Group-specific forecast

Group-specific conditions The forecasts for the future development of DEPFA Group are estimates which have been made on the basis of information available at present. If the assumptions underlying these forecasts fail to materialise, or if risks and opportunities occur to an extent which has not been calculated, the actual results may differ considerably from the results which are currently expected.

Future development in net assets, financial position and results of operations The DEPFA Group closed the financial year 2015 with pre-tax loss of € -53 million. This also comprises income of € 26 million from repurchasing covered bonds of DEPFA ACS. The extent of similar profits or losses in the course of the next few years will very much depend on the future development of the markets and other conditions. The result is also influenced by the net trading income of € 1 million, which has been caused by the change in own DEPFA Group credit spreads in relation to the valuation of derivatives (to the extent of € 12 million). If this develop- ment and other valuation parameters continue, this might have a negative impact on the future results of operations of the DEPFA Group. In addition, the creation of higher impairments in relation to receivables and securities or other onerous factors such as serious turmoil on the markets or the default of individual countries might also have a negative impact on the future results of operations.

In line with the requirements of the “burden sharing” specified by the European Commission in conjunction with the granting of state aid, the DEPFA Group must make further payments to the Federal Republic of Germany under certain conditions which were agreed in March 2013. The DEPFA Group has created a provision for amounts anticipated in the future, this provision has been posted directly against equity. Due to the negative result for the year, no provisions had to be created for the financial year 2015; however, future developments might mean that further provisions may become necessary.

The receivables as well as the liabilities have declined by a total of € 12 billion in 2015. The total decline in the receivables and the liabilities includes transfers to FMS Wertmanagement, maturities, repayments and sales of assets. It is expected that the overall volume of receiva- bles will decline in 2016, even if no other transfer effects are taken into consideration, because the DEPFA Group still does not operate any active new business.

However, the development of the balance sheet total is not entirely under the control of the DEPFA Group; for instance, exchange rate and interest rate fluctuations can also have a signifi- cant influence.

Opportunities, risks and uncertainties The development of the net assets, financial posi- tion and results of operations of the DEPFA Group in recent years has been consistent with the existing DEPFA Group strategy. Following clarification of the ownership situation and the subsequent transfer to FWS Wertmanagement on 19 December 2014, the DEPFA Group has

continued to focus on optimising the value of its core portfolio, and will continue not to operate any active new business. The continuation of this restrictive business model will necessarily lead to a further reduction and discontinuation of business activities at all locations and a general decline in the overall volume of business over a period of time.

At the request of investors, the DEPFA Group repurchased liabilities before the agreed matu- rity, thus realising profits. Such income might also be generated in future, depending on the behaviour of investors and the market conditions.

However, it is also possible that the net assets, financial position and results of operations might have to contend with further problems in the future. The extent of potential problems is influenced particularly by the occurrence or non-occurrence of the following risks, or the extent to which such risks might occur:

- Some European states have continued to face the challenge of obtaining refinancing resources without the benefit of international aid or support programmes. If the financing situ- ation of some countries were to deteriorate further, the creditors might have to face a partial or complete debt waiver; if the public sector were to become insolvent, the DEPFA Group would have to recognise considerable impairments in relation to receivables and securities in its capacity as a public sector financier. These impairments might increase if the negative effects of the economic difficulties of individual states have an impact on other debtors currently considered to be solvent.

- Potential downgradings of bank and covered-bond ratings might have a particularly negative impact on the refinancing conditions, trigger events and termination rights of derivatives and other contracts, and might also affect access to suitable hedge counterparties of the banks of the DEPFA Group, and thus have a negative impact on the financial position and results of operations.

- The methods for valuing financial instruments are constantly being improved on the market. For instance, the market conventions for valuing derivatives are changing. The application of IFRS 9 in 2018 might also result in a higher impairment requirement and change the valuation basis of various receivables. Such adjustments might have a negative impact on results of operations for the DEPFA Group.

- Whereas the current liquidity situation of the DEPFA Group is stable and whereas the DEPFA Group continues to expect that it will be able to meet all contractual and regulatory require- ments, the future liquidity requirements depend particularly on the following factors:

- Development of the discounts for repo refinancing in the market and with the central bank, - Collateral requirements as a result of the changed market parameters (incl. interest rates,

exchange rates and calculation bases),

- Changed requirements of the rating agencies regarding the surplus cover of cover funds, - Changes in market conditions, including the level of interest rates, can have a positive or

negative impact on the results of operations of the DEPFA Group.

- Litigation which is currently pending and which might become pending in future might have a considerably negative impact on the results and equity situation of the DEPFA Group.

- The DEPFA Group is exposed to operational risks which result from its reliance on members of staff in key positions and also a higher level of staff fluctuation. This might have an impact on the net assets, financial position and results of operations.

5.2 Sector-specific forecast 5.3 Group-specific forecast

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- The ongoing development of national and international regulatory requirements and the costs associated with it may have an impact on the structure of assets and liabilities, and may thus also affect the results of operations.