KBL 2013 GB

AACHEN
AMSTERDAM
ANTWERP
AUGSBURG
BARCELONA
BERLI N
BI RMI NGHAM
BREST
BRUSSELS
COLOGNE
DSSELDORF
EDI NBURGH
EI NDHOVEN
ESSEN
FRANKFURT
GENEVA
GRNWALD
HAMBURG
HASSELT
I NGOLSTADT
JAMBES
KOBLENZ
LAS PALMAS
LAUSANNE
LEEDS
LI GE
LI NGEN
LONDON
LUGANO
LUXEMBOURG
LYON
MADRI D
MANCHESTER
MONACO
MUNI CH
MNSTER
MURCI A
NANCY
PARI S
ROTTERDAM
ROTTWEI L
SI NT- MARTENS- LATEM
STRASBOURG
STUTTGART
WAREGEM
ZURI CH
EUROPES
PRIVATE BANKING GROUP
2013 ANNUAL REPORT
AMSTERDAM BRUSSELS GENEVA LONDON LUXEMBOURG MADRI D MONACO MUNI CH PARI S
2013 2012 2011 2010
ANNUAL REPORT
2013 ANNUAL REPORT 1
Keizergracht 617
1017 DS Amsterdam
The Netherlands
www.gilissen.nl
Pacellistrasse 16
D-80333 Munich
Germany
www.mercknck.de
43, boulevard Royal
L-2955 Luxembourg
Luxembourg
www.kbl.lu
Founders Court, Lothbury
London EC2R 7HE
United Kingdom
www.brownshipley.com
Herrmann Debrouxlaan 46
B-1160 Brussels
Belgium
www.pldw.be
8, avenue
de Grande-Bretagne
MC-98005 Monaco
Monaco
7, boulevard Georges-Favon
CH-1211 Geneva 11
Switzerland
www.kbs-bank.com
57, Calle Serrano
E-28006 Madrid
Spain
www.kbl-bank.es
22, boulevard Malesherbes
F-75008 Paris
France
www.kblrichelieu.com
2, boulevard E. Servais
L-2535 Luxembourg
Luxembourg
www.vitislife.com
OUR EUROPEAN NETWORK
LETTER FROM THE GROUP CEO
DIRECTORS & MANAGEMENT
2013 IN REVIEW
KEY CONSOLIDATED FIGURES
CONSOLIDATED MANAGEMENT REPORT
4
6
10
14
16
2013 IN REVIEW: AFFILIATES
NON-CONSOLIDATED MANAGEMENT REPORT
APPENDICES
GROUP CONTACT INFORMATION
28
40
42
54
LETTER FROM
THE GROUP CEO
2013 was a positive year for KBL epb, the
leading pan-European private banking group
headquartered in Luxembourg.
While our decision-making center is here, more
than half of our 2,225 employees are based
outside the Grand Duchy, serving in the eight
other European countries where we operate.
Based on our experience in each of these
markets, we have developed a knowledge base
that combines deep domestic market insight and
broader international perspective. We harness
that truly pan-European expertise in the training
and development of our staff and by putting it
to work for our clients in our domestic markets
and in hubs such as Luxembourg, where our client
base reects the diversity of our wider network.
For KBL epb, the previous 12-month period
was marked by a return to protability and the
full implementation of the groups long-term
growth strategy, including both ongoing internal
transformation and signicant focus on identifying
potential acquisition opportunities.
In Luxembourg, where we provide a range of
multi-specialist solutions to our HNWI clients,
the bank adapted quickly to the requirements
of a new regulatory environment supporting
impacted clients with the onshorization of
assets, and increasing the number of staff
dedicated to this critical project.
In the Grand Duchy, the bank also made a
significant number of senior appointments,
including to the Board of Directors and Executive
Committee, enhancing our ability to meet the
evolving needs of all our stakeholders.
In addition to focusing on the development of
our core business of private banking, we continue
to reinforce the services provided by our Asset
Management, Global Investor Services and
Global Financial Markets business lines, while
simultaneously enhancing the life insurance
contracts offered through our subsidiary Vitis Life.
Our unique value proposition is to integrate these
competencies into a "one-stop shop" solution for
a client base that includes individuals, families and
business owners, as well as institutional clients, family
ofces, foundations and external asset managers.
Outside Luxembourg, we saw great progress last
year. All of our onshore afliates are now protable,
with our branch in Spain delivering above-budget
performance.
Through our group-wide Transformation
Programme, launched last year, we are focusing
on the further professionalization of our approach
to clients, delivering greater value to them and
contributing to the groups bottom-line results.
Based on our core belief in the interdependence
of our nine-country network, we invested
signicant effort last year in strengthening the
ties that bind us as a group. That effort continues,
and will accelerate, in 2014 and the years to come
as this skills-based organization works toward the
realization of its ambitious goals.
Extending that principle to the communities we
serve, the group engaged in a wide range of
corporate social responsibility activities last year
underlining our commitment in that area, and in
everything we do, to our larger purpose: Caring
for generations.
Sincerely,
Yves Stein
Group CEO
We provide one-stop-shop solutions to
a client base that includes individuals,
business owners and families, as well
as institutional clients, family ofces,
foundations and external asset
managers
DIRECTORS &
MANAGEMENT
Jan Huyghebaert
Chairman
George Nasra
Vice Chairman
Alfred Bouckaert
Director
Ernst Wilhelm Contzen
Director
Frank Ertel
Director
Staff Representative
Marc Glesener
Director
Nicholas Harvey
Director
Christian Hoeltgen
Director
Jan Maarten de Jong
Director
Daniel Lardo
Director
Laurent Mertz
Director
Alan Morgan
Director
Mathias Rauen
Director
Anne Reuland
Director
Philippe Ryelandt
Director
Jacques Peters
Director
Albert Wildgen
Director
Andreas Wlfer
Director
BOARD
OF DIRECTORS
1
*
*As of December 31, 2013
Ruedi Baumgartner
KBL (Switzerland) Ltd
Jean Danckaert
KBL Monaco Private Bankers
Rafael Grau
KBL Espaa
Michael Krume
Merck Finck & Co
Nicolas Limbourg
Vitis Life
Tanja Nagel
Theodoor Gilissen
Olivier Roy
KBL Richelieu
Ian Sackeld
Brown Shipley
Franck Sarre
Banque Puilaetco Dewaay Luxembourg
Thierry Smets
Puilaetco Dewaay Private Bankers
AFFILIATE
CEOs
3
EXECUTIVE
COMMITTEE
2
Yves Stein
Group CEO

Marc Lauwers
Deputy Group CEO & COO
Olivier de Jamblinne de Meux
CEO, Luxembourg
Yves Pitsaer
Chief Finance, Risk & Compliance Ofcer
GENERAL
MANAGERS
4
Independent auditors responsible for external audit: Ernst & Young S.A.
Philippe Auquier
ALM
Jean-Yves Dourte
Credit
Rak Fischer
Global Investor Services
Stephen Friedlos
Information Technology Services
Guillaume de Groot-Herzog
Real Estate, Logistics & Procurement
Jonathan Grosvenor
Global Financial Markets
Gaelle Haag
Private Banking Strategic Planning
Olivier Hubert
Tax
Bernard Jacquemin
Wealth Management
Cdric Lebegge
Project Management Ofce
Philippe Mairlot
Accounting
Siegfried Marissens
Corporate Center & Legal
Nicholas Nesson
Corporate Communications
Dominique Rossignol
Deputy CFO
Vincent Salzinger
Group Compliance
Bernard Simonet
Human Resources
Anthony Swings (a.i.)
Risk Control
Thierry Thouvenot
Group Internal Audit
Philippe Van Dooren
Operations
Stefan Van Geyt
Group CIO
2013 IN REVIEW
JANUARY
Marking the start of the new year, and
a new era, KBL epb launches its group-
wide Transformation Programme, a
set of 14 key initiatives that support
ongoing, positive organizational
change.
Philippe Auquier, previously Chief
Financial Of ficer, is appointed
to the newly created position of
General Manager, Assets & Liabilities
Management (ALM), reflecting a
reinvigorated focus on the management
of the group balance sheet.
Stephen Friedlos, a seasoned IT
professional with nearly three decades
of international experience, joins
KBL epb as Head of the Information
Technology Services department.
Nicholas Nesson formerly Director
of Strategy and Financial Services
at Burson-Marsteller Middle East
is appointed General Manager,
Corporate Communications.
The month of January concludes
with the annual gathering of all
Luxembourg-based staff to review
with senior management the groups
per formance in 2012 and, more
importantly, its vision and strategy for
2013 and beyond. Reecting a new
spirit of positive accountability among
all staff, the theme of the evening is: A
Declaration of Interdependence.
FEBRUARY
KBL epb announces several key
appointments to its Executive
Committee, including naming Yves
Stein, a very senior nancial services
professional, as CEO, Private Banking,
for the group. Almost exactly one year
later, Stein who previously held the
position of CEO of Union Bancaire Prive
(Europe) in Luxembourg is promoted
to Group CEO.
During the same month, Marc Lauwers
is named group Chief Operating Ofcer.
Lauwers who brings nearly three
decades of experience to his new role,
including most recently as Head of Retail
and Commercial Banking at Belus Bank
in Belgium later assumes additional
responsibility as Deputy Group CEO.
MARCH
Group financial results for 2012 are
published: by signicantly depreciating
the value of certain assets and therefore
cleaning up its balance sheet, the
group is positioned for growth in 2013
and in the years to come. At the same
time, KBL epb highlights that it is now
actively seeking to identify acquisition
opportunities in select markets in
Europe.
KBL epb becomes a signatory to the
Ltzebuerg Diversity Charter, an
initiative of Luxembourgs Ministry of
Family and Integration. This follows
the earlier signing by the bank of
the Diversity and Equal Opportunity
Charter, drawn up by the Luxembourg
Bankers Association.
APRIL
Prime Minister Jean-Claude Juncker
announces that, as of January 1, 2015,
Luxembourg will introduce the automatic
exchange of information for all interest
payments made by nancial institutions
in Luxembourg to individuals resident
in another EU member state. KBL epb
accelerates its efforts to assist clients
with the onshorization of assets, and
increases the number of staff dedicated
to this extremely important process.
The senior management of KBL epb
hosts a media brieng to outline the
groups three-year growth strategy,
including a series of 14 key initiatives that
will support the realization of KBL epbs
vision to become a top 20 European
private banking group by 2015.
At the same brieng, senior management
emphasize the groups signicant growth
ambitions and, critically, the full
support of its shareholder to achieve its
goals.
Hanif Mohamed, a senior lawyer with
signicant cross-border experience, is
appointed Group Chief Legal Ofcer,
tasked with supervising and coordinating
the activities of all legal departments
across the groups ni ne-countr y
European network.
Concluding the month of April, KBL epb
announces a signicant upgrade to its
IT system through migration from its
existing mainframe to an open-systems
solution.
MAY
Amsterdam-headquartered Theodoor
Gilissen celebrates the 10th anniversary
of its rst sustainable index fund, which
has been highly protable since it was
launched. In the last decade, the Dutch
private bank has introduced three
sustainable index funds, each with a
specic geographic scope.
KBL epb introduces the Luxembourg
Coordination Committee, which, as the
name suggests, is primarily focused
on coordinating activities in the Grand
Duchy including identifying existing
inefciencies and implementing actions
to enhance performance. Olivier de
Jamblinne de Meux, CEO, Luxembourg,
is named Chairman of the Committee.
Brown Shipley holds its fourth annual
Gulls Eggs Luncheon in aid of
Macmillan cancer research.
Over 160 people attend,
r ai s i ng 14, 839
f or Macmi l l an
initiatives in the
local area.
JUNE
Theodoor Gilissen Fund Management
strengthens its sustainable index
investing by appointing F&C, a global
investment management company,
to assist with engagement activities
related to its sustainable funds.
JULY-AUGUST
KBL epb appoints Jonathan Grosvenor
as Head of Global Financial Markets.
He provides 25 years of experience,
i ncl udi ng as BBVAs Managi ng
Director, Head of Corporate Clients.
In the UK, Brown Shipleys Sterling
Bond Fund is the best Sterling
Corporate Bond Fund in the industry,
based on the previous 12-month return
of 14.8%.
KBL epb launches its UHNWI Desk,
which has been introduced to meet
the specific needs of clients with
a minimum of 20 million in liquid
nancial assets with the group.
Half-yearly nancial results show that
group net profit has risen to 41.9
million, up more than 300% compared
to 9.7 million for the same period in
2012. This robust performance reects
the groups increased income, lower
operating expenses and signicantly
reduced impairment provisions.
KBL epb introduces SuccessFactors,
a cloud-based platform that supports
enhanced account abi l i t y and
performance among individuals, teams
and business units across the group.
KBL epb participates in the successful
launch of the first tranche of $490
million in a $2 billion short-term
certificate programme issued by
the International Islamic Liquidity
Management Cor p. , whos e
Governing Board Members include
the central bank of Luxembourg.
SEPTEMBER
Stefan Van Geyt is appointed Group
CIO. He will lead investment strategy
and activity across KBL epbs nine
markets, drawing from his experience.
KBL epb al so announces the
appointment of Franck Prvot as Head
of Group Procurement, tasked with
dening, implementing and managing
purchasing strategy and activities
across a wide range of business units.
KBL epb supports the Luxembourg
Autism Foundations Open Day, which
provides community members with
a glimpse into the lives of autistic
children and adults.
Later this month, KBL epb hosts
a group of Maastricht University
students, giving them the opportunity
to discuss key topics with senior
management.
Vitis Life enters the Spanish market
wi th the i ntroducti on of Vi ti s
FlexiPatrimonium, a life insurance
contract tailored to the needs of
HNWIs, and Vitis FlexiRemuneration, a
tool for executive remuneration.
In Germany, Merck Finck launches the
innovative Triathlon Fund, a three-
part investment fund that focuses on
investment-grade bonds, derivatives
and bonus certicates.
In France, KBL Richelieu participates
as a partner in the 20th annual
Salon Patrominia, a major wealth
management event, at tracti ng
nearly 7,000 attendees. Vitis Life also
participates.
OCTOBER
Together, KBL epb and Vitis Life launch
a Sharia-compliant life insurance
contract, becoming the rst insurer
to offer this service to high net worth
individuals in France.
Puilaetco Dewaay earns Committed
to Excellence certication from the
European Foundation for Quality
Management, becoming the only bank
to earn this recognition in Belgium.
Muni ch- headquar t er ed Mer ck
Fi nck & Co appoi nts Joachi m
Gorny as Chief Finance and Risk
Officer. His responsibilities include
the identification, assessment and
monitoring of nancial risk factors and
the overseeing of the balance sheet.
Al so thi s month, Focus-Money
magazine ofcially recognizes Merck
Finck for its outstanding asset
management.
In the UK, Brown Shipley supports St.
Anns Hospices annual Ladies Fashion
Lunch, a sponsorship that began in
2009. At any given time, the hospice
cares for around 3,000 patients
affected by cancer.
2013 IN REVIEW
NOVEMBER
Jean Danckaert is appointed Chief
Executive Officer of KBL Monaco
Private Bankers. At this key moment
for KBL mpb and the sector as a
whole, he will drive the transformation
and onshorization of the groups
business in Monaco.
Cdric Lebegge joins KBL epb as Head
of the Project Management Ofce. He
will lead the coordination, monitoring
and support of large-scale group
projects. He joins the bank from Bain
& Company, where he was a partner in
the Financial Services Practice.
Also this month, Theodoor Gilissen
is voted Best Asset Manager at the
seventh annual Gouden Stier (Golden
Bull) Awards.
Based on the newly active regulation
establishing the Single Supervisory
Mechanism, it is decided that KBL
epb, due to its size and systemic
characteristics, falls under the direct
supervision of the European Central
Bank. It will therefore undergo a risk
assessment, to conclude in November
2014, that includes an asset quality
review and a stress test.
For the sixth year in a row, Merck Finck
receives summa cum laude ranking
from Elite Report, in cooperation with
the business newspaper Handelsblatt.
DECEMBER
Daniel Boos is appointed to the
Executi ve Commi t tee of KBL
(Switzerland) Ltd, and Head of
International Private Banking. In the
latter role, he will develop the private
banking activities of KBL spb in global
markets of strategic importance,
including the Middle East.
Marc Formisani, a senior professional
with more than a decade of corporate
nance experience, is appointed Head
of Mergers and Acquisitions. Based in
Luxembourg, he will lead, coordinate
and execute the M&A process, in
close collaboration with all relevant
stakeholders.
In France, KBL Richelieu presents
an award to entrepreneurs who
i ncorporate i nnovati ve, sociall y
minded business ideas. A jury of high-
level business and community leaders
in Paris determines which companies
receive this award.
Also in France, KBL Richelieu organizes
a major private client event at the
Lyon Museum of Fine Arts. The bank,
which has ofces in Lyon, is a founding
member of the Lyon Museum of Fine
Arts Club.
Wrapping up 2013, KBL epbs Flagship
Fund, an actively managed fund that
determines equity exposure based
on conrmed trend indicators and
other key criteria, registers a 12-month
net return of 10.10%, significantly
outper formi ng the average of
comparable peers and enhancing its
competitiveness in both absolute and
relative terms.
KEY CONSOLIDATED FIGURES
(Consolidated gures as of December 31) 2010 2011 2012
(1)
2013
Results (in EUR million)
Net banking income 602.6 549.3 393.5 540.6
Operating expenses -503.2 -438.8 -561.3 -425.9
Impairments -44.6 -99.4 -76.0 -3.6
Share in results of associated companies 1.6 0.6 0.0 0.1
Badwill 29.0
Pre-tax prot 85.4 11.8 -243.8 111.2
Income taxes -17.7 8.3 -6.1 -26.7
Net consolidated prot, group share 67.7 20.1 -249.9 84.5
Financial ratios (in %)
Core tier one ratio Basel II 11.3% 16.3% 12.6% 13.5%
Tier one ratio Basel II 13.4% 16.3% 12.6% 13.5%
Solvency ratio Basel II 21.6% 22.3% 18.7% 18.2%
Regulatory capital/balance sheet total 8.8% 7.0% 6.0% 5.6%
Loan-to-deposit ratio 17.2% 19.0% 21.5% 23.8%
ROAE 6.6% 2.0% -26.4% 9.1%
ROAA 0.5% 0.1% -1.8% 0.7%
Cost/income ratio 83.5% 79.9% 142.6% 78.8%

(1)
Restated according to the amendment to IAS 19.
The Pillar III disclosures report will be published in rst half of 2014 on the website of KBL epb.
KEY CONSOLIDATED
FIGURES
(Consolidated gures as of December 31) 2010 2011 2012
(1)
2013
Balance sheet total (in EUR billion) 14.7 14.8 12.9 12.5
ASSETS
Loans and advances to credit institutions 4.1 4.9 2.2 2.1
Loans and advances to non-credit institutions 1.6 1.7 1.9 2.3
Equity and debt instruments 5.5 4.1 4.4 4.1
LIABILITIES
Deposits from credit institutions 2.4 2.5 1.2 1.0
Deposits from non-credit institutions 8.1 8.2 7.4 7.5
of which, subordinated debt 0.8 0.3 0.3 0.2
Total equity 1.1 1.0 0.9 1.0
AuMs (in EUR billion)
Assets under management (private banking) 44.1 39.8 40.9 42.2
Volume impact +0.4% -3.9% -4.8% -2.0%
Price impact +5.7% -6.0% +7.6% +5.3%
AuCs (in EUR billion)
Assets under custody (funds & institutions) 44.1 39.9 38.6 41.3

(1)
Restated according to the amendment to IAS 19.
The Pillar III disclosures report will be published in rst half of 2014 on the internet site of KBL epb.
CONSOLIDATED
MANAGEMENT
REPORT
Net consolidated profit, group share, as of
December 31, 2013, was EUR 84.5 million
compared to EUR -249.9 million as of December
31, 2012, (adjusted amount of +EUR 1.2 million
due to the retrospective application of IAS19R).
This positive performance is due to an increase in
gross income, a reduction in operating expenses
and a signicant reduction in impairment losses.
Whereas 2012 was marked by the completion
of a long sales process, 2013 was the rst full
year since the implementation of the groups
long-term growth strategy. This performance
is particularly remarkable since the banks
willingness to grow has not yet materialized
through new acquisitions. Therefore, the increase
in results compared to last year was on an
unchanged consolidation scope basis.
In 2013 gross income rose by 37% compared to
the previous year, reaching EUR 540.6 million.
Net interest continued to fall, a result of very
low interest rates on capital markets and a slight
reduction in balance sheet assets.
The result realized and the valuation result on the
nancial assets and liabilities globally climbed to
EUR 120.4 million. However, 2012 was impacted
by a loss of EUR 70.5 million generated by the
divestment of certain PIIGS positions intended
to reduce risk.
In parallel to the increase in net banking income,
the net result benefited from a significant
reduction in operating expenses. These fell by
24%.
Staff costs fell by EUR 83.3 million. Even though
2012 was sharply impacted by restructuring costs,
this reduction shows the efciency of the cost-
cutting measures implemented.
Administrative costs and depreciations fell by
17% and 64% respectively.
Here again, one-of f elements such as
impairments on IT projects of EUR 30 million were
entered in the accounts in 2012.
Impairments on goodwill were EUR 0.1 million in
2013 against EUR 46.9 million in 2012.
The balance sheet total of EUR 12,468.6 million
is down 4% on the year due in particular to
divestments in the portfolio of available for sale
assets and a reduction of deposits with central
banks.
At the end of the nancial year under review,
tier one capital after deductions (calculated
in accordance with CSSF Circular 06/273, as
subsequently amended, dening capital ratios
under Basel II) amounted to EUR 522.3 million.
Consolidated solvency ratio on tier one equity
and core tier one ratio stand at 13.53%.
GENERAL COMMENTS
ON THE RESULTS
1
Here in Luxembourg and across Europe, we
engage our clients in dialogue, provide them
with independent investment advice, and strive
to meet their evolving needs through a range of
tailor-made services and products.
Based on our core belief in the principle of
interdependence among our stakeholders and
across our network of more than 2,000 specialist
professionals in nine European markets
KBL epb fosters cooperation and encourages
entrepreneurship.
From our central hub in Luxembourg with
the ability to share information and resources
seamlessly and efciently across our footprint
we serve our clients through an operational
model that allows us to combine broad pan-
European perspective and deep local insight.
As a group, we look to the future with ambition
and condence, focusing on our mission to be a
preferred European private banking group that
cares for clients and colleagues as if they were
members of our own family, always putting their
long-term well-being rst.
We have dened a clear strategy for even greater
success and are condent that we can realize
our vision to become a top 20 European private
banking group by 2015. To achieve our ambitious
goals, we are today in the midst of group-wide
transformation.
With the full support of our shareholder
Precision Capital, a Luxembourg-based bank
holding company KBL epb is consolidating
its presence across Europe, including through
potential acquisitions. Simultaneously, we
are expanding our horizons to capture future
opportunities in high-growth emerging markets.
Complementing our core private banking
activities, we provide a range of additional
investment solutions through our Global Investor
Services, Global Financial Markets and Asset
Management departments.
At KBL epb, our aspiration is to serve as a trusted
advisor, investor and employer whose larger
purpose caring for generations informs
everything we do, every single day.
With a multi-local presence spanning
Europe, centuries of collective
heritage and a shared commitment
to personalized service, KBL
European Private Bankers cares
for generations
CORPORATE
PURPOSE
2
2.1 MISSION
Our mission is to be a preferred European
private banking group that cares for clients and
colleagues as if they were members of our own
family, always putting their long-term well-being
rst.
In line with this mission, we seek to serve as a
trusted advisor to our private banking clients,
acting as a trusted investor on their behalf,
earning their condence by committing ourselves
to:
n Listening carefully to each clients needs
n Developing personalized, long-term
relationships
n Communicating with every client clearly
and transparently
n Managing each portfolio proactively and
with foresight
Recognizing the vital importance of building
and sustaining such relationships by adhering
to these principles, we offer ongoing, objective
advice adapted to the prole of each individual
client.
Through sustained dialogue with our private
banking clients, KBL epb provides tailored
investment strategies, which are flawlessly
executed by our specialist advisors based in
Luxembourg and across our European network.
Just as importantly, we seek to be perceived as a
trusted employer.
Informed by our core belief in the principle
of interdependence, we promote both
entrepreneurship and collaboration among
all our staff. Within this framework of positive
accountability, every employee understands the
importance of their individual contribution to our
shared success.
To that end, we provide ongoing professional
development opportunities so that all KBL epb
staff, across our network, can realize their full
potential.
As an employer of choice in all the markets in
which we are present, KBL epb encourages
its staff to be active participants in their local
communities, including through the banks
various corporate social responsibility initiatives.
2.2 VISION
Our vision is to become a top 20 European
Already an established leader in private banking,
KBL epb will further consolidate this position
in future, including through both organic
and inorganic growth, supported by the full
commitment of its shareholder in this regard.
At the same time, we will continue to reinforce
the services provided by our Asset Management,
Global Investor Services and Global Financial
Markets departments.
2.3 GROUP EMPLOYEES
As of December 31, 2013, the KBL epb network
included 2,225 individual staff, 7.5% lower than
2,406 at the end of 2012. Of the groups 2,225
employees, some 56% work in subsidiaries
outside Luxembourg.
2.4 INTERNAL
TRANSFORMATION
At KBL epb, we are rising to the challenge of
change, seizing new opportunities to further
professionalize our approach to clients, deliver
greater value and contribute to bottom-line
results.
This is why, in 2013, we launched our
Transformation Programme which includes a
range of group-wide initiatives, each of which
has Executive Committee-level ownership. This
ongoing programme is critical to our success,
and our vision to become a top 20 European
2.5 CORPORATE
GOVERNANCE
KBL epb is committed to the highest standards
of corporate governance in all its activities, and,
over the past year, has put in place an enhanced
organizational structure to meet the needs of the
group and its clients today and in the future.
Through new appointments to the Board of
Directors and Executive Committee staffed
by highly respected industry leaders who are
empowered to oversee and manage the banks
operations we are ensuring that the groups
sustained growth journey will be informed by
the core values of transparency, accountability
and integrity.
Private banking is the core business of KBL
European Private Bankers.
Already rmly established as European leaders,
we have started to consolidate this position with
the full support of our shareholder.
With our teams of private bankers and their local
know-how based on knowledge of international
practices, we are continuing to expand our
private banking activities, maintaining our
client-focused approach, while at the same
time favoring innovation and diversity. We are
also attaching greater importance to electronic
banking products and services.
Throughout the group, our wealth management
services are distinguished not only by their
variety and quality, but also by an overall
partnership approach, informed by long-term
analysis and founded upon our belief in the
importance of holistic portfolio management.
Our approach does not consist of offering the
same products and strategies to everyone.
Whether we are managing todays wealth
or structuring tomorrows inheritance, our
clients benet from an approach that is open,
independent and individually tailored to their
specic needs.
It is from this perspective that we intend to
further develop a high-end clientele, whom we
will offer personalized, added-value service.
PROVEN PROFESSIONAL
EXPERIENCE
Our teams have professional experience in areas
such as portfolio management, investment
advice, and nancial and estate planning.
At KBL epb, our broad array of portfolio
management services provides significant
added value for clients. By highlighting strategic
investment opportunities and offering tailored
solutions, we take into account the specic
requirements and risk appetite of each client.
Our investment advisers including portfolio
management specialists, analysts, lawyers and
tax experts guide each client to the right
solutions to meet their needs.
Our ongoing focus is to safeguard and grow
our clients wealth. Whether by investing in
equities, derivatives, xed-income or structured
products, or KBL epb or third-party funds, we
take into account the risk-return potential of
each investment, which we tailor to each clients
specic objectives.
When it comes to nancial and estate planning,
our aim is to provide investment strategies
and wealth management solutions based on a
detailed analysis of each clients assets, so that
capital is preserved and can be passed on to
future generations in the best way possible.
CLIENT FOCUS
At KBL epb our success comes from the fact
that, as an organization, we are wholly focused
on our clients.
The client is at the center of the relationship and
constitutes our priority.
We also understand the importance of regular
communication, especially during periods of
increased volatility, and remain in constant
contact with our clients, providing transparent
reporting of the management of each portfolio.
As we mark a new beginning in the more than
60-year history of the group we will therefore
continue to build upon our heritage as European
private bankers, demonstrating our ongoing
commitment to earning the trust of our clients
each and every day.
OUR CORE PROFESSION:
PRIVATE BANKING
3
KBL epb has developed for its members a set
of ICT and operational services in Luxembourg
grouped in the Hub Service Center concept.
The Project GOLD (Generate excellence in
Operations, Lean processes and Dashboards)
was launched in 2012 and aimed at the
improvement of services to clients, efcient cost
management, synergies, review of processes,
the development of performance dashboards
and the centralization of support functions. The
project resulted in a new Target Operating Model
(TOM) that went live in the rst half of 2013.
The new TOM demonstrated its value when the
Hub managed throughout 2013 to cope with a
signicant increase in volumes while maintaining
a structurally lower cost level. With its focus on
continuous improvement and new managerial
roles, the model inspired the launch of GOLD 2,
incorporating all remaining operational tasks into
the new organizational structure.
In 2013 we continued our efforts to optimize
the use of technology across the group, sharing
the scale benets of our Luxembourg Hub both
as a center for hosting and managing group
technology, and as a center of expertise from
which we support local technology teams in our
subsidiaries.
Technology continues to play a vital role in our
operational efciency and in the delivery of
service excellence to clients.
2013 was a notable year for investment in our
technology infrastructure; we have initiated a
number of projects to refresh or enhance key
elements of our core infrastructure, giving the
group added systems resilience, performance,
scalability and functionality for the future. As well,
we launched a new group procurement function
and group-wide procurement optimization
project.
The group is going through a Transformation
Programme. As part of the COO function, a
Project Management Ofce was installed. Its
mission is to ensure feasibility of the KBL epb
project roadmap while the scope is expanding,
capturing interdependencies and resources
constraints. The PMO ensures transversal
control of execution at all times, with a proper
challenging of initiatives.
THE HUB
SERVICE CENTER
4
5.1 GLOBAL INVESTOR
SERVICES
In parallel with our private banking business, in
Luxembourg we have a second core business
closely linked to the specics of the nancial
center. Since its launch in 2007 our Global
Investor Services (GIS) has been centralizing all
the services and skills in the bank and making
them available to non-private clients. The sectors
in which GIS professionals work are primarily
those linked to the undertaking for collective
investment (UCI) industry and to market-based
activities for professional and institutional
clients. Their aim is to develop these services
and generate new business relationships.
Within GIS, some 40 experts provide tailor-
made services to professional and institutional
clients and offer them products and services
developed within the bank and more particularly
within the dealing room. They are assisted
in their task by technical devices, such as the
Hubs integrated operational platform and
the financial communication and information
systems eKBL, AMP, Bloomberg and Reuters.
In 2013 the world economy and, in particular,
developed markets showed signs of renewed
vigor and posted global growth of 2.5% at
the end of the year. The positive stock market
performance and the stability of our clients funds
in terms of subscriptions and redemptions, as well
as the commercial successes in the acquisition
and extension of our business relationships
contributed to a sharp increase in our net assets.
The UCI & Global Custody Services, experts in
the eld of administrative and banking services,
essential for the smooth running of the UCI of
our professional and institutional clients, now
have clients from the four corners of the globe;
from the US to Singapore to the Middle East.
This year again, we want to highlight the
impressive evolution of non-domiciled finds
with KBL epb, which have risen sharply.
Activities linked to our skills and market activities
have also proted from the growth in assets of
our institutional and professional clients and have
had very good nancial results generated by a
marked increase in foreign exchange transactions,
intermediation on third-party funds and equities.
They met with the approval of investors who,
expecting markets to rise and having large cash
reserves available, made massive investments in
equities, mainly US and from emerging markets.
COMPLEMENTARY
NICHE ACTIVITY
5
GIS is staffed by some 40 experts, who provide tailor-
made services to professional and institutional clients,
offering them products and services developed by
KBL epb and within our dealing room
5.2 CENTRAL UCI
ADMINISTRATION
LUXEMBOURG,
EUROPES LEADER
Just as in 2012, the Luxembourg investment fund
sector rose almost continuously throughout the
year. At the end of December 2013, net assets
in the Luxembourg nancial center rose 9.69%
to reach a new all-time high, for the second year
running of EUR 2.615 trillion against EUR 2.384
trillion at the end of 2012. In the summer of 2013,
net assets fell slightly, only to pick up again quickly.
The rise of EUR 231 billion was made up of 84% net
issues (EUR 194 billion) and 16% positive nancial
market effect (EUR 38 billion).
In 2013 promoters and initiators from 61 countries
again became active in launching structures and
UCI sub-funds: net UCI structures increased 1.6%
(+61 units) in 2013 while the number of sub-funds
rose 2% (+265 units). As seen in previous years,
Specialized Investment Funds (SIF) increased most
with 77 new units, while UCI under Part I and Part
II of the 2010 Law were less successful up 16 and
down 32 units respectively.
Luxembourg strengthened its rst-place ranking in
Europe. With its 3,902 structures and 13,685 sub-
funds, the country is, after the United States, still
the second global market for investment funds.
For the rst year the United Kingdom entered
the top three countries for promoters (market
share in percentage of total net assets); this now
comprises the US (22.7%), Germany (15.2%) and
the UK (15.1%); Switzerland (14.3%) closed 2013 in
fourth place.
Through various initiatives, ALFI (Association
of the Luxembourg Fund Industry) and LFF
(Luxembourg for Finance), are continuing to
promote the nancial center in Asia, the Middle
East and Latin America, territories that are now
distribution markets of prime importance for
Luxembourg funds and also of growing interest
for players from these regions for launching their
own Luxembourg investment funds.
In 2013, once again, alternative investment funds
in the form of Specialized Investment Funds (1,562
units at the end of December 2013) or in the form
of venture capital investment companies (Socits
dInvestissement en Capital Risque; 280 units
at the end of 2013) met with clear success. As
indicated above, with a net rise of 77 structures,
it is once again the SIF a exible but regulated
vehicle introduced just over six years ago which
performed best. The majority of them are funds
that follow an alternative investment strategy in
the widest sense: property, non-listed companies,
hedge funds, micro-nance, new energy, socially
responsible investments, etc.
In regulatory terms, the following were on the
agenda:
n The AIFM (Alternative Investment Fund
Managers) Directive regulating the managers
of alternative vehicles and indirectly also
alternative funds - the Directive of July 2011
should be transposed into the various national
legislations by July 21, 2013, at the latest. In
Luxembourg this was done last July when the
Law of 12 July on alternative investment fund
managers entered into force.
n The professional European passport for
alternative managers and their alternative
investment funds introduced by this new
Directive now offers opportunities to many
initiators and will undoubtedly have a positive
effect on the UCI business in Luxembourg.
Consequently, alternative funds such as SIF,
SICAR and Part II funds should still have a rosy
outlook.
n 2013 was also marked by the implementation
of the requirements of the European UCITS
Directive (UCITS IV) and also by discussions
on the next version of this Directive (UCITS
V) expected in mid-May 2014 (with a two-
year grandfathering period), which will deal
with subjects such as the responsibility of the
custodian bank and managers remuneration.
EVOLUTION OF ASSETS
MANAGED BY KTL
In 2013 the net assets of the 85 UCI structures,
totalling 612 sub-funds being managed, reached
EUR 29.7 billion, up EUR 1.2 billion (4.2%) on
2012. A considerable number of new business
relationships with promoters worldwide started
in 2013.
EUROPEAN FUND
ADMINISTRATION
Since 1998 KTL a specialist subsidiary of KBL
epb has served as the central UCI administration
entity and has subcontracted its management
accounting and investor register management
functions to a specialist company called European
Fund Administration (EFA), of which KBL epb is the
major shareholder. At the end of 2013, EFA was
managing over 2,687 sub-funds containing total
net assets worth EUR 107 billion for 215 clients.
Since its launch in 2007 EFA Private Equity, the
business line handling services for real estate
funds and venture capital/private equity, has
been offering its specialized services to more
than 100 clients. With more than EUR 11 billion
in assets under management, EFA Private
Equity is the main provider of administrative
and accounting services for regulated capital
investment and real-estate vehicles in Luxembourg.
Finally, within the context of new regulations
and requirements introduced by UCITS IV and
AIFMD, EFA has developed numerous additional
services to support the various players in elds
such as governance, risk management and
performance analysis, investment limits, eligibility
and the valuation of targeted investments.
5.3 GLOBAL FINANCIAL
MARKETS
2013 was a year of contrasting fortunes in
nancial markets, with equities delivering another
stellar year while xed income markets suffered
signicant reversals as the yield curve steepened
on both sides of the Atlantic. There was a similar
polarization of performance between developed
and emerging markets, as evidenced across all
geographies in currency, equity and xed-income
markets. Meanwhile, central banks intensied
their efforts to peg short-term interest rates at
rock-bottom levels, complemented by a full suite
of open market operations, forward guidance and
quantitative easing.
With the Dow Jones recording its best year since
1998, Japans Nikkei a standout performer and
European and UK stocks also rallying strongly,
Global Financial Markets was well positioned
to advise and deliver investment solutions for
our private and institutional clients into equities,
exchange-traded funds and bespoke structured
products.
Fixed-income markets started 2013 nervously, but
were particularly spooked by the Federal Reserve
Chairmans comments regarding a possible
tapering in quantitative easing in May, prompting
a 100 basis point rise in yields over 60 days. The
European market response was fully correlated,
and thus began the rebalance between assets
generating capital gains and those offering yield,
with emerging markets and precious metals
particularly gold being the clear losers. Over the
year, gold lost more than a third of its value and
recorded its rst retracement since the millennium,
although trading volumes for Global Financial
Markets remained stable, and we consolidated
our position as the leading trader and custodian
of precious metals in Luxembourg.
Against the rising yield curve, the switch from
emerging to developed xed income markets
dominated, with the peripheral European markets
particularly beneting from the ECBs monetary
stimulus. Nevertheless demand for this bellwether
product continued to grow, and we participated
in more than 750 different new bond issues across
a broad swathe of markets, industries, currencies
and maturities in response to client demand.
Indeed, as the only European Primary Dealer on
a $2 billion short-term certicate programme for
IILM, KBL epb was awarded Deal of the Year
and Sukuk Deal of the Year at the 2014 Islamic
Finance Awards.
On currency markets, we noted the euros
persistence strength, a recovery in sterling but
above all a 25% retreat in the yen under the
reationary policies of Shinzo Abe, prompting a
corresponding rally in Japanese equities. From
Global Financial Markets, we continue to hedge
our customers currency exposures in all major
convertible currencies, on both outright and
forward bases.
In July 2013, we appointed a new General Manager
of Global Financial Markets, with a mandate to
reorganize and refocus our trading activities in
Luxembourg and throughout the group. Initiatives
have been already adopted in equities, xed
income and funds trading, while we continue to
reposition GFM to best serve our clients interests.
2013 IN REVIEW:
AFFILIATES
2013 was a very interesting yet challenging
year for UK-based Brown Shipley, and one that
ultimately resulted in an excellent contribution to
overall group performance.
Every one of our 232 employees contributed
significantly to our performance over that
12-month period. Thanks to that commitment, we
are convinced that we have a great opportunity
to further grow and develop in 2014.
As part of the group-wide Transformation
Programme, our initial venture in this regard led to
the launch of a dedicated Transformation Team at
Brown Shipley. This team will be at the forefront
of change management within our organization
for years to come, and is complemented by the
Group Project Management Ofce, from whom
we seek regular input and advice on our own
transformation journey.
Specic work was undertaken in 2013
in relation to pricing, which has
resulted in the roll-out of new fee
structures for our discretionary
clients, while also giving us
the opportunity to re-launch
our advisory and execution-
only offerings, which will
happen in the rst quarter
of 2014.
We continued our initiative
to recruit new private
bankers in 2013, as part of
our semi-organic growth
plans. With three new hires
last year and a number of
high-quality potential private
bankers in the pipeline for
2014, recruitment will signicantly aid our own
growth ambitions. Additionally, we will consider
growth via acquisition should such opportunities
arise in 2014.
We started 2014 with a new senior management
and corporate governance structure in place,
and welcomed Hugh Titcomb as our new Head
of Private Banking in January 2014. In addition,
we have restructured our Board membership in
line with KBL epbs new governance framework.
In the heavily regulated UK environment,
this new structure will support our continued
progress, positioning us well for future growth
opportunities.
BROWN SHIPLEY
Established in 2011, KBL Espaa is headquartered
in Madrid, with ofces in Barcelona, Murcia and
Las Palmas. We offer clients the exibility of
private banking relationship management from
Spain with the ability to domicile assets in the
KBL epb market of their choice.
As a greenfield operation in the very large
Spanish market, we believe that there is
enormous opportunity for future growth both
organically and, potentially, through acquisitions.
In 2013, during only our second full year of
operations and despite the lingering impact of
the nancial crisis, the bank witnessed signicant
expansion in terms of both assets under
management and total revenues.
Meanwhile, in addition to asset management and
tax and estate planning, our range of tailored
wealth management solutions has grown over
the last year to include:
n Spanish SICAV and Luxembourg SIF
n Collective SICAV
n Unit-linked insurance
n Structured deposits
n Short, medium and long-term nancing as
an integral part of the service required by
HNWI and UHNWI clients in the Spanish
market
n Acting as intermediaries for property/
corporate divestments
The majority of our clients are high net worth
individuals. We provide them with customized
asset management services, with the objective
of analyzing each client holistically to provide a
complete wealth management solution that takes
into account more than purely nancial factors.
Working closely with our colleagues in
Luxembourg and across Europe, we are
identifying further opportunities for cross-border
cooperation, enhancing our ability to provide
clients with both deep insight on the Spanish
market and broader international perspective.
KBL ESPAA
2013 marked a new beginning for KBL Monaco
Private Bankers, which provides bespoke, high-
quality service to both resident and international
clients.
The appointment of Jean Danckaert as Chief
Executive Ofcer, in the fourth quarter of last
year, was a truly milestone announcement in
the banks nearly 20-year history. At this key
moment for KBL mpb and the sector as a whole,
Danckaert is now driving the transformation and
onshorization of the business in Monaco.
Having held a range of senior management
positions at private banks in the Principality over
the last two decades, Danckaert is focused on
ensuring that KBL mpb provides its clients with
an even higher level of personalized service and
access to an even greater range of products.
With a team of more than 50 experienced,
committed professionals in Monaco supported
by some 2,000 KBL epb colleagues across Europe
KBL mpb provides the full spectrum of nancial
solutions, including:
n Investment advisory
n Portfolio management
n Specialized services, including brokerage,
wealth insurance and credit solutions
Additionally, the bank provides an integrated,
multilingual platform for external asset managers
and family ofces, which benet from a range of
exible investment services and solutions for
their own end clients.
Based in one of Europes major international
private banking centers, KBL mpb operates from
a politically and economically stable nancial hub
with optimal regulations that support the private
banking needs of both resident and international
clients.
Since its founding in 1996, KBL mpb has stood
out due to the quality of service we provide and
the long-term nature of our client relationships.
As we mark this new beginning and look to the
future with renewed confidence, those core
values will not change.
KBL MONACO PRIVATE BANKERS
2013 was a positive year for KBL Richelieu, a
French private bank on a human scale.
Building upon our long experience, the bank
increased its market share across each of its
three business lines, which serve private clients,
institutional clients and independent nancial
advisors (IFAs). At the same time, we continued
to expand our horizons to capture future growth
opportunities.
Belonging to KBL epb, an ambitious European
private banking group, supports our ability to
serve an increasingly global client base. KBL
Richelieu is also able to drawn upon in-house
savoir-faire to meet the complex requirements
of our private clients, while simultaneously
broadening our offering for institutional clients
and IFAs.
In 2013, we continued to demonstrate to
institutional clients the significant appeal of
the Undertakings for Collective Investment in
Transferable Securities (UCITS) offered by KBL
Richelieu Gestion, our asset management arm.
As a consequence, KBL Richelieu Gestion was
entrusted with a range of new management
mandates over the course of last year.
In parallel, our fund managers reached out
beyond our domestic borders to countries
such as Belgium, Luxembourg, Monaco and
Switzerland as part of an ongoing geographic
diversication strategy.
Indeed, the strong historical performance of
KBL Richelieu Gestion is a key differentiator, not
just for our advisory business but across each
of our primary lines. That includes, in particular,
the positive ranking of our UCITS and, more
generally, the broad recognition of our fund
managers as thought leaders in France.
Another differentiator for KBL Richelieu is the
quality of the service we provide. Recently, we
were very pleased to have been recognized for
excellence in that regard by Gestion de Fortune,
a leading magazine that covers the French
private banking sector.
We are proud to have recei ved such
acknowledgment, and share the credit for it with
all our staff, who work so hard on behalf of our
clients striving each day to meet their individual
needs and maintain their long-term trust.
KBL RICHELIEU
The strong historical performance
of KBL Richelieu Gestion is one
of the key differentiators for the
Paris-headquartered private bank
Founded in 1970, KBL (Switzerland) Ltd provides
global perspective rooted in traditional Swiss
values. With over 100 staff operating from
Geneva, Lausanne, Zurich and Lugano, we are
always close to our clients working with them
to meet their evolving expectations, including
during periods of signicant external change.
2013 was just such a period for the private
banking sector in Switzerland.
Last year, at an historic moment for the sector,
amidst increasingly complex regulator y
requirements, KBL spb launched a major internal
transformation programme. We realigned our
strategic priorities to ensure long-term stability,
while at the same time ensuring compliance with
new intergovernmental agreements and rules
in force in our target markets.
Our rst priority was to dene markets
of strategic current and future
i mpor t ance. Si mul t aneousl y,
we redoubled our ef for ts to
assist existing clients with the
onshorization process.
We also reviewed and revised
our range of products and
services, placing particular
emphasi s on i ncreased
specialization. At the same time,
we invested in increased training
for our client advisers, including
on the key topic of regulatory
affairs.
Importantly, we strengthened both
our Compliance and Risk Management
departments to ensure that to we can
meet these new systemic challenges.
By the end of 2013, nearly all of this work was
complete.
In 2014, like many of our peers, KBL spb will
continue to invest significant energy in the
successful resolution of the private banks status
vis--vis the new US regulatory framework,
ensuring the full application of relevant
regulations with complete peace of mind.
During this transitional period, we see a
signicant opportunity for this local private
bank that is part of a larger, pan-European
group. Indeed, the ability to share knowledge
and resources has never been more critical to
our success and to that of our clients.
KBL (SWITZERLAND) LTD
As an experienced, broad-based asset manager,
Munich-headquartered Merck Finck & Co offers
a wide spectrum of solutions for our high net
worth clients. Indeed, with 16 ofces and 340
employees across Germany, we build upon 140
years of experience to forge strong relationships
founded upon mutual trust.
Key milestones last year at Merck Finck & Co
included the appointment of Joachim Gorny
as Chief Finance and Risk Ofcer. The German
KBL epb afliate also invested signicant efforts
in hiring experienced private bankers, thus
extending its impact within the large German
market.
As part of the group-wide Transformation
Programme, the bank introduced a new,
transparent and fair pricing model in 2013.
Moreover, varying client needs
are now met by tailored
r e l a t i o n s h i p
ma n a g e me n t
s o l u t i o n s
f or each
segment.
Over the same period, Merck Finck & Co
launched two major IT projects to ensure
that our Portfolio Management and archiving
systems remain up to date.
In 2013, investors continued to face the prospect
of diminishing yields in the bond market. At the
same time, client focus on asset protection
remained unchanged. Our investment team
therefore developed the Triathlon Fund, which
aims to combine different strategies by linking a
bond investment to a conservative option selling
strategy. The combination of these elements
offers an above-average yield, based on a
conservative investment approach, in a single
product.
Inspired by KBL epbs ambition to become a
top 20 European private banking group by 2015,
Merck Finck & Co is likewise focused on growth
both organically and inorganically. We see a
special opportunity to do so in the German
market, where many HNWI and UHNWI clients
are eager to identify a private bank that can
meet their special requirements.
Finally, the outstanding quality of our advisory
services was again recognized by leading media
such as the Handelsblatt Elite Report and Focus-
Money.
MERCK FINCK & CO
2013 was a landmark year for Brussels-
headquartered Puilaetco Dewaay Private
Bankers, which operates seven ofces across
Belgium.
During the course of last year, our ongoing
pursuit of excellence was acknowledged by the
European Foundation for Quality Management,
making us the only Belgian bank to have earned
Committed to Excellence certication from the
EFQM.
We see this acknowledgement not as an end,
but as the beginning of our further growth: it is a
milestone on our journey towards becoming the
most trusted private bank in Belgium.
In 2013, we substantially improved our
commercial organization attracting a range of
new private bankers and signicantly enhancing
the tools we use to serve our clients.
Investing in people including appointing a new
Chief Strategist as well as a new Head of Credit
and communicating the depth of our expertise
were also key in 2013. Over the same period,
we provided a total of more than 500 days of
training for our private bankers and managers
as part of our commitment to lifelong learning.
Following the announcement by the Belgian
government that 2013 would be the last period
of scal amnesty for those with holdings abroad,
Puilaetco Dewaay worked closely with relevant
clients to guide them through this process
providing deep insight and local expertise.
Partly as a consequence of the onshorization
process and also through our renewed
commercial vigour, we attracted a
signicant number of new clients
throughout the year, and
exceeded earlier forecasts
in this regard.
Finally, at a time when
technology is more
i mpor tant than
ever, we improved
our ex i s t i ng
pl at f or ms and
processes, and
remain focused on
achieving progress
in this impor tant
area.
For all of those reasons,
for all of us at Puilaetco
Dewaay, 2013 was a year to be
proud of.
PUILAETCO DEWAAY PRIVATE BANKERS
For the nancial services sector in Luxembourg,
no event in 2013 was more important than
the announcement by the government of the
upcoming automatic exchange of information
with EU and American tax authorities.
At Banque Puilaetco Dewaay Luxembourg, we have
long been preparing our clients and ourselves
for this significant moment. As anticipated,
throughout the year, we received an increasing
number of requests from clients, particularly
those resident in Belgium, to transfer
their accounts to their country of
residence.
Thats precisely why we
proactively forged strong
third-party management
agreements with our
par ent , Pui l aet co
Dewaay Private Bankers
in Belgium, and then
st rengt hened t hem
further in 2013.
Introduced over the past
several years, these third-
party management agreements
took concrete form last year, and
now concern a signicant percentage of the
clientele of Puilaetco Dewaay Luxembourg.
This solution allows any Belgian client of
the bank to have their account domiciled in
Belgium while continuing to be served by their
trusted private banker from Puilaetco Dewaay
Luxembourg.
Over the course of this year, we expect to
conclude similar agreements with other KBL epb
afliates, including in France and in Switzerland.
At the same time, we maintained our ongoing
focus on the development of our private banking
activities. To that end, we hired two new Senior
Private Bankers with primary responsibility for
the development of our French client base.
Indeed, since 2010, we have put in place a policy
of hiring Senior Private Bankers specically
to develop new assets. Over the
past four years, this strategy has
borne signicant fruit and
will continue to be pursued
in 2014 and beyond.
Last year, we launched
an initiative to automate
the producti on of
certain key documents,
s uc h as annual
statements for our private
clients, to ensure greater
consistency and efciency.
This represents a small but
important step in the ongoing
modernization of our operations.
Overall, despite the significant challenges
facing the sector as a whole, we met all of our
objectives for 2013. As a consequence, we are
condent about our outlook for this year and
for those that follow.
BANQUE PUILAETCO DEWAAY LUXEMBOURG
2013 was transformative for Amsterdam-
headquartered Theodoor Gilissen, founded
more than 130 years ago.
As part of a group-wide strategic review
initiated in 2012 by our parent, KBL epb, we
jointly identied the need to carry out several
key actions at Theodoor Gilissen, including
increasing our asset base, optimizing our cost-
to-income ratio and adding greater value to our
overall service offering.
We then developed specific initiatives to
address these challenges, including:
n Reshaping our private banking service
offering and pricing model, based on co-
creation efforts with clients
n Enhancing the efciency of our sales force
n Upgrading our online service offering
n Improving and tailoring investment
information and research
In 2013, our focus was on the implementation of
these initiatives.
In that regard, our efforts unquestionably
paid off: protability was restored, with annual
performance signicantly up from the previous
year, and a substantial number of new client
relationships were established.
Last year, we continued to safeguard and
nurture our strong reputation in the Dutch
market. To that end, the bank maintained its
excellent solidity and strong liquidity positions,
well above the market average and minimum
required levels. Also, our robust risk framework
to control strategic and tactical risks (in place
since 2011) was reviewed and approved by the
Supervisory Board.
In 2013, our investment team delivered strong
returns on discretionary portfolios. Meanwhile,
Theodoor Gilissen was voted Best Asset
Manager at the seventh annual Gouden Stier
(Golden Bull) Awards. An independent jury of
experts reached that decision after considering
criteria that included comprehensiveness,
transparency, cost, explanation of risks, portfolio
structure and client focus.
As always, we maintained our commitment to
best practice corporate governance, as well
as soundly managed operations. Ongoing
attention was also given to our corporate
culture including the our vision, mission and
core values ensuring that we keep in mind
the needs of all our
stakeholders in
ever y t hi ng
we do.
THEODOOR GILISSEN
2013 was a year of multiple achievements for Vitis
Life, a Luxembourg-headquartered provider of
la carte wealth solutions for clients in Belgium,
France, Italy, the Netherlands and Spain.
Indeed, several major projects were launched
last year, enhancing our offering of high-end life
insurance contracts and positioning Vitis Life
as a major participant in the pan-European life
insurance market.
Vitis Life entered the Spanish market in
September 2013 with two dif ferent life
insurance contracts: Vitis FlexiPatrimonium, a
life insurance contract dedicated to high net
worth individuals, and Vitis FlexiRemuneration,
a life insurance tool for executive remuneration.
To market these two new products in Spain, we
recruited two Spanish Country Managers with
signicant private banking experience.
In France, we launched our rst Sharia-
compliant product for that market: Amne
Exclusive Life. This contract is the result
of close cooperation among Vitis
Life, KBL epb and the Independent
Islamic Finance Committee in
Europe (CIFIE).
Vitis Life and KBL epb worked together to launch
this life insurance contract that fully adheres to
the principles of Islamic nance, obtaining a
fatwa (legal judgement) approving that product
in October 2013. We thus became the rst life
insurer operating under the Freedom to Provide
Services from Luxembourg Act to offer Sharia-
compliant life insurance to high net worth
individuals in France.
Finally, Vitis Life partnered with KBL epb to
offer clients of the private bank in Luxembourg
accidental death cover when signing or renewing
any discretionary or advisory mandate another
example of the kind of intra-group cooperation
that is driving our shared success.
VITIS LIFE
NON-CONSOLIDATED
MANAGEMENT
REPORT
1. GENERAL BALANCE
SHEET PERFORMANCE
At the end of 2013, KBL epbs balance sheet
totalled EUR 8.4 billion and remains stable, both
in size and structure, compared to the end of 2012
(+EUR 0.2 billion).
Under the aegis of Precision Capital for more
than a year, a Luxembourg-based bank holding
company, the bank has begun an internal
Transformation Programme and redened its
investment strategy. At the end of 2012, KBL epb
consequently decided to exit a series of bond and
asset-backed securities investments - where the
underlyings are situated in peripheral eurozone
countries - to reinvest the cash in a new bond
portfolio.
The bank is continuing its relaunch of loan activity
on a securitized base and has slightly raised the
volume of its reverse repo interbank operations.
Thanks to the quality of its assets, KBL epb is
maintaining a high liquidity ratio of 51.2%. The
Basel II solvency ratio and the core tier I ratio
both remain very comfortable at 32.9% and 27.9%
respectively.
2. NET INTEREST AND
COMMISSION MARGIN
Interest margins, held since the beginning of the
crisis, are 6% lower compared to 2012, at EUR 53.3
million.
Net commissions rose more than 3% to EUR 87.5
million. KBL epb showed its ability to manage
proactively the "onshorization" process and kept
most of its clients in Luxembourg or within the
group.
3. DIVIDEND
Dividend income (EUR 19.4 million) fell by 24.4%,
mainly with group companies.
4. SECURITIES INCOME
KBL epb posted securities income of EUR 30.2
million, mainly on the sale of equities exposed to
Asia. In 2012 KBL epb posted a loss on the sale of
PIIGS positions of EUR 70.5 million.
5. OPERATING EXPENSES
The restructuring plan begun in 2012 combined
with a policy of operational efciency reduced
expenses by 38% and now total EUR 154.9 million
(2012: EUR 249.5 million).
6. IMPAIRMENT
The annual impairment tests led to a write-down of
EUR 26.4 million for KBL (Switzerland) Ltd.
7. 2013 NET RESULT
As of December 31, 2013, KBL epb recorded a net
prot of EUR 35.2 million.
For detailed gures please refer to the Annual Accounts.
APPENDICES
APPENDIX 1
DEPOSIT GUARANTEE
Since December 31, 2013, KBL epb has had, in
accordance with CSSF Circular 13/555, a system
allowing it, should the bank become insolvent,
to rapidly produce a Single Customer View le
for the Association pour la Garantie des Dpts
Luxembourg (AGDL Deposit Guarantee
Association Luxembourg) covering all cash
accounts and personal information for clients
beneting from the deposit guarantee. This le
also includes clients from the Spanish subsidiary.
This guarantee covers natural persons and
small-scale legal bodies (under cer tain
conditions) headquartered in a member
state of the European Economic Area and
consists in compensating them, in the case of
the insolvency of an establishment which is a
member of the AGDL, for their cash deposits in
this establishment. This guarantee is limited to
EUR 100,000 per person.
APPENDIX 2
COMPLIANCE RISK
Compliance is responsible for implementing all
measures designed to prevent the bank and the
group from suffering damage or loss, whether
nancial or otherwise, due to a failure to comply
with regulations in force.
The tasks of KBL & Group Compliance
encompass the identication and management of
compliance risks, as well as the implementation of
an awareness-raising policy, corrective measures,
internal reporting and relations with the Public
Prosecutor and the CSSF in the eld of money
laundering. It actively helps the managing bodies
in the management and control of these risks.
Its major areas of intervention are:
n The ght against money laundering and
the nancing of terrorism
n Investor protection (MiFID, market abuse,
customer complaints, conicts of interest,
etc.)
n Professional ethics (codes of conduct,
compliance manuals, etc.) and the ght
against fraud
n Data protection (including banking
secrecy)
n Prevention of risks linked to cross-border
business
The threefold role of advice, prevention and
control in these various areas of intervention
form the core work of Compliance. The latter
also monitors compliance risks and their
management across the whole KBL epb network
through a functional link between the local
bodies and those in Luxembourg.
Furthermore, a specic Board Compliance &
Legal Committee is informed of and regulatory
monitors the adequacy of Compliance
measures. It consists of three directors with
expertise in the eld.
2.1 ADVICE AND
PREVENTION
In 2013 Compliance continued its advisory
and support role for the various business
lines, especially within the framework of the
banks current activities. It has become a
regular support for commercial actions and
the questions which may arise from them. It is
involved in the banks client acceptance and
revision procedure.
It should be noted that the Committee on the
Authorization and Supervision of Financial
Products (CAS), of which Compliance is a
permanent member, meets on a regular basis
to approve products that are to be offered
to clients. Informing clients so that they can
understand the products and make an informed
investment decision are the main points of this
process, which uses brochures or term sheets to
clarify the products characteristics and risks.
Apart from being available to answer questions
of interpretation and its constant monitoring of
the subsidiaries, Compliance Advisory and the
Money Laundering Reporting Ofcer (MLRO)
pay particular attention to carrying out a
Compliance Awareness programme across the
KBL epb network. This programme is principally
based upon a systematic and structured multi-
annual approach, with more or less frequent
and more or less extensive training sessions
depending upon the level of exposure to
Compliance risks of the concerned persons.
The programme is accompanied by regular
information for employees and managers on
Compliance risks according to what is topical
(internal or external).
We continue to strengthen Compliance
practices within the group with forums, regular
exchanges with the Compliance Ofcers in our
European network and by adopting new codes
of conduct and good practice (acceptance
policy for high-prole clients, good practice in
the matter of suitability, good practice in tax
compliance relating to the acceptance of new
clients, etc.)
2.2 CONTROL
Compliance continued to maintain its role in this
area. Its second-level control framework is part
of the banks general internal control framework.
In addition to refining and strengthening
certain tests, the Compliance Monitoring entity
continued to oversee its Compliance Monitoring
Programme (CMP). This tool maps Compliance
risks and is designed to check on a regular basis
that these risks are under adequate control. If
necessary, suggestions for improving the plan
are put forward.
The correct execution of these controls by
our subsidiaries was also monitored from
Luxembourg. Where appropriate, support was
also given to certain group bodies.
Specialist anti-money laundering software
(SIRON) is now in place in all KBL epb group
subsidiaries of signicant size. This solution
seeks to improve the review processes for the
groups clients, whether new or existing, both
by analyzing client behaviour (before and after)
and by screening the client database versus
international lists of persons subject to legal
action or restrictive measures.
The bank is constantly adapting its control
procedures and making staff aware of the need
to protect clients.
Group Compliance carries out regular checks in
the groups various subsidiaries.
3.1 MISSION AND
ACHIEVEMENTS 2013
In 2013 the Board of Directors, through its
dedicated committee for risk oversight, the Board
Risk Committee (BRC), expressed its appetite
for risk in its rst Risk Appetite Statement (RAS).
This document denes the types and levels of risk
it is prepared to accept in pursuit of its strategy,
whether nancial (liquidity risk, market risk, credit
risk and business risk) or non-nancial (operational
risk, reputational risk, regulatory risk and client risk).
The risk levels considered acceptable are
quantified and monitored by means of key
indicators, for which limits and alert thresholds
have been set at consolidated level first.
Implementation of this principle throughout
the various group entities started in 2013
and will continue during the rst half of 2014.
At the same time, a new system of reporting
to the BRC and the Management Committee
was constructed based on the RAS, with
the collaboration of external consultant
Oliver Wyman. In addition to providing
regular measurement of the corresponding
indicators, focusing on any excesses detected
(i.e. analysis and action plan), the reporting
places greater emphasis on the concerns,
stakes and projects relating to risk problems.
The rollout of the RAS (through the adoption
by local Boards of Directors of their own limits)
and of the associated reporting started in 2013
and will continue during the rst half of 2014.
As regards liquidity risk, in preparation for their
coming into force under the European CRR/
CRD IV regulations, the LCR (liquidity coverage
ratio) and NSFR (net stable funding ratio)
continued to be evaluated every quarter for all
group entities, while for KBL epb, where the
liquidity risk is more material, daily monitoring
was put in place to ensure tight control.
The BRC also validated the new version of the
liquidity stress tests. This exercise aims to evaluate
the banks liquidity situation in the event of a
general market crisis arising at the same time as a
crisis specic to KBL epb. The former relates to the
difculty of mobilizing the nancial instruments
held by the bank, while the latter focuses more on
its ability to stabilise its nancing sources (funding
risk). The conclusions of this exercise show that the
group could survive a severe liquidity crisis for three
months without its business model being affected.
On the same theme, towards the end of 2013 the
bank embarked on the initial reections preliminary
to drawing up a recovery plan, studying what
measures the bank could take to re-establish its
nancial situation if it were to seriously deteriorate.
In 2014 this project will involve the heads of the
majority of functions, either on a permanent basis
or as guests of a dedicated steering committee.
For market risks associated with the trading
activity, a 10-day, 99% HVaR (Historical Value at
Risk), which had been discontinued following
the change of shareholder, was reactivated
for monitoring trading activities in order to
provide a measurement common to all market
risks, but also with a view to completing the
limits structure currently in place for each of
the activities. This HVaR is still in the test phase
and should go into production in early 2014.
As regards market risks linked to assets and
liability management (ALM), excluding trading
activities, the controls were adapted following
the creation of the ALM function in early 2013.
This functions essential responsibility is to
recommend to the ALCO (Assets and Liabilities
Committee) strategies in terms of management
of the gaps between resources and utilization
(long-term), liquidity management, ROE
enhancement and risk mitigation. It also oversees
implementation of the ALM policy throughout
the group. In the context of this new governance,
the Risk Control Function performs a veritable
second-level control entity role, issuing opinions
APPENDIX 3
RISK MANAGEMENT
on proposals and repeatedly measuring the
market risks associated with the ALM activity.
In the eld of credit risk, a global action plan
was established for 2013 and 2014, covering the
evaluation of the risks associated with the Lombard
lending activity in the various group entities. The
rst phase of this plan, executed in 2013, consisted
in a comprehensive inventory of existing practices,
notably in terms of the eligibility of collateral (types
of securities accepted or excluded), the level of
haircuts and pledged securities and the conditions
for realizing securities in pledged portfolios.
A stress-test was also developed in order to
determine the pertinence of the haircuts used in
light of historical market volatility over a period
corresponding to the time needed to realise the
security. Studies will continue in 2014, in particular
on the possibility and desirability of still further
harmonisation of practices within the group.
Control and monitoring of credit risk in the xed-
income investment portfolios was adapted,
these portfolios now being managed by the
ALM function. All investments must comply
with the concentration limits dened by type
of issuer (sovereign, corporate or bank), as
well as with country limits. Interbank limits
continued to be closely monitored in 2013.
Notably, they were reduced during the year
following the lowering of the Large Exposures
limit to below the EUR 176 million threshold.
In addition to a prior control of limits, the
Credit Risk Control department can reject a
fixed-income investment based on its own
assessment of the credit risk, supported by the
comments of the international rating agencies
and an analysis of the issuers nancial statements.
The situation of the investment portfolios,
and any excesses over concentration
limits arising from downgrading of ratings
are repor ted monthly to the ALCO.
Apart from this, 2013 was devoted to bringing
the bank into compliance with the EMIR
(European Market Infrastructure Regulation),
which introduces new obligations relating to
derivative contracts traded over the counter,
notably in terms of risk reduction techniques,
the handling of collateral and the reporting of
transactions. In the course of this project, all
the valuation models for nancial instruments
were validated by a recognised independent
company, these models being used in the context
of determining results and for bilateral margin
calls. The modelling of structured products and
options was similarly validated, allowing them to
be integrated in a new valuation and analysis tool.
As part of the move to meet EMIR requirements,
the bank equipped itself with the triResolve
system (the industry standard) which makes
possible an exhaustive reconciliation of its
portfolio of derivative contracts with those
of its counterparties, and thus optimizes
the handling and resolution of differences.
In the eld of operational risk, an Operational
Risk Framework was defined with Oliver
Wyman in order to formalize the organisation
and standardize the management of
operational risk in the group by means of:
n Common classication of operational risk
n Organisation and a governance model
n Series of tools and methods for detecting
and measuring risk
n Risk-mitigation process
n Standardized reporting
In this context, particular attention was given to
improving the existing tools for risk self-assessment
(RSA) through the introduction of a new approach
called risk and control self-assessment (RCSA),
which will allow the banks various business
lines to gain a better understanding of their
operational risk by evaluating the effectiveness
of the controls and mitigation procedures put
in place. The development of a centralised
approach will also make it possible to analyse
and compare the level of risk and the efciency
of the controls throughout the group and
thus to form a clearer idea of the exposure
to operational risk. This new methodology,
which has been used in two pilot schemes,
one in Luxembourg and the other at Theodoor
Gilissen, will be rolled out starting in 2014.
Additionally, the Common Operational Risk
Rules System (CORRS), design and deployment
of which started in 2012, was developed in
2013 for the private banking and lending
business lines. The purpose of the CORRS is
to establish minimum principles (standards)
in respect of operational risk at group level.
Lastly, in the context of the Single Supervisory
Mechanism that will come into force in
November 2014, our shareholder, Precision
Capital, appears on the list of credit institutions
considered signicant. As such, it will be subject
to a comprehensive evaluation in 2014, covering
among other areas the quality of its assets,
and will also be subjected to a stress test.
All the information needed for this evaluation
was collected during the last quarter of 2013
from the group as an entity forming part of the
consolidated balance sheet of Precision Capital.
3.2 STRUCTURE AND
ORGANIZATION
The Risk Control Charter was drawn up based
on the EBAs Guidelines for Internal Governance;
it formalizes the work of the Risk Control
entities and the principles, responsibilities and
guidelines for risk management.
As described in the Charter, the Risk Control
Function performs a level two control function
in managing the banks risks, a level it shares
with entities such as Compliance, the Finance
Function and Human Resources. Level one
controls are performed by the entities at the
source of the risks (front-ofce, back-ofce, etc.)
The Group Risk Control Function in the parent
company is organized in four departments with
a total of 25 FTEs:
n The Market Risk Control department (with
4.8 FTEs) is in charge of the specic control
of ALM and liquidity risks.
It also performs certain more transversal
functions for all the risks covered by the
Risk Control Function, including reporting
to the Management Committee and the
Board Risk Committee, regulatory watch,
modelling (when sophisticated statistical
techniques are required) and transversal
regulatory approaches such as the ICAAP.
This is also the department that develops
the controls for detecting potential risks in
client portfolios.
n The Middle Ofce and Collateral
Management department (with 9.9 FTEs)
is in charge of the level two recurrent
controls on the activities of the Financial
Markets function, i.e. mainly:
The control of the integrity and reliability
of positions and trading results in
Luxembourg, as well as their reporting
Consolidated monitoring of the market
risk associated with the Groups trading
activities (control of usage of and
excesses over limits)
Monitoring of counterparty/country risk
(uncommitted lines), namely the credit
risk associated with the professional
activities of the Luxembourg dealing
room
The management of collateral arising
from proprietary activities such as
repos, securities lending and derivative
products based on negotiated framework
agreements
In June 2013, the bank launched the GOLD
2.0 project, which aims to put synergies in
place by reallocating operational activities,
enabling expertise to be developed, people
to become more flexible and versatile,
performance management to be improved
and controls to be optimized. At the
conclusion of this project, it was decided
that the activities of control of positions and
results and management of collateral arising
from proprietary trading would leave the
Middle Ofce and Collateral Management
in 2014 and join the Operational Function,
while the control of limits and liquidity
monitoring activities would remain in the
Risk Control functions.
n The Operational Risk Control department
(with 5.2 FTEs), is in charge of monitoring
problems relating to operational risk. Its
responsibilities are essentially:
Def i ni ng and i mpl ementi ng the
Operational Ri sk Framework and
controlling its application in all group
entities
Defning and implementing standards
for managing operational risk (risk
i denti f i cati on, measurement and
mitigation)
Controlling the application of plans for
mitigating the risks identied
Repor ting on the management of
operational risk to the Executive
Committee and the Board of Directors
The depar tment al so manages the
insurance programme for the group and
the implementation of a consistent and
exhaustive set of transversal procedures,
mainly for the parent company, but also for
certain branches/subsidiaries that use its
services.
n The Credit Risk Control department (with 3.8
FTEs) is in charge of monitoring credit risk
for the group. Credit risk arises essentially
from the following activities:
Lombard loans mortgage lending to
private clients in support of the banks
main activity
Portfolios of fxed income investments
(essentially investment-grade, FRN and
SAS), in the context of placement of
liquidity
Counterparty risk linked to transactions
of the Financial Markets function
(management of uncommitted bank lines)
Committed and uncommitted credit lines
granted to investment funds in support of
the Global Investor Services activity
Direct bilateral credits to local companies
Credit risk in the network of sub-
custodians
The department also covers the monitoring
of country risks, and is involved in dening
and complying with criteria for accepting
securities taken as collateral.
The total number of risk managers in group
associates is 25 FTEs. In view of the greater
degree of uniformity of the activities in the
subsidiaries and the non-materiality of certain
risks (absence of trading activity, ALM risk present
only in certain entities and tightly controlled from
the parent company, liquidity risk also limited),
the major part of these resources is dedicated
to managing and controlling client risks and
operational risks.
A "Rule Book between Group Risk Control and
Local Risk Control" sets out the operating rules
between the Groups Risk Control entities on
the one hand and those of the subsidiaries/
branches on the other. It governs in particular the
involvement of Group Risk Control in recruitment,
transfers and evaluation of local executives.
3.3 ASSETS & LIABILITIES
MANAGEMENT
Banking crisis
The crisis of 2008 was in large part caused by
banks having signicant internal imbalances, the
risks of which neither they nor their controllers
had measured. The collapse of the investment
bank Lehman Brothers, based in the United
States but with business worldwide, showed
that the notion of "too big to fail" had become
obsolete: anything was now possible, including
the fall of the biggest and best-known banks.
Governments were no longer necessarily
disposed to intervene in order to save those that
had poorly evaluated their risks. This led to great
distrust among banks, which stopped lending to
one another except on a secured basis (repo or
reverse repo). In Europe, governments continued
to support most of the ailing banks, but at the
same time the European Union was drawing up
regulations imposing material constraints on
banks to ensure that in future they would have the
means, in case of problems, to protect depositors
in all circumstances, and above all independently,
thus ensuring their survival.
These constraints nd expression chiey in the
strengthening of minimum levels of solvency
and liquidity required and in more robust
measurements and controls. In this way they
aim to reduce the internal imbalances that are
considered the most dangerous. In this regard,
our group is one of the approximately 100
European banks that will henceforth come under
the control of the European Central Bank as well
as of our national regulators.
ALM Principles
ALM is not a commercial activity in the way that
private banking or the administration of mutual
funds is. ALM is a concept, which was developed
in the years 1980-90 in the nancial sector. It
concerns the balance sheet equilibrium of each
legal entity as well as of the consolidated group,
and therefore in a way it encompasses everything
that the commercial activities contribute to the
banks balance sheet.
A balance sheet is in one sense always in
equilibrium by denition: total assets equal total
liabilities, or in laymans terms, all the investments
are nanced.
However, within the balance sheet, imbalances
at the level of certain sub-sets can generate
unwanted risks or lead to loss of prots if they are
not managed: nancing assets denominated in
US dollars using euro resources without hedging,
nancing assets that produce variable revenue
using xed-cost resources, or nancing long-term
investments with unstable resources.
The rst objective of ALM is to manage these
imbalances while at the same time optimizing
protability under the constraint of a maximum
level of acceptable risk. This maximum level
of acceptable risk is defined by the banks
management bodies and nds expression in
limits (in euros, or in VaR sensitivity metrics,
basis points value, etc.) on risk by country, issuer,
maturity, currency, limits on interest rate risk, on
liquidity risk, etc.
ALM at KBL epb
KBL epbs activity, like that of most traditional
banks, consists in the use of client deposits
that, by their nature, are usually at short term, by
reinvesting them in short-, medium- and long-
term transactions. This apparent imbalance
(short-term resources financing long-term
applications) is not really so if the proven
behavior of these short-term resources means
that in practice they remain in the bank for long
periods. ALM therefore evaluates the stable
portion of these short-term resources in order to
dene the possible volume of medium- and long-
term reinvestment in the form of lending (secured
or otherwise) or in the form of portfolios of liquid
securities. The mix between lending and liquid
bonds will in part be determined by the banks
strategy, but also by the liquidity constraints
(Basel III Regulations).
At KBL epb, the private banking and UCITS
custodian activities have the effect of generating
very high levels of liquidity. This liquidity,
consisting of client deposits, is in fact largely
what is left, i.e. the part that has not been
invested (in securities, precious metals, property,
etc.) Therefore these resources may uctuate,
but in general we see that the proportion of cash
deposits is historically fairly stable. Moreover, as
far as usage is concerned, the lending activity is
appreciably less developed in a private bank than
in a branch network bank, so with us the portion
corresponding to liquid bonds is signicant.
Bonds form the bulk of the groups liquid
securities. They are:
n Of high credit quality (weighted average
rating "A")
n Very highly liquid, as evidenced by their
very high level of ECB eligibility (> 80%) and
of High Quality Liquid Assets (>60%) for
calculating the Liquidity Coverage Ratio
n Have limited exposure to interest rate risk
(average duration less than two years)
Apart from this, we also have a small portfolio of
equities, which we slightly increased in 2013. This
equity portfolio is an "opportunistic" investment,
which means that in certain circumstances it may
be completely absent. However, in a year like
2013 when we expected an improvement in the
health of economies and a gradual increase in
interest rates, our equity investments constituted
a useful and protable diversication.
The equities portion is subject to a strict stop-
loss policy, but more generally, ALM investments
(like the banks other activities) are governed by
management and risk control policies which are
reported on to the ALM committee (ALCO), the
Board of Directors and the regulator.
The positive performances in 2013 are the result
of a combination of several factors:
n Historically low cost of nancing
n A largely cyclical portfolio structure, i.e. with
maturities spread evenly over the duration
and a signicant portion of securities that
have been in the portfolio for several years
and therefore have relatively high returns
n An appreciable proportion of securities on
which the credit risk evolved favourably over
the year, while at the same time generating
an attractive margin
n The realization of capital gains in target
markets
ALLOCATION OF PROFIT
AND PROPOSED DIVIDEND
After constitution of the necessary provisions
and depreciation, KBL epbs net prot for the nancial year
ended on December 31, 2013, was 35,229,989.27
(all gures in EUR)
Pursuant to legal and statutory provisions, we propose appropriating this prot as follows:
Unavailable reserve AGDL
(1)
provision framework 2,000,000.00
Dividend to preference shareholders relating to years 2010, 2011 and 2012
(2)
1,462,283.25
Dividend relating to year 2013 31,758,095.44
Carried forward 9,610.58

