119.2 m 17.2 % 110 bp. Valiant in 2017

Transcription

1 2017 annual report

2 Valiant in January We opened a new branch in Brugg, and another one in Morges at the end of November. The new type of branch combines digital banking services with personalised advice. 31 March Top honours: According to business magazine BILANZ s annual private banking ranking, we offer the best investment advisory service among all Swiss regional banks m Profit Net profit went up by 1.5% % Total capital ratio Valiant has a very solid capital base and exceeds FINMA requirements by a considerable margin. 18 May 20th Annual General Meeting of Valiant Holding AG. Two new members, Dr Maya Bundt and Nicole Pauli, were elected to the Board of Directors. The dividend was increased by CHF 0.20 to CHF 3.80 per share. Proposed dividend per share Our shareholders will benefit from a dividend increase of CHF 0.20, to CHF 4.00 per share. 3 July On 17 March, we announced a public tender offer to buy the shares in Triba Partner Bank AG (Triba). Upon completion of the purchase offer, Valiant held more than 97% of Triba s share capital. We plan to fully integrate Triba by summer bp Net Interest margin The net interest margin remained at a high level despite difficult conditions. 15 November Valiant issued the first CHF 250 million tranche of its covered bond programme. It is the first covered bond governed by Swiss law and with a Swiss guarantor. Rating agency Moody s has assigned the Valiant covered bond the best possible rating of Aaa. Growth in loans We increased client loans by 5.9% to CHF 23.5 billion (+2.2% excluding Triba).

3 Key figures Balance sheet Total assets 27,563,587 26,094,545 25,448,559 25,266,135 25,451,880 Due from customers and mortgage loans 2 23,520,525 22,202,660 22,085,423 21,775,991 21,769,239 Client deposits 18,722,952 18,240,801 18,083,963 17,894,986 17,404,394 Equity capital 2,202,582 2,127,732 2,051,456 1,986,039 1,939,703 Client assets 27,750,317 26,806,215 27,200,784 27,675,898 26,982,575 Income statement Net interest income before value adjustments for credit risk, and loan losses 296, , , , ,397 Total operating income 3 388, , , , ,695 Operating expenses 226, , , , ,434 Operating profit 136, , , ,623 84,924 Group profit 119, , ,379 94,506 91,437 Cost/income ratio as % Profitability RorE (return on required equity) as % RoE (return on equity) as % Equity capital Risk-weighted assets 13,176,503 12,735,188 12,680,663 13,128,575 13,484,151 Eligible capital 2,273,055 2,202,973 2,125,651 2,074,092 2,027,732 Core capital ratio Tier 1 + Tier 2 as % Leverage ratio as % Headcount Number of employees 1, Full-time equivalents Share data Book value per share Net profit per share Dividend Payout ratio as % Year-end share price Market capitalisation millions 1,665 1,601 1,864 1,304 1,261 Rating Moody s Short-term deposits Prime-1 Prime-1 Prime-1 Prime-2 Prime-2 Long-term deposits A1 A1 A2, positive A3 A3 Baseline Credit Assessment 5 a3 a3 baa1 C- C- 1 Restatement pursuant to FINMA Circular 2015/1 Accounting for Banks, effective from 1 January From 2017 includes value adjustments for default risks. Restatement of Before value adjustments for credit risk, and loan losses. 4 Proposed. 5 Until 2014: Financial Strength Rating.

4 2 Report by the Chairman and the CEO 4 Interview with the Chairman and the CEO Management report 9 Strategy and goals 14 Business performance 17 Risk assessment 20 Investors Corporate responsibility report 25 Foreword 26 Sustainable business model Corporate governance report 43 Group structure 46 Capital structure 48 Board of Directors 58 Executive Board 62 Compensation, shareholdings and loans 63 Shareholders participation rights 65 Change of control and defensive measures 66 Auditors 68 Information policy Compensation report 71 Foreword 72 Key components and principles of our compensation policy 73 Decision-making authority for determining compensation 74 Components of compensation 78 Calculation of variable compensation 79 Executive Board targets and attainment 81 Compensation approved by the Annual General Meeting 82 Compensation in the reporting period 87 Auditor s report Financial report 91 Consolidated financial statements 96 Notes to the consolidated financial statements 131 Auditor s report on the consolidated financial statements 135 Disclosures of capital adequacy and liquidity 136 Statutory financial statements of Valiant Holding AG 144 Auditor s report on Valiant Holding AG Offices 148 Our branches magazin zum geschäftsjahr 2017 Magazine for the 2017 financial year At Valiant, we celebrated an anniversary in 2017 as did many others in our area of business. At valiant-gb.ch, alongside the abridged annual report, you will find 11 inspirational success stories.

5 2017 Annual Report Valiant is an independent retail and SME bank that operates exclusively in Switzerland. We offer private clients and small and medium-sized businesses a comprehensive range of easy-to-understand products and services covering all of their financial needs. We have a strong local presence, with 91 branch offices in 11 Swiss cantons. And through our innovative digital services, we are available to clients throughout Switzerland.

6 CHAIRMAN AND CEO REPORT 2017 ANNUAL REPORT / VALIANT HOLDING AG 2 Report by the Chairman and the CEO Dear Shareholders, 2017 was another good year for Valiant. Consolidated net profit rose by 1.5% to CHF million a solid result given the pressure on the net interest margin in our core businesses. In view of the bank s financial stability, we will recommend increasing the dividend by CHF 0.20 to CHF 4 per share at the upcoming Annual General Meeting in Bern. By offering this third successive increase, we are reaffirming our commitment to paying a consistent or rising dividend, with a payout ratio of between 40% and 70%. This latest increase would bring the payout ratio up to 53%. Continuity in the bank s management Following a realignment and a new beginning for the bank, the Board of Directors of Valiant Holding AG is working to establish continuity in the bank s management. Jürg Bucher will be nominated for re-election as Chairman of the Board of Directors at the Annual General Meetings in 2018 and In doing this, we are making an exception to the Organisational Regulations, which limit the term of office of members of the Board of Directors to the age of 70. Markus Gygax is then slated to succeed him as Chairman in two years time. In order to avoid any conflicts of interest between the posts of CEO and Chairman, Markus Gygax will move to the Board of Directors in 2019 for an initial period of one year as an ordinary member. Continuity is important for a retail bank such as Valiant with a long-term business model. And in Markus Gygax, we have a capable, experienced leader who will serve the bank with great distinction as Chairman of the Board of Directors. The Board will appoint his successor this year, and he or she will take over as CEO in May 2019.

7 ANNUAL REPORT 2017 / VALIANT HOLDING AG CHAIRMAN AND CEO REPORT 3 Turnaround in commission and fee income Net interest income, the main revenue driver, rose by 2.0% to CHF million in At 1.10%, the net interest margin was slightly lower year on year (1.13% in 2016), but held steady from the first quarter onwards. Commission and fee income also saw growth, rising to CHF 62.3 million (+4.6%). We may have achieved an initial turnaround in our fee business, but that is just the first step. We now want to continue strengthening our investment business going forward and confirm this trend. Expansion strategy increases costs The strategic investments and the integration of Triba had a perceptible impact on costs. Operating expenses were up by 2.3%, reaching CHF million. While general and administrative expenses rose only slightly (+0.8%), personnel expenses increased by CHF 4.4 million (+3.7%) year on year. And we intend to hire more new private client and SME advisors in Profitable growth in our core market The numerous measures we have taken in recent years to boost sales have paid off. We were able to significantly increase our sales of mortgage loans and SME loans in Even excluding Triba, lending grew by 2.2% to CHF 22.7 billion. Mortgage volumes also increased by 2.2%. Our aim was to grow with the market and fight for every basis point, and our staff did just that and outstandingly well. Investments pay off In 2017, we invested some CHF 10 million in our own future viability. With the expansion to Brugg and Morges and the successful launch of Switzerland s first covered bond, we achieved some of our Strategy 2020 milestones. Additional branches are set to be opened this year in Vevey and Nyon, and new offices geared towards serving SMEs in Fribourg and Zug are planned. We will then press ahead with our expansion into northern and eastern Switzerland in Extremely solid capital base We are in a very solid position. Our equity capital now amounts to CHF 2.2 billion, CHF 75 million more than at the end of Our total capital ratio stands at 17.2%, well above the 12% required by the Swiss Financial Market Supervisory Authority, FINMA. We will use the surplus funds to repay a subordinated bond in an amount of CHF 150 million in April, ahead of the bond s final due date in Positive outlook for 2018 We expect operating profit to come in higher in Net profit is expected to be in line with the 2017 figure. Valiant is well positioned and fit for the future. The strategy is right, we are strong on implementation and we remain flexible. We would like to thank all of our employees for their dedication and our shareholders for the trust they have placed in us. Jürg Bucher Chairman of the Board of Directors Markus Gygax CEO

8 INTERVIEW CHAIRMAN AND CEO 2017 ANNUAL REPORT / VALIANT HOLDING AG 4 Trust is formed between people Valiant is making steady progress with its expansion to the west, digitisation and branch upgrades. And, most importantly of all, income is growing faster than costs. Our covered bond programme, which provides a stable source of funding, represents a milestone. Jürg Bucher, Markus Gygax, what pleased you most about the bank in 2017? Jürg Bucher: Its overall performance! We have positioned ourselves well in a difficult environment and made progress both in our operating business and in our many projects. I feel that the whole team is pulling in the same direction. Markus Gygax: I would highlight the covered bond issue in particular. We are the first bank in the Swiss market to have placed a bond of this kind under Swiss law and with a Swiss guarantor. The first tranche of CHF 250 million issued in autumn 2017 was massively oversubscribed and therefore a complete success. We have created a broader base for our funding and, thanks to the bond s triple-a rating, we are on a level playing field with the cantonal banks. We can expand and lend money without first waiting for client deposits. And given the strong demand, we intend to issue a further CHF 500 million this year. How do you assess the bank s performance, with a small increase in profit for the third year in a row? Markus Gygax: Our business model is focused strongly on continuity: evolution rather than revolution. Step by step, we have made progress, both in our operations as can be seen from our results and in our lending growth, which increased threefold. We also succeeded in keeping the net interest margin steady from the first quarter onwards. We did not have to cut prices to grow, and we kept our costs under control. How exactly did you succeed in improving the bank s results? Markus Gygax: Put simply: income grew faster than costs. We saw a return to growth both in commission income and what we call other income. And we were able to maintain the net interest margin while growing. That was the key factor. Jürg Bucher: The turnaround in fee and commission income gives us fresh confidence after a period of several years when figures were falling. Our task now is to sustain this turnaround. Markus Gygax: The stock market situation helped, too. More assets mean more income. However, we also took a more proactive approach in our investment business. At the same time, commission expense fell. We will continue to make investment business a top priority in All of our client advisors are properly trained and certified. We offer attractive products and good performance it is now up to us to impress our clients. That is how we will sustain the turnaround. Jürg Bucher: Our offering is very strong, and compares well with that of our competitors. Business magazine BILANZ has once again rated us the best regional bank in the investment advisory category. Client deposits excluding Triba have fallen slightly even though you are expanding your branch network. How has that happened? Markus Gygax: In the first quarter, we deliberately let go of institutional client deposits that were too expensive for us. However, in the second half of the year we saw a a substantial inflow of new funds. We are very happy to take client deposits in the retail and SME businesses, but we will avoid taking deposits from large investors. If I could start the bank again from scratch today, I would make more use of funding instruments such as the covered bond we mentioned earlier. We need to simplify all of our activities. Markus Gygax, CEO Can you explain why? Markus Gygax: There are more attractive sources of funding out there than client deposits, which entail interest-rate hedging and liquidity costs. With our ten-year covered bond, we don t have those costs. The interest rate is fixed, and there

