ICF BANK
19 20
ANNUAL REPORT GESCHÄFTSBERICHT 41 _ 42 CONTENTS
LETTER FROM THE CHIEF EXECUTIVE OFFICER 43
REPORT OF THE SUPERVISORY BOARD 47
MANAGEMENT REPORT 49
BUSINESS DEVELOPMENT 51 FINANCIAL SITUATION 54 RISK REPORT 55 OUTLOOK AND REPORT ON OPPORTUNITIES 57
FINANCIAL STATEMENT 59 BALANCE SHEET 61
PROFIT AND LOSS STATEMENT 63
NOTES 65
INDEPENDENT AUDITOR'S REPORT 75
IMPRINT 77 43 _ 44
LETTER FROM THE CHIEF EXECUTIVE OFFICER LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
DEAR SHAREHOLDERS, LADIES AND GENTLEMEN,
In many respects, financial year 2019/2020 was chequered and dominated by unprecedented challenges. The year 2019 as a whole was marked by fears of recession, Brexit, the trade dispute between the US and China and a contentious tariff policy in transatlantic trade, with the central banks keeping interest rates low due to the signs of a wavering economy. This led to a relatively low level of volatility on the global equities markets although the DAX climbed 25.5% to a record high of 13,249 points in 2019, which had a very positive effect on earnings development at ICF BANK AG.
The international equities markets plummeted at unprecedented speeds in the first quarter of 2020 in the wake of the coronavirus and COVID-19 outbreak, which developed into a pandemic and saw lockdowns implemented in almost every corner of the globe. The outcome remains uncertain but the first quarter of 2020 will go down in stock market and economic history. ICF BANK AG leveraged its efficient organi- sational structure to react quickly and judiciously to the market situation. Thanks to a systematic and proactive approach and the outstanding professional skills and motivation of all our staff, ICF BANK AG closed out the 2019/2020 financial year with an exceptionally good result from ordinary activities of EUR 7,897 thousand.
Our business development in the 2019/2020 financial year and the first quarter of the 2020/2021 financial year clearly demonstrates that our strategy of "diversifying and promoting core competencies" is not just a key condition for growth and sustainable profits but also offers flexibility and resilience, especially in an unfavourable environment.
Continually developing our segments is a prerequisite for us to offer our customers the best possible service. For example, the "Dynamic Best Execution Policy" project, which we completed this past financial year, is now ready to be rolled out to our customers. This new product offering met with positive feedback and won the Company several new customers.
The "Internaliser" project is still in the roll-out phase, and we see it as a further pillar in our efforts to expand the range of services.
ICF BANK AG was also registered as an official EU Benchmark Administrator with Germany's Federal Financial Supervisory Authority (BaFin) and has been included in the European Securities and Markets Authority (ESMA) register since 19 July 2019. Lawmakers passed the Bench- mark Regulation to fully regulate the indices used as reference rates for financial products. Supervised companies may only use indices as benchmarks for their financial products if the benchmark administrator is entered into the ESMA register. Our customers take part in innovative benchmark concepts in observance of high security standards.
We also succeeded in penetrating a further segment in the area of Market Making thanks to our many years' expertise and integrity. Since January 2020, we have been the sole lead broker on the Düsseldorf Stock Exchange and have established a branch in Düsseldorf to further optimise our process chain.
Developing new products and services, winning market share and opening up new markets achieved measurable success in the 2019/2020 financial year that was reflected in our operating result.
We are pleased to give you an overview of developments in our three core divisions: Market Making, Brokerage Services and Capital Markets.
MARKET MAKING
As a specialist on the Frankfurt Stock Exchange, ICF BANK AG manages roughly 800 (previous year: 802) stocks, including 114 foreign REITs (real estate investment trusts) in the REITs segment. In addition, there were approximately 9,400 (previous year: approximately 9,550) fixed- income securities. The number of funds on the Frankfurt Stock Exchange managed by ICF BANK AG was approximately 1,350 (previous year: approximately 1,500).
ICF BANK AG currently manages some 610,000 (previous year: approximately 660,000) products in the Market Making Derivatives Products segment; the average number of products managed over the year in the Market Making ETP segment was approximately 450 (previous year: approximately 400).
On the Quotrix exchange in Düsseldorf, ICF BANK AG manages approximately 4,100 stocks (previous year: approximately 4,100), approxi- mately 8,300 fixed-income bonds (previous year: approximately 6,650), approximately 2,100 funds (previous year: approximately 2,300) and approximately 1,550 ETPs (previous year: approximately 1,500).
Since January 2020, ICF BANK AG has been the lead broker on the Düsseldorf Stock Exchange, managing approximately 3,300 equities, approximately 9,400 fixed-income bonds, approximately 3,200 funds and approximately 1,500 ETPs. This lays the foundation for healthy growth. 45 _ 46
BROKERAGE SERVICES
On the stock exchanges, equities performed well in 2019. Anxiety surrounding the coronavirus at the beginning of 2020 then had a massive impact on the international equities markets. The extraordinary turnover on the markets caused a significant increase in business in the Glo- bal Markets department, which in turn meant that Global Markets could again generate very encouraging overall results in the 2019/2020 financial year.
In the Customized Indices segment, financial year 2019/2020 was marked by various upgrades to our proprietary software and hardware. This enabled us to further improve performance and systems scalability, thereby laying the foundation for further growth. The number of indices calculated remained roughly the same, overall.
CAPITAL MARKETS
ICF BANK AG's capital markets team successfully carried out several transactions – some of which were exceptionally high-volume – in the 2019/2020 financial year through its Equity & Debt Capital Markets and Institutional Sales Equity & Debt departments. A total of eight capital market transactions and several technical mandates were managed. At the same time, the issuance business was stopped in its tracks in Febru- ary 2020 due to the turbulence on the capital and commodities markets in the wake of the coronavirus pandemic; this led to a postponement of planned capital market projects.
In Designated Sponsoring, we gained more mandates than we lost in the 2019/2020 financial year. The total number of mandates increased by 3 to 56, as at 31 March 2020. The quality of the mandates managed remained high. At the balance sheet date, one-quarter of the managed companies were included in a Deutsche Börse AG selection index. Currently, 9 mandates from the MDAX, 3 from the SDAX and 2 from the TecDAX are managed. As in previous years, Designated Sponsoring achieved Deutsche Börse AG's best rating (AA) for all mandates under management.
All in all, the capital markets team generated very healthy overall results. LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
We can be pleased with the development within our three core divisions. Financial year 2019/2020 was a success, and we either achieved or exceeded our earnings targets in all material operating segments. Thus we reported EUR 1.4 million in net retained earnings for financial year 2019/2020. Due to the higher trading volumes, our net trading portfolio result rose from EUR 3 million to EUR 9.7 million in the financial year ended. Administrative expenses rose by approximately 20% to EUR 3.1 million due to non-recurring factors and one-off HR costs. The result from ordinary activities amounted to EUR 7.9 million as at the end of the year. Two transfers were made to the fund for general banking risks: EUR 384 thousand in accordance with section 340e (4) of the German Commercial Code (Handelsgesetzbuch, "HGB") and EUR 4,956 thousand in accordance with section 340g (1) HGB. Following a tax expense of EUR 2.6 million, the net income for the financial year amoun- ted to EUR 5 thousand. Regulatory tier 1 capital amounted to EUR 22.5 million. The equity ratio is approximately 57%. The positive earnings trend in the 2019/2020 financial year should enable us to pay out a higher dividend and still reinvest profits in the Company's future growth. Consequently, the Executive Board and the Supervisory Board will propose to the Annual General Meeting of ICF BANK that it increase the dividend from EUR 0.04 to EUR 0.15 per outstanding share.
Although we can be satisfied with the results for financial year 2019/2020, we know that a lot of work lies ahead. Wide-ranging investments must be made in the Company's technological development to drive forward digitalisation. There must likewise be no let-up in efforts to review and refine our products and services so that we can remain competitive.
Staying on our growth trajectory requires realistic ideas.
For example, BÖAG Börsen AG acquired the majority of shares of ICF BANK AG at the beginning of the new 2020/2021 financial year. Acqui- ring the majority interest strengthens BÖAG's position as part of the strategic partnership and ICF BANK AG gains a reliable foothold to drive forward sources of growth and earnings in addition to its original focus on securities trading.
As the CEO of ICF BANK AG, I again stood for election to various volunteer positions in the past financial year. I was confirmed in my position as a member of the Exchange Council of the Frankfurt Stock Exchange and elected for a further three years, and once again assume the position of Chairman of the Standing Committee of the Exchange Council. I was also reappointed as a member of the Exchange Council of the Düsseldorf Stock Exchange and the Munich Stock Exchange and elected for a further three-year term of office. In March this year, member of the Executive Board Mr Sascha Rinno was elected to the Exchange Council of the Berlin Stock Exchange to serve a term of office from 2020 to 2022.
It is not possible at present to make any reliable earnings forecast for the coming 2020/2021 financial year due to the unforeseeable effects of the COVID-19 crisis. However, we believe that our diversified business model, sensible cost management, efficient organisational structures and a highly skilled workforce puts us in a good position in view of the difficult situation.
The fact that we can look back on a successful year is down to the effort, reliability and team spirit of our employees. I would like to take this opportunity to offer my thanks – including on behalf of my colleagues on the Executive Board – to all of our Company's staff for their extra- ordinary work. Your ideas, your realistic assessments of markets and customer expectations have been crucial in strengthening our Company. Together we can achieve much, as we have seen once again this year. We would also like to thank the Supervisory Board for the constructive and positive cooperation as well as our shareholders for the trust they place in us. Last but not least I would like to thank our customers for their steadfast loyalty over all these years.
