2014 AT A GLANCE
The 2014 Valartis Group Consolidated Financial Statements, in accordance with International Financial Reporting Standards (IFRS),
show a Group loss of CHF 73.3 m for continued operations and discontinued operations, taking into consideration non-recurring, exceptional factors (2013 on a comparable basis: Group profit of CHF 0.4 m).
This is made up of the loss of CHF 19.6 m from discontinued operations resulting from divestment of Valartis Bank AG, Switzerland and
Valartis Wealth Management S.A. plus a loss from continued operations of CHF 53.7 m. The loss from continued operations of CHF 53.7 m
is mainly attributable to the following factors: necessary value adjustments on receivables from the 2012 sale of Eastern Property Holdings Ltd., impairment of goodwill positions, a decrease in income from
interest and a significantly lower trading result in 2014 due to lower
rouble valuations on private equity holdings and losses on the ENR
Russia Invest S.A. bond portfolio.
Due to divestment of Valartis Bank AG, Switzerland and Valartis Wealth
Management S.A., the provisions of the International Reporting Standards (IFRS) for continued and discontinued operations (IFRS 5) apply for
the Valartis Group 2014 Annual Report. The activities of these two
companies are allocated to discontinued operations in 2014.
Overview of continued operations
Income from commission and services for continued operations remained stable at CHF 47.2 m (2013: CHF 47.1 m)
– In the Private Clients segment, the Valartis private banks performed
very nicely. Income from commission and services was up by
19 percent to CHF 40.7 m (2013: CHF 34.3 m)
Net new money inflow of CHF 285 m (2013: CHF 438 m) despite the
challenging environment
– Net new money inflow in the segment Private Clients: CHF 530 m
(2013: CHF 508 m)
Clients assets rose by 9 percent to CHF 6.5 bn (2013: CHF 6.0 bn)
– Segment Private Clients: Rise in client assets under management of
15 percent to CHF 6.1 bn (2013: CHF 5.3 bn)
Despite the costs arising out of implementation of new regulatory
requirements in 2014, overall costs for the financial year only rose by
2 percent to CHF 53.0 m (2013: CHF 52.0 m).
Equity capital base: core capital ratio 15.8 percent (2013: 25 percent)
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Cover: View of the Silvretta group, a range of mountains on the Swiss-Austrian border.
KEY FIGURES AT A GLANCE
Key Figures – 2013 and 2014 shown as continued and discontinued operations
in CHF million
31.12.2010
31.12.2011
31.12.2012
31.12.2013
31.12.2014
96.8
63.3
70.7
73.7
26.5
Income from interest and dividend
49.6
41.2
18.3
17.5
9.2
Income from commission and service fee
46.9
52.2
41.5
47.1
47.2
Income from trading book
-6.9
-20.3
6.3
-3.6
-31.5
7.2
-9.8
4.6
12.7
1.6
Administrative expense
-87.6
-81.7
-50.4
-52.0
-53.0
Personnel expense
-55.7
-50.4
-33.0
-34.1
-34.6
General expense
-31.9
-31.3
-17.4
-17.9
-18.5
9.2
-18.4
20.3
21.7
-26.6
-16.7
-17.0
-15.9
-9.1
-28.3
Total operating income
Other ordinary income
Gross income/(loss)
Depreciation, valuation adjustments and provisions
6.0
1.4
3.2
0.6
1.3
Net profit from concontinued operations
Income taxes
-1.5
-34.0
7.6
13.2
-53.7
Net profit from disconcontinued operations
12.2
14.5
2.6
-12.8
-19.6
Net profit
10.7
-19.5
10.2
0.4
-73.3
attributable to shareholders of Valartis Group AG
10.9
-14.8
6.7
-2.5
-69.2
attributable to non controlling interests
-0.2
-4.7
3.5
2.9
-4.1
Total assets
2,437
2,631
3,175
3,027
2,886
Total liabilities
2,100
2,322
2,859
2,707
2,646
Total shareholders' equity (including non-controlling
interests)
Return on shareholders' equity
Total client assets
Continued operations
337
309
316
319
241
3.0%
n/a
3.3%
0.1%
n/a
6,277
6,835
7,798
7,957
6,459
6,277
6,835
5,528
6,034
6,459
2,270
1,923
0
220
862
929
242
285
850
438
285
79
-196
0
Discontinued operations
Net New Money
Continued operations
Discontinued operations
Commission margin, in basis points
74.1
79.6
67.1
81.5
75.6
Employees, as full-time equivalents (FTE)
380
297
299
285
215
220
217
215
Continued operations
Discontinued operations
79
68
0
90%
129%
71%
71%
201%
26.00
17.25
20.00
17.70
15.40
Dividend per share, in CHF
0.50
0.00
1.00
0.00
0.00
Dividend yield
1.9%
n/a
5.0%
n/a
n/a
Cost / Income Ratio
Closing price of VLRT bearer shares, in CHF
Client assets
by business segment *
Client assets by asset class*
Institutional
Clients 6%
Alternative/other 6.3%
Client assets by region*
Asia, Middle East
and rest: 10.6%
Precious metals 1.7%
Shares 8.7%
Latin and North
America: 9.6 %
Bonds 17.8%
Private
Clients 94%
Total client assets, in CHF m
7798
Eastern Europe
and CIS: 20.8%
Liquidity 46.9%
Funds 18.6%
Shareholders’ equity, in CHF m
Western and
Central Europe:
59.0%
Net profit, in CHF m ***
7957
6835
337
6459**
6277
309
316
319
241**
10.7
10.2
0.4
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
-19.5
-73.3
* From continued operations
** 2014: From continued operations
2010 – 2013: from continued and discontinued
operations (incl. Valartis Bank AG, Switzerland)
*** From continued and discontinued business activities. The 2014 Valartis Group Consolidated Financial
Statements of continued activities shows a Group
loss of CHF 53.7 m.
CONTENTS
3
LETTER TO SHAREHOLDERS
4
Letter to Shareholders
7
VALARTIS GROUP
8
10
12
13
16
Valartis Group
Clients and Markets
Products and Services
Strategic Goals and Objectives
Corporate Sustainability
21
BUSINESS ACTIVITIES
22
26
29
34
Comments on Business Activities
Private Clients
Institutional Clients
Corporate Center
37
CORPORATE GOVERNANCE
38
50
Corporate Governance
Risk Management
55
COMPENSATION REPORT
56
57
57
67
Introduction by the Chairman of the Compensation Committee
Compensation Committee: organisation, duties and areas of responsibility
Compensation guidelines for the Board of Directors, Group Executive
Management and employees
Determining compensation
Compensation: Board of Directors
Compensation: Group Executive Management
Compensation: employees
Overview: loans, shares and options held by members of the Board of
Directors and Group Executive Management as at the end of 2014
Auditor’s Report on the Compensation Report
67
VALARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS
72
73
74
76
78
81
163
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes
Auditor’s Report on the Consolidated Financial Statements
165
VALARTIS GROUP AG FINANCIAL STATEMENTS
167
168
169
172
173
Income Statement of Valartis Group AG
Statement of Financial Position of Valartis Group AG
Notes
Proposal of the Board of Directors to the Annual Shareholders’ Meeting
Auditor’s Report on the Financial Statements
175
176
Valartis Group AG Bearer Share
Addresses and Imprint
58
59
61
63
64
The English Valartis Group Annual Report is a translation of the German original. Only the German original is legally binding.
08:20
Partnunstafel, canton of Grisons
10:20
LETTER TO SHAREHOLDERS
ACTIVELY SHAPING CHANGE
LETTER TO SHAREHOLDERS
Dear Shareholders, Dear Ladies and Gentlemen
In 2014, changes in framework
conditions on national and international financial markets
continued apace. In particular,
altered conditions on national
and international financial
markets, emerging regulatory
convergence on a global level,
the breakdown in competitive
and location-related advantages together with the current dynamic era of technological advances have influenced
Urs Maurer-Lambrou,
the needs, wishes, and the fiChairman of the Board of Directors
nancial risk awareness of clients and, in part, changed them fundamentally. The financial
sector has been undergoing a complex process of transformation over the past few years and, as one of the smaller financial
groups, it is imperative that we adapt quickly to these changing
framework conditions. Over the last few years, we have come to
understand that competence, know-how and experience nowadays no longer suffice for a financial institute to be able to compete successfully internationally. Instead, the decisive factor in
our success is how quickly and resolutely we can adapt our business model to the creation of added value for shareholders, clients and employees.
2014 – A YEAR OF CONTINUED ADJUSTMENT
In financial year 2014, Valartis Group concentrated on implementation of the strategic decisions taken in 2013 and 2014. The
main focus was on the sale of Valartis Bank AG, Switzerland to
Banque Cramer & Cie S.A. at end-August 2014 and the reorganisation of Valartis Group AG with the incorporation of Valartis
Finance Holding AG in Liechtenstein in summer 2014.
A look back
In 2007, Valartis Group was realigned in order to focus strategically on the wealth management business with wealthy private
clients and institutional investors. Despite the financial crisis
which started in 2008, Valartis Group was able to further develop its private banking activities over the following three years
through targeted acquisitions in that segment. Valartis Group
intensified concentration on private banking by means of tactical divestments of non-private banking activities in 2011 and
2012 and, at the same time, by tightening its organisation in
2012 and 2013 by means of cost reduction measures.
4
After it had become apparent that the acquisition capacity of
Valartis Bank AG, Switzerland could not be enhanced at the
planned rate despite the 2012 newly aligned front-office organisation, and that the bank would not attain the appropriate critical mass within the foreseen timeframe, in 2013, Valartis Group
decided to divest the Swiss 100-percent subsidiary. By retaining
a 25-percent holding in Norinvest Holding S.A., the listed parent
company of Banque Cramer & Cie S.A., the purchaser of the
Swiss bank, Valartis Group maintains in 2014 its presence in the
private banking market in Switzerland on a smaller scale.
Divestment of Valartis Bank AG, Switzerland
On 16 May 2014, together with the purchaser, Banque Cramer &
Cie S.A., we presented an optimum and, in the long term, attractive solution for the Swiss bank and we are confident that we
found the best possible solution for Valartis Bank AG, Switzerland. The transaction was closed, as planned, on 29 August 2014,
and integration of the Swiss bank into Banque Cramer & Cie S.A.
was concluded.
Following the sale, we provided social cushioning in the form of
a comprehensive Outplacement Programme to employees who
could not be integrated into Banque Cramer or Valartis Group
in order to provide those employees with external, professional
assistance and support in their professional reorientation.
CONSOLIDATED FINANCIAL STATEMENTS 2014
The provisions of the International Financial Reporting Standards
(IFRS) for continued and discontinued operations (Discontinued
Operations, IFRS 5) apply for the 2014 Annual Report. From a
purely operational viewpoint, overall income from commission
and services for continued operations remained stable in comparison with the previous year. In the segment Private Clients,
income from commission and services at the Valartis private
banks rose by 19 percent to CHF 40.7 m (previous year: CHF
34.3 m). In addition, despite the challenging market environment,
Valartis Group’s continued operations posted an overall net new
money inflow of CHF 285 m (2013: CHF 438 m) and client assets
rose by 9 percent to CHF 6.5 bn (2013: CHF 6.0 bn). Despite the
costs arising out of implementation of new regulatory requirements in FY 2014, overall costs only rose by a modest 2 percent.
However, the 2014 Valartis
Group Consolidated Financial
Statements show a Group loss
of CHF 73.3 m for continued
and discontinued operations,
taking into consideration various non-recurring, exceptional
factors (previous year on a
comparable basis: Group profit
of 0.4 m). This is made up of
the loss of CHF 19.6 m from
discontinued operations resulting from divestment of
Gustav Stenbolt,
Valartis Bank AG, Switzerland
Chief Executive Officer
and Valartis Wealth Management S.A. plus a loss from continued operations of CHF 53.7 m.
(2013 on a comparable basis: Group profit of CHF 13.2 m). The
loss from continued operations of CHF 53.7 m is mainly attributable to the following factors:
– value adjustments which became necessary in 2014 on receivables from the 2012 sale of Eastern Property Holdings Ltd.
amounting to CHF 27.5 m due to substantial value adjustments on real estate projects effected by that company as a
result of the current economic situation in Russia on the back
of international sanctions;
– impairment of goodwill positions amounting to CHF 10.6 m;
– a significant decrease in income from interest for continued
operations amounting to CHF 8.3 m due to declining market
interest rates and the lack of reinvestment in bonds in FY 2014;
– a significantly lower 2014 trading result due to lower rouble
valuations on private equity holdings and losses on the ENR
Russia Invest S.A. bonds portfolio amounting to CHF 8.1 m.
Continued operations from an operational viewpoint
Valartis Group’s continued operations comprise the Private Clients and Institutional Clients segments which include the Private Banking and Wealth Management units together with Asset Management, Private Equity, Corporate Finance, and Real
Estate Management.
Despite the challenging environment, continued operations
achieved a net new money inflow of CHF 285 m (2013: CHF
438 m) and client assets rose by 9 percent to CHF 6.5 bn (2013:
CHF 6.0 bn). This was largely attributable to the Private Clients
segment which achieved a net new money inflow of CHF 530 m
(2013: CHF 508 m) and a rise in client assets under management
of 15 percent to CHF 6.1 bn (2013: CHF 5.3 bn). Valartis Bank
(Liechtenstein) AG made the greatest contribution to this satisfactory result.
Equity capital base
In summer 2014, Valartis Group incorporated Valartis Finance
Holding AG in Liechtenstein in which the relevant operating activities of the Private Banking, Wealth Management and Private
Equity units, together with financial holdings, are combined.
Valartis Finance Holding AG is subject to the consolidated banking supervision by the Financial Market Authority in Liechtenstein (FMA). In Liechtenstein, as of 31 December 2014, risks are
assessed using Basel II approaches. As at 31 December 2014, the
hard core capital ratio according to Basel II for Valartis Finance
Holding AG was 15 percent and the overall capital ratio in accordance with Basel III for Valartis Group was 16 percent. This
equity capital base and the risk-bearing capacity thus cushion
the above-mentioned business risks – primarily evaluation adjustments which are not cash-effective, or market movements –
which have led to the overall Group loss.
A look to the future
Since the financial crisis, wealth management banks have found
themselves in a difficult macroeconomic environment with record low interest rates and a challenging investment situation. In
addition, implementation of a range of complex, national and
international regulatory requirements is affecting banks’ cost
structures and margins. And these trends did not bypass Valartis
Group. This environment makes it increasingly difficult for the
Group to generate sustainable operating profits. The critical
mass for Valartis Group’s private banking activities as a whole
has not been enhanced in spite of the sale of the Swiss unit. The
Group’s results in the last few years were also influenced by the
very volatile results from non-private banking activities.
From a purely operational viewpoint, i.e. without taking nonrecurring, exceptional factors into consideration, income from
commission and services for continued operations remained stable at CHF 47.2 m (2013: CHF 47.1 m) in comparison with the previous year. In the Private Clients segment, the Valartis private
banks performed very nicely. Income from commission and
services was up by 19 percent to CHF 40.7 m (2013: CHF 34.3 m).
In particular, the bank in Liechtenstein posted a robust annual
profit for 2014.
ANNUAL REPORT 2014
|
LETTER TO SHAREHOLDERS | 5
Against this background, the Board of Directors of Valartis Group
is now carefully examining the Group’s strategy, business model,
and structure in order to align it more expediently to the challenging environment with the aim of generating sustainable, appropriate yields from invested capital. In this context, the Board
of Directors will implement the corresponding measures by summer 2015.
THANK YOU
We would like to thank all Valartis Group employees and to express our appreciation and respect for their extraordinary commitment, dedication and tireless efforts to helping Valartis
Group achieve its goals.
We also want to thank you, our clients and our shareholders, for
your loyalty and trust. We will maintain the course we have taken and work with resolution and dedication towards achieving
sustainable success for our company and added value for our
stakeholders.
Baar, canton Zug, 24 June 2015
Urs Maurer-Lambrou
Chairman of the Board of Directors
6
Gustav Stenbolt
Chief Executive Officer
09:45
Schijenflue in the morning light, canton of Grisons
10:50
VALARTIS GROUP
STRUCTURES CHANGE, VALUES REMAIN
VALARTIS GROUP
INTERNATIONAL BANKING AND FINANCIAL
GROUP WITH SWISS ROOTS
We are an internationally active private banking and financial
group located in Liechtenstein, Austria and Switzerland and with
offices in Luxembourg and Moscow. Our focus is on wealth management for high-net-worth private clients (Private Banking and
Wealth Management) together with institutional investors. In
addition to traditional wealth management and investment advisory services, we develop, manage and market innovative investment products and provide additional specialised services in the
fields of Asset Management, Corporate Finance, Real Estate Management and Private Equity.
The parent company is Valartis Group AG with headquarters in
Baar, canton Zug, Switzerland. The Valartis Group AG bearer
shares are listed on the Swiss Stock Exchange, SIX Swiss Exchange
(ISIN CH0001840450, see also page 175). The largest shareholder
is MCG Holding S.A. in Baar, canton Zug, who held 50.2 percent of
capital and voting rights as of 31 December 2014 (see page 170).
Valartis Group AG holds direct and indirect participations in several fully consolidated companies (see also note 46 in the Notes
to the Consolidated Financial Statements).
Valartis Group
The relevant operating activities of the Private Banking and
Wealth Management segments of our two private banks in
Liechtenstein and Austria, together with holdings in the area of
finance, such as in the Swiss Norinvest Holding S.A., the parent
company of Banque Cramer & Cie S.A., have been combined in
Valartis Finance Holding AG in Liechtenstein, which is subject to
consolidated banking supervision of the Financial Market Authority in Liechtenstein (FMA). Valartis Finance Holding AG was
incorporated in summer 2014 following the divestment of
Valartis Bank AG, Switzerland and during the course of the reorganisation of Valartis Group (see also www.valartisfinanceholding.li).
As of 31 December 2014, the Group employs 215 employees in
its continued operations and manages assets amounting to
CHF 6.5 bn (previous year: CHF 6.0 bn).
Tight cost management and strategic focussing
In addition to consistent cost management and efficiency enhancement, we continue to focus on the two business segments
Private Clients (Private Banking and Wealth Management) of the
private banks in Liechtenstein and Austria,and together with the
business segment Institutional Clients. The areas of Asset Management, Corporate Finance and Real Estate Management and
Private Equity are also intended to undergo rigorous further development and strengthening.
CHANGING TO MAINTAIN VALUES
Optimised business model
BUSINESS MODEL OF VALARTIS GROUP
Private Clients1
Institutional Clients
Private Banking
Liechtenstein
Asset Management
Funds & Investment Companies
Private Banking
Austria
Real Estate
Funds & Property Companies
2013 AND 2014 – YEARS OF ADJUSTMENTS
With the on-going strategic refocusing of the business model
and streamlining of structures, initiated in 2012, Valartis Group
continued to pursue its aim of achieving a more sustainable and
rigid orientation towards profitability. As a result, in August
2013, the Board of Directors of Valartis Group AG decided to spin
off Valartis Bank AG, Switzerland from the Group. From the beginning, the Board of Directors and the Group Executive Management of Valartis Group AG were committed to finding the
best possible solution for shareholders, clients and employees.
On 23 May 2014, together with the purchaser, Banque Cramer &
Cie S.A., we presented an optimum and, in the long-term, attractive solution for the Swiss Bank. The transaction was closed as
planned on 29 August 2014.
As of 9 April 2014, the Group Executive Management was
accordingly adjusted as follows for the transformation phase:
Gustav Stenbolt, Group CEO, Vincenzo Di Pierri, Deputy Group
CEO and former CEO of Valartis Bank AG, Switzerland and George
M. Isliker, Group CFO & CRO.
8
Corporate Finance
1 The activities of Valartis Bank AG, Switzerland are discontinued operations according
to IFRS5.
During the course of the reorganisation in 2014, the Board of Directors of Valartis Group AG aligned the integrated business
model to the new framework and market conditions: It continues to comprise the two Private Clients business segments of
the two private banks, together with the Institutional Clients
segment. It combines – under one roof – relationship managers
and financial experts with many years of experience and indepth financial know-how to benefit our next generation so-
phisticated, international private banking clients and institutional investors.
Organisation Chart
Board of Directors
The right competencies
+ With us, our clients get relationship managers with many
years of international experience and very high levels of
advisory expertise, together with other specialists in related
fields – all under one roof.
+ Our relationship managers regard themselves as Financial
Coaches: they are there to accompany clients personally on
their long-term journey, as partners, providing forward-looking advisory services in a responsible manner.
+ We offer our clients transparent, professional advisory services.
+ In addition to classical wealth management and investment
advisory services, we also provide our clients with individually
tailored private banking solutions and specialised, innovative
investment products in the categories Shares, Fixed Income,
Alternative Investments and Real Estate.
+ Our clients profit from efficient, professional and requirements driven solutions implementation in all business segments due to the organisational constellation of the Group, its
inter-connectedness and its rapid decision-making channels.
«We regard ourselves as a long-term partner. We advise our clients personally, as a partner, responsibly
and with the future in mind.»
Urs Maurer-Lambrou, Chairman
Rolf Müller-Senn, Vice-Chairman 1, 2
Christoph Meister 1, 2
Jean-François Ducrest 1, 2
Stephan Häberle
Compensation
Committee
Jean-François
Ducrest,
Chairman
Audit Committee
Internal Audit
Christoph N. Meister,
Chairman
Group Executive Management
Gustav Stenbolt, CEO
Vincenzo Di Pierri, Stv. CEO3
George M. Isliker, CFO/CRO
Private Clients4
Institutional
Clients
Corporate
Center
Private Banking
Liechtenstein
Asset Management
Funds & Investment
Companies
Corporate Finance
Risk Management &
Risk Controlling
Private Banking
Austria
Real Estate, Funds &
Property Companies
Corporate Finance
Legal & Compliance
Corporate
Communications &
Marketing
1 Member of Audit Committee
2 Member of Compensation Committee
3 also CEO Valartis Bank AG, Switzerland until the closing of the transaction on
29 August 2014
4 Activities of Private Banking Switzerland 2014 are discontinued operations according
to IFRS 5
Segments
Valartis Group’s activities are divided into two main client segments – Private Clients and Institutional Clients – together with
front-office services which are allocated to Corporate Center.
While the Private Clients business segment includes the continued operations of the private banking business of the two
banks in Austria and the Principality of Liechtenstein as well as
financial participations, the business segment Institutional Clients integrates asset management, corporate finance, real estate management and private equity activities. Corporate Center
represents the internal services center for the operating business units of Valartis Group. It provides services in the fields of
accounting & controlling, risk management & risk controlling,
legal & compliance and corporate communications & marketing.
In addition, consolidation items, together with income and expenses items with no direct connection to the operating business segments are assigned to the Corporate Center (see also
detailed segment reporting, pages 26 ff. and Note 44).
Group companies, together with the most important participations belonging to Valartis Group’s scope of consolidation, are
listed in Note 46 of the Notes to the Consolidated Financial
Statements.
ANNUAL REPORT 2014
|
VALARTIS GROUP | 9
CLIENTS AND MARKETS
TRUST AS THE BASIS FOR LONG-TERM
RELATIONSHIPS
Competence, know-how and experience nowadays no longer
suffice for a private bank to be able to win international, sophisticated clients. In particular, altered framework conditions on
national and international financial markets, emerging regulatory convergence on a global level, the breakdown in competitive
and location-related advantages together with the current dynamic era of technological advances have influenced the needs
and wishes of clients and, in part, changed them fundamentally.
The financial sector has been undergoing a complex process of
transformation over the past few years and it is essential that,
after completion of this process, the focus switches once again
even more strongly to specialist and social advisory competencies. Today, the decisive factor in the success of a financial institution is how quickly it can anticipate or understand the altered
needs and wishes of clients, in order to be able to integrate them
into client-specific, contemporary financial service offerings
under consideration of the legal and fiscal provisions of the
country of domicile.
Valartis Group has now completed the transformation phase
embarked upon in 2012 and, at the same time as strategically
realigning structures and organisation, has strengthened the
focus on specialist and social advisory and client liaison competencies with the aim of reinforcing and consolidating them. Over
the last few years, advisory services and client liaison support
have developed more and more into a process in which the client
advisor works together with a team of different internal specialists in order to offer clients the best possible individual solutions.
Based on that process, we cultivate relationships characterised
by trust, responsibility and cooperation and we focus on the
value for clients arising out of those relationships.
«As a Financial Coach, personal, solution-oriented client service has priority. Transparency and reliability,
together with a responsible investment of the assets
which have been entrusted to us, which is commensurate with risk and aimed at maintenance of stability, are the pivotal principles governing our client-oriented private banking philosophy.»
10
Wealthy private clients as the core target group
The Valartis banks’ private banking clients include entrepreneurs,
executives and private persons and their families. In addition to
very wealthy high-net-worth individuals (HNWI), our client advisors especially cater for so called affluent clients with liquid
investable assets of half a million Swiss francs, or more, in their
domestic markets and in neighbouring countries (see Country
overview on the right). The proportion of clients from emerging
markets, in particular Asia, has been rising steadily over the last
few years. Clients from these regions tend to be entrepreneurs
and on average younger than the «classical» private banking clients in our domestic markets and neighbouring countries.
Client assets by region
Asia, Middle East
and rest: 10.6%,
Latin and North
America: 9.6 %
Eastern Europe
and CIS: 20.8%,
Western and
Central Europe:
59.0%
Client value as focal point
Client value is always our focus, and for that reason, in addition
to location-related advantages – such as political and economic
stability – we offer specific, individual advice and support
coupled to a service offering which is aligned to clients’ requirements. Clients of the Valartis banks generally have second or
third accounts which serve, on the one hand, to pool life savings
for their own future retirement and the financial security of their
families or, on the other hand, as repositories for profits from
business activities to be used in further developing that business. For these clients in particular, a comprehensive understanding of their needs as entrepreneurs is essential, in conjunction with personalised, individual advice, discretion and
competence.
One of the most pertinent principles which we apply daily is the
responsible investment of our clients’ assets in a manner which
is commensurate with their appetite for risk. The 46.9 percent
investment in money markets and 17.8 percent investment in
bonds reflect a risk profile that is geared to stability and security
(see key figures at a glance).
OUR MARKETS
Valartis Group’s core markets consist of the respective domestic
markets (markets in the banks’ locations and the respective
neighbouring countries) as well as, in particular, Central and
Eastern Europe/CIS, parts of North and Latin America and – increasingly – certain countries in Asia. Opportunity markets are
mainly in the Near East. For historical and regulatory reasons,
the two Valartis banks have differing priorities with regard to
the core markets which they actively target, and the opportunity
markets which receive more passive attention (see also Strategy
and Objectives, page 13).
«Clients value our international and multicultural approach because they feel that their needs and wishes
are appreciated and understood.»
Valartis Group’s core and opportunity markets
Home markets
Core markets
Opportunity markets
Other
Comprehensive knowledge of markets and cultures
The success of our advisory and support model is largely dependent on our internationally oriented employees. Our employees
need to have in-depth knowledge of the respective culture,
economy and political environment in the country from which
their clients originate, must speak the respective language and
know and understand the country-specific needs of our international clientele (see also Key Employee Data, page 19). This clientele consists of, among others, wealthy private clients and selected institutional investors, together with independent
external asset managers to whom we also offer a comprehensive range of products and services. All our employees are committed to ensuring sustainable, personal and responsible, as well
as cooperative, advisory and support services for our clients. In
2014, we had more than 70 client advisors and 215 employees
from at least 15 nations, speaking a total of 32 languages.
In addition, the Valartis private banks’ extensive network of experienced external intermediaries assists client advisors in client
acquisition and client liaison. These intermediaries have excellent contacts and hold all the requisite licenses for establishing
new client relationships.
ANNUAL REPORT 2014
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CLIENTS AND MARKETS | 11
PRODUCTS AND SERVICES
TAILORED FINANCIAL SERVICES
Valartis Group client advisors are able to build on a close, constructive and professional cooperation with internal financial
experts and other specialists. Besides that, they can also rely on
an international network of external specialists who are at their
disposal and who, amongst other things, have relevant, local
knowledge. This integrated cooperation approach enables us to
design and offer bespoke and individually tailored investment
solutions and services. Clients benefit from our streamlined and
integrated organisation with its solid foundation of deep and
broad knowledge, competency and ability to make decisions
quickly – enabling a high degree of rapid and flexible implementation of solutions.
Comprehensive, holistic asset management
A systematic advisory process provides the foundation for a
comprehensive, holistic asset management and planning centered on personal, detailed discussions with client advisors. Each
investment portfolio is designed in accordance with the individual risk, return and liquidity requirements of the client. The goal
we pursue together with clients is the sustainable growth of
their assets in order to achieve suitable returns.
«We see ourselves as a long-term partner to our clients
and want to support them in becoming successful and
remaining successful.»
The Valartis private banks offer investment concepts to both
risk-aware, entrepreneurial investors and more conservative,
risk-averse investors. Along with standard asset management
strategies such as «conservative», «balanced» and «dynamic»,
Valartis Group’s portfolio managers are also able to implement
bespoke mandate solutions. These are based on the concept of
diversification and focus on careful strategic and tactical asset
allocation. Investments are made in accordance with a valuebased, core/satellite investment approach. This facilitates
risk-adjusted asset investment in index-tracking core investments in traditional as well as alternative asset categories while,
at the same time, remaining aware of selective investment opportunities with higher return potential.
Open architecture with best-in-class financial products
Our broad range of financial services encompasses traditional
private banking services, classical asset management, active and
strategic investment advisory services together with an independent and transparent product offering. In line with the bestin-class principle, the Valartis Group investment specialists select the best possible financial products and services in the
global market for each individual client (open platform).
12
Products and Services
Banking services
+ Discretionary portfolio management
+ Strategic investment advisory
+ Custody and execution services
+ Escrow services in Liechtenstein
+ Securities and foreign
exchange trading
+ Physical precious metals custody
Private solutions
+ Holistic wealth and retirement planning
+ Family foundations/trusts
+ Personalised investment
solutions in Austria
Investment instruments
+ Best-in-class financial products from
third parties
+ Specialised Valartis niche investment
funds
+ Access to real estate and exclusive
private equity investments
+ Tailored special funds and private
label fund solutions
Corporate Solutions
+ Corporate Finance
+ Range of services for external
asset managers
Specialised single-source investment instruments
In addition to selecting «best-in-class» third-party products,
Valartis Group’s investment specialists also use their expertise
to identify attractive investment opportunities to develop proprietary, index-tracking core investment products as well as
complementary niche investment instruments. Along with
niche equity funds and smaller retail funds in the fixed income
and alternative investments ranges, these include specialised investment vehicles consisting of real estate and private equity
portfolios in Germany and Russia. For institutional and private
clients, the in-house product offering is supplemented by «onestop shop» solutions for specialised funds in securities, together
with customised private label funds for investors with very specific investment expectations (see also page 29 ff. for more
detailed information on Valartis fund products).
As an investment company, our private label fund boutique in
Liechtenstein, Valartis Fund Management (Liechtenstein) AG,
holds both the UCITS and the AIFM licenses and manages over
30 complex fund structures.
STRATEGIC GOALS AND OBJECTIVES
THE LAST SEVEN YEARS
OBJECTIVES AND MEASURES
In 2007, Valartis Group focused its business activities on asset
management services for wealthy private clients and institutional investors. Over the course of the following three years, the
Group expanded its private banking business through targeted
acquisitions and continued to further focus on the private banking segment with systematic divestments of non-private banking activities in 2011 and 2012 and, at the same time in 2012 and
2013, with further streamlining through stringent cost-saving
measures. In 2013, Valartis Group decided to spin off the wholly
owned Swiss subsidiary, Valartis Bank AG, Switzerland due to the
fact that, despite the reorganisation of its front-office activities
in 2012, the bank’s acquisition performance could not be enhanced at the expected rate and it became evident that it would
not be able to reach its critical mass in the foreseeable future.
Valartis Group holds today a 25-percent participation in Norinvest Holding S.A., the listed parent company of Banque Cramer
& Cie S.A., who purchased the Swiss Bank in 2014, which permits
Valartis Group to maintain its private banking market access in
Switzerland to a reduced extent.
The next seven years
Valartis Group’s future lies in the concentrated development of
its strategic core markets, adjusting product and service offerings to the requirements of its international target groups and
re-engineering business models and structures to enable more
rigorous focus on profitability and maintenance of a favourable
risk/return ratio. The banking and financial group with international operations has two business segments: Private Clients
and Institutional Clients. Valartis Group currently has offices in
locations in Liechtenstein, Austria, in Switzerland, in Luxembourg, and Moscow. In 2014, the operating activities of the private banking and wealth management segments, together with
the private equity activities, were amalgamated in Valartis
Finance Holding AG which is subject to consolidated banking
supervision by the Financial Market Authority in Liechtenstein
(FMA). In addition to classical asset management and investment advisory services, Valartis Group designs, manages and
distributes innovative niche investment products, and offers
specialty products which combine a broad range of traditional
private banking services with specialised advisory and banking
services in the fields of asset management, corporate finance
and private equity, as well as innovative investment products in
the following asset classes: equities, fixed income, alternative investments and real estate. Valartis Group’s core markets are
Central and Eastern Europe, the Near East and individual countries in North and South America and Asia. Responsibility for the
individual markets resides with the respective locations and is
coordinated via the Group.
MARKET AND COMPETITIVE ENVIRONMENT
The competitive situation in which Valartis Group finds itself is
increasingly challenging due to tightening regulatory requirements, difficult economic conditions arising out of the current
interest rate curve and currency exchange rate fluctuations, together with markedly raised expectations on the part of an increasingly sophisticated clientele. On the back of these factors,
pressure on margins is rising which is forcing smaller and medium-sized private banks such as the Valartis banks, to rethink
their business activities. Besides positioning themselves in attractive niches, the future for financial institutions will increasingly include searching for collaborations or mergers, both internally and externally, in order to achieve effective economies of
scale.
Tightened regulatory conditions
Significantly tighter political and regulatory framework conditions in Europe are also influencing private banks’ business
models and exerting pressure on the costs side. The principles
according to which a bank interacts with its clients, provides
its products and services and even relates to governments and
other banks are increasingly dictated by laws and regulations.
Further focused growth
Valartis Group continues to pursue the same, unchanged medium-term objectives. Our aim is to achieve net new money inflow, based on clients’ assets under management, of an average
of 5 percent per year. The targeted cost/income ratio is between
65 and 70 percent and the core capital ratio at around 15 percent.
This can only be achieved, if sources of loss are sustainably minimised throughout Group companies – in the same way that between 2011 and 2013 the risk profile was consistently
lowered. In addition to vigilant maintenance of critical mass in
clients’ assets under management at the two banks, and concurrent reduction in its cost basis, establishing further sources of
revenue will become a central factor in the future success of the
Group.
Additional sources of income
This means that, alongside the Private Clients segment, Valartis
Group must now also further strengthen the Institutional Clients segment – not only by developing products which benefit
its own private banking activities, but also by focusing on its
presence in the market and optimising the range of its services
and products. In so doing, the Group should only pursue business activities with transparent and profitable risk/return prospects (see also Risk Management, page 50 ff. and 93 ff. ).
ANNUAL REPORT 2014
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STRATEGY AND OBJECTIVES | 13
Streamlined organisational structure
Valartis Group is organised on the basis of segments and specialist areas which are assigned to respective members of the Group
Executive Management. As part of its strategic course setting
for the future reorientation of Valartis Group, the Board of Directors downsized this leadership organisation from five members
to three. This leaner set-up will simplify processes and responsibilities and enhance efficiency and profitability through a
stronger Group-wide concentration of competences.
During the course of the divestment of the Swiss Bank, Valartis
Group realigned its organisation and incorporated Valartis
Finance Holding AG in Vaduz. The relevant operating activities of
the private banking and wealth management segments of the
two private banks in Liechtenstein and Austria, together with
holdings in the area of finance, such as the 25-percent holding in
Swiss Norinvest Holding S.A., the parent company of Banque
Cramer & Cie S.A., have been combined in Valartis Finance
Holding AG in Liechtenstein. Valartis Finance Holding AG is subject
to consolidated banking supervision by the Financial Market
Authority in Liechtenstein (FMA). As of 1 March 2015, Stephan
Häberle was designated CEO of Valartis Finance Holding AG in
Liechtenstein. He has in-depth knowledge and many years of experience in international private banking and wealth management, in particular in Switzerland, in Liechtenstein and Austria
as well as in Central Europe.
Targeted measures to control costs and raise income
Continued specific cost control and income enhancement programmes in all the Group’s operating companies are also aimed
at achieving the targeted increases in efficiency and profitability.
In particular, the Group Executive Management is actively working towards a targeted increase in short-term flexibility – despite tightening regulatory challenges and increased organisational complexity – in order to make the business model more
scalable. The aim is to achieve this by more efficient exploitation
of Group-wide synergy potential and, at the same time, Valartis
Group will continue to subject its cost centers to a rigorous cost
control. A balanced approach to risk remains a core principle. The
internal control system (ICS) is consistently being enhanced to
facilitate efficient management of operational risks. For details,
please also see Risk Management, page 50 ff.).
Continued improvement in commission income
In addition to an emphasis on client acquisition, Valartis Group is
also focusing on an annual increase in earnings. This means that
commission income must be raised in order for all operating
costs to be sustainably covered by the income from commission
and services. The constantly pleasant development of the business segment Private Client over the past years are to be further
strengthened in this direction. For detailed information, please
refer to the segment reports on page 26 ff.
14
Transparent «make and buy» strategy
The Valartis banks provide their range of private banking services at fees which are in line with the market. In the provision of
its services, Valartis Group wants to create transparency for clients. For this reason, the Group uses an «open platform» approach using «best-in-class» financial products from third-party
providers, selectively supplemented by competitive in-house investment instruments. The Group consciously avoids selection
and support of complex structured products which are difficult
to understand. In the case of private banking services that go
beyond classical portfolio management, strategic investment
advisory services and related banking services – for example,
cross-border tax advisory, retirement advisory and financial
planning advisory services – the Group uses a «buy» strategy –
i.e., close cooperation with selected external specialists.
An investment approach aimed at security and stability relies on
professional portfolio management. This is based on a riskadjusted combination of index-tracking core and value-based
satellite investments. Using this core/satellite investment
approach, Valartis Group’s asset management specialists have
begun developing the respective core fund products in-house,
on top of specialised niche investment instruments. In contrast
to Valartis Group’s Swiss niche funds, the new products are
mainly intended for the existing private clients of the two
Valartis banks in Liechtenstein and Austria. The principle of
transparency and competitiveness in selection of its products is
adhered to at all times. Further information on Valartis funds
products can be found on pages 29 ff.
Focused market development
Valartis Group focuses its market development activities primarily on wealthy private clients. Besides the traditional private
banking target group, high-net-worth individuals (HNWI),
Valartis Group primarily offers services in its domestic markets
to the affluent clients segment: wealthy clients with liquid investable assets of half a million Swiss francs, and over. The
Valartis banks have always been very successful in this client
segment, differentiating themselves in their domestic markets
and neighbouring countries by offering affluent clients individual services which are usually reserved for the HNWI client
segment.
Another target group for which Valartis caters is institutional investors including independent asset managers, custodians and
foundations or trusts, providing them with specific services and
products. The Valartis banks have many years of experience in
cross-border, cooperative collaboration with external asset managers.
Regional market development efforts center on expanding activities in domestic markets and promising growth markets in
Eastern Europe, Latin America and Asia. As a comparatively small
banking group with limited resources, Valartis Group focuses its
energies primarily on those actively serviced core markets which
are most profitable in terms of net margins generated. The main
criteria for determining the core markets of the two Valartis
banks are profitability, the available linguistic, cultural and market specific knowledge within the Group, and the estimated
market potential. The two banks also offer passive services in
various opportunity markets: clients here either visit one of the
Valartis banks or are served by a local intermediary (see also
chart Core and Opportunity Markets on page 11).
Efficiency for the Group as a whole
The Group also targets inter-company efficiency through partnerships. Collaborations offer a means of combating increasing
costs and can result in the design of new business models based
on alliances. In order to achieve this, Valartis Group consistently
shares leading practices with partners in order to optimise and
take mutual advantage of resources.
Outlook
In the Private Clients segment, the focus for 2015 is the successful servicing of target markets and a clear orientation towards
improving results. The Institutional Clients segment will focus
on enhancing its market presence and on optimising and expanding its range of services. Valartis Bank AG, Switzerland historically functioned like a head office and, as such, was responsible for the duties and services usually provided by a Corporate
Center. The operation was discontinued in 2014 and the Group
realigned its service organisation and Group structure to the
new circumstances and requirements, and transitioned the existing Group organisation and infrastructure. In 2015, the processes and procedures for the new service organisation will be
finalised and optimised.
VALARTIS GROUP MILESTONES
2014
Minority Participation in Norinvest Holding S.A.
Divestment of Valartis Bank AG, Switzerland, and
of its asset management company
2012
Divestment of holding in Eastern Property
Holdings Ltd.
Branch of Valartis Bank AG, Switzerland established in
Lugano
2011
Divestment of Valartis Bonus Card AG (former Jelmoli
Bonus Card AG)
2010
Establishing of a representative office in Singapore,
Asia
Raising holding in Jelmoli Bonus Card AG to 100
percent and renaming as Valartis Bonus Card AG
2009
Acquisition of Hypo Investment Bank (Liechtenstein)
AG and renaming as Valartis Bank (Liechtenstein) AG
2008
Strategic reorientation «Private Banking Plus»
Acquisition of Anglo Irish Bank (Austria) AG and
renaming as Valartis Bank (Austria) AG
2007
Group rebranded as Valartis Group
2006
OZ Bankers AG becomes a member of Visa Europe
minimum holding in Jelmoli Bonus Card AG
2005
Merger of OZ Group with MCT companies (MCG
Holding acquires 50 percent of share capital and
voting rights in OZ Holding AG)
ANNUAL REPORT 2014
|
STRATEGY AND OBJECTIVES | 15
CORPORATE SUSTAINABILITY
SUSTAINABLE CORPORATE MANAGEMENT
Corporate Responsibility
O
t
he
rD
ia
l
s
ee
oy
Transparency
+ Integrity
+ Responsibility
+ Respect
+ Customer Orientation
+ Discretion &
Confidentiality
+ Clear Risk Principles
+ Compliance
+ Sustainability
Em
pl
1 Code of Conduct of Valartis Group, Sustainability
The Code of Conduct serves as a guide for all Valartis Group employees on how to make every contact or encounter – be it with
clients, business partners, shareholders, or other stakeholder or
dialogue groups – into a brand experience (see graphic below).
Valartis Group conducts open, transparent dialogue and aspires
to a partnership based on trust and responsibility with clients,
partners, investors and colleagues. We understand the central
significance of good corporate governance for the success of
our business, and work accordingly to ensure rigid implementation of recognised standards (see also Corporate Governance,
page 38 ff. ).
ps
ou
Gr
Our relationships with our stakeholders are intended
to be lasting. In our role as Financial Coach, we accompany clients in the long term, offering them optimum solutions for every phase of their life or their
business.» 1
unication
Comm
«Sustainable business practices and related profitability are core to our long-term success. We integrate
ecological and social aspects into our business decision making, management of our resources and into
our infrastructure. We want to achieve continuous
sustainability for shareholders, clients and employees.
Cl
ie
Dialog
og
rs
de
ol
s
nt
Sh
ar
eh
Environment
Valartis Group is an international company with a broad network
and, as such, is conscious of the diversity and high level of
importance of our international and local stakeholders. To
achieve sustainable and successful business development, it is
therefore crucially important that we know exactly what they
require and what their interests are and take these into consideration in determining our strategy and in its implementation. In
addition to purely economic criteria, we also integrate social and
ecological aspects into our daily thoughts and actions in order to
reflect our corporate responsibility holistically. Our ethnic and
professional values, such as integrity, respect, trust, client and
dialogue orientation, cooperation and transparent communication, together with our strong sense of responsibility are collected in our Code of Conduct.
Social Environment
FOR OUR CLIENTS – A RESPONSIBLE,
FORWARD-LOOKING PARTNER
We are dedicated to the traditional values of private banking –
trust, cooperation, discretion, awareness of risks and responsibilities linked with competence, know-how and years of experience. In addition, we see ourselves as trustee and Financial
Coach and focus on the needs and expectations of a sophisticated, international clientele whose primary aim is sustainable
growth of their assets while, at the same time, achieving a reasonable rate of return. Sustainable asset growth requires expertise and experience, but above all, it also demands care and discipline with regard to provision of advice and implementation.
For that reason, Valartis Group’s client advisors make the best
use of their personal discussions to take time to get to know their
clients really well. They analyse their clients’ wealth situation
carefully and take into consideration their professional and personal context, their financial requirements and their risk capacity and propensity. Subsequently, our investment specialists
develop a future-driven, prudent, individual investment strategy,
together with the client, which is aimed at sustainably achieving
their financial goals. In doing so, they clarify not only the related
potential returns but also the risks involved.
Thorough and careful operative risk management and
compliance
We regard risk management and compliance as being of central
significance. Compliance is charged with observing legal responsibility and for ensuring adherence to all relevant internal and
external regulations, together with timely implementation of all
new regulatory stipulations. Our business activities are grounded in a disciplined, prudent approach to risks. We only assume
risks which we can assess, evaluate and carry within our risk appetite. In the interests of, and in order to protect stakeholders,
the Group also places a high level of emphasis on independent
risk management, compliance and audit procedures.
16
During the course of the 2014 reorganisation of Valartis Group,
the operating activities of the private banking and wealth management segments, together with the private equity activities
of ENR Russia Invest S.A., were amalgamated in the newly founded Valartis Finance Holding AG which is subject to consolidated
supervision by the Financial Market Authority in Liechtenstein
(FMA), please also see page 8 for details.
Dialogue with clients
In addition to continuous and institutionalised dialogue with clients, we also use a complaints system. This was introduced several years ago as a qualitative indicator for client satisfaction,
which is, of course, decisive in our field. This process, together
with complaints evaluation techniques and client feedback, enable us to professionally record, analyse and evaluate incoming
client feedback. The results provide us with valuable insight into
the mood of our clients and compel us to define and implement
improvement measures as quickly as possible in connection with
front-office and associated units or, if necessary, to take complaints into consideration in the future definition of processes,
products and business models.
FOR OUR SHAREHOLDERS – TRANSPARENT AND
SUSTAINABLE CORPORATE DEVELOPMENT
As a listed company, Valartis Group’s public shareholders, with a
free float of 42.7 percent of shares, represent an equally important stakeholder group as the majority shareholder MCG Holding S.A. in Baar, canton Zug, which holds 50.2 percent of capital
and voting rights (see Bearer share, page 170). The rest of the
shares are directly held by the company.
We seriously take our duty to both minority and majority shareholders to operate in an economically viable manner. We want to
generate a profit which makes it possible for us to achieve sustainable development not only by means of targeted, partial reinvestment in business activities, but also in economically difficult periods. The Group also wants to award their shareholders
appropriate interest on the capital they have made available, by
paying them a dividend, in as far as a suitable profit has been
generated.
Sustainable business development – value-driven management
While the Group was historically managed mainly according to a
profit-oriented and individual company approach, some years
ago, we transitioned to a holistic approach centered on management of the company. This is based on a systematic, multilevel, financial planning and management process using a dual
control concept with a clear separation between decentralised
control of front-office activities and a centralisation of the service organisation including the Group’s own financial investments and hedging strategies.
Broad-based Board of Directors and Group Executive
Management
The medium and long-term strategic orientation of Valartis
Group is determined by the five members of the Board of
Directors who, due to their professional backgrounds, all have
vast experience and expertise in wealth management, finance
and accounting, risk management and internal control systems,
as well as in commercial law (see also Corporate Governance Report, page 38 ff.). The strategic objectives of the Board of Directors are implemented by the Group Executive Management.
During the course of divesting the Swiss Bank in 2014, as from
9 April 2014, Group Executive Management was streamlined
for the duration of the transformation phase and comprised:
Gustav Stenbolt, Group CEO, Vincenzo Di Pierri, Deputy Group
CEO and former CEO of Valartis Bank Switzerland and George M.
Isliker, Group CFO & CRO. This body is also responsible for the
operational management of Valartis Group and its results (see
also page 46 ff.). As a decision-making body, the members together define gross profit performance targets for the coming three
years, as a part of the rolling, operational medium-term planning, and determine the core tactical approach on a Group level.
The CEOs of the two private banks in Liechtenstein and Austria
together with the Head of the Institutional Clients segment
which comprises Asset Management, Corporate Finance, Real
Estate Management and Private Equity all report to Group
Executive Management. Based on a detailed annual plan, they
each independently determine their risk and return budgets for
the coming year and decide on the appropriate use of funds. In
this way, the individual bank CEOs are free to decide whether
they want to attain the operating net income level which has
been set by raising returns or by reducing costs. Non-operating,
taxable returns and expenditure, such as trading or valuation
gains, however, are not included in the medium-term planning.
