audited annual accounts - seb group · s kandinavisk a enskil da ban ken s .a. repo ort n the aud...

AUDITED ANNUAL ACCOUNTSFor the year ended December 31, 2018

Skandinaviska Enskilda Banken S.A.

4, Rue PeternelchenL-2370 HowaldRCS Luxembourg: B 10 831

Postal address: P.O. Box 487, L-2014 Luxembourg, Office address: 4 rue Peternelchen, L-2370 HowaldSwitchboard: +352 26 23 1, Fax: +352 26 23 20 01Skandinaviska Enskilda Banken S.A., Registered office: 4, rue Peternelchen, L-2370 HowaldA subsidiary of Skandinaviska Enskilda Banken AB (publ), Registered number: RCS Luxembourg B10831, VAT number: LU11917605 sebgroup.lu

CONTENTS

Page

Directors' report 2018 1 - 5

Audit report 6 - 11

Balance Sheet 12 - 13

Off Balance Sheet 14

Profit and Loss Account 15

Notes to the annual accounts 16 - 45

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 LuxembourgT : +352 494848 1, F : +352 494848 2900, www.pwc.lu

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)R.C.S. Luxembourg B 65 477 - TVA LU25482518

Audit report

To the Board of Directors ofSkandinaviska Enskilda Banken S.A.

Report on the audit of the annual accounts

Our opinion

In our opinion, the accompanying annual accounts give a true and fair view of the financial position ofSkandinaviska Enskilda Banken S.A. (the “Bank”) as at 31 December 2018, and of the results of itsoperations for the year then ended in accordance with Luxembourg legal and regulatory requirementsrelating to the preparation and presentation of the annual accounts.

What we have audited

The Bank’s annual accounts comprise:

· the balance sheet as at 31 December 2018;· the profit and loss account for the year ended 31 December 2018; and· the notes to the annual accounts as at 31 December 2018, which include a summary of significant

accounting policies.

Basis for opinion

We conducted our audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) asadopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Ourresponsibilities under the EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adoptedfor Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseurd’Entreprises Agréé” for the audit of the annual accounts” section of our report.

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

We are independent of the Bank in accordance with the International Ethics Standards Board forAccountants’ Code of Ethics for Professional Accountants (IESBA Code) as adopted for Luxembourgby the CSSF together with the ethical requirements that are relevant to our audit of the annualaccounts. We have fulfilled our other ethical responsibilities under those ethical requirements.

To the best of our knowledge and belief, we declare that we have not provided non-audit services thatare prohibited under Article 5(1) of Regulation (EU) No 537/2014.

The non-audit services that we have provided to the Bank for the year then ended, are disclosed inNote 22 to the annual accounts.

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Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance inour audit of the annual accounts of the current period, and include the most significant assessed risksof material misstatement (whether or not due to fraud).

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

Key audit matter How our audit addressed theKey audit matter

Value adjustments on loans granted to customers

As at 31 December 2018 the loans granted to customers amountto 1,185.6 Mio EUR out of which 650.3 Mio EUR are related toMortgage loans; 459.6 Mio EUR are related to Lombard creditsand 75.7 Mio EUR to Advances. There is no value adjustmentrelated to impaired loans as at 31 December 2018.

The lending activity of the Bank is mainly dedicated to privatecustomers, for the purposes of investment management throughLombard credits (including loans, overdrafts, foreign exchangetransactions, guarantees) or to finance housing secured bymortgage deeds in residential properties located in the UK,France, Sweden, Spain and Switzerland and co-operative and/ortenant owner flats.

The value adjustments on loans are decided in accordance withthe circumstances and for amounts specified by the CreditCommittee and Management and approved by the Board ofDirectors.

This is a process which requires significant judgment and involvesvarious assumptions and factors, such as the identification of adeterioration in the creditworthiness of an individual or entity, themonitoring of repayment of principal or interests, the financialsituation of the counterparty, the value of collateral and theassessment of the recoverable amount.

We therefore focused on this area as the identification of doubtfulloans and the determination of value adjustments require asignificant amount of judgement. In addition, unidentified valueadjustment on loans to customers could have a significant impacton the Bank's annual accounts.

Refer to Note 2.3 (Loans and advances to credit institutions and tocustomers) and Note 3.3.2 (Private Banking Customer Credits)and Note 3.3.5 (Value adjustment of loans granted to customers)of the annual accounts.

We evaluated the design andtested the operating effectivenessof the internal controls over thecredit cycle, with special focus onthe credit monitoring process.

This includes those controlslinked to the identification ofpotential watch listed loanspresenting specific risk criteriasuch as a shortfall in collateral orexcess of approved limits.

In addition, we ensured thatcontrols over the annual reviewof loans by the Credit Committeeand over the management of theloans watch list were properlyundertaken.

Besides, we adopted a riskbased sampling approach tocover all loan types. Todetermine this sample wefocused on the largest exposuresof the Bank, the watch listedloans completed by elementsof unpredictability. We thenassessed the recoverability ofthose loans to identifyany potential unrecognisedvalue adjustments as of31 December 2018.

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Key audit matter How our audit addressed theKey audit matter

Other Provisions

We have particularly focused on “Other provisions” that at31 December 2018 represents 28.9 Mio EUR.

Provisions are intended to cover losses or debts, the nature ofwhich is clearly defined and which, at the date of the balancesheet, are either likely to be incurred or certain to be incurredbut uncertain as to their amount or the date on which they willarise.

At year-end, the Bank presents 5.7 Mio EUR of otherprovisions for restructuring mainly linked to a simplificationproject of its legal structure which is still uncertain as to thetiming of its completion and thus triggered significantManagement judgement in its estimation.

In addition, following the suspension of a project related to theoutsourcing of some operational processes to another Groupentity, an amount of 4.4 Mio EUR of provisions for restructuringhas been reversed.

The determination and valuation of provisions is judgementalby nature and therefore there is a risk that the estimate isincorrect and the provision is materially misstated.

We focused on this area because of this inherent level ofjudgement by Management in estimating certain otherprovisions.

Refer to Note 2.9 (Provisions) and Note 12 (Other provisions)of the annual accounts.

In order to mitigate the riskrelated to the estimation of otherprovisions, we obtained anunderstanding of the provisionestimation process and relatedcontrols.

We inquired Management andinspected Board of Directorsminutes of meeting for actual andpotential obligations arising in theyear. We challenged whetherprovisions represent presentobligations that are either likely tobe incurred or certain to beincurred.

We obtained an understanding ofexisting obligations, includingclaims and litigations, theassessment regarding thelikelihood of those obligations andthe basis used to measure theprovisions.

We requested lawyers of the Bankto provide us with confirmationsabout existing litigation includingthe likelihood and estimate offuture cash outflows as at31 December 2018.

We tested all significant otherprovisions as well as a sample ofadditional ones. To do so, wecompared the estimate of the riskand impact of these obligations,including claims and litigations tosupporting evidence.

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Other information

The Board of Directors is responsible for the other information. The other information comprises theinformation stated in the directors' report 2018 but does not include the annual accounts and our auditreport thereon.

Our opinion on the annual accounts does not cover the other information and we do not express anyform of assurance conclusion thereon.

In connection with our audit of the annual accounts, our responsibility is to read the other informationidentified above and, in doing so, consider whether the other information is materially inconsistent withthe annual accounts or our knowledge obtained in the audit, or otherwise appears to be materiallymisstated. If, based on the work we have performed, we conclude that there is a materialmisstatement of this other information, we are required to report that fact. We have nothing to report inthis regard.

Responsibilitie of the Board of Directors for the annual accounts

The Board of Directors is responsible for the preparation and fair presentation of the annual accountsin accordance with Luxembourg legal and regulatory requirements relating to the preparation andpresentation of the annual accounts, and for such internal control as the Board of Directors determinesis necessary to enable the preparation of annual accounts that are free from material misstatement,whether due to fraud or error.

In preparing the annual accounts, the Board of Directors is responsible for assessing the Bank’s abilityto continue as a going concern, disclosing, as applicable, matters related to going concern and usingthe going concern basis of accounting unless the Board of Directors either intends to liquidate theBank or to cease operations, or has no realistic alternative but to do so.

Responsibilitie of the “Réviseur d’Entreprises Agréé” for the audit of the annual accounts

The objectives of our audit are to obtain reasonable assurance about whether the annual accounts asa whole are free from material misstatement, whether due to fraud or error, and to issue an auditreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with the EU Regulation No 537/2014, the Law of23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and are considered materialif, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these annual accounts.

