Vontobel Portrait 2010 'A time of change'

Vontobel Group

Portrait 2010

The Vontobel Group The Vontobel Group offers the unique combination of an independent Swiss private bank with the innovative strength of an active international asset manager. Our integrated business model with the three business units Private Banking, Investment Banking and Asset Management ensures close cooperation and allows us to successfully pool our expertise and resources for the benefit of our clients and business partners. Each day, around 1,400 Vontobel employees around the world create sustained added value for our clients: they diligently manage and monitor the client assets entrusted to us, while carefully tracking developments in the financial markets and observing global events. Whether they are in the heart of Zurich, in New York or Dubai – employees in 19 international locations identify trends and devise appropriate innovative investment strategies and products everywhere that our clients are based.

At the Vontobel Group, our relationship with our clients is founded on performance and trust. This is one reason why many of these relationships continue from one generation to the next. We focus on areas of business of which we have an expert knowledge and we earn the trust of our clients by delivering on our promises.

Front cover: Headquarters of Bank Vontobel, Zurich, “Tubes�, artistic installation, 2008, Lang/Baumann Legal information The Vontobel Portrait 2010 is intended solely for information purposes. The information and views contained in it do not constitute a request, offer or recommendation to use a service, to buy or sell investment instruments or to conduct other transactions. In addition, there is a risk that forecasts, predictions, projections and results described or implied in future-oriented statements may not prove correct. Information and statements concerning audited financial results and corporate governance should only be taken from the Vontobel Holding AG Annual Report 2009. It is available at www.vontobel.com or can be obtained by post upon request.

Vontobel Portrait 2010

A time of change Dear reader Over the last two years, the financial world has faced one of the most gruelling tests in its history, as the majority of financial institutions battled with declining income levels, many well-known major banks experienced severe difficulties, and several specialized providers were unable to escape collapse. Time and again, we saw how industry players were confronted with failure after promising excessive returns.

And, as if this were not enough, some of Wall Street’s former stars were even exposed as fraudsters.

The Vontobel Group passed this endurance test. Having decided to pursue our own direction, we are now large enough to offer a broad range of wealth and asset management services and to maintain a team of internal specialists to respond to all your needs. At the same time, we are small enough to retain our flexibility and our ability to make decisions rapidly and effectively. Our positioning guarantees that we can offer individually tailored solutions to our clients while maintaining our capacity to act swiftly in the market.

The financial crisis has confirmed that capital strength, credibility and financial solidity are the keys to success. It has also radically transformed our industry. We regard this pro­cess of change as a source of opportunity and we want to continue our tradition as an independent and innovative private bank and dynamic asset manager. Due to our very solid capital position, we have the necessary strength and resources to skillfully capture market opportunities, as demonstrated by our acquisition of the Swiss unit of Commerzbank last year. Thanks to our loyal, professional and committed employees, we are able to deliver on our goals – even in challenging times.

The debate about tax issues and banking confidentiality will remain an important topic at Vontobel going forward. However, we are convinced that Switzerland will continue to attract international clients in future in view of its excellent service quality and economic and political stability. The enduring appeal of the Swiss financial centre was particularly evident last year, when it continued to experience inflows of new money despite the ongoing financial crisis.

The Vontobel Group performed well in 2009. Our clients value our broad offering of private banking, investment banking and asset management products and services from a single source. We are continuing to manage our risks prudently, and our business philosophy – which is geared towards the achievement of sustained success – ensures that we adopt a forward-looking perspective when reaching decisions. We are building on these solid foundations while remaining true to our integrated business model. At the same time, we are prudently pursuing our growth strategy with a focus on our Swiss home market as well as our core market of Germany, which has a close geographical and cultural proximity to Switzerland. As a bank with a long tradition and rich heritage, we know and believe in our own strengths – including our many years of experience and our passion for innovation. We are convinced that companies such as Vontobel that demonstrate an ability to embrace change will remain successful in the future.

Dr. Urs Widmer Chairman of the Board of Directors

Herbert J. Scheidt Chief Executive Officer

1

2

Vontobel Portrait 2010

“If you focus on your strengths …

Dr. Urs Widmer, Chairman of the Board of Directors, and Herbert J. Scheidt, Chief Executive Officer

Dr. Urs Widmer, Chairman of the Board of Directors of the Vontobel Group, and Herbert J. Scheidt, Chief Executive Officer, discuss developments in the banking industry in 2009 and the out­ look for 2010 in the following interview.

Vontobel Portrait 2010

2009 began with a sharp downturn in the markets.

This made the strong and sustained recovery that started in the spring and the benign conditions at the end of the year all the more astonishing.

Dr. Urs Widmer: The concerted international efforts to shore up the financial system and the packages of measures to support the real economy had the intended effect. The equity markets gradually grew more optimistic that the world would not face financial collapse and were bolstered by the hope of an imminent rise in corporate earnings.

Are the banks now out of the woods?

Widmer: No. The recovery is still fragile. Many banks have not yet fully addressed their risk exposures. If the crisis in the real economy were to continue for a long period of time or to intensify, this could result in further credit defaults, which would have a severe knock-on effect in the financial sector. However, the entire finance industry and politicians are working together to implement the necessary remedial measures. I therefore believe there is reason to be cautiously optimistic.

“Our prudent business policy proved effective once again.”

How did the Vontobel Group perform in the financial year 2009 and what measures did it take?

Herbert J. Scheidt: We succeeded in growing our net profit by 22 % to CHF 138.3 mn in a continued difficult operating environment. Our result was impacted by integration costs of around CHF 10 mn relating to the acquisition of the Swiss unit of Commerzbank. From a strategic perspective, this acquisition was a decisive step for the future development of our business. At the same time, we further expanded our private clients business and, in Private Banking, will soon open new branches in Basel and Berne, thus consolidating our already strong position in our Swiss home market.

We expect this to enhance our ability to attract new money.

In Germany, our newly established subsidiary Bank Vontobel Europe, which is headquartered in Munich, commenced operations in spring 2009. We now have a presence in Munich, Frankfurt, Cologne and Hamburg. Our Investment Banking business not only made a substantial contribution to the Group’s net profit but also extended its leadership position in the complex structured products market. At the same time, there were pleasing developments in our Corporate

Finance business. In Asset Management, we saw signs of a turnaround in the second half of the year. We have already taken important steps to realign this business and now expect to attract significant inflows of new money.

