INSINGER DE BEAUFORT Asset Management N.V. Jaarverslag 31 december 2012

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1 INSINGER DE BEAUFORT Asset Management N.V. Jaarverslag 31 december 2012 Jaarrekening is vastgesteld door de Algemene Vergadering van Aandeelhouders gehouden op 26 april G.S. Wijnia P.D. Yeo

2 INSINGER DE BEAUFORT ASSET MANAGEMENT N.V. Annual Report for the year ended 31 December

3 CONTENTS General information 3 Director' Report 4 Annual review Financial statements Profit and loss account 9 for the year ended 31 December 2012 Balance sheet 10 as at 31 December 2012 Statement of changes in equity 11 for the year ended 31 December 2012 Cash flow statement 12 for the year ended 31 December 2012 Summary of significant accounting policies 13 for the year ended 31 December 2012 Notes 14 Other information 17 Appropriation of the result Independent auditor's report 2

4 General information Address: Herengracht BV Amsterdam P.O. Box EV Amsterdam The Netherlands Tel +31 (0) Fax +31 (0)

5 Director s Report Annual Review 2012 Market Developments was dominated by the policies of central banks, with the ECB and the Fed leading the way. Aided by highly-expansionary monetary policies, investors rediscovered the confidence they had lost in 2011 and both bond and equity markets performed very well. Global government bonds earned a return of about 9%, while corporate bonds rose in value by about 13% (expressed in euros). The riskiest corporate bonds, high yield or junk bonds, even earned a total return of about 23%, far outstripping the average return on the global equity markets (about 13% in euros). In December 2011 and February 2012, the ECB attracted the most attention when it made available over EUR1,000 billion in three-year loans to European banks. Banks in Italy and Spain in particular took advantage of this credit facility, partly to buy up government bonds issued by their own countries in order to bring down the yields that had risen so perilously in The enormous sums of money made available to the financial system by central banks are a reflection of the scale of the global debt crisis. Only if very low yields persist will the enormous mountain of debt remain at all affordable, fostering hopes that it could be brought under control at some point. This could be achieved either by economic growth picking up or by a long-term period of negative real interest rates, which would lead to a decrease in the value of the debt. Aided by the actions of the ECB, but also by better-than-expected US job figures, markets around the world earned surprisingly high returns in the first quarter of Banks advanced the furthest, having been under the greatest pressure in In the second quarter, the equity markets in particular suffered a relapse in April and May, cancelling out almost all the profit made in the first quarter. Although the disappointing economic growth in the US and China also prompted some unease, the Eurozone was again the greatest source of concern in the second quarter. Attention mostly focused on Spanish banks, which threatened to go under in the wake of the collapse of the Spanish housing market. In June, Spanish banks were promised EUR100 billion in aid, but the positive market reaction only lasted a few hours. Expectations were so low prior to the Euro Summit in June that the outcome was in fact better than expected. Led by Germany, Northern European countries ultimately agreed to the new ESM bail-out fund actively providing capital directly to (Spanish) banks without the state being involved; this means that the aid does not count as sovereign debt. This severs the link between the required recapitalisation of the banking sector and higher sovereign debt. Another positive element is that the ESM will not be given preference over sovereign debt, which will improve the position of investors in government bonds. The markets responded positively, resulting in yields on Spanish and Italian government bonds in particular declining and equities rallying (especially banking equities). In the third quarter, equity markets succeeded in prolonging the rally of early June. These sound performances were not driven by the prospect of an economic recovery, but once again by the actions of central banks. It was initially ECB President Draghi who was most active. On 26 July, he announced that he would do whatever it takes to safeguard the future of the euro. On 6 September, he made good that promise by announcing that the ECB is prepared to buy up an unlimited number of government bonds on the secondary market (i.e. not on initial issue, the ECB is prohibited from doing that). It has to be said that Draghi s actions proved successful. Yields on bonds issued by Spain, the country most at risk, fell by two whole percentage points 4

