Rothschild & Co Annual Report 2020 Annual Report 2020 One Group organised around 3 businesses • Global Advisory • Wealth and Asset Management • Merchant Banking 3,587 employees 62 locations 43 countries Contents Message from the Chairman of the Supervisory Board 2 Message from the Management Board 4 1. Overview Overview of businesses 8 Rothschild & Co business model 10 World presence 12 Corporate governance 14 Organisation chart as at 31 December 2020 17 Corporate Responsibility 18 Rothschild & Co and its shareholders 22 2. Business review Global Advisory 28 Wealth and Asset Management 34 Merchant Banking 38 3. Management report A. Activities and results for the 2020 financial year 50 B. Information on the Company and its share capital 60 C. Internal control, risk management and accounting procedures 76 D. Corporate Responsibility 83 E. Report on corporate governance 128 4. Financial statements Consolidated financial statements 172 Statutory auditors’ report on the consolidated financial statements 236 Parent Company financial statements 239 Statutory auditors’ report on the parent company financial statements 251 General Information Abbreviations and glossary 256 Statement by the persons responsible for the annual financial report 259 Other information 260 Rothschild & Co | Annual Report 2020 1 Message from the Chairman of the Supervisory Board Dear Shareholders, At the end of what can only be described a tumultuous François Henrot retired from his position as observer on year, when the world faced unprecedented challenges, the Board in May 2020. François first joined the Board I would like to thank the Supervisory Board members of Rothschild & Co in 2010 and was appointed to be for their continued support and engagement with Vice-Chairman of the Board at the time of the Group’s Rothschild & Co. We all benefit hugely from their reorganisation in 2012. For the past ten years, he has experience and wisdom both during and outside our Board been a loyal and wise counsel to us. François’s immense meetings. This year, given the particular circumstances, contribution to the Board meetings will be missed and the Board met on seven separate occasions, notably to I would like to thank him, on behalf of the Board, for his review the impact of and responses to COVID-19. dedication to the Group over this period. Rothschild & Co’s heritage and strong foundations Following the departure of Angelika Gifford, we were give us a unique perspective at times of crises, and delighted to announce the nomination of Véronique Weill throughout our history we have built our reputation on as Board member. Véronique Weill has enjoyed a highly providing sound advice for our clients. This pandemic successful career in financial services, including at both is no different and the Managing Partner, represented J.P. Morgan and AXA group. Her experience and in-depth by Alexandre de Rothschild, Executive Chairman, and understanding of finance, M&A, new technology and the three Managing Partners, Marc-Olivier Laurent, digital will be real assets to the Board. In December, Robert Leitão and François Pérol, have shown exceptional Véronique was appointed to be a member of the leadership under the most difficult and challenging of Remuneration and Nomination Committee. circumstances this year. At the Annual General Meeting held on 14 May 2020, the shareholders approved the re-election of Éric de Rothschild and Suet-Fern Lee, and the appointment of Gilles Denoyel as members of the Supervisory Board for a period of three years. Angelika Gifford, retired from the Board and I would like to thank her for her dedication and insightful input that she brought to our Board meetings during the more than five years that she was a member. 2 Rothschild & Co | Annual Report 2020 Gilles Denoyel’s career spans both the public and private Following the recommendations of our regulator, no sector in France, and he is reputed as a leading financial dividend payment was made in 2020 and the dividend expert. The Board has already benefitted from his expertise proposed to the AGM in May 2021 will be restricted, in in the French and international banking sector, in particular spite of Rothschild & Co’s strong performance. However, with regard to risk and compliance, as well as his regular it is the Group’s intention to make an exceptional interim practice of relations with the regulatory authorities including dividend payment in respect of the 2021 financial year, the ACPR. Gilles has been appointed to be a member of if and when allowed by our regulator, in order to revert to a both the Risk Committee and the Audit Committee. global payout more in line with our usual distribution policy. We are delighted that both Véronique and Gilles have Finally, I would also like to congratulate all the teams accepted our invitation to join the Board, and we are in our Group, in the 43 countries where we are present, fortunate to enjoy already the benefits of working who, despite the difficulties