Annual Report LGT Bank Ltd., Vaduz

Transcription

1 Annual Report 2015 LGT Bank Ltd., Vaduz

2 Our company s stable ownership structure enables us to take a long-term approach and gives us a high level of consistency in our management and staff. Thomas Piske, Chairman of the Board of Directors A look inside the Princely Collections For more than 400 years, the Princes of Liechtenstein have been passionate art collectors. The Princely Collections include key works of European art stretching over five centuries and are now among the world s major private art collections. The notion of promoting fine arts for the general good enjoyed its greatest popularity during the Baroque period. The House of Liechtenstein has pursued this ideal consistently down the generations. We make deliberate use of the works of art in the Princely Collections to accompany what we do. For us, they embody those values that form the basis for a successful partnership with our clients: a long-term focus, skill and reliability. Cover picture: Bauer brothers, Hortus Botanicus, detail from Lilium candidum L., c LIECHTENSTEIN. The Princely Collections, Vaduz Vienna

3 Contents 4 Organizational structure 5 The business year in comparison 6 Annual report 7 Balance sheet 8 Off-balance sheet transactions 9 Profit and loss account 10 Appropriation of net profit 11 Flow of funds statement 12 Appendix to the financial statement 16 Remuneration report 21 Notes on the balance sheet 35 Notes on off-balance sheet transactions 37 Notes to the profit and loss account 39 Additional information 43 Report of the statutory auditor 44 International presence

4 4 Organizational structure as of April 2016 Board of Directors Thomas Piske, Chairman H.S.H. Prince Max von und zu Liechtenstein Olivier de Perregaux Jacques Engeli Internal Audit Daniel Hauser Executive Management Board Norbert Biedermann, Chairman Ivo Klein Roland Schubert Markus Werner Statutory Auditor PricewaterhouseCoopers AG, Zurich

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

6 6 Annual report Taking into consideration the difficult economic environment, including negative interest rates and volatile currencies, LGT Bank Ltd., Vaduz, can look back on a very positive year with a significant rise in gross profit. impressed by our achievements in the integration of new employees, but also by our offering in the area of continuing education, as well as the opportunities available to staff and management for personal and professional development. Thanks to the higher level of assets under management, income from services rose by 17.5 percent to CHF 270 m. Income from trading activities also experienced an above-average increase of 23.1 percent to CHF 75.5 m. This was driven in particular by a high level of client trading activity in foreign currencies and the anticipation of market developments. Despite the negative interest rates, net interest and similar income rose by 10.4 percent to CHF m, which is attributable to active balance sheet management. Ownership structure of LGT Bank Ltd. The shares of LGT Bank Ltd. are wholly owned by the LGT Group Foundation. No own shares were acquired or taken as pledge, either directly or indirectly. LGT Bank Ltd. is part of LGT Group (LGT), a global private banking and asset management group that takes an integrated approach to the management and development of the individual group companies. The LGT Annual Report contains more detailed information on the Group s financial strength, expertise and development. On the cost side, personnel expenses rose by 6.1 percent to CHF m. As at year-end 2015, we employed 808 staff (expressed in full-time equivalents). This corresponds with an increase of 37 full-time positions compared to the previous year. Business and office expenses were up by 11.5 percent to CHF m. Overall, gross profit rose significantly from CHF 98.7 m to CHF m. The balance sheet total decreased by 5.2 percent to CHF m due to the appreciation of the franc. LGT Bank Ltd. remains very well capitalized. As at year-end 2015, the tier 1 ratio was 22 percent, and therefore significantly above the minimum regulatory requirement of 8 percent. Positive net asset inflows were once again reported in 2015, and considerably exceeded the currency-related decline in existing assets under management. Assets under management rose by 1.8 percent to CHF 62.4 bn as at year-end Outlook We have gotten off to a good start in 2016, in line with our expectations, and remain optimistic in our business outlook and opportunities for growth for the remainder of the year and beyond. As in previous years, we expect to see further volatility in financial markets in 2016, and cannot at this time rule out that this could have a negative impact on our earnings performance. This also applies in the event that the Swiss franc should appreciate further. The economic environment will continue to present us with significant challenges. Low interest rates are expected to persist in putting pressure on our performance, at least in the mediumterm. However, we can expect to see positive effects once interest rates are raised, which has been forecast for some time now. A key factor for the successful development of our company remains LGT s stable ownership structure, which enables us to take a long-term approach and gives us a high level of consistency in our management and staff. Accolades for high quality Our high standards of quality in all areas were once again recognized by a number of independent juries in The Handelsblatt Elite Report awarded LGT Bank Ltd. the highest summa cum laude rating for the 13 th consecutive year, and we received a wholly commended rating from the renowned Fuchsbriefe for the quality of our advice and products. In 2016, the Top Employers Institute designated us as a Top Employer for the second year in a row. The Institute was particularly We will remain a reliable partner to our clients in their financial matters and thank them for the trust they place in us. We also thank our employees for their strong dedication throughout the course of the reporting year. Thomas Piske, Chairman of the Board of Directors Norbert Biedermann, Chairman of the Executive Management Board