9 ANNUAL REPORT 2017 / VALIANT HOLDING AG INTERVIEW CHAIRMAN AND CEO 5 Markus Gygax, CEO With the 2020 expansion strategy you are aiming higher. Markus Gygax: Our target for loan growth in our core regions in 2018 is 2%. In the areas we are expanding into, we are aiming for an additional one percentage point of growth in We will keep up the pace of expansion in 2018, with two new branches employing a total of 20 new staff: ten private client advisors and ten SME specialists. Our initial focus is on western Switzerland. After that, we will look to the east, with a first branch to open in St. Gallen. We are consciously not moving into major city centres, but rather into suburbs and medium-sized towns and cities. It is important in this respect that our branch managers and client advisors are based locally. is no risk of outflows. We will therefore continue to reduce large clients deposits this year. Net profit was solid, which means you can raise the dividend once again. Wouldn t it be better to invest the money in the expansion rather than distributing it? Jürg Bucher: We target a capital ratio of between 15% and 17%. It is my firm view that we should not hoard capital. At the end of 2017, our total capital ratio stood at 17.2%. After we repay a subordinated bond in the spring of 2018, it will still be 16.2%. We therefore have a very sound capital base, which allows us to moderately increase the dividend once again. I believe that our dividend policy sends a clear message to our shareholders and the market that we are committed to a linear improvement in the bank s results. Valiant is a dividend-paying stock that currently yields 3.8%. That is a respectable figure. Meanwhile you are getting rid of the counter areas. Markus Gygax: What will change is the entrances to the branches. The client areas are being redesigned. Increasingly, we are getting rid of counters, as the number of transactions has been falling dramatically for some time now. In three locations we are piloting our new branch concept, which we plan to roll out at all locations over the next few years. The service offering itself is hardly changing, but the services are provided in a different form. Instead of counters there are ATMs and video advisors. However, as before, the branch manager and client advisor will be present on site. The big advantage is that branches with video reception are accessible all day. And client advisors no longer have to spend time on questions relating to cash handling and security, but instead can devote their full attention to clients. Jürg Bucher: Instead of closing branches we are upgrading them, because we are convinced that even in a digital world, it is people that make the difference. Banking transactions are based on trust, and trust is formed between people. Valiant still has a human face. Following the good results in 2017, what do you expect in 2018? Will you benefit from the strong economy? Markus Gygax: Yes, we will benefit directly. When the economy is going well, there are likely to be fewer non-performing loans, which means lower value adjustments. Growth in our core businesses will probably be in line with Swiss economic growth, and that is also in keeping with our targets. In addition, we want to keep growing our investment business. For 2018, we expect operating profit to rise and net profit to be roughly in line with last year s figure. You mention digitisation. How is that going for you? Jürg Bucher: We are taking a very proactive approach, but client behaviour is not changing as quickly as anticipated. As a result, certain projects have been successful, but not others. One case in point is the option to open an account online, which has been available to our clients for two years now. We were the first bank in Switzerland to offer this option, and now between 3% and 5% of our clients have made use of it. As you see, it takes time. The key factor is to be able to build up broad experience within the bank. That

10 INTERVIEW CHAIRMAN AND CEO 2017 ANNUAL REPORT / VALIANT HOLDING AG 6 It is my firm view that we should not hoard capital. Jürg Bucher Chairman of the Board of Directors Are you having any second thoughts about the chosen course of action? Jürg Bucher: Not at all. The key elements are in place, and implementation is going well: we are pressing ahead with our expansion to the west and then to the east, and with digitisation as well as strengthening our market presence and broadening the expertise of our employees. Markus Gygax: The business model focused on private clients and SMEs has proven to be the right one. It has given us an extremely stable base. But we have the potential to increase our capacity utilisation even further, be it through organic growth or acquisitions. That would automatically drive up profitability, which is one of our targets at the moment. Generating more income while keeping costs the same: that s our goal. Jürg Bucher, Chairman of the Board of Directors Jürg Bucher has been Chairman of the Board of Directors of Valiant since the start of Previously, he served as head of PostFinance and group director of Swiss Post. In his free time he enjoys going to the theatre, listening to jazz and classical music, and doing in outdoor sports. is the only way to ensure that we can act promptly when new opportunities arise. However, the bottom line is that we always need to make money from any innovation. Markus Gygax: Technically, there are a lot of possibilities, but client behaviour is slow to change. That said, we need to push ahead with digitisation within the bank, too, and fully digitise our processes. The way we do things is still too complicated. The first area we are addressing is the lending process. We need to simplify all of our activities. Markus Gygax, CEO Before taking office as CEO of Valiant in November 2013, Markus Gygax was head of the retail division and a member of the Executive Board at Banque Cantonale Vaudoise. He likes to spend his free time with his family and enjoys curling. Medard Meier conducted the interview. Mr Meier is an experienced financial journalist and was editor-in-chief at Swiss business magazine BILANZ for many years. His current work includes serving as a communications advisor for Avenir Suisse. Jürg Bucher, you will remain Chairman of the bank for another two years, even though according to the Organisational Regulations you ought to be retiring. Does this have to do with implementing Strategy 2020? Jürg Bucher: No, the implementation of the strategy does not depend on any one individual. But the fact is, we are only part-way through it. The Board of Directors has therefore agreed that the operational management team led by Markus Gygax should continue to drive implementation forwards for another year. The intention is that he will then move over to the Board of Directors in 2019 and take over as Chairman in 2020.

11 2017 Management Report Valiant had a successful year in In addition to the increase in net profit, we were able to maintain our net interest margin at a high level and also grow our business, which was a significant achievement. With the opening of new branches in Brugg and Morges and the successful launch of the first Valiant covered bond, we achieved some of our Strategy 2020 milestones.

12 Strategy and goals 9 Our strategy 9 Our goals up to Our client segments 12 Our products and services 13 Our area of business Business performance 14 Key events 14 Financial performance 16 Outlook Risk assessment 17 Risk situation 17 Risk management Investors 20 Shareholders 21 The Valiant share 21 Dividend policy 22 Credit ratings and bonds Employee figures (particularly the number of full-time equivalents over the year) can be found on page 36 of the Corporate Responsibility Report.

13 2017 ANNUAL REPORT / VALIANT HOLDING AG MANAGEMENT REPORT 9 Strategy and goals Valiant is an independent Swiss bank. We offer simple, understandable products and excellent service to private individuals and companies. We have set ourselves ambitious goals to be met by 2020, and are on track towards achieving them. Our strategy As an independent retail and SME bank operating exclusively in Switzerland, we foster an open, value-based culture both within the bank and towards the outside world. Simple business model At Valiant, we earn our shareholders trust by having a solid capital base, a simple, understandable business model and a business policy geared towards long-term stability. Balanced risk profile We increase our profitability by means of a balanced risk profile that is aligned with the bank and its business model, with the aim of striking the right balance between risk, return and growth. Close relationships on an equal footing We have strong regional ties and do business with our clients on an equal footing. We work to consistently foster close relationships with our clients, always striving to make their financial lives easier. Employee development Our employees are the key to our bank s success. We attach a great deal of importance to promoting and developing our workforce. Strong partners We work with strong partners particularly in areas such as digitisation, products, settlement and logistics in order to free up resources so that we can focus fully on our clients. Our goals up to 2020 Valiant is still Valiant but we have our sights set on further ambitious development. This should enable us to maintain our independent position in the Swiss banking landscape. We have set ourselves ambitious goals. Profitability Under our current strategy, we are seeking to achieve a return on equity of 6% to 8% by 2020, with a payout ratio of between 40% and 70% and a dividend of at least CHF 4.00 per share. Our goals up to 2020 Profitable growth Enhanced efficiency Capital management Lending growth per year: µ µ 2 3% in existing markets µ µ 2 3% in new regions µ µ Additional growth to be achieved by our existing middleand back-office resources µ µ Gradual upgrading of branches µ µ Total capital ratio: 15 17% µ µ RoE: 6 8% µ µ Payout ratio: 40 70% µ µ Dividend: at least CHF 4.00

14 MANAGEMENT REPORT 2017 ANNUAL REPORT / VALIANT HOLDING AG 10 Capital management We also aim to keep the total capital ratio consistently above 15% well in excess of the regulatory minimum. In 2017, we added an upper limit of 17% to this target. Profitable growth We want to be profitable at the operating level and enhance our efficiency. We are targeting annual lending growth of 2-3% by 2020, and 2-3% in new regions as well. In doing so, we are not changing our conservative risk profile. Enhanced efficiency We aim to achieve this additional growth using our existing middle- and back-office resources. We will also gradually convert the client areas in some of our branches. We expect to make savings in recurring costs over the medium term by combining personalised local advice with digital services. We are investing in growth As part of our 2020 goals and our strategic measures, we are investing in three areas. Firstly, we are expanding our footprint. At present, Valiant operates predominantly in rural areas. To remain sustainable, we are increasingly entering urban areas and centres of growth the places where clients are. In the coming years, we will gradually expand our presence. As well as setting up new branches, we will bolster our headcount in client advisory services for SMEs and private clients. Secondly, we are investing in digitisation, our brand and our employees. By digitising our banking services, we want to make our clients financial lives easier and be a reliable partner for them in the digital world. We are working, partly in conjunction with external partners, to develop innovative solutions that enable our clients to manage their banking needs more simply and conveniently. Digitisation is a growth driver for us, as it will allow us to offer our services throughout Switzerland. We will only be successful with this approach, however, if we strengthen our brand and our skills alongside our physical expansion. This strategy, together with a consistent client experience across all channels, should continue to set us apart in the market. Thirdly, we are ready to continue on our path of non-organic growth. We are not looking to diversify, but rather to sharpen our existing focus. Before thoroughly examining any options, we must ensure that they fit with our business model. Implementation still on track The measures implemented in 2017 show that we are making good progress with the strategy we put in place the previous year. The new branch concept, which combines personalised advice and digital self-service elements, has enabled us to expand into new geographical territory in Brugg and Morges. This expansion is being supported by the recruitment of new client advisors for private and business clients. In 2017 we successfully acquired a majority stake of 97.9% in Triba Partner Bank AG. With our integration of Triba by mid-2018, we will also achieve non-organic growth. The launch of our own covered mortgage bond (Valiant covered bond) was very well received by the market. With this bond we have created a broader base for funding our mortgages and loans while reducing our funding costs. Our strategic measures for Expansion until 2020 Additional investment Non-organic growth µ µ 80 additional client advisors µ µ A total of ten new branches Up to CHF 15 million per year in: µ µ Digitisation µ µ Market presence µ µ Training and development µ µ Assessing opportunities

15 2017 ANNUAL REPORT / VALIANT HOLDING AG MANAGEMENT REPORT 11 Our client segments Valiant s business is focused on the following retail and SME segments: Self-employed individuals and small companies In this segment, we stand out from the competition by having one individual contact person responsible for serving the client s private and business banking needs. Private retail clients Valiant stands out thanks to the simplicity of our products, services and processes. Clients are also increasingly able to choose between contacting us in person or using our expanding range of online services. Medium-sized companies Valiant offers medium-sized companies and institutional clients specialist know-how as an alternative to the internationally focused big banks and cantonal banks. Affluent private clients We work to maintain banking relationships with affluent private clients by providing bespoke, personalised management and advisory services. CHF 438 million in total income by segment Clients by segment 18% Mediumsized companies 2% Private retail clients 10% Self-employed individuals and small companies 1% Medium-sized companies 33% Self-employed individuals and small companies 47% Affluent private clients 28% Affluent private clients 61% Private retail clients CHF 27.8 billion in client assets by segment CHF 23.5 billion in loans by client segment 27% Mediumsized companies 7% Private retail clients 17.5% Mediumsized companies 0.3% Private retail clients 17% Self-employed individuals and small companies 49% Affluent private clients 37.6% Self-employed individuals and small companies 44.6% Affluent private clients

16 MANAGEMENT REPORT 2017 ANNUAL REPORT / VALIANT HOLDING AG 12 Our products and services We focus on the core tasks of a bank in the areas of payments, savings, investment, retirement planning and financing, offering our clients a full spectrum of simple and understandable banking services from a single source. Payments We make our clients day-to-day lives easier through our payment services. Clients increasingly wish to make cash-free payments and carry out banking transactions at any time. We meet this demand with products such as our mobile banking app. We offer our private clients and our business clients a selection of different product sets with various features. We select the set that matches our client s individual needs especially in terms of ensuring simple and worry-free payment transactions. Savings We offer our clients simple savings products that are tailored exactly to their needs. In addition to selecting from our range of savings products, our private clients can make use of a savings calculator and budget planner free of charge on our website. In just a few steps, the tool calculates and illustrates how they can reach their savings goals or the best way to budget for their current expenses. Financing Finding the best financing product, calculating the borrower s ability to service debt or choosing the right term for a fixedrate mortgage: these are all needs and issues that concern both private and business clients. Through our products and personal advisory services, we aim to provide our clients with targeted support in meeting these needs while also offering them comprehensive advice. Our strengths in this area are our local knowledge and market-oriented lending conditions. Whenever we offer financing, we remain true to our cautious credit policy, despite the fiercely competitive market environment. We know the properties that we finance. We also know the tradespeople and industrial companies that finance their investment needs with our business loans. Investing Valiant s investment solutions are flexible and individual. We have the right offering to meet all our clients personal and financial circumstances. We draw up customised, needsbased investment proposals in accordance with the personal investor profile that we define jointly with the client. We also continue to provide our investment clients with assistance and support in the implementation of the chosen investment strategy and in the long-term attainment of the goals that we have defined together with them. In doing so, we take due consideration of changes in their personal and financial circumstances. Retirement planning It is becoming increasingly important for clients to play an active role in their retirement planning, given rising life expectancy. This applies equally to retail clients who wish to prepare for their retirement or protect their family or home and to business clients seeking the optimum pension fund and personal insurance solutions. Needs vary depending on their personal or business situation. Existing solutions must be reviewed and, where necessary, adjusted. Valiant relies on needs-based, understandable solutions. Together with our clients, we customise their retirement planning to their individual needs. Moreover, our clients benefit from the comprehensive services offered by our retirement specialists.

17 2017 ANNUAL REPORT / VALIANT HOLDING AG MANAGEMENT REPORT 13 Our area of business Valiant has strong regional ties and values close client relationships. With a total of 91 branches, we have a strong local presence in our core region, which stretches across 11 cantons from Vaud to Central Switzerland. This allows us to be close to our clients and have short decision-making chains. Valiant is not restricted by any geographical boundaries in Switzerland, and we are extending our business beyond our core market. Thanks to digitisation, we can also offer our services throughout Switzerland. 91 branches. We have a dense branch network in our core market. This means that we are visible and physically accessible to our clients. 11 cantons. Our core region covers 11 cantons. BS 227 ATMs. We operate 227 ATMs throughout Switzerland. Our clients can also withdraw cash free of charge from a further 165 Entris ATMs. JU SO BL AG ZG NE LU VD FR BE CH Present throughout Switzerland. Thanks to digitisation, our clients can access our services throughout the country.

