Annual Report LGT Bank Ltd., Vaduz

Transcription

1 Annual Report 2012 LGT Bank Ltd., Vaduz

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3 Contents Organizational structure 4 The business year in comparison 5 Annual report 6 Balance sheet 7 Off-balance sheet transactions 8 Profit and loss account 9 Appropriation of net profit 10 Flow of funds statement 11 Appendix 12 Remuneration report 17 Notes on the balance sheet 21 Notes on off-balance sheet transactions 35 Notes to the profit and loss account 37 Additional information 39 Report of the statutory auditor 43 International presence and imprint 44

4 Organizational structure as of April 2013 Board of Directors Thomas Piske, Chairman H.S.H. Prince Max von und zu Liechtenstein Olivier de Perregaux Jacques Engeli Internal Audit Daniel Hauser Executive Management Board Norbert Biedermann, Chairman Dr. Florian Dürselen* Ivo Klein Markus Werner Roland Schubert** Statutory Auditor PricewaterhouseCoopers AG, Zürich * until 31 March 2013 ** since 1 April Organizational structure as of April 2013

5 The business year in comparison Balance sheet Change absolute % Balance sheet total CHF m Shareholders funds (after profit distribution) CHF m Client deposit CHF m Due from clients CHF m Profit and loss account Net interest income CHF m Net commission and fee income CHF m Income from financial transactions CHF m Gross operating income CHF m Personnel expenses CHF m Operating expenses CHF m Result on ordinary business activity CHF m Taxes CHF m Profit for the year CHF m Client assets under administration Client assets under administration CHF m Personnel (full-time equivalents) Staff at year-end The business year in comparison 5

6 Annual report The year 2012 was characterized by an economic climate that remained unsettled, by continued low interest rates, and by further monetary easing on the part of the leading central banks. Despite the positive developments on the stock markets, many investors remained anxious, which is why client activity only increased slightly. The regulatory environment was also demanding, especially the preparation and implementation phases in connection with the various agreements on final withholding tax. In view of these overall conditions, LGT Bank Ltd. (formerly LGT Bank in Liechtenstein Ltd.) achieved a very pleasing result. Profit and loss account Net interest income increased by 3.9 percent in the year under review, while income from commission business and services was up by 17.2 percent as a result of an adjustment in fee structure and a higher asset base than in the prior year. Income from financial transactions rose by a striking CHF million. This growth can be primarily explained by market-related gains in the value of high-quality bonds held by LGT in its securities portfolio. Overall, gross operating income increased by CHF million or 39.4 percent in the 2012 business year. Operating expenses increased by 44.4 percent to CHF 97.1 million in the period under review. Personnel expenses rose by 72.9 percent. This was due to higher performance-related compensation resulting from the growth of the business. Business and office expenses climbed by 21 percent. Besides higher income, reduced losses were also posted in the year under review. As a consequence of this, profit for the year increased by 57.8 percent to CHF million. LGT Bank Ltd. remained extremely well capitalized at the end of The bank s equity capital ratio of 24.7 percent at the end of 2012 exceeded the legally required 8 percent of risk-weighted exposure by 208 percent. Ownership of LGT Bank Ltd. All shares of LGT Bank Ltd. are wholly owned by the LGT Group Foundation. No own shares were acquired or taken as pledge, either directly or indirectly. LGT Bank Ltd. is part of LGT Group, a globally active private banking and asset management group that manages and develops the individual Group companies in an integrated manner. The annual report of LGT Group gives further information on the financial capacity, expertise and development of LGT Group. Close to our clients LGT Bank Ltd. is part of a long-term-oriented, familyowned company with a clear focus on asset management for private and institutional investors. Our pleasing results in the year under review confirm the soundness of our strategic positioning and the attractiveness of our business model for demanding, security-conscious clients. Our proximity to our clients and our precise knowledge of their goals and needs form the basis of our individual advisory services. Of central importance is a close dialog between the client and his relationship manager. A deeper understanding of the needs and expectations of private investors has also been provided for us by a highly regarded study that we commissioned from the Johannes Kepler University in Linz on the investment behavior of high net worth private clients in Switzerland and Austria. Outlook We regard ourselves as being excellently positioned for the future, thanks to our international base, our superior investment expertise and the strong capital base of our parent company. We would like to express our gratitude to our employees for their outstanding commitment in the year under review and we would like to thank you, our clients, for the trust that you place in us. We look forward to remaining your Liechtenstein private bank for Client assets under administration rose by 17 percent to CHF 50.3 billion. This increase was due to performance-related appreciations, to new money inflows and to the transfer of client assets after the takeover of LGT Bank (Austria) Ltd. Thomas Piske Chairman of the Board of Directors 6 Annual report

7 Balance sheet Assets (TCHF) Appendix Change absolute % Cash and cash equivalents Debt instruments of public authorities and bills which are eligible for refinancing at central banks 3, Due from banks Due from clients 1, of which mortgage loans 1, Bonds and other fixed-interest bearing securities 2, 3, 4, 23, Equities and other non-fixedinterest securities 2, 3, 4, Participations 5, 7, 8, Shares in affiliated companies 5, 6, 8, 21, Intangible assets Tangible assets Other assets Accrued income and prepaid expenses Total assets Liabilities (TCHF) Due to banks Due to clients 16, Securitized liabilities 12, Other liabilities Accrued expenses and deferred income Provisions 13, 26, Subordinated liabilities Provisions for general banking risks Share capital Revenue reserves Profit carried forward Profit for the year Total liabilities Important This document is a non-binding English translation of the authoritative German annual report. Balance sheet 7

8 Off-balance sheet transactions Off-balance sheet (TCHF) Appendix Change absolute % Contingent liabilities 1, of which liabilities from guarantees and indemnity agreements as well as from the furnishing of collateral 1, Credit risks of which irrevocable commitments of which commitments to subscribe additional contributions for shares or other equity securities Derivative financial instruments Positive replacement values 30, Negative replacement values 30, Contract volume Fiduciary transactions Important This document is a non-binding English translation of the authoritative German annual report. 8 Off-balance sheet transactions

