rothschild bank ag zurich annual report 20112012

Rothschild Bank AG Zurich

Annual Report 2011/2012

707532_Rothschild_GB2011_UG_en.qxp:Layout 1 8.5.2012 13:59 Uhr Seite 1


R

Part 1

Part 1 – Overview

Key Figures 2

Chairman’s Statement 3

Directors, Executive Committee, Auditors and Senior Staff 4

Part 2 – Consolidated Financial Statements

A Consolidated Balance Sheet 6

B Consolidated Income Statement and Statement of Cash Flows 9

C Notes to the Consolidated Financial Statements 11

D Consolidation, Accounting and Valuation Principles 25

E Notes on Risk Management 29

Business and Services Provided by Rothschild Bank AG Zurich and Subsidiaries 32

Report of the Statutory Auditor on the Consolidated Financial Statements 34

Part 3 – Financial Statements of Rothschild Bank AG

Balance Sheet of Rothschild Bank AG 38

Income Statement 41

Proposal of the Board of Directors to the Annual General Meeting 42

Notes to the Financial Statements 43

Accounting and Valuation Principles of Rothschild Bank AG 48

Notes on Risk Management 51

Report of the Statutory Auditor on the Financial Statements 53

Part 4 – Addresses

Head Office, Subsidiaries and Representatives of Rothschild Bank AG 55

Group Directory 56

Rothschild Bank AG ZurichAnnual Report for the year ended 31st March 2012

1


R

Part 1

Key FiguresRothschild Bank AG Zurich, consolidated

31. 3. 2012 31. 3. 2011 Change 1000 CHF 1000 CHF 1000 CHF %

Consolidated balance sheetTotal shareholders’ equity 401,728 417,866 – 16,138 – 3.9

Total assets 3,911,762 3,051,928 859,834 28.2

Consolidated income statementNet interest income 23,313 17,994 5,319 29.6

Net commission income 109,551 126,878 – 17,327 – 13.7

Results from trading operations 29,018 25,485 3,533 13.9

Gross income 169,688 177,583 – 7,895 – 4.4

Total operating expenses – 135,190 – 130,980 – 4,210 3.2

Consolidated net profit 19,602 33,373 – 13,771 – 41.3

Net profit per employee 43.4 83.2 – 39.9 – 47.9

Staff(at the end of business year)

Staffing level domestic 358 306 52 17.0

Staffing level abroad 94 95 – 1 – 1.1

Total staffing level 452 401 51 12.7

2


R

Part 1

The past year has been one of very good development in a particularly difficult environment. Our focus on real wealth preservation and providing the best independent advice has remained attractive for clients, and we have seen near-record inflows of net new assets.

We have reinforced our position in our core markets, bolstering our client and investment teams in the UK, Switzerland, Germany and Asia with a series of hires, including new staff in Singapore and Hong Kong and new team heads in Frankfurt and Geneva.

At the same time, we have also invested heavily in our operational systems, introducing a new global IT platform which was successfully implemented at the end of May 2012. This platform brings together all the functions and processes that are crucial to our business model and allows our teams to service their clients more effectively.

In addition, we reorganised our investment process last year, placing a greater emphasis on real capital preservation and providing more flexibility to take meaningful positions in promising asset classes. Within our trust business, we have continued to enhance our wealth planning expertise.

For the full year, assets under management rose by 4 % to CHF 13.3 billion. The net inflow of close to CHF 1 billion has shown a marked increase over the previous year (+ 36 %). However, the persistent strength of the Swiss franc weighed heavily on our bottom line, as did our combined investment in new people and systems. Our net profit fell by 41 % to CHF 19.6 million.

Looking ahead, we are optimistic about the new financial year and expect to see further strong inflows of assets. Our clear positioning and targeted investment should also enable us to achieve a renewed and sustainable improvement in our long-term profitability.

On behalf of the Board, I take this opportunity to thank our clients for their continued faith in our Bank. Hans-Heinrich Coninx, Richard Martin, Otto H. Suhner and Guy Wais stepped down from the Board in the financial year just ended and I thank them again for their invaluable services.

This year was particularly stressful for our staff in view of the work needed to reach the successful introduction of the new IT platform. I would like to extend my thanks to all of them for their dedication to the Bank and the services they render to our clients.

On behalf of the Board of Directors

Baron Eric de Rothschild

Chairman’s Statement

3


R

Part 1

Board of Directors

ChairmanBaron Eric de Rothschild1)

Deputy ChairmanBaron David de Rothschild1)

MembersDr Hans Heinrich Coninx3)* Richard Martin3) Otto H. Suhner3)*Sylvain Hefes2) Alain Massiera Peter A. Smith2) *Nigel Higgins Claude Messulam* Dr Rudolf Tschäni1) 2) *Philip Marcovici2) * Bernard I. Myers1) 2) * Guy Wais3)*

1) Members of the Committee of the Board

2) Members of the Audit Committee

3) Stepped down as of March 2012

* Meets the criteria on independence in accordance with FINMA circular 08/24

Executive Committee

General ManagerVeit de Maddalena

Members of the Executive CommitteeStefan Liniger Thomas Pixner Alexander Troschel Dirk Wiedmann

Internal AuditWilfried Bürge, Soheyla Sadeghian,Managing Director Assistant Directorand Head Internal Audit

Statutory AuditorsKPMG AG

Directors, Executive Committee and Auditors

4


R

Part 1

Managing Directors Daniel Arnold Giovanna Lagutaine Schwarzenbach Ariane Richter MerzAndreas Bickel Marc Lauer Luigi RoccuGregg P. Blonigan Simon Lutch Claudio SacchetCarlo Braunwalder Steffen Mack Christopher SchallenbergerLuca Dal Dosso Dr Joe Maersch Marco SchallerRobert Deverell Daniel Maurer Christoph SchärerMarc Dietrich Matthias Montani Jean-Pierre StillhartEdward Ennis Heinz Nesshold Barbara Vannotti-Holzrichter Ernst A. Furrer Riccardo Petrachi Marcel WeissAitor I. Garcia Jon Andrea Mario von Planta1)

DirectorsVictoria Burke Dr Urs Peter Kälin Sofie Rosman Robert Baumann Jörg Kopp Harold RudelUrsizin Blumenthal Bruno Knecht Roger SchwarzenbachSiegbert Böttinger Valeria Kühne Cristina Theus Sigismondi Irina Buholzer Léon Lee Michel van der Spek Bernhard Bumann Dominique Julien Maire Guido V. VassalliMichael Curschellas Urs Meier Sven Vinther Mark de Munk Martin Noseda Daniel WeberPatrik Gilli Benjamin M. Prior Ernst WegmannAgnieszka Joanna Golynska Davide Rima Christian H. WentzelMarie-Hélène Guex

Assistant DirectorsThomas Balmer Viktor Izakowicz1) Thomas SchmidFernando Beltrán de Otálora Ivo Hubli Susanne Schweizer-HagmannThomas Blum Kurt Immer Jacobo SteinerKerstin Böttcher Harry Jääskeläinen Ludwig StierliJan Brunschwig Guido Lustenberger Marc Triebswetter1)

Enrica Cargasacchi Mirjam Meili Barbara UrsprungEdith Dennis Urs Pfister Marco VoneschJaume Domènech Jacop Rentschler Fiona Wallace-Mason Roland Ducommun Claudia Ruggli Rüegg Joachim WegmannMario Fischer Claudia Rutishauser Karl WielandUrs-Beat Fus Yasmin Sabeti Beat WolferAlejandro Garcia Soheyla Sadeghian Rudolf A. Würmli

1) From April 2012

Senior Staff

5


R

Part 2

A Consolidated Balance Sheet as of 31st March 2012 and 2011

Assets

31. 3. 2012 31. 3. 2011 Change Notes 1000 CHF 1000 CHF 1000 CHF %

Cash 13 2,313,758 299,646 2,014,112 672.2

Money market instruments 9, 13 40,000 373,842 – 333,842 – 89.3

Due from banks 9, 13, 14 524,633 1,331,949 – 807,316 – 60.6

Due from customers 1, 2, 11, 13, 14 536,326 580,673 – 44,347 – 7.6

Trading balances in securities and precious metals 3, 9, 13 1,212 829 383 46.2

Financial investments 4, 9, 13 286,009 251,050 34,959 13.9

Participations 5, 6 84,722 84,722 – –

Fixed assets 6, 7 45,694 45,972 – 278 – 0.6

Intangible assets 6 32,817 5,937 26,880 452.8

Accrued income and prepaid expenses 11,723 12,624 – 901 – 7.1

Other assets 8 34,868 64,684 – 29,816 – 46.1

Total assets 15, 16, 17 3,911,762 3,051,928 859,834 28.2

Total assets due from non-consolidated participations and significant shareholders 13,085 13,367 – 282 – 2.1

6


R

Part 2

A Consolidated Balance Sheet as of 31st March 2012 and 2011

Liabilities and shareholders’ equity


Money market instruments 32 676 – 644 – 95.3

Due to banks 13, 14 50,252 80,781 – 30,529 – 37.8

Due to customers, other 13, 14 3,345,353 2,441,482 903,871 37.0

Accrued expenses and deferred income 45,800 47,314 – 1,514 – 3.2

Other liabilities 8 51,181 53,542 – 2,361 – 4.4

Valuation adjustments and provisions 11, 12 17,416 10,267 7,149 69.6

Reserves for general banking risks 11, 12 22,769 22,769 – –

Share capital 12 10,330 10,330 – –

Capital reserve 12 4,620 4,620 – –

Reserves and retained earnings 12 336,951 337,351 – 400 – 0.1

Minority interests in shareholders’ equity 12 7,456 9,423 – 1,967 – 20.9

Consolidated net profit 12 19,602 33,373 – 13,771 – 41.3

of which minority interest in consolidated net profit 12 – 2,531 1,648 – 4,179 – 253.6

Total liabilities and shareholders’ equity 15, 17 3,911,762 3,051,928 859,834 28.2

Total liabilities due to non-consolidated participations and significant shareholders 33,840 17,526 16,314 93.1

7


R

Part 2

A Consolidated Off-Balance Sheet Transactions

as of 31st March 2012 and 2011


Contingent liabilities 1, 18 62,837 75,904 – 13,067 – 17.2

Irrevocable commitments 1, 19 7,925 5,685 2,240 39.4

Fiduciary transactions 22 1,276,939 1,476,854 – 199,915 – 13.5

Derivative instruments– positive replacement value

20, 21 24,981 51,332 – 26,351 – 51.3

– negative replacement value 43,792 48,176 – 4,384 – 9.1

– contract volume 4,200,844 2,467,896 1,732,948 70.2

8


R

Part 2

B Consolidated Income Statement for the period 1st April to 31st March

2011/12 2010/11 Change Notes 1000 CHF 1000 CHF 1000 CHF %

Interest and discount income 22,376 16,487 5,889 35.7

Interest and dividend income on financial investments 2,013 2,556 – 543 – 21.2

Interest expense – 1,076 – 1,049 – 27 2.6

Net interest income 27 23,313 17,994 5,319 29.6

Commission income on lending activities 426 628 – 202 – 32.2

Commission income on asset management 71,499 81,589 – 10,090 – 12.4

Commission income on trust and company management services 39,277 46,413 – 7,136 – 15.4