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

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

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

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

11 11 Flow of funds statement Flow of funds statement (TCHF) Source of funds 2015 Application of funds Source of funds 2014 Application of funds Flow of funds from operating result (internal financing) Profit for the year Depreciation of non-current assets Value adjustments and provisions Accrued income and prepaid expenses Accrued expenses and deferred income Other items Previous-year dividend Balance Flow of funds from changes to non-current assets Participations 39 Shares in affiliated companies Securities and precious metals as non-current assets 45 Intangible assets Properties Other tangible assets Balance Flow of funds from banking operations Medium and long-term business (> 1 year) Due to banks Due to clients Bonds Medium-term notes Other liabilities Due from banks Due from clients (excl. mortgage loans) Mortgage loans Other receivables Short-term business ( 1 year) Due to banks Due to clients Other liabilities Due from banks Due from clients Trading positions in securities and precious metals Securities and precious metals held as current assets (excl. trading positions) Other receivables Liquid funds Cash and cash equivalents Balance Total Important: This document is a non-binding English translation of the authoritative German annual report.

12 12 Appendix to the financial statement Notes on business activity General points LGT Bank Ltd. with its registered office in Vaduz operates as a universal bank and securities trader. The company has branch offices in Hong Kong and Vienna. The bank maintains representative offices in Bahrain, Chur, Davos, Geneva, Lugano and Zurich. At 31 December 2015, LGT Bank Ltd. employed 808 persons on a full-time equivalent basis (771 in the previous year). In 2015, the average headcount amounted to 796 persons (739). As a universal bank, LGT Bank is active in the fields of wealth management (commission business and services) and trading, as well as in money market and lending business. Wealth management LGT Bank Ltd. is one of the leading international names in traditional private banking. The bank offers a broad spectrum of products and services that enable clients to choose the best solution to suit their needs. Most earnings from commission business and services stem, among other things, from wealth management. The commission business and services also represents the bank s main source of revenue. Money market business Within the scope of money market business, money in the form of call money, time deposits and fiduciary investments is deposited with the bank. Insofar as these funds are not required for lending business, they are placed with first-class banks, predominantly in Western Europe. These investments are being made in the form of easily convertible money market paper (certificates of deposit, Euro commercial papers). Despite its focus on private banking, interest margin business represents an important earnings stream for the bank. Trading business LGT Bank Ltd. operates trading transactions for clients and for its own account in securities, foreign exchange and precious metals. The bank trades for its own account in accordance with conservative principles. Derivative instruments are used mostly for hedging purposes. Lending business Most lending takes the form of Lombard loans and mortgages on residential property. Mortgages are granted primarily for financing properties in Liechtenstein and in Switzerland. Property financing in selected other countries is offered as part of integrated wealth management.