18 MANAGEMENT REPORT 2017 ANNUAL REPORT / VALIANT HOLDING AG 14 Business performance Valiant had a successful The numerous measures taken in recent years to boost sales have paid off. Key events Financial performance 21 January Valiant opened a new branch in Brugg, and another one in Morges at the end of November. The new branch design combines digital banking services with personalised advice. 15 February We published our 2016 financial results. Net profit rose by 2.7% to CHF million. We were able to maintain our net interest margin while also growing our business, which was a major challenge in the prevailing market environment. 17 March We announced an offer to buy Triba Partner Bank AG (Triba). Both parties supported the move and the plan to integrate Triba s business activities into Valiant. 31 March Top honours: According to business magazine BILANZ s annual private banking ranking, we offer the best investment advisory service among all Swiss regional banks. 18 May 20th Annual General Meeting of Valiant Holding AG. Two new members, Dr Maya Bundt and Nicole Pauli, were elected to the Board of Directors. The dividend was increased by CHF 0.20 to CHF 3.80 per share. 3 July Upon completion of the purchase offer, Valiant held more than 97% of Triba s share capital. We plan to complete the integration of Triba into Valiant Bank by summer 2018, when the legal merger will take place. In 2017, we achieved key financial targets and beat our 2% target for growth in lending. The net interest margin was largely maintained despite the persistently challenging low interest-rate environment. At the beginning of July, Valiant acquired a majority stake in Triba Partner Bank AG, which has since been consolidated. Net profit improved by 1.5% to CHF million in In addition, CHF 13.7 million was allocated to the reserves for general banking risks, with the amount directly in equity. The amount allocated resulted from the additional income arising from the winding-up of the RBA assistance fund and from the negative goodwill incurred in connection with the acquisition of Triba Partner Bank AG. Operating profit declined by 2.0% to CHF million in Excluding value adjustments in interest income and the operating profit of Triba Partner Bank AG, operating profit grew by 5.2%, reflecting the improvement in Valiant s operating performance. Our capital base is very sound. Despite the acquisition of Triba Partner Bank AG in July 2017, the total capital ratio remained practically unchanged from the previous year at 17.2% (2016: 17.3%). In view of the increase in profit and the solid capital base, the Board of Directors will recommend at the Annual General Meeting that a dividend of CHF 4.00 per share be paid, which represents an increase of CHF November We issued the first CHF 250 million tranche of our covered bond programme. It is the first covered bond governed by Swiss law and with a Swiss guarantor. Rating agency assigned the Valiant covered bond the best possible rating of Aaa.

19 2017 ANNUAL REPORT / VALIANT HOLDING AG MANAGEMENT REPORT 15 Interest income Net interest income before value adjustments for default risk and loan losses increased by 2.0% from CHF million to CHF million. Adjusted for the effect of Triba in the second half of the year, net interest income was practically unchanged. Owing to market conditions, interest and dividend income fell by 2.5%. We reduced interest expense by 15.2% by adjusting the interest-rates on client deposits and by making use of mortgage bonds and the Valiant covered bond to decrease funding costs. The ongoing negative interest-rate situation also had a positive and risk-free impact on the interbank business. The net interest margin reached 110 basis points (2016: 113 basis points). We further reduced our already low interest-rate exposure in the year under review. Fee and commission income, and trading income Fee and commission income rose by 4.6% or CHF 2.8 million to CHF 62.3 million. This signalled a turnaround in commission income after several years. Net trading income increased by 3.2% to CHF 11.7 million. Income from other business Other operating income reached CHF 18.0 million (+3.4%). The absence of income from holdings in Triba Partner Bank AG in the second half of the year was offset by higher income from the holding in RBA. Operating expenses and efficiency Operating expenses rose by CHF 5.1 million or 2.3% to CHF million in Personnel expenses increased by 3.7%. This was driven by factors such as the recruitment of new client advisors and the acquisition of Triba. General and administrative expenses went up by 0.8% or CHF 0.8 million. The cost / income ratio before depreciation remained practically unchanged from the previous year at 58.3%. The cost / income ratio after depreciation saw a slight decrease of 0.9 percentage points to 64.1%. Depreciation, value adjustments, provisions and losses Depreciation of tangible assets fell by CHF 2.4 million, or 9.5%, year on year to CHF 22.7 million. This was due to a further decline in write-downs in connection with the Finnova bank core system. Other value adjustments, provisions and losses fell by CHF 1.9 million to CHF 2.4 million. Higher oneoff provisions had been set aside in the previous year for the implementation of strategic projects. Other value adjustments remained at a very low level. Extraordinary income and taxes Extraordinary income reached CHF 28.9 million. It consisted of the last repayment of the RBA assistance fund (CHF 22.8 million) and negative goodwill totalling CHF 5.9 million as a result of the acquisition of Triba. Tax expense increased by 21.1% to CHF 32.2 million. This was mainly due to the allocation to the reserves for general banking risks. Loans Client loans rose by 5.9% to CHF 23.5 billion at the end of Mortgage lending increased by 5.9% to CHF 21.9 billion, while amounts due from customers increased by 6.2% to CHF 1.6 billion. The quality of the loan book remained high despite the rise in volumes. At the end of 2017, 97% of loans were secured, while the share of first mortgages also remained steady at 94%. The average residual maturity of mortgages was 3.8 years (2016: 3.6 years). The net loan-to-value ratio was 63.0% (2016: 63.1%). Value adjustments for credit risk were low at 0.20% at the end of 2017 (2016: 0.24%), while nonperforming loans accounted for 0.16% (2016: 0.14%) of loans. Funding and client assets Valiant recorded an increase in client deposits of CHF 482 million, or 2.6%, to CHF 18.7 billion. The coverage ratio of client loans to client deposits was 79.6% (2016: 82.2%). Bond issues and central mortgage institution loans increased by 13.1%, or CHF 0.65 billion, to CHF 5.6 billion, of which CHF 0.25 billion was from our first covered bond issue. Client assets increased by 3.5% to CHF 27.8 billion.

20 16 MANAGEMENT REPORT 2017 ANNUAL REPORT / VALIANT HOLDING AG Balance sheet Total assets rose by 5.6% to CHF 27.6 billion in The acquisition of Triba Partner Bank AG was the main factor driving the rise in total assets. On the liabilities side, customer deposits saw the greatest increase, together with bond issues and central mortgage institution loans. In the year under review, equity capital excluding minority interests rose by 3.5% to CHF billion. The increase in equity capital reduced the return on equity from 5.6% to 5.5%. Outlook We do not expect interest-rates to return to normal in Switzerland yet. In this challenging environment, withstanding the pressure on the net interest margin continues to be a top priority for Valiant. We believe that growth will continue to be driven by income. Investment in market development and digitisation will continue as part of our strategy in place until 2020.

21 2017 ANNUAL REPORT / VALIANT HOLDING AG MANAGEMENT REPORT 17 Risk assessment We strive to achieve a balanced risk / return ratio in all of our business transactions, and we remain true to our cautious risk policy. Risk situation For the purpose of managing risk, Valiant addresses all the relevant categories of risk and risks. These risks are regularly assessed by the Executive Board, the Audit and Risk Committee, and the Board of Directors. The most important kinds of risk are those that could affect Valiant s performance as a result of the potential impact on Valiant s business model and strategy. The acquisition of Triba Partner Bank AG had no significant impact on Valiant s overall risks given Triba s size and conservative risk profile. Risk categories Overarching risks µ µ Systemic risks µ µ Strategic risks µ µ Reputational risks µ µ Equity risks Primary risks µ µ Credit risks µ µ Interest-rate risks µ µ Liquidity/funding risks µ µ Other market risks Risk management The Board of Directors pays constant attention to the company s risk situation and has adopted a risk policy. This policy aims to maintain a balanced risk / return trade-off, manage risks proactively and set limits in line with Valiant s risk tolerance. This involves measuring, mitigating and monitoring all material risks. When establishing processes and organisational structures, appropriate consideration is given to risk management, which involves the identification, measurement, assessment, control and reporting of both individual and aggregated risk positions. The Board of Directors carries out a risk assessment at least once a year and reviews the risk policy. This includes assessing the appropriateness of the risk-mitigation measures taken and the limits set. Appropriate risk-mitigation measures are taken to ensure compliance with the risk tolerance level specified by the Board of Directors. These include a bank-wide internal control system (ICS), collateral and quality requirements for loans, hedging as part of asset and liability management, a comprehensive limit system, optimised processes with adequate segregation of functions, emergency plans as part of business continuity management, insurance protection and independent control bodies (Risk Control and Compliance). The risk situation with respect to the key types of risk for Valiant is set out below. General information on risk management can be found in the notes on risk management in the notes to the consolidated financial statements, on pages Operational risks µ µ Legal risks µ µ Compliance risks µ µ Settlement risks

22 18 MANAGEMENT REPORT 2017 ANNUAL REPORT / VALIANT HOLDING AG Credit risks In view of our careful lending policy, Valiant has a diversified, high-quality credit portfolio. The portfolio does not contain either cluster risks subject to a disclosure obligation or heightened sector concentrations in the corporate client business. Value adjustments remained low in the year under review. CHF 21.9 billion in mortgage loans by type of property 4 % Office / business 9 % Trade / industry 5 % Other 82 % Residential property CHF 23.5 billion in loans 7 % Due from customers 93 % Mortgage loans CHF 21.9 billion in mortgage loans by canton 4 % Basel 5 % Rest of Switzerland 7 % Fribourg 7 % Jura / Western Switzerland 44 % Bern 15 % Aargau 18 % Lucerne Risk indicators Share of first mortgages to all mortgage loans, as % Average loan-to-value ratio of mortgage loans, as % Value adjustments to lending, as % Value adjustments and provisions for credit risk, 50,104 53,612 75,815

23 2017 ANNUAL REPORT / VALIANT HOLDING AG MANAGEMENT REPORT 19 Interest-rate risks In view of Valiant s business activities, interest-rate risk is the most significant market risk. Accordingly, interest-rate risks are actively managed, limited, measured and reported. The limits are aligned with Valiant s risk capacity and also allow for future lending growth. The most important key figures are set out below: Key indicators of balance sheet structure 31/12/ /12/ /12/2015 Effective asset duration, as % Effective liability duration, as% Present value sensitivity of equity, as % bp bp Present value of equity, millions 3,096 2,821 2,652 Swap volume, millions 2,400 1,940 1,684 Hedging costs, millions Liquidity / funding risks Valiant has stable client deposits. Valiant can also cover its financing needs via third-party banks and on the capital market by means of bonds and covered bonds. To deal with liquidity shortages, Valiant holds securities recognised under financial investments amounting to CHF 884 million that are eligible for repo transactions. This provides funding at any time. The required minimum level for the short-term liquidity coverage ratio (LCR) was complied with at all times. More information on the LCR is available on page 135. Other market risks The securities recognised under financial investments amounting to CHF 0.94 billion (2016: CHF 1.12 billion) largely comprise. The credit rating of the securities is closely monitored. The interest-rate risk relating to these securities is monitored as part of the management of Valiant s overall interest-rate risks. All other market risks play a minor role for Valiant. Accordingly, the open limits are low and do not expose Valiant to any major risks. Operational risks (including legal and compliance) Valiant has a bank-wide internal control system to manage operational risks in line with the risk tolerance set by the Board of Directors. The security and reliability of electronic data processing are of crucial importance for a financial services provider. Valiant outsources its IT to first-class external providers (mainly Swisscom). Due to greater digitisation and interconnections, banks have increasingly been the subject of cyber attacks in recent times. Comprehensive measures have been taken to mitigate risk in conjunction with the outsourcing of providers. In the year under review, there were no significant operational incidents at Valiant, nor did any new provisions have to be created for legal cases.

24 20 MANAGEMENT REPORT 2017 ANNUAL REPORT / VALIANT HOLDING AG Investors We have a broad shareholder base, with a free float of 100%. We pursue a sustainable dividend policy. Various credit ratings confirm our good credit quality. Shareholders Valiant shares are widely held. Of around 33,000 shareholders, over 97% are private individuals, who together hold 47.2% of our share capital. The bank s 904 institutional investors hold 34.3%. The remaining 18.5% of shares are not recorded in the share register. Distribution by size 31/12/ /12/ /12/ , % 39.7% 41.0% 1,001 10, % 12.1% 12.2% 10, , % 12.8% 11.0% > 100, % 21.2% 19.9% Not registered 18.5% 14.2% 15.9% Shareholder structure 10.3% Institutional investors abroad 24.0% Institutional investors in Switzerland 18.5% Non-registered shares (shares pending registration of transfer) 47.2% Private shareholders The free float is 100%. At the balance sheet date, Valiant s largest shareholders were UBS Fund Management, Highclere International Investors LLP and Norges Bank, each holding more than 3% of the shares outstanding. At year-end 0.6% of registered shares were held by employees, of which 0.1% were held by members of Valiant s Executive Board.

