Nomura Bank (Luxembourg) S.A. · as active members of some ABBL and ALFI working groups. We have...

Nomura Bank(Luxembourg) S.A.Annual accounts, Directors’ Report and independent auditor’s report 31 March 2012

Table of contents

Directors’ report 2

Independent auditor’s report 5

Annual accounts

- Statement of financial position 6 – 7

- Income statement 8

- Statement of comprehensive income 9

- Statement of changes in equity 10

- Statement of cash flows 11 – 12

- Notes to the annual accounts 13 – 67

Nomura Bank (Luxembourg) S.A.

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Directors' Report

Year ended 31 March 2012

The directors of Nomura Bank (Luxembourg) S.A. (the “Bank”, “NBL”, “we”, “our”, “us”) are pleased to announce its financial results for the fiscal year ended 31st March 2012. Throughout the fiscal year, we faced continuous challenges, especially the avalanchine implementation of tighter regulatory frameworks, and continued our ceaseless efforts to reduce operational errors and risks and achieved to stabilize our assets under administration after significant development in previous fiscal exercise.

As in previous years, the major part of our businesses has been promoted by the strong relationships with the Nomura Group’s global network, specifically in investment trusts businesses in Japan and it has relied on our capabilities and adaptability of the operations by 300 (2011 – 288) experienced professionals and staff members of the Bank.

Throughout the fiscal year we had a remarkable increase of revenues generated by our funds custody and funds administration business. Income from treasury activities has also been improving over the year. The higher than expected revenues, combined with an adequate management of our expenses, has enabled the Bank to record historical high operating profits. As part of the non operating profits, we also continued to receive dividends from our Cayman subsidiary for €8m (2011 - €6m).

As a result of these activities and transactions, profit before tax for the fiscal year amounted to €64m (2011 - €43m), our balance sheet as of 31st March 2012 amounts to €6,120m (2011 - €6,890m) and shareholders’ equity amounts to €287m (2011 - €230m).

After having reached a historical high at $90bn in the middle of Q2 of our exercise, the Bank’s Assets under Administration (“AuA”), as of 31st March 2012, were about $83bn (2011 - $81bn). Luxembourg funds represented $16bn (2011 - $16bn) of the AuA while Cayman funds accounted for $67bn (2011 - $65bn). As of 31st March 2012, the Bank was servicing 440 funds and sub-funds (2011 - 424), 84 % of which were Cayman Islands funds.

Similarly to previous fiscal year, the Bank profitable funds business is first of all to be attributed to Nomura Securities Co., Ltd’s ability to distribute investment funds despite challenging

market conditions in Japan. 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 as well as covered call equity options products to retail investors in Japan. Secondly and more than last fiscal year, the performance of the Bank resulted from its ability to deliver best quality and flexible services for the so-called “T+0” funds. In order to meet the continuous growing demand from the promoters to distribute these types of funds, the Bank has strengthened its specific operational processes and has enhanced the size of the teams working for evening and night shifts. Even though AuA for “T+0” funds have slightly decreased to $24bn (2011 - $27bn), during the period, 30 new funds’ portfolios (2011 – 24) have been set-up under this scheme.

As announced last fiscal year, the Bank has finalized the set-up of a “controlled subsidiary” of Global Funds Trust Company (“GFTC”). In July 2011, the Cayman Islands Monetary Authorities have confirmed the registration of Master Trust Company (“MTC”). MTC, which has obtained a mutual fund administrator license, is fully owned by GFTC and has an initial paid up capital of €600,000. The new company is and will be utilised as second trustee for “master-feeder” structures as well as management company for investment trusts set-up in the Cayman Islands under Retail Mutual Fund (Japan) Regulations for public distribution in Japan.

In order to meet the European regulatory requirements on the Alternative Investment Fund Managers Directive (“AIFMD”) but also to be able to support the possible future business development of UCITs products in the Asian area by Nomura Asset Management Co, Ltd. the Bank has kicked off a project targeting to upgrade Global Funds Management S.A. (“GFM”), its fully owned Luxembourg domiciled management company. With the assistance of an external consultant, GFM’s infrastructure, risk management, monitoring on delegated activities and internal controls will be reinforced with the objective to fill the necessary application to the regulator by July 2013. In parallel, the Bank will carry on with the implementation of its custody health check under UCITs/AIFMD regulations.

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 decided to prepare a unique Service Organization Control report issued under internationally


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recognized standards. To this aim, NBL has appointed an external auditor to obtain a combined ISAE 3402/SSAE 16 report which will replace the existing Control Report and the AT101 US Custody Rule Report. It is intended that the first new report will be issued before the end of the next fiscal year.

The Bank has a permanent focus on managing its business and associated risks appropriately. As in previous fiscal years, this resulted in constant search for improvement in processes, structure, tools, expertise and education. Accordingly, during the year closed on 31st March 2012, significant 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. Significant examples of these investments are projects aiming to review and improve our reporting functions, increasing automation to decrease operational risks related to manual bookings, changing our funds accounting application and platform.

Because we believe that human capital is the biggest asset of the Bank and in a way to mitigate the operational risk, we have continuously encouraged all staff to increase their business knowledge by attending to general trainings on anti-money laundering and fight against terrorism financing and participating to various external seminars and conferences. Some of our most qualified staffs have been also enrolled as active members of some ABBL and ALFI working groups. We have also continued recruiting experienced and talented professionals. As of 31st March 2012, the Bank employs 308 staff (2011 - 297).

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 by 4 to 5 points reaching as of 31st March 2012 the level of 16.66% (2011 – 12.42%) thus further assessing the robustness of our Tier1 capital; 2.) since September 2011 we introduced a liquidity buffer of minimum €300m mainly composed of level 1 securities under Basle III ie. Government securities from Belgium, France,

Japan and the United States of America, marked-to-market on a daily basis, set-up done in coordination with the Banque Centrale de Luxembourg (“BCL”) and the Commission de Surveillance du Secteur Financier (“CSSF”); 3.) and ultimately our preparations for gradually implementing the Basle III and 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 specific netting agreements and collateral usage, in line with the revised constraints from the regulatory bodies. All over the year closed on 31st March 2012 we stabilised the volume of our Bank’s banking business and thus the size of our balance sheet. This has been achieved through continuous counterparty diversification, increase of secured reverse repo business and thorough review of collateral requirements through the use of Credit Support Annex (“CSA”) linked to ISDA contracts or pledge agreements in the scope of foreign exchange business as well as money market business. All the fiscal 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.

As per our commitment to regularly challenge the adequacy and pertinence of the Bank’s risk management functions, a dedicated chief risk officer (“CRO”) has joined us on 1st June 2011 thus enabling ourselves to set-up a fully fledged risk management function within a centralised Risk Management Department (RMD). The composition of this department is made-up as follows: one team responsible for Financial Risk management and another team in charge of Operational Risk monitoring and both teams together preparing the Bank’s readiness for the upcoming new regulatory framework. The new CRO is currently busy implementing our first 18-months RMD Global Overview & Action Plan 2011-12, which has been officially communicated to our regulators CSSF and BCL. Since then the RMD is gradually reviewing the Bank’s approach towards risk management because of its growth, the changes in the financial environment and the increasing complexity and challenges of proper risk management. Also a reinforced and re-empowered Risk Management Committee is held on a monthly basis – under the delegated chairmanship of the CRO – and all types of risk exposures that the Bank is facing

DiRectoRS’ RepoRt (continued)

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Directors' Report (continued)

based on its core business activities are duly discussed and appropriate mitigation techniques and solutions thoroughly decided and implemented. Further achievements done by the RMD until today may be summarised as follows: the ICAAP report 2012 has been broadly enhanced and the Risk Strategy of the Bank has been clearly defined – both documents waiting the final approval of the Board of Directors scheduled for 5th June 2012. With regards to Credit Risk monitoring, the CRO is currently working on a solid local service solution, thus reducing the dependence towards the EMEA CRO office and the credit support service provided under a renewed service level agreement with Nomura International Plc in London. Ultimately adequate resourcing and tools have and will be put in place or reinforced where necessary, and monthly coordination meetings between the CRO and the Bank’s Executive Committee (“Ex-Com”) have been introduced.

With regards to the internal audit control function, we confirm that, during this fiscal year, the Internal Audit Department (“IAD”) has completed a full review of the remaining departments and thus concluded a global control of the whole Bank. 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. IAD is now about to start a new 3-year audit program.