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

14 14 Appendix to the financial statement Securities and precious metals held as current and non-current assets Current assets are valued at the lower of cost or market. Money market papers are measured at amortized cost. Fixed-interest bearing securities assigned to non-current assets are reported in the balance sheet at the repayment amount. Premiums and discounts which have not yet been amortized are reported as accrued items. Only those debt instruments which are kept until maturity are recorded as non-current assets. Precious metals held as current assets are valued at the market value on the balance sheet date. Precious metals held as non-current assets are reported at cost minus necessary value adjustments. Repurchase and reverse repurchase transactions (Repo transactions) Repo transactions are used to refinance and fund money market transactions. They are entered in the balance sheet as advances against collateral and cash contributions or with pledging of securities held on own account. Securities provided to serve as cover thus continue to be posted in the corresponding balance sheet positions securities received to serve as collateral are not reported in the balance sheet. Interest resulting from the transactions is posted as net interest income. Securities lending and borrowing transactions Securities lending is recorded at the value of cash deposits which have been received or made, including interest accrued. Shares in affiliated companies and participations Shares in affiliated companies and participations are valued at cost, taking into account necessary value adjustments. Shares in infrastructure companies are also reported in the balance sheet under participations. These items are insignificant in capital and voting shares. Subordinated loans to affiliated companies are reported at the nominal value. Securities which have been borrowed or accepted as collateral are only recorded in the balance sheet if the bank gains control of the contractual rights contained in these securities. Securities lent or provided as collateral are only taken off the balance sheet if the bank loses the contractual rights associated with these securities. The market values of the securities which have been either borrowed or lent are monitored daily so that additional collateral can be provided or requested where necessary. Tangible assets Properties for the bank s own use are valued at cost, including any appreciating investments, less depreciation over a fixed useful life (generally 50 years). Any building work carried out in rented properties is depreciated over the term of the rental agreement. Other tangible assets such as machinery, furniture and vehicles are depreciated over their useful life (normally three to five years). Derivatives The positive and negative replacement values of all derivative financial instruments are reported under the positions other assets or other liabilities. The positive and negative replacement values are reported in the balance sheet as gross figures and valued at fair value. If interest rate business positions are hedged with derivatives, the difference between the fair value valuation and the accrual method is reported in the compensation account. Fees arising from securities lending and repurchase transactions, which have been received or paid, are entered as interest earned and interest paid. Amounts due to banks and clients Amounts due to banks and clients are reported in the balance sheet at nominal values. Securitized liabilities Securitized liabilities in the form of certificates and mediumterm notes are reported in the balance sheet at repayment amount. Bonds are reported at amortized cost using the effective interest method. Other liabilities Derivatives are reported at their fair value. The other items (settlement accounts, coupons etc.) are reported at their nominal value or the value of the repayment amount.

15 15 Subordinated debt Securitized subordinated debt is entered in the balance sheet at the value of the repayment amount. Non-securitized subordinated debt is reported at the nominal value. Value adjustments and provisions In accordance with prudent accounting practice, specific value adjustments and provisions are made for all identifiable risks. To cover latent default risks, which, as experience has shown, exist in a loan portfolio, portfolio value provisions are also made based on a systematic approach. Value adjustments are offset directly against the corresponding asset position. Provisions are formed for uncertain liabilities and for threatened losses which are likely or certain on the balance sheet reporting date, but whose level or date of occurrence is uncertain. Provisions are reported under the same name in the balance sheet. Taxes Taxes accruing to the result for the period under review are recorded as expenses in the accounting period in which the corresponding profit has occurred. Risk management The risk policy complies with internal requirements and guidelines, Liechtenstein Banking Law, FMA communiqué no. 10/2009 Risk-compatible capital adequacy requirements, risk management and control, the guidelines of the European Banking Authority and the principles of the Basel Committee on Banking Supervision. Credit risks Lending activities are primarily carried out in the interbank market or in secured form in private client business. The bank pursues a conservative lending policy where the same guidelines are applied for both monetary loans and guarantee credits. By strict limitation of the default risks, the formation of cluster and country risks is also countered. An internal rating procedure is applied as an instrument for efficient risk management and risk-adjusted calculation of conditions. Detailed reporting ensures that the Executive Board is constantly informed about developing risks. Operational risks The operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. LGT has established a Group-wide Operational Risk Committee which provides the Executive Board with support in the early identification of these risks and in implementing appropriate measures. These tasks are based on the principles stipulated in the Sound Practices for the Management and Supervision of Operational Risk issued by the Basel Committee on Banking Supervision. Derivative financial instruments Interest rate and currency swaps, forward rate agreements, futures and share options are regularly used to manage the bank s own risk positions. Within the framework of client business, foreign currency and precious metals options are used in addition to the aforesaid instruments. The Board of Directors has overall responsibility for implementing risk policy. Whereas the functions of risk management are allocated to operational units, the Executive Board is responsible for overall risk control. The independent Risk Controlling Department monitors compliance with the issued provisions. The accounting and valuation principles remain unchanged compared to last year. Market risks The bank s business activities mean that it is mainly exposed to risks associated with interest rate changes and share price and foreign currency fluctuations. Whereas the Trading Committee is responsible for controlling risks resulting from trading activities, the Asset and Liability Committee is responsible for controlling the risks associated with changes in interest rates. These bodies restrict the risk positions by means of volume and sensitivity guidelines and Value at risk limits. An analysis of the aggregate risks and the simulation of worst-case scenarios are carried out on a regular basis.