25 2017 ANNUAL REPORT / VALIANT HOLDING AG MANAGEMENT REPORT 21 The Valiant share Benchmark performance comparison The Valiant share has been listed on SIX Swiss Exchange since Valiant Holding AG was founded in % 40 % Valiant Holding AG share Swiss security number ISIN CH Ticker symbol VATN Par value CHF 0.50 Number of shares outstanding 15,792, % 0 % 20 % 40 % 60 % 80 % 10 years 5 years 3 years Share price In 2017 the Valiant share traded in a range between CHF and CHF The share price was CHF at year-end, representing a rise of 3.9% versus the end-2016 figure of CHF The SWX Banks Price Return Index increased by 17.7% during the reporting period. The average daily liquidity of the Valiant share was CHF 1.7 million in 2017, which represents a year-on-year increase of 4.4%. Stock market performance since 2007 Total return on Valiant share (incl. dividends and capital distributions) Total return on SWX Banks Index (incl. dividends and capital distributions) Dividend policy Valiant pursues a stable dividend policy that targets a payout ratio of 40% to 70% of profit. Our shareholders have consistently received a distribution since Valiant Holding AG was founded in At the Annual General Meeting, the Board of Directors will recommend a dividend increase of CHF 0.20 to CHF 4.00 per registered share for the 2017 financial year. Source: Bloomberg / G2 140 % 120 % 100 % 80 % 60 % 40 % Dividend information Dividend per share CHF Ex-dividend date 25/05/2018 Payout date 29/05/ Proposed. 20 % 0 % The Valiant share Swiss Exchange Market Sector Bank Price Return Index Base of 100 at 31/12/2006 Current information for investors in Valiant shares can be found at Valiant.ch/investors. The following chart shows the total return (capital gains, dividends and capital distributions) on an investment in Valiant shares. The benchmark is the SWX Banks Index calculated by SIX Swiss Exchange.

26 22 MANAGEMENT REPORT 2017 ANNUAL REPORT / VALIANT HOLDING AG Key per-share indicators Key per-share indicators Book value () Net profit () Price / earnings ratio Dividend (CHF) Dividend yield (%) Payout ratio (%) Share price at year-end (CHF) Full-year high () Full-year low () Market capitalisation at 31 December (CHF m) 1,665 1,601 1,864 1,304 1,261 1 Proposed. Credit ratings and bonds Valiant holds various credit ratings. Listed bonds The following bonds issued by Valiant Bank AG are listed on the SIX Swiss Exchange: Moody s rating Valiant Bank AG has been rated by the world s leading rating agency for the past 15 years. On 18 December 2017, Moody s reaffirmed its rating for long- and short-term client deposits of A1/P-1, with a stable outlook, and for the Baseline Credit Assessment (BCA) of a3. Interest-rate Amount Maturity ISIN 1% CHF 185 million /11/2018 CH % CHF 150 million /11/2019 CH % 1 CHF 150 million /04/2023 CH % 2 CHF 250 million /12/2027 CH The subordinate bond was called on 23 March 2018 with effect Zürcher Kantonalbank (ZKB) rating Valiant Bank AG has been rated by Zürcher Kantonalbank since The A rating did not change in the year under review. The last time the rating was reaffirmed was 1 July Gesellschaft für Bonitätsbewertung (GBB) rating Valiant Bank AG has been rated by GBB since On 6 September 2017, GBB reaffirmed its A rating (stable). In April 2017, Credit Suisse s Swiss Institutional Credit Research Team discontinued their ratings following the restructuring of their investment universe. The High A rating was last reaffirmed on 16 February from 24 April Valiant covered bond. In November 2017, Valiant issued its first mortgage covered bond as part of its new covered bond programme. The covered bond is included in the Swiss Bond Index and has been assigned the best possible rating of Aaa by Moody s. You can find current information about our bonds and ratings on the Investor Relations page of our website under

27 2017 Corporate Responsibility Report Corporate responsibility and sustainability have always been part and parcel of our commitment towards the regions we serve and are therefore reflected in our values and in our culture. Continuity and fostering strong relationships are two key elements of our simple business model, defining the way we see our role and responsibilities within society and towards our stakeholders.

28 Corporate responsibility 25 Foreword 26 Sustainable business model 28 Elements of corporate responsibility 31 Development of the regional economy 32 Client needs and client protection 32 Responsibility towards society 33 Role as employer 37 Responsibility towards the environment 38 Corporate culture and compliance 39 Corporate stability

29 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE RESPONSIBILITY 25 Foreword Dear Readers, In 2017, Valiant celebrated its 20-year anniversary. We are building on the firm foundations of our predecessor banks, whose origins date back to the early 19th century as do our principles of doing business sustainably. We have always assumed a key role as a financial hub in the regions we serve by being close to our clients and having a firmly established regional presence. This function is still of key importance to Valiant today and we consider it to be our core corporate responsibility. Reporting To underscore the importance we attribute to corporate responsibility, we have enhanced the chapter on corporate responsibility in this report. This illustrates how seriously we take corporate responsibility at Valiant. We are pleased to provide you with this insight into the various aspects of our corporate responsibility and wish you an enjoyable read. Fostering a dialogue with stakeholder groups In the past financial year, we also made progress in terms of our corporate responsibility. For example, we extended our reporting so as to make it transparent and familiarise our various stakeholders with our practices and our understanding of what corporate responsibility means. This dialogue with our stakeholders provided us with valuable insights and shed light on areas in which we can improve and in what respect. Markus Gygax, CEO Our responsible business practice enables Valiant to make a direct contribution to the long-term prosperity of the regional economy and society. We see ourselves as equal partners within our close-knit network of clients, employees and shareholders, and we also have a stake in the environment and society overall. In recent years we have discussed various aspects of corporate responsibility with these stakeholder groups, prioritised them for Valiant and worked steadily to improve them. And we set great store by continuing and expanding on this dialogue, which is based on partnership.

30 26 CORPORATE RESPONSIBILITY 2017 ANNUAL REPORT / VALIANT HOLDING AG Sustainable business model Our clients, our employees, our investors and our business partners are placing ever-greater expectations on Valiant. These expectations go beyond the traditional business relationships as we have known them in the past. And what they have in common is that they all relate to conducting our business responsibly and sustainably. Valiant cultivates a responsible and sustainable business practice. We acknowledge this responsibility and will also continue to do so in future. This is why we are evolving all the time and working both formally and in our communications to become even more visible and transparent towards our stakeholders in terms of sustainability and corporate responsibility. have to be critically examined in terms of fundamental human rights, large-scale environmental pollution, and forced or child labour. Meanwhile, our credit portfolio reflects the sectoral distribution of SMEs in Switzerland. The portfolio is therefore well diversified, with no cluster risks. Exposure to sustainability risks is also low. In line with our careful lending policy, we take a cautious approach towards sectors that have questionable ecological, economic and social aspects. Sustainability is in our DNA. Our roots go back to the early 19th century, and today the group is made up of more than 30 regional banks along with several branches acquired from third-party banks. This history forms the basis for many long-standing client relationships. We know our clients, and our clients know us. Our clearly defined geographical area of activity within Switzerland, our positioning as a retail and SME bank, and these close relationships with our clients are the key features of our simple, responsible and sustainable business model. Impact of our core business on our environment The client deposits and savings entrusted to us are used to provide mortgages to home owners and funding to small and medium-sized businesses. Our lending is broken down into many small and medium-sized amounts. The properties and businesses that we finance are exclusively in Switzerland, and we know them very well thanks to our regional roots and close client relationships. As a result, and given the very stringent regulatory environment in Switzerland, our approach to many ecological, economic and social aspects already meets relatively high standards. With our four clearly defined client segments, we do not enter into disproportionately large, risky exposures. And given Valiant s simple business model, we do not finance international projects, which would

31 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE RESPONSIBILITY 27 Our sustainable business model explained simply Clients Our clients entrust us with their money and savings. Private clients account for 89 % of our client base, and self-employed individuals and small and medium-sized business for the remaining 11 %. Client assets CHF 27.8 billion Client deposits CHF 18.7 billion Safe custody assets CHF 9.1 billion Client deposits CHF 18.7 billion. Client deposits form the basis for the financing of residential property and SMEs. Safe custody assets Client assets of CHF 9.1 billion are invested with us with some of that amount in sustainable investments. Funding We fund up to 80% of our activities via client deposits and savings as well as via the capital market. Funding is diversified across various sources. Loans CHF 23.5 billion Financing residential property The single-family houses and condominiums financed by Valiant are all located in Switzerland. SME financing We finance small and mediumsized businesses and self-employed individuals in Switzerland exclusively. Thanks to our strong regional roots going back many years, we know our clients and their business. Valiant operates exclusively in Switzerland. Given the very stringent regulatory environment, and as we are a pure financial services company, our approach to many ecological, economic and social aspects already meets relatively high standards. This forms a solid basis for our sustainable, responsible and simple business model.

32 28 CORPORATE RESPONSIBILITY 2017 ANNUAL REPORT / VALIANT HOLDING AG Elements of corporate responsibility Valiant attaches great value to stability and sustainability, which is also manifested in our business policy. This mindset also forms the basis for our understanding of what constitutes a responsible and entrepreneurial approach. Our business model is based on the idea that continuity and fostering strong relationships are the two crucial features of our role in society. In recent years, we have focused unwaveringly and systematically on corporate responsibility, developing a comprehensive philosophy in the way we address the topic. Corporate responsibility policy In 2016 we revised our corporate responsibility policy. The policy is intended as a concise summary of the key aspects of corporate responsibility as we understand it. It is closely aligned with our code of conduct, which binds our employees to a set of values to be put into practice in our day-to-day work. The policy is based on the seven key pillars of corporate responsibility established in our dialogue with various stakeholder groups. The policy also explains the organisational aspects of corporate responsibility at Valiant and the allocation of responsibilities. The Board of Directors is responsible for overseeing corporate responsibility and for defining objectives. This includes approving the policy. Responsibility at the operational level lies with the CEO. Corporate responsibility issues are addressed at regular intervals by the Executive Board and the Board of Directors. Our corporate responsibility policy and code of conduct are available on the Valiant website. Key pillars of corporate responsibility Corporate responsibility as we understand it is divided into seven elements, structured in the form of a house. Corporate stability and corporate culture are its foundation. On top of these, there are four pillars representing our relationship with our four primary stakeholder groups. Our raison d être developing the economy plays an overarching role. Our understanding of corporate responsibility Development of the economy Raison d être of corporate responsibility Client needs and client protection Responsibility towards society Role as employer Responsibility towards the environment Relationship to clients, society, employees and the environment Corporate culture and compliance Corporate stability and shareholders Foundation: corporate culture and corporate stability

33 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE RESPONSIBILITY 29 Key areas of activity The key pillars of our corporate responsibility were originally the product of a dialogue between internal and external shareholders in A materiality analysis was drawn up to identify the most important sustainability topics. These remain the key topics for Valiant and serve as a guide for our activities under the heading of corporate responsibility. However, we have revised the materiality matrix below, so that it is different from that of previous years. It now more strongly conveys the influence and implications of our environmental activities environment. This results in a better and more precise understanding of those topics that are of primary interest to our external stakeholders. They thus form the basis for prioritising future corporate responsibility initiatives. Materiality matrix High Influence of our stakeholder groups on decisions Environmental aspects in products Resources and emissions Offering (comprehensibility/ transparency) Business ethics and compliance Corporate governance Equal treatment of employees Compensation system Shareholder structure Client relationship National money cycle Digitisation / access to banking services Credit policy / risk policy Employee satisfaction Training and development Capitalisation Financial results Social responsibility High Moderate Economic, ecological and social implications of Valiant s activities Raison d être of corporate responsibility Relationship to clients, society, employees and the environment Corporate culture and corporate stability

34 30 CORPORATE RESPONSIBILITY 2017 ANNUAL REPORT / VALIANT HOLDING AG Transparent reporting At the same time, the results of the materiality analysis show us how to further develop our reporting, which is based on the requirements of the international Global Reporting Initiative. This annual report has been drawn up in compliance with the GRI Standards Core option. We see further development of our reporting as a continuous process. Hence, we regularly invite our stakeholders for an exchange of ideas, so that we can hear more about their specific expectations. Additionally, we aim to further develop and report on our activities and efforts in the area of corporate responsibility in a targeted and needs-oriented manner. Dialogue with stakeholders One key element of our positioning in the market and one of our strengths is our authentic cultivation of solid relationships that are based on trust. We consequently seek dialogue at different levels with various partners in our everyday business. The following graphic is an extremely simplified illustration of our network of contacts but provides insight into our dialogue with key stakeholders. Dialogue with our stakeholders Employees Clients Client satisfaction The satisfaction of our private and corporate clients is measured and any areas of improvement defined based on regular surveys. New intranet Employees can find useful information and working tools on an innovative platform. Client events We provide our clients with first-hand information on economic developments and investment recommendations at our Valiant business drinks receptions. Executive Board meetings The Executive Board meets up to ten times per year at different branches in order to get feedback from employees and the regions. Regional support Valiant enters into around 2,000 small and 50 large financing and advertising commitments in the areas of sport, culture, social responsibility, ecology and the economy. Shareholders Dialogue with investors We regularly meet institutional investors, hold roadshows and take part in investor conferences. Reporting All of our shareholders around 33,000 in total receive our Magazin zum Geschäftsjahr, tailored especially to their needs. Society Environment Active dialogue Valiant takes part in studies and engages in an active dialogue with environmental associations with a view to ensuring continuous improvement in this area.

