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AnnuAl RepoRt | FinAnciAl StAtementSmAnAgement RepoRt 2011

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Annual Report 2011Financial Statements and management Report

Deg – Deutsche investitions- und

entwicklungsgesellschaft mbH

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Contents

FinAnciAl StAtementS AnD mAnAgement RepoRtAnnuAl RepoRt 2011

DeG at a Glance 3

Report by the supervisory Board 4

Corporate Governance Report 6

Management Report for 2011 14

– Business Development and climate 14

– Fields of Business 16

– non-financial performance indicators 20

– profitability 23

– Financial position 24

– net worth position 25

– Follow-up report 26

– Risk report 26

– outlook 35

Annual statements of Accounts: 37

– Balance Sheet 38

– profit and loss Account 40

– Appendix 41

– Auditor’s Report 59

Imprint 60

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2011 2010

Project finance:

Total financial commitments in financial year 1,223 1,226

Project portfolio (commitment obligation) at year end 5,647 5,236

of which trust business 78 90

Total investments of co-financed enterprises /new business 6,847 7,770

Total investments of co-financed enterprises /project portfolio 39,007 34,051

Advisory and other services:

Income from consultancy services, trust business and other services 11 13

Annual statements of accounts:

Balance sheet total 4,368 3,883

Subscribed capital 750 750

of which called up 628 628

Reserves 852 585

Pre-tax operating result 246 272

Taxes 29 4

Profit for the financial year 218 268

Withdrawal purpose-tied reserve fund 2 1

Net income 220 270

Developmental impacts /new business:

Tax revenue p.a. 780 490

Net foreign exchange income p.a. 698 2,700

Newly created and secured jobs (number) 240,000 335,000

direct 110,000 115,000

indirect 130,000 220,000

euR million

DeG at a Glance

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RepoRt By tHe SupeRviSoRy BoARD

The European and US economies weakened further and

the uncertainty in the financial markets increased in the

2011 financial year as a consequence of the economic and

cur rency crisis. The resulting slowdown of demand in the

industrial nations also had an impact on foreign trade and

investment activity in developing and emerging market

countries. Despite these difficult conditions, DEG, as a

re liable partner, was able to make long-term risk capital

available to enterprises in developing countries in com-

pliance with its development policy mandate, As a result,

the volume of new commitments slightly exceeded the

EUR 1.2 billion originally planned.

Advice to and supervision of the Management Board

In the 2011 financial year, DEG’s Supervisory Board con-

cerned itself extensively with the company’s situation. In

addi tion to supervising the proper conduct of its activity,

the Supervisory Board gave DEG’s Management Board the

benefit of its advice. Members of the Supervisory Board

received regular, timely and comprehensive written and

oral reports from the Management Board. When ever

decisions required the consent or cooperation of the Super-

visory Board by law, under the Articles of Associa tion,

or by standing orders, the Supervisory Board was no less

closely involved in the decision-making process than when

decisions of fundamental importance to DEG were being

taken. DEG’s rules and regulations have been revised in

keeping with the requirements of the Public Corporate

Governance Kodex des Bundes (German Federal Public

Corporate Governance Code PCGK) and meet modern

governance standards.

Meetings of the supervisory Board

During the past year, the Supervisory Board held four re-

gular meetings. It was assisted in carrying out its work by

the Audit Committee appointed from among its members,

which met twice. Consultations and resolutions relating

to DEG’s finance business were an integral part of all the

meetings of the Supervisory Board.

For the first time, the Supervisory Board carried out a

self-evaluation to review the quality and efficiency of the

board’s activities and its adoption of optimisation

measures.

The Supervisory Board concentrated on setting a sustain-

able direction for DEG’s business. Members warmly wel-

comed the fact that the results of the quantitative and

qualitative assessment of the developmental impact of

DEG’s projects, additionally verified by a quantitative

ex-post analysis, were again very positive. DEG’s handling

of environmental and social standards, as documented

in the sustainability report, met with an equally positive

reception.

In the context of the Management Board’s overall

stra tegic policy, the Supervisory Board discussed busi-

ness policy for 2012, risk strategy including annual plan-

ning for 2012, and the medium-term business outlook

for 2013-2016.

The Supervisory Board additionally addressed important

strategic issues, e.g. ways to implement the strategic focus

on medium-sized enterprises, the promotion of German

enterprises, DEG’s involvement in investment funds and its

cooperations at a European level.

Important institutional topics were also debated, such as

the adjustment of DEG’s risk provisioning method to match

corporate standards and the OrgaCheck2 project. Other

institutional subjects included the future involvement of

KfW’s Kredit-Risiko-Komitee (Credit Risk Committee KRK)

in major DEG projects and the concept providing for a

review of the the effectiveness of DEG’s Internal Control

System by the Supervisory Board.

A priority topic in the Supervisory Board’s discussions was

DEG’s gender equality concept, which is specifically designed

to promote qualified female senior executives. An interim

report on implementation of the gender equality policy

was presented which detailed good progress in promoting

women.

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Annual statements of accounts and management report

KPMG AG Wirtschaftsprüfungsgesellschaft, Düsseldorf

has audited and certified both the Annual Statements

of Accounts and the Management Report, drawn up in

ac cordance with statutory regulations.

The Audit Committee appointed by the Supervisory Board

reviewed and discussed the Annual Statements of Accounts

along with the Management Report, based on the Auditor’s

Report, and recommended their approval to the members

of the Supervisory Board. During a final detailed review

by the Supervisory Board, no objections were raised. The

members of the Supervisory Board agreed with the Audit

Committee’s recommendations and approved the findings

of the Auditor’s Report and the Annual Statements of

Accounts including the Management Report.

The Supervisory Board recommended that the Share holder’s

Meeting adopt the Annual Statements of Accounts for

2011 and discharge the Management Board from its

liabilities.

Changes in membership of the supervisory Board

During the previous financial year, Dr. Peter Ammon re-

signed from the Supervisory Board following his appoint-

ment as Ambassador of the Federal Republic of Germany in

Wa shing ton. Marianne Sivignon-Lecourt also relinquished

her membership of the Supervisory Board.

Thanks are due to them for their valuable contribution and

energetic support for the company.

Dr. Harald Braun, Cécile Couprie and Professor Dr. Beatrice

Weder di Mauro were newly appointed for the current

17th term.

During its meeting on 30 March 2011 and in keeping with

the standing orders agreed in December 2010, the Super-

visory Board for the first time appointed deputies for the

members of the Executive and Audit Committees from

among its own members.

thanks and appreciation

The Supervisory Board would like to express its gratitude

and appreciation to the Management Board for its co oper-

ation, which has been both open and distinguished by a

high level of trust.

Special thanks and appreciation are due to DEG’s staff;

their great dedication and capabilities have once again

enabled DEG to achieve an outstanding result.

The Supervisory Board is confident that DEG will continue

to achieve successful growth. Its members will do all in

their power to support the company in this endeavour.

Cologne, 26 March 2012

The Chairwoman of the Supervisory Board

Gudrun Kopp

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As a member of KfW Bankengruppe, DEG – Deutsche Inve-

stitions- und Entwicklungsgesellschaft mbH has made a

commitment to act responsibly and transparently and open

up its actions to scrutiny. The Management Board and

Supervisory Board of DEG accept the principles of the Ger-

man federal government’s Public Corporate Governance

Code (PCGC) on behalf of DEG. A first Declaration of Con-

formity in respect of compliance with the code’s recom-

mendations was made on 30 March 2011. Since then, an

annual declaration and explanation of any departures from

the code has been made.

Since 19 June 2001 DEG has operated as a legally indepen-

dent, wholly owned subsidiary of KfW. Its standing orders

(Articles of Association, procedural rules for the Super-

visory Board and its committees and procedural rules for

the Management Board) specify the basic elements of the

system via which it is managed and controlled by its cor-

porate bodies.

To implement the PCGC, DEG revised its standing orders

in 2010 and integrated the code’s recommendations

and suggestions into its Articles of Association, the

pro cedural rules for the Supervisory Board and its com-

mittees, and the procedural rules for the Management

Board. The new regulations came into force on 11 Feb ru-

ary 2011.

Declaration of Conformity

The Management Board and the Supervisory Board of

DEG make the following declaration: "Since the last decla-

ration of conformity on 30 March 2011, the recommenda-

tions of the federal government’s Public Corporate Govern-

ance Code, passed on 1 July 2009, have been and are

being complied with, excepting only the recommendations

below."

Deductible for D&o insuranceThe existing D&O insurance contract between KfW and

the insurer is corporate insurance, and the cover extends

to members of DEG’s Management Board. In a de parture

from sub-paragraph 3.3.2 of the code, the existing D&O

insurance contract does not provide for a deduc tible. The

future design of the contract is currently under review.

Delegation to committeesThe Supervisory Board is relieved of a portion of its work-

load by its committees, which benefit from greater famili-

arity with the issues and flexibility of scheduling. Where

the matter cannot be referred to the Supervisory Board

in cases under article 10 section 5 no. 4 of the Articles of

Association (measures and transactions of special im-

portance) because a quick decision is required, the Execu-

tive Committee is empowered to decide in place of the

Supervisory Board in an individual case under article 10

section 8 and in departure from sub-paragraph 5.1.8 of the

code. This prevents the company suffering any economic

disadvantage because of a longer wait.

Loans for members of corporate bodiesUnder the procedural rules for DEG’s Supervisory Board

and its committees, as well as for the Management

Board, DEG is not permitted to grant individual loans

to members of the Supervisory Board and the Manage-

ment Board. However, in an effort to ensure equal

treatment and in a departure from sub-paragraph 3.4

of the code, this ban does not apply to taking advantage

of promotional loans provided by KfW programmes. Be-

cause the granting of these loans has been standardised,

and given the principle of delivery via the borrowers’

banks, programme loans present no risk of conflicts of

interest.

Cooperation of Management Board and supervisory Board

The Management Board and the Supervisory Board work

closely together for the benefit of DEG. The Management

Board, especially its chairman, stays in regular contact

with the chairwoman of the Supervisory Board. The Man-

agement Board discusses significant issues of corporate

management and strategy with the Supervisory Board. If

an important cause arises, the chairwoman of the Super-

visory Board informs the Board and calls an extraordinary

meeting if necessary. No such event occurred in 2011.

In the year under review, the Management Board provided

comprehensive information to the Supervisory Board on

all corporate issues of relevance to DEG, especially matters

to do with profitability, the financial or net worth position,

coRpoRAte goveRnAnce RepoRt

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the risk situation, risk management and risk control, and

general business development; it also discussed the strate-

gic direction with the Supervisory Board.

Management Board

The members of the Management Board conduct DEG’s

business with the care of a fit and proper business person

in accordance with the law, the Articles of Association,

the procedural rules for the Management Board and the

decisions of the shareholders’ meeting and the Supervisory

Board.

In the year under review, the members of the Management

Board had the following areas of responsibility up to 30

June 2011:

Bruno Wenn as chairman of the Management Board

• Staff Department Human Resources*,

• Staff Department Corporate Strategy/Communications*

with Dept. Economy/Development policy*,

• Regions Division (Depts. Africa and Asia),

• Sectors 1 Division (Depts. Treasury, Manufacturing In-

dustry/Services, Agribusiness and Infrastructure).

* from 1 March 2011 merged as Corporate Management

Division

Dr. Michael Bornmann:

• Legal Department**,

• Regions Division (Depts. Europe/Middle East/Central

Asia, Latin America, German Corporates),

• Sectors Division 2 (Depts. Equity/Mezzanine, Financial

Institutions, Programme Finance and Sustainable Deve-

lopment /Environment),

• Internal Audit.

** from 1 March 2011 Legal and Compliance Division

Philipp Kreutz:

• Credit Review***,

• Finance/Controlling Division (Depts. Procurement/Spe-

cial Tasks, Investment and Financial Data Processing,

Corporate Planning/Controlling, Risk Controlling*** and

Accounting),

• Portfolio Management Division (Portfolio Management

Asia, Europe/Middle East/Central Asia, Africa and Latin

America, also Portfolio Analysis*** and Special Opera-

tions***),

• In-house Services Division (In-house Services, Informa-

tion Technology and Organisation).

*** from 1 March 2011 merged as Risk Management

Division

On 1 July 2011 a new Management Board schedule of

responsibilities came into force with the following areas of

accountability:

Bruno Wenn as chairman of the Management Board:

• Corporate Management Division (Depts. Corporate Stra-

tegy/Communications, Development Policy/Economics

and Human Resources),

• Countries Division 1 (Depts. Africa and Latin America),

• Sectors Division 2 (Depts. Sustainability, Treasury and Fi-

nancial Institutions),

• Internal Audit.

Dr. Michael Bornmann:

• Legal and Compliance Division,

• Countries Division 2 (Depts. Asia and Europe/Middle

East/Central Asia),

• Sectors Division 1 (Depts. Manufacturing Industry/Ser-

vices, Agribusiness and Infrastructure),

• Division German Corporates/Special Programmes (Depts.

Middle Office, Special Programmes and German Corporates).

Philipp Kreutz:

• Finance/Controlling Division (Depts. Procurement/Spe-

cial tasks, Transaction Management, Corporate Planning/

Controlling and Accounting)

• Risk Management Division (Depts. Credit Review, Special

Operations, Portfolio Analysis and Risk Controlling),

• In-house Services Division (In-house Services, Informa-

tion Technology and Organisation)

The members of the Management Board are committed

to DEG’s corporate interest, may not pursue their personal

interests in decision-making, and are subject to a compre-

hensive non-compete obligation while acting for DEG. The

members of the Management Board must immed iately

inform the shareholder of any conflicts of interest arising.

During the year under review, no such case occurred.

8

supervisory Board

The Supervisory Board advises and monitors the Manage-

ment Board as it manages DEG.

DEG has a voluntary Supervisory Board. Its membership is

made up of representatives of the German federal govern-

ment, the shareholder, the private sector, the scientific

community and civilian society.

Under DEG’s Articles of Association, the Supervisory Board

shall have a minimum of eight and a maximum of twelve

members, of which four shall be representatives of the

German federal government – one each from the Federal

Ministry for Economic Cooperation and Development,

the Federal Ministry of Finance, the Federal Foreign Office

and the Federal Ministry of Economics and Technology –

and two shall be representatives of KfW. In the year under

review, three members of the Supervisory Board were

women.

At no time shall the Supervisory Board include more

than two former members of the Management Board.

Further more, no-one already exercising more than five

control mandates with an enterprise being supervised by

the German Federal Financial Supervisory Authority may

be appointed as a member of the Supervisory Board. The

members proposed by the Federal Government shall as a

rule not exercise more than three mandates in supervisory

bodies at any one time. Any conflicts of interest shall be

disclosed to the Supervisory Board. During the period

under review, no such case occurred.

During the year under review one member of the Super-

visory Board attended fewer than half of the meetings of

the Supervisory Board.

Committees of the Supervisory Board To pursue its advisory and supervisory activities more

efficiently, the Supervisory Board has formed two com-

mittees.

The Executive Committee is responsible for discussing

personnel matters and the principles of corporate govern-

ance as well as – where necessary – preparing for meetings

of the Supervisory Board; it also takes decisions on urgent

matters.

The Audit Committee is responsible for accounting mat-

ters and risk management. It also concerns itself with the

effec tiveness of the internal control system, with prepar-

ations for assigning the auditors, and with setting the

priorities for the annual audit. It discusses business stra-

tegy, annual planning including the medium-range business

outlook, risk strategy and the annual financial statement

in prepa ration for the meetings of the whole Super-

visory Board.

The committee chairwomen or chairmen make regular re-

ports to the Supervisory Board. The Supervisory Board is

entitled to change or withdraw the competences trans-

ferred to the committees at any time.

In its report, the Supervisory Board provides information

about its own work and the work of its committees during

the year under review. A summary listing the members of

the Supervisory Board and its committees may be found

on DEG’s website.

shareholder

DEG’s sole shareholder is KfW. The shareholders’ meeting

is responsible for all matters not assigned, by law or by the

Articles of Association, to another body as its exclusive

responsibility, in particular for: approving the annual state-

ments of accounts and the appropriation of the annual

result or net income; determining the sum available within

the company for variable remuneration components; ap-

pointing and dismissing members of the Supervisory Board;

discharging members of the Supervisory Board and mem-

bers of the Management Board from their liability; and

appointing the auditor of the annual accounts.

supervision

DEG is a credit institution within the meaning of section

1 (1) of the Banking Act of the Federal Republic of Germany

(KWG). The German Federal Financial Supervisory Author-

ity (BaFin) has issued revocable exemptions to DEG as per

KWG section 2 (4), which partially exempt it from the

CoRPoRAte GoVeRnAnCe RePoRt

9

provisions of the act. However, DEG does specifically apply

the minimum requirements for risk management (MaRisk)

mutatis mutandis.

Public benefit

Under article 2 (1) of DEG’s Articles of Association, DEG

exclusively and directly serves the public benefit purpose

of promoting development cooperation as per section 52

of the German Fiscal Code (AO). It operates altruistically

within the meaning of AO section 55.

transparency

DEG makes all the key information about the company and

its annual statements of accounts available on its website.

Corporate Communications also provides regular updates

on current developments involving the company. The an-

nual Corporate Governance Reports, including the Decla-

ration of Conformity in respect of the Public Corporate

Governance Code, shall be published on DEG’s and KfW’s

website, where they shall be permanently available.

Risk management

Risk management and risk controlling are key manage-

ment tasks at DEG. The Management Board draws up

the risk strategy, establishing the framework for business

activities in terms of risk tolerance and risk capacity. This

ensures that DEG is able to maintain an acceptable risk

profile, allowing it to fulfil its special tasks sustainably and

over the long term. Monthly risk reports to the Manage-

ment Board present a comprehensive analysis of the

overall risk situation, and adjustments are made where

necessary. The Supervisory Board is regularly given a

detailed update on the risk situation.

Compliance

Compliance with regulatory requirements and voluntary

performance standards is part of DEG’s corporate culture.

The institution’s compliance organisation includes, in par-

ticular, data protection systems and systems designed to

prevent conflicts of interest, insider trading, money laun-

dering, the financing of terrorism and other criminal activ-

ities. There are binding regulations and procedures that

influence day-to-day values and corporate culture; these

are continuously updated to reflect the legal and regulatory

framework as well as market requirements. Regular training

on compliance and money laundering is available to DEG

employees.

Accounting and annual audit

On 4 April 2011 DEG’s shareholder appointed KPMG AG

Wirtschaftsprüfungsgesellschaft as the auditor for the

2011 financial year. The Supervisory Board subsequently

issued the audit mandate to KPMG on 17 August 2011 and

agreed the priorities for the audit with the auditors. It was

stipulated that the chairwoman of the Supervisory Board

would be informed immediately of any grounds for dis-

qualification or bias while the audit was on-going, unless

such grounds could be rectified at once. It was additionally

agreed that the auditor would instantly inform the chair-

woman of the Supervisory Board about any qualified re-

marks and potential misstatements in the Declaration of

Compliance in respect of the PCGC. A declaration of the

auditor’s independence was obtained.

efficiency review of the supervisory Board

The Supervisory Board regularly reviews the efficiency of

its activities. The Supervisory Board’s self-evaluation for

2011 was conducted using a structured questionnaire.