16 16 Remuneration report Remuneration principles LGT is a family-run company built on the values of long-term commitment, stability and independence. LGT relies on the achievements, ideas and dedication of its employees to meet the needs of its clients and implement its business strategy. An appropriate, sustainable and market-based remuneration model forms a central part of the attractive and inspirational working environment that LGT offers. The remuneration model of LGT and LGT Bank Ltd. (the bank) is based on the following principles: The compensation model supports the implementation of LGT s corporate values and objectives and takes the risk elements into consideration. Excellent performance, outstanding dedication and successes achieved with integrity will be rewarded. The compensation model is focused on long-term business success. Success is evaluated on a long-term basis. Failure on the part of employees in key positions can also result in salary deductions. The total amount of remuneration paid by the bank is approved by the HRCC on the basis of a recommendation from the Board of Directors of the bank/ccb. The remuneration of the Executive Board is decided in accordance with the following process: Decision process Beneficiary Recommended by Approved by CEO of the bank Norbert Biedermann Members of the Executive Board Roland Schubert Ivo Klein Markus Werner Board of Directors of the bank/ccb CEO of the bank HRCC Board of Directors of the bank/ccb LGT s fundamental salary policy guidelines are developed and monitored by the Human Resources Compensation Committee (HRCC) 1 of the Foundation Board. At bank level, the implementation of the guidelines is guaranteed by the Compensation Committee of the Bank (CCB) 2. The CCB evaluates the implementation of the guidelines and the growth, suitability and composition of the overall compensation. It also determines whether the remuneration is based on the remuneration principles. In addition, it ensures that the current national regulatory requirements are met. It reports annually to the HRCC and submits changes to the HRCC for approval. 1 Dr. Rodolfo Bogni, Dr. Phillip Colebatch 2 H.S.H. Prince Max von und zu Liechtenstein, Thomas Piske

17 17 Components of the remuneration The compensation model for all employees of the bank consists of a fixed basic salary, a variable remuner ation component and benefits. The following table gives a summary of the individual components of the remuneration. Compensation model Characteristics Element Plan participants Brief description Purpose Fixed Cash Basic salary Employees of the bank Variable Benefits Options Cash incentive Bonus Deferred incentive LTIS 1 Benefits/ Fringe benefits Employees of the bank Senior Management and employees in key positions Employees of the bank Monthly market-based remuneration paid in 13 installments in accordance with the position and the contract of employment Granted and paid annually. Amount of bonus depends on business success and individual performance in the business year in question Options on LGT dividend right certificates granted annually. Three-year blocked period, followed by exercise of the options within four years Pension, insurance, discounts on bank products, right to a sabbatical Reflects abilities, skills and responsibility Rewarding excellent performance, outstanding dedication and successes achieved with integrity Reinforcing the long-term links between the interests of the employees, owners and clients. Possibility for plan participants to share in the value created by the company Providing competitive benefits 1 Long Term Incentive Scheme Basic salary The fixed monthly basic salary is paid in cash in 13 installments to compensate employees for performing the tasks relating to their position, for their personal abilities and skills and for any management responsi bility that they have taken on. LGT regularly checks the basic salaries against market benchmarking studies to ensure that they are compatible with the market and makes any necessary changes. LGT does not grant any automatic salary increases. Variable remuneration As a basic principle, the total variable remuneration is based on the business success of LGT and the bank and reflects the bank s risk profile. In order to take account of exceptional developments, the final decision about the total amount is made during the approval process at the discretion of the HRCC. The variable remuneration can be paid directly as an annual cash bonus or can take the form of options as part of the Long Term Incentive Scheme (LTIS). The relationship between the direct and the deferred remuneration (LTIS and cash incentive) is determined on the basis of the employee s risk profile. In the case of members of the Executive Board and risk takers, the proportion of deferred remuneration is in line with the regulatory requirements. Parts of the variable remuneration can be subject to a forfeiture clause. Where appropriate, claims to variable remuneration (the cash bonus) may be forfeited, for example, in the case of extraordinary dismissal, serious breaches of the law and significant financial losses made by the Group.

