DEUTSCHE TELEKOM INTERNATIONAL FINANCE B.V.

MAASTRICHT

Annual Report

for the year ended December 31, 2023

Company boards reports	3
Report of the Management Board	4
Report of the Supervisory Board	7
Financial statements	8
Statement of comprehensive income	9
Statement of financial position	10
Statement of changes in equity	11
Statement of cash flows	12
Notes to the financial statements	13
Other information	33
Proposed appropriation of result according to article 21 of the articles of association	33
Independent auditor’s report	34

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Company boards reports
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Report of the Management Board

The Management Board is pleased to present the financial statements of Deutsche Telekom International Finance B.V. (“the Company”) for the financial year ended December 31, 2023.

Objectives, structure, and staffing

The Company was incorporated in the Netherlands in 1995 as a wholly owned subsidiary of Deutsche Telekom AG (DTAG). The purpose of the Company is to finance business and companies belonging to the Deutsche Telekom Group by raising funds from the capital markets. The Company has a two-tier board structure. The Management Board consists of two members and no further staff is hired. The Supervisory Board consists of three members, all hired by DTAG. According to the regulations of the Dutch Civil Law (Wet Toezicht Bestuur effective as of 1 January 2013 and the gender appointment quota for supervisory boards effective as of 1 January 2022), the Company’s Boards are unbalanced since less than 30% of their members are female. The Company’s Board members have been appointed based on qualifications and availability, irrespective of gender. In order to create more balance, the Boards will take these regulations into account with respect to future appointments of Board members.

Corporate Responsibilities

The Company recognizes the importance of corporate social responsibility (CSR) and is committed to contributing positively to society and the environment. The Company has implemented several CSR initiatives focused on digital inclusion, environmental sustainability, and social empowerment. DTAG has set ambitious sustainability goals aligned with the United Nations Sustainable Development Goals (SDGs). These goals encompass areas such as reducing greenhouse gas emissions, increasing energy efficiency, promoting responsible supply chain practices, and ensuring data privacy and security. Since financial year 2017, DTAG has published a non-financial statement (NFS) as part of the management report. The annual Corporate Responsibility (CR) report of DTAG supplements this NFS, meeting in full the requirements from a range of different stakeholders for substantiated accountability. The NFS is used by CR experts as an aid to rating Deutsche Telekom’s sustainability performance. In 2023 DTAG has focused on combining ESG measures along the operating segments in the CR report so as to more clearly reflect the Group perspective. This will also prepare DTAG for compliance with the CSRD requirements that will apply to DTAG starting in the 2024 financial year and probably to the Company in the 2025 financial year. As far as applicable the Company has embraced the sustainability goals as set by DTAG and the measures to be taken and to report.

Business activities

In 2023 the Company did not issue any new bonds, nor did it draw any new bank loans. In 2023 the Company issued tender offers for the early redemption of parts of certain of its outstanding bonds. With these tenders the Company redeemed EUR 2,089 million, GBP 239 million (EUR 270 million), both on February 1, 2023, and USD 632 million (EUR 591 million) on March 13, 2023. On July 19, 2023 the Company redeemed a USD Bond with a nominal amount of USD 750 million (EUR 669 million), making use of the two months early redemption option. Furthermore, the Company redeemed EUR 200 million on March 17, 2023, EUR 1,115 million on April 3, 2023 and GBP 208 million (EUR 241 million) on October 6, 2023. Loans granted to DTAG were repaid to the Company for the same total nominal amounts an on same dates.

Financial developments

Before income taxes, the Company made a loss of EUR 21,010 thousand in 2023 versus a loss before income taxes of EUR 32,649 thousand in 2022. The result before income taxes of the Company under IFRS is volatile since derivatives are carried at fair value and the non-derivative financial instruments at amortized cost. Additionally, the result before income taxes is affected by the decreased impairment of loan assets in 2023 compared with the impairment of loan assets recognized in 2022. We refer to note 6 of the notes to the financial statements for further details.

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The Company made a net loss of EUR 21,099 thousand in 2023 versus a net profit of EUR 46,099 thousand in 2022. In 2023 the company received a refund of income tax related to the 2020 fiscal year in the amount of EUR 2,906 thousand. The net result in 2022 was affected by the current and deferred tax position taken by management. In 2022 the Company received refunds of income taxes over the financial years 2018 and 2019 for a total amount of EUR 6,167 thousand and recognized additional expected income tax receivables for the years 2020, 2021 and 2022 for a total amount of EUR 8,337 thousand. The recognition of refunds of income taxes were a result of adoption of corporate income tax calculation according to a cost-plus method for the relevant financial years. The release of the deferred tax position via the 2022 statement of comprehensive income was a result of a reassessment by the Management Board and concluded that, according to the definitions of IFRS 12.5, the Company had no reason for a recognition of deferred taxes. We refer to note 5 of the notes to the financial statements for further details.

Management Board policy with respect to risks

The Management Board is responsible for the strategy, operations, financial position, financial reporting and compliance of the Company. Within each of these fields the Company faces certain risks which are managed by the Management Board. Each of the risk fields are reviewed and discussed in the Management Board meetings and measurements are mitigated. However, the way the Company has been structured makes it inherently very limited exposed to risks. The strategic decisions are liaised with DTAG – Group Treasury and the Supervisory Board of the Company. Therefore, the risks related to the Company’s strategy are minimized.

The operational activities of the Company are performed by a small team of experienced staff. Nevertheless, management has established a fall-back procedure for mitigating the risks relating to the operational activities like omissions and fraud. Furthermore, the Company participates in the DTAG’s Internal Control System (ICS). The accounting-related ICS comprises both preventive and detective controls which include general IT management checks, four eyes principle, segregation of functions and the monitoring of the accounting reporting process. The internal audit department of DTAG is responsible for independently reviewing the functionality and effectiveness of the ICS and the Audit Committee of DTAG monitors the effectiveness of the ICS and the DTAG risk management system. In 2023 and 2022 respectively the ICS-controls of the Company were assessed and the results thereof were signed off by management.

The main financial risks arising from the Company’s financial instruments are currency risk, interest rate risk and liquidity risk. Additionally, there is a limited credit and counterparty default risk. Management of these risks is performed in accordance with DTAG Group financial risk management policy. We regard effective management of the interest rate risk and foreign currency risk as one of our main tasks. The currency risk is mitigated by means of raising the funds in the same currency as the corresponding financing provided to the borrowers. However, currency results under IFRS arise because the Company concluded two USD interest financial instruments in the past which are classified and valuated differently compared to the USD loans for which hedges these contracts were concluded. The interest rate levels and the maturities of the Company’s funding do in principle match with the interest rate levels, including a margin, and the maturities of the corresponding loans provided by the Company. The credit and counterparty default risks are mainly covered by the guarantee agreement with DTAG. In this guarantee agreement the own risk for the Company is limited to EUR 10 million in total for all outstanding financial assets.

The Company has obligations to disclose annual and non-audited semi-annual external financial reporting and a monthly internal financial reporting. Since the activities of the Company and the kind of transactions closed do not differ much from previous ones, the risk of false or misleading reporting is low.

Compliance with rules and regulations is a main risk which has a narrow focus with the Management Board. Within DTAG the Management is in close contact with the departments Group Compliance, Legal and Tax in order to mitigate the risks related to relevant changes in laws and regulations. Furthermore, the Management Board has access to a network of external legal and tax advisors in order to mitigate possible risks and uncertainties.

For further details of the risk policies, we refer to note 1 of the notes to the financial statements.

Code of Conduct and corporate culture

The Company applies and is in compliance with the Deutsche Telekom’s group Code of Conduct. The code includes measurements regarding Corporate Governance, dealing with business relationship, avoiding conflicts of interest, private use of company property, handling information and rules of behaviour. Deutsche Telekom actively stimulates staff of all its group companies to live the corporate culture. The six Guiding Principles help to keep the shared values in mind at all times, and to align actions.