Close monitoring of results and discussion on a monthly basis
facilitate to quickly implement necessary counter-measures,
without disrupting operations, if there are significant deviations
from the set budget. At the same time, specially designed information and risk management systems make it possible to maintain control over operating risk (see also Risk Management, page
50 ff.). The three-year capital plan represents conclusion of the
financial management process.
2 The Group Executive Management regularly meet with Banking and Finance
Committee, which includes the Head of Institutional Clients and the CEOs of the two
private banks in Liechtenstein and Austria. For details on Group Management, see
page 46 ff.
ANNUAL REPORT 2014
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CORPORATE SUSTAINABILITY | 17
FOR OUR EMPLOYEES – EMPOWERING SUCCESS
OUR PROMISE TO THE EMPLOYEES
Accept social
responsibility
Sustainable employee
development –
future-driven
Value-driven compensation
system – target-oriented,
appreciation
Values – trust,
responsibility, cooperation
We want all our employees to enjoy an
adequate work/life balance, i.e., a favourable ratio between career and family and
a suitable balance of work and leisure
time, exercise and nutrition. For that reason, the Valartis companies offer holidays
and holiday provisions which are in line
with the market and aligned regionally,
together with flexible working times and
on-site catering.
We promote and enable personal and
professional development within the
Group.
We offer compensation which is in line
with the market in all our locations (for
details please see Compensation Report,
p. 56 ff.). The compensation system
provides incentives which promote a
performance, team and risk-aware
culture and entrepreneurial thinking
and action which strengthen Valartis
Group as a whole.
We pursue the principle of equality,
in particular in determining salaries.
Female specialists who work in the
same location and have the same
qualifications and experience as their
male colleagues always receive the same
salary as their male colleagues. The
percentage of women in the Group as a
whole is around 43.7 percent, of whom
23.4 percent are in the senior management (one level below local Executive
Management).
Social cushioning in difficult times,
see e.g., comprehensive Outplacement
Programme in the section below.
We have institutionalised internal and
external training and further training.
Trainee development is an integral part
of our Group’s training programme.
We want our employees to be successful, to be willing to accept
challenges, to be committed and passionate about their work
and, at the same time, to be able to balance their working lives
and their private lives. Our international orientation and the cultural diversity of clients demand a high level of professionalism,
expertise and knowledge of people and cultures, together with
the observance of our values. In return, we offer our employees
a value-driven management approach which comprises progressive social benefits, attractive basic salaries which are in line
with the market, together with a performance-related compensation system and institutionalised further development platforms. Our value-driven management approach forms the basis
for Valartis Group to become an even more attractive and progressive employer.
Accept social responsibility: comprehensive Outplacement
Programme at Valartis Bank AG, Switzerland in 2014
Following the sale of Valartis Bank AG, Switzerland to Banque
Cramer & Cie S.A., it was not possible to integrate all the Swiss
Bank’s employees with the new owner. As a Group, it was very
important to us to provide social cushioning in the form of a
comprehensive Outplacement Programme in order to provide
those employees with external, professional assistance in their
reorientation. This involved 20 employees from service and
back-office units in the Swiss Bank. The Outplacement Programme started in May 2014 and ended as of end of December
2014.
Work/life balance
A fundamental prerequisite for maintaining long-term employee
performance capability is the link between work and family, or
establishing an adequate work/life balance. For that reason, the
Group offers holidays and holiday provisions which are in line
with the market and aligned regionally, together with the possi-
18
We offer to, and expect from, our employees an open attitude to, and respect
of, all nationalities, cultures, mindsets,
age groups and needs.
bility to set flexible working times. In addition, employees are
provided with free beverages (coffee, tea, mineral water, and
soft drinks). Our bank in Liechtenstein also provides reasonably
priced lunches in house.
Sustainable employee development – future-driven
For a service provider like Valartis Group, qualified and committed employees are the most important capital. It is their specific expertise, experience and pronounced, solutions-oriented
mind-set, together with the high level of personal commitment
which enable us to remain focussed on the future and make it
possible for us to continue developing in order to quickly get
back on a successful course, despite the continuing extremely
challenging environment in 2014. In the financial services sector,
demands on employees are intensifying due to increasing complexity within the finance sector as a consequence of new
framework conditions, increased regulation and new product
launches. In order to remain fit and competitive in the market,
and to ensure sustainable success for the company, education
and advanced training for employees, in particular in the fields
of local and international markets, products, compliance,
cross-border regulation and other regulatory guidelines, are essential. For that reason, we continue to pursue a policy of continuous, targeted development of our intellectual capital by offering systematic, institutionalised training programmes to our
employees. For example, our client advisors regularly participate
in internal training sessions to acquire in-depth knowledge of
our product and services offerings, enabling them to give proficient advice to clients in their meetings. As a responsible employer, we also support our employees individual external training
and further training efforts. For some years, we have invested
over CHF 1000 per employee annually in further training activities (2014: CHF 1,432 per employee) – and we intend to continue
to do so in future. In addition, we also promote intensive knowledge transfer among our interdisciplinary teams, including
across borders.
Value-driven compensation system – target-oriented and
appreciative
We are committed to a fair, balanced and performance-oriented
compensation policy and offer employees in all our Group companies progressive social benefits, on top of attractive basic salaries which are in line with the market and an attractive bonus
system for employees who perform very well, or turn in aboveaverage performances. Our value-driven compensation system
is intended to support the Group’s long-term economic success
and our sustainable competitiveness (for details, see also Compensation Report, page 56 ff.). We provide incentives for employees which promote a performance, team and risk-aware culture
and entrepreneurial thinking and action which strengthen the
Group as a whole. For example, management receives a portion
of their variable performance component exclusively in Valartis
Group AG shares (vested over a period of up to three years).
Along with targeted employee advancement and development,
market-related salary and progressive social benefits, our employees also receive a number of additional benefits such as seniority awards, marriage and birth benefits, car pool discounts
and company cars. These are offered in line with regional conventions in individual locations. For this reason, compensation
and recruiting models for the two Valartis banks in Austria and
Liechtenstein vary, for historical reaons as follows:
Valartis Bank (Liechtenstein) AG
The compensation model of the bank in Liechtenstein comprises
a share participation programme in which employees and the
management currently hold close to 30.5 percent of capital
rights in the company and who, thus, have a significant stake in
its long-term success through their annual dividend. The bonus
payments for these employees are capped at a maximum of
25 percent of their respective fixed salaries – according to the
principle of equality for all employees, the same percentage applies to all.
The bank in Liechtenstein consciously refutes the poaching of
entire teams from outside the bank and does not work with
headhunters. Specialists are recruited online. In the main, the
bank relies on the proven approach of regularly engaging students from the Universities of St. Gallen, Vienna and Liechtenstein as trainees, in order to provide them with bank-specific, internal advanced training. Around half of current department
heads in Valartis Bank (Liechtenstein) AG began their professional career in this way.
Valartis Bank (Austria) AG
The compensation system of Valartis Bank in Austria is consistent with efficient risk management and offers no incentive to
run unreasonable risks based on management structures or
practices e.g., identification of risk buyers, pouvoir provisions,
committee resolutions, premium pool method. A maximum
amount in variable compensation is set per financial year and
per person which may be paid in cash with no repayment conditions. Amounts which exceed that limit are distributed over a
KEY EMPLOYEE DATA 2014
Company
as of 31.12.2014
Valartis Bank
(Liechtenstein)
AG
Valartis Bank Valartis Advisory
Valartis
(Austria) AG
Services S.A. International S.A.
Valartis Group
(continued business activities)
Number of employees
95
76
27
26
224
Number of employees (adjusted for part-timers)
94
73
25
23
215
Trainees
11
0
0
0
11
Average age
37
40.4
44
43.5
Average number of years in the company
3.7
7.9
5.2
4.8
Nationalities
15
13
8
2
Number of women
51
39
12
10
Number of women in management positions (of all women)
29%
15%
25%
20%
Number of women in management positions
(of all employees)
14%
8%
11%
8%
41
24
7
1
Training costs per employee
Number of client advisors
CHF 1,432.00
ANNUAL REPORT 2014
|
73
CORPORATE SUSTAINABILITY | 19
period of five years under consideration of the bank’s longerterm overall results. Compensation is thus risk, function and performance-oriented and geared to sustaining the overall success
of the bank.
The bank in Austria recruits primarily through its employees’ extensive international network, which facilitates a rapid and efficient recruiting process. Specialists are also recruited online. In
addition, internships are offered every year to students, in order
to train suitable young professionals for the longer term. Particular importance is attached to foreign language skills/multilingualism, in order to generate potential future client advisors for
our sophisticated, international clientele.
FOR SOCIETY – COMMITMENT IN THE FIELDS OF
CULTURE, SPORTS AND SOCIAL AFFAIRS
As a socially responsible company, Valartis Group supports a
range of reputable charitable organisations and is also involved
in sporting, cultural and social engagements.
Sponsoring engagements and client events – live
communication platforms
Sponsoring engagements and client events provide ideal platforms to strengthen client relationships and relationships with
other groups, such as media representatives, or to reach potential clients. Individual meetings and encounters, stimulating dialogue, mutual experiences and culinary highlights are live communication opportunities to touch and feel the Valartis brand.
In 2014, we invited clients to a range of events including specialist lectures by internal and external speakers, various sports
events held together with foreign business partners and joint
visits to the theatre and to concerts.
One highlight – Valartis Bank Snow Polo World Cup
Our private bank in Liechtenstein has been the main sponsor of
the Snow Polo World Cup in Kitzbühel, Austria, since 2003. Together with the Hahnenkamm downhill alpine skiing race, the
polo tournament is the annual social highlight in this town in the
Tyrolean Alps, attracting 8,000 visitors and making it the largest
meeting in the Austrian equestrian sports calendar. Together
with our personal guest liaison and support, this sporting event
offers our clients and partners an unforgettable brand experience.
Social commitment
Valartis Bank (Liechtenstein) AG
Valartis Bank has supported the Heilpädagogisches Zentrum
(Center for Therapeutic Pedagogy) in Liechtenstein (www.hpz.li)
for a number of years. The special educational workplaces provide disabled people with an occupation and have provided the
bank for over ten years with periodic services such as packing
and mailing publications, for example, the monthly investment
newsletter with a circulation of over 5,000 copies. They also produce the Liechtenstein bank’s hand-made Christmas cards.
20
Valartis Bank (Austria) AG
The bank traditionally supports a number of organisations by
means of donations. No Christmas presents are given to clients
or employees, instead the bank supports children in need.
FOR THE ENVIRONMENT – FUTURE-DRIVEN,
LONG-TERM BALANCE
In managing our business, we are guided, amongst other things,
by the following basic principle: We aim to achieve an adequate
and future-driven, sustainable balance between our economic,
social and ecological responsibilities as a company. As an internationally oriented company, it is important to us to attain this
balance and to accept our responsibilities.
In the case of sustainability issues, we continue to focus on the
efficient use of resources because we are convinced that using
resources efficiently will, in the future, remain a deciding factor
in the success of companies and institutions. Stakeholders will
continue to intensify their demand for concerted action in connection with sustainability issues and a responsible use of nonrenewable resources, together with further enhanced resource
efficiency and more investment in, for example, renewable energy sources.
Systematic recording and evaluation of ecological data are currently not viable on the grounds of lack of capacity. But we are
consistently pursuing pragmatic solutions and our subsidiaries
have clear instructions to consider ecological aspects in their
strategy development, budgeting and overall business activities,
as well as in their daily routine:
We reduce our ecological footprint for example by:
– Always using public transport for business trips (free multi-trip
tickets are made available, employees may travel first class)
– Challenging every flight: Plane trips to visit clients abroad are
limited to the absolutely necessary minimum
– Using new technology (online or video conferences) for meeting
– increasing the efficiency of electricity for computer systems,
appliances, etc.
– Optimising use of paper. For example, the Valartis Group AG
Annual Report is now only printed on demand and sent via
post
– Updating online communication tools and platforms and offering more user-friendly versions: microsite and apps for Annual Reports and publications
– Collecting and separating used paper in special containers for
appropriate disposal
– Constructing cooling ceilings in our offices which provide for a
comfortable climate both in summer and in winter
– Providing beverages for clients and employees in returnable
bottles which go back to the dealer after use.
13:20
View of the Silvretta group, a range of mountains on the
Swiss-Austrian border
14:30
COMMENTS ON BUSINESS ACTIVITIES
BETWEEN THE PRESENT AND THE TUFURE
COMMENTS ON BUSINESS ACTIVITIES
The 2014 Valartis Group Consolidated Financial Statements, in
accordance with International Financial Reporting Standards
(IFRS), show a Group loss of CHF 73.3 m for continued operations
and discontinued operations, taking into consideration non-recurring, exceptional factors (previous year on a comparable basis: Group profit of CHF 0.4 m). This is made up of the loss of
CHF 19.6 m from discontinued operations resulting from divestment of Valartis Bank AG, Switzerland and Valartis Wealth Management S.A. plus a loss from continued operations of CHF 53.7 m.
The loss from continued operations of CHF 53.7 m (previous year
on a comparable basis: Group profit of 13.2 m) is mainly attributable to the following factors: necessary value adjustments on
receivables from the 2012 sale of Eastern Property Holdings Ltd.
amounting to CHF 27.5 m, impairment of goodwill positions
amounting to CHF 10.6 m, a decrease in income from interest
amounting to CHF 8.3 m and a significantly lower trading result
in 2014 due to lower rouble valuations on private equity holdings and losses on the ENR Russia Invest S.A. bond portfolio of
CHF 8.1 m.
From a purely operational viewpoint, i.e., without taking nonrecurring, exceptional factors into consideration, income from
commission and services for continued operations remained
stable in comparison with the previous year and net new money
inflow rose to CHF 285 m (2013: CHF 438 m). Despite the costs
arising out of implementation of new regulatory requirements,
overall costs for the last financial year only rose by a modest
2 percent. However, the continued downward trend in market
interest rates and the lack of reinvestment opportunities for
bonds negatively influenced interest income for the continued
operations of Valartis Group. As a result, income from interest
was reduced from CHF 17.5 m to CHF 9.2 m at a significantly lower average invested volume in FY 2014.
As reported at the end of the half-year, the non-recurring, exceptional factors which contributed to this loss include CHF 19.6 m
arising in connection with operations which were discontinued
in 2014 (Valartis Bank AG, Switzerland and Valartis Wealth Management S.A.), the associated restructuring costs for the reorganisation of the Group – in particular the costs for advisory services – together with the value adjustments on receivables out
of the 2012 sale of Eastern Property Holdings Ltd, due to substantial value adjustments amounting to around CHF 27.5 m on
real estate projects effected by that company as a result of the
current economic situation in Russia. One additional factor was
an impairment of goodwill positions amounting to CHF 10.6 m,
also as a result of the current situation.
Continued strategic focusing
Within the framework of the strategic orientation embarked
upon in 2008, following development of its private banking business, Valartis Group focused business activities in 2011 and 2012
on wealth management activities by means of two tactical divestments. In 2013 and 2014, in addition to an increase in assets
under management in the Private Clients segment, implementation of further targeted cost reduction measures were at the
center of Valartis Group’s continued strategic focusing. Valartis
Group focused primarily on the concentrated development of its
strategic core markets, adjustment of its product and services
22
offering to the requirements of its international target groups as
well as on realigning business models and structures to enable a
more rigorous orientation towards profitability. In order to
achieve a sustainable, future-driven cost/income basis (in a
range of 65 to 70 percent) across the Group, an attractive solution for Valartis Group shareholders as well as the clients and
employees of Valartis Bank AG, Switzerland was found in 2014.
The Bank, with close to 70 employees, managed only around onefifth of Valartis Group’s client assets but generated 30 percent of
costs, and was divested in 2014.
Valartis Group has been implementing these measures since
2011, as part of its attempt to cut out the loss-generating operating units and to limit the influence of non-recurring, exceptional factors to the greatest possible extent by reducing its risk
profile, in order to attain sustainable profits. In 2015, Valartis
Group will stay on this course and will strive to achieve this objective despite all the obstacles in the current market environment which is characterised by considerable insecurity, historically low interest rates, continued growing regulatory pressure
and its associated costs. Valartis Group also expects growth
rates in the European economy to decelerate on the back of the
elimination of the euro minimum exchange rate and the associated, expected volatility. These factors will have corresponding
repercussions for the 2015 financial results for the Group companies – even before we factor in the effects of negative exchange rates in 2015. In the Notes on the Consolidated Financial
Statements, in Note 51 and table 3 on page 95, events after the
balance sheet date and their theoretical effects on the 2014
closing result are described and evaluated; they include the currency exchange rate effects on the 2014 result associated with
the elimination of the euro minimum exchange rate on 15 January 2015.
Discontinued operations
In the course of the realignment of structures, on 26 August
2013, the Board of Directors of Valartis Group AG decided to divest Valartis Bank AG, Switzerland. During the first half-year
2013, it had become apparent that the acquisition capacity of
the Swiss bank could not be enhanced at the planned rate, despite the newly aligned front-office organisation, and it was
clear that the bank would not attain the appropriate critical
mass within the foreseen timeframe, despite the last five years
of work on its development. The Swiss bank’s costs, together
with costs arising out of measures implemented as a result of
growing regulatory pressure, accelerated further squeezing margins and significantly raising the level of the necessary critical
mass for a Swiss bank. Valartis Bank AG, Switzerland was a wholly owned subsidiary of Valartis Group AG with offices in Zurich,
Geneva and Lugano. The Swiss bank and the associated wealth
management company, Valartis Wealth Management S.A., were
sold on 16 May 2014, and on 29 August 2014, the merger with
the purchaser, Banque Cramer & Cie S.A. in Geneva, was concluded.
For this reason, the provisions of the International Reporting
Standards (IFRS) for continued and discontinued operations
(IFRS 5) apply for the 2014 Annual Report. The 2014 Consolidated
Financial Statements for Valartis Group show a Group loss
amounting to CHF 53.7 m for continued operations (previous
year on a comparable basis: Group profit of CHF 13.2 m) and a
Group loss of CHF 19.6 m for discontinued operations (previous
year on a comparable basis: Group loss of CHF 12.8 m).
Client assets by asset class
2013
Alternative/other 8%
Shares 15%
Liquidity 40%
CLIENT ASSETS
Funds 17%
Valartis Group posted net new money inflow of CHF 285 m for
continued operations in 2014 (previous year on a comparable basis: CHF 438 m). The increase in market- and exchange-rate-related overall Group client assets in 2014 thus amounted to CHF 140
m (previous year on a comparable basis: CHF 13 m). Total client
assets managed by Valartis Group thus amounted to CHF 6.5 bn
as at 31 December 2014 – after the successful divestment of the
Swiss bank and the Swiss wealth management company (previous year: CHF 6.0 bn).
As at 31 December 2014, the Group’s client assets are distributed
between the two core business segments as follows:
– Private Clients: CHF 6.1 bn – or 94 percent
– Institutional Clients: CHF 0.4 bn – or 6 percent
Client assets by asset class
2014
Alternative/other 6%
Precious metals 2%
Shares 9%
Liquidity 47%
Bonds 18%
Funds 19%
Precious metals 2%
Bonds 18%
With 47 percent in liquidity, 18 percent in bonds and 2 percent in
precious metals, the assets managed by Valartis Group continue
to reflect the security-driven risk profile. Only 9 percent of clients assets were invested in shares and 19 percent in funds at
year-end. Four-fifths of client assets under management are
held in USD (45 percent) and EUR (36 percent). The percentage
held in CHF is 7 percent.
INCOME STATEMENT
Total operating income
The continued downward trend in market interest rates and the
lack of reinvestment opportunities for bonds negatively influenced interest income on the bond portfolio. As a result, income
from interest for continued operations decreased by 48 percent
from CHF 17.5 m to CHF 9.2 m in FY 2014. The effects of the significant reduction of the bond portfolio in 2013 were also reflected in the result. In order to avoid a contravention of tightened capital adequacy requirements in Switzerland introduced
by the Swiss Financial Market Authority (FINMA) as of 1 January
2014, Valartis Group’s risk profile had to be significantly reduced
at end-2013, whereby portions of the bond portfolio, classed as
held to maturity, had to be disposed of with effect in the year
2013. The 2014 average invested volumes were, therefore, significantly lower.
ANNUAL REPORT 2014
|
COMMENTS ON BUSINESS DEVELOPMENT | 23
Overall income from commission and services, however, remained stable at CHF 47.2 m (previous year: CHF 47.1 m). In the
Private Clients segment, an increase of 19 percent to CHF 40.7 m
was achieved (previous year: CHF 34.3 m), while in the Institutional Clients segment the result decreased from CHF 13.2 m to
CHF 6.0 m. This can be attributed to among other factors a oneoff commission amounting to CHF 4.7 m from the real estate
fund which accrued in the previous year. The main income positions performed as follows:
– Income from wealth management and investment business:
down 28 percent
– Commission income: up 18 percent
– Custody fees: up 34 percent
– Income from services: up 14 percent
The trading performance 2014 closed significantly lower than
the previous year as a result of lower rouble valuations on private equity holdings, together with losses associated with the
ENR Russia Invest S.A. bond portfolio. In addition, Valartis Group
was negatively affected by value adjustments in 2014 on Eastern Property Holdings Ltd (EPH) real estate projects arising out of
the sales agreements made in 2012: the current crisis in Russia
affected the net calculation of project earnings for the EPH Escrow Accounts which Valartis Group posted from the sale of EPH
on 28 December 2012 and necessitated a corresponding correction for 2014 for Valartis Group. The trading performance for
continued operations therefore shows a loss of CHF 31.5 m (previous year: loss of CHF 3.6 m).
In summary, in 2014, continued operations posted income
amounting to CHF 26.5 m together with a net loss of CHF 26.6 m,
over income of CHF 73.7 m and a net loss of CHF 21.7 m the previous year.
Income from commission and interest versus administrative
expenses in CHF m
96.5
93.4
87.6
81.7
64.7
59.8
56.4
50.4
51.9
53.0
Income from
commission and
services
Income from
interest and
dividends
General expenses
Personnel expenses
2010
24
2011
2012*
2013*
2014*
* Continued
operations
Administrative expenses
Administrative expenses rose slightly over the previous year by
around 2 percent from CHF 52.0 m to CHF 53.0 m. At end-2014,
Valartis Group employed 215 full-time equivalent employees
(previous year: 217 employees. Costs rose as a result of the sale
process of Valartis Bank AG, Switzerland, partly due to a comprehensive outplacement programme for employees (until December 2014) and partly due to a rentention programme for key
functions (until January 2015) accompanying the merger process.
Improvements in cost management could not quite compensate
for additional advisory and project costs in 2014, which means
that general expenses increased from CHF 17.9 m to CHF 18.5 m.
Depreciation, value adjustments, provisions and losses
As a result of the elimination of amortisation on acquisitions
made in 2008 and 2009, depreciation is considerably lower than
for the previous year, at CHF 7.9 m (previous year: CHF 10.5 m).
Net loss
The 2014 Consolidated Financial Statements for Valartis Group,
compiled in accordance with International Financial Reporting
Standards (IFRS) and taking into consideration of all non-recurring, exceptional factors, show a consolidated loss for continued
and discontinued operations amounting to CHF 73.3 m (previous
year on a comparable basis: consolidated profit of CHF 0.4 m), of
which CHF 53.7 m can be attributed to continued operations
(previous year on a comparable basis: consolidated income of
CHF 13.2 m) and, for discontinued operations, CHF 19.6 m (previous year on a comparable basis: consolidated loss of CHF 12.8 m).
Business segments
A breakdown of Valartis Group’s results for the two business segments Private Clients and Institutional Clients, as well as Corporate Center, can be found on pages 26 ff. and in the Notes to the
Consolidated Financial Statements in Note 44. In Note 44, the
business segments are also broken down into continued and discontinued operations.
CAPITAL, RISK TRENDS AND LIQUIDITY
Valartis Group uses the Basel III standard approach to economic
risk capital for credit and market risks and the Basel III basic indicator approach for operational risks. The newly incorporated
Valartis Finance Holding AG in Vaduz, Liechtenstein, is subject to
the consolidated supervision by the Liechtenstein Finance Market Authority (FMA). On 31 December 2014, risks were still subject to Basel II approaches. In contrast, Valartis Group is not subject to any consolidated banking supervision. For that reason,
the following information has been compiled on the basis of interpretations of International Reporting Standards provisions
(disclosure requirement, IFRS 7). IFRS 7 demands disclosure of a
range of financial positions, amongst others, equity capital. The
FINMA provisions, which were anticipated in the previous year,
no longer need to be taken into consideration. In order to enable
a comparison, the figures from the previous year will be adjusted
accordingly.
As of 31 December 2014, Valartis Group’s business activities
required equity capital amounting to CHF 95 m (previous year:
CHF 85 m). Eligible capital amounted to CHF 194 m (previous
year: CHF 278 m). The core capital ratio was thus 15.8 percent as
at 31 December 2014 (previous year: 25 percent). The total capital ratio in accordance with Basel III was 16.4 percent as at 31
December 2014 (previous year: 26 percent). Valartis Group does
not include any hybrid capital in its eligible capital, and does not
set off any assets or liabilities in accordance with IFRS (balance
sheet contraction). Valartis Group’s equity capital is not «diluted» and can be considered as good. Further information on equity capital and risk trends can be found on page 94 ff.
Risk coverage potential is calculated on the basis of a guarantee
of the continued existence of the whole bank even in the event
of a significantly negative impact; i.e., the whole bank would still
have sufficient capital to absorb extraordinarily high losses from
an improbable extreme event and nevertheless remain able to
continue operative business activities in an appropriate manner.
Accordingly, the entire amount of freely available equity capital
is not used to cover economic capital requirements; a portion is
retained as a risk cushion. This is to guarantee that risk coverage
potential is not endangered even in the event of non-quantifiable risks, which are not covered by regulatory or economic capital, materialising, for example, business risks.
Business risks result from unexpected changes in market and
framework conditions which negatively impact earnings performance or equity capital. Exceptional factors in 2014 primarily
fall into the category of business risks.
STATEMENT OF FINANCIAL POSITION
Total assets as at 31 December 2014 amounted to CHF 2.9 bn – a
significant rise of 25 percent on the back of continued operations. On the liabilities side, amounts due to clients increased
from CHF 1.9 bn to CHF 2.5 bn. On the assets side, balances held
at National Banks and amounts due from banks increased by
CHF 0.2 bn respectively. In addition, investments amounting to
close on CHF 0.2 bn were made in bonds. Group equity capital at
end-2014 amounted to CHF 240.6 m, while Valartis Group AG’s
shareholder equity was at the new level of CHF 186.6 m.
In order to fulfil the more stringent liquidity requirements,
Valartis Group increased liquidity and cash/cash equivalents
from CHF 568.6 m to CHF 792.1 m. This includes non-interest-bearing balances held at the Swiss National Bank, or European National Banks.
CALCULATION OF RISKS-BREARING CAPACITY
Risk-bearing capacity is the ability of an overall company to absorb losses arising out of any risks that materialise without endangering its continued existence. Risk-bearing capacity depends on the overall company’s equity base and its current level
of profitability.
The risk appetite of a company is the extent to which its Board of
Directors is willing to take risks and must conform with the
risk-bearing capacity and the strategic goals of the company as a
whole. The Board of Directors determines risk appetite within
the framework of the annual budgeting process. The Board determines the amount of risk capital included in the bank’s freely
available equity capital and sets an overall bank risk limit which
must be lower than the maximum loss which could potentially
be absorbed.
ANNUAL REPORT 2014
|
COMMENTS ON BUSINESS DEVELOPMENT | 25
PRIVATE CLIENTS
The business segment Private Clients includes the Valartis Group
wealth management business activities. In FY 2014, this segment comprised the two Valartis banks in the Principality of
Liechtenstein and in Austria, together with the 25-percent holding in Norinvest Holding S.A., the parent company of Banque
Cramer & Cie S.A.. The segment is headed by Gustav Stenbolt
(Group CEO), to whom the CEOs of the two Valartis banks report,
and is managed by the Group Executive Management. The two
CEO of the Valartis banks, the Group Executive Management and
Philipp LeibundGut, Head Institutional Clients, are representatives in the Group Banking & Finance Committee (Group Executive Management, see page 45 ff.).
2013. It had also become apparent that the bank would not attain the appropriate critical mass in the foreseeable future.
Valartis Bank AG, Switzerland employed around 70 personnel
and managed around one-fifth of Valartis Group client assets,
but generated around 30 percent of costs. In order to attain a
sustainable, future-driven cost/income ratio across the Group,
on 26 August 2013, the Board of Directors of Valartis Group AG
decided to spin off Valartis Bank AG, Switzerland.
«In addition to very wealthy high-net-worth individuals (HNWI), the Private Clients business segment also caters for affluent clients with liquid
investable assets of CHF 500,000, or more, in our
current locations in Liechtenstein and Vienna.
Valartis Group’s core markets consist of the respective domestic markets in Liechtenstein and Austria,
the respective neighbouring countries, as well as, in
particular, Central and Eastern Europe/CIS, the Middle East, parts of North and Latin America and – increasingly certain countries in Asia. For historical and
regulatory reasons, the two Valartis banks have differing priorities in defining the core markets, which
they actively target, and the opportunity markets,
which receive more passive attention.»
Divestment of Valartis Bank AG, Switzerland
On 16 May 2014, together with the purchaser, Banque Cramer &
Cie S.A., we presented an optimum and, in the long-term, attractive solution for the Swiss Bank and we are confident that we
found the best possible solution for Valartis Bank AG, Switzerland. The transaction was closed, as planned, on 29 August 2014
and integration of the Swiss bank into Banque Cramer & Cie S.A.
was concluded.
Development of the private banking business
During the course of expanding its private banking and asset
management activities, in 2008, Valartis Group AG initially acquired Anglo Irish Bank (Austria) AG based in Vienna and
founded in 1890, which was renamed Valartis Bank (Austria) AG.
In 2009, there followed the acquisition of Hypo Investment Bank
(Liechtenstein) AG, founded in 1998 with a full banking license in
Liechtenstein and subsequently renamed Valartis Bank (Liechtenstein) AG. Simultaneously, the private banking activities of
Valartis Bank AG, Switzerland were progressively expanded in
Zurich and Geneva and further private banking teams in Liechtenstein and Vienna were established. In 2010, the Austrian bank
opened an office in Singapore and in autumn 2012, the Swiss
bank established a branch in Lugano.
Transformation phase
By means of tactical divestments in 2011 and 2012 of Group
companies unrelated to private banking activities, i.e. non-core
operations together with measures to improve cost efficiency
implemented in 2012 and 2013, Valartis Group focused its business activities on the field of private banking, subordinating all
Group activities and services to this strategy. Despite these
measures and despite the newly aligned front-office organisation in Switzerland, the acquisition capacity of the Swiss bank
could not be enhanced at the planned rate in the first half-year
26
In FY 2014, we focused on implementation of the strategic decisions taken in 2013 and 2014:
– Divestment of Valartis Bank AG, Switzerland, end-August 2014
– Future-driven reorganisation of Valartis Group and founding
of Valartis Finance Holding AG in Liechtenstein
Reorganisation of Valartis Group and incorporation of Valartis
Finance Holding AG, Liechtenstein
During the course of divestment of the Swiss bank, the Board of
Directors realigned the organisational structure of Valartis
Group and also incorporated Valartis Finance Holding AG in Vaduz. The relevant operating activities of the Private Banking and
Wealth Management segments of our two private banks in
Liechtenstein and Austria, together with holdings in the area of
finance, such as the 25-percent holding in Swiss Norinvest Holding S.A., the parent company of Banque Cramer & Cie S.A., have
been combined in Valartis Finance Holding AG in Liechtenstein,
which is subject to consolidated banking supervision of the Financial Market Authority in Liechtenstein (FMA). As of 1 March
2015, the Board of Directors appointed Stephan Häberle as CEO
of Valartis Finance Holding AG. He has in-depth knowledge of international private banking and wealth management and extensive management experience, in particular in Switzerland, in
Liechtenstein and Austria as well as in Central Europe.
Over the last few years of this transformation process, we have
been looking to the future and are now confident that we have
the necessary measures in place to enable us to achieve a sustainable, more stringent focus on profitability for the whole
Group. The targeted cost/income ratio is between 65 and 70 percent.
As at end-2014, more than 70 Group client advisors managed assets in continued operations totalling CHF 6.1 bn in the two
Valartis Bank locations (2013: CHF 5.3 bn). More detailed information on segment reporting can be found in Note 44 in the
Notes on the Consolidated Financial Statements.
PRIVATE BANKING SWITZERLAND
SEGMENT KEY FIGURES*
In CHF 1,000
Operating income
Income from interest and dividends
Income from commission and services
Income from trading
Other ordinary income
Administrative expenses
2014
2013
54,423
48,145
7,385
7,455
40,729
34,277
6,578
6,199
652
1,526
35,654
34,761
Personnel expenses
24,256
23,694
General expenses
11,398
11,067
Services from/to other segments
-921
-1,312
18,769
13,385
6,095
5,305
Net new money inflow, in CHF m
530
508
Headcount, full-time equivalents
166
172
Gross operating profit
In accordance with International Financial Reporting Standards
IFRS 5, Valartis Bank AG, Switzerland, and Valartis Wealth Management S.A. are discontinued operations and no longer included in this segment.
The Board of Directors of Valartis Group would like to take this
opportunity to extend their thanks to the Swiss bank’s employees for their commitment and for maintaining their professional,
top-class services to clients right up to the closing of the divestment of Valartis Bank AG, Switzerland at end-August 2014.
PRIVATE BANKING LIECHTENSTEIN
Total client assets, in CHF m
* From continued operations: 2013 and 2014
More detailed information on segment reporting can be found in Note 44 in the
Notes on the Consolidated Financial Statements.
Operating income from continued operations
Despite challenging framework conditions in financial markets,
the Private Clients business segment performed well in FY 2014.
In particular, the performance for Valartis Bank in Liechtenstein
was very positive. In total, assets under management rose by
15 percent to CHF 6.1 bn (previous year: 5.3 bn) and net new
money went up to CHF 530 m (previous year: CHF 508 m).
Operating income from continued operations comprising the
Valartis banks in the Principality of Liechtenstein and in Austria,
together with their fund administration companies and participations in the financial industry, was up by 13 percent to
CHF 54.4 m (2013: CHF 48.1 m). Income from interest at CHF 7.4 m remained practically unchanged over the previous year
(2013: CHF 7.5 m). Income from commission increased significantly by 19 percent to CHF 40.7 m (2013: CHF 34.3 m); both
Valartis banks contributed to this result.
Personnel expenses, at CHF 24.3 m (2013: CHF 23.7 m) and general expenses, at CHF 11.4 m (2013: CHF 11.1 m) put the segment’s administrative expenses at only 3 percent higher than
the previous year at CHF 35.7 m (2013: CHF 34.8 m), as a result of
the cost-saving programme and despite higher advisory services
expenditure. The personnel expenses were slightly higher than
in the previous year due to the alignment of the relationship
management organisation to market requirements. At year-end,
the full-time equivalent headcount decreased by 3.5 percent
from 172 to 166 employees.
The Liechtenstein bank was once again very successful in 2014
and a major contributory factor in this success over the last few
years has been its employees. They were able to consistently develop client relationships while keeping costs under control. After taxes, income for Valartis Bank (Liechtenstein) AG rose by
15.5 percent to CHF 18.0 m (2013: CHF 15.6 m) and net new money inflow amounted to CHF 733 m (2013: CHF 874 m). At end2014, assets under management had increased to CHF 4.3 bn
(2013: CHF 3.5 bn).
Valartis Bank (Liechtenstein) AG provides services to around
10,000 clients from 106 countries and employs over 90 people
who speak a total of 32 different languages and who are, therefore, able to advise clients in their respective languages. Clients
value, above all, continuity with regard to their advisors, security,
trust and client protection. The intrinsic legal security in the
Principality, the direct communication channels with authorities
and the degree to which the public sector upholds a services
concept, enable the bank to resolutely continue on the path it
has embarked upon.
«The transformation process towards tax transparency for banking clients has been ongoing for some
years and conclusion of this process will still take
some time. But the path we have embarked upon in
Liechtenstein is the right one for this banking center.»
Andreas Insam, CEO Valartis Bank (Liechtenstein) AG
Overall, the gross operating profit for the Private Clients business segment was up by 40 percent to CHF 18.8 m (2013:
CHF 13.4 m).
ANNUAL REPORT 2014
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PRIVATE CLIENTS | 27
Organisation and employee participation as contributors
to success
One of the core factors contributing to success is the employee
share participation programme. Currently, employees and the
management hold 30.5 percent of the capital rights of Valartis
Bank (Liechtenstein) AG and thus have a substantial stake in its
long-term business success. We consciously refute the poaching
of entire teams from outside the bank, do not work with head
hunters and do not pay individual bonuses. Employees in Liechtenstein are all treated equally, i.e., if members of management
receive 100 percent of the bonus which has been noted in their
employment contract, this applies equally to all other employees. Bonus payments for all employees are capped at 25 percent
of fixed salary.
Cost leadership
The cost/income ratio is once again low – at 48 percent. Return
on equity has been at roughly the same level for several years –
25 percent. These values are very favourable for the financial
sector. Based on income after taxes, Valartis Bank (Liechtenstein)
AG is currently placed fourth from a total of 16 banks in the Principality of Liechtenstein.
PRIVATE BANKING AUSTRIA
A challenging year
In an environment that remains demanding and challenging,
Valartis Bank (Austria) AG posted a significantly lower pre-tax
result of minus CHF 2.6 m (2013: profit contribution of CHF
8.4 m). A major IT project, together with exceptional expenses
in connection with regulatory, organisational and personnel adjustments to the new framework conditions significantly influenced the result.
Valartis Bank (Austria) AG has a very strong core capital ratio of
25.0 percent (2013: 35.9 percent). The change over the previous
year is largely attributable to the low level of risk exploitation as
at 31.12.2013.
As at 31 December 2014, Valartis Bank in Austria managed client
assets amounting to around CHF 1.6 bn (2013: CHF 1.7 bn).
Net new money inflows are linked to the focus on core competencies – wealth management and advisory services.
Cost-saving measures
The cost-saving programme launched in 2013 was robustly pursued in 2014 and the business model was adjusted to market requirements and client needs in terms of organisation and staffing. The branch in Singapore was closed, as planned, in 2014 and,
since then, our Asian clients have been served from Vienna.
28
«Professionalism and discretion are the cornerstones
of our private banking philosophy. We create personal and enduring relationships with our clients
by responding to the individual expectations and
goals of our wealthy clientele and by protecting and
growing their assets with skill and care. Partnerships
based on trust are at the core of comprehensive
wealth advisory and planning services.»
Monika Jung, CEO Valartis Bank (Austria) AG
Austria as attractive banking center
Austria is regarded by private banking clients as an attractive
and secure banking center. Our clients value the decades of private banking expertise of our Viennese bank, whose traditions
and roots stretch back to 1890, together with the above-average
capital base coupled with the Austrian legal system and the
country’s economic and political stability.
Focus on client service and asset protection
Our declared objective is to protect and grow assets entrusted to
us over the long term. Our offering comprises a wide range of
services, from wealth management through proactive advisory
services to financial consulting services and individual pension
solutions. In 2014, we continued to optimise and strengthen the
social and specialised advisory competencies of our employees,
further developed our team’s proactive client care and placed an
even stronger focus on client needs and added value for clients
in our investment services.
For our international market development and expansion of our
client base, we use our broad collaboration network of local, well
established intermediaries. The structure of these collaborations
has been further economically optimised to comply with more
stringent regulatory documentation requirements.
As at end-2014, Valartis Bank (Austria) AG employed more than
75 people from 11 countries. Thanks to our multicultural and experienced specialists and our flat organisational structure, we
are well equipped to offer our international and domestic private clients solutions which are tailored to their needs. We are
confident that the measures we have implemented over recent
years will begin to take effect in 2015.
INSTITUTIONAL CLIENTS
The Institutional Clients business segment comprises Valartis
Group’s Asset Management, Corporate Finance and Real Estate
Management units together with Private Equity. As is the case
for the Private Clients business segment, it is managed by the
three members of Group Executive Management chaired by
Group CEO, Gustav Stenbolt.
The business activities of the following operating units are integrated into the Institutional Clients segment:
Asset Management
– Valartis Advisory Services S.A. (former Valartis Asset Management S.A.)
– Valartis International Ltd
– MCT Luxembourg Management Sàrl
The two fund administration companies in Austria and Liechtenstein, Valartis Asset Management (Austria) Kapitalanlagegesellschaft mbH and Valartis Fund Management (Liechtenstein)
AG, are not integrated into this business segment. The two companies are wholly owned subsidiaries of the two Valartis banks
in Austria and the Principality of Liechtenstein. Their asset management activities are described in this section, but their assets
and gross income are allocated to the Private Clients business
segment (see page 26 ff).
«The Institutional Clients business segment offers
innovative niche investment products and special
products which combine a wide range of traditional private banking services with specialised advisory
services in the fields of asset management, corporate finance and private equity together with innovative investment products in the investment classes shares, fixed income, alternative investments and
real estate.»
Philipp LeibundGut, Head Institutional Clients of Valartis Group
SEGMENT KEY FIGURES*
In CHF 1,000
Operating income
In FY 2014, the fund business activities managed in Switzerland
and focusing on Russia and Eastern Europe, together with the
Structured Finance Team’s activities were allocated to discontinued operations, in accordance with the provisions of International Financial Reporting Standards IFRS 5, and are no longer
allocated to this business segment. Following divestment of
Valartis Bank AG, Switzerland, these activities were transitioned
to the new owner, Banque Cramer & Cie S.A.
15,137
5,707
Income from commission and services
6,033
13,241
-41,099
-9,980
Income from trading
Other ordinary income
2,378
7,019
10,590
11,556
Personnel expenses
5,963
7,224
General expenses
4,627
4,332
Gross operating profit
Total client assets, in CHF m
Real estate portfolios
– Berlin Real Estate, Germany
– German Residential Health Care, Germany
– Sociétés des Centers Commerciaux d’Algérie (SCCA), Algeria
– Eastern Property Holdings Ltd. (EPH), CIS, Eastern and Central
Europe
-29,261
4,131
Services from/to other segments
Private Equity
– ENR Russia Invest S.A., Russia/Eastern Europe
2013
Income from interest and dividends
Administrative expenses
Corporate Finance
– Corporate Finance/Mergers & Acquisitions
2014
-704
-849
-39,851
3,582
364
729
Net new money inflow, in CHF m
-245
-70
Headcount, full-time equivalents
33
33
* from continued operations: 2013 und 2014
More detailed information on segment reporting can be found in Note 44 in the
Notes on the Consolidated Financial Statements.
Activities
Continued operations in the Institutional Clients business segment currently manage assets amounting to CHF 364 m (2013:
CHF 729 m). The decrease is associated with a real estate maturity fund - an investment fund with a fixed term which is determined from the outset. At the end of this term, the fund is liquidated and the invested capital, including the accrued income, is
paid out to shareholders. This was also the reason for the rise in
income in this segment in 2013. In 2015, this liquidation will be
concluded. The segment headcount is 33 full-time equivalent
employees (2013: 33 employees).
ANNUAL REPORT 2014
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INSTITUTIONAL CLIENTS | 29
In 2014, the business segment’s operating income decreased to
minus CHF 29.3 m (previous year: CHF 15.1 m). Income from interest was down by 28 percent to CHF 4.1 m (2013: CHF 5.7 m)
and income from commission by 54 percent to CHF 6.0 m (2013:
CHF 13.2 m). This reduction can be attributed to among other
factors the above-mentioned one-off commission amounting to
CHF 4.7 m. The trading performance for 2014 closed significantly
lower than the previous year as a result of lower rouble valuations on private equity holdings, together with losses associated
with the ENR Russia Invest S.A. bond portfolio. In addition,
Valartis Group was negatively affected in 2014 by value adjustments on Eastern Property Holdings Ltd (EPH) real estate projects, as a result of the sales agreements in view of the Russian
current situation on the back of international sanctions. These
value adjustments affected the net calculation of project earnings for the EPH Escrow Accounts which Valartis Group posted
from the sale of EPH on 28 December 2012 and necessitated a
corresponding correction for FY 2014 for Valartis Group. The
trading performance for continued operations therefore shows
a loss of CHF 41.1 m (previous year: loss of CHF 10.0 m).
Administrative expenses were reduced by 8 percent to CHF
10.6 m (2013: CHF 11.6 m). This resulted in a drop in gross income
to minus CHF 39.9 m (2013: plus CHF 3.6 m).
In FY 2014, net new money outflow amounted to CHF 245 m
(2013: net new money outflow of CHF 70 m). At year-end, client
assets totalled CHF 364 m (2013: CHF 729 m) after market and
currency adjustments. Both reductions are a consequence of
the above mentioned termination of the real estate investment
fund.
Outlook
For 2015 to 2017, Valartis Group’s medium-term operational
planning will target the strengthening and further development
of the Institutional Clients business segment. This will be
achieved by developing new products in support of our private
banking activities in Liechtenstein and Vienna and focusing on
our market presence in those locations, together with accelerating and boosting optimisation of our range of services. In these
business activities, we will accept only transparent and profitable risk/return relationships (see also Risk Management, page
50 ff.).
In particular, the private label fund boutique, Valartis Fund Management (Liechtenstein) AG, in the up-and-coming funds location of Liechtenstein, will be expanded. Since August 2014, the
company has a license as manager of alternative investment
funds in accordance with Art. 28 para. 1 of the Law on Alternative Investment Fund Managers (AIFMG) (on top of its licenses in
accordance with UCITSG and IUG). In addition, opportunities in
the fields of corporate finance, private equity and real estate
management will also be consistently targeted.
30
ASSET MANAGEMENT FUNDS AND
INVESTMENT COMPANIES
Asset management is one of our core competencies. For institutional and private clients, the goal is to identify compelling investment opportunities and to benefit from the Group’s expertise in the development, structuring and management of funds
and investment companies to offer investment solutions which
add value. This segment seeks to achieve above-average returns
by combining active management with a value-based investment process.
Careful focusing and individualisation are used to develop,
launch and manage niche investment products which go beyond
the mainstream and open up attractive investment opportunities to clients, which would not otherwise be available to them.
In adherence to our core/satellite investment philosophy, the
niche investment strategies often deliberately deviate from index weightings in order to create possibilities for outperformance. Our investment satellite products come in the form of
regional and sector funds, or holding companies, and are used to
complement Valartis Group’s typically index-tracking core portfolio in order to address specific investment requirements. Priority is given to investment in the following asset classes: shares,
fixed income, alternative investments and fund of funds. Investment activities focus on emerging markets, in particular Russia/
Eastern Europe/CIS and Central Europe.
In addition to specialised niche funds for qualified investors,
however, we also offer core fund products for private investors.
These have a strong index component and, in contrast to the
niche products, are primarily intended for internal sale to our private clientele. Our core products such as the Global Emerging
Market Equity Fund or the Global Emerging Markets Bond Fund
enable us to offer smaller investors in particular an attractive
opportunity to better diversify their investments. Since bonds
offering interesting returns are usually only issued in minimum
tranches of between EUR 100,000 and 200,000, effectively ruling out direct investment for affluent clients, Valartis Group’s
European High Yield Bond Fund offers an interesting alternative
for smaller investors.
In taking investment decisions, we are supported by a team of
experienced portfolio managers, analysts and other investment
specialists in Liechtenstein, Vienna and Geneva. The wide-ranging expertise of these specialists is strategically used throughout the Group to offer institutional investors and our larger private banking clients investment structures which are tailored to
their specific, individual expectations. For example, the total-return-oriented investment specialists in Vienna offer special fund
solutions in securities, while the fund management experts in
Liechtenstein offer customised private label funds for open or
closed groups of investors with very specific investment expectations.
Our investmend fund products
Bond funds
+ Valartis Euro Bond Fund
+ Valartis Dollar Bond Fund
+ Valartis Vorsorge
Equity funds
+ Valartis Russian Market Fund
+ Global Return Fund
+ Valartis Smart Beta Concept
Specialities
+ VFM Mutual Fund AG
& Co. KG
+ Valartis Physical Gold
Coin Fund
+ Trend Concept
(Total Return Funds)
+ Wealth Generation Fund
+ Tailored fund solutions
+ Ocean Constant Cash Yield
+ Perpetuum Fund
Private label funds from Liechtenstein
Valartis Fund Management (Liechtenstein) AG was founded as a
wholly owned subsidiary of Valartis Bank (Liechtenstein) AG in
2007.
We focus on structuring and managing intensive and customised private label fund mandates, primarily in the alternative investments sector. In establishing and administering tailored
fund solutions, we offer institutional clients, family offices and
wealthy private clients a complete package – from the initial advisory session to the finalised registered investment fund with
an international security number (ISIN). Regulated private label
funds are flexible and future-driven instruments for realising
selected investment strategies in accordance with the wishes
of clients.