Because of the nature of our business with main focus on funds administration, custody and agency, it is our policy not to take any significant market risks in foreign exchange, interest rate and other market prices. 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.

The Bank has assessed and quantified its current and expected risks over a 3-year period by considering the activities of its various business lines. The analysis considered several types of risks (operational risk, market risk, credit risk, liquidity risk, business risk and specific risks related to the management activities of its subsidiaries). As a result of the analysis conducted, and considering all the risks the Bank faces, we concluded that the Bank continues to be adequately capitalized.

In order to mitigate the inherent risks associated with our business, we will continue to place emphasis on compliance, internal audit, and risk management and control activities managed by the dedicated professional staff with the help of Nomura Group’s network. The latest decision taken in early 2012 is the projected split of our Legal & Compliance department into two separate departments respectively headed by a newly recruited Head of Legal department and a recently identified new Head of Compliance department.

As forecasted, in order to reinforce its corporate governance by separating responsibilities for strategic decision making process and day to day management, the Bank has completed, during the fiscal year under review, changes in the composition of the Board of Directors by increasing the number of non-executive Directors and decreasing the number of Directors being also members of the Ex-Com.

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

There are no post balance sheet events to report that would affect the financial results for the year ended 31st March 2012 or that would require a disclosure in the notes to the annual accounts. For the new fiscal year 2012-13, the Bank has forecasted a stabilisation 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.

5 June 2012

Masafumi NAKADA Hajime USUKIChairman President & Managing Director Nomura Bank (Luxembourg) S.A Nomura Bank (Luxembourg) S.A.


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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 financial position as of 31 March 2012, the income statement, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows 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 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.

Responsibility of the “réviseur d’entreprises agréé” (continued)

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 Nomura Bank (Luxembourg) S.A. as of 31 March 2012, and of its financial performance and its cash flows 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, 5 June 2012


independent auditor’s report31 March 2012


Statement of financial positionAs of 31 March 2012 (expressed in EUR)

Assets

Notes 31 March 2012 31 March 2011

cash and balances with central banks 4, 31, 32 430.045.561 244.000.347

Derivatives held for trading 5, 31, 32, 35 948.459.411 1.603.772.012

Available-for-sale financial instruments 6, 31, 32, 35 487.477.823 2.595.940 Equity instruments 3.678.659 2.595.940 Debt instruments 483.799.164 ---

Loans and advances 7, 29, 31, 32, 35 4.197.450.431 4.960.858.228 Loans and advances to credit institutions 2.584.889.956 2.909.690.003 Loans and advances to customers 1.612.560.475 2.051.168.225

tangible assets 8, 31 2.554.641 3.303.096

intangible assets 8, 31 3.477.009 3.059.221

Deferred tax assets 14, 31 6.369.063 7.346.549

other assets 9, 31 44.000.033 64.636.595

total Assets 6.119.833.972 6.889.571.988

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


Liabilities and shareholders’ equity

Liabilities Notes 31 March 2012 31 March 2011

Deposits from central banks 31, 32 501.375.000 500.000.000

Derivatives held for trading 10, 31, 32, 35 967.630.601 1.626.067.372

Financial liabilities designated at fair value through profit or loss 13, 31, 32 49.165.871 64.543.047

Financial liabilities measured at amortised cost 31, 32, 35 4.259.466.934 4.391.544.635 Amounts due to credit institutions 11 8.954.166 52.295.203 Amounts due to customers 12 4.250.512.768 4.339.249.432

tax liabilities 14, 31 18.988.389 20.040.956 Current tax liabilities 11.908.796 11.938.265 Deferred tax liabilities 7.079.593 8.102.691

other liabilities 15, 31 36.526.707 57.694.784

total liabilities 5.833.153.502 6.659.890.794

Shareholders’ equity

Issued capital 16 28.000.000 28.000.000

Reserves (including retained earnings) 17 200.005.531 163.498.705

Available-for-sale reserve 6 2.789.052 1.675.663

Profit for the year 55.885.887 36.506.826

total shareholders’ equity 286.680.470 229.681.194

total liabilities and shareholders’ equity 6.119.833.972 6.889.571.988

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10


income statement

For the year ended 31 March 2012 (expressed in EUR)

Notes 31 March 2012 31 March 2011

Net interest income 35 8.949.602 7.177.527 Interest and similar income 19 34.530.222 30.931.847 Interest and similar expenses 20 (25.580.620) (23.754.320)

Dividend income 21, 35 8.067.500 5.592.366

Net fee and commission income 22, 35 67.565.965 51.282.742 Fee and commission income 67.822.641 51.358.245 Fee and commission expenses (256.676) (75.503)

Net realised gains (losses) on financial assets and liabilities not designated at fair value through profit or loss 23 --- ---

Net (un) realised gains (losses) on financial assets and liabilities held for trading 24 28.040.713 15.841.296

Net (un) realised gains (losses) on financial assets and liabilities designated at fair value through profit or loss 13, 32 (3.307.155) 2.829.854

Foreign exchange differences 25 (290.188) 3.573

Net other operating income/expenses (1.100.286) (774.373) Other operating income 212.787 143.749 Other operating expenses (1.313.073) (918.122)

Administrative expenses 26, 29, 30, 34, 35 (42.157.346) (36.207.809)

Depreciation and amortization (2.239.309) (2.868.619) Tangible assets 8, 27 (1.208.035) (1.718.371) Intangible assets 8, 27 (1.031.274) (1.150.248)

impairment (11.000) --- Available-for-sale financial instruments 27 (11.000) ---

profit before tax 63.518.496 42.876.557

income tax expenses 14 (7.632.609) (6.369.731)

profit for the year 55.885.887 36.506.826


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Statement of comprehensive incomeFor the year ended 31 March 2012 (expressed in EUR)

31 March 2012 31 March 2011

profit for the year 55.885.887 36.506.826

other comprehensive income Net gains (losses) on available-for-sale financial instruments 1.119.422 277.255 Income tax relating to components of other comprehensive income (6.033) (2.205)

other comprehensive income for the year, net of tax 1.113.389 275.050

total comprehensive income for the year, net of tax 56.999.276 36.781.876


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Statement of changes in equityFor the year ended 31 March 2012 (expressed in EUR)

Balance at transfers and total Balance at 31 March 2011 allocation of the comprehensive 31 March 2012 prior year’s profit income

Issued capital 28.000.000 --- --- 28.000.000

Profit brought forward 140.067.032 33.756.826 --- 173.823.858

FTA Reserve 3.201.673 --- --- 3.201.673

Reserves: 20.230.000 2.750.000 --- 22.980.000 a) Legal reserve (1) 2.800.000 --- --- 2.800.000 b) Special reserves (2) 17.430.000 2.750.000 --- 20.180.000

AFS reserve 1.675.663 --- 1.113.389 2.789.052

Profit for the year 36.506.826 (36.506.826) 55.885.887 55.885.887

Shareholders’ equity 229.681.194 --- 56.999.276 286.680.470

Balance at transfers and total Balance at 31 March 2010 allocation of the comprehensive 31 March 2011 prior year’s profit income

Issued capital 28.000.000 --- --- 28.000.000

Profit brought forward 91.125.942 48.941.090 --- 140.067.032

FTA Reserve 3.201.673 --- --- 3.201.673

Reserves: 18.305.000 1.925.000 --- 20.230.000 a) Legal reserve (1) 2.800.000 --- --- 2.800.000 b) Special reserves (2) 15.505.000 1.925.000 --- 17.430.000

AFS reserve 1.400.613 --- 275.050 1.675.663

Profit for the year 50.866.090 (50.866.090) 36.506.826 36.506.826

Shareholders’ equity 192.899.318 --- 36.781.876 229.681.194

(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)


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Statement of cash flows For the year ended 31 March 2012 (expressed in EUR)

31 March 2012 31 March 2011

profit before tax 63.518.496 42.876.557

Adjustments: Depreciation / Amortisation / Impairment 2.250.309 2.868.619 Fair value adjustments 182.984 1.023.507

cash flows from operating profits before changes in operating assets and liabilities 65.951.789 46.768.683