Commission income on other services 681 838 – 157 – 18.7

Commission expense – 2,332 – 2,590 258 – 10.0

Net commission income 27 109,551 126,878 – 17,327 – 13.7

Results from trading operations 24, 27 29,018 25,485 3,533 13.9

Results from the sale of financial investments – – 49 49 – 100.0

Income from non-consolidated participations 6,200 5,772 428 7.4

Real estate income 1,606 1,503 103 6.9

Total other ordinary results 27 7,806 7,226 580 8.0

Total income 27 169,688 177,583 – 7,895 – 4.4

Personnel expenses 10, 25, 27 – 105,756 – 99,811 – 5,945 6.0

Operating expenses 26, 27 – 29,434 – 31,169 1,735 – 5.6

Total operating expenses 27 – 135,190 – 130,980 – 4,210 3.2

Gross profit 27 34,498 46,603 – 12,105 – 26.0

Depreciation and write-offs of non-current assets 6 – 4,740 – 5,084 344 – 6.8

Valuation adjustments, provisions and losses 11 – 4,720 – 752 – 3,968 527.7

Result before extraordinary items and taxation 25,038 40,767 – 15,729 – 38.6

Taxation 11, 28 – 5,436 – 7,394 1,958 – 26.5

Consolidated net profit 12 19,602 33,373 – 13,771 – 41.3

of which minority interest in consolidated net profit – 2,531 1,648 – 4,179 – 253.6

9


R

Part 2

B Consolidated Statement of Cash Flows for the period 1st April to 31st March

31. 3. 2012 31. 3. 2011

Source

of fundsApplication

of fundsBalance

1000 CHF Source

of fundsApplication

of fundsBalance

1000 CHF

Consolidated net profit incl. minorities 19,602 – – 33,373 – –

Depreciation of non-current assets 4,740 – – 5,084 – –

Valuation adjustments and provisions 4,720 – – 1,750 – –

Accrued income and prepaid expenses 901 – – 497 – –

Accrued expenses and deferred income – 1,514 – 836 – –

Dividend of previous year – 32,000 – – 22,000 –

Dividend paid to minorities – 3,553 – – 3,533 –

Cash flow from operating results 29,963 37,067 – 7,104 41,540 25,533 16,007

Participations – – – 36 – –

Tangible fixed assets – 4,195 – – 4,452 –

Intangible assets – 27,167 – – 5,947 –

Cash flow from investment activities – 31,362 – 31,362 36 10,399 – 10,363

Due to banks over 90 days – – – – – –

Due from banks over 90 days – 50,649 – 79 – –

Money market instruments 334,486 – – 327,792 – –

Due to customers, other 903,871 – – – 82,594 –

Due from customers 44,347 – – – 55,929 –

Trading balances in securities and precious metals – 383 – 523 – –

Financial investments – 34,959 – – 150,072 –

Other assets 29,816 – – – 3,588 –

Other liabilities – 2,361 – 2,897 – –

Cash flow from banking operations 1,312,520 88,352 1,224,168 331,291 292,183 39,108

Cash – 2,014,112 – 37,423 – –

Due from banks up to 90 days 857,965 – – – 118,901 –

Due to banks up to 90 days – 30,529 – 37,600 – –

Other positions – – 974 – – 874 –

Liquidity 857,965 2,043,667 – 1,185,702 75,023 119,775 – 44,752

Total source of funds 2,200,448 – – 447,890 – –

Total application of funds – 2,200,448 – – 447,890 –

10


R

Part 2

C Notes to the Consolidated Financial Statements

Information on the Balance Sheet

1 Listing of collateral of loans and off-balance sheet transactions

Mortgage collateral

Other collateral

Without collateral Total

1000 CHF 1000 CHF 1000 CHF 1000 CHF

Due from customers – 497,539 38,787 536,326

Total loans Current year – 497,539 38,787 536,326

Previous year – 544,374 36,299 580,673

Contingent liabilities – 62,833 4 62,837

Irrevocable commitments – – 7,925 7,925

Total off-balance sheet transactions Current year – 62,833 7,929 70,762

Previous year – 75,890 5,699 81,589

2 Endangered receivables

Gross debt

amount

Estimated realisable

value of collateral

Net debt

amountIndividual

provisions 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Total bad and doubtful debts Current year – – – –

Previous year – – – –

3 Trading balances in securities and precious metals


Shares 1,212 829 383 46.2

Trading balances in securities and precious metals 1,212 829 383 46.2

4 Financial investments

Book value Fair value 31. 3. 2012 31. 3. 2011 31. 3. 2012 31. 3. 2011 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Interest bearing securities / accrual method 67,787 103,483 69,112 105,163

Precious metals 218,222 147,567 218,222 147,567

Total financial investments 286,009 251,050 287,334 252,730

of which eligible for repo based on liquidity requirements 64,290 52,085 – –

11


R

Part 2


5 Participations

Consolidated participations

Name Domicile Business activity

Share capital

in 1000

Partici- pation

of votes in %

Partici- pation

of capital in %

Rothschild Bank (C.I.) Ltd. Guernsey Bank 27,000 CHF 100.00 100.00

Equitas SA Geneva Asset management 1,000 CHF 90.00 90.00

Rothschild Advisory Partners AG Zurich Advisory services 2,000 CHF 100.00 100.00

Rothschild Vermögensverwaltungs-GmbH Frankfurt Asset management 250 EUR 100.00 100.00

RBZ Treuhand AG Zurich Fiduciary services 100 CHF 100.00 100.00

Creafin AG Zurich Asset management 100 CHF 100.00 100.00

Sagitas AG Glarus In liquidation 100 CHF 100.00 100.00

Anterana Holdings AG Glarus Fiduciary services 100 CHF 100.00 100.00

Rothschild Wealth Management (Singapore) Ltd. Singapore Asset management 500 SGD 100.00 100.00

Rothschild Wealth Management (Hong Kong) Ltd. Hong Kong Asset management 10,000 HKD 100.00 100.00

Rothschild Private Trust Holdings AG Zurich Holding 5,000 CHF 56.84 56.84

Rothschild Trust (Schweiz) AG Zurich Trust services 500 CHF 100.00 100.00

RTS Geneva SA Geneva Trust services 100 CHF 100.00 100.00

Master Nominees Tortola Nominee services – USD 100.00 100.00

Rothschild Trust Cayman Ltd. George Town Trust services 400 KYD 100.00 100.00

Rothschild Trust BVI Ltd. Tortola Trust services 250 USD 100.00 100.00

RTB Trustees Tortola Trust services – USD 100.00 100.00

Rothschild Trust (Singapore) Ltd. Singapore Trust services 987 SGD 100.00 100.00

Rothschild Trust Corp. Ltd. London Trust services 250 GBP 100.00 100.00

Rothschild Nominees London Nominee services – GBP 100.00 100.00

Rothschild Trust Guernsey Ltd. Guernsey Trust services 3,500 GBP 100.00 100.00

Rothschild Trust (Bermuda) Ltd. Bermuda Trust services – USD 100.00 100.00

Rothschild Trust Canada Inc. Charlottetown Trust services 10 CAD 100.00 100.00

Rothschild Trust Financial Services Ltd. St. Peter Port Trust services – GBP 100.00 100.00

Rothschild Trust New Zealand Ltd. Auckland Trust services – NZD 100.00 100.00

Rothschild Trust Protectors Ltd. Charlottetown Trust services – CAD 100.00 100.00

12


R

Part 2


Non-consolidated participations


Non-consolidated participations without market value 84,722 84,722 – –

Total non-consolidated participations 84,722 84,722 – –

Major non-consolidated participations

Name DomicileBusiness activity

Share capital

in 1000

Partici- pation

of votes in %

Partici- pation

of capital in %

Rothschild Bank International Ltd. Guernsey Bank 5000 GBP 0.00 40.00

The investment in Rothschild Bank International Ltd. (RBI), formerly NM Rothschild & Sons (CI) Ltd., Guernsey, has a book value of CHF 83.3 million (preferred shares without voting rights). RBI is an affiliated company, which is controlled by Rothschilds Continuation Holdings AG, Zug.

6 Participations and fixed assets

Historical cost

Accu- mulated depreciation

write-offs

Book value

previous year

Re- classi-

fications Additions

Disposals/ Forex

impact

Depre- ciation/

Valuation adjustments

Book value

current year

1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Other participations 84,722 – 84,722 – – – – 84,722

Total participations 84,722 – 84,722 – – – – 84,722

Bank buildings 51,383 34,383 17,000 – – – – 17,000

Other properties 27,092 16,092 11,000 – – – – 11,000

Outfitting costs 25,014 10,927 14,087 – 2,853 – 11 2,671 14,280

Other fixed assets 11,538 7,653 3,885 – 1,342 40 1,773 3,414

Total fixed assets 115,027 69,055 45,972 – 4,195 29 4,444 45,694

IT platform (host system) 5,203 – 5,203 – 26,685 – – 31,888

Other intangible assets 3,469 2,735 734 – 482 – 9 296 929

Total intangible assets 8,672 2,735 5,937 – 27,167 – 9 296 32,817

Total 208,421 71,790 136,631 – 31,362 20 4,740 163,233

7 Fire insurance value

31. 3. 2012 1000 CHF

31. 3. 2011 1000 CHF

Fire insurance value of real estate 94,681 93,190

Fire insurance value of other fixed assets 71,543 79,868

13


R

Part 2


8 Other assets and other liabilities

31. 3. 2012 31. 3. 2011

Other assets

Other liabilities

Other assets

Other liabilities

1000 CHF 1000 CHF 1000 CHF 1000 CHF

Replacement values of all derivative financial instruments 24,781 43,792 51,332 48,176

Compensation accounts, stamp duty, VAT, withholding tax 2,801 3,459 2,569 3,057

Due from Trust customers 5,693 – 9,289 –

Other assets and liabilities 1,593 3,930 1,494 2,309

Total other assets and other liabilities 34,868 51,181 64,684 53,542

9 Indication of pledged or assigned assets to secure own commitments and of assets with reservation of title

Pledged or ceded assets and assets with reservation of title without securities lending and borrowing and without repurchase and reverse repurchase agreements

31. 3. 2011 31. 3. 2011

Book valueof which

used Book valueof which

used 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Money market instruments 40,000 – 29,956 –

Due from banks 40,784 11,764 17,117 2,299

Securities 64,290 – 94,969 –

Total 145,074 11,764 142,042 2,299

10 Disclosure of liabilities to Rothschild Bank pension plan

Swiss pension plans

BVG pension schemeAdditional supporting

foundation 31. 3. 2012 31. 3. 2011 31. 3. 2012 31. 3. 2011 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Cover margin according Swiss GAAP FER 16 9,554 15,794 5,265 5,791

Excess in relation to disclosed liabilities in % 5.7 % 9.8 % 25.9 % 28.2 %

Economic benefit – – – –

Economic liability – – – –

The disclosures are based on the annual accounts of the pension schemes as of 31. 12. 2011 and 31. 12. 2010 respectively.

14


R

Part 2


NMR Overseas Pension Plan

The Group’s subsidiaries Rothschild Bank (CI) Ltd., Guernsey (“RBCI”), and Rothschild Trust Guernsey Ltd., Guernsey (“RTG”), participate in the NMR Overseas Pension Fund, a defined benefit scheme operated for the benefit of employees of certain Rothschild Group entities outside the United Kingdom and outside of Switzerland. A funding valuation (which is being prepared at least every three years) of the scheme as of 31st March 2009 revealed a funding deficit of GBP 15.9 million. The Board of Trustees has agreed that annual contributions of GBP 2.1 million should be paid to the scheme from 31st March 2009 to 31st March 2019. The proportion to be carried by RBCI and RTG amounts to GBP 1 million p.a. or 46% of the total contributions.

