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Annual Report ROBECO GROEP N.V. 2012

Annual Report

ROBECO GROEP N.V.


On the images in this Corporate Report Images can be looked at from an abstract perspective or through eyes that observe reality. All images in this report can be seen in one of these two ways: they either show the beauty and detail of reality or abstract patterns that remind us of something real. We invite you to have a look at each image from the other angle - approach the abstract as reality or discover abstract beauty in images that show aspects of the real world. We have selected images of a wooden roof, a fragile leaf, an oil plant, the round leaves of the nasturtium, clouds after the rain, glass marbles, and a garden with an abstract pattern of bushes. Some of these pages play a visual game between what is real and what is abstract, combining shapes and forms to create complete harmony. They invite the viewer to discover the beauty of seeing things from two completely different angles.


Corporate Statements


Contents

Corporate Statements

01 02 03 04 05

Preface General information Report of the Supervisory Board Corporate Governance and Fund Governance Report of the Management Board

5 6 8 13

Robeco profile and key figures

18 20 23 26 28 32 34 38 48

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Addresses

Financial Statements

Chapter 1

Market environment

Chapter 2

Strategy

Chapter 3

Organization

Chapter 4

Investment performance

Chapter 5

Business developments

Chapter 6

Financial results

Chapter 7

Risk Management Framework

Chapter 8

Sustainability Investing & Corporate Responsibility

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Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Accounting policies for the consolidated financial statements

Notes to the consolidated income statement

Notes to the consolidated statement of financial position

Notes to the consolidated statement of cash flows

Company Financial Statements

Company income statement

Company statement of comprehensive income

Company statement of financial position

Notes to the company financial statements

Other information

126 127 128 129 131

Auditor’s report Key figures 2008 - 2012

132 134

58 59 60 62 63 64 80 84 122

Corporate Statements

2012

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Annual Report ROBECO GROEP N.V.

2012


Preface The year 2012 represented another period of high volatility in the financial markets. Budget discussions in the US and ongoing doubts as to the euro’s ability to survive made for widely divergent returns, both positive and negative. The FED and the ECB once again played an important role. The FED ensured that money-market rates stayed low, and continued to be a large buyer of long-maturity bonds. The objective of these measures – to help jump-start the US economy – is still only slowly taking effect. The ECB managed to shoulder its “big bazooka” when, in July, Mr. Draghi announced that he would do “whatever it takes” to save the euro. From that moment onwards, the spreads between German Bunds and other European sovereign bonds started to narrow, and sentiment in the financial markets improved.

focusing on the interest of our clients, improving the effectiveness and efficiency of our organization and to strengthen our profile in the market. I am pleased to find that to a large extent we succeeded in reaching the targets set and by doing so realizing attractive returns for both our clients and our shareholder. We now know that in ORIX we will have a strong new shareholder, with a long-term investment horizon and the expressed intention to support Robeco’s current strategy going forward. Nevertheless, this sales process has caused uncertainty for clients, investment consultants and also for our own staff. This places the above-mentioned numbers and the 2012 Robeco Group net profit, which increased by 47% to reach the EUR 197-million level, in an even more favorable light.

Robeco clients who maintained a ‘risk-on’ portfolio enjoyed attractive returns in 2012, ranging from 14% for investment-grade corporate bonds to 28% for Asia Pacific equities. In relative terms, Robeco delivered a solid performance for its clients, with 69% of assets under management outperforming their respective benchmarks.

Although 2012 was a good year for investments, it was also a year where uncertainty about Robeco’s future played a central role; despite this I am proud to say that we hardly lost any staff. Our professionals stayed the course, serving our clients’ interests by managing their money across the globe. This bodes well for the years to come; our 1500 employees worldwide, with their combined skill-sets, their drive and their commitment will continue to fulfill our clients’ needs. With a new shareholder, ORIX, and the 10% equity stake retained by Rabobank, Robeco will ‘enjoy the best of both worlds’. We will look to supplement our current strength in the US and Europe with new opportunities in Asia, and I am confident that going forward we will succeed in realizing our ambitious strategy!

Clients appreciated our products, solutions and services in 2012. In total, Robeco managed to attract a net inflow of EUR 18.4 billion, a record performance in our 83-year history. I am especially happy that this occurred throughout the company, both geographically and across various investment capabilities and solutions. If we also take market returns into account, the money clients have entrusted to Robeco Group now stands at a record level of EUR 189 billion. Last year was also the year in which Rabobank announced that it would investigate the possibility of selling Robeco. This gives reason to reflect on the state of affairs of the implementation of the Strategy plan 2010-2014. The efforts in the past three years were focused on realizing our strategic objectives, such as increasingly

Roderick Munsters CEO Robeco

Corporate Statements

2012

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General information Composition of the Supervisory Board

Members of the Supervisory Board

D.P.M. (Dick) Verbeek, Chairman P. J.A. (Piet) van Schijndel, Vice Chairman A. (Bert) Bruggink A.C. (Arjen) Dorland (from 13 February 2012) S.E. (Sjoerd) Eisma G. (Gilles) Izeboud Ph. (Philip) Lambert

D.P.M. (Dick) Verbeek, Chairman (male, 1950) Dutch nationality. Appointed in 2001 and last reappointed in 2011. Scheduled to resign in 2015. Former member of the Executive Board of Aon Group in Chicago and former chairman/CEO of the Executive Board of Aon Holdings in Rotterdam. Supervisory Director at Aegon N.V.

Composition of the Management Board R.M.S.M. (Roderick) Munsters, Chairman and CEO L.M.T. (Leni) Boeren H.W.D.G. (Hester) Borrie H.A.A. (Hans) Rademaker J.B.J. (Jurgen) Stegmann

Company Secretary D.H. (Dave) Cross

P.J.A. (Piet) van Schijndel, Vice Chairman (male, 1950) Dutch nationality. Appointed in 2006 and last reappointed in 2010. Scheduled to resign and eligible for reappointment in 2014. Member of the Executive Board of Rabobank Nederland until 1 December 2012. A. (Bert) Bruggink (male, 1963) Dutch nationality. Appointed in 2009. Scheduled to resign and eligible for reappointment in 2013. Member of the Executive Board of Rabobank Nederland, professor of Financial Management and Business Administration at Twente University. A.C. (Arjen) Dorland (male, 1955) Dutch nationality. Appointed in 2012. Scheduled to resign and eligible for reappointment in 2016. Executive Vice President Technical and Competitive IT at Shell, where he has been working since 1986. S.E. (Sjoerd) Eisma (male, 1949) Dutch nationality. Appointed in 2010. Scheduled to resign and eligible for reappointment in 2014. Former partner at De Brauw Blackstone Westbroek (1978 – 2010). Supervisory director at HAL Holding N.V. G. (Gilles) Izeboud (male, 1942) Dutch nationality. Appointed in 2004 and last reappointed in 2012. Scheduled to resign in 2014. Partner and board member at pwc (formerly PricewaterhouseCoopers, 1977 through 2002). Former member of the Corporate Governance Committee in the Netherlands. Deputy Justice at the Enterprise Section of the Amsterdam Court of Appeal.

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Annual Report ROBECO GROEP N.V.

2012


Members of the Management Board Ph. (Philip) Lambert (male, 1946) Dutch nationality. Appointed in 2005 and last reappointed in 2009. Scheduled to resign and eligible for reappointment in 2013. Former Head of Corporate Pensions at Unilever N.V. and PLC in London. Member of the Investment Committee of the ABN AMRO Pension Fund. Committees of the Supervisory Board – Audit & Risk Committee: Gilles Izeboud (Chairman) Bert Bruggink Arjen Dorland (from 3 April 2012) Sjoerd Eisma Dick Verbeek – Nomination, Remuneration & Corporate Governance Committee: Sjoerd Eisma (Chairman) Philip Lambert Piet van Schijndel Dick Verbeek – Investment Committee: Philip Lambert (Chairman) Bert Bruggink Arjen Dorland (from 3 April 2012) Gilles Izeboud Dick Verbeek Since 1 January 2013 it has been a legal requirement for companies to try to ensure that at least 30% of their Supervisory Board and Management Board members are women and at least 30% are men. The current composition of the Supervisory Board does not meet this requirement. In the future, efforts will be made to consider suitable female candidates for appointment to the boards. Because of the increasing importance of the IT systems for the Robeco Group, the Supervisory Board felt the need to add this specialist knowledge to the Board. In this specific case, as the most suitable candidate Arjen Dorland has been appointed.

R.M.S.M. (Roderick) Munsters (male, 1963) Dutch and Canadian nationality. Employed at Robeco since September 2009 as Chief Executive Officer. Former member of the Executive Board and Chief Investment Officer of APG All Pensions Group and member of the Executive Board (investments) of PGGM. Member of the Capital Market Committee of the Dutch regulator AFM (Autoriteit Financiële Markten). L.M.T. (Leni) Boeren (female, 1963) Dutch nationality. Member of the Management Board since January 2005 and Chief Operating Officer since January 2009. Former Managing Director of Information Services and member of the Executive Committee of Euronext N.V. Chairman of the Board of the Dutch Fund and Asset Management Association (DUFAS). H.W.D.G. (Hester) Borrie (female, 1969) Dutch nationality. Employed at Robeco since October 2009 as head of Global Distribution and Marketing. Formerly held several sales positions at Morgan Stanley in Amsterdam/London and was an associate in Corporate Finance & Capital Markets at MeesPierson. H.A.A. (Hans) Rademaker (male, 1962) Dutch nationality. Employed at Robeco since February 2010 as head of the Investments Division. Former Director of Fiduciary Management at Kempen Capital Management, Director of Asset Management and head of Financial Investments and Treasury at Mn Services. J.B.J. (Jurgen) Stegmann (male, 1960) Dutch nationality. Employed at Robeco since March 2011 as Chief Financial Officer. Former member of the Executive Board of Fortis Bank in the Netherlands and Vice Chairman of the Managing Board and Chief Risk Officer at NIBC. From 2008 until he joined Robeco, he was active as a boardroom consultant, mainly in the financial sector.

Corporate Statements

2012

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Supervisory Board Report of the Supervisory Board

Composition of the Supervisory Board Mr. Gilles Izeboud was reappointed in the annual meeting held on 28 June 2012. Mr. Arjen Dorland was appointed as a supervisory director as per 13 February 2012. The supervisory directors, except Messrs. Bruggink and Van Schijndel, are independent within the meaning of the Dutch Corporate Governance Code. For information about each of the supervisory directors, please refer to the General Information section of this annual report.

Meetings of the Supervisory Board In 2012 the Supervisory Board met four times. Most of the Supervisory Board meetings were attended by all of the Supervisory Board members and the Management Board members. However, Mr. Bruggink and Mr. Van Schijndel did not attend a number of meetings for the reason of possible conflicts of interest on account of the process of the sale of shares in the capital of the company. The members of the Management Board were not present when their own performance and remuneration were discussed. The CEO did attend these meetings but did not attend the discussion on his own performance and remuneration. The meeting in April, in which the 2011 annual report was discussed, was also attended by the external auditor, Ernst & Young Accountants LLP. In June, the Supervisory Board met at the offices of RobecoSAM in Zurich. Prior to this meeting the management of RobecoSAM gave presentations and exchanged ideas with the Supervisory Board on various issues, such as trends in the field of sustainability, business development and the situation in the markets. The Supervisory Board used detailed, regularly updated reports for its discussions with the Management Board on the company’s quarterly and year-end results in terms of budgetary targets, investment results and the development of assets under management. Based on reports from its Audit & Risk Committee, the Supervisory Board discussed

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Annual Report ROBECO GROEP N.V.

2012

various (internal) audit, compliance and risk-management related issues. Like in the previous year the remuneration policy was a regular item on the agenda of the Supervisory Board in 2012. The main topic was the implementation of the Dutch Central Bank’s Regulation for Sound Remuneration (Regeling beheerst beloningsbeleid Wft 2011) and the Rabobank Group-remuneration Policy ‘Rabobank Groepsbreed Beloningsbeleid’ into the Robeco Group Remuneration Policy. In this context approval was given to the adjustments to be made to the Management Board and Supervisory Board Regulations. Apart from the regular, plenary meetings of the Supervisory Board, the supervisory directors that are independent from Rabobank met eight times during the year to discuss Rabobank’s contemplated sale of Robeco. In these meetings, the independent supervisory directors, supported by external advisors, carefully considered the interest of all stakeholders, also due attention was paid to the issue of capital distribution to the shareholder. On 21 June, 19 September and 12 December 2012 permanent-education sessions were held, which were attended by most of the Supervisory Board members and by the members of the Management Board. The issues dealt with in these sessions related to sustainability, the Premie Pensioen Instelling (PPI)/Flexioen, the Alternative Investment Fund Managers Directive (AIFMD) and Cybercrime. Presentations were given by experts in the respective fields, which were followed by discussions on those issues relevant for the operations of the company. In addition to this, various publications and research papers on the asset-management industry were circulated on a regular basis throughout the year.

Supervisory Board Committees There are three Supervisory Board Committees; the composition of the committees is given in the General information section in this report.


Audit & Risk Committee In 2012 the Audit & Risk Committee met six times. The meetings of the Committee were attended by the CEO, the CFO and the COO together with the heads of Group Internal Audit, Group Risk Management and Group Compliance and the external auditor Ernst & Young Accountants LLP. These meetings were preceded by private sessions with the external auditor. The regular agenda items were interim financial reports on the Robeco Group and Robeco Direct N.V., as well as semi-annual reports and (draft) annual reports for publication. Other subjects discussed included the tax position of Robeco Groep N.V., the implementation of global mandates for group monitoring functions, fund governance related issues, the design of the Risk Control Framework and the risk appetite of both Robeco Groep N.V. and Robeco Direct N.V. Moreover, proposed changes to the Charters of Compliance and of Group Risk Management were discussed and approved.

(CARs). Other items on the agenda in 2012 were the policy on management development, succession issues and the implementation of the Human Resources global mandate.

On the basis of quarterly reports from the respective departments the Audit & Risk Committee discussed various internal audit, compliance and risk-management related issues, including Robeco’s compliance with the Banking Code (Code Banken).

Composition of the Management Board

Nomination & Remuneration & Corporate Governance Committee In 2012 the Nomination, Remuneration & Corporate Governance Committee met five times, in the presence of the CEO and the head of Group Human Resources. An important issue in 2012 related to the implementation of the Rabobank Group Remuneration Policy and the Robeco Group Remuneration Policy. In this context proposals for adjustments to the Management Board and Supervisory Board Regulations were discussed and subsequently submitted for approval to the full Supervisory Board. Other remuneration-related issues on the agenda were the KPIs of the members of the Management Board and of the Identified Staff, proposals regarding variable remuneration 2012 and the long-term incentive allocation

Remuneration regulations In 2012, there was further focus on the implementation of the sound remuneration regulations, introduced by the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, AFM) and the Dutch central bank (De Nederlandsche Bank, DNB) on 1 January 2011. To ensure compliance with these regulations and other regulations such as the Dutch Banking Code, Rabobank has introduced a Group Remuneration Policy and related procedures to ensure remuneration practices reflect Rabobank’s risk appetite and take into account the interests of all stakeholders. The main principles of the Group Remuneration Policy, which is in line with the existing framework, are as follows: – Appropriateness of pay; taking into account the longer

Investment Committee In 2012 the Investment Committee met four times, in the presence of the CEO and the CIO. In these meetings special attention was paid to the investment capabilities of Fixed Income Credit/High Yield, Emerging Markets Equities, Global Equities and to the Asset Allocation capabilities. Members of the respective departments gave presentations and discussed various issues with the Investment Committee members. A regular item on the agenda was the product range. The performance of the Robeco products was also discussed, while analysis of the profitability of the investment capabilities was on the agenda too. Updates were given on the state of the economy and the situation in the financial markets.

There were no changes in the composition of the Management Board in 2012.

Remuneration report

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Report of the Supervisory Board - Remuneration report

term interests of the company, the interests of clients and stakeholders and the risk appetite of the company. – Governance; ensuring robust governance procedures are applicable to remuneration involving Risk management and Compliance. – Culture and behavior; remuneration practices should ensure appropriate behavior is incentivized and not encourage employees to focus on short term results and their own interests. This is why variable remuneration above EUR 50,000 is deferred and subject to malus and clawback provisions. – Pay for risk adjusted performance; to prevent excessive risk taking and avoid payment for failure various measures have been introduced, such as risk adjusted performance measures, deferral and claw back and prohibitions on personal hedging, guaranteed bonuses and excessive severance payments. General principles of the remuneration structure As part of the Rabobank Group, Robeco implemented this Group Remuneration Policy, taking local market practice and regulations into account (effective for remuneration relating to 2011). As a result of this, the Supervisory Board approved the new Robeco Remuneration Policy. The general underlying principles of the Robeco Remuneration Policy are as follows. Fair and consistent remuneration The fixed remuneration component aims to provide an attractive base remuneration relative to both the Dutch financial services market and the international asset-management market, taking into account the level of responsibility of the relevant functions, their targets and competences. Performance management as starting point The remuneration policy supports Robeco’s business strategy and reflects both individual and collective performance, while promoting the long-term interests of Robeco’s clients and taking into account the risk appetite of Robeco and its clients. Appropriate measures are

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Annual Report ROBECO GROEP N.V.

2012

undertaken to ensure sustainable performance is rewarded and reward for failure is avoided. External benchmarking Robeco must be able to attract, retain and motivate employees who perform well and are expected to make an important contribution to the firm. Therefore independent benchmarking is used to keep track of the median level of the relevant local (labor) market. Remuneration policy for the Management Board The remuneration package consists of the following components: fixed remuneration, variable remuneration and fringe benefits. Fixed remuneration In 2012, the fixed remuneration of the Management Board was not changed. Variable remuneration A maximum of 40% of the variable remuneration component for the Management Board depends on the achievement of financial Key Performance Indicators (KPIs) such as Rabobank net profit, Robeco Groep N.V.’s EBIT (excluding performance fees), the run rate revenue on net new money, and the investment (out)performance. It is also linked to the financial results of those areas that fall under the specific responsibility of any individual member of the Management Board. The ratio between the actual results and the budgeted results determines the level of any payment made. Part of the remuneration is also linked to the financial performance of Rabobank Groep as a whole. In addition to these quantitative KPIs, at least 60% of this remuneration is linked to non-financial KPIs such as client satisfaction and progress on the strategy. The Robeco Supervisory Board reviews the final variable remuneration for the individual Management Board members on a discretionary basis. The Rabobank Supervisory Board approves the final variable remuneration for the individual Management Board members. The total variable remuneration of the members of


the Management Board does not exceed 100% of their fixed remuneration. A maximum of 50% is paid in cash and the remainder in instruments (Cash Appreciation Rights, CARs). CARs represent a value that directly corresponds to a pro forma calculated value of Robeco Groep N.V., based on ‘profit from continuing operations after deduction of the expenses related to the long-term incentive plans and including the results relating to the foreign-currency hedge’. At least 80% of the variable remuneration is deferred or retained over a period of four years, and during this period it is subject to risk mitigating measures such as malus and clawback. In principle, once a recipient is no longer employed by Robeco Groep N.V. any rights to deferred variable remuneration lapse. Fringe benefits Robeco offers a competitive package of fringe benefits, which may include a lease car, expense allowance, insurance, supplementary mortgage benefits, and a pension plan made up of an average wage plan (defined benefit, up to approximately EUR 76,000) and a defined-contribution scheme. Governance The governance procedures surrounding remuneration are aligned with the new remuneration policies to ensure the company has a robust process in place. This includes the involvement of a range of internal departments representing different interests (Group Risk Management, Group Compliance, Group Human Resources and Group Internal Audit) to ensure the necessary controls are in place. Robeco also has a Monitoring Committee with representatives from these departments (excluding Group Internal Audit) which monitors and reviews remuneration practices to ensure these are in line with the principles of the Group Remuneration Policy and then advises the Supervisory Board based on their findings. Group Internal Audit annually reviews the remuneration process, including the involvement of the Monitoring Committee.

The governance of remuneration includes the following elements: – The remuneration policy proposed by the Management Board has to be approved by the Supervisory Board. Deviations from the Group Remuneration Policy also have to be approved by the Supervisory Board of Rabobank. – The remuneration of employees who have been identified as potentially having a significant impact on the risk profile of the company (Identified Staff) is approved annually by the Supervisory Board and the Rabobank Supervisory Board. – The Monitoring Committee is involved into the remuneration process, both ex ante (by Group Risk Management and Group Compliance) and ex post (by Group Risk Management, Group Compliance and Group Internal Audit). – Group Human Resources is responsible for monitoring the implementation and execution of the remuneration policy. Once again, in 2013, the remuneration framework and processes will be carefully monitored and changes implemented if required as a result of new remuneration regulations and/or various European directives.

Recommendation to adopt the annual financial statements The Supervisory Board has taken note of the contents of the report presented by Ernst & Young Accountants LLP, who have given an unqualified opinion on the annual financial statements as presented, and recommends approval thereof. We concur with the Management Board’s proposal to add the positive result to the retained earnings.

Rotterdam, 10 April 2013 The Supervisory Board

Corporate Statements

2012

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Corporate Governance & Fund Governance Corporate Governance As in previous years, in 2012 corporate governance remained a widely discussed subject. Although Robeco Groep N.V. is not a listed company and, as such, is not bound by the Dutch Corporate Governance Code (in this Chapter referred to as ‘the Code’), it does find it important to comply with the Code’s principles and best-practice provisions where possible. Robeco strives to implement any amendments to the Code if these are applicable. It should be noted here that the shares of Robeco Groep N.V. are all held by one shareholder, the Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (‘Rabobank Nederland’). This means that those Code principles that relate to multiple shareholders do not apply. Below an overview is given of the issues covered by the Code that are most relevant to Robeco Groep N.V. The principles and best-practice provisions of the Code that Robeco Groep N.V. does not or cannot apply and the current corporate-governance structure are also described and explained.

Compliance and enforcement of the Code The corporate-governance policy of Robeco Groep N.V. is established in the company’s Articles of Association and in the shareholder agreement between Robeco Groep N.V. and Rabobank Nederland, which was entered into in 1997 and amended in 2004. Within this framework, Robeco Groep N.V.’s Management and Supervisory Boards are responsible for the company’s corporategovernance structure and compliance with the Code. They are accountable to Robeco Groep N.V.’s only shareholder, Rabobank Nederland. Robeco Groep N.V. intends to comply as fully as possible with the Code. The Management Board Robeco Groep N.V. is managed by a Management Board, consisting of five members. The Management Board is supervised by a Supervisory Board. According to the appointment procedure, a proposal is put forward at

the General Meeting of Shareholders, but the candidate has to have been approved by the Supervisory Board before he or she can be appointed to the Management Board during this meeting. The Supervisory Board has undertaken not to reject proposals for appointments without good reason. On account of the above mentioned nature of the company, the maximum four-year membership term for board members recommended by the Code has not been complied with in the past. However, four of the five Robeco Groep N.V. Management Board members have now been appointed for a definite period. After prior consultation with the Supervisory Board, the General Meeting of Shareholders appoints one of the members of the Management Board as chairman. The General Meeting of Shareholders is authorized to suspend or dismiss any member of the Management Board at any time. Dismissal terms for Management Board members are determined reasonably and fairly on a case-by-case basis. The Management Board is responsible for formulating and executing the approved strategic and operational policy of the company as well as managing its daily operations. In 2010 a set of Management Board Regulations were adopted, which have been adjusted in the context of the implementation of the Group Remuneration Policy in 2012. These regulations supplement the statutory provisions and the Articles of Association that relate to the Management Board and its members. The Management Board reports to the Supervisory Board and to the General Meeting of Shareholders. Furthermore, the Management Board is also responsible for compliance with all relevant legislation and regulations, for risk management and for the financing of all corporate activities. Finally, the Management Board is responsible for providing the Supervisory Board with information, relating to the company’s activities and on any developments affecting the Robeco Group as a whole. The Supervisory Board needs this information to carry out its supervisory

Corporate Statements

2012

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Corporate Governance

responsibilities in a satisfactory way. As recommended by the Code, Robeco Groep N.V.’s regulatory environment and its risk-management structure are explained in the Report of the Management Board in the chapter on the Riskmanagement framework. The remuneration policy for members of the Management Board is outlined in the Report of the Supervisory Board (Remuneration report); this policy was adjusted in 2010, at the level of parent company Rabobank Nederland, in order to ensure its compliance with the Banking Code and in 2011 with the ‘Regeling beheerst beloningsbeleid Wft 2011’ of the Dutch Central Bank. The way in which these policies have been applied in this reporting period is explained in the notes to the annual financial statements. The remuneration policy forms an integral part of the Annual Report and is published on the company’s website. The remuneration per individual board member can be found in the notes to the annual financial statements. The value of the options granted in the past to the Management Board and staff is also shown there. An explanation of the calculations involved can be found in the Accounting Policies in the annual financial statements. The company does not grant loans or guarantees to members of the Management Board. Robeco Direct N.V., which is a wholly-owned subsidiary of Robeco Groep N.V. and a credit institution, can grant loans to members of the Management Board under the same conditions that apply to other Robeco employees. In the opinion of the Management Board, there were no conflicts of interest or semblance thereof between the company and the members of the Management Board in 2012. Robeco Groep N.V. does not have separate regulations covering securities transactions by members of the Management Board. The applicable ‘Rules and regulations regarding private investment transactions by employees and insiders of Robeco Nederland B.V.’ is published on the company’s website. These rules should ensure that any insider trading or a semblance thereof, and any mixing of business and private interests are avoided.

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Annual Report ROBECO GROEP N.V.

2012

The Supervisory Board It is the duty of the Supervisory Board to supervise the Management Board’s activities and any general developments at the company and its affiliated enterprises. The Supervisory Board also advises the Management Board. Robeco Groep N.V. has laid down the specific tasks of the Supervisory Board in the Articles of Association of the company and the above mentioned shareholder agreement. Moreover, in 2010 a set of Supervisory Board Regulations were adopted, which have been adjusted in the context of the implementation of the Group Remuneration Policy in 2012. These regulations supplement the statutory provisions and the Articles of Association that relate to the Supervisory Board and its members. Information on the Supervisory Board’s activities in the past financial year and the information required by the Code can be found in the Report of the Supervisory Board. Robeco Groep N.V.’s Supervisory Board consists of nine persons: four supervisory directors A, four supervisory directors B and one chairman. There are currently two vacancies. The chair cannot be held by a supervisory director B or by an employee of Rabobank Nederland. Supervisory directors A cannot be or have been supervisory directors B, nor can they be employees of Rabobank Nederland. The General Meeting of Shareholders appoints the supervisory directors and is authorized to dismiss any supervisory director at any time. Supervisory directors will be appointed on the basis of a binding proposal consisting of at least two candidates, formulated by the Supervisory Board. The Supervisory Board is structured in such a way that it can satisfactorily fulfill its tasks and that its members can operate critically and independently of each other, the Management Board and any other participating interests. It should be noted that two of the supervisory directors B are employed by Rabobank Nederland. In line with the principle of the Code, each Robeco Groep N.V. supervisory director is able to assess the general overall


policy and has the necessary expertise to fulfill his task. The Supervisory Board meets the Code’s recommendation to have at least one financial expert as supervisory director; please refer to the short CVs of the supervisory directors in the General Information section. In order to get a proper insight into Robeco Groep N.V. and its activities, newly appointed members of the Supervisory Board follow a tailored introduction program. All members of the Supervisory Board also meet the recommendation on the maximum number of supervisory directorships at Dutch listed companies (please refer to the information regarding supervisory directors in the General Information section) and all the supervisory directors (except for Messrs. Bruggink and Van Schijndel) are independent within the meaning of the Code. In accordance with the Articles of Association and the recommendation of the Code, the Supervisory Board has drawn up a retirement schedule. According to this schedule, supervisory directors should, in principle, resign on the day of the General Meeting of Shareholders four years after they were appointed. Reappointment can take place with immediate effect but only after careful consideration and not if the person involved has reached or will reach the age of 72 in that year. In contrast to the recommendation of the Code, no maximum term is applied for supervisory directors. The company publishes the retirement schedule on its website. In close consultation with and after approval by the Supervisory Board, the General Meeting of Shareholders appoints a chairman and one of the supervisory directors B as vice chairman. As mentioned above, the chairman may not be a supervisory director B or an employee of Rabobank Nederland. The chairman chairs the meetings of the Supervisory Board and ensures that the Supervisory Board functions satisfactorily. Furthermore, the chairman of the Supervisory Board has regular contact with the CEO on all issues relating to the responsibilities of the Supervisory Board. The company secretary assists the chairman of the Supervisory Board with the actual

organization of Supervisory Board meetings. In 2004 a presidium was formed consisting of the chairman and the vice chairman of the Supervisory Board. The vice chairman is a supervisory director B who, in contrast to a supervisory director A, may be an employee of Rabobank Nederland. The CEO, in particular, keeps the presidium informed and discusses issues with them. The Supervisory Board has appointed an Audit & Compliance Committee, a Nomination, Remuneration & Corporate Governance Committee and an Investment Committee from among its members. In conformity with the Code’s recommendations, the three committees are not chaired by the chairman of the Supervisory Board. The committees consist of four or five persons (see ‘General Information’). The Report of the Supervisory Board gives details about the composition of the committees, the number of meetings and the main items discussed in these meetings. In the opinion of the Supervisory Board there were no conflicts of interest or semblance thereof between the company and the members of the Management Board in 2012. The remuneration for supervisory directors is agreed on at the General Meeting of Shareholders. This remuneration is not linked to the company’s results. The notes to the annual financial statements contain the information required by Dutch law (articles 2:383c through 2:383e of the Dutch Civil Code) on the level and structure of the remuneration for each supervisory director. The supervisory directors of Robeco Groep N.V. do not receive shares and/or rights to shares in the company as remuneration. The company does not grant loans or guarantees to its supervisory directors. Shareholders and the General Meeting of Shareholders Each year within six months of the close of the financial year, the General Meeting of Shareholders of Robeco Groep N.V. is held in Rotterdam. At this meeting the reports of the Management and Supervisory Boards are discussed, the annual financial statements are approved and decisions

Corporate Statements

2012

15


Corporate Governance

are taken on the proposed dividend and other items on the agenda. The minutes of the General Meeting of Shareholders are made available to the shareholder within three months of the meeting, in accordance with the Code’s recommendations. As Robeco Groep N.V. has only one shareholder, the recommendations of the Code relating to proxy voting are irrelevant. The company does follow the other recommendations of the Code relating to dividend and discharge. The Code’s recommendations on the supply of information to the General Meeting of Shareholders on price sensitive information or analysts’ reports do not apply, as Robeco Groep N.V. is not a listed company. Finally, the recommendations relating to the responsibilities of institutional investors do not apply to Rabobank Nederland in its capacity as shareholder of Robeco Groep N.V. Robeco does pursue an active voting policy for most of its investment funds and institutional mandates, on the basis of which, voting rights are exercised on the underlying stocks. For more information on this subject, please see the company’s website. Financial reporting The Management Board is responsible for the quality and completeness of the published financial reports and the Supervisory Board ensures that the Management Board takes this responsibility. Each year at the General Meeting of Shareholders, the external auditor is commissioned to audit the annual financial statements, on the recommendation of the Supervisory Board. The external auditor reports his findings to the shareholder, the Supervisory Board and the Management Board. Robeco Groep N.V. complies with the Code’s recommendations relating to internal and external auditors. Robeco Groep N.V.’s annual financial statements are published on the company’s website.