35 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE RESPONSIBILITY 31 Development of the regional economy Development of loans and client deposits We are convinced that, thanks to our simple business model, we are actively helping to ensure the economic, cultural and social development of Switzerland, something that ultimately benefits everyone living there. The focus lies on our core tasks of accepting money for deposits, carefully managing money and lending it, and in this way completing the national money cycle. CHF 25 billion CHF 20 billion CHF 15 billion Banking partner for SMEs Loans Valiant has always been a typical SME bank, and we have Client deposits many SMEs and self-employed individuals among our clients. To strengthen this key area of our business, we are continually developing our advisory services for small and medium-sized enterprises. We also provide our clients with assistance that goes beyond daily banking business, for example by offering succession planning. A simple approach for a successful future SMEs and self-employed individuals are the backbone of our economy. Their continued existence is of key economic importance. Succession planning in a company is a complex process be it at operational or financial level and represents a major challenge for all concerned. There is no one-size-fits-all solution. For this reason, it is vital to involve specialists in drawing up a customised succession planning concept. The earlier this is done, the more promising the results will be, so we support our clients in planning as well as implementing their succession planning, and together with them take their company into a successful and sustainable future. This is to the benefit of our clients and our economy. Financing of home ownership One important pillar of our business model is the financing of real estate, and so we observe this market very closely. In this way, we can identify any risks at an early stage and take the appropriate measures. We also evaluate financed property according to our own assessments and not based on inflated market prices. Despite our clear and low-risk focus, we have enabled many of our clients to realise their dream of owning their own home, providing them with assistance and advice along the way.

36 32 CORPORATE RESPONSIBILITY 2017 ANNUAL REPORT / VALIANT HOLDING AG Client needs and client protection We offer our clients straightforward, understandable banking services from a single source. We play an active role as a key link in the Swiss economy and as a pillar of the community. As a bank with strong regional ties, we offer our services to the entire population, in both economic centres and rural areas. Transparent, needs-based offering For us, providing our clients with transparent information on the opportunities and risks inherent in financial products is a component of sound, trustworthy and credible advice. We are constantly developing our offering in response to changing client needs. In this way, we take care to ensure that our products remain simple and understandable. At the same time, we offer solutions for specific requirements in collaboration with our specialists or with external partners where necessary. Sustainable investments For our institutional clients in particular, we have grown in step with their need for sustainable investments and offer a range of appropriate investment opportunities. Our fund recommendation list contains investment recommendations in the areas of water, sustainable energy and sustainable bond investments. Access to banking services In banking as in many other sectors, we are seeing a clear shift in client requirements towards digital channels. Alongside our current wide range of digital services, we offer our SME clients and self-employed individuals the option of applying for a business loan simply online, anywhere and at any time. With just a few clicks of the mouse, clients receive a non-binding offer on their screen, irrespective of the type and amount of the loan in question. They can speed up the process even more if they upload their annual statements at the same time. In two working days at the latest, their loan application is reviewed, and they are contacted by our advisors. At home physically and virtually At the same time, we have noticed that many of our clients use various channels, depending on their situation and needs, whether for personalised advice or digital services. To meet this need, we continue to develop all channels and keep them up to date. Valiant has developed a new type of branch that combines all the services of a traditional bank with the latest digital technology. Our clients can make an appointment online or drop into a branch without an appointment, as before. Following a needs analysis at the virtual reception, our client advisors take over on site or via video conferencing. A self-service option is available for clients who do not need personalised advice. The advantages of this new type of branch are the longer opening hours, rapid involvement of specialists, numerous selfservice options and advisory appointments, including in the evening and at weekends. The first branch of this type was opened in Brugg at the beginning of In November 2017, a second branch based on the same concept was opened in Morges. Protection of privacy Protecting and respecting privacy is crucially important to our business. We want our clients to feel they are safe and in good hands with us, and that we protect their assets and their privacy. To ensure that we can continue to protect our clients data in future, we review and optimise our business processes on an ongoing basis. Responsibility towards society We take seriously our responsibilities as part of the communities in which we operate, and we maintain good relations based on partnership. As a strong banking partner, we strive to contribute to the common financial good. Within the context of the national money cycle, we create value as follows: µ µ Personnel expenses in 2017 amounted to CHF million. Our staff are almost exclusively resident in Valiant s market area, and they therefore help to support the regional economy.

37 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE RESPONSIBILITY 33 µ µ General and administrative expenses in 2017 were CHF million. Wherever possible, we meet our needs through Swiss-made products and services. This enables us to support the local economy and strengthen our ties with the region. µ µ We returned approximately CHF 60.0 million to our shareholders in the form of dividend payments. µ µ Our aggregate taxes of CHF 32.2 million in 2017 were a direct contribution to the public-sector budget. µ µ We entered into around 2,000 small and 50 larger financing and advertising commitments in the areas of sport, culture, social responsibility, ecology and the economy last year. We focus our support on the areas where our clients live and thus help to support the region and consolidate our regional roots. µ µ As a politically neutral organisation, however, we make no donations to political activities or parties. One example of our commitments in 2017 was the Schweizerische Schulsporttag (Swiss School Sports Day). The biggest school sports day in Switzerland took place in the canton of Fribourg in June As many as 3,000 secondary school level-one pupils from all Swiss cantons and Liechtenstein successfully negotiated the qualifying rounds to compete in the event s 12 disciplines: badminton, basketball, beach volleyball, artistic gymnastics, handball, track and field, orienteering, multi-sport relay, swimming, floorball, table tennis and volleyball. Being locally established in the region of Fribourg, Valiant supported the event as lead sponsor. This attests to our commitment to young people and amateur sports as well as to our market area. However, the promotion and support of cultural events in our core territory is also of importance to us. From July to September 2017, the world s biggest St Bernard exhibition took place in Bern entitled BernARTiner. More than 100 artworks depicting St Bernards designed by companies, institutions and private individuals enchanted the city of Bern. Valiant sponsored the exhibition and took part in the campaign for donations, the sale of the BernART piggy banks and the design of two BernART figures. The exhibition closed with the auctioning of unique works of art with the proceeds going to the Jeki and Terra Vecchai foundations and the Barry Foundation. Role as employer Our employees are the key to the bank s success. They are the face of Valiant and the channel through which we express our culture to our clients and our business partners. Staff policy Our strengths as an employer are that we offer our employees excellent opportunities to contribute to and help shape the company, as well as a flat hierarchy and streamlined decision-making processes. The current expansion of our business is opening up additional development opportunities within the company. To meet these expectations. Valiant has revised the strategic orientation of its staff management. Professional integration of new employees Our clear recruitment standards enable us to efficiently hire candidates. We always seek to find those with the best fit to fill our vacancies. New employees should be an optimal fit for a job profile and for the company culture with personality traits and expertise being the decisive selection criteria rather than gender or age. We provide a professional introductory programme to support new recruits and existing employees in new positions. Another recruitment path is via an apprenticeship. In 2017, we employed a total of 55 trainees in different years of their training and two different career paths: banker, and since 2016, media technologist. All of our apprentices passed their final exams in We strive to reach a high retention rate for our junior staff following the completion of their training in 2017 this rate was 69 %. We also offer a placement programme for intermediate-school leavers, which offers those with a Swiss school-leaving certificate an attractive alternative to studying. In trainees took the opportunity to join Valiant in this way. Two graduates also for the first time embarked on a career start programme at Valiant. We offer performance-oriented junior staff with potential a number of careers and interesting opportunities to further their personal development. Our staff are therefore better for assuming management positions and other key functions.

38 34 CORPORATE RESPONSIBILITY 2017 ANNUAL REPORT / VALIANT HOLDING AG Modern working models The changing needs of both our clients and our employees are reflected in our greater range of working models. Whereas the norm ten years ago was a traditional Monday to Friday full-time job based on regular office hours, we are increasingly moving towards more flexible models. In line with the principle of mutual give and take, our staff have more flexibility when it comes to striking a work-life balance. Over a third of our employees work on a part-time basis, and this proportion has risen continually in recent years. This, coupled with often very short commuting times, gives rise to attractive working opportunities outside the main densely populated areas as well. Our advisory expertise Our ambition is to raise the quality of advice at all locations to a uniformly high level, so that we can offer all our clients professional, comprehensive advice from a single source. In practical terms, client advisory services and advisory consultations are to be standardised with clearly defined steps, advisory sheets and checklists. The six steps of our advisory process Training and development We provide our staff at all levels with generous and targeted support in their training and development and offer them opportunities to pursue specialist or management careers. By identifying common career paths, we can show our employees the range of opportunities available. One special focus is on the next generation of client advisors, who are offered a targeted development plan. Our staff are trained in developing not only their advisory expertise, but also their management expertise. This is because management is important at Valiant for our staff and for the success of our bank. In 2016, Valiant launched the development concept Dynamique. This concept is the basis for sustainable sales success. 5 Establish how to proceed 6 Follow up the discussion 4 Come up with solutions Client 1 Prepare the discussion 3 Establish the client s needs 2 Define the subjects to be addressed All topics relating to client discussions are covered in depth through several training phases. For example, training in question-asking techniques, product presentation and recommendation management is provided. In 2017, over 600 advisors received intensive training on more than 120 training days and are pleased to apply the expertise they learned in their everyday advisory sessions with clients.

39 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE RESPONSIBILITY 35 Our management expertise For us management means developing and encouraging staff. Alongside advisory training, under Valiant s proprietary Dynamique development concept, we offer managers training so that they can assume the role of boss, developer, organiser or communicator depending on the situation. In addition to the four management roles, we lay down management principles that are designed to guide us in our everyday management work as part of what we understand management to involve. In this way we convey a sense of purpose across all areas of activity. Staff satisfaction We measure staff satisfaction using structured employee surveys carried out every two years. The survey results are a key indicator of job satisfaction and the commitment of employees. The last survey was conducted in The high participation rate along with the level of job satisfaction gave a positive picture overall. The potential for improvement was recognised and measures were defined accordingly. Valiant has laid down the following management principles that all of our managers must follow: µ µ We set an example and have trust in our staff µ µ We set our sights on business that is sustainable and client-focused, and we work as a team µ µ We think and act in a business-minded way µ µ We keep our word and are reliable µ µ We communicate at the right time, honestly and in a way that is appropriate for the target group µ µ We shape change together with our team Valiant s age structure Age Women Men Number 100 of 90 employees Executive Board and senior management Middle management Employees Apprentices

40 36 CORPORATE RESPONSIBILITY 2017 ANNUAL REPORT / VALIANT HOLDING AG Headcount Key personnel figures were stable overall. The headcount bottomed out at the end of 2015 following a multi-year adjustment phase and rose again continuously in the last two years. This increase is partly because we are broadening the advisory expertise of our staff and are moving into new regions. The staff of Triba Partner Bank AG were included in the figures for the first time in 2017 (30 employees, or 22 full-time equivalents). Valiant employed 1,000 people and 81 apprentices at the end of 2017, representing a year-onyear increase of around 4.5%. There was a net increase of nine in the number of full-time equivalents in Employee figures Employees 1, Total proportion of women as % Proportion of women in middle and senior management as % Full-time equivalents Average full-time equivalents over the year Part-time employees Part-time employees as % Women as % Men as % Employee turnover rate as % New staff Average duration of employment in years Total number of apprentices Number of interns Number of trainees Number of career starters 2 2 Retention rate for trainees as % Trainee-to-headcount ratio as % Costs of training and development 3,160 2,310 1,640 Internal training days per employee Absence rate as % Ratio of top to median salary : : : 1 Insured members of pension fund Pension fund pension recipients Pension fund cover ratio as % figure: excluding Triba Partner Bank AG. 2 New training category since Basis = fixed compensation plus variable compensation for the previous financial year. The median salary is based on all employees salaries and is extrapolated to working hours of 100%. 4 Tentative, for 2017.