9 Profit and loss account Profit and loss account (TCHF) Appendix Change absolute % Interest earned 32, Interest paid Net interest income Equities and other non-fixed-interest securities Participations Shares in affiliated companies Current income from securities Commission income from lending business Commission income from securities and investment business Commission from other services Income from commission business and services Commission paid Net commission and fee income Income from financial transactions of which from trading Other ordinary income Gross operating income Personnel expenses Operating expenses Business expenses Gross profit Amortization of intangible assets and depreciation of tangible assets Other ordinary expenses 36, Value adjustments on receivables and funds allocated to provisions for contingent liabilities and credit risks Income from the release of value adjustments on receivables and from provisions for credit risks Amortization of participations, shares in affiliated companies and securities held as non-current assets Result on ordinary business activity Income tax Other taxes Income from the release of provisions for general banking risks Profit for the year Important This document is a non-binding English translation of the authoritative German annual report. Profit and loss account 9

10 Appropriation of net profit Appropriation of net profit proposal of the Board of Directors to the general meeting of shareholders (CHF) Profit for the year Profit carried forward Accumulated profit for the year Profit distribution Allocation to legal reserves Allocation to statutory reserves Allocation to other reserves Dividend on company capital Other profit distribution Profit carried forward Important This document is a non-binding English translation of the authoritative German annual report. 10 Appropriation of net profit

11 Flow of funds statement Flow of funds statement (TCHF) Source Application Source Application of funds of funds of funds of funds Flow of funds from operating result (internal financing) Profit for the year Depreciation of non-current assets Value adjustments and provisions Accrued income and prepaid expenses Accrued expenses and deferred income Other items 0 0 Previous-year dividend Balance Flow of funds from changes to non-current assets Participations Shares in affiliated companies Securities and precious metals as non-current assets Intangible assets Properties Other tangible assets Balance Flow of funds from banking operations Medium and long-term business (> 1 year) Due to banks Due to clients Bonds Medium-term notes Other liabilities Due from banks Due from clients (excl. mortgage loans) Mortgage loans Other receivables Short-term business ( 1 year) Due to banks Due to clients Other liabilities Due from banks Due from clients Trading positions in securities and precious metals Securities and precious metals held as current assets (excl. trading positions) Other receivables Liquid funds Cash and cash equivalents Balance Total Important This document is a non-binding English translation of the authoritative German annual report. Flow of funds statement 11

12 Appendix to the financial statement Notes on business activity General points LGT Bank in Liechtenstein Ltd. has changed its name in line with current linguistic usage. Since 3 January 2013 it has operated under the new name of LGT Bank Ltd., Vaduz. LGT Bank Ltd. with its registered office in Vaduz operates as a universal bank and securities trader. The company has branch offices in Hong Kong and Vienna. The branch in Vienna resulted from the takeover of LGT Bank (Austria) Ltd. in the fall of The bank maintains representative offices in Bahrain, Chur, Davos, Geneva, Lugano, Zurich and Montevideo. At 31 December 2012, LGT Bank Ltd. employed 665 persons on a full-time equivalent basis (574 in the previous year). In 2012, the average headcount amounted to 606 persons (486). As a universal bank, LGT Bank is active in the fields of wealth management (commission business and services) and trading, as well as in money market and lending business. Wealth management LGT Bank Ltd. is one of the leading international names in traditional private banking. The bank offers a broad spectrum of products and services that enable clients to choose the best solution to suit their needs. Most earnings from commission business and services stem, among other things, from wealth management. The commission business and services also represents the bank s main source of revenue. Money market business Within the scope of money market business, money in the form of call money, time deposits and fiduciary investments is deposited with the bank. Insofar as these funds are not required for lending business, they are placed with first-class banks, predominantly in Western Europe. These investments are being made in the form of easily convertible money market paper (certificates of deposit, Euro commercial papers). Despite its focus on private banking, interest margin business represents an important earnings stream for the bank. Trading business LGT Bank Ltd. operates trading transactions for clients and for its own account in securities, foreign exchange and precious metals. The bank trades for its own account in accordance with conservative principles. Derivative instruments are used mostly for hedging purposes. Lending business Most lending takes the form of Lombard loans and mortgages on residential property. Mortgages are granted primarily for financing properties in Liechtenstein and in Switzerland. Property financing in selected other countries is offered as part of integrated wealth management. Statement regarding the correctness of the financial statements and the annual report We confirm that the financial statements have been prepared in conformance with the prevailing accounting policies and standards, and that to our knowledge they present a true and fair picture of the assets and liabilities, as well as the financial, earnings and profitability position of the bank. The annual report contains all the required information about the course of business, the results of operations and the position of the bank. It provides an accurate picture of the actual situation, and outlines the most important risks and uncertainties. Thomas Piske Chairman of the Board of Directors Olivier de Perregaux Member of the Board of Directors 12 Appendix to the financial statement