Sincerely,
Bernd Gegenheimer Chairman of the Executive Board 47 _ 48
REPORT OF THE SUPERVISORY BOARD
The Supervisory Board performed the duties assigned to it by law and the Company's Articles of Association and monitored the Company's management on an ongoing basis. In written and oral reports, it was provided with regular, timely and comprehensive information on the position and key developments of the Company. The subsidiaries ICF Systems AG and NOVIS Software GmbH were included in the reporting. A total of six Supervisory Board meetings were held in the year under review from 1 April 2019 to 31 March 2020. In addition, there were also two meetings of the Strategy Committee and two of the Personnel Committee.
During the year under review, the Supervisory Board and its Committees exami- ned in depth the Company's position and prospects. At the Supervisory Board meetings, the Executive Board provided timely reports on the development of business, on fundamental issues of business strategy and on potential courses of action in accordance with the statutory requirements. Ways of increasing the profitability of the individual divisions, sustainable cost management and the performance of the subsidiaries were the subjects of discussion at each of the meetings. Extensive talks were held on setting up new and expanding exis- ting divisions as well as diversifying products and markets. These covered the Company's strategy and the development of market making in the Düsseldorf Stock Exchange's Quotrix trading system, associated with a reduction in securi- ties settlement costs and a growth initiative designed to increase order flow. In addition, ICF BANK AG has been the sole lead broker on the Düsseldorf Stock Exchange since January 2020.
One topic of central importance discussed towards the end of the financial year was how to handle the coronavirus crisis, with respect to business continuity and the safety of employees – particularly in the case of official orders, such as quarantine measures, and a strict risk management apparatus in the face of massive increases in turnover and heavy market volatility. The Supervisory Board conferred regularly and at length with the Executive Board with respect to con- tingency measures – which were implemented early and in a highly professional manner – including the leasing of additional trading locations and equipping the entire staff to work from home.
The Supervisory Board was continually briefed about the further intensification of the Capital Markets (CM) division. A variety of transactions in the growth finance sector and placements of corporate issuances were successfully imple- mented. In addition, the Supervisory Board closely monitored the cooperation with a FinTech company to tap into new sales channels in the field of corporate finance. The growth strategy of ICF Systems AG and NOVIS Software GmbH was also closely monitored during the year under review, with particular emphasis placed on ensuring constant data security and operational stability. The Strategy Committee and the Supervisory Board also closely monitored the project initia- ted to secure the future shareholder structure in light of the demographic trend among the shareholder base, with the objective of guiding the Company into a secure future. In that vein, the Supervisory Board welcomes the decision by the Company's founders to transfer the majority of their shares to our longstanding business partner BÖAG Börsen AG, thereby bringing a new generation into the shareholder base while also laying the foundation for the Company's continued sustainable growth in the future. The Supervisory Board believes that there is significant potential for synergies and an innovative collaboration with the new strategic investor in a spirit of partnership, to the benefit of both companies.
The Supervisory Board meetings passed resolutions on all business that required its approval under the law, the Articles of Associations and the rules of procedu- re. In addition, the implications of instability in global politics for the financial markets were discussed in particular, as were the impending trade restrictions LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
and political activities with respect to climate protection and sustainability. In addition, current issues relating to business policy, risk assessment, regulatory matters and the Company's position and results of operations were dealt with in regular discussions between the Executive Board and the Chairman of the Supervisory Board.
At the Annual General Meeting on 9 September 2019, Rainer Roubal, Prof. Dr. Rüdiger von Rosen and Franz A. Rüegg were once again confirmed in their capacity as members of the Supervisory Board. Rainer Roubal was elected as the new Chairman of the Supervisory Board and Prof. Dr. Rüdiger von Rosen his Deputy Chairman.
The books and records, the annual financial statements and the management report for financial year 2019/2020, as well as the consolidated financial state- ments and the Group management report for financial year 2019/2020 were audited by Dohm Schmidt Janka, Revision und Treuhand AG, 60325 Frankfurt am Main, who were elected as auditors by the Annual General Meeting on 9 September 2019, and issued an unqualified audit opinion.
The auditors' reports by Dohm Schmidt Janka were submitted to the Supervisory Board. The Supervisory Board conducted an in-depth examination of the annual and consolidated financial statements, taking into account the auditors' audit reports, as well as of the Executive Board's proposal for the appropriation of the net retained profits. The auditors took part in the discussion. The Supervisory Board's examination has not led to any reservations. On the basis of its own examination, the Supervisory Board concurs with the result of the audit of the annual and consolidated financial statements by the auditors.
At its meeting on 24 August 2020, the Supervisory Board resolved to approve the annual financial statements prepared by the Executive Board, and resolved to adopt the consolidated financial statements as prepared. The Supervisory Board discussed the Executive Board's proposal on the appropriation of net re- tained profits with the Executive Board, in light of the interests of the Company and its shareholders. Following that discussion and its own review, the Super- visory Board approved the Executive Board's proposal for the appropriation of the net retained profits.
The particularly high-level of commitment demonstrated by everyone involved enabled the Company to generate outstanding earnings. In a competitive environment still driven by constant change, the Supervisory Board believes that ICF BANK AG is very well prepared for the future. The Supervisory Board will continue to make every effort to work toward sustained positive business performance in order to continue to future-proof ICF BANK AG in the inte- rests of its owners and employees. The Supervisory Board wishes to thank the Executive Board and all employees of the ICF Group for their dedicated, hands-on commitment, particularly during the coronavirus crisis, which con- tributed significantly to ICF BANK AG's highly successful performance in the past financial year.
Supervisory Board of ICF BANK AG
Frankfurt am Main, 24 August 2020
Rainer Roubal Chairman of the Supervisory Board 49 _ 50 19 20
MANAGEMENT REPORT 51 _ 52
BUSINESS DEVELOPMENT
Financial year 2019/2020 was a year of extremes. Initial volume on the Xetra® trading platform rose by approximately 61 % in Q1 2020 expectations for 2019 were for a slightly downward eco- as compared to the same quarter of the previous year. nomic trend. By the end of the financial year, that trend had pivoted to a negative course. In this challenging environment, ICF BANK AG benefited greatly from the incre- ase in trading volume in particular, and closed the financial year with a highly Uncertainty as to the form of the United Kingdom's with- encouraging operating result. drawal from the European Union overshadowed the poli- tical and economic situation in the European Union until well into the 2019/2020 financial year. The UK's exit from MARKET MAKING the EU on 31 January 2020 – to be followed by a transiti- on phase ending on 31 December 2020 during which the As a specialist on the Frankfurt Stock Exchange, ICF BANK AG manages rough- long-term relationship between the United Kingdom and ly 800 (previous year: 802) stocks, including 114 foreign REITs (real estate the European Union was meant to be renegotiated – re- investment trusts) in the REITs segment. In addition, there were approximately duced the immediate source of pressure. However, things 9,400 (previous year: approximately 9,550) fixed-income securities. The num- will remain uncertain for the capital markets until there is ber of funds on the Frankfurt Stock Exchange managed by ICF BANK AG was clarity as to the specific terms of withdrawal. approximately 1,350 (previous year: approximately 1,500). ICF BANK AG cur- rently manages some 610,000 (previous year: approximately 660,000) pro- The USA's trade disputes with China and the European ducts in the Market Making Derivatives Products segment; the average number Union represented further sources of uncertainty. The pu- of products managed over the year in the Market Making ETP segment was ap- nitive tariffs imposed by each side on the other strained proximately 450 (previous year: approximately 400). On the Quotrix exchange the economy and stoked fears of a global trade war. The in Düsseldorf, ICF BANK AG manages approximately 4,100 stocks (previous Federal Reserve attempted to counter the prospect of an year: approximately 4,100), approximately 8,300 fixed-income bonds (previ- economic downturn by repeatedly cutting its key rates, ous year: approximately 6,650), approximately 2,100 funds (previous year: resulting in a continuation of the low interest rate envi- approximately 2,300) and approximately 1,550 ETPs (previous year: appro- ronment. ximately 1,500). Since January 2020, ICF BANK AG has been the lead broker on the Düsseldorf Stock Exchange, managing approximately 3,300 equities, However, COVID-19 posed an extreme challenge for peop- approximately 9,400 fixed-income bonds, approximately 3,200 funds and ap- le, the economy and the stock markets. For the most part, proximately 1,500 ETPs. the lockdown in Germany paralysed public life and the economy. The coronavirus pandemic has led to a global The Market Making FWB Equities segment's income is significantly influenced economic standstill. Governments and the European Cen- by the development of trading volume on the Frankfurt Stock Exchange (FSE). tral Bank have launched large-scale economic measures Given the sharp increase in order book volume due to the coronavirus crisis, in an attempt to mitigate the consequences. The effects of income in financial year 2019/2020 showed a highly encouraging trend. the coronavirus crisis had already made themselves felt by March 2020, with the ifo Business Climate Index plumme- The Market Making FWB Bonds segment also concluded the 2019/2020 finan- ting by 8.3 points. The pandemic and its implications will cial year with an encouraging result, even in a persistent low-interest rate envi- continue to mark the global economy and stock markets ronment, due to rising bond trading volumes on the Frankfurt Stock Exchange. well into the new financial year. We continued to systematically expand our collaboration with issuers and issu- ing banks, and the inclusion of new bonds on the Frankfurt Stock Exchange had The DAX benchmark index made a very positive start to a significantly positive influence on our earnings. 