As part of an audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 andwith ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintainprofessional scepticism throughout the audit. We also:

· identify and assess the risks of material misstatement of the annual accounts, whether due to fraudor error, design and perform audit procedures responsive to those risks, and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting amaterial misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol;

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· obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Bank’s internal control;

· evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the Board of Directors;

· conclude on the appropriateness of the Board of Directors’ use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Bank’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw attentionin our audit report to the related disclosures in the annual accounts or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up tothe date of our audit report. However, future events or conditions may cause the Bank to cease tocontinue as a going concern;

· evaluate the overall presentation, structure and content of the annual accounts, including thedisclosures, and whether the annual accounts represent the underlying transactions and events ina manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable,related safeguards.

From the matters communicated with those charged with governance, we determine those mattersthat were of most significance in the audit of the annual accounts of the current period and aretherefore the key audit matters. We describe these matters in our audit report unless law or regulationprecludes public disclosure about the matter.

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pwc

Report on other legal and regulatory requirements

The directors‘ report 2018 is consistent with the annual accounts and has been prepared inaccordance with applicable legal requirements.

We have been appointed as “Réviseur d’Entreprises Agréé” of the Bank by the Board of Directors on9 March 2018 and the duration of our uninterrupted engagement, including previous renewals andreappointments, is 19 years.

Pricewater , useCoopers, Société coopérative " Luxembourg, 8 March 2019Represe ed by

J e Batsch

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

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Balance Sheet as at December 31, 2018(expressed in EURO)

2018 2017A S S E T S Note(s)

EUR EUR

Cash in hand, balances with central banks and postoffice banks

4 1,524,580,145 2,525,757,507

Loans and advances to credit institutions 5.2 1,379,116,017 2,112,830,581- repayable on demand 54,117,953 112,566,748- other loans and advances 1,324,998,064 2,000,263,833

Loans and advances to customers 5.2, 10 1,185,645,585 1,073,308,262

Bonds and other fixed-income transferablesecurities

6.1 57,081,099 82,785,239

- issued by public bodies 6.1 57,081,099 82,785,239

Shares in affiliated undertakings 5.1, 6.2, 7 99 102

Intangible assets 7 123,633 222,835

Tangible assets 7 1,184,867 1,497,623

Other assets 8.1 28,592,214 23,347,196

Prepayments and accrued income 8.2 22,284,646 5,640,334___________ ___________

Total assets 4,198,608,305 5,825,389,679=========== ===========



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Balance Sheet as at December 31, 2018 (cont.)(expressed in EURO)

2018 2017L I A B I L I T I E S Note(s)

EUR EUR

Amounts owed to credit institutions 5.2 520,961,066 2,397,108,859- repayable on demand 22,610,639 4,387,918- with agreed maturity dates or periods of notice 498,350,427 2,392,720,941

Amounts owed to customers 5.2 3,360,146,080 3,107,911,951- other debts 3,360,146,080 3,107,911,951· repayable on demand 3,170,994,752 2,992,577,671· with agreed maturity dates or periods of notice 189,151,328 115,334,280

Debts evidenced by certificates 9 4,859,234 4,859,234- others 4,859,234 4,859,234

Other liabilities 11 15,684,284 12,716,359

Accruals and deferred income 3,632,280 7,152,506

Provisions 49,066,870 46,355,078- provisions for pensions and similar obligations 1,506,594 1,530,627- provisions for taxation 18,685,251 15,628,531- other provisions 12 28,875,025 29,195,920

Special items with a reserve quota portion 13 22,798,741 22,798,741

Subscribed capital 14, 16 117,985,000 117,985,000

Reserves 15, 16 87,975,250 87,475,250

Profit brought forward 16 26,701 514,521

Profit for the financial year 16 15,472,799 20,512,180_____________ _____________

Total liabilities 4,198,608,305 5,825,389,679============ ============



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Off Balance Sheet as at December 31, 2018(expressed in EURO)

Note(s) 2018

EUR

2017

EUR

Contingent liabilities 18.1 13,522,753 14,381,764Of which:- guarantees and assets pledged as collateral security 13,522,753 14,381,764

Commitments 18.2 4,065,680,897 155,048,174



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Profit and Loss Account for the year ended December 31, 2018(expressed in EURO)

Note(s) 2018 2017

EUR EUR

Interest receivable and similar income 41,451,349 28,602,328Of which:- arising from fixed-income transferable securities 1,185,259 806,013

Interest payable and similar charges (22,248,671) (14,986,052)

Income from transferable securities 799 799- income from shares and other variable-yield transferable

securities799 799

Commissions receivable 47,757,220 73,016,170

Commissions payable (25,254,214) (49,100,734)

Net profit on financial operations 9,840,949 14,190,369

Other operating income 19.3 13,555,945 10,968,767

General administrative expenses (40,032,763) (40,289,551)- staff costs (23,860,341) (25,491,317)

Of which:· wages and salaries (19,260,925) (20,373,080)· social security costs (3,292,818) (3,669,786)

Of which: pension costs (2,356,744) (2,660,879)- other administrative expenses (16,172,422) (14,798,234)

Value adjustments in respect of intangible and tangibleassets

7 (656,773) (911,165)

Other operating charges 19.2 (5,727,295) (485,088)

Value adjustments in respect of loans and advances andprovisions for contingent liabilities and commitments

20 - (10,826)

Value re-adjustments in respect of loans and advances andprovisions for contingent liabilities and commitments

- 4,423,678

Value adjustments in respect of transferable securities heldas financial fixed assets, participating interests and sharesin affiliated undertakings

(11,962) (54,485)

Tax on profit on ordinary activities (3,200,000) (4,850,000)

Profit on ordinary activities after tax 15,474,584 20,514,210_________ _________

Other taxes not shown in the preceding items (1,785) (2,030)_________ _________

Profit for the financial year 15,472,799 20,512,180========= =========

Skandinaviska Enskilda Banken S.A.Notes to the annual accounts as at December 31, 2018

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NOTE 1 - GENERAL

Skandinaviska Enskilda Banken S.A. (“the Bank”) was incorporated in Luxembourg under the denominationBfG Bank Luxembourg S.A. as a joint-stock company under Luxembourg law on March 30, 1973. The duration ofthe company is unlimited.

During an Extraordinary Shareholders’ Meeting held on March 7, 2001, the Shareholders approved the mergerbetween BfG Bank Luxembourg S.A. and SEB Private Bank S.A. and a capital increase of EUR 36,193,000 byissuing 16,846 new shares, in consideration of the transfer of all the assets and liabilities of SEB Private Bank S.A..At the same meeting, the company’s corporate name was changed from BfG Bank Luxembourg S.A. intoSEB Private Bank S.A..

On March 7, 2006 the shareholders of the Bank resolved during an Extraordinary meeting to change the name of theBank to Skandinaviska Enskilda Banken S.A. with effect June 1, 2006.

The purpose of the Bank is to carry out any banking financial, industrial, commercial and real estate transactions forwhich it is empowered by virtue of the laws of Luxembourg.

The Bank is a fully-owned (100%) subsidiary of Skandinaviska Enskilda Banken AB (publ), Stockholm, a bankincorporated under the laws of the Kingdom of Sweden.

The consolidated accounts of Skandinaviska Enskilda Banken AB (publ), Stockholm, may be obtained from itsregistered office:

Skandinaviska Enskilda Banken ABKungsträdgårdsgatan 8S-106 40 Stockholm (Sweden)

These consolidated accounts represent the smallest and the biggest group of companies, which the Bank belongs to asa subsidiary.

The Bank undertakes transactions to a significant extent directly or indirectly with other companies of theSEB Group.

The Bank has established branch office in Singapore on June 16, 2005.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND VALUATION RULES

2.1 Basis of presentation

These annual accounts have been prepared in conformity with accounting principles generally accepted in thebanking sector in Luxembourg. The accounting policies and the valuation principles are determined and applied bythe Board of Directors, except those, which are defined by law and by the Commission for the Supervision of theFinancial Sector (“CSSF”).

The preparation of annual accounts requires the use of certain critical accounting estimates. It also requires the Boardof Directors to exercise its judgment in the process of applying the accounting policies. Changes in assumptions mayhave a significant impact on the annual accounts in the period in which the assumptions changed. The Board ofDirectors believes that the underlying assumptions are appropriate and that the annual accounts therefore present thefinancial position and results fairly.