82% of members participated in the efficiency review.

The overall results of the survey are very positive. Both

the Supervisory Board and the Management Board seized

on opportunities for improvement. Those concerned are

continuously engaged in implementing and monitoring

these. The Supervisory Board discussed the results of the

self-evaluation during its meeting on 19th September

2011. The subject of the next efficiency review will be the

2012 financial year, and thereafter reviews will be held

biannually.

Compensation Report

The compensation report describes the basic structure of

the remuneration system for the Management Board and

10

the Supervisory Board and discloses the individual re-

muneration for members of both boards. The compen-

sation report is part of the appendix to the annual state-

ments of accounts.

Remuneration of the Management BoardThe remuneration system for DEG’s Management Board is

designed to provide appropriate compensation to members

of the board in accordance with their remit and areas of

responsibility, taking into account their performance and

the institution’s success.

Remuneration componentsOn 30 March 2011 DEG’s Supervisory Board voted to retain

without change the remuneration system for DEG’s Man-

agement Board agreed on 18 March 2010. This system

meets PCGC rules on variable remuneration components

and includes a balanced mix of short and medium-term

incentives. For instance, only half of performance-related

management bonuses, as measured by the attainment of

goals, is immediately paid to the Management Board; the

other half only constitutes a provisional claim and is paid

out from a "bonus account" in equal instalments over the

following three years, provided business performance has

not declined substantially. If the agreed profitability target

is not met in subsequent years, payments from the bonus

account may be subject to a penalty.

ResponsibilityThe Executive Committee discusses the remuneration

system for the Management Board, including contractual

elements, and reviews it regularly. The Supervisory Board

agrees the basic structure of the remuneration system for

the Management Board, acting on the proposal from the

Executive Committee.

The following summary (p. 11) shows total compensation

broken down by fixed and variable components and bene-

fits in kind. It also shows transfers to pension provision for

indi vidual members of the Management Board as well as

the balance of the bonus account.

Benefits in kindBenefits in kind primarily include contractual fringe ben-

efits. The members of the Management Board are entitled

to a company car and driver for both company and per-

sonal use. Any costs incurred as a result of personal use

of the company car and driver are met by the members of

the Management Board as per current tax regulations. If

a second residence is required for business purposes, the

costs of running a second household are reimbursed as per

tax regulations.

Members of the Management Board are insured under a

group accident insurance policy. Health and long-term care

insurance are subsidised. In respect of the risks asso ciated

with their activities on the governing bodies, members

of the Management Board are insured under a policy that

covers their liability for monetary damages (D&O insur-

ance) and a supplementary policy covering them for mone-

tary damage and legal expenses. These insurance policies

are designed as KfW group insurance. The D&O insurance

2011 2010 Change

Management Board 1,182 1,061 95

Previous members of the Management Board & surviving dependants 783 771 12

Members of the Supervisory Board 16 17 -1

Total 1,981 1,849 106

euR thousand

Compensation for the Management Board and members of the supervisory Board

CoRPoRAte GoVeRnAnCe RePoRt

11

provides protection from financial losses that may result

from of the performance of the duties of a member of

DEG’s Management Board. There is currently no deduc-

tible associated with this insurance. When carrying out

their duties, members of DEG’s Management Board are

also covered by a special policy for employees that meets

any legal expenses incurred as a result of criminal pro-

secution. This insurance was taken out as a group in-

surance policy by KfW.

Like all senior executives, members of the Management

Board are entitled to participate in the deferred com-

pen sation scheme, a supplementary company pension

plan via deferred compensation payments deducted from

salary.

In keeping with security policy, the costs of security

measures carried out at residential properties occupied

by members of the Management Board are assumed by

DEG up to a level deemed reasonable and fall under bene-

fits in kind. The provision of this security is accounted for

under operating charges.

entitlement to retirement pension and other benefits in case of early retirement or departureAfter leaving DEG, members of the Management Board

are entitled to a retirement pension. The pension commit-

ments to members of the Management Board and their

surviving dependants are defined in the board members’

employment contracts.

For 2011 and 2010, the following retirement pensions are

payable to former members of the Management Board or

their surviving dependants:

Salary Variable compensation

Benefits in kind

Total1) Bonus account

Transfers to pension

provision

Bruno Wenn (Chairman) 2011 327.0 41.0 23.4 391.4 41.0 115.0

2010 327.0 0 22.7 349.8 0 165.1

Dr. Michael Bornmann 2011 327.0 39.5 35.1 401.6 39.5 -49.4

2010 327.0 0 36.2 363.2 0 123.0

Phlipp Kreutz 2011 327.0 40.8 21.2 389.1 40.8 94.2

2010 327.0 0 20.9 347.9 0 143.0

Total1) 2011 981.1 121.3 79.6 1,182.1 121.3 159.8

Total1) 2010 981.1 0 79.8 1,060.9 0 431.1

euR thousand

Annual compensation of members of the Management Board and transfers to pension provision for 2011 and 2010

1) Discrepancies due to rounding may occur in the table for computational reasons.

No.2011

EUR thousand

2011 No.

2010

EUR thousand

2010

Former members of the Management Board

6 661.0 6 678.6

Surviving dependants 3 122.1 2 92.0

Total 9 783.1 8 770.6

EUR 1,099.2 thousand were spent on pension obligations

towards former members of the Management Board and

12

their surviving dependants as at the end of the financial

year (prev. year: EUR 40.6 thousand).

In the 2011 financial year, no loans were provided to former

members of the Management Board and their sur viving

dependants.

Compensation for the supervisory BoardMembers of the Supervisory Board receive appropriate

annual compensation, the level of which is set by the

share holder’s meeting as per article 13 (1) of DEG’s Articles

of Association, taking account of DEG’s character as an

institution serving the public benefit. In the year under

review, compensation for ordinary members amounted to

EUR 2,045. Chairmanship of the Supervisory Board attracts

compensation in the sum of EUR 3,323, while the two

deputy chairmen receive EUR 2,556 each.

Members of the Audit Committee each receive annual com-

pensation of EUR 511, provided their fixed remunera tion

does not exceed EUR 2,045; membership of the Executive

Committee does not attract compensation, nor does chair-

manship of the committees.

Where membership only covers part of a year, remunera-

tion is paid pro rata. An attendance fee (EUR 31 per day

of attendance), a daily allowance (EUR 12 per day of at-

tendance) and an accommodation allowance (EUR 20) are

paid on request. Travel expenses which have been incurred

and value-added tax which is payable are reimbursed.

As of 1 July 2011 members of KfW serving on the Super-

visory Board of DEG for the first time declined to claim

their remuneration and attendance fees for the remainder

of the 2011 financial year. This is in accordance with a

fundamental and open-ended decision by the Supervisory

Board of KfW that no compensation shall be accepted for

mandates within the group.

The following tables provide details of the Supervisory

Board’s remuneration for the 2011 and 2010 financial

years; the sums shown are EUR net and have all been paid.

Travel expenses and other miscellaneous expenses were

reim bursed on presentation of receipts and are not in-

cluded in the table.

There are no pension obligations towards members of the

Supervisory Board.

In the year under review, members of the Supervisory

Board received no remuneration for services provided

personally. No direct loans were made to members of

the Supervisory Board during the year under review.

Cologne, 26 March 2012

Management Board

Supervisory Board

CoRPoRAte GoVeRnAnCe RePoRt

13

No. Name Period of member ship 2011

Membership of Supervisory Board

Committee membership

Daily allowance & attendance fee

Total

1. Gudrun Kopp1) 1 Jan to 31 Dec 0 0 0 0

2. Dr. Norbert Kloppenburg 1 Jan to 31 Dec 1,268 253 86 1,607

3. Dr. Hans-Jörg Todt 1 Jan to 31 Dec 2,556 0 215 2,771

4. Dr. Peter Ammon2) 1 Jan to 19 July 1,115 - 43 1,158

5. Dr. Harald Braun2) 6 Sept to 31 Dec 656 0 86 742

6. Eberhard Brandes5) 1 Jan to 31 Dec 2,045 - 0 2,045

7. Ernst Burgbacher1) 1 Jan to 31 Dec 0 - 0 0

8. Arndt G. Kirchhoff 1 Jan to 31 Dec 2,045 - 0 2,045

9. Hartmut Koschyk1) 1 Jan to 31 Dec 0 0 0 0

10. Siegmar Mosdorf 1 Jan to 31 Dec 2,045 - 172 2,217

11. Marianne Sivignon-Lecourt1) 1 Jan to 6 June 0 - 0 0

12. Cécile Couprie1) 6 Sept to 31 Dec 0 - 0 0

13. Dr. Ulrich Schröder 1 Jan to 31 Dec 1,014 - 0 1,014

14. Prof. Dr. Beatrice Weder di Mauro 1 Jan to 31 Dec 2,045 - 0 2,045

Total6) 14,788 253 602 15,643

No. Name Period of member ship 2010

Membership of Supervisory Board

Committee membership

Daily allowance & attendance fee

Total

1. Gudrun Kopp 1) 1 Jan to 31 Dec 0 0 0 0

2. Dr. Norbert Kloppenburg 1 Jan to 31 Dec 2,556 0 3013) 2,857

3. Dr. Hans-Jörg Todt 1 Jan to 31 Dec 2,556 0 246 2,802

4. Dr. Peter Ammon2) 1 Jan to 31 Dec 2,045 - 0 2,045

5. Eberhard Brandes 1 Jan to 31 Dec 2,045 - 0 2,045

6. Ernst Burgbacher1) 1 Jan to 31 Dec 0 - 0 0

7. Arndt G. Kirchhoff 1 Jan to 31 Dec 2,045 - 43 2,088

8. Hartmut Koschyk1) 1 Jan to 31 Dec 0 0 0 0

9. Siegmar Mosdorf 1 Jan to 31 Dec 2,045 - 86 2,131

10. Marianne Sivignon-Lecourt1) 24 Jun to 31 Dec 0 - 0 0

11. Dr. Ulrich Schröder 1 Jan to 31 Dec 2,556 3) - 0 2,556

12. Etienne Viard 1) 1 Jan to 23 Jun 0 - 0 0

Total 15,848 0 676 16,5246)

euR

Compensation of members of the supervisory Board for the 2011 und 2010 financial years

1) Allowance & fee not claimed 2) The German federal regulation on secondary employment applies to this sum3) Includes part of the remuneration for 20094) The discrepancy compared to the total charges for the Supervisory Board (EUR 23.941) shown in the appendix to the annual statements of accounts

is largely due to expenses allowances (travel expenses & entertainment costs) and value added tax, which are not included here. 5) Fee & allowance donated to WWF6) Discrepancies due to rounding may occur in the table for computational reasons.

14

BusIness DeVeLoPMent AnD CLIMAte

DEG – Deutsche Investitions- und Entwicklungsgesellschaft

mbH has been given the development policy mandate to

promote the formation and growth of the private sector

in developing and transition countries. For 50 years, it has

financed investments by private sector enterprises in these

partner countries and advised them on planning and im-

plementing their projects. DEG contributes to sustainable

eco nomic and social progress by means of entrepreneurial

development cooperation. Working within the context of

German development cooperation, it is contributing to

achieving the internationally agreed Millennium Develop-

ment Goals. Its priorities in carrying out this task are to

reduce poverty and permanently improve people’s living

conditions.

DEG finances investments that have a developmental im-

pact, are cost-effective and environmentally and socially

sound. Using its own funds, it provides enterprises mainly

with risk capital in the form of equity and mezzanine

finance as well as with long-term loans and guarantees. It

also advises these enterprises and arranges the finance for

their investment projects. Small and medium-sized en ter-

prises (SMEs) are an important client group. DEG makes

capital available to them directly while also financing banks,

investment and leasing companies that in turn provide fi-

nance to SMEs. As a development institution with a devel-

opment policy mandate, it operates on the sub sidiarity prin-

ciple, meaning that it provides financial services which are

unavailable or in short supply from commercial providers.

In exercising its mandate, DEG cooperates with bilateral

development finance institutions from the group of Euro-

pean Development Finance Institutions (EDFI), with the

European Investment Bank (EIB), and with the European

Bank for Reconstruction and Development (EBRD). It also

works with the International Finance Corporation (IFC),

which is part of the World Bank Group, and with regional

development finance providers with a view to packaging

finance and know-how. This helps to boost the broad-based

and structural development impact of projects. Through

division of labour and standardisation, this fine-tuned co-

operation between the institutions helps to reduce trans-

action costs for clients and improves the efficiency of

development cooperation. Strategic partnerships between

DEG and selected commercial banks serve to improve

provision of financial services in sectors with a bearing

on development policy.

Comprehensive knowledge of the economic and political

situation in partner countries and a permanent presence

on the ground are important prerequisites if DEG is ad-

equately to fulfil its promotional mandate. In 2011 DEG

maintained local representative offices in thirteen loca-

tions: in Accra for West Africa, in Bangkok for Thailand,

in Bangladesh, Cambodia, Laos and Vietnam, in Beijing for

China and Mongolia, in Jakarta for Indonesia, in Johannes-

burg for Southern Africa, in Lima for the Andean countries,

in Mexico City for Central America, in Moscow for the

Russian Federation, in Nairobi for East Africa, in New Delhi

for India, and in São Paulo for the Mercosur region. In

2011 a new office was added in Istanbul for Turkey and

the Middle East. The regional office for Asia, previously

based in Bangkok, was moved to Singapore. DEG also has

the option of sharing the use of 70 representative offices

operated by KfW Bankengruppe.

Following the initially speedy economic recovery from the

world-wide recession in 2010, the global economy progres-

sively lost momentum in 2011. Among the main reasons

were: the problem of sovereign debt in the countries par-

ticipating in European Monetary Union (EMU), the slow

recovery and on-going financial policy debate in the USA,

and the high level of uncertainty in the global financial

markets. Temporary strains included a sharp rise in the

price of raw materials and the impact of the devastating

earthquake in Japan. During the year under review, global

GDP only grew by 2.7% on average, compared to approxi-

mately 4% the previous year. There were marked differ-

ences between various groups of countries: the industrial

nations recorded a rise of only 1.6% against around 6%

for emerging market and developing countries. This was

mainly on account of the Asian economies, led by China

and India, while growth rates in Latin America were

also around the 4.5% mark.

DEG’s business was not directly affected by this increas-

ingly precarious development, especially since the impact

Deg mAnAgement RepoRt FoR 2011

15

in its partner countries was initially limited. During the first

months of the financial year, many enterprises refrained

from pursuing investment projects, and demand for credit

by financial intermediaries was also muted at first. As the

year progressed, however, there was more call for DEG’s

financial and arrangement services.

In 2011, DEG was able to maintain its promotional business

at the same high level as the previous year. With financial

commitments of EUR 1,223 million, it recorded the third

highest volume of new commitments in its history (2010:

EUR 1,226 million). These newly committed funds will mo-

bilise private sector investments with an overall volume of

approx. EUR 6,847 million. Disbursements in the year under

review came to EUR 1,078 million, exceeding the previous

year’s figure (EUR 869 million).

The net commitment portfolio (own account and trust busi-

ness portfolio) rose to EUR 5,647 million by 2011 year end

(2010: EUR 5,236 million). It extended across 549 enter-

prises in 85 partner countries and displayed a stable risk

structure, making DEG once again one of the largest Euro-

pean development finance providers dedicated to promo-

ting the private sector. For more detailed information on

the risk structure, cf. the risk report.

The operating result before provision for risk was EUR 201

million (2010: EUR 185 million). The higher operating result

before provision for risk was mainly due to a rise in interest

receivable.

The global economic recovery had already led to an im-

provement in the economic situation of large numbers of

project enterprises in the 2010 financial year, and for many

project enterprises, a further credit enhancement was ob-

served in 2011. As a result, it was again possible to reduce

levels of risk provisioning in 2011. In total, a net write-back

of provision for risk of EUR 45 million (2010: EUR 87 million)

was carried out for the 2011 financial year.

The result from ordinary activities was EUR 246 million

(2010: EUR 272 million). After taxes, this produced a pro fit

for the financial year of EUR 218 million (2010: EUR 268

million). After taking into account withdrawals from the

purpose-tied reserve fund for complementary measures to

improve the developmental quality of projects, net income

for 2011 was EUR 220 million (2010: EUR 270 million).

Thanks to the excellent results in the 2010 and 2011 finan-

cial years, DEG has achieved a return on equity of 10.6%

on average before tax over the past three years. In keeping

with its development policy mandate, DEG’s business goals

are: to cover its running costs and the cost of risk provi-

sioning for its finance business, to build adequate reserves,

and to achieve a return on capital sufficient for asset

maintenance.

Given the considerable increase in equity due to the level

of retained earnings, DEG maintains an appropriate risk

capacity and a resilient foundation, allowing it to expand

its development business further over the coming years

while remaining self-sufficient.

Reform of organisational structure

In 2011 DEG undertook a reform of its organisational struc-

ture, which had been established in the year 2000. The

intention is to contribute to achieving the goals associated

with its growth course. The reform is aimed at improving

the focus on the clients, increasing the efficiency and

speed with which projects are processed, and streamlining

accountability, especially in the field of risk management.

The high quality of DEG’s project portfolio and its focus

on risk are to be preserved.

In late 2010, a decision in principle was made in favour

of one particular model, based on an analysis of the or-

gani sational structure and possible alternatives. During

the subsequent implementation phase, special weight

was given to participation by members of staff and the

inclu sion of the Staff Council (project “Orga-Check 2”).

The reformed organisational structure largely came into

force on 1 July 2011. The acquisition and portfolio man-

agement functions were combined so projects could be

processed more efficiently. The specialist knowledge re-

quired to assess equity and mezzanine finance was pooled

in two “Equity/Mezzanine” departments with a view to

further expanding the proportion of risk capital finance.

The departments involved in dealing with German clients

16

were brought together in a single division. The di visions

that handle the arrangement of finance remained un-

changed.

Those DEG departments that can be subsumed under back

office were pooled to create a single “Risk Management”

division.

FIeLDs oF BusIness

Investment finance and financial sector development

In the 2011 financial year DEG committed EUR 1,222.5 mil-

lion (2010: EUR 1,226.3 million) in finance for 100 invest-

ment projects.

DEG took equity stakes in enterprises with EUR 273.6 million

(2010: EUR 169.8 million). Lendings totalled EUR 945.1 mil-

lion (2010: EUR 1,044.6 million); they included lendings in

US dollars equivalent to EUR 699.6 million (2010: EUR 643.7

million). Of the lendings, EUR 235.0 million were arranged

as loans with equity features (2010: EUR 173.8 million).