18 18 Remuneration report Cash Incentive (bonus) All bank employees can benefit from the cash incentive. The individual bonus amount is linked to performance based on quantitative and qualitative criteria. The quantitative criteria relate to performance at Group, bank, business sector and individual level, which is measured against predefined target values. The qualitative criteria include risk behavior, compliance with the code of conduct, specialist expertise, social skills, personality and management ability. These are assessed on the basis of the skills in the employee qualification system (BSC). This approach allows the bank to reward excellent performance, outstanding dedication and successes achieved with integrity. Deferred incentive (LTIS Long Term Incentive Scheme) In order to enable employees who have specifically promoted the growth of the company by means of their position, their knowledge or their abilities to participate in the company s long-term success, LGT has set up an internal Long Term Incentive Scheme (LTIS) based on options. This reinforces the links between the interests of the employees and those of the owners, which is an important aspect of LGT s philosophy. The long-term structure of the LTIS rewards loyalty to the company and, at the same time, encourages a conscious and cautious approach to opportunities and risks for the benefit of the entire company and the cohesion of the Group. The LTIS allows plan participants to take part in the development of the economic value added, which is measured using a predefined formula. The calculation is based on the operating profit, the performance of the Princely Portfolio and the Group s capital costs. Benefits/Fringe benefits Benefits are another component of the LGT compensation model. These can take the form, for example, of a pension, insurance, discounts on bank products and the right to a sabbatical. LGT works with different pension companies that make payments into insurance products or funds under trusteeship. Remuneration of the Executive Board The remuneration paid to the Executive Board is checked regularly by the CCB to ensure that it is appropriate. In order to reinforce the links between the interests of the management and the owners and to ensure that the management focuses on long-term added value, the members of the Executive Board receive variable remuneration, which is made up of the cash incentive and the LTIS. The conditions governing the cash incentive and the LTIS apply, while the bonus amount can be adjusted on a discretionary basis. Regulatory requirements The HRCC makes every effort to ensure that the remuneration policy of LGT and the bank and its practical application meet national and international requirements. For this purpose, the committee monitors developments and changes in the legal regulations that are relevant to LGT and the bank. The bank s remuneration system is subjected to an independent internal investigation by the CCB regularly, i.e. annually or as events dictate, to ensure that it fulfills all the regulations. Remuneration of the Executive Board The remuneration paid to the Executive Board is shown in the table below. The LTIS options are granted annually and can be exercised after a three-year blocked period up to and including the seventh year (see chart). Overview of the LGT remuneration structure LTIS Blocked period Exercise period Cash incentive Basic salary Remuneration of the Executive Board 2015 (TCHF) Direct Cash payment Deferred Shares/share-linked instruments Basic salary Bonus LTIS Entire EB In 2015 there were four members of the Executive Board. Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Time

19 Bauer brothers, Hortus Botanicus, detail from Amaryllis belladonna, c. 1778

20 Bauer brothers, Hortus Botanicus, detail from Lilium, 1776/1804

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

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

23 23 5 Participations and shares in affiliated companies (TCHF) Participations with market value 0 0 without market value Total Shares in affiliated companies with market value 0 0 without market value Subordinated claims against affiliated companies Total Affiliated companies Business activity Share capital % share of votes Banks and investment firms % share of capital Business result TCHF LGT Bank (Cayman) Ltd., Grand Cayman bank USD LGT Bank (Ireland) Ltd., Dublin bank USD Other LGT Investment Portfolio Ltd., Grand Cayman investment company CHF The capital of LGT Bank (Cayman) Ltd. is divided into ordinary shares and participating shares. Both categories of share have a par value of USD 1 per share. The participation comprises 100% of the ordinary shares, which have a preferential dividend. At 31 December 2015, the shares in banks and investment firms shown under the shares in affiliated companies item amounted to TCHF ( in the previous year). 7 Participations The companies listed under participations serve only as infrastructure and are insignificant in terms of the share of capital and votes. There are no shares in banks and investment firms under participations.

