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Citco Bank Nederland N.V.

ANNUAL REPORT2015


Citco Bank Nederland N.V.Amsterdam

Report on theconsolidated annual accounts 2015

April 15, 2016

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© 2015 Citco Bank Nederland N.V., Amsterdam. This report is strictly confidential. Unauthorised use of this report is prohibited. Page 2 of 99

TABLE OF CONTENTS

SECTION PAGE

1. Management Board’s Report 4

2. Supervisory Board’s Report 13

3. Consolidated Financial Statements 19 Consolidated income statement for the year ended December 31, 2015 20 Consolidated statement of comprehensive income for the year ended December 31, 2015 21 Consolidated statement of financial position as at December 31, 2015 22 Consolidated statement of changes in equity for the year ended December 31, 2015 23 Consolidated statement of cash flows under indirect method for the year ended December 31, 2015 25

4. Notes to the Consolidated Financial Statements 26 4.1. General 27 4.2. Principal accounting policies 29 4.3. Financial risk management 39 5. Banking and Custody Services 47 6. Personnel expenses 47 7. Office and administration expenses 47 8. Travel expenses 48 9. Professional services 48 10. Depreciation and amortization 48 11. Other operating expenses 49 12. Net finance income 49 13. Fees to independent auditors 49 14. Income tax expense 50 15. Property, plant and equipment 51 16. Intangible assets 52 17. Long-term investment 53 18. Loans to affiliated companies 53 19. Deferred tax asset and liabilities 54 20. Trade receivables 56 21. Other receivables and accrued income 57 22. Short-term investments 57 23. Loans and advances to customers 58 24. Cash and cash equivalents 58 25. Share capital 59 26. Provisions 59 27. Retirement benefits schemes 60 28. Other payables and accrued expenses 60 29. Amounts owed to depositors 61 30. Contingencies and commitments 61 31. Operating lease arrangements 62 32. Derivative financial instruments 62

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33. Fair value of financial instruments 63 34. Categories of financial assets and financial liabilities 64 35. Financial assets and liabilities not carried at fair value 64 36. Assets under Custody 65 37. Litigations 65 38. Related party transactions 66 39. Directors’ remuneration 67 40. Events after the reporting date 67

5. CBN Financial Statements 69 41. Property, plant and equipment 75 42. Intangible assets 76 43. Investments in subsidiaries 77 44. Long-term investments 77 45. Other receivables and accrued income 78 46. Short-term investments 78 47. Loans and advances to customers 79 48. Cash and cash equivalents 79 49. Share capital 80 50. Provisions 80 51. Other payables and accrued expenses 81 52. Amounts owed to depositors 81 53. Related party transactions 82

6. Other Information 85

7. Independent Auditor’s Report 87

8. Appendices 96

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Section 1Management Board’s Report

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1. Management Board’s Report

Summary

During 2015, the Management Board continued to build on the positive direction towards the strategic objectives of Citco Bank Nederland N.V. and its subsidiaries (”CBN Group”). The CBN Group specializes in the provision of banking services related to investment funds, both for funds of funds as well as for financial institutions. The head office is located in Amsterdam, but it also carries on business through its branches in Dublin and in Luxembourg. European clients are served primarily by the Dublin, Ireland branch. The Luxembourg branch focuses on Luxembourg domiciled fund clients. North American clients are served by Citco Bank Canada, a subsidiary of the Bank, which also provides custody services. The principal activity of Citco Fund Services (Ireland) Limited (“CFSI”) is the provision of administration services to both Irish and non-Irish domiciled funds. The strategic objectives related to increasing its profitability through increasing its revenue while keeping cost at the same level and remaining fully compliant. For an overview of the ownership structure of CBN Group, reference is made to note 4.1.1.

Despite the challenging economic environment evidenced by continued low or in some cases even negative interest rates for most major currencies, CBN Group has been able to record a significant increase in revenue in 2015 due to its treasury management activities, an increase in business volumes as well as improved results from its subsidiaries, while maintaining the cost base at a similar level to the previous year.

The changing regulatory environment and the need for increased information security led to the decision at the end of 2013 to invest in a new core banking system. Management is confident that this will result in an enhanced, more efficient and effective system. This will enable the CBN Group to achieve further automation and efficiency in the delivery of its banking services and products.

Management will continue to look into expanding its product offering such as the offering of payment services to clients, specifically in the Netherlands and Luxembourg.

Operations

In order to further create efficiencies within the CBN Group, during the past year Management successfully completed the integration of the AML and KYC processes from its Luxembourg branch to its Amsterdam office.

During the year under review, the CBN Group completed its fifth consecutive SOC1 Type #2 certification obtaining an unqualified opinion from a big four audit firm. In 2015, the report was further enhanced to update existing control objectives and control activities for Banking, Depositary and Custody Services processes.

Regulatory environment

Management will continue to ensure that the CBN Group complies with all regulatory and legal requirements. As in previous years, the regulatory landscape once again continued to develop and become more complex. National and European regulators implemented standards that pose an ongoing challenge for financial institutions in general. In addition a number of levies have been implemented that directly lead to a cost for CBN.

There is continuous work in progress in relation to current and future Basel III and CRD IV rules, which CBN Group has expanded further in 2015. The CBN Group continues to manage the necessary changes to its organization in connection with the new regulatory requirements. CBN Group is in the progress of recruiting additional staff with relevant expertise to manage the Basel III and CRD IV changes and meet the set timelines. In contrast to many banks CBN Group is pleased to note that due to its conservative risk appetite it already complies with all of the future requirements for capital adequacy and liquidity.

The CBN Group wishes to be at the forefront of combating illicit activities to ensure that the products and services provided are not misused. To that end the CBN Group has invested in a leading monitoring and customer due diligence system to support these activities.

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The CBN Group has spent significant resources, both human and capital, to ensure full compliance with both FATCA and the Common Reporting Standard (“CRS”). FATCA reporting to the relevant tax authorities was executed on a timely and accurate manner, and CRS was implemented as per January 1, 2016.

Banking Code

The Banking Code, enacted on January 1, 2010 and aimed at rebuilding trust in the financial industry, was introduced as a corporate governance code for all financial institutions in The Netherlands. The Banking Code has been updated by the Dutch Banking Association as per January 1, 2015 together with the introduction of a Social Charter and the implementation of the bankers’ oath and the associated Rules of Conduct. Together these amendments form the fundamental principles for future-oriented banking. On February 7, 2015 the Dutch law on remuneration in financial organisations “Wet beloningsbeleid financiële ondernemingen” was enacted as a result of which variable remuneration has become subject to additional restraints. The CBN Group completed a review of the impact on its existing Remuneration Policy and as a result existing policies have been amended and new policies introduced to ensure the CBN Group remains fully compliant. These policies have been approved by the Supervisory Board. No shares have been granted to the Management Board as compensation as the CBN Group has no shares in circulation. The Management Board has established that it continues to adhere to the principles and best practices of the Dutch Banking Code.

Management Board

The composition of the Management Board at the end of 2015 is as follows:

- Mr. Michael Leers - Managing Director & Chairman of the Management Board with responsibilities for all aspects concerning General Management, branches and subsidiaries, Human Resources, Commercial Group, Finance, Legal and Internal Audit;

- Mr. Frans van Proosdij - Managing Director, with responsibilities for all aspects concerning Corporate Governance, Integrity Assurance, Compliance and Risk Management, and the relationship management with the CBN Group’s lead regulator; and

- Mr. Paul Symonds - Managing Director & Head of Cash Banking, with responsibilities for all aspects concerning Treasury Management, Credit, Operations and Information Technology.

The Management Board continues to meet the criteria of expertise and diversity in competencies as set out in the Management Board charter.

Risk Management

Managing risk is considered a key element in running the affairs of the CBN Group. In order to facilitate this process the CBN Group uses an Enterprise Risk Management framework (“ERM”). The critical elements of this framework are the effective and efficient management of the CBN Group’s key risks and the capital required to support them.

Risk Governance

CBN Group’s risk management governance is structured around the three lines of our defence model. The allocation of responsibility for risk management is structured accordingly, with the Managing Board bearing ultimate responsibility for the organisation and oversight of the (integrated) risk management framework.

The operational departments are the first line of defence (risk owners). These departments have primary responsibility for managing day-to-day risks in their operating processes: whoever bears first line responsibility for obtaining results is also responsible for the risks associated with obtaining these results.

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The main parties in the second line of defence are the Risk Management, Compliance, Finance and various committees. The risk management function and the compliance function have special responsibility for risk analysis, policy preparation and the coordination of efforts to control the CBN Group’s risks. It also bears the responsibility for monitoring the first line risk owners, with a remit that generally extends across the entire CBN Group. The Management Board is responsible for formulating risk policy with regard to the objectives. This policy is used as the basis for setting a series of limits and guidelines for managing market, liquidity, credit, operational and strategic risks throughout the CBN Group.

The third line of defence is Internal Audit, which conducts operational, IT, compliance and audits as a means of independently and objectively assessing the effectiveness of internal controls.

We have established a variety of committees for risk management purposes, and these also form part of the second line of defence. These committees operate within the mandate granted by the Management Board, with the latter remaining ultimately responsible for structuring and supervising the overall risk management framework.

Some of the more important commissions are the Risk Committee, which monitors the Management Board’s compliance with CBN Group’s risk management policy and procedures, and the three sub-committees Asset & Liability Committee, Operational Risk Committee and Credit Committee that manage specific risk categories. At a Supervisory Board level there is the Audit Committee and the Risk and Compliance Committee.

Enterprise Risk Management (ERM) framework

The ERM framework ensures a structured approach to the identification, assessment and mitigation of the CBN Group’s key risks. An ERM dashboard highlighting the current status of the key risk categories and related drivers is produced for the Management Board Risk Committee to provide oversight, assess the capital requirements for each risk category and feed into strategic decision making.

To ensure effective and appropriate process for risk management, internal control and capital management, management uses the following risk classifications to identify the key risks faced by CBN Group:

Strategic Risk; Credit Risk; Market Risk; Liquidity Risk; Operational Risk; and Reputation Risk.

The Management Board assesses on an ongoing basis whether these risks are appropriately managed. On a regular basis, the Management Board reviews the potential impact of these risks on the development of the business against the approved risk appetite and capital adequacy.

Current capital levels of the CBN Group exceed the minimum capital requirement (Pillar 1) as well as the requirement assessed by the CBN Group’s Management Board under Basel II (Pillar 2). The amount of regulatory capital held by the CBN Group continues to be higher than its internal target.

The Pillar 1 capital calculation equates to a solvency percentage of 31.05% as of December 31, 2015.

Risk Assessment Methodology

The CBN Group uses a matrix of probability versus impact to arrive at an assessment in one of the following four Risk Assessment Grades (“RAG”):

RAG Minor Low Medium High

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Strategic Risk

The Management Board risk appetite towards Strategic Risk can be classified as ‘Medium’. The Management Board understands and accepts the fact that in order to realize its strategic objectives some Strategic Risk exposure is necessary. The Strategic Risk appetite for CBN Group states that the organization does not accept losses over 50% of the forecasted increase of ‘business as usual’ retained earnings on an annual basis.

The Management Board believes that the probability of a Strategic Risk occurring is unlikely as there is sufficient mitigation in place for Strategic Risks. However, in the unlikely event that a Strategic Risk would occur, the impact of that occurrence is deemed to be severe as strategic business objectives can be seriously threatened. The results of the risk assessment and risk appetite process for Strategic Risk, is depicted in the table below.

Strategic Risk

Main Risk Sub Category Probability Impact RAG Risk Appetite

Strategic Risk - Unlikely Severe Medium Medium

Credit Risk

CBN Group is very risk averse with respect to counterparty default risk. The Management Board has a ‘Low’ to ‘Minor’ appetite for credit risk. CBN Group must avoid default of counterparties at all times, but takes some controlled credit risk in order to generate yield. Besides that, the Management Board believes a conservative collateral management approach is prudent and must be adhered to by the various operational departments at all times. Lastly, excessive concentration on any counterparty or client needs to be avoided at all times. The credit risk appetite for CBN Group states that the organization does not accept any unexpected credit losses.

The probability that credit risk events occur is deemed rare by the Management Board based on actual historical credit risk occurrences. However, the possible impact of an occurrence of a credit risk event differs significantly across the risk sub-categories. The impact of client default risk is deemed to be “Minor” as in the event of a client default the direct lending to clients is collateralized by its assets under custody. The possible impact of a counterparty default is deemed to be severe as a major counterparty default would have a severe impact on CBN Group’s capital position. The possible impact related to Concentration Risk is deemed to be severe as the loss could amount up to EUR 150mm due to the regulatory Large Exposure Rule.

Credit Risk is defined as the current or prospective risk arising from a counterparty’s failure to meet the terms of any contract with the CBN Group or its failure to perform as agreed. Credit risk is monitored continuously by reviewing outstanding loans, temporary overdrafts and trade receivables by the account managers. New extensions of credit are subject to written credit memoranda that must be appropriate to the established criteria of the credit risk policy approved by the appropriate level of management. CBN Group mitigates credit risk by choosing only high quality counterparties for liquid funds and FX forwards.

CBN Group has implemented a monitoring methodology which uses the view of the rating agencies on a counterparty’s probability of default through long term ratings, and the more reactive short-term view of the credit markets using credit default swap spreads to ensure that CBN Group only deals with highly regarded counterparties.

Loans to fund-of-funds clients are fully secured with a maximum loan to value ratio of 35% of eligible assets via a pledge agreement covering the clients underlying securities portfolio held by CBN Group’s separate custody affiliates. Valuations of these underlying securities are made on a regular basis against industry norms and a legal entitlement to make margin calls on the client is in place. The loan portfolio is mainly focused on Europe and the offshore jurisdictions which attract quality mutual and hedge funds providers that are clients of CBN Group.

CBN Group manages exposure to concentration of credit risk through diversification across high quality counterparties.

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Credit Risk


Credit Risk Client Default Rare Minor Low Low

Credit Risk Counterparty Default Rare Severe Minor Minor

Credit Risk Concentration Risk Rare Severe Minor Minor

Market Risk

CBN Group has a very low appetite towards market risk.

Market Risk is defined as CBN Group’s current or prospective risk to earnings and capital arising from adverse movements in market variables mainly interest rates and foreign exchange rates. This risk can arise from dealing and position-taking in securities, currencies, or derivatives (on bonds, securities, currencies, or commodities).

CBN Group fully hedges Traded Market Risk beyond the small open FX limits and seeks opportunities to minimise Structural Market Risk on an ongoing basis. The Management Board is of the opinion that only minor mismatches in interest rates terms are acceptable, as well as for open FX exposures.

Market Risk


Market Risk Traded Market Risk Rare Minor Low Low

Market Risk Structural Market Risk Rare Minor Low Low

Liquidity Risk

The Management Board has a ‘Minor’ risk appetite for Liquidity Risk. CBN Group’s funding and liquidity position is comprised of own funds in the form of capital and deposits from its clients and clients of other Citco affiliates which, although repayable on demand have traditionally, in aggregate, provided a stable source of funding.

CBN Group manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast to actual cash flows and matching the maturity profiles of financial assets and liabilities. In addition, CBN Group manages any counterparty risk in respect of liquidity through its proprietary monitoring methodology.

