Annual Report 2012 LGT Bank Ltd., Vaduz
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
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 2013 4 Organizational structure as of April 2013
The business year in comparison Balance sheet 2012 2011 Change absolute % Balance sheet total CHF m 23 947.2 23 495.9 451.3 1.9 Shareholders funds (after profit distribution) CHF m 1 916.9 1 836.0 80.9 4.4 Client deposit CHF m 13 639.4 12 404.5 1 234.9 10.0 Due from clients CHF m 10 089.5 8 265.4 1 824.0 22.1 Profit and loss account Net interest income CHF m 150.6 145.0 5.6 3.9 Net commission and fee income CHF m 175.7 149.9 25.8 17.2 Income from financial transactions CHF m 131.3 20.0 111.3 556.6 Gross operating income CHF m 485.0 348.0 137.1 39.4 Personnel expenses CHF m 170.7 98.7 72.0 72.9 Operating expenses CHF m 145.4 120.2 25.2 21.0 Result on ordinary business activity CHF m 154.8 102.4 52.3 51.1 Taxes CHF m 9.8 10.6-0.8-7.2 Profit for the year CHF m 144.9 91.8 53.1 57.8 Client assets under administration Client assets under administration CHF m 50 272.4 42 975.3 7 297.1 17.0 Personnel (full-time equivalents) Staff at year-end 665 574 91 15.9 The business year in comparison 5
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 111.3 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 137.1 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 144.9 million. LGT Bank Ltd. remained extremely well capitalized at the end of 2012. 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 2013. 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
Balance sheet Assets (TCHF) Appendix 31.12.2012 31.12.2011 Change absolute % Cash and cash equivalents 5 579 617 2 346 525 3 233 092 137.8 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 3, 22 23 603 206 108-182 505-88.5 Due from banks 16 4 824 349 7 357 129-2 532 780-34.4 Due from clients 1, 16 10 089 453 8 265 449 1 824 004 22.1 of which mortgage loans 1, 16 2 387 441 2 237 641 149 800 6.7 Bonds and other fixed-interest bearing securities 2, 3, 4, 23, 38 1 986 212 3 043 190-1 056 978-34.7 Equities and other non-fixedinterest securities 2, 3, 4, 38 1 255 2 650-1 395-52.6 Participations 5, 7, 8, 38 166 220-54 -24.5 Shares in affiliated companies 5, 6, 8, 21, 38 58 248 90 681-32 433-35.8 Intangible assets 9 30 0 30 0.0 Tangible assets 8 93 067 91 757 1 310 1.4 Other assets 40 1 257 119 2 050 380-793 261-38.7 Accrued income and prepaid expenses 34 050 41 785-7 735-18.5 Total assets 23 947 169 23 495 874 451 295 1.9 Liabilities (TCHF) Due to banks 16 6 633 555 6 790 244-156 689-2.3 Due to clients 16, 24 12 669 031 11 619 419 1 049 612 9.0 Securitized liabilities 12, 25 969 404 784 028 185 376 23.6 Other liabilities 41 900 920 1 642 047-741 127-45.1 Accrued expenses and deferred income 63 408 44 324 19 084 43.1 Provisions 13, 26, 36 84 496 86 260-1 764-2.0 Subordinated liabilities 39 920 1 005-85 -8.5 Provisions for general banking risks 13 644 500 644 500 0 0.0 Share capital 14 291 201 291 201 0 0.0 Revenue reserves 15 1 544 500 1 500 500 44 000 2.9 Profit carried forward 298 502-204 -40.6 Profit for the year 144 936 91 844 53 092 57.8 Total liabilities 23 947 169 23 495 874 451 295 1.9 Important This document is a non-binding English translation of the authoritative German annual report. Balance sheet 7
Off-balance sheet transactions Off-balance sheet (TCHF) Appendix 31.12.2012 31.12.2011 Change absolute % Contingent liabilities 1, 27 4 077 147 3 956 408 120 739 3.1 of which liabilities from guarantees and indemnity agreements as well as from the furnishing of collateral 1, 27 4 077 147 3 956 408 120 739 3.1 Credit risks 52 076 57 298-5 222-9.1 of which irrevocable commitments 1 47 164 51 810-4 646-9.0 of which commitments to subscribe additional contributions for shares or other equity securities 1 4 912 5 488-576 -10.5 Derivative financial instruments Positive replacement values 30, 40 765 328 1 453 594-688 266-47.3 Negative replacement values 30, 41 842 970 1 530 438-687 468-44.9 Contract volume 30 83 261 944 82 559 475 702 469 0.9 Fiduciary transactions 29 320 806 565 331-244 525-43.3 Important This document is a non-binding English translation of the authoritative German annual report. 8 Off-balance sheet transactions