2019, and closed on 31 December 2019 at 13,249, up 25 %. In 2019, average stock volatility was down slightly year The turnover trend for the Market Making FWB Funds segment, which had on year, with the exception of a few short-term peaks. The been in decline for years, was stopped in the past financial year, particularly as number of IPOs in the Xetra segment fell sharply in 2019 a result of activity in the final quarter. Turnover in ETPs was also stabilised at a to only 4. Trading volumes on the Xetra® trading plat- low level. The flight from active funds towards ETPs continued, and as a result form used primarily by institutional investors decreased by we accelerated our efforts in the past financial year to win over new mandates approximately 14 % year on year in 2019. The Frankfurt in the ETPs segment. We improved our technical set-up and pricing routines as Stock Exchange's trading volume fell by 17.76 % from EUR planned and adapted them to meet the latest standards. 40.1 billion in 2018 to EUR 32.9 billion in 2019. The first quarter of 2020 was dominated by the coronavirus crisis. In the Market Making Derivatives Products segment, ICF BANK AG managed up The markets collapsed, with the DAX nose-diving to 8,500 to 750,000 products for a time during the 2019/2020 financial year. Given the points on one occasion. The DAX recovered slightly by the major drop in March 2020 and the extremely high volatility among the various end of March 2020 to close at 9,935 points, representing a asset classes, many products were called; accordingly, this consolidation and decrease of roughly 25 % since the close of 2019. Trading the realignment of the product portfolio by issuers resulted in a reduction in volumes on the Frankfurt Stock Exchange skyrocketed due the number of securities managed. Despite the reduction in absolute terms of to the extreme increase in volatility in the first quarter of managed securities, ICF BANK AG increased its percentage share on the overall 2020. Order book volume on the Frankfurt Stock Exchange market, which is currently above 50 % of all listed securities on the Frankfurt more than doubled year on year in Q1 2020. Order book Stock Exchange's segment for certificates, Börse Frankfurt Zertifikate. LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
The Market Making Derivatives Products segment can look back on yet another CAPITAL MARKETS highly successful financial year. Turnover in structured products on the Börse Frankfurt Zertifikate segment rose further in the past financial year. Particularly ICF BANK AG's capital markets team successfully carried in the fourth quarter of the past financial year, new records for turnover were out several transactions – some of which were excepti- set thanks to the extremely high volatilities. onally high-volume – in the 2019/2020 financial year through its Equity & Debt Capital Markets and Institutional The issuers managed remain in pole position as far as execution and perfor- Sales Equity & Debt departments. A total of eight capital mance measurement is concerned. Our activities as a quote provider again market transactions and several technical mandates were generated stable income in the past financial year thanks to our efforts to sys- managed. At the same time, the issuance business was tematically implement optimisation processes. stopped in its tracks in February 2020 due to the turbu- lence on the capital and commodities markets in the wake Quotrix serves as a BestEx venue that operates in fierce competition with other of the coronavirus pandemic; this manifested itself in a exchanges. ICF BANK AG has implemented a quality analysis system using in- postponement of planned capital market projects. ternally generated software for the purposes of determining and monitoring quote and trade quality on Quotrix. This quality analysis emphasises the best The focus of the transaction business in financial year price and trade quality on Quotrix as compared to the competition. According to 2019/2020 was in the Fixed Income and Debt Advisory the quality standards stipulated by MiFID II, price and trade quality are among segments. The successful implementation of financing for the most important criteria, alongside costs, for deciding how to steer BestEx the Huarong Group (hotel financing) and Fakt AG (shop- flow. Despite offering the best trading and execution quality, ICF lost the BestEx ping centre financing) saw the Debt Advisory team once Flow in bonds and ETPs for one customer, and was forced to accept conside- again develop and implement bespoke, innovative finan- rable losses in trading volumes. We were able to partially offset that loss by cing structures – not only for our corporate clients but also connecting further customers to the Quotrix exchange and by winning over for the investors we serve. additional BestEx Flows. Due to the extreme market volatility caused by the coronavirus crisis, overall trading volumes on the Quotrix exchange rose consi- In the Fixed Income Financing segment, the capital mar- derably year on year. The order book volume in the bonds segment once again kets team again assisted Deutsche Rohstoff AG with a increased significantly due to the expansion of the number of bonds managed. bond issuance and advised Media & Games Invest PLC for The segment closed the financial year with a very encouraging result. the first time. The successful placement of Groß & Part- ner Grundstücksentwicklungsgesellschaft mbH's corporate On 1 January 2020, ICF BANK AG was appointed lead broker on the Düsseldorf bond offered impressive evidence of the team's expertise, Stock Exchange. ICF BANK AG manages all securities classes on the Düsseldorf particularly in the area of real estate financing. In the equi- Stock Exchange as the exclusive lead broker. ICF BANK AG's transition as lead ty financing area, the Bank's successful management of broker went without incident. The product range was expanded significantly in the GK Software SE capital increase bears special notice. January by approximately 700 equities. The segment was already able to gene- rate a highly positive result in the fourth quarter of the financial year. In addition to serving debt advisory clients and marketing capital market transactions, the segment organised a vari- ety of corporate roadshows and was co-organiser or active BROKERAGE SERVICES sponsor of relevant investor conferences and capital mar- ket platform events (such as the German Equity Forum, 2019 was a very good year for equities on the stock exchanges. The year was the Munich Capital Markets Conference, HIT Hamburger not free from worries for the economy – the threat of recession, Brexit, rising Investorentag). populism in Europe and, not least, the US-Chinese trade war. Added to this in 2020 was the spectre of the coronavirus, which caused investors to hold In summary, the capital markets team's Equity & Debt Ca- their breath around the globe. It also caused a great stir on the international pital Markets and Institutional Sales Equity & Debt depart- equities markets. One positive factor was the extraordinary turnover on the ments generated a highly positive overall result. markets, which led to a significant increase in business in the Global Markets department. The department again generated encouraging overall results in the In the Designated Sponsoring segment, the competitive 2019/2020 financial year. environment remains challenging. In the past financial year, client relationships came to an end as a result of, In the Customized Indices segment, financial year 2019/2020 was marked by a for instance, capital market realignments by the managed large number of upgrades to our proprietary software and hardware. This ena- companies, delisting and consolidation to only one desig- bled us to further improve performance and systems scalability, thereby laying nated sponsor. New competitors also emerged which had the foundation for further growth. The number of indices calculated remained previously not included designated sponsoring activities in roughly the same, overall. their portfolio.
In the 2019/2020 financial year, the Company recorded more additions to its roster of managed clients than de- partures. The total number of mandates thus increased by 3 to 56, as at 31 March 2020. 53 _ 54
For instance, in Germany it won over Villeroy & Boch AG, Business continuity will be secured by implementing the following measures in a well-known company and CompuGroup SE, a compa- the event of an emergency: ny which is included in two selection indices (MDAX and TecDAX). – ICF BANK AG has alternative workspaces which make it possible for traders to divert to several alternative locations in the event one trading venue The quality of the mandates managed remained high. At is closed; these workspaces are equipped with tested, functioning trading the balance sheet date, one-quarter of the managed com- applications and alternative workstations for traders. panies were included in a Deutsche Börse AG selection – In addition, at present home office workstations have been established and index. Currently, 9 mandates from the MDAX, 3 from the tested for every employee at every functional area, allowing them to carry SDAX and 2 from the TecDAX are managed. As in previous out their work from home at short notice, if necessary until further notice. years, Designated Sponsoring achieved Deutsche Börse – Furthermore, the trading departments were spread out over a total of three AG's best rating (AA) for all mandates under management. locations. This preventative measure reduces the risk that all employees might be ordered to work from home at the same time. In terms of net trading income, the Designated Sponso- – ICF BANK AG consults regularly with the exchanges, trading venues and ring segment fell significantly short of expectations due clients about their contingency planning. to non-recurring factors and – commencing in February – ICF BANK AG has issued internal instructions to its employees on safeguar- 2020 – the most challenging phase on the stock exchan- ding operations and employee health; these include a general prohibition ges since 1987. on business trips, the replacement of meetings – whether externally with clients or internally with employees of subsidiaries – with conference calls and video conferences, limiting communications to the furthest extent pos- OTHER SIGNIFICANT EVENTS OF THE sible to telephone and e-mail, and prohibiting participation at trade fairs, FINANCIAL YEAR conferences and seminars until further notice. – Employees returning from holiday are subject to further measures, such as a The Düsseldorf Stock Exchange issued a call for tenders duty to notify management if they are returning from high-risk areas. for lead broker in its Regulated Market and Open Mar- – Employees have furthermore been called upon to comply with instructions ket (Freiverkehr) from 1 January 2020. ICF BANK AG was from public authorities and keep abreast of current developments. awarded the mandate, and will serve as lead broker in all securities classes until 31 December 2023. These preventative measures are intended to ensure business continuity in all areas and functions in the event of an emergency, particularly if quarantine By virtue of a decision dated 19 June 2019, ICF BANK AG measures are imposed. was approved as an authorised EU Benchmark Administ- rator. PERSONNEL As part of the preventative measures enacted to combat the spread of the coronavirus (COVID-19), the Frankfurt ICF BANK AG had an average of 64 employees and 3 Executive Board members Stock Exchange on 10 March 2020 suspended its requi- during the year under review. An average of 30 people were employed in the rement that traders be available in the trading halls until Market Making segment, 5 in Brokerage Services, 10 in Capital Markets and 19 further notice, subject to strict conditions. In particular, in Administration. it must be ensured that at no time is orderly exchange trading jeopardised by participation in exchange trading on FSE outside of the registered and approved trading location(s). ICF BANK AG must always comply with the ap- plicable stock exchange rules and regulations, specifically the Exchange Rules for the Frankfurt Stock Exchange and the Conditions of Trading on the Frankfurt Stock Exchange.
