VP LUX S.à r.l. ANNUAL ACCOUNTS AND REPORT OF THE REVISEUR D ENTREPRISES AGREE 32, Boulevard Royal L-2449 Luxembourg R.C.S. Luxembourg : B 138.936
TABLE OF CONTENTS Page MANAGEMENT REPORT 3-4 REPORT OF THE REVISEUR D ENTREPRISES AGREE 5-6 ANNUAL ACCOUNTS - Balance sheet as at 7 - Profit and loss account for the year ended 8 - Notes to the annual accounts 9-15
Management Report Financial Development: Profit & Loss for VP LUX for 20 I 5 shows a profit for the year of EUR 5 I k compared to a profit of EUR 63 kin 2014. The decrease in profit compared to the year ended 2014 is caused by lower net turnover. The profit for 20 I 5 at EUR 5 I k is carried forward into the next financial year. Activity: VP LUX S.a r.l. is a Luxembourg Central Securities Depository (CSD) established in 2008. Its first objective is to facilitate access for mortgage credit institutions and other eligible issuers to issue euro-denominated bonds eligible as collateral for credit with central banks in the Eurosystem. As a fully-owned subsidiary of VP SECURITIES A/S (the Danish CSD), its second objective is to offer its CSD-services and STP-solutions also to the Luxembourg investment fund market. By the end of2015 the current volume of investment funds issued with VP SECURITIES A/S was 167 billion EUR and the total annual turnover of investment funds on the VP SECURITIES A/S settlement platform in 2015 was 481 billion EUR. VP LUX is approved by the Luxembourg financial supervisory authority (CSSF) and the Luxembourg central bank (BCL) to operate a CSD and is also approved, in accordance with the standards of the Eurosystem, for issuance and administration of securities eligible as collateral for Eurosystem credit operations. Since March 2015, when VP SECURITIES A/S was approved as eligible for Eurosystem credit operations, Danish issuers of euro-denominated bonds have transferred their issuance of new bonds from VP LUX to VP SECURITIES A/S. As consequence, the issuance activities in VP LUX was reduced during 2015. By end of 2015, the total volume of bonds issued with VP LUX was 17 billion EUR equal to a 34% decrease compared to end of2014. The majority of bonds issued with VP LUX are AAA-rated mortgage credit bonds with an initial maturity of 1-5 years issued by inter alia Nykredit, Realkredit Danmark, DLR Kredit, Nordea Kredit and BRFkredit. As a service provider, VP LUX seeks to attract issuance of selected segments of euro-denominated bonds, including EMTN programs, covered bonds, corporate bonds and government bonds. The VP LUX value proposal to the bond market is a unique combination of low operational- and settlement risk, and low safekeeping fees via leverage of the VP SECURITIES A/S bond issuance and safekeeping platform. A distinctive feature of bonds issued via VP LUX is that they may qualify as eligible collateral with the Eurosystem as well as with the Danish Central Bank. During 2015 VP LUX has further extended its product range on issuance-, clearing-, settlement-, custodyand investor- solutions to the Luxembourg investment fund market with special focus on foreign funds distribution to Nordic investors. VP LUX launched the first agreements in this area in early 2012 and expects to extend in 20 I 6 this offer to include distribution of foreign funds also to other European investors. The VP LUX business model is to provide access mainly for Danish issuers to easy, safe and cost effective distribution of securities issued through VP LUX to all relevant European markets. Therefore, VP LUX has established access (links) to Clearstream, Euroclear Bank, Monte Titoli and VP SECURITIES A/Sand indirect access to other markets. In 2015 the VP LUX links to Euroclear Bank, to Monte Titoli and to VP - 3 -
