je connais mon banquier je connais mon banquier Annual Report

Transcription

1 Annual Report 2003

2 La BCGE célèbre son retour dans les chiffres noirs. L Agefi La Banque Cantonale regagne ses lettres de noblesse comme établissement de proximité. Tribune de Genève La BCGE gagne du crédit en Europe. Tribune de Genève Genfer Kantonalbank wieder in der Gewinnzone. Neue Zürcher Zeitung A l heure où la BCGE franchit le seuil de l équilibre et confirme son assainissement, le satellite Anker est maintenant remis en direction. 24 Heures

3 The je connais BCGE mon banquier Group je connais mon in banquier brief The BCGE the Bank for all Genevese A comprehensive portfolio of diverse activities The mission of the Banque Cantonale de Genève is to contribute to the development of Canton Geneva and the region by offering all their residents, companies and institutions banking services developed or freely chosen by the Bank, which are competitive and in line with the features and capacity of a regional banking establishment. Fulfilling its role as a multi-purpose regional bank, the BCGE provides a comprehensive range of global banking services adapted to the requirements of its customers. This is shown by its portfolio of diverse activities for corporate and institutional customers (right column opposite) and for private individuals (left column opposite). Each activity includes several lines of business under one heading. 1 Law on the Banque Cantonale de Genève, art.1, para. 1 Correspondance Telephone banking e-commerce Debit cards Currency exchange Principal Secondary France Discretionary Non-discretionary Safekeeping accounts Ordinary Medium-term Investments Lombard Leasing Credit cards Personal loans Banking transactions Mortgages Wealth management Savings Financing for individuals Financial services Real-estate financing Asset management Cash Management Corporate financing Global commodity finance Net banking BCGE Business link Forex Derivatives Money transfers Private and institutional investors Promotion Construction Real-estate services Industrial Commercial Long term Short term Large corporations SMB Mass-market companies International Trade Finance 2003 results at a glance Public authorities financing and management Uncovered Mortgage-backed The BCGE Group has cleared the third hurdle of its restructuring plan, which was adopted in 2000 with the aim of returning to net profits in This new financial condition opens up exciting prospects for the Bank in such strategic areas as customer confidence, refinancing terms, future investment potential and the company s solid standing in the face of risks and competitive pressure. The BCGE Group s consolidated gross profits totalled CHF 76.1 million, an increase of 8.2%, making steady progress for the third consecutive year. Consolidated net profit moved into the black, the real highlight of the year. It gained CHF 35 million on the 2002 figure to reach CHF 7.2 million. Calendar General Meeting of Shareholders 4 May 2004 First half 2004 results 31 August 2004 Annual results 2004 March 2005 General Meeting of Shareholders May 2005 Payments to public authorities 2003 Commission paid to the canton for the savings guarantee CHF 2.6 million Amount paid to the canton for the simple guarantee on the financing of the Fondation de Valorisation CHF 1.0 million Interest paid on savings accounts Total paid in 2003 Information BCGE Group Quai de l Ile 17 CH 1204 Geneva Switzerland INDIVIDUALS Advisory Service CORPORATE Capital markets Club CFO CHF 41.3 million Tel: +41 (0) Fax: +41 (0) A BCGE Annual Report 2003 Financial institutions Mr François Julia Tel: +41 (0) Fax: +41 (0) francois.julia@bcge.ch Investor relations and institutional communication Mr Nicolas de Saussure Tel: +41 (0) Fax: +41 (0) actionnaires@bcge.ch

4 the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief BCGE key figures Return to profit Balance sheet in CHF millions Total balance sheet 14,561 15,450 17,144 18,632 20,533 19,326 17,901 Loans to clients 12,021 12,857 14,377 15,468 17,041 15,584 14,867 Client deposits and borrowings 13,254 13,607 13,775 14,372 15,882 15,672 14,459 Shareholders equity ,071 1,064 Results in CHF millions Interest income Commission income Trading income Other ordinary income Total income Operating expenses Gross profit Depreciation, value adjustments, provisions and losses, extraordinary income Group result Personnel (full-time jobs) Ratios in % Shareholders equity / total balance sheet Gross profit / shareholders equity Expenses / income Data per bearer share in CHF Shareholders equity Gross profit Net profit Dividends Stock market data History of bearer share price (in CHF) - high low at Market capitalisation (in CHF millions) Number of shares (in thousands) 5, , , , , , ,575.5 Equity capital / number of shares ( ) B BCGE Annual Report 2003

5 the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief the BCGE Group in brief Regional and customer spread The BCGE Group has four entities: The BCGE Group operates in the Geneva, Swiss and French markets. With its four entities, it provides banking services to private individuals, companies and institutional customers. The Group has a strong presence in Geneva and generates additional and selective growth in its neighbouring catchment areas of Switzerland and France. In total, the Group employs 829 people in Geneva, Lausanne, Zurich, Lugano, Lyon and Annecy. The BCGE Group comprises the following entities: The mission of the Banque Cantonale de Genève is to contribute to the development of Canton Geneva and the region by offering all their residents, companies and institutions banking services developed or selected by the Bank, which are competitive and in line with the features and capacity of a regional banking establishment. The Bank is listed on the Swiss stock market SWX (BCGE). Founded in 1993, with its Head Office in Lyon and a branch in Annecy, the Banque Cantonale de Genève (France) SA is a wholly owned subsidiary of the Banque Cantonale de Genève. It offers corporate and realestate financing for its corporate customers, as well as asset management for its private customers. It extends the regional influence of the BCGE Group in France. The Bank s balance sheet totals CHF million, and it employs 28 people. Further details on pages 15 and 78. Synchrony Asset Management SA has been a wholly owned subsidiary of the Banque Cantonale de Genève since It provides sophisticated asset-management solutions and services, integrating quantitative management, aimed at institutional investors. The assets under management currently amount to CHF billion, and it employs 15 staff. Further details on pages 12 and 78. Anker Bank SA, a wholly owned subsidiary of the Banque Cantonale de Genève since 1997, contributes to the development of the BCGE Group s management of private assets on the Swiss market. With its head office in Zurich, it has branches in Lausanne, Lugano and Geneva. Its balance sheet totals CHF million, and it employs 60 staff. Further details on pages 16 and 78. The BCGE Group offers its services and looks after customers in Geneva, Switzerland and France In Geneva Individuals resident and/or working in the canton Companies of all sizes Public bodies Commodity trading companies International clients in the financial sector Lyon Geneva Annecy Lausanne In France The business community of the Rhône-Alpes region Long-established partners operating in France Individuals for wealth-management Zurich Lugano In Switzerland International and Swiss clients in wealth-management Institutional clients BCGE Annual Report 2003 C

6 I know my banker In 2003, the Banque Cantonale de Genève launched a new institutional communication campaign on the theme I know my banker (je connais mon banquier). This campaign underlines the personal rapport the Bank fosters with its customers, as well as the closeness and background of their relationship. It s a relationship that extends far beyond the narrow bounds of current business or investment issues. It is based on the knowledge, understanding and the common values that have developed over the years among those who live and work in Geneva. We are also building this relationship with those who visit Geneva regularly and who love the city and its surroundings. At the BCGE they will find a bank intent on nurturing their roots and their feeling of belonging. Today almost 4,500 are taking part in the revival and growth of their general bank in Geneva. To illustrate the point, your Bank has decided to feature its employees in its 2003 Annual Report with portraits of seven of them and the rest in a sequence of photos. Although anonymous, this frieze of faces follows you as you read the report, reminding you that the Banque Cantonale de Genève is, above all, personalised par excellence. To conclude, we are delighted to be able to celebrate this year the 10th anniversary of the Banque Cantonale de Genève. A new chapter is opening in excellent circumstances, as you will discover in this annual report. This is the spirit behind the Bank s objective in wanting each of its customers to get to know at least one member of the staff. If this can be achieved, then everybody will have a point of reference, a banker whom they can easily contact. In this way our Bank guarantees being accessible and available to its customers, many of whom have also become shareholders in the Bank. Blaise Goetschin Chief Executive Officer Nicolas de Saussure Institutional Communications Manager 2 BCGE Annual Report 2003

7 Contents annual report 2003 * Message from the Chairman of the Board of Directors 4 Message from the Chief Executive Officer 6 Review of the Business Units 12 Finance and Risk Management Retail Services and Branch Network Corporate Private Banking Credit Control and Administration Logistics and Information Technology Structure and organisation of the BCGE Group 20 Principal committees Organisation chart at Board of Directors Review of Geneva s economy in Review of the financial markets in Collaboration of the BCGE Group 30 Snapshots of Report of the group auditors 34 Consolidated balance sheet Balance sheet BCGE Group Profit-and-loss account BCGE Group Cash flow statement BCGE Group Statement of shareholders equity BCGE Group Notes to the consolidated financial statements 2003 Corporate governance information on the BCGE 63 Auditors Report 80 Parent company accounts Balance sheet before allocation Profit-and-loss account Statement of shareholders equity Notes to the financial statements Parent company Statutes of 15 May 2001 Banque Cantonale de Genève 90 BCGE, a banking group serving its region 96 BCGE, list of publications 98 *This English annual report is a free translation of the French official version. BCGE Annual Report

8 Message from the Chairman of the Board of Directors dollar despite the weakening of the franc against the euro. These negative factors which have marked 2003 should not, however, mask the more favourable indicators, the first being the beginnings of a recovery in the United States. Still fragile and threatened by the size of public deficits, this upturn will certainly be at the centre of debate in the run-up to the American presidential elections. The firmness of that recovery will govern the return of growth in Europe. Dear Shareholders, Customers, Staff and Partners of BCGE, 2003 unfortunately centred on the conflict in the Middle East. Apart from its geopolitical consequences, its development helped dissipate the climate of considerable uncertainty clouding western economies before the outbreak of hostilities. Nevertheless, this new hand of cards has not solved everything, far from it. The European economy continued to fluctuate between a state of lethargy and the hope of recovery, its cohesion hit by public deficits slipping out of control in France and Germany. The Swiss economy, which was showing signs of slight recession during the first half of 2003, has been severely affected by the fall of the Geneva s struggling economy The Geneva economy has failed to stand out in an environment that lacks any clear trend. It is significant to note that the uptake rate of commercial loans has remained at an all-time low, indicative of the caution shown by analysts during This restraint has been particularly evident in the construction industry, which is also suffering from over-capacity and from the lack of a genuine long-term investment policy. Furthermore, it has to be pointed out that unemployment continued to rise a trend not likely to be reversed in the short term, as a considerable number of job cuts have been announced both in the public and private sectors. There are, however, some positive points, starting with the upward trend on the stock markets, which, after three difficult years, has stimulated the banking sector. There are also encouraging signs of exports recovering, with order books starting to fill nicely. Finally, the success of Geneva Airport is worth underlining, with the increase in passenger numbers and the opening of new connections boosting Geneva s influence and development. So there would appear to be few reasons to be overjoyed in the short term, with business in general remaining sluggish. However, in line with most analysts, we can reasonably expect business activity to move ahead from the second half of BCGE Annual Report 2003

9 message from the Chairman of the Board of Directors message from the Chairman of the Board of Directors message from the Chairman of the Board of Directors message from the Chairman of the Board of Directors message from the Chairman of the Board of Directors message from the Chairman of the Board of Directors The BCGE reaches its objectives In this very flat environment, the Banque Cantonale de Genève has reached the objectives fixed in its strategic plan and budget, notably the return to profit. Indeed, in 2003, the Banque Cantonale de Genève started reaping the benefits of the in-depth reforms undertaken during the two previous years. Despite fierce competition, the Bank has been able to maintain, and even gain, market share in the Geneva economy, and substantially increase savings deposits. As planned, the balance sheet total has been reduced compared to 2002, due to the encouragingly rapid repayment by the Fondation de Valorisation of the Bank s loans. Corporate governance: unresolved issues 2003 has also seen continuous study into the adoption of a corporate governance programme, with the support of external consultants and in consultation with the head of Geneva s Department of Finance, Mrs Martine Brunschwig Graf. By 2006, pending any legislative amendments, it would appear that the following issues must be clarified and adapted to banking-sector requirements: - The size of the Board of Directors and the allocation of seats between shareholder groups; - Maintaining the Bank Committee or replacing it with permanent ad hoc Board committees; - The authority regarding loans; - The precise role of the Control Committee. To close this message, I address my sincere thanks to the Republic of Geneva, in particular to Mrs Martine Brunschwig Graf, and to the cantonal government for their constant support. I would also like to thank the BCGE shareholders, both public and private, who, I am pleased to note, are more and more numerous a sign of renewed trust. My thanks also go to all our customers for their commitment and loyalty to our institution, and to all my colleagues on the Board of Directors for their constant and valuable support. Finally, I wish to thank the general managers of the BCGE and the entire staff who this year passed a critical milestone and who have proved themselves to be worthy of the high expectations of the Bank s shareholders and of the people of Geneva. Michel Mattacchini Chairman of the Board of Directors A lot of preparatory work has been done. It is now a question of implementing this major project to modernise the Board. This reform comes at an excellent time and in conjunction with a substantial transformation of the company. The BCGE, renewed, is becoming a powerful tool serving the economy and interests of Geneva. BCGE Annual Report

10 Message from the Chief Executive Officer Re-invigorated business activity since 2001, including the launch of several new asset-management products for private, institutional, corporate and public-authority clients, is generating regular and constantly rising revenue-flow. The Group has stuck to its ambitious programme of modernisation and improved productivity. Its mainstays are staff training and certification, IT upgrading, and a bolder marketing approach. The impact of these investments on operating costs is under control and the resulting improvements will pay back in the long term. The good results for 2003 confirm the success of the strategy and the recovery schedule. They represent a significant step for customers, shareholders and staff alike. It is also good news for the people of Geneva. This upturn brings with it a continued increase in the number of individual shareholders (+21% to 4,443 on ) and the share price has climbed sharply (CHF 172 on , up 23%). BCGE celebrates its 10th anniversary with a return to profit The BCGE Group has cleared the third hurdle of its restructuring plan, adopted in 2000 with the aim of returning to net profits in This new financial condition opens up exciting prospects for the Bank in such strategic areas as customer confidence, refinancing terms, future investment potential and the company s solid standing in the face of risks and competitive pressure. The year s financial objectives were met. On 31 December 2003, Group figures showed: a consolidated net profit (CHF 7.2 million) an increase in consolidated gross profit (+8.2% at CHF 76 million) a constant rise in operating income since 2001 (+5.9% in 2003 at CHF 276 million) a satisfactory capital-adequacy ratio (126.7%) sound interest margins (CHF 171 million) an increase in commission income (+8.2% at CHF 73 million) substantial modernisation and productivity investments. Results in line with 2000 plan: on schedule, as promised Phase 3: Return to net pro 2. Qualitative rev growth 3. Improved produc Phase 2: Revived busine 2. Cut in structural c 3. Positive economic Phase 1: Equity coverag 2. Balance sheet restru 3. Operational profitability e 6 BCGE Annual Report 2003

11 message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer Sharp rise in gross and net profits The BCGE Group s consolidated gross profits totalled CHF 76.1 million, an increase of 8.2%, making steady progress for the third consecutive year. Consolidated net profit moved back into the black, the real highlight of the year. It gained CHF 35 million on 2002 s figure to reach CHF 7.2 million. 2003: back to profit 90 in CHF millions Improved liability structure and a cut in refinancing costs The increase in savings deposits with the BCGE, already a feature in 2002, continued during 2003 to reach a record CHF 5 billion (+8.5%). In a fiercely competitive market, this performance attests to the Bank s appeal and to the regained trust of its customers. With liabilities towards other banks continuing to decrease and now standing at a low of CHF 482 million, the Bank can secure advantageous refinancing costs and thereby reinforce its independence and competitiveness in this strategic area Gross result Net result ,2 Improved refinancing structure 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, ,307 4,308 3,251 2,512 18,632 17,144 15,450 in CHF millions 5,022 4, , ,000 5,000 4,000 3,000 2,000 1,000 0 Group revenue continued to rise to CHF million (+5.9%). Interest income held up well (CHF million) despite the drop in total assets (see below) and the exceptionally low interest rates. Other revenue sources increased substantially, particularly income from financial trading (+44.7% at CHF 18.4 million), commission income (+8.2% at CHF 72.7 million) and other ordinary income (+87.5% at CHF 13.5 million). This sustained improvement in profitability indicators therefore bolstered the good first-half results, which prompted the Zurich Cantonal Bank (ZKB) to revise its BCGE rating upwards to A in August Balance sheet total Liabilities to banks Savings deposits Decrease in total assets but interest margin holds up Total assets amounted to CHF billion, a drop of CHF 888 million. Two factors are mainly responsible: The Group s focus on business with optimal returns and limited risk. The major reduction of the loan to the Fondation de Valorisation ( CHF 814 million), by much more than the average amount budgeted in the 10-year plan. BCGE Annual Report

12 message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer These figures also point to the success of the institutional restructuring mechanisms implemented in 2000 and allay fears that the reduction of the Fondation de Valorisation debt was too slow. Customer and mortgage loan receivables (excluding the Fondation de Valorisation) remained stable at CHF 8.6 billion. This is a good performance considering the tough competition on the mortgage market and the limited use of credit lines by companies in a flat economic environment. Finally, the savings-deposits to mortgagecover ratio has increased to 83.4% (+7.2%). Expressed in terms of interest productivity, the margin on assets (including the loan to the Fondation de Valorisation) has progressed from 0.85% in 2000 to more than 1.1% on , despite the constant balance sheet reduction over the period. Steady improvement in interest margins 1.50% in CHF millions 25, % 20,000 Stable business assets reflect a cautious risk policy 1.10% 15,000 20,000 15,000 10,000 6,855 6,241 5,081 4,916 3,532 3,220 in CHF millions 6,077 6,020 4,229 3,415 2,552 2,586 8,000 7,000 6,000 5,000 4,000 3, % 10, % 5, % Interest margin on assets Average balance sheet 5,000 2, , Balance sheet total Mortgage loans 17,144 1,000 Fondation de Valorisation Customer loans The interest margin remained flat at CHF 171 million, a noteworthy performance given the exceptionally low market rates and the balance sheet reduction. 15,450 14,561 0 Increased profitability from asset management The volume of funds under management slipped marginally in 2003 ( 3.8% to CHF 7.2 billion), which is explained by greater selectivity regarding customers and the focus on asset-management mandates. Nevertheless, it should be noted that these net figures mask the substantial progress made by the new asset-management mandates (+9.6%), particularly by the spectacularly successful BCGE Best of. These mandates performed very satisfactorily in 2003 with, for example, returns of 5.2% (defensive risk profile in CHF), 9.66% (balanced risk profile in CHF) and 14.12% (dynamic risk profile in CHF). 8 BCGE Annual Report 2003

13 message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer BCGE Best of : a success story since 2001 Assets and number of mandates Assets under management in CHF millions Performance 108% 106% 104% 102% 100% 98% 96% 94% 92% 90% 88% 0 June 01 Oct. 01 Aug. 01 Dec. 01 Oct. 01 Feb. 02 Dec. 01 Apr. 02 June 02 Feb. 02 Aug. 02 Apr. 02 Oct. 02 Assets managed Number of mandates June 02 Dec. 02 Aug. 02 Feb. 03 Oct. 02 Apr. 03 Dec. 02 June 03 Feb. 03 Aug. 03 Apr. 03 Oct. 03 June 03 Dec. 03 Aug Number of mandates Oct. 03 Dec. 03 This innovative concept is now available in the whole of Switzerland through Anker Bank (Zurich, Lausanne, Lugano and Geneva) and in France since last August, when BCGE France SA won approval from the French Securities and Exchange Commission (COB). Commitment to the Geneva economy honoured The BCGE Group actively supports the regional economy. In 2003, the reduction of the Fondation de Valorisation loan was partly redirected towards increased lending to public authorities, international companies and to the property and construction sectors. The Banque Cantonale de Genève works with nearly 10,000 Geneva companies, almost 70% of which have the Bank as their exclusive or main financial partner. Expenditure reflects the modernisation of the Bank The main examples are the upgrading of the IT network, the development of the new Internet site ( with its highperformance e-banking solution, and the investments required in obtaining COB approval for the BCGE Best of in France. Other business initiatives include: the implementation of the successful BCGE Business link (a system for managing company cash-flows and payments); the launch of direct telephone banking, known as BCGE Direct; the inauguration of Synchrony Finest of (innovative portfolio-management for small and medium-sized pension funds) and the rollout of a new advertising campaign on the theme of I know my banker (see page 2). Added to the investments mentioned above are legal fees, which are still high, (approx. CHF 4 million, mostly for litigation involving the Bank s past) and the payment of CHF 3.6 million in commissions to Canton Geneva for its guarantee of savings deposits and loans to the Fondation de Valorisation. BCGE Best of performance (adjusted) Composite index (100% June 01) BCGE Annual Report

