Annual Reports 2010
Vontobel Group
Consolidated Accounts Vontobel Holding AG
Annual Reports
2010
Key figures
2
Shareholders’ letter
4
Vontobel Group
9
Sustainability
12
Review of business activities
22
Information relating to Corporate Governance
37
Consolidated financial statements
63
Vontobel Holding AG
157
Information for shareholders
168
Where to find us
169
Vontobel Group, Annual Reports 2010
1
Ratios
31-12-10
Return on shareholders’ equity (ROE) (%)1 Cost2/income ratio (%) Equity ratio (%) 1 2
31-12-09
31-12-08
31-12-07
31-12-06
9.8
9.7
8.1
19.2
21.6
78.3
79.1
80.6
67.0
63.9
8.2
8.4
8.8
8.0
8.8
Group net profit as a percentage of average equity based on monthly figures, both without minority interests Operating expense, excl. value adjustments, provisions and losses
Share data
31-12-10
31-12-09
31-12-08
31-12-07
31-12-06
Basic earnings per share (CHF)1
2.31
2.17
1.78
4.14
4.00
Diluted earnings per share (CHF)1
2.26
2.12
1.74
4.06
3.95
23.67
Equity per share outstanding at balance sheet date (CHF)
23.31
21.73
22.50
20.16
Dividend per share (CHF)
1.40 2
1.40
1.20
2.00
2.00
Price/book value per share
1.5
1.3
1.0
2.4
2.6
Price/earnings per share
15.4
13.6
12.4
13.2
13.2
Share price at balance sheet date (CHF)
35.60
29.55
22.00
54.75
52.70
High (CHF)
36.50
38.00
54.90
77.30
55.65
Low (CHF) Market capitalization (CHF mns) Undiluted weighted average number of shares 1 2
26.75
15.30
19.40
49.35
38.00
2,262.0
1,881.0
1,387.0
3,457.3
3,364.2
63,918,532
63,973,581
63,481,890
63,637,178
63,985,995
Basis: weighted average number of shares As per proposal submitted to the General Meeting
Share information
Performance of Vontobel Holding AG registered share (indexed) 130 125 120 115 110 110 100 95 90
Par value
CHF 1.00
Stock exchange listing
SIX Swiss Exchange
ISIN
CH001 233 554 0
Security number
01-01-2010
30-06-2010
31-12-2010
Vontobel Holding AG registered share (TR)
Swiss Performance Index (SPI)
1 233 554
Reuters
VONTZn.S
Bloomberg
VONN SW
Telekurs
VONN
Source: Bloomberg
BIS capital ratios Tier 1 capital ratio (%) Total risk weighted positions (CHF mns)
Risk ratio1 Average Value at Risk market risk (CHF mns) 1
31-12-10
31-12-09
31-12-08
31-12-07
31-12-06
21.8
20.9
18.4
21.4
22.9
5,689.8
5,894.9
5,292.0
6,281.1
4,947.7
31-12-10
31-12-09
31-12-08
31-12-07
31-12-06
19.65
4.41
6.64
8.44
8.64
Average Value at Risk 12 months. Historical simulation Value at Risk; 99% confidence level; 1-day holding period; 4-year historical observation period. The system was altered at the start of the year 2010 as part of the further development of risk modelling. Based on these enhancements, issuer-specific credit spread risks are now included in the calculation. As a result, risk measurements have increased although the positions remain the same. The figures for the prior years have not been adjusted. Value at Risk for positions in the Financial Products division of the Investment Banking business unit.
Ratings
31-12-10
31-12-09
31-12-08
Moody’s Rating Bank Vontobel AG
A1
A1
A1
Standard & Poor’s Rating Bank Vontobel AG
A+
A+
A+
2
Vontobel Group, Annual Reports 2010
Key figures
31-12-10 CHF mns
31-12-09 CHF mns
31-12-08 CHF mns
31-12-07 CHF mns
31-12-06 CHF mns
Total operating income
830.2
785.0
756.0
991.0
840.2
Operating expense
657.1
633.1
618.7
667.6
538.7
Group net profit
147.3
138.3
113.0
268.3
259.5
Income statement
of which allocated to minority interests
(0.5)
(0.6)
0.2
4.6
3.4
147.8
138.9
112.8
263.7
256.1
31-12-10 CHF mns
31-12-09 CHF mns
31-12-08 CHF mns
31-12-07 CHF mns
31-12-06 CHF mns
48.5
21.2
51.0
83.1
73.8
Investment Banking
115.5
147.1
77.5
181.4
194.6
Asset Management
50.6
31.5
76.3
86.3
71.1
Corporate Center
(41.5)
(47.9)
(67.5)
(27.4)
(38.0)
Balance sheet
31-12-10 CHF mns
31-12-09 CHF mns
31-12-08 CHF mns
31-12-07 CHF mns
31-12-06 CHF mns
of which allocated to the shareholders of Vontobel Holding AG
Segments (pre-tax income) Private Banking
Total assets
18,301.6
18,081.4
15,531.8
17,992.1
14,952.0
Shareholders’ equity (excl. minority interests)
1,503.9
1,483.6
1,369.9
1,421.1
1,287.0
Due from customers
1,427.0
1,005.4
666.0
813.1
692.0
Due to customers
4,925.7
4,594.4
3,594.2
2,061.2
1,785.6
Structured products issued
9,344.0
9,292.7
8,496.6
11,136.7
8,915.7
31-12-10 CHF bns
31-12-09 CHF bns
31-12-08 CHF bns
31-12-07 CHF bns
31-12-06 CHF bns
78.6
75.2
62.4
79.52
71.2
of which under discretionary management
45.9
42.8
37.3
49.7
45.6
of which under non-discretionary management
32.7
32.4
25.1
29.82
25.6
5.5
2.1
3.9
5.8
4.5
Assets under management1 Total assets under management
Net new money 1 2
Calculation in accordance with Table Q of the guidelines issued by the Swiss Financial Market Supervisory Authority (FINMA) concerning accounting standards for financial institutions and Vontobel Group internal guidelines. Adjusted for reclassifications
Custody assets Custody assets 1
31-12-10 CHF bns
31-12-09 CHF bns
31-12-08 CHF bns
31-12-07 CHF bns
40.4
39.2
36.1
31-12-10
31-12-09
31-12-08
31-12-07
31-12-06
1,097.6
1,119.1
1,093.4
1,049.7
981.9
248.5
242.0
226.3
204.4
168.6
1,346.1
1,361.1
1,319.7
1,254.1
1,150.5
46.21
31-12-06 CHF bns
37.1
Adjusted for reclassifications
Headcount (full time equivalents) Number of employees Switzerland Number of employees abroad Total number of employees
Vontobel Group, Annual Reports 2010
3
Shareholders’ letter
Dear shareholders and clients At the end of 2009 – in the middle of the financial and economic crisis – various scenarios were formulated regarding the future development of the global economy; they ranged from a rapid economic recovery to a protracted recession of the kind previously witnessed in Japan. Events in 2010 demonstrated that an entirely different outcome is also possible. The real economy proved many macroeconomists wrong and evolved in a way that few had predicted. An unexpectedly strong upturn was followed by months of major uncertainty. The debt crisis and euro crisis left some EU countries in a precarious position. The imponderabilities in the markets triggered high levels of volatility, significantly weakening the US dollar and the euro on the one hand but driving up the value of the Swiss franc on the other – in reflection of Switzerland's stability – with negative consequences for the domestic economy. The climate of uncertainty in the markets also caused bank clients to adopt a passive approach and dampened the performance of wealth and asset managers across the industry. In addition to these economic effects, political factors and regulatory changes had an equally large impact on the performance of the banking sector in the period under review. It is imperative for the Swiss financial centre to compete successfully in the international arena and to regain the trust of clients and investors. Initial agreements have now been reached regarding the introduction of a flat-rate withholding tax. This represents an important milestone for the financial centre and we believe that the approach that is being defined will prove an acceptable solution for private clients.
4
Vontobel Group, Annual Reports 2010
Shareholders’ letter
The Vontobel Group delivered a good performance in the financial year 2010 in this challenging operating environment. The dynamic first half of the year was followed by a slow third quarter and a slight upturn in the final part of 2010. This translated into a net profit of CHF 147.3 mn for the full year, which represents a very solid result. An important feature of the results is the significant increase in the profit contribution generated by the wealth and asset management business. Both Private Banking and Asset Management reported an impressive growth in profits. The strategic direction we have taken in recent years is proving effective. The Investment Banking business unit achieved an appealing result, although not fully in line with the very strong figures for the previous year. The main highlight in the year under review was the very pleasing inflow of new money recorded by Vontobel. In particular, this reflects Asset Management’s successful asset gathering in Asia, Italy and the Middle East. In addition, the product lines managed in the US according to the Value approach produced a strong performance and inflow of new money. The growth of our presence in Private Banking through the opening of new branches met with a positive response from clients and attracted a large volume of new assets. Together with our high level of advisory expertise – which was confirmed by the findings of an extensive client survey in 2010 – we have thus succeeded in creating a strong basis for future growth. Investment Banking experienced a significant level of demand for its structured products and the Vontobel Group maintained its leading position in the increasingly competitive Swiss derivatives market. This business unit once again demonstrated its skill and expertise with the successful launch of the deritrade ® issuing platform in Germany. As a result of our continued high level of capital expenditure, the Group’s return on equity and cost/income ratio fell slightly short of our mid-term targets. Capital adequacy remains a key topic in the finance industry. In autumn 2010, the central bank chiefs and financial supervisory authorities of 27 countries agreed on a global increase in capital and liquidity standards within the framework of Basel III. The Vontobel Group has retained a high level of financial flexibility despite the tighter regulations being implemented both in Switzerland and internationally. Our company has a tradition of maintaining a strong capital base, which is an expression of our conservative risk profile. At the end of 2010, our capital amounted to 21.8% of riskweighted positions. Ensuring that shareholders gain an appropriate share of our company’s profits is one of the cornerstones of our corporate policy. Based on this principle and the stable development of our earnings, the Board of Directors of Vontobel Holding AG will propose the distribution of a dividend of CHF 1.40 per share – unchanged from the previous year – to the General Meeting of Shareholders. The Organizational Regulations of Vontobel Holding AG prescribe a maximum age limit of 70 years for the incumbent members of the Board of Directors. This age limit also applies to the Chairman of the Board of Directors, Dr Urs Widmer, who will step down at the forthcoming General Meeting of Shareholders. The Board of Directors conducted intensive discussions regarding the appointment of his successor and will Vontobel Group, Annual Reports 2010
5
Shareholders’ letter
propose to the General Meeting of Shareholders that the incumbent CEO of the Vontobel Group, Herbert J. Scheidt, be appointed as the new Chairman of the Board of Directors of Vontobel Holding AG and Bank Vontobel AG. Dr Zeno Staub has been named as the new CEO. He is currently Head of the Asset Management business unit and has held various senior management positions within the Vontobel Group since 2001. Zeno Staub will assume his new function on 4 May 2011, following the General Meeting of Shareholders. The success of our company is driven primarily by the performance and expertise of our managers and employees. Without them, we would be unable to perform our complex activities or to deliver on our ambitious targets. In 2010, our daily operations and numerous business projects placed significant demands on our employees. They have accomplished a great deal and have helped to advance our business in many areas. We would like to take this opportunity to thank them for the considerable dedication they have shown. We also wish to thank our shareholders for their confidence in our strategy and our ability to execute it successfully. Our aim in 2011 is to continue to pursue our growth initiatives in a targeted manner – with a focus on the German market as well as our international sales activities in Asset Management – while strictly managing costs. We remain committed to using the capital entrusted to us by our shareholders in a prudent and efficient manner. Vontobel successfully navigated the severe financial crisis but was unable to emerge from this challenging environment completely unscathed. There are signs that unstable economic developments could once again affect our business in 2011. Nevertheless, we remain confident about the future of our business in view of the solidity, independence, integrity and strong client focus of the Vontobel Group. We develop effective concepts and solutions for our clients and strive to build long-term relationships with them based on our motto “Performance creates trust”. In brief: Vontobel’s strategy is in place and we have defined the future course of our business. Our goal in 2011 is to systematically realize our potential!
6
Vontobel Group, Annual Reports 2010
Dr Urs Widmer
Herbert J. Scheidt
Chairman of the Board of Directors
Chief Executive Officer
Shareholders’ letter
Changes in the Board of Directors Dr Urs Widmer will step down at the forthcoming General Meeting of Shareholders after reaching the maximum age limit prescribed in the Organizational Regulations of Vontobel Holding AG. As a member of the Board of Directors since 2003 and its Chairman since the General Meeting of Shareholders in 2005, Urs Widmer has been instrumental in shaping the strategy of the Vontobel Group and in defining the direction it has taken. The entire Vontobel Group has great respect for Urs Widmer’s achievements and owes him sincere thanks for the enormous commitment he has shown. The Board of Directors is highly appreciative of his exceptional contribution to the company and his dedication during his tenure as Chairman and a member of the Board. With his entrepreneurial foresight, Urs Widmer has played a decisive part in ensuring the successful long-term development of the Vontobel Group. Dr Wolfhard Graetz will also step down as a member of the Board of Directors at the forthcoming General Meeting of Shareholders. He has been closely associated with the Vontobel Group for many years. Wolfhard Graetz successfully managed various areas of Asset Management and Private Banking from 1988 to 1999. He was responsible for the strategic and operational realignment of Tardy, de Watteville & Cie SA in Geneva (later Banque Vontobel Genève SA) as its Chairman and subsequently as its CEO. He has been contributing his expertise as a member of the Board of Directors of the Vontobel Group since 1997 and has supported Urs Widmer in his capacity as Vice-Chairman since April 2005. We owe considerable thanks to Wolfhard Graetz for his significant contribution and tireless efforts on behalf of our company. At the General Meeting of Shareholders of 3 May 2011, Clara Streit will be proposed for election to the Board of Directors. Born in Syracuse, New York, Clara Streit studied Economics at the University of St. Gallen before joining the international consulting firm McKinsey & Company at the age of 23. She became a Senior Partner in 2003. During her many years in the field of consulting, she has acquired a vast knowledge of the finance industry as well as extensive international expertise. With her impressive professional track record and international background, Clara Streit will be a valuable addition to our Board of Directors. The Board of Directors would also like to express its thanks to CEO Herbert J. Scheidt for having successfully driven the strategic realignment and growth of the Vontobel Group over the last eight years. With his in-depth experience in the field of international banking and his proven management style – reflecting both his strategic approach and strong conceptual abilities – he is the ideal candidate to succeed Urs Widmer as Chairman of the Board of Directors. Herbert J. Scheidt embodies Vontobel's core values and will guarantee continuity and reliability as well as ensuring the success of the company. The Board of Directors is convinced that under his leadership, the Vontobel Group will continue to flourish – thus benefiting all our our shareholders, clients and employees.
Bruno Basler, Chairman of the NCC, on behalf of the Board of Directors Vontobel Group, Annual Reports 2010
7
Vontobel Group
The Vontobel Group offers the unique combination of the tradition and solidity of an
Our Company
independent, internationally-oriented Swiss private bank and the innovative strength of an active international asset manager. Our integrated business model with the three business units Private Banking, Investment Banking and Asset Management ensures close cooperation and allows us to successfully pool our expertise and resources for the benefit of our clients and cooperation partners. Each day, around 1,400 Vontobel employees around the world create sustained added value for our clients. Whether they are in the heart of Zurich, in New York or Dubai – teams in 19 international locations identify trends and formulate innovative investment strategies and products everywhere that our clients are based. Performance creates trust At the Vontobel Group, the relationship with our clients is founded on performance and trust. This is one reason why many of these relationships continue from one generation to the next. We want to achieve a performance that inspires our clients with confidence each time we serve them. We focus on areas of business of which we have an expert knowledge and we earn the trust of our clients by delivering on our promises.
How we position ourselves Vontobel is an internationally-oriented Swiss private bank. We specialize in asset
Key messages in our Mission Statement
management for sophisticated private and institutional clients. Vontobel’s core competence is centred around Private Banking, Investment Banking and Asset Management, all for the benefit of its clients and cooperation partners in all areas of asset management. Our benefits for clients, employees and shareholders – Our integrated business model, with its three core competencies Private Banking, Investment Banking and Asset Management, allows us to combine know-how and resources in the best interests of our clients and cooperation partners. – We are an attractive and fair employer. – As a long-term-oriented company we aim to offer our shareholders sustainable growth of the company’s value. – We strongly support social and cultural causes. – We measure our success on the basis of mutually agreed benchmarks and report regularly on our performance. Our ambition – We offer outstanding service quality. – We are both objective-oriented and flexible in our work. – We are experts in the development of tailored solutions. – We communicate openly and transparently. – We are the bank with short decision paths.
Vontobel Group, Annual Reports 2010
9
Vontobel Group
Trust is at the core of our business – We know that our success and the loyalty of our clients and cooperation partners depend on the trust placed in us on a daily basis. And we know just what a precious and fragile gift this is. Which is why we are so careful with it. – We are a solid, independent partner. – We have integrity. – We are discrete and respect other privacy. – We are transparent. Our principles Our solid reputation and the confidence accorded us are built upon a daily balance between the quest for profit, the willingness to take risks and the principles of responsible management. Our medium-term bank strategy is the embodiment of this mission statement. It determines our operational aims, the measures taken to achieve them and the responsibilities set out.
Strategy
Our strategy is founded on – Independence This is derived from our stable family shareholder base and its commitment to the independence of the Vontobel Group as well as from the preservation of our solid capital base. The prevention of conflicts of interest enhances our long-term stability. – The business units Private Banking, Investment Banking and Asset Management The integrated business model with our core competencies in wealth and asset management and investment banking enables us to achieve a balanced value generation on a Group level. – Our focus on specific client segments and markets while taking account of Group synergies – Our clear growth strategy that is pursued prudently through organic growth, cooperation agreements and acquisitions
Medium-term targets Assets under management
CHF 100 bns
Growth in net new money
to exceed market growth
Return on equity (ROE) Cost/income ratio
10
Vontobel Group, Annual Reports 2010
>10% while maintaining a solid capital base 65%–75%
Vontobel Group
The Vontobel brand
Brand strategy
A good corporate name is today more important than ever before in determining the success of a company. Banks are therefore investing increasingly in their brands, which serve as a valuable guide for clients when selecting a financial partner. Our corporate identity is a decisive factor in achieving a uniform corporate image and presence both internally and externally. Within our company, the Vontobel brand provides us with a clear sense of identity. Our brand is conveyed externally through the systematic application of our corporate design, which guarantees a consistent overall presence in our communication with the market. Vontobel employees have a key role to play in this context by acting as the primary ambassadors for our brand in their contact with clients and business partners. Their conduct and performance are key in determining the way Vontobel is perceived in the public arena. Our claim “Performance creates trust” is a powerful and unique expression of our brand promise. We have a clearly defined brand structure. At company level, we operate as the Vontobel Group with our three business units Private Banking, Investment Banking and Asset Management. At the next level, the visual presence of Harcourt Investment Consulting, Vontobel Swiss Wealth Advisors and Vontobel Financial Products reflects the Vontobel brand. In the area of structured products, the derinet ® portal (www.derinet.com) offers interested investors a range of information on these instruments. In addition, the electronic sales platform deritrade ® provides customized solutions for our institutional clients in Switzerland and Germany. We are committed to continuously developing Vontobel’s strong corporate brand in order to increase the loyalty of our clients, business partners and shareholders. During the year under review, our strategic marketing activities focused on the targeted further development of the Vontobel brand. Acting from a position of strength, we want to carefully refine our brand and to further accentuate its positioning within the company’s business strategy based on our corporate values and qualities. In addition, we have set ourselves the goal of measuring the success of our strategic and operational marketing activities even more regularly and systematically in the future. This will enable us to use the available marketing resources more effectively and efficiently and to successfully support the business units’ client activities. Well-established brands can become an important factor determining business success. We are therefore very pleased that Vontobel achieved a top-five ranking in the Swiss bank brand ratings published by the business magazine Bilanz.
Vontobel Group, Annual Reports 2010
11
Sustainability at the Vontobel Group
In 2010, small but significant steps were achieved in international efforts to promote a greater commitment to sustainability principles. At the end of the International Year of Biodiversity, the UN General Assembly decided to establish the Intergovernmental Science Platform on Biodiversity and Ecosystem Services (IPBES), which will address scientific questions regarding the economic value of biodiversity in the same way that the IPCC examines matters relating to climate change. The Climate Change Conference in Cancún ended with an agreement being reached on important measures that will lay the foundations for future climate negotiations. In addition, the community of states pledged their support for a World Bank climate fund that will promote the transfer of technologies to developing countries. These are just two examples to show that sustainability issues figure high on the political agenda and will thus also remain of paramount importance for the private sector. These developments confirm that the Vontobel Group is adopting the right approach by taking greater account of sustainability issues in all areas of its business. Sustainability is enshrined in Vontobel’s principles As an independent Swiss private bank with a strong family shareholder base, the Vontobel Group is committed to sustainable business management. It understands that stability, financial success and responsibility go hand in hand and it applies this knowledge in every area of its work. For generations, the bank has been committed to operating in an ethical and far-sighted manner. Vontobel Group’s sustainability guidelines Principle 1. Vontobel is committed to the principle of sustainable development. Clients 2. When advising our clients, we focus on their long-term satisfaction. 3. We are responding to a growing demand among clients by offering innovative investment services that take account of the opportunities and risks related to sustainability. Shareholders and external stakeholders 4. As an organization with a long-term focus, we generate sustained increases in the value of our company for our shareholders through measures that include the consideration of environmental and social issues. 5. Together with our charitable foundations and through the personal commitment of each individual, Vontobel strives to create social and cultural added value. 6. We engage in an active dialogue with the public about sustainability issues. Employees 7. We are an attractive and fair employer. 8. We make our employees aware of the opportunities and risks relating to sustainability on a continuous basis. Environment 9. We reduce the environmental impacts of our business activities as far as possible, thus also making a contribution towards climate protection. Implementation 10. We set specific sustainability targets and ensure that we have appropriate management structures and processes in place to facilitate the continuous improvement of our performance.
12
Vontobel Group, Annual Reports 2010
Sustainability at the Vontobel Group
Vontobel Group’s revised Business Code sets out the principles and practices that the Board of Directors expects employees to observe in their daily work. It reaffirms the basic values that enable Vontobel to act as a reliable partner to its clients, shareholders, employees, business partners, the authorities and the general public. In its Business Code, Vontobel pledges to operate ethically, responsibly and with integrity when dealing with its stakeholders. Since the Vontobel Group purchases a large number of products and services from external partners – ranging from cleaning services and IT equipment to the design and production of printed materials – it is important for its sustainability principles to also be considered at this level. In 2010, the Sustainability Committee therefore approved sustainable purchasing guidelines that will be defined in detail for specific areas and product groups. The guidelines will prescribe the environmental and social standards that Vontobel expects its business partners to observe. Sustainable added value for clients As a wealth and asset manager, Vontobel believes that the consideration of sustainability aspects in the field of investing is an essential part of a comprehensive sustainability strategy. The signing of the Principles for Responsible Investment (PRI) by Vontobel at the start of 2010 represents an important milestone in this context. These Principles, which were issued by the United Nations Environment Programme (UNEP) Finance Initiative and the UN Global Compact, set out a range of possible actions to facilitate the increased incorporation of environmental, social and governance issues in the areas of wealth and asset management. By becoming a signatory to the Principles for Responsible Investment, the Vontobel Group has demonstrated its commitment not only to offering special sustainability products but also to taking greater account of sustainability aspects in all areas of investing. The first step was taken in Asset Management with the adjustment of the investment process for global equity funds that are managed by Vontobel in Zurich. Sustainability criteria are now systematically incorporated into the financial analysis and thus form an important part of the assessment of the opportunities and risks relating to companies. In addition, financial analysts and sustainability analysts work together to define minimum sustainability criteria for each sector. During this process, the financial analysts can draw on various sources of external data, thus providing clear added value in their analyses. Vontobel’s offering of innovative sustainable investment products enables clients to invest in future-oriented themes and to thus achieve a financial return while contributing towards sustainable development. The main focus of the offering is on products in the Global Change Investing line that address diverse aspects of global change via different approaches. The Global Responsibility funds invest in companies across all sectors and apply a range of sustainability criteria during the selection process. In addition to the four existing regional funds, Global Responsibility International Equity – a global portfolio that takes account of sustainability criteria – was launched in 2010. The Global Vontobel Group, Annual Reports 2010
13
Sustainability at the Vontobel Group
Responsibility funds reported a total volume of CHF 276 mn of assets under management at the end of 2010. The following table provides an overview of the performance of the different funds. All Global Responsibility funds bear the Eurosif trans parency logo, which guarantees that investors are fully informed about the investment process as well as the fund criteria (Global Responsibility International Equity will be included in the next round). In addition, Vontobel manages sustainability funds with a volume of CHF 2,011 mn of assets on behalf of cooperation partners such as Raiffeisen. Through its participation in responsAbility, an organization specializing in social investments and microfinance investing, Vontobel also supports the provision of microfinance funds and other innovative financial products. Sustainable investment funds managed by Vontobel
Fund class
Vontobel Global Responsibility Asia (ex Japan) Equity
Equity fund
Performance 2010
18.9%
Vontobel Global Responsibility International Equity
Equity fund
15.0%
Vontobel Global Responsibility US Equity
Equity fund
11.1%
Vontobel Global Responsibility European Equity
Equity fund
9.2%
Vontobel Global Responsibility Swiss Equity
Equity fund
5.7%
Raiffeisen Futura Swiss Stock
Equity fund
7.2% (6.9%)
Raiffeisen Futura Global Stock
Equity fund
Raiffeisen Futura Global Bond
Bond fund
3.5%
Raiffeisen Futura Swiss Franc Bond
Bond fund
2.5%
Raiffeisen Multi Asset Class Futura
Investment target fund
(1.3%)
Raiffeisen Pension Invest Futura 50
Investment target fund
1.2%
Raiffeisen Pension Invest Futura 30
Investment target fund
0.4%
Harcourt Belair (Lux) Sustainable Alternatives SRI
Fund of hedge funds
0.2%
In addition to the sustainability funds, a range of theme funds from the Global Trend family are available that focus on various key trends such as the restructuring of the energy system, the more efficient use of resources and the supply of clean technologies. At the end of 2010, the three Vontobel funds Global Trend New Power, Global Trend Future Resources and Global Trend Clean Technology reported total assets under management of CHF 527 mn.
Theme funds managed by Vontobel
Fund class
Performance 2010
Vontobel Global Trend Future Resources
Equity fund
29.9%
Vontobel Global Trend Clean Technology
Equity fund
14.6%
Vontobel Global Trend New Power
Equity fund
6.2%
Vontobel offers private clients a type of asset management portfolio that takes account of sustainability criteria and is diversified broadly across various asset classes. Three different investment strategies are available. Unlike other forms of portfolio management, all of the investments undergo a clearly defined sustainability review. This gives investors the opportunity to participate in the success of sustainable companies and to combine their personal values with their investment activities.
14
Vontobel Group, Annual Reports 2010
Sustainability at the Vontobel Group
Once each quarter, the new magazine “blue” provides private clients with compelling insights into topics that go beyond the world of investing. What does security mean? What is our relationship with time? How are our lives affected by constant change? The publication explores these and other questions from different perspectives in a series of specialist articles and interviews with experts. Lateral thinkers are also invited to express their opinions, thus presenting the topic from a new angle and encouraging readers to challenge established views. In October 2010, clients from Switzerland, Germany and Austria were invited to participate in a survey about the advisory and service quality offered by Vontobel Private Banking. Over 90% of the participating private banking clients indicated that they were generally satisfied – with around 70% stating that they were either very or extremely satisfied. The survey also revealed that Bank Vontobel’s image is rated very positive by its clients. The valuable client input from the survey will be used as a basis to achieve ongoing improvements in service and advice. Investment Banking offers a variety of structured products that focus on sustainability themes. In 2010, for example, Vontobel launched its Renewable Energies II basket that enables investors to participate in 10 different wind and solar energy stocks. Sustainable investments
2010
2009
2008
Volume of sustainable investments (CHF mns)
4,066
3,176
1,928
Share of sustainable investments (in % of AuM)1
4.8%
3.6%
3.1%
1
Excluding volume of structured products
The volume of sustainable investments managed by the Vontobel Group rose by 28% compared to the previous year. Measured as a proportion of total assets under management, this corresponded to an increase of 1.2 percentage points, underlining the growing importance of sustainable investing for both private and institutional clients. Clients who wish to use part of their wealth to promote worthwhile causes can lend their support to projects that focus on social issues, culture, ecology, education and medicine through Bank Vontobel’s charitable foundation. In 2010, the foundation made a significant donation to the non-profit organization “Die Sozialfirma AG” to help establish a new branch – “Baum und Grün” – which employs teams of people with and without disabilities who perform gardening work for standard rates of pay. The organization is designed to help people with disabilities to find employment. The research project “Biodiversity in the Landscape” run by the Research Institute of Organic Agriculture in Frick is committed to promoting the use of mixed cultivation and to thus reducing the use of pesticides in order to promote biodiversity. The foundation has provided a substantial donation to support the project throughout the period from its launch 2008 through to its completion in 2011.
Vontobel Group, Annual Reports 2010
15
Sustainability at the Vontobel Group
Diverse benefits for our stakeholders The following key figures illustrate how the Vontobel Group’s business activities generate added value for its shareholders and the general public. External stakeholders
2010
2009
2008
Added value (CHF mns)1
572.0
551.2
504.3
30.2
16.5
27.5
90.2
77.4
128.5
Tax liability (CHF
mns)2
Dividends paid (CHF mns) 1 2
Operating income less depreciation of fixed assets and intangible assets Includes profit tax, capital gains tax and other taxes and contributions
Value creation has increased compared to the previous year. The growth in profit has led to a marked increase in both tax contributions and dividends. The Vontobel Group is involved in various organizations that promote a more sustainable approach to business within the finance industry. For example, it is a member of The Sustainability Forum Zurich (TSF), an international network that aims to increase the importance assigned to sustainability principles within the financial markets by cultivating a forward-looking dialogue between key players in the industry. Zeno Staub, Head of Vontobel Asset Management, has been the President of TSF since the start of 2010. In the year under review, the annual Sustainability Leadership Symposium organized by TSF was dedicated to the topic “Financing the transition to a low carbon economy”. In 2010, a local branch of the Forum for Sustainable Investments was established in Switzerland. Vontobel has assumed the role of Chairman of the Swiss organization, thus helping to shape its activities and to educate investors and the general public about sustainable investing. In March 2010, the Forum for Sustainable Investments Switzerland presented a Swiss market study about the renewed increase in the volume of sustainable investments and organized various events on current topics relating to this field. As a founding member of the Climate Foundation Switzerland, Vontobel once again lent its support to several climate protection projects conducted by Swiss small and medium-sized enterprises (SMEs) in 2010. With the support of the Climate Foundation, a mill in Dambach installed a new heating system that converts its own biomass waste into process steam, thus saving gas equivalent to over 3,000 megawatt-hours each year and reducing the mill’s volume of CO2 emissions by 650 metric tons. Other projects that have received support include the construction of a new production plant equipped with a heating pump and waste heat recovery system, as well as the installation of an energy screen in the greenhouse of a garden centre to reduce the extent to which the structure cools down at night.
16
Vontobel Group, Annual Reports 2010
Sustainability at the Vontobel Group
Charitable donations
2010
2009
2008
0.8
0.1
0.4
13.7
11.8
19.6
9.8%
8.6%
17.7%
Donations and gifts (CHF mns) Dividends to charitable foundations (CHF mns) Dividends to charitable foundations, contributions and donations (in % of profit)
It is not only financial contributions that are beneficial: knowledge is also a valuable asset. A number of Vontobel employees share their financial expertise with others by giving talks and presentations at training events held internally or by external organizations. The Vontobel Group believes it has a duty to make its financial know-how available to employees as well as to broader sections of society in order to create greater public understanding of complex financial market issues and to raise awareness of their importance for the Swiss economy. Focus on employees Vontobel assigns considerable importance to the provision of attractive working conditions for its employees. This includes promoting a healthy work/life balance. For example, the conditions for maternity leave and paternity leave that it grants to working parents exceed the statutory minimum. After completing six years of service, female employees benefit from six months of maternity leave on full pay, while members of staff who have been with the company for a shorter period of time are entitled to four months of maternity leave. Fathers are granted five days of paternity leave. Vontobel has, for many years, been a member of Childcare Service, an organization that advises parents on childcare issues and runs a group of nurseries. In July 2010, Vontobel also became a member of the kcc group (kid’s care concept), thus providing its employees with a further childcare option. The kcc group offers families holistic care solutions for children. Wherever possible from an operational perspective, Vontobel endeavours to meet requests for part-time working arrangements from employees, including members of middle management. The following table shows how many Vontobel employees work on a part-time basis: Proportion of males/females in part-time positions in 2010 Number Proportion of women of women
Number Proportion of men of men
Total Proportion number of total
20 – 49%
21
4%
5
1%
26
2%
50 – 79%
70
14%
27
3%
97
7%
80 – 99%
68
14%
28
3%
96
7%
100%
336
68%
863
93%
1,199
84%
Total
495
100%
923
100%
1,418
100%
The proportion of female employees at Vontobel who work on a part-time basis increased by two percentage points to a total of 32% compared to the previous year. This demonstrates Vontobel’s willingness to offer solutions that help employees to combine their professional and family commitments.
Vontobel Group, Annual Reports 2010
17
Sustainability at the Vontobel Group
Actively promoting health and wellbeing in the workplace is an important aspect of Vontobel’s focus on employees. For example, the company regularly offers free influenza immunizations to members of staff. Employees can enjoy a healthy meal each day in the staff restaurant at Vontobel’s head office. The restaurant is operated by SV-Service, which pursues a comprehensive sustainability strategy as well. In addition, fresh fruit is offered to employees in the workplace on a daily basis. Employee diversity in terms of gender, age and nationality is a key factor determining a company’s success. A high level of attention was assigned to this issue when developing internal training programs for the current year, including a new seminar on the topic of diversity. The following table illustrates the proportion of men and women at different levels of management, as well as the various nationalities represented within the company. Proportion of males/females at different levels of management in 2010 Number of women
Proportion of women
Number of men
Proportion of men
Employee
187
55%
152
45%
Middle management
222
47%
255
53%
Senior management
86
14%
510
86%
0
0%
6
100%
495
35%
923
65%
1
12%
7
88%
Number
31-12-10 in %
Number
31-12-09 in %
Group Executive Management Total Board of Directors
Nationalities of employees Switzerland
995
70
1,003
70
Germany
152
11
154
11
Austria
57
4
59
4
Italy
58
4
59
4
USA
49
3
39
3
Spain
16
1
17
1
France
13
1
17
1
United Kingdom
22
2
16
1
56
4
63
5
1,418
100
1,427
100
Number
31-12-10 in %
Number
31-12-09 in %
Up to 1 year
215
15
135
10
1 to 5 years
588
41
661
46
5 to 10 years
309
22
342
24
10 to 20 years
207
15
184
13
20 to 30 years
84
6
90
6
More than 30 years
15
1
15
1
1,418
100
1,427
100
Other Total
Seniority structure
Total
18
Vontobel Group, Annual Reports 2010
Sustainability at the Vontobel Group
Age structure
Number
31-12-10 in %
Number
31-12-09 in %
Up to 20 years old
22
2
24
2
20 to 30 years old
165
12
164
11
30 to 40 years old
485
34
476
33
40 to 50 years old
470
33
485
34
50 to 60 years old
228
16
227
16
More than 60 years old Total
48
3
51
4
1,418
100
1,427
100
Continuous training and development enables employees to remain abreast of the constant changes in the company’s operating environment. Vontobel therefore offers them both internal training programs and the opportunity to attend external courses. A range of attractive apprenticeships enable young people to embark on a career in this fascinating industry. At the same time, Vontobel benefits from the fact that it thus gains access to a pool of well-qualified young people whom it can subsequently offer a permanent position within the bank. The rate of staff turnover depends on various factors; when viewed over time, it indicates that employees are essentially satisfied with their work at Vontobel. Turnover and training
2010
Fluctuation rate (in %)
9.3 1
2009
8.62
2008
10.2
Training costs (CHF 1,000)
2,167
1,777
2,154
Training costs (CHF/FTE)
1,528
1,306
1,656
21
22
19
Number of trainees 1 2
Excluding staff changes resulting from the acquisition of Commerzbank (Schweiz) AG Excluding staff changes resulting from a cost-cutting exercise
In 2010, training expenditure returned to 2008 levels after being reduced in 2009 in line with the performance of the business. The majority of apprentices who completed their training were replaced by new apprentices. Changes in employee behaviour also enable Vontobel to significantly increase its contribution towards building a stable society and preserving an intact environment. Vontobel therefore conducts various initiatives to raise employee awareness of social and environmental issues. – During the “Energy Weeks” event, Vontobel organized a wide variety of initiatives and supplied information to educate employees about simple ways in which energy savings can be realized on a daily basis, thus helping to protect the climate. These activities focused on electricity consumption, mobility and nutrition. The event attracted a high level of interest and inspired lively discussions on this topic. – In summer 2010, Vontobel participated in the “Bike to Work” campaign for the second time. This initiative encourages employees to cycle to work instead of taking the car or public transport. Numerous teams of Vontobel employees registered to take part in the campaign once again.
Vontobel Group, Annual Reports 2010
19
Sustainability at the Vontobel Group
Long-term compensation concept The compensation concept introduced by Vontobel in 2005 provides employees with an incentive to focus on long-term performance and to help drive the sustained success of the company. The concept largely satisfies the demands for sustainable, integrated compensation systems that are being widely debated. Further information on this topic can be found in the chapter “Information relating to corporate governance” in the section “Compensation, shareholdings and loans” as well as in the Notes to the consolidated financial statements, note 29. The compensation system places a strong emphasis on the long-term performance of the Vontobel Group and defers the payment of part of the variable compensation awarded to participating employees. In this way, Vontobel encourages and rewards responsible and risk-conscious conduct that is in the best interests of the company. Responsibility for the environment As part of its climate strategy, Vontobel implemented various measures in the course of 2010 to gradually reduce the volume of CO2 emissions resulting from its banking operations. As well as switching to renewable sources of electricity to power its external computing centre, Vontobel conducted a comprehensive energy audit of the largest office at its headquarters in Zurich, which offers workplaces for around 365 employees. Experts examined the heating, ventilation and lighting systems and certified that they are in generally good condition and are being carefully maintained. It was nevertheless possible to achieve a 14% reduction in energy consumption – and consequently in energy costs – simply through the use of optimization measures. The costs of the energy audit were recovered in less than one year, meaning that this measure proved beneficial not only from an environmental but also from a financial perspective. The “Energy Weeks” conducted in June 2010 – which are described in the section “Focus on employees” – enabled Vontobel to generate savings of around 10,000 kg of CO2 through the provision of climate-friendly meals in the staff restaurant as well as a reduction in elevator usage. This is equivalent to the amount of carbon that would be captured by planting 937 spruce trees, meaning that the Vontobel Group’s efforts during the “Energy Weeks” can be compared to planting a forest of almost 1,000 trees. The entire Vontobel Group has been carbon neutral since 1 January 2009. In conjunction with the established partner First Climate, Vontobel purchased emissions reduction certificates that are equivalent to its annual global CO2 output, thus fully offsetting its greenhouse gas emissions. The purchase of these certificates enables renewable energy projects to be implemented in developing countries and the emerging markets that would not otherwise be possible. Each year, Vontobel gathers key data regarding the environmental impacts of its banking activities. The most recent figures are published in a separate document that can be downloaded from the Internet.
20
Vontobel Group, Annual Reports 2010
Sustainability at the Vontobel Group
Implementation Vontobel’s Sustainability Committee, which is chaired by the CEO, ensures that its sustainability guidelines are implemented in practice and that Vontobel achieves ongoing improvements in these various areas. The Sustainability Committee consists of representatives of the three business units Private Banking, Investment Banking and Asset Management, as well as various Group functions. Vontobel’s efforts to take greater account of sustainability across all areas of its business are part of an ongoing commitment in this area. It will therefore strive to achieve continuous improvements in the many fields of sustainable business management. Information about Vontobel’s progress in this area of sustainability is continuously updated on the Internet: www.vontobel.com/sustainability
Vontobel Group, Annual Reports 2010
21
Review of business activities
Vontobel Group reports growth in profit and strong inflow of new money
Total assets under management (CHF bns) 80
The Vontobel Group grew its net profit by 7% to CHF 147.3 mn in 2010 while operating in a still very challenging environment. Its return on equity was 9.8%, in line with
70
the previous year (9.7%). Basic earnings per registered share totalled CHF 2.31 (2009: CHF 2.17). Private Banking and Asset Management reported a substantial growth in
60
profits. Investment Banking – in an increasingly competitive market – did not reach the previous year’s result. In view of this solid and broad-based result, the Board of
50
Directors will propose a dividend of CHF 1.40 per registered share – unchanged from the previous year – to the General Meeting of Shareholders.
40
The Group attracted CHF 5.5 bn of net new assets during the financial year, corre30
sponding to growth of 7.3% of assets. This impressive inflow of new money confirms the high level of trust that clients place in Vontobel’s expertise and financial solidity.