The overarching measure used to set CBN Group’s liquidity risk appetite is the Liquidity Risk Tolerance Statement which is based on the Liquidity Stress Test. The Liquidity Risk Tolerance Statement is set in terms of survival period under three scenarios that are aligned to the regulatory prescribed scenarios; Idiosyncratic, Market-Wide and Combined scenarios. Three levels of severity (mild, moderate and severe) are run for each of the scenarios and the Liquidity Risk Tolerance Statement applies to all of them. The Liquidity Risk Tolerance Statement describes a number of limits designed to ensure compliance at all times with the minimum survival periods and regulatory requirements. This includes the required size of the liquidity buffer and of overnight placements.

Liquidity Risk


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Liquidity Risk Market Liquidity Rare Severe Minor Minor

Liquidity Risk Funding Liquidity Rare Severe Minor Minor

Operational Risk

CBN Group’s operational risk appetite states that it manages operational activities to avoid a combined impact that exceeds 15% of gross revenue. This 15% of gross revenue is the combined impact of all individual risks of the Basel II event types. The results within the 15% gross revenue targets of the risk assessment and risk appetite process for Operational Risk, including its Basel II event types, is depicted in the table below.

To ensure that operational risk is adequately controlled, an extensive internal control framework has been set up. Also, an extensive training program for staff of CBN Group has been introduced to further embed the Operational Risk Management responsibilities in the first line. In addition, key operational processes are certified under International Standard on Assurance Engagements (ISAE) No. 3402, Assurance Reports on Controls at a Service Organisation. An Enterprise Risk Management framework which includes operational risk has been implemented across CBN Group.

Operational Risk


Operational Risk Internal Fraud Rare Major Minor Minor

Operational Risk External Fraud Unlikely Major Minor Minor

Operational Risk Employment Practices and

workplace safety Rare Moderate Low Low

Operational Risk Clients, Products & Business

practices Unlikely Severe Medium Minor

Operational Risk Damage to Physical Assets Rare Moderate Low Low

Operational Risk Business Disruption & System

Failure Likely Minor Minor Minor

Operational Risk Execution, Delivery and Process

Management Likely Minor Minor Minor

Reputational Risk

CBN Group has a ‘minor’ risk appetite towards reputational risk. Reputation Risk is the risk related to perception of trustworthiness of CBN Group. Damage to CBN Group’s reputation can result in loss of revenue or shareholder value due to adverse perception of CBN Group’s image by clients, counterparties, shareholders, investors or regulators. Reputation Risk includes Image and Branding Risk, Stakeholder Relations Risk and Contagion Risk.

The Management Board has assessed reputation risks to be ‘Minor’. The probability of the risk occurring is assessed as ‘Rare’ with a ‘Severe’ impact.

The outcome of the risk assessment and risk appetite process for Reputation Risk is depicted in the table below.

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Reputation Risk


Reputation Risk Reputation Risk Rare Severe Minor Minor

A more comprehensive quantitative description of the financial risks (credit risk, market risk and liquidity risk) of CBN Group is part of the financial statements in section 4.3. Financial risk management.

Financial Performance

The financial performance of the CBN Group takes into account the results as derived from its Banking services, Custody activities in its Canadian subsidiary and Citco Fund Services Ireland’s fund administration activities.

A strong performance was posted in 2015 resulting in a net profit of EUR 16.7 million, an increase of EUR 15.6 million from 2014. Revenues increased by EUR 25.1 million to EUR 119.6 million in 2015.

This increase was predominately achieved through higher interest margin results of EUR 6.3 million as well as a EUR 16.0 million increase in Fund Administration. Operating expenses increased 10.9% to EUR 102.3 million, compared with EUR 92.3 million in 2014. The increase was mainly due to the negative currency impact which impacts the CBN Group’s USD cost base and higher regulatory costs. This increase is partially offset by a EUR 2.7 million decrease in legal expenses. In August 2015 settlement terms were agreed in a consolidated class action in the US, Anwar v. Fairfield Greenwich Limited. Final class approval was granted and the case dismissed by Order of the Court in October 2015. As a result, the cost/income ratio improved to 85% from 97% in 2014.

Due to additional deposits which came in at year end and as a result of additional business volumes, as of December 31, 2015 the balance sheet of the CBN Group has grown from EUR 4.1 billion to EUR 6 billion.

Citco Bank Canada

Assets under Custody for Citco Bank Canada amounted to USD 54 billion as of December 31, 2015, which is a year-on-year decrease of USD 9 billion or 14.2% for the year. This is primarily the result of one client restructuring their funds during the year rather than clients leaving. Citco Bank Canada expects Assets under Custody to grow in 2016, which will have a positive impact on operating income. The growth in Assets under Custody is expected to come from market appreciation, organic growth and new mandates. The increased custody fee income, combined with foreseeable increased interest margin, will result in an increase in net profit.

Citco Fund Services (Ireland) Limited

The principal activity of CFSI is the provision of administration services to both Irish and non-Irish domiciled funds. In addition to this, CFSI provides services to affiliated companies (intercompany services). 2015 proved to be a year of further growth for hedge funds. This was evidenced by investors’ subscriptions that exceeded the redemptions, combined with positive performance of hedge funds. As a result, Assets under Administration grew by 10% year-on-year.

Over the past few years CFSI has worked hard on further developing its fund of hedge fund service offering. CFSI believes that as its clients are trying to reduce their cost, they will seek to outsource more activities to CFSI. CFSI feels well placed to pick up these activities. CFSI management is confident that it will achieve modest growth in both Assets under Administration and revenue in 2016.

Assets under Administration amounted to USD 118 billion as of December 31, 2015, which represents year-on-year increase of USD 11 billion or 10.2%. The profit for the year amounted to USD 6.8 million (2014: USD 5.5 million). The main reason that the profit is higher than 2014 is that new business was generally serviced from existing headcount.

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Outlook

The CBN Group’s Treasury group optimized its cash management activities using various tools to identify client funding behaviors, core deposit levels and liquidity patterns. These tools helped the Treasury group to invest in higher yielding instruments in a timely and cost efficient manner. The existing pressure on short-term yields is expected to continue during 2016.

Whilst 2015, as a repeat of 2014, has seen a reduction and a convergence of credit default swap spreads, signifying a global lowering of perceived credit risk, the Treasury group continues to seek out exposures to only the highest rated counterparties. 2016 looks be challenging in this area as increased concern on the stability and capital levels of global financial institutions have generated significant volatility in stock prices and credit default swap spreads.

Management expects that average funding levels will remain relatively stable for 2016 and that the CBN Group can benefit from the Federal Reserve’s increased target interest rate from the end of December 2015. The average number of full-time employees for the year was 749 (2014: 735) of which 39 (2014: 44) were employed in The Netherlands. No significant changes are expected.

Amsterdam, April 15, 2016

Managing Directors: Assistant Managing Directors:

M. Leers R.J. Boonstra

F. van Proosdij M.O. Knapen

P.N. Symonds

Dublin branch: Luxembourg branch:

M. Sweeney A. de Groot


Section 2Supervisory Board’s Report

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2. Supervisory Board’s Report

The Supervisory Board of Directors hereby presents the 2015 Annual Report of Citco Bank Nederland N.V. and its subsidiaries, (the “CBN Group”). The Annual Report includes the report of the Management Board and the Annual Accounts.

The Supervisory Board supervises the Management Board of the CBN Group and its general affairs, the business and advises the Management Board. In fulfilling its tasks, the Supervisory Board is guided by the interests of the CBN Group and its business, and takes into account the relevant interests of all stakeholders in the company.

The Supervisory Board has approved the financial statements after their audit by Deloitte Accountants B.V., and proposes to the Annual General Meeting of Shareholders that the 2015 financial statements be adopted as submitted and that the Board of Managing Directors be acquitted for their successful conduct of the CBN Group’s affairs and the members of the Supervisory Board for their supervision.

General

The uptick in US interest rates by 0.25 percent as mandated by the Federal Reserve in late 2015 will benefit the CBN Group in that its assets are basically US Dollar based. The recent increase in rates is expected to result in a moderate increase in the CBN Group’s interest income for 2016. Conversely, since the CBN Group’s expenses are primarily Euro based, the strengthening US Dollar will have a salutary effect on the expense base of the organization. The net effect of these two events is expected to have a beneficial impact on the CBN Group’s financial results in 2016.

Role of the Supervisory Board

The Supervisory Board is responsible for the overall oversight of the CBN Group. It accomplishes this by supervising, monitoring and advising the Management Board on a broad range of topics intrinsic to the overall functions of the institution, including, but not limited to achievement of the CBN Group’s objectives; operational performance; strategy and risks inherent it its business activities; structure, management and effectiveness of internal risk management and control systems including audit; financial management and reporting processes; relationship with shareholders; compliance with laws and regulations; corporate governance and corporate social responsibility.

In fulfilling its tasks, the Supervisory Board is guided by the interests of the CBN Group and its business, and takes into account the relevant interests of all stakeholders in the CBN Group.

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Composition of the Supervisory Board

The composition of the Supervisory Board evolved during 2015. Mr. Harry Bolsius retired from the Supervisory Board on March 1, 2015; while Mr. Peter de Ruijter was appointed as a member on the same date. Additionally, Mr. Jan Buné was appointed to the Supervisory Board on January 28, 2016.

The current membership of the Supervisory Board is provided below:

Mr. Charles Rund – Mr. Rund, age 72, serves as the Chairman of the Supervisory Board of Directors and has over 45 years of experience in the international banking sector, serving in the position of general manager in numerous countries such as the USA, Brazil, Uruguay, Aruba, Curacao and The Netherlands. He is a former vice president of Bank of America and ABN Amro Bank. He was Managing Director & General Manager of Multibanco Internacional de Investimentos S.A. (Bank of America’s investment banking affiliate in Brazil); First National Bank of Aruba N.V. and Citco Bank Nederland N.V. Mr. Rund is a US citizen and was appointed as Supervisory Director in 2005. Mr. Rund provides expertise in the area of general management, custody, brokerage and treasury.

Mr. Dirk Jan van der Poel – Mr. van der Poel, age 55, serves as the Chairman of the Risk and Compliance Committee and has over 30 years of experience in the Accountancy, IT Risk and Advisory, Mergers and Acquisitions sectors in various industries on strategic, tactical and operational levels. He is a former IT Risk and Advisory Partner at Ordina, KPMG and Arthur Andersen. During 2015 he joined ING Bank as Corporate Head of Information Risk Management. Mr. van der Poel is a Dutch citizen and was appointed as a Supervisory Director in 2012. Mr. van der Poel’s areas of expertise within the Supervisory Board are risk, governance and IT.

Mr. Peter de Ruijter – Mr. de Ruijter, age 60, was appointed Supervisory Director and Chairman of the Audit Committee as of March 1, 2015. Mr. de Ruijter was educated and began his career as a chartered accountant/auditor, and has over 24 years of international executive experience as a general manager of Fortis Bank/MeesPierson and subsequently as CEO of Staalbankiers N.V. He also holds a Supervisory Board membership position in Mizuho Bank Nederland N.V. In addition to audit, he will also provide expertise in banking and treasury management, corporate governance, risk management and regulatory affairs.

Mr. Jan Buné – Mr. Buné, age 63, was appointed as Supervisory Director and member of the Audit Committee as of January 28, 2016. Mr. Buné is a former senior partner of Deloitte Accountants with over 40 years of experience in public accounting and business advisory. He also holds a Supervisory Board membership position at Mail.ru Group Ltd and Burgland Real Estate BV. He serves as an Independent Advisor to the Audit Committee of bpfBOUW, the pension fund for the building and construction sector in the Netherlands. Furthermore he is Commissioner at the Supervisory Authority for the media sector in the Netherlands. He is also a member of the Board of Trustees of the Artis, the Royal Amsterdam Zoo. His main responsibilities in the Supervisory Board of the CBN Group will lie in the area of audit, finance, governance, compliance and control.

Diversity Profile of the Supervisory Board 2015

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CharlesRund 1943 • • • • MJanBuné 1953 • • • • • • • MPeterdeRuijter 1956 • • • • • • • • • MDirkJanvanderPoel 1961 • • • • • • • • • M

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Retirement Schedule Supervisory Board 2015

Meetings

During 2015, the Supervisory Board met five times; three of which were in formal sessions and two conference calls to address specific matters. Among others, individual meetings were called for the discussion and approval of the 2015 Budget, and the 2014 Annual Report, respectively.

Life Long Education Program/Induction Program

The Lifelong Learning Program continued with all Supervisory Board members receiving training in the following areas: Risk Management Reporting – Introduction to the Development of Risk Reporting Cyber Security – The Threat is Real CRD IV Remuneration Policy – Application of the New Remuneration Law

Additionally, individual members of the Supervisory Board undertook personal training courses. Mr. van der Poel received formal training in numerous programs; including, but not limited to intensive bank analysis; non-financial risk; information processing policy development; business continuity management policy development; business continuity and disaster recovery. Mr. de Ruijter received outside training in culture and behavior in the boardroom; cybercrime/EU legislation on privacy and data protection and compliance for payment institutions.

An Induction Program for new Supervisory Directors was developed and provided to Mr. de Ruijter upon his appointment as a board member in order to familiarize him with the products and strategies of the CBN Group and its custody and fund administration subsidiaries. With his appointment to the Supervisory Board in 2016, Mr. Jan Buné will also participate in this Induction Program.

Remuneration

A separate Remuneration Committee has not been established. The Supervisory Board addresses remuneration issues with the entire Supervisory Board membership. For 2015 bonuses and 2016 salary actions, the Supervisory Board reviewed, commented on and approved the recommended salary and bonus actions for the Management Board and control functions in line with the Supervisory Board Charter for approval by the Annual General Meeting of Shareholders.

Committees of the Supervisory Board

Name(yearofbirth) Firstappointment Firstre-appointment Secondre-appointment Finalre9rement

CharlesRund(1943,Chairman) 13May2005 13May2009 13May2013 13May2017

DirkJanvanderPoel(1961) 10August2012 10August2016 10August2020 10August2024

PeterdeRuijter(1956) 1March2015 1March2019 1March2023 1March2027

JanBuné(1953) 28January2016 28January2020 28January2024 28January2028

Name

AuditCommi-ee

Risk&ComplianceCommi-ee

CharlesRund Member MemberPeterdeRuijter Chairman DirkJanvanderPoel ChairmanJanBuné Member Member

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The Supervisory Board has two permanent committees to which certain tasks are assigned: the Audit Committee, and the Risk and Compliance Committee. These committees exist to assist the Supervisory Board in fulfilling its oversight responsibilities. Each committee is composed of at least two Supervisory Board members. Members are elected by the Supervisory Board of Directors and serve until successors are elected.

Audit Committee

The primary function of the Audit Committee is to assist the Supervisory Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process and the process for monitoring compliance with laws, regulations and the policies/code of ethics. Mr. Peter de Ruijter was appointed Chairman of the CBN Group’s Audit Committee and Mr. Charles Rund is the other member of the committee.

The Audit Committee met three times during 2015. All meetings were attended by all the committee members and minutes were distributed to the Supervisory Board.

The Audit Committee reviews the annual financial statements of the CBN Group; annually reviews the Audit Committee Charter and the Internal Audit Mandate; reviews and approved the appropriate key performance indicators of the Internal Audit function; arranges for periodic independent assessment of the Internal Audit function; reviews the regulatory reporting of the CBN Group, and approves the Internal Audit Plan for the CBN Group.

Additionally, the Audit Committee recommends the appointment, compensation and retention of the independent auditors and reviews the work of the independent auditor who reports director to the Audit Committee. It reviews the performance of the independent auditor and recommends removal if circumstances warrant.

