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Nomura Bank (Luxembourg) S.A.

Annual accounts,Directors’ report andIndependent auditor’s report

as of 31 March 2014


Bâtiment A – 33 rue de Gasperich

L-5826 Luxembourg

R.C.S. B 32921 – SWIFT NBLXLULL

Nomura - Couverture 2014.indd 1 15.12.2014 8:40:38 Uhr

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Table of Contents

Directors’ Report ............................................................................................................................................................... 3

Independent Auditor’s Report ............................................................................................................................................ 9

Statement of fi nancial position ......................................................................................................................................... 11

Income statement ............................................................................................................................................................ 15

Statement of comprehensive income ............................................................................................................................... 17

Statement of changes in equity ........................................................................................................................................ 19

Statement of cash fl ows .................................................................................................................................................. 21

Notes to the annual accounts .......................................................................................................................................... 25

Directors’ Report

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Directors’ Report

Year ended 31 March 2014

The directors of Nomura Bank (Luxembourg) S.A. (the “Bank”, “NBL”, “we”, “our”, “us”) are pleased to announce the fi nancial results of the Bank for the fi scal year ended 31 March 2014. Throughout the fi scal year, we faced continuous challenges, especially the avalanching implementation of tighter regulatory frameworks, and continued our ceaseless efforts to improve quality of our operations for satisfaction of our clients.

As in previous years, the major part of our business has been promoted by the strong relationships with the Nomura Group’s global network, specifi cally in investment trusts business in Japan. Management of Nomura Group had set strategy in 2012 emphasizing further marketing of existing investment trusts. Financial stability enhanced globally and new Japanese political initiative so called Abenomics brought growth in equity market in Japan. However, the Bank’s Assets under Administration (“AuA”) have been decreased by 5% (Mar 2013 – $85bn to Mar 2014 - $81bn) refl ecting continuous low interest rates in the fi xed income markets as of 31 March 2014. Luxembourg funds represented $18bn (2013 - $18bn) of the AuA while Cayman funds accounted for $63bn (2013 - $67bn). As of 31 March 2014, the Bank was calculating 540 NAV/shs (2013 - 460), servicing more than 310 funds and sub-funds, 78% of which were Cayman funds.

As a result, our funds custody and funds administration business suffered generating less revenues (8.0% below FY13 and 10.8% below budget) and our treasury activities as well, have continuously faced remarkable diffi culties of business opportunities (11.0% below FY13 and 19.1% below budget).

Another important initiative taken at the previous fi scal year was review of IT projects and establishment of IT blueprint to cope with increased expectation from our Group. The Bank’s Management decided to revisit its IT strategy from the bottom, and set new IT blueprint to support its business. In this context, NBL has achieved a major milestone when on 25 November 2013 the migration from Olympic F version to Olympic A version went live. This mainframe system upgrade was of critical importance for further project phases in this IT blueprint strategy roll-out. Another achievement during this November release was the new communication system for subscription/redemption orders and executions with a network of securities brokerage houses in Japan, called GAITO 1 project.

As a result of these activities and transactions, profi t before tax for the fi scal year amounted to €62m (2013 - €62m), our balance sheet as of 31 March 2014 amounts to €5,562m (2013 - €5,249m) and shareholders’ equity amounts to €398m (2013 - €342m).

Similarly to previous fi scal years, the Bank profi table funds business is fi rst of all to be attributed to Nomura Securities Co., Ltd’s ability to broadly distribute investment funds in Japan. As a trend, additional new classes of units have been opened for CDSC (Contingental Differal Sales Charge) funds. In the meantime, the Asset Management division of the Nomura Group continued to be innovative and proposed new multi-dividend funds with exposure to a basket of selected currencies to retail investors in Japan. The fact that the assets of so-called “T+0” funds (intraday or closing prices valuation for European and US markets) have increased slightly to $23bn (2013 - $20bn) during the period, shows that there is still a strong demand for such kind of products.

With regards to Global Funds Management S.A. (“GFM”), NBL’s fully owned management company domiciled in Luxembourg, continuous efforts in order to obtain its Alternative Investment Fund Managers (“AIFM”) license fully succeeded, and an offi cial AIFM license notifi cation effective as of 14 February 2014 was received from the CSSF. In the coming months, GFM will be working on the roll-out of the risk management as well as the new AIFMD regulatory reporting.

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Further AIFMD regulatory compliance features to be mentioned are the design and implementation of a new department

called Depositary Control and Oversight Department. This department is responsible for monitoring adherence to all duties

and responsibilities of the Depositary Bank for those funds in scope of the AIFMD, and as such is directly reporting to the

Authorised Management of the Bank.

In a view to demonstrate the quality of its level of services and related control procedures to its existing and potential new

counterparties, the Bank has mandated Deloitte to re-issue a combined ISAE 3402 / SSAE 16 report for the fi scal year

1 April 2013 to 31 March 2014, our second Service Organisation Control report.

The Bank has a permanent focus on managing its business and associated risks appropriately. As in previous fi scal years,

this resulted in constant search for improvement in processes, structure, tools, expertise and education. Accordingly,

during the year closed on 31 March 2014, signifi cant investments have been made in applications and systems, research

and analysis as well as enhancing processes and controls. Those investment commitments are made for the long term

and will continue over the next years. Signifi cant examples of these investments are projects aiming to review and improve

our reporting functions, increasing automation to decrease operational risks related to manual bookings, upgrading our

funds custody and accounting applications and platform.

Because we believe that human capital is the biggest asset of the Bank, we continuously hired talents at the Bank’s

important positions, as well implemented change of organisation. The new Collateral Management Department was

launched in November 2013 in order to centralise all collateral management activities under one consolidated processing

area.

Also we have continuously encouraged all staff to increase their business knowledge by attending trainings, external

seminars and conferences. General trainings on anti-money laundering and fi ght against terrorism fi nancing were regularly

held in house. Some of our most qualifi ed staffs have been also enrolled as active members of a number of ABBL and

ALFI working groups. We have also continued recruiting experienced and talented professionals. As of 31 March 2014, the

Bank employs 349 staff (2013 - 324).

In order to sustain our growth coupled with the evolution of legal and business environment, we continued to prioritise the

ever-growing importance of proper monitoring of capital and liquidity (solvency, liquidity, large exposure, allocated capital

or funding). In this context, following developments are worth to be mentioned: 1.) our solvency ratio has been improving

reaching as of 31 March 2014 the level of 43.86% (2013 – 24.10%) thus further assessing the robustness of our Tier

1 capital; 2.) our preparations for gradually implementing the Basel III and CRR/CRD IV requirements are on track. These

efforts obviously resulted in a stronger overall liquidity management as well as a broader range of counterparty credit risk

mitigation techniques. The Bank maintained core focus on large exposure monitoring and specifi c netting agreements and

collateral usage, in line with the revised constraints from the regulatory bodies. All over the year closed on 31 March 2014

we stabilised the volume of our Bank’s banking business and thus the size of our balance sheet. All the fi scal year long,

the Bank communicated closely with CSSF and BCL in order to follow up on the Bank’s business and development and

maintain regulatory ratios at more comfortable levels enlarging room for further growth.

With regards to the internal audit control function, we confi rm that, during this fi scal year, the Internal Audit Department

(“IAD”) has completed its internal audit plan. Management is performing a close follow-up of all audit issues and is

committed to address them timely and adequately. A strong IAD teamwork with all business stakeholders enabled us to

strengthen our working processes and to enhance the application of our policies and procedures.

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Because of the nature of our business with main focus on funds administration, custody and agency services, it is

our policy not to take any signifi cant market risks in foreign exchange, interest rate and other market risk exposures.

It is also our policy to closely monitor credit risks of our counterparties with the support of the specialists in our local Risk

Management Department in full transparency with and complementary to the credit experts of Nomura Group in London.

We continuously monitor operational risk and search for improvements within the internal control environment.

The Bank has formalised their approach to risk within the Risk Strategy document, defi ning the risk appetite framework

announced in line with our business and risk profi le. The Bank has gone through the internal capital adequacy assessment

process (“ICAAP”) and performed capital forecasts over a 3-year period by considering the activities of its various business

lines and its subsidiaries activities. The Bank has performed stress tests analysis for all the material risks identifi ed such

as operational risk, market risk, credit risk, counterparty credit risk, liquidity risk, business risk and systematic risk.

As a result of the analysis conducted, and considering all the risks the Bank faces, we concluded that the Bank continues

to be adequately capitalised.

In order to mitigate the inherent risks associated with our business, we will continue to place emphasis on compliance,

internal audit, and risk control as well as other control activities managed by the dedicated professional staff with the help

of Nomura Group’s network. For the Authorised Management, to keep itself updated, it is important to highlight that the

offi cial internal control key functions holders are permanent members of the Executive Committee bi-weekly meetings.

In this context, it should be noted that Internal Audit is reviewing all open audit issues and action plans on a monthly basis,

together with the Authorised Management.

In parallel, in order to keep business key stakeholders updated on the growing number of regulatory changes, our

Compliance department is organising monthly Regulatory Steering Committee meetings evidencing regular progress made

on the implementation of these new regulatory requirements.

Finally, the Chief Risk Offi cer (CRO), with the support of the Operational Risks and the Financial Risks monitoring experts

convey all business key stakeholders as well as the Authorised Management to their monthly Risk Management Committee

meetings.

Furthermore, the Bank has launched since March 2013 a new forum called the New Product Approval Committee (NPAC)

where business, internal control functions and Authorised Management, together with Fund Legal and Corporate Legal

representatives, decide on new investment funds, new investment products and new banking services.

To conclude all actions taken by NBL with regards to new regulatory requirements throughout the fi scal year under review,

we should not forget to highlight the creation of dedicated working groups composed by business experts, control

functions holders and external consultancy fi rms. Below we are listing the most important ones:

1) EMIR: working group in charge of the implementation of the applicable requirements under the European Market

Infrastructure Regulation.

2) FATCA: working group in charge of the implementation of the applicable requirements under the Foreign Account Tax

Compliance Act.

3) BASEL III, CRR/CRD IV: working group in charge of the implementation of the applicable requirements under these new

regulations.

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During this fi scal year, NBL has also been subject to two routine inspections led by the CSSF: the fi rst inspection by our regulator took place in July 2013 focusing on the effectiveness of the Internal Governance framework of the Bank and the second one in March 2014 focusing on the appropriateness of the Depositary Bank Responsibilities Control including the recent new regulatory compliance requirements related to AIFMD as transposed into Luxembourg law on 12th July 2013. These on-site CSSF inspections have been successfully coordinated by our Chief Compliance Offi cer (CCO).

The Bank has no activities in research and development, has not bought its own shares during the fi scal year and has not created any branches.

There are no post balance sheet events to report that would affect the fi nancial results for the year ended 31 March 2014 or that would require a disclosure in the notes to the annual accounts.

As stated in note 36 in the annual accounts, on 23 April 2014, the Bank signed a guarantee letter in favour of its subsidiary Global Funds Management S.A. (“GFM”), authorised by the CSSF as alternative investment fund manager for an unlimited duration whereby the Bank guarantees to pay to its subsidiary immediately upon its request an amount corresponding to a maximum of 50 percent of the additional amount of own funds required to be provided by GFM in accordance with Article 8 of – the Law dated 12 July 2013 relating to the alternative investment funds managers implementing Directive 2011/61/EU of 8 June 2011, as such law may be amended, supplemented or rescinded from time to time (the “2013 Law”), but which shall in aggregate and at all times not exceed €2.5m, so that GFM will have a suffi cient additional amount of own funds to comply, as and when required, with the capital requirements applicable to GFM as per Article 8 (3) of the 2013 Law.

For the new fi scal year 2014-15, the Bank has forecasted a slight decrease in terms of Assets under Administration as well as for gross revenues, whereas expenses are deemed to increase slightly due to further investments into our systems infrastructure targeting more recent state of the art technology, enhanced functionalities for our business users and reporting improvements for our Customers.

There will be more fi nancial impact brought to the Bank from forthcoming challenges of regulatory implementation as well as Customers’ changes of investment attributes. However we should conclude the last fi scal year was for the Bank to foresee the direction of the change and be ready to enhance its capabilities as unique Fund Administration entity to serve the benefi t of Group strategy.

3 June 2014

Chie SHIMPO Masaru KONNOChairman President & CEONomura Bank (Luxembourg) S.A. Nomura Bank (Luxembourg) S.A.

Independent Auditor’s Report

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To the Board of Directors ofNomura Bank (Luxembourg) S.A.Société Anonyme33, rue de GasperichL-5826 Hesperange

Report on the annual accounts

Following our appointment by the Board of Directors, we have audited the accompanying annual accounts of Nomura Bank (Luxembourg) S.A., which comprise the statement of fi nancial position as of 31 March 2014, the income statement, the statement of comprehensive income, the statement of changes in equity, the statement of cash fl ows for the year then ended, and a summary of signifi cant accounting policies and other explanatory information.

Board of Directors’ responsibility for the annual accounts

The Board of Directors is responsible for the preparation and fair presentation of these annual accounts in accordance with International Financial Reporting Standards as adopted by the European Union and for such internal control as the Board of Directors determines is necessary to enable the preparation and presentation of annual accounts that are free from material misstatement, whether due to fraud or error.

Responsibility of the “réviseur d’entreprises agréé”

Our responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts. The procedures selected depend on the judgement of the “réviseur d’entreprises agréé”, including the assessment of the risks of material misstatement of the annual accounts, whether due to fraud or error. In making those risk assessments, the “réviseur d’entreprises agréé” considers internal control relevant to the entity’s preparation and fair presentation of the annual accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the annual accounts.

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

Opinion

In our opinion, the annual accounts give a true and fair view of the fi nancial position of Nomura Bank (Luxembourg) S.A. as of 31 March 2014, and of its fi nancial performance and its cash fl ows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Report on other legal and regulatory requirements

The Directors’ report, which is the responsibility of the Board of Directors, is consistent with the annual accounts.