Profit and loss account Profit and loss account (TCHF) Appendix 2012 2011 Change absolute % Interest earned 32, 33 260 908 254 903 6 005 2.4 Interest paid -110 331-109 925-406 0.4 Net interest income 150 577 144 978 5 599 3.9 Equities and other non-fixed-interest securities 0 0 0 0.0 Participations 755 657 98 14.9 Shares in affiliated companies 29 29 0 0.0 Current income from securities 784 686 98 14.3 Commission income from lending business 6 416 5 947 469 7.9 Commission income from securities and investment business 212 304 182 883 29 421 16.1 Commission from other services 15 375 10 095 5 280 52.3 Income from commission business and services 234 095 198 925 35 170 17.7 Commission paid -58 441-49 067-9 374 19.1 Net commission and fee income 175 654 149 858 25 796 17.2 Income from financial transactions 131 267 19 993 111 274 556.6 of which from trading 33 61 175 60 237 938 1.6 Other ordinary income 42 26 766 32 455-5 689-17.5 Gross operating income 485 048 347 970 137 078 39.4 Personnel expenses 34-170 655-98 696-71 959 72.9 Operating expenses 35-145 353-120 171-25 182 21.0 Business expenses -316 008-218 867-97 141 44.4 Gross profit 169 040 129 103 39 937 30.9 Amortization of intangible assets and depreciation of tangible assets -7 752-5 705-2 047 35.9 Other ordinary expenses 36, 43-6 159-19 834 13 675-68.9 Value adjustments on receivables and funds allocated to provisions for contingent liabilities and credit risks -1 027-1 433 406 28.3 Income from the release of value adjustments on receivables and from provisions for credit risks 671 310 361 116.5 Amortization of participations, shares in affiliated companies and securities held as non-current assets 0 0 0 0.0 Result on ordinary business activity 154 773 102 441 52 332 51.1 Income tax -9 837-10 597 760-7.2 Other taxes 0 0 0 0.0 Income from the release of provisions for general banking risks 0 0 0 0.0 Profit for the year 144 936 91 844 53 092 57.8 Important This document is a non-binding English translation of the authoritative German annual report. Profit and loss account 9
Appropriation of net profit Appropriation of net profit proposal of the Board of Directors 2012 2011 to the general meeting of shareholders (CHF) Profit for the year 144 935 835.66 91 844 177.80 Profit carried forward 297 646.42 501 600.62 Accumulated profit for the year 145 233 482.08 92 345 778.42 Profit distribution Allocation to legal reserves 0.00 0.00 Allocation to statutory reserves 0.00 0.00 Allocation to other reserves 80 000 000.00 44 000 000.00 Dividend on company capital 64 064 176.00 48 048 132.00 Other profit distribution 0.00 0.00 Profit carried forward 1 169 306.08 297 646.42 Important This document is a non-binding English translation of the authoritative German annual report. 10 Appropriation of net profit
Flow of funds statement Flow of funds statement (TCHF) 2012 2011 Source Application Source Application of funds of funds of funds of funds Flow of funds from operating result (internal financing) Profit for the year 144 936 91 844 Depreciation of non-current assets 7 752 5 705 Value adjustments and provisions 1 764 12 293 Accrued income and prepaid expenses 7 735 501 Accrued expenses and deferred income 19 084 7 137 Other items 0 0 Previous-year dividend 48 048 128 128 Balance 129 695 36 236 Flow of funds from changes to non-current assets Participations 54 0 0 0 Shares in affiliated companies 32 433 0 1 0 Securities and precious metals as non-current assets 0 13 0 36 Intangible assets 0 30 0 0 Properties 1 034 9 220 0 3 111 Other tangible assets 0 876 0 1 359 Balance 23 382 4 505 Flow of funds from banking operations Medium and long-term business (> 1 year) Due to banks 28 3 333 Due to clients 700 121 Bonds 236 381 164 728 Medium-term notes 5 476 25 992 Other liabilities 12 205 32 795 Due from banks 75 255 110 460 Due from clients (excl. mortgage loans) 90 211 97 367 Mortgage loans 6 794 97 764 Other receivables 14 377 37 805 Short-term business ( 1 year) Due to banks 156 661 1 018 112 Due to clients 1 048 912 1 743 033 Other liabilities 785 489 778 113 Due from banks 2 608 035 690 310 Due from clients 1 726 999 354 637 Trading positions in securities and precious metals 161 896 290 327 Securities and precious metals held as current assets (excl. trading positions) 1 197 827 1 682 612 Other receivables 660 053 189 507 Liquid funds Cash and cash equivalents -3 233 092-2 108 863 Balance -153 077 40 741 Total 0 0 40 741 40 741 Important This document is a non-binding English translation of the authoritative German annual report. Flow of funds statement 11
