annual report 2010 - lgt group

Annual Report 2010

LGT Group

3

Contents

Contents

Corporate bodies 4

Financial highlights 5

Chairman’s report 6

Corporate governance 8

Consolidated financial statements 9

LGT Group Foundation 77

International presence and imprint 92

4

Corporate bodies as of April 2011

Board of Trustees H.S.H. Prince Philipp von und zu Liechtenstein, Chairman

Dr. Rodolfo Bogni 1

K B Chandrasekar 2

Dr. Phillip Colebatch 1

Sir Ronald Grierson 2

Dr. Dominik Koechlin 1, 2

Prof. Dr. Conrad Meyer 2

Senior Management Board H.S.H. Prince Max von und zu Liechtenstein, Group CEO

Dr. André Lagger, CEO LGT Financial Services

Dr. Roberto Paganoni, CEO LGT Capital Partners

Olivier de Perregaux, Group CFO

Thomas Piske, CEO LGT Wealth Management

Torsten de Santos , CEO LGT Capital Management

Internal Audit Daniel Hauser *

External Audit PricewaterhouseCoopers Ltd., Zurich

* since 1 January 2011

Corporate bodies as of April 2011

1 Member of the Management Development and Compensation Committee2 Member of the Audit Committee

5

Financial highlights

Assets under administration CHF m

of which client assets under administration CHF m

of which LGT’s Princely Portfolio CHF m

Net asset inflow CHF m

of which net new money CHF m

of which through acquisition CHF m

Total operating income CHF m

Group profit CHF m

Appropriation of Foundation earnings and dividends CHF m

Group equity capital CHF m

Total assets CHF m

Ratios

Tier 1 %

Cost/income %

Performance of LGT’s Princely Portfolio %

Headcount at 31 December

Rating2

Moody’s

Standard & Poor’s

1 Proposed2 LGT Bank in Liechtenstein Ltd., Vaduz

Financial highlights

2010 2009 2008 2007 2006

86 079 89 023 78 030 102 750 88 028

83 547 86 604 75 912 99 868 85 370

2 532 2 419 2 118 2 882 2 658

3 102 4 550 -1 265 11 000 7 466

3 102 -3 651 -1 265 11 000 7 466

0 8 201 0 0 0

883 779 788 879 727

148 106 163 255 181

-751 -75 -75 -150 -100

3 084 2 958 2 561 3 395 3 023

24 388 24 793 22 795 21 369 17 886

19.3 18.5 16.5 17.8 18.6

70 74 68 66 70

13.3 15.7 -24.1 15.5 17.6

1 889 1 985 1 870 1 689 1 484

Aa3 Aa3 Aa3 Aa3 Aa3

A+ A+ A+ AA- AA-

6 Chairman’s report

H.S.H. Prince Philipp von und zu Liechtenstein, Chairmanof the Board of Trustees (left) andH.S.H. Prince Max von und zu Liechtenstein, Group CEO (right)

Chairman’s report

Results for 2010 and outlook

In 2010 the financial markets were significantly affected

by the consequences of the financial and economic

crisis. While the economy has recovered more or less

across the globe, the political and economic challenges

faced by individual countries and regions still vary

widely. LGT believes it is well positioned in this

environment, and intends to continue investing in

expanding its international business.

Group profits up; balance sheet and

capitalization robust

Total operating income increased 13 percent overall

to CHF 883 million. Earnings were held back by low

interest rates and the strength of the Swiss franc

against the euro and US dollar. Offsetting these devel-

opments was a general pick-up in client stock market

activity over the course of the second six months. In

this environment, LGT’s net interest income declined

42 percent, while income from services increased 17

percent. Income from trading activities and other oper-

ating income was up 58 percent, thanks in particular

to realized gains on securities and currency hedges.

In 2010 total operating expenses came to CHF 683

million, an increase of 18 percent; net of the EUR 50

million payment to the German authorities (in con-

junction with the data theft case), the increase was

7 percent. Personnel expenses were up 6 percent, and

business and operating expenses increased 11 percent,

primarily due to the integration of Dresdner Bank

(Switzerland) with LGT, and ongoing investment in

implementing the group’s international expansion

strategy. The cost/income ratio improved, declining

from 74 percent to 70 percent.

In 2010 LGT released part of the tax provisions made

in 2009 in connection with the acquisition of Dresdner

Bank (Switzerland) and tax changes in Liechtenstein.

The result was a reduction in the tax charge in the

year under review. LGT Group posted a group profit

of CHF 148 million for the 2010 financial year after

CHF 106 million in 2009 (an increase of 40 percent).

Group equity grew 4 percent to CHF 3.1 billion. At

19.3 percent on 31 December 2010 (versus 18.5 per-

cent at the end of 2009), the Tier 1 capital ratio is well

above the lower limit of 8 percent laid down by the

legislator, and means that the company has a good

liquidity profile and is extremely well capitalized. Fur-

ther factors underline the financial solidity of the group

and its subsidiaries: LGT Bank in Liechtenstein Ltd.,

Vaduz, is one of the few international private banks

to have its creditworthiness rated by well-known inde-

pendent agencies. Since 1996, when the first ratings

were produced, LGT Bank, has consistently received

very high ratings (Moody’s Aa3; Standard & Poor’s A+).

Net new money develops positively

Net asset inflows came to CHF 3.1 billion in 2010. At

year end, client assets under administration stood at

CHF 86.1 billion. Substantial inflows in the Asian markets

and onshore private banking operations contributed

7Chairman’s report

significantly to this result. Inflows in our institutional

asset management and fund businesses were mainly

driven by good long-term investment performance.

Well positioned for further growth

For many years LGT has been investing in the inter-

national diversification and expansion of its business,

focusing on both the emerging markets and some of

the more appealing European markets. We have built

up our private banking business in Asia over the past

25 years, and with over 200 employees now have a

substantial presence and strong roots in the region.

Our banks in Switzerland, Austria and Germany have

all increased their assets over the last few years, with

the biggest growth in Switzerland, where we have

almost doubled assets under management thanks to

the successful acquisition and integration of Dresdner

Bank (Switzerland) into LGT Bank.

Alongside the international growth of its private bank-

ing operations, LGT’s main investment was geared to

expanding its asset management units. Today we em-

ploy over 270 people in New York, London, Pfäffikon,

Singapore, Hong Kong and Tokyo. Our global reach

and local presence in the main financial and economic

areas is a decisive advantage in our efforts to identify

and work with the world’s leading investment experts

across various regions and asset classes. Another key

to success in investment management is our strategic

and tactical asset allocation expertise, which we will

further develop this year in collaboration with leading

universities. The strong returns of our LGT investment

products indicate that we are on the right track. In

2011, LGT plans to move further forward with its

growth and diversification strategy. On the traditional

asset management side we intend to expand our insti-

tutional distribution set-up, and in alternative asset

management we are planning targeted measures to

grow our private equity and fund-of-funds businesses.

As a truly private bank and family operation, we can

afford to manage our business with a long-term per-

spective. We are convinced that our strong corporate

culture and commitment to quality will remain key

success factors in the future, both for us and for our

clients.

8

Corporate governance

LGT Group and its holding company, LGT Group

Foundation, are 100 percent controlled by the Prince

of Liechtenstein Foundation (POLF). H.S.H. Reigning

Prince Hans-Adam II. von und zu Liechtenstein is the

main beneficiary of the POLF. The POLF names the

Board of Trustees of LGT Group Foundation. The

Group’s Board of Trustees meets at least four times

a year and has constituted two separate committees

(Audit Committee; Management Development and

Compensation Committee). The Chairman of the

Group’s Board of Trustees is H.S.H. Prince Philipp von

und zu Liechtenstein. The Group’s Board of Trustees

has appointed the Group CEO, H.S.H. Prince Max

von und zu Liechtenstein, who is responsible for the

strategic and operational management of the Group.

The compensation system is supervised by the Man-

agement Development and Compensation Committee,

and consists of a fixed salary component, a yearly

bonus and a long-term incentive scheme (LTIS). As a

privately held company, LGT has developed an internal

LTIS based on an option scheme. Senior management

and other key people are entitled to participate in the

LTIS. The LTIS is calculated according to a predefined

formula which includes, in particular, the result of

operating activities, the investment performance of

the Princely Portfolio and the Group’s cost of capital.

LTIS options are granted yearly and can be exercised

between three to seven years after grant. In addition

to direct compensation, the management has the

possibility to co-invest directly in client products.

These co-investments are at the full risk/benefit of

the subscribing employee.

Internal Audit reports directly to the Group’s Board of

Trustees. In accordance with a general principle, the

external auditors are re-evaluated on a regular basis.

The consolidated LGT Group is supervised by the

Liechtenstein Financial Market Authority (FMA). Local

companies are supervised by their local authorities.

Although it is a privately held company, LGT aims to

follow the standard practices of public companies;

therefore LGT applies a transparent and proactive

communication policy. LGT Bank in Liechtenstein Ltd.

is rated by Moody’s and Standard & Poor’s. The LGT

Group has applied International Financial Reporting

Standards (IFRS) since 1996.

Corporate governance

9

Consolidated financial statements

10

Report of the group auditors

Report of the group auditors

11

Consolidated income statement

Consolidated income statement (TCHF) Note

Net interest and similar income 1

Income from services 2

Income from trading activities 3

Other operating income 4

Total operating income

Personnel expenses 5

Business and office expenses 6

Other operating expenses 7

Total operating expenses

Operating profit before tax

Tax expense 8

Net profit before minority interests

Minority interests

Net profit of LGT Group

The accompanying notes form an integral part of the consolidated financial statements.

Consolidated income statement

2010 2009 Changeabsolute %

95 773 166 385 -70 612 -42

514 327 439 604 74 723 17

198 845 171 355 27 490 16

73 920 1 689 72 231 4 277

882 865 779 033 103 832 13

-438 184 -413 571 -24 613 6

-245 083 -164 091 -80 992 49

-54 660 -45 671 -8 989 20

-737 927 -623 333 -114 594 18

144 938 155 700 -10 762 -7

8 262 -45 192 53 454 -118

153 200 110 508 42 692 39

-5 544 -4 974 -570 11

147 656 105 534 42 122 40

12

Consolidated statement of comprehensive income

Consolidated statement of comprehensive income

Consolidated statement of comprehensive income Note(TCHF)

Net profit before minority interests

Other comprehensive income

Changes in cumulative translation adjustments

Net change in revaluation reserves, net of tax

thereof investments in associates

thereof available-for-sale securities

thereof cash flow hedge

Total other comprehensive income

Total comprehensive income before minority interests

Minority interests

Total comprehensive income of LGT Group



153 200 110 508 42 692 39

-33 415 819 -34 234 -4 180

25 86 385 367 816 -281 431 -77

81 995 301 595 -219 600 -73

5 372 66 026 -60 654 -92

-982 195 -1 177 -604

52 970 368 635 -315 665 -86

206 170 479 143 -272 973 -57

-5 541 -4 974 -567 11

200 629 474 169 -273 540 -58

13Consolidated balance sheet

Consolidated balance sheet (TCHF) Note

Assets

Cash in hand, balances with central banks 9

Loans and advances to banks 10

Loans and advances to customers 11

Securities held for trading purposes 12

Derivative financial instruments 30

Financial assets designated at fair value 13

Other investment securities 14

Investments in associates 15

Property and equipment 16

Intangible assets 17

Prepayments and accrued income

Deferred tax assets 8

Other assets 18

Total assets

Liabilities

Amounts due to banks 19

Amounts due to customers 20

Derivative financial instruments 30

Financial liabilities designated at fair value 21

Certificated debt 22

Accruals and deferred income

Current tax liabilities

Deferred tax liabilities 8

Other liabilities 23

Provisions 24

Total liabilities

Group equity capital

Foundation capital

Retained earnings

Cumulative translation adjustments

Other reserves 25

Total Group equity capital and reservesattributable to LGT’s equity holder

Minority interests

Total Group equity capital

Total liabilities and Group equity capital


Consolidated balance sheet


291 495 746 774 -455 279 -61

5 316 583 8 216 711 -2 900 128 -35

5 383 600 5 690 962 -307 362 -5

15 344 73 618 -58 274 -79

1 690 852 829 375 861 477 104

3 228 137 3 005 441 222 696 7

4 917 781 2 788 574 2 129 207 76

2 531 615 2 419 334 112 281 5

187 792 199 476 -11 684 -6

302 743 330 903 -28 160 -9

80 683 93 197 -12 514 -13

36 143 37 707 -1 564 -4

405 636 361 399 44 237 12

24 388 404 24 793 471 -405 067 -2

1 871 916 1 454 580 417 336 29

14 239 473 16 210 051 -1 970 578 -12

1 937 856 803 618 1 134 238 141

805 791 1 120 200 -314 409 -28

1 570 416 1 672 317 -101 901 -6

68 971 96 344 -27 373 -28

19 097 18 001 1 096 6

79 139 107 986 -28 847 -27

630 233 243 725 386 508 159

81 799 108 272 -26 473 -24

21 304 691 21 835 094 -530 403 -2

339 044 339 044 0 0

1 855 596 1 782 940 72 656 4

-66 648 -33 236 -33 412 101

949 372 862 987 86 385 10

3 077 364 2 951 735 125 629 4

6 349 6 642 -293 -4

3 083 713 2 958 377 125 336 4

24 388 404 24 793 471 -405 067 -2

14

Consolidated statement of changes in equity

Consolidated statementof changes in equity (TCHF)