Net (increase)/decrease in loans and advances to credit institutions 5.937.893 1.115.979.739 Net (increase)/decrease in loans and advances to customers 438.607.750 (465.058.967) Net (increase)/decrease in available-for-sale financial assets (483.773.966) --- Net (increase)/decrease in other assets 20.636.562 (15.033.247) Net increase/(decrease) in deposits from banks (41.966.037) (1.173.673.487) Net (increase)/decrease in deposits from customers (88.736.664) 1.653.448.408 Net increase/(decrease) in financial liabilities designated at fair value through profit or loss (18.684.331) (54.203.192) Net increase/(decrease) in other liabilities (21.168.077) 3.878.812 Income tax (7.715.927) (6.181.648) Net variations in other operating assets/liabilities (22.959) 139.331

Net cash flow from operating activities (130.933.967) 1.106.064.432

Acquisition of investment securities --- --- Acquisition of intangible/ tangible assets (1.910.623) (4.457.008) Proceeds from sale of tangible assets 27.650 ---

Net cash flow from investing activities (1.882.973) (4.457.008)

Net increase/decrease in cash and cash equivalents (132.816.940) 1.101.607.424

cash and cash equivalents at beginning of year 2.412.386.697 1.310.779.273 Net increase/decrease in cash and cash equivalents (132.816.940) 1.101.607.424

cash and cash equivalents at end of year 2.279.569.757 2.412.386.697

of which: not available 430.034.727 243.979.788


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Statement of cash flows (continued) For the year ended 31 March 2012 (expressed in EUR)

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

31 March 2012 31 March 2011

cash and balances with central banks (Note 4) 430.045.561 244.000.347

Loans and advances to credit institutions 1.849.524.196 2.168.386.350 repayable with less than three months maturity from the date of acquisition 1.849.524.196 2.168.386.350

cash and cash equivalents 2.279.569.757 2.412.386.697



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.

Most members of the Board of Directors are Senior Executives of the Bank and its subsidiaries including the Managing Director.

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 authorized for issue by the Bank’s Board of Directors on 5 June 2012.

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.

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.


Notes to the annual accountsAs of 31 March 2012

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changes in accounting policies

The accounting policies adopted are consistent with those of the previous year, except for the following new and amended IFRS and IFRIC interpretations effective as of 1 January 2011:

– IAS 24 Related Party Disclosures (amendment) effective 1 January 2011

– IAS 32 Financial Instruments: Presentation (amendment) effective 1 February 2010

– Improvements to IFRSs (May 2010)

The adoption of the standards or interpretations is described below:

IAS 24 Related Party Transactions (Amendment)

The IASB issued an amendment to lAS 24 that clarifies the definitions of a related party. The new definitions emphasise a symmetrical view of related party relationships and clarifies the circumstances in which persons and key management personnel affect related party relationships of an entity. In addition, the amendment introduces an exemption from the general related party disclosure requirements for transactions with government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Bank.

IAS 32 Financial Instruments: Presentation (Amendment)

The IASB issued an amendment that alters the definition of a financial liability in lAS 32 to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given prorata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, to acquire a fixed number of the entity’s own equity instruments for a fixed amount in any currency. The amendment has had no effect on the financial position or performance of the Bank because it does not have this type of instruments.

Improvements to IFRSs

In May 2010, the IASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard.

The adoption of the following amendments resulted in changes to accounting policies, but has no impact on the financial position or performance of the Bank.

IFRS 7 Financial Instruments – DiscIosures: the amendment •was intended to simplify the disclosures provided by reducing the volume of disclosures around collateral held and improving disclosures by requiring qualitative information to put the quantitative information in context.

lAS 1 Presentation of Financial Statements: the amendment •clarifies that an entity may present an analysis of each component of other comprehensive income maybe either in the statement of changes in equity or in the notes to the annual accounts.

Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Bank:

lAS 27 Consolidated and Separate Financial Statements•

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 2012. 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.

IAS 1 Financial Statements Presentation – Presentation of Items of Other Comprehensive Income (OCI)

The amendments to IAS 1 change the grouping of items presented in OCI. Items that could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment

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Notes to the annual accounts (continued)

As of 31 March 2012

Note 2 - SigNiFicANt AccouNtiNg poLicieS (continued)

affects presentation only and has there no impact on the Bank’s financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012.

IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements

The amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the Bank’s annual accounts to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognised assets to enable the user to evaluate the nature of and risks associated with, the entity’s continuing involvement in those derecognised assets. The amendment becomes effective for annual periods beginning on or after 1 July 2011.

IFRS 9 Financial Instruments (Not endorsed by the European Union at that stage)

This standard, which is being developed to ultimately replace IAS 39 in its entirety, has been divided into three main phases. The first phase, which relates to the recognition and measurement of financial assets and financial liabilities, has already been completed. It introduces significant changes in the accounting requirements of financial assets, such as: a reduction in the number of available categories, business model-oriented classification rules and the prohibition to recycle (into income statement) any gains and losses on financial assets measured at fair value through other comprehensive income.

The last two phases which concern impairment and hedge accounting are still to be finalized.

The standard (including its first phase on a stand-alone basis) is applicable for annual periods beginning on or after 1 January 2015. Earlier application is permitted.

IAS 27 Separate Financial Statements (as revised in 2011)

As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries,

jointly controlled entities, and associates in separate financial statements. The amendment becomes effective for annual periods beginning on or after 1 January 2013.

IFRS 13 Fair Value Measurement

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 fair value is required or permitted. This standard becomes effective for annual periods beginning on or after 1 January 2013.

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.

17



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.

(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) Derivative 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 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.

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.

18




As of 31 March 2012

As of 31 March 2012 and 2011, 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 firm 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 firm commitment occurs.

As of 31 March 2012 and 2011, 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 2012 and 2011, 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).

(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 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.

19



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 profit or loss;

– Those that the Bank, upon initial recognition, designates as available-for-sale financial 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 “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:

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

20




As of 31 March 2012

difference between the purchase and resale prices is recorded in ‘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.

(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

21



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.

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 2012 and 2011, 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.

22




As of 31 March 2012

(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.

(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.

23



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 “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 licenses. 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 licenses: 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 2012 and 2011, the Bank has not booked any impairment on non-financial assets.

(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 “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.

24




As of 31 March 2012

(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 tax. 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 or substantively 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

– 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.

25



(q) Reclassifications of prior year figures

Where necessary, certain prior year figures have been reclassified to conform with changes to the current year’s presentation for comparative purpose.

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.

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

26



As of 31 March 2012



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 recognized 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.

27

Note 3 - SigNiFicANt AccouNtiNg eStiMAteS AND juDgMeNtS (continued)

28



As of 31 March 2012

Note 4 - cASh AND cASh BALANceS with ceNtRAL BANkS (in euR)

31 March 2012 31 March 2011

Petty cash 3.397 3.500

Cash balances with central banks 430.042.164 243.996.847

total 430.045.561 244.000.347

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 and forward foreign exchange transactions.

The Bank has entered into interest rate swaps contracts (“IRS”) 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 2012 31 March 2011

Listed unlisted Listed unlisted

Derivatives on interest rates --- 14.181 --- 7.167 Derivatives on foreign exchange rates --- 948.445.230 --- 1.603.764.845

total --- 948.459.411 --- 1.603.772.012

As of 31 March 2012, the global notional amount of the IRS contracts, including IRS with negative fair values, amounts to EUR 70.712.723 (2011: EUR 89.397.232), which is equal to the nominal of the notes (see Note 13).

Note 5 - DeRivAtiveS heLD FoR tRADiNg – ASSetS (in euR) (continued)

interest rates Foreign currency total - 31 March 2012type of derivatives / underlying assets Notional Notional Notional amount Fair value amount Fair value amount Fair value

Listed derivative products Financial derivatives --- --- --- --- --- --- Other --- --- --- --- --- ---

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

unlisted derivative products Financial derivatives 3.941.425 14.181 52.347.591.564 948.445.230 52.351.532.989 948.459.411 Other

3.941.425 14.181 52.347.591.564 948.445.230 52.351.532.989 948.459.411

total 3.941.425 14.181 52.347.591.564 948.445.230 52.351.532.989 948.459.411

interest rates Foreign currency total - 31 March 2011type of derivatives / underlying assets Notional Notional Notional amount Fair value amount Fair value amount Fair value

Listed derivative products Financial derivatives --- --- --- --- --- --- Other --- --- --- --- --- ---

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

unlisted derivative products Financial derivatives 1.539.722 7.167 60.014.916.150 1.603.764.845 60.016.455.872 1.603.772.012 Other --- --- --- --- --- ---

1.539.722 7.167 60.014.916.150 1.603.764.845 60.016.455.872 1.603.772.012

total 1.539.722 7.167 60.014.916.150 1.603.764.845 60.016.455.872 1.603.772.012

29


30



As of 31 March 2012

Note 6 - AvAiLABLe-FoR-SALe FiNANciAL iNStRuMeNtS (in euR)

equity instruments

They are composed of:

31 March 2012 31 March 2011

Listed --- ---

Unlisted 3.678.659 2.595.940

total 3.678.659 2.595.940

As of 31 March 2012 and 2011, 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 31.03.2012: EUR 3.139.042profit for the year ended 31.03.2012: EUR 1.329.327

Name: Global Funds Trust Company

Registered 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 31.03.2012: EUR 500.017profit for the year ended 31.03.2012: EUR 11.148.264

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

31


Note 6 - AvAiLABLe-FoR-SALe FiNANciAL iNStRuMeNtS (in euR) (continued)

Debt instruments

They are composed of:

31 March 2012 31 March 2011

Listed 483.799.164 ---

Unlisted --- ---

total 483.799.164 ---

As of 31 March 2012, listed debt instruments are composed of Belgian, French, US and Japanese Government bonds with maturity less than 6 months.