13 Accounting policies Basic principles The annual accounts are prepared in accordance with the act and ordinance on banks and investment firms (Banking Act, Bank Ordinance) and applicable provisions of the Law on Persons and Companies (PGR). Consolidation LGT Bank Ltd. does not prepare consolidated accounts because the parent company, the LGT Group Foundation, is itself subject to the Banking Act and prepares annual accounts at Group level. The consolidated accounts are available for inspection at LGT Marketing & Communications at the offices of LGT Bank Ltd., Herrengasse 12, FL-9490 Vaduz, and can be accessed on the internet under Recording and reporting of transactions All business transactions are recorded in the company s accounts on the date of the transaction, and are valued from this date for the calculation of earnings. Foreign currency conversions Assets and liabilities denominated in foreign currencies are converted at the rates applicable on the balance sheet date. For income and expenditure, the rates applicable at the time of the transaction are used. Futures contracts are valued at residual maturity rates. The balance sheet and income statement positions of foreign operations are converted at the rates prevailing on the balance sheet date. Cash and cash equivalents, debt instruments of public authorities and bills which are eligible for refinancing at central banks, and claims on banks Cash and cash equivalents and claims on banks are reported in the balance sheet at par value. Registered money market claims, rescriptions and treasury certificates are reported inclusive of amortized discounts. Due from clients Non-impaired claims against clients are reported in the balance sheet at nominal value. Impaired claims, i.e. claims where it appears unlikely that the debtor will be able to meet his future obligations, are valued on an individual basis and the decrease in value is covered by specific value adjustments. Loans are rated as impaired at the latest if the contractual payments for capital and/or interest have been outstanding for more than 90 days. Interest which has been outstan ding for more than 90 days is regarded as overdue. Overdue interest and interest which is in danger of not being received, is no longer recovered but is instead allocated to value adjustments. The decrease in value is measured according to the difference between the book value of the claim and the probable recoverable amount, taking account of the estimated net present value on the balance sheet date. The net present value calculation is based on the current interest rate of the claim and the expected dates of the future incoming payments. Specific value adjustments are deducted directly from the corresponding claims. Conversion rates EUR USD GBP SGD HKD JPY In addition to the specific value adjustments, the bank makes portfolio value adjustments to cover any latent default risks present on the balance sheet date. In this connection, equivalent claims not entitled to specific value adjustments are grouped together (portfolios). A calculation model is then applied to each portfolio to determine the necessary portfolio value adjustments as soon as a latent credit risk is signaled by predetermined indicators. Portfolio value adjustments are offset against the corresponding claims. Changes to the portfolio value adjustments are entered in the profit and loss account. Impaired claims are reclassified as performing if the outstanding capital amounts and interest are again paid within the specified period under contractual agreements. Appendix to the financial statement 13

14 Trading positions comprising securities and precious metals Trading positions are valued at the market value on the balance sheet date. For positions which are not traded on a recognized exchange or for which there is no representative market, valuation is carried out at the lower of cost or market. Securities and precious metals held as current and non-current assets Current assets are valued at the lower of cost or market. Money market papers are measured at amortized cost. Fixed-interest bearing securities assigned to non-current assets are reported in the balance sheet at the repayment amount. Premiums and discounts which have not yet been amortized are reported as accrued items. Only those debt instruments which are kept until maturity are recorded as non-current assets. Precious metals held as current assets are valued at the market value on the balance sheet date. Precious metals held as non-current assets are reported at cost minus necessary value adjustments. Shares in affiliated companies and participations Shares in affiliated companies and participations are valued at cost, taking into account necessary value adjustments. Shares in infrastructure companies are also reported in the balance sheet under participations. These items are insignificant in capital and voting shares. Subordinated loans to affiliated companies are reported at the nominal value. Tangible assets Properties for the bank s own use are valued at cost, including any appreciating investments, less depreciation over a fixed useful life (generally 50 years). Any building work carried out in rented properties is depreciated over the term of the rental agreement. Other tangible assets such as machinery, furniture and vehicles are depreciated over their useful life (normally 3 5 years). Derivatives The positive and negative replacement values of all derivative financial instruments are reported under the positions other assets or other liabilities. The positive and negative replacement values are reported in the balance sheet as gross figures and valued at fair value. If interest rate business positions are hedged with derivatives, the difference between the fair value valuation and the accrual method is reported in the compensation account. Repurchase and reverse repurchase transactions (Repo transactions) Repo transactions are used to refinance and fund money market transactions. They are entered in the balance sheet as advances against collateral and cash contributions or with pledging of securities held on own account. Securities provided to serve as cover thus continue to be posted in the corresponding balance sheet positions securities received to serve as collateral are not reported in the balance sheet. Interest resulting from the transactions is posted as net interest income. Securities lending and borrowing transactions Securities lending is recorded at the value of cash deposits which have been received or made, including interest accrued. Securities which have been borrowed or accepted as collateral are only recorded in the balance sheet if the bank gains control of the contractual rights contained in these securities. Securities lent or provided as collateral are only taken off the balance sheet if the bank loses the contractual rights associated with these securities. The market values of the securities which have been either borrowed or lent are monitored daily so that additional collateral can be provided or requested where necessary. Fees arising from securities lending and repurchase transactions, which have been received or paid, are entered as interest earned and interest paid. 14 Appendix to the financial statement

15 Amounts due to banks and clients Amounts due to banks and clients are reported in the balance sheet at nominal values. Securitized liabilities Securitized liabilities in the form of certificates and medium-term notes are reported in the balance sheet at repayment amount. Bonds are reported at amortized cost using the effective interest method. Other liabilities Derivatives are reported at their fair value. The other items (settlement accounts, coupons etc.) are reported at their nominal value or the value of the repayment amount. Risk management The risk policy complies with internal requirements and guidelines, Liechtenstein Banking Law, FMA communiqué no. 10/2009 Risk-compatible capital adequacy requirements, risk management and control, the risk management guidelines of the Swiss Bankers Association and the principles of the Basel Committee on Banking Supervision. The Board of Directors has overall responsibility for implementing risk policy. Whereas the functions of risk management are allocated to operational units, the Executive Board is responsible for overall risk control. The independent Risk Controlling Department monitors compliance with the issued provisions. Subordinated debt Securitized subordinated debt is entered in the balance sheet at the value of the repayment amount. Non-securitized subordinated debt is reported at the nominal value. Value adjustments and provisions In accordance with prudent accounting practice, specific value adjustments and provisions are made for all identifiable risks. To cover latent default risks, which, as experience has shown, exist in a loan portfolio, portfolio value provisions are also made based on a systematic approach. Value adjustments are offset directly against the corresponding asset position. Provisions are formed for uncertain liabilities and for threatened losses which are likely or certain on the balance sheet reporting date, but whose level or date of occurrence is uncertain. Provisions are reported under the same name in the balance sheet. Taxes Taxes accruing to the result for the period under review are recorded as expenses in the accounting period in which the corresponding profit has occurred. For value adjustments and provisions recognized and entered against tax only, a provision for deferred taxes is made against the profit and loss account. Market risks The bank s business activities mean that it is mainly exposed to risks associated with interest rate changes and share price and foreign currency fluctuations. Whereas the Trading Committee is responsible for controlling risks resulting from trading activities, the Asset and Liability Committee is responsible for controlling the risks associated with changes in interest rates. These bodies restrict the risk positions by means of volume and sensitivity guideline limits. An analysis of the aggregate risks and the simulation of worst-case scenarios are carried out on a regular basis. Credit risks Lending activities are primarily carried out in the interbank market or in secured form in private client business. The bank pursues a conservative lending policy where the same guidelines are applied for both monetary loans and guarantee credits. By strict limitation of the default risks, the formation of cluster and country risks is also countered. An internal rating procedure is applied as an instrument for efficient risk management and risk-adjusted calculation of conditions. Detailed reporting ensures that the Executive Board is constantly informed about developing risks. Provisions for general banking risks Provisions for general banking risks are formed to hedge against latent risks in the bank s operating activities. Appendix to the financial statement 15