Risk capital in the form of equity stakes and loans with

equity features thus accounted for EUR 508.6 million in

overall commitments – a new record for this segment,

which is crucial to business and development policy (2010:

EUR 343.6 million). EUR 3.8 million were committed for

guarantees (2010: EUR 12.0 million).

Financial commitments were allotted to investments in 42

countries (2010: 32). Among the least developed countries

(LDC) in which DEG was involved in 2011 were Bangladesh,

Cambodia, Togo and Uganda.

With EUR 418.4 million, the lion’s share of finance commit-

ted in 2011 was destined for projects in Asia (2010: EUR

326.1 million), followed by finance of EUR 348.1 million

for projects in Latin America (2010: EUR 360.0 million).

For Africa, a focus of development cooperation and a stra-

tegic target for DEG, new commitments in 2011 came to

EUR 232.9 million in total (2010: EUR 226.9 million). That

represents a further increase in its promotional activities

on a continent of key importance in development policy.

Of this total, investments in Sub-Saharan Africa accounted

for EUR 219.4 million (2010: EUR 192.5 million). Commit-

ments for North Africa and the Middle East came to EUR

44.0 million in total (2010: EUR 43.1 million) for, among

other things, investment projects in Egypt and Iraq.

The Europe/Caucasus region received financial commit-

ments of EUR 186.3 million, of which EUR 138.0 million

was allocated to Europe (2010: EUR 274.5 million, with EUR

258.5 million for Europe). EUR 6.4 million were committed

for one supra-regional project (2010: EUR 30.0 million).

By sector, DEG committed EUR 505.6 million for the finan-

cial sector in 2011, representing approximately 41% of new

business (2010: EUR 403.8 million). Its increased involve-

ment in this sector is primarily designed to improve the

range of finance available to small and medium-sized enter-

prises in partner countries. For example, DEG pledged to

provide banks with credit lines for the purpose of offering

loans to local enterprises. It also became involved in equity

and mezzanine funds with a view to closing the gap in the

supply of risk capital, which is especially scarce. In addition,

DEG financed specialist providers such as, e.g. insur ance

companies to help people set up systematic financial

Development of annual financial commitments

800

1,200

400

020

07

2008

2009

2010

2011

1,206 1,225

1,015

1,226 1,223

euR million

MAnAGeMent RePoRt

17

protection. To further increase the professionalisation of

the financial sector, DEG advised and supported the banks

and companies it was co-financing, focussing especially on,

e.g. encouraging them to operate in compliance with inter-

national standards of corporate governance.

In 2011 DEG committed finance in the sum of EUR 342.2

million for infrastructure projects (2010: EUR 271.5 mil-

lion). This represents a new record in an economic sector

that is fundamental to sustainable development in its

partner countries. In many countries, very poor infra-

structure is the main impediment to development. Of new

commitments, 28% were allocated to financing invest-

ments by private enterprises in the energy and water

supply, telecommunications, health, transport and traffic

sectors. These included especially finance for modern

communications systems and for power plants using

renewables.

EUR 269.7 million were made available for investments in

industry and manufacturing (2010: EUR 398.1 million). The

reduced volume compared to the previous year was due to

the very limited opportunities for new business, especially

in the first half of the year. Enterprises in the manufactur-

ing industry play a very significant part in the creation of

skilled jobs and in encouraging the transfer of knowledge

and technology. In 2011 DEG financed projects in, e.g. the

pharmaceutical industry and in the textile, building ma-

terials and recycling industries in countries such as India,

Indonesia and Kenya.

Commitments for agribusiness – primary production,

local processing and farming services – came to EUR 86.1

mil lion (2010: EUR 97.9 million). Finance for the service

sector accounted for EUR 18.9 mil lion (2010: EUR 55.0

million).

The promotion of climate protection is one of DEG’s

business strategy goals. EUR 185.5 million in new com-

mitments were destined for 22 investment projects

that make a direct contribution to climate protection

(2010: EUR 228.6 million). Again, support was primarily

directed towards renewable energy projects and schemes

to im prove energy efficiency. In addition, develoPPP

measures and complementary measures germane to

climate pro tection were co-financed with a total of

EUR 7.5 million.

EUR 287.8 million of the funds committed for direct invest-

ment finance were intended for investing enterprises from

partner countries (2010: EUR 492.7 million). DEG commit-

ted EUR 39.5 million (2010: EUR 28.2 million) for South-

South cooperation schemes involving enterprises from

several developing countries. EUR 145.5 million went to

enterprises from developed non-EU countries investing in

developing countries (2010: EUR 17.9 million), while EUR

31.8 million was allocated to investors from EU countries

(2010: EUR 57.0 million).

DEG made EUR 98.6 million available for investments in

cooperation with German businesses (2010: EUR 135.3 mil-

lion). These were mainly projects by the manufac turing in-

dustry in countries such as Azerbaijan, China and Uruguay.

Approximately 43% of newly committed finance was

intended for small and medium-sized enterprises (SMEs).

By promoting this sector, DEG made a system atic con-

tribution to closing the existing supply gap in long-term

finance for SMEs in its partner countries. Compared to the

previous year’s new business, the proportion intended for

this sector was increased by roughly 10 per cent.

At 2011 year end, current financial commitments came to

EUR 5,646.9 million in total (2010: EUR 5,236.4 million), a

rise of a little under 8%. Of this, EUR 5,568.5 million, by

far the largest proportion, was finance at own risk. Trust

business with funds from the German federal government

and the European Union made up EUR 78.4 million, which

included EUR 54.2 million in loans from business start-up

programmes.

Advisory services and development programmes

In 2011, DEG continued to advise its clients on planning

and devising their investments. In doing so, it not only

drew on its experience of countries and industries, but

above all applied its financial expertise. By providing these

consultancy services, it was able to contribute to improv-

ing project quality and the chances of success.

18

MAnAGeMent RePoRt

new financial commitments for investments in Africa

0

50

100

150

200

250

300

2007

2008

2009

2010

2011

187 179

266

227 233

euR million (Deg funds)

The finance programmes DEG carries out on behalf of the

German federal government are designed to facilitate and

promote measures by private enterprises that make sense

in terms of development policy. Public funds are used in

tandem with the enterprises’ own funds for this purpose.

Overall, 151 projects received approval in 2011 within the

scope of DEG’s public service activities, most of them in

cooperation with German enterprises.

Under the programme for development partnerships with

the private sector (“Entwicklungspartnerschaften mit der

Wirtschaft”) operated by the Federal Ministry for Economic

Cooperation and Development (BMZ), funds were made

avail able for develoPPP.de as well as for complementary

measures, for feasibility studies and grants for transaction

costs.

“develoPPP.de” helps German and other European enter prises

to carry out developmentally prudent measures. A share

of the funding is provided, generally up to EUR 200,000

per measure. DEG has been running the programme on be-

half of BMZ since 1999. In 2011 EUR 14.4 million in BMZ

funds were made available. Enterprises submitted 157 pro-

posals to DEG for ideas competitions, of which 62% met

the requirements of the programme. In total, EUR 41.8 mil-

lion were committed for 70 new PPP projects – EUR 16.3

million in public funds and an addi tional EUR 25.5 million

from private enterprises. Almost two thirds of projects,

some 65%, related to the priority themes of resource con-

servation, climate protection and energy.

In connection with its projects, DEG carries out comple-

mentary measures designed to further enhance their

broad-based and structural impact. 53 such complemen t-

ary measures to improve the projects’ economic, social

and ecological sustainability were successfully implement-

ed in 2011. For example, financial institutions were helped

to establish risk-adequate environmental and social ma-

nagement. In 2011 DEG allocated EUR 1.8 million of its own

funds for the purpose, supplemented by EUR 2.0 million

in budgetary funds from BMZ.

In 2011 DEG was for the first time commissioned by

BMZ to co-finance feasibility studies by enterprises. The

studies help in the preparation of specific private-sector

investment projects, especially in relation to the intro-

duction of, and back-up for, new technologies and sup-

port for adapting new technologies, processes and

services. BMZ made EUR 1.0 million per year available

for this purpose in 2011 and 2012. DEG’s contribution

to the cost of studies with a duration of up to twelve

months was a maximum of 50%, with a ceiling of EUR

200,000. In 2011, it provided EUR 1.3 million for eleven

feasibility studies, while the enter prises contributed a

further EUR 1.4 million. This scheme helps to facilitate

developmentally sound foreign investments by medium-

sized German and EU enterprises in developing and

emerging market countries.

With a view to supporting more foreign investments on

a smaller scale by German enterprises, BMZ also provided

grants to meet transaction costs in 2011. Overall, ten such

projects by medium-sized German enterprises were facili-

tated, mainly in the manufacturing industry in countries

like China, India and El Salvador.

The programme “Climate partnerships with the private

sector”, run on behalf of the Federal Ministry for the

Environment, Nature Conservation and Reactor Safety

19

(BMU), supported six enterprise projects in 2011. Its goal is

to promote and spread climate-friendly technologies in de-

velop ing and emerging market countries. In 2011 BMU prov-

ided a further EUR 2.0 million from International Climate

Ini tiative (ICI) funds as well as an additional EUR 1.0 million

in start-up finance for project development companies.

Since 2009 DEG has been working with GIZ (Deutsche Ge-

sellschaft für Internationale Zusammenarbeit) to carry out

a programme in Sub-Saharan Africa with funds from the

Bill & Melinda Gates Foundation and BMZ. The aim is to

boost the competitiveness of African cotton and improve

income levels for the cotton farmers. The Competitive

African Cotton Initiative (COMPACI) has a volume of USD

55 mil lion. In 2011, the number of small farmers taking part

increased to 300,000 – a rise of more than 80% compared

to the pre vious year. Initial impact studies have shown that

farmers growing cotton and food crops such as maize have

increased their yields by more than 25%. The partner enter-

prises also implemented gender-specific activities in 2011.

In Afghanistan DEG expanded a loan guarantee fund for

small and medium-sized local enterprises, for which BMZ

and the development organisation USAID have made ap-

prox. USD 14.7 million available since 2005. In 2011 some

460 guarantees were issued for loans of USD 20.1 million.

In total to date, USD 70.0 million have been committed

for around 2,100 loans. More than 26,400 jobs have been

created or safeguarded as a result. DEG additionally pro-

vides consultancy services to the partner banks via a local

project office, the Afghanistan Credit Support Program

(ACSP). In 2012 the programme and the fund capital are

to be jointly transferred to an independent foundation.

International cooperation

For many years, DEG has been working closely with its

European partner institutions under the umbrella of the

European Development Finance Institutions (EDFI) – a group

of 15 bilateral development finance providers that promote

the private sector. In 2011, to take due account of the in-

creasing importance of promoting the private sector in de-

velopment cooperation at a European level, EDFI formulated

and approved a strategy for the period 2012-2015, with

DEG playing a significant role in the process. The aim of the

strategy is to increase EDFI’s vis ibility, strengthen its net-

work and expand European finance partnerships.

Along with the European Investment Bank (EIB), DEG and

eleven other EDFI members have been partners in the co-

financing vehicle European Financing Partners (EFP) since

2003. The purpose of EFP is to promote private investment

in countries in the African, Caribbean and Pacific regions

(the ACP Group of States). To date, more than EUR 800

million have been made available for investments, mainly

in Africa. Following the EFP model, 12 EDFI members, EIB

and the Agence Française de Développement (AFD) set up

the Interact Climate Chance Facility (ICCF) in 2010 with a

view to jointly promoting climate-friendly projects by the

private sector. They allocated approx. EUR 250 million to

the facility. In 2011 one project was co-financed with USD

56 million in ICCF funds.

The three largest EDFI members – DEG, FMO of the Nether-

lands and Proparco of France – have successfully worked

together for many years. With a view to expanding this in

future, they concluded a cooperation agreement in 2011,

which was signed on the sidelines of the World Bank meet-

ing in Washington. As part of their cooperative efforts,

they will be opening a joint office in Johannesburg, South

Africa, with a view to jointly taking on projects from there.

A common strategy to promote the food sector in Africa

has already been devised. Under current plans, the annual

volume of finance will be EUR 200 million in total.

Within the framework of their joint projects, DEG, FMO

and Proparco committed loan and equity finance of more

than EUR 1 billion in total for 30 new projects in the 2011

financial year, an increase of around 30% over the previous

year (2010: EUR 760 million). This included a loan of USD

70 million (equivalent to EUR 53.3 million) for a major

mining project in Kenya.

Looking beyond Europe, DEG extended its cooperation with

international partners. For example, working with 25 other

bilateral and multi-lateral development finance institu-

tions, it formulated a Corporate Governance Development

Frame work which was signed in 2011. With this follow-up

declaration to the 2007 Corporate Governance Approach

Statement, the development finance providers have jointly

20

MAnAGeMent RePoRt

made a commitment to improve the quality of corporate

governance in project enterprises.

In addition, DEG and 30 other finance providers commis-

sioned a study on promoting the private sector in develop-

ment cooperation which was published on the occasion

of the 2011 Annual Meeting of the World Bank. The study

shows that support of the private sector makes a substan-

tial contribution to sustainable growth, job creation, income

generation and the transfer of knowledge.

non-FInAnCIAL PeRFoRMAnCe InDICAtoRs

Developmental impacts

For a decade now, DEG has been using the Corporate Policy

Project Rating (Geschäftspolitisches Projektrating GPR) to

evaluate and control the quality of its projects in relation

to business and development policy. This tool allows both

ex-ante and ex-post analyses to be carried out. Each pro-

ject is assessed and awarded points in four categories and

then assigned to a developmental quality group based on

the results. GPR, which was developed by DEG, is now also

used by 15 other development finance institutions.

The most recent evaluations of new commitments for 2011

have shown an improvement in developmental quality over

the previous year, with an average rating of 2.4 (2010: 2.6).

The investments committed in 2011 will create or secure

around 110,000 jobs in the enterprises concerned. Added

to this are approximately 130,000 jobs with suppliers of the

enterprises being co-financed and with ultimate borrowers

in financial sector projects.

Through their tax payments, the enterprises will addition-

ally contribute approx. EUR 780 mil lion an nually to govern-

ment revenues in partner countries and earn around EUR

700 million a year in net foreign exchange income. This can

be used to reduce budget deficits, enable investment and

give a sustainable boost to foreign exchange revenue.

Some 63% of new commitment projects also make a

direct contribution to achieving at least one of the eight

International Millennium Development Goals (2010:

64%). Many of the enterprises co-financed by DEG make

a considerable effort to meet their corporate social re-

sponsibility. They pay above-average wages, offer, e.g.

additional pension or health insurance benefits, set up

health centres and build nurseries and schools.

sustainability

An important condition of DEG’s involvement is that any

investment project must be environmentally and socially

sound. A robust ecological and social basis is essential if

projects are to achieve sustainable success. This conviction

is one of DEG’s guiding principles, and the institution ac-

tively carries it over into any enterprise it co-finances.

Promoting investment projects in developing and transition

countries offers considerable opportunities to improve

the environmental and social situation on the ground, but

there may also be significant inherent risks. That is why

the assessment of environmental and social risks is part

and parcel of the general consideration of risk carried out

by DEG. For every project, it checks whether respect for

human rights is being shown, working conditions are

fair, and activities are carried out in an environmentally

responsible way.

All the projects to which DEG committed finance in 2011

involved a contractual commitment to comply with na-

tional regulations and also maintain international environ-

mental and social standards. This includes the IFC perfor-

mance standards as environmental and social standards

and the core labour standards set up by the International

Labor Organization (ILO).

By agreeing environmental and social action plans, DEG

again took on an important development policy role in

the majority of new projects. Its aim is to improve environ-

mental and social standards in the enterprises concerned

while also promoting the spread of international standards

in its partner countries. DEG closely supported the enter-

prises as they implemented the action plan requirements

and worked with them to solve any issues arising. DEG

tracks the agreed activities and steps throughout the

lifetime of the project.

21

A shortage of clean water threatens ecosystems and

people’s standard of living, especially in developing coun-

tries. The availability of water is also increasingly proving

a development choke-point for business. That is why in

2011, DEG launched the Water Stewardship Programme

jointly with WWF. Enterprises working in developing coun-

tries are made aware of the risks and given support in water

management. In this context, a newly developed “water

risk filter” helps to take account of water-related risks early

on in any investment and highlights possible actions enter-

prises can take. With this programme, DEG wants to make

a contribution to lessening the ecological and economic

impacts of the growing global water crisis.

Environmentally responsible action also extends to DEG’s

own operations. In addition to the health and safety of its

own staff, the sparing use of resources is a priority. Cor-

porate health protection was further expanded in the year

under review; among other things, a “health day” was held.

DEG’s headquarters building, which has been awarded a

gold seal of quality by the German Sustainable Building

Council (DGNB), again recorded excellent consumption

figures for 2011. All DEG’s CO2 emissions are offset as part

of the KfW Bankengruppe’s policy of maintaining a climate

neutral rating.

Personnel

In 2011 as in earlier years, DEG’s highly motivated and

qualified employees made a significant contribution to

the institution’s business success. DEG’s personnel include

mainly experienced management experts, economists and

lawyers with above-average levels of training. As well as

professional experience in international investment fi-

nance, anyone working for DEG must have expert know-

ledge of development policy, country and sector know-

how, and proficiency in foreign languages.

At 2011 year end DEG retained 457 employees (2010: 436).

Staff numbers break down into three members of the Man-

agement Board, 316 staff outside regular pay scales – of

which 50 are senior executives – 120 staff on regular pay

scales and 18 apprentices. This includes 58 people working

part time (2010: 57). 234 employees (51.2% of staff) were

female (2010: 50.2%), while male employees accounted

for 48.8% (49.8%) of the total. The average age was 42.6

years, unchanged from the previous year. The proportion

of severely disabled people was 3.4% (4.1%). 18 members

of staff were employed in DEG’s representative offices,

supported by 27 local experts.

To ensure that its employees’ professional and methodo-

logical competence and personal skills are maintained to

meet current requirements, DEG has developed an exten-

sive programme of additional training. Access to the trai-

ning schemes offered by KfW Bankengruppe is also provi-

ded. In 2011, the current programme of professional and

extra-disciplinary training was supplemented and given

a new emphasis by training on personal safety abroad and

closer cooperation on training within the EDFI group. The

importance DEG attaches to personal development is re-

flected in the fact that it invested approx. EUR 1.2 million

in such measures in 2011 (2010: EUR 0.8 million).

In 2011, one of the priorities for staff development was the

development of senior executives. In addition to taking

part in the 90 degree feedback system for the first time,

all senior executives participated in a Leadership Develop-

ment Programme consisting of several modules.

For junior staff, DEG provides a trainee programme which

was completed by seven female and five male university

graduates in 2011. This represents a further improvement

in entry-level career opportunities for qualified young

talent. DEG has also for many years supported initial

voca tional training. In 2011 six apprentices started their

training at DEG: three management assistants in office

communications, one female and two male cooks. For

the second year running, DEG supported ten students

at Cologne University with scholarships.