20
Total assets under management increased by 5% or CHF 3.4 bn to CHF 78.6 bn compared to the end of 2009. The large volume of assets gathered by Vontobel and the
10
positive overall market effects of CHF 3.2 bn were more than offset by negative for2010
2009
2008
2007
2006
eign exchange impacts totalling CHF 5.3 bn. From an investment perspective, 2010 0
was characterized by slight overall advances in prices in the equity and bond markets, combined with a high level of volatility and strong currency fluctuations. The escalation of the euro crisis from May 2010 onwards prompted another flight to quality, resulting in falling yields in Switzerland and Germany. The equity markets rose primarily in the second half of 2010 as a result of more positive economic forecasts. The Vontobel Group reported strong shareholders’ equity of CHF 1.5 bn. Its solid capital position is also reflected by its above-average BIS tier 1 capital ratio of 21.8%. Thanks to this solid financial basis, Vontobel is well positioned to pursue its targeted growth strategy while taking account of stricter regulatory requirements. Growing contribution of the wealth and asset management business Pre-tax profit Private Banking Investment Banking Asset Management
31-12-10 CHF mns
31-12-09 CHF mns
48.5
21.2
115.5
147.1
50.6
31.5
Corporate Center
(41.5)
(47.9)
Total
173.1
151.9
The wealth and asset management business achieved significant progress in terms of the generation of new money and profitability. Private Banking benefited from measures to strengthen its market presence as well as its increased advisory capabilities. In Asset Management, the decision to focus on selected product lines and to strengthen its distribution capacity proved effective. Private Banking and Asset Management collectively accounted for CHF 99.1 mn of the Group’s pre-tax profit of CHF 173.1 mn. Investment Banking maintained its leading position in the listed structured products market in Switzerland and generated a pre-tax profit of CHF 115.5 mn. The Corporate Center result improved due to the more active management of treasury holdings.
22
Vontobel Group, Annual Reports 2010
Review of business activities
Pleasing development of net new money
Group net profit (CHF mns)
All three business units substantially increased their inflows of new money compared 300
to the previous year. The institutional business, in particular, gathered an impressive volume of new assets from international clients. Asset gathering in Private Banking slowed following the announcement that Switzerland has reached initial agreements
250
on the issue of taxation with two EU countries. In view of all these circumstances, the net inflow of new money from private and institutional clients can be viewed as significant.
200 31-12-10 CHF bns
31-12-09 CHF bns
1.5
0.5
Private Banking
1.2
0.4
External asset managers
0.3
0.1
4.0
1.6
Development of net new money
150
2.2
0.9
(1.0)
Investment Banking
0.3
0.4
5.5
2.1 2006
Total net new money
50
2010
2.8
Asset management/investment funds
2009
Asset management/mandates
2008
Institutional clients
100
2007
Private clients
0
In the private clients business, Vontobel generated CHF 1.5 bn of net new money, driven mainly by inflows from Central and Eastern Europe as well as the new branches in its Swiss home market. In the institutional business and in investment funds, Vontobel attracted CHF 4.0 bn of assets. The mandates business generated strong inflows of CHF 2.8 bn from international markets in particular. Following a difficult period, the investment fund business reported significant inflows of CHF 0.9 bn. At the end of 2010, the Vontobel Group had CHF 78.6 bn of assets under management, corresponding to an increase of 5% or CHF 3.4 bn compared to the end of the previ-
Shareholders’ equity (CHF bns)
ous year. The pleasing growth in net new money and positive market developments were partly offset by significant negative foreign exchange impacts. 31-12-10 in %
31-12-09 in %
Swiss equities
17
17
Foreign equities
28
24
Bonds
31
31
Assets under management by investment category
Alternative investments Liquid assets, fiduciary investments Other1 1
6
6
14
18
4
4
1.5
1.0
Including structured products 0.5
The composition of assets under management by investment category altered during the year under review due to a slight shift from liquid assets to equities. This reflects the Vontobel Group’s active investment policy as well as a moderate increase in client
2010
2009
2008
2007
2006
confidence in the capital markets.
Vontobel Group, Annual Reports 2010
0
23
Review of business activities
Net operating income (CHF mns)
31-12-10 in %
31-12-09 in %
CHF
36
36
EUR
26
32
USD
21
19
Other
17
13
Assets under management by currency 1,000
800
The value of the euro declined by 16% versus the Swiss franc in 2010. The lower pro-
600
portion of euro investments in client portfolios reflects this trend. The impact of the 10% decline in the value of the US dollar versus the Swiss franc was offset by the strong inflow of new money in the US institutional business. 400
Growing fee and commission income due to increased asset base 200
Structure of the income statement
2010
2009
2008
2007
2006
Net interest income 0
31-12-09 CHF mns
31-12-09 in %1
6
46.0
6
Fee and commission income
478.2
58
420.0
53
Trading income
273.9
33
298.0
38
25.0
3
21.0
3
Total operating income
830.2
100
785.0
100
Personnel expense
392.3
47
386.8
49
General expense
196.2
24
171.9
22
61.8
7
61.9
8
6.8
1
12.5
1
657.1
79
633.1
80
25.8
3
13.6
2
147.3
18
138.3
18
Depreciation, amortization Valuation adjustments, provisions and losses
1,400
31-12-10 in % 1
53.1
Other income
Headcount (full time equivalents)
31-12-10 CHF mns
Operating expense Taxes Group net profit
1,200
1
1,000
Operating income rose by 6% to CHF 830.2 mn in 2010. Net fee and commission
Share of operating income
income, which is with a share of 58% by far the most important income component at Vontobel, increased by 14% to CHF 478.2 mn, thus exceeding the growth in other
800
types of income. This mainly reflects a 20% increase in the average asset base. Trading income totalled CHF 273.9 mn, down slightly from the previous year. This com-
600
ponent includes the issuing, hedging and secondary trading of structured products and derivatives, as well as foreign exchange trading. While trading income benefited significantly from valuation effects in the previous year, this factor had a limited over-
400
all impact in the financial year 2010. The 15% rise in net interest income to CHF 53.1 mn reflects the significant increase in client deposits in the course of the year as well
200
as the more active management of treasury liquidity. The latter also had a positive
24
2010
2009
2008
2007
2006
impact on the development of other income, which grew by 19% to CHF 25.0 mn. 0
Vontobel Group, Annual Reports 2010
Review of business activities
Systematic implementation of strategic initiatives The Vontobel Group’s strategy entails targeted growth initiatives in all three business units, based on organic growth and expansion through acquisitions, as well as cooperation agreements in the bank’s defined core markets. In the financial year 2010, investments in the business once again focused on wealth and asset management activities. In Private Banking, Vontobel grew its market presence in Switzerland by completing the integration of Commerzbank (Schweiz) AG and opening new branches in Basel and Berne. Asset Management strengthened its international distribution capabilities. In Germany, Vontobel combined the activities of its three business units within Bank Vontobel Europe AG, which is headquartered in Munich. It has thus laid optimal foundations for the expansion of its operations across all areas of the business in its second core market. As a result of continued capital expenditure and increased business volumes, operating expense rose by 4% to CHF 657.1 mn. Personnel expense increased by 1% to CHF 392.3 mn compared to the previous year and general expense grew by 14% to CHF 196.2 mn. Operating expense included the final integration costs relating to Commerzbank’s Swiss subsidiary in the amount of CHF 9.3 mn. At the end of 2010, the Vontobel Group had 1,346 employees (FTEs), a decrease of 15 employees from the end of 2009. Depreciation remained in line with the previous year at CHF 61.8 mn, as planned. The tax rate increased from 9.0% to 14.9%, as expected, due to the more balanced distribution of profits.
Capital expenditure and depreciation of property,
31-12-10 CHF mns
31-12-09 CHF mns
Capital expenditure
41.0
39.4
Depreciation
61.8
61.9
equipment and intangible assets
The cost/income ratio improved marginally to 78.3% (2009: 79.1%). Vontobel’s operating efficiency remained slightly outside the mid-term target range of 65% to 75% defined by the Board of Directors and the Group Executive Management, reflecting the ongoing transformation process in the finance industry as well as the continuation of Vontobel’s strategic expansion. Far-sighted risk policy In 2010, the creditworthiness of certain EU countries came under severe pressure due to their spiralling levels of debt. Thanks to its prudent risk management approach, the Vontobel Group has only limited positions in bonds issued by these countries. The Group has thus maintained its conservative risk profile. It has also made further adjustments to the way it measures risk: with effect from 2010, its calculation of Value at Risk has included the issuer-related credit spread risk. As a result, the average Value at Risk of CHF 19.7 mn reported by the Financial Products division of the Investment Banking business unit cannot be compared with the figures for prior periods.
Vontobel Group, Annual Reports 2010
25
Review of business activities
Value at Risk (VaR) for the positions of Financial Products Average 12 months ending
31-12-10 CHF mns
31-12-09 CHF mns
1.1
2.7
Equities Interest rates Currencies Commodities Total
17.9
1.6
0.4
(0.1)
0.3
0.2
19.7
4.4
A new calculation method including issuer-related credit spread risk applies from 2010. The figures for prior period have not been adjusted.
Solid capital position – even in view of stricter future regulations The Vontobel Group’s capital position remains solid, with an equity ratio of 8.2% and a BIS tier 1 capital ratio of 21.8%. This means that it is well positioned to pursue its growth path, even when it becomes subject to stricter regulatory requirements in the future. Shareholders’ equity totalled CHF 1.5 bn and was thus unchanged from the end of 2009. The Group generated a pleasing return on equity of 9.8%. In view of the high level of market volatility and low investment returns, many of the Vontobel Group’s clients favoured liquid investments, resulting in a further increase in client deposits. Due to customers rose by 7% to CHF 4.9 bn compared to the end of 2009. Vontobel’s balance sheet also reflects the strong level of interest in its derivative products (CHF 9.3 bn) and the more active management of treasury holdings. On the assets side of the balance sheet, Vontobel continued to place a strong emphasis on investments characterized by high credit quality and short maturities. At CHF 18.3 bn, total assets remained virtually unchanged compared to the end of 2009. Of the regulatory capital of CHF 625.1 mn (31-12-09: CHF 666.7 mn) required according to BIS rules, 42% was allocated to Investment Banking.
Credit risks CHF mns
Market risks CHF mns
Operational risks CHF mns
Goodwill etc. CHF mns
Total CHF mns
Private Banking
30.3
0.0
34.9
77.1
142.3
Investment Banking
38.4
154.1
50.5
21.0
264.0
Asset Management
6.1
0.0
31.4
71.8
109.3
51.5
56.2
1.8
0.0
109.5
126.3
210.3
118.6
169.9
625.1
Allocation of regulatory capital required
Corporate Center Total
The two rating agencies Standard & Poor’s and Moody’s continue to rate the longterm debt of Bank Vontobel AG as A+ and A1, respectively. They assigned Vontobel Holding AG a rating of A and A2, respectively. These ratings confirm the recognized financial strength and solidity of the Vontobel Group.
26
Vontobel Group, Annual Reports 2010
Private Banking
Private Banking is committed to expertly managing the assets entrusted to it by its clients. It offers them the full range of financial and wealth management services and advice based on a holistic and customized approach with a focus on individual solutions. Private Banking supplies a wide variety of services, from portfolio management and active investment advisory to integrated financial advice and inheritance planning. Thanks to Vontobel's business model, clients can also benefit from access to the proven expertise of Asset Management and Investment Banking. In every aspect of their work, the specialists in Private Banking focus on security and the sustained enhancement of value. The business unit has operations in Zurich, Basel, Berne, Geneva, Lucerne, Vaduz, Salzburg, Vienna, Munich, Hamburg, Milan and Hong Kong. At the start of 2011 it established a presence in Cologne. The Swiss private banking sector is undergoing substantial changes. Following the signing of agreements in principle with Germany and the UK, the parameters that will apply to the industry in the future are becoming increasingly clear. Many clients are positioning themselves accordingly. As a result, the net inflow of new money slowed in the second half of 2010. The regulations that are being defined will once again provide greater legal certainty and have a positive impact on the Swiss wealth management sector in the medium term. During the year under review, Vontobel Private Banking focused on actively realigning its activities to the changed operating environment and on increasing business momentum. For example, the integration of Commerzbank (Schweiz) AG was successfully completed and Private Banking strengthened its presence in its Swiss home market by opening new branches in Basel and Berne. In addition, the establishment of Vontobel Swiss Wealth Advisors AG created the basis for the provision of services to US private clients. At the same time, Private Banking continued to expand its range of advisory services and enhanced numerous processes by adopting a more client-focused approach. The client survey conducted in 2010 confirmed the very high level of satisfaction with Vontobel's advisory services among private banking clients. At the end of December 2010, Vontobel Private Banking reported assets under management of CHF 29.6 bn (–1% compared to the end of 2009). The net inflow of new money trebled to CHF 1.2 bn compared to 2009. New money was acquired primarily in Vontobel's Swiss home market as well as in Central and Eastern Europe. Market performance had a positive impact in the amount of CHF 1.4 bn. This compared with negative foreign exchange impacts totalling CHF 2.9 bn due to the weakness of the euro and the US dollar. Private Banking reported a pleasing 17% rise in operating income to CHF 248.5 mn. The increase in operating expense remained within narrow limits thanks to synergy effects resulting from the acquisition of Commerzbank (Schweiz) AG and strict cost discipline, rising by 4% to CHF 200.0 mn. The cost/income ratio improved very significantly from 85.7% to 77.2%. Pre-tax profit grew by 129% from CHF 21.2 mn to CHF 48.5 mn. In view of the high level of market uncertainty, clients remained cautious and displayed a preference for near-liquid investments (22% of assets under management in Private Banking). The gross margin reached 83 basis points, while the net margin rose by 7 basis points to 16 basis points.
28
Vontobel Group, Annual Reports 2010
Private Banking
Segment results
31-12-10 CHF mns
31-12-09 CHF mns
Net interest income
26.6
16.8
9.8
58
Other operating income
221.9
195.8
26.1
13
Operating income
248.5
212.6
35.9
17
Personnel expense
90.1
86.6
3.5
4
General expense
20.3
19.2
1.1
6
Services from/to other segment(s)
78.7
74.8
3.9
5
Depreciation of property, equipment and intangible assets
2.8
1.5
1.3
87
Value adjustments, provisions and losses
8.1
9.3
(1.2)
(13)
200.0
191.4
8.6
4
48.5
21.2
27.3
129
Cost1/income ratio (%)
77.2
85.7
Change of assets under management (%)
(1.0)
30.0
4.0
1.7
Operating expense Segment profit before taxes
Change to 31-12-09 CHF mns in %
Key figures
of which net new money (%) of which change in market value (%)
(5.0)
9.2
0.0
19.1
Net new money (CHF bns)
1.2
0.4
Operating income/average assets under management (bp)2
83
833
(bp)2
16
94
29.6
29.96
(0.3)
(1)
30.0
25.6
4.4
17
347.7
404.7
(57.0)
(14)
183.3
170.3
13.0
8
of which through acquisition (%)
Profit before taxes/average assets under management
Assets under management5 Assets under management (CHF bns) Average assets under management (CHF
bns)7
Personnel Employees (full time equivalents) of which relationship managers
1 2 3 4 5 6 7
Operating expense excl. value adjustments, provisions and losses Calculation based on average values for individual months. The previous year’s figure has been adjusted. Considering operating income of Commerzbank (Schweiz) AG, annualized Considering profit before taxes of Commerzbank (Schweiz) AG, annualized Calculation in accordance with Table Q of the guidelines issued by the Swiss Financial Market Supervisory Authority (FINMA) concerning accounting standards for financial institutions and Vontobel Group internal guidelines Adjusted for reclassifications and including the acquisition of Commerzbank (Schweiz) AG which had CHF 4.4 bn of assets under management as of the acquisition date Average based on monthly figures
Vontobel Group, Annual Reports 2010
29
Investment Banking
Vontobel Investment Banking focuses on the products business, while maintaining a conscious and prudent approach to risk. Vontobel Financial Products is one of the leading issuers of derivatives and structured products in Switzerland and Europe. The Brokerage division, which has received a number of international awards, is ideally complemented by the Corporate Finance business. Comprehensive services are also offered to external asset managers. Securities and foreign exchange trading, as well as the securities services provided in the area of Transaction Banking, complete the broad range of offerings for clients. Investment Banking has operations in Zurich, Geneva, Cologne, Frankfurt, Munich, Dubai, London and New York. In an environment characterized by low levels of client activity and increasingly fierce competition, Investment Banking reported an 11% decline in operating income to CHF 331.7 mn. Financial products accounted for around 75% of the business unit's operating income, while Brokerage and the business with external asset managers contributed 10% and 9%, respectively. Operating expense fell by 4% to CHF 216.2 mn, reflecting lower personnel costs. This resulted in a cost/income ratio of 65.0%. Pre-tax profit decreased by 21% to CHF 115.5 mn. This included a slightly positive net impact from changes in valuation. Assets under management increased to CHF 8.2 bn thanks to net inflows of new money totalling CHF 0.6 bn. Custody assets totalled CHF 40.4 bn, including the portfolios of Raiffeisen Switzerland, for which Vontobel provides custody services as part of a long-term cooperation agreement. Structured products have been an established asset class in Switzerland for several years and now form an integral part of the portfolios of private and institutional investors. According to statistics published by the Swiss National Bank, around 5% of the assets held in client portfolios fall into this category. With a market share on Scoach Switzerland of 24% in 2010, Vontobel Financial Products remains the leading provider of listed structured products and derivatives in this market. Vontobel also performed very well in Germany, where it positioned itself as one of the top 10 providers. Compared to the end of 2009, the Group-wide volume of structured products outstanding remained unchanged (CHF 9.3 bn). In a sideways market combined with high levels of volatility, there was a strong demand from investors for return optimization products. Commodities and the emerging markets were also popular investment themes. The organizational structure of the Brokerage business, which is now headed by a new manager, has been realigned to take greater account of the highly competitive environment. The awards received by Vontobel from the renowned ranking agencies Extel Thomson and Starmine confirm that Vontobel's Brokerage unit remains one of the leaders in the field of Swiss equities. The range of services offered to external asset managers has been expanded with the introduction of a state-of-the-art, multifunctional electronic banking platform for this client group.
30
Vontobel Group, Annual Reports 2010
Investment Banking
Segment results
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
Net interest income
10.8
6.1
4.7
77
Other operating income
320.9
367.1
(46.2)
(13)
Operating income
331.7
373.2
(41.5)
(11)
Personnel expense
103.6
127.4
(23.8)
(19)
General expense
48.0
38.1
9.9
26
Services from/to other segment(s)
61.4
56.3
5.1
9
Depreciation of property, equipment and intangible assets
2.6
2.5
0.1
4
Value adjustments, provisions and losses
0.6
1.8
(1.2)
(67)
Operating expense
216.2
226.1
(9.9)
(4)
Segment profit before taxes
115.5
147.1
(31.6)
(21)
65.0
60.1
8.2
7.7
0.5
6
3.7
3.33
0.4
12
0.6
0.5
0.3
0.13
Key figures Cost1/income ratio (%)
Assets under management2 Assets under management (CHF bns) of which external asset managers (CHF bns) Net new money (CHF bns) of which external asset managers (CHF bns)
Custody assets Custody assets (CHF bns)
40.4
39.2
1.2
3
341.6
324.9
16.7
5
Personnel Employees (full time equivalents) 1 2 3
Operating expense excl. value adjustments, provisions and losses Calculation in accordance with Table Q of the guidelines issued by the Swiss Financial Market Supervisory Authority concerning accounting standards for financial institutions and Vontobel Group internal guidelines Adjusted for reclassifications
Vontobel Group, Annual Reports 2010
31
Asset Management
The Asset Management business unit specializes in active asset management and is positioned as a multi-boutique provider. It has three global and three regional actively managed, distinctive product lines in the market. Vontobel Asset Management's core competencies include targeted asset allocation, stock selection and multi-manager approaches. Its products are distributed directly to institutional clients and via wholesale channels and are also sold by Vontobel’s cooperation partners. Harcourt, a boutique provider specializing in alternative investments, offers hedge fund solutions that are mainly geared towards institutional investors, as well as a UCITS III commodity product. The Vontobel Group has a longstanding cooperation agreement with Raiffeisen Switzerland, which it supplies with comprehensive investment services. The Asset Management business unit serves clients from locations in Zurich, Berne, Geneva, New York, Frankfurt, Vienna, Luxembourg, Milan, Madrid, Stockholm, Hong Kong and now also London. In addition, Harcourt has operations in Grand Cayman. A recovery in the equity markets towards the end of 2010, as well as continued low interest rates and the weakness of the euro and US dollar, shaped market developments in the year under review. In this challenging environment, Vontobel's portfolio managers succeeded in outperforming the relevant benchmarks in many of their product lines. In particular, the core Contemporary Value line and the Global Trend Future Resources fund achieved a significant outperformance. Among fixed income investment products, the Absolute Return products delivered pleasing results relative to their benchmark. Vontobel Asset Management once again received a number of awards in recognition of the excellent performance of its products. Client and fund assets totalled CHF 42.5 bn at the end of 2010. This 10% increase was partly driven by a very pleasing and internationally broad-based net inflow of new money totalling CHF 3.7 bn. At the same time, positive market effects were offset by very negative currency fluctuations. The mandates business achieved another highly successful performance with CHF 2.8 bn of net new money, while the investment fund business generated net inflows of CHF 0.9 bn. The Contemporary Value products managed in New York, which have now reached a volume of USD 11.7 bn, also attracted a significant volume of new assets. Investor interest focused on product lines offering absolute returns in the area of fixed income. As a result of the successful steps taken in recent years to increase the depth of the product range and the density of its international distribution network, Vontobel Asset Management now reaches 90% of the global fee pool for institutional investments. Operating income rose by 21% compared to 2009 to CHF 214.3 mn. Income from performance fees accounted for CHF 8.2 mn (2009: CHF 2.9 mn) of operating income. Operating expense grew less rapidly than operating income to CHF 163.7 mn (+12%). The cost/income ratio improved significantly to 77.0%. As a result, Vontobel Asset Management reported a 61% increase in pre-tax profit to CHF 50.6 mn. Both the gross margin of 52 basis points and the net margin of 12 basis points increased compared to 2009.
32
Vontobel Group, Annual Reports 2010
Asset Management
Segment results
31-12-10 CHF mns
31-12-09 CHF mns
Net interest income
0.5
1.5
(1.0)
(67)
Other operating income
213.8
175.9
37.9
22
Operating income
214.3
177.4
36.9
21
Personnel expense
96.2
81.1
15.1
19
General expense
22.9
21.0
1.9
9
Services from/to other segment(s)
37.6
34.5
3.1
9
Depreciation of property, equipment and intangible assets Value adjustments, provisions and losses Operating expense Segment profit before taxes
Change to 31-12-09 CHF mns in %
8.4
8.7
(0.3)
(3)
(1.4)
0.6
(2.0)
(333)
163.7
145.9
17.8
12
50.6
31.5
19.1
61
77.0
81.9
9.4
14.8
3.9
10
Key figures Cost1/income ratio (%) Change of assets under management (%)2 of which net new money
(%)2
of which change in market value (%)2 Net new money (CHF bns)
9.9
3.7
(0.5)
11.1
3.7
1.2
(bp)3
52
51
Profit before taxes/average assets under management (bp)3
12
9
42.5
38.6
Operating income/average assets under management
Assets under management and investment fund assets4 Assets under management (CHF bns)5 of which Vontobel funds (CHF bns)
10.4
9.3
1.1
12
of which private label funds (CHF bns)
9.5
10.0
(0.5)
(5)
of which managed on behalf of other segments (CHF bns)
1.7
1.3
0.4
31
41.5
35.0
6.5
19
281.0
270.7
10.3
4
Average assets under management (CHF
bns)6
Personnel Employees (full time equivalents) 1 2 3 4 5 6
Operating expense excl. value adjustments, provisions and losses Adjusted for assets that are managed on behalf of other segments. Calculation based on average values for individual months. The previous year’s figure has been adjusted. Calculation in accordance with Table Q of the guidelines issued by the Swiss Financial Market Supervisory Authority concerning accounting standards for financial institutions and Vontobel Group internal guidelines The assets under management reported by Asset Management now also include assets managed on behalf of other segments. Average based on monthly figures
Vontobel Group, Annual Reports 2010
33
Corporate Center
The Corporate Center of the Vontobel Group comprises the support units Operations, Finance & Risk and Group Services. The Operations unit is divided into IT, Facility Management & Services and Operations & Information Risk. The Finance & Risk unit combines the areas of Finance & Controlling, Treasury, Risk Control, Compliance, Legal and Investor Relations. Group Services encompasses the areas of Human Resources, Group Communications, Corporate Business Development and International. The Corporate Center reported a pre-tax segment result of CHF –41.5 mn in 2010 compared to CHF –47.9 mn in the previous year. The improvement in the result is mainly attributable to the active management of Group liquidity by Vontobel's Treasury department. In view of the very low interest rates in the interbank market, Treasury increased its level of investment in high-quality bonds. The Corporate Center result includes integration costs relating to the acquisition of Commerzbank (Schweiz) AG in the amount of CHF 9.3 mn. The Operations unit continued to focus on the optimization of business processes and the IT landscape during the period under review. The IT systems of Commerzbank (Schweiz) AG were successfully migrated to the Vontobel platform in the first quarter of 2010. In the second half of the year, Vontobel began preparations for the planned relocation of its Swiss Operations units from their current base in ZurichWollishofen to Zurich-Enge. The Finance & Risk unit ensures that the guidelines issued by the supervisory authorities, the Board of Directors and the Group Executive Management are implemented appropriately within the Group. It produces financial reports and thus creates transparency about Group-wide income and risk positions. The significant changes in the regulatory environment placed particular demands on the Compliance division during 2010. Its activities focused primarily on preparations for the introduction of FATCA (US Foreign Account Tax Compliance Act) and the implementation of measures relating to the cross-border wealth management business, as well as the establishment of the new unit serving US private clients.
34
Vontobel Group, Annual Reports 2010
Corporate Center
Segment results
31-12-10 CHF mns
31-12-09 CHF mns
Net interest income
15.2
21.6
(6.4)
Other operating income
20.5
0.2
20.3
Operating income
35.7
21.8
13.9
64
Personnel expense
102.4
91.7
10.7
12 12
General expense
Change to 31-12-09 CHF mns in %
(30)
105.0
93.6
11.4
(177.7)
(165.6)
(12.1)
Depreciation of property, equipment and intangible assets
48.0
49.2
(1.2)
(2)
Value adjustments, provisions and losses
(0.5)
0.8
(1.3)
(163)
Operating expense
77.2
69.7
7.5
11
(41.5)
(47.9)
6.4
375.8
360.8
15.0
Services from/to other segment(s)
Segment profit before taxes
Personnel Employees (full time equivalents)
Vontobel Group, Annual Reports 2010
4
35
Information relating to Corporate Governance
1. Group structure and shareholders
38
2. Capital structure
42
3. Board of Directors
43
4. Group Executive Management
52
5. Compensation, shareholdings and loans
56
6. Shareholders’ participatory rights
58
7. Changes of control and defence measures
60
8. Statutory auditor/Group auditor
61
9. Information policy
62
Vontobel Group, Annual Reports 2010
37
Information relating to Corporate Governance
The Vontobel Group is committed to pursuing a responsible, value-oriented approach to corporate management and control. It considers good corporate governance to be a vital success factor and an essential prerequisite for the achievement of strategic corporate goals and the creation of lasting value for shareholders and all other stakeholders. Key elements of our corporate governance are: a clearly defined, wellbalanced distribution of powers between the Board of Directors and the Group Executive Management, the protection and promotion of shareholders’ interests, and a transparent information policy. The Articles of Association of Vontobel Holding AG, the Organizational Regulations of Vontobel Holding AG and the Minutes of the General Meeting of Shareholders of Vontobel Holding AG are available on the Internet (www.vontobel.com > Investor & Media Relations > Annual General Meeting). The SIX Swiss Exchange AG issued a “Directive on Information relating to Corporate Governance”, which entered into effect on 1 July 2002. The following information meets the requirements of this directive and takes account of the SIX commentary last updated on 20 September 2007. If information required by this directive is published in the Notes to the financial statements, a reference indicating the corresponding section of the notes is given.
1. Group structure and shareholders
1.1 Structure of the Vontobel Group as of 31 December 2010
Board of Directors Chairman: Dr Urs Widmer
Chief Executive Officer Herbert J. Scheidt
Private Banking
Investment Banking
Asset Management
Finance & Risk
Operations
Peter Fanconi
Roger Studer
Dr Zeno Staub
Dr Martin Sieg Castagnola
Felix Lenhard
Group companies that are to be consolidated (scope of consolidation) are listed in the Notes to the consolidated financial statements on page 150 together with details of the company name, registered office, share capital, stock exchange listing and the interest held by the Group.
38
Vontobel Group, Annual Reports 2010
Information relating to Corporate Governance
1.2 Major shareholders and groups of shareholders with pooled voting rights Nominal CHF mns
31-12-10 Share in %
Nominal CHF mns
31-12-09 Share in %
11.8
18.2
11.8
18.2
3.6
5.5
3.6
5.5
Vontrust AG (Holding of the Vontobel family shareholders)
8.1
12.5
8.1
12.5
Other shares of family shareholders
0.3
0.5
0.3
0.5
Vontobel Foundation
7.1
10.9
7.1
10.9
Pellegrinus Holding AG (public utility foundation Corvus)1
2.7
4.2
2.7
4.2
Vontobel Holding AG including subsidiaries (own shares without voting rights)2
1.5
2.3
1.3
2.0
Executive members
0.6
0.9
0.6
0.9
Raiffeisen Switzerland
8.1
12.5
8.1
12.5
43.8
67.5
43.6
67.2
of which members of the pool (with and without voting rights)
35.7
54.9
35.5
54.6
of which members of the pool (with voting rights)
34.2
52.6
34.2
52.6
of which pooled shares
26.0
40.0
26.0
40.0
With voting rights on share capital of CHF 65 mn Dr Hans Vontobel Ruth de la Cour-Vontobel
Total voting rights on share capital
1 2
Usufruct including voting right by Pellegrinus Holding AG, ownership by Vontobel Foundation Excluding option rights amounting to 0.1% (previous year 0.1%) of shares outstanding
On 3 September 2009, the Disclosure Office of the SIX Swiss Exchange AG granted Vontobel Holding AG’s request for the extension of the easing of the reporting and disclosure requirement (“corridor solution”) in accordance with the Stock Exchange Act. Until 31 March 2011, the shareholding of the group of shareholders of Vontobel Holding AG that is subject to a reporting requirement (tied and free shares) can therefore fluctuate between 64.5% and 69.0% without leading to a disclosure report by the aforementioned group of shareholders or a public disclosure by Vontobel Holding AG upon it reaching, exceeding or falling below the threshold of 66 2/3%. Furthermore, no disclosure notifications as defined in Article 20 of the Stock Exchange Act or other notifications of significant changes in shareholder structure were published during the year under review. Shareholder pooling agreement The major shareholders (Dr Hans Vontobel, Ruth de la Cour-Vontobel, Vontrust AG, other shares of family shareholders, Vontobel Foundation, Pellegrinus Holding AG, Vontobel Holding AG and executive members) are parties to a pooling agreement. This agreement encompasses specific Vontobel Holding AG shares held by these shareholders. As of 31 December 2010, 40% of all shares issued are bound by the pooling agreement. The members of the pool can freely dispose of any shares not specifically mentioned in the pooling agreement. Any sale of pooled Vontobel Holding AG shares requires prior approval by the pool members. If the members approve the intended sale, the pool member wanting to sell shares must first offer his or her shares to the other pool members for purchase. The other pool members have pre-emptive rights of purchase in proportion to each member’s pooled interest. If a pool member declines to exercise or transfer all or part of his or her rights of purchase, the unexercised rights
Vontobel Group, Annual Reports 2010
39
Information relating to Corporate Governance
will be allocated among the remaining pool members willing to exercise said rights, in proportion to each member’s respective interests. The rules governing the sale of pooled shares held by executive members differ in that Vontobel Holding AG has preemptive rights to purchase their shares. The parties to the shareholder pooling agreement exercise their rights at the General Meeting of Shareholders uniformly in accordance with the prior resolutions passed by the pool. The shareholder pooling agreement is valid until 31 December 2017. It will be renewed automatically for three years at a time, provided notice to terminate the agreement is not given beforehand. Registered shareholders as at 31-12-10 Natural persons Legal persons Unregistered shares Total
Number of shareholders
in %
Number of shares
in %
7,193
95.1
25,012,842
38.5
373
4.9
31,481,344
48.4
-
-
8,505,814
13.1
7,566
100.0
65,000,000
100.0
Shareholding of Raiffeisen Switzerland related to long-term cooperation agreement In connection with the long-term cooperation between Vontobel Holding AG and Raiffeisen Switzerland, Raiffeisen Switzerland and the members of the aforementioned shareholder pooling agreement (including Vontobel Holding AG) signed an agreement on 7 June 2004 governing the shareholding in Vontobel Holding AG acquired by Raiffeisen Switzerland (the “participation agreement”). Under the participation agreement, several pool members – particularly Vontobel Holding AG – sold 12.5% of outstanding Vontobel Holding AG shares to Raiffeisen Switzerland for total consideration of CHF 225 mn. The price per share was based on the volume-weighted average price paid for Vontobel shares during the 60 trading days prior to 17 May 2004, the reference date set by the parties to the agreement. After the signing of the cooperation agreements, the purchase transaction was conducted by Raiffeisen Switzerland and Vontobel Holding AG on 8 December 2004. Raiffeisen Switzerland has undertaken not to purchase any Vontobel Holding AG shares – in particular free float shares – prior to the termination of the participation agreement. This restriction does not apply to the purchase of shares by Raiffeisen Switzerland from pool members in accordance with the purchase rights defined in the participation agreement. On 14 December 2009, the existing cooperation agreement was extended until at least the end of June 2017. The parties essentially granted each other the following rights of purchase: If the cooperation is terminated by Raiffeisen Switzerland or with mutual consent, the selling pool members have the pre-emptive right to repurchase the interest acquired by Raiffeisen Switzerland. If the cooperation is terminated by Vontobel Holding AG (further details on the duration of the agreement and the terms and conditions of termination are given in the Notes to the consolidated financial statements, note 40), Raiffeisen Switzerland has the right to sell its interest back to Vontobel Holding AG in two tranches in the first and fourth year after termination of the cooperation. If Raiffeisen Switzerland does not exercise this right of sale, the pool members have the right to repurchase the shares in two tranches in the second and fifth year after terminaton of the cooperation. The selling pool members and Raiffeisen Switzerland
40
Vontobel Group, Annual Reports 2010
Information relating to Corporate Governance
have additionally granted each other mutual pre-emptive rights of purchase in the event that Raiffeisen Switzerland sells its interest to a third party or the pool members sell shares bound by the pooling agreement to a third party prior to the termination of the cooperation agreement. In all of the above cases, the prevailing market price shall apply, based on the 60-day, volume-weighted average share price. Furthermore, in the event that the pool members plan to sell a controlling stake to a third party that would give said party control over more than 331/3% of the voting rights of Vontobel Holding AG, the pool members must offer Raiffeisen Switzerland the corresponding number of shares for purchase prior to executing the aforementioned transaction. In this case, the prevailing market price at the time plus an appropriate control premium will apply. The pre-emptive rights of purchase and the requirement to tender shares for purchase shall not apply in the event that a public takeover bid is issued by a third party. Provided Raiffeisen Switzerland does not issue at least an equivalent public takeover bid of its own, the pool members will decide at their sole discretion whether to accept or refuse the third-party takeover bid. Raiffeisen Switzerland has the right to propose a candidate for election to the Board of Directors of Vontobel Holding AG throughout the duration of the cooperation. The pool members are required to cast all of the voting rights stemming from their shareholdings in favour of this representative. In reciprocation, Vontobel Holding AG has the right to attend the meetings of the Board of Directors of Raiffeisen Switzerland. Apart from these provisions, the participation agreement contains no voting rights commitments between the pool members and Raiffeisen Switzerland, nor has Raiffeisen Switzerland been granted any veto rights. In particular, the pool members are free to exercise the voting rights stemming from their shareholdings in accordance with the terms and conditions of the shareholder pooling agreement by which they are bound (see above), and no understanding or agreements have been reached that have a bearing on the decision-making processes of the Board of Directors of Vontobel Holding AG or on the passing of the Board’s resolutions. The participation agreement essentially ends with the sale of all shares governed by the pool to Raiffeisen Switzerland (if the pre-emptive rights of purchase are exercised) or to a third party, in compliance with the provisions of all valid agreements or with the sale of the shares owned by Raiffeisen Switzerland to the authorized pool members (if the pre-emptive rights of repurchase are exercised) or to a third party in compliance with the provisions of all valid agreements, or at the latest upon retransfer of the interest acquired by Raiffeisen Switzerland to Vontobel Holding AG or to the pool members following the termination of the cooperation. The Swiss Takeover Board noted in a Recommendation dated 4 June 2004 that the purchase of the interest by Raiffeisen Switzerland and the granting of the rights described above did not trigger an obligation to issue a public takeover bid. Raiffeisen Switzerland and the pool members do not therefore represent a group that is obligated to issue a public takeover bid. 1.3 Cross shareholdings No cross shareholdings exist between Vontobel Holding AG or its subsidiaries and other corporations that exceed 5% of capital or voting rights. Vontobel Group, Annual Reports 2010
41
Information relating to Corporate Governance
2. Capital structure
2.1 Capital The share capital of Vontobel Holding AG amounts to CHF 65,000,000. The registered shares of Vontobel Holding AG (security no. 1 233 554) are listed on the SIX Swiss Exchange and are included in the Swiss Performance Index SPI ®. Further information on the composition of capital can be found in the Notes to the consolidated financial statements, note 26. 2.2 Details of contingent and authorized capital Details of contingent and authorized capital can be found in the Notes to the consolidated financial statements, note 26. 2.3 Changes in capital Information on the composition of capital, changes in capital during the past two years and authorized capital is given in the Statement of equity and in the Notes to the consolidated financial statements, note 26. For information on earlier periods, please refer to the relevant Annual Reports (2009 and 2008: see note 28). 2.4 Shares and participation certificates The share capital of Vontobel Holding AG is divided into 65,000,000 fully paid in registered shares with a par value of CHF 1.00 each. Vontobel Holding AG does not have any participation certificates outstanding. 2.5 Profit-sharing certificates Vontobel Holding AG does not have any profit-sharing certificates outstanding. 2.6 Restrictions on transferability and nominee registrations in the share register This information is provided in section 6 “Shareholders’ participatory rights”. 2.7 Convertible bonds and options All outstanding bonds are listed in the Notes to the consolidated financial statements, note 23. There were no convertible bonds outstanding as of 31 December 2010. Information on the options on shares of Vontobel Holding AG issued by the Vontobel Group is provided in the Notes to the consolidated financial statements, note 26. The volume of the entire share capital recorded for outstanding structured products and options amounts to 34,764 shares, net (previous year: 72,814 shares). This means that option rights issued by the Vontobel Group amounting to 0.1% (previous year: 0.1%) of share capital were outstanding on 31 December 2010. No conditional capital is used to hedge these option rights; they are hedged through market transactions.
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3. Board of Directors
3.1 Members of the Board of Directors The Board of Directors of Vontobel Holding AG consists of the following members as of 31 December 2010:
Name
Dr Urs Widmer Dr Wolfhard Graetz
Committee membership1 Initial election
Function
Nationality
Term expires
Chairman
CH
NCC
2003
2011
Vice-Chairman
D
AC
1997
2011
Prof. Dr Ann-Kristin Achleitner
Member
D
AC
2009
2011
Bruno Basler
Member
CH
NCC2
2005
2011
Dr Philippe Cottier
Member
CH
NCC
2009
2011
Peter Quadri
Member
CH
2005
2011
Dr Frank Schnewlin
Member
CH
2009
2011
Dr Pierin Vincenz
Member
CH
2005
2011
1
2
AC2
Further information on the Committees is provided below under “Internal organization” NCC: Nomination and Compensation Committee AC: Audit Committee Chair
Dr Hans Vontobel has been Honorary Chairman of Vontobel Holding AG and Bank Vontobel AG since 1991. No member of the Board of Directors of Vontobel Holding AG performed any operational management functions for the company or any of its subsidiaries in 2010. Any previous executive functions are detailed below. The Chairman of the Board of Directors of Vontobel Holding AG, Dr Urs Widmer, has a seat on the Board of Directors of Helvetia Holding AG in connection with Vontobel’s cooperation with Helvetia. Bruno Basler is Vice-Chairman of the Board of Trustees of the Vontobel Foundation and thus represents the interests of majority shareholders. Dr Pierin Vincenz represents Raiffeisen Switzerland on the Board of Directors of Vontobel Holding AG. The Vontobel Group and Raiffeisen Switzerland have a long-term cooperation agreement (see note 40). Dr Philippe Cottier was CEO of Harcourt Investment Consulting AG, a subsidiary of Vontobel Holding AG, until 30 June 2007. He subsequently held the position of Senior Advisor, member of the Board of Directors and member of the Investment Committee of this company until the end of March 2009. The majority of the members of the Board of Directors of Vontobel Holding AG meet the independence criteria prescribed in the FINMA Circular 08/24 “Supervision and Internal Control at Banks”, mn 20–24. They are: Prof. Dr Ann-Kristin Achleitner, Dr Wolfhard Graetz, Peter Quadri, Dr Frank Schnewlin and Dr Urs Widmer.