Ernst & Young Société Anonyme Cabinet de révision agréé

Sylvie Testa

Luxembourg, 3 June 2014

Statement of fi nancial position

As of 31 March 2014(expressed in EUR)

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Assets

Notes 31 March 2014 31 March 2013

Cash and balances with central banks 4, 31, 32 517,046,884 336,324,280

Derivatives held for trading 5, 31, 32, 35 1,232,394,811 743,263,702

Available-for-sale fi nancial instruments 6, 31, 32, 35 455,238,148 391,530,881Equity instruments 6,510,760 5,008,129Debt instruments 448,727,388 386,522,752

Loans and advances 7, 29, 31, 32, 35 3,280,203,095 3,674,123,586Loans and advances to credit institutions 2,993,264,774 2,456,739,930Loans and advances to customers 286,938,321 1,217,383,656

Tangible assets 8, 31 3,032,164 2,157,530

Intangible assets 8, 31 7,856,904 2,317,063

Deferred tax assets 14, 31 2,773,495 3,024,975

Other assets 9, 31 63,240,245 96,323,465

Total assets 5,561,785,746 5,249,065,482

The accompanying notes form an integral part of these annual accounts.

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Liabilities and shareholders’ equity

Liabilities Notes 31 March 2014 31 March 2013

Deposits from central banks 31, 32 507,732,637 505,525,821

Derivatives held for trading 10, 31, 32, 35 1,240,238,154 751,470,255

Financial liabilities designated at fair value through profi t or loss 13, 31, 32 81,536,510 44,624,342

Financial liabilities measured at amortised cost 31, 32, 35 3,267,009,632 3,500,566,271Amounts due to credit institutions 11 190,063,279 8,561,674Amounts due to customers 12 3,076,946,353 3,492,004,597

Tax liabilities 14, 31 19,231,310 17,471,106Current tax liabilities 15,934,946 13,892,796Deferred tax liabilities 3,296,364 3,578,310

Other liabilities 15, 31 47,595,695 87,248,351

Total liabilities 5,163,343,938 4,906,906,146

Shareholders’ equity

Issued capital 16 28,000,000 28,000,000

Reserves (including retained earnings) 17 310,068,666 255,891,418

Available-for-sale reserve 6 5,490,802 4,090,670

Profi t for the year 54,882,340 54,177,248

Total shareholders’ equity 398,441,808 342,159,336

Total liabilities and shareholders’ equity 5,561,785,746 5,249,065,482

Income statement

For the year ended 31 March 2014(expressed in EUR)

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Notes 31 March 2014 31 March 2013

Net interest income 35 4,923,660 6,370,595

Interest and similar income 19 18,007,571 24,218,278

Interest and similar expenses 20 (13,083,911) (17,847,683)

Dividend income 21, 35 11,704,500 11,148,000

Net fee and commission income 22, 35 77,347,298 73,520,785Fee and commission income 77,687,233 73,867,125Fee and commission expenses (339,935) (346,340)

Net realised gains (losses) on financial assets and liabilitiesnot designated at fair value through profit or loss 23 --- ---

Net (un) realised gains (losses) on financialassets and liabilities held for trading 24 17,852,528 30,616,854

Net (un) realised gains (losses) on financial assets and liabilities designated at fair value through profit or loss 13, 32 (845,965) (11,453,023)

Foreign exchange differences 25 (155,135) (1,476)

Net other operating income/expenses (675,284) (853,024)Other operating income 624,208 571,415Other operating expenses (1,299,492) (1,424,439)

Administrative expenses 26, 29, 30, 34, 35 (45,380,974) (44,356,927)

Depreciation and amortisation (2,293,694) (3,276,087)Tangible assets 8, 27 (1,622,666) (1,031,474)Intangible assets 8, 27 (671,028) (2,244,613)

Impairment 27 --- ---

Profit before tax 62,476,934 61,715,697

Income tax expenses 14 (7,594,594) (7,538,449)



Statement of comprehensive income


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31 March 2014 31 March 2013


Other comprehensive income

Items that may be reclassifi ed subsequently to profi t or loss Net gains (losses) on available-for-sale fi nancial instruments 1,514,073 1,289,973Income tax relating to components of other comprehensive income (113,941) 11,645

Other comprehensive income for the year, net of tax 1,400,132 1,301,618

Total comprehensive income for the year, net of tax 56,282,472 55,478,866


Statement of changes in equity


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Balance at Transfers and Total Balance at 31 March 2013 allocation of comprehensive 31 March 2014 prior year’s profi t income

Issued capital 28,000,000 --- --- 28,000,000

Profi t brought forward 226,084,745 49,777,248 --- 275,861,993

FTA Reserve 3,201,673 --- --- 3,201,673

Reserves: 26,605,000 4,400,000 --- 31,005,000a) Legal reserve (1) 2,800,000 --- --- 2,800,000b) Special reserves (2) 23,805,000 4,400,000 --- 28,205,000

AFS reserve 4,090,670 --- 1,400,132 5,490,802

Profi t for the year 54,177,248 (54,177,248) 54,882,340 54,882,340

Shareholders’ equity 342,159,336 --- 56,282,472 398,441,808

Balance at Transfers and Total Balance at 31 March 2012 allocation of comprehensive 31 March 2013 prior year’s profi t income

Issued capital 28,000,000 --- --- 28,000,000

Profi t brought forward 173,823,858 52,260,887 --- 226,084,745

FTA Reserve 3,201,673 --- --- 3,201,673

Reserves: 22,980,000 3,625,000 --- 26,605,000a) Legal reserve (1) 2,800,000 --- --- 2,800,000b) Special reserves (2) 20,180,000 3,625,000 --- 23,805,000

AFS reserve 2,789,052 --- 1,301,618 4,090,670

Profi t for the year 55,885,887 (55,885,887) 54,177,248 54,177,248

Shareholders’ equity 286,680,470 --- 55,478,866 342,159,336


1 Legal reserve recorded under Luxembourg law (see Note 17)2 Reserves linked to exoneration of Net Wealth Tax charge subject to conditions (see Note 17)

Statement of cash fl ows


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31 March 2014 31 March 2013

Profi t before tax 62,476,934 61,715,697

Adjustments: Depreciation / Amortisation / Impairment 2,293,694 3,276,087Fair value adjustments (7,254,454) (4,621,033)

Cash fl ows from operating profi ts before changes in operating assets and liabilities 57,516,174 60,370,751

Net (increase)/decrease in loans and advances to credit institutions (147,721,612) 197,953,280Net (increase)/decrease in loans and advances to customers 930,445,335 395,176,819Net (increase)/decrease in available-for-sale fi nancial assets (62,307,135) 97,248,560Net (increase)/decrease in other assets 33,083,220 (52,323,432)Net increase/(decrease) in deposits from banks 183,708,421 3,758,329Net (increase)/decrease in deposits from customers (415,058,244) (758,508,171)Net increase/(decrease) in fi nancial liabilities 43,769,112 (10,814,233)Net increase/(decrease) in other liabilities (39,652,656) 50,721,644Income tax (5,700,000) (5,700,000)Net variations in other operating assets/liabilities 151,390 (82,545)

Net cash fl ow from operating activities 578,234,005 (22,198,998)

Acquisition of intangible/tangible assets (8,708,169) (1,719,029)

Net cash fl ow from investing activities (8,708,169) (1,719,029)

Net increase/decrease in cash and cash equivalents 569,525,836 (23,918,027)

Cash and cash equivalents at the beginning of the year 2,255,651,730 2,279,569,757Net increase/decrease in cash and cash equivalents 569,525,836 (23,918,027)

Cash and cash equivalents at the end of the year 2,825,177,566 2,255,651,730

of which: not available --- 336,320,942


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For the purposes of the statement of cash fl ows, cash and cash equivalents comprise the following balances with less than three months maturity from the date of acquisition:

31 March 2014 31 March 2013

Cash and balances with central banks (Note 4) 517,046,884 336,324,280

Loans and advances to credit institutions 2,308,130,682 1,919,327,450repayable with less than three months maturity from the date of acquisition 2,308,130,682 1,919,327,450

Cash and cash equivalents 2,825,177,566 2,255,651,730


Notes to the annual accounts

As of 31 March 2014

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NOTE 1- CORPORATE INFORMATION

Corporate matters

Nomura Bank (Luxembourg) S.A. (the “Bank” or “NBL”) was incorporated in Luxembourg on 2 February 1990 as a Société Anonyme.

Nature of the Bank’s business

The object of the Bank is to undertake all banking, financial securities and fiduciary operations and to engage in leasing and factoring activities for its own account or for account of its customers.

The Bank can establish or take part in finance and other companies or acquire, encumber or dispose of real estate for its own or for account of its customers.

A significant volume of the Bank’s transactions is concluded directly with companies of the Nomura Group or with their Japanese clients.

Annual accounts

The Bank’s accounting year ends on 31 March of each year. The annual accounts were authorised for issue by the Bank’s Board of Directors on 3 June 2014.

Parent undertaking

The Bank is a subsidiary of Nomura Europe Holdings Plc (the “Parent company”), a holding company incorporated under the laws of United Kingdom and whose registered office is in London. The consolidated accounts of Nomura Europe Holdings Plc may be obtained at 1 Angel Lane, London, EC4R 3AB, UK.

The Bank’s ultimate parent is Nomura Holdings, Inc., a holding company incorporated under the laws of Japan whose registered office is in Tokyo. The consolidated accounts of Nomura Holdings, Inc. may be obtained at 1-9-1, Nihonbashi, Chuoku, Tokyo 103-8645, Japan.

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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Note 2.1 - Basis of preparation

The annual accounts are prepared on the historical cost basis except for derivatives held for trading, available-for-sale financial instruments and debt certificates designated at fair value through profit or loss which are measured at fair value.

Statement of compliance

The annual accounts have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and the relative interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) as adopted for use in the European Union.

The preparation of annual accounts in accordance with IFRS requires the Board of Directors to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense items. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by the Board of Directors in the application of IFRS that have significant effect on the annual accounts and estimates with a significant risk of material adjustments in the next year are developed in Note 3.

Changes in accounting policies

The accounting policies adopted are consistent with those of the previous year, except for the following amendment to IFRS effective as of 1 January 2013. This newly applicable requirement has had no impact on the financial position and performance of the Bank:

Presentation of Items of Other Comprehensive Income (issued in June 2011) - Amendments to lAS 1 - Presentation of Financial Statements

The amendments modify the grouping of items presented in other comprehensive income. Items that could be reclassified (or “recycled”) to the income statement at a future point in time are now to be presented separately from items that will never be reclassified. The layout of the statement of comprehensive income has been adjusted accordingly.

The amendments affect presentation only and have no impact on the Bank’s financial position or performance.

IFRS 13 - Fair Value Measurement (new standard issued in May 2011)

According to the specific transitional provisions embedded in IFRS 13, the new standard is to be applied on a prospective basis (with no requirement to restate/produce disclosures for the comparative period). IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements.

IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when a fair valuation is required or permitted.

IFRS 13 defines fair value as an exit price. IFRS 13 also requires additional disclosures. Application of IFRS 13 has not impacted the fair value measurements of the Bank. Additional disclosures, where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined.

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Disclosures - Offsetting Financial Assets and Financial Liabilities (issued in December 2011) - Amendments to IFRS 7 - Financial Instruments: Disclosures

The amendments require an entity to disclose information about rights to set-off and related arrangements

(e.g. collateral agreements).

The new disclosures provide users with information that is useful in evaluating the effect of netting arrangements on

the Bank’s financial position. They apply to all recognised financial instruments that are subject to an enforceable

master netting agreement, irrespective of whether they are set off in accordance with lAS 32 - Financial Instruments:

Presentation.

Transitional rules indicate the amendments are to be applied on a retrospective basis.

Standards issued but not yet effective

The following IFRS standards and IFRIC interpretations were issued with an effective date for financial periods

beginning on or after 1 January 2014. The Bank has chosen not to early adopt these standards and interpretations

before their effective dates.

Only accounting policies and disclosures applicable or potentially applicable to the Bank are mentioned below.

lAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to lAS 32

These amendments clarify the meaning of “currently has a legally enforceable right to set-off” and the criteria for

non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These amendments are not

expected to impact the Bank’s financial position or performance and become effective for annual periods beginning

on or after 1 January 2014.

IFRS 9 Financial Instruments - Classification and Measurement (Not endorsed by the European Union yet)

IFRS 9, as issued, reflects the first and the third phases of the IASB’s work on the replacement of lAS 39. Those

phases relate to classification and measurement of financial assets and financial liabilities (as defined in lAS 39) and to

Hedge Accounting. The second phase, which deals with impairment methodology, has not been published yet.

The IASB recently decided to tentatively remove the mandatory effective date for IFRS 9. That mandatory effective

date will be set when the revised classification and measurement proposals and the expected credit loss proposals

are finalised.

The adoption of the first phase of IFRS 9 is expected to have an effect on the classification and measurement of the

Bank’s financial assets, but not on the classification and measurement of financial liabilities. The Bank will quantify the

effect in conjunction with the other phases, when the final standard including all phases is issued.

IFRIC Interpretation 21 Levies (IFRIC 21)

IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified

by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation

clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 is effective

for annual periods beginning on or after 1 January 2014. The Bank does not expect that IFRIC 21 will have a material

financial impact in future annual accounts.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

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lAS 39 Novation of Derivatives and Continuation of Hedge Accounting - Amendments to lAS 39

These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments are effective for annual periods beginning on or after 1 January 2014. The Bank has not novated derivatives designated in effective hedging relationships during the current financial year. However, these amendments will be considered for future novations.

IFRS 10 Consolidated Financial Statements, lAS 27 Separate Financial Statements

IFRS 10 replaces the portion of lAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation - Special Purpose Entities.

IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in lAS 27. Based on the preliminary analyses performed, IFRS 10 is not expected to have any impact on the currently held investments of the Bank.

The IASB determined the new standard should become effective for annual periods beginning on or after 1 January 2013; however, the European Union allowed preparers of financial statements to postpone the initial application of the standard to 1 January 2014.

Exemption from preparing consolidated accounts

These annual accounts are prepared on a stand-alone basis.

According to the current Luxembourg regulation, the Bank is exempt from the requirement to publish consolidated accounts and a consolidated management report.