The Audit Committee reviews the financial, accounting and reporting procedures and through consultation with the independent auditor and financial management, reviews the integrity of the financial reporting processes of the CBN Group.

Risk and Compliance Committee

The Risk and Compliance Committee assists the Supervisory Board with the performance of its duties in relation to risk and compliance. It is responsible for the oversight of all banking related aspect of the CBN Group’s risk control and monitoring systems. This encompasses all risks including credit risk, operation risks, and liquidity and market risks. It also oversees the CBN Group’s legal, regulatory and corporate governance compliance. With the retirement of Supervisory Director Harry Bolsius, as of March 1, 2015, the Chairmanship of the Risk and Compliance Committee passed to Mr. Dirk Jan van der Poel and Mr. Charles Rund is the other member of the committee.

The Risk and Compliance Committee supervises the Enterprise Risk Management (ERM) framework pursued by the Management Board and its implementation. It regularly reviews and assesses operational risk. It discusses the CBN Group’s risk profile and assesses at a strategic level whether the CBN Group’s activities are aligned with the approved risk appetite.

The Risk and Compliance Committee assesses the CBN Group’s compliance and internal control functions by undertaking the following actions amongst other: it supervises the CBN Group’s adherence to rules and regulations applicable to it; receives updates from the compliance officer on legal, regulatory and compliance matters; assesses findings of investigations by regulatory and/or supervisory authorities; assesses changes in the design and effectiveness of compliance systems; informs the Supervisory Board of any matters that could affect the CBN Group’s reputation or activities, and assesses the effectiveness of the compliance function.

The Risk and Compliance Committee supervises the CBN Group’s adherence to the principles and best practices of the Dutch Banking Code, Dutch Corporate Governance Code, and other regulatory guidelines. In this regard, please refer to the Management Board Report regarding the CBN Group’s compliance with the Dutch Banking Code. The Supervisory Board confirms the stated view that the CBN Group is compliant with the Dutch Banking Code.

18



The Risk and Compliance Committee also assesses whether the Management Board communicates the right management culture by highlighting the importance of adherence to corporate governance principles and best practices and whether it ensures that all employees understand their roles and responsibilities.

During 2015, the Risk and Compliance Committee met three times, attended by all members.

Corporate Governance

Based upon the results of an outside evaluation by the accounting firm KPMG that had been commissioned by the Supervisory Board in 2012, and also the results of a self-evaluation of its performance by the Supervisory Board, a number of areas for improvement were noted, although the results of the two evaluations were largely positive. During the following year, a plan to address these areas was developed and implemented, covering the areas identified for attention.

The Supervisory Board will engage an outside company to undertake a new evaluation of the functioning of the Supervisory Board in 2016.

CBN Group has taken notice of adopted legislation (effective as of 1 January 2013) as a consequence of which a “large” company, when nominating or appointing members of the Management Board or Supervisory Board, should take into account as much as possible a balanced composition of these Boards in terms of gender, to the effect that at least 30 percent of the positions are held by women and at least 30 percent by men.

Conclusion

Given the challenging banking environment, the Supervisory Board is of the opinion that it has effectively discharged its duties in an effective manner. Keys to this result are, among others, the composition of the Board; the expertise and experience of its members, level and frequency of meetings, effective committees, access to information; and good working relationship with the Management Board and staff.

The Supervisory Board has approved the financial statements after the audit by Deloitte Accountants B.V. The Supervisory Board proposes to the Annual General Meeting of Shareholders that the 2015 financial statements be adopted as submitted and that the Board of Managing Directors be discharged for their conduct of the bank’s affairs and the members of the Supervisory Board for their supervision.


Supervisory Directors:

C. Rund, Chairman

J.G.C.M. Buné

D.J. van der Poel

P. de Ruijter

19


Section 3Consolidated Financial Statements

20



3. Consolidated Financial Statements

Consolidated income statement for the year ended December 31,

Note

2015

2014

EUR 000

EUR 000

Revenue: Fund administration and investor relation services

84,980

68,953 Banking and custody services 5

34,648

25,560

119,628

94,513 Operating expenses:

Personnel expenses 6

41,567

37,731 Restructuring expenses 26

704

782

Office rent

4,872

4,028 Office and administration expenses 7

2,350

1,678

Travel expenses 8

1,155

1,328 Professional services 9

2,677

5,777

Depreciation and amortization 10

783

238 Other operating expenses 11

48,202

102,310

40,719

92,281

Net profit from operations

17,318

2,232

Net finance income 12

533

144 Net profit before tax

17,851

2,376

Income tax expense 14

1,110

1,314 Net profit after tax

16,741

1,062

Attributable to: Shareholder of CBN

16,741

1,062

Net profit for the year

16,741

1,062

21



Consolidated statement of comprehensive income for the year ended December 31,

Note

2015

2014

EUR 000

EUR 000

Net profit for the year

16,741

1,062

Other comprehensive income, net of income tax:

Items that may be reclassified subsequently to

consolidated income statement:

Foreign exchange gain 23,269 23,850

Revaluation of available-for-sale assets

(169)

302 Total other comprehensive income, net of income tax

23,100

24,152

Total comprehensive income for the year

39,841

25,214 Attributable to: Shareholder of CBN 39,841 25,214

22



Consolidated statement of financial position as at December 31,

Note

2015

2014

EUR 000

EUR 000

Assets

Non-current assets

Property, plant and equipment 15

7,009

203 Intangible assets 16

–

1

Long-term investments 17

442,334

348,168 Loans to affiliated companies 18

3,542

20,587

Deferred tax assets 19

12,274

465,159

11,948

380,907

Current assets

Trade receivables 20

3,806

1,277 Other receivables and accrued income 21

77,439

85,846

Current tax receivables

437

283 Receivables with affiliated companies

20,016

4,739

Short-term investments 22

2,080,452

1,766,487 Loans and advances to customers 23

14,130

31,871

Cash and cash equivalents 24

3,341,034

5,537,314

1,820,110

3,710,613

Total assets

6,002,473

4,091,520

Equity and liabilities

Share capital 25

5,000

5,000 Additional paid-in capital

48,503

48,503

Translation reserve

36,589

13,320 Revaluation of AFS Assets

(59)

110

Retained earnings

155,824

139,082 Total equity attributable to the shareholder of

CBN

245,857

206,015

Non-current liabilities

Deferred tax liabilities 19

6,832

8,014 Other liabilities

447

7,279

290

8,304

Current liabilities

Trade payables

1,194

224 Other payables and accrued expenses 28

63,462

70,818

Payables to affiliated companies

847

1,262 Provisions 26

–

79

Deferred income

231

86 Current tax liabilities

55

1,366

Amounts owed to depositors 29

5,683,548

5,749,337

3,803,366

3,877,201

Total equity and liabilities

6,002,473

4,091,520

23


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25


© 2015 Citco Bank Nederland N.V., Amsterdam. This report is strictly confidential. Unauthorised use of this report is prohibited Page 25 of 99

Consolidated statement of cash flows under indirect method for the year ended December 31,

Note

2015

2014

EUR 000

EUR 000

Cash flows from operating activities: Net profit for the year

16,741

1,062 Adjusted for:

• Income tax expense 14

1,110

1,314 • Depreciation 10

782

235

• Amortization 10

1

3 • Net interest income 12

(433)

(286)

• Net interest income from banking activities 5

(18,338)

(12,066)

(137)

(9,738)

Movement in working capital: • (Increase)/decrease in trade receivables

(2,529)

1,302 • Decrease/(increase) in other receivables and accrued income

8,777

(39,704)

• Decrease/(increase) in receivables with affiliated companies

(15,277)

(1,216) • Increase/(decrease) in trade payables

970

(202)

• (Decrease)/increase in other payables and accrued expenses

(7,367)

31,473 • Decrease in payables to affiliated companies (415) (4,844) • (Decrease)/increase in provisions

(79)

316

• Increase/(decrease) in deferred income

145

(165) • Increase/(decrease) in amounts owed to depositors

1,880,182

(189,497)

Interest paid

(856)

(332) Interest received

19,268

10,843

Unrealised currency translation gain

23,258

23,834 Pension reserve

–

(1,026)

Income taxes paid

(4,083)

(452) Increase in other liabilities

157

201

(Increase) in short and long-term investments

(408,300)

(491,539) Decrease/(increase) in loans and advances to customers and affiliated companies

34,786

(12,411)

Net cash flow generated by/(used in) operating activities

1,528,500

(683,157)

Cash flows from investing activities: Additions to property, plant and equipment 15 (7,576) (185)

Net cash flow (used in) investing activities

(7,576)

(185)

Net increase/(decrease) in cash and cash equivalents

1,520,924

(683,342)

Cash and cash equivalents: Cash and cash equivalents as at January 1 24

1,820,110

2,503,452 Cash and cash equivalents as at December 31 24

3,341,034

1,820,110

Increase/(decrease) in cash and cash equivalents 1,520,924 (683,342)

26


Section 4Notes to the Consolidated Financial Statements

27



4. Notes to the consolidated financial statements

4.1. General

4.1.1. Ownership

Citco Bank Nederland N.V. (“CBN”) is domiciled in Amsterdam and it was incorporated in Amsterdam on December 20, 1985. CBN is registered with the Trade Register of the Amsterdam Chamber of Commerce under number 33185291 pursuant to the terms of its Articles of Association as contained in the Deed of its Incorporation.

CBN is a wholly-owned subsidiary of Citco Bank Holding N.V., Curaçao, which is ultimately a wholly-owned subsidiary of Citco III Limited, Cayman Islands (the ultimate parent company).

The consolidated financial statements of CBN for the year ended December 31, 2015 comprise of CBN and its subsidiaries (together referred as “CBN Group”).

CBN Group consists of the following branches and subsidiaries: Citco Bank Nederland N.V., Amsterdam, the Netherlands

o Branch Office, Dublin, Republic of Ireland o Branch Office, Luxembourg, Luxembourg

Citco Bank Canada, Toronto, Canada Citco Fund Services (Ireland) Ltd., Cork and Dublin, Republic of Ireland

The address of its registered office is as follows:

Telestone 8 – Teleport Naritaweg 165 1043 BW Amsterdam

4.1.2. Activities

Fund Administration and Investor Relations Services (‘CFS’)

CFS is an independent global leader in the administration of hedge funds and hedge fund of funds for fund managers of large pools of equities, bonds, money market, and derivative instruments. The companies within CFS offer a complete range of fund administration services including fund set up, independent accounting, and net asset value calculations, investor relations, and back-office services. CFS has built its capability and expertise over a period of more than forty years. In addition to the provision of fund administration services to both domestic and offshore hedge funds, companies within CFS offer a full front-to-back office service using a straight-through processing capability. This service combines the offering of a trading and portfolio management platform which is installed on the trader’s desktop, with full front, middle, and back-office support.

Experienced back-office staff members of the CFS companies, using the latest software technology, provide responsive investor relations services to the financial services industry worldwide. These services include investor verification and record-keeping. Reports are available online or in hard copy. Investor relations services on behalf of a fund are designed to fully support clients’ capital raising, distribution, and investor retention efforts.

28



Banking and Custody Services

Drawing on an unrivaled breadth and depth of industry expertise, CBN Group provides access to the best breed process and technology that have set industry standards.

Utilizing the electronic platforms, institutional and hedge fund of funds clients can access the funds universe via CitcoFundsNet, an online real-time global funds platform. CBN Group offers the following services to its clients:

Custody and Trading Offers unlimited access to online trading as well as tailored reporting.

Trustee Services Provides trustee and custody services to Irish domiciled collective investment schemes (UCITS, Professional Investor Funds, and Qualifying Investors Funds).

Depository Oversight (Luxembourg) The Citco Bank Nederland N.V. Luxembourg Branch acts as a depository on behalf of Luxembourg regulated funds.

Credit Facilities Provides clients with short term bridge finance and foreign exchange facilities.

4.1.3. Group structure

An overview of CBN and its main subsidiaries as per December 31, 2015 is included in Appendix I of this report.

4.1.4. Currency

CBN uses the United States Dollar (USD) as its functional currency and the Euro (EUR) as its reporting currency. In accordance with IAS 21 the EUR/USD conversion rate that has been used for the balance sheet is the 2015 year-end rate of 1.0889 (2014: 1.2133) and for conversion of the profit or loss an average exchange rate for 2015 of 1.1049 (2014: 1.3208) is used.

4.1.5. Approval of the Board

These consolidated financial statements have been approved for issuance by the Board of Directors on April 15, 2016.

29



4.2. Principal accounting policies

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and its interpretations adopted by the European Union (‘EU’). The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments. The historical cost is generally based on the fair value of the consideration given in exchange for assets. The principal accounting policies adopted are set out below. These have been applied consistently during the year.

Comparative figures

In order to align with current year’s presentation certain insignificant changes have been made to the comparative figures. These reclassifications have no effect on the total equity or the net result for the year.

4.2.1. New and amended standards adopted by the Group

Annual Improvements to IFRSs 2010-2012 Cycle and 2011-2013 Cycle, minor amendments to a number of standards

The adoption of the improvements made in the 2010-2012 Cycle and 2011-2013 Cycle has had no material impact on the disclosures or the amounts recognised in the consolidated financial statements.

4.2.2. New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations have been endorsed but are not yet effective. Management is currently evaluating the impact of these new standards and interpretations but does not expect a material impact to the consolidated financial statements. Below is a listing of the upcoming new standards and interpretations:

Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations, annual periods on or after January 1, 2016. The amendments add new guidance on how to account for the acquisition of interest in joint operations that constitutes a business.

Amendments to IAS 1 Disclosure Initiative, annual periods on or after January 1, 2016. The amendment encourages companies to apply professional judgement in determining what information to disclose in the financial statements.

Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation, annual periods on or after January 1, 2016. The amendment prohibits revenue-based depreciation methods and generally presumes that such methods are an inappropriate basis for amortising intangible assets.

Annual Improvements to IFRSs 2012-2014 Cycle, annual periods on or after January 1, 2016. Minor amendments to a number of standards.

30



4.2.3. Use of estimates in the preparation of financial statements

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of available information and application of judgment are inherent in the formation of estimates. Although these estimates are based on management’s best knowledge of current events and actions, actual results in the future could differ from such estimates and the differences may be material to the consolidated financial statements (reference is made to note 4.2.26)

4.2.4. Basis of consolidation

The consolidated financial statements incorporate the financial statements of CBN and enterprises controlled by CBN (its subsidiaries) made up to December 31, each year. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect returns through its power over the investee.

On acquisition, the assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition. The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances between CBN Group entities are eliminated on consolidation.

4.2.5. Foreign currency translation

Transactions in currencies other than USD are initially recorded at the rates of exchange prevailing on the date of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing at the end of the reporting period. Gains and losses arising on exchange are included in the consolidated income statement for the year.

During the year CBN Group hedged its exposure to certain foreign exchange risks by entering into forward exchange contracts.

On consolidation, the assets and liabilities of CBN Group’s non-USD operations are translated at the exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and transferred to CBN Group’s translation reserve. On disposal of an entity, such cumulative translation differences are recognised as gain or loss in the year in which the disposal takes place.

Goodwill and fair value adjustments arising on the acquisition of a non-USD entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate.