1 January 2010

Appropriation of Foundation

earnings and dividends

Net profit

Changes in cumulative

translation adjustments

Net change in revaluation

reserves, net of tax

thereof investments in

associates

thereof available-for-sale

securities


Other changes

31 December 2010

1 January 2009

Appropriation of Foundation

earnings and dividends

Net profit

Changes in cumulative

translation adjustments

Net change in revaluation

reserves, net of tax

thereof investments in

associates

thereof available-for-sale

securities


Changes through acquisitions

31 December 2009

Consolidated statement of changes in equity

Foundation Retained Cumulative Other Total Minority Totalcapital earnings translation reserves attribut- interests

adjustments able toLGT’s equity

339 044 1 782 940 -33 236 862 987 2 951 735 6 642 2 958 377

0 -75 000 0 0 -75 000 -5 239 -80 239

0 147 656 0 0 147 656 5 544 153 200

0 0 -33 412 0 -33 412 -3 -33 415

0 0 0 86 385 86 385 0 86 385

0 0 0 81 995 81 995 0 81 995

0 0 0 5 372 5 372 0 5 372

0 0 0 -982 -982 0 -982

0 0 0 0 0 -595 -595

339 044 1 855 596 -66 648 949 372 3 077 364 6 349 3 083 713

Foundation Retained Cumulative Other Total Minority Totalcapital earnings translation reserves attribut- interests

adjustments able toLGT’s equity

339 044 1 752 406 -34 055 495 171 2 552 566 8 111 2 560 677

0 -75 000 0 0 -75 000 -7 005 -82 005

0 105 534 0 0 105 534 4 974 110 508

0 0 819 0 819 0 819

0 0 0 367 816 367 816 0 367 816

0 0 0 301 595 301 595 0 301 595

0 0 0 66 026 66 026 0 66 026

0 0 0 195 195 0 195

0 0 0 0 0 562 562

339 044 1 782 940 -33 236 862 987 2 951 735 6 642 2 958 377

15Consolidated cash flow statement

Consolidated cash flow statement (TCHF) Note

Cash flow from operating activities

Profit after tax

Impairment, depreciation, provisions

Impairment on available-for-sale securities 4

Tax expense 8

Changes in accrued income and expenses

Interest and similar income received

Interest paid

Income tax paid

Cash flow from operating activities before changes in operating assets and liabilities

Loans and advances to banks

Loans and advances to customers

Trading securities and financial instruments designated at fair value

Amounts due to banks

Amounts due to customers

Other assets and other liabilities

Cash flow from changes in operating assets and liabilities

Net cash flow from operating activities

Cash flow from investing activities

Proceeds from sales of property and equipment

Purchase of property and equipment 16

Purchase of other intangible assets 17

Cash outflow on acquisition/foundation of subsidiaries

Cash inflow from sale of subsidiaries

Additions of share of investments in associates 15

Disposals of share of investments in associates 15

Proceeds from sales of investment securities 14

Purchase of investment securities 14

Net cash flow from investing activities

Cash flow from financing activities

Issue of certificated debt

Repayment of certificated debt

Dividends paid to minority interests

Dividends paid to beneficiary

Net cash flow from financing activities

Effects of exchange rate changes on cash

Change in cash in hand, balances with central banks

At the beginning of the period 9

At the end of the period 9

Change in cash in hand, balances with central banks


Consolidated cash flow statement

2010 2009

153 200 110 508

13 767 39 592

-830 7

-8 262 45 192

-27 493 -116 924

170 614 321 957

-87 178 -83 898

18 810 -19 131

232 628 297 303

2 899 087 -1 573 095

307 362 -260 262

-476 832 66 188

417 336 736 296

-1 970 578 388 885

580 443 35 048

1 756 818 -606 940

1 989 446 -309 637

74 3 701

-11 452 -32 426

-4 932 -32 906

-237 -138 428

1 287 19 090

-110 405 0

143 907 0

22 373 555 5 725 910

-24 654 374 -5 356 505

-2 262 577 188 436

223 312 627 330

-325 213 -218 939

-5 239 -6 443

-75 000 -75 000

-182 140 326 948

-8 133

-455 279 205 880

746 774 540 894

291 495 746 774

-455 279 205 880

16

Introduction

LGT Group Foundation, Herrengasse 12, Vaduz,

Principality of Liechtenstein, is the holding company

of LGT Group, a global financial services institution.

The beneficiary of LGT Group Foundation is the Prince

of Liechtenstein Foundation. The main economic

beneficiary of the Prince of Liechtenstein Foundation

is the reigning prince of Liechtenstein, H.S.H. Prince

Hans-Adam II. of Liechtenstein.

The terms “LGT Group”, “LGT” or “Group” mean

LGT Group Foundation together with its subsidiary

undertakings and the term “Company” refers to

LGT Group Foundation.

Presentation of amounts

The Group publishes its financial statements in thou-

sand Swiss Francs (TCHF) unless otherwise stated.

Accounting principles

The consolidated financial statements for the financial

year 2010 are prepared in accordance with Interna-

tional Financial Reporting Standards (IFRS). LGT has

applied IFRS rules since 1996. The consolidated finan-

cial statements are prepared on the historical cost

convention, as modified by revaluation of available-

for-sale financial assets, financial assets and liabilities

held at fair value through profit or loss and all

derivative instruments. A summary of the principal

Group accounting policies is set out below.

The Group CEO and the Group CFO considered the

consolidated financial statements on 5 April 2011. They

were approved for issue by the Audit Committee of the

LGT Group Foundation Board on 27 April 2011. The

Foundation Board approved the consolidated financial

statements for issue on 28 April 2011. The accounts

were presented for approval at the Foundation Meeting

to the Supervisory Board on 28 April 2011. The Foun-

dation Board proposed to the Foundation Meeting of

28 April 2011 the payment of CHF 75 000 000 to the

Prince of Liechtenstein Foundation. The accounts on

pages 11 to 71 were approved by the Foundation

Board on 28 April 2011 and are signed on its behalf

by H.S.H. Prince Philipp of Liechtenstein, Chairman,

and Olivier de Perregaux, Group CFO.

Basis of consolidation

Subsidiaries are fully consolidated from the date on

which control is transferred to the Group. Inter-company

transactions, balances and unrealized gains on trans-

actions between Group companies are eliminated.

Subsidiaries are deconsolidated from the date that

control ceases. The purchase method of accounting is

used to account for the acquisition of subsidiaries by

the Group. The cost of an acquisition is measured at

the fair value of the assets given, equity instruments

issued and liabilities incurred or assumed at the date

of exchange, plus costs directly attributable to the

acquisition. Identifiable assets acquired and liabilities

and contingent liabilities assumed in a business com-

bination are measured initially at their fair values at

the acquisition date, irrespective of the extent of any

minority interest. The excess of the cost of acquisition

over the fair value of the Group’s share of the identi-

fiable net assets acquired is recorded as goodwill. If

the cost of acquisition is less than the fair value of the

net assets of the subsidiary acquired, the difference is

recognized directly in the income statement.

A list of the Group’s principal subsidiary undertakings

is provided in note 32.

Investments in associates

Investments in associates are investments in companies

over which the Group has significant influence but

not control, generally accompanying a shareholding

of between 20 percent and 50 percent of the eco-

nomical rights. LGT associates are accounted for by

the equity method of accounting and are initially

recognized at cost. Unrealized gains on transactions

between the Group and its associates are eliminated

unless the transaction provides evidence of an impair-

ment of the asset transferred. Accounting policies have

been changed where necessary to ensure consistency

with the policies adopted by the Group. The invest-

ments in associates are reported in note 15.

The Group’s share of its associates’ post-acquisition

profit or loss is recognized in the income statement,

or in other reserves. Its share of post-acquisition

movements in reserves is recognized in reserves. The

cumulative post-acquisition movements are adjusted

against the carrying amount of the investment.

Notes to the consolidated financial statementsGroup accounting principles

Notes to the consolidated financial statements

17

Foreign currencies

Functional and presentation currency

Items included in the financial statements of each of

the Group’s entities are measured using the currency

of the primary economic environment in which the

entity operates (“the functional currency”).

The consolidated financial statements are presented in

Swiss Francs, which is the Group’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into the

functional currency using the exchange rates prevailing

on the dates of the transactions. Foreign exchange

gains and losses resulting from the settlement of such

transactions and from the translation at year-end ex-

change rates of monetary assets and liabilities denomin-

ated in foreign currencies are recognized in the income

statement, except when deferred in equity as qualifying

cash flow hedges and qualifying net investment hedges.

Translation differences on non-monetary items, such

as equities held at fair value through profit or loss, are

reported as part of the fair value gain or loss. Trans-

lation differences on non-monetary items, such as

equities classified as available-for-sale financial assets,

are included in the fair value reserve in equity.

Group companies

The results and financial position of all the Group

entities that have a functional currency different from

the presentation currency are translated into the

presentation currency as follows:

� assets and liabilities for each balance sheet presented

are translated at the closing rate on the date of

that balance sheet;

� income and expenses for each account of the income

statement are translated at average exchange rates;

� all resulting exchange differences are recognized as

a separate component of equity.

On consolidation, exchange differences arising from

the translation of the net investment in foreign entities,

and of borrowings and other currency instruments

designated as hedges of such investments, are taken

to shareholders’ equity. When a foreign operation is

sold, such exchange differences are recognized in the

income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the

acquisition of a foreign entity are treated as assets

and liabilities of the foreign entity and translated at

the closing rate.

Foreign exchange rates

The foreign exchange rates for the major currencies

which have been applied are as follows:

2010Average rate Year-end rate

CHF per 1 USD 1.0367 0.9367

CHF per 1 EUR 1.3782 1.2564

CHF per 1 GBP 1.6044 1.4629

2009Average rate Year-end rate

CHF per 1 USD 1.0814 1.0296

CHF per 1 EUR 1.5059 1.4832

CHF per 1 GBP 1.6856 1.6712

Interest income and expense

Interest income and expense are recognized in the

income statement for all instruments measured at

amortized cost using the effective interest method.

The effective interest method is a method of calculating

the amortized cost of a financial asset or a financial

liability and of allocating the interest income or interest

expense over the relevant period. The effective interest

rate is the rate that exactly discounts estimated future

cash payments or receipts through the expected life of

the financial instrument or, when appropriate, a shorter

period to the net carrying amount of the financial asset

or financial liability. When calculating the effective inter-

est rate, the Group estimates cash flows considering

all contractual terms of the financial instrument (for

example, prepayment options) but does not consider

future credit losses. The calculation includes all fees

and interest points paid or received between parties to

the contract that are an integral part of the effective

interest rate, transaction costs and all other premiums

or discounts. Once a financial asset or a group of similar

financial assets has been written down as a result of an

impairment loss, interest income is recognized using the

rate of interest used to discount the future cash flows

for the purpose of measuring the impairment loss.