14 message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer message from the Chief Executive Officer Staff numbers are slightly lower ( 2.1% at 829 full-time job equivalents). Staff costs did not, however, decrease in line, mainly due to the start of intensive training involving job certifications and a programme of resource management aimed at a better balance between the company s requirements and the experience and skills of its staff. The above items explain the high operating costs of CHF million, part of which will not be recurrent and all of which are under control. Operating costs under control Encouraging outlook The Banque Cantonale de Genève emerges from the last financial year strengthened on two counts. On one hand, last year confirmed the financial strength of the Bank and its return to profits. On the other, the many projects underway, some of which entail considerable human and financial investments, have enabled the Bank to pursue its aims of optimising procedures, improving productivity and controlling risks, all of which guarantee continuity and the future success of the Group. The public has regained its confidence in the Bank. The marketing drive and the broadening of products and services on offer have convinced them of the institution s revival and its return to strength in CHF millions In an uncertain stock-market and economic environment, which makes the prospects of Geneva s small and medium businesses hard to forecast, and faced with interest-rate and foreign-exchange risks, the Bank has set the following strategic objectives: a moderate growth in assets, a rigorous evaluation of credit risks, improved productivity and a wider variety of revenue sources. Over the coming years, the Bank will continue to invest in productivity for a continued improvement in its profitability Staff costs Total operating costs Other costs Blaise Goetschin Chief Executive Officer Allocations to provisions continue to fall Provisions, at CHF 63.1 million have continued to decrease ( 23.5%). This figure includes a value adjustment of CHF 19.6 million for two buildings. The balance is lower than the Bank s budgeted figure and is close to cantonal bank criteria. 10 BCGE Annual Report 2003

15 If you have to manage a portfolio or grant a loan, the most important thing is integrity towards your client and the Bank. Without an ethical basis, it would be very difficult for me to function in whatever I do. Nicolas Scheidegger Business consultant Retail Services and Branch Network BCGE Annual Report

16 Review of the business units Finance and Risk Management Eric Bourgeaux Member of the General Management This division provides the financial framework of the Bank s strategy and objectives. As such, the division s first mission is to secure solid and competitive financing. Applying advanced risk management, the division is also responsible for the progress of the Bank s balance sheet. Low interest rates have permitted the Bank to cut its refinancing costs significantly in The Bank s balance sheet underwent significant structural changes in In particular, we saw an increase in savings deposits (+8.5%), a fall in inter-bank loans ( 51%) and a decrease in the loan to the Fondation de Valorisation (CHF 814 million). Moreover, favourable market conditions allowed the reimbursement of high-interest loans. Overall, the BCGE s balance sheet was strengthened and its equity capital level was significantly improved, with a ratio of shareholders equity to total assets of 126.7%. High equity coverage 130% 120% 110% 100% 90% 80% 70% % Equity coverage ratio Minimum ratio Comfortable coverage level Projects to modernise operations In the course of the past year, the division set up a unified trading-room platform for the entire group. This platform achieved good results while maintaining a prudent risk profile. Within this scope, the Value at Risk process, which enables the follow-up and monitoring of the trading-room, was automated. Moreover, the division executed several projects updating operations, particularly in risk management. Sophisticated portfolio management techniques were adjusted to monitor products designed for our private and institutional customers. Finally, the division developed new and closer relationships with Swiss and foreign financial analysts and investors, by giving several institutional presentations in Zurich, Paris and Frankfurt. New growth basis for institutional management In institutional asset management, our Synchrony Asset Management (Synchrony) subsidiary went through a period of consolidation. Backed by a new management and supervisory team, Synchrony made headway in its area of expertise index management and in balanced mandates it achieved global performances Active interest-rate close to reference indices. Moreover, Synchrony started to management helped us apply its management mandate make it possible for clients based on an open architecture. to benefit from better In this regard, Synchrony now conditions offers institutional customers a new asset-management product called the Synchrony Finest of, which responds to the very specific requirements of this customer segment in a personalised manner. Another notable achievement in 2003 was the Lipper Fund Awards Fund of the year 2003 award for the Synchrony Market Fund Swiss Government Bonds. This segment of the umbrella Synchrony Market Fund is the Swiss Confederation s number-one bond fund. It aims for a long-term return, excluding charges and dividends, equal to that of its benchmark index, the Swiss Domestic Bond Government Index (SDBG), with a tracking error of less than 0.5%. 12 BCGE Rapport Annuel 2003

17 review of the business units review of the business units review of the business units review of the business units review of the business units review of the business units Retail Services and Branch Network review of the business units review of the business units review of the business units review of the business units The 2002 reorganisation of the Retail Services and Branch Network division started to pay off in The branch network adopted new operational procedures, based on decentralised decision-making. The Carouge and Lancy sectors were merged to equate human resources to business volumes and to make the best use of office premises. The division s progress is also noted in the strong improvement in the quality of customer advice and the versatility of the staff serving clients. To this end, training and certification have been stepped up considerably. All these improvements have led to an increase in the number both of clients and of accounts, and to improved results in the areas of savings deposits, mortgages, commercial loans, pension products, Maestro cards and credit cards. A modernisation of the branch network Efforts to modernise facilities continued on various fronts. A major project was the launch of a renovation programme (offices, client reception areas, showcase windows, etc.), which will be progressively implemented in all branches. This allows for the realisation of branch interior layouts which take into account every branch s needs, in accordance with the Bank s new corporate identity. The Versoix branch, the renovation of which was completed at the end of 2002, was officially inaugurated in March The BCGE continued to install Automated Teller Machines (ATMs), reaching a total of 67 machines at 36 locations by the end of The ATMs all allow cash withdrawals free of charge in Swiss francs, and most of them also distribute Euros. Johan Bernard Alexander Kroon Member of the General Management A notable increase in savings deposits, investment accounts and lending Confirming its role as a premier regional player, the BCGE has maintained its strong position in the real-estate market by improving mortgage offerings and streamlining its lending process. The division also strongly contributed to the growth in the Group s inflow of savings deposits. In this regards, the bonus programme BCGE Avantage service, which rewards customer loyalty and extended customer bank relationships by granting interest rate bonuses of up to 2% on specific savings accounts, continued to expand in a highly satisfactory manner. This programme makes a serious contribution to the strength of our customer base. Moreover, the branch network, thanks to its presence throughout the whole Geneva territory, contributed substantially to the growth of asset management mandates by means of BCGE Best of. 49 of the branch network s staff have successfully completed the BCGE Best of certification. Personal pension schemes took off In 2003, the Banque Cantonale de Genève repositioned itself in a spectacular way regarding personal pension product offerings. With a 75% increase in subscriptions for the so-called third pillar accounts and a substantial increase in life-insurance premium income, the Banque Cantonale de Genève has become an important local player in the personal pension-scheme market. Upgraded telephone banking and netbanking services In 2003, the Bank substantially improved its BCGE Direct telephone banking services. It gives clients direct phone access to a range of advantageous banking services through an experienced BCGE client advisor, available from 7:30 to 19:00. Finally, the Bank s new Internet site has been an important factor in the division s development. BCGE Annual Report

18 2003 opened the way to a new stability. That means the driving force is back and harmony reigns after a turbulent period in which a great deal has happened. Romaine Jordan Inspection and reporting specialist Finance & Risk Management 14 BCGE Annual Report 2003

19 review of the business units review of the business units review of the business units review of the business units review of the business units review of the business units Corporate review of the business units review of the business units review of the business units review of the business units During 2003, the division pursued its global business-partnership strategy. It is heavily involved in financing the Geneva economy, to the tune of more than CHF 5 billion. Due in particular to the BCGE Club CFO (optimised financial advice), it has given some of its best customers access to a professional trading room and to financialengineering expertise, facilitating optimum cash investment, risk and exchange-rate management. High-performance cash-flow management In September 2003, a platform called the BCGE Business link was set up to manage corporate cash-flow and payments. This system enables the financial flows for the whole of a company and for each of its subsidiaries to be grouped within a single support facility. Fully automated with the latest transaction processing, the system eliminates potential risks arising from the duplication of data capture, guaranteeing tight security. The system thus offers companies a credible alternative in cash-flow management. Loan portfolios a quality approach A total of 2,007 files were processed during 2003, more than two-thirds of which were for mortgage loans. In the property and construction sectors, the number of high-return property deals fell back sharply due to BCGE s top-half of the scarcity of offers. In balance-sheet operations addition, given the level of interest rates, the majority of demonstrate the Bank s property-market specialists expertise and generate have restructured their loan commissions commitments and extended their repayment schedules therefore witnessed an unprecedented move towards fixed-term loans. Claude Bagnoud Member of the General Management There to support local authorities The BCGE has continued to assist Canton Geneva in developing the pooling of its cash-flow management. Similarly, it has remained attentive to the needs of public bodies by providing solutions most suited to their requirements. The canton s public sector has been particularly interested in the BCGE Business link. Good performance from international trading activities The international-trading department has benefited from the increase in raw-material prices, which favoured an upturn in business and in commission income (+8%) despite the fall of the dollar against the Swiss franc. This encouraging revenue trend has been accompanied by the implementation of a new operational risk-control structure aimed at maintaining a healthy diversification of risk. Banque Cantonale de Genève (France) SA In its 10th anniversary year, the BCGEF obtained the French Securities and Exchange Commission (COB) approval for its asset-management business. The initial results of this venture have been promising. Despite the difficulties in certain sectors of the French economy, the BCGEF has continued to provide financing, especially to highperformance companies in the Rhône-Alpes region, and for quality property transactions notably through its holding in the Compagnie Foncière Franco-Suisse (CFFS). At the end of the year, the BCGEF recorded a net profit of CHF million, the best result in the subsidiary s existence. Its balance sheet totals CHF million. For its refinancing needs, the BCGE s French subsidiary continued to benefit from the support of its parent company. BCGE Annual Report

20 review of the business units review of the business units review of the business units review of the business units review of the business units review of the business units Private Banking review of the business units review of the business units review of the business units review of the business units The new Group investment policy launched in 2001 is now well established. Today more than 1,400 customers have signed a BCGE Best of assetmanagement mandate. The BCGE Best of investment concept is based on a methodical and rigorous approach, taking maximum advantage of the open-architecture principle and the very high degree of portfolio diversification. The reputation that this dynamic and independent asset-management product is progressively acquiring enables the BCGE to claim a solid and pre-eminent position in the asset-management market. BCGE s Best of asset-management mandate: a spectacular success One of the particulars of the BCGE Best of mandate is its accessibility to a wide public, due to the high quality of its advisory service for assets of CHF 100,000 and above. The originality of these managed portfolios lies in asset allocation, which favours an independent selection of the best international equity-fund managers. This approach achieved an exemplary performance during 2003, with, for example, 5.20% (defensive risk profile in Swiss francs), 9.66% (balanced risk profile in Swiss francs) and 14.12% (dynamic risk profile in Swiss francs). Business linked to BCGE Best of has therefore grown remarkably, the number of mandates and customers having doubled in 2003 compared with This growth has helped strengthen the BCGE s presence as an active player on the Geneva private-banking scene. The BCGE Group has thus been encouraged to extend the concept beyond the canton s borders to the Swiss and French markets, in particular the Rhône-Alpes region. As noted on page 15, the Banque Cantonale de Genève (France) SA, has received the consent of France s securities and exchange commission (COB) and Financial Markets Council (CMF) to develop its asset-management business in France. As a result, the BCGE Best of France mandate was launched during the autumn of In addition to these efforts, the Bank created a private-banking unit dedicated to the French on-shore market. Alain Spadone Member of the General Management Building up Private Banking To deal with the extension of its asset-management activities, the management has been strengthened, and the portfoliomanagement, reporting and financial-control teams have been enlarged. This has enabled the Bank to absorb the increasing mandates and amounts under management that have been entrusted to it. The definition and monitoring of an investment strategy by the Financial Analysis group have contributed not only to the excellent performance of the BCGE Best of mandates, but also to that of the BCGE Diamant Rainbow Fund. This balanced investment fund with a risk profile similar to that of a BCGE Best of mandate, also delivered a very respectable 9.30% over This fund enables smaller investors to gain access to top-quality asset-management services. Anker Bank SA Wholly owned by the Banque Cantonale de Genève Group since 1997, Anker Bank has offices in Zurich, Lausanne, Lugano and Geneva. The thorough strategic transformation, which started in 2002, is being successfully pursued. The new management is taking steps to restructure and stabilise activities and to establish enduring confidence. Making the most of the synergies with the BCGE Group, Anker Bank could look forward to a trouble-free The new direction and methodology in asset-management and investment launched by the BCGE Group now ensure Anker Bank s customers access to a reliable process for managing performance and risk. Major issues still have to be faced, especially in logistics where Anker Bank has made substantial investments in a new IT platform shared with the parent company. Anker Bank is today clearly pointing to the future. It is determined to occupy an important position in open-architecture private banking while remaining true to basic values where quality, ethics and independent advice take priority over all other considerations. 16 BCGE Rapport Annuel 2003

21 review of the business units review of the business units review of the business units review of the business units review of the business units review of the business units Credit Control and Administration review of the business units review of the business units review of the business units review of the business units The Credit Control and Administration division is responsible for the administration of lending operations and the follow-up and monitoring of credit risks. It further handles distressed situations by way of debt recovery or workout loans at risk that require follow-up and support. The division also manages the BCGE s non-banking real-estate for resale and is responsible for the Start-PME Foundation that assists young companies. Furthermore, it ensures coordination of the Bank s assets with the Fondation de Valorisation. Finally, the division is currently responsible for a major project: the introduction of advanced software tools to provide administrative and analytical support to the Bank s lending operations. The Swiss Federal Banking Commission s new accounting directives (DEC) which were put into effect in December 2002, have led the Bank to refine its All credit managers accounting policies regarding underwent training to the credit-risk provisions. The ensure proper Bank s credit managers have application of the new received in-depth training to ensure the strict application of accounting directives these guidelines. Modernisation of IT systems underway The 2003 financial year was marked by strong efforts by our credit+ project team to put into operation software tools for the front office and credit administration. These tools are designed to streamline and standardise the Bank s credit products. The project requires working processes, staff profiles, work organisation and credit standards to be reviewed. The project is now in its testing phase and will be progressively implemented during Allocations to provisions continue to fall Emile Rausis Member of the General Management Provisions constituted during the year Adjustment of former risks (CHF 17.7 mio) Adjustment to properties (CHF 19.6 mio) Ordinary risks 2003 (CHF 25.8 mio) Satisfactory development of activities Several important factors allow us to look back at the financial year with satisfaction. Above all, two companies, in which the BCGE was a shareholder and which employ more than 70 people, were sold without layoffs at favourable financial terms. Moreover, five financially restructured debtor accounts representing more than CHF 12 million owed to the Bank could be transferred back to the front office, which is now responsible for follow-up. Although we had to participate in public auctions of some 30 real-estate properties, we only had to acquire a few of them, nine of which could be resold with profit during the financial year. Thus, the volume of real-estate on our books remained low at CHF 10.6 million. Finally, the litigation department recorded its first successes in the management of assets at default, an activity reorganised since in CHF millions BCGE Annual Report

22 My credo? You have to dance every day even if it s only in the mind. Shahab Malek-Abhari Portfolio manager Private Banking 18 BCGE Rapport Annuel 2003

23 review of the business units review of the business units review of the business units review of the business units review of the business units review of the business units Logistics and Information Technology review of the business units review of the business units review of the business units review of the business units After restructuring in 2002, the division could go ahead in 2003 with investments in information technology and systems to optimise resources for future growth. Following the retirement of Michel Villien-Gros, the division reports, since 1 July 2003, to Jean-Marc Joris, former head of the organisation department. Optimised resources and new services The organisation and logistics departments concentrated on achieving better efficiency in several of the BCGE Group s activity areas. The operation involved the whole of the Group, including Anker Bank and the BCGE France. To this end, operational processes were reviewed to improve bank services. An in-depth appraisal lead to the modification of operational rules and lending policies by market segment, as well as the introduction of new customer services, such as Quick orders in foreign currencies or cash management through the BCGE Business link. Also, the Bank s office premises have been reorganised and improved. This includes modernisation of the Bank s major infrastructure at its key premises at Lancy and Vallin, and at the Geneva corporate centre. Over time, staff will be regrouped at these locations. The project aims to improve communication between operating units, to enhance information flows and to realise savings through a better use of the infrastructure. In this context, the Tour de l Ile building was sold in January 2003, in line with the Bank s reorganisation strategy, which is focused on core activities and the disposal of non-operational assets. Jean-Marc Joris Member of the General Management Updated computer technology and a new Internet site The division also implemented several important projects improving and consolidating systems and procedures. In this regard, all PCs and screens were changed. Unicible was given the assignment to migrate data and to manage the new infrastructure. This is in line with the Bank s intent to outsource services not directly linked to its banking activities. Furthermore, We received some the BCGE s new Internet site 800 congratulatory was successfully put online, s during the which immediately resulted in a significant increase in new month following the Internet contracts. To develop launch of our new the new site, particular attention Internet site was paid to banking services featuring such innovative options as offline data entry for payments and pen scanners for payment slips. New centre of competence In the course of the year, several operating units were regrouped, particularly those responsible for pension-fund accounts, client administration, filing and archiving, and securities administration and compliance. In this reorganisation, a new unit, Service Administration and Compliance, was created and integrated into the division on 1 January The purpose of this reorganisation is to create a new centre of competence, in view of regulatory, tax and legal requirements. BCGE Annual Report

24 Structure and organisation of the BCGE Group Substantially remodelled in 2001 and 2002, the organisation of the Group has enabled the BCGE to focus on its strategic and commercial activities by redistributing operational decision-making and internal-control responsibilities. Based on a strong company spirit, which permeates the whole structure, this new organisation has proved to be an efficient and productive management model. The principles of this organisation are as follows: The Banque Cantonale de Genève is split into six divisions, each conceived as a customer-focused business, meeting the needs of both external and internal customers and endowed with a large degree of autonomy. They are headed by members of the General Management whose details figure on page 67 of this report. Coordination and synergies between the divisions are assured on one hand by a matrix function and on the other by the chief executive officer and the senior executive team. This organisation supports cross-selling between front-office activities. The number of senior executives in each division is reduced as much as possible. Responsibilities are clearly defined by a system of financial and qualitative reporting. Delegation of authority is as extensive as possible with sophisticated risk monitoring as a counterweight. The General Management operates as a steering and controlling body, acting on a collegial basis and representing the major operational and strategic functions of the Bank. There are six members of the General Management. The basic operating structure described above is strengthened by a number of committees which, on behalf of the general management, are responsible for certain major areas of activity and control. These committees are: Credit Committee This is the decision-making body for all loans of a certain size. Decisions are based on the degree of equity-capital utilisation. For major risks, decisions are taken either by the Bank Committee or by the Board of Directors. Chairman: Claude Bagnoud Vice-chairman: Blaise Goetschin Strategy Committee This committee defines the BCGE Group s investment strategy as well as investment limits regarding recommended transferable securities. Chairman: Alain Spadone ALM Committee (Asset and Liability Management) This committee is responsible for monitoring and steering the Group s financial policy, and in particular for balance sheet and interest-rate risk management. Chairman: Blaise Goetschin Vice-chairman: Eric Bourgeaux Risk Committee The Risk committee analyses the Group s strategic risks by monitoring the Bank s activities in each risk category (please refer to the section on risk management). Chairman: Eric Bourgeaux Vice-chairman: Emile Rausis IT-strategy Committee This committee defines the Group s IT strategy. It controls applications and ensures cooperation with Unicible and the banks sharing this platform. Chairman: Blaise Goetschin Vice-chairman: Eric Bourgeaux Credit-risk Commission This commission takes decisions regarding specific or sensitive areas of lending (debt recovery, workout). Chairman: Emile Rausis Vice-chairman: Bernard Matthey In addition, numerous other interdisciplinary working groups are responsible for driving the Bank s organisational and operational modernisation programmes. The fundamental strategy of the Bank is to constantly adapt a dynamic response to customer requirements. The organisation is therefore flexible and adaptable in line with the increasingly rapid evolution of customer expectations. 20 BCGE Annual Report 2003