Future business and financing developments and expectations

The Management Board does not expect any new financings in 2024. Since derivatives are carried at fair value and the non-derivative instruments at amortized costs, the financial result under IFRS of the Company is expected to remain volatile. However, management expects net positive cash flow for the year ending December 31, 2024, as well as in each of the following years.

Events after the statement of financial position date

On January 30, 2024 the Company redeemed a EUR Bond with a remaining outstanding nominal value of EUR 834 million and a loan to DTAG with the same outstanding nominal amount was repaid to the Company. These repayments will cause a negative impact of TEUR 424 on the interest result and equity of the Company in 2024.

Management representation

The members of the Management Board certify that, to the best of their knowledge:

the financial statements give a true and fair view, in all material respects, of the assets, the liabilities, the financial position and profit and loss of the Company;

the annual report gives a true and fair view, in all material respects, of the Company as per December 31, 2023 and the business activities during 2023; and

the annual report describes the material risks that the Company is facing.

Maastricht, March 15, 2024

The members of the Management Board,

Markus Schäfer Frans Roose

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Report of the Supervisory Board

As per December 31, 2023 the Supervisory Board of Deutsche Telekom International Finance B.V. comprised the following members:

 S. Wiemann, (m), Group Treasurer at Deutsche Telekom AG, Bonn, Germany; appointed on March 7, 2016

 Dr. Ch. Dorenkamp, (m), Senior Vice President Group Tax at Deutsche Telekom AG, Bonn, Germany; appointed on July 1, 2014

 Dr. A. Lützner (m), Vice President Legal GD/USA & Organization EU at Deutsche Telekom AG, Bonn, Germany; appointed on November 1, 2007

According to the regulations of the Dutch Civil Law (Wet Toezicht Bestuur effective as of January 1, 2013 and the gender appointment quota for supervisory boards effective as of January 1, 2022), the Company’s Supervisory Board is unbalanced since less than 30% of its members are female. The Company’s Supervisory Board members have been appointed for an indefinite period and based on qualifications and availability, irrespective of gender. In order to create more balance, the Boards will take these regulations into account with respect to future appointments of Board members.

The Supervisory Board met once on March 27, 2023. During this meeting the Management Board presented the business results for the year 2022 and a forecast for 2023. Main discussed items were the release of the deferred tax position, the use of a cost-plus method for income tax calculations, the liability management transactions and the further decrease of financial assets and liabilities in the coming years. Furthermore, the dividend policy of the company was discussed.

In the reporting year, bonds and assignable loans to group companies were repaid in aggregate volumes per currency of EUR 3,404 million, USD 1,382 million (EUR 1,260 million) and GBP 447 million (EUR 511 million), respectively. After the reporting year, on January 22, 2024 the Company entered into a Loan Assumption Agreement with Deutsche Telekom AG (DTAG) and Magyar Telekom Nyrt. (MT), which is a DTAG group company. As a result of this agreement, parts of three loans to DTAG with an aggregate amount of EUR 225 million were assigned to MT. On January 30, 2024 the Company redeemed a EUR Bond with a remaining outstanding nominal value of EUR 834 million and a loan to DTAG with the same remaining nominal amount was repaid to the Company.

The financial statements for the year 2023 as presented by the Management Board have been audited and were given an unqualified opinion by the independent external auditor of Deloitte Accountants B.V. The independent auditor’s report is included in this report. The Supervisory Board has authorized the financial statements for the year 2023 of Deutsche Telekom International Finance B.V. for issue by the management Board on March 15, 2024 for approval by the General Meeting of Shareholders. The Supervisory Board recommends that the General Meeting of Shareholders adopts the financial statements for the year 2023.

The statement of comprehensive income for the year 2023 discloses a net loss of EUR 21,099 thousand.

The Supervisory Board has taken notice of the performed ICS control test assessment in 2023. By the controls and payment procedures in the ICS, the risks of fraud and mistakes have been mitigated.

The Supervisory Board takes this opportunity to express its appreciation for the performance of the Management Board during the financial year 2023.

Maastricht, March 15, 2024

Dr. Ch. Dorenkamp Dr. A. Lützner S. Wiemann

‎Financial Statements

‎Statement of comprehensive income

thousands of €
	Note	2023	2022

Finance income	2
Interest income		845,745	907,043
Interest expense		(872,802)	(933,333)
Impairment reversals on financial assets	6	3,457	-
Impairment on financial assets	6	-	(2,316)
Other financial income / (expense)	3	3,055	(3,688)

Loss from financial activities		(20,545)	(32,294)

General and administrative expenses	4	(489)	(397)
Other operating income		24	42

Loss from operations		(465)	(355)

Loss before income taxes		(21,010)	(32,649)

Income taxes	5	(89)	78,748

(Loss) / Profit after income taxes		(21,099)	46,099

Other comprehensive income		-	-

(Loss) / Profit attributable to owners:		(21,099)	46,099
Total comprehensive (loss) / profit attributable to the owners:		(21,099)	46,099

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Statement of financial position

(Before proposed appropriation of result)

thousands of €
	Note	31-12-2023	31-12-2022

ASSETS

Non-current assets		15,611,053	20,064,012
Financial assets	6	15,611,053	20,064,012

Current assets		2,220,299	3,266,754
Financial assets	6	2,205,906	3,239,496
Income tax receivable	5	5,395	8,337
Other assets		4	5
Cash and cash equivalents with aff. comp.		8,994	18,916

TOTAL ASSETS		17,831,352	23,330,766

SHAREHOLDER'S EQUITY AND LIABILITIES

Shareholder's equity	8	207,460	249,518
Issued Capital		500	500
Retained earnings		228,059	202,919
Net (loss) / profit		(21,099)	46,099

Non-current liabilities		15,428,121	19,852,667
Financial liabilities	7	15,428,121	19,952,667


Current liabilities		2,195,771	3,228,581
Financial liabilities	7	2,195,674	3,228,469
Other liabilities		97	112

Liabilities		17,623,892	23,081,248

TOTAL SHAREHOLDER'S EQUITY AND LIABILITIES		17,831,352	23,330,766

‎Statement of changes in equity

thousands of €	Note	Issued share capital	Retained earnings	Unappropriated result for the year	Total
		Issued share capital	Retained earnings	Unappropriated result for the year	Total
	8

Balance as at January 1, 2022		500	186,835	23,705	211,040

Movements
Net (loss) / profit				46,099	46,099
Appropriation of result			23,705	(23,705)	-
Transactions with owners
Dividends paid			(7,621)		(7,621)

Balance as at December 31, 2022		500	202,919	46,099	249,518

thousands of €	Note	Issued share capital	Retained earnings	Unappropriated result for the year	Total
		Issued share capital	Retained earnings	Unappropriated result for the year	Total
	8

Balance as at January 1, 2023		500	202,919	46,099	249,518

Movements
Net (loss) / profit				(21,099)	(21,099)
Appropriation of result			46,099	(46,099)	-
Transactions with owners
Dividends paid			(20,959)		(20,959)

Balance as at December 31, 2023		500	228,059	(21,099)	207,460

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Statement of cash flows

thousands of €
	Note	2023	2022
	9
Interest received	2	795,068	957,305
Interest paid	2	(808,070)	(965,549)
Interest received from derivatives	3	229,974	172,661
Interest paid from derivatives	3	(198,369)	(140,037)
Guarantee fees paid	7	(18,914)	(22,976)
Net discount received on repaid bonds	7	77,657	-
Net discount paid on repaid loans	6	(77,657)	-
Net income tax received	5	2,852	3,552
Others	4	(528)	(375)

Net cash generated from operating activities		2,013	4,582

Proceeds from repayments of current loans	6	2,972,156	3,098,330
Proceeds from repayments of non-current loans	6	2,210,910	-

Net cash generated from investing activities		5,183,066	3,098,330

Repayment of current financial liabilities	7	(2,963,132)	(3,089,530)
Repayment of non-current financial liabilities	7	(2,210,910)	-
Dividend payments	8	(20,959)	(7,622)

Net cash used in financing activities		(5,195,001)	(3,097,152)

Net (decrease) increase in cash and cash equivalents with aff. comp.		(9,922)	5,760

Cash and cash equivalents with aff. comp., at the beginning of the year		18,916	13,156

Cash and cash equivalents with aff. comp., at the end of the year		8,994	18,916

‎Notes to the financial statements

General information

Deutsche Telekom International Finance B.V. (hereafter “the Company”) is the financing company of Deutsche Telekom AG, Bonn, Germany (hereafter “DTAG”). Its principal activities consist of the issuance of debt instruments and funding of the Deutsche Telekom Group. The Company has its registered office at Stationsplein 8-K, Maastricht, the Netherlands, registered under number 33274743 with the Dutch trade register “Kamer van Koophandel” and is a 100% subsidiary of DTAG, which is also the ultimate parent of the Company. The Company’s financial statements are included in the consolidated financial statements of DTAG. The financial statements of the Company for the 2023 financial year were authorised for issue by the Management Board on March 15, 2024.