Widmer: Like other banks, Vontobel faced one or two major challenges during the crisis but our prudent business policy proved effective once again: the Vontobel Group is one of the financial institutions that continued to generate profits even during this turbulent period. We reported solid results in 2009. A significant proportion of our profits will be distributed to shareholders – with the remainder being used to finance growth and to strengthen our already very solid capital base.

A year ago, the loss of trust in financial institutions was a major theme. The client assets they manage have since benefited significantly from the recovery.

Has there been a return to business as usual?

Scheidt: The shock waves created by the crisis have not been forgotten and the loss of confidence in the financial sector has yet to be overcome. It would be good for the industry to return to the traditional values of the Hanseatic “honourable merchant”, whose word was his bond and who sought to create value in the long term based on an honest approach that centred on client needs. At Vontobel, we work according to the principle that “you say what you think and do what you say”. After all, every relationship is founded on the concept of being able to trust in a reliable partner.

“We work according to the principle that ‘you say what you think and do what you say’.”

Some individual investors incurred massive losses on derivatives. This is an important area of business for Vontobel.

Scheidt: The Vontobel Group’s investment banking activities have always differed greatly from those of the traditional US or UK-style investment banks in terms of practices and risk profiles. Our successful structured products business is our main area of focus. This business serves as a prime example of the benefits of adopting a long-term perspective and focusing on clients. While other participants withdrew from this market during the crisis, we continued to consoli-

3

4

Vontobel Portrait 2010

… you can master crises independently” date and expand our leadership position. Advisory quality, reliability and transparency are rewarded by financial success.

In March 2009, Switzerland decided to withdraw its reservation to the OECD Model Tax Convention and to extend the scope of international administrative assistance to include tax evasion. Despite these mea­ sures, it has faced fierce international criticism. What are your views on this dispute?

Widmer: Swiss banking confidentiality and the protection of individual privacy – which is the core element of the confidentiality regime – must be preserved at all costs.

The importance of Switzerland’s political and economic stability in attracting foreign clients will gradually be recognized. The extension of administrative assistance in tax matters must be subject to clear and precise conditions.

Random and indiscriminate searches – known as “fishing expeditions” – cannot be allowed. In fact, any such mea­ sures are not in line with the OECD standards.

Increasing regulation is also a topic in Switzerland.

How is the Vontobel Group preparing itself for this?

Scheidt: The banks – particularly those which are system relevant – need to have a more solid basis in the future. The growing body of regulations will therefore focus on ensuring the solidity of their financial position and operations.

Within the new supervisory framework, it will be necessary to make sure that the smaller and mid-sized banks that have navigated the crisis without turning to the state for support do not now see their growth curbed by excessive regulations. It will therefore be important to have different regulatory capital requirements. Bank Vontobel currently has a tier 1 capital ratio of around 21% and thus has extremely solid foundations, which gives us a great deal of flexibility.

Widmer: Effective financial supervision is essential. At the same time, it is important for the various national supervisory authorities to make sure that regulatory measures are well coordinated on a global level to align risk standards and prevent individual countries from being placed at an advantage in terms of risk policy.

“Bank Vontobel currently has a tier 1 capital ratio of around 21% and thus has extremely solid foundations.”

797

Herbert J. Scheidt

In order for the battle against tax evasion to be conducted efficiently at an international level, all states have to participate and apply the same rules. This is what we refer to as a “level playing field”. Swiss politicians must continue their efforts to ensure that other financial centres such as Singapore also adopt the OECD standards. And finally, the double taxation treaty that is to be negotiated must not be enforced retroactively.

It is not just capital and risk but also compensation that is now being regulated. Do you agree with this?

Widmer: I favour a liberal approach to compensation models. It is pointless imposing caps on pay. The Vontobel Group introduced an integrated salary system several years ago. The system focuses on rewarding sustained, long-term success and defers the payment of part of the variable compensation awarded to employees for a period of three years.

In particular, it encourages and rewards responsible conduct that is in the best interests of the company. As a result, Vontobel managers and employees have personally felt the impacts of the volatile performance of the business in recent years. I think it makes sense for stricter compensation rules to be imposed on banks that receive direct support from the state.

Vontobel Portrait 2010

There is talk of lower margins in the area of private banking and of a decline in risk appetite in investment banking. How will this affect the profits of the Vontobel Group in the medium term?

Scheidt: The finance industry is today confronted with a new economic reality, which takes the form of even stricter regulation, even higher capital requirements, lower levels of profitability and consequently a lower return on equity.

In the case of the Vontobel Group, this means that we will have to adapt flexibly to the change in operating conditions and will have to draw on our considerable innovative strength to develop compelling solutions in response to new client needs. First-class service and a strong client focus will continue to guarantee long-term success, even in this new environment.

“The Vontobel Group introduced an integrated salary system several years ago.”

Turning to the future: how will the Swiss financial centre look 10 years from now?

Widmer: Switzerland will remain a leading player in the global financial system due to its political stability as well as the professionalism and quality of its workforce – provided that we respond flexibly to the changing operating environment. Politicians, regulators and financial institutions will have to work together to define and implement the right strategy. This type of coordinated approach has been lacking in the past. Switzerland’s sound legal system is of vital importance to the wealth and asset management business, which is why we are eager for security and clarity to be provided to international clients in a swift and binding manner. We are opposed to the automatic exchange of information; the protection of individual privacy remains our ultimate priority. Even 10 years from now, clients will still value a financial partner that offers them discretion.

Dr. Urs Widmer

And returning to the present: what are your expectations for the financial year 2010?

Widmer: Economic forecasts give us reason to be optimistic, even if the possibility of setbacks cannot be ruled out entirely. No matter how the financial markets develop: our integrated business model with our core competencies in wealth and asset management and investment banking has already demonstrated its resilience in crisis situations.

Vontobel Group: solidity and recognized financial strength The stable shareholder structure of the Vontobel Group and the long-term focus and entrepreneurial philosophy of its major shareholders are the key to its solidity and reliability. The Vontobel families hold a majority of around 53 % of votes and capital. In addition, Vontobel’s strategic partner, the Raiffeisen Group, holds a stake of 12.5 % in the company.

The rating agencies Standard & Poor’s and Moody’s have analyzed and rated Bank Vontobel AG and Vontobel Holding AG. The ratings confirm the recognized financial strength and solidity of the Vontobel Group.