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Information relating to Corporate Governance
Dr Urs Widmer, born 1941, Swiss citizen Chairman of the Board of Directors until 3 May 2011 Dr. iur.; attorney at law, own law firm Professional background: 1974–2002 Ernst & Young: – 1980 Head of the Legal department of ATAG Ernst & Young AG – 1984 Member of the Executive Board of ATAG debis Informatik AG – 1986 CEO of ATAG Wirtschaftsinformation Holding AG – 1988 Member of the Board of Directors of ATAG Ernst & Young AG – 1991 Member of the Executive Board of Ernst & Young Europe, Brussels – 1994 Member of the Global Executive Board of Ernst & Young International, New York and London – 1995 Delegate and Chairman of the Board of Directors of ATAG Ernst & Young Holding 2002 Opening of own law firm 2002–April 2005 Chairman of the Board of Directors of Vontrust AG 2003 Member of the Board of Directors of Vontobel Holding AG and Bank Vontobel AG Since 2005 Chairman of the Board of Directors of Vontobel Holding AG and Bank Vontobel AG
Member of the Board of Directors of Barry Callebaut AG and Helvetia Holding AG Member of the Board of Trustees of Stiftung Technopark and of Stiftung Zoo Zürich
Dr Wolfhard Graetz, born 1946, German citizen Vice-Chairman until 3 May 2011 Dr. oec., University of St. Gallen; financial advisor Professional background: 1973–1974 Citibank Switzerland 1974–1985 Nestlé SA 1985–1988 Lombard Odier & Cie 1988–1999 Various executive functions within the Vontobel Group in Zurich, New York and Geneva: – 1988–1998 CEO of Vontobel Asset Management AG, Zurich – 1991–1998 Chief Investment Officer of the Vontobel Group – 1996–1998 Chairman of Vontobel USA, New York – 1995–1998 Chairman of the Board of Directors of Tardy, de Watteville & Cie SA (subsequently renamed Banque Vontobel Genève SA) – 1998–1999 CEO of Tardy, de Watteville & Cie SA Since 2000 independent financial advisor
Chairman of the Board of Directors of Pfister Arco Holding AG and Möbel Pfister AG
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Information relating to Corporate Governance
Prof. Dr Ann-Kristin Achleitner, born 1966, German citizen Dr. oec. and Dr. iur., University of St. Gallen; Scientific Director of the Center for Entrepreneurial and Financial Studies (CEFS) at the Technical University Munich Professional background: 1992–1994 Lecturer in Finance & External Auditing at the University of St. Gallen 1994–1995 Business Consultant at McKinsey & Company Germany 1995–2001 Holder of the Endowed Chair and Chairman of the Board of the Institute for Financial Management at the EBS European Business School, Germany Since 1994 Adjunct Professor of Business Administration at the University of St. Gallen Since 2001 Holder of the KfW Endowed Chair for Entrepreneurial Finance at the Technical University Munich Since 2003 Scientific Director of the Center for Entrepreneurial and Financial Studies (CEFS) at the Technical University Munich
Member of the Board of Directors of SpineWelding AG (formerly WW Technology AG); Vice-Chairman of the “Research and Innovation” Commission of Experts (EFI) of the German Federal Government; member of the Senate of Fraunhofer Gesellschaft (FhG); member of the Board of Trustees of the Johannes B. Ortner Foundation; member of the “FLÜGGE” Commission of Experts of the Bavarian State Ministry of Science, Research and the Arts
Bruno Basler, born 1963, Swiss citizen Degree in civil engineering from the Swiss Federal Institute of Technology (ETH); MBA INSEAD Chairman of the Board of Directors of Ernst Basler + Partner AG Professional background: 1989–1991 Holinger AG 1992–1994 McKinsey & Company Since 1994 Ernst Basler + Partner AG – 1994–2001 Delegate and Chairman of the Board of Directors – Since 2001 Chairman of the Board of Directors
Vice-Chairman of the Board of Trustees of the Vontobel Foundation Member of the Board of Directors of Robert Aebi AG Member of the Board of Directors of Baumann Federn AG
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Information relating to Corporate Governance
Dr Philippe Cottier, born 1967, Swiss citizen Dr. oec. and lic. rer. publ., University of St. Gallen Professional background: 1994–1998 UBS AG – 1994–1995 SBC Warburg Futures & Options Management, Zurich – 1995–1996 Hedge fund analyst at SBC Private Bank Investment Consulting, Basel – 1997–1998 Hedge fund analyst and portfolio manager at UBS Warburg, Hong Kong 1998–1999 Boston Consulting Group, Sydney 1998–2009 Harcourt Investment Consulting AG, Zurich – 1998–2002 Chairman – 1999–2006 Head of Research – 2002–2007 CEO – 2007–2009 Senior advisor, member of the Board of Directors and of the Investment Committee
Member of the Board of Directors of EFIS AG Member of the Board of Trustees of the Cottier Donzé Foundation Member of the Advisory Board of Ansher Holding Ltd. Member of the Advisory Board of Lumix Capital AG
Peter Quadri, born 1945, Swiss citizen lic. oec. publ. Professional background: 1970–2007 IBM (International Business Machines) in various functions in systems engineering, sales and management. Activities in the US, Denmark, Germany and Austria. – 1996–2007 Member of the Executive Board with overall responsibility for the service business – 1998–2007 CEO and Chairman of the Board of Directors of IBM Switzerland
Chairman of the Board of Directors of Unitectra Member of the Board of Directors of Swiss Life Holding AG and Bühler AG President of the Zurich Chamber of Commerce
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Dr Frank Schnewlin, born 1951, Swiss citizen Dr. ès. sc. écon., University of Lausanne; MBA, Harvard Business School; MSc, London School of Economics; lic. oec., University of St. Gallen Professional background: 1983-2001 Various functions within Zurich Financial Services Group – 1983 Zurich Insurance Company, Zurich – 1984–1986 Zurich American Insurance Group, Schaumburg, US – 1986–1987 Senior Territorial Manager at Zurich American Insurance Group, Cleveland, US – 1987–1989 CFO & Senior Vice President at Universal Underwriters Group, Kansas, US – 1989–1993 Head of the Corporate Development department, Head office, Zurich – 1993–2000 Head of the Southern Europe, Asia/Pacific, Middle East and Africa, Latin America business division, member of the Group Management Board – 2000–2001 Head of Corporate Center, Head office, Zurich, member of the Group Executive Committee, Chairman of the Group Finance Council 2002–2007 Group CEO of Bâloise Holding, Head of the Group Corporate Executive Committee and CEO of the International business division
Vice-Chairman of the Board of Directors of Swiss Life Holding AG; Chairman of the Nomination and Compensation Committee. Member of the Board of Trustees of the Drosos Foundation; Chairman of the Finance Committee
Dr Pierin Vincenz, born 1956, Swiss citizen Dr. oec., University of St. Gallen; Chairman of the Management Board of the Raiffeisen Group Switzerland Professional background: 1979–1982 Schweizerische Treuhandgesellschaft, St. Gallen 1986–1990 Swiss Bank Corporation, Global Treasury, Zurich, and Swiss Bank Corporation O’Connor Services L.P 1991–1996 Vice President and Treasurer at Hunter Douglas, Lucerne Since 1996 Raiffeisen Switzerland: – 1996–1999 Head of the Finance department and member of the Executive Board of Raiffeisen Switzerland – Since 1999 CEO of Raiffeisen Switzerland
Chairman of the Board of Directors of Aduno-Gruppe and Plozza Vini SA Member of the Board of Directors of SIX Group, Helvetia Holding AG and Pfandbriefbank Schweizerischer Hypothekarinstitute Member of the Steering Committee of the UNICO Banking Group Brussels; member of the Committee of the Governing Board of the Swiss Bankers Association; member of the Management Board of Pflegekinder-Aktion Schweiz; member of the Board of Directors of the Swiss Finance Institute; member of the Board of Trustees of the Ostschweizerischen Stiftung für klinische Krebsforschung
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Information relating to Corporate Governance
3.2 Other activities and functions See section 3.1 “Members of the Board of Directors”. 3.3 Cross-directorships There are no cross-directorships between Vontobel Holding AG and other listed companies. 3.4 Election and term of office The Chairman of the Board of Directors and all other members of the Board are elected individually by the General Meeting of Shareholders. The Board of Directors constitutes itself except for the position of Chairman. The members of the Board of Directors are elected for a term of one year and may be re-elected. According to the internal Organizational Regulations, members of the Board of Directors have to step down at the General Meeting of Shareholders in the calendar year in which they turn 70. Further information regarding the year in which the individual members of the Board of Directors were first elected can be found in section 3.1 “Members of the Board of Directors”. 3.5 Internal organization Board of Directors The Board of Directors appoints a Vice-Chairman from among its members. The Chairman of the Board of Directors appoints a Secretary, who need not be a member of the Board of Directors. The Board of Directors meets as often as necessary to perform its duties and generally once or twice a quarter but no fewer than four times a year. The meetings usually last around eight hours. A total of five meetings were held during the year under review (in February, April, July, October, and December); this included a two-day strategy meeting. The Board of Directors constitutes a quorum when the absolute majority of its members is present. Board resolutions and appointments are decided by the absolute majority of the members present, in accordance with the Organizational Regulations. In the event of a tied vote, the chairman of the meeting casts the deciding vote. Resolutions passed by circular letter must be approved by the majority of all members of the Board of Directors. The Board of Directors may delegate some of its duties to committees. The standing committees are as follows: the Nomination and Compensation Committee and the Audit Committee. Their duties and powers of authorization are defined in internal regulations. Information on the composition of the individual committees can be found in section 3.1 “Members of the Board of Directors”. Nomination and Compensation Committee (NCC) The Nomination and Compensation Committee prepares decisions concerning all important personnel issues and related organizational issues at the level of the Group Executive Management and senior executives, including compensation issues, for approval by the Board of Directors. The Nomination and Compensation Committee also decides on the compensation of the members of the Board of Directors of Vontobel Holding AG with the exception of the Chairman. The meetings of the Nomination and Compensation Committee are attended by the CEO as well as the Head of
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Human Resources. The CFO is invited to attend when financial issues are discussed. The Nomination and Compensation Committee meets at least once a year. The meetings usually last around four hours. A total of five meetings were held during the year under review (in February, June, September, November and December). Audit Committee (AC) The Audit Committee examines whether all systems created to monitor compliance with legal and statutory provisions and internal regulations are appropriate and whether they are being applied properly. It reports to the Board of Directors and provides it with recommendations. It also monitors and evaluates the integrity of the financial results, internal controls, and the effectiveness of the external auditor and Internal Audit. Its range of responsibilities include: aspects of external and internal audit; the interaction between the Board of Directors, the CEO, the Group Executive Management and the heads of the business units and support units; the internal control system; risk management; compliance activities and the structure of the Compliance function; accounting; and the receipt and handling of internal and external audit reports. The Audit Committee can conduct special reviews of important issues in consultation with the Chairman of the Board of Directors and can request additional internal and/ or external resources for this purpose. The Chairman of the Board of Directors is not a member of the Audit Committee but is invited to attend the meetings. All the members of the Audit Committee meet the independence criteria prescribed by supervisory law. The meetings of the Audit Committee are also attended by the CEO, the CFO and representatives of Internal Audit and the external auditor. When specific topics are discussed, internal specialists in the relevant fields – particularly from Finance & Risk – are regularly invited to attend. The Audit Committee meets at least three times per year. The meetings usually last four to six hours. A total of four meetings were held during the year under review (in February, June, July and November). The Board of Directors of Vontobel Holding AG decided to discontinue the IT Committee in 2010. The upgrading of the Group-wide IT infrastructure was largely completed in 2009 with the rollout of the Avaloq system. Consequently, the main focus in the area of IT is now on operational aspects. When necessary, ad-hoc committees are formed to deal with specific topics such as mergers and acquisitions projects. No ad-hoc committees were formed during the year under review. Internal Audit Internal Audit helps the Board of Directors to exercise its statutory supervisory and control duties within the Vontobel Group and performs the audit functions assigned to it. The duties and rights of Internal Audit are detailed in separate regulations. It has an unlimited right of inspection within all Group companies; all business documents are available for it to inspect at any time. Internal Audit reports to the Board of Vontobel Group, Annual Reports 2010
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Information relating to Corporate Governance
Directors and regularly attends the meetings of the Audit Committee. Its audit activities are based on the guidelines issued by the Swiss Institute of Internal Auditing (SVIR). Internal Audit coordinates its activities with the external auditor in accordance with professional guidelines. 3.6 Powers of authorization Board of Directors The Board of Directors is responsible for the overall management of the company and the supervision and oversight of the managers of the holding company and the Group. It approves and periodically revises the Mission Statement and Group strategy, issues directives and guidelines as necessary, and determines the Group’s organizational structure and risk policies. It also receives reports about the existence, appropriateness and effectiveness of the internal control system. In addition, it supervises and monitors individuals entrusted with the operational management of the company. The Board of Directors is responsible for appointing and dismissing the CEO and members of the Group Executive Management, as well as the Head of Internal Audit. It also approves the appointment and promotion of managers of the Vontobel Group. Furthermore, the Board of Directors performs the duties assigned to it by law (Art. 716a of the Swiss Code of Obligations). The delegation of powers between the Board of Directors, its committees, the CEO, and the Group Executive Management is specified in the Group’s Organizational Regulations (www.vontobel.com > Investor & Media Relations > Annual General Meeting). Among other things, the purchase and disposal of shareholdings, the establishment and closure of Group companies and regional offices, the raising of loans and bonds as well as the issuing of bonds or guarantees that exceed a certain limit, are to be approved by the Board of Directors. Investment plans and other decisions that have an impact on cash flows must also be approved by the Board of Directors once a certain threshold is exceeded. Group Executive Management The Group Executive Management is the Group’s executive body and reports to the Board of Directors. It is responsible for all Group issues that do not expressly fall within the remit of the Board of Directors of Vontobel Holding AG or a Group company according to legislation, the Articles of Association or the Organizational Regulations. The Group Executive Management functions as a committee and all decisions have to be reached by the entire executive body. If its members are unable to agree on an issue, the decision is reached by the CEO. The Group Executive Management is responsible, in particular, for developing a Group-wide business strategy for presentation to the Board of Directors, implementing the decisions reached by the Board of Directors within the Group, monitoring the execution of these decisions, and managing and supervising the Group’s everyday operations. The latter must be effected within the scope of the financial plan, annual objectives, annual budget and risk policy and in accordance with the other regulations and instructions issued by the Board of Directors. It is responsible for ensuring compliance with legal and regulatory requirements as well as applicable industry standards. Its responsibilities also include the management of income, the balance sheet structure and the formulation of the risk policy. The Group Executive Management submits the risk policy to the Audit Committee for approval by the Board of Directors and regularly reviews the policy
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and presents any amendments to the Board. A detailed description of the Vontobel Group’s risk policy, Risk Management function and risk controls can be found in the Notes to the consolidated financial statements commencing on page 81. The Group Executive Management is responsible for issuing regulations relating to the implementation of the risk policy, i.e. rules governing basic aspects of risk responsibility, risk management and risk control. In particular, this includes the organization of the internal control system and its compliance with the requisite division of powers and functions. The Group Executive Management reports to the Board of Directors and the Audit Committee about the existence, appropriateness and effectiveness of internal controls. The duties of the Group Executive Management also include the drawing-up of the Group’s annual budget and the definition of its annual objectives, broken down by business unit and support unit, and their submission to the Board of Directors for approval. Furthermore, the Group Executive Management reaches decisions about new products, business activities and markets. If this has a significant impact on the Group’s business policy, the Group Executive Management refers the matter directly to the Board of Directors. However, if the issue has a significant impact on the Group’s risk profile, the Group Executive Management obtains the relevant approval from the Board of Directors through the Audit Committee. The Group Executive Management ensures that a professional investment policy is permanently in place and is implemented promptly throughout the Group. It issues the directives which apply to the entire Group and which – according to legal provisions, the Articles of Association or the current Organizational Regulations – fall exclusively within the remit of the Group Executive Management. Equally, it is responsible for issuing directives for the Compliance function and Asset & Liability Management. In addition, its competences include the granting of loans in accordance with the powers of authorization defined in the credit regulations as well as the assumption of trading positions on own account within the defined limits. The Group Executive Management delegates the permissible limits to the responsible areas and units within the Group. Further information about the delegation of powers between the Board of Directors and the Group Executive Management can be found in the Organizational Regulations of Vontobel Holding AG, which are available on the Internet: www.vontobel.com > Investor & Media Relations > Annual General Meeting 3.7 Information and control instruments relating to the Group Executive Management The Board of Directors meets at least four times a year as specified in the Organizational Regulations; in practice, there are six to eight meetings a year. The ordinary meetings usually last an entire day. These meetings are also attended by the CEO, the CFO and, depending on the items on the agenda, other members of Group Executive Management or internal specialists. The Board of Directors receives monthly reports about the performance of the business and is informed about the development Vontobel Group, Annual Reports 2010
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of risk as well as the Group’s compliance with legal, regulatory and internal rules and requirements at least every six months. Its control instruments include semi-annual reporting requirements, the annual budgeting process and internal and external audits. The periodic reporting requirements include a monthly financial report, which provides information on the current performance of the business and the corresponding realization of targets at both Group level and business unit level (MIS), as well as information about the meetings of the Group Executive Management. Internal Audit reports to the Chairman of the Board of Directors and the Audit Committee about its audit activities on an ongoing basis and provides the Board of Directors with consolidated reports twice annually. The external auditor produces its annual statutory report (report about the statutory audit) as well as further reports on audits addressing specific topics for submission to the Board of Directors. The statutory report is addressed to the Board of Directors and a copy of the report is submitted to the Swiss Financial Market Supervisory Authority (FINMA) as well as the Group Executive Management and the Head of Internal Audit. During the meetings of the Board of Directors, any member of the Board may request information on any matters relating to the holding company and the Group from the other members of the Board of Directors or the CEO. Outside the meetings of the Board of Directors, any member of the Board may request information about the performance of the business from the CEO and, subject to the approval of the Chairman, may obtain information about specific business transactions and inspect business records.
4. Group Executive Management
4.1 Members of the Group Executive Management Group Executive Management comprises the following members as of 31 December 2010: Name
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Vontobel Group, Annual Reports 2010
Function
Nationality
Herbert J. Scheidt
CEO
CH/D
Dr Martin Sieg Castagnola
CFO
CH
Peter Fanconi
Member
CH
Felix Lenhard
Member
CH
Dr Zeno Staub
Member
CH
Roger Studer
Member
CH
Information relating to Corporate Governance
Herbert J. Scheidt, born 1951, Swiss and German citizen CEO of the Vontobel Group since 1 October 2002; designated Chairman of the Board of Directors of Vontobel Holding AG and Bank Vontobel AG, Zurich Business Manager; M.A. in Economics, University of Sussex; MBA, University of New York Professional background: 1982–2002 Various functions at Deutsche Bank in Germany, New York, Milan and Geneva – 1996–2002 Head of Private Banking International in Geneva – 2001–2002 Chief Executive Officer Deutsche Bank (Schweiz) AG
Vice-Chairman of the Board of Directors of Hero AG, Lenzburg Member of the Board of Directors of SIX Group, Zurich Member of the Board of Directors Swiss Bankers Association, Basel Member of the Board of the Association of Swiss Commercial and Investment Banks (VHV) Member of the Executive Committee of the German Council on Foreign Relations (DGAP) Designated member of the Board of Directors of Helvetia Holding AG
Dr Martin Sieg Castagnola, born 1965, Swiss citizen CFO of the Vontobel Group since 1 November 2008 Dr. oec., University of Zurich Professional background: 1994–2008 Zürcher Kantonalbank (ZKB), Zurich – 1994–1999 Head of the Economy department and Risk Controlling – 1999–2003 Head of Equities & Equity Derivatives Trading – 2003–2005 Head of Portfolio Management of ZKB Axxess Vision – 2005–2006 Head of Treasury – 2007 Head of Asset Management – 2007–2008 Member of the Executive Board and Head of Investment & Private Banking 1994–1999 Lecturing assignments at the University of Zurich in the area of empirical economic research/econometrics; assistant at the Institute for Empirical Research in Economics
Vice-Chairman of the Regulatory Board of the SIX Swiss Exchange AG and Chairman of the Participants & Surveillance Committee of the SIX Swiss Exchange AG
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Information relating to Corporate Governance
Peter A. Fanconi, born 1967, Swiss citizen Head of Private Banking since 1 March 2009 lic. iur., University of Zurich Professional background: 1995–1997 SCG St. Gallen Consulting Group AG: Senior Consultant 1997–2002 Founding shareholder and Managing Partner of MAP Group AG 2002–2003 PwC, Managing Partner and Head of Business Development Switzerland within Corporate Finance/M&A business (after PwC acquired MAP Group AG) 2003–2009 Harcourt Investment Consulting AG: Managing Partner – 2003–2007 Head of Business Development – 2007–2009 CEO and member of the Board of Directors
Member of the Board of the Zurich Banking Association
Felix Lenhard, born 1965, Swiss citizen Head of Operations of the Vontobel Group since 1 January 2010 lic. oec., University of St. Gallen Professional background: 1991–1996 PwC, Financial Services division, Zurich and London 1996–2000 Partner of almafin AG, St. Gallen, with responsibility for the area of consulting 2000 Member of the Executive Management of BZ Informatik AG Since 2001 Vontobel Group: – 2001–2003 Project Manager (implementation of functional organization; central project controlling) – 2003–2009 Head of Business Applications division within the Operations support unit – 2009 Head of IT within the Operations support unit
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Dr Zeno Staub, born 1969, Swiss citizen Head of Asset Management since 1 January 2008; designated CEO of the Vontobel Group Dr. oec., University of St. Gallen Professional background: 1994–2000 Founding shareholder and Managing Partner of almafin AG 2000 Member of the Executive Management of BZ Informatik AG Since 2001 Vontobel Group: – 2001–2002 Head of the CFO management support unit (Controlling and IT project portfolio) – 2003–2006 CFO and Member of the Group Executive Management – 2006–2007 Head of Investment Banking and member of the Group Executive Management
Member of the Management Board of Schweizerische Management Gesellschaft President of the Board of Directors of the Sustainability Forum Zurich Member of the Swiss Society for Financial Market Research (SGF)
Roger Studer, born 1967, Swiss citizen Head of Investment Banking since 1 January 2008 MBA, Rochester-Berne; Swiss Certified Financial Analyst and Portfolio Manager (CIIA); Swiss Certified Expert in Finance and Investments (CIWM) Professional background: 1984–1996 Bank Vontobel AG: – 1992–1995 Head of Warrants and Options Trading – 1995–1996 Head of Market Making Derivative Products 1997–1998 DG Bank AG (Switzerland), Head of Private Clients Austria 1999 Rentenanstalt/Swiss Life, Head of Quantitative Asset Allocation 1999–2000 ABN AMRO Bank AG (Switzerland), Head of Portfolio Management and Research Since 2001 Vontobel Group: – 2001–2002 Head of Risk Management and Development of Derivative Products – 2003–2007 Head of Financial Products
Vice President of the European Structured Investment Products Association (Eusipa), Brussels Member of the Cash Market Advisory Board of the SIX Swiss Exchange AG Member of the Commission for Structured Products (KSP) of Scoach Schweiz AG
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Information relating to Corporate Governance
4.2 Other activities and functions See section 4.1 “Members of the Group Executive Management”. 4.3 Management contracts There are no management contracts.
5. Compensation, shareholdings and loans
5.1 Structure and definition of compensation and stock ownership plans The Vontobel Group’s compensation system is designed to successfully motivate employees at all levels of the company to realize or even exceed ambitious short, medium and long-term strategic objectives. Through its Long-Term Incentive Plans, it systematically rewards the sustained achievement of good financial results in combination with a relatively low risk profile more generously than the achievement of good financial results in combination with a comparatively higher risk profile. The compensation system introduced in spring 2005 is structured in such a way as to align the interests of all stakeholders as effectively as possible. Consequently, the principles set out in the FINMA Circular 10/1 “Remuneration Schemes”, which is recommended as a guideline for the Vontobel Group, have largely been implemented. The CEO submits a proposal to the Nomination and Compensation Committee of the Board of Directors (NCC) in June and December of each year regarding the level of bonus accruals to be recorded for the first half of the year and the size of the annual bonus pool, respectively. The Nomination and Compensation Committee discusses the size of the bonus pool and subsequently submits a proposal to the entire Board of Directors, which reaches a decision on the bonus pool. The total bonus pool is divided into smaller bonus pools for each business unit and support unit by the CEO of the Vontobel Group on the basis of various quantitative and qualitative criteria. The Vontobel Group wants to be a fair and attractive employer to its staff, management and the members of the Board of Directors. It is therefore very important for it to offer compensation that is in line with market rates. When determining fixed salaries and bonuses, it consults benchmarking studies and comparisons of compensation levels, particularly with regard to medium-sized institutions that are active in private banking, institutional asset management and the product business within investment banking in Switzerland. These data are supplied to the Vontobel Group in an anonymized form by external consultants (e.g. Towers Watson). Board of Directors The compensation of the Chairman of the Board of Directors, who performs this role on a full time basis, comprises a base salary that is paid each month and a variable bonus which is determined each year according to performance-related criteria (and includes his participation in the stock ownership plan), as in the case of the members of the Group Executive Management. The Nomination and Compensation Committee determines the level of compensation, including any special payments, of the members of the Board of Directors. The Board of Directors decides on the level of compensation paid to the Chairman; the Chairman is not party to this discussion.
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Vontobel Group, Annual Reports 2010
Information relating to Corporate Governance
The compensation of the other members of the Board of Directors consists of a minimum base component, which is paid in cash. If the dividend paid exceeds 100% of the par value of the registered share of Vontobel Holding AG, the base compensation increases accordingly. This additional compensation component is paid in registered shares of Vontobel Holding AG, which are blocked for a period of three years. In addition, members of the Board of Directors receive an expense allowance and actual costs are reimbursed. The members of the committees are paid additional compensation. The modalities of the compensation paid to the members of the Board of Directors are reviewed annually and determined by the Nomination and Compensation Committee. For the financial year 2010, the performance-related component of the compensation paid to the Chairman of the Board of Directors amounted to 208% (previous year 189%) of the base salary and the performance-related component of the compensation paid to the other members of the Board of Directors amounted to an average of 24% (previous year 23%) of the base compensation. Group Executive Management As in the case of all employees of the Vontobel Group, the performance of the CEO and members of the Group Executive Management is evaluated systematically according to the principles of management by objectives (MbO). The compensation paid to members of the Group Executive Management comprises a base salary that is paid in cash and a variable bonus which is determined each year and takes the form of a one-off payment. For the financial year 2010, the variable bonus paid to the members of the Group Executive Management based on an analysis of the achievement of their individual objectives amounted to an average of 294% (previous year 252%) of the base salary. The change compared to the previous year reflects the development of the Group’s financial result and the performance of the relevant business unit, as well as the extent to which the individual objectives of the members of the Group Executive Management were achieved (see below for details of the objectives). Within the scope of the Vontobel Group’s stock ownership plan, half of the bonus is paid in cash and half in the form of registered shares of Vontobel Holding AG, which are blocked for a period of three years. The number of these bonus shares forms the basis for the number of performance shares allocated after a period of three years, depending on the results achieved during the preceding three financial years. Further information on the modalities of the compensation paid to the members of the Group Executive Management is disclosed in the Notes to the consolidated financial statements, note 29. The Nomination and Compensation Committee of the Board of Directors is responsible for determining the compensation paid to the members of the Group Executive Management, including the individual compensation components. The entire Board of Directors is informed about compensation decisions by the NCC. The base salary and bonus are determined on an annual basis. The annual bonus paid to the members of the Group Executive Management is determined on the basis of the achievement of their individual objectives, as well as the realization of the targets defined for the relevant business unit or support unit and the company as a whole. The evaluation takes account of their performance and leadership.
Vontobel Group, Annual Reports 2010
57
Information relating to Corporate Governance
This means that aspects including: – Individually agreed budget targets – Process/structure/system-related targets – Client/market/product-related targets – Culture/expertise/employee-related targets are systematically assessed for each member of the Group Executive Management and are taken into account when determining their individual bonuses. This process is not based on a specific formula or on fixed weighting criteria. Instead, the various aspects described above are considered in respect of the function of each member of the Group Executive Management on a differentiated basis. These individual performance targets are also designed to ensure that the Group Executive Management and each of its members do not assume any inappropriate risks and that the risk policy approved by the Board of Directors is implemented properly. Against the backdrop of significant market developments and regulatory changes, the bonuses awarded to the members of the Group Executive Management are discussed in detail by the NCC and are determined using its best judgment. The Vontobel Group does not disclose the detailed objectives when determining the variable compensation of the individual members of the Group Executive Management. Any such disclosure would reveal activities and plans of strategic relevance (e.g. acquisition targets) that could place Vontobel at a competitive disadvantage. In this case, it is to be assumed that competitors might use the information about Vontobel’s ambitions in individual markets in a way that would prove detrimental to the Group (e.g. to poach clients or employees). In principle, all the employment contracts of employees of the Vontobel Group (i.e. including members of the Group Executive Management) are subject to a notice period of a maximum of six months. The contracts concluded with the members of the Board of Directors and the Group Executive Management do not contain any clauses relating to severance payments. Information on compensation, shareholdings and loans is provided in the Notes to the consolidated financial statements (notes 28–30).
6. Shareholders' participatory rights
6.1 Voting rights: restrictions and representation According to Art. 4 of the Articles of Association, the transfer of registered shares is subject to the approval of the Board of Directors or a committee designated by the Board of Directors. If the registered shares have been purchased on the stock exchange, ownership of the shares passes to the purchaser when transferred; if they are purchased other than through the stock exchange, ownership passes to the purchaser as soon as the purchaser applies to be recognized as a shareholder in the company’s share register. In any event, the purchaser cannot exercise either the voting rights associated with the shares or any other rights associated with the voting rights until the company has officially recognized the purchaser as a shareholder. The purchaser is not subject to any restrictions on the exercising of all other shareholder rights.
58
Vontobel Group, Annual Reports 2010
Information relating to Corporate Governance
The Board of Directors can refuse to recognize a purchaser of registered shares as a shareholder with full rights if (a) the number of registered shares held by the purchaser exceeds 10% of the total number of shares entered in the Commercial Register. These voting rights restrictions are intended to ensure a clear control structure. The General Meeting of Shareholders may rescind them at any time. Natural or legal persons that take coordinated action in an effort to avoid restrictions on entry in the share register are considered as one single purchaser with regard to this provision. The duly acquired rights of shareholders or shareholder groups that had already owned more than 10% of share capital prior to the introduction of this registration restriction on 25 January 2001 remain reserved in accordance with Art. 4 of the Articles of Association. (b) the purchaser does not, upon the request of the company, expressly state that he has acquired the shares in his own name and for his own account. The company recognizes as shareholders and beneficiaries of registered shares only those natural or legal persons duly registered in the share register. Purchasers of shares who have not yet been recognized by the company are entered in the share register after transfer of ownership as shareholders without voting rights; the corresponding shares are deemed not to be represented at the General Meeting of Shareholders. See section 6.2 “Statutory quorums” for information on the conditions that apply to the lifting of statutory restrictions on voting rights. No nominee registrations are made in the share register. 6.2 Statutory quorums Resolutions and elections are decided at the General Meeting of Shareholders by an absolute majority of the votes cast, unless otherwise prescribed by law. In accordance with Art. 17 of the Articles of Association, the General Meeting of Shareholders must pass resolutions with at least two thirds of the votes represented and the absolute majority of the share par value represented voting in favour of the resolution in the following cases: (a) Modification of the company’s business purpose (b) Issuance of shares with special voting rights (c) Modification or abolishment of the restrictions regarding transferability of registered shares (d) Authorized or conditional capital increases (e) Capital increases from equity capital in return for contributions in kind or for the purpose of acquisitions in kind or the granting of special benefits (f) Restriction or suspension of subscription rights (g) Relocation of the company’s registered office (h) Removal of more than one member of the Board of Directors during the course of one financial year (i) Dissolution of the company (with or without liquidation) (j) Distribution of a dividend in kind (k) Increase in share capital (in all cases) Vontobel Group, Annual Reports 2010
59
Information relating to Corporate Governance
6.3 Convening of General Meeting of Shareholders The following legal regulations apply to the convening of the General Meeting of Shareholders. Written invitations to the General Meeting of Shareholders, including the items on the agenda and the proposals, are issued at least 20 days prior to the date of the General Meeting of Shareholders. No resolutions can be passed on items that have not been duly placed on the agenda with the exception of motions to convene an Extraordinary General Meeting or to initiate a special audit. One or more shareholders who collectively represent at least 10% of the share capital may request that an Extraordinary General Meeting be convened. In this case, the Extraordinary General Meeting must be held no later than two months after the request was received. 6.4 Inclusion of an item on the agenda Shareholders representing shares with an aggregate par value of at least 0.5% of share capital may request that an item be included on the agenda, provided the request is submitted in writing and the items to be included and the proposals to be put forward are specified. In accordance with Art. 10 of the Articles of Association, any such request must be received by the company at least two months prior to the date of the General Meeting of Shareholders. 6.5 Entry in the share register and proxies Shareholders may only be represented by proxy at the General Meeting of Shareholders if a written power of attorney is granted. No entries will be made in the share register from the date on which the invitations to the General Meeting of Shareholders are sent out until one day after the General Meeting of Shareholders.
7. Change of control and defence measures
7.1 Mandatory public takeover offer The Articles of Association do not include an “opting out” or “opting up” clause with regard to mandatory public takeover offers, as defined in Art. 22 of the Stock Exchange Act. The instruments available to the company to defend itself against hostile takeover bids essentially comprise the following measures already referred to above: – At present, 40% of voting rights are bound by a shareholder pool agreement on a long term basis (see section 1.2 “Major shareholders and groups of shareholders with pooled voting rights”). – The registration restrictions allow the Board of Directors to refuse to enter shareholders or a group of shareholders in the share register once their shareholdings exceed a 10% threshold (see section 6.1 “Voting rights: restrictions and representation”). – A change in the registration restrictions or the removal of more than one member of the Board of Directors during the course of one financial year must be approved by a qualified majority (see section 6.2 “Statutory quorums”). 7.2 Clauses on changes of control The contracts with the members of the Board of Directors and the Group Executive Management do not make provision for any agreements in the case of a change of corporate control (change of control clauses). In the event of a change of control, the
60
Vontobel Group, Annual Reports 2010
Information relating to Corporate Governance
claims arising from the stock ownership plan will, however, be granted directly if the plan cannot be continued.
8. Statutory auditor/Group auditor
8.1 Duration of mandate and term of office of auditor in charge The consolidated financial statements and the financial statements of Vontobel Holding AG and the majority of the subsidiaries are audited by Ernst & Young. The remaining subsidiaries are audited by other companies. The external auditor of Vontobel Holding AG is elected for a period of one year at the Ordinary General Meeting of Shareholders. Ernst & Young was elected as auditor for the first time when Vontobel Holding AG was established in 1983. The auditor in charge is Iqbal Khan, who has held this function since the financial year 2009. The holder of this office changes every seven years, in accordance with banking legislation. Iqbal Khan has also performed the role of statutory auditor since the financial year 2009. 8.2 Audit fees 31-12-10 1,000 CHF
31-12-09 1,000 CHF
2,986.7
3,205.3
278.3
581.2
46.8
61.7
Legal advice
0.0
181.8
Advice on international accounting
0.0
21.5
231.5
316.2
Fees paid to the auditor Auditing fees billed by Ernst & Young Additional fees billed by Ernst & Young for audit-related services Tax advice
Other consulting services
8.3 Additional fees The additional fees primarily concern services provided in connection with projects and audit-related services regarding international accounting as well as tax, legal or regulatory issues. The audit company is permitted to provide these services as well as performing the auditing duties of the external auditor as they do not give rise to any conflicts of interests. The subject of any new audits, as well as special audits that have to be conducted at the request of the supervisory authorities, are subject to the approval of the Audit Committee. There is no prescribed catalogue of criteria that has to be consulted when approving these types of additional mandates; the Audit Committee decides on an individual basis whether the issuing of the additional mandates would impact the auditor's independence. 8.4 Supervision and control instruments relating to audits The Board of Directors is responsible for the supervision and control of the external audit process. Its remit includes reviewing internal and external audit reports; it is assisted by the Audit Committee when discharging this duty. The Audit Committee receives regular reports from representatives of the external auditor and it discusses these reports and evaluates their quality and comprehensiveness. The auditor in charge who represents the external auditor attended three meetings of the Audit Committee in the year under review. The Head of Internal Audit attended all four meetings of the Audit Committee in the year under review.
Vontobel Group, Annual Reports 2010
61
Information relating to Corporate Governance
The Vontobel Group, as a banking group, is subject to consolidated supervision by the Swiss Financial Market Supervisory Authority (FINMA). The requirements set out in Art. 728 of the Swiss Code of Obligations (independence of auditors), as well as the guidelines stipulated by FINMA in Circular 08/41 “Audit matters”, have to be observed when selecting an external audit company. Other relevant selection criteria applied by the Board of Directors comprise the auditor's proven level of expertise, including its ability to address complex finance and valuation issues in accordance with the accounting standards prescribed by FINMA and the International Financial Reports Standards (IFRS). Considerable importance is also assigned to continuity. When evaluating the performance and fees of the external auditor, the Audit Committee bases its assessment on its own experience and professional powers of judgment; there is no prescribed catalogue of criteria that has to be consulted in this context.
9. Information policy
As a company listed on the stock exchange, Vontobel Holding AG pursues a consistent and transparent information policy vis-à-vis its shareholders, clients and employees, as well as the financial community and the general public. Its regular reporting activities include the publication of the annual and half-year reports and shareholders’ letters, as well as the organization of events such as the annual press conference, conferences with financial analysts and the General Meeting of Shareholders. When important events occur, the above-mentioned stakeholders are informed simultaneously via press releases. Details of sources of information, the financial calendar and contact addresses are listed on page 168 of the Annual Report.
62
Vontobel Group, Annual Reports 2010
Consolidated financial statements
Consolidated income statement
64
Consolidated statement of comprehensive income
65
Consolidated balance sheet
66
Statement of equity
68
Consolidated cash flow statement
70
Notes to the consolidated financial statements
72
Report of the Group Auditors
Vontobel Group, Annual Reports 2010
155
63
Consolidated income statement
Note
Interest income Interest expense Net interest income
1
Fee and commission income Fee and commission expense Net fee and commission income Trading income Other income
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
59.8
59.0
0.8
1
6.7
13.0
(6.3)
(48)
53.1
46.0
7.1
15
593.1
525.3
67.8
13
114.9
105.3
9.6
9
2
478.2
420.0
58.2
14
3
273.9
298.0
(24.1)
(8)
5, 6
25.0
21.0
4.0
19
830.2
785.0
45.2
6
Total operating income Personnel expense
7
392.3
386.8
5.5
1
General expense
8
196.2
171.9
24.3
14
Depreciation of property, equipment and intangible assets
9
61.8
61.9
(0.1)
(0)
Value adjustments, provisions and losses
10
Operating expense Profit before taxes Taxes
11
Group net profit of which allocated to minority interests
6.8
12.5
(5.7)
(46)
657.1
633.1
24.0
4
173.1
151.9
21.2
14
25.8
13.6
12.2
90
147.3
138.3
9.0
7
(0.5)
(0.6)
0.1
147.8
138.9
8.9
6
12
2.31
2.17
0.14
6
12
2.26
2.12
0.14
7
of which allocated to shareholders of Vontobel Holding AG
Share information Basic earnings per share (CHF)1 Diluted earnings per share 1
64
(CHF)1
Basis: weighted average number of shares
Vontobel Group, Annual Reports 2010
Consolidated statement of comprehensive income
Group net profit according to the income statement
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
147.3
138.3
9.0
(32.9)
(2.6)
(30.3)
0.0
0.0
0.0
(32.9)
(2.6)
(30.3)
11.9
41.0
(29.1)
(12.0)
(1.8)
(10.2)
7
Other comprehensive income Currency translation adjustments Income during the reporting period Income tax related to currency translation adjustments Currency translation adjustments, net of tax Financial investments carried at fair value (“available-for-sale�) Income during the reporting period Gains and losses transferred to the income statement Income tax related to financial investments carried at fair value
(71)
0.9
(4.1)
5.0
0.8
35.1
(34.3)
(98)
Total other comprehensive income
(32.1)
32.5
(64.6)
(199)
Comprehensive income
115.2
170.8
(55.6)
(33)
Financial investments carried at fair value, net of tax
of which allocated to minority interests of which allocated to shareholders of Vontobel Holding AG
(0.5)
(0.6)
0.1
115.7
171.4
(55.7)
Vontobel Group, Annual Reports 2010
(32)
65
Consolidated balance sheet
Assets
Note
Cash Due from banks
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
1,457.6
1,950.0
(492.4)
(25) (14)
2,227.8
2,580.5
(352.7)
Cash collateral for reverse-repurchase agreements
21
300.0
300.0
0.0
0
Trading portfolio assets
13
2,017.3
1,708.1
309.2
18
Positive replacement values Other financial assets at fair value Securities lent or delivered as collateral Due from customers
13, 41, 42
197.2
214.5
(17.3)
(8)
13
8,476.6
8,529.9
(53.3)
(1)
13, 15, 21
500.1
239.5
260.6
109
14
1,427.0
1,005.4
421.6
42
226.6
197.9
28.7
15 16
Accrued income and prepaid expenses Financial investments
15
1,044.6
899.1
145.5
Investments in associates
16
0.6
0.6
0.0
0
Property and equipment
17
204.8
217.8
(13.0)
(6)
Goodwill and other intangible assets
18
150.7
161.2
(10.5)
(7)
4.4
18.2
(13.8)
(76)
Current tax assets Deferred tax assets
11
6.3
5.6
0.7
13
Other assets
19
60.0
53.1
6.9
13
18,301.6
18,081.4
220.2
1
5.0
5.9
(0.9)
(15)
Total assets Total subordinated assets
66
31-12-10 CHF mns
Vontobel Group, Annual Reports 2010
Consolidated balance sheet
Liabilities and equity
Note
Due to banks Trading portfolio liabilities
31-12-10 CHF mns
31-12-09 CHF mns
1,472.0
1,738.8
Change to 31-12-09 CHF mns in %
(266.8)
(15)
13
1,215.8
1,178.0
37.8
3
13, 41, 42
544.2
361.7
182.5
50
Other financial liabilities at fair value
13
8,183.0
8,279.7
(96.7)
(1)
Due to customers
22
4,925.7
4,594.4
331.3
7
325.9
274.4
51.5
19
Negative replacement values
Accrued expenses and deferred income Issued debt instruments
23
Current tax liabilities Deferred tax liabilities
11
0.0
25.0
(25.0)
(100)
15.3
5.4
9.9
183
56.6
60.1
(3.5)
(6)
Provisions
25
10.4
9.0
1.4
16
Other liabilities
24
49.2
40.3
8.9
22
16,798.1
16,566.8
231.3
1
65.0
65.0
0.0
0
189.6
190.1
(0.5)
(0)
51.8
51.0
0.8
2
(46.2)
(13.3)
(32.9)
1,298.0
1,240.4
57.6
5
(0.1)
(0.1)
0.0
0
(4.7)
Total liabilities Share capital
26
Capital reserve Net gains/(losses) on available-for-sale financial investments
27
Currency translation adjustments Retained earnings Shareholders’ equity classified as a liability to purchase minority interests Treasury shares Shareholders’ equity Minority interests Total equity Total liabilities and equity
26
(54.2)
(49.5)
1,503.9
1,483.6
20.3
1
(0.4)
31.0
(31.4)
(101)
1,503.5
1,514.6
(11.1)
(1)
18,301.6
18,081.4
220.2
1
Vontobel Group, Annual Reports 2010
67
Statement of equity
in CHF mns
Balance as of 01-01-09
Share capital
Treasury shares
65.0
(77.5)
65.0
(77.5)
0.0
28.0
IAS-/IFRS adjustments Balance as of 01-01-09 after adjustments Changes in equity Ownership-related changes Dividend
payment1 28.0
Purchase/sale of treasury shares Income from sale of treasury shares Employee share based benefit programs Change in minority interests Change in liability to purchase minority interests 0.0
0.0
Balance as of 31-12-09
65.0
(49.5)
Balance as of 01-01-10
65.0
(49.5)
65.0
(49.5)
0.0
(4.7)
Other effects Group net profit Other comprehensive income
IAS-/IFRS adjustments Balance as of 01-01-10 after adjustments Changes in equity Ownership-related changes Dividend payment1 (4.7)
Purchase/sale of treasury shares Income from sale of treasury shares Employee share based benefit programs Change in minority interests Change in liability to purchase minority interests Other effects
0.0
0.0
65.0
(54.2)
Group net profit Other comprehensive income Balance as of 31-12-10 1 2
68
Vontobel Holding AG paid a dividend of CHF 1.40 (previous year: CHF 1.20) per registered share with a par value of CHF 1.00 in May 2010. The reduction was the result of the squeeze-out of minority shareholders of VT Finance AG in the course of the merger with VT Investment (Zurich) AG.