Subject to approval of this allocation, the following dividends shall be payable at our branches as from
March 20, 2014:
n A gross dividend of EUR 0.75 (net dividend of EUR 0.6375) per non-voting preferential shares
upon submission of Coupon No. 12
n A gross dividend of EUR 1.5772 (net dividend of EUR 1.3406) per share upon submission of
Coupon No. 13 of the non-voting preferential shares, and Coupon No. 13 of the ordinary shares
(1)
"Association pour la Garantie des Dpts Luxembourg"
(2)
Holders of preferential shares are entitled to receive an initial dividend of EUR 0.25 per share, as established
in the banks articles of incorporation, and are therefore guaranteed a minimum annual return. If there are
no prots, this dividend entitlement is carried forward to subsequent periods. Any prots remaining once
this rst dividend has been paid are shared out between all shareholders, whether they hold ordinary
or preferential shares, in such a way that both categories of shareholders ultimately receive an identical
dividend
COMPOSITION OF THE
BOARD OF DIRECTORS
On April 15, 2013, Edmond Muller resigned from his post as Director of KBL epb.
Francis Godfroid resigned from his post as director representing the staff on August 1, 2013 and was
replaced by Daniel Lardo.
At the Ordinary General Meeting of July 18, 2013, the mandates of Jan Huyghebaert, George Nasra,
Alan Morgan and Albert Wildgen were unanimously renewed until the 2014 Ordinary General Meeting.
At the Ordinary General Meeting of December 18, 2013, the mandates of Ernst Wilhelm Contzen,
Nicholas Harvey and Alfred Bouckaert were unanimously approved until the 2017 Ordinary General
Meeting.
This report is available in English and French.
Only the English version is authentic.
DECLARATION ON THE CONFORMITY
OF THE ANNUAL ACCOUNTS
We, Yves Stein, Group Chief Executive Ofce, and Yves Pitsaer, Chief Finance, Risk & Compliance
Ofcer, conrm, to the best of our knowledge, that the annual accounts which have been prepared
in accordance with International Financial Reporting Standards as adopted by the European Union
give a true and fair view of the assets, liabilities, nancial position and prot or loss of KBL European
Private Bankers S.A., and that the management report includes a fair review of the development and
performance of the business and the position of KBL European Private Bankers S.A. together with a
description of the principal risks and uncertainties that the Bank faces.
Luxembourg, February 27, 2014
Yves Stein
Group CEO
Yves Pitsaer
Chief Finance, Risk & Compliance Ofcer
UNQUALIFIED CERTIFICATION
OF THE INDEPENDENT AUDITOR
TO THE BOARD OF DIRECTORS OF KBL EUROPEAN PRIVATE BANKERS S.A.
Socit Anonyme, Luxembourg
REPORT ON THE
CONSOLIDATED ACCOUNTS
Following our appointment by the Board of
Directors, we have audited the accompanying
consolidated accounts of KBL European
Private Bankers S.A., which comprise the
consolidated balance sheet as at December
31, 2013, the consolidated income statement,
the consolidated statement of comprehensive
income, the consolidated statement of changes
in equity, the consolidated cash ow statement
for the year then ended, and a summary of
significant accounting policies and other
explanatory information.
Board of Directors responsibility for the
consolidated accounts
The Board of Directors is responsible for the
preparation and fair presentation of these
consolidated 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 necessar y to enable the
preparation and presentation of consolidated
accounts that are free from material
misstatement, whether due to fraud or error.
Responsibility of the rviseur dentreprises
agr
Our responsibility is to express an opinion on
these consolidated 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 consolidated accounts are free from material
misstatement.
An audit involves performing procedures to
obtain audit evidence about the amounts
and disclosures in the consolidated accounts.
The procedures selected depend on the
judgement of the rviseur dentreprises agr,
including the assessment of the risks of material
misstatement of the consolidated accounts,
whether due to fraud or error. In making those
risk assessments, the rviseur dentreprises
agr considers internal control relevant to
the entitys preparation and fair presentation
of the consolidated 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
entitys 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 consolidated accounts.
We believe that the audit evidence we have
obtained is sufcient and appropriate to provide
a basis for our audit opinion.
Opinion
In our opinion, the consolidated accounts give a
true and fair view of the nancial position of KBL
European Private Bankers S.A. as of 31 December
2013, and of its nancial performance and its
cash ows for the year then ended in accordance
with International Financial Reporting Standards
as adopted by the European Union.
REPORT ON OTHER LEGAL AND
REGULATORY REQUIREMENTS
The consolidated management report, including
the corporate governance statement, which is
the responsibility of the Board of Directors, is
consistent with the consolidated accounts and
includes the information required by the law with
respect to the corporate governance statement.
ERNST & YOUNG
Socit Anonyme
Cabinet de rvision agr
Sylvie Testa
CONTACT INFORMATION
43, boulevard Royal
L-2955 Luxembourg
T. (+352) 4797-1
F. (+352) 4797-73900
www.kbl.lu
R.C. Luxembourg B 6395
PRIVATE BANKING
43, boulevard Royal
L-2955 Luxembourg
T. (+352) 4797-2099/2100/3100
PERSONAL BANKING
43, boulevard Royal
L-2955 Luxembourg
T. (+352) 4797-2272
Corporate Center Support (+352) 4797-2320
Legal Department (+352) 4797-3115
Tax Department (+352) 4797-2987
Corporate Communications (+352) 4797-2658
Human Resources (+352) 4797-3412
Finance (+352) 4797-2933
Risk (+352) 4797-2933
KBL EUROPEAN PRIVATE BANKERS
PRIVATE & PERSONAL BANKING
GENERAL DEPARTMENTS
GLOBAL INVESTOR SERVICES
Investment Funds & Global Custody (+352) 4797-3512
Global Execution Services - Equity (+352) 2621-0211
Global Execution Services - Money Markets & Forex (+352) 2621-0144
EXECUTION & BACK OFFICE
Management (+352) 4797-2773
Global Market Execution (+352) 4797-2264
Funds (+352) 4797-2290
Bonds (+352) 4797-6090
Equities & Derivatives (+352) 4797-2280
Global Financial Markets Back Ofce (+352) 4797-5327
Financial Markets Back Ofce (+352) 4797-2546
Cash Management & Investigations (+352) 4797-2819
Money Transfers (+352) 4797-2571
Fiscal Agencies (+352) 4797-5315
GLOBAL FINANCIAL MARKETS
Management & Executive Assistant (+352) 4797-2774
Correspondent Banking & Financial Institutions (+352) 4797-3869
MONEY MARKETS
Treasury & Money Markets (+352) 2621-0311
Repos & Securities Lending (+352) 2621-0322
Fiduciary Deposits (+352) 2621-0344
Forex (+352) 2621-0333
Precious Metals (+352) 2621-0355
FIXED INCOME
Fixed Income Pricing & Advisory (+352) 2621-0122
STRUCTURED PRODUCTS + EQUITIES & DERIVATIVES
Structured Products, Equities & Derivatives (+352) 2621-0233
Equity Care Orders (+352) 2621-0233
THIRD PARTY FUNDS
Third Party Funds Pricing & Execution (+352) 4797-2551
MISCELLANEOUS
eKBL (+352) 4797-2496
Transfers (+352) 4797-2571
Corporate Actions (+352) 4797-2769
UHNWI/Private Equity (+352) 4797-2941
INSTITUTIONAL CLIENTS
KREDIETRUST LUXEMBOURG S.A.
11, rue Aldringen
L-2960 Luxembourg
T. (+352) 46 81 91
F. (+352) 4797-73930
R.C. Luxembourg B 65 896
Administration (+352) 46819-2093
Portfolio Management (+352) 46819-4191
Fund Research & Multi Management (+352) 46819-2341
KBL EUROPEAN PRIVATE BANKERS S.A.
KBL EUROPEAN PRIVATE BANKERS SUBSIDIARIES
HEAD OFFICE
43, boulevard Royal, L-2955 Luxembourg
T. (+352) 4797-1
www.kbl.lu
PRIVATE CLIENTS
T. (+352) 4797-2389
F. (+352) 4797-73914
[email protected]
INVESTMENT FUNDS AND OTHER
INSTITUTIONAL CLIENTS
Global Investor Services
T. (+352) 4797-2316
[email protected]
FINANCIAL INSTITUTIONS
Global Financial Markets
T. (+352) 4797-2551
[email protected]
BELGIUM
PUILAETCO DEWAAY PRIVATE BANKERS S.A.
46, avenue Herrmann Debroux
B-1160 Brussels
T. (+32) 2 679 45 11
www.pldw.be
FRANCE
KBL RICHELIEU BANQUE PRIVEE S.A.
22, boulevard Malesherbes
F-75008 Paris
T. (+33) 1 42 89 00 00
www.kblrichelieu.com
GERMANY
MERCK FINCK & CO OHG
Pacellistrasse 16
D-80333 Munich
T. (+49) 89 21 04 16 52
www.mercknck.de
LUXEMBOURG
BANQUE PUILAETCO DEWAAY
LUXEMBOURG S.A.
L-2535 Luxembourg
T. (+352) 47 30 251
www.puilaetco.lu
VITIS LIFE S.A.
L-2535 Luxembourg
T. (+352) 26 20 46 300
www.vitislife.com
MONACO
KBL MONACO PRIVATE BANKERS S.A.M.
8, avenue de Grande-Bretagne
MC-98005 Monaco
T. (+377) 92 16 55 55
SPAIN
KBL EUROPEAN PRIVATE BANKERS S.A.
SUCURSAL EN ESPAA
Calle Serrano 57 sexta planta
E-28006 Madrid
T. (+34) 91 423 22 00
www.kblbank.es
SWITZERLAND
KBL (SWITZERLAND) LTD
7, boulevard Georges-Favon
CH-1204 Geneva
T. (+41) 58 316 60 00
www.kblswissprivatebanking.com
THE NETHERLANDS
THEODOOR GILISSEN BANKIERS N.V.
Keizergracht 617
NL-1017 DS Amsterdam
T. (+31) 20 527 60 00
www.gilissen.nl
UNITED KINGDOM
BROWN SHIPLEY & CO. LIMITED
Founders Court, Lothbury
London EC2R 7HE
T. (+44) 207 606 9833
www.brownshipley.com

KBL European Private Bankers S.A.
43, boulevard Royal
L-2955 Luxembourg

R.C.S. Luxembourg: B 006.395

Consolidated accounts, Report of the independent auditor
and Consolidated management report as at 31 December 2013

Table of contents

Unqualified certification of the independent auditor ........................................................................................... 1
Consolidated income statement ......................................................................................................................... 3
Consolidated statement of comprehensive income ............................................................................................ 4
Consolidated balance sheet ............................................................................................................................... 5
Consolidated statement of changes in equity ..................................................................................................... 6
Consolidated cash flow statement ...................................................................................................................... 7
Notes to the consolidated accounts .................................................................................................................... 8
Note 1 General ................................................................................................................................................ 8
Note 2a Statement of compliance ................................................................................................................... 9
Note 2b Significant accounting policies ......................................................................................................... 14
Note 3a Operating segments by business segment ...................................................................................... 23
Note 3b Operating segments by geographic sector ...................................................................................... 25
Note 4 Net interest income ............................................................................................................................ 25
Note 5 Gross earned premiums, insurance ................................................................................................... 26
Note 6 Gross technical charges, insurance ................................................................................................... 26
Note 7 Dividend income................................................................................................................................. 26
Note 8 Net gains/losses on financial instruments measured at fair value through profit or loss ................... 26
Note 9 Net realised gains/losses on financial assets and liabilities not measured at fair value through
profit or loss ...................................................................................................................................................... 27
Note 10 Net fee and commission income ...................................................................................................... 27
Note 11 Other net income.............................................................................................................................. 27
Note 12 Operating expenses ......................................................................................................................... 28
Note 13 Staff .................................................................................................................................................. 28
Note 14 Impairment ....................................................................................................................................... 29
Note 15 Share of profit of associates ............................................................................................................ 32
Note 16 Income tax (expenses) / income ...................................................................................................... 32
Note 17 Classification of financial instruments: breakdown by portfolio and by product .............................. 33
Note 18 Available-for-sale financial assets and Loans and receivables: breakdown by portfolio and
quality................................................................................................................................................................ 42
Note 19 Financial assets and liabilities: breakdown by portfolio and residual maturity ................................ 43
Note 20 Offsetting of financial assets and liabilities ...................................................................................... 44
Note 21 Securities lending and securities given in guarantee ...................................................................... 45
Note 22 Securities received in guarantee...................................................................................................... 47
Note 23 Impairment of available-for-sale financial assets ............................................................................. 47
Note 24 Impairment of loans and receivables ............................................................................................... 48
Note 25 Derivatives ....................................................................................................................................... 49
Note 26 Other assets ..................................................................................................................................... 50

Note 28 Investments in associates ................................................................................................................ 51
Note 29 Goodwill and other intangible assets ............................................................................................... 52
Note 30 Property and equipment and investment properties ........................................................................ 53
Note 31 Gross technical provisions, insurance ............................................................................................. 54
Note 32 Provisions ......................................................................................................................................... 55
Note 33 Other liabilities.................................................................................................................................. 56
Note 34 Retirement benefit obligations ......................................................................................................... 57
Note 35 Equity attributable to the owners of the parent ................................................................................ 60
Note 36 Result allocation proposal ................................................................................................................ 61
Note 37 Loans commitments, financial guarantees and other commitments ................................................ 61
Note 38 Assets under management and custody ......................................................................................... 61
Note 39 Related party transactions ............................................................................................................... 62
Note 40 Solvency ........................................................................................................................................... 63
Note 41 Maximum credit risk exposure and collateral received to mitigate the risk ..................................... 64
Note 42 Risk management ............................................................................................................................ 65
Note 43 Audit fees ......................................................................................................................................... 88
Note 44 List of significant subsidiaries and associates ................................................................................. 89
Note 45 Main changes in the scope of consolidation .................................................................................... 90
Note 46 Events after the balance sheet date ................................................................................................ 90
Management report ... 91
Declaration on the conformity of the consolidated accounts .... 133

The quantitative tables in the following pages may sometimes show small differences due to the use of
concealed decimals. These differences, however, do not in any way affect the true and fair view of the
consolidated accounts of the Group. Similarly, the value zero 0 in the following tables indicates the presence
of a number after the decimal, while - represents the value nil.

- 1 -
UNQUALIFIED CERTIFICATION OF THE INDEPENDENT AUDITOR

To the Board of Directors of
Socit Anonyme
Luxembourg

Report on the consolidated accounts

Following our appointment by the Board of Directors, we have audited the accompanying consolidated
accounts of KBL European Private Bankers S.A., which comprise the consolidated balance sheet as
at 31 December 2013, the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity, the consolidated cash flow
statement for the year then ended, and a summary of significant accounting policies and other

Board of Directors responsibility for the consolidated accounts

The Board of Directors is responsible for the preparation and fair presentation of these consolidated
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 consolidated accounts that are free from material misstatement,
whether due to fraud or error.

Responsibility of the rviseur dentreprises agr

Our responsibility is to express an opinion on these consolidated 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 consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated accounts. The procedures selected depend on the judgement of the rviseur
dentreprises agr, including the assessment of the risks of material misstatement of the
consolidated accounts, whether due to fraud or error. In making those risk assessments, the rviseur
dentreprises agr considers internal control relevant to the entitys preparation and fair presentation
of the consolidated 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 entitys
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 consolidated accounts.

- 2 -

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 consolidated accounts give a true and fair view of the financial position of KBL
European Private Bankers S.A. as of 31 December 2013, 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 consolidated management report, including the corporate governance statement, which is the
responsibility of the Board of Directors, is consistent with the consolidated accounts and includes the
information required by the law with respect to the corporate governance statement.

Ernst & Young
Socit Anonyme

Sylvie Testa

Luxembourg, 27 February 2014

- 3 -
CONSOLIDATED INCOME STATEMENT

(in EUR thousand) Notes 31/12/2012
(1)
31/12/2013

Net interest income 4, 39 95,214 87,921
Gross earned premiums, insurance 5, 31 1,553 1
Gross technical charges, insurance 6, 31 -9,182 -3,841
Ceded reinsurance result, insurance 31 -265 -496
Dividend income 7 4,255 6,044
Net gains / losses on financial instruments measured at fair
value through profit or loss
8 49,746 44,255
Net realised gains/losses on financial assets and liabilities not
measured at fair value through profit or loss
9 -83,376 42,467
Net fee and commission income 10, 39 330,194 348,133
Other net income 11, 39 5,377 16,088
GROSS INCOME 393,516 540,572

Operating expenses 12, 39 -561,320 -425,923
Staff expenses 13, 33, 34 -360,300 -277,018
General administrative expenses 43 -140,906 -116,423
Other 29, 30, 32 -60,114 -32,482
Impairment 14, 23, 24, 29, 39 -76,015 -3,628
Share of profit of associates 15, 28 35 142
PROFIT / (LOSS) BEFORE TAX -243,784 111,163
Income tax (expenses) / income 16 -6,091 -26,678
PROFIT / (LOSS) AFTER TAX -249,874 84,485
Attributable to:
Non-controlling interest
-8 -9
Owners of the parent -249,866 84,494

The notes refer to the Notes to the consolidated accounts.

(1)
Restated according to the amendment to IAS 19 (see Note 2a).

- 4 -
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in EUR thousand)

31/12/2012
(1)
31/12/2013

OTHER COMPREHENSIVE INCOME 160,795 -15,173
Items that may be reclassified subsequently to profit or loss 178,862 -14,879
Available-for-sale financial assets 181,750 -16,930
Revaluation at fair value 144,996 21,555
Net realised gains / losses on sales 97,970 -47,059
Impairment 7,279 1,996
Income tax (expenses) / income -68,494 6,578
Exchange differences on translation of foreign operations -2,888 2,051

Items that will not be reclassified to profit or loss -18,068 -294
Remeasurements of defined benefit pension plans -18,068 -294
Remeasurements (gross) -19,524 71
Income tax (expense)/income on remeasurements 1,456 -365

TOTAL COMPREHENSIVE INCOME -89,080 69,312
Attributable to non-controlling interest -8 -9
Attributable to owners of the parent -89,072 69,321

(1)

- 5 -
CONSOLIDATED BALANCE SHEET

ASSETS (in EUR million) Notes 31/12/2012
(1)
31/12/2013

Cash and balances with central banks 20, 41 1,330 1,171
Financial assets 17, 18, 19, 20, 21, 22, 39, 41 10,996 10,708
Held-for-trading 25 502 390
At fair value through profit or loss 2,110 1,863
Available-for-sale financial assets 23 4,270 4,005
Loans and receivables 24 4,069 4,415
Hedging derivatives 25 45 34
Reinsurers share in technical provisions, insurance 31 1 0
Tax assets 27, 41 35 23
Current tax assets 5 4
Deferred tax assets 30 19
Investments in associates 28 12 12
Investment properties 30 27 26
Property and equipment 30 180 168
Goodwill and other intangible assets 29 231 232
Other assets 26, 41 121 129
TOTAL ASSETS 12,933 12,469

EQUITY AND LIABILITIES (in EUR million) 31/12/2012
(1)
31/12/2013

Financial liabilities 17, 19, 20, 39 11,158 10,820
At fair value through profit or loss 2,095 1,856
At amortised cost 8,655 8,560
Gross technical provisions, insurance 31 355 214
Tax liabilities 27 9 11
Current tax liabilities 2 2
Deferred tax liabilities 7 9
Provisions 32 25 34
Other liabilities 33, 34, 39 497 430

TOTAL LIABILITIES 12,043 11,510
TOTAL EQUITY 890 959
Equity attributable to the owners of the parent 35 889 958
Non-controlling interest 0 0
Out of which Common Equity Tier 1 instruments issued 478 508

TOTAL EQUITY AND LIABILITIES 12,933 12,469

(1)

- 6 -
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in EUR million)
Issued
and paid-
up share
capital
Share
premium
Treasury
shares
Consoli-
dated
reserves
Revalua-
tion reserve
(AFS)
Remeasurement
of defined benefit
pension plans
Currency
translation
differences
Equity, group
share
Non-
controlling
interests
Total
equity
2012

Balance as at
01/01/2012
187.2 321.3 -0.1 524.2 -61.4 - 6.6 977.7 0.3 978.1

Net movements on
treasury shares
- - - - - - - - - -

Dividends and
profit-sharing
- - - - - - - - - -

Total
comprehensive
income for the year
- - - -249.9 181.8 -18.1 -2.9 -89.1 -0.0 -89.1

Changes in scope
of consolidation
- - - - - - - - - -

Effects of
acquisitions/
disposals on non-
controlling interest
- - - - - - - - - -

Other - - - 0.7 - - - 0.7 - 0.7

Balance as at
31/12/2012
(1)

187.2 321.3 -0.1 275.0 120.3 -18.1 3.7 889.3 0.3 889.7

(1)

(in EUR million)
Issued
and paid-
up share
capital
Share
premium
Treasury
shares
Consolidated
reserves
Revaluation
reserve
(AFS)
Remeasurement
of defined
benefit pension
plans
Currency
translation
differences
Equity, group
share
Non-
controlling
interests
Total
equity
2013

Balance as at
01/01/2013
187.2 321.3 -0.1 275.0 120.3 -18.1 3.7 889.3 0.3 889.7

Net movements on
treasury shares
- - - - - - - - - -

Dividends and
profit-sharing
- - - - - - - - - -

Total
comprehensive
income for the year
- - - 84.5 -16.9 -0.3 2.1 69.3 -0.0 69.3

Changes in scope
of consolidation
- - - - - - - - - -

Effects of
acquisitions/
disposals on non-
controlling interest
- - - - - - - - - -

Other - - - -0.3 - - - -0.3 -0.0 -0.3

Balance as at
31/12/2013
187.2 321.3 -0.1 359.2 103.4 -18.4 5.7 958.3 0.3 958.7

- 7 -
CONSOLIDATED CASH FLOW STATEMENT

(in EUR million) Notes 31/12/2012
(1)
31/12/2013

Profit / (loss) before tax -243.8 111.2
Adjustments for: 128.5 38.4
Impairment on securities, amortisation and depreciation on property
and equipment, intangible assets and investment properties 12, 14 123.4 22.4
Profit/loss on the disposal of investments 11 -5.7 0.1
Change in impairment for losses on loans and advances 14 10.1 1.6
Change in gross technical provisions insurance 6 9.2 3.8
Change in the reinsurers share in the technical provisions 5 0.3 0.5
Change in gross earned premiums 5 -1.6 0.0
Change in other provisions 12 2.6 12.1
Unrealised foreign currency gains and losses and valuation
differences

-9.8 -2.0
Income from associates 15 0.0 -0.1
Cash flows from operating activities, before tax and changes in operating
assets and liabilities

-115.3 149.6
Changes in operating assets
(2)
-2,739.6 219.6
Changes in operating liabilities
(3)
1,060.2 -140.5
Income taxes - -2.9
NET CASH FLOWS FROM / (USED IN) OPERATING ACTIVITIES -1,794.8 225.8

Purchase of subsidiaries or business units, net of cash acquired/disposed of - -
Proceeds from sale of subsidiaries or business units, net of cash
acquired/disposed of

- -
Purchase of investment properties 30 -0.2 0.0
Proceeds from sale of investment properties 11, 30 13.7 -
Purchase of intangible assets 29 -2.6 -2.4
Proceeds from sale of intangible assets 29 - -
Purchase of property and equipment 30 -10.2 -5.2
Proceeds from sale of property and equipment 11, 30 1.9 0.1
NET CASH FROM / (USED IN) INVESTING ACTIVITIES 2.5 -7.4

Purchase/sale of treasury shares - -
Issue/repayment of loans 17 -0.3 -30.5
Issue /repayment of subordinated debts 17 -8.6 -9.8
Dividends paid and profit-sharing - -
NET CASH FLOWS FROM / (USED IN) FINANCING ACTIVITIES -8.8 -40.3

NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS
(4)
-1,801.1 178.0

CASH AND CASH EQUIVALENTS AS AT 01/01

4,529.3 2,728.2
Net increase/decrease in cash and cash equivalents -1,801.1 178.0
Net foreign exchange difference - -
CASH AND CASH EQUIVALENTS AS AT 31/12 2,728.2 2,906.2

ADDITIONAL INFORMATION
Interest paid during the year -90.1 -70.8
Interest received during the year 172.4 162.7
Dividends received (including equity method) 7 4.3 6.0

COMPONENTS OF CASH AND CASH EQUIVALENTS 2,728.2 2,906.2
Cash and balances with central banks (including legal reserve with the central
bank)

1,329.6 1,171.5
Loans and advances to banks repayable on demand 1,980.3 2,347.7
Deposits from banks repayable on demand -581.7 -613.0

Of which: not available
(5)
389.4 595.5

1. Restated according to the amendment to IAS 19 (see Note 2a).
2. Including loans and advances to banks and customers, securities, derivatives and other assets.
3. Including deposits from banks and customers, bonds issued, derivatives and other liabilities.
4. Cash includes cash and deposits payable on demand; cash equivalents are short-term investments that are very liquid, easily
convertible into a known cash amount and subject to a negligible risk of a change in value.
5. Cash and cash equivalents not available for the Group mainly comprise of the legal reserve held with the Luxembourg
Central Bank and the margin accounts held with clearing houses (futures markets, etc.).

