ANNUAL REPORT 2014 HSH NORDBANK SECURITIES S.A.

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1 ANNUAL REPORT 2014 HSH NORDBANK SECURITIES S.A.

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3 ANNUAL REPORT Organisational structure 4 Management report 9 Report of the Board of Directors 12 Balance sheet 14 Statement of income 15 Notes to the accounts 30 Report of the Réviseur d Entreprises agréé

4 2 HSH NORDBANK SECURITIES S.A ORGANISATIONAL STRUCTURE COMPOSITION OF THE BOARD OF DIRECTORS AS AT MANAGEMENT Wolfgang Topp Chairman of the Board of Directors General Representative and Head of the Restructuring Unit of HSH Nordbank AG Hamburg-Kiel, Germany Dr David Mbonimana Head of Business Unit Strategy of HSH Nordbank AG Hamburg-Kiel, Germany Carsten Bäcker Spokesperson of Management Chief Financial Officer/Chief Risk Officer (CFO/CRO) Franz-Josef Glauben Managing Director Market and Credit Services Dr Dirk Lammerskötter (since ) Managing Director Business Unit Workout of HSH Nordbank AG Hamburg-Kiel, Germany MEMBERS OF THE BOARD OF DIRECTORS WHO RESIGNED IN 2014 Dr Torsten Arens (until ) Head of Management Board of HSH Nordbank AG Hamburg-Kiel, Germany Gunther Plohr (until ) Head Wind-Down-Assets, Restructuring Unit of HSH Nordbank AG Hamburg-Kiel, Germany

5 Organisational structure 3 BUSINESS DIVISIONS, SERVICE AND STAFF DEPARTMENTS OUR SHAREHOLDER Finance & Risk Controlling Jochen Hirschmann Human Resources Britta Marquardt Audit Georg Reiser Operations centre Karsten Lehn HSH Nordbank AG Hamburg and Kiel, Germany 100% Total assets (as at ) 112,689 million Capital and reserves (as at ) Including silent participations 4,422 million IT & Services Dr Jürgen Jostock Loan & Fund Services Franz-Josef Glauben Capital Markets 1) Jochen Klaproth Compliance, Legal & Assistance Magnus von Schéele (since ) 1) Via HSH Nordbank AG Luxembourg Branch

6 4 HSH NORDBANK SECURITIES S.A MANAGEMENT REPORT OF HSH NORDBANK SECURITIES S.A. FOR THE 2014 FINANCIAL YEAR 1. OVERALL PERFORMANCE Total assets and risk assets again declined in Total assets were down by approximately 16% on the previous year to 0.9 billion. The financial instruments still held by HSH Nordbank Securities S.A. primarily comprise intra-group money market transactions. At million, equity capital, excluding the result carried forward, was unchanged from the previous year as of the balance sheet date. The Bank s role remained focused on that of a service provider to the HSH Nordbank Group in Luxembourg in As a result of the continued restructuring process, the bank expects consequences for the headcount also in the next financial year, for which the Bank has established provisions. HSH Nordbank Securities S.A. was affected by the restructuring measures also through its subsidiaries and equity investments. In this context, the Bank sold its investment in Nobis Asset Management S.A. in December In addition, the subsidiary Sotis S.à r.l. was liquidated in June HSH Nordbank Securities S.A. generated a result of 13.4 million in the reporting year. 2. CHANGES IN THE EXECUTIVE BODIES As of 1 January 2014, the Board of Directors had the following composition: Wolfgang Topp (Chairman), Gunther Plohr, Dr Torsten Arens and Dr David Mbonimana. Dr Torsten Arens and Gunther Plohr resigned from the Board of Directors with effect from 5 February 2014 and 30 September 2014, respectively. Dr Dirk Lammerskötter was appointed member of the Bank s Board of Directors with effect from 1 October As of 31 December 2014, Wolfgang Topp (Chairman), Dr David Mbonimana and Dr Dirk Lammerskötter sat on the Board of Directors of HSH Nordbank Securities S.A. 3. NET ASSETS AND FINANCIAL POSITION As of 31 December 2014, the Bank reduced its total assets by 0.1 billion to 0.9 billion. The total business volume, which comprises the balance sheet items as well as contingent liabilities and loan commitments, amounted to 1.2 billion (previous year: 1.3 billion). At 0.8 billion, loans and advances to banks account for the majority (approx. 87%) of total assets and primarily consisted of loans and advances towards Group entities of HSH Nordbank AG, Hamburg-Kiel.