6 in the following months. This drop in yields occurred without Draghi even being able to buy up the bonds in question. In order for this to happen, Spain and Italy were required to submit an official request for a bail-out to the ESM emergency fund, but they have not yet done so. Towards the end of the third quarter, the US Fed announced a fresh, third round of quantitative easing, or QE3, aimed at bringing down mortgage rates further by purchasing mortgage-backed securities. The Fed has left the scale and duration of this programme open, allowing it to maximise the flow of money. Following initial hesitation early in the fourth quarter, most equity markets resumed their upward trend in November and December, allowing them to finish the year close to their 2012 peaks. It was noticeable that it was chiefly the US which boosted markets in the first half of The European markets took the lead in the second half, however, while many emerging markets also started to rise towards the end of the year when the Chinese economy showed signs of recovery. Once again, rising equity markets (risk-on) generally went hand-in-hand with a rising euro-us dollar exchange rate, resulting in lower returns in euros than in US dollars. However, across 2012 as a whole, the euro barely rose against the US dollar (from 1.30 to 1.32). Insinger de Beaufort Asset Management N.V.: General Insinger de Beaufort Asset Management N.V. (the Company) is the investment manager of the Insinger de Beaufort Funds as stipulated in article 1:1 of the Dutch Act on Financial Supervision (Wft). On 22 June 2006, Insinger de Beaufort Asset Management N.V. was issued with a license as stipulated in article 2:65 paragraph 1 and 2 of the Wft. Insinger de Beaufort Asset Management N.V. acts solely as the investment manager of investment funds. The Company invests assets in European and Real Estate Equities and also specialises in Manager Selection, investing assets in other investment funds, hedge funds and Socially Responsibility Investments (SRI) funds. Besides the board of directors the Company has a supervisory board. The composition of the board of directors and the supervisory board does not comply with article 2:166 of the Dutch Civil Code (minimum 30% male and 30% female). Members of the board of directors and the supervisory board are appointed by Bank Insinger de Beaufort N.V. The above-mentioned requirement can only be met when there are new vacancies within these boards and if candidates are suitable and available. The Company has no employees. The Company is part of the Insinger de Beaufort Group and is a 100% subsidiary of Bank Insinger de Beaufort N.V.. Bank Insinger de Beaufort N.V. recharged certain personnel costs to the Company 5

7 Main developments Since the transfer in June 2011 of our private and institutional clients and intermediaries business to our holding company, Bank Insinger de Beaufort N.V. we have been able to focus fully on the management of our investment funds which has led to good performances in our Real estate fund with 17.99% and our European Mid cap fund with a 17.21% in However our Equity income fund lagged a bit with a performance of 11,85% in 2012 to the benchmark due to a strong underweight in financials and a higher allocation of cash. The Global Convertible fund had a performance 6,41% and lagged the benchmark, mainly due to adverse currency movements. In October 2011 the management of the fund was transferred to BNP IP. Mr Kobus Human, who had been a director of IdB Asset Management NV since 1996 resigned in September 2012 to pursue other business opportunities. Mr Human was replaced by Mr Gerwin Wijnia in December In addition to this directorship Mr Wijnia is the Chief Investment Officer of Bank Insinger de Beaufort N.V. Risk Management An important part of our governance structure are our risk management processes. As a financial institution we are constantly evaluating the potential risks that underlie our business and how to mitigate these risks. We have processes in place to control and monitor risks and members of the executive management are responsible for ensuring that risks and controls are addressed in each of their areas of operations. Particular attention is paid to: Market and Portfolio Risk: although we have no market positions in our own name, it is vital for us to manage Market and Portfolio Risk within all our fund portfolios. As such, management of market and portfolio risks is an integral part of our investment processes. In addition, the monitoring of the risk in our fund portfolios is in scope of the Insinger de Beaufort ( IdB ) Group s Investment Risk Management process. Operational Risk: it is essential for us to have an adequate administrative organisation and system of internal controls in place. As we do every year, we reviewed our written procedures and we conducted Risk Self Assessments to ensure that we have identified all the relevant risks and have established all the necessary controls in place to mitigate those risks. Legal & Compliance Risk: the regulatory environment in which we operate is continually changing with existing legislation being regularly updated or new laws being implemented. Our Legal & Compliance team is responsible for reviewing all changes in the legal and compliance environment and implementing these changes within our products, policies and processes. In this regard we set up separate projects to deal with new international laws such as the Alternative Investment Fund Managers Directive (AIFMD) and the Foreign Account Tax Compliance Act (FATCA). We also started projects to address and deal with the impact of more localised legislation such as the Retail Distribution Review (RDR) in the UK, Circular 12/546 relating to UCITS substance in Luxembourg and the proposed banning of trailer fees in the Netherlands. In addition to our own risk management processes, as part of the IdB Group we also plug in to the group s and the BNP group s risk management processes and policies. We have access to the group s risk management department which supplies us with support and tools to ensure that risk management is adequately executed in a consistent manner. Overlaying this process the IdB group s Permanent Control department independently monitors the ongoing adequacy and execution of our processes and controls. They report their findings both to us and to the 6