Standard & Poor’s

Moody’s

as of 31.12.2009

Vontobel Holding AG Bank Vontobel AG Vontobel Holding AG Bank Vontobel AG

A A+ A2 A1

5

6

Vontobel Portrait 2010

“Committed to transparency and a first-class performance” How smooth was your transition to Private Banking?

Peter A. Fanconi: It reminded me once again of the importance of personal contact. I benefited from the fact that I already knew some of the people at the Vontobel Group from my Harcourt days. I was given a very warm welcome and everyone offered me a great deal of support.

Peter A. Fanconi, Head of Private Banking

Peter A. Fanconi has been the Head of ­Private Banking at the Vontobel Group since spring 2009. He already had an indepth knowledge of the company thanks to his former role as the CEO of Harcourt, a subsidiary of Vontobel that specializes in alternative investments. In the following interview, he explains the concept of client service within Bank Vontobel and outlines the activities performed in his area of business and the private banking industry.

The products within the finance industry are growing in­ creasingly similar. How does Vontobel distinguish itself from the competition? What services do you offer clients?

It is true that product cycles have become shorter. However, private banking is a long-term business and we still act as a financial partner to our clients from one generation to the next. Qualities such as our sense of tradition and our solidity, as well as our pronounced focus on security and uncompromising commitment to quality clearly differentiate Vontobel from other banks. This is coupled with our remarkably strong capital ratio. We address the individual needs of our clients with our innovative product range, which we are continuously expanding. There is a strong demand for sustainable investments in connection with themes such as global change, and this area will undoubtedly grow even more important in future. A decisive factor is, however, the way in which the concept of client service is understood by each of our employees. Solid financial expertise combined with a strong intuitive understanding of our clients and excellent people skills – these are the hallmarks of a good relationship manager today.

The corporate culture of an organization is shaped by its employees. How would you describe Vontobel’s culture?

Vontobel has a long history and tradition. However, its success is not simply a matter of chance; we have worked hard to get where we are today. Industriousness, discretion and performance are the qualities that characterize our employees. We deliver on our promises: this is the basis on which we build our relationship with our clients. In addition to our corporate culture, aspects such as our incentive systems and the training we offer within the company ensure a low level of staff turnover, which is valued greatly by our clients. Furthermore, Vontobel offers the unusual combination of a public company with a strong family shareholder base, which provides a good blend of transparency and long-term performance.

Vontobel’s new advertising campaign focuses on advice, service and performance.

Advice, service and performance are the core themes in our discussions with clients. They want to know what they

Vontobel Portrait 2010

“Flexibility and an ability to respond to changing conditions are the qualities that will determine which banks emerge as the winners in the future.”

Peter A. Fanconi

will receive in return for the fees they pay. The statements that appear in our advertising campaign demonstrate that the interests of our clients are central to all that we do. We also provide an insight into the team of experts who work for Vontobel. And finally, we describe how we provide our services in plain and simple terms, since clients need to understand precisely what they are buying in order to subsequently be satisfied with their purchase.

What are your goals for Private Banking?

The size of our company – which is neither too small nor too large – provides us with clear advantages in the market.

Vontobel employs enough specialists to be able to supply the breadth and depth of services sought by our clients.

This sets us apart from many wealth managers and boutique firms that are too small to achieve this and face greater challenges than a company of our size due to the increasing volume of regulations. At the same time, we have remained an enterprising financial partner for sophisticated clients both in Switzerland and internationally thanks to our manageable size. My goal is to exploit these strengths even more effectively to benefit Vontobel. Flexi­ bility and an ability to respond to changing conditions are the qualities that will determine which banks emerge as the winners in the future. At the same time, we have to assume responsibility for our actions. Transparency and honesty are vital in this context.

The financial crisis has seriously undermined client trust.

Which measures are you taking to restore confidence?

We didn’t make the same mistakes as some of our competitors, who have been severely impacted as a result. We didn’t have any large-scale exposures to hedge funds or other investments that incurred total losses during the crisis.

This was not only a question of skill: it also reflects a healthy level of mistrust. We only engage in business activities that we understand. This will remain the case going forward. The prudent determination of risk tolerance – i.e. the ongoing monitoring of risk parameters coupled with balanced portfolios and the avoidance of aggressive switching tactics – enables us to deliver results that inspire confidence in our clients. After all, value preservation and absolute perfor­ mance are unquestionably our ultimate priorities in Private Banking.

There are growing calls for a return to and strengthening of first-class Swiss service quality. Is the answer as sim­ ple as that?

Quality is of decisive importance. However, it is important to understand that Swiss quality alone is no guarantee of success. Other financial centres have not been idle and our competitors around the globe have done their homework. If we want to preserve our competitive advantage in the future, it is imperative that we develop new ideas for a new era of banking.

Many investors complain that too much importance is sometimes assigned to investment strategy. Wouldn’t simpler products often be more effective?

It is true that the finance industry has been too imaginative in certain areas and has produced innovations that are more beneficial to the creator than the client. It would be good for the private banking sector to go back to basics to some extent. At Vontobel, we consider it important for our clients to have a precise understanding of how the products that they purchase function.

7

8

Vontobel Portrait 2010

The company’s conscience

Dr. Martin Sieg Castagnola, Chief Financial Officer

Professional risk supervision, prudent capital management and compliance with all applicable rules and regulations: these are the different requirements that a bank must simultaneously strive to ­fulfil. ­Ensuring that a company retains its financial flexibility while maintaining the highest possible level of security is the responsibility of the Chief Financial Officer.

Dr. Martin Sieg Castagnola has been the Chief Financial Officer (CFO) of the Vontobel Group since autumn 2008. He assumed this challenging role at the peak of the financial crisis and helped to steer the company through this turbulent period to safety. Dr. Martin Sieg Castagnola manages the Finance & Risk department, which comprises around 100 proven specialists in the areas of Compliance, Finance & Controlling, Investor Relations, Legal, Risk Control and Treasury.

The Vontobel Group reports its financial results according to the International Financial Reporting Standards (IFRS). This internationally recognized but highly complex set of regulations tests the knowledge of the experts responsible for compiling our Annual Report as well as its readers. The Vontobel Group publishes its key facts and figures twice per annum in its Annual and Half-year Report.

