Annual Report 2019

VALUES WORTH SHARING

Annual Report 2019

LGT Bank Ltd., Vaduz

“In the future, we will continue to focus on offering our clients a comprehensive range of asset classes and solutions.”

Roland Schubert, Chairman of the Executive Board

A look inside the Princely Collections: Veduta painting is the realistic depiction of a land or cityscape that gained popularity during the 18th century as a result of tourism in Italy. The examples thereof held in the Princely Collections demonstrate that beyond serving as mere records, many of these paintings are in fact works of art.

For more than 400 years, the Princes of Baroque period. The House of Liechtenstein Cover image: Rudolf von Alt, detail from Liechtenstein have been passionate art has pursued this ideal consistently down “View of the mole in Venice with the Doge’s collectors. The Princely Collections include the generations. We make deliberate use of Palace and Santa Maria della Salute,” 1835 key works of European art stretching over the works of art in the Princely Collections five centuries and are now among the world’s to accompany what we do. For us, they © LIECHTENSTEIN. The Princely Collections, major private art collections. The notion of embody those values that form the basis Vaduz–Vienna promoting fine arts for the general good for a successful partnership with our clients: enjoyed its greatest popularity during the a long-term focus, skill and reliability. www.liechtensteincollections.at Contents

4 Organizational structure

5 The business year in comparison

6 Annual report

8 Balance sheet

9 Off-balance sheet transactions

10 Profit and loss account

11 Appropriation of net profit

12 Flow of funds statement

14 Appendix to the financial statement

18 Remuneration report

24 Notes on the balance sheet

38 Notes on off-balance sheet transactions

40 Notes to the profit and loss account

42 Additional information

46 Report of the statutory auditor

52 International presence 4

Organizational structure as of March 2020

Board of Directors Thomas Piske, Chairman H.S.H. Prince Max von und zu Liechtenstein H.S.H. Prince Hubertus Alois von und zu Liechtenstein Gabrielle Nater-Bass Olivier de Perregaux

Internal Audit Daniel Hauser

Executive Board Roland Schubert, Chairman Ivo Klein Markus Werner Mark Steiner

Statutory Auditor PricewaterhouseCoopers AG, Zurich

The business year in comparison

Balance sheet 2019 2018 Change absolute % Balance sheet total CHF m 38 501.9 34 590.6 3 911.3 11.3 Shareholders’ funds (after profit distribution) CHF m 3 122.8 3 142.2 -19.4 -0.6 Client deposit CHF m 23 171.1 21 224.3 1 946.8 9.2 Due from clients CHF m 17 302.7 16 059.4 1 243.3 7.7

Profit and loss account Net interest income CHF m 239.7 222.7 17.0 7.6 Net commission and fee income CHF m 314.1 323.2 -9.1 -2.8 Income from financial transactions CHF m 127.5 104.6 23.0 22.0 Gross operating income CHF m 720.5 756.7 -36.2 -4.8 Personnel expenses CHF m 268.9 246.8 22.1 9.0 Operating expenses CHF m 275.5 270.1 5.4 2.0 Result on ordinary business activity CHF m 145.4 195.6 -50.2 -25.7 Income tax CHF m 14.8 13.1 1.7 12.8 Profit for the year CHF m 130.6 182.4 -51.9 -28.4

Capital ratio Capital ratio % 20.4 19.1 1.3 6.8

Client assets under administration Client assets under administration CHF m 96 589.8 86 458.5 10 131.4 11.7

Personnel (full-time equivalents) Staff at year-end 1 050 992 58 5.8 6

Annual report

LGT Bank Ltd. reported a good result in a challenging economic Business expenses increased 5 percent in 2019 to CHF 544 and political environment with variable market conditions. million. Operating expenses rose 2 percent to CHF 276 million and personnel expenses increased 9 percent to CHF 269 million. Positive business development This is primarily attributable to an increase in headcount and If the liquidation gains reported in 2018 amounting to CHF higher performance-related compensation components. As at 78 million are excluded, LGT Bank Ltd.’s profit for the year the end of the year, the number of employees increased from would have increased by 25 percent. Taking into account this 992 to 1050 in full-time equivalents. extraordinary prior-year item, gross profit was 27 percent lower and amounted to CHF 176 million. Profit for the year Despite a decline in net asset inflows, assets under manage- declined 28 percent to CHF 131 million. ment increased 12 percent to CHF 97 billion as a result of positive market performance and currency impacts. In wealth management, our core business, income from services decreased by roughly 2 percent to CHF 387 million. Strong capital base In addition to a slight decline in client transactions, this was LGT Bank Ltd. is very well capitalized. As at year-end 2019, primarily due to the fact that the subsidiary in Hong Kong the capital ratio was 20.4 percent of risk-weighted assets. It conducts certain transactions on own account and this income therefore remains substantially above the minimum regulatory is now for the first time being reported under income from requirement of 8 percent. trading. Net interest income rose roughly 8 percent to CHF 240 million. This was driven by increased volume, the higher Recognition of achievements US dollar interest rates and the correct assessment of market In 2019, LGT’s achievements were once again recognized by a movements. Income from trading increased 17 percent to number of independent juries. At the Financial Times Group’s CHF 124 million. This is primarily attributable to higher gains PWM (Professional Wealth Management) and The Banker mag- on own securities as well as the transfer out of income from azines Global Private Banking Awards, LGT received the Best services mentioned previously. The significant 67 percent Private Bank for Alternatives award for the second time. In the decrease in other income to CHF 35 million mainly reflects Elite Report assessment, LGT Bank Ltd. for the fourth consecu the above-mentioned fact that high gains were recorded in tive year received the highest possible score and for the 17th time 2018 as a result of the liquidation of two companies. in a row was given the highest “summa cum laude” rating. Expansion in sustainable investments Despite an overall positive outlook, the impact that the In following with our long-term corporate philosophy, which COVID-19 pandemic will have should not be underestimated. focuses on sustainable value creation for all stakeholders, LGT At the time of going to print (April 2020), the global short- to has over the years expanded its offering of environmentally medium-term economic outlook has substantially deteriorated and socially sustainable investment solutions. LGT introduced and will also have a negative impact on our business. While an its sustainable equity and bond funds in 2009, and in 2017, accurate prediction remains impossible at this stage, we have it launched a comprehensive sustainability rating for equities, already started to adjust our priorities to address the rapidly bonds, funds and ETFs. In 2019, LGT Bank Ltd. launched a new changing conditions and the increased risk environment. portfolio management solution with a focus on sustainability. Thanks to its very prudent business philosophy, LGT Bank Ltd. This marks a further important step toward significantly increas- has successfully navigated recessions, market turmoil and other ing the share of sustainable investments in client portfolios. crises since its founding in 1921. We remain highly confident that with its well capitalized balanced sheet and high liquidity, Ownership structure of LGT Bank Ltd. LGT Bank Ltd. is in a strong position to successfully overcome All shares of LGT Bank Ltd. are held by LGT Group Holding Ltd., the challenges ahead. Our long-term and comprehensive a 100 percent subsidiary of LGT Group Foundation. No own approach to business remains an important prerequisite for shares were acquired or taken as pledge, either directly or sustainable success. In these challenging times our stable indirectly. LGT Bank Ltd. is part of LGT Group (LGT), a global ownership structure enables us to take a cross-generational private banking and asset management group that takes an perspective together with our clients, creating value both integrated approach to the management and development today and tomorrow. of the individual Group companies. The LGT Annual Report contains more detailed information on the Group’s financial We thank our clients for the high level of trust they place in strength, expertise and development. LGT and our employees for their strong commitment during the reporting year. Outlook LGT Bank Ltd. will continue to focus on providing efficient Thomas Piske, Chairman of the Board of Directors services and offering its clients a comprehensive range of asset Roland Schubert, Chairman of the Executive Board classes and solutions. We want to achieve further profitable growth by building on our strengths and our long-term strategy. 8

Balance sheet

Assets (TCHF) Appendix 31.12.2019 31.12.2018 Change absolute % Cash and cash equivalents 5 963 184 5 614 503 348 681 6.2 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 3, 22 133 243 246 260 -113 017 -45.9 Due from banks 16 7 955 297 6 183 793 1 771 504 28.6 Due from clients 1, 16 17 302 685 16 059 376 1 243 309 7.7 of which mortgage loans 1, 16 3 276 941 3 520 103 -243 162 -6.9 Bonds and other fixed-interest bearing securities 2, 3, 4, 21, 23, 40 5 395 969 4 944 545 451 424 9.1 Participations 5, 7, 8, 40 295 295 0 0.0 Shares in affiliated companies 5, 6, 8, 21, 40 20 655 20 655 0 0.0 Intangible assets 9 122 393 140 822 -18 429 -13.1 Tangible assets 8 71 537 72 838 -1 301 -1.8 Other assets 41 1 475 690 1 246 007 229 683 18.4 Accrued income and prepaid expenses 60 978 61 491 -513 -0.8 Total assets 38 501 926 34 590 585 3 911 341 11.3

Liabilities (TCHF) Due to banks 16 10 871 062 9 042 774 1 828 288 20.2 Due to clients 16, 24 20 910 277 18 967 238 1 943 039 10.2 Securitized liabilities 12, 25 2 260 871 2 257 079 3 792 0.2 Other liabilities 42 1 023 000 1 031 008 -8 008 -0.8 Accrued expenses and deferred income 134 278 125 059 9 219 7.4 Provisions 13, 26, 37 29 631 25 211 4 420 17.5 Share capital 14 291 201 291 201 0 0.0 Revenue reserves 15 1 624 500 1 624 500 0 0.0 Profit carried forward 1 226 514 1 044 072 182 442 17.5 Profit for the year 130 592 182 443 -51 851 -28.4 Total liabilities 38 501 926 34 590 585 3 911 341 11.3

Important: This document is a non-binding English translation of the authoritative German annual report. 9