Vontobel Group, Annual Reports 2010
Statement of equity
Capital reserve
Shareholders’ equity classified as a liability to purchase minority interests
Retained earnings
Net unrealized gains/(losses) on available-for-sale financial investments
Currency translation adjustments
Shareholders’ equity
Minority interests
Total equity
198.4
(0.1)
1,178.9
15.9
(10.7)
1,369.9
0.7
1,370.6
198.4
(0.1)
1,178.9
15.9
(10.7)
1,369.9
0.7
1,370.6
(8.3)
0.0
(77.4)
0.0
0.0
(57.7)
30.9
(26.8)
(77.4)
0.0
(77.4)
28.0
0.0
28.0
0.0
0.0
(77.4) (17.7)
0.0
(17.7)
9.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0 0.0
0.0
0.0
138.9
(17.7)
9.4
0.0
9.4
0.0
30.9
30.9
0.0
0.0
0.0
0.0
0.0
0.0 138.3
138.9
(0.6)
35.1
(2.6)
32.5
0.0
32.5
190.1
(0.1)
1,240.4
51.0
(13.3)
1,483.6
31.0
1,514.6
190.1
(0.1)
1,240.4
51.0
(13.3)
1,483.6
31.0
1,514.6
190.1
(0.1)
1,240.4
51.0
(13.3)
1,483.6
31.0
1,514.6
(0.5)
0.0
(90.2)
0.0
0.0
(95.4)
(30.9)
(126.3)
(90.2)
0.0
(90.2)
(4.7)
0.0
(4.7)
0.0
(90.2) 0.8
0.8
(1.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(1.3) 0.0
0.0
(0.1)
0.0 0.0
0.0
0.0
147.8 189.6
0.0
1,298.0
0.8 0.0 (30.9) 2
(1.3) (30.9)
0.0
0.0
0.0
0.0
0.0
147.8
(0.5)
147.3
0.8
(32.9)
(32.1)
0.0
(32.1)
51.8
(46.2)
1,503.9
(0.4)
1,503.5
Vontobel Group, Annual Reports 2010
69
Consolidated cash flow statement
31-12-10 CHF mns
31-12-09 CHF mns
147.3
138.3
61.8
61.9
0.6
5.5
Income from investments in associates
(0.1)
0.2
Deferred taxes
(4.6)
0.7
1.6
2.9
Cash flow from operating activities Group net profit (incl. minorities) Reconciliation to net cash flow from operating activities Non-cash positions in Group results: Depreciation and value adjustments of property, equipment and intangible assets Credit loss expense
Change in provisions Net income from investing activities Other non-cash income
30.8
0.0
0.0
(15.1)
(129.9)
1,610.1
0.0
(155.0)
Net (increase)/decrease in assets relating to banking activities: Due from/to banks, net Reverse-repurchase agreements, cash collateral for securities borrowing Trading positions and replacement values, net
(77.7)
(425.9)
(279.4)
209.3
Due from/to customers, net
(90.2)
293.1
Accrued income, prepaid expenses and other assets
(35.8)
(47.2)
Other financial assets/liabilities at fair value, net
Net increase/(decrease) in liabilities relating to banking activities: Repurchase agreements, cash collateral for securities lending
0.0
0.0
90.4
(50.1)
(6.5)
(30.8)
(291.7)
1,597.9
Investments in subsidiaries and associates
0.0
183.8
Disposal of subsidiaries and associates
0.0
0.1
(41.0)
(39.4)
Accrued expenses, deferred income and other liabilities Taxes paid Cash flow from operating activities Cash flow from investing activities
Purchase of property, equipment and intangible assets Disposal of property, equipment and intangible assets
0.0
0.3
Investment in financial investments
(1,806.8)
(890.3)
Divestment of financial investments
1,595.7
541.5
Cash flow from investing activities
(252.1)
(204.0)
(6.0)
17.0
0.0
0.0
Dividends paid
(90.2)
(77.4)
Issued debt instruments
(25.0)
(24.0)
Change in minority interests
(30.9)
0.0
Cash flow from financing activities
(152.1)
(84.4)
Effects of exchange rate differences
(12.4)
(0.4)
Net increase/(decrease) in cash and cash equivalents
(708.3)
1,309.1
Cash and cash equivalents, beginning of the year
3,746.2
2,437.1
Cash and cash equivalents as at the balance sheet date
3,037.9
3,746.2
Cash flow from financing activities Net movements in treasury shares Capital increase/(decrease)
70
Vontobel Group, Annual Reports 2010
Consolidated cash flow statement
31-12-10 CHF mns
31-12-09 CHF mns
1,457.6
1,950.0
Cash and cash equivalents comprise at year end Cash Money market paper with original time to maturity up to 3 months
0.0
0.0
Due from banks on demand
1,580.3
1,796.2
Total
3,037.9
3,746.2
Further information: Dividends received Interest received Interest paid
30.3
24.2
258.2
151.1
5.0
18.5
Vontobel Group, Annual Reports 2010
71
Notes to the consolidated financial statements
Accounting principles
1. Basis of presentation Vontobel Group’s consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), which are published by the International Accounting Standards Board (IASB). The accounting standards applied are the same as in the consolidated financial statements dated 31 December 2009, the only exceptions being the changes referred in section 4.
2. Estimates, assumptions and the exercising of discretion by management In the application of the accounting principles, management is required to make numerous estimates as well as assumptions and discretionary decisions that influence the level of reported assets and liabilities and expenses and income, as well as the disclosure of contingent assets and contingent liabilities. The Vontobel Group is convinced that – in all material respects – these consolidated financial statements provide a true and fair view of its financial position, its results of operations and its cash flows. Management reviews its estimates and assumptions on a continual basis and adapts them in line with new findings and conditions. Estimates and assumptions are mainly contained in the following areas of the consolidated financial statements and are disclosed in the corresponding notes to the consolidated financial statements: fair value of financial instruments, share-based payment, provisions, income taxes, pension plans, and goodwill and other intangible assets.
3. Summary of the most important accounting principles 3.1 Consolidation principles Subsidiaries The consolidated financial statements comprise the accounts of Vontobel Holding AG and its subsidiaries. All subsidiaries directly or indirectly controlled by the Vontobel Holding AG are consolidated. Acquired subsidiaries are consolidated from the date on which control is transferred to the Vontobel Group. Changes to investments in subsidiaries are recorded as transactions in shareholders’ equity provided the Vontobel Group retains control of the subsidiary. Subsidiaries that are sold are consolidated until the date on which control is lost. If the Group loses control of the subsidiary, any remaining interest is recorded under “Investments in associates” or as a financial instrument according to IAS 39. The acquisition of a subsidiary is accounted for using the purchase method. The acquisition costs are measured at the fair value of the consideration at the acquisition date. Previously held equity interests in the acquiree that are treated as financial instruments in accordance with IAS 39 or as an associated company are measured at fair value at the acquisition date and any gain or loss is recorded in the income statement. The identifiable assets acquired and liabilities and contingent liabilities assumed are recognized at fair value at the acquisition date. A minority interest in the acquiree is measured either at fair value or at its proportionate interest in the fair value of the net assets acquired; either method can be exercised on a transaction-by-transaction basis. If the aggregate of the fair value of the consideration, the previously held equity interests and the minority interests measured according to the chosen method, as detailed above, exceeds the fair value of the net assets acquired, the difference between the two amounts is recorded as goodwill. If the opposite applies, the difference is immediately recorded in the income statement. The costs directly attributable to the acquisition (e.g. consulting and audit costs) are charged to the income statement. The effects of intra-Group transactions are eliminated in the consolidated financial statements. Shareholders’ equity, net profit and comprehensive income attributable to minority interests are reported separately in the consolidated balance sheet and statement of comprehensive income. Associates Companies over which the Group can exert significant influence are accounted for using the equity method. As a rule, influence is deemed significant when the Group holds 20% to 50% of voting rights.
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Notes to the consolidated financial statements Accounting principles
According to the equity method of accounting, the interest acquired in a company is stated at cost in the balance sheet upon acquisition. After the acquisition, the book value of the associated company is increased or reduced, depending on the Group’s share of the comprehensive income and the ownership-related changes in the shareholders’ equity of the associated company.
3.2 General principles Foreign currency translation The Group companies prepare their financial statements in the respective functional currency. Transactions in a currency other than the functional currency are recorded by the companies at the exchange rate on the date of the transaction. Exchange differences arising between the date of a transaction and its subsequent settlement are recognized in the income statement. At the balance sheet date, monetary assets and liabilities denominated in a foreign currency are translated into the functional currency using the closing exchange rates, unrealized exchange differences are recognized in the income statement. Non-monetary items carried at historical cost in a foreign currency are translated into the functional currency at the historical exchange rate. Nonmonetary items carried at fair value in a foreign currency are translated into the functional currency at the closing exchange rates. When drawing up the consolidated financial statements, the balance sheets of Group companies that are denominated in a foreign currency are translated into Swiss francs at the closing exchange rates. Average exchange rates for the period under review are used for items of the income statement, other comrpehensive income and cash flows. Exchange differences arising from the use of closing exchange rates and average exchange rates are recognized as currency translation differences in other comprehensive income. On the loss of control of a subsidiary, the currency translation differences previously recognized in other comprehensive income are reclassified from other comprehensive income to the income statement. Business segments External segment reporting reflects the organizational structure of the Vontobel Group as well as internal management reporting, which forms the basis for the assessment of the financial performance of the segments and the allocation of resources to the segments. The Group comprises three business units – Private Banking, Investment Banking and Asset Management – which reflect the types of products and services offered to clients and constitute the operating and reportable segments as defined in IFRS 8. The support units Operations, Finance & Risk und Group Services supply core services to the business units and are grouped within the Corporate Center. Income, expenses, assets and liabilities are allocated to the business units on the basis of client responsibility or according to the principle of origination. Items that cannot be allocated directly to the business units are reported in the Corporate Center accounts. The Corporate Center also includes consolidating entries. The costs of the services supplied internally are reported in the item “Services from/to other segment(s)” as a reduction in costs for the service provider and as an increase in costs for the recipient, based on agreements that are renegotiated periodically according to the same principle as if they were concluded between independent third parties (“at arm’s length”). Cash and cash equivalents Cash and cash equivalents in the cash flow statement include cash (petty cash, postal check account deposits, giro or demand deposits at the Swiss National Bank and foreign central banks as well as clearing credit balances at recognized clearing centres and clearing banks), receivables due from banks on demand as well as available-for-sale money market paper in the balance sheet item “Financial investments” with an original term of a maximum of three months. Accrual of earnings Income from services rendered over a specific period of time is recorded on a pro rata basis for the duration of the service. This includes asset management fees and custody fees. Profit-based income and performance-based income are not recorded until all of the relevant criteria have been met. This type of income may, for example, be generated in corporate finance and in the business with hedge funds. Interest income is accrued as earned. Dividends are recognized when payment is received.
Vontobel Group, Annual Reports 2010
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Notes to the consolidated financial statements Accounting principles
3.3 Financial instruments Initial recognition Purchases and disposals of financial assets are recognized in the balance sheet on the trade date. At the time of initial recognition, financial assets or financial liabilities are classified in the respective category according to IAS 39 criteria and measured at the fair value of the consideration given or received, including directly attributable transaction costs. In the case of trading portfolio assets and other financial instruments at fair value (“Fair value through profit and loss”), the transaction costs are immediately recognized in the income statement. Determining fair value and recognition of “Day 1 Profit” Please refer to note 34 “Fair value of financial instruments” and note 35 “Level 3 instruments” for information on the determination of the fair value of financial instruments, the fair value hierarchy, the valuation methods and the day 1 profit. Trading portfolio assets and liabilities and other financial instruments at fair value (“fair value through profit and loss”) Financial assets or financial liabilities held for trading purposes are measured at fair value in “Trading portfolio assets” or “Trading portfolio liabilities”. Gains and losses on the sale and redemption of such instruments, interest and dividend income as well as all changes in fair value are recognized in “Trading income”. Provided the criteria defined by IAS 39 have been met, a financial instrument can be assigned to the category “Other financial instruments at fair value” upon initial recognition and carried in the balance sheet as “Other financial assets at fair value” or “Other financial liabilities at fair value”. The corresponding accounting treatment in the income statement is analogous to the treatment of trading portfolio assets and liabilities. Within the scope of the issuing business, the Vontobel Group reports structured products containing a debt instrument and an embedded derivative in the balance sheet item “Other financial liabilities at fair value” and reports interest rate instruments that were acquired for the purpose of reinvesting the issue proceeds and hedging the interest rate risks of these structured products in the balance sheet item “Other financial assets at fair value”. In addition, certain designated portfolios of equity instruments and shares in funds outside the trading business are also reported in the item “Other financial assets at fair value”. Based on a documented strategy, the management, valuation and reporting to the senior management of both structured products and designated interest rate instruments from the issuing business as well as of equity instruments and shares in funds outside the trading business is performed on a fair value basis. This allows for the consistent treatment of issued products and designated hedging transactions in the issuing business. Available-for-sale financial assets Financial assets that are available for sale are stated at fair value. Unrealized gains and losses are recognized in other comprehensive income until the financial assets are sold or determined to be impaired. Equities and similar securities and rights are considered impaired if the acquisition cost may not be recovered due to a significant or prolonged decline in fair value. A debt instrument is considered impaired if the creditworthiness of the corresponding debtor significantly deteriorates or if other specific signs of difficulty are observable. If an available-for-sale asset is determined to be impaired, the cumulative unrealized loss previously recognized in other comprehensive income is reclassified to the item “Other income” in the income statement. Impairment reversals on debt instruments are recognized in “Other income”, impairment reversals on equities in other comprehensive income. This also applies if an impairment recorded in the first half of the year is partly or completely offset by a reversal of impairment in the second half of the year. On the disposal of a financial asset that is available for sale, the cumulative unrealized gain or loss previously recognized in other comprehensive income is transferred to the item “Other income” in the income statement. Gains or losses from partial disposals are calculated using the average cost method. Interest is accrued in the period in which it is earned using the effective interest method and recognized together with dividend income in the item “Net interest income”.
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Notes to the consolidated financial statements Accounting principles
Loans granted Loans are reported in the balance sheet at amortized cost using the effective interest method less any specific allowances for credit risks. Based on the size and structure of the credit portfolio, as well as the Vontobel Group’s policy of essentially only granting credit on a secured basis or to counterparties with very high creditworthiness, no general allowances are made for credit risks. A loan is considered impaired when it is likely that the amount due according to the contractual terms cannot be entirely collected. An impairment is recorded under “Valuation adjustments, provisions and losses” and corresponds to the difference between the book value of the loan and the present value of the amount that is expected to be collected – calculated on the basis of the original effective interest rate on the loan – taking account of the counterparty risk and the net proceeds from the liquidation of any collateral. The reasons for impairment could be specific to the relevant counterparties or countries. Interest income on loans that are not overdue is accrued in the period in which it is earned and recorded in “Net interest income”. Increases in or reversals of impairment losses are recognized in “Value adjustments, provisions and losses”. As a rule, they are derecognized at the point in which a legal title confirms the conclusion of the liquidation process. Securities lending and borrowing transactions The transfer of securities in the case of securities lending and borrowing transactions (due to the actual lending or borrowing transaction or as collateral) is only recorded in the balance sheet if the risks and rewards of ownership of the securities are also transferred. In securities lending agreements, cash collateral received is recorded in the balance sheet as “Cash collateral from securities lending agreements”. In securities borrowing agreements, cash collateral provided is recorded in the balance sheet as “Cash collateral for securities borrowing agreements”. Securities lent or delivered as collateral for which the counterparty has an unlimited right to resell or pledge are reported in the balance sheet item “Securities lent or delivered as collateral”. Fees and interest from securities lending and borrowing are accrued in interest income or interest expense in the period in which they are incurred. Repurchase and reverse-repurchase agreements Repurchase and reverse-repurchase agreements are treated as secured financing agreements. The transfer of securities in the case of repurchase and reverse-repurchase agreements is only recorded in the balance sheet if the risks and rewards of ownership of the securities are also transferred. In reverse-repurchase agreements, cash collateral provided is stated in the balance sheet as “Cash collateral for reverse-repurchase agreements”. In repurchase agreements, the cash collateral received is stated in the balance sheet as “Cash collateral from repurchase agreements”. Delivered securities for which the counterparty has an unlimited right to resell or pledge are reported in the balance sheet item “Securities lent or delivered as collateral”. Interest income from reverse-repurchase agreements and interest expense from repurchase agreements are accrued in the period in which they are incurred. Derivative financial instruments Derivative instruments are stated at fair value and presented as positive and negative replacement values. The Group offsets positive and negative replacement values in the case of transactions with the same counterparty, provided that legally enforceable netting agreements are in place and the intention to offset exists. Realized and unrealized gains and losses are recognized in the item “Trading income”. The Group may apply hedge accounting if the criteria specified in IAS 39 are met.1 At the time a hedge transaction is made, it is determined whether it is a hedge of the fair value of a balance sheet item or an unrecognized firm commitment (fair value hedge) or a hedge of the cash flows from a balance sheet item or a highly probable future transaction (cash flow hedge). In a fair value hedge, the change in fair value of the hedging instrument is reported in the income statement. The change in fair value of the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is also recognized in the income statement. 1
No hedge accounting was applied neither in the year under review nor in the previous year
Vontobel Group, Annual Reports 2010
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Notes to the consolidated financial statements Accounting principles
In a cash flow hedge, the change in fair value of the effective portion of the hedging instrument is recognized in other comprehensive income, while the change in fair value of the ineffective portion of the hedging transaction is recorded in the income statement. Gains or losses from the hedging instrument reported in other comprehensive income are reclassified from other comprehensive income to the income statement in the same periods in which the hedged cash flows of the underlying transactions are recognized in the income statement. Issued debt instruments Issued debt instruments are carried in the item “Issued debt instruments” at amortized cost using the effective interest rate method provided they were not designated as “Other financial liabilities at fair value” upon initial recognition. Debt instruments with embedded derivatives on own shares are split up into these two components upon issue and subsequently recognized as an issued debt instrument and as derivatives on own shares. Financial guarantees After initial recognition, a financial guarantee is reported in the balance sheet at the higher of the following two values: the amount of the provision that has to be recorded for the financial guarantee if an outflow of funds is probable, the level of which can reliably be estimated, and the amount that was originally recorded less the cumulative amortization recorded in the income statement.
3.4 Other basic principles Own shares and derivatives on own shares Vontobel Holding AG shares held by the Group are deducted from shareholders’ equity in the item “Treasury shares” at weighted average cost. Changes in fair value are not recorded. The difference between the sales proceeds of treasury shares and the corresponding acquisition cost is recorded in “Capital reserve”. Derivatives on own shares that must be physically settled qualify as equity instruments and are stated in shareholders’ equity under “Capital reserve”. Changes in fair value are not recognized. Upon settlement of a contract, the sale proceeds net of costs are recorded under “Capital reserve” or the purchase price is recorded under “Treasury shares”. Derivatives on own shares that must be settled in cash or that offer a choice of settlement method are treated as derivative financial instruments. An exception are put options written on own shares and forward contracts to purchase own shares in which physical settlement has been agreed on or offered as an alternative. In both cases, the discounted strike price or forward price upon execution of the contract is deducted from shareholders’ equity as a liability. This liability is increased during the contract term up to the strike price or forward price using the effective interest rate method. Upon settlement of a contract, the liability is either derecognized or transferred to shareholders’ equity. Share-based payment According to the bonus model of the Vontobel Group, the employees of most Group companies are offered an annual bonus as well as a performance-related future allocation of shares. Employees have the right and/or the obligation to draw part of their annual bonus in shares of Vontobel Holding AG instead of in cash. The fair value of these shares at grant date is charged as personnel expense. Employees who elect to draw part of their annual bonus in shares are entitled to receive additional Vontobel Holding AG shares after three years have lapsed provided certain criteria with regard to operating performance have been met. Market-related variables are fixed at the time the rights to receive these so-called performance shares are granted and are not adjusted during the vesting period. The share price used to determine personnel expense is calculated on the basis of the fair value of the Vontobel Holding AG share at this time, less the present value of the dividends expected during the vesting period. The variables that cannot be observed in the market, such as the future performance of the business and the probability that employees with rights to receive performance shares will leave the company early, are continually reassessed by
76
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Notes to the consolidated financial statements Accounting principles
management during the vesting period based on current developments and conditions. The estimated cost of the performance shares for the entire vesting period on the balance sheet date is charged as personnel expense on a pro rata temporis basis. Property and equipment Property and equipment include bank buildings, leasehold improvements, information technology and telecommunications equipment, software (IT core systems and other software, incl. software in development) and other fixed assets. The acquisition or production costs of property and equipment are capitalized if the Group is likely to obtain future economic benefits from them and the costs can be both identified and reliably determined. Property and equipment are depreciated on a straight-line basis over their estimated useful life as follows: Bank buildings
max. 40 years
Leasehold improvements
max. 10 years
Information technology and telecommunications equipment
3 years
IT core systems
max. 10 years
Other software
3–5 years
Other fixed assets
2–5 years
Property and equipment are reviewed for impairment if events or circumstances indicate that the carrying amount may be impaired. If the carrying amount exceeds the realizable amount, an impairment loss is recorded. Any reversals of impairments at a later date will be recognized in the income statement. Goodwill and other intangible assets The goodwill arising from the acquisition of a subsidiary (see section 3.1 “Consolidation principles” for details) is recognized as an asset in the balance sheet and assigned to one or more cashgenerating units and is, in principle, subject to an annual impairment test. If events or a change of circumstances indicate a possible impairment, the test is carried out more frequently to determine whether the book value of the relevant cash-generating unit exceeds its recoverable amount. The recoverable amount is the higher of the fair value less costs to sell and the value in use. If the book value of the cash-generating unit exceeds the recoverable amount, a goodwill impairment is recorded. Reversals of impairments are not recorded. This also applies if an impairment recorded in the first half of the year is partly or completely offset by a reversal of impairment in the second half of the year. Other intangible assets include the client relationships and brands acquired during business combinations. They are depreciated on a straight-line basis over the useful life of five to ten years (client relationships) or ten years (brands). The other intangible assets are tested for impairment if events or circumstances indicate that the book value may be impaired. If the book value exceeds the recoverable amount, an impairment loss is recorded. Any reversals of impairments at a later date will be recognized in the income statement. No other intangible assets with an indefinite useful life are capitalized in the Vontobel Group’s balance sheet. Leasing In the case of operating leasing, the leased assets are not reported in the Vontobel Group’s balance sheet since the related ownership rights and obligations remain with the lessor. The expenses resulting from operating leasing are recorded in the position “General expense”. Vontobel does not have any significant finance leasing agreements. Income taxes Current income taxes are calculated on the basis of the applicable tax laws in individual countries and recognized as an expense in the period in which the related profits are made. Assets or liabilities related to current income taxes are reported in the balance sheet in the items “Current tax assets” or “Current tax liabilities”. Tax effects arising from temporary differences between the carrying amounts of assets and liabilities in the Group’s balance sheet and their corresponding tax values are recognized, respectively, as “Deferred tax assets” and “Deferred tax liabilities”. Deferred tax assets arising from temporary differences and from loss carryforwards eligible for offset are capitalized if it is likely that sufficient taxable profits will be available against which those temporary differences or loss carryVontobel Group, Annual Reports 2010
77
Notes to the consolidated financial statements Accounting principles
forwards can be offset. Deferred tax assets and deferred tax liabilities are calculated at the tax rates expected to apply in the period in which the tax assets will be realized, or the tax liabilities settled. Tax assets and tax liabilities are offset against each other when they refer to the same taxable entity, concern the same tax authority, and an enforceable right to offset exists. Current and deferred taxes are credited or charged to other comprehensive income or shareholders’ equity if the taxes refer to items that are credited or charged to other comprehensive income or to shareholders’ equity in the same or a different period. Pension funds The Group operates a number of pension plans for its employees in Switzerland and in other countries. They include both defined benefit and defined contribution plans. The pension plans in Switzerland have been set up according to the Swiss method of defined contributions but do not fulfil all the criteria of a defined contribution pension plan according to IAS 19. For this reason, the Swiss pension plans are treated as defined benefit plans in the consolidated financial statements. In the case of defined benefit plans, the pension obligations and expenses are determined by actuarial appraisals prepared by outside experts according to the projected unit credit method. The appropriate calculations are performed on an annual basis. If the balance of the accumulated, unrecognized actuarial gains or losses at the end of the preceding year surpasses both 10% of the assets and 10% of the obligations of the pension plan, the part of the unrecognized actuarial gains or losses that exceeds the higher of the two threshold values is recorded in the income statement over the average remaining working lives of the employees. If the total resulting from a pension fund surplus plus (less) actuarial losses (gains) that have not yet been recognized and any service costs that have not yet been recognized is negative, a liability for the corresponding amount is recognized in the Group’s balance sheet. If the above total is positive, an asset is recognized in the Group’s balance sheet, which corresponds to the lower of the following two values: – the above total, or – the total of the actuarial losses that have not yet been recognized and service costs that have not yet been recognized, plus the economic benefit in the form of a future reduction in contributions. No actuarial calculations are required in order to record defined contribution plans in the balance sheet. The contributions to these types of pension plans are recorded in the income statement when the employees render the corresponding services, which is generally in the year in which the contributions are paid. Provisions A provision is recognized if the Group has, as a result of a past event, a current liability at the balance sheet date that will probably lead to an outflow of funds, the level of which can be reliably estimated. The recognition and release of provisions are recorded in the item “Value adjustments, provisions and losses”. If an outflow of funds is unlikely to occur or the amount of the liability cannot be reliably estimated, a contingent liability is shown. If there is, as a result of a past event, a possible liability as of the balance sheet closing date whose existence depends on future developments that are not fully under the Vontobel Group’s control, a contingent liability is likewise shown.
4. Changes in accounting principles and presentation 4.1 Standards and interpretations that have been implemented The Vontobel Group applied the following new and revised standards and interpretations for the first time in the financial year 2010: IFRS 3 – Business Combinations and IAS 27 – Consolidated and Separate Financial Statements The changes to the two revised standards relate to the treatment of specific issues in the case of business combinations (e.g. the valuation of minority interests, the treatment of business combi-
78
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Notes to the consolidated financial statements Accounting principles
nations achieved in stages, the recording of conditional consideration and the determination of acquisition costs) as well as subsequent changes in ownership interests with or without a loss of control. The changes apply to financial years that began on or after 1 July 2009. The new provisions did not have any significant impact on the Vontobel Group when they were first applied. Other new standards and interpretations The following new and revised standards and interpretations did not have any impact on the Vontobel Group or were not relevant to the Vontobel Group when applied for the first time: – IAS 39 – Exposures Qualifying for Hedge Accounting – IFRS 1 – First-time Adoption of International Financial Reporting Standards – IFRS 2 – Group Cash-settled Share-based Payment Transactions – Annual Improvement Project (publication 2009) – Conceptual Framework for Financial Reporting (Phase A) – IFRIC 17 – Distributions of Non-cash Assets to Owners
4.2 Other changes None.
5. Standards and interpretations that have not yet been implemented Various new and revised standards and interpretations have to be applied with effect from 1 January 2011 or a later date. The Vontobel Group has not made use of the option of applying them prior to the effective dates. IFRS 9 – Financial Instruments: Classification and Measurement The publication of IFRS 9 represents the completion of the first phase in a project to replace IAS 39. The IASB is expected to approve new regulations on the impairment methodology for financial instruments and on hedge accounting in 2011, as part of the second and third phases of the project. Under IFRS 9, all financial assets are measured either at fair value or at amortized cost. Debt instruments that are held with the aim of generating contractual cash flows that solely represent the repayment of principal and interest are measured at amortized cost. All other debt instruments are measured at fair value and all income components are recorded in the income statement. All equity instruments are measured at fair value and, in principle, changes in their fair value are recorded in the income statement. If an equity instrument is not held for trading purposes, it can irrevocably be classified as an instrument that is measured at fair value the first time it is recorded in the balance sheet, as a result of which all income components – with the exception of dividends – are recorded in other comprehensive income. IFRS 9 incorporates the rules on the classification and valuation of financial liabilities set out in IAS 39. A new feature in IFRS 9 is that the impact of the change in own credit risk from financial liabilities, for which the fair value option is applied, is now recorded in other comprehensive income. However, if this treatment would create or increase an accounting mismatch in the income statement, the impact of the change in own credit risk should continue to be recorded in the income statement according to the method used in IAS 39. These changes have to be applied from 1 January 2013. The Vontobel Group is currently analyzing the impacts of the new regulations.
Vontobel Group, Annual Reports 2010
79
Notes to the consolidated financial statements Accounting principles
IFRIC 14 – Prepayments of a Minimum Funding Requirement IFRIC 14 is an interpretation of IAS 19 – Employee Benefits. The amendment to IFRIC 14 applies in circumstances when a company is subject to minimum funding requirements for a defined benefits plan and makes an early payment of contributions. According to the amendment to IFRIC 14, the prepayments that are made to cover minimum funding requirements are always recognized in the form of a future reduction in contributions when their economic benefit is determined. The amendment to IFRIC 14 applies from 1 January 2011 and is not expected to have any impact on the consolidated financial statements of the Vontobel Group. Other new standards and interpretations Based on initial analyses, the following new and revised standards and interpretations are not expected to have any significant impact on the Vontobel Group’s net profit, comprehensive income and shareholders’ equity or are not expected to be relevant to the Vontobel Group: – IAS 12 – Deferred Tax: Recovery of Underlying Assets – IAS 24 – Related Party Disclosures – IAS 32 – Classification of Rights Issues – IFRS 1 – First-time Adoption of International Financial Reporting Standards – IFRS 7 – Enhancing Disclosures about Transfers of Financial Assets – Annual Improvement Project (publication 2010) – IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments
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Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk management and risk control
1. Risk policy A conscious and prudent approach to risk is a prerequisite for the sustained, long-term success of the Vontobel Group as an internationally oriented Swiss banking group specializing in wealth and asset management and investment banking. The assumption of risk is an inherent part of the activities of the three business units Private Banking, Investment Banking and Asset Management. The Vontobel Group’s risk policy defines the relevant risk categories and the corresponding risk profile, as well as the powers of authorization, organizational structure, methods and processes relating to the management and control of risks. The appropriateness of the risk policy is reviewed at least once annually by the Board of Directors. The Risk Management and Risk Control units ensure that all risks are managed and monitored with the utmost care.
Risk management and risk control
The most important principles regarding risk management and control are: – Clearly delegated responsibilities and authority – Alignment of risk profile and risk capacity – Independent control functions and adequate human and technical resources – Adequate internal control systems – Transparency regarding the risks taken Clear responsibilities and powers of authorization Organization and authority regarding the management and control of all risks have been defined as follows: – Responsibility for risk has been assigned to the Board of Directors. – The Group Executive Management is responsible for the operational management of the Group and hence for the implementation of our risk policy and for the management and control of all risks. – The heads of the business units and support units are responsible for the management of risks in the framework of the qualitative and quantitative guidelines. – The “Risk Control” unit is responsible for risk control. Alignment of risk profile and risk capacity Comprehensive, combined company-wide stress tests are conducted on a regular basis. As well as taking account of market and credit risks (i.e. position risks), these tests assess operational risks as well as risks relating to income and costs. The results of the stress tests are compared with the Vontobel Group’s risk capacity to ensure that its risk profile does not exceed the available risk capacity. Independent control functions as well as adequate human and technical resources The Risk Control unit reports directly to the Head of the Finance & Risk support unit. It is organized into various teams, which are responsible for the subsequent independent monitoring of market risks, credit and counterparty risks and operational risks in general, as well as the risks that result when client assets are not invested in accordance with internal or external regulations (investment control) in particular. The Compliance and Legal units have an important role to play in the area of operational risk in particular. They also report to the Head of the Finance & Risk support unit. The Risk Control unit is primarily responsible for identifying risks related to ongoing business activities, changes in the environment (markets or regulation) or the launch of new activities (new products and services or new markets). Secondly, it records the identified risks using suitable methods and measuring systems and quantifies, aggregates, analyses and monitors them as far as possible. The Vontobel Group employs conventional methods and procedures to achieve this (see the following sections on the individual risk categories). Market and credit risks are monitored on a daily basis and compared with the limits that have been set. If any limits are exceeded, this is reported immediately and the position is monitored closely until the additional exposure is reduced. The Risk Control unit’s third responsibility is to ensure transparency regarding the risks that have been assumed.
Vontobel Group, Annual Reports 2010
81
Notes to the consolidated financial statements Risk management and risk control
Adequacy of internal control systems The management and control of all risks is essentially performed using a holistic approach referred to as the Internal Control System (ICS). In accordance with the FINMA circular 08/24 “Supervision and Internal Control at Banks”, as well as the provisions governing control processes during the production of financial statements according to the Swiss Code of Obligations, existing control processes are regularly reviewed and further optimized. As well as ensuring compliance with legal and regulatory requirements, the focus is on ensuring the effectiveness, efficiency and reliability of business processes as well as of the financial information. Transparency regarding the risks taken The Vontobel Group’s risk policy distinguishes between market, liquidity, credit, operational and reputational risks. The latter are considered to be of particular and overriding importance. The Board of Directors, Group Executive Management and employees know that the good reputation of the Vontobel Group and the trust which is placed in it are based on their ability to strike a balance between profit orientation, risk tolerance and compliance with mandatory rules of conduct each day. Ensuring transparency about the risk profile as a whole, as well as the individual risks that have been assumed, is a core function of the risk control areas (see above). The front office areas which are responsible for risk management are essentially informed about market and credit risks on a daily basis via suitable reports. However, reports on operational risks are provided at appropriate intervals rather than on a daily basis. The Group Executive Management and the Board of Directors are informed in full about any changes in individual risk factors in the Group’s risk profile via consolidated periodic risk reports. The valuation principles are set out in note 34.
2. Market risk 2.1 General information Market risk refers to the risk of losses due to adverse changes in market deveopments related, for example, to interest rates, credit spreads, foreign-exchange rates, stock prices, or commodities prices, and in the corresponding volatilities. Market risks are relevant in various areas, both within and outside Investment Banking. The major proportion of the risk positions within Investment Banking originates from its business with proprietary products such as warrants, certificates and structured products, as well as the hedging of these instruments. Financial Products of Investment Banking is responsible for these positions, as well as for foreign exchange and money market trading, the management of the foreign exchange position and collateral trading (repo transactions and securities lending and borrowing transactions). Market risks are limited and monitored using a multi-level system of limits. In addition to the Value at Risk limits and stress exposure limits defined at a global level and for each trading unit, this system defines a wide range of detailed sensitivity limits and volume limits in order to control and limit risks. Market risk positions are also held outside Investment Banking. These financial investments consist of broadly diversified portfolios and non-consolidated holdings. Within the scope of asset allocation, the equity exposure is maintained at a consistently low level. The financial investments are classified as “available-for-sale”. Non-strategic exposures in equity instruments and investment funds (incl. alternative investments) are classified as “Other financial assets at fair value through profit and loss” (see note 13). To quantify and limit risk, the same measurement methods – i.e. Value at Risk and stress exposure – are used for these positions at an aggregate level as for the positions held by Investment Banking. Further information on market risks at overall balance sheet level (interest rate risks and currency risks) can be found in section 2.3 “Market risks related to the balance sheet structure”
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Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk management and risk control
2.2 Market risks related to Investment Banking and other securities holdings 2.2.1 Value at Risk (VaR) The management and control of market risks for all the positions in Investment Banking as well as for securities holdings outside Investment Banking is based on specific sensitivity and volume limits as well as on Value at Risk and stress exposure measurements, in line with the general market standard. VaR is measured using the historical simulation method. All instruments are revalued based on historical changes of the risk factors. As a result, the historically observed volatility of the individual risk factors and the historically observed correlations between the individual risk factors are imputed directly into the VaR calculations. The confidence level is 99%, the holding period is set at one day and the historical period of observation to determine the time series relevant to VaR is now four years. At the beginning of 2010, the risk measurement methods used to calculate value at risk as well as stress exposures underwent a significant change, which involves the comprehensive modelling of issuer-specific credit spread risks relating to interest rate instruments. As a result of this change, value at risk figures have increased although the positions remain the same. Consequently, the value at risk figures for 2010 are not comparable with the figures for prior periods. The following table shows the VaR for the Vontobel Group as a whole, as well as for Investment Banking. The average VaR for the year under review totalled CHF 27.4 mn for the Vontobel Group as a whole, of which CHF 19.7 mn comprised the VaR for Investment Banking. As a result of the change in methodology, these figures cannot be compared with the figures for the previous year (average VaR of CHF 10.1 mn for the Vontobel Group and of CHF 4.4 mn for Investment Banking). The table also shows the relative importance of the VaR for the individual risk factors as a proportion of total VaR. In the year under review, the largest proportion of average VaR was attributable to interest rate risks and issuer-specific credit spread risks both in the Vontobel Group as a whole and in Investment Banking. When interpreting the table, it should be noted that – depending on the historically realized correlations between risk factors – individual risk factors may also display positive risk values; these figures are shown in brackets in the following table. Value at Risk (VaR) for Vontobel Group overall and for Investment Banking1 Interests incl. credit spread CHF mns
Currencies CHF mns
17.4
17.6
0.7
0.4
36.1
7.3
19.4
0.4
0.3
27.4
Minimum
6.5
12.4
0.6
0.0
19.5
Maximum
15.1
20.8
0.7
1.0
37.6
of which Investment Banking
5.2
20.5
0.7
0.3
26.7
Average
1.1
17.9
0.4
0.3
19.7
Minimum
0.1
12.1
0.3
0.1
12.6
Maximum
4.5
20.7
1.2
0.5
26.9
Equities2 CHF mns
Vontobel Group: Average
1 2 3
Commodities3 CHF mns
31-12-10 Total CHF mns
99% confidence level; 1-day holding period; four-year historical observation period. The contributions to the risk factors include both price and volatility risks. Including positions in investment funds and hedge funds Including precious metals
Vontobel Group, Annual Reports 2010
83
Notes to the consolidated financial statements Risk management and risk control
CHF mns
Interests incl. credit spread CHF mns
Currencies CHF mns
12.0
(1.3)
1.1
1.1
12.9 10.1
Equities1
Vontobel Group: Average
Commodities2 CHF mns
31-12-09 Total CHF mns
10.3
(0.8)
0.2
0.4
Minimum
5.9
(0.6)
(0.0)
0.0
5.3
Maximum
14.3
(0.5)
0.5
0.6
14.9
of which Investment Banking
4.9
(0.7)
0.6
0.8
5.6
Average
2.7
1.6
(0.1)
0.2
4.4
Minimum
1.9
0.3
0.0
0.1
2.3
Maximum
8.3
2.5
(0.8)
0.1
10.1
1 2
Including positions in investment funds and hedge funds Including precious metals
The graph below shows the development over time of 1-day VaR for the positions of Investment Banking/Financial Products of Vontobel Group. There is also a graph to show the frequency distribution of daily gains and losses for the years 2010 and 2009. Value at Risk (VaR)1 for the positions of Investment Banking/Financial Products of Vontobel Group (CHF mns) 30 28 26 24 22 20 18 16 14 12 10 31-03-10 1
84
Vontobel Group, Annual Reports 2010
30-06-10
30-09-10
99% confidence level; 1-day holding period; four-year historical observation period.
31-12-10
Notes to the consolidated financial statements Risk management and risk control
Frequency distribution of the gains and losses of the positions Investment Banking/ Financial Products1 (number of days) 80 70 60 50 40 30 20 10
9.75
2010
1
The reported gains and losses represent actual income incl. spreads as well as income from intraday trading (in CHF mns).
>10.00
8.75
7.75
6.75
5.75
4.75
3.75
2.75
1.75
0.75
–0.25
–1.25
–2.25
–3.25
–4.25
–5.25
■
■
–6.25
–7.25
–9.25
–8.25
<–10.00
0
2009
2.2.2 Stress exposure In addition to the 99% confidence level for the Value at Risk limits, there are predefined stress exposure limits and corresponding stress tests conducted on a daily basis. All positions held by Investment Banking and all other securities positions are re-evaluated in a specific number of historical and institute-specific stress scenarios (with 1-day and 10-day holding periods) and the scenario with the largest loss is subsequently selected for the stress exposure.