SECURITIES A/S were approved by the Eurosystem and all links from VP LUX are now approved as eligible for Eurosystem credit operations. In 2015 the Eurosystem also approved to re-open for distribution of Eurosystem eligible bonds issued with VP LUX via "the Bridge" (the link between Clearstream and Euroclear). Therefore, since October 2015, securities issued with VP LUX have been freely tradable in all relevant markets. In 2012 VP LUX decided to join the Eurosystem project for a pan-european platform for clearing and settlement of securities transactions, T ARGET2-Securities (T2S). The preparations of the migration of the VP LUX settlement platform to T2S have progressed as planned in 2015 and VP LUX expects to migrate to T2S in September 2016 alongside VP SECURITIES A/S. Currently all securities issued with VP LUX (bonds as well as investment funds) are eligible for settlement with T2S. VP LUX is a member of the Luxembourg T2S National User Group (NUG). VP LUX is currently preparing its application for license as CSD under the 2014 European CSD-regulation. This license will allow VP LUX to offer its services to clients in all EU/EEA-countries as from 2017. VP LUX had three employees by end of 2015. VP LUX has outsourced most of its technical and operational services to VP SECURITIES. In 2015 VP LUX had no research and development costs. The company does not have any branches and does not have own shares. Outlook for 2016: In 2016 VP LUX expects a decline of its result on ordinary activities due to the relocation of Danish mortgage credit bond issuance activities to VP SECURITIES A/S. Management is currently assessing which options to pursue in terms of addressing the declining revenues. The Board of Managers and the Managing Directors have this day discussed and approved the annual accounts of VP LUX for the year ended December 31, 2015. The annual accounts have been prepared in compliance with Luxembourg legal and regulatory requirements relating to the preparation of the annual account. We consider the accounting principles applied to be appropriate, and in our opinion, the annual accounts present a true and fair view of the company's assets and liabilities, its financial position, the financial result and cash flow. The annual accounts are recommended to the general meeting of shareholders for adoption. 0 J H r\~'- Niels Olsen Birger Schmidt Niels Hjort Rotendahl The Managing Directors: rmz~ Flemming Andersen (CEO) - 4 -
Deloitte. Deloitte Audit Societe a responsabilite limitee 560, rue de Neudorf L-2220 Luxembourg 8.P. 1173 L-1011 Luxembourg To the Board of Managers of VP Lux S.a r.1. 32, Boulevard Royal L-2449 Luxembourg Tel: +352 451 451 Fax: +352 451 452 992 www.deloitte.lu REPORT OF THE REVISEUR D'ENTREPRISES AGREE Report on the annual accounts We have audited the accompanying annual accounts of VP Lux S.a r.1., which comprise the balance sheet as at and the profit and loss account for the year then ended, and a summary of significant accounting policies and other information. Responsibility of the Board of Managers for the annual accounts The Board of Managers 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 Managers 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 reviseur d'entreprises agree 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 whether the annual accounts are free from material misstatement. Soc1ete a responsabil1te limitee au capital de 35.000 { RCS Luxembourg B 67.895 VAT LU25101535 Automation d'etablissement 10022179-5 -
Deloitte. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts. The procedures selected depend on the reviseur d'entreprises agree's judgement, 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 reviseur d'entreprises agree 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 Managers, 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 VP Lux S.a r.l. as of December 3 1, 2015, 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. Report on other legal and regulatory requirements The management report, which is the responsibility of the Board of Managers, is consistent with the annual accounts. Martin Flaunet, R viseur d'entreprises agree Partner April 8, 2016-6 -
BALANCE SHEET (expressed in EUR) FIXED ASSETS A S S E T S 2015 2014 L I A B I L I T I E S 2015 2014 CAPITAL AND RESERVES (note 4) Tangible assets (note 3) 39.337 50.282 39.337 50.282 CURRENT ASSETS Subscribed capital Legal reserve Loss brought forward Result for the financial year 2.730.000 2.730.000 4.893 1.703-1.011.568-1.072.186 50.722 63.808 1.774.047 1.723.325 Debtors becoming due and payable within one year Amounts owed by affiliated undertakings (note 5) 158.252 46.174 Tax debtors 0 38.605 Trade debtors 93.087 127.240 Cash at banks 1.531.607 1.522.257 1.782.946 1.734.276 NON SUBORDINATED DEBTS Creditors becoming due and payable within one year Amounts owed to affiliated undertakings (note 5) 0 30.201 Tax and social security debts 29.117 18.528 Trade creditors 31.619 37.254 60.736 85.983 PREPAYMENTS 12.500 24.750 TOTAL ASSETS 1.834.783 1.809.308 TOTAL LIABILITIES 1.834.783 1.809.308 The accompanying notes form an integral part of these annual accounts. - 7 -