Given the risks caused by the coronavirus (COVID-19), the contingency manual and the contingency plans have been expanded to include pandemics. Comprehensive measures have been taken which are intended to help guarantee ICF BANK AG's ability to continue to operate, as well as the functioning of its systems and the operational readiness of its employees, even in the event of illness and/or quaran- tine measures. LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
FINANCIAL SITUATION
RESULTS OF OPERATIONS If the Annual General Meeting accepts the Executive Board's proposal, the net retained profits will be used to Net commission income pay a dividend of EUR 0.15 per outstanding share on the day of the Annual General Meeting. Net commission income rose sharply year on year by EUR 4,293 thousand or 37.8 %, and was highly positive in nearly every segment. Thus a significant The remaining amount will be carried forward to new ac- increase in commission income was reported by Equity & Debt Capital Mar- count. kets (EUR +2,372 thousand; +71.6 %), Global Markets (EUR +893 thousand; +39.0 %), Specialist Market Making Equities and Funds (EUR +447 thousand; Following the distribution, the regulatory Tier 1 capital will +74.6 %) and Derivatives Products & Brokerage (EUR +1,030 thousand; amount to EUR 22,496 thousand. +24.5 %). Designated Sponsoring also recorded a slight increase of EUR +8 thousand (+1.2 %). The equity ratio is approximately 57 % (previous year: 64 %).
As at 31 March 2020, ICF BANK AG had total assets Net trading portfolio result of EUR 41,647 thousand (previous year: EUR 29,493 thousand), of which loans and advances to banks accoun- The net trading portfolio result rose in the past financial year by EUR 6,709 ted for 68 % (previous year: 47 %). thousand to EUR 9,721 thousand.
This extraordinarily positive development was due primarily to an increase in FINANCIAL POSITION trading volume, particularly hitting its peak at the beginning of the coronavirus crisis. The Company's liquidity was secured throughout the who- le financial year; at the end of the financial year, cash and Of the 20.3 % increase in administrative expenses, EUR 3,133 thousand related cash equivalents available at short notice – excluding the to additional personnel expenses, offset by a further EUR 118 thousand attribu- trading portfolio assets – exceeded current liabilities in- table to a reduction in non-personnel expenses. cluding trading portfolio liabilities and the corresponding provisions by EUR 10,028 thousand. The result from ordinary activities was EUR 7,897 thousand in the year under re- view, a more-than-tenfold increase over the previous year's EUR 721 thousand. The net assets, financial position and results of operations of ICF BANK AG continue to be in good order. A EUR 384 thousand contribution to the fund for general banking risks pursu- ant to section 340e (4) HGB was made. EUR 4,956 thousand was transferred to the fund for general banking risks in accordance with section 340g (1) HGB. Following a tax expense of EUR 2,552 thousand, the net income for the finan- cial year amounted to EUR 5 thousand.
NET ASSETS
Assets – loans and advances to banks, trading portfolio, and intangible assets
Loans and advances to banks and the trading portfolio accounted for 87 % of total assets at the end of the financial year (previous year: 80 %). The net trading portfolio decreased by EUR 2,628 thousand to EUR 149 thousand, while the balances held with banks, net of corresponding liabilities, rose by EUR 14,184 thousand to EUR 26,733 thousand.
Equity and liabilities – provisions, equity, fund for general banking risks
Provisions (EUR 6,749 thousand) increased year on year by EUR 5,330 thousand. This development was caused by personnel provisions and income tax provisions, a large amount of which were recognised and required due to the increase in earnings.
The equity base, including the fund for general banking risks, increased from EUR 18,933 thousand in the previous financial year to EUR 23,903 thousand as at the balance sheet date. 55 _ 56
RISK REPORT
Risk management is a fundamental component of ma- internal audit activities are based on the Minimum Requirements for Risk Ma- nagement and control within ICF BANK AG. An effective nagement (Mindestanforderungen an das Risikomanagement, "MaRisk"). The and efficient risk management system helps the Company audits are conducted every one to three years depending on the risk assess- to achieve its goals and ensures its continued existence. ment. This audit frequency is documented in the audit plan. For this reason, ICF BANK AG applies an established, com- prehensive risk concept that ensures that any risks are The Internal Audit function at ICF BANK AG is performed by the external service detected early and immediately controlled with adequa- provider GAR Gesellschaft für Aufsichtsrecht und Revision mbH, Frankfurt. te measures. In addition, as a securities trading bank, ICF BANK AG is subject to supervision by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanz- CONTROLLING dienstleistungsaufsicht, "BaFin"). The earnings of our core business correlate closely with turnover trends on securi- Controlling comprises cost/budget control, equity investment control as well as ties markets. project control. It provides the Executive Board with comprehensive, up-to-date information on the Company's performance. Both financial and operational risks can be detected early and countermeasures can be initiated. RISK MANAGEMENT For the detection and prevention of operational risks, the Company has created The Risk Management department monitors risks throug- a risk inventory, which is assessed by Risk Management in consultation with the hout ICF BANK AG's various segments. It uses state-of-the Executive Board. In connection with the quarterly risk reports to the Supervisory art software solutions which help the department's emplo- Board, the inventory is checked for completeness and the risks are reassessed. yees to carry out detailed analyses and controls of external and internal limits. An online position management system gives trading departments a full overview of their positions RISK STRUCTURING AND MEASUREMENT in real time. ICF BANK AG has a business and risk strategy in accordance with MaRisk, which One primary responsibility of Risk Management is thus to assesses the risks to which the business activities and trading activities, as well use state-of-the-art systems and processes to make risks as the organisational and operational structure of the individual segments and and opportunities quantifiable and transparent as they departments of ICF BANK AG are exposed and derives appropriate measures to arise out of the daily movements on the various financial manage those risks. markets. The individual risks relevant to ICF BANK AG are described in detail below: Risk Management compiles a quarterly risk report to provi- de information to the Executive Board and the Supervisory Board. This report contains any significant abnormalities MARKET PRICE RISK with regard to market price risks, default risks and liquidity risks, and provides an overview of operational risks. Market price risk is a core risk to which ICF BANK AG's business model is ex- posed. This breaks down into interest rate risk, share price/index risk, bond risk, funds risk, derivatives risk, foreign currency risk and commodity risk. INTERNAL AUDIT ICF BANK AG's business is not at all exposed to commodities risks, and interest Internal Audit is an objective auditing and project manage- rate and currency risks are merely of insignificant influence. By contrast, risks ment activity at ICF BANK AG that is independent of the relating to specific asset classes are given particular significance. day-to-day business. Internal Audit helps ICF BANK AG to achieve its objectives through a systematic and disciplined Market price risk in relation to shares and funds is the result of fluctuation in approach towards measuring and optimising effectiveness the market value of the instruments traded in response to market developments in risk management, the internal controls environment and this may lead to losses in ICF BANK AG's securities portfolios. Interest rate and corporate governance. The objective is to continually risk is the primary market risk to which bonds are exposed. Trading in derivatives improve upon business processes and create added value is exposed in particular to the risk that the price of the underlying will change. for the organisation. Internal Audit supports the Executive Board and the Supervisory Board of ICF BANK AG in carry- ICF BANK AG holds various classes of assets in its own portfolio due to its ing out their control, management and steering functions activities as a specialist/market maker on German stock exchanges and as by carrying out independent internal audits. an intermediary between institutional market participants. In addition, it also holds assets in its own portfolio resulting from its activities as a designated The internal audit report prepared by Internal Audit is an sponsor and in the issuance business, although these assets are only held in objective tool for management to identify risks. To this end, the short term. audits are conducted in all divisions of ICF BANK AG to test the compliance, functionality, efficiency and security In order to enable the adequate measurement and management of the risk of workflows and of the organisational structure. These from changing market prices, ICF BANK AG uses a value-at-risk model with a LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
confidence level of 95 %. It also assigns and monitors portfolio and loss limits Operational risks are mapped in the risk inventory. Iden- for all trading areas. tified operational risks include potentially intended or un- intended errors on the part of employees, the loss of cus- The DECIDE system is used to monitor market price risks for the current securi- tomers and mandates, prospectus liability risks and risks ties portfolio. To that end, the purchase prices are constantly compared against from investments. the exchange prices (reference prices). The reference prices are automatically obtained from price information services and updated constantly. The estimated ICF BANK AG has outsourced the material operational ele- market liquidity is used to determine which markets should be used as reference ments of its IT infrastructure (computer centre, hardware markets for risk management purposes. maintenance and operation, systems monitoring, network security, etc.) to Group subsidiary ICF Systems AG. ICF Systems AG is responsible for operating ICF BANK AG's IT DEFAULT RISK systems to the latter's specifications using an infrastruc- ture-as-a-service (IaaS) model, which has been expanded Default risk is a core risk to which ICF BANK AG's business model is exposed. to include a platform-as-a-service (PaaS) model for certain Default risk arises primarily from credit/settlement risks, performance risks, ad- services. ICF Systems AG is certified in accordance with vance delivery risks and large exposure risks under sections 13 and 13a of the DIN EN ISO 9001:2015 as well as ISO 27001:2013 and German Banking Act (Kreditwesengesetz, "KWG"). has its own dedicated contingency plan and an internal control system. This system is audited annually by an ex- Default risks outside of the securities trading business relate in particular to ternal auditor engaged in accordance with IDW AuS 951 loans and advances to banks, loans and advances to customers, equity invest- type B and IDW AuS 983. The audit report that is issued is ments, and other receivables. updated annually. The integration of ICF Systems AG into ICF BANK AG's Group control and internal audit system ICF BANK AG's objective is to minimise default risks in every area. To that end, ensures that all control and inspection rights are exercised structures and processes have been established in Risk Management, Accoun- pursuant to section 25b KWG. ICF Systems AG prepares a ting, Middle Office, Compliance and Money Laundering to effectively minimise, comprehensive risk report each quarter on the basis of its manage and monitor these risks. own risk inventory.