In principle, the remuneration of DEG staff takes the

form of a fixed salary. The basic annual salary, as the

main element of the remuneration, consists of thirteen

monthly salary payments. A variable, appropriately lim-

ited share of the remuneration is awarded depending on

the success of the business and individual performance.

The principles governing DEG’s remuneration system are

regulated by the corporate agreement on compensation

management.

22

MAnAGeMent RePoRt

At the beginning of the year, DEG enters into a personal

goal agreement with all members of staff outside regular

pay scales. The goals specified in the agreement are estab-

lished based on DEG’s business planning procedures and

form the basis for setting the personal remuneration pack-

age. The level of the maximum possible variable remunera-

tion depends on career level and is set in percentages of

the basic annual salary. These percentages represent a

fixed upper limit on variable remuneration. The final deter-

mination of the variable remuneration is carried out annu-

ally, taking into account both business performance and

the extent to which the member of staff has met his or her

targets. Members of DEG’s Management Board receive a

management bonus, which depends on achieving defined

quantitative and qualitative goals; 50 per cent of this man-

agement bonus is paid over a period of several years. In

keeping with this practice, the sum of EUR 0.1 million from

the management bonus for the 2010 financial year was not

paid out in 2011.

DEG’s social benefits include employer contributions to

various corporate pension schemes, group accident in-

surance and the granting of loans. In addition, there are

recuperation allowances, support in case of illness and

other emergencies, and a child care allowance. Employees

are provided with a free pass for travel on public trans -

port, partly for environmental reasons. DEG also supports

preventative health measures and corporate sporting

activities.

In 2010, DEG had devised a gender equality policy with

the aim of fostering the wide-ranging potential of its

employees and increasing the proportion of women

among its senior executives. In the 2011 financial year,

seven female and three male employees were appointed

as department heads, and another female staff member

took on the management of a division. The proportion

of women among the senior staff rose sharply to 25%

(2010: 14%). In 2011 DEG also undertook a needs assess-

ment for an audit on better work-life balance, which is

due to be completed in 2012.

The Management Board would like to express its grati -

tude to all members of staff who have enthusiastically

dis played high motivation and commitment. They have

made a significant contribution to DEG’s ability to fulfil its

mandate and meet its corporate goals. The Management

Board would also like to thank the employees’ represen-

tative bodies – the Staff Council and the Economic Com-

mittee – as well as the Senior Staff Council for their

co operation, which has consistently proved loyal and

most constructive.

Number of staff

(number of beneficiaries

variable remuneration)

Fixed salaries

total (gross)

Management bonus

2011 (for perfor-

mance in 2010)

Bonus 2011

(for performance

in 2010)

EUR million EUR million EUR million

Staff on regular pay scales

144*(98 beneficiaries) 5.3 0.2

Staff outside regular pay scales

332*(283 beneficiaries) 24.1 4.1

Management Board 3 1.0 0.2

Remuneration 2011

* Staff numbers include everyone who was active in 2011, all those who left during the year, and everyone who was entitled to a proportion of the management bonus for 2010. Beneficiaries refers to all members of staff who received variable remuneration in 2011 as a result of achieving the agreed goals.

23

PRoFItABILIty

Operating income rose by EUR 10.9 million. Due to the

higher average margin compared to the previous year,

a rise in the base rate and a greater volume of finance,

income from loans increased by EUR 8.7 million.

Income from the disposal of participating interests of

EUR 66.6 million (2010: EUR 64.1 million) was accounted

for by 31 project enterprises (previous year: 21). Of this,

EUR 22.5 million derived from the sale of a single partici-

pating interest.

Other interest receivable and similar income resulted mainly

from controlling DEG’s strategic interest position with suit-

able derivatives. This income is offset by corresponding in-

terest charges of EUR 6.0 million (2010: EUR 1.0 million).

In the year under review, income from the net write-back of

provision for risk (write-backs minus provisions) amounted

to EUR 45.4 million (2010: EUR 86.7 million). The continuing

improvement in the economic situation of many project

enterprises again resulted in a net write-back of provision

for risk in 2011, although this was lower than for the

previous year. Individual value adjustments in respect

of loans were reduced by EUR 35.0 million. In Ukraine,

a country badly affected by the financial and econ omic

crisis, provision for risk was written back during this fi-

nancial year as a result of restructuring, credit enhance-

ments and disposals. On the other hand, significant in di-

vidual value adjustments had to be made for individual

projects in India and China, where a specific non-payment

risk had become observable. Project risk provisioning for

participating inter ests rose in net terms (provisions minus

write-backs) by EUR 24.6 million. The highest allocations

were for individ ual projects in India.

As a result of the (net) write-backs due to a change in the

method used to determine provisioning for risk, which was

aimed at improving the accuracy of the assessment, there

was a positive effect on provision for risk in the amount of

EUR 27.8 million. During the previous year, profitability had

already increased by EUR 26.9 million due to a change in

the method of individual value adjustment.

Position 2011 2010Operating income* 297.2 286.3

Other interest receivable and similar income 23.7 9.3

Total income (net) 320.9 295.6

Provisions for risk (net)** 45.4 86.7

Interest payable 25.7 17.0

Staff costs and operating charges 94.1 93.1

Pre-tax operating result 246.5 272.2

Taxes 28.6 4.0

Profit for the financial year 217.9 268.2

Withdrawal purpose-tied reserve fund 1.8 1.3

Net income 219.7 269.5

euR million

Breakdown of income and charges

* Income from participating interests, income from loans from financial assets and other operating income ** Income from write-ups and write-backs of provisions in the loans and equity business less charges for write-offs and value adjustments as well as allocations to provisions in the loans business.

24

Interest payable from loans against borrowers’ notes and

time deposits increased by EUR 2.3 million due to a higher

refinance volume of EUR 179.1 million and a rise in the

base rate of 55bps on average over the financial year. The

corresponding hedging transactions for refinance gener-

ated income of EUR 3.3 million because of the increased

strength of the Euro compared to the US dollar on average

over the financial year, and due to a change in the EUR-USD

interest rate differential that benefited the Euro. In addition,

charges of EUR 3.6 million (2010: EUR 0 million) from the

discounting of provisions were shown for the first time in

the 2011 financial year.

Staff costs were reduced by EUR 0.8 million for the 2011

financial year. A rise of EUR 2.4 million in wages and sala-

ries (including social security contributions) as a result of

increased staff numbers at DEG was set against a EUR 3.2

million reduction in charges for pension provision. During

the previous year’s changeover to the Accounting Law

Modernisation Act (BilMoG), DEG had taken advantage of

the option to retain the existing excess of EUR 4.6 million

in the pensions reserve; as a result, net allocations to the

reserve for pensions and similar obligations came to just

EUR 0.1 million during the year under review.

The pre-tax operating result fell to EUR 246.5 (2010: EUR

272.2 million). Taxes amounted to EUR 28.6 million on

balance, with current taxes for the 2011 financial year

accounting for EUR 28.8 million. As a result of an audit

for the period from 2004 to 2008, which was completed

during the financial year, and taking into account the

reversal effects in sub sequent years and a tax rebate

for 2010, tax income of EUR 0.2 million was received.

A positive impact on the previous year’s taxes had been

achieved by taking advantage of tax loss carry-forwards

and tax rebates for earlier years.

Overall, the profit for the financial year was EUR 217.9 mil-

lion (2010: EUR 268.2 million). Following the withdrawal of

EUR 1.8 million (2010: EUR 1.3 million) from the purpose-

tied reserve fund for complementary measures to enhance

the developmental impact of DEG’s projects, a net profit of

EUR 219.7 million (2010: EUR 269.5 million) remained.

FInAnCIAL PosItIon

Disbursements for investments in partner countries came

to EUR 1,079.6 million (2010: EUR 868.8 million) in total

for 2011. Disbursements of EUR 1.2 million were made in

trust business (2010: EUR 0.4 million). Accordingly, busi-

ness on own account amounted to EUR 1,078.4 million

(2010: EUR 868.4 million).

Business on own account in the year under review was

financed in the amount of EUR 687.2 million (2010: EUR

657.0 million) by net cash flow from the disposal of par-

ticipating interests, loan repayments, and amounts owed

from the disposal of investments.

MAnAGeMent RePoRt

60%

29%

7%4%

60%

29%

7%4%

Breakdown of operating incomefor the 2011 financial year

Total operating income: EUR 297.2 million

60%

29%

7%4%

60%

29%

7%4%

25

Operating income for the 2011 financial year was EUR 207.0

million (2010: EUR 189.8 million). Non-cash expenses and

procurement was made up of the procurement of intangible

assets as well as property, plant and equipment, their de-

pre ciation and the allocation to other provisions (not in-

cluding provisions for the loan business) and provisions

for pensions and similar obligations.

External funds of EUR 1,258.5 million (2010: EUR 1,279.4

million) were largely newly borrowed from the shareholder

in the year under review. EUR 1,079.4 million in external

funds were repaid as scheduled (2010: EUR 1,234.2 million).

Consequently amounts owed in financing investment activ-

ities rose by EUR 234.4 million, of which EUR 55.3 million

resulted from foreign currency valuation.

Taking into account the transfer of EUR 269.5 million in

net profit for the 2010 financial year to the appropriated

surplus, the use of EUR 1.8 million from the purpose-tied

reserve fund for complementary measures, and a net profit

of EUR 219.7 million in the year under review, own funds

increased overall by EUR 217.9 million to EUR 1,700.3 mil-

lion. The equity ratio (proportion of equity capital to

business volume) rose from 39.1% to 39.7% taking the

in creased volume of refinance into account.

net woRth PosItIon

Business volume (measured by balance sheet total without

trust business) rose to EUR 4,283.3 million, an increase of

13.1% compared to the previous year.

Investments in partner countries at original cost increased

by EUR 349.8 million to EUR 4,305.2 million due to the dis-

bursement (+8,9%). Disbursements of EUR 987.1 million in

respect of financial commitments compared to disposals

and write-offs of EUR 705.2 million. A further EUR 67.9

million related to additions and disposals resulting from

foreign currency valuation. After deduction of value adjust-

ments, the increase amounted to 431.6 million (+12.3%)

against the background of a drop in provision for risk.

Participating interests at original cost rose by EUR 96.0

mil lion to EUR 825.1 million (+13.0%). Despite higher

value adjustments, and taking into account provision

for risk, there was 12.8% growth.

In the year under review, more investments in partner

countries were carried out making use of bonds and notes.

At balance sheet date, the company held seven bonds

and notes (previous year: two). One bond relates to the

2011 2010

Operating activities before tax 207.0 189.8

– Operating result before provision for risk 201.1 185.5

– Non-cash expenses and procurement 5.9 4.3

External funds 179.1 45.2

– New borrowings 1.258.5 1,279.4

– Repayment -1,079.4 -1,234.2

Investments in partner countries -391.2 -211.4

– Disbursements -1,078.4 -868.4

– Net cash flow incl. amounts owed from disposal of investments 687.2 657.0

euR million

Financing and funding structure on own account

26

MAnAGeMent RePoRt

restructuring of a loan to a project company which, due

to financial difficulties, had to be fully written down as

at 31 December 2011.

Amounts owed rose by EUR 8.1 million in total. EUR 3.0 mil-

lion of the increase was accounted for by amounts owed

by project enterprises, mainly dividends and interest due.

Adequate provision for risk was made for actual and po-

tential non-payment risks. EUR 5.2 million of the rise was

accounted for by pro-rata accrued interest from swap

agreements.

EUR 3.1 million (2010: EUR 0.2 million) of the substantial

rise in other assets is accounted for by the balancing item

for accountancy purposes for the MXN and PLN micro

valuation units, which arises partly from the use of the

gross hedge presentation method and partly from hedging

with off-balance sheet foreign currency transactions. The

balancing item for accountancy purposes of EUR -16.0 mil-

lion relating to foreign currency valuation for the macro

valuation unit was largely responsible for the increase in

other amounts owed.

In total, liquid funds (including bonds and notes) fell by

EUR 21.4 million to EUR 117.0 million (2010: EUR 138.4

million) as a result of disbursements arising from the

in creased volume of business. Bonds and notes under

current assets fell as a result of the partial disposal of a

bond in the amount of EUR 5.1 million held as liquidity

reserve.

FoLLow-uP RePoRt

No significant events of special importance to profitability,

financial or net worth position occurred after the end of

the financial year.

RIsk RePoRt

Risk policy

DEG’s project portfolio reflects the institution’s develop-

ment and promotional policy mandate. It is largely made

up of countries and addresses with a structurally higher

risk. That is why it is essential to have an adequate risk

management system to control these risks, taking special

account of risk capacity, in order to ensure that DEG’s

abil ity to maintain and expand its development capacity

is safeguarded. With this in mind, both new and existing

business is subject to credit rating, both periodically and

as occasion arises. In addition, the corporate policy rating

examines both profitability aspects and above all develop-

mental impacts.

In order to integrate DEG into KfW Bankengruppe’s risk

management system, corporation-wide instruments

(e.g. rating methods) and processes (e.g. the internal

capital adequacy assessment process ICAAP) have been

implemented which enable appropriate risk measurement

to be carried out. DEG has additionally committed itself

to applying the standards of the Bank Supervision

Act, e.g. minimum requirements for risk management

(MaRisk), and to complying with these in its business

operations.

Organisation of risk management

Risk management must fulfil the following requirements:

• identification of significant risks,

• risk analysis and limitation,

• approval of risk provisioning

• monitoring and communication of risks

Including specifically:

• development and validation of standardised instruments

for measuring risk

• evaluation of, and reporting on, DEG’s risk situation for

internal and external addressees

• risk management in the sense of:

− identifying potential country- and industry-specific

risks,

− limiting individual address, country and industry risks

through limit management and risk barriers,

− risk assessment of individual deals in the course of

obtaining a second opinion, taking the risk strategy

into account (back office),

− supervision of problematic involvements

(restruc tur ing, disposal).

27

DEG has an in-house risk manual. This set of rules is de-

signed to ensure that any risks arising from DEG’s business

activities are handled consistently, both in terms of risk

policy and of process. The overriding principle is: “same

risk – same rules”.

DEG’s approach to risk policy is defined by its annually

updated risk strategy – which includes risk control tar -

gets for its main business operations and lists measures

to achieve these targets – as well as by applied risk ma-

nagement meth ods and processes which are subject to

on-going development.

A risk inventory, carried out for the first time in 2011, in-

volves a structured survey of key risks and/or areas of risk

within DEG. The main risks for DEG derive from its business

profile. The results are approved by the Risk Management

Committee and agreed by the Management Board.

According to the risk strategy in force during the year

under review, the following types of risks were significant

for DEG’s business operations:

• address non-payment risks, i.e. address and country risks

as well as counterparty risks

• market price risks, i.e. interest rate risks and currency

risks, and

• operational risks.

DEG draws on refinance from KfW in accordance with the

latter’s pledge. To that extent, any liquidity risks affecting

KfW could also have an impact on DEG. Overall, however,

given the unlimited refinance pledge by KfW, which oper-

ates under a guarantee by the German federal government,

as well as DEG’s specific business model (no deposit busi-

ness, no short-term loans business), the liquidity risk does

not feature as a significant risk to DEG. Under the umbrella

of KfW Bankengruppe, DEG remains responsible for its own

liquidity management.

Address and country limits based on equity capital deter-

mine DEG’s scope for action on risk strategy, which is ad d-

itionally embedded within corporation-wide limit struc-

tures. There are also counterparty limits linked to the

counterparty rating, limits for interest rate and currency

risks based on DEG’s capital, and limits for liquidity risk

that relate to non-disbursed commitments. For more

detailed information, cf. the section on “Types of Risk”.

The following types of risk are controlled for possible risk

concentrations:

• address and country risks: to control any concentrations,

targets for credit risk classes and country risk classes

were defined in the 2011 risk strategy;

• market price risks: any concentrations in the currency

sphere relating to the Euro and the US dollar, or in the

interest rate field (there possibly also linked to certain

term-related asset/liability gaps) are assessed at net

present value and controlled;

• liquidity risks: refinanced exclusively via KfW (risk not

significant due to refinance agreement with KfW).

Responsibility for observing the limits on market price and

liquidity risks rests with Treasury.

Monitoring of address risks, country risks, of counterparty

risks in the investment and derivatives business and of

market price risks is undertaken by the Risk Controlling

Department, which reviews compliance with the limits.

Calculation of the liquidity ratio is also carried out by Risk

Controlling. As well as performing an on-going analysis of

market influences (mainly interest rate developments and

exchange rate movements) Risk Controlling also verifies

that Treasury transactions with market partners are on

market terms. If anomalies occur, or where limits have

been breached, the Management Board is immediately

notified. The Auditing Committee and the Supervisory

Board receive regular updates on DEG’s current risk po si-

tion as part of the quarterly reports.

The Risk Management Committee (RMC), which meets

monthly, has advisory and decision-making powers in

areas including risk strategy, risk capacity, stress tests,

methods relating to address non-payment, market price

and liquidity risks, and the introduction and/or evaluation

of new products. The Asset/Liability Committee (APS)

advises DEG’s Management Board on a monthly basis,

specifically on setting short, medium and long-term fi-

nance policy for DEG in tandem with appropriate liquidity

planning and control. Other issues regularly considered

by APS are the analysis and evaluation of current interest

28

MAnAGeMent RePoRt

rate and currency risks and the definition of any measures

required (including setting upper limits for any open posi-

tions DEG may hold), and the setting of exposure limits

based on the agreed interest rate projection and the pro-

bability that it will materialise.

The Equity Risk Committee (ERC) is an advisory and coordi-

nation body; its aim is the early identification of movements

in the market and the cross-functional control of risks in

DEG’s equity portfolio. In addition, it is engaged in consoli-

dating information for liquidity planning and control.

The Credit Risk Committee (CRC) is an advisory and coordi-

nation body; its aim is the early identification of increased

risks in DEG’s loans portfolio; it also carries out compliance

reviews for any close supervision and discusses existing

and potential payment delays.

DEG is represented in corporate bodies (Credit Risk Com-

mittee, Market Price Risk Committee, Committee for Ope-

rational Risks and various work groups) and thus integrated

into the group’s coordinating processes.

Income and risk concentrations are regularly analysed, ge-

nerally as part of the quarterly stress tests. The Credit Risk

Committee (CRC) and the Equity Risk Committee (ERC),

in-house bodies that meet monthly, discuss income and

risk concentrations and devise additional measures if re-

quired (e.g. as part of managing new business). Income and

risk concentrations are integrated into overall institutional

management via the strategy process and risk reporting.

The measurement and management of risk concentrations

in respect of address and country risks are to be further

developed in 2012.

Risk capacity

The degree of economic risk capacity is based on the quo-

tient of equity capital and tied-up economic capital.