Off-balance sheet transactions

Off-balance sheet (TCHF) Appendix 31.12.2019 31.12.2018 Change absolute % Contingent liabilities 1, 27 7 083 355 5 591 635 1 491 720 26.7 of which liabilities from guarantees and indemnity agreements as well as from the furnishing of collateral 1, 27 7 083 355 5 591 635 1 491 720 26.7

Credit risks 1 015 035 803 335 211 700 26.4 of which irrevocable commitments 1 202 078 150 460 51 618 34.3 of which commitments to subscribe additional contributions for shares or other equity securities 1 812 957 652 875 160 082 24.5

Derivative financial instruments Positive replacement values 30, 41 630 446 804 208 -173 762 -21.6 Negative replacement values 30, 42 912 187 818 256 93 931 11.5 Contract volume 30 100 681 606 100 573 110 108 496 0.1

Fiduciary transactions 29 801 272 413 903 387 369 93.6

Important: This document is a non-binding English translation of the authoritative German annual report. 10

Profit and loss account

Profit and loss account (TCHF) Appendix 2019 2018 Change absolute % Interest earned 32, 33, 34 653 903 498 891 155 012 31.1 Interest paid 33 -414 206 -276 212 -137 994 50.0 Net interest income 239 697 222 679 17 018 7.6

Equities and other non-fixed-interest securities 2 1 1 100.0 Participations 4 225 1 743 2 482 142.4 Shares in affiliated companies 101 101 0 0.0 Current income from securities 4 328 1 845 2 483 134.6

Commission income from lending business 5 564 5 589 -25 -0.4 Commission income from securities and investment business 366 501 373 586 -7 085 -1.9 Commission from other services 15 146 16 737 -1 591 -9.5 Income from commission business and services 387 211 395 912 -8 701 -2.2

Commission paid -73 071 -72 667 -404 0.6 Net commission and fee income 314 140 323 245 -9 105 -2.8

Income from financial transactions 127 542 104 577 22 965 22.0 of which from trading 34 123 618 105 878 17 740 16.8

Other ordinary income 43 34 748 104 316 -69 568 -66.7

Gross operating income 720 455 756 662 -36 207 -4.8

Personnel expenses 35 -268 864 -246 775 -22 089 9.0 Operating expenses 36 -275 511 -270 070 -5 441 2.0 Business expenses -544 375 -516 845 -27 530 5.3

Gross profit 176 080 239 817 -63 737 -26.6

Amortization of intangible assets and depreciation of tangible assets -24 800 -24 894 94 -0.4 Other ordinary expenses 37, 44 -3 911 -10 582 6 671 -63.0 Value adjustments on receivables and funds allocated to provisions for contingent liabilities and credit risks -3 584 -12 377 8 793 -71.0 Income from the release of value adjustments on receivables and from provisions for credit risks 1 621 3 607 -1 986 -55.1 Result on ordinary business activity 145 406 195 571 -50 165 -25.7

Income tax -14 814 -13 128 -1 686 12.8 Profit for the year 130 592 182 443 -51 851 -28.4

Important: This document is a non-binding English translation of the authoritative German annual report. 11

Appropriation of net profit

Appropriation of net profit – proposal of the Board of Directors 2019 2018 to the general meeting of shareholders (TCHF) Profit for the year 130 592 182 443 Profit carried forward 1 226 514 1 044 072 Accumulated profit for the year 1 357 106 1 226 514 Profit distribution Allocation to legal reserves 0 0 Allocation to statutory reserves 0 0 Allocation to other reserves 0 0 Dividend on company capital 149 968 0 Other profit distribution 0 0 Profit carried forward 1 207 137 1 226 514

Important: This document is a non-binding English translation of the authoritative German annual report. 12

Flow of funds statement

Flow of funds statement (TCHF) 2019 2018 Source Application Source Application of funds of funds of funds of funds Flow of funds from operating result (internal financing) Profit for the year 130 592 182 443 Depreciation of non-current assets 24 800 815 24 894 75 Value adjustments and provisions 4 420 4 472 Accrued income and prepaid expenses 513 17 549 Accrued expenses and deferred income 9 219 13 469 Balance 168 729 198 710

Flow of funds from changes to non-current assets Participations 90 Shares in affiliated companies 36 413 Securities and precious metals as non-current assets 127 Intangible assets 1 411 1 282 Properties 1 377 4 583 92 4 100 Other tangible assets 131 2 649 15 1 448 Balance 4 313 29 727

Flow of funds from banking operations Medium and long-term business (> 1 year) Due to banks 53 221 53 182 Due to clients 21 747 47 363 Bonds 413 418 518 316 Medium-term notes 8 250 4 083 Other liabilities 45 464 57 388 Due from banks 62 868 79 112 Due from clients (excl. mortgage loans) 244 802 225 962 Mortgage loans 51 543 128 356 Other receivables 57 086 28 432 54 584 Short-term business (≤ 1 year) Due to banks 1 775 067 835 834 Due to clients 1 964 785 694 716 Other liabilities 454 848 476 746 13 469 Due from banks 1 834 372 689 385 Due from clients 1 539 654 764 013 Trading positions in securities and precious metals 794 717 105 973 Securities and precious metals held as current assets (excl. trading positions) 113 017 18 941 356 857 1 171 185 Other receivables 190 207 513 17 549 103 759

Liquid funds Cash and cash equivalents 348 681 1 183 135 Balance 164 417 228 437

Total 168 729 168 729 228 437 228 437

Important: This document is a non-binding English translation of the authoritative German annual report. Rudolf von Alt, detail from “The port of Naples with the view of Vesuvius,” 1835 14 Appendix to the financial statement

Notes on business activity

General points Money market business LGT Bank Ltd. with its registered office in Vaduz operates Within the scope of money market business, money in the as a universal bank and securities trader. The company has form of call money, time deposits and fiduciary investments branch offices in Hong Kong, Vienna and Dublin. The bank is deposited with the bank. Insofar as these funds are not maintains representative offices in Bahrain, Davos, Geneva, required for lending business, they are placed with first-class Lugano and Zurich. banks, predominantly in Western Europe. These investments At 31 December 2019, LGT Bank Ltd. employed 1050 persons are being made in the form of easily convertible money on a full-time equivalent basis (992 in the previous year). market paper (certificates of deposit, Euro commercial papers). In 2019, the average headcount amounted to 1033 persons Despite its focus on private banking, interest margin business (976 in the previous year). represents an important earnings stream for the bank. As a universal bank, LGT Bank is active in the fields of wealth management (commission business and services) and trading, Trading business as well as in money market and lending business. LGT Bank Ltd. operates trading transactions for clients and for its own account in securities, foreign exchange and precious Wealth management metals. The bank trades for its own account in accordance LGT Bank Ltd. is one of the leading international names in with conservative principles. Derivative instruments are used traditional private banking. The bank offers a broad spectrum mostly for hedging purposes. of products and services that enable clients to choose the best solution to suit their needs. Most earnings from commission Lending business business and services stem, among other things, from wealth Most lending takes the form of Lombard loans and mortgages management. The commission business and services also on residential property. Mortgages are granted primarily represents the bank’s main source of revenue. for financing properties in Liechtenstein and in Switzerland. Property financing in selected other countries is offered as part of integrated wealth management. 15

Accounting policies

Basic principles Cash and cash equivalents, debt instruments of public The annual accounts are prepared in accordance with the authorities and bills which are eligible for refinancing at act and ordinance on banks and investment firms (Banking central banks, and claims on banks Act, Bank Ordinance) and applicable provisions of the Law Cash and cash equivalents and claims on banks are reported on Persons and Companies (PGR). LGT Bank Ltd. publishes in the balance sheet at par value. For claims on banks, specific its financial statement in thousands of Swiss francs (TCHF) value adjustments and portfolio value adjustments are also unless otherwise stated. deducted. Registered money market claims, rescriptions and treasury certificates are reported inclusive of amortized discounts. Due to rounding, the numbers presented in this report may not always add up precisely to the totals in the tables and text. Due from clients Non-impaired claims against clients are reported in the balance Consolidation sheet at nominal value. Impaired claims, i.e. claims where it LGT Bank Ltd. does not prepare consolidated accounts because appears unlikely that the debtor will be able to meet his future the ultimate parent company, the LGT Group Foundation, is obligations, are valued on an individual basis and the decrease itself subject to the Banking Act and prepares annual accounts in value is covered by specific value adjustments. Loans are at Group level. The consolidated accounts are available for rated as impaired at the latest if the contractual payments for inspection at LGT Marketing & Communications at the offices capital and/or interest have been outstanding for more than of LGT Bank Ltd., Herrengasse 12, FL-9490 Vaduz, and can be 90 days. Interest which has been outstanding for more than accessed on the internet under www.lgt.com 90 days is regarded as overdue. Overdue interest and interest which is in danger of not being received, is no longer recovered Recording and reporting of transactions but is instead allocated to value adjustments. All business transactions are recorded in the company‘s accounts on the date of the transaction, and are valued from The decrease in value is measured according to the difference this date for the calculation of earnings. between the book value of the claim and the probable recover able amount, taking account of the estimated net present value Foreign currency conversions on the balance sheet date. The net present value calculation is Assets and liabilities denominated in foreign currencies are based on the current interest rate of the claim and the expected converted at the rates applicable on the balance sheet date. dates of the future incoming payments. Specific value adjust- For income and expenditure, the rates applicable at the time ments are deducted directly from the corresponding claims. of the transaction are used. Futures contracts are valued at residual maturity rates. In addition to the specific value adjustments, the bank makes portfolio value adjustments to cover any latent default risks The balance sheet and income statement positions of foreign present on the balance sheet date. In this connection, equivalent operations are converted at the rates prevailing on the balance claims not entitled to specific value adjustments are grouped sheet date. together into risk portfolios. A calculation model is then applied to each risk portfolio to determine the necessary portfolio