16 Operational risks The operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. LGT Group has established a Group-wide Operational Risk Committee which provides the Executive Board with support in the early identification of these risks and in implementing appropriate measures. These tasks are based on the principles stipulated in the Sound Practices for the Management and Supervision of Operational Risk issued by the Basel Committee on Banking Supervision. The set guidelines ensure that risk management takes suitable care of all risk categories. Derivative financial instruments Interest rate and currency swaps, forward rate agreements, futures and share options are regularly used to manage the bank s own risk positions. Within the framework of client business, foreign currency and precious metals options are used in addition to the aforesaid instruments. 16 Appendix to the financial statement

17 Remuneration report Remuneration principles LGT Group (LGT) is a family-run company built on the values of long-term commitment, stability and independence. LGT relies on the achievements, ideas and dedication of its employees to meet the needs of its clients and implement its business strategy. An appropriate, sustainable and market-based remuneration model forms a central part of the attractive and inspirational working environment that LGT offers. The remuneration model of LGT and LGT Bank Ltd. (the bank) is based on the following principles: n The compensation model supports the implementation of LGT s corporate values and objectives and takes the risk elements into consideration. n Excellent performance, outstanding dedication and successes achieved with integrity will be rewarded. n The compensation model is focused on long-term business success. n Success is evaluated on a long-term basis. Failure on the part of employees in key positions can also result in salary deductions. The total amount of remuneration paid by the bank is approved by the HRCC on the basis of a recommendation from the Board of Directors of the bank/ccb. The remuneration of the Executive Board is decided in accordance with the following process: Beneficiary Recommended Approved by by CEO of the bank Board of Directors HRCC Norbert Biedermann of the bank/ccb Members of the CEO of the bank Board of Directors Executive Board of the bank/ccb Dr. Florian Dürselen Ivo Klein Markus Werner LGT s fundamental salary policy guidelines are developed and monitored by the Human Resources Compensation Committee (HRCC) 1 of the Board of Trustees. At bank level, the implementation of the guidelines is guaranteed by the Compensation Committee of the Bank (CCB) 2. The CCB evaluates the implementation of the guidelines and the growth, suitability and composition of the overall compensation. It also determines whether the remuneration is based on the remuneration principles. In addition, it ensures that the current national regulatory requirements are met. It reports annually to the HRCC and submits changes to the HRCC for approval. 1 Dr. Rodolfo Bogni, Dr. Dominik Koechlin, Dr. Phillip Colebatch 2 H.S.H. Prince Max von und zu Liechtenstein, Thomas Piske Remuneration report 17

18 Components of the remuneration The compensation model for all employees of the bank consists of a fixed basic salary, a variable remuneration component and benefits. The following table gives a summary of the individual components of the remuneration. Characteristics Element Plan participants Brief description Purpose Fixed Cash Basic salary Employees of the bank Monthly market-based remuneration paid in 13 installments in accordance with the position and the contract of employment Reflects abilities, skills and responsibility Variable Cash incentive Bonus Employees of the bank Granted and paid annually. Amount of bonus depends on business success and individual performance in the business year in question Rewarding excellent performance, outstanding dedication and successes achieved with integrity Options Deferred incentive LTIS 1 Senior Management and employees in key positions Options on LGT dividend right certificates granted annually. Three-year blocked period, followed by exercise of the options within four years Reinforcing the long-term links between the interests of the employees, owners and clients. Possibility for plan participants to share in the value created by the company Benefits Benefits/ Fringe benefits Employees of the bank Pension, insurance, discounts on bank products, right to a sabbatical Providing competitive benefits 1 Long Term Incentive Scheme Basic salary The fixed monthly basic salary is paid in cash in 13 installments to compensate employees for performing the tasks relating to their position, for their personal abilities and skills and for any management responsibility that they have taken on. LGT regularly checks the basic salaries against market benchmarking studies to ensure that they are compatible with the market and makes any necessary changes. LGT does not grant any automatic salary increases. Variable remuneration As a basic principle, the total variable remuneration is based on the business success of LGT and the bank and reflects the bank s risk profile. In order to take account of exceptional developments, the final decision about the total amount is made during the approval process at the discretion of the HRCC. The variable remuneration can be paid directly as an annual cash bonus or can take the form of options as part of the Long Term Incentive Scheme (LTIS). The relationship between the direct and the deferred remuneration (LTIS and cash incentive) is determined on the basis of the employee s risk profile. In the case of members of the Executive Board and risk takers, the proportion of deferred remuneration is in line with the regulatory requirements. 18 Remuneration report