25 structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group Anker Bank SA Fully owned subsidiary Gilbert PFAEFFLI Market Transactions Juerg Bernard SCHWAB Private Banking Digital Reporting and Management Support Philippe BAILAT Information Technology Christian KEMPER Private Management Amin KHAMSI Credit Control and Administration Logistics Gilles CHAPPATTE Logistics and Information Technology Credit Control Emile RAUSIS (ad int) Investment Strategy and Financial Studies Jean-Luc LEDERREY Organisation Clément FITOUSSI Credit Administration Hans-Joerg FREY Centralised Management Urs BUSER Banking Transactions Claude REGAMEY Workout François KIRCHHOFF MGM Alain SPADONE MGM Jean-Marc JORIS Litigation Bernard MATTHEY Headquarters General Management Elisabeth RAY MGM Emile RAUSIS Legal Felice GRAZIANO Institutional Communication Nicolas de SAUSSURE Chief Executive Officer Blaise GOETSCHIN General organisation chart on 31 Decem

26 Finance and Risk Management Management Control Marc DOERKS Banking Relations François JULIA Risk Management Michel MAIGNAN Synchrony Asset Management SA Fully owned subsidiary Pierre WEISS (ad int) Retail Services and Branch Network Vernier Sector Patrick BLANCHARD Branch Network Manager Bernard BESSIRE Servette Sector Giovanni LO BUE E-Commerce Paolo CANONICA Business Development Andrew GILBERT BCGE (France) SA Fully owned subsidiary Alain BOCHET General Accounts Yvan NICOLET Carouge Sector Claude-Alain ZENGER Corporate Public Administration Ronald LABBE Financial Markets and Treasury Marc HOLLISTEIN ( ) MGM Eric BOURGEAUX Chêne Sector André FROSSARD Consumer Credits and Corraterie Sector Thierry JAQUIER Real Estate Jos VON ARX International Companies Pierre-Olivier FRAGNIERE General Secretariat Daniel BURKHARDT MGM Johan B. A. KROON Rhône-Alpes Region Andrée ALLIOD Marketing and Product Management Laurence EQUEY Human Resources Alessandro LANCI Swiss Companies Christian TURBE MGM Claude BAGNOUD Member of the Credit Committee Member of the Strategy Committee Member of the ALM Committee Member of the Risk Committee Member of the IT-strategy Committee Member of the General Management Member of the Credit-Risk Commission ber 2003

27 structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group The Board of Directors The Board of Directors defines the Bank s strategy framework and its activities according to the objectives stipulated by law. It monitors performance in attaining its goal: to contribute to the development of Canton Geneva and to the region. It supervises senior management and the activity of the Bank Committee. On 31 December 2003, following the resignation of a director on 13 November 2003, it comprised 14 members. The chairman is Mr Michel Mattacchini. The organisation and missions of the Board of Directors are set out in detail on page 65 of this report. The Bank Committee The Bank Committee is an offshoot of the Board of Directors. It is delegated to exercise the main supervision of the management and ensures that the Board s decisions are implemented. The committee comprises at least one representative of each of the shareholder groups, namely Canton Geneva, the City of Geneva and the private shareholders. On 31 December 2003, it comprised seven members, under the chairmanship of Mr Michel Mattacchini. The organisation and missions of the Bank Committee are set out in detail on page 66 of this report. Madeleine Bernasconi The Control Committee The Control Committee supervises the Bank s compliance with the relevant legal, statutory and regulatory provisions and with normal banking practice. It comprises three members: one person from outside the Bank, appointed by the Geneva Council of State, and two BCGE directors. The scope and duties of the Control Committee are set out in detail on page 67 of this report. Gabriel Barrillier Bern Ion Bals 23 BCGE Annual Report 2003

28 structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group structure and organisation of the BCGE Group Bernard Clerc Jean Gallay Mariane Grobet-Wellner Andràs November Erwin Meyer Jean-Claude Rivollet The members of the BCGE Board of Directors on Sami Kanaan ard Lescaze Michel Terrier (secretary) Michel Mattacchini (president) David Hiler (vice-president) Internal Audit Board of Directors Control Committee Bank Committee General Management

29 Review of Geneva s economy in 2003 Geneva s economy in went down as a hard year for the Geneva economy fewer jobs, a paltry rise in overall wages, a fall in new-car purchases, shrinking industrial output, gloom in construction, despondency in the shops Yet, there were some positive signs. The fall in employment was less than the national average, and Geneva had its biggest rate of population growth in 30 years. Population increase Geneva s population grew by 6,768 residents (+1.6%), one of the biggest annual rises since the seventies. At the end of December 2003, 434,473 people lived in the canton, 38.7% of them foreigners. The population growth was due more to the 5,448 immigrants than to the natural increase of 1,320 souls. On the employment front, 2003 reversed the trend of the previous year when some growth in jobs could still be detected. There was a noticeable drop in full-time jobs ( 3.2% annual average compared with 2002), while part-time employment rose 7.1%. Geneva s unemployment rate grew steadily throughout 2003, from 5.8% at the end of December 2002 to 6.9% 12 months later. The number of registered jobless reached 15,124 (a rise of 18.2% in the year). Finally, wages paid in Canton Geneva (international organisations excluded) amounted to CHF 17.6 billion a modest increase of 0.3% in real terms. Disappointing industrial output and external trade After a nonetheless promising end to 2002, business conditions worsened throughout The trend reversal hit export industries hardest, with bankruptcies up 10.2% over the previous year to reach 907. The canton s exports fell 3.2% in a year to CHF 8.6 billion. By the same token, imports stood at around CHF 6 billion, down 3.1% from Unemployment rate 10% 8% 6% 4% 6% 0% Geneva Switzerland Business development in industry Geneva Switzerland BCGE Annual Report

30 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Geneva s economy in 2003 Tension in construction and housing Although building starts went up by 5.4% over the year to reach CHF 1,034 million, construction firms considered business in 2003 unsatisfactory. Their pessimism was confirmed by the annual drop in the value of new orders, extrapolated from the figures for the first three quarters; the fall in labour reserves and the slump in the value of authorised construction projects, 19.9% lower than the five-year average. Cement deliveries 100 A poor vintage for the retail and hotel sectors, as prices stay stable 2003 yielded a meagre harvest for Geneva s retailers, even though by September business expectations of shopkeepers were beginning to shift into positive territory. The depressing business climate was characterised by strong price stability (+0.9% in 2003). For the hotels, guest-nights went down 3.8% in Canton Geneva during 2003 but the year ended better than it started. The decline comes despite the increasing number of passengers recorded by Geneva s international airport, 8 million in 2003, up 6.2% from Hotel guest-nights 120 in thousands Geneva Switzerland 175 So far as housing and business premises were concerned, only 1,209 homes, including private houses, were built in 2003 fewer than the previous year s 1,313, and a 20-year low. At the year s end 2,270 residences were under construction (+317 units in a year), two-thirds of which (1,471) had been started in Building permissions for 1,409 homes were granted during the year an increase of 229. But planned applications for building permits were slightly down from 2002 s figure of 1,333 homes, at 1,257 units Geneva Source: Reflets conjoncturels de l économie genevoise OCSTAT, Geneva 2004 There was strong growth in newly built space for commercial premises and infrastructures over the year, thanks to some publicworks projects. In contrast, office, banking and retail space shrank to its smallest in 10 years. However an increase in office, banking and retail premises under construction as well as new sites could be noted at the end of BCGE Annual Report 2003

31 I m responsible for welcoming customers, so my best business card is competence with a smile. Fabienne Campolucci Management secretary Synchrony Asset Management SA BCGE Rapport Annuel

32 Review of the financial markets in 2003 Optimism returns In many respects, the 2003 financial year will remain a red-letter one. Firstly, because it brought a halt to three consecutive years of declining stock-exchange indices and even an upturn, which enabled a recovery of between a fifth and a third of the fall recorded since mid The year also saw a change in attitudes towards risk and hence a marked shift of preference from bonds to equities. Finally, the expected fall in the dollar eventually happened during the second half of the year, threatening economic recovery in some countries, notably in Europe. Exchange rates US$ / CHF 2002 / May 02 Sept 02 Jan 03 May 03 Sept 03 Jan 04 A difficult start of the year So more than ever, it took financial operators a lot of discipline to get to grips with market trends throughout the year. At the beginning of 2003, the uncertain outcome of the conflict in Iraq blighted the behaviour of financial specialists, paralysed by the risk of the conflict spreading to the whole of the Arab world. Prospects for growth at that point were utterly clouded, all the more so as the deflationary threats that appeared in 2002 seemed to raise their head again. The direct result: equity markets were on a falling trend, and bonds were in great demand especially as wide spreads were being offered reflecting the operators aversion to risk. In line with this logic, there was substantial activity in the credit derivatives market, as this market enables a split between the rate risk and the credit risk of the issuer. The American recovery As soon as the conflict in Iraq ended, stock markets started to move upwards, bolstered by good economic indicators from the United States. On their side, central banks were conducting accommodating monetary policies to encourage recovery, with the United States Federal Reserve going as far as cutting its interest reference rate to 1% in June 2003, the lowest for more than 50 years. From June onwards, there was clear evidence of an upturn, shown by the resurgence of technology stocks which investors had steered clear of since the Internet securities bubble burst in Over the year, the NASDAQ, heavily weighted by tech. stocks, climbed 50%. In the same spirit of recovery, small- and mid-caps also benefited from investor enthusiasm, with dealers favouring discounted stocks, which had been over-penalised when there were major concerns about their lack of liquidity. A contagious rise The American stock market recovery, which fuelled dealers appetite for equities, stimulated an upturn in the other major markets, particularly in Asia, borne up by the spectacular level of economic growth in China (nearly 10%) and by the first signs of recovery in Japan. With the Asian markets holding up well, an overall climb in emerging markets was also detectable, as well as the reopening of the IPO market, particularly for Chinese companies. 28 BCGE Annual Report 2003

33 review of the financial markets in 2003 review of the financial markets in 2003 review of the financial markets in 2003 review of the financial markets in 2003 review of the financial markets in 2003 review of the financial markets in 2003 The European markets progressed satisfactorily. While in general they also followed an upward trend in the wake of Wall Street, some turned in remarkable performances, notably Germany (DAX: +37% over the year) and Spain (IBEX: +28%), or very respectable results, such as France (CAC 40: +16%). On the Swiss market, the SMI large-cap index rose by almost 50% from its lowest point, on 12 March 2003, to the year-end gaining almost 19% over the full calendar year. Swiss Market Index 1999 / ,000 8,000 7,000 6,000 5,000 4,000 3,000 millions Jan. 00 Jan. 01 Jan. 02 Jan. 03 Numerous questions What clear signs for the future does the analysis of market performances give? Basically very few, because 2003 was a turnaround year with a unique environment and very specific characteristics. For 2004, the American elections, the continued geopolitical risks and inflationary threats are all major unknown factors that will have an impact on the financial markets. BCGE Annual Report

34 Collaboration of the BCGE Group Union of Swiss Cantonal Banks In 1907, the cantonal banks entered into a grouping known as the Union of Swiss Cantonal Banks (UBCS). The aim of this cooperative venture is to share needs and competences by capitalising on the banks strengths, developing synergies and reducing costs. Local roots and proximity to customers, two great assets of the cantonal banks, are exploited to the full while respecting the independence of each institution. In parallel, the development of bilateral and multilateral cooperation continues. Blaise Goetschin, chief executive officer of the Banque Cantonale de Genève, is member of the Board of Directors of the UBCS. Mortgage Bond Centre of the Swiss Cantonal Banks Founded by the cantonal banks in 1931 in Zurich, the Mortgage Bond Centre (CLG) is one of the two Swiss agencies established by the federal law on the issue of mortgage bonds for this purpose. All the cantonal banks are both members and shareholders of this central organisation. The Mortgage Bond Centre grants long-term loans to the cantonal banks against mortgage bonds. These are used exclusively to finance mortgage lending and cover about 14% of the refinancing needs of its members. The Centre raises funds by regularly issuing mortgage bonds on the Swiss capital market and through private placements. With a volume in circulation of CHF 25.7 billion (on ), it is one of the principal operators in this area. Its bonds are listed on the stock market and traded daily. The Moody s Investor Service rating agency acknowledges the reliability and excellent quality of the bonds issued by CLG by giving them its highest AAA rating. Blaise Goetschin, chief executive officer of the Banque Cantonale de Genève, is vice-chairman of the Board of Directors of the Mortgage Bond Centre of the Swiss Cantonal Banks. SwissBanking (Swiss Bankers Association SBA) Founded in 1912 in Basel, the SBA is the leading professional umbrella organisation of the Swiss financial industry. Its main purpose is to promote and protect the Swiss financial industry, to facilitate the exchange of information and knowledge between banks and their employees and to coordinate joint projects undertaken by Swiss banks. For English-speakers, the name SwissBanking has been adopted. SBA membership today comprises 400 banks and 8,300 individual members. Blaise Goetschin, chief executive officer of the Banque Cantonale de Genève, is member of the Board of Directors of the SBA. Swissca Holding SA Created in 1993 by the cantonal banks, this company provides modern financial services and advice on asset formation, portfolio management, pension funds and international trade in securities. The complementary approach and close cooperation between the Swissca companies and the cantonal banks are the cornerstones of the success of all the partners concerned. Alain Spadone, a member of the General Management of the Banque Cantonale de Genève, Private Banking, is also a member of the Board of Directors of Swissca Holding SA. Geneva Financial Centre Foundation The Geneva Financial Centre Foundation (Fondation Genève Place Financière) is a development instrument at the service of a prestigious banking and financial centre. Its vocation is to respond to joint needs through professional and innovative services in promotion and training. The Foundation does not replace the financial actors who are the main contributors to Geneva s prosperity. Instead it brings together, organises and creates events from which Geneva as a banking and financial centre can benefit. The Foundation acts as a figurehead enabling its discussion partners to benefit from its experience and expertise. A member of the BCGE General Management is on the board of the Genève Place Financière foundation BCGE Annual Report 2003

35 collaboration of the BCGE Group collaboration of the BCGE Group collaboration of the BCGE Group collaboration of the BCGE Group collaboration of the BCGE Group collaboration of the BCGE Group Geneva Chamber of Commerce and Industry (CCIG) Founded in 1985, the Geneva Chamber of Commerce and Industry is a non-profit association established under private law. It groups more than 1,400 companies of all sizes and industries, their managers and professional organisations. The CCIG operates with a staff of approximately 20 people. It represents, promotes and defends the interests of its corporate members. It encourages business relationships in Geneva and abroad. Furthermore, it supports the Geneva economy in co-operation with cantonal and federal authorities. Based on its long experience as an arbitrator, the CCIG also settles disputes and offers an arbitration centre for effective mediation procedures. A member of the BCGE General Management is on the board of the CCIG. FAME International Centre for Financial Asset Management and Engineering FAME s ambition is to transform the Lake Geneva region into the intellectual capital of the world of asset management and financial engineering, in keeping with the role and place of Switzerland as a world-recognised financial centre. To that end, FAME wants to be a pole of attraction for top students and researchers and a reference centre for joint projects between the investment and academic worlds. Its strategy is to build on existing academic strengths, remedy current weaknesses and to develop synergies among affiliated academic and professional institutions. A member of the BCGE General Management is on the board of the FAME Foundation board. Higher Institute for Training in Banking The Higher Institute for Training in Banking is an association of the Geneva banks, which gives its members priority access to a platform for specialised occupational training in banking and asset management. Its purpose is to offer a range of à la carte courses and diplomas enabling professionals in the banking and financial sector to develop their skills and perfect their expertise. Its diplomas are recognised by the canton. The Institute plays a key role in maintaining the competitiveness of Geneva s financial centre and safeguarding its long-term future. A member of the BCGE General Management is on the board of the Higher Institute for Training in Banking. BCGE Annual Report

36 Snapshots of 2003 New site: je Launched connais in mon November banquier 2003, the je new connais site mon banquier has proved highly successful, judging by the 800 or so congratulatory s received in just four weeks, payment traffic that went up 50% and a rise of more than 10% in the number of users. 20 Rates have never been so low! The BCGE is a competitive player for financing property in Geneva. Just compare and go to the BCGE! Your banker on the phone whenever you want Do you know BCGE Direct, the telephone banking service? Your advisor is at the other end of the line on +41 (0) from 7:00 to 19:00 at low rates. BCGE Business link A brand-new service for business: BCGE Business link enables you to handle high-volume payment traffic thanks to a direct IT connection with the Bank. 32 BCGE Annual Report 2003

37 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 snapshots of 2003 The BCGE near you! With the people of Geneva at local festivals, sporting and cultural events, the BCGE actively supports the cross-canton walking race, Science Night, village football matches, the Geneva gymnastics day and many other events. 03 New Charter of Ethics Outlook 2004 A business seminar, organised by the Bank. Dig out some finance and budgeting notions and ask the BCGE specialists to talk about them that was the agenda of the seminar which attracted more than 80 company directors. Outlook 2004 was also the opportunity to join in the debate and get advice. Accepted at the annual shareholders meeting on 20 May 2003, pending ratification by the Geneva Grand Council, the BCGE s updated Charter of Ethics lists the values that are shared by all Bank employees, as well as the BCGE s responsibilities beyond its legal obligations. Compliance without question. You can consult the Charter of Ethics on BCGE s rating upgraded The Zurich Cantonal Bank, impressed by the BCGE s half-year results in 2003, upgraded its rating from BB+ to A-. BCGE Annual Report

38

39 Consolidated balance sheet 2003 The BCGE Group balance sheet The BCGE Group profit-and-loss account The BCGE Group cash flow statement The BCGE Group statement of shareholders equity Notes to the consolidated financial statements Business activities and personnel Fondation de Valorisation Agreement with the majority shareholder Principles governing the consolidated financial statements Risk management Notes to the consolidated financial statements Summary of collateral for loans and off-balance sheet operations Securities and precious metals held in trading portfolios Essential assets and liabilities under other balance sheet items, valued at market price, the results of which are under income from trading Financial investments Investments under equity method Registered name, head office, activity, share capital and major percentage stakes held Fixed assets Other assets and liabilities Assets pledged or assigned against the Bank s commitments and assets sold with retention of title Liabilities towards own pension plans Current bond issues Adjustments to valuations and provisions. Changes in reserves for general banking risks Maturity structure of current assets, financial investments and debt Amounts due to/from affiliates and loans to directors Assets and liabilities by domestic and foreign origin Total assets by country or group of countries Balance sheet by major currencies Contingent liabilities Loans by acceptances Open derivative instruments at year end Fiduciary transactions Interest income Interest charges Trading results Personnel Other operating expenses Amortisation and depreciation of fixed assets Value adjustments, provisions and losses Extraordinary income Extraordinary expenses Income and expenses of ordinary banking activities in Switzerland and abroad, according to domicile s accounting principles 61 BCGE Annual Report

40 BCGE Group balance sheet Consolidated Notes Variation Assets Cash , ,343 93,060 Money-market instruments , ,449 6,375 Due from banks ,094, , ,502 Due from clients ,001,368 6,780, ,313 of which Fondation de Valorisation 3,415,327 4,228, ,639 Mortgages ,019,955 6,076,714 56,759 Securities and precious-metals trading portfolios 6.2 4, , ,418 Financial investments , ,347 15,933 Investments under equity method ,393 5,371 10,022 Fixed assets , ,763 59,750 Intangible assets ,650 14,614 1,964 Accrued income and prepaid expenses 33,292 54,472 21,180 Other assets , ,933 6,770 Total assets 14,561,305 15,449, ,248 Total subordinated claims 22,519 42,403 19,884 Total due from non-consolidated investments and qualified participations 126, ,675 15,997 of which total claims in Canton Geneva 126, ,675 16,001 Liabilities Money-market instruments ,216 1, Due to banks , , ,119 Due to clients on savings and deposit accounts ,021,802 4,628, ,103 Due to clients, other ,353,869 3,426,279 72,410 Medium-term notes (cash bonds) , ,685 86,417 Bonds and mortgage-backed bonds ,737,280 5,324, ,720 Accrued expenses and deferred income 93, ,435 16,805 Other liabilities , ,653 10,419 Valuation adjustments and provisions ,689 13,482 7,793 Share capital 360, ,000 Capital reserve 309, ,890 1,839 Accumulated deficit/retained earnings 35,780 19,351 16,429 Treasury shares 17,772 17,772 Foreign-exchange differences Group Result 7,192 28,034 35,226 Total liabilities 14,561,305 15,449, ,248 Total subordinated debt 420, ,000 Total due to non-consolidated investments and qualified participations 188, ,064 8,595 of which total due to Canton Geneva 184, ,025 5,905 Off-balance sheet items Contingent liabilities , ,226 48,922 Irrevocable commitments 196, , ,191 Commitments to subscribe and pay further sums 40,872 40,872 Commitments resulting from deferred payments ,832 44,139 25,307 Financial derivatives: - underlying amounts ,341,969 2,957, ,800 - positive replacement values ,236 93, negative replacement values ,187 68,829 3,642 Fiduciary transactions , , , BCGE Annual Report 2003

