Notes to the annual consolidated financial statements

1. Illustration of the Bank's business operations and organization

The Banca del Sempione Group profile

Banca del Sempione SA, founded in 1960, is the Group’s parent company with its head office in Lugano and branches in Bellinzona, Chiasso and Locarno. The Group operates abroad through an affiliate incorporated in the Bahamas, Banca del Sempione (Overseas) Ltd., and an asset-management company named Accademia SGR SpA, specializing in the promotion and management of Italian-law real estate investment funds.

Since September 2009, Banca del Sempione SA has also held 52% of the share capital of LMF & Partners SIM SpA, a stock brokerage company with its head office in Milan.

A complete list of the Group’s equity investments is provided in paragraph 3.3.

The Banca del Sempione Group business

The Group provides its private and corporate clients with all the typical services of a universal bank, the main focus being on the provision of financial advice, asset administration services as well as securities, derivatives and currencies trading on behalf of its clients. The volume of transactions for the Group’s own account is limited.

The Group also promotes and manages a SICAV operating under the laws of Luxembourg (Base Investments SICAV, licensed to distribute products in Switzerland). On the other hand, on-balance sheet transactions have secondary meaning. The lending policy has been kept very tight for a while; new loans are issued only if backed by collateral. Customer loans backed by guarantees shown in the financial statements account for 92% of the customer loans. Excess cash is invested short term at primary banks, medium term in a diversified high quality bond portfolio booked under “financial investments”.

Personnel

As at 31 December 2009, the Group had 133 employees on its books, equating to 126.4 full-time positions (previous year: 118 employees, equating respectively to 115.5 positions).

Risk control and management

During the year, the Board of Directors regularly analyses the main risks linked to the Group’s activities. This analysis is largely based on the information generated by the risk management system that the Group has set up, as illustrated below, and the reports issued by Internal Audit, Operations Management, Risk Control and Compliance. On the basis of this assessments, the Board of Directors determines the standards that regulate the Group risk policy.

The Group has a set of regulations defining risk control and risk management in all areas of activities. Clear and conservative limits have been defined for each type of risk. These limits are regularly updated and adapted to the risk profile of each operation wich is carried out. The Risk Control unit is endowed with the necessary independence and professionalism. Its operating responsibility is to identify and measure risks as well as to ensure that the Group's policies are implemented and limits respected: controls take place at regular intervals with the aid of the appropriate surveillance tools. Market valuations are updated on a daily basis. Operations Management is constantly informed on the Group’s risks. The Risk Control unit also draws up a quarterly report addressed to Operations Management and to the Board of Directors.

Counterparty (credit) risks are minimized through a rigorous selection of financial counterparties and by systematic demands on customers for collateral and margin coverage. The Group’s companies also have procedures regulating concession powers and ensuring a separation of functions between units that take on risk and those that manage it. Lombard credits, which represent the preponderant part of the customer loan portfolio, are granted on the basis of collateral, prudentially calculated and constantly monitored. The mortgage portfolio mainly refers to residences occupied by the owners themselves. The average mortgage amount issued is CHF 367,000 (previous year: CHF 320,000). The collateral value of commercial properties, incoming-producing buildings and private houses of high standing is determined with the help of external appraisers.

Interest rate risk management with respect to the balance sheet structure is managed by the Group’s ALM committee. Other market risks, mainly on currency and securities positions, are contained by virtue of very strict limits imposed by the operating units. The positions are monitored daily.

Operating risks are limited through a series of internal regulations and provisions. Control operations are an integral part of daily operations. Internal Audit constantly monitors the adequacy of the procedures. The Compliance service ensures that regulations and diligence requirements affecting the Group’s various areas of operations are respected. The Group has a business continuity plan to ensure operating continuity even in case of extraordinary events that limit the availability of personnel, infrastructure, and information systems.