linked to the pandemic, have with them. continued to provide their daily assistance effectively, thus contributing for a large part to the success of As I informed you in my message last year, a Board Rothschild & Co in 2020. Committee has been set up to cover Corporate Responsibility. Lucie Maure-Aubert has accepted Last, but not least, I would like to thank our shareholders to act as Chairwoman of our Corporate Responsibility for their valuable support and express my sincere gratitude. Committee, which is also made up of Carole Piwnica and Anthony de Rothschild. In this annual report, as well as on the Company’s David de Rothschild website, you will find detailed information on the Chairman of the Supervisory Board of Rothschild & Co composition of the Supervisory Board and its specialised committees, as well as the other directorships held by the Board members. In our Annual General Meeting (AGM) document to be published soon on our website, you will find the information about the members of the Board due to be re-elected at this year’s Annual General Meeting. Rothschild & Co | Annual Report 2020 3 Message from the Management Board Dear Shareholders, 2020 was a particularly challenging year for all Financing Advisory revenue for the full year was our stakeholders. Our focus was on ensuring the €380 million, 33% above 2019 levels, which represents welfare of all our colleagues who reacted swiftly and a record performance. Revenue was driven by demand remained focused on our clients’ needs during these from existing and new clients for advice around liquidity, unprecedented circumstances. Thanks to this strong financing and balance sheet repair matters, as well as commitment and collaboration on a global scale, the restructuring activity. We ranked 2nd in Europe in 2020 business continued to operate effectively and produced by number of completed restructuring transactions and a robust set of results. maintained our position as adviser on more European equity assignments than any other independent The results for our Global Advisory business were financial adviser(3). resilient. In Europe, we continue to advise on more M&A transactions than any of our competitors, a position we During 2020, we promoted 20 new Managing Directors have held for more than 15 years. The business delivered across the business, demonstrating our focus on growing revenue for the full year of €1,146 million, down 1% talent from within. We continued our ongoing strategic below 2019, despite the challenging market environment. investment in North America with a new Vice-Chairman We ranked 8th globally by advisory revenue(1) for the last of North America and one new MD focusing on the twelve months to December 2020. Operating income for automotive sector. We recruited two new MDs into our 2020, excluding ongoing investment in the development Swiss and Middle Eastern businesses. of our North American M&A franchise, was €178 million Despite volatile market conditions and a declining representing an operating margin of 15.6%. interest rate environment around the world, our Wealth M&A advisory revenue the year was €766 million, down and Asset Management business performed strongly 13% year-on-year, but in line with the decrease of 14% in with 2020 full year results marginally up compared to value in the global M&A market. For 2020, we maintained 2019. In December 2020, we announced the acquisition our market leading position, ranking 2nd globally and 1st of Banque Pâris Bertrand, a renowned private bank in Europe by number of completed transactions(2). headquartered in Switzerland, with c. CHF6.5 billion of AuM (€6 billion). (1) Source: Company filings. (2) Source: Refinitiv. (3) Source: Dealogic. 4 Rothschild & Co | Annual Report 2020 1. Overview Net New Assets (NNA) for 2020 were reasonable at Corporate Responsibility and ESG €0.7 billion. Excluding outflows of €1.8 billion from our North American Asset Management business Corporate Responsibility and ESG integration continued (AM US), NNA for 2020 were €2.5 billion. This is due to be key priorities for us in 2020. to an excellent performance in Wealth Management, The Group is now signatory to the UN Global Compact. with net inflows of €2.9 billion, up 16%, in all our main Operationally our key areas of focus in 2020 were on geographies, partially offset by net outflows in Asset (i) employee wellbeing and productivity in a remote working Management Europe of €0.4 billion. environment; (ii) gender and ethnic minority inclusion, Revenue for the full year 2020 was broadly flat at with a clear ambition to increase female representation €499 million. However, Wealth Management revenue alongside other diverse profiles in our workforce; 2. Business review increased by 4% to €402 million whereas Asset (iii) further reduction in operational GHG emissions. Management revenue decreased by 13%, of which A clear business priority was the continued integration €10 million in relation to our AM US business.