Compliance with the Banking Code In 2010 the decision was taken to implement the Banking Code at both Robeco Groep N.V. and Robeco Direct N.V.

16

Annual Report ROBECO GROEP N.V.

2012

level. In 2012, Robeco Groep N.V. applied the principles of the Banking Code. As in previous years, Group Internal Audit performed an assessment on governance and internal control within the Robeco Group as required by the Banking Code. From this assessment, it appears that Robeco Groep N.V. complies with the Banking Code with the exception of the following principles: Principle 2.1.10: This principle states that in addition to the Supervisory Board’s annual self-evaluation, the functioning of the Supervisory Board shall be evaluated under independent supervision once every three years. The regulations of both the Supervisory Board of Robeco Groep N.V. and Robeco Direct N.V. are now aligned to reflect the prescribed frequency of once every three years. However, in 2012 no self-evaluation or evaluation under independent supervision was carried out. The selfevaluation under independent supervision will take place for the first time in 2013. Principle 3.1.2: This principle states that in all of its actions, the bank’s Executive Board shall ensure that it carefully considers the interests of all of the parties involved in the bank, such as the bank’s clients, its shareholders and its employees. In relation to this principle, it should be noted that the Executive Boards of Robeco Groep N.V. and Robeco Direct N.V. are to a certain extent interwoven. It is common practice for the Management Board of Robeco Groep N.V. to invite all statutory directors of Robeco Direct N.V. if decisions relating to Robeco Direct N.V. are to be made. This has not yet been formalized in the regulations of the Management Board of Robeco Groep N.V.; but this will be done in the near future. Information on remuneration can be found in the Remuneration Report, part of the Report of the Supervisory Board.


Fund Governance

Fund Governance Robeco is committed to running its fund-management activities in a fair and responsible manner and in the best interests of its customers. Several years ago, Robeco adopted its own principles on fund governance in which it addresses how conflicts of interest in its fund-management activities should be handled.

performed reviews on the Product and Service Approval Process, the NAV calculation, Investment Restrictions Monitoring and Distribution Fees.

In 2008, the Dutch Fund and Asset Management Association (DUFAS) established a regulatory framework on fund governance and Robeco’s principles were used as a basis for this. This framework has now been formally established as an effective self-regulatory industry standard. Robeco subscribes to the DUFAS principles and has integrated them into its own principles on fund governance (‘the Principles’). These Principles, which also describe a number of potential conflicts of interest, have been published on the company’s website.

Monitoring Group Compliance monitors compliance with the Principles on an ongoing basis. It does this through a number of its activities including: – memberships of the Product Approval Committee, the Risk Management Committees and the Valuation Committee; – assessments of marketing materials; – involvement in fixing compensation for funds/clients in the event of operational incidents; – involvement in implementing the Banking Code; – monitoring individual employees’ personal trading activity; and – monitoring over 6,000 investment restrictions in more than 210 portfolios. The Principles and any conflicts of interest which have arisen are also regular and specific items on the agendas of the relevant Management Company Board meetings, in which – if and when applicable – so-called ‘conscientious consideration’ takes place. In 2012, Group Internal Audit

Corporate Statements

2012

17


Management Board Report of the Management Board - Robeco Profile

Robeco, established in Rotterdam in 1929, offers investment products and services to institutional and private investors worldwide. Assets under management amounted to EUR 189 billion as of 31 December 2012. Robeco advocates sustainable investing. Environmental, social and governance factors are integrated into the investment processes, and there is an exclusion policy in place. Robeco makes active use of its voting rights and enters into dialogue with the companies in which it invests, because we believe this will, in the long run, enhance the risk/return profile of our clients’ investments. The product range encompasses equity and fixed-income investments and alternative investments, including private equity fund of funds, hedge funds and structured products. The various strategies are managed from Rotterdam, Zurich, Boston, New York, Los Angeles, Greenbrae, Mumbai and Hong Kong.

Hong Kong, Japan, Korea, Luxembourg, the Netherlands, Spain, Taiwan, the United States, Switzerland and Australia. Robeco also has interests in a number of entities in the form of subsidiaries, joint ventures or branches. Entities in which Robeco now holds a 100% stake include Corestone (Zug, Switzerland), Harbor Capital Advisors (Chicago, USA), RobecoSAM (Zurich, Switzerland), Robeco Investment Management, Inc. (‘RIM’, Boston and New York, USA) and Robeco Institutional Asset Management, Robeco Direct and Transtrend (all Rotterdam, the Netherlands). Furthermore, Robeco holds a 51% interest in Robeco Teda (Tianjin) Investment Management Co Ltd. (Tianjin, China, which is in the process of dissolution) and a 49% interest in Canara Robeco Investment Management (Mumbai, India).

To service institutional and business clients, Robeco has offices in Dubai, mainland China, Germany, France,

Robeco is part of Rabobank Group, the bank with the highest credit rating of all privately owned banks in the world. Furthermore, within the banking sector, Rabobank is one of the global leaders in terms of corporate social responsibility and sustainability.

Operating income

Operating expenses

EUR x million

EUR x million

889 776

764

619

680

482

482

481

2010

2011

2012

Key figures

512

2008

18

528

2009

Annual Report ROBECO GROEP N.V.

2010

2012

2011

2012

2008

2009


Hans Rademaker, Hester Borrie, Roderick Munsters, Jurgen Stegmann and Leni Boeren

On 19 February 2013 ORIX Corporation (ORIX), Rabobank and Robeco announced that ORIX is acquiring approximately 90.01% of the equity in Robeco from Rabobank. Closing of the transaction is subject to legal and regulatory approvals, which are expected to be completed the second half of 2013.

ORIX and Rabobank have agreed that Robeco’s banking activities, which are only based in the Netherlands, will be transferred to Rabobank with Robeco retaining its client service relations.

Part of the agreement is a strategic alliance between Rabobank and ORIX. This includes Rabobank retaining a 9.99% share in Robeco, and continuing to cooperate in maintaining and expanding Robeco’s business platform.

ORIX is committed to support Robeco’s 2010-2014 strategy, its services to clients, its investment processes and teams, based on Robeco’s long term commitment to deliver value to clients. Robeco Group’s legal structure will remain unchanged, as will the current governance and reporting lines from Robeco’s subsidiaries.

Net result

Assets under Management

EUR x million

EUR x billion 197 181

171

189

134 150

150

2010

2011

135 111

– 11 2008

2009

2010

2011

2012

2008

2009

2012

Corporate Statements

2012

19


Chapter 1 Market environment

In 2012, the global economy had to cope with the structural problems that are hindering a traditional economic recovery. Once again, the focus in developed markets was on controlling sovereign debt, while economic growth was moderate and inflation was low. It was also the year that central banks made their voices heard. Getting a grip on sovereign debt would be easier if the world economy was growing more robustly. In the first few months of 2012, growth came mainly from the US. There, unemployment fell to 7.5%, while the housing market started to recover. The Federal Reserve played an important role in the US economy’s gradual improvement. The US central bank promised to keep interest rates low to support economic development, while it also introduced a target for the reduction of the unemployment rate (6.5%). Although the US economy improved in 2012, it had to cope with the threat of the fiscal cliff—previously enacted laws designed to cut the budget deficit drastically—at the start of 2013. In Europe, some worries were alleviated because the European Central Bank (ECB) made low interest loans available to banks. Part of the available funding was used to buy high-interest government bonds. However, risks in Europe’s peripheral countries remained; largely because of the threat of further fall-out should Greece leave the euro. Later on in the year, financial turbulence increased after the Greek government was unable to meet all the demands of the Troika (the IMF, the ECB and the EU) and needed

20

Annual Report ROBECO GROEP N.V.

2012

a third financial support package. Furthermore, the problems in the Spanish housing market became increasingly visible. In an attempt to stabilize financial markets, Mario Draghi, the ECB president, stated in July that he would do ‘whatever it takes’ to save the euro. Government bond markets in Italy and Spain reacted favorably to the announcement of an ECB bond purchasing program and yields fell sharply. Economic growth in emerging markets was lower than in previous years. Overall, some worries in the global macro picture were alleviated in 2012 but there is still much to be done. The global financial system remains fragile. In particular, European policymakers need to continue the good work via a banking union and further fiscal and economic integration.

A good year for equities Despite ongoing troubles in Europe’s peripheral countries and the possible impact of the looming US fiscal cliff, 2012 was a good year for equities. This robust performance was driven by investors seeking yield and the decreasing risk of a break-up of the euro. US equities rose by 16% over the year. A strong start to the year was followed by a difficult second quarter, but the US equity market recovered strongly in the second half of the year. European equities also did well, with the EURO STOXX 50 gaining 18%. Individual country performance was mixed: the German market rallied by 29%, while Spain was in negative territory. This reflects the divergence in economic performance within


the euro zone. In Asia, the Nikkei 225 made a strong comeback from the weak performance in 2011 after the earthquake and subsequent tsunami and nuclear disaster, rising by 26% in 2012. The MSCI China gained 23%. In June 2012, China’s central bank lowered interest rates to prevent a further slowdown of the country’s economy. This was the first rate cut since 2008. Emerging markets performed strongly, with a 17% rise. These markets did not share the same economic problems as developed markets in 2012. On the sector front, the best performers were financials and consumer discretionary. Financials were boosted by central banks’ interventions. The laggards in 2012 were utilities and energy. Utilities had performed strongly in 2011, while energy stocks suffered as a result of lower WTI crude oil prices and cheaper US natural gas.

Bond markets helped by central banks Bond markets also made strong gains. The credit market environment was friendly: inflation and economic growth remained low and markets were helped by central bank activity. These developments enticed investors to take more risk. The top gainers were European high yield bonds (+28%), Italian government bonds (+21%) and emerging market debt (+17%). Investment-grade corporate bonds in the US (10%) and in Europe (14%) also did well. Companies reported high earnings, but were still reluctant to make new investments. This resulted in high cash flows and stronger balance sheets. However, not all sections of the bond market did so well. US (+2%) and Japanese

(+2%) government bonds made only small gains, because there was little room for yields to fall further. German government bonds fared better, with a 5% gain.

Currencies: a large decline for the yen The euro strengthened slightly against the US dollar. The euro was helped by the ECB’s strong measures. The dollar declined by 3% against the euro. The Japanese yen fell by 14% against the euro thanks to Bank of Japan (BoJ) measures to boost economic growth and weaken the yen. Furthermore, the BoJ came under strong political pressure to continue to ease monetary policy.

A mixed year for commodities It was a mixed year for commodities. In 2012, industrial metals such as lead, zinc and copper rose in value. These commodities benefitted from expectations that Chinese economic growth would pick up thanks to the accelerated approval of public infrastructure projects. China is the world’s largest consumer of industrial metals. But the prices of WTI crude oil and natural gas fell as a result of a strong increase in unconventional US oil and gas production. Brent oil rose, sending the Brent-WTI spread to record levels. Gold increased by 6%.

Real estate: a strong performance Real estate performed strongly in 2012 with a 22% gain. Investors were attracted by the combination of attractive yields and the asset class’s defensive characteristics.

Corporate Statements

2012

21


22

Annual Report ROBECO GROEP N.V.

2012


Chapter 2 Strategy

In 2012, Robeco Group continued to implement its 2010-2014 strategy. This strategy aims to provide institutional and retail clients in the Netherlands and a number of countries in Europe, Asia, the Middle East, Latin America and the United States with a selection of competitive, sustainable and actively managed investment strategies and pension/ investment solutions. The strategy is based on the following pillars: Act in the best interests of clients: Our success is based on our ability to consistently think and act in the best interests of our clients, within the framework of a profitable investment-management company. This means making clear choices and focusing on those areas where we provide the highest added value for our clients.

Robeco’s profile in the market. Feedback from clients and consultants indicates that our visibility and credibility further improved in 2012, which is reflected in the higher levels of money entrusted to us; net new money amounted to EUR 18.4 billion in 2012, which was far more than we had anticipated. Deepen our synergies with Rabobank: We are working with Rabobank to offer clients new product ranges, for example food and agricultural funds and pension solutions such as the Premie Pensioen Instelling (PPI). Cooperation has increased over the years and will continue to do so in the Netherlands and internationally, in both retail and institutional markets.

Market leader in the Netherlands Improve effectiveness and efficiency: We aim to reduce our recurring costs by EUR 75 million in the period 2010-2014 and are on target to meet this goal. By improving our cost-effectiveness and providing more focused services and solutions, we are becoming a leaner and more effective organization that is better able to meet our clients’ needs. Strengthen our profile in the market: A disciplined implementation of the choices that have been made, especially in terms of product focus, investment solutions and themes (Research/Quant, Sustainability Investing, Pensions, Inflation and Food & Agri) will strengthen

Robeco aspires to increase its share of the Dutch institutional market from 8% in 2010 to 16% by 2014. The increased focus on institutional investors paid off in 2012 with net new money from the Dutch institutional market amounting to around EUR 16.5 billion. A key element of Robeco’s strategy for the Dutch institutional market is the development of investment solutions that fit the absolute-return objectives of pension funds and insurance companies. We are actively supporting the shift in focus currently taking place in the institutional arena, where a preference for absolute returns rather than relative performance is becoming increasingly evident.

Corporate Statements

2012

23


Report of the Management Board - Strategy

Our liability-driven fund investments (introduced in 2005) and tailor-made liability-matching solutions attracted considerable attention from clients and prospects. Some of our most successful solutions were low-volatility equity strategies or ‘Conservative Equities’, which were selected by a number of large Dutch pension funds.

In the US, results continued to be very strong, with most cash and inflow through the intermediary channel. In total EUR 2.4 billion net new money was raised by Robeco Investment Management, while Harbor Capital Advisors had another outstanding year with net inflows of EUR 3.3 billion.

At the same time, appetite for Robeco’s emerging-market equity strategies remained strong. Robeco’s fundamental emerging-markets strategy remained closed to new institutional clients in 2012, but newer strategies, namely, Active Quant Emerging Markets Equities and Emerging Conservative Equities, attracted inflows. As a consequence of the relatively significant market inefficiencies in emerging markets, it is still possible to realize attractive investment returns using smart quantitative models.

In 2012, Robeco opened a new office in Miami. The rationale behind this step is Robeco’s strong and growing Latin American business in countries such as Colombia, Peru and Chile, where Robeco has achieved a significant market share. The move underlines our commitment to increase the level of service we offer our Latin American clients.

Focused international strategy Robeco’s international strategy is focused on the US and a number of countries in Europe, the Middle East, Asia and Latin America, where Robeco concentrates on institutional investors and larger distributors and intermediaries (designated key accounts). In 2012, a year that was dominated by the uncertainty of the strategic review by Rabobank, Robeco nevertheless managed to attract substantial new assets from new and existing clients throughout the world.

24

Annual Report ROBECO GROEP N.V.

2012

In Europe, the picture was mixed. The distribution sector is still going through a difficult time, due to uncertain macro-economic conditions as well as the lack of a full return of investor confidence. This is despite the strong results we have seen in, for example, in the global equity markets Robeco N.V. yielded 16.8%. Robeco’s German business activities continued to show strong results, particularly on the institutional side, Switzerland suffered from poor market sentiment and Spanish clients held onto their assets despite very negative market sentiment. In France a decision was made to focus on the sales and servicing of long-term capability assets and to shift away from offering (less profitable) local short-term moneymarket products.


In Asia, we saw good results in Korea, where we were awarded several new mandates. Japan suffered from outflows in Transtrend. New investments were made in teams and resources, for example in Hong Kong. Notably, and in line with our strategy to further increase our institutional share of the business, we opened an office in Sydney, in one of the largest and most sophisticated institutional markets in the world. Some preliminary successes have strenghtened our view that Robeco’s skills and capabilities will find fertile ground in Australia. Robeco has been present in the Middle East since 2000 and remains strongly committed to this strategically important region.

ORIX Corporation, which will acquire 90.01% percent of the shares in Robeco Groep N.V., is committed to supporting Robeco’s 2010-2014 strategy, its services to clients and its investment processes and teams, on the understanding that ORIX and Rabobank have agreed that Robeco’s banking activities will be transferred to Rabobank with Robeco retaining its client-service relations.

Canara Robeco, Robeco’s joint venture in India, which was established in 2007, has gained a reputation for reliability and as a market authority in a very short time, providing a solid foundation for long-term growth. Assets under management amounted to circa EUR 1.1 billion at the end of 2012. These are invested in money-market instruments, equities and fixed income. Going forward, Canara Robeco will boost its activities in these last two asset classes. Robeco Asia Pacific now has offices in Hong Kong (regional headquarters), Shanghai, Taipei City, Tokyo and Seoul. Robeco Asia Pacific’s assets under management now amount to over EUR 3.2 billion.

Corporate Statements

2012

25


Chapter 3 Organization

Robeco’s Management Board Robeco’s Management Board acts on the basis of shared responsibility and on the understanding that all members have their own focus areas. It is made up of the following members: Chief Executive Officer is Roderick Munsters, Chief Operating Officer is Leni Boeren, Hester Borrie is Head of Sales & Marketing, Hans Rademaker is Head of Investments and Jurgen Stegmann is the Chief Financial Officer. More details on their responsibilities are shown in the diagram below.

Investments

Sales & Marketing

CEO

CFO

COO

Hans Rademaker

Hester Borrie

Roderick Munsters

Jurgen Stegmann

Leni Boeren

– Group Corporate Development & Business Control – Group Finance – Group Fiscal Affairs

– Group Information Services – Financial Service Center (incl. Robeco Direct Operations) – Simplicity Program

– Group Risk Management

– Vendor Management

– Group Legal Affairs

– RobecoSAM

– Central Purchasing

– Robeco Investment Management (RIM)

– Investment Products – – – – – – –

26

Investment Solutions Investment Services Quantitative Strategies Investment Specialists Financial Markets Research Robeco Gestions Corestone

– Sales Offices NL & International – Group Key Account Management & Consultant Relations – Group Marketing & Business Support – Robeco Direct Client Relations – Canara Robeco

Annual Report ROBECO GROEP N.V.

2012

– – – – – – – – –

Group Compliance Group Internal Audit Group Human Resources Group Corporate Communications Company Secretary Group Product Management Sustainability Investing Transtrend Harbor Capital Advisors

– Group Treasury/ALM

– Private Equity


Subsidiaries, joint ventures and associates Robeco Groep N.V. holds a 100% stake in all companies mentioned below, unless indicated otherwise. A full list is disclosed in the notes to the Financial Statements. Robeco Institutional Asset Management B.V. The asset management company of the Robeco Group, also the director/manager of Robeco’s Dutch-based investment funds. Robeco Direct N.V. Robeco’s direct distribution channel. In the Netherlands, the bank Robeco Direct serves its retail clients via Internet and telephone, offering them Robeco mutual funds, savings and brokerage services. Corestone Investment Management A.G. Swiss-based independently operating investment manager, Corestone manages multi-discipline open-architecture portfolios for institutional investors. Harbor Capital Advisors Inc. Chicago-based Harbor Capital Advisors (HCA) offers a family of mutual funds through selecting and monitoring best-of-breed external managers. HCA provides management services to Harbor Funds, a mutual-fund complex, and to institutional segregated accounts. HCA’s assets under management amount to around EUR 55 billion (at 31 December 2012).

Robeco Investment Management Inc. US-based asset manager, offering specialist equity investment capabilities through two specialist boutiques (Robeco Boston Partners and Robeco Weiss Peck & Greer) with offices in New York, Boston, Greenbrae and Los Angeles. RIM’s assets under management amount to around EUR 18 billion (at 31 December 2012). RobecoSAM AG RobecoSAM is a Swiss-based global investment boutique focused exclusively on Sustainability Investing. The firm’s range of services and products comprise asset management, indexes and clean tech private equity. RobecoSAM partners with S&P Dow Jones Indices to develop and publish the Dow Jones Sustainability Indices (DJSI). Its total assets amount to EUR 9 billion (as of 31 December 2012). Transtrend B.V. Rotterdam-based research-driven and system-based managed-futures trader, with a track record going back to 1992. Transtrend’s assets under management amount to around EUR 6 billion (at 31 December 2012). Canara Robeco Asset Management Company Ltd. Joint venture with Canara Bank, one of the largest banks in India (49% stake). Canara Robeco’s assets under management amount to around EUR one billion (at 31 December 2012).

Corporate Statements

2012

27


Chapter 4 Investment performance

Group performance Investment returns are dependent on general market developments and on the outperformance and underperformance of the different investment programs. Market developments are covered in detail elsewhere in this report. In 2012, at group level, 69% (2011: 50%) of the assets under management outperformed compared to the relevant benchmark. Equity: a year with positive relative returns The year 2012 was a positive year in absolute terms for equity investments. In relative terms, the results were also positive. At group level, 84% of equity investments outperformed their benchmark on a gross-of-fees basis. Over a three-year period this figure is 61%. At business-line level, the percentage of outperforming equity assets over 2012 was 74% for Rotterdam, 68% for RIM, 99% for HCA, 68% for RobecoSAM and 6% for Canara Robeco Asset Management. The Harbor International Fund, the largest Robeco Group fund (EUR 29.6 billion) added another year of outperformance to its very impressive long-term track record. Its excess return versus the benchmark was 4.5% gross-of-fees. The Harbor Capital Appreciation Fund outperformed by 1.2% over 2012. The Robeco fund outperformed its benchmark by 2.1% and Rolinco by 2.8%. Robeco Emerging Markets Equities slightly underperformed its benchmark by 0.1%.

28

Annual Report ROBECO GROEP N.V.

2012

Robeco Emerging Stars Equities (2.9%) and Robeco AsiaPacific Equities (3.9%) both achieved outperformance. Robeco Chinese Equities (-2.2%) and Robeco Hollands Bezit (-6.1%) underperformed their benchmarks. The Emerging Markets Quant funds outperformed their benchmarks by 1.6% (Institutional Fund) and 2.4% (Active Quant). The Conservative Equity funds realized positive risk-adjusted returns versus their reference indices. Sharpe ratios over 2012 were 1.1 (Global) versus 1.0 for the reference index, 2.0 (European) versus 1.3 and 2.6 (Emerging) versus 1.1. The two largest products managed by RIM in Boston are BPAM Large Cap Value and Robeco US Premium Equities. Large Cap Value outperformed its benchmark by 3.8% while Robeco US Premium Equities realized an underperformance of 1.8%. SAM Sustainable Water Fund realized a positive excess return of 7.0% versus the MSCI World, while SAM Smart Energy Fund underperformed the MSCI World by 10.3% over 2012. However, in comparison to the industry reference – the S&P Global Clean Energy Index – SAM Smart Energy Fund outperformed by 21.4% in 2012. Fixed Income: positive relative returns in 2012 The year 2012 was a positive year in absolute as well as relative terms for fixed-income investments. At group level, 60% of fixed-income assets outperformed the benchmark. Over a three-year period this figure is 76%. The largest Robeco Group bond fund, HCA Bond (EUR 6.0 billion) outperformed by 5.7%. Rorento realized an absolute return of 10.0%, resulting in an outperformance of 4.0% over


2012. The absolute return of Robeco Lux-o-rente was 3.2%, an underperformance of 0.9%. Robeco All Strategy Euro Bonds achieved an outperformance of 1.5%. Robeco High Yield Bonds realized an absolute return of 18.2% and an outperformance of 2.1%. Alternatives: neutral absolute return for Transtrend Transtrend’s Enhanced Risk USD had a neutral year with an absolute performance of 0.7% net-of-fees. Robeco Multi Market Bonds (which is largely invested in a Transtrend product) realized mixed absolute returns.

Returns of Robeco’s flagships In order to highlight the general developments in the market in 2012, an overview of the absolute returns of Robeco´s flagship funds is given in the table below. The table shows the gross-of-fees absolute returns of the major funds (net-of-fees for alternatives), arranged according to investment type and assets under management (AuM). The excess returns shown are the out- or underperformance of the funds versus their benchmarks.

Return flagship funds

Flagship

Strategy

Harbor International* Harbor Capital Appreciation* BPAM Large Cap Value Composite* Robeco Robeco US Premium Equities* Robeco Emerging Markets Equities Robeco Emerging Stars Equities Robeco Asia-Pacific Equities SAM Sustainable Water Rolinco Harbor Bond* Robeco High Yield Bonds Robeco Lux-o-rente Robeco All Strategy Euro Bonds Rorento Transtrend Enhanced Risk USD*

Equity - Large Cap Value Equity - Large Cap Growth Equity - Large Cap Value Equity - Global Equity - Premium Equity Equity - Emerging Markets Equity - Emerging Markets Focus Equity - Asia-Pacific Equity - Global Sustainability Equity - Thematic Investing Fixed Income - US Fixed Income - Global High Yield Fixed Income - Quantative Global Fixed Income - All Strategy EMU Fixed Income - Global Alternative Investments - Diversified Trend Program

AuM in Absolute return in % bln EUR** (in local currency) 29.6 12.9 6.6 4.1 4.0 2.2 0.8 0.8 0.6 0.6 6.0 3.2 2.7 1.8 1.6 5.1

Excess return in %

21.8 16.4 21.3 16.8 15.8 16.3 19.3 18.9 21.0 17.2 9.9 18.2 3.2 12.7 10.0 0.7

4.5 1.2 3.8 2.1 – 1.8 – 0.1 2.9 3.9 7.0 2.8 5.7 2.1 – 0.9 1.5 4.0 ***

* Returns in USD ** As at 31/12/2012 *** No appropriate benchmark available

Corporate Statements

2012

29


Report of the Management Board - Investment performance

Robeco 1929 - 2012 The graph below shows the performance of Robeco N.V. over time. The fund, which started as an investment consortium, was founded on the 4th of December 1929 and celebrated its 83nd anniversary in 2012. Robeco N.V. has had an eventful history. It survived the depression of the thirties and the Second World War that followed and then prospered during the period of economic growth in the fifties and sixties. The pace of growth slowed somewhat during the seventies, but Robeco successfully rode the big

bull market of the eighties and nineties, ending the century at its highest level ever. Up until now the 21st century has not been very kind to equity investors in developed markets, but the relative performance of the fund has been sound. As the graph shows, the fund has been through good and bad times, but on average the performance has been a solid annualized return of 8.2%. An investment of EUR 100 (if the euro had existed then) made in March 1933, when the current legal entity Robeco N.V. was incorporated, would have grown to more than EUR 54,500 by the end of 2012.

Performance of Robeco N.V. since inception (logarithmic scale)

10,000,000

1,000,000

100,000

10,000 1933

30

Annual Report ROBECO GROEP N.V.

1939

2012

1945

1951

1957

1963

1969

1975

1981

1987

1993

1999

2005

2011

2012


Corporate Statements

2012

31


Chapter 5 Business developments

Global business development 2012

EUR x billion

AuM at opening date Investment result

Total

Retail

Institutional

Total

Retail

Institutional

150.3

78.3

72.0

149.6

81.0

68.6

20.8

11.0

9.8

– 4.5

– 2.9

– 1.6

Net cash flow

18.4

3.4

15.0

7.6

2.2

5.4

Other losses

– 0.6

– 0.5

– 0.1

– 2.4

– 2.0

– 0.4

188.9

92.2

96.7

150.3

78.3

72.0

AuM at closing date

Growth of assets under management In 2012, assets under management increased strongly, growing by 26% to EUR 188.9 billion at year-end. This alltime high for Robeco is the result of both strong investment results, boosted by the recovery in the financial markets and a well-differentiated cash flow, which reached a record level in 2012. The EUR 38.6 billion increase in assets under management is the result of a positive net investment result of EUR 20.8 billion and a net cash inflow of EUR 18.4 billion. The investment result was affected by a EUR 1.4 billion loss, mainly due to the depreciation of the US dollar. The item ‘Other Losses’ includes annual non re-invested dividend payments and interest payments. One of the strategic pillars of the Robeco 2010-2014 strategy is to accelerate growth in its institutional business. The increased focus on institutional clients is clearly visible

32

2011

Annual Report ROBECO GROEP N.V.

2012

in the net cash inflow in 2012. Some 82% of the net cash inflow stemmed from institutional clients. As a result, the proportion of institutional assets to the total assets under management further increased to 51% (2011: 48%). During 2012, Robeco introduced a number of new funds, including Robeco Covered Bonds, Robeco Emerging Markets Smaller Companies and Robeco Quant Emerging Debt Local Currency. Net cash flow In terms of net cash flow, 2012 was a tremendous year for Robeco; one highlight was a fiduciary mandate worth more than EUR 12 billion. The total cash inflow at distributor level was almost EUR 29 billion, while the outflow was EUR 10.6 billion, resulting in a net cash


inflow of EUR 18.4 billion, EUR 6.1 billion of which was in the US. Robeco’s Bank savings products including third-party distribution, suffered around EUR 1.2 billion outflow. In Europe, there was considerable investor interest in both the balanced and fixed-income asset classes, resulting in cash inflows that exceeded the EUR 16 billion mark in 2012. The mutual funds of Harbor Capital Advisors were especially popular among retail clients and Robeco Investment Management also enjoyed strong inflows. Harbor International Fund is Robeco’s largest mutual fund and had EUR 30.3 billion in assets under management by the end of 2012. At present, there is a rapid increase in demand among employers and pension funds for defined-contribution solutions, which can be implemented in a transparent and efficient manner. In order to meet this demand, Robeco launched the Robeco Premie Pensioen Instelling (PPI) in the Netherlands, which experienced positive momentum last year as it welcomed several large pension funds as new clients.

