-1-404 20, ext. 6666

Fax: +43-1-404 20, ext. 6696

http://www.oenb.at

Orders:Financial Markets Austria Services Ltd.

attn. Karl Wagner

Am Hof 4, A-1010 Vienna, Austria

Telephone: +43-1-531 27, ext. 2512

Fax: +43-1-531 27, ext. 5816

e-mail: [email protected]



Otto-Wagner-Platz 3, A-1090 Vienna, Austria

Postal address: P. O. Box 61, A-1011 Vienna, Austria

Telephone: +43-1-404 20, ext. 6666

Fax: +43-1-404 20, ext. 6696

http://www.oenb.at

This publication is designed to provide accurate information in regard to the subject matters covered. The information has been

carefully prepared and has been drawn from the most reliable sources available. Nevertheless, the publishers cannot be held responsible

for its accuracy. It is distributed with the understanding that the publishers are not engaged in rendering legal, accounting or other

professional service.

Copy deadline: May 2003

The publication of a brochure providing easy access to continuously updatedinformation on the Austrian capital markets to the international investmentcommunity was one of the first suggestions developed within the frameworkof the reform initiative currently undertaken by participants in the Austrianfinancial market. This brochure, jointly edited by the Oesterreichische Natio-nalbank and Financial Markets Austria Ltd., a subsidiary of OesterreichischeKontrollbank AG (OeKB), is the result of continuous efforts and the commitmentof a number of contributors.

We would like to express our sincere appreciation for their contributionsto the Federal Ministry of Finance, OMV Aktiengesellschaft, The FinancialMarket Authority, the Austrian Institute of Economic Research, O‹IAG O‹ sterrei-chische Industrieholding AG, O‹VFA O‹ sterreichische Vereinigung fu‹r Finanzanalyse undAnlageberatung (Austrian Association of Financial Analysis and Asset Manage-ment), KPMG Alpen-Treuhand Gesellschaft mbH and Dr. Po‹ch, legal counselorto OeKB.

A lot of input and expertise have been provided by the Wiener Bo‹rse AG (theVienna securities and derivatives exchange) and numerous banking and finan-cial institutions active in the Austrian and international capital markets, as wellas the experts who contributed to the brochure and are named in the brochureas contacts for further details.

The Austrian Financial Markets 3�

Acknowledgment

1 Preface by:

The Austrian Federal Minister of Finance 8The Governor of the Oesterreichische Nationalbank 10The Government Representative for the Capital Market 12

2 Focus on Special Topics

2.1 Cross Border Settlement in the EU 162.2 The Financial Market Authority (FMA) 182.3 Wiener Bo‹rse AG 212.4 Austria in Central Europe 22

3The Economy

3.1 Economic Structure and Selected Indicators 283.2 Foreign Trade and the Balance of Payments 333.3 Labor, Education and Social Services 363.4 Federal Budget, Public Deficit and Public Debt 38

4Monetary Policy

4.1 The Oesterreichische Nationalbank — Central Bank of Austria 444.2 Monetary Policy 464.3 The Banking System 48

Introduction 48Joint Stock Banks 49Savings Banks 49Cooperative Banks 50State Mortgage Banks 51Special Purpose Banks 52The Structure of Austria�s Banking System 52

4.4 Supervisory Requirements 56Capital Requirements for Credit and Market Risks 56Future Capital Framework 56Risk Weighting 57Other Risks 57Supervisory Review Process 58Market Discipline 58

5The Capital Markets

5.1 Wiener Bo‹rse AG 60The Central Role of Wiener Bo‹rse in the Austrian Capital Market 60Future Strategy of Wiener Bo‹rse 60Added Value Services based on Competence and Know-how 60The New Market Segmentation of Wiener Bo‹rse 60New CECE indices in Euro on the otob market 60Campaign Targeting Private Investors 61Investor Relations Campaign of the Listed Companies of Wiener Bo‹rse 61Cooperation with Banks 61Initiative to Promote the New Retirement Product 61Initial Public Offering Campaign 61

4 The Austrian Financial Markets�

Table of Contents

Initiative for the Development of Austrian Investment Funds 62The Committee for the Austrian Capital Market 62Austrian Code of Corporate Governance 62EXAA 62Outlook 62The Market Segmentation on Wiener Bo‹rse 63A. equity market.at 63B. bond market.at 65C. otob market.at 65D. warrants.at 65E. other listings.at 65Listing on Wiener Bo‹rse 66Xetra¤ — The Trading System on the Cash and Warrants Market 71Cash Market 71Auction 71Continuous Trading 72Warrants Market 72The Clearing and Settlement System (Arrangement) 73The Depository System 74Wiener Bo‹rse Membership 77Membership Fees 78List of Members of Wiener Bo‹rse AG 79

5.2 The Austrian Bond Market 83Recent Performance and Developments 83The Characteristics and Scale of the Market 83Market Structure 84The Auction System for Government Bonds 88Bond-Market Indices 91

5.3 The Austrian Equity Market 92Index Performance 2002 92The Structure and Scale of the Equity Market in 2002 93The Different Types of Shares Traded on Wiener Bo‹rse AG 95Austrian Shareholders 97The Indices Traded at Wiener Bo‹rse 97

5.4 otob market.at — Wiener Bo‹rse�s Derivatives Market 101A. Austrian Derivatives 101B. The CECE Index Family 101Trading and Clearing on the otob market 102

5.5 Privatizations in Austria 1045.6 The Capital Markets Act 108

General 108Public Offer 108Prospectus 108Notification Office 108


Table of Contents

Annex

Facts and FiguresA. Key Facts on the Republic of Austria 112B. Recent Economic Developments and Outlook 117C. Capital Market Data 119

C.1 The Bond Market 119C.2 The Equity Market 122C.3 OTOB — Derivatives Market 124

D. Financial Data Service by Oesterreichische Kontrollbank AG 126E. Exchange Data Provided by Wiener Bo‹rse 128F. Accounting Standards for Austrian Companies 129G. Taxation 131H. Useful Addresses and Telephone Numbers 145I. List of Sources and Bibliography

Pertaining to Austria�s Capital Markets 147


Table of Contents

I

Preface

Nowadays financial markets are becoming more and more important for thereal economy: dynamic developments such as globalisation, liberalisationand product innovation are leading without doubt to a more efficient alloca-tion of capital. The other side of the coin is the higher financial vulnerabilitydue to steady integration of the markets.

In this respect much more emphasis has been laid lately on preserving andimproving the stability of the financial markets. On national level we havealready taken important steps by creating the new Financial Market Authority(FMA) which assumed all operative tasks of the supervision of the banking,insurance, securities and pension funds. Due to the integration of all sectorswithin a single authority, close examination of cross-sector aspects, whichoften impose higher threats to financial stability, is therefore granted. Further-more, the close co-operation between the FMA and the OesterreichischeNationalbank in certain fields of supervision is an important aspect of guaran-teeing the stability of the finance markets. This relatively new level playingfield for supervision is currently being assessed by an IMF/Worldbank-initia-tive (FSAP — Financial Sector Assessment Programme), which will provide auseful check of the organisation and functioning of the Austrian supervision ofthe financial system in practical terms. Recommendations by the IMF will behelpful for further improvements of the supervisory framework and finally ofthe stability of the Austrian financial markets.

As to the EU level, the importance of further convergence of supervisorymethods and of closer co-operation amongst the competent authorities hasbeen recognised by the EU-Member States. Experience has shown, that acountry can not take isolated measures any more in case of severe problems.In order to lay the ground for common activities, EU-Member have thereforeagreed to apply the �Lamfalussy framework� to all financial sectors in order tomake EU arrangements for financial regulation, supervision and stability moreefficient, effective and flexible. In addition regular intense discussions offinancial market developments with special emphasis on cross-sector andcross-border aspects take place in order to gain good oversight and a coherentview on the situation on the markets.

The new capital adequacy regulation (�Basle II�) will certainly contributeas well to the goal of increasing the stability in financial markets by demandinga more comprehensive treatment of risks and by strengthening the supervisorybodies. The discussions here are in a final stage, the recommendations by theBasle Committee are expected to be published in October 2003.

The severe correction in stock market valuations and the increased risk-aversion we can observe since the last years were amongst others caused bya series of corporate governance scandals world wide. In order to restorethe investor�s confidence the Austrian Corporate Governance Code has beendrawn up, addressing specifically enterprises that raise funds through capitalmarkets. It consists of a set of rules, which lay down the principles of goodcorporate governance and which can therefore be said to constitute an impor-tance source of guidance for investors. It is a voluntary self-regulatory initia-tive laying emphasis on reporting transparency, quality of co-operationbetween supervisory board, management board and shareholders, and alsotaking into account long-term value creation. On EU-level the EU Commis-

Karl-Heinz GrasserAustrian Federal Ministerof Finance


Preface

sion has also published an action plan in spring 2003 to improve the corporategovernance in the European Union.

To strengthen the Austrian Capital Market, the special governmentrepresentative, Mr. Schenz, has drawn up an Action Plan by bundling variousinitiatives into a common strategy. Emphasis is being laid on creating a highervolume of securities traded on the Vienna stock exchange and on improvingthe investor�s confidence in the Austrian Markets. Some initiatives have alreadybeen realised, such as the above mentioned Corporate Governance code andthe equity-based private pension scheme (�Zukunftsvorsorge�). This productis aimed at fostering the so-called �third pillar� of pension schemes but alsoat promoting the Austrian capital market and it has been very well receivedby the public giving the capital market a new impetus.

In spring 2003 discussions on some other important topics were finalised:amongst these the agreement with the European Commission on Stateguarantees granted by regional or local authorities to certain credit institu-tions, the transposition of the second EU-anti-money laundry directive inthe field of the financial sector and the passing of the Act on real-estate invest-ment trusts are worth mentioning here.

All these developments demonstrate clearly, that the Austrian FinancialMarket is in a permanent change in order to cope with the challenges. Thevery same will apply for the future.


Preface

The year 2002 was marked by global economic cooling and turmoil in inter-national stock markets. Moreover, geopolitical tension exacerbated uncer-tainty on future global economic developments.

In this difficult environment, European monetary policymakers faced newchallenges. However, pursuing a prudent monetary policy, the GoverningCouncil of the ECB continued to maintain price stability and interest ratesreached a very low level both in nominal and real terms, which — from amonetary point of view — has paved the way for a gradual recovery of theeconomy. To be able to fully utilize the potential of the stability-orientedmonetary policy, the euro area also needs an economic policy aimed atsafeguarding stability in the long run. Thus, fiscal policies must be drivenby adherence to the provisions of the Treaty establishing the EuropeanCommunity and the Stability and Growth Pact as well as the vigorouscontinuation of the structural reforms of the labor, goods and financial marketswhich have already been initiated.

The worldwide downturn has dampened economic growth also in Austria.The slowdown in growth and higher volatility in international financialmarkets are reflected, inter alia, in the performance of the Austrian financialsector. Yet the Austrian banking system proved fairly robust by internationalcomparison, which is attributable mainly to the flourishing business in Centraland Eastern Europe. Austrian banks continue to utilize their extraordinaryknow-how on these markets to step up their already very successful activitiesin Central and Eastern Europe.

After the successful implementation of monetary union, the EU is nowsetting its sights on the next milestone of integration: its enlargement byten new Member States. The acceding countries� progress in economic tran-sition and catching-up over the past ten years has been impressive.

The gradual monetary integration of the new Member States following EUaccession will further enhance the efficiency of the European financialmarkets, thus making a crucial contribution to financial stability.

The increasing integration of the European financial markets highlights theneed for an EU-wide financial stability perspective. The Eurosystem�s policy ofcentralized decision-making and decentralized implementation gives theparticipating national central banks — depending on their individual degreeof integration into financial market and banking supervision — the opportunityto provide valuable contributions to systemic financial stability.

Austria has responded to the increased international challenges in financialmarkets by establishing a new independent regulatory body, the FinancialMarket Authority (FMA). Regardless of the transfer of prudential respon-sibilities to the FMA, which now represents the statutory integrated financialsector supervisory agency, the OeNB�s previously existing tasks and rights ofparticipation as laid down in the Austrian Banking Act have not only beenpreserved; in fact, they have been augmented, which significantly enhancedcooperation between the statutory supervisory body and the OeNB. Further-more, payment systems oversight was conferred on the OeNB from April 1,2002. Thus, another crucial step towards creating supervisory structures inline with Eurosystem standards was successfully completed.

Under the guidance of the Special Government Representative for theCapital Market appointed by the federal government, experts drew up an

Klaus LiebscherGovernorOesterreichischeNationalbank


Preface

action plan to strengthen the competitiveness of the Austrian capital market inthe new European environment. In addition, a Board for the Promotion of theAustrian Capital Market1) was established in cooperation with the OeNB andWiener Bo‹rse AG. The primary objective of this initiative is to sustainablystimulate the Austrian capital market and to strategically strengthen its posi-tion in Europe.

Monetary union and the euro have already considerably strengthened theeuro area�s position in the dynamic process of globalization. In the future, theywill continue to drive reform and act as a catalyst for further economic andpolitical integration in Europe. Internationally competitive and efficientfinancial markets and banking systems in the euro area play a pivotal role inthis development.

1 Kuratorium fu‹r den o‹sterreichischen Kapitalmarkt.


Preface

Optimism takes hold of Austrian capital marketThe global environment for capital markets has deteriorated in the course ofthe year. Still, despite the adverse situation, Austria�s capital market achievedexcellent performance in international comparison. This remarkable perfor-mance is also the outcome of the consistent capital market policy pursuedin the past few years. Policymakers in Austria have been quick to take adequateand effective measures after having clearly recognised the need for an efficientand well-functioning national capital market to provide the domestic economywith the capital it requires, in particular, in the light of the Basle II Accord andto meet the challenges of ensuring old age provisions.

The action plan for the Austrian capital marketAs the Special Government Representative for the Capital Market, it is my jobto bundle the positive forces best suited to strengthen the Austrian capitalmarket and to coordinate the measures needed for its revival. To this end,I have drafted an action plan for the Austrian capital market jointly withrecognised capital market experts. This action plan has defined two majorareas of focus: increasing confidence and increasing volume. It definesprecisely those measures called for to eliminate the weak spots in Austria�scapital market. Considering the special situation in Austria, a completelynew approach is needed that bundles a large number of measures designedto promote the capital market. Two core elements of the action plan havealready been implemented: the Austrian Code of Corporate Governanceand the creation of a new state-subsidised retirement product.

Austrian Code of Corporate Governance to bolster confidenceThe adoption of the Austrian Code of Corporate Governance marks theachievement of a balanced, internationally acceptable and viable frameworkthat defines rules of good practice for companies. This voluntary, self-regu-latory step has met with wide acceptance and approval, and will contributeto reinforcing the confidence of investors.

State-subsidised retirement product to stimulate investment activityThe creation of a state-subsidised retirement product is a milestone achieve-ment in the promotion of retirement provisions and has been specificallydesigned to strengthen the Austrian capital market. On the one hand, it is aretirement scheme outside the mandatory system that offers attractive taxadvantages and safe investments through capital guarantees, and on the otherhand, it encourages a focus on investments in Austria that will benefit WienerBo‹rse and provide it with the crucial impulses needed for growth. At least40% of the capital must be invested in stocks listed on markets in the EEAwhose market capitalization is lower than 30% of GDP. This provision encour-ages investments in Austria�s stock market and after the enlargement of the EUalso in the stock markets of the accession countries.

The public relations and campaign work of the Committee for the AustrianCapital MarketAnother major step forward in the endeavour to revive the capital market hasbeen the establishment of a Committee for the Austrian Capital Market which

Richard SchenzSpecial GovernmentRepresentativefor the Capital Market


Preface

boasts top decision-makers from Austria�s business community. This bodyplays an especially important role for the work of raising awareness andproviding information to the population and business sector on investmentsin Austrian securities.

Further activitiesIn this encouraging environment, we expect to see new listings and the home-coming of Austrian companies to Wiener Bo‹rse. Nonetheless, it remains a factthat the still low level of capitalisation of the Austrian capital market does notcorrespond to the economic performance capacity of our country. The globalcrisis of confidence in stock markets has also left its mark on Austria. For thecapital market campaign to achieve sustainable success, we need concertedaction to increase investor confidence in Austria�s capital market and to raisethe volume of trading. In my opinion, the following measures of the action planmust be implemented quickly to achieve success:� Expansion of employee participation schemes� Exploitation of the potential of securitisation� Tax incentives to reinforce the equity base of companies and encourage

public offerings� Development of Austrian investment funds� Creation of a Central European financial marketplace� Specialisation as a market for SMEs� Strengthening the pre-IPO risk capital market (venture capital and private

equity)� Dissemination of comprehensive information on the Austrian capital

market


Preface

2

Focus on Special Topics

2.1 Cross Border Settlement in the EU

OeKB to ensure highly efficient clearingand settlement in the Austrian securities marketOesterreichische Kontrollbank AG (OeKB) is highly committed and invests greatefforts in further developing the Austrian financial market — among otherthings, also as a member of the Committee for the Austrian Capital Market.In its role as an established Clearing House for Wiener Bo‹rse and as theCentral Securities Depository with an excellent international network, itserves as the competence centre for the Austrian capital market and contri-butes enormously to optimising cross-border securities dealings.

The globalisation of capital markets has led to the steady rise of cross-border securities trading in Europe and between continents. Since 1999, thisdevelopment has accelerated even more with the introduction of the Euro.

The European Central Securities Depositories have responded to thechallenges arising from this development and have worked closely togetherto define standards for the interoperability of the individual clearing andsettlement organisations. To this end they founded the European CentralSecurities Depository Association (ECSDA) in 1997 with the main goal ofimplementing a secure and efficient process for the cross-border settlementof securities dealings in Europe. In its function as the Central SecuritiesDepository for Austria, Oesterreichische Kontrollbank AG is one of thefounding members of the ECSDA and contributes major and valuable inputsto the attainment of the goals of the ECSDA.

In the past two years, the European Union intensified its efforts to com-plete the internal market for financial services and has defined as a focus ofwork the creation of an integrated European securities market and theelimination of barriers to cross-border securities settlement. Already inNovember 2001, a group of experts headed by Alberto Giovannini identifiedin the �Report on Cross Border Clearing and Settlement Arrangements in theEU� fifteen barriers that are still hindering cross-border securities settlementin Europe.

On the basis of this report, the commission drafted a Communication tothe Council and to the European Parliament in May 2002 in which it formu-lated as policy goals the elimination of barriers to settlement in the form ofnational difference and the abolishment of distortions to competition due tothe unequal treatment of clearing institutions and settlement agencies. Allmajor market participants, associations and interest group representatives aswell as the European Parliament made statements on the proposals of theCommission that varied widely and some of which were highly controversial.Jointly with the other 15 Central Securities Depositories in Europe, we for-mulated a comprehensive statement within the scope of the ECSDA, whichincorporates the position of Austrian market participants, and sent it to theCommission. Furthermore, the ECSDA has addressed all elected officials ofthe European Parliament in a joint paper.

In the past few months, further proposals have been presented for theimprovement of the clearing and settlement of cross-border securities dealingswithin the scope of the diverse initiatives:

Johannes AttemsMember of the Boardof Executive Directors,OesterreichischeKontrollbank AG

Giovannini Group

EU Commission



� The Group of Thirty (G 30), a consultative group on internationaleconomics and monetary affairs composed of senior representatives ofthe private and public sectors and academia released a report with 20 re-commendations to significantly improve the safety and efficiency ofinternational securities markets. The recommendations aim at creating astrengthened, interoperable global network, mitigating risk and improvinggovernance. Their implementation shall take place within a 5 to 7 yearperiod and will be monitored by the G30.

� In a joint project, the ECB and CESR (Committee of European SecuritiesRegulators) formulated in more detail and concretely the 19 recommen-dations drafted by the CPSS (Committee of Payment and SettlementSystems) and the IOSCO (International Organisation of Securities Com-missions) for their optimised application in the sophisticated Europeanmarkets. Apart from improved cooperation among the diverse publicauthorities, security and transparency within the European markets areto be raised and a level playing field is to be secured for the diverse serviceproviders.

� Meanwhile, the second report of the Giovannini group has been completedthat contains concrete proposals stating who is to be responsible foreliminating each of the 15 barriers to settlement and up to what time.The ECSDA (European Central Securities Depositories Association) willbe responsible for eliminating three of these barriers (operating hours &settlement deadlines, corporate actions, intraday settlement) and thecorresponding working groups have already been established in the ECSDAin which we are represented by experts.As the Austrian Central Securities Depository and Clearing House for

Wiener Bo‹rse, Oesterreichische Kontrollbank AG has been offering highquality clearing and settlement services to market participants in the Austriancapital market for many years. Our efficiently organised team of specialistswork with the most modern systems and the close collaboration with theEuropean authorities and the ECSDA ensures that business processes areconstantly and flexibly adjusted to the future challenges of an integrated Euro-pean securities market.

For more detailed information please contact:Oesterreichische Kontrollbank AGAttn.: Mr. Georg ZinnerAm Hof 4, A-1010 ViennaPhone: +43-1-531 27-2353Fax: +43-1-531 27-5826e-mail: [email protected]

G 30

ECB-CESR

15 Barriers



2.2 The Financial Market Authority (FMA)

The FMA was established as an integrated financial supervisory authority on1 April 2002 under the Austrian Financial Market Authority Act. The super-visory tasks concerning banking, insurance and pension funds were transferredto the FMA from the Federal Ministry of Finance. In addition, also theAustrian Securities Authority became part of the FMA. The FMA is nowthe single statutory supervisory body directly responsible for banking,insurance, pension funds, securities and stock exchange supervision.

The reorganisation, which is also a reaction to the altered internationalregulatory conditions and the growing globalization of the financial markets,has led to the disappearance of the institutional segmentation of the oldsystem. One of the most important projects of the FMA for the forthcomingyears in the context of new international standards is the preparation for theimplementation of the Basel II principles with their new distinct capitalprovisions.

The FMA is an institution under public law and forms a legal entity of itsown. In performing its tasks it is not bound by any directives. The status of theFMA is secured by constitutional provision which was unanimously supportedby all parties represented in the Austrian Parliament in February 2002. Thisamendment to the Financial Market Authority Act guarantees the status ofthe FMA as an integrated and independent supervisory authority.

The FMA�s independence is a strong asset for the credibility of the plans ofthe Austrian government to provide the Austrian financial markets with atransparent, effective and efficient supervisory framework. The FMA aimsto take advantage of the synergies of being an integrated financial supervisoryauthority and to be an open, transparent and consistent supervisor. With theabolishment of the old institutional segregation there is considerable potentialfor increased cost efficiency.

The Austrian approach to financial market supervision is concentrating onthe core functions performed within the financial system rather than on insti-tutions or sectors and is thus in line with a functional approach to supervision.The new system is sector neutral and ensures a level playing field for allfinancial institutions doing business in Austria.

The main objectives of the Austrian Financial Market Authority are tostrengthen the stability and performance of the Austrian financial market,to ensure that financial legislation is observed and to guarantee fairness inthe Austrian financial market.

Besides, the FMA is concerned with the implementation of relevant EU-directives and actively participates in the elaboration of financial legislation.International co-operation and the fostering of bilateral and multilateralcontacts form another major task (Memoranda of Understanding).

The FMA supervises 906 credit institutions, 115 insurance companies,20 Pensionskassen (pension funds) and 339 investment services providers(date of survey: 31 December 2002).

On 1 January 2003 a new system for severance payments came into forcein Austria. This amendment to the legal situation required the establishment ofthe �Mitarbeitervorsorgekassen� (institutions authorised to conduct the business of

Andreas Gru‹nbichlerExecutive Directorof the FinancialMarket Authority



investment-based statutory severance payments). The FMA is responsible forthe licensing and the supervision of these institutions.

The costs for banking, insurance, pension funds and securities supervisionare primarily borne by the supervised institutions themselves. In addition, thefederal government contributes a flat amount of EUR 3.5 million per fiscalyear. The total budget of the FMA for the year 2003 amounts to aboutEUR 21.8 million.

The �Directive on Insider Dealing and Market Manipulation� (MarketAbuse Directive) of the European Parliament and of the Council was publishedin the Official Journal of the European Union on 12 April 2003. Austria like allother member states shall bring into force the laws, regulations and adminis-trative provisions necessary to comply with this Directive until 12 October2004. This new directive strengthens the position of the FMA as supervisoryauthority, e.g. it enables the FMA to carry out on-site inspections at issuers ofsecurities. Furthermore, it harmonizes the definitions of �inside information�,�market manipulation� and the different �financial instruments� for allEuropean financial markets. After the implementation of the directive intonational law, the senior management of companies issuing securities will berequired to disclose their own trading in securities. According to the AustrianCode of Corporate Governance there has not been a disclosure obligation sofar. On the whole, the Market Abuse Directive is an important step forwardsfor the combat against insider trading and market manipulation of securitieslisted on the stock exchange. In the future the FMA aims to be vested withthe legal power to pursue insider trading in administrative penalty proceed-ings.

To enhance the enforceability of supervisory measures, the FMA is vestedwith administrative penal power and the power to enforce its supervisoryadministrative decisions. No appeal of any kind is possible against rulingsissued by the FMA except in administrative penalty proceedings.

Furthermore, the FMA has the power to issue ordinances in order tospecify the general obligations stated by law. Regulations of the FMA arepublished in the Federal Law Gazette.

The FMA�s accountability is clearly defined. The FMA is accountable to theFinancial Committee of the National Assembly and the Federal Minister ofFinance. According to the Austrian Financial Market Authority Act, theFederal Minister of Finance supervises the FMA in order to ensure that itfulfils its statutory duties, does not breach the laws and regulations whenperforming its functions and does not exceed its scope of authority. For thispurpose, the Federal Minister of Finance is authorized to seek informationfrom the FMA on all matters relating to the supervision of the financialmarket.

The FMA has two executive directors, Andreas Gruenbichler, who isProfessor for Finance at the University of St. Gallen and Kurt Pribil, formerHead of the Foreign Research Division of the Oesterreichische Nationalbank(Austrian Central Bank). The Executive Board is appointed by and reporting toa Supervisory Board.

The Supervisory Board of the FMA consists of a Chairman, a Vice-Chair-man, four additional members and two co-opted members. The Chairman,the Vice-Chairman and the other members of the Supervisory Board with



the exception of the two co-opted members are appointed by the FederalMinister of Finance. The Oesterreichische Nationalbank submits nominationsfor the functions of the Vice-Chairman and two additional members of theSupervisory Board. In addition, the Supervisory Board co-opts two membersnominated by the Austrian Federal Economic Chamber. However, they have novoting rights.

To promote co-operation, the exchange of ideas and to provide advice onissues of the financial markets, the financial market stability and supervisorymatters the Financial Market Committee has been set up at the FederalMinister of Finance. It consists of one representative of the FMA, the Oester-reichische Nationalbank as well as of one representative of the Federal Ministryof Finance. This committee is meant to serve as a platform for the institutionsjointly responsible for financial stability, i.e. Oesterreichische Nationalbank, FMAand the Federal Ministry of Finance. It is convened at least four times a year.External experts may be called in as consultants. However, the FinancialMarket Committee is no decision making body of the FMA.

Complementing the establishment of the FMA as the single, statutorysupervisory body, there is a close co-operation between the FMA and theOesterreichische Nationalbank and also the Federal Ministry of Finance.

There is a close involvement of the Oesterreichische Nationalbank in thesupervision of the banking system. The Oesterreichische Nationalbank has tobe entrusted with on-site inspections regarding the examination of creditand market risk of banks and is to be consulted in certain matters. Inparticular, the FMA continuously entrusts the Oesterreichische Nationalbankwith the collection and processing of money and banking statistics (e.g.monthly returns, quarterly reports, major loans register).

The Federal Ministry of Finance, on the other hand, safeguards thecorrectness of the FMA�s conduct of business and remains the major authorityfor drafting legislation in this field.

With the establishment of the FMA, there is an independent and efficientAustrian supervisory regime in line with recent international developments.The FMA will continue striving to obtain material improvements in super-visory instruments and to further benefit the stability of the Austrian financialmarket. The FMA has budgetary independence, autonomy in employment andthe resources to recruit highly qualified staff. The number of employees rosesignificantly throughout the last year and currently amounts to 155 (April2003).

Keep yourself informed about the developments of financial supervisionpolicies on our website www.fma.gv.at. The FMA plans to restructure andextend its existing website and to implement an English version in summer2003.

FMA — Finanzmarktaufsicht(The Austrian Financial Market Authority)Praterstrasse 23A-1020 Vienna, AustriaPhone: +43-1-249 59-0Fax: +43-1-249 59-4499e-mail: [email protected]://www.fma.gv.at



2.3 Wiener Bo‹ rse AG

Wiener Bo‹rse is a modern, customer- and market-oriented financial servicescompany, which plays a central role in the Austrian capital market. However,the sustained support of the latter and the retention of its competitiveness in aEuropean context can only be achieved in teamwork with all market players.With this objective in view, during 2002 Wiener Bo‹rse began to set up theCommittee for the Austrian Capital Market. In view of the internationalmarket situation, which is characterised by a general lack of optimism, it isextremely pleasing that important protagonists from Austrian industryspontaneously declared their readiness to assist in shaping this project.

The most significant aspect of the Committee�s activities is the creation of anetwork at management and expert level, which above and beyond theexchange of ideas, initiates numerous individual measures and is of major im-portance to the Austrian economy. The first result of this co-operation withthe Government Representative for the Capital Market, Richard Schenz, isan innovation for Austria in the form of a pensions product containing a highlevel of Austrian stock and offering an advantageous premium.

In the meantime, numerous national companies have recognised thebenefits of the domestic stock exchange, not least due to the stable pricedevelopment of the ATX and the ATX prime indices. Several companies,which up to now were listed on other exchanges, are already quoted inVienna, or are in the process of preparing such a listing.

The future strategy of Wiener Bo‹rse has two focal points:— On the one hand, the creation of all the technical and organisational

prerequisites required for smooth trading and the positioning of WienerBo‹rse AG as a modern services company.

— On the other hand, the motivation of all market players to make activecontributions to the development of the Austrian financial market.As an intermediary between all the market participants, Wiener Bo‹rse AG has

been actively involved in the development and support of the Austrian capitalmarket for many years. Even in an increasingly integrated European economiczone, regional institutions retain their importance and are indispensable forthe upholding of certain quality standards. In the medium-term, Wiener Bo‹rseAG intends to fully exploit the potential for small and mid-cap issues and,above all, to interest retail investors in the purchase of domestic stocks.

Furthermore, Wiener Bo‹rse has steadily expanded its range of services andmodified them to match the needs of the modern market. Among other items,via data vendors, Wiener Bo‹rse Information Products supplies real time priceinformation to professional market players and retail investors. As a specialinformation service, Wiener Bo‹rse AG issues and calculates 19 real time shareindexes, which have established themselves as benchmarks for the Austrianand the CEE markets.

In terms of an international comparison, despite the negative, generalsituation, the ATX, the leading index of Wiener Bo‹rse, was able to performwell. At the year-end 2002, the ATX closed at 1,150.05 points, which repre-sented a slight 0.85% improvement in performance over the year-end 2001(1,140.36 points).

Stefan ZapotockyMember of theManagement BoardWiener Bo‹rse AG

Erich ObersteinerMember of theManagement BoardWiener Bo‹rse AG



2.4 Austria in Central Europe

At the European Council meeting held in Copenhagen in December 2002, aresolution was passed to admit eight Central and East European countries aswell as Cyprus and Malta to the EU.

The EU accession treaty was signed at the Acropolis on 16 April 2003, andaccession is scheduled for May 2004. The EU enlargement will provide amajor impetus to growth in the new and old member countries and willincrease Austria�s appeal as a business location. The enlargement is fullysupportive of Austria�s economic and political interests. Due to its geograph-ical location and historical relations, Austria has always had close economic tiesto Eastern Europe, but at the same time it has also been firmly integrated inthe West European economy. In 2002, 60.2% of Austria�s exports went to theEU (euro area countries accounted for 53.7%), and 17.7% went to East Euro-pean countries (8 EU accession countries accounted for 12.4%). The EUaccounted for a 35.0% share of Austria�s direct investments abroad in mid-2002, while East European countries accounted for a 36.7% share.

Economic relations boostedsince the transformation of 1989The political transformation in the Eastern European countries in the autumnof 1989 radically changed the political and economic relations between Austriaand Eastern Europe. Eastern Europe�s transition to democracy and free marketeconomy has not only eliminated the latent threat along the long easternborder (1,300 km), it has also resulted in considerable economic advantages.Austria shifted from a peripheral location at the border between the West andthe East to the heart of a converging continent. Real economic growth hasincreased considerably since 1989 as a result of the opening up of EasternEurope (liberalisation) and an estimated number of 60,000 new jobs have beencreated. Austria took advantage of the opportunities in Eastern Europe earlierthan its competition.

The growing economic relations with Eastern Europe were based on thegradual integration of the region under the Europe Agreements and on signi-ficant economic aid. Austrian exports to the East European countries soared to4.4 times the 1989 figure by 2002 and even by as much as 5.8 times in thesuccessful transition countries of Eastern Central Europe (Hungary, CzechRepublic, Slovakia, Poland). Exports to South-eastern Europe also developedvery well after the end of the Balkan crisis. Although exports to Russia and theother states that emerged from the former USSR lost significance during thenineties, they recovered perceptibly in 2000 and 2001. As a result of thisdynamic development, the amount of exports to the East increased from lessthan 10% in 1989 to almost 18% of total exports in 2002, while those to East-ern Central Europe rose from 4.5% to over 10%. Austria�s most importanttrade partners in the East in 2002 were Hungary, which was 4.3% ahead ofthe Czech Republic and Slovenia. Eight of Austria�s 20 most important tradepartners were located in Eastern Europe.

In 2002, the volume of Austrian exports to Eastern Europe rose +6.8%,which was less than the years before, but still far above that of the EU (+3.1%)and most other regions. Exports to the economically more advanced countries

Jan StankovskyAustrian Instituteof Economic Research(WIFO)



in Eastern Central Europe have only shown moderate growth (+4.0%, ofwhich Hungary is responsible for +0.9%), since these countries are feelingthe effects of the continuing economic stagnation within the EU (particularlyin Germany) due to their high degree of integration in the West. Exports toRussia and the Ukraine have also stagnated. Remarkable results were achievedin South-eastern Europe (+14.3%) — a region that has recovered from thedestruction of the last years and has also made progress in the transformationprocess.

Overall Austrian imports may have dropped by 2.2% in 2002 due tocyclical factors, but exports to Eastern Europe rose by 2.1%. Thanks to lowerprices and improved quality, East European suppliers have been able to steadilyenlarge their market share in Austria and the percentage that East Europeancountries account for in total imports (13.8%) today is over twice as highas in 1989. A significant share of the imports from Eastern Europe comes fromthe subsidiaries of Austrian and international corporations. Austria�s balance oftrade for 2002 with the East European countries reported a surplus ofEUR 3 billion.