New AIFMG license in 2014
Since August 2014, Valartis Fund Management (Liechtenstein)
AG has a license as manager of alternative investment funds in
accordance with Art. 28 para. 1 of the Law on Alternative Investment Fund Managers (AIFMG), since March 2013, a license as
manager of harmonised securities funds in accordance with the
Law on Certain Undertakings for Collective Investment in Transferable Securities (UCITSG) and, since December 2007, authorisation in accordance with the Law on Investment Companies for
other Securities.
The company successfully increased business volumes in FY 2014
across all activities. There was sustainable growth in assets
under management, the number of mandates, and income generated. The predominant majority of mandates are managed by
Valartis Bank (Liechtenstein) AG as custodian bank which further
enhances the funds business of the bank in Liechtenstein and, at
the same time, promotes synergies.
We aim to continue to expand our competent employee basis in
2015 and over the next years, in particular in the fields of asset
management, risk management and international fund structuring including tax analysis at Valartis Fund Management (Liechtenstein) AG, in order to comply with more stringent regulatory
requirements at international level.
Valartis Fund Management (Liechtenstein) AG continues to focus on developing challenging funds solutions in the alternative
segment, but is also in a position to manage classical fund mandates in shares and bonds. The fund company also occupies a
particular niche with its US life settlement business. In this segment, it now manages two funds, one of which – via the wholly
owned subsidiary VFM Mutual Fund AG – is one of the world’s
largest US life settlement portfolios with an insurance value of
over USD 1 billion.
Mutual and special funds made in Austria
Valartis Asset Management (Austria) Kapitalanlagegesellschaft
mbH (VKAG) is a wholly owned subsidiary of Valartis Bank (Austria) AG and was integrated into the financial group in Austria.
The Austrian finance group was bought by the Valartis Group
in 2008.
Over the last few years, within Valartis Group, VKAG has specialised in the structuring, launch and management of guideline-conform investment funds (UCITS IV). These investment
funds are used by Valartis Group’s private banking units in their
wealth management and advisory activities, and they are also
made available to institutional clients. Over the last few years,
the VKAG investment professionals have been further developing the white label funds and are also in a position to launch mutual funds (UCITS IV) as well as specialised funds for institutional
clients, private foundations and high-net-worth individuals
(HNWI). Capital retention is the highest priority in fund management, i.e., funds are managed in accordance with an absolute
return approach.
In FY 2014, VKAG underwent a slowdown in growth which can
be attributed primarily to the withdrawal of a major client. As at
end-2014, VKAG managed fund assets of around CHF 322 m
(2013: CHF 341 m).
In 2014, we continued to focus on client care, process optimisation and product development and, at the beginning of the third
quarter, we also submitted an application to the Austrian Finance Market Authority for the award of a license as alternative investment funds manager (AIFM). Special funds are subject to
cross-Europe harmonised supervision in accordance with the
Law on Alternative Investment Funds Managers (AIFMG). We
expect to be awarded the license in 2015 and will subsequently
evaluate extending our special fund management business activities.
ANNUAL REPORT 2014
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INSTITUTIONAL CLIENTS | 31
Corporate finance
The Valartis Group corporate finance team provides services in
the fields of corporate finance and mergers and acquisitions and
primarily focuses on advisory activities for listed and non-listed,
medium-sized companies in Germany, Austria and Switzerland
as well as in Central and Eastern Europe.
For the Valartis private banks in Liechtenstein and Austria, these
activities also represent valuable private banking «add-on» services which are increasingly in demand due to the fact that a
large proportion of our private banking clientele have corporate
backgrounds. Our independence from larger institutions means
that our clients are able to discuss their visions and strategies
with our specialists at a level of confidentiality which other companies are unable to offer. In addition, our well-established relationships with selected European private equity firms and
wealthy private investors make it possible for our corporate finance specialists to create value-growing transaction concepts
and possibilities for businesses, and for management teams in
MBO or MBI situations.
Based on the extensive transaction and management experience of our sector specialists, our core industries are: pulp, paper
and packaging, financial services, alternative energy, real estate,
consumer goods and industrial products.
Capital Markets
+ Investment placements
+ Equity placements
+ Block trades
+ Initial public offerings
+ Public takeover offers
+ Public to private
+ Thematic shares
+ Reverse takeovers
+ Fund raising/Private
placements
32
Mergers & Acquisitions
+ Sales
+ Acquisitions
+ Mergers
+ Management Buy-outs,
buy-ins
+ Private equity transactions
+ Real Estate M&A
+ Company Evaluation
Activities in 2014
At the end of August 2014, the corporate finance experts successfully closed divestment of the Swiss bank to Banque Cramer
& Cie S.A.. In August and September 2014 (see also Note 40),
they also issued bonds valued at USD 140 m and USD 130 m respectively for Eastern Property Holdings Ltd. Eastern Property
Holdings Ltd specialises in real estate investments and real estate development projects in Russia and the CIS states, as well as
Central Europe. In 2014, the team managed a range of advisory
mandates focused on the energy, real estate and financial services sectors.
PRIVATE EQUITY INVESTMENTS IN RUSSIA AND
EASTERN EUROPE
Our range of specific investment products for Russia and Eastern
Europe is complemented by ENR Russia Invest S.A. (ENR), which is
listed on the Swiss stock exchange, SIX Swiss Exchange. Valartis
Group has a holding of 62.5 percent in this holding company. Our
specialists in Geneva and Moscow provide management services
for ENR which specialises in private equity, investments in equity of real estate companies, and fixed-income investment instruments in Russia, the CIS states and the Baltic states. Over the
next few years, ENR is planning to make further selected investments in attractive investment opportunities.
ENR’s market expertise in private equity – investment in unlisted
companies by means of private holdings – provides our private
and institutional clients with investment opportunities in Russia
and the Eastern European market.
REAL ESTATE FUNDS AND INVESTMENT
COMPANIES
In the real estate sector, we combine the management of profitable commercial and residential real estate with investments in
promising development projects, as well as management of
niche funds for institutional investors. The Valartis Group real
estate investment specialists’ know-how and broad network of
cooperation contacts support our private clientele in their search
for specific investment opportunities in the real estate sector.
Private equity real estate investments in Germany
The two real estate funds for institutional investors performed
well again in 2014:
– As part of the exit strategy for MCT Berlin Residential SCA as
set out in the articles of association, all its remaining properties were successfully sold at attractive prices and the final
changes in ownership took place in the first half-year 2014.
The total transaction amount for the entire portfolio over the
last few years came to around EUR 347 m. MCT Berlin Residential SCA will be liquidated as planned in 2015. The overall performance generated for shareholders is an estimated 16 percent over the term of the fund.
– With an annual leasing income of around EUR 1.8 m, Valartis
German Residential Health Care SICAV Fund also performed
satisfactorily in line with expectations. The fund has invested
around EUR 25 m in three top-quality, German residential care
homes and continues to benefit from ongoing demographic
changes in the population. The fund distributed 7.5 percent to
shareholders in the last year.
Shopping center in North Africa
The Société des Centers Commerciaux Algérie SPA (SCCA), in
which Valartis Group has a holding of around 20, is the first ever
shopping mall in Algeria. The 100,000-square-metre complex
opened in 2010 and comprises a shopping and leisure center
with around 100 stores and restaurants, together with a modern
business center. In FY 2014, the trend was positive with 7.5 m
visitors to the shopping center and the opening of various stores
belonging to the Inditex Group: Zara, Zara Home and Bershka.
We assume that the key milestones will be achieved in 2015 and
also expect further Inditex Group stores such as Oysho, Pull&Bear
and Stradivarius to open in 2015, together with a bowling hall
with 10 alleys and a fitness center with spa. New tenants are
expected for the business center in 2015. The sales and marketing activities are accordingly focused on ensuring optimum rental of the leasable space.
ANNUAL REPORT 2014
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INSTITUTIONAL CLIENTS | 33
CORPORATE CENTER
Corporate Center is a service organisation which supports Group
Executive Management in the overall management of the Group.
It comprises the following units which also assume Group-wide
responsibilities and provide cross-Group services: Accounting &
Controlling, Risk Management & Risk Controlling, Legal & Compliance as well as Corporate Communications & Marketing. The
IT and Logistics unit are also incorporated in Corporate Center.
Valartis Bank AG, Switzerland, acted within the Group in the
function as its head office. After divestment of the Swiss bank in
August 2014, Corporate Center was transitioned to Valartis Advisory Services S.A. (formerly Valartis Asset Management S.A.).
Valartis Advisory Services S.A. has offices in Geneva and Zurich
and, in addition to the front-office organisation (Asset Management, Corporate Finance, Private Equity and Real Estate) now
also comprises the Valartis Group service organisation.
In 2014, responsibilities and services increased in complexity
and scope – and this is expected to continue in future – leading
to a consistent raising of the bar for general and specialist requirements.
Corporate Centre headcount rose to 16 in 2014 as a result of the
Group reorganisation and divestment of the Swiss bank (some
employees were transferred) (2013: 12 employees). In the past,
Corporate Centre was also responsible for the Swiss bank.
Income and expenses that are not directly associated with the
two operating business segments Private Clients and Institutional Clients, together with consolidation items, are allocated
to Corporate Center. Treasury services, income from the balance
sheet and capital management are also attributed to Corporate
Center – after deduction of a risk-free return on the investment
of client assets in favour of front-office operations. Head of Corporate Center is George M. Isliker, Group Chief Financial Officer
& Chief Risk Officer (CFO/CRO).
34
Selected activities
During the reporting period, Valartis Group’s service organisation was involved in two main areas of activity:
– Merger of Valartis Bank AG, Switzerland with Banque Cramer
& Cie S.A. and the corresponding deconsolidation
– Reorganisation of Valartis Group and incorporation of Valartis
Finance Holding AG in Liechtenstein: During the course of the
sale of the Swiss bank to Banque Cramer & Cie S.A. in 2014
(merger on 29 August 2014), Valartis Group also realigned its
organisation and incorporated Valartis Finance Holding AG in
Vaduz. The relevant operating activities of the Private Banking
and Wealth Management segments of our two private banks
in Liechtenstein and Austria, together with holdings in the
area of finance, such as our 25-percent holding in Swiss Norinvest Holding S.A., the parent company of Banque Cramer & Cie
S.A., have been combined in Valartis Finance Holding AG in
Liechtenstein, which is subject to consolidated supervision by
the Financial Market Authority in Liechtenstein (FMA).
– At Group level, implementation of required adjustments to
comply with new Swiss corporate legislation («Minder Initiative»)
The effectiveness of monitoring processes was further enhanced
to comply with legal stipulations; this included the further expansion of internal audit, continued configuration of the risk
system («New Risk Cockpit») and the further standardisation of
the systematic recording and reporting of cross-Group operational risks at additional Group companies.
Corporate Center – segment key figures
Segment reporting is dictated by the technical requirements of
IFRS 5 (separation of continued and discontinued operations). Divestment of the Swiss bank severed a unit from the Group which
had traditionally acted as the Group’s head office, not only in
terms of the responsibilities fulfilled and services provided, but
also with regard to intercompany financing and placement of
collateralised interbank investments. IFRS 5 requires that intercompany income and expenses from discontinued operations
should continue to be eliminated. As a result, although technical
representation of the Corporate Center segment result is correct,
it only partially reflects economic reality in FY 2014. For example,
intercompany income from interest for discontinued operations
is eliminated at continued operations level. Following divestment of the Swiss bank, Valartis Advisory Services S.A. took over
the function of Corporate Center. Income and expenditure since
then have therefore been reported in that segment’s result.
Outlook
The realignment of the service organisation and overall Group
structure to the new conditions, requirements and service structures, which was embarked upon in 2014, will be continued and
further optimised. In particular, Legal & Compliance will need to
be restructured. From an operative viewpoint the Legal & Compliance function assures compliance with legal stipulations
within Corporate Center and assures compliance with regulatory
provisions for the regulated unit Valartis Finance Holding AG.
SEGMENT KEY FIGURES*
In CHF 1,000
Operating income
Income from interest and dividends
Income from commission and services
Income from trading
Other ordinary income
Administrative expenses
2014
2013
1,288
10,385
-2,346
4,317
448
-390
2,983
142
-1,422
4,155
6,803
5,681
Personnel expenses
4,349
3,192
General expenses
2,455
2,489
1,625
2,161
-5,516
4,704
Total client assets, in CHF m
0
0
Net new money inflow, in CHF m
0
0
Headcount, full-time equivalents
16
12
Services from/to other segments
Gross operating profit
* From continued operations: 2013 und 2014
More detailed information on segment reporting can be found in Note 44 in the
Notes on the Consolidated Financial Statements.
ANNUAL REPORT 2014
|
CORPORATE CENTER | 35
15:20
View of the north face of the Schollberg,
canton of Grisons
16:00
CORPORATE GOVERNANCE
FUFILLING DEMANDS – NOW AND IN THE FUTURE
CORPORATE GOVERNANCE
Robust Corporate Governance is key to ensuring the sustainable
commercial success of Valartis Group. For that reason, Valartis
Group rigorously implements acknowledged standards in Corporate Governance in order to adequately protect the interests of
all its stakeholders. Valartis Group provides all groups of stakeholders with a transparent and tailored representation of Group
Corporate Governance which enables them to evaluate the executive abilities of management and the relationship between
leadership and control of the Group. Valartis Group regards all
stakeholders, i.e., shareholders, clients, employees and media
representatives as equal partners and treats them accordingly.
– Valartis Group’s Compensation Policy defines the fundamental elements and principles of an appropriate system of compensation for members of the Board of Directors and Group
Executive Management (see Compensation Report 2014, page
59 ff.).1
– Risk management: The Board of Directors determines Valartis
Group’s risk policy and monitors implementation, see page 50
ff. 1
1 These documents can be downloaded from the Investor Relations site on
www.valartisgroup.ch
Corporate Governance
LEGAL GUIDELINES AND PRINCIPLES
Valartis Group adheres to the principles and recommendations
of the Swiss Code of Best Practice for Corporate Governance issued by economiesuisse and, in particular, to its Appendix containing recommendations relating to the compensation of the
Board of Directors and Group Executive Management (see Compensation Report on page 55). Valartis Group is listed on the
Swiss stock exchange, SIX Swiss Exchange (SIX) and, accordingly,
is also subject to the SIX Exchange Regulations. Valartis Group’s
management principles comply with the Directive on Information relating to Corporate Governance (DCG) of 1 September
2014, issued by SIX, and with the Duty of Disclosure in accordance with Arts. 663b up to and including 663 c para. 3 of the
Swiss Code of Obligations (OR). Unless otherwise indicated, all
information is as of 31 December 2014.
Corporate Governance Guidelines
Valartis Group’s Corporate Governance Guidelines clearly define
the roles, competencies and areas of responsibility of management and supervisory bodies, governs a balanced distribution of
them and provides appropriate control of adherence to them. All
principles and guidelines which refer to Corporate Governance
are binding for the organisation and management of Valartis
Group. The following documents constitute the Corporate Governance Guidelines of Valartis Group and include the following
elements:
– The Articles of Association define the corporate objective and
the overall organisational framework requirements of Valartis
Group.1
– The Code of Conduct of Valartis Group defines the ethical and
professional core values such as integrity, respect, client and
dialogue-orientation and fairness, as well as transparent communication and sustained sense of accountability.
– The internal organisational Rules of Procedure define Valartis
Group’s responsibilities and competencies.
– The regulations of the Board of Directors’ Committees – the
Audit and Compensations Committee 1 – define the duties
and responsibilities of the committees and individual members (see also page 43 and page 44).
38
Code of Conduct
Corporate Governance
Guideline
Articles of
Association
Organisational
By-Law
Risk Policy
Directives
Regulations
CORPORATE STRUCTURE AND SHAREHOLDERS
Corporate structure
Valartis Group is a public limited company in accordance with
Swiss law based in Baar, canton Zug, Switzerland. The bearer
shares of Valartis Group AG (ISIN CH0001840450) are listed on
the Swiss stock exchange, SIX Swiss Exchange. As of 31 December 2014, market capitalisation of Valartis Group amounted to
CHF 77.0 m, which corresponds to CHF 15.40 per share of the total 5,000,000 shares issued. As of 31 December 2014, 7.1 percent
or 355'725 shares are held by the Group.
The organisational chart on page 9 shows the operating structure of Valartis Group and its division into business segments.
Business activities are allocated to the segments Private Clients
and Institutional Clients and service activities to Corporate
Center. Segment reports, notes and further information can be
found on page 26 and Note 44.
Consolidation
The operative Group companies and the major holdings which
are consolidated under Valartis Group (scope of consolidation of
Valartis Group) are listed in Note 44 to the Consolidated Financial Statement with details of company name, domiciles, purpose, share capital, participation quota and share of capital and
voting rights. Associated companies are listed and described in
Note 46 to the Consolidated Financial Statement.
The following major holding within the scope of consolidation is
listed on the Swiss stock exchange, SIX Swiss Exchange: ENR Russia Invest S.A., Geneva (Switzerland), ISIN CH0034476959.
Major shareholders
MCG Holding S.A., Baar, canton Zug, Switzerland, directly holds
50.2 percent of the capital and of voting rights of Valartis Group.
Beneficial owners of MCG Holding S.A. are: Gustav Stenbolt, Geneva; Philipp LeibundGut, Zurich; Pierre Michel Houmard, Geneva and Tudor Private Portfolio LLC, Greenwich, USA. In addition,
INTEGRAL Stiftung für die berufliche Vorsorge (occupational
benefits foundation), Thusis, canton Grisons holds 5.1 percent of
capital and voting rights in Valartis Group AG. No other shareholders are known with holdings of over 3.0 percent of shares
with voting rights. Detailed information on shareholder structure can be found on page 186. There are no shareholder agreements in place.
Cross-shareholdings
There are no cross-shareholdings of capital or voting rights between Valartis Group AG and its subsidiaries and other companies.
Participation certificates
Valartis Group AG has no participation certificates.
Limitation of transferability and nomination registrations
There are no registered shares. There are therefore no limitations
on transferability or nominee registrations.
Convertible bonds and options
Valartis Group AG has not issued any convertible bonds.
BOARD OF DIRECTORS
Members of the Board of Directors
Name
Position
Nationality
Urs MaurerLambrou
Chairman
Swiss
Elected
to
First
elected
2015
2011*
Rolf Müller-Senn
Vice Chairman** Swiss
2015
2011
Jean-François
Ducrest
Member**
Swiss
2015
2008
Christoph N.
Meister
Member**
Swiss
2015
2011
Stephan Häberle
Member
Swiss
2015
2014
* Chairman of the Board of Directors since 2013
** Member of the Audit Committee and Compensation Committee
CAPITAL STRUCTURE
Capital
The share capital of Valartis Group AG amounts to CHF 5,000,000,
divided into 5,000,000 bearer shares with dividend and voting
rights at a face value of CHF 1.00 each. All bearer shares in
Valartis Group AG are fully paid in and listed on the main segment of the Swiss stock exchange, SIX Swiss Exchange. As of the
closing date for financial year 2014, there are no financial instruments outstanding which could result in dilution of the company’s equity.
Recording in share register
There are no registered shares.
Conditional capital
Valartis Group AG has no conditional capital.
Authorised capital
Valartis Group AG has no authorised capital.
Changes to capital
There were no changes to the share capital of Valartis Group AG
in financial year 2014. Changes to overall share capital are listed
on page 86 in the table Consolidated Statement of Changes in
Equity.
ANNUAL REPORT 2014
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CORPORATE GOVERNANCE | 39
THE BOARD OF DIRECTORS
The Board of Directors of Valartis Group consists of five members. The majority of members of the Board of Directors fulfil
the independence criteria of the relevant provisions of Circular
08/24 «Supervision and internal control – banks» of the Swiss
Financial Market Supervisory Authority (FINMA) in 2014. Thus,
none of the five members of the Board of Directors held a position on the Group Executive Management of a Valartis Group
company in 2014. Although Jean-François Ducrest and Urs
Maurer-Lambrou occasionally work for companies of Valartis
Group in their capacities as lawyers, these activities do not conflict with their roles as independent members of the Board of
Directors. The main criteria governing the choice of a person to
fill an open position on the Board of Directors are the specialist
competencies, expertise and international experience of the potential candidates.
Urs Maurer-Lambrou, born 1960
Attorney-at-law, LL. M. from Duke University (Durham, USA) and
attorney-at-law in Switzerland/New York, USA. Urs Maurer-Lambrou has been Chairman of the Board of Valartis Group since
14 May 2013 and a member of the Board since 2011. He is also
Chairman of the Board of Valartis Finance Holding AG, Liechtenstein, as well as of Valartis Bank (Liechtenstein) AG, Chairman of
the Supervisory Board of Valartis Bank (Austria) AG and Chairman of the Board of ENR Russia Invest S.A. (until 8 January 2015).
Urs Maurer-Lambrou is an expert in the fields of M&A, corporate
and securities law, and IT. Urs Maurer-Lambrou is also member
of the Zurich and Swiss Bar Association, the New York State Bar,
USA, the VQF, Zug (society for the quality assurance of financial
services), member of the management board of the Deutsche
Gesellschaft für Informationsfreiheit e. V., Berlin, and the Efficiency Club Zurich, section ERFA XII Kommunikation.
Rolf Müller-Senn, born 1955
Banking professional. Vice-Chairman of the Board of Directors
since 14 May 2013 and member of the Audit and Compensation
Committee of Valartis Group; member of the Board of Directors
of Valartis Finance Holding AG, Liechtenstein as well as of
Valartis Bank (Liechtenstein) AG and of the Supervisory Board of
Valartis Bank (Austria) AG. Until the beginning of 2011, Rolf
Müller-Senn was Managing Director at Bank Vontobel, with responsibility for the integration of Commerzbank Switzerland.
From 2004 to 2009, he was CEO of Commerzbank (Switzerland)
AG in Zurich, prior to which he held senior positions with Bank
von Ernst & Cie AG and Lloyds Bank International.
40
Christoph N. Meister, born 1953
Business economist HWV and Swiss certified auditor; former
partner at Ernst & Young AG, Switzerland. Since 2011, Christoph
N. Meister has been a member of the Board of Directors and
Chairman of the Audit Committee and since 2014, member of
the Compensation Committee of Valartis Group; and since 2014
member of the Board of Directors of Valartis Finance Holding AG,
Liechtenstein as well as of Valartis Bank (Liechtenstein) AG and a
member of the Supervisory Board of Valartis Bank (Austria) AG.
From January 1979 to November 2010 (as a partner with effect
from April 1993), Christoph N. Meister held various positions in
the auditing profession, above all in the banking and finance sector, as a lead auditor recognised by Swiss Financial Market Supervisory Authority (FINMA) and the Financial Market Authority
Liechtenstein (FMA).
Jean-François Ducrest, born 1958
Lic. iur. University of Fribourg, LL.M. from Duke University (Durham, USA) and attorney-at-law. Jean-François Ducrest has been
a member of the Board of Directors of Valartis Group and a
member of the Audit Committee since 2008 and since 2014
Chairman of the Compensation Committee of Valartis Group. He
has been a partner with the law firm Ducrest Heggli Avocats LLC
since 2010. From 2003 to 2010, he was a partner with the law
firm Borel & Barbey in Geneva, and before that he worked for
Paul Weiss Rifkind Wharton & Garrison in New York, among others. Jean-François Ducrest is a member of the Geneva Bar Association and has sat on its Executive Board since 2004 (as Chairman
from 2008 to 2010).
Stephan Häberle, born 1961
Banking professional. Member of the Board of Directors of
Valartis Group AG since 2014. Stephan Häberle was CEO at MediBank in Zug between 2013 and 2015. Between 2009 and 2012,
he headed Centrum Bank in Liechtenstein as CEO and from 2010
he was also Group CEO. In 2006, he worked at the private banking and asset management group LGT in Liechtenstein as Head
of Private Banking International and member of the Senior Management. He was also a member of the Senior Management of
LGT (Switzerland) AG. Prior to that, from 1998 to 2006, at UBS
Wealth Management International, Mr Häberle was Regional
Market Manager in charge of Austria and Central Europe. From
1980 to 1998, Stephan Häberle occupied various positions at
Private Banking, Switzerland and abroad at Bank Leu, Zurich. In
1996, he became Chief of Staff and headed several projects.
ANNUAL REPORT 2014
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CORPORATE GOVERNANCE | 41
Annual General Meeting 2014
Board of Directors
At the constituent meeting of the Board of Directors of 13 May
2014, Urs Maurer-Lambrou was reaffirmed as Chairman of the
Board of Directors of Valartis Group AG, and Rolf Müller-Senn
was reaffirmed as Vice Chairman. Stephan Häberle was elected
as a new member of the Board of Directors of Valartis Group.
Amendments to the Articles of Association
Amendments to the Articles of Association were approved unanimously by the Annual General Meeting of 13 May 2014 (see
www.valartisgroup.ch, subsite Investor Relations – Annual General Meeting 2014).
Since the Annual General Meeting of 14 May 2013, each member
is elected individually. Re-election is admissible. Should a member withdraw prior to the end of their term of office, a replacement is elected at the next Annual General Meeting. If the number of members of the Board of Directors falls below three, an
Extraordinary General Meeting must be held within a reasonable period of time to conduct election of replacement members.
A member elected as a replacement completes the term of office of their predecessor. The date of first election is in accordance with the guidelines in the section Members of the Board of
Directors. The Board of Directors constitutes itself, elects a
Chairman and Vice Chairman from among its members and designates a Secretary, who need not be a member of the Board of
Directors.
Internal organisation
The Board of Directors is the highest governing body of Valartis
Group AG. It is responsible to the shareholders for the Group’s
overall management and decides on all matters that are not delegated to the Annual General Meeting by law or under the Articles of Association. One of the most important non-transferable
tasks is risk management. Details can be found in the Risk Management section (page 55 ff.).
Main duties
The Board of Directors is responsible for the overall management, supervision and control of Group Executive Management.
The Board assumes responsibility for all obligations allocated in
accordance with law, Articles of Association or internal regulations, in as far as these have not been assigned to any other
bodies. In addition to obligations listed in the Articles of Association, the Board of Directors is responsible for the following
irrevocable and non-transferable obligations and duties:
– Determining and periodically reviewing mid and long-term
corporate strategy and provision of resources required to
achieve corporate goals
– Harmonising strategy, risks and finances
– Determining organisation
– Determining guidelines governing personnel and compensation policy (see also Compensation Committee, page 57 ff.)
– Structuring accounting, financial controls and finance planning, together with approval of the annual budget
42
– Nominating members of the Audit and Compensation Committees from among their number
– Nominating and dismissing persons entrusted with executive
management
– Supervising persons entrusted with executive management,
in particular with regard to compliance with law, Articles of Association, regulations and directives
– Responsibility for the content of Annual Reports, preparation
for Annual General Meetings and implementation of resolutions
– Drafting motions to be submitted to the Annual General
Meeting in connection with compensation for the Board of Directors and Group Executive Management, as well as in connection with drafting of the Compensation Report
– Examining and approving reports from internal and external
audit, as well as special regulatory reports
Further exclusive obligations
– Regular exchange of information relating to business and any
special events; in particular, profitability, financial situation,
liquidity, equity capital requirements and risk status
– Determining risk policy and risk control systems as well as
monitoring consolidated risk management (see also page 50 ff.
Risk Management)
– Drafting guidelines or regulations governing risk management
and responsibility and procedures for authorising business
which carries risk
– Taking decisions regarding acquisition or divestment of holdings in other companies and the foundation or liquidation of
subsidiaries
– Taking decisions regarding setting up and closing of companies, branch offices and representative offices
– Determining credit approval powers and taking decisions regarding major engagements (incl. cluster risks) and loans to
management/supervisory bodies
– Determining Group, overall position limits
– Ensuring timely measures are taken and informing the authorities
– Appointing Head of Internal Audit of the Group
– Taking decisions regarding employees’ assumption of supplementary employment
With the exception of non-transferrable and inalienable duties,
parts of the duties of the Board of Directors may be transferred
to individual members (delegates), to a group of members (committees), or to third parties. The Audit Committee was inaugurated in 2011 and the Compensation Committe in 2014. In 2014,
Christoph N. Meister was Chairman of the Audit Committee, and
Jean-François Ducrest was appointed Chairman of the Compensation Committee.
The Board of Directors is convened by the Chairman or, if he or
she is unable to do so, by the Vice-Chairman, as often as business
requires, or at the request of one of its members or the auditors.
The Board of Directors passes its resolutions by means of an absolute majority vote of members present. In the event of a tied
vote, the Chairman has the casting vote. The minutes of the
meetings of the Board of Directors are kept and must be signed
by the Secretary of the Board of Directors and the Chairman.
The Board of Directors meets as often as the business of the
Company requires, but at least once per quarter. In 2014, six ordinary meetings were held. These meetings are also attended by
the Group CEO and Group Chief Financial Officer/Chief Risk Officer as well as other individuals, where required.
The Board of Directors conducts an annual self-assessment of its
activities.
The Audit Committee consists of three Board members. The
Chairman is Christoph N. Meister, and Jean-François Ducrest and
Rolf Müller-Senn are the other two members. The members have
experience in finance, accounting, risk management, and internal control systems by virtue of their professional backgrounds.
The term of office is the same as the term of office for a member
of the Board of Directors; re-election is possible.
Information and control instruments
A range of information and control instruments are available to
the Board of Directors, its Audit Committee and Compensation
Committee as support in the overall fulfilment of its management and supervisory duties towards Group Executive Management. Such instruments include the strategy process, medium-term plan, annual planning process and internal and external financial reporting.
The members of the Board of Directors receive a reporting package on a quarterly basis, in particular management and controlling reports, liquidity as well as risk reports and periodic financial results (consolidated and individual financial statements
on a quarterly, semi-annual and annual basis). These include
quantitative and qualitative information, such as budget deviations, benchmark comparisons, prior-period and multi-year comparisons, key performance indicators and risk analyses for the
Group companies and the Group as a whole.
These reports enable the Board of Directors to keep abreast of
major developments and the risk situation within Valartis Group
at all times. Reports falling under the responsibility of the Audit
Committee, or Compensation Committee are discussed by the
Committee and forwarded to the Board of Directors with a request for approval. The latest reports are discussed in depth at
each meeting of the Board of Directors. The Chairman of the
Board of Directors and the Chairmen of the Audit Committee
also receive minutes of all meetings of Group Executive Management and regularly exchange information with the Group CEO
and the other members of Group Executive Management.
AUDIT COMMITTEE
The Audit Committee constitutes itself with reference to representation and organisation of work to be performed and must
hold at least four meetings per year. Five meetings were held in
2014.
Duties
The Audit Committee prepares bases for decision making, supports the Board of Directors in an advisory capacity and supports the Board in the fulfilment of the duties allocated to it by
law, Articles of Association and regulations, in particular in connection with:
– Supervision and control, specifically with regard to compliance
with laws, the Articles of Association, regulations and directives
– Implementation of the financial and risk policies as well as appropriate financial and risk management
– Internal and external auditing and the internal control system
(ICS)
– Analysis of the annual and interim financial statements of Valartis Group and the Group as a whole
The duties of the Audit Committee are listed in the corresponding regulations.
ANNUAL REPORT 2014
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CORPORATE GOVERNANCE | 43
COMPENSATION COMMITTEE
The Compensation Committee was created in 2014 and consists
of at least three members of the Board of Directors, each of
whom is elected individually at the Annual General Meeting for
a term of one year, i.e., up to and including the first Ordinary Annual General Meeting following their election. Re-election is permissible. If one or more members withdraw, or if the Compensation Committee is not complete, the Board of Directors
designates replacements from among its members for the period to the end of the next Annual General Meeting. In 2014, JeanFrançois Ducrest was Chairman, Christoph N. Meister and Rolf
Müller were members.
The Compensation Committee constitutes itself and designates
a member as Chairman. The Compensation Committee meets as
often as business requires, but at least three times per year.
Three meetings were held in 2014.
Tasks and Responsiblites
The Compensation Committee performs its duties and competencies as a joint and collective body. Members have no personal
powers and cannot, therefore, issue any instructions. The Compensation Committee may propose motions to the Board of Directors in connection with all issues concerning compensation.
The Compensation Committee supports the Board of Directors
in its duties and responsibilities in the field of personnel policy.
These include, but are not limited to:
– Preparing, drafting and periodic reviewing of compensation
policy and performance goals for management positions
– Periodic reviewing and implementing of compensation policy
– Annual review of compensation for the individual members of
Group Executive Management
– Annual assessment of the members of Group Executive Management
– Planning successors and their nomination for positions in
Group Executive Management
– Preparing choices of candidates for election or re-election to
the Board of Directors
Compensation for the Board of Directors and Group Executive
Management
The Compensation Committee determines the respective total
amount of compensation for the Board of Directors and Group
Executive Management (incl. Group CEO), to be submitted by the
Board of Directors to the Annual General Meeting for approval
(for details, see Compensation Report, page 56 ff.).
Compensation Report
The Compensation Committee compiles the Compensation Report and submits it to the Board of Directors for approval (see
page 56 ff.).
Insurance and employee benefits
The Compensation Committee periodically evaluates appropriate insurance coverage for the members of the Board of Directors and Group Executive Management, with the assistance
of specialists, and recommends adjustments to the Board of
44
Directors. The Compensation Committee requests information
on employee benefits for all employees from Group Executive
Management at least every three years.
The duties of the Compensation Committee are defined in detail
in a separate regulation and published on the website (www.
valartisgroup under sub-site Corporate Governance).
GROUP INTERNAL AUDIT
A further important instrument for the Board of Directors’ performance of its supervision and control function is Group Internal Audit, which consists of seven team members at the three
locations in Switzerland, Austria, and Liechtenstein. Group companies without their own internal audit units have transferred
this task to Group Internal Audit. The purpose, authority, and responsibility of Internal Audit are defined in a separate policy, and
the internal auditors work in accordance with local versions of
the international standards of the Institute of Internal Auditors
(IIA). Acting independently, Internal Audit audits in particular the
internal steering and control system, governance and risk management.
Group Internal Audit ensures that all risk-relevant business activities are covered by a multi-year plan and defines a risk-based
annual audit programme. The Chairman of the Board of Directors may also assign special tasks in addition to the standard
auditing work to Group Internal Audit. The efficiency of Group
Internal Audit is enhanced by coordinating its activities with
those of the external auditor.
COMPLIANCE
Valartis Group has established a compliance function which is
independent of income units. This compliance function can be
outsourced to other organisational Group units. This function
coordinates compliance for the individual Group companies and
ensures the corresponding reporting to Group Executive Management and the Board of Directors.
The main responsibilities of the compliance function are:
– Identification and evaluation of compliance risks (risk of violation of provisions, regulations and standards with the corresponding, potential legal and regulatory sanctions, financial
losses or damage to reputation) within the Group
– Organisation and coordination of (de)centralised compliance
controls within the Group
– Control and supervision of all measures to minimise compliance risks within the Group
– Suitable reporting to Group Executive Management and the
Board of Directors
– Advisory support for the Board of Directors, Group Executive
Management and employees in all compliance issues
The compliance function regulations and the compliance reporting directive govern details.
GROUP EXECUTIVE MANAGEMENT
Members of Group Executive Management
Name
Position
Nationality
Norwegian
Gustav Stenbolt
Group Chief Executive Officer (CEO)
Vincenzo Di Pierri
Deputy Group CEO
George M. Isliker
Group Chief Financial Officer and
Chief Risk Officer (CFO/CRO)
Swiss and
Italian
Swiss
Organisation of Group Executive Management
Group Executive Management is responsible for the management of Valartis Group’s business activities, except for those
duties incumbent upon the Board of Directors by law or under
the Articles of Association or the organisational regulations. The
Group CEO heads Group Executive Management, which decides
on business development. Specifically, Group Executive Management is responsible for the development and implementation of
the Group’s strategy and its results. The Group CEO is responsible for overall management and comprehensive coordination.
The members of Group Executive Management meet at least
once a month. Further meetings on strategy, corporate development, annual planning, budgeting and other topical issues also
take place.
Further activities and vested interests
Further activities and vested interests of individual members of
Executive Management are cited in the following short biographies:
Realignment of Group Executive Management
In the course of its strategic realignment and the continuation of
its transformation phase, Valartis Group down-sized its management organisation with the divestment of Valartis Bank AG,
Switzerland in August 2014. As of 9 April 2014, Group Executive
Management for the transformation phase is as follows: Gustav
Stenbolt, Group CEO, Vincenzo Di Pierri, Deputy Group CEO and
former CEO of Valartis Bank AG, Switzerland (to 29 August 2014)
and George M. Isliker, Group CFO & CRO.
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Gustav Stenbolt, born 1957
Lic. rer. pol University of Fribourg. Chief Executive Officer of
Valartis Group since 2007 and Valartis Advisory Services S.A.
since 2014. He was Chairman of the Executive Board of Jelmoli
Holding from 2004 to 2007. From 1996 to 2004, CEO and founder
of the MCT group in Geneva. MCT merged with OZ Holding in
2005. The merged entity was renamed Valartis Group in 2007.
From the period 1983 to 1996, CIO of Unifund for Asia, Latin
America and Eastern Europe/CIS. Gustav Stenbolt is member of
the Board of ENR Russia Invest S.A., Eastern Property Holdings,
and the Anglo Chinese Group, Hong Kong.
Vincenzo Di Pierri, born 1950
Banking professional. Vincenzo Di Pierri has been CEO of Valartis
Bank AG, Switzerland and Deputy Group CEO since 2012. He was
CEO of the Zurich-based private bank Finter Bank from 2003 to
2011. Vincenzo Di Pierri’s banking career spans 40 years and
started in 1974 when he began work as a forex trader at what is
now Credit Suisse Switzerland. He then held various management positions at Credit Suisse and today’s UBS between 1984
and 1998, prior to becoming a member of the Executive Board
of HSBC Republic Bank Switzerland, where he was responsible
for the private banking business in Zurich and Lugano. Vincenzo
Di Pierri is also Chairman of the Italian Chamber of Commerce
for Switzerland (CCIS), and in this capacity is involved in various
binational bodies.
George Marc Isliker, born 1964
Certified Public Accountant (CPA), Trust and Estate Practitioner
(TEP), studied law at the University of St. Gallen (HSG). Chief
Financial Officer and Chief Risk Officer of Valartis Group since
2011 and Valartis Advisory Services S.A. since 2014. He was previously Head of Group Finance & Risk at VP Bank Group (Vaduz,
Liechtenstein, 2004 to 2010). He took a sabbatical in 2003. Before that, George M. Isliker was Head of Finance and of the Credit Department at the Hottinger & Cie, Banquiers private banking
group (Zurich, 1995 to 2002) and an auditor with KPMG (Zurich,
1992 to 1995).
46
Management of Valartis Bank (Liechtenstein) AG
Andreas Insam, born 1957
Andreas Insam holds the qualification of Dr. rer. soc. oec. from
the University of Innsbruck. He has been CEO of Valartis Bank
(Liechtenstein) AG since it was founded in 1998. Prior to that, Andreas Insam worked at Vorarlberger Landes- und Hypothekenbank AG, Bregenz, where in 1998 he was charged with setting up Hypo Investment Bank (Liechtenstein) AG, Vaduz, later
Valartis Bank (Liechtenstein) AG). Before taking up his post at
Vorarlberger Landes- und Hypothekenbank AG, he was a member of the Directorate of LGT Bank in Liechtenstein (Frankfurt)
GmbH from 1985 to 1992, where he was responsible for the Institutional Sales division. Andreas Insam has been a lecturer and
examiner for many years at the University of Liechtenstein and
University of Innsbruck. He has been a Board member of the
Liechtenstein Bankers Association since 2004.
Gerhard Lackinger, born 1957
Dr iur. and Mag. rer. soc. oec. from the University of Innsbruck,
and Austrian certified public accountant. He has been a member
of the Executive Board of Valartis Bank (Liechtenstein) AG since
2000 with responsibility for the back office, comprising the Accounting, Legal & Compliance, IT, Credit, Human Resources, and
Facilities Management departments. Previously, he was Head of
the Executive Board Secretariat and Legal Department at Vorarlberger Landes- und Hypothekenbank AG, Bregenz. Gerhard Lackinger is also a long-standing speaker for and member of the
Austrian Mortgage Banks’ Audit Committee.
Management of Valartis Bank (Austria) AG
Monika Jung, born 1965
Mag. rer. soc. oec. in Commerce and Master of Science (MSc) in
Executive Management, Vienna University of Economics and
Business. Monika Jung has been a member of the Executive
Board at Valartis Bank (Austria) AG since 2010 and CEO of Valartis
Bank (Austria) AG since February 2013. Prior to that, she headed
the private banking operation at Raiffeisen Centrobank in Vienna (from 2000 to 2010), and private wealth management at
Meinl Bank Vienna (from 1997 to 2000). From 1993 to 1997
Monika Jung held various management positions at Meinl Bank
Vienna and Creditanstalt Vienna.
Andreas Rosenbaum, born 1962
Mag. rer. soc. oec. in Commerce, Vienna University of Economics
and Business. Andreas Rosenbaum joined the Executive Committee of Valartis Bank (Austria) AG on 1 May 2013. After university,
he began his career in asset allocation/portfolio management at
VPM Vermögensverwaltungs AG in 1989. After spending time
abroad in 1996–1997 he took up a post as Compliance Officer
and Controller in the securities department of what is now Raiffeisen Centrobank AG in 1997. Andreas Rosenbaum has been
Head of Controlling & Risk Management since 2001.
Management agreements
Valartis Group and its subsidiaries have not delegated any management tasks to third parties.
ANNUAL REPORT 2014
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CORPORATE GOVERNANCE | 47
COMPENSATION, HOLDINGS AND LOANS
CHANGE OF CONTROL AND DEFENSIVE MEASURES
Information on Valartis Group’s compensation system, together
with compensation for members of the Board of Directors and
Group Executive Management for financial year 2014 can be
found in the separate Compensation Report (see page 56 ff.) and
in Note 43 of the Notes on the Consolidated Financial Statements. Details of the holdings of the Board of Directors and
Group Executive Management and loans made to members are
disclosed on page 64.
Opting-out
Under the Articles of Association, an acquirer of shares of the
Company is not obliged to offer to acquire all the equity securities pursuant to Articles 32 and 52 of the Swiss Federal Act on
Stock Exchanges and Securities Trading.
Change of control clauses
Exit compensation for members of the Board of Directors and
employees is explicitly excluded by regulations.
SHAREHOLDERS’ PARTICIPATION RIGHTS
AUDITORS
Restrictions on voting rights and proxies
The shareholders’ rights of participation correspond to the statutory regulations of the Swiss Code of Obligations. There are no
limitations on voting rights. Each bearer share gives entitlement
to one vote at the Annual General Meeting of Valartis Group. A
shareholder may exercise his/her voting right in person at the
Annual General Meeting, appoint a third-party representative, or
request the independent shareholder proxy or official custody
account representative to vote on their behalf.
Quora prescribed by the Articles of Association
There are no regulations that deviate from Article 704 of the
Swiss Code of Obligations. Accordingly, no special quora prescribed by the Articles of Association have been defined.
Convening of the Annual General Meeting
There are no provisions in the Articles of Association that deviate
from the statutory provisions governing the convening of the
Annual General Meeting. The AGM is convened by the Board of
Directors at least 20 days before the day of the meeting; details
of the agenda and proposals are given at the same time. The
meeting is called by publishing a single notice in the company’s
official organ of publication. This publication is currently the
Swiss Official Gazette of Commerce, the «Schweizerisches Handelsamtsblatt». An Extraordinary General Meeting may also be
called by one or more shareholders who together represent at
least one tenth of the share capital. This must be done in writing
and include details of the agenda and proposals.
Agenda
The Articles of Association provide that one or more shareholders who together represent at least three per cent of the share
capital may propose an agenda item for the Annual General
Meeting in writing explaining the proposed matter and motions;
the proposed agenda item must be received by the Company at
least 45 days before the Annual General Meeting.
48
The external audit mandate is performed by Ernst & Young AG,
Zurich, Switzerland. The external auditors are appointed at the
Ordinary Annual General Meeting for a period of one year.
Duration of mandate and period of office of the lead auditor
Ernst & Young AG was first appointed in 1988. The current lead
auditor is Patrick Schwaller, Swiss Certified Accountant, who has
exercised this function since financial year 2009.
Auditor’s fee
Ernst & Young AG charged Valartis Group CHF 1.8 m (2013:
CHF 1.7 m) in financial year 2014, for services in connection with
the regulatory audits and with auditing the annual financial
statements and the consolidated financial statements of Valartis
Group and the Valartis Group companies.
Additional fees
In addition, Ernst & Young AG charged Valartis Group CHF 0.1 m
(previous year: CHF 0.2 m) for other services in the fields of legal
issues, taxes, projects and IT.
Supervisory and control instruments relating to Auditors
Control of the external auditors and the Group auditor is the responsibility of the Board of Directors. This responsibility includes
examining the reports by the internal and external auditors and
it is supported in this by the Audit Committee.
INFORMATION POLICY
All legal reporting obligations of Valartis Group are met through
official Swiss publications, currently the Swiss Official Gazette
of Commerce («Schweizerisches Handelsamtsblatt»). Valartis
Group provides shareholders and capital market participants
with open, extensive, simultaneous and prompt information. Its
information policy is based on the principle of equal treatment
of all capital market participants. As a company listed on the
Swiss stock exchange, SIX Swiss Exchange, Valartis Group is subject, in particular, to the duty of immediate disclosure of share
price-relevent events (SIX Exchange Regulation Ad hoc Publicity
RLAhP).
Regular reporting includes annual and half-year reports, which
are prepared according to International Financial Reporting
Standards (IFRS), media releases on the latest developments, the
annual press and analysts’ conference in April and the Annual
General Meeting in May. In addition to the dispatch of media releases and reports by e-mail, hard copies of publications can be
sent by post to all interested parties on request, or can also be
downloaded from the Homepage www.valartisgroup.ch. The
Corporate Governance Regulations documents (see page 38 in
the section Corporate Governance) are also available on the
website.
Agenda 2014
Annual results media and analysts’ conference
28 April 2015
Annual General Meeting 2015
2 June 2015
Half-year results 2015
25 August 2015
Investor Relations
Valartis Group AG
Blegistrasse 11a
CH-6340 Baar ZG
Tel. +41 44 503 54 00
[email protected]
Valartis stock market information
Exchange listing:
SIX Swiss Exchange
Securities symbol: VLRT
Reuters:
VLRT.S
Bloomberg:
VLRT SW
ISIN:
CH0001840450
www.valartisgroup.ch
ANNUAL REPORT 2014
|
CORPORATE GOVERNANCE | 49
RISK MANAGEMENT
ORGANISATION
The Board of Directors is responsible for the risk management of
Valartis Group. It determines risk policy and risk control systems
and also monitors consolidated risk management. The Board of
Directors drafts the guidelines governing risk management and
also determines the procedures governing responsibility for authorising business which carries risk. It is responsible for determining the annual risk budget, setting certain limits and the
maximum risk tolerance (quantitative and qualitative) in relation to the Group’s overall risk capacity. In addition, once per year,
it evaluates the suitability and efficiency of risk control systems
and determines mandatory adjustments. The Audit Committee
oversees controls relating to corporate governance and the internal control system, including financial management and income
and risk controlling.
The Group Executive Management is responsible for implementing the risk principles as well as the risk budget approved by the
Board of Directors. Within the Group companies, the Group Executive Management is responsible for compliance with the risk
principles and the mandated limits for the operative business
areas.
The Group Investment Committee is made up of members of the
Group Executive Management. It is responsible for overall risk
management and for the implementation of the risk principles
in line with the investment policy for the Group’s own asset
management and financial investments. Group Risk Management actively manages financial risks at Group level.
At the local level, the Asset & Liability Committees (ALCOs) and
the Credit Committees are responsible for implementing the risk
principles with respect to securing and investing liquidity and for
actively managing and controlling the respective loan portfolios.
Group Risk Controlling monitors compliance with the risk policy,
risk principles and annual risk budget drawn up by the Board of
Directors. Legal & Compliance ensures general compliance with
the law. These departments report directly to the Group Chief
Financial Officer/Group Chief Risk Officer (CFO/CRO), and their
reporting is integral to the monthly meetings of Valartis Group
Executive Management and the quarterly meeting of the Group
Board of Directors.
Board of Directors
Audit Committee
Group Executive
Management
Risk Management
Risk Controlling
Group Investment Committee
Group Risk Management
Business Units
Asset & Liability Committees
Credit Committees
Group Chief Risk Officer
Group Risk Controlling
Group Legal & Compliance
OVERVIEW OF RISK PROFILE
Following divestment of Valartis Bank AG, Switzerland, Valartis
Group’s strategic focus in 2014 remained on the business segments Private Clients and Wealth Management at the two private banks in Liechtenstein and Austria, together with Asset
Management, Corporate Finance, Private Equity and Real Estate.