As restructuring measures were agreed, the economic liability was determined based on the net present value of the future extraordinary contributions. The provision has been increased by CHF 3.3 million to CHF 9.2 million. In the case of a recovery of the Plan, the decision of the Board of Trustees maybe unwound.


foundation Total 31. 3. 2012 31. 3. 2011 31. 3. 2012 31. 3. 2011 31. 3. 2012 31. 3. 2011 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Employer contribution reserve not capitalised 598 598 – – 598 598

All employees of Rothschild Bank and its Swiss subsidiaries are members of a definied contribution pension scheme, which covers the mandatory benefits specified in the BVG and super-obligatory benefits. A second supporting foundation provides further supplementary super-obligatory benefits.

Due to pension schemes amount to CHF 2.1 million (last year : CHF 11.3 million).

11 Valuation adjustments and provisions, reserves for general banking risks

Balance previous

year

Usage in conformity with their

purpose

Recoveries, overdue interest, currency

differences

New creation,

charged to income

statement

Reversals, credited to

income statement

Balance current

year 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Provisions for deferred taxes 3,425 – – – – 3,425

Provisions for pension obligations 5,997 – – 104 3,265 – 9,158

Other provisions 845 – 90 – 5 4,083 – 4,833

Total valuation adjustments and provisions 10,267 – 90 – 109 7,348 – 17,416

Total valuation adjustments and provisions as per balance sheet 10,267 – – – – 17,416

Reserves for general banking risks 22,769 – – – – 22,769

Statutory accounts include hidden reserves according to para. 30 Swiss Banking GAAP. These are treated under reserves for general banking risks in the consolidated true and fair accounts.

15


R

Part 2


12 Statement of changes in shareholders’ equity

1000 CHF

Share capital 10,330

Capital reserve 4,620

Reserves and retained earnings 337,351

Minority interest in shareholders’ equity 9,423

Reserves for general banking risks 22,769

Consolidated net profit incl. minority interests 33,373

Shareholders’ equity at beginning of current year 417,866

Dividends paid – 32,000

Dividends paid to minorities – 3,553

Translation adjustments – 187


Shareholders’ equity at end of current year 401,728


Capital reserve 4,620

Reserves and retained earnings 336,951

Minority interest in shareholders’ equity 7,456




16


R

Part 2


13 Maturity structure of current assets, financial investments and liabilities

At sightRedeemable

by notice

Maturity within

3 months

Maturity within 3–

12 months

Maturity within

1–5 years

Maturity after

5 yearsTotal

31. 3. 2012 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Cash 2,313,758 – – – – – 2,313,758

Money market instruments – – 40,000 – – – 40,000

Due from banks 449,588 – 5,925 69,120 – – 524,633

Due from customers 32,591 235,105 157,531 102,216 8,883 – 536,326

Trading balances in securities and precious metals 1,212 – – – – – 1,212

Financial investments 218,222 – 1,808 16,529 49,450 – 286,009

Total current assets 3,015,371 235,105 205,264 187,865 58,333 – 3,701,938

Previous year 812,186 97,961 1,480,045 352,636 95,161 – 2,837,989

Money market instruments 32 – – – – – 32

Due to banks 50,252 – – – – – 50,252

Due to customers, other 3,326,444 – 13,845 5,064 – – 3,345,353

Total borrowed funds current year 3,376,728 – 13,845 5,064 – – 3,395,637

Previous year 2,319,257 180,935 2,709 20,038 – – 2,522,939

14 Disclosure of amounts due from and due to affiliated companies as well as loans and exposures to directors and senior executives


Claims against affiliated companies 75,754 10,505 65,249 621.1

Liabilities against affiliated companies 1,234 1,844 – 610 – 33.1

Loans and exposures to directors and senior executives 30,981 45,718 – 14,737 – 32.2

Transactions with affiliated persons and companies (in particular parent and subsidiary companies) such as securities transactions, granting loans and account interest are carried out at the conditions offered to third parties. Members of the Executive Committee (ExC) and the internal audit department are offered the Bank’s normal conditions for employees. Members of the Board are charged at least the Bank’s normal conditions for employees.

17


R

Part 2


15 Balance sheet by domestic and foreign origin

31. 3. 2012 31. 3. 2011 Domestic Foreign Total Domestic Foreign Total 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Assets

Cash 2,313,751 7 2,313,758 299,642 4 299,646

Money market instruments 40,000 – 40,000 329,740 44,102 373,842

Due from banks 94,037 430,596 524,633 492,955 838,994 1,331,949

Due from customers 50,418 485,908 536,326 39,580 541,093 580,673

Trading balances in securities and precious metals – 1,212 1,212 – 829 829

Financial investments 221,214 64,795 286,009 157,556 93,494 251,050

Participations 50 84,672 84,722 50 84,672 84,722

Fixed assets 45,148 546 45,694 45,098 874 45,972

Intangible assets 32,194 623 32,817 5,645 292 5,937

Accrued income and prepaid expenses 10,075 1,648 11,723 11,048 1,576 12,624

Other assets 31,243 3,625 34,868 53,063 11,621 64,684

Total assets 2,838,130 1,073,632 3,911,762 1,434,377 1,617,551 3,051,928


Money market instruments 32 – 32 676 – 676

Due to banks 10,938 39,314 50,252 59,734 21,047 80,781

Due to customers, other 570,796 2,774,557 3,345,353 460,492 1,980,990 2,441,482

Accrued expenses and deferred income 44,615 1,185 45,800 44,417 2,897 47,314

Other liabilities 41,966 9,215 51,181 47,880 5,662 53,542

Valuation adjustments and provisions 4,920 12,496 17,416 3,925 6,342 10,267

Reserves for general banking risks 22,769 – 22,769 22,769 – 22,769

Share capital 10,330 – 10,330 10,330 – 10,330

Capital reserve 4,620 – 4,620 4,620 – 4,620

Reserves and retained earnings 344,407 – 344,407 346,774 – 346,774

Consolidated net profit 19,602 – 19,602 33,373 – 33,373

Total liabilities and shareholders’ equity 1,074,995 2,836,767 3,911,762 1,034,990 2,016,938 3,051,928

18


R

Part 2


16 Geographical analysis of assets

31. 3. 2012 31. 3. 2011 1000 CHF Share in % 1000 CHF Share in %

Europe 3,576,760 91.5 2,629,258 86.2

America 263,309 6.7 366,672 12.0

Asia, Australia, New Zealand 58,751 1.5 49,912 1.6

Others 12,942 0.3 6,086 0.2

Total 3,911,762 100.0 3,051,928 100.0

19


R

Part 2


17 Balance sheet by currencies in 1000 CHF

CHF EUR GBP USD AUD Other Total

31. 3. 2012

Assets

Cash 2,312,796 738 61 89 – 74 2,313,758

Money market instruments 40,000 – – – – 40,000

Due from banks 42,211 238,389 19,939 122,012 912 101,170 524,633

Due from customers 83,805 214,985 115,636 101,428 1,362 19,110 536,326

Trading balances in securities and precious metals – 24 – 1,188 – – 1,212

Financial investments 27,988 39,799 – – – 218,222 286,009

Participations 84,722 – – – – – 84,722

Fixed assets 45,175 193 170 – – 156 45,694

Intangible assets 32,766 – 51 – – – 32,817

Accrued income and prepaid expenses 7,601 1,756 1,999 201 7 159 11,723

Other assets 30,845 1,030 2,987 – – 6 34,868

Total on balance assets 2,707,909 496,914 140,843 224,918 2,281 338,897 3,911,762

Contingent assets from forex spot, forex forward and forex options transactions 279,913 642,596 510,376 1,964,391 43,610 248,890 3,689,776

Total assets 2,987,822 1,139,510 651,219 2,189,309 45,891 587,787 7,601,538


Money market instruments 32 32

Due to banks 8,341 8,098 5,786 21,578 1,307 5,142 50,252

Due to customers, other 448,375 520,299 401,656 1,561,588 9,937 403,498 3,345,353

Accrued expenses and deferred income 43,326 142 2,323 1 2 6 45,800

Other liabilities 50,503 9 660 – – 9 51,181

Valuation adjustments and provisions 16,421 995 – – – – 17,416

Reserves for general banking risks 22,769 – – – – – 22,769

Share capital 10,330 – – – – – 10,330

Capital reserve 4,620 – – – – – 4,620

Reserves and retained earnings 344,407 – – – – – 344,407

Consolidated net profit 19,602 – – – – – 19,602

Total on balance liabilities 968,726 529,543 410,425 1,583,167 11,246 408,655 3,911,762

Contingent liabilities from forex spot, forex forward and forex options transactions 2,058,970 603,976 231,989 604,957 35,561 172,912 3,708,365

Total liabilities and shareholders’ equity 3,027,696 1,133,519 642,414 2,188,124 46,807 581,567 7,620,127

Net position per currency – 39,874 5,991 8,805 1,185 – 916 6,220 –

20


R

Part 2


Information on Off-Balance Sheet Transactions

18 Analysis of contingent liabilities


Guarantees and letters of credit 62,837 75,904 – 13,067 – 17.2

19 Irrevocable commitments


Liability against the Swiss deposit guarantee 4,570 3,746 824 22.0

Other 3,355 1,939 1,416 73.0

20 Outstanding derivative instruments

Trading instruments Replacement value Contract

volume positive negative 1000 CHF 1000 CHF 1000 CHF

Foreign exchange

Forwards 20,194 39,007 3,437,848

Options (OTC) 4,787 4,785 762,996

Total before consideration of netting contracts

Current year 24,981 43,792 4,200,844

Previous year 51,332 48,176 2,467,896

There were no hedging instruments and no netting agreements open at current and previous business year-end.

21 Analysis of counterparties of derivative instruments

31. 3. 2012 31. 3. 2011 Replacement value Contract

volume Replacement value Contract

volume positive negative positive negative 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Banks and derivative exchanges

– with duration up to 1 year 13,965 26,413 2,790,234 29,092 13,338 1,143,451

Customers with collateral 11,016 17,379 1,410,610 22,240 34,838 1,324,445

Total 24,981 43,792 4,200,844 51,332 48,176 2,467,896

21


R

Part 2


22 Analysis of fiduciary transactions


Fiduciary placements with third-party banks 1,101,906 1,325,937 – 224,031 – 16.9

Fiduciary placements with affiliated banks 175,033 149,589 25,444 17.0

Fiduciary credits and other fiduciary transactions – 1,328 – 1,328 – 100.0

Total 1,276,939 1,476,854 – 199,915 – 13.5

23 Client assets

31. 3. 2012 31. 3. 2011 Change CHF Mio. CHF Mio. CHF Mio. %

Type of client assets

Other client assets 7,054 6,935 119 1.7

Fund assets managed by RBZ Group 216 231 – 15 – 6.5

Assets with management mandate 5,986 5,634 352 6.2

Total client assets (incl. double count) 13,256 12,800 456 3.6

thereof double count 216 231 – 15 – 6.5

Net new assets 971 714 257 36.0

Custody assets 5,549 4,819 730 15.1

Client assets include deposits as well as the market value of securities, precious metals and fiduciary investments. Net new assets consist of all external cash deposits and withdrawals on client accounts as well as all external in- and outflows from / into client deposits. Interest and dividend income are not taken into account.