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Chapter 6 Financial results

Financial results EUR x million

2012

2011

Assets under management (EUR x billion)

188.9

150.3

Management and performance fees

1,009

914

Operating income Operating expenses Operating result Non operating result Taxes Net result

The operating result for 2012 amounted to EUR 295 million, an increase of EUR 97 million from 2011. The management fee exceeded the EUR 1 billion mark for the first time. Robeco generated a net profit of EUR 197 million, following a profit of EUR 134 million in the previous year. This increase was mainly due to the higher management fees, results on financial instruments from banking operations and the stable operating expenses. The operating income increased by 14% to EUR 776 million. The increase in management-fee income can be attributed to higher recurring management fees as a result of the firm growth in assets under management. These increased by EUR 38.6 billion (+26%)

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776

680

– 481

– 482

295

198

2

6

– 100

– 70

197

134

to EUR 188.9 billion, due to strong net cash inflow and positive market performance. In general, management-fee income was slightly positively affected by the movement of the US dollar in 2012. Performance fees were slightly higher than in 2011, increasing from EUR 14 million to EUR 18 million. As entrusted funds declined further and yields on triple-A sovereign bonds and investment-grade paper fell sharply, banks’ net interest income, as part of the operating income, remained under pressure. Falling savings rates in 2012 did not help this situation and so the net interest income from banking operations (EUR 30 million) almost


halved, resulting in a EUR 21 million decline compared to 2011. This situation is not expected to improve in the foreseeable future, unless the restricted investment universe widens. The results on financial assets from banking operations showed a strong improvement as interest yields fell to historically low levels and credit spreads narrowed significantly. All investment books that are stated at fair value reflected positive fair-value changes, with major contributions from asset-backed securities and GIIPS sovereign bonds. This effect was also evident in the reversal of impairment losses (EUR 14 million income versus a EUR 6 million loss in 2011), to which asset-backed securities made a particularly positive contribution, thanks to reversals of earlier impairments, sales of instruments that had already been impaired at a book gain, and positive fair value changes in the remaining instruments. Operating expenses remained unchanged in 2012. If the impact of the reversal of impairments relating to banking operations had been excluded, operating expenses would have increased by 4% due to higher personnel costs. In 2012, Robeco intensively continued to implement its 2010-2014 strategy, including projects to further improve effectiveness and efficiency. The number of both internal and external staff further declined during 2012. Although the number of internal staff declined due to the sales of Sage and Banque Robeco (which occurred at an earlier stage) and the transformation of Robeco Gestions (asset-management activities) into Robeco France

(sales office), the higher variable remuneration and the Dutch government’s extra income tax caused employee-benefit expenses to rise. ‘Other expenses‘, which form part of recurring ‘Operating expenses’ and are mainly made up of out-of-pocket costs, declined again, falling by 2.7% in 2012 (2011: -7.5%) to EUR 178 million. The information technology (IT) and fund- and clientrelated costs remained unchanged. The costs for marketing and temporary staff decreased consistently, down 22% compared to 2011, while advisory fees increased by 35% as a result of Rabobank’s sale of Robeco. In 2012, the non-operating result was negatively affected by returns on foreign-currency hedge positions, which were considerably lower than in the previous year. Due to a recovery in market circumstances, the results from the held-for-trading portfolio were significantly higher than in 2011. However, this effect was offset by lower positive results on the corresponding total return swaps. No new impairments were recognized for these instruments and only fair-value changes on already impaired co-investments caused an impairment loss in 2012. The 2012 effective corporate tax rate of 33.5% is rather high compared to the statutory tax rate (25%) in the Netherlands. In addition to the higher US taxable income, due to a higher local tax rate, some operational results from foreign subsidiaries could not be recognized as taxable losses, causing the effective corporate tax rate for 2012 to exceed the Dutch base tax rate.

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Report of the Management Board - Financial results

Total assets declined from EUR 9.9 billion to EUR 8.3 billion, mainly as a result of the outflow from banking activities. Due to severe competition in the retail savings market and strategic choices within Robeco Direct, the bank suffered a cash outflow of EUR 1.2 billion (2011 EUR 0.4 billion) on an aggregate level. Furthermore a capital distribution of EUR 500 million was made to the shareholder in 2012. Shareholders’ equity at year end 2012 amounted to EUR 1,120 million. The EUR 245 million decline is primarily due to the aforementioned capital distribution, the increase in unrealized fair value of financial instruments and the net result for 2012.

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Corporate Statements

2012

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Chapter 7 Risk Management Framework

Introduction Robeco’s risk-management framework was further optimized in 2012; the core risk-management principles of Robeco remained stable and continue to be highly effective. These are: Management responsibility Line management is responsible for identifying risks within their business areas and ensuring that these are managed appropriately. Before taking decisions, clear analysis is vital to ensure all risks taken are consistent with Robeco’s strategy and risk appetite. Business ownership of risks is an essential element in understanding and controlling risk. Global mandate Group Risk Management (GRM), Group Compliance (GC) and Group Internal Audit (GIA) have a global mandate and are therefore responsible for all risk management, compliance and internal audit activities within Robeco. Independence Robeco has adopted a model incorporating three lines of defense. The first line of defense is the business unit itself which has primary responsibility for risk management. GC and GRM are the second line of defense, providing independent oversight. GIA is the third line of defense, auditing the activities of the first two lines.

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Development of new products and services Robeco aims to create a diversified range of products that is actively managed, profitable and scalable. Processes are in place to ensure that new products and services are aligned with Robeco’s strategy and are in the best interests of its clients. Continuous assessment and monitoring The responsibility for identifying, monitoring, reporting and controlling all risk categories on a daily basis lies with the three lines of defense.

Governance Risk control governance is exercised by line management and GRM, GC and GIA. The Head of GRM is Robeco’s Chief Risk Officer who reports directly to the CFO. The Chief Risk Officer has a secondary reporting line to the Audit & Risk Committee (A&RC) which approves his/her appointment or dismissal. For Robeco entities, the primary responsibility of the risk- management function lies with the local management teams. The Local Risk Managers perform the day-to-day risk-management activities within each Robeco entity and have a functional reporting line to GRM on risk-related matters. As the second line of defense, GRM aims to ensure that the operational and financial risks related to Robeco’s activities are identified, monitored and controlled. GRM


supports the Management Board and line management by developing and implementing policies, methodologies and tools for the identification, measurement, monitoring and reporting of the different risk types that relate to the activities of the Robeco Group. Policies are aligned with Rabobank to the extent that this is relevant or necessary. GC acts as the second line of defense in supporting the Management Board and line management of the various entities in maintaining a high level of compliance. GC also aims to ensure that all business principles are understood and implemented. GC monitors adherence to policies and procedures and participates in local and group committees. The Local Compliance Officers perform the day-to-day compliance activities within each Robeco entity and have a functional reporting line on compliance-related matters to the Group Compliance Officer. Again, policies are aligned with Rabobank to the extent that this is relevant and necessary. GC reports directly to the CEO of Robeco Group. GIA acts as the third line of defense and audits the activities of the first and second lines. GIA uses an in-depth annual risk analysis to maintain and execute a medium-term audit plan. It also uses input from line management, GC and GRM for its risk assessment and to compile the audit plan. This plan is adjusted every quarter to reflect any new developments, but also focuses on keeping the overall audit coverage at an appropriate level that is sufficient

for the Robeco Group as a whole. GIA directly reports to the CEO of Robeco Group. The independence of this function is safeguarded by having a second reporting line, to the Chairman of the A&RC. Besides operational audits, IT audits, project reviews and management-control assessments, GIA also tests the operating effectiveness of controls relevant for financial reporting. In executing its audit plan, GIA closely cooperates with the external auditors, Ernst & Young, on a global level. Audits generally result in audit reports with an audit rating. On the basis of these audits, measures of improvement are agreed with management and for each measure an owner, a deadline and its significance are documented. GIA monitors the progress made in implementing the measures of improvement and reports on this on a quarterly basis. The quarterly reports of GRM, GC and GIA are discussed in detail with the Management Board (MB), in the Group Risk Management Committee (GRMC) and in the A&RC. In addition to this, GIA reports are also discussed with Audit Rabobank Group. The announced acquisition of Robeco Groep N.V. by ORIX Corporation will likely lead to changes in the reporting structure as far as Audit Rabobank Group is concerned. In addition to the functional organization, Robeco has a number of cross-functional committees in place that have decision-making power in specific areas.

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Report of the Management Board - Risk Management framework

Audit & Risk Committee The Supervisory Board of Robeco Groep N.V. has established the A&RC to supervise the financial reporting process, the control environment, the system of internal controls, risk management and internal audit. The A&RC also reviews the process used to monitor compliance with legislative and regulatory requirements and its own internal policies. The A&RC relies on reporting from GRM, GC, GIA, Group Finance (GF), the external auditor and updates from the business entities. The A&RC also acts as Audit & Risk Committee for Robeco Direct N.V. Group Risk Management Committee There are several risk-management committees to ensure comprehensive and consistent risk oversight throughout the Robeco Group. Risk oversight involves a combination of internal audit and risk-management functions. The GRMC is the highest body within Robeco Group that focuses on risks. It consists of all the members of the MB, representatives from GIA, GRM, Group Legal Affairs and front and back office. It is the responsibility of the GRMC, which is chaired by the CEO of Robeco Group, to evaluate and approve group-wide policies relating to risk-management topics. Furthermore, it reviews root cause analyses of operational incidents and the results of risk assessments. The GRMC is supported by various local risk- management committees, responsible for individual business entities, and by (sub) committees that focus on specific issues (e.g.

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valuation, security, new products, and asset and liability management). A crisis management team has been set up to ensure the continuity of the critical processes and services in times of disasters. In Control Board The In Control Board (ICB) ensures effective governance of the different cross-domain internal control topics like activities for the control statement on financial reporting to Rabobank, ISAE 3402, business continuity management, information security and internal control awareness. The ICB consists of the CFO and COO of Robeco Group, and representatives of GIA, GRM, GF and Group Information Services, front and back office (depending on the issue). In 2013 the set-up of the ICB was evaluated and it was decided to transform the ICB into a Security Board with focus on tactical security management whereby the other internal control topics are transferred to the GRMC and local Risk Management Committees. Financial Crisis Committee In the event of a financial distress situation, the Financial Crisis Committee (FCC) is responsible for identifying any risks that could arise and their potential impact on client portfolios and Robeco’s reputation.

Robeco Control Framework During 2012, GRM further optimized its risk and control framework, the Robeco Control Framework (RCF). This


renewed framework has a stronger focus on significant risks and ensures transparent reporting by the first line of defense on the effectiveness of risk management in their own domain. For this purpose, GRM consolidates information from the different Robeco Group entities and reports to relevant committees and regulators. Risk responsibility can be achieved by the (further) integration of risk-management responsibilities into the existing business processes. Risk appetite plays a central role in the RCF. It defines the scope of the framework and determines the definition and implementation of controls. Ernst & Young has been actively involved in the roll out, implementation, deployment and monitoring phases of the RCF. When comparing the Robeco approach to that of other institutions in the financial services industry, we believe that Robeco is further advanced than many in terms of creating a culture where risk management is a primary responsibility of business management. The RCF provides senior management with a framework, which enables them to monitor and report on significant risks at a Robeco entity level.

Risk Appetite Robeco´s risk appetite is the level and type of risk that Robeco Group is able and willing to accept in the pursuit of its business objectives. This willingness to pursue or accept risks is linked to

the organization’s financial resilience and the reputation it intends to maintain with clients, regulators and other stakeholders. As an asset manager with limited financial buffers, Robeco endeavors to keep its reputation risk to a minimum and seeks to reduce net income volatility. Robeco’s risk appetite is a balanced mix of qualitative and quantitative measures. The following qualitative measures have been defined for Robeco Group: – aspire to longer term, profitable relationships with a diversified client base; – aim for a diversified range of actively managed, profitable and scalable products and services; – hedge financial risks in Robeco’s own account positions to the extent that this is efficient and practically possible; – actively reduce IT- and organizational complexity; – seek to attract and retain top talent and aims to avoid key persons risk; – have zero tolerance towards bribery, finance or support of terrorism; and – keep a close eye on new developments in the regulatory environment and complies with relevant rules and regulations. Robeco’s risk profile is quantified in terms of Economic Capital (EC) relative to available capital. In the EC

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Report of the Management Board - Risk Management framework

framework, risk types are converted to the amounts of capital required to support them. EC covers credit risk, market risk, interest rate risk, operational risk and business risk. For all risk types, EC models are based on relevant risk measures and appropriate horizons. On an annual basis the overall risk budget for EC is calculated as 75% of available capital as per January 1st of that year (overall quantitative risk appetite). The risk budget is allocated to risk types and (if relevant) activities.

occur or the potential magnitude of the related financial consequences. This chapter covers the risks that are currently considered to be significant within Robeco Group, which means that this list of risks is not exhaustive. There may be other risks that have not yet been identified or that have been assessed as not having a significant potential impact on the business, but that could materialize as such in the future. Robeco’s control framework is designed to provide timely insight into such risks.

Risk Management and monitoring Robeco defines two broad categories of risk, fiduciary risk for client portfolios (funds and mandates) and corporate risk, which includes both balance-sheet (including but not limited to trading and investment books of Robeco Direct) and operational risk. Reputational risk is considered to be derived from fiduciary and corporate risks. Certain risks, including those described below, may impact Robeco’s ability to execute its strategy and directly affect its business activities, financial condition, the results of its operations and its future prospects. The business of an asset manager is inherently exposed to risks that become apparent only with the benefit of hindsight. These are risks of which we are not currently aware or do not currently consider material, but which could materially affect our business activities, financial condition, the results of our operations and future prospects. The sequence in which the risks are presented below is not indicative of the likelihood that they will

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Complexity risk Complexity risk is the risk that Robeco is unable to make changes and achieve its strategic ambition, because the organizational landscape (incl. applications) is too complex, potentially resulting in high costs, financial losses and reputation risk. In 2012 a program was executed to harmonize and centralize certain activities in the Investment domain (portfolio implementation, portfolio monitoring, trading and transaction processing). The project to implement the Charles River trading platform was another effort to control costs, reduce complexity and increase standardization. During any project phase there is an inherently higher level of risk for those processes, systems and methodology that are being changed. In both cases, there was a strong focus on executing daily operations and maintaining awareness of internal controls in order to


mitigate the project risk. Ultimately these projects will result in cost reduction, increased efficiency and more system/process stability. Credit risk Credit risk is the risk of a loss stemming from a borrower’s failure to repay a loan or otherwise meet a contractual obligation. This risk is only applicable to Robeco Direct. As part of the transition to Basel III, the entity Robeco Direct set up a migration plan with the aim of becoming compliant with relevant Basel III areas such as capital, solvency, liquidity and leverage. In this plan target ratios for measures in these areas were defined (core-tier 1 ratio, leverage ratio, liquidity coverage ratio and net stable funding ratio). By the end of 2012, Robeco Direct met the set targets for all these ratios. In 2012, Robeco further enhanced its stress testing framework by developing overarching stress scenarios specifically applicable to the Robeco Direct balance sheet. The framework consists of a combination of sensitivity, historic and hypothetic scenarios. Stress testing helps us to gain an insight into vulnerable areas within specific scenarios and provides an indication on how much capital is required to absorb losses should large shocks occur. The results of these stress scenarios help management to make strategic decisions.

Market risk Market risk is the risk of financial markets being disrupted as a result of a market crisis possibly affecting liquidity, net income, reputation and / or the execution of the Robeco Group strategy. Since 2011, Robeco Group has been actively focusing on the (possible) direct and indirect impacts of the euro zone crisis. The company has assessed exposure in terms of direct investments in government debt and the additional effects the crisis may have on liquidity and the creditworthiness of banks. The FCC’s risk assessment identified certain measures for client portfolios and Robeco’s own account. As a result of this, steps were taken including a reduction in direct exposure and temporary reduction in indirect exposure to peripheral euro zone countries and their financial institutions. In addition, a financial crisis plan including scenario planning was developed to be able to effectively deal with turmoil in the financial markets. Liquidity risk for funds Liquidity risk for funds is the risk that an asset cannot be sold due to lack of liquidity in the market or that client redemptions cannot be fulfilled.

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Report of the Management Board - Risk Management framework

The financial crisis highlighted the risk of a mismatch between the required and available liquidity in funds which might result in financial and reputation damage for Robeco Group. Fund liquidity is monitored by the first and second lines of defense. Robeco has liquidity risk-management policies with escalation procedures. These policies and procedures are updated regularly to respond to market changes. Valuation committees are responsible for the valuation principles and procedures within Robeco on all securities and the procedures on how to deal with illiquid markets. The risk that an asset cannot be sold due to lack of liquidity in the market is managed by monitoring the funds (measurement of trade volume, stale prices, input portfolio management and trading desk) and the concentration limits on undesirable exposure. The risk that client redemptions cannot be fulfilled is managed by periodically analyzing reports on our client base. These include elements such as concentration, type of client, etc. and analysis of account management information on (expectations of) cash in-/ outflow. In certain cases a liquidity buffer is applied to ensure that client redemptions can be fulfilled. Reputation risk Reputation risk is the risk that Robeco’s reputation is harmed due to misalignment between a client’s expectations (risk, return, quality) and actual performance.

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As an asset manager, Robeco has a fiduciary function. Clients entrust their money for the longer term, trusting that Robeco will generate attractive returns. As the future is unsure, their decision is also based on Robeco’s track record and reputation. Consequently, a strong and stable reputation is absolutely vital for Robeco. The first of Robeco’s strategic pillars is to act in the best interests of clients. The success of Robeco Group is based on its ability to consistently think and act in the best interests of clients, within the framework of a profitable investmentmanagement company. This means making clear choices and focusing on those areas where we provide the highest added value for our clients. The Product Development and Product Approval Processes ensure that new products are carefully examined by relevant departments and that products are transparent and compliant with Robeco’s standards and regulations. Product-at-Risk Reports are used to inform the MB in the event that products do not perform as expected. Robeco Group has a leading position in Sustainability Investing. Environmental, Social and Governance factors (based on ratings provided by RobecoSAM experts) are integrated into the investment decision-making process to facilitate ‘Sustainability Investing’. The Sustainability Investing department monitors compliance with sustainability investing targets on a quarterly basis.


Robeco and its employees are well aware that the company is primarily managing the money of its clients, not its own money. In order to justify the trust placed in Robeco, the organization has set itself specific integrity requirements. Robeco demands integrity in all internal and external dealings, consistently and uncompromisingly. The Robeco Code of Conduct outlines the conduct expected of Robeco employees and acts as an umbrella for its compliance policies and behavior. It describes what Robeco stands for, and what Robeco Group expects from its employees. The behavior of our employees is essential in consolidating and strengthening this reputation. GC is committed to helping employees to achieve this. It does this by assessing market materials, advising employees, checking that our clients are treated fairly and monitoring compliance with investment and other agreements we have entered into with our clients. Investment restrictions are monitored by the investment-restrictions team that forms part of GC. Compliance with these agreements is considered a cornerstone of Robeco’s business. IT risk Cybercrimes Cyber criminals are especially interested in activities that offer financial benefits and an e-banking service is therefore an attractive target. The company is aware of the potential

risks for the Robeco on-line fund bank and specific controls are in place to manage those risks. Particular attention has been focused on implementing and testing the necessary security measures for the new retail e-banking system. Cybercrime is not only applicable to Robeco, as our outsourcing partners are also exposed to this threat. Together with these partners, Robeco has implemented advanced technical solutions to manage security risks related to cybercrime. Security threats and vulnerable areas are continuously monitored, using network penetration tests, for example, and further enhancement will be implemented where necessary. This, in combination with a professional security organization and employees trained in security-awareness, adds to a secure IT environment. Outsourcing and Cloud Computing Outsourcing risk is the risk that the outsourced activities are not (sufficiently) controlled, which could have a range of impacts, also on Robeco’s reputation. In several areas of Robeco’s business, activities are outsourced to third parties and the scope of such activities is growing. As Robeco remains responsible, the decision-making process for outsourcing activities is supported by internal guidelines, such as the Outsourcing Policy, and includes risk assessments. In 2012, cloud computing was implemented for some services. Special attention was paid to the benefits and risks involved. Cloud computing has important advantages for Robeco, such as the scalability and flexibility that are

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Report of the Management Board - Risk Management framework

associated with large multi-tenancy IT environments. Our research has covered important topics such as data location, external assurance and security certifications, the exit plan and the rights of supervisory bodies such as the Dutch Central Bank (De Nederlandsche Bank, DNB) to examine the provider.

Compliance with laws and regulations Compliance risk is the risk of legal or regulatory sanctions, substantial financial loss, or the loss of reputation a financial institution may suffer as a result of its failure to comply with sound business practices, laws, regulations, rules, related self-regulatory organizational standards and code of conducts applicable to its activities. Robeco operates in markets that are regulated by financial authorities and has all the necessary licenses to operate in these markets. It is in the interest of our clients that Robeco complies with all relevant rules and regulations and that the company retains these licenses. In order to do this, Robeco must maintain a high level of compliance with the license requirements and all other requirements set by regulators and legislators, both nationally and internationally. Furthermore, Robeco continually works on maintaining a proactive relationship with regulators through open and transparent communication.

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In 2012, the number of rules and regulations worldwide and their diversity and complexity increased even more. As a consequence of this, the inherent risk of non-compliance has also increased. To manage and mitigate this risk, Robeco’s Group Compliance department employs specialists for designated compliance areas. GC initiates and monitors the implementation of new laws and regulations together with Group Legal Affairs to ensure that Robeco’s products, activities and conduct are in line with stakeholders’ expectations. Robeco is active in many countries, each with its own laws and regulations. Therefore GC initiates, implements and monitors global compliance standards for activities worldwide. Although Robeco’s products and services differ from one country to another, high standards of integrity and conduct are always required. Robeco has implemented a set of fund governance principles that are consistent with the industry’s best practices. Policies and procedures within Robeco are consistent with these principles.

Management review Ongoing monitoring of risk management and internal control systems is embedded in the Robeco Control Framework. This provides an insight into the significant risks that are applicable to the Robeco Group. These


risks are discussed with senior management and/or the Audit & Risk Committee. In addition, regular reports are submitted to and discussed with the Management Board and Supervisory Board in the presence of relevant staff. It is important to note that the proper design and implementation of internal risk-management and control systems significantly reduces risks. However, it cannot fully eliminate the possibility of human error; control processes being deliberately circumvented by employees and others; management overriding controls; and the occurrence of unforeseen circumstances.

Based on the monitoring of Robeco’s risk management and internal control systems, and our awareness of their inherent limitations as described above, we have concluded that there is reasonable assurance that Robeco has sufficient insight into the extent to which its objectives will be realized and the reliability of its internal and external (financial) reporting. In view of the above, the Management Board believes that Robeco complies with best practice provision II.1.5 of the Dutch Corporate Governance Code. Based on this assessment and to the best of our knowledge, nothing has come to our attention that causes us to believe that we are not in compliance with the applicable laws and regulations.

Another limitation is the need to consider the relative costs and benefits of risk responses. Properly designed and implemented internal risk-management and control systems will therefore provide reasonable, but not absolute assurance that a company will not be hindered in achieving its business objectives, or in conducting its business in an orderly and legitimate way. In this context, reasonable assurance refers to a degree of certainty that would be satisfactory for prudent managers in the management of their affairs in the given circumstances. Projections of any evaluation of future effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with Robeco policies, procedures and instructions may deteriorate.

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Chapter 8 Sustainability Investing and Corporate Responsibility

Introduction Robeco advocates sustainability investing because we believe that good corporate governance and social responsibility enhance the long-term risk-return profiles of our investment portfolios. In recent years, this conviction has developed into an essential element of our investment approach. In addition, sustainability investing corresponds closely to our clients’ requirements. In the late 1990s, Robeco started to focus increasingly on sustainability investing and in 1999 it became the first large Dutch asset manager to introduce a sustainable equity fund. This was followed in 2004 and 2005 by an increased focus on voting rights and engagement, areas in which Robeco now holds a leading position. We took another important step in 2006 by acquiring SAM (now called RobecoSAM), our subsidiary that focuses exclusively on sustainability investing. Since 2008, Robeco has increasingly set its sights on sustainability investing and on extending its lead in this area still further. This is being achieved through incorporating ESG (environmental, social and governance) factors into our investment process and increasing our active dialogue and voting activities. In addition, Robeco has implemented an exclusion policy focusing on companies that are involved in the production of, or trade in, controversial weapons such as cluster munitions and anti-personnel mines and on companies that are structurally and severely breaching the UN

Global Compact. A final important element of Robeco´s sustainability investing strategy is our own corporate responsibility; this covers Robeco’s attitude and approach towards its stakeholders, the environment and society as a whole. Robeco deals responsibly with people and the environment.

Robeco and sustainability investing in figures (year end 2012) Assets in sustainability theme funds Assets for which ESG integration has been implemented

EUR

Assets ‘under dialogue’ * Assets ‘under voting’ **

EUR 50.5 billion EUR 31.8 billion

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EUR 100.5 billion

ESG Integration into the investment process Robeco considers integrating ESG factors into investmentanalysis and decision-making processes (in short: ESG integration) to be one of the most important elements of sustainability investing. We expect this to improve risk/ return profiles and our corporate risk assessment, lead to more comprehensive company assessments, and enable us to discover new investment opportunities more quickly. There has been further improvement in both the quality and the quantity of ESG integration across Robeco’s investment product range in the course of 2012.

* A total of 302 engagement cases covering 22 different themes were conducted in 2012. ** In 2012 Robeco voted at 2,888 shareholder meetings

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In 2012, ESG integration was further implemented into the portfolio- management process of our assets under management that fall within the scope for ESG integration. At the end of 2012, ESG integration was applied to EUR 100.5 billion of Robeco’s assets under management. Robeco’s preferred supplier for ESG data is our subsidiary RobecoSAM, which has used ESG assessments to compile one of the world’s largest sustainability databases. RobecoSAM’s proprietary research and sustainability data are also fully integrated into its investment offering. Robeco’s portfolio managers work closely together with the department focusing on engagement and voting and with RobecoSAM. Engagement and enhanced engagement Robeco’s engagement covers companies worldwide from both developed and emerging markets and relates to both equity and credit investments. A specific part of Robeco’s active-ownership strategies concentrates on companies that structurally and severely breach the UN Global Compact, this is called enhanced engagement. If an enhanced engagement dialogue does not lead to the desired result, the Robeco management board can decide to exclude the company in question. The process for enhanced engagement is a formal part of Robeco’s exclusion policy. In certain countries, at the request of clients, the exclusion policy is not applied. In 2012, Robeco excluded a company for the first time because of severe structural environmental breaches of the UN Global Compact.

Corporate responsibility Corporate responsibility refers to Robeco’s attitude and approach towards stakeholders, the environment and society as a whole. Robeco deals responsibly with people and the environment. Robeco’s corporate responsibility focuses on environmental and social issues, responsible purchasing, and social commitment and donations. With regards to the environment, we aim to reduce our environmental footprint and fully compensate our remaining direct carbon footprint. Since the launch of our environmental policy in 2009, improvements have been made throughout the Robeco Group. In 2012, both the head office and the international subsidiaries implemented new measures to further reduce energy usage and the frequency and impact of travel. The sustainability of our office buildings has further improved as well. Our responsible purchasing approach involves measures and guidelines to ensure that the best value products and services are purchased in a responsible manner. With regards to social issues, we aim to increase employees’ commitment to the company by establishing guidelines and targets in a range of areas relating to social issues. In 2012, Robeco launched a pilot on ‘the New Ways of Working’ (or flexible working). Robeco’s social commitment committee approved numerous requests for social commitment and donations in 2012. Robeco supports the active involvement of its

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Report of the Management Board - Sustainability investing and Corporate Responsibility

employees in social projects and provides financial support for these. An example of this is Robeco’s ongoing support of the Workmate volunteer program in Rotterdam. In 2012, approximately 90 Robeco employees participated in Workmate activities.

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53


Addresses Headquarters Robeco Groep N.V. Coolsingel 120 NL - 3011 AG Rotterdam Postbus 973 NL - 3000 AZ Rotterdam The Netherlands Tel: +31 10 224 1224 Fax: +31 10 411 5288 Internet: www.robeco.com

Offices Robeco Europe Frankfurt am Main – Zweigniederlassung der Robeco Institutional Asset Management B.V. Taunusanlage 17 D - 60325 Frankfurt am Main Germany Tel: +49 69 959 0859 Fax: +49 69 959 0850 Internet: www.robeco.de Madrid – Robeco Asset Management Spain Paseo de la Castellana 42, 4 Planta 28046 Madrid Spain Tel: +34 91 702 0705 Fax: +34 91 702 0671 Internet: www.robeco.com/es

54

Annual Report ROBECO GROEP N.V.

2012

Zug – Corestone Investment Managers AG Baarerstrasse 37 CH-6300 Zug Switzerland Tel: +41 41 726 8585 Internet: www.corestone.ch Paris – Robeco France S.A.S. 21, Boulevard de la Madeleine 75039 Paris Cedex 01 France Tel: +33 15 535 4700 Fax: +33 15 535 4710 Internet: www.robeco.fr Luxembourg – Robeco Luxembourg S.A. 6-12, Place d’Armes L - 1136 Luxembourg Tel: +352 2638 72 Internet: www.robeco.com/ luxembourg   Zürich – RobecoSAM AG Josefstrasse 218 CH-8005 Zürich Switzerland Tel: +41 44 653 1010 Fax: +41 44 653 1080 Internet: www.robecosam.com Rotterdam – Transtrend B.V. Weena 723, Unit C5.070 P.O. Box 444 NL - 3000 AK Rotterdam Tel: +31 10 453 6500 Fax: +31 10 453 2750 Internet: www.transtrend.com

Offices Robeco USA Harbor Capital Advisors, Inc. Chicago Harbor Capital Advisors, Inc. 111 South Wacker Drive, 34th floor PO Box 804660 Chicago, IL 60606 - 4108 United States Tel: +1 800 422 1050 Internet: www.harborfunds.com Boston 33 Arch Street, Suite 2000 Boston, MA 02110 United States Tel: +1 800 422 1050 Robeco Investment Management, Inc. (RIM) Boston One Beacon Street – 30th Floor Boston, MA 02108 United States Tel: +1 617 832 8200 Internet: www.robecoinvest.com New York 909 Third Avenue, 32nd floor New York, NY 10022 United States Tel: +1 212 908 9500 Internet: www.robecoinvest.com Greenbrae 100 Drakes Landing Road, Suite 360 Greenbrae, CA 94904 Tel: +1415 464 2890 Internet: www.robecoinvest.com


Los Angeles 350 South Grand Avenue, Suite 1550 Los Angeles, CA 90071 Tel: +1 213 687 1650 Internet: www.robecoinvest.com San Francisco 601 California Street, Suite 1510 San Francisco, CA 94108 Tel: +1 415 773 2700 Fax: +1 415 989 5108

Robeco Japan Robeco Institutional Asset Management B.V. Japan Branch Atago Green Hills MORI Tower 17F 2-5-1 Atago Minato-Ku, Tokyo Japan Tel: +81 3 6402 5780 Fax: +81 3 6402 5779

Other

Robeco Korea Robeco Institutional Asset Management B.V. – Korea Representative Office 21/F Seoul Finance Center 84 Taepyungro 1-ga, Jung-gu Seoul 100-768, Korea Tel: +82 2 3782 4694 Fax: +82 23782 4697

Robeco Middle-East Robeco Institutional Asset Management B.V. – Dubai Representative Office Dubai International Financial Center Gate Village Building 7, 2nd Floor, Unit 209 Dubai, United Arab Emirates Tel: +971 4 367 4700 Fax: + 971 4 368 8160

Robeco Shanghai Robeco Institutional Asset Management B.V. – Shanghai Representative Office 18F, Hang Seng Bank Tower 1000 Lujiazui Ring Road Pudong New Area Shanghai 200120, China Tel: +86 21 6841 2668 Fax: +86 21 6841 2608

Robeco Miami B.V. 201 South Biscayne Boulevard (28th floor) Miami, FL 33131 United States

India, Canara Robeco Canara Robeco Asset Management Company Ltd. Construction House, 4th Floor 5, Walchand Hirachand Marg Ballard Estate Mumbai 400 001 India Tel: +91-22-6658 5000 Fax: +91-22-6658 5012 Internet: www.canararobeco.com Robeco Hong Kong Robeco Hong Kong Ltd. 9/F, Li Po Chun Chambers, 189, Des Voeux Road Central Hong Kong Tel: +852 3719 7400 Fax: +852 2530 5696 Internet: www.robeco.hk Robeco Australia Robeco Hong Kong Ltd. – Representative Office Australia Darling Park Tower 3, Level 16 201 Sussex Street Sydney NSW 2000 Australia Tel: +61 28115 4446 Fax: +62 28115 2504 Robeco Taiwan Robeco Taiwan Ltd. Room 3, Floor 2, no 77, Section 2, Dunhua South Road Taipei City 10682 Taiwan Tel: +886 2 2708 7171 Fax: +886 2 2708 7571

Corporate Statements

2012

55


Financial Statements


Consolidated income statement for the year ended 31 December

Notes

2012

2011

Management and other fees

5

1,009

914

Distribution and subadvisory costs

6

– 314

– 283

695

631

EUR x million

Net income from fees Interest income from banking operations

7

209

246

Interest expense from banking operations

8

– 179

– 195

30

51

9

43

– 14

10

8

12

776

680

Net interest income from banking operations Results on financial instruments from banking operations Other income Operating income Employee benefits expense

11

279

254

Depreciation and amortization

12

38

39

Reversal of impairment losses / impairment losses

13

– 14

6

Other expenses

14

178

183

Operating expenses

481

482

Operating result

295

198

15

1

5

Finance income Finance costs

16

– 11

– 11

Results on financial instruments held for trading

17

1

12

Results on financial instruments designated at fair value through profit or loss Results on financial instruments available-for-sale

18 19

7 4

–6 5

Results from groupcompanies

20

-

1

Share of result of associates

26

Result before tax Income tax expense

21

Result for the year

-

-

297

204

100

70

197

134

197

134

-

-

197

134

Attributable to: Equity holders of the parent Non-controlling interests

58

Annual Report ROBECO GROEP N.V.