- 8 -
NOTES TO THE CONSOLIDATED ACCOUNTS

Note 1 General

KBL European Private Bankers Group (hereinafter KBL epb group or the Group) is an international
network of banks and financial companies, specialised in private banking. In support of, and
complementary to this activity, KBL epb group is also developing several niche activities specific to its
various markets.

The business purpose of KBL epb group is to carry out all banking and credit activities. In addition,
KBL epb group is allowed to carry out all commercial, industrial or other operations, including real
estate transactions, in order to achieve its main business purpose, either directly or through
shareholdings, or in any other manner, these provisions to be understood in the widest manner
possible. KBL epb group may carry out any activity which contributes in any way whatsoever to the
achievement of its business purpose. The Groups main activities are described in Note 3 a -
Operating segments by business segment.

KBL epb group is headed by KBL European Private Bankers S.A. (hereinafter KBL epb or the
Bank), a public limited liability company (socit anonyme) in Luxembourg and having its registered
office at:

43, boulevard Royal
L-2955 Luxembourg

Since July 2012, KBL epb group is 99.9% owned by Precision Capital, a Luxembourg-based company
governed by Luxembourg law representing the interests of a group of Qatari private investors.

The Banks consolidated accounts are consolidated in the Precision Capitals consolidated accounts.
Precision Capitals annual consolidated accounts and management report are available at its head
office.

- 9 -
Note 2a Statement of compliance

The consolidated accounts presented in this report were approved by the Board of Directors of KBL
epb on 27 February 2014.

The Group consolidated accounts have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRS).

The consolidated accounts provide comparative information in respect of the previous financial year.
Comparative information as of 31 December 2012 has been modified following the application of IAS
19 Employee Benefits (Revised 2011) but the Group did not present an additional balance sheet at the
beginning of the earliest financial year as the impact is not material on the balance sheet.

In preparing the consolidated accounts under IFRS, the Board of Directors is required to make
estimates and assumptions that affect reported income, expenses, assets, liabilities and disclosure of
contingent assets and liabilities. Use of available information and application of judgement are
inherent in the formation of estimates. Actual results in the future could differ from such estimates and
the differences may be material to the consolidated accounts.

The accounting policies adopted are consistent with those of the previous financial year, except for the
following amendments to IFRS effective for the Group as of 1 January 2013 (for the avoidance of
doubt, only the new standards, amendments to standards and IFRIC which may have an effect on the
Groups consolidated accounts are mentioned below):

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

The amendments modify the grouping of items presented in other comprehensive income. Items
that could be reclassified (or "recycled") to the income statement at a future point in time are now
to be presented separately from items that will never be reclassified. The layout of the
consolidated statement of comprehensive income has been adjusted accordingly.
The amendments affect presentation only and have no impact on the Group's financial position or
performance.

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

According to the specific transitional provisions embedded in IFRS 13, the new standard is to be
applied on a prospective basis (with no requirement to restate / produce disclosures for the
comparative period).
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements.
IFRS 13 does not change when an entity is required to use fair value, but rather provides
guidance on how to measure fair value under IFRS when a fair valuation is required or permitted.
IFRS 13 defines fair value as an exit price. IFRS 13 also requires additional disclosures.
Application of IFRS 13 has not impacted the fair value measurements of the Group. Additional
disclosures, where required, are provided in the individual notes relating to the assets and
liabilities whose fair values were determined. The extended disclosure of the fair value hierarchy
is provided in Note 17.

- IAS 19 revised Employee benefits (revised standard issued in June 2011)

The revised standard has introduced numerous amendments to the previous version of IAS 19.
These range from fundamental changes such as removing of the corridor mechanism and the
concept of expected return on plan assets to simple clarifications and re-wording. The transitional
provisions of IAS 19 revised require a retrospective application.
Prior periods figures presented in this report have therefore been adjusted to comply with the
requirements of the revised standard. The below table shows the detailed impacts of IAS 19
revised on prior periods figures.

- 10 -
The major adjustment concerns the actuarial gains and losses which were not recognized under
the previous version of IAS 19 (optional corridor approach chosen by the Group) and that are to
be recognized through other comprehensive income under the revised standard.

Impacts that relate to periods before the 2012 exercise have been directly deducted from the
consolidated reserves; those relating to the 2012 exercise were recognized in the new dedicated
remeasurement reserve.

Amounts are presented in EUR thousand and as adjustment (increase / decrease) of the related
headings in previous consolidated accounts).

(in EUR thousand)
Opening
01/01/2012
Closing
31/12/2012

ASSETS -629 -4,634
Tax assets +220 +1,633
Other assets -848 -6,267

LIABILITIES +27,013 +39,868
Tax liabilities +41 -
Other liabilities +26,972 +39,868

EQUITY AND COMPREHENSIVE INCOME -27,642 -44,502
Consolidated reserves and currency translation differences -27,642 -27,642
Defined benefit remeasurement reserve (gross) - -19,523
Defined benefit remeasurement reserve (income tax) - +1,456
Staff expenses (income statement) - +1,208
Income tax (income statement) - -1

of which total net impact on the profit or loss - +1,207

OPERATING SEGMENTS BY BUSINESS SEGMENT
Operating expenses (staff expenses) +1,208
Private banking +869
Global Investor Services +113
ALM activities +84
Other +142

Income tax expense -1
Private banking -1

The impact of IAS 19 revised on the 2013 income statement - i.e. compared to the picture that
would have been obtained had the previous version of IAS 19 still been applied - is not
significant.

- Annual Improvements to IFRS 2009-2011 Cycle (issued in May 2012)
Amendments to IAS 1 - Presentation of Financial Statements
Amendments to IAS 16 - Property, Plant and Equipment
Amendments to IAS 32 - Financial Instruments: Presentation
Amendments to IAS 34 - Interim Financial Reporting

The only amendment that had an impact on the Group's consolidated accounts concerns the
clarification introduced in IAS 34. As a matter of fact, the related amendment aligns the disclosure
requirements for segment assets and liabilities in interim financial statements to those applicable
in the consolidated accounts.
This in particular means that the disclosures of segment assets and liabilities are only required if
such measures are regularly provided to the chief operating decision maker.

- 11 -
Considering the information of segment assets and liabilities is no longer regularly provided to
any member of the Group's Management, the related disclosures were removed from the interim
report for the first time as at 30 June 2013.
The approach adopted in that interim report has been maintained in these consolidated accounts.

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

The amendments require an entity to disclose information about rights to set-off and related
arrangements (e.g. collateral agreements).
The new disclosures provide users with information that is useful in evaluating the effect of
netting arrangements on the Groups financial position. They apply to all recognized financial
instruments that are subject to an enforceable master netting agreement, irrespective of whether
they are set off in accordance with IAS 32 Financial Instruments : Presentation.
Transitional rules indicate the amendments are to be applied on a retrospective basis.

The new required disclosures, including those which relate to the comparative period, are
provided in Note 20.

The Group has also decided not to early adopt the standards, amendments to standards and
interpretations of the IFRIC which have been published but are not applicable to the Group for the
year ending 31 December 2013. The Group will adopt these standards on the date of their effective
application and when they will be approved by the European Union.

This basically concerns the following publications (only the standards, amendments to standards and
IFRIC which may have an effect on the Groups financial position or performance are mentioned
below):

- Offsetting Financial Assets and Financial Liabilities Amendments to IAS 32
These amendments clarify the meaning of currently has a legally enforceable right to set-off and
the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for
offsetting. These amendments are not expected to impact the Groups financial position or
performance and become effective for annual periods beginning on or after 1 January 2014.

- IFRS 9 Financial Instruments Classification and Measurement (Not endorsed by the European
Union yet)
IFRS 9, as issued, reflects the first and the third phases of the IASBs work on the replacement of
IAS 39. Those phases relate to classification and measurement of financial assets and financial
liabilities (as defined in IAS 39) and to Hedge Accounting. The second phase, which deals with
impairment methodology, has not been published yet.
The IASB recently decided to tentatively remove the mandatory effective date for IFRS 9. That
mandatory effective date will be set when the revised classification and measurement proposals
and the expected credit loss proposals are finalised.
The adoption of the first phase of IFRS 9 is expected to have an effect on the classification and
measurement of the Groups financial assets, but not on the classification and measurement of
financial liabilities. The Group will quantify the effect in conjunction with the other phases, when
the final standard including all phases is issued.

- 12 -
- IFRIC Interpretation 21 Levies

IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers
payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon
reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated
before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods
beginning on or after 1 January 2014. The Group does not expect that IFRIC 21 will have a
material financial impact in future consolidated accounts.

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

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

- Recoverable Amount Disclosures for Non-Financial Assets Amendments to IAS 36

The amendments remove the requirement to disclose the recoverable amount of each cash-
generating unit for which the carrying amount of goodwill or intangible assets with indefinite useful
lives allocated to that unit is significant when compared to an entitys total carrying amount of
goodwill or intangible assets with indefinite useful lives. The disclosure requirement is however
maintained for impaired assets. The amendments are applicable on a retrospective basis for
annual periods beginning on or after 1 January 2014.

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

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

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

- IFRS 11 Joint Arrangements
IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities
Non-Monetary Contributions by Venturers. It establishes revised principles for financial reporting
by entities that have interest in arrangements that are controlled jointly.
Based on the preliminary analyses performed, the Group has no interest in such arrangements.
The IASB determined the new standard should become effective for annual periods beginning on
or after 1 January 2013; however, the European Union allowed preparers of financial statements
to postpone the initial application of the standard to 1 January 2014.

- 13 -
- IFRS 12 Disclosure of Involvement with Other Entities
The new IFRS includes all disclosures relating to consolidated financial statements previously
included in IAS 27, as well as all disclosures previously included in IAS 31 Interests in Joint
Ventures and IAS 28 Investments in Associates. These disclosures relate to an entitys interests in
subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures
are also required. One of the most significant changes introduced by IFRS 12 is that an entity is
now required to disclose the judgements made to determine whether it controls another entity. Many
of these changes were introduced by the IASB in response to the financial crisis. Now, even if the
Group concludes that it does not control an entity, the information used to make that judgement will
be transparent to users of the consolidated accounts. Those users will then be able to make their
own assessment of the financial impact were the Group to reach a different conclusion regarding
consolidation.

The Group will need to disclose more information about the consolidated and unconsolidated
structured entities with which it is involved or has sponsored. However, the standard will not have
any impact on the consolidated financial position or performance of the Group.

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

- IAS 27 Separate Financial Statements (as revised in 2011)
As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is limited to accounting
for subsidiaries, jointly controlled entities and associates in separate annual accounts.
The IASB determined the revised standard should become effective for annual periods beginning on
or after 1 January 2013; however, the European Union allowed preparers of financial statements to

- IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in
Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in
Associates and Joint Ventures, and describes the application of the equity method to investments in
joint ventures in addition to associates.
The IASB determined the revised standard should become effective for annual periods beginning on
or after 1 January 2013; however, the European Union allowed preparers of financial statements to
This application is not expected to impact the Groups financial position or performance.

- Investment Entities Amendments to IFRS 10, IFRS 12 and IAS 27
These amendments are effective for annual periods beginning on or after 1 January 2014. They
provide an exception to the consolidation requirement for entities that meet the definition of an
investment entity under IFRS 10. The exception to consolidation requires investment entities to
account for subsidiaries at fair value through profit or loss. These amendments should not
significantly impact the Groups financial position and performance.

- 14 -
Note 2b Significant accounting policies

a. Consolidation criteria

All entities controlled by KBL epb or over which
KBL epb has a significant influence are
included in the scope of consolidation when
the materiality thresholds are exceeded. These
limits are based on the following criteria: share
in the Group equity, share in the Group profit
and in the Group total balance sheet increased
by the off-balance sheet rights and
commitments which are used to calculate the
solvency ratio.

An entity is included in the scope of
consolidation from the date of acquisition,
being the date on which KBL epb obtains a
significant influence or control over this entity
and continues to be included until this
influence or control ceases.

All entities exclusively controlled by KBL epb,
directly or indirectly, are consolidated using the
full consolidation method.

Companies over which joint control is
exercised, directly or indirectly, are
consolidated using the proportionate
consolidation method.

Investments in associates, that is, where KBL
epb has a significant influence, are accounted
for using the equity method.

b. Foreign currency translation

KBL epbs consolidated accounts are
presented in EUR, which is also the functional
currency of the Group.

KBL epb maintains a multi-currency accounting
system under which any transaction is
registered in its original foreign currency.

In preparing the annual accounts of all the
consolidated entities which present their
accounts in EUR, assets and liabilities in
foreign currencies are translated into EUR
according to the following principles:

monetary items denominated in foreign
currencies are converted at the closing
rate prevailing at the reporting date;
differences arising from such conversion
are recorded in the income statement;
non-monetary items in foreign currencies
measured in terms of historical cost are
translated using the historical exchange
rate prevailing at the date of the
transaction;
non-monetary items denominated in
foreign currencies measured at fair value
are translated using the spot exchange
rate at the date when the fair value is
determined and translation differences are
reported together with changes in fair
value.

Income and expense items denominated in
foreign currencies are recognised in the
income statement using exchange rates that
approximate the rates at the dates of the
transactions (e.g. average monthly exchange
rates).

Foreign subsidiaries balance sheets
denominated in foreign currencies are
translated into EUR using the closing rate
prevailing at the reporting date (with the
exception of the capital, reserves and goodwill,
which are translated using historical rates).

Foreign subsidiaries income statements
denominated in foreign currencies are
translated at the average exchange rate for the
financial year.

These principles are applicable to the KBL epb
subsidiaries in Switzerland and in the United
Kingdom.

- 15 -

Annual average exchange rates in 2013
1 EUR = ... CUR Variation versus
average 2012
CHF 1.228208 +1.95%
GBP 0.849342 +4.50%

Exchange rate as at 31/12/2013
1 EUR = ... CUR Variation versus
31/12/2012
CHF 1.2276 +1.69%
GBP 0.8337 +2.16%

Exchange differences resulting from the
procedures applied to translate balance sheets
and income statements of foreign subsidiaries
denominated in foreign currencies into EUR
are recognised as a separate item in equity.

c. Financial assets and liabilities

General principles of recognition and
derecognition of financial instruments

A financial instrument is recognised in the
balance sheet when and only when the Group
becomes a party to the contractual provisions
of the instrument.

A financial asset is derecognised when and
only when the contractual rights to receive
cash flows from the asset have expired or the
Group transfers the financial asset.

A financial liability is derecognised when and
only when the contractual liability is settled,
cancelled or expires.

The purchases and sales of financial assets
are recognised on the payment date, which is
the date on which the asset is delivered. Any
variation in the fair value of the asset to be
received during the period from the transaction
date to the payment date is recognised in the
same way as for the asset acquired. In other
words, the change in value is not recognised
for assets recognised at cost or at amortised
cost; it is recognised in the income statement
for assets classified as financial assets at fair
value through profit or loss and in equity for
those classified as available-for-sale.

In the case of sales, the assets at fair value are
measured at their sale price during the period
between the transaction date and the payment
date.

Pursuant to the provisions of IAS 39 on
derecognition, the Group keeps securities lent
in its securities portfolio but securities
borrowed are not recorded on the balance
sheet.

Similarly, the securities transferred through
repurchase agreements are kept in the
securities portfolio but those under reverse
repurchase agreements are not recorded on
the balance sheet.

Definition of IAS 39 categories of financial
assets and financial liabilities

All financial assets and liabilities including
derivatives must be measured on the
balance sheet according to their IAS 39
category. Each category is subject to specific
measurement rules.

The IAS 39 categories are the following:

Held-to-maturity assets are all non-
derivative financial assets with fixed
maturities and fixed or determinable
payments that KBL epb group intends and
is able to hold to maturity. The Groups
management has decided not to class
financial instruments in this category.

Loans and receivables are all non-
derivative financial assets with fixed or
determinable payments that are not quoted
in an active market.

Financial assets at fair value through profit
or loss include held-for-trading assets and
any other financial assets initially
designated at fair value through profit or
loss. Held-for-trading assets are those
acquired principally for the purpose of
selling them in the near term and those
which are part of a portfolio with

- 16 -
indications of recent short-term profit-
taking. All derivative assets are considered
as being held for trading unless designated
as effective hedging instruments. Other
assets initially designated at fair value
through profit or loss (frequently referred to
as the fair value option) are valued in the
same way as held-for-trading assets, even
if there is no intention of short-term profit
taking.
The fair value option may be used when a
contract contains one or more embedded
derivatives under certain conditions or
when its application produces more
pertinent information:
- either because a group of financial
assets/liabilities is managed on a fair
value basis and its performance
measured on a fair value basis,
following a documented investment or
risk management strategy;
- or because the application of this
option reduces a measurement or
recognition inconsistency that would
otherwise arise from measuring assets
or liabilities or recognising the gains
and losses on them on different bases.
This option is mainly used by the Group for
contracts with one or more embedded
derivatives, as an alternative to hedge
accounting (aligning the valuation of the
hedged instrument with that of the hedging
instrument) and, for insurance
subsidiaries, to mirror the valuation of unit-
linked financial liabilities.

Available-for-sale financial assets are all
non-derivative financial assets which do
not fall into one of the above categories.

Financial liabilities at fair value through
profit or loss encompass held-for-trading
liabilities and financial liabilities initially
loss. Held-for-trading liabilities are
liabilities held mainly with the intention of
repurchasing them in the near term. All
derivative liabilities are considered as
being held for trading unless designated as
effective hedging instruments.
Financial liabilities initially designated at
fair value through profit or loss are those
liabilities accounted for under the fair
value option. This category is currently
only used for unit-linked financial liabilities
of insurance subsidiaries.

Other financial liabilities are all other
financial instruments not at fair value
through profit or loss.

Hedging derivatives are the derivatives
designated in hedging relationships for
which hedge accounting is applied.

Evaluation of financial instruments

Financial assets and liabilities are initially
recognised at fair value and are then
measured in accordance with the principles
governing the IAS 39 category in which they
are placed.

o General principles

Loans and receivables with a fixed maturity are
measured at amortised cost using the effective
interest rate (hereinafter EIR) method, that is
the rate that precisely discounts the future
cash inflows or outflows to obtain the carrying
amount. Instruments without a fixed maturity
are measured at cost.

The available-for-sale financial assets are
measured at fair value with changes in fair
value recognised in equity (Revaluation
reserve (available-for-sale financial
instruments)) until the sale or impairment of
these instruments. In the latter cases, the
cumulative result of the revaluation is
transferred from equity to the income
statement of the period.

The financial assets and liabilities at fair value
through profit or loss are measured at fair
value with changes in fair value recognised in
the income statement.

Other financial liabilities are measured at
amortised cost. The difference between the
amount made available and the nominal
amount is recognised in the income statement
(net interest income) prorata temporis, on an
actuarial basis using the EIR method.

- 17 -
o Determination of fair value

IFRS 13 defines fair value as the price that
would be received to sell an asset or paid to
transfer a liability in an orderly transaction
between market participant at the
measurement date (i.e. an exit price).

When available, published price quotations
(unadjusted) on active markets are used to
determine the fair value of financial assets or
liabilities.

If such quotations are not available fair value
can be determined or derived :
from quoted prices for similar assets or
liabilities in active markets and/or from
quoted prices for identical assets or
liabilities in markets that are not active.
by using a valuation technique.

When valuation techniques are used to
estimate fair value, those techniques
incorporate all factors that market participants
would consider in setting a price and are
consistent with accepted financial
methodologies used for pricing financial
instruments.
Such techniques encompass discounted cash
flow analysis (e.g. for the valuation of interest
rate swaps or forward foreign exchange
transactions) and option pricing models.
Inputs used in those models (yield curves,
exchange rates, volatilities) are often readily
observable on the markets. When measuring
fair value, the Group maximises the use of
relevant observable inputs and minimises the
use of unobservable inputs.

o Impairment

Available-for-sale financial assets and loans
and receivables are also subject to impairment
tests and impairment losses are recognised if
evidence of impairment exists on the balance
sheet date.
Available-for-sale financial assets
For listed shares, an impairment is recognised
if the market value is less than 70% of the
purchase value or if the market price of the
share is less than the acquisition price over
one year.
For debt and other equity instruments, the
impairment amount is measured from the
recoverable value.

Impairment losses are always recognised in
the income statement. Impairment reversals
are recognised in the income statement for
debt instruments and in other comprehensive
income (available-for-sale revaluation reserve)
for listed shares and other equity instruments.

Loans and receivables
The amount of the impairment loss is the
excess of the carrying amount over the
recoverable amount of the asset. The Group
firstly evaluates if there is an impairment loss
for each individually significant loan or
receivable or for each group of loans or
receivables not individually significant. If the
Group considers that there is no evidence of
an impairment loss for a given loan or
receivable, individually significant or not, it
includes it in a group of financial assets
presenting the same credit risk characteristics
and examines the possibility of an impairment
loss on a collective basis. The assets
evaluated individually and for which an
impairment loss is recognised are not
examined collectively.

o Embedded derivatives

Derivatives embedded in financial instruments
that are not measured at fair value through
profit or loss are separated from the financial
instrument and measured at fair value through
profit or loss if the economic characteristics
and risks of the embedded derivative are not
closely related to the economic characteristics
and risks of the host contract.

In practice, financial assets with embedded
derivatives are however primarily classified as
financial instruments at fair value through profit
or loss, making it unnecessary to separate the
embedded derivative from the hybrid
(combined) instrument, since the entire
financial instrument is measured at fair value,
with changes in fair value being recognised in
the income statement.

- 18 -
o Hedge accounting

The Group makes little use of macro-hedge
accounting. It is used to hedge a mortgage
portfolio in one of the Groups subsidiary.
It does however apply micro-hedge accounting
when all the following conditions are met: the
hedging relationship must be designated at
inception and formally documented, the hedge
is expected to be highly effective and it must
be possible to reliably measure the
effectiveness of the hedge, forecast
transactions (for cash flow hedges) must be
highly probable and the hedge is measured on
an ongoing basis and is determined actually to
have been highly effective throughout the
periods covered by the consolidated accounts
for which the hedge was designated.

Fair value hedge accounting is used by the
Group to cover the exposure of a financial
instrument (e.g. loans, available-for-sale bonds
and some issued debt securities) to changes in
fair value attributable to changes in interest
rates or exchange rates. In this case those
derivatives designated as hedging instruments
(mainly interest rate swaps and cross-currency
interest rate swaps) are measured at fair value
with changes in fair value recognised in the
income statement. Furthermore, the gain or
loss on the hedged item attributable to the
hedged risk adjusts the carrying amount of the
hedged element and is also recognised in the
income statement. If the hedged item is an
available-for-sale asset already measured at
fair value under other IFRS requirements,
applying hedge accounting leads to splitting
the change in the instrument fair value
between the portion addressed by the hedging
relationship, recognised in the income
statement, and the portion that relates to
unhedged risks, recognised in the revaluation
reserve in equity.

Hedge accounting is discontinued once the
hedge accounting requirements are no longer
met or if the hedging instrument expires or is
sold. In this case, and for debt instruments, the
cumulative change to the carrying amount of
the hedged instrument (relating to hedged
risks) is transferred to the income statement
prorata temporis until the instrument expires.
As regards to cash flow hedge (not currently
used by the KBL epb group), hedging
instruments are measured at fair value. The
portion of the gain or loss that is determined to
be an effective hedge is recognised in other
comprehensive income. The ineffective portion
is recognised in the income statement. Hedge
accounting is discontinued if the hedge
accounting criteria are no longer met. In this
case, the hedging instruments shall be treated
as held-for-trading and measured accordingly.

Foreign currency funding of a net investment in
a foreign entity is accounted for as a hedge of
that net investment. Translation differences
(taking into account deferred taxes) on the
financing are recorded in equity, along with
translation differences on the net investment.

d. Goodwill, badwill and other intangible
assets

Goodwill arising in a business combination is
defined as any excess of the cost of the
business combination over the acquirers
interest in the net fair value of the identifiable
assets and liabilities acquired and contingent
liabilities recorded at the date of acquisition.

Goodwill arising in a business combination is
not amortised but is tested for impairment at
least on an annual basis.

An impairment loss is recognised if the
carrying amount of the goodwill exceeds its
recoverable amount. The recoverable amount
may be estimated using various methods such
as a Dividend Discount Model, percentage of
assets under management or a price/earnings
ratio multiple. Impairment losses on goodwill
cannot be reversed.

Badwill (negative goodwill) is the excess of
KBL epbs interests in the net fair value of the
identifiable assets, liabilities and contingent
liabilities of a subsidiary, joint venture or
associate at the date of acquisition over the
acquisition cost. Where negative goodwill
exists after re-examination and re-estimation of
the fair value of the identifiable assets,
liabilities and contingent liabilities of a
subsidiary, joint venture or associate, it is

- 19 -
immediately recognised as a profit in the
income statement.

The purchase of a portfolio of customers
generally includes the transfer of the client
assets under management to the Group and
the recruitment of all or part of the account
officers in charge of client relationships.
This type of intangible assets is not amortised,
but is tested for impairment at least annually.
The criteria and methodologies used for
impairment testing are those initially used to
measure the purchase price (percentage of
assets under management, gross margin
multiple, etc.). Whenever available, the result
of the impairment test is compared with an
estimate based on the parameters deduced
from similar transactions.

When the recognition criteria are met and
when the amounts are not immaterial, software
is recognised as an intangible asset.
Internal and external expenses incurred during
the development phase of internally generated
strategic software are initially recognised in
assets at cost. These assets are subsequently
carried at cost less any accumulated
amortisation and any accumulated impairment
losses.
Amortisation is calculated using the straight-
line method over the estimated useful life
(average annual depreciation rate: 25%).
However, the useful life of two specific IT
projects (Corporate Action Management -
CAMA - and Globus T24) has been estimated
at 7 years (average annual rate: 14.3%).

Research expenses for these projects and all
expenses that relate to non-strategic projects
are recognised directly in the income
statement.

e. Property and equipment

Property and equipment are initially recognised
at cost.

Property and equipment the use of which is
limited in time are depreciated using the
straight-line method over their estimated useful
lives.

Overview of average depreciation rates

Type of investment Depreciation rate

Land Non depreciable
Buildings 2%-3%
Technical installations 5%-10%
Furniture 25%
IT hardware 25%
Vehicles 25%
Works of art Non depreciable

An impairment loss must be recognised if the
carrying value exceeds the recoverable value
(which is the greater of the assets value in use
and its fair value less costs of disposal).

When property or equipment is sold, the
realised gains or losses are recognised in the
income statement. If property or equipment is
destroyed, the carrying amount to be written off
is immediately recognised in the income
statement.

f. Investment properties

Investment property is property held to earn
rentals or for capital appreciation or both.

Investment property is recognised only when it
is probable that future economic benefits
associated with the investment property will
flow to KBL epb group and if its cost can be
measured reliably.

Investment property is measured at cost less
any accumulated depreciation and impairment.
It is depreciated using the straight-line method
over its estimated useful live (average rate: 2%
- 3%).

g. Technical provisions, insurance

Sufficient technical provisions are made to
enable the Group to face its commitments
resulting from insurance contracts. The
reinsurers share in technical provisions is
included within assets on the balance sheet.

- 20 -
o Provision for unearned
premiums

Premiums earned represent premiums
received or receivable for all insurance policies
issued before year end. The part of the
premiums earned which relates to subsequent
accounting periods (i.e. the entrance fee) is
calculated individually prorata temporis for
each contract with fixed duration and deferred
through the transfer to the provision for
unearned premiums.

o Life insurance provision

Life insurance provision, which comprises the
actuarial value of the Groups liabilities after
deducting the actuarial value of future
premiums, is estimated separately for each
insurance policy on the basis of mortality
tables accepted in Luxembourg. Life insurance
provision is calculated on the basis of a
prospective actuarial method.

o Discretionary participation
feature (DPF)

The provision for DPF is estimated separately
for each contract.

h. Pensions

In addition to the general and legally
prescribed retirement plans, KBL epb group
maintains a certain number of complementary
systems in the form of both defined
contribution and defined benefit pension plans.
Defined benefit plans are those under which
the Group has a legal or constructive obligation
to pay further contributions if the pension fund
does not hold sufficient assets to pay all
employee benefits for the current and past
periods.

Defined contribution plans are those under
which the Group has no further legal or
constructive liability beyond the amount it pays
into the fund.

In the case of defined benefit pension plans,
the pension cost in the income statement and
the liability on the balance sheet are calculated
in accordance with IAS 19 (as revised in 2011),
based on the Projected Unit Credit Method,
which sees each period of service as giving
rise to an additional unit of benefit entitlement.
The calculations are made each year by
independent actuaries.

The components of the defined benefit cost are
recognized according to the following
principles:

(i) Service cost and net interest on
the net defined benefit liability /
asset are recognized in the
income statement;

(ii) Remeasurements of the net
defined benefit liability / asset are
recognized in other
comprehensive income.
Remeasurements include:
actuarial gains and losses
stemming from the
remeasurement of the defined
benefit obligation;
the return of plan assets after
deducting the portion included
in net interest as determined in
(i); and
any change in the effect of the
asset ceiling also excluding
any amount included in net
interest as determined in (i).
Remeasurements recognized in
other comprehensive income are
not reclassified to the income
statement in subsequent periods.

In the case of defined contribution plans, the
contributions payable are expensed when the
employees render the corresponding service
which generally coincides with the year in
which the contributions are actually paid.

i. Tax assets and liabilities

These balance sheet headings include both
current and deferred tax assets and liabilities.

Current tax is the amount expected to be paid
or recovered, using the tax rates which have

- 21 -
been enacted or substantively enacted at the
balance sheet date.

Deferred tax liabilities are recognised for all
taxable temporary differences between the
carrying amount of an asset or liability and its
tax base. They are valued using the tax rates
in effect for the periods when the assets are
realised or the liabilities settled, on the basis of
the tax rates enacted or substantively enacted
at the balance sheet date.

Deferred tax assets are recognised for the
carryforward of all unused tax losses and
unused tax credits and for all deductible
temporary differences between the carrying
value of the assets and liabilities and their tax
base, to the extent that it is probable that future
taxable profit will be available against which
these losses, tax credits and deductible
temporary differences can be utilised.

Where required by IAS 12, tax assets and
liabilities are offset.

j. Provisions

A provision is recognised when and only when
the following three conditions are met:
the Group has a present obligation (at the
reporting date) as a result of a past event;
it is more likely than not that an outflow of
resources embodying economic benefits
will be required to settle this obligation;
and
the amount of the obligation can be
estimated reliably.

k. Financial guarantees

Financial guarantees contracts are initially
recognised at fair value and subsequently
measured at the higher of (i) the amount
initially recognised less, when appropriate,
cumulative amortisation and (ii) the Groups
best estimate of the expenditure required to
settle the present obligation at the reporting
date.

l. Equity

Equity is the residual interest in the assets of
the KBL epb group after all its liabilities have
been deducted.

Equity instruments have been differentiated
from financial instruments in accordance with
the provisions of IAS 32.

The acquisition cost of KBL epb treasury
shares that have been or are being purchased
is deducted from equity. Gains and losses
realised on sale or cancellation of treasury
shares are recognised directly in equity.

The revaluation reserve for available-for-sale
financial assets is included in equity until any
impairment or sale. In such a case, the gains
and losses are transferred to the income
statement of the period.

The defined benefit remeasurement reserve
relating to the recognition of certain pension
costs is also included in equity. This reserve
will however never be subsequently recycled
into the income statement.

As regards to cash flow hedges and hedges of
a net investment in a foreign operation, the
portion of the gain or loss on the hedging
instrument that is determined to be an effective
hedge is recognised directly in equity.

m. Revenue

KBL epb group recognises revenue relating to
ordinary activities if and only if the following
conditions are met:
it is probable that the economic benefits
associated with the transaction will flow to
the KBL epb group, and
the amount of revenue can be measured
reliably.

The specific conditions below must also be met
before recognising the related revenue:

Net interest income

Interest is recognised prorata temporis using
the effective interest rate, which is the rate that

- 22 -
exactly discounts the estimated future cash
payments or receipts through the expected life
of the financial instrument or, when
appropriate, a shorter period, to the net
carrying amount of the financial asset or
liability.

All interests paid and received on financial
instruments are recorded under the heading
Net interest income except interest on held-
for-trading derivative instruments, which are
presented under the heading Net gains/losses
on financial instruments measured at fair value
through profit or loss in the income statement.

Dividends

Dividends are recognised when the right of the
shareholder to receive the payment is
established. They are presented under the
heading Dividend income in the income
statement irrespective of the IFRS category of
the related assets.

Rendering of services

Revenue from services is recognised by
reference to the stage of completion at the
balance sheet date. According to this method,
the revenue is recognised in the periods when
the services are provided.

Gross premiums, insurance

For single premium business, revenue is
recognised on the date on which the policy is
effective.

n. Reclassifications of prior year figures

Where necessary, certain prior year figures in
the Notes to the consolidated accounts have
been reclassified to conform with changes to
the current years presentation for comparative
purposes.

- 23 -
Note 3a Operating segments by business segment

KBL epb group distinguishes between the following primary segments:

The Private Banking segment includes the wealth management activities provided to private
clients, as well as the management of investment funds, mainly distributed to private clients. This
segment includes all major subsidiaries of KBL epb group (KBL (Switzerland) Ltd, KBL Monaco
Private Bankers, KBL Richelieu Banque Prive S.A., Puilaetco Dewaay Private Bankers S.A.,
Theodoor Gilissen Bankiers N.V., Brown Shipley & Co. Limited, and Merck Finck & Co.), and the
private banking activities of KBL epb and Kredietrust Luxembourg S.A. (including the branch in Spain).
Vitis Life S.A. (insurance) is also part of this segment.

The Global Investor Services segment includes services provided to institutional clients. This
segment includes custodian bank and fund domiciliation and administration activities, paying agent
activities, central securities depository Clearstream / Euroclear activities, as well as intermediation and
portfolio management services for KBL epb institutional clients.

The ALM Activities segment includes Global Financial Markets & Treasury" activities, which
represent the extension of intermediation activities provided to KBL epb clients and operates cash
management within the Group by means of treasury activities, securities lending and repos / reverse
repos, as well as Credit & Portfolio ALM, which cover credit exposure (including direct loans to non-
private clients of KBL epb) and securities held on its own behalf by KBL epb.

The Other segment includes support activity provided by KBL epb for the network of subsidiaries,
acting in its capacity as parent company, and all other elements not directly linked to the previous
three segments, including reallocation of excess equity, net of the cost of financing holdings, and
elements not directly linked to other business segments.

The various items of the income statement include inter-segment transfers, calculated on an arms
length or cost recovery basis.

The net result of each subsidiary included in the scope of consolidation is allocated to the various
sectors after taking into account consolidation restatements, after removing non-controlling interests
and before removing intercompanies accounts.

- 24 -
Income statement

In EUR million
PRIVATE
BANKING
GLOBAL
INVESTOR
SERVICES
ALM
ACTIVITIES
OTHER TOTAL GROUP

2012 2013 2012 2013 2012 2013 2012 2013 2012 2013

Net interest income 64.5 57.8 11.7 10.6 22.6 28.0 -3.6 -8.5 95.2 87.9
Gross earned premiums, insurance 1.6 0.0 - - - - - - 1.6 0.0
Gross technical charges, insurance -12.2 -6.1 - - - - 3.1 2.3 -9.2 -3.8
Ceded reinsurance result, insurance -0.3 -0.5 - - - - - - -0.3 -0.5
Dividend income 3.1 2.8 - - 1.1 3.3 0.0 0.0 4.3 6.0
Net gains/losses on financial instruments
measured at fair value through profit or
loss
10.8 13.4 5.2 6.4 34.2 16.8 -0.5 7.7 49.7 44.3
Net realised gains/losses on financial
assets and liabilities not measured at fair
2.2 12.3 - - 3.3 30.2 -88.9 0.0 -83.4 42.5
Net fee and commission income 286.9 301.2 36.3 37.2 -0.3 1.8 7.3 7.9 330.2 348.1
Other net income -0.7 6.0 - - 2.0 4.0 4.1 6.1 5.4 16.1
GROSS INCOME 355.8 386.7 53.1 54.3 62.9 84.1 -78.4 15.4 393.5 540.6
Operating expenses -359.0 -319.8 -33.0 -29.1 -25.6 -27.4 -143.6 -49.6 -561.3 -425.9
Impairment -57.5 -0.7 - - -10.0 -1.7 -8.5 -1.3 -76.0 -3.6
Share of profit of associates - - 0.0 0.1 - - - - 0.0 0.1
PROFIT / (LOSS) BEFORE TAX -60.8 66.3 20.1 25.4 27.4 55.0 -230.5 -35.4 -243.8 111.2
Income tax (expense) / income -13.6 -21.7 -5.7 -7.3 -7.3 -16.1 20.5 18.4 -6.1 -26.7
PROFIT / (LOSS) AFTER TAX -74.3 44.6 14.4 18.0 20.1 38.9 -210.0 -17.0 -249.9 84.5
Attributable to non-controlling interest 0.0 0.0 - - - - 0.0 0.0 0.0 0.0
Attributable to the owners of the parent -74.3 44.6 14.4 18.0 20.1 38.9 -210.0 -17.0 -249.9 84.5

Management monitors the operating results of its operating segments separately for the purpose of
making decisions about resource allocation and performance assessment. Segment performance is
evaluated based on operating profit or loss and is measured consistently with operating profit or loss in
the consolidated accounts.

Transfer prices between operating segments are on an arms length basis in a manner similar to
transactions with third parties.

- 25 -
Note 3b Operating segments by geographic sector

KBL epb group distinguishes between the secondary segments INTERNATIONAL MARKETS, covering
the activities of the Luxembourg, Swiss and of Monaco companies, and DOMESTIC, covering the
activities of the other companies included in the scope of consolidation

(in EUR million) Domestic
International
markets
KBL epb group
2012
(1)
2013 2012
(1)
2013 2012
(1)
2013

Gross income 206 230 188 310 394 541

Total assets 2,529 2,634 10,404 9,835 12,933 12,469

Total liabilities
(excluding equity)
3,199 3,269 8,844 8,241 12,043 11,510
(1)

Note 4 Net interest income

(in EUR thousand) 31/12/2012 31/12/2013

Breakdown by portfolio

Interest income 181,596 157,362
Available-for-sale financial assets 90,987 84,546
Loans and receivables 58,787 46,527
Other 1,168 1,303
Sub-total of interest income from financial assets not measured at fair value
through profit or loss
150,942 132,376

Financial assets held-for-trading 4,663 3,700
Net interest on hedging derivatives 25,797 21,185
Other financial assets at fair value through profit or loss 195 101

Interest expense -86,382 -69,442
Financial liabilities at amortised cost -42,003 -28,725
Other -476 -435
Sub-total of interest expense on financial liabilities not measured at fair value
-42,478 -29,161

Net interest on hedging derivatives -43,904 -40,281

Total 95,214 87,921

- 26 -
Note 5 Gross earned premiums, insurance

As of 31 December 2013 and 2012, the gross earned premiums only include individual and single
premiums.

Note 6 Gross technical charges, insurance

(in EUR thousand) 31/12/2012 31/12/2013

Claims paid -65,046 -140,427
Change in life provision 74,656 140,109
Profit sharing 173 -19
Other technical charges / income -18,964 -3,502

Total -9,182 -3,841

Note 7 Dividend income

(in EUR thousand) 31/12/2012 31/12/2013

Available-for-sale equity instruments 3,886 5,658
Equity instruments held-for-trading 356 381
Equity instruments at fair value through profit or loss 13 5

Total 4,255 6,044

Note 8 Net gains/losses on financial instruments measured at fair value through profit or loss

(in EUR thousand) 31/12/2012 31/12/2013

Held-for-trading (including interest and valuation of trading derivatives) 20,567 10,738
Other financial instruments at fair value 941 2,881
Exchange differences 28,693 30,486
Fair value adjustments in hedge accounting -456 150
Micro-hedging -569 21
Fair value of hedged items 12,434 -7,283
Fair value of hedging items -13,003 7,305

Macro-hedging 114 129

Total 49,746 44,255

- 27 -
Note 9 Net realised gains/losses on financial assets and liabilities not measured at fair value

(in EUR thousand) 31/12/2012 31/12/2013

Available-for-sale financial assets -85,848 40,969
Debt instruments -84,791 6,019
Equity instruments -1,056 34,949
Financial liabilities measured at amortised cost - -
Other 61 3

Total -83,376 42,467

Note 10 Net fee and commission income

(in EUR thousand) 31/12/2012 31/12/2013

Fee and commission income 416,798 428,566
Asset management 264,344 279,919
Securities transactions 118,693 114,005
Other
(1)
33,761 34,642

Fee and commission expense -86,605 -80,433
Asset management -51,788 -54,436
Securities transactions -26,366 -19,071
Other
(1)
-8,451 -6,927

Total 330,194 348,133

(1)
of which net commissions on Unit Link activities of the Insurance subsidiary 11,232 12,835

Note 11 Other net income

(in EUR thousand) 31/12/2012 31/12/2013

Total 5,377 16,088

of which:

Final wealth tax settlement from 2008 to 2011 3,142
Reimbursement Fonds de Protection 3,654
Net proceeds from the sale of Boulevard Royal building 5,708
Net proceeds from precious metals transactions 2,215 4,251
Tax on property -3,111 2,865
Rental income 2,101 1,972
Withholding tax on dividends and wealth tax -2,305

- 28 -
Note 12 Operating expenses

Operating expenses include staff costs, amortisation and depreciation of investment properties,
amortisation and depreciation of property and equipment and intangible assets, changes in provisions
and general administrative expenses.

General administrative expenses include in particular repair and maintenance expenses, advertising
expenses, rent, professional duties, IT costs and various (non-income) taxes.

(in EUR thousand) 31/12/2012
(1)
31/12/2013

Staff expenses -360,300 -277,018
General administrative expenses -140,906 -116,423
Depreciation and amortisation of property and equipment, intangible assets and
investment properties
-57,482
(*)
-20,333
Net provision allowances

-2,632 -12,149

Total

-561,320 -425,923
(1)
(*) of which accelerated depreciation on several IT projects (please refer to Note 29).

Note 13 Staff

31/12/2012 31/12/2013
Total average number of persons employed (in full-time equivalents - FTE) 2,289 2,078

Breakdown by business segment
(1)

Private Banking 1,701 1,549
Global Investor Services 207 180
ALM Activities 140 130
Other 241 219

Total 2,289 2,078

31/12/2012 31/12/2013
Geographic breakdown
Domestic 1,129 1,053
International markets 1,159 1,026

Total 2,289 2,078

(1)
The breakdown of commercial, administrative and support staff, which does not include the pre-retirement FTE, has been
made on the same basis as for drawing up Note 3a on operating segments by business segment.

- 29 -
Note 14 Impairment

(in EUR thousand) 31/12/2012 31/12/2013

(Impairment)/reversal of impairment of:
Loans and receivables -10,052 -1,570
Available-for-sale financial assets -19,009 -1,925
Goodwill -46,955 -133

Total -76,015 -3,628

Impairment of loans and receivables

More detailed information on impairment is provided in Note 42 and in the annex to the consolidated
management report.

(in EUR thousand) 31/12/2012 31/12/2013

Breakdown by type
(Impairment)/reversal of impairment:
Specific impairment on loans and receivables -8,647 -2,024
Portfolio-based impairments -1,406 454

Total -10,052 -1,570

Geographic breakdown
Domestic -7,986 -140
International markets -2,066 -1,429

Total -10,052 -1,570

See also Note 24 Impairment of loans and receivables

Impairment of available-for-sale financial assets

(in EUR thousand) 31/12/2012 31/12/2013

Debt instruments -12,914 -1,818
Equity instruments -6,095 -107

Total -19,009 -1,925

Impairment of goodwill

(in EUR thousand) 31/12/2012 31/12/2013

Goodwill arising in a business combination -32,230 -
Purchased portfolio of customers -14,724 -133

Total -46,955 -133

- 30 -
The values of goodwill and purchased portfolios of customers in the Groups consolidated accounts
are subject to an impairment test which is performed at least annually in the course of the fourth
quarter.

Recoverable values are primarily measured from a Dividend Discount Model (DDM) valuation
method which, in practice, represents an estimation of fair value less costs of disposal (the related fair
value estimates correspond to level 3 fair values under the fair value hierarchy described in IFRS
13).
Other cross-check methods such as the Net asset value + multiple of Assets under management
might be used to corroborate the results of the DDM method.

DDM methodology

Future dividends input in the DDM model are estimated according to the following methodology:
- For the period covering the next three years, dividends are based on the three-year Business
Plan presented by the subsidiaries to the Group Executive Committee;
- For the period beyond the third year, a terminal value is calculated based on a long term (LT)
growth rate of dividends.

In 2012, the DDM method included a seven-year transitory period after the initial three-year period
(when cash-flows are directly extracted from business plans) and before the date when the terminal
value was calculated. This period was primarily used to recognize a transition towards the Group
cost/income target ratio.
In 2013, considering the mature profile of the participations tested for impairments and, more
specifically, the high degree of integration of their related intangible assets, this transitory period has
been removed.

Key assumptions

Key assumptions used in the DDM are the following:
- the Discount rate;
- the LT growth rate.

The Discount rate used in the DDM calculations is determined from the Group current cost of capital
as estimated from the Capital Asset Pricing Model (CAPM).
The CAPM estimates the cost of capital as the sum of the current risk free rate and an equity
premium, the latter being adjusted to reflect current market expectations of the return required for the
specific asset ( factor).

Inputs used in the model are adjusted to reflect current market situation and relies as much as
possible on relevant observable data:
- risk free rates are measured from current long dated (10 years) government bond yields in the
country where the participation operates;
- the factor is directly derived from current observable market data for a selection of listed
peers;
- consistently with generally accepted market methodologies used in business valuations, the
standard Equity Risk premium is estimated from historical data on a country-by-country basis
(source Morningstar - Ibbotson).

LT growth rates used in the DDM have been aligned on Real GDP Growth rates (i.e. excluding the
inflation component) as published in the European Commission Eurostat database (2015 forecasts by
country).

- 31 -
Impairment tests performed

Impairment tests performed as at 31 December 2013 primarily concerned assets related to two
following subsidiaries. Those tests did not reveal any losses to be recognized in the 2013 consolidated
accounts.
- Puilaetco Dewaay Private Bankers (PDW)
Goodwill recognized on the Group balance sheet amounts to EUR 179.7 million. The current
recoverable value of this asset at year end has been estimated at EUR 191.4 million.
The underlying assumptions for the estimation of the current recoverable value are detailed infra:

- Key assumptions

Discount rate
(measured on a post-tax basis)
LT Growth rate
9.1%
(2012: 10.0%)
1.4%
(2012: 3.5%)

- Recoverable amount (in EUR million)

Net carrying value of
assets before 2013
impairment test
Current estimated
recoverable value
at year end
Impairment loss recognized
in the 2013 income
statement
Net carrying value of
assets after 2013
impairment test
179.7 191.4 -

179.7

- Sensitivity analysis

As described here above, the estimates of the current recoverable values are mostly sensitive to
changes in the Discount and LT growth rates.
The Group performed a sensitivity analysis to measure changes in the recoverable values in
several alternate LT growth rate/Discount rate scenarios. The results of that analysis are
disclosed in the below table (in EUR million):

NB: the LT growth rate and the Discount rate are related. The most meaningful figures in the
table above are highlighted in the diagonal and results in a meaningful sensitivity range from
EUR -11.5 million to EUR + 55.2 million.

- Theodoor Gilissen Bankiers (TGB)
The net carrying amount of assets
1
recognized on the Group balance sheet amounts to EUR 28
million. For this subsidiary, the current estimated recoverable value
2
largely exceeds the net
carrying amount of assets.

1
Goodwill arising in a business combination + purchased portfolio of customers
2
Recoverable value of EUR 93.5 million as of 31 December 2013, based on the following key assumptions: discount rate 9.5%
(vs 10% in 2012), LT growth rate 1.2% (vs 3.5% in 2012)
0,0% 0,5% 1,0% 1,4% 2,0% 2,5% 3,0%
7,0% 39,0 55,2 74,1 91,6 123,1 155,9 196,7
8,0% 9,0 21,1 34,8 47,3 69,2 91,1 117,4
9,1% -16,5 -7,5 2,7 11,7 27,2 42,3 59,8
10,0% -32,9 -25,5 -17,4 -10,2 1,9 13,6 26,8
11,0% -48,1 -42,2 -35,7 -30,0 -20,5 -11,5 -1,5
LT growth rate
D
i
s
c
o
u
n
t

r
a
t
e

- 32 -
Changes in key assumptions which would result in a recoverable value equalling current carrying
value are not currently considered reasonable.

Note 15 Share of profit of associates

(in EUR thousand) 31/12/2012 31/12/2013

European Fund Administration S.A. and EFA Partners S.A. 35 142

Total 35 142

Note 16 Income tax (expenses) / income

(1)
31/12/2013

Breakdown by type
Current tax -2,924 -6,859
Deferred tax -3,166 -19,819

Total -6,091 -26,678

(1)
31/12/2013

Breakdown by major components:

Result before tax -243,784 111,163
Luxembourg income tax rate 28.80% 29.22%

Income tax calculated at the Luxembourg income tax rate 70,210 -32,482
Plus/minus tax effects attributable to:
Differences in tax rates, Luxembourg abroad 50,078 8,156
Tax free-income 6,681 1,779
Other non-deductible expenses -8,564 -1,234
Adjustments related to prior years -1 1,111
Adjustments to opening balance due to tax rate change 818 -15
Unused tax losses and tax credits -124,229 541
Other -1,080 -4,534
Income tax adjustments -76,300 5,804

Total -6,091 -26,678

Details of tax assets and liabilities are given in Note 27.