Assets with management mandate cover both assets deposited with Group companies and assets deposited at third-party institutions for which the Bank holds a management mandate.

Custody assets include assets for which the Bank provides custody services only. These relate mainly to assets from Group Companies. In addition, assets from the Banks’ pension schemes and assets of employees are included.

22


R

Part 2

Information on the Income Statement


24 Result from trading operations

2011/12 2010/11 Change 1000 CHF 1000 CHF 1000 CHF %

Profit on foreign exchange and bank notes 26,935 24,015 2,920 12.2

Profit on bullion transactions 1,276 623 653 104.8

Profit on securities 807 847 – 40 – 4.7

Total 29,018 25,485 3,533 13.9

25 Personnel expenses


Salaries and allowances – 80,798 – 77,155 – 3,643 4.7

Social security contributions – 4,697 – 4,492 – 205 4.6

Pension contributions – 13,404 – 11,783 – 1,621 13.8

Other personnel expenses – 6,857 – 6,381 – 476 7.5

Total – 105,756 – 99,811 – 5,945 6.0

Staff Rothschild Bank AG 257 225 32 14.2

Staff Rothschild Bank AG and subsidiaries 452 401 51 12.7

26 Other operating expenses


Occupancy expenses – 3,893 – 4,663 770 – 16.5

Cost of IT, machinery, furniture, vehicles and other equipment – 6,863 – 6,214 – 649 10.4

Printing and postage – 1,007 – 926 – 81 8.7

Research, communication and public relations – 5,885 – 5,428 – 457 8.4

Insurance – 1,999 – 2,180 181 – 8.3

Travel and entertainment – 5,496 – 5,720 224 – 3.9

Legal, audit, consultancy and regulatory fees – 4,136 – 5,852 1,716 – 29.3

Other operating expenses – 155 – 186 31 – 16.7

Total – 29,434 – 31,169 1,735 – 5.6

23


R

Part 2


27 Gross profit by domestic and foreign origin

2011/12 2010/11 Domestic Foreign Total Domestic Foreign Total 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Net interest income 20,842 2,471 23,313 16,074 1,920 17,994

Net commission income 86,660 22,891 109,551 93,843 33,035 126,878

Results from trading operations 26,979 2,039 29,018 23,608 1,877 25,485

Other ordinary results 7,023 783 7,806 11,211 – 3,985 7,226

Total gross income 141,504 28,184 169,688 144,736 32,847 177,583

Personnel expenses – 92,949 – 12,807 – 105,756 – 84,968 – 14,843 – 99,811

Other operating expenses – 22,740 – 6,694 – 29,434 – 23,073 – 8,096 – 31,169

Total operating expenses – 115,689 – 19,501 – 135,190 – 108,041 – 22,939 – 130,980

Gross profit 25,815 8,683 34,498 36,695 9,908 46,603

28 Taxation


Deferred tax expense 5 294 – 289 – 98.3

Costs for current income and capital taxes – 5,441 – 7,688 2,247 – 29.2

Total – 5,436 – 7,394 1,958 – 26.5

Unrecognised tax assets on losses 2,962 3,018 – 56 – 1.9

24


R

Part 2

General PrinciplesThe consolidated financial statements have been prepared in accordance with the Swiss Bank Accounting Guidelines of the Swiss Financial Market Supervisory Authority (BAG-FINMA).

The Group accounts present a true and fair view of the financial position of the Group, and of the results of its operations and its cash flows in compliance with the accounting rules applicable for banks.

Consolidated CompaniesSubsidiaries are entities controlled by the Bank. Control exists when the Group has the power, directly or indirectly, usually based on a participation of over 50 % of voting capital, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Method of ConsolidationThe Group’s capital consolidation is prepared in accordance with the purchase method.

Change in the Scope of ConsolidationThere are no changes in the scope of consolidation.

Accounting and Recording of TransactionsAll transactions effected up to and including the balance sheet date are accounted for on the trade date and are, from this date on, stated and assessed according to the principles laid out below.

Foreign Currency Translation of the Financial StatementsIncome statements of foreign entities are translated into the Group’s reporting currency at average exchange rates for the period and their balance sheets are translated at the exchange rate at the end of the period. Foreign exchange differences arising from the translation are recognised directly as a separate component of equity. On disposal of a foreign entity, these translation differences are recognised in the income statement as part of the gain or loss on sale.

Transactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Swiss Francs at the foreign exchange rate ruling at the balance sheet date. Foreign exchange differences are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at the foreign exchange rates ruling at the dates the fair value was determined.

The following rates prevailing on the balance sheet date were used for foreign currency translations:

Foreign exchange rates used2011/12 2010/11

Spot rate Average rate Spot rate Average rateEUR 1.2058 1.2141 1.2998 1.3300GBP 1.4448 1.4072 1.4704 1.5619USD 0.9005 0.8778 0.9125 1.0041

D Consolidation, Accounting and Valuation Principles

25


R

Part 2


Cash, Due from and to Banks, Due to Customers and Money Market InstrumentsAssets and liabilities are stated in the balance sheet at their nominal value.

Due from CustomersDue from customers are stated in the balance sheet at their nominal value. Claims – taking all off-balance sheet items into account – which the debtor will be unlikely to satisfy in future are covered by individual provisions. These are classified as non-performing if interest and capital payments are overdue for more than 90 days. Individual provisions are deducted directly from the corresponding asset positions.

Claims rated as uncollectible are written off against the individual provisions made.

Trading Portfolios in Securities and Precious MetalsSecurities and precious metals in trading portfolios are in principle stated at the fair value. The price obtained on a price-efficient and liquid market is taken as the fair value, which as a rule corresponds to the market value.

If in exceptional cases there is no fair value available, securities and precious metals in trading portfolios will be valued and stated at the lower of cost or market.

Interest, discount and dividend income from trading securities are set off against refinancing expenses and booked as income from trading operations.

Financial InvestmentsFixed income securities that are planned to be held until maturity are valued by the accrual method. Premiums and discounts are amortised over the remaining life of the respective security and are recognised in interest and dividend income on financial investments. Other financial investments are valued at the lower of cost or market value.

Non-consolidated ParticipationsAn associate is an entity in which the Group has significant influence, but no control over the operating and financial management policy decisions. This is generally demonstrated by the Group holding in excess of 20 %, but no more than 50 %, of the voting rights. The Group’s investments in associates are initially recorded at cost. Subsequently their value is increased or decreased by the Group’s share of the post-acquisition profit or loss, or by other movements reflected directly in the equity of the associate. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

All other participations without a significant influence are stated at cost less necessary depreciation.

Fixed Assets Fixed assets are valued at cost less depreciation over an expected useful lifetime of maximum ten years for fitout costs and maximum six years for other tangible fixed assets and maximum three years for IT assets. Bank buildings and other properties are depreciated to a base level generally accepted by the tax authorities. The value is reviewed on a regular basis. If a review reveals an impairment in value, an additional, unscheduled write-off is made. The remaining book value is subsequently written down over the residual useful lifetime. If the review reveals a change in the useful lifetime, the remaining book value is written down as planned over the adjusted useful life. Small investment outlays are charged directly to operating expenses at the time of purchase.

26


R

Part 2

Intangible AssetsIntangible assets acquired are stated at cost less depreciation over a measurable useful life of maximum three years for IT software and ten years for the components of the IT platform (host system). Review and adjustments of value are carried out in the same way as with tangible assets. Small investment outlays are charged directly to operating expenses at the time of purchase.

Derivative InstrumentsDerivative financial instruments are stated at fair value. The positive and negative replacement values are included in the balance sheet under other assets and other liabilities. Unrealised/realised gains are included in results from trading operations. All derivative financial instruments are allocated to the trading book.

Liabilities to Pension PlansPension liabilities are treated according to Swiss GAAP FER 16 (accounting standard for pension benefit obligations relevant for Swiss Banking GAAP). The employer’s contributions according to the defined contribution pension plans are included within personnel expenses. Employer contribution reserves (prepaid pension contributions paid by the employer) are not capitalised.

Valuation Adjustments and ProvisionsClaims that a debtor is unlikely to satisfy in future are covered by individual valuation adjustments. Individual valuation adjustments are deducted directly from the corresponding asset positions. Individual valuation adjustments and individual provisions are made for all other recognisable loss risks according to a concept of prudence.

Interest Income and ExpenseInterest income and expense are recognised in the income statement for all interest bearing instruments on an accrual basis.

Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. Interest including accrued interest that are due but unpaid for more than 90 days are considered as being at risk and an appropriate provision is established.

Fee and Commission Income and ExpenseThe Group earns fee and commission income from services provided to clients. Fee income from advisory and other services can be divided into two broad categories; fees earned from services that are provided over a period of time, which are recognised over the period in which the service is provided; and fees that are earned on completion of a significant act or on the occurrence of an event, such as the completion of a transaction, which are recognised when the act is completed or the event occurs.

Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. Commission including accrued commission that are due and unpaid for more than 90 days are considered as being at risk and an appropriate allowance is established.

Portfolio and other management advisory and service fees are recognised based on the applicable service contracts. Asset management fees related to investment funds are recognised over the period the service is provided. The same principle is applied to the recognition of income from wealth management, financial planning and custody services that are continuously provided over an extended period of time.


27


R

Part 2


Operating Lease and Rental AgreementsThe Group has entered into operating leases in respect of equipment. The total payments made under operating leases are charged to the income statement on a straight-line basis over the period of the leases. There are no claims or commitments from finance leases.

Income Tax Current taxes are recurring taxes on capital and income. Current taxes are determined in accordance with the local fiscal regulations on ascertaining profits and capital tax and are stated as expenses during the accounting period. Taxes owed are recorded as accrued expenses.

Deferred taxes arise when valuation principles other than those relevant from the fiscal law perspective are used in drawing up consolidated annual financial statements. Deferred tax liabilities are booked under provisions and valuation adjustments and any changes are recognised in the income statement.

Fiduciary Placement Activities The Group acts as custodian and in other fiduciary capacities that result in the holding or placing of assets on behalf of customers. These assets and the interest income arising therefrom are excluded from these financial statements, as they are not assets of the Group.

Contingent Liabilities and Fiduciary OperationsTransactions resulting from these activities are stated off-balance sheet at their face value. For recognisable risks, provisions are made and recorded under liabilities.

Changes in Accounting and Valuation PrinciplesThere were no changes in accounting and valuation principles.

28


R

Part 2

General PrinciplesThe Board of Directors of the Bank is responsible for the stipulation of the risk policy. The Board of Directors has released a risk policy, which both takes into account the circumstances of the business activities of the Bank and its subsidiaries and also reflects the capital funds situation of the Group, the interest of the shareholders and the regulatory environment. The risk policy is constantly monitored and amended if necessary.

The formal methodology of the risk policy relates primarily to the observance of quantitative risk limits, especially for credit and market risks, and to the qualitative aspects of risk diversification and of working procedures for reducing operational risks. At the same time, great importance is attached to the risk awareness of the management bodies and all Group staff. Hence the Board of Directors and the Executive Committee pursue an open risk culture which is also implemented by responsible, careful and professional behaviour from all employees. The Group consciously depends on the personal integrity, specialist competence and risk awareness of each individual and undertakes the necessary steps.