41 BCGE Group profit-and-loss account Consolidated Notes Variation Interest income and expenses Interest and discount income , ,888 88,873 Interest and dividends from trading portfolios ,667 7,031 2,364 Interest and dividends from financial investments ,768 4, Interest expenses , ,198 89,983 Net interest income 171, ,299 2,064 Commission and fee income Commission income from lending 23,292 20,044 3,248 Commission income from trading, securities and deposits 32,298 33,852 1,554 Commission income from other services 23,604 20,458 3,146 Commission expenses 6,501 7, Total commission and fee income 72,693 67,173 5,520 Net result of trading operations ,377 12,699 5,678 Other ordinary income Income from sale of financial investments 10, ,777 Income from investments 1, ,693 of which consolidated by equity method 1, ,693 Real estate income 2,052 2, Other ordinary income 3,808 3, Other ordinary expenses 4, ,722 Other ordinary income (expenses), net 13,546 7,223 6,323 Net operating income 275, ,394 15,457 Operating expenses Personnel , , Other operating expenses ,370 78,252 10,118 Net operating expenses 199, ,037 9,674 Gross profit 76,140 70,357 5,783 Depreciation of fixed assets ,244 27,625 2,381 Valuation adjustments, provisions and losses ,077 82,494 19,417 Result before extraordinary items and taxes 12,181 39,762 27,581 Extraordinary income ,419 19,624 2,795 Extraordinary expenses ,075 5,974 4,899 Taxes 1,971 1, Net result for the year 7,192 28,034 35,226 BCGE Annual Report

42 BCGE Group cash flow statement Consolidated 2003 Source of funds 2003 Use of funds 2002 Source of funds 2002 Use of funds Cash flow from operating income (internal financing) - profit / loss for the year 7,192 28,034 - depreciation of fixed assets 24,095 26,376 - depreciation of goodwill 1,149 1,147 - other depreciation and write-offs allocation to profit reserve 1,839 - allocation for currency conversion difference reversal of reserves for general banking risks 1,187 - valuation adjustments and provisions 7,793 3,185 - accrued income and prepaid expenses 21,180 18,513 - accrued expenses and deferred income 16,805 23,407 - other items 3,649 46,403 32,765 Balance 23,170 3,963 Cash flow from changes in fixed assets - other participations 10,022 11,132 - fixed assets 35,655 13,361 - intangibles Balance 26,448 2,327 Cash flow from banking transactions Medium- and long-term transactions (> 1 year) - due to banks 46, ,120 - due to clients 51,902 37,864 - medium-term notes (cash bonds) 63,739 19,328 - bonds and mortgage-backed bonds 554, ,000 - due from banks 1,915 - due from clients 1,401,700 2,385,875 - mortgages 962, ,918 - financial investments 3,152 3,700 Short-term transactions - due to banks 546,061 1,393,819 - due to clients 372,595 34,187 - cash bonds 22,678 - bonds and mortgage-backed bonds 32,000 - allocation to profit reserves 11,605 - allocation for own securities 17,772 - due to money-market instruments 494 5,931 - due from money-market instruments 6, ,607 - due from banks 281,587 51,691 - due from clients 622,387 3,741,281 - mortgages 1,019,165 - financial assets 19,085 - securities & precious-metals trading portfolios 153, ,026 Balance 142,678 10,141 Total variation in cash flow 93,060 8,505 Cash variation as per balance sheet 93,060 8, BCGE Annual Report 2003

43 BCGE Group statement of shareholders equity Consolidated Shareholders equity at 1 January 2003 Share capital 360,000 Capital reserve 310,890 Accumulated loss / retained earnings 47,385 Sub-total 623,505 Restatement of treasury shares 12,424 + Consolidation effects 4,008 Total shareholders equity at 1 January ,089 + Group profits on 31 December ,192 Repurchase of treasury shares (at cost) 3,560 + Sale of treasury shares (at cost) 5,809 +/ Profit / loss on the sales of treasury shares 1,839 +/ Currency conversion difference 360 Total shareholders equity at 31 December ,331 Of which: Share capital 360,000 Capital reserve 309,051 Accumulated loss / retained earnings 35,780 Group profit / loss 7,192 +/ Currency conversion difference 360 Treasury shares 17,772 Treasury shares Nombre Number at 1 January ,746 + Purchase 27,223 Sale 27,789 Number at 31 December ,180 New presentation of treasury shares from 1 January 2003, in compliance with the FBC s accounting directives. BCGE Annual Report

44 Notes je connais mon to banquier the je consolidated connais mon banquier financial statements 2003 BCGE Group je 1. Business connais activities mon banquier and personnel je connais mon banquier The Banque Cantonale de Genève Group acts as a universal bank and, as cantonal bank, also has the role of supporting the economic development of Canton Geneva and its region. At year-end, loans granted to the Fondation de Valorisation amounted to CHF 3,415,326,546 (CHF 4,228,966,416 in 2002). Canton Geneva guarantees these loans up to CHF 5 billion. The fee for this guarantee, which is fixed in the tripartite agreement, amounted to CHF 1 million in 2003 (CHF 3 million in 2002). Its activities include mortgage lending and commercial loans, both to companies and for international trade. The Group is also active in assets management and manages public issues and placements in the financial markets. On 31 December 2003, the Group had 829 equivalent full-time employees compared to in The Bank s policy is to outsource its information technology so as to concentrate on high-value business in its own field. The Bank has mandated Unicible Informatique Bancaire SA in Lausanne to house and operate its central computer resource and databank, and to print and send banking documents. The relationship is governed by service contracts (SLA) in compliance with the Federal Banking Commission s CFB 99/2 circular on outsourcing. Since April 2003, the Bank has transferred the management of its office PCs to Unicible. 2. Fondation de Valorisation ( The principles governing the transfer of assets from the BCGE to the Fondation de Valorisation are set out in a tripartite agreement signed on 27 July 2000 and in a supplementary agreement signed on 19 November 2001 between Canton Geneva, the Banque Cantonale de Genève and the Fondation de Valorisation. The agreement lays down procedures for the disposal of the assets, their financing, and repayments between the Fondation de Valorisation and the Bank. 3. Agreement with the majority shareholder In application of Law No 8194 of May 19, 2000 (authorising the Government of the State of Geneva to issue a loan of CHF 246 million to finance the purchase of the shares, registered and bearer, of the Banque Cantonale de Genève) and the tripartite agreement of July 27, 2000, between the Canton Geneva, the Fondation de Valorisation des Actifs de la Banque Cantonale de Genève, and the Bank, the latter might be requested, in the attribution of its annual profit, after creating the provisions and reserves necessary for its capital requirements and, if the case, payment of a dividend, to reimburse, immediately after the Annual Shareholder Meeting, the following expenses incurred by the Fondation: - interest and other financial expenses, - operating expenses, - costs incurred to liquidate its property portfolio (other than taxes) The canton will pay the expenses to the Fondation, not paid directly by the Bank as an attribution of its annual profits. The canton might seek reimbursement of such expenses paid out of the future profits of the Bank. During the year, the Bank signed a financial agreement with the canton and the Fondation, which requires that the specific details of the expenses that the Bank should reimburse to the Fondation, be mutually agreed between the three parties. 40 BCGE Annual Report 2003

45 4. Principles governing the consolidated financial statements Terms of reference The accounts of the Banque Cantonale de Genève Group comply with the Swiss Code of Obligations, the Federal Banking Law and its executive ordinance and the accounting directives of the Federal Banking Commission (status on 18 December 2002). The Group accounts have been prepared in order to present a true and fair view. Statutory closing date for the consolidated accounts The accounts are closed on 31 December each year. Scope of consolidation Banks, financial and real-estate firms whose consolidation makes an important financial difference, have been included in these financial statements as follows: Full consolidation All Group companies in banking, finance and real-estate, held as permanent assets in which the parent company has a direct or indirect stake of more than 50% are fully consolidated. The equity method All permanently held Group companies in banking, finance and real-estate, in which the parent company has a direct or indirect stake of between 20% and 50% are consolidated under equity method. Changes to the scope of consolidation The Group decided to increase its stake in Compagnie Foncière Franco-Suisse SAS (CFFS) following the decision of one of the partners to sell his shareholding. At the end of the financial year, the BCGE Group owned a 50% stake in CFFS s capital, with the parent company holding 16.7% and its subsidiary Banque Cantonale de Genève (France) SA holding 33.3%. This participation is accounted for under the equity method, taking into consideration the management objective. Balance sheet total Banque Cantonale de Genève, Geneva 14,548,714 Banque Cantonale de Genève (France) SA, Lyon 294,656 Anker Bank SA, Zurich 283,206 Compagnie Foncière Franco-Suisse SAS, Lyon 20,717 Investissements Fonciers SA, Lausanne 14,152 Synchrony Asset Management SA, Geneva 5,101 Consolidation process On the purchase of an equity interest, the net book value of the securities in the consolidated company is offset against the proportion of the company s total net assets these shares represent. Any difference is recorded either as a valuation adjustment on the consolidated balance sheet or as goodwill. Goodwill is shown in the balance sheet as intangible assets. Intangible liabilities are allocated according to their characteristics, either to profit reserves, capital reserves or offset by a reduction of the intangible assets. Liabilities and receivables, as well as income and expenses from intercompany transactions are eliminated. The Group ensures that the companies fully consolidated are able to meet their contractual liabilities. Profit-and-loss and balance sheet items in foreign currencies are converted into Swiss francs at the rate applying at year-end. Equity capital is converted at historical rates. The difference is accounted for as a conversion difference. BCGE Annual Report

46 Valuation methods The consolidated financial statements are based on the Group companies individual annual financial statements using uniform accounting principles and valuation methods. Adjustments to conform to true and fair view principle are generally made to treasury shares and bonds by deducting the corresponding liabilities. Accounting dates All transactions are recorded in the Group s books at the date of transaction. Currencies, bank notes and precious metals Positions held in currencies are converted to Swiss francs at the following year-end rates: Main currencies Unit Exchange rate on US dollar Euro Pound sterling Income and expenses are converted at the rate applying on the transaction date. Gains and losses arising on conversion are reported under the heading Results of trading operations. Cash and receivables from monetary instruments Cash is reported on the balance sheet at its nominal value. Book receivables are recorded at cost. Receivables and liabilities on banks, customers and mortgage loans Receivables and liabilities are shown at their nominal value. Receivables are valued in the balance sheet at no more than the value that they represent for the Bank. Provisions for risk of loss either known or estimated at year-end are booked as a reduction in the value of the corresponding assets. Related interest and fees that remain unpaid 90 days after falling due are considered non-performing and are booked under valuation adjustments and provisions. No entry in the profitand-loss statement is made until payment is received. For consumer-credit portfolios (personal loans and leasing) consisting of many similar loans, individual provisions are determined on portfolio-basis using general historic data. Repurchase and reverse repurchase agreements The transaction of securities, using repurchase and reverse repurchase agreements (repos), are recorded in the books as follows: - Sums in cash that are transacted are recorded in the balance sheet. - The transfer of securities is not recorded in the balance sheet so long as the seller retains the rights to them. - The subsequent transfer of received securities is entered in the balance sheet as a non-monetary liability at market value. Securities & precious-metals trading portfolios Securities held in portfolio are recorded in the balance sheet at their year-end market value under Results from trading operations. In accordance with the Group s principles of true and fair view, treasury bonds are not marked-to-market, but at their nominal value. Treasury shares are recorded at Group level by deducting their acquisition cost from shareholders equity, under a separate position called treasury shares. Payment of dividends and results of subsequent transfers are attributed to Reserves from capital. Financial investments Financial investments include securities held for the long term and companies bought for strategic purposes and which are likely to be sold in the medium term. Debt and equity are valued according to lowest market value, or at cost, less any necessary adjustments. 42 BCGE Annual Report 2003

47 Buildings acquired in the course of lending operations and intended for resale are carried on the balance sheet at cost, less any adjustments in value and liquidation costs, on the principles of lowest market value. Fixed assets Fixed assets are carried on the balance sheet either at cost or at the appraisal value established during the 1994 merger. They are amortised linearly according to their expected useful life, subject to the following maximum periods: - 10 years for fixtures - 8 years for furniture and refurbishments - 5 years for office machines - 5 years for IT hardware and software - 3 years for Internet hardware and software. Intangible assets Intangible assets comprise goodwill arising on first-time consolidation. They are written down linearly over periods of 5 or 20 years. Twenty-year amortisation is justified by strategy and the value of the asset. Direct taxation The Bank makes provision for the estimated amount of tax payable for the year. Financial derivatives Positions in financial instruments open at year-end are reported at their market value. Adjustments made to replacement values are accounted for according to the intention underlying the transaction: - active trading positions, at market price in the profit-and-loss account; - hedging positions in accordance with the valuation of the underlying transaction hedged. Modification of accounting and valuation principles There has been no major change since the previous year in the accounting and valuation principles, apart from those required to comply with new regulations governing annual accounts. In terms of the transitory provisions of the FBC s accounting directives, the Bank has not readjusted the previous year s figures. 5. Risk management Risk policies are approved or revised by the Board of Directors according to legal requirements. These are consistently applied within the Group. The Bank has set up different risk committees to assess, monitor and manage risks incurred. Basic principles Risk control is separated from operational management. The Bank has set up a risk-management department which supports front-office and control functions. All members of the General Management are responsible for the revenues and costs arising from positions of risk in their divisions, and must take necessary measures to manage and reduce risk. 5.1 Consolidated supervision The organisation of risk management within the Group is based on the Bank s own management principles. The aim is a comprehensive understanding of risks and their uniform control at consolidated level. The risk-management department in the Finance & Risk Management Division consolidates positions and their analyses. It draws up monthly reports and submits them to the Bank Committee and on a quarterly basis to the Board of Directors. The circulation of these reports and their systematic review with the front departments during Risk and ALM Committees have made the overall approach more effective. A single system consolidates all individual positions and provides an overview. The operational data from IT systems is reconciled to the accounting monthly. 5.2 Credit risks The lending policy sets the frameworks for all credit operations and lays down different conditions according to the financial situation of the borrower and the type of contract. For business loans, the collateral is evaluated annually; at least once every 5 years for second mortgages and every 10 years for first mortgages. Security is further assessed in the event of renegotiation with the borrower. BCGE Annual Report

48 Credit approval is determined by the amount of the loan. The first levels of authority are the front-office departments followed by the credit committee, the Bank Committee and the Board of Directors. Credit ratings (from A to E and then from F to I for contracts at risk) are updated on a dedicated system that provides information for risk management. Ratings are calculated objectively using a program that has been customised for the BCGE by its Credit Control and Administration division. The risk-management unit performs statistical analyses of these ratings. A significant drop in rating triggers a riskassessment process, and if necessary, the setting up of provisions and the transfer of the case to workout or litigation department. The Credit Control and Administration division deals with all loans. It reinforces the formal checks and the information screening performed by the front-end departments that grant the loans. The Credit Control and Administration division and the Market Operations department each has its own risk-monitoring tasks when limits are exceeded or ratings downgraded, or where risk concentrates in a particular economic sector or economic group. The front-end divisions, Corporate, Retail Services and Branch Network and Private Banking initially assess risk when services are first provided and a loan is granted. Risk-monitoring procedures are regularly reviewed, adjusted and improved. A risk committee meets regularly. Overall credit-position reports are circulated each month for all the credit items. Each report breaks down the entire credit portfolio by type of loan (commercial mortgages and residential mortgages at fixed or variable rates being the main items), field of activity (NOGA codes) and rating category. A database compiles information on the amounts at risk in case of default (EAD exposure at default). Provisions are thus made for the EAD amounts. A further list of cases handed over to the workout and litigation departments shows the amount recovered and the amount effectively lost (LGD loss given default). Information compiled on these cases provides statistical data for forecasting. These elements from the Advanced IRB method and the Basel II accords are supplemented by probability matrices on rating changes. Non-performing loans, as well as impaired loans are valued individually and the asset depreciation is covered by the individual value adjustment. Impaired loans, as well as obtained securities are valued at liquidation price, adjusted according to the solvency of the debtor. This valuation method also covers off-balance sheet operations. Any large risks (Article 21 of the Banking Ordinance) are recorded at least monthly and are presented quarterly to the Board of Directors and the external auditors. The Board of Directors reviews banks limits annually in the light of financial fluctuations and geopolitical risks. 5.3 International trade financing risks International trade financing risks are permanently monitored and analysed. The dedicated IT system connected to the riskmanagement system performs situation analyses, which list each third party with their ratings, limits and outstanding financings. Commodity analyses complete the picture. Off-balance sheet positions and indirect risks have been identified in the systems. 5.4 Market risks Market risks are due to variations in exchange rates, stockmarket prices and interest rates. The policy on interest-rate risks, approved by the Board, delegates its implementation to the General Management. The ALM (Asset and Liability Management) committee meets monthly. The committee contributes to decisions on steering the Bank s balance sheet in the light of possible trends in business, the financial market situation and other parameters. The results of reports from the risk-management department are presented and discussed at the ALM committee. In compliance with legal requirements, the ALM committee analyses the effects of rate fluctuations on income (short-term) and on value (long-term). 44 BCGE Annual Report 2003

49 All significant trading transactions are tracked on a single system that allows immediate assessment of risks. Connexion to the centralised risk-management computers also offers synchronised reports on capital requirements for these trading transactions. An independent department is tasked with a permanent check of the trading transactions compliance to the limits and stop-loss arrangements. Reports have been enhanced on several points, partly by value-at-risk calculations for internal needs. The riskmanagement department also monitors trading operations. 5.5 Operational risks The compliance and risk-management departments analyse new directives and instructions, in particular the new anti-moneylaundering and compliance rules, as soon as they are published by the regulatory bodies. They are presented at ad-hoc committee meetings and then implemented. 5.6 Legal risks The legal department reports directly to the CEO. Its mission is to identify legal risks, defend the Bank s interests and to support asset managers in their client relationships. The legal department gets involved once a potential risk has been identified. It assesses the problem and, if appropriate, engages an external attorney with whom it handles the case. Risk provisions are according to a case-by-case analysis. Provisions for legal risks are booked as liabilities under adjustments to assets and provisions. The Bank is currently involved in legal proceedings related to its past, acting, depending on the case, as defendant or plaintiff. The outcome of these proceedings cannot for the time being be predicted. Administrative instructions and other internal directives are regularly updated and made accessible on the Bank s Intranet. Analysis of IT vulnerability, according to the MARION method (method of risk analysis by level optimisation) is underway. The implementation of procedures for operational-risk control established according to the Basel II directives has started. The CIROP project (internal and operational risk control) is being implemented as a pilot project in one activity trading operations. BCGE Annual Report

50 6. Notes to the consolidated financial statements Summary of collateral for loans and off-balance sheet operations Type of collateral Mortgages Other collateral Without collateral Total Loans Due from clients 309,101 3,739,307 1,952,960 6,001,368 Mortgages 5,961,521 32,620 25,814 6,019,955 Residential real-estate 4,840,477 4,840,477 Office and business premises 625, ,571 Industrial property 329, ,634 Other 175, ,838 Total loans ,270,622 3,771,927 1,978,774 12,021,323 Total loans ,297,873 4,842,265 1,717,257 12,857,395 Off-balance sheet items Contingent liabilities 486, ,148 Guarantees / sureties 107, ,808 Documentary credits 378, ,340 Irrevocable commitments 196, ,015 Commitments to subscribe capital or pay further sums 40,872 40,872 Acceptances 18,832 18,832 Off-balance sheet total , ,867 Off-balance sheet total , , ,443 Impaired loans Gross amount Estimated liquidation value of guarantees Net amount Individual value adjustments ,857 83, , , Securities and precious metals held in trading portfolios Securities and precious metals held in trading portfolios Debt securities - listed (traded on a recognised securities market) 3, ,777 Equity securities ,586 Precious metals Total securities and precious metals held in trading portfolios 4, ,813 Treasury shares and bonds are expressed as a reduction of the corresponding liabilities, according to the current valuation principles. 46 BCGE Annual Report 2003