2.3 Market risks related to the balance sheet structure The Treasury division is responsible for managing the balance sheet structure and capital. Interest rate risks and currency risks are monitored and limited as part of the Group’s asset and liability management (ALM) activities. Treasury is also responsible for securing refinancing and monitoring liquidity risk on a continuous basis. 2.3.1 Interest rate risk Interest rate and foreign-exchange risks arise in balance sheet management through differing interest commitments and foreign currencies on the asset and liability side of the balance sheet and of off-balance-sheet items. These risks are managed and monitored at an aggregated level. The interest rate sensitivities of the market value of shareholders’ equity (and broken down to show positions within and outside Investment Banking) are presented in the tables on the next two pages. The table shows the gains and losses by currency and maturity range, assuming a +/–100 basis point change in interest rates in accordance with the reporting of interest rate risks prescribed by FINMA Circular 08/6. Assuming very conservative, additive aggregation between individual currencies, the sensitivity to a +100 basis point change corresponds to CHF +2.2 mn for the current year and CHF –26.9 mn for the previous year.
Vontobel Group, Annual Reports 2010
85
Notes to the consolidated financial statements Risk management and risk control
Interest rate risk of Vontobel Group up to 1 month CHF mns
1 to 3 months CHF mns
3 to 12 months CHF mns
Interest sensitivity as of 31-12-10 1 to 5 more than Total years 5 years CHF mns CHF mns CHF mns
Interest rate risk +100 basis points CHF: Vontobel Group
1.3
2.3
(2.1)
(1.6)
7.2
7.1
of which IB
0.4
2.4
(0.9)
4.4
7.4
13.7
of which non-IB
0.9
(0.1)
(1.2)
(6.0)
(0.2)
(6.6)
USD: Vontobel Group
0.0
(0.4)
2.1
0.5
(0.2)
2.0
(0.1)
(0.3)
1.9
1.2
(0.2)
2.5
0.1
(0.1)
0.2
(0.7)
0.0
(0.5)
of which IB of which non-IB EUR: Vontobel Group
0.0
(0.6)
2.9
(13.5)
6.0
(5.2)
(0.3)
(0.4)
2.5
0.9
6.5
9.2
0.3
(0.2)
0.4
(14.4)
(0.5)
(14.4)
others: Vontobel Group
0.0
(0.1)
(1.1)
(0.4)
(0.1)
(1.7)
of which IB
0.0
0.0
(0.5)
(0.3)
(0.1)
(0.9)
of which non-IB
0.0
(0.1)
(0.6)
(0.1)
0.0
(0.8)
of which IB of which non-IB
â&#x20AC;&#x201C;100 basis points CHF: Vontobel Group
(0.7)
0.0
0.4
(5.2)
(0.8)
(6.3)
0.2
(0.1)
(0.8)
(11.4)
(1.1)
(13.2)
of which non-IB
(0.9)
0.1
1.2
6.2
0.3
6.9
USD: Vontobel Group
0.0
0.5
(1.9)
(0.4)
0.2
(1.6)
of which IB
of which IB of which non-IB EUR: Vontobel Group
0.1
0.4
(1.7)
(1.1)
0.2
(2.1)
(0.1)
0.1
(0.2)
0.7
0.0
0.5
0.0
0.2
(4.0)
12.7
(6.3)
2.6
0.3
0.0
(3.6)
(2.2)
(6.8)
(12.3)
(0.3)
0.2
(0.4)
14.9
0.5
14.9
others: Vontobel Group
0.0
0.1
1.1
0.2
0.2
1.6
of which IB
0.0
0.0
0.3
0.1
0.2
0.6
of which non-IB
0.0
0.1
0.8
0.1
0.0
1.0
of which IB of which non-IB
IB = Investment Banking
86
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk management and risk control
up to 1 month CHF mns
1 to 3 months CHF mns
3 to 12 months CHF mns
Interest sensitivity as of 31-12-09 1 to 5 more than Total years 5 years CHF mns CHF mns CHF mns
Interest rate risk +100 basis points CHF: Vontobel Group
0.0
2.5
0.8
(13.9)
(9.2)
(19.8)
(1.0)
2.6
1.4
0.9
(6.2)
(2.3)
of which non-IB
1.0
(0.1)
(0.6)
(14.8)
(3.0)
(17.5)
USD: Vontobel Group
(0.2)
1.2
(0.3)
(3.3)
(1.3)
(3.9)
(0.4)
1.3
(0.5)
(3.0)
(1.3)
(3.9)
0.2
(0.1)
0.2
(0.3)
0.0
0.0
of which IB
of which IB of which non-IB EUR: Vontobel Group
0.3
1.3
4.9
(0.2)
(8.4)
(2.1)
of which IB
0.2
1.4
5.0
3.3
(7.8)
2.1
of which non-IB
0.1
(0.1)
(0.1)
(3.5)
(0.6)
(4.2)
others: Vontobel Group
0.0
0.2
(0.7)
(0.6)
0.0
(1.1)
of which IB
0.0
0.3
(0.5)
(0.6)
0.0
(0.8)
of which non-IB
0.0
(0.1)
(0.2)
0.0
0.0
(0.3)
23.4
â&#x20AC;&#x201C;100 basis points CHF: Vontobel Group
0.8
(2.4)
(0.1)
14.7
10.4
1.8
(2.5)
(0.8)
(0.7)
7.2
5.0
of which non-IB
(1.0)
0.1
0.7
15.4
3.2
18.4
USD: Vontobel Group
0.2
(1.2)
0.4
3.9
1.7
5.0
of which IB
of which IB of which non-IB EUR: Vontobel Group
0.4
(1.3)
0.6
3.6
1.7
5.0
(0.2)
0.1
(0.2)
0.3
0.0
(0.0)
(0.2)
(1.9)
(5.0)
(2.1)
9.4
0.2
of which IB
(0.1)
(1.9)
(5.2)
(5.7)
8.7
(4.2)
of which non-IB
(0.1)
0.0
0.2
3.6
0.7
4.4
others: Vontobel Group
0.0
(0.3)
0.7
0.7
0.0
1.1
of which IB
0.0
(0.4)
0.6
0.7
0.0
0.9
of which non-IB
0.0
0.1
0.1
0.0
0.0
0.2
IB = Investment Banking
Vontobel Group, Annual Reports 2010
87
Notes to the consolidated financial statements Risk management and risk control
Under IFRS, the market value effect of changes in interest rates in Investment Banking essentially has an impact on the income statement, as well as on shareholders’ equity as a result of changes in retained earnings. However, the only impact outside Investment Banking is on interest rate sensitive positions that are assigned to the category “fair value through profit and loss” under IFRS. In the case of interest rate sensitive financial investments in the category “availablefor-sale”, the market value effect of changes in interest rates only has an impact on shareholders’ equity. If interest rates changed by +100 (–100) basis points, the impact on pre-tax profit in Investment Banking would be CHF +24.5 mn as of 31-12-10 and CHF –4.9 mn as of 31-12-09 (31 12-10: CHF –27.0 mn, 31-12-09: CHF +6.7 mn) and the pre-tax impact on consolidated shareholders’ equity would be CHF +2.2 mn as of 31-12-10 and CHF –26.9 mn as of 31-12-09 (3112-10: CHF –3.7 mn, 31-12-09: CHF +29.7 mn). As a result of conservative risk limits and the moderate level of sensitivity to changes in interest rates at Group level, it is not necessary for Treasury to implement hedging measures involving interest rate derivatives. In view of the limited importance of interest income from positions outside Investment Banking, the impact of a change in interest rates on income levels has not been simulated. 2.3.2 Currency risk As in the case of interest rate risks, currency risks relating to trading positions and the balance sheet structure are kept at a low level. This is achieved primarily through currency-congruent investments and refinancing activities. The following table shows the sensitivities to changes in foreign exchange rates of +/–5% according to internal reports. The sensitivities correspond to the pre-tax impact on consolidated shareholders’ equity; the impact on pre-tax profit is largely represented by the sensitivities in IB.
Currency risk Currency sensitivity as of 31-12-10 JPY GBP Others 1,000 CHF 1,000 CHF 1,000 CHF
USD 1,000 CHF
EUR 1,000 CHF
388.4
7,681.5
(608.8)
74.8
(966.8)
(1,311.2)
1,115.1
(611.8)
(138.8)
(1,289.3)
1,699.6
6,566.4
3.0
213.6
322.5
(2,502.2)
(6,928.0)
(109.2)
(471.7)
(970.9)
+5% Vontobel Group of which IB of which non-IB –5% Vontobel Group of which IB of which non-IB
(802.6)
(361.6)
(106.2)
(258.1)
(648.4)
(1,699.6)
(6,566.4)
(3.0)
(213.6)
(322.5)
USD 1,000 CHF
EUR 1,000 CHF
Currency sensitivity as of 31-12-09 JPY GBP Others 1,000 CHF 1,000 CHF 1,000 CHF
+5% Vontobel Group
(2,251.0)
5,893.3
114.7
619.9
128.7
of which IB
(1,112.4)
685.3
114.9
601.3
86.8
of which non-IB
(1,138.6)
5,208.0
(0.2)
18.6
41.9
–5% Vontobel Group
88
5,457.5
(3,954.0)
(333.2)
(489.0)
(90.9)
of which IB
4,318.9
1,254.0
(333.4)
(470.4)
(49.0)
of which non-IB
1,138.6
(5,208.0)
0.2
(18.6)
(41.9)
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk management and risk control
3. Liquidity risk and refinancing Liquidity risk refers to the risk of being unable to cover short-term funding needs at any time (impossibility of substituting or renewing deposits, outflows of funds due to drawing on lending commitments or margin requirements, etc.). By diversifying the sources of refinancing and through access to the repo market, cash and cash equivalents can rapidly be made available on a secured basis if required. Liquidity is monitored and assured on a daily basis. The continuous monitoring of the volume and quality of available collateral also ensures that the Vontobel Group always has adequate refinancing capabilities. In the event of an unexpected tightening of liquidity, the Group can also access a portfolio of positions that retain their value and can easily be liquidated. The maturity structure of assets and liabilities is shown in note 33. Liquidity has to be provided for the daily market making required for the issuing and trading business. Consequently, the balance sheet positions “Trading portfolio assets”, “Positive replacement values”, “Other financial assets at fair value”, “Trading portfolio liabilities”, “Negative replacement values” and “Other financial liabilities at fair value” are not broken down into individual cash flows and divided into different maturity ranges but are, instead, reported at fair value in the “Demand” column. In the case of the other financial balance sheet positions, the book values are reported in the maturity range which represents the earliest point at which payment can be demanded according to the contractual provisions. In view of the predominantly short maturities, the breakdown of these positions into individual cash flows would provide an only marginally different view.
4. Credit risk 4.1 General information Credit risk concerns the risk of losses should a counterparty fail to honour its contractual obligations. In the case of the Vontobel Group, credit risk comprises: – Default risks from lending against collateral (“lombard lending”) – Default risks from bond positions (issuer risk) – Default risks from money market transactions – Default risks related to securities lending and borrowing, repo transactions, collateral management and derivatives, as well as – Default risks related to settlement. The Vontobel Group is not active in the commercial lending business.
4.2 Lending to private and institutional investment clients The Vontobel Group basically only engages in lending against collateral with private and institutional investment clients, i.e. the extension of loans is subject to the provision of securities that serve as easily realizable collateral. As a restriction on lending, limits on blanket credit lines are set for each client. These limits cover all the exposures assumed in respect of each client. These exposures (including the risk add-ons determined by the type of exposure) must essentially be covered by the collateral value of the collateral (securities after haircuts). Exposures that are only secured from a market value perspective but not after the application of collateral add-ons or haircuts, or exposures that are secured by collateral that is not recognized according to the guidelines of the Basel Committee on Banking Supervision, are only assumed in exceptional cases in respect of these clients. The lending value of positions and portfolios is generally determined in accordance with the “comprehensive approach” prescribed in the capital adequacy requirements of the Basel Committee on Banking Supervision (Basel II). The quality of the collateral (volatility, rating, liquidity and tradability) and the diversification of the portfolio are considered in the calculation. In cases where the exposures are covered by market values but not by lending values (i.e. after taking account of risk discounts), a default process is initiated with the aim of restoring cover through the reduction of the exposures or the provision of additional collateral.
Vontobel Group, Annual Reports 2010
89
Notes to the consolidated financial statements Risk management and risk control
As of 31-12-10, gross exposures to private clients and institutional investment clients totalled CHF 1,204.9 mn (31-12-09: CHF 849.5 mn), of which CHF 1,149.8 mn (31-12-09: CHF 804.8 mn) was secured by recognized financial collateral (after risk discounts) and CHF 55.1 mn (31-12-09: CHF 44.7 mn) was not secured by recognized financial collateral.
Lending to private clients and institutional investment clients1
Total lending exposure
Total lending exposure 1
90
Vontobel Group, Annual Reports 2010
Covered by recognized collateral CHF mns
Not covered by recognized collateral CHF mns
31-12-10 Total CHF mns
1,149.8
55.1
1,204.9
Covered by recognized collateral CHF mns
Not covered by recognized collateral CHF mns
31-12-09 Total CHF mns
804.8
44.7
849.5
Comprises not only cash credits but also the total due from private and institutional investment clients.
Notes to the consolidated financial statements Risk management and risk control
4.3 Exposures to professional counterparties and issuer risk The Vontobel Group has both secured and unsecured exposures to professional counterparties. Secured exposures result from securities lending and borrowing, repo transactions, the collateral management of margin obligations and margin calls, as well as the collateralization of OTC derivatives that are eligible for netting. The mitigation of credit risks using securities as easily realizable collateral is of key importance for these types of transactions. The transactions are generally concluded on the basis of collateralized netting agreements with strict requirements regarding eligible collateral, appropriate contractual collateral values and low contractual thresholds and minimum transfer amounts. The daily calculation and comparison of credit exposures and collateral is a core element of the management and monitoring of credit risks. During this process, conservative add-on factors are applied to the credit exposures and conservative haircuts are applied to the collateral in accordance with the â&#x20AC;&#x153;comprehensive approachâ&#x20AC;? prescribed in the capital adequacy requirements of the Basel Committee on Banking Supervision (Basel II). The different add-ons and haircuts are determined according to the type of instrument, rating, term to maturity, liquidity and tradability. Unsecured exposures mainly comprise the issuer risks in bond portfolios held in Investment Banking or for the purpose of balance sheet management. They also include exposures relating to money market transactions, accounts, guarantees and contractual independent amounts (threshold values and minimum transfer amounts) that are agreed with counterparties in netting agreements for securities lending and borrowing, repurchase agreements and the collateralization of OTC derivatives. Settlement risks are reduced through the use of the Continuous Linked Settlement (CLS) system when conducting foreign currency transactions. Vontobel is connected to the CLS system as a third party. The remaining settlement risks are restricted and monitored through the use of limits for each settlement period. All exposures to professional counterparties are monitored and restricted using a differentiated system of limits for the individual counterparty categories, rating segments, countries and regions. The Vontobel Group bases the management and limitation of exposures to professional counterparties on internal assessments by the Credit Management unit as well as on the ratings of external agencies recognized by the FINMA. It uses the ratings of Fitch, Moodyâ&#x20AC;&#x2122;s and S&P. If various ratings exist for a specififc position, the relevant rating is assigned according to the rules prescribed by the Basel Committee on Banking Supervision. The requirements regarding counterparty creditworthiness are particularly high for unsecured credit risks as well as issuer risks. The breakdown of unsecured counterparty and issuer risks by rating category is shown in the following table and graph. This and the following tables now only contain information on current unsecured exposures without potential exposures relating to collateralized positions. The figures including the application of add-ons or haircuts in accordance with capital regulations are presented in the tables in the section on capital.
Vontobel Group, Annual Reports 2010
91
Notes to the consolidated financial statements Risk management and risk control
Breakdown of unsecured counterparty and issuer risks by rating1
AAA CHF mns
AA CHF mns
A CHF mns
BBB CHF mns
below BBB/ without rating CHF mns
Issuer risk from debt instruments
3,100.3
3,356.1
3,038.9
279.4
139.4
9,914.1
Money market and accounts
1,515.8
310.5
133.6
0.0
2.1
1,962.0
Other financial
receivables2
Total
31-12-10 Total CHF mns
3.9
24.0
62.3
3.0
1.6
94.8
4,620.0
3,690.6
3,234.8
282.4
143.1
11,970.9
31-12-09 Total CHF mns
AAA CHF mns
AA CHF mns
A CHF mns
BBB CHF mns
below BBB/ without rating CHF mns
Issuer risk from debt instruments
3,278.5
3,199.9
2,453.6
236.5
195.0
9,363.5
Money market and accounts
1,874.1
184.0
210.6
0.0
3.0
2,271.7
1.5
78.9
150.2
0.3
1.5
232.4
5,154.1
3,462.8
2,814.4
236.8
199.5
11,867.6
Other financial receivables2 Total 1 2
Unsecured credit exposure after contractual netting without the application of add-ons on derivatives and haircuts on other financial securities Securities lending & borrowing, repo-transactions, collateral management, derivatives, guarantees, and pledged capital life insurance policies
Breakdown of the Vontobel Group’s credit risk by rating (CHF mns) 6,000
5,000
4,000
3,000
2,000
1,000
0 AAA ■
2010
AA
A ■
2009
BBB
below BBB/ without rating
The exposures mainly relate to the rating categories “AAA” and “AA”, as shown in the previous table and graph: as of 31-12-10, 69% (31-12-09: 73%) of the exposures related to these categories of high creditworthiness. 96% of the exposures comprised a rating of “A” or above (31-12-09: 96%). The proportion of exposures with a rating of less than “BBB” or with no rating was 1% (31-12-09: 2%).
92
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk management and risk control
The breakdown of credit exposures by counterparty type as well as by geographical region is illustrated in the following table. Breakdown of unsecured counterparty and issuer risks by counterparty type1
Issuer risk from debt instruments Money market and accounts Other financial
Banks CHF mns
Other corporations/ institutions without bank status CHF mns
4,501.1
1,482.1
3,930.9
9,914.1
572.9
13.0
1,376.1
1,962.0
receivables3
Total
Issuer risk from debt instruments
Governments/public sector bodies2 CHF mns
31-12-10 Total CHF mns
41.4
51.3
2.1
94.8
5,115.4
1,546.4
5,309.1
11,970.9
Banks CHF mns
Other corporations/ institutions without bank status CHF mns
Governments/public sector bodies2 CHF mns
31-12-09 Total CHF mns
5,245.9
1,250.1
2,867.5
9,363.5
Money market and accounts
500.2
29.7
1,741.8
2,271.7
Other financial receivables3
182.6
49.8
0.0
232.4
5,928.7
1,329.6
4,609.3
11,867.6
Total 1 2 3
Unsecured credit exposure after contractual netting without the application of add-ons on derivatives and haircuts on other financial securities Incl. due from the Swiss National Bank Securities lending & borrowing, repo-transactions, collateral management, derivatives, guarantees, and pledged capital life insurance policies
With regard to the counterparty type, a large proportion of the unsecured counterparty and issuer risks relates to banks, as expected. As of 31-12-10, these exposures accounted for CHF 5,115.4 mn (previous year CHF 5,928.7 mn) of a total of CHF 11,970.9 mn (CHF 11,867.6 mn) or 43% (previous year 50%). When setting limits, considerable importance is assigned to preventing concentration risks relating to individual counterparties, thus ensuring that exposures within counterparty categories are broadly diversified.
Vontobel Group, Annual Reports 2010
93
Notes to the consolidated financial statements Risk management and risk control
Breakdown of unsecured counterparty and issuer risks by region1
Issuer risk from debt instruments Money market and accounts Other financial
receivables2
Switzerland CHF mns
Europe excl. Switzerland CHF mns
North America CHF mns
Asia CHF mns
Others CHF mns
31-12-10 Total CHF mns
805.5
6,773.2
1,178.4
866.6
290.4
9,914.1
1,590.4
343.5
26.3
0.0
1.8
1,962.0
28.0
53.5
10.3
0.0
3.0
94.8
2,423.9
7,170.2
1,215.0
866.6
295.2
11,970.9
Switzerland CHF mns
Europe excl. Switzerland CHF mns
North America CHF mns
Asia CHF mns
Others CHF mns
31-12-09 Total CHF mns
Issuer risk from debt instruments
1,153.0
5,826.8
1,213.6
890.4
279.7
9,363.5
Money market and accounts
1,618.2
622.6
30.9
0.0
0.0
2,271.7
68.9
21.6
6.4
135.5
0.0
232.4
2,840.1
6,471.0
1,250.9
1,025.9
279.7
11,867.6
Total
Other financial receivables2 Total 1 2
Unsecured credit exposure after contractual netting without the application of add-ons on derivatives and haircuts on other financial securities Securities lending & borrowing, repo-transactions, collateral management, derivatives, guarantees, and pledged capital life insurance policies
In geographical terms, the unsecured credit and issuer risks mainly relate to the region of Europe (excl. Switzerland). Exposures in Switzerland and in the regions of North America and Asia account for a much smaller proportion of these risks. Exposures involving country risks are avoided in principle. Consequently, there are no relevant country risks to report on a consolidated basis.
94
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk management and risk control
5. Operational risks 5.1 Definition of operational risks Operational risks – which are primarily regarded as the residual exposures to the traditional risk categories of market and credit risks – represent the risk of losses resulting from the inadequacy or failure of internal processes, people and systems or from external events.
5.2 Operational risk concept In order to identify and restrict operational risks, appropriate measures such as internal control systems (ICS) as well as the selection, training and supervision of employees are implemented within the individual units. A uniform framework is used throughout the Vontobel Group to provide a shared understanding of the concept and to ensure the comparability of results. The concept is based on four dimensions: – A generic, hierarchical process model forms the basic framework. – The qualitative assessment of risks leads to an aggregation of subjective evaluations. – The quantitative measurement of risks completes the picture. – After being assessed and measured, the risks are prioritized and appropriate measures are taken to mitigate them. The identification, analysis and measurement of operational risks is an iterative, ongoing process conducted throughout the organization. 5.2.1 Process model Measures to identify operational risks are focused on the value-creating core competencies within the organization and consequently on income-generating core business processes. A generic process model that is applied to all business units as well as to the Group on an aggregate basis thus forms the basic framework for the management of operational risks. This process view constitutes the basis for the qualitative and quantitative examination of risk as well as for the Internal Control System. 5.2.2 Qualitative risk assessment The qualitative risk assessment takes account of risks that are difficult or impossible to quantify. These risks include potential losses that don’t directly result in financial gains or losses at the time of the loss event but indirectly impact the company’s earnings position at a later date. The assessment of qualitative risks is based on the view that the most accurate picture of the qualitative risk situation can be obtained primarily through subjective evaluations by risk specialists. Subjective estimates are produced using various methods of data collection. Within the operational risk concept, the method used for this assessment and qualitative evaluation of risks is founded on the Key Risk Indicator (KRI) process – comprising risk assessment workshops and surveys of experts – which is based on an industry-wide approach that is recognized from a regulatory perspective. Classification of operational risks The possibility that an operational risk event could occur is implicit in every business activity. At the Vontobel Group, a combination of two risk dimensions – frequency and impact – are considered relevant when assessing risks. – Frequency: denotes the probability that a loss event will occur, i.e. how often a specific event can be expected to happen. – Impact: denotes the magnitude of the loss event. This risk dimension is expressed in directly quantifiable terms (profit/loss; opportunity costs) as well as in (external) terms that are difficult to quantify (e.g. reputation, level of resources tied up internally, external investigations and proceedings, etc.).
Vontobel Group, Annual Reports 2010
95
Notes to the consolidated financial statements Risk management and risk control
Risks are classified as follows, based on the various possible combinations of these two risk dimensions: Low Operational Risk – Low Impact/Low Frequency: Loss events that rarely occur and have a low loss potential. Medium Operational Risk – Low Frequency/High Impact: Loss events that rarely occur but have a high loss potential. For example, a loss event could lead to the breakdown of one or more business-critical process entities and thus render one or more core business processes and business functions impossible, resulting in a significant loss of income. This risk category has to be monitored very carefully due to the high loss potential involved – High Frequency/Low Impact: Loss events that have an insignificant loss potential when they occur individually and do not directly jeopardize core business processes and functions. In view of the frequency with which these loss events occur, this combination is nevertheless of relevance to the business and can lead to a significant loss of income. This risk category has to be monitored very carefully due to the high loss potential involved. High Operational Risk – High Frequency/High Impact: Loss events that have a high loss potential and occur very frequently. Their impact ranges from a very significant loss of income to the unavoidable discontinuation of business activities. These risks can have exceptionally far-reaching implications for the Group and are therefore of the utmost importance in terms of risk management. 5.2.3 Quantitative risk assessment A quantitative risk assessment is performed with the aim of comprehensively recording all the actual or potential operational risk variables that occur in the company based on numerical values. As well as ensuring compliance with all regulatory and legislative requirements, the primary objective of this risk assessment is to create transparency and expertise regarding the companywide operational risk situation and the active management of risk. 5.2.4 Risk mitigation The Vontobel Group assigns particular importance to operational risks that are classified as medium or high-level operational risks in the qualitative risk assessment. Based on economic and risk-related considerations, the aim is to transform higher-level risks into lower-level risks. This process involves identifying and analyzing potential sources and transmitters of risk and planning appropriate measures to reduce the frequency with which the loss events occur and/or their impact. The following strategies are applied in this context: – Risk prevention: Selective approach to business activities to prevent risk. – Risk reduction: Reduction of risk through improvements in processes, systems and controls. – Risk transfer: Transfer of risks to third parties through the conclusion of suitable insurance policies or sourcing. In order to mitigate risks, it is absolutely imperative to have an ICS as well as an iterative process to ensure the ICS functions effectively and to keep it up to date.
96
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Capital
The capital base serves primarily as a means of covering inherent business risks. The active management of the volume and structure of capital is therefore of key importance. Capital adequacy is monitored and controlled according to the regulations and ratios defined by the Basel Committee on Banking Supervision in particular, as well as other criteria. Compliance with the statutory capital adequacy requirements prescribed by Switzerland and the Swiss Financial Market Supervisory Authority (FINMA) is mandatory. External capital adequacy requirements were met in the year under review and in previous years without exception.
Capital
1. Capital management Capital management is aimed primarily at supporting growth and creating added value for shareholders while complying with the regulatory minimum capital requirements. By maintaining a solid capital structure, the Vontobel Group can also demonstrate its financial strength and creditworthiness to its business partners and clients. Capital management is performed while taking account of the economic environment and the risk profile of all business activities. Various control options are available to maintain the capital structure or to adapt it in line with changing requirements, including flexible dividend payments, the repayment of capital or the procurement of various forms of capital (tier 1 to tier 3). During the year under review, there were no significant changes to the objectives, principles of action or processes compared to the previous year.
2. Regulatory requirements Banks can use a number of different approaches to calculate their capital adequacy requirements according to Basel II. The Vontobel Group applies the International Standardized Approach (SA-BIS) for credit risks, the standardized approach for market risks and the base indicator approach for operational risks. As part of the reduction of credit risks (risk mitigation), the comprehensive approach with standard haircuts is applied for the recognition of collateral. As a result of the recognition of the fair value option by FINMA in accordance with Section V. of the FINMA circular 08/34 (adjustment of tier 1 capital), unrealized gains and losses are included in the calculation of tier 1 capital. This excludes the valuation adjustments of own liabilities recorded in accordance with IFRS rules due to a change in own creditworthiness. Including the valuation adjustments of own liabilities, tier 1 capital amounts to CHF 1,261.9 mn and the BIS tier 1 ratio would be 22.2%. The scope of consolidation used for the calculation of capital was the same in the year under review and the previous year as the scope of consolidation used for accounting purposes. Please refer to the tables “Major subsidiaries and participations” and “Changes in the scope of consolidation” in the Notes to the consolidated financial statements for further details. With the exception of the statutory regulations, no restrictions apply that prevent the transfer of money or capital within the Group.
Vontobel Group, Annual Reports 2010
97
Notes to the consolidated financial statements Capital
Eligible and regulatory capital 31-12-10 CHF mns
31-12-09 CHF mns
1,412.6
1,425.6
Eligible capital Gross tier 1 capital Paid-in capital
65.0
65.0
1,345.4
1,329.3
Net profit for the current financial year
147.8
138.9
Deduction for treasury shares
(54.2)
(49.5)
(0.4)
31.0
Disclosed reserves
Minority interests Innovative instruments (hybrid tier 1) Deduction for dividends, as proposed by the Board of Directors Deduction for goodwill and intangible assets Other deductions Eligible BIS tier 1 capital Tier 2 and tier 3 capital Other deductions from total capital
0.0
0.0
(91.0)
(89.1)
(150.7)
(161.2)
(19.2)
(33.9)
1,242.7
1,230.5
0.0
0.0
0.0
0.0
1,242.7
1,230.5
145.6
179.3
125.8
151.1
19.8
28.2
16.2
17.1
174.8
148.6
109.7
88.9
Equities
23.5
29.4
Currencies
26.5
19.3
1.6
2.6
Eligible capital (BIS)
Regulatory capital Credit risks Receivables Price risk relating to equity instruments in the banking book Non-counterparty related risks Market risks Interest rates
Gold
13.5
8.4
Operational risk
Commodities
118.6
126.6
Total regulatory capital
455.2
471.6
49.9
69.5
505.1
541.1
BIS tier 1 capital ratio before the adjustment of the Group’s own credit risk (minimum requirement: 4%)1
22.2%
21.4%
BIS tier 1 capital ratio after the adjustment of the Group’s own credit risk (minimum requirement: 4%)1
21.8%
20.9%
21.8%
20.9%
223.1%
207.1%
Additional Swiss capital requirements for non-counterparty related risks and credit risks Total regulatory capital according to FINMA regulations
Ratios
BIS total capital ratio after the adjustment of the Group’s own credit risk (minimal requirement:
8%)1
Ratio of eligible/regulatory capital according to the guidelines of the Swiss Financial Market Supervisory Authority (minimum requirement 100%) 1
98
As a result of the recognition of the fair value option by FINMA in accordance with Section V. of the FINMA circular 08/34 (adjustment of tier 1 capital), unrealized gains and losses are included in the calculation of tier 1 capital. This excludes the valuation adjustments of own liabilities recorded in accordance with IFRS rules due to a change in own creditworthiness. Including the valuation adjustments of own liabilities, tier 1 capital amounts to CHF 1,261.9 mn (previous year CHF 1,264.4 mn) instead of CHF 1,242.7 mn (previous year CHF 1,230.5 mn).
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Capital
3. Breakdown of credit risks in accordance with FINMA Circular 08/22 The following tables are intended to provide additional quantitative information regarding the capital adequacy requirements for credit risks, in accordance with the FINMA Circular 08/22. The information is based on the Basel II regulations and the totals may deviate from the book values reported according to IFRS. In particular, off-balance-sheet items are weighted with the corresponding credit conversion factor and reported accordingly. In the case of derivative financial instruments, the negative replacement values that are eligible for offset (netting) are deducted from the positive replacement values. Financial investments comprise all securities in the banking book that represent an issuer-related risk. All remaining positions are reported collectively under “Other assets” if they have to be covered with capital for credit risks. The balance sheet items “Trading portfolio assets” and ”Other financial assets at fair value” do not represent any credit risks from a capital adequacy perspective; instead, they entail a specific market risk. As a result, these items are not shown in the following tables. Information on credit risks relating to these balance sheet items can be found in section 4.3 of the notes on risk management and risk control. The domicile of the counterparty or issuer serves as the basis for the allocation to the different geographical regions in the following table. Credit risks broken down by region
Switzerland CHF mns
Europe excl. Switzerland CHF mns
North America CHF mns
Asia CHF mns
Others CHF mns
31-12-10 Total CHF mns
Due from banks
754.1
974.1
53.2
144.8
301.6
2,227.8
Due from customers
31.2
101.2
1,427.0
Balance sheet 419.9
776.0
98.7
Financial investments/debt instruments/securities without securitisation transactions
269.3
594.7
64.9
0.0
63.0
991.9
Other assets
718.5
34.1
0.1
15.6
0.5
768.8
43.0
75.0
4.0
0.1
1.8
123.9
2,204.8
2,453.9
220.9
191.7
468.1
5,539.4
175.6
32.2
5.6
1.5
7.4
222.3
2.5
0.0
0.0
0.0
0.0
2.5
Positive replacement values after netting Total balance sheet Off balance sheet Contingent liabilities/guarantee credits Irrevocable commitments Add ons Total off balance sheet Total
14.6
167.7
0.6
0.2
3.1
186.2
192.7
199.9
6.2
1.7
10.5
411.0
2,397.5
2,653.8
227.1
193.4
478.6
5,950.4
Vontobel Group, Annual Reports 2010
99
Notes to the consolidated financial statements Capital
Others CHF mns
31-12-09 Total CHF mns
65.4
80.6
2,580.5
21.5
128.6
1,005.4
57.9
0.6
28.4
1,092.3
0.1
3.9
0.5
710.8
Switzerland CHF mns
Europe excl. Switzerland CHF mns
North America CHF mns
Asia CHF mns
1,143.8
1,250.5
40.2
257.8
552.8
44.7
Financial investments/debt instruments/securities without securitisation transactions
692.3
313.1
Other assets
664.1
42.2
Balance sheet Due from banks Due from customers
Positive replacement values after netting Total balance sheet
39.6
106.1
1.4
0.5
3.9
151.5
2,797.6
2,264.7
144.3
91.9
242.0
5,540.5
101.7
79.7
4.9
68.9
6.8
262.0
Off balance sheet Contingent liabilities/guarantee credits Irrevocable commitments Add ons Total off balance sheet Total
5.6
0.0
0.0
0.0
0.0
5.6
17.9
275.7
1.1
0.7
6.3
301.7
125.2
355.4
6.0
69.6
13.1
569.3
2,922.8
2,620.1
150.3
161.5
255.1
6,109.8
The industry code of the counterparty or issuer serves as the basis for the allocation to the different sectors in the following table. Credit risks broken down by sector or counterparty type
Government and central banks CHF mns
Banks CHF mns
Public bodies CHF mns
Private clients and institutional investment clients CHF mns
0.0
2,227.8
0.0
0.0
0.0
2,227.8
36.3
0.0
67.3
1,274.4
49.0
1,427.0
232.7
158.3
264.2
0.0
336.7
991.9
1.2
35.0
0.1
503.2
229.3
768.8
Other CHF mns
31-12-10 Total CHF mns
Balance sheet Due from banks Due from customers Financial investments/debt instruments/securities without securitisation transactions Other assets Positive replacement values after netting
0.2
78.3
0.5
41.6
3.3
123.9
270.4
2,499.4
332.1
1,819.2
618.3
5,539.4
Contingent liabilities/guarantee credits
0.9
78.1
0.6
53.5
89.2
222.3
Irrevocable commitments
0.0
0.0
0.0
0.0
2.5
2.5
Add ons
0.2
171.8
1.0
10.3
2.9
186.2
Total off balance sheet
1.1
249.9
1.6
63.8
94.6
411.0
271.5
2,749.3
333.7
1,883.0
712.9
5,950.4
Total balance sheet Off balance sheet
Total
100
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Capital
Government and central banks CHF mns
Banks CHF mns
Public bodies CHF mns
Private clients and institutional investment clients CHF mns
Due from banks
0.0
2,580.5
0.0
0.0
0.0
2,580.5
Due from customers
3.6
0.0
13.6
932.9
55.3
1,005.4
Other CHF mns
31-12-09 Total CHF mns
Balance sheet
Financial investments/debt instruments/securities without securitisation transactions
131.1
74.3
275.9
0.0
611.0
1,092.3
Other assets
1.8
54.5
0.0
252.6
401.9
710.8
Positive replacement values after netting
0.0
114.8
0.4
35.8
0.5
151.5
136.5
2,824.1
289.9
1,221.3
1,068.7
5,540.5
Contingent liabilities/guarantee credits
0.3
179.5
0.3
65.9
16.0
262.0
Irrevocable commitments
0.0
0.0
5.6
0.0
0.0
5.6
Add ons
0.0
283.0
0.6
16.9
1.2
301.7
Total off balance sheet
0.3
462.5
6.5
82.8
17.2
569.3
136.8
3,286.6
296.4
1,304.1
1,085.9
6,109.8
100% CHF mns
150% CHF mns
31-12-10 Total CHF mns
Total balance sheet Off balance sheet
Total
The following table provides an overview of credit risks broken down by risk weighting categories according to Basel II. The allocation of the exposures to the risk weightings is based on the type and current rating of the counterparty or the issue rating for the financial investment. Credit risks broken down by risk weighting categories according to Basel II
0% CHF mns
20% CHF mns
50% CHF mns
75% CHF mns
Balance sheet Due from banks
1,819.8
346.0
62.0
0.0
0.0
0.0
2,227.8
Due from customers
961.5
0.1
0.0
78.5
386.9
0.0
1,427.0
Financial investments/debt instruments/ securities without securitisation transactions
251.0
507.6
127.3
0.0
63.1
42.9
991.9
4.7
1.2
31.1
0.3
731.5
0.0
768.8
Other assets Positive replacement values after netting Total balance sheet
76.7
10.1
34.5
0.0
2.5
0.1
123.9
3,113.7
865.0
254.9
78.8
1,184.0
43.0
5,539.4
37.1
67.9
4.6
6.5
106.0
0.2
222.3
Off balance sheet Contingent liabilities/guarantee credits Irrevocable commitments
0.0
0.0
0.0
0.0
2.5
0.0
2.5
Add ons
20.5
4.9
158.2
0.0
2.6
0.0
186.2
Total off balance sheet
57.6
72.8
162.8
6.5
111.1
0.2
411.0
3,171.3
937.8
417.7
85.3
1,295.1
43.2
5,950.4
Total
Vontobel Group, Annual Reports 2010
101
Notes to the consolidated financial statements Capital
0% CHF mns
20% CHF mns
50% CHF mns
75% CHF mns
100% CHF mns
150% CHF mns
31-12-09 Total CHF mns
Balance sheet Due from banks
1,629.5
685.4
265.6
0.0
0.0
0.0
2,580.5
Due from customers
506.9
0.0
0.0
55.3
443.2
0.0
1,005.4
Financial investments/debt instruments/ securities without securitisation transactions
137.4
545.7
58.3
0.0
232.7
118.2
1,092.3
Other assets Positive replacement values after netting Total balance sheet
2.7
10.4
44.0
0.5
653.2
0.0
710.8
34.7
39.4
74.1
0.0
3.3
0.0
151.5
2,311.2
1,280.9
442.0
55.8
1,332.4
118.2
5,540.5
70.5
105.1
70.7
2.1
13.5
0.1
262.0
0.0
5.6
0.0
0.0
0.0
0.0
5.6
Off balance sheet Contingent liabilities/guarantee credits Irrevocable commitments Add ons
15.5
17.6
265.2
0.5
2.1
0.8
301.7
Total off balance sheet
86.0
128.3
335.9
2.6
15.6
0.9
569.3
2,397.2
1,409.2
777.9
58.4
1,348.0
119.1
6,109.8
Total
Loans extended against collateral, OTC derivatives, securities lending and borrowing transactions and repo transactions are secured primarily using securities as easily realizable collateral. The following table shows the credit risks broken down by collateral type in accordance with the comprehensive approach under Basel II with standard haircuts. Credit risks broken down by credit risk mitigation methods
Covered by recognized collateral CHF mns
Not covered by recognized collateral CHF mns
31-12-10 Total CHF mns
1,819.8
408.0
2,227.8
961.5
465.5
1,427.0
Financial investments/debt instruments/securities without securitisation transactions
0.0
991.9
991.9
Other assets
0.0
768.8
768.8
Balance sheet Due from banks Due from customers
Positive replacement values after netting Total balance sheet
76.8
47.1
123.9
2,858.1
2,681.3
5,539.4
37.1
185.2
222.3
Off balance sheet Contingent liabilities/guarantee credits Irrevocable commitments
0.0
2.5
2.5
Add ons
20.4
165.8
186.2
Total off balance sheet
57.5
353.5
411.0
2,915.6
3,034.8
5,950.4
Total
102
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Capital
Covered by recognized collateral CHF mns
Not covered by recognized collateral CHF mns
31-12-09 Total CHF mns
1,629.5
951.0
2,580.5
506.9
498.5
1,005.4
Financial investments/debt instruments/securities without securitisation transactions
0.0
1,092.3
1,092.3
Other assets
0.0
710.8
710.8
Balance sheet Due from banks Due from customers
Positive replacement values after netting Total balance sheet
34.7
116.8
151.5
2,171.1
3,369.4
5,540.5
70.5
191.5
262.0
Off balance sheet Contingent liabilities/guarantee credits Irrevocable commitments
0.0
5.6
5.6
Add ons
15.5
286.2
301.7
Total off balance sheet
86.0
483.3
569.3
2,257.1
3,852.7
6,109.8
Total
The above information on the mitigation of credit risks is based on the Basel II rules and thus represents the coverage ratios from a capital adequacy perspective. However, the disclosure of credit risk on page 90 provides a more appropriate basis for the assessment of the actual risk profile.