The exemption from preparing consolidated accounts in accordance with IFRS is based on the Accounting Regulatory Committee’s paper (ARC/06/2007) which confirmed that where, under the 7th Company Law Directive, a parent company is exempted from preparing consolidated accounts, but chooses or is required to prepare its annual accounts in accordance with IFRS as adopted by the European Union, the provisions in IAS 27 setting out the requirement to prepare consolidated accounts do not apply.

Note 2.2 - Summary of significant accounting policies

(a) Foreign currency translation

The annual accounts are presented in Euro (“EUR”), which is also the Bank’s functional currency.

Transactions in foreign currencies are initially recorded at the functional currency rate of exchange ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency exchange rates prevailing at the statement of financial position date. All differences arising on non-trading activities are taken to “Foreign exchange differences” in the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.


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(b) Financial instruments – initial recognition and subsequent measurement

(i) Date of recognition

All financial assets and liabilities are initially recognised on the value date. This includes purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace.

(ii) Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on the purpose and the management’s intention for which the financial instruments were acquired and their characteristics. All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss.

(iii) Derivatives held for trading

Derivatives held for trading are recorded in the statement of financial position at fair value. Changes in fair value are recognised in “Net (un) realised gains (losses) on financial assets and liabilities held for trading”. Interest income or expense is recorded in “Net interest income” according to the terms of the contract, or when the right to the payment has been established.

(iv) Derivatives held for hedging

The Bank may use derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. Where there is a hedging relationship between a derivative financial instrument and a related item being hedged, the hedging instrument is measured at fair value. The treatment of any resulting gains and losses is set out below.

A hedging relationship exists when:

– At the inception of the hedge there is formal documentation of the hedge;

– The hedge is expected to be highly effective throughout the period and prospectively;

– The effectiveness of the hedge can be reliably measured;

– For hedges of a forecasted transaction, the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect net profit or loss.

For the purpose of hedge accounting, the Bank has classified hedges as fair value hedges and cash flow hedges.

Fair value hedges

The change in the fair value of a hedging derivative is recognised in the income statement. The change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of the carrying value of the hedged item and is also recognised in the income statement.

For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through the income statement over the remaining term to maturity. Any adjustment to the carrying amount of a hedged financial instrument for which the effective interest rate method is used, is amortised through the income statement.

Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

If the hedged item is derecognised, the unamortised fair value is recognised immediately in the income statement.


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When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in the income statement. The changes in the fair value of the hedging instrument are also recognised in the income statement.

As of 31 March 2014 and 2013, the Bank has no fair value hedged transactions.

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while any ineffective portion is recognised immediately in the income statement.

Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged item is the cost of a non financial asset or non financial liability, the amounts taken to equity are transferred to the initial carrying amount of the non financial asset or liability.

If the forecast transaction or fi rm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction or fi rm commitment occurs.

As of 31 March 2014 and 2013, the Bank has no cash flow hedged transactions.

(v) Financial liabilities designated at fair value through profit or loss

Financial liabilities classified in this category are those that have been designated by management on initial recognition. Management may only designate an instrument at fair value through profit or loss upon initial recognition when the following criteria are met, and designation is determined on an instrument by instrument basis:

– The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the liabilities or recognising gains or losses on them on a different basis; or

– The liabilities are part of a group of financial liabilities which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or

– The financial instrument contains one or more embedded derivatives which significantly modify the cash flows that otherwise would be required by the contract.

Financial liabilities at fair value through profit or loss are recorded in the statement of financial position at fair value. Changes in fair value are recorded in “Net (un) realised gains (losses) on financial assets and liabilities designated at fair value through profit or loss” in the income statement.

As of 31 March 2014 and 2013, included in this category are structured medium term notes issued by the Bank which contains embedded derivatives not separately recorded as permitted by IAS 39 – 11 A. These financial instruments are not listed in an active market (see Note 13).


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(vi) Available-for-sale financial instruments

Available-for-sale financial instruments include equity and debt securities. Equity instruments classified as available-for-sale are those which are neither classified as held for trading nor designated at fair value through profit or loss. Debt instruments in this category are intended to be held for an indefinite period of time and may be sold in response to needs for liquidity or in response to changes in the market conditions.

Available-for-sale equity instruments include mainly non quoted investments in subsidiaries.

The Bank has not designated any loans or receivables as available-for-sale.

After initial measurement, available-for-sale financial instruments are subsequently measured at fair value.

Unrealised gains and losses are recognised directly in equity in the “Available-for-sale reserve”. When the financial instrument is disposed of, the cumulative gain or loss previously recognised in equity is recognised in the income statement in “Net realised gains (losses) on financial assets and liabilities not designated at fair value through profit or loss”. Where the Bank holds more than one investment in the same security they are deemed to be disposed of on a first-in first-out basis.

Dividends earned whilst holding available-for sale equity instruments are recognised in the income statement as “Dividend income” when the right of the payment has been established. The losses arising from impairment of such investments are recognised in the income statement in “Impairment losses on financial investments” and removed from the “Available-for-sale reserve”.

(vii) Loans and advances

Loans and advances include non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:

– Those that the Bank intends to sell immediately or in the near term and those that the Bank upon initial recognition designates at fair value through profi t or loss;

– Those that the Bank, upon initial recognition, designates as available-for-sale fi nancial instruments; or

– Those for which the Bank may not recover substantially all of its initial investment, other than because of credit deterioration.

After initial measurement, “Loans and advances” are subsequently measured at amortised cost using the effective interest rate (“EIR”), less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortisation is included in the caption “Interest and similar income” in the income statement. The losses arising from impairment are recognised in the income statement.

(c) Derecognition of financial assets and financial liabilities

(i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

– The rights to receive cash flows from the asset have expired; or

– The Bank has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either:


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– The Bank has transferred substantially all the risks and rewards of the asset; or

– The Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Bank’s continuing involvement in the asset. In that case, the Bank also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Bank has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Bank could be required to repay.

(ii) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

(d) Reverse repurchase agreements

Securities purchased under agreements to resell at a specified future date are not recognised in the statement of financial position. The consideration paid, including accrued interest, is recorded in the statement of financial position reflecting the transaction’s economic substance as a loan by the Bank. The difference between the purchase and resale prices is recorded in the caption “Net interest income” and is accrued over the life of the agreement using the EIR.

(e) Determination of fair value

The fair value for financial instruments traded in active markets is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted cash flow method, comparison to similar instruments for which market observable prices exist, options pricing models, credit models and other relevant valuation models.

Certain financial instruments are recorded at fair value using valuation techniques in which current market transactions or observable market data are not available. Their fair value is determined using a valuation model that has been tested against prices or inputs to actual market transactions and using the Bank’s best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for bid and ask prices to reflect costs to close out positions, counterparty credit and liquidity spread and limitations in the models. Also, profit or loss calculated when such financial instruments are first recorded (“Day 1” profit or loss) is deferred and recognised only when the inputs become observable or on derecognition of the instrument

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 32.


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(f) Impairment of financial assets

The Bank assesses at each statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, the probability that they will enter bankruptcy or other financial reorganisation, default or delinquency in interest or principal payments and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

(i) Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Bank first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of “Interest and similar income”. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Bank. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the income statement.

The present value of the estimated future cash flows is discounted at the financial asset’s original EIR. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Bank’s internal credit grading assessment.


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Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group.

Historical loss experience, if any, is adjusted on the basis of current observable data to reflect the effects of current conditions on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

As of 31 March 2014 and 2013, no impairment losses on financial assets carried at amortised cost have been recorded by the Bank.

(ii) Available-for-sale financial instruments

For available-for-sale financial instruments, the Bank assess at each statement of financial position date whether there is objective evidence that an investment is impaired.

In the case of debt instruments classified as available-for-sale, the Bank assesses individually whether there is objective evidence of impairment based on the same criteria as financial assets carried at amortised cost.

However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of “Interest and similar income”. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to credit event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement.

In the case of equity investments classified as available-for-sale, objective evidence would also include a “significant” or “prolonged” decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement – is reclassified from equity to income statement as a reclassification adjustment. Impairment losses on equity investments are not reversed through the income statement; increases in the fair value after impairment are recognised directly in equity.

(g) Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, therefore, the related assets and liabilities are presented gross in the statement of financial position.


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(h) Recognition of income and expenses

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Interest and similar income and expenses

For all financial instruments measured at amortised cost and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the EIR, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Bank revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as “Other operating income”.

Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

(ii) Fee and commission income

The Bank earns fee and commission income from a diverse range of services it provides to its customers. Fee income has to be divided into the following two categories:

Fee income earned from services that are provided over a certain period of time

Fees earned for the provision of services over a period of time are accrued over that period. These fees include commission income and asset management, custody and other management and advisory fees.

Loan commitment fees for loans that are likely to be drawn down and other credit related fees, if any, are deferred (together with any incremental costs) and recognised as an adjustment to the EIR on the loan. When it is unlikely that a loan be drawn down, the loan commitment fees are recognised over the commitment period on a straight line basis.

Fee income from providing transaction services

Fees arising from negotiating or participating in the negotiation 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 businesses, if any, are recognised on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognised after fulfilling the corresponding criteria.

(iii) Dividend income

Dividend income is recognised when the Bank’s right to receive the payment is established.

(i) Cash and cash equivalents

Cash and cash equivalents as referred to in the statement of cash flows comprises cash on hand, non-restricted current accounts with central banks and amounts due from banks on demand or with an original maturity of three months or less.


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(j) Tangible assets

Tangible assets are stated at cost excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Changes in the expected useful life are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates.

Depreciation is calculated using the straight-line method to write down the cost of tangible assets to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows:

– Computer hardware: 3 to 5 years;

– Other fixtures and fittings, tools and equipment: 5 years.

Tangible assets are derecognised on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in the caption “Other operating income/expenses” in the income statement in the year the asset is derecognised.

(k) Intangible assets

The Bank’s intangible assets include the value of computer software and licences. An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Bank.

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.

Amortisation is calculated using the straight-line method to write down the cost of intangible assets to their residual values over their estimated useful lives as follows:

– Computer software and licences: 3 to 5 years.

(l) Impairment of non-financial assets

The carrying amounts of the Bank’s assets, except deferred income tax assets and financial assets, are reviewed at each statement of financial position date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the income statement. The recoverable amount of other assets is the greater of their net selling price 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 that reflects current market assessments of the time value of money and the risks specific to the asset.

As of 31 March 2014 and 2013, the Bank has not booked any impairment on non-financial assets.


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(m) Financial guarantees

In the ordinary course of business, the Bank gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognised in the financial statements (within “Other liabilities”) at fair value, being the premium received. Subsequent to initial recognition, the Bank’s liability under each guarantee is measured at the higher of the amount initially recognised less, when appropriate, cumulative amortisation recognised in the income statement, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee.

Any increase in the liability relating to financial guarantees is recorded in the income statement. The premium received is recognised in the income statement in the caption “Net fee and commission income” on a straight line basis over the life of the guarantee.

(n) Pension benefits

The Bank operates a defined contribution pension plan. The contribution payable to a defined contribution plan is in proportion to the annual gross salary of the concerned employees and is recorded as an expense under “Administrative expenses”. Unpaid contributions are recorded as a liability.

(o) Provisions

Provisions are recognised when the Bank has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the income statement net of any reimbursement.

(p) Taxes

Income tax on the income statement for the year comprises current and deferred taxes. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

(I) Current income tax

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

(II) Deferred income tax

Deferred income tax is provided using the liability method, on temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

– Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and


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– In respect of taxable temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:

– Where the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

– In respect of deductible temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each statement of financial position date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date.

Income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.


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NOTE 3 - SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Bank makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Going concern

The Bank’s Board of Directors has made an assessment of the Bank’s ability to continue as a going concern and is satisfied that the Bank has the resources to continue in business for the foreseeable future. Furthermore, the Board of Directors is not aware of any material uncertainties that may cast significant doubt upon the Bank’s ability to continue as a going concern. Therefore, the annual accounts continue to be prepared on the going concern basis.

(b) Estimation of fair values of financial instruments

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments.

(i) Securities

The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Bank establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

(ii) Derivatives

The fair value of derivatives is calculated, for listed instruments, on the basis of market prices ruling at the end of reporting period. When market prices are not available and/or reliable, valuation methods and models are used based on market-derived data (e.g. valuation of listed instruments with similar characteristics, discounted cash flow analysis, option price calculation methods, or valuation used in comparable transactions).

When discounted cash flow techniques are used, estimated future cash flows are based on Board of Directors’ best estimates and the discount rate is a market related rate for a similar instrument at the statement of financial position date. Where other pricing models are used, inputs are based on market related data at the statement of financial position date.

(iii) Interest-bearing loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows.

Where quoted market prices or broker/dealer quotations are not available, prices for similar instruments or valuation pricing models are considered in the determination of fair value. Valuation pricing models consider contractual terms, position size, underlying asset prices, interest rates, dividend rates, time value, volatility and other statistical measurements for the relevant instruments or for instruments with similar characteristics. These models also incorporate adjustments relating to market liquidity adjustments. These adjustments are fundamental components of the fair value calculation process. The valuation technique used maximises the use of market inputs and minimises the use of entity-specific inputs which are unobservable in the market.

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Valuation pricing models and their underlying assumptions impact the amount and timing of unrealised gains and losses recognised, and the use of different valuation pricing models or underlying assumptions could produce different financial results. Any changes in the fixed income, equity, and foreign exchange and commodity markets can impact the Bank’s estimates of fair value in the future, potentially affecting trading gains and losses. The Bank’s estimates of fair value may involve greater subjectivity due to the lack of transparent market data available upon which to base assumptions underlying valuation pricing models.

(iv) Other financial assets/liabilities

For other financial assets/liabilities with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value.

(c) Impairment

Assets are subject to impairment tests at the end of reporting periods. In determining whether an impairment loss should be recognised, the Bank makes judgements to ascertain whether there is any objective evidence that a financial asset or group of financial assets is impaired. If there is evidence of a long-term reduction in the value of the asset concerned, this is recognised in income statement on the basis of market prices in the case of listed instruments, and of estimated future cash flows discounted according to the original effective interest rate in the case of unlisted instruments. If the reasons for which the loss was recorded subsequently cease to apply, the impairment is written back to profit and loss accounts.