DEG’s risk capacity is determined and monitored under both

economic and regulatory aspects (monthly and quarterly

respectively). The monthly deadline view is supplemented

quarterly by a going concern view. This going concern view

was introduced in 2011 following a corporate project de-

signed to carry the group’s risk management forward. Man-

agement is primarily geared to economic capacity, since

this requires tighter limits on risks. The measuring and

management requirements are defined by the Internal

Capital Adequacy Assessment Process (ICAAP), which ap-

plies across the whole group. Under this system, economic

capital (ECAP) must be held available for significant risks.

In respect of regulatory risk capacity, Section 10 of the

Banking Act of the Federal Republic of Germany (KWG)

defines risk coverage as the core capital, i.e. paid-up share

capital plus reserves, taking deductible items into account.

Supplementary funds or tier 3 capital are not available to

DEG. Equity capital is set based on the approved annual

financial statement for a financial year. Deductible items

as per Section 10 of the Banking Act KWG are participating

interests and subordinated debt in financial undertakings.

The regulatory capital requirement is determined using

the Credit Risk Standardized Approach (CRSA) as per the

Solvency Regulation (SolvV).

In calculating economic risk capacity, the deductible items,

like all other items, are economically assessed as per Section

10 of the Banking Act (KWG) and not deducted from equity

capital. The economic capital required for address risks is

determined using a credit portfolio model (IRBA formula as

per SolvV). In this model, the level of economic capital de-

pends on individual project enterprise ratings and product-

related loss ratios.

Market price risks are monitored based on the German

Federal Financial Supervisory Authority BaFin’s standard

interest rate shock designed to measure interest rate risks.

The predicted yield curve shift is simulated with +130 and

-190 basis points respectively (from 31 Dec. 2011 +/-200

basis points). In 2012 the measurement is to be extended

to take in value at risk (VaR) figures for market price risks.

For operational risks, individual types of earnings in de-

fined fields of business are weighted with special risk fac-

tors as required by the supervisory authority BaFin in the

standard approach under Basel II rules.

As at 31 December 2011 the economic capital requirement

shown in the risk capacity calculation was distributed across

the three types of risk that are of significance to DEG:

29

address non-payment risk (EUR 828 million), market price

risk (EUR 94 million) and operational risk (EUR 38 million).

Stress tests

The use of stress tests is designed to identify and model

risks of significance to DEG and/or relevant risk factors

by employing suitable scenarios. On the one hand, the

sce narios are based on group-wide targets and approved

by a corporate body in which DEG is involved. On the

other hand, calculations are carried out for scenarios

specific to DEG which are based on historical or hypo-

thetical events. This involves the assumption that impro-

bable, but plausible changes and shocks are affecting risk

factors. DEG carries out quarterly stress tests across all

risk types for address non-payment risks, market price

risks and operational risks. Risk types are additively linked.

The figures resulting from the stress tests represent the

ECAP requirements triggered by the stress scenarios

and/or impacts affecting the Profit and Loss Account

(e.g. transfer to provision for risk).

Stress test results are used quarterly to assess risk capacity

for both the deadline view and the going concern view and

are taken into consideration in medium and long-term

planning.

DEG carries out the following quarterly stress tests for

address and country risks:

• General stress test as per Article 123 of the Solvency

Regulation SolvV.

• General stress test for correlations in the credit portfolio

model.

• Stress tests in the going concern view on the basis of

current risk assessments. These are corporate scenarios

for country/industry segments.

• DEG-specific stress tests that take account of specific

income and risk concentrations in DEG’s project port-

folio (concentrations in relation to borrower units, in-

dustries, countries and groups of countries. These stress

tests are based on historical and hypothetical scenarios.

• Reverse stress test.

For both the general and scenario stress tests, potential

losses are calculated, economic capital development is

modelled and the effects on risk capacity are outlined and

critically considered. This includes any impacts on the Pro-

fit and Loss Account as a result of non-payment and rating

migrations. The choice of scenarios and their results are

discussed quarterly by the Risk Management Committee

with Management Board involvement.

For market price risks DEG regards BaFin’s standard interest

rate shock (shift of yield curve by +130/-190 or +/-200 ba-

sis points respectively) as a stress test, so no special stress

tests are carried out for market price risk. In 2012, DEG

plans to extend its stress testing for market price risks

with the introduction of value-at-risk figures.

For operational risks, loss scenarios are calculated.

For market liquidity risk, calculations are based on a sce n-

ario where additional refinance is only available via KfW

at unexpectedly increased rates of interest.

The Management Board and the Supervisory Board are

promptly notified about DEG’s overall risk situation, its risk

capacity and the results of the stress tests in the quarterly

report. The analysis of risk capacity under stress conditions

has shown that the risks taken on by DEG were tenable at

all times, both on the effective date of 31 December 2011

and throughout the year.

types of risk

The following paragraphs examine DEG’s business activities

under the aspect of relevant types of risk.

Address non-payment riskAddress non-payment risk is the risk of a loss (of value)

where

• business partners (including counterparty risks in the

case of commercial or derivatives transactions) or debt-

ors fail to meet their financial obligations towards DEG

either in full, in part or by the due date (default), or have

their rating downgraded (migration);

• solvent private sector business partners or debtors are

un able to fulfil their financial obligations in foreign

currency towards DEG due to a sovereign act, i.e. foreign

exchange restrictions (conversion/transfer risk);

30

MAnAGeMent RePoRt

As the breakdown of the commitment obligation by region

(viewed by risk country) and by sectors shows, DEG’s risk

policy positioning creates certain concentrations in the

portfolio. The distribution by region is not critical from

the point of view of risk. Distribution by sector shows

concentrations in the financial and manufacturing in-

dustries. DEG fulfils its development policy mandate in-

directly in the real economy with the help of banks,

leasing companies and funds, where the financial sector

operates as an intermediary in providing capital to small

and medium-sized enterprises in particular, which gener-

ally have difficulty in gain ing access to capital markets.

Against this business policy background, the concentra-

tion in the financial sector is acceptable, especially given

that the financial sectors in our partner countries are

comparatively poorly integrated into the international

financial markets. In the “manufacturing” sector, the

commitment obligation is spread across 20 industries and

displays a high level of diversification.

Because DEG’s business model is influenced by develop-

ment policy, its portfolio mix – as regards country and

credit risk classes – displays a concentration of medium

and high default risk, which is to be expected.

The Supervisory Board is kept regularly updated on any

changes to the structure of DEG’s address risk in the quar-

terly report. Monthly reports and an existing system of ad

hoc reporting ensure that both the Management Board

and KfW are routinely informed.

A system of limits caps potential losses for individual

ad dresses, countries or borrower units. DEG is addition-

ally integrated into KfW’s corporate limits system. Existing

limits must be observed, whether set by DEG or by the

group.

Country and address risk limits are linked to DEG’s equity

capital and are expressed as percentages of equity capital

based on the rating. The Management Board is immedi ately

notified of any breach of the limits. Breaches of the limits

are detailed in the risk report.

Apart from occasional passive breaches, the limits defined

for both individual projects and countries as well as at

portfolio level were observed. Two passive breaches of the

address limit and one passive breach of the country limit

remained as at 31 December 2011. These passive breaches

(due to ratings being downgraded or movements in the

Africa Asia Europe Latin America Total Prev. year31 Dec. 2010

Financial institutions 7.7% 13.0% 12.1% 10.0% 42.8% 40.7%

Manufacturing 2.6% 12.9% 5.1% 4.6% 25.2% 28.2%

Transport, telecommunications, infrastructure

2.9% 3.2% 1.6% 2.0% 9.7% 10.0%

Other services, tourism 1.3% 0.9% 4.1% 2.2% 8.5% 8.1%

Energy & water supply 1.3% 3.2% 0.7% 4.7% 9.9% 9.0%

Agriculture, forestry, fisheries 0.9% 1.3% 0.5% 0.5% 3.2% 3.6%

Mining, quarrying, non-metallic minerals

0.4% 0.3% 0.0% 0.0% 0.7% 0.4%

Total 17.1% 34.8% 24.1% 24.0% 100.0%

Prev. year, 31 Dec. 2010 17.2% 35.0% 28.0% 19.8% 100.0%

(commitment obligation as at 31 Dec. 2011)

Regional distribution of industries by commitment obligation

31

foreign exchange rate) were immediately reported and

analysed. On that basis, appropriate policy options were

devised and measures implemented.

Over the year, acute risks in countries and sectors are ad-

ditionally limited based on risk barriers prescribed by the

group; these use a traffic-light system to monitor and

control transactions in the markets affected.

For most of its business, DEG additionally uses group-wide

credit ratings for banks and corporates as well as its own

in-house rating methods. These rating methods meet the

criteria of the German Solvency Regulation (IRBA). Risk

capital and investment companies are assessed using DEG’s

own rating for funds. The introduction of a new, group-

wide rating system for funds is planned for 2012.

The loan portfolio is monitored monthly for interest or

redemption payments in arrears for more than 90 days.

In addition, the loan portfolio is analysed and monitored

for arrears of between 30 and 90 days to extrapolate pos-

sible early warning indicators. Non-performing obligations

(commitment obligations with an M19 or M20 rating) as

at 31 December 2011 amounted to EUR 349 million, with

arrears of over 90 days and in excess of EUR 10,000

coming to EUR 43 million.

With the intrinsic value of DEG’s portfolio in mind, the

need for individual value adjustments in business on own

account, depreciations in trust business for the German

government, or individual provisions for probable losses

from guarantees and additional funding obligations are

determined using the available assessment tools to estab-

lish the need for risk provisioning in individual cases.

In addition to on-going risk reporting and monitoring, a

comprehensive quarterly portfolio analysis is undertaken

as part of regular portfolio management. If problems with

an involvement are spotted in the course of portfolio han d-

ling, it is subjected to close supervision involving special

measures. If certain criteria apply (including serious per-

form ance impairments, enforcement measures, or the well-

founded suspicion of criminal conduct on the part of project

partners), it is transferred to the special department for prob -

lem management, regardless of type and level of involvement.

Counterparty risks are limited in line with credit rating

classes based on external ratings. This is due to be changed

in 2012 to limits based on internal ratings. Money market

and securities trading may be engaged in only for the pur-

pose of investing funds not required for immediate use

and only with addresses that have an international A rating

(commercial banks) or a AAA rating respectively (other

partners, e.g. insurance companies).

Market price risksMarket price risk is the risk of losses (in value) due to a

change in market prices unfavourable to DEG. DEG oper ates

Country or credit risk classes on the M scale

Default risk Commitment obligation as at 31 Dec. 2011

Countries Projects

EUR thousand Per cent EUR thousand Per cent

M1 bis M8 Investment Grade 3,079,906 55% 305,036 6%

M9 bis M15 Speculative Grade 2,040,562 37% 4,444,731 80%

M16 bis M18 Close supervision 448,029 8% 469,851 8%

M19 und M20 Default 0 0% 348,879 6%

Total 5,568,497 100% 5,568,497 100%

Commitment obligation in the finance business by credit and country risk classes

32

MAnAGeMent RePoRt

as a non-trading book institution, i.e. there is no trad ing

for the purpose of generating short-term income. So mar-

ket price risks are confined to the asset book. Derivatives

are primarily used for hedging purposes in respect of the

asset book. Processes or measures designed to op t imise

the project portfolio are undertaken independently within

the scope agreed at group level. Market prices relevant to

DEG include the interest rate ratio (interest rate risk) and

exchange rates (currency risk).

Interest rate risk is the risk of losses (in value) due to a

change in interest rate ratio unfavourable to DEG.

Any interest rate risk remaining due to fixed interest over-

hangs is limited and continuously monitored. This risk is

quantified based on a sensitivity approach that determines

the present value risk potential using approved standard

scenarios. The relevant factor here is the yield curve shift

based on the regulatory requirements as applied to risk

capacity.

In 2011 DEG and KfW jointly developed a policy designed

to refine the measurement and control of interest rate

risks. Starting in 2012, DEG will supplement the existing

measurement by calculating a value-at-risk for the interest

rate risks which takes account of interest rate developments.

The value-at-risk is capped based on the risk capacity calcu-

lation and the system of limits.

For present-value management, interest rate risks are en-

tered into to a limited extent in order to achieve net inter-

est income through maturity transformation. An existing

fixed interest overhang, which generally stabilises the net

interest result, carries the risk of increased refinance costs

which cannot be offset by a rise in interest earned. As a

result, both the operating result and the present value of

DEG’s portfolio, which is continuously monitored, are sub-

ject to corresponding risk. These risks are conservatively

controlled with derivatives by the Asset/Liability Commit-

tee (APS), which meets once a month.

Appropriate scenario or stop-loss limits have been defined

for present value changes or losses. A daily risk calculation

is carried out using the latest market data and employing

customary calculation methods, both for the scenario

simulations based on interest rate shock and variations

derived from them, as well as for an ex-post analysis of

present value changes (stop-loss limits).

DEG issues a daily risk report, ensuring that the Manage-

ment Board is always kept informed. This is supplemented

by monthly reports and a previously introduced ad-hoc

reporting system in case limits are breached.

Currency risk is the risk of losses (in value) as a result of

exchange rate movements unfavourable to DEG. DEG only

takes foreign exchange risks (FX risks) indirectly in the

context of its loan and equity business and any refinance

business. It does not enter into FX risk positions in order to

generate income directly as a result of exchange rate fluc-

tuations. Where these occur in the course of business ope-

rations, individual positions are closed with refinance or

by hedging wherever possible and appropriate. DEG avoids

volatility driven by exchange rates in its Profit and Loss

Account by establishing valuation units in its loans busi-

ness wherever possible and appropriate.

As for interest rate risks, the risk is quantified and limited

by means of daily market data and the use of this data in

ex-post analyses and scenario simulations, as applied to

the portfolio being modelled at the time. Existing currency

risks are the result of a partial failure to secure margins as

well as to incongruent cover, which may occur, e.g. due to

disruptions in the flow of loan repayments. In the case of

participating interests in foreign currency, the currency risk

is only hedged in individual cases where cash flow is pre-

dictable. As an annual average, the risk of an ad-hoc ex-

change rate movement of 10%, as monitored daily across

all present value foreign currency positions, excluding

participating interests, was approximately EUR 7.5 million

(2010: approx. EUR 14.8 million). At year end, the FX risk

was EUR 13.3 million, exceeding the previous year’s level

by around EUR 4 million.

The current risk position is partly the result of a high pro-

portion of the loan portfolio being in USD, combined with

the trend in the USD exchange rate, which remained very

volatile throughout 2011. A reduction in the USD risk posi-

tion was undertaken in the first quarter of 2011. Over the

year, the position bounced back. The average risk from US

33

dollar risk positions for an ad-hoc exchange rate movement

of 10% was EUR 8.2 million, markedly below the previous

year’s value (EUR 15.1 million).

As for interest rate risks, the measurement and control of

foreign exchange risks was reviewed and extended in 2011.

The enhancements relate mainly to expanding risk meas ure-

ment to include participating interests in foreign currency

and introducing a value-at-risk calculation for currency

risks. As for interest rate risks, value-at-risk is capped based

on the risk capacity calculation and the limits system.

Appropriate scenario or stop-loss limits have been defined

for present value changes or losses. A daily risk calculation

is carried out using the latest market data and employing

customary calculation methods, both for the scenario

simulations based on interest rate shock and variations

derived from them, as well as for an ex-post analysis of

present value changes (stop-loss limits).

DEG issues a daily risk report, ensuring that the Manage-

ment Board is always kept informed. This is supplemented

by monthly reports and a previously introduced ad-hoc

reporting system in case limits are breached.

Liquidity risk Liquidity risk is the risk of a lack of liquidity, either on the

part of DEG or the market. So it consists of an institutional

liquidity risk and a market liquidity risk. Institutional liq u-

idity risk is the risk that DEG may not be able to meet its

financial obligations, or be unable to meet them on time or

in full (including withdrawal risk and maturity risk). Market

liquidity risk is the risk of losses if, due to insufficient liquid-

ity in the market, DEG is unable to trade assets or finance,

or unable to trade them on time, in full, in sufficient quan-

tity or on market terms.

Given the nature of its business operations, DEG does not

regard liquidity risk as a significant risk as defined by Ma-

Risk, since DEG and KfW have a written agreement where-

by KfW has undertaken to provide DEG with capital market

funds and time deposits. DEG counters the risk of any im-

pairment of its solvency by holding liquidity reserves of

at least 5% of non-disbursed commitments. As at 31 De-

cember 2011, liquidity reserves, mainly in the form of over-

night funds and time deposits, came to approximately EUR

112 million (2010: EUR 128 million). With non-disbursed

commitments (excluding trust funds) of EUR 1,083 million

(2010: EUR 1,098 million), that amounts to liquidity re-

serves of 10% (2010: 12%), which exceeds the lower limit

set in house by EUR 58 million.

While relevant to DEG, market liquidity risk is not a signifi-

cant risk. Within the scope of the stress tests, a scenario

is calculated for market liquidity risk in which additional

refinancing funds can only be procured (from KfW) at an

unexpectedly increased rate of interest.

Operational risks Operational risks are defined as the danger of losses occur-

ring due to shortcomings or failures of internal processes,

personnel or systems, or because of external events. This

definition includes legal risks, but excludes strategic risks.

Any losses above a minimum level of EUR 5,000 are record-

ed in an OpRisk events database. In addition, operational

risks are systematically recorded in the risk assessments.

The measuring of operational risks as part of the risk as-

sessments is carried out on the basis of expert appraisals

supported by data.

In cases where unavoidable internal or external events

occur, Business Continuity Management (BCM) describes

a holistic management process that involves all aspects

required to carry out critical business processes and reduce

losses. BCM also takes account of preventative and reactive

components (contingency planning and emergency & dis-

aster recovery respectively).

The purpose of managing and controlling operational risks

and of Business Continuity Management is to recognise

potential losses for DEG in a timely manner and, depending

on their gravity, prevent them or, in the case of emergen-

cies and disasters, ensure that they can be controlled, thus

safeguarding DEG’s operational capacity despite the loss of

significant resources. Under the OpRisk model, operational

risks are systematically classified by cause.

To achieve efficient coordination, internal organisational

structures and processes were refined in 2011. A central

34

MAnAGeMent RePoRt

Operational Risk Management Team (ORMT) was set up,

and independent coordinators for operational risks and

Business Continuity Management appointed. The ORMT

is part of the Risk Management Division.

Operational risks in the IT field are much lower by compari-

son with commercial banks, but still need to be recorded

and assessed. An effort is made to keep these risks at an

acceptable level by applying the usual standards to IT strat-

egy and operations, and by having regular external reviews.

Emergency policies are in place. DEG has a backup computer

centre at its disposal.

For risks that may arise due to unforeseeable events, ap-

propriate emergency prevention plans and crisis manage-

ment schemes exist. DEG has comprehensive insurance

cover for insurable risks (e.g. fire or water damage).

