Annual Report 2014/2015 (Formerly Paris Orléans) Annual Report 2014/2015 02 Paris Orléans – Annual Report 2014 / 2015 Contents Message from the Company’s Managing Partner 06 Message from the Chairman of the Supervisory Board 11 1. Overview 13 Overview of businesses 14 World presence 16 Governance 18 Group economical organisation chart 21 Corporate social responsibility 22 Shareholder information 23 2. Business review 27 Global Financial Advisory 28 Wealth & Asset Management 34 Merchant Banking 42 3. Management report 51 Results as at 31 March 2015 52 Information on the Company and share capital 54 Corporate governance 67 Corporate social responsibility 107 Other information 120 4. Financial statements 123 Consolidated financial statements 124 Parent company financial statements 186 Annual Report 2014/2015 – Paris Orléans 03 Paris Orléans over time 1838 Creation of Paris Orléans, a French railway company. 1937 Paris Orléans discontinues its railway business. Relaunch of Rothschild’s French activities through Paris Orléans following 1982 the nationalisation of the Rothschild family’s French bank in 1981. Move to unify and optimise the worldwide Group structures with the creation of a new lead entity, Concordia BV, held equally by Paris Orléans and 2003 the English branch of the Rothschild family. Acquired control of the banking activities at a global level and completed 2008 reorganisation of family shareholdings. Paris Orléans’ reorganisation to streamline its organisation, optimise its regulatory capital and preserve family control, with its conversion into 2012 a partnership limited by shares. 2015 Paris Orléans will change its name to Rothschild & Co. Today’s integrated Group offers full-scale financial advice Today and services around the world. 04 Paris Orléans – Annual Report 2014/2015 Key figures as at 31 March 2015 43 world presence countries 2,853 employees (2,804 as at 31 March 2014) €1,403m of revenues (€1,108m as at 31 March 2014) €268m of operating income (€129m as at 31 March 2014) €1,419m of shareholders’ equity – Group share (€1,269m as at 31 March 2014) Annual Report 2014/2015 – Paris Orléans 05 Message from the Company’s Managing Partner Chairman’s statement Dear Shareholders, I am pleased to be able to report that 2014/2015 was a Broadly speaking we believe the ongoing outlook for our very positive year for the Group, our shareholders and business to be benign. The world economy has weathered employees, with net income after minorities up to the storm of the financial crisis well. GDP per capita is €144 million. higher in real terms than before the crash and we expect economic activity to continue to grow. However, there are This reflects an improved performance in each of our risks and challenges we will have to face. There appears to three core businesses – Global Financial Advisory, Wealth be a decoupling of growth and monetary policy between & Asset Management, and Merchant Banking – and the the US and UK on the one hand and on the other major continued orderly run-down of our legacy banking economies in Europe and Asia. The long-term implications activities. of this are far from clear. Asset prices and exchanges rates With revenues of €880 million, Global Financial Advisory are still distorted by loose monetary policy, providing traps recorded its strongest performance since the financial for the unwary if and when policy tightens. Geopolitical crisis as the M&A and financing Advisory markets were tensions in the Middle East and Eastern Europe are high, buoyant. Wealth & Asset Management revenues of and closer to home it remains to be seen if the UK will €336 million were the highest in five years, driven by remain within the EU, a decision that would have favourable market conditions and strong net inflows in all significant implications for our business. Whilst there can locations. Merchant Banking had an outstanding year with be no doubt that some of the past practices in the banking revenues of €145 million. However, these include industry were unacceptable, the cost of providing services significant levels of investment gains from the realisation to our clients continues to increase as a result of ever of proprietary investments which will not be repeated. more onerous regulation. Change of name At our Annual General Meeting in September we will propose changing the name of the Company from Paris Orléans to Rothschild & Co to reflect more closely the Group’s family history, the presence of long-term shareholders and our partnership culture. The commitment that my family members have to the Group’s success, and to their role in it, remains unchanged. We continue to be at the core of the global business, with family control assured through the corporate structure established in 2012. David de Rothschild 06 Paris Orléans – Annual Report 2014/2015 Corporate social responsibility We have a deeply-held sense of responsibility to our Finally, we would like to thank our shareholders