The significance of foreign trade with Eastern Europe for Austria is two tothree times greater than for the other Western countries. Austria accountedfor 6.6% of the exports from industrialized countries (OECD) to EasternEurope and for 7.5% of the exports to Eastern Central Europe as well asfor 10.2% of exports to South-eastern Europe. Austria is one of the mostimportant trade partners for its neighbouring countries to the East. AlthoughAustria lost some market shares in Eastern Europe in 2001, it maintained itsposition and even achieved slight gains in 2002 according to the resultscurrently available. Austria�s strong position in Eastern Europe is remarkable,since it is a relatively small country with a population of 8 million and accountsfor only 1.7% of the OECD�s exports worldwide.

Austria�s ties to Eastern Europe are also based on the intensive cooperationamong businesses relating to direct investments. Takeovers and acquisitions ofstakes in companies in Eastern Europe have helped Austrian companies tosecure market shares in the region. The outsourcing of wage-intensive produc-tion has helped to improve the Austrian economy�s competitive position at theinternational level. The subsidiaries in Eastern Europe are generally highlyprofitable and make significant contributions to the good results of the parentcompanies in some sectors (e.g. banks). The excellent position of Austriancompanies in Eastern Europe has enhanced their appeal for international jointventures. Vienna has become one of the preferred sites for the Eastern Euro-pean headquarters of multinational companies.

Austrian companies have expanded their position as investors in EasternEurope over the last years. New investments doubled from EUR 1 billionin 1999 to EUR 2.1 billion by 2000 and rose further to EUR 2.6 billion by2001, reaching a new high of EUR 1.6 billion by mid-year 2002. The invest-ment boom also continued during the second half of 2002. The Austrianmarket share in terms of new investments in Eastern Europe rose from8.3% in 2001 to over 10% in the first half of 2002. Austria accounted for over12% of new investments in Central Europe1). The share of direct investments1 Cf. Hunya, G., Stankovsky, J., WIIW-WIFO Database, Foreign direct investment in CEECS and the former Soviet Union,

WIIW-WIFO, February 2003.



by Austrian investors in Eastern Europe was EUR 10.6 billion at the end of2001, and had risen to EUR 12.2 billion by mid-2002. Austria accountedfor 6.0% of the existing foreign investments in Eastern Europe by mid-2002. Around 30% of the total foreign investment capital in Slovakia andthe Slovenia, and 10% in the Czech Republic, Hungary and Croatia come fromAustria.

The Czech Republic is currently of the focus of interest of Austrian invest-ors. The geographical proximity, the population�s relatively high purchasingpower and the country�s industrial tradition as well as the companiesscheduled for privatisation are behind this trend. Croatia came in second placerecently, which is somewhat surprising since it is not a candidate for EUmembership. The political and economical consolidation of Croatia hasobviously convinced Austrian investors of its attractiveness.

The total number of Austrian �East European companies� was estimated tobe somewhere between 11,000 and 12,000 by the Austrian Federal EconomicChamber in 2000. A number of 162,000 persons were employed in the sub-sidiaries of Austrian companies in Eastern Europe in the year 2000, 50,000each in the Czech Republic and Hungary and 21,000 in Poland. Austria wasalso a major employer in Slovakia.

Austrian direct investments in Eastern Europe are for the most part profit-able. After a difficult transition phase in the mid-1990s, the majority of theAustrian subsidiary companies in East Europe have started generating highreturns. In 2000, Austrian subsidiaries in East European countries achieveda net income of EUR 654 million. The restructured companies posted a profitof EUR 878 million, but the figure contrasts with losses of EUR 224 millionreported by local branches. The improved earnings situation becomes parti-cularly clear when we look at the profitability (net income as a percentageof equity). The profitability of Austrian companies was extremely low andeven negative during the restructuring phase between 1992 and 1995. Earningpower has increased significantly since 1996 and recently it surpassed the 10%level. Since a relatively large number of East European companies — mostlyacquisitions or newly founded enterprises — are posting losses, the profitabilityof the restructured companies is high and is probably quite frequently around20% of the invested capital. The earning power of the East European sub-sidiaries was roughly twice as high as those in other countries in the pastfew years.

The increasingly closer economic ties with Eastern Europe ahead of theaccession to the EU were to be expected and the experience is similar tothe one made during the southern EU enlargement. The successful conclusionof the EU enlargement negotiations will give foreign direct investment in East-ern Europe a major boost.

Economic cooperation with Eastern Europein the enlarged EUAustria became a member of the European Union in 1995, a move whichenabled it to secure its economic interests in this important market. EUmembership did not have a negative effect on Austria�s trade relations withEastern Europe; on the contrary, Austrian exports have shown above averagegrowth ever since.



East European countries have close economic ties with the EU. In Decem-ber 2002, the European Council in Copenhagen passed a resolution to admiteight European countries (Poland, Czech Republic, Slovakia, Slovenia,Hungary and three Baltic countries) as well as Cyprus and Malta to the EU.The EU membership of these countries will add further depth to the economiccooperation and will widen the flow of foreign capital from West to East. EUmembership will accelerate growth in the new EU states. These states havecommitted themselves to adopt the aquis communautaire of the EuropeanUnion, a move which will substantially lower the export and investment risk.At the same time, existing trade barriers (e. g. border checks) between the oldand the new EU members are being eliminated, which will reduce trade costsand facilitate foreign trade as well as cross-border cooperation among busi-nesses. The new members will receive considerable financial support fromthe EU. According to a recent EU study (�Kok Report�), the advantages ofthe EU enlargement and the resulting opportunities outweigh the possiblecosts and risks by far1). EU membership will heighten Eastern Europe�s appealas an export market and investment location. Austria has good chances ofstaking its claim among competitors in Eastern Europe. Austrian exports toEastern Europe will grow at above average rates and Austria�s share in the totalexports could rise to almost 20% by 20102). The flow of foreign capital intoEastern Europe will increase. The capital invested in Eastern Europe hasresulted mainly in advantages for Austria and will also have a positive effectin the future. The upcoming enlargement of the Union will create majoropportunities for Austria. The economic advantages resulting from theenlargement will probably not be as great as those related to the openingup of Eastern Europe, but they will be positive in any case. Economic growthwill increase almost one percentage point by 2010, inflation will be curbed,the unemployment rate will drop slightly and the burden on the governmentbudget will drop. Austria stands to gain more from the EU�s enlargement toEastern Europe than other EU countries3). In Austria, the closer economicrelations with Eastern Europe have already started to exert — often painful —pressure to adjust existing structures, and it will still increase in some sectors.The pressure is unevenly distributed across regions, sectors and social groups.The liberalisation of current restrictions relating to the job market and transittraffic could (temporarily) lead to problems, but Austria has been concededtransitional measures in these areas (temporary job market protection, amongothers). The border regions will receive substantial help under the EUassistance programmes.

1 �Die Erweiterung der Europa‹ischen Union: Errungenschaften und Herausforderungen�, EU March 2003,http://europa.eu.int/comm/enlargement/communication/index.htm/kok_report.

2 Cf., Stankovsky, J., EU-Erweiterung: Chancen und Herausforderungen fu‹r die o‹sterreichische Wirtschaft, in: Neisser, H. undPuntscher Riekmann S. (Hg.), Europa‹isierung der o‹sterreichischen Politik, Universita‹tsverlag, Vienna, 2002.

3 Cf. Breuss, F. , �Teilprojekt 12: Makroo‹konomische Auswirkungen der EU-Erweiterung auf alte und neue Mitglieder�, in:Mayerhofer, P. und Palme, G. (Koordination) (2000/01), Strukturpolitik und Raumplanung in den Regionen an dermitteleuropa‹ischen EU-Au§engrenze zur Vorbereitung auf die EU-Osterweiterung (Preparity); Breuss, F. und Lehner, G.�Teilprojekt 12/2: Die Auswirkungen der EU-Erweiterung auf den o‹sterreichischen Staatshaushalt�, in: Mayerhofer, P.,Palme, G. (Coordination).



For more detailed information please contact:Austrian Institute of Economic ResearchAttn.: Mr. Jan StankovskyP. O. Box 91, A-1103 ViennaPhone: +43-1-798 26 01Fax: +43-1-798 93 86e-mail: [email protected]://www.wifo.ac.at

Austria�s economic relations with East European countries

2001 20021)

Value Dynamic Significance2) Value Dynamic Significance2)

in EUR million Change in % Share in % in EUR million Change in % Share in %

Foreign tradeExports 12.8 10.9 17.2 13.6 6.8 17.7Imports 10.4 5.7 13.2 10.6 2.1 13.8Balance of trade 2.4 . . . . 3.0 . . . .

Direct investmentExisting investments 10.6 31.9 35.2 12.2 . . 36.7New investments 2.6 22.7 75.1 1.6 . . 50.71) Direct investment in first half-year.2) Share accounted for by Eastern European countries in total foreign trade.



3

The Economy

3.1 Economic Structure and Selected Indicators

Robust economic growth and a strengthening labor market, stable prices,moderate unit labor costs and high price competitiveness, heightened attrac-tiveness for foreign investment, a firm commitment to sound public finances,a track record of monetary stability, and social partners� responsible policy-making have proved big assets for Austria and have clearly reinforced itsinternational competitiveness since its entry into the European Union (EU)in 1995 and by its participation in the first wave of EMU in 1999, as reflectedby highly favorable economic conditions that prevail in Austria.

In an international comparison of business locations, Austria claims aremarkably strong position. For one thing, Austria provides a sound businessclimate for industrial enterprises, which is underscored by the substantialamount of direct investment the country has attracted and by the better exportperformance it has achieved in recent years. The economic integration withinthe EU as well as the progressive integration of southeastern and eastern Euro-pean countries — both of which guarantee access to large, more highly inter-linked markets — are also seen as important competitive advantages. Moreover,a high standard of living and stable macroeconomic and legal frameworkconditions contribute to the favorable assessment of Austria as a businesslocation. Last but not least, Austria boasts a workforce whose qualificationsand motivation are well above the European average. Austria will maintainits appeal as a business location against international competition also in thelong term. To this effect, the reforms that have been started to eliminateexisting structural weaknesses will have to be advanced energetically. Enlarge-ment opens up new chances and challenges for Austria as a business location.According to the most recent �World Competitiveness Yearbook 2003� andespecially to the World Competitiveness Scoreboard (which presents theoverall ranking for 49 countries) Austria moved to rank 10 (2002: 8). Eco-nomic giants like Germany, France and Japan lie either just ahead of orbehind Austria. The following review of Austria�s performance highlightsthe headway Austria has made in terms of economic growth, budget consol-idation and competitiveness.

Almost half of Austria�s land area is used for agriculture and animalfarming. Domestic agricultural production satisfies about 80% of the country�sfood needs. In 2002, almost 25,800 people were employed in agriculture andforestry, or 0.8% of Austria�s jobholders. This sector accounted for 2.0% ofAustria�s GDP.

Austria is a highly industrialized country with efficient and diversifiedindustrial and services sectors. Austria�s industries — which include manu-facturing and mining, power generation and water supply — accounted forabout 21.9% of GDP in 2002. In terms of output, the country�s most impor-tant industrial sectors are metals (machinery and tools, iron and steel, motorvehicles, nonferrous metals), chemicals, electrical equipment and electronics,food and beverages, forestry products (production and processing of paper andwood), oil, textiles and clothing.

In 2002, the construction industry employed about 240,000 persons, or7.6% of Austria�s jobholders, and accounted for 6.9% of Austria�s GDP.

Introduction

Austria attractive Business Location

Agriculture and forestry

Industry

Construction sector


The Capital Market

The sector trade and services as a whole accounted for about 63.4% ofGDP in 2002. Services have become the biggest single contributor to theAustrian economy. The country�s services sector comprises high-performancetransport and telecommunication industries, banking and insurance, com-merce and a wide variety of production-related services. Tourism is an impor-tant service industry, making a major contribution to Austria�s currentaccount.

The GDP generated by all these sectors in 2002 totalled EUR 216.6 billionat current prices. This represents a nominal 2.2% increase on 2001. Allowingfor inflation, Austria�s GDP increased by 1.0%. Real GDP is expected to growby 0.7% in 2003 and by 1.2% in 2004 (most recent WIFO-forecast of June2003).

An international comparison of key economic indicators shows that Austriaperforms very well across the board. Over the long term, the country�seconomy has grown in line with that of most European countries. Moreover,Austria has an extremely good employment and inflation record.

Average gross unadjusted per-capita income equaled EUR 2,400 a monthin 2001 (there are no data available for 2002 yet). After deducting payroll tax,social insurance contributions, etc., jobholders had average monthly take-home pay of EUR 1,620, which represents a 1.25% increase on 2001.

The productivity of Austrian employees has grown steadily during the pastfew years but weakening in 2001 (it remained unchanged year on year). In2002, productivity (measured as real GDP per employee) climbed by 1.5%.

Table 1

Gross Domestic Product

Sector 1996 1997 1998 1999 2000 2001 2002 2002

EUR billion % of GDP

Agriculture, hunting and forestry 4.2 4.2 4.3 4.3 4.3 4.5 4.3 2.0

ManufacturingMining and quarrying 0.6 0.6 0.6 0.6 0.7 0.8 0.8 0.4Manufacturing 32.8 34.3 36.2 37.5 40.4 41.3 41.9 19.3Electricity, gas and water supply 4.8 4.5 4.7 4.8 4.4 4.2 4.7 2.2Construction 13.5 13.8 14.5 14.9 15.1 14.7 14.9 6.9Total manufacturing 51.7 53.2 56.0 57.8 60.6 61.0 62.3 28.8

Trade and servicesWholesale and retail trade1) 21.4 22.0 22.8 23.3 24.9 25.1 25.5 11.8Hotels and restaurants 6.5 6.6 7.0 7.3 7.9 8.6 9.0 4.2Transport, storage and communication 12.2 12.5 12.8 12.9 13.4 13.9 13.9 6.4Financial intermediation 11.4 12.2 12.2 11.7 13.2 13.1 12.7 5.9Real estate, renting and business activities 24.3 25.7 27.6 29.1 31.4 33.8 34.9 16.1Public administration and defence; compulsory social security 11.2 11.4 11.7 12.2 12.5 12.8 12.9 6.0Other services 25.6 24.3 25.2 25.3 26.5 27.4 28.4 13.1Total trade and services 112.6 114.7 119.3 121.8 129.8 134.7 137.3 63.4

Less financial intermediation services indirectly measured 8.5 9.1 9.1 8.4 9.6 10.3 9.9 4.6Taxes less subsidies on products 17.9 19.5 20.0 21.5 21.8 21.8 22.7 10.5GDP at current prices 178.0 182.5 190.6 197.2 207.0 211.9 216.6 100.0GDP at 1995 prices 175.7 178.5 185.5 190.6 197.4 198.7 200.8 x

%-change in GDP vs. previous yearat current prices 3.3 2.5 4.5 3.4 5.0 2.3 2.2 xat 1995 prices 2.0 1.6 3.9 2.7 3.5 0.7 1.0 x

Source: Statistics Austria, OeNB.1) Inclusive repair of motor vehicles, motorcycles and personal and household goods.

Services, Tourism

GDP

International comparison

Per-Capita income

Productivity


The Capital Market

Over the longer term, Austria has a good inflation record. Stability-oriented and competitiveness-oriented wage moderation has contributedsignificantly to the favorable price environment. Due to stagnant unit laborconstant increasing competition especially in the service sector (deregulation,liberalization), the HICP-inflation dropped to a low of 0.5% in 1999. In 2002,inflation came to 1.7% (and therefore clearly fell behind the 2001 figure of2.3%). Inflation was largely carried by services and food including alcoholicbeverages and tobacco. Prices of unprocessed food, by contrast, decelerated.In 2002, the Austrian price increase was below the average in the Euro area(2.2%) and in the European Union (2.1%).

Table 2

The Austrian Economy in an International Context

Austria Euro Area European Union

1999 2000 2001 2002 1999 2000 2001 2002 1999 2000 2001 2002absolute or % vs. previous year

GDP at constant prices 2.7 3.5 0.7 1.1 2.8 3.5 1.5 0.8 2.8 3.5 1.6 1.0Consumer prices 0.6 2.3 2.7 1.8 x x x x x x x xHarmonized consumer prices 0.5 2.0 2.3 1.7 1.1 2.3 2.3 2.2 1.2 1.9 2.2 2.1Unemployment rate(EUROSTAT-Definition) 3.9 3.7 3.6 4.3 9.4 8.5 8.0 8.3 8.7 7.8 7.3 7.6Budget deficit(general government) as % of GDP —2.3 —1.5 0.3 —0.6 —1.3 0.1 —1.6 —2.3 —0.7 0.9 —0.9 —1.9Gross fixed capital formationat constant prices 2.1 5.9 —2.2 —4.6 5.9 4.9 —0.6 —2.6 5.2 4.7 —0.3 —2.4Exports at constant prices 8.5 13.4 7.4 2.7 5.3 12.6 3.0 1.3 5.5 12.2 2.6 1.0Imports at constant prices 9.0 11.6 5.9 —1.3 7.4 11.3 1.7 —0.4 7.4 11.4 1.6 —0.1Current account deficit/surplus as % of GDP —3.2 —2.6 —1.9 0.4 0.6 0.0 0.3 0.9 0.2 —0.3 0.2 0.7

Sources: Statistics Austria, EUROSTAT, EU-Commission.

Table 3

The Austrian Productivity, Wage and Price Indices

Year GDP per employee Negotiated minimum wage rate Wholesale prices Harmonized consumer price index

Index(1995=100)

–% vs.previous year

Index(1986=100)


Index(1996=100)


Index(1996=100)


1997 103.7 1.1 153.3 1.8 100.4 0.4 101.2 1.21998 106.7 2.9 156.7 2.2 99.9 —0.5 102.0 0.81999 108.1 1.3 160.6 2.5 99.0 —0.8 102.5 0.52000 111.1 2.8 163.9 2.1 103.0 4.0 104.5 2.02001 111.1 0.0 168.3 2.7 104.5 1.5 106.9 2.32002 112.7 1.5 172.3 2.4 104.2 —0.4 108.8 1.7

Source: Statistics Austria.

Prices


The Capital Market

Unit labor costs are an important criterion of international competitive-ness. Austria has been performing well in this respect for many years. Austria�srelative industrial labor costs have been improved Austria�s competitivenessvis-a‘-vis both Germany and (on average) its trading partners (weighted onthe basis of their share in foreign trade).

Table 4

Harmonized Index of Consumer Prices — International Comparison

Selected Countries 1998 1999 2000 2001 2002

Change in % vs. previous year

Belgium 0.9 1.1 2.7 2.4 1.6Germany 0.6 0.6 1.4 1.9 1.3Greece 4.5 2.1 2.9 3.7 3.9Spain 1.8 2.2 3.5 2.8 3.6France 0.7 0.6 1.8 1.8 1.9Ireland 2.1 2.5 5.3 4.0 4.7Italy 2.0 1.7 2.6 2.3 2.6Luxembourg 1.0 1.0 3.8 2.4 2.1Netherlands 1.8 2.0 2.3 5.1 3.9Austria 0.8 0.5 2.0 2.3 1.7Portugal 2.2 2.2 2.8 4.4 3.7Finland 1.4 1.3 3.0 2.7 2.0

Euro Area 1.2 1.1 2.3 2.3 2.2

Denmark 1.3 2.1 2.7 2.3 2.4Sweden 1.0 0.6 1.3 2.7 2.0United Kingdom 1.6 1.3 0.8 1.2 1.3

EU-15 1.3 1.2 1.9 2.2 2.1

Switzerland1) 0.0 0.8 1.6 1.0 0.6Norway1) 2.3 2.3 3.1 3.0 1.3

USA1) 1.5 2.2 3.4 2.8 1.6Japan1) 0.7 —0.3 —0.7 —0.6 —0.9Canada1) 1.0 1.7 2.7 2.5 2.3

Total OECD1) 4.0 3.4 4.0 3.4 2.5

Sources: EUROSTAT, OECD.1) National CPI.

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Unit labor costs


The Capital Market

During 2002 Austrians spent 57.6% of income earned within Austria onprivate consumption and 18.7% on public consumption. However, the levelof investment expenditure on industrial modernization and the infrastructurewas also high. Austria�s gross fixed capital formation reached 21.8%, whichwas ahead of the OECD average.

Table 5

Relative Labor Costs in Manufacturing in Austria

Labor costsper unitof output

Relative labor costs1)

Austria versustradingpartners

Austria versusGermany

Annual change in %

1990 �0.9 �2.2 �3.41991 þ2.2 �2.7 �1.81992 þ3.8 þ2.3 �0.91993 þ0.9 þ1.1 �2.71994 �3.6 þ0.8 þ2.91995 �0.6 þ3.0 �0.21996 �0.8 �1.6 þ1.21997 �4.4 �4.8 þ0.81998 �2.0 �1.2 þ0.11999 �1.2 �2.1 �0.82000 �4.5 �5.4 �1.82001 þ1.8 �0.3 þ0.12002 �0.2 �0.2 þ0.020032) �0.5 þ1.4 �1.420042) �0.6 �0.7 �1.2

Sources: Statistics Austria, WIFO (Austrian Institute of Economic Research).1) Negative values indicate an increase in competitiveness.2) Forecast (WIFO — June 2003).

Table 6

Domestic Expenditure in Austria

1996 1997 1998 1999 2000 2001 2002 2002

EUR billion % of GDP

Private consumption 101.8 105.0 108.5 112.0 117.4 121.6 124.9 57.6Public consumption 36.1 35.9 37.3 39.0 39.8 40.5 40.6 18.7Total consumption 137.9 141.0 145.7 151.0 157.2 162.1 165.4 76.4Gross fixed capital formation 41.5 43.0 45.0 46.2 49.4 49.1 47.2 21.8Changes in inventories andacquisitions less disposals of valuables 0.7 1.2 1.2 2.1 0.9 0.0 — 0.5 — 0.2Gross capital formation 42.2 44.1 46.2 48.4 50.3 49.1 46.7 21.6Errors and omissions — 0.1 0.2 — 0.2 — 0.5 0.8 0.7 — 0.5 — 0.2Total domestic expenditure 180.0 185.3 191.8 198.9 208.3 211.9 211.7 97.7


Domestic expenditure


The Capital Market

3.2 Foreign Trade and the Balance of Payments

Because of its extensive foreign trade, Austria�s economy is strongly inter-twined with those of other countries. According to Statistics Austria calcu-lations, imports in 2002 amounted to EUR 77.1 billion, which equals adecline by 2.0% year on year, whereas exports advanced by 4.2% atEUR 77.4 billion. The balance of trade indicates for the first time since1945 a surplus of EUR 0.3 billion (in 2001 there was a deficit EUR 4.4 billionrecorded). Export growth was above average in non-EU trade, but belowaverage in intra-EU trade.

Austria�s exports to non-EU countries expanded at a markedly faster pacethan to intra-EU trade, which nevertheless continues to account for thelion�s share (roughly two thirds) of Austria�s merchandise trade. Whileimports from EU countries decreased by 1.5%, exports rose by 3.0% yearon year. Therefore the deficit decreased to EUR 4.2 billion (2001: EUR 6.3billion). In 2002, Austria�s trade with non-EU countries showed decreasingimports (—3.0%) and increasing exports (+6.1%) year on year, respectively.Merchandise trade depicted an exports surplus which increased to EUR 4.5billion (2001: EUR 1.9 billion).

The geographical breakdown displays a marked concentration on WesternEurope, but Austria benefits from its position as a gateway between east andwest in Europe and the countries of Central and Eastern Europe have recentlybeen gaining in importance.

Table 7

Foreign Trade in Austria

Year Exports Imports Balanceof trade

Exports as apercentageof imports

EUR million

1991 34,812 43,015 �8,203 80.931992 35,432 43,162 �7,730 82.091993 33,951 41,054 �7,103 82.701994 37,246 45,702 �8,456 81.501995 42,151 48,548 �6,396 86.821996 44,490 51,798 �7,309 85.891997 51,962 57,430 �5,468 90.481998 56,302 61,200 �4,897 92.001999 60,266 65,316 �5,050 92.272000 69,692 74,935 �5,243 93.002001 74,251 78,692 �4,440 94.362002 77,401 77,106 295 100.38



The Capital Market

The commodity breakdown of Austria�s foreign trade has becomeconsiderably more balanced over the past few years. There is a clear trendtowards manufactured products and capital goods on both the export andimport sides.

An evaluation of the Austrian current account for 2002 shows a balancedresult — a noticeable improvement that is ascribable to a rise in Austrianexports and to lower income outflows. For the first time in ten years, theAustrian current account recorded a surplus of EUR 0,949 million or 0.4%of GDP in 2002 — a substantial improvement by EUR 5,063 million against2001.

According to the transaction principle the current account recorded forthe first quarter 2003 a surplus of EUR 1.4 billion, a slightly lower surplusthan in the like period of 2002. This development is due to the lower net flowsfrom the position merchandise and service payments and to the betterdevelopment of the income position.

Table 8

Exports and Imports in Austria — According to Product Group1)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2002

EUR million % of total

Exports (f.o.b):Food and live animals 1,088 1,395 1,666 1,968 2,108 2,309 2,478 2,803 3,075 3.97Beverages and tobacco 258 288 283 358 431 641 780 974 975 1.26Raw materials, inedible,other than fuels 1,597 1,749 1,616 1,869 1,903 2,142 2,396 2,388 2,511 3.24Fossil fuels, lubricants andrelated substances 484 423 547 623 561 656 911 1,452 1,840 2.38Animal and vegetable oils, fats 25 35 28 39 45 52 54 53 66 0.08Chemical products 3,407 3,877 4,156 5,038 5,242 5,655 6,427 7,077 7,929 10.24Processed goods2) 10,752 12,274 12,085 13,468 14,868 14,439 16,363 17,187 17,309 22.36Machinery and vehicles 14,511 16,447 18,083 21,301 23,344 25,982 30,612 32,137 33,069 42.72Miscellaneous manufactured goods 5,102 5,626 5,897 7,222 7,722 8,338 9,089 9,910 10,092 13.04Goods not classed by kind 23 36 127 76 78 51 581 270 535 0.69Total exports3) 37,246 42,151 44,490 51,962 56,302 60,266 69,692 74,251 77,400 100.00

Imports (c.i.f):Food and live animals 2,207 2,562 2,806 3,218 3,311 3,427 3,553 3,937 4,030 5.23Beverages and tobacco 179 195 201 270 319 336 376 437 497 0.64Raw materials, inedible,other than fuels 1,931 2,256 1,947 2,356 2,378 2,487 3,014 2,930 2,960 3.84Fossil fuels, lubricants andrelated substances 2,014 2,151 2,767 3,030 2,565 2,881 4,899 5,500 5,731 7.43Animal and vegetable oils, fats 83 88 101 127 133 116 111 110 126 0.16Chemical products 4,742 5,189 5,359 6,089 6,546 6,749 7,572 8,229 8,683 11.26Processed goods2) 8,744 9,385 9,412 10,507 11,056 11,135 12,501 13,264 12,507 16.22Machinery and vehicles 17,365 17,896 19,613 21,916 24,320 26,947 30,818 31,612 30,020 38.93Miscellaneous manufactured goods 8,415 8,515 9,214 9,725 10,229 11,044 11,814 12,431 12,184 15.80Goods not classed by kind 23 310 377 191 343 193 278 241 368 0.48Total imports3) 45,702 48,548 51,798 57,430 61,200 65,316 74,935 78,692 77,104 100.00

Source: Statistics Austria.1) Based on movements of goods.2) Semi-finished and finished products.3) Amounts may not add up due to rounding.


The Capital Market

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Table 9

Balance of Payments1)

1994 1995 1996 1997 1998 1999 2000 20012) 20023)

EUR million

Current account � 2,717 � 4,490 � 4,180 � 5,758 � 4,685 � 6,330 � 5,357 � 4,114 949

Goods � 6,557 � 4,874 � 5,598 � 3,777 � 3,289 � 3,377 � 2,990 � 1,403 3,749Exports - f.o.b. 37,340 42,253 44,615 52,038 56,413 60,504 70,187 74,722 78,031Imports - c.i.f 43,897 47,127 50,213 55,816 59,702 63,881 73,177 76,125 74,282Services 6,108 3,379 3,501 874 2,122 1,648 1,743 2,045 1,069of which travel 2,873 1,925 1,354 788 1,502 1,730 1,536 1,423 1,952Income � 1,373 � 1,741 � 715 � 1,349 � 1,779 � 2,698 � 2,661 � 3,404 -2,134Current transfers � 896 � 1,254 � 1,367 � 1,506 � 1,738 � 1,902 � 1,449 � 1,352 -1,735

Financial account 3,147 5,047 3,812 5,448 5,531 6,614 4,679 4,599 -4,623

Capital account � 232 � 203 � 75 � 111 � 308 � 248 � 475 � 592 -580

Foreign direct investment abroad � 1,043 � 828 � 1,488 � 1,762 � 2,469 � 3,098 � 6,230 � 3,506 -6,001Foreign direct investment in Austria 1,745 1,395 3,405 2,354 4,078 2,792 9,595 6,574 1,612Portfolio investment assets � 3,744 � 2,073 � 6,396 � 8,800 �10,116 �27,207 �29,167 �11,882 -25,151Portfolio investment liabilities 4,036 9,418 4,764 10,174 16,018 24,654 32,395 18,603 19,992Other investment assets � 2,311 � 7,414 651 � 4,526 � 825 �10,571 �17,187 � 9,520 11,320Other investment liabilities 5,260 5,336 3,369 4,572 1,566 18,496 14,698 2,334 -7,795Change in official reserves � 768 � 1,001 � 809 2,608 � 2,914 1,963 838 2,067 1,810

Errors and omissions � 197 � 354 443 421 � 539 � 36 1,152 108 4,254

Source: Oesterreichische Nationalbank.1) Amounts may not add up due to rounding.2) Revised data.3) Provisional data.


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3.3 Labor, Education and Social Services

During 2002, Austria�s total work force (jobholders, the self-employed andthe unemployed) averaged 4.29 million. The number of jobholders (depend-ent employment) averaged 3.16 million, 28% of whom worked in industryand construction, 68% in commerce and other service sectors and 1% inagriculture and forestry.

Unemployment has been increasing in recent years. In 2002 it averaged232,400, compared with 203,900 in 2001. Job vacancies averaged 23,200during 2002. The unemployment rate (Eurostat definition) was 4.3%, whichwas well blow the euro area average (8.3%). This rate is putting Austria inthird place within the Euro area, namely behind Luxemburg and the Nether-lands. The national unemployment rate (not seasonally adjusted) came to6.9% in 2002.

The past few years have also seen the employment of a substantial numberof foreigners. Their number peaked in 2002 with an average of 334,000, or10.6% of all jobholders. At that time, 48.3% of the foreign workers werecitizens of former Yugoslavia, 16.8% of Turkey and 11.7% of EU countries.

Thanks to its well-developed and comprehensive educational system,Austria has a highly-qualified work force. Children have to attend school fromthe age of six, and compulsory schooling lasts for nine years. After four yearsat elementary school, ten-year-old pupils can choose between two systems ofschooling: extended elementary school or secondary school. Pupils whocomplete their studies at a secondary or higher vocational school are awardeda graduation certificate that entitles them to attend university.

In 2002, the federal government�s expenditure on education amounted toEUR 5.66 billion. The system provides pupils with excellent facilities. Thegovernment is continuing to improve the country�s school system by makingclasses smaller and introducing new subjects such as computer science andelectronic data processing. In the 2001/2002 school year, 1.231,000 pupilsattended Austria�s 6,800 schools.

Table 10

Employment and Unemployment in Austria

Dependent employment Registeredunemployment

Unemployment rate Vacancies

in 1,000 annualchange in %

in 1,000 NationalDefinition1)

EUDefinition2)

in 1,000

1991 2,997.4 þ2.3 185.0 5.8 3.4 49.41992 3,055.8 þ2.0 193.1 6.0 3.3 44.11993 3,054.9 �0.0 222.3 6.8 3.9 32.91994 3,070.7 þ0.5 214.9 6.5 3.8 30.21995 3,068.2 �0.1 215.7 6.6 3.9 25.01996 3,047.3 �0.7 230.5 7.0 4.4 19.41997 3,055.6 þ0.3 233.3 7.1 4.4 19.01998 3,076.7 þ0.7 237.8 7.2 4.5 23.11999 3,107.9 þ1.0 221.7 6.7 3.9 31.22000 3,133.7 þ0.8 194.3 5.8 3.7 35.52001 3,148.2 þ0.5 203.9 6.1 3.6 29.72002 3,155.2 þ0.2 232.4 6.9 4.3 23.2

Sources: Austrian Public Employment Service, EUROSTAT, Austrian Institute of Economic Research, Main Association of Austrian Social SecurityInstitutions.1) Registered unemployed in % of dependent employment and registered unemployed.2) Sample survey according to EUROSTAT criteria.

The work force and employment

Unemployment

Foreign workers

Education

The educational budget


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Expenditure on R&D encompasses much of those resources which are usedmore or less like an investment into the future and spent with a view toobtaining and securing competitive advantages. During the 1990s, Austriamade a serious effort to catch up: From 1.39 percent of GDP in 1990, publicspending on research successively grew to 1.95 percent in 2002, which hasbrought Austria to a medium level within Europe; but there is still a widegap to leading countries such as Finland or Sweden.

Austria�s social security system offers health, maternity, disability and old-age benefits, family allowances, supplementary retirement and welfareschemes, unemployment benefits and a number of other social welfareschemes and benefits. 99% of Austria�s population is covered by the socialsecurity net. Social security benefits are financed by regular contributionsfrom employees and employers (about three quarters of total securitybenefits) or by allocations from the federal budget. Austria�s good positionfor business location can also be seen when looking at the number of strikedays which is very low in comparison to other main industrial countries.

Table 11

Strikes: Working Time Lost

Country 1993 1994 1995 1996 1997 1998 1999 2000 2001

Per jobholder (minutes/year)

Austria 2.0 0.0 0.0 0.0 2.9 0.0 0.0 0.4 0.0Germany 8.8 3.4 3.7 1.5 0.8 0.2 1.2 0.2 . .Denmark 12.4 7.8 40.8 15.5 20.3 631.0 18.1 24.4 11.7USA 17.6 21.5 23.9 19.7 17.8 19.9 7.8 78.3 4.4United Kingdom 14.1 6.0 8.9 27.8 4.9 5.8 4.9 9.9 10.3Sweden 25.8 7.2 85.0 8.3 3.2 0.2 10.4 0.0 1.4

Source: Austrian Federal Chamber of Labor.