Regular dialogue with stakeholders It is vitally important for a listed company such as the Vontobel Group to maintain a dialogue with its investors. Their main point of contact is the bank’s CFO, who talks to investors and analysts in Switzerland and internationally at up to 100 meetings or events each year. This provides him with an opportunity to explain the Vontobel Group’s financial performance, business model and strategy. The market then uses this information to determine the company’s value. Vontobel has been assigned regular ratings by the rating agencies Moody’s and Standard & Poor’s since 2008.

The CFO is frequently in contact with the rating agencies and provides the information they require to produce a fair and accurate assessment of the Vontobel Group’s creditworthiness. Thanks to its strong capital position, Vontobel maintained stable credit ratings even during the financial crisis. An increased focus is now being placed on relations with the Swiss Financial Market Supervisory Authority (FINMA). The dialogue between the banks and FINMA has intensified significantly since the outbreak of the financial crisis.

Vontobel Portrait 2010

Controlled risks Ever since the very first European banks were established in Italy in the 13th century, the activities of the global banking industry have centred on the assumption of risks. The management of these risks is, and will remain, an inherent and fundamental part of any bank’s operations. There is no such thing as a “risk-free bank”. The highly responsible role performed by the CFO and his team involves limiting risk exposures and maintaining them at an acceptable level through professional management and appropriate systems. At the Vontobel Group, state-of-the-art methods and models are used to contain, control and monitor risk. ­Vontobel has around 20 employees in the area of risk moni­ toring alone, which underscores the importance of this function. It is possible to distinguish between various cat­­ egories of risk, depending on the type of business performed by a financial institution. In the case of Vontobel, five cat­e­gories of risk apply: reputational risks, market risks, liqui­dity risks, credit risks and operational risks. Changes in market prices such as fluctuations in share prices, interest rates and foreign exchange rates can lead to financial losses.

They are described as “systemic risks” in specialist literature. The Vontobel Group consciously manages and restricts this category of risk using hedging transactions.

Vontobel is the leading issuer of listed structured products in the Swiss market. It holds a large bond portfolio to hedge the corresponding liabilities. The credit risks on bonds that are subsequently assumed represent the largest category of risk within the Vontobel Group.

“The highly responsible role performed by the CFO and his team involves limiting risk exposures and maintaining them at an acceptable level through professional management and appropriate systems.”

The company’s credit risk relates to the possibility that bonds purchased by the Vontobel Group may not be redeemed or may only partially be redeemed. This default risk on Vontobel’s sizeable bond portfolio can be reduced effectively through prudent stock selection and broad diversi­ fication across a very large number of different bonds while, at the same time, specifying counterparty limits to ensure that the majority of the positions are focused on the best

rating classes. Since the Vontobel Group does not engage in any corporate lending or offer mortgage financing, the extent of other credit risks remains at a very manageable level. We offer lending against collateral to our investment clients on a relatively modest scale. The third category comprises operational risks. Internal processes, people and systems can lead to losses. Preventing them from occurring is also an important function of risk management.

Capital management Equity capital has a pivotal role to play within a bank: each financial institution must have sufficient capital to be able to absorb any potential losses. Banking legislation stipulates that all risk positions must be backed by capital. Ensuring that capital is used prudently is therefore of key importance.

At the Vontobel Group, this function is performed by Trea­ sury, which also manages the company’s liquidity. Many clients have been holding large liquidity positions since the start of the financial crisis due to their increased focus on security. As a result, Vontobel’s Treasury team has had several billions of francs of liquidity to manage. In accordance with the Vontobel Group’s conservative risk policy, these funds are not fully invested in the money and capital markets. Instead, a large proportion is held in the form of liquid assets by the Vontobel Group in an account at the Swiss National Bank that is not exposed to any counterparty risks.

Part of its free capital component is used by the Vontobel Group to finance organic growth and acquisitions in Switzerland as well as internationally.

A proponent of fair business practices Banking transactions are founded on mutual trust. The steadily growing body of regulations represents a challenge for the industry, and the Financial Market Supervisory ­Authority is continuously issuing stringent new regulations that have to be complied with. Vontobel’s Compliance team ensures that the company adheres to legislation, industry standards, regulations and directives at all times. Part of its role is to make sure that all employees know exactly which duties they are expected to perform and actively assume their responsibilities. The services provided by the Legal department are equally important to those of the Compliance function. The Vontobel Group has a complex legal structure, comprising various legal entities within and outside Switzerland. Its internal legal experts represent the company’s interests in all social and supervisory matters and act as a lawyer on behalf of the Vontobel Group in litigation cases.

9

The bank in a time of change. Above: headquarters of Bank Vontobel; SIX Swiss Exchange; Bank Vontobel trading floor, Zurich Below: The bank’s first registered office, Bahnhofstrasse 58, Zurich; trading floor in the 1950s; the Zurich stock exchange in the 1930s, Zurich

12

Vontobel Portrait 2010

Combining our expertise

The Group Executive Management (L-R): Herbert J. Scheidt, CEO; Dr. Martin Sieg Castagnola, CFO; Peter A. Fanconi, Head of Private Banking

Private Banking In Private Banking, we address the needs of wealthy pri­ vate clients by offering them service and advice according to a holistic and customized approach. Our commitment to first-class quality is inherent in every aspect of our work and our performance. Independent advice, individual service and transparent processes are key elements of our relationship with our clients.

• Our investment advisory offering is based on an intensive dialogue and personal service. Drawing on our analyses and expertise in the area of active asset management, we provide clients with comprehensive information and ­recommendations that are tailored to their specific needs.

In this way, we deliver our entire integrated know-how to our clients via an individual, needs-oriented approach.

sis of our clients’ circumstances as well as considering their personal wishes and ideas. Themes such as the planning and structuring of assets, retirement provision or succession issues are of key importance in this context.

Investment Banking In Investment Banking, we offer private clients, compa­ nies and institutional investors a range of global solutions from a single source.

• The experts in Financial Products are responsible for the creation and selling of structured products, as well as for market making activities. With our innovative deritrade® trading platform, we enable professional investors to simulate and trade a variety of structured products.

• We provide clients with comprehensive asset manage-

• Brokerage is an important partner for our clients who

ment services so that they don’t need to focus on selecting the right investments. Based on an active approach, broad expertise and an institutional investment process, we guarantee a high level of quality and continuity. We offer appropriate solutions to meet the individual wishes of each client, while taking account of their risk tolerance and other specific preferences.

invest internationally and has already won a number of awards in the area of Swiss equities. We also offer brokerage services directly in a number of other key markets.

