WE ARE DELIGHTED. The partners of the Pictet Group

Transcription

1 The Pictet Group Report for the Half Year Ended 30 June 2014

2 WE ARE DELIGHTED to present the first public report of the Pictet Group since we opened for business in Geneva in 1805, under the original name of De Candolle, Mallet & Cie. For 209 years, trust has been at the heart of the relationship between us and our clients. Even the most rudimentary figures concerning our balance sheet and profitability have been under a veil of discretion. Therefore the publication of these figures twice a year a statutory duty of the new legal form that we now have may seem to herald a big change, as much for our clients as for us. But it does not undermine the primacy of trust. We believe that if we continue to look after the interests of our clients with dedication, independence and responsibility the numbers will look after themselves. The partners of the Pictet Group 2

3

4 GROUP FINANCIAL SUMMARY half year ended 30 june 2014 Operating income Consolidated profit Total assets Equity CHF975m CHF203m CHF34.2bn CHF2.2bn Core tier 1 capital ratio 21.7% Total capital ratio 21.7% Liquidity coverage ratio 166% Assets under management or custody CHF404bn In this document the terms Pictet Group or the Group or Pictet shall be taken to mean all entities in which the Pictet partners directly or indirectly have a majority stake. 4

5 CONTENTS 6 Management owned Pictet is a partnership of eight owner managers responsible for the entire business of the Group. Our principles of succession and transmission of ownership have remained unchanged since foundation in Three businesses, one focus As an investment-led service company, we offer only wealth management, asset management and related asset services. We do not engage in investment banking, nor do we extend commercial loans. The partnership ethos of Pictet ensures that we remain committed to preserving the integrity of the Group. 19 Independence We are able to set our own business strategy without pressure from external shareholders or creditors. Our financial independence goes hand-in-hand with independence of mind, exacting risk management and freedom from the temptations of short term fashion. 23 Continuity Over the past 209 years there have been only 40 partners, each with an average tenure of over 21 years. Because the terms of the partners overlap, their knowledge, experience and values are absorbed and passed on without interruption. Successive generations therefore act as custodians as much as owners of the Pictet Group. 28 Adaptability Our adaptability springs from solid and entrepreneurial foundations. Together with our size, these foundations allow us to enjoy the technical expertise and range of skills of the biggest financial groups, while retaining the agility and pioneering spirit of the smallest. 34 Our responsibilities While our first and final duty is to our clients and our employees, everything we do entails responsibilities towards the society and the wider world in which we invest and live. 5

6 MANAGEMENT OWNED Pictet is a partnership of eight owner managers responsible for the entire business of the Group. Our principles of succession and transmission of ownership have remained unchanged since foundation in

7 7

8 The Pictet Group On 5 February 2013, we announced that our Swiss bank, Pictet & Cie, would become a limited liability company under the name Banque Pictet & Cie SA and that the management of the Pictet Group would fall under a corporate partnership 1, each with effect from 1 January This was no sudden decision. We had considered a change in our legal structure and governance more than once in recent years. Such a change became steadily self-evident with the growth in the range and complexity of Pictet s worldwide business activities. This expansion had generally required the creation of distinct legal entities most of them as limited liability entities especially in financial centres where the regulatory authorities do not recognise the unlimited partnership form. A corporate partnership preserves the independence of the Group and the personal commitment of the partners, who remain as owners and managers of Pictet. With the publication of financial reports and the establishment of an independent supervisory board, the new legal structure also provides greater transparency for our clients. While the partnership s principles of ownership remain, since 2006 Pictet has introduced equity participation for a select number of top managers. Membership of this incentive scheme is based on such factors as past and potential contribution to Pictet and respect for our values. In some ways each of these decisions might seem to disturb our traditions. In fact, they show our ability to evolve with the times, while retaining the essential character that is the source of our long term strength. 1 Société en commandite par actions 8

9 Group full time equivalent employees 3,611 Assets under management or custody CHF billion 26 offices 17 countries Employee turnover rate 4% 49 equity owners including partners 2 The term Assets under management or custody includes the assets of private and institutional clients looked after by the Pictet Group. These assets may for example be managed through individual discretionary mandates, benefit from value added services such as investment advice, or simply be under deposit. 9