Conversion rates 31.12.2019 31.12.2018 value adjustments based on the probability of default and loss 1 EUR 1.0870 1.1266 given default. Portfolio value adjustments are offset against the 1 USD 0.9684 0.9853 corresponding claims. Changes to the portfolio value adjust- 1 GBP 1.2825 1.2559 ments are entered in the profit and loss account. 1 SGD 0.7202 0.7229 1 HKD 0.1243 0.1258 Impaired claims are reclassified as performing if the outstanding 100 JPY 0.8913 0.8978 capital amounts and interest are again paid within the specified period under contractual agreements. 16 Appendix to the financial statement

Trading positions comprising securities and hedged with derivatives, the difference between the fair value precious metals valuation and the accrual method is reported in the compen- Trading positions are valued at the market value on the balance sation account. sheet date. For positions which are not traded on a recognized exchange or for which there is no representative market, valu- Repurchase and reverse repurchase transactions ation is carried out at the lower of cost or market. (Repo transactions) Repo transactions are used to refinance and fund money market Securities and precious metals held as current and transactions. They are entered in the balance sheet as advances non-current assets against collateral and cash contributions or with pledging of Current assets are valued at the lower of cost or market. Money securities held on own account. Securities provided to serve as market papers are measured at amortized cost. Fixed-interest cover thus continue to be posted in the corresponding balance bearing securities assigned to non-current assets are reported sheet positions – securities received to serve as collateral are in the balance sheet at the repayment amount. Premiums and not reported in the balance sheet. Interest resulting from the discounts which have not yet been amortized are reported as transactions is posted as net interest income. accrued items. Only those debt instruments which are kept until maturity are recorded as non-current assets. Securities lending and borrowing transactions Securities lending is recorded at the value of cash deposits Precious metals held as current assets are valued at the which have been received or made, including interest accrued. market value on the balance sheet date. Precious metals held as non-current assets are reported at cost minus necessary Securities which have been borrowed or accepted as collat- value adjustments. eral are only recorded in the balance sheet if the bank gains control of the contractual rights contained in these securities. Shares in affiliated companies and participations Securities lent or provided as collateral are only taken off the Shares in affiliated companies and participations are valued balance sheet if the bank loses the contractual rights associ- at cost, taking into account necessary value adjustments. ated with these securities. The market values of the securities Shares in infrastructure companies are also reported in the which have been either borrowed or lent are monitored daily balance sheet under participations. These items are insignificant so that additional collateral can be provided or requested in capital and voting shares. Subordinated loans to affiliated where necessary. companies are reported at the nominal value. Fees arising from securities lending and repurchase transactions, Intangible assets/tangible assets which have been received or paid, are entered as interest earned Intangible assets are depreciated over the useful life (generally and interest paid. five to ten years). Properties for the bank’s own use are valued at cost, including any appreciating investments, less depreciation Amounts due to banks and clients over a fixed useful life (generally 50 years). Any building work Amounts due to banks and clients are reported in the balance carried out in rented properties is depreciated over the term of sheet at nominal value. the rental agreement. Securitized liabilities Other tangible assets such as machinery, furniture and vehicles Securitized liabilities in the form of certificates and medium- are depreciated over their useful life (normally three to five years). term notes are reported in the balance sheet at repayment amount. Bonds are reported at amortized cost using the Derivatives effective interest method. The positive and negative replacement values of all derivative financial instruments are reported under the positions other Other liabilities assets or other liabilities. The positive and negative replace- Derivatives are reported at their fair value. The other items ment values are reported in the balance sheet as gross figures (settlement accounts, coupons etc.) are reported at their and valued at fair value. If interest rate business positions are nominal value or the value of the repayment amount. 17

Subordinated debt Credit risks Securitized subordinated debt is entered in the balance sheet Lending activities are primarily carried out in the interbank at the value of the repayment amount. Non-securitized sub- market or in secured form in private client business. The bank ordinated debt is reported at the nominal value. pursues a conservative lending policy where the same guidelines are applied for both monetary loans and guarantee credits. Value adjustments and provisions By strict limitation of the default risks, the formation of cluster In accordance with prudent accounting practice, specific value and country risks is also countered. An internal rating procedure adjustments and provisions are made for all identifiable risks. is applied as an instrument for efficient risk management and To cover latent default risks, which, as experience has shown, risk-adjusted calculation of conditions. Detailed reporting exist in a loan portfolio, portfolio value provisions are also made ensures that the Executive Board is constantly informed about based on a systematic approach. Value adjustments are offset developing risks. directly against the corresponding asset position. Provisions are formed for uncertain liabilities and for threatened losses Operational risks which are likely or certain on the balance sheet reporting date, Operational risk is defined as the risk of loss resulting from but whose level or date of occurrence is uncertain. Provisions inadequate or failed internal processes, people and systems are reported under the same name in the balance sheet. or from external events. LGT Bank Ltd. has established a Group-wide committee which provides the Executive Board Taxes with support in the early identification of these risks and in Taxes accruing to the result for the period under review are implementing appropriate measures. recorded as expenses in the accounting period in which the corresponding profit has occurred. Derivative financial instruments Interest rate and currency swaps are regularly used to manage Risk management the bank’s own risk positions. Within the framework of client The risk policy complies with internal requirements and business, foreign currency and precious metals options are guidelines, Liechtenstein Banking Law, FMA communiqué used in addition to the aforesaid instruments. no. 10/2009 “Risk-compatible capital adequacy requirements, risk management and control”, the guidelines of the European The accounting and valuation principles remain unchanged Banking Authority and the principles of the Basel Committee compared to last year. on Banking Supervision.

The Board of Directors has overall responsibility for implementing risk policy. Whereas the functions of risk management are allocated to operational units, the Executive Board is responsible for overall risk control. The independent Risk Controlling Department monitors compliance with the issued provisions.

Market risks The bank’s business activities mean that it is mainly exposed to risks associated with interest rate, credit spread and foreign currency fluctuations. Whereas the Trading Committee is responsible for controlling risks resulting from trading activities, the Asset and Liability Committee is responsible for controlling the stemming from the balance sheet structure.

These bodies restrict the risk positions by means of volume and sensitivity guidelines, and value-at-risk and loss limits. An analysis of the aggregate risks and the simulation of worst-case scenarios are carried out on a regular basis. 18

Remuneration report

Remuneration principles The total amount of remuneration paid by the bank is approved LGT is a family-run company built on the values of long-term by the HRCC on the basis of a recommendation from the Board commitment, stability and independence. LGT relies on the of Directors of the bank/CCB. The remuneration of the Execu- achievements, ideas and dedication of its employees to meet tive Board is decided in accordance with the following process: the needs of its clients and implement its business strategy. An appropriate, sustainable and market-based remuneration model forms a central part of the attractive and inspirational Decision process working environment that LGT offers. Beneficiary Recommended by Approved by CEO of the bank Board of Directors HRCC The remuneration model of LGT and LGT Bank Ltd. (the bank) Roland Schubert of the bank/CCB is based on the following principles: Members of the CEO of the bank Board of Directors Executive Board of the bank/CCB ■ The compensation model supports the implementation Ivo Klein of LGT’s corporate values and objectives and takes the Markus Werner risk elements into consideration. Mark Steiner

■ Excellent performance, outstanding dedication and successes achieved with integrity will be rewarded.

■ The compensation model is focused on long-term business success.

■ Success is evaluated on a long-term basis. Failure on the part of employees in key positions can also result in salary deductions.

LGT’s fundamental salary policy guidelines are developed and monitored by the “HR Compensation Committee (HRCC)” of the Foundation Board. At bank level, the implementation of the guidelines is guaranteed by the “Compensation Committee of the Bank (CCB)”.

The CCB evaluates the implementation of the guidelines and the growth, suitability and composition of the overall compensation. It also determines whether the remuneration is based on the remuneration principles. In addition, it ensures that the current national regulatory requirements are met. It reports annually to the HRCC and submits changes to the HRCC for approval. 19

Components of the remuneration The compensation model for all employees of the bank consists of a fixed basic salary, a variable remuneration component and benefits. The following table gives a summary of the individual components of the remuneration.

Compensation model

Characteristics Element Plan participants Brief description Purpose Fixed Cash Basic salary Employees of Monthly market-based remuneration Reflects abilities, skills and the bank paid in 13 installments in accordance responsibility with the position and the contract of employment Variable Cash incentive Employees of Granted and paid annually; amount Rewarding excellent perfor Bonus the bank of bonus depends on business success mance, outstanding dedication and individual performance in the and successes achieved with business year in question integrity Options Deferred incentive Senior Management Options on LGT dividend right Reinforcing the long-term links LTIS 1 and employees in certificates granted annually. between the interests of the key positions Three-year blocked period, followed employees, owners and clients; by exercise of the options within possibility for plan participants four years to share in the value created by the company Benefits Benefits/ Employees of Pension; insurance; discounts on bank Providing competitive benefits Fringe benefits the bank products; right to a sabbatical

1 Long Term Incentive Scheme

Basic salary The variable remuneration can be paid directly as an annual The fixed monthly basic salary is paid in cash in 13 installments cash bonus or can take the form of options as part of the Long to compensate employees for performing the tasks relating to Term Incentive Scheme (LTIS). The relationship between the their position, for their personal abilities and skills and for direct and the deferred remuneration (LTIS and cash incentive) any management responsibility that they have taken on. LGT is determined on the basis of the employee’s risk profile. In regularly checks the basic salaries against market benchmarking the case of members of the Executive Board and “risk takers”, studies to ensure that they are compatible with the market the proportion of deferred remuneration is in line with the and makes any necessary changes. LGT does not grant any regulatory requirements. automatic salary increases. Parts of the variable remuneration can be subject to a forfeiture Variable remuneration clause. Where appropriate, claims to variable remuneration As a basic principle, the total variable remuneration is based (the cash bonus) may be forfeited, for example, in the case on the business success of LGT and the bank and reflects the of extraordinary dismissal, serious breaches of the law and bank’s risk profile. In order to take account of exceptional significant financial losses made by the Group. developments, the final decision about the total amount is made during the approval process at the discretion of the HRCC. 20 Remuneration report

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

The LTIS options are granted annually and can be exercised after a three-year blocked period up to and including the Remuneration of the Executive Board 2019 (TCHF) seventh year (see chart). Direct Deferred Cash payment Shares/share-linked instruments Basic salary Bonus LTIS Overview of the LGT remuneration structure Entire EB 1 1 228 1 095 811 LTIS Blocked period Exercise period Cash incentive 1 In 2019 there were four members of the Executive Board. Basic salary

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Time “We want to achieve further profitable growth by building on our strengths and our long-term strategy.”