Outsourcing

Banca del Sempione SA has appointed an external company to carry out the necessary maintenance work on programs belonging to the IT platform BOSS. A detailed services contract formally regulates the terms of this service. All personnel connected with the service company are subject to bank secrecy obligations. However, the services are not subject to the provision of circular FINMA 08/07.

2. Accounting principles and valuation criteria

General principles

The accounting principles and valuation criteria adopted are in compliance with the provisions of the Code of Obligations, Swiss banking law, and the guidances issued by the FINMA. The consolidated financial statements have been drawn up in accordance with Swiss law governing the preparation of bank accounting statements. They present a true and fair view of the Group's capital structure, financial standing, and operating performance. All transactions are shown in the financial statements according to the transaction date entry principle.

Scope and method of consolidation

Those companies in which the Bank owns more than 50% of capital and shares with voting rights are fully consolidated. In accordance with the fully consolidation method, debits and credits, as well as revenues and expenses generated by transactions between consolidated companies, are netted. Consolidation of capital takes place according to the "purchase method". According to this method, book value is offset against net equity existing at the time of formation or acquisition. Any equity investments held by 20%-50% are recognized in the consolidated financial statements according to the equity method. The non-consolidated equity investments are shown in the balance sheet at acquisition cost less any amortization, which may be necessary. The list of significant equity investments, as well as the change in the scope of consolidation, are shown in paragraph 3.3 of the Schedule.

Conversion of foreign currencies

Foreign currency transactions are booked at the exchange of the transaction date. Profits and losses generated by the winding up of these transactions or by the conversion of foreign-currency denominated assets and liabilities at exchange rates prevailing as at the end of the financial year are booked to the income statement. The assets and liabilities of the consolidated companies are converted at the year-end exchange rate, whereas revenues and expenses are converted at the average exchange rate. The resulting differences are directly allocated to the Group equity.

The following table sets out the exchange rates against the major foreign currencies applied for conversion purposes:

Main valuation principles

Assets, liabilities, and off-balance sheet entries shown under the same item are always subject to an individual valuation.

2009 2008

Year End Average Year End Average USD 1.0310 1.0827 1.0605 1.0803 EUR 1.4857 1.5139 1.4912 1.5854 GBP 1.6613 1.5392 YEN 1.1162 1.1757

Cash, money market securities, loans to banks, liability reserves

These items are shown in the financial statements on the basis of their nominal value or acquisition value, less write-downs to individual items for credit risk. The discount on money market securities is divided into installments.

Loans (accounts receivable from customers and mortgage lending) Loans are generally booked at nominal value. Non-performing loans – defined as loans for which the debtor is considered unlikely to meet its commitments based on an examination of solvency criteria – are valued on a case-by-case basis. Presumed risks of loss are covered by individual prudent write-downs. Any commitments deriving from off-balance sheet transactions are duly considered in this valuation. A loan is considered non-performing when interest and repayment are expired by more than 90 days at the latest. In this case, interest not received is directly attributed to write-downs; an entry to revenues is made only when the interest is effectively received. The amount of the write-down corresponds to the difference between the book value of the loan and the amount the Bank believes it can collect based on counterparty risk and net revenues obtainable from the implementation of any guarantees. Non-performing loans are recognised in the balance sheet net of corresponding write-downs. A lump-sum adjustment may be applied to loans that, while not substandard, present a potential risk of loss, and to the portion of the portfolio consisting of numerous small loans. This adjustment is determined by applying a calculation method that is systematic and constant over time (20% of the nominal value of risked loans and 5% for the minor loans). Changes in the amount of the write-down, both case-by-case and lump-sum, as well as collections of loans previously amortised are entered under the income statement item “value adjustments, provisions, and losses”. Reserves released because they are no longer necessary are either allocated to form new provisions or booked to the income statement under the item “extraordinary gains”.

Trading securities and precious metals

Trading securities and precious metals are shown at the market price on the closing date of the financial statements and the results generated are shown in the income statement. If no reliable market price is available, the lesser value principle is applied.