10 THREE BUSINESSES, ONE FOCUS As an investment-led service company, we offer only wealth management, asset management and related asset services. We do not engage in investment banking, nor do we extend commercial loans. The partnership ethos of Pictet ensures that we remain committed to preserving the integrity of the Group. 10

11 Pictet Wealth Management Whether they are entrepreneurs, successful professionals or individuals with inherited wealth, we offer our clients wealth management in the widest sense, including private banking, wealth solutions and family office services. We usually begin by defining an investment strategy to meet the financial goals of our clients in the context of their broader aspirations. Clients then decide how much they wish to be involved in the investment process, from delegating the management of their wealth to taking advantage of our investment advice or execution-only services. For clients with larger fortunes whose needs are more complex, we offer a full range of wealth solutions. These include dedicated holding structures, bespoke reporting, global custody and direct access to trading services. For families of exceptional wealth, our family office services team helps clients design the most appropriate governance for family organisation, investment strategy and the administration of portfolios. Our investment capabilities extend across developed and emerging markets and cover almost all asset classes and currencies, including alternative investment funds through Pictet Alternative Advisors. We also offer different jurisdictions for holding client assets as dictated by economic, geopolitical or personal circumstances. 11

12 Assets under management CHF 150 billion 19 offices worldwide 115 investment professionals 325 private bankers 650 full time equivalent employees Managing Exceptional Wealth A quarter of a century ago, the world s exceptional fortunes were few in number. Many were either inherited wealth or large business fortunes in the US. The collapse of the Berlin Wall in 1989 and Deng Xiaoping s market-based reforms in China in the late 1980s spreading to other emerging economies released a global entrepreneurial energy that has transformed the wealth management landscape. There are many more large fortunes globally, mostly first generation entrepreneurs, many from emerging markets. They are very sophisticated, global, and their needs are complex. We need to be equipped to look after such clients, says Philippe Bertherat, managing partner. Pictet has developed expertise in the structuring, investment and operational demands of such clients. These clients need a bank of a certain size because they are large. They want high quality services, which we have because of our institutional activities both in wealth management and asset services. But also they like to deal in a private environment where they can talk to the owners. Frankly I don t know very many firms that can offer that, observes Jacques de Saussure, senior managing partner. 12

13 Pictet Asset Management We provide specialist investment management services through segregated accounts and mutual funds to leading institutions globally. Our clients include some of the world s largest pension funds, financial institutions and sovereign wealth funds. With strong investment convictions and clear strategic priorities, we aim to build lasting partnerships with our clients by meeting or exceeding their expectations for investment performance and service. We manage equity, fixed income, alternatives and multi-asset strategies. We commit substantial analytical resources to three axes: Greater Europe, where we have a natural competitive advantage; Emerging World, where we have been pioneers in both equity and debt markets; and Global Specialities, where we have an established record of developing original thematic strategies. In our investment teams, we believe that a collegiate style rather than a star culture is more conducive to long term investment performance. It also explains our low employee turnover and reinforces the essential relationship with our clients. In this respect, we consider it fundamental to cultivate a meritocratic environment that attracts individuals with distinctive talent and a sense of team spirit. 13

14 Asset manager since 1980 Assets under management CHF 144billion 721 full time equivalent employees 17 offices worldwide 7 investment centres 286 investment professionals Fresh Water Thinking The launch of our Luxembourg-based Water fund in January 2000 coincided with the hyperbole of the new millennium. Investors obsessed with dotcoms wanted something stronger than water. It was several years before the fund built up assets and gained a reputation for expertise and performance. Today, as a CHF 3 billion fund investing in companies operating throughout the water cycle from giant utilities to small firms in filtration technology it is the biggest such fund worldwide. In the industry we are seen as thought leaders. Companies like to have us as shareholders because we understand the risks and opportunities in the sector, says Hans Peter Portner, co-lead manager of the fund for over a decade. For smaller companies we are a source of growth capital. Just one example is a Canadian firm whose unique smart ball pipeline leak detection device we helped bring to fruition. 14