• Thanks to our interdisciplinary team, we provide external asset managers with a broad spectrum of services – from research to IT – that goes beyond simple execution.

• As part of our professional, holistic wealth management

• Our Corporate Finance team develops tailored solutions

services, we pursue an integrated financial advisory approach that enables us to assess the current financial situation of each individual client and to take a prudent look at the future. This includes conducting an in-depth analy-

for capital markets transactions as well as mergers & acquisitions services. We focus on small to medium-sized companies in Switzerland, Germany and Austria.

Vontobel Portrait 2010

Roger Studer, Head of Investment Banking; Dr. Zeno Staub, Head of Asset Management; Felix Lenhard, Head of Operations

• Our specialists in Asset Finance create financing solutions in the area of renewable energies and cover the entire value chain: from the selection of projects and structuring to the placement of individually developed financing packages in the credit or capital markets.

• Transaction Banking Services offers complete packages of services with a focus on the B2B segment. Its offering ranges from trading execution, clearing and settlement to custody services.

enable clients to invest sustainably on a global scale while, at the same time, promoting a responsible approach to business.

• Together with our Value specialists in New York, we have built and continuously developed a value-oriented investment approach over the last 20 years. This systematic bottom-up approach combines the best elements of a growth-oriented investment strategy with strict valuation discipline.

• Our subsidiary Harcourt Investment Consulting AG is an Asset Management As a multiboutique asset manager, we offer innovative and transparent investment solutions for private and institu­ tional clients. Our investment skills are based on our com­ mitment to active asset management. We focus on achieving above-average performance quality and pursue this goal with passion. Various independent awards provide confir­ mation of our level of expertise.

We concentrate on four core competencies: Global Change Investing, Contemporary Value, Alternative Investments / Funds of Hedge Funds and Specialty Products.

• We offer sustainable and thematic investment products that address the challenges associated with global change.

Our Global Trend products focus on themes such as the scarcity of resources, enhanced energy efficiency and clean technologies. Our Global Responsibility products

internationally established provider of alternative investment products and services. In addition to numerous funds of hedge funds, Harcourt offers a sustainabilityoriented product line as well as an actively managed commodities fund.

• Our specialty products in the areas of Swiss equities, fixed income and mixed investments are also actively managed.

• Vontobel provides the Raiffeisen Group with comprehensive investment services as part of our long-term cooperation.

13

14

Vontobel Portrait 2010

The strong performance of listed family businesses Listed family businesses represent an important group of companies in the capital market. This corporate segment is sandwiched between large public corporations and privately owned companies. According to new research by the Center for Entrepreneurial and Financial Studies (CEFS) at the Technische Universität München (TUM), family businesses account for around half of all the domestic companies listed in the regulated market of Deutsche Börse.

Owners play an active role The importance of listed family businesses has only been recognized fairly recently. Both at a national and international level, it was long believed that all listed companies take the form of anonymous public corporations that have a broad shareholder structure and are run by managers employed by the organization. It was not until the late 1990s that the first academic studies revealed that this image does not reflect the reality in Continental Europe and that even mid-sized or large listed companies often have concentrated ownership structures in which families frequently constitute a major shareholder group. In most cases, however, families are not only represented as a block shareholder in these companies but also play an active role in the management and control of the business.

Prof. Dr. Ann-Kristin Achleitner, Member of the Board of Directors of Vontobel Holding AG

In what way is the long-term develop­ ment of listed family businesses shaped by the influence of their owners? A study by the Center for Entrepreneurial and ­Financial Studies (CEFS) at the Technische Universität München (TUM) ­analyzed the performance of family firms in Germany.

A focus on long-term success It is assumed that the founders and owners of companies often focus their business policies on the long-term health of the firm rather than concentrating on short-term profit maximization. As well as maintaining a large degree of uniformity in terms of ownership and control, founding families are often committed to passing the business on to the next generation, while concerns about the family’s reputation also shape the company’s strategic direction. These factors suggest that the family influence can have a strong positive impact on the development of the company. However, there are certain aspects that call these positive ­effects into question. For example, the holders of key positions within family businesses are often appointed from a limited pool of human capital, i.e. the family. The succession pro­ cess within a family can prove critical – especially if, for example, no suitable candidate is available within the founding family. Furthermore, conflicts may arise between the family’s objectives and those of the shareholders. This is the reason why critics repeatedly express doubts about the adequate protection of minority shareholders.

Vontobel Portrait 2010

study produces clear findings regarding capital market performance: it suggests that family businesses generate higher returns than non-family businesses while, at the same time, being exposed to greater volatility.

Prof. Dr. Ann-Kristin Achleitner

Performance of listed family businesses In recent years, academic studies have increasingly been devoted to the question of whether family businesses can outperform non-family businesses in the stock market. Although these studies were conducted in various countries over different periods of time and were based on non-uniform definitions of family businesses, the findings present a largely consistent picture: family firms perform at least as well in the stock market as non-family businesses. In fact, most studies even suggest that the family influence has a significant positive impact on the company’s operational performance.

New study on capital market performance The same conclusion is reached in a new study by the CEFS that was commissioned by the Charitable Foundation for Family Business (Stiftung Familienunternehmen) in Germany. In view of the volume of data examined and the scope of the analysis, this study goes further than any previous evaluations relating to the German capital market.

Most academic studies about the performance of family businesses focus solely on key figures that reflect their operational performance (e.g. return on assets) or their capital market valuation based on the market value/book value ratio (Tobin’s Q). The capital market performance of family businesses had not been researched as intensively until now. In the case of well-established companies in particular, it is possible to identify a positive correlation between family influence and operational performance. The CEFS

New share indices for owner-managed companies The findings of the academic studies are highly relevant in practice. Listed family businesses are now attracting considerable interest among investors and this trend is growing. Owner-managed companies appeal to a broad circle of investors, as demonstrated by the performance of specific share indices for owner-managed businesses such as the German Entrepreneurial Index (GEX) or the Credit Suisse Family Index. On 4 January 2010, Deutsche Börse launched two indices* – the DAXplus Family Index and the DAXplus Family 30 Index. Their performance to date reveals that the DAXplus Family 30 Index in particular has clearly outperformed the DAX not only in terms of its increase in value over the last 12 months but also when its performance is calculated retrospectively over a five-year horizon. These two family indices have the benefit of offering family firms a high level of visibility in the capital market. As a result, the importance of this segment of listed family businesses is being recognized increasingly in the capital market due to its special characteristics and is also likely to feature more prominently in considerations about the regulation of the capital markets in future.