Thomas Piske, Chairman of the Board of Directors

Rudolf von Alt, detail from “The harbor of Santa Lucia in Naples,” 1835 24

Notes on the balance sheet

1 Overview of collateral (TCHF) Mortgage- Other Without Total backed collateral collateral Advances Due from clients (excl. mortgage loans) 141 524 11 163 274 2 720 946 14 025 744 Mortgage loans Residential properties 2 785 472 0 0 2 785 472 Office and business premises 241 928 0 0 241 928 Commercial and industrial premises 138 505 0 0 138 505 Other 111 036 0 0 111 036 Total 31.12.2019 3 418 465 11 163 274 2 720 946 17 302 685 31.12.2018 3 608 369 9 746 132 2 704 875 16 059 376

Off-balance sheet transactions Contingent liabilities 88 225 204 6 858 063 7 083 355 Irrevocable commitments 9 156 87 556 105 366 202 078 Commitments to subscribe additional contributions for shares or other equity securities 0 256 612 556 345 812 957 Total 31.12.2019 9 244 569 372 7 519 774 8 098 390 31.12.2018 10 903 476 199 5 907 868 6 394 970

Impaired due amounts (TCHF) Gross Estimated Net Specific amount realization amount value due value of due adjustments collateral 31.12.2019 51 693 38 285 13 408 13 408 31.12.2018 51 986 38 429 13 557 13 557

2 Trading positions (TCHF) Book value Cost Market value 31.12.2019 31.12.2018 31.12.2019 31.12.2018 31.12.2019 31.12.2018 Trading positions comprising securities and precious metals Debt instruments 2 005 605 1 573 122 2 037 212 1 626 752 2 005 605 1 573 122 listed (traded on a recognized exchange) 1 714 190 1 382 771 1 738 790 1 428 067 1 714 190 1 382 771 unlisted 291 415 190 351 298 422 198 685 291 415 190 351 of which own bonds and medium-term notes 19 408 24 660 19 720 25 460 19 408 24 660 Equity paper 0 0 0 0 0 0 Precious metals 753 491 391 258 753 491 391 258 753 491 391 258 Total 2 759 097 1 964 380 2 790 703 2 018 010 2 759 097 1 964 380 of which central bank-eligible securities (eligible for repo transactions) 23 774 1 942 24 129 1 943 23 774 1 942 25

3 Securities and precious metals held as Book value Cost Market value current assets (excl. trading positions) 31.12.2019 31.12.2018 31.12.2019 31.12.2018 31.12.2019 31.12.2018 (TCHF) Debt instruments 3 523 607 3 617 683 3 610 607 3 647 425 3 572 287 3 631 388 Equity paper 0 0 0 0 0 0 Precious metals 0 0 0 0 0 0 Total 3 523 607 3 617 683 3 610 607 3 647 425 3 572 287 3 631 388 of which eligible as security for central bank borrowings 2 057 568 2 215 204 2 102 670 2 230 986 2 079 807 2 221 996

4 Securities and precious metals held as Book value Cost Market value non-current assets (TCHF) 31.12.2019 31.12.2018 31.12.2019 31.12.2018 31.12.2019 31.12.2018 Debt instruments 0 0 0 0 0 0 Equity paper 0 0 0 0 0 0 Precious metals 1 015 958 1 797 1 797 1 310 1 122 Total 1 015 958 1 797 1 797 1 310 1 122 of which eligible as security for central bank borrowings 0 0 0 0 0 0

5 Participations and shares in affiliated companies (TCHF) 31.12.2019 31.12.2018 Participations with market value 0 0 without market value 295 295 Total 295 295

Shares in affiliated companies with market value 0 0 without market value 655 655 Subordinated claims against affiliated companies 20 000 20 000 Total 20 655 20 655

6 Affiliated companies Business activity Share capital % share % share Business of votes of capital result TCHF Banks and investment firms LGT Bank (Cayman) Ltd., Grand Cayman bank USD 600 000 100 83 356

The capital of LGT Bank (Cayman) Ltd. is divided into 500 000 ordinary shares and 100 000 participating shares. Both categories of share have a par value of USD 1 per share. The participation comprises 100% of the ordinary shares, which have a preferential dividend. At 31 December 2019, the shares in banks and investment firms shown under the shares in affiliated companies item amounted to TCHF 655 (655 in the previous year).

7 Participations The companies listed under participations serve only as infrastructure and are insignificant in terms of the share of capital and votes. There are no shares in banks and investment firms under participations. 26 Notes on the balance sheet

8 Statement of changes in non-current assets (TCHF) Cost Accumulated Book value Investments Disinvestments Reclassifications Write-ups Depreciation Book value depreciation/ 31.12.2018 31.12.2019 write-ups Total participations (minority holdings) 295 0 295 0 0 0 0 0 295 Total shares in affiliated companies 20 655 0 20 655 0 0 0 0 0 20 655 Total securities and precious metals held as non-current assets 1 797 -839 958 0 0 0 57 0 1 015 Total intangible assets 169 340 -28 518 140 822 0 -1 411 0 0 -17 018 122 393 Properties Bank premises 207 772 -137 096 70 676 4 583 -1 377 0 672 -6 470 68 083 Other properties 9 616 -9 616 0 0 0 0 0 0 0 Other tangible assets 8 397 -6 235 2 162 2 649 -131 0 86 -1 312 3 454 Total tangible assets 225 785 -152 947 72 838 7 231 -1 508 0 758 -7 782 71 537 Fire insurance value of properties 209 759 209 060 Fire insurance value of other tangible assets 6 077 7 635 Real estate intended for sale (not included in the statement of changes in non-current assets) 0 1 230

9 Intangible assets At 31 December 2019, this item included capitalized software licenses amounting to TCHF 6 and at 31 December 2018 amounting to TCHF 15. At 31 December 2019, this item also included goodwill and other acquired intangible assets amounting to TCHF 122 387 and at 31 December 2018 amounting to TCHF 140 807. These are depreciated over a ten-year period and arise from the acquisition of the private banking business of ABN AMRO in Hong Kong in 2017.

10 Pledged or assigned assets and assets subject to reservation of ownership (TCHF) 31.12.2019 31.12.2018 Pledged or assigned assets and assets subject to reservation of ownership, without securities lending or repurchase transactions Book value of pledged or assigned (assigned as collateral) assets 304 182 223 586 Actual liabilities 125 042 170 464

There are no assets subject to reservation of ownership.

Securities lending and repurchase transactions Receivables from cash deposits in connection with securities borrowing and reverse repurchase transactions 4 478 075 1 168 097 Liabilities from cash deposits in connection with securities lending and repurchase transactions 147 439 297 954 Own securities lent or provided as collateral within the scope of securities lending, borrowing transactions and transferred from repurchase transactions 0 172 170 of which capable of being resold or pledged without restrictions 0 172 170 Securities borrowed or accepted as collateral within the scope of securities lending, borrowing transactions and reverse repurchase agreements which are capable of being resold or further pledged without restrictions 5 459 542 2 027 412 of which resold or further pledged securities 602 977 573 234

11 Liabilities in respect of own pension funds (TCHF) 31.12.2019 31.12.2018 Total liabilities 36 762 41 368 27

12 Outstanding bonds at 31.12.2019 Interest rate Year of Earliest Currency Par value % issue redemption TCHF date LGT GIM Index Certificates 0.0 ongoing 28.02.2022 EUR 35 667 LGT GIM Index Certificates II 0.0 ongoing 30.06.2024 EUR 113 321 LGT GIM Index Certificates II/2 0.0 ongoing 31.03.2021 EUR 21 604 LGT GIM Index Certificates III 0.0 ongoing 31.07.2021 EUR 72 295 Crown Absolute Return Index Certificates 0.0 ongoing 30.11.2023 EUR 2 448 LGT M-Smart Allocator Index Certificates 0.0 ongoing 31.08.2022 EUR 56 697 1.875% bond LGT Bank Ltd. 2013 – 8.2.2023 1.875 2013 08.02.2023 CHF 299 427 1.5% bond LGT Bank Ltd. 2014 – 10.5.2021 1.5 2014 10.05.2021 CHF 299 696 0.625% bond LGT Bank Ltd. 2015 – 25.11.2025 0.625 2015 25.11.2025 CHF 300 528 0.2% bond LGT Bank Ltd. 2016 – 12.10.2026 0.2 2016 12.10.2026 CHF 349 958 0.5% bond LGT Bank Ltd. 2017 – 12.05.2027 0.5 2017 12.05.2027 CHF 276 252 0.375% bond LGT Bank Ltd. 2019 – 5.7.2028 0.375 2019 05.07.2028 CHF 149 622 0.375% bond LGT Bank Ltd. 2019 – 15.11.2029 0.375 2019 15.11.2029 CHF 159 826

For product explanations see appendix 47 on page 44 28 Notes on the balance sheet

13 Value adjustments and provisions Status Application Recoveries, New Releases to Status (TCHF) 31.12.2018 overdue allocations P/L account 31.12.2019 interest, out of P/L currency account differences Value adjustments for default risks Specific value adjustments 13 557 -1 406 -347 1 961 -358 13 408 Portfolio value adjustments 13 133 0 -22 1 237 -1 204 13 143 Provisions for contingent liabilities and credit risks 2 743 0 0 386 -59 3 070 Provisions for other business risks 8 542 -136 -38 257 -24 8 602 Provisions for taxes and deferred taxes 12 610 -11 945 -102 16 203 -838 15 927 Other provisions 1 316 -58 -18 793 0 2 033 Total value adjustments and provisions 51 901 -13 545 -527 20 838 - 2 484 56 183 less: Value adjustments -26 690 -26 551 Total provisions as per the balance sheet 25 211 29 631

See also Point 37

14 Share capital (TCHF) 31.12.2019 31.12.2018 Total Number Capital Total Number Capital nominal of shares entitled to nominal of shares entitled to value a dividend value a dividend Share capital 291 201 2 912 008 291 201 291 201 2 912 008 291 201 Total 291 201 2 912 008 291 201 291 201 2 912 008 291 201

No authorized capital or contingent capital exists.