Financial investments

Fixed-income securities are valued according to the accrual method since the intention is to hold them to maturity. Any transaction premiums and discounts at the time of the acquisition of the fixed-income securities are therefore shown in the income statement on an accrual basis according to time-to-maturity. The result realized on a sale or early repayment is spread over the residual duration of the transaction determined on the basis of the original maturity date. Any depreciation in value caused by a deterioration in the issuer’s solvency is shown under the item “other ordinary expenses”. In a similar way, any later write-backs to the previous value are booked to the item “other ordinary revenues”. Equity investments and precious metals are shown at the lesser of acquisition cost and market value. Real assets received in guarantee of loans issued, and then received from auctions, are shown among financial investments if the intention is to sell them off; they are shown at the lesser of acquisition cost and liquidation value. Physical assets in precious metals intended for conversion into cash are valued according to the lesser value principle, while those used to cover commitments in the metals account are valued according to market prices.

Non-consolidated equity investments

Any minority stakes held by 20%-50% are shown in the financial statements according to the equity method. The companies in which the Bank holds an equity investment of less than 20% of the voting shares or whose sizes and operations do not have a significant impact on the Group, are shown in the financial statements at acquisitions price less depreciation and amortization as appropriate.

Fixed assets

Assets used for more than one reporting period and which are higher than the minimum activation limit are shown in the balance sheet at acquisition cost less depreciation and amortization. Depreciation and amortization are applied according to the straight-line method and are estimated on the basis of the presumed useful life of the assets according to conservative criteria. Purchase of software and other intangible assets are carried in the balance sheet only if their useful life is multi-year. Intangible assets developed in-house are not recognized on the balance sheet. Every year the bank examines the consistency of the criteria adopted and, if necessary, deducts supplementary depreciation and amortization. Ordinary and supplementary depreciation and amortization are booked under the income statement item “depreciation and amortization of fixed assets.”

The presumed useful life expected for the different categories of assets is set out below:

Real estate, including land Up to 67 years Other fixed assets Up to 10 years Information technology and other equipment Up to 5 years

Any gains realized on sales of fixed assets are shown under the item “extraordinary gains” and any losses under the item “extraordinary losses”.

Intangible Assets

Goodwill If an equity investment is acquired at a price higher than the net value of the assets taken over, the difference is recognised as goodwill. Amortisation, calculated in accordance with the useful life of the asset (usually 5 years), is recognised in the income statement. At the end of each period, the real value of goodwill is in any case subject to an impairment test. If it proves to be overvalued, supplemental amortisation is recognised.

Employee pension funds

All employees at the Swiss parent company are members of two legally autonomous pension funds. Foreign employees are subject to a professional pension required from local laws. In the absence of such laws, voluntary pensions may be set up.

Premiums paid by the employer are recognised as staff expenses.

Taxes

Current taxes are determined in accordance with legal provisions in force. They are booked in the income statement of the period in which taxable earnings are generated. Tax provisions set aside at year-end are booked under the liability item “accrued liabilities and deferred income”. The tax effect of the time difference between the tax amount and the financial statement value of the assets and contingent liabilities is booked as deferred taxes on the liability side of the balance sheet under the item “value adjustments and provisions”. Deferred taxes are calculated separately for each accounting period and for each tax entity based on tax rates in effect at the time the annual financial statements are drawn up. Deferred tax credits on time differences or on losses carried forward are booked under the asset item “pre-paid expenses and accrued interest” only if it is likely that they will be realized as a result of the future generation of sufficient taxable earnings. Deferred tax credits and liabilities are offset only to the extent that they are attributable to the same tax collection agency and only if this offsetting is permitted by law.

Contingent liabilities

These off-balance sheet transactions are booked at nominal value. Value adjustments and provisions are made for all recognizable risks on a case-by-case basis as at the financial statement ending-date according to the conservative principle.