51 6.3 Essential assets and liabilities under other balance sheet items, valued at market price, the results of which are under Income from trading Positive replacement values of financial derivatives accounted for under Trading results (Other assets) 25,571 16,768 Negative replacement values of financial derivatives accounted for under Trading results (Other liabilities) 16,418 14, Financial investments Book value Fair value Financial investments Debt securities 8,977 3,322 of which valued by the accrual method 654 of which valued at lowest price 8,977 2,668 9,797 2,730 Investments 65,162 84,608 77, ,500 of which qualified participations* 29,588 49,661 Real-estate 18,275 20,417 18,975 21,117 Total financial investments 92, ,347 * minimum 10% of capital or of votes 6.5 Investments under equity method No market value 15,393 5,371 Total investments under equity method 15,393 5,371 BCGE Annual Report

52 6.6 Registered name, head office, activity, share capital and major percentage stakes held Financial investments Company, head office Activity Capital in thousands % stake Fully consolidated Banque Cantonale de Genève (France) SA, Lyon Bank E 15, Anker Bank SA, Zurich Bank CHF 20, Synchrony Asset Management SA, Geneva Institutional asset management CHF 3, Investments under equity method Compagnie Foncière Franco-Suisse SAS, Lyon Real-estate E 2, Investissements Fonciers SA, Lausanne Fund manager CHF 1, On 1 January 2003, Synchrony Asset Management SA and Synchrony SA merged by absorbtion in terms of Article 748 of the Swiss Code of Obligations Fixed financial assets Company, head office Activity Capital % stake Industrial sector (50% interest and greater) Sécheron SA, Geneva Industry 10, Other sectors (33 1/3% interest and greater costing more than CHF 1,000,000) Office genevois de cautionnement mutuel, Geneva SMB support 5, The Bank sold its stake in CBG Banca Privata Lugano SA, on 21 June, The Bank has other insignificant minority holdings. 48 BCGE Annual Report 2003

53 6.7 Fixed assets Historical cost Accumulated amortisation Shareholdings Participations accounted for under the equity method 5,371 5,371 10, ,393 Total participations 5,371 5,371 10, ,393 Real-estate Bank premises 247,664 68, ,248 8,442 7, ,998 Other premises 104,920 10,432 94,488 15,795 20,287 58,406 Total real-estate 352,584 78, ,736 24,237 28, ,404 Other fixed assets 111,487 77,460 34,027 9,072 1,970 14,520 26,609 Total fixed assets 464, , ,763 9,072 26,207 42, ,013 Intangible assets (consolidation goodwill) 20,357 5,743 14, ,149 12,650 Fire-insurance value of real-estate 605, ,247 Fire-insurance value of other tangible assets 137, ,869 Commitments: future liabilities on operating leases A valuation adjustment for CHF millions is shown under Amortisation for other premises. Negative investment in intangible assets arises from the consolidation of the Compagnie Foncière Franco-Suisse SAS by the equity method. Book value Investments Disposals Amortisation Book value 6.8 Other assets and liabilities Other assets Other liabilities Other assets Other liabilities Replacement value of financial instruments 94,236 65,187 93,312 68,829 Clearing account 12,669 12,469 Spread of gains on swap operations 2,963 4,030 Federal tax 1,840 14,805 2,737 19,956 Securities & coupons 351 2,039 3,149 1,485 Issue costs / bond issues to be amortised 6,340 8,480 Other 2,396 4,571 4,255 5,884 Total 105, , , ,653 The Bank closed out swaps previously used for balance sheet hedging purposes. The Bank s gain on these transactions is spread over the residual lifetime of these swaps, in compliance with the FBC s accounting directives. BCGE Annual Report

54 6.9 Assets pledged or assigned against the Bank s commitments and assets sold with retention of title On Book value of assets pledged or consigned as collateral Effective commitments Swiss National Bank Limit 200,000 Nominal value of securities and debts pledged 225,000 Swiss electronic exchange Nominal value of pledged securities 19,150 19,150 Mortgage-backed securities (Centrale d émission de lettres de gage des banques cantonales suisses) Nominal value of mortgage securities kept aside 3,819,307 3,819,307 Total borrowings 2,823,000 2,823,000 Securities lending and repo transactions Claims resulting from a cash pledge when borrowing securities or entering into a repurchase agreement 35,000 Commitments resulting from cash received in securities lending or repo transactions 100,000 Securities held on own account, loaned or transferred as collateral for securities lending or repo transactions 100,192 of which securities with unrestricted rights of subsequent alienation or pledge Securities received as collateral in securities lending and borrowing and in repo transactions, with unrestricted rights of subsequent alienation or pledge 35,006 of which securities alienated or remitted to a third party as collateral 50 BCGE Annual Report 2003

55 6.10 Liabilities towards own pension plans Liabilities as pension fund Liabilities as custodian bank 29,223 37,399 Description of the plan The BCGE s pension plan is a defined benefit plan but contribution-oriented according to paragraph 4 of the Swiss GAAP RPC 16 recommendation. Employer s and employees contributions are fixed in advance according to the rules of the plan. The employer bears none of the investment or actuarial risks. Past surpluses generated by the plan have been used to improve early retirement benefits. The BCGE pension plan is the Group s main pension fund covering all the Bank s employees as well as the workforce of some affiliated companies. Other existing plans are not significant. Membership and rights Active and retired employees constitute those insured under the plan. Membership starts with employment, but not before 1 January following the 17th birthday for life and invalidity insurance, and not before 1 January following the 24th birthday for the retirement insurance. Membership is compulsory for the Bank s employees whose annual salary reaches the minimum set out in Article 2, paragraph 1 of the law on pensions (LPP), with the following exceptions: - employees hired for 3 months or less; - employees having an additional professional activity if they are already covered by a compulsory insurance for their main job, or if they are mainly self-employed. Membership ceases with the end of the working relationship. Insured benefits All insured women and men have rights to the retirement benefits from the first of the month following their 62nd birthday and at the latest from the first of the month following their 65th birthday. The benefits are calculated on the last fixed salary, the years insured or bought and the average degree of occupation. Early retirement is possible from the age of 56, with a reduction of the retirement benefits as determined by the rules of the plan. Other insured benefits comprise a refundable or non-refundable bridge to the state pension (AVS), a life disability annuity as well annuities for surviving spouses and children or for children of retired or disabled pensioners. Regulated contributions The contribution fixed by the rules of the plan is 25.5% of the insured salary (gross salary less a harmonisation deduction of CHF 13,000). The employer pays 17% of the salary and the employee 8.5%. Employer s contribution reserves Not applicable. No provision in the rules of the pension plan. Liabilities arising from the termination of employment which is otherwise unprovided for At the termination of working relations, the pension fund starts paying the free-transfer benefit which is equal to the current value of acquired benefits and at least to the value of the exit benefits, according to Article 17 of the law on free transfer (LFLP). Current value of future reductions of existing contributions to free funds Not applicable. BCGE Annual Report

56 6.11 Current bond issues Bonds and mortgage-backed bonds Bonds 1,945,000 2,525,000 Mortgage-backed bonds 2,823,000 2,799,000 Total bonds and mortgage-backed bonds 4,768,000 5,324,000 Average rate at year end 3.36% 3.42% Bonds Maturity at Year Interest Amount call / final of issue rate % ,000 ** , ,000 ** , ,000 ** ,000 * ,000 ** ,000 * , ,000 ** ,000 ** , ,000 ** ,000 * ,000 * , ,000 Total 1,945,000 of which subordinated debt 420,000 * = Subordinated ** = Libor-based private placements 52 BCGE Annual Report 2003

57 6.12 Valuation adjustments and provisions, as well as reserves for general banking risks. Balance at Utilisation according to purpose Recoveries, non-performing interest, exchange differences New provisions charged to the P&L account Release of provisions credited to the P&L account Balance at Valuation adjustments and provisions for default risks (collection and country risks) 947, ,043 8,285 47,860 6, ,858 Valuation adjustments and provisions for other operating risks 8,433 6, ,321 Valuation adjustments and provisions for financial assets 28,442 5, ,527 27,515 Provisions for taxes Other provisions 5, ,611 1,913 22,665 Total valuation of adjustments and provisions 990, ,650 8,175 72,770 8, ,359 Less: Valuation adjustments directly netted with assets 977, ,670 Total valuation adjustments and provisions shown on liabilities 13,482 5,689 Reserves for general banking risks BCGE Annual Report

58 6.13 Maturity structure of current assets, financial investments and debt Sight Redeemable at notice Time to maturity Fixed assets Total Within 3 months 3 to 12 months 12 months to 5 years More than 5 years Current assets Cash 124, ,283 Money-market instruments , , ,824 Due from banks 7, ,886 93,321 1,915 1,094,555 Due from clients 932, , ,432 1,692,339 2,404, ,308 6,001,368 Mortgages 119,819 1,805, , ,657 2,469, ,788 6,019,955 Securities and precious-metals trading portfolios 4,395 4,395 Financial investments 66,156 7,976 18,282 92,414 Total current assets ,254,966 2,365,255 1,999,894 2,952,474 4,875, ,072 18,282 14,146, ,552,332 3,554,620 1,826,353 2,013,663 5,617, ,499 21,873 14,955,400 Debt Money-market instruments 1,216 1,216 Due to banks 40, , ,199 75,498 54, ,986 Due to clients on savings and deposit accounts 936,601 4,085,201 5,021,802 Due to clients, other 2,141, , ,755 75,000 21,476 3,353,869 Medium-term notes (cash bonds) 38,674 39,460 53,332 9, ,268 Mortgage-backed bonds 56, ,000 2,896,535 1,234,745 4,737,280 Total debt ,119,451 4,085, ,287 1,135,414 3,100,365 1,320,703 13,737, ,501,943 3,868,521 2,429, ,089 3,427,430 1,617,058 14,589, BCGE Annual Report 2003

59 6.14 Amounts due to/from affiliates and loans to directors Due from affiliates 4,012,122 4,863,004 of which Fondation de Valorisation 3,415,327 4,228,966 Due to affiliates 46,561 35,027 Loans to directors 4,617 2,693 Due from affiliates (excluding the Fondation de Valorisation) are mostly mortgages to Canton Geneva s public-sector property institutions. Due to affiliates correspond to the current accounts of institutions. These operations are carried out in standard conditions. Loans to directors are mostly mortgages granted to directors and to members of the General Management on the standard conditions applicable to the Bank s employees. Due to and from Canton Geneva, shown under the balance sheet, are carried out on standard banking conditions. The Bank paid CHF 3.6 million in fees to Canton Geneva for the simple guarantee on the loans to the Fondation de Valorisation (CHF 1 million) and for the guarantee on savings accounts (CHF 2.6 million) Assets and liabilities by domestic and foreign origin Switzerland Foreign Switzerland Foreign Assets Cash 120,259 4, ,231 2,112 Money-market instruments 799,734 10, ,562 3,887 Due from banks 282, , , ,243 Due from clients 5,047, ,443 5,856, ,248 Mortgages 6,006,731 13,224 6,008,767 67,947 Securities and precious-metals trading portfolios 3, ,813 Financial investments 88,150 4, ,435 4,912 Investments under equity method 9,978 5,415 5,371 Fixed assets 247, , Intangible assets 12,650 14, Accrued income and prepaid expenses 31,076 2,216 53,298 1,174 Other assets 101,094 4, ,606 3,327 Total assets 12,751,924 1,809,381 14,074,962 1,374,591 Liabilities Money-market instruments 1,216 1,710 Due to banks 420,346 61, , ,861 Due to clients on savings and deposit accounts 4,566, ,019 4,224, ,837 Due to clients, other 3,070, ,531 3,162, ,025 Medium-term notes (cash bonds) 141, ,685 Bonds and mortgage-backed bonds 4,737,280 5,324,000 Accrued expenses and deferred income 93, ,435 Other liabilities 99,300 2, ,925 3,728 Valuation adjustments and provisions 4,466 1,223 12, Share capital 360, ,000 Capital reserve 309, ,890 Accumulated loss / retained earnings 35,780 19,351 Treasury shares 17,772 Foreign-exchange differences 360 Group result 7,192 28,034 Total liabilities 13,756, ,766 14,579, ,204 BCGE Annual Report

60 6.16 Total assets by country or group of countries Amounts % Amounts % Assets Europe Switzerland 12,751, ,074, France 605, , Germany 261, , United Kingdom 134, , Austria 121, , Italy 96, , Belgium 55, Greece/Cyprus 51, , Turkey 36, , Luxemburg 25, Other 120, , North America US 178, , Canada 1, South and Central America 74, , Africa , Middle East 10, , Asia Japan 4, , Other 28, , Australia / Oceania Australia Other Total assets 14,561, ,449, BCGE Annual Report 2003

61 6.17 Balance sheet by major currencies Currencies Assets Cash CHF 95,957 USD 1,809 EUR 25,059 OTHER 1,458 METALS Money-market instruments 800,151 6,828 2,845 Due from banks 940,603 93,614 40,027 18,725 1,586 Due from clients 4,831, , ,769 5, Mortgages 5,980,637 2,247 37,071 Securities and precious-metals trading portfolios 3, Financial investments 89,184 1,013 2,217 Investments under equity method 8,009 7,384 Fixed assets 247, Intangible assets 13, Accrued income and prepaid expenses 28, , Other assets 100,684 4,479 Total asset positions 13,139, , ,439 28,014 2,515 Delivery claims resulting from cash forward and options transactions 702, , ,161 20,677 10,994 Total assets 13,842, , ,600 48,691 13,509 Liabilities Money-market instruments 1, Due to banks 202, , , Due to clients on savings and deposit accounts 4,999,693 22,109 Due to clients, other 2,847, , ,540 18,639 3,550 Medium-term notes (cash bonds) 141,268 Mortgage-backed bonds 4,737,280 Accrued expenses and deferred income 90,077 1,255 2,296 2 Other liabilities 98, ,692 8 Valuation adjustments and provisions 4,466 1,223 Share capital 360,000 Capital reserve 309,051 Accumulated loss/retained earnings 35,780 Treasury shares 17,772 Currency conversion difference 360 Group result 7,192 Total liability positions 13,744, , ,118 19,225 3,550 Delivery commitments resulting from cash, forward and options transactions 265, , ,384 22,999 9,468 Total liabilities 14,009, , ,502 42,224 13,018 Net position by currency 167,147 47, ,098 6, BCGE Annual Report

62 6.18 Contingent liabilities Irrevocable guarantees 119, ,697 Irrevocable commitments arising from letters of credit 367, ,529 Contingent liabilities 486, , Loans by acceptances Commitments resulting from deferred payments 18,832 44,139 Loans by acceptances 18,832 44, BCGE Annual Report 2003

63 6.20 Open derivative instruments TRADING INSTRUMENTS HEDGING INSTRUMENTS at year end Positive Negative Positive Negative replacement replacement Contract replacement replacement Contract value value volume value value volume Interest-rate instruments Forward contracts inc. FRAs Swaps 31 25,000 68,544 47,946 2,104,000 Futures Options (OTC) ,698 Options (exchange traded) Total interest-rate instruments 31 25,000 68,665 48,769 2,195,698 Currencies / precious metals Forward contracts 24,622 15, ,560 Cross-currency interest-rate swaps ,512 Futures Options (OTC) ,184 Options (exchange traded) Total currencies / precious metals 25,311 16,189 1,112,256 Equity securities / indices Forward contracts Futures Options (OTC) Options (exchange traded) ,469 Total equity securities / indices ,015 Total on ,571 16,418 1,146,271 68,665 48,769 2,195,698 Total on ,768 14,884 2,957,169 76,544 53,945 The Bank did not enter into any specific netting contracts Fiduciary transactions Fiduciary investments with third parties 428, ,825 Fiduciary loans 8,661 9,829 Fiduciary transactions 436, ,654 BCGE Annual Report

64 6.22 Interest income Loans to banks and clients 414, ,167 Bills of exchange and money-market instruments 2,062 10,721 Interest and dividends earned on financial investments 3,768 4,578 Interest and dividends earned on trading portfolios 4,667 7,031 Total 425, , Interest expenses Interest on subordinated debts 19,411 18,850 Other debit interest 234, ,348 Total 254, , Trading results Foreign-exchange and banknote trading, including derivatives 13,793 15,710 Precious-metals trading Securities trading 4,496 3,042 Total 18,377 12, Personnel Salaries and bonus payments 87,386 86,713 Social-security benefits 7,219 9,454 Contributions to pension funds 12,371 11,416 Other personnel expenses 4,365 4,202 Total 111, , Other operating expenses Occupancy expenses 10,759 10,842 IT expenses 36,874 23,112 Office equipment, furniture, vehicles Other operating expenses 40,265 43,901 Total 88,370 78, BCGE Annual Report 2003

65 6.27 Depreciation of fixed assets Permanent installations 9,575 7,224 Appliances, fixtures and telecommunications, IT programs and equipment 11,562 14,516 Office equipment, furniture and vehicles 2,958 4,734 Participations and goodwill 1,149 1,151 Total 25,244 27, Valuation adjustments, provisions and losses Valuation adjustments, losses on credits, contingent liabilities 63,077 64,445 Valuation adjustments on financial investments 3,296 Miscellaneous provisions and losses 14,753 Total 63,077 82, Extraordinary income Sale of fixed assets 19,984 Reversal of reserves for general banking risks 1,187 Disposals 1,916 Other 2,435 16,521 Total 22,419 19, Extraordinary expenses Fee for Canton Geneva s simple guarantee on the loan to the Fondation de Valorisation 1,000 3,000 Other extraordinary expenses 75 2,974 Total 1,075 5, Income and expenses of ordinary banking activities in Switzerland and abroad, according to domicile s accounting principles Switzerland Foreign Switzerland Foreign Income from interest-rate operations 164,783 6, ,844 5,455 Income from commissions and services 70,054 2,639 65,059 2,114 Income from trading 18,377 12,699 Other ordinary income 12,323 1,223 7, Operating expenses 194,478 5, ,536 4,501 Gross profit 71,059 5,081 67,242 3,115 BCGE Annual Report

66 I ve been with the BCGE since 1985, and the best things about my job are the familiar faces, the working atmosphere and my daily tasks. I m retiring at the end of 2OO4 and I m looking forward to the future especially to my new title of grandfather. Gianni Martinini Usher Logistics and Information Technology 62 BCGE Rapport Annuel 2003

67 Corporate Governance Information on the BCGE 1. General information about the Bank Group and shareholder structure Capital structure Organs of the Banque Cantonale de Genève Organisation of the Board of Directors Group management Audit Further information on the Board of Directors for corporate governance purposes Further information on the General Management for corporate governance purposes Management contract Remuneration Shareholders participation rights limit and representation of voting rights External auditor Information policy Further information regarding the major shareholdings of the BCGE Group Information on affiliate companies of the Banque Cantonale de Genève 78 BCGE Annual Report