(1)

- 33 -
Note 17 Classification of financial instruments: breakdown by portfolio and by product

Financial instruments are classified into several categories (portfolios). Details of these various
categories and the valuation rules linked to them are given in Note 2b, point c, dealing with
financial assets and liabilities (IAS 39).
The balance sheet analyses below have been conducted at the clean price. Thus the
interest accrued is presented separately, except for trading derivatives, which are presented at
the dirty price.

CARRYING AMOUNT
(in EUR million)

31/12/2012

ASSETS
Held-for-
trading
(HFT)
assets
Financial
instruments
at fair value
(FIFV) through
profit or loss
Available-
for-sale
(AFS)
financial
assets
Loans and
receivables
(L&R)
Hedging
derivatives
Total
Loans and advances to credit institutions - - - 2,157 - 2,157

Loans and advances other than with credit
institutions
Consumer credits
Mortgage loans
Term loans
Current accounts
Other

-
-
-
-
-
-

15
-
-
-
-
15

-
-
-
-
-
-

1,905
5
496
928
412
64

-
-
-
-
-
-

1,920
5
496
928
412
79
Equity instruments

7 0 329 - - 337
Investment contracts (Insurance branche 23) - 2,095 - - - 2,095

Debt instruments
Government bodies
Credit institutions
Corporates

229
16
80
132

0
0
-
-

3,869
1,803
769
1,297

-
-
-
-

-
-
-
-

4,098
1,819
850
1,429
Financial derivatives 264 - - - 34 298
Accrued interest 3 0 72 6 10 92

Total

502 2,110 4,270 4,069 45 10,996
Of which reverse repos - - - 1,617 - 1,617

- 34 -

CARRYING AMOUNT
(in EUR million)

31/12/2013

ASSETS
Held-for-
trading
(HFT) assets
Financial
instruments
at fair value
(FIFV)
through
profit or loss
Available-
for-sale
(AFS)
financial
assets
Loans and
receivables
(L&R)
Hedging
derivatives
Total
Loans and advances to credit institutions

- - - 2,143 - 2,143
Loans and advances other than with credit
institutions
Consumer credits
Mortgage loans
Term loans
Current accounts
Other

-
-
-
-
-
-

-
-
-
-
-
-

-
-
-
-
-
-

2,267
5
617
1,176
386
84

-
-
-
-
-
-

2,267
5
617
1,176
386
84

Equity instruments
4 7 386 - - 398

Investment contracts (Insurance branche 23)
- 1,856 - - - 1,856

Debt instruments
Government bodies
Credit institutions
Corporates
133
4
58
71
0
0
-
-
3,550
1,668
713
1,170
-
-
-
-
-
-
-
-
3,683
1,671
771
1,241

Financial derivatives
252 - - - 24 276
Accrued interest 2 - 68 6 10 86

Total

390 1,863 4,005 4,415 34 10,708

- 35 -

CARRYING AMOUNT
(in EUR million)

31/12/2012

LIABILITIES
Held-for-
trading
(HFT)
liabilities
Financial
liabilities at
fair value
(FIFV)
through
profit or
loss
Hedging
derivatives
Financial
liabilities at
amortised cost
Total

Deposits from credit institutions

- - - 1,196 1,196
Deposits from other than credit institutions
Current accounts/demand deposits
Time deposits
Other deposits

Debt certificates
Deposits certificates
Customer savings bonds
Debt certificates
Non-convertible bonds
Non-convertible subordinated liabilities

-
-
-
-

-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-

7,068
5,350
1,700
18

377
0
2
118
3
254

7,068
5,350
1,700
18

377
0
2
118
3
254

Investment contracts (insurance) - 2,095 - - 2,095

Financial derivatives 286 - 86 - 372

Short sales
Equity instruments
Debt instruments
15
0
15

-
-
-

-
-
-

-
-
-

15
0
15

Accrued interest 0 - 20 14 35
Total 301 2,095 107 8,655 11,158
Of which repos - - - 1,118 1,118

- 36 -
CARRYING AMOUNT
(in EUR million)

31/12/2013

LIABILITIES
Held-for-
trading
(HFT)
liabilities
Financial
liabilities at
fair value
(FIFV)
through
profit or
loss
Hedging
derivatives
Financial
liabilities at
amortised cost
Total

Deposits from credit institutions - - - 1,011 1,011

Time deposits
Other deposits

Debt certificates
Deposits certificates
Debt certificates

-
-
-
-

-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-

7,211
5,497
1,702
12

326
0
1
90
1
233

7,211
5,497
1,702
12

326
0
1
90
1
233

Investment contracts (insurance) - 1,856 - - 1,856

Financial derivatives 304 - 75 - 379

Short sales
Equity instruments
Debt instruments
5
0
5
-
-
-
-
-
-
-
-
-
5
0
5

Total 309 1,856 95 8,560 10,820
Of which repos - - - 324 324

- 37 -
FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarises the carrying amounts and fair values of the financial assets and
liabilities not measured at fair value, excluding accrued interest.

Carrying amount Fair value
(in EUR million) 31/12/2012 31/12/2013 31/12/2012 31/12/2013
ASSETS
Loans and advances to credit institutions 2,157 2,143 2,157 2,143

Loans and advances to other than credit institutions
Consumer credits
Mortgage loans
Term loans
Current accounts
Other

1,905
5
496
928
412
64

2,267
5
617
1,176
386
84

1,905
5
496
928
412
64

2,267
5
617
1,176
386
84

LIABILITIES
Deposits from credit institutions 1,196 1,011 1,196 1,011

Time deposits
Other deposits

Debt certificates
Deposit certificates
Debt certificates

7,068
5,350
1,700
18

377
0
2
118
3
254

7,211
5,497
1,702
12

326
0
1
90
1
233

7,067
5,350
1,699
18

367
0
2
118
3
244

7,210
5,497
1,702
12

316
0
1
90
1
223

- 38 -
Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
Level 1: quoted (unadjusted) price in active market for identical assets or liabilities;
Level 2: other 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 that have a significant effect on the recorded fair value
that are not based on observable market data.

31/12/2012

(in EUR million) Level 1 Level 2 Level 3
Accrued
interest
TOTAL
ASSETS

Held-for-trading 161 339 - 3 502
Equity instruments 7 0 - - 7
Debt instruments 119 109 - 3 231
Derivatives 35 229 - - 264

At fair value through profit or loss 2,095 15 - 0 2,110

Available-for-sale financial assets 3,900 296 0 72 4,269
Equity instruments (excluding instruments at cost) 298 30 - - 328
Debt instruments 3,602 267 0 72 3,941

Hedging derivatives - 34 - 10 45

LIABILITIES

Equity instruments - - - - -

At fair value through profit or loss 2,095 - - - 2,095


- 39 -
31/12/2013

(in EUR million) Level 1 Level 2 Level 3
Accrued
interest
TOTAL
ASSETS

Held-for-trading 168 220 0 2 390
Debt instruments 76 57 0 2 134

At fair value through profit or loss 1,863 0 - - 1,863

Available-for-sale financial assets 3,618 317 - 68 4,003
Debt instruments 3,276 274 - 68 3,619

Loans and receivables - 4,409 - 6 4,415
Loans and advances to credit institutions - 2,143 - 1 2,143
Loans and advances to others than credit institutions - 2,267 - 5 2,272


LIABILITIES

Equity instruments - 0 - - 0

At fair value through profit or loss 1,856 - - - 1,856


Financial liabilities at amortized cost 212 8,325 - 13 8,550
Deposit from credit institutions - 1,011 - 1 1,011
Deposit from other than credit institutions - 7,210 - 1 7,211
Debt certificates 212 104 - 12 328

- 40 -
Level 3 items measured at fair value

Financial instruments
measured at fair value
Available-for-sale
financial assets
Total
(in EUR million)

Balance as at 01/01/2012 - 0 0
Total profit / loss for the year 1 - 1
- recognised in the income statement 1 - 1
- recognised in other components of
comprehensive income
- - -
Purchases - - -
Sales -1 - -1
Transfers from / to level 3 - - -
Balance as at 31/12/2012 - 0 0

Total profit / loss for the year recognised in the income
statement and relating to assets held as at 31/12/2012
1 0 1

Available-for-sale
financial assets
Total
(in EUR million)

Balance as at 01/01/2013 - 0 0
- recognised in other components of
comprehensive income
- - -
Purchases - - -
Sales -1 - -1
Balance as at 31/12/2013 - 0 0

Total profit / loss for the year recognised in the income
statement and relating to assets held as at 31/12/2013
1 0 1

- 41 -
Transfers between the level 1 and level 2 categories

In EUR million

31/12/13

ASSETS From Level 1 to
Level 2
From Level 2 to
Level 1

Held-for-trading 8 6
Equity instruments 0 -
Debt instruments 8 6

Available-for-sale financial assets 115 41
Equity instruments (excluding instruments at cost) 8 -

LIABILITIES

Equity instruments - -

Group policy for determining the timing of the transfers

The transfers disclosed in the above table are deemed to have occured at the end of the reporting
period.
Transfers are thus measured at the closing fair values of the related items.

Reasons for those transfers

The transfers made in 2013 mainly reflect a change in the Group assessment of the current liquidity of
the underlying instruments compared to the previous analysis performed as at 31 December 2012.

Transfers between the level 1 and level 2 categories which occurred in 2012 were not significant.

- 42 -
Note 18 Available-for-sale financial assets and Loans and receivables: breakdown by
portfolio and quality

(in EUR million)
Available-for-sale
(AFS) financial
assets
Loans and
receivables
(L&R)
TOTAL

31/12/2012
Unimpaired assets 4,213 4,057 8,270
Impaired assets 114 59 173
Impairment -57 -47 -105

Total 4,270 4,069 8,339

(in EUR million)
Available-for-sale
(AFS) financial
assets
Loans and
receivables
(L&R)
TOTAL

31/12/2013

Total 4,005 4,415 8,420

- 43 -
Note 19 Financial assets and liabilities: breakdown by portfolio and residual maturity

(in EUR million)
Held-for-
trading
(HFT)
assets
Financial
instruments
at fair value
(FIFV)
through
profit or
loss
Available-for-
sale
(AFS)
financial
assets
Loans and
receivables
(L&R)
Hedging
derivatives
Total
ASSETS

31/12/2012

Less than or equal to 1 year 263 8 622 3,208 2 4,103
More than 1 but less than or equal to 5
years
156 7 2,345 395 33 2,936
More than 5 years 73 0 901 459 0 1,434
Indefinite period 7 2,095 329 - - 2,432

Total 502 2,110 4,270 4,069 45 10,996

31/12/2013
Less than or equal to 1 year 234 - 713 3,340 1 4,287
years
85 - 2,115 616 22 2,838
More than 5 years 66 0 722 454 1 1,243
Indefinite period 4 1,863 386 - - 2,254

Total 390 1,863 4,005 4,415 34 10,708

(in EUR million)
Held-for-
trading
(HFT)
liabilities
Financial
instruments
at fair value
(FIFV)
through profit
or loss
Liabilities at
amortised
cost
Hedging
derivatives
Total
LIABILITIES

31/12/2012

Less than or equal to 1 year 197 - 8,273 3 8,473
More than 1 but less than or equal to 5 years 59 - 363 50 472
More than 5 years 44 - 5 33 82
Indefinite period 0 2,095 - - 2,095

Total

301 2,095 8,655 107 11,158
31/12/2013
Less than or equal to 1 year 241 - 8,295 2 8,539
More than 1 but less than or equal to 5 years 26 - 250 41 317
More than 5 years 41 - 2 32 74
Indefinite period 0 1,856 - - 1,856

Total 309 1,856 8,560 95 10,820

- 44 -
Note 20 Offsetting of financial assets and liabilities

A financial asset and a financial liability shall be offset and the net amount presented in the balance
sheet position when, and only when the Group:
o currently has a legally enforceable right to set off the recognized amounts; and
o intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.

The Group currently has no legally enforceable right which satisfies the above conditions. It follows
that all amounts presented on the face of the balance sheet are gross amounts.

The Group however frequently enters into Master Netting Agreements (MNA) with its counterparties
to manage the credit risks associated primarily with (i) repurchase and reverse repurchase
transactions, (ii) securities borrowing / lending and (iii) over-the-counter derivatives.
These arrangements may also be supplemented by collateral agreements.

Offsetting rights provided for by such MNA are generally conditional upon the occurrence of some
specific future events (typically the events of default, insolvency or bankruptcy of the counterparty).
They are thus not current, which prevents the Group from setting the related assets and liabilities off
on the balance sheet.
Similarly, the rights of set off relating to the cash and other financial instrument collateral are also
conditional upon the default of the counterparty.

The financial impact of the MNA potential offsetting opportunities are disclosed in the following tables.
Only Global Master Repurchase Agreements (GMRA) for repurchase agreements and International
Swaps and Derivatives Association Master Agreement (ISDA) for over-the-counter derivatives have
been considered.
The effect of Master Netting Agreements relating to securities lending and borrowing has not been
reported because, as underlined in the Groups significant accounting policies (cf. Note 2b), those
transactions are not recognized on the balance sheet (i.e. securities lent are not derecognized from
the balance sheet and securities borrowed are not recognized within assets). Notes 21 and 22 give
additional information on those activities and on the related financial collateral received / pledged.

ASSETS (in EUR million) Impact of Master Netting Agreements

31/12/2012

Gross amounts
of financial
assets
presented on the
balance sheet

Netting potential /
financial liabilities
Financial collateral
received
(securities and
cash)
Net amount
Cash and balances with central banks 1,330 - - 1,330

Financial assets
Hedging and trading derivatives 309 -178 -23 107
Held-for-trading assets (excluding derivatives) 238 - - 238
Assets designated at fair value through profit or
loss 2,110 - - 2,110
Available-for-sale financial assets 4,270 - - 4,270
Loans and receivables 4,069 -118 -1,307 2,644

Total 12,326 -296 -1,330 10,699

- 45 -
LIABILITIES (in EUR million) Impact of Master Netting Agreements

31/12/2012
Gross amounts
of financial
liabilities
presented on
the balance
sheet

Netting potential /
financial assets
Financial
collateral pledged
(securities and
cash)

Net amount
Financial liabilities
Hedging and trading derivatives 393

-178 -99

115
Held-for-trading liabilities (excluding
derivatives) 15

- -

15
Liabilities designated at fair value through
profit or loss 2,095

2,095
Liabilities measured at amortized cost 8,655

-118 -331

8,206

Total 11,158

-296 -430

10,431


31/12/2013

Gross amounts
of financial
assets
presented on the
balance sheet

Netting potential /
Financial collateral
received
(securities and
cash)
Net amount
Cash and balances with central banks 1,171 - - 1,171

Financial assets
Held-for-trading assets (excluding derivatives) 139 - - 139
Assets designated at fair value through profit or
loss 1,863 - - 1,863

Total 11,879 -247 -1,700 9,932


31/12/2013
Gross amounts
of financial
liabilities
presented on
the balance
sheet

Netting potential /
financial assets
Financial
collateral pledged
(securities and
cash)

Net amount

-121 -124

155
Held-for-trading liabilities (excluding
derivatives) 5

- -

5
Liabilities designated at fair value through
profit or loss 1,856 1,856

-126 -186

8,247

Total 10,820

-247 -310

10,263

Note 21 Securities lending and securities given in guarantee

The Group regularly carries out transactions in which the assets transferred do not qualify for
derecognition under IAS 39. The related securities are generally transferred under full ownership and
the counterpart is thus able to re-use them in other operations.
This mainly concerns the following operations:
- repurchase agreements (repo);
- securities lending; and

- 46 -
- securities given as collateral (in particular for securities borrowing or to guarantee credit lines
received).

These transactions can be broken down as follows:

In EUR million
31/12/2012
Repo (**) Securities lending
Collateral
given for
securities
borrowing (***)
Other
Debt
instruments
Debt
instruments
Equity
instruments
Debt
instruments
Debt
instruments
Held-for-trading financial assets 4 2 - - -
Available-for-sale financial assets 502 153 1 697 384
Loans and receivables - - - - 143
Total financial assets not
derecognised 506 155 1 697 528
Other (*) 508 886 5 779 -
Total 1,014 1,041 6 1,476 528

In EUR million
31/12/2013
Collateral
given for
securities
borrowing (***)
Other
Debt
instruments
Debt
instruments
Equity
instruments
Debt
instruments
Debt
instruments
Held-for-trading financial assets
- 1 - - -
81 103 - 749 516
derecognised
81 104 - 749 516
Other (*)
234 1,032 0 598 70
Total
315 1,136 0 1,347 586

(*) The item Other relates to securities borrowed or received as collateral for other operations.
(**)The carrying amount of debts associated with repo operations is available in Note 17.
(***) Fair value of securities borrowed: EUR 1,218 million at 31/12/2013 (EUR 1,173 million at 31/12/2012)

- 47 -
Note 22 Securities received in guarantee

The Group mainly receives securities as collateral in relation to its reverse repurchase agreement
operations and securities lending.
These securities are generally transferred under full ownership and the Group is able to re-use them in
other operations.

The fair value of these guarantees can be broken down as follows:

(in EUR million) 31/12/2012 31/12/2013
Reverse repurchase agreements 1,466 1,978
Collateral received in securities lending 973 1,169

Total 2,438 3,147
Of which, transferred to:
Repurchase agreements 251 -
Securities lent 29 18
Collateral given for securities borrowing 779 598
Other - 70

Total 1,060 685

Note 23 Impairment of available-for-sale financial assets

Changes (in EUR million) Debt instruments Equity instruments

Balance as at 01/01/2012 42 53
Changes affecting the income statement 13 6
Allowances 14 6
Reversals -1 0
Changes not affecting the income statement -44 -12
Securities sold/matured -43 -13
Other 0 1
Balance as at 31/12/2012 11 46

Changes (in EUR million) Debt instruments Equity instruments

Balance as at 01/01/2013 11 46
Allowances 2 0
Reversals 0 0
Securities sold/matured -7 -21
Other 0 0
Balance as at 31/12/2013 5 26

- 48 -
Note 24 Impairment of loans and receivables

(in EUR million) 31/12/2012 31/12/2013
Total 47 41

Breakdown by type 47 41
Specific impairments of loans and receivables 45 39
Portfolio-based impairment 3 2

Breakdown by counterparty 47 41
Loans and advances to credit institutions - -
Loans and advances to other than credit institutions 47 41

Geographic breakdown 47 41
Domestic 30 32
International markets 17 9

Changes (in EUR million)
Specific
impairments
of loans and
receivables
Portfolio-based
impairment
Total

Balance as at 01/01/2012 50 1 52
Changes affecting the income statement 9 1 10
Allowances 10 2 12
Reversals -1 0 -2
Changes not affecting the income statement -14 0 -14
Use of provision -13 - -13
Other / Change impact -2 0 -2
Balance as at 31/12/2012 45 3 47

Specific
impairments
of loans and
receivables
Portfolio-based
impairment
Total

Balance as at 01/01/2013 45 3 47
Allowances 4 0 4
Reversals -2 -1 -2
Changes not affecting the income statement -8 0 -8
Change in the scope of consolidation 1 - 1
Other / Change impact 0 0 0
Balance as at 31/12/2013 39 2 41

- 49 -
Note 25 Derivatives

The notional value of the foreign exchange contracts represents the nominal to be delivered.

31/12/2012 Held-for-trading
Fair value hedging
(in EUR million)
Fair value
Notional value
Fair value
Notional value
Assets Liabilities Assets Liabilities

Total 264 286 27,994 45 107 1,265

Interest rate contracts 66 75 15,304 45 107 1,263
Options 0 0 26 0 - 1
Interest rate swaps 59 68 14,713 43 106 1,146
Futures 0 0 89 - - -
Other 7 7 476 2 0 116

Foreign exchange contracts 110 124 9,898 - - -
Foreign exchange forwards 110 124 9,811 - - -
Cross currency swaps - - - - - -
Futures 0 0 74 - - -
Options 0 0 10 - - -
Other 0 0 3 - - -

Equity contracts 88 86 2,768 0 - 3
Futures 15 15 1,053 - - -
Options 55 55 1,396 - - -
Other 17 16 319 0 - 3

Loan contracts 0 0 2 - - -

Commodities and other
contracts
0 0 22 - - -

31/12/2013 Held-for-trading Fair value hedging
(in EUR million)
Fair value
Notional value
Fair value
Notional value

Total 252 304 43,012 34 95 1,294

Options 0 0 25 0 - 1
Interest rate swaps 47 52 29,166 33 86 1,121
Futures 0 0 100 - - -
Other 3 3 207 1 0 114

Foreign exchange contracts 79 126 9,454 0 9 57
Cross currency swaps - - - 0 9 57
Futures - - - - - -
Options 3 3 567 - - -
Other 0 0 6 - - -

Equity contracts 122 123 4,045 - - -
Futures 57 57 2,255 - - -
Options 61 61 1,681 - - -
Other 4 5 109 - - -

Loan contracts - - - - - -

contracts
0 0 14 - - -

- 50 -
Note 26 Other assets

The heading Other assets covers various short-term receivables such as dividends and coupons
that clients bring to KBL epb group to be cashed and the value of which has already been paid.

Note 27 Tax assets and liabilities

(in EUR million) 31/12/2012
(1)
31/12/2013
Current tax assets 5 4
Employee benefits 0 1
Losses carried forward 69 56
Tangible and intangible assets 1 1
Provisions -20 -21
Financial instruments at fair value through profit or loss 0 0
Available-for-sale financial instruments -34 -29
Other 14 11
TAX ASSETS
35 23
Tax losses and tax credits not capitalised
(1), (2)
147 154

(1) Restated according to the amendment to IAS19 (see Note 2a)
(2) Tax losses and tax credits not capitalised mainly concern tax losses of Group companies, which are not recognised
because of uncertainty about future taxable profits.

(in EUR million) 31/12/2012 31/12/2013

Current tax liabilities 2 2
Deferred tax liabilities 7 9
Employee benefits - 1
Losses carried forward -7 -2
Tangible and intangible assets 0 0
Provisions 0 1
Financial instruments at fair value through profit or loss -1 0
Available-for-sale financial instruments 13 9
Other 1 1
TAX LIABILITIES
9 11

Changes in deferred tax assets and liabilities are not equal to the deferred tax charge/income
recognised in the income statement during the year. This is mainly due to the deferred tax linked to
the recognition in the revaluation reserve of fair value changes in unimpaired available-for-sale
financial instruments.

- 51 -
Note 28 Investments in associates

Associates are companies over which the KBL epb group has a significant influence, either directly or
indirectly, without having full or joint control.

(in EUR million) 31/12/2012 31/12/2013
Total 12 12

Overview of investments in associates (including goodwill)
European Fund Administration S.A. and EFA Partners S.A. 12 12
Goodwill in associates
Gross amount - -
Cumulative impairment - -

Changes 31/12/2012 31/12/2013

Opening balance 13 12
Share of profit for the year 0 0
Dividends paid -1 0
Changes in scope - 0
Ending balance 12 12

Summary financial information (in EUR thousand) Total assets
Total liabilities
excluding equity
Net profit / (loss)
31/12/2013 (provisional figures)

European Fund Administration S.A. 36,526 12,448 462
EFA Partners S.A. 2,098 4 -3

- 52 -
Note 29 Goodwill and other intangible assets

Goodwill
arising in a
business
combination
Purchased
Portfolio of
customers
Software
developed
in-house
Software
purchased
Other Total
Balance as at 01/01/2012 238 23 35 10 0 306
Acquisitions - - 6 2 0 8
Disposals - - - - - -
Amortisation - - -28 -9 - -37
Impairment -32 -15 - - - -47
Allowances -32 -15 - - - -47
Reversals - - - - - -
Changes in scope - - - - - -
Other - - - 1 0 1
Balance as at 31/12/2012 206 8 12 5 0 231
Of which cumulative amortisation and
impairment
-121 -81 -35 -26 0 -263

Balance as at 01/01/2013 206 8 12 5 0 231
Acquisitions - - 3 2 0 5
Disposals - 0 0 - - 0
Amortisation - - -2 -2 - -5
Impairment - 0 - - - 0
Allowances - 0 - - - 0
Reversals - - - - - -
Changes in scope - - - - - -
Other - - - 0 0 0
Balance as at 31/12/2013 206 8 13 5 0 232
Of which cumulative amortisation and
impairment
-121 -81 -8 -27 0 -237

- 53 -
Note 30 Property and equipment and investment properties

(in EUR million) 31/12/2012 31/12/2013

Property and equipment 180 168
Investment properties
Carrying amount 27 26
Fair value 32 34
Investment properties Rental income 2 2

Investment properties fair values disclosed supra are based on valuations obtained from independent
valuers who hold a recognized and relevant professional qualification and have recent experience in
the location and category of the investment properties being valued.
The estimates are primarily derived from recent transactions and other local market data observable in
the areas where the properties are held. Related fair values are thus to be classified within the level 2
category under the IFRS 13 fair value hierarchy.


Land and
buildings

IT equipment

Other
equipment

Total property and
equipment

Investment
properties

Balance as at 01/01/2012 147 13 28 189 36
Acquisitions 2 6 2 10 0
Disposals -2 0 0 -2 -8
Depreciation -7 -9 -4 -20 -1
Impairment - - - - -
Allowances - - - - -
Reversals - - - - -
Translation differences 0 0 0 0 -
Changes in scope 3 - - 3 -
Other 1 0 -1 0 0
Balance as at 31/12/2012 144 10 26 180 27
Of which cumulative depreciation and
impairment
-101 -38 -45 -184 -9


Land and
buildings

IT equipment

Other
equipment

Total property and
equipment

Investment
properties

Balance as at 01/01/2013 144 10 26 180 27
Disposals 0 0 0 0 -
Depreciation -7 -5 -3 -15 -1
Reversals - - - - -
Translation differences 0 0 0 0 -
Changes in scope - - - - -
Other -2 0 0 -2 0
Balance as at 31/12/2013 136 9 23 168 26
Of which cumulative depreciation and
impairment
-106 -37 -46 -189 -9

- 54 -
Note 31 Gross technical provisions, insurance

(in EUR million) 31/12/2012 31/12/2013
Total 355 214
Provision for unearned premiums - -
Life insurance provision 355 214
Discretionary participation features - 0

Changes (in EUR million) 31/12/2012 31/12/2013
Opening balance 429 355
Net payments received/premiums receivable 2 0
Liabilities paid for surrenders, benefits and claims -65 -141
(Theoretical) risk premiums deducted - -
Credit of interest or change in unit-prices 10 7
Attributed profit sharing 0 -
Translation differences - -
Other movements -22 -6
Changes in scope - -
Closing balance 355 214

The above technical provisions correspond to residual amounts which relate to former insurance
contracts (Branche 21) that used to be offered by the Group insurance company (Vitis Life S.A.) but
which are no longer actively marketed.

The provisions include two distinct products:
- bons dassurance which are similar to debt certicificates and which offer a
guaranteed interest rate up to a fixed maturity;
- assurance pargne contracts which include a discretionary participation feature.

Amounts received on the issue of these contracts are recognized in the income statement under the
heading Gross earned premiums, insurance.
Amounts paid under the early redemptions of the contracts or at their maturity date are recorded in the
income statement under the heading Gross technical charges, insurance. That heading also includes
the symmetrical change in the insurance provision (for both amounts received and paid).

Insurance contracts issued by the Group nearly never include any insurance risk, as defined by IFRS
4. In addition, whenever such risk is taken, it is systematically fully covered through a reinsurance
transaction.
Reinsurance premiums paid are recorded in the income statement under the heading Ceded
reinsurance result.
Reinsurers share in technical provisions is disclosed separately within assets in the Groups balance
sheet. Changes in the reinsurers share in technical provisions are also booked under the Ceded
reinsurance result in the income statement.

Apart from the above run-off activity, the Group regularly issues Unit-Linked insurance products
(Branche 23). For this activity, and as described in the Group significant accounting policies, both the
insurance liability and the linked asset are classified in the Financial Instruments at Fair Value
category (see Note 17).
This approach reflects the investment risk on those transactions is fully borne by the policy holders.

- 55 -
Note 32 Provisions

Specific
impairment for
credit
commitments
Pending legal
disputes
Operational
losses
Other
provisions

Total
Balance as at 01/01/2012 0 16 0 11 28
Changes affecting the income statement 0 5 0 -2 3
Allowances - 6 0 1 7
Reversals 0 -1 - -3 -4
Other changes 0 -4 0 -2 -6
Balance as at 31/12/2012 0 17 1 7 25

Specific
impairment for
credit
commitments
Pending legal
disputes
Operational
losses
Other
provisions

Total
Balance as at 01/01/2013 0 17 1 7 25
Changes affecting the income statement 0 2 0 10 12
Allowances 0 3 0 14 17
Reversals - -1 0 -4 -5
Other changes 0 -2 0 -1 -3
Balance as at 31/12/2013 1 17 0 16 34

Specific impairment for credit commitments: provisions accounted for to cover risk on given
guarantees, more precisely on credits for which the Bank acts as sub-participant.

Provisions for pending legal disputes: provisions recorded to cover legal disputes with private and
professional counterparties, including lawyers fees.

Operational losses: provisions to cover operational dysfunctions for which the responsibility is not
determined at the closing date.

Other provisions: other provisions than the above-mentioned provisions, among which provisions to
cover the expenses in relation with the closedown of the Polish branch and provisions for tax
regularization.

For most of the provisions recorded, no reasonable estimate can be made of when they will be used.

The main litigation cases are the following:

Proceedings before the Belgian courts
KBL epb with other defendants has been summoned in 2008 by an English company (BSL) to
appear before the Belgian Court. The plaintiff, a former client of KBL epb, claims the payment of an
astronomic amount of USD 300 million alleging that KBL epb participated in the embezzlement of a
commission which the plaintiff claims was owed to him by a South African counterpart with whom he
was involved in an international commercial transaction between 1986 and 1991.
BSL held a KBL epb account from 1990 to 1991. BSL alleges that by opening this account the Bank
acted in collusion with the counterpart in order to mislead him.
The Court declined jurisdiction in respect of KBL epb and ordered the plaintiff to pay an
indemnification of EUR 50.000 to KBL epb for frivolous and vexatious proceedings.
BSL appealed the judgment and the case will be heard before the court of appeal in January, May and
June 2014.

- 56 -
Madoff cases
In December 2008, Bernard L. Madoffs massive Ponzi scheme was discovered. Bernard L. Madoff
Investment Securities LLC (BLMIS) and its feeder funds were put into liquidation.
The liquidator of BLMIS considers that certain investors in BLMIS knew or should have known that
BLMIS was a fraud. He therefore claims back payments made by BLMIS to these investors (so called
claw-back actions).
As the liquidator started claw-back actions against the feeder funds, the liquidators of these funds
have in their turn started similar actions against KBL epb and other defendants before the New York
courts and the BVI courts.
The BVI courts rejected the claim against KBL epb and other defendants judging that they acted in
good faith.
The liquidators appealed these decisions before a London court. As a consequence of these decisions
the New York courts decided to stay all proceedings until a final decision is taken in the BVI cases.

Landsbanki
The Landsbanki liquidators are suing KBL epb before the court of Reykjavik, claiming rescission of a
payment of ISK 724,6 million (+/- EUR 2,9 million) made in the context of an interbank money deposit
transaction, having taken place in 2008 a few days before the declaration of insolvability of
Landsbanki.
In accordance with the Icelandic Act of Bankruptcy, they claim annulment of this payment because it
was made during the suspect period leading up to the bankruptcy of Landsbanki Islands hf.s.
The first instance court rejected the claim but the liquidators appealed the decision. The court of
appeal will probably render its decision in 2014.

As in these cases the risks are remote (in the Madoff case the investors and not KBL epb bear the risk
of repayment), provisions have only be made for the legal costs

KBL (Switzerland) tax regularization programs
The subsidiary has assessed the legal risk and, on the basis of the assumptions made, it has, when
appropriate, accounted for provisions for the risk of non recovery by the paying agents of the up-front
payment made within the tax agreement between the Swiss Confederation and the United Kingdom
(Rubik) and for the preliminary estimation of the costs related to the participation in the regularization
program proposed by the US Department of Justice (DoJ).

Note 33 Other liabilities

The heading Other liabilities in particular covers various items payable in the short term such as
coupons and redeemable securities as paying agent.
The net liabilities related to staff pension funds (see Note 34) and restructuring plans are also included
in this item.

- 57 -
Note 34 Retirement benefit obligations

KBL epb group operates a number of defined benefit plans for its employees. The most material plans
are in the Germany, Luxembourg and Switzerland. It also operates defined contribution plans in some
countries.

Luxembourg

The Group operates a number of defined benefit plans in Luxembourg comprising employer-funded
and employee-funded plans. The employer-funded plans provide retirement benefits linked to service
and final salary. Investment earnings applied to employee contributions are subject to a minimum
guaranteed return. The plans are funded via insurance arrangement with a third party to which the
company pays regular premiums.

Germany

KBL epb group operates defined benefit plans in Germany which provide retirement, death and
disability benefits. Some of these plans are closed to new entrants. Those plans with active
membership mostly provide fixed amount pension promises. The plans are mostly unfunded but one
plan is partly financed via a support fund, which invests in a single property.

Switzerland

KBL epb group operates a company-sponsored pension plan in Switzerland that provides contribution-
based cash balance retirement benefits and death and disability benefits to employees to meet its
obligations under Switzerlands mandatory company-provided 2
nd
pillar pension system. The plan is
established within a pension foundation which is a separate legal entity to KBL epbs Swiss subsidiary
and is governed by a board that is legally responsible for the operation of the plan. Contributions are
made to the plan in line with local funding requirements.

There are a number of guarantees provided within the plan, including a guaranteed minimum return on
account balances as required by law.

Other plans

The Group also has various retirement plans in France, the Netherlands and the UK. Most of these
plans are funded, with assets backing the obligations held in separate legal vehicles such as trusts or
insurance vehicles. The benefits provided, the approach to funding and the legal basis of the plans
reflect their local environments.

- 58 -
DEFINED BENEFIT PLANS 31/12/2012
(1)
31/12/2013
In EUR million

Defined benefit plan obligations
Value of obligations as at 01/01 199 225
Current service cost 6 7
Interest cost 8 6
Past service cost and losses arising from settlements - -2
Actuarial (gains)/losses 25 2
stemming from changes in demographic assumptions 0 2
stemment from changes in financial assumptions 26 -7
experience adjustments -1 7
Benefits paid -16 -11
Out of which: amounts paid in respect of settlements - -
Plan participant contributions 1 1
Currency adjustment 1 -1
Other 0 0

Fair value of plan assets
Fair value of assets as at 01/01 121 134
Actual return on plan assets 11 5
Interest income 4 4
Return on plan assets (excluding interest income) 6 2
Employer contributions 12 7
Benefits paid -13 -8
Currency adjustment 1 -1
Other 0 0

Plan assets include an investment of EUR 1.6 million in a transferable security issued by the Group (2012: EUR - million)
and a property partially used by the Group for administrative purposes. The fair value of the portion of the property held for
own use, as estimated at year-end, is EUR 0.5 million (2012 : EUR 0.5 million).

Effect of the asset ceiling
Effect of the asset ceiling as at 01/01 -1 -1
Interest on the effect of asset ceiling 0 0
Change in the effect of asset ceiling 0 0
Other - -

Funded status
Plan assets in excess of defined benefit obligations -91 -89
Unrecognised assets -1 -1
Unfunded accrued / prepaid pension cost -92 -90

(1)

- 59 -
In EUR million 31/12/2012 31/12/2013

Changes in net defined benefit pension liability or asset
Unfunded accrued / prepaid pension cost as at 01/01 -79 -92
Net periodic pension cost recognized in the income statement -10 -7
Remeasurements recognized in OCI (excl. change in tax provision) -19 -1
Pension payments by employer 3 3
Currency adjustment 0 0

Changes in the tax provision relating to current deficits on external plans
Recognized provision as at 01/01 -3 -4
Change in the provision recognized through OCI -1 1

Changes in the remeasurement reserve in equity
Recognized reserve as at 01/01 - -20
Remeasurement recognized in OCI -20 0
Transfers - -
Recognized reserve as at 31/12 -20 -19

AMOUNTS RECOGNIZED IN COMPREHENSIVE INCOME
Amounts recognised in the income statement
Current service cost -6 -7
Net interest on the defined benefit liability/asset -3 -3
Past service cost - 2
Gains and losses arising from settlements - -
Other - -
Net pension cost recognized in the income statement -10 -7

Amounts recognized in other comprehensive income
Actuarial gains/losses on the defined benefit obligation -25 -2
Actual return on plan assets (excluding amounts included in interest income) 6 2
Change in the effect of the asset ceiling 0 0
Change in the tax provision -1 1
Currency adjustment - 0
Total other comprehensive income -20 0

Actual return on plan assets 8.78% 4.05%

Breakdown of plan assets 100% 100%
Fixed income
Quoted market price in an active market 63% 66%
Unquoted - -
Equities
Unquoted - -
Alternatives
Unquoted - -
Cash 3% 4%
Real estate 3% 3%
Other 2% 3%

- 60 -

In EUR million 31/12/2012 31/12/2013

Significant actuarial assumptions used:

Defined benefit obligation
The rate used to discount the post-employment benefit obligations is determined by reference to market yields at the end of
the reporting period on high-quality corporate bonds with similar maturities than the pension commitments.

Discount rate 1.50% to 4.25% 2.00% to 4.40%
DBO sensitivity to changes in discount rate
Scenario DR -1% n/a +33
Scenario DR +1% n/a -26

Expected rate of salary increase (including inflation) 2.00% to 3.00% 2.00% to 3.00%
Scenario SR -1% n/a -5
Scenario SR +1% n/a +5
Maturity profile of the DBO
Weighted average duration of the DBO (in years) n/a 15

Expected contributions for next year 7 7

Defined contribution plans
In EUR million
31/12/2012 31/12/2013

Amount recorded in the income statement -5 -6

Note 35 Equity attributable to the owners of the parent

Pursuant to the extraordinary general meeting of the shareholders of the Bank held on 9 July 2013, it
was decided to propose to each holder of preferential non-voting shares to convert part or all of its
preferential non-voting shares into ordinary shares, the proposed exchange ratio being one
preferential non-voting share against one ordinary share, being understood however that only the
number of preferential non-voting shares for which the holders of preferential non-voting shares had
accepted the conversion offer during the conversion offer period ended on 9 August 2013 were
effectively converted into ordinary shares.

As such, 1,945,670 preferential non-voting shares were converted into 1,945,670 ordinary shares and,
as at 31 December 2013, the subscribed and paid-up capital is EUR 187.2 million, represented by
20,132,547 ordinary shares without par value and by 4,041 non-voting preference shares without par
value.

Holders of preference shares are entitled to receive an initial dividend of EUR 0.25 per share, as
established in the Banks articles of incorporation, and are therefore guaranteed a minimum annual
return. If there are no profits, this dividend entitlement is carried forward to subsequent periods. Any
profits remaining once this first dividend has been paid are shared out between all shareholders,
whether they hold ordinary or preference shares, in such a way that both categories of shareholders
ultimately receive an identical dividend. The Bank is thus indebted for EUR 1.5 million to preference
shareholders for 2010, 2011 and 2012, where no dividend has been paid-up.

Article 39 of the Banks articles of incorporation specifies that the net liquidation profit, after the
charges payment, will be used to firstly refund the non-voting preference shareholders. The remaining
balance will be allocated on equal basis to ordinary shareholders.

As at 31 December 2013, the legal reserve is EUR 18.7 million (31 December 2012: EUR 18.7 million)
representing 10% of the paid-up capital, the free reserves amounts to EUR 782.4 million (31
December 2012: EUR 758.7 million) and the reserve for the reduction of wealth tax is nihil

- 61 -
(31 December 2012: EUR 23.7 million). The retained earnings are negative for EUR 282,1 million (31
December 2012: positive for EUR 38.3 million).

in number of shares 31/12/2012 31/12/2013

Total number of shares issued 20,136,588 20,136,588
Ordinary shares 18,186,877 20,132,547
Preference shares 1,949,711 4,041
Of which: shares entitling the holder to a dividend payment 20,135,744 20,135,744
Of which: treasury shares, including commitments 844 844
Of which: shares representing equity under IFRS 20,135,744 20,135,744

Changes Ordinary shares Preference shares Total

Balance as at 01/01/2013 18,186,877 1,949,711 20,136,588
Conversion of preference shares into ordinary shares +1,945,670 -1,945,670 0
Balance as at 31/12/2013 20,132,547 4,041 20,136,588

Note 36 Result allocation proposal

At its meeting on 27 February 2014, the Board of Directors proposes to distribute the 2013 net result
of EUR 35.2 million as follows:

(i) in the AGDL (Association pour la Garantie des Dpts Luxembourg) provision framework, EUR
2.0 million will be allocated to the unavailable reserve;
(ii) according to the Bank status (see Note 35), a dividend of EUR 0.75 by share will be paid to the
preference shareholders for EUR 1.5 million relating to years 2010, 2011 and 2012 when no
dividend had been paid-up;
(iii) finally, a dividend of EUR 1.5772 by share will be paid-up to each preference and ordinary
shareholders for a total amount of EUR 31.8 million.

On 19 March 2014, this affectation will be submitted to the approval of the Annual General Meeting.

Note 37 Loans commitments, financial guarantees and other commitments

(in EUR million) 31/12/2012 31/12/2013

Confirmed credits, unused 779 758
Financial guarantees 59 66
Other commitments (securities issuance facilities, spot transaction settlement, etc.) 318 550

Total 1,157 1,373

Note 38 Assets under management and custody

Total assets under management related to clients in the private banking sector (including frozen and
low yielding assets) as at 31 December 2013 amount to EUR 42.2 billion (2012: EUR 40.9 billion).

Total assets under custody (investment funds and institutionals) as at 31 December 2013 amount to
EUR 41.3 billion (2012: EUR 38.6 billion).

- 62 -
Note 39 Related party transactions

Related parties refers to the parent company of KBL epb, its subsidiaries and key management
personnel. Transactions with related parties are carried out under conditions equivalent to those
applicable to transactions subject to conditions of normal competition.
Transactions with associates are not included below because they are not material.

In EUR million 31/12/2012 31/12/2013

Financial assets - 0
of which financial assets with Precision Capital - -
with Banque Internationale Luxembourg - 0
Held-for-trading - -
At fair value through profit or loss - -
Available-for-sale financial assets - -
Loans and receivables - 0
Hedging derivatives - -

Financial liabilities 18 12
of which financial liabilities with Precision Capital 18 12
Held-for-trading - 0
At amortised cost 18 12

Income statement 0 0
of which income statement with Precision Capital 0 0
Net interest income - 0
Net realised gains on available-for-sale financial assets - -
Net fee and commission income 0 0
Other net income / (charges) - -
Operating expenses - 0
Impairment of financial assets not measured at fair value through
profit or loss
- -

WITH KEY MANAGEMENT PERSONNEL
In EUR million
31/12/2012 31/12/2013
Amount Number of persons Amount Number of persons

Amount of remuneration to key management
personnel of KBL epb group on the basis of their
activity, including the amounts paid to former key
management personnel
40 223 36 230
Credit facilities and guarantees granted 9 55 9 60
Loans outstanding 6 47 6 46
Guarantees outstanding 0 12 0 13
Pension commitments 68 84 66 90
Expenses for defined contribution plans 2 63 1 63

- 63 -
Note 40 Solvency

The table below gives the solvency ratios calculated pursuant to CSSF circular 06/273 as amended.

In EUR million 31/12/2012 31/12/2013

Regulatory capital 781 702

Tier 1 capital 527 523
Capital, share premium, reserves and retained earnings 1,035 789
Accumulated other comprehensive income/loss on remeasurement of defined
benefit pension plans
- -18
Non-controlling interest 0 0
Intangible assets and purchased portfolio of customers -26 -26
Goodwill -206 -206
Treasury shares 0 0
Negative revaluation of AFS bonds
(1)
- -
Net loss of the financial year -251 -
Deferred tax assets
(2)
-25 -16

Preference shares 30 0
Positive revaluation of AFS shares 58 60
Subordinated liabilities 166 119

Deductions -1 -1

Overall own funds requirements 333 309
Credit risk, counterparty risk, securitisation and incomplete transaction risk 259 239
Exchange risk 1 1
Position risk linked to debt securities trading 8 5
Position risk linked to equities 0 0
Settlement risk linked to trading securities 0 0
Operational risk 66 63

Solvency ratios
Basic solvency ratio (Tier 1 ratio) 12.64% 13.53%
Solvency ratio (CAD ratio) 18.73% 18.18%

(1)
In July 2009, KBL epb notified the Commission de Surveillance du Secteur Financier (CSSF) of its choice to cease
including unrealised profits or losses on available-for-sale debt instruments when calculating its prudential capital figures.
(2)
At the CSSF request, deferred tax assets are deducted from Tier 1 capital as from end 2012.

- 64 -
Note 41 Maximum credit risk exposure and collateral received to mitigate the risk

(in EUR million) 31/12/2012 31/12/2013

Assets 10,359 10,152
Balances with central banks 1,302 1,149
Financial assets 8,901 8,852
At fair value through profit or loss 15 7
Hedging derivatives 45 34
Tax assets 35 23
Other assets 121 129

Off-balance sheet items 1,157 1,373
Loans commitments 779 758
Other commitments (securities issuance facilities, spot transaction settlement,
etc.)
318 550

Securities lending 1,047 1,137

Maximum credit risk exposure 12,563 12,661

For the instruments carried at fair value, the amounts disclosed above represent the current credit risk
exposure and not the maximum credit risk that could apply as a consequence of future changes in the
estimates made.

Collateral received to mitigate the maximum exposure to credit risk
(in EUR million)
31/12/2012 31/12/2013

Equity - -
Debt instruments 1,191 1,347
Loans and advances 2,622 3,662
of which measured at fair value - -
Derivatives 167 138
Other (including loans commitments given, undrawn amount) 70 107
Collateral received to mitigate the maximum exposure to credit risk 4,050 5,253

The amount and type of collateral required depend on the type of business considered and the
Groups assessment of the debtors credit risk.

The main types of collateral received are as follows:
- Cash;
- Securities (in particular for reverse repo operations and securities lending); and
- Other personal and/or collateral guarantees (mortgages).

These guarantees are monitored on a regular basis to ensure their market value remains adequate as
regards the assets they are intended to cover. If a guarantee is noted to be insufficient, margin calls
are made in accordance with the agreements signed with the various counterparties concerned.

- 65 -
Following the Banks request, the CSSF has approved an exemption from including in its calculation of
the large risks exposures, in accordance with Part XVI, point 24 of the CSSF Circular 06/273, as
amended, the risks to which the Bank is exposed towards Banque Internationale Luxembourg and
KBL epb's subsidiaries. This exemption is not eligible towards Precision Capital. The exposures on
related parties are disclosed in Note 39.

Note 42 Risk management

This note aims to disclose the nature and risks arising from financial instruments to which the entity is
exposed during the period and at the end of the reporting period, and how the entity manages those
risks, as required by IFRS 7. The information is presented by risk type as proposed by the standards.

The Pillar III disclosures report will be published in the first half of 2014 on the internet site of KBL epb.

1. Credit risk

1.1. Qualitative information

1.1.1. Origin of credit risk

The credit risks arising from financial instruments mainly originate from:

- lending to private clients (mainly Lombard loans and Mortgage loans) and to investment funds
to a lesser extent, alongside the Banks core activities has remained a supporting activity of
the business. Risk in this activity is largely mitigated by a strong collateral policy, implying
limited unsecured exposures;
- positions in ALM portfolios;
- uncommitted lines covering the trading activity and counterparty exposures with banks (forex,
money markets, swaps, reverse repo, securities lending, derivatives, etc.);
- the granting of uncommitted lines to clients of the Global Investor Services (GIS) department
in Luxembourg (mainly UCI), to cover temporary overdrafts;
- the acceptance of securities used as collateral in securities lending and repo transactions.

1.1.2. Credit allocation decision making process / governance

In Luxembourg, as in subsidiaries, all lending/investment decisions and decisions to grant
uncommitted lines are the responsibility of the Executive Committee or one of the other competent
bodies designated under the delegation of authority based on specific criteria. This delegation of
powers always requires the involvement of at least two people from different entities, to ensure that
there is no risk of conflict of interest. All decisions taken on the basis of a delegation of powers must
also be reported to and approved by the senior body.

A delegation grid has been defined for all subsidiaries. Any credit proposal exceeding the defined
limits has to be submitted to the Group Credit Committee for decision.

As a matter of principle, each new credit proposal submitted to the Credit Committee/Executive
Committee is accompanied by an opinion issued by the Credit Risk Control, based on an analysis of
the financial situation and creditworthiness of the borrower and of the structure of collateral.

At inception, internal processes ensure the identification of related counterparties, in order to monitor
concentration risk on debtors/group of debtors. Group structures are moreover permanently updated
by the Credit Risk Control.

- 66 -
(1)
1.1.3. Credit policy

In the context of the development of the credit activity for private banking clients, a review of the credit
policy has been initiated. The aim is to precise the framework within which the loan activities to
customers are managed in the KBL epb group, validated by the Board Risk Committee (BRC).

1.1.4. Measurement/monitoring of credit risk

Credit risk related to lending activities, investment portfolios or trading activities has to remain within
the general framework set in the Risk Appetite Statement validated in July 2013 by the Board Risk
Committee
3
for KBL epb group. Therefore, specific indicators have been defined, that are monthly
reported to the ALCO and quarterly to the BRC. Specific attention has been set on concentration risk,
being on single issuers, single banking counterparties or countries.

At a regulatory level, KBL epb group uses the standardised Basel II methodology to calculate credit
risk.
Group Credit Risk Control has developed its own tools for Bank analyses, and implemented its own
systems for Bank and Country limits, approved by the Executive Committee. These systems allow the
definition of limits adapted to the size of the Group and to its risk appetite.

1.1.4.1. Loans

In terms of the day-to-day monitoring of lending transactions, the loan administration systems
automatically monitor the loans and guarantees schedule, which allows any overrun to be detected
and the appropriate corrective action to be taken swiftly.

On a quarterly basis, a global consolidated reporting of all lending exposures is performed, detailing
the portfolio by loan types, customers type, countries, maturities and performing status. It also
presents information on the effective loan-to-values for the collateralized exposures.

The files for which a specific monitoring is requested are included in the Watch-list which is discussed
monthly in the Group Credit Committee.