15 Pictet Asset Services By managing every aspect of the asset servicing process ourselves, we leave our clients free to concentrate on their own priorities that is, distributing their products or generating portfolio performance. Among the range of our clients are asset managers (including independent asset managers for private clients), pension funds, institutions and banks. We provide custody services, administration and governance for investment funds, transfer agency services as well as trading services through our Négoce teams. As the Pictet Group has no investment banking activities, we can act without conflicts of interest and to the best advantage of our clients. Close collaboration between our traders and trading room strategists lies at the heart of our Négoce services. Through quantitative research and market analysis we aim to improve execution quality across all major markets around the clock. Our investment fund solutions are designed to accommodate the particular risk profiles and target returns of our clients. Moreover, such solutions can be adapted to satisfy different regulatory frameworks. Our dedicated third-party management companies handle relationships with regulators and provide fund governance services. We also offer a set of related capabilities in investment controlling, performance measurement and risk management. 15

16 Fund services CHF 172billion Assets in custody CHF 371billion 974 full time equivalent employees 9 booking centres 1 global platform 24/24 execution capabilities Exploring New Frontiers Twenty years ago, investing in emerging markets required strong convictions, rigorous operational controls and, it has to be said, a certain audacity. We were among the first to develop expert asset servicing for our own emerging market funds, says Marc Briol, CEO of Pictet Asset Services. Soon after, with a London-based investment manager, we saw the opportunity to create a vehicle to invest in Africa and the Middle East. Even now they often consult us on counterparty, operational and regulatory risk in these markets. The fund holds board meetings in the Middle East to have direct access to the companies in which it invests. We made this leap into the unknown together and today we see an experienced manager looking after a multiple of the original seed capital. It s very satisfying. Michèle Berger, now head of FundPartner Solutions, involved in setting up the fund in 1994, recalls, The extensive fact finding we carried out gave us the confidence that we would be able to take advantage of the great opportunities ahead of us. 16

17 THE VIEW FROM INSIDE I love printing, distribution and storage technology. I love paper but I also really like managing people - the ideas and solutions my team come up with constantly amaze me. It s very rewarding. The Pictet family archives carry material back to the 15th century. There are paintings, books and letters between Pictet family members and such historical figures as Napoleon I, Madame de Staël, Victor Hugo, Voltaire and Franz Liszt. I see you worked as a croupier. You know you re not allowed to play money games here. We had ethical scores for stocks and we had alphas, but how could we build a portfolio? GH, former Head of Quantitative Products, am You have to build the relationship through trust, and it takes time. Fortunately, at Pictet we have time. FG, Regional Head Middle East, Africa and Central Asia, am 2011 was a historic moment. The rating agencies downgraded over 100 banks, Europe failed to contain the Greek débâcle and the US lost its triple-a rating. GB, Chief Credit Officer You could say that we re like a specialist consultant compared to the general practitioners who are the private bankers. While we work directly with a private banker s client, he or she, as lead relationship manager, always keeps overall responsibility. JCE, Head of Family Office Services JG, Head of Multimedia Production Japan is an isolated country. Only we speak Japanese. We are surrounded by sea. But I think Pictet understands Japan very well. OW, Tokyo Head of Sales, am People think they are cleverer than the backtest but that s a behavioural bias. We never override the signals. EVT, Head of Quantitative Strategy, wm Since I began my career as a banker, Pictet has always been the benchmark. Working for other banks, I always wanted to be like Pictet, act like Pictet, and above all, have a reputation like Pictet. My first experiences confirmed the outside impression of Pictet s ability to react quickly if you touched the right string. At the same time, if there s no internal conviction, it never happens. DW, Chief Financial Officer JPB, former Chief Economist, wm LC, Archivist Some fund managers like detail and facts, but you also need perception and intuition. It s a good cocktail to have in the team. AD, Head of Emerging Corporate Debt, am LSDL, Senior Private Banker I like the high level of responsibility. I m encouraged to find ideas myself and present them back to the team. After in-depth research, building a model and speaking to a company, it s very rewarding when the stock goes into the portfolio. MA, Recent Graduate, am You can be a great chef with just one ingredient, but - no matter how good you are - nothing can make up for a mediocre ingredient. AC, Head of Dining and Reception After you ve been through the Pictet programme, you really feel that Pictet has invested in your future. You feel a strong sense of loyalty. DA, Recent Graduate, wm Pictet has qualities that other banks have lost. For example, management stability. I know that my boss will be the same in five or even ten years time. At other banks you d be lucky to get two years and every boss has a new plan. We also have short reporting lines. To have direct access to a managing partner is unrivalled. CH, Chief Executive wm Asia Our independence is crucial and our 200-year-old partnership structure appeals to Chinese entrepreneurs, who are mostly first or second generation. I like analysing commodities because it s very logical: who consumes, who produces, what it s used for. You also have to take account of the big macroeconomic trends. CKD, Currencies and Commodities Strategist, wm It was really scary. Normally the shaking lasts for one to ten seconds. This time it went on and kept getting bigger and wider. That evening I stayed in the office to contact distributors who weren t affected. Risk management is to know why and what it means to protect a reputation, how to manage a crisis and never to take anything for granted. BL, Group Chief Risk Officer CH, Chief Executive, wm Asia I have generations of naturalised English-Dutch ancestors, a Finnish mother and a Swiss passport. Typical Geneva person. Someone told me that the brand, the image of Pictet, was that of a very respectable institution. Once you re in, it s like a family, they said. AD, Head of Emerging Corporate Debt, am EVT, Head of Quantitative Strategy, wm The last time I was in Riyadh it was 56 degrees. But if you go when others don t, I think it shows real commitment. FG, Regional Head Middle East, Africa and Central Asia, am My co-fund manager is an amazing person to visit forestry companies with. He takes photos of the bark, the cones, the needles, everything. He knows all the tree species and their sylvicultural requirements. GM, Senior Fund Manager, am I m not thinking of retiring. I get on very well with the young people. What would I do anyway? I m 85. Investment is about making rational assumptions, trying to assess fair value and being contrarian for a reason. Entrepreneurs who cash out want wealth preservation. They look for trust, a safe pair of hands. They take risk and make money with their own business. They don t need volatility. This plays to Pictet s strengths. PS, Recent Graduate, am ADG, Senior Private Banker ET, Filing Officer, am OW, Tokyo Head of Sales, am Note: in the above citations, am and wm denote Asset Management and Wealth Management respectively; the quotes above are drawn from interviews made between 2011 and 2014.