31 March 2012 31 March 2011

Belgium 89.982.509 ---

France 44.997.498 ---

USA 74.865.031 ---

Japan 273.954.126 ---

total 483.799.164 ---

Note 7 - LoANS AND ADvANceS (in euR)

total net carrying amounts 31 March 2012 31 March 2011

unlisted loans and advances to: - Credit institutions 2.584.889.956 2.909.690.003 - Non credit institutions 1.609.942.834 2.050.418.335 - Corporate customers 1.814.594 4.680 - Staff 803.047 745.210

total 4.197.450.431 4.960.858.228

impairment allowance for loans and advances

As of 31 March 2012 and 2011, 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 2012 31 March 2011

Current accounts 174.345.883 107.685.262

Term deposits 2.167.865.912 2.802.004.741

Other loans and advances: Reverse repo transactions 242.678.161 ---

total 2.584.889.956 2.909.690.003

Loans and advances to non credit institutions - breakdown:

31 March 2012 31 March 2011

Current accounts --- ---

Term deposits --- ---

Other loans and advances: Reverse repo transactions 1.609.942.834 2.050.418.335

total 1.609.942.834 2.050.418.335

guarantees received as collateral

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

32



As of 31 March 2012

Note 7 - LoANS AND ADvANceS (in euR) (continued)

Loans and advances to corporate customers – breakdown:

31 March 2012 31 March 2011

Current accounts 1.814.594 4.680

total 1.814.594 4.680

Loans and advances to staff – breakdown: 31 March 2012 31 March 2011

Credit cards, personal loans and loans guaranteed by payrolls 803.047 745.210

total 803.047 745.210

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 financial amount amount the financial year as of as of year 31 March 2012 31 March 2011

tangible assets 9.639.472 461.561 (78.222) 10.022.811 (7.468.170) 2.554.641 3.303.096 of which: Computer hardware 5.454.640 295.639 --- 5.750.279 (3.461.182) 2.289.097 2.933.904 Office furniture, fixtures, fittings and equipment 4.109.910 165.922 (3.300) 4.272.532 (4.006.988) 265.544 369.192 Cars 74.922 --- (74.922) --- --- --- ---

intangible assets 19.499.321 1.449.062 --- 20.948.383 (17.471.374) 3.477.009 3.059.221 of which: Computer software and licences 19.499.321 1.449.062 --- 20.948.383 (17.471.374) 3.477.009 3.059.221

33


Note 9 - otheR ASSetS (in euR)

31 March 2012 31 March 2011

Accounts receivable for the account of third parties 25.884.186 48.883.166

Commissions receivable 15.244.100 13.102.696

Prepaid expenses and other items 2.871.747 2.650.733

total 44.000.033 64.636.595

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 to its customers. Those commissions are usually claimed on a quarterly basis.

34



As of 31 March 2012

Note 10 - DeRivAtiveS heLD FoR tRADiNg – LiABiLitieS (in euR)

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 2012 31 March 2011

Listed unlisted Listed unlisted

Derivatives on interest rates --- 21.561.033 --- 24.861.173 Derivatives on foreign exchange rates --- 946.069.568 --- 1.601.206.199

total --- 967.630.601 --- 1.626.067.372

interest rates Foreign currency total - 31 March 2012type of derivatives / underlying assets Notional Fair value Notional Fair value Notional Fair value amount amount amount

unlisted derivative products Financial derivatives 66.771.298 21.561.033 53.272.785.142 946.069.568 53.339.556.440 967.630.601 Other --- --- --- --- --- ---

66.771.298 21.561.033 53.272.785.142 946.069.568 53.339.556.440 967.630.601

total 66.771.298 21.561.033 53.272.785.142 946.069.568 53.339.556.440 967.630.601

interest rates Foreign currency total - 31 March 2011type of derivatives / underlying assets Notional Fair value Notional Fair value Notional Fair value amount amount amount

unlisted derivative products Financial derivatives 87.857.510 24.861.173 61.590.411.225 1.601.206.199 61.678.268.735 1.626.067.372 Other --- --- --- --- --- ---

87.857.510 24.861.173 61.590.411.225 1.601.206.199 61.678.268.735 1.626.067.372

total 87.857.510 24.861.173 61.590.411.225 1.601.206.199 61.678.268.735 1.626.067.372

35


Note 11 - AMouNtS Due to cReDit iNStitutioNS (in euR)

As of 31 March 2012 and 2011, they are composed of:

31 March 2012 31 March 2011

Current accounts and deposits on demand 1.463.130 45.222.756

Loans with agreed maturity 7.491.036 7.072.447

total 8.954.166 52.295.203

Note 12 - AMouNtS Due to cuStoMeRS (in euR)

As of 31 March 2012 and 2011, they are composed of:

31 March 2012 31 March 2011

Current accounts 4.166.381.729 4.287.764.498

Term deposits 84.131.039 51.484.934

total 4.250.512.768 4.339.249.432

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 70.712.723, (2011: 89.397.232) 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).

36



As of 31 March 2012

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 2012 and 2011 are:

31 March 2012 31 March 2011

Current tax assets --- ---

Deferred tax assets - due to temporary deductible differences 6.369.063 7.346.549

total tax assets 6.369.063 7.346.549

Current tax liabilities 11.908.796 11.938.265

Deferred tax liabilities - due to temporary taxable differences 7.079.593 8.102.691

total tax liabilities 18.988.389 20.040.956

income tax expenses

31 March 2012 31 March 2011

Current taxes 7.679.000 5.929.455

Changes in income tax rate for previous financial years --- ---

Current taxes prior years 57.545 ---

Reversal of tax provision prior years (50.086) (3.344)

Deferred tax assets (54.072) (1.349) Related to previous fiscal exercises (reverse to the income statement) (756.080) 841 Generated in the fiscal exercise 702.008 (2.190)

Deferred tax liabilities 222 444.969 Related to previous fiscal exercises (reverse to the income statement) 2.190 (311.111) Generated in the fiscal exercise (1.968) 756.080

total 7.632.609 6.369.731

37


Note 14 - tAx expeNSeS, ASSetS AND LiABiLitieS (in euR) (continued)

Reconciliation of the total tax expenses

A reconciliation between the tax expenses and the accounting profit multiplied by Luxembourg tax rates for the years ended 31 March 2012 and 2011 is as follows:

31 March 2012 31 March 2011

Accounting profit before tax 63.518.496 42.876.557

Tax expenses at income tax rate of 29,55% 18.769.716 12.670.023

+/- adjustments linked to: income not subject to tax (14.801) (1.652.544) non-deductible expenses 37.610 4.321

Other (11.159.916) (4.652.069)

income tax expenses 7.632.609 6.369.731

Note 15 - otheR LiABiLitieS (in euR)

31 March 2012 31 March 2011

Accounts payable for the account of third parties 25.884.186 48.883.166

Salary related contributions 2.430.000 1.955.610

Deferred revenues 4.501.637 4.512.118

Other 3.710.884 2.343.890

total 36.526.707 57.694.784

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 2012 and 2011, the Bank’s authorised, subscribed and paid-up capital amounts to EUR 28.000.000, represented by 2.800 ordinary shares with a nominal value of EUR 10.000 each.