Value adjustments and provisions

A single value adjustment and provision is made for all recognizable risks as at the financial statement ending-date according to the conservative principle. Provisions no longer necessary for operating purposes and which are not used to constitute new provisions of the same type are liquidated in favor of the income statement. Individual provisions and value adjustments are used to directly decrease the value of the asset in question. The tax provision includes only deferred taxes deriving from the difference between the financial statement criteria adopted for drawing up the annual consolidated accounts and the individual financial statements.

Derivative financial instruments

All derivative financial instruments are shown at market value since they are strictly for trading purposes. Positive and negative replacement values are booked under the balance sheet items “other assets” or “other liabilities” as appropriate. Market value is determined by market prices on an efficient and sufficiently liquid regulated stock exchange, by sell prices offered by a market-maker or by prices calculated with the aid of a pricing model. Offsetting in the balance sheet between positive and negative replacement values with the same counterparty is allowed only within the limits of legally valid offsetting agreements. The realized or unrealized results from transactions with derivative instruments are shown under the item “results from trading operations”.

Changes to the accounting, valuation, and presentation principles

The accounting and valuation principles applied to the annual report for the year-ending 31 December 2009 are the same as those applied in the previous year.

3.1 Breakdown of collateral loans and off-balance sheet transactions

(Amount expressed in CHF 1’000)

Type of collateral Mortgage Other Without collateral collateral collateral Total

Loans

Due from customers 5’362 52’761 10’983 69’106 Mortgages 74’122 – Residential real estate 62’406 – Trade and industrial property 11’716

Total loans 79’484 52’761 10’983 143’228

Previous year 68’826 41’173 6’500 116’499

Off-balance sheet transactions

Contingent liabilities

17’934 456 18’390 Irrevocable commitments 2’744 2’744 Liabilities for calls on shares and other equities 50 50

Total off-balance sheet transactions 17’934 3’250 21’184

Previous year 17’304 2’688 19’992

(Amount expressed in CHF 1’000)

Estimated Specific Gross realisation Net provisio –amount value amount ning

Non-performing loans Year under review 3’787 310 3’477 3’477

Previous year 4’648 310 4’338 3’588

3.2 Securities and precious metal trading portfolios, financial investments and participations

(Amount expressed in CHF 1’000)

Year under Previous review year

Securities and precious metal trading portfolios

Interest bearing securities Listed equities

802 349 2’546 141 Precious metals 36 242

Total securities and precious metal trading portfolios 3’384 732

(Amount expressed in CHF 1’000)

Book Market Value Value Year under Previous Year under Previous

review year review year

Financial investments

Interest bearing securities to keep until maturity 79’221 44’732 80’622 45’154 Listed equities 3’490 3’217 3’711 3’219 Real estate 2’015 2’015 2’015 2’015

Total financial investments 84’726 49’964 86’348 50’388

of which securities used in repurchase agreements, according to liquidity provisions 56’016 26’732

(Amount expressed in CHF 1’000)

Participations

Not listed

Total participations

Year under Previous review year

23 20 23 20

3.3 Information on significant participations

Year under Previuos Name and address Business activities review year

Share capital Interest in % Interest in %

Fully consolidated companies

Banca del Sempione (Overseas) Ltd., Nassau Bank and Trus CHF 5’000’000 100.0 100.0 BDS Corporate Services Ltd., Nassau Financial USD 100’000 100.0 100.0 Imocentro SA, Lugano Real Estate CHF 700’000 100.0 100.0 Finrate SA, Lugano Financial CHF 200’000 100.0 100.0 Accademia SGR SpA, Milano Asset Management EUR 1’942’800 93.7 91.0 LMF & Partners SIM SpA, Milano Asset Management EUR 2’300’000 52.1 0.0

During the year under review, Accademia SGR SpA increased its share capital by an amount of EUR 578,000. This capital increased was only reserved to Banca del Sempione SA.