Vontobel Group, Annual Reports 2010
103
Notes on the consolidated financial statements Details on consolidated income statement
31-12-10 CHF mns
31-12-09 CHF mns
25.0
33.1
(8.1)
(24)
6.4
5.6
0.8
14
Interest income from financial assets at amortized costs
31.4
38.7
(7.3)
(19)
Dividend income from financial assets available-for-sale
7.1
7.5
(0.4)
(5)
Interest income from financial assets available-for-sale
21.3
12.8
8.5
66
Interest and dividend income from financial assets at fair value
28.4
20.3
8.1
40
Total interest income
59.8
59.0
0.8
1
1
Net interest income
Interest income from banks and customers Interest income from securities borrowing and reverse-repurchase agreements
Change to 31-12-09 CHF mns in %
Interest expense from securities lending and repurchase agreements
0.8
1.1
(0.3)
(27)
Interest expense from other financial liabilities at amortized costs
5.9
11.9
(6.0)
(50)
Interest expense from financial liabilities at amortized costs Total
2
Net fee and commission income
Commission income from lending activities
6.7
13.0
(6.3)
(48)
53.1
46.0
7.1
15
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
0.8
0.6
0.2
Brokerage fees
138.6
132.3
6.3
33 5
Custody fees
114.4
91.2
23.2
25
Advisory and management fees
301.4
258.3
43.1
17
Corporate finance
3.6
5.3
(1.7)
(32)
Fiduciary transactions
3.2
7.1
(3.9)
(55)
Other commission income from securities and investment transactions Total fee and commission income from securities and investment transactions Other fee and commission income
28.7
27.5
1.2
4
589.9
521.7
68.2
13
2.4
3.0
(0.6)
(20)
Brokerage fees
22.3
19.0
3.3
17
Other commission expense
92.6
86.3
6.3
7
Total commission expense
114.9
105.3
9.6
9
Total
478.2
420.0
58.2
14
31-12-10 CHF mns
31-12-09 CHF mns
3
Trading income
Change to 31-12-09 CHF mns in %
Securities
320.5
558.9
(238.4)
Other financial instruments at fair value
(55.2)
(275.0)
219.8
Forex and precious metals Total
(43)
8.6
14.1
(5.5)
(39)
273.9
298.0
(24.1)
(8)
Trading income as of 31-12-10 includes an income of CHF –15.8 mn (31-12-09: CHF –167.5 mn), which is attributable to changes in fair value due to a change in the Group’s own credit risk. Of the total impact, CHF –1.1 mn was realized as of 31-12-10 (31-12-09: CHF 4.3 mn), while the remaining CHF –14.7 mn (previous year CHF –171.8 mn) is unrealized and is shown in the balance sheet item “Other financial liabilities at fair value” as of 31-12-10. On a cumulative basis, the changes in own credit risk resulted in a cumulative profit of CHF 31.4 mn, of which CHF 12.2 mn are realized and CHF 19.2 mn are unrealized. This unrealized impact will be completely reversed over the term of the relevant instruments provided they are not redeemed or repurchased prior to their contractual maturity.
104
Vontobel Group, Annual Reports 2010
Notes on the consolidated financial statements Details on consolidated income statement
4
31-12-10 CHF mns
Comprehensive income from financial instruments before tax
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
Financial instruments held-for-trading
320.5
558.9
(238.4)
Other financial instruments at fair value
(55.2)
(275.0)
219.8
Forex and precious metals
(43)
8.6
14.1
(5.5)
(39)
273.9
298.0
(24.1)
(8)
Financial instruments available-for-sale
49.7
22.3
27.4
123
Loans and receivables
30.8
33.2
(2.4)
(7)
Financial liabilities measured at amortized costs
(6.7)
(13.0)
6.3
Total financial instruments income statement
Trading income
347.7
340.5
7.2
2
Unrealized gains/(losses) on available-for-sale financial instruments, recorded in other comprehensive income
11.9
41.0
(29.1)
(71)
(Gains)/losses on available-for-sale financial instruments, transferred from other comprehensive income to the income statement
(12.0)
(1.8)
(10.2)
Comprehensive income before tax
347.6
379.7
(32.1)
(8)
Comprehensive income includes interest income, dividend income, net realized and unrealized gains and currency translation adjustments, as well as impairment losses and reversals.
5
Other income
Note
31-12-10 CHF mns
31-12-09 CHF mns
0.7
0.8
(0.1)
(13)
6
21.3
2.0
19.3
965
0.0
(0.1)
0.1
0.1
(0.2)
0.3
Real estate income Income from the sale of financial investments available-for-sale Impairments of financial assets available-for-sale Income from investments in associates Other income Total
6
Income from the sale of financial investments available-for-sale
6
Change to 31-12-09 CHF mns in %
2.9
18.5
(15.6)
(84)
25.0
21.0
4.0
19
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
Debt instruments
15.9
2.2
13.7
Equity instruments
5.4
(0.2)
5.6
21.3
2.0
19.3
31-12-10 CHF mns
31-12-09 CHF mns
Share of profit
0.1
0.2
(0.1)
(50)
Impairments
0.0
(0.4)
0.4
(100)
Total
0.1
(0.2)
0.3
(150)
Total
Income from investments in associates
623 965
Change to 31-12-09 CHF mns in %
Vontobel Group, Annual Reports 2010
105
Notes on the consolidated financial statements Details on consolidated income statement
31-12-10 CHF mns
31-12-09 CHF mns
318.8
315.6
3.2
1
26.5
29.3
(2.8)
(10)
Other social contributions
26.1
26.2
(0.1)
(0)
Other personnel expense
20.9
15.7
5.2
33
392.3
386.8
5.5
1
7
Personnel expense
Note
Salaries and bonuses Retirement benefit plan expense
Total
43
Change to 31-12-09 CHF mns in %
Personnel expense includes the expense for share-based compensation of CHF 19.2 mn (previous year: CHF 28.4 mn).
31-12-10 CHF mns
31-12-09 CHF mns
Occupancy expense
33.2
32.2
1.0
IT, telecommunications and other equipment
73.7
67.6
6.1
9
Travel and representation, public relations, marketing
41.1
35.0
6.1
17
Consulting and audit fees
23.1
18.9
4.2
22
Other general expense
25.1
18.2
6.9
38
196.2
171.9
24.3
14
31-12-10 CHF mns
31-12-09 CHF mns
Depreciation of property and equipment
50.7
52.8
(2.1)
(4)
Amortization of other intangible assets
10.5
8.5
2.0
24
0.6
0.6
0.0
0
61.8
61.9
(0.1)
(0)
31-12-10 CHF mns
31-12-09 CHF mns
8
General expense
Total
9
Depreciation of property, equipment and intangible assets
Impairments of property and equipment Total
10 Value adjustments, provisions and losses Impairments on credit risks Decrease of allowances for credit losses Additions to provisions Release of provisions
Change to 31-12-09 CHF mns in %
3
Change to 31-12-09 CHF mns in %
Change to 31-12-09 CHF mns in %
0.8
5.6
(4.8)
(0.2)
(0.1)
(0.1)
7.5
5.8
1.7
(3.3)
(2.0)
(1.3)
(86) 29
Other
2.0
3.2
(1.2)
(37)
Total
6.8
12.5
(5.7)
(46)
106
Vontobel Group, Annual Reports 2010
Notes on the consolidated financial statements Details on consolidated income statement
31-12-10 CHF mns
31-12-09 CHF mns
Current income taxes
30.4
12.9
17.5
136
Deferred income taxes
(4.6)
0.7
(5.3)
(757)
Total
25.8
13.6
12.2
90
173.1
151.9
21.2
14
38.1
33.4
4.7
14
(10.3)
(13.7)
3.4
8.7
8.1
0.6
11 Taxes
Change to 31-12-09 CHF mns in %
Statement of tax status Explanation of the relationship between tax expense and net profit before taxes:
Profit before taxes Expected income tax rate of 22% Explanations for higher (lower) tax expense: Applicable tax rates differing from expected rate Tax losses not taken into account Appropriation of non-capitalized deferred taxes on loss carryforwards
7
(0.2)
0.0
(0.2)
Value adjustments on deferred tax assets
0.2
0.0
0.2
Other non-deductible expenses
0.0
0.7
(0.7)
Tax income unrelated to accounting period
2.0
(1.9)
3.9
(13.9)
(13.9)
0.0
0
Participation relief granted to holding companies Other impacts
(100)
1.2
0.9
0.3
33
25.8
13.6
12.2
90
Tax loss carryforwards
0.8
0.2
0.6
300
Other
5.5
5.4
0.1
2
Total deferred tax assets1
6.3
5.6
0.7
13
10.0
11.8
(1.8)
(15)
1.4
1.4
0.0
0
29.9
29.8
0.1
0
4.6
3.7
0.9
24
10.7
13.4
(2.7)
(20)
56.6
60.1
(3.5)
(6)
Income tax expense Composition of deferred taxes
Intangible assets Investments in associates Other provisions Unrealized gains on available-for-sale financial investments Other Total deferred tax 1
liabilities1
According to IAS 12, a company may offset deferred tax assets and liabilities with each other if those assets and liabilities refer to taxes on income levied by the same tax authority. This condition is fulfilled in the case of companies belonging to the Vontobel Group. The deferred tax assets and deferred tax liabilities shown in the balance sheet therefore represent the balance of the gross amounts of such assets and liabilities presented here.
Vontobel Group, Annual Reports 2010
107
Notes on the consolidated financial statements Details on consolidated income statement
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
Balance at the beginning of the year
54.5
44.6
9.9
22
Changes effecting the income statement
Changes in deferred tax assets and liabilities (net) (5.8)
1.4
(7.2)
(514)
Changes not effecting the income statement
1.5
3.8
(2.3)
(61)
Change in scope of consolidation
0.0
4.5
(4.5)
(100)
Translation adjustments
0.1
0.2
(0.1)
(50)
50.3
54.5
(4.2)
(8)
31-12-10 CHF mns
31-12-09 CHF mns
Within 1 year
0.0
4.3
(4.3)
(100)
From 1 to 5 years
4.9
5.9
(1.0)
(17)
After 5 years
55.3
49.4
5.9
12
Total
60.2
59.6
0.6
1
Total as at the balance sheet date
Tax loss carryforwards expire as follows:
Change to 31-12-09 CHF mns in %
Vontobel Holding AG and its subsidiaries are liable for income tax in most countries. The current tax assets and current tax liabilities reported as of the balance sheet date, as well as the resulting current tax expense for the period under review, are based partly on estimates and assumptions and may therefore differ from the amounts determined by the tax authorities in the future. In certain cases where complex tax questions arise, external tax specialists are consulted or preliminary clarification is obtained from the tax authorities. In the case of deferred taxes, the level of recognized tax assets depends on assumptions regarding available future taxable profits that are eligible for offset. The determination of deferred tax assets is essentially based on budget figures and mid-term planning. If a company has posted a series of financial losses in the recent past, the deferred tax assets are only recognized to the extent that the company has sufficient taxable temporary differences or has convincing other evidence that sufficient taxable profits will be available in future periods. Recognized deferred tax assets for loss carryforwards eligible for offset amounted to CHF 0.8 mn (31-12-10) or CHF 0.2 mn (31-12-09). Unrecognized loss carryforwards in the amount of CHF 60.2 mn (31-12-10) or CHF 59.6 mn (31-12-09) are subject to tax rates of 21% to 33% (31 12 10) or 21% to 33% (31-12-09). If recognized in full, the deferred tax assets for loss carryforwards eligible for offset would total CHF 18.7 mn (31-12-10) or CHF 17.0 mn (31-12-09).
12 Earnings per share Net profit (CHF mns)1 Weighted average number of shares issued Less weighted average number of treasury shares
31-12-10
31-12-09
Change to 31-12-09 in %
147.8
138.9
8.9
6
65,000,000
65,000,000
0
0
1,081,468
1,026,419
55,049
5
63,918,532
63,973,581
(55,049)
(0)
1,549,414
1,546,463
2,951
0
65,467,946
65,520,044
(52,098)
(0)
Undiluted Group earnings per share (in CHF)
2.31
2.17
0.14
6
Diluted Group earnings per share (in CHF)
2.26
2.12
0.14
7
Weighted average number of shares outstanding (undiluted) Dilution effect number of shares2 Weighted average number of shares outstanding (diluted)
1 2
The net profit attributable to the shareholders of Vontobel Holding AG constitutes the basis for the calculation of undiluted as well as diluted earnings per share. The dilution effect is primarily the result of employee share-based benefit programs.
108
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Details on consolidated balance sheet
13 Financial instruments at fair value through profit and loss 31-12-10 CHF mns
31-12-09 CHF mns
Debt instruments of governments and public sector entities
177.5
212.3
(34.8)
(16)
Debt instruments of financial institutions
475.3
480.0
(4.7)
(1)
Trading portfolio assets
Change to 31-12-09 CHF mns in %
Debt instruments
Debt instruments of corporations Total of which listed of which unlisted
72.3
133.6
(61.3)
(46)
725.1
825.9
(100.8)
(12)
688.7
765.1
(76.4)
(10)
36.4
60.8
(24.4)
(40)
1,240.7
852.3
388.4
46
Equity instruments Listed Unlisted
0.0
0.0
0.0
1,240.7
852.3
388.4
46
Listed
34.5
28.9
5.6
19
Unlisted
46.3
50.3
(4.0)
(8)
Total
80.8
79.2
1.6
2
Precious metals
51.1
24.8
26.3
106
2,097.7
1,782.2
315.5
18
80.4
74.1
6.3
9
Total Units in investment funds
Total trading positions of which lent or delivered as collateral
Financial instruments that are lent or delivered as collateral are reported in the separate balance sheet item â&#x20AC;&#x153;Securities lent or delivered as collateralâ&#x20AC;?.
Vontobel Group, Annual Reports 2010
109
Notes to the consolidated financial statements Details on consolidated balance sheet
Trading portfolio liabilities Debt instruments of which listed of which unlisted
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
169.4
181.9
(12.5)
(7)
167.9
181.9
(14.0)
(8)
1.5
0.0
1.5
1,046.4
995.1
51.3
of which listed
850.2
745.9
104.3
14
of which unlisted
196.2
249.2
(53.0)
(21)
Units in investment funds
0.0
1.0
(1.0)
(100)
of which listed
0.0
0.0
0.0
of which unlisted
0.0
1.0
(1.0)
(100)
1,215.8
1,178.0
37.8
3
31-12-10 CHF mns
31-12-09 CHF mns
Positive replacement values
197.2
214.5
(17.3)
(8)
Negative replacement values
544.2
361.7
182.5
50
31-12-10 CHF mns
31-12-09 CHF mns
Equity instruments
Total
Open derivative instruments
Other financial assets at fair value through profit and loss
5
Change to 31-12-09 CHF mns in %
Change to 31-12-09 CHF mns in %
Debt instruments Debt instruments of governments and public sector entities
952.6
794.4
158.2
20
Debt instruments of financial institutions
6,026.0
6,392.1
(366.1)
(6)
Debt instruments of corporations
1,784.7
1,367.9
416.8
30
Total
8,763.3
8,554.4
208.9
2
of which listed
6,390.6
6,012.3
378.3
6
of which unlisted
2,372.7
2,542.1
(169.4)
(7)
Listed
0.7
0.9
(0.2)
(22)
Unlisted
0.0
0.0
0.0
Total
0.7
0.9
(0.2)
Equity instruments
(22)
Units in investment funds Listed
23.4
9.5
13.9
146
Unlisted
40.7
80.6
(39.9)
(50)
Total
64.1
90.1
(26.0)
(29)
8,828.1
8,645.4
182.7
2
351.5
115.5
236.0
204
Total other financial assets at fair value through profit and loss of which lent or delivered as collateral
Financial instruments that are lent or delivered as collateral are reported in the separate balance sheet item â&#x20AC;&#x153;Securities lent or delivered as collateralâ&#x20AC;?.
110
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Details on consolidated balance sheet
31-12-10 CHF mns
31-12-09 CHF mns
Structured products
8,183.0
8,279.7
(96.7)
(1)
of which listed
6,981.2
7,769.4
(788.2)
(10)
of which unlisted
1,201.8
510.3
691.5
136
31-12-10 CHF mns
31-12-09 CHF mns
1,429.5
1,013.4
Other financial liabilities at fair value through profit and loss
14 Due from customers, net Other accounts receivable Less allowances for credit risks Total
Change to 31-12-09 CHF mns in %
Change to 31-12-09 CHF mns in %
416.1
(2.5)
(8.0)
5.5
1,427.0
1,005.4
421.6
(8.0)
(2.2)
(5.8)
41 42
Allowances for credit risks Balance at the beginning of the year Utilization in conformity with designated purpose
6.2
0.0
6.2
(0.1)
(0.3)
0.2
(Increase)/decrease recognized in the income statement, net
(0.6)
(5.5)
4.9
Allowances as at the balance sheet date
(2.5)
(8.0)
5.5
Impaired loans
3.3
8.0
(4.7)
Estimated proceeds of liquidating collateral
0.8
0.0
0.8
Doubtful interest income1
Impaired loans
Impaired loans, net Allowance for credit losses related to impaired loans Average impaired loans
(59)
2.5
8.0
(5.5)
(2.5)
(8.0)
5.5
(69)
3.3
8.4
(5.1)
(61)
(59)
Non-performing loans1 Non-performing loans Allowance for credit losses related to non-performing loans Average non-performing loans 1
3.3
8.0
(4.7)
(2.5)
(8.0)
5.5
3.3
8.4
(5.1)
(61)
Interest of CHF 0.1 mn (previous year CHF 0.3 mn) on non-performing loans that had not yet been received was capitalized.
Change in non-performing loans Non-performing loans at the beginning of the year
8.0
1.8
6.2
344
Net increase/(decrease)
1.5
6.2
(4.7)
(76)
Write-offs and disposals
(6.2)
0.0
(6.2)
3.3
8.0
(4.7)
Non-performing loans as at the balance sheet date
Vontobel Group, Annual Reports 2010
(59)
111
Notes to the consolidated financial statements Details on consolidated balance sheet
31-12-10 CHF mns
31-12-09 CHF mns
Debt instruments of governments and public sector entities
344.8
334.3
10.5
Debt instruments of financial institutions
528.7
427.3
101.4
24
Debt instruments of corporations
100.1
49.6
50.5
102
Total
973.6
811.2
162.4
20
of which listed
769.8
607.2
162.6
27
of which unlisted
203.8
204.0
(0.2)
(0)
124.5
125.3
(0.8)
(1)
15 Financial investments
Change to 31-12-09 CHF mns in %
Carried at fair value (“available-for-sale”) Debt instruments 3
Equity instruments and other participations Listed Unlisted Total
1.1
1.0
0.1
10
125.6
126.3
(0.7)
(1)
12.6
10.5
2.1
20
Units in investment funds Listed Unlisted Total Total financial investments carried at fair value (“available-for-sale”) of which lent or delivered as collateral
1.0
1.0
0.0
0
13.6
11.5
2.1
18
1,112.8
949.0
163.8
17
68.2
49.9
18.3
37
Financial instruments that are lent or delivered as collateral are reported in the separate balance sheet item “Securities lent or delivered as collateral”.
112
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Details on consolidated balance sheet
31-12-10 CHF mns
31-12-09 CHF mns
Balance at the beginning of the year
0.6
0.9
(0.3)
Increases
0.0
0.0
0.0
Decreases
0.0
(0.1)
0.1
Equity income
0.1
0.2
(0.1)
16 Investments in associates and joint ventures
Impairments Translation differences Total as at the balance sheet date
Significant subsidiaries consolidated using the equity method Vontobel Treuhand AG Deutsche Bรถrse Commodities GmbH
Change to 31-12-09 CHF mns in %
0.0
(0.4)
0.4
(0.1)
0.0
(0.1)
0.6
0.6
0.0
(33)
(50)
0
Domicile
Activity
Currency
Share capital mns
Interest held in % 31-12-10 31-12-09
Vaduz
Fiduciary
CHF
0.5
49
49
Frankfurt
Issues
EUR
1.0
16
16
Vontobel Group, Annual Reports 2010
113
Notes to the consolidated financial statements Details on consolidated balance sheet
17 Property and equipment
Bank buildings CHF mns
IT systems CHF mns
Software CHF mns
Software in development CHF mns
Other fixed assets CHF mns
Total fixed assets CHF mns
33.5
40.3
166.1
47.4
58.5
345.8
Acquisition cost Balance as of 01-01-09 Additions
1.7
4.0
77.1
(44.4)
1.0
39.4
Disposals
0.0
(10.5)
(16.1)
0.0
(2.3)
(28.9)
Change in scope of consolidation
0.0
1.0
1.4
0.0
3.3
5.7
Translation differences
0.0
0.0
0.1
0.0
0.0
0.1
Balance as of 31-12-09
35.2
34.8
228.6
3.0
60.5
362.1
Additions
0.0
6.6
27.2
3.0
4.2
41.0
Disposals
0.0
(23.0)
(19.8)
0.0
(6.4)
(49.2)
Change in scope of consolidation
0.0
0.0
0.0
0.0
0.0
0.0
Translation differences
(2.9)
(0.3)
(0.3)
0.0
(1.2)
(4.7)
Balance as of 31-12-10
32.3
18.1
235.7
6.0
57.1
349.2
Balance as of 01-01-09
(9.0)
(23.6)
(71.5)
0.0
(15.3)
(119.4)
Depreciation
(0.8)
(10.9)
(31.3)
0.0
(9.8)
(52.8)
Impairment losses
0.0
0.0
0.0
0.0
(0.6)
(0.6)
Reversals
0.0
0.0
0.0
0.0
0.0
0.0
Disposals
0.0
10.4
15.9
0.0
2.3
28.6
Cumulative depreciation
Change in scope of consolidation
0.0
0.0
0.0
0.0
0.0
0.0
Translation differences
(0.1)
0.0
(0.1)
0.0
0.1
(0.1)
Balance as of 31-12-09
(9.9)
(24.1)
(87.0)
0.0
(23.3)
(144.3)
Depreciation
(0.9)
(8.2)
(32.4)
0.0
(9.2)
(50.7)
Impairment losses
0.0
(0.1)
(0.3)
0.0
(0.2)
(0.6)
Reversals
0.0
0.0
0.0
0.0
0.0
0.0
Disposals
0.0
23.0
19.8
0.0
6.4
49.2
Change in scope of consolidation
0.0
0.0
0.0
0.0
0.0
0.0
Translation differences
1.0
0.2
0.3
0.0
0.5
2.0
Balance as of 31-12-10
(9.8)
(9.2)
(99.6)
0.0
(25.8)
(144.4)
Net carrying values 31-12-09
25.3
10.7
141.6
3.0
37.2
217.8
Net carrying values 31-12-10
22.5
8.9
136.1
6.0
31.3
204.8
31-12-10 CHF mns
31-12-09 CHF mns
2.1
2.3
Fire insurance value of real estate
23.5
Fire insurance value of other fixed assets
82.2
Change to 31-12-09 CHF mns in %
Additional information on property and equipment Tangible assets in finance lease
The fixed assets in finance lease comprise information technology equipment. Vontobel Group is not a party to any noteworthy â&#x20AC;&#x153;sale and lease backâ&#x20AC;? transactions.
114
Vontobel Group, Annual Reports 2010
(0.2)
(9)
28.2
(4.7)
(17)
95.8
(13.6)
(14)
Notes to the consolidated financial statements Details on consolidated balance sheet
Goodwill CHF mns
Other intangible assets CHF mns
Total intangible assets CHF mns
69.7
67.5
137.2
Additions
0.0
0.0
0.0
Disposals
0.0
0.0
0.0 54.2
18 Goodwill and other intangible assets Acquisition cost Balance as of 01-01-09
Change in scope of consolidation
28.2
26.0
Translation differences
0.0
0.0
0.0
Balance as of 31-12-09
97.9
93.5
191.4
Additions
0.0
0.0
0.0
Disposals
0.0
0.0
0.0
Change in scope of consolidation
0.0
0.0
0.0
Translation differences
0.0
0.0
0.0
Balance as of 31-12-10
97.9
93.5
191.4
0.0
(21.7)
(21.7)
(8.5)
(8.5)
0.0
0.0
Cumulative depreciation Balance as of 01-01-09 Amortization Impairment losses
0.0
Reversals
0.0
0.0
0.0
0.0
0.0
Change in scope of consolidation
0.0
0.0
0.0
Translation differences
0.0
0.0
0.0
Balance as of 31-12-09
0.0
(30.2)
(30.2)
(10.5)
(10.5)
0.0
0.0
Disposals
Amortization Impairment losses
0.0
Reversals
0.0
0.0
Disposals
0.0
0.0
0.0
Change in scope of consolidation
0.0
0.0
0.0
Translation differences
0.0
0.0
0.0
Balance as of 31-12-10
0.0
(40.7)
(40.7)
Net carrying values 31-12-09
97.9
63.3
161.2
Net carrying values 31-12-10
97.9
52.8
150.7
Capitalized goodwill amounted to CHF 97.9 mn as of 31-12-10 (previous year CHF 97.9 mn) and originated from the following business combinations: 31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
Banque Tardy, de Watteville & Cie SA
18.2
18.2
0.0
0
Harcourt Investment Consulting AG
51.5
51.5
0.0
0
Commerzbank (Schweiz) AG
28.2
28.2
0.0
0
Total
97.9
97.9
0.0
0
Vontobel Group, Annual Reports 2010
115
Notes to the consolidated financial statements Details on consolidated balance sheet
The following organizational units represent the lowest level at which the goodwill allocated to them is monitored for internal management purposes: 31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
Private Banking segment
36.2
36.2
0.0
0
Latin Europe division
18.2
18.2
0.0
0
Asset Management segment
17.2
17.2
0.0
0
Harcourt division
26.3
26.3
0.0
0
Total
97.9
97.9
0.0
0
The above goodwill positions are subject to an annual impairment test, which is conducted in the third quarter of each year. If events or a change of circumstances indicate a possible impairment, the test is carried out more frequently to determine whether the book value of the relevant organizational unit exceeds its recoverable amount. The recoverable amount is the higher of the fair value less costs to sell and the value in use. If the book value of the organizational unit exceeds the recoverable amount, a goodwill impairment is recorded. When conducting an impairment test, the Vontobel Group begins by comparing the book value of the organizational unit with its fair value less costs to sell. Assets under management are a key factor that is considered in the case of all the organizational units that are assessed because it has a significant impact on their future earnings potential. The implicit multiplier for assets under management is calculated on the basis of the market capitalization of companies engaging in similar business activities, less reported shareholdersâ&#x20AC;&#x2122; equity. If there is a difference between the gross margins of the organizational unit under review and the peer group, the multiplier is adjusted accordingly. If the book value of the organizational unit exceeds the fair value calculated using the adjusted multipliers less costs to sell, the book value is subsequently compared with the value in use of the organizational unit. In the financial year 2010, adjusted multipliers for assets under management of 0.5% to 1.7% were calculated for the different organizational units. The fair value calculated using these adjusted multipliers less costs to sell significantly exceeded the book value of all organizational units. As a result, management determined that no changes to the adjusted multipliers that would reasonably be possible would result in the book value of an organizational unit significantly exceeding its fair value less costs to sell. The comparison of the book value of the organizational units and their value in use was therefore not required.
19 Other assets
Note
31-12-10 CHF mns
7.9
5.0
2.9
58
43
29.3
33.3
(4.0)
(12) (93)
Value-added tax and other tax receivables Prepaid pension costs Settlement and clearing accounts
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
0.1
1.5
(1.4)
18.9
8.5
10.4
122
Other
3.8
4.8
(1.0)
(21)
Total
60.0
53.1
6.9
13
Other receivables
116
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Details on consolidated balance sheet
Carrying amount CHF mns
31-12-10 Actual liability CHF mns
Carrying amount CHF mns
31-12-09 Actual liability CHF mns
8.7
-
0.0
-
Financial assets
345.1
-
227.2
-
Other assets
153.5
-
123.3
-
Total
507.3
642.1
350.5
426.5
20 Assets pledged or assigned as security for own liabilities Trading portfolio assets
Assets are pledged for collateralized credit lines with central banks, security deposits with respect to stock exchange membership, OTC contracts as well as due to customers. The transactions are carried out at fair market conditions.
21 Securities lending and borrowing operations and securities repurchase and reverse-repurchase transactions
31-12-10 Cash collateral for securities reverseborrowing repurchase agreements agreements CHF mns CHF mns
31-12-09 Cash collateral for securities reverseborrowing repurchase agreements agreements CHF mns CHF mns
Due from banks
0.0
300.0
0.0
300.0
Due from customers
0.0
0.0
0.0
0.0
Total balance sheet position: cash collateral
0.0
300.0
0.0
300.0
Other financial instruments at fair value
0.0
0.0
0.0
0.0
Total
0.0
300.0
0.0
300.0
31-12-10 Cash collateral for securities lending repurchase agreements agreements CHF mns CHF mns
31-12-09 Cash collateral for securities repurchase lending agreements agreements CHF mns CHF mns
Due to banks
0.0
0.0
0.0
0.0
Due to customers
0.0
0.0
0.0
0.0
Total
0.0
0.0
0.0
0.0
31-12-10 CHF mns
31-12-09 CHF mns
500.1
239.5
260.6
109
500.1
239.5
260.6
109
909.2
1,694.8
(785.6)
(46)
338.7
944.0
(605.3)
(64)
Book value of securities in the bankâ&#x20AC;&#x2122;s possession that have been lent or given as collateral in securities lending and borrowing operations or have been transferred in repurchase transactions of which those for which the right to resell or repledge as collateral has been granted without restriction Fair value of securities received as collateral or borrowed in securities lending and borrowing operations or received through reverse-repurchase transactions for which the right to resell or repledge as collateral has been granted without restriction of which fair value of securities resold or repledged as collateral
Change to 31-12-09 CHF mns in %
Vontobel Group, Annual Reports 2010
117
Notes to the consolidated financial statements Details on consolidated balance sheet
31-12-10 CHF mns
22 Due to customers Due to customers on savings and deposit accounts
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
6.8
8.8
(2.0)
(23)
Other accounts due, on time and demand
4,918.9
4,585.6
333.3
7
Total
4,925.7
4,594.4
331.3
7
Interest rate in %
31-12-10 CHF mns
31-12-09 CHF mns
3.50
0.0
25.0
0.0
25.0
23 Issued debt instruments Vontobel Holding AG Medium-term note issued by Vontobel Holding AG, 02-07-08 â&#x20AC;&#x201C; 25-11-10 Total
24 Other liabilities Liabilities towards own employee benefit plans Value-added tax and other tax liabilities Settlement and clearing accounts Other liabilities Others Total
25 Provisions Balance at the beginning of the year Utilization in conformity with designated purpose
Note
43
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
4.0
5.1
(1.1)
(22)
12.1
10.4
1.7
16
0.6
1.7
(1.1)
(65)
25.8
14.1
11.7
83
6.7
9.0
(2.3)
(26)
49.2
40.3
8.9
22
Other CHF mns
2010 Total CHF mns
2009 Total CHF mns
9.0
9.0
6.1
(2.6)
(2.6)
(0.9)
Increase in provisions recognized in the income statement
7.5
7.5
5.8
Release of provisions recognized in the income statement
(3.3)
(3.3)
(2.0)
Change in scope of consolidation
0.0
0.0
0.0
Translation differences
(0.2)
(0.2)
0.0
Provisions as at the balance sheet date
10.4
10.4
9.0
Short-term provisions
10.0
10.0
3.7
0.4
0.4
5.3
10.4
10.4
9.0
Long-term provisions Total Other provisions consist of provisions for process risks and other liabilities.
A provision is recorded if, as a result of a past event, the Group has a current liability as of the balance sheet date that will probably lead to an outflow of funds, the level of which can be reliably estimated. When determining whether a provision should be recorded and whether the amount of the provision is appropriate, the best possible estimates and assumptions as of the balance sheet date are used; these estimates and assumptions may be adapted at a later date if necessary, based on new findings and circumstances. The Vontobel Group is involved in various legal proceedings in the course of its normal business operations. A provision is recorded in respect of current and potential legal proceedings if the above recognition criteria are met. In certain cases, external legal specialists are consulted to determine whether this is the case.
118
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Details on consolidated balance sheet
Number of shares
Share capital Par value CHF mns
Balance as of 01-01-08
65,000,000
65.0
0
0.0
Balance as of 31-12-08
65,000,000
65.0
0
0.0
Balance as of 31-12-09
65,000,000
65.0
0
0.0
Balance as of 31-12-10
65,000,000
65.0
0
0.0
Number
CHF mns
Balance as of 01-01-09
1,955,585
77.5
Purchases
2,429,096
65.4
Disposals
26 Share capital
Authorized capital Number Par value of shares CHF mns
The share capital is fully paid in.
Authorized capital In fiscal 2009 and 2010 the Board of Directors did not apply for the creation of authorized capital.
Contingent share capital There is no contingent share capital.
Treasury shares
(3,040,337)
(93.4)
Balance as of 31-12-09
1,344,344
49.5
Purchases
2,618,309
83.2
Disposals
(2,503,012)
(78.5)
1,459,641
54.2
Balance as of 31-12-10 As of 31-12-10 Vontobel Group held 6,398 (previous year 16,102) treasury shares to secure options and structured products. Own shares were offset against shareholdersâ&#x20AC;&#x2122; equity in accordance with IAS 32.
Underlying shares 31-12-10 31-12-09
Options and structured products Call options Put options Structured products 1
Number1
(1,200)
Number1
(37,700)
2,680
2,000
(36,244)
(37,114)
A negative (positive) symbol indicates that if the instrument is exercised, the Vontobel company that acted as issuer would be obliged to deliver (would receive delivery of) the corresponding number of shares of Vontobel Holding AG.
In the case of these derivative instruments, which are issued by a Vontobel Group company, the underlying instrument is the share of Vontobel Holding AG.
Vontobel Group, Annual Reports 2010
119
Notes to the consolidated financial statements Details on consolidated balance sheet
Unrealized gains CHF mns
31-12-10 Unrealized losses CHF mns
Unrealized gains CHF mns
31-12-09 Unrealized losses CHF mns
56.7
(0.5)
47.7
(0.5)
Units in investment funds
2.1
(0.2)
1.4
(0.9)
Debt instruments
2.2
(4.2)
9.4
(0.8)
Total before taxes
61.0
(4.9)
58.5
(2.2)
Taxes
(5.6)
0.8
(6.1)
0.6
Total net of tax1
55.4
(4.1)
52.4
(1.6)
27 Unrealized gains and losses on financial investments Equity instruments and other participations
1
The total amount after taxes includes exchange differences in the amount of CHF â&#x20AC;&#x201C;0.5 mn (previous year CHF â&#x20AC;&#x201C;0.2 mn).
120
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Transactions with related parties
28 Compensation paid to governing bodies The governing bodies of Vontobel Group comprise the members of the Board of Directors of Vontobel Holding AG and Group Executive Management. Additional information about the current members of governing bodies can be found in the Corporate Governance section of this annual report. Compensation of members of the governing bodies is decided by the Nomination and Compensation Committee (NCC) of the Board of Directors. The Board of Directors decides on the remuneration of the Chairman. The composition of the NCC is likewise disclosed in the section on Corporate Governance. The compensation paid to these persons is as follows. Compensation is recognized in the fiscal year in which it was accrued. It is thus reported according to the accrual principle, irrespective of cash flows. This does not include the cost of performance shares, which is recorded during the three-year vesting period. However, the allocation of the shares is shown when the vesting conditions are met and the performance shares are transferred.
Members of the Board of Directors of Vontobel Holding AG and Bank Vontobel AG 31-12-10 CHF mns
31-12-091 CHF mns
Change to 31-12-09 CHF mns in %
Compensation for the financial year Short-term employee benefits
2.5
2.4
0.1
Post-employment benefits
0.0
0.0
0.0
Other long-term benefits
0.0
0.0
0.0
Termination benefits
0.0
0.0
0.0
1.0
0.9
0.1
11
3.5
3.3
0.2
6
0.0
0.0
0.0
3.5
3.3
0.2
Equity compensation benefits bonus
shares2
Total mandate-related compensation for the financial year3 Compensation for additional services Total compensation for the financial year 1 2
3
4
6
Including compensation of one former member of the Board of Directors. The members of the Board of Directors received a total of 31,581 (previous year 34,119) shares of Vontobel Holding AG as part of their compensation for the year under review, of which 24,630 (previous year 26,640) shares entail a conditional right to receive performance shares following the expiry of a three-year vesting period. The cost of the performance shares is not included in the calculation of share-based compensation during the vesting period of the shares.
Compensation of the members of the Board of Directors for the financial year Basic compensation CHF 1,000
Variable compensation paid in cash CHF 1,000
Variable compensation paid in shares1 CHF 1,000
Other compensation CHF 1,000
31-12-10 Total CHF 1,000
31-12-09 Total CHF 1,000
Name
Function
Dr Urs Widmer
Chairman
686.3
715.0
715.0
10.0
2,126.3
1,991.3
Dr Wolfhard Graetz
Vice-Chairman
220.0
0.0
36.0
14.7
270.7
273.6
Prof. Dr Ann-Kristin Achleitner
Member
140.0
0.0
36.0
16.2
192.2
131.2
Bruno Basler
Member
150.0
0.0
36.0
24.3
210.3
200.3
Dr Philippe Cottier
Member
140.0
0.0
36.0
14.3
190.3
138.7
Peter Quadri
Member
130.0
0.0
36.0
7.2
173.2
199.2
Heinz Roth
Member
-
-
-
-
n/a
70.7
Dr Frank Schnewlin
Member
150.0
0.0
36.0
16.6
202.6
137.9
Dr Pierin Vincenz
Member
130.0
0.0
36.0
3.6
169.6 2
185.72
1,746.3
715.0
967.0
106.9
Total 1 2
3,535.2
3,328.7
Allocation of shares of Vontobel Holding AG that are subject to a holding period of three years, during which they cannot be sold. Of which payment of the cash component of CHF 133,600 (previous year CHF 149,700) to Raiffeisen Schweiz Vontobel Group, Annual Reports 2010
121
Notes to the consolidated financial statements Transactions with related parties
Allocation of shares from the long-term employee share-based benefit programme The Vontobel Groupâ&#x20AC;&#x2122;s compensation concept focuses on the achievement of sustained success. The granting of performance shares is a long-term component of this compensation system. The cost of performance shares is not included in share-based compensation during their vesting period. The number of shares allotted in the year under review is calculated on the basis of the number of bonus shares received for the 2006 financial year as well as the performance of the business from 2007 to 2009, measured in terms of the average return on equity and the average BIS tier 1 capital ratio. In accordance with the relevant IFRS rules, the cost per share was CHF 59.60 and was recorded on a pro rata temporis basis over the vesting period. The market price at the date on which the performance shares were allotted in April 2010 was CHF 32.25.
Equity compensation benefits performance shares in CHF mns Value of performance shares at the date on which they were allotted in CHF mns Number of performance shares allotted thereof Dr Urs Widmer
31-12-10 CHF mns or number
31-12-09 CHF mns or number
1.7
1.2
Change to 31-12-09 CHF mns or number in %
0.5
42
0.9
0.6
0.3
50
28,849
25,605
3,244
13
28,849
25,605
3,244
13
31-12-10 CHF mns
31-12-09 CHF mns
Members of the Group Executive Management Change to 31-12-09 CHF mns in %
Compensation for the financial year Base salary
3.2
4.01
Other short-term employee benefits
0.1
0.1
Cash component of bonus
4.9
4.2
0.7
17
Post-employment benefits
0.5
0.6
(0.1)
(17)
Other long-term benefits
0.0
0.0
0.0
Termination benefits
0.0
0.0
0.0
Equity compensation benefits bonus shares2
4.9
4.2
0.7
17
13.6
13.1
0.5
4
0.0
0.0
0.0
13.6
13.1
0.5
4
6
7
(1)
(14)
Total contract-related compensation for the financial year Compensation for additional services Total compensation the financial year Number of persons receiving compensation 1
2
(0.8)
(20)
0.0
0
Including compensation of CHF 0.7 mn paid to two former members of the Group Executive Management until the end of their contract. Furthermore, as a result of the new contractual terms agreed with one member who resigned from the Group Executive Management, his conditional rights to receive performance shares continue to apply in accordance with the allocation dates and calculation methods prescribed in the stock ownership plan. A total of 167,072 (previous year 172,133) Vontobel Holding AG shares were allocated to members of the Group Executive Management. These bonus shares entail a conditional right to receive performance shares following the expiry of a three-year vesting period.
Allocation of shares from the long-term employee share-based benefit programme The Vontobel Groupâ&#x20AC;&#x2122;s compensation concept focuses on the achievement of sustained success. The granting of performance shares is a long-term component of this compensation system. The cost of performance shares is not included in share-based compensation during their vesting period. However, the conditional right to receive performance shares was included in the calculation to determine the member of the Group Executive Management with the highest total compensation with a weighting of one performance share per bonus share. The number of shares allotted in the year under review is calculated on the basis of the number of bonus shares received for the 2006 financial year as well as the performance of the business from 2007 to 2009, measured in terms of the average return on equity and the average BIS tier 1 capital ratio. In accordance with the relevant IFRS rules, the cost per share was CHF 59.60 and was recorded on a pro rata temporis basis over the vesting period. The market price at the date on which the performance shares were allotted in April 2010 was CHF 32.25.
122
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Transactions with related parties
31-12-10 CHF mns or number
31-12-09 CHF mns or number
7.6
6.8
Equity compensation benefits performance shares in CHF mns Value of performance shares at the date on which they were allotted in CHF mns Number of performance shares allotted
Change to 31-12-09 CHF mns or number in %
0.8
12
4.1
3.5
0.6
17
128,180
144,316
(16,136)
(11)
4
4
0
0
Pension plan CHF 1,000
Other compensation CHF 1,000
Total CHF 1,000
Number of persons receiving compensation
Of which paid to the member with the highest total compensation for the financial year
Base salary CHF 1,000
Bonus paid in cash CHF 1,000
CEO
704.6
1,300.0
1,300.0
118.7
13.0
3,436.3
Head of Investment Banking
500.0
1,350.0
1,350.0
89.3
15.4
3,304.7
Financial year
Name
Function
2010
Herbert J. Scheidt
2009
Roger Studer
1
Bonus paid in shares1 CHF 1,000
The member of the Group Executive Management was awarded 44,782 shares (previous year: 55,328 shares) of Vontobel Holding AG as part of his compensation for the year under review. These shares are subject to a holding period of three years, during which they cannot be sold. These bonus shares entail a conditional right to receive performance shares following the expiry of a three-year vesting period.
The Vontobel Group’s compensation concept focuses on the achievement of sustained success. The granting of performance shares is a long-term component of this compensation system. The number of shares allotted in the year under review is calculated on the basis of the number of bonus shares received for the 2006 financial year as well as the performance of the business from 2007 to 2009, measured in terms of the average return on equity and the average BIS tier 1 capital ratio. Further details of the programme can be found on page 77 and in note 29.