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 2012. 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
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 www.lgt.com. 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 31.12.2012 31.12.2011 1 EUR 1.2068 1.2151 1 USD 0.9148 0.9356 1 GBP 1.4863 1.4545 1 SGD 0.7488 0.7218 1 HKD 0.1180 0.1205 100 JPY 1.0570 1.2158 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
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
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
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
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
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
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
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 1 940 852 32 1 In 2012 there were four members of the Executive Board. 20 Remuneration report
Notes on the balance sheet 1 Overview of collateral (TCHF) Mortgage- Other Without Total backed collateral collateral Advances Due from clients (excl. mortgage loans) 6 348 6 659 346 1 036 318 7 702 012 Mortgage loans Residential properties 1 910 010 0 0 1 910 010 Office and business premises 212 720 0 0 212 720 Commercial and industrial premises 143 429 0 0 143 429 Other 121 282 0 0 121 282 Total 31.12.2012 2 393 789 6 659 346 1 036 318 10 089 453 31.12.2011 2 246 640 4 439 077 1 579 732 8 265 449 Off-balance sheet transactions Contingent liabilities 243 141 098 3 935 806 4 077 147 Irrevocable commitments 42 789 1 985 2 390 47 164 Commitments to subscribe additional contributions for shares or other equity securities 0 0 4 912 4 912 Total 31.12.2012 43 032 143 083 3 943 108 4 129 223 31.12.2011 52 046 142 230 3 819 430 4 013 706 Impaired due amounts (TCHF) Gross amount Estimated realization Net amount Specific value due value of collateral due adjustments 31.12.2012 11 040 3 691 7 349 7 349 31.12.2011 11 329 3 912 7 417 7 417 2 Trading positions (TCHF) Book value Cost Market value 31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011 Trading positions comprising securities and precious metals Debt instruments 63 479 105 135 63 251 105 189 63 479 105 135 listed (traded on a recognized exchange) 63 479 105 135 63 251 105 189 63 479 105 135 unlisted 0 0 0 0 0 0 of which own bonds and medium-term notes 5 285 0 5 283 0 5 285 0 Equity paper 1 255 2 650 1 200 2 679 1 255 2 650 of which own equity paper 0 0 0 0 0 0 Precious metals 443 147 561 992 443 147 561 992 443 147 561 992 Total 507 881 669 777 507 598 669 860 507 881 669 777 of which eligible as security for central bank borrowings 0 170 0 170 0 170 Notes on the balance sheet 21
3 Securities and precious metals Book value Cost Market value held as current assets 31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011 (excl. trading positions) (TCHF) Debt instruments 1 946 336 3 144 163 1 969 450 3 197 195 1 959 896 3 147 342 of which own bonds and medium-term notes 0 0 0 0 0 0 Equity paper 0 0 0 0 0 0 of which qualified participations (at least 10% of capital or votes) 0 0 0 0 0 0 Precious metals 0 0 0 0 0 0 Total 1 946 336 3 144 163 1 969 450 3 197 195 1 959 896 3 147 342 of which eligible as security for central bank borrowings 1 098 541 1 537 565 1 103 934 1 554 391 1 102 859 1 538 525 4 Securities and precious metals Book value Cost Market value held as non-current assets 31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011 (TCHF) Debt instruments 0 0 0 0 0 0 of which own bonds and medium-term notes 0 0 0 0 0 0 of which valued according to the accrual method 0 0 0 0 0 0 of which valued at the lower of cost or market 0 0 0 0 0 0 Equity paper 0 0 0 0 0 0 of which qualified participations (at least 10% of capital or votes) 0 0 0 0 0 0 Precious metals 954 941 1 791 1 791 954 941 Total 954 941 1 791 1 791 954 941 of which eligible as security for central bank borrowings 0 0 0 0 0 0 22 Notes on the balance sheet