2012

40


Consolidated statement of comprehensive income for the year ended 31 December

2012

2011

197

134

Net unrealized results on financial assets available-for-sale

111

–7

Realized gains and losses on financial assets available-for-sale reclassified to the income statement on disposal

– 17

–4

(Reversal of) impairment of financial assets available-for-sale

– 14

6

Income tax effect

– 20

2

60

–3

–3

–5

–3

–5

EUR x million

Result for the year Other comprehensive income

Net result on hedge of net investments

Exchange differences on translation of foreign operations

-

11

Change in valuation allowance for deferred tax asset

-

–2

1

-

Other comprehensive income for the year, net of tax

58

1

Total comprehensive income for the year, net of tax

255

135

255

135

-

-

255

135

Other items

Attributable to: Equity holders of the parent Non-controlling interests

Financial Statements

2012

59


Consolidated statement of financial position at 31 December

Notes

2012

2011

22

17

21

Intangible assets

23-24

451

483

Investment in associates

25-26

-

-

4,944

6,184

2,504

2,686

EUR x million

Assets Non-current assets Property, plant and equipment

Financial assets Available-for-sale

27

Held-to-maturity

28

-

56

Designated at fair value through profit or loss

29

854

1,680

Loans and advances

30

1,586

1,762

Derivative financial instruments

37

14

16

Deferred tax assets

31

194

220

Pension asset

44

32

28

5,652

6,952

330

377

Current assets Loans and advances

32

Current tax receivables

33

3

20

Financial assets held for trading

34

538

503

Other current financial assets

35

733

560

Other receivables

36

193

207

Derivative financial instruments

37

5

4

Cash and cash equivalents

38

847

1,283

2,649

2,954

8,301

9,906

Total assets

60

Annual Report ROBECO GROEP N.V.

2012


2012

2011

5

5

744

744

Available-for-sale reserve

24

– 36

Foreign currency translation reserve

–5

–2

EUR x million

Notes

Equity and liabilities Equity attributable to equity holders of the parent

39

Issued capital Share premium

Other revaluation reserve Retained earnings Non-controlling interests

40

Total equity

20

31

332

623

1,120

1,365

3

-

1,123

1,365

Non-current liabilities Subordinated loans

41

38

38

Other interest-bearing loans and borrowings

42

211

215

Provisions

43

3

5

Employee benefit liability

44

80

51

Deferred tax liabilities

31

36

32

Total return swaps

48

75

114

Other derivative financial instruments

37

69

161

Other non-current liabilities

45

4

15

516

631

Current liabilities Interest-bearing loans due to customers

46

5,404

6,182

Interest-bearing loans due to banks

47

738

1,187

Total return swaps

48

27

5

Other derivative financial instruments

37

8

7

Current tax payable

33

25

5

Provisions

43

2

8

Financial liabilities at fair value

49

162

192

Financial liabilities at amortized cost

49

1

2

Other non-financial liabilities

50

295

322

6,662

7,910

Total liabilities

7,178

8,541

Total equity and liabilities

8,301

9,906

Financial Statements

2012

61


Consolidated statement of changes in equity for the year ended 31 December

Non-

Attributable to equity holders of the parent

EUR x million

controlling

Total equity

interests

At 1 January 2012

62

Issued capital

Share premium

Availablefor-sale reserve

5

744

– 36

Foreign currency Other translation revaluation reserve reserve –2

Retained earnings

Total

31

623

1,365

-

Result for the year

-

-

-

-

-

197

197

Other comprehensive income

-

-

60

–3

-

1

58

-

Total comprehensive income

-

-

60

–3

-

198

255

-

Dividends

-

-

-

-

-

– 500

– 500

1,365 197 58 255 – 500

Amortization of intangible assets

-

-

-

-

– 11

11

-

-

-

Movements in non-controlling interests

-

-

-

-

-

-

-

3

3

At 31 December 2012

5

744

24

–5

20

332

1,120

3

1,123

At 1 January 2011

5

1,119

– 33

–8

41

481

1,605

-

1,605

Result for the year

-

-

-

-

-

134

134

-

134

Other comprehensive income

-

-

–3

6

-

-2

1

-

1

Total comprehensive income

-

-

–3

6

-

132

135

-

135

Dividends

-

-375

-

-

-

-

– 375

-

– 375

Amortization of intangible assets

-

-

-

-

– 10

10

-

-

-

Movements in non-controlling interests

-

-

-

-

-

-

-

-

-

At 31 December 2011

5

744

– 36

–2

31

623

1,365

-

1,365

Annual Report ROBECO GROEP N.V.

2012


Consolidated statement of cash flows for the year ended 31 December

EUR x million

Operating activities

Notes

2012

2011

295

198

38

39

55

Operating result Adjustments to operating result: Depreciation and amortization Impairment

– 14

6

Results on financial assets

– 35

18

–4

7

1

12

Exchange rate differences on loans and borrowings Addition to provisions Other movements from operations: Current assets Current liabilities Income tax paid Net cash flows from operating activities Investing activities

19

344

– 1,401

– 379

– 57

– 133

– 1,158

112

56

Interest received

1

5

Other intangible assets

-

–2

Purchase of property, plant and equipment

–1

–2

Purchase of financial assets available-for-sale

– 578

– 1,204

Purchase of financial assets held-to-maturity

-

–3

Purchase of financial assets at fair value through profit or loss

– 215

– 294

Purchase of financial assets loans and advances

– 230

– 344

710

1,601

Proceeds from sale of financial assets available-for-sale Proceeds from sale and redemption of financial assets held-to-maturity

58

110

Proceeds from sale of financial assets designated at fair value through profit or loss Proceeds from redemption of financial assets loans and advances

1,045 443

257 476

Net cash flows used in investing activities

1,233

600

-

–7

– 500

– 375

Financing activities

57

Repayment of other interest-bearing loans and borrowings Dividend paid to equity holders of the parent Interest paid Net cash flows from/(used in) financing activities

– 11

– 11

– 511

– 393

Net increase/(decrease) in cash and cash equivalents

– 436

319

Cash and cash equivalents at 1 January

1,283

964

847

1,283

– 204

– 207

257

291

Cash and cash equivalents at 31 December

38

Cash flows from interest from banking operations Interest paid Interest received

Financial Statements

2012

63


Accounting policies for the consolidated financial statements

1. Corporate information Robeco Groep N.V. is established in the Netherlands. Its core business is managing funds for its clients. The main activities are regular investment management activities for which management fees and other fees are received. In addition to the core business, Robeco Groep N.V. is also involved in banking activities. The consolidated financial statements of Robeco Groep N.V. for the year ended 31 December 2012 relate to Robeco Groep N.V. and its subsidiaries (together referred to as the ‘Company’), as well as the Company’s investment in jointly controlled entities. The consolidated financial statements of Robeco Groep N.V. are included in Rabobank Group’s consolidated financial statements. All shares in Robeco Groep N.V. are held by Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland), which is also the ultimate parent. On 19 February 2013 ORIX Corporation (ORIX), Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., (Rabobank) and Robeco Groep N.V., (Robeco) announced that ORIX is acquiring approximately 90.01% of the equity in Robeco from Rabobank. Closing of the transaction is subject to legal and regulatory approvals, which are expected to be granted in the second half of 2013. The financial statements were prepared by the Management Board on 10 April 2013. The shareholder has formal power to change the financial statements after issue.

2. Accounting policies Statement of compliance The financial statements of Robeco Groep N.V. have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), and in accordance with Part 9 of Book 2 of the Dutch Civil Code. Basis of preparation The financial statements are presented in millions of euro, which is the functional currency of Robeco Groep

64

Annual Report ROBECO GROEP N.V.

2012

N.V., except when explicitly stated otherwise. The financial statements have been prepared on a fair value or amortized cost basis, except for property, plant and equipment, purchased intangible assets and goodwill. Property, plant and equipment and purchased intangible assets are stated at historical cost less accumulated depreciation or amortization and any accumulated impairment losses. Goodwill is stated at historical cost less any accumulated impairment losses. The presentation of, and certain terms used in, certain notes have been changed to provide additional and more relevant information. The accounting policies applied in preparing the 2012 financial statements of Robeco Groep N.V. did in substance not deviate from those as applied in preparing the 2011 financial statements. IFRS developments Adopted International Financial Reporting Standards Several new or revised IFRS standards were issued for the purpose of the consolidated financial statements as of 2012. Those standards are not applicable to the consolidated financial statements 2012 of Robeco Groep N.V. Future IFRS developments Of all future IFRS developments, only those mentioned below are considered to be applicable to the financial statements of Robeco Groep N.V. In general, it is expected that these developments will have a slight impact on the presentation of the consolidated statements. IAS 1 Presentation of Items of Other Comprehensive Income (Amendment) The IAS 1 amendment relates to the grouping of items presented in other comprehensive income. Items that could be reclassified or recycled to profit or loss at a future point of time would be presented separately from items which will never be reclassified. This amendment is effective for annual periods beginning on or after 1 July 2012. IAS 19 Employee Benefits (Revised) The IASB has issued numerous amendments to IAS 19 which are effective for annual periods beginning on or after 1 January 2013. One of the main changes in the revised standard results in immediate recognition in equity of


“unrecognized actuarial gains and losses” (removal of the corridor mechanism) as of the effective date. Unrecognized actuarial gains and losses as at 31 December 2012 are disclosed in Note 44 ‘Pension asset and employee benefit liability’, amounting to EUR 142 million. As revised, amounts recorded in profit or loss are limited to current and past service costs, gains or losses on settlements and net interest income (expense). All other changes in the net defined benefit assets (liability), including actuarial gains and losses, are recognized in Other comprehensive income, with no subsequent recycling to profit or loss taking place. The return on plan assets will be based on the discount rate. The new disclosures include quantitative information about the sensitivity of the defined benefit obligation to a reasonably possible change in each significant actuarial assumption. IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments) These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to impact the Group’s financial position or performance and will be effective for annual periods beginning on or after 1 January 2014. IFRS 7 Disclosures Offsetting Financial Assets and Financial Liabilities (Amendments) These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g. collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognized financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the Company’s financial position or performance and are effective for annual periods beginning on or after 1 January 2013.

IFRS 9 Financial Instruments The first phase of IFRS 9 Financial Instruments addresses the classification and measurement of financial assets and financial liabilities. The work of the IASB on the other phases is ongoing and includes classification and measurement of financial liabilities, impairment of financial instruments, hedge accounting and derecognition of financial instruments. Phase I of IFRS 9 applies to all financial assets and liabilities within the scope of IAS 39. The standard has not yet been adopted by the EU and was initially effective for annual periods beginning on or after 1 January 2013. Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, which were issued in December 2011, have moved the mandatory effective date for IFRS 9 from 1 January 2013 to 1 January 2015. Early adoption is permitted but only possible after endorsement of this standard by the EU. IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation – Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore, required to be consolidated by a parent, compared with the requirements included in IAS 27. Based on the preliminary analyses performed, IFRS 10 is expected to have slight impact on the investments currently held by the Company. This standard has been adopted by the EU and will be effective in the EU for annual periods beginning on or after 1 January 2014. IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled-Entities – Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. Instead, jointly controlled entities that meet the definition of a joint venture must be accounted for using the equity method. The application of this new standard will slightly impact the financial position of the Company. This is due to the cessation of proportionately consolidating the joint ventures to equity accounting. This standard has been

Financial Statements

2012

65


Accounting policies for the consolidated financial statements

adopted by the EU and will be effective in the EU for annual periods beginning on or after 1 January 2014. IFRS 12 Disclosure of Involvement with Other Entities IFRS 12 includes all disclosures that were previously included in IAS 27 relating to consolidated financial statements, as well as all disclosures previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. This standard has been adopted by the EU and will be effective in the EU for annual periods beginning on or after 1 January 2014. IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Company is currently assessing the impact that this standard will have on the financial position and performance. This standard is effective for annual periods beginning on or after 1 January 2013. Annual improvements IAS 1 Presentation of Financial Statements This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. As a rule, the minimum required comparative information relates to the previous period. The improvement will not have an impact on the Company and is effective for annual periods beginning on or after 1 January 2013. Interest in investment funds Interests in investment funds managed by the Company are recognized as equity securities and stated at fair value. Depending on the IFRS classification, unrealized gains and losses are taken to the statement of comprehensive income or the income statement. Realized gains and losses are recognized in the income statement. For interests in investment funds for which the IFRS control criteria are met, the Company consolidates the underlying interests in full.

66

Annual Report ROBECO GROEP N.V.

2012

Basis of consolidation The consolidated financial statements include Robeco Groep N.V., its subsidiaries and its joint ventures as at 31 December. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent IFRS accounting policies. Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are exercisable or convertible are taken into account to determine whether the Company holds more than 50% of the voting rights. The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date control ceases. A complete list of subsidiaries is shown in the Related parties note. The subsidiaries are accounted for by integral consolidation showing a non-controlling interest in equity. Joint ventures The Company’s interests in jointly controlled entities are accounted for by proportionate consolidation. Under this method, the Company includes its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows in the relevant components of the financial statements. Transactions eliminated on consolidation Intragroup balances, any unrealized gains or losses and income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with associates and jointly controlled entities are eliminated in proportion to the Company’s interest in the entity. Unrealized losses are eliminated in the same way as unrealized gains, unless evidence of impairment is provided. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured


as the aggregate of the consideration transferred at acquisition date, measured at fair value, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the noncontrolling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized, in accordance with IAS 39, either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, as from the acquisition date, allocated to each of the Company’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are attributed to those units. Where goodwill forms part of a cash-generating unit, and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is

included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

3. Significant accounting judgments, estimates and assumptions The preparation of financial statements in conformity with IFRS requires the use of judgments and estimates that affect the recognition and valuation of assets and liabilities, the disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, the actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Judgments made by management in applying IFRS that might have a significant impact on the financial statements are: Going concern The Company’s management is not aware of any material uncertainties that could affect the continuity of the Company. Therefore, management has drawn up the 2012 Annual Report applying the going concern assumption. On 19 February 2013, ORIX Corporation (ORIX), Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) and Robeco Groep N.V. (Robeco) announced that ORIX will acquire approximately 90.01% of the equity in Robeco from Rabobank. ORIX is committed to supporting Robeco’s 20102014 strategy, its services to clients, its investment processes and teams, based on Robeco’s long-term commitment to delivering value to clients. Robeco Group NV’s legal structure will remain unchanged, as will the current governance and reporting lines from Robeco’s subsidiaries. Goodwill and other identified intangibles Goodwill arises on the acquisition of group companies, joint ventures and associates, when the costs of acquisition exceed the fair value of the Company’s share of the

Financial Statements

2012

67


Accounting policies for the consolidated financial statements

identifiable assets, liabilities and contingent liabilities acquired. Goodwill related to associates is included in the carrying amount of the associate. Each year, the Company performs a goodwill impairment test and assesses whether there are indications of impairment of other identified intangibles. Management judgment is involved in the calculation of the values of the expected future cash flow, the cost of capital and the value in use. See also note 4.14 Impairment testing of non-financial assets for further details. Fair value of financial instruments The fair value of financial assets classified as availablefor-sale, financial assets and financial liabilities classified as designated at fair value through profit or loss and held for trading, and of derivative financial instruments is determined by reference to published price quotations in an active market if available. If no active market price or rate is available, the fair values are estimated using appropriate discounted cash-flow models and option valuation models, using inputs based on market conditions existing at the reporting dates. Certain inputs to these models may not be market observable and are therefore estimated based on assumptions. For some financial instruments the Company might adjust the latest valuation in order to limit the time lag between the moment of valuation and availability of information at the reporting dates by assessing additional required information from underlying independent fund managers. These valuation adjustments are necessary and appropriate to fairly determine the values of financial instruments carried at fair value in the statement of financial position. Impairment of financial instruments available-for-sale and at amortized cost The Company reviews its financial assets classified as available-for-sale and at amortized cost at each reporting date to assess whether they are impaired. See also note 4.20 Impairment of financial assets for further details.

of unused tax credits and unused tax losses in full, the future taxable profit of the operations concerned has to be estimated. At the moment of recognition, the Company is satisfied that, based on current assumptions regarding growth of business and profitability, the relevant future tax benefits can be realized within the obligatory legal timeframe. Capitalized fees For certain structured products the Company records an asset in relation to structuring fees recognized upfront. The Company recognizes part of the future management fee upfront in the income statement for which upfront fees to distributors and all costs relating to the structuring of this type of products are also recognized. During the useful life of the product the asset will be amortized at the actual management fees received. Due to the structuring of the products these upfront fees are guaranteed, subject to a limited residual risk. The Company regularly reviews the risk to establish that the capitalized fees are recoverable. With regard to certain private equity products some expenses have been paid in advance. Those expenses are also capitalized and will be amortized against the management fees received. Pension benefits The cost of defined benefit plans and the present value of the pension asset are determined using actuarial valuations. An actuarial valuation involves making various assumptions. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Owing to the complexity of the valuation, the underlying assumptions and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Further details about the assumptions used are given in note 44 Pension asset and employee benefit liability.

4. Summary of significant accounting policies Deferred tax asset The Company tests annually whether the recognized deferred tax assets are still appropriate. To recognize the deferred tax assets related to deductible temporary differences, mainly regarding capitalized and amortized goodwill of several acquired entities, and carry forward

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The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These accounting policies are applied consistently in all periods presented in the consolidated financial statements.


The Company presents its income statement using a nature of expense view. This presentation provides clear insight into the profitability of its main activities. 4.1 Foreign currency translation As stated before, the euro is the functional currency of Robeco Groep N.V. Each entity of the Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency Monetary assets and liabilities denominated in foreign currencies are translated into euros at the spot rates ruling at the reporting date. Non-monetary items measured at historical cost in a foreign currency are translated using the exchange rates ruling at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates ruling at the date when the fair value was determined. Any goodwill arising on the acquisition of a foreign operation is translated using the exchange rates at the date when the fair value was determined. Any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and are translated using the spot rate ruling at the reporting date. Purchases and sales of securities are translated at the exchange rates ruling at the relevant transaction date. The same applies to both income and expenses. Forward transactions in foreign currencies for funds withdrawn and settled are converted at the exchange rates ruling at the closing date. Other forward exchange transactions not settled at the reporting date are valued at the forward rate for the contract’s remaining term to maturity at closing date. In general, the exchange rate differences are taken to the income statement. Exchange rate differences in non-monetary items classified as available-for-sale are taken to other comprehensive income. Exchange rate differences in non-monetary items classified as designated at fair value through profit or loss are taken to the income statement.

Changes in the valuation of investments in foreign operations are recorded in other comprehensive income. Changes in the valuation of derivative financial instruments, which are designated as a hedge against the foreign operations currency risk, are also recorded in other comprehensive income. 4.2 Management and other fees Management and other fees include management fees, service fees, performance fees, transaction fees, structuring fees, distribution fees and securities lending commission. Fees are recognized when the services have been performed and can be reliably measured. Management and service fees are primarily based on predetermined percentages of the market value of the assets under management, including investment performance and net subscriptions or redemptions. Transaction fees are based on predetermined percentages of transaction volumes. Performance fees are calculated as a percentage of the performance of the relevant assets under management and recorded when earned. Unrealized performance fees are not recognized when the performance fee period ends after the Company’s reporting date, since the net asset value could change significantly between the reporting date and the realization date as a result of market changes. Structuring fees, technically locked in with limited risk, are recognized and earned immediately after completion and distribution of a product. Securities lending commissions are recognized in the period in which the services are rendered. 4.3 Distribution and subadvisory costs Distribution and subadvisory costs include trailer fees, one-off distribution expenses and subadvisory costs payable to third and related parties. Trailer fees, oneoff distribution expenses and subadvisory costs are recorded when the services have been performed and can be reliably measured. Trailer fees are primarily based on predetermined percentages of the market values of the assets under management of the investments, including investment performance and net subscriptions or redemptions. Subadvisory costs are paid to third party asset managers. These costs are based on predetermined percentages of the market values of the average assets under management of the investments.

Financial Statements

2012

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Accounting policies for the consolidated financial statements

4.4 Interest income from banking operations Interest income is recognized in profit or loss on an accrual basis using the effective interest rate. Interest income from banking operations consists of the interest income generated by banking activities on the mortgage portfolios, the investment portfolio and derivative financial instruments. Interest earned on financial assets related to banking operations is also recognized as interest income from banking operations. 4.5 Interest expense from banking operations Interest expense is recognized in profit or loss on an accrual basis using the effective interest rate. Interest expense from banking operations mainly relates to expenses incurred on entrusted funds from customers and banks, as well as gross interest expenses on derivative financial instruments. 4.6 Results on financial instruments from banking operations Results on financial instruments from banking operations consists of the realized gains and losses on the sale of interest bearing securities classified as available-for-sale and all gains and losses in the fair value through profit or loss portfolio to the extent that these are related to the banking operations. 4.7 Other income and expenses Other income consists of income generated from rendering services, i.e. the sale of mutual funds of third party asset management companies, distribution, research and advisory activities on behalf of third parties, to both related and third parties. The revenues are recognized in the period in which the services are rendered. Gains and losses from the disposal of property, plant and equipment are also included in Other income. Other expenses consist of expenses charged by third parties for services rendered to the Company. The expenses are recognized in the period in which the services are rendered to the Company. 4.8 Finance income and costs Finance income and finance costs relate to non-banking activities only.

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Finance income comprises interest income on cash and short-term deposits. Finance costs comprise interest payable on subordinated loans and interest-bearing loans. 4.9 Results on financial instruments held for trading, available-for-sale and designated at fair value through profit or loss Results on financial instruments held for trading, availablefor-sale and designated at fair value through profit or loss relate to results on financial instruments from non-banking operations only. Results on financial instruments held for trading comprise realized and unrealized gains and losses on financial instruments held for trading. Results on financial instruments designated at fair value through profit or loss comprise realized and unrealized gains and losses on financial instruments designated at fair value through profit or loss. Results on financial instruments available-for-sale comprise realized gains and losses and impairment losses on financial instruments available-for-sale following seed capital, co-investments and secondary market support. 4.10 Non-controlling interests Non-controlling interests represent the portion of the net result and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the Company. 4.11 Property, plant and equipment Property, plant and equipment is stated at cost, less accumulated depreciation and any recognized accumulated impairment losses. If an indication of impairment exists, the items are impaired to their recoverable amount and the impairment is taken to the income statement in the period in which it arises. Depreciation is calculated using the straight-line method over the expected useful lives of the assets, recognized as an expense and included in the income statement under Depreciation and amortization expenses. Disposal gains or losses are included in the income statement under Other income. The assets’ residual values, useful lives and methods of depreciation are reviewed and adjusted, where necessary, at each financial year-end.


Category of property, plant and equipment

Category Property (excluding land) Equipment

Useful life (in years)

Depreciation rate

40 5

2.5% 20.0%

4.12 Intangible assets Intangibles consist of goodwill and certain other intangible assets. The goodwill and other intangible assets are tested for impairment annually and immediately if there are indications of impairment. Goodwill The acquired business combinations are accounted for using the purchase method. The goodwill is initially measured at cost being the excess of the cost of the business combination over the Company’s share in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, the goodwill acquired in a business combination is, as from the acquisition date, allocated to the Company’s cashgenerating unit that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to these units. Where goodwill forms part of a cash-generating unit, and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Other intangible assets Other intangible assets consist of capitalized software, customer relations, licenses and sustainability databases. Other intangible assets are stated at cost less any accumulated amortization and any accumulated impairment losses determined individually for each asset. The identified intangible assets meet the recognition criteria of IAS 38 and IFRS 3 standards and are amortized through the income statement between 4 to 15 years

as from the acquisition date. The intangible assets are reviewed for impairment on an annual basis; they are reviewed immediately if there are indications of impairment. The intangible assets of the Company are all finite and acquired. Amortization is effected on a straight-line basis. The amortization periods are as follows.

Category Customer relations Databases Capitalized software Purchased software

Amortization period (in years) 5-15 7 4 5

Measurement as at the acquisition date of the fair value of the assets and liabilities of the business combinations, identification of goodwill and purchase price allocation for Transtrend B.V. and SAM Sustainable Asset Management A.G. were supported by an independent valuer. 4.13 Investment in associates An associate is an entity over which the Company has significant influence (usually 20%-50% of the voting rights) and which is neither a subsidiary nor a joint venture. The financial statements of the associate are used by the Company to apply the equity method. The reporting dates of the associate and the Company are identical, both applying uniform accounting policies. The income statement reflects the Company’s share of the associate’s operating profit. Where a change has been recognized directly in the associate’s equity, the Company recognizes its share of that change and discloses it in the statement of changes in equity. Upon acquisition of an investment any difference between the cost of an investment and the investor’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities is accounted for as goodwill, which is included in the carrying amount of the associate. 4.14 Impairment testing of non-financial assets In accordance with IAS 36, Impairment of Assets, the Company performs an impairment test on goodwill and intangible assets with indefinite lives. For intangible assets

Financial Statements

2012

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Accounting policies for the consolidated financial statements

with definite lives the Company assesses whether there are any indications of impairment at each reporting date. The goodwill and other intangible assets of the acquired group companies Transtrend B.V., SAM Sustainable Asset Management A.G. and Canara Robeco Asset Management Company Ltd. are included in the assessment. Since 2010, the goodwill of Transtrend B.V. has been allocated to the cash-generating unit Transtrend, the goodwill of SAM Sustainable Asset Management A.G. to the cash-generating unit Robeco Core, and the goodwill of Canara Robeco Asset Management Company Ltd. to the cash-generating unit Canara Robeco. 4.15 Financial assets available-for-sale Financial assets available-for-sale are non-derivative financial instruments that are designated as available-for-sale or are not classified as (a) loans and advances, (b) held-to-maturity, (c) financial assets designated at fair value through profit or loss. Those financial assets are recorded on a trading date basis. Financial assets available-for-sale are instruments which, in management’s opinion, may be sold in response to or in anticipation of needs for liquidity or changes in interest rates, foreign exchange rates or equity prices. Financial assets available-for-sale consist of money market paper, other debt instruments and equity instruments. Financial assets available-for-sale are initially recognized at fair value plus directly attributable transaction costs. After initial measurement, financial assets available-forsale are subsequently measured at fair value. Unrealized gains or losses on financial assets available-for-sale are reported as other comprehensive income and recognized in the available-for-sale reserve, net of taxes until such assets are sold, collected or otherwise disposed of, or until such assets are impaired. On disposal of an available-for-sale asset, the accumulated unrealized gain or loss included in the available-for-sale reserve is transferred to the income statement. Gains and losses on disposal are determined using the average cost method. If a financial asset available-for-sale is impaired, the cumulative unrealized loss recognized in the availablefor-sale reserve is included in the income statement. Interest earned on financial assets available-for-sale related to banking operations is reported as Interest income from

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banking operations. Realized gains and losses on financial assets available-for-sale related to banking operations are recognized as Results on financial instruments from banking operations. Interest earned on financial assets available-for-sale not related to banking operations is recognized under Results on financial instruments available-for-sale. Realized gains and losses on financial assets available-for-sale not related to banking operations are also recognized as Results on financial instruments available-for-sale. If a financial asset available-for-sale is impaired, the amount comprising the difference between its costs (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in the income statement, is removed from other comprehensive income and recognized in the income statement. For debt instruments available-for-sale reversals of impairment losses are recognized through the income statement, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognized in the income statement. With respect to available-for-sale equity securities, however, reversals of impairment losses are not recognized through the income statement; increases in their fair value after impairment are recognized directly in other comprehensive income. 4.16 Financial assets held-to-maturity When management has both the intention and the ability to hold financial assets to maturity, securities with fixed or determinable payments and fixed maturity are classified as financial assets held-to-maturity. Management determines the appropriate classification of its financial assets at the time of purchase. The financial assets are recorded on a trading date basis. Financial assets held-to-maturity are initially recognized at fair value and subsequently carried at amortized cost using the effective-yield method. Interest earned on financial assets held-to-maturity is reported as Interest income from banking operations. If there is objective evidence that an impairment loss on financial assets carried at cost or amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and


the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred), discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss shall be recognized in the income statement. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the income statement, to the extent that the carrying amount of the asset does not exceed its amortized cost at the reversal date. 4.17 Financial assets designated at fair value through profit or loss Financial assets designated at fair value through profit or loss are non-trading financial assets that have been designated on initial recognition at fair value through profit or loss, using the ‘fair value option’. These financial assets are recorded on a trading date basis and are initially recognized at fair value and subsequently measured at fair value. Changes in the credit quality of loans within the portfolio are not taken into account in determining fair value. The impact of credit risk is recognized separately through an allowance account which is determined by an individual assessment of the loans as to whether objective evidence of impairment exists. The fair value of the loans is reduced by this allowance account. The management of the Company chooses to designate non-trading financial assets at fair value through profit or loss on initial recognition when one of the following criteria is met: – the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or recognizing gains or losses on them on a different basis; or – the assets are part of a group of financial assets which are managed and their performance evaluated on a fair value basis in accordance with a risk management strategy; or – the financial instruments contain an embedded derivative, unless the embedded derivative does not significantly modify the cash flows or if it is clear that it would not be separately recognized.