7 Management Report 5 Liquidity was managed in close coordination with the parent company. Funding is made at matching interest rates and currencies. The Bank complied at all times during the last financial year with the regulations applicable in Luxembourg regarding the liquidity of credit institutions. 4. NET EARNINGS The result of the financial year amounted to 13.4 million, compared to 13.8 million in the previous year. The Bank s net interest income amounted to 4.3 million (previous year: 4.1 million). The main components result from net interest income from money market transactions, primarily with entities of the HSH Nordbank Group. Due to the sale of investments, income from investments declined to 0.3 million compared to 0.8 million in the previous year. Net commission income in the amount of 3.8 million (previous year: 4.4 million) primarily resulted from the product management and servicing of funds of HSH Nordbank AG Hamburg-Kiel and from commissions for an intra-group funding transaction. Other operating income totalled 17.3 million (previous year: 17.0 million) and comprised payments for services to other HSH Nord bank Group companies in Luxembourg ( 7.0 million) as well as income from the sale of investments ( 8.1 million). General administrative expenses plus amortisation/depreciation of intangible and tangible assets again declined in the 2014 financial year due to the locational reorganisation and amounted to 10.5 million (previous year: 12.1 million). Other operating expenses ( 2.1 million, previous year: 0.2 million) included provisions for further branch restructurings. The Bank released valuation allowances in the amount of 0.7 million (previous year: 0.0 million). The Bank has established provisions or valuation allowances for acute risks. 5. EQUITY CAPITAL At million, equity capital, excluding the result carried forward, remained unchanged from the previous year. The Bank complied with the Basle III capital adequacy requirements (CRR/CRD IV) in conjunction with CSSF regulation No at all times in the past financial year. The solvency coefficient was 30.6% as at 31 December The Tier 1 capital ratio also stood at 30.6%. 6. EMPLOYEES As of the balance sheet date, HSH Nordbank Securities S.A. employed 67 people. The Board of Directors and the Management thank all employees for their high level of motivation and commitment.

8 6 HSH NORDBANK SECURITIES S.A OUTLOOK The Bank continues to focus its business operations on services for units of the HSH Nordbank Group in Luxembourg and the portfolios managed there. As the restructuring process continues, the Bank projects effects on the headcount also for the coming financial year and has established provisions for this purpose. The company s liquidity situation continues to be materially influenced by ongoing funding from HSH Nordbank AG. The past financial year saw HSH Nordbank AG make progress in implementing the business model as a Bank for Entrepreneurs and managing the legacy burdens on the balance sheet. It was also positive to see that HSH Nordbank successfully passed the ECB s Comprehensive Assessment including the Asset Quality Review (AQR) and the stress test. The risk provisions established for legacy burdens in the shipping portfolio in view of the difficult situation in the shipping sector was again largely offset by the guarantee. HSH Nordbank AG will post a profit at Group level for the past financial year. In 2015, the focus will be on the expected conclusion of the EU proceedings and on further measures aimed at improving the sustainability of the business model. No other events of special importance occurred after the end of the financial year. 8. RISK REPORT Just like all entrepreneurial decisions, business policy decisions entail general risks of liquidity disruptions and/or developments that impact profitability. Effective risk management is therefore essential also for the remaining portfolio. An active risk management process is an important component of business management at HSH Nordbank Securities S.A. Under this process we place great emphasis on the ongoing development of structures and methods for measuring and managing risk. At the same time, it is ensured that the risk management tools used locally are integrated into the risk management methodology at Group level. In accordance with CSSF circular 12/552, the organisational and strategic orientation of HSH Nordbank Securities S.A. s risk management is decided by the Board of Directors on an annual basis and described in the risk strategy. The risk strategy is an important instrument for defining the Bank s risk culture. HSH Nordbank Securities S.A. has implemented a concept to assess its risk-bearing capacity which meets the requirements of ICAAP (Internal Capital Adequacy Assessment Process). The monitoring of risk-bearing capacity is based on the comparison between risk coverage and risk exposure arising from all of the risk categories relevant to HSH Nordbank Securities S.A. s business strategy. Risk capital is allocated as part of the annual planning process taking potential available risk coverage into account and is adjusted, where necessary, to consider changes in general conditions arising during the year, changes in the strategic direction or anticipated market developments. The Board of Directors approves the entire risk capital; management allocates the risk capital and is responsible for the risk management tools, and provides the structural and organisational framework for an effective risk controlling process which is independent of the front office. The risk-bearing capacity is given at the reporting date of 31 December The risk management tools used for the four central risk categories counterparty default risk, market risk, liquidity risk and operational risk are outlined below.