18

Commission income

Commission income and any associated expense arising

from the provision of private banking and investment

management services, credit commissions and interest

are all accounted for using the accrual method. Fixed

commissions receivable and payable are accounted for

evenly over the life of the relevant contract.

Performance fees are defined as management fees

payable for the provision of investment management

services, but which are conditional on the performance

of the fund or account under contract, compared to

the performance of a specified benchmark. They are

accrued according to the contract terms for the meas-

urement period when they can be reliably measured,

and are invoiced only after confirmation of the per-

formance fee calculation.

Property and equipment

Property and equipment and their subsequent costs

are stated at cost less accumulated depreciation and

accumulated impairment losses. All other repairs and

maintenance are charged to the income statement

during the financial period in which they are incurred.

Property and equipment are periodically reviewed for

impairment. An asset’s carrying amount is written

down immediately to its recoverable amount if the

asset’s carrying amount is greater than its estimated

recoverable amount. The recoverable amount is the

higher of the asset’s fair value less costs to sell and

value in use. Depreciation on it is provided, on a

straight-line basis, from the date of purchase, over

the estimated useful life of the asset. The assets’

residual values and useful lives are reviewed, and

adjusted if appropriate, at each balance sheet date.

Estimated asset lives vary in line with the following:

Freehold buildings 50 years

Leasehold improvements period of lease

IT equipment 3–5 years

Office equipment 5 years

Motor vehicles 4 years

Intangible assets

Goodwill

Goodwill represents the excess of the cost of a business

combination over the fair value of the Group’s share of

the net identifiable assets of the acquired subsidiary/

associate at the date of acquisition. Goodwill on a

business combination of subsidiaries is included in

“goodwill and other intangible assets”. Goodwill on a

business combination of investments in associates is

included in “investments in associates”. Goodwill is

tested annually for impairment and carried at cost less

accumulated impairment losses. Gains and losses on

the disposal of an entity include the carrying amount

of goodwill relating to the entity sold.

Software

Software acquired by the Group is stated at cost less

accumulated amortization and accumulated impairment

losses. Subsequent expenditure on software assets is

capitalized only when it increases the future economic

benefits embodied in the specific asset to which it

relates. All other expenditure is expensed as incurred.

Amortization is recognized in the income statement on

a straight-line basis over the estimated useful life of the

software, from the date that it is available for use. The

estimated useful life of software is three to ten years.

Other intangible assets

Other intangible assets are recognized on the balance

sheet at cost determined at the date of acquisition

and are amortized using the straight-line method over

their estimated useful economic life, not exceeding

20 years. The amortization is recognized in other oper-

ating expenses in the income statement.

At each balance sheet date other intangible assets are

reviewed for indications of impairment or changes in

estimated future benefits. If such indication exists, an

analysis is performed to assess whether the carrying

amount of other intangible assets is fully recoverable.

An impairment is charged if the carrying amount

exceeds the recoverable amount.


19

Financial instruments

Financial assets

Purchases and sales of financial assets at fair value

through profit or loss, held to maturity and available

for sale are recognized on the trade-date – the date

on which the Group commits to purchase or sell the

asset. Loans are recognized when cash is advanced to

the borrowers. Financial assets are initially recognized

at fair value plus transaction costs for all financial

assets not carried at fair value through profit or loss.

Financial assets are derecognized when the rights to

receive cash flows from the financial assets have ex-

pired or where the Group has transferred substantially

all risks and rewards of ownership.

Loans and advances

Loans and receivables are non-derivative financial

assets with fixed or determinable payments that are

not quoted in an active market. They arise when the

Group provides money, goods or services directly to

a debtor with no intention of trading the receivable.

Loans and advances to customers and to banks are

reported at their amortized cost less allowances for

any impairment or losses.

Investment securities

Investment securities are classified as financial assets

at fair value through profit or loss, available-for-sale

and held-to-maturity securities. They are recognized

on the balance sheet and initially measured at fair

value, which is the cost on the consideration given

or received to acquire them. Subsequent to initial

recognition, securities are remeasured to fair value,

except held-to-maturity securities which are carried at

amortized cost subject to a test for impairment. To

the extent that quoted prices are not readily available,

fair value is based on either internal valuation models

or management’s estimate of amounts that could be

realized, based on observable market data, assuming

an orderly liquidation over a reasonable period of time.

Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets

held for trading, and those designated at fair value

through profit or loss at inception. A financial asset is

classified in this category if acquired principally for the

purpose of selling in the short term or if so designated

by management. Derivatives are also categorized as

held for trading unless they are designated as hedges.

The Group designates financial assets and liabilities at

fair value through profit or loss when either

the assets or liabilities are managed, evaluated

and reported internally on a fair value basis;

the designation eliminates or significantly reduces an

accounting mismatch which would otherwise arise;

the asset or liability contains an embedded derivative

that significantly modifies the cash flows that would

otherwise be required under the contract.

Held-to-maturity securities

Held-to-maturity securities are financial assets with fixed

or determinable payments and fixed maturity that LGT

has the positive intention and ability to hold to maturity.

Held-to-maturity securities are carried at amortized cost

subject to a test for impairment. The difference between

initial recognition and nominal value is amortized over

the period to maturity. This amount and interest income

are stated as net interest income.

Available-for-sale securities

Available-for-sale securities are those securities that do

not properly belong in trading securities or held-to-

maturity securities. They are initially recognized at

fair value (plus transaction costs). Available-for-sale

securities are subsequently remeasured at fair value or

amounts derived from cash flow models. Fair values for

unlisted equity securities are estimated using applicable

price/earnings or price/cash flow ratios refined to reflect

the specific circumstances of the issuer. Unrealized

gains and losses arising from changes in the fair value

of securities classified as available-for-sale are recog-

nized in equity. Equity securities for which fair values

cannot be measured reliably are recognized at cost less

impairment. When the securities are disposed of or im-

paired, the related accumulated fair value adjustments

are included in the income statement as income from

investment securities.


20

Borrowings

Borrowings are recognized initially at fair value, being

their issue proceeds (fair value of consideration

received) net of transaction cost incurred. Borrowings

are subsequently stated at amortized cost, any differ-

ence between proceeds net of transaction costs and

the redemption value is recognized in the income

statement over the period of the borrowing using the

effective interest method.

Other liabilities

Other liabilities are reported at amortized cost.

Interest and discounts are taken to net interest and

similar income on an accrual basis.

Derivative financial instruments and hedging

Derivatives are initially recognized at fair value on the

date on which a derivative contract is entered into

and are subsequently remeasured at their fair value.

Fair values are obtained from quoted market prices in

active markets and valuation techniques, including

discounted cash flow models and option pricing

models, as appropriate. All derivatives are carried as

assets when fair value is positive and as liabilities

when fair value is negative.

In the case of hedging transactions involving derivative

financial instruments, on the inception of transaction it

is determined whether the specific transaction is

a hedge of the value of a balance sheet item

(a fair value hedge), or

a hedge of a future cash flow or obligation

(a cash flow hedge).

Derivatives categorized in this manner are treated

as hedging instruments in the financial statements if

they fulfill the following criteria:

existence of documentation that specifies the

underlying transaction (balance sheet item

or cashflow), the hedging instrument as well as

the hedging strategy/relationship,

effective elimination of the hedged risks through

the hedging transaction during the entire reporting

period (high correlation),

sustained high effectiveness of the hedging

transaction.

A hedge is regarded as highly effective if actual results

are within a range of 80 percent to 125 percent.

Changes in the fair value of derivatives that are

designated and qualify as fair value hedges and that

prove to be highly effective in relation to hedged risk

are recorded in the income statement, along with the

corresponding change in the fair value of the hedged

asset or liability that is attributable to that specific

hedged risk.

If the hedge no longer meets the criteria for hedge

accounting, in the case of interest-bearing financial

instruments the difference between the carrying

amount of the hedged position at that time and the

value that this position would have exhibited without

hedging is amortized to net profit or loss over the

remaining period to maturity of the original hedge. In

the case of non-interest-bearing financial instruments,

on the other hand, this difference is immediately

recorded in the income statement.

Changes in the fair value of derivatives that have been

recorded as a cash flow hedge, that fulfill the criteria

mentioned above and that prove to be effective in

hedging risk are reported under other reserves in Group

equity capital. If a future financial transaction or an

obligation results in a balance sheet item, the gains or

losses previously recorded in shareholders’ equity are

derecognized and set off against the cost of this

balance sheet item. If the hedged cash flow or the

obligation leads to direct recognition in the income

statement, the hedging instrument’s cumulative gains

or losses from previous periods in Group equity capital

are included in the income statement in the same

period as the hedged transaction.

Certain derivative transactions represent financial

hedging transactions and are in line with the risk

management principles of the Group. However, in

view of the strict and specific guidelines of IFRS, they

do not fulfill the criteria to be treated as hedging

transactions for accounting purposes. They are there-

fore reported as trading positions. Changes in value

are recorded in the income statement in the corres-

ponding period.


21

Determination of fair values

For financial instruments traded in active markets, the

determination of fair values of financial assets and

financial liabilities is based on quoted market prices or

dealer price quotations. This includes listed equity

securities and quoted debt instruments on major

exchanges as well as exchange traded derivatives.

A financial instrument is regarded as quoted on an

active market if quoted prices are readily and regularly

available from an exchange, dealer, broker, industry

group, pricing service or regulatory agency, and those

prices represent actual and regularly occurring market

transactions on an arm’s length basis. If the above crite-

ria are not met, the market is regarded as being inactive.

For all other financial instruments, fair value is deter-

mined using valuation techniques. In these techniques,

fair values are estimated from observable data in

respect of similar financial instruments, using models

to estimate the present value of expected future cash

flows or other valuation techniques, using inputs (for

example, LIBOR yield curve or FX rates) existing at the

consolidated balance sheet dates.

The Group uses widely recognised valuation models for

determining fair values of non-standardized financial

instruments of lower complexity, such as options or

interest rate and currency swaps. For these financial

instruments, inputs into models are generally market-

observable.

For more complex instruments, the Group uses internally

developed models, which are usually based on valuation

methods and techniques generally recognised as stand-

ard within the industry. Valuation models are used pri-

marily to value derivatives transacted in the over-the-

counter market. Some of the inputs to these models

may not be market observable and are therefore estima-

ted based on assumptions. The impact on net profit of

financial instrument valuations reflecting non-market ob-

servable inputs (level 3 valuations) is disclosed in note 29.

The output of a model is always an estimate or approxi-

mation of a value that cannot be determined with

certainty, and valuation techniques employed may not

fully reflect all factors relevant to the positions the

Group holds. Price data and parameters used in the

measurement procedures applied are generally

reviewed carefully and adjusted, if necessary – particu-

larly in view of the current market developments.

The fair value of over-the-counter (OTC) derivatives is

determined using valuation methods that are commonly

accepted in the financial markets, such as present

value techniques and option pricing models. The fair

value of foreign exchange forwards is generally based

on current forward exchange rates.

Private equity investments for which market quotations

are not readily available are valued at their fair values

as determined in good faith by the respective Board of

Directors in consultation with the investment manager.

In this respect, investments in other investment com-

panies (fund investments) which are not publicly traded

are normally valued at the underlying net asset value

as advised by the managers or administrators of these

investment companies, unless the respective Board of

Directors are aware of good reasons why such a valu-

ation would not be the most appropriate indicator of

fair value.

In estimating the fair value of private equity fund in-

vestments, the respective Board of Directors considers

all appropriate and applicable factors (including a sen-

sitivity to non-observable market factors) relevant to

their value, including but not limited to the following:

reference to the fund investment’s reporting informa-

tion including consideration of any time lags between

the date of the latest available reporting and the

balance sheet date of the respective Group entity in

those situations where no December valuation of the

underlying fund is available. This includes a detailed

analysis of exits (trade sales, initial public offerings,

etc.) which the fund investments have gone through

in the period between the latest available reporting

and the balance sheet date of the respective Group

entity, as well as other relevant valuation information.