* These two indices focus on family-owned companies. For the purpose of the indices, a company is classed as a family business if a member of the founding family holds at least 25 % of voting rights or has a seat on the management or supervisory board of the company and holds at least 5 % of voting rights.

Bank Vontobel is the first bank to have launched a ­certificate on the new family index, thus enabling ­investors to participate directly in the performance of the DAXplus Family 30 price index, although past performance is no guarantee of future returns.

15

16

Vontobel Portrait 2010

The dynamics of change

Dr. Martin Meyer, literary editor of “Neue Zürcher Zeitung”

The concept of responsibility is especially important during periods of change and uncertainty. By assuming individual responsibility, we not only contribute to sustained success but also help to strengthen our culture of freedom.

Modern societies are shaped by change. It is the driving force behind the developments that we generally associate with progress. At the same time, change is transforming conditions in the scientific and technical world. Old habits and commitments are fading. Long-held values and traditions are disintegrating. We even believe that the process

of change is visibly accelerating. This can be illustrated using the following image: a plot of land used for farming 500 years ago became the site of a workshop 300 years ago, a factory 150 years ago, a railway station 100 years ago, an airport 70 years ago, a nuclear power station 30 years ago and today may even be the setting for a biotope.

The future is open The acceleration of change is leading us towards an increasingly uncertain, indeterminate future. The main catalysts behind this process are science and technology – elements that we can all experience first hand. Technological revolutions such as the split-second transfer of data are a sign of our times. However, they are also triggering a mutation of our social, economic, political and cultural environment. It is widely hoped that new knowledge and insights will help to create a better way of life. The extent to which the western hemisphere has benefited from change in terms of increased comfort, prosperity and security, as well as a reduction in

Vontobel Portrait 2010

physical pressures, is already evident. At the same time, the potential for this arsenal of skills to be exploited for less peaceful purposes is growing. In the 20th century, humankind has been faced with wars, unrest and destructive powers that would have been inconceivable not long ago.

We are now living in a world in which the benefits and drawbacks of change are plain to see. On the one hand, progress is predominantly seen as a blessing; this is the view that prevails in many countries. Even objections about the adverse impacts of progress cannot detract from the fact that large numbers of people are now better off than ever before. On the other hand, the world is now confronted with various issues that justifiably give us grounds for concern. They range from international terrorism, climate change and environmental problems to poverty, epidemics and the threat posed by uncontrolled developments in the finance industry, which have only recently become drastically visible.

What lessons must we learn from this? First, we must recognize that change – as a whole – cannot be controlled.

There is no one individual who knows how to steer this process, even if it would be sensible to try. Second, the concept of responsibility grows more and more important in line with increasing uncertainty. If freedom not only represents one of the major political and social achievements of the enlightened and confident modern age but also serves to increase our individual scope for creativity and entrepreneurship, then it is imperative for us to raise awareness of the need to create structures in which freedom can flourish.

While many cultures that laboured under totalitarian regimes for decades are now gradually learning how to turn their freedom to their advantage, our world – rooted in western culture – is now embarking on a new process of learning. We must learn lessons about the need for sustainable business approaches. Sustainability, in turn, not only relates directly to the economy but also to the political arena and to the cultivation of both our public and private spheres.

Moderation and a sense of proportion Moderation – or a sense of proportion in an everyday context – has been an integral part of West European civilization since the early years of the economic miracle. The process of change that occurred at this time was always accompanied by a desire to do the right thing or, at least, to do what was prudent. Naturally, risks had to be accepted but they were always coupled with a healthy dose of scepticism and foresight. The values that were widely upheld were not geared towards generating a quick profit or engaging in hedonistic

pleasures. They promoted a sense of modesty and strengthened strategic thinking about growth and future security.

Work led to the accumulation of capital for other purposes – rather than putting it at stake in the short term.

If the successful principles of freedom, responsibility and modesty are to withstand the process of change, however, they need to be assimilated as a form of internal compass.

This mainly applies to our lifestyle rather than to functional activities. However, it also concerns attitudes that are associated with the classic-liberal notion of performance.

Third, the following also applies: the more the rate of change accelerates, the more important our traditions and customs become in providing us with an anchor to hold onto in this sea of change.

“There can be no future without a past.

Our past is our history and our identity – elements that are not simply dictated by fashion and trends.”

The only true certainty is uncertainty. And while we may continue to dream of elaborate plans and utopias, what really matters is whether we can put our hearts and minds to making them happen – including in periods of sweeping change. The gift of freedom, which we have worked long and hard to acquire, is too precious for us to squander it away and submit to new servitudes because we neglected to assume our individual responsibilities. Despite widespread pessimism, the audacious prediction that we may succeed in realizing our goals if we take them very seriously may yet prove to be true.

Dr. Martin Meyer has been the literary editor of “Neue Zürcher Zeitung” since 1992. In addition to his work as a journalist, he also publishes books and essays on contemporary themes, literature, art and music (his most recent work is “Piranesis Zukunft. Aufsätze zu Literatur und Kunst”, 2009). He has been awarded the Charles Veillon European Essay Prize and is a corresponding member of the German Academy of Language and ­Literature.

17

18

Vontobel Portrait 2010

The changing face of the Swiss financial centre Knowledge is a resource The Swiss Banking Institute of the University of Zurich is committed to helping the Swiss financial centre master these challenges. The Institute intends to do so by placing its academic expertise at the disposal of the financial centre in accordance with the principle “excellence in research with industry and political relevance”. The professors at the Institute come from Switzerland, France, Germany, Austria, Norway, Sweden, Romania, China, the US, Lebanon and Iran. In addition to their interest in top-level research, they all share one thing in common: their love of Switzerland, which they regard as a liberal, open-minded country in which knowledge is seen as an important resource in the competitive global landscape. With its leading team of international researchers, the Institute figures among the top three finance institutes in the research rankings for the German-speaking world (e.g. the “Handelsblatt” rankings) and is classed as one of the top ten institutes in Europe.

Prof. Dr. Thorsten Hens, Director, Swiss Banking Institute

“Love will fly if held too lightly – love will die if held too tightly.”