Major shareholders and groups of shareholders 31.12.2019 31.12.2018 linked by voting rights Nominal % Nominal % with voting right: LGT Group Holding Ltd. 291 201 100.0 291 201 100.0

LGT Group Holding Ltd. is a 100% subsidiary of LGT Group Foundation. The economic beneficiary of LGT Group Foundation is the Prince of Liechtenstein Foundation in Vaduz. The main economic beneficiary of the Prince of Liechtenstein Foundation is the reigning prince of Liechtenstein, H.S.H. Prince Hans-Adam II von und zu Liechtenstein. 29

15 Equity statement (TCHF) Equity capital at the start of the business year Share capital paid in 291 201 Capital reserves 0 Legal reserves 218 500 Reserves for own shares 0 Statutory reserves 0 Other reserves 1 406 000 Accumulated profit for the year 1 226 514 Total equity capital at the start of the business year (prior to profit distribution) 3 142 215 +/- capital increase/capital reduction 0 + premium 0 - Release of provisions for general banking risks 0 - dividend from the previous year’s profit 0 + annual profit for the business year 130 592 Total equity capital at the end of the business year (prior to profit distribution) 3 272 807 of which: Share capital paid in 291 201 Capital reserves 0 Legal reserves 218 500 Reserves for own shares 0 Statutory reserves 0 Other reserves 1 406 000 Accumulated profit for the year 1 357 106 30 Notes on the balance sheet

16 Maturity structure of assets, liabilities and provisions (TCHF) On demand Redeemable Due within Due between Due between Due after Immobilized Total 3 months 3 to 12 months 12 months to 5 years 5 years Assets Cash and cash equivalents 5 963 184 – – – – – – 5 963 184 Due from banks 971 296 – 3 800 898 2 462 822 427 326 292 956 – 7 955 297 Due from clients 18 112 702 582 14 679 893 808 968 696 255 396 875 – 17 302 685 of which mortgage loans 923 23 733 2 164 055 253 970 466 309 367 950 – 3 276 941 Trading positions comprising securities and precious metals 2 759 097 – – – – – – 2 759 097 Debt instruments and precious metals held as current assets (excl. trading positions) 3 390 364 – 133 243 – – – – 3 523 607 of which debt instruments of public authorities and bills eligible for refinancing at central banks – – 133 243 – – – – 133 243 Securities and precious metals held as non-current assets 1 015 – – – – – – 1 015 Other assets 17 774 45 842 627 255 153 374 49 637 30 392 72 767 997 041 Total assets 31.12.2019 13 120 842 748 424 19 241 288 3 425 163 1 173 218 720 223 72 767 38 501 926 31.12.2018 13 754 202 818 043 15 132 019 2 598 256 1 569 150 646 077 72 838 34 590 585

Liabilities and provisions Due to banks 3 470 284 3 721 637 2 829 830 617 307 28 404 203 600 – 10 871 062 Due to clients 9 554 403 7 706 370 2 914 181 706 389 28 933 0 – 20 910 277 Savings accounts – 655 580 – – – – – 655 580 Other liabilities to clients 9 554 403 7 050 790 2 914 181 706 389 28 933 0 – 20 254 696 Securitized liabilities – – 4 973 36 379 974 127 1 245 392 – 2 260 871 Issued bonds – – 4 973 36 379 974 127 1 245 392 – 2 260 871 of which medium-term notes – – 4 973 36 379 72 973 9 206 – 123 531 Other securitized liabilities – – – – – – – 0 Provisions (excl. provisions for general banking risks) 29 631 – – – – – – 29 631 Other liabilities 149 521 45 842 669 724 159 366 90 177 42 648 – 1 157 278 Total liabilities and provisions 31.12.2019 13 203 840 11 473 849 6 418 709 1 519 442 1 121 640 1 491 639 0 35 229 119 31.12.2018 14 858 575 6 195 416 6 739 164 1 524 039 1 027 491 1 103 684 0 31 448 369

Of the securities reported in the balance sheet under bonds and other fixed-interest bearing securities, instruments amounting to TCHF 1 491 191 (1 121 379 in the previous year) will become due in 2020. Issued bonds due in 2020 amount to TCHF 41 352 (442 728 in the previous year). 31

17 Transactions with closely associated persons (TCHF) 31.12.2019 31.12.2018 Claims on affiliated companies Due from banks 1 331 556 1 697 494 Due from clients 5 686 960 5 641 726 of which due from qualified participants 4 970 436 4 942 756 Total 7 018 516 7 339 220

Liabilities to affiliated companies Due to banks 9 251 135 7 646 013 Due to clients 445 092 534 522 of which due to qualified participants 22 142 15 893 Securitized liabilities 0 0 Total 9 696 227 8 180 535

Loans to governing bodies Members of the Board of Directors 1 775 1 775 Members of the Executive Board 4 233 4 177 Members of the governing bodies of the parent company 1 865 1 050 Total 7 873 7 002

Liabilities to Prince of Liechtenstein Foundation (qualified participant) Due to clients 120 512 7 516

Significant transactions Transactions with closely associated persons such as securities transactions, payment transactions, lending facilities and interest on deposits were made under the same terms and conditions as applicable to third parties.

Counterparty Type(s) of transaction 2019 2018 LGT Group Holding Ltd., Vaduz Interest earned Debit interest 3 587 3 716 Other ordinary income Income from real estate 1 877 1 224 Operating expenses Services for accounting/controlling, internal audit, compliance, HR, marketing, risk controlling, legal & tax, property insurance 43 153 41 911 LGT Group Foundation, Vaduz Interest earned Debit interest 8 881 9 077 Operating expenses Logo fee, marketing 20 634 20 590 LGT Bank (Switzerland) Ltd., Basel Interest earned Debit interest, negative debit interest 10 954 10 555 Interest paid Credit interest, negative credit interest 95 287 60 882 Commission income Brokerage fees, custody fees 13 272 13 134 Commission paid Client advisory services, investment management 3 657 3 469 Other ordinary income Loan administration, management services 3 175 2 014 Personnel expenses Staff interchange 1 602 929 Operating expenses Income from real estate, services for IT, marketing, investment services 7 332 7 592 Commitments to subscribe additional contributions Payment commitments for shares or other equity securities 118 610 106 561 33

Counterparty Type(s) of transaction 2019 2018 LGT Bank (Singapore) Ltd., Singapore Interest earned Debit interest, negative debit interest 6 674 14 851 Interest paid Credit interest, negative credit interest 4 882 2 046 Commission income Brokerage fees, custody fees 51 760 50 418 Commission paid Client advisory services, investment management 3 166 7 021 Other ordinary income Loan administration, management services, investment services, front support services, staff interchange 15 658 12 446 Operating expenses Trading administration, IT, investment services 16 826 15 600 Contingent liabilities Guarantees 6 839 805 5 309 695 Commitments to subscribe additional contributions Payment commitments for shares or other equity securities 182 773 88 014 LGT Capital Partners (FL) Ltd., Vaduz Commission income Distribution fees 73 019 76 081 LGT Capital Partners Ltd., Pfäffikon Interest paid Negative credit interest 827 959 Commission paid Portfolio management 1 687 1 949 Operating expenses Logo fee 3 160 3 080 LGT Capital Partners (Ireland) Ltd., Dublin Commission income Distribution fees 2 518 2 291 Other ordinary income Income from real estate, services for IT, legal, accounting, facility 851 1 358 LGT Capital Partners (Asia-Pacific) Ltd., Hong Kong Other ordinary income Income from real estate, services for accounting, facility, IT, HR 3 577 2 520 LGT investment management companies Interest earned Debit interest 2 762 1 852 Interest paid Negative credit interest 2 250 442 Commission income Distribution fees, custody fees 9 451 9 831 Other ordinary income Income from real estate, services for IT, facility, accounting, HR, legal 674 1 114 Contingent liabilities Guarantees 10 047 10 417 LGT (Middle East) Ltd., Dubai Commission paid Client advisory services 4 437 4 920 LGT Financial Services Ltd., Vaduz Operating expenses Services for IT, payment transactions, securities administration, facility management, property management 104 393 101 122 Other ordinary income Income from real estate 2 183 2 304 LGT Global Invest Ltd., Cayman Interest earned Debit interest 1 709 1 212 LGT Investment Management (Asia) Ltd., Hong Kong Other ordinary income Management services, investment services, accounting, compliance, staff interchange 1 784 1 297 Contingent liabilities Guarantees 2 902 2 956 LGT Capital Invest Mauritius PCC, Mauritius Operating expenses Logo fee 10 410 9 637 LGT Certificates Ltd., Cayman Commission income Distribution fees 3 837 4 374 34 Notes on the balance sheet