19 Parts of the variable remuneration can be subject to a forfeiture clause. Where appropriate, claims to variable remuneration (the cash bonus) may be forfeited, for example, in the case of extraordinary dismissal, serious breaches of the law and significant financial losses made by the Group. Cash incentive (bonus) All bank employees can benefit from the cash incentive. The individual bonus amount is linked to performance based on quantitative and qualitative criteria. The quantitative criteria relate to performance at Group, bank, business sector and individual level, which is measured against predefined target values. The qualitative criteria include risk behavior, compliance with the code of conduct, specialist expertise, social skills, personality and management ability. These are assessed on the basis of the skills in the employee qualification system (BSC). This approach allows the bank to reward excellent performance, outstanding dedication and successes achieved with integrity. Deferred incentive (LTIS Long Term Incentive Scheme) In order to enable employees who have specifically promoted the growth of the company by means of their position, their knowledge or their abilities to participate in the company s long-term success, LGT has set up an internal Long Term Incentive Scheme (LTIS) based on options. This reinforces the links between the interests of the employees and those of the owners, which is an important aspect of LGT s philosophy. The long-term structure of the LTIS rewards loyalty to the company and, at the same time, encourages a conscious and cautious approach to opportunities and risks for the benefit of the entire company and the cohesion of the Group. The LTIS allows plan participants to take part in the development of the economic value added, which is measured using a predefined formula. The calculation is based on the operating profit, the performance of the Princely Portfolio and the Group s capital costs. The LTIS options are granted annually and can be exercised after a three-year blocked period up to and including the seventh year (see chart). Benefits/Fringe benefits Benefits are another component of the LGT compensation model. These can take the form, for example, of a pension, insurance, discounts on bank products and the right to a sabbatical. LGT works with different pension companies that make payments into insurance products or funds under trusteeship. Overview of the LGT remuneration structure LTIS Blocked period Exercise period Cash incentive Basic salary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Time Remuneration report 19

20 Remuneration of the Executive Board The remuneration paid to the Executive Board is checked regularly by the CCB to ensure that it is appropriate. In order to reinforce the links between the interests of the management and the owners and to ensure that the management focuses on long-term added value, the members of the Executive Board receive variable remuneration, which is made up of the cash incentive and the LTIS. The conditions governing the cash incentive and the LTIS apply, while the bonus amount can be adjusted on a discretionary basis. Regulatory requirements The HRCC makes every effort to ensure that the remuneration policy of LGT and the bank and its practical application meet national and international requirements. For this purpose, the committee monitors developments and changes in the legal regulations that are relevant to LGT and the bank. The bank s remuneration system is subjected to an independent internal investigation by the CCB regularly, i.e. annually or as events dictate, to ensure that it fulfills all the regulations. Remuneration of the Executive Board Remuneration of the Executive Board 2012 (TCHF) Direct Deferred Cash payment Shares/sharelinked instruments Basic salary Bonus LTIS Entire EB In 2012 there were four members of the Executive Board. 20 Remuneration report

21 Notes on the balance sheet 1 Overview of collateral (TCHF) Mortgage- Other Without Total backed collateral collateral Advances Due from clients (excl. mortgage loans) Mortgage loans Residential properties Office and business premises Commercial and industrial premises Other Total Off-balance sheet transactions Contingent liabilities Irrevocable commitments Commitments to subscribe additional contributions for shares or other equity securities Total Impaired due amounts (TCHF) Gross amount Estimated realization Net amount Specific value due value of collateral due adjustments Trading positions (TCHF) Book value Cost Market value Trading positions comprising securities and precious metals Debt instruments listed (traded on a recognized exchange) unlisted of which own bonds and medium-term notes Equity paper of which own equity paper Precious metals Total of which eligible as security for central bank borrowings Notes on the balance sheet 21

22 3 Securities and precious metals Book value Cost Market value held as current assets (excl. trading positions) (TCHF) Debt instruments of which own bonds and medium-term notes Equity paper of which qualified participations (at least 10% of capital or votes) Precious metals Total of which eligible as security for central bank borrowings Securities and precious metals Book value Cost Market value held as non-current assets (TCHF) Debt instruments of which own bonds and medium-term notes of which valued according to the accrual method of which valued at the lower of cost or market Equity paper of which qualified participations (at least 10% of capital or votes) Precious metals Total of which eligible as security for central bank borrowings Notes on the balance sheet

23 5 Participations and shares in affiliated companies (TCHF) Participations with market value 0 0 without market value Total Shares in affiliated companies with market value 0 0 without market value Subordinated claims against affiliated companies Total Affiliated companies Business Share % share % share Business activity capital of votes of capital result TCHF Banks and investment firms LGT Bank (Cayman) Ltd., Grand Cayman bank USD LGT Bank (Ireland) Ltd., Dublin bank USD The capital of LGT Bank (Cayman) Ltd. is divided into ordinary shares and participating shares. Both categories of share have a par value of USD 1 per share. The participation comprises 100% of the ordinary shares, which have a preferential dividend. At 31 December 2012, the shares in banks and investment firms shown under the shares in affiliated companies item amounted to TCHF ( in the previous year). 7 Participations The companies listed under participations serve only as infrastructure and are insignificant in terms of the share of capital and votes. There are no shares in banks and investment firms under participations. Notes on the balance sheet 23

24 8 Statement of changes in non-current assets (TCHF) Cost Accumulated Book value depreciation/ write-ups Total participations (minority holdings) Total shares in affiliated companies Total securities and precious metals held as non-current assets Total intangible assets Properties Bank premises Other properties Other tangible assets Total tangible assets Fire insurance value of properties Fire insurance value of other tangible assets Intangible assets At 31 December 2012, this item included a capitalized software license amounting to TCHF 30. At 31 December 2011, there were no capitalized intangible assets. 10 Pledged or assigned assets and assets subject to reservation of ownership (TCHF) Pledged or assigned assets and assets subject to reservation of ownership, without securities lending or repurchase transactions Book value of pledged or assigned (assigned as collateral) assets Actual liabilities There are no assets subject to reservation of ownership. Securities lending and repurchase transactions 1 Receivables from cash deposits in connection with securities borrowing and reverse repurchase transactions Liabilities from cash deposits in connection with securities lending and repurchase transactions Own securities lent or provided as collateral within the scope of securities lending, borrowing transactions and transferred from repurchase transactions of which capable of being resold or pledged without restrictions Securities borrowed or accepted as collateral within the scope of securities lending, borrowing transactions and reverse repurchase agreements which are capable of being resold or further pledged without restrictions of which resold or further pledged securities Figures for the prior year have been adjusted on account of inaccurate values. The values given in the prior year s annual report were as follows in TCHF: line 1: 0, line 2: 0, line 3: , line 4: , line 5: unchanged and line 6: Notes on the balance sheet