The major financial crisis of 2007 and 2008 signalled the end of the “laissez-faire” mentality in the financial markets that was triggered by the advent of neoconservatism embodied by Margaret Thatcher and Ronald Reagan. However, a return to stagflation – i. e. the period before 1980 when the global economy lost its growth momentum while savings were devoured by inflation – is no alternative. The formidable global challenge now facing the financial markets is to find a new balance between contractual freedom on the one hand, and compliance with certain precautionary measures on the other. At the same time, Switzerland is burdened by a longstanding problem that threatens the very heart of its financial centre – private banking: the repositioning of banking confidentiality.

Lessons from leading academics The Swiss Banking Institute is ideally positioned to monitor and assess the challenges of the coming years from an academic perspective. The professors of Quantitative Finance, including the Vontobel Professor Markus Leippold, focus on developing risk measures that systematically gauge risk levels and cannot be manipulated. The Corporate Finance department demonstrates ways in which companies can raise capital even during financial crises. The professors of Financial Economics are specialists in Behavioural Finance – an area dedicated to analyzing speculative bubbles in the financial markets (dot-com bubble, housing bubble, etc.), which also provides the academic basis for private banking. In the immediate future, the professors in the Banking department will probably continue to play a pivotal role in the efforts to overcome the financial crisis. Jean-Charles Rochet from Toulouse – one of Europe’s most eminent banking experts – has now joined the Swiss Banking Institute. His book “Why are there so many banking crises?” is a best seller in the category of academic literature. His colleague Urs Bichler, the former Director of the Financial Stability department at the Swiss National Bank, has an outstanding knowledge of the Swiss financial centre. This research duo provides the Swiss Banking Institute and its students with a unique blend of expertise.

Don’t put all your eggs in one basket Like any other university, the Swiss Banking Institute provides research-based teaching that closely reflects current events.

The objective of all its courses – ranging from Bachelors degrees or Masters to PhDs and Executive Programmes – is to encourage students to explore and critically assess current

Vontobel Portrait 2010

The interior of the library of the Faculty of Law at the University of Zurich, designed by the architect Santiago Calatrava

knowledge in the areas of finance and banking. It is intended that students should not only learn how things work but also understand why they work in a specific way and which methods can be used to gain further knowledge. The financial crisis has taught us that a certain breadth of knowledge is very important. Before the crisis, the most successful courses in finance were those that taught students who were well versed in mathematics but had no prior knowledge of finance how they could apply their mathematical expertise in order to determine how things work in the financial markets. The global financial crisis has shown that historical, psychological and other institutional knowledge would have helped us to identify and possibly even avert negative developments. The core function of teaching is therefore to provide students with the requisite level of specialist knowhow while ensuring a broadbased approach – even if they themselves would prefer to concentrate on their favourite subjects. A basic rule of finance is: “don’t put all your eggs in one basket”. This fundamental principle also needs to be observed in the world of academia when structuring courses. Institutions of learning that operate according to the “diversity in university” principle have the

advantage of bringing together a broad spectrum of subjects and of thus promoting a dialogue between students from different disciplines – even outside the lecture theatre.

Prof. Dr. Thorsten Hens is the SFI Professor of Financial Economics at the Swiss Banking Institute of the University of Zurich. He has been the Director of the Institute since 2007. Thorsten Hens is also a research fellow of CEPR and Adjunct Professor of Finance at the Norwegian Business School in Bergen. He studied in Bonn and Paris and held professorships in Stanford and Bielefeld before assuming his post in Zurich. His research activities focus on the areas of Behavioural and Evolutionary Finance. Thorsten Hens ranks as one of the 10 leading economists in the German-speaking world (Germany, Austria and Switzerland).

To mark the 175th anniversary of the University of Zurich, Bank Vontobel and the Vontobel Foundation endowed a professorship in Financial Engineering; the chair is held by Prof. Dr. Markus Leippold.

19

20

Vontobel Portrait 2010

Vontobel and NZZ Podium – connecting values

NZZ Podium events

The Vontobel Group has been one of the main sponsors of NZZ Podium since it was launched.

By sponsoring NZZ Podium, we are lending our support to a unique public forum that examines the key issues of our times. Each event begins with a fascinating address in which the guest speaker presents his or her views on the challenges we face in the areas of politics, business, culture or science. The subsequent discussions between the speaker, journalists from “Neue Zürcher Zeitung” (NZZ) and other experts with international experience take the debate to a new level. The members of the audience have the opportunity to ask questions and to test the views expressed by the panel. NZZ Podium thus provides a platform for a lively and passionate debate about today’s key themes.

Since its launch in 2007, NZZ Podium has been managed

by Dr. Martin Meyer, literary editor of NZZ. The evening events – which are held seven or eight times a year – prove very popular with the public and the tickets sell out quickly.

Exchanging knowledge across boundaries The pace of change in society, the economy and the political arena is constantly accelerating and these areas are growing ever more complex. No country, no society – indeed no company – is now immune to global trends. As an internationally-oriented Swiss private bank, we know that the latest knowledge and in-depth expertise are of critical importance in this type of environment. We believe that the permanent exchange of knowledge across boundaries cre-

Vontobel Portrait 2010

ates substantial added value for society and we want to contribute to this process through our support for NZZ ­Podium. This reflects the core principles of the Vontobel Group, which combines tradition with innovation and is as committed to promoting new ideas as it is to cultivating established values.

Dr. Hans Vontobel believes that in challenging times in particular, each country and its people must return to their core values and traditions. We all know the enduring values that have contributed to Switzerland’s success: hard work, punctuality, reliability, quality, integrity and discretion. Values such as these deserve to be upheld both now and in the future.

First-class quality and solidity are the hallmarks of NZZ Podium – both in terms of its programme, its selection of guest speakers and the execution of its events. All of its activities centre on promoting the long-term formation of knowledge and independent thought. These are the values embodied

by NZZ: they are the values that connect us through this sponsorship commitment and are the values that we share.

“The permanent exchange of knowledge across boundaries creates substantial added value for society. We want to ­contribute to this process through our

Dr. Hans Vontobel, Honorary Chairman of the Vontobel Group

Strong brands, strong messages As one of the main sponsors of this discussion platform, we firmly believe that this partnership helps to convey in-depth knowledge about the complex and interconnected themes in today’s world to a broad audience. This is why we decided to support NZZ Podium together with Swiss Re.

support for NZZ Podium.”