Research and development

A well-developedsocial security network


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3.4 Federal Budget,

Public Deficit and Public Debt

The public fiscal year is the calendar year. Before the start of every new fiscalyear, the federal government submits an annual budget containing the plannedrevenues and expenditures to the Austrian Parliament (Nationalrat) for �adop-tion. Any changes in expenditures and revenues exceeding the Minister ofFinance�s competence require the Nationalrat�s approval in the form of a�special budget law. If the federal budget act cannot be passed before the be-ginning of the new fiscal year, an automatic provisional budgetary arrangemententers into force. In order to achieve greater continuity in budget policy, it hasbeen the practice since 1996 to negotiate federal budgets in groups of two(1996/97, 1998/99, 2001/02, 2003/04 with the exception of 2000).

Table 12 shows the structure and development of Austria�s federal budgetover the last few years.

The government has been pursuing a policy of privatization since 1986. Itsold state-owned shares worth more than EUR 1.7 billion during the firstround of privatization (1986—1994). Following the sale of Verbundgesellschaftshare capital in 1987 and the takeover of the national Mint by the Oesterreichi-sche Nationalbank in 1989, active privatization slowed down, with little actionbeing taken between 1991 and 1994. Between 1995 and 2000, shares worthanother EUR 2.3 billion were sold (mainly of Bank Austria and the Creditanstalt-Bankverein).

Table 12

Summary of Revenues and Expenditures of Federal Budget1)

1997 1998 1999 2000 2001 2002 20035) 20045)

EUR million

I. General AccountRevenue:Total taxes and levies, gross 45,343 48,709 48,675 50,387 56,210 54,951 53,758 57,618Less transfers to EU,provinces, municipalities and others 15,315 15,263 15,997 17,345 18,278 18,285 18,314 19,002Total taxes and levies, net 30,028 33,446 32,678 33,041 37,933 36,666 35,444 38,616Federal enterprises and other sources 19,5874) 18,267 19,615 22,352 21,055 22,746 21,970 20,620Total revenues 49,6154) 51,712 52,293 55,393 58,988 59,413 57,414 59,236

Expenditure:Government expenditure 54,282 56,286 57,093 58,247 60,403 61,803 61,355 62,666Federal enterprises 2184) 224 156 0 0 0 0 0Total expenditure 54,5004) 56,510 57,249 58,247 60,403 61,803 61,355 62,666Budget deficit, net of public debt redemptions 4,885 4,798 4,956 2,854 1,415 2,390 3,941 3,430Budget deficit, net as a percentage of GDP 2.67% 2.53% 2.51% 1.39% 0.67% 1.10% 1.78% 1.51%

II. Financing Account:Expenditure2) 12,161 24,887 30,655 63,418 37,114 34,697 51,276 50,993Revenue3) 17,046 29,685 35,611 66,272 38,529 37,087 55,217 54,423Surplus 4,885 4,798 4,956 2,854 1,415 2,390 3,941 3,430

Source: Bundesministerium fu‹r Finanzen (Federal Ministry of Finance). WIFO (Austrian Institute of Economic Research).1) Pursuant to ⁄ 16, para 1, of the Federal Budget Act (Bundeshaushaltsgesetz — BHG) the federal budget is to be divided into a general account and a financing account. Receipts from and expenditure on

swaps (interest and capital) are given in gross figures. Amounts may not add up due to rounding.2) Redemptions of federal debt, Austrian Industrial Holding Company�s debt and short-term cash-raising operations.3) Receipts from borrowing and short-term cash-raising operations.4) Adjusted in the course of the separation of the Motorway and Road-Financing Agency (ASFINAG).5) Budget estimate (Bundesvoranschlag — BVA).

The federal budget

Privatization of state-owned sharesanual real estates


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The Federal Minister of Finance collected privatization revenues for thefederal budget to the amount of EUR 429 million in 1995, EUR 342 millionin 1996, EUR 1.3 billion in 1997, EUR 203 million in 1998 and EUR 51million in 2000 and EUR 2.8 million in 2002. No revenues were realized fromprivatization in 1999 and 2001. For 2003 and 2004 privatisation revenues inamount of EUR 9.8 million and EUR 1.4 million respectively are expected.

See section 5.5 for details on the privatization of O‹IAG companies inparticular and the new role of O‹IAG in privatizing shares of public enterprisesin general.

The 2002 budget report of the Austrian federal government states thatfederal government real estate sales to Bundesimmobiliengesellschaftamounted to EUR 0.54 billion in 2000, EUR 0.78 billion in 2001 and EUR0.74 billion in 2002. Further real estate sales (last instalment of the trans-action) of EUR 0.34 billion are planned for 2003.

The federal government plays a dominant role in the development of thepublic balance. In 1994 and 1995, when Austria joined the EU, the budgetdeficit amounted to 5.0% and 5.2% of GDP, respectively.

Table 13

Austria�s Direct Debt1)

1995 1996 1997 19983) 19993) 2000 2001 2002

EUR million

ATS/EUR debt 76,400 80,001 85,100 97,939 101,196 103,984 105,220 108,248Foreign currency debt2) 21,156 21,512 22,160 13,664 16,778 16,722 16,193 15,705Total debt 97,556 101,514 107,260 111,603 117,974 120,705 121,413 123,953

Source: O‹ sterreichische Bundesfinanzierungsagentur (Austrian Federal Financing Agency).1) Including swap-transactions, excluding own holdings of federal securities.2) Converted into EUR at the exchange rate on 31 December of the particular year.3) Break in the time series: Since 1999 the euro debt of the federal government comprises re-denominated ATS debt and foreign currency debt held in euro

currencies. Only debt held in non-euro currencies is recorded as federal foreign currency debt. Figures for 1998 are recalculated.

Table 14

Federal Debt Servicing Costs for the ATS/EUR Debt

1999 2000 2001 2002)

EUR million

Interest payments 6,034 6,025 5,911 6,044Redemptions 11,126 11,312 9,706 12,459Other1) 0 211 � 88 � 32Total servicing costs 17,160 17,548 15,529 18,471

Source: O‹ sterreichische Bundesfinanzierungsagentur (Austrian Federal Financing Agency).1) Actual expenditure for other costs (commission, issuing costs) and the zero coupon fund.

Table 15

Federal Debt Servicing Costs for the Foreign Currency Debt1)

1999 2000 2001 2002

EUR million

Interest payments 607 736 649 533Redemptions 433 2,008 1,650 1,975Other2) 4 20 � 9 24Total servicing costs 1,045 2,764 2,291 2,532

Source: O‹ sterreichische Bundesfinanzierungsagentur (Austrian Federal Financing Agency).1) Converted into EUR at the exchange rate on 31 December of the particular year.2) Actual expenditure for other costs (commission, issuing costs) and the zero coupon fund.

Budgetary development1996—2005


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In April 1996, a fiscal consolidation program for 1996 and 1997 waslaunched to bring the public budget deficit in line with the Maastricht criteriaand to meet requirements for Monetary Union. The decrease of the generalpublic deficit by 1.4 percentage points to 3.8% of GDP in 1996 and by1.9 percentage points to 1.9% in 1997 can be traced to the impact of theconsolidation package.

The federal budget plans for 1998 and 1999 were aimed at stabilizingbudgetary consolidation without taking any sweeping measures. In 1998 anincrease to 2.4% was observed, while the public deficit ratio stood at 2.3%of GDP in 1999.

The deficit ratio came to 1.5% of GDP (without UMTS licenses: 1.9% ofGDP) in 2000 owing to a number of tax-related measures (specific indirecttaxes, fees and charges were raised), the sale of UMTS licenses and favorableeconomic conditions. The fiscal activities for 2001 and 2002 were character-ized by comprehensive and ambitious austerity measures (mainly comprising apension reform, a reduction of the number of public employees and direct taxmeasures) and a new agreement between the federal government, the La‹nderand the local authorities in which the representatives of the La‹nder and localauthorities have committed to increasing their contributions to budgetary con-solidation.

Despite the considerable slowdown in growth, the general government im-proved to a slight surplus of 0.3% of GDP in 2001. In 2002 by contrast generalgovernment finances deteriorated by almost one percentage point to 0.6% ofGDP reflecting the working of automatic stabilizers and the consequences ofthe flood disaster of August 2002. According to the latest update of theAustrian stability program for 2003 a further increase of the general govern-ment�s deficit to 1.3% may occur. This is mainly due to the delayed costs of theflood, budgetary effects of the decided two stimulus packages, already agreedupon increases in salaries and benefits and revenue losses caused by the weakeconomic conditions.

In 2004 and 2005 besides the brightening economic conditions, theenvisaged cuts in public employment will have a positive influence on fiscaldevelopments in these years. While the cost saving effects of the pensionreform will be small over the forecast horizon, pension outlays will diminishconsiderably over the medium to long term. In contrast to these measures, the

Table 16

Development of the Public Sector in Austria

1998 1999 2000 2001 20021) 20032) 20042)

in % of GDP

Public Deficit/SurplusGeneral Government � 2.4 � 2.3 � 1.5 0.3 � 0.6 � 1.3 � 0.7Central Government � 3.0 � 2.5 � 1.6 � 0.5 � 1.0 � 1.8 � 1.4State Government 0.4 0.3 0.2 0.5 0.3 0.4 0.7Local Government 0.1 0.0 0.0 0.3 0.2 0.1 0.0Social Security Funds 0.1 0.0 � 0.1 0.0 0.0 0.0 0.0

Public Debt 64.9 67.5 66.8 67.3 67.7 67.13) 66.53)

Source: Statistics Austria, Federal Ministry of Finance, Austrian Institute of Economic Research.1) Provisional Data.2) Update of the Stability Programme of Austria (2003—2007).3) Estimate (Report on the federal budget, May 2003).


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first step of the tax reform will increase the budget deficit by about 0.1% ofGDP (in net terms) in 2004 and by approximately 0.2% of GDP in 2005. For2004 and 2005, the Ministry of Finance expects a deficit ratio of 0.7% and1.5% of GDP respectively, taking fully into account the second step of thetax reform in 2005.

Since 1993, the public debt quota has been above the 60% level laid downin the Maastricht Treaty. In 1996, the debt ratio reached 69.1%, but fell to64.7% in 1997 (for the most part owing to the reclassification of a numberof public enterprises to be included in the private sector). Figures for grossgovernment debt were significantly revised upwards, in 2001 by 1.2% ofGDP following a EUROSTAT decision on securitisation operations, and in2002 by 5.4% of GDP, due to a rectification of the Austrian debt reportingrelating to the inclusion of bonds issued in order to finance state-owned enter-prises. As a result, general government debt ratcheted up to 67.7% of GDP in2002. According to this second EUROSTAT decision also the debt ratios from1998 onwards had to be revised upwards (1998: 64.9%; 1999: 67.5%; 2000:66.8%; 2001: 67.3%). However, since interest and principal payments onthese bonds are being made by the beneficiary enterprises, this revision hadno impact on the deficit figures. From 2003 onwards again a downward trendof the debt ratio is expected by the government. According to the stabilityprogram a debt ratio of less than 60% of GDP will be achieved in 2007.

For further information please contact:Oesterreichische NationalbankEconomic Analysis and Research DivisionOtto-Wagner-Platz 3, A-1090 ViennaPhone: +43-1-404 20-7400


The Capital Market

4

Monetary Policy

4.1 The Oesterreichische Nationalbank

Central Bank of Austria

With Austria�s entry into Stage Three of the Economic and Monetary Union(EMU) on 1 January 1999 the Oesterreichische Nationalbank has become anintegral part of the European System of Central Banks (ESCB). The ESCBconsists of the ECB and the national central banks (NCBs) of the EU MemberStates and is directed by the ECB�s decision-making bodies.

The legal status of Austria�s central bank is regulated by the Nationalbank-gesetz 1984 as amended as well as the Treaty establishing the EuropeanCommunity (EC Treaty) and the Protocol on the Statute of the EuropeanSystem of Central Banks and the European Central Bank (ESCB/ECB Statute).

With the transfer of monetary policy competence to the ECB at the start ofStage Three of EMU, the responsibility and the tasks of the OesterreichischeNationalbank have changed.

The Oesterreichische Nationalbank is, in accordance with the provisions of theEC Treaty, the ESCB/ECB Statute, the directly applicable Community legis-lation adopted thereunder, and the Nationalbankgesetz 1984, obliged to worktowards the achievement of the objectives and the fulfilment of the tasks ofthe ESCB. Within the framework of Community law, in particular Articles2 and 105 of the EC Treaty, the Oesterreichische Nationalbank shall use all themeans at its disposal to secure the objective of price stability. To the extentthat this does not interfere with the objective of price stability, the needs ofthe national economy with regard to economic growth and employment trendsshall be taken into account and the general economic policies of the Commun-ity shall be supported.

The basic tasks to be carried out through the ESCB are� to define and implement the monetary policy of the Community;� to conduct foreign exchange operations consistent with the provisions of

Article 111 of the EC Treaty;� to hold and manage the official foreign reserves of the Member States;� to promote the smooth operation of payment systems.

Since 1 January 2002 and subject to the approval of the ECB, the Oester-reichische Nationalbank is empowered to issue banknotes denominated ineuros. The banknotes denominated in euros, which are issued by the Oester-reichische Nationalbank, the ECB and the national central banks of the otherMember States participating in the third stage of EMU have the status of legaltender. The Oesterreichische Nationalbank is the only institution in Austriaentitled to print or to let print banknotes that have the status of legal tenderin Austria; the legal position of the ECB is not affected thereby. Furthermore,the Oesterreichische Nationalbank is empowered to produce securities, otherstores of value and administrative forms that must meet special securityrequirements.

The Nationalbankgesetz 1984 contains a number of provisions that aredesigned to protect the central bank�s independence as laid down for NCBsand the members of their decision-making bodies in Article 108 of the ECTreaty.

In pursuing the objectives and performing the tasks within the ESCB theOesterreichische Nationalbank shall act in accordance with the guidelines and

Principal responsibilities

Protecting the central bank�sindependence


Foreign-Exchange and Monetary Policy

instructions laid down by the ECB. Neither the Oesterreichische Nationalbanknor any member of its decision-making bodies shall seek or take instructionsfrom Community institutions or bodies, from any government of a MemberState, or from any other body.

The Governor, who is a member of the ECB Governing Council and theGeneral Council of the ECB or his deputy is in no way bound, in performingthese functions, either by the decisions of the Oesterreichische Nationalbank�sGoverning Board or its General Council, nor shall they be subject to any otherinstructions.

The State Commissioner and a Deputy State Commissioner, who areappointed by the Federal Minister of Finance, are entitled to participate inthe General Meeting and the meetings of the General Council of the Oester-reichische Nationalbank in an advisory capacity. In order to guarantee fullindependence of the Oesterreichische Nationalbank the former right of the StateCommissioner to raise objections to decisions of the General Council wasabolished.



4.2 Monetary Policy

The primary goal of the Eurosystem is price stability. In this context, theGoverning Council of the ECB has adopted the following definition: �Pricestability shall be defined as a year-on-year increase in the HarmonizedConsumer Price Index for the euro area of below 2%�.

An important indicator is the development of monetary growth: InDecember 2002 the ECB has decided to confirm the reference value of4.5% p.a. for the increase of the broad monetary aggregate M3, against whichthe Eurosystem monitors on the basis of three-month moving averages of themonthly twelve-month growth rates for M3. This decision was taken on thegrounds that the available evidence continues to support the assumptionsunderlying the initial derivation of the reference value in December 1998(and its confirmation in the following years), namely those for trend potentialoutput growth and the trend decline in M3 income velocity in the euro area.

Thus, in parallel with the analysis of monetary growth in relation to thereference value, a broadly-based assessment of the outlook for price develop-ments and the risks to price stability in the euro area play a major role in theEurosystem�s strategy. This assessment is made by using a wide range ofeconomic and financial variables as indicators for future price developments.

In order to achieve its objectives the Eurosystem has at its disposal a set ofmonetary policy instruments; the Eurosystem conducts open market opera-tions, offers standing facilities and requires credit institutions to hold mini-mum reserves on accounts with the Eurosystem.

Open market operations play an important role in the monetary policy ofthe Eurosystem for the purposes of steering interest rates, managing theliquidity situation and signalling the stance of monetary policy.

The most important instruments are the main refinancing operations,(MROs) which are regular liquidity-providing reverse transactions with aweekly frequency and normally a maturity of two weeks. These operationsprovide the bulk of refinancing to the financial sector. In January 2003 theGoverning Council of the ECB has decided to shorten the maturity of MROsfrom two weeks to one week with effect of first quarter of 2004.

In combination with a change of the timing of the minimum reserve main-tenance period this shall further improve the efficiency of the operationalframework for monetary policy.

Besides there exist the longer-term refinancing operations, which areregular liquidity-providing reverse transactions with a monthly frequencyand a maturity of three months.

Moreover the Eurosystem may use quick tenders, outright transactions,the issuance of debt certificates, foreign-exchange swaps and the collectionof fixed-term deposits.

Standing facilities aim to provide and absorb overnight liquidity, signal thegeneral stance of monetary policy and bound overnight market rates.

Counterparties can use the marginal lending facility to obtain overnightliquidity from the national central banks against eligible assets. The interestrate on the marginal lending facility normally provides a ceiling for the over-night market interest rate.

Instruments

Open market operations

Standing facilities



Counterparties can use the deposit facility to make overnight deposits withthe national central banks. The interest rate normally provides a floor for theovernight market interest rate.

In general, credit institutions subject to minimum reserves according toArt. 19.1 of the Eurosystem-statute may participate in monetary policyoperations of the Eurosystem.

All Eurosystem credit operations have to be based on adequate collateral.A distinction is made between �Tier one�- and �Tier two�-Collateral. Tier

one consists of marketable debt instruments fulfilling uniform euro-wideeligibility criteria specified by the ECB. Tier two consists of additional assets,marketable and non-marketable, which are of particular importance fornational financial markets and banking systems and for which eligibilitycriteria are established by the national central banks, subject to ECB approval.No distinction is made between the two tiers with regard to the quality of theassets and their eligibility for the various types of Eurosystem monetary policyoperations (except that tier two assets are normally not used by theEurosystem in outright transactions).

Concerning the minimum reserve system the ECB decided to apply areserve ratio on deposits and debt security issues with a maturity up to twoyears and money market paper.

Liabilities vis-a‘-vis other institutions subject to Eurosystem�s minimumreserve system and liabilities vis-a‘-vis the ECB and the national central banksare excluded from the minimum reserve base.

A lump-sum of EUR 100.000 is allowed to be deducted from an insti-tution�s reserve requirement. The minimum reserves are remunerated atthe average, over the maintenance period of one month (weighted accordingto the number of calendar days), of the Eurosystem�s rates of the mainrefinancing operations.

The system of monetary policy instruments of the Eurosystem is describedin detail in �The Single Monetary Policy in the Euro area — General documen-tation on Eurosystem monetary policy instruments and procedures�, ECB,April 2002.

Collaterals

Minimum reserve requirements



4.3 The Banking System

IntroductionThe Austrian banking system is a universal banking system. As in Germany,there is no statutory requirement to separate commercial banking from invest-ment banking. However, the universal banking system does not exclude thepossibility that individual credit institutions may have restricted bankinglicenses or specialize in particular lines of business.

The legal framework was overhauled in 1993 with the passing of a newBanking Act, that was introduced to bring Austrian banking laws in line withthe EU directives. Certain categories of credit institutions are regulated byother legislation (e.g. Savings Bank Act, Postal Savings Bank Act etc.) to theextent that is not incompatible with the Banking Act.

The Austrian banking system is organized by category or �sector�. Austria�s897 independent banks (December 2002) are divided into seven sectors,including the so-called special purpose banks established for special financingpurposes (which do not have full banking licenses):59 joint stock banks;64 savings banks;9 state mortgage banks;

609 Raiffeisen banks;70 Volksbanken;5 housing construction savings and loan associations;81 special purpose banks.The sectoral organization of the banking industry has historical roots in

Austria. Today, there are few differences between the activities of the differentsectors, but the sectoral structure is still in place. In practice, almost all banksare universal banks and there are only a few credit institutions that arespecialized in specific lines of business.

The classification of banks by sector is determined by their legal form or bythe industry association they belong to.

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The sectors are organized in single-tier and multi-tier structures. Thesectors of joint stock banks, state mortgage banks, housing construction sav-ings and loan associations and specialized credit institutions are single-tier.Savings banks and Volksbanken have a two-tier structure and Raiffeisen banks athree-tier structure.

Within the multi-tier sectors, also known as the decentralized sectors, theso-called central or umbrella institution assumes the tasks of coordination,including sectoral funding. Above all, the central institutions serve as thehub for business done with the other sectors.

In the decentralized sectors of savings banks, Volksbanken and Raiffeisenbanks, the awareness of belonging together is very strong. If an institutionin one of these sectors gets into difficulties, it can usually count on the supportof the other credit institutions in its sector.

Joint Stock BanksThe main business of joint stock banks has traditionally been the financing oflarge industrial projects and providing banking services to corporate custom-ers in the trade and industrial segments of the economy. Other activitiesinclude international business and export financing for Austrian enterprises.

In total, this sector comprises 59 credit institutions with 534 branch offices(as per December 2002). Their legal status is either that of a stock corporationor a limited liability company.

Some of the largest institutions belonging to the joint stock bank sectorare:� Bank fu‹r Arbeit und Wirtschaft AG — BAWAG, the third largest bank, and� Postsparkasse — P.S.K. (Postal Savings Bank), the sixth largest bank.

The owners of BAWAG are O‹sterreichischer Gewerkschaftsbund (Austrian Feder-ation of Trade Unions), which holds 54%, and Bayerische Landesbank, whichholds 46%.

In August 2000, BAWAG bought PSK, the Austrian postal savings bank, forEUR 1.28 billion. The takeover propelled BAWAG and PSK to a third placeranking in the category of Austria�s major banks, behind the Bank Austriagroup and Erste Bank. With the sale of PSK, the government has successfullyimplemented yet another privatization plan.

Savings BanksTraditionally, the savings banks sector was mainly committed to promotingand collecting savings deposits from the general public, granting loans andlines of credit to industrial, trade and commercial enterprises, as well asproviding funds for housing construction and municipal projects. Today thebusiness of these banks covers the full range of banking products and services.

Savings banks do not have owners as such. According to the Savings BankAct of 1979, they can be founded either by municipalities (municipal savingsbanks) or by private individuals or associations (savings associations) as legalentities under private law. The Savings Bank Act is a special law that containsthe specific legal provisions regulating savings banks, which are not set out inthe Austrian Banking Act. The main difference between municipal savingsbanks and savings associations is that in the event of a municipal savings bankbecoming insolvent, the municipality acts as deficiency guarantor.

Postsparkasse

BAWAG



However, since 1986 both forms of savings banks may be transformed intoa savings bank joint stock corporation. In this case, a savings bank brings itsbanking operations into a special form of holding company (Anteilsverwaltungs-sparkasse, AV-S), which merely manages the bank�s assets (shares are owned bythe AV-S). The AV-S itself is also ownerless. In principle, the AV-S is liable forthe savings bank�s entire assets. Should the AV-S become bankrupt or go intocomposition, the municipality again comes into play as guarantor for municipalsavings banks. Savings associations without guarantors include the Erste Bank,the second largest bank in Austria, and a number of other institutions.

Since 1 January 1999, savings banks have had the option of transformingholding management savings banks into private law foundations. This bringsthe transparency of the ownership structure into line with international stand-ards. Under the new regulations, the municipalities can be held liable only forliabilities incurred before the transformation.

The best example of a savings bank joint stock corporation is the country�slargest bank, Bank Austria, which was created in 1990 as a result of the mergerbetween the La‹nderbank and the Zentralsparkasse.

At the beginning of 1997, Bank Austria bought the second-largest bank inthe country, Creditanstalt AG.

In September 2000, the supervisory board of Bank Austria endorsed theintegration of Bank Austria in the Bayerische HypoVereinsbank group. The twobanks emerged from the merger as the third largest European bank. Withinthe HypoVereinsbank group, Bank Austria was made responsible for the impor-tant growth regions Central and Eastern Europe and for the Austrian market.

In August 2002, Bank Austria and Creditanstalt merged to form Bank AustriaCreditanstalt. The bank now operates in Austria as a single new entity.

Erste Bank der oesterreichischen Sparkassen AG (Erste Bank) is now the second-largest credit institution in Austria. Following the sale by AV-Z its 56.1% sharein GiroCredit, the savings banks sector�s leading institution at the time, to ErsteSpar-Casse, the two institutions merged in 1997, forming the Erste Bank, whichbecame the leading institution in this sector.

Cooperative BanksThere are two cooperative banking sectors in Austria, the Raiffeisen and theVolksbanken sector. They are organized in such a way that the cooperative�smembers hold stakes in the cooperative. Typically, members have voting rightsin the general meeting, but are not entitled to receive a share in the earnings,nor are they co-owners of the cooperative�s material assets, i.e. their sharesare only worth the amount they paid in. The legal framework is created bythe Banking Act and the Cooperatives Act.

The Austrian Raiffeisen sector is organized in the form of a regional three-tier system. At the primary level there are 609 Raiffeisen banks with 1,719branch offices. The second level consists of 8 Raiffeisenlandesbanken (regionalRaiffeisen banks), whose shares are held by the primary level cooperatives(today these regional cooperatives are joint stock corporations, the share-holders being the local Raiffeisen banks).

At the third or top level of the Raiffeisen sector is the Raiffeisen-ZentralbankO‹ sterreich AG (RZB), which is not a credit cooperative, but a joint stock corpo-ration whose shares are owned by the Raiffeisenlandesbanken. The main activities

Bank Austria

Erste Bank

Raiffeisen banks



of RZB include commercial banking, international business, investment bank-ing and treasury activities. In recent years, business expansion has focused onCentral and Eastern Europe.

Liquidity and financing flows go from the local Raiffeisen banks to theregional Raiffeisenlandesbanken that serves as the lead institution for therespective Austrian region. These second-tier institutions, in turn, deposittheir surplus funds with the RZB.

Originally the focus of this sector lay on the provision of funds to agricul-tural enterprises, but today more loans are in fact granted to industrial andcommercial enterprises than to the agricultural enterprises.

The Volksbanken sector is the other of the two cooperative sectors. It has atwo-tier structure, i.e. there are no Volksbanken at the regional level. At theprimary level there are 70 Volksbanken, all of which have the status of cooper-atives. At the second and top level is the lead institution of the Volksbankensector, O‹sterreichische Volksbanken AG (O‹VAG). It is a joint stock company, 60%of whose shares are held by the Volksbanken (local cooperatives) and 23% bythe Deutsche Zentral-Genossenschaftsbank.

In its capacity as a central institution, in addition to regular banking oper-ations of all kinds carried out in Austria and abroad, O‹VAG covers the followingfields of activity (similar to the role of the much larger RZB in the three-tierRaiffeisen sector):� managing of the liquid funds of the associated commercial cooperatives,

granting them loans and providing temporary liquidity,� organizing and operating non-cash transfers of payments within the Volks-

banken sector,� issuing funded bonds for refinancing purposes (O‹VAG is, however, not

licensed to issue mortgage-backed bonds or municipal credit-backedbonds).Traditionally, the first commercial cooperatives were associations of crafts-

men and owners of small businesses in the middle of the last century. Supply-ing trades and commercial enterprises with credit is still the main-stay of thissector today.

State Mortgage BanksThe state mortgage banks were founded by the provincial governments. At onetime they specialized in mortgage-backed bonds and mortgage financing, butthey have since developed into universal banks.

Their main line of business is to grant mortgage loans and loans to localauthorities (provinces and municipalities) that are refinanced through ownissues (mortgage-backed bonds and public sector mortgage-backed bondsand credit-backed bonds). The difference between the two is that in the firstcase the loan is secured by a mortgage and in the second case by loans to thepublic sector. These banks are also authorized to collect deposits and grantshort-term loans.

Traditionally, state mortgage banks were organized as institutions createdunder public law. Furthermore, the respective Austrian provincial govern-ments acted as guarantors (deficiency guarantors), for which these bankspay a fee. Over the past few years, the state mortgage banking sector haschanged considerably. Changes in the legal form (from entities under public

Volksbanken



law into joint stock corporations) and (partial) privatization have completelychanged the face of this sector.

In the meantime, all nine state mortgage banks have exercised the option oftransforming themselves into joint stock corporations, which will pave theway for strategic alliances.

Special Purpose BanksApart from these five sectors, there are 81 special purpose banks. Amongthese are investment management companies. These are usually subsidiariesof credit institutions and insurance companies. They are not allowed to pursueany banking activity other than the investment fund business.

The Oesterreichische Kontrollbank (OeKB) is owned exclusively by a number ofleading Austrian commercial banks. The primary task assigned to it by theRepublic of Austria is to provide export guarantees and long-term exportfinancing. For refinancing purposes, the OeKB issues bonds in its own nameand borrows long-term from credit institutions. In addition the OeKB also actsas a clearing house for the Wiener Bo‹rse AG and as central securities depositoryand settlement agency.

Investkredit Bank AG, as a bank for corporates, provides its customers withall financial services going beyond the scope of day-to-day company business.It raises its funds mainly by issuing medium-term and long-term bonds.

Furthermore, Austria also has five housing construction savings and loanassociations with 59 branch offices. Their task is to grant savers who have paidin a minimum amount of capital, secondary loans and mortgages at low inter-est rates. The loans must be used for the purchase of housing.

The Structure of Austria�s Banking SystemThe concept of the universal bank model includes significant potential forsynergy, allows for a high degree of risk-spreading and translates into flexibleadaption to shifting demand. With the member banks of the two-tier andthree-tier sectors cooperating closely and sharing a spirit of solidarity, difficul-ties that could affect other small banks can be largely prevented and insolvencyproblems may be resolved within the sector. Austrian banks� competitivenessvis-a‘-vis their EU counterparts is further underpinned by traditionally strong

Market Share of Largest Banks in Austria

in Terms of Total Assets (Dec. 2002) unconsolidated

Institution Percentage share

per bank aggregated

Bank Austria Creditanstalt 19.48 19.48Erste Bank AG 10.09 29.58BAWAG 6.64 36.22RZB 5.65 41.86Kontrollbank 4.08 45.94O‹ VAG 1.98 47.92PSK 2.13 50.05RLB OO‹ 1.98 52.03RLB NO‹ -WIEN 1.81 53.84

Source: Oesterreichische Nationalbank, Monthly Reports.

Oesterreichische Kontrollbank



relations with their customers. In particular, Austrian banks boast indepthknowledge of the workings and needs of small and medium-sized enterprises,offer an all-encompassing range of services, including the distribution ofproducts not traditionally linked with banks, are renowned for their EasternEuropean know-how and, over the years, have acquired invaluable expertisein an environment that benefits from a stability-oriented monetary policy.

As is the case in other countries, the Austrian banking system is currentlyundergoing structural change. Although this is taking place predominantly inthe �big bank� sector, small and medium-sized credit institutions are alsoinvolved in a continual process of concentration and cooperation.

After the major mergers of the year 1997, consolidation in the Austrianbanking sector focused on continued restructuring in the newly createdgroups Bank Austria-Creditanstalt and the Erste Bank, and on further consoli-dation in the multi-tier sectors.

Austria�s banking system comprises 5,368 independent banks and branchoffices. The relatively high number of offices compared to other internationalbanking sectors may be explained by the fact that banks are the first choice forsavings and for the funding of investments, over-shadowing the comparablyminor — but now steadily increasing — role of other financial intermediaries(capital market, institutional investors) in Austria.

The Development of the Banking Sectors

Sector Total Assets Dec. 2002 Total Assets Dec. 2001 Total Assets Dec. 1990

EUR million % sharein aggregatetotal assets



Savings banks 214,777.71 37.5 203,214.25 34.6 72,856.6 24.8Joint stock banks 91,936.05 16.0 129,264.40 22.0 105,895.6 36.1Raiffeisen banks 131,264.08 22.9 125,760.28 21.4 52,804.1 18.0Special purpose banks 46,325.36 8.1 45,259.28 7.7 22,625.1 7.7State mortgage banks 40,457.16 7.1 35,821.36 6.1 16,279.7 5.5Volksbanken 29,789.58 5.2 29,362.20 5.0 12,593.3 4.3Housing constructionsavings and loan associations 18,717.98 3.3 19,058.63 3.2 10,578.5 3.6

Source: Oesterreichische Nationalbank.

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From 1980 to 2002, the total number of Austrian credit institutions con-siderably decreased from 1,595 to 897, i.e. a reduction of more than 40% or698 institutions. This reduction was especially pronounced in the decentral-ized sectors (savings banks, Raiffeisen banks and Volksbanken). In the sameperiod the number of banking outlets increased by 397 institutions orapproxematly 8%. The most important trend is the absolute reduction bothin the number of head offices and branches since 1996.

In 2002 the number of branch offices decreased by 55 and the number ofhead offices was reduced by 10. Thus the total number of bank outlets wasreduced by 85. Due to the merger of Bank Austria and Creditanstalt in summer2002 a decrease of banking outlets in the joint stock banks sector and anincrease in the savings banks sector can be observed.

The high number of credit institutions is one reason for the comparativelylow degree of concentration in the Austrian banking system, which encom-passes many small and a fair number of medium-sized banks, but only fewlarge banks.

Owing to M&A activities in the last years, an increased degree of concen-tration within the Austrian banking sector can be observed. As regards theconcentration of the five largest banking groups (in terms of total assets),the ratio increased slightly from 45.5% (in 20011)) to 45.9% (in 2002).2)

Austria�s banks have been players in the European Single Market since thestart of 1994, when the European Economic Area (EEA) came into effect. Theensuing freedom of establishment and of services (mutual recognition of banklicenses and supervisory systems) has helped Austrian credit institutions to dobusiness in other EEA countries and vice versa.

The EU�s common market has served as a key catalyst for the Austrianbanking sector�s increased consolidation efforts to make the banks more com-petitive. Major banks have been taking over more and more small creditinstitutions in the multi-tier segments of the banking industry in the pastfew years.

Mergers have also taken place across banking sectors (see above). Anumber of strategic alliances was also forged. The traditionally large stake heldby the Republic of Austria in Austria�s banks has been steadily trimmed overrecent years. By year-end 2002, the government�s shareholdings in the nom-inal of Austrian banks had thus dropped to EUR 22.67 million. Governmentownership of Austrian banks had come down to one specialized institution(100% in Austria Wirtschaftsservice Gesellschaft m.b.H., the former BU‹RGESFo‹rderungsbank and Finanzierungsgarantie Gesellschaft m.b.H.) as well as a stakeof 15% in O‹sterreichischer Exportfonds.

Compared to 2001, the aggregate operating result of the Austrian bankingsector has decreased markedly in 2002 by 7.9% to EUR 4.22 billion, reflectingthe difficult market conditions. The key items of operating income are net fee-based income, income from securities portfolios and participations, and netinterest income. The latter totaled EUR 7.08 billion in 2002, which corres-ponds to a slight decrease of 0.1%.