38



As of 31 March 2012

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 4.850.000 to a net worth tax reserve for the tax year 2011 (2010: 3.850.000). 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 2011:

Profit of the year 36.506.826

Transfer to special reserve for 2011 4.850.000

Release from special reserve for 2005 (2.100.000)

Allocation to retained earnings 33.756.826

Note 18 - ASSetS AND LiABiLitieS DeNoMiNAteD iN FoReigN cuRReNcy

As of 31 March 2012, the aggregate amount of the Bank’s assets denominated in currencies other than EUR, translated into EUR, amounts to EUR 4.860.740.427 (2011: EUR 5.619.911.326).

As of 31 March 2012, the aggregate amount of the Bank’s liabilities denominated in currencies other than EUR, translated into EUR, amounts to EUR 4.858.656.836 (2011: EUR 5.616.590.193).

Note 19 - iNteReSt AND SiMiLAR iNcoMe (in euR)

31 March 2012 31 March 2011

Loans and advances to central banks 2.153.118 1.483.682

Loans and advances to credit institutions 26.962.355 22.029.482

Loans and advances to customers 26.280 51.954

Derivatives held for trading 4.560.672 7.366.729

Available-for-sale financial assets 827.797 ---

total 34.530.222 30.931.847

39


Note 20 - iNteReSt expeNSeS AND SiMiLAR chARgeS (in euR)

31 March 2012 31 March 2011

Amounts due to central banks 6.403.752 5.841.667

Debt certificates designated at fair value through profit or loss 4.502.239 7.324.022

Amounts due to credit institutions 4.661.739 614.512

Amounts due to customers 10.012.890 9.974.119

total 25.580.620 23.754.320

Note 21 - DiviDeND iNcoMe

As of 31 March 2012 and 2011, the dividend income relates to the available-for-sale financial instruments.

Note 22 - Net Fee AND coMMiSSioN iNcoMe (in euR)

31 March 2012 31 March 2011

Administration fees 44.319.735 30.762.996 Custody fees 20.945.887 17.749.190 Other fees 2.557.019 2.846.059

total fee and commission income 67.822.641 51.358.245

total fee and commission expenses (256.676) (75.503)

Net fee and commission income 67.565.965 51.282.742

Note 23 - Net ReALiSeD gAiNS (LoSSeS) oN FiNANciAL ASSetS AND LiABiLitieS Not DeSigNAteD At FAiR vALue thRough pRoFit oR LoSS

As of 31 March 2012 and 31 March 2011, there is no net realized gains (losses) recognized in this caption.

40



As of 31 March 2012

Note 24 - Net (uN)ReALiSeD gAiNS (LoSSeS) oN FiNANciAL ASSetS AND LiABiLitieS heLD FoR tRADiNg (in euR)

31 March 2012 31 March 2011

Realized gains Derivatives Foreign exchange 24.917.296 17.165.678 IRS 24.861.173 22.667.545

Realized losses Derivatives Foreign exchange (752) (348) IRS (7.167) (643.393)

unrealized gains Derivatives Foreign exchange 655.136.630 1.275.779.894 IRS 14.181 7.167

unrealized losses Derivatives Foreign exchange (655.319.615) (1.274.274.074) IRS (21.561.033) (24.861.173)

total 28.040.713 15.841.296

Note 25 - FoReigN exchANge DiFFeReNceS (in euR)

31 March 2012 31 March 2011

Spot exchange on derivatives and other financial instruments Gains 319.594.569 136.464.645 Losses (319.884.757) (136.461.072)

total (290.188) 3.573

41


Note 26 - ADMiNiStRAtive expeNSeS (in euR) 31 March 2012 31 March 2011

wages and salaries - Wages and salaries 24.198.155 21.040.888 - Social contributions 2.500.164 2.179.248 - Other expenses 1.153.709 1.067.236 - Defined contribution plan 500.503 498.754 - Expenses for seconded personnel 21.403 62.983

total wages and salaries 28.373.934 24.849.109

other administrative expenses - Advisory and audit fees 589.652 593.031 - Legal fees 146.497 39.705 - Maintenance, repairs and refurbishment 27.250 20.354 - Rents and leases 2.256.116 1.670.026 - Service providers 185.304 194.361

- Couriers 38.148 44.318 - Telephone and web services 147.156 150.043

- Agency and travel expenses 291.377 245.679 - Membership subscription 203.450 190.457 - IT costs 6.635.997 5.673.824 - Outsourcing services 2.742.649 1.887.601 - Other 705.120 843.662

total other expenses 13.783.412 11.358.700

total administrative expenses 42.157.346 36.207.809

Note 27 - DepReciAtioN, AMoRtizAtioN AND iMpAiRMeNt (in euR)As of 31 March 2012 and 2011, depreciation, amortization and impairment are as follows:

Amortization impairment Amounts recoveries 31 March 2012

Tangible assets 1.208.035 --- --- 1.208.035

Intangible assets 1.031.274 --- --- 1.031.274

AFS financial instruments --- 11.000 --- 11.000

total 2.239.309 11.000 --- 2.250.309

Amortization impairment Amounts recoveries 31 March 2011

Tangible assets 1.718.371 --- --- 1.718.371

Intangible assets 1.150.248 --- --- 1.150.248

AFS financial instruments --- --- --- ---

total 2.868.619 --- --- 2.868.619

42



As of 31 March 2012

Note 28 - guARANteeS, coNtiNgeNt LiABiLitieS AND coMMitMeNtS (in euR)

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

31 March 2012 31 March 2011

guarantees given Financial guarantees 840.417 832.141 Commercial guarantees --- ---

irrevocable commitments to lend funds to Banks --- --- Customers --- ---

total 840.417 832.141

As of 31 March 2012, the Bank’s contingent liabilities include rental guarantees for its offices for an amount of 737.596 (2011: 737.596).

As of 31 March 2012, the Bank’s contingent liabilities include guarantees granted by the Bank on behalf of its employees to third parties in amount to 102.821 (2011: 94.545).

There were no contingent liabilities toward related parties as of 31 March 2012 and 2011.

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 the financial situation of the Bank. As of 31 March, details of such other commitments are as follows:

31 March 2012 31 March 2011

Commitments in respect of fixed rental payments contracted for premises 8.046.624 9.711.210

There were no such commitments toward related parties as of 31 March 2012 and 2011.

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.

43


Note 28 - guARANteeS, coNtiNgeNt LiABiLitieS AND coMMitMeNtS (in euR) (continued)

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 EUR 100.000 per cash deposit and EUR 20.000 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 Shareholders’ equity.

Note 29 - StAFF

As of 31 March 2012 and 2011, the average number of Bank’s staff is as follows:

31 March 2012 31 March 2011

Management – Senior 7 8

Management – Middle 37 31

Other staff 256 249

total 300 288

As of 31 March 2012 and 2011, 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 2012 31 March 2011

Loans and advances Managerial bodies 49.900 51.976

guarantees Managerial bodies 43.725 26.025

93.625 78.001

Note 30 - AuDit FeeS (in euR)

As of 31 March 2012 and 2011, the audit fees are split as follows:

31 March 2012 31 March 2011

Audit fees 239.400 236.123

Audit related fees 65.385 63.790

total 304.785 299.913

44



As of 31 March 2012

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:

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

Second Line of Defence concerns those units responsible for risk oversight and risk guidance in the Bank as well as 2. 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.

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

Fourth Line of Defence is composed by the Board of Directors, which have the ultimate responsibility of the risk 4. 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 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:

Implement the Risk Appetite;1.

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

Set guidelines for the Risk Management framework;3.

Promote the risk culture across the Bank;4.

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

1 Administration Support Department is in charge of Health & Safety.

45


Note 31 - RiSk MANAgeMeNt (in euR) (continued)

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:

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

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

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

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:

Information Technology Management Committee is a bi-weekly meeting where on-ongoing IT topics, including IT risks, 1. are discussed as well as future organisation and process changes. Information Security Head also attends to share in technical topics around Information Security. One of the permanent topics of this meeting is to allow attendees to raise risks to the Risk Management Committee;

It is worth noting that Information Technology has implemented IT Infrastructure Library (‘ITIL’) leading practices for 2. Incident Management, Problem Management, Change Management and Configuration Management;

Project Review Team is held every six weeks, whose purpose is to review and monitor on-going and future projects 3. evolution as well as look into project risks. The Bank follows Prince2 and Project Management Institute (‘PMI’) leading market methodologies in project management;

Legal & Compliance Committee is the formal body for legal and compliance matters, currently meeting every two months 4. and composed of the Executive Committee and heads of Internal Audit and Risk Management as observers;

Information Security Committee is a quarterly meeting with focus on discussion of Information Security topics including 5. 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;

Business Continuity Committee is a quarterly meeting with focus on business resilience topics, including discussion on 6. risks and mitigating action plans as well as ad-hoc risk assessments and their impacts on the Bank;

Monthly Interest Rate Review Meeting, whose purpose is to review and approve acceptable interest rate margin rates for 7. the next month. Interest Rate Risk is monitored by the Risk Management Committee;

Pricing Advisory Group, whose purpose is to monitor securities pricing issues and make recommendations to the 8. Management Company and Trustee.