1.1.4.2. Investment Portfolio

Investments proposals in the portfolios of any entity of KBL epb group are submitted by the ALM
Function. All proposals within the Group have to respect the concentration limits, defined by issuers
type (Sovereigns, Corporates and Banks), as the concerned country limits. The Group Credit Risk
Control department checks the availability under those limits before any investment, and issues its
own opinion on the credit risk linked with the issues, based on the analyses provided by the rating
agencies and the published financial statements.

Group Credit Risk Control automatically monitors debtors ratings, as reported by rating agencies, and
informs the entities concerned accordingly. Various types of standard or specific report are also drawn
up in order to monitor any deterioration in the quality of the portfolio.
Any overdraft of issuer concentration limits, due to rating downgrades, is communicated monthly to the
ALCO, and quarterly to the BRC.

3(1)
The Board Risk Committee or BRC is a sub-committee of the Board of Directors dedicated to risk issues

- 67 -
1.1.4.3. Interbank transactions

The measurement and monitoring of counterparty risk for interbank transactions, which are mainly
concentrated in the Luxembourg Dealing Room, are a major activity of Group Credit Risk Control. The
department sets interbank limits for these transactions by establishing requirements for the whole KBL
epb group. Loans outstanding are allocated to lines based on the marked-to-market + add on
methodology.

The system for managing interbank limits has been validated by the Executive Committee of KBL epb
group and is operational since mid-2012. This system defines interbank limits which are
commensurate with the size of the Bank and its risk appetite, and fully integrates the Large Exposures
regulation. Group Credit Risk Control has also developed its own tools for analysing bank
counterparts.

The interbank limits system ensures that concentration limits, defined by counterparty and by group of
counterparties, are respected at any level.

It is the task of the Banks front-office to manage the outstanding amounts on these interbank limits.
Thus, for example, before concluding a deal, the operator must ensure that lines are available for the
counterparty and for the product (and country) in question and that the relevant amounts and terms
are available. In Luxembourg, overruns are monitored daily by the middle-office (using GEM).
Exceptions reports are sent to the Trading Room management on a daily basis for justification and
ratification, and to the Risk Control manager. All overruns are reported to the members of KBL epb
Executive Committee.

1.1.4.4. Collateral monitoring

The management and supervision of collateral received for secured transactions (performed in
Luxembourg), in addition to contract management, is handled by the Collateral Management entity in
Luxembourg, which is part of Group Risk Control and located in close proximity to Group Credit Risk
Control. At the beginning of 2012, the Executive Committee updated the specific guidelines regarding
acceptable collateral with new rules on concentration by counterparties and by securities accepted as
collateral, as well as risk correlation limits (correlation between the counterparty and the collateral).
The respect of these rules is monitored on a daily basis by the Group Credit Risk Control department.

1.1.4.5. Country limits

As for interbank limits, Group Credit Risk Control has developed a new framework for the definition
and monitoring of country limits, which is operational since mid-2012. The methodology has also been
adapted in such a way as to cover all types of country risks (in particular that of contagion) and is no
longer limited to the risk of transferability.

Lines are allocated to the Bank and its subsidiaries for credit activities, bonds investments and trading
room activities (for Luxembourg) as and when required. As for counterparty risk, the respect of the set
country limits is monitored on a daily basis.

1.1.4.6. Concentration monitoring

As mentioned here above, issuer concentration limits are defined per individual or group of
counterparts. These limits are assigned to sovereign, banks and corporate counterparts, using a
methodology derived from the country limit framework and consider additional financial criteria. Issuer
concentration limits are divided into sub-limits which preserve diversification both in terms of maturity
and products.

The issuer concentration limits are updated and monitored by Group Credit Risk Control. Exception
reports are escalated to the Group ALCO.

- 68 -
1.2. Quantitative information

1.2.1. Breakdown of credit risk exposures

The distribution of the credit risk exposures (available-for-sale (AFS) financial assets and Loans and
receivables (L&R)) by products is as follows:

In EUR million
AFS Amortised cost (before impairment) Fair value (after impairment)
31/12/2012
NPL/Impaired Standard Total NPL/Impaired Standard Total
Bank bonds - 778.2 778.2 - 818.4 818.4
Corporate bonds 20.6 996.9 1,017.5 11.0 1,064.5 1,075.4
Asset-backed securities - 208.2 208.2 - 210.3 210.3
Government bonds 1.9 1,718.8 1,720.6 0.7 1,836.3 1,837.0
Sub-total 22.4 3,702.0 3,724.5 11.6 3,929.4 3,941.1
Equity instruments, funds

329.4

TOTAL 4,270.5

In EUR million
31/12/2013
Bank bonds - 713.7 713.7 - 753.7 753.7
Corporate bonds 9.2 974.2 983.4 3.9 1,031.7 1,035.6
ABS - 129.5 129.5 - 131.8 131.8
Government bonds - 1,611.1 1,611.1 - 1,697.5 1,697.5
Sub-total 9.2 3,428.4 3,437.7 3.9 3,614.8 3,618.7
Other (Equity instruments, funds) 386.1

TOTAL 4,004.8

In EUR million

NPL/Impaired Standard Total 31/12/2012
Banks and other financial institutions - 2,492.5 2,492.5
Customers 15.8 1,504.2 1,520.0
Sub-total 15.8 3,996.7 4,012.5
Other L&R and Intercompanies 56.1
TOTAL

4,068.6

In EUR million

NPL/Impaired Standard Total 31/12/2013
Customers 44.1 1,682.8 1,726.9
Sub-total 44.1 4,313.3 4,357.4
Other L&R and Intercompanies 57.4
TOTAL

4,414.8

- 69 -
1.2.2. Specific loan impairment

For the parent company in Luxembourg, which constitutes the largest portion of global exposures, the
valuation of potential losses and the adjustment of specific impairments are carried out quarterly by
Credit Risk Control. The Credit Committee decides on any adjustment for the first three quarters of the
year, this being the responsibility of the Executive Committee for the fourth quarter.

Subsidiaries submit their proposals for impairments during the quarterly consolidation.

Below are listed specific impairments established in respect of the non performing loans and available-
for-sale financial assets (debts instruments) as at 31 December 2012 and 2013:

In EUR million
< 30 days
30-60
days
60-90
days
90-180
days
6-12
months
>12
months
other
impaired
(1) TOTAL
31/12/2012
AFS gross
- - - - - - 22.4 22.4
Impairment
- - - - - - 10.8 10.8
AFS net
- - - - - - 11.6 11.6
Non performing L&R gross
2.3 0.1 1.5 2.2 - 48.5 9.6 64.2
Impairment
- - - 0.9 - 39.4 4.2 44.5
Non performing L&R net
2.3 0.1 1.5 1.3 - 9.1 5.4 19.7
Total gross
2.3 0.1 1.5 2.2 - 48.5 32.0 86.6
Impairment
- - - 0.9 - 39.4 15.0 55.3
Total net
2.3 0.1 1.5 1.3 - 9.1 17.1 31.3
(1)
The related assets are impaired but not because of delays in payments.

In EUR million
< 30 days
30-60
days
60-90
days
90-180
days
6-12
months
>12
months
other
impaired
(1) TOTAL
31/12/2013
AFS gross
- - - - - - 9.2 9.2
Impairment
- - - - - - 5.4 5.4
AFS net
- - - - - - 3.9 3.9
L&R gross
39.3 17.9 7.5 3.6 8.7 38.0 13.7 128.7
Impairment
0.5 2.8 - - 0.3 30.0 5.2 38.8
L&R net
38.8 15.2 7.5 3.6 8.4 8.0 8.5 89.9
Total gross
39.3 17.9 7.5 3.6 8.7 38.0 22.9 138.0
Impairment
0.5 2.8 - - 0.3 30.0 10.5 44.2
Total net
38.8 15.2 7.5 3.6 8.4 8.0 12.4 93.8
(1)

In 2012, the Bank proceeded with new write-offs on loans exposures. The impairment on 4 debt
instruments has been partially used during 2012 following the sale of the positions.
In 2013, the Bank proceeded with additional write-offs following the sale of securities.
The stock of impairment has also been influenced by a new specific allowance on a defaulted loan
and on two perpetual securities.

The loan/loss ratio is as follows:

Loan/Loss ratio (*) 2012 2013
L&R from customers 59 bps 13 bps
AFS financial assets 35 bps 5 bps
(*) The loan/loss ratio is defined as the net variation of specific and general impairments on the
average loan portfolio over the year.

- 70 -
1.2.3. Concentration of risks

1.2.3.1. By rating
(1)

In EUR million
AFS L&R-Banks and other financial institutions
Rating NPL /
Impaired
Standard Total Other
L&R
Reverse
Repo
Commercial
Paper
Total
31/12/2012
AAA - 1,266.9 1,266.9 0.1 - -
0.1
AA+ - 554.8 554.8 - - -
-
AA - 164.2 164.2 123.7 - 10.0
133.7
AA- - 260.7 260.7 29.8 - 0.0
29.8
A+ - 135.6 135.6 90.5 191.5 44.8
326.8
A - 216.0 216.0 189.0 1,106.1 99.6
1,394.7
A- - 395.1 395.1 83.7 75.1 19.9
178.8
BBB+ - 276.3 276.3 10.2 67.6 43.5
121.3
BBB 1.6 448.8 450.4 9.7 - -
9.7
BBB- - 143.5 143.5 0.0 - -
0.0
BB+ - 25.3 25.3 0.2 - -
0.2
BB - 11.8 11.8 0.1 - -
0.1
BB- - 3.0 3.0 0.6 - -
0.6
B+ - 0.2 0.2 - - -
-
B - - - - - -
-
B- - 0.2 0.2 0.0 - -
0.0
CCC - - - - - -
-
CC 0.7 - 0.7 - - -
-
D - - - - - -
-
Not rated 9.3 27.0 36.3 119.7 177.0 -
296.7
Total 11.6 3,929.4 3,941.1 657.4 1,617.3 217.8 2,492.5

Rating NPL/
Impaired
Standard Total Other L&R Reverse /
Repo
Commercial
Paper
Total
31/12/2013
AAA - 1,127.2 1,127.2 1.5 - -
1.5
AA+ - 543.2 543.2 0.3 - -
0.3
AA - 372.2 372.2 68.5 - -
68.5
AA- - 88.3 88.3 32.6 - -
32.6
A+ - 116.0 116.0 81.4 17.1 -
98.5
A 2.3 274.8 277.1 221.8 257.8 -
479.6
A- - 338.2 338.2 79.2 337.1 -
416.2
BBB+ - 246.8 246.8 20.7 - -
20.7
BBB 1.6 347.8 349.4 54.6 951.8 -
1,006.4
BBB- - 84.2 84.2 0.0 247.4 -
247.4
BB+ - 15.7 15.7 - - -
-
BB - 8.6 8.6 0.3 - -
0.3
BB- - - - 0.6 - -
0.6
B+ - - - - - -
-
B - - - - - -
-
B- - - - - - -
-
CCC - - - - - -
-
(1)
The information on rating is not available as such for Loans and receivables to customers.

- 71 -
CC - - - - - -
-
D - - - - - -
-
Note Rated 0 51.8 51.8 107.9 150.0 -
257.9
Total 3.9 3,614.8 3,618.7 669.3 1,961.2 -
2,630.5

1.2.3.2. Government bonds by country

In EUR million Available-for-sale financial assets

Held-for-trading
assets
31/12/2012
Nominal
Carrying
amount
Available-
for-sale
reserve Impairment
Related
hedging
derivatives Nominal
Carrying
amount
Austria

112.7 131.3 9.8 - -

0.1 0.1

Maturing in 2014 or 2015 4.1 4.4 0.1 - -

- -

Maturing in 2016 or 2017 27.0 30.7 2.5 - -

- -

Maturing in 2018 and later 81.6 96.3 7.3 - -

0.1 0.1
Belgium

286.8 317.3 12.1 - -5.0

- -

Maturing in 2013 10.2 10.5 0.2 - -

- -

Maturing in 2014 or 2015 151.3 162.5 5.2 - -

- -

Maturing in 2016 or 2017 93.7 107.4 2.9 - -5.0

- -


- -
Czech Republic 8.0 9.4 0.1 - -

- -


- -
Denmark

0.1 0.1 - - -

- -

Maturing in 2013 0.1 0.1 - - -

- -
Finland

2.3 2.3 0,0 - -

0,0 0,0

Maturing in 2013 2.3 2.3 0,0 - -

- -

Maturing in 2018 and later - - - - -

0,0 0,0
France

212.3 226.7 7.9 - -

- -

Maturing in 2013 90.4 91.8 0.6 - -

- -

Maturing in 2014 or 2015 67.4 71.7 2.5 - -

- -

Maturing in 2016 or 2017 27.4 31.4 2.7 - -

-


0,0 -
Germany

105.5 115.7 6.2 - -

0.1 0.1

Maturing in 2014 or 2015 64.0 67.2 1.9 - -

- -

Maturing in 2016 or 2017 35.5 40.8 3.4 - -

- -


0.1 0.1
Greece

- - - - -

- -

Maturing in 2013 - - - - -

- -

maturing in 2014 or 2015 - - - - -

- -
Ireland

77.6 81.5 -0.1 - -

0.1 0.1

Maturing in 2014 or 2015 24.1 25.1 -0.1 - -

- -

Maturing in 2016 or 2017 20.0 21.6 -0.1 - -

0.1 0.1


0,0 0,0
Italy

180.1 184.4 3.7 - -

- -

Maturing in 2013 41.7 41.9 0.1 - -

- -

Maturing in 2014 or 2015 59.1 60.3 1.5 - -

- -

Maturing in 2016 or 2017 48.6 49.7 1.7 - -

0,0 0,0


- -
Lithuania

3.8 4.9 0.1 - -

0.2 0.2

Maturing in 2016 or 2017 - - - - -

0.2 0.2


- -
Luxembourg 96.9 106.6 2.2 - -7.2

1.0 1.0

Maturing in 2013 46.9 48.4 1.3 - -

0.8 0.8

Maturing in 2018 and later 50.0 58.2 0.9 - -7.2

0.2 0.2

- 72 -
The Netherlands 81.5 89.6 5.6 - -

0.1 0.1

Maturing in 2013 19.6 20.0 0.2 - -

- -

Maturing in 2014 or 2015 30.8 32.9 2.0 - -

- -

Maturing in 2016 or 2017 20.6 24.2 2.1 - -

- -


0.1 0.1
Poland

16.5 18.7 - - -

0.7 0.8

Maturing in 2014 or 2015 - - - - -

- -

Maturing in 2016 or 2017 11.0 11.9 0,0 - -

- -

Maturing in 2018 and later 5.4 6.8 -0,0 - -

0.7 0.8
Slovakia

22.3 23.9 0.2 - -0.4

- -

Maturing in 2014 or 2015 12.3 13.0 0.1 - -

- -

Maturing in 2016 or 2017 7.0 7.5 0.2 - -0.4

- -

Maturing in 2018 and later 3.0 3.4 - - -

- -
Slovenia

24.7 24.5 -0.1 - -

- -

Maturing in 2014 or 2015 9.0 9.1 -0.1 - -

- -

Maturing in 2018 and later 15.6 15.4 0,0 - -

- -
Spain

26.3 26.4 0,0 - -

- -

Maturing in 2013 26.3 26.4 0,0 - -

- -
Sweden

23.3 24.3 0.9 - -

- -

Maturing in 2014 or 2015 23.3 24.3 0.9 - -

- -
Supranational 253.3 271.9 9.9 - -5.4

6.3 6.8

Maturing in 2013 2.9 2.9 0,0 - -

- -

Maturing in 2014 or 2015 56.6 58.0 0.3 - -

1.6 1.7

Maturing in 2016 or 2017 145.0 156.3 8.2 - -1.9

1.9 2.0


2.8 3.1
Rest

130.2 143.5 7.0 -1.2 -

7.3 7.0

Maturing in 2013 9.1 9.1 0,0 - -

1.1 1.1

Maturing in 2014 or 2015 22.3 23.7 0.5 - -

2.7 2.6

Maturing in 2016 or 2017 30.3 32.2 0.4 - -

0.5 0.5

Maturing in 2018 and later 68.5 78.5 6.2 -1.2 -

3.1 2.7
Total 1,664.4 1,803.1 65.6 -1.2 -18.1 15.8 16.1

In EUR million Available-for-sale financial assets

Held-for-trading
assets
31/12/2013
Nominal
Carrying
amount
Available-
for-sale
reserve Impairment
Related
hedging
derivatives Nominal
Carrying
amount
Austria

105.5 118.2 5.8 - -

- -

Maturing in 2014 4.1 4.2 0.0 - -

- -

Maturing in 2015 or 2016 1.0 1.0 0.0 - -

- -

Maturing in 2017 or 2018 62.2 70.2 4.6 - -

- -


- -
Belgium

269.0 286.2 4.3 - -3.4

- -

Maturing in 2014 87.8 89.2 0.5 - -

- -

Maturing in 2015 or 2016 122.3 130.4 1.7 - -3.4

- -

Maturing in 2017 or 2018 34.2 39.7 1.3 - -

- -


- -
Czech republic 8.0 9.3 0.1 - -

0.0 0.0

Maturing in 2017 or 2018 5.0 5.8 0.1 - -

- -


0.0 0.0
Finland

2.0 2.2 0.0 - -

0.0 0.0


0.0 0.0
France

158.6 169.5 4.8 - -

- -

Maturing in 2014 29.8 30.6 0.2 - -

- -

Maturing in 2015 or 2016 60.9 63.1 1.1 - -

- -

- 73 -

Maturing in 2017 or 2018 53.0 59.3 3.1 - -

- -


- -
Germany

126.7 133.1 3.3 - -

- -

Maturing in 2014 47.0 47.0 0.0 - -

- -

Maturing in 2015 or 2016 42.2 44.3 1.0 - -

- -

Maturing in 2017 or 2018 27.7 31.0 1.8 - -

- -


- -
Ireland

77.6 83.9 3.6 - -

0.0 0.0

Maturing in 2014 9.1 9.1 - - -

- -

Maturing in 2015 or 2016 25.0 26.5 0.5 - -

- -

Maturing in 2017 or 2018 41.4 46.0 2.8 - -

- -


0.0 0.0
Italy

128.4 134.3 5.1 - -

- -

Maturing in 2014 25.3 25.4 0.3 - -

- -

Maturing in 2015 or 2016 49.2 51.3 2.4 - -

- -

Maturing in 2017 or 2018 54.0 57.5 2.4 - -

- -
Luxembourg 54.2 60.2 0.4 - -5.1

0.4 0.4


0.4 0.4
The Netherlands 103.2 108.5 4.0 - 0.7

0.0 0.0

Maturing in 2014 9.2 9.4 0.0 - -

- -

Maturing in 2015 or 2016 35.4 36.8 1.2 - -

- -

Maturing in 2017 or 2018 26.7 30.2 1.8 - -

- -

Maturing in 2019 and later 32.0 32.2 1.0 - 0.7

- -
Norway

- - - - -

0.1 0.1

Maturing in 2015 or 2016 - - - - -

0.1 0.1
Poland

29.4 33.1 0.1 - -1.8

- -

Maturing in 2015 or 2016 14.1 15.0 0.1 - -

- -

Maturing in 2017 or 2018 10.9 13.0 0.2 - -1.8

- -

Maturing in 2019 and later 4.4 5.1 -0.2 - -

- -
Slovakia

42.7 45.7 0.2 - -1.4

- -

Maturing in 2014 8.0 8.0 0.0 - -

- -

Maturing in 2015 or 2016 16.8 17.7 0.2 - -0.2

- -

Maturing in 2017 or 2018 2.7 3.0 0.0 - -

- -


- -
Spain

- - - - -

0.1 0.1

Maturing in 2017 or 2018 - - - - -

0.1 0.1
Sweden

23.3 23.6 0.2 - -

- -

Maturing in 2014 23.3 23.6 0.2 - -

- -
Supranational 274.9 288.2 6.8 - -3.9

1.8 1.9

Maturing in 2014 16.6 16.8 0.1 - -

- -

Maturing in 2015 or 2016 146.0 152.8 5.5 - -

0.1 0.1

Maturing in 2017 or 2018 56.3 58.5 0.4 - -1.3

1.4 1.5


0.3 0.3
Rest

158.5 171.7 0.9 - -2.2

1.3 1.2

Maturing in 2014 15.5 15.6 0.1 - -

0.1 0.1

Maturing in 2015 or 2016 52.3 55.1 0.2 - -

0.8 0.7


0.5 0.4
Total 1,562.1 1,667.7 39.5 - -17.0 3.7 3.7

- 74 -
1.2.3.3. Country Risk Management

The breakdown of Available-for-sale financial assets and Loans and receivables per countries is as
follows:

In EUR million AFS L&R-Banks and other financial institutions L&R-
Customers
Country NPL/
Impaired
Standard Total Other
L&R
Reverse
repo
Commercial
Paper
Total Total
31/12/2012
Supranational - 691.3 691.3 - - - - -
France 11.0 587.4 598.3 33.2 646.6 35.8 715.6 136.3
Belgium - 492.1 492.1 76.0 - 10.0 86.0 196.4
Italy - 308.1 308.1 3.5 - 8.7 12.2 8.8
Germany - 291.2 291.2 78.9 177.0 19.9 275.9 144.2
The Netherlands - 279.6 279.6 29.7 - 29.9 59.6 330.9
United Kingdom - 164.1 164.1 139.3 793.8 58.8 991.9 134.5
United States of America - 159.9 159.9 16.0 - - 16.0 8.8
Austria - 158.6 158.6 1.5 - 9.9 11.4 -
Luxembourg - 119.6 119.6 130.6 - - 130.6 292.1
Spain - 107.2 107.2 3.3 - 14.9 18.2 60.5
Ireland - 87.2 87.2 - - - - -
Switzerland - 73.8 73.8 88.2 - - 88.2 29.1
Sweden - 73.6 73.6 0.4 - - 0,4 -
Russia - 32.3 32.3 0.0 - - - 7.7
Denmark - 29.1 29.1 6.3 - 19.9 26.2 1.3
Finland - 26.9 26.9 2.8 - - 2.8 -
Slovenia - 25.3 25.3 - - - - -
Slovakia - 24.6 24.6 0.0 - - - 0.4
Poland - 22.4 22.4 3.8 - - 3.8 4.1
Hong Kong - 16.9 16.9 2.0 - - 2.0 0.0
Czech Republic - 16.7 16.7 1.9 - - 1.9 2.0
United Arab Emirates - 16.6 16.6 0.1 - 10.0 10.1 0.3
Norway - 15.5 15.5 0.8 - - 0.8 0.7
Qatar - 12.0 12.0 0.2 - - 0.2 -
Panama - 10.3 10.3 - - - - 3.7
Canada - 10.2 10.2 6.0 - - 6.0 4.0
Australia - 8.9 8.9 1.1 - - 1.1 0.1
Brazil - 6.5 6.5 7.1 - - 7.1 0.2
British Virgin Islands - - - - - - - 70.2
Monaco - - - 0.5 - - 0.5 38.0
Other - - - - - - - 10.7
Mauritius - - - - - - - 10.5
Other below EUR 10
million
0.7 61.5 62.2 24.1 - - 24.1 24.2
Total 11.6 3,929.4 3,941.1 657.4 1,617.3 217.8 2,492.5 1,520.0

- 75 -
In EUR million AFS L&R-Banks and other financial institutions L&R-Customers
Country
NPL/
Impaired
Standard Total
Other
L&R
Reverse
repo
Commercial
Paper
Total Total
31/12/2013
United Kingdom - 179.6 179.6 93.0 486.4 - 579.4 175.5
France 1.6 486.0 487.5 44.5 125.5 - 170.1 267.0
Spain - 60.5 60.5 1.7 688.2 - 689.9 111.1
Italy - 198.6 198.6 49.6 511.1 - 560.6 6.0
Supranational - 740.6 740.6 - - - - -
Belgium - 419.6 419.6 51.6 - - 51.6 231.3
Germany - 296.3 296.3 62.0 150.0 - 212.0 127.3
The Netherlands - 280.7 280.7 25.6 - - 25.6 293.5
Luxembourg - 70.6 70.6 87.4 - - 87.4 282.7
United States of America 2.3 133.6 135.9 43.9 - - 43.9 6.2
Austria - 151.2 151.2 0.9 - - 0.9 -
Switzerland - 58.9 58.9 42.4 - - 42.4 39.8
Ireland - 86.5 86.5 5.9 - - 5.9 -
Sweden - 75.0 75.0 0.4 - - 0.4 0.2
China - 2.3 2.3 52.2 - - 52.2 0.4
Japan - 3.5 3.5 50.8 - - 50.8 -
Slovakia - 47.1 47.1 0.2 - - 0.2 0.2
Monaco - - - - - - - 46.1
Poland - 37.2 37.2 1.6 - - 1.6 1.1
Finland - 21.9 21.9 14.1 - - 14.1 0.0
Czech Republic - 21.0 21.0 11.4 - - 11.4 0.0
Russia - 30.9 30.9 0.4 - - 0.4 0.4
Denmark - 25.3 25.3 4.4 - - 4.4 0.1
Qatar - 27.8 27.8 0.3 - - 0.3 -
Canada - 24.9 24.9 2.5 - - 2.5 0.3
Hong Kong - 22.7 22.7 0.7 - - 0.7 1.4
United Arab Emirates - 20.3 20.3 0.2 - - 0.2 0.1
Brazil - 12.8 12.8 2.3 - - 2.3 0.4
Norway - 13.3 13.3 0.6 - - 0.6 0.1
New Zealand - 7.6 7.6 2.8 - - 2.8 0.3
Australia - 8.8 8.8 1.4 - - 1.4 0.0
Cayman Islands - - - 0.0 - - 0.0 10.0
Other below EUR 10
million
- 49.7 49.7 14.7 0.0 0.0 14.7 61.9
Total 3.9 3,614.8 3,618.7 669.3 1,961.2 0.0 2,630.5 1,726.9

- 76 -
2. Market Risk: Trading Risk


2.1.1. Origin of trading risk

KBL epb group being mainly Private Banking oriented, its trading risk-taking activity aims to support
the core business activities. The trading positions reflect the necessary intermediation of the Head
Office s Dealing Room, supporting client flows of the Group in terms of debts instruments, equity
instruments, structured products, forex and deposits. Most of the instruments used by the Dealing
Room are plain vanilla.

2.1.2. Trading risk policy

The risks incurred therefore are mainly short-term interest rate risk (treasury in the currencies of
clients), medium/long-term interest rate risk (bond trading, particularly in EUR), price volatility risk
(trading in listed equities and structured products sold to private clients) and forex risk (spot and
forward exchange rates in the liquid currency pairs used by clients). Forex risk is the only trading
activity for which subsidiaries are allowed to carry some residual positions relating to their customers
flows.

2.1.3. Trading decision making process / governance

Trading activities are concentrated in Luxembourg (except residual Forex positions for a maximum
equivalent of EUR 3 million, no trading activity is allowed in the subsidiaries).The primary limits are
granted by the Board Risk Committee (according to the Risk Appetite Statement) to the Executive
Committee of KBL epb group, which is responsible for the overruns validation. Trading exposures
compared to their respective primary limits are communicated on a quarterly basis to the Board Risk
Committee which is also informed when triggers are reached.

2.1.4. Measurement and monitoring of trading risk

The system of primary limits in place at KBL epb group is based on:

- nominal amounts for the activities subject to currency risk (Forex) and to price volatility risk (Equity,
Third Party Funds, Structured Products, Special Bonds);
- 10 bpv limits for activities subject to interest rate risk (Treasury and Bond Desks).

These primary limits are supplemented by a structure of secondary limits allowing a more detailed
analysis of the trading risks. Those secondary limits consist in concentration limits by currency and by
time bucket as well as in limits by issue and issuer based on their rating or on their market liquidity.

Since August 2013, the set up of a Historical Value at Risk measure on each trading activity is tested.
The implementation is planned to be finalized mid 2014.

2.1.5. Concentration Risk

Concentration risk by issuer is strictly governed by conservative limits restricting the trading in non-
investment grade debts and in illiquid equities, which leads to a well diversified trading portfolio.

Notwithstanding the exposure on KBC Bank, the Banks former mother company, for which the
outstanding has strongly decreased in 2013 (EUR 23.0 million end of year) and the exposure on
International Islamic Liquidity Management issues for which KBL epb operates as Primary Market
Dealer (EUR 43.2 million end of year), the trading activity, as at 31 December 2013, was diversified on
139 Corporate and Financial issuers with an average outstanding of +/- EUR 0.7 million, with a
maximum of EUR 7.1 million on EIB.

- 77 -
The evolution of exposures related to each activity compared with their respective limits (primary and
secondary), as well as the results and key facts, are reported daily to the Heads of the Dealing Room
and of the Risk Control Function. They are also weekly reported to the KBL epb group Executive
Committee, on a monthly basis to the ALCO and on a quarterly basis to the Group Board Risk
Committee.


As at 31 December 2013 and 2012, the usage of limits in the Trading activities are as follows (KBL
epb group):

Limit in 10
bpv (1)
Oustanding
31/12/2012
Maximum
observed in
2013
Average
observed in
2013
Oustanding
31/12/2013
In EUR million

Treasury 2.5 0.6 1.6 0.6 0.7
Bond 0.8 0.2 0.7 0.2 0.0
(1) BPV 10 bps oustanding corresponds to the sum in abs value of the BPV 10 bps in each currency

Limit in
Nominal
Amount
Oustanding
31/12/2012
Maximum
observed in
2013
Average
observed in
2013
Oustanding
31/12/2013
In EUR million

Forex (bullions
included) 23.0 5.5 10.9 5.4 4.2
Third Party funds 5.0 - 0.4 0.1 0.3
Equity 8.0 0.2 4.6 0.8 0.2
Bond Special (2) 20.0 12.7 14.7 6.7 1.9
Structured Product 80.0 54.2 72.4 59.4 51.4
(2) Bond Special activity: constant maturity swap notes (CMS) and steepeners

Over the year 2013, oustandings in each activity remained well below the authorised limit as
expressed by the maximum outstanding observed.

3. Market Risk : ALM Risk


3.1.1. Origin of ALM risk

The traditional activity of a private bank entails little ALM risk
(3)
compared to a retail bank: most of the
client assets are reported as an off-balance sheet item in the form of securities deposits. Most short-
term client cash deposits offer variable rates linked with money market rates and the same applies to
Lombard/mortgage loans to customers. When fixed rates are granted for loans, hedging swaps are
contracted.

(3)
The ALM risk is defined as the market risks induced by the balance sheet, except the trading activity.

- 78 -
As a consequence, the ALM interest rate risk is mainly entailed by the securities portfolios set up
within the frame of the ALM policy:

- fixed income bonds portfolios dedicated to the reinvestment of the free capital and of the
stable part of clients deposits (in the most material entities);
- in KBL epb only, fixed income securities, according to a return/interest rate risk optimisation
approach, are also included in the bonds portfolio dedicated to the reinvestment of stable
liquidities
(1)
.

The ALM equity risk is induced by an investment portfolio invested in direct lines of equities or in UCI
shares. The portfolio held in KBL epb (Luxembourg) is managed along Group ALCOs guidelines.
Some equities portfolios exist in the subsidiaries, in order to meet specific needs (reinvestment of
branch 21 liabilities in the insurance company Vitis Life, pension obligations in Merck Finck & Co
a.o.). Transactions in these portfolios are performed after validation of the subsidiary and of the Group
ALM.

KBL epb group is not exposed to any ALM forex risk as no active foreign exchange exposure is taken
(assets are funded in their respective currencies).

3.1.2 ALM decision making process/governance

The ultimate responsibility for the ALM of KBL epb group is held by the Group ALCO Committee,
which gathers monthly and is an Executive Committee extended to the representatives of the ALM
Function, of the Risk Control Function, of Global Financial Markets in addition to the Chief Investment
Officer.

The ALCO validates a.o. strategies in terms of management of the gap between resources and their
utilisations, in terms of return on equity enhancement, liquidity management and mitigation of the
related risks.

Those strategies are proposed by the ALM Function (created in 2013) which has the responsibility for
the preparation of the ALCO meetings and of the topics which are submitted to its decisions. The
Function is also in charge of the day-to-day implementation of the ALCO decisions. When they have a
Group dimension, it has to ensure their implementation within the limits of the governance constraints
in place.

Under this new structure, the Risk Control Function endorses a role of second level control entity,
issuing opinions on the proposals and monitoring the risks related to the ALM activity on a recurring
basis.

3.1.3 ALM policy

A document entitled Investment Policy and ALM framework has been drafted by the ALM Function. It
is in line with the Risk Appetite Statement expressed by the Board of Directors and describes a.o. the
ALM objectives, the ALM governance and constraints (credit, liquidity, risk ). Its validation process is
ongoing.

3.1.4. Measurement and monitoring of ALM risks

In its Risk Appetite Statement dated 18 July 2013, the Board Risk Committee has expressed its risk
appetite for ALM interest rate risk and equity risk, mainly through limits on Value at Risk indicators,
sensitivity measures and global outstanding at KBL epb group level.

Regarding the interest rate risk, one of the limits is based on the regulatory 200 bpv (basis point value)
limit for all banking book positions of KBL epb group. While the regulatory limit amounts to 20% of own
funds, the BRC limit has been fixed at 18%; the 200 bpv sensitivity equals 4.1% as at 31 December
2013 (31 December 2012: 13.2 %).

(1)
This portfolio also contains interest rate risk-free securities - swapped or FRN -, according to a return/credit risk optimisation approach.

- 79 -
On the other hand, the interest rate Value at Risk 99% - 1 year amounts to EUR 81 million for a limit of
EUR 150 million as at 31 December 2013 (31 December 2012 : EUR 110 million) for KBL epb group.

Regarding the equity (price) risk, the Risk Appetite statement is expressed in terms of limits on equity
Value at Risk, by the fixing of stop losses and of maximum size for listed equities as well as for
alternative equity investments for the whole Group.

The Value at Risk 99% - 1 year amounts to EUR 131 million for a limit of EUR 150 million as at 31
December 2013 (EUR 108 million as at 31 December 2012) for KBL epb group.


3.2.1. Interest rate

3.2.1.1. Interest rate sensitivity

The sensitivity of the economic value of the balance sheet to interest rates (impact of a parallel
increase by 1% of the interest risk curve) is as follows for KBL epb group:

In EUR million

Less
than 3
months
Between
3 months
and 1
year
Between
1 year
and 3
years
Between 3
years and
5 years
More
than 5
years

Total
100
bpv

Carrying
amount
100 bpv as at 31/12/2012

Financial assets

-8 -10 -27 -39 -54 -137 10,996
Held-for-trading

0 -4 0 0 0 -5 500
Designated at fair
value through profit or
loss

0 0 0 - 0 0 2,110
Available-for-sale
financial assets

0 -3 -24 -37 -43 -106 4,198
Loans and
receivables

0 -3 -2 -2 -11 -19 4,062
Hedging derivatives

-7 0 0 0 0 -8 34
Accruals

- - - - - - 92


13 28 12 18 12 83 11,158
Held-for-trading

0 6 1 1 3 12 301
Designated at fair
loss

- - - - - - 2,095
Measured at
amortised cost
(excluding deposits
from CB)

4 3 8 5 5 24 8,387
Subordinated
liabilities

0 0 0 7 0 7 254
Hedging derivatives

9 20 0 0 - 30 86
Accruals

- - - - - - 35
Other liabilities (Vitis
Life Br21)

0 0 3 4 3 10

Gap

5 19 -14 -22 -42 -54

- 80 -
In EUR million

Less
than 3
months
Between
3 months
and 1
year
Between
1 year
and 3
years
Between 3
years and
5 years
More
than 5
years

Total
100
bpv

Carrying
amount
100 bpv as at
31/12/2013

Financial assets

-4 -6 -32 -33 -42

-117

10,708
Held-for-trading

-0 -2 - - -

-2

389
Designated at fair value

-0 - -0 - -

-0

1,863
Available-for-sale
financial assets

-0 -3 -25 -29 -35

-92

3,936
Loans and receiables

-2 -1 -2 -5 -7

-17

4,410
Hedging derivatives

-1 -0 -5 - -

-6

24
Accruals

- - - - -

-

86


4 5 18 17 24

73

10,820
Held-for-trading

0 2 2 3 2

9

309

- - - - -

-

1,856
Measured at amortised
cost (excluding deposits
from CB)

3 3 6 5 5

22

8,314
Subordinated liabilities

0 0 5 0 0

5

233
Hedging derivatives

0 0 5 9 16

31

75
Accruals

- - - - -

-

34
Other liabilities (Vitis
Life Br 21)

0 0 2 1 2

5

Gap

-0 -1 -14 -16 -18

-45

The sensitivity of the balance sheet has decreased since end of 2012 mainly due to the realignment of
the portfolio dedicated to reinvestment of the free capital (around EUR 181 million) and to movements
of the basic interest rate curves.

The sensitivity of the interest margin of KBL epb group to the interest rates (impact of a parallel
increase by 1 % of the interest rate risk curve) is as follows:

In EUR million

Less
than 3
months
Between 3
months
and 1 year
Between
1 year
and 3
years
Between
3 years
and 5
years
More
than 5
years

Total
impact Sensitivity 100 bpv Shift
31/12/2012

Financial assets

-3.6 -8.4 -18.5 -13.5 -29.1 -73.2

4.0 10.4 8.7 6.7 16.3 46.2

Net impact

0.3 2.0 -9.8 -6.8 -12.8 -27.0

- 81 -
In EUR million

Less
than 3
months
Between 3
months
and 1 year
Between
1 year
and 3
years
Between
3 years
and 5
years
More
than 5
years

Total
Impact
Sensitivity 100 bpv Shift
31/12/2013

Financial assets

-4.2 -6.0 -15.6 -8.5 -6.3

-40.5

3.8 5.6 9.7 4.7 4.0

27.6

Net Impact

-0.4 -0.4 -5.9 -3.8 -2.4

-12.9

3.2.1.2. Concentration of interest rate risk

The sensitivity analysis shows that the main exposure to a parallel increase of the interest rates curve
is located in the time buckets beyond 3 years, reflecting the current ALM policy (reinvestment of the
free capital and of client deposits in cyclical portfolios up to 7 years, reinvestment of the excess
liquidity). However, this exposure has to be put into perspective considering the permanent monitoring
of the open positions in the liquidity portfolio by the ALM Function (and reviewed by Risk Control).

3.2.2. Equity Risk

3.2.2.1. Sensitivity of equity risk

Regarding the equity risk, the impact of a decrease of 25 % on both the income statement
(impairment) and the equity AFS revaluation reserve (excluding Equity instruments at cost) is as
follows for KBL epb group:

In EUR thousand
Current
situation
(1)

Impact of a markets
decrease of 25%
Stock after
decrease 31/12/2012
Marked-to-Market value 296,253 -74,063 222,190
Gain/Loss 76,471 -74,063 2,408
Equity impact (AFS reserve) 78,867 -64,801 14,067
Income statement impact (impairment) -2,397 -9,263 -11,659
(1) Some Equity instruments classified as available-for-sale financial assets are not covered here.

In EUR thousand
Current
situation
(1)

Impact of a markets
decrease of 25%
Stock after
decrease 31/12/2013
Gain/Loss 80,527 -97,390 -16,863
Equity impact (AFS reserve) 82,647 -92,772 -10,124
Income statement impact (impairment) -2,121 -4,618 -6,739

- 82 -
3.2.2.2. Concentration of equity risk

An exposure on the equity market(s) can be created/increased when the expectations for the equity
market(s) are, according to an analysis validated by the ALCO, declared to be favourable. Such
analysis will also decide on the relative weights of Europe, USA and Emerging Markets. But within the
various regions, the investments are properly diversified in terms of sector, country/region and number
of positions held. Concentration principles are respected for individual equity lines or individual
investment funds, expressed in absolute amounts and in percentage of daily volume traded (or for
fund of total NAV).
Those diversification rules do not apply when the Bank is a seed investor in a new investment fund
managed by an asset management entity of the Group. In this case, the commercial objectives of such
investment prevail over the objectives and constraints set for standard investments in equity funds.

Following the principles presented above, the breakdown of the whole Equity portfolio of KBL epb
group (direct lines and Funds) per nature and per region shows a prominent pan-European part as at
end of December 2013 :

In EUR million

REGION / NATURE 31/12/2013
Europe (Equity Funds + direct lines) 170.1 50%
Europe (Diversified Funds) 2.4 1%
EUR (Fixed Income Funds) 3.3 1%
World (Diversified Funds) 50.0 15%
World (Equity Funds + direct lines) 37.8 11%
United States (Equity Funds + direct
lines)
40.0 12%
USD (Fixed Income Funds) 20.3 6%
Asia (Equity Funds + direct lines) 17.8 5%
TOTAL 341.6 100%
Other Equities 44.4
Total Equities portfolios 386.1

However, within these regions, the diversification is permanently targeted: a.o. for direct lines
(equities), the breakdown per country is as follows as at 31 December 2013:

In EUR million

COUNTRY 31/12/2013
France 43.3 33%
Germany 20.9 16%
Switzerland 15.5 12%
United States of
America
14.6 11%
The Netherlands 10.2 8%
Sweden 6.7 5%
Belgium 6.3 5%
Spain 4.5 3%
Luxembourg 3.5 3%
Finland 3.2 2%
Italy 1.7 1%
Portugal 0.8 1%
United Kingdom 0.8 1%

- 83 -
Other 0.6 0%
TOTAL Direct Lines
Equity
132.6 100%
Funds and other
253.4

Total Equities
portfolios
386.1

Overweight in French equities is being gradually reduced with the sale of legacy positions
(representing EUR 10 million of the France equity exposure as of 31 December 2013).
Similarly, the breakdown of the direct lines per economic sector reflects the permanent attention to the
diversification of the Equity portfolio:

In EUR million

SECTOR 31/12/2013
Industrial 25.7 19%
Financial 22.6 17%
Consumer, non cyclical 21.7 16%
Consumer, cyclical 20.7 16%
Energy 11.3 9%
Basic materials 10.7 8%
Communications 8.1 6%
Technology 6.7 5%
Utilities 4.2 3%
Diversified 0.9 1%
TOTAL
132.6 100%
Funds and other
253.4

Total Equities Portfolios
386.1

On the other hand, as at 31 December 2013, the individual exposures entailing equity risk, except
seed moneys and pure bonds funds, do not exceed EUR 25 million per Equity Fund and EUR 10
million per direct line (with historical positions being the most significant).

4. Liquidity risk


4.1.1. Origin of Liquidity risk

Liquidity risk is constantly monitored and is not seen as a major risk within KBL epb group. Indeed, the
Bank as a Group has a large and stable funding base due to the natural accumulation of deposits from
its two core businesses: Private Banking and Global Investor Services, which on the other hand
consume relatively little liquidity. The overall funding gap is structurally and globally positive and KBL
epb group is a net lender recycling structural liquidity positions in the interbank market.

- 84 -
4.1.2 Liquidity decision making process/governance

Like for Assets and Liabilities Management, the Group ALCO Committee has the final responsibility of
the Liquidity Management of KBL epb group. The Group ALM Function proposes strategies with the
approval of the local Management/ALCO Committee - for the management of long term liquidity
(putting, a.o. a strong emphasis on ECB eligible as well as Basel III eligible bonds), while the short
term liquidity management is delegated to the Treasurer within strict limits (see trading risk above).

The Risk Control Function acts as a second level control entity, issuing opinions on the proposals and
monitoring the liquidity risk on a daily basis.

4.1.3 Liquidity policy

The current policy applied by KBL epb group is to centralise the placement of all liquidity surpluses at
the Head Office level. However, when local regulatory constraints exist (large exposures regime,
liquidity constraints), the subsidiaries liquidity is collateralized or is reinvested in local ALM portfolios
under the supervision of both Group ALM and Risk Control Functions.
At the Head Office, the stable part of global funding is reinvested in ALM portfolios following a
conservative strategy (a.o. respecting minimum European Central Bank/Basel III eligibility and rating
criteria) and the unstable part of global funding is replaced in the short-term interbank market, the
majority in the form of reverse repo transactions.

4.1.4. Measurement and monitoring of liquidity risk

The Board Risk Committee has expressed its Risk Appetite in terms of liquidity risk, by imposing limits
for each entity of the Group on the future Basel III ratios (LCR and NSFR), and on deposits outflows.
Furthermore, the loan-to-deposit ratio and some concentration indicators are more specifically
monitored by the ALCO Committee.

As the excess liquidity throughout the Group is centralised at KBL epbs Treasury Department,
concentrating the Groups liquidity risk, KBL epbs liquidity situation is closely monitored.

The operational liquidity of KBL epb is monitored on a daily basis by the Risk Control Function, which
reports to Financial Markets (Dealing Room):

- a contractual liquidity gap of up to five days, as if the activity was to be continued (no stress
test). This report is also sent to the BCL;
- a stock of available liquid assets;
- a daily estimate of the Basel III Liquidity Coverage Ratio, which stood at 135.4% as at
31 December 2013;
- the value of quantitative indicators, which can potentially trigger the Liquidity Contingency Plan
(the Plan consists in various actions depending on the gravity - minor, major - of the liquidity
crisis).

As far as structural indicators are concerned, the Loan-to-Deposit (LTD) ratio is established on a
monthly basis for KBL epb group. As at 31 December 2013, it stood at 23.8%, confirming the excellent
liquidity situation of the Group as natural deposit collector.

Finally, liquidity stress tests have been refined in 2013 in order to better fit the business model of KBL
epb group defined by its shareholder. Their conclusions are that the Group can survive a severe
liquidity crisis for 3 months without affecting its business model.

- 85 -

4.2.1. Maturity analysis of liquid stock

The maturity analysis of financial assets held for managing liquidity risk (unencumbered marketable
assets) is as follows:

In EUR million

Stock of
available
assets
Less
than
3 months
Between
3 months
and
1 year
Between 1
year and
3 years
Between 3
years and
5 years

More
than 5
years
Marketable assets
31/12/2012

Initial stock of available assets

4,122 3,313 2,869 1,736

885
CB eligible

2,970 -225 -375 -1,017 -718

-704
Marketable securities

1,152 -584 -69 -116 -133

-128
Total

4,122 -809 -445 -1,132 -851

-832

Residual stock of available assets 4,122 3,313 2,869 1,736 885

53

In EUR million

Stock of
available
assets
Less
than
3 months
Between
3 months
and
1 year
Between 1
year and
3 years
Between 3
years and
5 years

More
than 5
years
Marketable assets
31/12/2013


5,011 3,024 2,764 1,253

667
CB eligible

4,026 -1,778 -235 -1,246 -463

-313

985 -209 -25 -265 -124

-217
Total

5,011 -1,988 -260 -1,510 -586

-530

Residual stock of available assets 5,011 3,024 2,764 1,253 667

137

4.2.2. Maturity analysis of financial assets and liabilities

The analysis by remaining contractual maturity for financial assets and liabilities is as follows:

In EUR million

Less
than
3 months
Between 3
months
and 1 year
Between 1
year and
3 years
Between 3
years and
5 years
More
than 5
years

Undetermined

Total
31/12/2012

Cash and balances with central
banks

1,330 - - - - - 1,330

Financial assets

3,237 959 1,663 1,273 1,400 2,465 10,996
Held-for-trading

172 91 119 38 39 41 500
Designated at fair value through profit or
loss

- 8 7 0 0 2,095 2,110

177 446 1,294 1,051 901 329 4,198

2,794 414 243 151 459 0 4,062
Hedging derivatives

2 0 0 33 0 - 34
Accruals

92 - - - - - 92

Other assets

- - - - - 611 611

TOTAL ASSETS

4,567 959 1,663 1,273 1,400 3,076 12,937

- 86 -
Deposits from central banks

- - - - - -

-


8,134 374 191 273 41 2,145 11,158
Held-for-trading

166 32 49 2 2 50 301
Designated at fair value through profit or
loss

- - - - - 2,095 2,095
Measured at amortised cost
(excluding subordinated liabilities)

7,925 337 120 1 3 0 8,387

7 3 8 233 2 - 254
Hedging derivatives

1 3 14 36 33 - 86
Accruals

35 - - - - - 35

Other liabilities

22 33 130 106 64 491 845

Shareholders' equity

- - - - - 934 934

TOTAL LIABILITIES

8,156 408 320 379 105 3,570 12,937

GAP

-3,589 552 1,343 894 1,295 -494

Of which derivatives:

31/12/2012

Cashflows by bucket

Less than 3
months
EUR
thousands
Between 3
months and
1 year
EUR
thousands
Between 1
year and 3
years
EUR
thousands
Between 3
years and 5
years
EUR
thousands

More than
5 years
EUR
thousands

Total
EUR
thousands

Carrying
amount
EUR
million

Inflows 6,239 3,291 143 45 16 9,734 309
Interest rate 34 120 141 43 15

353 111
Equity 0 1 1 1 1 5 88
Currency 6,206 3,170 - - - 9,376 110
Other 0 0 - - - 0 0
Outflows -6,238 -3,313 -147 -40 -18 -9,757 393
Interest rate -37 -128 -146 -39 -17 -367 182
Equity 0 -1 -1 -1 -1 -4 86
Currency -6,201 -3,184 - - - -9,385 124
Other 0 0 - - - 0 0

Gap - Derivatives 2 -22 -5 4 -2 -23

- 87 -
In EUR million

Less
than
3 months
Between 3
months
and 1 year
Between 1
year and
3 years
Between 3
years and
5 years
More
than 5
years

Undetermined

Total
31/12/2013

banks

1,171 - - - - - 1,171

Financial assets

3,661 712 1,724 1,114 1,208 2,289 10,708
Held-for-trading

141 92 72 13 30

40

389
Designated at fair value through profit
or loss

- - - - 0

1,863

1,863

282 431 1,344 771 722

386

3,936
Loans and receiables

3,151 189 286 329 454

0

4,410
Hedging derivatives

1 - 22 0 1

-

24
Accruals

86 - - - -

-

86
Other assets

- - - - - 589 589

TOTAL ASSETS

4,833 712 1,724 1,114 1,208 2,879 12,469

Deposits from central banks

- - - - - -

-


8,278 295 284 29 37 1,896

10,820
Held-for-trading

176 65 22 1 3

41

309
Designated at fair value through profit
or loss

- - - - -

1,856

1,856
Measured at amortised cost (excluding
subordinated liabilities)

8,065 226 19 3 1

0

8,314

2 2 226 2 1

-

233
Hedging derivatives

0 2 17 24 32

-

75
Accruals

34 - - - -

-

34

Other liabilities

- - - - - 690

690
Provisions

- - - - -

34

34
Other liabilities

- - - - -

656

656

Shareholders' equity

- - - - - 959

959

TOTAL LIABILITIES

8,278 295 284 29 37 3,545

12,469

GAP

-3,445 416 1,439 1,085 1,170 -666

- 88 -

31/12/2013

Cashflows by bucket

Less than
3 months
EUR
thousands
Between 3
months and 1
year
EUR
thousands
Between 1
year and 3
years
EUR
thousands
Between 3
years and 5
years
EUR
thousands

More than 5
years
EUR
thousands

Total
EUR
thousands

Carrying
amount
EUR million

Inflows

6,852 1,724 129 40 68

8,813

286
Interest rate

47 113 125 24 16

325

84
Equity

0 0 0 1 0

2

122
Currency

6,805 1,611 3 16 52

8,487

79
Other

- - - - -

-

0
Outflows

-6,892 -1,750 -143 -55 -79

-8,918

399
Interest rate

-47 -128 -130 -32 -18

-355

141
Equity

0 -0 -0 -0 -0

-1

123
Currency

-6,845 -1,622 -13 -22 -60

-8,562

135
Other

- - - - -

-

0
Gap -
Derivatives

-40 -26 -14 -15 -10

-105

4.2.3. Concentration risk

The concentration risk the Bank is facing in terms of liquidity is twofold:

- concentration in assets in which the liquidity is reinvested : this risk is monitored through the
credit risk procedures (as described above);
- concentration in the funding sources. The Board Risk Committee has defined a specific Risk
Appetite indicator with limits and triggers, based on the relative weight of the top 20 Private
Clients Deposits among all deposits. This indicator is monthly monitored by the ALCO at
Group level, completed with a concentration indicator for all significant counterparties in terms
of funding sources (>1% of total liabilities, according to Basel III definition), and quarterly by
the BRC. The percentage amounts to 10% for KBL epb group as at 31 December 2013 for a
limit of 25%.