18 Breakdown of balance sheet according to domicile (TCHF) 31.12.2019 31.12.2018 Domestic Abroad Domestic Abroad Assets Cash and cash equivalents 5 707 880 255 304 5 528 368 86 135 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 0 133 243 0 246 260 Due from banks 6 284 722 1 670 575 3 182 619 3 001 174 Due from clients (excl. mortgage loans) 7 388 230 6 637 515 6 354 335 6 184 938 Mortgage loans 2 481 413 795 528 2 595 562 924 541 Bonds and other fixed-interest bearing securities 509 556 4 886 413 496 431 4 448 114 Participations 66 229 66 229 Shares in affiliated companies 20 000 655 20 000 655 Intangible assets 0 122 393 0 140 822 Tangible assets 63 453 8 084 65 186 7 652 Other assets 679 084 796 605 620 646 625 361 Accrued income and prepaid expenses 15 081 45 897 18 632 42 859 Total assets 23 149 485 15 352 440 18 881 845 15 708 740

Liabilities Due to banks 9 494 260 1 376 802 7 963 414 1 079 360 Due to clients (excl. savings accounts) 7 060 201 13 194 495 5 726 913 12 592 730 Savings accounts 550 706 104 874 537 061 110 534 Securitized liabilities 2 260 871 0 2 257 079 0 Other liabilities 500 501 522 499 395 626 635 382 Accrued expenses and deferred income 67 431 66 847 58 450 66 609 Provisions 23 631 6 000 25 079 132 Share capital 291 201 0 291 201 0 Legal reserves 218 500 0 218 500 0 Other reserves 1 406 000 0 1 406 000 0 Profit carried forward 1 226 514 0 1 044 072 0 Profit for the year 114 474 16 118 174 048 8 395 Total liabilities 23 214 291 15 287 635 20 097 443 14 493 142

Balance sheet items are broken down based on the client’s domicile, mortgage loans by the location of the property. Domestic comprises Liechtenstein and Switzerland.

19 Breakdown of assets according to country/country group 31.12.2019 31.12.2018 TCHF % TCHF % Country Liechtenstein 7 532 893 19.6 7 647 143 22.1 Switzerland 15 616 592 40.6 11 234 703 32.5 Europe excl. Liechtenstein/Switzerland 6 918 223 18.0 6 463 872 18.7 North America 1 485 556 3.9 1 940 769 5.6 Caribbean 2 740 904 7.1 2 640 490 7.6 Latin America 71 026 0.2 148 697 0.4 Africa 119 414 0.3 130 083 0.4 Asia 3 216 872 8.4 3 763 472 10.9 Oceania 800 445 2.1 621 356 1.8 Total assets 38 501 926 100.0 34 590 585 100.0 35

20 Breakdown of balance sheet according to currencies (TCHF) 31.12.2019 CHF EUR USD Other Total Assets Cash and cash equivalents 5 702 090 213 136 757 47 202 5 963 184 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 0 0 77 441 55 802 133 243 Due from banks 4 904 964 886 814 1 711 142 452 376 7 955 297 Due from clients (excl. mortgage loans) 7 523 173 2 405 214 2 298 742 1 798 616 14 025 744 Mortgage loans 2 496 340 278 814 43 825 457 961 3 276 941 Bonds and other fixed-interest bearing securities 486 884 781 139 2 951 430 1 176 516 5 395 969 Participations 295 0 0 0 295 Shares in affiliated companies 20 655 0 0 0 20 655 Intangible assets 0 6 0 122 387 122 393 Tangible assets 63 453 3 596 0 4 488 71 537 Other assets 652 487 6 053 9 670 807 480 1 475 690 Accrued income and prepaid expenses 13 187 4 723 23 358 19 711 60 978 Total assets 21 863 525 4 579 496 7 116 365 4 942 539 38 501 926 Delivery claims from forex spot, forex futures and forex options transactions 13 817 139 15 524 246 43 826 058 18 115 210 91 282 655 Total assets 35 680 666 20 103 742 50 942 424 23 057 749 129 784 581

Liabilities Due to banks 1 034 625 2 078 111 6 262 899 1 495 426 10 871 062 Due to clients (excl. savings accounts) 3 153 222 4 694 032 9 822 146 2 585 296 20 254 696 Savings accounts 619 605 32 037 3 937 0 655 580 Securitized liabilities 1 954 569 306 303 0 0 2 260 871 Other liabilities 963 791 17 382 16 902 24 926 1 023 000 Accrued expenses and deferred income 58 112 7 251 51 511 17 404 134 278 Provisions 21 580 1 192 1 943 4 917 29 631 Share capital 291 201 0 0 0 291 201 Legal reserves 218 500 0 0 0 218 500 Other reserves 1 406 000 0 0 0 1 406 000 Profit carried forward 1 226 514 0 0 0 1 226 514 Profit for the year 114 474 9 283 0 6 835 130 592 Total liabilities 11 062 193 7 145 589 16 159 338 4 134 805 38 501 926 Delivery liabilities from forex spot, forex futures and forex options transactions 24 772 444 12 948 693 34 883 271 18 895 374 91 499 781 Total liabilities 35 834 637 20 094 282 51 042 609 23 030 179 130 001 707 Net position per currency -153 971 9 460 -100 185 27 570 -217 126 36 Notes on the balance sheet

Breakdown of balance sheet according to currencies (TCHF) 31.12.2018 CHF EUR USD Other Total Assets Cash and cash equivalents 5 522 453 36 291 802 54 957 5 614 503 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 0 0 177 218 69 042 246 260 Due from banks 1 818 661 881 086 2 892 556 591 490 6 183 793 Due from clients (excl. mortgage loans) 6 232 179 2 497 144 1 916 845 1 893 105 12 539 273 Mortgage loans 2 611 202 318 441 27 259 563 201 3 520 103 Bonds and other fixed-interest bearing securities 490 114 791 770 2 703 246 959 415 4 944 545 Participations 295 0 0 0 295 Shares in affiliated companies 20 655 0 0 0 20 655 Intangible assets 0 15 0 140 807 140 822 Tangible assets 65 185 3 282 0 4 371 72 838 Other assets 761 313 7 144 2 752 474 798 1 246 007 Accrued income and prepaid expenses 12 531 7 010 26 694 15 256 61 491 Total assets 17 534 588 4 542 183 7 747 372 4 766 442 34 590 585 Delivery claims from forex spot, forex futures and forex options transactions 14 336 857 19 962 166 40 629 561 15 609 317 90 537 901 Total assets 31 871 445 24 504 349 48 376 933 20 375 759 125 128 486

Liabilities Due to banks 1 009 387 2 360 327 4 108 026 1 565 034 9 042 774 Due to clients (excl. savings accounts) 2 903 990 4 286 821 8 140 444 2 988 388 18 319 643 Savings accounts 611 350 30 506 5 739 0 647 595 Securitized liabilities 1 906 808 350 271 0 0 2 257 079 Other liabilities 871 130 20 049 123 989 15 840 1 031 008 Accrued expenses and deferred income 56 600 8 126 42 419 17 914 125 059 Provisions 22 931 189 2 035 56 25 211 Share capital 291 201 0 0 0 291 201 Legal reserves 218 500 0 0 0 218 500 Other reserves 1 406 000 0 0 0 1 406 000 Profit carried forward 1 044 072 0 0 0 1 044 072 Profit for the year 174 048 3 904 0 4 491 182 443 Total liabilities 10 516 017 7 060 193 12 422 652 4 591 723 34 590 585 Delivery liabilities from forex spot, forex futures and forex options transactions 21 360 784 17 416 229 36 031 332 15 733 814 90 542 159 Total liabilities 31 876 801 24 476 422 48 453 984 20 325 537 125 132 744 Net position per currency -5 356 27 927 -77 051 50 222 -4 258 37

21 Subordinated assets (TCHF) 31.12.2019 31.12.2018 Balance sheet items Bonds and other fixed-interest bearing securities 5 889 0 Shares in affiliated companies 20 000 20 000 Total 25 889 20 000

22 Debt instruments of public authorities and bills which are eligible for refinancing at central banks 31.12.2019 31.12.2018 (TCHF) Debt instruments of public authorities 133 243 246 260 Total 133 243 246 260

23 Bonds and other fixed-interest bearing securities (TCHF) 31.12.2019 31.12.2018 Money market paper 22 261 0 of which from public sector issuers 0 0 of which from other issuers 22 261 0 Bonds 5 373 708 4 944 545 of which from public sector issuers 549 915 568 206 of which from other issuers 4 823 793 4 376 339 of which own bonds 19 408 24 660 Total 5 395 969 4 944 545

24 Due to clients (TCHF) 31.12.2019 31.12.2018 Savings accounts 655 580 647 595 Other liabilities 20 254 696 18 319 643 Total 20 910 277 18 967 238

25 Securitized liabilities (TCHF) 31.12.2019 31.12.2018 Issued bonds 2 260 871 2 257 079 of which medium-term notes 123 531 135 784 Other securitized liabilities 0 0 Total 2 260 871 2 257 079

26 Provisions (TCHF) 31.12.2019 31.12.2018 Tax provisions 15 927 12 610 Other provisions 13 705 12 601 Total 29 631 25 211 38

Notes on off-balance sheet transactions

27 Contingent liabilities (TCHF) 31.12.2019 31.12.2018 Credit guarantees and similar instruments 205 549 251 924 of which for affiliated companies 25 749 91 943 Performance guarantees and similar instruments 6 875 980 5 333 289 of which for affiliated companies 6 827 641 5 291 760 Irrevocable commitments and other contingent liabilities 1 826 6 422 of which for affiliated companies 0 0 Total 7 083 355 5 591 635

28 Commitment credits Liabilities from deferred payments are reported in the balance sheet. There were no acceptance liabilities or other commitment credits at 31 December 2019 and 31 December 2018.