Adjustments to the risk profile are mainly a result of changes in
client assets carried on the balance sheet. In financial year 2014,
client assets carried on the balance sheet rose by CHF 608 m to
CHF 2,521 m. Investment on the assets side was made in the traditional areas of interbank placements, lending and bond portfolios. This constitutes Valartis Group’s risk profile.
CALCULATION OF RISK-BEARING CAPACITY
Risk-bearing capacity is the ability of an overall company to absorb losses arising out of any risks that materialise without endangering its continued existence. Risk-bearing capacity depends on the overall company’s equity base and its current level
of profitability.
The risk appetite of a company is the extent to which its Board of
Directors is willing to take risks and must conform to the
risk-bearing capacity and the strategic goals of the company as a
whole. The Board of Directors determines risk appetite within
the frame-work of the annual budgeting process. The Board determines the amount of risk capital included in the bank’s freely
available equity capital and sets an overall group risk limit which
must be lower than the maximum loss which could potentially
be absorbed.
Risk coverage potential is calculated on the basis of a guarantee
of the continued existence of the whole bank even in the event
of a significantly negative impact; i.e., the whole bank would still
have sufficient capital to absorb extraordinarily high losses from
an im-probable extreme event and nevertheless remain able to
50
continue operative business activities in an organised manner.
Accordingly, the entire amount of freely available equity capital
is not used to cover economic capital requirements; a portion is
retained as a risk cushion. This is to guarantee that risk coverage
potential is not endangered even in the event of non-quantifiable risks, which are not covered by regulatory or economic capital, materialising, for example, business risks.
Development of due from banks
In CHF m
1,304
1,135
981
Business risks result from unexpected changes in market and
framework conditions which negatively impact earnings performance or equity capital. Exceptional factors in 2014 primarily
fall into the category of such business risks.
INTERBANK PLACEMENTS
The easing of tension on the interbank market, which was noticeable in 2013, continued far into 2014. However, emerging, or accentuated, geopolitical friction in Eastern Europe, together with
signs of potential political instability on the European periphery,
led to risks in the interbank market once again increasing in significance. For that reason, Valartis Group maintains high standards, for example, in terms of the creditworthiness of its counterparties in the interbank business. Risks on the interbank
market represented the highest risk category in volume for
Valartis Group in 2014.
The Group’s interbank placements are thus secured or placed
with banks that have an external rating of A or higher. Exceptions are individually assessed by the Group Investment Committee on a monthly basis and approved subject to a detailed
evaluation if necessary. The Group Investment Committee comprises the members of Group Executive Management, Group
Risk Management and Group Risk Controlling in their respective
advisory roles.
Rest of Group
Valartis Bank (Austria) AG
Valartis Bank (Liechtenstein) AG
2012
2013
2014
The increase in interbank placements at Valartis Bank (Liechtenstein) AG amounting to around CHF 200 m, corresponding to the
inflow of new client assets.
The decrease in interbank placements at Valartis Bank (Austria)
AG amounting to almost CHF 100 m, is the result of increased
involvement in the capital markets (for details, see the section
Bonds portfolio).
The increase in interbank placements for the rest of the Group
stems mainly from funds which were freed up by the disposal of
the ENR bonds portfolio (for details, see the section Bonds portfolio).
LENDING BUSINESS
The Group’s core competence in the Private Clients business segment is wealth management. Institutional Clients business activities also include specialised banking services in the areas of
corporate finance. Valartis Group’s lending business thus comprises of Lombard loans to private banking clients as well as
loans to institutional clients and corporate finance offering. In
line with the Group’s lending policy, only collateralised loans are
generally granted.
ANNUAL REPORT 2014
|
RISK MANAGEMENT | 51
BOND PORTFOLIO
Loan portfolio by business units
Rest of Group 4%
Valartis Bank
(Austria) AG 10%
Valartis Bank
(Liechtenstein) AG
86%
The chart above gives a breakdown of the Group’s loan portfolio
by business unit of continued operations as of 31 December 2014.
Loans are approved and monitored directly at the local level by
each bank, based on the segregation of functions stated above.
This makes it possible to take local aspects into account in the
approval process, thereby ensuring the best possible service for
individual clients. Credit risk is monitored at the consolidated
level using the concept of economic risk capital. Standardised
processes are employed to oversee compliance with the risk requirements on a consolidated basis.
Development of loan portfolio by business unit
In CHF m
229
Investment strategy
The investment strategy has now become firmly established and
did not change significantly compared to previous years. Valartis
Group’s bond portfolio remains divided between two different
strategies.
For the Group’s short-term liquidity management, repo-eligible
bonds with short terms to maturity are held in the trading book
and also in the portfolio as «available for sale» (AFS). This facilitates precise cash management whereby liquidity flows are
matched and rapid access to funding on the international money
markets is assured.
Medium-term investments are held in the banking book as «held
to maturity» (HTM) or «available for sale» (AFS) positions and are
intended to optimise returns on medium-term cash holdings.
The local Asset & Liability Committees manage liquidity for each
bank in accordance with the guidelines provided by the Group
Investment Committee based on input from Group Risk Management. Group Risk Controlling monitors the implementation
of these strategies.
Investments in medium-term bonds
Investments in bonds with medium maturities are a way to optimise the return on medium-term cash holdings. The residual
maturities in this portfolio are also set in line with Group-wide
liquidity planning.
207
Valartis Group also sets high standards with respect to generating liquidity in this investment strategy. As in the short-term
bond portfolio, a significant proportion of the bonds in the medium-term portfolio are also repo-eligible.
Rest of Group
Valartis Bank (Austria) AG
Valartis Bank (Liechtenstein) AG
2013
2014
In comparison to the previous year, the loan portfolio increased
by CHF 21 m (10 percent) to CHF 229 m. The major factor in this
change can be attributed to new business at Valartis Bank (Liechtenstein) AG amounting to CHF 55 m. This increase is the result
of an overall rise in loan products, namely mortgages, Lombard
loans for private banking clients and loans to institutional clients
in the Corporate Finance segment.
52
Overall portfolio
In financial year 2013, Valartis Group sold a high portion of its
bond portfolio in order to reduce its risk profile. This measure
was necessary due to tighter capital adequacy requirements in
the Swiss financial markets introduced by FINMA. Following the
successful divestment of the Swiss Bank and the subsequent reorganisation of Valartis Group in financial year 2014, it was possible to successively reconstruct the bond portfolio in accordance with the strategy described above.
In this way, in financial year 2014, risk-related bonds held mainly
by ENR Russia Invest S.A., were reduced (CHF -62 m) and, simultaneously, largely low-risk, highly liquid securities were acquired
(CHF +190 m). This is reflected in the improved credit standing
figures for the bond portfolio. The portfolio's average remaining
time to maturity is currently one-and-a-half years.
Development of the bond portfolio according to business segment
In CHF m
293
Geography and currency
About 60 percent of the Valartis Group bond portfolio consists
of investments in Europe (including Russia). Other interest-bearing investments are from supranational and US issuers. In financial year 2014, investments in government bonds issued by GIIPS
countries (Greece, Italy, Ireland, Portugal and Spain) were completely eliminated, either through sales, or maturity. Total bond
exposure in GIIPS countries (about 12 percent) consists primarily
of corporates and banks operating internationally. Group Risk
Controlling monitors these investments separately.
165
152
ENR Russia Invest S.A.
Valartis Bank (Austria) AG
Valartis Bank (Liechtenstein) AG
2012 2013
restated
tion, the portion of issuers with an external rating BBB or better
rose to 97 percent from 93 percent the previous year.
Bond portfolio by country
2014
Italy 5%
Russia 6%
2014
Au
France 8%
IT
Rest 36%
Diversification
The diversification of Valartis Group’s bond portfolio by balance
sheet category, credit quality, geography, currency and industry
sector is outlined below.
R
Fr
Germany 11%
DE
US
Balance sheet category
Approximately 7 percent of the Valartis Group bond portfolio is
held in the trading book (classified as trading), while 45 percent
is classified as held to maturity and 48 percent as available for
sale.
Development of the bond portfolio by balance sheet category
In CHF m.
293
USA 17%
Supranational 17%
Bond portfolio by country
2013
USA 5%
Supranational 5%
SN
Germany 2%
France 5%
Austria 8%
Russia 48%
165
Rest 27%
2013
2014
Available for Sale
Held to Maturity
Trading
By establishing a new AAA-HTM portfolio and a new AFS portfolio and, at the same time reducing Russian investments, it was
possible to dilute the previous year’s concentration on Russia.
The new situation means that, for the three largest countries in
which investments are held, external ratings are exclusively first
class.
Credit quality
By expanding the new AAA-HTM portfolio and simultaneously
reducing the BB, or poorer investments, the credit standing of
the bond portfolio improved significantly in comparison to the
previous year. In this way, the portion of bonds with an external
rating of A or better rose from 37 percent to 82 percent. In addi-
ANNUAL REPORT 2014
|
RISK MANAGEMENT | 53
Bond portfolio by currency
CAPITAL ADEQUACY
293
165
Others
CHF
USD
EUR
2013
2014
At the end of 2014, all investments were in EUR, USD and CHF.
Valartis Group avoids currency risks in its net cash flows. Any
currency mismatching is hedged.
Classification
The loan portfolio is made up of around 40 percent in investments in bank titles, followed by state bonds and corporate
bonds held in other sectors (each 30 percent).
Bond portfolio by classification
293
Banks
Corporates
Sovereign
54
Capital ratios
Equity capital requirements apply to the regulated segments of
Valartis Group. Following reorganisation, these are now unified
under Valartis Finance Holding AG and are subject to the consolidated supervision by the Financial Market Authority Liechtenstein (FMA). Valartis Finance Holding AG presents its key figures
under consideration of the stipulations of the Liechtenstein Capital Adequacy Ordinance which came into force at the end of
2014 and which is still aligned to Basel II.
Capital requirements as well as tier 1 and tier 2 capital are set on
the basis of the IFRS consolidated financial statements, but with
a stricter definition of core capital. Any appreciation gains on
either associated companies or financial investments which under local accounting rules must be recorded at the lower of cost
or market are eliminated.
The qualitative and quantitative information required on capital
adequacy, strategies and risk management procedures, as well
as on the risk situation of Valartis Group, are disclosed in the
Notes to Capital Management on page 102 ff. For each risk category, differing approaches for calculating capital adequacy are
required. Valartis Group uses a standardised approach for credit
and market risks and a basic indicator approach for operational
risks.
165
2013
The fundamental goal of Group Risk Management is to generate
an operative suitable risk-adjusted return on invested capital for
shareholders. To achieve this goal, Valartis Group seeks to identify advantageous risk-return ratios when managing capital. In doing so, the Group avoids extreme risks that could endanger its
risk capacity and thus its health and existence, managing all risks
within the risk budget set by the Board of Directors. When managing capital, the Group assesses both the required capital (minimum capital amount to cover risks on the basis of supervisory
requirements) as well as the available eligible capital (available
capital calculated according to the supervisory authorities’ criteria) and evaluates the development of both as part of its capital
planning.
2014
16:10
Lake Partnun, canton of Grisons
16:50
COMPENSATION REPORT
RECONCILING THE INTERESTS OF SHAREHOLDERS
AND EMPLOYEES
COMPENSATION REPORT
Dear shareholders,
We are pleased to present the detailed 2014 Compensation Report for Valartis Group. This report is intended to fulfil our stakeholders entitlement to information regarding transparency,
comprehensibility and plausibility of the compensation policy
and compensation system of Valartis Group.
The 2014 Compensation Report presents details of how performance components are linked to compensation. It comprises the
following sections:
– Compensation Committee: organisation, duties and areas of
responsibility
– Compensation guidelines for the Board of Directors, Group Executive Management and employees
– Determining compensation
– Compensation for the Board of Directors
– Compensation for Group Executive Management
– Compensation for employees
– Overview: Loans, shares and options held by members of the
Board of Directors and Group Executive Management as at
end-2014
The 2014 Compensation Report fulfils current Corporate Governance requirements and is based on the stipulations of the Swiss
Code of Best Practice for Corporate Governance, the SIX Swiss
Exchange Corporate Governance guideline, Art. 663bbis OR (Swiss
Code of Obligations’ Transparency Law) and the Swiss constitutional article of the Ordinance against Excessive Compensation
in listed companies (VegüV).
Value-driven compensation system
Valartis Group’s compensation system is an instrument which is
intended to harmonise the interests of shareholders and employees. Our aims are to offer incentives to achieve corporate
goals, market-driven and competitive compensation and, at the
same time, to protect the interests of shareholders. Valartis
Group is committed to a fair, balanced and performance-oriented compensation system. In addition to progressive social
benefits, we offer employees throughout the Group attractive,
market-oriented basic salaries, thus binding employees, where
appropriate, to the company by means of a medium-term bonus
system.
56
Valartis Group’s value-driven compensation system is aimed at
achieving the long-term economic success and sustainable competitiveness of the Group (see also the information on corporate
sustainability on page 16 ff.). It aligns the interests of shareholders and employees by offering incentives that promote a performance, team and risk-conscious culture as well as corporate
thinking and action which strengthen the company as a whole.
For example, members of management receive a portion of their
variable performance component exclusively in Valartis Group
AG shares (distributed over a period of up to three years).
We endeavour to review our compensation policy on a regular
basis and to further develop it with the interests of our shareholders and employees in mind.
On behalf of the Board of Directors
Jean-François Ducrest
Chairman of the
Compensation Committee
COMPENSATION COMMITTEE: ORGANISATION,
DUTIES AND AREAS OF RESPONSIBILITY
Organisation of the Compensation Committee and its duties are
defined in accordance with Art. 24 of the Articles of Association
from 13 May 2014 and Art. 3.10 (a) of the Organisational Regulations for the Board of Directors of Valartis Group AG as follows:
Organisation
The Compensation Committee consists of at least three members of the Board of Directors, each of whom is elected individually at the Annual General Meeting for a term of one year, i.e., up
to and including the first Ordinary Annual General Meeting following their election. Re-election is permissible. If one or more
members withdraw, or if the Compensation Committee is not
complete, the Board of Directors designates replacements from
among its members for the period to the end of the next Annual
General Meeting.
In 2014, Jean-François Ducrest was Chairman, Christoph N.
Meister and Rolf Müller were members.
The Compensation Committee constitutes itself and designates
a member as Chairman. The Chairman of the Board of Directors
may not be Chairman of the Compensation Committee. The
Compensation Committee meets as often as business requires,
but at least three times per year. The Compensation Committee
performs its duties and competencies as a joint and collective
body. Members have no personal powers and cannot, therefore,
issue any instructions. The Compensation Committee is quorate
when the majority of its members are present. It passes its resolutions by means of an absolute majority vote of members present. In the event of a tied vote, the Chairman has the casting vote.
The minutes of meetings are submitted to the Board of Directors.
Duties and responsibilities
The Compensation Committee may propose motions to the
Board of Directors in connection with all issues concerning compensation and supports the Board’s work in the field of personnel policy. The Committee’s duties include, amongst others, the
following:
– Preparing, drafting and periodic reviewing of compensation
policy and performance goals for Group Executive Management
– Periodic reviewing and implementing of compensation policy
– Annual assessment of the members of Group Executive Management
– Planning successors and their nomination for positions in
Group Executive Management
– Annual review of compensation for the individual members of
Group Executive Management
– Preparing choices of candidates for election or re-election to
the Board of Directors and submitting the corresponding proposals to the Board of Directors
– Compiling the Compensation Report and submitting it to the
Board of Directors for approval
– Periodic evaluation of appropriate insurance coverage for the
members of the Board of Directors and Group Executive Management, with the assistance of specialists, and recommendation of adjustments to the Board of Directors
COMPENSATION GUIDELINES FOR THE BOARD OF
DIRECTORS, GROUP EXECUTIVE MANAGEMENT
AND EMPLOYEES
Valartis Group’s value-driven compensation system is aimed at
winning the right employees, promoting them and binding them
to the company in order to assure the long-term economic success and sustainable competitiveness of the Group. It is based on
the following principles:
– Compensation should be comparable with other companies in
the financial services sector
– The compensation system offers incentives which promote a
performance, team and risk-conscious culture, as well as corporate thinking and action which strengthen Valartis Group as
a whole
– Total compensation consists, as a rule, of a fixed and a variable
component
– Variable compensation components are dependent to a suitable degree on individual performance, the annual result of the
respective business segment and the success of the Group as a
whole
– The basis for evaluating the variable compensation components apply directly measurable, as well as non-measurable
criteria
– A significant portion of the variable compensation components is paid in Valartis Group AG shares
– Payment of a significant portion of the variable compensation
is made dependent on the future success of Valartis Group. Appropriate consideration is given to risks which have been taken
– Severance payments for Board of Directors and Group Executive Management members are not permitted
Compensation Board of Directors
In order to guarantee the independence of the Board of Directors, their compensation comprises exclusively fixed payments
which is independent of corporate success. The level of compensation is based on the office held by the member of the Board of
Directors and their respective contribution (for details, see page
59).
Compensation Group Executive Management
Compensation for members of the Group Executive Management comprises a fixed basic salary and a performance-related
payment (for details, see page 61).
– The basic salary is based on the respective duties and functional responsibility
– The performance-related payment is determined based on the
Group operating earnings, business segment operating earnings and their personal, individual contribution
ANNUAL REPORT 2014
|
COMPENSATION REPORT | 57
– The performance-related components are included in the annual goal-setting process in which both the individual and financial performance goals are determined. At the end of the
period, an assessment is made of the degree to which goals
have been achieved
– In determining quantitative goals, appropriate consideration
must be given to the interests of shareholders (equity capital
interest, impact of market movements on the result, etc.). Individual contributions include measurable factors such as improved results, project completion, etc., but also nonfinancial factors (personnel management, leading by example,
commitment to the Group as a whole, etc.)
Bonus Shares Programme
Valartis Group’s Bonus Shares Programme is an integral part of
the compensation system which takes into consideration the
overall success of the company and individual performances, as
well as the aim to bind employees in a long-term relationship
with the company, and protection of shareholders’ interests (see
details on page 63).
DETERMINING COMPENSATION
The Compensation Committee determines the respective total
amount of compensation for the Board of Directors and Group
Executive Management (incl. Group CEO). This is then submitted
by the Board of Directors to the Annual General Meeting for approval. This comprises the following two steps:
– The Compensation Committee determines compensation for
the individual members of the Board of Directors within the
framework of the authorised (or still to be authorised) maximum total amount and presents the corresponding proposals
to the Board of Directors (see also «Competencies and areas of
responsibility» below)
– The Compensation Committee determines compensation for
the Group CEO and, following consultation with the Group
CEO, for the individual members of the Group Executive Management within the framework of the authorised (or still to be
authorised) maximum total amount and presents the corresponding proposals to the Board of Directors (see also «Competencies and areas of responsibility» below) Board of Directors and Group Executive Management
Board of Directors and Group Executive Management
Based on the proposals of the Compensation Committee, the
Board of Directors of Valartis Group AG determines compensation for members of the Board of Directors and (following consultation with the Group CEO) for members of the Group Executive Management, subject to approval by the Annual General
Meeting and in accordance with the company Organisational
Regulations.
Employees
The Group CEO presents an application to the Compensation
Committee for the amount of bonus for each respective business segment, based on the total bonus amount determined by
the Board of Directors. The Compensation Committee examines
each corresponding application. The responsible manager for
each segment determines the bonus payments to employees
working in that segment in agreement with the Group CEO.
Bonus payments to those employees who are not allocated directly to a specific business segment are determined by the
Group CEO.
Consultative vote on compensation for members of the Board
of Directors and Group Executive Management
The Board of Directors proposed a non-binding consultative vote
on compensation for members of the Board of Directors and
Group Executive Management to the Annual General Meeting in
2014, in accordance with the provisions of the Swiss Code of Best
Practice for Corporate Governance. The majority of shareholders
endorsed the 2013 Compensation Report. Valartis Group proactively seeks dialogue with shareholders and shareholder representatives, in order to collect valuable comments on their compensation policy. This feedback is then taken into consideration
in regular reviews of the compensation policy.
Competencies and areas of responsibility
Ruling
Group CEO
Compensation
Committee
BoD
Proposal
Approval
Review
Proposal
Approval
Bonus Shares Programme2
Group CEO
Proposal
Approval
Bonus Shares Programme
members of Group Executive Management (excl. Group CEO)
Proposal
Review
Proposal
Approval
Proposal
Review
Proposal
Approval
Compensation for members of BoD1, Chairman of BoD and Group CEO
Fixed compensation for members of Group Executive Management (excl. Group CEO)
Bonus Shares Programme
other entitled persons
Proposal
1 Board of Directors
2 Cash and Bonus Share Programme of Valartis Group: Cash, bonus shares and super bonus shares (for details, see page 63)
58
COMPENSATION: BOARD OF DIRECTORS
The members of the Board of Directors receive a fixed compensation, the level of which is based on their individual function
within the Group. No variable compensation component is provided for the Board of Directors. The Compensation Committee
determines compensation for the members and the Chairman of
the Board of Directors within the framework of the authorised
(or still to be authorised) maximum total amount and presents
the corresponding proposals to the Board of Directors (see also
«Competencies and areas of responsibility», page 58). Since 2013,
salaries for the members of the Board of Directors are determined for the period between two Ordinary General Meetings.
The Compensation Regulations for the Board of Directors of
Valartis Group AG stipulate that all compensation must be paid
in monetary form. However, every member of the Board of Directors may request their compensation, in part or in full, in the
form of shares. Details of loans, shares and options holdings are
disclosed in Note 43 (see also Compensation Report, page 64 f.).
Overview of 2014 compensation to the Board of Directors
2014
in CHF
Compensation Guidelines
Fixed compensation
Urs MaurerLambrou
Chairman
until
AGM
2014
Rolf Müller-Senn
Vice-Chairman
Christoph N.
Meister
Jean-François
Felix
Ducrest Fischer1
from
AGM
2014
until
AGM
2014
from
AGM
2014
until
AGM
2014
from
AGM
2014
until
AGM
2014
from
AGM
2014
until
AGM
2014
380,000 160,000
55,000
55,000
40,000
40,000
40,000
40,000
40,000
–
Audit Committee
–
–
25,000
25,000
35,000
35,000
25,000
25,000
Compensation Committee
–
–
–
10,000
–
10,000
–
20,000
Valartis Finance Holding AG3
–
80,000
–
25,000
–
25,000
–
–
Stefan
Häberle2
Total
Total
from
AGM
2014
until
AMG
2014
from
AGM
2014
40,000 555,000
335,000
–
85,000
–
–
85,000
40,000
–
–
–
130,000
Valartis Bank (Liechtenstein) AG
–
70,000
25,000
25,000
25,000
25,000
–
–
–
–
50,000
120,000
Valartis Bank (Austria) AG
–
70,000
25,000
25,000
25,000
25,000
–
–
–
–
50,000
120,000
Valartis Bank AG, Switzerland 4
–
70,000
25,000
25,000
25,000
25,000
25,000
25,000
–
25,000
75,000
170,000
Valartis Wealth Management S.A.4
–
10,000
10,000
10,000
10,000
10,000
20,000
20,000
–
–
40,000
50,000
380,000 460,000 165,000 200,000 160,000 195,000 110,000 130,000
40,000
Total compensation
1
2
3
4
65,000 855,000 1,050,000
Member up to AGM, 13 May 2014.
Member as of AGM, 13 May 2014.
Incorporated on 27 June 2014. Compensation for a full year. In fact, only pro rata compensation was paid from 1 July 2014.
Compensation for a full year. In fact, only pro rata compensation was paid up to divestment on 29 August 2014.
ANNUAL REPORT 2014
|
COMPENSATION REPORT | 59
Comparison of 2014 and 2013 compensation to the Board of Directors
2014
in CHF
Urs Maurer- Rolf Müller-Senn,
Lambrou,
Vice-Chairman
Chairman
Christoph N.
Meister
Jean-François
Ducrest
Felix
Fischer1
Stefan
Häberle2
Total
881,100
Compensation for the Board of Directors
Compensation from group entities (basic)
393,000
172,100
167,100
101,200
14,800
32,900
–
–
–
–
–
–
–
Social Security contributions3
43,500
19,100
18,500
11,200
800
3,700
96,800
Other social insurance contributions3
10,700
5,500
5,400
4,200
200
1,200
27,200
Compensation for additional services
102,400
–
–
7,000
–
–
109,400
–
–
–
–
–
–
–
549,600
196,700
191,000
123,600
15,800
37,800
1,114,500
Christoph N.
Meister
Jean-François
Ducrest
Erwin W.
Heri1
Felix
Fischer2
Total
of which in shares
Other benefits
Total
1 Member up to 13 May 2014
2 Member as of 13 May 2014
3 Valartis Group pays both employer and employee contributions.
Pension contributions include AHV (Retirement and survivors’ insurance) contributions.
2013
in CHF
Urs Maurer- Rolf Müller-Senn,
Lambrou,
Vice-Chairman
Chairman
Compensation for the Board of Directors
Compensation from legal entities (basic)
of which in shares
Employer's social security and pension
fund contribution3
Compensation for additional services
Other benefits
Total
327,900
253,200
253,700
121,300
264,500
26,900
1,247,500
–
–
–
–
–
–
–
23,300
18,200
19,900
9,100
17,800
2,000
90,300
–
–
23,500
–
–
–
23,500
4,100
4,100
4,100
–
4,100
–
16,400
355,300
275,500
301,200
130,400
286,400
28,900
1,377,700
1 Chairman up to 14 May 2013
2 Member as of 14 May 2013
3 In 2013, pension contributions and contributions to other social security were posted as a total.
In the 2014 Compensation Report, they are recorded separately as pension
contributions and contributions to other social security.
Compensation to former members of the Board of Directors
In FY 2014, the former Chairman of the Board of Directors, Erwin
W. Heri, received a salary amounting to CHF 270,000 (previous
year: CHF 270,000) for advisory services in connection with strategic asset allocation. This payment is not included in the Compensation to Members of the Board of Directors table because
this service was provided after Mr Heri had retired from the
Board of Directors. The advisory services contract expired in
2014.
60
COMPENSATION: GROUP EXECUTIVE
MANAGEMENT
The compensation policy for Group Executive Management is issued by the Board of Directors based on Art. 3.9 (b) of the Organisational Regulations of the company. The specifications contained therein comply with the Swiss Stock Exchange, SIX Swiss
Exchange guidelines relating to information on the compensation of members of the Group Executive Management. On the
recommendation of the Compensation Committee, the Board of
Directors of Valartis Group AG authorises compensation for the
Group CEO and, following consultation with the Group CEO, for
the remaining members of the Group Executive Management
within the framework of the authorised (or still to be authorised)
maximum total amount.
Structure of the compensation system for Group Executive
Management
The compensation system for Group Executive Management is
based on the interconnection between corporate success and individual performance components which are listed in section
«Determining compensation» on page 62.
Compensation is determined based on the following points:
– Compensation for members of the Group Executive Management comprises a fixed basic salary and a performancerelated component
– Basic salary is based on the duties and functional responsibilities of individual members
– Performance-related compensation is determined on the basis
of the following quantitative and qualitative components:
– Operating earnings
– Business segment operating earnings
– Individual, personal contribution
2014 and 2013 comparison of compensation to members of Group Executive Management
2014
in CHF
Gustav Stenbolt, Group CEO
Other members of the Group
Executive Management (GEM)1
Total
Compensation for the GEM
552,500
1,094,410
1'646'910
Variable remuneration in cash
0
0
0
Variable remuneration in shares
(entitlement from ongoing share plans)2
0
0
0
Basic remuneration in cash
Employer’s social security and
pension fund contributions3
131,700
228,164
359,864
Other social security contributions
29,100
37,254
66,354
Other benefits
47,500
4,021
51,521
760,800
1,363,849
2,124,649
Total
1 Monika Jung and Andreas Insam were members of Group Executive Management up to 8 April 2014.
2 Evaluated on the date of granting of the entitlement.
3 Contributions include the employer contribution for Retirement and survivors’ insurance and pension fund contributions.
2013
in CHF
Gustav Stenbolt, Group CEO
Other members of the Group
Executive Management (GEM)1
Total
Basic remuneration in cash1
511,300
1,377,500
1,888,800
Variable remuneration in cash
175,000
165,000
340,000
Variable remuneration in shares
(entitlement from ongoing share plans)2
144,800
83,400
228,200
155,600
323,800
479,400
5,000
11,100
16,100
991,700
1,960,800
2,952,500
Compensation for the GEM
Employer’s social security and
pension fund contributions3
Other benefits
Total
1 In the 2013 Annual Report, «Fixed in cash» recorded the actual payment made to members of the Group Executive Management. In the 2014 Compensation Report,
gross salary i.e., incl. employer contributions is recorded as «Fixed in cash».
2 «Variable in shares» for the previous year recorded all shares which were vested to members of Group Executive Management in 2013. In the 2014 Compensation Report, all share
categories which have been allocated to members of Group Executive Management on the basis of bonus evaluations for 2014 are recorded. (Actual vesting of these bonus shares
will take place in one year and for super bonus shares in three years).
3 In the 2013 Annual Report, employer social security contributions were posted as a total. In the 2014 Compensation Report, they are recorded separately as pension contributionss
and other social security contributions.
ANNUAL REPORT 2014
|
COMPENSATION REPORT | 61
Weighting
The following percentages serve as a gauge for the weighting of
the individual components, whereby the individual components
together yield a total of 100 percent:
Function/
components
Group CEO
Deputy
Group CEO
CFO/CRO
Head
Business
segment
(a) Operating
earnings
30% – 50%
20% – 40%
20% – 40%
10% – 20%
(b) Business
segment
operating
earnings
–
–
–
30% – 40%
50% – 70%
60% – 80%
60% – 80%
40% – 60%
(c) Individual,
personal
contribution
In determining the individual components, due consideration is
given to the interests of shareholders (equity capital interest, impact of market movements on the result, etc.). Individual contributions include measurable factors such as improved results,
completion of a project on-time and in-budget, etc., but also
qualitative factors such as personnel management, leading by
example and commitment to the Group as a whole (this list is
not conclusive).
In order to focus the thinking and actions of members of the
Group Executive Management on sustainably strengthening
Valartis Group’s earnings power, performance-related compensation in excess of CHF 50,000 is paid in accordance with the following conditions, (see also diagram on page 63):
– If performance-related compensation does not exceed
CHF 50,000 per year, the entitled person is free either to have
it paid out in full, in cash, or to participate in the Valartis Group
AG Bonus Shares Programme (in accordance with compensation policy)
– If performance-related compensation for the year exceeds the
sum of CHF 50,000, then the entitled person will participate in
the Valartis Group AG Bonus Shares Programme in accordance
with the following conditions:
– 50 percent of performance-related compensation is paid in
cash, 25 percent is allocated in the form of Bonus Shares and
25 percent is allocated in the form of Super Bonus Shares,
whereby the terms «Bonus Shares» and «Super Bonus
Shares» refer to Valartis Group AG shares
– The number of Bonus and Super Bonus Shares at the time of
allocation will be determined based on the total amount of
bonus in CHF (50 percent of the performance-related compensation) divided by the unweighted, average daily closing
prices for the company’s share for the month of March
– Payment of the cash component is completely unconditional and takes place in accordance with Valartis Group’s compensation policy
62
– Bonus Shares: Ownership of Bonus Shares (25 percent of the
total performance-related compensation) vests to the eligible person 12 months after allocation (vesting period of 1
year). These are blocked for a period of 2 years. Ownership of
shares will only vest to the eligible person if notice has not
been given on their employment contract with the company, or a subsidiary controlled by the company, or if they have
left the Group as a Good Leaver (the Award Agreement governs conditions and the definition of «Good Leaver»)
– Super Bonus Shares: Ownership of Super Bonus Shares
(25 percent of the total performance-related compensation)
vests to the eligible person 3 years after allocation (vesting
period of 3 years). The effective number of shares to be
transferred at this time is dependent on the success/risk
profile of the company over a 3-year horizon (arithmetic average RoE and BIS Tier 1 ratio)
– Cash performance-related compensation components are
paid out after conclusion of the evaluation process (determination of performance-related compensation), but no later than the end of April of the following financial year
– Depending on the performance of Valartis Group during this
vesting period, the share portion of the bonus (number of
shares initially allocated) may double at most (given a total bonus of CHF 50,000, this would amount to a maximum of
CHF 50,000 in the form of shares). The basis for performance
measurement, which begins at the start of a financial year, are
the average return on equity achieved over the two subsequent years and the average Tier 1 capital ratio measured over
the same period. Financial details on the participation programmes can be found in Note 11 of the Annual Report
– Dependence on business performance and individual, personal contributions may result in considerable variations from
year to year in the total compensation for a member of Group
Executive Management. The proportion of fixed and variable
compensation components fluctuate accordingly.
Details on loans, shares and options holdings can be found in
Note 43 of the Notes to the Consolidated Financial Statements,
or on pages 64 ff. of this Compensation Report.
Local practices and regulations are adhered to outside Switzerland – this may lead to differing models being applied for Group
Executive Management members in Liechtenstein and in Austria.
Compensation guidelines for employees of the Valartis Group Bonus Shares Programme
If bonus <
CHF 50.000
Bonus
in cash
Basic
compensation
in cash
If bonus >
CHF 50.000
Allocation of Bonus and Super Bonus Shares
Bonus
Shares*
25%
Vesting 1 year and
blocked for additional
2 years **
At free
disposal
Super Bonus
Shares*
25%
Vesting 3
years ***
At free
disposal
Bonus
50% in cash
* Variable compensation components are dependent on the individual performance,
the annual result of the respective business segment and the success of the
Group of a whole.
** still employed or a good leaver
***still employed or a good leaver. Numbers of shares are dependent on the targets
(RoE and BIZ Tier 1 Ratio) with floor 100% and cap 200% of granted shares.
COMPENSATION: EMPLOYEES
The compensation model as described for Group Executive Management also applies in principle for all employees in Switzerland. The Group CEO determines the total amount of bonus payment for each business segment, based on the total bonus
amount made available by the Board of Directors, and presents
the corresponding proposal to the Compensation Committee for
review (see also pages 57 ff.). The responsible manager for each
segment determines the bonus payments to employees working
in that segment in agreement with the Group CEO. Bonus payments to those employees who are not allocated directly to a
specific business segment are determined by the Group CEO.
The following percentages (in deviation from provisions for
Group Executive Management) serve as a gauge for the weighting of the individual components, whereby the individual components together yield a total of 100 percent:
Function/Components*
Front
Service
office organisation
(a) Operating earnings
10%
10%
(b) Business segment operating earnings
30%
0%*
(c) Individual, personal contribution
60%
90%
* In order to comply with legal stipulations, the operating earnings of the respective
business segment are not included for service organisation personnel. Any bonus
participation received by these functions are calculated in accordance with the
above-mentioned criteria.
Further information on salaries, bonuses, social security benefits, pension provisions and employee participations can be
found in Notes 5, 11 and 12 of the Notes to the Consolidated
Financial Statements.
ANNUAL REPORT 2014
|
COMPENSATION REPORT | 63
OVERVIEW: LOANS, SHARES AND OPTIONS HELD BY MEMBERS OF THE BOARD OF DIRECTORS AND
GROUP EXECUTIVE MANAGEMENT AS AT END-2014
The tables below list all loans, shares and options held by the Board of Directors, Group Executive Management as of 31 December 2014:
Loans, shares and options held by members of the Board of Directors 2014 and 2013
2014
in CHF
Urs Maurer- Rolf Müller-Senn,
Lambrou,
Vice-Chairman
Chairman
Christoph N.
Meister
Jean-François
Ducrest
Felix
Fischer1
Stefan
Häberle2
Total
Number of shares held and loans/
advances for the Board of Directors
Numbers of shares
1,329
4,417
4,821
2,827
–
–
13,394
Loans and advances directly in CHF
–
–
–
–
–
–
–
Loans and advances to related parties
–
–
–
–
–
–
–
Christoph N.
Meister
Jean-François
Ducrest
Felix
Fischer1
1 Member up to 13 May 2014
2 Member as of 13 May 2014
2013
in CHF
Urs Maurer- Rolf Müller-Senn,
Lambrou,
Vice-Chairman
Chairman
Total
Number of shares held and loans/
advances for the Board of Directors
Numbers of shares
Loans and advances directly in CHF
Loans and advances to related parties
1 Member as of 14 May 2013
64
1,329
4,417
4,821
2,827
2,500
15,894
146,000
127,500
127,500
–
–
401,000
–
–
–
–
–
–
Loans, shares and options held by members of Group Executive Management 2014 and 2013
Gustav Stenbolt,
Group CEO
Vincenzo Di Pierri,
Deputy CEO
George M. Isliker,
CFO/CRO
Total
1,873,821
2,349
5,852
1,882,022
20,230
11,899
9,433
41,562
Loans and advances directly in CHF
–
–
–
–
Loans and advances to related parties
–
–
–
–
2014
in CHF
Number of shares held and loans/
advances for the
Group Executive Management
Numbers of shares
Numbers of shares entitled from
ongoing share plans1
1 Shares allocated to members of the Group Executive Board as bonus components in this FY or in previous FYs but which have not yet been vested are listed as entitlements.
No loans or credit allocations have been made to former members of Group Executive Management at market-conform conditions.
2013
in CHF
Gustav Stenbolt, Vincenzo Di Pierri,
Deputy CEO
Group CEO
George M. Isliker,
CFO/CRO
Monika Jung
Andreas Insam
Total
Number of shares held and loans/
advances for the
Group Executive Management
Numbers of shares
Loans and advances directly in CHF
Loans and advances to related parties
1,838,038
–
2,329
2,405
–
1,842,772
127,500
–
–
–
1,625,777
1,753,277
–
–
–
–
2,832,455
2,832,455
No loans or credit allocations have been made to former members of Group Executive Management at market-conform conditions.
ANNUAL REPORT 2014
|
COMPENSATION REPORT | 65
AUDITOR’S REPORT ON THE COMPENSATION REPORT
Ernst & Young Ltd
Maagplatz 1
P.O. Box
CH-8010 Zurich
Phone
+41 58 286 31 11
Fax
+41 58 286 30 04
www.ey.com/ch
To the General Meeting of
Valartis Group AG, Baar
Zurich, 28 April 2015
Report of the statutory auditor on the remuneration report
We have audited the accompanying remuneration report dated 28 April 2015 of Valartis Group AG
(pages 56 to 65) for the year ended 31 December 2014.
Responsibility of the Board of Directors
The Board of Directors is responsible for the preparation and overall fair presentation of the
remuneration report in accordance with Swiss law and the Ordinance against Excessive Compensation
in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for
designing the remuneration system and defining individual remuneration packages.
Auditor's responsibility
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our
audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the
remuneration report complies with Swiss law and articles 14 – 16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the
remuneration report with regard to compensation, loans and credits in accordance with articles 14 – 16
of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatements in the remuneration report, whether due to fraud or error. This
audit also includes evaluating the reasonableness of the methods applied to value components of
remuneration, as well as assessing the overall presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Opinion
In our opinion, the remuneration report for the year ended 31 December 2014 of Valartis Group AG
complies with Swiss law and articles 14 – 16 of the Ordinance.
Ernst & Young Ltd.
Patrick Schwaller
Alain Münger
Licensed audit expert
(Auditor in charge)
Licensed audit expert
ANNUAL REPORT 2014
|
COMPENSATION REPORT | 67
17:00
View of the Sulzfluh from the village of Partnun,
canton of Grisons
17:50
VALARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS
CONFIDENTLY MASTERING CHALLENGING TIMES
VALARTIS GROUP CONSOLIDATED FINANCIAL STATEMENTS
72
CONSOLIDATED INCOME STATEMENT
73
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
74
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
76
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
78
CONSOLIDATED CASH FLOW STATEMENT
81
NOTES
163 AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
VALARTIS GROUP ANNUAL REPORT 2014
| CONSOLIDATED FINANCIAL STATEMENTS | 71
CONSOLIDATED INCOME STATEMENT
In CHF 1,000
Note
Interest and discount income
Dividend income
Interest expense
Income from interest and dividends
1
Commission income from loan business
Commission income from securities and investment business
Commission expense
1.1.–31.12.2014
1.1.–31.12.2013
14,607
24,940
110
191
-5,547
-7,650
9,170
17,481
558
650
61,969
63,898
-15,317
-17,421
Income from commission and service fees
2
47,210
47,127
Income from trading
3
-31,538
-3,639
3,406
5,292
-1,324
7,408
Income from associates
Other income
Finance costs
-474
0
4
1,608
12,700
26,450
73,669
Personnel expense
5
-34,568
-34,110
General expense
6
Other ordinary income
Total operating income
-18,480
-17,888
Administrative expense
-53,048
-51,998
Gross loss/profit
-26,598
21,671
Depreciation/amortisation of property, plant
and equipment and intangible assets
7
-7,853
-10,544
Valuation adjustments, provisions and losses
8
-20,496
1,417
-54,947
12,544
1,269
689
Net loss/profit from continued operations before taxes
Income taxes
9
Net loss/profit from continued operations
-53,678
13,233
-19,600
-12,799
Net loss/profit
-73,278
434
Net loss attributable to shareholders of Valartis Group AG
-69,174
-2,441
-4,104
2,875
Net loss from discontinued operations after tax
40
Net loss/profit attributable to non-controlling interests
in CHF
in CHF
Undiluted earnings attributable to shareholders of Valartis Group AG
Earnings per share
10
-14.92
-0.53
Diluted earnings attributable to shareholders of Valartis Group AG
10
-14.92
-0.53
Undiluted earnings attributable to shareholders of Valartis Group AG
10
-10.69
2.26
Diluted earnings per share attributable to shareholders of Valartis Group AG
10
-10.69
2.26
Undiluted earnings attributable to shareholders of Valartis Group AG
10, 40
-4.23
-2.79
Diluted earnings per share attributable to shareholders of Valartis Group AG
10, 40
-4.23
-2.79
Earnings per share – continued operations
Earnings per share – discontinued operations
72
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
In CHF 1,000
1.1.–31.12.2014
Net loss/profit in the income statement
Unrealised gains/losses from financial assets available for sale 1)
Gains/losses on financial assets available for sale transferred to the income statement 1)
Foreign exchange translation differences
Other comprehensive income that will be reclassified to the income statement
Remeasurement of defined benefit pension plans 2)
1.1.–31.12.2013
-73,278
434
3,102
1,902
764
167
-4,310
2,787
-444
4,856
1,991
2,715
Other comprehensive income that will not be reclassified to the income statement
1,991
2,715
Total other comprehensive income, after tax
1,547
7,571
-71,731
8,005
-67,155
5,128
-4,576
2,877
Total comprehensive income
Allocation of total comprehensive income
Shareholders of Valartis Group AG
Non-controlling interests
1) The gains/losses on financial instruments available for sale before tax
amounts to TCHF 3'187 (gain) and the income tax to TCHF -85. In previous year
the gain on financial instruments available for sale before tax was TCHF 1'971
and the income tax TCHF 98.
2) The result of the remeasurement for defined benefit pension plans before tax
is TCHF 1'475 and the tax effect TCHF -516 (previous year: pre-tax TCHF 3'213,
tax effect TCHF -498).
VALARTIS GROUP ANNUAL REPORT 2014
| CONSOLIDATED FINANCIAL STATEMENTS | 73
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Assets
In CHF 1,000
Note
31.12.2014
31.12.2013
Cash
13
792,077
568,607
Due from banks
14
1,305,679
1,134,578
Due from clients
14
228,857
201,351
Trading portfolio assets
16
35,422
106,862
Financial assets available for sale
17
159,470
41,853
Financial assets held to maturity
17
133,867
57,174
Other financial assets at fair value
18
7,761
36,742
Associated companies
19
45,335
25,534
Property, plant and equipment
20
43,755
45,659
Investment Property
21
45,667
0
Accrued and deferred assets
22
11,105
9,355
Derivative financial instruments
23
1,473
477
Other assets
24
32,802
27,737
Goodwill and other intangible assets
25
35,582
49,490
9
7,396
8,217
2,886,248
2,313,636
0
712,995
2,886,248
3,026,631
Deferred tax assets
Assets classified as held for sale
Total assets
40
Total subordinated assets
3,284
of which discontinued operations
Total amounts due from holders of qualified participations
74
3,005
262
Liabilities
In CHF 1,000
Note
31.12.2014
31.12.2013
58,349
29,476
Due to clients
28
2,520,995
1,913,274
Derivative financial instruments
23
5,814
904
9
2,375
1,647
Accrued and deferred liabilities
29
17,245
13,981
Other liabilities
30
13,154
3,548
Issued debt instruments
31
12,025
12,268
Provisions
32
3,693
2,096
9
11,949
14,697
2,645,599
1,991,891
0
715,536
2,645,599
2,707,427
5,000
5,000
Reserves
219,042
286,644
Foreign exchange translation differences
-35,561
-31,740
Liabilities
Due to banks
Current income taxes
Deferred tax liabilities
Liabilities directly associated with the assets classified as held for sale
40
Total liabilities
Shareholders' equity
Share capital
33
Unrealised income from financial assets available for sale
Treasury shares
34
Shareholders' equity of the shareholders of Valartis Group AG
Non-controlling interest
Total shareholders' equity (including non-controlling interests)
Total liabilities and shareholders' equity
Total subordinated liabilities
5,777
1,928
-7,701
-8,850
186,557
252,982
54,092
66,222
240,649
319,204
2,886,248
3,026,631
12,025
37,044
of which discontinued operations
Total amounts due to holders of qualified participations
VALARTIS GROUP ANNUAL REPORT 2014
| CONSOLIDATED FINANCIAL STATEMENTS | 75
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2013
Share capital
Treasury shares
Capital reserves
Retained earnings
5,000
-9,626
-4,094
297,105
In CHF 1,000
Opening balance at 1 January 2013
Restatement opening balance 1)
Restated opening balance at 1 January 2013
-31
5,000
-9,626
-4,094
0
0
0
297,074
Gains/losses from financial assets available for sale
Foreign exchange translation differences
Remeasurement of defined benefit pension plans
Other comprehensive Income 2)
Net loss/profit
Comprehensive income
0
0
0
776
-94
Dividend payments
Employee participation plan
122
Transaction with non-controlling interests
Total shareholders' equity at 31 December 2013
-2,441
-5,000
Change in treasury shares
Owner-related changes
0
-2,441
24
-95
0
776
52
-5,095
5,000
-8,850
-4,042
289,538
5,000
-8,850
-4,042
289,538
0
0
0
0
0
0
0
2014
Opening balance at 1 January 2014
Gains/losses from financial assets available for sale
Foreign exchange translation differences
Remeasurement of defined benefit pension plans
Other comprehensive Income
Net loss
Comprehensive income
-69,174
-69,174
Dividend payments
Change in treasury shares
1,149
Employee participation plan
Transaction with non-controlling interests
Owner-related changes
Total shareholders' equity at 31 December 2014
-25
153
0
1,149
-572
153
5,000
-7,701
-4,614
220,517
1) Restated due to retrospectively implementation of IAS 19 revised.
2) The share of discontinued operations on other comprehensive income in equity is disclosed in Note 40.
76
43
-590
Net unrealised
Foreign exchange
Remeasurement
Total equity
Non-controlling
Foreign exchange
Total non-con-
Total
gains/losses
translation
defined benefit
shareholders
interests
effect on non-con-
trolling interests
shareholders'
on financials
difference
pension plans
of the Valartis
-133
-133
-34,528
0
253,724
-5
-1,567
-1,603
-34,533
-1,567
252,121
63,872
2,061
8
2,061
2,793
2,061
2,793
2,793
63,872
2,793
2,715
2,061
equity
trolling interests
Group AG
available for sale
2,715
2,715
-21
63,851
317,575
0
-1,603
-21
63,851
315,972
8
2,069
-6
-6
2,787
0
2,715
2,715
7,569
8
-2,441
2,875
5,128
2,883
-5,000
-1,140
-6
-6
682
122
-71
634
2
7,571
2,875
434
2,877
8,005
-1,140
-6,140
0
682
0
122
634
563
0
0
0
-4,267
-506
0
-506
-4,773
1,928
-31,740
1,148
252,982
66,249
-27
66,222
319,204
1,928
-31,740
1,148
252,982
66,249
-27
66,222
319,204
3,849
17
17
3,866
-489
-489
-4,310
0
1,991
-489
-472
1,547
-4,104
-73,278
-489
-4,576
-71,731
-6,088
-6,088
1,192
0
1,192
-590
0
-590
3,849
-3,821
-3,821
1,991
1,991
3,849
-3,821
1,991
2,019
3,849
-3,821
1,991
17
-69,174
-4,104
-67,155
-4,087
-6,088
128
-1,466
-1,466
-1,338
0
0
0
730
-7,554
0
-7,554
-6,824
5,777
-35,561
3,139
186,557
54,608
-516
54,092
240,649
VALARTIS GROUP ANNUAL REPORT 2014
| CONSOLIDATED FINANCIAL STATEMENTS | 77
CONSOLIDATED CASH FLOW STATEMENT
In CHF 1,000
2014
2013
-54,947
12,544
Net loss before taxes from discontinued operations
-17,216
-12,972
Net loss before taxes
-72,163
-428
Depreciation of property, plant and equipment
3,921
7,201
Amortisation of intangible assets
5,255
6,219
Net loss/profit before taxes from continued operations
Non-cash activities in the consolidated income statement
Adjustments on fair value of investment properties
Impairment of goodwill and intangible assets
Change in valuation adjustments and provisions
-13,360
10,605
878
Impairment of associated companies
Income from associated companies
15,308
84
-2,194
-3,406
Income from sale of participations
353
Income from financial instruments
-5,292
24,824
-6,099
Income from other assets
7,488
-4,720
Other non-cash activities
-830
2,339
Change in deferred taxes
5,475
2,800
4,273
16,203
Net (increase)/decrease in assets and liabilities of the banking business
Accrued and deferred assets
Accrued and deferred liabilities
-2,603
-5,994
Trading securities
64,725
72,590
Amounts due to clients
779,407
43,514
Amounts due from clients
-52,800
-75,662
18,367
-224,794
-523,225
-23,804
Amounts due to banks, including repurchase agreements
Amounts due from banks, including repurchase agreements
Derivative financial instruments (assets)
Derivative financial instruments (liabilities)
Other financial assets at fair value including AFS
Other assets
Other liabilities
Taxes paid
Cash flow from operating activities
Purchase of property, plant and equipment
-1,567
-937
2,982
2,646
-105,925
66,412
-22,226
3,872
6,142
-229
-1,343
-2,624
135,247
-113,589
-1,242
-2,833
Sale of property, plant and equipment
22
Acquisition of investment properties
-16
Acquisition of associated companies
-16,633
-355
-44
-43
Decrease of financial assets held to maturity
-76,717
287,651
Acquisition of subsidiaries less acquired cash
-7,152
Purchase of intangible assets
Sale of subsidiaries less corresponding cash
Cash flow from investment activities
In the Cash Flow statement there is no separation of the discontinued operations.