The Board of Directors makes estimates and assumptions that affect the reported amounts of assets and liabilities inthe next financial year. Estimates and judgments are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be reasonable under the circumstances.


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2.2 Foreign currencies

The annual accounts are expressed in euro (“EUR”). The Bank has adopted a multicurrency accounting system, as aresult of which assets and liabilities are recorded in the currencies in which they were created. For the preparation ofthe annual accounts, amounts in foreign currencies are translated into EUR on the following basis:

2.2.1. Spot transactions

Assets and liabilities denominated in foreign currencies are translated into EUR at exchange rates applicable at thebalance sheet date.

Unsettled spot foreign exchange transactions are translated into EUR at the spot rate of exchange prevailing on thebalance sheet date. Foreign exchange gains and losses resulting from spot transactions not hedged by forwardtransactions are accounted for in the profit and loss account for the financial year.

Foreign exchange gains and losses resulting from spot transactions hedged by forward transactions (“swaps”) areneutralised through “prepayments and accrued income” and “accruals and deferred income” accounts. Differencesarising due to the disparity between spot and forward exchange rates are amortised in the profit and loss account on aprorata basis.

2.2.2. Forward transactions

Unsettled forward exchange transactions are translated into EUR at the forward rate prevailing on the balance sheetdate for the remaining maturity.

Exchange losses on un-hedged forward exchange contracts are recognised in the profit and loss account at theforward rate prevailing on the balance sheet date for the remaining term of the contract. Exchange gains onuncovered forward exchange contracts are only recognised when realised.

For hedged exchange transactions, foreign exchange losses arising on revaluation are set against profits arising asstated above. Provision is made to cover any net loss position arising.

2.3 Loans and advances to credit institutions and to customers

Loans and advances are stated at nominal value less repayments made and any value adjustments required. Accruedinterests are recorded in balance sheet caption “prepayments and accrued income”.

The policy of the Bank is to establish specific allowances for doubtful debts in accordance with the circumstancesand for amounts specified by the Board of Directors. These allowances are deducted from the appropriate assetaccount balances and shall not be maintained if the reasons for which they were recorded no longer exist.

2.4 Fixed-income and variable-yield transferable securities

The Bank has divided its portfolio of fixed-income and variable-yield transferable securities into three categories forvaluation purposes:

2.4.1. Investment portfolio of financial fixed assets

This portfolio comprises fixed-income transferable securities, which are intended to be held on a long-term basis.It also includes participating interests and shares in affiliated undertakings of a fixed asset nature.

Fixed-income and variable-yield transferable securities having the characteristics of financial fixed assets are valuedat purchase price, adjusted prorata by the premium or the discount for fixed-income transferable securities. A valueadjustment is made where the market value at the balance sheet date is lower than the acquisition costs.This adjustment is made when the Board of Directors considers the depreciation as durable. No value adjustment wasmade at year-end.


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Securities acquired at a price exceeding the amount repayable on maturity: the difference between acquisition costand redemption value is written off in instalments to profit and loss and recorded as interest payable and similarcharges. Instalments are written off prorata temporis over the life of the security. No such securities were held atyear-end.

Securities acquired at a price lower than the amount repayable at maturity: the difference between acquisition costand redemption value is credited to profit and loss in instalments and recorded as interest receivable and similarincome. Instalments are spread prorata temporis over the life of the security.

The Bank does not hold an investment portfolio as of December 31, 2018 (nil as at December 31, 2017).

2.4.2. Trading portfolio

This portfolio comprises fixed-income and variable-yield transferable securities purchased with the intention ofselling them in the immediate short term.

Securities in this portfolio are valued at the lower of their acquisition cost or their market value.

They have the following characteristics:

- They are traded on a market whose liquidity can be assumed to be certain;- The market price of the securities in the trading portfolio is at all times available to third parties.

The Bank does not hold a trading portfolio as of December 31, 2018 (nil as at December 31, 2017).

2.4.3. Structural portfolio

This portfolio comprises transferable securities purchased for their investment return or yield, or held to establish aparticular asset structure or a secondary source of liquidity. It also includes transferable securities not contained in theother two categories. Securities in this portfolio are valued at the lower of their acquisition cost or their market value.

The value adjustment corresponding to the negative difference between the market value and the acquisition cost, isnot maintained if the reasons for which it was recorded no longer exists.

Securities acquired at a price exceeding the amount repayable on maturity: the difference between acquisition costand redemption value is written off in instalments to profit and loss and recorded as interest payable and similarcharges. Instalments are written off prorata temporis over the life of the security. No such securities were held atyear-end.

Securities acquired at a price lower than the amount repayable at maturity: the difference between acquisition costand redemption value is credited to profit and loss in instalments and recorded as interestreceivable and similar income. Instalments are spread prorata temporis over the life of the security.

As at December 31, 2018, such securities held amounted to EUR 57,081,099 (EUR 82,785,239 as atDecember 31, 2017).

2.5 Intangible and tangible fixed assets

Intangible and tangible fixed assets are valued at cost less accumulated amortisation/depreciation.Amortisation/depreciation is calculated on a straight-line basis over the estimated useful life of individual assets.

In case of durable reduction in value, intangible and tangible assets are subject to value adjustments, regardless ofwhether their utilisation is limited. The valuation at the inferior value is not maintained if the reasons for which thevalue adjustments were made no longer exist.

2.5.1. Intangible assets

Intangible assets are valued at cost less amortisation to date.

Other intangible assets are amortised on a straight line basis at the rate between 25% and 50%.


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2.5.2. Tangible assets

Tangible assets are used by the Bank for its own operations. Tangible assets, other than land, are valued at cost lessdepreciation to date. Depreciation is calculated on a straight-line basis over the life of the assets concerned. The ratesused for this purpose are:

%Furniture, fixtures and fittings 20 - 25Hardware equipment 20 - 25Leasehold improvement 5 - 25Other equipment and motor vehicle 20 - 25

2.6 Valuation of derivatives

2.6.1. Interest rate swaps

The derivatives on interest rates, mainly Interest Rate Swap (“IRS”), traded over the counter and unallocated to givenassets or liabilities, are marked-to-market. The unrealised losses are booked in the profit and loss account whereasunrealised gains are ignored.

IRS traded over the counter for hedging purposes of the Bank’s interest rate positions are not marked-to-marketunless they are hedging fixed-income transferable securities included in the investment portfolio valued at the “lowerof cost or market”.

2.6.2. Options

For the options traded over the counter and unallocated to given assets or liabilities, the premiums received or paidappear on the balance sheet until the exercise or the expiration date of the options, if the option is not exercisedbefore that date. Commitments on written options are booked off balance sheet.

Options not used for hedging purposes are marked-to-market. The unrealised losses are booked in the profit and lossaccount whereas unrealised gains are ignored.

Option contracts entered into for hedging purposes are not marked-to-market.

Call option contracts entered into for hedging a balance sheet item (asset or liability) are booked as follows:unrealised result on the premiums is account for profit or loss account in “Net profit or net loss on financialoperations”. Unrealised result arising from the evaluation of the hedge item (asset or liability) is account for profit orloss in “Net profit or net loss in financial operations”. These booking are presented in net by compensation profit orloss effects.

Option contracts traded on a regulated market and entered into for the purpose of hedging identical reverse optionsalso traded on a regulated market, are booked as follows: as the position on these instruments is closed, the resultarising from premiums received and paid is accounted for in the profit and loss account.

2.6.3. Financial futures

Margin calls on financial futures traded on a regulated market are booked daily. Gains and losses on trading positionsare directly booked in the profit and loss account. Gains and losses on hedging positions are amortised over the sameperiod as the results from the hedged item.

2.7 Amounts owed to credit institutions and to customers

Amounts payable are recorded under liabilities at the amount of reimbursement of the debt.

When the amount of reimbursement of a debt is greater than the amount received, the difference may be accountedfor as an asset. This difference shall be amortised on a reasonable annual basis and no later than the maturity date.


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2.8 Lump-sum provision

A general reserve for potential risks on balance sheet and off balance sheet items has been booked. This provision,which is tax deductible, is deducted from the corresponding assets; the portion of the provision relating to the offbalance sheet items is included in the caption: “Other provisions”.

The dotation of this provision is done at Profit and Loss level through caption “Value adjustments in respect of loansand advances and provisions for contingent liabilities and commitments”.

The reversal of this provision is done at Profit and Loss level through caption “Value re-adjustments in respect ofloans and advances and provisions for contingent liabilities and commitments”. No reversal was done as atDecember 31, 2018 (EUR 4,423,678 as at December 31, 2017).