Basis of preparation

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of its derivatives. The financial statements have been prepared in accordance with International Financial Reporting Standards (hereafter “IFRS”) as adopted by the EU and with Part 9 of Book 2 of the Dutch Civil Code. All IFRSs issued by the International Accounting Standards Board (hereafter “IASB”) adopted by the European Commission for use in the EU and effective at the time of preparing these financial statements have been applied by the Company. The financial year corresponds to the calendar year. Both the functional and presentation currency of the Company is Euro (EUR). All values are rounded to the nearest thousand except when indicated otherwise. As there is no doubt upon the entity’s ability to continue in business for the foreseeable future the financial statements continue to be prepared on a going concern basis.

Initial application of standards, interpretations and amendments to standards and interpretations in the financial year

In the 2023 financial year, the Company applied the following IASB pronouncements and/or amendments to such pronouncements for the first time:


Pronouncement	Title		Changes	Impact on the presentation of the Company’s results of operations and financial position
Pronouncement	Title	Applied by the Company from	Changes
IFRS 17	Insurance Contracts	Jan. 1, 2023	IFRS 17 governs the accounting for insurance contracts and replaces IFRS 4.	No material impact.
Amendments to IFRS 17	Insurance Contracts	Jan. 1, 2023	The initial application of IFRS 17 was postponed until January 1, 2023. The fundamental principles under IFRS 17 remain unaffected. The amendments IFRS 17 are aimed at helping entities implement the standard and, at the same time, avoiding a significant loss of useful information. The option for companies to delay application of IFRS 9 until the initial application of IFRS 17 has also been extended until January 1, 2023.	No material impact.
Amendments to IFRS 17	Initial Application of IFRS 17 and IFRS 9 – Comparative information	Jan. 1, 2023	The supplementary transition option relating to comparatives in the first reporting year allows for the option of a different classification pursuant to IFRS 9 (classification overlay) for the comparative periods in the year of first-time application of both standards. In addition, for financial assets that relate to insurance contracts, existing classification options under IFRS 9 can be exercised again if IFRS 9 was applied prior to the first-time application of IFRS 17.	No material impact.
Amendments to IAS 1 and IFRS Practice Statement 2	Presentation of Financial Statements	Jan. 1, 2023	The amendments to IAS 1 require entities to disclose their material accounting policies rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 “Making Materiality Judgements” contain guidance on applying materiality judgments to accounting policy disclosures.	No material impact.
Amendments to IAS 8	Definition of Accounting Estimates	Jan. 1, 2023	The amendments relate to the definition of accounting estimates. It is clarified how entities can distinguish between changes to accounting policies and to accounting estimates.	No material impact.
Amendments to IAS 12	Deferred Tax related to Assets and Liabilities arising from a Single Transaction	Jan. 1, 2023	IAS 12 provides for exemptions to the recognition of deferred taxes in specific cases. It was previously unclear as to whether the initial recognition exemptions also apply for transactions in which the initial recognition of an asset and a liability gives rise to equal taxable and deductible temporary differences. The exemptions apply specifically to leases and restoration obligations. The IASB now clarifies that the exemption relating to the recognition of deferred taxes is not applicable in the aforementioned configuration.	No material impact.
Amendments to IAS 12	Income taxes: International Tax Reform – Pillar Two Model Rules	Jan. 1, 2023	The amendments introduce a temporary exception to the accounting for deferred taxes arising from the jurisdictions implementing the global tax rules. The amendments require an entity to disclose that it has applied the temporary exception. The amendments also introduce targeted disclosure requirements for affected entities to help users of the financial statements better understand an entity’s exposure to income taxes arising from legal regulations to ensure minimum taxation levels globally (under the OECD Pillar Two Model Rules), particularly before legislation implementing these rules takes effect.	No material impact.

Standards, interpretations and amendments issued, but not yet to be applied

Pronouncement	Title	To be applied by	Changes	Expected impact on the presentation of the Company’s results of operations and financial position
Pronouncement	Title	the Company from	Changes
IFRSs endorsed by the EU
Amendments to IFRS 16	Lease Liability in a Sale and Leaseback	Jan. 1, 2024	The provisions require a seller-lessee to subsequently measure lease liabilities arising from a sale and leaseback transaction in a way that it does not recognize any amount of the gain or loss that relates to the right of use it retains. The requirements for initial measurement of the right-of-use asset have not been amended. By contrast, the change to the subsequent measurement of the lease liability requires variable lease payments that do not depend on an index or interest rate to also be considered in the initial measurement of the lease liability from a sale and leaseback transaction.	No impact.
Amendments to IAS 1	Classification of Liabilities as Current or Non-current	Jan. 1, 2024	The amendments clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period. The amendment also clarifies the definition of settlement of a liability.	No material impact.
Amendments to IAS 1	Non-current Liabilities with Covenants	Jan. 1, 2024	The amendments clarify that covenants in loan agreements with which an entity is required to comply only after the reporting date do not affect the classification of a liability on the reporting date as current or non-current. By contrast, covenants with which an entity must comply on or before the reporting date affect the classification.	No material impact.
IFRSs not yet endorsed by the EU ^a
Amendments to IAS 7 and IFRS	Supplier Finance Arrangements	Jan. 1, 2024	The subject of the amendments is supplier finance arrangements, especially reverse factoring arrangements. The amendments created additional disclosure requirements in accordance with IAS 7 and IFRS 7 to increase transparency about the impact that supply finance arrangements have on an entity’s liabilities, cash flows, and liquidity risk.	No impact.
Amendments to IAS 21	Lack of Exchangeability	Jan. 1, 2025	The amendments amend IAS 21 to – specify when a currency is exchangeable into another currency and when it is not; – specify how an entity determines the exchange rate to apply when a currency is not exchangeable; and – require the disclosure of additional information when a currency is not exchangeable.interest rate to also be considered in the initial measurement of the lease liability from a sale and leaseback transaction.	No impact.

^a For standards not yet endorsed by the EU, the date of first-time adoption scheduled by the IASB is assumed for the time being as the likely date of first-time adoption.

With the exception of the standards, interpretations, and amendments of standards and interpretations that are effective for the first time in the financial year, the Company did not make any major changes in its accounting policies.

Adjustment of comparable figures

Statement of cashflows. The 2022 comparable figures positions of “Interest received” and “Proceeds from repayment of current loans” in the Statement of cashflows have been adjusted compared to their disclosures in the 2022 financial statement. The Management Board decided to correct the positions with regard to the repayment parts of the semi-annual annuity payments and move the repayments from “Interest received” to “Proceeds from repayment of current loans”. The adjustments do not have any impact on the equity or result of the Company.