5 Participations and shares in affiliated companies (TCHF) 31.12.2012 31.12.2011 Participations with market value 0 0 without market value 166 220 Total 166 220 Shares in affiliated companies with market value 0 0 without market value 17 067 17 067 Subordinated claims against affiliated companies 41 181 73 614 Total 58 248 90 681 6 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 600 000 100 83 8 572 LGT Bank (Ireland) Ltd., Dublin bank USD 50 000 000 75 25 3 936 The capital of LGT Bank (Cayman) Ltd. is divided into 500 000 ordinary shares and 100 000 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 57 068 (57 068 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
8 Statement of changes in non-current assets (TCHF) Cost Accumulated Book value depreciation/ 31.12.2011 write-ups Total participations (minority holdings) 220 0 220 Total shares in affiliated companies 90 681 0 90 681 Total securities and precious metals held as non-current assets 1 791-850 941 Total intangible assets 0 0 0 Properties Bank premises 187 288-101 548 85 740 Other properties 11 616-6 789 4 827 Other tangible assets 1 591-401 1 190 Total tangible assets 200 495-108 738 91 757 Fire insurance value of properties 198 514 Fire insurance value of other tangible assets 21 079 9 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) 31.12.2012 31.12.2011 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 360 518 681 343 Actual liabilities 43 584 374 876 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 1 135 885 1 633 033 Liabilities from cash deposits in connection with securities lending and repurchase transactions 0 452 484 Own securities lent or provided as collateral within the scope of securities lending, borrowing transactions and transferred from repurchase transactions 0 315 369 of which capable of being resold or pledged without restrictions 0 315 369 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 1 527 957 1 993 281 of which resold or further pledged securities 280 301 414 128 1 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: 561 857, line 4: 561 857, line 5: unchanged and line 6: 310 976. 24 Notes on the balance sheet
Investments Disinvestments Reclassifications Write-ups Depreciation Book value 31.12.2012 0-54 0 0 0 166 0-32 433 0 0 0 58 248 0 0 0 13 0 954 30 0 0 0 0 30 9 220 0 92 0-6 227 88 825 0-1 034-92 0-947 2 754 876 0 0 0-578 1 488 10 096-1 034 0 0-7 752 93 067 200 066 2 344 11 Liabilities in respect of own pension funds (TCHF) 31.12.2012 31.12.2011 Total liabilities 16 121 21 384 12 Outstanding bonds Interest Year of issue Earliest Currency Par value at 31.12.2012 rate % redemption date TCHF LGT GIM Index Certificates 0.0 up to 2004 28.2.2012 EUR 61 704 LGT GIM Index Certificates II 0.0 up to 2006 30.6.2014 EUR 166 445 LGT GIM Index Certificates II/2 0.0 2006 31.3.2016 EUR 41 826 LGT GIM Index Certificates III 0.0 up to 2008 31.7.2016 EUR 105 420 LGT GIM Index Certificates IV 0.0 ongoing 31.3.2018 EUR 155 Crown Absolute Return Index Certificates 0.0 ongoing 30.11.2013 EUR 5 628 Crown Absolute Return Index Certificates II 0.0 ongoing 31.7.2014 EUR 1 486 Crown Alternative SV Index Certificates 0.0 ongoing 30.6.2017 EUR 57 606 LGT GATS Index Certificates 0.0 ongoing 30.9.2014 EUR 54 895 LGT M-Smart Allocator Index Certificates 0.0 ongoing 31.8.2017 EUR 57 415 LGT EX EQ EM IU Leaders Certificates 0.0 ongoing 31.12.2027 USD 1 797 LGT EX EQ GEM IU Index Certificates 0.0 ongoing 31.12.2027 USD 1 993 LGT EX FI EM IU Index Certificates 0.0 ongoing 31.12.2027 USD 11 029 LGT EX HF GIM IU Index Certificates 0.0 ongoing 31.12.2027 USD 14 614 LGT EX HF GATS IU Index Certificates 0.0 ongoing 31.12.2027 USD 8 034 2% bond LGT Bank Ltd. 2012 2.7.2019 2.0 2012 02.07.2019 CHF 249 138 For product explanations see appendix 45 on page 41 Notes on the balance sheet 25
13 Value adjustments and provisions/ Status Application provisions for general banking risks (TCHF) 31.12.2011 Value adjustments for default risks Specific value adjustments 7 417-52 Flat-rate specific value adjustments (incl. such adjustments for country risks) 0 0 Portfolio value adjustments 6 620 0 Provisions for contingent liabilities and credit risks 402 0 Provisions for other business risks 4 151-1 683 Provisions for taxes and deferred taxes 80 409-8 847 Other provisions 1 298-23 Total value adjustments and provisions 100 297-10 605 less: Value adjustments -14 037 Total provisions as per the balance sheet 86 260 Provisions for general banking risks 644 500 See also Point 36 14 Share capital 31.12.2012 31.12.2011 (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 291 201 2 912 008 291 201 291 201 2 912 008 291 201 Total 291 201 2 912 008 291 201 291 201 2 912 008 291 201 No authorized capital or contingent capital exists. Major shareholders and groups of 31.12.2012 31.12.2011 shareholders linked by voting rights Nominal % Nominal % with voting right LGT Group Foundation 291 201 100.0 291 201 100.0 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
