Rothschild & Co
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Rothschild & Co Annual Report 2017 Annual Report 2017 Report Annual WorldReginfo - 145370ec-15f4-41f1-b402-4af90622e0bc WorldReginfo - 145370ec-15f4-41f1-b402-4af90622e0bc Contents Message from the Chairman of the Supervisory Board 4 Message from the Chairman 5 Message from the Management Board 6 1. Overview Overview of businesses 10 World presence 12 Corporate governance 14 Organisation chart 17 Corporate Social Responsibility 18 Shareholder information 19 2. Business review Rothschild Global Advisory 24 Rothschild Private Wealth & Asset Management 30 Rothschild Merchant Banking 37 3. Management report Results for the 2017 financial year 46 Information on the Company and share capital 54 Internal control, risk management and accounting procedures 66 Corporate governance 73 Corporate Social Responsibility 98 4. Financial statements Consolidated financial statements 118 Parent company financial statements 181 Rothschild & Co | Annual Report 2017 1 WorldReginfo - 145370ec-15f4-41f1-b402-4af90622e0bc History Preserving a first-class reputation across generations Paris Orléans streamlines its Relaunch of Rothschild’s organisation, French financial optimises its regulatory activities through Paris capital and preserves Rothschild & Co pursues Orléans following family control, with its its simplification with Rothschild & Co offers Creation of the nationalisation of conversion into the removal of banking full-scale financial advice Paris Orléans, a French the Rothschild French a partnership licences and the sale of and services around railway company. bank in 1981. limited by shares. non-core business. the world. 1838 1982 2012 2016 Today 1937 2008 2015 2017 Paris Orléans Paris Orléans acquires Paris Orléans Rothschild & Co discontinues control of the banking changes its name completes the merger railway business. activities at a global to Rothschild & Co, with Compagnie level and completes a necessary Financière Martin reorganisation of family step in the Maurel to enhance shareholdings. Group’s its Private Wealth transformation. business. 2 Rothschild & Co | Annual Report 2017 WorldReginfo - 145370ec-15f4-41f1-b402-4af90622e0bc Key figures A distinct perspective that makes a meaningful difference Key figures for the 12 months to December 2017 (versus 12 months to December 2016) (1) Rothschild & Co provides independent advice Revenues on M&A, strategy and financing, as well as investment and private wealth and asset +12% management solutions to large institutions, €1,910m families, individuals and governments, worldwide. With approximately 3,500 talented employees Operating income on the ground in over 40 countries around the world, we deliver a unique global perspective. €456m +18% As a family-controlled business that has been at the centre of the world’s financial markets for over 200 years, we can rely on an unrivalled network of experts and are known for our track Net profit – Group share (2) record of outstanding execution in financial services. €247m +35% Our integrated global network of trusted professionals and decision-makers provide in-depth market intelligence, meaning we can be closer to current issues than any other global EPS(2) (Earnings Per Share) financial institution in our core markets. Informed by experience yet not limited by +25% convention, we are able to separate insight €3.33 from information and access opportunities for our clients from a unique angle. It is this scale, local knowledge and intellectual ROTE(2) (Return On Tangible Equity) capital that allow us to provide a distinct perspective and effective long-term solutions 17.2% +19% for our partners. Shareholders’ equity – Group share €1,912m +24% (1) As a result of the change in financial year from 31 March to 31 December, the financial year 2017 spanned only nine months (April to December 2017). To facilitate the understanding of the activity, Rothschild & Co presented its results for the full calendar year 2017 compared to the calendar year of 2016. (2) Excluding exceptional items. For more information, please refer to page 46. Rothschild & Co | Annual Report 2017 3 WorldReginfo - 145370ec-15f4-41f1-b402-4af90622e0bc Message from the Chairman of the Supervisory Board Dear Shareholders, I would like to thank the Supervisory Board, the Mr. Jacques Richier, board member for the last six years, management team and the employees for their hard work decided to step down in 2017 in order to focus on his new and dedication over this period allowing us to announce role within the Group as a member of Rothschild Martin another excellent set of financial results. The Managing Maurel’s Supervisory Board. I would like to take this Partner, Rothschild & Co Gestion, represented by its opportunity to thank Mr. Richier for all the valuable Chairman, David de Rothschild, its Executive Deputy advice he has provided and I am pleased that the Group Chairman, Alexandre de Rothschild and the four Managing will still benefit from his wisdom in his new position. Partners, Nigel Higgins, Marc-Olivier Laurent, Robert