68 Corporate Governance Information on the BCGE 1. General information about the Bank 1.1 Registered name Legal form The Banque Cantonale de Genève is a limited company established by public law according to Article 763 of the Swiss Code of Obligations. It has the status of a cantonal bank as defined by the Federal Law on Banks and Savings Banks (Federal Banking Law), and conducts its business under the registered name of Banque Cantonale de Genève. Except where otherwise specified in the Cantonal Law governing the Banque Cantonale de Genève, the Statutes, the Federal Banking Law and Federal Law on Stock Exchanges and Securities Trading, the provisions of Article 26 of the Swiss Code of Obligations are applicable to the Bank. The registered office and the management of the Bank are in Geneva where it also operates branches. 1.2 Commercial register The Banque Cantonale de Genève was entered in the Geneva Register of Commerce on 17 December Purpose, activities and duration The main purpose of the Banque Cantonale de Genève is to contribute to the economic development of the canton and region. In its capacity as a multi-purpose bank, it handles all transactions covered by the Federal Banking Law and trades in securities. In particular, it performs the transactions listed under article 2 of the Statutes (page 90). The Bank is authorised to pursue its activities on any financial or stock market in Switzerland and abroad. It is managed according to the proven principles of economy and banking ethics. It is established for an unlimited period. 1.4 Supervision The Bank is subject to supervision by the Federal Banking Commission, in compliance with the Federal Banking Law. The Federal Banking Commission may require from the Bank and its auditors any information and documents needed for the performance of its task. Supervision of compliance with cantonal laws is a matter for the Council of State of the Republic and Canton Geneva (Geneva State Council). 2. Group and shareholder structure 2.1 Group structure Please refer to the presentation of the Group s organisational structure on page 20. Please refer to the table of the Group s major affiliated companies on page Major shareholders The situation regarding major shareholders on 31 December 2003 is set out in the table opposite: 2.3 Cross participations The Bank is not aware of the existence of any cross participations exceeding 3% of the capital or of the totality of shares with voting rights. 2.4 Business strategy and main objectives Please refer to pages A and C of this annual report. 3. Capital structure 3.1 Share capital The capital consists of A and B registered shares and bearer shares, making a total of 5,720,826 shares. The bearer shares have a nominal value of CHF 100 each and are listed on the Swiss stock market (SWX), whereas the registered shares with a nominal value of CHF 50 each are held exclusively by Genevese institutions established under public law and are not listed. The canton and its municipalities hold all the registered shares, which give them a majority of the votes. Each municipality is required to hold at least 2,010 A registered shares with a nominal value of CHF 50 each. The Bank increased its capital on 27 June It amounts to CHF 360,000,000 and underwent no further changes. The capital is represented by 2,651,032 A registered shares with a nominal value of CHF 50 each, 1,590,620 new B registered shares with a nominal value of CHF 50 each, and 1,479,174 bearer shares, each with a nominal value of CHF 100, all fully paid up. 3.2 BCGE bearer shares Stock number ISIN number CH BCGE bearer shares symbols Stock market quotation Swiss Stock Exchange BCGE Reuters BCGE.S Bloomberg BCGE SW Telekurs BCGE 3.4 Authorised or conditional capital increase There is at present no provision in the Statutes authorising the Board of Directors to increase the capital (authorised increase) or to permit a conditional capital increase (conversion or option rights). 64 BCGE Annual Report 2003

69 Voting rights held by public authorities on Shareholders Bearer shares A & B registered shares Total votes Nom. bearer share value in CHF Nom. reg. share value in CHF Total nominative value Canton Geneva 538,636 2,510,443 3,049,079 53,863, ,522, ,385, City of Geneva 147,270 1,208,106 1,355,376 14,727,000 60,405,300 75,132, Municipalities 5, , , ,300 26,155,150 26,751, Shares or votes of public authorities 691,869 4,241,652 4,933,521 69,186, ,082, ,269, Total: votes and capital 1,479,174 4,241,652 5,720, ,917, ,082, ,000,000 % votes % capital 3.5 Changes in the share capital No changes were made to the share capital in the period under review. 3.6 Participation and dividend certificates The Bank has issued no participation certificates or certificates giving dividend rights. 3.7 Transfer restrictions and registration of nominees The by-laws of the Banque Cantonale de Genève contain no provisions to this effect. 3.8 Transfer restrictions by share category with an indication of possible clauses in the Group s Statutes and of provisions governing the granting of dispensations In terms of the Statutes, the registered shares are transferable only between the local municipalities. Moreover, each municipality is required to hold at least 2,010 A registered shares with a nominal value of CHF 50 each. 3.9 Procedure and conditions for lifting statutory privileges and transfer restrictions Statutory privileges and transfer restrictions may only be removed by an amendment of the law on the Banque Cantonale de Genève, subject to a referendum. 4. Organs of the Banque Cantonale de Genève 4.1 General Meeting of Shareholders The General Meeting of Shareholders is the supreme body of the Bank. Persons who intend to attend the General Meeting must give evidence of their status as shareholders or of their authority to represent shareholders. The shareholders exercise their voting rights in proportion to the number of shares they hold, irrespective of their nominal value, each share giving the right to one vote. 4.2 Powers of the General Meeting Please refer to Article 7 of the Statutes on page The Board of Directors The Board of Directors may be constituted with 15 to 18 members. The law on the Banque Cantonale de Genève determines its membership. On 31 December 2003, it had 14 members, namely: Michel Mattacchini, former bank manager, chairman since 1 June 2002; David Hiler, historian, member of the Geneva Grand Council, vice-chairman; Ion Bals, industrialist; Gabriel Barrillier, secretary general of the Geneva Building Trades Federation; Madeleine Bernasconi, mayor of Meyrin, member of the National Council; Bernard Clerc, head of research at the Geneva General Hospice; Jean Gallay, company manager; Mariane Grobet-Wellner, economist; Sami Kanaan, consultant, member of the Grand Council; Bernard Lescaze, historian, member of the Grand Council, Geneva city councillor; Pierre-Alain Loosli (until ), attorney-at-law; Erwin Meyer, bank manager; Andràs November, honorary professor, former member of the Grand Council; Jean-Claude Rivollet, chartered accountant, and Michel Terrier, former bank manager, mayor of Jussy, secretary to the BCGE Board. 5. Organisation of the Board of Directors 5.1 Procedure for the election of Board members Nominations to the Board of members representing bearer shareholders must reach the registered office of the Bank no later than 31 March before the ordinary General Meeting or one month before an extraordinary General Meeting convened to make such appointments. Directors representing the registered shareholders must be designated by 31 March before the ordinary General Meeting or one month before an extraordinary General Meeting which renews the term of office of directors representing bearer shareholders. BCGE Annual Report

70 5.2 Allocation of tasks between the Board of Directors and the Bank Committee The Board of Directors is the body responsible for the strategic management of the Bank in terms of Article 3, para. 2 (a) of the Federal Banking Law. It determines the general policy of the Bank and the nature of its activities according to the objectives defined by law, while ensuring the attainment of the Bank s statutory purpose as defined in Article 2. It supervises the General Management and the activity of the Bank Committee. It appoints committees responsible for supervising and reporting on the different activities of the Bank. The Bank Committee, for its part, is delegated by the Board to supervise the management. 5.3 Functions of the Board of Directors Please refer to Article 16 of the Statutes on page 92. In addition to the responsibilities conferred on it by the Statutes, the Board of Directors has the following powers and duties as defined in the management and organisational regulations: 1. Approval of the annual budget; 2. Establishing the general policy regarding salaries and the pension fund; 3. Establishing the Bank s real-estate policy; 4. Defining information required for the Bank s risk policy; 5. Approval of acquisitions and divestments worth more than CHF 3,000, Working method of the Board of Directors and Bank Committee The Board of Directors meets at least once a month. In the absence of its chairman, it is chaired by the vice-chairman or the secretary. It may hold extraordinary meetings if business so requires, or at the request of seven of its members, of the Bank Committee or of the auditors. The Bank Committee meets at least once every 15 days or as often as the business of the Bank requires. The presence of a majority of its members is necessary. The members of the Board and of the Bank Committee must be able to consult the files on the items appearing on the agenda within a time limit stipulated in the rules of the Committee but no later than 24 hours before the meeting opens. Several special ad hoc or permanent committees have specific functions delegated by the Board of Directors. 5.5 Number of meetings of the Board of Directors in 2003 In 2003, the Board of Directors held 15 ordinary meetings and 10 extraordinary meetings. 5.6 The Bank Committee Currently, the Bank Committee is composed of seven members appointed according to the law on the Banque Cantonale de Genève. They are: Michel Mattacchini, chairman; David Hiler, vice-chairman; Michel Terrier, secretary; Mariane Grobet-Wellner, Bernard Lescaze, Ion Bals and Jean-Claude Rivollet. 5.7 Powers of the Bank Committee Please refer to Article 21 of the Statutes on page 93. In addition to responsibilities conferred onto it by law and the Statutes, the Bank Committee has the following powers and duties as defined by the management and organisational rules: 1. Granting loans and credits in accordance with the by-laws; 2. Making acquisitions and divestments of stakeholdings worth less than CHF 3,000,000; 3. Setting the base rates of mortgages and loans to local authorities; 4. Setting savings-deposit rates; 5. Approving the purchase and sale of capital goods for the Bank s own use and of real-estate, without prejudice to the powers of the General Management; 6. Establishing internal directives concerning the investment of cash and securities deposits, exchange transactions, other securities and commitments taken abroad; 7. Setting the remuneration of the General Management and the head of the internal audit; 8. Appointing the members of the General Management. 5.8 Number of meetings of the Bank Committee in 2003 In 2003, the Bank Committee held 36 ordinary meetings and one extraordinary meeting. 5.9 Mechanisms for information and supervision by the General Management and Board of Directors A monthly financial report is forwarded to the General Management and Bank Committee. A detailed quarterly report for each area of activity is drawn up at the level of the General Management and Bank Committee to monitor targets and results. The results by entity and activity area are presented to the Board of Directors every six months. To these are added specific reports on the tracking of business and risk control, addressed to the Bank s organs at the same intervals. In addition, the internal audit, which reports to the Board of Directors, makes selective checks and establishes reports on these missions. They are supplemented by monthly committee meetings (CALM) to consider rate risks, and by some 10 meetings a year of the risk committee (CRISK) Risk management Please refer to risk management, paragraph 5 of the notes to the 2003 consolidated financial statements on page BCGE Annual Report 2003

71 6. Group management 6.1 General management The members of the General Management are: Blaise Goetschin, chief executive officer; Alain Spadone, head of the Private Banking division; Emile Rausis, Credit Control and Administration; Claude Bagnoud, head of Corporate division; Michel Villien-Gros, head of Logistics and IT (until 30 June 2003); Jean-Marc Joris, head of Logistics and IT (since 1 July 2003); Eric Bourgeaux, head of Finance and Risk Management, and Johan Bernard Alexander Kroon, head of the Retail Services and Branch Network division. The General Management is appointed for an indefinite period. However, its members are required to resign from their duties no later than at the end of the calendar year in which they reach the age of Powers and duties of the General Management Please refer to Article 25 of the Statutes on page 93. Over and above the powers granted to it by the Statutes, the General Management takes decisions according to management and organisational regulations on: 1. The setting of interest rates outside the responsibility of the Bank Committee; 2. Loans, cash investments, exchange transactions and placing of securities pursuant to the Bank Committee s directives; 3 The acquisition and disposal of capital goods for the use of the Bank and of real-estate with a value of less than CHF 2,000,000, when such properties are not intended for use by the Bank; 4. The appointment of executives; 5. Internal directives on banking operations that are not governed by law, the Statutes, or the present regulations; 6. The maintenance and refurbishment of buildings at a cost not exceeding CHF 2,000,000 for each property; 7. Determining the salaries of the Bank s staff with the exception of the General Management and the head of internal audit. In addition, it is responsible for: 1. Supervising compliance with regulations on liquidity, shareholders equity and risk sharing; 2. Determining the necessary rules for the application of risk-management policy and submitting these for approval by the Board of Directors; 3. Appointing a member of the General Management responsible for monitoring the trend of derivative-related risks; 4. Setting limits for country and interest-rate risks, exchange and market risks and submitting these limits to the Bank Committee for approval; 5. Regularly submitting to the Board of Directors reports on business development (financial statements, analyses, major transactions and events), with any other reports that may be requested by the Board; 6. Establishing a quarterly list of all the major risks defined by Article 21 of the federal banking ordinance on the form drawn up by the Federal Banking Commission for the attention of the Bank Committee and the Board of Directors. 7. Audit 7.1 The Control Committee The Control Committee comprises three members: two directors designated by the Board of Directors and the third member appointed by Geneva s State Council. The member of the Control Committee appointed by the State Council cannot be a civil servant. He is governed by banking secrecy. The present members are: Erwin Meyer and Andràs November, both of whom are directors, and Jean-Blaise Conne, chartered accountant, a partner at PricewaterhouseCoopers, appointed by the Geneva State Council. 7.2 Powers and duties of the Control Committee Please refer to Article 28 of the Statutes on page Number of meetings of the Control Committee In 2003, the Control Committee held 24 ordinary meetings. 7.4 Internal audit The internal audit is an independent unit reporting to the Board of Directors, with particular responsibility for evaluating the effectiveness of the Bank s risk-management and internal-control processes. It may make proposals to improve their efficiency. It currently comprises 13 auditors and performs its mandate at the parent company and subsidiaries. The head of the internal audit is Mr Gilbert Galland, who holds a federal diploma in banking economics. BCGE Annual Report

72 8. Further information on the Board of Directors for corporate governance purposes Mattacchini Michel Mr Michel Mattacchini, born on 20 February 1946, is Swiss. He was elected to the Board of Directors of the Bank in 2001 by the bearer shareholders at the General Meeting. Since 2001, he has also been a member of the Bank Committee. His mandate expires in Since 1 June 2002, Michel Mattacchini has been chairman of the Board of Directors of the Bank. His mandate expires in Michel Mattacchini began his career as a bank employee with Société de Banque Suisse in Geneva, Basel and New York. He was put in charge of the Business Division (multinationals), Swiss companies, real-estate, networks, branches, Rhône-Alpes and institutional investors. From 1999 to 2001, he was responsible for recovery management at UBS SA for French-speaking Switzerland. In 2001, he retired from UBS SA and continued his activity as an independent director and consultant. Other activities: Michel Mattacchini is a director of LEM Holding SA, a listed company registered at Plan-Les-Ouates, director of Parking du Mont-Blanc SA in Geneva, director and vice-chairman of Parking de Cornavin SA in Geneva and director and vice-chairman of 022 Télégenève SA in Geneva. A person close to Michel Mattacchini holds some bearer shares in the Bank. *Further notes: 1, 2, 3, 5, 6, 8, 10, 11, 12. Hiler David Mr David Hiler was born on 18 June 1955 and is Swiss. Appointed by the Geneva City Council, he has been member of the Board of Directors since In 2000, he became a member of the Bank Committee and vice-chairman of the Board of Directors. His mandate as director is due to end in He holds a degree in economics and social sciences from Geneva University and began his professional career as a teacher. He became an assistant in the department of economic history and then head of teaching. He was a journalist for the Tribune de Genève and has held office for the Republic of Geneva, the city of Geneva, the local authorities, the Geneva Real-Estate Chamber (CGI), the Geneva Residential Cooperative Society (SCHG) and the Geneva section of the Swiss Society of Entrepreneurs. Among his other activities, he is a member of the board of the Real-Estate Foundation in Geneva and chairman of the Popular Albanian University in Geneva. David Hiler is a member of the Geneva Grand Council, elected on the list of the Ecology Party. *Further notes: 1, 2, 3, 5, 7, 8, 9, 10, 11, 12. Barrillier Gabriel Mr Gabriel Barrillier, born on 1 July 1945, is Swiss. He has been a member of the Board of Directors since His mandate as a director ends in He holds a degree in political science (HEI) obtained in 1970, and became a director of the Swiss Farmers Union in 1980 where he dealt primarily with economic issues involving the OECD, the employment market and public finances. Since 1980, he has also been secretary general of the Geneva Building Trades Federation (FMB) and a member of many economic and professional bodies in Geneva and in Switzerland. In particular, he is a member of the select committee of the Swiss Construction Industry (the umbrella organisation for the construction industry with its head office in Zurich). Among his other activities, he is a member of the board of the Occupational Benefits Foundation of the Banque Cantonale de Genève. He has held political office as a member of the Geneva Grand Council since October 2001, elected on the list of the Radical Party. He also holds various posts in several non-parliamentary and professional committees and bodies. *Further notes: 1, 2, 3, 5, 7, 8, 9, 10, 11, 12. Bals Ion Mr Ion Bals, born on 24 June 1942, is Swiss. He was elected to the Board of Directors of the Banque Cantonale de Genève in 2001 by the bearer shareholders. His term of office ends in After training as an electronics engineer at the Polytechnic School, he was the managing director of Orbisphère from 1985 to He was then chairman of the board of Orbisphère between 1992 and Among his other activities he has been a member of the board of the D.H. Wright Foundation for Science in Geneva since He has also been a member of the LAPMI Commission (law on assistance to small and medium-sized industries) since 1998 and has been reappointed to that post for four years. Finally, he is a member of the board of Omnisens, a start-up company that operates on the site of the Federal Polytechnic in Lausanne (EPFL). *Further notes: 1, 2, 3, 5, 6, 7, 8, 9, 10, 11. Bernasconi Madeleine Mrs Madeleine Bernasconi, born on 15 September 1939, is Swiss. She was appointed to the Board of Directors by the association of Geneva s municipalities and has been a member since Her term of office ends in After attending a business school, she trained as a teacher and taught in the health and youth department. She then worked in the financial service of ABN (Allgemeinde Bank Nederland). She attended a training course in public administration with IDEHAP and was manager of the civil-security department. Among her other activities, she is a member of the board of the Nouveau Meyrin Foundation, chairperson of the Jura La Tour Foundation, chairperson of the Association de la Résidence du Jura (EMS) and member of the Tourism Foundation board in Geneva. From 1990 to May 2003, Madeleine Bernasconi was administrative councillor and mayor of Meyrin. From 1999 to 30 November 2003, she was a member of the National Council elected on the Radical Party list. Mrs Bernasconi holds a few bearer shares in the Bank. *Further notes: 1, 2, 3, 5, 7, 8, 10, BCGE Annual Report 2003

73 Clerc Bernard Mr Bernard Clerc, born on 27 February 1946, is Swiss. He was appointed to the Board of Directors by the Geneva City Council in May His term of office expires in After training as a social assistant at the Social Studies Institute in Geneva, he worked as a social assistant in various Geneva social services. He is currently in charge of research at the General Hospice in Geneva. Among his other activities, Bernard Clerc is a member of the Committee of the Association for the Taxation of Financial Transactions and Assistance to Citizens (ATTAC- Geneva). Bernard Clerc held political office as a member of parliament from 1993 to 2001, elected on the list of the Left Alliance. He holds some bearer shares in the Bank. *Further notes: 1, 2, 3, 4, 5, 7, 8, 10, 11, 12. Gallay Jean Mr Jean Gallay, born on 18 March 1957, is Swiss. The Geneva State Council appointed him to the Board of Directors in His mandate as a director ends in Jean Gallay holds a degree from the Federal Polytechnic School in Lausanne. Between 1983 and 1986 he worked at Hayek Engineering in Zurich and as a strategy and reorganisation consultant. From 1987 to 1997, he was the manager of Jean Gallay SA, an industrial company established in Geneva. From 1997 to 2003, he was manager of Mag Plastic SA, a company based in Geneva. From 1994 to 2003, he was also a member of the steering committee of Mauser Werke GmbH, a company established in Germany. Since 1997, Jean Gallay has been a director of Sécheron SA, wholly owned by the Banque Cantonale de Genève. Since 2003, he has been chief executive officer of Frame SA, a company specialising in industrial investments. Among other activities, Jean Gallay is a member of the bureau of the Chamber of Commerce and Industry of Geneva (CCIG). Finally, he has a seat on the board of Harwanne SA, Geneva, an industrial and financial investment company listed on the Swiss stock exchange SWX. Jean Gallay holds some bearer shares in the Bank. *Further notes: 1, 2, 3, 5, 6, 8, 10, 11, 12. Grobet-Wellner Mariane Mrs Mariane Grobet-Wellner, born on 22 May 1947, holds Swiss and Swedish nationality. She was appointed to the Board of Directors by the Geneva State Council in October Her term of office ends in Mrs Grobet-Wellner holds a degree in economics and works as an independent economist. She has been a member of the Bank Committee since joining the Board of Directors. Among her other activities, she has been treasurer of Asloca-Geneva since She was elected a member of the Geneva Grand Council in 1997 and re-elected in 2001 on the Socialist Party list. Mariane Grobet-Wellner holds some bearer shares in the Bank. *Further notes: 1, 2, 3, 4, 7, 8, 10, 11, 12. Kanaan Sami Mr Sami Kanaan, born on 8 January 1964, is Swiss. He was appointed to the Board of Directors by the Geneva City Council and has held his seat since His term of office is due to end in Sami Kanaan graduated in physics from the Federal Polytechnic in Zurich and went on to take a master s degree in political science at Geneva University and finally a diploma in advanced political-science studies at Geneva University. From 1989 to 1995, he was head of the French-speaking section of the Society for University and Research (SUR) in Zurich and Geneva. From 1995 to 2001, he was responsible for the evaluation and quality-assurance activities of the European Conference of University Rectors in Geneva. Since 2001, he has been a partner of the Evaluanda Bureau (political/public evaluations and organisational analysis) in Geneva. He is chairman of the Transport and Environment Association Committee Geneva section, and chairman of the Geneva AIDS Group Committee. From 1997 to 2001, he was a member of the Geneva City Council. In November 2001, he became a member of the Geneva Grand Council elected on the Socialist Party list. *Further notes: 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12. Lescaze Bernard Mr Bernard Lescaze, born on 31 March 1947, is Swiss. The Geneva City Council appointed him to the Board of Directors in Since 2001, he has been a member of the Bank Committee. His term of office expires in Bernard Lescaze holds a double degree in letters and law from Geneva University and a postgraduate diploma in history from Lausanne University. He worked for the FNRS before becoming an assistant at Geneva University and finally a teaching assistant at the universities of Lausanne and Toulouse. Today he works as an independent historian and HES-SO lecturer. Among his other activities, Bernard Lescaze is secretary to the board of the University Foundation for Student Accommodation (FULE) and chairman of the Pittard Foundation in Andely. Since 1987, Bernard Lescaze has been a member of the Geneva City Council of which he has also served as president. Since 1993, he has been a member of the Geneva Grand Council elected on the Radical Party list. In , he chaired the Geneva Grand Council. *Further notes: 1, 2, 3, 4, 5, 7, 8, 9, 10, 11. Loosli Pierre-Alain (until 13 November 2003) Born in 1944, Mr Pierre-Alain Loosli is Swiss. He was a member of the Board of Directors from 1999, appointed by the Geneva State Council. A lawyer by training, Pierre-Alain Loosli headed the tax department at Arthur Andersen before practising at the bar for several years. Appointed deputy manager of the cantonal tax authority in 1981, he became general manager in 1987 and held that post until He was a manager at Lombard Odier & Co. from 1994 to 1997 and resumed his activities as an attorney at the Geneva bar. Pierre-Alain Loosli is a BCGE Annual Report