25 Investments Disinvestments Reclassifications Write-ups Depreciation Book value Liabilities in respect of own pension funds (TCHF) Total liabilities Outstanding bonds Interest Year of issue Earliest Currency Par value at rate % redemption date TCHF LGT GIM Index Certificates 0.0 up to EUR LGT GIM Index Certificates II 0.0 up to EUR LGT GIM Index Certificates II/ EUR LGT GIM Index Certificates III 0.0 up to EUR LGT GIM Index Certificates IV 0.0 ongoing EUR 155 Crown Absolute Return Index Certificates 0.0 ongoing EUR Crown Absolute Return Index Certificates II 0.0 ongoing EUR Crown Alternative SV Index Certificates 0.0 ongoing EUR LGT GATS Index Certificates 0.0 ongoing EUR LGT M-Smart Allocator Index Certificates 0.0 ongoing EUR LGT EX EQ EM IU Leaders Certificates 0.0 ongoing USD LGT EX EQ GEM IU Index Certificates 0.0 ongoing USD LGT EX FI EM IU Index Certificates 0.0 ongoing USD LGT EX HF GIM IU Index Certificates 0.0 ongoing USD LGT EX HF GATS IU Index Certificates 0.0 ongoing USD % bond LGT Bank Ltd CHF For product explanations see appendix 45 on page 41 Notes on the balance sheet 25

26 13 Value adjustments and provisions/ Status Application provisions for general banking risks (TCHF) Value adjustments for default risks Specific value adjustments Flat-rate specific value adjustments (incl. such adjustments for country risks) 0 0 Portfolio value adjustments Provisions for contingent liabilities and credit risks Provisions for other business risks Provisions for taxes and deferred taxes Other provisions Total value adjustments and provisions less: Value adjustments Total provisions as per the balance sheet Provisions for general banking risks See also Point Share capital (TCHF) Total Number Capital Total Number Capital nominal of shares entitled to nominal of shares entitled to value a dividend value a dividend Share capital Total No authorized capital or contingent capital exists. Major shareholders and groups of shareholders linked by voting rights Nominal % Nominal % with voting right LGT Group Foundation The economic beneficiary of LGT Group Foundation is the Prince of Liechtenstein Foundation in Vaduz. The main economic beneficiary of the Prince of Liechtenstein Foundation is the reigning prince of Liechtenstein, H.S.H. Prince Hans-Adam II von und zu Liechtenstein. 26 Notes on the balance sheet

27 Recoveries, overdue interest, New allocations out of Releases to Status currency differences P/L account P/L account Equity statement (TCHF) Equity capital at the start of the business year Total equity capital at the end of the Share capital paid in business year (prior to profit distribution) Capital reserves 0 of which Legal reserves Share capital paid in Reserves for own shares 0 Capital reserves 0 Statutory reserves 0 Legal reserves Other reserves Reserves for own shares 0 Provisions for general banking risks Statutory reserves 0 Accumulated profit for the year Other reserves Total equity capital at the start of the Provisions for general banking risks business year (prior to profit distribution) Accumulated profit for the year /- capital increase/capital reduction 0 + premium 0 - Release of provisions for general banking risks 0 - dividend from the previous year s profit annual profit for the business year Total equity capital at the end of the business year (prior to profit distribution) Notes on the balance sheet 27

28 16 Maturity structure of assets, liabilities and provisions On demand Redeemable (TCHF) Assets Cash and cash equivalents Debt instruments of public authorities and bills which are eligible for refinancing at central banks 0 0 Due from banks Due from clients of which mortgage loans Trading positions comprising securities and precious metals Securities and precious metals held as current assets (excl. trading positions) Securities and precious metals held as non-current assets Other assets Total assets Liabilities and provisions Due to banks Due to clients Savings accounts Other liabilities to clients Securitized liabilities 0 0 Issued bonds 0 0 of which medium-term notes Other securitized liabilities 0 0 Provisions (excl. provisions for general banking risks) Subordinated liabilities 0 0 Other liabilities Total liabilities and provisions Of the securities reported in the balance sheet under bonds and other fixed-interest bearing securities, instruments amounting to TCHF ( in the previous year) will become due in Issued bonds due in 2013 amount to TCHF ( in the previous year). 28 Notes on the balance sheet

29 Due within Due between Due between Due after immobilized Total 3 months 3 to 12 months 12 months to 5 years 5 years Notes on the balance sheet 29

30 17.1 Claims on affiliated companies (TCHF) Due from banks Due from clients of which due from qualified participants (LGT Group Foundation) Bonds and other fixed-interest bearing securities Total Liabilities to affiliated companies (TCHF) Due to banks Due to clients of which due to qualified participants (LGT Group Foundation) Securitized liabilities 0 0 Subordinated liabilities 0 0 Total Loans to governing bodies (TCHF) Members of the Board of Directors Members of the Executive Board Total Transactions with closely associated persons Transactions with closely associated persons such as securities transactions, payment transactions, lending facilities and interest on deposits were made under the same terms and conditions as applicable to third parties. 30 Notes on the balance sheet

31 18 Breakdown of balance sheet according to domicile (TCHF) Domestic Abroad Domestic Abroad Assets Cash and cash equivalents Debt instruments of public authorities and bills which are eligible for refinancing at central banks Due from banks Due from clients (excl. mortgage loans) Mortgage loans Bonds and other fixed-interest bearing securities Equities and other non-fixed-interest securities Participations Shares in affiliated companies Intangible assets Tangible assets Other assets Accrued income and prepaid expenses Total assets Liabilities Due to banks Due to clients (excl. savings accounts) Savings accounts Securitized liabilities Other liabilities Accrued expenses and deferred income Provisions Subordinated liabilities Provisions for general banking risks Share capital Legal reserves Other reserves Profit carried forward Profit for the year Total liabilities Balance sheet items are broken down based on the client's domicile, mortgage loans by the location of the property. Notes on the balance sheet 31