The cash flows of the discontinued operations are disclosed in Note 40.
78
90,009
-11,773
284,420
in CHF 1,000
2014
2013
restated 1)
Dividend payments
0
Change in treasury shares
Change in non-controlling interests in equity
Issuance of debt instruments
-5,000
1,193
641
-7,350
-501
0
12,333
Cash flow from financing activities
-6,157
7,473
Effect of foreign exchange translation differences (including non-controlling interests)
-3,252
4,646
Increase in cash and cash equivalents
114,065
182,950
Position at 1 January
1,184,323
1,001,373
Position at 31 December
1,298,388
1,184,323
Cash
792,077
736,751
Due from banks at sight/callable
506,311
447,572
Total cash and cash equivalents
1,298,388
1,184,323
Cash and cash equivalents comprise the following assets:
Whereof cash and cash equivalents from continued operations
952,160
Cash
568,607
Cash equivalents
383,553
Whereof cash and cash equivalents from discontinued operations
232,163
Cash
168,144
Cash equivalents
64,019
Dividends received
61
119
Interest received
18,254
50,775
Interest paid
-5,612
-9,902
1) See Footnote on page 78.
VALARTIS GROUP ANNUAL REPORT 2014
| CONSOLIDATED FINANCIAL STATEMENTS | 79
NOTES
83
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
115
NOTES TO THE CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
83
83
83
84
84
91
Description of Business
Accounting Principles
Changes to Accounting Policies
Approval of the Consolidated Financial Statements
Major Accounting Principles
Estimates, Assumptions and Exercise of Discretion
by Management
94
NOTES TO THE RISK MANAGEMENT
94
94
95
96
97
102
Structure of Risk Management
Risk Bearing Capacity
Market Risk
Liquidity Risk
Credit Risk
Operational Risk
115
115
116
116
117
118
118
121
123
123
124
125
126
130
140
13. Cash
14. Due from Banks and Clients
15. Valuation Adjustments for Credit Risks
16. Trading Portfolio Asset
17. Financial Assets
18. Other Financial Assets at Fair Value
19. Associated Companies
20. Property, Plant and Equipment
21. Investment Property
22. Accrued and Deferred Assets
23. Open Derivative Financial Instruments
24. Other Assets
25. Goodwill and Other Intangible Assets
26. Assets Pledged or Assigned to Secure Own
Liabilities and Assets under Reservation of Ownership
27. Lending and Repurchase Transactions
with Securities
28. Due to Clients
29. Accrued and Deferred Liabilities
30. Other Liabilities
31. Issued Debt Instruments
32. Provisions
33. Share Capital
34. Treasury Shares
35. Consolidated Statement of Financial Positions
by Currency
36. Maturity Structure of Assets, Liabilities and
Off-Balance-Sheet Items
37. Assets and Liabilities by Domestic and
Non-Domestic Positions
38. Shareholder Structure
141
ADDITIONAL INFORMATION
141
142
39. Netting Agreemements
40. Sale of Subsidiaries and
Discontinued Operations
41. Acquisition of Subsidiaries
42. Related Parties and Companies
43. Loans and Equity Holdings at Year-End
44. Business Segments
45. Fair Value of Financial Instruments
46. Major Group Companies
47. Subsidiaries with material
Non-Controlling Interests
48. Structured Entities
49. Assets under Management
50. Consolidated Off Balance Sheet Items
51. Events After the Balance Sheet Date
130
103
NOTES TO THE CAPITAL MANAGEMENT
103
103
103
103
Capital Management
Capital Adequacy
Management of equity capital
Eligible Capital and Capital Adequacy
105
NOTES TO THE CONSOLIDATED
INCOME STATEMENT
105
105
106
106
107
107
107
108
108
110
110
111
1. Income from Interest and Dividends
2. Income from Commission and Service Fees
3. Income from Trading
4. Other Ordinary Income
5. Personnel Expense
6. General Expense
7. Depreciation and Amortisation
8. Valuation Adjustments, Provisions and Losses
9. Income Taxes
10. Earnings per Share
11. Share-based payment
12. Employee Pension Plan
130
131
131
132
133
134
134
135
137
139
146
147
148
149
152
158
159
161
161
162
162
163
VALARTIS GROUP ANNUAL REPORT 2014
Auditor’s Report on the
Consolidated Financial Statements
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DESCRIPTION OF BUSINESS
Valartis Group is an internationally active banking and finance
group whose parent company, Valartis Group AG, is domiciled in
Baar, canton of Zug, Switzerland, and is listed on the SIX Swiss Exchange. As its core competence, the Group concentrates on wealth
management in the Private Clients business segment. Its Institutional Clients business covers the development, implementation,
and management of innovative niche investment products and
provides specialised banking services within corporate and structured finance. Geographically, Valartis Group operates in Switzerland, Central and Eastern Europe, the Middle East, and selected
countries in North and South America as well as Asia.
ACCOUNTING PRINCIPLES
The consolidated financial statements of Valartis Group are prepared in accordance with International Financial Reporting Standards (IFRS) and comply with the provisions of the listing regulations of the SIX Swiss Exchange. A part of Valartis Group, the
banking sub-group, Valartis Finance Holding AG, Vaduz, is now
subject to consolidated supervision by the Financial Market Authority in Liechtenstein (FMA) following divestment of Valartis
Bank AG, Zurich on 29. August 2014. Up to that date, consolidated
supervision for all of Valartis Group was undertaken by the Swiss
Financial Market Supervisory Author-ity (FINMA).
Consolidation is based on uniformly prepared separate financial
statements of the Group companies. The consolidated financial
statements are in Swiss francs (CHF).
CHANGES TO ACCOUNTING POLICIES
Implemented International Financial Reporting Standards and
interpretations
The following new, or revised, standards and interpretations have
been in effect since 1 January 2014, and had no effect, or were
without significance for the Valartis Group consolidated financial
statements on their initial application:
– IFRS 10 – Investment Entities
– IAS 32 – Offsetting of financial instruments
– IAS 39 – Novation of Derivatives and Continuation of Hedge
Accounting
– IFRIC 21 – Levies.
Standards and interpretations which have not yet been
implemented
Various new and revised IFRS and interpretations should be applied for financial years beginning after 1 January 2014. Valartis
Group has not availed itself of the possibility of early application
of these revised standards and interpretations.
IFRS 9 – Financial instruments
The finalised version of IFRS 9 was published in July 2014 and
replaces IAS 39. IFRS 9 is sub-divided into three phases: classification and evaluation, impairment and hedge accounting. The classification and evaluation of financial assets is dependent on the
instrument’s contractual payment flows and the business model
under which the instrument is held.
The following categories apply to debt instruments:
– Reporting at amortised cost using the effective interest rate
method
– Reporting at fair value, in which case changes in fair value are
reported in «other income» and transferred to the statement
of income after disposal of the instrument
– Reporting at fair value, in which case changes in fair value are
reported in the statement of income
All equity capital instruments are valued at their fair value.
Changes in fair value are always reported as affecting net income. If an equity capital instrument is not held for trading purposes, for first-time reporting it may irrevocably be classed as an
instrument which is reported at fair value, but for which all income components, with the exception of dividends, are reported
in «other income» and never – even upon disposal – transferred
to the statement of income.
IFRS 9 assumes the regulations on classification and evaluation
of financial obligations from IAS 39. However, a new regulation
has been included; the effect of changes in own credit risks in
connection with financial obligations to which the fair value option is applied, are reported in «other income».
The new impairment model primarily applies to financial assets
which are valued at amortised cost or for which changes in fair
value are reported in «other income». IFRS 9 also governs hedge
accounting, in which case, unification of risk management and
accounting is desirable.
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 83
The new standard takes effect from 1 January 2018. The previous
year need not be adjusted. Initial adjustment takes place under
equity capital on 1 January 2018. The effects on the Valartis
Group Consolidated Financial Accounts are currently being analysed.
IFRS 15 – Income from contracts with clients
In May 2014, the IASB published new regulations on revenue recognition which replace in their entirety the existing US GAAP and
IFRS regulations on reporting of revenue from sales. Revenue is
recognised to depict the transfer of goods or services to clients at
an amount which reflects the consideration to which the supplier expects to be entitled in exchange for those goods or services.
IFRS 15 comprises a five-step model for recognition of revenue,
whereby the type of transaction and industry sector are irrelevant. The standard also stipulates additional disclosures and is
applicable for financial years beginning on or after 1 January
2017, and is obligatory. The effects on the Valartis Group Consolidated Financial Accounts are currently being analysed.
IAS 1 – Disclosure initiative
Changes to IAS 1 are designed to allow waiver of disclosure of
information in notes to financial statements if the information is
not material. The changes to the standard include additional clarification on the detailed or summarised positions in the balance
sheet and consolidated income statement. The revised standard
takes effect on 1 January 2016. The effects of the new standard
on the preparation of the Group Consolidated Financial Statements is currently being analysed.
In the course of its annual revision, in December 2013, the IASB
published further revisions to various IFRS provisions which all
take effect as of 1 January 2015. After an initial analysis, it appears that these will probably not have any noticeable effect on
the Valartis Group result or equity capital, or that any effect will
be negligible.
APPROVAL OF THE CONSOLIDATED
FINANCIAL STATEMENTS
The 2014 consolidated financial statements were released by the
Board of Directors on 24 April 2015. The consolidated financial
statements are subject to the approval of the Shareholders’
Meeting on 2 June 2015.
MAJOR ACCOUNTING PRINCIPLES
Consolidation principles
Subsidiaries
The consolidated financial statements comprise the accounts of
Valartis Group AG, Baar, canton of Zug, Switzerland, and its subsidiaries as at 31 December 2014. A controlling relationship is
deemed to exist if the following conditions are met cumulatively:
Valartis Group has power over the other company; it is exposed
to variable returns from its involvement with the other company;
and it has the ability to affect the amount of those returns
through its power over the other company.
If the Group does not hold a majority of the voting rights of an
investee, it takes into account all the relevant facts and circumstances in determining whether control exists. These include,
among others, contractual arrangements with other parties
holding voting rights or rights arising from other contractual
arrangements. If the facts and circumstances indicate a change
in one or more of the three control elements, the Group will reassess whether it has control over an investee.
Consolidation of a subsidiary begins at the date the Group obtains control over that subsidiary and ceases when the Group loses control over the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the
reporting period are included on the balance sheet and in the
statement of comprehensive income from the date the Group
obtains control of the subsidiary until the date the Group ceases
to control the subsidiary. If Valartis Group loses control over a
company, any retained interest is recognised as an investment in
an associate or as a financial instrument under IAS 39.
Investments in associates and joint ventures
Group companies over which Valartis Group can exercise a significant influence are accounted for using the equity method, and
are recorded under «Associated companies». As a rule, influence
is considered significant if the Group holds between 20 per cent
and 50 per cent of the voting rights.
84
A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets
of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control. The Group’s investments in a joint venture are accounted for under «Joint ventures» in accordance with
the equity method.
The considerations made in determining significant influence or
joint control are comparable with those necessary to determine
control over subsidiaries.
The acquisition of an investment in an associated company or
a joint venture must be recognised and measured analogously to
majority ownership in accordance with IFRS 3. Accordingly, the
purchase price must be compared with the value of the investor’s
share (after revaluation) of the associated company or joint venture in order to identify any necessary adjustments and any positive or negative goodwill (bargain purchase). In contrast to IFRS 3,
however, under the equity method all adjustments and goodwill
positions are reported as a separate balance sheet item under «Associated companies» or under «Joint ventures». Any negative
goodwill positions are recognised as income under «Income from
business combinations (negative goodwill)». Subsequently, the
carrying amount of the associated company is increased or decreased depending on the Group’s share in the profit or loss for the
period of the associated company or joint venture, minus dividends received and foreign exchange translation differences.
Structured entities
The collective investment instruments of Valartis Group are
structured entities as defined under IFRS 12. If Valartis Group
operates such an investment instrument acting as an agent primarily in the interests of investors, this structured entity is not
consolidated. Investments in such investment instruments held
by Valartis Group are recognised as financial instruments. If
Valartis Group acts as principal primarily in its own interests, the
investment instrument is consolidated.
Method of consolidation
All intercompany receivables and liabilities, earnings and expenses, as well as off-balance-sheet transactions, are completely
eliminated in the Group financial statements. The equity of consolidated companies is recorded at the carrying amount of the
participations at the parent company at the time of purchase or
the time of establishment.
After the initial consolidation, changes resulting from business
operations that are included in the result for the reporting period
are allocated to retained earnings. Non-controlling interests in
equity and net profit are stated separately in the consolidated
statement of financial position and income statement.
Changes in the scope of consolidation
Holdings in Valartis Bank AG, Zurich and Valartis Wealth Management S.A., Geneva were sold on 29 August 2014.
On 30 September 2014, 100 per cent of holdings in Romsay Property Limited and Stainfield Limited, both headquartered in Cyprus,
were acquired.
On 4 October 2014, Valartis Group acquired a 25-per cent holding
in Norinvest Holding S.A., Geneva.
In addition, Valartis Financial Advisory PTE Ltd., Singapore, was liquidated in 2014. The company was no longer operative.
Consolidation period
The consolidation period for all Group companies is the calendar
year. The closing date for the consolidated financial statements is
31 December.
General principles
Currency translation
The functional currency is the Swiss franc (CHF), the currency of
the country in which Valartis Group AG is domiciled. The assets
and liabilities denominated in foreign currencies of foreign Group
companies are translated into Swiss francs at the respective
exchange rates on the balance sheet date. For the income statement and the cash flow statement, annual average exchange
rates are used. Any exchange rate differences resulting from
consolidation are reported as translation differences in equity.
In the individual financial statements of the Group companies,
transactions in foreign currencies are recognised at the corresponding daily exchange rates. Monetary assets are translated
and booked in the income statement at the exchange rates valid
on the balance sheet date. Non-monetary items recorded at historical cost in a foreign currency are translated at the historical
exchange rate.
Not realised foreign exchange differences of equity investment
– available for sale are part of the change of its entire fair value
and are recognised in the shareholders equity.
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 85
The following exchange rates are used for the major currencies:
EUR
2014
Balance sheet
date rate
2014
Annual
average rate
2013
Balance sheet
date rate
2013
Annual
average rate
1.2025
1.2145
1.2268
1.2309
USD
0.9891
0.9156
0.8903
0.9268
GBP
1.5407
1.5070
1.4726
1.4491
RUB
1.6860
2.4154
2.7098
2.9099
DZD
1.1200
1.1357
1.1400
1.1643
Segments
Valartis Group is divided into two operational business segments:
Private Clients and Institutional Clients. Reporting is based on operating locations. Certain services, consolidation items, and items
that cannot be directly allocated to a particular segment are recognised in the Corporate Center.
Cash and cash equivalents
Cash and cash equivalents in the cash flow statement consist of
liquid assets (petty cash, postal cheque balances, giro and sight
deposits with the Swiss National Bank) and at sight/immediately
callable amounts due from banks.
Accrual of earnings
Income from services is recorded when the services are provided.
Individual transactions, particularly in corporate finance, are fulfilled when the service is completed. Interest is accrued by period.
Dividends are recognised on receipt of payment.
Determination of fair value
Valartis Group measures part of the financial instruments and
the financial liabilities as well as individual non-financial assets
at fair value at each balance sheet date. Fair value is defined as
being the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an orderly arm’s length transaction.
The fair values are used either to determine the carrying amount
or for the disclosures in the notes.
All assets and liabilities that are reported at fair value or for
which the fair value is disclosed in the notes are categorised
within the fair value hierarchy, described as follows below.
Level 1 instruments
Level 1 instruments are those financial instruments whose fair
value is based on quoted prices in active markets. This category
comprises almost all equity and debt instruments held by the
Group. Investment funds for which a binding net asset value is
published at least daily, exchange-traded derivatives and precious metals are also categorised as level 1 instruments.
86
Closing prices are used for the valuation of debt instruments in
the trading book. In the case of equity instruments, listed investment funds and exchange-traded derivatives, the closing or settlement prices of the relevant exchanges are used. In the case of
unlisted investment funds, the published net asset values are
used. In the case of currencies and precious metals, generally
accepted prices are applied. No valuation adjustments are made
in the case of level 1 instruments.
Level 2 instruments
Level 2 instruments are financial instruments whose fair value is
based on quoted prices in markets that are not active. The same
categorisation is used where the fair value is determined using
a valuation method where significant inputs are observable, either directly or indirectly. This category essentially comprises forex and interest-rate derivatives as well as illiquid debt instruments and investment funds for which a binding net asset value
is not published on a daily basis.
If no active market exists, the fair value is determined on the basis of generally accepted valuation methods. If all of the significant inputs are directly observable in the market, the instrument
is deemed to be a level 2 instrument.
The valuation models take account of the relevant input such as
the contract specifications, market price of the underlying asset,
the foreign exchange rate, the corresponding yield curve, default
risks, and volatility.
The valuation of interest rate instruments for which no quoted
prices exist is carried out using generally recognised methods. For
the valuation of OTC derivatives, generally recognised option pricing models and quoted prices in markets that are not active are
used. In the case of investment funds, the published net asset values are used. The credit risk is only taken into account when market
participants would take it into account when determining prices.
Level 3 instruments
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 essentially comprise equity instruments and/
or investment funds for which a binding net asset value is not
published at least quarterly. The fair value of these positions is
based on the estimates of external experts or on audited financial statements. Where possible, the underlying assumptions are
supported by observed market quotes.
The procedure for determining the fair value of the contingent
purchase price consideration from the sale of Eastern Property
Holdings Ltd. included under «Other financial assets at fair value»
is shown in Note 45.
The Group determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation at the end
of each reporting period.
The categorisation of the financial instruments and financial liabilities in the described fair value hierarchy is shown in Note 45.
In the case of non-financial assets that are recorded at fair value
or for which a fair value must be disclosed, the information on
the determination of the fair value and the categorisation level
can be found in the corresponding notes.
Financial instruments
Basic principle
Purchases and disposals of financial instruments are recognised
in the balance sheet at the trade date. At the time of initial recognition, financial assets and liabilities are, in accordance with
IAS 39, attributed to the corresponding categories and measured
on the basis of their classification.
Valartis Group classifies financial instruments, which include
traditional financial assets and liabilities and equity instruments,
as follows:
– Trading securities and liabilities from trading
– Financial assets or financial liabilities measured at fair value
through profit and loss («Other financial assets/liabilities at
fair value»)
– Financial assets available for sale
– Financial investments held to maturity
– Loans that are neither held for trading nor designated as financial assets available-for-sale and that are not measured at fair
value in the income statement
Trading securities and liabilities from trading
Trading securities include money market papers, other debt instruments including marketable loans and equity instruments
(long positions). Liabilities from trading include obligations to
deliver financial instruments such as money market papers, and
other debt and equity instruments that the Group has sold to
third parties but do not belong to the Group (short positions).
A financial asset or liability is designated as held for trading if
the asset was bought or if the liability was entered into mainly
with the goal of a short-term sale or repurchase and if it is part
of a clearly identifiable portfolio for which there are indications
of short-term profit-taking in the recent past.
Trading securities and liabilities from trading are reported at fair
value. Profits and losses from sale or redemption and changes in
fair value are recognised under «Income from trading». Interest
and dividend income or interest and dividend expense from trading are recorded in «Income from interest and dividend business».
Financial assets available for sale
The category «Financial assets available for sale» consists of financial instruments that are held for an indefinite period. Their sale
allows management to react to liquidity squeezes respectively
movements in interest rates, exchange rates, or share prices.
These financial instruments can comprise equity instruments, including specific private equity investments, and debt instruments.
Financial assets available for sale are reported at fair value. Unrealised gains or losses from financial assets available for sale are
recognised in shareholders’ equity (after deferred taxes) under the
position «Unrealised income from financial assets available for
sale» until the financial assets are derecognised or impaired.
receivable and the prospective recoverable amount, discounted at
the effective interest rate determined in the initial recognition in
consideration of the net proceeds from the realisation of any collateral. Loans with variable interest rates are discounted at
the current effective interest rate. If there are changes with regard
to the amount and the timing of expected future cash flows compared to previous estimates, the value adjustment for credit risks
is adjusted and recognised in the income statement under «Valuation adjustments, provisions and losses».
Non-performing loans are receivables for which the contractually
agreed capital and/or payments are overdue by more than 90 days
and where there are no clear indications that they may be recovered by later payments or the sale of collateral. Interest is still
charged on non-performing loans. Loans are fixed without interest when their collectability is so doubtful that an accrual can no
longer be considered reasonable. Non-performing loans that are
classified as completely or partially unrecoverable are eliminated
and charged to a specific value adjustment if one exists. Impaired
receivables are reclassified at full value if the outstanding capital
and interest is once again paid on time according to contractual
agreements and if further credit risk requirements are fulfilled.
The recovery of loans that had previously been written down and
taken off the books is recorded in the income statement.
The existing procedures for the determination and calculation of
specific value adjustments results in a comprehensive assessment
of loans; accordingly, portfolio value adjustments are generally
unnecessary.
Realised income from loans that are sold before their maturity
or repaid early are recorded in the income statement under the
position «Interest and discount income».
Financial assets held to maturity
Financial investments held to maturity are investments with
fixed or determinable payments and a fixed maturity which the
Group has the intention and capability of holding until maturity.
Shares, participation certificates and fund units cannot be classified as financial investments held to maturity because they do
not expire. Convertible bonds also do not qualify as financial investments held to maturity because the definition of this term
does not correspond to their characteristics.
A financial asset held to maturity is recognised at amortised cost
using the effective interest rate method, unless it is impaired.
Financial investments are considered impaired if there are objective indications that the full contractually agreed amount may
not be recovered. If an impairment has been made, the carrying
amount is reduced to the recoverable amount and recognised in
VALARTIS GROUP ANNUAL REPORT 2014
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 87
the income statement. Interest and dividend income are accrued
according to the effective interest rate method and recognised in
«Income from interest and dividend».
Other financial instruments at fair value (fair value option)
On initial recognition, a financial instrument may be assigned to
the category «Other financial instruments at fair value» and recognised in the balance sheet under «Financial assets at fair value»
or «Financial liabilities at fair value». Profits and losses from sale
or redemption and changes in fair value are recognised under
«Income from trading».
In its issuing business, Valartis Group reports issued structured
products that include a debt instrument and an embedded derivative under the position «Other financial liabilities at fair value».
In accordance with the fair value option as defined in IAS 39, the
requirement to split the structured products into the underlying
contract and embedded derivative and report them separately
does not apply.
Derivative financial instruments
All derivative financial instruments are reported as positive or
negative replacement values. Derivatives that are embedded in
underlying contracts count as hybrid instruments and originate
from the issue of structured debt instruments. For these products, Valartis Group applies the fair value option; accordingly,
there is no need to separate the embedded derivative components for measurement purposes. Consequently, recognition
takes place under the positions «Financial assets at fair value» or
«Financial liabilities at fair value».
Valartis Group uses derivative financial instruments for trading
purposes. Changes in the fair value of derivatives are recognised
in the income statement under «Income from trading».
Loans
Loans include loans that the Group grants directly to a borrower,
as well as purchased loans that are not held for trading and not
traded on an active market. Granted loans that are soon to be sold
are recognised under trading securities and accordingly are measured at fair value in the income statement.
Initial measurement is at fair value, which corresponds to the cash
expended for the issue of the loans including transaction costs.
Subsequent measurement is at amortised cost less any specific
value adjustment for credit risks.
paired loans. Specific value adjustments for credit risks are recognised in the balance sheet as write-downs of the carrying amount
of the loan in question. The value adjustment is measured on the
basis of the difference between the carrying amount of the
receivable and the prospective recoverable amount, discounted at
the effective interest rate determined in the initial recognition in
consideration of the net proceeds from the realisation of any collateral. Loans with variable interest rates are discounted at
the current effective interest rate. If there are changes with regard
to the amount and the timing of expected future cash flows compared to previous estimates, the value adjustment for credit risks
is adjusted and recognised in the income statement under «Valuation adjustments, provisions and losses».
Non-performing loans are receivables for which the contractually
agreed capital and/or payments are overdue by more than 90 days
and where there are no clear indications that they may be recovered by later payments or the sale of collateral. Interest is still
charged on non-performing loans. Loans are fixed without interest when their collectability is so doubtful that an accrual can no
longer be considered reasonable. Non-performing loans that are
classified as completely or partially unrecoverable are eliminated
and charged to a specific value adjustment if one exists. Impaired
receivables are reclassified at full value if the outstanding capital
and interest is once again paid on time according to contractual
agreements and if further credit risk requirements are fulfilled.
The recovery of loans that had previously been written down and
taken off the books is recorded in the income statement.
The existing procedures for the determination and calculation of
specific value adjustments results in a comprehensive assessment
of loans; accordingly, portfolio value adjustments are generally
unnecessary.
Realised income from loans that are sold before their maturity
or repaid early are recorded in the income statement under the
position «Interest and discount income».
Securities borrowing and lending transactions
Securities borrowing and lending transactions are backed by
collateral. In such transactions, the Group lends or borrows securities against securities or cash deposits as collateral. The Group
also borrows securities from the securities portfolios of individual clients. Shares and debt instruments are used for securities
borrowing and lending operations.
Any difference between the original amount and the amount to
be repaid at maturity is amortised using the effective interest rate
method and accrued as interest and discount income.
Securities received or delivered within the scope of securities
borrowing or lending transactions are recognised or derecognised in the balance sheet only if control over the contractual
rights connected with the securities is transferred.
At each balance sheet date, a credit assessment is made to see if
there are objective indications that the contractually owed
amount may not be recovered in full. If there are such indications,
specific value adjustments for credit risks are made on these im-
In securities lending operations, the cash deposit received is recognised under «Cash» in the balance sheet and a corresponding
liability is recognised under «Cash deposits for loaned securities».
In securities borrowing transactions, the cash deposit made is
88
eliminated from the balance sheet and a corresponding receivable is recognised under «Cash deposits for borrowed securities».
Repurchase and reverse repurchase transactions
Any repurchase transactions or reverse repurchase transactions
are treated as secured financing transactions. As a rule, these
include debt securities such as bonds or money market papers.
The transactions are settled on the financial markets by means of
standardised contracts.
In reverse repurchase transactions, securities are purchased and
simultaneously resold at a fixed or open date. The purchased
securities are not recorded in the Group’s balance sheet as long as
the transferring party retains the economic rights associated
with the securities (assumption of price and credit risk, entitlement to current income and other property rights). The cash deposit paid in reverse repurchase operations is eliminated from
«Cash» and recognised in the balance sheet as a receivable under
«Reverse repurchase transactions». This receivable reflects the
Group’s right to recover the cash deposit. Securities that the
Group has received in a reverse repurchase transaction are recognised as off-balance-sheet transactions if the Group has a right to
resell or repledge the securities. Conversely, the resale of the purchased securities is recognised under «Cash» and under the balance sheet position «Trading portfolio liabilities» (short sale). The
position «Trading portfolio liabilities» is measured at fair value. In
addition to cash deposits, securities and guarantees can also be
provided as collateral. Interest income from reverse repurchase
transactions is accrued over the term of the corresponding transaction.
In repurchase transactions, securities are sold and simultaneously repurchased at a fixed or open date. The cash deposit received
in a repurchase transaction is recognised under «Cash», while the
corresponding liability to return the securities is recognised in the
balance sheet under «Cash deposits for repurchase transactions».
The sold securities are kept on the Group’s balance sheet according to their original classification as long as the economic rights
are not transferred. Securities that the Group has transferred
from its own portfolio to third parties and for which it has granted the recipient a right to resell or repledge are reclassified from
the trading portfolio to the position «Loaned securities or securities deposited as collateral». In addition to cash deposits, securities and guarantees can also be accepted as collateral. Interest
expense for repurchase transactions is accrued over the term of
the corresponding transaction.
quently, the liability is measured at the higher of the best estimate
of the expenditure required to settle the present obligation at the
reporting date and the amount recognised less cumulative amortisation.
Property, plant, and equipment
Property, plant, and equipment include properties, undeveloped
land and fixtures in third-party properties, IT and telecommunications equipment, software (including software in development)
and other fixed assets. Acquisition and production costs are carried as an asset if future economic income is likely to flow from
them to the Group and the costs can be identified and reliably determined. Property, plant, and equipment is depreciated on a
straight-line basis over the estimated useful life as follows:
Property
max. 100 years
Fixtures in third-party properties
max. 10 years
IT and telecommunications equipment
max. 5 years
Software
max. 5 years
Other fixed assets
max. 5 years
Impairment tests are performed on property, plant, and equipment if events or circumstances suggest that the carrying
amount may have been impaired. If the carrying amount exceeds
the achievable income, the carrying amount is written down.
Investment properties
Investment properties are real estate (land, premises or both),
which are held by the Group in order to generate rental income
and/or income from added value. For initial reporting, investment properties are recorded at purchase or building cost. For
later evaluation, investment properties are recorded at fair value
and changes to fair value affect net income. Fair value is evaluated based on an annual independent assessment which is based
on the highest level and best possible usage of the property. This
takes into consideration the use of the asset which is physically
possible, legally permissible and financially meaningful.
Investment properties in finance leasing
If a leasing agreement transfers the risks and rewards of an
asset, the lease is recorded as a finance lease and the related
asset is capitalised. Initially the value of the asset is posted at
the future non-discounted minimum leasing rate, and, at the
maximum, the fair value of the leased asset. For later evaluation
the fair value is posted. The corresponding obligations from
finance leasing are posted as liabilities.
Financial guarantee contracts
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder
for a loss it incurs because the specified debtor fails to make
a payment when due in accordance with the terms of a debt
instrument. Financial guarantee contracts are recognised initially
as a liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee. Subse-
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 89
Goodwill
Goodwill is measured as the difference between the sum of the
fair value of consideration transferred plus the recognised
amount of any non-controlling interests in the acquire and the
recognised amount of the identifiable assets acquired and liabilities assumed.
In accordance with IFRS 3, goodwill is carried as an asset and allocated to the corresponding cash-generating unit (CGU). It is subject to an impairment test at least annually, or more often if
there are indications of a potential decrease in value.
For this purpose, the carrying amount of the CGU to which goodwill was allocated is compared with its recoverable amount. The
recoverable amount is the higher of the fair value of the CGU less
costs to sell and its value in use.
Fair value less costs to sell is the amount that could be realised by
the sale of a CGU in a transaction at market conditions between
knowledgeable, willing parties after deduction of the sales costs.
The value in use is the present value of future cash flows a CGU is
expected to generate.
Should the carrying amount of the CGU exceed the recoverable
amount, a goodwill adjustment charge is recognised in the income statement.
Intangible assets
Intangible assets with finite useful lives
Intangible assets with finite useful lives mainly include the longterm client relationships acquired from the acquisition of a company. These assets are amortised on a straight-line basis over
a period of up to ten years. Where necessary, a valuation adjustment is recognised in the income statement in addition to the
amortisation.
to offset these differences. In order to calculate deferred income
taxes, the Group applies the tax rates expected to be applicable
in the period in which the assets will be realised or the liabilities
settled. Deferred taxes are recognised only to the extent it is likely they will arise in future. Tax claims and tax liabilities are offset
against each other if they apply to the same tax subject and the
same tax authority and if there is an enforceable right to their
offsetting. Changes in deferred taxes are reported in the income
statement under taxes. Deferred taxes related to changes that
are recognised directly in shareholders’ equity are directly
charged or credited to shareholders’ equity.
Operating leases
In the case of operating leases, the Group does not recognise
leased assets in its books because ownership rights and duties
from the object of the lease contract remain with the lessor.
Expenses for operating leases are charged to the position «General
expense» on a straight-line basis over the contractual period.
Treasury shares and derivatives on treasury shares
Shares in Valartis Group AG held by the Group («treasury shares»)
are deducted from equity at weighted average acquisition cost.
Changes in fair value are not recorded. The difference between
the sales proceeds from treasury shares and the corresponding
acquisition cost is recognised under «Capital reserves». Derivatives on treasury shares that must be settled physically qualify as
equity instruments and are recognised under «Capital reserves»
in shareholders’ equity. Changes in fair value are not recognised.
When a contract is settled, the sales proceeds after costs are
recognised under «Capital reserves» or the purchase price is recognised under «Treasury shares».
Provisions
A provision is recognised if as a result of past events the Group
has a current liability on the balance sheet date that is likely to
result in the outflow of resources, and the amount of which can
be reliably estimated. If the liability cannot be sufficiently reliably estimated, it is shown as a contingent liability.
Client assets
Client assets include all assets of private, corporate, and institutional clients managed or held for investment purposes and assets
in self-managed funds and investment companies of the Group.
They essentially comprise all amounts due to clients, fixed deposits, fiduciary deposits, and all valued assets. Client assets deposited
with third parties are also included if they are managed by a Group
company. Pure custody assets (i.e., strict clearing accounts), on the
other hand, are not included in the calculation of client assets. Double counts show those assets which are included more than once,
i.e., in multiple categories of client assets requiring disclosure.
Taxes and deferred taxes
Income taxes are based on the tax laws of each tax authority and
are expensed in the period in which the related profits are made.
Capital taxes are included in office and business expense. The effective tax rate is applied to net profit.
Employee benefits
Short-term employee benefits
Short-term employee benefit obligations are measured and recorded on an undiscounted basis as soon as the employees render
the related service and the obligation can be reliably estimated.
Deferred income taxes arising from temporal differences between the stated values of assets and liabilities in the consolidated balance sheet and their corresponding tax values are recognised as deferred tax claims or deferred tax liabilities. Deferred
taxes are capitalised if there is likely to be enough taxable profit
Pension plans
Valartis Group makes contributions for its employees to various
pension plans that provide benefits in the event of death, disability, retirement, or termination of employment. These include
both defined benefit and defined contribution plans.
90
In the case of defined benefit plans, the period costs are determined by an independent recognised actuary. The benefits provided by these plans are generally based on the years of insurance, age, and pensionable salary. The net liability or net asset for
each defined benefit plan is measured on the basis of the present
value of the pension obligations determined using the projected
unit credit method and the present value of the plan asset and
reported in the balance sheet. These calculations are carried out
annually by the actuary on the basis of the estimated future benefits based on the years of service. If the calculation shows an
overfunding, the net asset to be recorded is limited to the present value of an economic benefit.
Remeasurement resulting from actuarial gains and losses, the
effect of the asset ceiling, or the return on plan assets (excluding
net interest), are recorded in other comprehensive income with
a corresponding debit or credit to retained earnings. All expenses
related to defined benefit plans are recorded through profit and
loss as employee benefits.
Valartis Group does not exercise the option, to recognise contributions from employees or third parties as a reduction in the service cost in the period in which the related service is rendered.
Issued debt instruments
The issued debt instruments are initially recorded at acquisition
cost, i. e., at the fair value of the consideration received minus
transaction costs. The difference between the acquisition cost
and the repayment value (nominal value) will be recorded in the
income statement under interest expense over the term of the
instrument using the effective interest method.
Share-based payment
The bonus model of Valartis Group stipulates that performance-related remuneration in excess of CHF 50,000 is paid out
as follows: 50 per cent of the total bonus is paid out immediately
in cash. An additional 25 per cent is allocated in the form of
shares in the company (bonus shares) which are eligible after one
year and which are blocked for two years. The remaining portion
of the bonus of 25 per cent, also in the form of shares in the company (super bonus shares), vests after three years and is dependent on the performance of Valartis Group over this period.
The remuneration model as described basically applies to all employees in Switzerland. When implemented in other countries,
local practices and regulations are followed. In terms of the bonus shares and super bonus shares, the market-related volumes
are fixed at the time the rights to these shares are acquired and
are not adjusted for the entire length of the vesting period. By
contrast, the parameters that cannot be observed on the market
are continually reassessed during the vesting period based on
current developments. The estimated expense for the bonus
shares and super bonus shares as at the balance sheet date is
charged pro rata temporis to personnel costs and the shareholders equity for the entire vesting period.
ESTIMATES, ASSUMPTIONS, AND EXERCISE
OF DISCRETION BY MANAGEMENT
Basic principle
In applying the accounting principles, management is required to
make numerous estimates and assumptions which can influence
the disclosures made in the consolidated income statement, consolidated balance sheet and notes to the consolidated financial
statements. The actual results can deviate from these estimates.
Valartis Group is confident that the consolidated financial statements present a true and fair view of the assets, financial, and
income situation. Management reviews the estimates and assumptions on a continuous basis and adapts them to new knowledge and circumstances. This can have an effect on aspects of
the consolidated financial statements including the following:
Fair value of financial instruments
If the determination of the fair value of financial assets and liabilities is not based on quoted market prices or price quotes by brokers, the fair value is calculated by means of valuation methods,
e. g., discounted cash flow models. As far as possible, input
parameters for modelling are based on observable market data. If
there are no observable market data available, discretionary decisions and estimates are used taking into account parameters such
as liquidity risk, default risk, and volatility risk. Changes in these
estimates may have an effect on the fair value of such financial
instruments. For further details see «General principles, Determination of fair value».
Fair value of contingent purchase price consideration
Valartis Group sold its strategic stake of around 40 per cent in
Eastern Property Holdings Ltd. (EPH) on 19 December 2012.
Valartis Group received part of the sales considerations in cash in
2012. Another part is connected to the successful completion of
development projects of EPH. Due to the difficult conditions on
Russian real estate property market, it has been agreed with the
buyer of EPH's shares to change the contract (see further details
in note 18). The determination of the fair value of the deferred
contingent purchase price consideration of the EPH transaction is
still to a large extent based on a semi-annual project evaluation
based on the expected cash flows and the resultant net asset value (NAV). If these parameters change due to changes in the economic situation or new market conditions, future results may
deviate from the calculated NAV. Such deviations may impact the
valuation of the contingent purchase price consideration.
VALARTIS GROUP ANNUAL REPORT 2014
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 91
Value adjustments on credit positions
Various factors can influence the value adjustment estimates for
credit positions. These factors include changes in borrowers’ credit ratings, loan collateral valuations and the expected scale of loss.
Management determines how high the value adjustment needs
to be based on the present value of the expected future cash
flows. In order to estimate the expected cash flows, management
must make assumptions regarding the financial situation of the
counterparty and the estimated recoverable amount of collateral.
Investment properties
The fair value of investment properties was calculated by an independent, accredited surveyor. Evaluation was carried out in
accordance with the standards of the Royal Institution of Chartered Surveyors (RICS). The discounted cash flow model used in
the evaluation takes into consideration the present value of net
cash flows from a property, i.e., anticipated trends in rental income, vacancy rate, rent-free periods, other costs not borne by
tenants, maintenance costs and investment plans. The anticipated net cash flows are discounted using risk-adjusted discount
rates. Location and property–specific criteria are factored into
the discount rate.
Evaluation of the investment property held by Valartis Group in
St. Petersburg in Russia is influenced by the economic and political risks inherent in the Russian national economy. For Valartis
Group management, investments in property presuppose a long
investment horizon. By means of this approach, risks from shortterm value fluctuations can be minimised.
Goodwill and intangible assets
Among other factors, the value of goodwill and intangible assets
is largely determined by the cash flow forecasts, the discount factor (weighted average cost of capital, WACC), and long-term client
retention and AuM multiplicators (Assets under Management). All
material assumptions are disclosed in the notes to the financial
statements. The principal assumptions are listed in the notes to
the consolidated financial statements. A change in assumptions
can lead to disclosure of impairment in the subsequent year.
Provisions
Valartis Group recognises provisions for imminent threats if in the
opinion of the responsible experts the probability that losses will
occur is greater than the probability that they will not occur and
if their amount can be reliably estimated. In judging whether the
creation of a provision and its amount are reasonable, the best-possible estimates and assumptions as at the balance sheet date are
applied. If necessary, these will be adjusted to reflect new knowledge and circumstances at a later date. New knowledge may have
a significant effect on the income statement.
92
Actuarial assumptions
For the defined benefit plans, statistical assumptions have been
made to estimate future trends. These include assumptions and
estimates with regard to discount rates and expected rates of
salary increases. The actuaries also use statistical information
such as mortality tables and turnover probabilities in their actuarial calculations to determine the pension liabilities.
If these parameters change due to demographic developments,
changes in the economic situation, or new market conditions, future results may deviate significantly from the actuarial reports
and calculations. In the medium term, such deviations can have
an influence on the expenses and revenue arising from the employee pension plans.
Associated companies
Associated companies are measured using the equity method. For
the real estate property of associated companies Darsi Group, Valartis Group has a real estate valuation carried out annually by an
independent expert.
Income taxes
The current tax obligations reported as at the balance sheet date
and the current tax expenses resulting for the reporting period
are based in part on estimates and assumptions and can therefore deviate from the amounts determined in the future by the
tax authorities. Deferred taxes are calculated at the tax rates
which are expected to be applicable in the accounting period in
which the assets will be realised or the liabilities settled. Changes
in the expected tax rates and any unexpected reductions in the
value of goodwill or intangible assets can have a significant
effect on the income statement.
Restrictions on capital outflows
As at 31 December 2014, Valartis Advisory Services S.A., a wholly
owned subsidiary of Valartis Group AG, recognised receivables and
accrued and deferred assets of around CHF 3.4 million (previous
year: CHF 2.7 million) in respect of Société des Centres Commerciaux Algérie SPA (SCCA), an associated company of Valartis Group.
SCCA is domiciled in Algeria and there are legal requirements that
permit outward transfers of capital from Algeria only under certain conditions. Due to these conditions there is uncertainty with
regard to the timing of the repayment of the receivables to Valartis
Advisory Services S.A. In management’s opinion, the conditions for
the settlement of the receivables can be met by submitting the
corresponding contract documents to the Banque d’Algérie. SCCA’s
payment plan envisages the amount due being settled in instalments at the end of 2016 and the end of 2017. Management has
therefore concluded that there is no need for a valuation adjustment in respect of the amount due from SCCA.
NOTES TO THE RISK MANAGEMENT
STRUCTURE OF RISK MANAGEMENT
Overview
Accepting specific risks and managing them professionally is the
basis for the value-driven success of the Valartis Group. Accordingly, the return for accepting risks is central to risk management
and risk control.
The concept for risk management and risk control is provided by
the fundamental principles defined in the risk policy. This concept takes into account regulatory requirements and has also
been fine-tuned to take further risks into account. In particular, it
includes a breakdown of products by market liquidity, as well as
assumptions about the distribution of their market price fluctuations and the rating classification. Risk indicators are reported as
economic risk capital (ERC), which reflects the product-specific
loss potential in a stress scenario. The structure is therefore similar to the regulatory capital concept and allows various risks
across different assets classes to be directly compared, so that an
overall risk landscape – which is essential for the Valartis risk
management concept – can be presented. The ERC method has
some advantages over other risk measurement methods that are
based on a statistical analysis of the markets. For example, factors that affect the loss potential are included in the calculations
in a very transparent way. This makes it easy to interpret the
results of the risk analysis, enabling an efficient optimising of the
risks assumed with respect to the expected return.
Risk management organisation
In its role as the ultimate supervisory body, the Board of Directors is
responsible for all risks of the Group. By means of the risk policy, the
Board of Directors defines all risk activities of the Group: It is responsible for defining the annual risk budget, the formulation of
additional limits and the maximum risk tolerance (quantitatively
and qualitatively) in respect of the risk capacity of the Group. Within
the Board of Directors, the Audit Committee is focused on the specific questions regarding accounting and the management of risks.
The Group Executive Management is responsible for operational
implementation of the risk management and risk control principles
and ensures that the prescribed limits are adhered to at all times.
The management of risks is usually performed directly in connection with the business units and is based on the guidelines from
central Risk Management. Risk Controlling is responsible for independent risk assessments at Group level. This function ensures in
particular the adherence to and constant monitoring of the risk
management process based on the core elements, namely risk identification, risk measurement and assessment, risk allocation, and
risk controlling. Risk Controlling reports to the CFO/CRO of Valartis
Group.
94
Risk reporting
The reporting obligations with regard to content, responsibility,
recipients, and frequency are defined in the risk policy. The regular reporting is submitted to the Group Executive Management
and the Board of Directors. The reports contain a structured presentation of the risk indicators – risk limits and utilisation – for the
various business activities. The risk measurement and risk reporting can be hierarchically structured and remain very concise, as
the underlying ERC concept enables the risks of different business
activities to be added despite their – in some cases very different
– market characteristics. This can even be done without forfeiting the necessary accuracy or violating the applicability of the risk
measurement methods. The risk report, in combination with the
associated profitability figures, allows management to allocate
limits to business activities with a view to achieving the best possible relationship between risk and return.
RISK BEARING CAPACITY
Risk bearing capacity is the capacity of a Group to absorb losses
from realised risks without endangering its continued existence.
The risk bearing capacity depends on the capital adequacy and
the actual earning strength of the Group.
Risk appetite means the extent to which the Board of Directors is
inclined to take risks yet to stay consistent with the risk capacity
and the strategic objectives of the Group. As a part of the annual
risk budgeting process the Board of Directors determines the risk
appetite by the risk capital derives from the available equity capital of the Group as an overall limit, which is below the maximum
acceptable loss potential.
The target of the risk cover potential calculation is to ensure the
existence of the Group also in a very negative stress case. This
means that the Group keeps sufficient capital to withstand extraordinarily high losses from an unlikely extreme event while
still being able to continue their overall business operations. Consequently, not the entire available equity capital is allocated for
the economic capital requirements, but retained part of it as a
risk buffer. This is to ensure that the risk-bearing capacity is also
not at risk if, inter alia, unquantifiable risks incur which are neither covered by the regulatory nor the economical capital, as for
example business risks.
Business risks result inter alia from unexpected changes in market and environmental conditions with negative effects on earnings or equity capital. The non-recurring, exceptional factors in
2014 are mostly those business risks.
MARKET RISK
Table 1: Value at Risk (99 per cent, 1 day) of Valartis Group’s
trading portfolio assets (continued operations)
Market risk refers to the risk of a loss of value due to detrimental
changes in the market prices of interest rate products, equities,
currencies, and other equity instruments, as well as derivative
positions.
In CHF 1,000
Volume trading interest rate instruments
A specially adapted measurement method is used to report the
market risks of each business activity.
Equities
As a rule, these products are highly liquid. This means that market risks can be managed promptly, and can be reduced quickly
and efficiently if necessary. The risk measurement method used
takes this product characteristic into account. The choice of parameters is monitored with a high level of frequency on the basis
of the market conditions observed, and adjusted as required.
Less liquid products may have a longer holding period, for instance because market liquidity does not allow positions to be
built up or reduced quickly. For this reason a risk assessment is
carried out by conducting a stress scenario analysis, taking into
account a significant reduction in price at the same time as a
change in other market parameters, such as volatility or an
abrupt slump in the trading volume of the product. Correspondingly, the risk factor used in determining the economically required capital is significantly higher than for equities that have a
high level of market liquidity or for a market for traded derivatives.
2013
22'104
83'306
174
252
6'981
4'907
Equity price risk
135
240
Total
309
492
Interest rate instrument price risk
Market risks
Valartis Group’s trading positions are managed by the various
Group companies. Risk monitoring takes place centrally and decentrally to ensure compliance with risk limits both Group-wide and
locally. Trading activities are focused on fixed-income portfolios,
the hedging of certificates that have been issued, and some stock
market positions, mostly as part of market-making activities.