74 member of the control committee of the self-regulating body for casinos and sits on the boards of Banque Jacob Safra (Suisse) SA, Lundin Oil Services SA and APM Audiovisual Properties Management SA. Since 1987, he has lectured at Geneva University and is the author of several works on corporate taxation. Mr Pierre-Alain Loosli resigned from his post as director on 13 November *Further notes: 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12. Meyer Erwin Born on 6 August 1939, Mr Erwin Meyer is Swiss. He joined the Board of Directors in 1999, appointed by the Geneva State Council. His term of office ends in Erwin Meyer began his career with Credit Suisse and attended several training courses in banking in London and Frankfurt. He became head of the departments of corporate customers, branches and retail banking with Credit Suisse in Geneva. He went on to take charge of loans at risk (workout) for French-speaking Switzerland when Credit Suisse took over the Banque Populaire Suisse. Finally, he was in charge of the credit unit for French-speaking Switzerland of Credit Suisse. In 1998, Erwin Meyer retired from Credit Suisse. Since 1998, he has been chief executive officer of Banque Unexim (Suisse) SA, in Geneva, subsequently renamed Rosbank (Switzerland) SA. Among his other activities, Erwin Meyer is a member of the board of the foundation and management of Orgexpo in Geneva, which runs Palexpo. He is also a member of the bureau and vice-chairman of Geneva Tourism (OTG), secretary of the board of Banque Bonhôte and Co. SA of Neuchâtel and member of the board of Baumann-Jeanneret SA in Geneva. Among his official duties, Erwin Meyer is a member of the LAPMI Commission (law on aid for the financing of small and medium-sized industries) and is a reserve colonel in the army information service. Erwin Meyer holds some bearer shares in the Bank. *Further notes: 1, 2, 3, 7, 8, 10, 11, 12. November Andràs Mr Andràs November, born 21 March 1936, is Swiss. He has held a seat on the Board of Directors since 1999, appointed by the Geneva State Council. He is also a member of the Control Committee. His mandate ends in Andràs November holds a degree in political science from Geneva University and a doctorate in political science from the University Institute of Higher International Studies (IUHEI). He was a research assistant with the International Labour Office (ILO) and a research employee of Nestlé SA. He worked at the CFH Institute Centre for Watch Industry Training in Lausanne the International Trade Centre (UNCTAD/GATT) in Geneva and the general audit company Atag in Bern. He worked as a management consultant with the Institute for Research, Communication and Motivation (IRCM) in Geneva and worked with Centre-Info SA (centre for research and information on business and investors responsibility) in Fribourg. Today, he is an honorary professor at the University Institute for Development Studies (IUED) and coordinator of a research programme on biotechnologies and sustainable development. Andràs November is also a member of the Environmental Council for Canton Geneva, member of the Strategic Council for Economic Promotion of Canton Geneva, member of the Ecology-Economy Association for Sustainable Development and chairman of BIEN/Switzerland (Basic Income European Network). He holds some bearer shares in the Bank. *Further notes: 1, 2, 3, 5, 6, 7, 8, 10, 11. Rivollet Jean-Claude Born on 12 August 1941, Mr Jean-Claude Rivollet is Swiss. He joined the Board of Directors in 2002 when he was elected at the General Meeting by the bearer shareholders. He is a member of the Bank Committee. His term of office will end in Jean-Claude Rivollet has held a federal diploma as a chartered accountant since Until 1982, he worked with the audit company Bourquin Frères et Béran SA. From 1982 to 1988, he worked as a self-employed chartered accountant in Geneva. Since 1989, he has been a managing director of Fiduciaire d Expertise et de Révision SA in Geneva. Among his other activities, Jean-Claude Rivollet is director of Cave de Genève SA, Geneva. He holds some bearer shares in the Bank. *Further notes: 1, 2, 3, 4, 5, 6, 7, 8, 10, 11. Terrier Michel Mr Michel Terrier, born on 22 July 1944, is Swiss. He joined the Board of Directors in June 2000 and is a member of the Bank Committee. His term of office expires in After training with Banque Pasche SA in Geneva, Michel Terrier joined the Banque Scandinave en Suisse in 1965, which subsequently became Banque Edouard Constant SA. He left that institution in 1999 after being head of the treasury department (stock market, foreign exchange, bank listings). Among his other activities, Michel Terrier was chairman of the Public Law Foundation for Housing of the Jussy municipality until 30 September He also acts as a consultant to Banque Edouard Constant in Geneva, which became EFG Private Banking SA in Michel Terrier was mayor of Jussy in Canton Geneva until 31 May He holds some bearer shares in the Bank. *Further notes: 1, 2, 3, 7, 8, 10, 11, BCGE Annual Report 2003

75 * Explanation of the further notes: 1. Holds no operational posts at the BCGE or a member company of the Group. 2. Is not or has not been a member of the management bodies of the BCGE, or a member company of the Group, in the three financial years before the year under review. 3. Does not have close ties with the BCGE. 4. Holds no official posts in management and supervisory bodies of corporations, foundations or big establishments (Swiss or foreign) under private and public law. 5. Performs no permanent management or consultancy functions for large Swiss and foreign groupings. 6. Has no official functions and no political office. 7. Does not sit on the board of listed companies. 8. Has not received either personally, or through persons close to him, free shares in the BCGE during the year under review. 9. Neither he/she nor persons close to him/her hold shares in the BCGE. 10. Neither he/she nor persons close to him/her have received options (including synthetic participation programme options) on BCGE shares. 11. Neither he/she nor persons close to him/her have received fees and additional remuneration for further services provided to the BCGE or to another company in the BCGE Group. 12. Neither he/she nor persons close to him/her benefit from loans, sureties, advances or credits granted bythe BCGE or a company of the Group. 9. Further information on the General Management for corporate governance purposes Goetschin Blaise Mr Blaise Goetschin, born on 1 September 1957, is Swiss. He holds a degree from the HEC at Lausanne University and began his professional career in 1982 as an auditor with Price Waterhouse in Geneva. In 1985, he joined Credit Suisse, first in Zurich as deputy vice-president, capital markets, and then in New York as an executive in the corporate banking department. He returned to Lausanne where, in 1990, he became a member of the general management in charge of corporate-finance activity in Frenchspeaking Switzerland, Bern and Basel. In 1993, he was given responsibility for the corporate finance/private companies function for the whole of Switzerland. In 1995, he was appointed by the State Council of Canton Vaud to take charge of the cantonal finance department. From 1998 to 2000, he was a general manager of the Fiduciary Trust Bank private and institutional management, the Swiss subsidiary of this New York-based banking group. He has been chief executive officer of Banque Cantonale de Genève since 1 October Among his other activities, Blaise Goetschin is chairman of Anker Bank SA and of Synchrony Asset Management SA, chairman of the supervisory board at the Banque Cantonale de Genève (France) SA, vice-chairman of the board of Centrale de Lettres de Gage SA, director of La Foncière-Investissements Fonciers SA, committee member of board of the Union of Swiss Cantonal Banks, member of the board of the Swiss Bankers Association, member of the board of the Geneva Financial Centre Foundation, the board of the Geneva Chamber of Commerce and Industry, vicechairman of the Higher Institute for Training in Banking in Geneva, member of the bank committee of the Society for Economic and Social Studies in Lausanne and of the committee of the Centre for Military History and Forecasting in Pully. He is a major in the Swiss army. In 2002 and 2003, Blaise Goetschin received some free shares in the Bank under a stock option plan. A person close to Blaise Goetschin holds some bearer shares in the Bank. *Further notes: 3, 5, 6, 8, 10, 11, 12. Bourgeaux Eric Mr Eric Bourgeaux, born on 31 May 1956, holds dual Swiss and French nationality. He is a graduate of the Higher Commercial School of Paris and holds a DECS degree. He began his professional career with KPMG Paris as an auditor and consultant. From 1982 to 1986, he was an auditor with Price Waterhouse in Geneva. From 1986 to 1988, he was manager of Asea Capital, which subsequently became the ABB World Treasury Centre in Geneva, and from 1988 to 1996, manager and later general manager of Nokia Finance International BV, Geneva. From 1998 to 2000, he was a director of Clariden Bank and from 1997 to 2000, manager of André & Cie, Lausanne. Eric Bourgeaux joined the General Management of Banque Cantonale de Genève on 1 December 2000 as chief financial officer. He is a member of the supervisory board of Banque Cantonale de Genève (France) SA, member of the board of Synchrony Asset Management SA, member of the supervisory board of Compagnie Foncière Franco-Suisse and a board member of Asia Pacific Performance, Luxembourg. Eric Bourgeaux received some free shares from the Bank in *Further notes: 3, 4, 5, 6, 7, 10, 11, 12. Bagnoud Claude Mr Claude Bagnoud, born on 1 January 1964, is Swiss. He is a graduate of the Higher School of Business Administration in Geneva and holds a diploma from IMD Lausanne, Executive Development Programme (1999). Claude Bagnoud began his professional career as an accountant with the Geneva Industrial Services. In 1990, he joined the commercial credits department of the Banque Hypothécaire du Canton de Genève. Appointed to a managerial position in 1991, he became head of the commercial-credits department from 1994 to From 1996 to 1999, he was in charge of the real-estate and commercial-credits section for the general market. In 1996, he was appointed to the management. From March to December 1999, he followed a training course and gained work experience in London, BCGE Annual Report

76 followed by a diploma from IMD, Lausanne. In 2000, he was head of section in the industries, trade and services department. In May 2001, he was appointed to the General Management with responsibility for the Corporate division. In addition to his duties at the BCGE, Claude Bagnoud is a director of Sécheron SA and of Synchrony Asset Management SA, member of the supervisory board of BCGE (France) SA, member of the board of the La Gravière Industrial Foundation, member of the supervisory board of Compagnie Foncière Franco-Suisse, member of the board of the Palais des Expositions Foundation and of the Hall 6 Foundation. Claude Bagnoud received some free BCGE shares under the stock option plan. *Further notes: 3, 5, 6, 7, 10, 11. Kroon Johan Bernard Alexander Mr Johan Bernard Alexander Kroon, born on 28 May 1963, is Dutch. He holds an MBA and a Master of International Management from Thunderbird University (Arizona, USA). Johan Bernard Alexander Kroon began his professional career in 1987 with Citibank in Düsseldorf. From 1991 to 1994, he gained further experience in Germany with Citicorp Diners Club Deutschland in Frankfurt. From 1995 to 1997, he was Marketing Manager with the Citibank US & Europe Consumer Bank in Brussels, and from 1997 to 1999, Marketing and Strategic Planning Manager at the Citibank Private Bank in Geneva. Following a 10-year career with Citibank, he was Marketing Manager for Deutsche Bank International Private Banking in Geneva from 1999 to He then went on to become Head of Strategy and Marketing with JP Morgan Private Bank in Geneva. In May 2002, he joined the BCGE as a member of the General Management responsible for the division Retail Services and Branch Network. In addition to his duties with the BCGE, Johan Bernard Alexander Kroon is a member of the Board of the Transferable Pension Fund Foundation of the BCGE and of the Third Pillar Savings Foundation, member of the Board of Directors of Servisa SA and member of the Transferable Pension Fund Foundation Servisa, Servisa group and Servisa Supra group. A person close to Mr Kroon holds some bearer shares in the Bank. Mr Kroon received free shares from the Bank in *Further notes: 3, 5, 6, 7, 10, 11. Rausis Emile Mr Emile Rausis, born on 31 August 1957, is Swiss. He holds a federal banking diploma (CFC) and began his career in 1977 as an office employee with Société de Banque Suisse in Monthey. From 1978 to 1984, he worked in the credit department of SBS in Geneva and was appointed junior manager on 1 April From 1984 to 1985, he worked as a credit manager with the general management in Basel, in the credit department Switzerland responsible for the branches in French-speaking Switzerland. From 1985 to 1986, he returned to Geneva with responsibility for a credit customer group. From 1 April 1986, he became a company officer with statutory authority at Société de Banque Suisse until 1988, in charge of SMB customers. Emile Rausis joined the Banque Hypothécaire du Canton de Genève in 1989 as deputy manager and pursued his career in the credits field. In 1991, he was appointed deputy manager responsible for a loans department and substitute for the head of the commercial division. Following the merger in 1996, he took charge of finance and support for the SMB department. In April 2001, Mr Rausis was appointed member of the General Management in charge of the Credit Control and Administration division. This division handles litigations, loan administration, workout programmes and also includes an analysis and computerised credit-management department. In addition to his duties with the Bank, he is director of Geparco Holding SA. He holds some bearer shares in the Bank and received some free shares in *Further notes: 3, 4, 5, 6, 7, 10, 11. Spadone Alain Mr Alain Spadone, born on 23 April 1949, is Swiss and French. He holds a degree from the Panthéon Sorbonne University in Paris and began his professional career as a headmaster between 1974 and From 1987 to 1991, he was a financial analyst with Financière Fransad, Geneva. From 1991 to 1992, he performed the same duties with the Canadian Imperial Bank in Geneva, and from 1992 to 1996 he extended his experience by working as an asset manager with the Union Bancaire Privée in Geneva. From 1997 to 2000, he was a financial analyst and institutional manager with Société Fiduciaire Suisse in Geneva. In December 2000, he joined the Banque Cantonale de Genève as chief investment officer. In September 2002, Alain Spadone was appointed member of the General Management in charge of Private Banking. In addition to his duties with the parent company, Alain Spadone is a member of the board of Anker Bank SA, member of the supervisory board of BCGE (France) SA, and a member of the board of Swissca Holding SA. He holds some bearer shares in the Bank and received some free shares in *Further notes: 3, 6, 7, 10, 11, 12. Villien-Gros Michel (until 30 June 2003) Mr Michel Villien-Gros, born on 20 November 1945, is French. He began his professional career in Geneva as an accountant before joining the Caisse d Epargne de la République et du Canton de Genève (CEG) in Appointed junior manager in 1970, he held various posts and rose through the ranks until he was appointed company officer with statutory authority in In 1980, he created the business-promotion and advertising department, which he headed until In 1984, he took over responsibility for the products and resources department and in 1988, was put in charge of the marketing and communications department at CEG two departments which he created. He was appointed assistant manager in 1988 and deputy manager in He retained responsibility for the marketing and communications department in 1994, when BCGE was incorporated. In 1995, he set up and headed the retail department at BCGE. At the end of 2000, he took over the 72 BCGE Annual Report 2003

77 management of the new Retail and Branch Network division as a member of the General Management and then in 2002, responsibility for the Logistics and Information-Technology division. In addition to his duties with the Bank, Michel Villien-Gros is chairman of the Transferable Benefits Foundation of the BCGE and the Savings 3 Occupational Benefits Foundation. He and a person close to him hold some bearer shares in the Bank. He received some free shares in Mr Villien-Gros retired on 30 June *Further notes: 3, 4, 5, 6, 7, 10, 11, 12. Joris Jean-Marc (from 1 July 2003) Mr Jean-Marc Joris, born on 10 September 1968, is Belgian. He holds a degree in business and finance and began his professional career in 1993 in the capital-markets department of Dexia Luxembourg. From September 1993 to June 1997, he worked as a project manager in the risk-management department. From June 1997 to March 2002, he was deputy head of business development at the ING Baring Private Bank in Geneva. Jean-Marc Joris joined the Banque Cantonale de Genève in April 2002 as a member of the management, in charge of the logistics department and as interim manager of the IT department. On 1 July 2003, he was appointed member of the General Management, heading the Logistics and IT division. He holds some bearer shares in the Bank. *Further notes: 1, 3, 4, 5, 6, 7, 10, 11, 12. *Explanation of the further notes: 1. Holds no operational posts at the BCGE or a company of the Group. 2. Is not or has not been a member of the management bodies of the BCGE, or of a company of the Group, in the three financial years before the year under review. 3. Does not have close ties with the BCGE. 4. Holds no official duties in management and supervisory bodies of corporations, foundations or big establishments (Swiss or foreign) under private and public law 5. Performs no permanent management or consultancy duties for major Swiss and foreign interest groupings. 6. Has no official functions and no political office. 7. Does not sit on the board of listed companies. 8. Has not received either personally, or through persons close to him, free shares in the BCGE during the year under review. 9. Neither he/she nor persons close to him/her hold shares in the BCGE. 10. Neither he/she nor persons close to him/her have received options (including synthetic participation programme options) on BCGE shares. 11. Neither he/she nor persons close to him/her have received fees and additional remuneration for further services provided to the BCGE or another company in the BCGE Group. 12. Neither he/she nor persons close to him/her benefit from loans, sureties, advances or credits granted by the BCGE or a company of the Group. 10. Management contract In 2002 the Banque Cantonale de Genève sold the 30% stake it has held since 1992 in Unicible SA its principal information-technology serviceprovider. Since then, a framework agreement on cooperation, with detailed addenda, defines the relationship between the Bank and Unicible SA. Unicible SA provides the Bank with essential IT services, such as operations, maintenance, hosting of the banking computer systems, management of the Bank s PCs and Windows servers, user support, etc., in accordance with the Federal Banking Commission circular letter 99/2 on the outsourcing of services. This restructuring of the Bank s IT operations has had no effect on the quality of service provided to clients. The cost of Unicible SA s IT services amounted to CHF 30,480,000 in 2003, of which CHF 21,797,000 for support and maintenance, CHF 2,578,500 for investments and CHF 6,104,500 for development and operations. 11. Remuneration Global remuneration of the Board of Directors in 2003 CHF 1,001,800 Of which fixed fees: CHF 682,500 Of which director s fees: CHF 286,800 Of which entertainment allowance: CHF 32,500 Highest fee paid to a member of the Board of Directors in 2003 CHF 246,500 Of which fixed fee: CHF 180,000 Of which director s fee: CHF 34,000 Of which entertainment allowance CHF 32,500 Global remuneration of the General Management in 2003 CHF 3,378, Participations Shares held by the directors, as a whole, on 31 December shares representing % of the equity or % of votes. Shares held by the General Management, as a whole, on 31 December ,514 shares representing % of the equity or % of votes Loans and credits to members of the Board of Directors Loans and credits to members of the Board of Directors and their close families amount to CHF 2,177,100, of which CHF 2,020,100 are mortgage guaranteed and CHF 157,000 are unsecured. Six board members and their families benefit from such loans and credits. BCGE Annual Report