Number of performance shares allotted
31-12-10
31-12-09
49,829
30,260
Governing body loans and employee terms and conditions Loans to members of the Vontobel Group’s governing bodies and to significant shareholders and the persons and companies related to them may only be granted in accordance with the generally recognized principles of the banking industry. Governing body members are generally treated like employees, and that particularly in regard to lending terms. Governing body loans must be approved by the Board of Directors of Vontobel Holding AG in addition to the levels of authority applicable to employees. As of 31 December 2010 and 31 December 2009, no loans to members of the Vontobel Group’s governing bodies or related parties were outstanding. In the case of members of the Vontobel Group’s governing bodies and major shareholders, margin calls that are fully secured by collateral totalled CHF 0.0 mn (previous year CHF 0.2 mn) as of 31 December 2010. No loans to former members of the Board of Directors or the Group Executive Management were outstanding that were not granted according to standard terms and conditions. The Vontobel Group does not grant mortgage loans to governing body members or employees. It provides mortgage loans to governing body members or employees with selected outside banks at a preferential rate of 1% below the usual rate up to a maximum loan amount of CHF 1 million per borrower. The Vontobel Group does not assume any credit risks or other obligations in the process.
Vontobel Group, Annual Reports 2010
123
Notes to the consolidated financial statements Transactions with related parties
The members of the Board of Directors and Group Executive Management conduct usual banking transactions with Vontobel Group at the same conditions as employees.
29 Management and employee share based benefit programs Under the current stock ownership plan introduced in early 2005, the employees of Vontobel Group can draw 25% of their variable salary in shares of Vontobel Holding AG (bonus shares). These shares are acquired at a price equivalent to 80% of the market price. The relevant stock exchange price corresponds to the average closing price of the month of January of the year in which the bonus is paid out. The bonus shares are subject to a holding period of 3 years, during which time they cannot be sold. Members of Executive Management are allocated 50% of their entire bonus in shares at the aforementioned conditions. After drawing bonus shares employees will automatically participate in the performance share program, which entitles them to receive additional shares (performance shares) at no cost after three years’ time provided the company’s financial performance has met certain hurdles and their employment contract has not been terminated. The amount of performance shares allocated depends on the number of bonus shares drawn as well as on the results of the preceding three fiscal years, in particular on the average return on equity (ROE) together with the average BIS tier 1 capital ratio. The performance shares allocated to employees are not subject to any holding period. Previous stock ownership plans for top management An earlier management stock ownership plan that was discontinued at the end of 2002 was designed to give top-level executives a significant participation in Vontobel Holding AG. Shares were allotted at no cost and were subject to a holding period of ten years. Upon termination of the employment contract the management executives are required to tender the shares received within the scope of this managment participation program to Vontobel Holding AG. The price of the shares is calculated using the average price of the past 90 trading sessions prior to repurchase by Vontobel Holding AG. Shares distributed under stock ownership plans are included in personnel expense at fair value, adequately taking into consideration trading and selling restrictions.
Holdings of blocked shares at the beginning of the year Allotted shares and transfers (addition) Shares for which the holding period has lapsed Shares of employees/members who have left the Group and transfers (reduction) Shares bought back from the management plan Holdings of blocked shares as at the balance sheet date Charged as personnel expense in the year under review (CHF mns) Charged as personnel expense in the preceding year (CHF mns) Average price of shares upon allotment (CHF) Fair value of blocked shares as at the balance sheet date (CHF mns) 1
Members of the Board of Directors and the top management 1 31-12-10 31-12-09 Number Number
31-12-10 Number
Employees 31-12-09 Number
1,284,657
1,092,106
1,034,890
962,009
583,884
613,080
219,597
222,029
(317,434)
(288,002)
(134,902)
(109,442)
(70,225)
(132,527)
(46,408)
(39,706)
-
-
0
0
1,480,882
1,284,657
1,073,177
1,034,890 0.7
1.0
1.7
0.4
16.3
12.2
6.4
4.7
32.40
24.00
32.25
24.04
52.7
38.0
38.2
30.6
In addition to the members of the Group Executive Management, the top management also includes the shares of managers that are included in the shareholder pooling agreement (see Chapter “Information relating to Corporate Governance”, page 39).
124
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Transactions with related parties
Rights to receive performance shares The cost of the performance share program is accrued over the respective vesting period and is charged as personnel expense. The estimated charge to personnel expense for the total remaining vesting periods takes account of expectations regarding the performance of the business (ROE and BIS tier 1 capital ratio) and the probability that employees will leave the company. In view of expectations regarding the performance of the business, the calculation of the number of rights is based on the assumption that between 78% and 98% (previous year between 94% and 122%) of the original number of bonus shares will be granted as performance shares to eligible employees in connection with the individual programmes. If the ROE in 2011 and 2012 is 3 percentage points higher (lower) than expected due to an improvement (deterioration) in the performance of the business, between 78% and 119% (61% and 78%) of the original number of bonus shares will be granted as performance shares to eligible employees in connection with the individual programmes. If the BIS tier 1 capital ratio in 2011 and 2012 is 2 percentage points higher (lower) than expected, these factors would be between 78% and 98% (74% and 87%). As a result, a reasonably possible deviation from the expected values would not have a significant impact on the Vontobel Group's future personnel expense.
Holdings of rights at the beginning of the year Allotted rights and transfers (addition) Recorded performance shares Forfeited rights and transfers (reduction)
Chairman of the Board of Directors and members of the Group Executive Management 31-12-10 31-12-09 Number Number
31-12-10 Number
Employees 31-12-09 Number
1,383,296
1,181,631
574,757
492,494
583,665
637,969
213,246
218,605
(384,974)
(490,736)
(157,029)
(169,921)
(75,586)
(115,455)
(50,032)
(38,908)
Change of rights due to modified parameters
(192,269)
169,887
(73,788)
72,487
Holdings of rights as at the balance sheet date
1,314,132
1,383,296
507,154
574,757
Charged as personnel expense in the year under review
10.4
17.3
3.9
7.5
Estimated personnel expense for the remaining vesting periods including future terminations
13.3
14.5
5.2
5.9
Estimated personnel expense for the remaining vesting periods excluding future terminations
15.4
16.5
6.0
6.7
Figures in CHF mns
Vontobel Group, Annual Reports 2010
125
Notes to the consolidated financial statements Transactions with related parties
30 Share and option ownership Members of the Board of Directors Name
Dr Urs Widmer Dr Wolfhard Graetz
Function
Shares Number
31-12-10 Options Number of shares at the time of exercise call put option option
31-12-09 Options Number of shares at the time of exercise call put option option
Shares Number
Chairman
171,099
0
0
129,410
0
0
Vice-Chairman
4,042
0
0
6,297
0
0
Member
787
0
0
0
0
0
Prof. Dr Ann-Kristin Achleitner Bruno Basler
Member
6,418
0
0
5,237
0
0
Dr Philippe Cottier
Member
137,577
0
0
136,790
0
0
Peter Quadri
Member
6,918
0
0
5,737
0
0
Dr Frank Schnewlin
Member
787
0
0
0
0
0
Dr Pierin Vincenz
Member
13,155
0
0
11,974
0
0
Members of the Group Executive Management Name
Herbert J. Scheidt Dr Martin Sieg Castagnola
31-12-10 Options Number of shares at the time of exercise call put option option
31-12-09 Options Number of shares at the time of exercise call put option option
Function
Shares Number
CEO
444,611
0
0
347,650
0
0
Shares Number
CFO
42,196
0
0
23,753
0
0
Peter Fanconi
Member
109,557
0
0
87,519
0
0
Felix Lenhard
Member
15,812
0
0
n/a
n/a
n/a
Dr Zeno Staub
Member
126,351
0
0
136,572
0
0
Roger Studer
Member
155,837
0
0
143,502
0
0
Member
n/a
n/a
n/a
138,408
Member resigned Peter Gubler 1
(50,000)1
Written call options, strike CHF 33, maturity date 15-10-10
The above figures do not include rights to receive performance shares. The calculation of the number of shares at the time of exercise reflects the exchange ratio of the respective options. The above figures also include the share and option holdings of parties related to the members of the Vontobel Groupâ&#x20AC;&#x2122;s governing bodies.
126
Vontobel Group, Annual Reports 2010
0
Notes to the consolidated financial statements Transactions with related parties
31 Transactions with related companies and persons Companies and persons are deemed related if one side is able to control the other or exert a substantial influence on the otherâ&#x20AC;&#x2122;s financial or operational decisions. 31-12-10 CHF mns
Receivables Liabilities
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
0.1
0.4
(0.3)
(75)
77.1
77.4
(0.3)
(0)
Vontobel Foundation and other members of the shareholder pool The Vontobel Foundation conducts business with Bank Vontobel AG at the same terms and conditions offered to employees.
32 Other related parties Pension funds of Vontobel Group The assets of these pension funds are managed by Bank Vontobel AG. Reduced commission rates are charged.
Vontobel Group, Annual Reports 2010
127
Notes to the consolidated financial statements Risk related to balance sheet positions
33 Risk related to balance sheet positions 31-12-10
Demand CHF mns
Subject to notice CHF mns
Due within 3 months CHF mns
Due within 3 to 12 months CHF mns
198.3
287.3
161.9
Due within 1 to 5 years CHF mns
Due after 5 years CHF mns
Total CHF mns
Liquidity risk Maturity structure of assets and liabilities Assets Cash
1,457.6
Due from banks
1,580.3
1,457.6
Cash collateral for reverse-repurchase agreements Trading portfolio assets Positive replacement values Other financial assets at fair value
2,227.8
300.0
300.0
2,097.7
2,097.7
197.2
197.2
8,828.1
8,828.1
Due from customers net of allowances
19.5
Accrued income and prepaid expenses
226.6
Financial investments
136.9
622.6
463.9
203.7
94.8
22.5
1,427.0
38.1
143.1
786.0
8.7
1,112.8
226.6
Investments in associates1
0.6
0.6
Property and equipment1
204.8
204.8
Goodwill and other intangible assets1
150.7
150.7
Current tax assets
4.4
4.4
Deferred tax assets
6.3
6.3
Other assets Total
60.0
60.0
14,614.6
820.9
1,089.3
Due to banks
1,459.1
12.3
0.6
Trading portfolio liabilities
1,215.8
508.7
880.8
387.3
18,301.6
Liabilities
Negative replacement values
1,472.0 1,215.8
544.2
544.2
Other financial liabilities at fair value
8,183.0
8,183.0
Due to customers
4,794.4
Accrued expenses and deferred income
85.7
40.6
5.0
325.9
4,925.7 325.9
Issued debt instruments
0.0
Current tax liabilities
15.3
15.3
Deferred tax liabilities
56.6
56.6
Provisions
10.4
10.4
Other liabilities
49.2
Total liabilities
16,653.9
12.3
86.3
40.6
0.0
5.0
16,798.1
274.0
259.6
14.4
29.0
23.0
12.7
612.7
49.2
Off-balance sheet Contingent liabilities and irrevocable commitments 1
Immobilized
128
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk related to balance sheet positions
Demand CHF mns
31-12-09
Subject to notice CHF mns
Due within 3 months CHF mns
Due within 3 to 12 months CHF mns
159.2
391.7
233.4
Due within 1 to 5 years CHF mns
Due after 5 years CHF mns
Total CHF mns
Liquidity risk Maturity structure of assets and liabilities Assets Cash
1,950.0
Due from banks
1,796.2
1,950.0
Cash collateral for reverse-repurchase agreements Trading portfolio assets Positive replacement values Other financial assets at fair value
300.0
300.0
1,782.2
1,782.2
214.5
214.5
8,645.4
8,645.4
Due from customers net of allowances
26.6
Accrued income and prepaid expenses
197.9
Financial investments
136.0
Investments in
2,580.5
350.4
312.0
196.8
106.9
12.7
17.4
90.4
631.4
73.8
1,005.4 197.9
associates1
949.0
0.6
0.6
Property and equipment1
217.8
217.8
Goodwill and other intangible assets1
161.2
161.2
Current tax assets
18.2
18.2
Deferred tax assets
5.6
5.6
Other assets Total
53.1
53.1
14,825.7
509.6
1,021.1
520.6
Due to banks
1,664.3
64.5
8.3
1.7
Trading portfolio liabilities
1,178.0
738.3
466.1
18,081.4
Liabilities
Negative replacement values
1,738.8 1,178.0
361.7
361.7
Other financial liabilities at fair value
8,279.7
8,279.7
Due to customers
4,400.8
Accrued expenses and deferred income
1.7
154.8
30.4
0.8
5.9
4,594.4
274.4
274.4
Issued debt instruments
25.0
25.0
Current tax liabilities
5.4
5.4
Deferred tax liabilities
60.1
60.1
Provisions
9.0
9.0
Other liabilities
40.3
40.3
Total liabilities
16,273.7
66.2
163.1
57.1
0.8
5.9
16,566.8
310.6
123.1
9.5
99.1
29.3
9.2
580.8
Off-balance sheet Contingent liabilities and irrevocable commitments 1
Immobilized
Vontobel Group, Annual Reports 2010
129
Notes to the consolidated financial statements Risk related to balance sheet positions
Book value CHF mns
Fair Value CHF mns
31-12-10 Deviation CHF mns
Book value CHF mns
Fair Value CHF mns
31-12-09 Deviation CHF mns
Cash
1,457.6
1,457.6
0.0
1,950.0
1,950.0
0.0
Due from banks
2,227.8
2,227.8
0.0
2,580.5
2,580.5
0.0
300.0
300.0
0.0
300.0
300.0
0.0
Due from customers net of allowances
1,427.0
1,431.0
4.0
1,005.4
1,008.6
3.2
Financial assets at amortized costs
5,412.4
5,416.4
4.0
5,835.9
5,839.1
3.2
Trading portfolio assets
2,097.7
2,097.7
0.0
1,782.2
1,782.2
0.0
197.2
197.2
0.0
214.5
214.5
0.0
8,828.1
8,828.1
0.0
8,645.4
8,645.4
0.0
34 Fair value of financial instruments Assets
Cash collateral for reverse-repurchase agreements
Positive replacement values Other financial assets at fair value Financial assets available-for-sale
1,112.8
1,112.8
0.0
949.0
949.0
0.0
12,235.8
12,235.8
0.0
11,591.1
11,591.1
0.0
Due to banks
1,472.0
1,472.0
0.0
1,738.8
1,738.8
0.0
Due to customers
4,925.7
4,924.5
(1.2)
4,594.4
4,592.7
1.7
0.0
0.0
0.0
25.0
25.0
0.0
Financial liabilities at amortized costs
6,397.7
6,396.5
(1.2)
6,358.2
6,356.5
1.7
Trading portfolio liabilities
1,215.8
1,215.8
0.0
1,178.0
1,178.0
0.0
544.2
544.2
0.0
361.7
361.7
0.0
Other financial liabilities at fair value
8,183.0
8,183.0
0.0
8,279.7
8,279.7
0.0
Financial liabilities at fair value
9,943.0
9,943.0
0.0
9,819.4
9,819.4
0.0
Financial assets at fair value Liabilities
Issued debt instruments
Negative replacement values
The table shows the fair value of the financial instruments based on the valuation methods and assumptions explained below. The fair value corresponds to the amount at which assets can be exchanged or obligations fulfilled by knowledgeable parties willing to contract and acting independently of one another. Short-term financial instruments Included here are accounts due from/to banks, accounts due from/to customers, and debt issued that have a maturity or a refinancing profile of at most one year as well as the balance sheet items “cash”, “cash collateral for reverse-repurchase agreements” and “cash collateral for repurchase agreements”. It is assumed for short-term financial instruments that the book value matches the fair value. Long-term financial instruments Included here are accounts due from/to banks, accounts due from/to customers, and debt issued that have a maturity or a refinancing profile of over one year. The fair value is based on listed market prices or the prices quoted by traders, provided the financial instrument is traded in an active market. Otherwise, the fair value is determined by means of the present value method.
130
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk related to balance sheet positions
Trading portfolio assets, other financial instruments at fair value, financial investments and derivative financial instruments If a financial instrument is traded in an active market, its fair value is based on listed market prices or the prices quoted by traders. In the fair value hierarchy prescribed in IFRS 7, this type of financial instrument is classified as a level 1 instrument. If an active market no longer exists, the fair value is determined on the basis of valuation models or other generally accepted valuation methods. If all the significant inputs can be observed directly or indirectly in the market, the instrument is classified as a level 2 instrument. This category mainly includes OTC derivatives, some debt instruments and products issued by the Vontobel Group. Most of the latter are listed with the Vontobel Group as market maker. The valuation models take account of the relevant parameters such as contract specifications, the market price of the underlying asset, foreign exchange rates, yield curves, default risks and volatility. Vontobel’s credit risk is taken into account when determining the fair value of financial liabilities if market participants consider it important for the calculation of prices. If at least one significant input cannot be observed directly or indirectly in the market, the instrument is classified as a level 3 instrument. These instruments mainly comprise illiquid fund shares. The fair value of these positions is usually determined based on the estimates of external experts regarding the level of future payouts. The fair value of level 2 and level 3 instruments is always an estimate or an approximation of a value that cannot be determined with absolute certainty. Furthermore, the valuation methods used do not always reflect all of the factors that are relevant when determining fair value. To ensure that the valuations are appropriate, additional factors such as uncertainties relating to the models and parameters as well as liquidity risks and the risk of the early redemption of products issued by the Vontobel Group are considered. Management believes it is necessary and appropriate to take these factors into account in order to correctly determine the fair value. The appropriateness of the valuation of financial instruments that are not traded in an active market is ensured through the application of clearly defined methods and processes as well as independent controls. The control processes comprise the analysis and approval of new instruments, the regular analysis of risks as well as gains and losses, the verification of prices and the examination of the models on which the estimates of the fair value of financial instruments are based. These controls are conducted by units that possess the relevant specialist knowledge and operate independently from the trading and investment functions. Sensitivity of fair values of level 3 instruments A reasonably realistic change in the basic assumptions or estimated values has no significant impact on the Vontobel Group’s income statement, statement of comprehensive income or shareholders‘ equity. Day 1 profit When a financial instrument is recognized for the first time, the transaction price provides the best indication of the fair value unless the fair value of this financial instrument can be evidenced by comparison with other observable current market transactions involving the same instrument (level 1 instrument) or is based on a valuation method that uses market data (level 2 instrument). If this is the case, the difference between the transaction price and the fair value – referred to as “day 1 profit” – is recorded in “Trading income” in the case of trading portfolio assets, other financial instruments at fair value and derivative financial instruments and is recorded in “Other comprehensive income” in the case of financial investments. In the case of level 3 instruments, the day 1 profit is deferred and is not recognized in the income statement. It is only recorded as “Trading income” or in the “Other comprehensive income” when the fair value can be determined using observable market data. During the financial year and the previous year, no positions with deferred day 1 profit were recorded.
Vontobel Group, Annual Reports 2010
131
Notes to the consolidated financial statements Risk related to balance sheet positions
Valuation methods of financial instruments
Valuation methods based on market data CHF mns
Valuation methods not based on market data CHF mns
31-12-10 Total CHF mns
2,015.0
82.7
0.0
2,097.7
30.0
167.2
0.0
197.2
Listed market prices CHF mns
Assets Trading portfolio assets Positive replacement values Other financial assets at fair value Equity instruments Units in investment funds Debt instruments1
0.7
0.0
0.0
0.7
23.4
20.9
19.8
64.1
5,765.1
2,998.2
0.0
8,763.3
124.5
0.0
1.1
125.6
Financial assets available-for-sale Equity instruments and other participations Units in investment funds Debt instruments
12.6
1.0
0.0
13.6
769.8
203.8
0.0
973.6
178.6
1,037.2
0.0
1,215.8
Liabilities Trading portfolio liabilities of which listed Negative replacement values Other financial liabilities at fair value of which listed 1
839.5 23.7
520.5
0.0
544.2
0.0
8,183.0
0.0
8,183.0
6,981.2
In the case of interest rate instruments measured at fair value through profit and loss, the difference between the book value (fair value) and the contractually agreed redemption amount at maturity was CHF 189.0 mn.
In the financial year 2010, positions with a fair value of CHF 138 mn (previous year CHF 811 mn) were reclassified from Level 1 (listed market prices) to Level 2 (valuation methods based on market data), positions with a fair value of CHF 828 mn (previous year CHF 52 mn) were reclassified from Level 2 to Level 1, and positions with a fair value of CHF 9 mn (previous year CHF 20 mn) were reclassified from Level 2 to Level 3 (valuation methods not based on market data).
132
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Risk related to balance sheet positions
Valuation methods of financial instruments
Listed market prices CHF mns
Valuation methods based on market data CHF mns
Valuation methods not based on market data CHF mns
31-12-09 Total CHF mns
1,671.1
111.1
0.0
1,782.2
24.3
190.2
0.0
214.5
Assets Trading portfolio assets Positive replacement values Other financial assets at fair value Equity instruments Units in investment funds Debt instruments1
0.9
0.0
0.0
0.9
31.7
41.6
16.8
90.1
4,513.3
4,041.1
0.0
8,554.4
125.3
0.0
1.0
126.3
Financial assets available-for-sale Equity instruments and other participations Units in investment funds Debt instruments
10.5
1.0
0.0
11.5
607.2
204.0
0.0
811.2
220.6
957.4
0.0
1,178.0
Liabilities Trading portfolio liabilities of which listed Negative replacement values Other financial liabilities at fair value of which listed 1
707.2 31.3
330.4
0.0
361.7
0.0
8,279.7
0.0
8,279.7
7,769.4
In the case of interest rate instruments measured at fair value through profit and loss, the difference between the book value (fair value) and the contractually agreed redemption amount at maturity was CHF 143.8 mn.
Vontobel Group, Annual Reports 2010
133
Notes to the consolidated financial statements Risk related to balance sheet positions
35 Level 3 instruments
31-12-10
31-12-09
CHF mns
CHF mns
17.8
0.0
1.6
0.0
Balance sheet Holdings at the beginning of the year Investments Disposals
(0.1)
0.0
Issues
0.0
0.0
Redemptions
0.0
0.0
Losses recognized in the income statement
(8.0)
(1.9)
Losses recognized as other comprehensive income
(0.1)
(0.5)
Gains recognized in the income statement
0.2
0.0
Gains recognized as other comprehensive income
0.2
0.0
Reclassifications to level 3
9.3
20.2
Reclassifications from level 3
0.0
0.0
Translation differences
0.0
0.0
20.9
17.8
(15.8)
(1.9)
Total book value at balance sheet date
Income on holdings on balance sheet date Unrealized losses recognized in the income statement Unrealized losses recognized as other comprehensive income
(0.5)
(0.5)
Unrealized gains recognized in the income statement
0.3
0.0
Unrealized gains recognized as other comprehensive income
0.2
0.0
No deferred day 1 profit or loss (difference between the transaction price and the fair value calculated on the transaction date) was reported for level 3 positions as of 31-12-10 or 31-12-09.
134
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Off-balance sheet and other information
36 Off-balance sheet information
Notes
31-12-10 CHF mns
31-12-09 CHF mns
193.4
271.6
Change to 31-12-09 CHF mns in %
Contingent liabilities Credit guarantees Performance guarantees
(78.2)
(29)
5.8
7.5
(1.7)
(23)
Other contingent liabilities
398.6
289.4
109.2
38
Total
597.8
568.5
29.3
5
14.9
12.3
2.6
21
12.7
11.2
1.5
13
Irrevocable commitments Undrawn irrevocable credit facilities of which payment obligation to “Einlagensicherung”1 1
Deposit protection of Swiss Banks’ and Securities Dealers’ Depositor Protection Association
Of the aggregate sum of CHF 612.7 mn (previous year CHF 580.8 mn) comprising contingent liabilities and irrevocable commitments, a total of CHF 467.8 mn (CHF 551.9 mn) are secured by recognized collateral and CHF 144.9 mn (CHF 28.9 mn) are unsecured.
Fiduciary transactions Other fiduciary placements
1,588.7
2,553.5
(964.8)
(38)
6.7
24.1
(17.4)
(72)
Fiduciary credits Other fiduciary financial transactions
0.0
6.7
(6.7)
(100)
1,595.4
2,584.3
(988.9)
(38)
Positive replacement values
197.2
214.5
(17.3)
(8)
Negative replacement values
544.2
361.7
182.5
50
18,898.7
20,867.4
(1,968.7)
(9)
Total
Derivative financial instruments
Contract volumes
41, 42
Litigation On 29 September 2010, Private Equity Holding AG, Zug, filed a lawsuit against Bank Vontobel AG, Zurich, with the Commercial Court of the Canton of Zurich. In the litigation relating to the purchase by Private Equity Holding AG of its own shares from Bank Vontobel AG in April 2000, Private Equity Holding AG asserts its claim that the transaction was invalid due to the infringement of the provisions of Swiss company law and it demands payment of CHF 81.9 mn plus 5% interest for the period since 16 September 2005, as well as accrued interest of CHF 13.7 mn for the period up to 15 September 2005. Bank Vontobel AG firmly believes that the purchase of shares contested by Private Equity Holding AG was executed correctly. Furthermore, the Vontobel Group believes that any claims of enrichment based on Swiss company law are to be regarded as having been discharged based on the wording of the settlement reached with Private Equity Holding AG in August 2001. The Vontobel Group has therefore decided not to record any provisions in respect of the litigation and to report the sum claimed in the lawsuit of CHF 117.3 mn, including interest as of 31 December 2010, under contingent liabilities. In connection with the fraud committed by Bernard Madoff, the liquidators of investment vehicles that invested directly or indirectly in Madoff funds have filed lawsuits with various courts against more than 100 banks and custodians. The litigation is targeted at investors who redeemed their investments in these vehicles between 2004 and 2008. The liquidators are demanding that the investors repay the sums involved because he considers them to have been obtained unjustly as a result of the redemptions. Since the liquidators often only know the names of the investors’ custodian banks, they have filed the lawsuits against them. Several legal entities of the Vontobel Group are or may be affected by the litigation in their capacity as a bank or custodian. The claims filed against the Vontobel Group concern the redemption of investments worth around USD 2.8 mn. However, based on the information currently available to it, the Vontobel Group believes the probability of a lawsuit resulting in an outflow of funds is low.
Vontobel Group, Annual Reports 2010
135
Notes to the consolidated financial statements Off-balance sheet and other information
31-12-10 CHF bns
31-12-09 CHF bns
Assets in self-managed collective investment instruments
20.4
19.6
0.8
4
Assets with management mandate
27.2
25.1
2.1
8
Other assets under management
31.0
30.5
0.5
2
Total assets under management (including double counts)
78.6
75.22
3.42
5
of which double counts
3.6
3.7
(0.1)
(3)
Net inflow/(outflow) of new assets
5.5
2.1
3.4
162
37 Assets under management1
1 2
Change to 31-12-09 CHF bns in %
Calculation in accordance with Table Q of the guidelines issued by the Swiss Financial Market Supervisory Authority concerning accounting standards for financial institutions and Vontobel Group internal guidelines Of which CHF 4.1 bn related to the acquistion of Commerzbank (Schweiz) AG
Assets under management and net inflows/outflows of new money Assets under management are calculated and reported in accordance with the guidelines issued by the Swiss Financial Market Supervisory Authority (FINMA) concerning accounting standards for financial institutions. Assets under management comprise all of the assets managed or held for investment purposes of private, corporate and institutional clients excluding borrowings, as well as assets in self-managed collective investment instruments. This includes all amounts due to customers on savings and deposit accounts, fixed-term and fiduciary deposits, and all valued assets. Assets under management that are deposited with third parties are included to the extent that they are managed by a Group company. Assets under management only include those assets on which the Vontobel Group generates considerably higher income than on assets that are held solely for custody purposes or the execution of transactions. These types of custody assets are reported separately. Assets that are counted more than once, i. e. in several categories of assets under management to be disclosed, are shown under double counts. They primarily include shares in self-managed collective investment instruments in client portfolios. Net inflows or outflows of assets under management in the course of a specific period consist of the acquisition of new clients, the departure of clients as well as inflows and outflows of assets from existing clients. This also includes borrowing and the repayment of loans. The calculation of the net inflow or outflow of new money is performed at the level â&#x20AC;&#x153;total assets under managementâ&#x20AC;?, i. e. before the elimination of double counts. Securities and currency-related changes in market value, interest income and dividends, fee charges as well as loan interests paid do not represent inflows or outflows.
38 Custody assets1 Custody assets 1
31-12-10 CHF bns
31-12-09 CHF bns
40.4
39.2
Assets held exclusively for transaction and custody purposes, in which the Vontobel Group restricts itself to custody and collection.
136
Vontobel Group, Annual Reports 2010
Change to 31-12-09 CHF bns in %
1.2
3
Notes to the consolidated financial statements Off-balance sheet and other information
Finance Lease CHF mns
Operating Lease CHF mns
31-12-10 Total CHF mns
31-12-09 Total CHF mns
Due within 1 year
0.9
23.3
24.2
24.2
Due within 1 to 2 years
0.9
22.0
22.9
19.5
Due within 2 to 3 years
0.4
21.1
21.5
17.0
Due within 3 to 4 years
0.0
19.5
19.5
15.8
Due within 4 to 5 years
0.0
15.6
15.6
15.0
Due in more than 5 years
0.0
23.9
23.9
24.7
Total minimum obligation
2.2
125.4
127.6
116.2
39 Future liabilities for finance lease, operating lease and the acquisition of fixed assets and intangible assets
In the year under review, general expense include CHF 26.4 mn (previous year CHF 26.3 mn) from operating lease. The future liabilities from operating leases mainly comprise lease agreements for premises occupied by the Vontobel Group. The future income from minimum lease payments from non-terminable subtenancies amounted to CHF 0.0 mn in 2010 (previous year CHF 0.3 mn).
40 Cooperation agreement between Vontobel Group and Raiffeisen Switzerland The ongoing cooperation between Vontobel Group and Raiffeisen Switzerland (former Swiss Raiffeisen Group) initiated in 1994 was broadened in 2004 and extended through to 2017 at 14 December 2009. In connection with the expansion of its investment management business, the Raiffeisen Group cooperates with Vontobel Group and offers Vontobel’s investment-related services and selected third-party products at all of its banking locations in Switzerland. Vontobel develops and designs product and service solutions for Raiffeisen’s investment customers in the fields of investment funds, standardized asset management solutions and structured products. Raiffeisen banks continue to undertake the marketing and client advisory activities as before. Vontobel advises and supports Raiffeisen’s marketing organization. In addition, the Raiffeisen Group outsourced its securities trading and settlement as well as safekeeping activities to Vontobel in 2005. Additionally, Vontobel has made its trading infrastructure available to the central bank of the Raiffeisen Group. In October 2006, Vontobel Group as service provider assumed the custodian services for all Raiffeisen clients on behalf of the Raiffeisen Group. To underpin the long-term nature of their partnership, Raiffeisen Group acquired a 12.5% stake in Vontobel Holding AG effective as of 8 December 2004 (refer to the information given in the Corporate Governance, page 39f.). The requisite agreements implementing the mutual cooperation in the investment management and securities transactions and administration business were signed at the same time. The cooperation agreements took effect retroactively to 1 July 2004 and were prolonged at 14 December 2009 for an indefinite period, at minimum, however, until 30 June 2017. The earliest effective date of ordinary termination – in observance of a period of notice of 24 months – is 30 June 2017.
Vontobel Group, Annual Reports 2010
137
Notes to the consolidated financial statements Off-balance sheet and other information
41 Open derivative instruments
31-12-10
Term to maturity up to 3 months PRV1 NRV2 CHF mns CHF mns
Term to maturity 3 to 12 months PRV NRV CHF mns CHF mns
Term to maturity 1 to 5 years PRV NRV CHF mns CHF mns
Term to maturity more than 5 years PRV NRV CHF mns CHF mns
Total PRV CHF mns
Total NRV CHF mns
Total contract volume CHF mns
0.0
0.0
3.1
45.8
94.5
5,282.0
0.0
0.0
201.5
0.6
10.0
Debt instruments Forward contracts incl. FRAs
0.0
0.0
Swaps
0.1
0.7
4.2
6.0
38.3
60.6
3.2
27.2
Futures Options (OTC)
0.2
0.0
0.0
0.1
0.4
0.1
0.1
0.9
4.2
6.0
38.3
-
-
60.6
3.3
27.6
45.9
95.1
5,496.6
Forward contracts
21.4
27.6
5.6
8.1
0.2
0.1
0.0
27.2
35.8
1,114.8
Swaps
37.7
22.1
5.0
3.8
0.1
0.0
42.8
25.9
1,137.8
0.0
0.0
3.8
3.5
2.5
9.4
986.7
-
-
3.5
72.5
71.1
3,243.1
0.0
0.0
0.4
Options (exchange traded) Total Foreign currency
Futures Options (OTC)
1.0
1.9
1.3
3.5
0.2
0.5
60.1
51.6
11.9
15.4
0.5
0.6
0.0
0.0
2.5
22.0
1.8
26.5
0.0
0.3
2.5
22.0
1.8
26.5
0.0
0.3
Options (exchange traded) Total
0.0
Precious metals Forward contracts Futures Options (OTC)
0.0
0.0
173.8
9.3
4.3
58.1
402.1
-
-
9.3
4.3
58.1
-
-
7.8
8.7
0.0
0.0
580.7
29.3
276.1
7,361.3
30.0
23.7
1,175.6
67.1
308.5
9,387.7
0.3
2.3
96.4
0.3
2.3
96.4
Options (exchange traded) Total
-
576.3
Equities/indices Forward contracts Swaps
0.4
4.5
0.2
1.8
8.5
1.1
Futures Options (OTC)
0.5
60.8
4.5
122.8
24.2
51.3
Options (exchange traded)
10.8
7.7
16.3
15.3
2.9
0.7
Total
11.7
68.5
25.3
138.3
28.9
60.5
0.0
0.3
2.3
0.0
0.3
2.3
0.1
41.2
1.2
41.2
270.1
Credit derivatives Credit default swaps Total
-
-
-
-
-
Other Forward contracts Futures Options (OTC)
0.3
6.6
6.4
0.5
2.4
Options (exchange traded)
-
-
0.0
0.0
18.2
7.1
9.1
80.4
-
9.1
Total
-
0.3
6.6
6.4
0.5
-
-
2.4
7.1
Total
74.4
143.3
49.8
192.6
68.5
124.3
4.5
84.0
197.2
1 2
Positive replacement values Negative replacement values
138
Vontobel Group, Annual Reports 2010
98.6
544.2 18,898.7
Notes to the consolidated financial statements Off-balance sheet and other information
31-12-09
Term to maturity up to 3 months PRV1 NRV2 CHF mns CHF mns
Term to maturity 3 to 12 months PRV NRV CHF mns CHF mns
Term to maturity 1 to 5 years PRV NRV CHF mns CHF mns
Term to maturity more than 5 years PRV NRV CHF mns CHF mns
Total contract volume CHF mns
Total PRV CHF mns
Total NRV CHF mns
-
-
67.7
92.7
5,804.8
0.0
0.0
228.7
0.3
65.6
Debt instruments Forward contracts incl. FRAs Swaps
0.1
Futures
0.0
12.2
8.8
54.1
63.7
1.3
20.2
0.0
Options (OTC)
0.0
0.1
0.0
0.2
0.2
0.2 -
-
1.5
20.4
67.9
93.0
6,099.1
20.6
20.3
1,512.1
16.2
11.0
1,310.1
0.0
0.0
2.9
0.7
12.1
13.7
589.0
-
-
0.7
48.9
45.0
3,414.1
0.2
0.1
8.2
Options (exchange traded) Total
0.1
0.0
12.2
8.9
54.1
63.7
8.3
9.7
12.3
10.6
0.0
0.0
14.5
9.8
1.7
1.2
Foreign currency Forward contracts Swaps Futures Options (OTC)
0.5
1.3
11.4
11.6
0.2
0.1
23.3
20.8
25.4
23.4
0.2
0.1
0.2
0.1
0.0
0.0
0.0
3.3
1.6
2.6
1.4
0.8
0.2
3.4
1.6
2.6
1.4
0.8
Options (exchange traded) Total
-
Precious metals Forward contracts Futures Options (OTC)
0.0
0.0
104.5
2.8
3.0
9.5
178.2
-
-
2.8
3.2
9.6
-
-
1.3
1.3
0.0
0.0
232.7
171.5
9,202.4
31.3
1,270.1
Options (exchange traded) Total
-
290.9
Equities/indices Forward contracts Swaps
0.2
0.2
1.1
1.1
Futures Options (OTC) Options (exchange traded) Total
6.9
41.3
37.1
86.3
18.1
13.5
6.1
2.8
9.7
27.5
8.5
1.0
13.0
44.1
47.0
114.0
27.7
15.6
0.2
30.4
62.3
0.2
30.4
87.9
24.3
153.8
204.1 10,859.0
Credit derivatives Credit default swaps Total
3.1 -
-
-
3.1
-
-
-
-
0.0
3.1
70.3
0.0
3.1
70.3
Other Forward contracts Futures Options (OTC)
0.2
0.7
0.2
5.9
5.2
1.3
Options (exchange traded)
-
-
0.0
0.0
29.3
6.6
6.9
104.7
-
6.9
Total
-
0.2
0.7
0.2
5.9
5.2
-
1.3
6.6
Total
36.6
68.5
86.9
152.2
89.3
85.4
1.7
55.6
214.5
1 2
134.0
361.7 20,867.4
Positive replacement values Negative replacement values
Vontobel Group, Annual Reports 2010
139
Notes to the consolidated financial statements Off-balance sheet and other information
42 Open derivative instruments
31-12-10
PRV1 CHF mns
Trading instruments contract NRV2 volume CHF mns CHF mns
PRV CHF mns
Hedging instruments contract NRV volume CHF mns CHF mns
Debt instruments Forward contracts incl. FRAs
0.0
0.0
3.1
45.8
94.5
5,282.0
0.1
0.6
10.0
45.9
95.1
5,496.6
Forward contracts
27.2
35.8
1,114.8
Swaps
42.8
25.9
1,137.8
2.5
9.4
986.7
72.5
71.1
3,243.1
0.0
0.0
0.4
4.3
58.1
402.1
4.3
58.1
576.3
7.8
8.7
270.1
Options (OTC)
29.3
276.1
7,361.3
Options (exchange traded)
30.0
23.7
1,175.6
Total
67.1
308.5
9,387.7
Credit default swaps
0.3
2.3
96.4
Total
0.3
2.3
96.4
7.1
9.1
80.4
Total
7.1
9.1
Total
197.2
544.2
Swaps Futures Options (OTC)
201.5
Options (exchange traded) Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
98.6
-
-
-
18,898.7
0.0
0.0
0.0
Foreign currency
Futures Options (OTC)
3.8
Options (exchange traded) Total Precious metals Forward contracts Futures Options (OTC)
173.8
Options (exchange traded) Total Equities/indices Forward contracts Swaps Futures
580.7
Credit derivatives
Other Forward contracts Swaps Futures Options (OTC)
18.2
Options (exchange traded)
1 2
Positive replacement values Negative replacement values
140
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Off-balance sheet and other information
31-12-09
PRV1 CHF mns
Trading instruments contract NRV2 volume CHF mns CHF mns
PRV CHF mns
Hedging instruments contract NRV volume CHF mns CHF mns
Debt instruments Forward contracts incl. FRAs Swaps
67.7
92.7
0.2
0.3
65.6
67.9
93.0
6,099.1
Forward contracts
20.6
20.3
1,512.1
Swaps
16.2
11.0
1,310.1
12.1
13.7
589.0
48.9
45.0
3,414.1
0.2
0.1
8.2
3.0
9.5
178.2
3.2
9.6
290.9
1.3
1.3
153.8
Options (OTC)
62.3
171.5
9,202.4
Options (exchange traded)
24.3
31.3
1,270.1
Total
87.9
204.1
10,859.0
3.1
70.3
-
3.1
70.3
6.6
6.9
104.7
Total
6.6
6.9
Total
214.5
361.7
Futures Options (OTC)
5,804.8 228.7
Options (exchange traded) Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
134.0
-
-
-
20,867.4
0.0
0.0
0.0
Foreign currency
Futures Options (OTC)
2.9
Options (exchange traded) Total Precious metals Forward contracts Futures Options (OTC)
104.5
Options (exchange traded) Total Equities/indices Forward contracts Swaps Futures
232.7
Credit derivatives Credit default swaps Total Other Forward contracts Swaps Futures Options (OTC)
29.3
Options (exchange traded)
1 2
Positive replacement values Negative replacement values Vontobel Group, Annual Reports 2010
141
Notes to the consolidated financial statements Off-balance sheet and other information
43 Employee benefit plans There are pension plans for the majority of employees at Vontobel Group. These can be either defined contribution or defined benefit plans. Actuarial calculations of defined benefit plans are conducted by independent experts. The majority of Vontobel Group employees participates in the pension plans in Switzerland. The pension obligations are met through the pension assets of pension funds that are legally separate and independent from the Vontobel Group. These pension funds are managed by a Board of Trustees consisting of employee and employer representatives. The pension plan is organized, managed and funded in accordance with legislation, the foundation charters and the applicable pension regulations. Employees and pensioners or their survivors receive their statutory benefits when they leave the company or retire as well as in the event of death or disability. These benefits are funded through employer and employee contributions. Under IAS 19, Swiss pension plans are regarded as defined benefit plans due to their mandatory minimum rate of return, minimum conversion rate and the additional liability to pay benefits in connection with the restructuring of plans. The last actuarial calculation for these pension plans was conducted as of 1 May 2010. Foreign pension plans exist in Liechtenstein, Great Britain, Italy, Hong Kong, Luxemburg, Spain, Dubai, and the US. They are all defined contribution plans. There are individual pension commitments in Germany and Austria, for which a provision was expensed accordingly.