2014
Volume trading equities
The price risk of interest rate instruments decreased in the observation period from TCHF 252 to TCHF 174. This development is
due to a reduced volume. But comparatively the price risk is higher than in prior year. This is due to a higher volatility of interests
in general and on the Russian market in particular. A major part
of the bonds in the trading portfolio is affiliated with the Russian
market.
The drop in the equity price risk is due to changed composition
of the portfolio, which is compromise more equities with lower
risks.
Market risk: balance sheet structure
Interest rate and currency risks are caused by the balance sheet
structure, specifically in mismatches in capital commitments, interest maturities, and currencies between assets, liabilities, and
the off-balance-sheet positions.
The interest rate and currency risks arise from the deposits and
investments business of the various Group companies, and are
managed and monitored locally within the framework of limits
set out in Group guidelines. At the aggregated level, there is additional centralised management and monitoring, which ensures
that diversification effects are used cost-efficiently and Groupspecific positions are taken into account.
Interest rate instruments
The market risks of interest rate instruments are calculated by
applying to the market value of the instrument a stress factor for
the general interest rate risk and for the specific interest rate risk.
In the case of bonds not denominated in CHF, the risk contribution of forex volatility is also determined as part of determining
the forex risk. The stress factor is determined by means of a rating classification, based on ratings from different agencies as
well as internal valuation methods. This ERC used internally results in a more conservative risk assessment than is required
from the regulatory perspective.
Table 1 shows the market price risk of equities and interest rate
instruments in the trading book.
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 95
Interest rate risks
The interest rate sensitivity is shown in table 2. The table shows
the change in market value for the main currencies, both for
trading book and banking book positions, given a parallel interest
rate movement of +/-100 basis points across all maturities.
Table 2: Market risks – significant interest rate risks in the
trading and banking books
In CHF 1,000
31.12.2014
31.12.2013
+1%
-1%
+1%
CHF
-197
65
-224
60
EUR
-1'872
293
-300
474
USD
-4'424
2'768
-2'266
2'279
-109
76
-83
66
Others
-1%
The interest rate risks increased across all currencies compared
with 2013 due to bond purchases and higher loans to clients.
An interest rate increase of 100 basis points across all currencies
would entail a market value loss of around CHF 6.6 million.
Currency risks
The currency risks arising from trading book positions and financial investments are monitored and managed on an aggregated
basis. The sensitivity to a 1 per cent move in exchange rates is
shown for all currency risks in table 3. In principle, currency risks
are kept low, except in the case of certain positions in EUR and
USD for which dynamic hedging is permitted within set limits.
Table 3: Significant currency risks in the trading and
banking books
In CHF 1,000
1%
31.12.2014
Currency sensitivity
31.12.2013
Currency sensitivity
EUR
760
129
USD
238
39
RUB
82
39
DZD
43
100
Others
13
16
The greatest currency sensitivity as at 31 December 2014 is in
Euro (EUR) at TCHF 760, followed by the currency sensitivity in
US-Dollar (USD) at TCHF 238. Compared with prior year these values are higher. This is due to hedging instruments which were in
place at year end 2014 to cover currency risks during the period of
group reorganisation. After completion of the reorganisation
these instruments have been adjusted to come back to the practice described above to keep currency risks low.
In addition currency sensitivities exists in Russian rubel (RUB) of
TCHF 82, which are connected with the business activities of ENR
Group (see Note 41) and for Algerian Dinar (DZD) of TCHF 43
which are directly linked to the investments in associated company Darsi (see Note 19).
96
LIQUIDITY RISK
Liquidity risk is the risk of the Group not having sufficient liquid
funds available to meet its short-term payment obligations.
Management of liquidity risk
Operational liquidity risk management takes place decentrally at
the individual Valartis Group companies, which must in so doing
comply with the legal requirements in terms of liquidity and minimum reserves as well as the Group limits. Strategic liquidity risk
management and the consolidated monitoring of compliance
with the liquidity requirements are carried out centrally. The regular measurement of the insolvency risk is carried out on the one
hand by measuring the LCR as required by law, and on the other
hand with an analysis of ANL (Available Net Liquidity), to be interpreted as the result of the economic stress test. The strategic
liquidity risk management includes the continual monitoring of
structural liquidity, the analysis and simulation of possibilities
for generating additional liquidity, e.g., by using repo transactions, open market transactions, the potential sale of liquid assets, the restructuring of maturities on the deposit side in respect of client assets, e.g., through incentives in the form of
interest terms and other measures. The regulatory stress test in
this instance is linked to the economic stress test for the development of the regulatory and economic capital ratio, and is subject
to regular monitoring by Group Risk Controlling and Group Risk
Management.
Valartis Group seeks to continually harness new, diversified
sources of refinancing, so as to ensure availability of the required
liquidity at all times. In particular, Valartis Group maintains access to the repo market to allow it to procure liquidity quickly and
to reduce counterparty risks in financial investments.
The table “Maturity structure of assets and liabilities” (Note 36)
shows future cash flows based on the earliest contractual maturity, disregarding assumptions about the probability of individual
cash flows. In particular, the trading portfolio shows the multi-level liquidity management system that includes cash, staggered maturities on due from banks, and liquid debt instruments.
CREDIT RISK
Credit risk reflects the risk of loss arising from the failure of
a counterparty to fulfil its contractual obligations. It includes
default risks from the direct lending business, the invested bond
portfolio, concluded transactions (such as money market transactions, derivative transactions, etc.), and settlement risks.
Management of credit risks
The credit risk management is primarily focused on managing
and monitoring the collateral values, which are a result of haircuts applied to the market values, and the liquidity of the
collateral. Credit exposure must always remain within the limits
granted by Group Management and the Board of Directors, and it
is secured by collateral. The lending business by other Group
companies is limited.
The calculation of credit risk for balance sheet positions and offbalance-sheet positions in tables 4 to 8 was carried out on the
basis of the capital adequacy requirements for credit risks under
Basel II (previous year Basel III). For this reason, the figures reported in tables 4 to 8 may deviate from the balance sheet values
under IFRS. Financial instruments include financial assets held to
maturity and available for sale instruments, as well as the other
financial assets at fair value. The remaining positions that are
subject to capital charges are reported collectively under other
assets. In particular, this includes accruals and deferrals and other assets.
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 97
Table 4: Credit risk – overview of collateral
In CHF 1,000
Mortgage- Backed by collat-
Backed by
No
eral recognised
collateral not
collateral
backed
Total
under Basel II recognised under
Basel II
Loans 2014
Due from banks
Due from clients
15,145
199,253
1,305,679
1,305,679
14,459
228,857
of which mortgage loans
15,145
15,145
– Residential property
10,825
10,825
– Office and business property
1,343
1,343
– Commercial and industrial property
1,588
1,588
– Other
1,389
1,389
Financial instruments
3,866
297,232
301,098
Other assets
8,262
43,041
51,303
Derivative financial instruments
Total loans at 31 December 2014
15,145
211,381
6,832
168,628
0
1,473
1,473
1,661,884
1,888,410
1,134,578
1,134,578
25,891
201,351
Loans 2013
Due from banks
Due from clients
of which mortgage loans
6,832
6,832
– Residential property
2,101
2,101
– Office and business property
790
790
– Commercial and industrial property
1,604
1,604
– Other
2,337
Financial instruments
2,337
37,915
Other assets
Derivative financial instruments
Total loans at 31 December 2013
6,832
206,543
20
15,995
0
97,854
135,769
45,309
45,309
477
477
1,304,109
1,517,484
722
16,737
Off-balance-sheet items 2014
Contingent liabilities
Irrevocable commitments
Total off balance sheet items at 31 December 2014
0
20
15,995
18
17,237
18
17,237
0
722
16,737
1
17,256
1
17,256
Off-balance-sheet items 2013
Contingent liabilities
Irrevocable commitments
Total off balance sheet items at 31 December 2013
Table 4 shows that secured lending represents more than
90 per cent of the total due from clients. This figure is similar to
the level of prior year (87 per cent).
98
0
0
The bulk of the collateral consists of collateral recognised under
Basel II (primarily from the Lombard business).
Table 5: Credit risk – total credit risk/geographical credit risk
Switzerland
Europe 1)
Other
Total
Due from banks
314,848
954,056
36,775
1,305,679
Due from clients
In CHF 1,000
Geographical credit risk 2014
19,650
147,544
61,663
228,857
Financial instruments
6,864
178,617
115,617
301,098
Other assets
7,366
43,937
0
51,303
312
692
469
1,473
349,040
1,324,846
214,524
1,888,410
6,712
6,599
3,426
16,737
355,752
1,331,445
217,950
1,905,147
Due from banks
184,002
929,643
20,933
1,134,578
Due from clients
20,283
60,052
121,016
201,351
Financial instruments
19,274
56,826
59,669
135,769
1,545
41,892
1,872
45,309
281
80
116
477
225,385
1,088,493
203,606
1,517,484
5,276
7,938
4,042
17,256
230,661
1,096,431
207,648
1,534,740
Derivative financial instruments
Subtotal
Contingent liabilities
Irrevocable commitments
0
Total at 31 December 2014
Geographical credit risk 2013
Other assets
Derivative financial instruments
Subtotal
Contingent liabilities
Irrevocable commitments
0
Total at 31 December 2013
1) Investments in government bonds from GIIPS-countries (Greece,
Italy, Ireland, Portugal and Spain) represent only a minor part of the
total portfolio (about 1 per cent and no bonds from Greece).
Table 5 shows a concentration in Europe of due from banks and
clients as well as financial instruments. As at 31 December 2014,
foreign commitments amounted to CHF 1.5 billion, or 82 per cent
of the total lending volume.
More than 70 per cent of the lending and investments originate
from Europe (excluding Switzerland). The classification of due
from clients is based on the underlying country risk and therefore
may differ compared with an allocation based on the domicile of
the borrower.
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 99
Table 6: Credit risk – total credit risk/breakdown by counterparty
In CHF 1,000
Central banks
Banks
Public sector
Private and
entities
institutional
Other
Total
investment
clients
Breakdown by counterparty 2014
Due from banks
1,305,679
Due from clients
36
Financial instruments
Other assets
Derivative financial instruments
Subtotal
1,305,679
210,981
142,189
46,353
8,763
8,054
234
0
Contingent liabilities
1,456,901
54,407
2,527
89,544
17,840
228,857
23,012
301,098
34,486
51,303
771
468
1,473
301,296
75,806
1,888,410
14,210
16,737
Irrevocable commitments
Total at 31 December 2014
0
0
1,459,428
54,407
315,506
75,806
1,905,147
Breakdown by counterparty 2013
Due from banks
1,133,678
900
Due from clients
Financial instruments
6,283
Other assets
Derivative financial instruments
Subtotal
Contingent liabilities
15,971
201,351
33,703
12,271
46,810
36,702
135,769
394
8,434
6,208
30,273
45,309
20,705
239,529
82,946
1,517,484
246
6,283
1,134,578
185,380
1,168,021
231
3,603
477
13,653
17,256
Irrevocable commitments
Total at 31 December 2013
0
6,283
1,171,624
Table 6 shows a concentration of bank counterparties, which is
managed by a limit system on a consolidated level. This process
ensures the diversification of the counterparties themselves as
well as the counterparty domiciles. The classification of due from
100
20,705
253,182
82,946
1,534,740
clients is made based on the underlying risk and therefore may
differ compared with an allocation based on type of borrower.
Financial instruments issued by corporate entities are allocated
to the category Private and institutional investment clients.
Table 7: Credit risk – quality of assets
In CHF 1,000
AAA to AA-
A+ to BBB-
BB+ or lower
No
Book value
external
of impaired
rating
loans net
Total
Quality of assets 2014
Due from banks
271,528
Due from clients
Financial instruments
144,556
814,066
220,042
43
1,305,679
8,368
219,029
1,460
228,857
121,700
34,842
301,098
51,303
51,303
Other assets
Derivative financial instruments
Subtotal
158
46
416,242
944,180
Contingent liabilities
1,269
0
2,229
526,485
1,473
1,503
14,507
16,737
Irrevocable commitments
Total at 31 December 2014
1,888,410
0
416,242
946,409
196,147
804,064
34,689
43,863
1
5
0
540,992
1,503
1,905,147
133,832
535
1,134,578
191,973
1,845
Quality of assets 2013
Due from banks
Due from clients
Financial instruments
Other assets
Derivative financial instruments
Subtotal
7,533
1,267
246
231,083
Contingent liabilities
135,769
45,303
45,309
231
855,465
1,267
1,837
427,289
477
2,380
15,419
1,517,484
17,256
Irrevocable commitments
Total at 31 December 2013
201,351
55,950
0
231,083
857,302
Table 7 shows the quality of the assets according to the external
ratings available. Financial instruments without a rating are
mainly instruments for which there is no external rating availa-
1,267
442,708
2,380
1,534,740
ble. Amounts due from clients are allocated to the category «no
external rating».
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 101
Table 8: Credit risk: overdue loans without value adjustment, by maturity
In CHF 1,000
Less than
Between 31
Between 61
91 days
30 days
and 60 days
and 90 days
or more
588
695
Total
Overdue positions without valuation adjustment by
maturity 2014
Due from clients
of which loans and advances
0
Accrued and deferred assets
Total at 31 December 2014
1,283
0
0
0
588
695
1,283
786
786
786
786
Overdue positions without valuation adjustment by
maturity 2013
Due from clients
of which loans and advances
Accrued and deferred assets
Total at 31 December 2013
0
0
0
0
786
786
As a general rule, a loan is classified as impaired when it is more
than 90 days overdue. The Group has typically already recovered
these loans or formed provisions for such positions and therefore
such loans are not listed in table 8. Loans with a provision are
disclosed in note 14 and note 15.
OPERATIONAL RISK
Operational risk is the risk of losses due to faulty internal processes, procedures and systems, inappropriate behaviour by
employees, or external influences. The definition includes all legal risks as well as reputational risks. However, it excludes strategic risks.
Management of operational risk
The basic responsibility for operational risk is delegated directly
to the individual front and back office units in the individual
Group companies.
The identification of operational risk is therefore part of the
ongoing management activities and is performed whenever new
business activities, processes, or products are introduced, and
also at regular intervals for business activities, processes, and
products already implemented. In the case of business-critical
processes, additional key risk indicators are used.
102
Identified risks are mainly handled by the operational units within the prescribed framework. Decisions as to whether it is best to
avoid, minimise, transfer, or accept a risk are primarily based on a
cost/benefit analysis.
The ongoing monitoring of operational risk is, whenever possible,
embedded in the operational processes. Separation of functions
and a dual control principle are crucial elements in monitoring.
In addition to these activities that are carried out in the Group
companies, there is a separate process-independent monitoring
carried out by central units such as Group Compliance and Risk
Control. Special attention is paid to a target-performance comparison analysis in the identification, evaluation, and handling of
risks. The Board of Directors oversees the management of
operational risk based on standardised reporting and adhoc
information.
NOTES TO THE CAPITAL MANAGEMENT
CAPITAL MANAGEMENT
MANAGEMENT OF EQUITY CAPITAL
Capital management takes place in an active and focused manner in compliance with legal stipulations and under consideration
of internal goals and the demands of our clients and shareholders. Valartis Group strives to guarantee clients an appropriate degree of security in their banking relationship with us. In managing
our capital, we monitor the capital required to secure our banking
risks as well as available equity to support sustained Group
growth and assure creditworthiness. Forecasts on trends in capital requirements are made to support the management process.
The regulatory capital adequacy requirements and equity capital
are calculated and managed at bank level and at Valartis Finance
Holding Group level. Capital adequacy for market risks is calculated using the market risk standard approach, and for credit risks
using the Principality of Liechtenstein standard approach. Valartis Finance Holding Group weights all positions on the basis of
ratings from external rating agencies in accordance with Art. 32
para. 4 of the Liechtenstein Capital Adequacy Ordinance (ERV-FL).
Where no ratings are available, the «no rating» classification is
used to weight the concerned positions. Capital adequacy for operational risks is calculated using the basic indicator approach.
Following the restructuring which took place this past financial
year, Valartis Group is no longer subject to Swiss banking regulations and will from now on be split into a non-regulated division
and a regulated division. The newly founded Valartis Finance
Holding AG, Vaduz, is subject to the Liechtenstein Finance Market Authority (FMA). Due to the fact that, as of 31 December
2014, in the Principality of Liechtenstein capital management is
subject to the provisions of Basel II, the following tables and listings comply with those stipulations.
CAPITAL ADEQUACY
Valartis Finance Holding Group fulfils the capital adequacy requirements of Basel II. Disclosure of the required information in
accordance with the Liechtenstein Capital Adequacy Ordinance
(ERV-FL) is provided below. In accordance with Basel II, banks
have various approaches available to them for calculation of capital adequacy for credit risks, market risks and operational risks.
In order to fulfil supervisory capital adequacy regulations, Valartis Finance Holding Group applies the Liechtenstein standard approach (SA-FL) for credit risks, the standard approach for market
risks and the basic indicator approach for operational risks. For
calculation of eligible capital, goodwill and intangible assets,
amongst other things, must be deducted. The other tables containing information on capital adequacy are based on the SA-FL
approach.
ELIGIBLE CAPITAL AND CAPITAL ADEQUACY
At year-end Valartis Finance Holding had one long-term subordinated liability which fulfils requirements in accordance with Art.
18 ERV-FL. This was taken over through the acquisition of Valartis
Bank (Liechtenstein) AG, which was granted the loan by the original parent company, the Vorarlberger Landes- und Hypothekenbank AG. At end-year, at CHF 7.2 million, this is classified as Lower
Tier 2 capital, corresponding to 5 per cent of eligible core capital.
Required capital for credit risks resulting from amounts due from
banks, client loans, financial investments and derivative financial
instruments accounts for 67 per cent of required capital.
Required capital for non-counterparty-related risk amounts to
CHF 7.1 million, or 10 per cent of required capital.
Required capital for market risks amounts to CHF 12 million, or
16 per cent.
Required capital for operational risks amounts to CHF 5.6 million,
or 8 per cent.
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 103
Table 9: Capital adequacy
Method used
2014 1)
Credit risk
FL-Standard
49,569
Non-counter party risks
In CHF 1,000
Required capital
FL-Standard
7,125
Market risk
Standard
12,002
of which on interest rate instruments
Standard
925
(general and specific risk)
of which on equity instruments
Standard
161
of which on currencies and precious metals
Standard
10,908
of which on commodities
Operational risk
Total required capital
Standard
8
Basic indicator
5,550
74,246
Eligible capital
Gross core capital (equity and reserve)
of which minority interests
Other elements to be deducted from core capital
170,435
53,625
-30,472
(goodwill and non-consolidated participations)
Total eligible core capital
plus supplementary capital and additional capital
less other deductions from supplementary capital, additional capital and total capital
Total eligible capital
Ratio of eligible to required capital
BIS tier 1 capital ratio, in per cent
1) As per 31 December 2013 whole Valartis Group was subject to regulations by
FINMA. The capital adequacy figures were disclosed in prior year for the whole
Valartis Group. As per 31 December 2014 only the Subgroup of Valartis Finance
is subject to the regulations by the FMA Liechtenstein and the capital
adequacy figures are disclosed for Valartis Finance Subgroup. Due to this
reason, no figures are disclosed as a comparison to previous year.
104
139,963
7,215
-4,576
142,602
1.92
15.37%
NOTES TO THE CONSOLIDATED INCOME STATEMENT
1. INCOME FROM INTEREST AND DIVIDENDS
In CHF 1,000
2014
2013
Interest income from banking business
3,972
5,711
Interest income from client business
5,065
3,961
Interest and dividend income from the trading portfolio
3,317
4,518
Interest income from mortgage business
180
60
Interest and dividend income from financial assets available for sale
752
1,538
1,399
9,261
31
78
Interest income from financial assets held to maturity
Interest and dividend income from financial assets at fair value
Other interest income
1
4
Total interest and dividend income
14,717
25,131
Interest expense from banking business
-3,432
-5,148
Interest expense from client business
-1,373
-2,228
-260
-2
Other interest expense
Interest expense for issued debt instruments
-482
-272
-5,547
-7,650
9,170
17,481
In CHF 1,000
2014
2013
Commission income from loan business
558
650
Brokerage fees
9,317
7,907
Custody account fees
7,361
5,502
Commission on investment advice and asset management
19,764
27,753
Commission income from service fee business
14,038
12,327
Commission income from fiduciary business
521
601
Commission income from retrocession
962
805
Total interest expense
Total
2. INCOME FROM COMMISSION AND SERVICE FEES
Other commission income
9,866
9,003
Total income from commission and service fee business
62,527
64,548
Brokerage expense
-1,076
-1,161
Asset management/fund management by third parties
-6,110
-6,369
-653
-835
-6
-8
Commission expense on retrocession to third parties
-6,143
-7,901
Other commission and service fee expense
-1,329
-1,147
-15,317
-17,421
47,210
47,127
Commission expense to client intermediaries and representatives
Other securities trading expense
Total expense from commission and service fee business
Total
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 105
3. INCOME FROM TRADING
In CHF 1,000
Interest rate instruments
Securities
Currencies and precious metals
Funds
Total
2014
2013
-33,624
-6,283
-1,699
1,671
4,241
1,157
-456
-184
-31,538
-3,639
thereof trading
-10,758
492
thereof designated at fair value 1)
-20,780
-4,131
2014
2013
1) See in Note 18.
4. OTHER ORDINARY INCOME
In CHF 1,000
3,406
5,292
Income from the sale of tangible and intangible assets
Income from associates
35
19
Income from the sale of financial assets afs
24
Income from sale of financial instruments held to maturity 1)
Net income from real estate
Net result from fair value adjustment and foreign currency for investment property
investment
Finance costs investment property
Other income
Total
-160
5,212
2,489
506
-4,392
-474
520
1,831
1,608
12,700
3
-160
Income from financial assets available for sale
Interest rate instruments
Equity instruments
21
Income from the sale of financial assets available for sale
24
-160
Income from associates 2)
Share in result
3,406
5,292
Income from associates
3,406
5,292
Income from fair value adjustment and foreign exchange effect on investment property
Value adjustment on investment property including effect from foreign currency
translation
Result from foreign exchange translation of banking loan investment property
Net result from fair value adjustment and foreign currency for investment property
investment
1) For the income from sale of financial instruments held to maturity see Note 17.
2) For income from associated companies see Note 19.
106
13,361
-17,753
-4,392
0
In 2014 ENR Group acquired in a business combination transaction an investment property located in St. Petersburg, Russia (see
also Note 41). Rental income of the investment property are contractually linked to USD rates. The investment property is recognised in balance sheet at fair value, which is appraised at each
balance sheet date by an independent expert. According to IFRS
the result from exchange translation are recognised as part of
the gain or loss arising on the fair value re-measurement of the
investment property.
The credit facilities for the investment property are consisting of
a banking loan in USD. Due to this constellation, the result from
fair value adjustment and exchange difference for the investment property (total CHF 13.4 million) and the exchange difference for the banking loan (total CHF 17.8 million) are disclosed
together. These high value fluctuations were determined by the
sharp drop of Russian ruble in 4th quarter 2014.
5. PERSONNEL EXPENSE
In CHF 1,000
2014
2013
-26,994
-26,592
Social security benefits
-3,587
-3,660
Contributions to occupational pension plans
-1,644
-2,094
Salaries and bonuses
Share-based payments
-793
-746
-1,550
-1,018
-34,568
-34,110
2014
2013
Occupancy expense
-2,902
-3,068
IT and information expense
-4,928
-3,322
Office and business expense
-10,003
-7,755
-647
-3,743
-18,480
-17,888
2014
2013
Depreciation of property, plant and equipment
-2,598
-5,741
Amortisation of intangible assets
-5,255
-4,803
Total
-7,853
-10,544
Other personnel expense
Total
6. GENERAL EXPENSE
In CHF 1,000
Other general expense
Total
7. DEPRECIATION AND AMORTISATION
In CHF 1,000
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 107
8. VALUATION ADJUSTMENTS, PROVISIONS AND LOSSES
In CHF 1,000
2014
Impairments goodwill
2013
-10,600
Other impairments
Impairment reversals
Losses
Change in provisions
Total
-7,759
-122
400
3,364
-214
-392
-2,323
-1,433
-20,496
1,417
2014
2013
-2,133
-1,938
For the impairments on goodwill we refer to Note 25 and for the
changes in provisions to Note 32. The other impairments are
mainly due to receivables EPH (see also Note 24).
9. INCOME TAXES
In CHF 1,000
Current income taxes
Change in deferred taxes
1,018
2,800
-1,115
862
-54,947
12,544
Net profit from discontinued operations before tax
-17,216
-12,972
Net profit before tax
-72,163
-428
Total
Net profit from continued operations before tax
Expected income tax rate
1)
14.7%
14.7%
Expected income taxes
10,637
63
Difference between expected and actual tax rate
-3,456
689
86
1,283
Prior-year adjustments
Tax-exempted income (incl. income from investments)
92
2,399
Not activated loss carry forwards
-1,580
-1,299
Impairment on tax assets
-4,407
Non-tax-deductible expenses
-1,802
Other effects
Effective income taxes
Income tax as disclosed in the consolidated income statement
Income tax attributable to discontinued operations
1) The expected income tax rate is based on the ordinary income tax rate at the domicile of the parent company.
108
-2,515
-685
242
-1,115
862
1,269
689
-2,384
173
-1,115
862
Deferred tax
In CHF 1,000
2014
2013
Position at 1 January
6,480
6,422
Change in scope of consolidation
1,738
Development of deferred tax liabilities (net)
Discontinued operations
4,263
Changes affecting the income statement
Changes not affecting the income statement
Foreign exchange translation differences
Position at 31 December (net)
-3,312
-4,013
25
-229
-378
37
4,553
6,480
Expiry of non-capitalised tax allowances for losses
Within 1 year
From 1 to 5 years
3,351
3,351
After 5 years
16,464
2,072
Total
19,815
5,423
0
-1,554
Expiry of non-capitalised tax allowances for losses from continued operations
Reconciliation deferred taxes
Deferred tax assets
Tax loss carry forwards
5,520
147
Tax asset on Austrian corporation tax regime
7,317
8,070
Netting
-5,441
Total deferred tax assets
7,396
8,217
Deferred tax liabilities
296
2,714
Intangible assets
3,775
4,800
Property, plant and equipment and investment properties
6,120
5,520
Others
1,758
1,663
Contingent purchase consideration for Eastern Property Holdings
Netting
-5,441
Total deferred tax liabilities
11,949
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
14,697
| 109
10. EARNINGS PER SHARE
2014
2013
Net loss attributable to the shareholders of Valartis Group AG (CHF 1,000)
-69,174
-2,441
Net loss/profit from continued operations attributable to the shareholders
of Valartis Group AG, in CHF 1,000
-49,574
10,358
Net loss from discontinued operations attributable to the shareholders
of Valartis Group AG, in CHF 1,000
-19,600
-12,799
5,000,000
5,000,000
-363,507
-410,573
4,636,493
4,589,427
0
0
4,636,493
4,589,427
Earnings per share
in CHF
in CHF
Undiluted, attributable to shareholders of Valartis Group AG
-14.92
-0.53
Diluted, attributable to shareholders of Valartis Group AG
-14.92
-0.53
Undiluted, attributable to shareholders of Valartis Group AG
-10.69
2.26
Diluted, attributable to shareholders of Valartis Group AG
-10.69
2.26
Undiluted, attributable to shareholders of Valartis Group AG
-4.23
-2.79
Diluted, attributable to shareholders of Valartis Group AG
-4.23
-2.79
31.12.2014
31.12.2013
121,233
177,852
63,940
44,092
-56,568
-41,109
-7,237
-59,602
Weighted average number of shares
less weighted average number of treasury shares
Undiluted weighted average number of shares
Outstanding share options, number of shares
Diluted weighted average number of shares
Earnings per share from continued operations
Earnings per share from discontinued operations
11. SHARE-BASED PAYMENT
Number
Holdings of rights at 1 January
Allotted rights (addition)
Granted during the year (reduction)
Forfeited rights (reduction)
Reduction due to sale of entities (discontinued operations)
-47,068
Holdings of rights at 31 December
74,300
121,233
1,144
2,146
19.44
20.63
-1,754
-1,043
-793
-746
Fair value of the outstanding rights (in CHF 1,000)
1)
Average price of shares upon allotment, in CHF
In CHF 1,000
Charged as personnel expense in the year under review
of which continued operations
of which discontinued operations
-961
-297
Estimated charge to personnel expense for the remaining vesting periods
-498
-756
Maximum anticipated charge to personnel expense for the remaining vesting periods
-526
-928
1) The fair value is based on the market value of the Valartis Group AG share.
110
Content and process of determining remuneration and share
ownership programmes are described in the Remuneration Report. The presentation of the share-based payment in the annual
financial statements is explained under the accounting principles
in the «Notes to the Consolidated Financial Statements» (page 92).
12. EMPLOYEE PENSION PLAN
Although contributions are paid by the employer and employees in
the case of Swiss pension plans, they are considered to be defined
benefit plans owing to the guaranteed interest rate and the
prescribed conversion rate. The Austrian pension scheme is also a
defined benefit plan, while the Liechtenstein pension solution is a
defined contribution plan.
There are no on-balance-sheet obligations or assets for the defined contribution plan.
The most recent actuarial calculations for the defined benefit
plans were made as at 31 December 2014 with the following results across all plans:
Balance sheet items
In CHF 1,000
31.12.2014
31.12.2013
Present value of pension liabilities
25,468
14,350
Market value of plan assets
24,071
14,142
1,397
208
0
0
1,397
208
1,397
208
In CHF 1,000
2014
2013
Net liabilities/(asset) at 1 January
208
-370
Pension liabilities (+)/pension assets (–)
Impact of the limitation as per IAS 19.64 b)
Total pension liabilities (+)/pension assets (–)
whereof disclosed as other assets
whereof disclosed as other liabilities
Change in net liabilities/(assets) on the balance sheet
Defined benefit cost recognised in personnel expense
185
3,260
1,611
-3,213
Employer contributions
-479
-2,086
Paid out benefits
-104
-108
Defined benefit cost recognised in other comprehensive income
Foreign exchange (gain)/loss
-24
1
Net liabilities/(assets) at 31 December
1,397
-2,516
whereof continued operations
1,397
208
whereof discontinued operations
VALARTIS GROUP ANNUAL REPORT 2014
-2,724
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 111
Costs and remeasurement for employee pension plan in income statement and comprehensive income
In CHF 1,000
2014
2013
182
2,672
0
622
Components of pension costs in personnel expense
Annual pension costs
Plan amendments
Net interest expense/(income)
Pension costs for defined benefit plans
3
-34
185
3,260
Employer’s pension expense for defined contribution plans
1,459
1,154
Total pension costs
1,644
4,414
0
2,320
1,644
2,094
2,859
-1,657
whereof discontinued operations
Total Pensions costs recognised in personnel expense
Defined benefit cost recognised in other comprehensive income
Actuarial loss/(gain) on liabilities
Actuarial loss/(gain) on assets
-1,248
-1,556
Total remeasurements recognised in other comprehensive income
1,611
-3,213
whereof continued operations
1,611
whereof discontinued operations
-489
-2,724
Change in pension pension liabilities
In CHF 1,000
Present value of pension liabilities at 1 January
2014
2013
14,350
43,141
Annual pension costs
182
2,672
Employee contributions
272
1,322
Interest on pension liabilities
455
929
Paid in/(out benefits and vested benefits)
7,474
-4,051
Actuarial loss/(gains)
2,859
-1,657
3,161
-774
of which from adjustment to financial assumptions
of which from adjustment to demographic assumptions
of which from adjustment to experience-based assumptions
Foreign exchange loss/(gain)
Plan amendments
0
0
-302
-883
-124
86
0
622
Discontinued operations
Present value of pension liabilities at 31 December
112
-28,714
25,468
14,350
Change in pension assets
In CHF 1,000
Market value of available pension assets at 1 January
Employee contributions
Employer contributions
Paid in/(out benefits and vested benefits)
Expected return on plan assets
Actuarial (gain)/loss
Foreign exchange (gain)/loss
2014
2013
14,142
43,511
272
1,322
479
2,086
7,578
-3,942
452
963
1,248
1,556
-100
84
Discontinued operations
-31,438
Market value of available pension assets at 31 December
24,071
14,142
31.12.2014
31.12.2013
Liquidity
42.1
2.0
Main groups of the pension fund assets
Per cent
Bonds
20.2
45.0
Shares 1)
20.5
37.0
Others
17.2
16.0
31.12.2014
31.12.2013
Discount rate (Switzerland)
1.10
2.25
Discount rate (Austria)
1.90
3.00
Expected return on plan assets Switzerland
1.10
2.25
Expected return on plan assets Austria
1.90
3.00
Expected rate of salary increases Switzerland
1.50
1.50
Expected rate of salary increases Austria
2.00
2.00
Return on retirement assets Switzerland
1.10
2.25
1) There are no treasury shares of Valartis Group AG in the pension fund assets.
Actuarial assumptions
In per cent
Return on retirement assets Austria
Pension adjustments Switzerland
Pension adjustments Austria
As in previous year, the demographic assumptions (e. g. probabilities of death, disability and turnover) are based on the BVG/LLP
2010 actuarial tables. These generational tables are based on observations of large pools of insured persons in Switzerland over
several years.
n/a
n/a
0.00
0.00
1.5-2.0
1.5-2.0
The decrease in the discount rate from 2.25 per cent to 1.1 per
cent (previous year: increase from 2.0 per cent to 2.25 per cent) for
the Swiss plan has resulted in a TCHF 2,452 increase in the defined benefit obligation (previous year: reduction of TCHF 1,184).
The reduction in the discount rate from 3.0 per cent to 1.9 per
cent (previous year: reduction from 3.8 per cent to 3.0 per cent) in
the case of the Austrian plan has increased the defined benefit
obligation by TCHF 709 (previous year: increase of TCHF 410).
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 113
Estimate of contributions for the following year (continued operations)
In CHF 1,000
2014
2013
Employee contributions
276
164
Employer contributions
652
360
31.12.2014
Proportion in per cent
25,468
100
-1,485
-5.8
1,674
6.6
Sensitivity
The table below shows the change in the present value of the
defined benefit obligation if one of the key assumptions for the
actuarial calculation is reduced or increased ceteris paribus by 50
basis points.
Current actuarial calculation of the defined benefit obligation
Discount rate
Increase of 50 basis points
Reduction of 50 basis points
Salary trend
Increase of 50 basis points
Reduction of 50 basis points
114
464
1.8
-430
-1.7
NOTES TO THE CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
13. CASH
In CHF 1,000
31.12.2014
Cash balance
31.12.2013
2,375
1,683
Sight deposits with central banks
789,702
566,924
Total
792,077
568,607
31.12.2014
31.12.2013
Due from banks at sight
474,764
383,553
Due from banks, time deposits
830,958
751,118
-43
-93
1,305,679
1,134,578
14. DUE FROM BANKS AND CLIENTS
In CHF 1,000
Valuation allowances for credit risk
Total due from banks
Due from clients – secured by mortgage
Due from clients – other collateral
Due from clients – no collateral
Subtotal
Valuation adjustments for default risk
Total due from clients
VALARTIS GROUP ANNUAL REPORT 2014
|
15,145
6,832
199,253
176,861
15,919
19,504
230,317
203,197
-1,460
-1,846
228,857
201,351
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 115
15. VALUATION ADJUSTMENTS FOR CREDIT RISKS
In CHF 1,000
Position at 1 January
2014
2013
1,939
3,369
Discontinued operations
Utilisation in accordance with designated purpose
Newly formed valuation adjustments for default risks
Release of valuation adjustments for default risks
Foreign currency translation
Position at 31 December
-112
-263
-233
270
83
-447
-1,178
4
10
1,503
1,939
of which on amounts due from banks
43
93
of which on amounts due from clients
1,460
1,846
1,503
2,295
0
356
Impaired loans (net)
1,503
1,939
Specific valuation adjustments on impaired loans
1,503
1,939
Average impaired loans (gross)
1,898
3,160
31.12.2014
31.12.2013
Impaired loans
Impaired loans (gross)
Estimated realisation proceeds from collateral
16. TRADING PORTFOLIO ASSETS
In CHF 1,000
Debt instruments
Debt instruments of public sector entities
0
0
Debt instruments of financial institutions
15,024
55,390
Debt instruments of companies
Total debt instruments
7,080
27,916
22,104
83,306
6,981
4,907
6,336
18,649
35,422
106,862
2,343
7,133
Equity instruments
Total
Investment fund units
Total
Total trading portfolio assets
of which lent out trading portfolio assets
of which eligible for repo transactions at a central bank (SNB/ECB)
116
646
17. FINANCIAL ASSETS
In CHF 1,000
31.12.2014
31.12.2013
Debt instruments of public sector entities
16,370
7,718
Debt instruments of financial institutions
65,893
11,361
Debt instruments of companies
55,064
3,540
137,327
22,619
20,784
17,943
1,359
1,291
159,470
41,853
Debt instruments
Total debt instruments
Equity instruments
Total
Investment fund units
Total
Total financial assets available for sale
of which lent out
of which eligible for repo transactions at a central bank (SNB/ECB)
0
0
117,328
9,587
Debt instruments
Debt instruments of public sector entities
29,983
4,553
Debt instruments of financial institutions
76,296
28,625
Debt instruments of companies
27,587
23,996
Total debt instruments
133,867
57,174
Total financial assets held to maturity
133,867
57,174
of which lent out
of which eligible for repo transactions at a central bank (SNB/ECB)
Sale of held-to-maturity positions
In 2013, bonds in the amount of CHF 158.8 million were sold
from the part of the bond portfolio classified as «held to maturity», with CHF 5.2 million recognised in the income statement as
gain from sale of financial instruments. This sale was made because the Swiss Financial Market Supervisory Authority FINMA
imposed stricter capital adequacy requirements on Valartis
Group in 2013. The sale of the bonds was necessary for the company to continue to comply with the capital adequacy requirements as of 31 December 2013. Due to the requirement being
imposed specifically on Valartis Group (capital investments of
minority shareholders in fully consolidated group companies is to
be implemented at 31 December 2013 already and not as required by Basel III at 1 January 2019) by the supervisory authority,
the sale did not trigger a tainting event according to IFRS.
9,907
0
53,259
47,132
Since the sale of Valartis Bank AG in 2014, the sub-group Valartis
Finance is subject to the Financial Market Authority in Liechtenstein (FMA). Therefore the stricter regulation, decreed by FINMA,
is no longer in force.
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 117
18. OTHER FINANCIAL ASSETS AT FAIR VALUE
In CHF 1,000
31.12.2014
31.12.2013
Debt instruments of companies
7,732
36,640
Total
7,732
36,640
29
102
7,761
36,742
Debt instruments
Precious metals
Total
Total other financial assets at fair value
The debt instruments of companies relate primarily to the contingent purchase price considerations from the sale of Eastern
Property Holdings Ltd. (EPH) at 19 December 2012. Amounts to
be paid depend on the successful completion and sale of development projects of EPH. In the current business year 2014 a business premises and a portion of land could be sold, however to a
significantly lower price than originally calculated for the contingent purchase price considerations. The contractually agreed
deadline for a third project elapsed in 2014 without a sale having
been achieved.
Because of the difficult conditions on the Russian real estate
market, it has been agreed with the buyer of the EPH shares to
change the contract, which enfolds yet one real estate property
and one plot of land. In substance the contract will be extended
by two more years until 1 January 2019. In addition the costs to
complete and sale the real estate property will be fixed. In return
Valartis Group had to make concessions regarding the amount of
contingent considerations. In combination with the mentioned
sales of properties and the elapsed deadline a fair value adjustment of CHF 21.3 million (previous year: CHF 6.0 million) was recognised in the income from trading (see Note 3).
The new contract also includes the portion of contingent considerations which is secured by a cash-escrow account (see Note 24
other assets).
19. ASSOCIATED COMPANIES
In CHF 1,000
31.12.2014
31.12.2013
Position at 1 January
25,534
16,397
Additions
16,632
1,706
Disposals
Share in net profit
0
-3
3,406
5,292
Impairment
Reversal of impairment
Foreign exchange translation differences
Position at 31 December
-237
-52
45,335
25,534
of which Darsi Investment Ltd.
13,568
11,020
of which Société des Centres Commerciaux Algérie SPA
14,900
12,808
of which Norinvest Group
15,252
of which others
118
2,194
1,615
1,706
Norinvest Group
After the sale of Valartis Bank AG and Valartis Wealth Management S.A. to Banque Cramer & Cie S.A., Valartis Group acquired a
25-per cent holding in Norinvest Holding S.A., Geneva. Valartis
Group subscribed the new shares which have been issued by
Norinvest Holding S.A. to increase the share capital per 26 September 2014 for CHF 16.6 million.
Darsi Group
The Darsi subgroup consists of the following two companies:
Darsi Investment Ltd. and Société des Centres Commerciaux Algérie SPA (SCCA), Algiers. Via this subgroup, the Group is invested
in the «Bab Ezzouar» shopping, leisure and business centre in Algeria. As at 31 December 2014, Valartis Group held 32.4 per cent
of Darsi Investment Ltd., an investment company with its registered office in Tortola, British Virgin Islands (2013: 32.4 per cent).
Darsi Investment Ltd. in turn holds a controlling majority stake of
53.9 per cent in Société des Centres Commerciaux Algérie SPA,
the owner of the shopping centre in Algiers (2013: 53.9 per cent).
As an associated company, Darsi is accounted for in Valartis
Group’s financial statements using the equity method according
to the International Financial Reporting Standards (IFRS) at the
proportionate share of net assets. The net asset value is based
among other things on valuation assumptions regarding the real
estate of SCCA carried out by an external appraiser. Appraisals
are based on assumptions, and these by their nature entail inherent risks. It is therefore possible that the realisable value in the
event of a future disposal could deviate from these valuations.
Panariello Enterprises Ltd.
At the end of year 2013 ENR Russia Invest S.A. (ENR) closed a private equity transaction. In this transaction ENR transferred 51
per cent of Panariello Enterprises Ltd. to another investor (until
then ENR held 100 per dent). Panariello Enterprises Ltd. is recognised as an associated company since 2013.
More details to the associated companies are disclosed in the table on the next page. Panariello Enterprises Ltd. is disclosed in the
table in the column «other associated companies».
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 119
Details for associated companies
In CHF 1,000
Revenue
Income from continued operations
Other comprehensive income
Total comprehensive income
Dividends received
Norinvest Group 2)
Darsi Investment Group
Other associated companies
31.12.2014
31.12.2013
31.12.2014
31.12.2013
31.12.2014
31.12.2013
17,405
14,146
40,600
0
2,847
0
9,028
8,714
-8,166
0
-666
0
922
0
0
0
538
0
9,950
8,714
-8,166
0
-128
0
0
0
0
0
0
0
Short-term assets
10,867
11,558
1,519,670
0
1,396
2,034
Long-term assets
134,772
124,813
228,600
0
322
797
Short-term liabilities
46,757
42,980
1,681,556
0
1,001
203
Long-term liabilities
42,151
46,610
8,710
0
156
0
Shareholder’s equity at 31 December
56,731
46,781
58,004
0
561
2,628
non-controlling interests
14,900
12,808
0
0
Total shareholders' equity
(excluding non-controlling interests)
41,831
33,973
58,004
561
2,628
Share of the Group
32.44%
32.44%
25.00%
n/a
n/a
Carrying amount of participation
in Darsi Group
13,568
11,020
Carrying amount of non-controlling
interests in SCCA 1)
14,900
12,808
Total carrying amount associated
companies
28,468
23,828
Goodwill
14,501
0
0
751
276
1,288
1,339
418
1,615
1,706
Impairment
Net carrying amount
28,468
23,828
1) As Valartis Group holds 100 % of the non-controlling interests on Société des
Centres Commerciaux Algérie SPA (SCCA), this value is included in the carried
value of associated company Darsi Investment Group.
120
15,252
0
2) Since up-to-date financial information for Norinvest Group are not available
when Valartis Group prepares its consolidated financial results, estimates have
been made for the share of Valartis Group on the result of Norinvest Group
and other data disclosed for this associated group. Any differences between
these estimates and actual results will be adjusted in the Group’s 2015
consolidated financial statements when available.
20. PROPERTY, PLANT AND EQUIPMENT
In CHF 1,000
Property
Software
Total
15,741
43,207
35,208
104,048
488
0
260
1,972
-315
-226
0
-2,016
-696
Fixtures in
IT and
Other property,
third-party
telecom-
plant and
properties
munications
equipment
5,438
4,454
0
1,224
0
-4,669
Acquisition costs
Carrying amount at 31 December 2012
Investments
Divestments
Discontinued operations (Note 40)
-423
-964
-4,501
-11,882
Foreign exchange translation
differences
-47
-1
7
411
423
793
Carrying amount at 31 December 2013
722
3,346
15,314
43,618
30,967
93,967
252
262
90
638
1,242
-52
-1,124
-709
-669
-2,554
-171
0
-225
-513
-525
-1,434
499
2,474
14,642
43,195
30,411
91,221
-2,546
-4,077
-9,811
-4,531
-30,182
-51,147
Depreciation
-57
-300
-1,188
-644
-3,552
-5,741
Divestments
0
313
226
0
423
962
2,082
1,950
671
0
3,317
8,020
Investments
Divestments
Foreign exchange translation
differences
Carrying amount at 31 December 2014
Cumulative depreciation
Carrying amount at 31 December 2012
Discontinued operations (Note 40)
Foreign exchange translation
differences
Carrying amount at 31 December 2013
22
1
-5
-59
-361
-402
-499
-2,113
-10,107
-5,234
-30,355
-48,308
-637
-464
-2,597
670
2,534
Depreciation
-39
-574
-883
Divestments
53
1,123
688
Foreign exchange translation
differences
97
0
194
90
525
906
-388
-1,564
-10,108
-5,781
-29,624
-47,465
Net carrying amount at 31 December
2014
111
910
4,534
37,414
787
43,756
Net carrying amount at 31 December
2013
223
1,233
5,207
38,384
612
45,659
Carrying amount at 31 December 2014
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 121
Future liabilities from operating leases
In CHF 1,000
31.12.2014
31.12.2013
Remaining term up to 1 year
1,598
220
Remaining term from 1 to 5 years
4,568
399
Remaining term over 5 years
2,208
0
Total
8,374
619
Remaining term up to 1 year
2,745
0
Remaining term from 1 to 5 years
1,390
0
129
0
4,264
0
Future liabilities from operating leases
Future receivables from operating leases
Remaining term over 5 years
Total
Operating leases
As at 31 December 2014, there were various operating leases for
real estate and other property, plant and equipment, used for the
business activities. The most important leases have extension
options and termination clauses. The expense for operating leases is recorded in general expense, and amounts to CHF 1.7 million
(2013: CHF 2.0 million).
122
The rental income from operating leasing of about CHF 2.9 million (2013: nil) is part of other income (see Note 4) and is related
mainly to the new investment property Petrovsky Fort.
21. INVESTMENT PROPERTY
Investment Investment Properties
In CHF 1,000
Properties
Total
Financial Leasing
Buildings
Carrying amount at 31 December 2013
Change in scope of consolidation additions
0
0
0
49,649
2,398
52,047
Change in scope of consolidation disposals
Investments
16
16
Disposals
Fair value adjustments including foreign currency effects
13,361
Foreign exchange translation differences
13,361
-19,033
-724
-19,757
Carrying amount at 31 December 2014
43,993
1,674
45,667
Net carrying amount at 31 December 2014
43,993
1,674
45,667
Net carrying amount at 31 December 2013
Rental income from investment property
2,749
Maintenance and operating costs for investment properties
-534
Existence and extent of restrictions with regards to sale
At 30 September 2014 ENR Group acquired in a business combination the business premises Petrovsky Fort in St. Petersburg, Russia
(see Note 41). Rental incomes of the investment property are contractually linked to USD rates. The translation to functional cur-
rency results in significant exchange gains in 4th quarter 2014.
The fair value is appraised by an independent expert half-yearly.
Based on the input parameters of the valuation method used,
the measurement of fair value is categorised under Level 3.