32 19 Breakdown of assets according to country/country group TCHF % Country Liechtenstein Switzerland Europe excl. FL/CH North America Caribbean Latin America Africa Asia Oceania Total assets Breakdown of assets according to country/country group TCHF % Country Liechtenstein Switzerland Europe excl. FL/CH North America Caribbean Latin America Africa Asia Oceania Total assets Breakdown of balance sheet according to currencies (TCHF) Assets Cash and cash equivalents Debt instruments of public authorities and bills which are eligible for refinancing at central banks Due from banks Due from clients (excl. mortgage loans) Mortgage loans Bonds and other fixed-interest bearing securities Equities and other non-fixed-interest securities Participations Shares in affiliated companies Intangible assets Tangible assets Other assets Accrued income and prepaid expenses Total assets Delivery claims from forex spot, forex futures and forex options transactions Total assets Liabilities Due to banks Due to clients (excl. savings accounts) Savings accounts Securitized liabilities Other liabilities Accrued expenses and deferred income Provisions Subordinated liabilities Provisions for general banking risks Share capital Legal reserves Other reserves Profit carried forward Profit for the year Total liabilities Delivery liabilities from forex spot, forex futures and forex options transactions Total liabilities Net position per currency 32 Notes on the balance sheet

33 CHF EUR USD Other Total Notes on the balance sheet 33

34 21 Subordinated assets (TCHF) Balance sheet items Bonds and other fixed-interest bearing securities Shares in affiliated companies Total Debt instruments of public authorities and bills which are eligible for refinancing at central banks (TCHF) Debt instruments of public authorities Bills 0 0 Total Bonds and other fixed-interest bearing securities (TCHF) Money market paper of which from public sector issuers 0 0 of which from other issuers Bonds of which from public sector issuers of which from other issuers of which own bonds Total Due to clients (TCHF) Savings accounts Other liabilities Total Securitized liabilities (TCHF) Issued bonds of which medium-term notes Other securitized liabilities 0 0 Total Provisions (TCHF) Provisions for pensions and similar liabilities 0 0 Tax provisions Other provisions Total Notes on the balance sheet

35 Notes on off-balance sheet transactions 27 Contingent liabilities (TCHF) Credit guarantees and similar instruments of which for affiliated companies Performance guarantees and similar instruments of which for affiliated companies Irrevocable commitments and other contingent liabilities of which for affiliated companies 0 0 Total Commitment credits Liabilities from deferred payments are reported in the balance sheet. There were no acceptance liabilities or other commitment credits at 31 December 2012 and 31 December Fiduciary transactions (TCHF) Fiduciary investments at third-party banks Fiduciary investments at affiliated banks and investment firms 0 0 Fiduciary loans and other financial transactions in a fiduciary capacity 0 0 of which with affiliated companies 0 0 Total Notes on off-balance sheet transactions 35

36 30 Open derivative Trading instruments Hedging instruments financial instruments positive negative Contract positive negative Contract (TCHF) replacement replacement volume replacement replacement volume values values values values Interest rate instruments Forward contracts incl. FRAs Swaps Futures Options (OTC) Options (exchange-traded) Forex/precious metals Forward contracts Swaps Futures Options (OTC) Options (exchange-traded) Equity securities/indices Forward contracts Futures Options (OTC) Options (exchange-traded) Credit derivatives Credit default swaps Total return swaps First to default swaps Other credit derivatives Other Forward contracts Swaps Futures Options (OTC) Options (exchange-traded) Total At 31 December 2012 and 31 December 2011 there were no netting contracts. 36 Notes on off-balance sheet transactions

37 Notes to the profit and loss account 31 Offsetting of refinancing expenses with income from trading The refinancing expenses arising from trading positions are not offset against income from trading activities because this business activity does not have a significant influence on the bank s business result. 32 Interest income from fixed-interest securities (TCHF) Interest income from bonds Interest income from money market paper Total Income from trading transactions (TCHF) Reported in the P&L under Interest income from fixed-interest securities Interest income Interest income from credit derivatives Interest income Trading in foreign exchange and precious metals Income from financial transactions Securities trading Income from financial transactions Total Personnel expenses (TCHF) Wages and salaries Social security contributions, pensions and social assistance of which for pensions Other personnel expenses Subtotal Adjustment of liability for Long Term Incentive Scheme Total Emoluments to members of the Executive Board Operating expenses (TCHF) Occupancy expense Expenses for IT, machinery, furniture, vehicles and other equipment Other business expenses Total Notes to the profit and loss account 37

38 36 Losses, extraordinary items, provisions The losses reported under the item other ordinary expenses were incurred mainly in connection with guarantees provided for affiliated companies (see also Point 43). No extraordinary items were recorded in the years 2012 and The item provisions contains mainly tax provisions and provisions for contingent liabilities and credit risks, as well as provisions for other business risks (see also Points 13 and 26). 37 Income and expenses broken down according to office or branch (TCHF) FL Abroad FL Abroad Interest earned Interest paid Current income from securities Income from commission business and services Commission paid Income from financial transactions Other ordinary income Operating expenses Other ordinary expenses The break down is based on the domicile of the booking branch. 38 Notes to the profit and loss account

39 Additional information 38 Securities negotiable on the stock exchange (TCHF) Bonds and other fixed-interest bearing securities of which listed securities of which listed and treated as current assets of which listed and treated as non-current assets 0 0 of which unlisted securities Equities and non-fixed-interest securities of which listed securities of which listed and treated as current assets of which listed and treated as non-current assets 0 0 of which unlisted securities Participations of which listed securities 0 0 of which unlisted securities Shares in affiliated companies of which listed securities 0 0 of which unlisted securities Subordinated liabilities at Interest rate % Maturity Currency TCHF Medium-term note CHF 60 Medium-term note CHF 30 Medium-term note CHF 40 Medium-term note CHF 50 Medium-term note CHF 400 Medium-term note CHF 120 Medium-term note CHF 50 Medium-term note CHF 30 Medium-term note CHF 30 Medium-term note CHF 20 Medium-term note CHF 20 Medium-term note CHF 50 Medium-term note CHF 20 Total 920 Additional information 39