A finger on the pulse of current affairs The programme for 2010 began on 4 February with an event dedicated to the topic “The future of capitalism – the market economy torn between responsibility and government intervention”. This theme couldn’t be more appropriate in view of the broad social debate that is currently underway as a result of the financial crisis. The guest speaker was Hans-Olaf Henkel, Honorary Professor at the University of Mannheim, whose rich experience and profound knowledge of the economy, industry and politics is almost unrivalled. Professor Henkel was the President of the Federation of German Industries (BDI) for many years and is now actively involved in Amnesty International. The subsequent panel discussion with Prof. Dr. Thorsten Hens from the Swiss Banking Institute and Antoinette HunzikerEbneter, CEO of Forma Futura Invest AG, captivated the audience and prompted a number of intriguing questions.

Other compelling social and political themes that will be addressed in 2010: – Young people in the media culture: chatting, ­gaming, chilling and networking; 15 April 2010 – The meaning of life and the quest for happiness: what remains once all of our wishes have been ­realized?

27 May 2010 – The Middle East flash point; 7 October 2010 – Germany, a situation report; 11 November 2010 – Poetry reading; 8 December 2010 Detailed information is available at: www.nzzpodium.ch

21

22

Vontobel Portrait 2010

Private banking in the heart of Lombardy

The roof of Milan Cathedral

“Altro è dire, altro è fare” – saying and doing are two ­different things In the very heart of Milan, at Via Galileo Galilei 5, the Country Manager Francesco Tarabini Castellani manages a team of 20 employees. Anyone who comes here expecting to catch a glimpse of “dolce far niente” will be disappointed.

On the contrary: the 40-year-old Italian is a veritable whirlwind. His team is dynamic and focused. His “telefonino” – as mobile phones are affectionately known in Italy – rings constantly. Tarabini Castellani, who speaks perfect German and English, answers calls and gives out instructions while responding to e-mails. “My first priority is to lead the Vontobel Group to success in Italy. We have already accomplished a great deal. It is now a case of building on what we have achieved and of continuing to expand our business activities,” states the energetic head of Vontobel’s Italian operations as he explains how the bank intends to grow its private clients business.

Italy is classed as the sixth largest private banking market after the UK and Germany. In total, the Italian market for wealthy private clients is estimated to be worth EUR 500 billion, of which around half – i. e. approximately EUR 250 billion – is managed in Milan. “This means we are in the right place at the right time,” emphasizes Tarabini Castellani. He is also referring to the “scudo fiscale” – the broad-based tax amnesty launched by the Italian financial authorities, which will probably result in large numbers of private clients repatriating their assets, i.e. depositing them in Italy again and having them managed by an expert.

“However, no client will be willing to make concessions when it comes to advisory and service quality,” believes Stefano Calvi, Head of Private Banking Italy. And it is precisely this area that the Vontobel Group is focusing on.

“Now more than ever before, wealthy clients are seeking a solid and reliable banking partner that stands out due to its healthy level of conservatism. This is just as much the case in Italy as in other countries.”

Vontobel Portrait 2010

Committed to a sustainable system of values “Healthy conservatism” comprises a prudent approach to risk, a commitment to the generation of sustainable returns and a strong level of cost consciousness, according to the Vontobel Group’s definition of the term. Its philosophy and actions are geared towards solidity, stability and reliability, rather than short-term profit maximization and high-risk investment strategies. Vontobel believes that security must always take precedence over returns. This basic principle is an important component of the Group’s corporate culture and a key differentiating factor that sets it apart from its peers. The bank’s approach to risk says a lot about its ability to manage the assets entrusted to it in a prudent, forward-looking and responsible manner. This is precisely what is sought and valued by the clients of the Vontobel Group. First-class advice based on a customized approach, reliability and security – in other words: relationship man­ a­gers who say what they think and do what they say, since “altro è dire, altro è fare” – saying and doing are two different things.

“You can’t simply gain client trust – you have to earn it.”

The currency of trust A critical success factor in the finance industry is the quality of advice offered to clients. Those institutions that promise clients quick, risk-free profits will sooner or later find themselves mired in difficulties. This is the lesson we have learned from the financial crisis, which has long since developed into a real crisis of confidence. Scores of disappointed clients have terminated their relationship with their banks – some of which have served them for many years – as a result of their bad experiences and have turned to new financial partners that appear more reliable and responsible. Banks that inspire trust in clients through their solid advisory services are emerging as the winners in this period of change. “You can’t simply gain client trust – you have to earn it,” is the view of Tarabini Castellani. During consultations, clients want to know that their specific, individual needs are the core element on which advice is based, rather than simply being overlooked. Equally, they want to know that the risk/return potential of investment decisions will be explained transparently rather than being presented in incomprehensible terms. Sound advice is the key to success. Reliability, commitment and clarity are therefore the qualities that Vontobel pledges to offer – but they are much

Francesco Tarabini Castellani, Country Manager Italy

more than just a promise. They embody the fundamental approach that was adopted by the Vontobel Group long before the crisis and now distinguishes it from the masses.

Vontobel in Milan Milan is located in Northern Italy, has a population of 1.3 million and is the country’s second largest city after Rome. At the same time, it ranks as the nation’s largest commercial, industrial and financial centre and is therefore described as Italy’s economic powerhouse. The Vontobel Group opened a branch in Milan in 2003. Although the services it offers have been supplied almost exclusively by the asset management business to date, the private clients business is now being strengthened and expanded.

23

24

Vontobel Portrait 2010

Our locations Hamburg London

Cologne

Frankfurt

Luxembourg Berne Basel Zurich Lucerne

Munich Vienna

Vaduz Salzburg

Geneva

Milan

Madrid

Vancouver

New York

Dubai

Grand Cayman

Switzerland Zurich Lucerne Geneva Basel (from May 2010) Berne (from June 2010) Germany Frankfurt a. M. Hamburg Munich Cologne

UK London Italy Milan Liechtenstein Vaduz Luxembourg Luxembourg

Austria Salzburg Vienna Spain Madrid Cayman Islands Grand Cayman Canada Vancouver

Hong Kong

US New York U. A. E. Dubai China Hong Kong

The Vontobel Portrait 2010 is also available in German, French, Italian, Spanish and Russian.

03/10 4000 EN

Mixed Sources

SGS-COC-003355

Printed by NZZ Fretz AG without impacting the climate

Vontobel Holding AG Gotthardstrasse 43 CH-8022 Zurich Telephone +41 (0)58 283 59 00 Telefax +41 (0)58 283 75 00 www.vontobel.com