24 24 Notes on the balance sheet 8 Statement of changes in non-current assets (TCHF) Cost Accumulated depreciation/ write-ups Book value Total participations (minority holdings) Total shares in affiliated companies Total securities and precious metals held as non-current assets Total intangible assets Properties Bank premises Other properties Other tangible assets Total tangible assets Fire insurance value of properties Fire insurance value of other tangible assets Real estate intended for sale (not included in the statement of changes in non-current assets) 9 Intangible assets At 31 December 2015, this item included capitalized software licenses amounting to TCHF 64 and at 31 December 2014 amounting to TCHF Pledged or assigned assets and assets subject to reservation of ownership (TCHF) Pledged or assigned assets and assets subject to reservation of ownership, without securities lending or repurchase transactions Book value of pledged or assigned (assigned as collateral) assets Actual liabilities There are no assets subject to reservation of ownership. Securities lending and repurchase transactions Receivables from cash deposits in connection with securities borrowing and reverse repurchase transactions Liabilities from cash deposits in connection with securities lending and repurchase transactions Own securities lent or provided as collateral within the scope of securities lending, borrowing transactions and transferred from repurchase transactions of which capable of being resold or pledged without restrictions Securities borrowed or accepted as collateral within the scope of securities lending, borrowing transactions and reverse repurchase agreements which are capable of being resold or further pledged without restrictions of which resold or further pledged securities Liabilities in respect of own pension funds (TCHF) Total liabilities

25 25 Investments Disinvestments Reclassifications Write-ups Depreciation Book value Outstanding bonds at Interest rate % Year of issue Earliest redemption date Currency Par value TCHF LGT GIM Index Certificates 0.0 up to EUR LGT GIM Index Certificates II 0.0 up to EUR LGT GIM Index Certificates II/ EUR LGT GIM Index Certificates III 0.0 up to EUR Crown Absolute Return Index Certificates 0.0 ongoing EUR Crown Alternative SV Index Certificates 0.0 ongoing EUR LGT GATS Index Certificates 0.0 ongoing EUR LGT M-Smart Allocator Index Certificates 0.0 ongoing EUR % bond LGT Bank Ltd CHF % bond LGT Bank Ltd CHF % bond LGT Bank Ltd CHF % bond LGT Bank Ltd CHF For product explanations see appendix 47 on page 41

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

27 27 15 Equity statement (TCHF) Equity capital at the start of the business year Share capital paid in Capital reserves 0 Legal reserves Reserves for own shares 0 Statutory reserves 0 Other reserves Provisions for general banking risks 0 Accumulated profit for the year Total equity capital at the start of the business year (prior to profit distribution) /- capital increase/capital reduction 0 + premium 0 - Release of provisions for general banking risks 0 - dividend from the previous year s profit 0 + annual profit for the business year Total equity capital at the end of the business year (prior to profit distribution) of which: Share capital paid in Capital reserves 0 Legal reserves Reserves for own shares 0 Statutory reserves 0 Other reserves Provisions for general banking risks 0 Accumulated profit for the year

28 28 Notes on the balance sheet 16 Maturity structure of assets, liabilities and provisions (TCHF) On demand Redeemable Assets Cash and cash equivalents Debt instruments of public authorities and bills which are eligible for refinancing at central banks Due from banks Due from clients of which mortgage loans Trading positions comprising securities and precious metals Securities and precious metals held as current assets (excl. trading positions) Securities and precious metals held as non-current assets 785 Other assets Total assets Liabilities and provisions Due to banks Due to clients Savings accounts Other liabilities to clients Securitized liabilities Issued bonds of which medium-term notes Other securitized liabilities Provisions (excl. provisions for general banking risks) Subordinated liabilities Other liabilities Total liabilities and provisions Of the securities reported in the balance sheet under bonds and other fixed-interest bearing securities, instruments amounting to TCHF ( in the previous year) will become due in Issued bonds due in 2016 amount to TCHF ( in the previous year).

29 29 Due within 3 months Due between 3 to 12 months Due between 12 months to 5 years Due after 5 years Immobilized Total

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

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

32 32 Notes on the balance sheet 19 Breakdown of assets according to country/country group TCHF % TCHF % Country Liechtenstein Switzerland Europe excl. FL/CH North America Caribbean Latin America Africa Asia Oceania Total assets