To minimise default risk, ICF BANK AG performs credit checks for new custo- ICF BANK AG has its own contingency plan. This is regular- mers and defines settlement terms for transactions with the new customers. In ly reviewed to ensure that the reaction scenarios contained this process, ICF BANK AG uses a defined internal procedure for entering into therein are current. A key component includes emergency new business relations. New business is always conducted only with institutions workstations in external offices, primarily for employees that are subject to supervision by BaFin or an equivalent foreign supervisory exercising particularly critical functions. These are regularly body and which settle via recognised and respected settlement banks. To mana- tested to ensure that they work and logged. ge default risks arising from trading in bonds, bond issuers are classified based on publicly available ratings (Moody's). Depending on how the respective issu- To minimise personnel risks, new employees are only al- ers are rated, they are assigned internally defined default probabilities based on lowed to work at ICF BANK AG following the submission Moody's default risks. and examination of police certificates of good conduct. Each new employee receives induction into ICF BANK AG's framework. LIQUIDITY RISK Legal risks resulting from entry into contracts with cus- ICF BANK AG compiles a daily liquidity status report, which is distributed to tomers and suppliers are identified and assessed by the the institution's senior managers. This enables daily assessment of the liquidity Legal/Compliance department. and minimises the risk of liquidity losses. In addition, all the trading units have fixed position limits in the form of set market values, which limit the maximum ICF BANK AG minimises risks arising from entering into liquidity available for the individual trading unit. Daily liquidity is additionally business relationships in connection with trading in se- monitored using a traffic light system. At the balance sheet date, all of the regu- curities by subjecting all new customers not listed on an latory liquidity requirements were fulfilled with funds available at short notice exchange to a check by the compliance office and the totalling more than EUR 26.6 million (balance of loans and advances to banks anti-money laundering officer before they are admitted as and customers and deposits from banks against the netted trading portfolio). customers. ICF BANK AG only deals with institutional cli- ents in Germany and abroad who are classified as eligible counterparties or professional clients. OPERATIONAL RISKS Operational risks are monitored by the Risk Management Operational risks (OpRisk) are defined as risks which are difficult or impossible department based on a traffic light system. Every identified to quantify. Operational risks include for instance personnel risks, data proces- risk is assigned a likely impact intensity and the likelihood sing risks, legal risks and customer risks. of occurrence is estimated. 57 _ 58
OUTLOOK AND REPORT ON OPPORTUNITIES
Measures to manage operational risks are defined by the In the previous year's outlook and report on opportunities, the Executive Board Executive Board. Those include for instance the elimination of ICF BANK AG assumed that the Bank would achieve its earnings target for of risks by taking out insurance and reducing risks by esta- financial year 2019/2020, corresponding to a return on subscribed capital of blishing an internal control system. approximately 5 %. That assumption took into account the fact that financial year 2018/2019 saw earnings contributions from the trading departments that At present, operational risks are quantified and taken into were significantly above expectations in some cases, which would not be repli- account in the risk-bearing capacity analysis using a base cated in the current year. indicator approach in accordance with the CRR which is based on various income and expense components for the Given a result from ordinary activities amounting to EUR 7,897 thousand and Bank. subscribed capital of EUR 9,378 thousand, this corresponded to a return of approximately 84 %. The Executive Board of ICF BANK AG thus considers its estimate for the past financial year and the associated conservative earnings DEPENDENCE ON MAJOR CUSTOMERS projections to be significantly surpassed. This significant outperformance of the projected earnings target was due primarily to the sharp increase in trading The customer base was expanded again during the past volume in the first quarter of 2020 in the wake of the coronavirus pandemic and financial year, thus further reducing dependence on ma- the measures initiated to staunch it. jor customers. In order to ensure that we maintain and strengthen existing customer relationships, we continually ICF BANK AG's earnings prospects are highly dependent on capital market de- adapt our technical solutions to the individual needs of velopments. Trading volumes on the capital markets are influenced by the deve- our customers. Our Group structure allows us to carry out lopment of stock markets and the volatility associated with this. ICF BANK AG technical adjustments rapidly and flexibly. expects the economic situation in Europe to deteriorate significantly in financial year 2020/2021 due to the effects of the coronavirus crisis. The coronavirus pandemic and its implications will continue to mark the global economy and stock markets well into the new financial year. In its economic forecast in May 2020, the ifo Institut projected that the German economy would shrink by 6.6 % SIGNIFICANT EVENTS AFTER in 2020, and could grow from that low level by 10.2 % in 2021. Following a 12.4 % nosedive in Q2 2020, the economy is thus expected to recover by the THE CLOSE OF THE FINANCIAL middle of next year. The downside risk in the forecast is considerable, however, YEAR should the pandemic prove to be much slower to stop, or if the economy strugg- les to recover or it becomes impossible to prevent a second wave of infections. Furthermore, it is impossible to rule out the prospect of a wave of insolvencies, Subject to the requisite approvals from the supervisory au- either in Germany or in its sales and procurement markets. The current uncer- thorities, BÖAG Börsen AG, the operator of exchanges in tainty and high level of volatility on the financial markets will thus remain. The Düsseldorf, Hamburg and Hanover, intends to acquire the economic aid offered through tax cuts, liquidity injections and government gu- majority of shares in ICF BANK AG from the founders of arantees also bring new risks into play when it comes to government finances. the Company, and has secured an option to acquire addi- ICF BANK AG therefore expects that there will not be any fundamental shift tional shares. away from the current policy of low interest rates in Europe.
ICF BANK AG expects the market environment to be highly challenging in the 2020/2021 financial year. Due to continued growth in existing business fields, the Company considers itself to be well positioned and it expects to be able to leverage revenue potential, particularly by winning over new clients. The Com- pany will continue to adapt its range of products to suit specific client needs. By doing so, the Bank aims to increase client satisfaction and tap into further client groups. Tapping into new fields of business will open up new prospects for revenue. LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
MARKET MAKING CAPITAL MARKETS
The development of the earnings situation in the Market Making FWB Equities, In the area of capital markets financing, an extremely chal- Bonds, Funds und ETPs segment will be heavily influenced by the development lenging business environment is expected, particularly in of trading volume and the Frankfurt Stock Exchange's position in an increasin- view of the unclear but expected massive economic im- gly competitive environment. Given the ongoing coronavirus crisis, ICF BANK pact of the coronavirus pandemic, as well as trade conflicts AG expects that the first half of the new financial year will continue to be which are likely to flare up and the associated effects on marked by high volatility and associated peaks in turnover. Expectations as to the capital and commodity markets. the course of business over the remainder of the year are moderate. Growth op- portunities arising in connection with the expansion of managed assets across With an eye on the current pipeline of primary and secon- all segments are considered more modest in the coming financial year, because dary market projects it manages, the division is confident fewer new issuances are likely. Performance will depend on how severely the that it will be able to successfully implement further tran- coronavirus crisis will ultimately impact the economy. sactions in a re-stabilised capital market environment.
The development of activities as lead broker on the Düsseldorf Stock Exchange The Designated Sponsoring segment intends to further ex- depends heavily on the development of securities trading volume. The active pand its current position by adding new mandates, with marketing of the Düsseldorf marketplace, combined with best pricing quality, the focus remaining on adding high-quality companies. leads ICF BANK AG to expect to be able to leverage further earnings potential. The Bank expects to significantly expand its number of managed mandates in the new financial year. ICF BANK The success of the Market Making Derivatives Products department in the next AG has taken on the majority of designated sponsor man- financial year will also depend heavily on the development of the overall mar- dates from a competitor which has suspended its activities ket and the volatility of the primary indices. Changes or measures initiated by in this area. governmental authorities and/or regulators could have a significant influence on turnover. The "Act on the Introduction of a Duty to Report Cross-border Tax Arrangements" (Gesetz zur Einführung einer Pflicht zur Mitteilung grenzüber- OUTLOOK schreitender Steuergestaltungen) severely restricts and limits the offsetting of gains and losses arising on certain forward transactions. Beginning in 2021, The Executive Board of ICF BANK AG believes the Compa- according to the legislative language, losses from forward transactions may ny is well positioned to face the challenges of the future. only be offset against gains from forward transactions and covered options up With respect to the multi-year average for annual results to an amount of EUR 10,000. ICF BANK AG expects the new rule to lead to a generated, it is assumed that the Bank will achieve its ear- reduction in turnover in the Market Making Derivatives Products segment. ICF nings target for financial year 2020/2021, corresponding BANK AG's highly professional collaboration with its business partners is a vital to a return on subscribed capital of approximately 5 %. component in the success of that department. This also takes into account the current expectation that the earnings contributions from the trading departments In the Market Making Quotrix segment, the focus in financial year 2020/2021 in the year under review, which in some cases significantly will remain on adding new market participants in order to increase earnings exceeded expectations, will not be replicated in financial potential. The price quoting and trade quality analysis initiated by ICF BANK year 2020/2021. AG continues to confirm the best price and trading quality on Quotrix. In par- ticular, the quality standards under MiFID II should result in the addition of further linked market participants on Quotrix due to price and trade quality and Frankfurt am Main, 23 July 2020 increase trades through the addition of additional BestEx flow. Where bonds are concerned, ICF BANK AG believes that expanding the scope of managed securities offers further growth potential. ICF BANK AG THE EXECUTIVE BOARD BROKERAGE SERVICES
As in the previous financial year, the insourcing of securities trading by banks represents a core component of our strategic expansion. ICF BANK AG's clients will experience additional advantages thanks to our established dynamic best execution offering. Effective and efficient processes are nowadays a central re- quirement for entrepreneurial success in any sector. A further element is the ad- ditional focus on product sales and marketing in the Global Markets segment.