Recoveries, overdue interest, New allocations out of Releases to Status currency differences P/L account P/L account 31.12.2012 53 564-633 7 349 0 0 0 0-27 463 0 7 056-2 0-38 362-46 521-330 2 613 0 10 264-1 712 80 114-1 133 0 1 407-23 11 945-2 713 98 901-14 405 84 496 0 0 644 500 15 Equity statement (TCHF) Equity capital at the start of the business year Total equity capital at the end of the Share capital paid in 291 201 business year (prior to profit distribution) 2 625 435 Capital reserves 0 of which Legal reserves 218 500 Share capital paid in 291 201 Reserves for own shares 0 Capital reserves 0 Statutory reserves 0 Legal reserves 218 500 Other reserves 1 282 000 Reserves for own shares 0 Provisions for general banking risks 644 500 Statutory reserves 0 Accumulated profit for the year 92 346 Other reserves 1 326 000 Total equity capital at the start of the Provisions for general banking risks 644 500 business year (prior to profit distribution) 2 528 547 Accumulated profit for the year 145 234 +/- capital increase/capital reduction 0 + premium 0 - Release of provisions for general banking risks 0 - dividend from the previous year s profit -48 048 + annual profit for the business year 144 936 Total equity capital at the end of the business year (prior to profit distribution) 2 625 435 Notes on the balance sheet 27
16 Maturity structure of assets, liabilities and provisions On demand Redeemable (TCHF) Assets Cash and cash equivalents 5 579 617 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 0 0 Due from banks 1 283 036 0 Due from clients 20 987 1 183 475 of which mortgage loans 3 702 137 537 Trading positions comprising securities and precious metals 507 881 Securities and precious metals held as current assets (excl. trading positions) 1 922 733 Securities and precious metals held as non-current assets 954 0 Other assets 46 767 0 Total assets 31.12.2012 9 361 975 1 183 475 31.12.2011 8 038 947 1 241 612 Liabilities and provisions Due to banks 4 826 275 0 Due to clients 6 142 515 5 610 167 Savings accounts 0 766 023 Other liabilities to clients 6 142 515 4 844 144 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) 84 496 0 Subordinated liabilities 0 0 Other liabilities 121 619 0 Total liabilities and provisions 31.12.2012 11 174 905 5 610 167 31.12.2011 9 420 442 5 800 592 Of the securities reported in the balance sheet under bonds and other fixed-interest bearing securities, instruments amounting to TCHF 698 089 (1 209 710 in the previous year) will become due in 2013. Issued bonds due in 2013 amount to TCHF 36 345 (92 826 in the previous year). 28 Notes on the balance sheet
Due within Due between Due between Due after immobilized Total 3 months 3 to 12 months 12 months to 5 years 5 years 5 579 617 23 603 0 0 0 23 603 1 994 623 1 037 654 414 193 94 843 4 824 349 6 789 236 604 584 1 255 582 235 589 10 089 453 982 301 236 010 801 843 226 048 2 387 441 507 881 1 922 733 0 0 0 0 954 616 289 177 186 38 452 27 824 92 061 998 579 9 423 751 1 819 424 1 708 227 358 256 92 061 23 947 169 9 258 505 2 957 490 1 625 323 281 769 92 228 23 495 874 1 419 112 383 986 4 182 0 6 633 555 725 637 187 504 3 208 0 12 669 031 0 0 0 0 766 023 725 637 187 504 3 208 0 11 903 008 10 967 25 378 618 078 314 981 969 404 10 967 25 378 618 078 314 981 969 404 10 967 19 750 71 282 28 221 130 220 0 0 0 0 0 0 0 0 0 84 496 400 50 470 0 920 577 357 212 147 42 580 10 625 964 328 2 733 473 809 065 668 518 325 606 0 21 321 734 3 657 448 1 325 046 554 714 209 086 0 20 967 328 Notes on the balance sheet 29