2.9 Provisions

Provisions are intended to cover losses or debts, the nature of which is clearly defined and which, at the date of thebalance sheet, are either likely to be incurred or certain to be incurred but uncertain as to their amount or the date onwhich they will arise.

Provisions may also be created to cover charges that have originated in the financial year under review or in aprevious financial year, the nature of which is clearly defined and which, at the date of the balance sheet, are eitherlikely to be incurred or certain to be incurred but uncertain as to their amount on the date on which they will arise.

NOTE 3 - ANALYSIS OF FINANCIAL INSTRUMENTS

3.1 Strategy reflecting the use of financial instruments

By its nature the Bank’s activities are principally related to the use of financial instruments including derivatives.The Bank accepts deposits from customers at both fixed and floating rates and for various periods and seeks to earnabove average interest margins by investing these funds in high quality assets. The Bank seeks to increase thesemargins by consolidating short-term funds and lending for longer periods at higher rates whilst maintaining sufficientliquidity to meet all claims that might fall due.

The Bank has been active in adapting interest margins to local market conditions where customers reside.

The Bank’s strategy is to follow our Private Banker customer needs. The growth has been faster in mortgage productscompared to Lombard lending.

The Bank trades in financial instruments where it takes positions in traded and over the counter instruments includingderivatives to take advantage of short-term market movements in the bond, foreign exchange and money markets.The Bank does not trade in the equity market for its own account. The Board of Directors places trading limits on thelevel of exposure that can be taken in relation to both overnight and intra-day market positions. With the exception ofspecific hedging arrangements, foreign exchange and interest rate exposures associated with these derivatives arenormally offset by entering into counterbalancing positions, thereby controlling the variability in the net cashamounts required to liquidate market positions.

3.2 Analysis of financial instruments

3.2.1. Information on primary financial instruments

The tables below analyse the level of primary financial instruments (primary non-trading instruments and primarytrading instruments) of the Bank, in terms of carrying amounts, into relevant maturity groupings based on theremaining period at balance sheet date to the contractual maturity date. Additional indication of aggregate fair valuesof trading instruments is disclosed where they differ materially from the amounts at which they are included in theaccounts.

“Fair value” corresponds to the amount at which an asset could be exchanged or a liability settled as part of anordinary transaction entered into under normal terms and conditions between independent, informed and willingparties (at arm’s length), other than in a forced or distressed sale.


21

3.2.1.1. Analysis of financial instruments - Primary non-trading instruments as at December 31, 2018(at carrying amount - in EUR)

Primary non-trading instrumentsPrimarytrading

instrumentsTotal

less than3 months

> 3 months to1 year

> 1 year to5 years > 5 years No

maturity

Instrument class (financial assets)

Cash, balances withcentral banks and postoffice banks 1,524,580,145 - - - - - 1,524,580,145

Loans and advancesto credit institutions 739,509,533 639,606,484 - - - - 1,379,116,017

Loans and advancesto customers 548,496,675 108,021,076 420,810,615 108,317,219 - - 1,185,645,585Bonds and otherfixed-incomesecurities 57,081,099 - - - - - 57,081,099

Total financial assets 2,869,667,452 747,627,560 420,810,615 108,317,219 - - 4,146,422,846

Non financial assets 52,185,459

Total assets 4,198,608,305

Instrument class (financial liabilities)

Amounts owed tocredit institutions 396,152,448 5,180,198 75,184,399 44,444,021 - - 520,961,066Amounts owed tocustomers 3,346,575,207 7,609,538 5,961,335 - - - 3,360,146,080Debt evidenced bycertificates 4,859,234 - - - - - 4,859,234Total financialliabilities 3,747,586,889 12,789,736 81,145,734 44,444,021 - - 3,885,966,380Non financialliabilities 312,641,925

Total liabilities 4,198,608,305


22

3.2.1.2. Analysis of financial instruments - Primary non-trading instruments as at December 31, 2017(at carrying amount - in EUR)

Primary non-trading instrumentsPrimarytrading

instrumentsTotal

less than3 months

> 3 months to 1year

> 1 year to5 years > 5 years No

maturity


Cash,balances withcentral banksand postoffice banks 2,525,757,507 - - - - - 2,525,757,507Loans andadvances tocreditinstitutions 1,285,180,186 827,650,395 - - - - 2,112,830,581Loans andadvances tocustomers 422,460,344 131,293,571 412,113,674 107,440,673 - - 1,073,308,262Bonds andotherfixed-incomesecurities 82,785,239 - - - - - 82,785,239Totalfinancialassets 4,316,183,276 958,943,966 412,113,674 107,440,673 - - 5,794,681,589Non financialassets 30,708,090



Amountsowed tocreditinstitutions 2,314,551,007 12,703,428 43,750,246 26,104,178 - - 2,397,108,859Amountsowed tocustomers 3,069,143,250 8,636,405 30,132,296 - - - 3,107,911,951Debtevidenced bycertificates 4,859,234 - - - - - 4,859,234Totalfinancialliabilities 5,388,553,491 21,339,833 73,882,542 26,104,178 - - 5,509,880,044Non financialliabilities 315,509,635Totalliabilities 5,825,389,679


23

3.2.1.3. Analysis of financial instruments - Primary trading instruments as at December 31, 2018 (amounts in EUR)

Primary trading instrumentsPrimary non

trading(carryingamount)

Total

less than 3 months > 3 months to1 year > 1 year to 5 years > 5 years No

maturity Total primary tradingCarrying

amountCarryingamount

Fairvalue

Carryingamount

Fairvalue

Carryingamount

Fairvalue

Carryingamount

Fairvalue

Carryingamount

Fairvalue

Carryingamount

Fairvalue


Cash, balances withcentral banks andpost office banks - - - - - - - - - - - - 1,524,580,145 1,524,580,145Loans and advancesto credit institutions - - - - - - - - - - - - 1,379,116,017 1,379,116,017Loans and advancesto customers - - - - - - - - - - - - 1,185,645,585 1,185,645,585Bonds and otherfixed-incomesecurities - - - - - - - - - - - - 57,081,099 57,081,099Total financialassets - - - - - - - - - - - - 4,146,422,846 4,146,422,846

Non financial assets 52,185,459



24



Total

less than 3 months > 3 months to1 year > 1 year to 5 years > 5 years No

maturity Total primary tradingCarryingamountCarrying

amountFair

valueCarrying

amountFair

valueCarrying

amountFair

valueCarrying

amountFair

valueCarrying

amountFair

valueCarrying

amountFair

value


Amounts owed tocredit institutions - - - - - - - - - - - - 520,961,066 520,961,066Amounts owed tocustomers - - - - - - - - - - - - 3,360,146,080 3,360,146,080Debt evidenced bycertificates - - - - - - - - - - - - 4,859,234 4,859,234Total financialliabilities - - - - - - - - - - - - 3,885,966,380 3,885,966,380Non financialliabilities 312,641,925

Total liabilities 4,198,608,305


25

3.2.1.4. Analysis of financial instruments - Primary trading instruments as at December 31, 2017 (amounts in EUR)



Total

less than 3 months > 3 months to1 year

> 1 year to5 years > 5 years No maturity Total primary trading

CarryingamountCarrying

amount Fair value Carryingamount

Fairvalue

Carryingamount

Fairvalue

Carryingamount

Fairvalue

Carryingamount

Fairvalue

Carryingamount Fair value


Cash, balanceswith centralbanks and postoffice banks - - - - - - - - - - - - 2,525,757,507 2,525,757,507Loans andadvances tocreditinstitutions - - - - - - - - - - - - 2,112,830,581 2,112,830,581Loans andadvances tocustomers - - - - - - - - - - - - 1,073,308,262 1,073,308,262Bonds andother fixed-incomesecurities - - - - - - - - - - - - 82,785,239 82,785,239

Total financialassets - - - - - - - - - - - - 5,794,681,589 5,794,681,589Total assets 30,708,090

5,825,389,679


26



Totalless than3 months > 3 months to 1 year > 1 year to

5 years > 5 years No maturity Total primary tradingCarryingamountCarrying

amountFair

valueCarrying

amountFair

valueCarrying

amountFair

valueCarrying

amountFair

valueCarrying

amountFair

valueCarrying

amount Fair value


Amounts owedto creditinstitutions - - - - - - - - - - - - 2,397,108,859 2,397,108,859Amounts owedto customers - - - - - - - - - - - - 3,107,911,951 3,107,911,951Debtevidenced bycertificates - - - - - - - - - - - - 4,859,234 4,859,234

Total financialliabilities - - - - - - - - - - - - 5,509,880,044 5,509,880,044Non financialliabilities 315,509,635Totalliabilities 5,825,389,679


27

3.2.2. Information on derivative financial instruments

3.2.2.1. Description of derivatives used

The Bank enters into the following derivative instruments for hedging purposes:

Currency forwards represent commitments to purchase foreign and domestic currency, including undelivered spottransactions.