8 IdB group s Audit Committee, which oversees the group s risk management and control systems on behalf of the group s supervisory board. We can confirm that we have written procedures of the administrative organisation and internal controls that comply with the requirements of the Wet financieel toezicht ( Wft ) and related legislation. During the course of the year we reviewed various aspects of the administrative organisation and internal controls. This review indicated nothing that could conclude that the written procedures of the administrative organisation and internal controls as required by article 121 of the Besluit gedragstoezicht financiële ondernemingen ( Bgfo ) did not comply with the requirements of the Bgfo and the related legislation. There was also no indication that the administrative organisation and system of internal controls did not function effectively or in accordance with the written procedures. Results Gross income declined to 1,430 million from 4,932 million mainly due to the transfer in June 2011 of the private and institutional clients and intermediaries business to Bank Insinger de Beaufort N.V. The past year showed a net outflow of assets under management of 116 million. Our total assets under management amounted to 716 million as at 31 December 2012 compared to 775 million as at 31 December During 2012 the Company paid 30 million dividend to its shareholder. The financial position of the Company is solid with an equity of 8.2 million as at 31 December

9 Strategy & Outlook We currently have no plans to launch any new funds but the impact of changes to both international and local legislation (see above), as well as a change in strategy in our holding company will require us to make structural changes to some of our products and our business during the course of 2013 and We expect the markets to focus on the big rotation from bonds to equities in asset allocations in many investment mandates. Furthermore the eyes of investors will be on the prospect of an economic stabilisation or improvement in Europe from the second half onwards. We expect that these developments will have an important effect on the financial markets in Peter Yeo Gerwin Wijnia 26 April April 2013 Amsterdam Amsterdam 8

10 Financial statements Profit and loss account for the year ended 31 December 2012 EURO EURO Notes Income Net interest income Commission and management fee income Expenses Recharged salaries, pension and social security expenses Other expenses Result on ordinary activities before taxation ( ) Taxation on ordinary activities ( ) Result after taxation ( )

11 Balance sheet Notes as at December 2012 EURO EURO (before result appropriation) Assets Current assets Cash (Receivable from related parties) Receivables and accrued income Shareholder's equity and liabilities Shareholder's equity Issued and paid-up share capital Other reserves Result for the period ( ) Current liabilities Taxes and social securities Other liabilities Liabilities to related parties

12 Statement of changes in equity for the year ended 31 December 2012 Share Other Result for Capital Reserves the year Total Balance as at 1 January Appropriation of the result of prior year ( ) - Dividend ( ) ( ) Net profit Balance as at 31 December Balance as at 1 January Appropriation of the result of prior year ( ) 0 Dividend ( ) ( ) Net profit ( ) ( ) Balance as at 31 December ( )