This information is a result of continuous contact

with the investment managers and, specifically, by

monitoring calls made to the investment managers,

distribution notices received from the investment

managers in the period between the latest available

report and the balance sheet date of the respective


22

Group entity, as well as the monitoring of other finan-

cial information sources and the assessment thereof;

reference to transaction prices;

result of operational and environmental assessments:

periodic valuation reviews are made of the valuations

of the underlying investments as reported by the

investment managers to determine if the values are

reasonable, accurate and reliable. These reviews in-

clude a fair value estimation using widely recognised

valuation methods such as multiple analysis and

discounted cash flow analysis;

review of management information provided by the

managers/administrators of the fund investments

on a regular basis; and

mark-to-market valuations for quoted investments held

by the managers/administrators of the fund investments

which make up a significant portion of the relevant

Group entity’s net asset value.

If the respective Board of Directors comes to the con-

clusion upon recommendation of the investment man-

ager after applying the above-mentioned valuation

methods, that the most recent valuation reported by

the manager/administrator of a fund investment is

materially misstated, it will make the necessary adjust-

ments using the results of its own review and analysis.

Typically, the fair value of such investments are remeas-

ured based on the receipt of periodic (usually quarterly)

reporting provided to the investors in such vehicles by

the managers or administrators. For new investments

in such vehicles, prior to the receipt of fund reporting,

the investments are usually valued at the amount con-

tributed, which is considered to be the best indicator

of fair value.

In cases when the fair value of unlisted equity instru-

ments cannot be determined reliably, the instruments

are carried at cost less impairment.

Impairment of financial assets

Assets carried at amortized cost

The Group assesses at each balance sheet date whether

there is objective evidence that a financial asset or a

group of financial assets is impaired. A financial asset or

a group of financial assets is impaired and impairment

losses are incurred if, and only if, there is objective

evidence of impairment as a result of one or more

events that occurred after the initial recognition of the

asset (a “loss event”) and that loss event (or events)

has an impact on the estimated future cash flows of

the financial asset or group of financial assets that can

be reliably estimated. Objective evidence that a finan-

cial asset or group of assets is impaired includes

observable data that comes to the attention of the

Group about the following loss events:

significant financial difficulty of the issuer or obligor;

a breach of contract, such as a default or delin-

quency in interest or principal payments;

the Group granting to the borrower, for economic

or legal reasons relating to the borrower’s financial

difficulty, a concession that the lender would not

otherwise consider;

it becoming probable that the borrower will enter

bankruptcy or other financial reorganization;

the disappearance of an active market for that

financial asset because of financial difficulties;

observable data indicating that there is a measurable

decrease in the estimated future cash flows from a

group of financial assets since the initial recognition

of those assets, although the decrease cannot yet be

identified with the individual financial assets in the

group, including:

– adverse changes in the payment status of

borrowers in the group; or

– national or local economic conditions that

correlate with defaults on the assets in the group.

The Group first assesses whether objective evidence of

impairment exists individually for financial assets that are

individually significant, and individually or collectively

for financial assets that are not individually significant.

If the Group determines that no objective evidence of

impairment exists for an individually assessed financial

asset, whether significant or not, it includes the asset

in a group of financial assets with similar credit risk

characteristics and collectively assesses them for

impairment. Assets that are individually assessed for

impairment and for which an impairment loss is or

continues to be recognized are not included in a

collective assessment of impairment.

If there is objective evidence that an impairment loss on

loans and receivables or held-to-maturity investments

carried at amortized cost has been incurred, the amount


23

of the loss is measured as the difference between the

asset’s carrying amount and the present value of esti-

mated future cash flows (excluding future credit losses

that have not been incurred) discounted at the finan-

cial asset’s original effective interest rate. The carrying

amount of the asset is reduced through the use of an

allowance account and the amount of the loss is rec-

ognized in the income statement. If a loan or held-to-

maturity investment has a variable interest rate, the

discount rate for measuring any impairment loss is

the current effective interest rate determined under

the contract. As a practical expedient, the Group may

measure impairment on the basis of an instrument’s

fair value using an observable market price.

The calculation of the present value of the estimated

future cash flows of a collateralized financial asset

reflects the cash flows that may result from foreclosure

less costs for obtaining and selling the collateral,

whether or not foreclosure is probable.

For the purposes of a collective evaluation of impair-

ment, financial assets are grouped on the basis of

similar credit risk characteristics (i.e. on the basis of

the Group’s grading process that considers asset type,

industry, geographical location, collateral type, past-due

status and other relevant factors). Those characteristics

are relevant to the estimation of future cash flows

for groups of such assets by being indicative of the

debtors’ ability to pay all amounts due according to

the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are

collectively evaluated for impairment are estimated on

the basis of the contractual cash flows of the assets in

the group and historical loss experience for assets with

credit risk characteristics similar to those in the group.

Historical loss experience is adjusted on the basis of

current observable data to reflect the effects of current

conditions that did not affect the period on which the

historical loss experience is based and to remove the

effects of conditions in the historical period that do

not exist currently.

Estimates of changes in future cash flows for groups

of assets should reflect and be directionally consistent

with changes in related observable data from period to

period (for example, changes in unemployment rates,

property prices, payment status, or other factors indica-

tive of changes in the probability of losses in the group

and their magnitude). The methodology and assump-

tions used for estimating future cash flows are reviewed

regularly by the Group to reduce any differences

between loss estimates and actual loss experience.

When a loan is uncollectible, it is written off against

the related provision for loan impairment. Such loans

are written off after all the necessary procedures have

been completed and the amount of the loss has been

determined. Subsequent recoveries of amounts pre-

viously written off decrease the amount of the provi-

sion for loan impairment in the income statement.

If, in a subsequent period, the amount of the impair-

ment loss decreases and the decrease can be related

objectively to an event occurring after the impairment

was recognized (such as an improvement in the debtor’s

credit rating), the previously recognized impairment

loss is reversed by adjusting the allowance account.

The amount of the reversal is recognized in the income

statement.

Assets carried at fair value

The Group assesses at each balance sheet date whether

there is objective evidence that a financial asset or a

group of financial assets is impaired. In the case of

equity investments classified as available-for-sale, a

significant or prolonged decline in the fair value of the

security below its cost is considered in determining

whether the assets are impaired. If any such evidence

exists for available-for-sale financial assets, the cumu-

lative loss – measured as the difference between the

acquisition cost and the current fair value, less any

impairment loss on that financial asset previously rec-

ognized in profit or loss – is removed from equity and

recognized in the income statement. Impairment losses

recognized in profit or loss on equity instruments are

not reversed through the income statement, they are

reversed through equity. If, in a subsequent period, the

fair value of a debt instrument classified as available-

for-sale increases and the increase can be objectively

related to an event occurring after the impairment

loss was recognized in profit or loss, the impairment

loss is reversed through the income statement.


24

Renegotiated loans

Loans that are either subject to collective impairment

assessment or individually significant and whose terms

have been renegotiated are no longer considered to be

past due but are treated as new loans. In subsequent

years, the asset is considered to be past due and dis-

closed only if renegotiated.

Provisions

Provisions for restructuring costs, legal claims and other

operational risk are recognized, when the Group has a

present legal or constructive obligation as a result of

past events, when it is more likely than not that an out-

flow of resources will be required to settle the obliga-

tion and when the amount has been reliably estimated.

Fiduciary transactions

The Group commonly acts as trustees and in other

fiduciary capacities that result in the holding or placing

of assets on behalf of individuals, trusts, retirement

benefit plans and other institutions. These assets and

income arising thereon are excluded from these finan-

cial statements, as they are not assets of the Group.

Repurchase and reverse repurchase transactions

(repo transactions)

Repo transactions are used to refinance and fund money

market transactions. They are entered in the balance

sheet as advances against collateral and cash contribu-

tions or with pledging of securities held in the Group’s

own account. Securities provided to serve as collateral

thus continue to be posted in the corresponding balance

sheet positions – securities received to serve as collateral

are not reported in the balance sheet. Interest resulting

from the transactions is posted as net interest income.

Contingent liabilities

A contingent liability is a possible obligation that arises

from past events and whose existence will be confirmed

only by the occurrence or non-occurrence of one or

more uncertain future events not wholly within the con-

trol of the entity. Or a contingent liability is a present

obligation that arises from past events but is not rec-

ognized because it is not probable that an outflow of

resources embodying economic benefits will be required

to settle the obligation or the amount of the obligation

cannot be measured with sufficient reliability.

Leasing

The leases entered into by the Group are operating

leases. The expenses from operating leases (the rights

and responsibilities of ownership remain with the lessor)

are disclosed in business and office expenses.

Cash in hand

For the purpose of the consolidated cash flow state-

ment, cash in hand comprises liquid assets including

cash and balances with central banks and post offices.

Taxation

Corporate tax payable is provided on the taxable profits

of LGT Group companies at the applicable current rates.

Deferred income tax is provided in full, using the liabil-

ity method, on temporary differences arising between

the tax bases of assets and liabilities and their carrying

amounts in the consolidated financial statements.

Deferred income tax is determined using tax rates (and

laws) that have been enacted or substantially enacted

by the balance sheet date and are expected to apply

when the related deferred income tax asset is realized

or the deferred income tax liability is settled. Deferred

tax assets are recognized where it is probable that

future taxable profit will be available against which

the temporary differences can be utilized.

Employee benefits

Short-term benefits

Salaries are recognized in the income statement upon

payment. The amount for bonuses is accrued and will

be paid at the beginning of the following year.

Medium-term benefits

Senior management and other key people of the Group

are entitled to participate in a long-term incentive

scheme. The incentive scheme gives the holder the possi-

bility to participate in the development of the economic

value added of the Group. In principle, the economic

value added represents the operating profit of the

Group and the return on LGT’s Princely Portfolio after

adjustments for capital and refinancing costs. Options

granted under the scheme will, in normal circumstances,

only be exercisable within 3 to 7 years from the date

of grant of option. The annual costs of the scheme are

charged to the profit and loss account. The accruals

are shown as other liabilities until their realization.


25

Pension obligations

Group companies operate various pension schemes.

The schemes are generally funded through payments

to insurance companies or trustee-administered funds,

determined by periodic actuarial calculations. The

Group has both defined benefit and defined contribu-

tion plans. A defined benefit plan is a pension plan

that defines an amount of pension benefit that an

employee will receive on retirement, usually dependent

on one or more factors such as age, years of service

and compensation. A defined contribution plan is a

pension plan under which the Group pays fixed con-

tributions into a separate entity.

The liability recognized in the balance sheet in respect

of defined benefit pension plans is the present value

of the defined benefit obligation at the balance sheet

date less the fair value of plan assets, together with

adjustments for unrecognized actuarial gains or losses

and past service costs. The defined benefit obligation

is calculated annually by independent actuaries using

the projected 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

to the terms of the related pension liability.

Based on the corridor approach, actuarial gains and loss-

es arising from experience adjustments and changes in

actuarial assumptions are charged or credited to income

over the employees expected remaining average work-

ing lives if the net cumulative unrecognized actuarial

gains and losses exceed the greater of 10 percent of the

defined benefit obligation and 10 percent of the fair

value of any pension plan assets. Past-service costs are

recognized immediately in income, unless the changes

to the pension plan are conditional on the employees

remaining in service for a specified period of time (the

vesting period). In this case, the past-service costs are

amortized on a straight-line basis over the vesting period.

For defined contribution plans, the Group pays contri-

butions to privately administered pension insurance

plans on a mandatory, contractual or voluntary basis.

The contributions are recognized as employee benefit

expense when they are due. Prepaid contributions are

recognized as an asset to the extent that a cash refund

or a reduction in the future payments is available.

Client assets under administration

Client assets under administration are stated according

to the provisions of the Liechtenstein banking law.

Events after the reporting period

There are no events to report that had an influence

on the balance sheet and income statement for 2010.

Management’s judgements

The Group makes estimates and assumptions that affect

the reported amounts of assets and liabilities within the

next financial year. Estimates and judgements are con-

tinually evaluated and are based on historical experi-

ence and other factors, including expectations that are

believed to be reasonable under the circumstances.