In the financial year to come, the focus in the Customized Indices segment will remain on stepping up efforts to win over new clients and tap into new product groups. 59 _ 60 BRIEF DES VORSTANDSVORSITZENDEN _ BERICHT DES AUFSICHTSRATS _ LAGEBERICHT _ JAHRESABSCHLUSS _ ANHANG
19 20
FINANCIAL STATEMENT 61 _ 62
BALANCE SHEET
OF ICF BANK AG, FRANKFURT AM MAIN FOR THE FISCAL YEAR FROM APRIL 1, 2019 TO MARCH 31, 2020
ASSETS
(in EUR) 31 March 2020 31 March 2019
1. Cash reserve a) Cash balance 3,009.99 1,049.39 2. Loans and advances to banks a) Payable on demand 27,500,246.23 12,964,097.16 b) Other loans and advances 842,384.50 28,342,630.73 767,384.50 3. Loans and advances to customers 1,506,787.18 1,378,670.54 4. Trading portfolio 7,996,369.86 9,932,500.61 5. Investments in affiliated companies 2,031,500.00 2,031,500.00 6. Intangible assets 933,250.84 1,105,781.52 Purchased concessions, industrial and similar rights and assets, and licenses to such rights and assets 7. Tangible fixed assets 115,354.47 64,253.49 8. Other assets 286,687.82 817,740.75 9. Prepaid expenses 178,426.19 201,453.25 10. Excess of plan assets over pension liability 253,422.39 228,997.53 Total assets 41,647,439.47 29,493,428.74 LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
EQUITY AND LIABILITIES
(in EUR) 31 March 2020 31 March 2019
1. Deposits from banks a) Payable on demand 1,610,238.16 1,182,328.78 b) Subject to agreed term or notice period 0.00 1,610,238.16 0.00 2. Trading portfolio 7,847,377.41 7,155,574.55 3. Other liabilities 1,266,214.63 559,091.19 4. Deferred income 271,876.08 243,897.80 5. Provisions a) Tax provisions 2,361,593.42 20,000.00 b) Other provisions 4,386,852.03 6,748,445.45 1,399,190.21 6. Fund for general banking risks of which: 8,485,000.00 3,145,000.00 Special tax-allowable reserves pursuant to section 340e (4) HGB EUR 3,044,280.00 (previous year: EUR 2,660,000.00) 7. Equity a) Subscribed capital 9,387,984.00 9,387,984.00 Notional value of treasury shares -9,984.00 9,378,000.00 -9,984.00 b) Capital reserves 220,589.59 220,589.59 c) Revenue reserves ca) Legal reserve 718,208.81 718,208.81 cb) Reserves provided for by the Articles of Association 1,448,000.00 1,448,000.00 cc) Other revenue reserves 2,237,521.61 4,403,730.42 3,637,521.61 d) Net retained profits 1,415,967.73 15,418,287.74 386,026.20 Total liabilities and equity 41,647,439.47 29,493,428.74 63 _ 64
PROFIT AND LOSS STATEMENT
OF ICF BANK AG, FRANKFURT AM MAIN FOR THE FISCAL YEAR FROM APRIL 1, 2019 TO MARCH 31, 2020
(in EUR) 2019 / 2020 Previous year 1. Interest income from a) Lending and money 7,067.94 10,751.16 market transactions b) Fixed-income securities 222,530.65 229,598.59 265,357.20 276,108.36 and book-entry securities 2. Interest expense 119,166.76 110,431.83 95,688.31 180,420.05 3. Current income from a) Equities and other non-fixed 174,884.17 218,043.06 income securities b) Investments in 0.00 174,884.17 300,000.00 518,043.06 affiliated companies 4. Fee and commission income of 16,317,054.57 11,583,900.64 which: Brokerage income EUR 3,470,358.55 (previous year: EUR 2,359,841.22) 5. Fee and commission expense 655,372.89 15,661,681.68 214,642.93 11,369,257.71 6a. Trading portfolio income aa) Securities 47,897,824.60 20,494,071.25 ab) Futures 2,171,877.00 1,299,357.50 ac) Price differences from 2,284,229.89 52,353,931.49 81,336.96 21,874,765.71 issuance transactions 6b. Trading portfolio expense ba) Securities 39,020,651.24 17,343,247.39 bb) Futures 1,851,146.50 1,431,932.00 bc) Price differences from 1,761,335.40 42,633,133.14 9,720,798.35 87,814.26 18,862,993.65 3,011,772.06 issuance transactions 7. Other operating income 575,979.38 645,647.18 LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
(in EUR) 2019 / 2020 Previous year 8. General and administrative expenses a) Personnel expenses aa) Wages and salaries 9,736,659.77 6,656,569.15 ab) Social security, 1,097,164.60 10,833,824.37 1,044,057.07 7,700,626.22 post-employment and other employee benefit costs of which: for pensions EUR 251,905.18 (previous year: EUR 235,415.42) b) Other administrative 7,013,332.98 17,847,157.35 7,131,094.70 14,831,720.92 expenses 9. Depreciation, amortisation and 353,425.44 103,041.58 write-downs of intangible assets and tangible fixed assets 10. Other operating expenses 182,094.73 73,085.60 11. Write-downs and adjustments 6,070.00 0.00 to loans and advances and certain securities, and additions to provisions for credit risks 12. Income from reversals of 42,197.12 3,930.89 write-downs of loans and advances and certain securities and from the reversal of provisions for credit risks 13. Result from ordinary activities 7,897,225.01 721,222.85 14. Transfer from fund for general 5,340,000.00 485,000.00 banking risks 15. Reversal from fund for general 0.00 0.00 0.00 0.00 banking risks 16. Income taxes 2,601,741.25 261,542.95 17. Other taxes not reported under -49,577.77 2,552,163.48 -35,606.30 225,936.65 item 10 18. Net income for the financial year 5,061.53 10,286.20 19. Retained profits brought forward 10,906.20 5,740.00 20. Withdrawals from revenue reserves a) From other revenue reserves 1,400,000.00 370,000.00 21. Transfers to revenue reserves 0.00 0.00 a) to other revenue reserves 22. Net retained profits 1,415,967.73 386,026.20
19 20
NOTES 67 _ 68
GENERAL
The annual financial statements as at 31 March 2020 for ICF BANK AG Wertpapierhandelsbank, with its registered office in Frankfurt am Main (entered into commercial register B at the Frankfurt am Main Local Court (Amtsgericht) under number 43755), were prepared in accordance with the relevant provisions of the German Commercial Code (Handelsgesetzbuch, "HGB") and the German Stock Corporation Act (Aktienge- setz, "AktG") as well as the Regulation on the Accounting of Banks and Financial Services Institutions (Verordnung über die Rechnungslegung der Kreditinstitute und Finanzdienstleistungsinstitute, "RechKredV").
The income statement is presented in vertical format.
ACCOUNTING POLICIES
Receivables and securities exclusively held for trading are measured according to the rules applicable to current assets; securities held for trading are recognised either as assets at fair value less a risk discount or as liabilities plus a risk premium.
Credit risks are accounted for by recognising appropriate allowances. In the income statement, we have exercised the option under section 340f (3) HGB and are offsetting expenses and income from changes in the risk provision against receivables.
Investments in affiliated companies are recognised at cost.
Intangible assets and tangible fixed assets with finite useful lives are recognised over their useful lives at cost less depreciation, amor- tisation and write-downs, simultaneously taking into account arrangements permitted for tax purposes.
Other assets are recognised at cost, unless they had to be written down to the lower fair value as at the balance sheet date.
Prepaid expenses include expenses paid in the year under review but recognised as an expense in the subsequent period.
The excess of plan assets over pension liability is determined by netting the pension provision against the reinsurance policy.
Liabilities are recognised at their settlement amount plus accrued interest.
The income reported under deferred income reflects inflows in the year under review, which will be recognised as income in the subse- quent period.
Provisions have been recognised for uncertain obligations and expected losses from pending transactions; they are recognised according to prudent business judgement at the necessary settlement amount and, if their term exceeds one year, discounted by the average market interest rate of the past seven financial years that corresponds to their term, as published by Deutsche Bundesbank pursuant to the German Regulation on the Discounting of Provisions (Rückstellungsabzinsungsverordnung).
The provisions for pensions are calculated in accordance with actuarial principles pursuant to section 253 (1) sentence 2 HGB. That calculati- on does not factor in a potential distribution of the amount to be added to the provisions in accordance with Article 67 (1) of the Introductory Act to the German Commercial Code [Einführungsgesetz zum Handelsgesetzbuch, "EGHGB"]). This is recognised based on an excess of assets in the "Excess of plan assets over pension liability" item.
Currency translation is performed in accordance with section 340h HGB in conjunction with section 256a HGB. Assets and liabilities and pending cash transactions denominated in foreign currencies are translated at the ECB reference rates, and pending forward transactions are translated at the corresponding rates as at the balance sheet date. LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
BALANCE SHEET DISCLOSURES
The residual terms of the loans, advances and liabilities reported on the balance sheet break down as follows:
(in EUR '000) Up to three months Indefinite term Previous year Other loans and advances to banks 842.4 0.0 767.4 Loans and advances to customers 0.0 1,506.7 1,378.7 Deposits from banks subject to agreed term or notice period 0.0 0.0 0.0 Deposits from customers 0.0 0.0 0.0
Where the breakdown by maturity required pro rata interest to be taken into account, it was allocated to the "Up to three months" category.
There are restrictions on an amount of EUR 17,894.5 thousand under loans and advances to banks.
The securities allocated to the trading portfolio are listed; they break down as follows:
Trading portfolio (in EUR '000) Assets Previous year Liabilities Previous year Bonds and other fixed-income securities 1,328.4 3,493.5 864.9 2,966.1 Equities and other non-fixed income securities 6,920.4 6,460.0 7,032.6 4,169.5 Risk discount/premium 78.0 21.0 50.1 20.0
The risk discount is determined according to the management criteria for market price risks specified in the risk report using the value-at- risk-model, which assumes a confidence level of 95 %, a holding period of one trading day and an observation period of 30 days.