Currency and interest rate swaps are commitments to exchange one set of cash flows for another. Swaps result inan economic exchange of currencies or interest rates (for example, fixed rate for floating rate) or a combination of allthese (i.e. cross-currency interest rate swaps). Except for certain currency swaps, no exchange of principal takesplace.

Foreign currency and interest rate options are contractual agreements under which the seller (writer) grants thepurchaser (holder) the right, but not the obligation, either to buy (a call option) or sell (a put option) at or by a set dateor during a set period, a specific amount of a foreign currency or a financial instrument at a predetermined price.In consideration for the assumption of foreign exchange or interest rate risk, the seller receives a premium from thepurchaser. Options may be either exchange-traded or negotiated between the Bank and a customer (OTC).

Financial futures are contractual obligations to receive or pay a net amount based on changes in the price of anunderlying asset (interest rates, currency rates) or buy or sell foreign currency or a financial instrument on a futuredate at a specified price established in an organised financial market.

3.2.2.2. Analysis of derivatives

The table below analyses the level of derivative financial instruments (trading and non-trading) within the Bank,broken down in terms of notional amount, into relevant maturity groupings based on the remaining period at balancesheet date to the contractual maturity date. OTC derivative instruments and exchange-traded instruments areseparately disclosed.

The notional amounts of certain types of financial instruments provide a basis for comparison with instrumentsrecognised on the balance sheet but do not necessarily indicate the amounts of future cash flows involved or thecurrent fair value of the instruments and, therefore, do not indicate the Bank's exposure to credit or price risks.The derivative instruments become favourable or unfavourable as a result of fluctuations in market interest rates orforeign exchange rates relative to their terms. The aggregate contractual or notional amount of derivative financialinstruments on hand, the extent to which instruments are favourable or unfavourable and, thus the aggregate fairvalues of derivative financial assets and liabilities can fluctuate significantly from time to time.

Additional indication of aggregate fair values of trading instruments is disclosed where they differ materially fromthe amounts at which they are included in the accounts.

The Bank has no trading positions on derivative instruments as at December 31, 2018 and December 31, 2017.


28

3.2.2.2.1. Analysis of financial instruments - derivative non-trading instruments as at December 31, 2018 (amounts in EUR)

Contract/notional amount (EUR) Fair Value

Instrument class < 3 months > 3 months to 1year

> 1 year to 5years > 5 years TOTAL Positive Negative

Interest ratesOTC Swaps - - - - - - -Exchange-Traded Options - - - - - - -

Futures 1,635 - - - 1,635 24 24

Foreign exchangeOTC Forwards 10,587,435,164 8,821,361,272 112,400,105 - 19,521,196,541 229,278,871 229,278,871

EquitiesExchange-Traded Options 15,350,002 7,012,181 12,251,120 - 34,613,303 9,563,043 9,563,043 Futures 45,835,849 - - - 45,835,849 717,822 717,822

TOTAL 10,648,622,650 8,828,373,453 124,651,225 - 19,601,647,328 239,559,760 239,559,760


29

3.2.2.2.2. Analysis of financial instruments - derivative non-trading instruments as at December 31, 2017 (amounts in EUR)

Contract / notional amount (EUR) Fair Value

Instrument class < 3 months > 3 months to 1year

> 1 year to 5years > 5 years TOTAL Positive Negative

Interest ratesOTC

Swaps 20,000,000 - - - 20,000,000 2,381 2,381Exchange-Traded Options - - - - - - -

Futures 1,617 - - - 1,617 230 230

Foreign exchangeOTC Forwards 12,938,304,892 6,850,881,552 26,547,411 - 19,815,733,855 212,631,042 212,631,042

EquitiesExchange-Traded Options 30,016,118 8,590,773 5,002,920 - 43,609,811 7,568,886 7,568,886

Futures 12,848,723 238,700 - - 13,087,423 107,165 107,165

TOTAL 13,001,171,350 6,859,711,025 31,550,331 - 19,892,432,706 220,309,704 220,309,704


30

3.3 Credit risk

3.3.1. Description of credit risk

The Bank takes credit risk exposure which is the risk of a loss due to the failure of a counterparty to fulfil itsobligations towards the Bank. The Bank sets levels on acceptable credit risk by limits on single borrower or group ofborrowers. The set limits are monitored on a recurring basis and subject to individual reviews at least on an annualbasis in credit committee.

3.3.2. Private Banking Customer Credits

Credits are mainly granted to customers for the purposes of investment management through Lombard credits(including loans, overdraft, foreign exchange, guarantees) or to finance housing in the UK,France, Sweden, Spain and Switzerland secured by mortgage deeds in residential properties and co-operative/tenantowner flats.

Credit decisions shall be made either by establishing limits available for drawings or by granting credits forimmediate disbursement. The latter requires the credit amount to fall within a simultaneously or previously givenlimit for the client or group of clients.

Credit facilities are approved according to the Credit Instruction for SEB S.A. as well as SEB AB and the SEB Groupand relevant set Credit Policies within SEB Group.

The Bank provides Lombard credits which are secured by the clients’ portfolios deposited with the Bank. The Bankalso provides mortgage loans with first rank mortgage on residential properties to its customers. Each loan isapproved in accordance with the Bank's Credit Instruction and Credit Policy and all credit limits exceedingEUR 500,000 are subject to the setting of a Total Limit and individual annual review by the Credit Committee.The Risk Control department is responsible to regularly monitor shortfalls and limit excesses to bring to the attentionof the Client Executive concerned, Management and the Credit Committee on any outstanding items. The Bank'sClient Executives, through the follow-up of their respective clients' relationships, ensure to abide by the creditapprovals.

All Total Limits exceeding EUR 10,000,000 and/or if outside Credit Policy by more than EUR 2,000,000 requireapproval by the Divisional Credit committee for Retail and Private Banking as well as subsequent presentation to thelocal Board of Directors for its acknowledgement.

3.3.2.1. Derivatives transactions for customer account

The Bank maintains control limits on the customers’ net open derivative positions, i.e. the difference betweenpurchase and sale contracts, by both amount and term. At any one time the amount subject to credit risk is limited tothe margin requirement. The credit risk exposure linked to outstanding derivative transactions is monitored by way ofcomparing the required margin to the respective customer’s available collateral value assigned to the assets depositedwith the Bank.

3.3.3. Control of the large exposure risks

According to the EU Regulation n°575/2013, the Bank monitors the risks for the large exposure limits in respect ofthe definition of connected (i.e. co-limited and interdependent) clients. The Bank’s Client Executives are, accordingto the Credit Instruction, responsible for the regular monitoring of the exposure and the client adherence to theapproved conditions for the Total Limit and the group of connected clients. The Credit department as well as theManagement are reviewing the data of the large exposure credit group reporting before its submission to the CSSF.


31

3.3.4. Credit facilities to institutional customers

The Bank grants overdraft, authorised limit excess and foreign exchange facilities to funds registered in Luxembourgand where the Bank is acting as custodian.

Credit facilities are approved according to the Credit Instruction and Credit Policy of SEB Group to customers of theBank.

Presently limits are allocated to Luxembourg via the appointed global group client executive and approved by therelevant credit committees.

The Risk Control department is responsible to monitor shortfalls and limit excesses on a regular basis and to bringany outstanding items to the attention of the Management.

The Investor Services team ensure monitoring of movements on accounts, the regular payment of interest, thereimbursement of the principal due, etc. They shall ensure the maintenance of the quality of the respective underlyingpledged assets.

3.3.5. Value adjustment of loans granted to customers

If there are uncertainties related to a counterpart’s capacity to fulfil its obligations towards SEB S.A. (e.g. thecounterpart being in financial difficulty, concession granted, having insufficient cash flow or deteriorated collateralvalue), the counterpart will be classified as watch listed. The watch listed customers are reviewed at least on aquarterly basis in the Watch Credit Committee, in which an assessment is made of outstanding exposure versusestimated recovery value of underlying collateral. In case there is a gap between exposure and recovery value, a valueadjustment (potential loss given default) shall be made. The value adjustment level is re-assessed at least on aquarterly basis until it is either reverted or a write-off is made.