1 Bank Austria and Creditanstalt as well as BAWAG and PSK are added unconsolidated.2 Data is based on monthly reports.

Banking outles

Impacts of the single marketon Austria�s credit institutions



The ratio of net interest income to total operating income, however,improved to 51.6% in the year 2002 (2001: 50.4%). In fact, after a declinebelow the 50% level of total operating income in 2000, net interest incomecontributes once again more than 50%.While interest income continues toaccount for the biggest share of revenues by far, it has contnually become lessdominant in recent years (see also chart below).

The turmoil on financial markets resulted in a reduction of fee-basedincome in 2002 by 1.6% to EUR 3.01 billion, mostly due to the decreaseof fee income on securities portfolios (EUR —0.14 billion).

Operating income consequently declined markedly in 2002 by 2.4%(2001: +3.9%), operating expense rose only moderately by 0.2% (2001:+5.2%).

Turning to expenses, in the year 2002 general administrative expenses roseby a markedly more moderate extent of 1.1% than in the last years, reflectingcost reduction programs implemented in consequence of the difficult bankprofitability. Staff costs, as well increased by only 2.1% to EUR 4.78 billion.

Austrian Banks� Earning Indicators

1996 1997 1998 1999 2000 2001 2002

as percentage of balance sheet total

Net interest income 1.63 1.49 1.32 1.20 1.20 1.21 1.23Net commission 0.49 0.49 0.50 0.52 0.56 0.52 0.52Operating income 2.75 2.62 2.50 2.30 2.40 2.39 2.38Operating expenditure 1.89 1.81 1.71 1.63 1.60 1.61 1.65Net operating income 0.86 0.81 0.80 0.68 0.80 0.78 0.73

Source: Oesterreichische Nationalbank.

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4.4 Supervisory Requirements

Capital Requirements for Credit and Market RisksFollowing the introduction of capital standards for credit risk under theSolvency Ratio Directive (the European equivalent of the Basle Accord1988) further work was done to develop capital charges for the market risksincurred by banks. The European Union�s Capital Adequacy Directive of 1996(closely related to the Basle Market Risk Proposals of 1995) provides for astandardized approach as well as for Value at Risk (VAR) models for thecalculation of the own funds requirements applying to the trading book.The Basle Committee on Banking Supervision1) also examined the problemof market risk and proposed the possible use of three different types ofVAR model — historical simulation, variance/covariance and Monte Carlosimulations. Both the Basle Committee and the European Commission alsoformulated qualitative and quantitative criteria designed to guarantee a degreeof uniformity in the approval process. The quantitative standards define interalia the level of confidence and the holding period. The qualitative standardsinclude the involvement of senior management in the risk management andthe existence of a risk control unit that is independent of the trading units.The internally computed VAR must be multiplied by a supplementary factor(�multiplication factor�) of between three and four that is calculated for eachbank individually. The results of backtesting programs, i.e. ex-post compari-sons of forecast values with actual results, and the results of stress-tests are keyelements in the evaluation of internal VAR models.

The Solvency Ratio and Capital Adequacy Directives have both beenimplemented into the Bankwesengesetz (Austrian Banking Act). Trading booktransactions are subject to the own funds requirements of the Capital Ade-quacy Directive, while banking book transactions continue to be subject tothe solvency regulations. The Oesterreichische Nationalbank has become moreactively involved in banking supervision as a result of the implementation ofthe Capital Adequacy Directive. Prior to the approval of an internal modelby the Bundesministerium fu‹r Finanzen (Federal Ministry of Finance) two opin-ions, one from an independent expert, one from the Oesterreichische Natio-nalbank, are required. In addition, at least 12 months of backtesting resultsare subject to strict evaluation according to the criteria of para. 26 a) Bank-wesengesetz (Austrian Banking Act).

Future Capital FrameworkBoth the Basle Committee and the European Commission have produced sug-gestions for a future capital framework. These papers follow a so-called three-pillar approach. The first pillar focuses on credit risk, including credit riskmitigation techniques, and covers a range of other topics e.g. �other risks�and consolidation. The second pillar deals with the supervisory reviewprocess. The third pillar tackles the role of market discipline. The contentof each pillar is outlined briefly below. After a first consultation period in

1 The Basle Committee on Banking Supervision is made up of representatives of national central banks and the supervisoryauthorities of the Group of Ten (i.e. Belgium, Germany, France, the United Kingdom, Italy, Japan, Canada, the Nether-lands, Sweden, Switzerland, the USA) and Luxembourg.

Treatment of market risk and creditrisk in the European Union and theBasle Committee on BankingSupervision

Implementation in Austria



the year 2000, a second set of consultative documents was issued. The consul-tation period lasted until end May 2001. The consultation process was accom-pagnied by an impact study trying to find first results on the impact of the newcapital regime on the capital situation of the banking system. The results of thissecond round of consultation showed that the proposals once again have to bemodified. Therefore a third impact study was conducted in the second half of2002 and a third consultation process planned for 2003. In addition to that theEuropean Commission has conducted a so-called �pre-consultative dialogueexercise� where supervisory authorities, the banking industry and all inter-ested parties had the opportunity to comment on the latest draft directive.

Risk WeightingThe treatment of credit risk in the banking book is a key focus of the presentreview. Banking supervisors and market participants have taken the opportu-nity to strengthen the relationship between credit risk weights and economicrisk, to enhance the differentiation between credit risk weightings, and toalign credit allocation and pricing strategies more closely. Significant changesin banks� credit risk business (e.g. the move from static to dynamic manage-ment techniques for the credit risk portfolio, new financial instruments andinnovative structured financing) have all contributed to the pressure forrevision.

A priority is to ensure that the economic risk of financial transactions isbetter captured by capital charges. The initial proposals included the use ofexternal ratings as a means of improving the existing standardized weightingscheme. In the course of discussion the value of developing an approach basedon banks� own internal rating systems became clear and this now appears in theconsultation papers as the Internal Ratings-Based Approach, a more advancedand risk sensitive approach supplementing the standardized approach.

Under the existing regime risk mitigation is only partly taken into account.In order to recognize sound risk management practices, the Basel Committeeand the European Union will allow capital relief if risk mitigation techniquesare used. While the original proposals concentrated on more sophisticatedproducts such as asset backed securities or credit derivatives, it is now clearthat traditional bank collateral will also be included.

The current framework covers interest rate risk for trading book itemsonly. The Basel Committee and the European Union have therefore devisedproposals to cover the interest rate risk in the banking book.

Other RisksThe current capital framework concentrates on credit and market risks. Ananalysis of bank failures shows that another risk category can cause seriousproblems for banks. This so-called �other risks� category includes for exampleoperational, legal and reputational risk, which are currently not subject to aspecific, identifiable capital charge. The consultative papers suggest the intro-duction of a three-strand approach for the calibration of operational and legalrisks. A so-called basis indicator approach using gross income figures should bereplaced by a business-line based standard approach. In the future banks shoulddevelop advanced measurement approaches using their internal loss data. As acapital charge never can replace good management activity, the development

Use of internal andexternal ratings

Risk mitigation

Capital change for other risks



of sound risk management techniques to measure and control these risks willbe required and also discussed in the supervisory review process.

Supervisory Review ProcessCapital requirements cannot substitute for sound risk management practices.The underlying objective of supervisory review is to ensure not only thatinstitutions have adequate capital to support their risks, but also to encourageinstitutions to develop and make use of better risk management techniques tomonitor and manage those risks. Different institutions have different riskprofiles and it may therefore be appropriate for supervisors to be able to applydifferentiated capital requirements, at least for banks of systemic relevance.Supervisory authorities should also have the right to intervene when theown funds ratio decreases but remains above 8%.

Market DisciplineMarket discipline has the potential to complement the improvements in finan-cial supervision proposed in the first two columns. Financial institutionsshould be required to disclose adequate, accurate and timely information tothe market on their capital, their business and the risks to which they areexposed.

For further information please contact:Oesterreichische NationalbankFinancial Markets Analysis and Surveillance DivisionOtto-Wagner-Platz 3, A-1090 ViennaPhone: +43-1-404 20-3100



5

The Capital Markets

5.1 Wiener Bo‹ rse AG

The Central Role of Wiener Bo‹ rsein the Austrian Capital MarketWiener Bo‹rse is a modern customer- and market oriented financial servicecompany that plays a pivotal role in the Austrian capital market. It is the onlysecurities exchange and listing authority in Austria and offers, in addition tothe traditional cash market (equity market, bond market), an innovative deriv-atives market (otob market) and warrants market. All trading on WienerBo‹rse is conducted through the fully electronically trading systems, Xetra¤

(cash market) and OMex¤ (derivatives, warrants). These systems guaranteethe greatest possible transparency as well as fast and efficient execution ofmarket transactions.

Future Strategy of Wiener Bo‹ rseThe future strategy of Wiener Bo‹rse has two main themes:� First, to raise the technical and organizational standards required for

smooth trading and settlement operations to position Wiener Bo‹rse AG asa modern service company.

� Second, to motivate all market participants to contribute actively to theadvancement of the Austrian financial marketplace.In the past, Wiener Bo‹rse has always acted as an intermediary for market

participants with the objective of promoting the development of the Austriancapital market. Also in an increasingly converging European economic area,regional institutions will continue to play an important role and will beindispensable for guaranteeing certain quality standards.

Added Value Services based on Competenceand Know-howWiener Bo‹rse has been continually expanding its range of services and fine-tuning these to meet the needs of a modern capital market. The Wiener Bo‹rseInformation department supplies professionally compiled real-time price dataand market depth data to data vendors and private investors. As a specialservice, Wiener Bo‹rse computes and disseminates 19 stock indices in real time,which have become established as benchmarks for domestic, and central andeast European markets.

The New Market Segmentation of Wiener Bo‹ rseThe new market segmentation was installed successfully on 2 January 2002. Itreflects Wiener Bo‹rse�s excellent capacity for innovation and placed it in a lead-ing role among European stock exchanges. At present, 39 stocks with thehighest trading volumes on Wiener Bo‹rse are listed on the prime market. Thecompanies whose stocks are listed in this quality segment have voluntarilycommitted themselves to comply with transparency and disclosure require-ments that are stricter than the criteria set out in the Stock Exchange Act.

New CECE indices in Euro on the otob marketWiener Bo‹rse has responded to the growing interest of market participants andthe needs of investors for indices on the CEE countries (Central and East

Achievements and Capital MarketActivities 2002


The Capital Market

European countries) by adding five new indices of 1 July 2002: Czech TradedIndex¤ EUR (CTX EUR), Hungarian Traded Index¤ EUR (HTX EUR), PolishTraded Index¤ EUR (PTX EUR), Slovak Traded Index¤ EUR (STX EUR) andCECE-Index¤ EUR (CECE EUR). The latter is a regional index that includesall four previously mentioned indices. The CECE Index Family is now calcu-lated in euro as well as in US dollars and in local currencies. The advantage forinvestors is the low degree of volatility of exchange rates between the EURand the local currencies, as the latest developments in the CEE countries pointto an adjustment of their currencies to the euro. As a consequence, the influ-ence of currency fluctuations on index developments has diminished substan-tially. In order to guarantee the largest degree of comparability to the indicesin the local currencies and in US dollar, they have all been calculated back to 4January 1999.

Campaign Targeting Private InvestorsIn the spring of 2002, an advertising campaign was launched in leadingAustrian dailies that addressed the broad target group of private investors.A survey conducted by the IMAS Institute confirmed that a large proportionof the Austrian population considers domestic stocks to be an attractiveinvestment.

Investor Relations Campaignof the Listed Companies of Wiener Bo‹ rseIn 2002, Wiener Bo‹rse conducted an investor relations campaign jointly with the15 leading companies listed on the exchange with the aim of directing theattention of Austrian private investors to the opportunities of investing inAustrian stocks. In a series of 72 advertisements, the listed companies pre-sented themselves and their stocks. The campaign was very successful andhas been continued in 2003.

Cooperation with BanksIn mid-May 2002, a first group of banks launched the �Austrian InvestmentWeek��. By the end of 2002, most domestic banks had organized week-longevents focusing on the promotion of Austrian stocks through sales activitiesat their branch offices and through presentations to customers. These activitiescontinue throughout 2003.

Initiative to Promote the New Retirement ProductWiener Bo‹rse stressed the importance of creating a tax-privileged retirementproduct designed to sustainably stimulate the Austrian capital market. Thework at the expert level led to the creation of a state-subsidized retirementproduct that has been sold by a large number of banks and insurances since1 January 2003.

Initial Public Offering CampaignAs a market-oriented service organization, Wiener Bo‹rse offers companiesplanning to go public a wide range of consulting services and support. Thecompanies are offered support in all stages of an IPO by investment bankingspecialists, lawyers and auditors. During the initial public offering, Wiener


The Capital Market

Bo‹rse additionally supports the companies through marketing activities for thenewly listed stocks. In the light of the stable development of prices in the ATXand the ATX prime, a growing number of Austrian companies have recognizedthe clear advantages of the domestic stock market.

Initiative for the Developmentof Austrian Investment FundsUp to now, banks and investment management companies offering investmentfunds exclusively in Austrian stocks were rare. As a consequence of thechanging international setting, investment funds are gaining significance andbecoming more popular. The range of securities listed on Wiener Bo‹rse coversa broad spectrum that can be bundled into funds with different weightings.

The Committee for the Austrian Capital MarketThe Committee for the Austrian Capital Market is a joint initiative of, amongothers, banks, C.I.R.A., a syndicate of listed companies, the Financial MarketAuthority (FMA), the Federation of Austrian Industry, Oesterreichische Kontroll-bank (OeKB), the Oesterreichische Nationalbank (OeNB), the Special GovernmentRepresentative for the Capital Market, private sponsors, companies, theAustrian Federal Economic Chamber, the Vienna Business Promotion Fundand Wiener Bo‹rse AG. The Committee sustainably supports measures tobroaden the base of the Austrian capital market.

Austrian Code of Corporate GovernanceIn April 2002, the Austrian Working Group on Corporate Governance,headed by the Special Government Representative for the Capital Market,Dr. Richard Schenz, presented the first draft of the Austrian Code onCorporate Governance.

EXAAEXAA (Energy Exchange Austria) has its registered office in Graz and success-fully started electricity trading on 21 March 2002. Thirteen electricity tradecompanies participated in trading when the market opened. Ever since,20 power companies from a total of seven European countries have joinedtrading on EXAA — among which are four of the ten largest European electric-ity trade companies and 15 of the world�s largest electricity trade companies.From the start of the market on 21 March until 31 December an average of2,189.7 MWh were traded per delivery day. The market share in the Austrianspot market (as measured by domestic consumption) in 2002 was 1.3% with astrong upwards tendency. During 2003, EXAA plans to expand its business toinclude OTC clearing.

OutlookA functioning capital market is the backbone of a modern economy. In an openEurope and with Basel II looming, a prospering capital market is indispensablefor efficiently supplying companies with the equity capital they need forgrowth and development. It is just as important for an economy to have aregional capital market for the long-term formation of capital and also tosecure future pension payments. The new state-subsidized retirement

Outlook 2003


The Capital Market

products that have been available since 1 January 2003 are the ideal instrumentfor promoting the development of the Austrian capital market.

The cost-cutting measures taken last year have put Wiener Bo‹rse in solidposition to operate profitably as a central platform for the capital market.

The Market Segmentation on Wiener Bo‹ rseTrading of securities is grouped into five market segments as of 2 January2002: equity market (stocks), bond market (bonds), otob market (derivatives),warrants (warrants) and other listings.

A. equity market.atprime marketThis segment contains stocks that are admitted to listing on the Official Marketor Semi-official Market and meet special additional listing criteria.

The commitment of a trading participant to act as a specialist is also re-quired and who agrees to enter firm quotes into the system on a permanentbasis. It is desirable to have further commitments of market makers to increaseliquidity in the stock.

The trading platform used is XETRA¤ with the trading procedure�Continuous Trading�� in conjunction with several auctions (opening auction,intra-day auction, closing auction). The additional requirements are asfollows: The minimum requirements for companies listed on the primemarket in addition to a sufficient percentage of free float (>25 percent anda market capitalization >EUR 15 million. If the free float is <25 percent,the market capitalization >EUR 30 million is needed) and the admission tolisting on the Official Market or Semi-official Market, also include thecommitment of a specialist in consecutive trading. Moreover, after a transition

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Market Segmentation


The Capital Market

period, only the common stock of companies will be listed on the primemarket, and foreign stocks will be admitted only on a case-by-case basis.The lock-up period for a newly listed stock will be six months.

After a transition period, the ongoing obligations of companies on theprime market will foresee financial statements prepared according to IAS orUS-GAAP accounting standards. This requirement is designed to improvethe comparability of the stocks with their peer groups. The publication ofquarterly reports will be required within two months in German and Englishand must contain specific contents that will be obligatory as of 2003. A sep-arate outline for quarterly reports was developed for banks, insurances andother companies. Basically, it must contain an abbreviated profit and loss ac-count, a balance sheet, cash flow statements and statement of changes inthe shareholders� equity. Financial statements must be published within fourmonths in German and English.

A corporate calendar of events that contains the dates, for example, of theannual general meeting, analyst conferences and financial statements pressconferences will have to be published in advance at the beginning of each year.Furthermore, a company listed on the prime market will be required to belinked to an electronic system for ad hoc reports that guarantees equaldissemination.

standard marketAll other stocks that are admitted to listing on the Official Market or Semi-official Market will be listed on the standard market. There will be a differencebetween trading in the standard market continuous and standard marketauction procedures. Standard market continuous trading will correspond tothe Specialist Market in place up to now.

standard market continuousThe segment standard market continuous contains stocks admitted to listingon the Official Market or Semi-official Market, but that do not meet the morestringent criteria of the prime market.

The commitment of a trading participant to act as a specialist is alsorequired and who agrees to enter firm quotes into the system on a permanentbasis. It is desirable to have further commitments of market makers to increaseliquidity in the stock.

The trading platform used is XETRA¤ with the trading procedure�Continuous Trading�� in conjunction with several auctions (opening auction,intra-day auction, closing auction).

standard market auctionThe segment standard market auction contains less actively traded stocks andparticipation certificates. These stocks must be admitted to listing either onthe Official Market or Semi-official Market.

This segment contains all stocks and participation certificates for which notrading participant was found willing to assume the function of a specialist.

The trading platform is XETRA¤ trading system with the tradingprocedure �Auction�� (single intraday auction), with the trading participantshaving the possibility of assuming the obligation of entering binding buy and


The Capital Market

sell prices during the trading phase as nostro orders and to concluded trades insuch orders for the purpose market making.

B. bond market.atThe segment bond market contains all bonds that have been allocated to theOfficial Market, Semi-official Market or Third Market. These are governmentbonds, federal treasury certificates, treasury notes, interest rate and govern-ment strips, corporate bonds, bank bonds and convertible bonds. The tradingplatform used is XETRA¤ with the trading procedure �Auction Trading��(intra-day auction).

C. otob market.atAustrian derivativesThis segment contains both ATX futures and ATX options, which are definedas independent products to which special criteria apply. A trading participantis required who assumes the function of a specialist and agrees to enter firmbuy and sell orders for series requiring quotes on a permanent basis. Thetrading platform used is OMex¤ with the trading procedure �ContinuousTrading��.

CECE derivativesThis segment contains all the CECE index products. At least one tradingparticipants must assume market making commitments for stocks listed in thissegment. The trading platform used is OMex¤ with the trading procedure�Continuous Trading��.

D. warrants.atThe segment warrants contains all warrants that are admitted to listing to theOfficial Market, Semi-official Market and Third Market.

The trading platform is OMex¤ with the trading procedure �ContinuousTrading��.

E. other listings.atThe segment other listings contains all securities that cannot be allocated toany other segment. These include profit-sharing rights, investment and indexcertificates that are admitted to listing on the Official Market, Semi-officialMarket or Third Market as well as stocks and participation certificates admit-ted to the Third Market.

The trading platform is XETRA¤ trading system with the trading proce-dure �Auction�� (single intraday auction), with the trading participants havingthe possibility of assuming the obligation of entering binding buy and sellprices during the trading phase as nostro orders and to concluded trades insuch orders for the purpose market making.

If a market making commitment is given for a stock admitted to the ThirdMarket, the trading procedure �Continuous Trading�� in combination withseveral auctions (opening auction, closing auction) shall be available. Thetrading procedure �Continuous Trading�� in combination with several auctions(opening auction, closing auction) shall only be available for securities otherthan shares only in cases in which the liquidity of exchange trading and the


The Capital Market

avoidance of high price volatility is guaranteed in said security by appropriatemeasures such as market making in the security by the applying stock exchangemember.

Listing on Wiener Bo‹ rseThe Application for Admission to Listing(Article 72, Stock Exchange Act 1989, as amended by BGBl. I Nr. 2/2001)

(1) Applications for admission to listing on the Official Market and on theSemi-Official Market are to be made in writing to the exchange operatingcompany. They must be signed by a bank that is a Member of the exchangeif the issuer is not a bank and Member of the corresponding exchange.

(2) The application shall contain the name and registered office of theapplicant, the type and denomination of the securities as well as the totalamount of the issue to be admitted by stating the nominal value or in the caseof no-par value securities, the expected market value and the number ofsecurities. Furthermore, it shall specify any other exchanges on which anapplication for admission to listing has been made at the same time or withinthe past 30 days or will be made in the near future.

(3) The application shall be accompanied by the following documents:1. An excerpt from the commercial register in which the issuer is registered

that is not older than four weeks;2. a valid copy of the articles of association or partnership agreement of the

issuer;3. any official authorization certificates if such are required for the establish-

ment of the issuer�s company, the pursuit of its business activities or theissue of securities;

4. proof of any other legal requirements for the issue of securities;5. any proof of registration of the issue in a register if this is required for the

issue to be legal;6. a) if shares are to be admitted for the first time to listing on the Official

Market, the annual audited accounts with the statement of the auditorand the financial reports for the past three complete business years; if acompany has not existed in this legal form during the preceding threecomplete business years, then proof shall be given that it is the universalsuccessor to another and that the accounting is continuous, in particularthe transformation reports and audits shall be presented;b) in all other cases the annual audited accounts with the statement of theauditor and the annual report for the last complete business year.

7. two copies pursuant to Article 74 of the prospectus signed by the applicantand by the persons responsible in accordance with Article 80;

8. in the case that security certificates are to be printed, two sample prints ofthe security certificates of each of the denominations of the securities forwhich admission is applied for;

9. in the event that the securities or certificates seeking admission are to besecured by a global certificate, a declaration of the issuer stating at whichcentral depository for securities or similar depository the global certificateshall be in the custody of.(4) The exchange operating company must reach a decision on applications

pursuant to paragraph 1 within 10 weeks after receipt. During this period,

Application for Admission to Listing


The Capital Market

however, the time consumed in gathering information from the issuerpursuant to Article 73 paragraph 1, or due to publishing this informationpursuant to Article 73 paragraph 2, or consumed by the procedure pursuantto Article 75 a, or is necessary to remedy irregularities of form pursuant toArticle 13 paragraph 3 General Law on Administrative Procedure (AVG)1991 shall not be included.

Conditions for the Admission to Listing on the Official Market(Article 66, Stock Exchange Act 1989, as amended by BGBl. I Nr. 2/2001)

(1) The conditions for the admission of securities to listing on the OfficialMarket are:1. The establishment of the issuer�s company and the statutes or the partner-

ship agreement of the issuer must comply with the laws of the country inwhich the issuer has its registered office.

2. The securities to be listed must have at least a total nominal value of EUR2.9 million for shares and of EUR 725,000 million for other securities. Inthe case of admission of no-par value securities, the issuer shall certify thatthe market value is expected to reach at least EUR 750,000 million; thetotal number of such securities must be at least 20,000. In the case of pre-ferred shares without voting rights of Austrian companies whose ordinaryshares are not listed on the Official Market, the nominal value of the pre-ferred shares must be at least EUR 1 million.

3. A stock corporation whose shares are being admitted for the first timemust have existed for a period of at least three years and have publishedannual accounts in accordance with applicable regulations for the threecomplete financial years preceding the application; if the stock corporationis the universal successor to another and the accounting is continuous, thenthe period of existence of this other company shall be taken into the three-year time period. The requirement of the three-year period of existenceshall not apply if this is in the interest of the issuer and of the publicand documents are provided that contain information equivalent to theannual accounts of the past three years as regards the evaluation of theeconomic and legal status of the issuer. In any case, the stock corporationmust have published one full year�s accounts.

4. The securities shall be in compliance with federal and provincial lawsgoverning securities and new issues as well as the decrees and rulingsissued on the basis of these provisions; this also applies mutatis mutandisto foreign regulations of the country in which the security has been issued.Insofar as the issuing of securities must be entered into an official register,this entry must have been effected.

5. The securities must be freely negotiable. However, the following may alsobe admitted:a) securities that are not fully paid up if it is guaranteed that trading on theexchange shall not be hindered by this and if the prospectus or the decreeannouncing the admission pursuant to Article 78 paragraph 2 mentions thelack of full payment as well as the measures taken in this respect, as well asb) shares that may only be purchased subject to prior authorization iftrading on the exchange is not hindered by the authorization requirement.

Admission to listingon the Official Market


The Capital Market

6. The denominations of the securities, especially the smallest one, andthe number of certificates issued in this smallest denomination shallcorrespond to trading requirements and the needs of potential investors.

7. The application for admission shall be made for all shares already issued ofthe same kind or for all securities of the same offering; however, sharesmay be excluded from admission that may not be traded for a certainperiod of time for legal reasons if this exception does not prejudice thebearers of the shares to be admitted and the prospectus or the decreeannouncing the admission mentions this exception.

8. The securities shall have an adequate distribution in the general public. Ifthis is to be achieved by the admission to the exchange, the necessaryamount for trading on the exchange shall be provided. In the case of sharesan adequate distribution is reached if at least EUR 725,000 millionnominal share capital, in the case of no-par shares at least 10,000 sharesare in the possession of the public or are offered to the public for sale.

9. In the case of securities that give the bearer conversion rights or subscrip-tion rights to other securities, those underlying securities shall be admittedat the latest simultaneously with these to the exchange; exceptions may bemade to this requirement if the issuer furnishes proof that the owners ofthe securities with conversion rights or subscription rights have all theinformation at their disposal that is necessary in order to make a judge-ment on the value of the underlying securities; this is to be assumedespecially if the underlying securities are officially listed on an internation-ally recognized stock exchange and the prospectus for the admission ofsecurities with conversion or subscription rights contains the necessaryinformation in accordance with Article 74 paragraph 2 fig. 2.(2) In the case of admission of shares that have already been admitted to

official listing on one or more foreign exchanges and that have an adequatedistribution outside the country, the requirements stated in paragraph 1fig. 8 do not apply.

(3) In case of subsequent listings of further securities of the same type, therequirements stated in paragraph 1 fig. 2 and 8 do not apply.

(4) The restriction pursuant to paragraph 1 fig. 2 does not apply to theadmission of debt securities that are issued constantly without being restrictedto a subscription period and to a certain limited maximum amount.

(5) Debt securities of international organizations that are legal entitiesunder public law must be freely negotiable in order to be admitted to officiallisting, the application for admission to listing must be made for all debtsecurities of one issue. Debt securities issued by the federal government,the provinces (La‹nder) and states party to the EEA agreement shall beadmitted to official listing on every stock exchange.

(6) Certificates that represent shares may be admitted if1. the issuer of the shares represented fulfill the requirements in paragraph 1

fig. 1 to 3,2. the certificates are in compliance with the requirements stated in

accordance with paragraph 1 fig. 4 to 9 and3. the issuer of the certificates offers a guarantee for the fulfillment of its

obligations towards the bearers of these certificates.


The Capital Market

Conditions for the Admission to Listing on the Semi-Official Market(Article 68, Stock Exchange Act 1989, as amended by BGBl. I Nr. 2/2001)

(1) The conditions for the admission of securities to listing on the Semi-Official Market are:1. The establishment of the issuer�s company and the articles of association or

the partnership agreement of the issuer must comply with the laws of thecountry in which the issuer has its registered office.

2. The securities to be listed must have at least a total nominal value ofEUR 725,000 million. In the case of admission of no-par value securitiesthe issuer shall certify that the market value is expected to be at leastEUR 362,500 million; the total number of such securities must be at least10,000.

3. A stock corporation whose shares are being admitted for the first timemust have existed for a period of at least one year and have publishedannual accounts in accordance with applicable regulations for the completefinancial year preceding the application; if the stock corporation is theuniversal successor to another and the accounting is continuous, thenthe period of existence of this other company shall be taken into theone-year time period.

4. The securities shall be in compliance with federal and provincial lawsgoverning securities and new issues as well as any decrees and rulingsissued on the basis of these provisions; this also applies mutatis mutandisto foreign regulations of the country in which the security has been issued.If the issuing of securities must be entered into an official register, thisentry must have already been effected.

5. The securities shall have adequate amount of free floating shares. If this isto be achieved by the introduction to the exchange, the necessary amountfor trading on the exchange shall be provided. In the case of shares anadequate distribution is reached if at least EUR 181,250 million nominalshare capital, in the case of no-par shares at least 2,500 are in the posses-sion of the public or are offered to the public for sale.

6. The securities must be freely negotiable. However, the following may alsobe admitted:a) securities that are not fully paid if it is guaranteed that trading on theexchange shall not be hindered by this and if the prospectus or the decreeannouncing the admission pursuant to Article 79 paragraph 3 mentions thelack of full payment and the measures taken in this respect, as well asb) shares that may only be purchased subject to prior authorization iftrading on the exchange is not hindered by the authorization requirement.

7. The denominations of the securities shall meet trading requirements.8. The application for admission shall be made for all shares already issued of

the same kind or for all securities of the same offering; however, sharesmay be excluded from admission that may not be traded for a certainperiod of time for legal reasons if this exception does not prejudice thebearers of the shares to be admitted and the prospectus or the decreeannouncing the admission mentions this exception.

9. In the case of securities that give the bearer conversion rights or subscrip-tion rights to other securities, those underlying securities shall be admittedat the latest simultaneously with these to the exchange; exceptions may be

Admission to listingon the Semi-official Market


The Capital Market

made to this requirement if the issuer furnishes proof that the owners ofthe securities with conversion rights or subscription rights have all theinformation at their disposal that is necessary in order to make ajudgement on the value of the underlying securities; this is to be assumedespecially if the underlying securities are officially listed on an internatio-nally recognized stock exchange and the prospectus for the admission ofsecurities with conversion or subscription rights contains the necessaryinformation in accordance with Article 74 paragraph 2 fig. 2.(2) Certificates that represent securities may be admitted if:

1. the issuer of the securities represented fulfill the requirements in accord-ance with paragraph 1 fig. 1 to 3,

2. the certificates fulfill the requirements in accordance with paragraph 1fig. 4 to 9 and

3. the issuer of the certificates guarantees the fulfillment of its obligationstowards the bearers of these certificates.(3) The rules of exception in Article 66 paras. 2 to 4 apply mutatis

mutandis.

Trading on the Third Market(Article 69,�The Third Market�, Stock Exchange Act 1989, as amended byBGBl. I Nr. 2/2001)

(1) Securities other than those admitted to official listing or to the Semi-Official Market may only be traded on the exchange under the followingconditions:1. The written application for admission to listing is submitted by a member

of the exchange to the exchange operating company;2. The applicant furnishes proof that the legal status of the issuer and the

issuance of its securities are in compliance with the laws of the state inwhich it has its registered office or in the state in which the securities havebeen issued;

3. It meets the federal legal requirements regarding the obligations relating tothe publication of a prospectus.(2) Admission to the Third Market shall be rejected if the requirements

pursuant to paragraph 1 are not met, or if the admission would be againstthe interests of maintaining a properly functioning securities industry forthe benefit of the national economy or of safeguarding the vital interests ofthe investing public.

(3) Article 72 paragraph 2 shall apply to the application for admission tolisting with respect to the requirement that the exchange member submittingthe application must provide the information required. A prospectus accordingto the Capital Market Act shall be attached to the application for admission tolisting or the status of exemption pursuant to the Capital Market Act shall bedocumented.

(4) The applicant is under the obligation during the entire period of listingto immediately inform the exchange operating company of any important factsrelating to the issuer or its securities as well as any significant changes in thiscontext. An important fact is, for example, a change in the legal form of theissuer or in the event of a corporate action.

Trading on the Third Market


The Capital Market

(5) The admission to listing shall be revoked if compliance with any of thelisting requirements pursuant to paragraphs 1 and 2 no longer applies, if in-correct information was provided to meet the requirements or if the applicantfails to meet its ongoing reporting obligations. If the interests of investors arenot violated, the applicant may be requested to take measures to meet the legalstipulations within an appropriate period of grace granted in the event thatcompliance with the listing requirements no longer applies or if the applicantfailed to meet its reporting obligations; in these case admission to listing shallbe revoked only after the period of grace has expired.

(6) An appeal against a decision to reject an application for listing to theThird Market or the revocation of the admission to listing shall be heard bythe Appellate Committee pursuant to Article 64 paragraph 2.

(7) The exchange operating company shall be notified of the withdrawal ofsecurities from the Third Market at least one month in advance; this period ofnotice may by shortened upon request in the case of special circumstances.This period of notice does not apply if an application is submitted for admis-sion to listing to the Semi-official Market or Official Market before the end ofthe period of notice.

For more information, please contact:Wiener Bo‹rse AGMarkets & ProductsAttn.: Mr. Karl BrauneisWallnerstra§e 8, A-1014 ViennaPhone: +43-1-531 65-132e-mail: [email protected]

Xetra¤ — The Trading Systemon the Cash and Warrants Market

Cash MarketSince 5 November 1999, Austrian stocks, other equities and bonds have beentraded through Xetra¤ (Exchange Electronic Trading), the trading system ofDeutsche Bo‹rse. The Xetra¤ market model for Wiener Bo‹rse supports continuoustrading with several auctions as well as trading with only one auction pertrading session.

Xetra¤ trading at Wiener Bo‹rse is open only to institutions admitted to tradingon the exchange, such as banks, and their representatives (dealers). Investors�orders are entered into the Xetra¤ electronic order book by the responsibledealer. The system automatically checks whether a matching order is availableon the opposite side of the order book and the order can be executed. If nonematch, the order is entered into the order book (except in the case of �fill-or-kill� and �immediate-or-cancel� orders).

AuctionWith auctions, the liquidity available in a security is concentrated at a specificpoint in time. An auction consists of the call phase, the price determination


The Capital Market

phase and the order book balancing phase. Prices are determined according tothe principle of executing as many orders as possible. The auction price is theprice at which the largest volume of orders can be executed and the fewest areleft unfilled. In stock trading, the order book is open during the call phase. Anindicative price or the best buy/sell limit is quoted to inform market partic-ipants of the market situation. An auction schedule is published to announcethe times when specific securities are called.