18 INDEPENDENCE We are able to set our own business strategy without pressure from external shareholders or creditors. Our financial independence goes hand-in-hand with independence of mind, exacting risk management and freedom from the temptations of short term fashion. Profit / loss account 19 23

19 CONSOLIDATED INCOME STATEMENT half year ended 30 june 2014 CHF '000 Net interest income 62,746 Net commission and fee income 828,262 of which Fee income from securities trading and investment activities 955,463 a Fee income from other services 4,692 Commission expenses (131,893) b Net trading income 78,667 c Other ordinary income 5,337 Operating income 975,012 Personnel expenses (519,457) General and administrative expenses (184,609) d Operating expenses (704,066) Depreciation and amortisation (19,638) Changes to provisions and other value adjustments, losses (4,064) Operating profit 247,244 Taxes (44,285) Consolidated profit for the first half year ,959 a Fee income from securities trading and investment activities includes fees earned from the management, administration and custody of client investments, as well as related brokerage services. b c Commission expenses includes custody and brokerage fees paid to third parties. Net trading income mainly includes earnings from foreign exchange operations on behalf of clients and from sales of certificates to clients. d General and administrative expenses includes all operating costs other than those related to personnel. The two main items are information technology such as banking platform maintenance and upgrade, and physical infrastructure such as rents. 20

20 CONSOLIDATED BALANCE SHEET at 30 june 2014 Assets CHF '000 Cash and balances with central banks 9,402,643 Due from banks 2,158,913 Due from clients 5,001,011 Trading operations 1,582,948 Financial investments 14,273,882 a b c d e Accrued income and prepaid expenses 298,058 Fixed assets 480,551 Other assets 962,287 Total assets 34,160,293 a b Cash and balances with central banks are effectively on call and are held in order to carry out common payment operations on behalf of clients and to meet cash withdrawals by clients. Due from banks includes cash deposits with bank counterparties, typically arising from securities transactions by clients or from client deposits made in currencies other than the Swiss franc. The counterparty risk of such banks is managed by Pictet s treasury committee, which decides on limits for each counterparty. c d Due from clients includes securitiesbacked, so-called Lombard loans made to clients. The risk arising from these loans is generally limited, as Pictet adopts a conservative approach to loan collateralisation. Trading operations essentially represents the value of financial assets bought as underlying assets for certificates sold to clients. The value of these underlying assets is also shown on the liabilities side of the balance sheet under Due to clients. The risk of such certificates is borne entirely by clients. e Financial investments includes investments into money market instruments and straight bonds issued by corporations, governments or supranational institutions. The credit risk of such bond issuers is managed by Pictet s treasury committee, which decides on limits by credit rating and geography. As a rule Pictet does not invest in structured financial products. 21