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Accounting policies

Key assets and liabilities shown in the statement of financial position are subsequently measured as follows:

Items in the statement of financial position	Measurement principle
Items in the statement of financial position	Measurement principle
ASSETS
CURRENT ASSETS
Cash and cash equivalents	Amortized cost
Other financial assets
Loans to group companies; including interest receivables	Amortized cost
Derivative financial instruments	At fair value through profit and loss
ASSETS
NON-CURRENT ASSETS
Other financial assets
Loans to group companies	Amortized cost
Derivative financial instruments	At fair value through profit and loss
Deferred tax assets	Non-discounted amount measured at the tax rates that are expected to apply to the period when the asset is realized or the liability settled
SHAREHOLDERS’ EQUITY AND LIABILITIES
CURRENT LIABILITIES
Financial liabilities
Bonds and other securitized liabilities	Amortized cost
Derivative financial instruments	At fair value through profit and loss
Income tax liabilities	Amount expected to be paid to the taxation authorities, using the tax rates that have been enacted or substantively enacted by the end of the reporting period
Other liabilities	Amortized cost
SHAREHOLDERS’ EQUITY AND LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities
Bonds and other securitized liabilities	Amortized cost
Derivative financial instruments	At fair value through profit and loss
Deferred tax liabilities	Non-discounted amount measured at the tax rates that are expected to apply to the period when the asset is realized or the liability settled

‎The material principles on recognition and measurement outlined below were applied uniformly to all accounting periods presented in these financial statements.

Cash and cash equivalents with aff. comp., which include the balance from bank accounts included in the cash pooling and the inter-company current account with DTAG, are generally measured at amortized cost.

Financial instruments

Financial instruments are recognized as soon as the Company becomes a party to the contractual regulations of the financial instrument. However, in the case of regular way purchase or sale, the settlement date is relevant for the initial recognition and derecognition. This is the day on which the asset is delivered to or by the Company. In general, financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the entity currently has a right to offset the recognized amounts and intends to settle on a net basis. Transferred financial assets are derecognized in full if substantially all the risks and rewards of ownership are transferred or if some of the risks and rewards of ownership are transferred (risk sharing) and the acquirer has both the legal and the practical ability to sell the assets to a third party. If, in cases where risk is shared, the acquirer is unable to sell the assets to a third party, the assets will continue to be recognized to the extent the maximum risk retained. Financial liabilities are derecognized when the obligation specified in the contract expires or if there is a substantial modification of the terms of the contract.

Financial assets include loans to group companies, interest receivables and derivative financial assets. They are measured at fair value upon initial recognition. For all financial assets not subsequently measured at fair value through profit or loss, the transaction costs directly attributable to the acquisition are recognized plus, in the case of loans to group companies, a loss account for expected credit losses. The fair values recognized in the statement of financial position are generally based on market prices of the financial assets. If these are not available, the fair value is determined using standard valuation models based on current market parameters. For this calculation, the cash flows already fixed or determined by way of forward rates using the current yield curve taking into account maturity adjusted spreads are discounted at the measurement date using the discount factors calculated from the yield curve applicable at the reporting date. Middle rates are used.

For the classification and measurement of Loans to group companies, the respective business model for managing the loans and whether the instruments have the characteristics of a standard loan, i.e., whether the cash flows are solely payments of principal and interest, is relevant. Assuming the assets have these characteristics and if the business model is to hold to collect the asset’s contractual cash flows, they are measured at amortized cost. This is computed using the effective interest method. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate. On each statement of financial position date, the Company determines the recoverable amount of the assets by the calculation of the expected credit losses contributable to each of the items.

At initial recognition, Loans to group companies are measured including a loss allowance account for expected credit losses. The loss allowance is determined at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. Otherwise, the loss allowance is calculated at an amount equal to twelve-month expected credit losses. In this case, losses incurred later than twelve months after the reporting date would therefore not be considered. Based on the low credit risk assumption of Loans to group companies, the Company applies the practical expedient related to the identification of significant increase in credit risk.

When a loss allowance for expected credit losses is being determined, the historical probability of default supplemented by the relevant future parameters for the credit risk is used as the basis for the calculation. For all Loans to group companies, publicly available market data related to the Deutsche Telekom Group debt portfolio is used to determine the loss allowance for expected credit losses.

The loss allowance takes adequate account of the future expected credit risk; write-offs lead to the derecognition of the respective receivables. For allowances, financial assets are grouped together on the basis of similar credit risk characteristics, tested collectively for impairment, and written off, if necessary. The cash flows are discounted on the basis of the weighted average of the original effective interest rates of the financial assets in the relevant portfolio. Impairments of trade receivables are recognized in some cases using allowance accounts. The decision to account for credit risks using an allowance account or by directly reducing the receivable will depend on the reliability of the risk assessment.

Derivative financial assets are measured at fair value through profit and loss.

Financial liabilities are measured at fair value on initial recognition. For all financial liabilities not subsequently measured at fair value through profit and loss, the transaction costs directly attributable to the acquisition are also a component of the carrying amount. Subsequent to initial recognition all non-derivative financial liabilities are measured at amortized cost using the effective interest method. Financial liabilities are derecognized when the obligation under the liability is discharged, cancelled or expires.

Derivative financial liabilities are measured at fair value through profit and loss.

The Company uses derivative financial instruments to mitigate the interest rate risk resulting from its activities. The Company does not hold derivatives for speculative nor trading purposes. The Company does not apply hedge accounting as defined under IFRS 9. Derivatives that are not part of an effective hedging relationship as set out in IFRS 9 must be classified as and reported at fair value through profit or loss. If the fair values are negative, the derivatives are recognized as financial liabilities. Derivatives are recognized initially at fair value. Subsequent to initial recognition, derivatives are measured at fair value and changes in the fair value of derivatives are recognized immediately in other financial income (expense) in profit and loss. In the case that no market value is available, the fair value must be calculated using standard financial valuation models. The fair value of derivatives is the value that the Company would receive or have to pay if the financial instrument was discontinued at the reporting date. This is calculated on the basis of the contracting parties’ relevant exchange rates, interest rates and credit ratings at the reporting date. Calculations are made using mid rates. Currency basis and inter-tenor spreads are taken into account. In the case of interest-bearing derivatives, a distinction is made between the ”clean price” and the ”dirty price”. In contrast to the clean price the dirty price also includes the interest accrued. The fair values carried correspond to the full fair value or the dirty price.

Premiums and discounts on prepayments of financial liabilities and financial assets are recognized in the year of occurrence.

INCOME TAXES

Income taxes include current income taxes as well as (correction of) deferred taxes. Current and deferred tax assets and liabilities must be recognized where they are probable. They are measured in accordance with the tax laws applicable or already announced as of the reporting date, provided said announcement has the effect of actual enactment. Where current and deferred tax is recognized, it must be reported as income or expense except to the extent that the tax arises from a transaction which is recognized outside profit and loss, either in other comprehensive income or directly in equity, or in connection with a business combination. Current tax assets and current tax liabilities and deferred tax assets and deferred tax liabilities are offset in the statement of financial position if the Company has a legally enforceable right to set off current tax assets against current tax liabilities, has an intention to settle net, and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority.

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amounts are those that are enacted by the statement of financial position date.

Other liabilities comprise provisions and other current obligations and are generally measured at face value.

Dividend distribution to the Company’s shareholder is recognized as a liability in the financial statement in the period in which the dividends are approved by the Company’s shareholder.

Interest income (expense) is recognized as it accrues, using the effective interest method.

Other financial income (expense) includes gains (losses) from derivative financial instruments and from foreign exchange. Foreign-currency transactions are translated into the functional currency at the exchange rate at the date of transaction. At statement of financial position dates, monetary items are translated at the closing rate, and non-monetary items are translated at the exchange rate at the date of transaction.

‎Exchange rate differences are recognized in other financial income (expense) in profit or loss.

The exchange rates of significant currencies changed as follows:

in €	Average rate		Rate at balance sheet date
	2023	2022	31-12-2023	31-12-2022

1 Pound sterling (GBP)	1,14963	1,17289	1,15088	1,12695
1 Hong Kong dollar (HKD)	0,11811	0,12125	0,11587	0,12012
1 U.S. dollar (USD)	0,92468	0,94930	0,90506	0,93655

General administrative expenses include personnel costs, service fees, audit and consultancy fees and operational leases (telephone, computer equipment and office rent) and are recognized at cost.