4.2.6. Revenue recognition

Revenue comprises the value for the rendering of services in the ordinary course of the CBN Group’s activities. The CBN Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and the stage of completion of the transaction at the consolidated balance sheet date can be measured reliably. The amount of revenue is not considered to be reliably measured until all significant contingencies relating to the sale have been resolved. The CBN Group bases its estimates on historic results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is generated from contractual service agreements with the CBN Group’s clients. Custody and fund administration income is accrued on a time basis by reference to the Assets under Custody (‘AuC’) or Assets under Administration (‘AuA’) at the contractual basis points or at a minimum fee.

31



Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable. Interest income is recognized as earned.

Fees and commissions are generally recognized on an accrual basis when the service has been provided.

Fees and commissions arising from negotiating of a transaction for a third party - such as the arrangement of the acquisition of shares or other securities or the purchase or sale of business which are recognized on completion of the underlying transaction. Other advisory and service fees are recognized based on the applicable service contracts, usually on a time-proportionate basis.

4.2.7. Interest income and expense

Interest income and expense are recognised in the consolidated income statement for all instruments measured at amortised cost, using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that is used to discount the estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

When calculating the effective interest rate, CBN Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and basis points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

4.2.8. Operating expenses

Operating expenses are calculated at cost and are recognised in the period to which they relate. Amortisation and depreciation charges on intangible (excluding intangible assets with indefinite lives (i.e. goodwill)) and tangible assets are based on cost and are calculated by the straight-line method over the estimated lives of the assets concerned.

4.2.9. Retirement benefit costs

Payments to defined contribution retirement schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where CBN Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement scheme.

4.2.10. Taxation

Income tax expense represents the sum of the current tax payable and deferred tax.

The current tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. CBN Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.

32



Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where CBN Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which CBN Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

4.2.11. Property, plant and equipment

Land held for use in the supply of services, or for administrative purposes, is stated in the statement of financial position at historical cost less any accumulated impairment. Land is not depreciated. Buildings held for use in the supply of services, or for administrative purposes, are stated in the statement of financial position at historical cost less any subsequent accumulated depreciation and any accumulated impairment. Machinery and equipment, leasehold improvements and other tangible fixed assets are stated at cost less accumulated depreciation and any accumulated impairment.

If an item of property and equipment is comprised of several major components with different useful lives, each component is accounted for separately.

Depreciation is charged so as to write off the cost over their estimated useful lives, using the straight-line method, on the following bases:

Machinery and equipment 3-10 years Leasehold improvements Term of the lease These assets are reviewed at each reporting period for indications of impairment. If an indication of impairment exists, the recoverable amount of the asset is estimated based on its fair value. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. In addition, the useful lives of these assets are also reviewed and adjusted, if appropriate, at each reporting period.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset. This is recognised in the consolidated income statement.

33



4.2.12. Intangible assets

Third-party software

Acquired software is capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis over the assets useful life which typically ranges from three to five years. Where the carrying value of an asset is greater than its estimated recoverable amount the asset is written down immediately to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are recognised in the consolidated income statement.

For intangible assets with finite lives (software), the CBN Group reviews the carrying amounts at each end of the reporting period to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

4.2.13. Impairment

For tangible and intangible assets with finite lives, CBN Group reviews the carrying amounts at the end of each reporting period to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, CBN Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets not yet available for use are tested for impairment at least annually, and wherever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate which reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

4.2.14. Financial instruments

Financial assets and financial liabilities are recognised in CBN Group’s consolidated statement of financial position when CBN Group has become a party at (trade date) to the contractual provisions of the instrument. Financial assets and liabilities are offset and the net amounts are reported in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the net asset and settle the liability simultaneously.

At any time, CBN Group has outstanding commitments to extend credit. These commitments take the form of unused overdraft facilities.

CBN Group provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. These transactions have fixed limits and generally extend for a period of up to five years. Expirations are not concentrated in any particular period.

34



Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

The fair value of hedging derivatives is classified as a non-current asset or a non-current liability if the remaining maturity of the hedge relationship is more than 12 months and as a current asset or a current liability if the remaining maturity of the hedge relationship is less than 12 months.

Derivatives not designated into an effective hedge relationship are classified as a current asset or a current liability. Financial guarantee contract liabilities are measured initially at their fair values and are subsequently measured at the higher of:

the amount of the obligation under the contract, as determined in accordance with IAS 37 - Provisions, contingent liabilities and contingent assets; and

the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition policy as described in Note 4.2.6.

4.2.15. Trade receivables

Trade receivables are measured at amortised cost using the effective interest method, less any impairment.

4.2.16. Work in progress

Work in progress is valued at the estimated realisable value of services already performed but that are not yet invoiced. Work in progress is included within other receivables and accrued income.

4.2.17. Accrued income

Accrued income is stated at its nominal value. Accrued income includes fees for services provided but that are not yet invoiced.

4.2.18. Loans and advances to customers

Loans and advances originated by CBN Group include loans where money is provided directly to the borrower. Loans originated by CBN Group are initially recorded at fair value. Interest on loans originated by CBN Group is included in interest income and is recognised on an accrual basis. Fees and direct costs relating to loan origination, refinancing or to loan commitments are directly recorded in the consolidated income statement due to the short-term nature of the loans. The majority of loans bear floating interest rates implying no impairment risk that relates to any potential interest rate movement.

4.2.19. Allowance for credit losses

An allowance for credit losses is established if there is objective evidence that CBN Group will be unable to collect all amounts due on a claim according to the original contractual terms or the equivalent value. A “claim” means a loan, a commitment such as a letter of credit, a guarantee, a commitment to extend credit, or other credit product. An allowance for credit losses is reported as a reduction of the carrying value of a claim on the consolidated statement of financial position. Additions to the allowances for credit losses are made through value adjustments.

If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited as a reduction of the provision for loan losses.

Allowances for credit losses are evaluated at a counterparty-specific level.

35



A claim is considered impaired when management determines that it is probable that CBN Group will not be able to collect all amounts due according to the original contractual terms or the equivalent value. Individual credit exposures are evaluated based upon the borrower’s character, overall financial condition, resources and payment record, the original contractual term, exit possibilities and, where applicable, the realisable value of any collateral. The estimated recoverable amount is the present value of expected future cash flows, which may result from restructuring or liquidation. Impairment is measured and allowances for credit losses are established for the difference between the carrying amount and the estimated recoverable amount.

4.2.20. Investments in financial assets

Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned, and are initially measured at fair value, net of transaction costs.

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-maturity investments’, ‘available-for-sale’ and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Debt instruments that are classified as held-to-maturity, available-for-sale or loans and receivables recognise income on an effective interest rate basis.

36



Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss where CBN Group acquires the financial assets principally for the purpose of selling in the near term, the financial asset is a part of an identified portfolio of financial instruments that CBN Group manages together and has a recent actual pattern of short-term profit taking as well as all derivatives that are designated and effective hedging instruments. Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 33.

Where an entity designates financial assets into the financial assets at fair value through profit or loss category, it discloses:

(i) the nature of the financial assets;

(ii) the criteria for so designating such financial assets on initial recognition; and

(iii) how the entity has satisfied the requirements in lAS 39 for such designation, including a narrative description of the circumstances underlying the measurement or recognition inconsistency that would otherwise arise or of how designation at fair value through profit or loss is consistent with the entity’s documented risk management or investment strategy, as appropriate.

Held-to-maturity investments

Debt instruments for which CBN Group has the expressed intention and ability to hold to maturity are subsequently measured to redemption value over the remaining lifetime, less any impairment loss recognised to reflect irrecoverable amounts.

The annual amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the term of the instrument, so that the revenue recognised in each period represents the effective interest rate on the investment.

Available-for-sale financial assets (“AFS”)

Certain shares and redeemable notes held by CBN Group are classified as being available-for-sale and are stated at fair value. Fair value is determined in the manner described in note 33. Gains and losses arising from changes in fair value are recognised directly in other comprehensive income and accumulated in revaluation available-for-sale assets reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognized directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period.

Dividends on available-for-sale equity instruments are recognised in profit or loss when CBN Group’s right to receive payments is established.

The fair value of available-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at reporting date. The change in fair value attributable to translation differences that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in other comprehensive income.

Where CBN Group designates a financial asset into the available-for-sale category it discloses the criteria used in making the designation.

4.2.21. Cash and cash equivalents

Cash and cash equivalents comprise of cash and short-term deposits. Cash and cash equivalents are measured at amortised cost using the effective interest method, less any impairment.

37



4.2.22. Trade payables

Trade payables are measured at amortised cost using the effective interest method, less any impairment. CBN Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

4.2.23. Provisions

Provisions are recognised when CBN Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect is material, the provision is determined by discounting the expected future cash flows. Provisions are not recognised for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as finance expense. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

4.2.24. Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised as assets of CBN Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Finance lease payments are allocated between interest expense and reduction of lease liability over the term of the lease. The interest expense is determined by applying the interest rate implicit in the lease to the outstanding lease liability at the beginning of each lease payment period.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

38



4.2.25. Consolidated statement of cash flows

Cash and cash equivalents for the purpose of the statement of cash flows include cash on hand, deposits available on demand with central banks and net credit balances on current accounts with other banks.

The statement of cash flows, based on the indirect method of calculation, gives details of the source of cash and cash equivalents which became available during the year and the application of these cash and cash equivalents over the course of the year.

4.2.26. Critical accounting judgments and key sources of estimation uncertainty

Provisions for loan losses are recognised based on periodic valuation of the loan portfolio and receivables. Considerable judgment is exercised in determining the extent of the loan loss and receivable provision (impairment) and includes review of individual loss cases. Changes in such judgments and analyses may lead to changes in the provisions for loan losses over time.

The identification of impairment and the determination of the recoverable amount are an inherently uncertain process involving various assumptions and factors, including the financial condition of the counterparty, expected future cash flows, observable market prices and expected net selling prices.

Management is of the opinion that no provision needs to be recorded for the Fairfield Funds litigation and Fletcher litigation (reference is made to Note 37).

39



4.3. Financial risk management

4.3.1. Risk overview

In its operating environment and daily activities, CBN Group encounters various risks and constantly strives to mitigate related risks. In this process, CBN Group uses financial instruments including derivatives.

The main risks identified by CBN Group, related to its activities, are:

(a) Market risk, which includes three types of risk:

(i) Currency risk: The risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates;

(ii) Interest rate risk: The risk that the value of a financial instrument will fluctuate because of changes in market interest rates; and

(iii) Other price risk: Other than those arising from interest rate risk or currency risk this includes the risk that the value of a financial instrument will fluctuate because of factors related to the issuer of the financial instrument or by broad market movement.

(b) Credit risk: The risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

(c) Liquidity risk: The risk that obligations cannot be met due to a mismatch between the maturity profiles of assets and liabilities.

(d) Operational risk: The risk that losses occur because of the failing in procedures and information systems and the inability of internal controls to detect these failings.

(e) Capital adequacy risk: Risk that the capital position is not consistent with CBN Group’s overall risk profile and strategy, and it therefore, holds an inappropriate level of capital against its minimum regulatory capital requirements

Market risk

CBN Group’s policy is to reduce market risk to an acceptable level. Market risk embodies not only the potential for loss but also the potential for gain. In CBN Group the treasury instruments available to manage and reduce these risks within the division have been approved by the Board and consistently applied. This policy serves to set a framework of limits and to ensure clearly defined limits within that framework. There has been no change to CBN Group’s exposure to market risks and the Board and CBN Group Risk Officer continuously reviews the manner in which it manages and measures the risk.

CBN Group’s business model has a strong correlation to the performance of the hedge fund industry. Depending on the investment strategy of the client the correlation differs. Increased performance by its clients has (in general) a similar effect on the performance of CBN Group. As a result CBN Group’s market risk is correlated with general market developments; a higher potential for higher gains in an upward market and lower gains in a declining market.

Currency risk

Currency risk is the current or prospective risk to earnings and capital arising from adverse movements in foreign exchange rates. CBN Group has and manages currency risk in two key areas: 1. Client Treasury activities: clients place forward exchange contracts with CBN Group, therefore CBN Group is exposed

to fluctuations in foreign exchange rates on these contracts. In managing this risk CBN Group places offsetting forward exchange contracts with pre-approved counterparties with the same maturity. In addition clients are required to provide cash collateral in case of a margin call.

40



2. Operations: CBN Group is exposed to foreign exchange risk in respect of funding day-to-day activities and capital expenditure. In managing this risk management utilises forward exchange contracts for any imbalances or firm commitments for planned capital expenditure.

The table below summarises CBN Group’s exposure to currency risk translated to EUR:

EUR

USD

CHF

GBP

Other

Total

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

As at December 31, 2015: Non-current assets Property, plant and equipment 6,968

41

–

–

–

7,009

Long-term investments 280

442,054

–

–

–

442,334 Loans to affiliated companies –

230

–

–

3,312

3,542

Deferred tax assets 12,113

161

–

–

–

12,274

Current assets Trade receivables 124

2,343

1,010

329

–

3,806

Other receivables and accrued income 22,010

33,695

5,022

649

16,063

77,439 Current tax receivable 180

257

–

–

–

437

Receivables from affiliated companies 111

19,755

–

150

–

20,016 Short-term investments 364,966

1,715,486

–

–

–

2,080,452

Loans and advances to customers 8,540

5,579

2

2

7

14,130 Cash and cash equivalents 2,039,875

930,652

35,105

142,136

193,266

3,341,034

Total assets 2,455,167

3,150,253

41,139

143,266

212,648

6,002,473

Non-current liabilities Deferred tax liabilities 6,812

20

–

–

–

6,832

Other liabilities 19

428

–

–

–

447

Current liabilities Trade payables 757

428

–

9

–

1,194

Other payables and accrued expenses 17,980

24,433

5,065

27

15,957

63,462 Current payables affiliated companies 98

749

–

–

–

847

Short-term deferred income 1

228

2

–

–

231 Current tax liabilities 1

–

–

–

54

55

Amounts owed to depositors 867,163

4,291,849

35,043

365,487

124,006

5,683,548 Total liabilities 892,831

4,318,135

40,110

365,523

140,017

5,756,616

Net currency exposure 1,562,336

(1,167,882) 1,029

(222,257)

72,631

245,857

Off-balance sheet - guarantees to counterparties 1,545

–

–

1,160

–

2,705

Credit commitments –

289,541

–

–

–

289,541

As at December 31, 2014: Total assets 878,330

2,724,039

27,297

194,624

267,230

4,091,520

Total liabilities 523,856

2,930,467

26,863

194,398

209,920

3,885,504 Net balance sheet position 354,474

(206,428)

434

226

57,310

206,016

Off-balance sheet - guarantees to counterparties 1,195

–

–

1,098

–

2,293

Credit commitments –

109,891

–

–

–

109,891

All currency exposures are covered by foreign exchange contracts. The off-balance sheet net position excludes forward exchange contracts placed on behalf of clients (see Note 32). Currency exposures are covered in USD functional currency.

The off balance sheet items include potential currency risks for CBN Group. However, it is uncertain whether off balance sheet items will lead to an actual exposure.