Interest earned on these assets is reported as Interest income from banking operations. All realized and unrealized gains and losses from re-measurement at fair value are included in Results on financial instruments from banking operations. The fair value of financial assets actively traded in organized financial markets is determined by reference to quoted market prices at the close of business on the reporting date. The fair value of all other financial assets is determined using valuation techniques, which include net present value techniques, the discounted cash flow method, comparison to similar instruments for which market prices do exist, and valuation models. The input into these valuation models is practically always market observable. As the market risk of purchased loans and mortgages is considered to be nil as these positions are fully hedged, changes in the fair value of these financial assets are fully attributed to credit risk. 4.18 Financial assets loans and advances Financial assets loans and advances with a maturity of more than one year are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and advances are initially recognized at fair value, including transaction costs. Such assets are subsequently carried at amortized cost using the effective interest rate method less any impairment losses. Gains and losses are recognized in the income statement upon derecognition or impairment as well as through amortization. Transaction costs are taken into account at initial recognition and are amortized over the remaining term. Changes in the credit quality of loans within the portfolio are not taken into account in determining fair value. The impact of credit risk is recognized separately through an allowance account which is determined by an individually assessment of the loans as to whether objective evidence of impairment exists. The fair value of the loans is reduced by this allowance account. The assets are recorded on a trading date basis. Loans and advances with a (remaining) maturity of less than one year are recorded under current assets loans and advances.

Financial Statements

2012

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Accounting policies for the consolidated financial statements

4.19 Derecognition A financial asset, a part of a financial asset or a group of similar financial assets is derecognized when the rights to receive cash flows from that asset have expired, or the Company has transferred its rights to receive cash flows from the asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement, and either (a) the Company has transferred substantially all the risks and rewards of the asset or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset; but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognizes an associated liability. The transferred asset and associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement through a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. A financial liability is derecognized when the obligation under the liability is discharged or cancelled, or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying amount of the original financial liability and the consideration paid is recognized in profit or loss. 4.20 Impairment of financial assets The Company assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that occurred after

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the initial recognition of the asset (an incurred ‘loss event’) with that loss event having an impact on the estimated future cash flows of the financial asset or group of assets that can be reliably estimated. Objective evidence of impairment includes observable data about: – significant financial difficulties of the issuer; – an actual breach of contract, such as a default or delinquency in interest or principal payments; – probability of bankruptcy or other financial reorganization of the borrower; – the disappearance of an active market for that financial asset due to financial difficulties; – indications of a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets. For debt instruments classified as available-for-sale, heldto-maturity or loans and advances, impairment is assessed if there is objective evidence that an impairment loss has been incurred. If, in a subsequent period, the fair value of an impaired debt instrument increases and the increase can be objectively related to a credit event occurring after the impairment loss was recognized in the income statement, fair value increases will be reversed through the income statement up to the impaired amount, unless the credit event has been reversed in its entirety, in which case the impairment loss will be fully reversed through the income statement with any difference to the fair value reflected in other comprehensive income. Objective evidence of impairment for available-for-sale equity instruments may include specific information about the issuer as detailed above, but may also include a significant or prolonged decline in the fair value of the asset. In assessing whether it is significant, the decline in fair value is evaluated against the original cost of the asset at initial recognition. In assessing whether it is prolonged, the decline is evaluated against the period in which the fair value of the asset has been below its original cost at initial recognition. ‘Significant’ and ‘prolonged’ are interpreted on a case-by-case basis for specific equity instruments; as a general guideline, the Company considers a decline of 25% as ‘significant’ and a period of more than six months as ‘prolonged’.


For loans and advances to customers carried at amortized cost, the Company assesses individually whether objective evidence of impairment exists. If there is objective evidence that an impairment loss has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses not yet incurred). The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognized in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. In determining the extent of the impairment, management evaluates the risk in the portfolio, current economic conditions, loss experiences in recent years and credit concentration trends. The identification of impairment and determination of the recoverable amount are a process involving assumptions and factors including the financial condition of the counterparty, expected future cash flows and expected net selling prices. 4.21 Taxes Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized in other comprehensive income, in which case it is recognized in other comprehensive income. Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to tax authorities. The tax rates and laws used to compute taxable amounts are those enacted or substantially enacted at the reporting date. Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of

the carrying amount of assets and liabilities, at the tax rates that are expected to apply in the year when the asset is realized and the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date. A deferred tax asset is recognized for tax benefits relating to the carry forward of unused tax losses when it is probable that estimated future taxable profits will be available for which these losses can be utilized. The carrying amount of deferred income tax assets is reviewed annually and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. A deferred tax liability is provided for the recognized fair value identification on the intangible assets. Sales tax Revenues, expenses and assets are recognized net of the amount of sales tax except: – where the sales tax incurred on a purchase of assets or services is not recoverable from the tax authorities, in which case the sales tax is recognized as part of the costs of acquisition of the asset or as part of the expense item as applicable; and – receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the tax authorities is included as part of receivables or payables in the statement of financial position. 4.22 Financial assets held for trading Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near future. Financial assets held for trading are initially recognized at fair value, and transaction costs are expensed in the income statement. After initial measurement, financial assets held for trading are subsequently measured at fair

Financial Statements

2012

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Accounting policies for the consolidated financial statements

value. The financial assets held for trading are presented in the statement of financial position under Current assets. Interest earned and dividends received on these assets are reported as Results on financial instruments held for trading. All other realized and unrealized gains and losses on remeasurement of these financial instruments at fair value are also included in Results on financial instruments held for trading. All purchases and sales of financial assets held for trading that require delivery within the time frame established by regulation or market convention, i.e. regular-way purchases and sales, are recognized at the trading date. 4.23 Other receivables Other receivables are measured at cost, where applicable using the effective interest method. Other receivables mainly comprise interest receivables, accrued income and capitalized structuring fees. Capitalized structuring fees are recognized upfront and amortized over the maturity of the related products. 4.24 Derivative financial instruments and hedge accounting The Company enters into transactions of derivative financial instruments which are designated and qualify as net investment hedges of foreign operations and as derivative transactions conducted to hedge against economic risk exposure to which no hedge accounting is applied. The Company uses derivative financial instruments, such as forward exchange contracts, interest rate and credit default swaps to hedge foreign currency risk, interest rate risk, credit risk and market risk. Derivative financial instruments are recognized initially at fair value on the date of acquisition and subsequently carried at fair value. Net changes in the fair value of derivative financial instruments are included in Result on financial assets held for trading. Derivative financial instruments are carried as assets if the fair value is positive and as liabilities if the fair value is negative. The recognition of the resulting fair value gain or loss depends on whether the derivative financial instrument is designated as a hedging instrument and, if so, the nature of the item being hedged. The Company has designated

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certain derivative financial instruments as net investment hedges of foreign operations. The effective portion of changes in the fair value of hedges of net investments in foreign operations is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement. When a financial instrument is designated as a hedge, the Company documents the relationship between the hedging instrument and the hedged item. Accordingly, the Company documents its assessment, both at hedge inception and on an ongoing basis, of how effective the derivative financial instruments used in hedging transactions are in offsetting changes in the fair values of hedged items. This assessment includes a way of assessing the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value attributable to the hedged risk. The fair value gain or loss from the interest-rate swaps related to banking operations is recognized as Results on financial instruments from banking operations. All other fair value gains or losses from derivative financial instruments which are designated as economic hedges but which do not qualify for hedge accounting are recognized as Results on financial instruments held for trading. 4.25 Cash and cash equivalents Cash and cash equivalents comprise cash at banks, cash in hand and short-term deposits with an original maturity of three months or less and an insignificant risk of change in fair value. Certain cash and short-term deposits held to satisfy regulatory liquidity requirements are disclosed as restricted cash. Bank overdrafts are classified as current liabilities. For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and shortterm deposits as defined above, net of outstanding bank overdrafts. 4.26 Equity attributable to equity holders of the parent Equity is accounted for as the residual interest of the Company after deducting all its liabilities. The amount at


which equity is shown in the statement of financial position depends on the measurement of assets and liabilities. Dividend for distribution is recognized as a liability in the period in which it is declared. Dividend declared after the reporting date is not reflected retrospectively in the financial statements for the period just ended. Non-controlling interests are presented in the consolidated statement of financial position as part of total equity attributable to equity holders of the parent, separately from the Company’s equity. 4.27 Other interest-bearing loans and borrowings Other interest-bearing loans and borrowings are initially recognized at fair value and subsequently recognized at amortized cost using the effective interest method. Gains and losses are recognized in the income statement when the liabilities are derecognized as well as through amortization. Transaction costs are taken into account on initial recognition and amortized over the remaining term. 4.28 Provisions General A provision is recognized in the statement of financial position when the Company has a legal or constructive obligation as a result of a past event, for which it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. If the effect of time value is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market rates and, where appropriate, the risks specific to the liability. Restructuring provisions Restructuring provisions are only recognized when general recognition criteria for provisions are fulfilled. Additionally, the Company has a detailed formal plan in place regarding the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs and appropriate time line. The people affected have a valid expectation that the restructuring is being carried out or the implementation has been initiated already.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. 4.29 Pension asset and employee benefit liability Pensions The asset and liability recognized in the statement of financial position in respect of the defined benefit pension plan represents the value of the defined benefit obligation at the reporting date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses or past service costs. The defined benefit plan applies to employees of Robeco Nederland B.V. and SAM Sustainable Asset Management A.G. Other employees are entitled to defined contribution plans. The defined benefit obligation is calculated annually by independent actuaries using the project unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. In the euro zone, the yields on 1-3, 3-5, 5-7, 7-10 and over10-year iBoxx indices (not constituents) are converted from gross redemption yields to zero-coupon yields. They are then interpolated and extrapolated to form an AA corporate bond yield curve. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions exceeding the higher of 10% of the value of plan assets and 10% of the defined benefit obligation are charged or credited to the income statement as employee benefit costs over the employees’ expected average remaining working lives. Past-service costs arising from new plans or changes to existing plans are recognized on a straight-line basis over the average service period until the amended benefits become vested. Vested benefits are recognized immediately.

Financial Statements

2012

77


Accounting policies for the consolidated financial statements

Settlements and curtailments during the year are recognized in the income statement in the year in which they occur. A pro-rata share of unrecognized gains and losses is recognized immediately if curtailments occur. Under the defined contribution plan, the Company pays contributions to publicly or privately administered insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Other long-term employee benefits In addition to fixed annual income, all employees have a variable income component. The variable component is expressed as a percentage of fixed annual income. The percentage awarded depends on the realization of preset targets. The seniority of the employees concerned determines the range set for the variable income percentage. If the absolute amount of variable income exceeds a threshold, it is partially postponed over several years. The Company also has a staff option plan in place for its employees in the Netherlands as well as a management option plan. The costs of these option plans are borne in full by the Company and have no impact on the annual performance of the funds. The costs are recognized as employee benefits by the Company at the date of granting as these are fully vested from that date of granting. The estimated fair value of the options is calculated using the Cox, Ross & Rubinstein model, which is closely related to the methodology of the Black & Scholes option valuation model. Since 1 January 2010, no options have been granted on funds managed by the Company. The last options will expire in 2014 at the latest. The Company has a Long-term Incentive Plan for key employees. Until 2010, the plan is an Equity Notes Plan eligible for certain employees. These equity notes are recorded at a value that is related to the Company’s valuation basis of profit from continuing operations, adjusted downwards for expenses related to the Long-term Incentive Plan and adjusted for the results related to the foreign currency hedge.

78

Annual Report ROBECO GROEP N.V.

2012

Equity notes are vested according to a specific timetable or subject to pre-defined conditions, but generally they mature between four and six years after being granted. Based on the fact that the Equity Notes Plan is a long-term employee benefit plan as bonuses are vested and paid over one year after the period in which they are earned, the projected unit credit method is applied for accounting purposes. This leads to a straight-line allocation of the total expected amount of the benefit over the vesting period. Equity notes are recorded in the income statement after being granted to key employees. Since 2011, a new Long-term Incentive Plan for key employees is in place. This plan is a Cash Appreciation Rights (CARs) Plan for which certain employees are eligible. These CARs are recognized at a value related to the Company’s valuation basis for profit from continuing operations, including results from foreign currency hedges and excluding performance fee income. CARs are vested according to a specific timetable or subject to predefined conditions, but generally they mature between three and five years after being granted. Based on the fact that the CARs Plan is a long-term employee benefit plan, as bonuses are vested and paid more than one year following the period in which they are earned, the projected unit credit method is applied for accounting purposes. This leads to a straight-line allocation of the total expected amount of the benefit over the vesting period. CARs are recognized in the income statement after being granted to key employees. Equity notes and CARs that have been awarded but have not yet vested generate a cash yield of 5% of the basic value per year. Vested equity notes and CARs do not generate any yield. 4.30 Other non-current liabilities Other non-current liabilities include management fees received in advance which are stated at nominal value. The management fees are recognized in the income statement once the services have been performed. The current portion of the non-current liabilities is classified as Other nonfinancial liabilities.


4.31 Total return swaps The Company enters into structured transactions on behalf of clients, which result in total return swaps and certain financial instruments in the Company’s statement of financial position. Total return swaps are financial instruments whose values are derived from an underlying instrument or product. Using total return swaps, the market risk and economic returns on the underlying financial instrument are transferred to clients. Total return swaps are recognized at fair value at reporting date. The gains or losses arising from changes in the fair value and the economic returns on underlying financial instruments are recognized under Results on financial instruments held for trading. 4.32 Financial liabilities Financial liabilities designated at fair value through profit or loss are recognized at fair value, with transaction costs being recognized in profit or loss, and are subsequently measured at fair value. Gains and losses on financial liabilities designated at fair value through profit or loss are recognized in profit or loss as they arise. Financial liabilities at amortized cost are initially recognized at fair value and subsequently carried at amortized cost using the effective interest method. Other financial liabilities such as Interest-bearing loans due to customers and due to banks are measured at amortized cost.

Financial Statements

2012

79


Notes to the consolidated income statement

5. Management and other fees

8. Interest expense from banking operations

Management and other fees represent management fees, service fees, performance fees, transaction fees, structuring fees, distribution fees and securities lending commissions.

Interest expense from banking operations can be broken down as follows.

EUR x million

Management fees Performance fees Other fees Total

2012

2011

EUR x million

921 18 70

844 14 56

1,009

914

With effect from 2012, distribution fees of EUR 4 million are recognized under Management and other fees and no longer under Other income.

2012

2011

Due to customers and banks Derivative financial instruments Other

137 41 1

148 45 2

Total

179

195

9. Results on financial instruments from banking operations Results on financial instruments related to banking operations can be broken down as follows.

6. Distribution and subadvisory costs Distribution and subadvisory costs can be broken down as follows. 2012

EUR x million

2011

Distribution costs Subadvisory costs

153 161

145 138

Total

314

283

EUR x million

Gains and losses on portfolio designated at fair value through profit or loss Gains and losses on derivative financial instruments Realized gains and losses on available-for-sale portfolio Total

2012

2011

35

–4

–7

– 10

15

-

43

– 14

7. Interest income from banking operations Interest income from banking operations can be broken down as follows. EUR x million

Financial assets available-for-sale Financial assets designated at fair value through profit or loss Loans and advances Derivative financial instruments Other assets Total

80

Annual Report ROBECO GROEP N.V.

2012

2012

2011

65

84

29 95 15 5 209

61 73 17 11 246

Results on financial assets at fair value through profit or loss rose mainly due to unrealized gains on debt instruments that benefited from historically low market interest yields and tightened credit spreads. Gains on debt instruments mainly result from the sale of earlier impaired ABSs.

10. Other income Other income consists of: 2012

2011

Distribution income from external parties Sublease income Service charges to third parties Revenue on in-house clearing Other income

2 3 1 2

6 2 1 1 2

Total

8

12

EUR x million


With effect from 2012, distribution fees of EUR 4 million are no longer included under Other income, but recognized under Management and other fees. In 2011, distribution fees amounted to EUR 4 million.

Reference is made to the separate movements shown in note 22 ‘Property, plant and equipment’ and note 23 ‘Intangible assets’.

13. Impairment losses / reversal of impairment losses

11. Employee benefits expense Employee benefits expense can be broken down as follows.

2012

2011

1

7

Reversal of impairment of financial assets available-for-sale related to banking operations

– 15

–1

Total

– 14

6

EUR x million

2012

2011

Wages and salaries Social security costs Pension costs Other staff costs

224 18 25 12

205 14 23 12

Total

279

254

EUR x million

Salary costs per FTE increased in 2012 mainly due to higher variable remuneration, higher pension costs and increased social security costs in the Netherlands. The Company has a number of defined benefit plans in place. Contributions to these plans for the years 2012 and 2011 were EUR 19 million and EUR 14 million, respectively. On average, the Company had a workforce of 1,399 employees in 2012 (1,418 employees in 2011). The breakdown of employees by region is as follows. Average number of employees (FTE’s)

Netherlands Rest of Europe United States Other Total

2012

2011

878 168 236 117 1,399

880 171 254 113 1,418

12. Depreciation and amortization Depreciation and amortization can be broken down as follows. 2012

2011

Depreciation of property, plant and equipment Amortization of intangible assets Impairment of intangible assets

6 32 -

5 33 1

Total

38

39

EUR x million

Impairment of financial assets available-for-sale related to banking operations

Reversal of impairment losses on financial assets availablefor-sale related to banking operations predominantly concerns asset-backed securities. Based on the economic circumstances and the market situation in 2012 and 2011, the Company assessed all its investment portfolios. The outcome of this in-depth analysis in 2012 resulted in the reversal of earlier impairments of 2 ABSs (EUR 7 million; 2011: nil) and the recognition of fair value changes of earlier impaired instruments (EUR 7 million net gain; 2011: EUR 6 million net loss) in the income statement.

14. Other expenses Other expenses can be broken down as follows. EUR x million

Information technology Fund- and client-related costs Housing and furniture Marketing Advisory fees Temporary staff Market data Travel and accommodation Recruitment and courses Other Total

2012

2011

43 22 22 19 19 16 12 8 3 14

44 21 24 23 14 22 11 7 3 14

178

183

15. Finance income Finance income comprises interest income on cash and short-term deposits.

Financial Statements

2012

81


Notes to the consolidated income statements

16. Finance costs

19. Results on financial instruments available-for-sale

Finance costs can be broken down as follows. EUR x million

Interest expense on interest-bearing loans Interest expense on subordinated loans Total

2012

2011

10

10

1

1

11

11

Results on financial instruments held for trading can be broken down as follows. 2012

Gains and losses on the financial instruments held for trading portfolio Dividend received on financial instruments held for trading portfolio Gains and losses on total return swaps Gains and losses on other derivative financial instruments Foreign exchange differences Total

3

– 61

10

2 80

–9 –3

– 12 3

1

12

Results on financial instruments designated at fair value through profit or loss, related to seed capital investments, represented a gain of EUR 7 million in 2012 (2011: loss of EUR 6 million).

2012

2011

4

5

1

-

–1

-

4

5

Realized gains and losses on financial assets available-for-sale portfolio

2011

18. Results on financial instruments designated at fair value through profit or loss

Annual Report ROBECO GROEP N.V.

2012

Total

Results on financial instruments held for trading are mainly determined by seed capital investments. From time to time, the Company injects capital – on a temporary basis – into funds managed by the Company at the time of their inception. These seed capital investments are included in the financial instruments held for trading portfolio. As the gains and losses on total return swaps are strongly related to the financial instruments held for trading portfolio, they are both presented under Results of financial assets held for trading. These derivative financial instruments are designated as economic hedges, but do not qualify for hedge accounting.

82

EUR x million

Dividend and interest on financial assets available-for-sale portfolio Impairment of financial assets available-for-sale debt instruments not related to banking operations

17. Results on financial instruments held for trading

EUR x million

Results on financial instruments available-for-sale can be broken down as follows.

A major part of the results on financial instruments available-for-sale relates to long-term investments made by the Company to realize investment returns. These co-investments are included in the available-for-sale portfolio. The impairment of the financial assets availablefor-sale relates to investments in real estate bonds. A decline in the fair value of the underlying investments resulted in the recognition of fair value changes of earlier impaired investments.

20. Results from group companies In December 2010, Robeco signed a binding sale and purchase agreement with Oddo & Cie to sell Banque Robeco S.A. Ownership was transferred to Oddo & Cie on 31 March 2011. Results from group companies in 2011 concerns the final settlement following an audit of the closing figures of Banque Robeco S.A.


21. Income tax expense Income tax recognized in the consolidated income statement and consolidated statement of comprehensive income can be broken down as follows. Consolidated income statement 2012

2011

Current income tax Current year Prior-year adjustment

103 –1

76 -

Total

102

76

–2

–6

100

70

EUR x million

Deferred income tax expense Relating to changes in temporary differences Income tax expense reported in the income statement

The foreign tax threshold of EUR –1 million (2011: EUR –1 million) relates to ruling facilities agreed with local tax authorities. The 2012 effective tax rate of 33.5% (2011: 34.3%) is higher than the statutory tax rate due to profits realized by foreign US entities that are subject to higher local tax rates. The tax rates in the US are between 38.8% and 42.7% (federal, local and state taxes). The statutory tax rate in the Netherlands was 25.0% in 2012 (2011: 25.0%).

Consolidated statement of comprehensive income 2012

2011

Unrealized loss on financial assets available-for-sale Change in valuation allowance

20 -

2 –2

Income tax charged directly to comprehensive income

20

-

EUR x million

Reconciliation between the income tax expense and the accounting result before tax for the year ended 31 December 2012 and 31 December 2011 is shown below. EUR x million

Accounting result before tax Tax at statutory tax rate Adjustments related to tax assessments for previous years Effect of higher tax rates in foreign operations Movement in deferred tax position Foreign tax threshold Tax effect on subsidiary in liquidation (see note 25) Innovation box Other non-taxable income items Income tax expense according to income statement

2012

2011

297

204

74

51

–1

-

25 2 –1

21 –1

–1 2

–3 2

100

70

Financial Statements

2012

83


Notes to the consolidated statement of financial position

22. Property, plant and equipment Movements in property, plant and equipment are as follows. Buildings

Equipment

Total

Cost at 1 January 2012, net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year Foreign exchange differences

1 -

20 2 –6 -

21 2 –6 -

Net carrying amount at 31 December 2012

1

16

17

1 1

44 – 24 20

45 – 24 21

1 1

42 – 26 16

43 – 26 17

Buildings

Equipment

Total

Cost at 1 January 2011, net of accumulated depreciation and impairment Additions Depreciation charge for the year

1 -

23 2 –5

24 2 –5

Net carrying amount at 31 December 2011

1

20

21

2 –1

41 – 18

43 – 19

1

23

24

1 -

44 – 24

45 – 24

1

20

21

EUR x million

At 1 January 2012 Cost Accumulated depreciation and impairment

At 31 December 2012 Cost Accumulated depreciation and impairment

EUR x million

At 1 January 2011 Cost Accumulated depreciation and impairment

At 31 December 2011 Cost Accumulated depreciation and impairment

84

Annual Report ROBECO GROEP N.V.

2012


23. Intangible assets Movements in intangible assets are as follows. EUR x million

Other Goodwill intangible assets

Total

Cost at 1 January 2012, net of accumulated amortization and impairment Amortization Impairment

376 -

107 – 32 -

483 – 32 -

Net carrying amount at 31 December 2012

376

75

451

376 376

279 – 172 107

655 – 172 483

376 376

275 – 200 75

655 – 172 483

Other Goodwill intangible assets

Total

At 1 January 2012 Cost Accumulated amortization and impairment

At 31 December 2012 Cost Accumulated amortization and impairment

EUR x million

Cost at 1 January 2011, net of accumulated amortization and impairment Changes Amortization Impairment Foreign exchange differences

375 1

138 2 – 33 –1 1

513 2 – 33 –1 2

Net carrying amount at 31 December 2011

376

107

483

375 375

276 – 138 138

651 – 138 513

376 376

279 – 172 107

655 – 172 483

At 1 January 2011 Cost Accumulated amortization and impairment

At 31 December 2011 Cost Accumulated amortization and impairment

Goodwill (EUR 376 million) comprises the fair value of expected synergies arising from the acquired entities Canara Robeco Asset Management Company Ltd., SAM Sustainable Asset Management A.G. and Transtrend B.V.

Financial Statements

2012

85


Notes to the consolidated statement of financial position

24. Impairment testing of non-financial assets The Company has tested goodwill and other identified intangible assets for impairment. Impairment of other intangibles amounted to EUR 0.3 million in 2012 (2011: EUR 0.9 million). Goodwill was not impaired in 2012 and 2011. The total carrying amount of the cash-generating unit Robeco Core as at 31 December 2012 amounted to EUR 1,057 million (2011: EUR 972 million), of which EUR 89 million (2011: EUR 89 million) concerned goodwill. The total carrying amount of the cash-generating unit Transtrend as at 31 December 2012 amounted to EUR 408 million (2011: EUR 422 million), of which EUR 277 million (2011: EUR 277 million) concerned goodwill. The total carrying amount of the cash-generating unit Canara Robeco as at 31 December 2012 amounted to EUR 16 million (2011: EUR 13 million), of which EUR 10 million (2011: EUR 10 million) concerned goodwill. The recoverable amount was determined on the basis of a value-in-use calculation using cash flow projections from financial forecasts approved by senior management covering a multiple-year period. For 2012, the pre-tax discount rates used in cash flow projections were between 14% and 15% for the cash-generating units Robeco Core and Transtrend (2011: between 9% and 10%) and 13% for the cash-generating unit Canara Robeco (2011: 17%). These pre-tax discount rates were reassessed in 2012. Cash flows beyond the five-year period were extrapolated using longterm average growth rates of 2.1% for the cash-generating units Robeco Core and Transtrend (2011: 2.6%) and 7.7% for the cash-generating unit Canara Robeco (2011: 8.4%), in line with the expected long-term average growth rates for the underlying businesses. The calculation of value in use for the cash-generating units is most sensitive to the following assumptions: – Earnings before interest and taxes (EBIT) – Discount rates – Long-term average growth rate Earnings before interest and taxes (EBIT) – EBIT is derived from the Robeco Strategy 2010 – 2014 and current

86

Annual Report ROBECO GROEP N.V.

2012

developments. In order to forecast beyond the five-year period into perpetuity, a long-term average growth rate has been used. Discount rates – Discount rates reflect management’s estimate of the risks specific to each unit. The weighted average cost of capital is determined for each unit using the yield on a long-term risk-free government bond as at 31 October 2012, adjusted for a market risk premium and multiplied by a relevant beta coefficient. Long-term average growth rate – Rates are based on the average growth rate in Real Gross Domestic Product for the next five-year period in the territory or territories in which the revenues are generated, as published by an independent external party. With regard to the assessment of the value in use of the cashgenerating units Robeco Core, Transtrend and Canara Robeco, management believes that no probable change in any of the above key assumptions would cause the carrying amount of the unit to materially exceed its recoverable amount.

25. Acquisition of group company In 2010, the Company exercised a call option to purchase an additional 40% interest in Analytic Investment Management Trading N.V. The transaction was effected in 2011, with the Company holding an 80% interest in Analytic Investment Management Trading N.V. The consideration paid amounted to EUR 4 million, which was accounted for in the 2010 financial statements. At the end of 2011, the Company started the process to liquidate Analytic Investment Management Trading N.V. The liquidation loss was charged to taxable income for 2011.

26. Investment in associates and joint ventures An investment is classified as an associate if the Company has significant influence over its financial and operational policy decisions, but does not have control or joint control. The entity SET Venture Partners, powered by Chrysalix and Robeco B.V., acts as the management company for the Sustainable Energy Technology Fund. The Company’s interest in SET Venture Partners, powered by Chrysalix and Robeco B.V., is 27.5%. The Company has a 26.7% interest in RGS Capital LLC.


In 2012 the Company liquidated the 80% interest in Analytic Investment Management Trading N.V.

The accrued interest income on impaired financial assets available-for-sale amounted to EUR 0.1 million at 31 December 2012 (31 December 2011: EUR 0.3 million).

The carrying amount of investments and share of associate’s revenue and profit in 2011 and 2012 were negligible.

28. Financial assets held-to-maturity 2012

2011

Government bonds Bank bonds

50 5

97 17

Total

55

114

Non-current Current

55

56 58

In 2009, the Company set up Robeco TEDA (Tianjin) Investment Management Company Ltd., a joint venture with TEDA International (Holding) Corporation Ltd. Its financial information is consolidated on a 51% proportional basis.

Total

55

114

The table below shows the share of the results of the joint ventures included in the consolidation of the Company.

The table below provides the fair values of the Company’s non-trading financial assets designated at fair value through profit or loss.

EUR x million

Investment in joint ventures Canara Robeco Asset Management Company Ltd. is a joint venture in India entered into by Canara Bank and the Company. Its financial information is consolidated on a 49% proportional basis.

EUR x million

2012

2011 EUR x million

Share of joint ventures’ statement of financial position:

Current assets Non-current assets Current liabilities Non-current liabilities

2 6 –1 -

2 4 –1 -

Net assets

7

5

Share of joint ventures’ revenue and profit: Revenue Profit

4 1

3 -

27. Financial assets available-for-sale 2012

2011

Government bonds Bank bonds Asset-backed securities Other debt securities Equity securities

946 1,060 587 347 77

975 992 688 321 81

Total

3,017

3,057

Non-current Current

2,504 513

2,686 371

Total

3,017

3,057

EUR x million

29. Financial assets designated at fair value through profit or loss

Government bonds Bank bonds Other debt securities Equity securities Mortgages Total Non-current Current Total

2012

2011

396 350 206 67 -

405 469 188 54 695

1,019

1,811

854 165

1,680 131

1,019

1,811

In late 2012, the mortgage portfolio (notional amount: EUR 600 million), together with the accompanying saving deposits and interest rate swaps, was repurchased at net book value by the originator. This package formed part of the fair value portfolio on which the Company applied the fair value option. The government bonds, bank bonds and other debt securities (all with fixed rates) are managed as a single portfolio. Although the interest rate risk for this portfolio is largely hedged using interest rate swaps, the Company decided not to apply hedge accounting.

Financial Statements

2012

87


Notes to the consolidated statement of financial position

The maximum credit exposure of the loans amounted to EUR 27 million (2011: EUR 720 million, including mortgages). The change in fair value of the purchased loans attributable to changes in credit risk resulted in a gain of EUR 0.4 million (2011: a loss of EUR 0.9 million, including mortgages).

30. Financial assets loans and advances 2012

2011

841 291 638 37 -

898 329 742 52 2

Total

1,807

2,023

Non-current Current

1,586 221

1,762 261

Total

1,807

2,023

EUR x million

Loans originated from Robeco: Private sector loans and advances to customers Mortgages Public sector loans Private sector loans Bank loans Other

The company holds collateral relating to mortgages consisting of residential properties. Accrued interest on impaired loans and advances in 2012 and 2011 was negligible. For details on the loan loss allowance we refer to the Loan loss allowance table in note 52, Credit risk section. The company holds collateral relating to mortgages consisting of residential properties.

88

Annual Report ROBECO GROEP N.V.

2012


31. Deferred tax assets and liabilities

Movements in the deferred tax assets were as follows.

Deferred tax assets and liabilities can be broken down as follows.