Continuous TradingContinuous trading starts after the end of the opening auction. In Xetra¤, eachorder is first entered into an electronic order book in which buy and sellorders are displayed opposite each other. In continuous trading, the orderbook is open, showing aggregate order volumes along with applicable limits.As soon as buy and sell orders are matched, they are executed automatically bythe system.

The advantage of continuous trading is that trades can be concluded atany time without the need to wait for an auction. The market makers andspecialists at Wiener Bo‹rse guarantee that firm buy and sell quotes are enteredinto the system continuously, thus increasing the liquidity of the market.

Warrants MarketIssuers have a choice of two trading procedures: unrestricted continuoustrading during which quotes are placed into the system continuously between9:00 a.m. and 5:30 p.m. and short continuous trading during which quotes areplaced into the system continuously between 11:30 a.m. and 11:50 p.m.

Buy and sell prices are quoted by the warrants� issuers although this mayalso be done by other trading participants. Market orders and limit orders arepossible in both segments. Trading is anonymous and the order book is open. Ifno transaction is concluded, Wiener Bo‹rse determines the price according to apredefined set of rules.

Transaction Fees Cash Market

Segment Participant Variable Minimum Maximum

Prime market, Agent 4.00 bps EUR 1.80 EUR 90.00Standard market continous Principal 4.00 bps EUR 1.80 EUR 90.00(equity market.at) Market Maker 2.00 bps EUR 1.80 EUR 36.00

Specialist 0.00 bps EUR 0.00 EUR 0.00Standard market auction 6.00 bps EUR 3.60 NA(equity market.at)bond market.at 1.00 bps EUR 5.50 EUR 55.00other listings.at Agent 7.00 bps EUR 3.60 NA

Market Maker 2.00 bps EUR 1.80 NAwarrants.at Agent EUR 3.00 . . . .

Principal EUR 3.00 . . . .Market Maker 0.50% EUR 1.00 EUR 6.00or Specialist

Each bp (basis point) represents 1/10,000 of the trading volume per trade and side in EUR.


The Capital Market

Clearing and Settlement System (Arrangement)SICSClearing and settlement of all transactions concluded at Wiener Bo‹rse isconducted by the Oesterreichische Kontrollbank AG as the clearing agencyauthorized by Wiener Bo‹rse.

SICS means Settlement Information Clearing System and is the systemused to clear and settle transactions on Wiener Bo‹rse within the AustrianClearing and Settlement System (Arrangement). Prices and transaction dataare generated within the trading systems Xetra¤ and OMex¤ on the basis ofthe orders placed. SICS uses the transaction data delivered by Xetra¤ andOMex¤ for fully electronic settlement. In this manner SICS supports the clear-ing procedure required for exchange trading on the day of the transactionwithin the Arrangement system and the preparation of data flows related to thisprocess.

SICS places at your disposal one of the most advanced systems of its kind inEurope designed to maximize client satisfaction and at the same time minimizesettlement risk.

Real-time electronic trading information can be made available for andprocessed by bank IT-systems. The transfer is compatible with the mostmodern data transmission techniques. Conventional sources of error can beeliminated since data are transferred directly from the Oesterreichische Kontroll-bank AG�s central settlement system to a bank in-house system without any ad-ditional processing.

The settlement procedure offers both full collateralization of exposuresand settlement security, whilst optimizing capital employment by means of�netting positions.� Prompt and detailed information guarantees cover ideallymatched to exposure. Due to prompt and comprehensive information 99.8%of transactions are settled punctually, the international benchmark beingclearly lower.

Under the Austrian clearing and settlement system exchange transactionsexecuted within a trading period are collected and processed immediatelyafter the trading session. The final settlement takes place on the relevantpayment day; within the clearing and settlement period in SICS it is the 3rd

day after the date of the transaction.

Adjustment Fees Cash Market

Adjustment Fee in EUR Calculation Basis

Changes — cash market trades under XETRA¤ 5.00 per change and tradeCancellation — cash market trades under XETRA¤ 100.00 per order triggeringbyWiener Bo‹rse AG cancellationChanges — warrants trades via OMex¤ 5.00 per changeCancellation — warrants trades via OMex¤ 10.00 per tradebyWiener Bo‹rse AGManual entry of a warrants trades under OMex¤ 5.00 per tradebyWiener Bo‹rse AGManual order input byWiener Bo‹rse AG 5.00 per orderManual order cancellation byWiener Bo‹rse AG 0.00 per orderGive Up Trades 2.50 per trade

SICS advantages

SICS advantages


The Capital Market

Only exchange members may become clearing participants. There aredirect and indirect clearing participants. Participation in the clearing andsettlement system is obligatory for exchange members.

SICS supports the two-tier structure of the clearing participants (directclearing member, indirect clearing member [so called non-clearing member]).Direct clearing participants must maintain a drawing account for settlingmonetary transactions related to the clearing and settlement system, and mustalso deposit a clearing collateral and maintain a clearing collateral account anda securities depository account for crediting and debiting the units traded.

Indirect clearing participants must provide a declaration of a directclearing member stating that the direct participant assumes the obligationto settle all of the indirect member�s transactions.

The SICS data generated for non-clearing members are sent to both theclearing member responsible (indicating its group of non-clearing members),as well as to the non-clearing member.

The Depository SystemThe Austrian Central Securities Depository (WSB)WSB stands for Wertpapiersammelbank, the Austrian central securities deposi-tory. It is operated by Oesterreichische Kontrollbank AG. WSB takes care of thesafekeeping and transfer of securities together with the necessary financialclearing procedures and the day-to-day administration of securities anddeposits. SICS settlement data is fed directly into the WSB system to updateaccount balances.

The following have deposit and cash accounts with OesterreichischeKontrollbank AG�s WSB depository:� credit institutions;� recognized investment;� foreign central securities depositories;� securities clearing institutions;� other.

Securities Account Holder may be anyone as agreed with WSB: creditinstitutions, recognised investment firms, members of domestic stockexchanges, official brokers on the Securities exchange (Wiener Bo‹rse), foreignCentral Securities Depositaries and Securities clearing institutions. WSBmay also accept other legal or physical persons and partnerships as ownersof Securities Accounts.

Settlement of OTC TransactionsOver-the-counter transactions account for a large proportion of Austriansecurities turnover (95% of bond turnover, approximately 60% of stock turn-over). Participants in the central securities depository system instruct WSBonline or via SWIFT to settle OTC transactions in the Direct SettlementSystem (DS).

DS supports the following:� Securities transfers and direct transactions: Data entry and authorization

by the subscriber suffice to trigger the pertinent book entry in WSB�scentral depository system and make the credit entry in the recipient�saccount.

Non-clearing members

The Austrian Central

OTC settlements

OTC settlements


The Capital Market

� Standard on-screen inquiries: Subscribers can call up information abouttheir securities on deposit with Oesterreichische Kontrollbank AG�s centralsecurities depository system (see below). They can also see how thesecurities transfers that would result from planned DS or stock exchangetransactions might affect their securities balance. The system is capable ofcalculating fictitious securities balances for any specified value date.

Delivery versus PaymentWSB settles transfers between accounts on a simultaneous, final and irrevoca-ble delivery versus payment basis in same day funds. When a customer placesan order, WSB guarantees to the seller that the securities being sold will onlybe debited on the seller�s account against simultaneous payment by the buyer(through a current cash account held with Oesterreichische Kontrollbank AG orwith Austria�s Central Bank [Oesterreichische Nationalbank]). Electronic supportis provided by Oesterreichische Kontrollbank AG�s Direct Settlement System (DS).WSB also offers services for cross-border transactions for some markets (CBF,CBL, etc.).

Securities LendingThe securities lending facility was initiated to improve liquidity in a number ofmarket segments. Any Austrian bank that has a deposit account with the WSBdepository can borrow securities through the mediation of OesterreichischeKontrollbank AG for a period of between three days and six months. This allowsrapid access to securities that are not available in one�s own portfolios.

WSB selects a suitable lender from among the Austrian banks that haveagreed to act as lenders, acting in a fiduciary capacity and normally withoutdisclosing the identities of the parties to a contract.

The borrower has to pledge collateral in the form of securities. Thecollateral is credited to a collateral account administered by WSB as fiduciaryfor the lender.

Cross-Border LinksWSB depositors can acquire a share of the global certificate. It will correspondto the face value of the registered securities that they have had placed in WSB�saccount with the foreign depositary agent.

WSB offers account holders a variety of clearing and depository servicesthat facilitate their international securities business. The InternationalClearing and Depository Service helps settle cross-border securities trans-actions both rapidly and cost-effectively. The service is based on agreementsbetween Oesterreichische Kontrollbank AG and securities depositories and custo-dians respectively in other countries.

WSB has established links among others with Clearstream Banking Frank-furt (CBF), Euroclear Netherlands in Amsterdam, Euroclear and EuroclearFrance in Paris, SIS Sega Inter Settle in Zurich, Monte Titoli in Milan and withKeler in Budapest. Additional depository services were established for US,Czech, Slovak and Croatian securities. In addition to bilateral arrangementswith other CSDs, closer links with international clearing agents such as Clear-stream Banking and Euroclear are also playing an increasingly important rolein the settlement of cross-border securities transactions. Both, Euroclear and

The securities lending scheme

Settlements of cross-border

Settlement viaother (I)CSDs

Settlement viaother (I)CSDs


The Capital Market

Clearstream Banking Luxemburg have opened securities accounts with Oester-reichische Kontrollbank AG and WSB has accounts with them.

Since 1989, Oesterreichische Kontrollbank AG has been issuing global certifi-cates called �Austrian Depository Certificates� (ADC) for foreign registeredsecurities. This has facilitated their trade and enabled a listing on Wiener Bo‹rse.

The securities underlying the ADCs are held in custody by a foreigndepositary agent for the account of the Austrian WSB client. OesterreichischeKontrollbank AG selects the depositary agent in accordance with the bankarranging the stock exchange listing. The securities are registered in the nameof Oesterreichische Kontrollbank AG or a bank designated by OesterreichischeKontrollbank AG. Oesterreichische Kontrollbank AG then issues a global certificatefor the securities and holds it in the WSB vaults.

WSB has developed an extended foreign depository and general clearingservice for clearing and settlement of transactions on foreign stock exchangesas well as custody services for foreign securities deposited with WSB�scustodians.

WSB is responsible for carrying out subscribers� transfer orders, and pur-chased securities will be recorded as credit entries in WSB clearing accounts.Oesterreichische Kontrollbank AG has installed a fully electronic link with DeutscheBo‹rse AG, so as to cover all securities listed on German stock exchanges (Frank-furt and other regional exchanges) and traded via Xetra¤ or the regionalexchanges� System XONTRO.

Furthermore Oesterreichische Kontrollbank AG is a member of the EuropeanCentral Securities Depositories Association (ECSDA). This association wasestablished in 1997 in order to intensify the cooperation between centralsecurities depositories of the EU including Switzerland and Norway and topromote the development of intra-EU securities transactions. In this contextOesterreichische Kontrollbank AG is planning to establish custody links with mostof the European CSDs.

Custody ServicesWSB handles all administrative activities that may become necessary duringthe life of a security for the Austrian and foreign securities houses. Thiscovers, for example, all earnings-related tasks (e.g. interest and dividendpayments, capital repayments, exercising of warrants) and corporate actions.In addition, the WSB will also automatically carry out all mandatory actionsfor holders of custody accounts (e.g. splits, capital reductions, merges,spin-offs). At the request of the holder of the WSB custody account, theWSB also performs Special Actions (e.g. exercise of subscription rights,conversions or exercise of cash or share options). In addition, holders ofWSB custody accounts are always kept well-informed about upcoming events(e.g. corporate actions, cash earnings, general meetings). In the CUNOsystem (Custody Notification System) WSB customers receive online andSWIFT pre-advices, reminders and advices on their positions.

Foreign depository service




The Capital Market

Wiener Bo‹ rse MembershipIn order for an institution to participate in trading on Wiener Bo‹rse in thederivatives and cash markets, it is necessary for it to become a member ofWiener Bo‹rse and to have the required technical and human resources. Theamendment of the Stock Exchange Act that took effect in August 1999 openedmembership to the following institutions:� credit institutions from EEA Member States or domiciled in third coun-

tries� investment firms from the EEA and recognized investment firms domiciled

in third countries� local firms from EEA Member States and enterprises domiciled in third

countriesA prerequisite for companies who wish to become members of Wiener Bo‹rse

is a confirmation stating that the applicant is authorized to carry on thebusiness of providing investment services in its home country and has beenadmitted as a member to a regulated market there in addition to being super-vised by the competent authority. In the case of companies domiciled in thirdcountries, fulfillment of the admission requirements are examined indivi-dually.

A membership application may be submitted for one of the following:Participation in

� trading in securities, specifically for— trading in stocks and bonds— trading in warrants

� trading in options and financial futures contracts� the settlement system for securities transactions concluded through the

exchange� the settlement system for trades in options and financial futures contracts

concluded through the exchangeThe settlement system for the cash market is operated by Oesterreichische

Kontrollbank AG, and the clearing system for the derivatives market by WienerBo‹rse AG itself. The following types of membership are possible on the cash andderivatives markets:� General Clearing Member (GCM)� Direct Clearing Member (DCM)� Non-clearing Member (NCM)� Clearing Agent� Indirect Clearing Member via Clearing Agent

General Clearing Members (GCM) are authorized to settle trans-actions for their own account and for customers as well as the transactionsof other members (NCM) under the condition that a clearing agreement withsuch member has been concluded.

Direct Clearing Members (DCM) are authorized to settle transactionsfor their own account and for customers.

Non-clearing Members (NCM) have access to the trading system, butare not admitted as clearing members.

Clearing Agents are obliged to settle the trades of Indirect ClearingMembers for which they have assumed commitments for their own account.The Clearing Agent commits itself to fulfill the trades of its client (Indirect

Membership


The Capital Market

Clearing Member) under the settlement and clearing system only to theextent that it has been put into a position to do so by said client.

Indirect Clearing Members who are clients of a Clearing Agent areobliged to ensure that the Clearing Agent will be in a position to meet itsobligations under the settlement and clearing system.

All applicants must ensure that their transactions are settled in one of thefollowing manners: by becoming a General Clearing Member or a DirectClearing Member, or if applying as a Non-clearing Member, by concludingan agreement with a General Clearing Member for the settlement of itssecurities transactions conducted through the exchange.

Membership FeesThere is no admission fee for trading membership on the cash and derivativesmarket

Market makers who assume a commitment for at least two instruments onthe cash market will be refunded transaction fees up to a maximum amount ofEUR 7,250 for the first 12 calendar months as of the time they becomemembers.

For more information on membership fees, please contact:Wiener Bo‹rse AGSales & Member RelationsAttn.: Mr. Hannes Scho‹neggerWallnerstra§e 8, A-1014 ViennaPhone: +43-1-531 65-163e-mail: [email protected]

Annual ParticipationFee Cash Market

Stocks Bonds Other Minimum Maximum

Official Market1) 0.50 bp 0.16 bp 0.16 bp EUR 2,175 EUR 10,750Semi-official Market1) 0.25 bp 0.08 bp 0.08 bp EUR 1,075 EUR 5,450Third Market 0.25 bp 0.08 bp 0.08 bp EUR 725 EUR 3,6251) The variable fees are calculated from the annual turnover using basis points (bps), each bp equals 1/10,000 per year.

Annual Participation Fee otob market.at Trading Participant

Participation fee EUR 14,500Market Maker for at least two underlyings 50% of EUR 14,500

Clearing Membership otob market.at DCM Direct Clearing-Member) GCM (General Clearing-Member)

Clearing admission fee EUR 29,000 EUR 43,5001)Annual clearing participation fee EUR 21,750 EUR 29,0002)1) The fee is reduced by EUR 7,250 for each new NCM that the GCM offers its services to throughout the first 12 calendar months after becoming a

member as a GCM (maximum fee reduction: EUR 43,500).2) The fee is 50% lower if more than 2 NCMs are serviced throughout a calendar year. If more than 6 NCMs are serviced throughout this period, the full

annual fee is waived for the GCM.

Membership fees


The Capital Market

List of Members of Wiener Bo‹ rse AGFor information on membership, please also visit the Member Center atwww.wienerborse.at

BanksAllgemeine Sparkasse Obero‹sterreichBankaktiengesellschaftPromenade 11—13, A-4020 Linz/DonauPhone: +43-732-73 91-0Fax: +43-732-73 91-31www.sparkasse-ooe.at

Allianz Investmentbank AGHietzinger Kai 101—105, A-1130 ViennaPhone: +43-1-505 54 80-0Fax: +43-1-505 54 81www.allianzinvest.at

Bank Austria Creditanstalt AGVordere Zollamtsstra§e 13, A-1030 ViennaPhone: +43-1-711 91-0Fax: +43-1-711 91-82667www.ba-ca.com

Bank fu‹r Arbeit und Wirtschaft AGSeitzergasse 2-4, A-1011 ViennaPhone: +43-1-534 53-0Fax: +43-1-534 53-2840www.bawag.at

Bank fu‹r Ka‹rnten und Steiermark AGSt.-Veiter-Ring 43, A-9020 KlagenfurtPhone: +43-463-58 58-0Fax: +43-463-58 58-843www.bks.at

Bank fu‹r Tirol und Vorarlberg AGErler Stra§e 5—9, A-6021 InnsbruckPhone: +43-512-53 33-0Fax: +43-512-53 33-182www.btv.at

Bank Winter & Co. AGSingerstra§e 10, 1010 WienPhone: +43-1-515 04 — 0Fax: +43-1-515 04 — 207

Bankhaus Carl Spa‹ngler & Co AGSchwarzstra§e 1, A-5024 SalzburgPhone: +43-662-86 86-0Fax: +43-662-86 86-89www.spaengler.co.at

Bankhaus Krentschker & Co AGAm Eisernen Tor 3, A-8020 GrazPhone: +43-316-80 30-0Fax: +43-316-80 30-879 (Security Dept.)www.krentschker.at

Bankhaus Schelhammer & Schattera AGGoldschmiedgasse 3, A-1010 ViennaPhone: +43-1-534 34-0Fax: +43-1-534 34-64www.schelhammer.at

Capital Bank — Grawe Gruppe AGBurgring 16, A-8010 GrazPhone: +43-4352-2892-0Fax: +43-4352-2892-256www.capitalbank.at

Constantia Privatbank AGBankgasse 2, A-1010 ViennaPhone: +43-1-536 16-0Fax: +43-1-536 16-10130www.constantia.co.at

Deutsche Bank AG Filiale WienHohenstaufengasse 4, A-1013 ViennaPhone: +43-1-531 81-0Fax: +43-1-531 81-14www.deutsche-bank.de

direktanlage.at AGElisabethstra§e 22, A-5020 SalzburgPhone: +43-662-2070-260Fax: +43-662-2070-255www.direktanlage.at

EB und Hypo-Bank Burgenland AGNeusiedler Stra§e 33, A-7000 EisenstadtPhone: +43-2682-605-0Fax: +43-2682-605-268www.bank-bgld.at

ecetra Central European e-Finance AGNeutorgasse 2, A-1010 ViennaPhone: +43-1-536 89-0Fax: +43-1-536 89-7720www.ecetra.com

Erste Bank der oesterreichischen Sparkassen AGGraben 21, A-1010 ViennaPhone: +43-1-050100-10100Fax: +43-1-531 00 —2272www.sparkasse.at/erstebank

Hypo Alpe-Adria-Bank AGAlpen-Adria-Platz 1, A-9020 KlagenfurtPhone: +43-463-58 60-0Fax: +43-463-58 60-50www.hypo-alpe-adria.com

The Capital Market


Hypo Tirol Bank AGMeraner Stra§e 8, A-6021 InnsbruckPhone: +43-512-59 11-0Fax: +43-512-59 11-2121www.hypotirol.com

Investkredit Bank AGRenngasse 10, A-1013 ViennaPhone: +43-1-531 35-0Fax: +43-1-531 35-990www.investkredit.at

Kommunalkredit Austria AGTu‹rkenstra§e 9, A-1092 ViennaPhone: +43-1-316 31-0Fax: +43-1-316 31-505www.kommunalkredit.at

Landes-Hypothekenbank Steiermark AGRadetzkystra§e 15—17, A-8010 GrazPhone: +43-316-80 51-0Fax: +43-316-80 51-354www.hypobank.at

M & A PrivatBank AGRenngasse 6—8, A-1010 ViennaPhone: +43-1-205 95-0Fax: +43-1-205 95-190www.mabankag.com

Meinl Bank AGBauernmarkt 2, A-1014 ViennaPhone: +43-1-531 88-0Fax: +43-1-531 88-440www.meinlbank.com

Oberbank AGHauptplatz 11, A-4020 LinzPhone: +43-732-78 02-0Fax: +43-732-78 58 14 (Security Dept.)www.oberbank.at

Oesterreichische Kontrollbank AGAm Hof 4, A-1010 ViennaPhone: +43-1-531 27-0Fax: +43-1-531 27-5698www.oekb.at

O‹sterreichische Volksbanken-AGPeregringasse 3, A-1090 ViennaPhone: +43-1-313 40-0Fax: +43-1-313 40-3683www.oevag.com

Partner Bank AGGoethestra§e 1a, A-4020 LinzPhone: +43-732-69 65-0Fax: +43-732-66 67 67www.partner-bank.at

Raiffeisen Centrobank AGTegetthoffstra§e 1, A-1015 ViennaPhone: +43-1-515 20-0Fax: +43-1-513 43 96www.rcb.at

Raiffeisen Zentralbank O‹sterreich AGAm Stadtpark 9, A-1030 ViennaPhone: +43-1-717 07-0Fax: +43-1-717 07-1273www.rzb.at

Raiffeisenbank Reutte regGenmbHUntermarkt 3, A-6600 ReuttePhone: +43-5672-6900-0Fax: +43-5672-6900-2598www.rbr.at

Raiffeisenlandesbank Niedero‹sterreich-Wien AGFriedrich-Wilhelm-Raiffeisen-Platz 1, A-1020Phone: +43-1-211 36-0Fax: +43-1-211 36-2274www.rlbnoew.at

Raiffeisenlandesbank Niedero‹sterreich AGFriedrich-Wilhelm-Raiffeisen-Platz 1, 1020 WienPhone: +43-1-211 36-0Fax: +43-1-211 36-2274www.raiffeisen-bank.at

Raiffeisenlandesbank Obero‹sterreich regGenmbHRaiffeisenplatz 1, A-4021 LinzPhone: +43-732-65 96-0Fax: +43-732-65 96-2739www.raiffeisen-ooe.at

Raiffeisenlandesbank Steiermark regGenmbHKaiserfeldgasse 5-7, A-8011 GrazPhone: +43-316-40 02-0Fax: +43-316-40 02-900www.rlbstmk.at

Raiffeisen-Landesbank Tirol AGAdamgasse 1-7, A-6021 InnsbruckPhone: +43-512-5305-0Fax: +43-512-5305-1629www.rlb-tirol.at

Raiffeisenverband Salzburg regGenmbHSchwarzstra§e 13-15, A-5020 SalzburgPhone: +43-662-88 86-0Fax: +43-662-88 86-525www.salzburg.raiffeisen.at

Schoellerbank AGRenngasse 1-3, A-1010 ViennaPhone: +43-1-534 71-0Fax: +43-1-533 43 90www.schoellerbank.at

The Capital Market


Steierma‹rkische Bank und Sparkassen AGSparkassenplatz 4, A-8010 GrazPhone: +43-316-80 33-0Fax: +43-316-80 33-14369www.sparkasse.at/steiermaerkische

Volksbank Kufstein regGenmbHUnterer Stadtplatz 21, A-6330 KufsteinPhone: +43-5372-69 22-0Fax: +43-5372-69 22-250www.vb-kufstein.at

Volkskreditbank AGRudigierstra§e 5-7, A-4020 LinzPhone: +43-732-76 37-0Fax: +43-732-76 37-400www.vkb-bank.at

Vorarlberger Landes- und HypothekenbankHypo-Passage 1, A-6900 BregenzPhone: +43-5574-414-0Fax: +43-5574-414-457www.hypovbg.at

Vorarlberger Volksbank regGenmbHRingstra§e 27, A-6830 RankweilPhone: +43-5522-404-0Fax: +43-5522-455 53www.vorarlberger.volksbank.at

Welser Volksbank regGenmbHPfarrgase 5, A-4600 WelsPhone: +43-7242-495-0Fax: +43-7242-495-97www.welser.volksbank.at

Remote MembersCredit Suisse First Boston (Europe) Ltd.One Cabot Square, GB-London E14 4QJPhone: +44-207-888-8888Fax: +44-207-888-1600www.csfb.com

Deutsche Bank AGTaunusanlage 12, D-60325 Frankfurt/MainPhone: +49-69-910-00www.deutsche-bank.de

Dresdner Kleinwort Wasserstein Securities Ltd.20 Fenchurch Street, GB-London EC3P 3DBPhone: +44-207-475-0www.drkw.com

HSBC Trinkaus und BurkhardtKommanditgesellschaft auf AktienKo‹nigsallee 21-23, D-40212 Du‹sseldorfPhone: +49-211-910-0Fax: +49-211-2901www.hsbctrinkaus.de

Lehman Brothers International (Europe)One Broadgate, GB-London EC2M 7HAPhone: +44-207-601-0011Fax: +44-207-260-2999www.lehman.com

Sal. Oppenheim jr. & Cie.Kommanditgesellschaft auf AktienKo‹nigsberger Stra§e 29, D-60487 FrankfurtPhone: +49-69-7134-0Fax: +49-69-7134-5211www.oppenheim.de

Timber Hill (Europe) AGGotthard Strasse 3, CH-6300 ZugPhone: +41-41-726 50-0Fax: +41-41-726 50-88www.timberhill.com

Tullet Liberty (Equities) Ltd.54-62 New Broad, Cable House,GB-London EC2M 1JJPhone: +44-207-895-9595Fax: +44-207-895-0819www.tullett.com

Official Brokers for the Semi-official MarketEURO Invest Bank AGGru‹ngasse 16, A-1050 ViennaPhone: +43-1-879 39 57Fax: +43-1-879 30 40www.euroinvestbank.at

The Capital Market


Official Brokers for the Official MarketWerner LangPrinz-Eugen-Stra§e 6/10, A-1040 ViennaPhone: +43-1-505 78 59

Franz Erwin BauerPorzellangasse 10/18, A-1090 ViennaPhone: +43-1-31 83 36

Georg ZimmermannHablegasse 10, A-2380 PerchtoldsdorfPhone: +43-1-869 91 42

Gerhard Mittlbo‹ckPyrkergasse 33/15, A-1190 ViennaPhone: +43-1-364 71 45

Karl Glashu‹ttnerPacassistra§e 70/8, A-1130 ViennaPhone: +43-1-804 97 62

For more information on membership, please contact:Wiener Bo‹rse AGSales and Member RelationsAttn.: Mr. Andreas WeixelbaumerWallnerstra§e 8, A-1014 ViennaPhone: +43-1-531 65-215e-mail: [email protected]

The Capital Market


5.2 The Austrian Bond Market

Recent Performance and DevelopmentsDevelopments in the Austrian government bond market over the past fewyears have significantly increased its attractiveness to foreign investors. Its sizehas grown continuously since 1990 from EUR 13 billion in January 1990 toEUR 102 billion in December 2002. The substantial increase in standard issuesize — from EUR 0.2 billion per bond before the introduction of the auctionprocedure to EUR 5.2—8.8 billion — has possibly played an even bigger role inincreasing the market�s liquidity.

One important development of recent years was the 1991 revision ofissuance procedures for government bonds, when the government introducedregular new issue auctions (usually for a five-year or ten-year bond). Standar-dizing issues by focusing on five-year and ten-year bonds has helped stimulateinterest among foreign investors for a number of reasons. The most importantis that five and ten years are two common benchmark maturities for inter-national government bonds. This has given potential buyers of Austriangovernment bonds a choice of two highly-liquid benchmarks — an inter-mediate-maturity bond and a bond with a longer maturity — that are bothdirectly comparable with foreign benchmarks. Furthermore, in July 1997the first 30-year bond was introduced in order to widen the maturity range.Another striking feature of the revised issuance procedure — and one which ishelping stimulate secondary-market liquidity — has been the flotation of debtinstruments in the form of new tranches of outstanding issues.

The volatility of the European government bond and currency markets thatfollowed on the heels of Denmark�s rejection of the Maastricht treaty in June1992 and the ERM crisis in September 1992 stimulated investors� interest inthe Austrian bond market. The strength of the Austrian schilling whencompared with other European currencies was the market�s principal attrac-tion before the introduction of the euro. Investors have also been attractedby specific opportunities to exploit differences in yields between Austrianand German government bonds with comparable terms. Finally, they appre-ciate the increase in liquidity that has been induced by Austria�s auctionsystem.

The Characteristics and Scale of the MarketThe Austrian bond market is smaller than the country�s credit markets, but itis still considerably larger than the equity market.

The creation in 1979 of the Kapitalmarktausschuss (Capital Markets Com-mittee) under the Wertpapier-Emissionsgesetz 1979 (Securities Issuance Act) fos-tered the market�s development by paving the way for the judicious adoptionof international standards and practices. Austria introduced innovative instru-ments such as zero-coupon bonds and floating-rate notes at the same time asGermany, narrowing the gap between Austrian schilling and German markbond yields.

Increase in volume

Benchmark issues

A stable currency,pick-up in yields

The market�s structure

The Capital Market


Austrian bonds have tended to carry a higher yield — in particular between1985 and the middle of 1988 — in order to discourage major capital outflows.Between 1980 and 1986, the spread against German mark bonds averaged75 basis points. After a brief period of parity in 1983, the yield differentialbegan to widen, peaking at 186 basis points in the first quarter of 1986. Thiswas a response not only to the relative weakness of Austria�s key economicindicators at the time but also to the introduction of a coupon tax on newissues, which prompted Austrians to invest heavily in foreign-denominationsecurities. The outflow into foreign bonds during those years was clearlyreflected in the capital account, and the annual volume of new Austrian bondsdropped considerably. The Austrian government abolished the coupon tax onnew issues in 1986. This encouraged the repatriation of domestic funds andboosted foreign investment in securities denominated in Austrian schillings,confirming the underlying attractiveness of the schilling bond market at thesame time as prompting a further decline in yields. The yield spread betweenGerman and Austrian bonds narrowed perceptibly as a consequence.

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The spread betweenGerman and Austrianbond yields

The Capital Market


1989 saw the introduction of a 10% withholding tax. It was raised to 22%at the end of 1992 and to 25% in mid-1996 but did not cause major capitaloutflows.

1989 also saw the start of concrete measures to deregulate the primary andsecondary markets, increase trading volumes and reduce investors� transactioncosts. The reforms included the introduction of a market-maker system and abond lending scheme.

In preparation for the single European currency further steps were takento increase the market�s attractiveness, e.g. the harmonization of marketconventions with international standards and the inclusion of additionalnon-Austrian primary dealers in the auction group to further broaden theinternational investor base.

By the end of 2002, the outstanding volume of debentures came to EUR179 billion, 39% of it issued by banks and 61% by non-banks. As in previousyears, the Republic of Austria was the biggest single bond issuer in 2002. Out-standing Government Debt Issues totalled EUR 103 billion and accounted for58% of the outstanding volume of bonds. The remaining 3% comprisedoutstanding debt of foreign issuers, power companies and others.

Market StructureThe market�s biggest issuer is the Republic of Austria itself. Bundesanleihen(government bonds) account for 57% and Bundesobligationen (federal deben-tures) account for 0.6% of the market�s total outstanding volume. Up to1988, the Republic issued Bundesobligationen aimed at institutional investors.They were regarded as private placements with roughly the same yields asgovernment bonds. Following the introduction of a new auction system,government bonds have superseded Bundesobligationen.

Like the central government, public authorities such as La‹nder (provincialgovernments) and municipalities also used to raise funds in the capitalmarkets, but their share of the bond market has declined considerably.

Bank debentures account for 39% of the market�s total outstanding volume(including mortgage bonds, municipal bonds and Kassenobligationen [cashbonds]). Austrian banks also issue subordinate bonds and Erga‹nzungskapital-Anleihen (supplementary capital bonds) under the Bankwesengesetz (BankingAct).

Corporate bonds and other non-government and non-bank bonds accountfor about 3% of the market. Despite continuing deregulation, the corporatesegment is rather small.

Structural reforms

The scale of the market

Domestic issuers

The Capital Market


At the beginning of 1992, it became unnecessary to obtain formal approvalfrom the Bundesministerium fu‹r Finanzen (Austrian Federal Ministry of Finance)before issuing a bond when the new Kapitalmarktgesetz (Capital Markets Act)replaced the Wertpapier-Emissionsgesetz (Securities Issuance Act) as the legalbasis for bond issues.1)

Until 1986, most government issues were serial bonds, with the principalredeemable in equal instalments throughout the life of the bond. Since thenthe majority of bonds have been bullets. The other issues include FRNs, whoseinterest rates are adjusted according to average secondary-market yields ormoney market rates. Adjustment periods range from 3 months to 5 years.FRNs are issued almost exclusively by banks.

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Standards for new issues

Security variants

The Capital Market


Austrian bonds are bearer bonds. They are usually represented by a globalnote. Austrian fixed-rate bonds pay an annual coupon. In 1999, accrued inter-est calculation for government bonds was changed to an actual/actual daycount basis according to the ISMA convention. This change was effected onthe first coupon date in 1999 for each individual bond.

On 1 January 1999, virtually all outstanding government bonds trading onthe Vienna Stock Exchange were redenominated into the euro. New issuesnormally have a per-unit denomination of EUR 1,000. Denominations inthe private placement sector are usually many times higher.

Most bond trading takes place in the interbank market or involves insti-tutional investors. Government bonds are usually traded over the counter.Daily prices are also quoted on banks� Reuters and Bloomberg pages. Onlya smaller proportion is traded on the Vienna Stock Exchange.

In 1999, the Vienna Stock Exchange joined XETRA, the electronictrading system of the Frankfurt Stock Exchange. A �Viennese market segment�administered by the Vienna Stock Exchange was installed and trading hourswere extended.

Measures recently taken to increase government bond market liquidity(increase in volume, fungible tranches etc.) helped total market turnover torise significantly. Due to the increase in volume the most liquid governmentbonds are also eligible for trading on Euro-MTS, an electronic bond tradingplatform for European benchmark bonds.

Oesterreichische Kontrollbank AG computes the daily yields on all Austrianbonds and publishes them weekly together with primary and secondary marketdata on each individual bond in bulletins called Anleiheninformationen. Thesebulletins can be ordered from Oesterreichische Kontrollbank AG. Selected dataare also available via Internet (www.oebk.at).