Judgements and estimates

The Company exercises judgement in measuring and recognizing provisions. Judgement is necessary in assessing the likelihood that a liability will arise and to quantify the possible range of the final settlement. These estimates are subject to change as new information becomes available.

The determination of impairments to loan assets involves the exercise of judgement of the methodology used and the assumptions made for the calculation of the expected credit loss. We refer to the section under accounting policies (Financial assets) and Note 6 in the Financial Statements.

Regarding assumptions made for the calculation of fair values we refer to the section under accounting policies (Derivative financial instruments).

Development of climate change and the associated impact

In the 2023 financial year, DTAG analysed potential sustainability risks in the areas of climate change and scarcity of resources. Climate change risks are already visible in the form of increasingly extreme weather conditions. Such storm events could damage the infrastructure and disrupt network operation with direct or indirect effects on operations. The risk is assessed in relation to the continuation of operations as part of risk management and is managed at an operational level in the business units of DTAG.

DTAG has currently not identified any key risks to its business model in the area of either climate change or scarcity of resources and, as such, also does not currently anticipate any significant impacts from such risks on its business model or on the presentation of its results of operations or financial position.

Based on the analyses made by the Company and DTAG, the Company trust that DTAG will continue to be able to fulfil their liabilities towards the Company and judges the default risk being limited. The effects of the challenges and the climate change will not have a direct impact to the results, equity or valuation of the financial assets of the Company. The Company itself has taken additional measures to mitigate its operational risks.

‎Notes to the statement of comprehensive income

1. Risk management, financial derivatives and other disclosures on capital management

Principles of risk management

The Company’s principal financial liabilities, other than derivatives, mainly comprise issued bonds and the Company’s financial assets, other than derivatives, mainly comprise loans to group companies. These financial liabilities and financial assets are the result of the Company’s main purpose, i.e. to raise funds for DTAG or group companies of DTAG.

The main risks arising from the Company’s financial instruments are currency risk, interest rate risk and liquidity risk. Additionally, there is a limited credit and counterparty default risk. Management of these risks is performed in accordance with DTAG Group financial risk management policy. The Management Board regards effective management of the interest rate risk and foreign currency risk as one of its main tasks.

Historically, the Company has entered into various derivative transactions, primarily interest rate swaps and cross currency interest rate swaps, to mitigate the interest rate risk and currency translation risk arising from the group’s operations and its sources of funding. It is the Company’s policy that derivatives are exclusively used as hedging instruments, i.e. neither for trading nor for other speculative purposes. In 2023 and in 2022 the Company did not conclude any new derivative contracts.

For the presentation of market risks, IFRS 7 requires sensitivity analysis that show the effects of hypothetical changes of the relevant risk variables on profit or loss and shareholder’s equity. In addition to currency risks the Company is exposed to interest rate risks according to the definition of IFRS 7. The periodic effects are determined by relating the hypothetical changes in the risk variables to the balance of financial instruments at the reporting date. It is assumed that the balance at the reporting date is representative for the year as a whole.

Currency risk

Currency risk as defined by IFRS 7 arises on account of financial instruments being denominated in a currency that is not the functional currency and being of a monetary nature. The Company’s currency risk relates to positions in GBP, HKD and USD. The currency risk is mitigated by means of raising the funds in the same currency as the financing provided to the borrowers.

The currency sensitivity analysis is based on the following assumptions:

Major non-derivative monetary financial instruments (loans and other financial assets and interest-bearing and non-interest-bearing liabilities) are directly denominated in the functional currency.

Whereas derivatives are valued at fair value, non-derivative financial instruments are carried at amortized cost. The currency valuation result of both derivatives and non-derivative financial instruments are included in other financial income (expense). Therefore, a change in exchange rates has an impact on the result of the Company.

Interest income and interest expense from financial instruments are recorded directly in the functional currency. The Company does not hedge the future net margins. This has an impact on the net profit margin of the Company.

If the euro had gained 10 percent against all currencies at December 31, 2023, other financial income and equity would have been EUR 17.5 million lower (December 31, 2022: EUR 20.5 million lower). If the euro had lost 10 percent against all currencies at December 31, 2023 the result would be in the opposite direction.

The hypothetical effect on profit or loss before income taxes of EUR 17.5 million mainly results from the currency sensitivity EUR/USD.
‎

Interest rate risk

The Company is exposed to interest rate risk on the interest-bearing receivables and interest-bearing liabilities. However, the interest rates on the Company’s funding do in principle match with the interest rates on the corresponding loans provided by the Company (including a margin). Any interest rate exposure that arose nevertheless historically at the level of the Company has been mitigated by means of derivative contracts with DTAG so there will effectively be no interest rate risk with respect to cash flows at the level of the Company. However, as these derivatives are presented at fair value, a change in interest rates has an impact on the result of the company of the respective year.

The following table provides a breakdown of the USD Interest Rate Swaps concluded with DTAG:



Maturity	CCY	Notional	Pay	Receive

June 15, 2030	USD	1,685,000,000	6.28525%	SOFR +1.54851%
June 15, 2030	USD	1,685,000,000	SOFR +1.47326%	8.250%

In June 2023 the floating legs of the USD interest Rate Swaps have been modified due to the cessation of USD Libor. Consequently, the margin of both floating legs was adjusted by an additional spread of 0.42826% which is in accordance with ISDA rules.

Interest rate risks are presented by way of sensitivity analyses in accordance with IFRS 7. These show the effects of changes in market interest rates on interest payments, interest income and expense, other income components and, if appropriate, shareholder’s equity. The interest rate sensitivity analyses are based on the following assumptions:

Changes in the market interest rates of non-derivative financial fixed instruments do not affect income because they are not measured at fair value but at amortized cost.

Changes in the market interest rates of non-derivative financial variable instruments do not affect income because these instruments are back-to-back transactions.

Changes in the market interest rate of derivatives do affect other financial income or expense since they are measured at fair value and are not part of a hedging relationship as set out in IFRS 9. They are therefore taken into consideration in the income-related sensitivity calculations.

If the market interest rates had been 100 basis points higher (lower) at December 31, 2023, the profit or loss before income taxes and equity would have been EUR 4.9 million lower (higher) (December 31, 2022: respectively EUR 7.4 million lower (higher)).

Some issued bonds and attributed loan contracts granted to DTAG include a step-clause. If the rating of DTAG changes and triggers the step-clause of the specific bonds and loan contracts, the interest rates of those contracts are adjusted. If the rating of DTAG had been upgraded to A3 and A- as of December 31, 2023, this would trigger interest rates of two Bonds and three loan contracts being lowered by 0.5%. Two loan contracts have been concluded with different starting dates and interest levels compared to the underlying bond and which were hedged by the derivatives concluded with DTAG. Consequently, by the decrease of the interest rate by 0.5% the profit or loss before income taxes would have been EUR 2.3 million lower (December 31, 2022: EUR 3.0 million lower). If the rating of DTAG had been downgraded below Baa1 and BBB+ as of December 31, 2023, the interest rates of two other bonds and two other loan contracts would have been increased by 0.5%. However, in that case the profit or loss before income taxes and equity would not have materially changed.

‎

Credit and counterparty default risk

Loans are granted only to DTAG and DTAG group companies and as per the end of 2023 and 2022 respectively, all existing loans are with DTAG. The maximum exposure to credit and counterparty default risk is generally represented by the carrying amounts of the financial assets that are carried in the statement of financial position, including derivatives with positive market values. However, the Company has concluded a guarantee and credit default insurance agreement with DTAG in favour of the owners of financial liabilities issued by the Company, for which the Company pays a fix guarantee fee plus a onetime premium on occasion of default, calculated as a ratio of the loan amount in default divided by the total amount of loans outstanding multiplied by EUR 10 million. This guarantee and credit default insurance agreement also covers the derivatives which were closed with DTAG, only for the reason of covering the interest exposures related to certain loans to affiliates companies. Therefore, management has assessed that the risk exposure of default (CVA/DVA) with regard to the two derivatives is not material.