41 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE RESPONSIBILITY 37 Responsibility towards the environment In line with our corporate culture, we treat the environment with respect and seek to minimise the negative impact of our activities. As a pure services company with a simple and sustainable business model (page 27), we have relatively little direct impact on the environment. In pragmatic terms, however, we are constantly taking measures to further improve the careful use of natural resources. For instance, this year is the third time that this report has been printed on a climate-neutral basis. We no longer print a number of our publications but publish them exclusively online. Environmental impact of operations Valiant has publicly disclosed its energy consumption since Since 2016, with advisory firm Swiss Climate, we have produced a comprehensive carbon footprint report in accordance with recognised international standards, namely ISO and the Greenhouse Gas Protocol. As in the previous year, the report in 2017 was verified by the independent audit firm true&fair.expert. Careful use of resources Valiant operates a large number of small branches. These require above-average amounts of heating energy compared with larger branches or administrative buildings. Thus the bulk of our energy consumption comes from heating our various sites and is heavily influenced by factors such as the severity of the winter. We take care to keep electricity, paper and water use to a minimum in all our operations. Climate protection measures We are committed to climate protection to the extent possible and are constantly adopting both small- and large-scale measures in this regard. The organisation CDP (Carbon Disclosure Project) confirmed we are on the right track in autumn CDP awarded us an A rating in its latest climate change ratings, which represents a major improvement on the previous year. This development provides us with an incentive to continue putting our responsibility to the environment into practice. Energy consumption and carbon footprint 2017 Amount 2017 t CO 2 e t CO 2 e / (in %) Scope 1 direct emissions Heating (natural gas, heating oil, wood) 5,523,922 kwh 1,336 1, Business trips (company cars) 75,119 l Total direct emissions 1,522 1, Scope 2 indirect emissions Electricity 4,203,814 kwh Heating (district heating) 1,589,827 kwh Total indirect emissions Scope 3 further indirect emissions Energy supply Various Business trips (external means of transport such as train, airplane, private car) Various Commuter journeys 10,383,814 km Paper 46, 727 kg Print jobs 2 204,150 kg Water 36,292 m Total further indirect emissions 2 1,705 1, Total CO 2 emissions 2 3,813 3, CO2 equivalent in tons. 2 Values for 2016 corrected from those published in the 2016 Annual Report.

42 38 CORPORATE RESPONSIBILITY 2017 ANNUAL REPORT / VALIANT HOLDING AG Environmental considerations in our lending business Aside from emissions from our own operations, we also take environmental considerations into account when granting loans, valuing property and assessing financing risks. Our lending policy stipulates that loans are not granted for projects that disregard ecological principles. The principle of engaging in prudent, careful and sustainable environmental practices is also laid down in our code of conduct, which is binding for all of our staff and published on our website. Thanks to our strong regional roots going back many years, we know our clients, and when granting loans we can assess the extent to which they meet ecological criteria. The four values of our corporate culture Clientoriented Responsibility Values that guide our actions Solutionsdriven Corporate culture and compliance Valiant cultivates an open, values-based culture both within the bank and in its dealings with the outside world. Value-conscious behaviour is of central importance to Valiant, as the banking business is based on mutual trust. Conduct in business dealings Our corporate culture is expressed in a binding code of conduct. It is founded on four values that guide our actions in our everyday business. These values provide a framework that essentially enables our staff to make the right decisions for Valiant and to live out our corporate culture. The directive on the code of conduct became effective in This sets out the expected conduct of our employees in greater detail and defines the boundaries of acceptable behaviour. It also sets out the procedure to be followed in cases where an employee suspects or witnesses a breach of the code of conduct. Besides having points of contact for inhouse reporting, an external reporting system is also available through which information regarding harassment, discrimination, bullying or corruption can be reported. This may be done anonymously. As in the previous year, no such reports were made in The code of conduct, the implementing provisions of which are set out in the directive, is reviewed annually and is published on our website. Integrity Data protection and data security Valiant has made data protection and data security a major priority. Various directives and internal guidelines are in place to govern the handling of electronic media and of bank and client data by our employees in compliance with relevant legal provisions such as bank confidentiality, data protection and archiving obligations. Meanwhile, the digitisation of the banking business continues apace, presenting new challenges for the protection of client and bank data. We work as part of various bodies and interest groups to anticipate new criminal activities and to combat these effectively. With Swisscom as the operator of our core banking system, we benefit from the professional assistance of an experienced partner in this respect. For instance, we have made our ebanking system secure with Cronto Sign Swiss. Login data are encoded in a coloured mosaic and can only be decoded and displayed by means of a smartphone or other scanning device. Not only is this process simple, it is also particularly secure, and our many e-banking clients rely on it.

43 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE RESPONSIBILITY 39 Compliance with legal provisions At the very least, our conduct must ensure compliance with legal, regulatory and internal bank requirements as well as generally accepted market standards and the rules of professional conduct prescribed by the Swiss Bankers Association. In 2017, no fines or penalties were imposed on Valiant for failure to observe legal requirements. To ensure we maintain this high standard, our staff are regularly sensitised and trained in specific subjects. In the year under review, one focus was on specific compliance subjects and FATCA (Foreign Account Tax Compliance Act a unilateral US tax law with the aim of curbing all possible tax evasion at the expense of the United States). Staff received targeted training in their areas of responsibility in the form of elearning modules. Corporate stability A firm financial footing is vital to the long-term success of a business. This includes solid backing in the form of equity. The authorities have significantly increased the corresponding requirements in recent years. For example, the counter - cyclical capital buffer for loans secured by domestic residential properties has been raised. Banks consequently need to put aside more capital to back the mortgages they provide, rendering them less vulnerable if developments on the property market turn negative. As part of our capital planning, we calculate our capital base and subject it to an in-depth review using various macroeconomic scenarios every six months. Valiant intends to exceed the FINMA capital adequacy requirement. At group level, Valiant has a total capital ratio of 17.2%. Valiant therefore exceeds the FINMA requirement by a considerable margin. Total capital ratio 20% 15% 10% 5% 0% Total capital ratio FINMA minimum requirement (12%)

44 2017 Corporate Governance Report At the Annual General Meeting on 18 May 2017, two new members, Dr Maya Bundt and Nicole Pauli, were elected to the Board of Directors. Dr Maya Bundt is a renowned expert on the risks and opportunities of digitisation in the financial industry. Nicole Pauli held various management positions at a large Swiss bank and is a renowned banking expert. The election of both these new members has broadened the Board s collective specialist knowledge.

45 Group structure Group structure Major shareholders Cross-shareholdings Company history Capital structure Share capital Conditional and authorised capital Changes in capital Shares and participation certificates Dividend-right certificates Limitations on transferability and nominee registrations Convertible bonds and options Board of Directors Members of the Board of Directors Other activities and interests Regulations of the Articles of Association regarding the number of allowable activities Election and term of office Internal organisational structure Areas of responsibility Information and control instruments relating to the Executive Board Executive Board Members of the Executive Board Other activities and interests Regulations of the Articles of Association regarding the number of allowable activities Management contracts Compensation, shareholdings and loans 62 5 Compensation, shareholdings and loans Shareholders participation rights Restrictions on voting rights and proxies Quorums prescribed by the Articles of Association Convening of the Annual General Meeting Agenda Entries in the share register Change of control and defensive measures Obligation to make an offer Change of control clauses Auditors Term of mandate and term of office of the lead auditor Auditing fees Additional fees Information instruments pertaining to the external auditor Information policy 68 9 Information policy

46 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE GOVERNANCE 43 GROUP STRUCTURE 1 Group structure 1.1 Group structure Group organisational structure Operational group structure Valiant Holding AG was created in mid-1997 through the merger of three regional banks: Spar + Leihkasse in Bern, Gewerbekasse in Bern and Bank Belp. Today, 31 regional banks and several branches acquired from third-party banks are operating under the umbrella of Valiant Holding AG. Valiant Holding AG is a company limited by shares and governed by Swiss law, with its registered office in Lucerne. The holding company itself does not have bank status, in contrast to its subsidiary, Valiant Bank AG. The Valiant group ( Valiant ) comprises Valiant Holding AG, Valiant Bank AG, Triba Partner Bank AG (since July 2017) and other subsidiaries that are not operational. The Board of Directors and Executive Board of Valiant Holding AG and the Board of Directors and Executive Board of Valiant Bank AG are comprised of the same members. Valiant Holding AG Valiant Bank AG Triba Partner Bank AG Valiant Bank AG Valiant Bank is a retail and SME bank that operates exclusively in Switzerland. It offers private clients and small and medium-sized businesses a comprehensive range of easy-to-understand products and services covering all financial needs. It has local branch offices in 11 different Swiss cantons. Operational organisational structure CEO Human Resources Marketing and Communication Risk Management Legal and Compliance Corporate Development CFO Finance and Private and Corporate and Sales Channels Products and Infrastructure Business Clients Investment Advisory Operations Clients

47 44 CORPORATE GOVERNANCE GROUP STRUCTURE 2017 ANNUAL REPORT / VALIANT HOLDING AG Triba Partner Bank AG On 12 April 2017, Valiant published a public tender offer to buy the shares in Triba Partner Bank AG. It offered to pay CHF 1,450 per share in cash until 23 June Valiant held 97.87% of Triba s share capital at 31 December Triba Partner Bank AG is to be integrated into Valiant Bank AG by summer 2018 through a merger. Valiant representatives have been added to Triba s Board of Directors and Executive Board. Details of the cooperation between the governing bodies can be found in Triba Partner Bank AG s 2017 Annual Report, which is available at valiant.ch/results Consolidated companies of Valiant Holding AG No exchange-listed companies are consolidated under Valiant Holding AG. The unlisted companies consolidated under Valiant Holding AG are indicated in the notes to the consolidated financial statements on page 116 (fully consolidated holdings). 1.2 Major shareholders At 31 December 2017, the following holdings in Valiant Holding AG of 3% or more had been disclosed under Article 120 of the Swiss Financial Market Infrastructure Act: Shareholder Capital or voting rights Date of registration UBS Fund Management (Switzerland) AG 3.04% 12/07/2013 Highclere International Investors LLP 3.00% 27/09/2017 Norges Bank (the Central Bank of Norway) 3.082% 08/12/2017 Valiant is not aware of any other shareholders who held a direct or indirect voting share or an equity investment of 3% or more at 31 December The disclosure notices published on the SIX Exchange Regulation website in the year under review are available at: significant-shareholders.html 1.3 Cross-shareholdings Valiant is not aware of any cross-shareholdings of capital or voting rights that would amount to 5% on either side.

48 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE GOVERNANCE 45 GROUP STRUCTURE 1.4 Company history In the year under review, Valiant celebrated its 20th anniversary. It was created in 1997 through the merger of three regional banks whose roots go back to the early 19th century Valiant acquires Triba Partner Bank AG with a public tender offer. In addition, it opens new branches in Brugg and Morges The strategy until 2020 is presented, along with an updated brand featuring a new logo. Valiant is still Valiant, but we are continuing to develop ambitiously Valiant enters French-speaking Switzerland and opens a branch in Fribourg At the start of 2012, the four subsidiary banks, Valiant Bank, Banque Romande Valiant, Spar + Leihkasse Steffisburg and Valiant Privatbank, are merged under the umbrella of Valiant Bank In the course of the year, two further subsidiary banks Banque Romande Valiant (formerly Bank Jura Laufen) and Spar + Leihkasse Steffisburg join the Valiant group. Obersimmentalische Volksbank is also integrated into Valiant Bank, and Caisse d épargne de Siviriez is integrated into Banque Romande Valiant. 1997/1998 Valiant Holding AG is created in mid-1997 following the merger of three regional banks: Spar + Leihkasse in Bern, Gewerbekasse in Bern and BB Bank Belp. Ersparniskasse Murten is added in the same year, with Bank in Langnau following in KGS Sensebank in Heitenried in the canton of Fribourg is acquired in the spring and integrated into Valiant Bank. Towards the middle of the year, the group acquires IRB Interregio Bank and Luzerner Regiobank The history of Valiant begins in 1824 with the founding of Ersparniskasse Murten.

49 46 CORPORATE GOVERNANCE CAPITAL STRUCTURE 2017 ANNUAL REPORT / VALIANT HOLDING AG 2 Capital structure 2.1 Share capital 2.5 Dividend-right certificates The ordinary share capital of Valiant Holding AG is CHF 7,896, and is divided into 15,792,461 fully paid-up registered shares with a par value of CHF 0.50 per share. 2.2 Conditional and authorised capital No authorised capital or conditional capital exists. 2.3 Changes in capital In the current year and in the previous two financial years, there were no changes in the share capital. The last change in the share capital was in Shares and participation certificates Each of the 15,792,461 registered shares with a par value of CHF 0.50 per share entitles the holder to one vote at the Annual General Meeting of Valiant Holding AG. Voting rights can only be exercised if the shareholder is registered with voting rights in the share register. On 31 December 2017, 11,528,242 shares were registered in the share register of the company as shares with voting rights. All registered shares of Valiant Holding AG are fully paid up and entitle the holder to receive dividends. There are no preferential or voting shares. There are no participation certificates. There are no dividend-right certificates. 2.6 Limitations on transferability and nominee registrations Limitations on the transferability for each share category; indication of statutory group clauses and rules for granting exceptions The Board of Directors may refuse to register shareholders in the share register for the following reasons: a) If, through acquisition, a natural person or legal entity or a partnership would hold more than 5% of the entire share capital. Legal entities and partnerships, other combinations of persons or joint ownership relationships, where the persons are associated with one another on the basis of capital holdings or voting rights, a single management or in another way, as well as all individuals or legal entities or partnerships or communities which combine for the purpose of circumventing the threshold applying to entry in the share register, are deemed to be one person. The share registration limitation pursuant to the above provisions also applies to shares acquired or subscribed by the exercise of subscription, option or conversion rights attached to shares or other securities issued by the bank. b) If the purchaser does not expressly declare that they hold the shares in their own name and for their own account. c) If, according to the information available to the bank, further recognition of foreign purchasers as shareholders with voting rights could potentially obstruct legally required documentation. Registration in the share register may furthermore be denied if there is a danger of foreign control or significant foreign influence pursuant to the Swiss Federal Law on Banks and Savings Banks or the Federal Law on the Acquisition of Real Estate by Persons Abroad.