41



Interest rate risk

Interest rate risk is the current or prospective risk to earnings and capital arising from adverse movements in interest rates. Interest rate risk is controlled through the monitoring of deposits and short-term investments with the use of the interest balance sheet and maturity profile. Funding is short term in nature and placements (exclusive of short-term investments) are also on an overnight basis. An analysis is made of the level of deposits being considered as the minimum ‘core deposits’ of CBN Group. The amounts available for short-term investments are calculated based on this deposit base. The table below summarises CBN Group’s exposure to interest rate risk translated to EUR:

Up to 1 month

1-3 months

3-12 months

1-5 years

Over 5 years

Total

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

As at December 31, 2015: Non-current assets

Long-term investments –

–

–

284,034

158,020

442,054

Loans to affiliated companies –

–

230

–

–

230

Current assets

Receivables from affiliated companies – – 18,275 – – 18,275 Short-term investments 1,755,491

–

324,961

–

–

2,080,452


–

432

–

–


–

–

–

–

3,341,034


–

343,898

284,034

158,020

5,893,288

Current liabilities

Amounts owed to depositors 5,683,382

–

–

–

–

5,683,382

Total liabilities 5,683,382

–

–

–

–

5,683,382

Up to 1 month

1-3 months

3-12 months

1-5 years

Over 5 years

Total

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000



–

–

205,009

142,895

347,904


–

–

16,608

–

16,608

Current assets

Short-term investments 990,284

514,356

261,847

–

–

1,766,487


14,408

731

–

–


–

–

–

–

1,820,110


528,764

262,578

221,617

142,895

3,982,980

Current liabilities


–

–

–

–

3,803,366


–

–

–

–

3,803,366

42



Interest sensitivity analysis

The sensitivity analysis has been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

Interest sensitivity is applicable in one key area for the CBN Group, Net Interest Margin. The net interest margin earned from clients is subject to any changes in the spread CBN Group earns on placements in the markets versus the interest paid to clients. The sensitivity analysis has been determined based on the exposure to interest rates for any applicable derivatives and non-derivative instruments during the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk in respect of CBN Group to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher and all other variables were held constant, CBN Group’s net profit before tax for the year ended December 31, 2015 would increase by EUR 13.4 million (2014: increase by EUR 13.7 million) and CBN Group’s equity as at December 31, 2015 would increase by EUR 11.0 million (2014: increase by EUR 6.1 million).

If interest rates had been 50 basis points lower or at minimal zero and all other variables were held constant, CBN Group’s net profit before tax for the year ended December 31, 2015 would decrease by EUR 6.5 million (2014: decrease by EUR 6.4 million) and CBN Group’s equity as at December 31, 2015 would decrease by EUR 5.3 million (2014: decrease by EUR 2.9 million).

Liquidity risk management

CBN Group manages liquidity risk by maintaining adequate reserves, banking facilities, by continuously monitoring forecast to actual cash flows and matching the maturity profiles of financial assets and liabilities. In addition, CBN Group manages any counterpart risk in respect of liquidity through its utilisation of the Counter Party Risk Monitoring System.

Liquidity risk table

The following table details CBN Group’s remaining contractual maturity for its non-derivative and derivative financial assets and liabilities. The table has been drawn up based on the undiscounted contractual cash flows of financial assets and liabilities based on the earliest date on which the CBN Group can be required to receive and pay, respective.

43



Up to 1 month

1-3 months

3-12 months

1-5 years

Over 5 years

Total

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000



–

–

284,034

158,300

442,334


–

–

3,542

–

3,542 Current assets Trade receivables 3,806 – – – – 3,806 Other receivables and accrued income –

16,451

–

–

–

16,451

Receivables from affiliated companies 1,741

–

18,275

–

–

20,016 Short-term investments 1,164,714

519,604

396,134

–

–

2,080,452


–

3,319

–

–


–

–

–

–

3,341,034

Derivative financial assets 45,178

2,736

471

–

–

48,385


538,791

418,199

287,576

158,300

5,970,150

Current liabilities

Trade payables –

1,194

–

–

–

1,194

Other payables and accrued expenses –

9,080

–

–

–

9,080 Payables to affiliated companies 847

–

–

–

–

847


–

–

166

–

5,683,548 Derivative financial liabilities 41,068

2,705

1,231

–

–

45,004


12,979

1,231

166

–

5,739,673

Up to 1 month

1-3 months

3-12 months

1-5 years

Over 5 years

Total

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

As at December 31, 2014:

Non-current assets Long-term investments – – – 205,009 143,159 348,168 Loans to affiliated companies – – – 20,587 – 20,587

Current assets Trade receivables 1,277

–

–

–

–

1,277

Other receivables and accrued income –

17,815

–

–

–

17,815 Receivables from affiliated companies 4,739

–

–

–

–

4,739

Short-term investments 704,953

676,401

385,134

–

–

1,766,488 Loans and advances to customers 30,645

495

731

–

–

31,871

Cash and cash equivalents 1,820,110

–

–

–

–

1,820,110 Derivative financial assets 43,708

14,961

–

–

–

58,669


709,672

385,865

225,596

143,159

4,069,724

Current liabilities

Trade payables –

224

–

–

–

224

Other payables and accrued expenses –

9,699

–

–

–

9,699 Payables to affiliated companies 1,262

–

–

–

–

1,262

Amounts owed to depositors 3,803,213 – – – 153 3,803,366 Derivative financial liabilities 41,026 11,807 – – – 52,833 Total liabilities 3,845,501 21,730 – – 153 3,867,384

44



Credit risk

Credit risk is the current or prospective risk to earnings and capital arising from a debtor’s failure to meet the terms of any contract with CBN Group or if a debtor otherwise fails to perform. Credit risk is monitored continuously by reviewing outstanding loans, temporary overdrafts and trade receivables by the account managers. New extensions of credit are subject to written credit memoranda that must be appropriate to the established criteria of the loan policy approved by the appropriate level of management. CBN Group mitigates credit risk by choosing only reputable banks as counterparty for liquid funds and derivative financial instruments.

CBN Group has implemented a real-time monitoring methodology which uses the fundamental view of the rating agencies on a counterparty’s probability of default through long term ratings, and the more reactive short-term view of the credit markets using credit default swap spreads to ensure that CBN Group only deals with highly regarded counterparties.

Loans to fund-of-funds clients are fully secured with a maximum loan to value ratio of 35% of eligible assets, usually by a pledge agreement covering the clients underlying securities portfolio held by CBN Group’s separate custody subsidiaries. Valuations of these underlying securities are made on a regular basis against industry norms and a legal entitlement to make margin calls on the client is in place. The loan portfolio is mainly focused on Europe and the offshore jurisdictions which attract quality mutual and hedge funds providers that are clients of CBN Group.

In addition, CBN Group is exposed to credit risk in relation to financial guarantees provided by CBN Group. CBN Group’s maximum exposure in this respect is the maximum amount CBN Group could have to pay if the guarantee is called on. As at December 31, 2015, an amount of EUR 2.7 million (2014: EUR 2.3 million) has been recognised as a contingent liability (see Note 30).

CBN Group has no intention to have significant ongoing concentration of credit risk, with exposure spread over a large number of counterparties and customers.

Operational risk

CBN Group has to process many complex transactions daily. To ensure the operational risk is adequately controlled, an extensive internal control framework has been set up. Also an extensive training program for staff has been introduced in view of the growth of CBN Group. In addition, the operational processes are certified under International Standard on Assurance Engagements (ISAE) No. 3402, Assurance Reports on Controls at a Service Organisation. Operational Risk Management frameworks have been established in all divisions and an Enterprise Risk Management framework has been implemented across CBN Group.

Capital adequacy risk

CBN Group’s risk management committee reviews the capital structure on a routine basis. As a part of this review the committee considers the cost of capital and the risks associated with each business line. Based on the recommendations of the committee, CBN will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt. CBN’s overall strategy remains unchanged from 2014.

To monitor the adequacy of its capital, the regulated banks within CBN Group apply ratios established by the relevant central banks. These ratios measure capital adequacy by comparing the entity’s eligible capital with its balance sheet assets, off-balance sheet commitments, and market and other risk positions at weighted amounts to reflect their relative risk.

The market risk approach covers the general market risk and the risk of open positions in currencies and debt and equity securities. Assets are weighted according to broad categories of notional risk, being assigned a risk weighting in accordance with the amount of capital deemed to be necessary to support them. As of January 1, 2008, in addition to the risk weighted assets calculation, CBN Group needs to take into account 15% of gross revenues as an additional capital requirement under Basel-II for operational risk.

45



Off-balance sheet credit-related commitments and forward exchange contracts and options-based derivative instruments are taken into account by applying different categories of conversion factors, designed to convert these items into balance sheet equivalents. The resulting equivalent amounts are then weighted for risk using the same percentages as for on-balance sheet assets.

Certain regulated subsidiaries may need approval from the regulator in order to be able to pay out dividends to the parent company.

The actual capital ratio of CBN Group for 2015 and 2014 meets the minimum standards in accordance with the supervisory requirements.

At year-end 2015, CBN Group holds a total capital for an amount of EUR 246 million. As at December 31, 2015, the total capital consists of the following elements:

EUR 000

Share capital 5,000 Additional paid-in capital 48,503 Translation reserve 36,589 Revaluation of AFS assets (59) Retained earnings 155,824 Total 245,857

The total of EUR 245.9 million is classified as Tier 1 capital.

Capital requirements (Pillar 1)

Each month, capital requirements are calculated according to broad categories of notional risk, being assigned a risk weighting in line with the amount of capital deemed to be necessary to support them as per the guidelines of the DNB. Four categories of risk weightings (0%, 20%, 50%, 100%) are applied.

As at December 31, 2015, the capital requirements amounted to EUR 58 million (December 31, 2014: EUR 56 million) which consisted of EUR 42 million (December 31, 2014: EUR 43 million) for credit risk, EUR 15 million (December 31, 2014: EUR 13 million) for operational risk and EUR 0.8 million (December 31, 2014: EUR 0.02 million) for foreign exchange risk.

The Pillar I minimum capital requirement for credit risk is based on the Basel II framework under the Standardised Approach. CBN Group uses the Basic Indicator Approach to calculate the capital allocated to Operational Risk.

46



Internal capital assessment (Pillar 2)

The following table details CBN Group’s management view on additional capital required to cover Pillar 2 risks:

EUR 000

Operational risk - Strategic risk 11,333 Reputation risk - Total 11,333 Operational risk There is no additional Pillar II charge and management thinks it is sufficient with the Pillar I charge as a result of the implementation of ERM.

Strategic risk Strategic Risk is defined as the risk to prospective earnings and capital arising from changes in the business environment and from adverse business decisions, improper implementation of decisions or lack of responsiveness to changes in the business environment. Strategic Risk is identified by management as a key risk. Management finds it prudent to apply a capital charge for Strategic Risks under Pillar II.

A capital charge of EUR 11.3 million (USD 12.3 million) has been included for Strategic Risk under Pillar II. This charge is based on the revenue loss that will occur should the Bank’s top five clients leave the Bank.

Reputation risk

Reputation Risk is the risk related to perception of trustworthiness of the Bank. Damage to the Bank’s reputation can result in loss of revenue or shareholder value due to adverse perception of the image on the part of clients, counterparties, shareholders, investors or regulators. Reputation Risk includes Image and Branding Risk, Stakeholder Relations Risk and Contagion Risk.

There is no charge for reputation risk. CBN has a capital buffer of USD 47.2 million (as per 2015 ICAAP) to cover for other potential risks.

47



5. Banking and Custody Services

2015 2014 EUR 000 EUR 000 Interest income and similar income 19,205

12,401

Interest expense and similar charges (867)

(335) Custody and trading-related income 6,656 5,476 Net income from dealing in foreign currencies 3,133

2,695

Payment fees and other 1,834

1,460 Other operating income 4,687

3,863

Total 34,648

25,560

6. Personnel expenses

2015 2014 EUR 000 EUR 000 Salaries and bonuses 50,588

46,566

Social security charges and taxes 4,883

4,786 Pension expenses 2,774

2,849

Related party personnel recharge, net (Note 38) (18,429)

(18,316) Other personnel expenses 1,751

1,846

Total personnel expenses 41,567

37,731 The average number of full-time employees for the year was 749 (2014: 735) of which 39 (2014: 44) were employed in the Netherlands.

Included in the personnel expenses in 2014 is an amount of EUR 96 thousand related to the crisis income tax imposed in 2014 in the Netherlands for taxable wages exceeding EUR 150,000. In 2015 no crisis income tax was imposed. In 2014 EUR 44 thousand related to the tax on income of Directors. This amount is not included in the Directors’ remuneration (Note 39). During 2015, there were 12 employees classified as Identified Staff (excluding the Management Board) due to the Dutch law on remuneration in financial organisations (“Wet beloningsbeleid financiële ondernemingen”) that was enacted on February 7, 2015. These employees received a variable remuneration of EUR 364 thousand in 2015. In 2015, no employees received a remuneration of EUR 1 million or more.

Personnel expenses include the expenses associated with the Board of Directors. See Note 39 for Directors’ remuneration.

7. Office and administration expenses

2015

2014

EUR 000

EUR 000

Office and administration expenses 1,537

1,202 Related party office expenses, net (Note 38) 813

476

Total office and administration expenses 2,350

1,678

48



8. Travel expenses

2015

2014

EUR 000

EUR 000

Travel expenses 2,085

1,931 Related party travel expenses, net (Note 38) (930)

(603)

Total travel expenses 1,155

1,328

9. Professional services

2015

2014

EUR 000

EUR 000

Professional fees 2,434

4,935 Audit fees 299

385

Related party professional fees, net (Note 38) (56)

457 Total professional services 2,677

5,777

10. Depreciation and amortization

2015

2014

EUR 000

EUR 000

Machinery and equipment 289

168 Leasehold improvements 493

67

Total depreciation 782

235

Third-party software 1

3 Total amortization 1

3

Total depreciation and amortization 783 238

49



11. Other operating expenses

2015

2014

EUR 000

EUR 000

Group support service fee (Note 38) 3,049

3,508 Information technology service expense, net (Note 38) 3,072

4,855

Other related party expenses, net (Note 38) 37,056

27,511 Other operating expenses 5,025

4,845

Total other operating expenses 48,202

40,719

12. Net finance income

2015

2014

EUR 000

EUR 000

Foreign exchange gain/(loss) 100

(142) Interest income 433

286

Net finance income 533

144

All interest income and expenses are attributable to continuing operations.

13. Fees to independent auditors

2015

2014

EUR 000

EUR 000

Audit fees 268

284 Audit-related fees 31

22

Tax fees * –

12 All other fees –

–

Total fees 299

318

* Tax services were provided to a foreign subsidiary of CBN.

Deloitte Accountants B.V. provided audit services to the amount of EUR 204 thousand (2014: EUR 138 thousand). The remaining audit fees relate to services provided by other Deloitte member firms.

Audit-related fees consist mainly of attestation by other audit firms of internal controls in the context of the annual Service Organization Control 1 report. Tax fees consist of tax compliance and tax planning services. Other fees are related to risk management and regulatory compliance services, and other non-prescribed services.

50



14. Income tax expense

2015

2014

EUR 000

EUR 000

Current tax expense: Current tax 2,398

1,684

Adjustments for prior years (122)

(37)

2,276

1,647

Deferred tax expense: Current year 872

(339)

Adjustment for prior years (2,039)

6

(1,166)

(333)

Total income tax expense 1,110

1,314

Reconciliation of effective tax rate

2015

2014

%

EUR 000

%

EUR 000

Net profit/(loss) before tax

17,851

2,376

Income tax using the domestic corporation tax rate 25.00

4,463

25.00

594 Effect of tax rates in foreign jurisdictions (8.30)

(1,482)

(10.65)

(253)

Non-deductible expenses 0.81

144

4.48

106 Effect of non- capitalised tax losses (10.60)

(1,893)

37.79

898

(Over) provided in prior years (0.68)

(122)

(1.30)

(31) Income tax expense 6.23

1,110

55.32

1,314

As a group involved in worldwide operations, CBN Group is subject to several factors which affect its tax charge. This is principally due to the levels and mix of profitability in different jurisdictions, transfer pricing policies and tax rates imposed.