46



As of 31 March 2012


Risk Management Department

The Bank set up a fully fledged Risk Management function in June 2011 to implement a robust Risk Management framework. The Chief Risk Officer was recruited externally and reports directly to the President & Managing Director in line with leading market practices.

Risk Management department is structured in 2 departments:

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

Operational Risk and Risk-Regulatory Department, covering in particular the numerous risk-related regulations (Capital 2. Requirement Directive IV, Basel III, European Market Infrastructure Regulation, etc.).

(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.

In order to comply with liquidity funding requirements, the Bank has set up a liquidity buffer composed in particular of short term high rated government bonds.

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.

It is a Bank practice not to have any material mismatch of assets and liabilities in terms of interest rate.

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 2011 (last available calculation) would be 2.375.016 (31 December 2010: -782.576).

On the other hand, the impact of a decrease of 200 bps would be -1.039.801 (31 December 2010: 178.176).

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

47



(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.

– Foreign exchange Risks on own positions

As agent acting upon the orders of its clients, the Bank deals almost entirely spot and forward transactions in JPY, USD as well as currencies of other markets. 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 speculative transactions are carried out by the Bank for its own account.

Moreover, a general policy of not taking any speculative currency position has been set up by the Bank, detailing the allowed open currency position limits.

These limits are the following:

– Open currency position less than EUR 150.000 equivalent per actively traded currency (with the exception of USD and JPY less than EUR 500.000 equivalent each);

– EUR 50.000 equivalent per other currency;

– Aggregate open position of EUR 2.500.000 equivalent.

Based on the extreme assumptions that the global limit of EUR 2.500.000 equivalent is reached and Euro appreciates by 10% in one week compared to open currency positions, the stress test indicates an impact of EUR 250.000 on the income statement.

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

– 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.

48



As of 31 March 2012


(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 organization 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 by NIP which is the London-based securities broker/dealer operating company.

A credit risk policy (Credit Policies and Procedures) has been issued by the NIP Investment Evaluation & Credit Department in London.

The exposures of the Bank to counterparty risk differs according to its activities but are mainly dealt with Nomura group entities (Nomura Bank International Plc (“NBI”) and NIP) for the deposit. Foreign exchange transactions are mainly dealt with NIP.

– 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 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 EUR 150 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 (“RMD”) 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 for the nostro accounts the Bank holds with its counterparties and for the overdrafts of the funds accounts in the Bank’s books.

49



– 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.

Indeed, there is an internal policy preventing Treasury Department to take an aggregate foreign exchange exposure exceeding EUR 2.500.000 equivalent for its own account.

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

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 2012, the exposure to NSC represented 70.712.723 (nominal amount), of which 44.570.528 less than one year (2011: exposure to NSC: nominal of 89.397.232, of which 42.777.877 less than one year).

– Netting agreement

As a credit risk mitigation technique, the Bank has decided to enter into netting agreements with certain 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 five counterparties being Cayman-based funds, covering foreign exchange transactions.

The impact of these netting agreements is an estimated reduction of the credit risk capital allocation of 40%.

50



As of 31 March 2012


– 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 by CSSF circular 10/475.

Pledge agreements are considered for investment funds having a size of USD 1,5 billion or more.

The exposure of existing investment funds are reviewed on a daily basis, to identify those without pledge agreement and for which the exposure reaches EUR 20 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.

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.

51



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

52



As of 31 March 2012


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 2012 31 March 2011

Balances with central banks 430.042.164 243.996.847

Derivatives held for trading 948.459.411 1.603.772.012

Available-for-sale equity instruments 3.678.659 2.595.940

Available-for-sale debt instruments 483.799.164 ---

Loans and advances 4.197.450.431 4.960.858.228

total 6.063.429.829 6.811.223.027

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 2012 31 March 2011

Guarantees 840.417 832.141

53



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 individually 31 March 31 March 2012 2012 2012 31 March grade impaired 2012 2012 31 March 31 March 2012 2012

Balances with central banks 430.042.164 --- --- --- --- --- --- 430.042.164

Derivatives held for trading 167.902.197 10.300.946 --- --- 770.256.268 --- --- 948.459.411

Available-for-sale equity instruments --- --- --- --- 3.678.659 11.000 (11.000) 3.678.659

Available-for-sale debt instruments --- 483.799.164 --- --- --- --- --- 483.799.164

Loans and advances 3.326.006.768 865.729.958 3.086.641 9.424 2.617.640 --- --- 4.197.450.431

total 3.923.951.129 1.359.830.068 3.086.641 9.424 776.552.567 11.000 (11.000) 6.063.429.829

Neither past due nor impaired

prime Quality high grade Standard Sub- Not rated past due or total 31 March 31 March grade standard individually 31 March 2011 2011 2011 31 March grade impaired 2011 31 March 31 March 2011 2011

Balances with central banks 243.996.847 --- --- --- --- --- 243.996.847

Derivatives held for trading 1.172.825.461 7.167 --- --- 430.939.384 --- 1.603.772.012

Available-for-sale equity instruments --- --- --- --- 2.595.940 --- 2.595.940

Available-for-sale debt instruments --- --- --- --- --- --- ---

Loans and advances 4.770.392.940 187.421.766 2.293.628 4 749.890 --- 4.960.858.228

total 6.187.215.248 187.428.933 2.293.628 4 434.285.214 --- 6.811.223.027

54



As of 31 March 2012


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 2012 and 2011, 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 summarized as follows:

31 March 2012 31 March 2011

Australia 1.936.433 1.992.917 Belgium 36.246.734 168.501.484 Japan 19.001.804 15.303.387 Canada 40.318 19.292 Germany 456.954.139 81.107.175 Denmark 139.835.634 135.426.218 Spain 10.952 663.895 Finland 105.590.836 9.728 France 349.564.794 71.565.149 United Kingdom 2.475.520.898 5.040.677.018 Italy 7.565 11.032 Luxembourg 272.635.799 321.881.360 USA 341.562.834 74.992.407 Cayman Islands 722.128.286 381.908.175 Others 224.872.816 270.571.003

total 5.145.909.842 6.564.630.240

55



Sectorial allocation of risks

An industry sector analysis of the Bank’s derivatives held for trading and Loans and advances, before and after taking into account collateral held or other credit enhancements, without considering credit risk assets included in disposal groups classified as held for sale, is as follows:

31 March 2012 31 March 2011

gross maximum Net maximum gross maximum Net maximum exposure exposure exposure exposure

Financial services 5.145.106.795 2.344.028.149 6.563.885.030 4.183.803.527

Other 803.047 --- 745.210 ---

total 5.145.909.842 2.344.028.149 6.564.630.240 4.183.803.527

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

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 has affected the Large Exposures regime. In that scope, 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 1,75 billion credit risk equivalent. This exemption will be reduced to 1,3 billion credit risk equivalent once a Netting Agreement will be effectively put in place with NIP and recognized by the CSSF.

At the same time, the Bank has addressed the concentration risk in diversifying the remaining part of the unsecured exposures with external counterparties and in setting up an internal limit, defined in the ‘’Liquidity Management Policy’’, which requires that 20% of the investment funds cash is placed outside the Group.

In order to avoid a too high concentration of risks, the Bank is required to respect two criteria under Luxembourg law.

Firstly, in order to avoid a too high concentration of risk, the Bank is required to observe the following limit on a permanent basis:

– The total risk exposure towards a single client or group of connected clients must not exceed 25% of the own funds of the Bank.

For exposures towards the Group, please refer to previous paragraphs.

As the Bank is involved at 99% with high rated financial institutions established in OECD countries with stable political and economical environment, the country risk can be considered as limited.

56



As of 31 March 2012


The second criterion is the solvency 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 weighted credit risk of the assets and off-balance sheet. The minimum limit is 8%.