(d) Deferred taxes

Provisions for income taxes have been calculated on the basis of current, advance and deferred obligations. Advance and deferred taxes are calculated on the basis of temporary differences - without time limits - between the carrying amount of an asset or liability and its tax base.

Deferred tax assets and liabilities have been stated using the assumptions that the tax base of the assets and liabilities are determined by reference to Luxembourg tax principles.

NOTE 3 - SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (continued)

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NOTE 4 - CASH AND CASH BALANCES WITH CENTRAL BANKS (in EUR)

31 March 2014 31 March 2013

Petty cash 4,357 3,338

Cash balances with central banks 517,042,527 336,320,942

Total 517,046,884 336,324,280

Credit institutions established in Luxembourg are required to hold minimum reserves with the Luxembourg Central Bank. These deposits represent 1% of some of their liabilities. Compliance with the reserve requirement is determined on the basis of the institutions’ average daily reserve holdings over the maintenance period, thus reserves of credit institutions can vary from one day to another following their treasury management, the money market or their expectations in interest rates.

Mandatory reserve deposits with the Luxembourg central Bank are not used in the Bank’s day to day operations.

NOTE 5 - DERIVATIVES HELD FOR TRADING – ASSETS (in EUR)

They are composed of the positive fair values of interest rate swaps contracts (“IRS”) and forward foreign exchange transactions.

The Bank has entered into interest rate swaps contracts mainly in the context of its medium term notes program (see Note 13). These transactions do not qualify for hedge accounting in accordance with IAS 39 provisions.

The Bank enters into forward foreign exchange contracts mainly in the context of clients’ transactions (these positions are then covered by a reverse transaction in the market) and, to a non-significant extent, for dealing purposes.

31 March 2014 31 March 2013

Listed Unlisted Listed Unlisted

Derivatives on interest rates --- 50,781 --- 85,081

Derivatives on foreign exchange rates --- 1,232,344,030 --- 743,178,621

Total --- 1,232,394,811 --- 743,263,702

As of 31 March 2014, the global notional amount of the IRS contracts, including IRS with negative fair values, amounts to 90,758,671 (2013: 54,692,467), which is equal to the nominal of the notes (see Note 13).

43

Interest rates Foreign currency Total - 31 March 2014Type of derivatives /

Notional Fair Notional Fair Notional FairUnderlying assets amount value amount value amount value

Listed derivative products

Financial derivatives --- --- --- --- --- ---

Other --- --- --- --- --- ---

--- --- --- --- --- ---

Unlisted derivative products

Financial derivatives 9,296,871 50,781 31,174,326,583 1,232,344,030 31,183,623,454 1,232,394,811

Other --- --- --- --- --- ---

9,296,871 50,781 31,174,326,583 1,232,344,030 31,183,623,454 1,232,394,811

Total 9,296,871 50,781 31,174,326,583 1,232,344,030 31,183,623,454 1,232,394,811

Interest rates Foreign currency Total - 31 March 2013Type of derivatives /

Notional Fair Notional Fair Notional FairUnderlying assets amount value amount value amount value

Listed derivative products

Financial derivatives --- --- --- --- --- ---

Other --- --- --- --- --- ---

--- --- --- --- --- ---

Unlisted derivative products

Financial derivatives 10,321,889 85,081 40,830,832,588 743,178,621 40,841,154,477 743,263,702

Other --- --- --- --- --- ---

10,321,889 85,081 40,830,832,588 743,178,621 40,841,154,477 743,263,702

Total 10,321,889 85,081 40,830,832,588 743,178,621 40,841,154,477 743,263,702

NOTE 5 - DERIVATIVES HELD FOR TRADING – ASSETS (in EUR) (continued)

44

NOTE 6 - AVAILABLE-FOR-SALE FINANCIAL INSTRUMENTS (in EUR)

Equity instruments

They are composed of:

31 March 2014 31 March 2013

Listed --- ---

Unlisted 6,510,760 5,008,129

Total 6,510,760 5,008,129

As of 31 March 2014 and 2013, unlisted equity instruments are mainly composed of shares in the following affiliated undertakings:

Name: Global Funds Management S.A.Registered office: 33, rue de Gasperich L-5826 HesperangeProportion of the capital held: 100%Amount of capital and reserves as of 31.03.2014: EUR5,602,259Profit for the year ended 31.03.2014: EUR1,196,177

Name: Global Funds Trust CompanyRegistered office: c/o Maples & Calder P.O. Box 309, Ugland House George Town, Grand Cayman Cayman IslandsProportion of the capital held: 100%Amount of capital and reserves as of 31.03.2014: EUR500,255Profit for the year ended 31.03.2014: EUR769,746

Available-for-sale equity instruments are also composed, for a not significant amount, of other unlisted securities.

Debt instruments

They are composed of:

31 March 2014 31 March 2013

Listed 448,727,388 386,522,752

Unlisted --- ---

Total 448,727,388 386,522,752

45

As of 31 March 2014 and 2013, listed debt instruments are composed of US, Japanese and European countries Government bonds with residual maturity less than 6 months.

31 March 2014 31 March 2013

France 86,356,920 117,206,932

USA --- 39,079,199

Japan 282,867,276 166,173,981

Germany 50,911,286 ---

Netherlands 7,319,489 ---

Finland --- 39,075,060

European Union 21,272,417 24,987,580

Total 448,727,388 386,522,752

Collateral posted

The Bank has pledged some financial assets in favour of Euroclear in order to benefit from a credit facility of USD 200 millions to cover daily settlement activity.

31 March 2014 31 March 2013

Fair value of pledged securities 141,436,821 166,173,981

NOTE 6 - AVAILABLE-FOR-SALE FINANCIAL INSTRUMENTS (in EUR) (continued)

46

NOTE 7 - LOANS AND ADVANCES (in EUR)

Total net carrying amounts 31 March 2014 31 March 2013

Unlisted loans and advances to:

- Credit institutions 2,993,264,774 2,456,739,930- Non-credit institutions 284,417,367 1,216,082,842- Corporate customers 1,816,328 581,152- Staff 704,626 719,662

Total 3,280,203,095 3,674,123,586

Impairment allowance for loans and advances

As of 31 March 2014 and 2013, the Bank has not booked any specific and/or collective impairment on its loans and advances.

Loans and advances to credit institutions - breakdown:

31 March 2014 31 March 2013

Current accounts 102,896,172 143,369,934

Term deposits 1,985,462,124 1,787,373,742

Other loans and advances:

Reverse repo transactions 904,906,478 525,996,254

Total 2,993,264,774 2,456,739,930

Loans and advances to non-credit institutions - breakdown:

31 March 2014 31 March 2013

Current accounts --- ---

Term deposits --- ---

Other loans and advances:

Reverse repo transactions 284,417,367 1,216,082,842

Total 284,417,367 1,216,082,842

47

Guarantees received as collateral

The reverse repo transactions are fully secured by government or corporate bonds.

Loans and advances to corporate customers - breakdown:

31 March 2014 31 March 2013

Current accounts 1,816,328 581,152

Total 1,816,328 581,152

Loans and advances to staff - breakdown:

31 March 2014 31 March 2013

Credit cards, personal loans and loans guaranteed by payrolls 704,626 719,662

Total 704,626 719,662

NOTE 8 - MOVEMENTS IN TANGIBLE AND INTANGIBLE ASSETS (in EUR)

The following table represents the movements which have been occurred on the tangible and intangible assets portfolio during the financial year:

Tangible and intangible Gross Additions Disposals/ Gross value Accumulated Net Netassets value at the Transfers at the end of depreciation carrying carrying beginning of the fi nancial amount amount the fi nancial year as of as of year 31 March 2014 31 March 2013

Tangible assets 10,657,174 1,989,009 12,646,183 (9,614,019) 3,032,164 2,157,530of which:Computer hardware 6,349,380 1,754,693 8,104,073 (5,424,528) 2,679,545 1,934,799Offi ce furniture, fi xtures, fi ttings and equipment 4,307,794 234,316 4,542,110 (4,189,491) 352,619 222,731

Intangible assets 19,585,409 6,719,160 26,304,569 (18,447,665) 7,856,904 2,317,063of which:Computer software and licences 19,585,409 6,719,160 26,304,569 (18,447,665) 7,856,904 2,317,063

NOTE 7 - LOANS AND ADVANCES (in EUR) (continued)

48

NOTE 9 - OTHER ASSETS (in EUR)

31 March 2014 31 March 2013

Accounts receivable for the account of third parties 36,642,439 76,933,709

Commissions receivable 22,642,053 15,500,224

Prepaid expenses and other items 3,955,753 3,889,532

Total 63,240,245 96,323,465

Accounts receivable for the account of third parties are “Transitory accounts” maintained by the Bank for operational purposes. These accounts are linked to the accounts payable for the account of third parties in the caption “Other liabilities” (Note 15).

Commissions receivable refer to fees receivable for the services (mainly Custodian, Administration and Paying Agency services) rendered by the Bank. A significant part of those commissions are usually claimed on a quarterly basis.

49

They are composed of the negative fair values of the IRS and the forward foreign exchange contracts.

The Bank has entered into the IRS in the context of the medium term notes program (see Note 13). These transactions do not qualify for hedge accounting in accordance with IAS 39 provisions.

The Bank enters into forward foreign exchange contracts mainly in the context of clients’ transactions (these positions are then covered by a reverse transaction in the market) and, to a non-significant extent, for dealing purposes.

31 March 2014 31 March 2013

Listed Unlisted Listed Unlisted

Derivatives on interest rates --- 9,272,942 --- 10,153,207

Derivatives on foreign exchange rates --- 1,230,965,212 --- 741,317,048

Total --- 1,240,238,154 --- 751,470,255

Type of derivatives/ Interest rates Foreign currency Total - 31 March 2014

Underlying assets Notional Fair Notional Fair Notional Fair amount value amount value amount value

Unlisted derivative products Financial derivatives 81,461,800 9,272,942 32,405,231,630 1,230,965,212 32,486,693,430 1,240,238,154Other --- --- --- --- --- ---

81,461,800 9,272,942 32,405,231,630 1,230,965,212 32,486,693,430 1,240,238,154

Total 81,461,800 9,272,942 32,405,231,630 1,230,965,212 32,486,693,430 1,240,238,154

Type of derivatives/ Interest rates Foreign currency Total - 31 March 2013

Underlying assets Notional Fair Notional Fair Notional Fair amount value amount value amount value

Unlisted derivative products Financial derivatives 44,370,578 10,153,207 41,556,194,259 741,317,048 41,600,564,837 751,470,255Other --- --- --- --- --- ---

44,370,578 10,153,207 41,556,194,259 741,317,048 41,600,564,837 751,470,255

Total 44,370,578 10,153,207 41,556,194,259 741,317,048 41,600,564,837 751,470,255

NOTE 10 - DERIVATIVES HELD FOR TRADING – LIABILITIES (in EUR)

50

NOTE 11 - AMOUNTS DUE TO CREDIT INSTITUTIONS (in EUR)

As of 31 March 2014 and 2013, they are composed of:

31 March 2014 31 March 2013

Current accounts and deposits on demand 190,063,279 744,090

Loans with agreed maturity --- 7,817,584

Total 190,063,279 8,561,674

NOTE 12 - AMOUNTS DUE TO CUSTOMERS (in EUR)

As of 31 March 2014 and 2013, they are composed of:

31 March 2014 31 March 2013

Current accounts 3,046,495,822 3,460,704,822

Term deposits 30,450,531 31,299,775

Total 3,076,946,353 3,492,004,597

NOTE 13 - FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (in EUR)

The Bank issued structured medium term notes with a nominal value of 90,758,671 (2013: 54,692,467) and with structured coupon rates, including embedded derivatives.

The Bank has decided to use the fair value option (see Note 2.2 (b) (v)) to measure these debt certificates under the medium term notes program due to their embedded derivatives. These financial instruments are not listed in an active market. Their fair value is calculated using a valuation technique.

In the context of the medium term notes program, the Bank is entered into interest rate swap transactions (see Notes 5 and 10).

51

NOTE 14 - TAX EXPENSES, ASSETS AND LIABILITIES (in EUR)

The components of income tax expenses, tax assets and tax liabilities for the years ended 31 March 2014 and 2013 are:

31 March 2014 31 March 2013

Current tax assets --- ---

Deferred tax assets - due to temporary deductible differences 2,773,495 3,024,975

Total tax assets 2,773,495 3,024,975

Current tax liabilities 15,934,946 13,892,796

Deferred tax liabilities - due to temporary taxable differences 3,296,364 3,578,310

Total tax liabilities 19,231,310 17,471,106

Income tax expenses 31 March 2014 31 March 2013

Current taxes 7,739,000 7,684,000

Changes in income tax rate for previous fi nancial years --- ---

Current taxes prior years --- ---

Reversal of tax provision prior years --- ---

Deferred tax assets (144,681) (144,095)Related to previous fi scal exercises (reversed to the income statement) (550,095) (702,008)Generated in the fi scal exercise 413,232 550,095Changes in income tax rate for previous fi nancial years (7,818) 7,818

Deferred tax liabilities 275 (1,456)Related to previous fi scal exercises (reversed to the income statement) 3,376 1,968Generated in the fi scal exercise (3,149) (3,376)Changes in income tax rate for previous fi nancial years 48 (48)

Total 7,594,594 7,538,449

52

Reconciliation of the total tax expenses

A reconciliation between the tax expenses and the accounting profit multiplied by Luxembourg tax rate for the years ended 31 March 2014 and 2013 is as follows:

31 March 2014 31 March 2013

Accounting profi t before tax 62,476,934 61,715,697

Tax expenses at income tax rate of 29.97% (2013: 29,97%) 18,724,337 18,496,194

+/- adjustments linked to: income not subject to tax (31,798) ---non-deductible expenses 21,156 927

Other (11,119,101) (10,958,672)

Income tax expenses 7,594,594 7,538,449

NOTE 15 - OTHER LIABILITIES (in EUR)

31 March 2014 31 March 2013

Accounts payable for the account of third parties 36,642,439 76,933,709

Salary related contributions 2,488,820 2,327,950

Deferred revenues 3,926,364 4,079,353

Other 4,538,072 3,907,339

Total 47,595,695 87,248,351

Deferred revenues include payments received by the Bank for its agency activities within its own medium term notes program and within other debt securities programs carried out by other companies of the Nomura Group for which the Bank delivers agency services (Calculation Agent, Paying Agent and Settlement Agent).