17.1 Claims on affiliated companies (TCHF) 31.12.2012 31.12.2011 Due from banks 994 378 1 123 841 Due from clients 5 076 577 4 158 443 of which due from qualified participants (LGT Group Foundation) 451 333 1 280 500 Bonds and other fixed-interest bearing securities 52 074 104 853 Total 6 123 029 5 387 137 17.2 Liabilities to affiliated companies (TCHF) 31.12.2012 31.12.2011 Due to banks 5 475 295 4 999 503 Due to clients 446 037 554 444 of which due to qualified participants (LGT Group Foundation) 776 815 Securitized liabilities 0 0 Subordinated liabilities 0 0 Total 5 921 332 5 553 947 17.3 Loans to governing bodies (TCHF) 31.12.2012 31.12.2011 Members of the Board of Directors 5 301 4 871 Members of the Executive Board 4 591 4 501 Total 9 892 9 372 17.4 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
18 Breakdown of balance sheet according to domicile (TCHF) 31.12.2012 31.12.2011 Domestic Abroad Domestic Abroad Assets Cash and cash equivalents 5 572 007 7 610 2 346 490 35 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 0 23 603 0 206 108 Due from banks 1 841 275 2 983 074 2 014 598 5 342 531 Due from clients (excl. mortgage loans) 1 086 135 6 615 877 1 841 448 4 186 360 Mortgage loans 2 229 659 157 782 2 119 737 117 904 Bonds and other fixed-interest bearing securities 5 400 1 980 812 112 3 043 078 Equities and other non-fixed-interest securities 1 255 0 2 650 0 Participations 66 100 66 154 Shares in affiliated companies 40 000 18 248 70 000 20 681 Intangible assets 0 30 0 0 Tangible assets 86 308 6 759 90 485 1 272 Other assets 671 263 585 856 1 240 648 809 732 Accrued income and prepaid expenses 12 077 21 973 13 129 28 656 Total assets 11 545 445 12 401 724 9 739 363 13 756 511 Liabilities Due to banks 4 368 232 2 265 323 4 294 859 2 495 385 Due to clients (excl. savings accounts) 5 664 248 6 238 760 5 688 415 5 233 630 Savings accounts 644 308 121 715 592 060 105 314 Securitized liabilities 969 404 0 784 028 0 Other liabilities 426 115 474 805 700 284 941 763 Accrued expenses and deferred income 39 106 24 302 33 059 11 265 Provisions 84 229 267 86 072 188 Subordinated liabilities 920 0 1 005 0 Provisions for general banking risks 644 500 0 644 500 0 Share capital 291 201 0 291 201 0 Legal reserves 218 500 0 218 500 0 Other reserves 1 326 000 0 1 282 000 0 Profit carried forward 298 0 502 0 Profit for the year 144 936 0 91 844 0 Total liabilities 14 821 997 9 125 172 14 708 329 8 787 545 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
19 Breakdown of assets according to 31.12.2012 country/country group TCHF % Country Liechtenstein 2 876 871 12.0 Switzerland 8 668 574 36.2 Europe excl. FL/CH 4 900 047 20.5 North America 315 700 1.3 Caribbean 5 704 945 23.8 Latin America 114 255 0.5 Africa 27 074 0.1 Asia 950 365 4.0 Oceania 389 338 1.6 Total assets 23 947 169 100.0 Breakdown of assets according to 31.12.2011 country/country group TCHF % Country Liechtenstein 3 823 051 16.3 Switzerland 5 916 312 25.2 Europe excl. FL/CH 7 772 407 33.1 North America 757 548 3.2 Caribbean 3 959 506 16.9 Latin America 77 224 0.3 Africa 19 259 0.1 Asia 786 847 3.3 Oceania 383 720 1.6 Total assets 23 495 874 100.0 20 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
CHF EUR USD Other Total 5 563 920 14 355 534 808 5 579 617 0 0 0 23 603 23 603 1 068 592 897 322 1 901 350 957 085 4 824 349 3 744 803 1 963 449 1 128 506 865 254 7 702 012 2 230 618 40 344 6 984 109 495 2 387 441 1 076 730 100 280 180 622 628 580 1 986 212 330 0 925 0 1 255 166 0 0 0 166 57 068 0 0 1 180 58 248 0 30 0 0 30 86 308 4 821 0 1 938 93 067 786 886 22 064 127 448 042 1 257 119 16 264 3 853 5 866 8 067 34 050 14 631 685 3 046 518 3 224 914 3 044 052 23 947 169 18 092 638 15 810 545 33 476 294 11 396 162 78 775 639 32 724 323 18 857 063 36 701 208 14 440 214 102 722 808 1 224 016 1 738 420 2 381 831 1 289 288 6 633 555 3 102 909 2 879 691 4 018 379 1 902 029 11 903 008 729 437 31 324 5 262 0 766 023 369 076 562 860 37 468 0 969 404 879 221 15 497 3 424 2 778 900 920 49 666 5 491 1 941 6 310 63 408 82 037 494 1 830 135 84 496 920 0 0 0 920 644 500 0 0 0 644 500 291 201 0 0 0 291 201 218 500 0 0 0 218 500 1 326 000 0 0 0 1 326 000 298 0 0 0 298 144 936 0 0 0 144 936 9 062 717 5 233 777 6 450 135 3 200 540 23 947 169 23 681 555 13 634 048 30 242 495 11 262 278 78 820 376 32 744 272 18 867 825 36 692 630 14 462 818 102 767 545-19 949-10 762 8 578-22 604-44 737 Notes on the balance sheet 33