The risk of failing to meet long-term corporate goals

based on underlying business assumptions and forecasts

is dealt with by continuously matching new business and

the project portfolio to DEG’s corporate policy develop-

ment mandate, as well as by monitoring market condi-

tions and conditions governing competition. Strategies

and financial planning are devised using a systematic

multi-year planning process, and the resulting invest-

ments and measures are regularly reviewed along with

the portfolio mix.

Reputational risks are dealt with by carefully selecting,

managing and supervising involvements through the use

of the Corporate Policy Project Rating, by performing

money laundering checks, maintaining representative

offices, carrying out on-going training, and exchanging

ideas. In this context, special attention is paid to identi fy-

ing and con trol ling any risks associated with the finance

business that result from failing to meet environmental

and social standards.

Operational risks in the human resources field are dealt

with mainly through organisational arrangements and by

ensuring that members of staff have the required level of

qualification. The careful selection of qualified experts and

on-going training measures guarantee that project quality is

assessed with confidence. Job descriptions, including specifi-

cation of tasks and competencies, are defined under MaRisk.

Legal risks play a comparatively important role for DEG,

since its business operations extend across many countries

with a variety of different legal systems and ways of apply-

ing the law. This affects the way contracts are worded, and

the aim is to rule out risks to DEG’s legal positions as far as

possible by examining the formal and actual legal frame-

work in investment countries. DEG employs its own qualified

staff in its legal department, which is involved in contract

negotiations at an early stage and brings in external experts

as necessary, whether in Germany or in other countries.

The Internal Control System (ICS)

DEG defines its Internal Control System as all the principles,

processes and measures introduced into the business by

the management which are directed towards:

• securing the effectiveness and profitability of business

operations and

• the compliance and reliability of internal and external

financial reporting;

• fulfilling any legal requirements that apply to DEG

• fulfilling the mandate to benefit the public good as per

the Articles of Association, and

• protecting the assets and the substance of DEG’s finan-

cial situation and profitability.

Drawing on KfW’s ICS system, DEG has formulated its own

framework that describes the aim, structure and compo-

nents of ICS. These principles establish the quality require-

ments and the measures DEG will apply in implementing

its goals and identifying, assessing and reducing risks. ICS

design and implementation are the responsibility of the

Management Board and those senior DEG executives who

have strategic and operational responsibility for the pro-

cess. ICS extends to all business units, including the re-

presentative offices, and applies to all corporate functions

and processes.

Processes at DEG have been established in accordance with

the principles of a separation of functions. Process descrip-

tions and work instructions involve a detailed account of

these processes and the way competencies and respon-

sibility are assigned. They are updated in case of change

and regularly reviewed.

35

ICS consists of the internal management system that in-

cludes all the regulations designed to manage corporate

activities, and the internal monitoring system intended to

ensure the effectiveness of, and compliance with, these

regulations. The implementation of the annual business

and risk strategy is regularly monitored in the context of

the internal management system, and reports are made

to the appropriate bodies.

The in-house monitoring system includes measures inte-

grated into the process, and others that are independent

of it. To carry out process-integrated monitoring, the risks

inherent in the operational processes are identified and

corresponding checkpoints set up within the processes.

To verify the appropriateness and effectiveness of DEG’s

Internal Control System or highlight possible weak points,

DEG will compile an annual ICS report, beginning in 2012.

The first such report, which complements existing risk re-

porting, is due to be presented to DEG’s Supervisory Board

in March 2012.

outLook

Forecasts suggest that the global economic situation will

remain difficult throughout 2012, with no fundamental

improvement expected before 2013. Growth in the indust-

rialised nations will be even weaker in 2012 than during

the preceding year. The momentum in developing and

emerging market countries is also likely to flag slightly,

although growth of around 5.5% is nevertheless expected.

Catalysts are the trade in raw materials, domestic demand,

and the South-South trade between emerging markets and

developing countries. The main drivers of this growth will

still be the Asian economies.

But if the Euro debt crisis should intensify, a stronger im-

pact on the economies of developing and emerging market

countries via the transmission channels linking the real and

financial economies is to be expected. Any resulting drop in

investment activity might lead to less demand for finance

from DEG. On the other hand, there may be a chance of

additional business opportunities if access to finance for

enterprises in those countries should contract further be-

cause of the increased risks.

As to the political situation, the political systems in the

countries of Northern Africa and the Middle East have

still not stabilised following the changes, some of which

were radical. Based on the present situation, and in view

of the applications for finance already received, this will

not lead to a significant curtailment of DEG’s business

activities in these countries.

Giving due consideration to these factors, DEG expects to

find sufficient business opportunities with high develop-

ment potential in the years to come. Despite the economic

slow-down, growth in its partner countries can be expect-

ed to remain comparatively high and go hand in hand with

demand for investment goods. Another factor is the conti-

nuing shortage of long-term finance for enterprises willing

to invest.

Against this backdrop, DEG plans to continue expanding its

promotional activities. The applications for finance already

received, from which DEG’s new business derives, suggest

continuing demand. At 2011 year end, they came to approx.

EUR 1.6 billion, slightly exceeding the figure at the end of

the previous year (2010: EUR 1.5 billion). The volume of

finance already agreed in house but not yet contractually

finalised was approx. EUR 0.5 billion at year end (2010:

EUR 0.5 billion).

In 2011, when DEG devised its business strategy for 2012,

it defined five strategic fields of business: Africa, SMEs,

climate and environmental protection, risk capital and

German enterprises. New commitment levels were set for

these fields of business with the aim of achieving an over -

all volume of new commitments of EUR 1.3 billion. Under

current plans, this will rise to EUR 1.6 billion over the me-

dium term. The project portfolio (commitment obligation)

is scheduled to increase by around 6% annually in 2012

and the following years.

Africa remains a region of special strategic importance for

DEG. The priority is to extend involvement in Sub-Saharan

Africa, which has the largest number of low income and high

risk countries. In North Africa, an additional targeted effort

will be made to develop the private sector in order to con-

tribute to economic growth and a better outlook for the

young populations, and thus support the reform movements.

36

MAnAGeMent RePoRt

DEG specialises in financing and supporting small and me-

dium-sized enterprises (SMEs). The “SME Growth Initiative”

launched in 2009 is to continue in 2012. Medium-sized

enterprises have a crucial part in the development of DEG’s

partner countries. Now as in the past, they have virtually

no access to long-term investment finance, so DEG will

continue to maintain its strong commitment to providing

SMEs with finance, both directly and indirectly via financial

intermediaries, and using both its own and external capital.

Climate and environmental protection is an important glob-

al priority and has for many years been treated as a stra-

tegically relevant field of activity by KfW Bankengruppe as

well as its subsidiary DEG. The main aim of DEG’s promo-

tional activities is to co-finance energy efficiency projects

and measures as well as investments by private enterprises

using renewables for, e.g. power generation. This includes

advising enterprises during the planning and implementa-

tion stages of their projects.

As commercial loan finance becomes more easily available

and the liquidity of the local banking sector improves in

more developed partner countries, risk capital finance,

which remains scarce, continues to gain in importance.

DEG provides enterprises with risk capital both directly

and indirectly via investment companies. This is essential

if enterprises are to benefit from the existing external

finance on offer. Over the coming years, DEG plans to

main tain the share of its new business earmarked for risk

capital finance at the same high level as in 2011.

The involvement of especially medium-sized German enter-

prises in DEG’s partner countries is of considerable impor-

tance in terms of development policy. DEG supports their

activities by not only providing German businesses with

financial services, but also by supplying and developing a

wide range of supplementary services for them. In 2012,

the sales and marketing activities directed at German

enterprises are to be re-vamped with a view to extending

co-operation with this client group. DEG plans to expand

the business carried out on behalf of, and with funds from,

the German government or from foundations. The purpose

of these programmes is to support and advise enterprises

operating in developing countries. The aim is to incentivise

the private sector in these countries in ways that produce

developmental benefits.

Provided the economy continues to develop as predicted,

DEG assumes that it will be able to continue generating a

surplus in the years to come. For 2012, it expects the profit

for the financial year to be around EUR 63 million, with a

further increase of approx. EUR 10 million in 2013. In the

context of its planning, and based on KfW’s interest rate

forecast, DEG expects a moderate and continuous rise in

interest rate levels. Against the background of this predic t-

ion and the planned growth in its project portfolio, DEG

expects both its operating income and interest charges to

rise. The plans also provide for a net transfer to provision

for risk and a moderate rise in staffing as a result of vacan-

cies being filled.

DEG continues to aim for a pre-tax return on equity of 6%

on a three-year average, a challenging goal for a develop-

ment institution with a high equity ratio. It must be noted

that DEG’s financial success is significantly affected by net

provisions for risk and by volatile income from participating

interests, which is especially dependent on external market

conditions.

In addition to sustainably fulfilling its development policy

mandate, risk-conscious management of its project port-

folio and cautious cost management remain DEG’s main

priorities for the future.

37

AnnuAl StAtementS oF AccountS 2011

BALAnCe sheet

PRoFIt AnD Loss ACCount

APPenDIx

38

31 Dec. 2011 31 Dec. 2010

EUR EUR EUR EUR thousand

A. Fixed assets

I. Intangible assets

1. Industrial property rights and similar rights and assets,

including licences on such rights and assets

390,423 346

II. Tangible assets

1. Land and buildings 47,458,348 48,496

2. Office equipment 3,749,780 3,598

3. Payments in advance 173,563 0

51,381,691 52,094

III. Financial fixed assets

1. Investments in partner countries

a) Participating interests 689,723,132 611,289

b) Loans to undertakings in which DEG

has a participating interest 184,414,289 200,279

c) Other loans 3,059,297,743 2,690,159

3,933,435,164 3,501,727

2. Other financial fixed assets

a) Bonds and notes under current fixed assets 91,126,637 16,463

b) Other loans 731,638 848

91,858,275 17,311

4,025,293,439 3,519,038

Total A. (I. + II. + III.) 4,077,065,553 3,571,478

B. Current assets

I. Debtors and other assets

1. Amounts owed from investment activities 59,181,351 51,041

– of which amounts owed by undertakings in which DEG has a participating interest 3,387,428 4,193

2. Amounts owed from disposal of investments 947,297 947

3. Amounts owed from consultancy and other services 49,948 100

4. Other assets 28,560,295 24,722

88,738,891 76,810

II. Bonds and notes 5,056,212 10,385

III. Cash in hand, balances with Deutsche Bundesbank and

with credit institutions 111,964,989 128,127

Total B. (I. + II. + III.) 205,760,092 215,322

C. Accruals and deferrals 519,513 111

D. Assets held under trust 85,468,946 95,850

Total assets 4,368,814,104 3,882,761

Assets

BAlAnce SHeet At 31 DecemBeR 2011WitH pReviouS yeAR’S FiguReS FoR compARiSon

39

31 Dec. 2011 31 Dec. 2010

EUR EUR EUR EUR thousand

A. Shareholders’ equity

I. Subscribed capital

1. Subscribed capital 750,000,000 750,000

2. Subscribed capital unpaid -122,147,630 -122,148

Called up capital 627,852,370 627,852

II. Appropriated surplus

1. Purpose-tied reserve fund

as at 1 January 5,250,000 6,560

Transfer from net income for previous year 10,000,000 0

Withdrawal reserve fund -1,800,000 -1,310

as at 31 December 13,450,000 5,250

2. Other appropriated surplus

as at 1 January 579,745,298 630,105

Transfer from net income for previous year 259,540,000 -50,360

as at 31 December 839,285,298 579,745

852,735,298 584,995

III. Net profit 219,700,000 269,540

Total A. (I. + II. + III.) 1,700,287,668 1,482,387

B. Provisions for liabilities and charges

1. Provisions for pensions and similar obligations 70,676,886 69,986

2. Provisions for taxation 13,420,000 0

3. Other provisions 31,458,560 25,669

Total B. (1. + 2. + 3.) 115,555,446 95,655

C. Creditors

1. Amounts owed for financing investment activities

to credit institutions 2,418,434,411 2,179,021

2. Trade creditors 773,182 1,199

3. Other creditors 48,294,451 28,649

– of which tax payable: – of which social security:

819,08086

7010

Total C. (1. + 2. + 3. + 4.) 2,467,502,044 2,208,869

D. Liabilities for assets held under trust 85,468,946 95,850

Total liabilities 4,368,814,104 3,882,761

Contingent liabilities arising from the provision

of collateral in favour of third parties4,968,879 9,163

Liabilities

40

Income 1 Jan. - 31 Dec. 2011 1 Jan. -31 Dec. 2010

EUR EUR EUR thousand1. Income from participating interests 18,755,664 17,422

2. Income from long-term loans 180,272,725 171,632

– of which from affiliated enterprises 2,149,545 2,350

3. Other interest receivable and similar income 23,738,925 9,288

– of which from affiliated enterprises 20,242,580 4,135

4. Income from write-ups and write back of provisions in respect of lending business and participating interests

a) Write-up of financial fixed assets 238,254,051 164,531

b) Write-up of amounts owed from project activities and from disposal of investments 2,483,076 3,778

c) Write back of provisions in respect of lending business and participating interests 3,624,000 8,480

244,361,127 176,789

5. Other operating income

a) from disposal of participating interests 66,599,175 64,073

b) from consultancy services 4,422,761 3,780

c) from trust transactions 660,717 800

d) from other services 5,993,808 8,878

e) other 20,407,771 19,730

98,084,232 97,261

Total income 565,212,673 472,392

Charges 1 Jan. - 31 Dec. 2011 1 Jan. -31 Dec. 2010

EUR EUR EUR thousand 6. Depreciation, value adjustments and provisions in respect of lending business and participating interests

a) Depreciation and value adjustments in respect of financial fixed assets 191,201,566 85,561

b) Depreciation and value adjustments in respect of amounts owed from project activities and disposal of investments 1,575,306 3,466

c) Provisions in respect of lending business and participating interests 6,141,000 1,032

198,917,872 90,059

7. Interest payable and similar charges 25,707,906 17,003

– of which to affiliated enterprises 14,869,316 13,886

8. Staff costs

a) Wages and salaries 38,988,261 36,805

b) Social security, pensions and other benefits 6,538,159 9,549

– of which pensions 1,560,160 4,753

45,526,420 46,354

9. Depreciation and adjustments for impairment of tangible assets 2,914,192 2,550

10. Other operating charges 45,666,288 44,225

Total (6.+7.+ 8.+9.+10.) 318,732,678 200,191

11. Profit on ordinary activities 246,479,995 272,201

12. Tax on income and profit 28,571,956 3,962

13. Other taxes 8,039 9

14. Profit for the financial year 217,900,000 268,230

15. Withdrawal purpose-tied reserve fund 1,800,000 1,310

16. Net profit 219,700,000 269,540

pRoFit AnD loSS Account FoR tHe yeAR enDeD 31 DecemBeR 2011

WitH pReviouS yeAR’S FiguReS FoR compARiSon

41

AppenDiX

GeneRAL notes on the stAteMents oF AnnuAL ACCounts

Form of Annual Accounts

The Balance Sheet and Profit and Loss Account were laid out in compliance with the provisions for large corporations in

Articles 266 and 275 of the German Commercial Code (HGB).

Due to business conducted, the items in the Balance Sheet and the Profit and Loss Account have been supplemented or

re-designated in accordance with Article 265 of the German Commercial Code (HGB). Itemisation in the Profit and Loss

Account is based on income from participating interests.

In accordance with the provisions of the German Commercial Code and clarification by Article 1 of the Ordinance Regulating

the Presentation of Accounts by Credit Institutions, DEG is exempt from the provisions on financial statement forms.

Accounting/valuation criteria

Intangible and tangible assets are activated at original costs and subject to straight-line depreciation across their average

useful life.

The choice to activate internally produced intangible assets under current fixed assets under the provisions of Article 248

Paragraph 2 of the German Commercial Code was not exercised.

The choice under Article 67 Section 4 Clause 1 of the Introductory Act to the Commercial Code (EGHGB), according to

which lower valuations of assets based on depreciation under Article 254 of the German Commercial Code HGB (old ver-

sion) may be retained, is exercised for the building in respect of the one-off tax depreciation from the transfer of silent

reserves according to Article 6b of German Income Tax Law.

For the 2008 and 2009 financial years, the pooling system provided for in Article 6, Section 2a of German Income Tax Law

was used for low-value assets under Office Equipment, where the value was more than EUR 150 and less than EUR 1,000.

From 1 January 2010 low value assets were again dealt with in accordance with Article 6, Section 2 of German Income Tax

Law, i.e. where the value is less than EUR 410, they are recorded under other operating charges.

Financial fixed assets are recognised at original cost or at fair value if lower.

To take account of address risk, DEG carries out risk provisioning both for identifiable, and, beginning with the 2011 financial

year, for latent risks of loss in its financing portfolio. The value adjustments are set off in the respective asset items. For

guarantees issued by DEG in respect of its finance business, provisions are made in the case of identifiable and latent risks

that a claim will be made.

The value of a participating interest is generally determined using the Discounted Cash Flow (DCF) method. Where market

prices, e.g. stock market quotations, are available, DEG will verify whether, following a critical review of the assumptions

underlying the valuation and pricing, the stock market price represents an appropriate valuation. If the participating in-

terest was acquired less than a year earlier, DEG will generally fall back on the purchase price. However, if after acquiring

the participating interest, DEG becomes aware of important factors affecting the value which did not enter into the de-

termination of the purchase price, the DCF method is used to determine the purchase price, taking the new findings into

42

APPenDIx

account. This applies even during the first year after the participating interest was acquired. If a firm offer has been made

to purchase the participating interest, the proposed purchase price replaces the DCF method as the basis for assessing the

value of the participating interest. For participating interests, country risks are taken into account by an upward adjust-

ment of the discount factors. If the value of the participating interest is less than the purchase price, a corresponding

value adjustment is made.

To identify a project company’s address non-payment risk in the case of loans, trigger events are used to make an initial

assessment of whether risk provisioning is generally required. If a trigger event has taken place, the level of project risk

provisioning is estimated based on the present value of expected future repayments on the loan in question.

In the previous year, an individual value adjustment was also made for country risk in respect of the individual risk country.

This was done by rating the country risk based on an expert estimate with a factor tailored to the individual country. In the

2011 financial year, DEG has moved away from this evaluation method and written back EUR 113.2 million of provisioning

for country risk in full.

To improve the accuracy of the assessment of potential default risks, a flat-rate value adjustment was made for loans with-

out an individual value adjustment – a step undertaken for the first time in the 2011 financial year. Depending on the rating,

the flat-rate value adjustment is calculated based on the standard risk cost approach and takes into account both address

non-payment risks and country risks. In addition, the flat-rate value adjustment is supplemented by a risk provisioning

surcharge for special potential hazards in individual industries and countries. In the 2011 financial year, a flat-rate value

adjustment of EUR 71.8 million was made. As a result of the change in method, there was a net write-back of EUR 26.0

million at the 30 June 2011 change-over date.