Note 43 Audit fees

(in EUR thousand) 31/12/2012 31/12/2013

Standard audit services 2,346 2,125
Audit-related services 580 172
Other services - 457

Total 2,926 2,754

- 89 -
Note 44 List of significant subsidiaries and associates

COMPANY COUNTRY
CAPITAL
HELD
SECTOR

KBL European Private Bankers S.A. Luxembourg 100.00% Bank

FULLY CONSOLIDATED SUBSIDIARIES (global method)

Brown, Shipley & Co. Limited United Kingdom 100.00% Bank
Cawood Smithie & Co Limited United Kingdom 100.00% Other - financial
Fairmount Pension Trustee Limited United Kingdom 100.00% Other - financial
Fairmount Trustee Services Ltd United Kingdom 100.00% Other - financial
The Brown Shipley Pension Portfolio Ltd United Kingdom 100.00% Other - financial
Slark Trustee Company Ltd United Kingdom 100.00% Other - financial
White Rose Nominees Ltd United Kingdom 100.00% Other - financial
KBL Immo S.A. Luxembourg 100.00% Real estate
Financire et Immobilire S.A. Luxembourg 100.00% Other - financial
Centre Europe S.A. Luxembourg 100.00% Real estate
Rocher Ltd Isle of Man 100.00% Real estate
S.C.I. KBL Immo III Monaco 100.00% Real estate
Plateau Real Estate LTD Isle of Man 100.00% Real estate
SCI KBL Immo II Monaco 100.00% Real estate
KBL Monaco Private Bankers Monaco 100.00% Bank
S.C.I. KBL Immo I Monaco 100.00% Real estate
KBL Monaco Conseil et Courtage en Assurance Monaco 100.00% Insurance
KBL Beteiligungs A.G. Germany 100.00% Holding
Modernisierungsgesellschaft Lbecker Str. 28/29 Gbr Germany 79.06% Real estate
Merck Finck & Co. Germany 100.00% Bank
Merck Finck Pension Universal Funds Germany 100.00% Management (Funds, Pensions, Portfolios)
Merck Finck Treuhand A.G. Germany 100.00% Other - financial
KBL Richelieu Banque Prive S.A. France 100.00% Bank
KBL Richelieu Gestion France 100.00% Management (Funds, Pensions, Portfolios)
S.E.V. France 100.00% Other - Commercial
KBLR Courtage (ex-KBLR INVEST 1) France 100.00% Management (Funds, Pensions, Portfolios)
KBLR INVEST 2 France 100.00% Management (Funds, Pensions, Portfolios)
KBL Informatique G.I.E. Luxembourg 100.00% IT
KBL (Switzerland) Ltd Switzerland 99.99% Bank
Privagest Switzerland 99.99% Management (Funds, Pensions, Portfolios)
Kredietrust Luxembourg S.A. Luxembourg 100.00% Management (Funds, Pensions, Portfolios)
Puilaetco Dewaay Private Bankers S.A. Belgium 100.00% Bank
Banque Puilaetco Dewaay Luxembourg S.A. Luxembourg 100.00% Bank
Theodoor Gilissen Bankiers N.V. The Netherlands 100.00% Bank
TG Fund Management B.V. The Netherlands 100.00% Management (Funds, Pensions, Portfolios)
TG Ventures B.V The Netherlands 100.00% Corporate Finance
Theodoor Gilissen Trust B.V. The Netherlands 100.00% Management (Funds, Pensions, Portfolios)
Theodoor Gilissen Global Custody N.V. The Netherlands 100.00% Custodian
Lange Voorbehout B.V. The Netherlands 100.00% Real estate
Stroeve Asset Management B.V. The Netherlands 100.00% Management (Funds, Pensions, Portfolios)
Wereldeffect B.V. The Netherlands 100.00% Management (Funds, Pensions, Portfolios)
Vitis Life S.A. Luxembourg 100.00% Insurance
Data Office Belgium 100.00% Other - financial

ASSOCIATES
EFA Partners S.A.
(1)
Luxembourg 52.70% Holding
European Fund Administration S.A.
(1)
Luxembourg 48.58% Fund administration

(1) Despite the ownership percentage, KBL epb does not exercise control or joint control over EFA Partners S.A. or European
Fund Administration S.A.. These two companies are thus considered as associates over which KBL epb exercises a
significant influence and are equity reported.

- 90 -
COMPANY COUNTRY
CAPITAL
HELD

NON-CONSOLIDATED COMPANIES

Forest Value Investment Management S.A. Luxembourg 25.60%
Horacio sarl Luxembourg 100.00%
KBL Beteiligungs A.G.
Steubag G. Betriebsw. & Bankendienst. GmbH Germany 100.00%

Note 45 Main changes in the scope of consolidation

COMPANY COUNTRY
CAPITAL
HELD
SECTOR

EXCLUDED IN SCOPE OF CONSOLIDATION

Fidef Ingnierie Patrimoniale S.A. (liquidated) France 100.00% Other - financial
European Fund Administration S.A.
European Fund Administration France S.A.S. France 51.13% Fund administration

Note 46 Events after the balance sheet date

There was, after the closing date, no significant event requiring an update of the provided information
or adjustments in the consolidated accounts as at 31 December 2013.

43, boulevard Royal
L-2955 Luxembourg

R.C.S. Luxembourg: B 006.395

Annual accounts, Report of the independent auditor
and Management report as at 31 December 2013

- 2 -
Table of contents

UNQUALIFIED CERTIFICATION OF THE INDEPENDENT AUDITOR ..........................................................................................3
INCOME STATEMENT ...................................................................................................................................................................5
STATEMENT OF COMPREHENSIVE INCOME .............................................................................................................................5
BALANCE SHEET ..........................................................................................................................................................................6
STATEMENT OF CHANGES IN EQUITY .......................................................................................................................................7
CASH FLOW STATEMENT ............................................................................................................................................................8
NOTES TO THE ANNUAL ACCOUNTS .........................................................................................................................................9
NOTE 1 GENERAL ......................................................................................................................................................................9
NOTE 2A STATEMENT OF COMPLIANCE ............................................................................................................................... 10
NOTE 2B SIGNIFICANT ACCOUNTING POLICIES .................................................................................................................. 14
NOTE 3A OPERATING SEGMENTS BY BUSINESS SEGMENT ............................................................................................. 20
NOTE 3B OPERATING SEGMENTS BY GEOGRAPHIC SECTOR .......................................................................................... 21
NOTE 4 NET INTEREST INCOME ............................................................................................................................................ 21
NOTE 5 DIVIDEND INCOME ..................................................................................................................................................... 21
NOTE 6 NET GAINS/LOSSES ON FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE THROUGH PROFIT
OR LOSS ...................................................................................................................................................................................... 22
NOTE 7 NET REALISED GAINS/LOSSES ON FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AT FAIR
VALUE THROUGH PROFIT OR LOSS ........................................................................................................................................ 22
NOTE 8 NET FEE AND COMMISSION INCOME ...................................................................................................................... 22
NOTE 9 OTHER NET INCOME ................................................................................................................................................. 22
NOTE 10 OPERATING EXPENSES .......................................................................................................................................... 23
NOTE 11 STAFF ........................................................................................................................................................................ 23
NOTE 12 IMPAIRMENT ............................................................................................................................................................. 24
NOTE 13 INCOME TAX (EXPENSES) / INCOME ..................................................................................................................... 26
NOTE 14 CLASSIFICATION OF FINANCIAL INSTRUMENTS: BREAKDOWN BY PORTFOLIO AND BY PRODUCT ............ 27
NOTE 15 AVAILABLE-FOR-SALE FINANCIAL ASSETS AND LOANS AND RECEIVABLES: BREAKDOWN BY
PORTFOLIO AND QUALITY ......................................................................................................................................................... 34
NOTE 16 FINANCIAL ASSETS AND LIABILITIES: BREAKDOWN BY PORTFOLIO AND RESIDUAL MATURITY ................. 35
NOTE 17 OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES ....................................................................................... 36
NOTE 18 SECURITIES LENDING AND SECURITIES GIVEN IN GUARANTEE ...................................................................... 38
NOTE 19 SECURITIES RECEIVED IN GUARANTEE ............................................................................................................... 39
NOTE 20 IMPAIRMENT OF AVAILABLE-FOR-SALE FINANCIAL ASSETS ............................................................................. 39
NOTE 21 IMPAIRMENT OF LOANS AND RECEIVABLES ....................................................................................................... 40
NOTE 22 DERIVATIVES ............................................................................................................................................................ 41
NOTE 23 OTHER ASSETS ........................................................................................................................................................ 42
NOTE 24 TAX ASSETS ............................................................................................................................................................. 42
NOTE 25 INTANGIBLE ASSETS ............................................................................................................................................... 42
NOTE 26 PROPERTY AND EQUIPMENT AND INVESTMENT PROPERTIES ........................................................................ 43
NOTE 27 PROVISIONS ............................................................................................................................................................. 44
NOTE 28 OTHER LIABILITIES .................................................................................................................................................. 45
NOTE 29 RETIREMENT BENEFIT OBLIGATIONS ................................................................................................................... 46
NOTE 30 EQUITY ...................................................................................................................................................................... 49
NOTE 31 RESULT ALLOCATION PROPOSAL ......................................................................................................................... 50
NOTE 32 LOANS COMMITMENTS, FINANCIAL GUARANTEES AND OTHER COMMITMENTS ........................................... 50
NOTE 33 ASSETS UNDER MANAGEMENT AND CUSTODY .................................................................................................. 50
NOTE 34 RELATED PARTY TRANSACTIONS ......................................................................................................................... 51
NOTE 35 SOLVENCY ................................................................................................................................................................ 52
NOTE 36 MAXIMUM CREDIT RISK EXPOSURE AND COLLATERAL RECEIVED TO MITIGATE THE RISK ........................ 53
NOTE 37 RISK MANAGEMENT ................................................................................................................................................ 54
NOTE 38 AUDIT FEES .............................................................................................................................................................. 77
NOTE 39 SIGNIFICANT SUBSIDIARIES ................................................................................................................................... 77
NOTE 40 EVENTS AFTER THE BALANCE SHEET DATE ....................................................................................................... 77
MANAGEMENT REPORT ............................................................................................................................................................. 78
DECLARATION ON THE CONFORMITY OF THE ANNUAL ACCOUNTS................................................................................. 120

The quantitative tables in the following pages may sometimes show small differences due to the use of
concealed decimals. These differences, however, do not in any way affect the true and fair view of the
annual accounts of the Bank. Similarly, the value zero 0 in the following tables indicates the presence of a
number after the decimal, while - represents the value nil.

- 3 -

UNQUALIFIED CERTIFICATION OF THE INDEPENDENT AUDITOR

To the Board of Directors of
Socit Anonyme
Luxembourg

Report on the annual accounts

Following our appointment by the Board of Directors, we have audited the accompanying annual accounts of
KBL European Private Bankers S.A., which comprise the balance sheet as at 31 December 2013, the
income statement, the statement of comprehensive income, the statement of changes in equity, the cash
flow statement for the year then ended, and a summary of significant accounting policies and other

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 rviseur dentreprises agr

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 rviseur dentreprises agr,
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 rviseur dentreprises agr considers internal control
relevant to the entitys 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 entitys 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.

- 4 -

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 KBL European
Private Bankers S.A. as of 31 December 2013, 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 management report, including the corporate governance statement, which is the responsibility of the
Board of Directors, is consistent with the annual accounts and includes the information required by the law
with respect to the corporate governance statement.

Ernst & Young
Socit Anonyme

Sylvie Testa


- 5 -
INCOME STATEMENT

In EUR thousand Notes 31/12/2012
(1)
31/12/2013

Net interest income 4, 34 56,796 53,278
Dividend income 5, 34 25,617 19,354
Net gains/losses on financial instruments measured at fair value
6 40,418 32,742
Net realised gains/losses on financial assets and liabilities not
measured at fair value through profit or loss
7 -71,691 30,221
Net fee and commission income 8, 34 84,610 87,527
Other net income 9, 34 7,519 7,681
GROSS INCOME 143,269 230,803

Operating expenses 10, 34 -249,460 -154,898
Staff expenses 11, 28, 29 -145,468 -102,049
General administrative expenses 38 -61,022 -43,116
Other 25, 26, 27 -42,970 -9,734
Impairment 12, 20, 21, 34 -197,149 -28,163
PROFIT / (LOSS) BEFORE TAX -303,340 47,741
Income tax (expenses) / income 13 -1,907 -12,511
(1)

STATEMENT OF COMPREHENSIVE INCOME

In EUR thousand 31/12/2012
(1)
31/12/2013

OTHER COMPREHENSIVE INCOME 130,134 -6,606
Items that may be reclassified subsequently to profit or loss
135,382 -9,423
135,382 -9,423
Revaluation at fair value 92,514 29,022
Net realised gains/losses on sales 91,692 -44,238
Impairment 6,606 1,903
Income tax (expenses) / income -55,430 3,890
Items that will not be reclassified to profit or loss
-5,248 2,816
Remeasurements of defined benefit pension plans
-5,248 2,816
Remeasurements (gross)
-5,248 2,816
Income tax on remeasurements
- -

TOTAL COMPREHENSIVE INCOME -175,113 28,624
(1)

The notes refer to the Notes to the annual accounts.

- 6 -
BALANCE SHEET

ASSETS (In EUR million) Notes

31/12/2012 31/12/2013

Cash and balances with central banks 36 409 610
Financial assets 14, 15, 16, 17, 18, 19, 34, 36 7,552 7,569
Available-for-sale financial assets 20, 39 3,730 3,423
Loans and receivables 21 3,313 3,825
Tax assets 24,36 24 15
Current tax assets - -
Investment properties 26 4 4
Property and equipment 26 95 90
Intangible assets 25 97 97
Other assets 23,36 30 27
TOTAL ASSETS 8,212 8,413

EQUITY AND LIABILITIES (In EUR million) 31/12/2012
(1)
31/12/2013

Financial liabilities 14, 16, 17, 34 6,850 7,074
Provisions 27 7 6
Other liabilities 28, 29 253 201
TOTAL LIABILITIES 7,109 7,282

TOTAL EQUITY 30 1,102 1,131
Out of which Common Equity Tier 1 instruments issued 478 508

TOTAL EQUITY AND LIABILITIES 8,212 8,413

(1)


- 7 -
STATEMENT OF CHANGES IN EQUITY

In EUR million
Issued and
paid-up
share
capital
Share
premium
Treasury
shares
Revaluation
reserve
AFS
investments
Remeasu-
rement of
defined
benefit
pension
plans
Reserves

Total
equity

2012

Balance as at 01/01/2012
(1)
187.2 321.3 -0.1 -55.2
-
824.3 1,277.6

Net movements on treasury
shares
- - - - - - -
Dividends and profit-sharing - - - - - - -
Total comprehensive income
for the year
- - - 135.4 -5.2 -305.2 -175.1

Total variations - - - 135.4 -5.2 -305.2 -175.1

Balance as at 31/12/2012
(1)
187.2 321.3 -0.1 80.2 -5.2 519.1 1,102.4

(1)

In EUR million
Issued and
paid-up
share
capital
Share
premium
Treasury
shares
Revaluation
reserve
AFS
investments
Remeasu-
rement of
defined
benefit
pension
plans
Reserves

Total
equity

2013

Balance as at 01/01/2013 187.2 321.3 -0.1 80.2 -5.2 519.1 1,102.4

Net movements on treasury
shares
- - - - - - -
Dividends and profit-sharing - - - - - - -
Total comprehensive income
for the year
- - - -9.4 2.8 35.2 28.6

Total variations - - - -9.4 2.8 35.2 28.6

Balance as at 31/12/2013 187.2 321.3 -0.1 70.8 -2.4 554.3 1.131.0

- 8 -
CASH FLOW STATEMENT

In EUR million Notes 31/12/2012
(1)
31/12/2013

Profit /(loss) before tax -303.3 47.7
Adjustments for:
Impairment of securities, amortisation and depreciation of
property and equipment, intangible assets and investment
properties
10, 12 237.4 36.0
Profit/loss on the disposal of investments 9 -5.4 0.2
Change in impairment for losses on loans and advances 12 1.7 0.0
Change in other provisions 10 1.1 2.0
Unrealised foreign currency gains and losses -0.6 7.6
Cash flows from operating activities, before tax and changes in
operating assets and liabilities
-69.2 93.4
Changes in operating assets (2) -3,487.1 835.1
Changes in operating liabilities (3) 657.5 -159.8
Income taxes - 0.6
NET CASH FROM/(USED IN) OPERATING ACTIVITIES -2,898.8 769.2

Purchase of subsidiaries or business units -3.7 -0.8
Proceeds from sale of subsidiaries or business units - 0.8
Purchase of intangible assets 25 - 0.0
Proceeds from sale of investment properties 9, 26 13.7 -
Purchase of property and equipment 26 -2.0 -0.4
Proceeds from sale of property and equipment 9, 26 - -
NET CASH FLOWS FROM /(USED IN) INVESTING ACTIVITIES 8.0 -0.4

Purchase/sale of treasury shares - -
Issue/repayment of loans 14 -0,3 -30.5
Issue/repayment of subordinated debts 14 -8,6 -9.8
Dividends paid and profit-sharing - -
NET CASH FLOWS FROM /(USED IN) FINANCING ACTIVITIES -8.8 -40.3

NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (4) -2,899.7 728.5

Net increase/decrease in cash and cash equivalents -2,899.7 728.5

ADDITIONAL INFORMATION
Interest paid during the year 86.0 63.9
Interest received during the year 134.6 122.2
Dividends received (including equity method) 5 25.6 19.4

COMPONENTS OF CASH AND CASH EQUIVALENTS 1,222.0 1,950.6
Cash and balances with central banks (including legal reserve with the
central bank)
409.4 610.3
Loans and advances to banks repayable on demand 1,881.1 2,515.5
Deposits from banks repayable on demand -1,068.5 -1,175.2

Of which: not available (5) 389.4 595.5

(1)
(2)
Including loans and advances to banks and customers, securities, derivatives and other assets.
(3)
Including deposits from banks and customers, bonds issued, derivatives and other liabilities.
(4)
Cash includes cash and deposits payable on demand; cash equivalents are short-term investments that are very liquid,
easily convertible into a known cash amount and subject to a negligible risk of a change in value.
(5)
Cash and cash equivalents not available mainly comprise of the legal reserve held with the Luxembourg Central Bank and
the margin accounts held with clearing houses (futures markets, etc.).


- 9 -
NOTES TO THE ANNUAL ACCOUNTS

Note 1 General

KBL European Private Bankers S.A. (hereafter KBL epb" or the Bank) is specialised in private banking. In
support of and complementary to this activity, KBL epb has also developed several niche activities specific to
its various markets.

The business purpose of KBL epb is to carry out all banking and credit activities. In addition, KBL epb is
allowed to carry out all commercial, industrial or other transactions, including real estate transactions, in
order to achieve its main business purpose, either directly or through participation, or in any other manner,
these provisions to be understood in the widest manner possible. KBL epb may carry out any activity which
contributes in any way to the achievement of its business purpose. The Banks main activities are described
in Note 3a.

KBL epb is a public limited liability company (socit anonyme) incorporated in Luxembourg and having its
registered office at:

43, boulevard Royal
L-2955 Luxembourg

Since July 2012, KBL epb group is 99.9% owned by Precision Capital, a Luxembourg-based company
governed by Luxembourg law representing the interests of a group of Qatari private investors.

The Bank prepares consolidated accounts in accordance with International Financial Reporting Standards as
adopted by the European Union, as well as a consolidated management report, which are available at its
head office.

The Banks consolidated accounts are consolidated in the Precision Capitals consolidated accounts.
Precision Capitals consolidated accounts and management report are available at its head office.

As of 31 December 2013, KBL epbs non-consolidated accounts include those of the Spanish branch opened
on 7 April 2010.

- 10 -
Note 2a Statement of compliance

The annual accounts presented in this report were approved by the Board of Directors of KBL epb on
27 February 2014.

KBL epbs annual accounts have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS"). Given its activity, KBL epb is not concerned de facto
by IFRS 4 on insurance contracts.

The annual accounts provide comparative information in respect of the previous financial year. Comparative
information as of 31 December 2012 has been modified following the application of IAS 19 Employee
Benefits (Revised 2011) but the Bank did not present an additional balance sheet at the beginning of the
earliest financial year as the impact is not material on the balance sheet.

In preparing the annual accounts under IFRS, the Board of Directors is required to make estimates and
assumptions that affect reported income, expenses, assets, liabilities and disclosure of contingent assets
and liabilities. Use of available information and application of judgement are inherent in the formation of
estimates. Actual results in the future could differ from such estimates and the differences may be material to
the annual accounts.

The accounting policies adopted are consistent with those of the previous financial year, except for the
following amendments to IFRS effective for the Bank as of 1 January 2013 (for the avoidance of doubt, only
the new standards, amendments to standards and IFRIC which may have an effect on the Banks annual
accounts are mentioned below):

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

The amendments modify the grouping of items presented in other comprehensive income. Items that
could be reclassified (or "recycled") to the income statement at a future point in time are now to be
presented separately from items that will never be reclassified. The layout of the statement of
comprehensive income has been adjusted accordingly.
The amendments affect presentation only and have no impact on the Bank's financial position or
performance.

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

According to the specific transitional provisions embedded in IFRS 13, the new standard is to be applied
on a prospective basis (with no requirement to restate / produce disclosures for the comparative period).
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13
does not change when an entity is required to use fair value, but rather provides guidance on how to
measure fair value under IFRS when a fair valuation is required or permitted.
IFRS 13 defines fair value as an exit price. IFRS 13 also requires additional disclosures.
Application of IFRS 13 has not impacted the fair value measurements of the Bank. Additional
disclosures, where required, are provided in the individual notes relating to the assets and liabilities
whose fair values were determined. The extended disclosure of the fair value hierarchy is provided in
Note 14.

- IAS 19 revised Employee benefits (revised standard issued in June 2011)

The revised standard has introduced numerous amendments to the previous version of IAS 19. These
range from fundamental changes such as removing of the corridor mechanism and the concept of
expected return on plan assets to simple clarifications and re-wording. The transitional provisions of
revised IAS 19 require a retrospective application.

- 11 -
Prior periods figures presented in this report have therefore been adjusted to comply with the
requirements of the revised standard. The below table shows the detailed impacts of IAS 19 revised on
prior periods figures.

The major adjustment concerns the actuarial gains and losses which were not recognized under the
previous version of IAS 19 (optional corridor approach chosen by the Bank) and that are to be
recognized through other comprehensive income under the revised standard.
Impacts that relate to periods before the 2012 exercise have been directly deducted from the reserves;
those relating to the 2012 exercise were recognized in the new dedicated remeasurement reserve.

Amounts are presented in EUR thousand and as adjustment (increase / decrease) of the related
headings in previous annual accounts.

(in EUR thousand)

Opening
01/01/2012
Closing
31/12/2012

LIABILITIES +15,129 +19,852
Other liabilities +15,129 +19,852

EQUITY AND COMPREHENSIVE INCOME -15,129 -19,852
Reserves -15,129 -15,129
Defined benefit remeasurement reserve (gross) - -5,248
Staff expenses (income statement) - +525

of which net impact on the profit or loss - +525

OPERATING SEGMENTS BY BUSINESS SEGMENT
Operating expenses (staff expenses) - +525
Private banking - +186
Global Investor Services - +113
ALM activities - +84
Other - +142

Impact of IAS 19 revised on the current exercise:
The impact of IAS 19 revised on the 2013 income statement - i.e. compared to the picture that would
have been obtained had the previous version of IAS 19 still been applied - is not significant.

- Annual Improvements to IFRS 2009-2011 Cycle (issued in May 2012)
Amendments to IAS 1 - Presentation of Financial Statements
Amendments to IAS 16 - Property, Plant and Equipment
Amendments to IAS 32 - Financial Instruments: Presentation
Amendments to IAS 34 - Interim Financial Reporting

The only amendment that had an impact on the Bank's annual accounts concerns the clarification
introduced in IAS 34. As a matter of fact, the related amendment aligns the disclosure requirements for
segment assets and liabilities in interim financial statements to those applicable in the annual accounts.
This in particular means that the disclosures of segment assets and liabilities are only required if such
measures are regularly provided to the chief operating decision maker.
Considering the information of segment assets and liabilities is no longer regularly provided to any
member of the Banks and/or the Group's Management, the related disclosures were removed from the
interim report for the first time as at 30 June 2013.
The approach adopted in that interim report has been maintained both in these annual accounts and in
the Groups consolidated accounts as at 31 December 2013.

- 12 -
- Disclosures Offsetting Financial Assets and Financial Liabilities (issued in December 2011)
Amendments to IFRS 7 Financial Instruments : Disclosures

The amendments require an entity to disclose information about rights to set-off and related
arrangements (e.g. collateral agreements).
The new disclosures provide users with information that is useful in evaluating the effect of netting
arrangements on the Banks financial position. They apply to all recognized financial instruments that
are subject to an enforceable master netting agreement, irrespective of whether they are set off in
accordance with IAS 32 Financial Instruments : Presentation.
Transitional rules indicate the amendments are to be applied on a retrospective basis. The new required
disclosures, including those which relate to the comparative period, are provided in Note 17.

KBL epb has also decided not to early adopt the standards, amendments to standards and interpretations of
the IFRIC which have been published but are not applicable for the year ending 31 December 2013. KBL
epb will adopt these standards on the date of their effective application and when they will be approved by
the European Union.

This basically concerns the following publications (only the standards, amendments to standards and IFRIC
which may have an effect on KBL epb financial position or performance are mentioned below):

- IAS 32 Offsetting Financial Assets and Financial Liabilities Amendments to IAS 32
These amendments clarify the meaning of currently has a legally enforceable right to set-off and the
criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These
amendments are not expected to impact the Banks financial position or performance and become
effective for annual periods beginning on or after 1 January 2014.
- IFRS 9 Financial Instruments Classification and Measurement (Not endorsed by the European Union
yet)
IFRS 9, as issued, reflects the first and the third phases of the IASBs work on the replacement of
IAS 39. Those phases relate to classification and measurement of financial assets and financial
liabilities (as defined in IAS 39) and to Hedge Accounting. The second phase, which deals with
impairment methodology, has not been published yet.
The IASB recently decided to tentatively remove the mandatory effective date for IFRS 9. That
mandatory effective date will be set when the revised classification and measurement proposals and the
expected credit loss proposals are finalised.
The adoption of the first phase of IFRS 9 is expected to have an effect on the classification and
measurement of the Banks financial assets, but not on the classification and measurement of financial
liabilities. The Bank will quantify the effect in conjunction with the other phases, when the final standard
including all phases is issued.

- IFRIC Interpretation 21 Levies (IFRIC 21)
IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as
identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum
threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum
threshold is reached. IFRIC 21 is effective for annual periods beginning on or after 1 January 2014. The
Bank does not expect that IFRIC 21 will have a material financial impact in future annual accounts.

- 13 -
- IAS 39 Novation of Derivatives and Continuation of Hedge Accounting Amendments to IAS 39
These amendments provide relief from discontinuing hedge accounting when novation of a derivative
designated as a hedging instrument meets certain criteria. These amendments are effective for annual
periods beginning on or after 1 January 2014. The Bank has not novated derivatives designated in
effective hedging relationships during the current financial year. However, these amendments will be
considered for future novations.
- IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses
the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12
Consolidation Special Purpose Entities.
IFRS 10 establishes a single control model that applies to all entities including special purpose entities.
The changes introduced by IFRS 10 will require management to exercise significant judgement to
determine which entities are controlled and therefore are required to be consolidated by a parent,
compared with the requirements that were in IAS 27. Based on the preliminary analyses performed,
IFRS 10 is not expected to have any impact on the currently held investments of the Bank.
The IASB determined the new standard should become effective for annual periods beginning on or after
1 January 2013; however, the European Union allowed preparers of financial statements to postpone the
initial application of the standard to 1 January 2014.

- 14 -
Note 2b Significant accounting policies

a. Foreign currency translation

KBL European Private Bankers S.A.s accounts
are presented in EUR, which is also its functional
currency.

KBL European Private Bankers S.A. maintains a
multi-currency accounting system under which
any transaction is registered in its original foreign
currency.

In preparing the annual accounts, assets and
liabilities in foreign currencies are translated into
EUR. Monetary items denominated in foreign
currencies are converted at the closing rate
prevailing at the reporting date; differences arising
from such conversion are recorded in the income
statement. Non-monetary items denominated in
foreign currencies that are measured in terms of
historical cost are translated at the historical
exchange rate prevailing at the date of the
transaction. Non-monetary items denominated in
foreign currencies measured at fair value are
translated using the spot exchange rate at the
date when the fair value is determined and
translation differences are reported together with
changes in fair value.

Income and expense items denominated in
foreign currencies are recognised in the income
statement using exchange rates that approximate
the rates at the dates of the transactions (e.g.
average monthly exchange rates).

b. Financial assets and liabilities

General principles of recognition and
derecognition of financial instruments

A financial instrument is recognised in the balance
sheet when and only when the Bank becomes a
party to the contractual provisions of the
instrument.

A financial asset is derecognised when and only
when the contractual rights to receive cash flows
from the asset have expired or KBL European
Private Bankers S.A. transfers the financial asset.

A financial liability is derecognised when and only
when the contractual liability is settled, cancelled
or expires.

The purchases and sales of financial assets are
recognised on the payment date, which is the date
on which the asset is delivered. Any variation in
the fair value of the asset to be received during
the period from the transaction date to the
payment date is recognised in the same way as
for the asset acquired. In other words, the change
in value is not recognised for assets measured at
cost or at amortised cost; it is recognised in the
income statement for assets classified as financial
assets at fair value through profit or loss and in
equity for those classified as available-for-sale.

In the case of sales, the assets at fair value are
measured at their sale price during the period
between the transaction date and the payment
date.

Pursuant to the provisions of IAS 39 on
derecognition, the Bank keeps securities lent in its
securities portfolio but securities borrowed are not
recorded on the balance sheet. Similarly, the
securities transferred through repurchase
agreements are kept in the securities portfolio but
those under reverse repurchase agreements are
not recorded on the balance sheet.

Definition of IAS 39 categories of financial assets
and financial liabilities

All financial assets and liabilities including
derivatives must be measured on the balance
sheet according to their IAS 39 category. Each
category is subject to specific measurement rules.

The IAS 39 categories are:
- Held-to-maturity assets are all non-derivative
financial assets with fixed maturities and
fixed or determinable payments that KBL
European Private Bankers S.A. intends and
is able to hold to maturity. The Banks
management has decided not to class
financial instruments in this category.

- Loans and receivables are all non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market.

- Financial assets at fair value through profit or
loss include held-for-trading assets and any
other financial assets initially designated at
fair value through profit or loss. Held-for-
trading assets are those acquired principally
for the purpose of selling them in the near
term and those which are part of a portfolio
with indications of recent short-term profit-

- 15 -
taking. All derivative assets are considered
as being held for trading unless designated
as effective hedging instruments. Other
assets initially designated at fair value
through profit or loss (frequently referred to
as the fair value option) are valued in the
same way as held-for-trading assets, even if
there is no intention of short-term profit
taking.
The fair value option may be used when a
contract contains one or more embedded
derivatives under certain conditions or when
its application produces more pertinent
information:
o either because a group of financial
assets/liabilities is managed on a fair
value basis and its performance
measured on a fair value basis, following
a documented investment or risk
management strategy,
o or because the application of this option
reduces a measurement or recognition
inconsistency that would otherwise arise
from measuring assets or liabilities or
recognising the gains and losses on
them on different bases.
This option is mainly used by the Bank firstly
for contracts with one or more embedded
derivatives and secondly as an alternative to
hedge accounting (aligning the valuation of
the hedged instrument with that of the
hedging instrument).

- Available-for-sale financial assets are all
non-derivative financial assets which do not
fall into one of the above categories.

- Financial liabilities at fair value through
profit or loss encompass held-for-trading
liabilities and financial liabilities initially
loss. Held-for-trading liabilities are liabilities
held mainly with the intention of
repurchasing them in the near term. All
derivative liabilities are considered as being
held for trading unless designated as
effective hedging instruments.
Financial liabilities initially designated at fair
value through profit or loss are those
liabilities accounted for under the fair value
option. No liability is currently recognized
under this category in the KBL epbs annual
accounts.

- Other financial liabilities are all other
financial instruments not at fair value
through profit or loss.

- Hedging derivatives are the derivatives
designated in hedging relationships for
which hedge accounting is applied.

Evaluation of financial instruments

Financial assets and liabilities are initially
recognised at fair value and are subsequently
measured in accordance with the principles
governing the IAS 39 category in which they are
placed.

General principles
Loans and receivables with a fixed maturity are
measured at amortised cost using the effective
interest rate (hereinafter EIR) method, that is the
rate that precisely discounts the future cash
inflows or outflows to obtain the carrying amount.
Instruments without a fixed maturity are measured
at cost.

The available-for-sale financial assets are
measured at fair value with changes in fair value
recognised in equity (Revaluation reserve
(available-for-sale financial instruments)) until the
sale or impairment of these instruments. In the
latter cases, the cumulative result of the
revaluation is transferred from equity to the
income statement of the period.
Participating interests in subsidiaries, joint
ventures and associates are measured at cost,
less possible impairment. Other participating
interests are valued according to IAS 39 at fair
value or at cost less possible impairment if the fair
value cannot be measured reliably.

The financial assets and liabilities at fair value
through profit or loss are measured at fair value
with changes in fair value recognised in the
income statement.

Other financial liabilities are measured at
amortised cost. The difference between the
amount made available and the nominal amount
is recognised in the income statement (net
interest income) prorata temporis, on an actuarial
basis using the EIR method.

Determination of fair value
IFRS 13 defines fair value as the price that would
be received to sell an asset or paid to transfer a
liability in an orderly transaction between market
participants at the measurement date (i.e. an exit
price).

- 16 -
When available, published price quotations
(unadjusted) on active markets are used to
determine the fair value of financial assets or
liabilities.

If such quotations are not available fair value can
be determined or derived :
from quoted prices for similar assets or
liabilities in active markets and/or from quoted
prices for identical assets or liabilities in
markets that are not active.
by using a valuation technique.

When valuation techniques are used to estimate
fair value, those techniques incorporate all factors
that market participants would consider in setting
a price and are consistent with accepted financial
methodologies used for pricing financial
instruments.
Such techniques encompass discounted cash
flow analysis (e.g. for the valuation of interest rate
swaps or forward foreign exchange transactions)
and option pricing models.
Inputs used in those models (yield curves,
exchange rates, volatilities) are often readily
observable on the markets. When measuring fair
value, the Bank maximises the use of relevant
observable inputs and minimises the use of
unobservable inputs.

Impairment
Available-for-sale financial assets and loans and
receivables are also subject to impairment tests
and impairment losses are recognised if evidence
of impairment exists on the balance sheet date.

- Available-for-sale financial assets
For listed shares, an impairment is recognised if
the market value is less than 70% of the purchase
value or if the market price of the share is less
than the acquisition price over one year. For debt
and other equity instruments, the impairment
amount is measured from the recoverable value.

Impairment losses are always recognised in the
income statement. Impairment reversals are
recognised in the income statement for debt
instruments and in other comprehensive income
(available-for-sale revaluation reserve) for listed
shares and other equity instruments.

- Loans and receivables
The amount of the impairment loss is the excess
of the carrying amount over the recoverable
amount of the asset. The Bank firstly evaluates if
there is an impairment loss for each individually
significant loan or receivable or for each group of
loans or receivables not individually significant. If
the Bank considers that there is no evidence of an
impairment loss for a given loan or receivable,
individually significant or not, it includes it in a
group of financial assets presenting the same
credit risk characteristics and examines the
possibility of an impairment loss on a collective
basis. The assets evaluated individually and for
which an impairment loss is recognised are not
examined collectively.

Embedded derivatives
Derivatives embedded in financial instruments
that are not measured at fair value through profit
or loss are separated from the financial instrument
and measured at fair value through profit or loss if
the economic characteristics and risks of the
embedded derivative are not closely related to the
economic characteristics and risks of the host
contract.
In practice, financial assets with embedded
derivatives are however primarily classified as
financial instruments at fair value through profit or
loss, making it unnecessary to separate the
embedded derivative from the hybrid (combined)
instrument, since the entire financial instrument is
measured at fair value, with changes in fair value
being recognised in the income statement.

Hedge accounting
The Bank applies micro-hedge accounting when
all the following conditions are met: the hedging
relationship must be designated at inception and
formally documented, the hedge is expected to be
highly effective, and it must be possible to reliably
measure the effectiveness of the hedge, forecast
transactions (for cash flow hedges) must be highly
probable and the hedge is measured on an
ongoing basis and is determined actually to have
been highly effective throughout the periods
covered by the annual accounts for which the
hedge was designated.

Fair value hedge accounting is used by the Bank
to cover the exposure of a financial instrument
(participating interests in foreign currency,
available-for-sale financial assets and certain
financial liabilities) to changes in fair value
attributable to changes in interest rates or
exchange rates. In this case those derivatives
designated as hedging instruments (mainly
interest rate swaps and cross-currency interest
rate swaps) are measured at fair value with
changes in fair value recognised in the income
statement. Furthermore, the gain or loss on the
hedged item attributable to the hedged risk
adjusts the carrying amount of the hedged
element and is also recognised in the income
statement. If the hedged item is an available-for-
sale financial asset already measured at fair value

- 17 -
under other IFRS requirements, applying hedge
accounting leads to splitting the change in the
instrument fair value between the portion
addressed by the hedge relationship, recognised
in the income statement, and the portion that
relates to unhedged risks, recognised in the
revaluation reserve in equity.

Hedge accounting is discontinued once the hedge
accounting requirements are no longer met or if
the hedging instrument expires or is sold. In this
case, and for debt instruments, the cumulative
change to the carrying amount of the hedged
instrument (relating to hedged risks) is transferred
to the income statement prorata temporis until the
instrument expires.

As regards to cash flow hedge (not currently used
by the Bank) hedging instruments are measured
at fair value. The portion of the gain or loss that is
determined to be an effective hedge is recognised
in other comprehensive income. The ineffective
portion is recognised in the income statement.
Hedge accounting shall be discontinued if the
hedge accounting criteria are no longer met. In
this case, the hedging instruments shall be treated
as held-for-trading instruments and measured
accordingly.

Foreign currency financing of a net investment in
a foreign entity is accounted for as a hedge of that
net investment. Translation differences (taking
account of deferred taxes) on the financing are
recorded in equity, along with translation
differences on the net investment.
However, the Bank currently does not hold any
net investment in a foreign entity to which this
approach is applied.

c. Intangible assets

Intangible assets acquired are initially measured
at cost and subsequently carried at cost less any
accumulated amortisation and any accumulated
impairment losses.

The purchase of a portfolio of customers generally
includes the transfer of the client assets under
management to the Bank and the recruitment of
all or part of the account officers in charge of
client relationships.
This type of intangible assets is not amortised, but
is tested for impairment at least annually. The
criteria and methodologies used for impairment
testing are those initially used to measure the
purchase price (percentage of assets under
management, gross margin multiple, etc.).
Whenever available, the result of the impairment
test is compared with an estimate based on the
parameters deduced from similar transactions.

When the recognition criteria are met and when
the amounts are not immaterial, software is
recognised as an intangible asset. Internal and
external expenses incurred during the
development phase of internally generated
strategic software are recognised in assets and
amortised using the straight-line method over the
estimated useful life (average annual rate: 25%).
However, the useful life of two specific IT projects
(Corporate Action Management - CAMA - and
Globus T24) has been estimated at 7 years
(average annual rate: 14.3%).

Research expenses for these projects and all
expenses that relate to non-strategic projects are
recognised directly in the income statement.

d. Property and equipment

Property and equipment are initially recognised at
cost.

Property and equipment the use of which is
limited in time are depreciated using the straight-
line method over their estimated useful lives.

Overview of average depreciation rates

Type of investment Depreciation rate

Land Non depreciable
Buildings 2%-3%
Technical installations 5%-10%
Furniture 25%
IT hardware 25%
Vehicles 25%
Works of art Non depreciable

An impairment loss must be recognised if the
carrying value exceeds the recoverable value
(which is the greater of the assets value in use
and its fair value less costs of disposal).

When property or equipment is sold, the realised
gains or losses are recognised in the income
statement. If property or equipment is destroyed,
the carrying amount to be written off is
immediately recognised in the income statement.

e. Investment properties

Investment property is property held to earn
rentals or for capital appreciation or both.

- 18 -
Investment property is recognised only when it is
probable that future economic benefits associated
with the investment property will flow to KBL epb
and if its cost can be measured reliably.

Investment properties are measured at cost less
any accumulated depreciation and impairment.
They are depreciated using the straight-line
method over their estimated useful life (average
rate: 2% - 3%).

f. Pensions

In addition to the general and legally prescribed
retirement plans, the Bank maintains a certain
number of complementary systems in the form of
both defined contribution and defined benefit
pension plans. Defined benefit plans are those
under which the Bank has a legal or constructive
obligation to pay further contributions if the
pension fund does not hold sufficient assets to
pay all employee benefits for the current and past
periods. Defined contribution plans are those
under which the Bank has no further legal or
constructive liability beyond the amount it pays
into the fund.

In the case of defined benefit pension plans, the
pension cost in the income statement and liability
on the balance sheet are calculated in accordance
with IAS 19 (as revised in 2011), based on the
Projected Unit Credit Method, which sees each
period of service as giving rise to an additional
unit of benefit entitlement. The calculations are
made each year by independent actuaries.

The components of the defined benefit cost are
recognized according to the following principles:

(i) Service cost and net interest on the net
defined benefit liability / asset are recognized
in the income statement;

(ii) Remeasurements of the net defined benefit
liability / asset are recognized in other
comprehensive income. Remeasurements
include:
actuarial gains and losses stemming
from the remeasurement of the defined
benefit obligation;
the return of plan assets after deducting
the portion included in net interest as
determined in (i); and
any change in the effect of the asset
ceiling also excluding any amount
included in net interest as determined in
(i).
Remeasurements recognized in other
comprehensive income are not reclassified to
the income statement in subsequent periods.

In the case of defined contribution plans, the
contributions payable are expensed when the
employees render the corresponding service
which generally coincides with the year in which
the contributions are actually paid.

g. Tax assets and tax liabilities

These balance sheet headings include both
current and deferred tax assets and liabilities.

Current tax is the amount expected to be paid or
recovered, using the tax rate which has been
enacted or substantively enacted at the balance
sheet date.

Deferred tax liabilities are recognised for all
taxable temporary differences between the
carrying amount of an asset or liability and its tax
base. They are valued using the tax rates in effect
for the periods when the assets are realised or
the liabilities settled, on the basis of the tax rates
enacted or substantively enacted at the balance
sheet date.

Deferred tax assets are recognised for the
carryforward of unused tax losses and unused tax
credits and for all deductible temporary
differences between the carrying value of the
assets and liabilities and their tax base, to the
extent that it is probable that future taxable profit
will be available against which these losses, tax
credits and deductible temporary differences can
be utilised.

Where required by IAS 12, tax assets and
liabilities are offset.

h. Provisions

A provision is recognised when and only when the
following three conditions are met:
- KBL epb has a present obligation (at the
reporting date) as a result of a past event,
- it is more likely than not that an outflow of
resources embodying economic benefits will
be required to settle this obligation, and
- the amount of the obligation can be
estimated reliably.

- 19 -
i. Financial guarantees

Financial guarantees contracts are initially
recognised at fair value and subsequently
measured at the higher of (i) the amount initially
recognized less, when appropriate, cumulative
amortisation and (ii) the Banks best estimate of
the expenditure required to settle the present
obligation at the reporting date.

j. Equity

Equity is the residual interest in the assets of KBL
epb after all its liabilities have been deducted.

Equity instruments have been differentiated from
financial instruments in accordance with the
provisions of IAS 32.

The acquisition cost of KBL epb treasury shares
that have been or are being purchased is
deducted from equity. Gains and losses realised
on sale or cancellation of treasury shares are
recognised directly in equity.

The revaluation reserve for available-for-sale
financial assets is included in equity until any
impairment or sale. In such a case, the gains and
losses are transferred to the income statement of
the period.

The defined benefit remeasurement reserve
relating to the recognition of certain pension costs
is also included in equity. This reserve will
however never be subsequently recycled into the
income statement.

As regards to cash flow hedges and hedges of a
net investment in a foreign operation, the portion
of the gain or loss on the hedging instrument that
is determined to be an effective hedge is
recognised directly in equity.

k. Revenue

KBL epb recognises revenue relating to ordinary
activities if and only if the following conditions are
met:
- it is probable that the economic benefits
associated with the transaction will flow to
KBL epb, and
- the amount of revenue can be measured
reliably.
The specific conditions below must also be met
before recognising the related revenue:

Net interest income

Interest is recognised prorata temporis using the
effective interest rate, which is the rate that
exactly discounts the estimated future cash
payments or receipts through the expected life of
the financial instrument or, when appropriate, a
shorter period, to the net carrying amount of the
financial asset or liability.

All interests paid and received on financial
instruments are recorded under the heading Net
interest income except interests on held-for-
trading derivative instruments, which are
presented under the heading Net gains/losses on
financial instruments measured at fair value
through profit or loss in the income statement.

Dividends

Dividends are recognised when the right of the
shareholder to receive the payment is established.
They are presented under the heading Dividend
income in the income statement irrespective of
the IFRS category of the related assets.

Rendering of services

Revenue from services is recognised by reference
to the stage of completion at the balance sheet
date. According to this method, the revenue is
recognised in the periods when the services are
provided.

l. Reclassifications of prior year figures

Where necessary, certain prior year figures in the
Notes to the annual accounts have been
reclassified to conform with changes to the current
years presentation for comparative purposes.

- 20 -
Note 3a Operating segments by business segment

KBL epb distinguishes between the following primary segments:

- The PRIVATE BANKING segment includes the advisory and wealth management activities
provided to KBL epb private clients.

- The GLOBAL INVESTOR SERVICES segment includes services provided to institutional clients.
This segment includes custodian bank and fund domiciliation and administration activities,
paying agent activities, central securities depository Clearstream / Euroclear activities, as well
as intermediation and portfolio management services for KBL epb institutional clients.

- The ALM ACTIVITIES' segment includes "Global Financial Markets & Treasury" activities, which
represent the extension of intermediation activities provided to KBL epb clients and operates
cash management within the Group by means of treasury activities, securities lending and
repos / reverse repos, as well as Credit & Portfolio ALM, which cover credit exposure
(including direct loans to non-private clients of KBL epb) and securities held on its own behalf
by KBL epb.

- The OTHER segment includes support activity provided by KBL epb to the network of
subsidiaries, acting in its capacity as parent company, and all other elements not directly
linked to the previous three segments, including reallocation of excess equity, net of the cost
of financing of the holdings, and extraordinary elements not directly linked to other business
segments.

The various items of the income statement include inter-segment transfers, calculated on an arms
length or cost recovery basis.

Income statement

In EUR million
PRIVATE
BANKING
GLOBAL
INVESTOR
SERVICES
ALM
ACTIVITIES
OTHER KBL epb
(1) (1) (1) (1) (1)

2012 2013 2012 2013 2012 2013 2012 2013 2012 2013

Net interest income 11.4 14.3 11.7 10.6 22.3 28.0 11.3 0.4 56.8 53.3
Dividend income - - - 0.1 1.1 3.3 24.5 15.9 25.6 19.4
Net gains/losses on financial instruments
measured at fair value through profit or
loss 1.3 1.6 5.2 6.4 34.2 16.8 -0.2 7.9 40.4 32.7
Net realised gains/losses on financial
assets and liabilities not measured at fair
value through profit or loss - - - - 3.3 30.2 -75.0 - -71.7 30.2
Net fee and commission income 46.1 46.9 29.7 29.8 0.6 2.7 8.3 8.2 84.6 87.5
Other net income -0.7 0.0 - - 2.0 4.0 6.2 3.7 7.5 7.7
GROSS INCOME 58.1 62.8 46.5 47.0 63.6 84.9 -25.0 36.1 143.3 230.8
Operating expenses -50.4 -47.2 -29.5 -25.9 -25.6 -27.4 -144.0 -54.5 -249.5 -154.9
Impairment - 0.0 - - -11.7 -1.7 -185.4 -26.4 -197.1 -28.2
PROFIT/LOSS BEFORE TAX 7.7 15.6 17.1 21.2 26.3 55.8 -354.5 -44.8 -303.3 47.7
Income tax (expense) / income -2.9 -6.6 -3.9 -7.3 -10.5 -16.1 15.3 17.5 -1.9 -12.5
PROFIT/LOSS AFTER TAX 4.8 8.9 13.2 13.9 15.8 39.7 -339.1 -27.3 -305.2 35.2

(1)

- 21 -
Management monitors the operating results of its operating segments separately for the purpose of
making decisions about resource allocation and performance assessment. Segment performance is
evaluated based on operating profit or loss and is measured consistently with operating profit or loss
in the annual accounts.