Impairment losses on loans and advances

The Group reviews its loan portfolios to assess impair-

ment at least on a quarterly basis. In determining

whether an impairment loss should be recorded in the

income statement, the Group makes judgements as to

whether there is any observable data indicating that

there is a measurable decrease in the estimated future

cash flows from a portfolio of loans before the decrease

can be identified with an individual loan in that port-

folio. This evidence may include observable data indi-

cating that there has been an adverse change in the

payment status of borrowers in a group, or national or

local economic conditions that correlate with defaults

on assets in the group.

Management uses estimates based on historical loss

experience for assets with credit risk characteristics and

objective evidence of impairment similar to those in the

portfolio when scheduling its future cash flows. The

methodology and assumptions used for estimating both

the amount and timing of future cash flows are reviewed

regularly to reduce any differences between loss estima-

tes and actual loss experience. To the extent that the net

present value of estimated cash flows differs by +5 per-

cent, the provision would be estimated 271 (2009: 351)

lower. If the net present value differs by –5 percent, the

provision would be estimated 271 (2009: 351) higher.


26

Impairment of goodwill

The fair value of goodwill is reviewed annually and

management assesses whether an impairment charge

needs to be recognized.

Fair value of derivatives

The fair value of financial instruments that are not

quoted in active markets are determined by using valu-

ation techniques. Where valuation techniques (for

example, models) are used to determine fair values,

they are validated and periodically reviewed by qualified

personnel independent of the area that created them.

Changes in assumptions could affect reported fair value

of financial instruments. For example, to the extent

that management used a tightening of 20 basis points

in the credit spread, the fair value of derivative finan-

cial instruments would be estimated at -250 776

(2009: 25 952) as compared to their reported fair value

of -247 004 (2009: 25 757) at the balance sheet date.

Impairment of available-for-sale equity

investments

The Group determines that available-for-sale equity

investments are impaired when there has been a

significant or prolonged decline in the fair value below

their cost (cost is defined as historical cost). This deter-

mination of what is significant or prolonged requires

judgement. In making this judgement the Group

evaluates the following factors: (i) extent of the decline

is substantial (in excess of 20 percent of cost) or, (ii) the

fair value is three balance sheet dates in succession

(on a semi-annual basis) or more below cost. In addi-

tion, impairment may be appropriate when there is

evidence of a deterioration in the financial health of the

investee, industry and sector performance, changes in

technology, and operational and financing cash flows.

Had all the declines in fair value below cost been

considered significant or prolonged, the Group would

suffer an additional 12 686 (2009: 12 763) loss in its

financial statements, being the transfer of the total

fair value reserve to the income statement.

Income taxes

The Group is subject to income taxes in numerous

jurisdictions. Significant estimates are required in de-

termining the worldwide provision for income taxes.

There are many transactions and calculations for which

the ultimate tax determination is uncertain during the

ordinary course of business. The Group recognizes

liabilities for anticipated tax audit issues based on

estimates of whether additional taxes will be due.

Where the final tax outcome of these matters is differ-

ent from the amounts that were initially recorded, such

differences will impact the income tax and deferred tax

provisions in the period in which such determination

is made.

Based on the final outcome of the above-mentioned

judgement areas, the Group would need to decrease

income tax by 1 619 (2009: 1 095), in case of favor-

able market conditions, and decrease income tax by

1 673 (2009: 1 158), in case of unfavorable market

conditions.

Changes in accounting principles and presentation

Standards and interpretations that have been

adopted

The Group applied the following new and revised

standards and interpretations for the first time in the

financial year beginning on 1 January 2010:

IFRS 2 Share-based Payment – Amendment relating to

group cash-settled share-based payment transaction

(effective 1 January 2010)

IFRS 3 Business Combinations, and IAS 27 Consoli-

dated and Separate Financial Statements (effective

1 July 2009)

The changes to the two revised standards relate to

the treatment of specific issues in the case of business

combinations (e.g. the valuation of minority interests,

the treatment of business combinations achieved in

stages, the recording of conditional consideration and

the determination of acquisition costs) as well as

subsequent changes in ownership interests with or

without a loss of control.


27

IFRS 5 Non-current Assets Held for Sale and Discon-

tinued Operations – Amendments resulting from

May 2008 Annual Improvements to IFRSs (effective

1 July 2009)

IAS 28 Investments in Associates – Consequential

amendments arising from amendments to IFRS 3

(effective 1 July 2009)

IAS 31 Investments in Joint Ventures – Consequen-

tial amendments arising from amendments to IFRS 3


IAS 39 Financial Instruments: Recognition and Meas-

urement – Amendments for eligible hedged items


IFRIC 17 Distributions of Non-cash Assets to Owners


IFRIC 18 Transfers of Assets from Customers (to be

applied prospectively to transfers of assets from

customers received on or after 1 July 2009)

Improvements to International Financial Reporting

Standards 2009 (issue date: April 2009; effective

date: dealt with on a standard by standard basis,

generally 1 January 2010)

The adoption has not led to any changes in the Group

Accounting Principles. The standards and interpreta-

tions are not expected to have any impact on the

reported results or financial position of the Group.

Standards and interpretations that have not yet

been adopted

Numerous new and revised standards and interpreta-

tions were published that must be applied for financial

years beginning on or after 1 January 2011. The Group

has chosen not to adopt these in advance.

The new and revised standards and interpretations that

will be relevant to the Group are as follows:

IFRS 7 Financial Instruments: Disclosures –

Amendments enhancing disclosures about transfers

of financial assets (effective 1 July 2011)

IFRS 9 Financial Instruments – Classification and

Measurement (effective 1 January 2013)

IFRS 9 comprises two measurement categories for

financial assets: amortised cost and fair value. All

equity instruments are measured at fair value.

Management has an option to present in other

comprehensive income (OCI) unrealised and realised

fair value gains and losses on equity investments

that are not held for trading. A debt instrument is

at amortised cost only if it is the entity’s business

model to hold the financial asset to collect con-

tractual cash flows and the cash flows represent

principal and interest. It will otherwise need to be

considered at fair value through profit or loss.

Amendments to IFRS 9 Financial Instruments – Clas-

sification and Measurement (effective 1 January 2013)

The amendment includes guidance on financial liabil-

ities and derecognition of financial instruments. The

accounting and presentation for financial liabilities

and for derecognising financial instruments has been

relocated from IAS 39 without change, except for

financial liabilities that are designated at fair value

through profit or loss. Entities with financial liabilities

designated at FVTPL recognise changes in the fair

value due to changes in the liability’s credit risk di-

rectly in OCI. There is no subsequent recycling of the

amounts in OCI to profit or loss, but accumulated

gains or losses may be transferred within equity.

IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments (effective 1 July 2010)

Improvements to International Financial Reporting

Standards 2010 (issue date: May 2010; effective

date: dealt with on a standard by standard basis,

generally 1 January 2011)

Other new and revised standards and interpretations:

Based on initial analyses, the following new and revised

standards and interpretations which have to be applied

for financial years beginning on or after 1 January 2011

are not expected to have any significant impact on the

reported results or financial position of the Group:

IAS 24 Related Party Disclosures – Revised definition

of related parties (effective 1 January 2011)

IFRIC 14: IAS 19 The Limit on a Defined Asset, Mini-

mum Funding Requirements and their Interaction

(effective 1 January 2011)


28 Notes to the consolidated financial statements

1 Net interest and similar income (TCHF)

Interest earned and similar income

Banks

Customers

Interest income from investment securities

Dividend income from investment securities

Total interest earned and similar income

Interest expense

Banks

Interest on certificated debt

Customers

Total interest expense

Net interest and similar income

2 Income from services (TCHF)

Commission income from securities and investment business

Investment management fees

Brokerage fees

Honoraria and consulting

Administration fees and other income from investment business

Total commission income from securities and investment business

Commission income from other services

Lending business

Accounts and clearing business

Total commission income from other services

Commission expenses

Total income from services

3 Income from trading activities (TCHF)

Foreign exchange, notes

Translation gain/(loss)

Transaction gain/(loss)

Interest and dividend income

Profit/(loss) on securities trading 6 722

Profit/(loss) on financial instruments designated at fair value -9 133

Other trading activities -5 860

Total income from trading activities 198 845

Details on the consolidated income statement

2010 2009

46 483 90 087

102 506 111 193

37 781 86 701

835 124

187 605 288 105

-10 427 -7 995

-41 994 -27 229

-39 411 -86 496

-91 832 -121 720

95 773 166 385

2010 2009

311 679 272 209

105 237 88 452

1 693 1 487

93 664 75 829

512 273 437 977

3 953 2 975

11 130 11 138

15 083 14 113

-13 029 -12 486

514 327 439 604

2010 2009

84 885 9 226

76 821 31 085

45 410 52 454

-10 094

88 924

-240

171 355

29Notes to the consolidated financial statements

4 Other operating income (TCHF)

Income from investment securities

Realized net result on available-for-sale securities

Impairment losses on available-for-sale securities

Release of impairment losses on available-for-sale securities

Total income from investment securities

Realized net result on disposals of subsidiaries

Realized net result on investments in associates

Other

Total other operating income

5 Personnel expenses (TCHF)

Personnel expenses, including Directors’ emoluments, consisting of

salaries

bonuses

pension costs

social security costs

other personnel expenses

Total personnel expenses before long-term incentive scheme

Long-term incentive scheme

Total personnel expenses


6 Business and office expenses (TCHF)

Business and office expenses, consisting of

rents and office expenses

IT expenses

information and communication expenses

travel and entertainment expenses

legal and professional expenses 1

advertising expenses

general expenses

Total business and office expenses

1 In 2010 legal and professional expenses include EUR 50 million payment under agreement with the Bochum public prosecuter following the data theft case.

2010 2009

4 878 2 685

0 -7

830 0

5 708 2 678

2 298 -15 346

53 219 0

12 695 14 357

73 920 1 689

2010 2009

236 583 214 772

109 754 103 161

27 667 36 716

24 781 24 422

24 326 21 757

423 111 400 828

15 073 12 743

438 184 413 571

1 889 1 985

2010 2009

38 089 33 439

34 200 34 930

21 801 20 113

13 785 11 458

95 567 30 223

23 045 18 037

18 596 15 891

245 083 164 091


7 Other operating expenses (TCHF) Note

Depreciation on property and equipment 16

Amortisation of intangible assets 17

Other depreciation

Total depreciation and amortisation

Credit losses 11

Recovery of credit losses 11

Other

Total credit losses/(recoveries)