The participation in LMF & Partners SIM SpA (52.1%) was purchased in September 2009.

3.4 Fixed assets and participations

(Amount expressed in CHF 1’000)

Book Book Write-offs/ value value year Historical Accumulated previous Write-offs/ Reclas- under cost depreciation year Additions Disposals Depreciations sifications review

Non-consolidated Participations

Other participations 70 50 20 3 23

Total non-consolidated participation 70 50 20 3 23

Fixed assets

Bank buildings 49’289 16’436 32’853 244 –1’015 32’082 Others fixed assets 21’712 18’755 2’957 1’336 –1’217 194 3’270

Total fixed assets 71’001 35’191 35’810 1’580 –2’232 194 35’352

Intangible assests

Goodwill 583 583 1’209 –89 1’120

Total intangible assests 583 583 1’209 –89 1’120

Fire insurance value of real estate Fire insurance value of other fixed assets 43’511 6’747

Commitments on outstanding leasing contracts 94

3.5 Other assets and other liabilities

(Amount expressed in CHF 1’000)

Year under review Previous year Other Other Other Other assets liabilities assets liabilities

Replacement value of derivative financial instruments related to contracts negotiated for own account 3’311 3’186 10’691 10’424 Indirect taxes 251 3’052 219 3’022 Settlement accounts 734 2’130 309 3’566

Total 4’296 8’368 11’219 17’012

3.6 Assets pledged or ceded to secure own liabilities and assets subject to ownership reservation

(Amount expressed in CHF 1’000)

Year under Previous review year

Type of securities and purpose of the deposit

Financial investment reserved for REPO transactions with the SNB (unused) 6’174 5’955 Receivables from banks and financial investment to cover mandatory margins on derivative products (fully used) 10’283 7’077

Total 16’457 13’032

3.7 Liabilities to the pension fund of own staff

(Amount expressed in CHF 1’000)

Year under Previous review year Balances in sight and time accounts of the Group foundation 1’989 3’182

Banca del Sempione SA has twopension plans for its staff members in Switzerland. For the mandatory part, LPP, the Bank has opted for affiliation with the legally independent, Basel-based, Collective Pension Foundation. In addition, employees are affiliated with the Banca del Sempione Pension Fund, managing only the optional (supplemental) part of the professional pension plan. Both Funds reinsure risks with a life insurance company, fully for the mandatory part, and only for the risk of decease and disability for the supplemental part. The pension age is the same as that established by the AVS. In case of early retirement, the affiliate receives the capital accumulated at that time (supplemental part). At the end of the accounting period, as in the previous year, the Bank did not record any obligations with the two pension funds since all the risks are reinsured and there are no financial risks in the supplemental part. So the Bank receives neither a monetary advantage nor does it have coverage obligations. All the Bank’s financial obligations to the pensionFunds are fulfilled with the payment of the contributions. Neither of the two Funds contain reserve contributions from the employer. The Banca del Sempione SA Pension Fund’s last audited annual report (31 December 2008) showed a coverage rate of 137%. Banca del Sempione (Overseas) Ltd. employees benefit from voluntary pension coverage. In this case as well, the Bank’s commitment is limited to the payment of contributions

3.8 Valuation adjustements and provision

(Amount expressed in CHF 1’000)

Provisions for current and deferred taxes

Recoveries, New doubtful allocation Reversal change in the interest, charged credited Year Previous Specific scope of exchange to income to income under year usage consolidation differences statement statement review

1’657 140 –12 1’785

Valuation adjustments and provisions reserve for loan losses (credit and country risks) 3’683 –73 64 –63 3’611 Other provisions 12’550 –265 172 –44 500 12’913

Subtotal 16’233 –338 172 20 500 –63 16’524

Total valuation adjustments and provisions 17’890 –338 172 20 640 –75 18’309

less: valuation adjustments directly netted with assets –3’588 –3’477

Total valuation adjustments and provisions as per balance sheet 14’302 14’832 Reserves for general banking risks 14’950 560 15’510