The internally specified criteria for including financial instruments in the trading portfolio were not changed in the year under review.
The business relations with affiliated companies were as follows as at the balance sheet date:
(in EUR '000) 31 March 2020 Previous year Loans and advances to customers 0.0 0.0 Shares in affiliated companies (non-marketable) 2,031.5 2,031.5 Other assets 70.8 30.4 Other liabilities 131.7 35.0
The total amount of all assets and liabilities denominated in foreign currencies were as follows:
(in EUR '000) 31 March 2020 Previous year Assets 2,150.6 1,304.8 Liabilities 311.3 768.1
The differences in amounts attributable to assets and liabilities do not provide any indication of open positions. 69 _ 70
The currencies, amounts and maturities of the corresponding hedges entered into are shown in section E.
Fixed assets changed as follows in the year under review:
(in EUR '000) Investments in affiliated Purchased concessions, industrial and similar rights Tangible Total companies and assets, and licenses to such rights and assets fixed assets Cost 2,031.5 1,627.2 637.3 4,296.0 Additions 0.0 91.6 140.4 232.0 Reclassifications 0.0 0.0 0.0 0.0 Disposals 0.0 0.0 -39.1 -39.1 As at: 31 Mar. 2020 2,031.5 1,718.9 738.5 4,488.9 Depreciation, amortisation 0.0 -521.5 -573.0 -1,094.5 and write-downs carried forward Additions 0.0 -264.1 -89.3 -353.4 Reclassifications 0.0 0.0 0.0 0.0 Disposals 0.0 0.0 39.1 39.1 As at: 31 Mar. 2020 0.0 -785.6 -623.2 -1,408.8 Carrying amount 2,031.5 933.3 115.4 3,080.1 31 March 2020 Previous year 2,031.5 1,105.8 64.3 3,201.5
The items reported under tangible fixed assets are allocated to operating and office equipment.
For low-value assets as defined in section 6 (2a) of the German Income Tax Act (Einkommensteuergesetz, "EStG") a summary account is crea- ted on an annual basis and likewise reduced by accounting depreciation over a period of five years. In the year in which the summary account is reduced to zero, the respective assets are shown as a disposal in the above statement.
Investments in affiliated companies recognised on the balance sheet break down as follows:
(in EUR '000) Carrying Nominal Interest Equity Net profit/loss amount (in %) for the 2019/2020 financial year ICF Systems AG, Frankfurt am Main 1,141.5 1,000.0 100.0 2,510.7 160.5 NOVIS Software GmbH, Braunichswalde 890.0 30.0 60.0 1,059.5 83.0
The other assets item mainly comprises EUR 209.2 thousand in income tax refund claims.
The other liabilities are primarily the result of goods and services purchased (EUR 821.5 thousand) and taxes payable (VAT, payroll and church taxes of EUR 444.7 thousand).
Pension provisions are measured in accordance with recognised actuarial principles in application of the projected unit credit method (PUC method) using the simplification rule in section 253 (2) sentence 2 HGB (residual term of 15 years). The 2018G mortality tables published by Prof. Klaus Heubeck serve as the biometric basis of measurement. Pension adjustments of 2.0 % p.a. are factored in. The discount rate used (2.64 %) was based on the average market rate of interest as at the balance sheet date for the past 10 years, as determined by Deutsche Bundesbank. The addition to provisions for pensions and other employee benefits necessitated by the amended measurement method in accordance with the German Accounting Law Modernisation Act (Bilanzierungsmodernisierungsgesetz, "BilMoG") has already been fully recognised (Art. 67 (1) Introductory Act to the German Commercial Code [Einführungsgesetz zum Handelsgesetzbuch, "EGHGB"]); thus there is no funding shortfall. In addition, the discounting of these provisions using the average market interest rate for the past ten years rather than the past seven (1.91 %) results in a difference amounting to EUR 25.8 thousand. The conditions for the distribution restriction pursuant to section 253 (6) sentence 2 HGB have not been met. LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
The retirement age on which the calculations are based is the contractually stipulated age threshold. The pension obligation (EUR 579.9 thousand) was offset against the reinsurance claim from an effectively pledged reinsurance policy, whose actuarial reserves according to the business plan, including the allocated share of the surplus, amounted to EUR 833.4 thousand as at the balance sheet date. In the income statement, the expenses and income from interest on offset liabilities and assets are reported under interest expense (EUR 29.3 thousand), and the contributions to the reinsurance policy are netted with the increase in the reinsurance claim and reported in other administrative expenses (EUR 89.4 thousand). Due to the asset surplus of the reinsurance claim over the pension obligation as at the balance sheet date, this is reported in the "Excess of plan assets over pension liability" item.
Other provisions consist primarily of:
Other provisions (in EUR '000) 31 March 2020 31 March 2019 Bonuses and profit sharing 3,500 400 Outstanding invoices 65 157 Supervisory Board remuneration 220 224 Unclaimed holiday leave 153153 125
On the balance sheet date, the share capital (subscribed capital) amounted to EUR 9,387,984.00, divided into 9,387,984 no-par-value bearer shares.
On the basis of a resolution of the Annual General Meeting of 9 September 2019, the Executive Board was authorised to increase the share capital by issuing new no-par-value bearer shares against cash or non-cash contributions on one or several occasions, but in total limited to a maximum of EUR 4,650,000.00 (authorised capital). The Executive Board was authorised to disapply, with approval from the Supervisory Board, the statutory pre-emptive subscription rights of shareholders. The disapplication of the statutory pre-emptive subscription rights is linked to conditions that depend on the respective purpose.
Further details of how the capital increase from authorised capital is to be implemented are specified by the Executive Board with the Super- visory Board's approval.
The authorised capital expires on 9 September 2024.
As at the balance sheet date, there were 9,984 treasury shares with a notional value of EUR 9,984 (previous year: EUR 9,984) in the portfolio for the purpose of offering them to employees for purchase pursuant to section 71 (1) number 2 of the German Stock Corporation Act (Aktiengesetz, "AktG").
An amount of EUR 10.0 thousand is attributable to the Company's treasury shares, accounting for 0.11 %.
No treasury shares were acquired or sold in the past financial year.
The capital reserves are unchanged compared with the previous year.
The Company's equity changed as follows in the course of the financial year:
(in EUR '000) Balance at the beginning Withdrawals Contributions Balance at the end of of the financial year the financial year Subscribed capital (Share capital) 9,388.0 0.0 0.0 9,388.0 Treasury shares in portfolio -10.0 0.0 0.0 -10.0 9,378.0 Capital reserves 220.6 0.0 0.0 0.0 220.6 Revenue reserves Legal reserves 718.2 0.0 0.0 718.2 Reserves provided for by the 1,448.0 0.0 0.0 1,448.0 Articles of Association Other revenue reserves 3,637.5 1,400.0 0.0 2,237.5 4,403.7 Net retained profits 386.0 375.1 1,400.0 1,416.0 Equity 15,418.3 71 _ 72
A transfer was made to the fund for general banking risks pursuant to section 340g HGB in conjunction with section 340e (4) HGB during the year under review. EUR 384.3 thousand was transferred to the fund. EUR 4,955.7 thousand was transferred to the fund for general banking risks pursuant to section 340g HGB; in total, that line item amounted to EUR 8,485.0 thousand as at the balance sheet date.
The net income generated in financial year 2019/2020 amounted to EUR 5,061.53 and was included in the retained profits of EUR 10,906.20 brought forward from the previous year; in addition, EUR 1,400.0 thousand was transferred from other revenue reserves.
This takes the net retained profits for the year under review to EUR 1,415,967.73.
The Executive Board and Supervisory Board propose to the Annual General Meeting that the net retained profits be appropriated as follows:
Payment of a dividend of EUR 0.15 per outstanding share on the day of the Annual General Meeting. The unused portion of the net retained profits will be carried forward to new account.
The distribution restriction pursuant to section 268 (8) sentence 2 HGB does not apply, because the option under section 274 (1) sen- tence 2 HGB has been exercised and the excess of deferred tax assets over deferred tax liabilities has not been capitalised.
The differences between the amounts of assets and liabilities recognised in the financial statements and their tax base are attributable to provisions for pensions and other obligations with a net asset position of EUR 253 thousand.
Deferred taxes are calculated at a tax rate of approximately 32 %.
Return on assets pursuant to section 26a (1) sentence 4 of the German Banking Act (Kreditwesengesetz, "KWG") amounted to 2.44 % during the reporting year.
INCOME STATEMENT DISCLOSURES
The interest and commission income including income from shares, trading income and other operating income was generated primarily in Germany. Interest expenses included EUR 25.4 thousand in relation to discounting.
Other operating income included EUR 253.3 thousand from the reversal of provisions, EUR 128.6 thousand from other currency translation gains, EUR 30.8 thousand from prior-period income, EUR 26.6 thousand from personnel cost reimbursements and EUR 21.3 thousand from income from the provision of market data. During this period, EUR 0.0 thousand related to fees for services provided to affiliated companies.
Other operating expenses included EUR 103.0 thousand in prior-period expenses.
LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
OFF-BALANCE-SHEET OBLIGATIONS
Other obligations relate to lease and rental agreements as well as maintenance agreements for technical equipment in an amount of EUR 2,756.7 thousand, of which EUR 1,965.6 thousand is attributable to obligations to affiliated companies.
ICF BANK AG, Wertpapierhandelsbank exclusively entered into currency-based cash and/or forward transactions to cover short-term currency positions; their equivalent amounted to a total of EUR 931.3 thousand at the end of the financial year (previous year: EUR 501.8 thousand).