As of 31 March 2012, the solvency coefficient of the Bank was 16,66% (2011: 12,42%).

Impairment

As of 31 March 2012 and 2011, neither specific, nor collective impairments have been recorded by the Bank except for a not significant participation, which has been fully depreciated for EUR 11.000.

(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.

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

Nevertheless, in order to comply with Liquidity Funding requirements, the Bank has set up a liquidity buffer composed in particular of short term high rated government bonds.

The Bank is a liability-driven bank which deposits the majority of its funds with intra-group companies. In turn, the parent company is the main access point to the interbank market and it also acts as lender of last resort for the Bank.

Regarding off-balance sheet items, the Bank has entered into:

– IRS to hedge the MTN program;

– Currency forward contracts taken for the investment funds (1 leg with the funds, 1 leg with brokers, both legs offset each other).

(ii) Liquidity Risk Appetite

The Bank ensures that its liquidity ratio is exceeding, at all times, an internal warning threshold that has been defined at 50%.

The Bank’s liquidity profile fits well within NEHs (Nomura Europe Holdings Plc.) liquidity risk appetite which is itself in line with the global liquidity risk appetite of the group. The latter is defined as holding a sufficient liquidity portfolio of high quality assets to survive two severe stress scenarios without the ability to raise or roll unsecured financing or liquidation of assets.

57



(iii) Liquidity Risk Exposure

Based on its strategy and balance sheet structure, it appears that the Bank is not directly exposed to funding liquidity risk as it would only place the cash made available by its clients. The Bank is not either exposed to market liquidity risk as it does not hold securities for its own account except the bonds portfolio mentioned above and does not require any collateral from intra-group companies.

Liquidity risk exposure for the Bank may derive from other risks.

– Counterparty Settlement Risk: the failure of the Bank counterparties would impair its cash flows and hence its ability to meet its commitments as they fall due;

– Concentration Risk: the Bank has a high concentration with Nomura group. This risk has been the focus of liquidity risk stress testing;

– Operational Risk: this can be a source of liquidity disruptions. In particular, significant problems can develop very quickly 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.

(iv) Liquidity Measurement and Stress Testing

The Bank has performed a cash flow projection based on a maturity mismatch approach over a 1-year horizon. The projection shows that in normal circumstances the Bank is able to meet its payment obligations.

On top of its own bonds portfolio that can be quickly monetized, the Bank is as well relying on its parent company to support its liquidity in stressed times.

But the Bank has nevertheless identified and stressed extremely severe scenarios with low probability but still plausible.

The result is that the Bank has a good level of liquidity. The impact on the Bank’s liquidity would materialize under the high severity simulation of one scenario and under another scenario but only for one day. If the Bank were to face these fat-tail events, the Bank’s cash balance would be in overdraft one day. The Bank is able to support the cost of this one-day overdraft interests but is also considering possible alternatives to close the gap (e.g, reducing the intra-group concentration so that the Bank remains with positive cash flow in any stressed scenarios …).

(v) Liquidity Risk Controls and Mitigation

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. This 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 all the concerned entities.

As well, 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.

58



As of 31 March 2012


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.

Lastly, in case of emergency situation of liquidity shortage, the ExCom can invoke the Emergency Funding Procedures issued by the Global Funding, Risk and Cash Management team (“Global FRCM”) from NIP.

These procedures have been set-out to deal with serious adverse market conditions. They operate on an incremental escalation basis with status levels as green, amber and red dependent on severity of the conditions.

(vi) Liquidity Risk Exposure

Throughout the financial market turmoil, the Bank has not faced any liquidity problem, notably regarding the availability of liquidity.

In view of the stress testing results, the Bank has a better visibility on the areas where it should focus. The Bank has now the quantitative and qualitative elements to define its liquidity buffer and triggers of emergency cases. Since 2010, the Bank has been enhancing its liquidity risk management framework and formalizing the related policies and methodologies as well as its local contingency plan.

Mitigation actions described above successfully prevent the Bank from being exposed to liquidity issues.

59



Duration analysis

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

31 March 2012 < 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 --- --- --- --- --- 501.375.000 --- 501.375.000

Derivatives held for trading 92.476.087 809.836.975 43.045.255 727.236 1.319.727 11.106.381 9.118.940 967.630.601

Financial liabilities designated at fair value through profit or loss --- 1.422.824 2.772.818 --- 14.389.810 22.801.015 7.779.404 49.165.871

Amounts due to credit institutions 5.957.837 2.996.329 --- --- --- --- --- 8.954.166

Amounts due to customers 4.229.086.758 777.985 5.334.146 --- 15.313.879 --- --- 4.250.512.768

total financial liabilities 4.327.520.682 815.034.113 51.152.219 727.236 31.023.416 535.282.396 16.898.344 5.777.638.406

31 March 2011 < 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 --- 500.000.000 --- --- --- --- --- 500.000.000

Derivatives held for trading 392.539.191 1.196.623.455 11.560.075 2.593.371 1.805.486 8.267.750 12.678.044 1.626.067.372

Financial liabilities designated at fair value through profit or loss --- 20.047.817 2.817.245 422.354 6.935.506 22.103.904 12.216.221 64.543.047

Amounts due to credit institutions 45.222.756 --- 7.072.447 --- --- --- --- 52.295.203

Amounts due to customers 4.298.675.229 12.776.728 14.965.183 12.832.292 --- --- --- 4.339.249.432

total financial liabilities 4.736.437.176 1.729.448.000 36.414.950 15.848.017 8.740.992 30.371.654 24.894.265 6.582.155.054

60



As of 31 March 2012


Duration analysis

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

31 March 2012 < 1month ≥ 1 month ≥ 3 months ≥ 6 months ≥ 1 year ≥ 2 years ≥ 5 years undeter- total < 3 months < 6 months < 1 year < 2 years < 5 years mined

Guarantees --- --- --- 2.010 21.737 816.670 --- --- 840.417

31 March 2011 < 1month ≥ 1 month ≥ 3 months ≥ 6 months ≥ 1 year ≥ 2 years ≥ 5 years undeter- total < 3 months < 6 months < 1 year < 2 years < 5 years mined

Guarantees --- --- --- --- 13.437 88.503 730.201 --- 832.141

61



(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 2012 and 2011, the assets and liabilities denominated in EUR, in JPY, in USD and in other currencies are as follows:

31 March 2012 euR jpy uSD other total

Cash and balances with central banks 430.044.587 --- 349 625 430.045.561

Derivatives held for trading 1.470.895 79.070.602 811.593.857 56.324.057 948.459.411

Available-for-sale equity instruments 3.678.659 --- --- --- 3.678.659

Available-for-sale debt instruments 134.980.007 273.954.126 74.865.031 --- 483.799.164

Loans and advances Loans and advances to credit institutions 669.972.752 224.534.920 1.453.375.452 237.006.832 2.584.889.956 Loans and advances to customers 2.075.450 489.426.897 1.120.515.938 542.190 1.612.560.475

Tangible assets 2.554.641 --- --- --- 2.554.641

Intangible assets 3.477.009 --- --- --- 3.477.009

Deferred tax assets 6.369.063 --- --- --- 6.369.063

Other assets 4.470.482 3.696.229 32.323.138 3.510.184 44.000.033

total assets 1.259.093.545 1.070.682.774 3.492.673.765 297.383.888 6.119.833.972


Deposits from central banks 501.375.000 --- --- --- 501.375.000

Derivatives held for trading 9.769 103.384.599 48.720.580 815.515.653 967.630.601

Debt certificates designated at fair value through profit or loss --- 40.424.262 8.741.609 --- 49.165.871

Financial liabilities measured at amortised cost Amounts due to credit institutions 681.445 --- 7.834.635 438.086 8.954.166 Amounts due to customers 446.142.043 925.110.697 2.641.503.631 237.756.397 4.250.512.768

Tax liabilities 18.988.389 --- --- --- 18.988.389 of which: deferred tax liabilities 7.079.593 --- --- --- 7.079.593

Other liabilities 7.300.020 4.295.441 22.562.048 2.369.198 36.526.707

total liabilities 974.496.666 1.073.214.999 2.729.362.503 1.056.079.334 5.833.153.502

62



As of 31 March 2012



Cash and balances with central banks 243.999.219 --- --- 1.128 244.000.347

Derivatives held for trading 1.166.841 1.568.045 34.321.500 1.566.715.626 1.603.772.012