PROFIT AND LOSS ACCOUNT For the year ended (expressed in EUR) C H A R G E S 2015 2014 Other external charges (note 7) 692.365 789.296 Staff costs (note 6) Wages and salaries 290.910 321.413 Social security costs 32.790 36.074 Value adjustments on tangible fixed assets 10.945 12.388 Other operating charges (note 10) 0 2.248 Interest payable and other financial charges 460 682 Income taxes (note 8) Other taxes (note 8) 3.210 8.617 4.130 8.300 Profit for the financial year 50.722 63.808 TOTAL CHARGES 1.090.019 1.238.339 I N C O M E Net turnover (note 9) 1.088.661 1.234.097 Other interest and other financial income 1.358 4.242 TOTAL INCOME 1.090.019 1.238.339 The accompanying notes form an integral part of these annual accounts. - 8 -
NOTES TO THE ANNUAL ACCOUNTS NOTE 1 - GENERAL VP Lux S.à r.l. (the Company ) was incorporated on April 25, 2008 as a private limited company (Société à responsabilité limitée) under the Luxembourg Law for an unlimited period. The purpose of the Company is to deliver services as a Central Securities Depository (CSD), i.e. book-entry, clearing and settlement of securities and to carry out other services related hereto. The Company is registered as a Professional of the Financial Sector according to articles 26 of the Law of April 5, 1993 on the financial sector, as amended. The Company's financial year runs January 1 st to December 31 st. The registered office of the Company is in Luxembourg: 32, Boulevard Royal L-2449 Luxembourg The Company is registered at the Luxembourg Commercial Register under the number R.C.S. Luxembourg B 138.936. The Company is included in the consolidated accounts of VP SECURITIES A/S forming the largest body of undertakings of which the Company forms a part as a direct/indirect subsidiary undertaking. The registered office of VP SECURITIES A/S is located at Weidekampsgade 14, DK-2300 Copenhagen, Denmark. The consolidated financial statements are available at this address. - 9 -
NOTES TO THE ANNUAL ACCOUNTS - continued - NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General The annual accounts of the Company are prepared in conformity with Luxembourg legal and regulatory requirements. Accounting policies and valuation rules are, besides the ones laid down by the Law, determined and applied by the Board of Managers. Rounding differences up to one unit may occur in the tables shown in the notes. Where necessary, in order to better reflect the accounting provisions of the Luxembourg law, certain disclosure reclassifications have been made. Translation of foreign currencies The Company maintains its accounts in Euro (EUR) and the annual accounts are expressed in this currency. Income and expenses in currencies other than EUR are translated into EUR at applicable exchange rates at transaction date. Long term assets expressed in currencies other than EUR are translated into EUR at the exchange rate effective at the time of the transaction. At the balance sheet date, these assets remain translated at historic exchange rate. Cash at bank is translated at the exchange rate effective at the balance sheet date. Exchange losses and gains are recorded in the profit and loss account of the year. Other assets and liabilities are translated respectively at the lower or at the higher of the value converted at the historic exchange rate or the value determined on the basis of the exchange rate effective at the balance sheet date. The unrealized exchange losses are recorded in the profit and loss account of the year. The realized exchange gains are recorded in the profit and loss account at the moment of their realization. - 10 -
