Interests in unconsolidated structured entities

Structured entities are entities that have been designed so that voting rights or similar rights are not the dominant factor in deciding who controls the entity. The Cooperative Financial Network mainly distinguishes between the following types of interests in unconsolidated structured entities, based on their design and the related risks; these entities largely concern companies of the DZ BANK Group:

Interests in investment funds issued by the Cooperative Financial Network,
Interests in investment funds not issued by the Cooperative Financial Network,
Interests in securitization vehicles,
Interests in asset-leasing vehicles

Interests in investment funds issued by the Cooperative Financial Network
The interests in the investment funds issued by the Cooperative Financial Network largely comprise investment funds issued by entities in the Union Investment Group in accordance with the contractual form model without voting rights and, to a lesser extent, those that are structured as a company with a separate legal personality. Furthermore, DVB Bank SE makes subordinated loans available to fully consolidated funds for the purpose of transport finance. In turn, these funds make subordinated loans or direct equity investments available to unconsolidated entities.

The maximum exposure of the investment funds issued and managed by the Cooperative Financial Network is determined as a gross value, excluding deduction of available collateral, and amounts to €9,352 million as at the reporting date (2018: €8,855 million). These investment fund assets resulted in losses of €13 million (2018: losses of €85 million) as well as income of €2,421 million (2018: €2,192 million).

Interests in investment funds not issued by the Cooperative Financial Network
The interests in the investment funds not issued by the Cooperative Financial Network above all comprise investment funds managed by entities in the Union Investment Group within the scope of their own decision-making powers that have been issued by entities outside the Cooperative Financial Network and parts of such investment funds. Their total volume amounted to €40,256 million (2018: €37,405 million). Moreover, loans to investment funds are extended in order to generate interest income. In addition, there are investment funds issued by entities outside the Cooperative Financial Network in connection with unit-linked life insurance of the R+V Group (R+V) amounting to €8,837 million (2018: €7,244 million) that, however, do not result in a maximum exposure.

The maximum exposure arising of the investment funds not issued by the Cooperative Financial Network is determined as a gross value, excluding deduction of available collateral, and amounts to €7,000 million as at the reporting date (2018: €4,493 million). Income generated from these investment fund assets in the financial year 2019 amounted to €165 million (2018: €154 million).

Interests in securitization vehicles
The interests in securitization vehicles are interests in vehicles where the Cooperative Financial Network involvement goes beyond that of an investor. The material interests in securitization vehicles comprise the two multi-seller asset-backed commercial paper (ABCP) programs: CORAL and AUTOBAHN. DZ BANK acts as sponsor and program agent for both programs. It is also the program administrator for AUTOBAHN.

The maximum exposure of the interests in securitization vehicles in the Cooperative Financial Network is determined as a gross value, excluding deduction of available collateral, and amounts to €4,004 million as at the reporting date (2018: €3,895 million). Income generated from these interests in the financial year 2019 amounted to €63 million (2018: €48 million).

Interests in asset-leasing vehicles
In the previous year, the interests in asset-leasing vehicles comprised shares in limited partnerships and voting rights, other than the shares in limited partnerships, in partnerships established by the VR Smart Finanz sub-group for the purpose of real estate leasing (asset-leasing vehicles), in which the asset, and the funding occasionally provided by the DZ BANK Group, were placed.

As a result of the disposals of the asset-leasing vehicles on the part of VR Smart Finanz, the balance sheet of the Cooperative Financial Network does not include any associated assets and liabilities in the financial year under review. Moreover, there was no other exposure resulting from contingent liabilities as well as financial guarantee contracts, loan commitments or other obligations. The actual maximum exposure of the interests in asset-leasing vehicles in the Cooperative Financial Network was determined as a gross value, excluding deduction of available collateral, and amounted to minus €4 million in the previous year.

Interest income and current income and expense generated from asset-leasing vehicles amounted to €1 million (2018: €5 million), while other net operating income amounted to €2 million. No other net operating income was generated in the previous year.

Consolidated Financial Statements 2019 of the Volksbanken Raiffeisenbanken Cooperative Financial Network