3.9 Statement of changes in shareholders’equity

Shareholders’equity, at beginning of year under review

Share capital General legal reserve Minority interests in shareholders’equity Other reserves

(Amount expressed in CHF 1’000) 20’000 62’608 194 14’950 Retained earnings 9’062

Total shareholders’equity, at the beginning of year under review (before profit distribution) 106’814

– Dividend –5’000 + Allocation to the reserve for general banking risks 560 + Variation in minority shareholdings in the equity capital 1’782 + Foreign currency transactions and consolidation differences –178 + Net income 10’706

Total shareholders’equity, at the end of year under review (before profit distribution) 114’684

Of which: Share capital 20’000 General legal reserve 66’492 Minority interests in shareholders’equity 1’976 Other reserves 15’510 Retained earnings 10’706

3.10 Maturity structure of current assets and borrowed funds

(Amount expressed in CHF 1’000)

Maturity

Within Redeemable Within Within 12 months– After Real estate At sight by notice 3 months 3–12 months 5 years 5 years to be sold Total

Current assets

Cash 47’992 47’992 Due from banks 73’908 215’563 289’471 Due from customers 619 54’486 4’675 7’976 850 500 69’106 Mortgages 30’926 2’978 6’311 33’607 300 74’122 Securities and precious metal trading portfolios 3’384 3’384 Financial investments 3’490 9’785 15’145 51’120 3’171 2’015 84’726

Total current assets 129’393 85’412 233’001 29’432 85’577 3’971 2’015 568’801

Previous year 169’720 68’978 167’346 31’360 32’056 2’015 471’475

Borrowed funds

Due to banks 13’577 13’577

Due to customers in saving and investment accounts 46’517 46’517 Due to customers, other 405’821 1’500 2’875 149 410’345

Total borrowed funds 419’398 48’017 2’875 149 470’439

Previous year 308’875 45’313 22’044 2’679 378’911

3.11 Related party transactions, loans to members of the Bank’s governing bodies

(Amount expressed in CHF 1’000)

Year under Previous review year

Due from related companies

20’526 6’394 Due to related companies 9’701 10’138 Loans and exposure to members of the bank’s governing bodies 6’650 5’385

Transactions with related parties

No significant transactions with affiliated entities were executed during the financial year. The conditions applied for banking services are equivalent to those applied to primary customers. Members of the Bank’s governing bodiesenjoy the same benefits made available to all employees.

3.12 Assets and liabilities by domestic and foreign origin

Year under review Previous year

(Amount expressed in CHF 1’000)

Domestic Foreign Domestic Foreign

Assets

Cash 47’991 1 73’824 1 Due from banks 44’859 244’612 25’774 204’681 Due from customers 26’381 42’725 19’476 34’931 Mortgages 74’122 62’092 Securities and precious metal trading portfolios 39 3’345 248 484 Financial investments 9’393 75’333 10’843 39’121 Non-consolidated participations 20 3 20 Fixed assets 34’784 568 35’394 416 Intangible assets 1’120 Accrued income and prepaid expenses 1’847 1’124 2’183 785 Other assets 3’459 837 10’965 254

Total assets 242’895 369’668 240’819 280’673

Liabilities

Due to banks 1’400 12’177 8’471 2’474

Due to customers in saving and investment accounts 42’539 3’978 38’912 4’101 Due to customers, other 135’562 274’783 111’762 213’191 Accrued expenses and deferred income 3’438 802 3’592 861 Other liabilities 7’324 1’044 16’182 830 Valuation adjustments and provisions 14’660 172 14’302 Reserves for general banking risks 15’510 14’950 Share capital 20’000 20’000 Reserves and retained earnings 63’093 3’399 58’944 3’664 Minority interests in shareholders’equity 1’976 194 Net income 7’538 3’168 7’055 2’007 Of which minority interests 95 –42