51



15. Property, plant and equipment

Machinery and equipment

Leasehold improvements

and other

Total

EUR 000

EUR 000

EUR 000

Cost: As at January 1, 2015 2,248

2,266

4,514

Additions 1,642 5,934 7,576 Foreign exchange gain 257

259

516

Disposals (166)

–

(166) As at December 31, 2015 3,981

8,459

12,440

Accumulated depreciation: As at January 1, 2015 2,148

2,163

4,311

Depreciation 289

493

782 Foreign exchange loss 250 254 504 Disposals (166)

–

(166)

As at December 31, 2015 2,521

2,910

5,431

Net carrying amount: As at December 31, 2015 1,460

5,549

7,009



and other

Total

EUR 000

EUR 000

EUR 000


2,070

5,335

Additions 126 59 185 Foreign exchange gain 441

280

721

Disposals (1,584)

(143)

(1,727) As at December 31, 2014 2,248

2,266

4,514

Accumulated depreciation: As at January 1, 2014 3,126

1,971

5,097

Depreciation 168

67

235 Foreign exchange loss 438 268 706 Disposals (1,584)

(143)

(1,727)

As at December 31, 2014 2,148

2,163

4,311

Net carrying amount: As at December 31, 2014 100

103

203

52



16. Intangible assets

Third party software

EUR 000

Cost: As at January 1, 2015 161

Foreign exchange gain 18 Disposals (179) As at December 31, 2015 –

Accumulated amortization: As at January 1, 2015 160

Amortization charge 1 Foreign exchange loss 18 Disposals (179) As at December 31, 2015 –

Net carrying amount: As at December 31, 2015 –

Third party software

EUR 000


Foreign exchange gain 27 Disposals (61) As at December 31, 2014 161


Amortization charge 3 Foreign exchange loss 26 Disposals (61) As at December 31, 2014 160


The results on disposals of intangible assets are not significant.

53



17. Long-term investment

2015

2014

EUR 000

EUR 000

Bonds held-to-maturity 441,804

347,904 Other investments held at fair value through profit or loss 280

264

Junior note available-for-sale 250 – As at December 31, 442,334

348,168

Movement of held-to-maturity investments:

2015

2014

EUR 000

EUR 000

Balance as at January 1 348,168

26,038 Purchases 94,166

322,130

As at December 31 442,334

348,168

The fair value of the bonds held-to-maturity is EUR 446 million (2014: EUR 350 million).

18. Loans to affiliated companies

The loans receivable are as follows:

2015

2014

EUR 000

EUR 000

Within three months to one year 18,275

– Within one to five years 3,542 20,587 More than five years –

–

Total 21,817

20,587

Analysis of lending by currency:

2015

2014

EUR 000

EUR 000

In USD 18,505

17,028 In CAD 3,312

3,559

Total 21,817

20,587

EUR 18,505 thousand of these loans granted to affiliated companies are interest bearing. The interest rate used is six month Libor rate plus two percent. EUR 3,312 thousand of these loans are non-interest bearing. The amount of the unused loans is EUR 1.4 million.

EUR 18,275 thousand is included in “Receivables with affiliated companies”.

54



19. Deferred tax asset and liabilities

2015

2014

EUR 000

EUR 000

Capitalized tax losses 12,085

11,737 Deferred tax assets 189

211

Deferred tax liabilities (6,832)

(8,014) Net deferred tax asset 5,442

3,934

The following are the major deferred tax assets and liabilities recognised by CBN Group and the related movements during the year:

Capitalized tax

Deferred tax

losses and deferred

liabilities

tax assets

Total

EUR 000

EUR 000

EUR 000

As at January 1, 2015 (8,014)

11,948

3,934 Increase –

2,069

2,069

Utilization 1,182

326

1,508 As at December 31, 2015 (6,832)

12,274

7,511

As at January 1, 2014 (8,001)

11,832

3,831 Increase (13)

116

103

As at December 31, 2014 (8,014)

11,948

3,934

19.1 Recognised deferred tax assets and liabilities

Assets Liabilities Net

2015

2014

2015

2014

2015

2014

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

EUR 000

Property and equipment 189

211

–

–

189

211 Other items –

–

(6,832)

(8,014)

(6,832)

(8,014)

Capitalized tax losses 12,085

11,737

–

–

12,085

11,737 Net deferred tax assets/(liabilities) 12,274

11,948

(6,832)

(8,014)

5,442

3,934

55



19.2 Movement in temporary differences during 2015 and 2014

Temporary differences

Capitalized tax losses

Total

EUR 000

EUR 000

EUR 000

As at January 1, 2014 (7,817)

11,648

3,831 Additions during the year 14

89

103

As at January 1, 2015 (7,803)

11,737

3,934 Additions/(Utilizations) during the year 1,160

348

1,508

As at December 31, 2015 (6,643)

12,085

5,442 A specification as at December 31, 2015 of the deferred tax assets and how they are used, shows as follows:

Jurisdiction Deferred tax

assets

Carried forward losses

Carried forward until at least

Capitalized 2015

EUR 000

EUR 000

EUR 000

Netherlands 21

8,420

2020

8,441 Ireland 168

3,665

unlimited

3,833

189

12,085

12,274

Jurisdiction Deferred tax

assets

Carried forward losses

Carried forward until at least

Capitalized 2014

EUR 000

EUR 000

EUR 000

Netherlands 57

9,789

2016

9,846 Ireland 154

1,948

unlimited

2,102

211

11,737

11,948

Deferred tax assets have been recognised to the extent that it is considered more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Where this is not the case, deferred tax assets have not been recognised, as set out below:

Tax losses

Tax losses

2015

2014

EUR 000

EUR 000

Gross deferred tax assets 16,371

16,280 Amounts not recognized (4,286)

(4,332)

Amounts recognized 12,085

11,948 Of the amount not recognized in respect of tax losses EUR 4.0 million (2014: EUR 4.0 million) has an expiration date through to 2023.

56



20. Trade receivables

2015

2014

EUR 000

EUR 000

Trade receivables 3,806

1,277 As at December 31, 3,806

1,277

Per December 31, 2015 no allowance has been made for estimated irrecoverable amounts from the services provided.

CBN Group does not hold any collateral over these balances.

The average age of these receivables is 41 days (2014: 30 days). No interest is charged on trade receivables which are past due.

20.1. Age of trade receivables past due but not impaired

2015

2014

Past due but not impaired: EUR 000

EUR 000

30-60 days 321

304 60-90 days 456 49 90-120 days 631

–

> 120 days 15

21 As at December 31, 1,423

374

In determining the recoverability of the trade receivables, CBN Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debt.

57



21. Other receivables and accrued income

2015

2014

EUR 000

EUR 000


58,669 Other receivables 12,220

9,593

Accrued income 12,049

12,953 Interest receivable 3,348

2,978

Prepaid expenses 1,283

1,534 Net disbursements with third parties 154

93

Net disbursements with affiliated parties –


85,846

Derivative financial assets relate to the unrealised results on forward exchange contracts; counter parties are clients and financial institutions. Reference is made to Note 32.

22. Short-term investments

2015 2014

EUR 000 EUR 000 Available-for-sale investments carried at fair value: - Commercial paper issued by financial institutions 807,356 760,679 - Certificate of deposits 314,980 509,880 - US treasury bills 367,339 164,847 Financial instruments held to maturity: - Variable Funding Notes 519,604 267,203 - Mezzanine notes 71,173 63,878 2,080,452 1,766,487 The remaining term is as follows: - one month or less 1,164,714 704,953 - three months or less 519,604 676,401 - more than three months and up to a year 396,134 385,134 As at December 31, 2,080,452 1,766,487

Commercial paper issued by financial institutions (available-for-sale) and certificate of deposits represents A+ to AAA rated paper. In order to avoid fluctuations with profit and loss, these investments have been classified as available-for-sale with revaluations recorded in other comprehensive income.

Financial instruments held-to-maturity include Variable Funding Notes (“VFNs”) and a mezzanine note. The VFNs are notes issued with a commitment amount. The outstanding amount of the notes can vary on a daily basis, hence the term “variable funding”. The notes yield a LIBOR plus margin on the drawn portion of the notes, and a commitment fee on the undrawn portion. The undrawn amount on the VFNs is EUR 254 million (2014: EUR 100 million).

58



23. Loans and advances to customers

2015

2014

EUR 000

EUR 000

Current account overdrafts 5,453

9,603 Current account overdrafts affiliated companies 5,332 7,126 Term loans 3,345

15,142

As at December 31, 14,130

31,871

The amount of the unused advances is EUR 34.5 million (2014: EUR 10 million).

2015

2014

EUR 000

EUR 000

The remaining term is as follows: - one month or less 10,811

30,645

- more than one month and up to three months –

495 - more than three months and up to a year 3,319

731


31,871

As collateral, CBN Group accepts non-listed securities in the custody portfolio administered by CBN Group and/or affiliates of CBN Group. In order to determine the value of the eligible assets which can be considered suitable as collateral, the trading frequencies and liquidity of all securities are reviewed and their value discounted to reflect any potential impairment. A loan to value calculation is then performed on the available eligible assets in order to determine the maximum loan available. All significant loans are fully collateralised. Loans and advances to companies ultimately owned by the majority shareholder are disclosed in Note 38 Related party transactions.

24. Cash and cash equivalents

2015

2014

EUR 000

EUR 000

Cash held with central banks 1,983,879

76,318 Current accounts with other banks 820,787

763,620

Deposits with other banks 481,945

950,067 Bank balances with affiliated companies 54,365

30,046

Petty cash 58

59 As at December 31, 3,341,034

1,820,110

Bank balances earn interest at the respective short-term deposit market rates.

Banks are required to deposit a minimum average balance, calculated monthly, with the central banks, which is not available for use in the Group’s day-to-day operations. These deposits bear negative interest.

The Cash held with central banks increased in 2015 for solvency management purposes around year end.

59



25. Share capital

Authorised shares:

2015

2014

Number of shares 000


Ordinary shares of par value EUR 100 each 250

250 As at December 31, 250

250

Ordinary shares issued and fully paid:


EUR 000

As at January 1, 2014 and December 31, 2015 50

5,000

26. Provisions

Restructuring EUR 000 Balance as at January 1, 2015 79 Amounts used during the year (79) Balance as at December 31, 2015 – Balance as at January 1, 2014 789 Amounts used during the year (689) Unused amounts reversed during the year (21) Balance as at December 31, 2014 79

Current 79 Non-current – Balance as at December 31, 2014 79

Restructuring provision

A number of restructuring and cost reduction programs were initiated across CBN Group in order to improve client services and achieve efficiencies. Provisions for restructuring as at December 31, 2014 amounted to EUR 79 thousand. These programs were completed during 2015.

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27. Retirement benefits schemes

Defined contribution schemes

CBN Group pays premiums to defined contribution retirement schemes for all qualifying employees. Effective April 1, 2014, the Netherlands Scheme changed from a defined benefit plan to a defined contribution plan.

The assets of the schemes are held separately from those of CBN Group in funds under the control of trusts, foundations and the like. Where there are employees who leave the scheme prior to vesting fully in the contributions, the contributions payable by CBN Group are reduced by the amount of forfeited contributions.

The total cost charged to the consolidated income statement of EUR 2.8 million (2014: EUR 2.8 million) represents contributions payable to these schemes by CBN Group at rates specified in the rules of the schemes.

28. Other payables and accrued expenses

2015 2014 EUR 000 EUR 000 Derivative financial instruments 45,004 52,833 Taxes and social security contributions payable 9,337 8,267 Other payables 4,670 5,394 Accrued expenses 4,389 4,295 Lease incentives 41 19 Interest payable 21 10 As at December 31, 63,462 70,818

As part of a lease incentive certain subsidiaries received periods of free rent and furniture and leasehold development allowances from the lessor. As a consequence CBN Group amortises these allowances over the term of the lease.

CBN Group has financial risk management policies in place to ensure that all payables are paid within the permitted credit terms.

Derivative financial liabilities relate to the unrealised results on forward exchange contracts; counter parties are clients and financial institutions. Reference is made to Note 32.

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29. Amounts owed to depositors

2015

2014

EUR 000

EUR 000

Demand deposits 5,267,320

3,694,208 Demand deposits of affiliated companies 405,532

106,164

Savings deposits 47

82 Time deposits 10,346

2,626

Time deposits of affiliated companies 303

286 As at December 31, 5,683,548

3,803,366

Deposits are only short term and CBN Group pays interest based on the terms agreed with clients.

2015

2014

EUR 000

EUR 000

The remaining term is as follows: - on demand 5,683,382

3,803,213

- longer than one year 166

153 As at December 31, 5,683,548

3,803,366

30. Contingencies and commitments

The ultimate parent company has entered into a loan agreement with financial institutions. In this agreement CBN has been included as obligor for these facilities. The guarantee provided by CBN and its subsidiaries (Appendix II) is limited to the following:

I. The liability of each entity shall not exceed 10% of the Equity, and II. The total aggregate liability of all entities shall not exceed the lesser of 20% of the Equity and USD 15 million.

Equity under the definition of the loan agreement is the equity of Citco Banking Corporation N.V. and its subsidiaries on a consolidated basis and has the meaning given to it in the Supervisory Regulation. Citco Banking Corporation N.V. is the parent company of Citco Bank Holding N.V. (see 4.1.1.)

As at December 31, 2015, CBN and its subsidiaries had commitments on guarantees with counter guarantees amounting to EUR 1.7 million (2014: EUR 2.1 million) and guarantees without counter guarantees amounting to EUR 1.0 million (2014: EUR 0.2 million).

During the reporting period, the proceeding in two countries against CBN and/or its subsidiaries continued. No provisions have been made in these financial statements as CBN Group’s management does not expect any material adverse effect on CBN Group’s financial position as at December 31, 2015 (see Note 37).

62



31. Operating lease arrangements

Lease payments under operating leases recognised in the result for the period amount to EUR 3.7 million (2014: EUR 3.4 million).

As at the end of the reporting period, CBN Group had outstanding commitments under non-cancellable operating leases, which fall due as follows:

2015

2014

EUR 000

EUR 000

Within one year 3,301

3,435 In the second to fifth years inclusive 12,079

12,534

After five years 6,417

2,885 As at December 31, 21,797

18,854

Operating lease payments represent rentals payable by CBN Group for certain of its office properties, office equipment and cars. Leases are negotiated for an average term of 7 years and rentals are fixed for an average of 5 years.

32. Derivative financial instruments

CBN Group utilises the forward exchange contracts for hedging and non-hedging purposes.

Contract/ notional amount

Fair value assets

Fair value liabilities

EUR 000

EUR 000

EUR 000

As at December 31, 2015: Forward exchange contracts 8,423,064 48,385 45,004

As at December 31, 2014: Forward exchange contracts 7,437,285

58,669

52,739

Forward exchange contracts represent commitments to purchase foreign and domestic currency, including undelivered spot transactions. Since these contracts are collateralised by cash or marketable securities, the credit risk is negligible.

The fair value of forward exchange contracts is revalued daily based on the applicable spot rates.