EUR x million

EUR x million

Deferred tax asset Goodwill Net operating losses Pensions Unrealized loss on investments in partnerships Employee benefits Other Total deferred tax assets

Consolidated statement of financial position

Consolidated income statement

2012

2011

2012

2011

155 8 4

189 9 3

1 5 -

5 -

4 16 7

6 4 9

-

–3

194

220

6

2

Deferred tax liabilities Pensions Employee benefits Fair value adjustment of assets and liabilities taken over through acquisitions Unrealized results available-for-sale-portfolio

8 3

7 -

-

-

18 7

25 -

–8 -

–8 -

Total deferred tax liabilities

36

32

–8

–8

–2

–6

158

188

Deferred tax income Deferred tax assets (net)

The Company paid goodwill on the entities acquired in the United States in previous years. The goodwill concerned was immediately deducted from equity prior to the adoption of IFRS. As the amortization of goodwill for tax purposes requires at least 15-20 years of substantial gross profits, the Company estimates the growth of the business, taking into account the specific assumptions of future cash flows and market performance. Other under deferred tax assets in 2011 comprises the tax effect of a subsidiary in liquidation of EUR 3 million (see note 25).

2012

2011

Balance at 1 January

220

236

Release to current tax Foreign exchange difference Employee benefits Unrealized result on investments Adjustment valuation allowance Other

– 27 –4 12 –3 2 –6

– 24 8 3 1 –4

Balance at 31 December

194

220

The adjustment valuation allowance relates to a reversal of a prior-year unrecognized deferred tax asset which is likely to be recognized. The profitability assumptions used in the analysis are pre-tax operating profit for 2012, budgeted pre-tax operating profit for 2013, 20% growth of pre-tax profits for the years 2014 and 2015 and flat profitability in subsequent years. Movements in deferred tax liabilities were as follows. 2012

2011

Balance at 1 January Release to current tax Amortization of intangible assets Other

32 8 –8 4

50 – 10 –8 -

Balance at 31 December

36

32

EUR x million

Unrecognized deferred tax assets Deferred tax assets have not been recognized for a taxable loss of EUR 68 million (2011: EUR 74 million) of which EUR 63 million (2011: EUR 63 million) relates to Robeco France S.A.S. Recognition of deferred taxes on losses is based on management’s judgment to the extent that the taxable profits are expected to arise in the future, within the legal period for loss compensation.

Financial Statements

2012

89


Notes to the consolidated statement of financial position

34. Financial assets held for trading

Maturity of deferred tax assets and liabilities: 2012

EUR x million

2011

Deferred tax assets Deferred tax asset to be recovered after more than 12 months Deferred tax asset to be recovered within 12 months

170

192

24

28

Total deferred tax assets

194

220

2012

2011

EUR x million

Deferred tax liabilities Deferred tax liabilities to be realized after more than 12 months Deferred tax liabilities to be realized within 12 months Total deferred tax liabilities

The fair values of the Company’s financial assets held for trading can be broken down as follows. 2012

2011

Equity securities Other debt securities Other

343 195 -

389 113 1

Total

538

503

EUR x million

29

25

7 36

7 32

Financial assets held for trading include EUR 161 million (2011: EUR 194 million) held to back total return swaps entered into with Rabobank and other financial institutions and structured notes issued by the Company to meet specific investment objectives of note holders bearing the investment risk arising from financial assets held for trading.

32. Loans and advances 35. Other current financial assets

Total loans and advances can be broken down as follows. 2012

2011

78 29 2

78 23 2 13

109

116

Current portion of the non-current loans and advances

221

261

Total

330

377

EUR x million

Private sector loans and overdrafts Collateral paid Credits collateralized by securities Receivables from securities transactions

This item comprises the current portion of non-current financial assets and can be broken down as follows. EUR x million

Current portion of financial assets: Available-for-sale Held-to-maturity Designated at fair value through profit or loss Total

2012

2011

513 55

371 58

165 733

131 560

36. Other receivables 33. Current tax receivable and payable Current tax receivable consists of corporate income tax of EUR 3 million (2011: EUR 20 million). The current tax payable consists of corporate income tax of EUR 25 million (2011: EUR 5 million). Income tax receivable and payable are not netted due to the different tax jurisdictions in which the Company is located.

Other receivables can be broken down as follows. EUR x million

Accrued income Prepayments Capitalized structuring fee Cash transfer Other Total

2012

2011

164 14 6 6 3 193

167 13 10 11 6 207

Accrued income includes mainly items yet to be invoiced or received, such as accrued interest, management fees and VAT.

90

Annual Report ROBECO GROEP N.V.

2012


37. Derivative financial instruments

terms of their notional amounts and settlement dates and are designed to be bought or sold in active markets (i.e. at organized exchanges). Others are packaged specifically for individual customers and are not listed, as they may be bought and sold between counterparties at negotiated prices (over-the-counter instruments).

The Company hedges the foreign currency conversion risk of net investments in foreign entities using forward currency contracts. At 31 December 2012, forward currency contracts with a notional amount of EUR 278 million (2011: EUR 382 million) and a fair value of EUR -0.3 million (2011: EUR 0.9 million) were designated as net investment hedges. This resulted in an exchange loss of EUR 3 million for 2012 (2011: loss of EUR 5 million) that was taken to other comprehensive income. In 2012 and 2011, no amounts were withdrawn from other comprehensive income and no amounts were recognized as ineffective portions in the income statement.

Positive fair value represents the cost incurred by the Company of replacing all transactions with a receivable if all counterparties were to default. Negative fair value represents the cost incurred by the counterparties in replacing all transactions if the Company were to default. The total positive and negative fair values are included separately in the statement of financial position. The derivative financial instruments become favorable (assets) or unfavorable (liabilities) as a result of fluctuations in the underlying risk factors, such as interest rate or foreign exchange rate movements relative to their terms. The total contract or notional amount of derivative financial instruments held, the degree to which these instruments are favorable or not favorable, and hence the total fair value of the derivative financial assets and liabilities may fluctuate significantly.

The notional amounts or contract sizes of certain types of financial instruments provide a basis for comparison with instruments recognized in the statement of financial position. They do not necessarily indicate the value of future cash flows involved or the current fair value of the instruments and, therefore, they do not indicate the Company’s exposure to credit or price risks. The notional amount represents the value of a derivative financial instrument’s underlying asset, reference rate or index and forms the basis for measuring the value of the derivative financial instrument. It provides an indication of the volume of the Company’s business transactions, but does not provide any measure of risk. Some derivative financial instruments are standardized in EUR x million

The table below provides the notional amounts and the positive and negative fair values of the Company’s derivative transactions. 2012

Contract/notional amount Net Investment hedge Forward currency Derivative financial instruments held for hedge accounting Funded total return swaps Equity swaps Interest rate swaps Swaptions Credit default swaps Forward currency Derivative financial instruments not held for hedge accounting Total recognized derivative financial instrument Of which: Non-current Current Total

2011 Fair values Assets Liabilities

278

-

-

-

-

1 1,322 56 163

1 15 1 1 1

75 1 1 -

19

Contract/notional amount 382

Fair values Assets Liabilities -

1

-

1

1 17 2 -

3 160 2 2

77

20

167

19

77

20

168

14 5

69 8

16 4

161 7

19

77

20

168

2 2,333 38 173

Financial Statements

2012

91


Notes to the consolidated statement of financial position

The company manages its capital structure and monitors capital using various indicators for the assessment of financial performance. The use of these indicators is part of the strategic capital allocation process and enables the Company to improve the quality of decision-making.

In 2011, derivative financial instruments included an interest rate swap that formed part of a financial instruments package to which the Company applied the fair value option. These financial instruments were disclosed under financial assets at fair value through profit or loss.

38. Cash and cash equivalents Cash and cash equivalents can be broken down as follows. EUR x million

Cash at banks Short-term deposits Balances with central banks Cash in hand Cash and cash equivalents Bank overdrafts Cash and short-term deposits in the statement of cash flows

2012

2011

782

1,139

-

2

65

142

-

-

847

1,283

-

-

847

1,283

In the period from 12 December 2012 to 16 January 2013, an amount of EUR 62 million (in the period from 14 December 2011 to 18 January 2012: EUR 135 million) on average was held to satisfy regulatory liquidity requirements of the Dutch central bank, which is therefore restricted.

39. Equity attributable to equity holders of the parent The authorized share capital amounts to EUR 22,689,015 (2011: EUR 22,689,015), consisting of 22,689,015 shares with a nominal value of EUR 1 each, of which EUR 4,537,803 is paid in full. The number of shares has not changed. Shareholders are entitled to receive (interim) dividends when declared and are entitled to vote on a one-vote-pershare basis at the Company’s shareholder meetings. Capital management The primary objective when managing capital is optimization of the Company’s debts and equity balance in order to maintain a strong capital base and maximize shareholder value.

92

Annual Report ROBECO GROEP N.V.

2012

Capital is also required under regulatory rules. Robeco Direct N.V., a subsidiary with a bank license, monitors the regular capital based on the Advanced Internal Rating Based method. As part of the agreement between Rabobank and ORIX, the banking activities will be transferred to Rabobank. It is foreseen that as from that date there will be no longer a bank license within the Company. For other licensed subsidiaries within the Company, capital in use is monitored using the regulatory standardized approach. Developments in economic capital and regulatory requirements for different types of risks are monitored by the Asset and Liability Committee on a monthly basis. The determination of economic capital is disclosed in note 52 Financial risk management objectives and policies.

40. Non-controlling interests This item relates to a 28% interest in Robeco Asian Stars Equities, a 9% interest in KenTyde Diversified Fund and a 19% interest in KenTyde B.V. In 2011, this item related to a 4% interest in Robeco Asian Stars Equities, a 19% interest in KenTyde B.V. and a 20% interest in Analytic Investment Management Trading N.V. Movements in this item were as follows. EUR x million

Balance at 1 January Net result for the financial year Change in third party assets and liabilities Balance at 31 December

2012

2011

-

-

3 3

-


41. Subordinated loans

Movements in provisions were as follows.

Two loans with variable interest rates totaling EUR 38 million (2011: EUR 38 million) were granted by Rabobank Nederland to Robeco Direct N.V. The loans are subordinated to all other present and future liabilities of Robeco Direct N.V. The term is indefinite and subject to a five-year notice period. The loans were granted as a result of the solvency rules set by the Dutch central bank and can only be repaid when the Dutch central bank removes the subordination in writing. The average variable interest rates paid on the loans were as follows.

EUR x million

EUR x million

Provision for onerous contracts

Restructuring provision

Balance at 1 January Unused amounts reversed Arising during the year Utilised

2012 4 1 –1

2011 3 2 –1

2012 9 –8

2011 10 –1

Balance at 31 December

4

4

1

9

Terms to maturity of provisions at 31 December 2012 are set out below.

Average Interest rate (3 month Euribor + 40bp)

EUR x million

Less than 1 year

1 -5 years

More than 5 years

Total

EUR

2012

2011

Provision for onerous contracts

1

3

-

4

Rabobank Nederland

27

1.17%

1.73%

Restructuring provision

1

-

-

1

Rabobank Nederland

11

1.17%

1.73%

Total

2

3

-

5

42. Other interest-bearing loans and borrowings Total other interest-bearing loans and borrowings amounted to EUR 211 million (2011: EUR 215 million). To finance acquisitions, Rabobank Nederland has granted loans to Robeco Groep N.V.’s subsidiaries. In 2011 the loans to Robeco Institutional Asset Management B.V. were early repaid. The remaining loan to Robeco US Holding Inc. of USD 278 million has a fixed interest rate of 4.82%. It was issued in 2007 for a period of eleven years. On the interestadjustment date, the loan is repayable by the borrower at par value. The loan is non-current in principle.

43. Provisions Current and non-current provisions can be broken down as follows.

Restructuring provision The amount arising in 2011 was mainly attributable to the transfer of the Robeco-Sage business to Arden Asset Management and termination benefits payable to senior management in Europe which were settled in 2012. The maturity and amounts of the provisions are based on management’s best estimate.

2012

2011

Provision for onerous contracts Restructuring provision

4 1

4 9

Total

5

13

EUR x million

Onerous operating lease In 2009, the Company launched a program to create a more efficient organization. This program comprised the reduction of office space in use. In 2011, a provision was formed for a premise located in Europe. The provisions are recognized for the cost related to the early termination of rental commitments and the costs of restoring the premises to their original condition.

The provisions mainly relate to a rental agreement for office space and termination benefits.

Financial Statements

2012

93


Notes to the consolidated statement of financial position

44. Pension asset and employee benefit liability 2012

2011

Pension asset (The Netherlands)

32

28

Pension asset

32

28

Pension liability (Switzerland) Other employee benefits

3 77

3 48

Employee benefit liability

80

51

– 48

– 23

EUR x million

Net balance

Effective 1 January 2013 new accounting standards for defined benefit pension plans are applicable. Unrecognized actuarial gains and losses (removal of the corridor mechanism) will be recognized in equity immediately. Based on the current discount rate (2012: 3.3%; 2011: 4.4%), the impact of unrecognized actuarial losses is estimated at EUR 106 million after tax (2011: EUR 58 million). Following the implementation of IAS 19R as from January 2013, a corresponding liability of EUR 106 million is included in the statement of financial position at 1 January 2013. In addition, the new requirements will lead to a recurring annual impact on pension charges. In The Netherlands, the Company grants contributory pension benefits based on an average pay scheme to all employees on reaching the age of 65. This defined benefit plan comprises a retirement pension scheme, a surviving dependants’ pension scheme and a disability pension scheme. The plan only applies to salaries up to EUR 76,323 (2011: EUR 75,010). A defined contribution plan applies to salaries exceeding that amount. As from 1 January 2011, the defined benefit plan is based on an average pay scheme (until 1 January 2011: a final pay scheme). The annual pension entitlements of employees are based on 2% of the pensionable income. Furthermore, employees are required to contribute 20% of the pension premium subject to a maximum of 4.5% of the pensionable income. For employees employed by Robeco Nederland B.V. before 1 September 2010, a transitional arrangement applies.

94

Annual Report ROBECO GROEP N.V.

2012

The Company has guaranteed the obligations of Stichting Pensioenfonds Robeco, of which the unaudited funding level at 31 December 2012 was 110%, well above the minimum funding level of the pension fund of 105%. Due to the long term nature of certain employee benefits, Other employee benefits for 2011 have been reclassified (EUR 11 million); this obligation was included in note 50. The amounts recognized as pension asset/liability in the statement of financial position are determined as follows.

EUR x million

Defined benefit obligation Fair value of plan assets Funded status of plan Unrecognized actuarial gains and losses Net asset/liability Experience adjustments to plan assets gains/(losses) Experience adjustments to defined benefit obligation gains/(losses)

2012

2011

2010

2009

2008

– 478

– 349

– 323

– 251

– 190

365

296

284

241

195

– 113

– 53

– 39

– 10

5

142

78

65

33

–5

29

25

26

23

-

37

– 10

18

14

– 24

– 10

–7

3

– 13

9

Movements in the asset/liability recognized in the statement of financial position were as follows. EUR x million

Balance at 1 January Total company expense Actual employer contributions Balance at 31 December

2012

2011

25

26

– 15 19

– 15 14

29

25


Movements in the defined benefit obligation were as follows.

The principal actuarial assumptions used are as follows. 2012

2011

3.30% at 31-12-‘12 5.50% at 31-12-2012 2.00% per annum 3.00% per annum

4.40% at 31-12-’11 5.50% at 31-12-’11 2.00% per annum 3.00% per annum

13.28%-6.33% per annum 7.74%-4.94% per annum 8.19%-4.90% per annum 5.43%-3.63% per annum 3.07%-2.64% per annum 2.05%-1.06% per annum 1.27%-0.95% per annum

11.40%-8.50% per annum 7.83%-6.00% per annum 4.97%-3.57% per annum 3.10%-2.89% per annum 1.90%-1.96% per annum 1.04%-1.54% per annum

2.00% per annum

2.00% per annum

1.80% per annum

1.80% per annum

2.70% per annum

2.70% per annum

According to mortality tables, age setback of two years for men and one year for women

According to mortality tables, age setback of two years for men and one year for women

Disability rates (male-female) AGE: <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 >60 Correction factor on disability rates

0.05%-0.09% 0.09%-0.18% 0.14%-0.25% 0.19%-0.32% 0.25%-0.41% 0.34%-0.50% 0.44%-0.62% 0.56%-0.75% 0.72%-0.94% 0.77

0.05%-0.09% 0.09%-0.18% 0.14%-0.25% 0.19%-0.32% 0.25%-0.41% 0.34%-0.50% 0.44%-0.62% 0.56%-0.75% 0.72%-0.94% 0.77

Withdrawal rates (male-female) AGE: 20-39 40-44 45-49 50-54 55-65

5.27%-2.74% 1.51%-0.62% 0.99%-0.30% 0.48%-0.12% 0.54%-0.20%

5.97%-2.82% 1.40%-0.56% 0.88%-0.27% 0.35%-0.12% 0.52%-0.15%

2012

2011

EUR x million

Balance at 1 January Net service costs Interest expense Benefits paid Contributions by participants Actuarial gains and losses Foreign exchange differences Other movements

349 15 15 –5 1 102 1 -

322 15 14 –8 1 5 1 –1

Discount rate Expected return on plan assets Inflation General salary increase Career salary progression

Balance at 31 December

478

349

EUR x million

Actuarial gains and losses include a loss of EUR 111 million (2011: a loss of EUR 12 million) as a result of assumption changes. Movement in the fair value of plan assets were as follows. EUR x million

Balance at 1 January Expected return on plan assets Actual employer contributions Contributions by participants Benefits paid Actuarial gains and losses Balance at 31 December

2012

2011

296

284

17 19 1 –5 37

15 14 1 –8 – 10

365

296

The actual return on plan assets amounted to EUR 53 million (2011: EUR 5 million). The amounts recognized in the income statement are as follows. EUR x million

2012

2011

Net service costs Interest expense Expected return on plan assets Amortization of net gains and losses

15 15 – 16 2

15 14 – 16 2

16

15

Total pension expense

AGE (male - female): <25 25-30 (2011: 20-30) 31-35 36-39 40-44 45-49 >50 Increase in social security offset Increase in accrued pensions of active participants Increase in pensions in payment and vested benefits of deferred pensioners Mortality rates

The mortality table rates for 2012 are calculated using ‘Prognosetafel GBM/V 2012-2062’.

Financial Statements

2012

95


Notes to the consolidated statement of financial position

48. Total return swaps

With respect to the pension plan, the actual allocation of the plan assets is as follows. Percentage of plan assets 2012

Percentage of plan assets 2011

40 59 1

44 55 1

100

100

Equity securities Debt securities Other Total

The fair value of funded total return swaps, of which EUR 83 million (2011: EUR 99 million) was entered into with Rabobank and EUR 19 million (2011: EUR 20 million) with other financial institutions, depends on the value of the underlying investments (see note 34 Financial assets held for trading) that are held to meet the specific investment objectives of note holders who bear the investment risk arising from these investments. The total return swaps can be broken down as follows.

Other employee benefits consists mainly of long-term liabilities regarding equity notes, CARs and deferred employeeâ&#x20AC;&#x2122;s variable income.

2012

EUR x million

45. Other non-current liabilities The amount of EUR 4 million (2011: EUR 15 million) relates to management fees received in advance and a deferred payment.

Derivative financial instruments not designated for hedge accounting Funded total return swaps

46. Interest-bearing loans due to customers 2012

2011

Savings available on demand Savings not available on demand

5,313 91

6,116 66

Total

5,404

6,182

EUR x million

2011

Contract/ notional amount

Fair values liabilities

Contract/ notional amount

Fair values liabilities

102

102

119

119

Of which: Non-current Current Total

75 27 102

114 5 119

49. Financial liabilities The savings available on demand refer to the savings accounts of private customers and non-private customers. Savings not available on demand are fixed-term savings accounts and deposits provided by customers and some of the funds managed by the Company. The current accounts and settlement accounts consist of non-private customers.

47. Interest-bearing loans due to banks 2012

2011

Call money / balances available on demand Liability securities transactions Other

734 3 1

1,153 34 -

Total

738

1,187

EUR x million

Call money / balances available on demand refer to savings accounts through third-party distributors.

96

Annual Report ROBECO GROEP N.V.

2012

2012

2011

Financial liabilities at fair value Financial liabilities at amortized cost

162 1

192 2

Total

163

194

EUR x million

Financial liabilities are mainly stated at fair value. At 31 December 2012, the notional amount was EUR 175 million (2011: EUR 208 million). The Company issued principal protected (notional amount of EUR 62 million; fair value of EUR 62 million) and non-principal protected (notional amount of EUR 113 million; fair value of EUR 100 million) structured notes. All notes are linked to Robecoâ&#x20AC;&#x2122;s private equity, commodity trading advisor and fixed-income capabilities. The Company did not observe any credit events in 2012 and 2011 that affected the fair value of the issued securities.


50. Other non-financial liabilities EUR x million

Accrued interest Creditors Employee benefits obligation Accrued expenses payable Subadvisory fees Other non-financial liabilities Total

2012

2011

93 51 69 49 15 18

110 48 65 60 20 19

295

322

Accrued interest relates to customer savings. To provide increased insight, an amount of EUR 16 million related to employee benefits was reclassified from Other nonfinancial liabilities to Employee benefits obligation as at 31 December 2011. Due to the long-term nature of certain employee benefits, the Employee benefits obligation at 31 December 2011 (EUR 11 million) has been reclassified to Note 44.

to transaction bonus payments, accelerated vesting of bonuses and transaction related fees and other costs. Expenses for services provided per December 2012 are recognized in the presented Income Statement. Operating leases, rental commitments and IT services The Company has entered into commercial leases with respect to the vehicle fleet. The terms of these leases are between one and five years. The Company and its subsidiaries have rental commitments regarding buildings. These rental commitments have remaining terms of between one and ten years. On 1 January 2009, the Company outsourced the IT infrastructure activities to HP for a period of five years. The outsourcing scope covers the operational IT infrastructure as well as IT infrastructure projects. Future minimum payments and rentals were as follows. 2012

EUR x million

51. Contingent assets and liabilities

Rental Operating

Contingent assets In September 2011, the Company sold the Robeco Sage fund-of-funds portfolio for which the Company will be compensated by way of a share in the fees earned on assets transferred to the buyer until 2021. The revenues earned are tied to a continuing relationship with the buyer and will be recognized in the earned future periods. In July 2011, the Company entered into a service agreement with Stichting Premiepensioeninstelling Robeco for rendering administrative services. Taken into account the minimum capital requirement of Stichting Premiepensioeninstelling, the agreement offers the possibility to collect with retrospective effect of maximum 5 years and a maximum amount of EUR 2 million. Contingent liabilities In respect to the announced agreement that ORIX is acquiring approximately 90.01% of the equity in Robeco Groep N.V. including its subsidiaries from Rabobank, the Company has entered into revocable and irrevocable commitments for an estimated amount of EUR 50 million before tax , of which the majority of expenses is conditional upon completion of the transaction. The expenses relate

2011

lease

commit-

Rental IT Operating

ments services

commit-

IT

lease

ments

services

Less than one year Between one and five years More than five years

3 5 -

15 57 43

24 19 -

2 3 -

13 48 48

15 15 -

Total

8

115

43

5

109

30

Employee benefits In 2010, Robeco Nederland B.V. guaranteed the obligations of Stichting Pensioenfonds Robeco. Since 1 January 2011, this guarantee has changed. Robeco Nederland B.V. is obliged to pay additional contributions if the funding level of the pension fund is below 105%. These additional payments are limited to 35% of the pension base. Stichting Pensioenfonds Robeco has the right to request the Company for funding, subject to a maximum of three contributions in a ten-year period. The Company has awarded Equity Notes and Cash Appreciation Rights (CARs) as part of the Long-Term Incentives to a number of employees. They constitute a future cash entitlement, depending on the value and profitability of Robeco Groep N.V. The entitlement is subject to certain vesting requirements. The total amount consists of the notional value of Equity Notes awarded as part of

Financial Statements

2012

97


Notes to the consolidated statement of financial position

Guarantees The Company provided guarantees at 31 December 2012 relating both to credit and non-credit substitute guarantees.

the long-term Incentive Plan as well as the notional value of Equity Notes and CARs resulting from a mandatory conversion of deferred cash compensation. The notional value amounted to EUR 27 million at 31 December 2012 (31 December 2011: EUR 19 million). The Company stands surety for compliance with the obligations arising from mortgages granted to its employees by MNF Bank. At 31 December 2012, an amount of EUR 1 million (31 December 2011: EUR 1 million) was outstanding. Capital commitments The Company has entered into a commitment to repurchase specific bonds when requested by the bondholders. The Company can unwind these securities with a nominal amount of EUR 280 million (31 December 2011: EUR 343 million) without incurring a loss. The Company has irrevocable credit facilities related to mortgages and credits of EUR 539 million at 31 December 2012 (31 December 2011: EUR 580 million). These are all secured by customersâ&#x20AC;&#x2122; assets. With respect to the Companyâ&#x20AC;&#x2122;s co-investments in private equity funds, the Company had capital commitments of EUR 37 million (31 December 2011: EUR 49 million). The Company acts as guarantor for fulfilling the obligations of Stichting Effectengiro RAM relating to the obligations to account holders. At 31 December 2012, Stichting Effectengiro RAM had commitments to clients of EUR 3 billion (2011: EUR 3 billion). Stichting Effectengiro RAM holds receivables on the funds composed of deposited securities in the same amount. The Company has issued a guarantee committing to fulfilling the obligations of Stichting Robeco Funds towards its clients. As at December 2012, Stichting Robeco Funds held assets for an amount of EUR 27 million (2011: EUR 2 million) relating to items to be settled in the short term. Investment in associates With respect to Investment in associates and joint ventures, the Company has no capital commitments or other contingent liabilities, incurred jointly or otherwise.

98

Annual Report ROBECO GROEP N.V.

2012

Pledged assets Carrying amount

EUR x million

Financial assets available-for-sale Financial assets designated at fair value through profit or loss Financial assets held-to-maturity Total

Notional amount

2012

2011

2012

2011

365

295

343

285

152 51

88 52

145 50

86 50

568

435

538

421

The assets pledged by the Company are strictly for the purpose of providing collateral to counterparties for funds entrusted by them to the Company and any interest due on these entrusted funds. The pledged assets can neither be sold nor repledged by the counterparties, unless a default event should occur.

52. Financial risk management objectives and policies In respect of the foreseen transfer of the banking activities from the Company to Rabobank, the Company will continue pursuing the current financial risk management objectives and policies as long as it is appropriate. In the disclosure below the current applicable financial risk management objectives and policies are presented. Introduction The Company applies various indicators for assessing financial performance. The use of these indicators is part of the strategic capital allocation process and enables the Company to improve the quality of decision making. This process entails the use of internal models for individual risk types, a correlation matrix to account for inter-risk type diversification and a process to allocate capital to the various business lines and activities. The economic capital limit is determined by the Companyâ&#x20AC;&#x2122;s equity, its risk appetite and the portfolio of activities. In determining economic capital, the Company distinguishes between financial risk types (credit risk, market risk and interest rate risk) and non-financial risk types (operational risk and business risk). Besides


capital, liquidity risk is another important item for a financial institution. As an asset manager, the Company is not directly exposed to market, credit and interest rate risks relating to client portfolios. The nature of asset management activities thus implies significant importance of the non-financial risk types in the overall economic capital amounts. It is acknowledged that both operational risk and business risk are not easy to influence in the short term. The risk appetite relating to financial risk types depends on available capital and relating to non-financial risk types on required capital. However, the Company allocates capital to financial risk types, notably market risk and credit risk, since banking activities form an integral part of the Company’s activities. This capital allocation is influenced by the requirements for seed capital and co-investments, secondary market support and (dynamic) hedging of structured products issued by the Company. The provision of seed capital and co-investments serves to build a track record for a fund or trading strategy and/or achieve alignment of interest between the investment manager and the investor. Limits on these activities, both in terms of notional amounts and in terms of risk and risk capital are reviewed on an annual basis. The objective of the Company’s asset and liability management activities is geared towards optimizing interest rate risk results within the risk and other boundaries set by the Asset and Liability Committee. These boundaries and the allocation of capital to credit risk and interest rate risk depend on availability of risk capital and on opportunities in the markets. Adequate capitalization is also required from a regulatory perspective. For the individual banking and asset management licenses, the Company also determines and manages its regulatory capital for each entity as required by the local regulator based on the Basel II pillar 1 requirement. When allocating economic capital to financial risk types, the Dutch central bank requirements regarding regulatory capital are taken into account. The Company’s regulatory capital may not fall below the minimum required level set by the Dutch central bank. Since the start of the financial crisis, markets, countries and even continents have not yet found their equilibrium.

Instability from a macro-economic as well as a political perspective severely intensified during the year, putting markets under even more pressure. The Financial Crisis Committee, consisting of members of the boards of Robeco’s various group companies and supported by representatives from several departments such as Corporate Compliance and Risk Management, continued to be vigilant and discussed potential repercussions for the funds entrusted to the Company. Credit risk Credit risk is governed by credit risk policies, which are approved by the Asset and Liability Committee and the Management Board of Robeco Direct N.V. (the Bank). Credit risk mainly relates to the asset and liability management activities conducted by the Group’s banking entity, with entrusted savings being invested in predominantly investment grade bonds. Additional sources of credit risk are domestic residential mortgages and loans to public sector entities, counterparty credit risk in the Company’s trading and investment books and co-investment positions (mainly private equity). The Company applies the Advanced Internal Rating Based (“IRB-A”) approach to calculating regular capital requirements for credit risk. As a Rabobank entity, the Company also reports to Rabobank Group on an IRB-A basis. An overall limit in terms of Economic Capital applies to credit risk. With respect to most credit exposures, the calculation of capital requirements is based on the use of internal models for Probability of Default, Loss Given Default, Exposure At Default and Maturity. With respect to securitizations, the Company applies the Rating Based Approach capital requirement methodology of the Basel II Securitization Framework. For equity exposures in the banking book, predominantly longer term co-investments, the Simple Risk Weight approach is applied. For immaterial portfolios (non-retail mortgages and the corporate bonds in the banking portfolio), the Company applies the Standardized Approach. The overall Economic Capital limit is complemented by a set of controls aiming to prevent concentration risk in the portfolio. Controls relate to the exposure by issuer,

Financial Statements

2012

99


Notes to the consolidated statement of financial position

issue, country and sector. Additionally, the size of portfolios of corporate exposures, mortgages and asset-backed securities is contained by a strict limit and control structure. Dealings may only be undertaken in authorized products to secure correct processing through front-, mid- and backoffice systems. The management of Robeco Direct N.V. receives credit risk reports on a bi-weekly basis. The Asset and Liability Committee receives monthly credit risk reports containing a detailed overview of the different types of exposures and

EUR x million

corresponding capital requirements, as well as an analysis of the changes in credit risk exposures. The report also includes a description of market developments. The table below shows the maximum exposure to credit risk for the items included in the statement of financial position, including derivative financial instruments. The maximum exposure is shown gross, before the effect of mitigation through the use of master netting and collateral agreements.