13 Cash flow statement Cash flows from operating activities EURO EURO Net profit/loss ( ) Adjustment for: Taxation ( ) Net cash inflow from operating activities before changes in operating assets and ( ) Decrease/(Increase) in operating assets: Receivable from related parties Loans and advances to customers - ( ) Other assets (Decrease)/Increase in operating liabilities: Liabilities to related parties ( ) Other liabilities ( ) Net cash inflow/outflow from operating activities before ( ) payment of taxation Taxation received /(paid) ( ) Net cash inflow/outflow from operating activities after ( ) payment of taxation Cash flows from financing activities Dividend paid ( ) - Net decrease in cash and cash equivalents ( ) ( ) Cash and cash equivalents at beginning of year This relates to the bank cash account with Bank Insinger de Beaufort N.V. Net decrease in cash and cash equivalents ( ) ( ) Cash and cash equivalents at the end of year

14 Summary of significant accounting policies for the year ended 31 December 2012 General Insinger de Beaufort Asset Management N.V. ("the N.V.") is a 100% subsidiary of Bank Insinger de Beaufort N.V., Amsterdam. In 2010 BNP Paribas Wealth Management SA ("BNPPWM") and the former ultimate parent company IdB Holdings SA concluded the strategic transaction announced on 1 August As a result BNPPWM has a 63.02% interest in Bank Insinger de Beaufort N.V. as at 31 December The annual accounts of Insinger de Beaufort Asset Management N.V. are included in the consolidated annual accounts of Bank Insinger de Beaufort N.V. The annual accounts of Bank Insinger de Beaufort N.V. are included in the consolidated annual accounts of BNP Paribas S.A. The annual accounts of BNP Paribas S.A. can be found on The activities of Insinger de Beaufort Asset Management N.V. are not significantly impacted by seasonal influences. Restructuring In line with an organisational restructuring of the Insinger de Beaufort Group, a corporate restructuring of the N.V. was executed in June As a result, all non-fund management related activities of the N.V. were transferred to Bank Insinger de Beaufort N.V. This transfer was arranged by way of a legal split of the assets of the N.V. that were not related to the management of investment funds to a newly incorporated subsidiary company of Bank Insinger de Beaufort N.V. Subsequently, this newly incorporated company was merged into Bank Insinger de Beaufort N.V. by way of a legal merger. The restructuring process was completed on 20 June Accounting policies The annual accounts were prepared in accordance with the statutory provisions of Title 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. The annual accounts are denominated in euros. Basis of valuation of assets and liabilities General information Unless stated otherwise, assets and liabilities have been stated at amortised costs. The recorded value does not differ from the fair value. Maturity Assets and Liabilities The recorded assets and liabilities have a duration of no longer than one year. Foreign currency Assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Resulting gains or losses are recognised in the profit and loss account. Receivables and accrued income Receivables are valued against face value after deduction of provisions for bad debts. This item has a period shorter than one year. Basis for determination of results General Income and expenses are recorded in the year to which they relate. Fees and commissions Revenue from the various services the Company performs is recognised when the following criteria are met: persuasive evidence of an arrangement exists, the services have been rendered, the fee or commission is fixed or determinable and collectability is reasonably assured. Foreign exchange Income and expenses are translated at the rate of exchange ruling at the date of the transaction. Employee benefits The parent company, Bank Insinger de Beaufort N.V., has defined contribution plans and defined benefit plans in place. Reference is made to the annual report of Bank Insinger de Beaufort N.V. for information about the pension plans. Taxation The tax charge is calculated on the profit before taxes for the year under review in accordance with ruling tax legislation. The N.V. forms part of the fiscal unit headed by Bank Insinger de Beaufort N.V. As a member of the fiscal unit headed by Bank Insinger de Beaufort N.V., the N.V. is severally liable for the tax liability of the fiscal unit. The taxation recorded is the amount as if the Company was operating as a stand-alone entity. The receivables or payables relating to the taxation are due from/due to Bank Insinger de Beaufort N.V. The recorded tax is the effective tax. Cash flow statement The cash flow statement has been drawn up in accordance with the indirect method, making a distinction between cash flows from operating, investment and financing activities. Cash flows in foreign currency are converted at the average exchange rates during the financial year. With regard to cash flow from operations, the net profit is adjusted for income and expenses that did not result in receipts and payments in the same financial year and for changes in provisions and accrued and deferred items (other assets, accrued assets, other debts and accrued liabilities). Cash and cash equivalents consist of cash, deposits at the Dutch Central Bank, deposits at other banks and with Bank Insinger de Beaufort N.V. The current account with Bank Insinger de Beaufort N.V. is recorded under the item receivable from related parties. Accounting estimates Insinger de Beaufort Asset Management N.V. makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated. No significant changes have occurred compared to