Total liabilities and shareholders’equity 311’064 301’499 294’170 227’322

3.13 Assets by countries/country group

Year under review Previous year

(Amount expressed in CHF 1’000)

Amount CHF Percentage % Amount CHF Percentage %

Switzerland 242’895 40 240’819 46

Other OECD countries 353’135 57 268’598 52 Other countries 16’533 3 12’075 2

Total assets with foreign countries 369’668 60 280’673 54 Total assets 612’563 100 521’492 100

3.14 Balance sheet by currencies

(Amount expressed in CHF 1’000)

Currency CHF USD EUR Other Total

Assets

Cash 44’969 74 2’903 46 47’992 Due from banks 17’748 63’600 187’657 20’466 289’471 Due from Customers 20’931 8’915 37’430 1’830 69’106 Mortgages 74’122 74’122 Securities and precious metal trading portfolios 12 2’038 1’268 66 3’384 Financial Investments 50’818 7’858 26’050 84’726 Non-consolidated participations 23 23 Fixed assets 35’044 308 35’352 Intangible assets 1’120 1’120 Accrued income and prepaid expenses 1’120 320 1’523 8 2’971 Other assets 3’120 363 593 220 4’296

Total assets 249’027 83’168 257’732 22’636 612’563

Forward transactions and currency options 81’397 113’202 153’448 79’853 427’900

Total assets 330’424 196’370 411’180 102’489 1’040’463

Liabilities and shareholders’equity

Due to banks 745 387 11’692 753 13’577 Due to customers in saving and investment accounts 46’517 46’517 Due to customers, other 116’395 63’763 212’641 17’546 410’345 Accrued expenses and deferred income 3’803 118 317 2 4’240 Other liabilities 5’987 346 1’733 302 8’368 Valuation adjustments and provisions 2’717 12’115 14’832 Reserves for general banking risks 15’510 15’510 Share capital 20’000 20’000 Reserves and retained earnings 66’492 66’492 Minority interests in shareholders’equity 1’976 1’976 Net income 10’701 42 –37 10’706 Of which minority interests 95 95

Total liabilities and shareholders’equity 288’867 64’656 240’437 18’603 612’563

Forward transactions and currency options 48’403 132’985 163’326 83’186 427’900

Total liabilities and shareholders’equity 337’270 197’641 403’763 101’789 1’040’463

Net positions per currency –6’846 –1’271 7’417 700

4.1 Contingent liabilities

(Amount expressed in CHF 1’000)

Year under Previous review year

Contingent liabilities

Guarantees and similar instruments issued 17’697 17’748 Irrevocable commitments arising from documentary credits 693

Totale impegni eventuali 18’390 17’748

4.2 Outstanding derivative instruments

(Amount expressed in CHF 1’000)

Foreign exchange

Forward contracts Options (OTC)

Total

Previous year

Positive Negative replacement replacement Contract value value volumes

2’894 2’747 316’414 417 439 111’486

3’311 3’186 427’900

10’691 10’424 369’906

4.3 Fiduciary transactions

(Amount expressed in CHF 1’000)

Fiduciary transactions

Fiduciary deposits with third banks Fiduciary loans

Total fiduciary transactions

Year under Previous review year

64’729 297’663 38’084 38’657 102’813 336’320

4.4 Assets under control

(Amount expressed in CHF 1’000)

Year under Previous review year

Type of Assets under control

Assets in funds managed by the Group 712’804 415’734 Assets under management 842’982 478’452 Other Assets under control 1’654’454 1’913’234

Total Assets under control(including assets consolidated two times) 3’210’240 2’807’420

of which double counting 312’529 413’863 Net new money 214’583 129’422

The managed assets include all the equity for which the Bank receives commission and/or fees in addition to the safe custody and account charges. The Bank does not hold assets which could be considered as "custody only".