NOTE 16 - ISSUED CAPITAL

As of 31 March 2014 and 2013, the Bank’s authorised, subscribed and paid-up capital amounts to EUR28,000,000, represented by 2,800 ordinary shares with a nominal value of EUR10,000 each.

NOTE 14 - TAX EXPENSES, ASSETS AND LIABILITIES (in EUR) (continued)

53

NOTE 17 - RESERVES (INCLUDING RETAINED EARNINGS) (in EUR)

Under Luxembourg law, the Bank must appropriate to a legal reserve an amount equivalent to at least 5% of the annual net profit until such reserve is equal to 10% of the share capital. This appropriation is made in the following year. Distribution of the legal reserve is restricted.

The Bank transferred 7,100,000 to a net worth tax reserve for the tax year 2013 (2012: 5,800,000). Luxembourg tax legislation provides for a reduction in the net worth tax equal to its global amount on the condition that a special reserve is established in an amount equal to 5 times the net worth tax charge for the current year, and maintained for 5 years.

Allocation of results as of 31 March 2013:

Profi t of the year 54,177,248

Transfer to special reserve for 2013 7,100,000

Release from special reserve for 2007 (2,700,000)

Allocation to retained earnings 49,777,248

NOTE 18 - ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCY

As of 31 March 2014, the aggregate amount of the Bank’s assets denominated in currencies other than EUR, translated into EUR, amounts to EUR4,218,040,266 (2013: EUR4,105,830,778).

As of 31 March 2014, the aggregate amount of the Bank’s liabilities denominated in currencies other than EUR, translated into EUR, amounts to EUR4,215,461,691 (2013: EUR4,100,164,293).

NOTE 19 - INTEREST AND SIMILAR INCOME (in EUR)

31 March 2014 31 March 2013

Loans and advances to central banks 452,949 676,056

Loans and advances to credit institutions 9,392,603 19,251,277

Loans and advances to customers 67,166 32,452

Derivatives held for trading 7,573,347 3,787,584

Available-for-sale fi nancial assets 521,506 470,909

Total 18,007,571 24,218,278

54

NOTE 20 - INTEREST EXPENSES AND SIMILAR CHARGES (in EUR)

31 March 2014 31 March 2013

Amounts due to central banks 2,212,242 4,150,821

Debt certifi cates designated at fair value through profi t or loss 7,477,784 3,749,063

Amounts due to credit institutions 112,588 98,841

Amounts due to customers 3,281,297 9,848,958

Total 13,083,911 17,847,683

NOTE 21 - DIVIDEND INCOME

As of 31 March 2014 and 2013, the dividend income relates to the available-for-sale financial instruments.

NOTE 22 - NET FEE AND COMMISSION INCOME (in EUR)

31 March 2014 31 March 2013

Administration fees 46,398,978 48,821,063

Custody fees 19,774,733 22,463,373

Other fees 11,513,522 2,582,689

Total fee and commission income 77,687,233 73,867,125

Total fee and commission expenses (339,935) (346,340)

Net fee and commission income 77,347,298 73,520,785

NOTE 23 - NET REALISED GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES NOT DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

As of 31 March 2014 and 31 March 2013, there is no net realised gains (losses) recognised in this caption.

NOTE 24 - NET (UN)REALISED GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

As of 31 March 2014 and 2013, this caption includes the realised and unrealised gains and losses on derivative financial instruments.

55

NOTE 25 - FOREIGN EXCHANGE DIFFERENCES (in EUR)

31 March 2014 31 March 2013

Spot exchange on derivatives and other fi nancial instruments

Gains 100,380,488 136,590,878

Losses (100,535,623) (136,592,354)

Total (155,135) (1,476)

NOTE 26 - ADMINISTRATIVE EXPENSES (in EUR)

31 March 2014 31 March 2013

Wages and salaries - Wages and salaries 27,608,761 25,607,451- Social contributions 2,895,178 2,670,90- Other expenses 1,318,747 1,226,854- Defi ned contribution plan 537,044 622,587- Expenses for seconded personnel 5,602 20,558

Total wages and salaries 32,365,332 30,148,350

Other administrative expenses - Advisory and audit fees 1,178,093 750,288- Legal fees 111,358 67,315- Maintenance, repairs and refurbishment 26,045 12,787- Rents and leases 2,684,748 2,378,149- Service providers 175,738 174,999

- Couriers 36,871 40,276- Telephone and web services 138,867 134,723

- Agency and travel expenses 240,431 248,212- Membership subscription 330,147 221,942- IT costs 3,482,359 5,802,68- Outsourcing services 4,061,101 3,816,795- Other 725,622 735,403

Total other expenses 13,015,642 14,208,577

Total administrative expenses 45,380,974 44,356,927

56

NOTE 27 - DEPRECIATION, AMORTISATION AND IMPAIRMENT (in EUR)

As of 31 March 2014 and 2013, depreciation, amortisation and impairment are as follows:

Amortisation Impairment Amounts recoveries 31 March 2014

Tangible assets 1,622,666 --- --- 1,622,666

Intangible assets 671,028 --- --- 671,028

AFS fi nancial instruments --- --- --- ---

Loans and receivables --- --- --- ---

Total 2,293,694 --- --- 2,293,694

Amortisation Impairment Amounts recoveries 31 March 2013

Tangible assets 1,031,474 --- --- 1,031,474

Intangible assets 2,244,613 --- --- 2,244,613

AFS fi nancial instruments --- --- --- ---

Loans and receivables --- --- --- ---

Total 3,276,087 --- --- 3,276,087

57

NOTE 28 - GUARANTEES, CONTINGENT LIABILITIES AND COMMITMENTS (in EUR)

The Bank’s guarantees and commitments may be analysed as follows:

31 March 2014 31 March 2013

Guarantees given Financial guarantees 878,321 852,593Commercial guarantees ---

Irrevocable commitments to lend funds to Banks --- ---Customers --- ---

Total 878,321 852,593

As of 31 March 2014, the Bank’s contingent liabilities include rental guarantees for its offices for an amount of 725,201 (2013: 725,201).

As of 31 March 2014, the Bank’s contingent liabilities include guarantees granted by the Bank on behalf of its employees to third parties for an amount of 153,120 (2013: 127,392).

The Bank has also entered into certain other commitments which are not disclosed in the statement of financial position but which are significant for the purposes of assessing its financial situation of the Bank. As of 31 March, details of such other commitments are as follows:

31 March 2014 31 March 2013

Commitments in respect of fi xed rental payments contracted for premises 16,678,572 18,768,487

There were no such commitments toward related parties as of 31 March 2014 and 2013.

Legal claims

Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Bank has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably estimated, the Bank makes adjustments to account for any adverse effects which the claims may have on its financial standing.

Association pour la Garantie des Dépôts, Luxembourg (AGDL)

The Bank is a member of the non-profit making organisation “Association pour la Garantie des Dépôts, Luxembourg” (AGDL) that was established on 25 September 1989.

The AGDL has as its sole objective the establishment of a mutual system for the guarantee of cash deposits for the benefit of customers of the member credit institutions of the Association and for claims arising from investment transactions in favour of investors with the credit institutions and investment firms which are members of the Association.

The guarantee of cash deposits and of claims arising from investment transactions in favour of clients, individuals and certain companies as defined by the regulations is limited to a maximum amount fixed at the equivalent value in all currencies of EUR100,000 per cash deposit and EUR20,000 per claim arising out of investment transactions.

If the guarantee is called, the annual payment to be made by each member is limited to 5% of the Shareholders’ equity.

58

NOTE 29 - STAFF

As of 31 March 2014 and 2013, the average number of Bank’s staff is as follows:

31 March 2014 31 March 2013

Management – Senior 3 8

Management – Middle 47 41

Other staff 295 271

Total 345 320

As of 31 March 2014 and 2013, the Bank has granted advances and credits to members of its managerial bodies and has entered into guarantees on their behalf as follows (in EUR):

31 March 2014 31 March 2013

Loans and advances Managerial bodies --- 8,730

Guarantees Managerial bodies 10,650 39,375

10,650 48,105

NOTE 30 - AUDIT FEES (in EUR)

As of 31 March 2014 and 2013, the audit fees are split as follows:

31 March 2014 31 March 2013

Audit fees 255,658 260,738

Audit related fees --- ---

Other fees 124,540 ---

Total 380,198 260,738

59

NOTE 31 - RISK MANAGEMENT (in EUR)

In the Note 31, the concept of “hedging” is to be understood from an economic point of view and not from an IFRS point of view,

1. Four Lines of Defence Model

The Bank has adopted the “Four Lines of Defence” model as the outline for risk governance, comprising the following elements:

1. First Line of Defence: the business owns and manages its risks in accordance with agreed risk policies, appetite and controls, at the operational level. It is composed of the Bank’s main fund and custody activities including Internal Control Department.

2. Second Line of Defence concerns those units responsible for risk oversight and risk guidance in the Bank as well as they are responsible for defining risk policies and risk processes and controls. For instance: Risk Management function, Compliance, Legal and Finance, but also Health and Safety1, Information Security and Human Resources.

3. Third Line of Defence is independent assurance to the Board of Directors and Senior Management of the effectiveness of risk management processes. The assurance is the responsibility of the internal audit.

4. Fourth Line of Defence is composed of the Board of Directors, which has the ultimate responsibility of the risk management processes.

2. Embedding risk governance across the Bank

Board of Directors

The Board of Directors has the ultimate responsibility for setting up the Bank’s appetite for risks and the tolerance limits. In case that the risk appetite is significantly breached, the Board of Directors shall require corrective measures, which may need to be reported to the regulator as per regulatory requirements.

The Board of Directors shall globally define strategies and supervise the risk management and capital adequacy. The Board of Directors also ensures that Management establishes a framework for assessing the various risks, develops a system to relate risk to the Bank’s capital level and establishes a method for monitoring compliance with internal policies. The Board of Directors shall promote the risk culture across the Bank.

Executive Committee (“ExCom”)

The ExCom has the responsibility to manage the Bank’s day-to-day activities. Regarding risk management, the ExCom has to:

1. Implement the Risk Appetite;

2. Adopt and support Risk Management policies and procedures, including controls;

3. Set guidelines for the Risk Management framework;

4. Promote the risk culture across the Bank;

5. Define and review the risk strategy of the Bank.

1 Administrative Support Department is in charge of Health and Safety.

60

Risk Management Committee

Risk Management Committee is a standing committee of the Executive Committee. The purpose of this Committee is to assist the ExCom in fulfilling its responsibility with respect to:

1. Oversight of the Bank’s Risk Management framework, including the significant policies, procedures and practices using in managing the Bank’s risks;

2. Review the adequacy of the Bank’s capital, both economic and regulatory;

3. Review certain risk limits and regular risk reporting and make recommendations to the ExCom when appropriate.

The Risk Management Committee meets on a monthly basis and it is well represented by ExCom members as well as Senior Management of the business units.

Other Committees or Groups

The following Committees meet also on a regular basis to complement the risk governance of the Bank:

1. Information Security Committee is a Committee meeting on a quarterly basis with focus on discussion of Information Security topics including Information Security risks and action plans to mitigate Information Security risks. It is discussed about priorities aiming at enhancing the global security level of the Bank. It reviews and follows-up Information Security incidents and audit points, and follows ISO 27002 leading market methodologies in Information Security;

2. Business Continuity Committee is a Committee meeting on a quarterly basis with focus on business resilience topics, including discussion on risks and mitigating action plans as well as ad-hoc risk assessments and their impacts on the Bank;

3. Monthly Interest Rate Review Meeting, whose purpose is to review and approve acceptable interest rate margin rates for the next month. Interest Rate Risk is monitored by the Risk Management Committee;

4. Pricing Advisory Group, whose purpose is to monitor securities pricing issues and make recommendations to the Management Company and Trustee;

5. Regulatory Steering Committee ascertains that NBL and, to some extents, its affiliated companies, are fully and permanently compliant with laws and regulations applicable to them. The Committee ensures that laws and regulations applicable to NBL and its subsidiaries, and under certain circumstances to its clients, are adequately identified and anticipated. The Committee analyses and categorises laws and regulations based on their impacts on the business model, operations and controls. The Committee thoroughly follows-up on the implementation of any regulatory action plan deemed as appropriate to address the regulatory challenges and ensure compliance of the Bank in a consistent way basis over time. The Committee maintains an appropriate level of regulatory awareness at NBL through communication and trainings. The Committee also ensures that relevant regulatory instruments applicable to NBL’s clients are discussed with them and that opportunities to generate revenues through dedicated services have been identified;

6. Due Diligence Steering Committee is dedicated to the process of Due Diligence on sub-custodians and is mainly responsible for taking decisions concerning the necessity of establishing a new relationship with a new local sub-custodian and / or to terminate an existing one;

7. New Product Approval Committee, whose purpose is to formally approve new fund projects or any other banking related transactions which are in the scope of the Bank’s usual fund and custody business.

NOTE 31 - RISK MANAGEMENT (in EUR) (continued)

61

Risk Management Department (“RMD”)

Risk Management department is structured in 2 teams:

1. Financial Risk team, covering market risk, credit risk, liquidity risk and other financial risks;

2. Operational Risk team, covering operational risk events, Risk Control Self Assessment (“RCSA”), Key Risk Indicators (“KRI”) and Scenario analysis.

(a) Market Risk: qualitative information

Market risk is the risk of any impact on the Bank’s financial condition due to adverse market movements caused by market variables including, but not limited to, interest rates, foreign exchange rates, equity prices, credit spreads and ratings. Exposure to this type of risk primarily results from trading activities.

The Bank has limited dealing activities on its own account, exclusively related to foreign exchange and interest rate products.

The size of this activity is expected to remain limited and the related exposure to market risk is considered as non-material by the Bank.