9 Management Report 7 COUNTERPARTY DEFAULT RISK Counterparty default risk relates to any losses that may arise from the default or deterioration in the creditworthiness of business partners, guarantors, equity investments, countries and issuers of investments. A distinction is to be made between the individual borrower level and the portfolio level when managing and monitoring counterparty default risk. The analysis and management of counterparty default risk at borrower/ borrower unit level is performed by the responsible analysis unit at the head office. Coordination is the task of OU Loan & Collateral Management Luxembourg. Fixed limits are in place to manage the counterparty default risk based on an individual borrower. Additional elements of the risk management tools are internal rating procedures and historical probabilities of default based on market data. This data is linked to accounting data in order to be able to perform segment analyses based on different risk factors such as sector, country of domicile or credit-rating categories. The country risk to be taken into account in the counterparty default risk is managed via an additional country limit system. The majority of positions still held by HSH Nordbank Securities S.A. are intra-group receivables or are guaranteed by the Group, which means that there is no material counterparty default risk for HSH Nordbank Securities S.A. besides the internal risk. At the Bank s request, the CSSF completely exempted the Bank from taking intra-group receivables into account for purposes of the large risk limits in accordance with Part XVI, point 24 of Circular CSSF 06/273 and in conjunction with CSSF regulation No The management and the Board of Directors are informed of the counterparty default risk in the portfolio as part of the quarterly risk report. MARKET PRICE RISK Market price risk is defined as potential loss that may arise as a result of future fluctuations in market values of positions held, due to changes in the interest rate structure (interest rate risk), exchange rates (foreign exchange risk), share prices (equity price risk) as well as changes in the prices of precious metals and other trading instruments (other risks). In the case of positions with option components there are additional risks caused by fluctuations in the volatilities determined by price. The principal risks faced by HSH Nordbank Securities S.A. include interest rate and foreign exchange risk. The risk assessment processes of the Bank are based on a value-atrisk approach, which quantifies the potential losses arising from the classically incurred interest rate, foreign exchange, share price and fund price risks via a historical simulation, with a confidence level of 99% and a holding period of one day. For this purpose, 250 bank working days of historical data is used as the basis for the statistical time series considerations. Backtesting, which is based on changes in valuation derived from the actual daily changes in the risk factors, is performed on a regular basis in order to test the forecast quality of the value-at-risk. In addition to the determination of local value-at-risk key figures, the aggregation of potential losses at Group level is ensured through daily inclusion in Group reporting. VaR limits are derived and determined based on risk-bearing capacity considerations, taking into account supervisory framework conditions. The VaR limits are monitored on a daily basis. In addition to the VaR limits, positions in interest rate derivatives, currency derivatives and forward foreign exchange contracts are managed by volume limits.

10 8 HSH NORDBANK SECURITIES S.A The amount of the allocated limits is periodically compared to the risk-bearing capacity of the Bank. As a result, limits are reallocated and the business policy is adapted from time to time. The Bank does not hold open trading positions in foreign currency or precious metals. From a regulatory perspective the Bank has the status of a non-trading book institution. Management receives a daily report on the movements in market price risk. LIQUIDITY RISK Liquidity risk represents the risk of the Bank becoming unable to meet part or all of its existing or future payment obligations. The liquidity risk of the Bank is monitored on an ongoing basis. Cash flow balance sheets prepared using different fundamentals are used as the basis for decisions in liquidity management. Particular attention is paid to ensuring that liquidity is available over a 30-day period as well as to cash flow balances also in case of stress. Moreover, a report on material liquidity indicators (internal and external) for the Luxembourg location exists. In addition, the Bank checks its liquidity on a monthly basis for compliance with the liquidity coverage ratio (LCR) requirements; compliance with these requirements (minimum LCR of 60%) becomes mandatory only as of 1 October As of 31 December, the Bank had an LCR of 99.3%. OPERATIONAL RISK The term operational risk relates to the risk of direct and indirect losses resulting from the inappropriateness or the failure of the internal infrastructure, internal processes or employees, or from external influences. This also includes reputational and legal risks. A risk inventory is performed annually in cooperation with the parent company in order to identify and limit operational risk. The Bank and its subsidiaries use the loss event database throughout the Group and regularly record the losses incurred in accordance with the Group standards. Management is informed regarding the losses incurred. In order to counteract risks in the area of human resources management, the Bank pays particular attention to the selection, training, deployment as well as the promotion and development of staff. The Bank counteracts legal risk through the use of standard master agreements, reviewing of individual agreements, ongoing adjustment of contract documentation to comply with the respective prevailing case law as well as by providing support to the front office through the provision of advice from the Legal department. In the BCP (Business Continuity Plan), the Bank defines organisational and operational structural measures for the continuation of productive operations in different scenarios. It performs regular emergency tests to ensure that the business activities can be resumed in a timely manner in the case of an operational malfunction. In addition, the lower limit (30%) of the liquidity coefficient required by the Luxembourg supervisory authority is monitored. As of 31 December 2014, the Bank had a liquidity coefficient of 127.4%. The Bank is integrated into the Group s liquidity structure and essentially uses the funding capacity of the head office and other Group entities. Management is informed about the liquidity position of the Bank on a daily basis. HSH Nordbank Securities S.A. has an emergency plan which includes a list of measures as well as processes and responsibilities which apply in the event of a liquidity crisis.

11 Management Report Report of the Board of Directors 9 REPORT OF THE BOARD OF DIRECTORS The Board of Directors was kept informed in the reporting year regarding business developments and the financial position of the Bank as well as important transactions. The Board monitored the management in accordance with the statutory regulations and the Articles of Association and made decisions on transactions submitted whenever approval was required. Fundamental aspects of the business policy and the operating activities were discussed in detail at several meetings. Luxemburg, February 2015 The Board of Directors

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13 ANNUAL STATEMENT OF ACCOUNTS Balance sheet 14 Statement of income 15 Notes to the accounts 30 Report of Réviseur d Entreprises agréé

14 12 HSH NORDBANK SECURITIES S.A BALANCE SHEET AS AT 31 DECEMBER 2014 ASSETS ( ) Cash on hand, balances with central bank and post office giro institutions 11,920, ,172, Loans and advances to banks 751,675, ,875, a. payable on demand 10,637, ,318, b. other 741,037, ,556, Loans and advances to customers 2,808, ,474, Debentures and other fixed income securities 6,100, ,101, a. issued by public institutions b. other issuers 6,100, ,101, Shares and other non-fixed income securities 79,982, ,240, Equity holdings 13,135, ,505, Investments in affiliated companies , of which: associates Intangible assets 140, , Tangible assets 410, , Other assets 645, ,545, Accruals and deferrals 786, , Total assets 867,604, ,029,898, The notes to the accounts are an integral part of the annual accounts.