Notes

2012

2011

27 28 29 30 37

2,504 854 1,586 14

2,686 56 1,680 1,762 16

32 35 37 38

330 733 5 847

377 560 4 1,283

6,873

8,424

Non-current assets Financial assets Available-for-sale Held-to-maturity Designated at fair value through profit or loss Loans and advances Derivative financial instruments

Current assets Loans and advances Other current financial assets Derivative financial instruments Cash and cash equivalents (excluding cash in hand) Total

Off-balance sheet items Credit-related obligations Total maximum credit risk exposure

Where financial instruments are measured at fair value the amounts shown above represent the current credit risk exposure, but not the maximum risk exposure that could arise in the future as a result of changes in values. The credit-related obligations consisted of irrevocable credit facilities related to mortgages, credits and guarantees of EUR 539 million at 31 December 2012 (31 December 2011: EUR 580 million). These are secured by customersâ&#x20AC;&#x2122; assets. With respect to the Companyâ&#x20AC;&#x2122;s co-investments in private equity funds, the Company had capital commitments of EUR 37 million at 31 December 2012 (31 December 2011: EUR 49 million).

100

Annual Report ROBECO GROEP N.V.

2012

51

576

629

7,449

9,053

Risk concentrations for the maximum exposure to credit risk Concentration of risk is managed and monitored per counterparty. At 31 December 2012, the maximum credit exposure to one client or counterparty was EUR 1,566 million on Rabobank Nederland in the category Financial institutions (31 December 2011: EUR 1,694 million).


2012

2012

2011

2011

EUR

%

EUR

%

Central governments and central banks

2,317

31

2,734

30

Financial institutions

2,250

30

2,745

30

EUR x million

Counterparty risk concentrations of the maximum exposure to credit risk

Corporates

655

9

546

6

Retail

1,436

19

2,156

24

Equity

188

3

184

2

Securitizations

603

8

688

8

7,449

100

9,053

100

Total maximum credit risk exposure

Exposure to Southern European sovereigns and Ireland debts Given the unstable situation in the European bond markets, the Company closely monitors its sovereign positions in various European countries. The table below represents

the Company’s exposure to Southern European and Irish sovereigns and indicates, by country, the nominal and fair values, as well as the remaining duration (in years) at 31 December 2012.

IFRS category

Notionals

Fair values

Duration

Ireland

FVPL

45

46

0.3

Ireland

AFS

5

5

4.5

EUR x million

Souvereigns

Italy

FVPL

89

91

2.8

Italy

AFS

10

10

1.6

149

152

2.0

Total

There are no sovereign exposures to Spain, Portugal and Greece. Collateral and other credit enhancements The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Procedures are in place regarding the acceptability of types of collateral and valuation parameters.

– For counterparty credit risk arising from derivative transactions, adequate documentation is in place, including daily margining and cash collateral exchange. Management monitors the market value of the collateral and requests additional collateral in accordance with the underlying agreement if necessary. The collateral obtained is deemed to be sufficiently convertible into cash.

The main types of collateral obtained are as follows. – For securities lending: cash or securities. – For retail lending: mortgages on residential properties and securities.

Financial Statements

2012

101


Notes to the consolidated statement of financial position

Credit quality by class of financial assets The credit quality of financial assets is managed by using the Rabobank Risk Rating and in certain cases external credit ratings, which reflect the counterpartyâ&#x20AC;&#x2122;s probability of default over a one-year period. High-grade assets have a minimal

risk of defaulting, standard-grade assets are adequate to good in terms of credit quality, while sub-standard grade and past due, but unimpaired assets are vulnerable to defaults. The tables below show the credit quality by class of asset, based on the rating methodology applied:

Financial assets that are neither past due nor impaired

EUR x million

At 31 December 2012 Non-current assets Financial assets Available-for-sale Government bonds Bank bonds Asset-backed securities Other debt securities Held-to-maturity Designated at fair value through profit or loss Loans and advances

High grade

Individually Past due but impaired not impaired

Total

Standard Sub-standard grade grade

2,241 742 805 484 210 663 950

160 11 16 77 56 124 624

2 2 6

24 24 3

3

2,427 753 821 587 266 787 1,586

296 653 835

24 80 12

10 -

-

-

330 733 847

5,638

1,024

18

27

3

6,710

Non-current assets Financial assets Available-for-sale Government bonds Bank bonds Asset-backed securities Other debt securities Held-to-maturity Designated at fair value through profit or loss Loans and advances

2,419 809 829 551 230 56 902 1,005

152 3 57 33 59 694 747

4 4 1 6

30 30 6 1

23 3

2,605 812 886 618 289 56 1,626 1,762

Current assets Loans and advances Other current financial assets Cash and cash equivalents

375 506 1,261

2 54 22

-

-

-

377 560 1,283

Total

6,524

1,671

11

37

26

8,269

Current assets Loans and advances Other current financial assets Cash and cash equivalents Total EUR x million

At 31 December 2011

At year-end 2012, the fair value of mortgages on residential properties held as collateral amounted to EUR 834 million (2011: EUR 1,418 million including the mortgage portfolio of notional EUR 600 million repurchased by the originator

102

Annual Report ROBECO GROEP N.V.

2012

as described in note 29); the fair value of securities held as collateral in 2011 amounted to EUR 2 million. The effect of over-collateralization for individual assets has been eliminated in these amounts.


Loan loss allowance Movements in the loan loss allowance account during the year were as follows.

Should a residential mortgage client be confronted with financial difficulties, Robeco Direct N.V. has the capacity to apply various mitigants to address these. As of year-end the financial impact, in so fare not already recognized in the loan loss allowance, are deemed to be negligible. 2012

EUR x million

2011

Designated at fair value Loans and through profit advances or loss

Total

Designated at fair value Loans and through profit advances or loss

Total

Balance at 1 January Charge for the year Amounts written off and other charges

1 -

1 2 –3

1 3 –3

1 1 –2

1 -

2 1 –2

Balance at 31 December

1

-

1

-

1

1

Aging analysis of loans past due but not impaired by class of financial asset

EUR x million

< 30 days past due

> 30 ≤ 60 days past due

> 60 ≤ 90 days past due

> 90 days past due

Total

At 31 December 2012 Non-current assets Financial assets Designated at fair value through profit or loss Loans and advances

-

-

-

-

-

1

1

-

1

3

Total

1

1

-

1

3

Non-current assets Financial assets Designated at fair value through profit or loss Loans and advances

18

3

2

-

23

1

1

-

1

3

Total

19

4

2

1

26

EUR x million

At 31 December 2011

Interest rate risk Interest rate risk is governed by interest rate risk policies, which are approved by the Asset and Liability Committee and the Management Board of Robeco Direct N.V. Interest rate risk relates to the asset and liability management activities conducted by the Company. The sensitivity of

trading book positions to changes in interest rates is measured, monitored and controlled as an integral part of market risk. Interest rate risk in the banking book is part of the Pillar II capital adequacy assessment. Interest rate risk is measured through the Value at Risk of

Financial Statements

2012

103


Notes to the consolidated statement of financial position

equity on a mark-to-market (fair value) basis. Value at Risk is calculated based on historical simulation, seven years’ price history, a 99% one-tailed confidence level and a 1-month holding period for all investment books, with the exception of trading books. The Value at Risk at 31 December 2012, at a 99% confidence level and 1-month holding period, amounted to EUR 7 million (31 December 2011: EUR 4 million) versus a limit of EUR 15 million, excluding the trading positions included in the Market Risk Value at Risk. Given the positions in the investment books, the Value at Risk calculations provide senior management with insight into a potential loss threshold (EUR 7 million at year-end) and the (inverse) probability (1%) that this threshold is exceeded, due to extreme interest rate movements in the holding period. The main benefit of the historical simulation approach is that it does not rely on statistical assumptions regarding the price/interest rate changes. The main disadvantage is the relative importance of the definition of the sample period and the implicit assumption that the 7-year history is representative of the next holding period. From a risk management perspective, therefore, the Value at Risk calculations are complemented by several trading controls. Delta vectors are calculated representing the absolute change in the market value of equity following from a 1 basis point shock into a single maturity (time bucket) of the yield curve. Level control is implemented to control the overall level of deltas. Curvature control is in place to detect positions that have an extreme barbell character. Barbell positions tend to be duration-neutral. Finally, steepness control restricts an unequal distribution of positive and negative deltas over the time buckets. Additional risk measures applied by the Company are: Income at Risk, Earnings at Risk and Equity at Risk. – Income at Risk is a short-term indicator defined as a possible decline in interest income during the next 12 months if interest rates change by a maximum size compared to the interest income if interest rates stay constant. The statement of financial position is assumed to be stable. Income at Risk is calculated by running five interest rate scenarios (baseline +200 basis points, baseline -200 basis points, flattening, steepening and forward curve) and by determining the worst interest income downswing for the next 12 months.

104

Annual Report ROBECO GROEP N.V.

2012

– Earnings at Risk measures an estimated change in earnings when interest rates change. Earnings at Risk is calculated during the first and second 12-month period after the reporting date, based on scenarios of gradual shifts away from the yield curve, over the course of 12 months, to a value of 200 basis points above and below the baseline projection. – Equity at Risk measures long-term interest rate risk. It expresses the sensitivity of the market value of equity to interest rate fluctuations and is defined as the relative (%) change of the market value of equity resulting from a parallel shift of the relevant yield curves of 100 basis points. For regulatory reporting, shifts of 200 basis points are used. The management of Robeco Direct N.V. receives interest rate risk reports on a weekly basis. The Asset and Liability Committee receives monthly interest rate risk reports containing an extensive analysis of the interest rate risk exposures and their changes. The report includes a description of market developments, an explanation of changes in the value of the different risk measures, a description of cash flow developments and activities related to portfolio maintenance. It also contains an outlook for the next period. The tables o the next pages summarize the Company’s exposure to interest rate risk. They contain the Company’s assets and liabilities measured at carrying amounts, categorized by the earlier of contractual repricing and maturity dates. The carrying amounts of derivative financial assets which are principally used to reduce the Company’s exposure to interest rate movements are included in ‘Other derivates’. The off-balance sheet gap represents the net notional amounts of all interest-rate sensitive derivative financial instruments. Expected repricing and maturity dates do not differ significantly from the contractual dates, except for the maturity of EUR 845 million (2011: EUR 900 million) of ‘Loans and advances’ and EUR 6,055 million (2011: EUR 7,343 million) of ‘Interest-bearing loans due to customers and banks’ up to one month, of which 80% (2011: 78%) represents balances on savings accounts considered by the Company as a relatively stable core source of funding for its operations.


Up to 1 month

1-3 months

3-12 months

1-5 years

More than 5 years

Noninterestbearing

Total

209 -

456 -

6 -

1,579 -

177 -

77 -

2,504 -

16 537

3 95

46

464 685

295 219

76 4

854 1,586

Derivative financial instruments

4

-

8

1

-

1

14

Current assets Loans and advances Financial assets held for trading Other current financial assets Other receivables Derivative financial instruments Cash and cash equivalents

87 99 847

108 178 4 -

98 86 449 -

28 -

81 -

37 343 7 193 1 -

330 538 733 193 5 847

1,799

844

693

2,757

772

739

7,604

-

38

-

-

-

-

38

28 -

2 -

38 -

1 -

211 -

75 4

211 75 69 4

Current liabilities Interest-bearing loans due to customers Interest-bearing loans due to banks Total return swaps Other derivative financial instruments Financial liabilities at fair value Financial liabilities at amortized cost Other non-financial liabilities

5,313 735 -

-

8 -

1 -

91 -

3 27 162 295

5,404 738 27 8 162 1 295

Total liabilities

6,076

40

46

2

302

566

7,032

On-balance sheet interest sensitivity gap

– 4,277

804

647

2,755

470

173

572

Off-balance sheet interest sensitivity gap

392

24

521

– 518

– 419

-

– 3,885

828

1,168

2,237

51

173

EUR x million

At 31 December 2012 Non-current assets Financial assets Available-for-sale Held-to-maturity Designated at fair value through profit or loss Loans and advances

Total assets At 31 December 2012 Non-current liabilities Subordinated loans Other interest-bearing loans and borrowings Total return swaps Other derivative financial instruments Other non-current liabilities

Total interest sensitivity gap

Financial Statements

2012

105


Notes to the consolidated statement of financial position

Up to 1 month

1-3 months

3-12 months

1-5 years

More than 5 years

Noninterestbearing

Total

311 -

482 -

6 -

1,743 56

56 -

88 -

2,686 56

43 587

13 89

39 32

916 773

608 277

61 4

1,680 1,762

Derivative financial instruments

4

3

6

-

2

1

16

Current assets Loans and advances Financial assets held for trading Other current financial assets Other receivables Derivative financial instruments Cash and cash equivalents

61 114 1,283

168 123 2 -

102 1 323 2 -

72 -

40 -

46 390 207 -

377 503 560 207 4 1,283

Total assets

2,403

880

511

3,560

983

797

9,134

-

38

-

-

-

-

38

108 -

9 -

39 -

-

215 2 -

114 3 15

215 114 161 15

Current liabilities Interest-bearing loans due to customers Interest-bearing loans due to banks Total return swaps Other derivative financial instruments Financial liabilities at fair value Financial liabilities at amortized cost Other non financial liabilities

6,119 1.153 5 -

8 1 -

2 1 -

37 2 -

16 -

34 5 192 322

6,182 1,187 5 7 192 2 322

Total liabilities

7,385

56

42

39

233

685

8,440

On-balance sheet interest sensitivity gap

– 4,982

824

469

3,521

750

112

694

Off-balance sheet interest sensitivity gap

460

952

434

– 747

– 1,100

-

– 4,522

1,776

903

2,774

– 350

112

EUR x million

At 31 December 2011 Non-current assets Financial assets Available-for-sale Held-to-maturity Designated at fair value through profit or loss Loans and advances

At 31 December 2011 Non-current liabilities Subordinated loans Other interest-bearing loans and borrowings Total return swaps Other derivative financial instruments Other non-current liabilities

Total interest sensitivity gap

106

Annual Report ROBECO GROEP N.V.

2012


The following liability items are part of the IAS 39 category Other financial liabilities: Subordinated loans, Other interest-bearing loans and borrowings, Other non-current liabilities, Interest-bearing loans due to customers and Interest-bearing loans due to banks. Total return swaps and Other derivative financial instruments are part of the IAS 39 category Held for trading. Liquidity risk Liquidity risk relates to the Company’s banking activities. The Company is exposed to daily calls on its available cash resources from overnight deposits, maturing deposits and other financial instruments, non-maturity retail saving accounts, guarantees and commitments, and from margin and other calls on cash-settled derivative financial instruments. The Company does not maintain cash resources to meet all these needs as experience shows that withdrawal of funds (mainly retail savings) usually goes smoothly and a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The management of Robeco Direct N.V. monitors the in-and outflow on a daily basis and on a monthly basis the liquidity position is discussed within the management of Robeco Direct NV. The Asset and Liability Committee monitors the liquidity position of the asset and liability management activities on a monthly, and, if necessary, on an ad hoc basis. The asset and liability management activities of the Company can best be described as a liability-driven banking operation. Entrusted funds come predominantly from savings from retail clients, whereby statistical research and behavioral observation based savings are matched by corresponding investments. As part of the ongoing efforts to improve the risk management framework and in line with the upcoming Basel III regulations for liquidity risk, management, in close cooperation with Group Risk Management and Group Finance, has further enhanced its liquidity risk infrastructure enabling management to swiftly respond to potential liquidity opportunities and risks. The Asset and Liability Committee receives a monthly liquidity risk report in which daily, weekly and monthly liquidity indicators are shown for normal and stressed circumstances. The report contains assessments on potential clients’ behavior and the most recent insights

on the marketability of financial assets held. The analysis made is in supplement to the liquidity reports as prepared for regulatory purposes. As part of a regular process conducted in 2012, the internal scenarios were reviewed, taking market conditions and regulations into consideration. Liquidity of the Company and its asset management entities is separately monitored by Group Treasury on a daily basis, so that cash positions and required currency exposure can be optimized. This has proven to be helpful in efficiently supporting the process of distributing dividends to the parent company during the year. Group Finance, in close cooperation with Group Treasury, manages the cash pools and cash and cash equivalents which cannot be distributed in line with the minimum capital requirements on centralized accounts. Cash and cash equivalents balances are reported to the CFO on a regular basis. The table on the net page summarizes the maturity profile of the Company’s financial assets and liabilities as at 31 December. Trading derivatives are shown at fair value in a separate column. All derivatives used for hedging purposes are shown by maturity, based on their contractual undiscounted repayment obligations. Repayments which are subject to notice are treated as if notice were to be given immediately. However, the Company expects that many retail customers will not request repayment on the earliest possible date the Company could be required to pay and the table does not reflect the expected cash flows indicated by the Company’s deposit retention history. Mortgage portfolios are included on the basis of their weighted average lives. Equity securities are classified as no maturity, unless they concern participations in special-purpose companies, established for the issuance of bonds. In those cases the maturity of the equity equals that of the issued bonds. Financial instruments held for trading (other than equities) are classified based on the maturity dates of these instruments. Future interest receivables have been included in the line item Other receivables and future interest payables in the line item Other non-financial liabilities.

Financial Statements

2012

107


Notes to the consolidated statement of financial position

On demand

Up to 1 month

1-3 months

3-12 months

1-5 years

More than 5 years

No maturity

Total

-

-

-

-

2,287 -

161 -

77 -

2,525 -

-

-

-

-

464 564

269 1,016

67 4

800 1,584

Derivative financial instruments

-

2

-

2

13

2

-

19

Current assets Loans and advances Financial assets held for trading Other current financial assets Other receivables Derivative financial instruments Cash and cash equivalents

847

106 83 67 -

74 129 72 4 -

144 72 512 86 -

25 430 -

91 169 -

6 343 2 -

330 531 724 826 4 847

Total undiscounted financial assets

847

258

279

816

3,783

1,708

499

8,190

Total undiscounted non-derivative financial assets

847

256

275

814

3,770

1,706

499

8,167

-

-

-

-

-

38

-

38

-

-

-

-

-

211

-

211

-

2 -

-

14 -

43 46 2

32 20 2

-

75 82 4

Current liabilities Interest-bearing loans due to customers Interest-bearing loans due to banks Total return swaps Other derivative financial instruments Financial liabilities at fair value Financial liabilities at amortized cost Other non-financial liabilities

4,346 2 -

968 738 144

1 102

27 6 34 41

1 21

91 140 17

-

5,405 740 27 7 174 1 325

Total undiscounted financial liabilities

4,348

1,852

103

122

113

551

-

7,089

Total undiscounted non-derivative financial liabilities

4,348

1,850

102

75

24

499

-

6,898

576

-

-

-

-

-

-

576

â&#x20AC;&#x201C; 4,077

â&#x20AC;&#x201C; 1,594

176

694

3,670

1,157

499

525

EUR x million

At 31 December 2012 Financial assets Non-current assets Available-for-sale Held-to-maturity Designated at fair value through profit or loss Loans and advances

Financial liabilities Non-current liabilities Subordinated loans Other interest-bearing loans and borrowings Total return swaps Other derivative financial instruments Other non-current liabilities

Commitments and guarantees Net undiscounted financial assets/ liabilities

108

Annual Report ROBECO GROEP N.V.

2012


On demand

Up to 1 month

1-3 months

3-12 months

1-5 years

More than 5 years

No maturity

Total

-

-

-

-

2,344 55

288 -

81 -

2,713 55

-

-

-

-

645 693

870 1,044

54 4

1,569 1,741

Derivative financial instruments

-

1

1

-

5

2

-

9

Current assets Loans and advances Financial assets held for trading Other current financial assets Other receivables Derivative financial instruments Cash and cash equivalents

31 2 1,281

94 41 76 2

75 97 85 2 -

176 417 167 2 -

77 586 5 -

38 261 4 -

2 390 2 -

378 505 555 1,179 13 1,283

Total undiscounted financial assets

1,314

214

260

762

4,410

2,507

533

10,000

Total undiscounted non-derivative financial assets

1,314

213

257

760

4,400

2,501

533

9,978

-

-

-

-

-

38

-

38

-

-

-

-

-

215

-

215

-

1 -

1 -

18 -

76 45 12

38 109 3

-

114 174 15

Current liabilities Interest-bearing loans due to customers Interest-bearing loans due to banks Total return swaps Other derivative financial instruments Financial liabilities at fair value Financial liabilities at amortized cost Other non-financial liabilities

4,897 1 5

1,221 1,186 2 206

8 3 1 63

25 2 7 35

4 45 2 10

9 155 -

1

6,164 1,187 5 3 207 2 320

Total undiscounted financial liabilities

4,903

2,616

76

87

194

567

1

8,444

Total undiscounted non-derivative financial liabilities

4,903

2,613

71

67

73

420

1

8,148

629

-

-

-

-

-

-

629

â&#x20AC;&#x201C; 4,218

â&#x20AC;&#x201C; 2,402

184

675

4,216

1,940

532

927

EUR x million

At 31 December 2011 Financial assets Non-current assets Available-for-sale Held-to-maturity Designated at fair value through profit or loss Loans and advances

Financial liabilities Non-current liabilities Subordinated loans Other interest-bearing loans and borrowings Total return swaps Other derivative financial instruments Other non-current liabilities

Commitments and guarantees Net undiscounted financial assets/ liabilities

Financial Statements

2012

109


Notes to the consolidated statement of financial position

The Company maintains a portfolio of highly marketable and diverse assets, a major part of which are assumed to be easily liquidated in the event of an unforeseen interruption of cash flow. In addition, the bank entity of the Company maintains a statutory deposit with the Dutch Central Bank equal to 1% of customer deposits. In addition, a relatively large cash amount is held at Rabobank Nederland. In accordance with the Company’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and to the Company in particular. Currency risk The Company is exposed to the impact of fluctuations in the prevailing foreign currency rates on its financial position and cash flows. The Management Board sets limits on the level of exposure by currency and in total, which are monitored on a daily basis (trading financial assets and liabilities) or on a monthly basis for non-trading currency exposures as part of managing translation risks as detailed in note 37 Derivative financial instruments. There were no significant exposures in foreign currencies at reporting date. Market risk Market risk is governed by the market risk policies that are approved by the Asset and Liability Committee. The purpose of these policies is to protect the capital of the Company and to allow market risk exposures without duly compromising the Group’s or Bank’s capital or the stability of its earnings. The Company’s use of market risk capacity is primarily oriented towards the facilitation of seeding requests (to build track records or to provide initial or temporary capital), secondary market support and the hedging of structured products issued by the Group. Market risk is calculated using the Value at Risk engines in Rabobank International’s Global Market Risk infrastructure. In line with Rabobank’s methodology for trading portfolios, the Company’s Value at Risk figure is calculated using the historical simulation method with a sample period of twelve months of unweighted daily data (approximately 260 daily scenarios for risk factors). For each instrument, the individual risk factors are defined and taken into account. The historical scenarios with the market risk

110

Annual Report ROBECO GROEP N.V.

2012

factors are obtained from different suppliers and stored in a historical market database. Data are evaluated and diagnosed for data outliers on a daily basis. New regulations with regard to market risk calculations were implemented well before the end of 2011. The Value at Risk of a trading portfolio is the maximum loss in the trading portfolio over a given holding period, at a particular confidence level, assuming that positions cannot be adjusted during the holding period. At a confidence level of 97.5%, for example, the daily VaR figure represents the threshold for the potential trading loss that will not be exceeded in 195 out of 200 trading days. The main objective of the VaR calculation is to provide senior management with insight into this loss threshold and the probability (5 out of 200 days) of exceeding this threshold. To attain this objective, the Value at Risk methodology is able to represent risk in equivalent units across products traded, permitting consolidation, and effective comparison of risk factors across the various trading activities. Several Value at Risk figures are calculated: a VaR at a 97.5% confidence interval, and a 1-day close-out period for limit-setting and daily monitoring purposes. To demonstrate model integrity, a 1-day 99% Value at Risk is back-tested against hypothetical and actual gains and losses, on a daily basis. The main benefit of the historical simulation approach is that it does not rely on statistical assumptions (such as what is known as a normal distribution for the daily returns of trading portfolio assets). The main disadvantage is the relative importance of the definition of the sample period and the implicit assumption that the 260 historical scenarios are representative for the next holding period. Moreover VaR is meant for ‘normal’ circumstances. Therefore, Value at Risk calculations are complemented by trading controls, stress testing and operational restrictions, designed to control behavior in trading areas and risk factors directly. Trading controls aim to prevent concentrations of exposures in risk factors and serve to influence the portfolio structure. Note that limits are more important in terms of the excess/change procedure than trading controls. Transactions may only be undertaken in authorized products to secure correct processing through front-, mid- and back-office systems.


Limits and trading controls are monitored for excesses on a daily basis. Changes in limits and trading controls and excesses require approval from the Head of Global Risk Management, the Asset and Liability Committee or risk committees at a Rabobank Group level, depending on the scope or severity. The Asset and Liability Committee discusses monthly market risk reports. These reports contain a market risk monitor, focusing on the development of Value at Risk and back-test results for the actual and hypothetical gains and losses. Additionally, the report contains requests for limit and trading control changes, as well as a summary of excesses over the reporting period. In addition to the above, a quarterly seeding and co-investment report is discussed in the Asset and Liability Committee.

EUR x million

Non-current assets Financial assets available-for-sale Financial assets held-to-maturity Financial assets designated at fair value through profit or loss Financial assets loans and advances Derivative financial instruments Current assets Loans and advances Financial assets held for trading Other current financial assets Other receivables Derivative financial instruments Cash and cash equivalents

The Value at Risk at 31 December 2012, at a 97.5% one-tailed confidence level and a 1-day holding period, amounted to EUR 0.4 million (31 December 2011: EUR 0.5 million) versus a limit of EUR 2 million (31 December 2011: EUR 2 million).

EUR x million

Fair value of financial assets and liabilities The table below represents the fair value of financial instruments, including those not reflected in the financial statements at fair value. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an armâ&#x20AC;&#x2122;s length transaction.

Non-current liabilities Subordinated loans Other interest-bearing loans and borrowings Employee benefit liability Total return swaps Other derivative financial instruments Other non-current liabilities

With respect to financial instruments carried at fair value, market prices or rates are used to determine the fair value where an active market exists (such as a recognized stock exchange), as it is the best evidence of the fair value of a financial instrument. If no active market price or rate is available, fair values are estimated using present value or other valuation techniques, using inputs based on market conditions existing at the reporting dates.

Current liabilities Interest-bearing loans due to customers Interest-bearing loans due to banks Total return swaps Other derivatives financial instruments Financial liabilities at fair value Financial liabilities at amortized cost

2012

2011

Carrying amount

Fair value

Carrying amount

Fair value

2,504 -

2,504 -

2,686 56

2,686 58

854 1,586 14

854 1,627 14

1,680 1,762 16

1,680 1,797 16

330 538 733 193 5 847

328 538 733 193 5 847

377 503 560 207 4 1,283

378 503 560 207 4 1,283

2012

2011

Carrying amount

Fair value

Carrying amount

Fair value

38

38

38

38

211 80 75

237 80 75

215 51 114

231 51 114

69 4

69 4

161 15

161 15

5,404 738 27

5,404 738 27

6,182 1,187 5

6,182 1,187 5

8 162 1

8 162 -

7 192 2

7 192 1

The values derived from applying these techniques are significantly affected by the choice of valuation model used and the underlying assumptions made concerning factors such as the amounts and timing of future cash flows, discount rates, volatility and credit risk.

Financial Statements

2012

111


Notes to the consolidated statement of financial position

For the valuation of options in structured products, a (standard) option valuation model is used in combination with a â&#x20AC;&#x2DC;Volatility observing Ruleâ&#x20AC;&#x2122; and allows for a differentiation of volatilities for different option maturities. The initial Volatility Rule methodology is set by the Valuation Committee. The following methods and assumptions have been applied in determining the fair values of the financial instruments presented in the table above, both for financial instruments carried at fair value and those carried at cost (for which fair values are provided as a comparison). 1. Trading financial assets and liabilities, financial assets designated at fair value and derivative financial instruments are measured at fair value by reference to quoted market prices when available. If quoted market prices are not available, the fair value is estimated on the basis of appropriate discounted cash-flow models and option valuation models. 2. Financial assets classified as available-for-sale are measured at fair value by reference to quoted market prices when available. If quoted market prices are not available, the fair value is estimated on the basis of appropriate discounted cash-flow models and option valuation models. 3. The fair value of demand deposits and savings accounts with no specific maturity is assumed to be the amount payable on demand at the reporting date, i.e. their carrying amounts at this date. 4. The carrying amount of cash and cash equivalent assets and other assets maturing within 12 months is assumed to approximate their fair values. This assumption is applied to cash and cash equivalent assets and the short-term elements of all other financial assets and liabilities. 5. The fair value of variable rate financial assets is based on the carrying amount until maturity. Changes in the credit quality of loans within the portfolio are not taken into account in determining the fair value. The impact of credit risk is recognized separately by the use of an allowance account which is determined by an individual assessment of the loans as to whether objective evidence of impairment exists. The fair value of the loans is reduced by this allowance account. 6. The fair value of fixed rate loans carried at amortized

112

Annual Report ROBECO GROEP N.V.

2012

cost is estimated using discounted cash-flow calculations based on current market rates offered on similar loans. Changes in the credit quality of loans within the portfolio are not taken into account in determining fair value. The impact of credit risk is recognized separately by the use of an allowance account which is determined by an individual assessment of the loans as to whether objective evidence of impairment exists. The fair value of the loans is reduced by this allowance account. The table on the next page presents the valuation methods used to determine the fair values of financial instruments carried at fair value.


EUR x million

Quoted market prices in active markets Level 1

Valuation techniques â&#x20AC;&#x201C; market-observable inputs Level 2

Valuation techniques â&#x20AC;&#x201C; nonmarket-observable inputs Level 3

Total

31 December 2012 Financial assets Financial assets available-for-sale Government bonds Bank bonds Asset-backed securities Other debt securities Equity securities

Financial assets designated at fair value through profit or loss Government bonds Bank bonds Other debt securities Equity securities

Financial assets held for trading Other debt securities Equity securities

Derivative financial instruments Forward currency contracts Interest rate swaps Total return swaps

Financial liabilities Total return swaps Other derivative financial instruments Interest rate swaps

Financial liabilities at fair value

946 1,060 58 346 17

512 -

17 1 60

946 1,060 587 347 77

2,427

512

78

3,017

396 350 179 47

27 19

1

396 350 206 67

972

46

1

1,019

63 54

132 100

189

195 343

117

232

189

538

-

1 17 1

-

1 17 1

-

19

-

19

-

102

-

102

-

77

-

77

-

77

-

77

-

95

67

162

Financial Statements

2012

113


Notes to the consolidated statement of financial position

Quoted market prices in active markets Level 1

EUR x million

Valuation techniques â&#x20AC;&#x201C; market-observable inputs Level 2

Valuation techniques â&#x20AC;&#x201C; nonmarket-observable inputs Level 3

Total

31 December 2011 Financial assets Financial assets Available-for-sale Government bonds Bank bonds Asset-backed securities Other debt securities Equity securities

975 992 39 320 18

614 -

35 1 63

975 992 688 321 81

2,344

614

99

3,057

405 460 163 38

695 25 16

9 -

695 405 469 188 54

1,066

736

9

1,811

47 64

67 138

187

114 389

111

205

187

503

-

17 2 1

-

17 2 1

-

20

-

20

Financial liabilities Total return swaps

-

119

-

119

Other derivative financial instruments Forward currency swaps Interest rate swaps Equity swaps Swaptions

-

3 159 4 2

-

3 159 4 2

-

168

-

168

-

109

83

192

Financial assets designated at fair value through profit or loss Mortgages Government bonds Bank bonds Other debt securities Equity securities

Financial assets held for trading Other debt securities Equity securities

Derivative financial instruments Interest rate swaps Swaptions Equity swaps

Financial liabilities at fair value

114

Annual Report ROBECO GROEP N.V.