21 Liabilities and equity CHF '000 Due to banks 1,413,556 Due to clients 28,610,803 f g Accrued expenses and deferred income 431,838 Other liabilities 1,328,791 Provisions 166,599 Equity 2,208,706 h i of which Partners capital 787,783 Retained earnings 1,217,964 Consolidated profit for the first half year ,959 Total liabilities and equity 34,160,293 f g Due to banks includes liabilities vis-à-vis bank counterparties, generally arising from client transactions. As a rule Pictet does not rely on short term capital market funding. Due to clients represents cash deposits of clients and the value of certificates sold to clients (see Trading operations under Assets). h Provisions covers risks, including legal expenses, arising from an identifiable cause and for which a potential loss and likely time frame for payment can be estimated. i Equity is the capital that the partners have collectively entrusted to the Pictet Group. It also corresponds to the net value of the Pictet Group from an accounting point of view. In Pictet s case, equity, core tier 1 capital and total capital all amount to the same figure, since Pictet only holds the strongest form of capital. Financial ratios Core tier 1 capital ratio (21.7%) In Pictet s case, the core tier 1 capital ratio and the total capital ratio are identical (see note i above): namely the ratio of equity to risk-weighted assets. These measures aim to reflect the economic strength of a financial institution by taking into account the riskiness of its assets and its operations. Liquidity coverage ratio (166%) The liquidity coverage ratio is the ratio of highly liquid assets to expected short term liabilities. This measure aims to reflect the ability of a financial institution to withstand short term liquidity disruptions such as sudden cash withdrawals from clients. The Pictet Group s favourable ratio is explained by its large cash deposits with central banks and investments in highly liquid bonds. 22

22 CONTINUITY Over the past 209 years there have been only 40 partners, each with an average tenure of over 21 years. Because the terms of the partners overlap, their knowledge, experience and values are absorbed and passed on without interruption. Successive generations therefore act as custodians as much as owners of the Pictet Group. 23

23 The partners, from left: Marc Pictet, Jean-François Demole, Bertrand Demole, Nicolas Pictet, Jacques de Saussure, Rémy Best, Renaud de Planta, Philippe Bertherat

24 The origins of the Pictet Group The formal history of Pictet begins in Geneva on 23 July On that day, two young gentlemen Jacob-Michel-François de Candolle and Jacques-Henry Mallet signed, with three limited partners, a scripte de société to form the original partnership of De Candolle, Mallet & Cie. Annexed by the French Directoire in 1798, the city state of Geneva had become the capital of the Département du Léman. War and blockade had interrupted the export of watches, Geneva s forte, while the French monarchy s default after the Revolution had caused most banks to collapse. Yet Geneva s entrepreneurial flame, kindled by Calvinist principles of discipline and hard work, and fanned by the optimism of the Enlightenment, had stayed alive. As the Revolutionary inflation subsided, a new generation of financial partnerships emerged, eventually to be known as private bankers. With share capital of 125,000 Geneva pounds, Pictet s founders described its purpose as, to trade in goods and articles of all types, collect annuities and undertake speculation in commodities. It soon gave up these activities to specialise in currency trading and the management of wealth. Surviving account books and documents show that as early as the 1830s the bank held a broad range of securities on behalf of clients to ensure that risks were properly diversified. On the death of de Candolle in 1841, his wife s nephew Edouard Pictet joined the partnership, becoming sole partner in 1848 and remaining at the head of the bank until his retirement in