29 Fiduciary transactions (TCHF) 31.12.2019 31.12.2018 Fiduciary investments at third-party banks 801 272 413 903 Fiduciary investments at affiliated banks and investment firms 0 0 Fiduciary loans and other financial transactions in a fiduciary capacity 0 0 of which with affiliated companies 0 0 Total 801 272 413 903 39

30 Open derivative financial instruments Trading instruments Hedging instruments (TCHF) positive negative contract positive negative contract replacement replacement volume replacement replacement volume values values values values Interest rate instruments Forward contracts incl. FRAs 0 0 0 0 0 0 Swaps 10 492 10 765 997 666 5 412 75 309 2 676 832 Futures 0 0 0 0 0 0 Options (OTC) 5 5 2 033 0 0 0 Options (exchange-traded) 0 0 0 0 0 0

Forex/precious metals Forward contracts 449 906 519 110 66 497 944 62 879 214 229 19 609 038 Swaps 0 0 0 0 0 0 Futures 0 0 0 0 0 0 Options (OTC) 53 113 44 131 8 704 625 0 0 0 Options (exchange-traded) 0 0 0 0 0 0

Equity securities/indices Forward contracts 0 0 0 0 0 0 Swaps 0 0 0 0 0 0 Futures 0 0 0 0 0 0 Options (OTC) 48 638 48 638 2 193 468 0 0 0 Options (exchange-traded) 0 0 0 0 0 0

Total before consideration of the netting contracts 31.12.2019 562 154 622 649 78 395 737 68 291 289 538 22 285 869 31.12.2018 735 531 723 815 86 551 460 68 677 94 441 14 021 650

Total after consideration of the netting contracts positive negative replacement values replacement values 31.12.2019 207 485 489 227 31.12.2018 443 911 457 959 40

Notes to the profit and loss account

31 Offsetting of refinancing expenses with income from trading The refinancing expenses arising from trading positions are not offset against income from trading activities.

32 Interest income from fixed-interest securities (TCHF) 2019 2018 Interest income from bonds 57 582 37 152 Interest income from money market paper 3 579 8 664 Total 61 161 45 816

33 Negative interest (TCHF) 2019 2018 Negative interest on assets (reduction of interest income) 63 494 31 902 Negative interest on liabilities (reduction of interest expense) 21 373 20 391 Total 84 867 52 293

34 Income from trading transactions (TCHF) Reported in the P&L under 2019 2018 Interest income from fixed-interest securities Interest income 57 991 47 110 Trading in foreign exchange and precious metals Income from financial transactions 80 502 83 950 Securities trading Income from financial transactions 17 429 -975 Structured products and other income Income from financial transactions 25 687 22 903 Total 181 609 152 988

35 Personnel expenses (TCHF) 2019 2018 Wages and salaries 213 710 203 690 Social security contributions, pensions and social assistance 27 057 26 841 of which for pensions 11 185 10 203 Other personnel expenses 8 143 8 295 Subtotal 248 910 238 826 Adjustment of liability for Long Term Incentive Scheme 19 954 7 949 Total 268 864 246 775 Emoluments to members of the Executive Board 3 134 3 694 Emoluments to members of the Board of Directors 100 100

36 Operating expenses (TCHF) 2019 2018 Occupancy expense 26 995 23 877 Expenses for IT, machinery, furniture, vehicles and other equipment 85 509 82 686 Other business expenses 163 007 163 507 Total 275 511 270 070 41

37 Losses, extraordinary items, provisions The losses reported under the item “Other ordinary expenses” were incurred mainly in connection with lending business and settlements (see also Point 44). No extraordinary items were recorded in the years 2019 and 2018. The item provisions contains mainly tax provisions, provisions for projects, as well as provisions for other business risks (see also Points 13 and 26).

38 Income and expenses broken down according to office or branch (TCHF) 2019 2018 FL Abroad FL Abroad Interest earned 553 626 100 277 408 083 90 808 Interest paid -315 301 -98 905 -217 459 -58 753 Current income from securities 4 328 0 1 729 116 Income from commission business and services 236 788 150 423 248 405 147 507 Commission paid -54 464 -18 607 -58 246 -14 421 Income from financial transactions 66 955 60 587 58 256 46 321 Other ordinary income 8 602 26 146 84 869 19 447 Operating expenses -282 836 -261 539 -274 613 -242 232 Other ordinary expenses -3 150 -761 -8 701 -1 881

The break down is based on the domicile of the booking branch.

39 Return on assets (Net profit as a percentage of total assets) 2019 2018 Return on assets 0.34 0.53 42

Additional information

40 Securities negotiable on the stock exchange (TCHF) 31.12.2019 31.12.2018 Bonds and other fixed-interest bearing securities 5 395 969 4 944 545 of which listed securities 4 998 116 4 744 347 of which listed and treated as current assets 4 998 116 4 744 347 of which listed and treated as non-current assets 0 0 of which unlisted securities 397 853 200 198 Participations 295 295 of which listed securities 0 0 of which unlisted securities 295 295 Shares in affiliated companies 655 655 of which listed securities 0 0 of which unlisted securities 655 655

41 Other assets (TCHF) 31.12.2019 31.12.2018 Positive replacement values of derivatives 630 446 804 209 Due from tax authorities 3 835 2 403 Compensation account 54 850 23 634 Physical holdings of precious metals 754 507 392 216 Other properties (classified as available for sale) 1 230 0 Other assets 30 822 23 545 Total 1 475 690 1 246 007

42 Other liabilities (TCHF) 31.12.2019 31.12.2018 Negative replacement values of derivatives 912 187 818 256 Coupons 334 333 Long Term Incentive Scheme liability 53 432 46 429 Liabilities personnel administration (excluding Long Term Incentive Scheme) 2 745 1 559 Clearing accounts 41 247 156 181 Fees 540 546 Liabilities Tax Authorities 12 515 7 704 Total 1 023 000 1 031 008

43 Other ordinary income (TCHF) 2019 2018 Compensation from Group companies 23 843 20 315 Income from real estate 6 305 4 949 Income from the release of provisions 535 302 Realized income from participations 0 77 569 Remaining other income 4 065 1 181 Total 34 748 104 316

Realized income from participations formed the largest component of other ordinary income in 2018. This comprised proceeds from the liquidation of LGT Investment Portfolio Ltd. and LGT Ireland Ltd. A large component of other ordinary income in the current year is the compensation from other Group companies. This item comprises compensation for services, performed centrally by the bank on behalf of the Group companies. Income from real estate contains the net amounts (rent payments less maintenance costs) from the rental of bank-owned property to third parties and Group companies. 43

44 Other ordinary expenses (TCHF) 2019 2018 Losses from receivables and guarantees 588 674 Transaction losses 1 535 1 001 Creation of provisions for other business risks 257 6 564 Remaining other expenses 1 531 2 343 Total 3 911 10 582

See also Point 37

45 Breakdown of client assets (TCHF) 31.12.2019 31.12.2018 Client assets Client assets in own-managed funds (investment undertakings) 17 331 441 16 067 035 Client assets under management 15 914 526 14 932 691 Other client assets under administration 63 343 846 55 458 733 Total client assets (including double counting) 96 589 813 86 458 459 of which double counting 8 320 884 8 088 175

Method of calculation Assets under administration are all client assets managed or held for investment purposes. In principle, this includes all client liabilities, fiduciary time deposits and all valued custody assets. They are stated according to the provisions of the Liechtenstein Banking Act.

Assets in own-managed funds This item comprises the assets of the actively marketed investment funds of LGT.

Assets under management The calculation of assets with a management mandate takes into account client deposits as well as the fair value of securities, loan-stock rights, precious metals and fiduciary investments placed with third-party institutions. The information covers both assets deposited with Group companies and assets deposited at third-party institutions for which a discretionary mandate is held.

Other assets under administration The calculation of other assets under administration takes into account client deposits as well as the fair value of securities, loan-stock rights, precious metals and fiduciary investments placed with third-party institutions. The information covers assets for which an administrative or advisory mandate is exercised.

Double counting This item covers investment fund units from own-managed funds as well as certain assets that are included in assets under management.

46 Foreign branch offices Business Domicile Gross Headcount Profit for Tax on activity operating the year earnings income TCHF TCHF TCHF Firms LGT Bank AG, Zweigniederlassung Österreich bank Vienna 56 845 152 5 316 393 LGT Bank Ltd., Hong Kong Branch bank Hong Kong 232 529 419 6 835 3 642 LGT Bank Ltd., Dublin Branch bank Dublin 8 278 12 3 967 573 44 Additional information

47 Outstanding bonds Product explanations for table 12 on page 27 The LGT GIM Index Certificates (EUR) are issued in the form of no-par-value promissory notes. These each relate to one of the LGT Premium Strategy GIM (EUR) indices administered by index sponsor LGT Capital Partners Ltd. These indices reflect the value development of a global, diversified portfolio that invests in various asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. Both traditional and alternative asset classes are included. Both tranches of the Crown Absolute Return (EUR) Index Certificates are no-par-value. These each relate to one of the Crown Absolute Return (EUR) indices administered by index sponsor LGT Capital Partners Ltd. The two indices show the value development of a global, diversified portfolio that invests in alternative asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. The LGT M-Smart Allocator (EUR) Index Certificates are no-par-value. They relate to the LGT M-Smart Allocator (EUR) Index administered by index sponsor LGT Capital Partners Ltd. This index shows the value development of a global, diversified portfolio that invests in various asset classes, where exchange rate fluctuations of the components included in the index are largely hedged against the Euro. In 2019, the LGT GATS Index Certificates were fully redeemed with respect to the termination date (30 September 2019).

48 Total fees charged by the auditor (TCHF) The total fees charged by the auditor are published in the Annual Report of LGT Group. The LGT Group Annual Report can be downloaded from the Internet at www.lgt.com

49 Events after the reporting period There are no events to report that had an influence on the balance sheet and income statement for 2019. The global short- to medium-term economic outlook has substantially deteriorated and will also have a negative impact on our business. While an accurate prediction remains impossible at this stage, COVID-19 is likely to affect the bank’s financial performance, including credit loss estimates, income from services, net interest income and income from trading activities. The bank continues to observe the rapidly changing conditions and the increased risk environment in order to manage the impact on the bank’s financial performance.