The Bank is therefore subject to limited equity risk but not subject to commodity risk or basis risk. The economic value of the Bank could however be impacted by adverse movement in interest rates and/or foreign exchange rates.

(i) Interest Rate Risk

Interest rate risk is the potential adverse change in the economic value of a financial instrument or portfolio due to fluctuating interest rates.

The Market Risk Management Policy dictates the Bank not to have any material mismatch of assets and liabilities in terms of maturities.

The analysis of the balance sheet split by time bucket reveals that the Bank is mainly exposed to interest rate risk for periods less than 1 year.

The long term debt schedule, corresponding to the notes issued within the MTN program, is perfectly offset by the notional amount of the IRS reported on the assets and liabilities side.

Despite this observation, according to the CSSF circular 08/338, a calculation is performed twice a year to assess the impact on NBL balance sheet of a +/-200 bps movement in interest rates.

The results indicate that the impact of a 200 bps increase of the interest rates on the economic value of the Bank as of 31 December 2013 (last available calculation) would be -1,416,297 (31 December 2012: 737,862).

On the other hand, the impact of a decrease of 200 bps would be 479,329(31 December 2012: 157,042).

This stress test confirmed the non-material nature of interest rate risk to the Bank.

(ii) Foreign Exchange Risk

Exchange rates risk is the risk of loss arising from future movements in the exchange rates applicable to the currency positions maintained by the Bank. Similarly to all market risks, foreign exchange risk arises from both open and imperfectly

offset or hedged positions.


62

– Foreign Exchange Risks on Own Positions

As agent acting upon the orders of its clients, the Bank deals spot and forward transactions in JPY, USD, and other currencies. The highest transaction volumes are being performed on USD and JPY currencies.

The Treasury Department has to cover each customer’s position, trading or hedging intra-day. As such, no significant speculative transactions are carried out by the Bank for its own account.

The Banks has adopted an Open Currency Position Policy which defines the following open currency position limits:

– Open currency position less than EUR150,000 equivalent per actively traded currency (with the exception of USD and JPY less than EUR500,000 equivalent each);

– EUR50,000 equivalent per other currency;

– Aggregate open position of EUR2,500,000 equivalent.

Risk Management Department also performs an independent check against Treasury Department figures and reports to ExCom on a daily basis.

The stress testing scenarios resulted in the worst case to a potential loss of EUR106,553, which is deemed not material.

– Foreign Exchange Risks on the Custody and Administration Fees

Another source of foreign exchange risk relates to the mismatch between expenses (mainly in EUR) and revenues as the invoices to funds clients are mainly denominated in non-EUR currencies (in USD and JPY).

Treasury Department has set up a procedure for converting estimated cash inflows resulting from its main source of revenues: the fund custody and administration fees.

The Treasury Department monitors the trends of exchange rate curves and may suggest converting measures to cope with the risk attached to the negative variation of exchange rates.

This process allows the Bank to reduce its exposure on foreign exchange risk.

(b) Credit risk

Credit risk is the risk that unexpected losses may arise as a result of the Bank’s borrowers or market counterparties failing to meet their obligations to pay. While loans are the largest and most obvious source of credit risk, other sources of credit risk exist throughout the activities of a bank, including in the banking book and in the trading book, and both on and off the balance sheet (derivatives transactions, acceptances, interbank transactions, foreign exchange transactions, bonds, etc.).

(i) Counterparty Credit Risk

Counterparty credit risk is the risk that counterparty will default before settlement in a particular transaction. Counterparty credit risk is the risk that an organisation does not pay out on a credit derivative, credit default swap, credit insurance contract, or other trade or transaction when it is supposed to.

Because of the nature of its activity, the Bank enters into a reduced set of transactions for its own account.

The credit risk management and monitoring is performed at two levels:

– Firstly, at local level, by the Risk Management Department;

– Secondly, at the level of the Group, by Nomura International Plc (“NIP”), which is the London-based securities broker/dealer operating company.

The applicable framework is defined in the Credit Risk Management Policy.


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– On-Balance Sheet Transactions

The counterparty risk for on-balance sheet activities mainly concerns deposits that are done on a daily basis by Treasury Department. The major part of this liquidity comes from the cash held on the funds cash accounts under the Bank’s custody. These cash positions are then placed on the market by the Bank in terms of deposits with Nomura Bank International Plc (“NBI”) and external counterparties to guarantee a sufficient diversification, and reverse repos with NIP, subject to best market/competitive conditions application.

Every day, the Treasury Department in charge of cash management monitors its credit limits on the peak exposure of outstanding trades and the maximum tenor, which is a time limit of the exposure, as well as the regulatory large exposures limits that reduce the exposures to a maximum of EUR150 million by counterparty.

These exposures are compared to the credit limits to define which initial or additional positions may be taken with a specific counterparty.

At the end of the day, Risk Management Department performs relevant exposure control and monitoring. Moreover, a credit risk report is sent by RMD on a daily basis to the ExCom.

Every morning, an extraction of all deposits as of last business day is provided to the Investment Evaluation & Credit Department of NIP and the same day, the Treasury Department, the Risk Management Department and the ExCom receive from NIP a detailed report containing all the limits (exposure and tenor) and the actual positions by counterparty.

On top of the Bank’s internal applicable controls, NIP also performs the credit exposure monitoring of the nostro accounts the Bank holds with its counterparties and for the overdrafts of the funds accounts in the Bank’s books.

– Off-Balance Sheet Transactions

Foreign exchange transactions

The net currency position of the Bank for credit risk exposure on foreign exchange transactions made for its own account remains quite low.

The Bank enters into foreign exchange transactions with the investment funds under administration (in this case,the Bank is the counterparty of the funds) and then an opposite foreign exchange is performed with market counterparties (mainly NIP).

Besides, the Open Currency Position Policy prevents Treasury Department to take an aggregate foreign exchange exposure exceeding EUR2,500,000 equivalent for its own account.

Interest Rate Swaps (“IRS”)

The Bank’s exposure to IRS comes from the Medium-Term Notes (“MTN”) program where the Bank is issuing its own Notes.

In that respect, the Bank, as an issuer, is not exposed to credit risk but may be exposed to interest rate risk.

In order to cover this risk, the Bank enters into Interest Rate Swaps with Nomura Securities Company (“NSC”) every time a Note is issued.

This systematic IRS transaction covers the interest rate risk but creates an exposure to a counterparty risk with NSC.

As of 31 March 2014, the exposure to NSC represented 90,758,671 (nominal amount), of which 19,808,115 less than one year (2013: exposure to NSC: nominal of 54,692,467, of which 21,539,464 less than one year).


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– Netting agreement

As a credit risk mitigation technique, the Bank has entered into netting agreements with most of its counterparties.

These contractual netting agreements create a single legal obligation, covering all included transactions, such that, in the event of a counterparty’s failure to perform owing to default, bankruptcy, liquidation or any other similar circumstance, the credit institution would have a claim to receive or an obligation to pay only the net sum of the positive and negative mark-to-market values of included individual transactions.

These netting agreements have been subject to legal opinions and have been submitted to the CSSF for recognition as credit risk mitigation technique. So far, the Bank has signed netting agreements with NIP and with six counterparties being Cayman-based funds, covering foreign exchange transactions.

– Collateral Management Activities

The Bank is engaged in the following collateral management programmes:

Pledge of assets

Main credit risk exposure towards the investment funds comes from forward foreign exchange transactions. In order to reduce this exposure, the Bank has entered into pledge agreements with certain investment funds allowing taking financial collateral (cash or securities). The securities pledged to the Bank meet the eligibility criteria prescribed by the CSSF circular 06/273, as amended.

Pledge agreements are considered for investment funds having a size of USD 1.5 billion or more.

The exposure of existing investment funds is reviewed on a daily basis, to identify those without pledge agreement and for which the exposure reaches EUR20 million, to allow appropriate and timely set-up of a pledge agreement.

In case the exposure with one investment fund is going to exceed 25% of the Bank’s eligible own funds, the adequate amount of eligible collateral is transferred from the investment fund’s portfolio and pledged to the collateral account in order to keep the exposure below the 25% limit.

Margin calls under CSA

For the forward foreign exchange transactions concluded between the Bank and external counterparties, both counterparties to the transaction manage the economic potential loss or gain and require that collateral is allocated to cover the exposure, through a margining process.

The Bank has entered into ISDA/CSA agreements with external counterparties, which describe all the collateral requirements (eligibility, valuation, conditions) that must be followed to cover the mark-to-market exposure arising from these transactions.

In order to make sure that the margin calls are correctly handled, the Bank actively monitors the forward foreign exchange mark-to-market exposure and coverage on a daily basis. The conditions are negotiated by the Bank with the brokers, and are in line with the Group Credit Risk guidelines.


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Securities Lending

For the securities lending activity, the Bank acts as an agent to allow NIP, which is the exclusive borrower, to borrow securities from the portfolios of the investment funds that agree to participate as lenders.

All the securities lent to NIP are pledged by collateral (USD cash amount or G-10 government bonds) in order to cover the counterparty risk. This collateral must represent 105% of the market value of the lent securities.

As agent, the Bank has the responsibility to manage the collateral pledged to cover the counterparty risk. The high eligibility criteria ensure appropriate liquidity of the collateral and the 105% margin covers the potential losses and costs generated by the lent securities buy-in.

European Central Bank (“ECB”) Operations

The Bank is also engaged in the refinancing operation program with the European Central Bank (“ECB”), and which is operated through National Central Banks. The counterparty for the Bank is therefore the Banque Centrale du Luxembourg (“BCL”).

It enables Euro-zone banks to borrow cash amounts from the ECB against a pledge of collateral to guarantee the loan.

The liquidity obtained from BCL is then lent to NBI or NIP, in the form of repurchase agreements. In the opposite flow, the Bank receives securities from NIP as collateral to cover the exposure with NIP.

The table below shows the maximum exposure to credit risk for financial assets. The maximum exposure is shown before the effect of mitigation through the use of collateral agreements.

Maximum Maximum exposure exposure 31 March 2014 31 March 2013

Balances with central banks 517,042,527 336,320,942

Derivatives held for trading 1,232,394,811 743,263,702

Available-for-sale equity instruments 6,510,760 5,008,129

Available-for-sale debt instruments 448,727,388 386,522,752

Loans and advances 3,280,203,095 3,674,123,586

Total 5,484,878,581 5,145,239,111

Where financial instruments are recorded at fair value, the amounts shown above represent the current credit risk exposure but not the maximum risk exposure that could arise in the future as a result of change in values.

Maximum Maximum exposure exposure 31 March 2014 31 March 2013

Guarantees 878,321 852,593


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Credit quality per class of financial assets

The table below shows the credit quality by class of credit risk assets, based on the Bank’s credit rating system (outstanding carrying amounts at the reference date).

Neither past due nor impaired

Prime Quality High grade Standard Sub- Not rated Past due or Impairment Total 31 March 31 March grade standard 31 March individually 31 March 31 March 2014 2014 2014 31 March grade 2014 impaired 2014 2014 31 March 31 March 2014 2014

Balances withcentral banks 517,042,527 --- --- --- --- --- --- 517,042,527

Derivativesheld for trading --- 584,897,069 283,840,520 --- 363,657,222 --- --- 1,232,394,811

Available-for-saleequity instruments --- --- --- --- 6,510,760 --- --- 6,510,760

Available-for-saledebt instruments 354,131,693 43,684,409 50,911,286 --- --- --- --- 448,727,388

Loans and advances --- 2,197,939,144 1,079,742,998 --- 2,520,953 --- --- 3,280,203,095

Total 871,174,220 2,826,520,622 1,414,494,804 --- 372,688,935 --- --- 5,484,878,581

Neither past due nor impaired

Prime Quality High grade Standard Sub- Not rated Past due or Impairment Total 31 March 31 March grade standard 31 March individually 31 March 31 March 2013 2013 2013 31 March grade 2013 impaired 2013 2013 31 March 31 March 2013 2013

Balances with central banks 336,320,942 --- --- --- --- --- --- 336,320,942

Derivatives held for trading --- 248,627,956 486,707,878 --- 7,927,868 --- --- 743,263,702

Available-for-saleequity instruments --- --- --- --- 5,008,129 --- --- 5,008,129

Available-for-saledebt instruments 39,079,199 347,443,553 --- --- --- --- --- 386,522,752

Loans and advances --- 1,841,612,140 1,741,912,203 --- 90,599,243 --- --- 3,674,123,586

Total 375,400,141 2,437,683,649 2,228,620,081 --- 103,535,240 --- --- 5,145,239,111


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Note: Prime quality: AAA High grade: AA-A Standard grade: BBB-BB Sub-standard grade: B and less

Geographical allocation of risks

As of 31 March 2014 and 2013, the distribution by geographical area of the risks held in the Derivatives held for trading and Loans and advances before taking into account collateral held and other credit enhancements can be summarised as follows:

31 March 2014 31 March 2013

Australia 90,688 593,536Belgium 184,893,426 39,305,689Japan 42,697,541 6,818,700Canada 7,540,945 82,488Germany 329,733,933 523,196,925Denmark 137,475,240 117,390,887Spain 12,375 5,781Finland 10,639 15,755,606France 43,517,026 224,623,673United Kingdom 2,611,176,442 2,492,245,219Italy 9,316 15,011Luxembourg 373,362,297 197,123,520The Netherlands 140,152,999 81,599,135USA 133,742,379 256,696,392Cayman Islands 198,508,463 302,247,974Singapore 251,310,840 111,593,135Other 58,363,357 48,093,617

Total 4,512,597,906 4,417,387,288


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Sectorial allocation of risks

An industry sector analysis of the Bank’s Loans and advances, before and after taking into account collateral held or other credit enhancements, is as follows:

31 March 2014 31 March 2013

Gross exposure Net exposure Gross exposure Net exposure

Financial services 3,279,498,469 1,616,315,258 3,673,403,924 1,469,051,455

Other 704,626 704,626 719,662 719,662

Total 3,280,203,095 1,617,019,884 3,674,123,586 1,469,771,117

Net exposure consists of the gross exposure less the amount of the collateral received at the reference date.