2012


The table below shows transfers between level 1 and level 2 of the fair value hierarchy for financial assets and liabilities measured at fair value. EUR x million

2012

2011

39

90

56

39

investment funds results in a EUR 12 million fair value variance (2011: EUR 11 million).

Transfers from level 1 to level 2 Financial assets available-for-sale -asset-backed securities Transfers from level 2 to level 1 Financial assets available-for-sale -asset-backed securities

This year, ten asset-backed securities moved from Level 2 to Level 1, because recent trades in active markets were observed. Moreover, one asset-backed security (carrying amount: EUR 2 million) transferred from Level 3 to Level 1 this year, as a recent trade in an active market was noted. Four asset-backed securities transferred from Level 1 to Level 2, because their fair values were obtained applying valuation techniques with market-observable inputs as they ceased to be actively traded. Last year, one assetbacked security (carrying amount 2011: EUR 4 million) transferred from Level 1 to Level 3, because it ceased to be actively traded and its valuation incorporated non-marketobservable inputs, of which the effect on its price was significant. Certain asset-backed securities (carrying amount 2012: EUR 9 million; 2011: EUR 16 million) transferred from Level 2 to Level 3, as the effect of non-market observable inputs on prices calculated by the valuation models increased from minor to significant, while other asset-backed securities (carrying amount 2012: EUR 20 million; 2011: EUR 30 million) transferred from Level 3 to Level 2, because the effect of non-market observable inputs on their prices calculated by valuation models decreased from significant to minor. For Level-3 trading financial assets, the Bank may adjust its latest valuation to reduce the time lag between the period of valuation and the availability of additional information from independent fund managers at the reporting date. The fair value sensitivity of Level-3 financial assets mainly comprises trading and co-investment equities and shows that a 5% movement in the valuation of the underlying

Financial Statements

2012

115


Notes to the consolidated statement of financial position

Movements in Level 3 financial instruments measured at fair value The following table shows a reconciliation between the opening and closing amounts of Level 3 financial assets and liabilities which are recorded at fair value.

At 1 January 2012

Total gains/ losses recorded in income statement

Total gains/ losses recorded in other comprehensive income

Purchases

35 1 63 99

8 8

1 1

9 9

-

Financial assets held for trading Equity securities

187

Total level 3 financial assets

EUR x million

Financial assets Financial assets available-for-sale Asset-backed securities Other debt securities Equity securities

Financial assets designated at fair value through profit or loss Bank bonds Other debt securities

Financial liabilities Total level 3 financial liabilities Total net level 3 financial assets / liabilities

Sales

Transfers to level 2*

Transfers from level 1 and level 2*

At 31 December 2012

-

– 14 –4 – 18

– 22 – 22

9 9

17 1 59 77

-

1 1

–9 –9

-

-

1 1

–4

-

12

–5

-

-

190

295

4

1

13

– 32

– 22

9

268

83

–9

-

–7

-

-

-

67

212

13

1

20

– 32

– 22

9

201

* Once a year, transfers from and to Level 3 are determined at 31 December.

116

Annual Report ROBECO GROEP N.V.

2012


At 1 January 2011

Total gains/ losses recorded in income statement

Total gains/ losses recorded in other comprehensive income

Purchases

50 2 63 115

–1 –1 –2

–2 3 1

-

–1 –1

Financial assets held for trading Equity securities

161

Total level 3 financial assets

EUR x million

Financial assets Financial assets available-for-sale Asset-backed securities Other debt securities Equity securities

Sales

Transfers to level 2*

Transfers from level 1 and level 2*

At 31 December 2011

1 1

–2 –4 –6

– 30 – 30

20 20

35 1 63 99

-

10 10

-

-

-

9 9

10

-

49

– 33

-

-

187

276

7

1

60

– 39

– 30

20

295

97

2

-

– 17

1

-

-

83

179

5

1

77

– 40

– 30

20

212

Financial assets designated at fair value through profit or loss Bank bonds Other debt securities

Financial liabilities Total level 3 financial liabilities Total net level 3 financial assets / liabilities

* Once a year, transfers from and to Level 3 are determined at 31 December.

Gains or losses on Level 3 financial instruments Gains or losses on Level 3 financial instruments included in the income statement for the years 2012 and 2011 comprise:

EUR x million

Realized gains/losses

2012 Unrealized gains/losses

Total

Realized gains/losses

2011 Unrealized gains/losses

Total

Impairment losses

-

–2

–2

-

–3

–3

Impairment losses reversal

-

2

2

-

1

1

Results on financial instruments available-for-sale

8

-

8

-

-

-

Results on financial instruments held for trading Results on financial instruments designated at fair value through profit or loss

1

–5

–4

5

5

10

–2

11

9

-

–3

–3

7

6

13

5

-

5

Total gains or (losses) recognized in profit or loss

Financial Statements

2012

117


Notes to the consolidated statement of financial position

53. Related parties

The following funds, temporary controlled by the Company due to seed capital activities, are currently included in the consolidated financial statements of Robeco Groep N.V.

The following subsidiaries are currently included in the consolidated financial statements of Robeco Groep N.V.:

% equity interest Country of incorporation

Name Analytic Investment Management Trading N.V.* Canara Robeco Asset Management Company Ltd.** Corestone Investment Managers A.G. Harbor Capital Advisors Inc. Harbor Funds Distributors Inc. Harbor Services Group Inc. KenTyde B.V. Robeco A.G. Robeco Bestuurder Bewaarder B.V. Robeco Direct N.V. Robeco General Partner European II B.V. Robeco General Partner Funds B.V. Robeco General Partner Global II B.V. Robeco General Partner Sustainable B.V. Robeco France S.A.S. Robeco Hong Kong Ltd. Robeco India Holding B.V. Robeco Institutional Asset Management B.V. Robeco Institutional Asset Management US Inc. Robeco International Holding B.V. Robeco Investment Management Inc. Robeco Luxembourg S.A. Robeco Manager BSR B.V. Robeco Manager Clean Tech II B.V. Robeco Manager European III B.V. Robeco Manager Global III B.V. Robeco Manager Responsible II B.V. Robeco Miami B.V. Robeco Nederland B.V. Robeco SAM Clean Tech III General Partner LLC Robeco Securities Lending B.V. Robeco Securities LLC Robeco Taiwan Ltd. Robeco Teda (Tianjin) Investment Management Co. Ltd ** Robeco Teda (Tianjin) Equity Investment Management Co. Ltd ** Robeco Trust Company Robeco US Holding Inc. Ro-Boetie S.A.S SAM Group Holding A.G. *** SAM Indexes GmbH *** SAM Private Equity A.G. *** SAM Research A.G. *** SAM Sustainable Asset Management A.G. *** / **** Stichting Deelnemingen Robeco Groep Stichting Sociaal Fonds Robeco Sustainable Asset Management USA Inc. **** Transtrend B.V.

118

Annual Report ROBECO GROEP N.V.

2012

2011

49

80 49

100 100 100 100 81 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51

100 100 100 100 81 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51

51

51

United States United States France Switzerland Switzerland Switzerland

100 100 100 -

100 100 100 100 100 100

Switzerland Switzerland

100

100 100

Netherlands Netherlands United States Netherlands

100 100

100 100

Belgium India Switzerland United States United States United States Netherlands Switzerland Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands France Hong Kong Netherlands Netherlands United States Netherlands United States Luxembourg Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands United States Netherlands United States Taiwan China China

2012

% equity interest Name

Country of incorporation

2012

2011

Ethias Protection Plus II Kentyde Diversified Fund Robeco Asian Stars Equities Robeco Global Aggressive Equities Robeco Pension Matching Portfolio Robeco Pension Return Portfolio

Luxembourg Cayman Islands Luxembourg Luxembourg Luxembourg Luxembourg

91 72 100 100 100

100 96 -

In addition to these subsidiaries, the following related parties can be identified: – Rabobank Group, consisting of the parent entity of Robeco Groep N.V., Rabobank Nederland, and entities under the common control of the Company – Stichting Pensioenfonds Robeco – SET Venture Partners, an associate powered by Chrysalix and Robeco B.V. – SET Co-Investment C.V.

* This entity was liquidated in 2012. ** Jointly controlled *** The subsidiaries were merged into SAM Sustainable Asset Management A.G. as from 1 January 2012. **** Effective 14 January 2013, SAM Sustainable Asset Management AG changed its name into RobecoSAM AG and Sustainable Asset Management USA Inc. changed its name into RobecoSAM USA Inc. Also, as from that same date, SAM Sustainable Asset Management AG, a wholly-owned subsidiary of RobecoSAM AG, was incorporated.


paid to Rabobank on subordinated loans, among other things, as well as interest received and results realized on investments not part of the banking operations. Results on financial instruments relates to results on derivative financial instruments entered into with Rabobank for an amount of EUR 4 million (2011: EUR 61 million).

The table below shows the total income and expenses, as well as positions in the statement of financial position, which are the result of transactions with the aforementioned related parties for the relevant year. Total related parties 2012

2011

Income statement regarding related parties Operating income Operating expenses

– 47 18

– 62 18

Operating result

– 65

– 80

Finance income / costs Results on financial instruments held for trading

– 13 –4

–8 61

Result before tax

– 82

– 27

EUR x million

Total related parties EUR x million

2012

2011

Statement of financial position regarding related parties Assets Non-current assets Current assets

1,043 699

896 1,013

Total assets

1,742

1,909

Total related parties 2012

2011

Equity and liabilities Total equity

1,123

1,365

Non-current liabilities Current liabilities

384 364

411 1,043

Total liabilities

748

1,454

1,871

2,819

EUR x million

Total equity and liabilities

Operating income, including interest results, is derived from transactions with Rabobank Group to an amount of EUR 29 million (2011: EUR 33 million). Operating expenses consist mainly of expenses paid to Stichting Pensioenfonds Robeco relating to long-term employee benefits. Operating expenses paid to Rabobank Group amounted to EUR 1 million (2011: EUR 1 million). Finance costs and income of EUR 13 million (2011: EUR 8 million) related to interest

As a result of the core investment management activities, for which management fees and other fees are received, the Company is also related to the managed funds. For supervision purposes, several committees are in place in which the majority of members are independent Supervisory Board members within the meaning of the Corporate Governance Code. The role of each committee and the members of these committees are disclosed in the Annual Reports of the funds concerned. The transactions for these related parties regarding management fees received from funds and maintenance fees paid are included in operating income of the Company. The assets shown consist of investments, derivative financial instruments and cash and short term deposits for which the Company has relationships with Rabobank for the amount of EUR 1,702 million (2011: EUR 1,881 million). Liabilities for the amount of EUR 397 million (2011: EUR 1,099 million) relate to equity and loans supplied by Rabobank as well as, among other things, a total return swap for which Rabobank is the counterparty. Terms and conditions The sales to and purchases from related parties are made at arm’s length market prices. Outstanding receivables or payables at year–end are unsecured and interest-free, with settlement being in cash. The Company has not formed a provision for doubtful debts relating to amounts owed by related parties (2011: nil), because the risks involved are not considered material enough to do so. This assessment is made each year by examining the financial position of the related party and the market in which the party operates. Remuneration of key management personnel Both the Management Board and the Supervisory Board are acknowledged as key management on account of their authority in and responsibility for planning, directing and controlling activities of the Company.

Financial Statements

2012

119


Notes to the consolidated statement of financial position

Board. Remuneration of the Management Board in 2012 and 2011 is set out below.

In 2010, the Company adopted the new Dutch Banking Code standard for Management Board members. Furthermore, the deferral scheme for variable remuneration of Management Board members was changed, resulting in a four-year payment period.

EUR x thousand

Pursuant to the Dutch Corporate Governance Code, the remuneration report is included in the Report of the Supervisory Board. With respect to the Management Boardâ&#x20AC;&#x2122;s remuneration, the presentation below deviates from this Code. As it is believed that this provides more useful information, the remuneration of the members of the Management Board is presented in a way that deviates from the best practice as mentioned in the Dutch Corporate Governance Code. This results in the basic salary and performance-related remuneration granted being presented on an individual basis and the employee benefits expense summarized as a total amount. The annualized basic salary and performance-related remuneration granted are set out below: Base salary 2 at year-end EUR x thousand

R.M.S.M. Munsters L.M.T. Boeren H.W.D.G. Borrie H.A.A. Rademaker J.B.J. Stegmann 1 Total

Performance-related remuneration granted

2012

2011

2012

2011

575 400 400 400 400

575 400 400 400 400

485 347 337 337 337

466 338 351 330 257

2,175

2,175

1,843

1,742

Employed as from 15 March 2011. The actual basic salary received is related to the time of employment. 2 Basic salary includes vacation allowance. 1

Of the performance-related remuneration granted, 18% (2011: 18%) is short term. Total basic salary and variable remuneration paid to current Management Board members in 2012 amounted to EUR 3.6 million (2011: EUR 2.9 million). Besides salaries and benefits, no severance payments were made to former key management in 2012 and 2011. Salaries and benefits of EUR 5.2 million (2011: EUR 4.3 million) were awarded to members of the Management

120

Annual Report ROBECO GROEP N.V.

2012

2012

2011

Base salary 1 Variable remuneration (short- and long-term component) 2 Pension costs Other costs 3

2,175

2,068

1,803 596 615

1,590 561 73

Total

5,189

4,292

Includes vacation allowance. Of the variable remuneration 49% is long term and 51 % related to short term and the value development of CARs in 2012. 3 Includes social-security costs, social allowances, mortgage suppletion and one-off income taxation 2012. 1

2

Option rights consist of the right to buy shares in the funds over a period of five years, the value of the shares being not less than the opening price on the first trading day following the grant date. Since 2010, option rights are no longer granted to employees. The theoretical value of the currently outstanding option rights granted to the Management Board amounts to EUR 15,000 (2011: EUR 13,000). The theoretical value of all currently outstanding option rights granted to employees amounts to EUR 2.4 million (2011: EUR 2.2 million). The Company has a Long-term Incentive Plan in place for key employees within the Company. Since 2011, a new Long-term Incentive Plan has been in place, containing Cash Appreciation Rights (CARs). The former Long-term Incentive Plan consisted of an Equity Notes Plan, with equity notes ultimately vesting on 31 December 2016. Since 2010, Long-term Incentive Plan rewards are no longer granted to members of the Management Board. The purpose of the Long-term Incentive Plan is to reward and retain key employees of the Company by providing them with a share of the value of Robeco Groep N.V. The stake consists of units representing a cash value directly related to the Robeco Groep N.V. valuation based on the result for the year from continuing operations. CARs and equity notes will produce a cash yield of 5% of the basic value (award date value) per annum until the vesting date. CARs and equity notes will under no circumstances confer any vested contingent or conditional


rights to or any interest in income or assets of any group company, but will merely represent an unfunded, unsecured notional credit to a participant’s account under the plan, for purposes of facilitating the calculation of any value which may become due to a participant upon vesting at a later date. The total number of outstanding Long-term Incentive Plans of current Management Board members amounted to 10,169 CARs and 866 equity notes at the end of 2012 (end of 2011: 7,920 CARs and 1,657 equity notes). The outstanding number granted consists of equity notes awarded as part of the Long-term Incentive Plan as well as equity notes and CARs that result from a mandatory conversion of deferred cash compensation. No mortgages have been granted by the Company to members of the Management Board. Remuneration of members of the Supervisory Board is set out below. Members of the Supervisory Board EUR x thousand

D.P.M. Verbeek 1 A. Bruggink A.C. Dorland 2 S.E. Eisma 1 G. Izeboud P.J.A. van Schijndel Ph. Lambert Total

2012

2011

95 60 53 70 80 50 70

95 60 70 80 50 70

478

425

Remuneration is exclusive of VAT. A member of the Supervisory Board since 13 February 2012.

1

54. Events after the reporting date Sale of Robeco Groep N.V. On 19 February 2013 ORIX Corporation (ORIX), Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., (Rabobank) and Robeco Groep N.V., (Robeco) announced that ORIX is acquiring approximately 90.01% of the equity in Robeco from Rabobank. Closing of the transaction is subject to legal and regulatory approvals, which are expected to be granted in the second half of 2013. Part of the agreement is a strategic alliance between Rabobank and ORIX. This includes Rabobank retaining a 9.99% share in Robeco, and continuing to cooperate in maintaining and expanding Robeco’s business platform. ORIX and Rabobank have agreed that Robeco’s banking activities, which are only based in the Netherlands, will be transferred to Rabobank with Robeco retaining its client service relations. ORIX is committed to support Robeco’s 2010-2014 strategy, its services to clients, its investment processes and teams, based on Robeco’s long term commitment to deliver value to clients. Robeco Group NV’s legal structure will remain unchanged, as will the current governance and reporting lines from Robeco’s subsidiaries. The potential impact of the transaction on balance sheet items, such as financial instruments and deferred tax assets, of the Company will be analysed as part of the closing process. Contingent commitments relating to the completion of the transaction are disclosed as Contingent assets and liabilities.

2

Total remuneration costs are included in the Employee benefits expense. The Management Board’s remuneration is set by the Supervisory Board on the recommendation of the Nomination, Remuneration & Corporate Governance Committee. The total remuneration package is compared with external market conditions every two years and adjusted accordingly, if necessary.

Financial Statements

2012

121


Notes to the consolidated statement of cash flows

55. Net cash flows from operating activities An adjustment is made to the operating result for the depreciation of property, plant and equipment and the amortization of intangible assets. The results on financial assets relate to gains and losses from financial assets available-for-sale, designated at fair value through profit and loss and held for trading.

56. Net cash flows from investing activities Interest received relates to the amounts received on the current accounts of the Company. The interest received from banking operations is included in the operating result. Purchases and sales of property, plant and equipment and financial assets are based on the consolidated purchase and selling prices. Deferred payments on the purchases and sales are reported as movements in working capital (short-term payments) or under long-term liabilities for the payment obligations due after more than one year. Intangible assets relate to capitalized software. In general, movements in purchases and proceeds of financial assets are a direct consequence of the Companyâ&#x20AC;&#x2122;s regular banking activities.

57. Net cash flows from financing activities Interest paid relates to the amounts paid on the current accounts and the long-term liabilities of the Company. The interest paid from banking operations is included in the operating result.

122

Annual Report ROBECO GROEP N.V.

2012


123


Financial Statements

124

Annual Report ROBECO GROEP N.V.

2012


Company

Financial Statements


Company income statement for the year ended 31 December

2012

Notes

EUR x million

2011

Income statement Operating income

-

-

Non-operating income Interest income

-

Interest expense

-

-

Result before tax

-

3

Tax

-

â&#x20AC;&#x201C;1

197

132

197

134

Income from investments in group and associated companies after tax Result for the year

126

3

Annual Report ROBECO GROEP N.V.

2012

59


Company statement of comprehensive income for the year ended 31 December

2012

2011

197

134

111

–7

– 17

–4

(Reversal) impairment of financial assets available-for-sale

– 14

6

Income tax effect

– 20

2

60

–3

–3

–5

–3

–5

-

11

Change in valuation allowance deferred tax asset

-

–2

Other items

1

-

Other comprehensive income for the year, net of tax

58

1

Total comprehensive income for the year, net of tax

255

135

EUR x million

Result for the year

Notes

Other comprehensive income Net unrealized results on financial assets available-for-sale Realized gains and losses on financial assets available-for-sale reclassified to the income statement on disposal

Net result on hedge of net investments

Exchange differences on translation of foreign operations

Financial Statements

2012

127


Company statement of financial position at 31 December

2012

Notes

EUR x million

2011

Assets Non-current assets Investments in subsidiaries and associates

60

1,302

Total non-current assets Deferred tax assets

61

1,267 1,302

1,267

-

4

Current assets Accounts receivable Subsidiaries and associates

6

Other receivables

-

Cash and cash equivalents

62

7 4 6

11

6

87

Total current assets Total assets

12

98

1,314

1,369

Equity and liabilities Shareholders’ equity Issued share capital

5

5

744

744

Available-for-sale reserve

24

– 36

Foreign currency translation reserve

–5

–2

Other revaluation reserve

20

31

Share premium

Retained earnings

332

Total shareholders’ equity

623

63

1,120

1,365

64

-

-

Non-current liabilities Deferred tax liability Current liabilities 65

Subsidiaries Other liabilities

3

21

1

Total current liabilities

194

4

Total liabilities

194

4

1,314

1,369

Total equity and liabilities

128

173

Annual Report ROBECO GROEP N.V.

2012


Notes to the company financial statements

58. General accounting policies

62. Cash and cash equivalents

The accounting policies used in the company financial statements are based on Part 9 of Book 2 of the Dutch Civil Code. The valuation of the items is identical to the valuation used in the consolidated financial statements, except for the investment in subsidiaries which is recognized at net asset value following Dutch GAAP accounting.

Cash and cash equivalents consist of cash at banks.

59. Income from investment in subsidiaries after tax EUR x million

Robeco Institutional Asset Management B.V. Robeco International Holding B.V. Robeco Direct N.V. Robeco Nederland B.V. Total share of result of subsidiaries and associates at 31 December

2012

2011

44 77 48 28

43 54 5 30

197

132

60. Investment in subsidiaries Movements in Investment in subsidiaries were as follows: 2012

2011

Value of subsidiaries and associates at 1 Januari Revaluation of subsidiaries Net result for the financial year Dividend

1,267 58 197 â&#x20AC;&#x201C; 220

1,397 1 132 â&#x20AC;&#x201C; 263

Investment in subsidiaries and associates at 31 December

1,302

1,267

EUR x million

The Company filed Section 403 declarations for the financial year 2012 for the following companies: Robeco Direct N.V. Robeco International Holding B.V. Robeco Nederland B.V. Robeco India Holding B.V. Robeco Miami B.V.

61. Deferred tax asset The deferred tax asset in 2011 relates to the liquidation losses of Analytic Investment Management Trading N.V.

Financial Statements

2012

129


Notes to the company financial statements

63. Shareholders’ equity Attributable to equity holders of the parent

EUR x million

Share premium

Availablefor-sale reserve

Foreign currency translation reserve

Other revaluation reserve

Retained earnings

Total

5 -

744 -

– 36 60

–2 –3

31 -

623 197 1

1,365 197 58

Total comprehensive income Dividends Amortization of intangible assets

-

-

60 -

–3 -

– 11

198 – 500 11

255 – 500 -

At 31 December 2012

5

744

24

–5

20

332

1,120

Issued share capital At 1 January 2012 Result for the year Other comprehensive income

Attributable to equity holders of the parent

EUR x million

Share premium

Availablefor-sale reserve

Foreign currency translation reserve

Other revaluation reserve

Retained earnings

Total

5 -

1,119 -

– 33 –3

–8 6

41 -

481 134 –2

1,605 134 1

Total comprehensive income Dividends Amortization of intangible assets

-

– 375 -

–3 -

6 -

– 10

132 10

135 – 375 -

At 31 December 2011

5

744

– 36

–2

31

623

1,365

Issued share capital At 1 January 2011 Result for the year Other comprehensive income

Issued share capital The authorized share capital amounts to EUR 22,689,015 (2011: EUR 22,689,015), consisting of 22,689,015 shares with a nominal value of EUR 1 each, of which EUR 4,537,803 is paid in full. Shareholders are entitled to receive (interim) dividend when declared and are entitled to vote on a one-vote-per share basis at the Company’s shareholder meetings. Share premium The share premium was set at a price above the par value at the time of the sale of the shares. In 2011, a dividend of EUR 175 million for 2010 and an interim dividend of EUR 200 million for 2011 were paid to the equity holders of the parent.

130

Annual Report ROBECO GROEP N.V.

2012

Available-for-sale reserve The available-for-sale reserve concerns the fair value changes in the available-for-sale investments. Foreign currency translation reserve The foreign currency translation reserve includes the exchange rate differences arising from the translation of the financial statements of foreign subsidiaries. It also includes the effect of hedging the net investments in the foreign subsidiaries. Retained earnings Movements result from the increase of the result for the year and an adjustment to the deferred tax assets regarding US State and local taxes. In addition, in 2012, a dividend of EUR 134 million for 2011 and an interim


dividend of EUR 366 million for 2012 were paid to the equity holders of the parent. A restriction applies to capital distributions from retained earnings equal to the amount of the negative foreign currency translation reserves and other revaluation reserves. Apart from these reserves the retained earnings include an amount of EUR 2.0 million (2011: EUR 2.0 million) of legal reserves for reserves held in two subsidiaries. Other revaluation reserve The other revaluation reserve is used to record the amortization of intangible assets.

Other information Articles of Association provisions governing appropriation of result Under Article 22 of the Articles of Association, the result available for distribution shall be at the disposal of the General Meeting of Shareholders. Appropriation of result It is proposed to add the total profit of EUR 197 million to retained earnings

64. Deferred tax liability The deferred tax liability, which related to the temporary differences between the carrying amounts of assets and liabilities of the foreign companies acquired in previous years and the amounts used for tax purposes, was released in full in 2011.

65. Subsidiaries The Company has current accounts with several subsidiaries. These balances are interest-bearing.

66. Personnel The Company does not employ any staff itself. The Management Board is employed by its subsidiary Robeco Nederland B.V.

67. Other As the Companyâ&#x20AC;&#x2122;s income statement for 2012 is included in the consolidated financial statements, a summary income statement is sufficient to comply with the provisions of Section 402 of Book 2 of the Dutch Civil Code. For more detailed information, please refer to the section Basis of consolidation drawn up for the consolidated statement of financial position and income statement of Robeco Groep N.V.

Rotterdam, 10 April 2013 The Management Board

The Supervisory Board

Financial Statements

2012

131


Independent Auditor’s Report

To the Shareholder, the Supervisory Board and the Management Board of Robeco Groep N.V.

Report on the financial statements We have audited the accompanying financial statements 2012 of Robeco Groep N.V., Rotterdam. The financial statements include the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated statement of financial position as at 31 December 2012, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended and notes, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise the company statement of financial position as at 31 December 2012, the company income statement, the company statement of comprehensive income for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information. Management’s responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

132

Annual Report ROBECO GROEP N.V.

2012

the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion with respect to the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position of Robeco Groep N.V. as at December 31, 2012, its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code. Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of Robeco Groep N.V. as at December 31, 2012 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.


Report on other legal and regulatory requirements Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a result of our examination whether the management board report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed. Further we report that the Report of the Management Board, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code.

Amsterdam, 10 April 2013 Ernst & Young Accountants LLP Signed by Jeroen Preijde

Financial Statements

2012

133


Key figures 2008 - 2012

Consolidated income statement 2012

2011

2010

2009

2008

751 – 456 295

680 – 482 198

763 – 482 281

512 – 528 – 16

889 – 619 270

2 297

6 204

– 24 257

14 –2

– 41 229

Tax Non-controlling interest

– 100 -

– 70 -

– 76 -

–9 –2

– 58 4

Net result shareholders

197

134

181

– 13

175

2012

2011

2010

2009

2008

6,929

8,150

8,423

9,047

8,612

1,372 8,301

1,756 9,906

2,258 10,681

2,040 11,087

2,651 11,263

Group capital - of which equity Banking operations Asset management operations

1,123 1,120 6,434 744

1,365 1,364 7,759 782

1,606 1,605 8,037 1,038

1,383 1,367 8,717 987

1,319 1,299 8,544 1,400

Total liabilities

8,301

9,906

10,681

11,087

11,263

2012

2011

2010

2009

2008

AuM as of 1 January Investment result Regular net cash flow Non-regular net cash flow Distributions 1 Acquisitions/transfers

150 21 18 -

150 –5 8 –1 –2

135 20 –3 –1 –1 -

111 19 8 –2 –1 -

146 – 29 1 –2 –1 –4

AuM at 31 December

189

150

150

135

111

EUR x million

Operating income Operating expenses Operating result Non-operating income Result before tax

Consolidated statement of financial position EUR x million

Banking operations Asset management operations Total assets

Summary assets under management (AuM) EUR x billion

1

134

Distributions consist of dividends and interest paid.

Annual Report ROBECO GROEP N.V.

2012


Average number of employees FTEs

Netherlands Rest of Europe United States Other Total number of employees

2012

2011

2010

2009

2008

878 168 236 117

880 171 254 113

909 251 261 107

952 250 265 100

1,040 240 293 81

1,399

1,418

1,528

1,567

1,654

2012

2011

2010

2009

2008

60.7

70.9

63.2

103.1

69.6

537

480

500

327

537

17.5

9.8

11.3

â&#x20AC;&#x201C; 0.1

13.4

Ratios

Cost/income ratio (%) Income per employee (EUR x 1,000) Net return on shareholdersâ&#x20AC;&#x2122; equity (%)

Foreign currencies Foreign exchange rates (at year-end)

One Euro (EUR)

US-dollar British pound Swiss franc Japanese yen Indian ruppee Hong Kong dollar

USD GBP CHF JPY INR HKD

Foreign exchange rates (average)

2012

2011

2012

2011

1.3186 0.8156 1.2073 113.6400 72.5164 10.2200

1.2940 0.8370 1.2164 100.1100 68.6661 10.0521

1.2854 0.8111 1.2052 102.5884 68.6537 9.9709

1.3938 0.8692 1.2315 110.8518 65.1033 10.8455

Financial Statements

2012

135


Disclaimer

I This Robeco annual report and the information contained herein has been prepared and presented by Robeco Groep N.V., which is incorporated in the Netherlands. It is solely intended to supply the reader with general information about the investment-management activities and assets under management of Robeco Groep N.V. and its subsidiaries worldwide. It does not constitute an offer to sell or solicitation of an offer to buy any investment product or program offered by Robeco Groep N.V. or any of its subsidiaries, and is not intended to be used as the basis for an investment decision. Robeco Groep N.V. provides investment-advisory services, including investment advice on investment products and programs, through its authorized local subsidiaries. Its bank, all investmentadviser subsidiaries and affiliates are registered with their respective local regulators.

136

Annual Report ROBECO GROEP N.V.

2012

II Except as required by law and on behalf of itself and its subsidiaries, Robeco Groep N.V. expressly disclaims any obligation or undertaking to update or revise any statements of future expectations or other forward looking statements contained herein whether as a result of new information, change of events, circumstances or conditions on which any such statement is based on, or otherwise.


Annual Report ROBECO GROEP N.V. 2012

Annual Report

ROBECO GROEP N.V.

Annual report rgnv2012  
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