25 A Small Mystery Solved How much was Pictet s initial capital of 125,000 Geneva pounds (livres argent de Genève) worth in today s money? And was it something to do with the British pound sterling? After the Revolution, the French Directoire had imposed the French franc on Geneva as the main currency of exchange. Had Pictet s founders engaged in a minor act of rebellion in not using the currency of the occupying forces? The truth is more prosaic. The livre argent was one of the two accounting currencies used in Geneva. It had first appeared in the 16th century, mainly to facilitate trade with foreign countries. 3 The other accounting currency the florin was mostly used by individuals and by the city treasury. Despite the French occupation between 1798 and 1813, the livre argent remained in intermittent use until 1838, when the franc de Genève was adopted some years before the emergence of the Swiss franc itself. So, like the British pound sterling of the time, the livre argent was divided into 20 shillings = 20 x 12 pennies, but its value was related to French denominations then in circulation. There are three main ways to calculate the purchasing power of a currency over time: first, based on the gold price, second on a price index, and third according to per capita income. This last is probably the most accurate, as it also takes into account rising productivity. 4 On this basis, 125,000 Geneva pounds would convert into around 30 million Swiss francs in today s money. 3 Eugène Demole, Histoire monétaire de Genève de 1535 à 1848, Genève: Slatkine, 1978, pp Youssef Cassis, Les Capitales du Capital: Histoire des places financières internationales ( ), Genève: Slatkine, 2005, p350 27

26 ADAPTABILITY Our adaptability springs from solid and entrepreneurial foundations. Together with our size, these foundations allow us to enjoy the technical expertise and range of skills of the biggest financial groups, while retaining the agility and pioneering spirit of the smallest. 28

27 There is much talk nowadays that the future of the financial industry is uncertain. Six years after the financial crisis erupted, the reputation of banks in particular remains clouded by the hubris of the preceding boom. Meanwhile, international pressure has caused greater transparency in the private banking sector. Pictet s strategy for over thirty years has been guided by the conviction that our success depends on providing individuals and institutions with the highest possible investment quality and service. Today, we have a diversified and profitable asset management business similar in scale to our wealth management business. Whatever progress we have made is the result of strategic decisions and investments that were often taken at a time when the consequences were uncertain. Among these are the early openings of offices in London (1980), Tokyo (1981) and Hong Kong (1987); the establishment in Luxembourg of our first bank in the European Union (1989); the creation of an secregistered wealth management subsidiary (2006); the launch of a large scale, fully integrated banking platform (2007); and most recently the change in our legal status (2014). 29