Collateral received under pledge agreements

The Bank holds the following collateral from its clients (Funds) as per the pledge agreements in place. The collateral is intended to reduce the risk exposure arising from the forward foreign exchange transactions. None of this collateral has been sold nor repledged:

31 March 2014 31 March 2013

Fair value of cash collateral 82,044,684 145,653,687

Fair value of securities collateral 280,557,801 240,544,378

Concentration of risk

Concentration risk arises where the Bank becomes overly focused on one particular counterparty, business area, issuer or geographical region thereby meaning the Bank’s performance could be overly influenced by a small number of factors.

The transposition of CRD II Directives via the CSSF circular 10/475 as amended has affected the Large Exposures regime. The total risk exposure towards a single client or group of connected clients must not exceed 25% of the own funds of the Bank. In this context, the Bank has asked for and has been granted by CSSF in December 2010 a partial exemption for its intra-group transactions as follows:

– With NBI, the Bank is benefiting from a global exemption up to 1.5 billion;

– With NIP. the Bank is benefiting from an exemption on forward exchange derivative transactions up to 1.3 billion credit risk equivalent (since a Netting Agreement has been effectively put in place with NIP and recognised by the CSSF).

Intragroup exposure, in particular towards NIP, has been reduced through the use of short-term reverse repurchase transactions (secured loans).

Exposures with third-party financial institutions are limited to EUR150 million per counterparty or group of connected clients.

As the Bank is mainly involved with high rated financial institutions established in OECD countries with stable political and economic environment, the country risk can be considered as limited.


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Solvency ratio (or Capital ratio)

This ratio, as defined by the applicable regulation, defines the minimum amount of own funds that the Bank has to maintain in relation to the total risk-weighted assets and off-balance sheet items. The minimum level is 8%.

Until 31 December 2013, the solvency ratio was defined by the CSSF circular 06/273, as amended. Since 1 January 2014, this circular has been superseded by the EU Regulation 575/2013 which transposes Basel 3 framework at European level.

The Bank’s own funds are essentially composed of Tier 1 Capital (retained earnings).

As of 31 March 2014, the solvency ratio of the Bank was 43.86% (2013: 24.10%) under the calculation methodology of circular 06/273, as amended. The Bank is currently implementing the capital ratio methodology of EU Regulation 575/2013 where the remittance date has been postponed by the European Banking Authority to end of June 2014 (with reference data being as of March 2014).

Impairment

As of 31 March 2014 and 2013, neither specific, nor collective impairments have been recorded by the Bank.

(c) Liquidity risk

Liquidity for a bank is the ability to fund increases in assets and meet obligations as they come due, without incurring unacceptable losses, in both normal and stressed circumstances.

Liquidity risk is composed of Funding liquidity risk and of Market liquidity risk. Funding liquidity risk is the risk that the Bank will not be able to meet efficiently both expected and unexpected current and future cash flows and collateral needs without affecting either daily operations or the financial conditions of the Bank. Market liquidity risk is the risk that a Bank cannot easily offset or eliminate a position at the market price because of inadequate market depth or market disruption.

Because liquidity risk can be corollary to other risks, such as credit risk and market risk, the liquidity risk management framework has been designed to fit into the overall enterprise risk management framework.

(i) Liquidity Risk Profile

It is the Bank’s policy to have no material mismatch of assets and liabilities in terms of maturities.

The Bank does not have a trading book, and so does not hold significant securities for its own account.

The Bank is a liability-driven bank which does not rely on the interbank market to fund its business. Liquidity is placed with both external and intra-group financial counterparties and in both secured and unsecured form, mainly on an overnight basis. Therefore, NBL has a very limited exposure to funding-liquidity risk and it is not directly exposed to market-liquidity risk.

NBL’s principal source of funding is clients’ deposits, a portion of which is Nomura Group owned. The Bank’s liquidity pool is reflective of the clients’ liquidity: as such there is none or very limited mismatch of currency between assets and liabilities. Consequently, NBL is not relying on any USD funding and is therefore not exposed to the recommendation of the European Systemic Risk Board (‘ESRB’) on US dollar denominated funding of credit institutions (ESRB/2011/2).

NBL holds a portfolio of liquid assets which is used to offset outflows in the event of stress (Liquidity Buffer) and a portion which is used as collateral for the settlement cycle at International Central Securities Depository (‘ISCD’) as Euroclear, Clearstream, etc. Securities in the liquidity portfolio are held to maturity and consist in highly liquid government bonds.


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Regarding derivatives positions, the Bank has entered into:

– Interest rate swaps with Nomura Securities Co. Ltd (“NSC”) to hedge the MTN program;

– Foreign exchange (“FX”) forward contracts taken for the funds (undertakings for collective investment administered by the Bank): 1 leg with the funds, 1 leg with brokers, both legs offset each other after consideration of market spread and currency position rounding.

Given the hedging and back-to-back structure of the above mentioned derivative positions, these positions do not have a material impact on the Bank’s liquidity position.

NBL may be subject to liquidity risk as a consequence of other risks, as identified hereafter:

– Counterparty-Credit Risk:

For NBL, the failure of its counterparties could impair its cash flows and hence its ability to meet its commitments as they fall due. This risk is mitigated at two levels. On one hand, Treasury Department deals with selected counterparties within the limits that are set by the Group and, with particular reference to foreign exchange trades, Credit Support Annexes (“CSA”), which have been put in place. On the other hand, NBL has signed pledge agreements with the funds having significant FX exposure, allowing it to take collateral from those funds.

– Concentration Risk:

Concentrations of assets or liabilities can lead to liquidity problems. This risk is mitigated with the respect of credit limits which prevent unacceptable counterparty exposures. Furthermore, the Bank complies with Nomura Global Investment Guidelines setting forth concentration limits in terms of country and product exposures. Although the Bank concentrates a significant portion of its placings within the Group, it is done only in secured form, through the use of reverse repos.

– Operational Risk:

Significant problems can arise if the systems that process payment transactions or participants fail or delay transactions. Similarly, disruptions can be caused by operational problems at the level of critical participants or key third-party service providers. Cash Management activities are monitored by the Treasury and Back Office departments. These activities are governed by clearly defined processes and procedures, which are periodically reviewed.

(ii) Liquidity Risk Appetite

The Bank’s liquidity risk appetite is defined in line with forecasting cash available using the Bank’s Maximum Cumulative Outflow (“MCO”) model. NBL’s liquidity risk appetite is aligned with Nomura Holding Incorporated liquidity risk appetite.

The Bank has set up its liquidity risk appetite as follows:

2. Liquidity under Severe Stress: forecasting cash available under a severe market scenario using the Bank’s MCO model. Remaining positive at all times for at least 12 months and above the Minimum Regulatory Requirement set up by Basel III standards i.e. total inflows must be above 75% of the total outflows.

3. Liquidity under Acute Stress: forecasting cash available under both market- and Nomura event must remain positive at all times for at least 1 month and be above the Minimum Regulatory Requirement.

4. Liquidity Ratio B1.5 must be above the regulatory limit of 30%, with a tolerance zone of 30% - 50%. This ratio will be replaced by the Liquidity Coverage Ratio and the Net Stable Funding Ratio (Basel III standards).

5. No material mismatch between assets and liabilities in terms of maturities and currencies is tolerated.Materiality is defined as a difference large enough to generate interest or Foreign Exchange (FX) Risk.

6. Different Risk Tolerance Zones have been set up (green, amber, red) corresponding to the level of available cash.


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(iii) Liquidity Measurement and Stress Testing

The main Liquidity Risk Measuring and Monitoring tools for the Bank are:

1. Maximum Cumulative Outflow (‘MCO’): the purpose of the model is to determine the adequate size of NBL’s liquidity pool under normal and stressed circumstances in order to meet the Bank’s own liquidity risk appetite both as a standalone entity and as part of Nomura Group. The MCO model compares and matches cumulative inflows and outflows considering both on- and off-balance sheet liquidity risk drivers. NBL liquidity monitoring and stress testing comprise a normal scenarii and two stressed scenarios, applied cumulatively by degree of severity to a starting pool of available cash.

2. Liquidity Buffer: a pool of high liquid and unencumbered assets that can be monetised in certain amount of days whenever deemed necessary. For prudent reasons, NBL considers level 1 type of assets. NBL has purchased highly rated short-term government bonds.

3. Basel III liquidity monitoring tools: Risk Management is developing additional liquidity risk monitoring tools in line with Basel III regulation.

(iv) Liquidity Risk Controls and Mitigation

The MCO is run on a daily basis by Risk Management Department and discussed with Treasury Department.

Treasury Department is responsible for managing the liquidity buffer with “no trading intent” to ensure that the portfolio is classified within the banking book and not trading book. Risk Management Department monitors the value of the liquidity buffer and compares it to the minimum required level of liquidity on a daily basis.

Treasury Department provides ExCom members with a daily report which gives an overview of the liquidity situation of the Bank, including a high-level status of the intra-group concentration. The same information is also used to produce the “Monthly Global Treasury Report” for reporting to Global Treasury in London.

Treasury Department sends daily to Global Treasury London the Outstanding Deposits File and the Cash variation between T+1 and T+2. Those reports are consolidated by Global Treasury who sends a summary report back to the Bank and to all the concerned entities.

A daily liquidity conference call is held with Global Treasury London to discuss the liquidity situation at Group level and share business information having a liquidity impact.

Risk Management Department performs a daily analysis of concentrations in terms of counterparties and currencies.

Risk Management Department monitors daily the liquidity ratio and verifies that it is maintained at 50% at least.

A daily liquidity report is run daily and submitted to LCB. This report identifies the cash inflows and outflows expected in the upcoming five days.

Financial Accounting performs the Liquidity Coverage Ratio calculation and reporting to the CSSF and the BCL as required by the authorities (Basel III quantitative impact study until 31 December 2013, then EU Regulation 575/2013 applicable since 1 January 2014).

Lastly, in case of emergency situation of liquidity shortage, the Head of Treasury may invoke the Liquidity Task Force which will decide on the activation of the Contingency Funding Plan.

These procedures have been set-out to deal with serious adverse market conditions. They operate on an incremental escalation basis where the triggers and related actions depend on the defined severity level (green, red, amber).


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Duration analysis

The tables below present the analysis of financial liabilities of the Bank by contractual maturity dates (initial maturity):

31 March 2014 < 1month ≥1 month ≥3 months ≥6 months ≥1 year ≥2 years ≥5 years Total <3 months <6 months <1 year <2 years <5 years

Deposits from central banks --- --- --- --- --- 507,732,637 --- 507,732,637

Derivatives held for trading 268,761,856 954,314,641 7,752,698 177,368 656,466 7,984,502 590,623 1,240,238,154

Financial liabilities designated atfair value through profi t or loss --- 4,695,529 1,023,302 --- 10,766,947 55,456,230 9,594,502 81,536,510

Amounts due to credit institutions 190,063,279 --- --- --- --- --- --- 190,063,279

Amounts due to customers 3,069,208,289 --- --- 7,738,064 --- --- --- 3,076,946,353

Total fi nancial liabilities 3,528,033,424 959,010,170 8,776,000 7,915,432 11,423,413 571,173,369 10,185,125 5,096,516,933

31 March 2013 < 1month ≥1 month ≥3 months ≥6 months ≥1 year ≥2 years ≥5 years Total <3 months <6 months <1 year <2 years <5 years

Deposits from central banks --- --- --- --- --- 505,525,821 --- 505,525,821

Derivatives held for trading 183,413,076 527,082,185 30,529,017 336,793 1,074,706 8,404,607 629,871 751,470,255

Financial liabilities designated at fair value through profi t or loss --- 2,317,623 727,550 248,039 4,002,020 30,707,071 6,622,039 44,624,342

Amounts due to credit institutions 744,090 7,817,584 --- --- --- --- --- 8,561,674

Amounts due to customers 3,460,704,822 22,574,904 --- 8,724,871 --- --- --- 3,492,004,597

Total fi nancial liabilities 3,644,861,988 559,792,296 31,256,567 9,309,703 5,076,726 544,637,499 7,251,910 4,802,186,689


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Duration analysis

The tables below present the analysis of the guarantees of the Bank by contractual maturity dates (initial maturity):

31 March 2014 <1 month ≥1 month ≥3 months ≥6 months ≥1 year ≥2 years ≥5 years Undetermined Total <3 months <6 months <1 year <2 years <5 years

Guarantees --- --- --- --- 45,540 107,580 725,201 --- 878,321

31 March 2013 <1 month ≥1 month ≥3 months ≥6 months ≥1 year ≥2 years ≥5 years Undetermined Total <3 months <6 months <1 year <2 years <5 years

Guarantees --- --- --- --- 25,270 102,122 725,201 --- 852,593


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(d) Foreign exchange risk

Foreign exchange risk is the risk that the value of an asset or liability will fluctuate due to changes in foreign exchange rates.