Guarantees issued by DEG in respect of its finance business now also take account of latent non-payment risks as per the

method described above. In the 2011 financial year, a write-back in full of provisioning for country risk in the sum of EUR

3.6 million was carried out, and a flat-rate value adjustment of EUR 0.7 million made. As a result of the change in method,

there was a net write-back of EUR 1.8 million at the 30 June 2011 change-over date.

Amounts owed and other assets are recognised at their nominal value. Actual default risks are catered for by value adjust-

ments.

Assets and debts that are exempt from creditor access and serve only to settle debts from pension liabilities under the

deferred compensation scheme were offset against those debts in the sum of EUR 0.8 million as at balance sheet date,

as provided for by Article 246 Section 2 Clause 2 of the German Commercial Code. The offset debts were discounted at

the market interest rate (5.14%) published by Deutsche Bundesbank in December 2011, which results from an assumed

resid ual maturity of 15 years. Charges and income of EUR 27 thousand were offset.

Bonds and notes under current assets are recognised at original cost, applying the strict lowest value principle and observing

the value appreciation requirement.

Provisions for pensions and similar obligations are calculated at their going-concern value using the Mortality Tables 2005 G

(Richttafeln 2005 G) published by Dr. Klaus Heubeck.

Other provisions were made at the level of anticipated demand and take all actual risks and liabilities of uncertain cost into

account. Any provisions with a residual term of more than one year were discounted in accordance with their residual terms

at the average market rate across the past seven years published by Deutsche Bundesbank.

43

Amounts owed are recorded as liabilities with repayment amounts.

Deferred tax liabilities were offset against deferred tax assets. The choice not to activate deferred tax liabilities that exceed

deferred tax assets was exercised under the provisions of Article 274 Section 1 Clause 2 of the German Commercial Code.

Participating interests purchased with foreign currency are converted into Euros at the rate of exchange current at the time

of purchase.

For participating interests, currency changes are taken into account in respect of the individual assessment. A small number

of loans not hedged in foreign currency are valued at the mean rate of exchange at the balance sheet date, taking the cost

of purchase into account as upper value limit. Overnight and time-deposits and balances with banks are valued at the mean

rate of exchange at the balance sheet date.

Other assets, debts and pending foreign currency transactions are summarised in valuation units pursuant to Article 254

of the German Commercial Code. Along with one macro valuation unit for assets, debts and pending transactions in USD,

additional micro valuation units were established for the other foreign currencies (MXN, ZAR, PLN). The foreign currency

valuation units are reported in the balance sheet using the gross hedge presentation method.

In accordance with DEG’s risk strategy, currency risks are hedged against contrary changes in value in foreign currency

cash flows from loans and bonds and notes under current fixed assets, matching currency refinance or pending foreign

currency transactions. For the macro valuation unit in USD, all on-balance-sheet activities in USD (lending/deposit activ-

ities) are considered jointly; the resulting (net) currency risk remaining is hedged with appropriate derivatives transactions.

For the micro valuation units, the currency risks resulting from individual basic transactions are hedged with individual

hedging instruments. Currency risks are further limited by currency. The effectiveness of the hedging relationship can

therefore be assumed.

The macro valuation unit in USD comprises basic transactions in the form of loans in foreign currency with a book value after

deduction of individual value adjustments of EUR 2,317.5 million, bonds and notes under current fixed assets of EUR 23.0

million and foreign currency refinance (borrowers’ notes and overnight loans) of EUR 1,583.9 million. The level of remaining

(net) currency risks that required hedging was EUR 756.6 million as at 31 December 2011. This net position was hedged with

off-balance sheet transactions (interest rate swaps and forward exchange deals) in the sum of EUR 691.4 million.

The micro valuation units comprise basic transactions in the form of loans in foreign currency (without deduction of indivi d-

ual value adjustments) of EUR 88.2 million, which were hedged with off-balance sheet transactions (interest rate swaps)

in the same amount.

The market value of the basic transactions summarised in the macro valuation unit was EUR 16.0 million at balance sheet

date. Hedging transactions with a positive market value of EUR 6.0 million as at balance sheet date are used to hedge the

currency risk. The market values were determined using the dollar-offset method.

For derivatives, which are used in actively controlling interest rate risks, no provision is made for contingent losses

where the market value is negative. This is due to the interest surplus from interest-bearing transactions. Derivatives

transactions that neither enter into the foreign currency valuation unit nor serve to control interest rate risk are valued

according to the imparity principle at the balance sheet date. In pursuance of Article 249 Section 1 Clause 1 of the

German Commercial Code, this has resulted in provision for contingent losses of EUR 4.3 million. Accrued interest is

recognised for all derivatives.

44

notes on Assets

Fixed assets

Please see the table detailing “Movements in fixed asset balances” for details.

tangible assets

For 2011, depreciation came to EUR 2.7 million in total (previous year: EUR 2.4 million). This comprises depreciation on

office furniture and equipment of EUR 1.4 million and on buildings of EUR 1.3 million.

For the 2009 financial year, depreciation on the DEG building in Kämmergasse included one-off tax depreciation under

Article 254 of the German Commercial Code (old version) of EUR 1.0 million from the transfer of silent reserves from the

proceeds of the sale of the land and buildings in Belvederestraße as per Article 6b of German Income Tax Law. The 2011

annual result increased by the sum of EUR 30,000 as a result.

APPenDIx

Original costs

Balance carried for- ward to 1 Jan. 2011

Additions2011

Book transfers2011

Disposals2011

As of31 Dec. 2011

I. Intangible assets

1. Purchased industrial property rights and similar rights and assets, including licences on such rights and assets 3,977,328 268,397 - - 4,245,725

II. Tangible and intangible assets

1. Land and buildings 52,416,171 223,676 - - 52,639,847

2. Office equipment 6,795,476 1,655,881 - 343,557 8,107,800

3. Payments in advance 0 173,563 - - 173,563

Total (I. + II.) 63,188,975 2,321,517 0 343,557 65,166,935

III. Financial fixed assets

1. Investments in partner countries

a) Participating interests 729,095,470 173,214,437 - 77,258,599 825,051,308

b) Loans to undertakings in which DEG has a participating interest 219,445,253 59,031,373 -39,702,199 39,335,667 199,438,760

c) Other loans 3,006,873,943 1,000,401,674 39,702,199 766,249,114 3,280,728,702

Total 1. (a + b + c) 3,955,414,666 1,232,647,484 0 882,843,380 4,305,218,770

2. Other financial fixed assets

a) Bonds and notes under current fixed assets 16,195,422 95,726,688 - 3,130,223 108,791,887

b) Other loans 848,210 68,510 - 185,082 731,638

17,043,632 95,795,198 0 3,315,305 109,523,525

Total III. (1. + 2.) 3,972,458,298 1,328,442,682 0 886,158,685 4,414,742,295

Total (I. + II. + III.) 4,035,647,273 1,330,764,198 0 886,502,242 4,479,909,229

Movements in fixed asset balances

45

Investments in partner countries

This item shows investments from funds on own account of EUR 3,933.4 million, which are made up of participating inter-

ests and loans. Investments from trust funds of EUR 85.5 million are itemised as assets held under trust.

Own-account investments were made in 495 enterprises in 84 countries. These include three enterprises where the invest-

ments were partly financed out of German federal trust funds and by other trustee lenders. In the case of eight enterprises,

third parties entered into risk sub-participations in the form of counter-guarantees.

Foreign currency loans to the value of EUR 2,491.4 million are almost wholly hedged by currency swaps and by taking up

foreign currency loans.

1) of which euR 103,532,255 secured by unfunded risk participation 2) Without accrued pro rata interest

(continued) Value adjustments Book value Depreciation

Write-up2011

Accumulateddepreciation

As of31 Dec. 2011 2011

I. Intangible assets

1. Purchased industrial property rights and similar rights and assets, including licences on such rights and assets - 3,855,302 390,423 224,036

II. Tangible and intangible assets

1. Land and buildings - 5,181,499 47,458,348 1,261,059

2. Office equipment - 4,358,020 3,749,780 1,429,097

3. Payments in advance - - 173,563 -

Total (I. + II.) 0 13,394.,821 51,772,114 2,914,192

III. Financial fixed assets

1. Investments in partner countries

a) Participating interests 28,097,601 135,328,176 689,723,132 55,905,371

b) Loans to undertakings in which DEG has a participating interest 11,536,041 15,024,471 184,414,289 7,336,889

c) Other loans 198,608,228 221,430,959 3,059,297,743 108,909,132

Total 1. (a + b + c) 238,241,870 371,783,606 3,933,435,1641) 172,151,392

2. Other financial fixed assets

a) Bonds and notes under current fixed assets - - 89,741,7132) 19,050,174

b) Other loans - - 731,638 -

0 0 90,473,351 19,050,174

Total III. (1. + 2.) 238,241,870 390,833,780 4,023,908,515 191,201,566

Total (I. + II. + III.) 238,241,870 404,228,601 4,075,680,629 194,115,758

46

Bonds and notes in current fixed assets

Amounts owed from investment activities

Amounts owed from disposal of investments

Amounts owed from consultancy and other services

other assets

Bonds and notes in current fixed assets represents finance committed by DEG which has been securitised.

The item Bonds and notes under current fixed assets (EUR 91.1 million) comprises two convertible bonds (EUR 13.1 million),

one bond in respect of debt restructuring, the value of which had to be fully written down as at 31 December 2011, and four

further bonds (EUR 76.6 million).

Accrued interest as at balance sheet date was EUR 1.4 million.

The EUR 38.5 million in amounts owed comprises largely dividends and interest due (including accrued interest at year end

and commitment fees, as well as other amounts owed but not yet payable) and various reimbursement claims.

This item also includes pro-rata accrued interest from swap agreements (EUR 20.7 million).

This item shows the purchase money proceeds from the sale or transfer of participating interests and loans as well as

amounts owed with respect to these (e.g. interest payable on purchase money proceeds).

These are reimbursements from trust funds charged to the Federal Ministry for Economic Cooperation and Development

(BMZ).

Other assets largely consists of amounts owed by the Tax Office (EUR 16.2 million), amounts owed by consortium partners

(EUR 7.6 million) and a balancing item for accountancy purposes relating to foreign currency transactions in respect of the

micro valuation units (PLN and MXN) (EUR 3.1 million).

APPenDIx

EUR million

1. Investments in partner countries

a) Participating interests -

b) Loans to undertakings in which DEG has a participating interest 28.2

c) Other loans 524.8

2. Other financial fixed assets

a) Bonds and notes in current fixed assets 1.6

b) Other loans 0.0

Total 554.6

Financial fixed assets with a residual maturity term of up to one year

47

Bonds and notes under current assets

Balances with banks

Deferred tax assets

Assets held under trust

The item Bonds and notes under current assets comprises mainly a bond acquired in connection with the finance business.

The securities itemised in the balance sheet pertain to bonds and debentures worth EUR 5.1 million.

Balances with banks covers overnight and time deposits of EUR 77.0 million invested with the shareholder KfW, and current

account balances of EUR 35.0 million. These include corporate funds temporarily awaiting investment in enterprises in

partner countries.

There are taxable temporary differences that result in deferred tax liabilities of EUR 0.2 million. These are offset by deductible

temporary differences, especially from provisions and risk provisioning. These are not recognised in the balance sheet. The

choice to refrain from taking the excess into consideration was exercised.

The deferred tax liabilities were assessed based on an overall tax rate of 32.45%.

This item includes investments in partner countries from trust funds in the form of participating interests of EUR 15.1 million,

loans of EUR 60.0 million and additional trust funds from BMZ of EUR 4.6 million, as well as trust funds of EUR 2.5 million

from the American development agency USAID and amounts owed on a trust basis of EUR 3.3 million.

EUR 51.1 million of lending is accounted for by the “Federal Republic of Germany’s Lending Programme for Business Start-

Ups to Promote Start-ups of Small and Medium-sized Enterprises by Natural Persons in Developing Countries”, based on

special joint lending funds with partner countries or institutions.

Residual maturity

up to3 months

more than3 months

up to 1 year

more than1 yearup to

5 years

more than5 years

Total

Amounts owed

1. from investment activities 59.2 - - - 59.2

2. from disposal of investments 0.9 - - - 0.9

3. from consultancy and other services 0.1 - - - 0.1

4. from other assets 25.4 0.6 2.4 0.2 28.6

Total 85.6 0.6 2.4 0.2 88.8

Residual maturity profile of debtors, investments and other assets

euR million

48

Purpose-tied reserve fund for complementary measures

Provisions for pensions and similar obligations

Provisions for taxation

other provisions

Complementary measures are designed to enhance the developmental impacts of existing DEG finance projects and facilitate

new ones. They include in particular: project-related training and qualification measures, complementary environmental

and social measures, pre-investment studies, specific consultancy measures, and the assignment of external experts.

To enhance developmental impacts, the sum of EUR 10.0 million was transferred from the previous year’s net income to

purpose-tied reserves in the 2011 financial year, and EUR 1.8 million was transferred from existing reserves for such

measures. After transfer to reserves, the funds are appropriated for a term of up to five years.

In accordance with Article 253 Section 2 clause 2 of the German Commercial Code, provisions were discounted across the

board at the average market interest rate for the past seven years as published by Deutsche Bundesbank in October 2011,

which results from an assumed residual maturity of 15 years. The interest rate was 5.13%, compared to the previous year’s

5.16%. A rise in annual salaries of 3% and a pension rise of 2% or 1% respectively was assumed, depending on remuner-

ation or pension scheme.

Provisions for taxation are for corporation tax and local business tax of EUR 8.2 million for 2011 and for payment of tax

arrears plus interest of EUR 5.2 million following an audit of the 2004-2008 financial years.

Other provisions largely cater for risks in respect of project finance for sureties and guarantees of EUR 7.8 million.

In addition, there are provisions for derivative agreements that neither enter into the foreign currency valuation units

nor are used to control interest rate risks; these take the form of a provision for contingent losses (EUR 9.2 million), for

variable remuneration (EUR 4.6 million) and for savings on interest for future finance in ACP countries (EUR 2.1 million).

APPenDIx

notes on LIABILItIes

subscribed capital/Called up capital

After deduction of unpaid subscribed capital in the sum of EUR 122.1 million from subscribed capital (as per Article 272

Section 1 Clause 3 of the German Commercial Code), called up capital comes to EUR 627.9 million in total.

Sole Shareholder is KfW, Frankfurt am Main.

As a subsidiary of KfW, Frankfurt am Main, DEG is included in the consolidated accounts. These, along with the Manage-

ment Report, may be obtained from KfW.

As a general rule under DEG’s Articles of Association, profits are not distributed. Therefore, the limitation of profit dis tri b-

ution provided for by Article 268 Section 8 of the German Commercial Code for possible sums from the activation

of internally produced intangible assets under current assets, or the activation of deferred tax, does not apply.

49

Liabilities for assets held under trust

Deferred tax liabilities

Amounts owed for financing investment activities to credit institutions

other creditors

The following were made available to DEG on a trust basis for the purpose of financing investments in partner countries and

for business start-up loans: EUR 78.1 million from BMZ, a further EUR 4.6 million for business start-up loans in Afghanistan,

EUR 2.5 million from the US development agency USAID, and EUR 0.3 million from the European Union (EU).

Since these were balanced out against deferred tax assets, they are not shown.

Amounts owed here refers specifically to loans against borrowers’ notes in the amount of EUR 2,153.0 million placed with

the Shareholder KfW Bankengruppe (previous year: EUR 1,971.2 million).

Other creditors includes specifically EUR 16.0 million from the foreign currency adjustment item of the macro valuation

unit in USD, EUR 13.5 million from liabilities in respect of consortium partners and project enterprises, EUR 6.7 million

in respect of Bill & Melinda Gates Foundation funds, and EUR 4.8 million from trust funds not yet forwarded.

Residual maturity

up to3 months

more than3 months

up to 1 year

more than1 year

up to 5 years

more than5 years

Total

Amounts owed to credit institutions for financing investment activities

378.4 362.9 1,248,1 429.0 2,418.4*

Amounts owed to trade creditors 0.8 - - - 0.8

Other amounts owed 39.0 - 6.7 2.6 48.3

Total 418.2 362.9 1,254.8 431.6 2,467.5

Residual maturity profile of amounts owed to creditors

euR million

* of which euR 2,409.2 million (prev. yr. euR 2,166.6 million) to the Shareholder

50

other interest receivable and similar income

Income from write-ups and write-back of provisions in respect of lending business and participating interests

other operating income

For the most part, this item includes income from derivatives transactions (EUR 21.4 million), which is made up of earn ings

from option premiums (EUR 6.4 million) and derivatives sales (EUR 15.0 million), from sureties and guarantees (EUR 1.3

million) and from time deposits with credit institutions (EUR 0.6 million).

The income is made up of project write-ups as well as write-backs of redundant value adjustments and provisions for

project and country risks.

It includes a one-off item from changes to risk provisioning for loans of EUR 26.0 million and for guarantees of

EUR 1.8 million.

This item includes in particular income from the disposal of participating interests (EUR 66.6 million), income from other

services (EUR 6.0 million), and from consultancy (EUR 4.4 million).

Income of EUR 11.2 million (previous year: EUR 0.8 million) resulted from foreign currency valuation as per Article 256a

of the German Commercial Code (HGB) where residual maturity is a year or less.

Out-of-period income resulted from the write-back of EUR 3.1 million in other provisions.

APPenDIx

notes on InCoMe

Income from participating interests and loans

Income from participating interests and from loans in partner countries is largely made up of dividends, interest on loans,

bonds, and related hedging transactions, and commitment fees and commissions on loans. Break-down by region (excluding

the results from hedging transactions) is as follows:

2011EUR million

2010EUR million

Africa 33.5 35.4

America 51.0 45.8

Asia 71.8 71.0

Europe 40.5 35.4

Total 196.8 187.6

51

staff costs

Interest payable and similar charges

Wages and salaries increased due to a rise in staff numbers and salary adjustments.

In respect of provisions for pensions and similar obligations, DEG had in the previous year exercised its right to choose to

retain the higher valuation as per Article 67 Section 1 Clause 2 of the Introductory Act to the Commercial Code (EGHGB)

in relation to retaining the surplus of EUR 4.6 million. As a result, charges for social security, pensions and other benefits

are largely confined to the contributions to the Pension Association of Publicly Sponsored Companies (Versorgungsverband

bundes- und landesgeförderter Unternehmen e.V. – VBLU). In the 2011 financial year, pension payments have been

accoun t ed for as drawing on provisions, while in the previous year, pension payments were included under charges for

social security, pensions and other benefits.

The item Depreciations and value adjustments in respect of financial fixed assets and amounts owed shows provisions

for actual and potential risks (individual and flat-rate value adjustments respectively).