28 TWO CENTURIES OF VICISSITUDES Forty partners in 209 years Forty partners in 209 years Jacob-Michel- François de Candolle Jacques-Henry Mallet François Girard Charles Turrettini-Necker Edouard Pictet Alphonse Turrettini Ernest Pictet Emile Pictet Guillaume Pictet Jacques Marion Aymon Pictet Charles Gautier Gustave Dunant François de Candolle Pierre Lombard Albert Pictet Alexandre van Berchem Edouard Pictet Guy Demole Jean-Jacques Gautier Jean-Pierre Demole Michel Pictet Denis de Marignac Pierre Pictet Edmond Boissonnas Claude de Saussure Victor Gautier Jacques de Saussure Ivan Pictet Claude Demole Nicolas Pictet Renaud de Planta Fabien Pictet Pierre Lardy Charles Pictet Jean-François Demole Philippe Bertherat Rémy Best Marc Pictet Bertrand Demole Economic and financial events Swiss long term bond yield % 6 23 JUL 1805 Pictet founded in Geneva, originally known as De Candolle, Mallet & Cie 19 MAY 1815 Geneva joins Swiss Confederation 1838 French dahlia bubble 1844 Edouard Pictet goes to Turin to discuss 35 million franc railway financing with Cavour 1857 US railroad stock crash provokes run on banks, leads to global markets crash 1868 First closed-end fund, the Foreign and Colonial Government Trust, floats in London 1880 Ernest Pictet & Cie has 10 employees 1889 Germany s chancellor Bismarck conceives world s first pension fund system 1896 Charles Dow devises first stock market index Weak Swiss franc and post-wwi anti-inflationary monetary policy 1910 Pictet creates Amerosec, first closed-end fund in Switzerland 1924 First open-ended fund The Massachusetts Investment Fund ,000 US banks fail (14,000 remain), unemployment at 25% by 1933 AUG JUL 1946 Hungary experiences highest ever 12-month inflation Prices double every two days 1949 First long/short hedge fund launched by Alfred Winslow Jones President Nixon suspends dollar convertibility into gold Swiss National Bank imposes zero monetary growth after first oil shock Pictet Funds SA established to sell 1971 mutual funds to external investors Opening of Pictet s first EU bank in Luxembourg First dotcom bubble Economic and financial events Private banking and related activities come under Pictet Wealth Management Swiss long term bond yield Fund distribution brought into Pictet Asset Management 7% NAPOLEONIC WARS HOLY ALLIANCE Latin America boom and bust Gregor MacGregor issues 600,000 of bonds on imaginary country of Poyais 1822 STEAM TRIUMPH English railway boom 66 new lines authorised 1844 REVOLTS AND REACTION Year of revolutions Swiss civil war ends and federal constitution introduced 1848 CIVIL AND INTERNATIONAL WARS Bank of England refuses to rescue Overend, Gurney & Co, wholesale discount bank, thus avoiding moral hazard 1866 GOLD STANDARD AND DEFLATION Britain buys into Suez Canal after Egyptian Khedive s financial difficulties 1875 US economy in recession 44% of the time COLONIALISM AND MILITARY DRAFT Birmingham bicycle boom and bust John P Morgan saves Wall Street with U$25m after Knickerbocker Trust collapses 1907 WWI AND BEFORE Match King Ivar Kreuger forms consortium including Pictet to lend U$1bn to the Soviets but Stalin refuses, preferring autarky and 5-year planning 1928 DICTATORS AND DEPRESSION US approves letter-based credit ratings system 1933 Swiss Banking Act passed governing banking confidentiality 1934 WWII AND AFTER US stock prices bottom out, beginning 15-year bull market 1942 Dow Jones Average recovers to 1929 high 1954 THE GLORIOUS YEARS Pictet is a founding member of Switzerland s first independent investment foundation beginning institutional asset management business 1967 COLD WAR AND INFLATION Herstatt Bank collapse leads to eventual creation of Basel rules by Bank for International Settlements 1974 Tokyo equity market bubble peaks Imperial Palace grounds said to be worth more than California 1989 DEREGULATION AND SHAREHOLDER VALUE Birth of euro 1 JAN 1999 Repeal of Glass-Steagall Act opens door to commercial and investment bank mergers 1999 All institutional activities merged under Pictet Asset Management 1999 INTERNET, TERRORISM AND RECESSION Switzerland applies Article 26 of OECD s Model Tax Convention 13 MAR 2009 Major commercial banks bailed out worldwide after sub-prime crash RECOVERY AND... Pictet Asset Services formed to include global custody and fund administration services 2010 Pictet & Cie becomes Banque Pictet & Cie SA 1 JAN 2014 Global quantitative easing to counter deflation, strong Swiss franc after euro crisis Global expansion Zurich Tokyo Nassau Hong Kong Geneva Montreal London Luxembourg Madrid Florence Turin Basel Milan Dubai Frankfurt Barcelona Singapore Rome Taipei Lausanne Paris Osaka Global expansion Brussels Amsterdam Tel Aviv Munich Pictet head offices 3, cour Saint-Pierre , rue de la Cité , rue de la Corraterie , rue Petitot , rue Diday , rue Diday , boulevard Georges-Favon , route des Acacias 2006

29 OUR RESPONSIBILITIES While our first and final duty is to our clients and our employees, everything we do entails responsibilities towards the society and the wider world in which we invest and live. 34

30 In the long run, responsibility towards society and the wider world is about sustainability. Since we have always thought in terms of future generations, sustainable principles directly align with our way of thinking. First, we aim to manage our operations according to the best sustainable practice, with strict targets for co 2 emissions and waste reduction. Our Geneva head office matches technology with ecological economy. Outside Switzerland, we expect all our buildings to meet or exceed local standards. Second, in 1997 we began researching into Socially Responsible Investments (sri). Today we manage sri core equity portfolios as well as mutual funds embracing themes that are central to the concept of sustainability. Among these are Water, Clean Energy and Timber. Third, the Prix Pictet was founded in 2008 as a global award dedicated to environmental sustainability. Through outstanding photography and a recurring commission, the prize aims to deepen understanding of humanity s impact on the environment and raise public awareness of the need for action. Most recently, the partners have formalised and expanded the Pictet Group s philanthropic activities by establishing the Pictet Group Charitable Foundation in