Provision for operational risks

Other provisions

Total changes in provisions and other losses

Total other operating expenses

8 Taxation (TCHF)

Tax expense

Current income tax expense

Deferred income tax expense

Total income tax expense

Capital tax expense

Total tax expense

Reconciliation of the expected to the effective income tax expense

Profit before tax

Income tax expense calculated at a tax rate of 10% (2009: 9%)1

Tax rate difference from local differences in domestic tax rates

Tax rate difference on income components subject to foreign taxes

Income not subject to tax

Total income tax expense

1 The rate used is the average income tax rate of the Group.

2010 2009

22 366 20 847

19 479 14 854

771 0

42 616 35 701

4 462 8 320

-2 074 -12 606

0 596

2 388 -3 690

8 958 -623

698 14 283

9 656 13 660

54 660 45 671

2010 2009

20 227 20 509

-34 590 19 581

-14 363 40 090

6 101 5 102

-8 262 45 192

144 938 155 700

14 494 14 013

-26 278 25 822

-4 071 4 660

1 492 -4 405

-14 363 40 090


Deferred income tax expense comprises the following temporary differences

Losses available for offset against future taxable income

Accelerated depreciation for tax purposes

Provisions


Other temporary differences

Total deferred income tax expense

Deferred income tax assets and liabilities relate to the following items

Deferred income tax liabilities


Provisions



Total deferred income tax liabilities

Deferred income tax assets

Losses available for offset against future taxable income


Provisions


Total deferred income tax assets

Movement on the deferred income tax assets and liabilities is as follows

At 1 January

Income statement charge

Available-for-sale securities: fair value measurement

Other changes


At 31 December

Income tax on othercomprehensive income

Change in revaluation reserves


Other comprehensive income

2010 2009

-4 932 -8 715

-379 -936

-29 856 28 054

-856 -528

1 433 1 706

-34 590 19 581

-1 704 2 662

69 850 102 111

-23 1 046

11 016 2 167

79 139 107 986

35 002 38 535

807 -1

0 2

334 -829

36 143 37 707

70 279 36 757

-34 590 19 581

409 -1 103

922 15 044

5 976 0

42 996 70 279

2010 2009Before tax Tax (expense) Net of tax Before tax Tax (expense) Net of tax

/Tax benefit /Tax benefit

86 794 -409 86 385 366 713 1 103 367 816

-33 412 0 -33 412 819 0 819

53 382 -409 52 973 367 532 1 103 368 635

32

9 Cash in hand, balances with central banks (TCHF)

Cash in hand

Balances with central banks

Balances with post offices

Total cash in hand, balances with central banks

10 Loans and advances to banks (TCHF)

Loans and advances to OECD banks

Loans and advances to non-OECD banks

Total loans and advances to banks

11 Loans and advances to customers(TCHF)

Mortgage-backed

Other collateral

Without collateral

Total loans and advancesto customers

Details on the consolidated balance sheet


2010 2009

37 049 36 331

245 633 593 764

8 813 116 679

291 495 746 774

2010 2009

5 188 951 8 114 930

127 632 101 781

5 316 583 8 216 711

2010 2009Gross Impairment Carrying Gross Impairment Carrying

amount allowance amount amount allowance amount

2 467 252 -4 932 2 462 320 2 306 746 -4 808 2 301 938

2 742 544 -2 830 2 739 714 2 998 368 -3 794 2 994 574

191 779 -10 213 181 566 406 694 -12 244 394 450

5 401 575 -17 975 5 383 600 5 711 808 -20 846 5 690 962

33

Specific allowancefor impairment

At 1 January

Charges to allowance

Addition through acquisition

Release of allowance

Allowance utilized

Reclassifications

Currency translation

At 31 December

Portfolio allowancefor impairment

At 1 January


Release of allowance


At 31 December

Total allowancefor impairment

Additional information on credit risks

Non-performing customers’ loans

Additional information about loans and advances is shown separately in the risk management notes.


2010 2009Mortgage- Other Without Total Mortgage- Other Without Total

backed collateral collateral backed collateral collateral

4 808 3 794 6 624 15 226 4 061 12 790 4 039 20 890

1 458 126 2 878 4 462 270 1 779 6 271 8 320

0 0 0 0 1 133 0 0 1 133

-642 -3 -909 -1 554 -1 249 -9 881 -1 011 -12 141

-1 826 0 -2 878 -4 704 25 -246 -2 706 -2 927

965 -965 0 0 568 -624 56 0

-703 -124 272 -555 0 -24 -25 -49

4 060 2 828 5 987 12 875 4 808 3 794 6 624 15 226

0 0 5 620 5 620 0 0 6 085 6 085

0 0 0 0 0 0 0 0

0 0 -520 -520 0 0 -465 -465

0 0 0 0 0 0 0 0

0 0 5 100 5 100 0 0 5 620 5 620

17 975 20 846

2010 2009

46 515 54 316

34

12 Securities held for trading purposes (TCHF)

Total securities held for trading purposes

thereof listed

13 Financial assets designated at fair value (TCHF)

Securities designated at fair value to match financial liabilities through profit or loss

Loans and advances to customers designated at fair value to

match financial liabilities through profit or loss

Other securities designated at fair value through profit or loss1,2

Total financial assets designated at fair value

1 Thereof listed 1 977 935 (2009: 1 691 136)2 Thereof subordinated securities 15 147 (2009: 58 799)

At 31 December 2010 the maximum exposure to credit risk on loans and advances at fair value through profit or loss was 43 973 (2009: 51 913).

14 Investment securities (TCHF)


At 1 January

Redemption

Revaluations

At 31 December


At 1 January


Additions

Disposals and redemption

Revaluations

Less allowance for impairment

Release of impairment

At 31 December

Total investment securities

thereof fixed-income securities maturing within one year

thereof listed

Specific allowance for impairment on available-for-sale securities

At 1 January


Release of impairment

Other changes

At 31 December


2010 2009

15 344 73 618

15 327 21 266

2010 2009

779 307 1 080 473

43 973 51 913

2 404 857 1 873 055

3 228 137 3 005 441

2010 2009

1 998 6 982

-2 000 -5 000

2 16

0 1 998

2 786 576 3 040 846

-147 880 -320

24 654 374 5 356 505

-22 373 555 -5 725 910

-2 564 115 462

0 -7

830 0

4 917 781 2 786 576

4 917 781 2 788 574

3 796 465 1 623 748

1 144 692 1 176 641

4 920 4 913

0 7

-830 0

-50 0

4 040 4 920


15 Investments in associates (TCHF)

At 1 January

Additions

Disposals

Revaluation through equity

At 31 December

Details of investments in associates as open-end investment companies

Fixed-income

Real estate investment trusts

Equities

Hedge fund investments

Private equity investments

Cash

Total investments in associates

LGT’s investments in associates at 31 December 2010

Name Principal activity

LGT Capital Invest Limited, Grand Cayman Open-end investment company

Geschäftshaus Spitalgasse Waisenhausplatz AG, Berne was sold in 2010.

LGT’s investments in associates at 31 December 2009


LGT Capital Invest Limited, Grand Cayman Open-end investment company

Geschäftshaus Spitalgasse Waisenhausplatz AG, Berne

2010 2009

2 419 334 2 117 739

110 405 0

-143 907 0

145 783 301 595

2 531 615 2 419 334

725 934 611 480

50 214 39 925

608 065 643 980

539 067 546 939

575 465 580 856

32 870 -3 846

2 531 615 2 419 334

Ownership interest in %of ordinary/participation

shares held

41.32

Ownership interest in %of ordinary/participation

shares held

30.35

36.84


16 Property and equipment(TCHF)

Cost

At 1 January 2010


Additions

Reclassifications

Disposals

At 31 December 2010

Accumulated depreciation

At 1 January 2010


Charge for the year

Reclassifications

Disposals

At 31 December 2010

Net book value

At 31 December 2010

Property and equipment(TCHF)

Cost

At 1 January 2009


Additions

Additions through acquisitions

Reclassifications

Disposals

At 31 December 2009


At 1 January 2009


Charge for the year

Additions through acquisitions

Reclassifications

Disposals

At 31 December 2009

Net book value

At 31 December 2009

Insurance value of tangible assets

Insurance value

Freehold Other Leasehold Office Motor Totalbank freehold improve- equipment vehicles

premises property ments

271 213 2 051 13 825 69 211 1 209 357 509

0 1 -476 -1 349 0 -1 824

1 828 0 45 9 579 0 11 452

-10 937 -152 19 177 -939 -149 7 000

-923 0 -1 265 -7 420 -365 -9 973

261 181 1 900 31 306 69 082 695 364 164

102 958 875 7 416 45 976 808 158 033

0 0 -224 -913 0 -1 137

6 558 38 3 106 12 509 155 22 366

-163 -103 8 066 -651 -149 7 000

-1 065 1 -3 383 -5 134 -309 -9 890

108 288 811 14 981 51 787 505 176 372

152 893 1 089 16 325 17 295 190 187 792

Freehold Other Leasehold Office Motor Totalbank freehold improve- equipment vehicles

premises property ments

170 262 2 447 32 816 69 070 1 725 276 320

0 -21 -72 -108 -4 -205

21 790 21 45 10 570 0 32 426

65 680 0 0 2 853 0 68 533

13 582 0 -13 582 0 0 0

-101 -396 -5 382 -13 174 -512 -19 565

271 213 2 051 13 825 69 211 1 209 357 509

90 175 812 15 123 45 171 832 152 113

-5 -4 -37 -130 -1 -177

7 687 74 1 088 11 796 202 20 847

0 0 0 1 114 0 1 114

5 101 0 -5 101 0 0 0

0 -7 -3 657 -11 975 -225 -15 864

102 958 875 7 416 45 976 808 158 033

168 255 1 176 6 409 23 235 401 199 476

2010 2009

418 911 338 356


17 Intangible assets (TCHF)

Cost

At 1 January 2010


Additions

Disposals

At 31 December 2010

Accumulated amortization and impairment

At 1 January 2010


Charge for the year

Disposals

At 31 December 2010

Net book value at 31 December 2010

Intangible assets (TCHF)

Cost

At 1 January 2009


Additions

Disposals

At 31 December 2009

Accumulated amortization and impairment

At 1 January 2009


Charge for the year

Disposals

At 31 December 2009

Net book value at 31 December 2009

Goodwill

Goodwill is allocated to the following organizational units (cash-generating units; CGUs) based on the anticipated synergies:

LGT Bank (Schweiz) AG, Basel

LGT Capital Partners AG, Pfäffikon

Total

The two organizational units represent the level at which the goodwill is monitored for internal management purposes.

The calculation of the realizable amount of the units was based on the respective fair value less costs to sell. The level of the premium

for client assets was determined on the market prices of companies with similar business activities, for 2010 in the range of 2–4%.

The realizable amount exceeded the book value of all units, so that an impairment was considered unnecessary. An additional

calculation of the realizable amount of the two organizational units based on their value in use was therefore not determined.

Goodwill Software Other Totalintangible assets

148 002 150 284 47 926 346 212

-26 -170 -1 443 -1 639

237 4 932 0 5 169

-6 585 0 -5 658 -12 243

141 628 155 046 40 825 337 499

0 13 274 2 035 15 309

-26 -10 4 -32

237 15 395 3 847 19 479

0 0 0 0

211 28 659 5 886 34 756

141 417 126 387 34 939 302 743

Goodwill Software Other Totalintangible assets

112 955 117 378 23 354 253 687

0 0 -164 -164

35 047 32 906 24 736 92 689

0 0 0 0

148 002 150 284 47 926 346 212

0 0 458 458

0 0 -3 -3

0 13 274 1 580 14 854

0 0 0 0

0 13 274 2 035 15 309

148 002 137 010 45 891 330 903

2010 2009

134 154 135 517

7 263 12 485

141 417 148 002

38

18 Other assets (TCHF)

Precious metals

Client settlement accounts

Pensions

Other

Total other assets

19 Amounts due to banks (TCHF)

Deposits on demand

Time deposits

Total amounts due to banks

20 Amounts due to customers (TCHF)

Deposits on demand

Time deposits

Savings deposits

Total amounts due to customers

21 Financial liabilities designated at fair value (TCHF)

Bond issues designated at fair value

Other liabilities designated at fair value

Total financial liabilities designated at fair value

There were no gains or losses attributable to changes in the credit risk for those financial liabilities designated at fair value in 2010 (2009: 0).