15 Balance sheet ANNUAL STATEMENT OF ACCOUNTS 13 LIABILITIES ( ) Liabilities to banks 513,002, ,758, a. payable on demand 181, , b. with an agreed maturity or period of notice 512,821, ,478, Liabilities to customers 25,526, ,546, a. savings deposits b. other liabilities 25,526, ,546, ba. payable on demand 1,067, ,182, bb. an agreed maturity or period of notice 24,458, ,364, Securitised liabilities 63,738, ,331, a. notes and bonds 63,738, ,331, b. other Other liabilities 3,004, ,154, Prepaid income 390, , Provisions 13,313, ,218, a. provisions for pensions and similar obligations 1,148, ,018, b. tax provisions 931, , c. other provisions 11,233, ,668, Subordinated liabilities 57,655, ,757, Subscribed capital 62,806, ,806, Reserves 77,658, ,658, Retained earnings brought forward (+/ ) 37,060, ,228, Net profit/loss for the year 13,447, ,832, Total liabilities 867,604, ,029,898, The notes to the accounts are an integral part of the annual accounts. OFF-BALANCE SHEET ITEMS ( ) Contingent liabilities 305,623, ,601, of which: guarantees for third-party liabilities 305,187, ,160, liabilities arising under guarantees and the provision of collateral 305,623, ,601, Commitments 23,636, ,088, of which: repurchase agreements The notes to the accounts are an integral part of the annual accounts.

16 14 HSH NORDBANK SECURITIES S.A STATEMENT OF INCOME FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2014 ( ) Interest and similar income 8,620, ,305, of which: from fixed income securities 449, , Interest and similar expenses 4,272, ,230, Income from securities 338, , a. shares and other non-fixed income securities , b. equity holdings of which: associated companies 337, , c. investments in affiliated companies 376, Commission income 3,893, ,597, Commission expenses 79, , Result from financial transactions 26, , Other operating income 17,321, ,024, General administrative expenses 9,738, ,453, a. personnel expenses 5,753, ,753, of which: salaries and wages 4,890, ,457, social security contributions 863, ,296, of which: pension expenses 174, , b. other general administrative expenses 3,984, ,699, Write-downs and valuation allowances on intangible and tangible assets 794, , Other operating expenses 2,101, , Income from the reversal of valuation allowances on receivables and provisions for contingent liabilities and credit risks 11, , Valuation allowances on securities classified as financial assets 40, Income from the reversal of valuation allowances on securities classified as financial assets 678, Tax attributable to the result from ordinary activities 3, , Result from ordinary activities after tax 13,847, ,147, Other taxes not shown in the position above 400, , Net income/loss for the financial year 13,447, ,832, The notes to the accounts are an integral part of the annual accounts.

17 Statement of income Notes to the Accounts ANNUAL STATEMENT OF ACCOUNTS 15 NOTES TO THE ACCOUNTS AS AT 31 DECEMBER 2014 EXPLANATORY NOTES GENERAL INFORMATION HSH Nordbank Securities S.A. (the Bank) was founded on 23 March 1977 as a public limited company under Luxembourg law. The company is established for an indefinite period of time. The Bank is authorised to enter into any type of banking and financial transaction. Since the start of its strategic realignment, which is still ongoing, the Bank has focused on the role of a service provider for the HSH Nordbank Group in Luxembourg. One-hundred per cent of the Bank s capital is held by HSH Nordbank AG, Hamburg-Kiel, Germany. The financial statements of HSH Nordbank Securities S.A. are included in the HSH Nordbank AG consolidated financial statements, which take into account the largest number of companies. The consolidated financial statements are available in Hamburg and Kiel. The financial year is identical to the calendar year. The Bank draws up its accounts in euros. EVENTS OF PARTICULAR IMPORTANCE As a result of the Group-wide activities aimed at strategically repositioning the HSH Nordbank Group in the past years, the role of the Bank is focused on that of a service provider to the HSH Nordbank Group in Luxembourg. In the context of the restructuring process, the Bank projects further effects on the headcount. The provision established for this purpose in the past was therefore increased by 1.9 million to 4.5 million in the financial year. HSH Nordbank Securities S.A. was affected by the Group-wide restructuring also through its subsidiaries and equity investments. In December 2014, the Bank sold its shares in Nobis Asset Management S.A and generated proceeds of 7.0 million. In June 2014, the subsidiary Sotis S.à r.l. was liquidated. The company s liquidity situation remains strongly influenced by continued financing by HSH Nordbank. VALUATION PRINCIPLES The annual financial statements are prepared in accordance with the statutory regulations and taking due account of the generally accepted accounting principles applied in the banking sector of the Grand Duchy of Luxembourg. Accounting policies and valuation methods are coordinated throughout the Group. The following principles are applied in particular: Going concern principle Consistency principle Matching principle Prudence principle. The Bank applies the following accounting principles and methods:

18 16 HSH NORDBANK SECURITIES S.A CONVERSION OF CURRENCIES The Bank uses a multi-currency accounting system. Assets and liabilities denominated in foreign currency are held in the currency in which they are originated. Income and expense are converted to the reporting currency using the exchange rate prevailing on the date they are recorded in the accounting system. SPOT TRANSACTIONS AND BALANCE SHEET POSITIONS Assets and liabilities denominated in foreign currencies are converted to the reporting currency using the reference middle rate of the EURO FX prevailing at the balance sheet date. Outstanding spot transactions denominated in foreign currencies are converted to the reporting currency using the spot rate prevailing at the balance sheet date. FORWARD TRANSACTIONS Outstanding forward transactions denominated in foreign currencies are converted to the reporting currency using the forward rate at the reporting date. CURRENCY GAINS AND LOSSES Foreign currency gains and losses arising on spot positions hedged by forward transactions, as well as from forward transactions hedged by spot positions, are offset by recording them in accruals and deferrals. The differences between the spot and forward rates (swap premiums) are recognised in profit or loss on a pro-rata temporis basis. Unrealised gains on open currency positions are offset through the creation of a balancing item on the liabilities side. Positive foreign exchange results arising from open spot positions are recorded directly through profit or loss based on the option provided under commercial law. Additions to allowances on securities denominated in foreign currencies are, as a general rule, hedged by the Treasury department of the Bank. Valuation losses from unhedged forward transactions are netted against previously accrued valuation gains. A provision is made for any remaining valuation losses. VALUATION OF OTHER DERIVATE FINANCIAL INSTRUMENTS Derivatives are primarily used for hedging purposes. As a general rule, the valuation is performed through the creation of valuation units. The valuation units are accounted for in accordance with the imparity and realisation principles.

19 Notes to the Accounts ANNUAL STATEMENT OF ACCOUNTS 17 FIXED ASSETS NOT CLASSIFIED AS FINANCIAL INVESTMENTS Fixed assets not classified as financial investments are valued at cost. The cost of fixed assets with a limited useful life is reduced by depreciation calculated to ensure that the value of the fixed assets is written off on a scheduled basis over their useful lives. As a rule, low-value assets are written off in full in their year of purchase. Tangible assets are depreciated on a pro-rata temporis basis over their estimated useful lives. The annual depreciation rates applied are as follows: Technical equipment and cars 20.0% and 25.0% Mainframe software and hardware 20.0% to 33.3% Furniture and other equipment 10.0% Building fixtures and fittings 10.0% Irrespective of the limited economic useful life, valuation allowances are made to fixed assets in order to recognise them at the lower value attributable to them at the balance sheet date if it is anticipated that the impairment is permanent. The valuation allowances are reversed if the reasons for their creation no longer apply. SECURITIES The securities portfolio is broken down according to the classification criteria stipulated by the Bank. Securities designated to be permanently used to support the business activities of the Bank are classified as financial investments. Securities held in the financial investments portfolio are valued in accordance with an extended investment-grade procedure. Under these procedures all securities held in the financial investments portfolio whose rating is investment grade (BBB- or better) are valued in accordance with the moderate lower of cost or market principle. The strict lower of cost or market principle is applied to non-investmentgrade securities. No trading positions were held by the Bank during the 2014 financial year. Securities whose main purpose is the investment of cash and the maintenance of liquidity, and which do not meet the preconditions for the trading or investment portfolios, are allocated to the liquidity reserve. Securities held in the liquidity reserve are valued at their current market value or, if applicable, at their lower attributable value under the strict lower of cost or market principle. In addition, an impairment test is performed across the Group on securities held as financial investments. PREMIUMS/DISCOUNTS Premiums on securities held in the financial investments portfolio and in the liquidity reserve are recognised on a pro-rata temporis basis. Discounts arising from the acquisition of debentures and other fixed income securities are not recognised through profit or loss until final maturity or sale. LOANS AND ADVANCES Loans and advances are recognised at cost. The policy of the Bank is to make individual valuation allowances on doubtful loans depending on the prevailing circumstances, the amount of which is determined by the responsible executive bodies of the Bank. Valuation allowances are deducted from the corresponding asset positions. Premiums and discounts are recognised on a pro-rata temporis basis.

20 18 HSH NORDBANK SECURITIES S.A LIABILITIES Liabilities are recognised at their repayment amount. Premiums and discounts are recognised on a pro-rata temporis basis. PORTFOLIO LOAN LOSS PROVISION In accordance with an instruction from the Luxembourg Tax Authority dated 16 December 1997, the Bank established portfolio loan loss provisions for the risk assets from balance sheet transactions. The general allowance amounted to 652 thousand as of the balance sheet date. EXPLANATORY NOTES ON INDIVIDUAL ITEMS DEBT INSTRUMENTS ISSUED BY PUBLIC INSTITUTIONS AS WELL AS DEBENTURES AND OTHER FIXED INCOME SECURITIES In 2014, HSH Nordbank Securities S.A. held no debt instruments issued by public institutions. Debentures and other fixed income securities with acquisition costs of 1.1 million are classified as financial assets. LISTED AND NON-LISTED SECURITIES (NET) ( m) Listed Non-listed Total Previous year Previous year Previous year Debentures and other fixed income securities Shares and other non-fixed income securities Equity holdings Investments in affiliated companies Total Values before deduction of pro rata portfolio loan loss provisions. There were no debentures or debt instruments issued by public institutions eligible for refinancing with a central bank in the eurozone as at the balance sheet date. Shares and other non-fixed income securities in the amount of 16.3 million have been pledged.