33 33 20 Breakdown of balance sheet according to currencies (TCHF) CHF EUR USD Other Total Assets Cash and cash equivalents Debt instruments of public authorities and bills which are eligible for refinancing at central banks Due from banks Due from clients (excl. mortgage loans) Mortgage loans Bonds and other fixed-interest bearing securities Equities and other non-fixed-interest securities Participations Shares in affiliated companies Intangible assets Tangible assets Other assets Accrued income and prepaid expenses Total assets Delivery claims from forex spot, forex futures and forex options transactions Total assets Liabilities Due to banks Due to clients (excl. savings accounts) Savings accounts Securitized liabilities Other liabilities Accrued expenses and deferred income Provisions Subordinated liabilities Provisions for general banking risks Share capital Legal reserves Other reserves Profit carried forward Profit for the year Total liabilities Delivery liabilities from forex spot, forex futures and forex options transactions Total liabilities Net position per currency

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

35 35 Notes on off-balance sheet transactions 27 Contingent liabilities (TCHF) Credit guarantees and similar instruments of which for affiliated companies Performance guarantees and similar instruments of which for affiliated companies Irrevocable commitments and other contingent liabilities of which for affiliated companies 0 0 Total Commitment credits Liabilities from deferred payments are reported in the balance sheet. There were no acceptance liabilities or other commitment credits at 31 December 2015 and 31 December Fiduciary transactions (TCHF) Fiduciary investments at third-party banks Fiduciary investments at affiliated banks and investment firms 0 0 Fiduciary loans and other financial transactions in a fiduciary capacity 0 0 of which with affiliated companies 0 0 Total

36 36 Notes on off-balance sheet transactions 30 Open derivative financial instruments (TCHF) Trading instruments Hedging instruments positive negative contract positive negative contract replacement replacement volume replacement replacement volume values values values values Interest rate instruments Forward contracts incl. FRAs Swaps Futures Options (OTC) Options (exchange-traded) Forex/precious metals Forward contracts Swaps Futures Options (OTC) Options (exchange-traded) Equity securities/indices Forward contracts Futures Options (OTC) Options (exchange-traded) Credit derivatives Credit default swaps Total return swaps First to default swaps Other credit derivatives Other Forward contracts Swaps Futures Options (OTC) Options (exchange-traded) Total before consideration of the netting contracts Total after consideration of the netting contracts positive replacement values negative replacement values

37 37 Notes to the profit and loss account 31 Offsetting of refinancing expenses with income from trading The refinancing expenses arising from trading positions are not offset against income from trading activities. 32 Interest income from fixed-interest securities (TCHF) Interest income from bonds Interest income from money market paper Total Income from trading transactions (TCHF) Reported in the P&L under Interest income from fixed-interest securities Interest income Interest income from credit derivatives Interest income Trading in foreign exchange and precious metals Income from financial transactions Securities trading Income from financial transactions Structured products and other income Income from financial transactions Total Personnel expenses (TCHF) Wages and salaries Social security contributions, pensions and social assistance of which for pensions Other personnel expenses Subtotal Adjustment of liability for Long Term Incentive Scheme Total Emoluments to members of the Executive Board Operating expenses (TCHF) Occupancy expense Expenses for IT, machinery, furniture, vehicles and other equipment Other business expenses Total Losses, extraordinary items, provisions The losses reported under the item Other ordinary expenses were incurred mainly in connection with lending business and settlements (see also Point 44). No extraordinary items were recorded in the years 2015 and The item provisions contains mainly tax provisions, provisions for projects, as well as provisions for other business risks (see also Points 13 and 26).

38 38 Notes to the profit and loss account 37 Income and expenses broken down according to office or branch (TCHF) FL 2015 Abroad FL 2014 Abroad Interest earned Interest paid Current income from securities Income from commission business and services Commission paid Income from financial transactions Other ordinary income Operating expenses Other ordinary expenses The break down is based on the domicile of the booking branch. 38 Return on assets (Net profit as a percentage of total assets) Return on assets* * 2014: before release of the provisions for general banking risks

39 39 Additional information 39 Securities negotiable on the stock exchange (TCHF) Bonds and other fixed-interest bearing securities of which listed securities of which listed and treated as current assets of which listed and treated as non-current assets 0 0 of which unlisted securities Equities and non-fixed-interest securities of which listed securities of which listed and treated as current assets of which listed and treated as non-current assets 0 0 of which unlisted securities 0 0 Participations of which listed securities 0 0 of which unlisted securities Shares in affiliated companies of which listed securities 0 0 of which unlisted securities Subordinated liabilities at Interest rate % Maturity Currency TCHF Medium-term note CHF 40 Medium-term note CHF 50 Medium-term note CHF 50 Medium-term note CHF 20 Total Other assets (TCHF) Positive replacement values of derivatives Compensation account Physical holdings of precious metals Other assets Total Other liabilities (TCHF) Negative replacement values of derivatives Coupons LTIS liability Clearing accounts Total