2010 2009

335 246 287 152

0 294

31 311 19 255

39 079 54 698

405 636 361 399

2010 2009

879 801 548 330

992 115 906 250

1 871 916 1 454 580

2010 2009

5 700 445 6 156 868

7 402 712 9 013 718

1 136 316 1 039 465

14 239 473 16 210 051

2010 2009

761 818 1 068 287

43 973 51 913

805 791 1 120 200


Bond issues designated at fair value at 31 December (TCHF)

Product Date of issue Nominal value Interest Maturity‘000 rate %

LGT GIM Index Certificates1 up to 2004 EUR – 28.02.2012

LGT GIM Index Certificates II 2 up to 2006 EUR – 30.06.2014

LGT GIM Index Certificates II/2 3 2006 EUR – 31.03.2016

LGT GIM Index Certificates III 4 up to 2008 EUR – 31.07.2016

LGT GIM Index Certificates IV 5 continuously EUR – 31.03.2018

Castle Private Equity Performance Linked

Notes 6 02.06.2003 USD – 02.06.2010

Crown Absolute Return Index Certificates I 7 continuously EUR – 30.11.2013

Crown Absolute Return Index Certificates II 8 continuously EUR – 31.07.2014

Crown Alternative SV Index Certificates 9 continuously EUR – 30.06.2017

Crown Alternative Bond Index Certificates10 continuously EUR – 30.11.2017

LGT GATS Index Certificates11 continuously EUR – 30.09.2014

LGT M-Smart Allocator Index Certificates12 continuously EUR – 31.08.2017

LGT ex Equities Emerging Markets Leaders

Certificates13 continuously USD – 31.12.2027

LGT ex Equities GEM Index Certificates14 continuously USD – 31.12.2027

LGT ex Fixed Income Emerging Markets

Index Certificates15 continuously USD – 31.12.2027

LGT ex Hedge Funds GIM Index Certificates16 continuously USD – 31.12.2027

LGT ex Hedge Funds GATS Index Certificates17 continuously USD – 31.12.2027

LGT ex Private Equity IV Index Certificates18 continuously USD – 31.12.2027

Total bond issues designatedat fair value at 31 December

1 Linked to the performance of LGT Premium Strategy GIM (EUR) index administered by LGT Capital Management Ltd. with a duration from 2002 to 2012

incl. two 5-year extension options.2 Linked to the performance of LGT Premium Strategy GIM II (EUR) index administered by LGT Capital Management Ltd. with a duration from 2004 to 2014

incl. two 5-year extension options.3 Linked to the performance of LGT Premium Strategy GIM II (EUR) index administered by LGT Capital Management Ltd. with a duration from 2006 to 2016

incl. two 5-year extension options.4 Linked to the performance of LGT Premium Strategy GIM III (EUR) index administered by LGT Capital Management Ltd. with a duration from 2006 to 2016

incl. two 5-year extension options.5 Linked to the performance of LGT Premium Strategy GIM IV (EUR) index administered by LGT Capital Management Ltd. with a duration from 2008 to 2018

incl. two 5-year extension options.6 Linked to the Castle Note issued by Castle HoldCo Ltd. based on the performance of listed Castle Private Equity shares.7 Linked to the Crown Absolute Return I (EUR) index administered by LGT Capital Partners Ltd. with a duration from 2003 to 2013 incl. two 5-year extension options.8 Linked to the Crown Absolute Return II (EUR) index administered by LGT Capital Partners Ltd. with a duration from 2004 to 2014 incl. two 5-year extension options.9 Linked to the Crown Alternative SV (EUR) index administered by LGT Capital Partners Ltd. with a duration from 2007 to 2017 incl. two 5-year extension options.10 Linked to the Crown Alternative Bond (EUR) index administered by LGT Capital Partners Ltd. with a duration from 2007 to 2017 incl. two 5-year extension options.11 Linked to the performance of LGT Premium Strategy GATS (EUR) index administered by LGT Capital Management Ltd. with a duration from 2004 to 2014

incl. two 5-year extension options.12 Linked to the LGT M-Smart Allocator (EUR) index administered by LGT Capital Management Ltd. with a duration from 2007 to 2017 incl. two 5-year extension options.13 Linked to the LGT ex Equity Emerging Markets II (USD) index administered by LGT Capital Management Ltd. with a duration from 2007 to 2027

incl. two 5-year extension options.14 Linked to the LGT ex Equity Emerging Markets III (USD) index administered by LGT Capital Management Ltd. with a duration from 2007 to 2027

incl. two 5-year extension options.15 Linked to the LGT ex Fixed Income Emerging Markets II (USD) index administered by LGT Capital Management Ltd. with a duration from 2007 to 2027

incl. two 5-year extension options.16 Linked to the LGT ex Hedge Funds GIM IU (USD) index administered by LGT Capital Partners Ltd. with a duration from 2007 to 2027 incl. two 5-year extension options.17 Linked to the LGT ex Hedge Funds GATS IU (USD) index administered by LGT Capital Partners Ltd. with a duration from 2007 to 2027 incl. two 5-year extension options.18 Linked to the LGT ex Private Equity IV (USD) index administered by LGT Capital Partners Ltd. with a duration from 2007 to 2027 incl. two 5-year extension options.

Fair Fairvalue value2010 2009

62 099 78 020 99 237

180 893 227 270 320 073

49 320 61 964 79 532

122 350 153 718 210 086

786 988 1 045

0 0 9 650

4 569 5 741 6 564

1 387 1 742 1 998

30 799 38 695 44 701

114 143 230

56 150 70 546 94 309

36 374 45 699 48 298

7 452 6 980 10 244

7 049 6 602 12 342

15 286 14 318 29 260

30 905 28 947 62 779

21 828 20 445 32 826

0 0 5 113

761 818 1 068 287

40

22 Certificated debt (TCHF)

Bond issues (net book value)1

Subordinated cash bonds (fixed-rate medium term notes)2

Other cash bonds (fixed-rate medium term notes)

Total certificated debt

1 Net book value of bond issues is calculated using the effective interest method. Bonds held by LGT Group companies are eliminated.2 Interest 2010 is payable on the subordinated cash bonds at various rates ranging from 2.0625% to 3.6%. The interest charge for the year on these bonds

was 112 (2009: 115).

Bond issues at 31 December (TCHF)

Issuer Date of issue Nominal value Interest Maturityrate %

LGT Finance Limited 09.06.2006 CHF 250 000 2.625 09.06.2010







Total bond issuesat 31 December


23 Other liabilities (TCHF)

Capital tax

Amounts due to long-term incentive scheme

Amounts due to bonuses

Other

Total other liabilities

24 Provisions (TCHF)

At 1 January

Current year expense

Provisions released

Provisions utilized


Reclassification

Other changes due to acquisition

At 31 December

2010 2009

1 455 837 1 482 525

1 145 3 170

113 434 186 622

1 570 416 1 672 317

Net book Net bookvalue value2010 2009

0 249 516

199 561 199 847

249 046 248 974

243 334 249 113

226 123 244 149

293 544 290 926

244 229 0

1 455 837 1 482 525

2010 2009

5 680 6 099

28 931 17 785

108 957 120 672

486 665 99 169

630 233 243 725

2010 2009

108 272 61 364

11 029 29 544

-1 354 -21 366

-35 572 -4 959

-2 163 -114

1 587 0

0 43 803

81 799 108 272


25 Other reserves (TCHF)

Revaluation reserves – investments in associates

Revaluation reserves – available-for-sale securities

Revaluation reserves – cash flow hedge

Total other reserves

Revaluation reserves – investments in associates

At 1 January

Disposals

Net gain/(loss) from change in fair value

Reclassification

At 31 December

Revaluation reserves – available-for-sale securities

At 1 January


Deferred income tax

At 31 December

Revaluation reserves – cash flow hedge

At 1 January


At 31 December

2010 2009

928 682 846 687

11 604 6 232

9 086 10 068

949 372 862 987

846 687 545 092

-52 589 0

145 783 301 595

-11 199 0

928 682 846 687

6 232 -59 794

5 781 64 923

-409 1 103

11 604 6 232

10 068 9 873

-982 195

9 086 10 068

42

26 Contingent assets, contingent liabilities, commitments andfiduciary transactions (TCHF)

Contingent assets


Committed credit lines and other commitments

of which irrevocable commitments

Fiduciary transactions

Fiduciary investments

Fiduciary loans and other financial transactions in a fiduciary capacity

Total fiduciary transactions

Information about derivative financial instruments is shown separately in note 30.

27 Pledged and assigned assets/assets subject to reservation of ownership,which are used to secure own liabilities (TCHF)1

Book value of pledged and assigned assets (as collateral)

of which investment securities

of which financial assets designated at fair value

Actual commitments

There are no assets subject to reservation of ownership.

The assets are pledged for commitments in respect of Lombard limits at central banks, for securities deposits relating to X-Clear/Swiss Stock Exchange and limits

for cash settlement of securities transactions with EUROCLEAR BANK SA.

28 Lending transactions and pension transactions with securities (TCHF)1

Claims from cash deposits in connection with securities borrowing and

reverse repurchase transactions

Liabilities from cash deposits in connection with securities lending and

repurchase transactions

Own securities lent or provided as collateral within the scope of securities

lending or borrowing transactions, as well as own securities transferred from

repurchase transactions

of which capable of being resold or further pledged without restrictions

Securities borrowed or accepted as collateral within the scope of securities

lending or borrowing transactions, as well as securities received from reverse

repurchase transactions, which are capable of being resold or further

pledged without restrictions

of which resold or further pledged

1 These transactions are conducted under terms that are usual and customary to standard lending, and securities borrowing and lending activities, as well as

requirements determined by exchanges where the bank acts as an intermediary.


2010 2009

0 4 333

319 662 412 752

351 814 218 817

245 700 218 817

3 187 512 5 475 219

8 301 4 900

3 195 813 5 480 119

2010 2009

550 320 480 031

216 515 263 489

333 805 216 542

253 253 299 566

2010 2009

0 0

0 0

175 719 921 545

175 719 371 573

633 424 5 180 165

165 752 424 680


29 Financial instruments measured at fair value (TCHF)

Fair value hierarchy

IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or

unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group’s

market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1

Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt

instruments on exchanges and exchange traded derivatives.

Level 2

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices)

or indirectly (that is, derived from prices). This level includes investments in hedge funds, mutual funds, the majority of OTC

derivative contracts and structured debt.

Level 3

Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes mainly

private equity investments, issued structured debt as well as equity investments with significant unobservable components.

This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market

prices in its valuations where possible.

Fair value measurement at the endof the period

Assets

Securities held for trading purposes

Derivative financial instruments

Financial assets designated at fair value


Total assets measured at fair value

Liabilities


Financial liabilities designated at fair value

Total liabilities measured at fair value

There have been no transfers from Level 2 to Level 1 and vice versa.

Fair value measurement at the endof the period

Assets





Total assets measured at fair value

Liabilities



Total liabilities measured at fair value

There have been no transfers from Level 2 to Level 1 and vice versa.

2010Level 1 Level 2 Level 3 Total

15 327 17 0 15 344

0 1 690 852 0 1 690 852

2 133 753 1 084 652 9 732 3 228 137

1 144 692 3 766 704 6 385 4 917 781

3 293 772 6 542 225 16 117 9 852 114

0 1 935 921 1 935 1 937 856

0 805 791 0 805 791

0 2 741 712 1 935 2 743 647

2009Level 1 Level 2 Level 3 Total

21 266 52 102 250 73 618

53 829 322 0 829 375

1 700 786 1 294 940 9 715 3 005 441

1 174 643 1 607 803 4 130 2 786 576

2 896 748 3 784 167 14 095 6 695 010

11 801 937 1 670 803 618

0 1 120 200 0 1 120 200

11 1 922 137 1 670 1 923 818


Reconciliation of Level 3 items

Assets

At 1 January

Total gains or losses

thereof in profit or loss

thereof in other comprehensive income

Purchases

Issues

Sales

Redemptions

Transfers in/out of Level 3

At 31 December

Liabilities

At 1 January




Purchases

Issues

Sales

Redemptions


At 31 December

There have been no transfers either in or out of Level 3 in 2010.

Securities held Financial assets/ Available-for- 2010for trading liabilities desig- sale securities Totalpurposes nated at fair value

250 9 715 4 130 14 095

-26 -29 232 177

-26 -29 829 774

0 0 -597 -597

0 1 868 0 1 868

0 0 3 522 3 522

0 0 -477 -477

-224 -1 822 -1 022 -3 068

0 0 0 0

0 9 732 6 385 16 117

0 1 670 0 1 670

0 265 0 265

0 265 0 265

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 1 935 0 1 935


Reconciliation of Level 3 items

Assets

At 1 January




Purchases

Issues

Sales

Redemptions


At 31 December

Liabilities

At 1 January




Purchases

Issues

Sales

Redemptions


At 31 December

There have been no transfers either in or out of Level 3 in 2010.