21 Notes to the Accounts ANNUAL STATEMENT OF ACCOUNTS 19 INVESTMENTS IN AFFILIATED COMPANIES ASIAN CAPITAL INVESTMENT OPPORTUNITIES LTD./ EUROPEAN CAPITAL INVESTMENT OPPORTUNITIES LTD. The Bank holds 51% each of the shares in Asian Capital Investment Opportunities Limited, Hong Kong, and in European Capital Investment Opportunities Limited, Jersey, respectively. The purpose of these companies, which were established in 2002 and 2003, respectively, and act as general partners of partnerships under Hong Kong and Jersey law, respectively, is the performance of administration and management activities. For reasons of materiality, the companies are not included in the consolidated financial statements of HSH Nordbank AG, Hamburg-Kiel. SOTIS S.À R.L. The Bank owned 100% of Sotis S.à r.l., Luxembourg, whose subscribed capital amounted to 13 thousand. The company was liquidated in the financial year.

22 20 HSH NORDBANK SECURITIES S.A FIXED ASSETS FINANCIAL ASSETS The movement in financial assets during the course of the year is as follows: FINANCIAL ASSETS ( m) Debentures and other fixed interest securities Equity holdings Investments in affiliated companies Total financial investments Gross carrying amount as at (Previous year) (1.1) (20.0) (2.2) (23.3) Additions (Previous year) ( ) ( ) ( ) ( ) Redemptions/disposals (Previous year) ( ) ( 2.5) ( 2.2) ( 4.7) Gross carrying amount as at (Previous year) (1.1) (17.5) ( ) (18.6) Valuation allowances as at (Previous year) ( ) (1.9) ( ) (1.9) Net carrying amount as at (Previous year) (1.1) (15.6) ( ) (16.7) Values before deduction of pro rata portfolio loan loss provisions. As at the reporting date, financial assets with a carrying amount of 1.1 million were recognised at the strict lower of cost or market principle.

23 Notes to the Accounts ANNUAL STATEMENT OF ACCOUNTS 21 TANGIBLE AND INTANGIBLE ASSETS The table below shows the changes in tangible and intangible assets in the course of the year: TANGIBLE AND INTANGIBLE ASSETS (T ) Office equipment Intangible assets Total tangible assets Gross carrying amount as at ,540 6,280 11,820 (Previous year) (7,147) (7,241) (14,388) Additions (Previous year) (298) (281) (579) Disposals 2,181 1,075 3,256 (Previous year) ( 1,905) ( 1,242) ( 3,147) Gross carrying amount as at ,512 5,267 8,779 (Previous year) (5,540) (6,280) (11,820) Accumulated depreciation from prior periods 4,895 5,788 10,683 (Previous year) ( 6,344) ( 6,884) ( 13,228) Disposal of accumulated depreciation 2,181 1,075 3,256 (Previous year) (1,905) (1,242) (3,147) Additions to depreciation for the current year (Previous year) ( 457) ( 146) ( 603) Accumulated depreciation as at ,099 5,122 8,221 (Previous year) ( 4,895) ( 5,788) ( 10,683) Net carrying amount as at (Previous year) (644) (492) (1,137) Values before deduction of pro rata portfolio loan loss provisions. Software licences acquired by the Bank are shown under intangible assets.

24 22 HSH NORDBANK SECURITIES S.A LOANS AND ADVANCES AND LIABILITIES The Bank has the following loans and advances and (subordinated) liabilities with affiliated companies and/or companies with which there is an investment relationship: Of the above loans and advances to affiliated banks, an amount of 8.3 million has been pledged. ( m) Loans and advances to banks to customers Debentures and other fixed income securities Liabilities to banks to customers 0.6 Subordinated liabilities Values before deduction of pro rata portfolio loan loss provisions. OTHER ASSETS Other assets primarily consist of receivables from investment consulting fees in the amount of 0.4 million as well as a withholding tax receivable in the amount of 0.1 million. ASSETS PROVIDED AS COLLATERAL As at 31 December 2014, there were no securities held as proprietary positions for purposes of utilising available refinancing possibil ities (open market transactions) on deposit with the central bank of Luxembourg. OTHER LIABILITIES Other liabilities mainly consist of turnover tax liabilities in the amount of 1.2 million and interest liabilities for the profit participation capital of 0.7 million.