The implementation of the risk policy is delegated to the Executive Committee. Management is supported in this by a risk control unit which is independent from trading and client-related services and monitor compliance with limits and the risk policy.

Credit RisksCredit risk describes the potential for loss as a result of insolvency of a client or counterparty. A potential loss arises in particular when maturing loans or other obligations to payment are not repaid or cannot be repaid when due. For this reason loans and other credits are only granted after taking into account fundamental principles of caution. Since the banking business is strongly focused on private banking, loans are mainly granted against collateral in the form of pledged investment portfolios.

The competencies for loans approvals and the monitoring of credit positions are subject to clear rules and supervised by people who are independent of the client advisors. The Board of Directors and the Executive Committee have laid down clear guidelines for loanable values and the pledging of assets (collateral). In general, assets serving as collateral are held in the Bank’s custody and pledged in favour of the Bank under contractual agreements. The loanable values of the pledged assets, which are derived from market values, are compared daily to the loan commitments secured and are subject to constant monitoring. If coverage threatens to become insufficient, steps are taken to reestablish the necessary loanable value. If in exceptional cases no published market value is available for pledged assets, internal valuations calculated using standard banking methods will be applied. General principles have also been set out that aim for appropriate diversification of loan commitments and collateral. The concentration of risks on one client or counterparty or on one group of linked clients or counterparties is constantly monitored. Appropriate measures are taken to avoid the emergence of large exposures.

Counterparties are defined as banks or brokers with which the Bank trades or from which it purchases services. Counterparties are carefully selected on the basis of their creditworthiness, drawing on external ratings. Internal limits have to be approved by the competent bodies according to the risk policy and internal guidelines.

Liquidity RiskLiquidity risk describes the risk that in some circumstances, for example changed market conditions, the Bank might not be able to meet all its payment obligations as they fall due. The Bank maintains committed liquidity facilities with clearing institutions for the exceptional event that counterparties or clients do not meet their payment obligations punctually. Compliance with the liquidity rules as set out in the Banking Ordinance is constantly monitored.

E Notes on Risk Management

29


R

Part 2


Market RiskMarket risk describes the risk that the Bank could suffer losses as a result of changes on the financial markets (interest rates, FX rates, share prices). The business policy of the Bank is to only permit open market risk positions to a small degree in relation to client business volumes and available capital funds.

Trading positions are valued daily. Calculation of risk positions and monitoring of compliance with the limits is performed by a team independent from the trading department.

The Treasury Committee manages interest rate risk in the banking book and monitors the balance sheet structure.

Operational RiskOperational risk entails the possibility that losses may be incurred directly or indirectly due to the inappropriateness or failure of internal procedures, persons or systems or due to external events that cannot be influenced. In accordance with best practice standards in banking and the Bank’s dedication to ensure high quality services for its clients, the Executive Committee has implemented a set of processes and work flows by means of internal policies and procedures on organisation setup and controls, which are designed to maintain operational security at a high level. Particular attention is given to the quality and skills of staff, the segregation of duties, the careful selection of counterparties and the security of the central computer systems and networks. The Internal Audit department reviews the procedures and internal controls at regular intervals. Due to an escalation procedure it is assured that the responsible line management is adequately involved in the reporting and analyses process.

The Group has outsourced the operation of its computer systems to Banque Privée Edmond de Rothschild in Geneva. Both banks subscribe to high security standards developed to ensure that bank-client confidentiality is maintained.

The Board of Directors has considered the main operational risks of the Group and has issued guidelines (principles) for the measurement and limitation of operational risk.

Legal Risks and ComplianceIn order to monitor legal and regulatory risks, the Bank maintains a Legal and Compliance Department. These ensure that the Bank’s business activities are conducted in accordance with the applicable regulations and the obligation of financial intermediaries to observe due diligence. If required, external legal advice is sought.

30


R

Part 2

Capital Adequacy Disclosures


Eligible and mandatory capital


Gross capital 374,670 384,493 – 9,823 – 2.6

of which minority interests 7,456 9,423 – 1,967 – 20.9

Deductions from the core capital – 77,267 – 84,722 7,455 – 8.8

Eligible equity 297,403 299,771 – 2,368 – 0.8

Credit risk (international standard approach) 37,474 48,498 – 11,024 – 22.7

Non-counterparty-related risk 6,281 4,153 2,128 51.2

Market risk (Swiss standard approach) 4,701 3,864 837 21.7

Operational risk (basis indicator method) 27,007 27,658 – 651 – 2.4

SA-BIS and IRB approach: Additional capital requirement for non-counterparty-related risk and credit risk (multiplicators according to art. 64 und 65 CAO). 16,310 13,155 3,155 24.0

Required equity 91,773 97,328 – 5,555 – 5.7

Equity cover ratio 3.24 3.08 0.16 5.2

BIS-ratio 0.26 0.25 0.01 5.2

The required information according to the FINMA Circular 08/22 is disclosed in the notes on risk managment (qualitative information) and in the above table (quantitative information). Additional information is available on www.rothschildbank.com

31


R

Part 2

Rothschild Bank AG is an independent Swiss bank specialising in private banking and asset management. Consequently the most important contributions to income are derived from commissions and the provision of services. As a result of the links between its shareholders who are members of the Rothschild family, the Bank is also a member of an important worldwide group that has the benefit of farreaching resources and knowledge in the field of financial services.

The most important services that are offered within private banking are the management of accounts in all convertible currencies, the management and safekeeping of securities and precious metals, trading in currencies, securities and derivatives, secured lending and the provision of structures for the safeguarding and transfer of private wealth. The accounts are managed at the head office in Zurich and within the subsidiaries, Rothschild Bank (CI) Ltd., in Guernsey, Equitas SA, in Geneva, Rothschild Vermögensverwaltungs-GmbH in Frankfurt, Rothschild Wealth Management (Singapore) Ltd. in Singapore and Rothschild Wealth Management (Hong Kong) Ltd. in Hong Kong. In addition Rothschild Bank AG is represented through the worldwide network of the Rothschild Group.

It has been the principle of Rothschilds for generations that clients and their needs are of the highest importance. This principle, together with the personal relationship between the client and the portfolio manager, forms the foundation for successful capital growth and protection.

Portfolio ManagementIn addition to active investment advisory services for clients, the core competence lies in asset management tailored to the individual needs of clients. The investment philosophy of Rothschild Bank Zurich is aimed at the development of long-term solutions. The dynamic asset management process is designed for the evaluation of broad individual client needs and for their special requirements. This process takes place within the investment policy of the Bank that reflects the guidelines and instructions of the client and minimises the investment risks. The investment process is systematically organised and simple to understand. In investment advisory services as well as in asset management we make use of fundamental and financial analysis developed by specialists of the worldwide Rothschild Group. An internal investment committee reviews their recommendations. To ensure an ideal asset allocation, the Bank utilises both outstanding third party products as well as first class products developed by the Rothschild Group.

Trust and Company Management ServicesTrust and corporate services are largely provided by subsidiaries of Rothschild Private Trust Holdings AG. This company holds various subsidiaries, both in Switzerland, Guernsey and in a large number of other jurisdictions, which are specialised in the formation and management of trusts, foundations and corporate vehicles for private clients. This activity is a traditional service provided by the Rothschild Group. The trust specialists have the benefit of considerable experience over many years, in the structuring and management of trusts and foundations in many jurisdictions, which bring significant benefits for the transfer of wealth between generations of clients. These services make it possible to meet the needs of a widely distributed international clientele through the selection of the most beneficial and flexible vehicles and taking account of the individual’s personal preferences, tax, and legal situation.

Business and Services Provided by Rothschild Bank AG Zurich and Subsidiaries

32


R

Part 2

TradingThe provision of portfolio management services is supported by specialists and the necessary infrastructure in the trading department of the Bank. This allows quick execution and processing of orders in foreign exchange, fiduciary deposits and securities transactions on good terms in all the major financial centres as well as in investment funds and derivatives as instruments for investment management and risk. Rothschild Bank AG is a licenced securities dealer, an associated member of the Swiss Stock Exchange and a member of the German Stock Exchange Xetra.

Lombard LendingWithin the context of overall investment management and private banking, the Bank grants loans to clients and guarantees to third parties on behalf of clients. This credit activity is based upon lombard lending against marketable securities in diversified portfolios and normally does not allow granting advances over more than twelve months. Within the credit policies, there are strict rules regarding the quality of collateral together with margin requirements.

Business and Services Provided by Rothschild Bank AG Zurich and Subsidiaries

33


R

Part 2

Report of the Statutory Auditoron the Consolidated Financial Statementsto the General Meeting of Shareholdersof Rothschild Bank AG, Zurich

As statutory auditor, we have audited the accompanying consolidated financial statements of Rothschild Bank AG, Zurich, which comprise the balance sheet, income statement, cash flow statement and notes (pages 8 to 35) for the year ended 31st March 2012.

Board of Directors’ ResponsibilityThe Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the provisions governing the preparation of financial statements for Banks and the requirements of Swiss law as well as the consolidation and valuation principles as set out in the notes. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation 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 ResponsibilityOur 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. 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.

OpinionIn our opinion, the consolidated financial statements for the year ended 31st March 2012 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the provisions governing the preparation of financial statements for Banks and comply with Swiss law.

Report of the Statutory Auditoron the Consolidated Financial Statements

34


R

Part 2

Report of the Statutory Auditor on the Consolidated Financial Statements

Report on Other Legal RequirementsWe 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.

KPMG AG

Christoph Gröbli Daniel SennLicensed Audit Expert Licensed Audit ExpertAuditor in Charge

Zurich, 24th May 2012

35


R

Part 2

36


R

Part 3

Financial Statements of Rothschild Bank AG

37


R

Part 3

Balance Sheet of Rothschild Bank AGas of 31st March 2012 and 2011

Assets


Cash 2,313,750 299,641 2,014,109 672.2

Money market instruments 40,000 373,842 – 333,842 – 89.3

Due from banks 2, 8 485,844 1,221,597 – 735,753 – 60.2

Due from customers 4, 8 463,836 499,476 – 35,640 – 7.1

Trading balances in securities and precious metals 1,212 829 383 46.2

Financial investments 2 283,513 247,056 36,457 14.8

Participations 141,143 135,420 5,723 4.2

Fixed assets 44,227 45,098 – 871 – 1.9

Intangible assets 32,502 5,645 26,857 475.8

Accrued income and prepaid expenses 6,056 7,031 – 975 – 13.9

Other assets 1 26,165 53,704 – 27,539 – 51.3

Total assets 3,838,248 2,889,339 948,909 32.8

Total due from Group companies and significant shareholders 64,559 74,626 – 10,067 – 13.5

38


R

Part 3

Balance Sheet of Rothschild Bank AGas of 31st March 2012 and 2011



Money market instruments 32 676 – 644 – 95.3

Due to banks 8 612,166 433,061 179,105 41.4

Due to customers, other 3, 8 2,770,919 1,999,341 771,578 38.6

Accrued expenses and deferred income 34,058 30,030 4,028 13.4

Other liabilities 1 46,915 51,822 – 4,907 – 9.5

Valuation adjustments and provisions 4 17,264 16,269 995 6.1

Reserves for general banking risks 4, 7 7,000 7,000 – –

Share capital 5, 6, 7 10,330 10,330 – –

General legal reserve 7 63,300 60,100 3,200 5.3

Other reserves 7 240,500 240,500 – –

Retained earnings brought forward 7 5,010 3,994 1,016 25.4

Net profit 7 30,754 36,216 – 5,462 – 15.1

Total liabilities and shareholders’ equity 3,838,248 2,889,339 948,909 32.8

Total due to Group companies and significant shareholders 616,950 403,129 213,821 53.0