21 Subordinated assets (TCHF) 31.12.2012 31.12.2011 Balance sheet items Bonds and other fixed-interest bearing securities 5 709 25 683 Shares in affiliated companies 41 180 73 614 Total 46 889 99 297 22 Debt instruments of public authorities and bills which are eligible 31.12.2012 31.12.2011 for refinancing at central banks (TCHF) Debt instruments of public authorities 23 603 206 108 Bills 0 0 Total 23 603 206 108 23 Bonds and other fixed-interest bearing securities (TCHF) 31.12.2012 31.12.2011 Money market paper 129 719 410 781 of which from public sector issuers 0 0 of which from other issuers 129 719 410 781 Bonds 1 856 493 2 632 409 of which from public sector issuers 88 486 48 527 of which from other issuers 1 768 007 2 583 882 of which own bonds 5 285 0 Total 1 986 212 3 043 190 24 Due to clients (TCHF) 31.12.2012 31.12.2011 Savings accounts 766 023 697 374 Other liabilities 11 903 008 10 922 045 Total 12 669 031 11 619 419 25 Securitized liabilities (TCHF) 31.12.2012 31.12.2011 Issued bonds 969 404 784 028 of which medium-term notes 130 220 124 508 Other securitized liabilities 0 0 Total 969 404 784 028 26 Provisions (TCHF) 31.12.2012 31.12.2011 Provisions for pensions and similar liabilities 0 0 Tax provisions 80 114 80 409 Other provisions 4 382 5 851 Total 84 496 86 260 34 Notes on the balance sheet
Notes on off-balance sheet transactions 27 Contingent liabilities (TCHF) 31.12.2012 31.12.2011 Credit guarantees and similar instruments 646 529 542 021 of which for affiliated companies 539 298 448 305 Performance guarantees and similar instruments 3 430 092 3 413 936 of which for affiliated companies 3 381 862 3 361 708 Irrevocable commitments and other contingent liabilities 526 451 of which for affiliated companies 0 0 Total 4 077 147 3 956 408 28 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 2011. 29 Fiduciary transactions (TCHF) 31.12.2012 31.12.2011 Fiduciary investments at third-party banks 320 806 565 331 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 320 806 565 331 Notes on off-balance sheet transactions 35
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 0 0 0 0 0 0 Swaps 0 0 0 17 621 50 616 2 008 322 Futures 0 0 0 0 0 0 Options (OTC) 19 19 1 539 0 0 0 Options (exchange-traded) 0 0 0 0 0 0 Forex/precious metals Forward contracts 617 318 650 151 66 890 693 89 399 101 228 10 574 940 Swaps 0 0 0 0 0 0 Futures 0 0 0 0 0 0 Options (OTC) 38 053 38 038 3 267 054 0 0 0 Options (exchange-traded) 0 0 0 0 0 0 Equity securities/indices Forward contracts 123 123 1 765 0 0 0 Futures 0 0 0 0 0 0 Options (OTC) 461 461 52 935 0 0 0 Options (exchange-traded) 0 0 0 0 0 0 Credit derivatives Credit default swaps 832 832 68 705 0 0 0 Total return swaps 0 0 0 0 0 0 First to default swaps 0 0 0 0 0 0 Other credit derivatives 0 0 0 0 0 0 Other Forward contracts 0 0 0 0 0 0 Swaps 1 502 1 502 395 991 0 0 0 Futures 0 0 0 0 0 0 Options (OTC) 0 0 0 0 0 0 Options (exchange-traded) 0 0 0 0 0 0 Total 31.12.2012 658 308 691 126 70 678 682 107 020 151 844 12 583 262 31.12.2011 1 432 532 1 473 564 80 139 190 21 062 56 874 2 420 285 At 31 December 2012 and 31 December 2011 there were no netting contracts. 36 Notes on off-balance sheet transactions
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) 2012 2011 Interest income from bonds 43 071 56 432 Interest income from money market paper 5 810 10 398 Total 48 881 66 830 33 Income from trading transactions (TCHF) Reported in the P&L under 2012 2011 Interest income from fixed-interest securities Interest income 1 697 1 640 Interest income from credit derivatives Interest income 108 0 Trading in foreign exchange and precious metals Income from financial transactions 58 940 59 605 Securities trading Income from financial transactions 2 235 632 Total 62 980 61 877 34 Personnel expenses (TCHF) 2012 2011 Wages and salaries 118 806 83 442 Social security contributions, pensions and social assistance 17 610 14 696 of which for pensions 15 868 13 501 Other personnel expenses 7 922 5 058 Subtotal 144 338 103 196 Adjustment of liability for Long Term Incentive Scheme 26 317-4 500 Total 170 655 98 696 Emoluments to members of the Executive Board 1 824 2 633 35 Operating expenses (TCHF) 2012 2011 Occupancy expense 15 988 9 714 Expenses for IT, machinery, furniture, vehicles and other equipment 49 521 45 052 Other business expenses 79 844 65 405 Total 145 353 120 171 Notes to the profit and loss account 37