25 Notes to the Accounts ANNUAL STATEMENT OF ACCOUNTS 23 SUBORDINATED LIABILITIES The existing profit participation capital amounts to USD 70.0 million. The compound interest for the current financial year 2014 amounts to USD 0.9 million. The final maturity of the profit participation capital is Under the provisions stipulated by the Luxembourg banking supervisory authority, the total subordinated capital with an equivalent amount of 57.7 million is treated as equity capital. SUBSCRIBED CAPITAL Subscribed capital amounts to 62.8 million and is divided into 16,916 no par value registered ordinary shares. The capital of the company is fully paid in. LEGAL RESERVE Pursuant to Article 72 of the Luxembourg Commercial Code, 5% of the profit is to be annually appropriated to this reserve until it is equivalent to 10% of the subscribed capital of the company. The legal reserve may not be distributed and amounts to 6.28 million. The legal reserve is fully paid in. RESERVES Until 2006, the Bank exercised the option available under the tax rules to offset the net worth tax (VSt). Up to and including 2001, it was credited against the corporation tax liability in accordance with Article 174 of the Luxembourg Income Tax Act (Loi concernant l impôt sur le revenue LIR). From the 2002 tax assessment period onwards the net worth tax can be credited against itself under certain conditions following the repeal of Article 174 LIR (Section 8a of the Net Worth Tax Law). The net worth tax was not credited in the reporting year as there was no corporation tax liability as a result of the loss carryforward recorded. After expiry of the non-withdrawal period, the Bank had no more tied up net asset tax at the end of the reporting period. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The current value of assets and liabilities denominated in foreign currencies amounts to million and million, respectively. DEPOSIT GUARANTEE/INVESTOR COMPENSATION SCHEME The Bank is a member of the Deposit Guarantee Association, Luxembourg ( AGDL for short). The purpose of the AGDL is the establishment of a system to mutually guarantee private customers deposits of the member institutions of the AGDL. In the event of a default the annual payment obligation for each member of the AGDL is limited to 5% of regulatory capital. The Luxembourg Budget Law provides for a deposit guarantee in the maximum amount of 100 thousand. Pursuant to the Law dated 27 July 2000 regarding the implementation of Directive 97/9/EC on investor compensation schemes, the Bank has also been a member of the investor guarantee scheme since 1 January The purpose of the compensation scheme is to protect, in principle, all investment transactions entered into by private individuals and by legal persons up to an amount of 20 thousand in the case of a default determined by the court or management, irrespective of the number of accounts, the currency and their location within the European Community.

26 24 HSH NORDBANK SECURITIES S.A CONTINGENT LIABILITIES The following contingent liabilities were outstanding as at: ( m) Guarantees and other direct credit substitutes (including obligations to repurchase assets) Guarantees for services provided by third parties The guarantees for services provided by third parties relate to two guarantee schemes entered into in the interests of the Group for coupon payments to be made on securitisation transactions. Both guarantees are fully collateralised through a corresponding cash deposit from HSH Nordbank AG. The above-mentioned contingent liabilities are primarily liabilities to affiliated companies. LOAN COMMITMENTS/CREDIT RISKS There are payment obligations in the amount of 23.6 million relating to the share in a closed-end property fund shown under equity holdings. OUTSTANDING FORWARD TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS The following forward transactions and derivative financial instruments were outstanding as at: No exchange rate-related transactions existed as of the balance sheet date. ( m) Interest rate-related transactions Interest rate swaps SERVICES The Bank primarily acts as an agent for the HSH Group in Luxembourg. CLASSIFICATION OF INCOME BY GEOGRAPHICAL MARKETS The Bank mainly generates its income (interest and commission income, income from securities, income from financial transactions and other operating income) through business relationships with counterparties located in member countries of the OECD. OTHER OPERATING INCOME Other operating income totalling 17.3 million consists primarily of income from the sale of the shares in Nobis Asset Management S.A. of 7.0 million, agency income of 7.0 million as well as income from the reversal of provisions of 1.8 million.

27 Notes to the Accounts ANNUAL STATEMENT OF ACCOUNTS 25 OTHER OPERATING EXPENSES Other operating expenses in the amount of 2.1 million primarily resulted from the creation of a provision for restructuring measures in the amount of 1.9 million. AUDITOR S FEES The fees paid to the auditor KPMG Luxembourg S.à r.l., which were recorded as expense for the annual audit in the financial year, amount to 131 thousand (exclusive of VAT). AVERAGE NUMBER OF EMPLOYEES The average number of employees of the Bank in the financial year was: Group Number Management 2.00 Directors and executives holding a general power of attorney (Prokuristen) Employees Total REMUNERATION, PENSION OBLIGATIONS, LOANS TO EXECUTIVE BODIES OF THE BANK The remuneration of the management, administrative and supervisory bodies for the financial year comprises the following: (T ) Management body Remuneration Pension obligations Loans, guarantees Management, directors and executives holding a general power of attorney (Prokuristen) (a total of persons on an annual average) 1, CONSOLIDATED TAX GROUP HSH Nordbank Securities S.A. and the Luxembourg Branch of HSH Nordbank AG form a consolidated tax group for income tax purposes, which has been recognised by the Luxembourg tax authorities with effect from the 2002 tax assessment period. The controlling enterprise is the Luxembourg Branch of HSH Nordbank. ADDITIONAL INFORMATION ON FINANCIAL INSTRUMENTS Primary financial instruments and derivative financial instruments are shown by residual maturity in Appendices 1 to 5. There are no significant risk concentrations associated neither with primary financial instruments nor with derivative financial instruments.