In addition, Oesterreichische Kontrollbank AG publishes average yields forindividual issuer groups, such as the government, other public authorities,other domestic non-banks etc. Group yields are computed by weighting theyield on each individual bond according to the amount outstanding. Calcu-lations include all bonds quoted on the Vienna Stock Exchange that have aremaining maturity of more than one year. The formula used to calculate

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Market data and yield statistics

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group yields in Austria is currently based on a 360/360 basis. OesterreichischeKontrollbank AG calculates these figures on a daily basis and publishes them inAnleiheninformationen. The monthly arithmetic mean is announced in Statis-tisches Monatsheft, a periodical published by the Oesterreichische Nationalbank.All these data have a significant effect on the Austrian banking and capital-market sectors, providing the basis for interest rates on many loan contractsas well as FRNs.

Since 1 January 1993 a withholding tax has been levied on interest incomederived from bank deposits (savings deposits, time deposits, deposits oncurrent account) and interest-bearing securities (mortgage bonds, bonds,convertible bonds, profit-sharing bonds). If such interest income accrues toprivate individuals, the withholding tax also replaces individual income taxand inheritance tax (not the gift tax). In 1996, this withholding tax wasincreased from 22% to 25%.

Exemptions from the withholding tax:� If the interest paying agency is located abroad:

— interest income on foreign bank deposits and interest bearing securities(such income must be declared on the recipient�s income tax return inAustria and attracts the applicable income tax rate).

� If the interest-paying agency is located within Austria:— interest bearing securities denominated in Austrian schillings issued

before 1 January 1984— interest from interest-bearing securities denominated in foreign cur-

rencies issued before 1 January 1989— interest from interest-bearing securities issued by international finan-

cial institutions before 1 October 1992.� Investors who can prove they are not resident in Austria.

Their holdings of interest-bearing securities have to be deposited with abank in Austria.

The Auction System for Government BondsJanuary 1989 saw important changes in the way government bonds are issuedand traded in the secondary market. The earlier practice of placing govern-ment bonds within a fixed syndicate of Austrian banks gave way to an auctionsystem with an �underwritten component�. This meant that roughly half thevolume issued in any one year was underwritten by a syndicate. The auctionsystem was modified again in February 1991 and 2001 and now functions asfollows:

The O‹sterreichische Bundesfinanzierungsagentur (Austrian Federal FinancingAgency) as the issuer�s representative specifies which banks can participatein auctions. Its decision is based on a number of factors, including a bank�scapital adequacy, the number of its domestic and foreign branches, staff andsize and turnover of fixed income portfolios in euro and other relevant curren-cies. 24 banks currently participate in auctions and subsequently act as marketmakers. Foreign institutions have taken part in the auctions since mid-1994(for a detailed list, see Appendix C.1.: The Bond Market).

Every year, the O‹sterreichische Bundesfinanzierungsagentur, a privately runagency, announces the nominal total that can be expected to be issued duringthe coming year as well as an issuing calendar. One week before each auction,

Taxation

The auction system

Participants

Announcing the maturityand volume of a bond

The Capital Market


the Bundesfinanzierungsagentur announces the bond�s maturity and targetvolume. The bottom limit will be at least EUR 1 billion unless the announcedminimum annual volume has already been reached. Volumes below EUR1 billion usually apply to fungible issues whose purpose is to increase the totalvolume of bonds outstanding in the market. Before the bond�s maturity andvolume are announced, the participants in the auction are invited to makerecommendations to the government regarding the auction itself and/or termsof the bond. The Bundesfinanzierungsagentur may cancel an issue until apredetermined time after the deadline for the submission of bids. In such acase a new auction date is set one week later.

Standardized maturities and the regular intervals between auctions aregeared to increasing the market�s liquidity. Bonds can be sold as new tranchesof existing bonds so as to prevent the proliferation of coupons and bonds withdifferent maturities.

Each of the 24 participating banks must submit a bid for at least one 24th ofthe bond�s envisioned volume. This ensures that the entire volume of eachissue is bid for. In order to prevent any one institution from purchasing asubstantial share of the issue, no individual bank�s bid can exceed 30% ofthe bond�s announced volume in case of an issue amount of at least EUR1 billion and above.

Competitive bids must be submitted to Oesterreichische Kontrollbank AG by11:00 a.m. on auction day. By tradition Oesterreichische Kontrollbank AG actsas the fiscal agent for government bonds.

For the issuance of Austrian government bonds both price auctions andyield auctions are foreseen:

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The Capital Market


For tap issues price auctions have been employed since February, 2001.The bids submitted are ranked according to price in descending order. Bidsat the lowest price accepted (cut-off-price) may be subject to pro rata curtail-ments to provide for a precise representation of the scheduled competitiveissue volume. The allotment of bonds is carried out based on the prices bid.

For new issues bids are submitted in the form of yields, as the coupon iscalculated based on a weighted average of the accepted yields and an issue priceas close to par as possible. The yields bids are then transformed into prices.

The official issue price corresponds to the weighted average of theaccepted prices plus the maturity-dependent sales commission. This matur-ity-dependent sales commission awards to 1.05% for maturities of 5 yearsand 1.50% for maturities of 10 years.

As a performance incentive for panel members the former performance-commission was replaced by a modified non-competitive bidding possibility inFebruary 2001: An additional 15% of the competitive issue amount is madeavailable for the submission of non-competitive bids at the average price ofthe accepted competitive bids. Non-competitive bids have to be submitteduntil 11:00 a.m. CET one business banking day after the announcement ofcompetitive allotments. The maximum amount of non-competitive bids foreach bank corresponds to each bank�s market-share (i.e. the weighted averageof the competitive allotments) of the previous two auctions.

Since May 1998 an auction procedure has been carried out through ADAS(Austrian Direct Auction System), software developed for this purpose byOesterreichische Kontrollbank AG. As this software has been adjusted continuouslyto accommodate changing requirements, it covers a wide range of possibilities(different auction procedures, submission of competitive and non-competitivebids, various communication- and information tools etc.). Constant commu-nication and feedback on both sides, the issuer as well as the banks, before,during and after the auction, has promoted the development of ADAS.

Thus ADAS was established as a reliable and user-friendly application witha high standard of security. In addition to technical support, OesterreichischeKontrollbank AG assists all parties involved in dealing with questions concerningthe auction procedure. All results can also be calculated on Excel-spread-sheets, in order to guarantee the participants a maximum of transparencyand the possibility to arrive at the same results calculated by the system.

The essential advantage of the electronic auction-system can be found in itsability to respond quickly:� The submission of bids is carried out electronically.� The issuer confirms the issue electronically after the deadline for the

submission of competitive bids has expired.� Then, the total auction results are made available to the participants

(approximately 5—10 minutes after the deadline for the submission ofbids).

� All information (total auction results, resulting parameters in case of a newissue as well as individual allotments per bank) is communicated electro-nically via ADAS.

� Additionally, ADAS provides specific tools to enable the issuer viaOesterreichische Kontrollbank AG to communicate with participants indivi-dually via messages and info pages and generally offers the possibility to

Calculating the coupon andofficial issue price

Non-competitive bids

Electronic auction

The Capital Market


exchange views during round table chats (either using an ID or anony-mously).Since 1999, government bonds are also launched via a syndicate which may

change for each issue. Only participants in the auction procedure are eligibleto act as leadmanager or co-leadmanager. With the issuance of syndicatedtranches the Bundesfinanzierungsagentur intends to react flexibly to specificmarket situations and investor demands.

In order to help market makers fulfil their obligations, OesterreichischeKontrollbank AG — the clearing bank and central depository for Austriansecurities — has drawn up regulations for bond lending in governmentsecurities. The lending scheme has been in place for the bonds of other issuerssince the middle of 1991.

To further increase the attractiveness of government bonds an official strip-facility was set up by Oesterreichische Kontrollbank AG as the central securitiesdepositary in October 1996. This facility provides the possibility to tradethe capital and the coupons of selected government bonds separately.

Bond-Market IndicesOesterreichische Kontrollbank AG and various Austrian banks regularly compute anumber of Austrian bond market indices. International indices are publishedamong others by Goldman Sachs, Salomon Brothers, Merrill Lynch andBloomberg.

See Appendix C.1. for details of the pertinent Austrian and internationalbond indices.

For further information please contact:Oesterreichische Kontrollbank AGMr. Erich Weiss or Ms. Maria KuceraAm Hof 4, A-1010 ViennaPhone: +43-1-531 27-2305 or 2498Fax: +43-1-531 27-5233e-mail: [email protected] or [email protected]

Syndicated government bonds

The bond lending scheme

Stripping of bonds

The Capital Market


5.3 The Austrian Equity Market

Index Performance 2002The ATX closed at year-end 2002 at 1,150.05 points, which is slightly up by0.85% over year-end 2001 (1,140.36 points). The ATX hit its all-year high on2 May 2002 at 1,357.16 points, the all-year low was 1,003.72 points(10 October 2002).

A comparison with major international exchanges shows that WienerBo‹rse AG is one of the few exchanges that did not post price losses. In thebusiness year 2002, for example, the German DAX lost 44%, the FTSE100 Index of the London market dropped 24% and the CAC40 Index of Euro-next Paris lost 34%.

The ATX prime, the all-share index of the prime market segment, closedat year-end 2002 at 601.67 points, with a plus of 1.67% against year-end 2001(591.77 points).

The WBI, Wiener Bo‹rse�s all domestic shares index, closed at year-end 2002at 479.21 points, with a plus of 3.10% against year-end 2001 (464.81 points).

The prime market top performers in 2001 were BBAG Stamm (+66.25%),DO & CO (+54.68%), Brau Union (+40.63%), Agrana Vz (+32.92%), Mayr-Melnhof (+32.62%). The heaviest losses suffered Palfinger (—37.98%), HeadN.V. (—45.43%%), Feratel (—56.42%), BWT (—60.61%), JoWooD (—93.07%).

Turnover in domestic shares in 2002 was EUR 12.33 billion, a decrease of24.25% compared with 2001 (EUR 16.28 billion). Domestic equity marketcapitalization at year-end 2002 was EUR 30.39 billion, an increase of10.43% compared with EUR 27.52 billion registered at the end of 2001.

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The Structure and Scale of the Equity Marketin 2002

New Listings of Domestic Shares at Wiener Bo‹rse in 2002The data below is a snapshot taken at the time of the initial public offering. Forcurrent and detailed information on a company, please visit the InvestorCenter at www.wienerborse.at

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Market segment1) Capitalization in EUR Turnover in EUR Listings Issuers

prime market 11,998,307,774 39 39Domestic 25,114,236,232Foreign 80,835,974standard market continuous 358,470,202 11 10Domestic 1,202,084,645Foreign 125,335,724,454standard market auction 376,996,239 70 60Domestic 4,163,159,303Foreign 515,139,331,722other listings 119,702,693 19 10Domestic 1,755,720,058Foreign 183,122,000

Source: Wiener Bo‹rse AG.1) Market segmentation as of 2002.

New listings

The Capital Market


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Company First day of listing Market segment1)

Conwert Immobilien Invest 28. 11. standard market auctionTopcall 19. 12. prime marketLantec 20. 12. standard market auction1) New market segmentation effective with 2. 1. 2002.

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The Different Types of SharesTraded on Wiener Bo‹ rse AGCommon sharesCommon shares carry voting rights and pre-emptive rights that allow share-holders to subscribe to new issues in proportion to their existing holdings.Decisions that require a majority are made on a one-share/one-vote basis.Dividends will usually depend on a company�s profits, although mostcompanies try to steadily increase their dividends.

Preferred sharesPreferred shares give shareholders every right except the right to vote. Inreturn, non-voting cumulative preferred shares have priority when dividendsare distributed. There may be years in which only part of the dividends onthese shares can actually be distributed. If the arrears are not paid in the nextyear together with the regular dividend, holders of these shares are entitled tovote until the arrears have been paid in full. Non-voting cumulative preferredshares can only be issued up to a total of half the company�s outstandingordinary shares. This means that non-voting cumulative preferred shares cannever account for more than one third of a company�s share capital. Theattraction of these shares is their dividend guarantee. Unlike dividends onpreferred shares in the United States, the guaranteed dividend is a minimumreturn. In good years companies may supplement guaranteed base dividendswith a bonus. This means that dividends paid to preferred shareholders maynot be lower than dividends paid to holders of ordinary shares.

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Participation certificatesThe participation certificates (PCs) issued by the major banks and some indus-trial corporations are very similar to non-voting cumulative preferred shares.Holders of these instruments have an interest in the assets and profits of therespective company. Holders of participation certificates may attend AGMsand ask questions but are not allowed to vote. As a result, PCs are usuallytraded at a discount compared with other company shares.

Market Capitalization of Domestic Shares by Branches1)

Year-end 2002

Branch Capitalization in EUR

Banks 5,761,600,603Energy 5,504,820,507Telecommunications 4,826,887,453Mechanical engineering and metal processing 2,622,694,249Insurances 2,297,207,086Real estate 2,281,732,177Construction 1,928,957,054Breweries 1,526,654,060Pulp and paper 1,001,064,000Transport 906,600,000Foods 753,896,616Chemicals 585,874,691Others 228,300,269Refractories 156,027,287Textiles 91,800,000Internet 70,950,141Conglomerates 43,200,000Trade and services 42,776,830Software 7,255,303TOTAL 30,638,298,326

Source: Wiener Bo‹rse AG.1) Listed on the Official Market.

Turnover of Domestic Shares by Branches1)

Year-end 2002

Branch Turnover in EUR

Banks 2,869,144,031Energy 2,461,693,146Mechanical engineering and metal processing 2,032,895,177Telecommunications 1,671,621,476Pulp and paper 692,096,083Real estate 596,829,205Construction 571,356,080Transport 510,718,642Breweries 313,288,714Insurances 201,792,076Chemicals 124,693,058Refractories 100,026,260Textiles 50,327,022Foods 38,567,885Software 27,624,432Internet 27,311,272Others 22,807,150Trade and services 7,072,118Conglomerates 4,889,724TOTAL 12,324,753,551

Source: Wiener Bo‹rse AG.1) Listed on the Official Market.

Participation certificates

The Capital Market


Over the last few years, the participation certificate capital on WienerBo‹rse has steadily declined due to the conversion of participation certificatesinto shares.

Austrian ShareholdersBased on the study by Fessel + GfK 16.5% of Austrian population ownedsecurities in 2002 (16.5% in 2001, 15% in 2000, 13.4% in 1999). Securitiesare taken to include mortgage, municipal and other bonds, shares, profit-sharing certificates, investment fund certificates and participation certificates.The percentage of Austrians owning shares in 2002 was 7% (7.5% in 2001,7% in 2000 and 6.5% in 1999).

The Indices Traded at Wiener Bo‹ rseThe first index calculated and published by Wiener Bo‹rse was the WBI launchedin 1967 covering all Austrian stocks admitted to listing on the Official Market.The ATX followed in 1991, being designed as underlying for futures andoptions. Since January 2000, the growth and technology stocks listed onWiener Bo‹rse have been tracked by the Vienna Dynamic Index (ViDX). TheATX Prime (former ATX50) contains all stocks listed on the prime marketsegment and serves as a benchmark for institutional investors. Designed astraded indices and as underlyings for futures and options, the CECE indices(CTX, HTX, PTX, STX, RTX, RDX) were launched in 1996—1997and establishedthemselves as valuable instruments for investors focused on the respectiveCentral and Eastern European countries or on the region as a whole.

The use of indices of Wiener Bo‹rse AG as benchmarks or as underlyings forstructured products (warrants, index certificates, ETFs, swaps) issues is sub-ject to prior conclusion of a licence agreement.

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ATX — Austrian Traded IndexThe ATX, Wiener Bo‹rse�s major reference index, is a real-time share index thatcurrently tracks the price performance of 21 blue chip shares. The ATX servesas underlying for the options and futures contracts traded on Wiener Bo‹rse. Allshares in the ATX must be listed in the continuous trading segment and achievea certain stock exchange turnover volume. The composition of the ATX isreviewed every year in March and September. The main criteria for inclusionor deletion are the capitalized free float and stock exchange trading volumes.With every review, no more than three shares may be changed in the compo-sition of the index.

Base Value:1,000 index points on 2 January 1991

ATX PrimeThe ATX Prime is designed as an all-share index and consists of all securitiestraded in the prime market segment. The prime market segment includesstocks admitted to listing on the Official Market or Semi-official Market ofWiener Bo‹rse and that meet the special additional requirements of thissegment such as stricter disclosure and reporting obligations and minimumcapitalization.

The ATX Prime has been calculated since 2 January 2002. As the directsuccessor to the ATX50, it is linked to the closing price on 28 Decemberand serves as a benchmark for institutional investors.

Base Value: 462,49 index points on 2 January 2002

The Composition of the ATX

(as of June 11, 2003)

Company Weighting in %

Andritz 0.61AUA 1.04BBAG Stamm 4.06Boehler-Uddeholm 2.04Brau Union 4.81BWT 0.79Erste Bank 21.66EVN 2.89Flughafen Wien 3.82Generali Holding Vienna 2.74Mayr-Melnhof 3.41OMV 11.15Palfinger 0.6RHI 1.6Semperit 1.11Telekom Austria 17.76UNIQA 1.84VATechnologie 2.35Verbund Kat. A 4.81voestalpine AG 4.72Wienerberger 6.11ATX 100.00

Source: Wiener Bo‹rse AG.

The Capital Market


ViDX — Vienna Dynamic IndexThe Vienna Dynamic Index includes currently 10 growth- and technology-oriented companies listed at the Wiener Bo‹rse. The companies are either listedat the Official Market or at the Semi-official Market and are traded on acontinuous basis. The ViDX comprises companies whose business focuses inone of the following sectors: Computer Hardware/Software, Internet,Computer/Internet Service, Information technology, Telecommunications,Biotechnology, Environmental technology. Companies which are not in thescope of the above mentioned sectors may be included on an individual basisupon decision of the index committee.

Base Value: 100 index points on 31 December 1967

IATX — Immobilien-ATXThe Immobilien-ATX (Austrian Real Estate Securities Index) is the benchmarkindex of the most significant Austrian real estate securities. By comparison,real estate stock prices display a much steadier upward trend and a lowerdegree of volatility. For this reason, it is not very effective to measureperformance or compare real estate stock trends using a classic stock indexsuch as the ATX.

Base Value: 155.47 index points on 2 January 1996

WBI — Wiener Bo‹rse IndexThe WBI contains all shares listed on the Official Market and the Semi-OfficialMarket and, as an overall index, reflects the movements on the Austrian stockmarket as a whole. The individual shares are weighted according to their sharein market capitalization (number of shares issued times price). Shares withhigh market capitalization therefore have a stronger influence on the WBI thanshares with lower market capitalization. The index is calculated once a dayafter the closing of the trading session. It is not updated regularly, but onlyas the necessity arises. New listings have been added to the index since1984. Adjustments are made in cases of changes in the capital of a company(capital increases or reductions) and when new shares are admitted to listing.Adjustments are not made for price markdowns due to dividend distributions.

The WBI has been calculated in its present form since the beginning of theyear 1968. This date was chosen as base date because at the time, legislationpromoting economic growth (�Wachstumsgesetze�) became effective whichbrought numerous improvements to the capital market. The WBI has beencalculated on a daily basis at every trading session since September 2, 1985.For securities traded in consecutive trading, the closing prices are used, andfor those for which only one price is fixed per trading session, the day�s pricesare used. If no price or estimated price has been fixed at a trading session, thelast available price or estimated price is used for the index calculation.

The Paasche formula is used for the calculation of the WBI. Companies areweighted by their share capital. The index formula guarantees that eachindividual share price influences the overall index in proportion to thecompany�s listed capital.

Base Value: 100 index points on 31 December 1967

The Capital Market


For more information regarding our indices (methodology, composition,calculation, rules) please visit our indices information Website www.indices.ccor direct your queries or comments to [email protected] call: +43-1-531 65-198

For licensing opportunities please send an e-mail to [email protected] call: +43-1-531 65-169

The Capital Market


5.4 otob market.at —

Wiener Bo‹ rse�s Derivatives Market

The product range traded on Wiener Bo‹rse�s otob market includes:

A. Austrian Derivatives� Futures and options on the Austrian Traded Index (ATX)� ATX stock options:

Austrian Airlines (AUA)Bo‹hler-Uddeholm (BUD)Brau Union (BRA)BWT (BWT)Erste Bank Common (EBS)EVN (EVN)Flughafen Wien (FLU)Hypo Vereinsbank (HVB)Mayr-Melnhof (MMK)OMV (OMV)RHI (RHI)Telekom Austria (TKA)UNIQA (UQA)VA Technologie (VAT)Verbund Kat. A (VER)Voest Alpine (VAS)Wienerberger (WIE)Wolford (WOL)All ATX futures and options and ATX stock options are traded in Euro. A

more detailed description of the ATX you will find in: 5.3 The Austrian EquityMarket.

B. The CECE Index Family� Futures and options on the CTX, HTX, PTX, and RTX

The CECE Index family comprises traded indices of the major blue chips inthe Czech Republic (Czech Traded Index, CTX), in Hungary (HungarianTraded Index, HTX), Poland (Polish Traded Index, PTX), Slovakia (SlovakTraded Index, STX1), a benchmark index for the whole region (CECEIndex1) and Russia (Russian Traded Index, RTX). Beside these there is theRussian Depositary Index (RDX1) based on depositaries traded on the Frank-furt stock exchange on Russian blue chips.

The CTX, HTX, PTX, RTX serve as underlyings for futures and optionstraded on Wiener Bo‹rse since 1997. The indices are calculated as capital-weighted price indices, according to the method of calculation applied tothe ATX indices. One of the main targets for the establishment of the CECEindices is the opportunity to trade four different markets on a single tradingplatform in one single currency. All indices are calculated in USD, which is

1 Currently no futures and options traded on the STX and RDX.

The Capital Market


the predominant currency for the valuation of international portfolios. TheCTX, HTX, PTX and RTX are also available on a local currency basis.

Futures and options on the CTX, HTX and PTX are traded in Euro.Futures and options on the RTX are traded in USD.

Trading and Clearing on the otob marketTypes of OrdersOrders for futures and options can be specified according to position (long,short), option series (underlying), exercise price, option type (call or put),expiry date, price limits and number of contracts.

The various types of orders can be differentiated on the basis of their com-position (and size), the prices quoted and their treatment in the order book.On the basis of the price quoted, a distinction is made between limit ordersand market orders. Market orders have to be specified based on their execu-tion type (fill-or-kill, immediate-or-cancel). Limit orders can also be specifiedbased on the time of validity (rest-of-day, good-till-expiration, good-till-date).

Price spreads, time spreads, straddles and strangles can be keyed in asstandardized combination orders. Up to ten individual orders may be enteredas non-standardized combination orders. Combination orders will only beexecuted if every leg can be matched. While non-standardized combinationscan only be specified as fill-or-kill or immediate-or-cancel orders, standar-dized combination orders can be stored in the central order book accordingto their specific time of validity. The limit can be set on an aggregate basis.As soon as the system finds other orders/quotes which correspond in totalto the aggregate limit, the standard combination order will be matched.

Trading SystemTrading in futures and options on Wiener Bo‹rse is conducted via the fullyelectronic trading system Omex¤ that permits the immediate and swift exe-cution of transactions. For each listed derivative instrument, at least threemarket participants have committed themselves to act as market makers andto quote binding bid and ask prices. Permanent quotes are entered for allmajor futures maturities and options series. Bid and ask quotes are enteredfor the remainder upon quote request. The orders entered into the tradingsystem are ranked by time and price priority and are executed if matched.

ClearingThe clearing of transactions in futures and options concluded on Wiener Bo‹rseis an integrate part of the fully electronic marketplace system. As a neutralclearing house, Wiener Bo‹rse guarantees the fulfillment of transactions inderivatives and also requires clearing members to deposit margins for allbinding positions (futures and short positions in options). Wiener Bo‹rsemaintains principal, agent and market maker accounts. Margin and clearingaccounts for euro-denominated instruments are run by Oesterreichische Kontroll-bank (OeKB), accounts for USD-denominated instruments are run by Euro-clear.

Types of Orders

Trading System

Clearing

The Capital Market


Info ProvidersFor vendor symbols please visit www.wienerborse.at under�News & Services� — �Vendor symbols�.

TaxationExcept when underlying securities are actually delivered, financial futuresand options are exempt from stock-exchange turnover tax. This means thatexpired and closed positions are also exempt from turnover tax.

Corporate earnings from trading in options are subject to income andcorporation tax. Companies report their gains and losses in their routine state-ments of income and are taxed accordingly. Private investors� earnings fromoptions are subject to personal income tax if accrued within a year.

For further information, please contact:Wiener Bo‹rse AGMarkets & ProductsAttn.: Mr. Karl BrauneisWallnerstra§e 8, A-1014 ViennaPhone: +43-1-531 65-132Fax: +43-1-532 97-40e-mail: [email protected]

Info Providers

Taxation

The Capital Market


5.5 Privatizations in Austria

The first 15% of the issued share capital of oil, gas and chemicals groupO‹MV AG (now OMV AG) was placed on the Vienna Stock Exchange in 1987in the course of alterations to the legislative basis of O‹IAG (a holding companyfor the Republic of Austria�s industrial interests). This laid the cornerstone forAustria�s successful programme of privatization. Even though this, the veryfirst public sale of shares in an O‹IAG company occurred during one of theinternational equity markets� most difficult phases, the 15% were firmlyplaced at a price of EUR 31.98, allowing the stock exchange offering ofanother 10% in 1989. For the very first time, 25% of the issued share capitalof an O‹IAG company is consequently now in the hands of domestic and foreignshareholders. OMV has become one of the Vienna Stock Exchange�s mosttraded securities.

Because OMV�s share sale was so successful, other companies of the O‹IAGgroup have since floated their shares on the stock exchange. For instance,49% of VAE (VA Eisenbahnsysteme AG) was placed in the market in 1992,followed by 74% of AMS (Austria Mikro Systeme International AG) in 1993.

Parliament re-amended the existing O‹IAG act at the end of 1993, making itpossible for the O‹IAG group to sell majorities of its industrial interests. Sincethat time, O‹IAG has been performing its new task — the sale of majorities of itsindustrial interests or 100% privatization — as allowed by market receptivityand subject to the proviso that investors must be offered solid investmentopportunities.

Austria�s biggest capital-market transaction to date took place in May 1994with the placement of 51% of VA Technologie AG, a globally active technologygroup. The share�s price rose from EUR 65.41 at issue to EUR 73.84 at theend of 1998, furnishing convincing proof of the company�s acceptability toAustrian and foreign investors. O‹IAG currently holds 24% of its shares.

Thanks to placement know-how and years of experience, the followinggoing publics also made a positive contribution to Austria�s capital markets.

The first 100% privatization took place in 1994 with the stock exchangesale of the entirety of O‹IAG�s interests in VAE and AMS. AMS has since devel-oped very well, climbing from an issue price of EUR 24.42 to EUR 32.05 atthe end of 1998. VAE rose from EUR 66.50 at issue to EUR 122.82 at the endof 1998.

At the beginning of 1995, three million shares of Bo‹hler-Uddeholm AG, aninternationally active special-steel group, were placed on the Vienna StockExchange at a price of EUR 39.97. By year-end 1995, the share was alreadytrading at EUR 55.96.

In October 1995, 31.7% of VA Stahl AG, one of Central Europe�s leadingsteel groups, was privatized via the stock exchange. Demand for this sharewas so lively that the green-shoe option had to be enlarged from an initial15% of the total transaction to 20%. The issue price was EUR 20.71.

At the beginning of 1996, O‹IAG carried out a private placement thatreduced its 43.3% interest in VA Stahl AG to 38.8%. Furthermore, in the firsthalf of 1996 O‹IAG successfully floated 47.7% of the share capital of Bo‹hlerUddeholm AG — that is a total of 5.25 million shares — during a secondaryoffering at a price of EUR 57.05 per share, reducing its stake in the company

The Capital Market


to 25%. In a subsequent transaction (likewise a secondary offering), O‹IAGfloated 14.9% of the share capital of OMV AG — that is a total of 4,023,000shares — at a price of EUR 76.67 per share, reducing its interest to 35%. O‹IAGfloated a total volume of EUR 608 million in transactions during the first halfof 1996 and managed to place an average of almost 40% of each issue in theAustrian marketplace.

In the middle of 1996, Austria Tabak AG was transferred to O‹IAG for privati-zation. In November 1997, 49.5% of Austria Tabak, the sole tobacco productmanufacturer in Austria, having a leading market position with its owncigarette brands of 59% and being with its wholesale division market leaderin Austria, Germany and Hungary, was issued via the stock exchange.

Demand totalled 61.5 million shares with a value of more than EUR 2.25billion — the biggest amount ever ordered during an Austrian IPO. Prior tothe exercise of the green-shoe option, available volumes were oversubscribed4.6 times in Austria and 8.8 times abroad. 10,890,000 shares were on offerpost-green-shoe, giving an aggregate oversubscription quotient of 5.6 times.Turnover in Austria Tabak shares during their first trading session was thehighest ever recorded in the history of the Vienna Stock Exchange. Theyclosed at EUR 37.50 on that day, which compared with an issue price ofEUR 36.70, and gained almost 78% to end 1998 at EUR 65.33.

In the year 1998, O‹IAG did not organize any large-scale privatizations orcapital market transactions. However, O‹IAG has been assigned the legal dutyto prepare the public offering of the stakes held by the Republic of Austriain the companies O‹sterreichische Staatsdruckerei AG and Dorotheum Auktions-,Versatz- und Bank Gesellschaft m.b.H. (Dorotheum) through the stock exchange.

Furthermore, O‹IAG has been assigned the Republic of Austria�s stakes of51.94% in Austrian Airlines AG (AUA) and 17.38% in Flughafen Wien AG,the pertinent law providing for O‹IAG to exercise the ownership rights in thestead of the Republic.

O‹IAG also conducts sales on behalf of the Republic for companies in whichit does not own any interests. In 1998 the shares held by the Republic in

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The Capital Market


Dachstein Fremdenverkehrs AG were sold to an Austrian syndicate of bidders.O‹ IAG has also been assigned the task of preparing the sale of the 50% stakeheld by the Republic of Austria in Wiener Bo‹rse AG, in June 1999 the mentionedstake was sold to Austrian investors.

1999 O‹IAG reduced the stake in Austria Tabak from 50.5% to 41.1% via aninstitutional offer to national and international investors (block trade).

1999 Austrian Airlines AG increased its share capital from EUR 188.9million to EUR 247.1 million by an issue of new shares. O‹IAG did not takeadvantage of its subscription right, as a result, O‹IAG�s stake was reduced to39.7%.

On the initiative of the government, the Austrian parliament passed a newlaw in May 2000, which marks a change in the policy of O‹IAG.

The main content of the law:� The amalgamation of PTBG (Post und Telekombeteiligungsgesellschaft): Post AG

(Austrian Postal Service), Telekom Austria, PSK (postal saving bank) intoO‹IAG, and

� the privatization mandate assigned by the government to O‹IAG, underwhich the following state holdings are earmarked for privatization bythe end of 2003: Telekom Austria (75% +1 share held by O‹IAG), PSK,Dorotheum GmbH, Print Media Austria AG, Staatsdruckerei GmbH, the17.4% share held in Flughafen Wien AG and the O‹ IAG share in AustriaTabak AG (41.1%). The purpose of this mandate is to service all existingdebts of O‹ IAG within this government�s tenure by using privatizationproceeds.Within the scope of this privatization mandate, O‹IAG sold the PSK to Bank

fu‹r Arbeit und Wirtschaft AG (BAWAG) in August 2000. In November 112 millionshares (22.4% of the share capital) of Telekom Austria AG were floated at aprice of EUR 9 per share in the initial public offering through Wiener Bo‹rseand the New York Stock Exchange (NYSE). A total of 112 million shares wereoffered for sale and placed in Austria and abroad. With the support of anambitious marketing campaign, over 92,000 shares were placed with Austrianshareholders through private investor incentives (bonus of 5% up-front, onefree share for every ten shares after a certain holding period).

Further privatization measures in 2000 were the sale of the state-ownedprinting company Sicherheitsdruck GmbH to an Austrian investor and a reductionof the 17.4% share held in Flughafen Wien AG to 8.92%.

In line with the mandate of May 2000, O‹ IAG continued to privatize state-owned assets in 2001. The remaining share of 8.92% in Flughafen Wien AG wasdisposed of, a 1% stake in voestalpine was sold, thus reducing O‹IAG�s share from38.8% to 37.8%. After a call for tenders in which the major internationaltobacco concerns participated, the remaining 41.13% in Austria Tabak AG weresold to the British tobacco company Gallaher. As a consequence of Gallaher�soffer to remaining shareholders, Austria Tabak was delisted from Wiener Bo‹rse.

The traditional Austrian auction house Dorotheum GmbH was sold to anAustrian investor group at the end of 2001, and Druckerei GmbH was sold toan Austrian financial investor effective as of the beginning of 2002.

By reducing the debt with the proceeds from the privatization transactions,O‹IAG has already fulfilled part of its assignment. Further transactions to beeffected in the coming years according to the privatization order.

The Capital Market


In 2002, O‹IAG�s participation in voestalpine AG was reduced to 34.7% dueto a capital increase at voestalpine AG, in which O‹IAG only partly exercised itssubscription rights.

Since the last legislative period ended in October 2002, O‹IAG is expectingto receive a new privatization mandate by the federal government in thesecond quarter of 2003, which will provide for further privatizations duringthe next session of legislation.

Pursuant to the intergovernmental agreement entered into by the coalitionpartners it is intended to sell O‹IAG�s participations in voestalpine, Bo‹hlerUddeholm, O‹BAG, VA Tech AG as well as in Telekom Austria AG.

For further information please contact:O‹sterreichische Industrieholding AG (O‹IAG)Attn.: Mr. Lutz Sperlich (Communication/Privatization)Kantgasse 1, A-1015 ViennaPhone: +43-1-711 14-274Fax: +43-1-711 14-378

The Capital Market


5.6 The Capital Markets Act

GeneralAs part of the deregulation efforts of the Austrian government and in order tocomply with EEC regulations the Capital Markets Act (the �CMA�) was passedin autumn 1991 and published in the Federal Law Gazette 1991/625. TheCMA followed the prospectus directive of the EEC, Council Directive dated17 April 1989, 89/298/EEC for non-listed securities (the �Directive�).TheCMA does not require an authorization by a governmental office or otherorganization. Issues of securities may be freely made, but in case there is apublic offering the provisions of the CMA will apply. The CMA was amendedthe last time by the Capital Markets Reform Act, Federal Law Gazette I,2001/97 published on 7 August 2001.

Public OfferThe CMA applies only if there is a public offering. The definition of a publicoffer reads: A declaration of intent aimed at selling securities or other invest-ments and not directed towards specified persons; a declaration of intent notdirected towards specified persons exists in any case where the offeror has notdetermined by name the identity of the persons to which an offer is addressedprior to making the declaration of intent; is the declaration of intent addressedto more than 250 people, the offer is deemed to be public unless the offerorproofs to the contrary.