78 11.3 Loans and credits to members of the General Management in 2003 Loans and credits to members of the General Management and their close families totalled CHF 2,032,575 of which CHF 2,027,100 are mortgage guaranteed and CHF 5,475 are unsecured. Four members of the General Management and their families benefit from such loans and credits Stakeholdings, interests and loans The Bank s executives hold no registered shares and less than 1% of the bearer shares. They have no subscription rights or option distribution rights and no business beyond the Bank s ordinary business has been transacted with them. The loans granted to them are mentioned above. Furthermore, the Bank has not provided any guarantees to third parties on behalf of these executives. No financial or in-kind contributions were made to the Bank s directors, General Management and Control Committee during the past financial year. No financial or in-kind contributions were granted or paid to the Bank s directors, General Management and Control Committee by Group companies Procedures for determining remuneration The Bank Committee decides on the fixed and variable components of the remuneration paid to the members of the General Management. The Committee also comments on the provisions of the participation plan attached to the variable component. In addition, an ad hoc committee of the Board of Directors is responsible for establishing remuneration and participation programmes according to the requirements of corporate governance Remuneration to former members of management bodies No such payment was made in Additional payments and fees None such were received or paid in Allocation of free shares during the financial year 2003 Stock-option plan and bonus system Since 1996, staff at every level in the Bank have benefited from a stock-option plan. Once they have been in service for five years, they receive each year a number of free shares calculated according to the scale in force. The shares thus acquired remain blocked for five years and cannot be sold or pledged during that period, except to the Bank. On the other hand, the holders may freely dispose of the dividends and, in the event of any new issue, of any preferential subscription rights. The free shares are liable to federal and cantonal tax in compliance with the directives of the fiscal authorities concerned. The Bank acquires the shares for this stock-option plan at the market price. To date, 12,655 bearer shares, representing 0.35% of the share capital, have been distributed to the beneficiaries. Since March 1999, the Bank Committee, acting on a proposal from the General Management, has offered the beneficiaries of a bonus the possibility of acquiring bearer shares in the Banque Cantonale de Genève at a preferential rate. The Banque Cantonale de Genève buys its own shares at the market price and then sells them, net of all costs, to the beneficiaries of bonuses, at the rate of one share for every CHF 3,000 of bonus (starting from a bonus of CHF 3,000). Two free shares are offered to beneficiaries for each share they acquire. The shares thus obtained remain blocked for five years during which they cannot be sold or pledged, except to the Bank. On the other hand, holders may freely dispose of the dividends and, whenever a new issue is made, collect any preferential subscription rights. The shares made available without charge are liable to federal and cantonal taxation, in compliance with the directives of the relevant fiscal authorities. On 31 December 2003, 3,719 bearer shares had been distributed under this scheme. 12. Shareholders participation rights limit and representation of voting rights No limit exists on voting rights Statutory quorum The General Meeting is validly constituted irrespective of the number of shares represented. Decisions and elections are by an absolute majority of the votes allocated to the shares represented, unless there are contrary provisions in the law, or in the Statutes. Decisions concerning the adoption and amendment of the Statutes, such as notice of a merger, takeover or winding up of the Bank, require a two-thirds majority of the share capital. For a second round of voting in elections, a simple majority suffices. In the case of a tie, the chairman of the General Meeting has the casting vote. Elections are by secret ballot. At the request of 30% of the votes present, other decisions can also be taken by secret ballot Convening the General Meeting The ordinary General Meeting is held annually within six months of the end of the financial year. An extraordinary General Meeting may be convened as often as necessary. One or more shareholders representing at least one-tenth of the share capital may also make a written request for an extraordinary General Meeting to be convened, stating the reason. If necessary, the statutory auditors may also convene an extraordinary General Meeting. The General Meeting must be convened by the Board of Directors at least 20 days in 74 BCGE Annual Report 2003

79 advance by placing a notice in the Feuille d avis officielle de la République et Canton de Genève and in the Feuille officielle suisse du commerce. The meeting s agenda must be stated in the invitation to attend. The invitation must also mention that the usual documents are available to the shareholders at the Bank s registered office Agenda items The Board of Directors is required to place on the agenda individual proposals, which are subject to vote, provided that they are presented in writing by shareholders at least 20 days before the General Meeting. No decision can be taken on matters that are not on the agenda, except for a decision to convene an extraordinary General Meeting Entry in the share register The Bank keeps the share register at the company s head office, a distinction being made between classes A and B registered shares. Each share gives entitlement to a proportion of the net profit of the company and the proceeds of liquidation. B registered shares confer upon their holder the same patrimonial rights as those of bearer shares Taking control and defence measures Obligation to make an offer Opting up/out No provision exists for these matters in the Statutes of the Banque Cantonale de Genève Clauses on taking control There are no provisions for this at the Banque Cantonale de Genève. 13. External auditor At the ordinary General Meeting of 20 May 2003 the mandate of the Bank s auditor, Deloitte & Touche SA, as statutory auditor according to the Swiss Code of Obligations, was renewed for the year Duration of the audit mandate and of the mandate of the auditor-in-charge Since 1 January 2001, the auditor-in-charge, in terms of Article 46 para. 2 of banking ordinance, is Mr Pierre-Alain Bracher of Deloitte & Touche SA. The mandate held by Deloitte & Touche SA is subject to annual renewal by the General Meeting of shareholders External auditors basic fees in 2003 Audit of the BCGE Group: CHF 1,393,700 Of which audit of the BCGE: CHF 1,094, Additional fees paid to external auditors in 2003 Related to the annual financial audit: The BCGE Group: CHF 147,300 Of which the BCGE: CHF 34,500 Other The BCGE Group: CHF 89,500 Of which the BCGE: CHF 88, Instructions for supervision and control relating to the statutory auditors: Please refer to the paragraphs dealing with the Control Committee on pages 23 and Information policy The BCGE Group intends to provide the fullest possible information to its customers, suppliers, staff and shareholders by communicating its strategy, products, services and financial results. The Board of Directors expresses its views through its chairman. The chief executive officer is the official spokesman for the Bank. He determines the policies and information policy of the BCGE Group. He delegates the circulation of information to the communication department. The staff is kept informed of the strategy, products, services and financial results of the Group by information published on the Intranet site, in the house journal and at meetings with their departments and the General Management. Externally, the Group communicates regularly through institutional publications: Dialogue magazine (two or three times a year), the quarterly Investment Strategy brochure and various information bulletins from the General Management on the Group s company websites ( and Other means of communication include meetings with shareholders, the media or investors. In 2003, apart from the General Meeting held on 20 May, there were two press conferences and two presentations as well as financial presentations to analysts and institutional investors in Paris, Zurich and Frankfurt, and conference calls with Swiss analysts. In regard to shareholder relations, the Group encourages attendance at its ordinary General Meeting. Shareholders are invited to put their questions to the Board of Directors or to the General Management and may contact the institutional communication department of the BCGE by mail, telephone or (actionnaires@bcge.ch) at any time. Shareholders also receive two letters a year, which present the results and prospects of the Group, an annual report and institutional publications dealing with the Group s strategy or policies. Documents published by the Banque Cantonale de Genève are available in English and French, on the Internet site and on request from the BCGE branches. BCGE Annual Report

80 14.1 Information 14.2 The BCGE Group Investor relations and institutional communication Mr Nicolas de Saussure Tel: +41 (0) Fax: +41 (0) Banking relations Mr François Julia Tel: +41 (0) Fax: +41 (0) Mailing address: P.O. Box 2251 CH 1211 Geneva BCGE s method of financial analysis Financial analyses performed by the Banque Cantonal de Genève are based on a macro-economic study of the general environment (economic outlook, interest rates and foreign currency rates) and on micro-economic analyses of listed companies. The BCGE selects stocks and securities according to a secondary type of approach, essentially based on research supplied by specialised parties (banks, brokerage houses) chosen by the Bank. Research based on third-party studies is completed, if required, by public information directly supplied by companies themselves in their regular financial publications (management reports, press releases and analysts meetings) Organisation chart on Please refer to pages 21 and BCGE Annual Report 2003

81 15. Further information regarding the major shareholdings of the BCGE Group Please refer to items and of the notes to the 2003 consolidated financial statements, on page 48. Company Headquarters Activity Share capital (% shareholding) (% shareholding) Swissca Holding Bern Investment funds CHF 24,204, Swiss National Bank Zurich Central Bank CHF 25,000, Centrale de lettres de gage Zurich Refinancing CHF 165,000, Telekurs Holding Zurich Securities clearing CHF 45,000, Caleas AG Zurich Financial company CHF 30,000, S.W.I.F.T. La Hulpe Payments traffic E 10,800, Swiss Financial Service Group AG Zurich Securities transactions CHF 26,000, BCGE Annual Report

82 16. Information on affiliate companies of the Banque Cantonale de Genève Anker Bank SA BCGE (France) SA Synchrony Asset Management SA Activity Bank Bank Institutional asset management Affiliated Yes Yes Yes Shareholding 100% BCGE 100% BCGE 100% BCGE Cross-holdings None None None Group structure Consolidated Consolidated Consolidated Directors / start-end mandate Blaise Goetschin (chairman) / Raymond Flückiger (dep. chair) / Lionel Dornier / Jacques Perrot / Alain Spadone / Markus Hugelshofer / Jean-Pierre Strebel / Jacques Perrot / Blaise Goetschin (chair) / Claude Bagnoud / Eric Bourgeaux (dep. chair) / Alain Spadone / Blaise Goetschin (chair) / Claude Bagnoud / Eric Bourgeaux / Length of term 2 years 2 years 1 year Number of meetings in Auditors Deloitte & Touche SA Titular auditors Ernst & Young, to 2006 Mr Thierry Stévenon, to 2007 Substitute auditors Cabinet Cogem Audit, to 2007 Mr Marc Bonhomme, to 2006 Deloitte & Touche SA Statutes 1998 July 2001 October 1998 Statutory quorum for General Assemblies (GA) Majority of shares represented subject to law and mandatory statutes Extraordinary GA 1st summons: 1/3 of voting shares Extra. GA 2nd summons: 1/4 of voting shares Ordinary GA 1st summons: 1/4 of voting shares Ord. GA 2nd summons: no quorum GA is constituted irrespective of number of shareholders present or represented Shareholders equity CHF 20,000,000 in 20,000 registered shares of CHF 1,000 nominal value, fully paid-up E 15,200,000 in 1,000,000 registered shares of E nominal value, fully paid-up CHF 3,700,000 in 3,700 registered shares of CHF 1,000 nominal value, fully paid-up, linked according to statutes 78 BCGE Annual Report 2003

83 Business link? It s a team effort that has been successfully completed. BCGE s new cash-management service forges closer links with local businesses, and I welcome it with a certain amount of pride. Patrice Lefebvre Marketing manager Corporate BCGE Rapport Annuel

84

85 Parent company accounts 2003 Balance sheet before allocation Profit-and-loss account Statements of shareholders equity Notes to the financial statements 1. Accounting and valuation principles Assets pledged or assigned against the Bank s commitments and assets with retention of ownership Liabilities to the Bank s pension and retirement fund Amounts due to / from affiliates and loans to directors Extraordinary income Extraordinary expenses Share capital and shareholders with more than 5% of all voting rights Major shareholders and groups of shareholders bound by voting agreements Adjustments of values and provisions / adjustments of reserves for credit risk and for general banking risks Off-balance sheet transactions Trading results according to activity sector Personnel Other assets and liabilities Proposal for the allocation of the result. Cover of losses / distribution of profits 88 BCGE Annual Report

86 Balance sheet before allocation Parent company balance sheet before allocation Notes Variation Assets Cash 109, ,520 99,523 Money-market instruments 809, ,441 6,352 Due from banks 1,371,104 1,091, ,197 Due from clients 5,689,469 6,452, ,673 of which Fondation de Valorisation 3,415,327 4,228, ,639 Mortgages 5,969,379 6,007,807 38,428 Securities and precious-metals trading portfolios 47, , ,673 Financial investments 90, ,183 14,442 Investments in Group companies 92,854 99,187 6,333 Fixed assets 233, ,692 59,857 Accrued income and prepaid expenses 31,202 53,882 22,680 Other assets 102, ,689 5,863 Total assets 14,548,714 15,380, ,923 Total subordinated loans 38,886 60,485 21,599 Total due from Group companies and qualified participants 442, ,473 37,505 of which total due from the canton 126, ,675 16,001 Liabilities Money-market instruments 1,209 1, Due to banks 667,545 1,182, ,551 Due to clients on savings and deposit accounts 4,973,968 4,583, ,072 Due to clients, others 3,163,818 3,202,258 38,440 Medium-term notes (cash bonds) 140, ,853 86,239 Bonds and mortgage-backed bonds 4,768,000 5,324, ,000 Accrued expenses and deferred income 91, ,096 18,934 Other liabilities 97, ,599 10,334 Valuation adjustments and provisions 1.8 2,221 3,819 1,598 Share capital , ,000 Capital reserve 278, ,551 6,300 Retained earnings Result of the year 4,602 6,413 11,015 Total liabilities 14,548,714 15,380, ,923 Total subordinated debt 420, ,000 Total due to Group companies and qualified participants 426, ,459 35,118 of which total due to the canton 184, ,035 5,895 Off-balance sheet items Contingent liabilities 468, ,992 68,336 Irrevocable commitments 235, , ,942 Commitments to subscribe capital or pay further sums 40,872 40,872 Commitments resulting from deferred payments 18,832 44,139 25,307 Financial derivatives: - underlying amounts 3,318,748 2,907, ,228 - positive replacement values 93,722 93, negative replacement values 64,704 68,485 3,781 Fiduciary transactions , ,453 46, BCGE Annual Report 2003

87 Profit-and-loss account Parent company Notes Variation Interest income and expenses Interest and discount income 406, ,361 84,288 Interest and dividends from trading portfolios 4,667 7,031 2,364 Interest and dividends from financial investments 3,748 4, Interest expenses 254, ,191 86,722 Net interest income 160, , Commission and fee income Commission income from loan transactions 22,298 19,584 2,714 Commission income from trading, securities and deposits 25,672 25, Commission income from other services 17,134 12,077 5,057 Commission expenses 7,005 6, Net commission and fee income 58,099 49,773 8,326 Net result of trading operations ,841 9,006 9,835 Other ordinary income Income from the sale of financial investments 11, ,263 Income from investments 966 1, Real-estate income 2,054 2, Other ordinary income 4,920 5, Other ordinary expenses 4,723 4,723 Other ordinary income (expenses), net 14,419 11,056 3,363 Total operating income 251, ,593 20,785 Operating expenses Personnel 94,044 95,083 1,039 Other operating expenses 77,193 67,975 9,218 Net operating expenses 171, ,058 8,179 Gross profit 80,141 67,535 12,606 Depreciation of fixed assets 31,720 24,769 6,951 Valuation adjustments, provisions and losses 63,096 65,536 2,440 Result before extraordinary items and taxes 14,675 22,770 8,095 Extraordinary income ,780 22, Extraordinary expenses 1.5 1,003 4,750 3,747 Taxes 1,500 1,503 3 Net result for the year 4,602 6,413 11,015 BCGE Annual Report

88 Statement of shareholders equity Parent company Shareholders equity at 1st January 2003 Share capital 360,000 Capital reserve 284,551 Balance sheet profit / loss 6,241 Total shareholders equity at 1st January ,310 +/ Increase / decrease in reserves 6,300 +/ Coverage of balance sheet losses 6,300 + Profit of the year at ,602 Total shareholders equity at 31st December ,912 of which: Share capital 360,000 Capital reserve 278,251 Balance sheet profit/loss 4, Accounting and valuation principles The financial statements of the parent company are drawn up according to Group principles, with the exception of re-processing for the true and fair representation of the consolidated accounts. The Bank s treasury shares and bonds. 1.1 Assets pledged or assigned against the Bank s commitments and assets with retention of ownership Book value of assets pledged or assigned Commitments Swiss National Bank Limit 200,000 Nominal value of securities and debts pledged 225,000 Swiss Electronic Stock Market Nominal value of blocked securities 19,150 19,150 Mortgage-backed securities Nominal value of mortgage securities 3,819,307 3,819,307 Total borrowings 2,823,000 2,823,000 Securities lending and repo transactions Claims resulting from a cash pledge when borrowing securities or entering into a repurchase agreement 35,000 Commitments resulting from cash received in securities lending or repo transactions 100,000 Securities held on own account, loaned or transferred as collateral in securities lending or repo transactions 100,192 of which securities with unrestricted rights of subsequent alienation or pledge Securities received as collateral in securities lending and borrowing, and repo transactions, with unrestricted rights of subsequent alienation or pledge 35,006 of which securities alienated or remitted to a third party as collateral 84 BCGE Annual Report 2003

89 Notes to the financial statements Parent company 1.2 Liabilities to the Bank s pension and retirement fund in CHF in CHF Liabilities towards the pension fund Liabilities towards the pension fund as a custodian bank 28,462 35,788 Please refer to item 6.10 in Notes to the consolidated financial statements, Amounts due to / from affiliates and loans to directors Due from affiliates 4,012,122 4,863,004 of which Fondation de Valorisation 3,415,327 4,228,966 Due to affiliates 46,561 35,027 Loans to directors 4,022 2,693 Please refer to item 6.14 in Notes to the consolidated financial statements, Extraordinary income Sale of fixed assets 19,984 2 Disposals 6,285 Reversal of provisions 1,680 4,273 Other 34 12,050 Total 21,780 22, Extraordinary expenses Costs arising from Canton Geneva s simple guarantee on the loan to the Fondation de Valorisation 1,000 3,000 Financing of an early-retirement plan 647 Other 3 1,103 Total 1,003 4,750 BCGE Annual Report

90 notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company 1.6 Share capital and shareholders with more than 5% of all voting rights Total Number Capital Total Number Capital nominal of shares eligible for nominal of shares eligible for value dividends value dividends Share capital Class A registered shares 132,551,600 2,651, ,551, ,551,600 2,651, ,551,600 Class B registered shares 79,531,000 1,590,620 79,531,000 79,531,000 1,590,620 79,531,000 Bearer shares 147,917,400 1,479, ,917, ,917,400 1,479, ,917,400 Total share capital 360,000,000 5,720, ,000, ,000,000 5,720, ,000, Major shareholders and groups of shareholders bound by voting agreements Nominal % Nominal % Registered shares with voting rights Canton Geneva 125,522, ,522, City of Geneva 60,405, ,405, municipalities of Geneva 26,155, ,155, Bearer shares with voting rights Canton Geneva 53,863, ,863, City of Geneva 14,727, ,727, Various shareholders 79,326, ,326, On 31 December 2003, Canton Geneva held 49.83% of the Bank s shares (bearer and registered) and held 53.30% of the voting rights. 86 BCGE Annual Report 2003

91 notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company 1.8 Valuation adjustments and provisions / adjustments of reserves for credit risk and for general banking risks Balance at Utilisation Changes to allocation (new allocation) Recoveries, nonperforming interest, exchange differences New provisions charged to the P&L Reversals credited to the P&L Balance at Valuation adjustments and provisions for default (collection and country risk) 935, ,067 7,032 43, ,329 Valuation adjustments and provisions for financial investments 28,442 5, ,527 27,515 Provisions for taxes and deferred taxes Other provisions 4, ,971 1,680 22,079 Total valuation adjustments and provisions 969, ,770 6,920 67,127 1, ,923 Less valuation adjustments directly netted with assets 965, ,702 Total valuation adjustments and provisions on liabilities 3,819 2,221 BCGE Annual Report

92 notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company notes to the financial statements parent company 1.9 Off-balance sheet transactions Fiduciary transactions Fiduciary deposits with third parties 194, ,858 Fiduciary loans 8,633 6,595 Total fiduciary transactions 203, , Trading results according to activity sector Foreign-exchange trading / banknote trading including derivatives 10,628 11,439 Precious-metals trading Securities trading 8,127 2,464 Total trading operations 18,841 9, Personnel - In full-time job equivalents Number of employees Other assets and liabilities Other assets Other liabilities Other assets Other liabilities Replacement value of financial instruments 93,722 64,704 93,939 68,485 Compensation account 12,668 13,441 Attribution of profits on swaps 2,963 4,030 Federal tax administration 1,840 14,805 2,737 19,956 Securities and coupons 351 2,039 3,149 1,485 Issuing costs / bonds 6,340 8,480 Other Total 102,826 97, , , Proposal for the allocation of the result Cover of losses / distribution of profits Result for the financial year 4,602 6,413 Profit carried forward balance sheet profit / loss 4,661 6,241 (Allocation to) withdrawal from capital reserve 4,600 6,300 Profit carried forward BCGE Annual Report 2003

93 My daily task is to contribute actively to our new bank s vitality while recognising that everyone and their situations are different! Caroline Cenzato Guarantees administration Credit Control and Administration BCGE Rapport Annual Annuel Report