22. ACCRUED AND DEFERRED ASSETS
In CHF 1,000
31.12.2014
31.12.2013
Management and performance fees
3,410
3,124
Accrued interest
4,940
4,053
Other accrued and deferred assets
Total
VALARTIS GROUP ANNUAL REPORT 2014
|
2,755
2,178
11,105
9,355
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 123
23. OPEN DERIVATIVE FINANCIAL INSTRUMENTS (TRADING INSTRUMENTS)
In CHF 1,000
Positive
Negative
replacement values
replacement values
Contract volume
Debt instruments
Forward contracts
244
Swaps
Total at 31 December 2014
0
Options (OTC)
117,713
546
14,430
790
132,143
90
117,476
90
117,476
929
1,731
106,878
0
2,945
7,878
Total at 31 December 2014
929
4,676
114,756
Forward contracts
433
770
102,719
44
44
2,393
477
814
105,112
Total at 31 December 2013
0
Currencies/precious metals
Forward contracts
Options (OTC)
Options (OTC)
Total at 31 December 2013
Equity instruments/indices
Forward contracts
Options (OTC)
Total at 31 December 2014
468
14,821
76
76
1,212
544
76
16,033
0
0
0
0
272
8,959
Forward contracts
Options (OTC)
Total at 31 December 2013
Others
Forward contracts
Options (OTC)
0
0
0
Total at 31 December 2014
0
272
8,959
Forward contracts
0
0
Options (OTC)
0
0
0
Total at 31 December 2013
0
0
0
Total open derivative financial instruments at 31 December 2014
1,473
5,814
271,891
Total open derivative financial instruments at 31 December 2013
477
904
222,588
124
24. OTHER ASSETS
In CHF 1,000
31.12.2014
Value added tax and other indirect taxes
Other receivables, including accounts receivable
Other assets
Total
Other receivables consist mainly of five parts as described below:
New in this category is a receivable of CHF 6.8 million due from
the purchaser of Valartis Bank AG and Valartis Wealth Management S.A. which constitutes the deferred divestment price (further details see Note 40).
Also included in other receivables is an advance payment of CHF
6.0 million for an investment in a real estate property by ENR
Group.
In other receivables there is a performance fee of about CHF 7.2
million (2013: CHF 7.4 million) from a successfully completed
funds sale. The performance fee is due in first semester 2015. After a deduction of CHF 2.5 million, which have to be paid to third
parties, the performance fee amounts to CHF 4.7 million (net). The
CHF 2.5 million is recognised in accrued and deferred liabilities.
31.12.2013
658
466
30,191
25,670
1,953
1,601
32,802
27,737
As at 31 December 2014, Valartis Advisory Services S.A., a wholly
owned subsidiary of Valartis Group AG, recognised receivables
and accrued/deferred assets of around CHF 3.6 million (2013:
CHF 2.8 million) in respect of Société des Centres Commerciaux
Algérie SPA (SCCA), an associated company of Valartis Group.
SCCA is domiciled in Algeria and there are legal requirements
that permit outward transfers of capital from Algeria only under
certain conditions. Due to these conditions there is an uncertainty with regard to the timing of the repayment of the receivables
to Valartis Advisory Services S.A. In the management’s opinion,
the conditions for the settlement of the receivables can be met
by submitting the corresponding contract documents to
Banque d’Algérie. SCCA’s payment plan envisages the amount
due being settled in instalments at the end of 2016 and the end
of 2017. Management has therefore concluded that there is no
need for a valuation adjustment in respect of the amount due
from SCCA.
Also part of the other receivables are contingent considerations
on cash escrow accounts of CHF 8.3 million (previous year CHF
16.7 million) from the sale of EPH. The decrease is related to an
agreement with the buyer of the EPH shares to change the sales
contract. A portion of the receivable of about CHF 6.2 million was
impaired in 2014 (see also Note 18). The remaining reduction of
EPH receivable affects third parties which bear their own risks
and rewards of their part on this receivable.
VALARTIS GROUP ANNUAL REPORT 2014
|
NOTES TO THE CONSOLIDATED INCOME STATEMENT
| 125
25. GOODWILL AND OTHER INTANGIBLE ASSETS
In CHF 1,000
Goodwill
Intangible assets
Intangible assets
with finite
with indefinite
useful lives
useful lives
59,660
5,000
Total
Acquisition costs
Carrying amount at 31 December 2012
37,076
Investments
43
43
Divestments
Discontinued operations (Note 40)
Foreign exchange translation differences
Carrying amount at 31 December 2013
Investments
101,736
0
-9,063
-12,196
-5,000
-26,259
0
76,240
167
553
28,180
48,060
3,306
44
3,350
-7
-7
Divestments
720
Foreign exchange translation differences
-1,206
-692
Carrying amount at 31 December 2014
30,280
47,405
0
77,685
-1,898
0
-31,225
0
-31,225
Cumulative amortisation/impairment
Carrying amount at 31 December 2012
Amortisation
-4,803
-4,803
Losses from impairment
0
Divestments
0
Discontinued operations (Note 40)
9,537
Foreign exchange translation differences
Carrying amount at 31 December 2013
-259
0
Amortisation
Losses from impairment
9,537
-26,750
-259
0
-5,255
-5,255
-10,600
Divestments
-10,600
7
7
Discontinued operations (Note 40)
Foreign exchange translation differences
-26,750
0
75
420
-10,525
-31,578
0
-42,103
Net carrying amount at 31 December 2014
19,755
15,827
0
35,582
Net carrying amount at 31 December 2013
28,180
21,310
0
49,490
Carrying amount at 31 December 2014
126
495
Allocation and carrying amounts of goodwill and intangible assets
As of 31 December 2014, the carrying amounts of goodwill and
intangible assets are allocated to the corresponding cash-generating units (CGUs) as follows:
2014
Goodwill
Intangible assets
Intangible assets
with finite
with indefinite
useful lives
useful lives
In CHF 1'000
Total
Approach for determining
the recoverable amount
Business segment «Private Clients»
CGU Private Banking Austria
2,759
12,163
14,922
Fair value less cost
of disposal
CGU Private Banking Liechtenstein
5,126
2,712
7,838
Fair value less cost
of disposal
Subtotal
7,885
14,875
0
22,760
Business segment «Institutional Clients»
CGU Asset Management
7,583
CGU Investment Management
1,980
CGU Petrovsky Fort
(Investment property)
2,307
7,583
952
Fair value less cost
of disposal
2,932
Value in use
2,307
Fair value less cost
of disposal
Subtotal
11,870
952
0
12,822
Total
19,755
15,827
0
35,582
The carrying amount of goodwill of CHF 19.8 million (previous
year: CHF 28.2 million) can be primarily attributed to the merger
of OZ Group with the MCT companies in 2005 as well as the acquisition of Valartis Bank (Austria) AG in 2008, the Valartis Bank
(Liechtenstein) AG in 2009 and the acquisition of Petrovsky Fort
by ENR Group in 2014.
Impairment 2014
Goodwill and intangible assets were tested for impairment on
31 December 2014. The test resulted in impairments amounting
to CHF 7.6 million for CGU’s Private Banking Austria and CHF 3.0
million for CGU Asset Management. This impairment was booked
at the expense of earnings for 2014 in continued operations.
The intangible assets with finite useful lives amounting to CHF
15.8 million (2013: CHF 21.3 million) mainly include the long-term
client relationships and networks of intermediaries gained from
the acquisition of companies.
Impairment 2013
The impairment tests carried out on the goodwill and intangible
assets of the discontinued operations indicated an impairment
requirement. As at 31 December 2013, goodwill was impaired by
CHF 9.1 million and the intangible assets by CHF 6.2 million. Of
this latter impairment, CHF 1.2 million was attributable to intangible assets with finite useful lives and CHF 5.0 million to intangible assets with indefinite useful lives.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 127
2013
Goodwill
Intangible assets
Intangible assets
with finite
with indefinite
useful lives
useful lives
in CHF 1'000
Total
Approach for determining
the recoverable amount
Business segment «Private Clients»
CGU Private Banking Austria
CGU Private Banking Liechtenstein
Subtotal
10,491
14,942
25,433
Fair value less cost
of disposal
5,126
4,415
9,541
Fair value less cost
of disposal
15,617
19,357
0
34,974
Business segment «Institutional Clients»
CGU Asset Management
CGU Investment Management
10,583
1,980
1,953
10,583
Fair value less cost
of disposal
3,933
Value in use
Subtotal
12,563
1,953
0
14,516
Total
28,180
21,310
0
49,490
Impairment testing of goodwill and intangible assets for GCU
Asset Management and Investment Management
An impairment test is performed on the cash-generating units
(CGUs) annually as of 31 December, or more frequently if there
are indications of a potential impairment. The carrying amount
of the CGU to which goodwill and intangible assets were allocated is compared with the recoverable amount. If the carrying
amount of the CGU exceeds the recoverable amount, an impairment is recognised. The impairment charges of current and previous year are described on page 127.
Key assumptions for determining fair value less costs of disposal
Valartis Group continues to determine the recoverable amount of
all CGUs, with the exception of the CGU Investment Management, based on fair value less costs of disposal. This is the amount
that could be realised from the sale of a CGU in an arm’s length
transaction at market conditions between knowledgeable and
willing parties after deduction of the costs of disposal.
In both Private Banking and Asset Management, sales prices are
typically determined on the basis of the reported equity value
plus an amount for intangible assets not included in the balance
sheet (primarily the client list and goodwill). This additional
amount is normally derived from a percentage of client assets under management, so-called AuM multipliers. Valartis Group thus
determines fair value less costs of disposal on the basis of the valuation of client assets under management using AuM multipliers,
minus costs of disposal. Valartis Group applied the following key
assumptions in this regard:
– Expected net margin: The expected net margin corresponds to
the average profitability of the asset class. For client assets
that are recognised, this refers to a net interest margin. For client assets that are not recognised, this refers to a net commission margin. In Asset Management, it refers to the net com-
128
mission margin of individual mandates. In Private Banking, the
margin applied for recognised assets was 0.3 per cent to 0.6
per cent (2013: 0.3 per cent to 0.8 per cent). For assets that are
not recognised, the margin was 0.2 per cent to 1.3 per cent
(2013: 0.2 per cent to 1.3 per cent). In Asset Management, for
mandates the margin was 0.5 per cent to 1.5 per cent (2013:
0.5 per cent to 1.5 per cent), depending on the contracts
agreed with the client. The appropriateness of these assumptions is continually monitored using back testing.
– Multiplication factor: The multiplication factor reflects how
often a potential buyer is willing to pay the expected net margin on an annual basis. Assumptions are based on management expectations and take into consideration the wording
and term of the contracts. Depending on the asset class or
mandate in question, a multiplication factor of 1.0 to 2.3 was
applied (2013: 1.1 to 2.3).
– AuM multiplier: The AuM multiplier is determined by multiplying the expected net margin by the multiplication factor. In
the 2014 financial year, depending on the asset class the AuM
multipliers for Private Banking ranged between 0.3 per cent
and 2.0 per cent (2013: 0.3 per cent to 2.0 per cent). For Asset
Management, the multipliers were between 0.8 per cent and
3.5 per cent (2013: 0.8 per cent to 3.5 per cent). The appropriateness of the AuM multipliers used was validated using market comparisons. For this, peer group analyses were conducted
with the AuM multipliers of companies with comparable business activities, these multipliers being derived from publicly
available information.
– Costs of disposal: Management uses empirical values when
calculating the expected costs of disposal. The costs derived
from comparable transactions are between CHF 0.7 million
and CHF 0.9 million (2013: CHF 0.7 million to CHF 0.9 million).
Based on the input parameters of the valuation method used,
the measurement of fair value is categorised under Level 3.
The fair values less costs of disposal determined using these AuM
multipliers are higher than the carrying amount of all CGUs, and
are shown in the table above. The sensitivity analyses carried out
showed that the carrying amounts also remain covered in the
event of possible changes to the assumptions. Management is of
the opinion that, as of the balance sheet date, no reasonable possible change in the assumptions could lead to a situation in which
the carrying amount of a CGU would exceed its recoverable
amount.
Key assumptions for determining value in use
The recoverable amount of the CGU Investment Management is
determined on the basis of calculated value in use, applying cash
flow projections and the discounted cash flow method. The CGU
Investment Management contains corporate finance services.
The cash flow projections are based on the following assumptions:
– Development of service fee business: For the cash flow projections, management has used the 2015 annual budget as well
as the three-year medium-term plan.
– Cost development: Management has projected the corresponding costs based on the actual operating expenses of the
CGU’s activities.
– Discount rate: In line with the capital asset pricing model
(CAPM), a weighted average cost of capital of 9.4 per cent is
used for discounting cash flows (2013: 8.8 per cent).
– Growth rate estimates: The approach used to determine the
key assumptions and the associated growth rates is based on
management’s knowledge and appropriate expectations of
future business development. Internal and external market information are used for this purpose. To this end, the Group
uses historical information, taking into account the current
and expected market situations. Cash flow projections outside
of the three-year period are taken into consideration by means
of a perpetual annuity. A growth rate for the perpetual annuity
is not taken into consideration given the strong dependence of
the cash flows on external factors.
sensitivity analyses showed that the carrying amounts also remain covered in the event of possible changes to the assumptions. Sensitivity analyses have been performed for the discount
rates and growth rates applied in the three-year financial plan.
These analyses did not indicate any impairment. In light of the
general market situation, however, there are some uncertainties
involved in determining the assumptions used.
Assessment of impairment for goodwill CGU Petrovsky Fort (investment property)
From the acquisition of Romsay Properties Ltd. and Stainfield Ltd.
by ENR Group at 30 September 2014 goodwill (goodwill Petrovsky Fort) of CHF 3.3 million was recognised (see also note 41).
Due to the sharp drop of Russian ruble the book value of this
goodwill decreased to CHF 2.3 million at 31 December 2014.
Mainly the goodwill is based on the structure of the three entities purchased, which hold the investment property Petrovsky
Fort. For accounting purposes, a deferred tax liability recognised
in the Russian books as the attributable fair value of Petrovsky
Fort is lower than the actual tax value. However, in reality the
deferred tax liability will only be realised if a future sale transaction involving Petrovsky Fort is structured as an asset, as opposed to a share deal. As a potential future sale transaction can
be structured via a share deal, the deferred tax liability, having
already been recognised in the consolidated accounts, will then
not materialise. As long as the book value of the deferred tax liabilities are higher than the book value of the goodwill and a potential future sales transaction can be structured via a share
deal, the goodwill will be assessed as not impaired.
It is possible that the results actually achieved may deviate from
the key assumptions and that the assumptions could be changed
in view of altered assessments of the development of relevant
markets and business. Such deviations can arise from changes to
factors such as products, client segments, the income situation,
the required type and utilisation of human resources, changes in
employee remuneration, the implementation of known or new
business initiatives and other internal or external factors. These
changes can affect the value of the CGUs and hence increase or
decrease the difference between the carrying amount and the
recoverable amount, even leading to a partial impairment of
goodwill.
The value in use determined using cash flow projections and the
discounted cash flow method was higher than the carrying
amount of the CGU Investment Management. The performed
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 129
26. ASSETS PLEDGED OR ASSIGNED TO SECURE OWN LIABILITIES AND ASSETS UNDER RESERVATION OF
OWNERSHIP
In CHF 1,000
31.12.2014
31.12.2013
Market value
Effective
commitment
Market value
Effective
commitment
Amounts due from banks and clients
5,124
5,124
8,222
8,222
Financial instruments
9,938
9,938
5,790
5,790
14,012
14,012
Other assets
46,048
46,048
Total
61,110
61,110
25,853
25,853
Intercompany loan
1)
1) An intercompany loan has assigned to secure a loan from a third party. In the
consolidation process the intragroup loan is eliminated and is therefore not
included in the consolidated assets of Valartis Group.
The assets have been pledged for lombard loans of central banks,
stock exchange security deposits, OTC contracts as well as for
liabilities to customers and banks. The transactions are carried out
at fair market conditions.
27. LENDING AND REPURCHASE TRANSACTIONS WITH SECURITIES
In CHF 1,000
31.12.2014
31.12.2013
Carrying amount of receivables from cash deposits in securities borrowing and reverse
repurchase transactions
0
0
Carrying amount of liabilities from cash deposits in securities lending and repurchase
transactions
0
0
Carrying amount of own securities loaned in securities lending transactions or delivered as collateral in securities borrowing transactions or transferred to the bank’s
ownership in repurchase transactions
0
0
of which with unlimited right to resell or repledge (recognised in trading book)
0
0
Fair value of securities loaned as collateral in securities lending transactions or borrowed in securities borrowing transactions or received through reverse repurchase
transactions with unlimited right to resell or repledge
0
0
0
0
31.12.2014
31.12.2013
Fair value of all such securities that have been resold or repledged
28. DUE TO CLIENTS
In CHF 1,000
Due to clients in the form of savings and investments
Due to clients precious metals
251
256
1,372
1,465
Other amounts due to clients
2,519,372
1,911,553
Total
2,520,995
1,913,274
130
29. ACCRUED AND DEFERRED LIABILITIES
In CHF 1,000
31.12.2014
31.12.2013
Trailer fees
6,843
3,151
Accrued salaries, bonuses and social security benefits
4,434
2,527
Other accrued and deferred liabilities
5,968
8,303
17,245
13,981
31.12.2014
31.12.2013
Value added tax and other indirect tax liabilities
1,964
1,483
Liabilities to the company pension fund 1)
1,397
208
Other liabilities including creditors
7,598
708
Liabilities from financial leasing
1,676
0
519
1,149
13,154
3,548
31.12.2014
31.12.2013
Total
30. OTHER LIABILITIES
In CHF 1,000
Other
Total
1) See Note 12, employee pension plan.
The increase of other liabilities including creditors is due to a
short term liability regarding an investment fund and a dividend
to non-controlling interests of Valartis Bank (Liechtenstein) AG,
which have been approved in December 2014 and is due in January 2015.
Details to liabilities from financial leasing
The liabilities from financial leases are paid over the contractual
period and are due at the balance sheet date listed below:
In CHF 1,000
Sum of future leasing payments (nominal value)
Up to one year
More than one and up to five years
203
812
More than five years
6,497
Total
7,512
0
Sum of future leasing payments (present value)
Up to one year
More than one and up to five years
3
15
More than five years
1,658
Total
1,676
0
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 131
31. ISSUED DEBT INSTRUMENTS
In CHF 1,000
31.12.2014
31.12.2013
Private placements
12,025
12,268
Total issued debt instruments
12,025
12,268
12,025
12,268
of which subordinated
Detailed overview of long-term debt instruments issued
2014
Year of issue Interest rate Interest rate
In CHF 1,000
Valartis Bank (Liechtenstein) AG
nominal
2013
In 2013 Valartis Bank (Liechtenstein) AG repaid the subordinated loan of CHF 20 million from its former parent company,
Vorarlberger Landes- und Hypothekenbank AG, ahead of schedule. Simultaneously with the repayment, a subordinated debt
instrument in the amount of EUR 10 million was issued via a
private placement. In respect of the issued debt securities,
there were no late payments or breaches of contract in the year
under review.
132
4%
Maturity
Currency
effective
4%
14.6. 2018
EUR
Nominal
Carrying
amount in
amount in
1,000 EUR
1'000 CHF
10,000
12,025
32. PROVISIONS
In CHF 1,000
Provision for non
payment risks
(delcredere and
Provision for
Other
other business litigation and tax
provisions
Provision for
Total according Total according to
to balance
balance
sheet 2014
sheet 2013
2,096
2,545
-9
-363
-486
953
1,370
2,323
1,433
-360
-27
-387
-1,246
0
-213
risks
risks
1,052
1,044
-354
country risks)
Position at 1 January
0
Utilised/released in accordance
with designated purpose
Newly formed and charged to
income statement
Released and credited to income
statement
0
Discontinued operations (Note 40)
Foreign exchange translation
differences
Position at 31 December
0
-23
47
1,268
2,425
1,268
2,425
0
24
63
3,693
2,096
3,693
2,096
Maturity of the provisions
Within one year
More than one year
In comparison with the previous year at CHF 2.1 million, provisions have risen by CHF 1.6 million to CHF 3.7 million.
The increase in provisions for other business risks can largely be
attributed to claims from a bankruptcy case dating from a long
way back and which were only declared in 2014. These claims
relate to Valartis Bank Austria AG client relationships from 2005
(previous to belonging to Valartis Group). Further provisions
were established to cover water damage to the bank’s premises
in Vienna.
The amount of the provisions and their timing are by their nature
subject to uncertainty. However, these uncertainties are evaluated as being low since it was possible to reliably estimate the individual amounts and the majority of the recognised provisions
will probably become due within one year.
In 2014 there were no contingent liabilities as set down in IAS 37
(2013: nil).
As part of its normal business activities, Valartis Group is exposed to a wide range of legal risks. These include in particular
risks relating to litigation and tax law. Valartis Group recognises
provisions for such litigation and tax risks if the Group’s management and its legal advisers are of the opinion that an outflow of
resources embodying economic benefits is probable and a reliable estimate can be made of the amount. The provision of TCHF
2,425 as at 31 December 2014 relates to around 50% each of litigation and tax risks.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 133
33. SHARE CAPITAL
In CHF
31.12.2014
31.12.2013
Share capital, fully paid-in
5,000,000
5,000,000
Number of bearer shares
5,000,000
5,000,000
Nominal value per share
1
1
40.2
55.1
2014
2013
406,040
434,567
24,699
41,618
Equity per share (attributable to shareholders of Valartis Group AG,
before appropriation of profit)
For the financial year 2014, the Board of Directors propose to
the shareholder’s meeting to pay no dividend (previous year: no
dividend).
34. TREASURY SHARES
Number
Position at 1 January
Purchases
Sales
-75,014
-70,145
Position at 31 December
355,725
406,040
In 2014 24'699 shares were bought at CHF 19.64 each, while
75,014 shares with a historical average price of CHF 21.80 were
sold at an average price of CHF 22.37 each. In 2013, 41'618 shares
were bought at CHF 19.25 each and 70'145 shares were
134
sold at CHF 21.90 each. As at the balance sheet date, Valartis
Group had 355'725 treasury shares at a weighted average acquisition price of CHF 21.65 per share.
35. CONSOLIDATED STATEMENT OF FINANCIAL POSITION BY CURRENCY
2014
CHF
EUR
USD
Others
In CHF 1,000
Total
Currencies
Assets
Cash
115,387
676,375
209
106
792,077
Due from banks
78,614
209,443
844,330
173,292
1,305,679
Due from clients
34,853
62,963
88,844
42,197
228,857
8,070
8,586
18,709
57
35,422
Financial assets available for sale
22,189
116,697
20,584
Financial assets held to maturity
10,504
32,927
89,211
29
7,732
Associated companies
15,252
1,615
Property, plant and equipment
42,712
893
Trading portfolio assets
Other assets at fair value
Investment Property
Accrued and deferred assets
Derivative financial instruments
Other assets
Goodwill and other intangible assets
Deferred tax claims
159,470
1,225
133,867
28,468
45,335
7,761
150
43,755
43,993
1,674
45,667
4,864
3,303
2,625
313
11,105
490
52
900
31
1,473
8,698
9,301
8,361
18,353
14,922
6,442
32,802
2,307
35,582
79
7,317
360,065
1,144,423
1,125,498
256,262
2,886,248
14,924
20,021
32,400
9,758
77,103
374,989
1,164,444
1,157,898
266,020
2,963,351
Due to banks
15,827
8,120
32,808
1,594
58,349
Due to clients
192,269
1,064,638
1,058,990
205,098
2,520,995
1,403
592
844
2,975
5,814
On-balance-sheet assets
Claims arising from forex spot and forward trans.
Total at 31 December 2014
7,396
Liabilities and shareholders' equity
Derivative financial instruments
Taxes
Accrued and deferred liabilities
Other liabilities
2,312
63
10,320
5,084
590
1,251
17,245
6,015
44
2,229
13,154
4,866
Issued debt instruments
12,025
Provisions
1,400
2,293
Deferred tax liabilities
2,933
8,182
Shareholders' equity
240,649
On-balance-sheet liabilities
471,979
Obli. arising from forex spot and forward trans.
Total at 31 December 2014
Net position per currency 31 December 2014
2,375
12,025
3,693
834
11,949
213,981
2,886,248
240,649
1,107,012
1,093,276
14,908
20,018
32,388
9,758
77,072
486,887
1,127,030
1,125,664
223,739
2,963,320
-111,898
37,414
32,234
42,281
31
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 135
2013
CHF
EUR
USD
Others
In CHF 1,000
Total
Currencies
Assets
Cash
114,841
453,624
120
22
568,607
29,857
195,512
770,864
138,345
1,134,578
Due from clients
30,725
55,245
73,983
41,398
201,351
Trading portfolio assets
27,450
6,092
72,990
330
106,862
Financial assets available for sale
19,343
13,532
8,978
41,853
Financial assets held to maturity
6,251
43,860
7,063
57,174
102
36,640
Due from banks
Other assets at fair value
Associated companies
Property, plant and equipment
Accrued and deferred assets
Derivative financial instruments
Other assets
Goodwill and other intangible assets
Deferred tax claims
On-balance-sheet assets
1,706
36,742
23,828
25,534
21,567
23,798
294
45,659
4,402
2,153
2,613
187
9,355
10
161
169
137
477
403
10,267
16,742
325
27,737
24,056
25,433
1
49,490
204,867
2,313,636
78
8,139
278,983
839,624
8,217
990,162
Assets classified as held for sale
712,995
Total Assets
Claims arising from forex spot and forward trans.
Total at 31 December 2013
3,026,631
3,522
7,205
16,543
15,221
42,491
282,505
846,829
1,006,705
220,088
3,069,122
Liabilities and shareholders' equity
Due to banks
740
24,883
3,853
29,476
Due to clients
134,079
707,392
898,264
173,539
1,913,274
465
5
101
333
904
5
1,647
13,981
Derivative financial instruments
Taxes
1,642
Accrued and deferred liabilities
7,247
6,240
83
411
Other liabilities
1,197
2,249
53
49
Issued debt instruments
Provisions
Deferred tax liabilities
12,268
999
1,070
27
2,096
1,135
10,402
3,160
14,697
764,509
901,688
Shareholders' equity
319,204
On-balance-sheet liabilities
466,708
319,204
178,190
Liabilities classified as held for sale
2,311,095
715,536
Total Liabilities
Obli. arising from forex spot and forward trans.
3,548
12,268
3,026,631
3,520
7,203
16,527
15,219
42,469
Total 31 December 2013
470,228
771,712
918,215
193,409
3,069,100
Net position per currency 31 December 2013
-187,723
75,117
88,490
26,679
2,563
136
36. MATURITY STRUCTURE OF ASSETS, LIABILITIES AND OFF-BALANCE-SHEET ITEMS
2014
Demand
In CHF 1,000
Subject
Due within
Due within
Due within
Due after
to notice
3 months
3 to 12
1 to 5 years
5 years
Total
months
Assets
Cash
792,077
Due from banks
474,721
Due from clients
90,477
Trading portfolio assets
35,422
Financial assets available for sale
4,621
792,077
31,589
Associated companies
434,139
21,538
21,302
1,305,679
56,132
793
21,729
69,750
61,832
16,220
31,240
86,407
29
2,834
Investment Property
3,961
Derivative financial instruments
Other assets
Total at 31 December 2014
2,596
32,399
159,470
133,867
7,761
16,867
45,335
40,921
43,755
45,667
45,667
3,276
3,448
420
11,105
100
65
1,473
6,675
15,882
7,649
5,326
10,501
19,755
35,582
254
7,125
7,396
17
1,432,372
228,857
1,308
Goodwill and other intangible assets
Deferred tax claims
745
7,732
28,468
Property, plant and equipment
Accrued and deferred assets
39,408
35,422
Financial assets held to maturity
Other financial assets at fair value
365,230
32,802
435,976
581,187
233,826
170,488
2,886,248
32,084
20,706
360
200
58,349
47,862
29,827
28,661
1,590
2,520,995
2,607
3,172
35
151
Liabilities
Due to banks
4,999
Due to clients
2,409,571
3,484
Derivative financial instruments
Taxes
2,151
16
57
Accrued and deferred liabilities
8,032
1,711
7,502
Other liabilities
7,736
719
1,436
Issued debt instruments
2,375
17,245
1,587
1,676
12,025
Provisions
1,102
Deferred tax liabilities
2,078
Total at 31 December 2014
5,814
13,154
12,025
2,591
3,693
4
4
344
9,519
11,949
2,435,669
3,484
85,003
65,295
43,163
12,985
2,645,599
7,134
7,121
159
495
445
1,383
16,737
7,134
7,121
159
495
445
1,383
16,737
Off-balance sheet items
Contingent liabilities
Irrevocable commitments
Total at 31 December 2014
0
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 137
2013
Demand
In CHF 1,000
Subject
Due within
Due within
Due within
Due after
to notice
3 months
3 to 12
1 to 5 years
5 years
Total
months
Assets
Cash
568,607
Due from banks
371,609
Due from clients
102,098
Trading portfolio assets
106,862
Financial assets available for sale
17,722
568,607
11,850
Associated companies
357,280
18,842
23,208
737
1,357
20,134
4,918
18,705
33,551
102
5,172
1,735
1,361
180
736
41,853
57,174
36,742
1,705
25,534
335
5,239
40,085
45,659
1,895
916
11
9,355
460
17
24,236
1,119
149
27,737
1,346
17,769
30,375
49,490
873
2,581
4,763
8,217
146,521
106,455
2,313,636
Deferred tax claims
1,197,736
201,351
318
Goodwill and other intangible assets
Total at 31 December 2013
28,631
36,640
23,829
Derivative financial instruments
Other assets
28,572
1,167
Property, plant and equipment
Accrued and deferred assets
1,134,578
106,862
Financial assets held to maturity
Other financial assets at fair value
393,839
477
12,767
420,905
429,252
24,956
411
200
29,476
5,719
64,070
26,226
15,110
2,174
1,913,274
Liabilities
Due to banks
3,909
Due to clients
1,799,975
Derivative financial instruments
889
15
904
1,517
129
1
1,647
Accrued and deferred liabilities
7,134
2,208
4,639
Other liabilities
2,547
148
601
Taxes
Issued debt instruments
Provisions
Deferred tax liabilities
Total at 31 December 2013
13,981
41
211
12,268
226
12,268
1,870
4,820
3,548
2,096
1
144
3,741
5,991
14,697
1,820,128
5,719
67,445
58,452
31,571
8,576
1,991,891
8,396
5,636
900
368
453
1,503
17,256
Off-balance sheet items
Contingent liabilities
Irrevocable commitments
Total at 31 December 2013
138
0
8,396
5,636
900
368
453
1,503
17,256
37. ASSETS AND LIABILITIES BY DOMESTIC AND NON-DOMESTIC POSITIONS
In CHF 1,000
Domestic
Non-domestic
Total
Cash
115,329
676,748
792,077
Due from banks
314,848
990,831
1,305,679
Due from clients
19,640
209,217
228,857
Assets
Trading portfolio assets
Financial assets available for sale
2,059
33,363
35,422
20,568
138,902
159,470
133,867
133,867
7,761
7,761
Financial assets held to maturity
Other financial assets at fair value
Associated companies
Property, plant and equipment
15,252
30,083
45,335
180
43,575
43,755
45,667
45,667
10,565
11,105
Investment Porperty
Accrued and deferred assets
Derivative financial instruments
Other assets
Goodwill and other intangible assets
Deferred tax claims
Total at 31 December 2014
540
781
692
1,473
6,811
25,991
32,802
10,515
25,067
35,582
79
7,317
7,396
506,602
2,379,646
2,886,248
Assets classified as held for sale
0
Total assets at 31. December 2014
Total at 31 December 2013
2,886,248
1,129,724
1,896,907
3,026,631
Liabilities and shareholders' equity
Due to banks
20,033
38,316
58,349
Due to clients
74,449
2,446,546
2,520,995
2,629
3,185
5,814
169
2,206
2,375
Derivative financial instruments
Taxes
Accrued and deferred liabilities
Other liabilities
3,426
13,819
17,245
916
12,238
13,154
Issued debt instruments
Provisions
Deferred tax liabilities
12,025
12,025
1,200
2,493
3,693
53
11,896
Shareholders' equity
240,649
Total at 31 December 2014
343,524
2,542,724
Liabilities classified as held for sale
2,886,248
0
Total liabilities at 31. December 2014
Total at 31 December 2013
11,949
240,649
2,886,248
1,073,412
1,953,219
3,026,631
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 139
38. SHAREHOLDER STRUCTURE
In per cent
MCG Holding S.A., Baar ZG
31.12.2014
31.12.2013
50.2
50.2
INTEGRAL Stiftung für die berufliche Vorsorge, Thusis GR
5.1
5.1
Gustav Stenbolt and Philipp LeibundGut
0.9
0.6
Kreissparkasse Biberach, Biberach, Germany
1)
3.0
1) Since 3rd September 2014 the participation is lower than 3 Percent.
The share capital consists of bearer shares. The owners of the
shares are only known to Valartis Group if they either individually or collectively exceed the threshold and report according to
the Stock Exchange Act.
The beneficial owners of MCG Holding S.A. are Gustav Stenbolt,
Geneva, Tidesea Ltd., Baar (100 per cent controlled by Gustav
Stenbolt, Geneva), Philipp LeibundGut, Zurich, Pierre Michel Houmard, Geneva, and Tudor Private Portfolio LLC, Greenwich, USA.
The following are deemed to be holders of qualified participations : a) Gustav Stenbolt, who holds 73.6 per cent of the voting
rights (65.4 per cent of the share capital) of MCG Holding S.A.
(partly held through Tidesea Ltd., Baar), b) Philipp LeibundGut,
who holds 14.3 per cent of the voting rights (18.7 per cent of the
share capital) of MCG Holding S.A., and c) Tudor Private Portfolio
LLC, Greenwich, USA, which holds 11.8 per cent of the voting
rights (15.4 per cent of the share capital) of MCG Holding S.A.
140
Tudor Private Portfolio LLC is wholly controlled by Tudor Group
Holdings LLC, Greenwich, USA, which is in turn controlled by Paul
Tudor Jones of Greenwich, USA. Pierre Michel Houmard holds 0.3
per cent of the voting rights (0.5 per cent of the share capital) of
MCG Holding S.A.
The shares held directly by Gustav Stenbolt and Philipp LeibundGut as at 31 December 2014, originate from the bonus plans for
the Group Executive Management and employees which are
managed by Valartis.
ADDITIONAL INFORMATION
39. NETTING AGREEMENTS
To reduce credit risks related to derivative contracts, repurchase
and reverse-repurchase agreements and securities lending and
borrowing agreements, the Valartis Group enters into master netting agreements or similar netting arrangements with its counterparties. These netting agreements include derivatives clearing
agreements e. g. ISDA Master Netting Agreements and derivatives
market rules.
stances that result in a counterparty being unable to meet its obligations. In such cases, the netting agreements provide for the
immediate net settlement of all financial instruments covered by
the agreement. The right to off-set essentially only becomes enforceable following a default event or other circumstances not
expected to arise in the normal course of business. The financial
instruments covered by a netting agreement do therefore not
meet the requirements for balance sheet off-setting, which is why
the book values of the corresponding financial instruments are
not off-set on the balance sheet.
The netting agreements enable Valartis Group to protect itself
against loss in the event of a possible insolvency or other circumFinancial assets with netting agreements
in CHF 1,000
Amount before
Balance sheet
balance sheet
off-setting
Book value
1,473
Total 31 December 2014
1,473
Derivative financial instruments
477
Total 31 December 2013
477
Collateral
received
Net exposure
not off-set
off-setting
Derivative financial instruments
Financial
instruments
0
0
1,473
970
1,473
970
477
455
477
455
503
0
503
22
0
22
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 141
Financial liabilities with netting agreements
in CHF 1,000
Amount before
Balance sheet
balance sheet
off-setting
Book value
2,869
Total 31 December 2014
2,869
Derivative financial instruments
904
Total 31 December 2013
904
Collateral provided
Net exposure
not off-set
off-setting
Derivative financial instruments
Financial
instruments
0
0
2,869
970
1,139
760
2,869
970
1,139
760
904
455
359
90
904
455
359
90
40. SALE OF SUBSIDIARIES AND DISCONTINUED OPERATIONS
As part of the strategic realignment of the business model and
structural streamlining, the Board of Directors of Valartis Group
AG decided on 26 August 2013 to divest Valartis Bank AG, Switzerland. This decision was then subsequently communicated.
There were already indications in the first half of 2013 that despite the realigned front organisation, it would not be possible to
improve the ability of Valartis Bank AG, Switzerland, to acquire
clients to the planned extent, and that the bank would also be
unable to achieve the necessary critical volume in the foreseeable future.
Valartis Bank AG, Switzerland, and Valartis Wealth Management
S.A. are thus classified as discontinued operations since 31 December 2013.
On 16 May 2014, Valartis Group announced that Valartis Bank
AG, Switzerland and Valartis Wealth Management S.A. were to
be sold to Banque Cramer & Cie S.A., a wholly owned subsidiary
of Norinvest Holding S.A.
The sale was closed on 29 August 2014. Valartis Group took over
a holding of 25 percent in Norinvest Holding S.A.
142
In accordance with IFRS 5, Valartis Bank AG, Switzerland and Valartis Wealth Management S.A. are classified as discontinued operations up to 29 August 2014. Income from the divested units is
included in the income statement under income from discontinued operations.
Details for the disposal of Valartis Bank AG and Valartis Wealth Management S.A. per 29 August 2014
In CHF 1'000
29.8.2014
Balance sheet at closing date
Cash and due from banks
496,874
Due from clients
443,523
Trading portfolio assets
28,794
Property, plant and equipment
1,941
Derivative financial instruments
2,279
Accrued and deferred assets including other assets
4,687
Due to banks
-33,412
Due to clients
-837,709
Derivative financial instruments
-5,504
Accrued and deferred liabilities including other liabilities
-7,033
Provisions
-1,653
Net assets sold
92,787
Income from sale of subsidiaries
-382
Sales price
92,405
whereof in cash and cash equivalents
86,295
whereof as contingent considerations
6,110
Total sales price
Cash and cash equivalents disposed of
Net inflow of funds
Significant sales contract clauses
A receivable due from Banque Cramer & Cie S.A. of CHF 6.8 million and a payable of CHF 0.7 million are recognised in the balance sheet at 31 December 2014 as contingent considerations.
Banque Cramer & Cie S.A. will transfer the deferred divestment
price in the form of timed payments to the escrow account until
this reaches the sum of CHF 5 million. The remaining sum of CHF
1.8 million will then be transferred directly to Valartis Group. The
timing of the payments is calculated according to the fictitious
maturity of the HTM portfolio sold by Valartis Bank AG in 2013.
Payments totalling CHF 6.8 million will take place over the period
2014 to 2020.
92,405
-2,396
90,009
The escrow account of max CHF 5 million serves as security for
the purchaser for the guarantuees granted by Valartis Group in
the sales contract.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 143
Results of discontinued operations
In CHF 1,000
2014
2013
14,535
33,684
Administrative expense
-28,787
-27,745
Gross income
-14,252
5,939
-1,323
-2,876
Income statement of discontinued operations
Operating income
Depreciation/amortisation of property, plant and equipment
and intangible assets
Impairment loss recognised on the remeasurement to
fair value less costs to disposal
Valuation adjustments, provisions and losses
Net loss/profit from discontinued operations before tax
Income taxes
Net loss/profit from discontinued operations
-15,308
-1,641
-727
-17,216
-12,972
-2,384
173
-19,600
-12,799
Other comprehensive income of discontinued operations
Unrealised gains/losses from financial assets available for sale
219
Deferred taxes on unrealised gains/losses from financial assets available for sale
-44
Employee participation plan
-64
Remeasurement of defined benefit plans
2,724
Deferred taxes on remeasurement of defined benefit plans
-422
Total recognised in other comprehensive income
2,413
Cash flow from discontinued operations
Cash flow from operating activities
-232,963
-239,410
707
87,335
-232,256
-152,075
2014
2013
Undiluted earnings attributable to shareholders of Valartis Group AG
-4.23
-2.79
Diluted earnings attributable to shareholders of Valartis Group AG
-4.23
-2.79
Cash flow from investment activities
Cash flow from financing activities
Net cash flow
Earnings per share – discontinued operations
In CHF
Extraordinary expenses in the result for discontinued operations
Additional personnel expenses amounting to around CHF 3.3 million were incurred as a result of contractual clauses. In addition,
expenses of around CHF 3.0 million incurred in connection with
the premature termination of long-term contracts are included
under «other operating expenses».
144
Assets and liabilities classified as held for sale
In CHF 1'000
2014
2013
Assets classified as held for sale
Cash
168,144
Due from banks and clients
491,877
Trading portfolio assets
31,142
Financial assets available for sale
4,342
Property, plant and equipment
3,264
Derivative financial instruments
1,708
Accrued and deferred assets including other assets
8,052
Goodwill and other intangible assets
Deferred tax assets
Total assets classified as held for sale
4,466
712,995
Liabilities directly associated with the assets classified as held for sale
Due to banks and clients
699,337
Derivative financial instruments
7,902
Accrued and deferred liabilities including other liabilities
5,789
Provisions
Current and deferred tax liabilities
Total liabilities directly associated with the assets classified as held for sale
Net assets/(liabilities)
594
1,914
715,536
-2,541
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 145
41. ACQUISITION OF SUBSIDIARIES
In CHF 1'000
30.09.2014
Fair value
Assets
Cash and cash equivalents
Investment properties
Accrued and deferred assets including other assets
Deferred tax assets
Total assets
1,502
51,931
538
5,226
59,196
Liabilities
Due to banks and clients
29,857
Due to third parties
11,613
Accrued and deferred liabilities including other liabilities
5,150
Current and deferred tax liabilities
6,960
Total liabilities
Addition net assets
53,580
5,616
Non-controlling-interests
Goodwill
Purchase consideration
Purchase considerations in cash and cash equivalents
3,306
8,922
-8,654
Acquired cash and cash equivalents
1,502
Net outflow of funds
-7,152
On 30 September 2014, ENR Group acquired 100 percent of
Romsay Properties Limited (Romsay Ltd.), a company which is
registered in Cyprus. Romsay Ltd has a 100-per cent holding in
LLC Petrovsky Fort, a company domiciled in Russia (PF Russia). PF
Russia’s main asset is a business property in St. Petersburg (Petrovsky Fort). On the same date, ENR Group also acquired a 100-per
cent holding in Stainfield Ltd, domiciled in Cyprus (Stainfield).
Unicredit Bank Austria AG (Unicredit) granted debt financing for
Petrovsky Fort via Stainfield and this was extended as a result of
the purchase on 30 September 2014.
From 30 September 2014, Romsay Ltd., PF Russia and Stainfield
have been wholly integrated into the Valartis Group consolidation scope.
The purchase price for the 100-per cent holdings in Romsay Ltd.
and Stainfield amounted to around CHF 8.91 million (including a
price adjustment of CHF 0.25 million which was posted on 31 December 2014 as a liability). In addition to the price for the 100-per
146
cent holding, ENR Group also assumed the acquired companies’
liabilities amounting to CHF 11.22 million and paid this sum to
the vendor.
The fair value of the acquired assets and liabilities on 30 September 2014 is listed in the table above.
Since Romsay Ltd and Stainfield were integrated into the Valartis
Group consolidation scope on 30 September 2014, the two companies have achieved turnover of CHF 2.2 million and made a loss
of CHF 3.9 million, respectively. If the two companies had been
integrated into the consolidation scope at the beginning of the
financial year, Valartis Group would have posted a turnover of
CHF 6.0 million and a loss of CHF 29.1 million respectively.
Transaction costs for the acquisition of Romsay Ltd and Stainfield
amount to TCHF 123 and were posted to «other administrative
expenses» at the expense of the 2014 result.
42. RELATED PARTIES AND COMPANIES
A related party is a person or entity that has the ability to control
the Group or can exert a significant influence on operational and
financial decisions. As part of its regular business activities, the
Group also conducts transactions (such as securities transactions,
payments, etc.) with related parties. Members of the Board of
Directors and staff members are granted employee terms and
In CHF 1,000
conditions on security transactions (brokerage commission and
custody charges). Loans to Members of the Board of Directors and
to employees are granted with a 50 per cent discount on the credit margin. The following table provides an overview of transactions with related parties (persons and entities).
31.12.2014
31.12.2013
7
5,123
Associated companies
26,233
18,993
Other related entities
1,170
1,050
27,410
25,166
Assets
Key management and relatives
Total
Liabilities
Key management and relatives
Own pension fund
977
79
797
Associated companies
16,493
2,277
Total
16,572
4,051
Expenses
Key management and relatives
-30
Own pension fund
Associated companies
-52
Total
-52
-30
10
85
Associated companies
1,470
1,206
Other related entities
2,029
2,210
Total
3,509
3,627
Income
Key management and relatives
Own pension fund
On 30 September 2014 ENR Group acquired three entities from
Eastern Property Group (EPH), for further details we refer to
Note 41.
126
Valartis International Ltd., an entity of Valartis Group, performs
certain investment management functions for EPH. Receivables
and income from these activities are included in the table above
in the category other related parties.
Gustav Stenbolt is a board member of EPH and CEO of Valartis
Group (and since January 2015 chairman of the Board of Directors of ENR Russia Invest S.A.). He did not take part in the decision
about the sale and purchase of the three entities from EPH. The
purchase price for the three entities is disclosed in Note 41.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 147
43. LOANS AND EQUITY HOLDINGS OF THE MEMBERS OF THE BOARD
OF DIRECTORS AND GROUP EXECUTIVE MANAGEMENT AT YEAR END
2014
Members of the Board of Directors
Urs Maurer-
Rolf Müller-
Lambrou,
Senn,
Christoph N. Jean-Francois Felix Fischer 1)
Meister
Ducrest
Stephan
Total
Häberle 2)
Chairman Vice chairman
Numbers of shares
1,329
4,417
4,821
2,827
Total
13,394
Loans and advances in CHF
Loans and advances in CHF
to related parties
Group Executive Management
Numbers of shares
Numbers of shares (allotted) 3)
Gustav
Vincenzo Di
George M.
Stenbolt,
Pierri,
Isliker,
CEO
Deputy CEO
CFO/CRO
1,873,821
2,349
5,852
1,882,022
20,230
11,899
9,433
41,562
Loans and advances in CHF
Loans and advances in CHF
to related parties
1) Until 13 May 2014.
2) Since 13 May 2014.
3) Allotted shares means shares which have been granted to members of Group
Executive Management as bonus component of current year or in prior year,
but which have not yet been reached the vesting date.
2013
Members of the Board of Directors
Numbers of shares
Loans and advances in CHF
Urs Maurer-
Rolf Müller-
Christoph N.
Jean-Francois
Lambrou,
Senn,
Meister
Ducrest
Chairman
Vice chairman
1,329
4,417
4,821
2,827
146,000
127,500
127,500
1)
Total
2,500
15,894
Felix Fischer
401,000
Loans and advances in CHF
to related parties
Group Executive Management
Gustav Stenbolt,
CEO
Vincenzo Di George M. Isliker,
Pierri,
Monika Jung
Andreas Insam
Total
CFO/CRO
Deputy CEO
Numbers of shares
Loans and advances in CHF
Loans and advances in CHF
to related parties
1) Until 13 May 2014.
148
1,838,038
127,500
2,329
2,405
1,842,772
1,625,777
1,753,277
2,832,455
2,832,455
44. BUSINESS SEGMENTS
Valartis Group is divided into two business segments – Private
Clients and Institutional Clients – as well as the Corporate
Center. Indirect costs for internal services rendered between
the segments are in principle accounted for as expense by the
recipient of the services and as a reduction in expense by the
provider, in accordance with the originator principle.
Private Clients
The Private Clients business segment consists of the wealth management business of the two Valartis banks in Austria and the
Principality of Liechtenstein. In addition to Central Europe, its core
markets include in particular Eastern Europe, the Middle East,
parts of North and South America, and certain countries in Asia.
The private clients business of Valartis Bank in Switzerland was
sold to Banque Cramer & Cie S.A., Geneva on 29 August 2014. Results up to that date have been posted to discontinued operations.
Corporate Center
The Corporate Center acts as an internal service centre for
Valartis Group’s operational business units. It provides services in
the areas of risk management and risk controlling, legal and compliance, finance and controlling as well as corporate communications and marketing. All consolidation items as well as income and
expenses with no direct link to the operative business segments
are assigned to the Corporate Center as well. Treasury services and,
after deduction of a risk-free return from the investment of client
funds on behalf of the front organisations, the income from balance sheet and capital management are also attributed to the Corporate Center.
Institutional Clients
The Institutional Clients business segment comprises the business areas Asset Management Funds & Investment Companies,
Real Estate Funds & Investment Companies and Corporates &
Markets. In addition to asset management, the following group
companies also come under this segment: Valartis International
Ltd., Valartis Advisory Services S.A., MCT Luxembourg Management S.à.r.l. and Valartis Strategic Investments S.à.r.l. It also includes the fully consolidated investment company ENR Russia
Invest S.A. and the associated company Darsi Group (using the
equity method).