Actuarial data for the defined benefit pension plans1
31-12-10 CHF mns
31-12-09 CHF mns
(574.3)
(521.2)
Current service cost
(23.9)
(23.4)
Interest cost
(19.9)
(18.8)
Employee contributions
(11.3)
(11.1)
Present value of pension obligations at 1 January
Benefits paid/(deposited)
43.4
27.5
Past service cost
(1.2)
(1.5)
Business combination
0.0
(48.8)
Curtailments and settlements
0.0
1.5
Actuarial gains/(losses) on obligations Present value of pension obligations at 31 December Plan assets at fair value at 1 January
570.8
479.1
22.6
19.6
Contributions by the employer
19.7
17.4
Employee contributions
11.3
11.1
(43.4)
(27.5)
0.0
45.3
Business combination Actuarial gains/(losses) on plan assets Plan assets at fair value at 31 December 1
Vontobel Group, Annual Reports 2010
21.5 (574.3)
Expected return on plan assets
Benefits (paid)/deposited
142
(26.9) (614.1)
Pension obligations and costs are presented as negative amounts.
(5.8)
25.8
575.2
570.8
Notes to the consolidated financial statements Off-balance sheet and other information
Plan assets at fair value Present value of pension obligations Funding surplus/(gap) Unrecognized actuarial (gains)/losses Uncapitalizable surpluses
31-12-10 CHF mns
31-12-09 CHF mns
31-12-08 CHF mns
31-12-07 CHF mns
31-12-06 CHF mns
575.2
570.8
479.1
516.3
476.8
(614.1)
(574.3)
(521.2)
(480.8)
(398.5)
(38.9)
(3.5)
(42.1)
35.5
78.3
64.2
31.7
82.2
6.6
(42.9)
0.0
0.0
0.0
(2.7)
(29.2)
25.3
28.2
40.1
39.4
6.2
(5.8)
25.8
(64.5)
1.0
11.6
(14.8)
(14.5)
16.6
21.9
(54.7)
31-12-10 CHF mns
31-12-09 CHF mns
Current service cost
(35.2)
(34.5)
Interest cost
(19.9)
(18.8)
Expected return on plan assets
22.6
19.6
Recognition of actuarial gains/(losses)
(0.2)
(3.2)
Past service cost
(1.2)
(1.5)
Prepaid/(deferred) pension cost Experience gains/(losses) on plan assets Experience (gains)/losses on pension obligations
First-time application of IFRIC 14 â&#x20AC;&#x201C; IAS 19 in 2008. The figures for 2007 have been adjusted accordingly.
Effects of curtailments and settlements Employee contributions Pension cost for defined benefit plans Pension cost for defined contribution plans Total pension cost recognized in personnel expense Effective return on plan assets Prepaid/(deferred) pension cost as of 1 January Pension cost for defined benefit plans Contributions by the employer Business combination Prepaid/(deferred) pension cost as of 31 December
0.0
1.5
11.3
11.1
(22.6)
(25.8)
(3.9)
(3.5)
(26.5)
(29.3)
16.8
45.4
28.2
40.1
(22.6)
(25.8)
19.7
17.4
0.0
(3.5)
25.3
28.2
of which reported in Other assets
29.3
33.3
of which reported in Other liabilities
(4.0)
(5.1)
Vontobel Group, Annual Reports 2010
143
Notes to the consolidated financial statements Off-balance sheet and other information
31-12-10 in %
31-12-09 in %
Discount rate
2.7
3.5
Expected return on plan assets
4.0
4.0
Expected rate of salary increases
2.0
2.0
Expected rate of pension increases
0.0
0
20.5
18.5
Actuarial assumptions (Swiss pension plans)1
Anticipated contributions to pension funds in the following year (defined benefit plans) in CHF mns 1
The expected return on the assets is based on the targeted allocation of plan assets and takes account of both the long-term historical performance of the individual asset classes and assessments of future market performance.
Demographic assumptions (e.g. probability of death, disability or termination) are based on the technical principles set out in the Swiss Federal Law on Occupational Retirement, Survivorsâ&#x20AC;&#x2122; and Disability Pension Plans (BVG) 2005, which are based on the observation of large insurance portfolios in Switzerland over a period of several years.
31-12-10 CHF mns
31-12-09 CHF mns
Equity instruments
183.2
173.4
Debt instruments
312.0
312.2
27.0
23.3
Composition of plan assets
Real estate Others
53.0
61.9
575.2
570.8
of which registered shares of Vontobel Holding AG
0.0
0.0
of which debt instruments of the Vontobel Group
0.0
0.0
of which credit balances with Vontobel companies
23.2
15.7
0.0
0.0
Total plan assets at fair value
of which securities lent to the Vontobel Group
Plan-specific sensitivities The following overview illustrates the impacts of each isolated change in major actuarial assumptions on the present value of the pension liabilities as of 31 December 2010 or the anticipated service costs of defined benefit plans in the following year. Increase in the present value of the pension liability as of 31-12-10 CHF mns in %
Discount rate (reduction of 25 basis points) Expected rate of salary increases (increase of 50 basis points)
14.6
2.4
8.8
1.4
Increase in the expected service costs in the following year CHF mns in %
Discount rate (reduction of 25 basis points)
0.9
3.4
Expected rate of salary increases (increase of 50 basis points)
0.4
1.3
If the expected return was reduced by 50 basis points, the expected pension cost in the following year would increase by CHF 2.9 mn or 13.1%.
144
Vontobel Group, Annual Reports 2010
Notes to the consolidated financial statements Off-balance sheet and other information
44 Other employee benefits payable in the long term Other employee benefits payable in the long term exist in the form of long service awards and sabbatical leaves. Analogously to the defined benefit pension plans, actuarial calculations have been performed and an accrued expense recognized for these benefits.
Accrued expense for long service awards and sabbatical leaves
31-12-10 Mio. CHF
31-12-09 Mio. CHF
1.0
0.9
45 Significant foreign currency rates For the significant currencies, the following rates were used:
31-12-10
year end rates 31-12-09
2010
average rates 2009
1 EUR
1.25045
1.48315
1.37761
1.50474
1 USD
0.93210
1.03375
1.03649
1.08100
46 Events after the balance sheet date There were no events that had to be reported after balance sheet date.
47 Dividend payment The Board of Directors will propose the payment of a dividend of CHF 1.40 per registered share with a par value of CHF 1.00 to the General Meeting of Shareholders of Vontobel Holding AG on 3 May 2011. This corresponds to a total payment of CHF 90.5 mn.1 1
Shares entitled to a dividend as of 31-12-10
48 Authorization of the consolidated accounts The Board of Directors discussed and approved the present annual report during the board meeting on 10 February 2011. It will be submitted for approval at the General Meeting on 3 May 2011.
Vontobel Group, Annual Reports 2010
145
Notes to the consolidated financial statements Segment reporting
49 Segment reporting principles External segment reporting reflects the organizational structure of the Vontobel Group as well as internal management reporting, which forms the basis for the assessment of the financial performance of the segments and the allocation of resources to the segments. The segments correspond to the business units, which comprise the following activities: Private Banking Private Banking encompasses portfolio management services for private clients, investment advisory, custodian services, integrated financial services relating to legal, inheritance and tax matters, and wealth consolidation services. Investment Banking Investment Banking focuses on the derivatives and structured products business, securities and foreign exchange trading, institutional sales and research, corporate finance, services for external asset managers and transaction banking. Asset Management Asset Management specializes in active asset management based on asset allocation, stock selection and multi-manager approaches. Its products are distributed through wholesale channels and directly to institutional clients. They are also sold by Vontobel’s cooperation partners. Vontobel supplies Raiffeisen Switzerland with comprehensive investment services as part of their long-term cooperation. Corporate Center The Corporate Center of the Vontobel Group comprises the support units Operations, Finance & Risk and Group Services, which supply core services to the business units. Income, expenses, assets and liabilities are allocated to the business units on the basis of client responsibility or according to the principle of origination. Items that cannot be allocated directly to the business units are reported in the Corporate Center accounts. The Corporate Center also includes consolidating entries. The costs of the services supplied internally are reported in the item “Services from/to other segment(s)” as a reduction in costs for the service provider and as an increase in costs for the recipient. This cost allocation is based on agreements that are renegotiated periodically according to the same principle as if they were concluded between independent third parties (“at arm’s length”).
Vontobel Group, Annual Reports 2010
147
Notes to the consolidated financial statements Segment reporting
Private Banking CHF mns
Business segment reporting
Investment Banking CHF mns
Asset Management CHF mns
Corporate Center CHF mns
Total Group CHF mns
31-12-10 Net interest income
26.6
10.8
0.5
15.2
53.1
Other operating income
221.9
320.9
213.8
20.5
777.1
Operating income
248.5
331.7
214.3
35.7
830.2
Personnel expense
90.1
103.6
96.2
102.4
392.3
General expense
20.3
48.0
22.9
105.0
196.2
Services from/to other segment(s)
78.7
61.4
37.6
(177.7)
0.0
Depreciation of property, equipment and intangible assets
2.8
2.6
8.4
48.0
61.8
Value adjustments, provisions and losses
8.1
0.6
(1.4)
(0.5)
6.8
200.0
216.2
163.7
77.2
657.1
48.5
115.5
50.6
(41.5)
173.1
Operating expense Segment profit before taxes Taxes
25.8
Net profit
147.3
of which minority interests
(0.5)
Additional information Segment assets Segment liabilities Allocated equity according to BIS1 Assets under management (CHF bns) Net new money (CHF bns)
939.7
12,176.9
162.3
5,022.7
18,301.6
3,976.9
10,757.7
290.0
1,773.5
16,798.1
142.3
264.0
109.3
109.5
625.1
29.6
8.2
42.5
(1.7)
78.6
1.2
0.6
3.7
n/a
Custody assets (CHF bns)
40.4
Capital expenditure Employees (full time equivalents) 1
5.5 40.4
0.6
0.9
0.8
38.7
41.0
347.7
341.6
281.0
375.8
1,346.1
The allocation of the regulatory capital required in accordance with BIS standards to the individual segments is based on the principle of origination. With regard to capital requirements for credit risks related to balance sheet assets, allocation is based on guidelines analogous to those used for reporting segmental assets. The prescribed deduction of CHF 150.7 mn from core capital for intangible assets has been included in the figures above of the segments Private Banking, Investment Banking and Asset Management. The valuation adjustments of own liabilities are assigned to the Investment Banking segment. The deduction of CHF 54.2 mn from core capital for Treasury shares is not included in the figures above.
Information on regions1
Switzerland CHF mns
Europe excl. Switzerland CHF mns
Americas CHF mns
Other Countries2 CHF mns
Consolidation CHF mns
Total Group CHF mns
(1,992.9)
18,301.6
31-12-10 Operating income related to external customers Assets Property, equipment and intangible assets Capital expenditure 1 2
Reporting is based on operating locations. Mainly U.A.E.
148
Vontobel Group, Annual Reports 2010
517.2
148.6
35.6
128.8
9,634.3
983.6
35.2
9,641.4
830.2
338.4
13.6
1.5
2.0
355.5
38.5
2.3
0.1
0.1
41.0
Notes to the consolidated financial statements Segment reporting
Private Banking CHF mns
Business segment reporting
Investment Banking CHF mns
Asset Management CHF mns
Corporate Center CHF mns
Total Group CHF mns
31-12-09 Net interest income
16.8
6.1
1.5
21.6
46.0
Other operating income
195.8
367.1
175.9
0.2
739.0
Operating income
212.6
373.2
177.4
21.8
785.0
Personnel expense
86.6
127.4
81.1
91.7
386.8
General expense
19.2
38.1
21.0
93.6
171.9
Services from/to other segment(s)
74.8
56.3
34.5
(165.6)
0.0
Depreciation of property, equipment and intangible assets
1.5
2.5
8.7
49.2
61.9
Value adjustments, provisions and losses
9.3
1.8
0.6
0.8
12.5
191.4
226.1
145.9
69.7
633.1
21.2
147.1
31.5
(47.9)
151.9
Operating expense Segment profit before taxes Taxes
13.6
Net profit
138.3
of which minority interests
(0.6)
Additional information Segment assets Segment liabilities Allocated equity according to BIS1 Assets under management (CHF bns) Net new money (CHF bns)
908.3
11,301.2
184.9
5,687.0
18,081.4
3,565.6
11,469.1
364.9
1,167.2
16,566.8
147.8
278.2
117.3
123.4
666.7
29.9
7.7
38.6
(1.0)
75.2
0.4
0.5
1.2
n/a
Custody assets (CHF bns) Capital expenditure Employees (full time equivalents) 1
2.1
39.2
39.2
0.6
0.2
0.2
38.4
39.4
404.7
324.9
270.7
360.8
1,361.1
The allocation of the regulatory capital required in accordance with BIS standards to the individual segments is based on the principle of origination. With regard to capital requirements for credit risks related to balance sheet assets, allocation is based on guidelines analogous to those used for reporting segmental assets. The prescribed deduction of CHF 161.2 mn from core capital for intangible assets has been included in the figures above of the segments Private Banking, Investment Banking and Asset Management. The valuation adjustments of own liabilities are assigned to the Investment Banking segment. The deduction of CHF 49.5 mn from core capital for Treasury shares is not included in the figures above.
Information on regions1
Switzerland CHF mns
Europe excl. Switzerland CHF mns
Americas CHF mns
Other Countries2 CHF mns
Consolidation CHF mns
Total Group CHF mns
(1,060.3)
18,081.4
31-12-09 Operating income related to external customers Assets Property, equipment and intangible assets Capital expenditure 1 2
508.5
122.7
23.0
130.8
9,004.0
1,014.9
141.7
8,981.1
785.0
359.2
15.7
2.1
2.0
379.0
36.4
0.9
0.0
2.1
39.4
Reporting is based on operating locations. Mainly U.A.E.
Vontobel Group, Annual Reports 2010
149
Notes to the consolidated financial statements Major subsidiaries and participations
Fully consolidated companies Vontobel Holding AG Bank Vontobel AG Bank Vontobel Cayman Bank Vontobel Österreich AG Bank Vontobel Europe AG
Registered office
Business activity
Currency
Paid-up share capital mns
Share of votes and capital in %
Zurich
Holding
CHF
65.0
Parent company 100
Zurich
Bank
CHF
149.0
Grand Cayman
Bank
CHF
2.0
100
Salzburg/Vienna
Bank
EUR
9.6
100
Munich/Frankfurt/ Hamburg/Cologne
Bank
EUR
40.5
100
Bank Vontobel (Liechtenstein) AG
Vaduz
Bank
CHF
20.0
100
Vontobel Asset Management, Inc.
New York
Portfolio management
USD
6.5
100
Zurich
Holding
CHF
10.0
100
Vontobel Fonds Services AG
Zurich
Fund management
CHF
4.0
100
Vontobel Fund Advisory S.A.
Luxemburg
Fund management
EUR
0.14
100
Vontobel Beteiligungen AG
Vontobel Management S.A. Vontobel Europe S.A.
Luxemburg
Fund management
EUR
1.5
100
Luxemburg/London/ Madrid/Milan/Vienna
Portfolio management
EUR
2.0
100
Vontobel Swiss Wealth Advisors AG Vontobel Securities AG Vontobel Financial Products GmbH Vontobel Financial Products Ltd. Vontobel Invest Ltd.
Zurich
Wealth management
CHF
0.5
100
Zurich/New York
Brokerage
CHF
2.0
100
Frankfurt
Issues
EUR
0.1
100
Dubai
Issues
USD
2.0
100
Dubai
Investments
CHF
1.2
100
Hong Kong
Financial Advisor
HKD
7.0
100
VTT-Management Trust reg.
Vaduz
Director services
CHF
0.03
100
VT Wealth Management AG
Zurich
Wealth management
CHF
0.8
51.0
VT Investment (Zürich) AG
Zurich
Holding
CHF
0.1
100
Harcourt Investment Consulting AG
Zurich
Alternative investments
CHF
3.0
100
Harcourt Services AG
Zurich
Financial Services
CHF
0.25
100
Polaris Investment Advisory AG
Zurich
Alternative investments
CHF
1.0
71.8 100
Vontobel Asia Pacific Ltd.
Harcourt Investment Consulting AB Harcourt Alternative Investmtents (US) LLC
Stockholm
Alternative investments
SEK
0.25
Wilmington/New York
Alternative investments
USD
0.05
100
Bridgetown
Alternative investments
USD
0.006
100
Alternative Investment Management Ltd. Alternative Investment Solutions Ltd. Harcourt Alternative Investments (HK) Ltd. Harcourt Investments, Agencia de Valores, S.A.
Grand Cayman
Alternative investments
USD
0.005
100
Hong Kong
Alternative investments
HKD
0.950
100
Madrid
Alternative investments
EUR
0.7
100
The share of voting rights held corresponds to the equity interest held. Only the shares of Vontobel Holding AG are listed on the Swiss Exchange (SIX). Please see pages 2 and 168 for more detailed information.
Associated companies and joint ventures Vontobel Treuhand AG Deutsche Börse Commodities GmbH
150
Vontobel Group, Annual Reports 2010
Vaduz
Fiduciary company
CHF
0.5
49.0
Frankfurt
Issues
EUR
1.0
16.2
Notes to the consolidated financial statements Changes in the scope of consolidation in 2010
Companies fully consolidated for the first time Company
Currency
Paid-up share capital mns
Share of votes and capital in %
Registered office
Business activity
Vontobel Swiss Wealth Advisors AG
Zurich
Wealth management
CHF
0.5
100
VT Investment (Zürich) AG
Zurich
Holding
CHF
0.1
100
Participations accounted for under the equity method of accounting for the first time none
Participations removed from the scope of consolidation Participation
Registered office
Reason for removal
Vienna
Merged with Bank Vontobel Österreich AG, Salzburg
Frankfurt
Contributed to Bank Vontobel Europe AG, Munich
Cologne
Merged with Bank Vontobel Europe AG, Munich
Schaffhausen
Merged with VT Investment (Zürich) AG, Zurich
Vontobel Trust Company Cayman
Grand Cayman
Liquidation
VTC Director Services Ltd.
Grand Cayman
Liquidation
Commerzbank Oesterreich AG Vontobel Europe S.A., Branch Vontobel Securities AG VT Finance AG
Changes in company names during the year under review New company name
Registered office
Old company name
Registered office
none
Vontobel Group, Annual Reports 2010
151
Notes to the consolidated financial statements Statutory Banking Regulations
The Vontobel Group’s consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS). FINMA stipulates that banks domiciled in Switzerland that report their financial statements according to US GAAP or IFRS must explain any material differences between Swiss accounting regulations for banks (Banking Ordinance and FINMA Circular 2008/2) and the reporting standard used. The most significant differences between IFRS and Swiss accounting regulations for banks that are of relevance to the Vontobel Group are as follows: Financial assets available for sale Under IFRS, financial assets available for sale will be measured at the fair value. Changes in the fair value will be recognized in other comprehensive income, until the financial asset is sold, collected or otherwise disposed of, or its value is deemed to be impaired. As soon as a financial asset available for sale is deemed to be impaired, the cumulative unrealized loss previously entered in other comprehensive income will be reclassified to the income statement in the reporting period. Under Swiss law, these kinds of financial assets are recorded at the lower of cost or market. Impairment losses, any reversals of previously recognized impairment losses as well as profits and losses from disposals are recognized as “Other ordinary income”. Other financial assets and liabilities measured at fair value through profit and loss (Fair Value Option) According to IFRS, under certain conditions financial instruments can be assigned to the Other financial assets or liabilities category measured at fair value through profit and loss. These financial assets and liabilities are carried at fair value in the balance sheet, and income from the financial instruments is recognized in the income statement. This balance sheet item may also include financial instruments which under Swiss law are carried according to the lower-of-cost-or-market principle or at amortized cost. Write-downs to market value, any reversals of previously recognized impairment losses as well as disposal gains and losses are recognized in “Other ordinary income”. Extraordinary profit Under IFRS, all items of income and expense are allocated to ordinary operating activities. In accordance with Swiss law, income and expenses are classified as extraordinary if they are not recurring or not related to operational activities. Goodwill amortization The amortization of goodwill has been prohibited according to IFRS since the beginning of 2005. Instead it must be tested for impairment annually, or more frequently if events or changes in circumstances indicate a possible impairment. Under Swiss law, goodwill may still be written down on a linear basis over its anticipated useful life, but not more than 20 years. Reserve for general banking risks IFRS stipulates that general provisions cannot be recorded for unspecified purposes. Under Swiss accounting regulations for banks, reserves for general banking risks are reported as a separate component of shareholders‘ equity.
152
Vontobel Group, Annual Reports 2010
Personnel
Number of personnel (total and full time equivalents)
Registered office
Number
Zurich
5
4.3
4
3.1
31-12-10 FTE 1
Number
31-12-09 FTE1
Fully consolidated companies Vontobel Holding AG Bank Vontobel AG Bank Vontobel Österreich AG Bank Vontobel Europe AG
Zurich
1,060
999.9
1,087
1,037.4
Salzburg
49
44.0
48
43.8
Munich
75
72.9
56
52.3
Bank Vontobel (Liechtenstein) AG
Vaduz
13
11.8
14
12.8
Vontobel Asset Management, Inc.
New York
41
41.0
35
34.6
Vontobel Fonds Services AG
Zurich
13
12.3
14
12.7
Harcourt Group
Zurich
66
64.1
72
69.1
Other Group companies Total 1
96
95.8
97
95.3
1,418
1,346.1
1,427
1,361.1
Full time equivalents
Female
Male
31-12-10 Total
Female
Male
31-12-09 Total
495
923
1,418
507
920
1,427
Switzerland
382
779
1,161
403
777
1,180
Abroad
113
144
257
104
143
247
Staff changes Total number of personnel Breakdown by domicile
Numbers include trainees
Further information on staff changes can be found in the “Sustainability at the Vontobel Group” chapter on pages 17ff.
Vontobel Group, Annual Reports 2010
153
Report of the Group Auditors
Ernst & Young L td Belpstrasse 23 CH-3001 Berne
Phone +41 58 286 61 11 Fax +41 58 286 68 18 www.ey.com/ch
To the General Meeting of
Vontobel Holding AG, Zurich
Berne, 10 February 2011
Report of the statutory auditor on the consolidated financial statements As statutory auditor, we have audited the consolidated financial statements (pages 64 to 152) of Vontobel Holding AG for the year ended 31 December 2010. Board of Directors’ responsibility The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements for the year ended 31 December 2010 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.
Report on Other Legal Requirements We confirm that we meet the legal requirements on licensing according to the Auditor Over-sight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved.
Ernst & Young Ltd
Iqbal Khan
Dr Philippe Wüst
Licensed audit expert (Auditor in charge)
Licensed audit expert
Vontobel Group, Annual Reports 2010
155
Vontobel Holding AG
Review of business activities
158
Key figures
159
Income statement
160
Balance sheet
162
Shareholdersâ&#x20AC;&#x2122; equity/Notes to the financial statements
164
Proposal of the Board of Directors
166
Auditorsâ&#x20AC;&#x2122; report
167
Vontobel Group, Annual Reports 2010
157
Vontobel Holding AG Review of business activities
Vontobel Holding AG reported a net profit of CHF 131.4 mn for the financial year 2010. This result was virtually unchanged compared to 2009. The holding company’s income stemmed mainly from the prior-year profits (dividends) distributed by its operational subsidiaries. Operating income for 2010 declined by 29% to CHF 193.9 mn compared to the previous year. This decrease reflects the absence of non-recurring income: in 2009, income from participations was very positively impacted by the partial distribution of assets from Vontobel Beteiligungen AG in connection with MicroValue AG, which was acquired as a result of an exchange transaction. At the same time, this transaction gave rise to a writedown on Vontobel Beteiligungen AG. In the year under review, however, no one-off writedowns were recorded. As a result, operating expense also declined (–56%) to CHF 62.0 mn. Profit before extraordinary items and taxes was therefore unchanged at CHF 131.9 mn. No significant extraordinary income or expenses were recorded in 2010. In view of the 7% increase in Group net profit to CHF 147.3 mn, the Board of Directors of Vontobel Holding AG will propose a dividend of CHF 1.40 per registered share – unchanged from the previous year – to the General Meeting of Shareholders on 3 May 2011. The company’s share capital amounts to CHF 65.0 mn, consisting of 65 mn registered shares with a par value of CHF 1.00 each, of which 64,612,611 were entitled to a dividend as of 31 December 2010.
158
Vontobel Group, Annual Reports 2010
Vontobel Holding AG Key figures
Key figures Net profit per registered share in CHF1 Ordinary dividend in percent of share capital
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
131.4
132.5
(1.1)
(1)
2.03
2.05
(0.02)
(1)
140 2
140
1.40 2
1.40
0.0
0
900.0
859.1
40.9
5
13.93
13.27
0.66
5
193.9
273.8
(79.9)
(29)
167.4
260.4
(93.0)
(36)
Total operating expense
62.0
142.0
(80.0)
(56)
Financial expense
3.3
4.7
(1.4)
(30)
per registered share in CHF Shareholdersâ&#x20AC;&#x2122; equity (before distribution of profits) per registered share in CHF1 Total operating income Income from participations
Personnel and general operating expenses
26.5
23.7
2.8
12
Depreciation, write-offs
32.0
111.9
(79.9)
(71)
1,444.9
1,394.5
50.4
4
65.0
65.0
0.0
0
1,282.3
1,255.7
26.6
2
15.8
16.7
Total assets Share capital Participations Average return on equity in % 1 2
Dividend-bearing shares as per end of year As per the proposal submitted to the General Meeting
Vontobel Group, Annual Reports 2010
159
Vontobel Holding AG Income statement
Income statement
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
23.3
8.3
15.0
181
Operating income Commission income, Vontobel Group
1.1
2.6
(1.5)
(58)
Total income from services performed
Other income
24.4
10.9
13.5
124
Interest income, Vontobel Group
1.6
0.7
0.9
129
Interest income, other
0.0
0.0
0.0
Interest and dividend from financial assets
0.0
0.1
(0.1)
1.6
0.8
0.8
100
0.4
0.9
(0.5)
(56)
Income from participations
167.4
260.4
(93.0)
(36)
Foreign exchange income
(0.1)
0.0
(0.1)
167.7
261.3
(93.6)
(36)
Subtotal interest and dividend income Securities income and income from hedging
Subtotal trading income and income from participations Gains on the sale of financial investments
(100)
0.2
0.8
(0.6)
(75)
Total financial income
169.5
262.9
(93.4)
(36)
Total operating income
193.9
273.8
(79.9)
(29)
Interest paid, Vontobel Group
2.6
3.8
(1.2)
(32)
Interest expense bonds
0.7
0.8
(0.1)
(13)
3.3
4.6
(1.3)
(28)
0.0
0.1
(0.1)
(100)
3.3
4.7
(1.4)
(30)
Operating expense
Subtotal interest paid Commission expense Total financial expense Occupancy expense, furniture PR, advertising, annual report, consulting and audit expense Other operating and office expense Total operating and office expense Personnel expense Social contribution and pension benefits
0.1
0.0
0
18.3
2.3
13
0.5
0.3
0.2
67
21.2
18.7
2.5
13
5.0
4.6
0.4
9 (25)
0.3
0.4
(0.1)
5.3
5.0
0.3
6
29.0
111.9
(82.9)
(74)
Depreciation/write-offs on non-current assets
0.0
0.0
0.0
Other depreciation/write-offs and provisions
3.0
0.0
3.0
32.0
111.9
(79.9)
(71)
0.2
1.7
(1.5)
(88)
62.0
142.0
(80.0)
(56)
131.9
131.8
0.1
0
Total personnel expense Depreciation/write-offs on financial investments
Total ordinary depreciation/write-offs and provisions Total other operating expense Total operating expense Profit before extraordinary items and taxes
160
0.1 20.6
Vontobel Group, Annual Reports 2010
Vontobel Holding AG Income statement
Net profit Net profit before extraordinary items and taxes
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
131.9
131.8
0.1
0
Extraordinary income
0.1
1.2
(1.1)
(92)
Total extraordinary income
(92)
0.1
1.2
(1.1)
Extraordinary expense
0.0
0.0
0.0
Total extraordinary expense
0.0
0.0
0.0
Total tax expense
0.6
0.5
0.1
20
131.4
132.5
(1.1)
(1)
Net profit for the year
Vontobel Group, Annual Reports 2010
161
Vontobel Holding AG Balance sheet
Assets
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
0.0
0.0
0.0
Current assets Cash Due from banks, Vontobel Group
8.1
2.1
6.0
286
8.1
2.1
6.0
286
Accounts receivable, Vontobel Group
0.0
0.0
0.0
Other receivables
0.0
0.1
(0.1)
(100)
Total receivables
0.0
0.1
(0.1)
(100)
Total securities
2.4
1.9
0.5
26
Total accrued income and prepaid expenses
9.2
0.1
9.1
19.7
4.2
15.5
Total liquid assets
Total current assets
369
Non-current assets Due from banks, Vontobel Group
0.0
0.0
0.0
131.9
128.4
3.5
3
11.0
6.2
4.8
77
Participations
1,282.3
1,255.7
26.6
2
Total financial investments
1,425.2
1,390.3
34.9
3
Accounts receivable, Vontobel Group Securities
0.0
0.0
0.0
Total fixed assets
Furniture and equipment
0.0
0.0
0.0
Total intangible non-current assets
0.0
0.0
0.0
Total non-current assets
1,425.2
1,390.3
34.9
Total assets
1,444.9
1,394.5
50.4
4
5.0
1.4
3.6
257
of which subordinated assets due from Group companies
162
Vontobel Group, Annual Reports 2010
3
Vontobel Holding AG Balance sheet
31-12-10 CHF mns
31-12-09 CHF mns
Due to banks, Vontobel Group
0.0
0.0
Due to banks, others
0.0
0.0
0.0
Short-term liabilities
0.1
0.4
(0.3)
Liabilities and Shareholders’ equity
Change to 31-12-09 CHF mns in %
Liabilities
Accrued expenses and deferred income
0.0 (75)
4.8
4.8
0.0
0
4.9
5.2
(0.3)
(6)
0.0
25.0
(25.0)
(100)
Due to banks, Vontobel Group
335.0
480.0
(145.0)
(30)
Due to customers, Vontobel Group
180.0
0.0
180.0
Total short-term liabilities Bond issues
Long-term liabilities
0.0
0.0
0.0
25.0
25.2
(0.2)
(1)
Total long-term liabilities, provisions
540.0
530.2
9.8
2
Total liabilities
544.9
535.4
9.5
2
Provisions
Shareholders’ equity Share capital
65.0
65.0
0.0
0
162.0
162.0
0.0
0
Reserves from capital contributions
47.8
47.8
0.0
0
Reserve for own shares
54.1
49.0
5.1
10
263.9
258.8
5.1
2
General reserve
Total statutory reserve Other reserve Retained earnings Net profit for the year
0.9
6.0
(5.1)
(85)
438.8
396.8
42.0
11
131.4
132.5
(1.1)
(1)
Total retained earnings
570.2
529.3
40.9
8
Total shareholders’ equity
900.0
859.1
40.9
5
1,444.9
1,394.5
50.4
4
Total liabilities and shareholders’ equity
Vontobel Group, Annual Reports 2010
163
Vontobel Holding AG Shareholders’ equity/Notes to the financial statements
Following approval of the Board of Directors’ proposal for the distribution of profit for the year ended 31 December 2010, shareholders’ equity will be as follows:
Shareholders’ equity Share capital Statutory reserve Other reserve
31-12-10 CHF mns
31-12-09 CHF mns
Change to 31-12-09 CHF mns in %
65.0
65.0
0.0
0
263.9
258.8
5.1
2
0.9
6.0
(5.1)
(85)
Retained earnings
479.7
438.8
40.9
9
Total shareholders’ equity after distribution of profit1
809.5
768.6
40.9
5
31-12-10 CHF mns
31-12-09 CHF mns
9,222.2
9,161.8
60.4
0.0
0.0
0.0
0.0
0.0
0.0
Assets pledged in favour of Bank Vontobel AG
21.5
10.2
11.3
111
from which credit has been drawn
21.5
10.2
11.3
111
none
none
1
As at 31-12-10. The exact amount will be determined at the dividend payment date in May 2011.
Notes to the financial statements
Change to 31-12-09 CHF mns in %
Total amount of guarantees and pledges in favour of third parties: Guarantees and unpaid capital stemming from participations Pledges in favour of third parties Securities lending with Group companies
1
Total amount of assets assigned or pledged as security for own liabilities including assets to which title has been reserved:
Total amount of off-balance sheet lease liabilities
Liabilities under employee benefit schemes: Contributions to employee benefit schemes have been paid and Vontobel Holding AG has drawn no credits from employee benefit schemes. Principal amount, interest rates and maturity of bonds issued by the Company: See consolidated accounts, note 23
164
Vontobel Group, Annual Reports 2010
Vontobel Holding AG Notes to the financial statements
31-12-10 Book value CHF mns
31-12-09 Book value CHF mns
Principal subsidiaries/associated companies Bank Vontobel AG
394.2
394.2
Bank Vontobel (Liechtenstein) AG
20.0
20.0
Bank Vontobel Österreich AG
56.6
54.0
Bank Vontobel Europe AG
73.6
74.9
Bank Vontobel Cayman
0.0
19.0
Vontobel Fonds Services AG
4.0
4.0
Vontobel Fund Advisory S.A.
0.2
0.2
460.3
460.3
Vontobel Beteiligungen AG Vontobel Asset Management, Inc. Vontobel Financial Products Ltd. Dubai Harcourt Investment Consulting AG Other
5.8
5.8
62.3
2.3
187.2
187.2
18.1
33.8
For further information on the main participations, refer to the consolidated accounts on page 150 Total amount of replacement reserves released plus any other reserves released in excess of the amount of new funds allocated to such reserves: No significant amount of hidden reserves was released. There are no replacement reserves. Information on the acquisition, disposal and number of own shares held by the company, including transactions involving other companies in which a majority interest is held: Refer to the consolidated accounts, note 26, for further information on other purchases and disposals Liabilities: See consolidated accounts, notes 22 to 24 Amount of the authorized or conditional capital increase: See consolidated accounts, note 26 Details of shareholders pursuant to Art. 663c of the Swiss Code of Obligations: See consolidated accounts, page 39 For information on compensation, loans and shareholdings of members of the Board of Directors and the Group Executive Management pursuant to Art. 663bbis and Art. 663c of the Swiss Code of Obligations, please refer to the consolidated accounts, notes 28 to 30 For information on the risk evaluation process: See the “Risk management and risk control” section of the consolidated financial statements, pages 81 to 96 Information relating to the application of the Internal Control System (ICS): See the consolidated accounts, page 95f. For further details on the consolidated accounts, please refer to pages 63 to 153
Vontobel Group, Annual Reports 2010
165
Vontobel Holding AG Proposal of the Board of Directors
Proposal of the Board of Directors The Board of Directors is submitting the following proposal for the distribution of profit at the annual General Meeting of Shareholders on 3 May 2011: CHF mns
Net profit for the year
131.4
Retained earnings prior year
438.8
Total retained earnings
570.2
Dividend 140% (share capital ranking for dividend CHF 64.6 mn)1
90.5
Allocation to general reserve Allocation to other reserves Carried forward to the new accounting period
479.7
Total retained earnings
570.2
1
As at 31-12-10. The exact amount will be determined at the dividend payment date in May 2011.
Dividend payment If the proposal is approved, the dividend will be distributed as follows:
Dividend per registered share with a par value of CHF 1.00 (in CHF) Coupon no.
166
Vontobel Group, Annual Reports 2010
1.40 10
Ex-dividend date
05 May 2011
Record date
09 May 2011
Payment date
10 May 2011
Auditors’ report
Ernst & Young L td Belpstrasse 23 CH-3001 Berne
Phone +41 58 286 61 11 Fax +41 58 286 68 18 www.ey.com/ch
To the General Meeting of
Vontobel Holding AG, Zurich
Berne, 10 February 2011
Report of the statutory auditor on the financial statements As statutory auditor, we have audited the financial statements (balance sheet, income statement and notes pages 160 to 166) of Vontobel Holding AG for the year ended 31 December 2010. Board of Directors’ responsibility The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements for the year ended 31 December 2010 comply with Swiss law and the company’s articles of incorporation.
Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Over-sight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.
Ernst & Young Ltd
Iqbal Khan
Dr Philippe Wüst
Licensed audit expert (Auditor in charge)
Licensed audit expert
Vontobel Group, Annual Reports 2010
167
Information for shareholders
Vontobel Holding AG registered shares ISIN
CH001 233 554 0
Security number
001 233 554
Par value
CHF 1.00
Ticker symbols Stock exchange listing
Bloomberg
Reuters
Telekurs
SIX Swiss Exchange
VONN SW
VONTZn.S
VONN
Credit ratings
Bank Vontobel AG
Vontobel Holding AG
A-1
A-1 A
Standard & Poorâ&#x20AC;&#x2122;s
Short-Term Long-Term
A+
Moodyâ&#x20AC;&#x2122;s
Short-Term
Prime-1
Long-Term
A1
A2
Financial calendar Annual General Meeting 2011 Publication half-year results 2011 Publication annual results 2011 Annual General Meeting 2012
3 May 2011 10 August 2011 16 February 2012 24 April 2012
Investor Relations Susanne Borer Telephone +41 (0)58 283 73 29 Christian Waelti Telephone +41 (0)58 283 63 38 E-mail investor.relations@vontobel.ch
Media Relations Michael Pfister, Group Communications Telephone +41 (0)58 283 72 24 E-mail media.relations@vontobel.ch
Vontobel Holding AG Gotthardstrasse 43 CH-8022 Zurich Telefon +41 (0)58 283 59 00 Internet www.vontobel.com Corporate Governance www.vontobel.com/de/group/investor_and_media_relations/ corporate_governance/ Sustainability www.vontobel.com/sustainability
This report also appears in German. The German version is prevailing.
168
Vontobel Group, Annual Reports 2010
Where to find us
Switzerland Zurich Vontobel Holding AG Gotthardstrasse 43 CH-8022 Zurich Telephone +41 (0)58 283 59 00 www.vontobel.com Bank Vontobel AG Gotthardstrasse 43 CH-8022 Zurich Telephone +41 (0)58 283 71 11 Vontobel Swiss Wealth Advisors AG Tödistrasse 17 CH-8022 Zurich Telephone +41 (0)44 287 81 11 Vontobel Fonds Services AG Gotthardstrasse 43 CH-8022 Zurich Telephone +41 (0)58 283 74 77 Vontobel Securities AG Gotthardstrasse 43 CH-8022 Zurich Telephone +41 (0)58 283 71 11 VT Wealth Management AG Tödistrasse 27 CH-8002 Zurich Telephone +41 (0)44 287 17 00 www.vtwealth.ch
Vienna Bank Vontobel Österreich AG Kärntner Strasse 51 A-1010 Vienna Telephone +43 (0)1 513 76 40
Liechtenstein Bank Vontobel (Liechtenstein) AG Pflugstrasse 20 FL-9490 Vaduz Telephone +423 236 41 11
Vontobel Europe S.A. Vienna Branch Kärntner Strasse 51 A-1010 Vienna Telephone +43 (0)1 513 76 40
Vontobel Treuhand AG Pflugstrasse 20 FL-9490 Vaduz Telephone +423 236 41 80
Germany Frankfurt am Main Bank Vontobel Europe AG Frankfurt am Main Branch Kaiserstrasse 6 D-60311 Frankfurt am Main Telephone +49 (0)69 297 208 0 Vontobel Financial Products GmbH Kaiserstrasse 6 D-60311 Frankfurt am Main Telephone +49 (0)69 297 208 11 Cologne Bank Vontobel Europe AG Cologne Branch Auf dem Berlich 1 D-50667 Cologne Telephone +49 (0)221 20 30 00
Harcourt Investment Consulting AG Stampfenbachstrasse 48 CH-8006 Zurich Telephone +41 (0)44 365 10 00 www.harcourt.ch
Hamburg Bank Vontobel Europe AG Hamburg Branch Sudanhaus Grosse Bäckerstrasse 13 D-20095 Hamburg Telephone +49 (0)40 638 587 0
Basel Bank Vontobel AG St. Alban-Anlage 58 CH-4052 Basel Telephone +41 (0)58 283 21 11
Munich Bank Vontobel Europe AG Alter Hof 5 D-80331 Munich Telephone +49 (0)89 411 890 0
Berne Bank Vontobel AG Spitalgasse 40 CH-3011 Berne Telephone +41 (0)58 283 22 11
Great Britain Vontobel Europe S.A. London Branch Third Floor 22 Sackville Street London W1S 3DN UK Telephone +44 207 255 83 00
Geneva Bank Vontobel AG Place de l’Université 6 CH-1205 Geneva Telephone +41 (0)22 809 90 90 Lucerne Bank Vontobel AG Schweizerhofquai 3a CH-6002 Lucerne Telephone +41 (0)41 249 31 11 Austria
Hong Kong Vontobel Asia Pacific Ltd. 2301 Jardine House 1 Connaught Place, Central, Hong Kong Telephone +852 3655 3990
Luxembourg Vontobel Europe S.A. 1, Côte D’Eich L-1450 Luxembourg Telephone +352 26 34 74 1 Vontobel Management S.A. 1, Côte D’Eich L-1450 Luxembourg Telephone +352 26 34 74 40 Spain Vontobel Europe S.A. Sucursal en España Paseo de la Castellana, 40 bis - 6º E-28046 Madrid Telephone +34 91 520 95 34 USA Vontobel Asset Management, Inc. 1540 Broadway, 38th Floor New York, NY 10036, USA Telephone +1 212 415 70 00 www.vusa.com Vontobel Securities Ltd. New York Branch 1540 Broadway, 38th Floor New York, NY 10036, USA Telephone +1 212 792 58 20 V.A.E. Vontobel Financial Products Ltd. Liberty House, Office 913 Dubai International Financial Centre P.O. Box 506814 Dubai, U.A.E. Telephone +971 (4) 703 85 00 Vontobel Invest Ltd. Liberty House, Office 913 Dubai International Financial Centre P.O. Box 506814 Dubai, United Arab Emirates Telephone +971 (4) 703 85 00
Italy Vontobel Europe S.A. Milan Branch Piazza degli Affari, 3 I-20123 Milan Telephone +39 02 6367 3411
Salzburg Bank Vontobel Österreich AG Rathausplatz 4 A-5024 Salzburg Telephone +43 (0)662 8104 0 Vontobel Group, Annual Reports 2010
169
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