Statement regarding the correctness of the financial statements and the annual report We confirm that the financial statements have been prepared in conformance with the prevailing accounting policies and standards, and that to our knowledge they present a true and fair picture of the assets and liabilities, as well as the financial, earnings and profitability position of the bank. The annual report contains all the required information about the course of business, the results of operations and the position of the bank. It provides an accurate picture of the actual situation, and outlines the most important risks and uncertainties.

Thomas Piske Olivier de Perregaux Chairman of the Board of Directors Member of the Board of Directors Jakob Alt, detail from “View from Chiaia to the Castel dell’Ovo in Naples,” 1835 46

Report of the statutory auditor

Report of the statutory auditor to the General Meeting of LGT Bank Ltd. Vaduz

Report on the audit of the financial statements

Opinion We have audited the financial statements of LGT Bank Ltd. (‘the Company’), w hich comprise the balance sheet, the income statement, the cash flow statement and the notes for the year ended 31 December 2019.

In our opinion, the financial statements (pages 8 to 17 and pages 24 to 44) give a true and fair view of the financial position of the Company and its financial performance for the year ended 31 December 2019 in accordance with Liechtenstein law and the Company’s articles of association.

Basis for opinion We conducted our audit in accordance with Liechtenstein law and International Standards on Auditing (ISAs). Our responsibilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report.

We are independent of the Company in accordance with the provisions of Liechtenstein law and the requirements of the audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence w e have obtained is sufficient and appropriate to provide a basis for our opinion.

Our audit approach

Overview Overall materiality: CHF 32.7 million

In order to perform audit procedures that are appropriate in the circumstances, w e have structured the scope of the audit to enable us to express an opinion on the financial statements as a w hole, taking into account the organisation, internal controls and processes relating to accounting and the industry in w hich the Company operates.

As key audit matters, the follow ing areas of focus were identified: • Impairment of loans and advances due from clients • Valuation of the provisions for other business risks

Pricew aterhouseCoopers AG, Birchstrasse 160, Postfach, 8050 Zürich Telefon: +41 58 792 44 00, Telefax: +41 58 792 44 10, www.pwc.ch

PricewaterhouseCoopers AG ist Mitglied eines globalen Netzwerks von rechtlich selbständigen und voneinander unabhängigen Gesellschaften.

Materiality The scope of our audit w as influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Based on our professional judgement, w e determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a w hole as set out in the table below . These, together w ith qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a w hole.

Overall Materiality CHF 32.7 million

How w e determined it 1% of total equity

Rationale for the materiality We chose total equity as the benchmark because, in our view , it is the benchmark applied benchmark that best represents the solvency and stability of the Company and it is of major relevance for economic decisions made by the ow ners, clients and the regulator.

We agreed w ith the Audit Committee that w e would report to them misstatements above CHF 1.6 million identified during our audit as w ell as any misstatements below that amount w hich, in our view , warranted reporting for qualitative reasons.

Audit scope We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, w e considered where subjective judgements were made; for example, in respect of s ignificant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, w e also addressed the risk of management override of internal controls, including among other matters consideration of w hether there was evidence of bias that represented a risk of material misstatement due to fraud.

Key audit matters Key audit matters are those matters that, in our professional judgement, w ere of most significance in our audit of the financial statements of the current period. These matters w ere addressed in the context of our audit of the financial statements as a w hole, and in forming our opinion thereon, and w e do not provide a separate opinion on these matters.

LGT Bank Ltd. | Report of the statutory auditor 48 Report of the statutory auditor

Impairment of loans and advances due from clients

Key audit matter How our audit addressed the key audit matter We consider the audit of impairment of loans and advances We assessed the controls relating to the identification of due from clients as a key audit matter because they impaired loans and advances due from clients and tested represent the largest item on the balance sheet. their effectiveness. In particular, w e tested the relevant IT- Furthermore, the Board of Directors has significant scope to based controls. apply judgement w hen estimating the present value of future cash flows of loans and advances from the clients. Further, w e tested a sample of impaired loans and advances due from clients w ith regard to the existence of an As of 31 December 2019, the Company has CHF 17.3 billion impairment event (the moment from w hich an individual of outstanding loans and advances due from clients, of impairment should be recorded). Where an individual w hich 0.15% was assessed as impaired. impairment had been recorded, we checked whether the Company’s forecasts of cash collections from the clients Please refer to page 15 (Accounting policies) and note 13 on concerned were plausible and consistent with the individual page 28. impairment made. In doing so, w e challenged the assumptions and compared them w ith independently obtained information.

We examined a sample of loans and advances due from clients for w hich the Company had not identified an impairment event (by reference to the impairment criteria for loans and advances due from clients as set out in the Accounting principles on page 15). We applied our ow n judgement as to w hether the Board of Directors’ conclusions w ere appropriate.

Our audit did not give rise to any objections regarding the impairment of loans and advances due from clients.

LGT Bank Ltd. | Report of the statutory auditor 49

Valuation of the provisions for other business risks

Key audit matter How our audit addressed the key audit matter We consider the audit of valuation of the provisions for other We examined the analyses performed by the Company that business risks as a key audit matter because the Company form the basis for the valuation of the provisions required for operates in a regulatory and legal environment that exposes the settlement of litigation and regulatory proceedings. The it to the risk of litigation as w ell as to regulatory proceedings. evidence w e examined included, in particular, correspondence with external parties. The Board of Directors has significant scope for judgement in estimating the provisions for other business risks. This Further, w e used our understanding of the Company’s applies in particular to assessing the outcome of litigation business and our inspection of its business correspondence and regulatory proceedings against the Company. to assess the completeness of the provisions.

As of 31 December 2019, the Company has provisions for With regard to as yet unidentified risks, w e tested a sample other business risks in the amount of CHF 8.6 million. of client complaints by inspecting the associated correspondence. In this w ay, we were able to assess the Please refer to page 17 (Accounting policies) and note 13 on existence of systematic weaknesses for which provisions page 28. might have to be made. We also considered externally available information and assessed its potential implications for the Company.

Our audit did not give rise to any objections regarding the valuation of the provisions for other business risks.

Other information in the annual report The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the stand-alone financial statements of LGT Bank Ltd. and our auditor’s reports thereon.

Our opinion on the financial statements does not cover the other information in the annual report and w e do not express any form of assurance conclusion thereon.

In connection w ith our audit of the financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider w hether the other information is materially inconsistent w ith the financial statements or our know ledge obtained in the audit, or otherw ise appears to be materially misstated. If, based on the w ork we have performed, w e conclude that there is a material misstatement of this other information, w e are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors for the financial statements The Board of Directors is responsible for the preparation of the financial statements that give a true and fair view in accordance with the requirements of law and the provisions of Liechtenstein law , and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, w hether due to fraud or error.

In preparing the financial statements, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

LGT Bank Ltd. | Report of the statutory auditor 50 Report of the statutory auditor

Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about w hether the financial statements as a w hole are free from material misstatement, w hether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Liechtenstein law and ISAs w ill alw ays detect a material misstatement w hen it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Liechtenstein law and ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, w hether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit 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 Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, w hether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If w e conclude that a material uncertainty exists, w e are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. How ever, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and w hether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate w ith the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that w e identify during our audit.

We also provide the Board of Directors or its relevant committee w ith a statement that w e have complied w ith relevant ethical requirements regarding independence, and to communicate w ith them all relationships and other matters that may reasonably be thought to bear on our independence, and w here applicable, related safeguards.

From the matters communicated w ith the Board of Directors or its relevant committee, w e determine those matters that w ere of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or w hen, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so w ould reasonably be expected to outweigh the public interest benefits of such communication.

LGT Bank Ltd. | Report of the statutory auditor 51

Report on other legal and regulatory requirements

The chairman’s report (page 6 for the year ended 31 December 2019 complies w ith Liechtenstein law and the Company’s articles of incorporation. Furthermore, the chairman’s report corresponds to the financial statements and contains no significant incorrect information according to our assessment.

We further confirm that the proposed appropriation of available earnings complies w ith Liechtenstein law and the Company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

Pricew aterhouseCoopers Ltd.

Roman Berlinger Philipp Gämperle Certified Public Accountant Certified Public Accountant (CH) Auditor in charge

Zurich, 18 March 2020

LGT Bank Ltd. | Report of the statutory auditor 52

International presence

LGT Private Banking Austria, Salzburg, Vienna Media relations Bahrain, Manama Christof Buri Hong Kong SAR Phone +423 235 23 03 Ireland, Dublin [email protected] Principality of Liechtenstein, Vaduz Singapore Legal services Switzerland, Basel, Berne, Davos, Jacques Engeli Geneva, Lugano, Zurich Dr. Urs Gähwiler Thailand, Bangkok Phone +423 235 28 72 United Arab Emirates, Dubai [email protected] United Kingdom, Bristol, Jersey, London Dispatch LGT Capital Partners Australia, Sydney Group Marketing & Communications China, Beijing Phone +423 235 11 22 France, Paris [email protected] Germany, Frankfurt am Main Hong Kong SAR Ireland, Dublin Japan, Tokyo Principality of Liechtenstein, Vaduz Switzerland, Pfäffikon United Arab Emirates, Dubai United Kingdom, London United States, New York

A complete address list of all LGT locations can be found at www.lgt.com Joseph Rebell, detail from “View of Atrani on the Gulf of Salerno,” 1822 50025en 0520 www.lgt.li VAT No. 50119, UID: CHE-260.887.880 1122356-7, No.: HR Vaduz 9490 Office: BLFLLI2X, Reg. BIC 11 235 +423 22,Phone [email protected] 12, Vaduz FL-9490 Herrengasse Ltd. Bank LGT