The volumes of the transactions were as follows as at the end of the financial year:
(in EUR '000) Financial year Previous year Purchases Sales Purchases Sales AUD 8.9 36.9 10.8 0.0 CAD 12.5 5.9 12.0 0.0 CHF 0.0 0.0 0.0 4.5 GBP 0.0 40.9 62.8 0.0 MXN 9.5 0.0 0.0 0.0 NOK 51.3 0.0 31.3 0.0 NZD 0.0 0.0 54.7 17.5 RUB 14.6 0.0 0.0 0.0 SEK 0.0 0.0 0.0 0.0 TRY 0.0 2.6 2.7 0.0 USD 0.0 703.6 209.1 82.8 ZAR 0.0 44.6 0.0 2.1 Other currencies 0.0 0.0 0.0 0.0
The difference between the amounts to be settled and the fair values of all currencies to be included amounted to EUR 1.0 thousand on the balance sheet date.
ADDITIONAL DISCLOSURES
CONSOLIDATED FINANCIAL STATEMENTS
ICF BANK AG, Wertpapierhandelsbank, Frankfurt am Main, prepares consolidated financial statements in accordance with section 340i HGB; these statements are published in the Federal Gazette. The disclosures pertaining to the auditors' fees pursuant to section 285 no. 17 HGB are contained in the notes to ICF BANK AG's consolidated financial statements.
PERSONNEL
Excluding the Executive Board, the Company had an average of 64 (previous year: 64) employees in the past financial year, including 30 in Market Making, 5 in Brokerage Services, 10 in Capital Markets and a further 19 in Administration. 73 _ 74
EXECUTIVE BODIES
SUPERVISORY BOARD
Rainer Roubal Chairman from 9 September 2019 Consultant
Franz A. Rüegg Chairman until 9 September 2019 Board of Directors
Prof. Dr. Rüdiger von Rosen Deputy Chairman Managing Director
Christian R. Culver Systems analyst, management board member
Lars Hille Partner, management consulting firm
Werner Suhl German public auditor, tax advisor
EXECUTIVE BOARD
Bernd Gegenheimer Chairman Central Staff Function, Market Making, Brokerage Services
Adrian Braun Risk Management, IT, Legal/Compliance, Finance, Operations
Sascha Rinno Capital Markets, Internal Audit
LETTER FROM THE CHIEF EXECUTIVE OFFICER _ REPORT OF THE SUPERVISORY BOARD _ MANAGEMENT REPORT _ FINANCIAL STATEMENT _ NOTES
The following members of the Company's executive bodies were members of Supervisory Boards or other supervisory bodies in the year under review:
Rainer Roubal Chairman of the Supervisory Board of ICF Systems AG, Frankfurt am Main
Franz A. Rüegg Board of Directors, Managing Director of Finanzargovia AG, Brugg, Switzerland Board of Directors, Campussaal Immobilien AG, Brugg, Switzerland
Prof. Dr. Rüdiger von Rosen Chairman of the Supervisory Board of Paladin Asset Management Investmentaktiengesellschaft mit TGV, Hanover
Lars Hille Chairman of the Supervisory Board of V-Bank AG, Munich Chairman of the Supervisory Board of Bankhaus Ellwanger & Geiger AG, Stuttgart Chairman of the Supervisory Board of Spiekermann & Co. AG, Osnabrück
Bernd Gegenheimer Deputy Chairman of the Supervisory Board of ICF Systems AG, Frankfurt am Main Member of the Exchange Council of the Frankfurt Stock Exchange, Frankfurt am Main Member of the Exchange Council of the Baden-Württemberg Stock Exchange, Stuttgart Member of the Exchange Council of the Düsseldorf Stock Exchange, Düsseldorf Member of the Exchange Council of the Munich Stock Exchange, Munich Expert on the Exchange Council of the Hamburg Stock Exchange, Hamburg Member of the General Assembly of the Frankfurt Chamber of Commerce and Industry, Frankfurt am Main
Adrian Braun Alternate Member of the Exchange Council of the Düsseldorf Stock Exchange, Düsseldorf (until 31 December 2019)
Sascha Rinno Member of the Exchange Council of the Berlin Stock Exchange, Berlin (since 13 March 2020)
The total remuneration of the Supervisory Board in the year under review amounted to EUR 220.0 thousand, while Executive Board remuneration was EUR 1,249.5 thousand.
REPORT ON EVENTS AFTER THE BALANCE SHEET DATE
Subject to the requisite approvals from the supervisory authorities, BÖAG Börsen AG, the operator of exchanges in Düsseldorf, Hamburg and Hanover, intends to acquire the majority of shares in ICF BANK AG from the founders of the Company, and has secured an option to acquire additional shares. In view of the risks arising in connection with the coronavirus (COVID-19), comprehensive measures have been taken which are intended to help guarantee ICF BANK AG's ability to continue to operate, as well as the functioning of its systems and the operational readiness of its employees, even in the event of illness and/or quarantine measures. For a more detailed statement in this regard, please refer to the management report.
Frankfurt am Main, 23 July 2020
Bernd Gegenheimer Adrian Braun Sascha Rinno 75 _ 76
INDEPENDENT AUDITOR'S REPORT
To ICF BANK AG, Frankfurt AUDIT OPINIONS
We have audited the annual financial statements of ICF BANK AG Wertpapierhandelsbank, Frankfurt am Main, which comprise the balance sheet as at 31 March 2020, the statement of profit and loss for the financial year from 1 April 2019 to 31 March 2020, and notes to the financial statements, including the recognition and measurement policies presented therein. In addition, we have audited the management report of ICF BANK AG Wertpapierhandelsbank, Frankfurt am Main, for the financial year from 1 April 2019 to 31 March 2020.
In our opinion, on the basis of the knowledge obtained in the audit, Q the accompanying annual financial statements comply, in all material respects, with the requirements of German commercial law and give a true and fair view of the assets, liabilities and financial position of the Company as at 31 March 2020 and of its financial performance for the financial year from 1 April 2019 to 31 March 2020 in compliance with German Legally Required Accounting Principles, and Q the accompanying management report as a whole provides an appropriate view of the Company's position. In all material respects, this management report is consistent with the annual financial statements, complies with German legal requirements and appropriately pre- sents the opportunities and risks of future development.
Pursuant to § [Article] 322 Abs. [paragraph] 3 Satz [sentence] 1 HGB [Handelsgesetzbuch: German Commercial Code], we declare that our audit has not led to any reservations relating to the legal compliance of the annual financial statements and of the management report.
BASIS FOR THE AUDIT OPINIONS
We conducted our audit of the annual financial statements and of the management report in accordance with § 317 HGB and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the "Auditor's Responsibi- lities for the Audit of the Annual Financial Statements and of the Management Report" section of our auditor's report. We are independent of the Company in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the annual financial statements and on the management report.
RESPONSIBILITIES OF THE EXECUTIVE DIRECTORS FOR THE ANNUAL FINANCIAL STATEMENTS AND THE MANAGEMENT REPORT
The executive directors are responsible for the preparation of the annual financial statements that comply, in all material respects, with the re- quirements of German commercial law, and that the annual financial statements give a true and fair view of the assets, liabilities, financial po- sition and financial performance of the Company in compliance with German Legally Required Accounting Principles. In addition, the executive directors are responsible for such internal control as they, in accordance with German Legally Required Accounting Principles, have determined necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the annual financial statements, the executive directors are responsible for assessing the Company's ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting, provided no actual or legal circumstances conflict therewith.
Furthermore, the executive directors are responsible for the preparation of the management report that as a whole provides an appropriate view of the Company's position and is, in all material respects, consistent with the annual financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the management report.
The supervisory board is responsible for overseeing the Company's financial reporting process for the preparation of the annual financial statements and of the management report. AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE ANNUAL FINANCIAL STATEMENTS AND OF THE MANAGEMENT REPORT
Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstate- ment, whether due to fraud or error, and whether the management report as a whole provides an appropriate view of the Company's position and, in all material respects, is consistent with the annual financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our audit opinions on the annual financial statements and on the management report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with § 317 HGB and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements and this management report.
We exercise professional judgment and maintain professional skepticism throughout the audit. We also: Q Identify and assess the risks of material misstatement of the annual financial statements and of the management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Q Obtain an understanding of internal control relevant to the audit of the annual financial statements and of arrangements and measures (systems) relevant to the audit of the management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion on the effectiveness of these systems of the Company. Q Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures. Q Conclude on the appropriateness of the executive directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor's report to the related disclosures in the annual financial statements and in the management report or, if such disclosures are inadequate, to modify our respective audit opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to be able to continue as a going concern. Q Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements present the underlying transactions and events in a manner that the annual financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Company in compliance with German Legally Required Accounting Principles. Q Evaluate the consistency of the management report with the annual financial statements, its conformity with German law, and the view of the Company's position it provides. Q Perform audit procedures on the prospective information presented by the executive directors in the management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signi- ficant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Berlin, 23 July 2020
Dohm Q Schmidt Q Janka Revision und Treuhand AG Matthias Schmidt Iris Abraham Wirtschaftsprüfungsgesellschaft Wirtschaftsprüfer (Public Auditor) Wirtschaftsprüferin (Public Auditor))
Any publication or distribution of the annual financial statements and/or of the management report in a form differing from the certified version (including translation into other languages) requires prior confirmation of our opinion, if our audit certificate is quoted or our audit is referred to in such instances; we make special reference to section 328 HGB. 77 _ 78
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ICF BANK AG Wertpapierhandelsbank Kaiserstraße 1 60311 Frankfurt am Main
Phone +49 69 92877-0 Fax +49 69 92877-333
E-Mail [email protected] Web www.icfbank.de
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