40 40 Other assets (TCHF) Positive replacement values of derivatives Compensation account Physical holdings of precious metals Other assets Total Other liabilities (TCHF) Negative replacement values of derivatives Coupons LTIS liability Clearing accounts Total Other ordinary income (TCHF) Compensation from Group companies Income from real estate Income from the release of provisions Remaining other income Total Compensation from the other Group companies forms the largest component of other ordinary income. This item comprises compensation for services, performed centrally by the bank on behalf of the Group companies. Income from real estate contains the net amounts (rent payments less maintenance costs) from the rental of bank-owned property to third parties and Group companies. 43 Other ordinary expenses (TCHF) Losses from receivables and guarantees Transaction losses Remaining other expenses Total See also Point Breakdown of client assets (TCHF) Client assets Client assets in own-managed funds (investment undertakings) Client assets under management Other client assets under administration Total client assets (including double counting) of which double counting Additional information

41 45 Outstanding bonds Product explanations for table 12 on page 25 The LGT GIM Index Certificates (EUR) are issued in the form of no-par-value promissory notes. These each relate to one of the LGT Premium Strategy GIM (EUR) indices compiled and administered by LGT Capital Management Ltd. These indices reflect the value development of a global, diversified portfolio that invests in various asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. Both traditional and alternative asset classes are included. Both tranches of the Crown Absolute Return (EUR) Index Certificates are no-par-value. These each relate to one of the Crown Absolute Return (EUR) indices calculated and administered by LGT Capital Partners Ltd. The two indices show the value development of a global, diversified portfolio that invests in alternative asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. The Crown Alternative SV (EUR) Index Certificates are no-par-value. They relate to the Crown Alternative SV (EUR) Index calculated and administered by LGT Capital Partners Ltd. This index shows the value development of a global, diversified portfolio that invests in various alternative asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. The LGT GATS Index Certificates are no-par-value and are made out to the bearer. They relate to the LGT Premium Strategy GATS (EUR) Index compiled and administered by LGT Capital Management Ltd. This index shows the value development of a global, diversified portfolio that invests in various asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. The LGT M-Smart Allocator (EUR) Index Certificates are no-par-value. They relate to the LGT M-Smart Allocator (EUR) Index calculated and administered by LGT Capital Partners Ltd. This index shows the value development of a global, diversified portfolio that invests in various asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. The LGT EX EQ EM IU Leaders (USD) Index Certificates are no-par-value. They relate to the LGT EX Equity Emerging Markets II (USD) Index calculated and administered by LGT Capital Management Ltd. This index shows the value development of a diversified portfolio that invests globally. The LGT EX EQ GEM IU (USD) Index Certificates are no-par-value. They relate to the LGT EX Equity Emerging Markets III (USD) Index calculated and administered by LGT Capital Management Ltd. This index shows the value development of a diversified portfolio that invests globally. The LGT EX FI EM IU (USD) Index Certificates are no-par-value. They relate to the LGT EX Fixed Income Emerging Markets II (USD) Index calculated and administered by LGT Capital Management Ltd. This index shows the value development of a diversified portfolio that invests globally. The LGT EX HF GIM IU (USD) Index Certificates are no-par-value. They relate to the LGT EX Hedge Funds GIM IU (USD) Index calculated and administered by LGT Capital Partners Ltd. This index shows the value development of a diversified portfolio that invests globally. The LGT EX HF GATS IU (USD) Index Certificates are no-par-value. They relate to the LGT EX Hedge Funds GATS IU (USD) Index calculated and administered by LGT Capital Partners Ltd. This index shows the value development of a diversified portfolio that invests globally. Additional information 41

42

43 Report of the statutory auditor Report of the statutory auditor 43

44 International presence of LGT Group and imprint Austria Bahrain China Germany Hong Kong Ireland Japan Liechtenstein Netherlands Singapore Switzerland United Arab Emirates United Kingdom United States of America Uruguay Salzburg Vienna Manama Beijing Frankfurt am Main Hong Kong Dublin Tokyo Vaduz Rotterdam Singapore Basel Berne Chur Davos Geneva Lausanne Lugano Pfäffikon Zurich Dubai London New York Montevideo Media Relations Legal Services Dispatch Christof Buri Phone Jacques Engeli Dr. Urs Gähwiler Phone Iris Dreier Phone International presence and imprint

45 Lilium candidum L. The period from 1740 to 1840 saw a burst of development that proved ground-breaking in the field of botanical illustrations. This period, which also saw botany itself become established as an independent branch of the natural sciences, is also regarded as the heyday of flower painting in Vienna. During his early career, Ferdinand Lukas Bauer ( ) was active as a plant painter for the Princes of Liechtenstein. He accompanied several expeditions during which he made a pictorial record of foreign flora and fauna. His brother Franz Andreas Bauer ( ) also worked as a flower painter for the Princely House of Liechtenstein as well as for the famous Viennese court botanist Nikolaus von Jacquin. Between 1776 and 1805, the so-called Codex Liechtenstein was created: a fourteen-volume illuminated compendium of manuscripts in which Ferdinand Lukas, Franz Andreas and their brother Joseph Anton Bauer ( ) and several other plant illustrators were involved. This work, held today by the Princely Collections, is among the most beautiful plant books that were made at the time. In the Codex s more than separate plant illustrations, the Bauer brothers created a synthesis of art and science: faithful in detail, yet obeying the high aesthetic requirements of art, they achieved the balancing act of uniting fidelity to nature on the one hand with their own art of interpretation on the other. LIECHTENSTEIN. The Princely Collections, Vaduz Vienna The illustrations in this report are details from Brothers Bauer, Lilium candidum L., c. 1778

46 LGT Bank Ltd. Herrengasse 12 FL-9490 Vaduz Phone Fax LGT Group is represented in more than 20 locations in Europe, Asia and the Middle East. A complete address list can be seen at en H GUT