39


R

Part 3

Off-Balance Sheet Transactionsas of 31st March 2012 and 2011

31. 3. 2012 31. 3. 2011 Change Note 1000 CHF 1000 CHF 1000 CHF %

Contingent liabilities 60,616 73,898 – 13,282 – 18.0

Irrevocable commitments 7,258 5,243 2,015 38.4

Fiduciary transactions 9 1,326,184 1,561,921 – 235,737 – 15.1

Derivative instruments

– positive replacement value 1 24,902 51,239 – 26,337 – 51.4

– negative replacement value 1 43,903 48,189 – 4,286 – 8.9

– contract volume 4,176,210 2,460,675 1,715,535 69.7

40


R

Part 3

Income Statement for the period 1st April to 31st March

2011/12 2010/11 Change Notes 1000 CHF 1000 CHF 1000 CHF %

Interest and discount income 20,589 15,136 5,453 36.0

Interest and dividend income on financial investments 1,941 2,448 – 507 – 20.7

Interest expense – 1,692 – 1,516 – 176 11.6

Net interest income 20,838 16,068 4,770 29.7

Commission income on lending activities 379 566 – 187 – 33.0

Commission income on asset management 53,705 63,072 – 9,367 – 14.9

Commission income on other services 7,005 6,190 815 13.2

Commission expense – 1,929 – 2,401 472 – 19.7

Net commission income 59,160 67,427 – 8,267 – 12.3

Results from trading operations 11 27,216 23,998 3,218 13.4

Results from the sale of financial investments – – 51 51 – 100.0

Participation income 17,034 19,930 – 2,896 – 14.5

Net income from real estate holdings 1,566 1,492 74 5.0

Total other ordinary results 18,600 21,371 – 2,771 – 13.0

Total income 125,814 128,864 – 3,050 – 2.4

Personnel expenses – 66,439 – 61,360 – 5,079 8.3

Other operating expenses – 18,926 – 21,083 2,157 – 10.2

Total operating expenses – 85,365 – 82,443 – 2,922 3.5

Gross profit 40,449 46,421 – 5,972 – 12.9

Depreciation and write-offs of non-current assets – 3,832 – 4,506 674 – 15.0

Valuation adjustments, provisions and losses – 1,216 – 332 – 884 266.3

Result before extraordinary items and taxation 35,401 41,583 – 6,182 – 14.9

Extraordinary income 12 – 15,769 – 15,769 – 100.0

Extraordinary expenses 12 – – 15,769 15,769 – 100.0

Taxation – 4,647 – 5,367 720 – 13.4

Net profit 30,754 36,216 – 5,462 – 15.1

41


R

Part 3

Proposal of the Board of Directors to the Annual General Meeting

The following amount is available for distribution:

1000 CHF

Net profit for current financial year 30,754

Carried forward from previous year 5,010

35,764

The Board of Directors proposes to the Annual General Meeting to allocate this amount as follows:

Allocation to general legal reserve 2,000

Allocation to other reserves –

Distribution of a gross dividend 20,000

Balance to be carried forward 13,764

35,764

After distribution of the proposed dividend capital resources are as follows:


General legal reserves 65,300

Other reserves 240,500


Balance to be carried forward 13,764

Shareholders’ equity after distribution of the dividend 336,894

42


R

Part 3

Notes to the Financial Statements

Information on the Balance Sheet

1 Other assets and other liabilities

31. 3. 2012 31. 3. 2011

Other assets

Other liabilities

Other assets

Other liabilities

1000 CHF 1000 CHF 1000 CHF 1000 CHF

Replacement values of all derivative financial instruments 24,902 43,903 51,239 48,189

Compensation accounts, stamp duty, VAT, withholding tax 1,263 3,012 2,465 3,633

Total other assets and other liabilities 26,165 46,915 53,704 51,822

2 Indication of pledged or assigned assets to secure own commitments and of assets with reservation of title

Pledged or ceded assets and assets with reservation of title without securities lending and borrowing and without repurchase and reverse repurchase agreements

31. 3. 2012 31. 3. 2011

Book valueof which

used Book valueof which

used 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Money market instruments 40,000 – 29,956 –

Due from banks 40,784 11,764 17,117 2,299

Securities 64,290 – 94,969 –

Total 145,074 11,764 142,042 2,299

3 Disclosure of liabilities to Rothschild Bank pension plan


foundation 31. 3. 2012 31. 3. 2011 31. 3. 2012 31. 3. 2011 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Cover margin according Swiss GAAP FER 16 9,554 15,794 5,265 5,791

Excess in relation to disclosed liabilities in % 5.7 % 9.8 % 25.9 % 28.2 %

Economic benefit – – – –

Economic liability – – – –

The disclosures are based on the annual accounts of the pension schemes as of 31. 12. 2011 and 31. 12. 2010 respectively.

43


R

Part 3



foundation Total 31. 3. 2012 31. 3. 2011 31. 3. 2012 31. 3. 2011 31. 3. 2012 31. 3. 2011 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Accrued contributions 3,924 3,641 1,259 1,260 5,183 4,901

Pension expense 3,924 3,641 1,259 1,260 5,183 4,901

Employer contribution reserve not capitalised 598 598 – – 598 598

All employees of Rothschild Bank and its Swiss subsidiaries are members of a definied contribution pension scheme, which covers the mandatory benefits specified in the BVG and super-obligatory benefits. A second supporting foundation provides further supplementary super-obligatory benefits.

Due to pension schemes amount to CHF 2.1 million (last year : CHF 11.3 million).

4 Valuation adjustments and provisions, reserves for general banking risks

Balance previous

year

Special usage and reversals

Change in definition

of purpose, reclassi- fications

Re- coveries, doubtful interest, currency

differences

New creation, charged

to income statement

Reversals, credited to

income statement

Balance current

year 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF 1000 CHF

Other provisions 16,269 – – – 995 – 17,264

Total valuation adjustments and provisions 16,269 – – – 995 – 17,264

Total valuation adjustments and provisions as per balance sheet 16,269 17,264

Reserves for general banking risks 7,000 – – – – – 7,000

As of 31st March 2012 there are no endangered receivables.

44


R

Part 3


5 Schedule of share capital

31. 3. 2012 31. 3. 2011

Nominal

value Number

Dividend bearing capital

Nominal value Number

Dividend bearing capital

1000 CHF of units 1000 CHF 1000 CHF of units 1000 CHF

Capital structure Share capital 10,330 103,300 10,330 10,330 103,300 10,330

6 Significant shareholders and shareholder groups

31. 3. 2012 31. 3. 2011 Nominal Participation Nominal Participation 1000 CHF in % 1000 CHF in %

Rothschild Holding AG 10,330 100 10,330 100

Significant Shareholders of Rothschild Holding AG:

Rothschilds Continuation Holdings AG1) 7,793 74.0 7,793 74.0

Apollolaan Holdings AG2) 1,402 13.3 1,402 13.3

Banque Privée Edmond de Rothschild SA 1,016 9.6 1,016 9.61) The majority (approx. 53%) of the share capital of Rothschilds Continuation Holdings AG is directly or indirectly held by a group of shareholders which

consists of Rothschild Family members (through Rothschild Concordia SAS) or entities controlled by Rothschild Family members. Other important shareholders of Rothschilds Continuation Holdings AG are Jardine Strategic Investment Holdings GmbH with 20.1% and Rabobank International Holding BV with 7.5 %.

2) The share capital of Apollolaan Holdings AG is wholly owned by Intergritas BV, a Dutch Company which in turn is owned by the Trustees of trusts for the benefit of members of the English branch of the Rothschild Family.

45


R

Part 3


Information on Off-Balance Sheet Transactions

7 Statement of changes in shareholders’ equity

1000 CHF


General legal reserve 60,100


Reserves for general banking risks (all taxed) 7,000

Retained earnings 40,210

Shareholders’ equity at beginning of current year 358,140

(before profit distribution)

Dividends out of retained earnings brought forward – 32,000

Net profit 30,754


(before profit distribution)


General legal reserve 63,300


Reserves for general banking risks (all taxed) 7,000

Retained earnings 35,764


8 Disclosure of amounts due from and due to affiliated companies as well as loans and exposures to directors and senior executives


Claims against affiliated companies 67,875 6,138 61,737 1,005.8

Liabilities to affiliated companies 1,223 1,844 – 621 – 33.7

Loans and exposures to directors and senior executives 30,981 45,718 – 14,737 – 32.2

Transactions with affiliated persons and companies (in particular parent and subsidiary companies) such as security transactions, granting loans, and interest accounts are carried out at the conditions offered to third parties. Members of the Executive Committee (ExC) are offered the Bank’s normal conditions for employees. Members of the Board are charged at least the Bank’s normal conditions for employees.

9 Analysis of fiduciary transactions


Fiduciary placements with third-party banks 1,222,915 1,252,761 – 29,846 – 2.4

Fiduciary placements with banks of the Group and affiliated banks 103,269 307,832 – 204,563 – 66.5

Fiduciary credits and other fiduciary transactions – 1,328 – 1,328 – 100.0

Total 1,326,184 1,561,921 – 235,737 – 15.1

46


R

Part 3

Information on the Income Statement


10 Client assets

31. 3. 2012 31. 3. 2011 Change CHF Mio. CHF Mio. CHF Mio. %

Type of client assets

Other client assets 6,677 6,454 223 3.5

Fund assets managed by RBZ Group 216 231 – 15 – 6.5

Assets with management mandates 3,663 3,633 30 0.8

Total client assets (incl. double count) 10,556 10,318 238 2.3

thereof double count 216 231 – 15 – 6.5

Net new assets 621 594 27 4.5

Custody assets 2,103 1,981 122 6.2

Client assets include deposits as well as the market value of securities, precious metals and fiduciary investments. Net new assets consist of all external cash deposits and withdrawals on client accounts as well as all external in- and outflows from / into client deposits. Interest and dividend income are not taken into account.

Assets with management mandate cover both assets deposited with Group companies and assets deposited at third-party institutions for which the Bank holds a management mandate.

Custody assets include assets for which the Bank provides custody services only. These relate mainly to assets from Group Companies. In addition, assets from the Banks’ pension schemes and assets of employees are included.

11 Results from trading operations


Profit on foreign exchange and bank notes 25,130 22,569 2,561 11.3

Profit on bullion transactions 1,276 580 696 120.0

Profit on securities 810 849 – 39 – 4.6

Total 27,216 23,998 3,218 13.4

12 Extraordinary income and expense

In prior year, the Zurich Cantonal Tax Authorities issued a decree that prevents banks from holding untaxed reserves for general banking risks. However, there is the option under Swiss tax rules and Swiss Banking GAAP to hold untaxed hidden reserves within the position “other provisions”. Accordingly, the Bank released all untaxed reserves for general banking risks in the amount of CHF 15.8m and created a hidden reserve in the same amount within the position “other provisions”.