Derivative financial assets and liabilities relate primarily to two types of transactions undertaken by CBN Group: 1. Treasury activities- in earning additional interest margin over base rates, CBN Group undertakes forward foreign

exchange contracts to arbitrage the difference between the margin earned on higher yielding currencies (i.e. Euro) versus the cost of undertaking the swap. These transactions are short-term basis and with a small number of highly rated counterparties.

2. Foreign exchange contracts- CBN Group places foreign exchange contracts on behalf of clients. However CBN Group does not take any positions on these transactions and immediately places a corresponding trade in the market for which we retain a spread. These services are only provided to clients with funds on deposits with CBN Group and funds retained in order to meet any margin calls. Again other than the margin earned, the asset and liability positions offset. Reference is made to Notes 21 and 28.

CBN Group occasionally enters into forward exchange contracts to mitigate the exposure on material items of capital expenditure. The fair value of the assets and liabilities is represented in the statement of financial position as derivative financial assets under “Other receivables and accrued income” and as derivative financial liability under “Other payables and accrued expenses”.

63



33. Fair value of financial instruments

33.1 Fair value measurements recognised in the statement of financial position

The following table provides at the end of the reporting period an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from 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 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

December 31, 2015: Level 1 Level 2 Total EUR 000 EUR 000 EUR 000 Financial assets at fair value through profit or loss Derivative financial assets – 48,385 48,385 Other investments – 280 280 Available-for-sale financial assets Commercial Papers with financial institutions – 807,356 807,356 Certificate of deposits – 314,980 314,980 US treasury bills 367,339 – 367,339 Junior notes – 250 250 Total 367,339 1,171,251 1,538,590 Financial liabilities at fair value through profit or loss Derivative financial liabilities – 45,004 45,004

December 31, 2014: Level 1 Level 2 Total EUR 000 EUR 000 EUR 000 Financial assets at fair value through profit or loss Derivative financial assets – 58,669 58,669 Other investments – 264 264 Available-for-sale financial assets Commercial Papers with financial institutions – 760,679 760,679 Certificate of deposits – 509,880 509,880 US treasury bills 164,847 – 164,847 Total 164,847 1,329,492 1,494,339 Financial liabilities at fair value through profit or loss Derivative financial liabilities – 52,739 52,739

64



During 2015 and 2014, there have been no transfers between Level 1 and Level 2. Additionally, the Group held no Level 3 investments during 2015 and 2014.

33.2 Valuation techniques and assumptions applied for the purpose of measuring fair value

The fair values of financial assets and financial liabilities are determined as follows:

Financial assets/financial liabilities Fair value hierarchy Valuation technique(s) and key input(s)

Derivative financial instruments

- Forward exchange contracts

Level 2

Differences between the contract rate and a market quoted rate, adjusted to include credit risk or other factors as appropriate.

Available for sale financial assets

- Commerical Paper

Level 2 Quoted market prices or dealer quote for similar financial instruments

- Certificate of deposits

Level 2 Quoted market prices or dealer quote for similar financial instruments

- US treasury bills Level 1 Quoted bid prices in an active market

34. Categories of financial assets and financial liabilities

Financial assets 2015

2014

EUR 000

EUR 000

Cash and cash equivalents 3,341,034

1,820,110 Fair value through profit or loss (FVTPL):

Held for trading 48,385

58,669 Designated as at FVTPL 280 264

Held-to-maturity investments 1,032,581

678,985 Loans and receivables 57,945

76,290

Available-for-sale financial assets 1,489,925

1,435,406 As at December 31, 5,970,150

4,069,724

Financial liabilities 2015

2014

EUR 000

EUR 000


3,803,366 Fair value through profit or loss (FVTPL):

Held for trading 45,004

52,833 Other liabilities 11,121

11,185

As at December 31, 5,739,673

3,867,384

35. Financial assets and liabilities not carried at fair value

The following methods and significant assumptions have been applied in determining the fair values of financial instruments carried at cost:

(i) The fair value of assets and liabilities maturing within 12 months is assumed to approximate their carrying amount;

65



(ii) The fair value of demand deposits and savings accounts (included in due to customers) with no specific maturity is assumed to be the amount payable on demand at the end of the reporting period. Demand deposits and savings accounts bear floating interest rates, the fair value is assumed to approximate their carrying amount;

(iii) The fair value of variable rate financial instruments is assumed to be approximated by their carrying amounts and, in the case of loans, does not, therefore, reflect changes in their credit quality, as the impact of credit risk is recognised separately by deducting the allowances for credit losses; and

(iv) The fair value of fixed-rate loans and mortgages carried at amortised cost is estimated by comparing market interest rates when the loans were granted with current market rates offered on similar loans. Changes in the credit quality of loans within the portfolio are not taken into account in determining gross fair values, as the impact of credit risk is recognised separately by deducting the amounts of the allowances for credit losses.

36. Assets under Custody

CBN Group provides custody services to its clients, with respect to the security transactions. These services require CBN Group to maintain assets held under custody, which are not reported on the statement of financial position. As at December 31, 2015 CBN Group’s assets held under custody totaled EUR 49.7 billion (2014: EUR 51.9 billion).

37. Litigations

In 2015, various legal proceedings against CBN and/or its subsidiaries continued. Although the outcome of these litigations is still largely uncertain, management’s position on a favorable outcome has not changed and no provision is considered necessary as per December 31, 2015.

Claims and lawsuits relating to the Fairfield Funds

CBN and/or its subsidiaries have been named as defendants in various lawsuits relating to investment funds managed by the Fairfield Greenwich Group. These Fairfield-related lawsuits, the first of which was filed against CBN and/or its subsidiaries on January 12, 2009, arose out of the widely-reported Ponzi scheme that was operated by Bernard L. Madoff. The Fairfield Funds invested either directly or indirectly with Madoff and his firm, Bernard L. Madoff Investment Securities, LLC. Accordingly, the Fairfield Funds faced losses as a result of the Madoff Ponzi scheme. These actions include:

A consolidated class action in the US, Anwar v. Fairfield Greenwich Limited. Settlement terms were agreed in August 2015, final class approval was granted and the case dismissed by Order of the Court in October 2015.

A derivative claim in New York State Court which is under appeal by the plaintiffs, having lost at first instance. Certain investors in the Fairfield offshore funds who initiated proceedings against several Citco Companies

before the Dutch Court in Amsterdam, opted out of the Anwar settlement in order to continue their action in the Netherlands. These proceedings are still in their preliminary stages. CBN and its subsidiaries believe that there are meritorious defences in these lawsuits and intends to continue to vigorously defend them.

Claims and lawsuits relating to the Fletcher Funds

On March 1, 2013 three Louisiana-based pension funds filed a Petition for Damages against CBN and/or its subsidiaries and over ten other defendants. This petition asserts claims against CBN and/or its subsidiaries from work as administrator and custodian of Fletcher Income Arbitrage Fund and FIA Leveraged Fund. The petition does not specify the amount of damages the plaintiffs are seeking. On October 14, 2013 CBN and its subsidiaries moved to dismiss the claims asserted against it in their entirety. That motion is currently pending.

66



38. Related party transactions

Related party transactions are recognised on an arm’s length basis. CBN has a related party relationship with its parent company, fellow subsidiaries, associated companies and pension fund.

A summary of the transactions between CBN Group and related parties is as follows:

2015

2014

EUR 000

EUR 000

a) Companies ultimately controlled by the majority shareholder 432

1,226 b) Directors, officers and employees loans and current accounts 182 184 c) Guarantee provided by a company ultimately owned by the majority shareholder 2,957

2,957

a) CBN Group has granted fully pledged loans for a total amount of EUR 432 thousand (2014: EUR 1,226 thousand) to companies ultimately controlled by the majority shareholder. All loans have been granted at arm’s length conditions.

b) CBN has granted EUR 182 thousand (2014: EUR 184 thousand) to directors, officers and employees. All loans have been granted at arm’s length conditions.

c) A company ultimately controlled by the majority shareholder has provided a guarantee for an amount up to EUR 2,957 thousand (2014: EUR 2,957 thousand) for a loan granted.

The following services were provided by CBN Group to the parent company and/or affiliated companies:

2015

2014

EUR 000

EUR 000

Personnel (Note 6) (21,582)

(23,113) Operational services (Note 11) (16,291)

(26,785)

Finance services ** (7,239)

(4,734) General and administrative services (Notes 7,8,9,11) (2,615)

(2,160)

Information technology services (Note 11) (1,938)

(3,046) Office rent * (306) (394) Group support services (Note 11) –

(4,384)

As at December 31, (49,971)

(64,616)

* Included in “Office rent” in the consolidated income statement. ** EUR 427K (2014: EUR 273K) of this amount is included in “Net finance income” in the consolidated income statement. The remainder is included in “Banking and Custody Services”.

The following services were provided by the parent company and/or affiliated companies to CBN Group:

2015

2014

EUR 000

EUR 000

Operational services (Note 11) 52,206

53,627 Information technology services (Note 11) 5,010

7,901

General and administrative services (Notes 7,8,9,11) 3,583

3,159 Personnel (Note 6) 3,153

4,797

Group support services (Note 11) 3,049

7,892 Office rent * 334 325 Finance services ** 13

31


77,732

* Included in “Office rent” in the consolidated income statement. ** Included in “Net finance income” in the consolidated income statement

67



CBN Group has the following balances with affiliated companies:

2015 2014 EUR 000 EUR 000 Receivables 674,139 338,646 Payables (406,671) (82,922) Net balance 267,468 255,724

Furthermore, CBN Group shares limited physical and functional assets and persons with companies belonging to the majority shareholder. The recharges related to these services are settled on a periodic basis.

39. Directors’ remuneration

Remuneration paid to the Managing Directors and Supervisory Board Directors during the year and current account balances were as follows:

2015

2014

EUR 000

EUR 000

Managing Directors (incl pension premiums) 644

636 Supervisory Board Directors 141

157

As at December 31, 785

793

Executive: 2015

2014

EUR 000

EUR 000

Base Salary 550

507 Variable remuneration 59 59 Fringe benefits 5 7 Pension premiums 30

63

As at December 31, 644

636

Non-Executive: 2015

2014

EUR 000

EUR 000

Base Salary 141


157

The remuneration of the Managing Directors and Supervisory Board Directors is decided by the Shareholder.

One of the Managing Directors is earning a salary from CBN Group as well as an affiliated company.

In 2014 the Dutch government imposed a crisis tax payable by the employer of 16% for taxable wages over EUR 150 thousand. In 2015 no crisis income tax was imposed. The amount due relating to 2014 as a result of this crisis tax is not included in the calculation of the Managing Directors’ remuneration. In note 6 the effect of the crisis tax relating to 2014 is further disclosed.

40. Events after the reporting date

There were no events that have occurred subsequent to December 31, 2015 through to the date that the consolidated financial statements were signed which would require further adjustment or disclosure.

68



Signing of the consolidated financial statements

The financial statements were approved by the Board of Directors and authorised for issuance on, April 15, 2016 and are signed on its behalf by:

Managing Directors:

M. Leers

P.N. Symonds

F. van Proosdij

69


Section 5CBN Financial Statements

70


© 2015 Citco Bank Nederland N.V., Amsterdam. This report is strictly confidential. Unauthorised use of this report is prohibited.

Page 70 of 99

5. CBN Financial Statements

CBN abbreviated income statement for the year ended December 31,

2015

2014

EUR 000

EUR 000

Results of participating interests 10,043

6,964 Other results 6,698

(5,902)

Net profit after tax 16,741

1,062

Attributable to: Shareholder of CBN 16,741

1,062

Net profit for the year 16,741

1,062

71


© 2015 Citco Bank Nederland N.V., Amsterdam. This report is strictly confidential. Unauthorised use of this report is prohibited.

Page 71 of 99

CBN statement of financial position as at December 31,

Note

2015

2014

EUR 000

EUR 000

Assets

Non-current assets

Property, plant and equipment 41

36

61 Intangible assets 42

–

1

Investments in subsidiaries 43

171,365

144,655 Long-term investments 44

306,106

274,775

Loans to affiliated companies

3,312

5,784 Deferred tax assets

12,112

492,931

11,803

437,079

Current assets

Other receivables and accrued income 45

55,274

65,269

Current tax receivables

180

284 Receivables with affiliated companies

4,028

1,793

Short-term investments 46

1,621,370

1,766,487 Loans and advances to customers 47

14,129

31,871

Cash and cash equivalents 48

2,800,872

4,495,853

1,550,022

3,415,726 Total assets

4,988,784

3,852,805

Equity and liabilities

Share capital 49

5,000

5,000 Additional paid-in capital

48,503

48,503

Translation reserve

36,589

13,320 Revaluation of AFS Assets

(59)

110

Retained earnings

155,824

139,082 Total equity attributable to the

shareholder of the Company

245,857

206,015

Non-current liabilities

Deferred tax liabilities

6,811

6,811

8,013

8,013

Current liabilities

Trade payables

–

80 Other payables and accrued expenses 51

51,390

59,419

Payables to affiliated companies

244

914 Provisions 50

–

79

Amounts owed to depositors 52

4,684,482

4,736,116

3,578,285

3,638,777 Total equity and liabilities

4,988,784

3,852,805

72


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74



Notes to the specific items of CBN statement of financial position

The financial statements of CBN included in this chapter are prepared in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Section 362 (8) of Book 2 of the Netherlands Civil Code allows companies that apply IFRS as adopted by the European Union in their consolidated financial statements to use the same measurement principles in their CBN financial statements. CBN has prepared these CBN financial statements using this provision. The accounting policies are described in these annual accounts.

The principles of valuation and determination of the results stated in connection with the consolidated financial statements are also applicable to CBN financial statements. Investments in group companies and investments in associates are initially recognised at cost and subsequently accounted for by the equity method of accounting. The accounting policies with regard to presentation and disclosures are in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code.

Investments in subsidiaries are valued at net asset value determined on the basis of IFRS as adopted by the European Union.

In accordance with article 402 of Book 2 of the Netherlands Civil Code, CBN income statement is presented in an abbreviated form.

75



41. Property, plant and equipment



and other

Total

EUR 000

EUR 000

EUR 000


1,169

1,337

Foreign exchange gain 20

134

154 Disposals (166) – (166) As at December 31, 2015 22

1,303

1,325

Accumulated depreciation: As at January 1, 2015 151 1,125 1,276

Depreciation 17

14

31 Foreign exchange loss 18

130

148

Disposals (166) – (166) As at December 31, 2015 20

1,269

1,289


34

36



and other

Total

EUR 000

EUR 000

EUR 000


1,754

4,040

Additions – 6 6 Foreign exchange gain 309

236

545

Disposals (2,427)

(827)

(3,254) As at December 31, 2014 168

1,169

1,337

Accumulated depreciation: As at January 1, 2014 2,265 1,709 3,974

Depreciation 7

11

18 Foreign exchange loss 306

232

538

Disposals (2,427)

(827)

(3,254) As at December 31, 2014 151

1,125

1,276


44

61

The results on disposals of property, plant and equipment are not significant.

76



42. Intangible assets


EUR 000


Foreign exchange gain 18 Disposals (179) As at December 31, 2015 –


Amortization charge 1 Foreign exchange loss 18 Disposals (179) As at December 31, 2015 –

Net carrying amount: As at December 31, 2015 –


EUR 000


Foreign exchange gain 27 Disposals (61) As at December 31, 2014 161

Accumulated amortisation: As at January 1, 2014 192

Amortisation charge 3 Foreign exchange loss 26 Disposals (61) As at December 31, 2014 160


For intangible assets with finite lives (software), CBN reviews the carrying amounts at each end of the reporting period to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

The results on disposals of intangible assets are not significant.