15 Notes EURO EURO 1 Commission and management fee income Included under the line commission and management fee income are management fees, commissions received and paid, upfront fees and performance fees Included in the commission and management fee income is EUR 3,554,075 of commission paid to related party Bank Insinger de Beaufort N.V. (2011: EUR 3,163,768) and EUR 27,009 of commission paid to related party Bank Insinger de Beaufort N.V. UK Branch (2011: EUR 97,102). 2 Recharged salaries, pension and social security expenses Salaries Social security expenses Pension costs This relates to recharged personnel 3 Other expenses Recharges Information suppliers Other ) This relates to recharged expenses from the parent company Bank Insinger de Beaufort N.V. for various services received. These services are charged at a cost-plus basis. 2) Included in the other expenses is the remuneration of the auditor Deloitte (2011: PricewaterhouseCoopers). For a specification of the fees paid to the external auditor reference is made to the annual report of Bank Insinger de Beaufort N.V. 4 Receivable from related parties This relates to the following item: Bank account Bank Insinger de Beaufort N.V No interest is received on these bank accounts. 5 Receivables and accrued income This relates primarily to debtors and receivables from investment management. 14

16 Notes EURO EURO 6 Shareholder's equity Issued and paid-up share capital The authorised capital of EUR 350,000 consists of 350 shares with a nominal value of EUR 1,000. The issued and paid up share capital amounts to EUR 70,000 and consists of 70 shares with a nominal value of EUR 1,000. A dividend of EUR 30 mio has been paid to the parent company Bank Insinger de Beaufort N.V. 7 Other liabilities This item includes accrued expenses and deferred income. The remaining term is less than one year. 8 Liabilities to related parties The breakdown of this item is as follows: Bank Insinger de Beaufort N.V. Bank Insinger de Beaufort UK Branch

17 Notes 9 Related-party transactions Insinger de Beaufort Asset Management N.V. is controlled by Bank Insinger de Beaufort N.V. which owns 100% of the ordinary shares. A number of banking transactions are entered into with related parties in the normal course of business. The outstanding balances with related parties are separately disclosed in the balance sheet. 10 Employees Insinger de Beaufort Asset Management N.V. has no employees. A group company has recharged the total personnel costs of 9.3 FTEs (2011: 8.9). An amount of EUR 254,879 (2011: EUR 427,318) relates to directors, of which is variable EUR 18,938 (2011: EUR 70,000). These recharges are charged at cost. 11 Contingent liabilities As a member of the fiscal unity headed by Bank Insinger de Beaufort N.V, for both corporate income tax and value added tax, the N.V. is severally liable for the tax liability of the fiscal unity. Amsterdam, 26 April 2013 Directors P.D. Yeo G.S. Wijnia Supervisory Board R. Mooij P.G. Sieradzki 16

18 Other information Appropriation of the result Article 16 of the articles of association states: " 1. All profit as revealed in the adopted annual accounts is at the disposal of the general meeting. 2. The company is entitled to allocate payments to shareholders and other beneficiaries from the profit available for distribution only insofar as shareholders' equity exceeds the paid-up and called-up portion of the share capital augmented by statutorily retainable reserves. No distribution of profit can be made to the company itself on shares held by the company itself. 3. The general meeting is entitled, with due regard to the provisions laid down in paragraph 2 of this article and to Article 2:105 of the Civil Code, to make one or more interim dividends available for distribution. 4. Profit distribution takes place after the adoption of the annual accounts showing that such appropriation is permissible. " The proposed appropriation of the result for 2012 result is as follows: Net loss 2012 ( ) Dividend paid - Deducted from the other reserves ( ) Independent auditor's report The independent auditor's report can be found on the next page. 17