47


R

Part 3

General PrinciplesThe accounting and valuation principles comply with the Swiss Code of Obligations, the Bank Law, including the Swiss Financial Market Supervisory Authority guidelines as required for non-consolidated banks, and Statutory directives.

Accounting and Recording of TransactionsAll transactions effected up to and including the balance sheet date are accounted for on the trade date and are, from this date on, stated and assessed according to the principles laid out below.

Foreign Currency Translation of the Financial StatementsTransactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Swiss Francs at the foreign exchange rate ruling at the balance sheet date.

Foreign exchange rates used

31st March 2012 31st March 2011EUR 1.2058 1.2998GBP 1.4448 1.4704USD 0.9005 0.9125

Cash, Due from and to Banks, Due to Customers and Money Market InstrumentsAssets and liabilities are stated in the balance sheet at their nominal value.

Due from CustomersDue from customers are stated in the balance sheet at their nominal value.

Claims – taking all off-balance sheet items into account – which the debtor will be unlikely to satisfy in future are covered by individual provisions. These are classified as non-performing if interest and capital payments are overdue for more than 90 days. Individual provisions are deducted directly from the corresponding asset positions.

Claims considered as uncollectible are written off against the individual provisions made.

Trading Portfolios in Securities and Precious MetalsSecurities and precious metals in trading portfolios are in principle stated at the fair value. The price obtained on a price-efficient and liquid market is taken as the fair value, which as a rule corresponds to the market value.

If in exceptional cases there is no fair value available, securities and precious metals in trading portfolios will be valued and stated at the lower of cost or market value.

Interest, discount and dividend income from trading securities are set off against refinancing expenses and are included in income from trading operations.

Accounting and Valuation Principles of Rothschild Bank AG

48


R

Part 3


Financial InvestmentsFinancial investments are securities held on a long term basis for special business purposes. Fixed income securities that are planned to be held until maturity are valued by the accrual method. Premiums and discounts are amortised over the remaining life of the respective security and are recognised in interest and dividend income on financial investments. Other financial investments are valued at the lower cost or market value.

ParticipationsParticipations are stated at cost less any necessary depreciation. The Bank applies a collective valuation method as described in BAG-FINMA paragraph 17.

Fixed AssetsFixed assets are valued at cost less depreciation over an expected useful lifetime of maximum ten years for fitout costs and maximum six years for other tangible fixed assets and maximum three years for IT assets. Bank buildings and other properties are depreciated to a base level generally accepted by the tax authorities. The value is reviewed on a regular basis. If a review reveals an impairment in value, an additional, unscheduled write-off is made. The remaining book value is subsequently written down over the residual useful lifetime. If the review reveals a change in the useful lifetime, the remaining book value is written down as planned over the adjusted useful life. Small investment outlays are charged directly to operating expenses at the time of purchase.

Intangible AssetsIntangible assets acquired are stated at cost less depreciation over a measurable useful life of maximum three years for IT software and ten years for the components of the IT platform (host system). Reviews and adjustments of value are carried out in the same way as with tangible assets. Small investment outlays are charged directly to operating expenses at the time of purchase.

Derivative InstrumentsDerivative financial instruments are stated at fair value. The positive and negative replacement values are recorded in the balance sheet under other assets and other liabilities. Unrealised/realised gains are booked to results from trading operations. All derivative financial instruments are allocated to the trading book.

PensionsPension liabilities are treated according Swiss GAAP FER 16. Employer contribution reserves are not capitalised.

Valuation Adjustments and ProvisionsClaims that the debtor will be unlikely to satisfy in future are covered by individual valuation adjustments. Individual valuation adjustments are deducted directly from the corresponding asset positions. Individual valuation adjustments and individual provisions are made for all other recognisable loss risks according to the principle of caution.

49


R

Part 3

Income TaxCurrent taxes are recurring taxes on capital and income. Current taxes are determined in accordance with the local fiscal regulations on ascertaining profits and capital tax and are stated as expenses during the accounting period. Taxes owed are recorded in accrued expenses.

Fiduciary Placement ActivitiesThe Bank acts as custodian and in other fiduciary capacities that result in the holding or placing of assets on behalf of customers. These assets and the interest income arising therefrom are excluded from these financial statements, as they are not assets of the Bank.

Contingent Liabilities and Fiduciary OperationsTransactions resulting from these activities are stated off-balance sheet at their face value. For recognisable risks, provisions are made and recorded under liabilities.

Change in Accounting PoliciesThere were no changes in accounting policies.


50


R

Part 3

General PrinciplesThe Board of Directors of the Bank is responsible for the stipulation of the risk policy. The Board of Directors has released a risk policy which both takes into account the circumstances of the business activities of the Bank and its subsidiaries and also reflects the capital funds situation of the Group, the interest of the shareholders and the regulatory environment. The risk policy is constantly monitored and amended if necessary.

The formal methodology of the risk policy relates primarily to the observance of quantitative risk limits, especially for credit and market risks, and to the qualitative aspects of risk diversification and of working procedures for reducing operational risks. At the same time, great importance is attached to the risk awareness of the management bodies and all Group staff. Hence the Board of Directors and the Executive Committee pursue an open risk culture which is also implemented by responsible, careful and professional behaviour from all employees. The Group consciously depends on the personal integrity, specialist competence and risk awareness of each individual and undertakes the necessary steps.

The implementation of the risk policy is delegated to the Executive Committee. Management is supported in this by a risk control unit which is independent from trading and client-related services and monitor compliance with limits and the risk policy.

Credit RisksCredit risk describes the potential for loss as a result of insolvency of a client or counterparty. A potential loss arises in particular when maturing loans or other obligations to payment are not repaid or cannot be repaid when due. For this reason loans and other credits are only granted after taking into account fundamental principles of caution. Since the banking business is strongly focused on private banking, loans are mainly granted against collateral in the form of pledged investment portfolios.

The competencies for loans approvals and the monitoring of credit positions are subject to clear rules and supervised by staff who are independent of the client advisors. The Board of Directors and the Executive Committee have laid down clear guidelines for loanable values and the pledging of assets (collateral). In general, assets serving as collateral are held in the Bank’s custody and pledged in favour of the Bank under contractual agreements. The loanable values of the pledged assets, which are derived from market values, are compared daily to the loan commitments secured and are subject to constant monitoring. If coverage threatens to become insufficient, steps are taken to re-establish the necessary loanable value. If in exceptional cases no published market value is available for pledged assets, internal valuations calculated using standard banking methods will be applied. General principles have also been set out that aim for appropriate diversification of loan commitments and collateral. The concentration of risks on one client or counterparty or on one group of linked clients or counterparties is constantly monitored. Appropriate measures are taken to avoid the emergence of large exposures.

Counterparties are defined as banks or brokers with which the Bank trades or from which it purchases services. Counterparties are carefully selected on the basis of their creditworthiness, drawing on external ratings. Internal limits have to be approved by the competent bodies according to the risk policy and internal guidelines.

Notes on Risk Management

51


R

Part 3

Notes on Risk Management

Liquidity RiskLiquidity risk describes the risk that in some circumstances, for example changed market conditions, the Bank might not be able to meet all its payment obligations as they fall due. The Bank maintains additional liquidity facilities in the form of overdraft lines at correspondent banks and secured finance facilities with clearing institutions for the exceptional event that counterparties or clients do not meet their payment obligations punctually. Compliance with the liquidity rules as set out in the Bank Ordinance is constantly monitored.

Market RiskMarket risk describes the risk that the Bank could suffer losses as a result of changes on the financial markets (interest rates, FX rates, share prices). The business policy of the Bank is to only permit open market risk positions to a small degree in relation to client business volumes and available capital funds.

Trading positions are valued daily. Calculation of risk positions and monitoring of compliance with the limits is performed by a team independent from the trading department.

The Treasury Committee manages general interest rate risk in the banking book and monitors the balance sheet structure.

Operational RiskOperational risk entails the possibility that losses may be incurred directly or indirectly due to the inappropriateness or failure of internal procedures, persons or systems or due to external events that cannot be influenced. In accordance with best practice standards in banking and the Bank’s dedication to ensure high quality services for its clients, the Executive Committee has implemented a set of processes and work flows by means of internal policies and procedures on organisation setup and controls, which are designed to maintain operational security at a high level. Particular attention is given to the quality and skills of staff, the segregation of duties, the careful selection of counterparties and the security of the central computer systems and networks. The Internal Audit department reviews the procedures and internal controls at regular intervals. Due to an escalation procedure it is assured that the responsible line management is adequately involved in the reporting and analysis process.

The Group has out-sourced the operation of its computer systems to Banque Privée Edmond de Rothschild in Geneva. Both banks subscribe to high security standards developed to ensure that bank-client confidentiality is maintained.

The Board of Directors has considered the main operational risks of the Group and has issued guidelines (principles) for the measurement and limitation of operational risk.

Legal Risks and ComplianceIn order to monitor legal and regulatory risks, the Bank maintains a legal and compliance department. This ensures that the Bank’s business activities are conducted in accordance with the applicable regulations and the obligation of financial intermediaries to observe due diligence. If required, external legal advice is sought.

52


R

Part 3

Report of the Statutory Auditoron the Financial Statements to the General Meetingof Rothschild Bank AG, Zurich

As statutory auditor, we have audited the accompanying financial statements of Rothschild Bank AG, Zurich, which comprise the balance sheet, income statement and notes (pages 40 to 55) for the year ended 31st March 2012.

Board of Directors’ ResponsibilityThe Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements for the year ended 31st March 2012 comply with Swiss law and the company’s articles of incorporation.

Report of the Statutory Auditor on the Financial Statements

53


R

Part 3

Report on Other Legal RequirementsWe 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.

KPMG AG

Christoph Gröbli Daniel SennLicensed Audit Expert Licensed Audit Expert Auditor in Charge

Zurich, 24th May 2012

Report of the Statutory Auditor on the Financial Statements

54


R

Part 4

Subsidiaries

Equitas SA3, rue du Commerce

1204 Geneva

Telephone +41 (0)22 818 5900

Facsimile +41 (0)22 818 5901

Rothschild Vermögensverwaltungs-GmbHBörsenstrasse 2-4

60313 Frankfurt am Main, Germany

Telephone +49 (0)69 4080 2600

Facsimile +49 (0)69 4080 2655

Rothschild Bank (CI) LimitedSt. Julian’s Court

St. Julian’s Avenue, St. Peter Port

Guernsey, Channel Islands GY1 3BP

Telephone +44 (0) 1481 713713

Facsimile +44 (0) 1481 711272

Rothschild (Hong Kong) LimitedRothschild Wealth Management (Hong Kong) Limited 16 / F Alexandra House