The loans granted are unsecured and management does not expect non-performance by the counterparties of these loans. However, under IFRS 9 it is required to recognize and measure potential impairments in loans and receivables which are measured at Amortized Cost by the expected credit loss model. The general approach is applied. As per 31.12.2022 the provision on financial assets under IFRS 9 amounted to 3,724 thousands of euro (hereafter “TEUR”) and as per 31.12.2023 this was calculated at an amount of TEUR 267. This decrease of the impairment is due to the lower one-year default probability (1YDP) rate of DTAG per 31.12.2023 compared to 31.12.2022. The difference of TEUR 3,457 has been recognized through comprehensive profit (loss). Please also refer to Note 6.

Liquidity risk

Please refer to Note 7.

Capital management

The overriding aim of the Company’s capital management is to match amounts, return and maturities of its financial assets with its financial liabilities in order to ensure its capability to repay its debt. The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern in order to provide returns for the shareholder and benefits for other stakeholders.

‎

2. Finance income (expense)

The following table provides a breakdown of finance income (expense):


thousands of €	2023	2022

Interest income	845,745	907,043
Interest expense	(872,802)	(933,333)

	(27,057)	(26,290)

Interest income of TEUR 768,088 has been earned from loan contracts and cash deposits with Deutsche Telekom group companies in 2023 (2022: TEUR 907,043) and TEUR 77,657 from net discount received on prepaid bonds (2022: TEUR 0). In 2023 interest expense of TEUR 795,145 has been derived from Deutsche Telekom group external debt, including guarantee expenses (2022: TEUR 933,333), and TEUR 77,657 from net discount paid on prepaid loan contracts with Deutsche Telekom Group companies (2022: TEUR 0). The negative interest result is mainly due to the fact that hedge accounting as defined in IFRS 9 is not applied. We refer to Note 1, 3 and 6.

3. Other financial income (expense)

The item “Other financial income” breaks down as follows:


thousands of €	2023	2022

Gain / (Loss) from financial instruments	3,383	(5,052)
Gain / (Loss) from foreign exchange differences	(328)	1,364

	3,055	(3,688)

The position “Gain / (Loss) from financial instruments” in 2023 (and 2022) comprise the fair value change of two USD interest derivatives which were concluded with DTAG. The Company does not apply hedge accounting under IFRS. Therefore, all movements in fair value of financial instruments and related income and expenses are included in ‘Other financial income’. The position “Gain / (Loss) from foreign exchange differences” includes a gain of TEUR 10 (2022: a gain of TEUR 9) resulted from spot trades (the exchange of net interest margin in foreign currencies into euro) and is not disclosed in the net gain/loss by measurement category in Note 7.

‎

4. General and administrative expenses

The following table provides a breakdown of total general and administrative expenses:


thousands of €	2023	2022
Personnel costs
Remuneration Management Board	107	102
Other personnel benefits	3	3
Other social security costs	11	10
Total personnel costs	121	115

Other general and administrative expenses
Office rent	19	16
Service fees	141	141
Audit and tax consultancy fees	191	107
Computer lease	12	13
Other	5	5
Total other general and administrative expenses	368	282

Total general and administrative expenses	489	397

As at December 31, 2023 the Company employed 1 person (2022: 1 person).

Service fees of TEUR 141 have been paid in 2023 for services related to accounting, mainly provided by the shared service centre of DTAG (2022: TEUR 141). Furthermore, computer and software leasing fees of TEUR 12 have been paid in 2023 to DTAG (2022: TEUR 13).

The Audit and tax consultancy fees listed above relate to the procedures applied to the Company by accounting firms and external auditors as referred to in Section 1, subsection 1 of the Audit Firms Supervision Act (‘Wet toezicht accountantsorganisaties – Wta’) as well as by Dutch and foreign-based accounting firms, including their tax services and advisory groups. An amount of TEUR 75 has been recognized as fees for the audit of the 2023 financial statements performed by Deloitte Accountants B.V. (2022: TEUR 71), TEUR 24 of additional fees for the 2022 audit and TEUR 91 for tax services, not performed by Deloitte, regardless of whether the work was performed during the financial year (2022: TEUR 36). Deloitte Accountants B.V. has not performed any other services then audit services to the Company in 2023 and 2022 respectively.

Remuneration Management Board and Supervisory Board

The remuneration of the Management Board consists of short-term employee benefits and complies with the “bezoldiging bestuurders” in accordance with Dutch law article “2:383 BW” and IAS24. The Management Board consists of two persons of which one is remunerated by the Company and one is employed by DTAG. There are no long-term benefits, no pension plan or agreements are applied. The remuneration of the Supervisory Board in 2023 was nil (2022: nil). All Supervisory Board members are employed by DTAG. DTAG does not recharge expenses made by its employees related to the tasks performed to the Company, which is not at arm’s length. As per 31.12.2023 and 31.12.2022 respectively no loan contracts were outstanding with the Management Board or the Supervisory Board.

5. Income taxes

Income taxes in the statement of comprehensive income:


thousands of €	2023	2022

Current income tax expenses	(60)	(38)
Adjustment in respect of current income tax of prior years	(29)	11,549
Release of deferred tax through statement of comprohensive income	-	67,237

	(89)	78,748

‎The amount in “Current income tax expenses” reflects the calculated amount of income tax due over the year without having received a final assessment.

In 2023 the Company received a refund of Corporate Income Tax (CIT) for the fiscal year 2020 amounting to TEUR 2,906. In 2022 the Company received refunds of CIT for the fiscal years 2018 and 2019 amounting to TEUR 2,947 and TEUR 3,220 respectively. These refunds in 2023 and 2022 respectively were a result of the settlement of a dispute between DTAG and the auditor of the German tax authorities related to the remuneration the Company received via the interest spread on the loans to group companies granted by the Company. The Dutch tax authorities have assumed the calculation by the German tax authorities based on a cost-plus method and decided to adjust the CIT returns of the Company. The current income tax positions for the fiscal years 2022 and 2023 have been calculated based on the same cost-plus method.

The following table shows the analyses of the effective income tax rate:


thousands of €	2023	2022

(Loss) / Profit before income taxes	(21,010)	(32,649)
Income tax benefit (expense) according to statement of comprohensive income	(89)	78,748
Effective income tax rate	(0.4)%	241.2%

Difference between effective tax rate and nominal tax rate can be explained as follows:


thousands of €	2023	2022

Current income tax (expense) based on cost-plus calculation, effective starting with 2022*	(60)	(38)
Release of deferred tax through statement of comprehensive income **	-	67,237
Income tax previous years ***	(29)	11,549
Total income tax (expense)	(89)	78,748

* CIT is based on cost-plus basis and has been calculated as follows:

2023: Taxable income 287, 19% + 25.8% CIT: 60

2022: Taxable income: 254, 15% CIT: 38

** In 2022 deferred tax liabilities recognized in the 2021 financial statement were released

*** In 2023, corrections on expected refunds of income tax for the financial years 2020, 2021 and 2022 were recognized.

*** In 2022, refunds of income tax were received for the financial years 2018 and 2019 and further refunds were anticipated for the financial years 2020 and 2021.

Income taxes in the statement of financial position

Current income taxes in the statement of financial position refer to receivable income taxes related to net refunds expected for the financial years 2021, 2022 and 2023 amounting to TEUR 5,395 as of December 31, 2023 (December 31, 2022: receivable income taxes of TEUR 8,337). All income taxes are payable in the Netherlands.