31 THE VIEW FROM OUTSIDE On 6 and 7 May 2014, the London-based artist Fiona Banner visited Pictet s headquarters in Geneva for a reconnaissance in preparation for her specially commissioned artwork, The View from Outside, which appears on the following two pages. 36

32

33 CONTACTS SWITZERLAND Geneva Banque Pictet & Cie SA T Pictet Asset Management SA T Pictet Funds SA T FundPartner Solutions (Suisse) SA T Pictet North America Advisors SA T Pictet Alternative Advisors SA T Zurich Banque Pictet & Cie SA Niederlassung Zürich Pictet Asset Management SA Niederlassung Zürich Pictet Funds SA Niederlassung Zürich T Lausanne Banque Pictet & Cie SA Bureau de représentation T Basel Banque Pictet & Cie SA Repräsentanz T EUROPEAN UNION London Pictet Asset Management Ltd 5 Pictet Global Markets (UK) Ltd 5 Pictet & Cie (Europe) SA London branch 6 T Paris Pictet & Cie (Europe) SA Succursale de Paris T Amsterdam Pictet & Cie (Europe) SA Representative Office T Brussels Pictet & Cie (Europe) SA Bureau de représentation T Madrid Pictet & Cie (Europe) SA Sucursal en España T Barcelona Pictet & Cie (Europe) SA Sucursal en España T Milan Pictet & Cie (Europe) SA Succursale italiana Pictet Asset Management Ltd Succursale italiana T Turin Pictet & Cie (Europe) SA Succursale italiana T Florence Pictet & Cie (Europe) SA Succursale italiana T Rome Pictet & Cie (Europe) SA Succursale italiana T Frankfurt Pictet & Cie (Europe) SA Niederlassung Frankfurt T Munich Pictet & Cie (Europe) SA Niederlassung Frankfurt Büro München T Luxembourg Pictet & Cie (Europe) SA Pictet Funds (Europe) SA FundPartner Solutions (Europe) SA T AMERICAS Montreal Pictet Asset Management Inc Pictet Canada LP Pictet Overseas Inc T Nassau Pictet Bank & Trust Limited T MIDDLE EAST Dubai Banque Pictet & Cie SA Representative Office T Tel Aviv Pictet Wealth Management Israel Ltd T ASIA Tokyo Pictet Asset Management (Japan) Ltd T Osaka Pictet Asset Management (Japan) Ltd Representative Office T Hong Kong Pictet & Cie (Europe) SA Hong Kong Branch Pictet Asset Management (Hong Kong) Ltd T Singapore Bank Pictet & Cie (Asia) Ltd Pictet Asset Management (Singapore) Pte Ltd T Taipei Pictet Securities Investment Consulting Enterprise (Taiwan) Ltd T Pictet Group head office Route des Acacias Geneva 73 Switzerland T pictet.com 5 Authorised and regulated by the Financial Conduct Authority 6 Authorised and regulated by the Commission de Surveillance du Secteur Financier and subject to limited regulation by the Financial Conduct Authority 39

34 About this report This report is published in French, English and German. It is also available in pdf format for download from our website, pictet.com, where a more detailed financial report may be found. Acknowledgements Special thanks to Fiona Banner (The View from Outside), Nadav Kander (portrait photography) and Jean-Pierre Béguelin (economic and financial history) Infographic design by Information is Beautiful Studio Graphic design by Leagas Delaney Printed by Courvoisier-Attinger Arts graphiques SA Typeset in Lexicon 9.5/18pt and Trade Gothic 9/16pt Printed on 170gsm Lessebo and 290gsm Sirio Color Pietra No part of this publication may be reproduced without prior permission in writing. Published August Pictet Group All rights reserved Disclaimer This document is not aimed at or intended for distribution to or use by any person who is a citizen or resident of, or domiciled in, or an entity that is registered in, a country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. The information and material contained herein are provided for information purposes only and are not to be used or considered as an offer or solicitation to subscribe to any securities or other financial instruments. Furthermore, the information appearing in this document is subject to change without prior notice. Only the French version of this document shall be deemed authoritative. 40

35