Breakdown of the total value adjustments compared to loans and advances granted to customers as atDecember 31, 2018.

Type of loans granted to customers Loans and advances to customers Value adjustment

Mortgage Loans 650,286,609 -Lombard Credits 459,638,542 -Advances 75,720,434 -

-------------------- --------------------TOTAL 1,185,645,585 -

Breakdown of the total value adjustments compared to loans and advances granted to customers as atDecember 31, 2017.

Type of loans granted to customers Loans and advances to customers Value adjustment

Mortgage Loans 579,636,437 -Lombard Credits 463,473,699 -Advances 30,198,126 -

-------------------- --------------------TOTAL 1,073,308,262 -


32

3.3.6. Concentration of Credit risk

The tables below disclose concentration risk as it relates to loans and advances to credit institutions (excludingCentral Bank) and to customers by geographic location and economic sector as of December 31, 2018 andDecember 31, 2017.

Geographical Concentration of credit risk (in EUR):

Geographical Zone Loans and advances to creditinstitutions and to customers

Loans and advances to creditinstitutions and to customers

December 31, 2018 December 31, 2017

Sweden 1,335,499,753 1,680,760,259United Kingdom 333,254,751 377,466,383Singapore 240,738,018 391,592,237Luxembourg 182,041,076 151,012,093Germany 67,339,505 38,194,456Switzerland 65,191,772 62,520,592Spain 60,553,334 32,978,129Malta 47,959,718 35,518,478France 44,682,366 46,855,324Gibraltar 34,921,076 30,843,750Monaco 27,521,109 1,756,491Other 125,059,124 336,640,651

------------------- -------------------Total 2,564,761,602 3,186,138,843

Concentration of credit risk by economic sector (in EUR):

Economic sector Loans and advances to creditinstitutions and to customers

Loans and advances to creditinstitutions and to customers

December 31, 2018 December 31, 2017

Credit institutions 1,379,116,017 2,117,557,913Households and non-profit makinginstitutions servicing households 820,190,284 755,717,888Holdings / financial institutions 215,879,248 203,695,517Funds 149,418,439 108,835,158Non-financial corporations and quasi-corporations in the public and privatesectors 157,614 332,367

------------------- -------------------Total 2,564,761,602 3,186,138,843


33

3.3.7. Interbank transactions

The exposure to any one borrower including banks is further restricted by sub-limits covering on andoff balance sheet exposures and daily delivery risk limits in relation to trading items such as forward foreignexchange contracts.

Exposure to credit risk is managed through regular analysis performed by the Bank of the ability of borrowers andpotential borrowers to meet interest and capital repayment obligations and by changing these lending limits whereappropriate. Actual exposures against limits are monitored daily and controlled by Risk Oversight.

On currency and interest rate swaps, the Bank's credit risk represents the potential cost to replace the swap contractsif counterparties fail to perform their obligation. This risk is monitored on an ongoing basis with reference to thecurrent fair value, a proportion of the notional amount of the contracts and the liquidity of the market. To control thelevel of credit risk taken, the Bank assesses counterparties using the same techniques as for its lending activities.

3.3.8. Measures of credit risk exposure

Information on credit risk as it relates to financial instruments is disclosed on the basis of the carrying amount thatbest represents the maximum credit risk exposure at the balance sheet date without taking into account any collateral.

The Bank calculates credit risk associated with OTC derivative instruments using the original exposure approach.The disclosure is restricted to the risk-equivalent amounts obtained under this method, in accordance to theEU Regulation n°575/2013.

The following table discloses the level of credit exposure in terms of notional amounts, replacement cost, potentialfuture credit exposure and net risk exposure adjusted for any collateral, broken down by the degree of creditworthiness of the counterparty based on internal or external ratings.


34

3.3.8.1. Credit risk information - OTC derivative instruments as at December 31, 2018 (amounts in EUR)

Credit risk on OTC derivative instruments (use of market risk method) - amounts in EURNotional Current replacement Potential future Overall replacement Collateral Net risk exposureamount cost replacement costs cost

(1) (2) (3) (4) (5) (6)= (2) + (3) - provisions = (4) - (5)

Counterparty solvencyIRS - Banks - - - - - - - Private Clients - - - - - -

Total - - - - - -

3.3.8.2. Credit risk information - OTC derivative instruments as at December 31, 2017 (amounts in EUR)

Credit risk on OTC derivative instruments (use of market risk method) - amounts in EUR

Notional Current replacement Potential future Overall replacement Collateral Net risk exposureamount cost replacement costs cost

(1) (2) (3) (4) (5) (6)= (2) + (3) - provisions = (4) - (5)

Counterparty solvencyIRS - Banks 10,000,000 - - - - - - Private Clients 10,000,000 - - - - -

Total 20,000,000 - - - - -


35

3.4 Market risk

The Bank takes on exposures to market risks. Market risks arise from open positions in interest rate and foreignexchange markets, all of which are exposed to general and specific market movements. The Bank applies a “Value atRisk” methodology to estimate the market risk of positions held and the maximum losses expected, based upon anumber of assumptions for various changes in market conditions. The Board of Directors sets limits on the value ofrisk that may be accepted, which is monitored on a daily basis for all trading and portfolio operations.

The daily market value at risk measure (VaR) is an estimate, with a confidence level set at 99%, of the potential losswhich might arise if the current positions were to be held unchanged for one business day. The measurementcaptures the risk exposure held overnight. Actual outcomes are monitored regularly to test the validity of theassumptions and parameters/factors used in the VaR calculation.

NOTE 4 - CASH IN HAND, BALANCES WITH CENTRAL BANKS AND POST OFFICE BANKS

In accordance with the requirements of the European Central Bank, the Central Bank of Luxembourg implementedeffective January 1, 1999, a system of mandatory minimum reserves which applies to all Luxembourg creditinstitutions. This reserve balance as at December 31, 2018, held by the Bank with the Central Bank of Luxembourgamounted to EUR 35,536,163 (December 31, 2017: EUR 31,375,341).

At December 31, 2018, the Bank held excess liquidity with the Central Bank of Luxembourg amounting toEUR 1,488,700,000 (December 31, 2017: EUR 2,494,203,805). The large decrease compared to 2017 is due to theSkandinaviska Enskilda Banken AB’s decision to not place liquidity with the Bank on December 31, 2018.(December 31, 2017: EUR 2,000,000,000). In 2017, the placement was made for a four days period.

NOTE 5 - PARTICIPATING INTERESTS AND SHARES IN AFFILIATED UNDERTAKINGS

5.1 Summary of participating interests and shares in affiliated undertakings

At December 31, 2018, the Bank held the capital of the following company:

HeadOffice

BookValue

EUR

Proportion ofcapital held

%

Shareholders’equity

at 31/12/2017*

EUR

Net profitfor the year

ended31/12/2017*

EUR

Shares in affiliated undertakings:

§ SEB Private EquityOpportunityFund III S.C.A.

Luxembourg 99 0,24 502,883 221,307

* Based on last available financial information.


36

5.2 Loans and advances and amounts owed to affiliated undertakings

These items are detailed as follows:

2018 2017

Assets EUR EUR

- Loans and advances to credit institutions- Loans and advances to customers

1,356,649,73536,674

2,092,214,537-

____________ ____________1,356,686,409 2,092,214,537

=========== ===========

2018 2017

Liabilities EUR EUR

- Amounts owed to credit institutions 512,343,550 2,396,693,455- Amounts owed to customers 82,412,123 113,340,089

____________ ____________594,755,673 2,510,033,544

=========== ==========

At December 31, 2018, Skandinaviska Enskilda Banken AB didn’t place any liquidity with the Bank(EUR 2,000,000,000 placed in December 2017, which was subsequently entirely placed by the Bank with theCentral Bank of Luxembourg (BcL) on December 30, 2017 for a period of four days).

NOTE 6 - TRANSFERABLE SECURITIES

6.1 Quoted transferable securities

2018 2017

EUR EUR

Bonds and other fixed-income transferable securities:

- issued by public bodies 57,081,099 82,785,239___________ ___________

57,081,099 82,785,239========== ==========

As at December 31, 2018, the carrying amount of bonds issued by public bodies (resp. by other borrowers) andeligible for refinancing with a central bank of the euro zone is nil (resp. nil).