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 149
Segment reporting
2014
Private Clients
Institutional Clients
Corporate Center
Total
In CHF 1,000
Income from interest and dividends
Income from commission and service fees
Income from trading
Other ordinary income
Service from/to other segments
7,385
4,131
-2,346
9,170
40,729
6,033
448
47,210
6,578
-41,099
2,983
-31,538
652
2,378
-1,422
1,608
-921
-704
1,625
0
Operating income
54,423
-29,261
1,288
26,450
Personnel expense
-24,256
-5,963
-4,349
-34,568
General expense
-11,398
-4,627
-2,455
-18,480
Administrative expense
-35,654
-10,590
-6,804
-53,048
Gross income
18,769
-39,851
-5,516
-26,598
Depreciation and amortisation
-2,042
-83
-13
-2,138
Valuation adjustments, provisions and losses
-9,608
-10,488
-400
-20,496
7,119
-50,422
-5,929
-49,232
Amortisation of tangible and intangible assets
(PPA) 1)
-4,715
-1,000
Segment result from continued operations
after amortisation
2,404
-51,422
Segment result before amortisation
-5,715
-5,929
Income taxes
-54,947
1,269
Net loss from continued operations
-53,678
Net loss after tax from discontinued operations
-19,600
Net loss
-73,278
Net loss attributable to shareholders of
Valartis Group AG
-69,174
Net loss attributable to non-controlling interests
-4,104
Total assets from continued operations
2,742,901
320,337
-176,990
2,886,248
Total liabilities from continued operations
-109,922
2,645,599
2,613,786
141,735
Total investments for continued operations
1,054
3,538
4,592
Assets under management from continued
operations, in CHF million
6,095
364
6,459
Net new money from continued operations,
in CHF million
530
-245
285
Employees from continued operations,
full-time equivalents
166
33
1) The amortisation of the additionally activated tangible and intangible assets
due to the purchase price allocation are disclosed separately.
150
16
215
2013
Private Clients
Institutional Clients
Corporate Center
Total
In CHF 1,000
Income from interest and dividends
7,456
5,708
4,317
17,481
34,277
13,240
-390
47,127
Income from trading
6,199
-9,980
142
-3,639
Other ordinary income
1,526
7,019
4,155
12,700
Income from commission and service fees
Service from/to other segments
-1,312
-849
2,161
0
Operating income 1)
48,146
15,138
10,385
73,669
Personnel expense
-23,694
-7,224
-3,192
-34,110
General expense
-11,067
-4,332
-2,489
-17,888
Administrative expense
-34,761
-11,556
-5,681
-51,998
Gross income
13,385
3,582
4,704
21,671
Depreciation and amortisation
-1,933
-161
-2,094
Valuation adjustments, provisions and losses
-1,374
1,984
807
1,417
Segment result before amortisation
10,078
5,405
5,511
20,994
Amortisation of tangible and intangible assets
(PPA)
-8,450
Segment result from continued operations
after amortisation
1,628
-8,450
5,405
5,511
Income taxes
12,544
689
Net profit from continued operations
13,233
Net loss after tax from discontinued operations
-12,799
Net Profit
434
Net loss attributable to shareholders of
Valartis Group AG
-2,441
Net profit attributable to non-controlling
interests
2,875
Total assets from continued operations
2,183,352
361,705
-231,421
2,313,636
Total liabilities from continued operations
2,013,654
117,049
-138,812
1,991,891
Total investments for continued operations
1,998
17
2,015
Assets under management from continued
operations, in CHF million
5,305
729
6,034
Net new money from continued operations,
in CHF million
508
-70
438
Employees from continued operations,
full-time equivalents
172
33
12
217
For the footnote we refer to page 150.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 151
Information on regions
In CHF 1,000
31.12.2014
31.12.2013
Switzerland
Other countries
Total
Switzerland
Other countries
Total
Operating income
-17,003
43,453
26,450
2,509
71,160
73,669
Total assets
506,602
2,379,646
2,886,248
416,729
1,896,907
2,313,636
3,489
1,103
4,592
17
1,998
2,015
Total investments continued
operations
Reporting is based on operating locations.
45. FAIR VALUE OF FINANCIAL INSTRUMENTS
The table below shows the carrying amounts and fair values of
financial assets and liabilities.
In CHF 1,000
31.12.2014
Book value
Fair value
31.12.2013
Deviation
Book value
Fair value
Deviation
Assets
Cash
792,077
792,077
568,607
568,607
Due from banks
1,305,679
1,305,679
1,134,578
1,134,578
Due from clients
228,857
229,154
297
201,351
201,719
368
Financial assets held to maturity
133,867
133,995
128
57,174
58,251
1,077
Accrued and deferred assets
11,105
11,105
9,355
9,355
Other assets
32,802
32,802
27,737
27,737
2,504,387
2,504,812
1,998,802
2,000,247
35,422
35,422
106,862
106,862
159,470
159,470
41,853
41,853
Derivative financial instruments
1,473
1,473
477
477
Other financial assets at fair value
7,761
7,761
36,742
36,742
204,126
204,126
185,934
185,934
Due to banks
58,349
58,349
29,476
29,476
Due to clients
Financial assets at amortised costs
Trading portfolio assets
Financial assets available for sale
Financial assets at fair value
425
0
1,445
0
Liabilities
2,520,995
2,520,995
1,913,274
1,913,274
Accrued and deferred liabilities
17,245
17,245
13,981
13,981
Other liabilities
13,154
13,154
3,548
3,548
Issued debt instruments
12,025
11,800
-225
12,268
12,458
190
-225
1,972,547
1,972,737
190
904
904
904
904
Financial liabilities at amortised costs
2,621,768
2,621,543
Derivative financial instruments
5,814
5,814
Financial liabilities at fair value
5,814
5,814
152
0
0
The table below shows the financial instruments and liabilities
classified in 3 levels. For the definition of the levels used we refer
to the accounting principles section.
Valuation methods of financial instruments
2014
Quoted market prices
Valuation method
Valuation method
(Level 1)
based on
not based on
market data
market data
(Level 2)
(Level 3)
In CHF 1,000
31.12.2014
Assets
Cash
792,077
792,077
Due from banks
1,305,679
1,305,679
Due from clients
229,154
229,154
Financial assets held to maturity
133,995
133,995
Accrued and deferred assets
11,105
Other assets
Financial assets at amortised costs
Trading portfolio assets
Financial assets available for sale
Other financial assets at fair value
32,802
32,802
926,072
1,534,833
43,907
2,504,812
18,978
10,136
6,308
35,422
137,683
1,003
20,784
159,470
7,732
7,761
29
Derivative financial instruments
Financial assets at fair value
Total financial assets
11,105
1,473
1,473
156,690
12,612
34,824
204,126
1,082,762
1,547,445
78,731
2,708,938
Liabilities
Due to banks
58,349
Due to clients
2,520,995
58,349
2,520,995
Accrued and deferred liabilities
17,245
17,245
Other liabilities
13,154
13,154
Issued debt instruments
11,800
11,800
2,579,344
42,199
2,621,543
2,869
2,945
5,814
Financial liabilities at amortised costs
0
Derivative financial instruments
Total financial liabilities at fair value
0
2,869
2,945
5,814
Total financial liabilities
0
2,582,213
45,144
2,627,357
In the event of changes in the availability of market prices and/or market
liquidity, reclassifications are made at the end of the period under review.
In 2014, no positions were reclassified.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 153
Material positions at fair value classified as Level 3
Two of the contingent purchase price considerations from the
sale of Eastern Property Holdings Ltd. (EPH) of the amount of
CHF 7.7 million (2013: CHF 36.6 million) are recognised as other financial assets at fair value under Level 3 (see also the information in
Note 18). The fair value of these contingent purchase price considerations corresponds to the expected payout at the end of the measurement period, discounted as at the balance sheet date. The payout amount is linked to the successful completion and the sale of
the current development projects of EPH. In financial year 2014, a
business premises and a portion of land were sold. The contractually agreed deadline for a third project elapsed in 2014 without a sale
having been achieved. The weak rouble and the political situation
have had negative effects on the Russian real estate market. As a
result, the contract with the purchaser of the EPH shares, which
governs the contingent purchase price payment, was extended by
two years to 1 January 2019. The contract also covers a property
which is in the final stages of construction and a plot of land. The
anticipated payment is primarily based on a valuation report on remaining property and their successful sale within a period of four
years, which is carried out half-yearly by external independent experts. Valartis Group participates in any upside potential on the basis of a contractually agreed key. The downside risk is borne in
154
its entirety by Valartis Group, but is limited to a maximum of CHF
7.7 million (previous year: CHF 29.0 million). If the land can be sold
within the deadline, Valartis Group will benefit from a certain share
(upside potential only). The appropriateness of the fair value evaluation is reviewed periodically. Fair value fluctuations are reported as
profit or loss (see also Note 18).
Sensitivity of the fair values of Level 3-instruments
A change of one percentage point in the interest rate assumptions for determining the fair value of the contingent purchase
price considerations, coupled with a shortening of the payment
terms by one year, would result in only a minor change in the fair
value. A decrease in the evaluation of the remaining Eastern Property Holdings Ltd development project will lead to a corresponding adjustment to the anticipated payment (maximum downside
risk CHF 7.7 million). Valartis Group participates in an increase of
the evaluation on the basis of a contractually defined key.
From the current perspective, a realistic change in the basic assumptions of the estimated values of the other Level 3-positions also has no significant impact on the Group’s income
statement, statement of comprehensive income or shareholders’ equity.
2013
Quoted market prices
Valuation method
Valuation method
(Level 1)
based on
not based on
market data
market data
(Level 2)
(Level 3)
In CHF 1,000
31.12.2013
Assets
Cash
568,607
Due from banks
Due from clients
Financial assets held to maturity
57,626
568,607
1,134,578
1,134,578
201,719
201,719
625
58,251
Accrued and deferred assets
Other assets
Financial assets at amortised costs
9,355
9,355
27,737
27,737
626,233
1,336,922
37,092
2,000,247
Trading portfolio assets
76,464
22,272
8,126
106,862
Financial assets available for sale
23,910
0
17,943
41,853
102
0
36,640
36,742
Other financial assets at fair value
Derivative financial instruments
477
477
Financial assets at fair value
100,476
22,749
62,709
185,934
Total financial assets
726,709
1,359,671
99,801
2,186,181
Liabilities
Due to banks
29,476
29,476
Due to clients
1,913,274
1,913,274
Accrued and deferred liabilities
Other liabilities
Issued debt instruments
Financial liabilities at amortised costs
13,981
3,548
3,548
12,458
12,458
29,987
1,972,737
904
0
904
1,943,654
29,987
1,973,641
0
1,942,750
Total financial liabilities at fair value
0
Total financial liabilities
0
Derivative financial instruments
13,981
904
904
In 2013, positions with a fair value of TCHF 2'070 were reclassified from Level 1
(listed market prices) to Level 2 (valuation methods based on market data) and
positions with a fair value of TCHF 40 were reclassified from Level 2 to Level 3
(valuation methods not based on market data).
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 155
The table below shows the changes in the positions whose fair value is not measured on the basis of market-prices or -data (Level-3):
2014
01.01.2014
In CHF 1,000
Recognised
level 1 and
income shareholders'
level 2
statement
Trading portfolio assets
8,126
1)
17,943
Other financial assets at fair value
36,640
-21,348
01.01.2013
Recognised
In CHF 1,000
Derivative financial instruments
level 2
-4,115
15,487
Other financial assets at fair value
43,267
equity
1,433
-2,807
6,308
-7,560
7,732
Purchase
Sales
31.12.2013
1,859
-6
8,126
2)
0
2,416
-5,425
1) The unrealised trading loss recorded in the income statement for trading
portfolio held at year end amounts to TCHF -444 (previous year TCHF -137) and
the unrealised loss of other financial assets at fair value to TCHF -21,348
(previous year: TCHF - 5,425).
2) The unrealised gain on financial assets available for sale held at year-end
recorded in shareholders equity amounts to TCHF 2,841 (previous year
unrealised gain TCHF 2,416).
156
1)
-5
Less discontinued operations
Net income Transfer from
income shareholders'
5
Financial assets available for sale
continued operations 3)
31.12.2014
20,784
level 1 and
-137
19,602
Sales
2)
in the recognised in
6,410
Financial assets available for sale
Purchase
2,841
statement
Trading portfolio assets
equity
-444
Financial assets available for sale
continued operations
2013
Net income Transfer from
in the recognised in
40
17,943
-1,202
36,640
3) Transfer from/to level 2 comprises a financial instrument which has been
reclassified from level 3 to level 2 at the beginning of the period (amounts
TCHF 16,307). At 31 December 2013 the same financial instrument (amount
TCHF 17,721) was reclassified as level 3 because no regular quoted market
values were available anymore.
The table below shows the disclosure requirements in accordance with IFRS 7.12B-D for those fixed income positions that
have been reclassified from trading to held to maturity in 2010:
In CHF 1,000
31.12.2014
31.12.2013 1)
Time of
reclassification
Reclassified position – HTM (book value)
14,456
36,624
190,704
Reclassified position – HTM (fair value)
14,537
35,941
190,704
Expected undiscounted cash flow at the
time of the reclassification
236,598
Effective interest rate at the time of the reclassification
Fair value valuation losses/gains in reporting year as if
the reclassification had not taken place
Interest income from the reclassified positions
4.68%
-1,323
-338
1,070
1,985
1) The fixed income position, reclassified in 2010, of the discontinued operations
are not disclosed anymore for the year 2013. Per 1 January 2013 the book
values of these fixed income positions were CHF 88.4 million and the fair
values CHF 95.9 million.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 157
46. MAJOR GROUP COMPANIES
In addition to the figures for Valartis Group AG, Baar, canton of
Zug, the consolidated financial statements include the accounts
of the following major companies:
Company name
Registered office Purpose
Cur-
Share capital/
31.12.2014
31.12.2014
31.12.2013
31.12.2013
rency
Stock capital
Share of
Share of
Share of
Share of
capital
votes
capital
votes
Companies in the Segment Private Clients
Valartis Bank
(Austria) AG
Vienna, A
Bank
EUR
6,570,000
100%
100%
100%
100%
Valartis Bank
(Liechtenstein) AG 1)
Bendern, FL
Bank
CHF
20,000,000
69.23%
88.97%
69.30%
88.97%
Valartis Bank AG 2)
Zurich, CH
Bank
CHF
20,000,000
-
-
100%
100%
Valartis Wealth
Management S.A.2)
Geneva, CH
Asset Management CHF
2,000,000
-
-
100%
100%
Companies in the Segment Institutional Clients
thereof assets and funds management and corporate finance
Valartis International
Ltd.
Tortola, BVI
Investment Advisor USD
20,000,000
100%
100%
100%
100%
Valartis Advisory
Services S.A. 3)
Geneva, CH
Investment Advisor CHF
and Corporate
Center functions
1,896,210
100%
100%
100%
100%
MCT Luxembourg
Management S.à.r.l.
Luxembourg, L Investment Advisor EUR
12,085
100%
100%
100%
100%
Valartis Strategic
Investments S.à.r.l.
Luxembourg, L Holding Company
EUR
100,000
100%
100%
100%
100%
Financial Company CHF
32,790,585
62.49%
62.49%
61.35%
61.35%
thereof Investment companies fully consolidated
ENR Russia Invest S.A.
Geneva, CH
thereof Investment companies equity accounted
Norinvest Holding S.A. 4) Geneva, CH
Holding Company
CHF
25,689,000
25%
25%
-
-
Darsi Investment Ltd.
Tortola, BVI
Real estate
Company
EUR
7,476,190
32.44%
32.44%
32.44%
32.44%
Société des Centres
Commerciaux
D’Algérie SPA 5)
Algiers,
Algeria
Real estate
Company
DZD
1,703,333,000
20%
20%
20%
20%
Panariello Enterprises
Ltd.
Nicosia,
Cyprus
EUR
25,650
49%
49%
Investment Advisor
49%
49%
Companies in the Corporate Center
Valartis Finance
Holding AG 6)
Vaduz, FL
Holding Company
CHF
20,000,000
100%
100%
-
-
Valartis AG
Baar, CH
Holding Company
CHF
100,000
100%
100%
100%
100%
1) Of which CHF 6.4 million participation capital.
2) Sold at 29 August 2014.
3) Name changed, previous name: Valartis Asset Managment S.A.
4) Acquired at 3rd. October 2014.
158
5) The indirect participation on Société des Centres Commerciaux D’Algérie SPA
amounts on 45.95 per cent (2013: 45.95 per cent).
6) Incorporated at 27 June 2014.
Restriction on the use of assets
The use of assets for Valartis Bank (Austria) AG and Valartis Bank
(Liechtenstein) AG is restricted by the applicable regulatory provisions on equity capital in each case. Furthermore, the statutory
requirements under company law in the respective country of
domicile are to be complied with for all Group companies.
In CHF 1,000
47. SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS
The table below shows information on each subsidiary of the
Group with material non-controlling interests. This information
is based on amounts before intercompany eliminations.
Valartis Bank (Liechtenstein) Group
ENR Russia Invest Group
31.12.2014
31.12.2013
31.12.2014
31.12.2013
Participation
30.77%
30.70%
37.51%
38.65%
Voting rights
11.03%
11.03%
37.51%
38.65%
Total asset
2,006,024
1,387,237
131,067
119,667
Total liabilities
1,940,741
1,314,447
42,847
4,982
Net asset
65,283
72,790
88,220
114,685
Carrying amount of non-controlling interests
20,331
21,229
33,761
44,993
Operating income
44,850
37,030
-20,197
-2,558
Profit/loss
16,549
14,083
-24,504
-3,748
82
17
-1,317
-7
16,631
14,100
-25,821
-3,755
5,090
4,324
-9,194
-1,449
25
5
-497
-3
Cash flow from operating activities
463,222
322,378
50,844
-6,364
Cash flow investing from investment activities
-82,091
10,700
-20,606
-2
Cash flow from financing activity
-24,443
9,045
-1,366
-370
270
152
29,142
-6,584
Share of non-controlling interests in per cent
Other comprehensive income
Total comprehensive income
Profit/loss allocated to non-controlling interests
Other comprehensive income allocated to
non-controlling interests
Foreign currency translation effects
Net cash flow
Paid dividends to non-controlling interests
356,688
342,123
6,088
1,140
Further shares in Valartis Bank (Liechtenstein) AG were sold to
employees in 2014. The Group’s share in the capital thus decreased slightly from 69.30 per cent to 69.23 per cent. The shareholding in ENR Russia Invest S.A. was increased from 61.35 per
cent to 62.49 per cent.
The table below discloses the impact resulting from the change
in the share of capital held by Valartis Group in these two companies with material non-controlling interests.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 159
Changes in non-controlling interests
In CHF 1,000
Valartis Bank
ENR Russia Invest Group
(Liechtenstein) Group
Non-controlling interests at 1 January 2013
Non-real. gains of securities afs
Foreign exchange translation differences
Other comprehensive Income
2013
2013
16,932
46,919
8
0
-3
-3
5
-3
Net profit/loss
4,324
-1,449
Total comprehensive income
4,329
-1,452
Dividend payments
-1,140
0
Change in treasury shares
273
0
Other effects
835
-474
Owner-related changes
Total non-controlling interests at 31 December 2013
Non-controlling interests at 1 January 2014
Gains/losses from financial assets available for sale
Foreign exchange translation differences
Other comprehensive Income
-32
-474
21,229
44,993
2014
2014
21,229
44,993
17
0
8
-497
25
-497
Net profit/loss
5,090
-9,194
Total comprehensive income
5,115
-9,691
Dividend payments
-6,088
Change in treasury shares
Other effects
17
-307
58
-1,234
Owner-related changes
-6,013
-1,541
Total non-controlling interests at 31 December 2014
20,331
33,761
160
48. STRUCTURED ENTITIES
As an active asset manager, Valartis Group manages a wide range
of different collective investment instruments. These collective
investment instruments of Valartis Group are structured entities
as defined under IFRS 12. Valartis Group acts here as an agent in
the interests of investors, and these investment instruments are
therefore not consolidated. Investments held by Valartis Group in
its own investment funds are recognised as financial instruments.
With one exception, there are no contractual or constructive
obligations to provide financial or other support to the investment funds. When the investment fund MCT Berlin Residential
was established, Valartis Group took on unlimited liability for the
obligations of the fund. As at 31 December 2014, the liability risk
is insignificant. The properties held by the fund were sold at a
profit towards the end of 2013, and the fund will be liquidated in
2015.
Valartis Group manages the assets of the collective investment
instruments placed in the respective funds by the investors, doing so in accordance with the pertinent investment regulations.
In addition, Valartis also performs various administrative tasks
for the collective investment instruments. For these services,
Valartis Group receives fees at customary market rates. The gross
income from services for the collective investment instruments
in the 2014 financial year totalled CHF 16.8 million for continued
operations (2013: CHF 25.5 million). Units from self-managed
funds held by Valartis Group are recognised as financial instruments.
The table below shows the carrying amounts of Valartis Group’s
holdings in these collective investment instruments. With the
aforementioned exception, the carrying amount corresponds to
the maximum downside risk.
In CHF 1,000
Trading portfolio assets
Carrying amount 1 January
Purchase
Sales
recognised in the income statement
1)
Trading portfolio assets
1)
2014
2013
15,099
8,296
5,269
5,961
-16,725
0
-153
842
3,490
15,099
31.12.2014
31.12.2013
Assets in self-managed funds
766,301
745,611
Assets with management mandates
228,684
336,420
Total as at 31 December
1) The income recognised in income statement is disclosed as income
from trading.
49. ASSETS UNDER MANAGEMENT
In CHF 1,000
Other client assets
4,907,055
4,258,585
Total assets under management 1)
5,902,040
5,340,616
of which double counts
Net new money inflow
2)
Custody assets
Assets in leveraged funds
3)
Total assets under management (incl. leveraged funds and custody assets)
1) According to FINMA’s accounting rules (Table Q).
2) Net new assets inflow/outflow includes all deposits and withdrawals plus
inward and outward deliveries of non-monetary assets. In particular,
performance related changes in value and interest and dividend payments do
not constitute inflows or outflows.
63,194
201,698
284,802
437,504
209,302
117,922
347,569
575,458
6,458,911
6,033,996
3) Leveraged funds that exceed the internal gross profitability criteria.
VALARTIS GROUP ANNUAL REPORT 2014 | NOTES | 161
50. CONSOLIDATED OFF BALANCE SHEET ITEMS
In CHF 1,000
Credit guarantees
Warranties
31.12.2014
31.12.2013
9,602
8,861
0
0
Other contingent liabilities
7,135
8,395
Total contingent liabilities
16,737
17,256
Irrevocable commitments
0
0
Loan commitments
0
0
Call commitments and additional funding obligations
0
0
1,473
477
Derivative financial instruments (assets)
Derivative financial instruments (liabilities)
5,814
904
Contract volume
271,891
222,588
Fiduciary transactions
372,894
293,075
This table is based on the FINMA circular 2008/2. The contingent liabilities do
not qualify as contingent liabilities in accordance with IAS 37.
51. EVENTS AFTER THE BALANCE SHEET DATE
On 15 January 2015, the Swiss National Bank abolished the minimum exchange rate from Swiss francs to Euro. As a result foreign
currencies which are vital to Valartis Group (EUR and USD) depreciated significantly against the Swiss franc. The abolition of the
minimum exchange rate had no effect on Valartis Group’s 2014
consolidated financial statement. For the consequences in the
year 2015, we refer to the sensitivity analysis of foreign currencies in section Risk Management.
Following the sale of a major group entity in 2014, Valartis Bank
AG, Switzerland, Valartis Group made significant changes in the
group structure, in the consolidated supervision of the regulator
and in the intragroup financing facilities. These activities were
completed as of the year-end. In the course of these restructuring procedures, the substantial business activities in private
banking and wealth management of the two Private Banking entities in Liechtenstein and Austria and the Private Equity group
company were brought into the newly incorporated Valartis Finance Holding AG, Vaduz, Liechtenstein. With this domicile, Valartis Finance Holding AG is subject to the prudential supervision
of the Financial Market Authority (FMA) of Liechtenstein. In connection with (a) the change in ownership of Valartis Bank (Austria) AG, and (b) the tightened new regulatory capital adequacy
requirements in place since 1 February 2015 in Liechtenstein and
the related new requirements for risk management in Valartis
Bank (Liechtenstein) AG, as well as (c) the set-up of intragroup financing facilities, the regulatory authorities in Liechtenstein and
in Austria are currently undertaking regulatory examination proceedings of entities and individuals of the Valartis Group.
162
As these proceedings are currently still ongoing, any impact of
the outcome of such examinations on the group structure, the
intragroup financing and related consequences for the financial
position of the Group cannot be fully assessed at this point in
time. Should one or more of these examinations result in a negative outcome, this could have a material impact on the group
structure and the financial position of Valartis Group.
Based upon currently available information, the Board of Directors and Group Executive Management of Valartis Group are of
the opinion that these regulatory examination proceedings will
not have any significant negative consequences on the group
structure and intragroup financing and consequently have no
significant negative impact on the financial position of Valartis
Group.
AUDITOR’S REPORT ON THE CONSOLIDATED
FINANCIAL STATEMENTS
Ernst & Young Ltd
Maagplatz 1
P.O. Box
CH-8010 Zurich
Phone
+41 58 286 31 11
Fax
+41 58 286 30 04
www.ey.com/ch
To the General Meeting of
Valartis Group AG, Baar
Zurich, 28 April 2015
Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the consolidated financial statements of Valartis Group AG, which comprise
the income statement, statement of comprehensive income, statement of financial position, statement of changes in
equity, cash flow statement and notes (pages 70 to 162), for the year ended 31 December 2014.
Board of Directors’ UHVSRQVLELOLW\
The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with 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.
2SLQLRQ
In our opinion, the consolidated financial statements for the year ended 31 December 2014 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.
(PSKDVLVRI0DWWHU
We draw attention to Note 51 Events after the balance sheet date in the notes to the consolidated financial
statements which describes the existing uncertainties linked to the ongoing regulatory proceedings in connection
with the re-organization of the group structure and the group internal financing. As of today, the outcome of these
proceedings is uncertain but could have a significant impact on the group structure and financial position of the
group. Our opinion is not qualified in respect of this matter.
VALARTIS GROUP ANNUAL REPORT 2014
|
AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS | 163
2
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight 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.
Patrick Schwaller
Alain Münger
Licensed audit expert
(Auditor in charge)
Licensed audit expert
164
VALARTIS GROUP AG FINANCIAL STATEMENTS
INCOME STATEMENT OF VALARTIS GROUP AG
Income
In CHF
Note
Dividend income from group companies
Other financial income
4
Extraordinary income
Total income
1.1.– 31.12.2014
1.1.– 31.12.2013
109,680,800
4,514,513
7,081,129
475,461
62,226,470
560,425
178,988,399
5,550,399
-3,298,479
-2,006,324
-643,891
-1,805,956
-5,829,274
-9,525,820
-13,121
-388,201
-52,786,531
0
-4,327,489
-3,946,418
0
-19,734
Expenses
Office and business expense
Personnel expense
Financial expense
Commission expense
Depreciation of participations
4
Other ordinary expense
Extraordinary expense
Taxes
-12,907
-3,407
Total expenses
-66,911,692
-17,695,860
Net profit/loss
112,076,707
-12,145,461
VALARTIS GROUP ANNUAL REPORT 2014
|
VALARTIS GROUP AG FINANCIAL STATEMENTS | 167
STATEMENT OF FINANCIAL POSITION OF VALARTIS GROUP AG
Assets
In CHF
Note
31.12.2014
31.12.2013
Current assets
Due from banks
Due from group companies
Valuation adjustment due from group companies
3
2,914,858
684
43,481,653
18,693,123
-14,920,763
-13,777,306
Securities in the trading portfolio
1,574,773
8,730,614
Financial assets
3,379,373
15,313,010
244,435
17,290
Accrued and deferred assets
Other assets
Total current assets
1,795
1,705
36,676,124
28,979,120
190,126,247
271,539,557
Non-current assets
Participations
4
Long term receivables from third parties
5
6,810,000
0
Total non-current assets
196,936,247
271,539,557
Total assets
233,612,371
300,518,677
Liabilities and Shareholders’ Equity
Current liabilities
Due to banks
Due to group companies
Due to third parties
6
Accrued and deferred liabilities
Other liabilities
Provisions
Total current liabilities
38
24,776,038
39,014,261
213,144,886
19,161,199
0
1,628,182
1,265,769
918
918
1,200,000
800,000
61,004,598
239,987,611
5,000,000
5,000,000
1,000,000
1,000,000
Shareholders’ equity
Share capital
7
General legal reserve
Reserve for treasury shares
Free reserve
8
7,701,233
8,850,486
24,153,710
23,004,457
Retained earnings
22,676,123
34,821,584
Net profit/loss
112,076,707
-12,145,461
Total shareholders’ equity
172,607,773
60,531,066
Total liabilities and shareholders equity
233,612,371
300,518,677
Profit brought forward from previous year
168
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GUARANTEES, ASSETS PLEDGED AND ASSIGNED AS COLLATERAL IN FAVOUR OF THIRD PARTIES
Up to 29 August 2014, the company belonged to Valartis Group’s
VAT group and, up to that date, was jointly liable for VAT obliga-
tions to the tax authorities. As of 30 August 2014 and onwards
the company is no longer a part of a VAT group.
In CHF
31.12.2014
31.12.2013
Assets pledged and assigned as collateral
3,379,373
0
31.12.2014
31.12.2013
48,452,185
15,585,354
2. PLEDGED ASSETS AND ASSIGNED AS COLLATERAL FOR OWN OBLIGATIONS
In CHF
Assets pledged and assigned as collateral
3. VALUATION ADJUSTMENT
4. MAJOR EQUITY PARTICIPATIONS
The valuation adjustment was recognised in connection with the
sale of the participation in Eastern Property Holdings Ltd (EPH) in
December 2012. The payment of the sales price is split into a
number of instalments and is dependent on various criteria being
met. In accordance with the principle of prudence, for the statutory individual financial statements a valuation adjustment was
made for a part of the sales price payment not yet paid.
For general information of the major participations, please see
the Valartis Group Consolidated Financial Statements (Note 46).
The change compared to previous year is due to valuation with actual foreign currency rate.
The accounting profit from the sale effective 29 August 2014 of
Valartis Bank AG, Zurich to Banque Cramer & Cie S.A. is recorded
under extraordinary income 2014.
Value adjustments on holdings, which burdened 2014 earnings,
are mainly attributable to extraordinary dividends received.
In 2014, Valartis Group AG divested, or made a capital contribution to, the following holdings in Valartis Finance Holding AG,
Vaduz, or Valartis AG, Baar. These transactions took place as
a result of the change in regulatory supervision from the Swiss
Financial Market Supervisory Authority (FINMA) to the Financial
Market Authority Liechtenstein (FMA).
Participations
Transaction
Capital
Quotes
Valartis Bank Liechtenstein AG, Liechtenstein
Valartis (Austria) GmbH, Austria
Sale
88.97%
69.23%
Capital contribution
100%
100%
Valartis (Wien) GmbH, Austria
Sale
100%
100%
Norinvest Holding S.A., Switzerland
Capital contribution
25%
25%
Valartis AG, Schweiz
Partly sale and
capital contribution
100%
100%
VALARTIS GROUP ANNUAL REPORT 2014
|
VALARTIS GROUP AG FINANCIAL STATEMENTS | 169
5. LONG TERM RECEIVABLES FROM THIRD PARTIES
As part of the sale price for Valartis Bank AG and Valartis Wealth
Management S.A.,the deferred divestment price is posted as receivables from the purchaser under long term receivables.
6. DUE TO THIRD PARTIES
In current year a loan due to banks was redeemed by an investment fund and is now classified as due to third parties.
In December 2014 part of this loan was repaid.
7. SHARE CAPITAL
31.12.2014
31.12.2013
Share capital (CHF)
5,000,000
5,000,000
Number of bearer shares
5,000,000
5,000,000
1
1
31.12.2014
31.12.2013
Nominal value per share (CHF)
8. TREASURY SHARES
Number of shares in Valartis Group AG’s trading portfolio
102,258
96,234
Number of shares in Valartis International Ltd.'s trading portfolio
251,249
100,000
Number of shares in the Valartis Group Foundation’s trading portfolio
Number of shares in Valartis Bank AG’s trading portfolio
Reserve for treasury shares, in CHF 1)
2,128
54,896
0
154,910
7,701,233
8,850,486
31.12.2014
31.12.2013
50.2
50.2
5.1
5.1
1) In 2014, a total of 24,699 shares were purchased at CHF 19.64 and 75,014
shares were sold at an average price of CHF 22.37.
9. SHAREHOLDER STRUCTURE
In per cent
MCG Holding S.A., Baar ZG
INTEGRAL Stiftung für die berufliche Vorsorge, Thusis GR
Kreissparkasse Biberach, Biberach, Germany 1)
Gustav Stenbolt and Philipp LeibundGut
3.0
0.9
0.6
1) Since 3rd September 2014, the participation is lower than 3 per cent.
The share capital consists of bearer shares. The owners of the
shares are only known to Valartis Group if they individually or
collectively exceed the threshold and report according to the
Stock Exchange Act.
170
The beneficial owners of MCG Holding S.A. are Gustav Stenbolt,
Geneva, Tidesea Ltd, Baar (100 per cent controlled by Gustav
Stenbolt, Geneva), Philipp LeibundGut, Zürich, Pierre Michel
Houmard, Geneva, and Tudor Private Portfolio LLC, Greenwich,
USA. The following are deemed to be holders of qualified participations: a) Gustav Stenbolt, who holds 73.6 per cent of the voting
rights (65.4 per cent of the share capital) of MCG Holding S.A.
(partly held through Tidesea AG, Baar), b) Philipp LeibundGut,
who holds 14.3 per cent of the voting rights (18.7 per cent of the
share capital) of MCG Holding S.A., and c) Tudor Private Portfolio
LLC, Greenwich, USA, which holds 11.8 per cent of the voting
rights (15.4 per cent of the share capital) of MCG Holding S.A.
13. EVENTS AFTER THE BALANCE SHEET DATE
Tudor Private Portfolio is wholly controlled by Tudor Group Holdings LLC, Greenwich, USA, which is in turn controlled by Paul
Tudor Jones of Greenwich, USA.
Following the sale of a major group entity in 2014, Valartis Bank
AG, Switzerland, Valartis Group made significant changes in the
group structure, in the consolidated supervision of the regulator
and in the intragroup financing facilities. These activities were
completed as of the year-end. In the course of these restructuring procedures, the substantial business activities in private
banking and wealth management of the two Private Banking
entities in Liechtenstein and Austria and the Private Equity group
company were brought into the newly incorporated Valartis
Finance Holding AG, Vaduz, Liechtenstein. With this domicile,
Valartis Finance Holding AG is subject to the prudential supervision of the Financial Market Authority (FMA) of Liechtenstein. In
connection with (a) the change in ownership of Valartis Bank
(Austria) AG, and (b) the tightened new regulatory capital adequacy requirements in place since 1 February 2015 in Liechtenstein and the related new requirements for risk management in
Valartis Bank (Liechtenstein) AG, as well as (c) the set-up of intragroup financing facilities, the regulatory authorities in Liechtenstein and in Austria are currently undertaking regulatory examination proceedings of entities and individuals of the Valartis
Group.
Pierre Michel Houmard holds 0.3 per cent of the voting rights (0.5
per cent of the share capital) of MCG Holding S.A.
The shares held directly by Gustav Stenbolt and Philipp
LeibundGut as at 31 December 2014 and as at 31 December 2013
stem from the bonus scheme run by Valartis for Group Executive
Management and employees.
10. REMUNERATION OF THE MEMBERS
OF THE BOARD OF DIRECTORS AND THE
GROUP EXECUTIVE MANAGEMENT
Please refer to the Valartis Group Compensation Report for
further details of compensation for members of the Board of
Directors and Group Executive Management (contained in the
published Annual Report).
11. EQUITY HOLDINGS BY MEMBERS OF THE
BOARD OF DIRECTORS AND GROUP EXECUTIVE
MANAGEMENT
For information on and equity holdings, please see the published
Valartis Group Consolidated Financial Statements (Note 43).
12. RISK ASSESSMENT
The Board of Directors has regularly carried out risk assessments
and initiated any resulting measures to ensure that the risk of
material mis-statement in the consolidated financial statements
can be considered small.
On 15 January 2015, the Swiss National Bank abolished the minimum exchange rate from Swiss francs to Euro. As a result foreign
currencies which are vital to Valartis Group AG (EUR and USD)
depreciated significantly against the Swiss franc. The abolition of
the minimum exchange rate had no effect on Valartis Group AG’s
2014 annual financial statement.
As these proceedings are currently still ongoing, any impact of
the outcome of such examinations on the group structure, the
intragroup financing and related consequences for the financial
position of the Group cannot be fully assessed at this point in
time. Should one or more of these examinations result in a negative outcome, this could have a material impact on the group
structure and the financial position of Valartis Group AG.
Based upon currently available information, the Board of Directors
and Executive Management of Valartis Group AG are of the opinion that these regulatory examination proceedings will not have
any significant negative consequences on the group structure
and intragroup financing and consequently have no significant
negative impact on the financial position of Valartis Group AG.
For further information on risk assessment, please see the notes
on risk management in the published Valartis Group Consolidated Financial Statements.
VALARTIS GROUP ANNUAL REPORT 2014
|
VALARTIS GROUP AG FINANCIAL STATEMENTS | 171
PROPOSAL OF THE BOARD OF DIRECTORS TO THE
GENERAL MEETING OF SHAREHOLDERS
The Board of Directors will submit the following proposal to the
Ordinary General Meeting of Shareholders on 2 June 2015 in respect of the distribution of profit:
In CHF
2014
2013
22,676,123
34,821,584
Net profit/loss
112,076,707
-12,145,461
Retained earnings
134,752,830
22,676,123
0
0
134,752,830
22,676,123
0
0
Profit brought forward from previous year
Dividend on capital entitled to dividend payments
Profit to be carried forward
Dividend per bearer share entitled to dividend payments
172
AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS
Ernst
& Young
AG Ltd
Ernst
& Young
Maagplatz 1
Maagplatz 1
Postfach
P.O. Box
CH-8010 Zürich
TelefonPhone
+41 58+41
286 58
31 11
286 31 11
Fax
286 30 04
Fax +41 58+41
58 286 30 04
www.ey.com/ch
www.ey.com/ch
CH-8010 Zurich
An die Generalversammlung der
Valartis Group AG, Baar
To the General Meeting of
Valartis Group AG, Baar
Zürich, 16. April 2014
Zurich, 28
2015
Bericht
derApril
Revisionsstelle
zur Jahresrechnung
Als Revisionsstelle haben wir die Jahresrechnung der Valartis Group AG, bestehend aus Erfolgsrechnung, Bilanz, und Anhang
(Seiten 183 bis 187), für das am 31. Dezember 2013 abgeschlossene Geschäftsjahr geprüft.
Report of the statutory auditor on the financial statements
9HUDQWZRUWXQJGHV9HUZDOWXQJVUDWHV
Der Verwaltungsrat ist für die Aufstellung der Jahresrechnung in Übereinstimmung mit den gesetzlichen Vorschriften und den
As statutory auditor, we have audited the financial statements of Valartis Group AG, which comprise the income
Statuten verantwortlich. Diese Verantwortung beinhaltet die Ausgestaltung, Implementierung und Aufrechterhaltung eines internen
statement, statement
of financial
position and
notes
(pages 167 die
to 172),
forwesentlichen
the year ended
31 December
2014.
Kontrollsystems
mit Bezug
auf die Aufstellung
einer
Jahresrechnung,
frei von
falschen
Angaben als
Folge von
Verstössen oder Irrtümern ist. Darüber hinaus ist der Verwaltungsrat für die Auswahl und die Anwendung sachgemässer RechBoard of Directors’ responsibility
nungslegungsmethoden
sowie die Vornahme angemessener Schätzungen verantwortlich.
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The Board of Directors is responsible for the preparation of the financial statements in accordance with the
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requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing,
Unsere
Verantwortung
ist es, aufgrund
unserer control
Prüfung system
ein Prüfungsurteil
über
Jahresrechnung
abzugeben.
Wir haben
unsere
implementing
and maintaining
an internal
relevant to
thediepreparation
of financial
statements
that
are
Prüfung
in Übereinstimmung
mit dem schweizerischen
den Schweizer
Prüfungsstandards
Nach diesen
free from
material misstatement,
whether due toGesetz
fraud und
or error.
The Board
of Directors isvorgenommen.
further responsible
for
Standards haben wir die Prüfung so zu planen und durchzuführen, dass wir hinreichende Sicherheit gewinnen, ob die Jahresrechselecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the
nung frei von wesentlichen falschen Angaben ist.
circumstances.
Eine Prüfung beinhaltet die Durchführung von Prüfungshandlungen zur Erlangung von Prüfungsnachweisen für die in der JahresAuditor’s enthaltenen
responsibility
rechnung
Wertansätze und sonstigen Angaben. Die Auswahl der Prüfungshandlungen liegt im pflichtgemässen
Our responsibility
is to
express
aneine
opinion
on these
statementsfalscher
based on
our audit.
conducted our
Ermessen
des Prüfers.
Dies
schliesst
Beurteilung
derfinancial
Risiken wesentlicher
Angaben
in derWe
Jahresrechnung
alsaudit
Folge
von
Verstössen oder
ein.and
BeiSwiss
der Beurteilung
RisikenThose
berücksichtigt
der require
Prüfer das
Kontrollsystem,
soweit
in accordance
with Irrtümern
Swiss law
Auditing dieser
Standards.
standards
thatinterne
we plan
and perform
the
es
für to
die
Aufstellung
der Jahresrechnung
von Bedeutung
ist, statements
um die den are
Umständen
Prüfungshandlungen
audit
obtain
reasonable
assurance whether
the financial
free fromentsprechenden
material misstatement.
festzulegen, nicht aber um ein Prüfungsurteil über die Wirksamkeit des internen Kontrollsystems abzugeben. Die Prüfung umfasst
zudem die Beurteilung der Angemessenheit der angewandten Rechnungslegungsmethoden, der Plausibilität der vorgenommenen
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
Schätzungen sowie eine Würdigung der Gesamtdarstellung der Jahresrechnung. Wir sind der Auffassung, dass die von uns
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
erlangten Prüfungsnachweise eine ausreichende und angemessene Grundlage für unser Prüfungsurteil bilden.
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
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order unserer
to design
audit procedures
appropriate für
in the
but2013
not for
the purpose of
expressingdem
an
Nach
Beurteilung
entspricht that
die are
Jahresrechnung
das circumstances,
am 31. Dezember
abgeschlossene
Geschäftsjahr
schweizerischen
und den Statuten.
opinion on theGesetz
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
Berichterstattung
aufgrund
weiterer
gesetzlicher
Vorschriften
is sufficient and appropriate
to provide
a basis
for our audit
opinion.
Wir bestätigen, dass wir die gesetzlichen Anforderungen an die Zulassung gemäss Revisionsaufsichtsgesetz (RAG) und die
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Unabhängigkeit
(Art. 728 OR und Art. 11 RAG) erfüllen und keine mit unserer Unabhängigkeit nicht vereinbaren Sachverhalte
vorliegen.
In our opinion, the financial statements for the year ended 31 December 2014 comply with Swiss law and the
company’s articles of incorporation.
In Übereinstimmung mit Art. 728a Abs. 1 Ziff. 3 OR und dem Schweizer Prüfungsstandard 890 bestätigen wir, dass ein gemäss den
Vorgaben des Verwaltungsrates ausgestaltetes internes Kontrollsystem für die Aufstellung der Jahresrechnung existiert.
(PSKDVLVRI0DWWHU
We draw
attention
Note
Events
the balance
sheet
date in thedem
notes
to the financial
statements
which
Ferner
bestätigen
wir, to
dass
der 13
Antrag
überafter
die Verwendung
des
Bilanzgewinnes
schweizerischen
Gesetz
und den Statuten
describesund
theempfehlen,
existing die
uncertainties
linked to the zu
ongoing
regulatory proceedings in connection with the reentspricht,
vorliegende Jahresrechnung
genehmigen.
organization of the group structure and the group internal financing. As of today, the outcome of these proceedings
is uncertain but could have a significant impact on the group structure and financial position of Valartis Group AG.
Ernst
& YoungisAG
Our opinion
not qualified in respect of this matter.
Patrick Schwaller
Stefan Pfyffer
Zugelassener Revisionsexperte
(Leitender Revisor)
Zugelassener Revisionsexperte
VALARTIS GROUP ANNUAL REPORT 2014
|
AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS | 173
2
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight 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.
Patrick Schwaller
Alain Münger
Licensed audit expert
(Auditor in charge)
Licensed audit expert
174
VALARTIS GROUP AG BEARER SHARE
Acquisition of Hypo Investment
Bank (Liechtenstein) AG, which is
renamed Valartis Bank
(Liechtenstein) AG
Acquisition of Anglo Irish Bank
(Austria) AG, which is renamed
Valartis Bank (Austria) AG
Sale of Valartis
Bonus Card AG
Divestment of stake
in Eastern Property
Holdings Ltd. (EPH)
Divestment of Valartis
Bank AG, Switzerland and
minority holding in
Norinvest Holding S.A.
100%
80%
60%
40%
20%
0%
01.01.2008
31.12.2008
31.12.2009
31.12.2010
31.12.2011
31.12.2012
31.12.2013
31.12.2014
Valartis Group (VLRT SW, ISIN CH0001840450)
SPI Banks (SWX SP BANKS PR)
In CHF
31.12.2010
31.12.2011
31.12.2012
31.12.2013
31.12.2014
Share capital Valartis Group AG
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
Number of VLRT bearer shares issued
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
Number of VLRT bearer shares outstanding,
qualifying for dividends
4,850,106
4,860,366
4,903,766
4,903,766
4,897,742
Nominal value of VLRT bearer share
1.00
1.00
1.00
1.00
1.00
Closing price of VLRT bearer share
26.00
17.25
20.00
17.70
15.40
Annual high
39.35
26.30
21.30
22.10
23.00
Annual low
23.60
13.45
13.00
15.80
15.35
130,000,000
86,250,000
100,000,000
85,500,000
77,000,000
Dividend per share
Market capitalisation
0.50
0.00
1.00
0.00
0.00
Dividend yield
1.9%
n/a
5.0%
0.0%
0.0%
Price-to-book ratio
0.39
0.28
0.31
0.28
0.33
ANNUAL REPORT VALARTIS GROUP 2014
|
VALARTIS GROUP AG BEARER SHARE | 175
ADRESSES AND IMPRINT
Group Headquarters
Valartis Group AG
Blegistrasse 11a
CH-6340 Baar ZG
Phone +41 41 760 70 20
Fax
+41 41 760 70 19
Asset Management Liechtenstein
Valartis Fund Management (Liechtenstein) AG
Schaaner Strasse 27
FL-9487 Gamprin-Bendern
Phone +423 388 10 00
Fax
+423 388 10 01
Office Liechtenstein
Valartis Bank (Liechtenstein) AG
Schaaner Strasse 27
FL-9487 Gamprin-Bendern
Phone +423 265 56 56
Fax
+423 265 56 99
Asset Management Austria
Valartis Asset Management (Austria)
Kapitalanlagegesellschaft m.b.H.
Rathausstrasse 20
A-1010 Wien
Phone +43 (0)577 89
Fax
+43 577 89 270
Office Liechtenstein
Valartis Finance Holding AG
Marktgass 11
FL-9490 Vaduz
Office Vienna
Valartis Bank (Austria) AG
Rathausstrasse 20
A-1010 Vienna
Phone +43 (0)57789
Fax
+43 57789 200
Office Zurich
Valartis Advisory Services S.A.
St. Annagasse 18
CH-8001 Zurich
Phone +41 44 503 54 00
Fax
+41 44 503 54 49
Office Geneva
Valartis Advisory Services S.A.
2–4 place du Molard
CH-1211 Geneva 3
Phone +41 22 716 10 00
Fax
+41 22 716 10 01
176
Asset Management Luxembourg
MCT Luxembourg Management S.à.r.l.
5, avenue Monterey
L-2163 Luxembourg
Phone +352 26 20 25 94
Fax
+352 26 20 25 84
Asset Management Russia
Valartis International Ltd.
Petrovka Street 5
RU-107031 Moscow
Phone +7495 730 35 25
Fax
+7495 730 35 26
Investor & Media Relations
Valartis Group AG
Corporate Communications
Blegistrasse 11a
CH-6340 Baar, ZG
Phone +41 44 503 54 00
[email protected]
Valartis Market Information
Bearer shares listed on SIX Swiss Exchange
Symbol on SIX: VLRT
Reuters: VLRT.S
Bloomberg: VLRT SW
ISIN: CH0001840450
www.valartisgroup.ch
Valartis Group AG
Corporate Communications & Marketing
Blegistrasse 11a
CH-6340 Baar ZG
Tel. +41 44 503 54 00
[email protected]
Valartis market
Listed:
SIX Swiss Exchange
Symbol on SIX: VLRT
Reuters:
VLRT.S
Bloomberg:
VLRT SW
ISIN:
CH0001840450
www.valartisgroup.ch
Design
Schrägstrich, Zurich / Linkgroup, Zurich
Photography
Tres Camenzind, Zurich
Marco Blessano, Uster
Realization
Linkgroup, Zurich
Available on the iPad
App Store
r
www.valartisgroup.ch