50 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE GOVERNANCE 47 CAPITAL STRUCTURE Reasons for granting exemptions in the year under review No exceptions to transfer restrictions were granted (see also sections and 6.1.2) Admissibility of nominee registrations, with reference to possible percentage clauses, and registration requirements The company may decide, together with nominees, to enter the nominees in their own name with voting rights, even though they are acting for the account of a third party, for up to a registration limit of 1% of the overall share capital. In doing so, the manner in which information about the fiduciaries is to be provided to the company must be contractually stipulated. If the nominee does not uphold his or her contractual obligations, the company may remove the entry from the share register and replace it with an entry without voting rights Procedure and conditions for lifting privileges and limitations on transferability set out in the Articles of Association Lifting or amending privileges and limitations on the transferability of registered shares in the Articles of Association requires a resolution of the Annual General Meeting carried by two-thirds of the represented votes and an absolute majority of the represented share capital. 2.7 Convertible bonds and options There are no outstanding convertible bonds for Valiant Holding AG or group companies. Neither Valiant Holding AG nor its group companies have issued any options.

51 48 CORPORATE GOVERNANCE BOARD OF DIRECTORS 2017 ANNUAL REPORT / VALIANT HOLDING AG 3 Board of Directors 3.1 Members of the Board of Directors The following information is based on the composition of the Board of Directors at 31 December From left to right: Nicole Pauli; Barbara Artmann; Othmar Stöckli; Dr Maya Bundt; Jürg Bucher, Chairman of the Board of Directors; Prof Christoph B. Bühler, Vice Chairman of the Board of Directors; Franziska von Weissenfluh; Jean-Baptiste Beuret

52 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE GOVERNANCE 49 BOARD OF DIRECTORS Jürg Bucher Chairman of the Board of Directors Swiss national, 1947 Education Economics Career history Umbrella Foundation Museum of Fine Arts Bern Zentrum Paul Klee, President (since 2015) Schweizerische Post, Group Director ( ) Schweizerische Post, member of Executive Management ( ) PostFinance, Head ( ) Jean-Baptiste Beuret Swiss national, 1956 Education Law Career history Treuhandgesellschaft Juravenir SA, (since 2012), partner RBA-Holding AG ( ), chairman of the Board of Directors Banque Romande Valiant SA (formerly Bank Jura Laufen AG), ( ), chairman of the Board of Directors Bank Jura Laufen AG, chairman of the Board of Directors ( ), director ( ) Othmar Stöckli Swiss national, 1969 Education Science MBA from Duke University, North Carolina Career history Independent advisor in finance, real estate, construction and engineering (since 2015) Zuger Kantonalbank ( ), member of the Executive Board, Head of Investment and Corporate Clients UBS AG, Switzerland and US ( ), various management positions Prof Christoph B. Bühler Vice Chairman of the Board of Directors Swiss national, 1970 Education Law LL M International Business Law, University of Zurich Career history böckli bühler partner (since 2004), partner University of Zurich, honorary professor in commercial and business law Barbara Artmann Swiss and German national, 1961 Education Psychology and Business Management Dr Maya Bundt (from 18 May 2017) Swiss and German national, 1971 Education Environmental Science Career history Swiss Re (since 2003), Head Cyber & Digital Solutions (since 2016), various management positions ( ) Boston Consulting Group ( ), Management Consultant Nicole Pauli (from 18 May 2017) Swiss national, 1972 Franziska von Weissenfluh Swiss national, 1960 Education Economics Career history BERNEXPO Holding AG, chair of the Board of Directors (since 2015), director ( ) Berner Zeitung BZ ( ), various management positions, CEO ( ) Espace Media AG ( ), member of the management board Der Bund Verlag AG ( ), CEO Career history Owner and CEO of Künzli SwissSchuh AG (since 2004) UBS AG ( ), Head of the Strategic Projects department in Asset Management Zurich Insurance ( ), Project Manager Financial Products Switzerland Education Economics CFA charterholder Career history Credit Suisse ( ), Managing Director, Private Banking division ( ), various management positions ( )

53 50 CORPORATE GOVERNANCE BOARD OF DIRECTORS 2017 ANNUAL REPORT / VALIANT HOLDING AG Retiring members of the Board of Directors Dr Ivo Furrer, Vice Chairman, and Andreas Huber did not stand for re-election at the Annual General Meeting on 18 May 2017 and retired from the Board of Directors as of that date. Members of the Board of Directors operational management functions All members of the Board of Directors are non-executive members. Details of each non-executive member of the Board of Directors µ µ No member of the Board of Directors performed an executive function within the group during the three financial years preceding the reporting period. µ µ No personal business relationship exists with any member of the Board of Directors that might impair their independence. All relations with boards of directors and the companies associated with them are conducted within the course of ordinary business. 3.2 Other activities and interests Name Activities in governing and supervisory bodies of important Swiss and foreign organisations, institutions and foundations under private and public law Function Jürg Bucher Chairman Prof Christoph B. Bühler Vice Chairman Museum of Fine Arts Bern Zentrum Paul Klee umbrella foundation and the Bern Museum of Fine Arts Foundation and Zentrum Paul Klee Maurice E. and Martha Müller Foundation Bern Arena Stadion AG Gstaad Menuhin Festival & Academy AG SCB Group AG Stiftung Denk an mich böckli bühler partner BLT Baselland Transport AG Edward Geistlich Sons, Limited Company for Chemical Industry Hidrostal Holding AG, Hidrostal AG and Hidronova Holding AG AXA Foundation for Supplementary Benefits Peter und Annemarie Geistlich Stiftung Chairman of the Foundation Boards Member of the Board of Directors Member of the Board of Directors Member of the Board of Directors Member of the Foundation Board Partner Vice Chairman of the Board of Directors Member of the Board of Directors Member of the Board of Directors Chairman of the Foundation Board Member of the Foundation Board Barbara Artmann Künzli SwissSchuh AG Chair of the Board of Directors Jean-Baptiste Beuret Fiduciaire Juravenir SA Member of the Board of Directors BM conseil sàrl Globaz SA Melnal SA Juraimmobilier SA and Futurimmo SA Collège Saint-Charles société coopérative FFI Fondation pour la formation industrielle Fondation pour le Théâtre du Jura Position on behalf of Valiant Crédit Mutuel de la Vallée SA Position in majority holdings of Valiant RBA-Finance Ltd Partner and CEO Chairman of the Board of Directors Chairman and liquidator Chairman of the Board of Directors Chairman of the Board of Directors Member of the Foundation Board Member of the Foundation Board Member of the Board of Directors Vice Chairman of the Board of Directors

54 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE GOVERNANCE 51 BOARD OF DIRECTORS Dr Maya Bundt Swiss Re Principal Investments Company Ltd Member of the Board of Directors Swiss Re Investments Holding Company Ltd Member of the Board of Directors Swiss Re Investments Company Ltd Member of the Board of Directors Swiss Re Direct Investments Company Ltd Member of the Board of Directors Emisum Investments AG Member of the Board of Directors Nicole Pauli PvB Pernet von Ballmoos Ltd. Vice Chair of the Board of Directors Othmar Stöckli VERIT Holding AG and VERIT Real Estate Ltd Vice Chairman of the Board of Directors Pro Senectute Kanton Zug Member of the Foundation Board Stiftung Talentia Member of the Foundation Board Gemeinnützige Gesellschaft des Kantons Zug Member of the Finance Committee Franziska von Weissenfluh BERNEXPO Holding AG and BERNEXPO AG Chair of the Board of Directors Wetterhorn von Weissenfluh AG Chair of the Board of Directors Bern Welcome AG Member of the Board of Directors Youtility AG Member of the Board of Directors Deloitte Ltd Member of the Advisory Council Name Permanent management and consultancy functions for important Swiss and foreign interest groups; official functions and political posts Function Jürg Bucher None Chairman Prof Christoph B. Bühler swissvr Member of the Board Vice Chairman Barbara Artmann None Jean-Baptiste Beuret Parti démocrate chrétien de Courtételle Chairman of the Committee Dr Maya Bundt World Economic Forum Global Future Council for the Digital Economy and Society Swiss Insurance Association Nicole Pauli None Othmar Stöckli None Member Co-head of the cyber working group Franziska von Weissenfluh Bern Economic Development Agency Member of the Advisory Council No member of the Board of Directors holds a position in another listed company. 3.3 Regulations of the Articles of Association regarding the number of allowable activities The Articles of Association of Valiant Holding AG state that no member of the Board of Directors may hold more than ten additional positions, and not more than four of these in a listed company. Positions in companies that are controlled by the company are not subject to these restrictions. The positions concerned are those in the highest management body of a legal entity that is required to be recorded in the commercial register or in an equivalent register in a foreign country. Positions in various legal entities that are under single control or part of the same group are deemed to be one position.

55 52 CORPORATE GOVERNANCE BOARD OF DIRECTORS 2017 ANNUAL REPORT / VALIANT HOLDING AG 3.4 Election and term of office Basic principles of the election process and limitations on terms of office The Chairman and other members of the Board of Directors are elected at the Annual General Meeting for a term of office of one year. They may be re-elected. On reaching the age of 70, members of the Board of Directors shall resign with effect from the next ordinary Annual General Meeting. The Board of Directors has adopted a resolution to make an exception to the Organisational Regulations for Jürg Bucher until the 2020 Annual General Meeting. This exception has been approved by the Swiss Financial Market Supervisory Authority (FINMA). The Articles of Association contain no rules deviating from the provisions of the law concerning the appointment of the Chairman, the members of the Nomination and Compensation Committee and the independent shareholder proxy Dates of first election Name Date of first election Jürg Bucher, Chairman 24/05/2012 Prof Christoph B. Bühler, Vice Chairman 24/05/2013 Barbara Artmann 16/05/2014 Jean-Baptiste Beuret 15/05/2009 Dr Maya Bundt 18/05/2017 Nicole Pauli 18/05/2017 Othmar Stöckli 18/05/2016 Franziska von Weissenfluh 20/05/ Honorary Chairman In 2009, Prof Roland von Büren was appointed Honorary Chairman. The Honorary Chairman does not receive any papers of the Board of Directors or attend its meetings and receives no financial compensation or other benefits. 3.5 Internal organisational structure The Board of Directors elects a Vice Chairman and also appoints one or more secretaries. The Board of Directors meets as often as business requires, but at least six times a year. Ten ordinary meetings were held in 2017, all of which were attended by the CEO and CFO (see also section 3.5.3) Allocation of responsibilities within the Board of Directors Jürg Bucher is the Chairman of the Board of Directors, and Prof Christoph B. Bühler its Vice Chairman. The Board of Directors takes decisions and adopts resolutions. It is assisted by three committees, which share its responsibilities and provide advice in advance: the Strategy Committee, the Nomination and Compensation Committee, and the Audit and Risk Committee Composition of all committees of the Board of Directors, their tasks and powers Name Board of Directors Strategy Committee Nomination and Compensation Committee Audit and Risk Committee Jürg Bucher Chairman Chairman Prof Christoph B. Bühler Vice Chairman Barbara Artmann Jean-Baptiste Beuret Dr Maya Bundt Nicole Pauli Othmar Stöckli Chairman Franziska von Weissenfluh Chair

56 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE GOVERNANCE 53 BOARD OF DIRECTORS Strategy Committee The Committee is composed of members of the Board of Directors appointed by the Board of Directors. The members and chair of the Committee are elected by the Board of Directors for a term of office ending upon completion of the next Annual General Meeting. They may be re-elected. The CEO, CFO and other persons as required attend meetings of the Committee in an advisory capacity. The sole function of the Strategy Committee is to advise in advance. It has no decision-making powers. No external advisors attended any meeting of the Committee during the year. The Strategy Committee discusses the following matters in particular and proposes motions concerning them to the Board of Directors: µ µ developing the strategy and positioning of Valiant and drawing up proposals to refine and improve them; µ µ evaluating, assessing, preparing and regularly reviewing strategic partnerships; µ µ supporting the implementation of strategic partnerships and projects; µ µ supporting the processing and integration of acquisitions; µ µ advising and supporting the CEO and Executive Board on strategic issues. Nomination and Compensation Committee The Nomination and Compensation Committee is composed of members of the Board of Directors elected at the Annual General Meeting for a term of office ending upon completion of the next Annual General Meeting. Should any vacancies arise, the Board of Directors nominates one or more of its members to replace the missing member or members until completion of the next Annual General Meeting. The Nomination and Compensation Committee comprises at least three members of the Board of Directors. It constitutes itself; the Chairman of the Board of Directors may not chair the Committee. As a general rule, the Committee meets every month or every other month. The CEO, the Head of HR and if necessary the CFO or any other persons as required by the Committee attend its meetings in an advisory capacity. No external advisors attended any meeting of the Committee during the year. The Nomination and Compensation Committee discusses the following matters and proposes motions concerning them to the Board of Directors: µ µ medium- and long-term planning of successors to the Chairman and other members of the Board of Directors; µ µ medium- and long-term planning of successors to the CEO and other members of the Executive Board; µ µ proposing candidates for election as members of committees of the Board of Directors; µ µ drafting motions for the election and removal of members of the Executive Board; µ µ drafting motions for the election of function holders of significant importance; µ µ formulating and regularly reviewing the structure and elements of the performance-related compensation system; µ µ drafting rules for compensation and for the payment of expenses to members of the Board of Directors; µ µ drafting rules for the compensation of members of the Executive Board and of employees; µ µ preparing the Board of Directors motions for the Annual General Meeting regarding the compensation of the members of the Board of Directors and of the Executive Board; µ µ drafting the annual compensation report for the Annual General Meeting; µ µ drafting motions for general annual salary adjustments and the size of the overall pool for variable compensation; µ µ drafting motions for the individual compensation of the members of the Executive Board (including variable compensation) within the framework of the total compensation approved at the Annual General Meeting; µ µ drafting and reviewing performance objectives for the members of the Executive Board; µ µ checking on an annual basis compliance with Article 31 of the Articles of Association of Valiant Holding AG on the maximum number of external positions that may be held by members of the Board of Directors and the Executive Board; µ µ drafting principles for appointing employer representatives to the Foundation Board of the Pension Fund and the corresponding motions for the Board of Directors.