Transfer prices between operating segments are on an arms length basis in a manner similar to
transactions with third parties.

Note 3b Operating segments by geographic sector

The Bank carries out most of its activities in Western Europe.

Note 4 Net interest income

In EUR thousand 31/12/2012 31/12/2013

Breakdown by portfolio

Interest income 137,462 115,792
Other 31 24
Sub-total of interest income from financial assets not measured at fair value through
profit or loss
108,298 91,233

Financial assets held-for-trading 4,646 3,650
Net interest on hedging derivatives 24,323 20,808
Other financial assets at fair value through profit or loss 194 101

Interest expense -80,666 -62,514
Financial liabilities at amortised cost -42,716 -27,760
Other -372 -401
Sub-total of interest expense on financial liabilities not measured at fair value through
profit or loss
-43,088 -28,161

Net interest on hedging derivatives -37,578 -34,353

Net interest income 56,796 53,278

Note 5 Dividend income

In EUR thousand 31/12/2012 31/12/2013

Participating interests 24,484 16,063
Other equity instruments available-for-sale 1,133 3,291

Dividend income 25,617 19,354

- 22 -
Note 6 Net gains/losses on financial instruments measured at fair value through profit or loss

In EUR thousand 31/12/2012 31/12/2013

Held-for-trading (including interest and valuation of trading derivatives) 20,603 10,223
Other financial instruments at fair value 940 1,588
Exchange differences 19,444 20,910
Fair value adjustments in hedge accounting -569 21
Fair value micro-hedging -569 21

Net gains/losses on financial instruments measured at fair value through profit or
loss
40,418 32,742

Note 7 Net realised gains/losses on financial assets and liabilities not measured at fair value

In EUR thousand 31/12/2012 31/12/2013

Available-for-sale financial assets -74,150 28,725
Debt instruments -73,789 852
Equity instruments -360 27,874
Financial liabilities measured at amortised cost - -

Net realised gains/losses on financial assets and liabilities not measured at fair
-71,691 30,221

Note 8 Net fee and commission income

In EUR thousand 31/12/2012 31/12/2013

Fee and commission income 130,408 143,898
Asset management 94,484 104,857
Securities transactions 26,152 28,868
Other 9,772 10,173

Fee and commission expense -45,798 -56,371
Asset management -41,470 -51,674
Securities transactions -2,464 -2,884
Other -1,865 -1,813

Net fee and commission income 84,610 87,527

Note 9 Other net income

In EUR thousand 31/12/2012 31/12/2013
7,519 7,681
Of which :
Net proceeds from precious metals transactions 2,215 4,251
Final wealth tax settlement from 2008 to 2011 - 3,142
Net proceeds from the sale of "Boulevard Royal" building 5,708 -

- 23 -
Note 10 Operating expenses

Operating expenses include staff costs, amortisation and depreciation of investment properties,
amortisation and depreciation of property and equipment and intangible assets, changes in provisions
and general administrative expenses.

General administrative expenses include in particular repair and maintenance expenses, advertising
expenses, rent, professional duties, IT costs and various (non-income) taxes.

In EUR thousand 31/12/2012
(1)
31/12/2013

Staff expenses -145,468 -102,049
General administrative expenses -61,022 -43,116
Depreciation and amortisation of property and equipment, intangible assets and
investment properties -41,885
(2)
-7,745
Net provision allowances

-1,084 -1,989

Operating expenses -249,460 -154,898

(1)
(2)
of which accelerated depreciation on several IT projects (please refer to Note 25).

Note 11 Staff

31/12/2012 31/12/2013

Total average number of persons employed (in full-time equivalents - FTE) 873 777
Breakdown by business segment
(3)

Private Banking 309 270
Global Investor Services 188 162
ALM activities 140 130
Other 237 215

(3)
The breakdown of commercial, administrative and support staff, which does not include the pre-retirement
FTE, has been made on the same basis than for drawing up Note 3a on operating segments by business
segment.

- 24 -
Note 12 Impairment

In EUR thousand 31/12/2012 31/12/2013

Loans and receivables -1,659 48
Available-for-sale financial assets -195,490 -28,211

Impairment -197,149 -28,163

Impairment on loans and receivables

More detailed information on impairment is provided in Note 37.

In EUR thousand 31/12/2012 31/12/2013

Total

-1,659 48

Breakdown by type
(Impairment)/reversal of impairment
Specific impairment on loans and receivables -1,809 -568
Portfolio-based impairment 150 616

See also Note 21 Impairment on loans and receivables

Impairment on available-for-sale financial assets

In EUR thousand 31/12/2012 31/12/2013

Total

-195,490 -28,211

Debt instruments -12,054 -1,818
Equity instruments -183,436 -26,393
On participating interests -180,584 -26,393
KBL (Switzerland) Ltd Switzerland -49,996 -26,393
Theodoor Gilissen Bankiers N.V. The Netherlands -106,052 -
KBL Beteiligungs A.G. Germany -14,476 -
KBL Richelieu Banque Prive France -8,865 -
Puilaetco Dewaay Private Bankers S.A. Belgium -1,195 -

See also Note 20 Impairment on available-for-sale financial assets

- 25 -
The values of participating interests and purchased portfolios of customers are subject to an
impairment test which is performed at least annually in the course of the fourth quarter.

Recoverable values are primarily measured from a Dividend Discount Model (DDM) valuation
method which, in practice, represents an estimation of fair value less costs of disposal (the related fair
value estimates correspond to level 3 fair values under the fair value hierarchy described in IFRS
13).
Other cross-check methods such as the Net asset value + multiple of Assets under management
might be used to corroborate the results of the DDM method.

DDM methodology

Future dividends input in the DDM model are estimated according to the following methodology:
For the period covering the next three years, dividends are based on the three-year Business
Plan presented by the subsidiaries to the Group Executive Committee;
For the period beyond the third year, a terminal value is calculated based on a long term (LT)
growth rate of dividends.

In 2012, the DDM method included a seven-year-transitory period after the initial three-year-period
(when cash-flows are directly extracted from business plans) and before the date when the terminal
value was calculated. This period was primarily used to recognize a transition towards the Group
cost/income target ratio.
In 2013, considering the mature profile of the participations tested for impairments and, more
specifically, the high degree of integration of their related intangible assets, this transitory period has
been removed.

Key assumptions

Key assumptions used in the DDM are the following:
the Discount rate;
the LT growth rate.

The Discount rate used in the DDM calculations is determined from the Group current cost of capital
as estimated from the Capital Asset Pricing Model (CAPM).
The CAPM estimates the cost of capital as the sum of the current risk free rate and an equity
premium, the latter being adjusted to reflect current market expectations of the return required for the
specific asset ( factor).

Inputs used in the model are adjusted to reflect current market situation and relies as much as
possible on relevant observable data:
risk free rates are measured from current long dated (10 years) government bond yields in the
country where the participation operates;
the factor is directly derived from current observable market data for a selection of listed
peers;
consistently with generally accepted market methodologies used in business valuations, the
standard Equity Risk premium is estimated from historical data on a country-by-country basis
(source Morningstar - Ibbotson).

Discount rates used in the 2013 impairment tests range from 7.6% to 9.5% (7.8% for the impaired
participating interest in KBL (Switzerland) Ltd).

LT growth rates used in the DDM have been aligned on Real GDP Growth rates (i.e. excluding the
inflation component) as published in the European Commission Eurostat database (2015 forecasts by
country).

LT growth rates used in the 2013 impairment tests range from 1.2% to 2.4% (1.9% for the impaired
participating interest in KBL (Switzerland) Ltd).

- 26 -
Note 13 Income tax (expenses) / income

In EUR thousand 31/12/2012 31/12/2013

Total -1,907 -12,511

Breakdown by type -1,907 -12,511

Current tax - 0
Deferred tax -1,907 -12,511
of which: losses carried forward - -9,750

Breakdown by major components: -1,907 -12,511

Result before tax excluding branches -298,550 51,958
Luxembourg income tax rate 29.22% 29.22%

Income tax calculated at the Luxembourg income tax rate 87,236 -15,182

Plus/minus tax effects attributable to:
Tax-free income 6,627 4,688
Other non-deductible expenses -1,058 -1,315
Adjustments related to prior years - 946
Adjustments opening deferred tax due to change in tax rate 816 -
Unused tax losses and unused tax credits -94,224 -
Other -1,305 -1,648
Income tax adjustments -1,907 -12,511

Details of tax assets are given in Note 24.

In 2002, under Article 164 bis of the Luxembourg Income Tax Law (LIR), the Bank obtained approval
for the fiscal consolidation of the following subsidiaries : Kredietrust Luxembourg S.A., Financire et
Immobilire S.A., Centre Europe S.A. and KBL Immo S.A..

The deferred tax assets not recognised in the balance sheet as of 31 December 2013 amount to EUR
118.1 million (31 December 2012: EUR 117.2 million).

- 27 -
Note 14 Classification of financial instruments: breakdown by portfolio and by product

Financial instruments are classified into several categories (portfolios). Details of these various
categories and the valuation rules linked to them are given in Note 2b, point b dealing with
financial assets and liabilities (IAS 39).
The balance sheet analyses below have been conducted at the clean price. Thus the accrued
interest is presented separately, except for trading derivatives, which are presented at the dirty
price.

CARRYING AMOUNT
In EUR million

31/12/2012

ASSETS
Held-for-
trading
(HFT) assets
Financial
instruments at
fair value
(FIFV) through
profit or loss
Available-for-
sale
(AFS) financial
assets
Loans and
receivables
(L&R)
Hedging
derivatives
Total

Loans and advances to credit
institutions - - - 2,109 - 2,109
Loans and advances to
others than credit institutions

Consumer credits
Mortgage loans
Term loans
Current accounts
Other

-

-
-
-
-
-
15

-
-
-
-
15
-

-
-
-
-
-
1,200

5
90
754
134
217
-

-
-
-
-
-
1,215

5
90
754
134
232

Equity instruments 1 - 912 - - 912

Debt instruments issued by

- government bodies
- credit institutions
- corporates
227

16
80
131
0

0
-
-
2,771

1,266
493
1,012
-

-
-
-
-

-
-
-
2,998

1,282
573
1,143


Total 449 15 3,730 3,313 45 7,552

- 28 -

CARRYING AMOUNT
In EUR million

31/12/2013

ASSETS
Held-for-
trading
(HFT) assets
Financial
instruments at
fair value
(FIFV) through
profit or loss
Available-for-
sale
(AFS) financial
assets
Loans and
receivables
(L&R)
Hedging
derivatives
Total

Loans and advances to credit
institutions - - - 2,347 - 2,347
Loans and advances to
others than credit institutions

Consumer credits
Mortgage loans
Term loans
Current accounts
Other

-

-
-
-
-
-
-

-
-
-
-
-
-

-
-
-
-
-
1,476

4
114
989
147
222
-

-
-
-
-
-
1,476

4
114
989
147
222

Equity instruments 1 - 978 - - 979

Debt instruments issued by

- government bodies
- credit institutions
- corporates
131

3
58
70
0

0
-
-
2,400

1,158
425
817
-

-
-
-
-

-
-
-
2,531

1,162
482
887


Total 287 0 3,423 3,825 34 7,569

- 29 -
CARRYING AMOUNT
In EUR million

31/12/2012

LIABILITIES
Held-for-trading
(HFT) liabilities
Hedging derivatives
at amortised cost
Total

Deposits from credit institutions - - 2,257 2,257

Deposits from others than credit
institutions
Time deposits
Other deposits

Debt certificates
Debt certificates

-
-
-
-

-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-

3,864
2,579
1,266
18

377
0
2
118
3
254

3,864
2,579
1,266
18

377
0
2
118
3
254

Financial derivatives 241 67 - 308

Short sales
Equity instruments
Debt instruments

15
-
15

-
-
-

-
-
-

15
-
15

Accrued interest 0 16 14 31
Total 256 83 6,511 6,850
Of which repos - - 1,118 1,118

CARRYING AMOUNT
In EUR million

31/12/2013

LIABILITIES
Held-for-trading
(HFT) liabilities
Hedging derivatives
at amortised cost
Total

Deposits from credit institutions - - 2,382 2,382

Deposits from others than credit
institutions
Time deposits
Other deposits

Debt certificates
Debt certificates

-
-
-
-

-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-

4,065
2,599
1,455
11

326
-
1
90
1
233

4,065
2,599
1,455
11

326
-
1
90
1
233

Financial derivatives 205 62 - 267

Short sales
Equity instruments
Debt instruments

5
0
5

-
-
-

-
-
-

5
0
5

Total 210 79 6,786 7,074
Of which repos - - 324 324

- 30 -
FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarises the carrying amounts and fair values of the financial assets and
liabilities not measured at fair value (excluding accrued interest).

In EUR million

Carrying amount Fair value
31/12/2012 31/12/2013 31/12/2012 31/12/2013
ASSETS

Loans and advances to credit institutions 2,109 2,347 2,109 2,347

Loans and advances to others than credit institutions
Consumer credits
Mortgage loans
Term loans
Current accounts
Other
1,200
5
90
754
134
217
1,476
4
114
989
147
222
1,200
5
90
754
134
217
1,476
4
114
989
147
222

LIABILITIES

Deposits from credit institutions 2,257 2,382 2,257 2,382

Deposits from others than credit institutions
Time deposits
Other deposits

Debt certificates
Debt certificates
3,864
2,579
1,266
18

377
0
2
118
3
254
4,065
2,599
1,455
11

326
-
1
90
1
233
3,863
2,579
1,265
18

367
0
2
118
3
244
4,065
2,599
1,454
11

316
-
1
90
1
223

- 31 -
FAIR VALUE HIERARCHY

The Bank uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:

Level 1: quoted (unadjusted) price in active market for identical assets or liabilities;
Level 2: other 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 that have a significant effect on the recorded fair value that
are not based on observable market data.

31/12/2012

In EUR million

Level 1 Level 2 Level 3
Accrued
interest
Total
ASSETS
Financial assets at fair value through profit or loss
Equity instruments held-for-trading 0 0 - - 1
Debt instruments held-for-trading 118 110 - 2 230
Derivatives held-for-trading - 218 - - 218
Instruments designated at fair value through profit or loss 0 15 - 0 15
2,818 667 - 61 3,546
LIABILITIES
Financial liabilities at fair value through profit or loss
Equity instruments held-for-trading - - - - -
Debt instruments held-for-trading 14 1 - 0 15
Derivatives held-for-trading - 241 - - 241
14 308 - 17 339

- 32 -
Level 3 financial instruments measured at fair value

In EUR million
Available-for-sale
financial assets
Total

Balance as at 01/01/2012 - - -
- recognised in the other comprehensive
income - - -
Purchases - - -
Sales -1 - -1
Balance as at 31/12/2012 - - -
Total profit / loss for the year recognised in the
income statement and relating to assets held as
at 31/12/2012 1 - 1
31/12/2013

In EUR million

Level 1 Level 2 Level 3
Accrued
interest
Total
ASSETS
Derivatives - 153 - - 153

Financial assets at fair value through profit or loss - 0 - - 0

Avalaible-for-sale financial assets 2,401 299 - 45 2,745

Loans & receivables - 3,823 - 2 3,825
Loans and advances to credit institutions - 2,347 - 1 2,348
Loans and advances to others than credit institutions - 1,476 - 1 1,477


LIABILITIES

Equity instruments - 0 - - 0
Derivatives - 205 - - 205


Financial liabilities at amortized cost 212 6,551 - 13 6,776
Deposit from credit institutions - 2,382 - 0 2,383
Deposit from others than credit institutions - 4,065 - 0 4,065
Debt certificates 212 104 - 12 328

- 33 -
In EUR million
Available-for-sale
financial assets
Total

Balance as at 01/01/2013 - - -
- recognised in the other comprehensive
income - - -
Purchases - - -
Sales -1 - -1
Balance as at 31/12/2013 - - -
Total profit / loss for the year recognised in the
income statement and relating to assets held as
at 31/12/2013 1 - 1

Transfers between the level 1 and level 2 categories

31/12/2013

In EUR million

ASSETS From Level 1 to
Level 2
From Level 2 to
Level 1


Financial assets at fair value through profit or loss 0 -
Debt instruments 0 -

Equity instruments (excluding instruments at cost) - -

LIABILITIES


The transfers disclosed in the above table are deemed to have occured at the end of the reporting
period. Transfers are thus measured at the closing fair values of the related items.

The transfers mainly reflect a change in the Bank assessment of the current liquidity of the underlying
instruments compared to the previous analysis performed as at 31 December 2012.

Transfers between the level 1 and level 2 categories which occurred in 2012 were not significant.

- 34 -
Note 15 Available-for-sale financial assets and Loans and receivables: breakdown by
portfolio and quality

In EUR million
Available-for-sale
(AFS) financial assets
Loans and
receivables
(L&R)
Total

31/12/2012

Impaired assets 1,005 24 1,029
Total 3,730 3,313 7,044

In EUR million
Available-for-sale
(AFS) financial assets
Loans and
receivables
(L&R)
Total

31/12/2013

Total 3,423 3,825 7,248

- 35 -
Note 16 Financial assets and liabilities: breakdown by portfolio and residual maturity

In EUR million

ASSETS
Held-for-
trading
(HFT)
assets
Financial
instruments
at fair value
(FIFV)
through
profit or
loss
Available-
for-sale
(AFS)
financial
assets
Loans and
receivables
(L&R)
Hedging
derivatives
Total

31/12/2012
Less than or equal to 1 year 232 8 483 3,032 2 3,756
More than 1 but less than or equal
to 5 years 162 7 1,521 179 33 1,902
More than 5 years 52 0 766 97 0 915
Indefinite period 1 - 912 - - 912
Total 449 15 3,730 3,313 45 7,552
31/12/2013
Less than or equal to 1 year 156 - 411 3,475 1 4,043
More than 1 but less than or equal
to 5 years 95 - 1,369 252 22 1,738
More than 5 years 34 0 619 96 1 750
Indefinite period 1 - 978 - - 979
Total 287 0 3,423 3,825 34 7,569

In EUR million
LIABILITIES
Held-for-trading
(HFT) liabilities
Hedging
derivatives
Liabilities at
amortised cost
Total

31/12/2012
Less than or equal to 1 year 168 3 6,132 6,303
years 66 45 362 472
More than 5 years 22 20 3 44
Indefinite period 0 - 0 0
Total 256 83 6,511 6,850
31/12/2013
Less than or equal to 1 year 164 2 6,534 6,701
years 37 33 237 306
More than 5 years 9 27 2 38
Indefinite period 0 - 0 0
Total 210 79 6,786 7,074

- 36 -
Note 17 Offsetting of financial assets and liabilities

A financial asset and a financial liability shall be offset and the net amount presented in the balance
sheet when, and only when the Bank:
currently has a legally enforceable right to set off the recognized amounts; and
intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.

The Bank currently has no legally enforceable right which satisfies the above conditions. It follows that
all amounts presented on the face of the balance sheet are gross amounts.

The Bank however frequently enters into Master Netting Agreements (MNA) with its counterparties to
manage the credit risks associated primarily with (i) repurchase and reverse repurchase transactions,
(ii) securities borrowing / lending and (iii) over-the-counter derivatives.
These arrangements may also be supplemented by collateral agreements.

Offsetting rights provided for by such MNA are generally conditional upon the occurrence of some
specific future events (typically the events of default, insolvency or bankruptcy of the counterparty).
They are thus not current, which prevents the Bank from setting the related assets and liabilities off on
the balance sheet.
Similarly, the rights of set off relating to the cash and other financial instrument collateral are also
conditional upon the default of the counterparty.

The financial impact of the MNA potential offsetting opportunities are disclosed in the following tables.
Only Global Master Repurchase Agreements (GMRA) for repurchase agreements and International
Swaps and Derivatives Association Master Agreement (ISDA) for over-the-counter derivatives have
been considered.
The effect of Master Neeting Agreements relating to securities lending and borrowing has not been
reported because, as underlined in the Banks significant accounting policies (cf. note 2b), those
transactions are not recognized on the balance sheet (i.e. securities lent are not derecognized from
the balance sheet and securities borrowed are not recognized within assets). Notes 18 and 19 give
additional information on those activities and on the related financial collateral received / pledged.


31/12/2012

Gross
amounts of
financial
assets
presented on
the balance
sheet

Netting potential /
Financial
collateral
received
(securities and
cash)
Net amount

Cash and balances with central banks 409 - - 409

Financial assets
Held for trading assets (excluding
derivatives) 230 - - 230
Assets designated at fair value through profit
or loss 15 - - 15

Total 7,960 -300 -1,343 6,318

- 37 -

31/12/2012
Gross
amounts of
financial
liabilities
presented on
the balance
sheet

Netting potential /
financial assets
Financial
collateral
pledged
(securities and
cash)

Net amount


-182 -100

42
Held for trading liabilities (excluding
derivatives) 15

- -

15

-118 -331

6,062

Total 6,850

-300 -431

6,119


31/12/2013

Gross
amounts of
financial
assets
presented on
the balance
sheet

Netting potential /
Financial
collateral
received
(securities and
cash)
Net amount

Cash and balances with central banks 610 - - 610

Financial assets
Held for trading assets (excluding
derivatives) 134 - - 134
Assets designated at fair value through profit
or loss 0 - - 0

Total 8,179 -247 -1,700 6,232


31/12/2013
Gross
amounts of
financial
liabilities
presented on
the balance
sheet

Netting potential /
financial assets
Financial
collateral
pledged
(securities and
cash)

Net amount



-121 -124

39
Held for trading liabilities (excluding
derivatives) 5

- -

5

-126 -186

6,473

Total 7,075

-247 -310

6,517

- 38 -
Note 18 Securities lending and securities given in guarantee

The Bank regularly carries out transactions in which the assets transferred do not qualify for
derecognition under IAS 39. The securities are generally transferred under full ownership and the
counterpart is thus able to re-use them in other operations.

This mainly concerns the following operations:
repurchase agreements ("repo"),
securities lending,
securities given as collateral (in particular for securities borrowing or to guarantee credit lines
received).

These transactions can be broken down as follows:

In EUR million
31/12/2012
Collateral
given for
securities
borrowing (***)
Other
Debt
instruments
Debt
instruments
Equity
instruments
Debt
instruments
Debt
instruments
Held-for-trading financial assets 4 2 - - 2
Loans and receivables - - - - 143
derecognised 506 155 1 697 547
Other (*) 508 886 5 779 6
Total 1,014 1,041 6 1,476 553

In EUR million
31/12/2013
Collateral
given for
securities
borrowing (***)
Other
Debt
instruments
Debt
instruments
Equity
instruments
Debt
instruments
Debt
instruments
Held-for-trading financial assets
- 1 - - 19
81 103 - 749 760
derecognised
81 104 - 749 779
Other (*)
234 1,032 0 598 543
Total
315 1,136 0 1,347 1,322

(*) The item Other relates to securities borrowed or received as collateral for other operations.

(**) The carrying amount of debts associated with repo operations is available in Note 14.

(***) Fair value of securities borrowed: EUR 1,218 million at 31/12/2013 (EUR 1,173 million at 31/12/2012).

- 39 -
Note 19 Securities received in guarantee

The Bank mainly receives securities as collateral in relation to its reverse repurchase agreement
operations and securities lending.
These securities are generally transferred under full ownership and the Bank is able to re-use them in
other operations.

The fair value of these guarantees can be broken down as follows:

In EUR million 31/12/2012 31/12/2013
Reverse repurchase agreements 1,478 1,978
Collateral received for securities lending 973 1,169
Total 2,451 3,147

Of which, transferred to:
Repurchase agreements 251 -
Securities lent 29 18
Collateral given for securities borrowing 779 598
Other 6 543
Total 1,066 1,159

Note 20 Impairment of available-for-sale financial assets

CHANGES
In EUR million

Debt
instruments
Equity
instruments

Balance as at 01/01/2012 18 323
Allowances 12 183
Reversals 0 -
Securities sold / matured -20 -12
Other - 1
Balance as at 31/12/2012 11 495

CHANGES
In EUR million

Debt
instruments
Equity
instruments

Balance as at 01/01/2013 11 495
Allowances 2 26
Reversals 0 -
Securities sold / matured -7 -8
Other - -16
Balance as at 31/12/2013 5 497

- 40 -
Note 21 Impairment of loans and receivables

In EUR million 31/12/2012 31/12/2013

Total (balance sheet)

21 12

Breakdown by type 21 12
Specific impairments on loans and receivables 20 12
Collective impairment 1 0

Breakdown by counterparty 21 12
Loans and advances to banks - -
Loans and advances to customers 21 12

CHANGES
In EUR million

Specific
impairments on
loans and
receivables
Collective
impairment
Total

Balance as at 01/01/2012 31 1 32


Allowances 2 0 2

Reversals 0 0 0

Changes not affecting the income statement -13 - -13


Other / Change impact 0 - 0
Balance as at 31/12/2012 20 1 21

CHANGES
In EUR million

Specific
impairments on
loans and
receivables
Collective
impairment
Total

Balance as at 01/01/2013 20 1 21

Changes affecting the income statement 1 -1 0

Allowances 2 0 2

Reversals -1 -1 -2

Changes not affecting the income statement -9 - -9


Other / Change impact 0 - 0
Balance as at 31/12/2013 12 0 12

- 41 -
Note 22 Derivatives

The notional value of the foreign exchange contracts represents the nominal to be delivered.

In EUR million
Held-for-trading Fair-value micro-hedging
31/12/2012
Fair value
Notional value
Fair value
Notional value


Total 218 241 25,999 45 83 1,083

Options 0 0 31 0 - 1
Interest rate swaps 83 92 15,089 43 83 963
Futures 0 0 47 - - -
Other 7 7 476 2 0 116
Foreign exchange
contracts 109 124 9,937 - - -
Foreign exchange futures 0 0 74 - - -
Options 0 - 9 - - -
Other 0 0 3 - - -
Equity contracts 19 18 394 0 - 3
Equity futures 0 0 34 - - -
Equity options 2 2 40 - - -
Other 17 16 319 0 - 3
contracts 0 0 24 - - -

In EUR million
Held-for-trading Fair-value micro-hedging
31/12/2013
Fair value
Notional value
Fair value
Notional value


Total 153 205 39,427 34 79 1,126

Options 0 0 30 0 - 1
Interest rate swaps 64 68 29,519 33 69 954
Futures 0 0 53 - - -
Other 3 3 207 1 0 114
Foreign exchange
contracts 78 126 9,429 0 10 57
Foreign exchange futures - - - - - -
Cross currency swaps - - - 0 10 57
Options 3 3 546 - - -
Other - - - - - -
Equity contracts 8 8 175 - - -
Equity futures 0 0 6 - - -
Equity options 3 3 60 - - -
Other 4 5 109 - - -
contracts 0 0 14 - - -

- 42 -
Note 23 Other assets

The heading Other assets covers various short-term receivables such as dividends and coupons
that clients bring to KBL epb to be cashed and the value of which has already been paid.

Note 24 Tax assets

In EUR million 31/12/2012 31/12/2013

Current tax assets - -
Losses carried forward 65 55
Provisions -22 -22
Available-for-sale financial instruments -33 -29
Other 14 11
Tax assets 24 15

Changes in deferred tax assets and liabilities are not equal to the deferred tax charge recognised in
the income statement during the year. This is mainly due to the deferred tax linked to the recognition
in the revaluation reserve of fair value changes in unimpaired available-for-sale financial instruments.

Note 25 Intangible assets

CHANGES
Purchased
portfolio of
customers
Software
developed in-
house
Software
purchased
Total
In EUR million

Balance as at 01/01/2012 84 35 6 125

Acquisitions - 6 - 6

Disposals - - - -

Depreciation - -27 -7 -34

Impairment - - - -

Allowances - - - -

Reversals - - - -

Other - -1 1 0
Balance as at 31/12/2012 84 12 0 97
Of which: cumulative amortisation and
impairment - -35 -1 -36

Balance as at 01/01/2013 84 12 0 97

Acquisitions - 3 - 3

Disposals - 0 - 0

Depreciation - -2 0 -2

Impairment - - - -

Allowances - - - -

Reversals - - - -

Other - - - -
Balance as at 31/12/2013 84 13 0 97
impairment - -8 -1 -9

- 43 -
Note 26 Property and equipment and investment properties

In EUR million 31/12/2012 31/12/2013

PROPERTY AND EQUIPMENT 95 90

INVESTMENT PROPERTIES Net carrying value 4 4
Fair value 8 9

Investment properties Rental income 1 1

Investment properties fair values disclosed supra are based on valuations obtained from independent
valuers who hold a recognized and relevant professional qualification and have recent experience in
the location and category of the investment properties being valued.
The estimates are primarily derived from recent transactions and other local market data observable in
the areas where the properties are held. Related fair values are thus to be classified within the level 2
category under the IFRS 13 fair value hierarchy.

CHANGES

Land and
buildings

IT equipment

Other
equipment

Total property
and equipment

Investment
properties

Balance as at 01/01/2012 85 1 14 101 13
Disposals - - - - -8
Depreciation -5 -1 -1 -7 0
Reversals - - - - -
Other 0 - 0 0 0
Balance as at 31/12/2012 82 0 14 95 4
impairment -63 -2 -10 -75 -5

Balance as at 01/01/2013 82 0 14 95 4
Acquisitions 0 0 0 0 -
Disposals - - - - -
Depreciation -4 0 -1 -5 0
Reversals - - - - -
Other 0 0 - 0 -
Balance as at 31/12/2013 77 0 13 90 4
impairment -68 -2 -11 -81 -5

- 44 -
Note 27 Provisions

In EUR million Specific
impairment
for credit
commitments
Pending legal
disputes
Operational
losses
Other
provisions
Total

Balance as at 01/01/2012 0 1 0 4 6

Changes affecting the
income statement - 1 0 0 1
Allowances - 1 0 0 1
Reversals - 0 - - 0
Other changes 0 2 0 -3 -1
Balance as at 31/12/2012 0 4 1 2 7

In EUR million
Specific
impairment
for credit
commitments
Pending legal
disputes
Operational
losses
Other
provisions
Total

Balance as at 01/01/2013 0 4 1 2 7

Changes affecting the
income statement 1 0 0 0 2
Allowances 1 0 0 0 2
Reversals - - 0 - 0
Other changes 0 0 0 -2 -2
Balance as at 31/12/2013 2 4 0 1 6

Specific impairment for credit commitments: provisions accounted for to cover risk on given
guarantees, more precisely on credits for which the Bank acts as sub-participant.

Provisions for pending legal disputes: provisions recorded to cover legal disputes with private and
professional counterparties, including lawyers fees.

Operational losses: provisions to cover operational dysfunctions for which the responsibility is not
determined at the closing date.

Other provisions: other provisions than the above-mentioned provisions, among which provisions to
cover the expenses in relation with the closedown of the Polish branch.

For most of the provisions recorded, no reasonable estimate can be made of when they will be used.

The main litigation cases are the following:

Proceedings before the Belgian courts
KBL epb with other defendants has been summoned in 2008 by an English company (BSL) to
appear before the Belgian Court. The plaintiff, a former client of KBL epb, claims the payment of an
astronomic amount of USD 300 million alleging that KBL epb participated in the embezzlement of a
commission which the plaintiff claims was owed to him by a South African counterpart with whom he
was involved in an international commercial transaction between 1986 and 1991.
BSL held a KBL epb account from 1990 to 1991. BSL alleges that by opening this account the Bank
acted in collusion with the counterpart in order to mislead him.
The Court declined jurisdiction in respect of KBL epb and ordered the plaintiff to pay an
indemnification of EUR 50.000 to KBL epb for frivolous and vexatious proceedings.
BSL appealed the judgment and the case will be heard before the court of appeal in January, May and
June 2014.

- 45 -
Madoff cases
In December 2008, Bernard L. Madoffs massive Ponzi scheme was discovered. Bernard L. Madoff
Investment Securities LLC (BLMIS) and its feeder funds were put into liquidation.
The liquidator of BLMIS considers that certain investors in BLMIS knew or should have known that
BLMIS was a fraud. He therefore claims back payments made by BLMIS to these investors (so called
claw-back actions).
As the liquidator started claw-back actions against the feeder funds, the liquidators of these funds
have in their turn started similar actions against KBL epb and other defendants before the New York
courts and the BVI courts.
The BVI courts rejected the claim against KBL epb and other defendants judging that they acted in
good faith.
The liquidators appealed these decisions before a London court. As a consequence of these decisions
the New York courts decided to stay all proceedings until a final decision is taken in the BVI cases.

Landsbanki
The Landsbanki liquidators are suing KBL epb before the court of Reykjavik, claiming rescission of a
payment of ISK 724,6 million (+/- EUR 2,9 million) made in the context of an interbank money deposit
transaction, having taken place in 2008 a few days before the declaration of insolvability of
Landsbanki.
In accordance with the Icelandic Act of Bankruptcy, they claim annulment of this payment because it
was made during the suspect period leading up to the bankruptcy of Landsbanki Islands hf.s.
The first instance court rejected the claim but the liquidators appealed the decision. The court of
appeal will probably render its decision in 2014.

As in these cases the risks are remote (in the Madoff case the investors and not KBL epb bear the risk
of repayment) provisions have only be made for the legal costs.

Note 28 Other liabilities

The heading Other liabilities in particular covers various items payable in the short term such as
coupons and redeemable securities as paying agent.
The net liabilities related to staff pension funds (see Note 29) and restructuration plans are also
included in this item.

- 46 -
Note 29 Retirement benefit obligations

In addition to the legally prescribed plans, KBL epb maintains various complementary pension plans,
of both the defined contribution and defined benefit kinds.

Defined benefit plans may be either employer-funded or employee funded schemes. The employer-
funded plans provide retirement benefits linked to service and final salary. Investment earnings
applied to employee contributions are subject to a minimum guaranteed return.
The plans are funded via insurance arrangement with a third party to which the Bank pays regular
premiums.

DEFINED BENEFIT PLANS 31/12/2012
(1)
31/12/2013
In EUR million

Defined benefit plan obligations
Current service cost 2 2
Interest cost 3 2
Past service cost and losses arising from settlements - -
Actuarial (gains)/losses 5 0
stemming from changes in demographic assumptions - 2
stemment from changes in financial assumptions 5 0
experience adjustments 0 -2
Benefits paid -9 -4
Other - 0

Fair value of plan assets
Actual return on plan assets 2 4
Interest income 2 1
Return on plan assets (excluding interest income) 0 2
Benefits paid -8 -4
Other - 0

Plan assets include an investment of EUR 1.7 million in a transferable security issued by the Bank
(2012 : -).

Effect of the asset ceiling
Interest on the effect of asset ceiling 0 0
Change in the effect of asset ceiling 0 0
Other - -

Funded status
Plan assets in excess of defined benefit obligations -21 -18
Unrecognised assets -1 -1
Unfunded accrued / prepaid pension cost -21 -19

(1)

- 47 -
In EUR million 31/12/2012 31/12/2013

Changes in net defined benefit pension liability or asset
Net periodic pension cost recognized in the income statement -3 -3
Remeasurements recognized in OCI (excl. change in tax provision) -5 2
Pension payments by employer 1 0

Changes in the tax provision relating to current deficits on external plans
Change in the provision recognized through OCI -1 1

Changes in the remeasurement reserve in equity
Recognized reserve as at 01/01 - -5
Remeasurement recognized in OCI -5 3
Transfers - -
Recognized reserve as at 31/12 -5 -2

AMOUNTS RECOGNIZED IN COMPREHENSIVE INCOME
Amounts recognised in the income statement
Current service cost -2 -2
Net interest on the defined benefit liability/asset -1 -1
Past service cost - -
Gains and losses arising from settlements - -
Other - -
Net pension cost recognized in the income statement -3 -3

Amounts recognized in other comprehensive income
Actuarial gains/losses on the defined benefit obligation -5 0
Actual return on plan assets (excluding amounts included in interest income) 0 2
Change in the effect of the asset ceiling 0 0
Change in the tax provision -1 1
Total other comprehensive income -5 3

Actual return on plan assets 5.04% 8.81%

Breakdown of plan assets 100% 100%
Fixed income
Unquoted - -
Equities
Unquoted - -
Alternatives
Unquoted - -
Cash 8% 7%
Other - -

- 48 -
In EUR million 31/12/2012 31/12/2013

Significant actuarial assumptions used:

Defined benefit obligation
The rate used to discount the post-employment benefit obligations is determined by reference to market yields at the end of
the reporting period on high-quality corporate bonds with similar maturities than the pension commitments.

Discount rate 3.23% 3.20%
DBO sensitivity to changes in discount rate
Scenario DR -1% n/a 7
Scenario DR +1% n/a -6

Expected rate of salary increase (including inflation) 3.00% 3.00%
Scenario SR -1% n/a -4
Scenario SR +1% n/a 4

Maturity profile of the DBO
Weighted average duration of the DBO (in years) n/a 11.78

Expected contributions for next year 3 3

Defined contribution plans
In EUR million
31/12/2012 31/12/2013

Amount recorded in the income statement 1 2

- 49 -
Note 30 Equity

Pursuant to the extraordinary general meeting of the shareholders of the Bank held on 9 July 2013, it
was decided to propose to each holder of preferential non-voting shares to convert part or all of his/her
preferential non-voting shares into ordinary shares, the proposed exchange ratio being one
preferential non-voting share against one ordinary share, being understood however that only the
number of preferential non-voting shares for which the holders of preferential non-voting shares had
accepted the conversion offer during the conversion offer period ended on 9 August 2013 were
effectively converted into ordinary shares.

As such, 1,945,670 preferential non-voting shares were converted into 1,945,670 ordinary shares and,
as at 31 December 2013, the subscribed and paid-up capital is EUR 187.2 million, represented by
20,132,547 ordinary shares without par value and by 4,041 non-voting preference shares without par
value.

Holders of preference shares are entitled to receive an initial dividend of EUR 0.25 per share, as
established in the Banks articles of incorporation, and are therefore guaranteed a minimum annual
return. If there are no profits, this dividend entitlement is carried forward to subsequent periods. Any
profits remaining once this first dividend has been paid are shared out between all shareholders,
whether they hold ordinary or preference shares, in such a way that both categories of shareholders
ultimately receive an identical dividend. The Bank is thus indebted for EUR 1.5 million to preference
shareholders for 2010, 2011 and 2012, where no dividend has been paid-up.

Article 39 of the Banks articles of incorporation specifies that the net liquidation profit, after the
charges payment, will be used to firstly refund the non-voting preference shareholders. The remaining
balance will be allocated on equal basis to ordinary shareholders.

As at 31 December 2013, the legal reserve is EUR 18.7 million (31 December 2012: EUR 18.7 million)
representing 10% of the paid-up capital, the free reserves amounts to EUR 782.4 million (31
December 2012: EUR 758.7 million) and the reserve for the reduction of wealth tax is nihil
(31 December 2012: EUR 23.7 million). The retained earnings are negative for EUR 282,1 million (31
December 2012: positive for EUR 38.3 million).

In number of shares

31/12/2012

31/12/2013

Total number of shares issued 20,136,588 20,136,588
Ordinary shares 18,186,877 20,132,547
Preference shares 1,949,711 4,041
Of which: those that entitle the holder to a dividend payment 20,135,744 20,135,744
Of which: treasury shares 844 844
Of which: shares representing equity under IFRS 20,135,744 20,135,744

CHANGES

Ordinary shares Preference shares Total

Balance as at 01/01/2013 18,186,877 1,949,711 20,136,588

Conversion of preference shares into ordinary
shares
+1,945,670 -1,945,670 0
Balance as at 31/12/2013 20,132,547 4,041 20,136,588

- 50 -
Note 31 Result allocation proposal

At its meeting on 27 February 2014, the Board of Directors proposes to distribute the 2013 net result
of EUR 35.2 million as follows:

(i) in the AGDL (Association pour la Garantie des Dpts Luxembourg) provision framework, EUR
2.0 million will be allocated to the unavailable reserve;

(ii) according to the Bank status (see Note 30), a dividend of EUR 0.75 by share will be paid to the
preference shareholders for EUR 1.5 million relating to years 2010, 2011 and 2012 when no
dividend had been paid-up;

(iii) finally, a dividend of EUR 1.5772 by share will be paid-up to each preference and ordinary
shareholders for a total amount of EUR 31.8 million.

On 19 March 2014, this affectation will be submitted to the approval of the Annual General Meeting.

Note 32 Loans commitments, financial guarantees and other commitments

In EUR million 31/12/2012 31/12/2013

Confirmed credits, unused 865 838

Total 1,209 1,425

Note 33 Assets under management and custody

Total assets under management related to clients in the private banking sector (including frozen and
low yielding assets) as at 31 December 2013 amount to EUR 6.9 billion (2012: EUR 6.8 billion).

Total assets under custody (investment funds and institutionals) related to Global Investor Services
clients as at 31 December 2013 amount EUR 41.3 billion (2012 : EUR 38.6 billion).

- 51 -
Note 34 Related party transactions

Related parties refers to the parent company of KBL epb, its subsidiaries and key management
personnel. Transactions with related parties are carried out under conditions equivalent to those
applicable to transactions subject to conditions of normal competition.
Transactions with associates are not included below because they are not material.

In EUR million
31/12/2012

31/12/2013

of which financial assets with Precision Capital - -
with KBL epb group 1,266 1,403
with Banque Internationale Luxembourg - -
At fair value through profit or loss - -
Loans and receivables 546 700

Financial liabilities 1,720 1,926
of which financial liabilities with Precision Capital 18 12
with KBL epb group 1,702 1,915
with Banque Internationale Luxembourg - -

Income statement -175 -28
of which income statement with Precision Capital - 0
with KBL epb group -175 -28
with Banque Internationale Luxembourg 0 0
Net interest income -6 -2
Dividends 24 16
Net fee and commission income -9 -13
Other net income 1 1
Operating expenses 6 -3
Impairment of financial assets not measured at fair value through
profit or loss -181 -26

WITH KEY MANAGEMENT PERSONNEL
In EUR million
31/12/2012 31/12/2013

Amount
Number of
persons
Amount
Number of
persons

Amount of remuneration to key management personnel
of KBL epb on the basis of their activity, including the
amounts paid to former key management personnel 10 62 12 74
Credit facilities and guarantees granted 8 33 7 34
Loans outstanding 6 31 5 30
Guarantees outstanding 0 3 0 4
Pension commitments 20 40 17 40
Expenses for defined contribution plans - - - -

- 52 -
Note 35 Solvency

The table below discloses the solvency ratios calculated according to the IFRS definition of own funds
and applying the prudential filters as defined by CSSF circular 06/273 as amended.

In EUR million 31/12/2012 31/12/2013

Regulatory capital 1,135 1,077

Capital and reserves (including profit/loss carried forward) 1,318 1,028
Intangible assets -97 -97
Treasury shares -0 -0
Negative revaluation of AFS bonds
(1)
- -
Audited net loss -306 -
Remeasurement of defined benefit plans - -2
Deferred tax assets
(2)
-24 -15

Preference shares 30 0
Positive revaluation of AFS shares 46 45
Subordinated liabilities 168 120

Deductions -1 -1

Overall own funds requirements 281 262
Credit risk, counterparty risk, securitisation and incomplete transaction risk 245 230
Foreign exchange risk 1 1
Position risk linked to debt securities trading 8 5
Position risk linked to equities 0 0
Settlement risk linked to trading securities 0 0
Operational risk 27 26

Solvency ratios
Basic solvency ratio (Tier 1 ratio) 25,40% 27,89%
Solvency ratio (CAD ratio) 32,33% 32,95%

(1)
In July 2009, KBL epb notified the Commission de Surveillance du Secteur Financier (CSSF) of its choice to cease
including unrealised profits or losses on available-for-sale debt instruments when calculating its prudential capital
figures.
(2)
At the CSSF request, deferred tax assets are deducted from Tier capital from end 2012.

- 53 -
Note 36 Maximum credit risk exposure and collateral received to mitigate the risk

Maximum credit risk exposure
In EUR million 31/12/2012 31/12/2013

Assets 7,997 8,207
Balances with central banks 391 597
Hedging derivatives 45 34
Tax assets 24 15
Other assets 30 27

Off-balance sheet items 1,209 1,425
Loans commitments 865 838

Securities lending 1,047 1,137

Maximum credit risk exposure 10,253 10,769

For the instruments measured at fair value, the amounts disclosed above represent the current credit
risk exposure and not the maximum credit risk that could apply as a consequence of future changes in
the estimates made.

Collateral received to mitigate the maximum exposure to credit risk
In EUR million 31/12/2012 31/12/2013

Equity - -
Debt instruments 1,191 1,347
Loans and advances 2,054 2,520
of which designated at fair value - -
Derivatives 167 138
Other (including loans commitments given, undrawn amount) 9 14
Collateral received to mitigate the maximum exposure to credit risk 3,421 4,020

The amount and type of collateral required depend on the type of business considered and the Banks
assessment of the debtors credit risk.

The main types of collateral received are as follows:

cash,
securities (in particular for reverse repo operations and securities lending), and
other personal and/or collateral guarantees (mortgages).

These guarantees are monitored on a regular basis to ensure their market value remains adequate as
regards the assets they are intended to cover. If a guarantee is noted to be insufficient, margin calls
are made in accordance with the agreements signed with the various counterparties concerned.

Following the Banks request, the CSSF has approved an exemption from including in its calculation of
the large risks exposures, in accordance with Part XVI, point 24 of the CSSF Circular 06/273, as
amended, the risks to which the Bank is exposed towards Banque Internationale Luxembourg and
KBL epb's subsidiaries. This exemption is not eligible towards Precision Capital. The exposures on
related parties are disclosed in Note 34.

- 54 -
Note 37 Risk management

This note aims to disclose the nature and risks arising from financial instruments to which the entity is
exposed during the period and at the end of the reporting period, and how the entity manages those
risks, as required by IFRS 7
1
. The information is presented by risk type as proposed by the
standards.

A complete description of the Risk Management framework is provided in the annexes to the Annual
Report.

1. Credit risk

1.1. QUALITATIVE INFORMATION

1.1.1. Origin of credit risk

The credit risks arising from financial instruments mainly originate from:

- lending to private clients (mainly Lombard loans and Mortgage loans) and to investment funds to
a lesser extent, alongside the Banks core activities has remained a supporting activity of the
business. Risk in this activity is largely mitigated by a strong collateral policy, implying limited
unsecured exposures;
- positions in ALM portfolios;
- uncommitted lines covering the trading activity and counterparty exposures with banks (forex,
money markets, swaps, reverse repo, securities lending, derivatives, etc.);
- the granting of uncommitted lines to clients of the Global Investor Services (GIS) department in
Luxembourg (mainly UCI), to cover temporary overdrafts;
- the acceptance of securities used as collateral in securities lending and repo transactions.

1.1.2. Credit allocation decision making process / governance

In Luxembourg, all lending/investment decisions, as all decisions to grant uncommitted lines, are the
responsibility of the Executive Committee or one of the other competent bodies designated under the
delegation of authority based on specific criteria. This delegation of powers always requires the
involvement of at least two people from different entities, to ensure that there is no risk of conflict of
interest. All decisions taken on the basis of a delegation of powers must also be reported to and
approved by the senior body.

As a matter of principle, each new credit proposal submitted to the Credit Committee/Executive
Committee is accompanied by an opinion issued by the Credit Risk Control, based on an analysis of
the financial situation and creditworthiness of the borrower and of the structure of collateral.

At inception, internal processes ensure the identification of related counterparties, in order to monitor
concentration risk on debtors/group of debtors. Group structures are moreover permanently updated
by the Credit Risk Control.

1.1.3. Credit policy

In the context of the development of the credit activity for private banking clients, a review of the credit
policy has been initiated. The aim is to precise the framework within which the loan activities to
customers are managed in the KBL epb group, validated by the Board Risk Committee
1
(BRC).

1
The Board Risk Committee or BRC is a sub-committee of the Board of Directors dedicated to risk issues

- 55 -
1.1.4. Measurement/monitoring of credit risk

Credit risk related to lending activities, investment portfolios or trading activities has to remain within
the general framework set in the Risk Appetite Statement validated in July 2013 by the Board Risk
Committee. Therefore, specific indicators have been defined, that are monthly reported to the ALCO
and quarterly to the BRC. Specific attention has been set on concentration risk, being on single
issuers, single banking counterparties or countries.

At a regulatory level, KBL epb group uses the standardised Basel II methodology to calculate credit
risk.
Credit Risk Control has developed its own tools for Bank analyses, and implemented its own systems
for Bank and Country limits, approved by the Executive Committee. These systems allow the definition
of limits adapted to the size of the Bank and to its risk appetite.

1.1.4.1. Loans

In terms of the day-to-day monitoring of lending transactions, the loan administration systems
automatically monitor the loans and guarantees schedule, which allows any overrun to be detected
and the appropriate corrective action to be taken swiftly.

On a quarterly basis, a global reporting of all lending exposures is performed, detailing the portfolio by
loan types, customers type, countries, maturities and performing status. It also presents information on
the effective loan-to-values for the collateralized exposures.

The files for which a specific monitoring is requested are included in the Watchlist which is discussed
monthly in the Credit Committee.

1.1.4.2. Investment portfolio

Investments proposals are submitted by the ALM Function. All proposals have to respect the
concentration limits, defined by issuers type (Sovereigns, Corporates and Banks), as the concerned
country limits. The Credit Risk Control department checks the availability under those limits before any
investment, and issues its own opinion on the credit risk linked with the issues, based on the analyses
provided by the rating agencies and the published financial statements.

Group Credit Risk Control automatically monitors debtors ratings, as reported by rating agencies, and
informs the entities concerned accordingly. Various types of standard or specific report are also drawn
up in order to monitor any deterioration in the quality of the portfolio.
Any overdraft of issuer concentration limits, due to rating downgrades, is communicated monthly to the
ALCO, and quarterly to the BRC.

1.1.4.3. Interbank transactions

The measurement and monitoring of counterparty risk for interbank transactions, which are mainly
concentrated in the Luxembourg Dealing Room, are a major activity of Group Credit Risk Control. The
department sets interbank limits for these transactions by establishing requirements for the whole KBL
epb group. Loans outstanding are allocated to lines based on the marked-to-market + add on
methodology.

The system for managing interbank limits has been validated by the Executive Committee and is
operational since mid-2012. This system defines interbank limits which are commensurate with the
size of the Bank and its risk appetite, and fully integrates the Large Exposures regulation. Group
Credit Risk Control has also developed its own tools for analysing bank counterparts.

The interbank limits system ensures that concentration limits, defined by counterparty and by group of
counterparties, are respected at any level.