The net inflow includes all the incoming and outgoing liquidity and stock transfers during the year, according to the valuation on the day of the transfer and excluding interest, charges and commission. The assets controlled by LMF & Partners SIM SpA, when it was purchased by Banca del Sempione SA (September 2009), have been included in the net new money.

5.1 Result from trading operations

(Amount expressed in CHF 1’000) Foreign exchange and banknotes Precious metals Securities

Total result from trading operations

Year under Previous review year

4’221 2’147 55 4 216 –100

4’492 2’051

5.2 Personnel expenses

(Amount expressed in CHF 1’000)

Year under Previous review year

Bank organs

965 744 Salaries and wages 13’465 12’373 AVS, AI, IPG and other contributions required by law 1’455 1’301 Pension foundation contributions 1’348 1’321 Other personnel expenses 505 572

Total personnel expenses 17’738 16’311

5.3 Other operating expenses

(Amount expressed in CHF 1’000)

Year under Previous review year

Premises expenses 1’179 1’130 Information technology, machinery, fixtures and fittings, vehicles and other equipment 1’555 1’388 Other operating expenses 4’485 3’963

Total operating expenses 7’219 6’481

5.4 Extraordinary income and costs

Under the extraordinary costs a provision of CHF 560’000 has been registered in favour of the reserves for general banking risks.

5.5 Revaluation of fixed assets to a level exceeding acquisition value (art. 665 and 665a CO)

No company included within the scope of consolidation has carried out revaluations.

5.6 Revenues and expenses from ordinary banking operations broken down according to the domicile of operations (Switzerland or abroad)

Year under rewiew Previous year

(Amount expressed in CHF 1’000)

Switzerland Abroad Switzerland Abroad

Result from interest activities

Interest and discount income 4’727 516 8’400 1’193 Interest and dividend income on trading portfolios 37 4 Interest and dividend income on financial investments 1’769 67 841 50 Interest expense –476 –149 – 991 – 661

Net interest income (subtotal) 6’057 434 8’254 582

Result from commission and service fee activities

Commission income on lending activities 124 25 192 12 Commission income on securities and investment activities 22’834 5’542 19’040 3’592 Commission income on other services 2’242 1’580 2’376 848 Commission expenses –2’301 –204 –1’933 –190

Result from commission and service fee activities (subtotal) 22’899 6’943 19’675 4’262

Result from trading operations 4’290 202 1’945 106

Other ordinary results

Results from the sale of financial investments 44 9 –7 7 Income from non-consolidated participations 4 3 Real estate income 628 642 Other ordinary income 1 27 31 132 Other ordinary expenses –22 –40 –550 –26

Total operating expenses (subtotal) 655 –4 119 113

Total income 33’901 7’575 29’993 5’063

Operating expenses

Personnel expenses –15’775 –1’963 –14’953 –1’358 Other operating expenses –5’572 –1’647 –5’381 –1’100

Total operating expenses (subtotal) –21’347 –3’610 –20’334 –2’458

Gross Profit 12’554 3’965 9’659 2’605

5.7 Taxes

(Amount expressed in CHF 1’000) New provisions for deferred taxes Release of provisions for deferred taxes Taxes on current income

Total taxes

Year under Previous review year

140 –12 –13 2’215 1’952

2’343 1’939

6.Eligible capital and necessary capital

(Amount expressed in CHF 1’000)

Eligible capital

Year under Previous review Year 102’736 97’752

Credit risk Risk without counterparty Market risk Operational risk Write-downs and provisions

Necessary capital

19’299 13’475 8’656 8’661 2’514 3’465 5’678 5’202 –772 – 763

35’375 30’040

The data reported in the table is based in the Basel II provisions on capital. At 31 December 2009, CHF 35.4 million in eligible capital is in place covering a legal need valued at CHF 102.7 million. The ratio of eligible capital to necessary capital is 290% (previous year: 325%), reflecting Banca del Sempione’s solid capital structure.