Available-for-sale equity instruments 2.595.940 --- --- --- 2.595.940

Loans and advances Loans and advances to credit institutions 993.841.734 996.988.395 781.872.112 136.987.762 2.909.690.003 Loans and advances to customers 745.210 --- 2.050.423.015 --- 2.051.168.225

Tangible assets 3.303.096 --- --- --- 3.303.096

Intangible assets 3.059.221 --- --- --- 3.059.221

Deferred tax assets 7.346.549 --- --- --- 7.346.549

Other assets 13.602.852 3.810.426 45.864.965 1.358.352 64.636.595

total assets 1.269.660.662 1.002.366.866 2.912.481.592 1.705.062.868 6.889.571.988


Deposits from central banks 500.000.000 --- --- --- 500.000.000

Derivatives held for trading 48.946 213.169.584 1.406.316.397 6.532.445 1.626.067.372

Debt certificates designated at fair value through profit or loss --- 63.912.399 630.648 --- 64.543.047

Financial liabilities measured at amortised cost Amounts due to credit institutions 35.056.255 --- 17.238.948 --- 52.295.203 Amounts due to customers 473.305.309 906.919.475 2.821.134.219 137.890.429 4.339.249.432

Tax liabilities 20.040.956 --- --- --- 20.040.956 of which: deferred tax liabilities 8.102.691 --- --- --- 8.102.691

Other liabilities 14.849.135 5.266.677 37.081.427 497.545 57.694.784

total liabilities 1.043.300.601 1.189.268.135 4.282.401.639 144.920.419 6.659.890.794

63



(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 2012 < 1 month ≥ 1 month ≥ 3 months ≥ 6 months ≥ 9 months ≥ 12 months total < 3 months < 6 months < 9 months < 12 months or undeter- mined

Cash and balances with central banks 430.045.561 --- --- --- --- --- 430.045.561

Derivatives held for trading (IRS) 4.780 4.113 --- 4.192 --- 1.096 14.181

Available-for-sale debt instruments 89.990.636 136.313.503 257.495.025 --- --- --- 483.799.164

Loans and advances Loans and advances to credit institutions 1.789.106.217 214.044.295 80.364.444 --- --- 501.375.000 2.584.889.956 Loans and advances to customers 1.611.807.890 89.927 90.977 84.365 75.993 411.323 1.612.560.475

total 3.920.955.084 350.451.838 337.950.446 88.557 75.993 501.787.419 5.111.309.337


Deposits from central banks --- --- --- --- --- 501.375.000 501.375.000

Derivatives held for trading (IRS) 1.304.793 7.116.760 1.383.253 1.049.937 2.421.750 8.284.540 21.561.033

Debt certificates designated at fair value through profit or loss 4.872.907 12.952.538 1.631.046 2.256.658 9.593.971 17.858.751 49.165.871

Financial liabilities measured at amortised cost Amounts due to credit

institutions 8.954.166 --- --- --- --- --- 8.954.166 Amounts due to customers 4.229.864.743 5.334.146 15.313.879 --- --- --- 4.250.512.768

total 4.244.996.609 25.403.444 18.328.178 3.306.595 12.015.721 527.518.291 4.831.568.838

gap (324.041.525) 325.048.394 319.622.268 (3.218.038) (11.939.728) (25.730.872) 279.740.499

64



As of 31 March 2012



Cash and balances with central banks 244.000.347 --- --- --- --- --- 244.000.347

Derivatives held for trading (IRS) 153 --- --- --- --- 7.014 7.167

Loans and advances Loans and advances to credit institutions 2.655.399.744 199.243.980 55.046.279 --- --- --- 2.909.690.003 Loans and advances to customers 2.050.423.721 21.236 30.329 32.171 23.340 637.428 2.051.168.225

total 4.949.823.965 199.265.216 55.076.608 32.171 23.340 644.442 5.204.865.742


Deposits from central banks --- 500.000.000 --- --- --- --- 500.000.000

Derivatives held for trading (IRS) 2.168.506 1.124.716 581.278 1.091.492 4.540.263 15.354.918 24.861.173

Debt certificates designated at fair value through profit or loss 18.145.489 6.882.864 1.129.524 3.185.513 3.928.207 31.271.450 64.543.047

Financial liabilities measured at amortised cost

Amounts due to credit institutions 49.466.868 2.828.335 --- --- --- --- 52.295.203 Amounts due to customers 4.299.784.745 39.464.687 --- --- --- --- 4.339.249.432

total 4.369.565.608 550.300.602 1.710.802 4.277.005 8.468.470 46.626.368 4.980.948.855

gap 580.258.357 (351.035.386) 53.365.806 (4.244.834) (8.445.130) (45.981.926) 223.916.887

(f) operational risk

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

(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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Note 32 - FAiR vALue oF FiNANciAL iNStRuMeNtS (in euR)

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

carrying amount Fair value

31 March 2012 31 March 2011 31 March 2012 31 March 2011

Assets Balances with central banks 430.042.164 243.996.847 430.042.164 243.996.847 Loans and advances 4.197.450.431 4.960.858.228 4.197.450.431 4.960.858.228

Liabilities Deposits from central banks 501.375.000 500.000.000 501.375.000 500.000.000 Financial liabilities measured at amortised cost 4.259.466.934 4.391.544.635 4.259.466.934 4.391.544.635

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.

Fair value hierarchy

As of 31 March 2012, 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 2012 (in EUR) Level 1 Level 2 Level 3 total

Financial assets Derivatives held for trading --- 948.459.411 --- 948.459.411 Available-for-sale equity instruments --- --- 3.678.659 3.678.659 Available-for-sale debt instruments 483.799.164 --- --- 483.799.164

total financial assets 483.799.164 948.459.411 3.678.659 1.435.937.234

Financial liabilities Derivatives held for trading --- 967.630.601 --- 967.630.601 Financial liabilities designated at fair value through profit or loss --- --- 49.165.871 49.165.871

total financial liabilities --- 967.630.601 49.165.871 1.016.796.472

66



As of 31 March 2012

Note 32 - FAiR vALue oF FiNANciAL iNStRuMeNtS (in euR) (continued)

31 March 2011 (in EUR) Level 1 Level 2 Level 3 total

Financial assets Derivatives held for trading --- 1.603.772.012 --- 1.603.772.012 Available-for-sale equity instruments --- --- 2.595.940 2.595.940

total financial assets 1.603.772.012 2.595.940 1.606.367.952

Financial liabilities Derivatives held for trading --- 1.626.067.372 --- 1.626.067.372 Financial liabilities designated at fair value through profit or loss --- --- 64.543.047 64.543.047

total financial liabilities --- 1.626.067.372 64.543.047 1.690.610.419

During the year ending 31 March 2012, 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 2012, 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 2012, 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 profit or loss as of 31 March 2011 64.543.047

Total loss recognised in the income statement 3.307.155

Issues 112.941.958

Redemptions (137.683.870)

Transfers from/to Level 3 ---

Foreign exchange rates fluctuations 6.057.581

Financial liabilities designated at fair value through profit or loss as of 31 March 2012 49.165.871

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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 2012 and 2011, 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 organized 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 2012 and 2011 concerning Group entities, subsidiaries and the Parent company are as follows:

31 March 2012 31 March 2011


Available-for-sale equity instruments 3.639.059 2.547.500

Loans and advances 2.111.317.834 3.891.652.176

total assets 2.252.138.231 4.811.054.687


Financial liabilities measured at amortized cost 818.674.295 1.182.404.348

total liabilities 1.419.739.166 1.511.616.472

68



As of 31 March 2012

Note 35 - ReLAteD pARty DiScLoSuReS (in euR) (continued)

For guarantees granted to Managerial bodies, please refer to Note 29.

income and expenses 31 March 2012 31 March 2011

Net interest income 13.039.956 21.974.050

Dividend income 8.067.500 5.592.366

Net fee and commission income 2.401.600 2.697.313

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 2012 31 March 2011

Supervisory bodies 50.000 50.000

Managerial bodies 2.158.011 1.740.298

Corporate pensions 119.848 116.189

total 2.327.859 1.906.487

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 2012 and the date when the present annual accounts were authorised for issue.

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Nomura Bank (Luxembourg) S.A.Building A, 33 rue de Gasperich L-5826 HesperangeBP 289L-2012 LuxembourgTel.: (352) 463 88 88Fax: (352) 46 33 33Email: [email protected]

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