57 54 CORPORATE GOVERNANCE BOARD OF DIRECTORS 2017 ANNUAL REPORT / VALIANT HOLDING AG Audit and Risk Committee The Audit and Risk Committee is composed of no fewer than three members of the Board of Directors, each elected by the Board of Directors for one year. They may be re-elected. The Chairman of the Board of Directors may not be a member of the Audit and Risk Committee. The CFO, Deputy CFO, CRO and Head of Legal and Compliance attend meetings of the Audit and Risk Committee in an advisory capacity. No external advisors attended any meeting of the Committee during the year. The members of the Audit and Risk Committee must possess sound knowledge and experience of risk management, finance and accounting, be familiar with the accounting procedures of a retail bank and add to their knowledge of these fields. They must be familiar with the activities of the internal and external auditors and the basic principles of an internal control system. The members of the Audit and Risk Committee must satisfy the relevant rules on independence. Tasks and powers: a) Monitoring and evaluating the integrity of the financial statements The Audit and Risk Committee: µ µ critically analyses the financial statements, i.e. the individual and consolidated accounts and the annual and interim financial statements, and ensures they are prepared in accordance with applicable accounting principles, evaluating in particular the valuation of the main positions on and off the balance sheet; µ µ discusses the financial statements and the quality of the accounting processes by which they were produced with the CFO, the lead auditor and the Head of Internal Audit; µ µ reports to the Board of Directors on the work done in respect of the two points above and issues a recommendation as to whether the financial statements are ready for presentation to the Annual General Meeting. The decision is taken by the Board of Directors; µ µ monitors implementation of decisions by the Board of Directors on the appropriateness of liquidity and financing and the planning thereof; µ µ monitors the implementation of decisions by the Board of Directors on capital planning, capital adequacy and the allocation of capital to the different business areas; µ µ monitors, together with the Executive Board, the main market, credit and operational risks. b) Monitoring and evaluating internal controls and the internal audit The Audit and Risk Committee: µ µ monitors and assesses whether internal controls, especially the Compliance function and Risk Control, are appropriate and effective; µ µ ensures that the internal controls are adapted accordingly when there are major changes in the bank s risk profile; µ µ determines, in consultation with the Executive Board and the auditors, the audit programme for Internal Audit; µ µ orders special controls and the measures to be taken as a result of them; µ µ must be informed of the audit results from Internal Audit relating to internal controls and be in regular contact with the Head of Internal Audit. c) Monitoring and evaluating the effectiveness of the auditors and their cooperation with Internal Audit The Audit and Risk Committee: µ µ assesses the audit strategy once a year or in the event of major changes to the risk profile or in a risk analysis; µ µ critically analyses the regulatory basic audit, the full report in accordance with Article 728b (1) of the Code of Obligations (CO) and the summary reports in accordance with Article 728b (2) CO, and discusses these with the lead auditor(s); µ µ satisfies itself as to whether shortcomings have been remedied or the auditors recommendations put into effect; µ µ evaluates the performance and remuneration of the auditors and satisfies itself as to their independence; µ µ evaluates the cooperation between the auditors and Internal Audit; µ µ submits to the Board of Directors draft motions for the Annual General Meeting in relation to the selection of the external auditors and what functions they are to be mandated to perform over and above the ordinary audit mandate.

58 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE GOVERNANCE 55 BOARD OF DIRECTORS c) Monitoring and evaluating the risk policy and risk management The Audit and Risk Committee: µ µ defines the risk policy that the Board of Directors is to follow; µ µ evaluates the risk policy s appropriateness once a year and proposes a motion concerning this for the Board of Directors; µ µ evaluates the risk profile and the analysis of risks once a year and in the event of major changes; µ µ discusses the risks discovered and the reports from Risk Control and the Compliance function with the CRO and the Head of Legal and Compliance; µ µ reviews the appropriateness of the methods used to measure risk, including risk appetite and risk limits; µ µ checks the integrity and appropriateness of the Risk Management function; µ µ checks the appropriateness of the monitoring of reputational risks; µ µ checks the corporate responsibility and sustainable development policy Work of the Board of Directors and of its committees The following ordinary meetings were held during the year under review: Name Number of ordinary meetings Board of Directors 10 Strategy Committee 5 Nomination and Compensation Committee 6 Audit and Risk Committee 9 In addition to the ten ordinary meetings of the Board of Directors, a two-day workshop was held at which strategic issues were discussed with the Executive Board. Furthermore, the Board of Directors conducted three half-day training sessions on regulation and compliance, trends in digitisation, and digital transformation, with internal and external speakers. The agenda items for meetings of the Board of Directors are selected by the Chairman. Each member of the Board of Directors can request that an item be added to the agenda. Before each meeting of the Board, members of the Board of Directors receive documents enabling them to prepare for the discussion of the agenda items. Minutes are kept of the meetings. Meetings usually last two to four hours. Members of the Board of Directors attended the ordinary meetings as follows: Name Board of Directors ten meetings Strategy Committee five meetings Nomination and Compensation Committee six meetings Audit and Risk Committee nine meetings Jürg Bucher Prof Christoph B. Bühler 9 7 Barbara Artmann 10 5 Jean-Baptiste Beuret Dr Maya Bundt (from 18/05/2017) Dr Ivo Furrer (up to 18/05/2017) Andreas Huber (up to 18/05/2017) Nicole Pauli (from 18/05/2017) Othmar Stöckli 10 9 Franziska von Weissenfluh Jean-Baptiste Beuret has attended all meetings of the Nomination and Compensation Committee since the 2017 Annual General Meeting. 2 Dr Maya Bundt and Nicole Pauli have attended all meetings of the Board of Directors since their election. 3 Dr Maya Bundt has attended all meetings of the Strategy Committee since her election. 4 Dr Ivo Furrer attended four of five meetings of the Board of Directors up until the 2017 Annual General Meeting. 5 Dr Ivo Furrer attended two meetings of the Strategy Committee and all meetings of the Nomination and Compensation Committee up until the 2017 Annual General Meeting. 6 Andreas Huber attended four of five meetings of the Board of Directors up until the 2017 Annual General Meeting. 7 Andreas Huber attended all meetings of the Audit and Risk Committee up until the 2017 Annual General Meeting. 8 Nicole Pauli has attended all meetings of the Audit and Risk Committee since the 2017 Annual General Meeting.

59 56 CORPORATE GOVERNANCE BOARD OF DIRECTORS 2017 ANNUAL REPORT / VALIANT HOLDING AG Strategy Committee As a general rule, the Strategy Committee meets every other month. Extraordinary meetings may be requested by any member, stating the purpose for it. The meeting shall be called by the Chair. Meeting minutes are kept and sent to all members of the Board of Directors. Meetings usually last two to four hours. Nomination and Compensation Committee The Nomination and Compensation Committee meets every month or every other month. Extraordinary meetings may be requested by any member, stating the purpose for it. The meeting shall be called by the Chair. Meeting minutes are kept and sent to all members of the Board of Directors. Meetings usually last two or three hours. Audit and Risk Committee The Audit and Risk Committee meets at least six times a year. Dates of meetings are set taking into account the cycle of external and internal audits, the cycle of publication of financial results and the management cycle. Extraordinary meetings may be requested by any member, stating the purpose for it. The meeting shall be called by the Chair. Meetings usually last two to four hours. Minutes of the Audit and Risk Committee meetings are kept and sent to all members of the Board of Directors. Representatives of the internal and external auditors attended the following meetings in 2017: Meeting attendance Number external auditors 5 internal auditors Areas of responsibility The Board of Directors is responsible for the company s strategic direction and overall management. In accordance with Swiss banking legislation, the Board of Directors has entrusted the bank s executive management to the Executive Board. Membership of both boards at the same time is not possible Executive Board The Executive Board is responsible for managing Valiant Holding AG and Valiant Group and for executing decisions taken by the Board of Directors. It is responsible for operational management and deals with external communications on behalf of the Board of Directors, including investor relations. Other tasks and powers of the Executive Board are: µ µ preparing issues to be discussed by the Board of Directors and drafting the corresponding motions; µ µ drawing up company policy and strategy for submission to the Board of Directors; µ µ drawing up medium-term and annual objectives in keeping with the strategy of the Board of Directors; µ µ drawing up planning documents, including a budget; µ µ drawing up interim (quarterly) balance sheets and income statements; µ µ issuing directives, management guidelines and other instructions; µ µ setting HR strategy as part of the HR policy; µ µ approving the annual report for submission to the Board of Directors; µ µ ensuring compliance with regulatory requirements; µ µ short-term, temporary market-making in the event of the insolvency of the market maker after notifying the Board of Directors; µ µ carrying out own account transactions to the extent required in compliance with statutory provisions, the regulations in place and the instructions of the Board of Directors; µ µ responsibility for risk management, and in particular: developing and ensuring suitable processes to identify, measure, monitor and control the risks taken by Valiant Holding AG and Valiant group; risk analysis and control across the group; drawing up the risk policy;

60 2017 ANNUAL REPORT / VALIANT HOLDING AG CORPORATE GOVERNANCE 57 BOARD OF DIRECTORS µ µ reviewing and revising the suitability of the risk policy on an annual basis (framework concept); µ µ drawing up measures when risk-capacity limits are exceeded; µ µ ensuring the effectiveness of internal control systems operationally CEO The CEO has the following tasks in particular: µ µ The CEO leads and coordinates the Executive Board s activities and monitors the proper conduct of business. µ µ The CEO brings about timely and appropriate decisions and oversees their implementation. µ µ The CEO ensures that the Chairman of the Board of Directors receives appropriate and timely information. µ µ The CEO attends meetings of the Board of Directors in an advisory capacity. 3.7 Information and control instruments relating to the Executive Board The Board of Directors is kept informed of the Executive Board s activities by various means: µ µ The CEO and CFO attend meetings of the Board of Directors and report on the state of, and developments in, the areas of responsibility delegated to them. µ µ The CRO and the Head of Legal and Compliance participate in discussions of matters affecting their areas of responsibility. µ µ The Chairman of the Board of Directors is provided with minutes of Executive Board meetings, which enables the Chairman to keep up to date with all developments. µ µ The Board of Directors is informed immediately of any extraordinary events. µ µ Members of the Board of Directors can request any information they require to perform their tasks, even outside the context of a meeting. Each member of the Board of Directors can ask members of the Executive Board for information about the course of business, even outside the context of a meeting. Requests for information on individual business relationships or transactions are addressed to the Chairman, or, in his absence, the Vice Chairman. PricewaterhouseCoopers AG, as external auditors, and Aunexis AG, as internal auditors, closely cooperate in monitoring compliance with laws and regulations and with internal guidelines and directives. They are independent of the Executive Board, and report the findings of their audits to the Board of Directors and to the Audit and Risk Committee. Valiant s information management system is structured as follows: µ µ Members of the Board of Directors are provided with financial statements (balance sheet and income statement) for the group and its individual companies every quarter, every six months and annually. These include comparisons of the figures with those for the previous year and with the budget together with comments on them. They also receive a year-end projection with changes from the previous year s figures and from the budget. µ µ For the purpose of asset and liability management (ALM), monthly analyses are carried out of interest-rate risk and income in order to recognise, quantify and manage the risk of a change in interest rates across the whole balance sheet. These analyses serve as a basis for the decisions of the Asset and Liability Management Committee (ALCO), which is made up of members of the Executive Board and specialists. µ µ The ALCO is chaired by the CFO. The ALCO meets to discuss the analyses and any actions to be taken as a consequence of them as and when needed, but at least six times a year. Meetings of the Board of Directors are regularly informed of the results of ALM analyses and the lessons learned from them. Members of the Board of Directors are also provided with documentation concerning the quarterly analyses.

61 58 CORPORATE GOVERNANCE EXECUTIVE BOARD 2017 ANNUAL REPORT / VALIANT HOLDING AG 4 Executive Board 4.1 Members of the Executive Board The following information is based on the composition of the Executive Board at 31 December From left to right: Stefan Gempeler, Head of Products and Operations; Dr Marc Praxmarer, Head of Corporate and Investment Advisory Clients; Markus Gygax, CEO; Ewald Burgener, CFO, Deputy CEO; Martin Vogler, Head of Private and Business Clients; Christoph Wille, Head of Sales Channels