Disclosure on global minimum level of taxation

As per January 1, 2022 Section 8bb has been introduced in the Dutch corporate income tax act which limits a downward adjustment of the taxable profit in the Netherlands for taxpayers who do not demonstrate that the other group entity involved in the related transaction does not have a corresponding upward adjustment to avoid (Dutch) unilateral downward transfer pricing adjustments. Furthermore, the Dutch Minimum Taxation Act 2024, also known as Pillar Two, provides for a minimum effective tax rate of 15% per jurisdiction for large international enterprises (annual turnover exceeding 750 million euros) in line with the EU Directive of December 14, 2022 to implement the OECD Pillar Two agreement within the EU. On 19 December 2023, this legislative proposal was adopted by the Dutch Senate and has come into force for reporting years starting on or after December 31, 2023.

Based on the agreement with the German and Dutch Tax Authorities, the annual taxable result of the Company is calculated based on a cost-plus approach, and other results derived by the Company are considered to be part of the German tax base of DTAG. The cost-plus method aligns the transfer pricing treatment for both the Netherlands and Germany and therefore should not lead to a unilateral Dutch transfer pricing adjustment nor it is currently expected that it will lead to adjustment of the effective tax rate of the Company to the minimum of 15% for coming financial years.

Notes to the statement of financial position

6. Financial assets

The following table provides a breakdown of the financial assets:



thousands of €	31-12-2023		31-12-2022
	Total	Of which: current	Total	Of which: current

Loans to group companies	17,340,527	2,011,973	22,750,053	2,998,575
Derivative financial instruments with aff. companies	282,499	-	312,534	-
Interest receivables	193,933	193,933	240,921	240,921

	17,816,959	2,205,906	23,303,508	3,239,496

In 2023, loans to group companies were (p)repaid to the Company for total nominal amounts of EUR 3,404 million, USD 1,392 million (including the regular repayments of the annuity loan) and GBP 447 million resulting in a decrease of the book value of TEUR 5,183,066 (2022: total nominal amounts of EUR 2,250 million, GBP 700 million and USD 9 million resulting in a decrease of the book value of TEUR 3,098,330). Related to the prepayment of loans, a total net discount amount of TEUR 77,657 was paid. Other movements in the value of “Loans to group companies” compared to 2022 consist of FX differences, impairment and amortization. As per 31.12.2023 and 31.12.2022 respectively all Loans to group companies were with DTAG.

The following table shows the movement of the provision on financial assets under IFRS 9:

Movement of provision in accordance with IFRS 9	2023	2022
thousands of €

Provision previous year	(3,724)	(1,408)
Provision in the year through comprehensive profit (loss)	-	(2,316)
Release of provision in the year through comprehensive profit (loss)	3,457	-
Provision end of year	(267)	(3,724)

A financial asset is in default when it is 90 days past due and by an individual assessment of the Unlikeness to Pay (UtP).

With regard to all loans and receivables, none of those are past due.

There are no indications as of the reporting date that the debtors will not meet their payment obligations.

The Management Board calculates the provision on financial assets under IFRS 9 by using the 1-year Default Probability (PD) rate of DTAG and a Loss Giving Default (LGD) of 60%. All current and non-current financial assets relate to loans to the shareholder DTAG. The rating of DTAG is BBB+ (according to Standard & Poor’s), BBB+ (according to Fitch) and Baa1 (according to Moody’s).

The loans have stated coupon interest rates as per December 31, 2023 of 0.776% to 9.33% (2022: 0.755% to 9.33%) and mature up to 18 years (2022: up to 19 years). The average interest rate of the loans was 4.12% as of December 31, 2023 (2021: 3.63%).

The Company does not hold derivatives for speculative nor for trading purposes. All derivatives have been contracted with the parent company DTAG. The Company does not make use of hedge accounting as defined under IFRS 9. Since derivatives are carried at fair value and the non-derivative instruments at amortized costs, the financial result under IFRS of the Company is volatile. As shown by the liquidity analysis under note 7 the Company always has net positive cash flows in every year until the last contract expires.

All interest receivables as of December 31, 2023 (and December 31, 2022 respectively) refer to accrued interest from loans to DTAG.

‎

7. Financial liabilities

The following table provides a breakdown of financial liabilities and its maturities:

thousands of €	31-12-2023
	Total	due within	due > 1 year	due
		1 year	< 5 years	> 5 years
Bonds and other securitized liablities	17,262,591	2,001,488	7,237,477	8,023,626
Guarantee fees payable to aff. companies	69,608	7,285	22,179	40,144
Interest liabilities	186,901	186,901	-	-
Derivative financial instruments	104,695	-	-	104,695

	17,623,795	2,195,674	7,259,656	8,168,465

thousands of €	31-12-2022
	Total	due within	due > 1 year	due
		1 year	< 5 years	> 5 years
Bonds and other securitized liablities	22,651,646	2,988,161	7,853,986	11,809,499
Guarantee fees payable to aff. companies	92,848	10,174	21,322	61,352
Interest liabilities	230,134	230,134	-	-
Derivative financial instruments	106,508	-	-	106,508

	23,081,136	3,228,469	7,875,308	11,977,359

The average interest rate for bonds is 4.25% as of December 31, 2023 (2022: 3.70%).

Guarantee fees payable to aff. companies are guarantee liabilities to be paid to DTAG over the terms of the external financial instruments. DTAG provides a full and irrevocable guarantee for all liabilities issued by the Company, except for the own risk of EUR 10 million the Company is exposed to. Payment dates of guarantee fees are generally matched with interest payment dates of the external financial liabilities.

In 2023 (and 2022 respectively) all interest liabilities refer to group external debt.

In 2023 bonds were (p)repaid by the Company for total nominal amounts of EUR 3,404 million, USD 1,382 million and GBP 447 million resulting in a decrease of the book value of TEUR 5,174,042 million (2022: total nominal amounts of EUR 2,250 million and GBP 700 million resulting in a decrease of the book value of TEUR 3,089,530). Related to the prepayment of bonds a total net discount amount of TEUR 77,657 was received. The discount received and premium paid were recognized in interest income and interest expense respectively in the financial year. Other movements in the value of “Bonds and other securitized liabilities” compared to 2022 consist of FX differences and amortization.

Liquidity analysis

The following table shows the contractually agreed undiscounted interest and guarantee payments and repayments of the non-derivative financial instruments and the derivatives with positive and negative values as of December 31, 2023 and as of December 31, 2022 respectively. All instruments held at December 31, 2023 (December 31, 2022 respectively) and for which payments were already contractually agreed are included. Planning data for future new assets or liabilities were not included. Each amount in foreign currency was translated at the closing rate prevailing on reporting date. The variable interest payments arising from the financial instruments were calculated using the last interest rates fixed before December 31, 2023 (December 31, 2022 respectively). Based on this liquidity analysis the Company expects net positive cash flows in all years presented herein.

‎

The following tables show the undiscounted liquidity analysis as of December 31, 2023:

thousands of €	2024	2025-2028	>2028	Total cash flows	Carrying amount

Non derivative borrowings (cash payables)	(2,739,963)	(9,914,680)	(9,774,393)	(22,429,036)	(17,262,591)
Bonds fix	(2,739,963)	(9,914,680)	(9,774,393)	(22,429,036)

Guarantees payable to aff. companies	(14,941)	(43,794)	(26,288)	(85,023)	(69,608)

Derivatives	31,130	124,442	46,665	202,237	177,804
IR Derivatives outflow	(199,155)	(789,847)	(296,193)	(1,285,195)
IR Derivatives inflow	230,285	914,289	342,858	1,487,432

Loans granted (cash receivables)	2,730,814	9,854,944	9,764,718	22,380,476	17,340,527
Loans to aff. comp. fix	2,730,814	9,854,944	9,764,718	22,350,476

Total Cash Flow	7,040	20,912	10,702	38,654

The following tables show the liquidity analysis as of December 31, 2022:

thousands of €	2023	2024-2027	>2027	Total cash flows	Carrying amount

Non derivative borrowings (cash payables)	(3,831,814)	(10,851,308)	(14,257,143)	(28,940,265)	(22,651,646)
Bonds fix	(3,831,814)	(10,851,308)	(14,257,143)	(28,940,265)

Guarantees payable to aff. companies	(20,203)	(55,337)	(35,839)	(111,579)	(92,848)