NOTES TO THE ANNUAL ACCOUNTS - continued - NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Tangible assets Tangible assets which are made up of leasehold improvements and other equipment are stated at their purchase price less value adjustments. They are amortized on a straight-line basis over a period of 3-10 years. Debtors Debtors are valued at their nominal value. They are subject to value adjustments where their recovery is compromised or at indication of a compromise. These value adjustments are not continued if the reasons for which the value adjustments were made have ceased to apply. Prepayments This asset item includes expenditures incurred during the financial year but relating to a subsequent financial year. Turnover The net turnover comprises the amounts derived from the sale of products and the provision of services falling within the Company s ordinary activities, after deductions of value added tax and other taxes directly linked to the turnover. Provisions Provisions are intended to cover losses or debts, the nature of which is clearly defined and which, at the date of the balance sheet, are either likely to be incurred or certain to be incurred but uncertain as to their amount or the date which they will arise. Provisions may also be created to cover charges which originate in the financial year under review or in a previous financial year, the nature of which is clearly defined and which at the date of the balance sheet are either likely to be incurred or certain to be incurred but uncertain as to their amount or the date on which they will arise. - 11 -
NOTES TO THE ANNUAL ACCOUNTS - continued - NOTE 3 - TANGIBLE ASSETS Tangible assets consist of leasehold improvements and other equipment. Movements of the year are as follows: Leasehold Other Total improvements equipment EUR EUR EUR Gross book value - opening balance 28.864 72.904 101.768 Additions for the year 0 0 0 Disposals for the year 0 0 0 Gross book value - closing balance 28.864 72.904 101.768 Amortisation - opening balance -10.906-40.580-51.486 Amortisation for the year -2.886-8.059-10.945 Reversal for the year 0 0 0 Amortisation - closing balance -13.792-48.639-62.431 Net book value - closing balance 15.072 24.265 39.337 Net book value - opening balance 17.958 32.324 50.282 NOTE 4 - CAPITAL AND RESERVES Subscribed capital As at and 2014, the share capital is set at EUR 2.730.000 consisting of 2.730 fully subscribed and paid shares of a par value of EUR 1.000 each. - 12 -
NOTES TO THE ANNUAL ACCOUNTS - continued - NOTE 4 - CAPITAL AND RESERVES - continued Legal reserve An amount equal to at least 5% of the annual net income has to be allocated to a legal reserve until such reserve equals 10% of the paid-in share capital, as required by Luxembourg law. This reserve is not available for distribution. NOTE 5 - AMOUNTS OWED TO AND OWED BY AFFILIATED UNDERTAKINGS The amounts owed to and owed by affiliated undertakings are detailed as follows: 2015 2014 EUR EUR Receivables on provision of services 158.252 46.174 Debts on provision of services 0 (30.201) NOTE 6 - STAFF COSTS The average number of persons employed by the Company during the financial year is as follows: 2015 2014 Number Number Employees 3 3-13 -
NOTES TO THE ANNUAL ACCOUNTS - continued - NOTE 7 - OTHER EXTERNAL CHARGES Other external charges are broken down as follows: 2015 2014 EUR EUR Activity based costs 30.551 32.656 IT cost 210.554 297.101 Rent 146.266 104.379 Advisory, consulting and audit expenses 179.452 196.081 Insurance premium 4.412 4.455 General expenses 121.130 154.624 692.365 789.296 NOTE 8 - PROVISIONS FOR TAXATION Provisions for taxation corresponds to the difference between the estimated provisions created by the Company and the advance payments for the financial years for which no final tax assessment notices have been received yet. The Company is subject to all taxes applicable to Luxembourg commercial companies. To better reflect the accounting provisions of the Luxembourg law, certain disclosure reclassifications have been made between Income tax and other taxes. NOTE 9 - NET TURNOVER The net turnover is fully made on the market of Luxembourg. - 14 -
NOTES TO THE ANNUAL ACCOUNTS - continued - NOTE 10 - MANAGEMENT REMUNERATION Current year the Company has not granted emoluments amounting to the members of the Board of Managers. (2014: EUR 2.248). The Company has not granted advances or credits to the members of its Management. NOTE 11 - OFF-BALANCE SHEET COMMITMENTS One cash account is pledged as security, up to EUR 55.565, for a bank guarantee regarding the leased premises. As at, the Company has a total commitment for its office rental amounting to EUR 153.718 (2014: EUR 148.291). - 15 -