ProCredit : 2021 Annual Financial Statements ProCredit Holding AG & Co KGaA

Contents

Combined Management Report

4

Fundamental information about the Group ........................................................................................ 4

Human Resources report ............................................................................................................................ 9

Report on the economic position of the Group .............................................................................. 12

Management report of ProCredit Holding ........................................................................................ 25

Report on expected developments ....................................................................................................... 27

Risk report ................................................................................................................................................... 29

Disclosures required by Takeover Law ................................................................................................. 71

Corporate Governance Statement ...................................................................................................... 72

Annual Financial Statements

80

Balance Sheet .............................................................................................................................................. 81

Income Statement ..................................................................................................................................... 82

Notes to the Annual Financial Statements ........................................................................................ 83

Independent Auditor's Report ............................................................................................................. 102

Combined Management Report

The Management Report for ProCredit Holding AG & Co. KGaA (ProCredit Holding) and the Group Management Report for the ProCredit group (ProCredit) are presented as a Combined Management Report. It was prepared in accordance with sections 289ff and 315ff of the German Commercial Code (Handelsgesetzbuch - HGB) and the German Accounting Standard 20 (Deutscher Rechnungslegungsstandard 20 - DRS 20). The Risk Report also contains notes pursuant to IFRS 7.

FUNDAMENTAL INFORMATION ABOUT THE GROUP

Our Strategy

The activities of the ProCredit group comprise the financing of Small and Medium-sized Enterprises (SMEs) and direct banking for private clients. We operate in South Eastern Europe, Eastern Europe, South America and Germany.

The superordinated company of the group is ProCredit Holding, based in Frankfurt am Main.

Through our business activities we aim to sustainably provide a return on investment for our shareholders while making a contribution to economic, social and ecological development. Our business strategy is based on long-term relationships with our clients and staff as well as a conservative approach to risk. The group does not engage in speculative lines of business.

Accountability is part of our culture. Sustainable behaviour is therefore essential for us, and we want our activities to make a positive, lasting contribution to the environment and to society. We coordinate our actions using a comprehensive environmental management system. Accordingly, we analyse the environmental impact of both our own activities and those of our clients. During this process, we promote green investment projects, especially in energy efficiency and renewable energies. We present our activities in line with the United Nations Sustainable Development Goals in our Impact Report. In the face of the current economic and pandemic situation, we feel more validated than ever in our sustainable business approach.

We aim to be the "Hausbank" for our clients, and thus to be their first point of contact for financing and deposits as well as for account and payment services. Our SME clients typically have financing needs ranging from EUR 50 thousand to the single-digit millions. As specialists in financing SMEs, we understand the particular challenges these clients face and the specific needs they have, often going well beyond just loans. We offer all banking services in terms of financing, account operations, payments and deposit business, and we also support our clients in their long-term investment projects. In addition, we offer efficient solutions for trade finance business and international payments through our network of banks.

Our target group comprises innovative companies showing dynamic growth and stable, formalised structures. Through our work, we want to make a contribution to creating jobs, enhancing capacity for innovation, and encouraging investments in ecological projects. We place particular emphasis on issuing green loans and promoting local production, especially in agriculture. Our approach is based on a careful and critical selection of clients, with solvency, transparency and social responsibility at the heart of the lending process. In this way, we want to ensure that our customers can adequately service their loans from their current income and also build up reserves for potentially more difficult times. We attach great importance to transparent business relationships. This requires regular communication with us as a banking institution, as well as transparent interaction of our customers with

Combined Management Report | Fundamental information about the Group

society. We believe that our clients also make an important contribution to the formal sector, and thus to social and economic development, through their tax burden and by maintaining fair working conditions. At the same time, we make clear demands on our customers with regard to ethical business practices and the responsible treatment of their environment. Consideration of our clients' social and environmental risks is firmly integrated into our credit decision processes. We also place great emphasis on the prevention of money laundering, terrorist financing and other illegal activities.

We maintain long-term relationships with our customers and are convinced that this is beneficial for both sides: Our customers have us as a reliable partner who stands by their side, even when economic conditions become difficult. At the same time, we create a portfolio of loans to reliable clients that grows steadily and is of very good quality in the context of our markets.

In addition to serving SMEs, we also pursue a direct banking strategy for private clients, particularly the growing middle class. Our comprehensive range of online services creates the foundation for long-term client relationships. Our clients can conduct their banking transactions directly via our digital channels, and individual customer enquiries are processed in a focused way through our call centres. In general, we do not offer counter and cash transactions, which meant that the changes in contact and distance rules introduced in the time of the pandemic were relatively easy for us to implement and had virtually no impact on business operations. With our direct services, we aim to stand out from other providers in our markets in terms of convenience, security and transparency.

Consumer loans play virtually no role in our business strategy. Such loans can be a lucrative bulk business through which high margins can be achieved with little administrative effort. Overly intensive marketing of consumer loans, however, can lead to over-indebtedness problems for borrowers; at the same time, poorly collateralised consumer loan portfolios represent a higher risk for banks, especially in times of economic uncertainty. Consumer lending business is therefore not compatible with our strategy. In order to achieve sustainable profits, we instead place emphasis on long-term relationships with our customers. The share of consumer loans in our total portfolio is far below 1%.

The quality and motivation of staff is a key factor in achieving our business objectives. We select our staff carefully and offer long-term career prospects based on a transparent, standardised group-wide salary and promotion structure. In order to provide continued staff training and promote ongoing exchange within the group, we run a group-wide training programme in our own training centres. Our group-wide Code of Conduct emphasises a commitment to mutual respect and responsible behaviour in daily life, and annual workshops are held so all staff can discuss and contribute to its further development. Across the entire group, there is a diverse range of employees from various academic backgrounds and a balanced gender distribution at all business levels. We believe that this diversity promotes innovation and makes a significant contribution to the long-term success of our business.