6.2 Unquoted transferable securities

2018 2017

EUR EUR

Shares in affiliated undertakings 99 102


37

NOTE 7 - FIXED ASSETS

(expressed in EUR) Gross Value Value Adjustments Carryingvalue

ITEMS

Gross valueat the beginningof the financial

yearAdditions Disposals Exchange

rateDifferences

Gross valueat the end ofthe financial

year

Cumulativevalue

adjustments atthe beginning of

the Financialyear

ValueAdjustments

Reversal ofvalue

adjustments(*)

Cumulativevalue

adjustmentsat the end ofthe financial

year

Net value atthe end of thefinancial year

Shares in affiliated undertakings 102 - - (3) 99 - - - - 99

Intangible assets 2,927,103 33,591 - - 2,960,694 2,704,268 132,793 - 2,837,061 123,633

Tangible assets 10,383,509 222,631 260,486 - 10,345,654 8,885,886 523,980 (249,079) 9,160,787 1,184,867

Of which:

a) Plant and equipment 5,572,611 3,708 - - 5,576,319 5,344,157 95,014 - 5,439,171 137,148

b) Other fixtures and fittings, tools and equipment

4,810,898 218,923 260,486 - 4,769,335 3,541,729 428,966 (249,079) 3,721,616 1,047,719

(*) These movements correspond to write-off of accumulated value adjustments on disposed assets.


38

NOTE 8 - OTHER ASSETS AND PREPAYMENT AND ACCRUED INCOME

8.1 Other Assets

Other assets consist the following: 2018

EUR

2017

EUR

Income Tax Advances 15,516,605 13,047,397Premiums on options purchased 11,855,463 9,042,738Guarantees for the Bank’s own account 1,203,932 1,245,038VAT receivable 16,214 12,023

__________ __________28,592,214

==========23,347,196

==========

8.2 Prepayments and Accrued Income

Prepayments and accrued income consist principally of thefollowing:

2018

EUR

2017

EUR

Neutralisation of foreign exchange gains resulting from spottransactions hedged by forward transactions

9,385,440 -

Commission income to be received 7,879,041 2,402,759Interest receivable 2,899,198 2,044,761Transitory accounts 925,163 371,731Prepaid expenses 870,954 621,485Other 324,850 199,598

__________ _________22,284,646

==========5,640,334

=========

NOTE 9 - DEBTS EVIDENCED BY CERTIFICATES

Other debts evidenced by certificates comprise deposit receipts and certificates of deposit that are all matured andavailable for reimbursement as at December 31, 2018.

NOTE 10 - ASSETS PLEDGED AS COLLATERAL SECURITY

The Bank has pledged assets as collateral for transactions entered into by itself or on behalf of third parties. As atDecember 31, 2018, collateral deposit with NASDAQ OMX amounts to EUR 8,823,372 (EUR 4,743,691 as atDecember 31, 2017).

NOTE 11 - OTHER LIABILITIES

Other liabilities consist of the following: 2018 2017

EUR EUR

Premiums on options written 11,855,463 9,042,738Preferential creditors 1,697,883 1,744,660Short-term payables (Cheques for clients not cashed) 1,576,374 1,576,078Sundry creditors 554,564 352,883

__________ __________15,684,284

==========12,716,359

==========


39

NOTE 12 - OTHER PROVISIONS

Other provisions consist principally of the following: 2018 2017

EUR EUR

Unrealised losses on foreign exchange 6,854,350 1,382,775Provisions for restructuring 5,668,831 5,979,160Provision for LRF-LDGS 5,467,188 8,514,939Employee benefits 3,933,692 4,223,565Accrued expenses 2,782,233 2,412,614Lump sum provision for off balance sheet credit risk 1,561,176 2,626,811Provisions for customer and other claims 1,444,261 2,358,707Miscellaneous 1,163,294 1,697,349

__________ __________28,875,025

==========29,195,920

==========

Restructuring provisions relate mainly to a project of simplification of the legal structure.

Provision for LRF-LDGS relates to the former AGDL that will be used for LRF-LDGS charges (as described in theNote 18.4).

Employee benefits include deferred payments under the Bank’s “All Employee Programme” and long-term incentiveschemes and tax-related liabilities.

Accrued expenses, including retrocession fees to be paid to third parties relate to expenses that have been incurredbut not yet invoiced.

During the year 2018, total other provisions have decreased by EUR 320,895. Variations are explained by:

- Utilisation of EUR 6,397,755, mainly in provision for LRF-LDGS (EUR 3,047,751), in employee benefits(EUR 1,013,343) and in restructuring provisions (EUR 976,964).

- Reversal of EUR 9,999,628, mainly in restructuring provisions due to the project of outsourcing of certainoperational processes to another Group entity which has been put on hold (EUR 4,333,365), in provision forunrealised losses on foreign exchange (EUR 1,382,775), in accrued expenses (EUR 1,081,614) and in lump sumprovision for off balance sheet credit risk (EUR 1,065,635).

- Dotation of EUR 16,076,488, mainly in provision for unrealised losses on foreign exchange (EUR 6,854,350),in restructuring provisions linked to a project of simplification of the legal structure (EUR 5,000,000), in accruedexpenses (EUR 2,232,680) and in employee benefits (EUR 1,005,476).

NOTE 13 - SPECIAL ITEMS WITH A RESERVE QUOTA PORTION

In accordance with the law of July 23, 1983 and the circular letter of the Tax Administration datedNovember 24, 1983 applicable thereto, banks are allowed to neutralise unrealised translation gains on the investmentof equity up to December 31, 2000. The Bank has been allowed by the tax authorities to consider the US Dollar asbeing the currency deemed for tax purposes to represent equity funds.

As at December 31, 2000, the unrealised translation gains on the investment of the Bank’s equity deemed to be inUS Dollars, due to the exchange rate fluctuations of the US Dollar against Belgian Franc, amounted toEUR 22.80 million which were neutralised and accounted for under this caption in the balance sheet and profit andloss account. In 2001, part of these unrealised translation gains was transferred under the portion assimilated to equity(EUR 14.25 million).

From January 1, 2001 on, the currency to be considered for tax purposes to represent equity funds is EUR.Consequently, this special item with a reserve quota portion will no longer fluctuate as a result of theabove-mentioned situation.


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NOTE 14 - SUBSCRIBED CAPITAL

The authorised, subscribed and fully paid up capital amounts to EUR 117,985,000 and is represented by32,846 shares with no par value.

NOTE 15 - RESERVES

Reserves include:

15.1 Legal reserve

In accordance with Luxembourg law, the Bank must transfer at least 5% of its annual profit to the legal reserve untilthis equals 10% of subscribed capital. The legal reserve is not distributable.

15.2 Free reserve

The free reserve represents profits of previous years which have been appropriated by the Annual General Meeting ofshareholders to a specific reserve referred to as “free reserve”. This reserve may be distributed after approval by theshareholders on the Annual General Meeting.

15.3 Special reserve

In accordance with the tax law in force since January 1, 2002, the Bank reduced the Net Wealth Tax burden bycrediting it on the amount of the Corporate Income Tax. In order to comply with the tax law, the Board of Directorsproposed to the Annual General Meeting of the Shareholders to allocate under non-distributable reserves(under caption “special reserve”) an amount that corresponds to five times the amount of reduced Net Wealth Tax.This reserve is non-distributable for a period of five years from the year following the one during which the NetWealth Tax was credited.

NOTE 16 - CHANGES IN SHAREHOLDERS’ EQUITY

The movements of shareholders’ equity of the Bank is summarised below:

SubscribedCapital

Reserves Profit brought forward Profitfor the year

Total

EUR EUR EUR EUR EUR

Balance at31/12/2017 117,985,000 87,475,250 514,521 20,512,180 226,486,951Transfer tofree reserve - 21,000,000 (487,820) (20,512,180) -Dividenddistribution - (20,500,000) - - (20,500,000)Profit for thefinancial year - - - 15,472,799 15,472,799

_________ _________ ______ _________ __________Balance at31/12/2018

117,985,000 87,975,250 26,701 15,472,799 221,459,750


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Out of the caption "Reserves" amounting to EU 87,975,250, the Bank holds an amount ofnon-distributable "special reserve" to reduce the Net Wealth Tax (as mentioned in note 15.3). As at December 31, 2018,this non-distributable "special reserve" amounts to EUR 33,805,075 (2017: EUR 32,909,750). In addition, the Bankholds “legal reserve”. As the legal reserve reaches at least 10% of the share capital there is no requirement to allocatedpart of the result to that reserve. As at December 31, 2018 the amount of the legal reserve amounts to EUR 11,799,200.(December 31, 2017: EUR 11,799,200).