Derivatives	32,209	128,772	80,482	241,463	206,026
IR Derivatives outflow	(198,662)	(787,092)	(491,933)	(1,477,687)
IR Derivatives inflow	230,871	915,864	572,415	1,719,150

Loans granted (cash receivables)	3,828,913	10,804,659	14,227,684	28,861,256	22,750,053
Loans to aff. comp. fix	3,828,913	10,804,659	14,227,684	28,861,256

Total Cash Flow	9,105	26,586	15,184	50,875

‎

Additional disclosures on financial instruments

The following table provides carrying amounts, amounts recognized and fair values by measurement categories:


thousands of €	Category in accordance to IFRS 9	Carrying amount 31.12.2023	Amounts recognized in statement of financial position according to IFRS 9		Fair Value 31.12.2023

			Amortized cost	Fair value recognized in profit or loss
Assets
Cash and cash equivalents with aff. comp¹	AC	8,994	8,994	-	-
Loans to aff. comp.	AC	17,340,527	17,340,527	-	18,324,361
Other financial assets¹	AC	193,933	193,933	-	-
Derivative financial assets	FVPL	282,499	-	282,499	282,499
Liabilities
Bonds and other securitized liablities	AC	17,262,591	17,262,591	-	18,159,456
Other financial liabilities	AC	256,509	256,509	-	260,713
Derivative financial liabilities	FVPL	104,695	-	104,695	104,695

Thereof aggregated according to IFRS 9 categories
Assets
Financial assets carried at amortized cost	AC	17,543,453	17,543,453	-	18,324,361
Financial assets at fair value through profit and loss	FVPL	282,499	-	282,499	282,499
Liabilities
Financial liabilities carried at amortized cost	AC	17,519,100	17,519,100	-	18,420,169
Financial liabilities at fair value through profit and loss	FVPL	104,695	-	104,695	104,695


thousands of €-	Category in accordance to IFRS 9	Carrying amount 31.12.2022	Amounts recognized in statement of financial position according to IFRS 9		Fair Value 31.12.2022

			Amortized cost	Fair value recognized in profit or loss
Assets
Cash and cash equivalents with aff. comp.¹	AC	18,916	18,916	-	-
Loans to aff. comp.	AC	22,750,053	22,750,053	-	23,181,781
Other financial assets¹	AC	240,921	240,921	-	-
Derivative financial assets	FVPL	312,534	-	312,534	312,534
Liabilities
Bonds and other securitized liablities	AC	22,651,646	22,651,646	-	23,181,781
Other financial liabilities	AC	322,982	322,982	-	317,263
Derivative financial liabilities	FVPL	105,508	-	106,508	106,508

Thereof aggregated according to IFRS 9 categories
Assets
Financial assets carried at amortized cost	AC	23,009,890	23,009,890	-	23,181,781
Financial assets at fair value through profit and loss	FVPL	312,534	-	312,534	312,534
Liabilities
Financial liabilities carried at amortized cost	AC	22,974,628	22,974,628	-	23,175,724
Financial liabilities at fair value through profit and loss	FVPL	106,508	-	106,508	106,508

¹ We refer to the exception of IFRS 7.29(a) for the disclosure of the fair value. The amounts disclosed are approximately equal to the fair values.

AC = Amortized Cost

FVPL = Fair Value and changes in Profit and Loss

‎

Only derivative financial instruments are measured at fair value in the statement of financial position of the Company. IFRS 7 requires that the classification of financial instruments at fair value is determined by reference to the source of input used to derive the fair value. The classification uses the following three-level hierarchy: Level 1 uses quoted prices in active markets for identical assets or liabilities as input for the determination of the fair value, level 2 uses inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) and level 3 uses inputs for the asset or liability that are not based on observable market data (unobservable inputs). The derivatives of the Company are exclusively categorised under level 2 in the fair value hierarchy of IFRS 7.

The fair values recognized in the statement of financial position generally correspond to the market prices of the financial assets. If these are not immediately available, they must be calculated using standard valuation models based on current market parameters. For this calculation, the cash flows already fixed or determined by way of forward rates using the current yield curve taking into account maturity adjusted spreads are discounted at the measurement date using the discount factors calculated from the yield curve applicable at the reporting date. Middle rates are used.

Since no quoted prices are available for the derivative financial instruments of the Company, the fair value is determined with the use of standard valuation models based on observable market parameters. For this calculation, the cash flows already fixed or determined by way of forward rates using the current yield curve taking into account maturity adjusted spreads are discounted at the measurement date using the discount factors calculated from the yield curve applicable at the reporting date. Middle rates are used. A distinction between the Clean and the Dirty price is made. The Dirty Price also comprises accrued interest. The recognized Fair Values correspond to the Full Fair Value or the Dirty Price.

The classification in level 1 or level 2 of quoted bonds has been determined by the trading volume of the instrument. USD and EUR denominated bonds traded in an active market have been classified in level 1, all other, traded in less liquid markets, in level 2.

In 2023 and in 2022 the guarantee fees have been classified in level 2 and a fair value for the Other financial liabilities is disclosed accordingly. The fair values of the financial instruments classified in level 1 equal the nominal amounts multiplied by the price quotations at the reporting date. All other fair values of the financial instruments classified in level 2 are calculated as present values of the payments associated with the debts, based on the applicable yield curve and DTAG’s credit spread curve for specific currencies.

The following table shows the classification of financial instruments that are not recognized at fair value but whose fair values are disclosed:

thousands of €	31-12-2023

	Level 1	Level 2	Total
Assets
Loans to aff. comp.		18,324,361	18,324,361

Liabilities
Financial liabilities at amortized cost	16,167,720	2,252,449	18,420,169
- of which marketable securities	16,167,720		16,167,720
- of which non-marketable securities		1,991,736	1,991,736
- of which other financial liabilities		260,713	260,713

thousands of €	31-12-2022

	Level 1	Level 2	Total
Assets
Loans to aff. comp.		23,181,781	23,181,781

Liabilities
Financial liabilities at amortized cost	19,620,640	3,555,084	23,175,724
- of which marketable securities	19,620,640		19,620,640
- of which non-marketable securities		3,237,821	3,237,821
- of which other financial liabilities		317,263	317,263

‎

The following table provides net gains and losses from interests by measurement categories:


thousands of €	From interest	From subsequent measurement		From derecognition	Net gain (loss)
		At fair value	Currency translation		2023
Financial Assets at Amortized Cost (AC)	845,745	-	(249,214)	3,457	599,988
Financial Instruments measure at Fair Value and changes in Profit and Loss		3,383		-	3,383
Financial liabilities measured at amortized cost (AC)	(872,802)	-	248,876	-	(623,926)


thousands of €	From interest	From subsequent measurement		From derecognition	Net gain (loss)
		At fair value	Currency translation		2022
Financial Assets at Amortized Cost (AC)	907,043	-	402,646	(2,316)	1,307,373
Financial Instruments measure at Fair Value and changes in Profit and Loss		(5,052)		-	(5,052)
Financial liabilities measured at amortized cost (AC)	(933,333)	-	(401,291)	-	(1,334,624)

The following financial instruments are subject to enforceable master netting arrangements and similar agreements. The counterparty for all those derivative financial instruments is DTAG. Even though a netting option exists, netting is currently not applied. However, both parties will have the potential right to settle all derivative financial instruments on a net basis in the event of default of the other party.

Offsetting 31.12.2023:



thousands of €	Derivative financial assets	Derivative financial liabilities
Net amount presented in the balance sheet	282,499	104,695
Related amounts not set off in the balance sheet	104,695	104,695
thereof: financial instruments	104,695	104,695
thereof: collaterals	-	-
Net amount	177,804	-

Offsetting 31.12.2022:


thousands of €	Derivative financial assets	Derivative financial liabilities
Net amount presented in the balance sheet	312,534	106,508
Related amounts not set off in the balance sheet	106,508	106,508
thereof: financial instruments	106,508	106,508
thereof: collaterals	-	-
Net amount	206,026	-