- 56 -
It is the task of the Banks front-office to manage the outstanding amounts on these interbank limits.
Thus, for example, before concluding a deal, the operator must ensure that lines are available for the
counterparty and for the product (and country) in question and that the relevant amounts and terms
are available. Overruns are monitored daily by the middle-office using GEM. Exceptions reports are
sent to the Trading Room management on a daily basis for justification and ratification, and to the Risk
Control manager. All overruns are reported to the members of KBL epb Executive Committee.

1.1.4.4. Collateral monitoring

The management and supervision of collateral received for secured transactions, in addition to
contract management, is handled by the Collateral Management entity, which is part of Group Risk
Control and located in close proximity to Group Credit Risk Control. At the beginning of 2012, the
Executive Committee updated the specific guidelines regarding acceptable collateral with new rules on
concentration by counterparties and by securities accepted as collateral, as well as risk correlation
limits (correlation between the counterparty and the collateral). The respect of these rules is monitored
on a daily basis by the Group Credit Risk Control department.

1.1.4.5. Country limits

As for interbank limits, Credit Risk Control has developed a new framework for the definition and
monitoring of country limits, which is operational since mid-2012. The methodology has also been
adapted in such a way as to cover all types of country risks (in particular that of contagion) and is no
longer limited to the risk of transferability.

Lines are allocated to the Bank for credit activities, bonds investments and trading room activities as
and when required. As for counterparty risk, the middle-office is responsible for independent
monitoring, on a daily basis, of the respect of the country limits.

1.1.4.6. Concentration monitoring

As mentioned here above, issuer concentration limits are defined per individual or group of
counterparts. These limits are assigned to sovereign, banks and corporate counterparts, using a
methodology derived from the country limit framework and consider additional financial criteria. Issuer
concentration limits are divided into sub-limits which preserve diversification both in terms of maturity
and products.

The issuer concentration limits are updated and monitored by Group Credit Risk Control. Exception
reports are escalated to the Group ALCO.

1.2. QUANTITATIVE INFORMATION

1.2.1. Breakdown of credit risk exposures

The distribution of the credit risk exposures (available-for-sale (AFS) financial assets and Loans and
receivables (L&R)) by products is as follows:

- 57 -
In EUR million

31/12/2012
Bank bonds - 530.5 530.5 - 555.8 555.8
Corporate bonds 20.5 696.1 716.6 11.0 753.6 764.5
Asset-backed
securities
- 208.2 208.2 - 210.3 210.3
Government
bonds
1.9 1,210.4 1,212.3 0.7 1,287.4 1,288.1
Sub-total 22.4 2,645.2 2,667.6 11.6 2,807.1 2,818.7
Equity instruments, funds

911.8

TOTAL 3,730.5

In EUR million

31/12/2013
Bank bonds - 451.3 451.3 - 481.6 481.6
Corporate bonds 9.2 602.3 611.5 3.9 649.6 653.5
Asset-backed
securities
- 129.5 129.5 - 131.8 131.8
Government
bonds
- 1,117.2 1,117.2 - 1,177.7 1,177.7
Sub-total 9.2 2,300.3 2,309.5 3.9 2,440.8 2,444.7
Equity instruments, funds 978.4

TOTAL 3,423.1

In EUR million
Loans and receivables NPL/Impaired Standard Total
31/12/2012
Customers 2.7 486.6 489.2
Sub-total 2.7 2,707.6 2,710.3
Other L&R and Intercompanies 1.2 602.0 603.1
TOTAL 3.8 3,309.6 3,313.4

In EUR million
Loans and receivables NPL/Impaired Standard Total
31/12/2013
Customers 2.5 613.5 616.0
Sub-total 2.5 3,074.0 3,076.5
Other L&R and Intercompanies - 748.7 748.7
TOTAL 2.5 3,822.7 3,825.2

- 58 -
1.2.2. Specific loan impairment

The valuation of potential losses and the adjustment of specific impairments are carried out quarterly
by Credit Risk Control. The Credit Committee decides on any adjustment for the first three quarters of
the year, this being the responsibility of the Executive Committee for the fourth quarter.

Below are listed specific impairments established in respect of the non performing loans and available-
for-sale financial assets (debts instruments) as at 31 December 2012 and 2013:

In EUR million < 30 days 30-60 days 60-90 days 90-180
days
6-12
months
>12
months
other
impaired
(1)
TOTAL
31/12/2012
AFS gross - - - - - - 22.4 22.4
Impairment - - - - - - 10.8 10.8
AFS net - - - - - - 11.6 11.6
Non performing L&R gross 2.3 0.1 1.5 2.2 - 21.6 - 27.6
Impairment - - - 0.9 - 19.0 - 19.9
Non performing L&R net 2.3 0.1 1.5 1.3 - 2.5 - 7.7
Total gross 2.3 0.1 1.5 2.2 - 21.6 22.4 50.0
Impairment - - - 0.9 - 19.0 10.8 30.7
Total net 2.3 0.1 1.5 1.3 - 2.5 11.6 19.3
(1)

In EUR million < 30 days 30-60 days 60-90 days 90-180
days
6-12
months
>12
months
other
impaired
(1)
TOTAL
31/12/2013
AFS gross - - - - - - 9.2 9.2
Impairment - - - - - - 5.4 5.4
AFS net - - - - - - 3.9 3.9
Non performing L&R gross 19.3 5.1 6.9 0 0.4 11.8 - 43.4
Impairment 0.5 1.4 - - - 9.7 - 11.6
Non performing L&R net 18.8 3.6 6.9 0 0.4 2.1 - 31.8
Total gross 19.3 5.1 6.9 0 0.4 11.8 9.2 52.7
Impairment 0.5 1.4 - - - 9.7 5.4 17.0
Total net 18.8 3.6 6.9 0 0.4 2.1 3.9 35.7
(1)

In 2012, the Bank proceeded with new write-offs on loans exposures. The impairment on 4 debt
instruments has been partially used during 2012 following the sale of the positions.
In 2013, the Bank proceeded with additional write-offs following the sale of securities and a debt write-
off.
The stock of impairment has also been influenced by a new specific allowance on a defaulted loan
and on two perpetual securities.

The loan/loss ratio is as follows:

Loan/Loss ratio (*) 2012 2013
L&R from customers 40 bps 10 bps
AFS financial assets 44 bps 7 bps
(*) The loan/loss ratio is defined as the net variation of specific and general impairments on the average loan portfolio over the
year.

- 59 -
1.2.3. Concentration of risks

1.2.3.1. By rating
2

In EUR million

Rating NPL /
Impaired
Standard Total Other L&R Reverse
Repo
Commercial
Paper
Total
31/12/2012
AAA - 847.5 847.5 0.1 - - 0.1
AA+ - 413.7 413.7 - - - -
AA - 149.7 149.7 59.4 - 10.0 69.3
AA- - 173.2 173.2 29.8 - - 29.8
A+ - 104.7 104.7 88.4 191.5 44.8 324.7
A - 170.7 170.7 80.6 1,106.1 99.6 1,286.3
A- - 190.5 190.5 78.4 75.1 19.9 173.5
BBB+ - 224.4 224.4 10.2 67.6 43.5 121.3
BBB 1.6 341.9 343.5 9.7 - - 9.7
BBB- - 127.2 127.2 - - - -
BB+ - 23.3 23.3 0.2 - - 0.2
BB - 11.8 11.8 0.1 - - 0.1
BB- - 3.0 3.0 0.6 - - 0.6
B+ - 0.2 0.2 - - - -
B - - - - - - -
B- - 0.2 0.2 - - - -
CCC - - - - - - -
CC 0.7 - 0.7 - - - -
D - - - - - - -
Not rated 9.3 25.1 34.5 28.5 177.0 - 205.5
Total 11.6 2,807.1 2,818.7 385.8 1,617.3 217.8 2,221.0

2
The information on rating is not available as such for Loans and receivable to customers.

- 60 -
In EUR million

Rating NPL /
Impaired
Repo
Commercial
Paper
Total
31/12/2013
AAA - 753.8 753.8 0.1 - - 0.1
AA+ - 355.1 355.1 0.3 - - 0.3
AA - 302.9 302.9 51.8 - - 51.8
AA- - 58.1 58.1 16.7 - - 16.7
A+ - 72.8 72.8 79.6 17.1 - 96.8
A 2.3 193.5 195.9 199.8 257.8 - 457.5
A- - 154.0 154.0 61.8 337.1 - 398.9
BBB+ - 161.7 161.7 13.0 - - 13.0
BBB 1.6 243.1 244.7 54.5 951.8 - 1,006.3
BBB- - 73.9 73.9 0 247.4 - 247.4
BB+ - 13.1 13.1 - - - -
BB - 8.6 8.6 0.3 - - 0.3
BB- - - - 0.6 - - 0.6
B+ - - - - - - -
B - - - - - - -
B- - - - - - - -
CCC - - - - - - -
CC - - - - - - -
D - - - - - - -
Not Rated - 50.1 50.1 20.7 150.0 - 170.7
Total 3.9 2,440.8 2,444.7 499.3 1,961.2 - 2,460.5

1.2.3.2. Government bonds by country

In EUR million Available-for-sale financial assets Held-for-trading assets

31/12/2012 Nominal Carrying
amount
Available-
for-sale
reserve
Impairment Related
hedging
derivatives
Nominal Carrying
amount
Austria 65.6 76.2 5.0 - - 0.1 0.1
Maturing in 2016 or 2017 15.4 17.1 1.5 - - - -
Maturing in 2018 and later 50.2 59.1 3.5 - - 0.1 0.1
Belgium 215.3 235.9 3.8 - -5.0 - -
Maturing in 2014 or 2015 114.4 121.4 2.1 - - - -
Maturing in 2016 or 2017 80.4 91.8 1.0 - -5.0 - -
Maturing in 2018 and later 20.5 22.6 0.7 - - - -
Czech Republic 5.0 5.9 0.1 - - - -
Finland - - - - - 0 0
Maturing in 2018 and later - - - - - 0 0
France 165.3 176.1 6.0 - - - -
Maturing in 2013 87.2 88.5 0.6 - - - -
Maturing in 2014 or 2015 36.1 38.8 1.5 - - - -
Maturing in 2016 or 2017 22.4 25.7 2.5 - - - -
Germany 49.2 54.6 3.4 - - 0.1 0.1
Maturing in 2014 or 2015 20.4 21.5 0.8 - - - -
Maturing in 2016 or 2017 27.8 31.9 2.5 - - - -
Maturing in 2018 and later 1.0 1.2 - - - 0.1 0.1
Ireland 70.5 74.0 -0.2 - - - -
Maturing in 2014 or 2015 24.1 25.1 -0.1 - - - -
Maturing in 2016 or 2017 15.0 16.3 -0.1 - - - -
Maturing in 2018 and later 31.4 32.7 - - - - -

- 61 -
Italy 106.2 108.2 0.8 - - - -
Maturing in 2013 31.8 31.9 0.1 - - - -
Maturing in 2014 or 2015 20.5 20.4 0.2 - - - -
Maturing in 2016 or 2017 23.2 23.4 0.2 - - - -
Lithuania 3.8 4.9 0.1 - - 0.2 0.2
Maturing in 2016 or 2017 3.8 4.9 0.1 - - 0.2 0.2
Luxembourg 94.0 103.6 2.2 - -7.2 1.0 1.1
Maturing in 2013 44.0 45.5 1.3 - - 0.8 0.8
Maturing in 2018 and later 50.0 58.2 0.9 - -7.2 0.3 0.3
The Netherlands 56.6 60.5 3.1 - - - -
Maturing in 2013 19.6 20.0 0.2 - - - -
Maturing in 2014 or 2015 28.4 30.3 1.8 - - - -
Maturing in 2016 or 2017 8.6 10.2 1.1 - - 0 0
Poland 5.4 6.8 - - - 0.7 0.8
Maturing in 2018 and later 5.4 6.8 0 - - 0.7 0.8
Slovakia 17.0 18.0 0.1 - -0.4 - -
Maturing in 2014 or 2015 10.0 10.5 0 - - - -
Maturing in 2016 or 2017 7.0 7.5 0.2 - -0.4 - -
Slovenia 20.7 20.7 -0.1 - - - -
Maturing in 2014 or 2015 9.0 9.1 -0.1 - - - -
Maturing in 2018 and later 11.6 11.6 0 - - - -
Spain 16.9 16.9 - - - - -
Maturing in 2013 16.9 16.9 - - - - -
Sweden 21.2 22.1 0.8 - - - -
Maturing in 2014 or 2015 21.2 22.1 0.8 - - - -
Supranational 194.7 208.9 6.5 - -5.4 6.3 6.8
Maturing in 2013 0.1 0.1 - - - - -
Maturing in 2014 or 2015 47.3 48.4 0.2 - - 1.6 1.7
Maturing in 2016 or 2017 105.4 113.2 5.3 - -1.9 1.9 2.0
Rest 63.3 72.2 5.0 -1.2 - 7.3 7.0
Maturing in 2013 - - - - - 1.1 1.1
Maturing in 2014 or 2015 - - - - - 2.7 2.6
Maturing in 2016 or 2017 - - - - - 0.5 0.5
Maturing in 2018 and later 63.3 72.2 5.0 -1.2 - 3.1 2.7

Total 1,170.8 1,265.8 36.7 -1.2 -18.1 15.7 16.0

Available-for-sale financial assets Held-for-trading
assets
In EUR million
31/12/2013 Nominal Carrying
amount
Available-
for-sale
reserve
Impairment Related
hedging
derivatives
Nominal Carrying
amount
Austria 68.2 76.6 3.3 - - - -
Maturing in 2017 or 2018 40.1 45.0 3.0 - - - -
Belgium 226.2 239.9 1.5 - -3.4 - -
Maturing in 2014 78.0 79.3 0.4 - - - -
Maturing in 2015 or 2016 102.7 109.5 0.6 - -3.4 - -
Maturing in 2017 or 2018 25.0 29.1 0.2 - - - -
Czech republic 5.0 5.8 0.1 - - - -
Maturing in 2017 or 2018 5.0 5.8 0.1 - - - -
France 92.5 99.5 3.6 - - - -
Maturing in 2014 14.2 14.6 0.1 - - - -
Maturing in 2015 or 2016 36.3 37.7 0.7 - - - -
Maturing in 2017 or 2018 42.1 47.2 2.8 - - - -

49.2 52.7 2.1 - - - -

- 62 -
Germany
Maturing in 2014 9.3 9.3 0 - - - -
Maturing in 2015 or 2016 16.0 16.6 0.6 - - - -
Maturing in 2017 or 2018 22.9 25.7 1.5 - - - -
Maturing in 2019 and later 1.0 1.1 0 - - - -
Ireland 70.5 76.2 3.1 - - - -
Maturing in 2014 9.1 9.1 0 - - - -
Maturing in 2015 or 2016 20.0 21.1 0.4 - - - -
Maturing in 2017 or 2018 41.4 46.0 2.8 - - - -
Italy 74.5 78.2 2.6 - - - -
Maturing in 2014 15.2 15.2 0.1 - - - -
Maturing in 2015 or 2016 5.2 5.4 0.1 - - - -
Maturing in 2017 or 2018 54.0 57.5 2.4 - - - -
Luxembourg 50.0 55.5 0.4 - -5.1 0.4 0.4
The Netherlands 73.1 74.7 1.6 - 0.7 - -
Maturing in 2014 9.2 9.4 0 - - - -
Maturing in 2015 or 2016 30.5 31.6 1.0 - - - -
Maturing in 2017 or 2018 8.6 9.7 0.7 - - - -
Maturing in 2019 and later 24.7 23.9 -0.1 - 0.7 - -
Norway - - - - - 0.1 0.1
Maturing in 2015 or 2016 - - - - - 0.1 0.1
Poland 15.3 18.1 - - -1.8 - -
Maturing in 2017 or 2018 10.9 13.0 0.2 - -1.8 - -
Maturing in 2019 and later 4.4 5.1 -0.2 - - - -
Slovakia 29.0 30.8 0.2 - -1.4 - -
Maturing in 2014 8.0 8.0 0 - - - -
Maturing in 2015 or 2016 11.0 11.6 0.2 - -0.2 - -
Maturing in 2019 and later 10.0 11.1 0 - -1.1 - -
Sweden 21.2 21.5 0.2 - - - -
Maturing in 2014 21.2 21.5 0.2 - - - -
Supranational 219.0 229.3 4.6 - -3.9 1.8 1.9
Maturing in 2014 13.8 13.9 0 - - - -
Maturing in 2015 or 2016 102.5 106.9 3.5 - - 0.1 0.1
Maturing in 2017 or 2018 54.8 56.9 0.4 - -1.3 1.4 1.5
Rest 89.0 99.2 0.6 - -2.2 1.3 1.2
Maturing in 2014 - - - - - 0.1 0.1
Maturing in 2015 or 2016 - - - - - 0.8 0.7
- - - - - - -
Total 1,082.6 1,158.0 23.8 - -17.0 3.5 3.5

- 63 -
1.2.3.3. Country Risk Management

The breakdown of Available-for-sale debt instruments and Loans and receivables per countries is as
follows:

Country NPL/
Impaired
repo
Commercial
Paper
Total Total
31/12/2012
Supranational - 520.6 520.6 - - - - -
France 11.0 467.4 478.4 25.0 646.6 35.8 707.4 17.5
Belgium - 407.5 407.5 74.9 - 10.0 84.9 59.4
Italy - 225.3 225.3 3.5 - 8.7 12.2 -
The Netherlands - 138.9 138.9 0.2 - 29.9 30.1 2.0
United States of America - 133.8 133.8 16.0 - - 16.0 -
Germany - 122.5 122.5 11.5 177.0 19.9 208.4 1.9
Luxembourg - 112.4 112.4 64.5 - - 64.5 275.5
Austria - 86.5 86.5 1.5 - 9.9 11.4 -
Spain - 86.1 86.1 2.0 - 14.9 16.9 61.6
United Kingdom - 80.7 80.7 87.2 793.8 58.8 939.7 0.1
Ireland - 76.4 76.4 - - - - -
Sweden - 47.1 47.1 0.4 - - 0.4 -
Russia - 32.3 32.3 - - - - -
Switzerland - 30.1 30.1 42.3 - - 42.3 10.7
Denmark - 24.7 24.7 6.3 - 19.9 26.2 -
Slovenia - 21.3 21.3 - - - - -
Slovakia - 18.6 18.6 - - - - -
United Arab Emirates - 16.6 16.6 0.1 - 10.0 10.1 -
Norway - 14.4 14.4 0.8 - - 0.8 -
Qatar - 12.0 12.0 0.2 - - 0.2 -
Finland - 11.6 11.6 2.8 - - 2.8 -
Czech Republic - 10.8 10.8 1.9 - - 1.9 -
Panama - 10.3 10.3 - - - - -
Canada - 10.2 10.2 6.0 - - 6.0 -
Poland - 10.1 10.1 3.8 - - 3.8 -
Other below EUR 10 million 1.0 79.0 80.0 35.0 - - 35.0 4.1
Total 11.6 2,807.1 2,818.7 385.8 1,617.3 217.8 2,221.0 489.2

- 64 -
Country NPL/
Impaired
repo
Commercial
Paper
Total Total
31/12/2013
Spain - 50.3 50.3 0.5 688.2 - 688.7 109.9
Italy - 136.4 136.4 49.4 511.0 - 560.5 -
United Kingdom - 78.5 78.5 57.0 486.4 - 543.4 6.6
France 1.6 348.8 350.4 37.4 125.5 - 162.9 80.3
Supranational - 566.8 566.8 - - - - -
Belgium - 371.9 371.9 50.7 - - 50.7 60.1
Luxembourg - 61.8 61.8 67.1 - - 67.1 268.1
Germany - 107.7 107.7 3.0 150.0 - 153.0 1.8
United States of America 2.3 98.3 100.7 43.9 - - 43.9 0.1
The Netherlands - 131.3 131.3 1.4 - - 1.4 0
Austria - 92.6 92.6 0.9 - - 0.9 0
Ireland - 78.6 78.6 5.9 - - 5.9 0
Switzerland - 21.0 21.0 34.4 - - 34.4 10.4
China - 2.3 2.3 52.2 - - 52.2 -
Japan - 3.5 3.5 50.8 - - 50.8 -
Sweden - 33.5 33.5 0.4 - - 0.4 0.2
Slovakia - 31.7 31.7 0.2 - - 0.2 -
Russia - 27.7 27.7 0.4 - - 0.4 -
Qatar - 27.8 27.8 0.3 - - 0.3 -
Canada - 23.1 23.1 2.5 - - 2.5 -
Poland - 21.7 21.7 1.6 - - 1.6 -
Czech Republic - 10.6 10.6 11.4 - - 11.4 -
Denmark - 13.2 13.2 4.4 - - 4.4 -
Brazil - 10.5 10.5 2.3 - - 2.3 -
Finland - 11.2 11.2 0.8 - - 0.8 -
United Arab Emirates - 11.4 11.4 0.2 - - 0.2 -
Hong Kong - 10.2 10.2 0.7 - - 0.7 -
Cayman Islands - - - 0 - - 0 10.0
Other below EUR 10 million - 58.3 58.3 19.4 - - 19.4 13.6
Total 3.9 2,440.8 2,444.7 499.3 1,961.2 - 2,460.5 616.0

- 65 -
2. Market Risk: Trading Risk


2.1.1. Origin of trading risk

KBL epb group being mainly Private Banking oriented, its trading risk-taking activity aims to support
the core business activities. The trading positions reflect the necessary intermediation of the Head
Offices Dealing Room, supporting client flows in terms of debts instruments, equity instruments,
structured products, forex and deposits. Most of the instruments used by the Dealing Room are plain
vanilla.

2.1.2. Trading risk policy

The risks incurred therefore are mainly short-term interest rate risk (treasury in the currencies of
clients), medium/long-term interest rate risk (bond trading, particularly in EUR), price volatility risk
(trading in listed equities and structured products sold to private clients) and forex risk (spot and
forward exchange rates in the liquid currency pairs used by clients).

2.1.3. Trading decision making process / governance

Trading activities are concentrated in Luxembourg. The primary limits are granted by the Board Risk
Committee (according to the Risk Appetite Statement) to the Executive Committee which is
responsible for the overruns validation. Trading exposures compared to their respective primary limits
are communicated on a quarterly basis to the Board Risk Committee which is also informed when
triggers are reached.

2.1.4. Measurement and monitoring of trading risk

The system of primary limits in place at KBL epb is based on:

- nominal amounts for the activities subject to currency risk (Forex) and to price volatility risk
(Equity, Third Party Funds, Structured Products, Special Bonds);
- 10 bpv limits for activities subject to interest rate risk (Treasury and Bond Desks).

These primary limits are supplemented by a structure of secondary limits allowing a more detailed
analysis of the trading risks. Those secondary limits consist in concentration limits by currency and by
time bucket as well as in limits by issue and issuer based on their rating or on their market liquidity.

Since August 2013, the set up of a Historical Value at Risk measure on each trading activity is tested.
The implementation is planned to be finalized mid 2014.

2.1.5. Concentration Risk

Concentration risk by issuer is strictly governed by conservative limits restricting the trading in non-
investment grade debts and in illiquid equities, which leads to a well diversified trading portfolio.

Notwithstanding the exposure on KBC Bank, the Banks former mother company, for which the
outstanding has strongly decreased in 2013 (EUR 23.0 million end of year) and the exposure on
International Islamic Liquidity Management issues for which KBL epb operates as Primary Market
Dealer (EUR 43.2 million end of year), the trading activity, as at 31 December 2013, was diversified on
139 Corporate and Financial issuers with an average outstanding of +/- EUR 0.7 million, with a
maximum of EUR 7.1 million on EIB.

The evolution of exposures related to each activity compared with their respective limits (primary and
secondary), as well as the results and key facts, are reported daily to the Heads of the Dealing Room
and of the Risk Control Function. They are also weekly reported to the KBL epb Executive Committee,
on a monthly basis to the ALCO and on a quarterly basis to the Group Board Risk Committee.

- 66 -

As at 31 December 2013 and 2012, the usage of limits in the Trading activities are as follows (KBL
epb group) :

Limit in 10
bpv (1)
Oustanding
31/12/2012
Maximum
observed in
2013
Average
observed in
2013
Oustanding
31/12/2013
In EUR million

Treasury 2.5 0.6 1.6 0.6 0.7
Bond 0.8 0.2 0.7 0.2 0
(1) BPV 10 bps oustanding corresponds to the sum in abs value of the BPV 10 bps in each currency

Limit in
Nominal
Amount
Oustanding
31/12/2012
Maximum
observed in
2013
Average
observed in
2013
Oustanding
31/12/2013
In EUR million

Forex (bullions
included) 20.0 4.4 9.4 4.2 3.3
Third Party funds 5.0 - 0.4 0.1 0.2
Equity 8.0 0.2 4.6 0.8 0.2
Bond Special (2) 20.0 12.7 14.7 6.7 1.9
Structured Product 80.0 54.2 72.4 59.4 51.4
(2) Bond Special activity: constant maturity swap notes (CMS) and steepeners

Over the year 2013, oustandings in each activity remained well below the authorised limit as
expressed by the maximum outstanding observed.

3. Market Risk: ALM Risk


3.1.1. Origin of ALM risk

The traditional activity of a private bank entails little ALM risk
3
compared to a retail bank: most of the
client assets are reported as an off-balance sheet item in the form of securities deposits. Most short-
term client cash deposits offer variable rates linked with money market rates and the same applies to
Lombard/mortgage loans to customers. When fixed rates are granted for loans, hedging swaps are
contracted.

As a consequence, the ALM interest rate risk is mainly entailed by the securities portfolios set up
within the frame of the ALM policy:

- fixed income bonds portofolios dedicated to the reinvestment of the free capital and of fixed rate
sight deposits and savings accounts;
- fixed income securities, according to a return/interest rate risk optimisation approach, included in
the bonds portfolio dedicated to the reinvestment of other stable liquidities
4
.

The ALM equity risk is induced by an investment portfolio invested in direct lines of equities or in UCI
shares. This portfolio is managed according to the ALCOs expectations for the major indices per
markets.

3
The ALM risk is defined as the market risks induced by the balance sheet, except the trading activity.

4
This portfolio also contains interest rate risk-free securities - swapped or FRN -, according to a return/credit risk optimisation
approach.

- 67 -
KBL epb group is not exposed to any ALM forex risk as no active foreign exchange exposure is taken
(assets are funded in their respective currencies).

3.1.2 ALM decision making process/governance

The ultimate responsibility for the ALM of KBL epb group is held by the monthly Group ALCO
Committee, which is an Executive Committee extended to the representatives of the ALM Function, of
the Risk Control Function, of Global Financial Markets in addition to the Chief Investment Officer.

The ALCO validates a.o. strategies in terms of management of the gap between resources and their
utilisations, in terms of return on equity enhancement, liquidity management and mitigation of the
related risks.

Those strategies are proposed by the ALM Function (created in 2013) which has the responsibility for
the preparation of the ALCO meetings and of the topics which are submitted to its decisions. The
Function is also in charge of the day-to-day implementation of the ALCO decisions. When they have a
Group dimension, it has to ensure their implementation within the limits of the governance constraints
in place.

Under this new structure, the Risk Control Function endorses a role of second level control entity,
issuing opinions on the proposals and monitoring the risks related to the ALM activity on a recurring
basis.

3.1.3 ALM policy

A document entitled Investment Policy and ALM framework has been drafted by the ALM Function. It
is in line with the Risk Appetite Statement expressed by the Board of Directors and describes a.o. the
ALM objectives, the ALM governance and constraints (credit, liquidity, risk ). Its validation process is
ongoing.

3.1.4. Measurement and monitoring of ALM risks

In its Risk Appetite Statement dated 18 July 2013, the Board Risk Committee has expressed its risk
appetite for ALM interest rate risk and equity risk, mainly through limits on Value at Risk indicators,
sensitivity measures and global outstanding at KBL epb group level.

Regarding the interest rate risk, one of the limits is based on the regulatory 200 bpv (basis point value)
limit for all banking book positions of KBL epb group. While the regulatory limit amounts to 20% of own
funds, the BRC limit has been fixed at 18%; the 200 bpv sensitivity equals 4.1% as at 31 December
2013 for KBL epb (31 December 2012: 5.6%)

On the other hand, the interest rate Value at Risk 99% - 1 year amounts to EUR 46.8 million for KBL
epb as at 31 December 2013 (31 december 2012: EUR 72.4 million). As mentioned above, the related
Risk Appetite limit has been set for KBL epb group only (limit of EUR 150 million, for an exposure of
EUR 81.2 million as at 31 December 2013).

Regarding the equity (price) risk, the Risk Appetite statement is expressed in terms of limits on equity
Value at Risk, by the fixing of stop losses and in terms of maximum size for listed equities as for
alternative equity investments for the whole Group.

The Value at Risk 99% - 1 year amounts to EUR 96.9 million for KBL epb as at 31 December 2013
(31 December 2012: EUR 68.0 million). But similarly, the Risk Appetite limit has been set for KBL epb
group only (limit of EUR 150 million, for an exposure of EUR 130.8 million as at 31 December 2013).

- 68 -

3.2.1. Interest rate

3.2.1.1. Interest rate sensitivity

The sensitivity of the economic value of the balance sheet to interest rates (impact of a parallel
increase by 1% of the interest risk curve) is as follows for KBL epb :

In EUR million
Less
than 3
months
Between
3 months
and 1
year
Between
1 year
and 3
years
Between 3
years and
5 years
More
than 5
years

Total
100
bpv

Carrying
amount
100 bpv as at 31/12/2012

Financial assets -9 -10 -14 -29 -37 -99 7,552
Held-for-trading -1 -5 0 0 0 -6 446
Designated at fair
loss 0 0 0 - 0 0 15
Available-for-sale
financial assets 0 -2 -13 -28 -34 -78 3,682
Loans and
receivables -1 -2 -1 -1 -3 -7 3,309
Hedging derivatives -7 0 0 0 0 -8 34
Accruals - - - - - - 66

Financial liabilities 13 28 8 13 5 66 6,850
Held-for-trading 0 5 0 - - 6 255
Measured at
amortised cost
(excluding deposits
from CB) 3 2 7 5 5 23 6,244
Subordinated
liabilities 0 0 0 7 0 7 254
Hedging derivatives 9 20 0 0 - 30 67
Accruals - - - - - - 31

Gap 4 18 -7 -17 -32 -33

- 69 -
In EUR million
Less
than 3
months
Between
3 months
and 1
year
Between
1 year
and 3
years
Between 3
years and
5 years
More
than 5
years

Total
100
bpv

Carrying
amount
100 bpv as at
31/12/2013

Financial assets -3 -5 -19 -29 -34 -90 7,569
Held-for-trading -0 -2 -1 -3 -2 -9 285
Designated at fair
loss -0 - -0 - - -0 0
Available-for-sale
financial assets -0 -1 -13 -25 -29 -68 3,378
Loans and receiables -2 -1 -0 -1 -3 -7 3,823
Hedging derivatives -1 -0 -5 - - -6 24
Accruals - - - - - - 59

Financial liabilities 4 5 17 17 24 67 7,074
Held-for-trading 0 2 2 3 2 10 210
Measured at
amortised cost
(excluding deposits
from CB) 3 3 6 5 5 21 6,540
Subordinated
liabilities 0 0 5 0 0 5 233
Hedging derivatives 0 0 5 9 16 31 62
Accruals - - - - - - 30

Gap 1 0 -2 -12 -10 -23

The sensitivity of the balance sheet has decreased since end of 2012 mainly due to the realignement
of the portfolio dedicated to the reinvestment of the free capital (around EUR 181 million) and to
movements of the basic interest rate curves.
The sensitivity of the interest margin of KBL epb to the interest rates (impact of a parallel increase by
1 % of the interest rate risk curve) is as follows:

In EUR million

Less
than 3
months
Between 3
months
and 1 year
Between
1 year
and 3
years
Between
3 years
and 5
years
More
than 5
years

Total
impact Sensitivity 100 bpv Shift
31/12/2012

Financial assets -2.0 -9.2 -12.1 -10.9 -14.6 -48.8
Financial liabilities 3.5 9.7 6.7 5.7 15.3 40.8

Net impact 1.5 0.4 -5.4 -5.2 0.7 -8.0

In EUR million

Less
than 3
months
Between 3
months
and 1 year
Between
1 year
and 3
years
Between
3 years
and 5
years
More
than 5
years

Total
Impact
Sensitivity 100 bpv Shift
31/12/2013

Financial assets -3.2 -4.7 -9.3 -7.3 -5.5 -30.1
Financial liabilities 3.7 5.1 8.4 4.4 3.7 25.3

Net Impact 0.5 0.3 -1.0 -3.0 -1.8 -4.8

- 70 -
3.2.1.2. Concentration of interest rate risk

The sensitivity analysis shows that the main exposure to a parallel increase of the interest rates curve
is located in the time buckets beyond 3 years, reflecting the current ALM policy (reinvestment of the
free capital and of client deposits in cyclical portfolios up to 7 years, reinvestment of the excess
liquidity). However, this exposure has to be put into perspective considering the permanent monitoring
of the open positions in the liquidity portfolio by the ALM Function (and reviewed by Risk Control).

3.2.2. Equity risk

3.2.2.1. Sensitivity of equity risk

Regarding the equity risk, the impact of a decrease of 25 % on both the income statement
(impairment) and the equity AFS revaluation reserve (excluding Equity instruments at cost) is as
follows for KBL epb:

In EUR thousand
Current
situation
(1)

Impact of a markets
decrease of 25%
Stock after
decrease

31/12/2012


Gain/Loss 63,850 -52,038 11,812

Equity impact (AFS reserve) 63,851 -48,741 15,110

Income statement impact (impairment) -1 -3,296 -3,298


In EUR thousand
Current
situation
(1)

Impact of a markets
decrease of 25%
Stock after
decrease

31/12/2013


Gain/Loss 63,627 -75,127 -11,500

Equity impact (AFS reserve) 63,629 -74,476 -10,847

Income statement impact (impairment) -2 -651 -653


3.2.2.2. Concentration of equity risk

An exposure on the equity market(s) can be created/increased when the expectations for the equity
market(s) are, according to an analysis validated by the ALCO, declared to be favourable. Such
analysis will also decide on the relative weights of Europe, USA and Emerging Markets. But within the
various regions, the investments are properly diversified in terms of sector, country/region and number
of positions held. Concentration principles are respected for individual equity lines or individual
investment funds, expressed in absolute amounts and in percentage of daily volume traded (or for
fund of total NAV).
Those diversification rules do not apply when the Bank is a seed investor in a new investment fund
managed by an asset management entity of the Group. In this case, the commercial objectives of
such investment prevail over the objectives and constraints set for standard investments in equity
funds.

Following the principles presented above, the breakdown of the whole Equity portfolio of KBL epb
(direct lines and Funds) per nature and per region shows a prominent pan-European part as at end of
December 2013:

- 71 -
In EUR million

REGION / NATURE 31/12/2013
Europe (Equity Funds + direct lines) 132.7 49%
Europe (Diversified Funds) - 0%
EUR (Fixed Income Funds) - 0%
World (Diversified Funds) 39.4 15%
World (Equity Funds + direct lines) 18.6 7%
United States (Equity Funds + direct
lines) 40.0 15%
USD (Fixed Income Funds) 20.3 8%
Asia (Equity Funds + direct lines) 17.8 7%
TOTAL 268.7 100%
Other Equities 31.8
Total Equities portfolios
300.5

However, within these regions, the diversification is permanently targeted. For direct lines (equities),
the breakdown per country is as follows as at 31 December 2013 :

In EUR million

COUNTRY 31/12/2013
France 30.2 32%
Switzerland 15.3 16%
United States 14.6 15%
Germany 10.2 11%
The Netherlands 7.9 8%
Sweden 6.7 7%
Belgium 3.2 3%
Spain 2.8 3%
Luxembourg 1.7 2%
Finland 1.4 1%
United Kingdom 0.8 1%
Italy 0.5 0%
TOTAL Direct Lines
Equity
95.3 100%
Funds and other
205.3

Total Equities portfolios
300.5

- 72 -
Overweight in French equities is being gradually reduced with the sale of legacy positions
(representing EUR 10 million of the France equity exposure as of 31 December 2013).
Similarly, the breakdown of the direct lines per economic sector reflects the permanent attention to the
diversification of the Equity portfolio:

In EUR million
SECTOR 31/12/2013
Industrial 20.8 22%
Consumer, cyclical 16.4 17%
Consumer, non cyclical 15.9 17%
Financial 14.2 15%
Basic materials 8.1 8%
Energy 7.1 7%
Communications 7.1 7%
Technology 3.6 4%
Utilities 2.1 2%
TOTAL 95.3 100%
Funds and other 205.3

Total Equities portfolios 300.5

On the other hand, as at 31 December 2013, the individual exposures entailing equity risk, except
seed moneys and pure bonds funds, do not exceed EUR 25 million per Equity Fund and EUR 10
million per direct line (with historical positions being the most significant).

4. Liquidity risk


4.1.1. Origin of Liquidity risk

Liquidity risk is constantly monitored and is not seen as a major risk within KBL epb group. Indeed, the
Bank as a Group has a large and stable funding base due to the natural accumulation of deposits from
its two core businesses: Private Banking and Global Investor Services, which on the other hand
consume relatively little liquidity. The overall funding gap is structurally and globally positive and KBL
epb group is a net lender recycling structural liquidity positions in the interbank market.

4.1.2 Liquidity decision making process/governance

Like for Assets and Liabilities Management, the Group ALCO Committee has the final responsibility of
the Liquidity Management of the Bank. The ALM Function proposes strategies for the management of
long term liquidity (putting, a.o. a strong emphasis on ECB eligible as well as Basel III eligible bonds),
while the short term liquidity management is delegated to the Treasurer within strict limits (see trading
risk above).

The Risk Control Function acts as a second level control entity, issuing opinions on the proposals and
monitoring the liquidity risk on a daily basis.

4.1.3 Liquidity policy

The current policy applied by KBL epb group is to centralise the placement of all liquidity surpluses at
the Head Office level. However, when local regulatory constraints exist (large exposures regime,
liquidity constraints), the subsidiaries liquidity is collateralized or is reinvested in local ALM portfolios
under the supervision of both Group ALM and Risk Control Functions.

- 73 -
At the Head Office, the stable part of global funding is reinvested in ALM portfolios following a
conservative strategy (a.o. respecting minimum European Central Bank/Basel III eligibility and rating
criteria) and the unstable part of global funding is replaced in the short-term interbank market, the
majority in the form of reverse repo transactions.

4.1.4. Measurement and monitoring of liquidity risk

The Board Risk Committee has expressed its Risk Appetite in terms of liquidity risk, by imposing limits
on the future Basel III ratios (LCR and NSFR), and on deposits outflows. The loan-to-deposit ratio and
some concentration indicators are more specifically monitored by the ALCO Committee.

As the excess liquidity throughout the Group is centralised at KBL epbs Treasury Department,
concentrating the Groups liquidity risk, KBL epbs liquidity situation is closely monitored through both
operational and structural indicators.

The operational liquidity of KBL epb is monitored on a daily basis by the Risk Control Function, which
reports to Financial Markets (Dealing Room):

- a contractual liquidity gap of up to five days, as if the activity was to be continued (no stress test).
This report is also sent to the BCL;
- a stock of available liquid assets;
- a daily estimate of the Basel III Liquidity Coverage Ratio, which stood at 135.4% as at
31 December 2013;
- the value of quantitative indicators, which can potentially trigger the Liquidity Contingency Plan
(the Plan consists in various actions depending on the gravity - minor, major - of the liquidity
crisis).

Moreover, the Loan-to-Deposit (LTD) ratio is established on a monthly basis. As at 31 December
2013, it stood at 17.5%, confirming the excellent liquidity situation of KBL epb as natural deposit
collector.

Liquidity stress tests have been refined in 2013 in order to better fit the business model of KBL epb
group defined by its shareholder. Their conclusions are that the Group can survive a severe liquidity
crisis for 3 months without affecting its business model.


4.2.1. Maturity analysis of liquid stock

The maturity analysis of financial assets held for managing liquidity risk (unencumbered marketable
assets) is as follows:

In EUR million

Stock of
available
assets
Less
than
3 months
Between
3 months
and
1 year
Between 1
year and
3 years
Between 3
years and
5 years

More
than 5
years
Marketable assets
31/12/2012


2,732.1 2,091.9 1,715.6 1,162.9

556.0
CB eligible

1,794.1 -85.1 -311.1 -512.2 -489.7

-581.6

938.0 -555.1 -65.1 -40.5 -117.2

-115.2
Total

2,732.1 -640.2 -376.3 -552.7 -606.9

-696.8

Residual stock of available assets 2,732.1 2,091.9 1,715.6 1,162.9 556.0

-140.8

- 74 -
In EUR million

Stock of
available
assets
Less
than
3 months
Between
3 months
and
1 year
Between 1
year and
3 years
Between 3
years and
5 years

More
than 5
years
Marketable assets
31/12/2013


2,999.2 1,605.0 1,541.8 673.2

193.2
CB eligible

2,177.7 -1,219.3 -46.5 -684.5 -359.4

-210.5

821.5 -174.9 -16.7 -184.1 -120.7

-216.3
Total

2,999.2 -1,394.1 -63.2 -868.6 -480.0

-426.7

Residual stock of available assets 2,999.2 1,605.0 1,541.8 673.2 193.2

-233.5

4.2.2. Maturity analysis of financial assets and liabilities

The analysis by remaining contractual maturity for financial assets and liabilities is as follows:

In EUR million

Less
than
3 months
Between 3
months
and 1 year
Between 1
year and
3 years
Between 3
years and
5 years
More
than 5
years
Undetermined Total
31/12/2012

banks 409 - - - - - 409

Financial assets 2,960 862 1,011 891 915 913 7,552
Held-for-trading 159 72 121 41 52 1 446
Designated at fair value through
profit or loss - 8 7 - 0 - 15
Available-for-sale financial assets 121 362 729 792 766 912 3,682
Loans and receivables 2,612 420 154 25 97 0 3,309
Hedging derivatives 2 - 0 33 0 - 34
Accruals 66 - - - - - 66

Other assets - - - - - 250 250

TOTAL ASSETS 3,369 862 1,011 891 915 1,163 8,212

Deposits from central banks - - - - - - -

Financial liabilities 6,004 329 199 273 44 - 6,850
Held-for-trading 154 14 59 6 22 0 255
(excluding subordinated
liabilities) 5,812 310 120 1 1 0 6,244
Subordinated liabilities 7 3 8 233 2 - 254
Hedging derivatives 0 2 12 33 20 - 67
Accruals 31 - - - - - 31

Other liabilities - - - - - 239 239

Shareholders' equity - - - - - 1,122 1,122

TOTAL LIABILITIES 6,004 329 199 273 44 1,361 8,212

GAP

-2,635 533 812 618 872 -198

- 75 -

31/12/2012

Cashflows by bucket

Less than 3
months
EUR
thousands
Between 3
months and 1
year
EUR
thousands
Between 1
year and 3
years
EUR
thousands
Between 3
years and 5
years
EUR
thousands

More than
5 years
EUR
thousands

Total
EUR
thousands

Carrying
amount
EUR
million

Inflows 6,577 3,415 155 52 23 10,222 263
Interest rate 37 123 152 51 22 384 134
Equity 0 1 1 1 1 5 19
Currency 6,540 3,291 2 - - 9,833 109
Other - 0 - - - 0 0
Outflows -6,575 -3,440 -159 -48 -23 -10,245 324
Interest rate -37 -133 -156 -47 -22 -395 182
Equity 0 -1 -1 -1 -1 -4 18
Currency -6,538 -3,307 -2 - - -9,846 124
Other 0 - - - - 0 0

Gap - Derivatives 3 -25 -5 4 -1 -24

In EUR million

Less
than
3 months
Between
3 months
and
1 year
Between 1
year and
3 years
Between 3
years and
5 years
More
than 5
years
Undetermined Total
31/12/2013

Cash and balances with
central banks 610 - - - - - 610

Financial assets 3,561 470 963 777 818 979 7,569
Held-for-trading 107 49 75 20 34

1 285
through profit or loss - - - - 0

- 0

978 3,378
Loans and receiables 3,212 192 163 91 164 0 3,823
Hedging derivatives 1 - 22 0 1 - 24
Accruals 59 - - - - - 59

Other assets - - - - - 234 234

TOTAL ASSETS 4,171 470 963 777 818 1,213 8,413

Deposits from central banks 0 - - - - - 0

Financial liabilities 6,516 215 275 28 36 5 7,074
Held-for-trading 142 22 25 8 7 5 210
Designated at fair value through
profit or loss - - - - - - -
(excluding subordinated liabilities) 6,342 189 8 0 1 0 6,540
Subordinated liabilities 2 2 226 2 1 - 233
Hedging derivatives 0 2 15 18 27 - 62
Accruals 30 - - - - - 30

Other liabilities - - - - - 207 207

Shareholders' equity - - - - - 1,131 1,131

TOTAL LIABILITIES 6,516 215 275 28 36 1,343 8,413

GAP

-2,345 256 689 749 782 -130

- 76 -


31/12/2013

Cashflows by bucket

Less than 3
months
EUR
thousands
Between 3
months and
1 year
EUR
thousands
Between 1
year and 3
years
EUR
thousands
Between 3
years and 5
years
EUR
thousands

More than
5 years
EUR
thousands

Total
EUR
thousands

Carrying
amount
EUR
million

Inflows 7,120 1,882 139 46 72 9,258 187
Interest rate 50 116 134 30 19 349 101
Equity 0 0 0 1 0 2 8
Currency 7,070 1,766 4 16 52 8,908 78
Other - - - - - - 0
Outflows -7,156 -1,908 -153 -61 -82 -9,360 284
Interest rate -47 -132 -139 -38 -21 -378 140
Equity 0 -0 -0 -0 -0 -1 8
Currency -7,109 -1,776 -14 -22 -60 -8,982 136
Other - - - - - - 0

Gap - Derivatives -36 -26 -15 -15 -10 -102

4.2.2. Concentration risk

The concentration risk the Bank is facing in terms of liquidity is twofold:

- concentration in assets in which the liquidity is reinvested: this risk is monitored through the
credit risk procedures (as described above);
- concentration in the funding sources. The Board Risk Committee has defined a specific Risk
Appetite indicator with limits and triggers, based on the relative weight of the top 20 Private
Clients Deposits among all deposits. This indicator is monthly monitored by the ALCO at
Group level, completed with a concentration indicator for all significant counterparties in terms
of funding sources (>1% of total liabilities, according to Basel III definition), and quarterly by
the BRC. The percentage amounts to 18.78% for KBL epb as at 31 December 2013 for a limit
of 25%.

- 77 -
Note 38 Audit fees

in EUR thousand 31/12/2012 31/12/2013

Standard audit services 581 504
Audit related services - 121
Other services - 368

Total 581 993

Note 39 Significant subsidiaries

As at 31 December 2013, the list of the consolidated companies in which the Bank has a significant
holding of at least 20% of the capital is as follows :

NAME AND COUNTRY OF THE HEAD OFFICE
CAPITAL
HELD
EQUITY
Excluding result of
the year (2)
RESULT
(2)
Brown, Shipley & Co, Ltd U.K. (1) and (3) 100.00% GBP 42,317,536 GBP 5,486,931
KBL (Switzerland) Ltd - Switzerland 99.99% CHF 80,192,756 CHF -19,691,174
KBL Richelieu Banque Prive France 100.00% EUR 128,928,238 EUR 6,121,893
KBL Monaco Private Bankers S.A. Monaco 100.00% EUR 24,916,122 EUR 679,382
Financire et Immobilire S.A. Luxembourg (1) and (3) 100.00% EUR 2,418,365 EUR 71,101
KBL Immo S.A. Luxembourg (1) and (3) 100.00% EUR 35,726,955 EUR 546,479
Centre Europe S.A. Luxembourg (1) and (3) 100.00% EUR 25,292,801 EUR 635,826
Merck Finck & Co Germany (1) 100.00% EUR 112,083,393 EUR 106,549
European Fund Administration S.A. Luxembourg (1) 48,58% EUR 23,615,733 EUR 462,066
Kredietrust Luxembourg S.A. Luxembourg (1) and (3) 100.00% EUR 6,520,727 EUR 4,442,979
Theodoor Gilissen Bankiers N.V. Netherlands (3) 100.00% EUR 76,557,277 EUR 5,457,527
Puilaetco Dewaay Private Bankers S.A. Belgium (1) 100.00% EUR 83,526,143 EUR 11,482,399
KBL Beteiligungs A.G. Germany 100.00% EUR 32,248,259 EUR -1,411,207
Vitis Life S.A. Luxembourg 100.00% EUR 40,645,238 EUR 16,971,292

(1) : percentage of direct and indirect holdings.
(2) : provisional, social, local GAAP figures.
(3) : Local GAAP = IFRS ; equity excluding reserves on the available-for-sale portfolio and cash flow hedge effects.

Note 40 Events after the balance sheet date

There was, after the closing date, no significant event requiring an update of the provided information
or adjustments in the annual accounts as of 31 December 2013.

- 78 -
MANAGEMENT REPORT

- 120 -
DECLARATION ON THE CONFORMITY OF THE ANNUAL ACCOUNTS

We, Yves Stein, Chief Executive Office, and Yves Pitsaer, Chief Financial & Risk Officer, confirm, to
the best of our knowledge, that the annual accounts which have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union give a true and fair
view of the assets, liabilities, financial position and profit or loss of KBL European Private Bankers
S.A., and that the management report includes a fair review of the development and performance of
the business and the position of KBL European Private Bankers S.A. together with a description of the
principal risks and uncertainties that the Bank faces.


Yves Stein Yves Pitsaer
Chief Executive Officer Chief Financial & Risk Officer
2013 2012 2011 2010
ANNUAL REPORT
AACHEN
AMSTERDAM
ANTWERP
AUGSBURG
BARCELONA
BERLI N
BI RMI NGHAM
BREST
BRUSSELS
COLOGNE
DSSELDORF
EDI NBURGH
EI NDHOVEN
ESSEN
FRANKFURT
GENEVA
GRNWALD
HAMBURG
HASSELT
I NGOLSTADT
JAMBES
KOBLENZ
LAS PALMAS
LAUSANNE
LEEDS
LI GE
LI NGEN
LONDON
LUGANO
LUXEMBOURG
LYON
MADRI D
MANCHESTER
MONACO
MUNI CH
MNSTER
MURCI A
NANCY
PARI S
ROTTERDAM
ROTTWEI L
SI NT- MARTENS- LATEM
STRASBOURG
STUTTGART
WAREGEM
ZURI CH
EUROPES
PRIVATE BANKING GROUP
2013 ANNUAL REPORT
AMSTERDAM BRUSSELS GENEVA LONDON LUXEMBOURG MADRI D MONACO MUNI CH PARI S

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