These charges were incurred largely on loans against borrowers’ notes and bank loans (EUR 18.2 million), which have

been set against the net result from derivatives hedging (EUR -3.3 million). There was also a charge arising from the sale

of de rivatives (EUR 5.9 million). The 2011 financial year includes interest charges from the compounding of interest for

pension and other long-term provisions in the sum of EUR 3.6 million (previous year: EUR 0).

notes on ChARGes

Depreciation, value adjustments and provisions in respect of lending business and participating interests

This item includes in particular charges for expert consultants and advisers (EUR 11.5 million), charges for futures transactions

that may not be subsumed under the macro or micro valuation units (EUR 5.6 million), travel expenses (EUR 4.8 million), and

charges for foreign currency valuation as per Article 256a of the German Commercial Code (HGB) where residual maturity

is a year or less (EUR 3.7 million, prev. yr. EUR 7.9 million).

A charge of EUR 4.3 million relates to provision for contingent losses in respect of derivatives with a negative market value

that may not be subsumed under the macro valuation unit.

other operating charges

52

Tax charges of EUR 33.4 million in total, comprising tax on profit for the 2011 financial year of EUR 26.4 million, tax arrears

in the amount of EUR 4.5 million arising from a tax audit covering the years 2004-2008, and foreign tax charges of EUR

2.5 million, are set against income from tax rebates of EUR 4.8 million for the 2010 financial year.

taxes on income and profit

PRoFIt FoR the FInAnCIAL yeAR / net InCoMe

The net income for the financial year of EUR 219.7 million exceeds the profit for the financial year by EUR 1.8 million, the

sum withdrawn from the purpose-tied reserve fund; as stipulated in the Articles of Association, it may not be distributed.

notes on DeRIVAtIVes tRAnsACtIons

In the context of risk management, DEG regularly engages in futures trading and makes use of derivatives products. These

instruments are not used for trading purposes in the sense of items posted in the trading book, but are primarily deployed

to hedge interest rate and currency risks in the asset book.

The market values of derivatives held in the portfolio represent current replacement costs. The positive and negative market

values recorded are largely calculated based on in-house models. The main determinants of these models are interest rate

ratios and related rates of exchange.

APPenDIx

In the 2011 financial year, the following auditing fees were taken into consideration:

In the statement of auditing fees, write-backs of provisions from 2010 in the sum of EUR 8,158 were offset. The statement

of fees for other certification services includes the sum of EUR 18,750 for services that fall within the 2010 financial year.

EUR

Auditing fee 281,842

Other certification services 53,750

Tax consultancy services 18,559

Other services 62,765

Total 416,916

statement of auditing fees as provided by Article 285 clause 1 no. 17

53

Nominal values Positive market values Negative market values

31 Dec. 2010 31 Dec. 2011 31 Dec. 2011 31 Dec. 2011

Contracts with interest-rate risksInterest rate swaps 1,401.7 1,227.1 48.2 12.7Interest rate options Long - - - - Short 143.7 - - -Interest rate cap agreements - - - -Other interest-rate derivatives transactions - - - -Total interest-rate risks 1,545.4 1,227.1 47.1 12.7Contracts with currency risksForward foreign exchange transactions, swaps 166.1 140.8 - 1.8Currency and cross-currency interest-rate swaps 839.9 949.4 44.7 26.1Foreign currency options Long - - - - Short - - - -Other forward supply transactions - - - -Total currency risks 1,005.9 1.090.2 44.7 27.9Contracts with stock-market risksStock options Long - - - - Short - - - -Total stock-market risks - - - -

Total 2,551.3 2,317.3 91.8 40.6

.

Interest-rate risks Currency risks Stock-market risks

31 Dec. 2010 31 Dec. 2011 31 Dec. 2010 31 Dec. 2011 31 Dec. 2010 31 Dec. 2011Residual maturitiesUp to 3 months 0.0 0.0 191.1 140.8 - -More than 3 months up to 1 year 230.4 204.6 55.1 21.1 - -More than 1, up to 5 years 535.5 592.5 200.3 455.5 - -More than 5 years 779.5 430.0 559.4 472.8 - -

Total 1,545.4 1,227.1 1,005.9 1,090.2 - -

Nominal values Positive market values Negative market values

31 Dec. 2010 31 Dec. 2011 31 Dec. 2011 31 Dec. 2011OECD banks 2,551.3 2,317.3 91.8 40.6Banks outside the OECD - - - -Other counterparties - - - -Other agencies in the OECD - - - -

Total 2,551.3 2,317.3 91.8 40.6

Derivatives transactions

Counterparties euR million

Maturities nominal values, euR million

Volumes euR million

For derivatives with a negative market value, provision for contingent losses of EUR 9.2 million was made as at the balance

sheet date.

54

APPenDIx

DEG is required to pay a total of EUR 0.4 million annually under tenancy agreements that run until 2019.

A total of EUR 0.2 million is payable in fees on leasing contracts for the remaining term until 2014.

Obligations from undisbursed participating interests and loans amount to EUR 1,083.7 million.

In addition, commitments to stand surety in the sum of EUR 21.5 million have been made.

DEG is a member institute of the guarantee fund of the Central Savings Banks and Central Giro Institutions provided by

Deutscher Sparkassen- und Giroverband e.V. (DSGV). At the balance sheet date, there is an obligation to make an additional

contribution of no more than EUR 8.6 million (previous year: EUR 7.5 million). The likelihood that DEG will be called upon

to meet this obligation is currently regarded as low, since if a case requiring support arises, other support measures by the

guarantee fund must be undertaken first, before recourse to this obligation.

other financial obligations

DEG stands surety to the value of EUR 50.7 million for 11 project enterprises as collateral for borrowing.

Project-related provision of EUR 7.0 million was made in respect of the possibility that contingent liabilities may be incurred.

Provision of EUR 0.7 million was made for potential risks.

At the balance sheet date, DEG’s shares in two participating interests with a book value of EUR 5.0 million were pledged as

collateral in respect of liabilities of the project enterprises in question.

Given the credit ratings of the project enterprises in question, there is no expectation that any liability/contingent liabilities

incurred will go beyond the scope of the provision made for this purpose as at the balance sheet date.

MIsCeLLAneous

Liability/Contingent liabilities

55

AVeRAGe nuMBeR oF stAFF oVeR the yeAR

These figures include part-time staff (59) and temporary staff (37), but not Management Board, staff on parental leave,

apprentices or local staff in foreign countries.

ReMuneRAtIon oF CoRPoRAte BoDIes

Total charges for the Supervisory Board in the year under review came to EUR 22,703, of which EUR 15,643 was made

up of annual remuneration for membership of the Supervisory Board and the committees, attendance fees and daily

allowances; reimbursement of travel expenses accounted for EUR 5,996, reimbursement of value-added tax for EUR 368,

and entertainment costs for EUR 696.

Remuneration for the Management Board for the 2011 financial year came to EUR 1.303,412 in total. This includes the

sum of EUR 79,625 for benefits in kind and other payments. The performance-related bonus for 2010 was EUR 242,643

in total, of which EUR 121,321 will be paid out over several years. Current annual salary components were set at a uniform

rate of EUR 327,048 for all members of the Management Board.

Total pension allowances for former members of the Management Board and surviving dependants amounted to

EUR 783,133 in total. EUR 9,711.442 was set aside for pension provisions for these persons.

Staff not covered by regular pay scales and senior executives 300

Staff covered by regular pay scales 152

Number of female staff 228

Number of male staff 224

Total 452

56

P. No. Business name and registered office Currency1) Rate 1.00 EUR= … CU2)

(as of 31 Dec. 2011)

DEG holding in

per cent

Equity in TCU3)

Result in TCU3)

A. Home1. P 4216 PCC-DEG Renewables GmbH

Duisburg, GermanyEUR 1.00000 40.00 12,149 -432

B. Abroad I. Africa2. P 1147 Banque Nationale de Développement Agricole

Bamako, MaliXOF 655.95700 21.43 15,740,862 3,550,781

3. P 3199 Corporate Leasing Company Egypt Cairo, Egypt

EGP 7.81043 22.20 148,774 40,168

4. P 4181 Tourism Promotion Services Ltd. Kigali, Rwanda

RWF 779.00500 26.67 9,991,117 120,488

5. P 4422 Banyan Tree Growth Capital Port Louis, Mauritius

USD 1.29390 27.00 42,729 -3,098

6. P 4953 NAMF II (Mauritius) LimitedEbene, Mauritius

USD 1.29390 29.07 4) 4)

II. Amerika7. P 2782 The SEAF Central and Eastern Europe Growth Fund

Washington, USAUSD 1.29390 25.00 12,473 -246

8. P 3977 SAE Towers, LP.Washington, USA

USD 1.29390 26.92 18,086 5) -4,010 5)

9. P 4534 Kendall Court Mezzanine (Asia) Bristol Merit Fund L.P., Cayman Islands

USD 1.29390 24.37 24,617 -1,134

10. P 4557 Tolstoi Investimentos S.A. São Paulo, Brazil

BRL 2.41625 31.14 83,420 17,205

11. P 4580 Acon Latin American Opportunities Fund-A, L . P. Washington, USA

USD 1.29390 40.00 23,970 -1,593

12. P 4942 EMX Capital Partners LPMexiko City, Mexico

USD 1.29390 37.18 4) 4)

13. P 5085 Mongolia Opportunities Fund I L. P.Grand Cayman, Cayman Islands

USD 1.29390 20.00 4) 4)

14. P 5102 Worldwide Group Inc.Charlestown, St. Chr. and Nevis

USD 1.29390 32.28 4) 4)

15. P 5142 Russia Partners Technology Fund LPNew York, USA

USD 1.29390 27.70 4) 4)

Information on investment holdings as per article 285, no. 11 of the German Commercial Code (hGB)

the following table lists Deg’s investment holdings as of 31 December 2011 in accordance with article 285 no. 11 of the german commercial code (HgB) from 20%.

1) iSo currency code

2) cu currency units in local currency

3) tcu = 1,000 local currency units

4) enterprise in start-up phase; no annual statements of accounts available yet.

5) enterprise is being wound up. last audited annual statements of accounts dated 31 Dec. 2008.

APPenDIx

57

P. No. Business name and registered office Currency1) Rate 1.00 EUR= … CU2)

(as of 31 Dec. 2010)

DEG holding in

per cent

Equity in TCU3)

Result in TCU3)

III. Asia

16. P 2502 H&Q Philippine Holdings, Inc. Manila, Philippines

PHP 56.77300 49.98 42,042 6) 5,025 6)

17. P 2787 Benetex Industries Ltd. Dhaka, Bangladesh

BDT 105.97805 28.30 180,542 -97,672

18. P 3283 Langfang Hess Building Materials Machinery, Co. Ltd., Langfang, China

CNY 8.15880 40.00 42,040 4,921

19. P 3594 Jade Cargo International Co. Ltd. Shenzhen, China

CNY 8.15880 24.00 -522,061 149,383

20. P 3599 The New Baghlan Sugar Company Ltd.Baghlan-e Sonhati, Afghanistan

AFN 63.75841 30.31 400,208 -16,735

21. P 3763 HaPe International Ningbo Ltd. Ningbo, China

CNY 8.15880 37.50 88,476 12,762

22. P 3807 Wanfeng MotorcycleWheel Co. Ltd. Xinchang, China

CNY 8.15880 25.00 654,980 176,404

23. P 3878 Ace Power Pvt. Ltd. Colombo, Sri Lanka

LKR 147.51200 26.00 3,937,420 1,078,853

24. P 4518 OJSC Tourism Promotion Services Dushambe, Tadjikistan

TJS 6.15702 21.01 -251 -192

25. P 4538 Asia Insurance 1950 Company Ltd.Bangkok, Thailand

THB 40.96400 24.62 179,306 -19,846

26. P 4545 WPD Energy Vietnam Company Ltd.Hanoi, Vietnam

VND 27.24049 30.00 -156,687 -784,592

27. P 4791 PT Avrist AssuranceJakarta, Indonesia

IDR 11.74332 23.00 1,421,471,000 193,806,000

28. P 4976 Windprojektentwicklung ThailandBangkok, Thailand

THB 40.96400 33.33 4) 4)

IV. Europe

29. P 2562 TOO Knauf Gips Kaptschagaij GmbH Kapchagai, Kazakhstan

KZT 192.34000 40.00 7,647.745 1,583,615

30. P 2762 PII TOW Ukrspon LLC Kiev, Ukraine

EUR 1.00000 20.24 1,475 371

31. P 3445 Tirana Airport Partners SHPK Rinas, Albania

EUR 1.00000 31.70 30,614 8,501

32. P 3511 Center-Invest Bank Rostov-on-Don, Russ. Federation

RUB 41.76500 22.45 5,774,088 219,814

33. P 3665 TOO Isi Gips Inder Inderborskij, Kazakhstan

KZT 192.34000 40.00 1,494,684 102,033

34. P 4095 Emerging Europe Leasing and Finance (EELF) B.V.Amsterdam, Netherlands

EUR 1.00000 25.00 18,883 727

35. P 4641 OOO GematekSt. Petersburg, Russ. Federation

RUB 41.76500 27.95 290,605 83,886

1) iSo currency code

2) cu currency units in local currency

3) tcu = 1,000 local currency units

4) enterprise in start-up phase; no annual statements of accounts available yet.

5) enterprise is being wound up. last audited annual statements of accounts dated 31 Dec. 2008.

6) enterprise is being wound up. last audited annual statements of accounts dated 31 Dec. 2009.

58

APPenDIx

supervisory Board

Gudrun KoppChairwoman

Parliamentary State Secretary,

Federal Ministry for Economic

Cooperation and Development,

Berlin

Dr. Norbert KloppenburgFirst Deputy Chairman

Member of the Board of Managing

Directors, KfW,

Frankfurt am Main

Dr. Hans-Jörg Todt Second Deputy Chairman

Managing Director, AKA –

Ausfuhrkredit-Gesellschaft mbH,

Frankfurt am Main

Dr. Peter AmmonState Secretary,

Federal Foreign Office,

Berlin

(until 19 July 2011)

Eberhard BrandesCEO WWF Germany,

Berlin

Dr. Harald BraunState Secretary,

Federal Foreign Office,

Berlin

(as of 6 September 2011)

Ernst BurgbacherParliamentary State Secretary,

Federal Ministry of Economics

and Technology,

Berlin

Cécile Couprie

Assistant Director of the

Finance Department,

Proparco, Paris

(as of 6 September 2011)

Arndt G. Kirchhoff Managing Partner,

Kirchhoff Automotive GmbH & Co.

KG, Attendorn

Hartmut KoschykParliamentary State Secretary

Federal Ministry of Finance,

Berlin

Siegmar Mosdorf Parliamentary State Secretary (ret.)

Partner at CNC – Communications &

Network Consulting AG,

Berlin

Dr. Ulrich SchröderChairman of the Managing Board,

KfW, Frankfurt am Main

Marianne Sivignon-LecourtDirector of the Legal Dept. /

General Counsel

Proparco, Paris

(until 7 June 2011)

Prof. Dr. Beatrice Weder di MauroProfessor of Economics

Johannes Gutenberg University,

Mainz

Management Board

Dr. Michael Bornmann

Philipp Kreutz

Bruno WennChairman

CoRPoRAte BoDIes

Cologne, 14 February 2012

DEG – Deutsche Investitions- und

Entwicklungsgesellschaft mbH

Management Board

Dr. Bornmann Kreutz Wenn

59

AuDItoR’s RePoRt

We have audited the Annual Statements of Accounts –

con sisting of the Balance Sheet, the Profit and Loss Account

and Appendix – including the accounting system and the

Management Report – of DEG, Deutsche Investitions- und

Entwicklungsgesellschaft mbH, Cologne, for the financial

year from 1 January to 31 December 2011. The responsi bility

for keeping the books and records and preparing the Annual

Statements of Accounts and the Management Report, in

compliance with the provisions of the German Commercial

Code (HGB) and the supplementary provisions of the

Articles of Association, rests with the Company’s Board of

Management. Our task is to provide an opinion, based on

our audit, on the Annual Statements of Accounts, including

the accounting system, and on the Management Report.

We conducted our audit of the Annual Statements of Ac-

counts in accordance with Article 317 of the German Com-

mercial Code (HGB) and in compliance with the generally

accepted German standards for auditing financial state-

ments established by the Institut der Wirtschaftsprüfer

(German Institute of Accountants – IDW). Those standards

require that we plan and perform the audit with reasonable

assurance of detecting material misstatements and infringe-

ments affecting the presentation of the net worth, finan-

cial and earnings position in the Annual Statements of Ac-

counts as prepared in accordance with German accounting

principles, as well as in the Management Report. The audit

procedures adopted take account of information about the

Company’s business activities and its economic and legal

environment as well as possible errors. For the most part,

the effectiveness of the accounting-related internal audit

system and evidence supporting the amounts and dis-

closures in the books and records, the Annual Statements

of Accounts and the Management Report, are examined on

the basis of spot checks. The audit includes assessing the

accounting principles used and significant estimates made

by the members of the Company’s Management Board, as

well as evaluating the overall presentation of the Annual

Statements of Accounts and the Management Report. We

believe that our audit provides a reasonable basis for our

opinion.

Our audit has not given rise to any objections.

In our judgement, based on the audit findings, the Annual

Statements of Accounts comply with the statutory regu-

lations and the supplementary provisions in the Articles of

Association and give a true and fair view of the net worth,

financial and earnings position of the Company in accord-

ance with German accounting principles. The Management

Report conforms to the Annual Statements of Accounts,

provides a true understanding of the Company’s position

overall and presents an accurate picture of the opportu n-

ities and risks of future development.

Düsseldorf, 15 February 2012

KPMG AGWirtschaftsprüfungsgesellschaft

Jörg Kügler Myriam Lehnen

Auditor Auditor

60

Published by:

DEG – Deutsche Investitions- und

Entwicklungsgesellschaft mbH

Kämmergasse 22

50676 Cologne, Germany

PO Box 10 09 61, 50449 Cologne, Germany

Phone +49 221 4986-0

Fax +49 221 4986-1290

info@deginvest.de

www.deginvest.de

IMPRInt

Design and Layout:

Printed by:

Photos:

Werkstudio: Werbung und Design GmbH

Düsseldorf

Margreff Druck und Medien GmbH

Essen

Cover (from left to right):

DEG/Africa Interactive bv (Amsterdam), Christian Berg;

DEG/Africa Interactive bv (Amsterdam), Shubhangi Singh;

DEG/ich OHG (Cologne), Thorsten Thor

ISSN: 1862-779X

The Annual Report with Financial Statements

and Management Report is also available

in German.

Cologne, March 2012

translation:

Delphine Lettau

London

klimaneutral

III

IV

DEG – Deutsche Investitions- und Kämmergasse 22

Entwicklungsgesellschaft mbH 50676 Cologne, Germany

Phone +49 221 4986-0

Fax +49 221 4986-1290

info@deginvest.de

www.deginvest.de