40 40 Additional information 43 Other ordinary income (TCHF) Compensation from Group companies Income from real estate Income from the release of provisions Remaining other income Total Compensation from the other Group companies forms the largest component of other ordinary income. This item comprises compensation for services, performed centrally by the bank on behalf of the Group companies. Income from real estate contains the net amounts (rent payments less maintenance costs) from the rental of bank-owned property to third parties and Group companies. 44 Other ordinary expenses (TCHF) Losses from receivables and guarantees Transaction losses Remaining other expenses Total See also Point Breakdown of client assets (TCHF) Client assets Client assets in own-managed funds (investment undertakings) Client assets under management Other client assets under administration Total client assets (including double counting) of which double counting Foreign branch offices Business activity Domicile Gross operating income TCHF Headcount Profit for the year TCHF Tax on earnings TCHF Firms LGT Bank AG, Zweigniederlassung Österreich bank Vienna LGT Bank Ltd., Hong Kong branch bank Hong Kong

41 41 47 Outstanding bonds Product explanations for table 12 on page 25 The LGT GIM Index Certificates (EUR) are issued in the form of no-par-value promissory notes. These each relate to one of the LGT Premium Strategy GIM (EUR) indices compiled and administered by LGT Capital Partners (FL) Ltd. These indices reflect the value development of a global, diversified portfolio that invests in various asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. Both traditional and alternative asset classes are included. Both tranches of the Crown Absolute Return (EUR) Index Certificates are no-par-value. These each relate to one of the Crown Absolute Return (EUR) indices calculated and administered by LGT Capital Partners Ltd. The two indices show the value development of a global, diversified portfolio that invests in alternative asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. The Crown Alternative SV (EUR) Index Certificates are no-par-value. They relate to the Crown Alternative SV (EUR) Index calculated and administered by LGT Capital Partners Ltd. This index shows the value development of a global, diversified portfolio that invests in various alternative asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. The LGT GATS Index Certificates are no-par-value and are made out to the bearer. They relate to the LGT Premium Strategy GATS (EUR) Index compiled and administered by LGT Capital Partners (FL) Ltd. This index shows the value development of a global, diversified portfolio that invests in various asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. The LGT M-Smart Allocator (EUR) Index Certificates are no-par-value. They relate to the LGT M-Smart Allocator (EUR) Index calculated and administered by LGT Capital Partners (FL) Ltd. This index shows the value development of a global, diversified portfolio that invests in various asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. Statement regarding the correctness of the financial statements and the annual report We confirm that the financial statements have been prepared in conformance with the prevailing accounting policies and standards, and that to our knowledge they present a true and fair picture of the assets and liabilities, as well as the financial, earnings and profitability position of the bank. The annual report contains all the required information about the course of business, the results of operations and the position of the bank. It provides an accurate picture of the actual situation, and outlines the most important risks and uncertainties. Thomas Piske Chairman of the Board of Directors Olivier de Perregaux Member of the Board of Directors

42 Bauer brothers, Hortus Botanicus, detail from Amaranthus tricolor L., c. 1779

43 Report of the statutory auditor 43

44 44 International presence Europe America Asia Australia Principality of Liechtenstein, Vaduz Austria, Salzburg, Vienna Ireland, Dublin Switzerland, Basel, Berne, Chur, Davos, Geneva, Lugano, Pfäffikon, Zurich United Kingdom, London United States, New York China, Beijing Hong Kong Japan, Tokyo Singapore Sydney Media relations Christof Buri Phone Legal services Jacques Engeli Dr. Urs Gähwiler Phone Dispatch Daniela Schaefle Phone Middle East Bahrain, Manama United Arab Emirates, Dubai A complete address list of all LGT locations can be seen at

45 Bauer brothers, Hortus Botanicus, detail from Passiflora caerulea L., c. 1779

46 LGT Bank Ltd. Herrengasse 12, FL-9490 Vaduz Phone , BIC BLFLLI2X, HR No.: , Reg. Office: 9490 Vaduz VAT No , UID: CHE en H BVD