77


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43. Investments in subsidiaries

2015

2014

EUR 000

EUR 000


120,772 Share of results 10,043

6,964

Exchange differences 16,667

16,919 Balance as at December 31 171,365

144,655

The companies’ interests in its unlisted subsidiaries are as follows:

Country of

Incorporation Assets Liabilities Revenue Net profit Interest

held EUR 000 EUR 000 EUR 000 EUR 000 % December 31, 2015: Citco Fund Services (Ireland) Limited Ireland 100,290 14,505 117,826 6,165 100 Citco Bank Canada Canada 1,104,876 1,019,296 11,189 3,878 100 1,205,166 1,033,801 129,015 10,043 December 31, 2014: Citco Fund Services (Ireland) Limited Ireland 84,064 12,685 97,484 4,179 100 Citco Bank Canada Canada 304,464 231,187 7,884 2,785 100 As at December 31 388,528 243,872 105,368 6,964

44. Long-term investments

2015

2014

EUR 000

EUR 000

Bonds held-to-maturity 305,576

274,511 Other investments held at fair value through profit or loss 280 264 Junior note available-for-sale 250

–


274,775

Movement of held-to-maturity investments:

2015

2014

EUR 000

EUR 000


26,038 Purchases 31,331

248,737

As at December 31 306,106

274,775

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45. Other receivables and accrued income

2015

2014

EUR 000

EUR 000


58,669 Other receivables 3,135

1,285

Interest receivable 2,481

2,318 Accrued income, work in progress 1,423

2,114

Prepaid expenses 665

883 As at December 31 55,274

65,269

46. Short-term investments

2015

2014

EUR 000

EUR 000

Available-for-sale investments carried at fair value: - Commercial paper issued by financial institutions 531,943

760,679

- Certificate of deposits 314,980

509,880 - US treasury bills 183,670

164,847

Financial instruments held to maturity: - Variable Funding Notes 519,604

267,203

- Mezzanine notes 71,173

63,878

1,621,370

1,766,487

The remaining term is as follows: - one month or less 705,632

704,953

- three months or less 519,604

676,401 - more than three months and up to a year 396,134

385,134

As at December 31, 1,621,370

1,766,487

Commercial paper issued by financial institutions (available-for-sale) and certificate of deposits presents A+ to AAA rated paper. In order to avoid fluctuations with profit and loss, these investments have been classified as available-for-sale with revaluations recorded in other comprehensive income.

Financial instruments held-to-maturity include Variable Funding Notes (“VFNs”) and a mezzanine note. The VFNs are notes issued with a commitment amount. The outstanding amount of the notes can vary on a daily basis, hence the term “variable funding”. The notes yield a LIBOR plus margin on the drawn portion of the notes, and a commitment fee on the undrawn portion. The undrawn amount on the VFNs is EUR 254 million (2014: EUR 100 million).

79



47. Loans and advances to customers

2015

2014

EUR 000

EUR 000

Current account overdrafts 5,452

9,603 Current account overdrafts with affiliated companies 5,332 7,126 Term loans 3,345

15,142


31,871 The remaining term is as follows:

- one month or less 10,810

30,645 - more than one month and up to three months –

495

- more than three months and up to a year 3,319


31,871

The amount of the unused advances is EUR 34.5 million (2014: EUR 10 million).

As collateral, CBN Group accepts non-listed securities in the custody portfolio administered by CBN Group and/or affiliates of CBN Group. In order to determine the value of the eligible assets which can be considered suitable as collateral, the trading frequencies and liquidity of all securities are reviewed and their value discounted to reflect any potential impairment. A loan to value calculation is then performed on the available eligible assets in order to determine the maximum loan available. All significant loans are fully collateralised.

48. Cash and cash equivalents

2015

2014

EUR 000

EUR 000

Cash held with central banks 1,983,879

76,318 Current accounts with other banks 494,821

625,824

Deposits with other banks 286,335

844,903 Bank balances with affiliated companies 35,779

2,920

Petty cash 58

57

2,800,872

1,550,022

Bank balances earn interest at the respective short-term deposit market rates.

Banks are required to deposit a minimum average balance, calculated monthly, with the central banks, which is not available for use in the Group’s day-to-day operations. These deposits bear negative interest.

The Cash held with central banks increased in 2015 for solvency management purposes around year end.

80



49. Share capital

Authorised shares:

2015

2014



Ordinary shares of par value EUR 100 each 250


250

Ordinary shares issued and fully paid:


EUR 000

As at January 1, 2014 and December 31, 2015 50

5,000

50. Provisions

Restructuring EUR 000 Balance as at January 1, 2015 79 Amounts used during the year (79) Balance as at December 31, 2015 – Balance as at January 1, 2014 704 Amounts used during the year (604) Unused amounts reversed during the year (21) Balance as at December 31, 2014 79 Current 79 Non-current – Balance as at December 31, 2014 79

Restructuring provision

A number of restructuring and cost reduction programs were initiated across CBN Group in order to improve client services and achieve efficiencies. Provisions for restructuring as at December 31, 2014 amounted to EUR 79 thousand. These programs were completed during 2015.

81



51. Other payables and accrued expenses

2015

2014

EUR 000

EUR 000

Derivative financial instruments 45,003

52,739 Other payables 4,627

5,367

Taxes and social security contributions payable 1,189

905 Accrued expenses 548

407

Interest payable 23


59,419

CBN has financial risk management policies in place to ensure that all payables are paid within the permitted credit terms.

Derivative financial liabilities relate to the unrealised results on forward exchange contracts; counter parties are clients and financial institutions. Reference is made to Note 32.

52. Amounts owed to depositors

2015

2014

EUR 000

EUR 000

Demand deposits 4,255,418

3,198,600 Demand deposits with affiliated companies 418,368

376,691

Savings deposits 47

82 Time deposits 10,346

2,626

Time deposits affiliated companies 303

286 As at December 31, 4,684,482

3,578,285

The remaining term is as follows: - on demand 4,684,316

3,571,006

- longer than one year 166

153 As at December 31, 4,684,482

3,571,159

82



53. Related party transactions

In the ordinary course of business, CBN enters into a substantial number of related party transactions on an arm’s length basis. CBN has a related party relationship with its parent company, fellow subsidiaries, associated companies and pension fund.

The following services were provided by CBN to affiliated companies:

2015

2014

EUR 000

EUR 000

Personnel (7,531)

(8,912) Finance services (6,798)

(4,428)

General and administrative services (2,426)

(1,945) Office rent (1,067)

(1,279)

Group support services (759)

(4,817) Information technology services (738) (3,369) Operational services (679)

(13,243)

(20,000)

(37,993)

The following services were provided by the affiliated companies to CBN:

2015

2014

EUR 000

EUR 000

General and administrative services 3,506

3,140 Information technology services 3,072

7,621

Group support services 3,049

7,892 Personnel 2,527

3,838

Operational services 513

12,787 Office rent 230 258 Finance services 14

32

12,911

35,568

CBN has the following balances with affiliated companies:

2015

2014

EUR 000

EUR 000

Receivables 639,335

301,297 Payables (418,906)

(82,437)

Net balance 220,429

218,860

83



Signing of the financial statements

The financial statements were approved by the Board of Directors and authorised for issuance on April 15, 2016 and signed on its behalf by:

Managing Directors:

M. Leers

P.N. Symonds

F. van Proosdij

84


Section 6Other Information

85


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6. Other information

For an overview of the relevant legal structure including branch establishments, we refer to Appendix I and section 4.

Statutory rules concerning appropriation of result

The Articles of Incorporation of CBN provide that the appropriation of the net result for the year is decided upon the annual General Meeting of Shareholder.

Appropriation of result for the financial year 2014

The financial statements of 2014 were determined in the General Meeting of Shareholder held on June 4, 2015. The General Meeting of Shareholder determined the appropriation of result in accordance with the proposal being made to that end.

Proposed appropriation of result for the financial year 2015

Awaiting the decision by the shareholder, the net result for the year has been included in retained earnings.

Independent auditor’s report

Reference is made to the independent auditor’s report as included hereinafter.

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Section 7Independent Auditor’s Report

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Deloitte Accountants B.V. Gustav Mahlerlaan 2970 1081 LA Amsterdam P.O.Box 58110 1040 HC Amsterdam Netherlands Tel: +31 (0)88 288 2888 Fax: +31 (0)88 288 9737 www.deloitte.nl

Deloitte Accountants B.V. is registered with the Trade Register of the Chamber of Commerce and Industry in Rotterdam number 24362853.

Member of Deloitte Touche Tohmatsu Limited

Independent auditor’s report

To the shareholder and Supervisory Board of Citco Bank Nederland N.V.

Report on the audit of the financial statements 2015

Our Opinion

We have audited the financial statements 2015 of Citco Bank Nederland N.V. (the company), based in Amsterdam. The financial statements include the consolidated financial statements and the company financial statements.

In our opinion:

The consolidated financial statements give a true and fair view of the financial position of Citco Bank Nederland N.V. as at December 31, 2015, and of its result and its cash flows for 2015 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.

The company financial statements give a true and fair view of the financial position of Citco Bank Nederland N.V. as at December 31, 2015, and of its result for 2015 in accordance with Part 9 of Book 2 of the Dutch Civil Code.

What we have audited

The consolidated financial statements comprise:

1. the consolidated statement of financial position as at December 31, 2015; 2. the following statements for 2015: the consolidated income statement and the consolidated

statements of comprehensive income, changes in equity and cash flows; 3. the notes comprising a summary of the significant accounting policies and other explanatory

information.

The company financial statements comprise:

1. the company statement of financial position as at December 31, 2015; 2. the company income statement for 2015; 3. the notes comprising a summary of the significant accounting policies and other explanatory

information.

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Basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements” section of our report.

We are independent of Citco Bank Nederland N.V. in accordance with the “Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten” (ViO) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the “Verordening gedrags- en beroepsregels accountants” (VGBA).

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our audit approach

As part of our audit we have determined materiality and used it to identify the risks of a relevant misstatement in the financial statements. In particular we have assessed those accounts with a relatively high level of subjectivity; there where estimates with regard to uncertain future developments occur.

We specifically paid attention to the risk of management overriding internal controls and to the risk of material misstatements as a result of fraud. Additionally, we have taken continuity and reliability of the information technology environment into account during our audit procedures.

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Materiality

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR 1,200,000. The materiality level is based on an average of the result before tax, net revenue and equity over the last three years. The calculated materiality represents the equivalent of around 0.5% of equity. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

Overview materiality

Materiality for the financial statements as a whole EUR 1,200,000

Benchmark for materiality Equity

Threshold for clearly trivial misstatements EUR 60,000

We agreed with the Supervisory Board that misstatements in excess of EUR 60,000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds

Scope of the group audit

Citco Bank Nederland N.V. is head of a group of entities. The financial information of this group is included in the consolidated financial statements of Citco Bank Nederland N.V.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and / or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.

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Our group audit mainly focused on significant group entities and branches. We have: performed audit procedures ourselves on the operations in Amsterdam as well as the

Luxembourg branch of Citco Bank Nederland N.V.; used the work of other auditors when auditing the Dublin branch of Citco Bank Nederland N.V.;

Citco Fund Services (Ireland) Limited and Citco Bank Canada;

By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the consolidated financial statements.

Our key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed.

These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Regulatory compliance Description of key audit matter How our audit addressed the key audit matter Citco Bank Nederland N.V. is regulated by various regulators in respective jurisdictions in which it operates. Regulatory requirements may change over time which require management to align internal procedures to adhere to these changes. The risk exists that Citco Bank Nederland N.V. may not comply with regulatory requirements.

We have assessed communication between Citco Bank Nederland N.V. and its regulators. In addition we have assessed regulatory examination reports and met with regulators and management to get an understanding of current regulatory requirements, and assess Citco Bank Nederland N.V.’s compliance to these requirements.

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Deferred corporate income tax positions Description of key audit matter How our audit addressed the key audit matter Citco Bank Nederland N.V. operates in multiple jurisdictions all with differing tax regimes with complex cross-border arrangements. Citco Bank Nederland N.V. has recorded deferred tax assets and deferred tax liabilities in relevant jurisdictions. These tax positions may not be appropriately recorded or may not be realized in the future.

Deferred tax assets primarily result from tax losses carried forward. These losses can be carried forward for a remaining period up to 9 years in the Netherlands and for an indefinite period in Ireland. Based on the forecasted profits, management concluded that these losses should be recoverable within this set period. We considered the appropriateness of management’s assumption and estimates in relation to the deferred tax positions, challenging those assumptions and considering advice received by management from external advisors to support their position. For more information on the deferred tax position reference is made to note 19.

Claims and litigations Description of key audit matter How our audit addressed the key audit matter During its normal course of business Citco Bank Nederland N.V. may be exposed to claims and litigations. Citco Bank Nederland N.V. continued to be involved in one significant legal proceeding. As part of our audit, we considered the claims and litigations important given the related subjectivity.

We have assessed management’s position to provide for or disclose these claims and litigations and have reviewed supporting documentation obtained from Citco’s internal and external lawyers, focusing on the likelihood of occurrence and the possibility for quantification. For more information on claims and litigations reference is made to note 37.

Counterparty credit risk Description of key audit matter How our audit addressed the key audit matter Citco Bank Nederland N.V. holds assets which are exposed to counterparty credit risk. Such assets mainly include balances with correspondent banks and investments in commercial paper, certificates of deposits, treasury bills and variable funding notes. Assessing the valuation of these assets requires judgment taking into account relevant credit risk.

We have considered whether relevant controls have been put in place by management which ensure timely identification of credit risk deterioration of counterparties. We have evaluated and challenged the key considerations used by management in assessing credit risk. We further focused on the adequacy of the disclosures about credit risk. For more information on credit risk reference is made to note 4.3.1.

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Responsibilities of management and the Supervisory Board for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting framework mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. Management should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the company’s financial reporting process.

Our responsibilities for the audit of the financial statements

Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not have detected all errors and fraud.

For an overview of our responsibilities we refer to NBA’s website: https://www.nba.nl/Over-de-NBA/English/English/Standard-texts-auditors-report/

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Report on other legal and regulatory requirements

Report on the Management Board report and the other information

Pursuant to legal requirements of Part 9 of Book 2 of the Dutch Civil Code (concerning our obligation to report about the Management Board report and other information):

We have no deficiencies to report as a result of our examination whether the Management Board report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code, and whether the information as required by Part 9 of Book 2 of the Dutch Civil Code has been annexed.

We report that the Management Board report, to the extent we can assess, is consistent with the financial statements.

Engagement

We were engaged by the Supervisory Board of Citco Bank Nederland N.V. as of the audit for year 2002 and have operated as statutory auditor ever since that date.


Deloitte Accountants B.V.

Signed on the original: R.J.M. Maarschalk

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Section 8Appendices

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Appendix I: List of main subsidiaries

The consolidated financial statements include the financial statements of CBN and its directly and indirectly owned subsidiaries, which include the following main companies. Unless indicated otherwise, the companies are wholly-owned.

Banking and custody services Citco Bank Canada Canada Fund services Citco Fund Services (Ireland) Limited Ireland

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Appendix II: List of guarantors Below is a list of entities as referred to in note 30. Citco Fund Services (Ireland) Limited Ireland

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