NOTE 17 - POSITIONS IN FOREIGN CURRENCIES

2018 2017

EUR EUR

Total amount of assets in foreign currencies 2,062,464,892 2,738,692,587

Total amount of liabilities in foreign currencies 2,068,605,227 2,738,901,407

NOTE 18 - CONTINGENT LIABILITIES AND COMMITMENTS

18.1 Contingent liabilities

At December 31, 2018, contingent liabilities reported off balance sheet comprised:

2018 2017

EUR EUR

Guarantees and other direct substitutes for credit 13,522,753 14,381,764

18.2 Off Balance Sheet commitments

Commitments reported off balance sheet comprised:

2018 2017

EUR EUR

Confirmed credit not used 28,455,817 82,065,109Forward purchase of assets 4,037,225,080 72,983,065 Of which: with affiliated undertakings - -

__________ __________

4,065,680,897===========

155,048,174==========

The Bank has forward purchase of assets representing settlement of spot transactions on behalf of one financial institutionas at December 31, 2018. The mentioned financial institution was not a client of the Bank as at December 31, 2017.


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18.3 Other commitments

The Bank has entered into certain other commitments which are not disclosed in the balance sheet or in the offbalance sheet. Details of such other commitments as at December 31, 2018 are as follows:

The Bank's commitments in respect of fixed rental payments and for premises and assets leased under a leasingcontract are:

2018 2017

EUR EUR

- Maturing within 1 year 7,597,530 7,070,186- Maturing within 2 to 3 years 4,572,465 5,313,136

________ ________

12,169,995========

12,383,322========

18.4 Luxembourg Resolution Fund (“LRF”) and Luxembourg deposit Guarantee Scheme(“LDGS”)

The law related to the resolution, reorganisation and winding-up measures of credit institutions and certaininvestment firms and on deposit guarantee and investor compensation schemes ("the Law"), transposing intoLuxembourgish law the directive 2014/59/EU establishing a framework for the recovery and resolution of creditinstitutions and investment firms and the directive 2014/49/EU related to deposit guarantee and investorcompensation schemes, was passed on December 18, 2015.

The deposit guarantee and investor compensation scheme previously in place through the “Association pour laGarantie des Depots Luxembourg" (AGDL) has been replaced by a new contribution based system of depositguarantee and investor compensation scheme. This new system covers eligible deposits of each depositor up to anamount of EUR 100,000 (Luxembourg Deposit Guarantee Scheme) and investments up to an amount of EUR 20,000(Luxembourg Investors Compensation Scheme).

The Law also provides that deposits resulting from specific transactions or fulfilling a specific social or otherpurpose are covered for an amount above EUR 100,000 for a period of 12 months.

Provisions which were booked in the annual accounts of the credit institutions throughout the years in order torespect the obligations of the AGDL are reversed in proportion to the contribution paid on the new “LuxembourgResolution Fund" (LRF) and "Luxembourg Deposit Guarantee Scheme" (LDGS).

The funded amount of the LRF shall reach by the end of 2024 at least 1% of covered deposits, as defined inarticle 1 number 36 of the Law, of all authorised credit institutions all participating Member States. This amount willbe collected from the credit institutions through annual contributions during the years 2015 to 2024 using thepreviously constituted AGDL provision.

The target level of funding of the LDGS is set at 0.8% of covered deposits, as defined in article 163 number 8 of thelaw, of the relevant credit institutions arid is to be reached by the end of 2018 through annual contributions using thepreviously constituted AGDL provision. When the level of 0.8% will be reached, the Luxembourgish creditinstitutions are to continue to contribute for 8 additional years in order to constitute an additional safety buffer of0.8% of covered deposits as defined in article 163 number 8 of the law.

As of December 31, 2018, the Bank has made total advance payments in relation to a call for guarantee arising fromthe suspension of payment of three Luxembourg credit institutions, in the amount of EUR 2,065,841. As ofDecember 31, 2018 the Bank has received back the amount of EUR 1,457,218.

According to the passed AGDL law on December 18, 2015, the Bank decided to use the AGDL provision constitutedup to December 31, 2015 to cover LRF and LDGS charges occurring during the year.

During 2018, the AGDL provision was used to cover LRF and LDGS charges respectively EUR 2,778,262 andEUR 269,489 (2017: EUR 866,443 and EUR 246,503).


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18.5 Management and fiduciary services

The Bank has provided the following management and fiduciary services to third parties in the course of the financialyear:

- Portfolio management and advice;- Custody and administration of transferable securities;- Fiduciary agency;- Domiciliary activities;- Agency services.

NOTE 19 - PROFIT AND LOSS ACCOUNT

19.1 Sources of income by geographical region

By application of Article 69 (2) of the law of June 17, 1992 relating to the annual accounts of credit institutions, sourcesof income have not been analysed by geographical region.

19.2 Other operating charges

19.3 Other operating income

Other operating income are analysed as follows: 2018 2017EUR EUR

Release of provisions for liabilities and chargesof previous years

6,144,193 2,794,278

Reimbursement of expenses 4,884,209 5,320,149Reimbursement of VAT 1,394,968 1,441,863Income from previous years 969,714 1,245,392Release of provisions for taxation 143,281 133,335Reimbursement AGDL 19,480 22,653Profit on sale of fixed assets 100 11,097

_________ _________13,555,945 10,968,767

========= =========

The item “Reimbursement of expenses” includes recharged fees for services rendered to affiliated companies in theamount of EUR 4,764,388 (2017: EUR 5,189,105).

Other operating charges are analysed as follows: 2018 2017EUR EUR

Restructuring costs 5,000,000 -Expenses from previous years 419,443 212,317Expenses related to operational errors 306,116 235,164Loss on sale of fixed assets 1,736 37,607

________ ________5,727,295 485,088

======== ========


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19.4 Return on assets

The return on assets ratio of the Bank amounts to: 2018 2017

Return on assets 0.37% 0.35%

The return on assets is calculated on being the net profit of the Bank divided by its total balance sheet.

NOTE 20 - VALUE ADJUSTMENTS IN RESPECT OF LOANS AND ADVANCES AND PROVISIONSFOR CONTINGENT LIABILITIES AND COMMITMENTS

Value adjustments in respect of loans and advances and provisions consist principally of the following:

2018 2017EUR EUR

Value adjustment on loans and advances to customers - 10,826_____ _____

-=====

10,826=====

NOTE 21 - INFORMATION RELATING TO PERSONNEL EMPLOYED AND MANAGEMENT

21.1 Personnel employed

The average number of persons (total heads) employed during the financial year by the Bank is as follows:

2018 2017Senior Management 10 9Management 23 19Employees 163 163

___ ___196===

191===

21.2 Information relating to Management

Executive and non-executive managers received emoluments totalling EUR 5,528,772 in respect of their duties(2017: EUR 4,329,428).

Pension premiums in respect of executive and non-executive managers amount to EUR 191,019(2017: EUR 196,397).

Loans and advances granted to executive and non-executive managers amount to EUR 293,288(2017: EUR 237,996).

Guarantees granted on behalf of executive and non-executive managers amount to EUR 85,030 (2017: EUR 69,650).


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NOTE 22 - FEES OF THE INDEPENDENT AUDITORS

The fees of the independent auditors of the Bank for the year ended December 31, 2018 are as follows:

2018 2017

EUR EUR

Audit feesAudit-related fees

380,59642,000

361,13010,000

Tax related fees 65,558 43,370Other fees 14,931 934

_______ _______Total 503,084

======415,434======

NOTE 23 - BRANCH AND REPRESENTATIVE OFFICES

The Bank has a branch in the following location as of December 31, 2018:

Skandinaviska Enskilda Banken S.A.,Branch Office

50, Collyer Quay #12-03OUE BayfrontSingapore 049321Singapore

NOTE 24 - OUTSTANDING FORWARD TRANSACTIONS

The following types of forward transactions are outstanding as at December 31, 2018:

Operations linked to currency exchange rates- Forward foreign exchange transactions currency (swaps, outright).

Transactions outstanding at the year-end were undertaken to match transactions made on behalf of customers.

Operations linked to interest rates- Interest rate swaps.- Futures on interest rates.


Operations linked to other market rates- Futures and options on variable yield-securities.- Securities transactions.


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