and clients people, to the environment and to the communities in for their continued support. We believe that the Group’s which we operate. We are committed to the development stable, long-term shareholding structure, its solid financial and retention of people and are focused on cultivating an position and the quality of its people will allow us to inclusive environment where diversity is valued. We view achieve our objectives and remain confident in our ability this not only as important to our Group but as key to our to deliver strong long-term returns to shareholders and client relationships now and in the future. We also take an provide exceptional service to our clients. active interest in volunteering within our local communities. During the year we ran the Rothschild in the Community David de Rothschild, programme, encouraging employees to volunteer their Chairman of PO Gestion SAS, time and skills, in 10 cities globally. Our employees Managing Partner of Paris Orléans dedicated more than 4,000 hours to the programme and in the London office over 50% of employees took part. Lastly, we are dedicated to addressing the impact of our operations on the environment. Our environmental reporting footprint now covers over 70% of our employees and this is set to increase as we expand the number of environmental champions within our global office network. Dividend A dividend of €0.60 per share, an increase of 20%, will be proposed by the Managing Partner, PO Gestion SAS, at the Paris Orléans Annual General Meeting on 24 September 2015, called to approve the financial statements for the year ended 31 March 2015. We are targeting a progressive dividend policy over time in order to avoid the negative effect of potential results volatility. Board appointments We are delighted to have welcomed five new members to the Supervisory Board this year; Angelika Gifford, Arielle Malard de Rothschild, Carole Piwnica, Luisa Todini and Dr. Daniel Daeniker. These new members bring a wealth of experience, diversity and skills to the Supervisory Board and we would like to take this opportunity to thank them for joining us. Annual Report 2014/2015 – Paris Orléans 07 Chief Executive Officers’ statement The good results for the year ended March 2015 reflect a We remain among the top M&A advisers in the world, strong performance across our core businesses, success in ranking 4th globally by number of completed transactions. our ongoing strategy to build businesses for growth, In Europe, we continue to be the market leader and to gain disciplined cost management and the value of a diversified market share, advising on more M&A deals than any of our business model, better positioning us for the current competitors – a position we have held for more than a uncertain economic environment. decade. Financing Advisory revenue was €292 million, once again, The Group up strongly year-on-year (+19%) compared to €246 million Consolidated revenues for the year grew significantly to in the prior year, supported by our leading position in €1,403 million, up 27% from 2013/2014. Operating providing independent, strategic advice to companies, income for the year more than doubled to €268 million governments and financial sponsors. During the financial compared to €129 million in 2013/2014. As a result of year, we provided independent advice on more than this strong performance, Net income – Group share 220 debt and restructuring transactions with a total value increased to €144 million compared to €8 million in the of US$182 billion and improved our position in the global previous year. We should note, however, that this includes restructuring adviser league tables ranking 2nd by volume unusually high levels of Merchant Banking disposal profits and 3rd by value. We also advised on 29 IPOs with a total that will not be repeated in 2015/2016. value of US$46 billion, including the largest IPO in history (Alibaba), and maintained our position as adviser on more Global Financial Advisory European equity assignments than any other independent financial adviser. For the year to March 2015, Global Financial Advisory revenue was €880 million, 28% higher than the same period last year, and represents our strongest performance Wealth & Asset Management since the financial crisis. Wealth & Asset Management revenues during the year ended 31 March 2015 were €336 million, up 10% M&A advisory revenue was €588 million, up 33% from compared to the prior year (€307 million), the highest in €443 million last year, compared to a 21% increase in five years. This was driven by a 23% increase in assets global completed M&A deal values over the same period. under management to €52.1 billion as at 31 March 2015 This good performance reflects a continuing improvement (€42.3 billion as at 31 March 2014), as a result of in market share, particularly in our core European markets favourable market conditions (€6.4 billion) and strong net as well as in cross-border transactions.