As of 31 March 2014 and 2013, the assets and liabilities denominated in EUR, in JPY, in USD and in other currencies are as follows:

31 March 2014 EUR JPY USD Other Total

Cash and balances with central banks 517,045,035 --- 610 1,239 517,046,884

Derivatives held for trading 339,608 3,405,807 33,198,099 1,195,451,297 1,232,394,811

Available-for-sale equity instruments 6,510,760 --- --- --- 6,510,760

Available-for-sale debt instruments 49,992,000 282,867,276 115,868,112 --- 448,727,388

Loans and advances Loans and advances to credit institutions 739,265,743 573,475,373 1,537,046,558 143,477,100 2,993,264,774Loans and advances to customers 1,217,306 285,580,186 378 140,451 286,938,321

Tangible assets 3,032,164 --- --- --- 3,032,164

Intangible assets 7,856,904 --- --- --- 7,856,904

Deferred tax assets 2,773,495 --- --- --- 2,773,495

Other assets 15,712,465 5,212,305 40,656,004 1,659,471 63,240,245

Total assets 1,343,745,480 1,150,540,947 1,726,769,761 1,340,729,558 5,561,785,746


Deposits from central banks 507,732,637 --- --- --- 507,732,637

Derivatives held for trading 509,473 515,396,218 723,061,199 1,271,264 1,240,238,154

Debt certifi cates designated at fair valuethrough profi t or loss --- 79,268,077 2,268,433 --- 81,536,510

Financial liabilities measured at amortised cost Amounts due to credit institutions 68,908,538 --- 121,021,031 133,710 190,063,279Amounts due to customers 342,065,235 1,055,837,876 1,535,316,724 143,726,518 3,076,946,353

Tax liabilities 19,231,310 --- --- --- 19,231,310of which: deferred tax liabilities 3,296,364 --- --- --- 3,296,364

Other liabilities 9,435,054 4,166,363 33,261,911 732,367 47,595,695

Total liabilities 947,882,247 1,654,668,534 2,414,929,298 145,863,859 5,163,343,938


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Cash and balances with central banks 336,322,890 --- 364 1,026 336,324,280

Derivatives held for trading 353 164,400,162 430,920,251 147,942,936 743,263,702

Available-for-sale equity instruments 5,008,129 --- --- --- 5,008,129

Available-for-sale debt instruments 24,987,580 166,173,981 195,361,191 --- 386,522,752

Loans and advances Loans and advances to credit institutions 760,390,287 289,358,994 1,156,153,297 250,837,352 2,456,739,930Loans and advances to customers 1,292,171 590,725,207 625,357,640 8,638 1,217,383,656

Tangible assets 2,157,530 --- --- --- 2,157,530

Intangible assets 2,317,063 --- --- --- 2,317,063

Deferred tax assets 3,024,975 --- --- --- 3,024,975

Other assets 7,733,726 5,168,619 80,235,608 3,185,512 96,323,465

Total assets 1,143,234,704 1,215,826,963 2,488,028,351 401,975,464 5,249,065,482


Deposits from central banks 505,525,821 --- --- --- 505,525,821

Derivatives held for trading 2,423,401 74,217,134 137,050,820 537,778,900 751,470,255

Debt certifi cates designated at fair valuethrough profi t or loss --- 41,493,475 3,130,867 --- 44,624,342

Financial liabilities measured at amortised cost Amounts due to credit institutions 712,832 --- 7,817,584 31,258 8,561,674Amounts due to customers 271,210,073 996,682,789 1,972,633,316 251,478,419 3,492,004,597

Tax liabilities 17,471,106 --- --- --- 17,471,106of which: deferred tax liabilities 3,578,310 --- --- --- 3,578,310

Other liabilities 9,398,620 5,195,009 71,118,823 1,535,899 87,248,351

Total liabilities 806,741,853 1,117,588,407 2,191,751,410 790,824,476 4,906,906,146


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(e) Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments.

The tables below show the interest rate risk by maturity dates:

31 March 2014 <1 month ≥1 month ≥3 months ≥6 months ≥9 months ≥12 months or Total <3 months <6 months <9 months <12 months Undetermined

Cash and balances withcentral banks 517,046,884 --- --- --- --- --- 517,046,884

Derivatives held for trading (IRS) 9,760 3,692 11,407 --- 23,253 2,669 50,781

Available-for-sale debtinstruments 332,859,276 115,868,112 --- --- --- --- 448,727,388

Loans and advances Loans and advances tocredit institutions 2,340,278,482 137,253,015 --- 8,000,640 507,732,637 --- 2,993,264,774Loans and advances tocustomers 286,269,842 69,264 76,141 72,782 68,073 382,219 286,938,321

Total 3,476,464,244 253,194,083 87,548 8,073,422 507,823,963 384,888 4,246,028,148


Deposits from central banks --- --- --- --- 507,732,637 --- 507,732,637

Derivatives held for trading (IRS) 509,236 1,731,553 367,367 59,279 392,283 6,213,224 9,272,942

Debt certifi cates designated atfair value through profi t or loss 6,239,298 2,359,747 1,836,432 789,388 5,571,644 64,740,001 81,536,510

Financial liabilities measuredat amortised cost Amounts due to credit institutions 190,063,279 --- --- --- --- --- 190,063,279 Amounts due to customers 3,069,208,289 --- --- 7,738,064 --- --- 3,076,946,353

Total 3,266,020,102 4,091,300 2,203,799 8,586,731 513,696,564 70,953,225 3,865,551,721

Gap 210,444,142 249,102,783 (2,116,251) (513,309) (5,872,601) (70,568,337) 380,476,427


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Cash and balances withcentral banks 336,324,280 --- --- --- --- --- 336,324,280

Derivatives held for trading (IRS) 2,329 2,493 18,779 34,277 27,203 85,081

Available-for-sale debtinstruments 166,173,981 156,305,982 64,042,789 --- --- --- 386,522,752

Loans and advances Loans and advances tocredit institutions 1,750,353,834 126,849,336 74,010,939 --- --- 505,525,821 2,456,739,930Loans and advances tocustomers 1,216,701,276 74,177 79,628 75,611 69,492 383,472 1,217,383,656

Total 3,469,555,700 283,231,988 138,152,135 75,611 103,769 505,936,496 4,397,055,699


Deposits from central banks --- --- --- --- --- 505,525,821 505,525,821

Derivatives held for trading (IRS) 564,134 1,343,701 1,646,284 1,178,915 1,181,249 4,238,924 10,153,207

Debt certifi cates designated atfair value through profi t or loss 2,795,536 2,382,333 3,192,023 1,313,944 5,999,223 28,941,283 44,624,342

Financial liabilities measuredat amortised cost Amounts due to credit institutions 8,561,674 --- --- --- --- --- 8,561,674 Amounts due to customers 3,483,279,726 --- 8,724,871 --- --- --- 3,492,004,597

Total 3,495,201,070 3,726,034 13,563,178 2,492,859 7,180,472 538,706,028 4,060,869,641

Gap (25,645,370) 279,505,954 124,588,957 (2,417,248) (7,076,703) (32,769,532) 336,186,058


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(f) Operational risk

The Bank has an Operational Risk Management Policy in place which defines the applicable Operational Risk Management Framework (Risk Appetite, incidents reporting, Key Risk Indicators, Risk and Control Self-Assessment).

Operational Risk is defined as the risk of loss associated with inadequate or failed internal processes, people and systems or from external events. This is based on the standard Basel definition and excludes strategic risk (the risk of loss as a result of poor strategic business decisions), but includes the risk of breach of legal and regulatory requirements, and the risk of damage to the Bank’s reputation if caused by an Operational Risk event. System Risk is considered to be a component of Operational Risk as defined above.

Operational Risk is deemed to be a risk inherent to NBL activities, being one of its most material risks.

Segregation of duties, internal procedures, and technological systems in place mitigate the risk of losses due to errors or inadequacies.

Besides, NBL has business continuity management in place (including a Disaster Recovery Plan) to ensure ability to operate on an ongoing basis and limit losses in the event of severe business disruption.

(g) Profitability risk

Profitability risk is low due to the fact that management maintains sufficient control over its margins and costs in order to ensure continued profitability.


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The following table summarises the carrying amounts and fair values of financial assets and liabilities measured at amortised cost in the statement of financial position.

Carrying amount Fair value 31 March 2014 31 March 2013 31 March 2014 31 March 2013

Assets Balances with central banks 517,042,527 336,320,942 517,042,527 336,320,942Loans and advances 3,280,203,095 3,674,123,586 3,280,203,095 3,674,123,586

Liabilities Deposits from central banks 507,732,637 505,525,821 507,732,637 505,525,821Financial liabilities measured at amortised cost 3,267,009,632 3,500,566,271 3,267,009,632 3,500,566,271

The fair value of the financial assets and liabilities corresponds to the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

NOTE 32 - FAIR VALUE OF FINANCIAL INSTRUMENTS (in EUR)

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Fair value hierarchy

As of 31 March 2014 and 2013, the Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities. This level includes listed equity securities and debt instruments on exchanges (for example, London Stock Exchange, Frankfurt Stock Exchange, New York Stock Exchange) and exchanges traded derivatives like futures (for example, Nasdaq, S&P 500);

Level 2: techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly;

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

31 March 2014 Level 1 Level 2 Level 3 Total

Financial assets Balances with central banks --- 517,042,527 --- 517,042,527Derivatives held for trading --- 1,232,394,811 --- 1,232,394,811Available-for-sale equity instruments --- --- 6,510,760 6,510,760Available-for-sale debt instruments 448,727,388 --- --- 448,727,388Loans and advances --- 3,280,203,095 --- 3,280,203,095

Total fi nancial assets 448,727,388 5,029,640,433 6,510,760 5,484,878,581

Financial liabilities Deposits from central banks --- 507,732,637 --- 507,732,637Derivatives held for trading --- 1,240,238,154 --- 1,240,238,154Financial liabilities designated at fair value through profi t or loss --- --- 81,536,510 81,536,510Financial liabilities measured atamortised cost --- 3,267,009,632 --- 3,267,009,632

Total fi nancial liabilities --- 5,014,980,423 81,536,510 5,096,516,933

NOTE 32 - FAIR VALUE OF FINANCIAL INSTRUMENTS (in EUR) (continued)

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31 March 2013 Level 1 Level 2 Level 3 Total

Financial assets Balances with central banks --- 336,320,942 --- 336,320,942Derivatives held for trading --- 743,263,702 --- 743,263,702Available-for-sale equity instruments --- --- 5,008,129 5,008,129Available-for-sale debt instruments 386,522,752 --- --- 386,522,752Loans and advances --- 3,674,123,586 --- 3,674,123,586

Total fi nancial assets 386,522,752 4,753,708,230 5,008,129 5,145,239,111

Financial liabilities Deposits from central banks --- 505,525,821 --- 505,525,821Derivatives held for trading --- 751,470,255 --- 751,470,255Financial liabilities designated at fairvalue through profi t or loss --- --- 44,624,342 44,624,342Financial liabilities measured atamortised cost --- 3,500,566,271 --- 3,500,566,271

Total fi nancial liabilities --- 4,757,562,347 44,624,342 4,802,186,689

During the year ending 31 March 2014, in relation with financial instruments measured at fair value, there were no transfers between Level 1 and Level 2 categories, and no transfers into and out of Level 3 category.

During the year ending 31 March 2014, the movement in the Available-for-sale equity instruments classified in the Level 3 mainly results from the revaluation of the related assets at their fair value.

During the year ended 31 March 2014, the movement in the financial liabilities designated at fair value through profit or loss can be analysed as follows:

Financial liabilities designated at fair value through profi t or loss as of 31 March 2013 44,624,342

Total loss recognised in the income statement 845,965

Issues 261,529,263

Redemptions (217,760,151)

Transfers from/to Level 3 ---

Foreign exchange rates fl uctuations (7,702,909)

Financial liabilities designated at fair value through profi t or loss as of 31 March 2014 81,536,510

NOTE 32 - FAIR VALUE OF FINANCIAL INSTRUMENTS (in EUR) (continued)

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NOTE 33 - CAPITAL MANAGEMENT

The Bank maintains an actively managed capital base to cover risks inherent in the business.

The adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision (BIS rules/ratios) and adopted by the Commission de Surveillance du Secteur Financier supervising the Bank.

During the years ended 31 March 2014 and 2013, the Bank had complied in full with all its externally imposed capital requirements.

NOTE 34 - RETIREMENT BENEFIT PLAN

Since 2002, the Bank has entered into an agreement for payment of the retirement pension charges under the corporate defined contribution pension plan organised by its Parent company.

Only expatriate employees of the Bank are entitled to participate into this corporate pension plan.

NOTE 35 - RELATED PARTY DISCLOSURES (in EUR)

The Bank has a related party relationship with its Parent company, entities of its Group and with its directors and executive officers.

The amounts of assets, liabilities, income and expenses as of 31 March 2014 and 2013 concerning Group entities, subsidiaries and the Parent company are as follows:

Subsidiaries 31 March 2014 31 March 2013

Available-for-sale equity instruments 6,476,680 4,968,649

Total assets 6,476,680 4,968,649

Financial liabilities measured at amortised cost 16,156,093 15,269,324

Total liabilities 16,156,093 15,269,324

Income and expenses 31 March 2014 31 March 2013

Dividend income 11,704,500 11,148,000

Net fee and commission income 9,000,000 ---

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Group entities 31 March 2014 31 March 2013


Loans and advances 828,522,991 1,721,608,664

Total assets 1,346,193,009 1,958,419,849


Financial liabilities measured at amortised cost 360,662,128 404,925,119

Total liabilities 506,915,493 643,044,267

Income and expenses 31 March 2014 31 March 2013

Net interest income 10,170,474 9,516,480

Net fee and commission income 2,393,842 2,456,062

The Bank’s incurred in expenses with respect to the remuneration of the members of the administrative, management and supervisory bodies of the Bank are as follows:

31 March 2014 31 March 2013

Supervisory bodies 50,000 50,000

Managerial bodies 829,570 2,025,045

Corporate pensions 265,332 183,249

Total 1,144,902 2,258,294

For guarantees granted to Managerial bodies, please refer to Note 29.

NOTE 35 - RELATED PARTY DISCLOSURES (in EUR) (continued)

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NOTE 36 - EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE

The Bank is not aware of any adjusting or non-adjusting event that would have occurred between 31 March 2014 and the date when the present annual accounts were authorised for issue.

On 23 April 2014, the Bank signed a guarantee letter in favour of its subsidiary Global Funds Management S.A. (“GFM”), authorised by the CSSF as alternative investment fund manager for an unlimited duration whereby the Bank guarantees to pay to its subsidiary immediately upon its request an amount corresponding to a maximum of 50 percent of the additional amount of own funds required to be provided by GFM in accordance with Article 8 of the Law dated 12 July 2013 relating to the alternative investment funds managers implementing Directive 2011/61/EU of 8 June 2011, as such law may be amended, supplemented or rescinded from time to time (the “2013 Law”), but which shall in aggregate and at all times not exceed EUR2,500,000, so that GFM will have a sufficient additional amount of own funds to comply, as and when required, with the capital requirements applicable to GFM as per Article 8 (3) of the 2013 Law.

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Annual accounts,Directors’ report andIndependent auditor’s report

as of 31 March 2014


Bâtiment A – 33 rue de Gasperich

L-5826 Luxembourg

R.C.S. B 32921 – SWIFT NBLXLULL

Nomura - Couverture 2014.indd 1 15.12.2014 8:40:38 Uhr

Nomura Bank (Luxembourg) S.A.

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