ProspectusIf the CMA must be applied, the most important consequence is that ofpublishing a prospectus, the (minimum) contents of which are laid down invarious schemes annexed to the CMA. The prospectus must be in Germanor English. The Act provides for the recognition of certain prospectusespublished in member states of the EEA and translated into German or Englishif not produced in these languages. In conformity with the Directive the CMAprovides for exemptions from the obligation to publish a prospectus (e. g. the�European Bond�-exemption; denomination of the securities of at least EUR40,000 each or equivalent in foreign currency; exercise of conversion- orsubscription rights; offer to exchange securities; mergers of companies).

The prospectus, which is seen as the tool to protect the investors, must be�tried� by either banks or auditors. In view of the potential liability of thetester, the CMA requires insurance coverage in case of auditors and a mini-mum of own funds of EUR 18.2 million, or equivalent in foreign currency,in case of banks.

Notification OfficeThe CMA orders the prospectuses to be submitted to the notification office atleast one day before the public offering. The CMA named OesterreichischeKontrollbank AG as notification office. It must check whether the requiredsignatures (mainly of the issuer and the tester) have been made on theprospectus. It must keep the prospectuses on record and on request mustinform anybody whether a prospectus has been handed in for a specific issue,where and when it was published and must provide (photo)copies of it.

Deregulation

Potential applicationof the CMA

Publication of a prospectus

Prospectus to be tested

Submission of prospectusto notification office

The Capital Market


Everybody — with few exceptions — who plans to make an offering inAustria must inform the notification office of the planned issue, its foreseeabledate, amount, denomination, term and other relevant conditions. Thisinformation is designed to enable the notification office to publish a previewof forthcoming issues that helps potential issuers in evaluating the marketconditions.

Calendar of issues

The Capital Market


Oesterre i ch i s che Nat ionalbank

&

Financial Markets Austria Services Ltd.

The Austrian Fianancial Markets

A Survey of Austria�s Capital Markets

Facts and Figures

Annex

Revised Edit ion 2003

A. Key Facts on the Republic of Austria

The Country and its PopulationPopulation (as of May 2001) 8,032,926Language (2001): German (88.6%)Number ofinhabitants/km2: 95.8Borders (as agreed in by the Treatyof St. Germain in 1919) with: Switzerland, Liechtenstein, Germany,

The Czech Republic, Slovakia,Hungary, Slovenia, Italy

Total area: 83,870.95 km2

Under agriculture: 26,335.48 km2

Exploited forest area: 36,232.25 km2

Climate: Continental in the east, alpine incentral Austria

Capital: ViennaMajor business center: ViennaPopulations of major cities(as of May 2001):Vienna: 1,608,158Graz: 226,244Linz: 183,504Salzburg: 142,662Innsbruck: 113,392

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Key Facts on the Republic of Austria


Jobholders (2002): 3,155,161Foreign workers (2002): 334,432Unemployment rate (2002): 6.9%

The GovernmentBundespra‹sident(Federal President): Thomas Klestil

Bundeskanzler(Federal Chancellor): Wolfgang Schu‹ssel (O‹VP;

Austrian People�s Party)

Bundesminister fu‹r auswa‹rtigeAngelegenheiten(Federal Minister forForeign Affairs): Benita Ferrero-Waldner (O‹VP;

Austrian People�s Party)

Bundesminister fu‹r Finanzen(Federal Minister of Finance): Karl-Heinz Grasser

Bundesminister fu‹r Wirtschaftund Arbeit(Federal Ministerfor Economy and Labor): Martin Bartenstein (O‹VP)

Political system: Parliamentary democracy

Political parties:Ruling parties: O‹ sterreichische Volkspartei (O‹VP;

Austrian People�s Party)79 seatsFreiheitliche Partei O‹ sterreichs (FPO‹ ;Austrian Freedom Party)18 seats

Opposition parties: Sozialdemokratische Partei O‹ sterreichs (SPO‹ ;Social Democratic Party of Austria)69 seatsGru‹nalternative Partei (Gru‹ne;Green Party)17 seats

Next general election: 2006

Military status: Neutral since the Staatsvertrag(state treaty) re-establishedAustria as an independent anddemocratic state in 1955



Membership in International OrganizationsAustria is a member of many international organizations:� the United Nations and of all of its affiliated organizations. Two of these

organizations, the International Atomic Energy Agency (IAEA) and theUnited Nations Industrial Development Organization (UNIDO), havetheir headquarters in Vienna,

� the International Monetary Fund (IMF),� the International Bank for Reconstruction and Development (IBRD),� the Multilateral Investment Guarantee Agency (MIGA),� the International Finance Corporation (IFC),� the International Development Association (IDA),� the Asian Development Bank,� the Asian Development Fund,� the Inter-American Development Bank,� the African Development Fund,� the African Development Bank,� the European Bank for Reconstruction and Development (EBRD),� the European Investment Bank (EIB),� the Fund for Special Operations,� the Organization for Economic Cooperation and Development (OECD),� the Council of Europe,� the International Energy Agency,� the International Fund for Agricultural Development (IFAD),� the Common Fund for Commodities.

Austria is a founding member of the World Trade Organization (WTO)and was previously a party to the General Agreement on Tariffs and Trade(GATT).

Vienna is recognized as a center for international conferences and hasserved as the site of numerous United Nations meetings as well as StrategicArms Limitation Talks. The headquarters of the Organization of the PetroleumExporting Countries (OPEC) are located in Vienna.

The Republic has been a member of the EFTA since its establishment in1960. By 1966, all tariffs between EFTA members were eliminated. On 17 July1989 Austria applied for membership of the European Union.

On 2 May 1992 Austria signed, along with its former EFTA partners(except Switzerland) and EU counterparts, a treaty designed to create a Euro-pean Economic Area (EEA), linking the EFTA with the EU as a single tradingbloc. The EEAwas ratified by Austria�s parliament in 1993 and came into forceon 1 January 1994. The EEA guaranteed free movement of industrial goods,capital and labor throughout 18 participating states.

On 2 March 1994 an agreement was reached on the terms of Austria�sentry into the EU. On 12 June 1994 the Austrian electorate voted bya 2/3 majority to enter the EU. Membership has become effective on 1 January1995 and Austria remains a member of the EEA in the same way as other EUmembers form part of it. Membership in the EFTA has become incompatible.

Under Austria�s Bundesverfassungsgesetz (Federal Constitution Act) of 1920as amended in 1929, Austria is a democratic federal republic. Its legislativeand executive powers are apportioned between the federal government and

Membership in internationalorganizations

Form of government



the federation�s nine constituent provinces (Burgenland, Vienna, LowerAustria, Upper Austria, Salzburg, Tyrol, Vorarlberg, Styria and Carinthia).

A Democratic Federal RepublicThe federal government�s legislative power is vested in a bicameral legislaturecomprising the Nationalrat (national council) and the Bundesrat (federal coun-cil). The Nationalrat is elected for a period of four years by direct, secret,universal suffrage under a system of proportional representation. The Natio-nalrat can be dissolved within its four-year term either at its own instigationor — under special circumstances — that of the Bundespra‹sident. The present Na-tionalrat was elected in November 2002. The members of the Bundesrat areelected by the legislatures of the different provinces in proportion to theirpopulations.

The federal government�s executive powers are vested in the Bundespra‹sident,the Bundeskanzler and the Cabinet. The Bundespra‹sident is elected by direct,secret, universal suffrage for a term of six years. The Bundespra‹sident�s principalconstitutional powers include appointing the Bundeskanzler and the Cabinet anddissolving the Nationalrat. The present administration was formed in February2003. It is a coalition of the O‹VP (Austrian People�s Party) and the FPO‹(Austrian Freedom Party).

Judicial power is exercised by federal courts. There are courts of lastresort for questions of civil, criminal and administrative justice. A separateconstitutional court has supreme competence to judge the constitutionalityof all legislative and administrative actions on the part of the federal govern-ment and the provinces.

The following table shows the political make-up of the Nationalrat and theBundesrat after each of the last five national elections.

Political Parties

1995 19971) 1999 20001) 20011) 2002Nationalrat Bundesrat Nationalrat Bundesrat Nationalrat Bundesrat Nationalrat Bundesrat Nationalrat Bundesrat Nationalrat Bundesrat

Social DemocraticParty of Austria (SPO‹ ) 71 25 71 22 65 22 65 22 65 23 69 21Austrian People�sParty (O‹ VP) 53 26 52 27 52 27 52 28 52 28 79 28Austrian FreedomParty (FPO‹ ) 40 13 41 15 52 15 52 14 52 12 18 12Liberal Forum (LIF) 10 — 9 — — — — — — — — —Green Party (Gru‹ne) 9 — 9 — 14 — 14 — 14 1 17 1Independent — — 1 — — — — — — — — —1) There have been changes because of members of parliament crossing party lines and by-election.

Legislative power

Political parties



The CurrencyCurrency: Euro (EUR)

Average 2002 USD/EUR: 0.945

Economic OutputNominal GDP(2002, preliminary): EUR 216.831 billionPer capita GDP(2002, preliminary): EUR 26.621

Foreign TradeExports of goods and servicesas a percentage of GDP (2002): 52.1%

Imports of goods and servicesas a percentage of GDP (2002): 50.9%

Major trading partners (2002):Exports: Germany (31.96%), Italy (8.48%),

Switzerland (5.26%), United States (5.17%)United Kingdom (4.70%), France (4.37%),Hungary (4.33%), Spain (3.00%),Czech Republic (2.89%),Netherlands (2.31%)Eastern Europe (15.87%)

Imports: Germany (40.31%), Italy (7.08%),United States (4.83%), France (3.85%),Hungary (3.32), Switzerland (3.29%),Netherlands (3.27%),Czech Republic (2.91%),United Kingdom (2.66%), Japan (2.15%)Eastern Europe (11.54%),

Tourism in 2002Foreign visitors: 18.604 million

Overnight stays(foreigners): 85.754 million

Total overnight stays: 116.757 million

Foreign-currencymovements caused bytourism in 2002 (preliminary):Receipts EUR 14,044.00 millionOutflow EUR 10,869.20 millionNet EUR 3,174.80 million



B. Recent Economic Developments and Outlook

Economic Growth Remaining SubduedThe Austrian economy grew by 1 percent in real terms in 2002, a rate close towhat WIFO had expected as early as December 2001 (1.2 percent). Yet, in thethird and fourth quarter, GDP remained flat on a seasonally adjusted basis,with stagnation likely to continue this year. The main reasons are the conse-quences of geo-political instability for the economy as well as continued slug-gishness of domestic demand. GDP growth in 2003 is currently expected at1.1 percent, remaining close to a modest 1 percent for the third consecutiveyear. Such an extended period of weak activity has not been observed to date.

Prospects for 2004 are necessarily vague at this stage, given the greatuncertainty surrounding geo-political developments and the reaction ofeconomic policy. At present, growth is projected at 1.7 percent, remainingagain clearly below the long-term trend. Both in 2003 and 2004, the paceof expansion would thereby correspond to the euro area average. A cyclicalupswing in Europe appears unlikely, unless world-wide uncertainty subsidesand commodity prices ease markedly. Underlying the present projection arethe external assumptions of a reference price of 29 $ per barrel for crudeoil in 2003 and of 23 $ per barrel in 2004, and an exchange rate of 1.08 $per euro.

The real-effective appreciation of the euro is holding back the rise inAustrian exports. Merchandise exports are seen rising by 4.3 percent in vol-ume this year, and by 7.5 percent in 2004. As in the past two years, however,and despite the weak international environment, exports will stay the maindriving force of Austrian economic growth. The weak momentum of foreigndemand is dampening investment in the export-oriented business sector.Spending on machinery, vehicles, electronic equipment and software may pickup by an inflation-adjusted 3 percent this year, after having fallen by acumulated 13 percent since 2000. Towards the end of the year, some positiveeffects may be expected from spending being carried forward in view of thetemporary investment premium expiring. A genuine cyclical recovery ofinvestment may set in by 2004, with expenditure on new equipment projectedto gain 5.5 percent. Growth of manufacturing output, expected at 1.8 percentin volume in 2003 and 3 percent in 2004, will also be constrained by weakdemand. This will not suffice as to prevent further substantial job losses inindustry.

Domestic demand developments remain below the long-term average.After a decline in 2001 and 2002, a slight pick-up may be expected for thecurrent year. Spending of private households is held back by the unsatisfactorylabour market situation and the modest gains in net incomes. Nevertheless,private consumption is set to increase by nearly 11/2 percent, while public con-sumption will remain flat. Construction investment in civil engineering is ben-efiting from higher spending on road and railroad infrastructure, whereas thebuilding sector lacks stimulus.

Consumer price increases are slightly gaining momentum, with the rate ofinflation projected at 1.9 percent. Upward pressure is being exerted both byenergy and services prices, notably related to housing, but also by industrialmanufactures prices. Next year, inflation should moderate to a rate around

Recent Economic Development and Outlook


1� percent. The appreciation of the euro is dampening the rise of importprices, and unit labour costs should be of stabilising influence.

Slow economic growth has pushed up the number of unemployed by acumulated 38,000 in 2001 and 2002. The negative trend is unlikely to reverseduring the forecast period. In 2003, the number of actively employed willfall again slightly, with job losses being concentrated in manufacturing,construction and trade. The public sector is planning further cuts in person-nel. Unemployment is likely to increase by 8,000 people to a level of 240,000on annual average 2003, yielding a jobless rate of 7 percent of the dependentlabour force (national definition) or 4.2 percent of the total labour force(Eurostat concept). While in 2004 employment may pick up somewhat,unemployment is unlikely to decline, as both the initial steps towards theabolition of early retirement and the expected large inflow of foreign workerswill add to labour supply.

The general government account recorded a deficit of Euro 1.2 billion or0.6 percent of GDP last year, according to the Ministry of Finance and Statis-tics Austria. For 2003, no draft Federal budget has yet been submitted. WIFOexpects an increase in the overall deficit to some Euro 23/4 billion or 1.2 per-cent of GDP, due to the dampening effect of the cycle on tax revenues, thedeferred payments for flood relief, and additional outlays such as for familysubsidies. Also in 2004, adverse cyclical conditions will leave their mark onthe budget in the form of revenue shortfalls and high outlays for unemploy-ment benefits. The general government deficit may amount to 1 percent ofGDP.

Recent Economic Development and Outlook


C. Capital Market Data

C. 1 The Bond Market

Wiener Bo‹ rse — Key Figures 2002

Shares

Number of companiesprime market 39standard market continuous 10standard market auction 60Number of sharesprime market 39standard market continuous 11standard market auction 70New domestic listings 3Total market capitalization1) EUR 30.39 billionStock exchange turnover1) EUR 12.33 billion1) Domestic shares, Official and Semi-official Market.

Bonds

Number of bondsOther listings 1,036Unregulated market 1,173Total 2,209Number of issuersOther listings 64Unregulated market 116Total 180

million EUR

Stock exchange turnoverOther listings 384.46Unregulated market 264.20Total 648.66

in %

Average yieldsBonds total 4.67Government bonds 4.75

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This graph illustrates the close correlation between the macroeconomicclimate and the development of interest rates.

Bidders in Government-Bond Auctions:� ABN AMRO Bank N. V.� Bank fu‹r Arbeit und Wirtschaft Aktiengesellschaft� BNP Paribas� Bayerische Hypo- und Vereinsbank Aktiengesellschaft� CDC IXIS Capital Markets� Citigroup Global Markets Limited� Cre«dit Agricole Indosuez� Credit Suisse First Boston (Europe) Limited� Deutsche Bank Aktiengesellschaft� Dresdner Bank Aktiengesellschaft� DZ BANK AG Deutsche Zentral-Genossenschaftsbank� Erste Bank der oesterreichischen Sparkassen AG� Goldman Sachs International� HSBC CCF� ING Bank N.V.� J. P. Morgan Securities Ltd.� Merrill Lynch International� Morgan Stanley & Co. International Limited� Nomura International plc� Oberbank AG� O‹sterreichische Volksbanken-Aktiengesellschaft� Raiffeisenlandesbank Obero‹sterreich reg. Gen. m. b. H.� Raiffeisen Zentralbank O‹ sterreich Aktiengesellschaft� UBS Limited

Bond Market IndicesThe Yield Index of Oesterreichische Kontrollbank AGFor all fixed income issues (excluding Kassenobligationen and Bundesobligationen)yields to maturity, to next call, after withholding tax, etc. and other relevantkey figures (e. g. duration, lifetime, etc.) are calculated daily. The averageyield of specific groups of issuers (government, banks, all issuers, mortgageand municipality bonds, etc.) weighted by the outstanding amount, are avail-able on OeKB�s homepage www.oekb.co.at and serve as reference rates for alarge variety of credits and bond issues. These average yields are also availablefor various remaining life to maturity periods (term structure).

The API Bond Performance IndicesThese indices comprise a performance index for market portfolios of govern-ment bonds (API-1) and an index for all issuers (API-11, which does notinclude FRNs, Kassenobligationen, Bundesobligationen and mortgage and muni-cipality bonds). Additional indices for various remaining life to maturityperiods (0.5—1.5 years, 1.5—2.5 years, etc., over 10.5 years) are computedon a daily basis. The API indices are available on OeKB�s homepagewww.oekb.co.at.

Domestic indices

Capital Market Data


The PIA Bond Price IndexThis index is based on actual prices and has been calculated by OeKB since 1985and is published on OeKB�s homepage www.oekb.at.

For more information about OeKB indices, please contact:Oesterreichische Kontrollbank AGAttn.: Ms. Katja TitulskiAm Hof 4, A-1010 ViennaPhone: +43-1-531 27-401, Fax: +43-1-531 27-413e-mail: [email protected]

Capital Market Data


C.2 The Equity Market

Market Capitalization

of the prime market in 2002

Company

Capitalization in EUR

Telekom Austria 4,825,000,000Erste Bank 3,837,781,063OMV 2,526,660,000EVN 1,540,839,655Verbund Kat. A 1,225,360,052Generali Holding Vienna 1,183,582,400Wienerberger 1,106,478,592UNIQA 957,024,686voestalpine 916,740,000Immofinanz 899,936,721Mayr-Melnhof 846,000,000Flughafen Wien 672,000,000BBAG common 574,560,000Brau Union 555,500,000Boehler-Uddeholm 485,430,000Agrana 396,973,440Andritz 298,870,000Investkredit 261,112,500Semperit 256,962,191AUA 234,600,000VATechnologie 232,500,000BWT 172,093,275Jenbacher 171,600,000Constantia-Verp. 155,064,000RHI 146,412,287Palfinger 134,150,188Constantia-Iso 101,598,000AvW Invest AG common 81,002,399Head N.V. 80,835,974DO & CO 57,652,000Wolford 46,800,000Rosenbauer 43,299,000Unternehmens Inv 43,200,000Feratel 38,907,140BETandWIN 32,043,000Topcall 24,176,574HIRSCH Servo 16,500,000CLC 8,571,764JoWooD 7,255,302


Capital Market Data


Turnover of the prime market in 2002

Company

Turnover in EUR

Erste Bank 2,848,058,105Telekom Austria 1,652,600,993OMV 1,583,382,258voestalpine AG 738,511,791Mayr-Melnhof 683,663,361Verbund Kat. A 616,463,140Wienerberger 509,768,379Boehler-Uddeholm 407,738,503VATechnologie 397,280,374Flughafen Wien 361,271,831Immofinanz 341,168,392EVN 258,921,907BWT 256,118,793BBAG common 178,640,810AUA 149,446,811Brau Union 128,203,667Generali Holding Vienna 121,324,076PALFINGER 105,105,866Semperit 100,084,404RHI 99,795,960Andritz 76,583,958UNIQA 65,879,182Jenbacher 61,944,049Wolford 49,639,319JoWooD 27,624,432BETandWIN 22,933,550DO & CO 20,953,172Head N.V. 14,980,074AvW Invest AG common 13,788,267Rosenbauer 12,349,528Agrana preferred 9,163,961Constantia-Verp. 8,432,722HIRSCH Servo 8,349,208Constantia-Iso 7,933,966Unternehmens Inv 4,889,724Feratel 4,377,722Investkredit 1,812,472Agrana 1,707,283Topcall 216,932


Capital Market Data


C.3 O‹ TOB — Derivatives Market

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Capital Market Data


D. Financial Data Service

by Oesterreichische Kontrollbank AG

There is an increasing need for easily accessible, reliable and transparentinformation about securities. Austria�s most comprehensive and up-to-datedata pool on securities is available on the Internet. With ProfitWeb —www.profitweb.at — Oesterreichische Kontrollbank AG provides an informationtool meeting the growing demand for expert evaluation.

The ProfitWeb consulting and analysis tool offers

� master data on domestic and foreign shares, warrants, bonds and invest-ment funds

� all domestic investment funds (at present more than 2,400) with currentmarket prices, comparison of ratios based on performance, risk, yield andtotal net assets

� up-to-date, easy to customize features: charting tool and search functionwith combinable criteria, personal list of investment funds

ProfitWeb has been designed to allow full or modular integration intoother websites/Internet applications.

As the central registry assigning International Securities IdentificationNumbers (ISIN) to all Austrian securities, Oesterreichische Kontrollbank AGoperates the Austrian Securities Data Base (WertpapierDatenBank Oester-reich — WDBO), whose master files and transaction data for securities areavailable both via ProfitWeb (www.profitweb.at) and by direct dataacquisition.

On its website — www.oekb.at — Oesterreichische Kontrollbank AG providesonline information such as rates and charts of shares, day-to-day data onsecondary market yields and bond market indices as well as prices of Austrianinvestment funds computed on a day-to-day basis. Oesterreichische KontrollbankAG�s homepage also offers a yield curve of federal bonds based on the Svenssonmethod; this financial indicator meets international development standards ofmodern parameters.

For more detailed information about securities data, please contact:

Oesterreichische Kontrollbank AGFinanzDatenServicePostfach 70, A-1011 Viennae-mail: [email protected]

Profit Web

WDBO

Financial Data Service


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Financial Data Service


E. Exchange Data Provided by Wiener Bo‹ rse

Wiener Bo‹rse supplies real-time and historic data on prices, trading volumes andindices generated at Wiener Bo‹rse in the trading systems Xetra¤ and OMex¤.All data includes all indications and estimated prices on the Official Market,the Semi-official Market and the Third Market of Wiener Bo‹rse. The same datais available for the otob market, the derivatives market segment of WienerBo‹rse.

For more information, please contact:Wiener Bo‹rse AGDownstream ProductsAttn.: Mr. Ludwig Nie§enWallnerstra§e 8, A-1014 ViennaPhone: +43-1- 531 65-119e-mail: [email protected]

Exchange Data Provided by Wiener Bo‹ rse


F. Accounting Standards for Austrian Companies

O‹ VFA(The Austrian Association of Financial Analysts andInvestment Consultants)When the Rechnungslegungsgesetz (Accounting Act) came into force, O‹VFAdeveloped its own procedure for computing profits. It was designed to replacethe existing procedure, which was based on the way in which taxable income isassessed.

O‹VFA�s objective was to develop a unified method of calculating profits forthe benefit of outside financial analysts that would be as free as possible fromextraneous influences. O‹VFA hoped to create a viable basis for comparing pricedevelopments on the stock exchange by making corrective adjustments formajor extraordinary and out-of-period processes and events and the effectsof the different ways in which voting rights are exercised.

For want of any way of setting generally applicable depreciation standards,O‹VFA was forced to accept as a specifically Austrian phenomenon the fact thatAustrian fiscal depreciation rates are too high by international standards,making comparisons with foreign companies unreliable.

The adjustments that are made to posted annual profits to obtain the O‹VFAprofit estimate can be divided into three main categories:

Extraordinary items: In order to calculate comparable true-to-periodprofits, posted annual profits must be adjusted to allow for extraordinaryand out-of-period expense and income. O‹VFA�s calculations take a variety ofextraordinary and out-of-period items into account above and beyond thoseincluded in the extraordinary result defined by the Rechnungslegungsgesetz(Accounting Act). They include income and expense associated with the saleof fixed assets, extraordinary write-downs, changes in a company�s methods ofbalance-sheet accounting and methods of evaluation, issuing costs, out-of-period income and expense, and tax refunds and liabilities associated withearlier accounting periods.

Special cases, extraordinary and optional provisions: These can only beallowed for individual cases following approval by the Methodenbeirat (methodcommittee). This may be the case, for instance, if a company�s excessivecaution has had too great an effect on its posted profits.

The different ways in which companies apply Austrian evaluation stan-dards — which allow considerable leeway — are allowed for under the headingof �latitude in balance-sheet accounting�. Adjustments under this headingmight for instance be necessary because of leeway in entries pertaining to acompany�s goodwill, interest paid or payable on borrowed funds, expenditureon setting up operations and extending or altering them, intangible assetsacquired by affiliates, or accruals or supplementary allocations to provisionsfor pensions and severance payments.

In general, O‹VFA profit figures where taxes are paid are only adjusted by theamount of tax levied on the company�s profit.

The purpose of the third category of adjustments — �corrections to allowfor tax� — is to neutralize changes in fiscal burdens caused by a company�sexploitation of concrete tax concessions. This category covers the fiscal

Procedure for computing profits

Extraordinary items

Latitude in balance-sheetaccounting

Corrections to allow for tax

Accounting Standards for Austrian Companies


effects of increases and decreases in rent reserves, the revaluation of exportreceivables and global write-downs.

O‹VFA also subjects consolidated results to corrections that are specific tothe particular group before publishing an O‹VFA group result. Following thededuction of minority interests, this result provides the basis for calculatingthe group�s earnings per share.

During the changeover to a formula that conforms to the new Rechnungs-legungsgesetz (Accounting Act), O‹VFA has revised its method of calculating cashflow, which is now in line with international standards.

In order to improve the comparability of share-analysis data, O‹VFA hasstandardized other indicators.

This procedure does not apply to financial statements prepared in accord-ance with international accounting standards. There are discussions whethersimilar methods should be developed for financial statements which are notbased on the Austrian Accounting Act.

For more information please contact:O‹VFAO‹sterreichische Vereinigung fu‹r Finanzanalyse und Asset Management(Austrian Association of Financial Analysis and Asset Management)Attn.: Mr. Paul Severinc/o Bank Austria AGWallnerstra§e 3, A-1010 ViennaPhone: +43-1-533 50 50e-mail: [email protected]

Accounting Standards for Austrian Companies


G. Taxation

Individuals whose residence and customary place of abode is not in Austria andcorporate bodies whose registered offices and management is located abroadare considered non-residents. Non-residents are subject only to limited taxliability, i. e. they are taxable with regard to certain Austrian source income.

Withholding tax on investment income is not a new or additional tax but aspecial way of collecting (corporate) income tax.

Corporate recipients residing in Austria have to gross up the (exceptionallytaxable) dividend or interest received. In case the income tax was withheld,this tax withheld is treated as a tax prepayment and credited against theassessed (corporate) income tax liability.

However, for legal entities it is possible to file for a declaration ofexemption for interest withholding tax purposes (compare exemptions fromwithholding tax). Subsequently, no withholding tax is due and the taxationof the capital income received by that legal entity has to be effectuated viathe corporate income tax return. 34% corporate income tax are due. Non-resident corporate investors are only taxable with their income that is subjectto limited tax liability. E.g. they are taxable with the income that is received byan Austrian permanent establishment. A corporate tax return for such limitedtaxable corporations has to be filed for.

Non-resident recipients of investment income subject to Austrian with-holding tax are usually entitled to credit at least part of this withholding taxagainst their foreign tax liability subject to the provisions of the respectivedouble tax treaty.

However, for capital income that is not subject to a limited tax liability,non-resident investors can provide �proof of the foreign nationality� and aretherefore withholding tax exempt (compare exemptions from withholdingtax) on certain types of investment income (interest).

For residents as well as for non-residents, as far as they are private inves-ting natural persons, the withholding tax on interest and dividends is a finallevy for Austrian taxation purposes. For investments of natural persons dueto their company (not a corporation) the withholding tax on interest is a finallevy as well.

In the case of capital yields derived from shares of stock, shares in a limitedliability company or a silent partnership the distributing company has towithhold and pay the tax to the tax authorities within one week after thereceipt of this income by the beneficiary. A special tax return has to be filedwith the tax authorities. Special prepayments have to be made for withholdingtax on bank deposits (see below). The debtor of the investment income isliable for the withholding and payment of the tax to be withheld for the taxauthorities.

The withholding tax amounts to 25% and is applicable to capital yieldsspecified below derived in Austria from domestic capital and from securitiesrepresenting money claims. The capital yields are deemed to be derived inAustria if the debtor of the capital income has his residence, place of manage-ment or seat within the territory of the Austrian Republic or if it is a branch ofa financial institution within the territory of the Austrian Republic. Capital

Taxation


income derived from bond securities shall be deemed to be derived in Austriaif the coupon paying agent is located within Austria.

Exemption from Withholding Tax:� intercompany profit shares (dividends, etc.) paid to a resident corporation

provided that the participation exceeds 25%;� inter-company dividends paid to a non-resident corporation under the

parent subsidiary directive (90/435/EC). The percentage of the partici-pation (at least 25%) is reduced to 10% for dividends received in the fiscalyears ending after 31 December 2003 in case of reciprocity;

� interest income from cash deposits and other accounts receivable fromnon-resident permanent establishments of banks;

� interest income from cash deposits and other receivables against banks ifthe creditor of the capital is a domestic or foreign bank;

� nterest income from cash deposits (savings and fixed deposits) and fromother accounts receivable from banks based on banking operations andcapital yields from securities representing money claims if the recipientis a corporation that declares in writing that this interest income is tobe assessed as business receipts of a domestic or foreign trade or business.The recipient furthermore has to forward a duplicate of the exemptiondeclaration to the competent local tax office. The respective securityand the coupon have to be deposited in a custodian account with the bank;

� interest income from securities representing money claims issued by inter-national finance institutions prior to 1 October 1992;

� profit shares (dividends) derived form certain newly issued shares of stock;� income due to the issue of shares of stock in the case of capital increases

out of corporate funds (bonus shares).Foreign investors (either natural persons whose residence or customary

place of abode is not Austria or corporate entities having their registereddomicile and place of management abroad) are exempt from withholdingtax in Austria with

interest income from cash deposits (e. g. savings and time deposits) andfrom other accounts receivable from banks based on banking operations;

capital yields on securities representing money claims (certificates ofdeposit in foreign currency, mortgage funds, bond issues, convertible andincome bonds).

This tax exemption from withholding tax is only granted if evidence of theinvestor�s non-resident status is furnished (the bank will make a note of theinvestor�s name and address as well as certain particulars from the passport);investors who are Austrian nationals or nationals of Austria�s neighboringstates must declare in writing that they do not have their residence andcustomary abode in Austria.

In general, profit shares are taxed in the state of residence of the recipient.However, they are also taxed in Austria as state of source. The tax imposed inAustria is in most cases limited by the tax treaties concluded by Austria to acertain percentage (usually, this percentage ranges between 5% and 15%and may be precisely seen from the double tax treaty survey hereinafterreferred to).

Taxation


Tax Treaties

in Force with the Following States:

Australia ITArgentina IT, NWTArmenia IT, NWTAzerbaijan IT, NWTBelarus IT, NWTBelgium IT, NWTBrazil IT, NWTBulgaria IT, NWTCanada IT, NWTChina IT, NWTCroatia IT, NWTCyprus IT, NWTCzech Republic IT, NWT, IHT, GTFederal Republic of Germany IT, NWT, IHTDenmark IT, NWTEgypt IT, NWTEstonia IT, NWTFinland IT, NWTFrance IT, NWT, IHT, GTGeorgia IT, NWTGreece IT, NWTGreat Britain ITHungary IT, NWT, IHTIndia ITIndonesia IT, NWTIreland, Republic of ITIsrael IT, NWTItaly IT, NWTJapan ITRepublic of Korea (South) IT, NWTLiechtenstein IT, NWT, IHTLuxembourg IT, NWTMalaysia ITMalta IT, NWTMoldavia IT, NWTNepal IT, NWTNetherlands IT, NWTNorway IT, NWTPakistan ITPhilippines ITPoland IT, NWTPortugal IT, NWTRomania IT, NWTRussia (CIS)1) IT, NWTSingapore ITSlovak Republic IT, NWTSlovenia IT, NWTSouth Africa IT, NWTSweden IT, NWT, IHTSwitzerland IT, NWT, IHTSpain T, NWTTajikistan IT, NWT, IHTThailand IT, NWTTunesia IT, NWTTurkey IT, NWTUkraine IT, NWTUzbekistan IT, NWTUS IT, IHT, GT

Tax covered:Income Taxes ITNet Worth Tax NWTInheritance Tax IHTGift Tax GT1) The fee treaty applies to the following successor states of the previous USSR: Armenia, Georgia, Moldavia, Kazakhstan, Tajikistan and Turkmenistan.

Taxation


Austrian Withholding Tax (Kapitalertragsteuer — KESt)

on Dividends and Interest at a Glance

Recipient resident in Austrian KESt Dividends KEStunder DTT(max. 25%)

Refund2) Interest1) KEStunder DTT

Refund2)

%

Argentina 25 15 10 12.5 12.5Armenia 25 15/5A 10/20A 0 25Australia 25 15 10 10 15Azerbaijan 25 15/10B/5B11) 10/15B/20B 10/09) 15/25Belarus 25 15/5B 10/20B 5/09) 20/25Belgium 25 15/0F 10 15 10Brazil 25 15 10 15 10Bulgaria 25 0 25 0 25Canada 25 15/5A 10/20 10 15China 25 10/7B 15/18B 10 15Croatia 25 15/0A 15/0A 5 20Czech Republic 25 10 15 0 25Cyprus 25 10 15 0 25Denmark 25 10/0F 15 0 25Egypt3) 25 15 10 15 10Egypt4) 25 10 15 0 25Finland 25 10/0A 15/25 0 25France 25 15/0A 10/25 0 25Georgia 25 0 25 0 25Germany 25 15/5A/0F 10/20A 0 25Greece 25 0 25 0 25Hungary 25 10 15 0 25India 25 0 25 0 25Indonesia 25 15/10B 10/15 10 15Ireland 25 15/0B 10/25 0 25Israel 25 25 0 15 10Italy 25 15/0F 10 10 15Japan 25 20/10C 5/15C 10 15Korea 25 15/10A 10/15A 10 15Liechtenstein 25 15 10 10 15Luxembourg 25 15/5B/0F 10/15B 0 25Malta 25 15 10 5 20Malaysia 25 10/5B 15/20B 15 10Moldavia 25 0 25 0 25Nepal 25 15/10A/5B 10/15/20 15/105)/06) 10/15/20Netherlands 25 15/5B/0F 10/20B 0 25Norway 25 15/5B 10/20 0 25Pakistan 25 25/10B 0/15 25 0Philippines 25 25/10A 0/15A 15 10Poland 25 10 15 0 25Portugal 25 15/0F 10 10 15Romania 25 15 10 10 15Russia 25 0 25 0 25Slovak Republic 25 10 15 0 25Slovenia 25 15/5B 10/20 5 20South Africa 25 15/5B 10/20 0 25Spain 25 15/10C/0F 10/15C 5 20Sweden 25 10/5B/0F 15/20B 0 25Switzerland 25 15/0F 10 0 25Thailand 25 25/10B 0/15 25/107) 0/15Tunesia 25 20/10B 2/15B 10 15Turkey 25 25 0 15 10Ukraine 25 10/5A 15/20 2/58) 23/20United Kingdom 25 15/5B/0F 10/20B 0 25United States 25 5/12.5 20/12.5 0 25Uzbekistan 25 15/5A 10/20 10/09) 15/25

Abbreviations: KESt = Austrian withholding taxDTT = double taxation treaty

1) If a double taxation treaty permits a higher rate of withholding tax than is currently applicable in Austria, the applicable Austrian capital yields tax of 25% is shown as KESt under DTT.Please note: Non-resident individuals and enterprises are not subject to limited tax liability as to interest income derived from bank deposits (in ATS or foreign currency), from foreign interest-bearingsecurities (in ATS and foreign currency) and from domestic interest-bearing securities (in foreign currency). Therefore, always full refund (25%) or exemption at all will apply.

