Smart thinking for a new investment strategy€¦ · BHF Kleinwort Benson Group S.A 27,8 % Berliner Effektengesellschaft AG, Berlin 25,5 % Riedel Gruppe 15,0 % Executive Board quirin

Business report 2015Smart thinking for a

new investment strategy

Capital stock € 43.106.485,00

BHF Kleinwort Benson Group S.A 27,8 %

Berliner Effektengesellschaft AG, Berlin 25,5 %

Riedel Gruppe 15,0 %

Executive Board quirin bank AG 8,1 %

Diversified holdings 23,6 %

Balance sheet total of company € 407 million

Equity capital € 45 million

Annual financial report price of stock € 1.50

Annual result of company € 4.3 million

Number of employees 202

quirin bank AG

December 31, 2015

WKN: 520230 / ISIN: DE 0005202303

* formerly: RHJ International S.A., Brussels

1 | 4 | PREFACE

ince its foundation, the quirin bank has seen itself as modern bank that thinks outside the box. This also means that it was the first bank to

make fee-based consulting the basic principle of asset management.

In addition, with “Market – Opinion – Knowl-edge” we developed an investment system which replaces the often speculative and emo-tional previous investment strategies with a rational basis which is targeted and suc-cess-oriented.

“quirion” also stands for a new attitude. Intelli-gent money investment is now also possible online. For a modern elite which appreciates comfortable and transparent solutions.

On the following pages, Prof. Stefan May will present the thinking of the quirin bank. He is the PIONEER of new banking and asset man-agement concepts and an important driver of the quirin bank.

55

1

2

3

4

5

Preface 8 Preface of the Executive Board

13 We think to the future

Management report 34 1. Framework conditions

35 2. Positioning of the bank

40 3. Business development

47 4. Risk report

58 5. Opportunity and prognosis report

Annual financial report 64 Balance sheet for December 31, 2015

68 Profit and Loss Statement for

December 31, 2015

72 Annex for December 31, 2015

Further information 102 Confirmation certificate of the auditor

104 State-related reporting

Report of the Board of Supervisors 108 Report of the Board of Supervisors

112 Contact / Subsidiaries / Imprint

1 | 6 | PREFACE

7

1 Preface

1 | 8 | PREFACE

Dear shareholders, dear customers,dear business partners, dear friends of the quirin bank,

the continued dynamic economic environment and the positive development of

the capital markets in 2015 laid the foundation for a successful fiscal year for

the quirin bank: the annual profits on December 31, 2015 were € 4.3 million after

taxes. We were thus able to beat the result of the previous year of € 2.9 million

by 48 %. Due to the allocation of the annual profits into the reserves the equity

capital increased to € 45 million (previous year: € 41 million). Before taxes, we

achieved an equity capital yield of 11.9 %.

Both business areas – private banking and business banking – contributed to the

successful annual financial report. The commission surplus earned by private

banking, which reflects the earned consulting fees, increased by 24 %.

The managed assets in the past fiscal year 2015 increased by about € 200 million

to € 2.6 billion. Overall, the already positive contribution margin of the previous

years in private banking was once again clearly improved. Correspondingly, the

cost/income ratio (CIR) decreased from 82 to 74 %. The CIR is defined as the re-

lation of regular cost to regular income of the business areas.

The investment concept “Market - Opinion - Knowledge” (MMW) already intro-

duced in in 2013 was consistently developed in the reporting period. In the mean-

time, all former “multi-asset” customers have been transferred to MMW. The

foundation of this concept based on insights from financial market research is

systematic and disciplined investing into the world-wide stock and bond markets.

The goal is to ensure customers receive the “fair yield of the market” in form of

so-called “risk premiums” at a calculable risk despite the continuing low-interest

environment. An approach which moves away from the active management con-

cepts which dominate the market and which current and prospective customers

are asking for more and more.

9

The business area private banking covers personal customer care by fee-based

consultants of the bank as well as an online platform for digital asset manage-

ment operated under the brand name “quirion”. The bank tolled out “quirion”

in November 2013. At the end of 2015, there were already 700 customers with a

volume of € 28 million. Compared to the previous year (31.12.2014), the customer

number was increased by 171 % and the value of the managed assets by 228 %.

This confirms the bank's digitization strategy which plans to open the future

market of digital banking services as one of the major innovators.

In the past fiscal year, the private banking also managed the private customer

business of the subsidiary Berliner Effektenbank. Due to the strategic orientation

toward fee-based consulting, it was formally sold on February 1, 2016 to the Trade-

gate AG Wertpapierhandelsbank. The successive transfer of the customers began

already in the second half of 2015 and will continue until the first half of 2016.

The business area business banking with its program targeted at medium-sized

companies achieved a good commission result again but was unable to reach the

very good value from the previous year; the business banking thus was at the

same high level as in 2013. We are pleased that the trading result with institution-

al customers could be more than doubled thanks to the positive capital market

environment. In comparison to the previous year, the CIR of business banking

slightly increased from 58 % to 64 %.

On October 1, 2015, the business area was reinforced by a capital market team

specialized in the management of institutional customers. This is supposed to

increase the effectiveness in the area “institutional customer management” and

continue the strategic growth course.

1 | 10 | PREFACE

One of the most challenging projects of the past year for the bank was no doubt

the introduction of a new core banking software, operated by the Avaloq Sourcing

(Germany) AG. The associated system change is supposed to make the process-

es in the bank faster, more efficient, and more robust and improve the service

quality for customers. After two and a half years in the project, the new banking

technology was successfully implemented at the turn of 2015/16.

Already before this, on September 22, 2015, the still existing minority holdings

of the quirin bank in the Avaloq Sourcing (Germany) AG were sold to the Swiss

Avaloq Group. The company had already taken over the so-called business process

outsourcing business (BPO business) at the beginning of 2013 which had until

then been operated by the quirin bank.

On average in 2015, in addition to the four members of the Executive Board, the

bank had 202 employees (previous year 196) and also 202 employees on the bal-

ance sheet effective date (previous year 195). Stefan Spannagl, the member of the

Executive Board responsible for the BPO business, resigned his seat on February

29, 2016 after more than ten years of activity at the quirin bank and will work

exclusively for the Avaloq Sourcing (Germany) AG from this time forward.

11

11

From the left: Johannes Eismann,Karl Matthäus Schmidt,Dr. Marcel Morschbach

For the fiscal year 2016, the Executive Board expects another positive result.

However, the framework conditions continue to be challenging due to the volatile

markets and the tightening regulatory environment. Increased investments into

new services, integrated consulting processes, and the consequent development

of the online platform quirion are supposed to lay the foundations for sustained

success in the future.

Karl Matthäus Schmidt Johannes Eismann Dr. Marcel Morschbach Chairman Board Member Board Member

Professor Stefan MayProfessor for banking,

financial market analysis,

and portfolio management

at the Business School of

the Technical University

Ingolstadt

1 | 12 | WE THINK TO THE FUTURE

Professor Stefan MayProfessor for banking,

financial market analysis,

and portfolio management

at the Business School of

the Technical University

Ingolstadt

We think to the future.

13

We think differently.“Despite all the complaints, there is still a tremendous potential for revenue on the international financial markets which needs to be exploited - but one needs a system.


Market – Opinion – Knowledge

Fee-based consulting

Quirion

We have rethought the finance world three times with our scientific investment concept 'Market – Opinion – Knowledge', our business model of independent fee-based consulting, and our robo advisor quirion.”

15

We think in terms of partnership.

“As fee-based consulting bank, we do not need to tell you

stories about trending products or dream yields. We do not

live by selling products.”

“Instead, we can implement an intelligent form of financial

investment together with you from which you can profit

sustainably.”

Professor Stefan MayHead of Asset Management

quirin bank


The principle of

fee-based consulting

We think in terms of partnership.

“The nice thing about the quirin

bank is that it is on my side.”

Andrea Müller*

Customer since 2007

* Name changed

17

“With a combination of the three components 'Market', 'Opinion', and 'Knowledge' you actively determine your yield chances and risk profile. You asset management is implemented in the most efficient way.”

We think systematically.


Opinion

Knowledge

Market

We think systematically.

19

Quirion

We think innovatively.“Many private investors want to implement their asset management under their control. With our online program quirion we offer a solution to do just that: simple, transparent, and cost-effective. For a higher yield in your asset management!”


21

“People always ask me about the ideal time to get into the stock markets. After 30 years of theoretical and practical work in capital market research I have finally found an answer. The best time is anytime: now!”

We think differently.

Now


23

We think long-term.

9.3 %

5.8 %

Buy and hold

Performance-Chasing

Difference

Return Sharpe Ratio

9.3 % 0.44

5.8 % 0.29

3.5 % 0.15


“A well-structured investment portfolio looks like a giant combined harvest-er which efficiently collects all returns which exist in the international capital markets. This assumes that the investor does not interrupt his portfolio while it is working. Once a strategy has been chosen, it should be followed especially during crisis times and not changed in a panic reaction.”

25

“Even if many claim otherwise: nobody can magically predict the stock markets. In particular the attempt to continually determine the ideal entry and exit points is doomed to failure. It is all the more important that the structure of your investment portfolio is in proper order in terms of scientific-technical sense.”

We think rationally and not by divining the stars.

Order


We think rationally and not by divining the stars.

Order

27

“The development of a portfolio with international orientation bears clearly less risk than a purely national portfolio.”

We think comprehensively.


29

Pioneering

Eye to eye

We think quirin.

Representative for the entire asset management of the quirin bank (left to right):

Selda Kazankaya, Portfolio Manager / Risk Management

Matthias Schmidt, Senior Portfolio Manager

Philipp Dobbert, Chief Economist and Deputy Chief of Asset Management

Kristin Strohkorb, Portfolio Manager / Order Management

Marcus Müller, Senior Portfolio Manager

Kai Hattwich, Senior Portfolio Manager

Michael Plath, Senior Portfolio Manager


Valuable

31

2 Management report

2 | 34 | MANAGEMENT REPORT

1. Framework conditions

The economic framework conditions for the quirin bank AG (hereafter short “quirin

bank” or “bank”) and its customers were again favorable in the fiscal year 2015. In

particular the economic development in Germany was once again pleasing.

The macroeconomic growth rates of the GDP were clearly positive throughout 2015.

Overall this resulted in a price-adjusted economic growth of 1.7 % compared to the

previous year. This means that the continuous positive develop since the start of the

second half of 2014 continues, mainly driven by domestic consumer and investment

demand. The strong development in the German labor market also continued – the

average unemployment rate for 2015 was only 6.4 %.

In contrast, the stock markets relevant for German private investors were subject to

fluctuations over the course of the year. Over the year, the German Stock Index DAX

moved slightly up. However, during the year, the DAX was subject to clear fluctuations

with a bullish phase in the spring and a weaker phase in the fall of the year. The Europe-

an stock markets looked almost identical, for instance as measured in the EUROSTOXX

50. The US stock markets, e.g. the S&P 500, were even more volatile in the fall. The

bond markets developed relatively uniformly over the year, in particular in the area of

government bonds. While there had been clear yield increases towards the middle of

the year, almost all of them flattened again towards the end of the year.

The economic development and the situation at the financial markets continue to be

overshadowed by the monetary policy of the central banks – in Europe the European

Central Bank (ECB). Its purchase program for government bonds and other inter-

est-bearing papers has been extended again in the year. This in particular may have

also impacted the EUR/USD exchange rate – with fluctuations, it remained at a low

level compared to the long-term.

Management report for the fiscal year 2015

35

2. Positioning of the bank

The quirin bank operates two business fields with private banking and business bank-

ing. The focus thus lies on achieving revenue from services (commission surplus) from

business with wealthy private customers and medium-sized business customers. In

private banking, the bank follows the principles of independent consulting and a trans-

parent price model (“fee-based consulting”), both in the form of asset management and

deposit consulting. Until now, the quirin bank is the only bank in the German market

which offers this concept.

The quirin bank pursues the following main strategic goals:

> long-term establishment as desired brand for private banking in Germany and main-

taining leading role in fee-based consulting

> sustainable value increase of the bank through consistent development of the business

areas private banking and business banking

> improving profitability of private banking by increasing assets under management

(AuM), developing the loan business with private customers (Lombard), and active

cost management.

Until 2012, in addition to the two core business areas, the bank also provided business

process outsourcing, implementing the complete securities, foreign currency, and

derivative business for a group of four partner banks. In 2013, the bank introduced

these activities into a joint venture with the Swiss IT company Avaloq and have been

performed mainly by this company since then (Avaloq Sourcing (Germany) AG). This

means that the quirin bank is only involved in the BPO business to the extent that it

operates as banking partner for Avaloq Sourcing for services which require a banking

license (e.g. storing securities at securities collection points). In 2015, the quirin bank

sold its minority holdings of 49 % in the joint venture to the Avaloq group. In addition,

the quirin bank is supposed to transfer the remaining activities as banking partner to

another credit institute at the latest by the end of 2017.


Together with the transfer of the BPO business area to Avaloq Sourcing, it was also

decided to change the core banking system to Avaloq Banking Suite. This ensures that

the bank is also future-proof in terms of the system. The migration to the new IT system

was completed at the turn of the year 2015/2016.

Business area private banking

The business area private banking mainly handles customers with assets valued be-

tween 150 T€ and 750 T€. The bank can also increasingly take on the management

of larger assets. The clients are personally cared for by individually assigned private

customer consultants based on the fee-based consulting principle (independence and

transparency). For this purpose, the bank is present in the most important business cen-

ters. The consulting is exclusively provided by employed private customer consultants.

In addition to deposit consulting, the bank in particular focuses on customer care as

part of asset management. Asset management covers various investment strategies

from which customers and consultants can choose the suitable management corre-

sponding to the risk tolerance of the customer. The investment strategy is based on

corresponding portfolios which are centrally managed by an investment committee.

With its know-how from over seven years of fee-based consulting the bank developed a

new investment concept in 2013 which carries the title “Market – opinion – knowledge”.

It was developed together with the IVA (Institut für Vermögensaufbau = Institute for

Asset Development) in Munich. The investment concept of the bank allows customers

to achieve a fair and realistic yield for their assets using the latest scientific insights.

Among others, the concept integrates the insights of the Nobel Prize laurates for

economy Eugene Fama and Robert J. Shiller. Its basis is a long-term and cost-effective

portfolio based on index funds (exchange-traded fund or ETF) which allocates assets

fitting to the respective risk profile.

The “market” component uses a global capital market yield strategy to target world-

wide stock and bond markets to use in the portfolio. The basis of the method is the

insight that investing – as opposed to speculation – strives to acquire long-term own-

ership in value-forming commodities (intrinsic values) in order achieve a sustainable

fair “market yield”.

37

The “opinion” component, on the other hand, delivers a yield based on a subjective

assessment: the expectation of how economy, politics, and capital markets will develop

in the future.

Finally, in the “knowledge” component, our experts use temporary knowledge edges in

individual market segments or certain market phases in order to achieve a “knowledge

yield” using intelligent investment vehicles.

The innovation of the concept lies in the combination of different, clearly delineated

yield sources which come with different risks which are explained to the investor in a

transparent manner. By the end of 2015, almost all customers with asset management

mandates were transferred to this concept.

The strategic focus in private banking lies on resource-friendly and sustainable growth.

This goal is pursued through organic growth which is mainly based on wining new

customers. In this connection the bank already started to improve customer loyalty

in the past fiscal year by developing and expanding the credit business while also

improving the revenue situation. In the second half of 2016, the bank plans to open a

new subsidiary at a location with great potential, so that the number of locations will

increase from 12 to 13 in 2016.

In addition to stationary customer care, the business area private banking also includes

the online platform for digital asset management operated under the quirion brand.

With this platform, starting from an investment of 10 T€, the quirin bank also offers

internet-affine customers professional asset management similar to the “market” com-

ponent. The target group is a new generation of investors which is well-informed and

self-determined and are looking for intelligent investment possibilities on the internet.

In the past fiscal year, the private banking also operated the private customer business

of the subsidiary Berliner Effektenbank. Following the strategic concentration on private

banking activities under the “quirin bank” brand based on the principle of fee-based

consulting, the bank already decided on November 2014 to sell the private customer

business of the “Berliner Effektenbank” to the Tradegate AG Wertpapierhandelsbank,

Berlin. The corresponding contract provides that the customer relationships and the

employees of the subsidiary will be transferred to the new system one month after the

migration to the new IT system. Due to the migration which occurred at the turn of the

year 2015/2016, the employees and the business of the “Berliner Effektenbank” formally


transferred as of 01.02.2016 to the Tradegate AG Wertpapierhandelsbank. However, in

the interest of good customer relations, the parties agreed that the customers would

not be transferred suddenly but successively, starting in the second half of 2015. The

process will finish at the end of the second half of 2016.

Business area business banking

Many businesses face a more difficult financing via the classical path of bank loans. With

the introduction of Basel III, loans became scarcer and more expensive, more collateral

has to be provided, and are often only issued on a project-related basis. With this in

mind, many companies strive to become more independent from financing through

(house) banks and use the capital market for their financing.

As a business bank, the quirin bank consults with and supports medium-sized compa-

nies in preparing and implementing capital market transactions. This includes analyzing

the actual situation of the respective company as well as developing alternative financ-

ing possibilities, concept development, and the structuring of the transaction with all

its components – for instance targeted consulting in terms of due diligence, indicative

company evaluation, selecting exchange management, and developing the equity story

– as well as follow-up care after the successful implementation of the transaction by

the expert team of the der quirin bank.

The center of the company philosophy is formed by competent and integrated consulting

as a fair partner. Our business banking is split into three segments. This lets us offer

the full service range of an investment boutique from one source.

The Corporate Finance section was able to win numerous new mandates for capital

market transactions with its program tailored to medium-sized companies and imple-

ment them successfully together with the Institutional Sales section. Overall, Corporate

Finance can look back at a successful fiscal year in which it again made a significant

contribution to the overall result of the business area.

39

The Institutional Sales section trades stocks and loans for institutional customers. In

this environment we can regularly support the capital market-transactions performed

by Corporate Finance.

The Research section creates fundamental company analyses according to modern

valuation standards as well as company studies, market analyses, and industry reports.

The focus here lies on German small & midcap companies with a coverage universe of

more than 80 companies. On the other hand, capital market transactions of Corporate

Finance are supported by diverse analyses, which helps round out the added value chain.

The business banking has continued its strategic growth course in 2015 and, as of Octo-

ber 1, 2015, reinforced Institutional Sales and Corporate Finance with a capital market

team which is specialized caring for institutional customers. With this, the business

banking consciously positions itself oriented towards growth and with increased clout.

The goal is to sustainably expand and widen the placing power in Institutional Sales

through the added investor basis in the addressed markets.


3. Business development

Overview

2015 was a very successful fiscal year for the quirin bank. With an after-tax result of

€ 4.3 million, we were able to exceed both our own expectations and the already good

results from the previous year of € 2.9 million by 48 %. With the best result in our

company's history so far, we were able to completely compensate for the balance sheet

losses incurred until 2012. Both core business areas contributed to this positive devel-

opment. In particular the private banking was able to achieve a clear improvement of

the result. The equity capital yield before taxes is 11.9 %.

The commission surplus earned by private banking, which reflects the earned consulting

fees, increased by 24 %. This pleasing development is mainly due to two aspects. On

one hand, we were able to increase the managed assets by 7 % to € 2.6 billion due to

a good yield in a friendly market environment and net influx of funds of € 107 million.

On the other hand, the private banking achieved a slight margin increase by changing

the price model in the asset management and a targeted reduction of special condi-

tions – possible due to a solidified market position. In addition, the bank drove the

structural change from classical deposit consulting to asset management, which means

a diversified and less time-consuming asset investment not only for customers but

is also connected with greater scale effects on the cost side for the bank. At the end

of 2015, € 1.4 billion of the customer assets managed in private banking are in asset

management. This corresponds to a share of 55 %, which has thus increased by 3 %

compared to the previous year.

Under the brand quirion, at the end of 2015 the private banking already managed more

than 700 customers with assets of € 28 million. Customers and in particular volume

were thus more than doubled compared to the previous year.

In 2015, the private banking also still included the subsidiary Berliner Effektenbank,

whose employees and business formally transferred to the Tradegate AG Wertpapi-

erhandelsbank effective 01.02.2016. By mutual agreement between the contractual

parties and in the interest of a stable customer relationship, we already began in 2015

to transfer individual customers to the Tradegate AG Wertpapierhandelsbank. With

this in mind, the customer number (ca. -150) and the managed volume (€ -430 million)

already reduced correspondingly for the Berliner Effektenbank in 2015.

41

Overall, as of the effective date of the report, the customer assets managed in private

banking come to € 3.0 billion and has reduced by € 0.2 million due to the already started

transfer of customers of the Berliner Effektenbank.

Based on this, the already positive contribution margin of the previous years in private

banking was once again clearly improved. Due to this, the cost-income ratio (CIR) in

private banking also improved from 82 % to 74 %. The CIR is defined as the relation of

regular cost to regular income of the business areas.

While the business banking once again was able to achieve a good commission result,

it was not able to reach the strong commission surplus of the previous year. However,

the trade result from the brokerage business with institutional customers more than

doubled in a positive capital market environment. The result of the business banking

was thus not quite able to achieve the very good level of the previous year but was

clearly ahead of the planned values. In comparison to the previous year, the CIR slightly

deteriorated from 58 % to 64 %.

Revenue situation

The revenue situation of the bank is mainly defined by the commission surplus, which

increased by 3 % to € 31.8 million compared to the previous year. The basis for the

positive development is in particular the higher commission earned in private banking,

which more than compensated for the decrease of commission earned in business

banking.

The interest surplus (incl. current revenue from stock and other securities) is mainly

generated by the liquid funds largely invested in securities and with T€ 1,905 lies ca.

22 % below the previous year value of T€ 2,453 due to the continuing low interest rates.

This includes the negative interest on credit balances of T€ -221 (previous year: T€ -64).


The trade result, which mainly reflects the business activities of Institutional Sales

in business banking, more than doubled to € 4.8 million as compared to the previous

year. In particular the more lively business compared to the previous year from stock

trade with institutional customers contributed to the improvement of the result, even

though the business with loans in an environment of low interest and tight spreads

remained challenging. One also needs to consider that the trade result of the previous

year contained expenses of € 0.2 million for the formation of the fund for general

bank risks pursuant to § 340e Para. 4 HGB, while in the past fiscal year an amount of

T€ 46 could be dissolved.

The other operating result is almost unchanged to the previous year at € 4.5 million.

This mainly contains revenue from the reimbursement of passed-on outside costs

(€ 1.4 million), revenue from the dissolution of reserves (€ 1.2 million), and positive

assessment effects from the currency conversion (€ 1.4 million).

The administrative expenses in the reporting year were € 36.6 million and thus at

the same level as in the previous year. While the contained personnel costs increased

by 3 % to € 19.9 million due to the personnel increases in some areas and the higher

variable remunerations in fiscal year 2015 due to the results, the other administrative

costs were reduced by 5 % to € 15.9 million. Depreciation lies 28 % above the values

of the previous year due to unscheduled depreciation of T€ 287 for intangible assets.

The risk prevention for the credit business and for securities in the liquidity reserve

result in a positive balance of € 1.3 million for the fiscal year 2015 (previous year € 0.1

million). The results improvement is a one-time effect mainly due to the realization

of hidden reserves from the sale of securities in the liquidity reserve.

The result from financial investments is € -2.3 million (previous year € 1.0 million).

The result includes depreciation of securities in the fixed assets and a negative effect

from the sale of the minority share in Avaloq Sourcing.

Overall, as of December 31, 2015, compared to the previous year the bank shows an

improved after-tax result of € 4.3 million (+48 %).

43

In the annual average 2015, in addition to the four members of the Executive Board,

the company employed 202 employees (previous year 196) and also 202 employees on

the balance sheet effective date (previous year 195).

Financial situation

The capital stock of the quirin bank is € 43,106,485. It is split into 43,106,485 shares

with dividend rights made out to the owner.

On the financial report effective date, there is unutilized authorized capital against

cash or noncash contributions with a term until June 12, 2019 of T€ 21,553 (“authorized

capital 2014”).

In addition there is unutilized conditional capital of up to T€ 17,000 for convertible

bonds and/or options, profit participation rights and/or bonds (or combinations thereof)

which can be issued until June 12, 2019 with or without limited term for a total of up to

T€ 45,000 and which grant the owners / creditors of these bonds profit participation

rights/bonds for stock in the company to the name of the owner totaling up to T€ 17,000

with a proportional share of the capital stock up to T€ 17,000 (“conditional capital 2014”).

Furthermore, there is conditional capital totaling T€ 4,311 for subscription rights from

stock options issued to employees and organs as part of the stock option programs

2008 and 2011. Up to now, subscription rights for proportional capital stock of T€ 4,165

were issued in four tranches, of which subscription rights for a proportional capital

stock of T€ 842 have expired as of the balance sheet effective date since the benefit-

ting employees have retired from the company in the meantime. Accordingly, on the

balance sheet effective date there are subscription rights to proportional capital stock

of T€ 3,323 in circulation. The option exercise dates are ordered by tranche. The latest

option exercise date is 20.03.2019.


On the balance sheet effective date, the capital stock is distributed to the following

shareholders:

The bank is listed in the subsegment Entry Standard of the Open Market at the Frank-

furter securities exchange.

In addition to equity capital, the bank in particular refinances via customer deposits

which are due daily and time deposits of institutional customers whose interest rate is

oriented on the respective deposit facility of the ECB. In order to manage the liquidity

situation and liquidity risks, we refer to the corresponding explanation in the risk report.

The solvency of the bank was ensured at all times in the reporting period.

Asset situation

The balance sheet total on the financial report effective date is € 407 million and de-

creased by € 77 million compared to the previous year (€ 484 million). The asset-side

is mainly defined by the investment of liquid funds form customer deposits. This is

done be means of bonds and other fixed-interest securities, whose inventory has not

changed compared to the previous year. Liquid funds are also kept at credit institutes

(€ 100 million) and the Deutsche Bundesbank (cash reserve € 50 million). The cash re-

serve and receivables from credit institutes have reduced by € 37 million / € 48 million

15,0 % Riedel Gruppe

8,1 % Executive Board of the quirin bank AG

BHF Kleinwort Benson 27,8 %Group S.A., Brüssel

Berliner Effekten- 25,5 % gesellschaft AG, Berlin 23,6 % Free Float

45

in the reporting year. The reduction is mainly a consequence of decreased customer

deposits. The customer credit volume has increased by 52 % to € 24 million due to the

development and expansion of the Lombard credit business.

The structure of the liabilities has not changed in the past fiscal year. The main items

with € 273 million are customer deposits, which decreased by € 62 million or 19 %

compared to the previous year (€ 335 million). The main reasons for the decreased

customer deposits are the cash rate which decreased over 2015 as part of the asset

management as well as the started transfer of customer accounts as part of the sale of

the subsidiary “Berliner Effektenbank”. In addition, in comparison to last year's effective

date, the liabilities to credit institutes decreased by € 17 million to € 74 million. The

reserves and the fund for general bank risks have stayed virtually the same compared to

the previous year, while the other liabilities (€ 4 million) reduced by about € 2 million.

The equity capital increases to € 45 million due to the annual surplus of € 4 million.

In terms of regulatory law, as of the balance sheet effective date (before the determi-

nation of the annual surplus) there is still a comfortable core capital rate of 23.2 %

(previous year 21.6 %).

Overall statement concerning economic situation

In 2015, the bank was able to continue its growth and again clearly increase its results

above expectations. Based on the very good results, the accumulated balance sheet

loss until 2012 could now be completely balanced and legal and other retained profits

allocated, which strengthened the equity capital basis. While the quirin bank was able to

profit from a positive market environment in 2015, it now has reached the profit zone.

With the completed conversion to the scientific investment concept “market – opin-

ion – knowledge” in the asset management of the private banking, the bank has laid

the foundation for countering the continued low interest level and offer its customers

attractive solutions.


Basics of the remuneration system

The Executive Board determined employee remuneration on an individual basis consid-

ering performance and position. The remuneration of the Executive Board was deter-

mined by the Board of Supervisors. The remuneration systems of the quirin bank was

composed of fixed and variable components as well as subscription rights from stock

option programs. The variable remuneration components are regulated by contract,

depend on achieving certain company / department targets, or are subject to other

measurement factors.

Specification of granted advances, loans, and liability situation

At the end of the year, there are lines of credit granted to members of the Executive

Board and the Board of Supervisors at standard market conditions totaling T€ 810, of

which T€ 196 were utilized as of the balance sheet effective date and which are com-

pletely secured by mortgaged collateral.

Events of special significance after the balance sheet effective date

At the beginning of 2016, the bank – together with four other German credit institutes

– migrated to the new core banking system ABS. The migration process was successful,

however – as is typical in system changes – a few technical adjustments still need to

be made and processes adapted at the outsourcing partner. The bank expects that this

adjustment phase will last until the middle of the year.

As agree per contract, the subsidiary “Berliner Effektenbank” was sold to the Tradegate

AG Wertpapierhandelsbank effective 01.02.2016 and the sales revenue collected.

47

4. Risk report

In order to secure the assets and long-term revenue, a balanced relationship between

accepted risks and revenue potential is necessary. For this purpose, the bank has

established a risk management system. The system is based on the identification

and measurement of risks and their documentation in a risk map. The risks and

their measurement procedures are specified and defined in a risk manual. The Ex-

ecutive Board is responsible for all risks and, building on the business strategy and

in consideration of the risk capacity, has passed a risk strategy which specifies the

action framework in a binding manner. Bank-specific risk indicators are defined and

included in regular reporting.

The established risk management and controlling processes ensure that the main

risks included in the risk capacity concept are covered by the available risk coverage

funds at all times and thus that the risk capacity is ensured.

There is a risk and audit commission of the Board of Supervisors which meets reg-

ularly and reports at the meetings of the Board of Supervisors.

The risk management is performed by different departments. For this purpose, risk

information is included in strategic and operative decisions in order to achieve an

optimal risk-revenue profile for the respective business area.

In risk management we distinguish macro and micro levels. The macro level describes

the risk management at the overlying bank / department level, while the micro level

focuses on the risk management at the level of individual transactions or situations.

Macro-level

The Executive Board specifies the strategy which incorporates both the risk tolerance

and the desired risk-revenue relationship. The strategy is expressed in the risk capacity

calculation and the limit structure. In addition, determining company targets which

are anchored in the strategy is an essential responsibility of the Executive Board. In

addition to the basic targets, the target structures of the business areas are depicted

under risk aspects, thus forming a basis for the business management using (risk)

indicators and corresponding communication.


The Executive Board monitors and limits the overall risk position within global limits

and risk capacity.

In addition to individual transaction management, the overall risk position is managed

by measuring and limiting risk.

The risk management includes all measures with the objective of a value-increasing

design of the risk positions and securing the continued existence of the company. The

management of the individual risks is distributed in a decentralized manner. The risk

controlling includes the identification, analysis, limitation, and monitoring as well as

regular reporting of risks to the Executive Board. The risk strategy (operative control)

is implemented in the decentralized risk-bearing departments by accepting or reducing

risks. The Risk Management department is responsible for monitoring counterparty

default risks, market price risks, and operational risks, while the Credit department

(back office) monitors and controls credit risks and the Treasury controls liquidity.

Internal Revision serves as process-independent monitoring instance. It monitors the

suitability and effectiveness of the risk management and regularly reports to the Exec-

utive Board concerning its audit results, recommendations, and evaluations.

The Compliance function is responsible for the identification of essential legal regu-

lations and prescriptions as well as risks which may result from noncompliance to

endanger the assets of the institute, taking into account risk aspects.

49

Micro-level

Indicators limit structure and utilization:

The total limit was always kept in the reporting period. With the adjustment of the

limit structure in the second half of 2015, it is utilized between 53 and 56 % in the

stress calculation on the effective days July 31, October 31, and December 31.

In order to inspect the susceptibility to loss, stress calculations are performed quar-

terly for the most significant risks of the bank and reported to the organs of the bank.

The bank applies the going-concern method to measure the risk capacity (protection

of continued existence of the institute).

The quirin bank distinguishes the following relevant risk categories pursuant to MaRisk:

> Counterparty default risks

> Market price risk

> Operational risk

> Liquidity risks

> Business risk

December 31, 2015

Limit Utilization Limit Utilization

T € T € T € T €

Standard scenario Stress calculation

Counterparty default risks 4,000 812 7,800 4,890

Holding risk 1,500 6 2,000 25

Market price risk 6,300 2,529 9,800 6,379

Operational risk 1,000 460 3,000 1,380

Liquidity risk 300 26

Total risk 12,800 3,807 22,900 12,700


In the risk capacity, the risk coverage potential is determined based on the actual

values of the effective date. For this, the equity capital is supplemented with the fund

for general bank risks and reduced by intangible assets and the amount from the

regulatory equity capital requirements. A portion of the determined risk coverage

potential is defined as upper loss limit / global limit.

During the determination of the risk types, the bank distinguishes between a standard

scenario which assumes the realization of planning assumptions and stress calcula-

tions which reflect the adverse development of the risk positions.

In the risk quantification, another stress scenario with a causal chain of effects is

considered. The bank assumes a severe economic downturn with effects on the capital

market considering the business risk for the respective risk financial report effective

dates January 31, April 30, July 31, October 31, and December 31. The total stress limit

was met for the above risk financial report effective dates in 2015 and on the balance

sheet effective date.

The indicator for interest risks in the investment book according to the circular 11/2011

(BA) of BaFin dated November 9, 2011 lies at about 7.60 % (previous year 11.5 %) on

December 31, 2015.

Counterparty default risks

The counterparty default risk covers the credit and credit rating risks, counterparty

risks, issuer risks, and structure risks.

Credit and credit rating risks include the risk that a borrower does not meet his

contractual payment obligations or does not do so in a timely manner.

Counterparty risks result from not yet completely implemented transactions and

the risk of default of the business partner. It may be the fulfillment itself which

defaults if the bank has already provided its services in advance.

51

Issuer risks include the non-provision of interest and repayment payments from

an emission.

Structure risks result from the composition of the credit portfolio and the com-

bination of individual risks (concentration risks e.g. due to industry or regional

concentrations).

Loan decisions are made within the framework of the currently applicable Decision

Ordinance (EO) of the bank.

In order to measure counterparty default risks from credit risks for private customers,

the bank uses the scoring model of Schufa for private customers and the default prob-

abilities provided by Schufa. In case of missing information, the default probability is

set to a default value.

Loans are mainly assigned in form of loans secured by securities (Lombard loans) to

private persons and individual companies. The credit business is mainly oriented to

the regional and national market.

The stress calculation assumes that the securities collateral loses half its value.

Issuer risks: a default probability is determined for the respective counterparty. The

calculation is based on the respective default probability for the rating of the issuer

(Source: rating agency Standard & Poor’s – S&P). When determining the counterparty

risk, all transactions are considered with the exception of exchange transactions and

transactions in which payment and delivery occur step-by-step. In general, advance

service risks are avoided by agreeing to step-by-step transactions.

Issuer risks of the investment book with a non-zero KSA weighting in the standard

scenario are measured based on the respective default probability of S&P for the rating

of the issuer and the respectively determined residual term. If there are no external

ratings, the approach for the default probability follows a rating level for speculative

investments.

The assumed default probabilities are regularly checked in terms of the assumptions

that were made.


Migration risks are represented in the stress calculations by supposing an enhanced

rating deterioration.

The bank considers counterparty default risks from non-exchange-traded (OTC) deriv-

atives according to the regulatory method (CVA charge).

For the stress calculations, the bank uses the credit risk portfolio model by Gordy for

counterparty, issuer, and holding risks. For this, the current historical default rates are

assumed with two rating levels worse than the standard scenario. A minimum default

probability von 0.03 % is assumed. Issuers without rating (default rate set equal to

rating B) are set to one rating level worse.

The equity capital rate pursuant to CRR (capital requirements regulation) on the monthly

effective dates of the fiscal year did not go below 18.30 % and is 23.18 % on the balance

sheet effective date.

On the balance sheet effective date, the bank has formed general allowances for coun-

terparty default risks of T€ 1 (previous year T€ 118). There are specific allowances of

T€ 750 (previous year T€ 702).

Market price risks

The bank subsumes interest rate change, exchange rate, and currency risk under market

price risks. In addition, credit spreads in the trading portfolio and investment book are

recorded under market price risks.

The bank generally does not trade its own (nostro trading) stocks, derivatives, or foreign

currencies with the goal of short-term profits. Furthermore, the bank does not perform

transactions in real estate, options, and goods. These transactions are correspondingly

not considered in the explanations of market risks.

Since the bank generally performs securities orders and futures trading for customers

as commission transactions, these are also not considered in the market price risks.

53

The bank has developed a limited interest book in order to stabilize the interest result.

The existing limit system for limiting and monitoring market price risks from trading

activities prescribes individual limits for the respective portfolios. Demarcation criteria

are the classification of securities in trade and investment portfolio as well as the dif-

ferent investment types (bonds, call money and time deposits, funds, stock/certificates,

and foreign currencies). The limits are regularly checked.

The currency-, value-, and term-congruent valuation units formed as part of the balance

sheet valuation (micro-hedges) of foreign currency futures transactions are analyzed

and completely included in the risk management on an individual transaction basis and

close to the market. These transactions concern corresponding customers and their

hedging transactions.

The calculation of the risk utilization is performed daily based on the closing values

of the previous day. Limit excesses require special permission of the Executive Board.

In order to measure the market price risks, the bank uses the value-at-risk method

(VaR). The VaR is defined as the maximum loss of value of a risk position which is not

exceeded in a prescribed period with a specified probability.

The calculation for the VaR is based on a variance-covariance method (Delta-normal

method). A confidence level of 99 % and holding period of 30 days are specified for the

bank for the trade and investment portfolio. In order to calculate volatilities, a history

depth of 250 days is defined. In each case the VaR is calculated per individual position,

segmented by respective risk positions (exchange, interest, and currency risk) and ag-

gregated per portfolio. At the next-highest portfolio level, the VaR is again determined.

For the stress calculation, the confidence level is increased to 99.99 %.

In order to measure the credit spread, every month a calculation is performed based

on Z-spreads (and/or Z-discount margins for floaters) as VaR as part of a historical

simulation for fixed-interest securities and floaters. This means that first a theoret-

ical cash value is calculated by discounting based on the risk-free interest structure.

Then the interest curve is shifted parallel to find the one which exactly reproduces the

observed market value. The historical daily spread changes are applied to the actual


spread situation and correspondingly defined as scenarios. Correlations are thus im-

plicitly taken into account.

The stress determination is performed via a credit spread sensitivity of 50–100 base

points. The sensitivity expresses the value change of a position compared to a change

of the Z-spread by one base point.

For technical reasons, market price risks are calculated ex post on the following day

and compared to the limits. There is no intraday limit monitoring.

Operational risks

The bank defines the operational risk as the risk of losses due to the inappropriateness

or failure of internal procedures, employees, and systems or due to external events.

The Executive Board has implemented a system for the systematic, bank-wide, and

timely identification of operational risks. In this connection, methods and tools are de-

veloped to ensure more efficient measurement and control of operational risks (opRisk).

The quirin bank AG is a company which consciously manages operational risks. A stra-

tegic implementation was specified to achieve the goals. According to this, the bank has

created organizational framework conditions and systematically recorded operational

risks bank-wide. Claims are archived in a claim data base and analyzed.

In order to measure the operational risks, the maximum claim (without third-party

mitigation [e.g. insurance payments]) of the last 5 years is used and tripled for the stress

calculation. In the medium term, the methodology will be developed further and trans-

ferred into a comprehensive management concept for operational risks (long-term goal).

For the risk inventory, the bank uses an analytical self-assessment. With this risk

inventory it is possible to recognize risk potentials. This indication for existing opera-

tional risks in the bank shows changes to the risk measurement of the previous year

and identifies new weaknesses in the organization, processes, and systems. As part

of the self-assessment, risk-reducing measures are called for from the corresponding

departments and controlled.

55

These measures are supported by the consistent monitoring and development of the

internal control system (ICS) and compliance rules and corresponding monitoring in

the affected departments (such as Law and HR).

Executive Board and manager in particular have the responsibility of instilling a risk

culture in handling operational risks.

Liquidity risks

The bank must always ensure that it can meet its payment obligations at all times.

The bank refinances via customer deposits and equity capital. In addition, the bank

also utilizes the marginal lending facility and/or open market transactions of the ECB.

Call risks are controlled by means of mostly term-congruent liquidity investment and

investments in short-term realizable assets.

The bank accounts for deadline risks by means of mostly term-congruent transactions.

If possible, advance service risks are avoided by agreeing to step-by-step transactions.

The bank has a contingency plan to counteract possible liquidity bottlenecks.

The respective liquidity costs, benefits, and risks are considered in the planning of the

bank and are internally settled according to causation (internal transfer pricing system).

The Treasury is responsible for operative liquidity management. The basis for its deci-

sions is the reported refinancing need for the different timescales.

During the monitoring, the liquid funds are compared as payment obligations and

receivables corresponding to their deadlines.


The liquidity situation of the bank in the past fiscal year was stable due to the high

customer deposits. The indicator pursuant to the Liquidity Regulation was 3.14 as of

December 31, 2015. The LCR indicator was 2.33. In the entire fiscal year 2015, the in-

dicator for the individual monthly effective dates was between 2.67 and 5.39, the LCR

indicator between 2.08 and 3.76.

The bank uses Liquidity-at-Risk (LaR) for monitoring liquidity risks. The LaR describes

the surplus payments which is not exceeded with a certain probability during a busi-

ness day. The LaR can be used to determine how much liquidity the bank should keep

to ensure daily payment reserves. The bank allocates known liquidity streams from

its liquidity investment. For the period from January 1 to December 31, 2015, the LaR

indicator is € 81 million for a 99 % confidence level, for which the bank accounts by

means of overnight deposits and refinancing lines at the Deutsche Bundesbank/ECB.

Business risks

Cost, sales, and strategic risks are subsumed under business risks.

Cost risks are measured in the deviation of actual costs from the target costs as

part of %-utilizations. Deviation and indicator analyses are performed as part of the

planning and regularly during target-actual analyses.

Cost increases are limited by budget controls and responsibilities. During the tar-

get-actual analyses, measures for cost containment are discussed and passed in case

of budget overruns.

For sales risks, underruns of planned sales are assumed for constant plan expendi-

tures. Analog to cost risks, sales declines are limited by revenue controls and revenue

responsibilities. The sales risks is especially important due to the continued growth

phase of the assets under management in private banking. The strategic risk of mis-

interpreting market potential and trends is considered as part of the medium-term

planning and the regular audit of the business strategy.

57

The risk reporting includes the timely communication of the risk-relevant informa-

tion to the corresponding decision makers, taking into account the requirements of

MaRisk. In addition to daily reporting of limit utilization of the market price risks

and counterparty risks to the Treasury, the Finance and Credit departments, and the

Executive Board, there is a more in-depth monthly report to the same parties and

a quarterly report to the organs of the bank. There is a monthly report on business

developments to the organs of the bank.

The quirin bank is a member of the Association of German Banks Deposit Protection

Fund.

Summary and outlook for risk management

The Executive Board has determined the risks of the bank in the risk strategy, taking into

account the business strategy and risk capacity. Based on this, corresponding analyses,

methods, and indicators for the measurement and monitoring of risks were developed

and implemented. The risks are regularly measured and monitored.

The essential risks of the bank are covered by the risk coverage potential. The risk

capacity of the bank (continued existence) is ensured. In the reporting period, the bank

adhered to the overall limit. In keeping with expectations, the risks were reduced in

the second half of the year.

With the migration to the new IT system Avaloq as of January 1, 2016, the bank has also in-

troduced a new risk system by the company zeb/information.technology gmbh & co kg,

Münster (Module: “zeb.control.risk – ALM”, “zeb.control.risk – Credit” and “zeb.control.

risk – Trading”). Along with this, the methods for the measurement of the market price,

counterparty default, and liquidity risks are being adapted.

Furthermore, the outsourcing risks are being revised as part of the operational risks.

This is based on the individual performance targets agreed in service-level agreements

for the implementation quality with the outsourcing companies. The performance cri-

teria are measured, reported, and serve for internal control.


5. Opportunity and prognosis report

Outlook on future framework conditions

The macro-economic development in Germany and Europe is being affected of a cool-

ing global business climate at the beginning of 2016. Driven by a weakness of large

emerging economies such as Brazil or China, global growth forecasts have noticeably

cooled in the last few months. This particularly depresses the growth outlook of the

export-oriented German economy. In addition, the long and recently strong economic

upturn in German which started in 2009 will soon have passed its apex in the cycle.

This somewhat muted economic outlook for the world economy and thus for Germany

is only countered by the still extremely expansive monetary policy of the ECB. Despite

the slight appreciation tendency at the beginning of the year, it will likely still ensure a

favorable Euro/USD exchange rate for the rest of the 2016, which should help exports.

The capital markets also seem to be falling to a more skeptical interpretation in terms

of the economic outlook for 2016. For instance, the start of the year was marked by

partially clear price corrections on the international stock markets. Overall, we are

seeing signs for at least a challenging capital market environment for 2016.

Opportunities and risks

In the business area private banking, the quirin bank has a USP in Germany with

product-independent consulting, asset management based on scientific insights, and

transparent, fair, and success-oriented remuneration. The business model offers po-

tential for further growth in managed customers and their assets and thus further

sustainable revenue increases.

We see risks for the revenue development in a generally challenging market environ-

ment, for which we have seen indications at the beginning of 2016, since the measure-

ment basis for the remuneration calculation is stressed and the yield expectations of

customers may not be reached. On the other hand, this type of environment also bears

opportunities for additional customer growth since the dissatisfaction of customers

of our competitors who operate a classical commission-oriented consulting business

will tend to be greater.

59

We expect growth opportunities from planned new business including the opening of

a new subsidiary with great potential. In addition, we see opportunities in the planned

expansion of the credit business, in particular the Lombard loan business.

We expect disproportional growth for our online platform quirion, which offers pro-

fessional asset management in digital form even to customers with smaller assets. As

first adopter of the Fin-Techs, currently discussed in the media under the heading “ro-

bo-advisor”, we expect a competitive edge. There are also risks in the arrival of further

competitors entering into this market segment.

In Investment Banking, the bank is exposed to stronger competition which has put

great pressure on margins in the last few years. Still, the bank profits from the con-

tinuing reservation of the credit industry in the credit business with medium-sized

business customers. Success is strongly dependent on the performance and capacity

of the capital markets.

The historic low-interest phase continues to place a burden on the overall bank. It

contributes to exert sustained pressure on the interest margin, in particular from the

investment of liquid funds in securities.

The bank sees an opportunity in the migration to the new core banking system which

was completed at the turn of 2015/2016, which gives the bank a modernized infra-

structure based on which processes can be even more automated and accelerated. At

the same time, the completed project frees up internal resources which can now be

invested into the development of the product and service program. There are risks in

the transition phase due to increased process and operational risks.

In addition, the development of the regulatory environment will become an increas-

ingly important factor for the banking sector for the successful implementation of its

business models. This development also affect the quirin bank. New already effective

and foreseeable regulatory requirements will increase the costs and complexity of the

bank. With this in mind, the corresponding expenditures (“run the bank”) will stress

the business areas in the internal cost accounting corresponding to their utilization

of regulatory capital.


Prognosis

In fiscal year 2016, we expect continued positive coverage contributions from the oper-

ative business for the two business areas private banking and business banking, even

if not at the same level as in the past year.

In private banking, our plans assume volatile capital markets which, however, remain

at a generally high level, so that (with stable margins and the planned net fund influx-

es) we can achieve commission results at about the same level of the previous year.

However, the results contribution from investments into new products, integrated

consulting processes, the planned new subsidiary, and the further development of the

online platform will continue to place a burden on quirion in 2016.

Making a forecast for business banking is especially difficult due to the dependence

on the deal flow and the capital market environment, which is why the bank expects

a lower result for this business area based on conservative planning.

The bank will collect the sales price after the formal transfer of the subsidiary “Berliner

Effektenbank” to the Tradegate AG Wertpapierhandelsbank in February 2016. This posi-

tive one-time effect stands against future lower commission revenue and administration

costs due to the transfer of the subsidiary.

Unless there are unforeseen and protracted upheavals in the capital markets, we expect

in 2016 an overall positive after-tax total result ranging between € 2.0 to 2.5 million.

Summary

The quirin bank continues to be in strong competition on the market for the asset

management for wealthy private customers and business customers. However, overall

we feel that the bank is well positioned for achieving its goals.

The fiscal year 2015 was very positive. We were able to use the very good result to

compensate for the balance sheet losses accumulated until 2012. In addition, with the

allocation of the legal and other retained profits, the equity capital of the bank was

strengthened. The quirin bank has sustainably reached the profit zone and can gener-

ally pay dividends.

61

However, the framework conditions remain difficult. The continuing low-interest phase,

the increasing regulatory requirements, and geo-political tensions represent great

challenges.

Berlin, February 26, 2016

quirin bank AG

The Executive Board

Stefan Spannagl

Karl Matthäus Schmidt Johannes Eismann

Dr. Marcel Morschbach

3 Annual financial report

3 | 64 | ANNUAL FINANCIAL REPORT

Assets € €

31.12.2015€

31.12.2014€

1. Cash reserves

a) Cash balance 320.721,25 231.199,20

b) Credit balance at central banks 49.508.310,16 86.559.878,06

of which: at the Deutsche Bundesbank 49.508.310,16 € (86.559.878,06)

49.829.031,41 86.791.077,26

3. Receivables from credit institutes

a) due daily 59.556.350,02 117.292.366,80

b) other receivables 40.475.666,66 30.460.549,99

100.032.016,68 147.752.916,79

4. Receivables from customers 23.609.203,09 15.542.699,46

5. Promissory notes and other fixed-interest securities

b) Loans and promissory notes

ba) from public issuers 149.590.510,81 150.161.351,03


bb) from other issuers 63.445.938,33 63.212.033,67


213.036.449,14 213.373.384,70

213.036.449,14 213.373.384,70

6. Stock and other non-fixed-interest securities 7.006.369,25 5.269.537,86

6a. Trading portfolio 8.812.554,71 1.569.996,47

7. Holdings 1,00 7.907.901,00

8. Shares in affiliated companies 257.513,98 257.513,98

11. Intangible assets

b) purchased concessions, commercial copyrights, and similar

rights and values, as well as licenses for such rights and values 716.290,00 918.657,00

d) advance payments 424.461,34 211.203,81

1.140.751,34 1.129.860,81

12. Fixed assets 619.228,17 796.195,65

14. Other assets 1.279.257,12 1.797.287,47

15. Accrual and deferral items 1.677.860,19 2.146.101,27

Total assets 407.300.236,08 484.334.472,72

Balance sheet for December 31, 2015 of the quirin bank AG

65

Assets € €

31.12.2015€

31.12.2014€

1. Cash reserves

a) Cash balance 320.721,25 231.199,20

b) Credit balance at central banks 49.508.310,16 86.559.878,06


49.829.031,41 86.791.077,26

3. Receivables from credit institutes

a) due daily 59.556.350,02 117.292.366,80

b) other receivables 40.475.666,66 30.460.549,99

100.032.016,68 147.752.916,79

4. Receivables from customers 23.609.203,09 15.542.699,46

5. Promissory notes and other fixed-interest securities

b) Loans and promissory notes

ba) from public issuers 149.590.510,81 150.161.351,03


bb) from other issuers 63.445.938,33 63.212.033,67


213.036.449,14 213.373.384,70

213.036.449,14 213.373.384,70

6. Stock and other non-fixed-interest securities 7.006.369,25 5.269.537,86

6a. Trading portfolio 8.812.554,71 1.569.996,47

7. Holdings 1,00 7.907.901,00

8. Shares in affiliated companies 257.513,98 257.513,98

11. Intangible assets

b) purchased concessions, commercial copyrights, and similar

rights and values, as well as licenses for such rights and values 716.290,00 918.657,00

d) advance payments 424.461,34 211.203,81

1.140.751,34 1.129.860,81

12. Fixed assets 619.228,17 796.195,65

14. Other assets 1.279.257,12 1.797.287,47

15. Accrual and deferral items 1.677.860,19 2.146.101,27

Total assets 407.300.236,08 484.334.472,72


Balance sheet for December 31, 2015of the quirin bank AG

Liabilities€ €

31.12.2015€

31.12.2014€

1. Liabilities to credit institutes

a) due daily 47.073.590,05 89.038.517,55

b) with agreed term or termination period 27.070.034,72 2.070.146,63

74.143.624,77 91.108.664,18

2. Liabilities towards customers

b) other liabilities

ba) due daily 246.114.672,78 318.831.745,61

bb) with agreed term or termination period 26.836.911,98 16.221.918,64

272.951.584,76 335.053.664,25

272.951.584,76 335.053.664,25

3a. Trading portfolio 137.904,24 24.022,79

5. Other liabilities 3.859.927,82 6.035.673,85

6. Accrual and deferral items 9.884,64 17.081,92

7. Reserves

b) tax provisions 691.953,31 326.900,00

c) other provisions 8.735.709,00 9.257.964,26

9.427.662,31 9.584.864,26

11. Funds for general bank risks 1.609.130,41 1.654.729,82

12. Equity capital

a) Subscribed capital 43.106.485,00 43.106.485,00

b) Capital reserves 100.000,00 100.000,00

c) Retained profits

ca) legally prescribed reserves 97.701,61 0,00

cd) other retained profits 1.392.247,89 0,00

1.489.949,50 0,00

d) Balance sheet loss / profit 464.082,63 –2.350.713,35

45.160.517,13 40.855.771,65

Total liabilities 407.300.236,08 484.334.472,72

1. Contingent liabilities

b) Liabilities from guarantees and indemnity agreements 150.150,21 150.150,21 397.416,50

2. Other liabilities

c) Irrevocable credit commitments 380.000,00 380.000,00 0,00

67

Liabilities€ €

31.12.2015€

31.12.2014€

1. Liabilities to credit institutes

a) due daily 47.073.590,05 89.038.517,55

b) with agreed term or termination period 27.070.034,72 2.070.146,63

74.143.624,77 91.108.664,18

2. Liabilities towards customers

b) other liabilities

ba) due daily 246.114.672,78 318.831.745,61

bb) with agreed term or termination period 26.836.911,98 16.221.918,64

272.951.584,76 335.053.664,25

272.951.584,76 335.053.664,25

3a. Trading portfolio 137.904,24 24.022,79

5. Other liabilities 3.859.927,82 6.035.673,85

6. Accrual and deferral items 9.884,64 17.081,92

7. Reserves

b) tax provisions 691.953,31 326.900,00

c) other provisions 8.735.709,00 9.257.964,26

9.427.662,31 9.584.864,26

11. Funds for general bank risks 1.609.130,41 1.654.729,82

12. Equity capital

a) Subscribed capital 43.106.485,00 43.106.485,00

b) Capital reserves 100.000,00 100.000,00

c) Retained profits

ca) legally prescribed reserves 97.701,61 0,00

cd) other retained profits 1.392.247,89 0,00

1.489.949,50 0,00

d) Balance sheet loss / profit 464.082,63 –2.350.713,35

45.160.517,13 40.855.771,65

Total liabilities 407.300.236,08 484.334.472,72

1. Contingent liabilities

b) Liabilities from guarantees and indemnity agreements 150.150,21 150.150,21 397.416,50

2. Other liabilities

c) Irrevocable credit commitments 380.000,00 380.000,00 0,00


Profit and Loss Statementof the quirin bank AG

For the period from January 1 to December 31, 2015€ €

01.01.–31.12.2015€

01.01.–31.12.2014€

1. Interest earned from

a) credit and money market transactions 229.048,20 349.272,00

b) fixed-interest securities and debt register claims 1.851.688,98 2.408.315,54

2.080.737,18 2.757.587,54

2. Interest paid 348.952,88 353.820,70

1.731.784,30 2.403.766,84

3. Current income from

a) Stock and other non-fixed-interest securities 173.049,60 49.673,00

173.049,60 49.673,00

5. Commission revenue 48.361.302,42 49.845.235,68

6. Commissions paid 16.544.778,67 19.096.730,45

31.816.523,75 30.748.505,23

7. Net revenue from trading portfolio 4.765.187,02 2.063.736,71

8. Other operating revenue 5.223.767,28 7.120.929,32

10. General administrative expenditures

a) Personnel expenses

aa) Salaries and wages 17.693.627,97 17.109.739,14

ab) Social contributions and pension expenses and for support 2.213.830,21 2.184.684,16

of which: for retirement 87.974,95 € 19.907.458,18 19.294.423,30

(74.131,69)

b) Other administrative costs 15.891.351,21 16.796.491,56

35.798.809,39 36.090.914,86

>>

69


01.01.–31.12.2015€

01.01.–31.12.2014€

1. Interest earned from

a) credit and money market transactions 229.048,20 349.272,00

b) fixed-interest securities and debt register claims 1.851.688,98 2.408.315,54

2.080.737,18 2.757.587,54

2. Interest paid 348.952,88 353.820,70

1.731.784,30 2.403.766,84

3. Current income from

a) Stock and other non-fixed-interest securities 173.049,60 49.673,00

173.049,60 49.673,00

5. Commission revenue 48.361.302,42 49.845.235,68

6. Commissions paid 16.544.778,67 19.096.730,45

31.816.523,75 30.748.505,23

7. Net revenue from trading portfolio 4.765.187,02 2.063.736,71

8. Other operating revenue 5.223.767,28 7.120.929,32

10. General administrative expenditures

a) Personnel expenses

aa) Salaries and wages 17.693.627,97 17.109.739,14

ab) Social contributions and pension expenses and for support 2.213.830,21 2.184.684,16

of which: for retirement 87.974,95 € 19.907.458,18 19.294.423,30

(74.131,69)

b) Other administrative costs 15.891.351,21 16.796.491,56

35.798.809,39 36.090.914,86

>>


Profit and Loss Statementof the quirin bank AG


01.01.–31.12.2015€

01.01.–31.12.2014€

11. Depreciation, amortization, and valuation adjustments on intangible and tangible assets 850.547,77 666.304,49

12. Other operating expenditures 707.949,54 2.649.635,84

14. Revenue from write-ups to receivables and certain securities

and from divestiture of reserves in loan business 1.305.608,57 110.260,04

1.305.608,57 110.260,04

15. Depreciation and valuation adjustments from participations, shares in affiliated companies,

and securities treated as assets 2.304.588,56 0,00

16. Revenue from write-ups of participations, shares of associated companies,

and securities treated as assets 1.001.750,00

–2.304.588,56 1.001.750,00

19. Results from normal business activities 5.354.025,26 4.091.765,95

21. Extraordinary expenditures 0,00 729.791,55

22. Extraordinary result 0,00 0,00 –729.791,55

23. Taxes from income and revenue 1.046.424,78 447.225,27

24. Other taxes unless listed under item 12 2.855,00 3.194,00

1.049.279,78 450.419,27

27. Annual profit 4.304.745,48 2.911.555,13

28. Profit / loss carried forward from previous year –2.350.713,35 –5.262.268,48

1.954.032,13 –2.350.713,35

32. Allocations to retained profits

a) into legally prescribed reserves 97.701,61 0,00

d) into other reserves 1.392.247,89 0,00

1.489.949,50 0,00

34. Balance sheet profit / loss 464.082,63 –2.350.713,35

71


01.01.–31.12.2015€

01.01.–31.12.2014€

11. Depreciation, amortization, and valuation adjustments on intangible and tangible assets 850.547,77 666.304,49

12. Other operating expenditures 707.949,54 2.649.635,84

14. Revenue from write-ups to receivables and certain securities

and from divestiture of reserves in loan business 1.305.608,57 110.260,04

1.305.608,57 110.260,04

15. Depreciation and valuation adjustments from participations, shares in affiliated companies,

and securities treated as assets 2.304.588,56 0,00

16. Revenue from write-ups of participations, shares of associated companies,

and securities treated as assets 1.001.750,00

–2.304.588,56 1.001.750,00

19. Results from normal business activities 5.354.025,26 4.091.765,95

21. Extraordinary expenditures 0,00 729.791,55

22. Extraordinary result 0,00 0,00 –729.791,55

23. Taxes from income and revenue 1.046.424,78 447.225,27

24. Other taxes unless listed under item 12 2.855,00 3.194,00

1.049.279,78 450.419,27

27. Annual profit 4.304.745,48 2.911.555,13

28. Profit / loss carried forward from previous year –2.350.713,35 –5.262.268,48

1.954.032,13 –2.350.713,35

32. Allocations to retained profits

a) into legally prescribed reserves 97.701,61 0,00

d) into other reserves 1.392.247,89 0,00

1.489.949,50 0,00

34. Balance sheet profit / loss 464.082,63 –2.350.713,35


Creation of the annual financial report

The annual financial report of the quirin bank AG for December 31, 2015 was compiled

in accordance to the general regulations of the German Commercial Code (HGB), the

applicable regulations of the Stock Corporation Act (AktG), and the ordinance on ac-

counting for credit and financial services institutes (RechKredV).

The segmentation of the balance sheet and the profit and loss statement correspond-

ingly follows § 2 RechKredV, form sheet 1 and 3. The profit and loss statement was

structured using single-column accounting. The option § 265 Para. 8 HGB was exercised

for reasons of better organization. This option is analogously applied to the “of which”

notes provided on the form sheets.

Accounting and valuation principles

The balancing and valuation methods used for the items of the balance sheet

and P&L statement correspond to §§ 242 et seq. and 340 et seq. HGB as well as

RechKredV in its current version. Representation, segmentation, method, and

valuation of the annual financial report correspond to the principles applied in

the previous year.

The receivables from and liabilities to customers list all receivables / liabilities

w.r.t customers with whom we have a direct business relationship.

Assets and debt in foreign currency were valuated pursuant to § 256a HBG at the

average middle exchange rate on the closing effective date. In this respect, this

annual financial report contains unrealized profits and losses from currency con-

version. These are listed in the operating income and expenses. With a residual

term of more than one year, the conversion is performed with the average middle

exchange rate at the time it was incurred. In case of exchange rate changes before

the balance sheet effective date, the valuation is generally based on the average

middle exchange rate of the balance sheet effective date in consideration of the

A. General information on the segmentation of the annual financial report for December 31, 2015 and on the balancing and valuation methods

Annex of the quirin bank AG for the fiscal year 2015

73

lowest value principle on the asset side and the highest value principle on the

liabilities side.

Futures are converted at the corresponding forward rate of the conclusion effec-

tive date.

Currency futures are allocated to the trading book unless the valuation units fall

under § 254 HGB. The valuation results of the futures are identified in the trade

result. For the valuation of currency swap transactions, we use split forward rates.

The accrual of swap positions is also recognized in the trading result.

The cash reserve and receivables from credit institutes are identified at their

nominal value. Due to compensation agreements, receivables from credit institutes

and liabilities to credit institutes are partially offset.

Receivables from customers are listed at their nominal value. Recognizable risks

are sufficiently accounted for by forming specific valuation allowances. General

valuation allowances are formed for latent risks in the receivable portfolio.

The bonds and other fixed-interest securities in the portfolio are generally rec-

ognized at acquisition cost and valuated according to the moderated lowest value

principle. The premium for the fixed-interest securities acquired at par are accrued

and linearly dissolved in the right accounting period. Bonds and other fixed-interest

securities in the liquidity reserve are recognized at acquisition cost or the lower

attributable on the balance sheet effective date.

The valuation of the finance instruments in the trade portfolio follows § 340e Para.

3 Clause 1 HGB at the attributable fair market value on the balance sheet effective

date minus a risk discount. The risk discount is calculated using the value-at-risk

method and deducted from unrealized valuation profits in the trade portfolios.

This is based on a holding period of 10 days, a monitoring period of one year, and


a confidence level of 99.0 %. The institute-specific trading book criteria have not

changed in the reporting year. The risk discount is recognized in expenditures

pursuant to § 340c Para. 1 HGB in the net revenue of the trade portfolio. The

institute-internal criteria for the inclusion of finance instruments in the trade

portfolio have not changed in the fiscal year.

Accrued interest for receivables, liabilities, and securities are assigned to the

corresponding capital amounts and identified in the respective balance sheet item

of the business.

The holdings and shares in affiliated companies are valuated at acquisition cost

and/or lower attributable value.

The purchased intangible assets and fixed assets are recognized at acquisition cost

subject to capitalization minus scheduled depreciation. Depreciation is linear over

the usage term. Standard software is listed under intangible assets. Fixed asset

items with an acquisition value of less than 150 EUR are immediately recognized

as expenditures. Assets with an acquisition value between 150 and less than 1,000

EUR are assigned to a collective item and linearly depreciated over 5 years. The

regular usage terms of the systems lie between one and 23 years.

The other assets are generally recognized at nominal value. The corporate tax

credit pursuant to § 37 KStG was capitalized at cash value. An interest rate of

3.75 % was used for discounting.

The securities acquired as part of an operational retirement fund to cover claims of

entitled employees (covering capacity) are offset with the corresponding liabilities

pursuant to § 246 Para. 2 HGB. The pension obligation is determined actuarially

using biometric probabilities (Guide tables 2005 G by Prof. Dr. Klaus Heubeck)

using the projected unit credit method. When determining the term-congruent

accounting interest rate, we exercised the option pursuant to § 253 Para. 2 Clause

2 HGB to use the average market interest rate of the last seven year determined

and published by the Deutsche Bundesbank which arises when assuming a residual

term of 15 years. The accounting interest rate for the balance sheet effective date

is 3.89 %. Salary and pension trends as well as fluctuations are not considered

due to the type of promised services and the design of the benefit fund based of

a so-called real premium-oriented benefits plan.

75

The liabilities were assessed at their settlement amount.

The reserves consider all foreseeable risks and uncertain obligations in the payable

amount necessary according to a prudent commercial assessment. Future price

and cost increases are taken into account if there is sufficient indication for their

occurrence. Reserves with a residual term of more than one year are discounted

at the average market interest rate over the past 7 fiscal years corresponding to

their residual term which was determined by the Deutsche Bundesbank on the

balance sheet effective date.

The fund for general banking risks formed pursuant to § 340g HGB arises exclu-

sively from the mandatory allocation pursuant to § 340e Para. 4 HGB to balance

the risk of future net expenditures in the trade portfolio.

Formation of valuation units

Pursuant to § 254 HGB, valuation units are exclusively formed for currency futures

which the bank concludes for customer transactions and hedges with corresponding

counter-transactions in terms of the contained currency risks. The valuation units are

formed at the micro-level, i.e. individual hedging instruments stand against the value

changes from the hedged risk of the underlying transaction. The proof of balancing

the opposing changes from the underlying and hedging transaction is provided as part

of the critical-term-match method. It documents that the salient parameters between

underlying and hedging transaction agree. For this reason one can assume that value

changes relating to the hedged risk from the underlying or hedging transaction are

completely balanced over the entire term of the transactions. We generally use the net

hedge presentation method to represent the effective parts of a valuation unit on the

balance sheet. Any other invalidities related to the unhedged risk are treated according

to the general balancing regulations.


The nominal amounts of the underlying and hedging transactions included in the

valuation units and the hedged risks are as follows as of 31.12.2015:

Valuation of interest-related transaction of the banking book

In order to ensure a loss-free valuation of the banking book, the future payment

streams of all interest-bearing transactions with fixed interest are included in the

assessment whether there is excess liability. The cash values determined for the bal-

ance sheet effective date are compared to the corresponding book values. In addition,

suitable proportional risk and administration costs are taken into account. The IDW

statement on the loss-free valuation of interest-bearing transactions of the banking

book (BFA 3) is followed. There is no excess liability on the effective date. It is not

necessary to form a reserve.

In T€ Nominal value Hedged risk

at transaction rate

T €

at forward rate on effective date

T € T €

Basic transactions 2,332 2,348 6

Hedge transactions 2,334 2,348 –5

Total 4,666 4,696 1

77

B. Explanations for balance sheet

I. Assets

Promissory notes and other fixed-interest securities

On the reporting effective date, the balance sheet item 'bonds and other fixed-interest

securities' lists the securities of the liquidity reserve of T€ 105,542 and of the fixed

assets of T€ 107,494. In both stock types, due dates were mostly replaced in the past

fiscal year, so that the volume is almost unchanged compared to the previous year.

The bonds and other fixed-interest securities include securities with a book value of

T€ 31,946 which will become due in the following year.

Stock and other non-fixed-interest securities

The securities listed in the position 'stocks and other non-fixed-interest securities' are

assigned to the liquidity reserve (T€ 2,145) and the fixed assets (T€ 4,861). The valua-

tion based on market prices on the balance sheet effective date according to the strict

lowest value principle is performed analogous to the loans and bonds of the liquidity

reserve. The moderated lowest value principle is also applied to the stocks and other

non-fixed-interest securities of the fixed assets.


Assets held for trading

The assets held for trading and the risk discounts retained from the unrealized

valuation benefits of these finance instruments are segmented as follows on the

effective date:

The derivatives are positive market values of pending currency futures which are as-

signed to the trade portfolio. On the balance sheet effective date, the nominal value of

these currency futures is T€ 4,674 (previous year T€ 3,101), converted to the forward

rate at transaction closing.

Segmentation of negotiable securities

31.12.2015 31.12.2014

Book valueT €

contained VaRT €

Book valueT €

contained VaRT €

Derivatives 4 83 12 10


7,878 11 793 0

Stock and other non- fixed-interest securities

931 0 765 239

Total 8,813 94 1,570 249

31.12.2015T €

31.12.2014T €


negotiable > of which listed > of which not listed

213,036 98,273

114,763

213,373 99,784

113,589


negotiable > of which listed > of which not listed

5,823 0

5,823

0 0 0

79

Financial assets

Holdings

The holdings list the shares in the R:D Publishing Concepts GmbH, Frankfurt am Main

(formerly design.net AG), written off to a symbolic value of € 1.

In the previous year, this position still contained the 49 % share in the Avaloq Sourcing

(Germany) AG, Berlin with a book value of T€ 7,908. The shares in the company were

completely sold in the fiscal year.

Shares in affiliated companies

The shares in affiliated companies continue to list the quirin eins GmbH i. L., Berlin

with a book value of T€ 258. The capital stock of the company is T€ 290. The quirin

bank holds 100 % of the shares. On the balance sheet effective date, the company was

still in liquidation which was only completed on 19.01.2016.

Pursuant to §§ 290 Para. 5 in conjunction with 296 Para. 2 Clause 1 HGB, the bank

waives the creation of a consolidated financial statements under the provisions of the

Commercial Code, since, due to the size of its balance sheet total, equity capital, and

sales revenue, the subsidiary is of subordinate importance for the picture of the asset,

financial, and revenue situation of the bank corresponding to the actual situation.

Investments in non-current securities

The securities assigned to the fixed assets, with a book value of T€ 107,494, are loans

from mainly public issuers with very good ratings which serve for long-term business

operations and will be held until final maturity. In addition, shares in an investment

fund with a book value of T€ 4,861 are assigned to the fixed assets. There are no shares

in domestic investment assets or comparable foreign investments of more than 10 %

as of the balance sheet effective date (prev. year T€ 4,500).

Since the value reductions are not considered to be permanent, depreciation of T€ 10

(prev. year T€ 0.2) to the lower attributable market value of T€ 10,488 (prev. yr. T€ 1,000)

was waived for securities with a book value of T€ 10,491 (prev. year T€ 1,000), taking

into account amortized premiums as part of the application of the moderated lowest

value principle.


Intangible assets

In the fiscal year, transfers of T€ 196 were made from the advance payments into the

purchased intangible assets.

Fixed assets

31.12.2015T €

31.12.2014T €

Buildings on third-party properties 0 1

Operating and business equipment 454 582

Low-value commodities 165 213

Total 619 796

31.12.2015T €

31.12.2014T €

Purchased intangible assets 716 919

Payments towards intangible assets 425 211

Total 1,141 1,130

81

Other assets

Deferred items

The deferred items include trade account deferrals with terms of up to one year of

T€ 228 and of two to five years of T€ 1,450 which mainly come from the identified

premiums for investments in non-current securities.

31.12.2015 T €

31.12.2014T €

Open settlement from pending securities trans-actions

0 810

Trade account receivables 873 358

Receivables from tax agency and Federal Ministry of Finance

93 124

capitalized current assets 133 223

Checks and papers deposited for collection 180 282

Total 1,279 1,797


Deferred taxes

The quirin bank AG chooses to exercise the option of § 274 Para. 1 Clause 2 HGB to

omit the not asset-side overhang of deferred taxes of T€ 5,017 from the balance sheet.

T€ 649 of the asset-side overhang of deferred taxes results from recognition and val-

uation differences between the commercial and the tax balance sheet, which is mainly

due to the reserves (T€ 397) and the fund for general banking risks (T€ 501). In addition,

there is an asset-side overhang of deferred taxes from considering tax losses carried

forward (T€ 4,368) pursuant to § 274 Para. 1 Clause 4 HGB. The determined asset-side

deferred tax is based on an average tax rate of 31.1 %.

Asset analysis Investment securities

T €

Holdings

T €

Affiliated companies

T €

Intangible assets

T €

Fixed assets

T €

Total

T €

Historical acquisition costs 108,365 8,208 1,350 4,228 4,016 126,167

Purchases fiscal year 19,600 596 89 15,285

Sales fiscal year 11,483 7,908 19,391

Total depreciation 4,800 300 1,092 3,683 3,486 13,222

Depreciation fiscal year 164 585 266 876

Residual book value 31.12.2015 111,682 0 258 1,141 619 108,839

Residual book value previous year 103,729 7,908 258 1,130 796 113,821

83

Foreign currencies

The total volume of the assets in foreign currency is T€ 32,059 (converted).

Asset analysis Investment securities

T €

Holdings

T €


T €

Intangible assets

T €

Fixed assets

T €

Total

T €

Historical acquisition costs 108,365 8,208 1,350 4,228 4,016 126,167

Purchases fiscal year 19,600 596 89 15,285

Sales fiscal year 11,483 7,908 19,391

Total depreciation 4,800 300 1,092 3,683 3,486 13,222

Depreciation fiscal year 164 585 266 876

Residual book value 31.12.2015 111,682 0 258 1,141 619 108,839

Residual book value previous year 103,729 7,908 258 1,130 796 113,821

T€ 287 of the depreciation of the fiscal year for intangible assets comes from

unscheduled depreciation.


II. LIAbILItIes


Investments of free funds from affiliated companies result in unsecuritized liabilities

among the other liabilities to customers of T€ 313.

Trade liabilities

On the effective date, the trade liabilities include the following financial instruments:

The derivatives are negative market values of pending currency futures which are as-

signed to the trade portfolio. On the balance sheet effective date, the nominal value of

these currency futures is T€ 12,163 (previous year T€ 1,826), converted to the forward

rate at transaction closing.

31.12.2015T €

31.12.2014T €

Derivatives 136 23

Promissory notes and otherfixed-interest securities

2 0


0 1

Total 138 24

85

Other liabilities

The liabilities from company retirement insurance were offset with the securities

acquired to cover these liabilities (covering capacity) pursuant to § 246 Para. 2 HGB.

The settlement amount of the offset liabilities of T€ 407 stand against securities with

a market value of T€ 372 (acquisition cost T€ 371).

31.12.2015T €

31.12.2014T €

Liabilities from not yet implemented securities transactions

362 3.641

Tax liabilities 3,109 1,737

Trade account liabilities 351 352

Liabilities from company retirement insurance 35 32

Liabilities from collection documents 3 274

Total 3,860 6,036


Reserves

The reserves are segmented as follows as of the balance sheet effective date:

The other reserves mainly concerning pending claims, dismantling costs for tenant

installations, and archiving costs.

Pension reserves for the case of a coverage capacity shortfall compared to the liabilities

to beneficiaries of the company retirement insurance existing on the balance sheet

effective date.

Funds for general bank risks

The fund for general banking risks pursuant to § 340g HGB is T€ 1,609 and results

exclusively form the mandatory allocation pursuant to § 340e Para. 4 HGB to balance

the risk of future net expenditures in the trade portfolio. Since the fund for general

banking risks exceeded 50 % of the average of the last five annual net yields of the

trade portfolio in the reporting year, a value of T€ 46 was dissolved in favor of the net

yield of the trade portfolio.

31.12.2015T €

31.12.2014T €

Deliveries and services provided 4,328 4,686

Personnel reserves 3,204 3,162

Restructuring reserves 49 472

Tax reserves 692 327

Other reserves 1,155 938

Total 9,428 9,585

87

Equity capital

The equity capital is € 43,106,485. It is split into 43,106,485 shares with dividend rights

made out to the owner.

On the reporting effective date, there is unutilized authorized capital against cash or

noncash contributions with a term until June 12, 2019 of T€ 21,553 (“authorized capital

2014”). The shareholders must be granted subscription rights. Under certain conditions

and with the agreement of the Board of Supervisors, the Executive Board is entitled

to block the subscription rights of the shareholders. The Executive Board requires the

agreement of the Board of Supervisors to implement capital increases.

In addition there is unutilized conditional capital of up to T€ 17,000 for convertible

bonds and/or options, profit participation rights and/or bonds (or combinations thereof)

which can be issued until June 12, 2019 with or without limited term for a total of up to

T€ 45,000 and which grant the owners / creditors of these bonds profit participation

rights/bonds for stock in the company to the name of the owner totaling up to T€ 17,000

with a proportional share of the capital stock up to T€ 17,000 (“conditional capital 2014”).

Furthermore, there is conditional capital totaling T€ 4,311 for subscription rights from

stock options issued to employees and organs as part of the stock option programs

2008 and 2011. Up to now, subscription rights for proportional capital stock of T€ 4,165

were issued in four tranches, of which subscription rights for a proportional capital

stock of T€ 842 have expired as of the balance sheet effective date since the benefit-

ting employees have retired from the company in the meantime. Accordingly, on the

balance sheet effective date there are subscription rights to proportional capital stock

of T€ 3,323 in circulation. The option exercise dates are ordered by tranche. The latest

option exercise date is 20.03.2019.

Both the approved capital and the conditional capital certify the same voting and prof-

it-sharing rights as the previously issued capital stock, starting at the time of their

possible issue.

The majority shareholders are the Berliner Effektengesellschaft AG, Berlin, with 25.5 %

and the BHF Kleinwort Benson Group S.A., Brussels, with 27.8 % of the capital stock

of the quirin bank AG.


Foreign currencies

There is debt in foreign currency of T€ 16,831 (converted).

Residual term segmentation

Receivables from customers with undefined term

The receivables from customers list receivables with indeterminate term of T€ 10,026

(prev. yr. T€ 13,813).

31.12.2015T €

31.12.2014T €

Other receivables from credit institutes 40,476 30,461

a) up to three months 20,476 30,461

b) more than three months up to one year 20,000 0

Receivables from customers 13,584 1,730



Liabilities to credit institutes with agreed term or cancelation term 27,070 2,070


b) more than three months up to one year 0 0

Other liabilities to customers with agreed term or can-celation term 26,837 16,222



89

C. Explanations for P&L statement

Interest surplus

The interest result includes negative interest on credit balances of T€ -221 (previous

year: T€ -64).

Commission results

In the commission result, the bank collects fees from deposit and asset management.

The commission result contains non-period revenue of T€ 227 and non-period expen-

ditures of T€ -26.

Other operating results

The other operating profits and expenditures include the following:

31.12.2015T €

31.12.2014T €

Revenue from the reimbursement of expenses from clients, customers, and employees

1,700 2,205

Revenue from brokering business for third parties 356 2,245

Revenue from divestiture of reserves 1,181 790

Revenue from currency conversion 1,757 1,561

Revenue from other accounting periods 66 56

Other revenue 164 264

Total 5,224 7,121


The other expenditures contain T€ -5 (prev. yr. T€ -5) from the compounding of long-

term reserves.

Taxes from income and revenue

The listed revenue tax expenditures of T€ 1,046 has more than doubled compared to

the previous year due to the increased result. It concerns tax advance payments based

on the tax assessments for corporate and business tax as well as tax reserves that

were formed. While determining its tax expenditures, the bank took into account its

losses carried forward.

31.12.2015T €

31.12.2014T €

Expenditures for reimbursements –272 –153

Expenditures from brokering business for third parties 0 –1,942

Losses from currency conversion –344 –160

Non-period expenditures –43 –364

Other expenses –49 –31

Total –708 –2,650

91

D. Other information

Derivative transactions

Derivative transactions for the balance sheet effective date concern currency futures,

currency swaps, and options and futures. Derivatives are generally only concluded if

ordered by a customer / client. The risk positions are balanced with counter-trans-

actions with credit institutes. Since the hedging generally occurs at the micro-level,

the underlying and hedging transactions summarized into valuation units pursuant to

§ 254 HGB are mainly assigned to the investment book.


Investment book

Residual term Nominal Positive market values

Negative market valuesT € <= 1 year 1 to 5 years > 5 years

Currency risks 4,666 – – 4,666 19 –17

Stock and other price risks

40,988 – – 40,988 1,070 –1,085

Interest risks 3,900 – – 3,900 4 –4

Total 49,554 0 0 49,554 1,093 –1,106

Trading book

Residual term Nominal Positive market values

Negative market valuesT € <= 1 year 1 to 5 years > 5 years

Currency risks 16,836 – – 16,836 86 –135

Stock and other price risks

– – – – – –

Interest risks – – – – – –

Total 16,836 0 0 16,836 86 –135

Counterparty structure

T € 31.12.2015 31.12.2014

Receivable class institutes 53,348 412,190

Other receivable classes 13,042 20,902

Total 66,390 433,092

93

The stated values represent the attributable market value based on the rates on the

closing effective date. Transaction costs are not considered. Risk resulting from negative

market values are covered by corresponding reserves if this is required by commer-

cial law. The derivatives assigned to the trade portfolio are listed with their positive /

negative market values in the balance sheet item trade assets / trade liabilities. There

are no indications that the contractually agreed payment streams of these derivatives

are impaired in terms of amount, time, and security.


Members of the Executive Board

Karl Matthäus Schmidt (Chairman)

Responsibilities > Private banking and asset management > Personnel, law, revision > Public relations > Operations, data protection > Subsidiary Berliner Effektenbank

Johannes Eismann

Responsibilities > Entrepreneur bank> GWG / Fraud> Compliance

Stefan Spannagl

Chairman of Avaloq Sourcing (Germany) AG, Berlin

Responsibilities in the quirin bank AG Executive Board> BPO business


Responsibilities> Finances> Risk management> Treasury > Loans

Mandates in other control commissions> AR member of the DSC Deutsche SachCapital GmbH, Hamburg

95

Members of the Board of Supervisors

Holger Timm (Chairman)

Chairman of the Executive Board of the Tradegate AG Wertpapierhandelsbank, BerlinSpeaker of the Executive Board of the Berliner Effektengesellschaft AG, Berlin

Heinrich Karl Linz (Deputy Chairman)

Chairman of the Risk Committee of the Kleinwort Benson Group Limited, London (until 31.12.2015)Member of the Board of the Kleinwort Benson Bank Limited (until 31.12.2015)

Klaus-Gerd Kleversaat

Member of the Executive Board of the Tradegate AG Wertpapierhandelsbank, Berlin

Dr. Wolfgang Klein (since 12.06.2015)

Business consultant

Matthias Baller

Berliner Effektengesellschaft AG, Berlin

Prof. Dr. Christian Rödl (until 12.06.2015)

Managing partner Rödl & Partner GbR, Nuremberg

Dr. Andreas Neuner

Head of Holdings and Real Estate of the Riedel Holding GmbH & Co. KG, Nuremberg


Organ remuneration

The Executive Board members active in the fiscal year received remuneration of

T€ 1,504 from the quirin bank AG. The members of the Board of Supervisors received

remuneration of T€ 60 in the fiscal year.

Statement of granted advances, loans, and liability situation pursuant to § 34 Para. 2 No. 2 RechKredV

At the end of the year, there are lines of credit granted to members of the Executive

Board and the Board of Supervisors at standard market conditions totaling T€ 810, of

which T€ 196 were utilized as of the balance sheet effective date and which are com-

pletely secured by mortgaged collateral.

Statement pursuant to § 34 Para. 2 No. 4 and § 35 Para. 4 and 6 RechKredV

As of the balance sheet effective date, there are liabilities from guarantees and indem-

nity agreements of T€ 150 (prev. yr. T€ 397) and irrevocable loan commitments for

T€ 380 (prev. yr. T€ 0). As of the balance sheet effective date, there are no indications

that the bank has received claims based on guarantees and indemnity agreements.

97

Employees

The number of employees is composed as follows:

Auditor fee pursuant to § 285 No. 17 HGB

31.12.2015T €

31.12.2014T €

Final audit services 72 87

Other confirmation services 46 46

Tax consulting services 0 10

Other services 1 –5

Total 119 138

Number of employees as of

31.12.2015annual average

Male 123 124

Female 79 78

Total 202 202


E. Other information

Total of other financial obligations

Rental, lease, and brokerage, and maintenance contract resulted in future burdens to-

taling T€ 12,673 over the residual term of the major individual contracts, of which T€

6,066 refer to a residual term of more than one up to at most 5 years. In addition, as

of 31.12.2015 there are rental guarantees assumed for the bank of T€ 455.

Total assets transferred as collateral

On the balance sheet effective date, as part of the implementation of securities and

currency (futures) transactions and for margin commitments from customer and client

transactions, collateral in the value of T€ 202,497 has been transferred to credit insti-

tutes including the Deutsche Bundesbank. On the effective date, the transferred assets

stand against liabilities of T€ 25,350 at these institutes, so that the major portion of

the transferred collateral is unencumbered as of the balance sheet effective date. The

collateral are bonds and other fixed-interest securities of T€ 181,036, receivables due

on demand of T€ 1,001, and/or time deposits to credit institutes (cash collateral) of

T€ 20,000. For guarantees which were assumed mainly for the bank and to a lesser ex-

tent for third parties at the expense of the bank, T€ 460 of time deposits are mortgaged.

99

Use of results

The annual financial report was created with the partial use of profits. After balancing

the balance sheet losses of T€ 2,351 existing from previous years, pursuant to § 150 AktG

an amount of T€ 98 was allocated to the legal reserves. Pursuant to the bylaws, the

Executive Board and Board of Supervisors allocated 75 % of the remaining balance

sheet profit (T€ 1,392) into the other retained profits. In terms of the remaining bal-

ance sheet profits of T€ 464, the Executive Board proposes to allocate it to the other

retained profits as well.

Berlin, February 26, 2016

quirin bank AG

The Executive Board

Stefan Spannagl

Karl Matthäus Schmidt Johannes Eismann


4 Further information

We have audited the annual financial report - consisting of balance sheet, profit

and loss statement, and annex - using the bookkeeping and the management report

of the quirin bank AG, Berlin, for the financial year from January 1 to December 31,

2015. The accounting and compilation of annual account statement and financial

report according to the provisions in the German Commercial Law and Stock Cor-

poration Act are the responsibility of the Board of Directors of the company. It is

our responsibility to give an assessment of the annual accounts and book keeping

and financial report on the basis of our audit.

We conducted this annual accounts audit according to Art 317 HGB in adherence

to the German principles for proper accounts audit specified by the Institute for

Auditors (IDW). According to this, the audit must be planned and carried out in

such a way that incorrectness and discrepancies that affect the asset, financial,

and revenue situation through the annual accounts in keeping with the proper

accounting and the financial report are identified with sufficient reliability. The

determination of the audit procedures considers knowledge of business activities

and the commercial and legal environment of the company and the expectations

of possible errors. During the audit, the efficiency of the internal controlling sys-

tem and evidence for the information given in book keeping, annual accounts, and

financial report are mainly assessed on the basis of random samples. The audit

includes the assessment of materiality principles used and the important estimates

of the legal representatives and the appraisal of the complete representation of the

annual accounts and financial report. We believe that our audit is a sufficiently

reliable basis for our assessment.

Our audit did not draw any objections.

Confirmation certificate of the auditor

4 | 102 | FURTHER INFORMATION

103

According to our estimation based on the knowledge acquired through the audit, the

annual accounts corresponds with the legal provisions and determined in keeping

with the principles of proper accounting an overview of asset, financial and revenue

situation of the company corresponding with the actual conditions. The financial

report is consistent with the annual accounts, provides a realistic overview of the

situation of the company, and represents the opportunities and risks in future trends.

Stuttgart, March 2, 2016

Ebner Stolz GmbH & Co. KG

Audit Firm

Tax Consulting Firm

Matthias Kopka Lorenz Muschal

Auditor Auditor

Disclosure for annual financial report for 31.12.2015 of the quirin bank AG pursuant to § 26a Para. 1 Clause 2 KWG

The quirin bank AG is obligated to disclose the information specified in § 26a Para. 1

Clause 2 KWG.

The quirin bank AG is currently not a member of any regulatory group hierarchy. In

this respect, country-related information is exclusively disclosed at the level of the

individual institute.

The sales correspond to the total of interest result, commission result, net yield of

the trade portfolio, and other operating revenue. The sales are completely achieved in

German as the headquarters of the company.

The profit/loss taxes correspond to the item taxes on income and revenue.

The quirin bank AG has not received any public subsidies in the fiscal year 2015.

The sales were mainly generated by the following business types:

> Financial portfolio management

> Investment brokerage and consulting

> Loan and deposit business

> Guarantee business

> Securities deposit service

> Placement business

> Financial commission business

4 | 104 | FURTHER INFORMATION

31.12.2015

Sales in fiscal year (see definition above) T€ 43,711

Number of salary and wages recipients (FTE) 186

Profit or loss before taxes T€ 5,354

Taxes on profit or loss T€ 1,046

Public subsidies received –

105

5 Report of the Board of Supervisors

5 | 108 | REPORT OF THE BOARD OF SUPERVISORS

In fiscal year 2015, the Board of Supervisors again performed its responsibilities ac-

cording to the law and the bylaws and consulted with and monitored the Executive

Board of the quirin bank AG in the management of the bank. The Executive Board of

the bank informed it of the essential developments in the company in a timely and

comprehensive manner in written or verbal form.

The Executive Board regularly informed the Board of Supervisors of the business situ-

ation and the economic situation of the individual business areas private banking and

business banking, the business planning, the risk situation, and strategic orientation of

the bank. There was close cooperation between the Board of Supervisors and the Exec-

utive Board of the company concerning basic questions of business management and

the economic situation as well as significant business events. Even outside of regular

meetings of the Board of Supervisors, the Chairman of the Board of Supervisors and

his two deputies received information from the Executive Board concerning the current

business development and significant business events. The Board of Supervisors was

involved in all significant decisions of the bank and, after comprehensive consulting

and verification, granted its approval to any events requiring approval if required by

the law or bylaws.

In the reporting year, there were four scheduled regular meetings of the Board of Su-

pervisors on March 19, June 12, September 29, and December 15 as well as an inaugural

meeting on June 12 (before the actual meeting). The Executive Board also participated

in the meetings of the Board of Supervisors. In addition to the decisions passed in the

meetings, one decision was passed by circulation. There is a presidential committee,

an audit committee, and a risk committee. The presidential committee consists of the

Chairman of the Board of Supervisors, Mr. Timm and his two deputies, Dr. Neuner, and

Mr. Linz. The risk committee is composed of the members of the presidential committee.

The audit committee consists of Mr. Linz and Mr. as well as the new member of the

Board of Supervisors elected in the shareholder meeting, Dr. Klein. Mr. Linz acted as

chairman of the risk committee, Dr. Klein as the chairman of the audit committee. The

audit committee met twice in the reporting year. The department heads also partici-

pated in the meetings of the risk committee and the audit committee.

The central topic of the Board of Supervisors was the alignment of the company with

the goal of developing the business areas private banking and business banking lucra-

tively after the sale of the BPO section. The development of the quirion platform and

its strategic positioning was another focal point of consultations.

Report of the Board of Supervisors

109

The sale of the shares in the joint venture started with the Avaloq Group AG, Switzer-

land and the planned replacement of quirin as banking partner of the Avaloq Sourcing

(Germany) AG were also topics of the regular meetings, as was the related project to

implement the Avaloq software as new bank system of the quirin bank, which was

completed successfully by the end of the year.

Further focal points of the meetings were the transfer of the partial business of the Ber-

liner Effektenbank, the analysis of the fee-based banking, and the change of the auditor.

The business and risk strategy and the risk-bearing capacity of the bank for the fiscal

year were discussed with the Board of Supervisors in the meeting on June 12, 2015.

The compliance report, the report of the MaRisk compliance function, and the report

of the central office pursuant to § 25h Para. 4 in conjunction with § 25h Para. 1 KWG

(“Fraud”) were presented to the Board of Supervisors by the Compliance Officer in the

meeting on March 19, 2015 and explained.

In every meeting, the Board of Supervisors asked for detailed information from the

Executive Board concerning the findings of the Internal Revision and the respective

current risk position of the bank.

The audit pursuant to § 36 Para. 1 WPHG for the fiscal year 2015 was performed by the

Ebner Stolz GmbH & Co. KG Audit Firm, Tax Consultant, Berlin, hired by the Executive

Board. The audit report was presented to the members of the Board of Supervisors.

Annual financial report

The annual financial report for the fiscal year 2015 which the Executive Board compiled

according to the regulations of the Commercial Code (HGB) and the Stock Corporation

Act (AktG), was audited by the Ebner Stolz GmbH & Co. KG Audit Firm, Tax Consultant,

Berlin voted for in the general assembly on June 12, 2015 and assigned by the Board of

Supervisors using the accounts and management report and given an unqualified audit

certificate on March 2, 2016:

5 | 110 | REPORT OF THE BOARD OF SUPERVISORS

Reproduction of the confirmation certificate of the auditor

“We have audited the annual financial report - consisting of balance sheet, profit and loss

statement, and annex - using the bookkeeping and the management report of the quirin

bank AG, Berlin, for the financial year from January 1 to December 31, 2015. The account-

ing and compilation of annual account statement and financial report according to the

provisions in the German Commercial Law and Stock Corporation Act are the responsibility

of the Board of Directors of the company. It is our responsibility to give an assessment

of the annual accounts and book keeping and financial report on the basis of our audit.

We conducted this annual accounts audit according to Art 317 HGB in adherence to

the German principles for proper accounts audit specified by the Institute for Auditors

(IDW). According to this, the audit must be planned and carried out in such a way that

incorrectness and discrepancies that affect the asset, financial, and revenue situation

through the annual accounts in keeping with the proper accounting and the financial

report are identified with sufficient reliability. The determination of the audit procedures

considers knowledge of business activities and the commercial and legal environment of

the company and the expectations of possible errors. During the audit, the efficiency of

the internal controlling system and evidence for the information given in book keeping,

annual accounts, and financial report are mainly assessed on the basis of random sam-

ples. The audit includes the assessment of materiality principles used and the important

estimates of the legal representatives and the appraisal of the complete representation

of the annual accounts and financial report. We believe that our audit is a sufficiently

reliable basis for our assessment.

Our audit did not draw any objections.

According to our estimation based on the knowledge acquired through the audit, the an-

nual accounts corresponds with the legal provisions and determined in keeping with the

principles of proper accounting an overview of asset, financial and revenue situation of

the company corresponding with the actual conditions. The financial report is consistent

with the annual accounts, provides a realistic overview of the situation of the company,

and represents the opportunities and risks in future trends.”

111

The Board of Supervisors discussed and checked the annual financial report and

management report as well as the proposal for the use of the profits intensively. The

Board of Supervisors received the necessary documentation for this in time.

In its meeting on March 15, 2016, the Board of Supervisors discussed the annual

financial report of the quirin bank AG created by the Executive Board in detail with

the Executive Board and the auditor. After the final result of its own audit, the Board

of Supervisor does not have any objections and approves the annual financial report

2015, which is hereby approved. The Board of Supervisors second the proposals of the

Executive Board for balancing the balance sheet losses from previous year (T€ 2,351),

allocating funds to the legal reserve (T€ 98) as well as the other reserves (T€ 1,392),

so that there is a balance sheet profit of T€ 464.

The member of the Board of Supervisors Prof. Rödl retired from the Board of Super-

visors of the quirin bank in the reporting year for time reasons. Until his departure

from the Board of Supervisors, as chairman he was also a member of the audit

committee. He will be replaced by Dr. Wolfgang Klein who was elected in the general

assembly on June 12, 2015. The terms of Mr. Timm, Mr. Neuner, and Mr. Baller ended.

They were re-elected in the general assembly on June 12, 2015.

The Board of Supervisors thanks the Executive Board and all employees for their

great personal commitment and the work they did in 2015.

Berlin, March 15, 2016

Holger Timm

Chairman of the Executive Board

quirin bank AG

Kurfürstendamm 119

10711 Berlin

T +49 (0) 30 8 90 21-300

F +49 (0) 30 8 90 21-301

www.quirinbank.de

[email protected]

Imprint

Editorial staff:

Kathrin Kleinjung

Director Company Communication

Steffen Lange

Client Experience Management

Pictures:

Sven Serkis

Design:

BaggenDesign GmbH

Düsseldorf

Print:

GVD | Die Druckerei

Leipzig

Contact

All rights reserved Reprint or duplication only with the consent of the

quirin bank AG, Kurfürstendamm 119, 10711 Berlin.

Darmstadt

Friedensplatz 12, 64283 Darmstadt

T +49 (0) 6151 1 30 65-0

[email protected]

Düsseldorf

Königsallee 60 d, 40212 Düsseldorf

T +49 (0) 211 82 89 88-0

[email protected]

Frankfurt am Main

Schillerhaus, Schillerstraße 20

60313 Frankfurt am Main

T +49 (0) 69 2 47 50 49-0

[email protected]

Freiburg

Bismarckallee 9, 79098 Freiburg

T +49 (0) 761 20 85 32-0

[email protected]

Hamburg

Mittelweg 161, 20148 Hamburg

T +49 (0) 40 4 69 66 78-0

[email protected]

Hannover

Theaterstraße 3, 30159 Hannover

T +49 (0) 511 12 35 87-0

[email protected]

Hof

Lindenstraße 37, 95028 Hof

T +49 (0) 9281 8 20 88-0

[email protected]

Cologne

Spichernstraße 6, 50672 Cologne

T +49 (0) 221 55 40 26-0

[email protected]

Munich

Karlstraße 14, 80333 Munich

T +49 (0) 89 2 32 39 15-0

[email protected]

Nuremberg

WirtschaftsRathaus

Theresienstraße 9, 90403 Nuremberg

T +49 (0) 911 24 92 99-0

[email protected]

Stuttgart

Breitscheidstraße 10

70174 Stuttgart

T +49 (0) 711 72 23 43-0

[email protected]

Subsidiaries

quirin bank AG

Kurfürstendamm 11910711 Berlinwww.quirinbank.de

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