18 Chater Road

Central, Hong Kong

People’s Republic of China

Telephone +852 2525 5333

Facsimile +852 2868 1728

Rothschild Wealth Management (Singapore) Limited One Raffles Quay, North Tower

1 Raffles Quay#10-02

Singapore 048583

Telephone +65 6532 08 66

Facsimile +65 6532 41 66

Rothschild Trust(Switzerland) AGZollikerstrasse 181

8034 Zurich

Telephone +41 (0)44 384 7111

Facsimile +41 (0)44 384 7201

RTS Geneva SA3, rue du Commerce

1204 Geneva

Telephone +41 (0)22 818 5995

Facsimile +41 (0)22 818 5902

Rothschild Trust Guernsey LimitedSt. Peter’s House, Le Bordage

St. Peter Port, Guernsey

Channel Islands GY1 6AX

Telephone +44 (0)1481 707800

Facsimile +44 (0)1481 712686

Rothschild Trust CorporationLimitedNew Court, St. Swithin’s Lane

London EC4N 8AL, UK

Telephone +44 (0)20 7280 5000

Facsimile +44 (0)20 7929 5239

Rothschild Trust (Singapore) LimitedOne Raffles Quay, North Tower

1 Raffles Quay#10-02

Singapore 048583

Telephone +65 6532 0866

Facsimile +65 6532 4166

Head Office

Rothschild Bank AGZollikerstrasse 181

8034 Zurich

Telephone +41 (0)44 384 7111

Facsimile +41 (0)44 384 7222

www.rothschildbank.com

Head Office, Subsidiaries and Representatives of Rothschild Bank AG

55


R

Part 4

Rothschild Canada IncEight Avenue Place

1910, 525 - 8th Avenue SW

Calgary, Alberta

Canada T2P 1G1

Telephone +1 403 537 6300

Facsimile +1 403 537 6389

Channel IslandsRothschild Bank International LimitedSt. Julian’s Court, St. Julian’s Avenue

St. Peter Port, Guernsey

Channel Islands GY1 3BP

Telephone +44 (0)1481 713713

Facsimile +44 (0)1481 727705

ChinaRothschild China Holding AGBeijing Representative Office

Room 912A,

Winland International Finance Center

7 Finance Street, Xicheng District

Beijing 100033


Telephone +86 10 6655 5660

Facsimile +86 10 6655 5880

Shanghai Representative Office

Suite 3207, Tower 2, Plaza 66

1266 Nan Jing Xi Lu Road

Shanghai 200040


Telephone +86 21 6288 1528

Facsimile +86 21 6288 1517

Rothschild & Sons Financial Advisory Services(Beijing) Co Ltd

F910 Winland International

Finance Center

No. 7 Finance Street, Beijing 100033


Telephone +8610 6655 5660

Facsimile +8610 6655 5880

FranceRothschild Concordia SASParis Orléans SCA23 bis avenue de Messine

75008 Paris, France

Telephone +33 (0)1 5377 6510

Facsimile +33 (0)1 4563 8528

Rothschild & Cie Banque29 avenue de Messine

75008 Paris, France

Telephone +33 (0)1 4074 4074

Facsimile +33 (0)1 4074 9847

Rothschild & Cie23 bis avenue de Messine

75008 Paris, France

Telephone +33 (0)1 4074 4074

Facsimile +33 (0)1 4074 9847

Rothschild & Cie Gestion29 avenue de Messine

75008 Paris, France

Telephone +33 (0)1 4074 4074

Facsimile +33 (0)1 4074 4969

GermanyRothschild GmbHBörsenstrasse 2 - 4, 60313

Frankfurt am Main, Germany

Telephone +49 (0)69 4080 2600

Facsimile +49 (0)69 4080 2655

AustraliaRothschild Australia LimitedLevel 41, 50 Bridge Street,

Sydney, NSW 2000, Australia

Telephone +61 (0)2 9323 2000

Facsimile +61 (0)2 9323 2040

Level 21, 120 Collins Street

Melbourne Victoria 3000, Australia

Telephone +61 (0)3 9656 4600

Facsimile +61 (0)3 9656 4950

BelgiumRothschild BelgiqueSuccursale de Rothschild & Cie Banque

Avenue Louise, 166

1050 Bruxelles,

Telephone +32 (0)2 627 77 30

Facsimile +32 (0)2 627 77 59

BrazilRothschild (Brasil) LtdaAv. Brigadeiro Faria Lima 2055

18th Floor, Jardim Paulistano

01451-000 São Paulo, Brazil

Telephone +55 (0)11 3039 5828

Facsimile +55 (0)11 3039 5826

CanadaRothschild (Canada) Limited1002, rue Sherbrooke Ouest

Bureau 2300, Montréal, Québec

Canada H3A 3L6

Telephone +1 514 840 1016

Facsimile +1 514 840 1015

Brookfield Place

TD Canada Trust Tower

161 Bay Street, Suite 3150

PO Box 206, Toronto

Ontario, Canada, M5J 2SI

Telephone +1 416 369 9600

Facsimile +1 416 864 1261

Group Directory

56


R

Part 4

IndiaRothschild (India)Private Limited103, 1st Floor, Piramal Tower

Penninsula Corporate Park

Ganpatrao Kadam Marg, Lower Parel

Mumbai 400 013, India

Telephone +91 (0)22 4081 7000

Facsimile +91 (0)22 4081 7001

Unit No. F1 + F2, 1st Floor, Plot No. 2

The Grand Hotel

Nelson Mandela Road, Vasant Kunj

New Delhi - 110 070, India

Telephone +91 (0)11 4922 3000

Facsimile +91 (0)11 4922 3001

IndonesiaPT Rothschild IndonesiaIndonesia Stock Exchange Building

Tower 1, 15th Floor

Jl. Jend. Sudirman Kav. 52–53

Jakarta 12190, Indonesia

Telephone +62 (0)21 515 3588

Facsimile +62 (0)21 515 3589

IsraelRothschild IsraelRothschild Blvd. 32

Tel Aviv 6688210, Israel

Telephone + 972 72 220 4100

Facsimile + 972 72 220 4106

ItalyRothschild SpAVia Santa Radegonda 8

20121 Milan, Italy

Telephone +39 02 7244 31

Facsimile +39 02 7244 3310

Via S. Nicola da Tolentino 1/5

00187 Rome, Italy

Telephone +39 06 4217 01

Facsimile +39 06 4217 0252

JapanRothschild Bank AGTokyo Representative Office

20F Kmaiyacho MT Building

4-3-20 Toranomon

Minato-ku, Tokyo 105-001, Japan

Telephone +81 (0)3 5408 8045

Facsimile +81 (0)3 5408 8048

MalaysiaRothschild Malaysia Sdn BhdLetter Box No. 42, 29th Floor

UBN Tower, 10, Jalan P. Ramlee

50250 Kuala Lumpur, Malaysia

Telephone +603 2687 0966

Facsimile +603 2070 1001

MéxicoRothschild (México) SA de CVCampos Eliseos 345-8° piso, Polanco

CP 11550 México D.F, México

Telephone +52 55 5327 1450

Facsimile +52 55 5327 1485

NetherlandsRothschild Europe BVAppollolaan 133 - 135

1077 AR Amsterdam, The Netherlands

Telephone +31 (0)20 570 2916

Facsimile +31 (0)20 570 2901

PolandRCF Polska sp. z. o.o.Warsaw Financial Centre

Emilii Plater 53

00-113 Warsaw, Poland

Telephone +48 22 549 6400

Facsimile +48 22 549 6402

Group Directory

PortugalRothschild Portugal, LimitadaCalçada do Marquês de Abrantes

40-1° Esq., 1200-719 Lisbon, Portugal

Telephone +351 (0)21 397 5378

Facsimile +351 (0)21 397 5476

RussiaRCF (Russia) BV(Representative Office)Novinsky Passazh (8th Floor)

31 Novinsky Boulevard

123242, Moscow, Russia

Telephone +7 495 775 8221

Facsimile +7 495 775 8222

SingaporeRothschild (Singapore) LimitedOne Raffles Quay, North Tower

1 Raffles Quay #10-02

Singapore 048583

Telephone +65 6535 8311

Facsimile +65 6535 8326

South AfricaRothschild (South Africa) (Proprietary) Limited3rd Floor Oxford Corner

32a Jellicoe Avenue

Rosebank 2196, South Africa

Telephone +27 (0)11 428 3700

Facsimile +27 (0)11 447 0967

57


R

Part 4

Group Directory

SpainRothschild SAPaseo de la Castellana, 35-3º

28046 Madrid, Spain

Telephone +34 91 702 2600

Facsimile +34 91 702 2531

Avigunda Diagonal, 442-3º1

08037 Barcelona, Spain

Telephone +34 93 254 7503

Facsimile +34 93 254 7504

SwedenRothschild Nordic ABStrandvägen 7A

114 56 Stockholm, Sweden

Telephone +46 (0)8 586 33590

Facsimile +46 (0)8 660 9791

SwitzerlandRothschilds Continuation Holdings AGRothschild Concordia AGFive Arrows Capital AGBaarerstrasse 95, P.O. Box 735

6301 Zug, Switzerland

Telephone +41 (0)41 720 0680

Facsimile +41 (0)41 720 0683

TurkeyRothschild Kurumsal Finansman Hizmetleri Limited SirketiAkmerkez Rezidans No. 14 D 2

Akmerkez Is Merkezi Yani

Nispetiye Caddesi, 34340 Etiler

Istanbul, Turkey

Telephone +90 212 371 0800

Facsimile +90 212 371 0809

United Arab EmiratesRothschild Middle East LimitedPO Box 506570

Dubai International Financial Centre

Gate Precinct Building, 6, Level 7

Dubai, United Arab Emirates

Telephone +971 4 428 4300

Facsimile +971 4 365 3183

Rothschild Europe BV (Representative Office)Office 114, Bainunah Street 34

Al Bateen, PO Box 113100

Abu Dhabi, United Arab Emirates

Telephone +971 2 406 9866

Facsimile +971 2 406 9810

Rothschild (Qatar) LLCPO Box 31316, Al Fardan Office Tower

Offices 924, 8-9th Floor, West Bay

Doha, Qatar, United Arab Emirates

Telephone +974 410 1680

Facsimile +974 410 1500

United KingdomN M Rothschild & Sons LimitedNew Court, St. Swithin’s Lane

London EC4N 8AL, UK

Telephone +44 (0)20 7280 5000

Facsimile +44 (0)20 7929 1643

82 King Street

Manchester M2 4WQ, UK

Telephone +44 (0)161 827 3800

Facsimile +44 (0)161 835 3789

67 Temple Row

Birmingham B2 5LS, UK

Telephone +44 (0)121 600 5252

Facsimile +44 (0)121 643 7207

1 Park Row

Leeds ls1 5NR, UK

Telephone +44 (0)113 200 1900

Facsimile +44 (0)113 243 4507

Rothschild Wealth Management (UK) LimitedNew Court, St. Swithin’s Lane

London EC4N 8AL, UK

Telephone +44 (0)20 7280 5000

Facsimile +44 (0)20 7929 1567

Five Arrows Leasing Group LimitedHeron House, 5 Heron Square

Richmond-upon-Thames

Surrey TW9 IEL, UK

Telephone +44 (0)20 8334 3900

Facsimile +44 (0)20 8332 1636

United StatesRothschild North America IncRothschild IncRothschild Asset Management Inc1251 Avenue of the Americas

51st Floor

New York, NY 10020, USA

Telephone +1 (0)212 403 3500

Facsimile +1 (0)212 403 3501

Rothschild Inc.1101 Connecticut Avenue NW

Suite 700, Washington DC 20036, USA

Telephone +1 (0)202 862 1660

Facsimile +1 (0)202 862 1699

ZimbabweMBCA Bank Limited14th Floor, Old Mutual Centre

Third Street, Harare, Zimbabwe

Telephone +263 (0)4 701636

Facsimile +263 (0)4 708005

58

rothschild bank ag zurich annual report 20112012

Documents

rothschild bank ag zurichrpart

consolidated net profit

net commission income

gross income

new staff

total staffing level

past year

total assets