Leitão We were delighted to welcome Mrs. Suet-Fern Lee to the and Olivier Pécoux, lead the Group with vision and energy. Board following her appointment at the Shareholders Their successful strategy is committed to building long-term General Meeting last year. Mrs. Lee has significant value for shareholders and over the last five years they have experience as senior partner of a law firm specialising in successfully diversified the Group’s sources of income, mergers and acquisitions. With her deep understanding creating some very exciting prospects. of Southeast Asian markets, her appointment strengthens At the Shareholders’ General Meeting held on the Board for the benefit of our shareholders. Six female 28 September 2017, shareholders gave their approval members sit on a board totalling fourteen members for the change in our financial year end from 31 March and one non-voting member, and comprising nine to 31 December. As a result of this change, the statutory independent members. reporting for 2017 covers only nine months (April to In the present annual report and the Company’s website, December 2017). To enable a better understanding of its you will find more detailed information on the Board’s performance, Rothschild & Co has chosen to present its composition. In addition, our Shareholders’ General Meeting results for the full 2017 calendar year versus the 2016 document to be published soon, will provide you detailed calendar year. From now on, our results will continue to information regarding those members whose re-election be presented on this twelve-month basis. Information will be on the agenda of the Shareholders’ General Meeting for the nine-month period, from April to December 2017, this year. can be found in the Consolidated Financial Statements. Shareholders will also be asked to approve a dividend As Chairman of the Supervisory Board, my role is to ensure of €0.68 per share at the same meeting, unchanged that the Company maintains a high level of corporate compared to last year but for a nine-month period. governance. The Supervisory Board exercises permanent oversight of the management of the Company, including Last, but not least, I would like to thank you as always in particular the Company’s financial accounting reporting for your loyal support for Rothschild & Co. system and its internal control mechanisms. This year has been particularly active in France as the merger with Martin Maurel has created significant, additional challenges. Eric de Rothschild The composition of the Supervisory Board has slightly Chairman of the Supervisory Board of changed over the past twelve months, with the re-election Rothschild & Co of Mr. André Levy Lang and myself, the departure of Mr. Jacques Richier and the nomination of Mrs. Suet-Fern Lee. 4 Rothschild & Co | Annual Report 2017 WorldReginfo - 145370ec-15f4-41f1-b402-4af90622e0bc Message from the Chairman Dear Shareholders, 2017 has been another strong year for Rothschild & Co. Our Long-term thinking is also one that has always guided us Group has reached global scale today which demonstrates in our strategic choices. The integration of Rothschild & the relevance of our model and our values. We believe that Compagnie Banque and Banque Martin Maurel in France, purpose and principles allow us to hire some of the most was finalised in July to create Rothschild Martin Maurel talented individuals who together form true partnerships and we welcomed some 500 new colleagues to the Group, and teams across more than 40 countries. whilst expanding our geographic footprint, essentially in France. The combination of two family-owned businesses Our Global Advisory business had another record-breaking that share a similar history and understanding of their year in terms of revenues and we maintained our leading industry is on track to creating a first class group to serve position as the number one advisor for the number of deals our clients. globally. Private Wealth and Asset Management saw a significant improvement in revenue and profits thanks Before ending my message I would like to share with you to tight cost control and strong organic growth. Our more some information concerning our investment in the United recently developed Merchant Banking business is starting States in mergers and acquisitions and restructurings. to reach maturity and we saw its revenue jump 39%. In this world leading market, we have significantly strengthened our teams in New York, continued to develop Thanks to these strong results, our shareholders will be in Los Angeles, Chicago and launched our new team rewarded with a dividend of €0.68 per share, which specialising in technology, based in the heart of Silicon although at the same level as last year, represents an Valley. We will pursue this investment policy which we effective increase since it is only for a shorter nine-month believe will lead to strong results. period, in line with our progressive dividend policy. This will be subject to approval at the Annual General Meeting to be At the end of this more than satisfactory period, I would held on 17 May 2018.