2) Amount of refund = Austrian withholding tax actually withheld less withholding tax under double taxation agreement.A 10% holding; B 25% holding; C 50% holding; D 95% holding; E subject to tax clause; F After Austria�s joining the EU no capital yield tax will be withheld if the recipients of dividends meet therequirements described above. In these cases the DTT rates (as far as intra group dividends are concerned) do not apply.

3) Case Egyptian dividend paying company and Austrian recipient.4) Case Austrian dividend paying company and Egyptian recipient.5) Interest on bank deposits.6) Interest paid to regional authorities and to financial institutions that are subject to public law and interest on loans concerning public credit guarantees.7) Recipient is an Austrian bank or insurance company.8) For interest on bank loans for sale on hire purchase agreements.9) 0% in special cases.10) 10% if investment worth more than USD 100,000, 5% if more than USD 250,000.

Taxation


After having joined the EU no capital yield tax is withheld on intra groupdividends if the following requirements are met:� the foreign/non-resident parent company holds directly at least 25% of the

distributing resident subsidiary�s stated capital/share capital continuouslyfor a period of at least two years. The percentage of the participationhas been reduced to 10% in case of reciprocity and the holding periodhas been reduced to one year. Moreover it is no longer necessary forthe non-resident parent company to hold the participation directly. Thischange in law is applicable to dividends distributed in fiscal years endingafter 31 December 2003;

� the distributing company�s legal form is a corporation (Aktiengesellschaft —AG) or a limited liability company (Gesellschaft mit beschra‹nkter Haftung —GesmbH);

� the parent company is a foreign/non-resident corporation which complieswith the requirements set forth in Art. 2 of Directive 90/435/EC asamended from time to time.The capital yield tax, however, has to be withheld if at the date of distri-

bution the one year-period has not yet expired or if there are reasons whichinduce the tax authorities to suspect cases of tax avoidance or abuse or distri-bution of a constructive dividend and, therefore, the tax authorities give orderto withhold. In such cases, the parent company must apply for refund of thewithholding tax.

Company Law RequirementsAustrian commercial law offers a variety of incorporated and unincorporatedforms of business. The most common forms in which a foreign enterprisemay operate in Austria are the Limited Liability Company (Gesellschaft mitbeschra‹nkter Haftung [�GesmbH� oder �GmbH�]) and the Stock Corporation (Aktien-gesellschaft [�AG�]).

Limited Liability CompanyThe GesmbH is an incorporated enterprise the shareholders� liability of which islimited to the unpaid portion of the par value of the shares. Unless it isintended to raise funds on the Austrian stock market, the GesmbH will bethe most convenient form of organization owing to the relative flexibility itoffers. Most foreign-owned businesses in Austria are operating in this legalform.

a) FormationGenerally a GesmbH is formed by individuals or legal entities, resident or non-resident, Austrian or foreign citizens. All shares may be owned by one share-holder.

The articles of incorporation (together with the by-laws) must be executedbefore a notary public; they must include: name, registered domicile, purposeof business, the total amount of stated capital and the amount to be contri-buted by each shareholder.

However, it is also possible to form a GesmbH by one person; this personmay be an individual or legal entity, resident or non-resident, Austrian orforeign citizen. The articles of incorporation, may be replaced by a written

Taxation


statement certified by a notary public; the statement must include the sameinformation as the articles of incorporation.

A GesmbH comes into legal existence when it is entered into the Commer-cial Register (Firmenbuch). Before registration, any person acting in the name ofthe GesmbH is personally liable for obligations arising from such acts.

The articles also frequently contain provisions as to the number of regis-tered managers (Gescha‹ftsfu‹hrer). The manager is allowed to hold an interestin the GesmbH and needs not be an Austrian citizen.

According to Austrian Commercial Code (�Handelsgesetzbuch�, �HGB�) thereare three different size classifications for GesmbHs, i.e. �small-�, �medium-�and �large-sized� GesmbHs:� Small-sized GesmbHs are those meeting at least two of the

following criteria:— balance sheet sum must not exceed EUR 3.125 million— revenue (�Umsatzerlo‹se�) must not exceed EUR 6.25 million within

12 months prior to balance sheet date— annual average number of employees must not exceed 50 persons. The

respective average number of employees is determined by the numberof employees on the respective ends of months within the precedingcalendar year.

� Medium-sized GesmbHs are those exceeding at least two of the above statedcriteria and do not qualify for large-sized GesmbHs.

� Large-sized GesmbHs are those meeting at least two of the followingcriteria:— balance sheet sum exceeds EUR 12.5 million— revenue (�Umsatzerlo‹se�) exceeds EUR 25 million within 12 months

prior to balance sheet date— annual average number of employees exceeds 250 persons. The respec-

tive average number of employees is determined by the number ofemployees on the respective ends of months within the precedingcalendar year.

Small-sized GesmbHs are allowed to prepare notes to the financial state-ments which are limited to a minimum volume of details. They are not subjectto statutory audit unless they are obliged to appoint a supervisory board byvirtue of law (please compare below).

Medium-sized GesmbHs are subject to statutory audit. Furthermore, theyare obliged to publish their financial statements to a minimum volume ofdetails comparable to large-sized GesmbHs.

Large-sized GesmbHs have to include all basic particulars in the notes to thefinancial statements. They are subject to statutory audit and have to publish thefinancial statements along with the audit opinion in the official gazette. Thepublication of the above may be replaced by publishing a mere reference asto the submission of the financial statements along with further documentsand particulars with the Commercial Court.

A supervisory board is mandatory only for GesmbHs meeting any of thefollowing criteria:� the stated capital exceeds EUR 70,000 and there are more than 50 share-

holders,� an annual average number of employees exceeding 300, or

Taxation


� centralized management control (holdings of more than 50%) of stockcorporations or limited liability companies having a mandatory supervisoryboard, and the total number of employees of these companies togetherexceeding 300 employees on an average.A manager cannot be a member of the supervisory board of the same

GesmbH. As to the functions of the supervisory board, see below the state-ments under the caption �stock corporation�.

The cost of formation will depend on the amount of stated capital. In thecase of a stated capital of EUR 35,000 the overall cost will be roughly betweenEUR 3,500 and EUR 5,000. The following cost items must be considered:� capital transfer tax 1% of each shareholder�s contribution� fixed commercial register fee� fees for consultation and drafting of documents, particularly those of the

legal counsel and the tax adviser. These fees reflect the time and amountof work involved.

� cost of notarization charged by the notary public according to the feeschedule. As a rule, the cost of formation are borne by the company tobe formed; therefore, it is required to include a respective provision inthe articles of this company.According to commercial law the cost of formation are deemed to be

expenses; for tax purposes they are deductible.

b) Annual MeetingsA general shareholders� meeting must be held at least once a year (ordinarymeeting) and, in addition to the cases expressly referred to in the law orthe articles, it shall be called whenever required in the interest of the companyand, in particular, without delay after it has been ascertained that one half ofthe stated capital has been lost. The meeting shall be held at the registereddomicile of the company unless the articles determine otherwise. Decisionsthat the law or articles have made subject to a shareholder�s resolution shallbe made in the shareholders� meeting unless all shareholders have, in theindividual case, given their written consent to the provision to be adoptedor at least to a written vote. The shareholders decide on the audit and approvalof the annual financial statements, the distribution of net profits and therelease of the managers and members to the supervisory board (if any).The resolutions mentioned above shall be adopted with respect to the pre-ceding financial year within the first eight months of each financial year.

c) Stated CapitalThe minimum stated capital of a GesmbH is EUR 35,000 and shall consistof shares with a minimum nominal value of EUR 70. All shares must besubscribed in full on formation of the company, but only the higher of eitherEUR 17,500 or 25% of the total share capital must be paid in before registra-tion.

The law does not provide for the issue of share certificates; shares in aGesmbH cannot be traded on the stock exchange. Accordingly, a valid transferof the ownership of shares is only possible by means of an assignment before anotary public.

Taxation


d) Insolvency, LiquidationA GesmbH is considered insolvent when it cannot pay its debts as they mature,or as soon as the liabilities exceed the fair market value of the assets and nopositive forecast of continuity has been stated. In both cases, the managersare required, without delay, to apply to the court for liquidation proceedingsor for a settlement with creditors (Ausgleich). Failure to initiate the appropiateproceedings can involve the managers in personal liability. A petition in bank-ruptcy may also be filed by any creditor of the company.

Liquidation procedures are initiated by a 75% majority of the voting stock.The general meeting has to appoint a liquidator, usually one of the (former)managers who must file a relevant notification with the Commercial Register.The registration must be published in the official gazette �Wiener Zeitung�, itmust be accompanied by a request to all creditors to submit their claims. Aftersettlement of all the creditors� claims, the remaining assets are distributed tothe shareholders, but not earlier than three months after the public notifi-cation of the creditors. After the company has been finally wound up, itstermination has to be notified to the Commercial Court which deletes theGesmbH from the Commercial Register.

Stock Corporationa) FormationA stock corporation (AG) is formed by at least two promoters who subscribefor the shares and sign the Articles of Incorporation to be certified by a notarypublic. Besides the name, legal seat, business object and total amount of sharecapital, the Articles must include the par value of the different types of sharesto be issued and name the publications in which the audited annual accountsetc. are to be published.

The promoters of the stock corporation appoint the supervisory board(Aufsichtsrat) which in turn appoints the board of management (Vorstand).The stock corporation comes into legal existence with its entry in the Com-mercial Register. For this purpose the Articles of Incorporation, the openingbalance sheet as well as evidence that the capital has been settled in (see below)and the 1% capital transfer tax has been paid must be filed with the Commer-cial Register. Special requirements must be complied with if shares are issuedagainst contributions in kind.

The size classifications as described in the case of a GesmbH (see above) alsoapply to AGs. AGs whose shares of stock are admitted to listing or are includedin semi-official listing are always deemed to be large legal entities.

The cost of formation of a stock corporation depend on the amount of itscapital stock. The cost items referred to in the case of a GesmbH also apply tostock corporations. In the case of a formation by incorporators and sub-scribers, additional cost including cost of prospectus, additional meetings ofshareholders must be included. For a stock corporation with a stated capitalof EUR 70,000, total formation cost of EUR 9,000 through EUR 15,000 mustbe envisaged.

Taxation


b) Supervisory BoardThe statutory supervisory board consists of at least three members who areelected by the shareholders� meeting. According to a special act of law mem-bers of the works council (Betriebsrat) are delegated to the supervisory board asrepresentatives of the employees. The number of these delegated membersamounts to 33% of the members elected by the shareholders. The mainfunctions of the supervisory board are to appoint and remove the membersof the management board, to supervise and, as appropriate, give advice tothe management board, to approve certain types of transactions, to safeguardthe shareholders� interests and to give the corporation�s employees some par-ticipation in management matters. The audited annual financial statementsmust be approved by the supervisory board before they are submitted tothe shareholders� meeting.

c) Board of ManagementThe members of the board of management are the main officers of the cor-poration and are responsible for its management. They have legal power ofrepresentation which cannot be limited as far as their dealings with thirdparties are concerned. They periodically report to the supervisory boardand submit the annual financial statements for their approval.

d) Annual MeetingsA general meeting of the shareholders (Hauptversammlung) is to be held annu-ally within eight months after the balance sheet date. In the ordinary annualmeeting the shareholders decide on the distribution of profits, the formaldischarge of the supervisory board and board of management from legalresponsibilities and the appointment of the auditors. For fundamental deci-sions, e. g., increases or reductions of capital and other changes of the articlesof incorporation, mergers, profit and loss pooling agreements, liquidation,etc., the approval by 75% of the votes is required. The shareholders� meetingis usually called by the board of management; in addition, the supervisoryboard or shareholders holding at least 5% of the voting common stock areentitled to call an extraordinary shareholders� meeting. In order to becomelegally binding, the decisions of a general meeting must be certified by anotary public.

e) Share CapitalThe statutory minimum capital stock for an AG is EUR 70,000 and shallconsist of shares of at least EUR 1,00 or any multiple in full euro, non-parshares are permitted.

Before registration in the Commercial Register, at least 25% of the capitalsubscribed and, if the shares are issued at a premium, the full premium amounthas to be paid in. Shares must not be issued at a discount. Normally, bearercertificates are issued; registered shares are required as long as the sharesare not fully paid up. As a rule, one common share entitles its holder toone vote in the general meeting. Preference shares without voting right maybe issued up to one third of total share capital. Shares with multiple votingrights are not permitted.

Taxation


f) Insolvency, LiquidationAs regards insolvency, see above under GesmbH.

Liquidation proceedings for an AG are, in principle, the same as for aGesmbH, except that the request to all creditors to submit their claims mustbe published three times and that the liquidation proceeds must not be distri-buted earlier than twelve months after the latest publication of such request.

g) Stock Corporation and Limited Liability Company in Comparison

Stock Corporation Limited Liability CompanyMinimum Stated Capital Stock

EUR 70,000 EUR 35,000Shares

Share certificates issued No share certificates issuedQuotation on stock exchange Quotation on stock exchangepossible not possibleShareholders can be anonymous List of shareholders must be filed

with the Commercial RegisterAssignment of shares by physical Assignment of shares by notarialtransfer deed of assignment

ManagementManaging board members Managers appointed byappointed by supervisory board shareholders/articles of incorporation

Appointment for indefinite periodAppointment for a maximum of time possibleperiod of 5 years Bound by direct orders ofNot bound by direct orders of shareholdersshareholders Appointment revocable at any timeRevocation for good cause only without cause

Supervisory BoardObligatory Obligatory under certain conditions

onlyNumber of members depends on Number of members unlimited,capital stock, at least three at least threeShareholders entitled to elect Shareholders entitled to electtwo-thirds of the members two-thirds of the members

Minority Protection5% of capital stock entitle 10% of capital stock requiredshareholders to exercise most for exercising minority rightsof the minority rights

Both types of corporations have in common that all share certificates orshare quotas may be concentrated in a single owner. Corporate existence isnot affected thereby and the corporation remains a legal entity distinguishablefrom the personality of its sole shareholder who as a rule is not liable for thedebts of the corporation.

Taxation


Other Forms of CompaniesA Sole Proprietorship (Einzelfirma) must be registered with the local Commer-cial Register if the business requires an administrative or commercial organi-zation. The owner of the business has unlimited liability for any debts.

A Civil-Law Association (Gesellschaft bu‹rgerlichen Rechts) is not a legal entityand cannot sue or be sued. It is often used for single joint ventures (e. g.construction projects) and comes to an end when the joint project has beencompleted.

Partnerships may be formed in the legal forms of General Partnership(Offene Handelsgesellschaft, OHG) or Limited Partnership (Kommanditgesellschaft,KG). In the OHG, all partners are fully liable for the partnership�s debts,whereas in the KG there are general partners with unlimited liability andlimited partners whose liability is restricted to their fixed contributions tothe partnership. Although a partnership itself is not a legal entity, it mayacquire rights and incur liabilities, acquire title to real estate and sue or besued.

The GesmbH & Co KG is a limited partnership with, typically, the solegeneral partner being a limited liability company. It can thus combine theadvantages of a partnership with the limited liability of a corporation.

A Dormant Partnership (Stille Gesellschaft) comes into existence when aperson makes a contribution to an existing enterprise (company, partnership,sole proprietorship) and shares in the latter�s profits and, possibly, in the lossesas well. The dormant partner has no liability for the debts of the enterprise; incase of insolvency of the enterprise he is creditor with the portion of hiscontribution not consumed by losses. Strictly speaking, the dormant partner-ship is nothing more than an �undisclosed participation�.

A Private Foundation constitutes a conglomeration of property having legalpersonality but no shareholders; its activities involve managing its own fundsand assets for the beneficiaries.

The requirements for a private foundation are:� legal domicile in Austria� registration with the Commercial Court� no activities by way of business or trade (ancillary activities are permitted)

and� minimum assets of EUR 70,000.

Any contributions made by any donors are subject to inheritance and gifttax. The tax rate is 2.5% if the donor is another Austrian foundation and 5%for all other donations made by donors if the donor is mentioned as such in thecharter of the Private Foundation. The tax rate for all other donations rangesbetween 14 and 60% depending on the donated amount.

If the contributions include real estate, an additional gift tax amounting to3.5% of triple of the unit value of the land (which is considerably lower thanthe fair market value) has to be paid. Capital yields earned are in some cases(compare below) not subject to withholding tax until distribution. The foun-dation�s regular income (e.g. income derived from rentals and royalties) issubject to 34% corporate income tax, whereas capital gains are not taxableunless they are realized within one year of the acquisition of the asset orout of disposals of participations in Austrian and foreign corporations of atleast 1% (compare below). Furthermore, the following tax benefits are

Sole Proprietorship

Civil-Law Association

Partnerships

GesmbH & Co KG

Dormant Partnership

Private Foundation

Taxation


due, if the charter of the Private Foundation is disclosed to the competent taxauthority:� Dividends received from participations in Austrian corporations are tax-

exempt.� Dividends received from participations in foreign corporations are tax-

exempt, if no discharge from foreign withholding taxes due to the corre-sponding double taxation treaty is effectuated.

� Austrian and foreign interest on bank deposits, bonds, interest out ofAustrian investment funds, income out of foreign investment funds and(following information from the Ministry of Finance) capital gains out ofthe disposal of participations in Austrian and foreign corporations of atleast 1% are subject to a 12.5% interim taxation, unless there are distri-butions to the beneficiaries of the foundation in the same calendar year,25% withholding tax is levied on those distributions and no discharge fromthis withholding tax due to the corresponding double taxation treaty iseffectuated. If the 12.5% taxation was due in a precedent calendar year,later related distributions to the beneficiaries are subject to 25% withhold-ing tax but the 12.5% interim tax already paid in prior years can be recov-ered in the course of the corporate tax assessment. Capital gains out of thedisposal of participations in Austrian and foreign corporations of at least1% can be transferred to another participation exceeding 10% within12 months and therefore no interim taxation falls due in the calendar yearof disposal. If no new participation is purchased within 12 months, the12.5% taxation of the capital gains falls due in the subsequent calendaryear.

BranchA foreign enterprise may establish a branch in Austria; the branch must beregistered with the local Commercial Register which requires: proof of thelegal existence of the foreign company and of a regular business activity inthe country where it is domiciled; appointment of an authorized represen-tative residing in Austria in case the foreign enterprise has not been establishedaccording to the rules of an EEC member state.

An Austrian branch of a foreign enterprise is considered a taxable entityand has to maintain proper books and records in Austria.

Tax IncentivesSpecial tax incentives are granted for investments in tangible and intangiblefixed assets used in an Austrian permanent establishment. All the incentivesare applicable for income tax purposes (both corporate and individual incometax).

a) Investment Incentives� The investment allowance (Investitionsfreibetrag) has been abolished for all

acquisition or production costs occurred after 31 December 2000. Forthe fiscal years 2002 and 2003 it is possible to apply for an investmentpremium amounting to 10% of the acquisition or production costs thatexceed the average investment costs of the preceding three years.

Taxation


� Rollover of capital gains if fixed assets are sold gains resulting on disposalmay be deducted from the cost of investments made in the same period, ormay be allocated to a tax-free reserve to be used against investments withinthe following year. Any amounts not used within this period must be writ-ten back to taxable income. Capital gains on tangible assets can only berolled over to investments in other tangible assets; likewise, rolloversare only permitted from intangible to other intangible assets. Further-more, capital gains may be rolled over to investments in real estates if thesecapital gains derive from the sale of real estates. A carry over of capitalgains deriving from the disposal of business units or shares of a partnershipis not permitted. Moreover, a carry over of capital gains to the acquisitioncosts concerning business units, shares of a partnership and Financial As-sets is also not possible. At the time of their disposal the assets must havebeen part of the business-fixed assets for at least seven years. The mini-mum retention period is not required if the assets are disposed of on ac-count of force majeure or of expropriation proceedings.

b) Research and DevelopmentResearch and development expenses (excluding administration and distri-bution costs as well as cost of fixed assets) are tax deductible at 25% of theactual amounts incurred provided that the Ministry for Economy and Laborcertifies that the research work is in the economic interest of the AustrianRepublic. No such certificate is required if a patent has already been issued.

The tax deductible amount is raised to 35% of the current actual expensesfor Research and Development as far as the arithmetical mean of the expensesof the preceding three business years is exceeded. A tax deductible amount of15% of the expenses for not highly sophisticated research and developmentwhich have to meet certain requirements is allowed.

Education expenses for employees are tax deductible at 20% of the wholeamount excluding travelling expense.

Tax Rates in Austria1. Individual Income Tax

Unlimited Tax Liability

from 1. 1. 2003

Tax Rate on Total Income

%

first EUR 3,640 0next EUR 3,630 21next EUR 14,530 31next EUR 29,070 41income exceeding EUR 50,870 50

The Income tax is reduced by the following deductions

General deduction (for every taxpayer) EUR 1,2641)Deduction for employees and pension earners EUR 54Deduction for solitary earner in a family EUR 364Commuter�s deduction for employees EUR 291Deduction for pensioners EUR 4001) Depending on total income and other variables.

Taxation


The tax rate for individuals and partnerships with regard to retained earningsis reduced to the half of the average tax rate from 2003 on. Any distribution ofthese retained earnings within a seven year period will lead to additional taxationof this amount up to the average tax rate. This change will be applicable toretained earnings in fiscal years ending after 31 December 2003.

2. Corporate Income TaxThe basis for the corporate income tax assessment of a resident corporation isthe taxable profit including income from all domestic and foreign sources inconsideration of relating double taxation agreements. All the proceeds drawnby a corporation fall into the category �business income� and the total taxableincome is taxed at a uniform rate of 34%. There are no separate tax rates, e. g.for capital gains, rental income etc.

Resident legal entities have to pay a minimum corporate income tax whichamounts to 5% of the minimum stated capital per year. In case of a limitedliability company the minimum corporate tax amounts to EUR 1,750 andin case of a stock corporation the minimum corporate tax amounts to EUR3,500 (the minimum corporate tax for banks and insurance companiesamounts to EUR 5,450. This payment may be credited against the corporateincome tax liability of the assessment period infinitely. Taking into account awithholding tax for dividends of 25%, the development of overall income taxburden on retained and distributed earnings (dividends) of corporations maybe shown as follows:

1994 and subsequent yearsretained earnings 34.0%distributed earnings 50.5%

This overall tax rate in the case of distributions may decline if due to dou-ble tax treaties the withholding tax of 25% will be reduced to treaty rateswhich for certain qualified participations normally amount to 5% (such as,in the treaties with the Netherlands, Luxembourg, Sweden, Switzerland,UK, USA). In these cases the overall tax burden on distributed earnings willeven decline from 50.5% to 37.3%.

So-called financing companies remain tax exempted for a period of fiveyears subsequent to the year of registration. After the five-year period, thetax exemption will continue to apply without limitation of time to thoseportions of income which is to be allocated to the financing sphere. Additionaltax exemptions are granted as to capital transfer tax, legal fees. Financingcompanies which enjoy these benefits have to meet, inter alia, the followingrequirements:� minimum stated capital EUR 7.3 million� at least 75% of the company incorporators have to be investment com-

panies or credit institutions� nature and purpose of business has to be investment of own funds; 75%

thereof have to be invested domestically� investments have to be for the benefit of such Austrian small and medium-

sized enterprises which carry on business mainly in Austria.

3. Other TaxesThere is neither a trade tax on income nor a net worth tax.

Taxation


H. Useful Addresses and Telephone Numbers

Oesterreichische Nationalbank(Austrian National Bank)A-1090 Vienna, Otto-Wagner-Platz 3Phone: +43-1-404 20-6666Fax: +43-1-404 20-6699http://www.oenb.co.at

Oesterreichische Kontrollbank AGA-1010 Vienna,Am Hof 4 and Strauchgasse 1—3Phone: +43-1-531 27-0Fax: +43-1-531 27-237http://www.oekb.at

Finanzmarkt AustriaDienstleistungs GesmbHA-1010 Vienna, Am Hof 4Phone: +43-1-531 27-353Fax: +43-1-531 27-237

Wiener Bo‹rse AGA-1014 Vienna, Wallnerstra§e 8Phone: +43-1-531 65-0Fax: +43-1-532 97-40http://www.wienerborse.at

Finanzmarktaufsicht(The Financial Market Authority)A-1020 Vienna, Praterstra§e 23Phone: +43-1-249 59-0http://www.fma.gv.at

O‹sterreichische Bundesfinanzierungsagentur(Austrian Federal Financing Agency)A-1010 Vienna, Seilersta‹tte 24Phone: +43-1-512 25 11-0Fax: +43-1-513 99 94http://www.oebfa.co.at

Bank Austria Creditanstalt AGA-1030 Vienna, Vordere Zollamtsstra§e 13Phone: +43-505 05/543 02Fax: +43-505 05/543 20http://www.ba-ca.com

Bank fu‹r Arbeit und Wirtschaft AGA-1010 Vienna, Seitzergasse 2—4Phone: +43-1-534 53-0Fax: +43-1-534 53-22840http://www.bawag.com

Erste Bankder oesterreichischen Sparkassen AGA-1010 Vienna, Graben 21Phone: +43-50100-0Fax: +43-50100-910100http://www.erstebank.at

BAWAG-PSK Gruppe(BAWAG-PSK Group)A-1018 Vienna, Buchengasse 11—15Phone: +43-1-514 00-0Fax: +43-1-514 00-31700http://www.psk.co.at

Raiffeisen Zentralbank O‹sterreich AGA-1030 Vienna, Am Stadtpark 9Phone: +43-1-717 07-0Fax: +43-1-717 07-1715http://www.rzb.at

O‹sterreichische Volksbanken-AGA-1090 Vienna, Peregringasse 3Phone: +43-1-313 40-0Fax: +43-1-313 40-3683http://www.volksbank.co.at

O‹VFA: O‹sterreichische Vereinigungfu‹r Finanzanalyse und Asset Management(Austrian Association of Financial Analysisand Asset Management)A-1010 Vienna, Wallnerstra§e 3Phone: +43-1-711 91-548 03Fax: +43-1-711 91-448 84

Bundeskanzleramt(Federal Chancellery)A-1014 Vienna, Ballhausplatz 2Phone: +43-1-531 15-0Fax: +43-1-535 03 38http://www.austria.gv.at

Wirtschaftskammer O‹sterreich(Austrian Federal Economic Chamber)A-1045 Vienna, Wiedner Hauptstra§e 63Phone: +43-1-501 05-0Fax: +43-1-501 05-250http://www.wko.at

Kammer fu‹r Arbeiter und Angestellte fu‹r Wien(Vienna Chamber of Labor)A-1040 Vienna, Prinz-Eugen-Stra§e 20—22Phone: +43-1-501 65-0Fax: +43-1-501 65-2230http://www.akwien.at

WIFO: O‹sterreichisches Institutfu‹r Wirtschaftsforschung(Austrian Institute for Economic Research)A-1030 Vienna, Arsenal, Objekt 20A-1103 Vienna, P.O. Box 91Phone: +43-1-798 26 01-0Fax: +43-1-798 93 86http://www.wifo.ac.at

Useful Addresses and Telephone Numbers


O‹sterreichische Industrieansiedlungs-und Wirtschaftswerbungs GesmbH(Austrian Business Agency)A-1010 Vienna, Opernring 3Phone: +43-1-588 58-0Fax: +43-1-586 86 59http://www.aba.gv.at

Bundesministerium fu‹r Land- undForstwirtschaft, Umwelt und Wasserwirtschaft(Federal Ministry of Agriculture,Forestry, Environmentand Water Management)A-1010 Vienna, Stubenring 1Phone: +43-1-711 00-6953Fax: +43-1-711 00-2127http://www.bmlf.gv.at

Bundesministerium fu‹r Wirtschaft und Arbeit(Federal Ministry for Economics and Labour)A-1010 Vienna, Stubenring 1Phone: +43-1-711 00-5555Fax: +43-1-714 27 24http://www.bmwa.gv.at

Bundesministerium fu‹r Finanzen(Federal Ministry of Finance)A-1010 Vienna, Himmelpfortgasse 4—8Phone: +43-1-514 33-0Fax: +43-1-512 26 78http://www.bmf.gv.at

Bundesministerium fu‹rauswa‹rtige Angelegenheiten(Federal Ministry for Foreign Affairs)A-1014 Vienna, Ballhausplatz 2Phone: +43-5-011 50-0Fax: +43-5 011 59-0http://www.bmaa.gv.at

Bundesministerium fu‹r Inneres(Federal Ministry for Interior)A-1014 Vienna, Herrengasse 7Phone: +43-1-531 26-0Fax: +43-1-531 26-2580http://www.bmi.gv.at

Bundesministerium fu‹r Justiz(Federal Ministry for Justice)A-1070 Vienna, Museumstra§e 7Phone: +43-1-521 52-0Fax: +43-1-521 52-2727http://www.bmj.gv.at

Bundesministerium fu‹r soziale SicherheitGenerationen und Konsumentenschutz(Federal Ministry for Social Safety,Generations and Consumer Protection)A-1010 Vienna, Stubenring 1Phone: +43-1-711 00-6155Fax: +43-1-711 00-2156http://www.bmsg.gv.at

Bundesministerium fu‹r Verkehr,Innovation und Technologie(Federal Ministry of Transport,Innovation and Technology)A-1030 Vienna, Radetzkystra§e 2Phone: +43-1-711 62-0Fax: +43-1-713 78 76http://www.bmv.gv.at

Bundesministerium fu‹r Bildung,Wissenschaft und Kultur(Federal Ministry of Education,Science and Culture)A-1010 Vienna, Minoritenplatz 5Phone: +43-1-531 20-0Fax: +43-1-531 20-3099http://www.bmbwk.gv.at

Useful Addresses and Telephone Numbers


I. List of Sources and Bibliography

Pertaining to Austria�s Capital Markets(Publications that are Available in English)Economics� Economic Outlook, WIFO (quarterly), Vienna� IMF World Economic Outlook (published twice yearly), Washington� OECD Economic Outlook (June + December), Paris� OECD Economic Surveys: Austria (annual publication), Paris� OECD Financial Market Trends (published twice yearly), Paris� OECD Main Economic Indicators (monthly), Paris

Capital Markets� The Austrian Capital Market, A Strategic Approach to Reform, FMA,

Vienna, January 1993� The Austrian Capital Market, A Strategic Approach to Reform — Financial

Markets Initiative: Strategy Group Resolutions, FMA, Vienna, May 1993� ISSA Handbook, International Securities Services Association (ISSA),

NZZ — Fretz AG, Zurich, 1999� Stock Exchange Act 1989, BGBl. Nr. 555/1989, as amended by BGBl.

Nr. 558/1990, BGBl. Nr. 529/1993, BGBl. Nr. 532/1993, BGBl.Nr. 917/1993, BGBl. Nr. 753/1996, BGBl. I Nr. 11/1998, BGBl. INr. 126/1998, BGBl. I Nr. 127/1998, BGBl. I Nr. 123/1999, BGBl. INr. 187/1999, BGBl. I Nr. 2/2001, BGBl. I Nr. 42/2001, BGBl. INr. 97/2001, BGBl. I Nr. 33/2003

� Wiener Bo‹rse Yearbook 2002� Wiener Bo‹rse Annual Report 2002� Terms of Business of Wiener Bo‹rse (on the Website www.wienerborse.at

as pdf-file download)� Wiener Bo‹rse Statistics 2002� Wiener Bo‹rse Monthly Statistics� Austrian Securities Supervision Act 1998, BGBl. Nr. 753/1996, as

amended by BGBl. I Nr. 11/1998, BGBl. I Nr. 126/1998, BGBl. INr. 49/1999, BGBl I Nr. 63/1999, BGBl. I Nr. 76/1999, BGBl. INr. 123/1999, BGBl. I Nr. 2/2001, BGBl. I Nr. 97/2001, BGBl. INr. 34/2002

� Financial Market Supervision and Authorities Act, FMABG, BGBl. INr. 97/2001, as amended by BGBl. I Nr. 45/2002, BGBl. I Nr. 100/2002, BGBl I Nr. 33/2003, BGBl. I Nr. 35/2003

OeKB�s Securities Services� The Austrian Bond Market, May 2003� Quarterly Report, Agent for Government Bonds

Framework for Doing Business in Austria� Austrian Business Taxation, B. Gro‹hs & P. Polak, Manz, Vienna, 1992

(Looseleaf edition)� Austrian Business Law (Legal, Accounting and Tax Aspects of Business in

Austria), Kluwer and Manz, Vienna, 1992, (Looseleaf edition)

List of Sources and Bibliography


� The Austrian Capital Markets Act, P. Po‹ch, Journal of International Bank-ing Law, 4, 1992

� Takeover Rules in Austria, P. Po‹ch, International Company and Com-mercial Law Review — ICCLR, volume 10, number 3, 1999

� Austrian Banking Act, Translation by Christian Hausmaninger, ManzscheVerlags- und Universita‹tsbuchhandlung, Vienna 2002, Fifth Edition

� Business Law in Austria — A Practical Guideline to Doing Business andInvesting in Austria, Graf, Maxl & Pitkowitz Attorneys at Law, Vienna,2003.

� The Austrian Banking Act 1993 As Seen from the Perspective of a ForeignInvestor, P. Po‹ch, Journal of International Banking Law, 4, 1994.

� Austria�s Adoption of the Financial Services Directive and Other RecentEU Directives, P. Po‹ch, Journal of International Banking Law, 8, 1997.

� The Anonymous Bank Account and Recent Adoptions of EU Directives inAustria, P. Po‹ch, Journal of International Banking Law, 7 ,1997.

List of Sources and Bibliography


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