28 26 HSH NORDBANK SECURITIES S.A ADDITIONAL INFORMATION REGARDING RESIDUAL TERMS/CREDIT RISKS OF FINANCIAL INSTRUMENTS NON-TRADING PRIMARY FINANCIAL INSTRUMENTS (CARRYING AMOUNTS) Payable on demand < = 3 months > 3 months Financial assets Cash reserve/central banks 4,172 11,920 Debt instruments issued by public institutions Loans and advances to banks 7,323 10,646 21, , ,923 Loans and advances to customers Debentures and other fixed income securities Shares and other non-fixed income securities 16,924 3,000 Total 28,667 22,628 21, , ,299 Other assets Total assets Financial liabilities in 000 liabilities to banks , , ,000 liabilities to customers 3,182 1, securitised liabilities 3,000 subordinated liabilities Total 3,462 1,248 30, , ,385 other liabilities Total liabilities Published off-balance sheet items contingent liabilities payment obligations arising under equity holdings Total off-balance sheet items HSH Nordbank Securities S.A., Luxembourg, is classified as a nontrading institution. For regulatory reporting, the credit risk for derivative financial instruments is determined in accordance with the provisions of the regulatory capital requirements for covering credit risk on non-trading transactions based on the original exposure method. The positive and negative market values (dirty pricing) are disclosed in the Notes.

29 Notes to the Accounts ANNUAL STATEMENT OF ACCOUNTS 27 > 3 months > 1 year > 5 years None maturity Total ,172 11, , , , , , , ,610 1,763 4,474 2,808 1,101 1,104 5,000 4,996 6,101 6,100 13, ,109 79,953 69,241 79, , , ,981 43,719 86,712 1,002, ,486 27,035 15,118 1,029, ,604 81, , , , , ,297 24,179 27,547 25,526 13,251 36,080 63,739 52,331 63,739 50,758 57,656 50,758 57,656 81, , , , , , , , ,681 1,029, , , , , ,624 21,089 23,637 21,089 23, , ,617 21,530 23, , ,261

30 28 HSH NORDBANK SECURITIES S.A NON-TRADING DERIVATIVE FINANCIAL INSTRUMENTS (OPEN MARKET TRANSACTIONS) NON-TRADING DERIVATIVE FINANCIAL INSTRUMENTS (OPEN MARKET TRANSACTIONS) ( 000) <= 3 months >3 months <= 1 year Nominal amount Positive market values Negative market values Nominal amount Positive market values Negative market values Interest rate-related transactions Interest rate swaps 5, Total transactions linked to interest rates 5, Transactions linked to foreign exchange rates Forward foreign exchange transactions Cross-currency swaps Total transactions linked to foreign exchange rates Total 31 December , Total 31 December ,758 CREDIT RISK OF DERIVATIVE FINANCIAL INSTRUMENTS BY COUNTERPARTY TYPE ( 000) Nominal amount Positive market values Negative market values Counterparty solvency Interest rate transactions banks zone A 5, Foreign currency transactions banks zone A Foreign currency transactions non-banks Total 31 December , Total 31 December , FINANCIAL INSTRUMENTS BY INDUSTRY SECTOR/COUNTERPARTY TYPE ( 000, carrying amounts and/ or positive market values) Off-balance sheet financial instruments Derivative financial instruments Derivative financial instruments Financial assets (no derivatives) incl. CDS Positive market values Negative market values Banks 764, Corporates 84, ,188 Private clients 2,808 7 Total 31 December , , Total 31 December ,002, ,

31 Notes to the Accounts ANNUAL STATEMENT OF ACCOUNTS 29 Nominal amount >1 year <= 5 years >5 years Total Positive market values Negative market values Nominal amount Positive market values Negative market values Nominal amount Positive market values Negative market values 5, , , , , The consolidated credit risk concentration is shown in the following tables resulting from balance sheet and off-balance sheet primary financial instruments and derivative financial instruments. The risks are broken down by geographical markets and industry sector/counterparty type. FINANCIAL INSTRUMENTS BY GEOGRAPHICAL MARKETS ( 000, carrying amounts and/ or positive market values) Off-balance sheet financial instruments Derivative financial instruments Derivative financial instruments Financial assets incl. CDS Positive market values Negative market values Belgium Switzerland 344 New Zealand 1 Great Britain 6 USA 943 Germany 245, Singapore 199,806 Luxembourg 389, Other EEC countries Non-OECD countries 16, ,188 Other OECD countries 11 Total 31 December , , Total 31 December ,002, ,

32 30 HSH NORDBANK SECURITIES S.A REPORT OF THE RÉVISEUR D ENTREPRISES AGRÉÉ REPORT ON THE ANNUAL ACCOUNTS Following our appointment by the Board of Directors we have audited the accompanying annual accounts of HSH Nordbank Securities S.A., which comprise the balance sheet as at 31 December 2014 and the profit and loss account for the year then ended, and a summary of significant 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 Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts, and for such internal control as the Board of Directors determines is necessary to enable the preparation 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 sufficient 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 financial position of HSH Nordbank Securities S.A. as of 31 December 2014, and of the results of its operations for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts.