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Financial Statements F I N A N C I A L S TATEMENTS ICE Clear Credit LLC Years Ended December 31, 2020 and 2019 With Report of Independent Registered Public Accounting Firm ICE Clear Credit LLC Financial Statements Years Ended December 31, 2020 and 2019 Contents Report of Independent Registered Public Accounting Firm ......................................................... 1 Financial Statements Balance Sheets ............................................................................................................................ 3 Statements of Income .................................................................................................................. 4 Statements of Changes in Member’s Equity ................................................................................ 5 Statements of Cash Flows ........................................................................................................... 6 Notes to Financial Statements ..................................................................................................... 7 Ernst & Young LLP Tel: +1 404 874 8300 Suite 1000 ey.com 55 Ivan Allen Jr. Boulevard Atlanta, GA 30308 Report of Independent Registered Public Accounting Firm The Board of Managers and Member ICE Clear Credit LLC Opinion on the Financial Statements We have audited the accompanying balance sheets of ICE Clear Credit LLC (the Company) as of December 31, 2020 and 2019, the related statements of income, changes in member’s equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. Adoption of New Accounting Standard As discussed in Note 2 to the financial statements, the Company changed its method of accounting for income taxes in 2019 and 2020. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 1 A member firm of Ernst & Young Global Limited Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. We have served as the Company’s auditor since 2009. Atlanta, Georgia February 24, 2021 2 A member firm of Ernst & Young Global Limited ICE Clear Credit LLC Balance Sheets (In Thousands) December 31 2020 2019 Assets Current assets: Cash and cash equivalents $ 33,141 $ 60,354 Customer accounts receivable 5,312 7,100 Margin deposits and guaranty funds 37,495,572 24,412,923 Short-term restricted cash and cash equivalents 111,800 98,900 Due from affiliates 11,749 11,228 Other current assets 6,752 15,367 Total current assets 37,664,326 24,605,872 Developed software, net of accumulated amortization of $43,766 and $38,444 as of December 31, 2020 and 2019, respectively 14,708 14,740 Noncurrent assets: Long-term restricted cash 50,000 50,000 Total noncurrent assets 50,000 50,000 Total assets $ 37,729,034 $ 24,670,612 Liabilities and member's equity Current liabilities: Accounts payable and accrued liabilities $ 4,800 $ 25,816 Accrued salaries and benefits 5,472 4,459 Deferred revenue 3,166 2,714 Due to affiliates 7,160 8,627 Margin deposits and guaranty funds 37,495,572 24,412,923 Total current liabilities 37,516,170 24,454,539 Noncurrent liabilities: Other non-current liabilities 235 242 Total noncurrent assets 235 242 Total liabilities 37,516,405 24,454,781 Member's equity: Member's capital 126,800 113,900 Accumulated profit 85,829 101,931 Total member's equity 212,629 215,831 Total liabilities and member's equity $ 37,729,034 $ 24,670,612 See accompanying notes. 3 ICE Clear Credit LLC Statements of Income (In Thousands) Year Ended December 31 2020 2019 Revenues Clearing and processing fees, net $ 128,146 $ 116,992 Affiliate revenues 4,723 4,562 Other revenues 25,661 55,902 Total revenues 158,530 177,456 Operating expenses Compensation and benefits 17,531 16,446 Professional services 423 608 Selling, general and administrative 7,718 7,158 Service and license fees to affiliates 28,806 24,716 Amortization 9,166 8,925 Total operating expenses 63,644 57,853 Operating income 94,886 119,603 Other income (expense): Interest expense, net (2,556) (1,301) Other income (expense), net 1,078 229 Total other income (expense) (1,478) (1,072) Net income $ 93,408 $ 118,531 See accompanying notes. 4 ICE Clear Credit LLC Statements of Changes in Member's Equity (In Thousands) Total Member's Accumulated Member's Capital Profit Equity Balance at January 1, 2019 $ 105,000 $ 96,400 $ 201,400 Net income – 118,531 118,531 Distributions to member – (113,000) (113,000) Contributions from member 8,900 – 8,900 Balance at December 31, 2019 113,900 101,931 215,831 Impact of adoption of ASU 2016-13 – (10) (10) Net income – 93,408 93,408 Distributions to member – (109,500) (109,500) Contributions from member 12,900 – 12,900 Balance at December 31, 2020 $ 126,800 $ 85,829 $ 212,629 See accompanying notes. 5 ICE Clear Credit LLC Statements of Cash Flows (In Thousands) Year Ended December 31 2020 2019 Operating activities Net income $ 93,408 $ 118,501 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Amortization of developed software 9,166 8,925 Deferred taxes – (26) Changes in assets and liabilities: Customer accounts receivable 1,778 916 Other current assets 8,615 4,576 Accounts payable and current liabilities (20,004) (12,989) Deferred revenue 452 9 Due to/from affiliates (1,988) (1,637) Other non-current liabilities (7) 94 Total adjustments (1,988) (132) Net cash provided by operating activities 91,420 118,369 Investing activities Capitalized developed software costs (9,133) (8,757) Net cash used in investing activities (9,133) (8,757) Financing activities Distributions paid (109,500) (113,000) Member contributions 12,900 8,900 Net cash used in financing activities (96,600) (104,100) Net increase (decrease) in cash and cash equivalents and (14,313) 5,512 restricted cash and cash equivalents Cash and cash equivalents and restricted cash and cash 209,254 203,742 equivalents at beginning of year Cash and cash equivalents and restricted cash and cash $ 194,941 $ 209,254 equivalents at end of year See accompanying notes. 6 ICE Clear Credit LLC Notes to Financial Statements December 31, 2020 1. Formation, Organization, and Description of Business ICE Clear Credit LLC (ICE Clear Credit or the Company), serves as a regulated North American credit default swap (CDS) clearing house to clear North American, European, Asian-Pacific and Emerging Market CDS instruments. ICE Clear Credit is designed to address the operational and risk management needs of the credit derivatives market. The Company is a Securities and Exchange Commission (SEC) regulated Securities Clearing Agency (SCA) and a Commodity Futures Trading Commission (CFTC) regulated Derivatives Clearing Organization (DCO) subject to certain core principles. On July 18, 2012, ICE Clear Credit was designated as a systemically important financial market utility (SIFMU) by the Financial Stability Oversight Council (FSOC). With this designation, ICE Clear Credit is subject to higher standards than other clearing houses that are not deemed to be systemically important. These standards include greater regulatory scrutiny and higher default resource and liquidity requirements, as well as higher operational standards. ICE Clear Credit is also subject to Federal Reserve oversight as a result of being designated a SIFMU. ICE Clear Credit is wholly-owned by ICE US Holding Company L.P., a Cayman Islands exempt limited partnership. ICE US Holding Company L.P. is owned by ICE US Holding Company GP LLC and various other affiliated entities.
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