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 2011. 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 2012 2011 according to office or branch (TCHF) FL Abroad FL Abroad Interest earned 259 190 1 718 254 893 10 Interest paid -108 451-1 880-109 893-32 Current income from securities 784 0 686 0 Income from commission business and services 203 495 30 600 193 737 5 188 Commission paid -56 233-2 208-49 064-3 Income from financial transactions 129 998 1 269 19 936 57 Other ordinary income 23 191 3 575 31 817 638 Operating expenses -246 752-69 256-199 963-18 904 Other ordinary expenses -6 513-109 -19 646-188 The break down is based on the domicile of the booking branch. 38 Notes to the profit and loss account
Additional information 38 Securities negotiable on the stock exchange (TCHF) 31.12.2012 31.12.2011 Bonds and other fixed-interest bearing securities 1 986 212 3 043 190 of which listed securities 1 604 392 2 312 484 of which listed and treated as current assets 1 604 392 2 312 484 of which listed and treated as non-current assets 0 0 of which unlisted securities 381 820 730 706 Equities and non-fixed-interest securities 1 255 2 650 of which listed securities 1 255 1 170 of which listed and treated as current assets 1 255 1 170 of which listed and treated as non-current assets 0 0 of which unlisted securities 0 1 480 Participations 166 220 of which listed securities 0 0 of which unlisted securities 166 220 Shares in affiliated companies 17 067 17 067 of which listed securities 0 0 of which unlisted securities 17 067 17 067 39 Subordinated liabilities at 31.12.2012 Interest rate % Maturity Currency TCHF Medium-term note 2.0625 2015 CHF 60 Medium-term note 2.3750 2014 CHF 30 Medium-term note 2.3750 2016 CHF 40 Medium-term note 2.4375 2014 CHF 50 Medium-term note 2.5625 2013 CHF 400 Medium-term note 2.5625 2014 CHF 120 Medium-term note 2.5625 2016 CHF 50 Medium-term note 2.6875 2013 CHF 30 Medium-term note 2.7500 2014 CHF 30 Medium-term note 2.8125 2013 CHF 20 Medium-term note 2.8125 2014 CHF 20 Medium-term note 2.9375 2016 CHF 50 Medium-term note 2.9375 2017 CHF 20 Total 920 Additional information 39
40 Other assets (TCHF) 31.12.2012 31.12.2011 Positive replacement values of derivatives 765 328 1 453 594 Compensation account 28 248 29 174 Physical holdings of precious metals 444 101 562 932 Other assets 19 442 4 680 Total 1 257 119 2 050 380 41 Other liabilities (TCHF) 31.12.2012 31.12.2011 Negative replacement values of derivatives 842 970 1 530 438 Coupons 105 351 LTIS liability 30 551 4 513 Clearing accounts 27 294 106 745 Total 900 920 1 642 047 42 Other ordinary income (TCHF) 2012 2011 Compensation from Group companies 19 962 21 822 Income from real estate 5 130 3 906 Income from the release of provisions 330 0 Remaining other income 1 344 6 727 Total 26 766 32 455 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) 2012 2011 Losses from receivables and guarantees 4 334 18 393 Transaction losses 579 781 Remaining other expenses 1 246 660 Total 6 159 19 834 See also Point 36 44 Breakdown of client assets (TCHF) 31.12.2012 31.12.2011 Client assets Client assets in own-managed funds (investment undertakings) 14 386 810 13 098 285 Client assets under management 10 143 395 12 685 399 Other client assets under administration 25 742 147 17 191 601 Total client assets (including double counting) 50 272 352 42 975 285 of which double counting 7 612 413 6 326 527 40 Additional information
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
Report of the statutory auditor Report of the statutory auditor 43
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 +423 235 23 03 christof.buri@lgt.com Jacques Engeli Dr. Urs Gähwiler Phone +423 235 28 72 jacques.engeli@lgt.com Iris Dreier Phone +423 235 20 51 iris.dreier@lgt.com 44 International presence and imprint
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 (1760 1826) 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 (1758 1840) 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 (1756 1831) 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 2 700 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
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