Gains or losses included in profit or loss for financial instrumentsmeasured at fair value based on Level 3

Total gains or losses included in profit or loss for the period

Total gains or losses for the period included in profit or loss

for assets/liabilities held at the end of the reporting period

Securities held Financial assets/ Available-for- 2009for trading liabilities desig- sale securities Totalpurposes nated at fair value

0 6 732 39 570 46 302

10 938 -3 431 -2 483

10 938 -2 363 -1 415

0 0 -1 068 -1 068

240 3 368 13 555 17 163

0 0 -44 066 -44 066

0 -1 323 -1 498 -2 821

0 0 0 0

250 9 715 4 130 14 095

0 1 106 0 1 106

0 564 0 564

0 564 0 564

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 1 670 0 1 670

2010 2009

509 -1 979

-322 793


30 Derivative financial instruments

In the normal course of business, LGT Group and its subsidiaries use various derivative financial instruments to meet the financial

needs of their customers, to generate revenues through trading and market-making activities, and to manage their exposure to

fluctuations in interest and foreign exchange rates. Derivatives used for trading purposes include foreign exchange forwards, stock

options and warrants as well as forward rate agreements (FRAs). Within the context of asset and liability management, interest

rate swaps are primarily employed. Foreign exchange and precious metal OTC options are entered into for customer transactions

only. LGT Group controls the credit risk from derivative financial instruments through its credit approval process and the use of

control limits and monitoring procedures. LGT Group uses the same credit procedures when entering into derivatives as it does for

traditional lending products.

The following table summarizes the total outstanding volumes in derivative financial instruments. Positive and negative replace-

ment values are stated at gross values, without taking into consideration the effect of master netting agreements.

Types of derivativefinancial instruments heldfor trading (TCHF)

Interest rate products

Interest rate swaps

Interest rate OTC options

Foreign exchange products

Foreign exchange forwards

Foreign exchange swaps

Foreign exchange OTC options

Precious metal products

Precious metal forwards

Precious metal swaps

Precious metal OTC options

Derivatives on sharesand indices

Futures

Other products

Total contracts

Types of derivativefinancial instruments heldfor hedging (TCHF)

Interest rate products

Interest rate swaps

2010 2009Notional Positive Negative Notional Positive Negativeamount replacement replacement amount replacement replacement

value value value value

1 157 621 6 541 19 079 736 071 7 385 13 319

0 0 0 0 0 0

85 096 808 1 654 760 1 895 874 69 652 755 781 235 762 159

0 0 0 0 0 0

1 539 819 6 746 6 748 645 933 3 284 3 309

492 050 10 458 11 764 345 764 21 815 1 064

0 0 0 295 790 3 045 19 592

388 798 2 362 2 363 112 508 1 455 1 459

0 0 0 48 156 53 11

18 386 404 2 028 6 078 1 035 2 705

88 693 482 1 681 271 1 937 856 71 843 055 819 307 803 618

2010 2009Notional Positive Negative Notional Positive Negativeamount replacement replacement amount replacement replacement

value value value value

400 000 9 581 0 320 000 10 068 0


31 Capital resources

Capital adequacy and the use of capital are monitored by the Group and by individual operating units, employing techniques

based on the guidelines developed by the Basel Committee on Banking Supervision and implemented by the Liechtenstein

Government for supervisory purposes.

The Basel Committee guidelines require minimum risk ratios for all international banks of 8%. These ratios measure capital ade-

quacy by comparing the Group’s eligible capital with balance sheet assets, off-balance sheet commitments and market positions

at weighted amounts to reflect their relative risk. Assets are weighted according to broad categories of notional risk, first being

multiplied by a conversion factor and then being assigned a risk weighting according to the amount of capital deemed to be

necessary for them. Off-balance sheet commitments and default risk positions are also multiplied and risk-weighted. Market risk

is calculated with the standard approach.

The Group and its individually regulated operations have complied with all externally imposed capital requirements throughout

the period.

The following table analyzes the Group’s capital resources as defined for regulatory purposes.

Capital resources (TCHF)

Capital resources

thereof minority interest

thereof “innovative” instruments

Other deductions

Net core capital before adjustments

upper tier 2 capital

lower tier 2 capital

tier 3 capital

Other deductions

Net capital resources

Risk-weighted assets (TCHF) Approach

Credit risk Standard

On-balance sheet

Non-counterpart risks

Market risk Standard

thereof interest rate risks

thereof equity position risks

thereof foreign exchange risks

thereof commodities risks

thereof option risks

Operational risk Basic indicator

Total

Capital adequacy ratio

Net capital resources

2010 2009

3 083 713 2 958 377

6 349 6 642

0 0

-350 540 -286 095

2 733 173 2 672 282

0 0

559 756

0 0

-302 743 -330 903

2 430 989 2 342 135

823 097 791 775

808 035 775 778

15 062 15 997

65 755 104 437

38 640 39 951

1 723 8 083

10 931 35 473

14 461 16 991

0 3 939

119 575 116 960

1 008 427 1 013 172

19.3% 18.5%

2 430 989 2 342 135

48

32 Subsidiaries

The Group’s principal subsidiary undertakings at 31 December 2010 were:

Name Principal activity Registered office Ownershipinterest in %of ordinaryshares held1

LGT Bank in Liechtenstein Ltd. Banking and investment Vaduz – Liechtenstein 100.0

management

LGT Swiss Life Non Traditional Advisers Ltd. Investment advisers Vaduz – Liechtenstein 57.9

LGT Private Equity Advisers Ltd. Investment advisers Vaduz – Liechtenstein 60.0

LGT Capital Management Ltd. Investment management Vaduz – Liechtenstein 100.0

LGT Funds Ltd. Investment advisers Vaduz – Liechtenstein 100.02

LGT Funds II Ltd. Investment advisers Vaduz – Liechtenstein 100.02

LGT Investments Ltd. Investment advisers Vaduz – Liechtenstein 100.02

LGT Premium Strategy Ltd. Investment advisers Vaduz – Liechtenstein 100.02

LGT Fondsleitung Ltd. Investment advisers Vaduz – Liechtenstein 100.0

LGT Capital Partners Advisers Ltd. Investment advisers Vaduz – Liechtenstein 100.0

LGT Financial Services Ltd. Services company Vaduz – Liechtenstein 100.0

LGT Audit Revisions AG Audit services Vaduz – Liechtenstein 100.0

LGT Bank (Switzerland) Ltd. 3 Banking and investment Basel and branches – Switzerland 100.0

management

Artinba Ltd. Fine art services Basel – Switzerland 100.0

Global Fine Art Services Ltd.4 Fine art services Basel – Switzerland 100.0

LGT Capital Management Ltd. Investment advisers Pfäffikon SZ – Switzerland 100.0

LGT Capital Partners Ltd. Investment advisers Pfäffikon SZ – Switzerland 100.0

LGT Investment Partners Ltd. 5 Investment advisers Pfäffikon SZ – Switzerland 100.0

LGT Holding International Ltd. Holding company Pfäffikon SZ – Switzerland 100.0

Fitrust, Fiduciaire et Trustee SA Trust services Zurich – Switzerland 100.0

LGT Bank Deutschland & Co. OHG Banking and investment Frankfurt and branches – Germany 100.0

management

LGT Financial Consulting GmbH Consulting Frankfurt – Germany 100.0

Crown Verwaltungsgesellschaft mbH Investment advisers Munich – Germany 50.0

LGT Bank (Österreich) AG Banking and investment Vienna – Austria 100.0

management

LGT Capital Partners (U.K.) Ltd. Fund distribution London – United Kingdom 100.0

LGT Bank (Ireland) Ltd. Banking Dublin – Ireland 100.0

LGT Capital Partners (Ireland) Ltd. Investment advisers Dublin – Ireland 100.0

LGT Fund Managers (Ireland) Ltd. Fund services Dublin – Ireland 100.0


49

Name Principal activity Registered office Ownershipinterest in %of ordinaryshares held 1

LGT Holding Denmark ApS Holding company Copenhagen – Denmark 100.0

LGT Bank (Singapore) Ltd. Banking and investment Singapore 100.0

management

LGT Investment Management (Asia) Ltd. Consulting and advisers Hong Kong – China 100.0

LGT Capital Partners (Asia-Pacific) Ltd. Investment management Hong Kong – China 100.0

LGT Investment Management (Japan) KK Consulting and advisers Tokyo – Japan 100.0

LGT Holding (Malaysia) Ltd. Holding company Labuan – Malaysia 100.0

LGT Capital Partners (USA) Inc. Research services New York – USA 100.0

LGT Bank in Liechtenstein (Cayman) Ltd. Banking and investment Grand Cayman – Cayman Islands 100.0

management

LGT Finance Ltd. Financing Grand Cayman – Cayman Islands 100.0

LGT Investments Ltd. Investment management Grand Cayman – Cayman Islands 100.0

LGT Global Invest Ltd. Investment management Grand Cayman – Cayman Islands 100.0

LGT Participations Ltd. Investment management Grand Cayman – Cayman Islands 100.0

LGT Certificates Ltd. Investment management Grand Cayman – Cayman Islands 100.0

LGT (Uruguay) S.A. 6 Bank representation Montevideo – Uruguay 100.0

1 Ownership interest equals voting interest.2 Companies with variable share capital structure, only part of fund manager fully consolidated.3 Merger of LGT Bank (Switzerland) Ltd. and Dresdner Bank (Switzerland) Ltd. as per 5 February 2010.4 Founded as per 18 February 2010.5 Founded as per 10 December 2010.6 Acquired as per 13 August 2010.

KGR Capital Management Ltd. was liquidated as per 23 July 2010.

LGT Trust (Singapore) Ltd., LGT Management Services (Singapore) Pte. Ltd. and LGT Management Services (HK) Ltd. were sold in 2010.

Castle HoldCo Ltd. was liquidated as per 16 December 2010.


50

Operating segments at 31 December 2010(TCHF)

Total external operating income

Total internal operating income1

Total segment operating income (total revenue)

Operating expenses

Segment result before tax

Tax expense2

Minority interests


Net interest and similar income3

Income from services

Income from trading activities

Depreciation

Credit (losses) recoveries

Change in provisions and other losses

Profit/(loss) of associates

Headcount

Assets under administration in CHFm4

Segment assets

Segment liabilities


Goodwill and other intangible assets

Capital expenditure

Operating segments at 31 December 2009(TCHF)

Total external operating income

Total internal operating income1

Total segment operating income (total revenue)

Operating expenses

Segment result before tax

Tax expense2

Minority interests


Net interest and similar income3

Income from services

Income from trading activities

Depreciation

Credit (losses) recoveries

Change in provisions and other losses

Profit/(loss) of associates

Headcount

Assets under administration in CHFm4

Segment assets

Segment liabilities


Goodwill and other intangible assets

Capital expenditure

33 Operating segments

Headquartered in Vaduz, Principality of Liechtenstein, LGT

Group is the Wealth & Asset Management Group of the

Princely House of Liechtenstein. The Group’s segmental re-

porting comprises the four operating business units Wealth

Management, Traditional Asset Management, Alternative

Asset Management and Operations & Technology. The

remaining not directly connected revenue and expenses

including consolidation adjustments are shown under

Corporate Center.

LGT’s reportable segments are strategic business units that

offer different products and services to external and internal

customers. They are managed separately because each business

unit requires different technology and marketing strategies.

The segment reporting reflects the internal management

structure. The segments are based upon the products and

services provided or the type of customer served, and they

reflect the manner in which financial information is currently

evaluated by management. Results of these lines of business

are presented on a managed basis. Both the external and the

internal reports are prepared in accordance with International

Financial Reporting Standards (IFRS).

Wealth Management offers private clients comprehensive

wealth management services around the world. Traditional

Asset Managment (LGT Capital Management) is a specialist

in the allocation of assets and selection of investment man-

agers, and manages and monitors a wide range of investment

funds. Alternative Asset Management (LGT Capital Partners)

is a specialist in the alternative asset classes of hedge funds

and private equity. Operations & Technology (LGT Financial

Services) is the IT and business service provider.

The accounting policies of the operating segments are the

same as those described in the summary of the Group

accounting principles. Income and expenses are assigned to

the individual business lines in accordance with current market

prices and based on the client relationships. Indirect costs

resulting from services provided internally are accounted for

according to the principle of causation and are recorded as

a revenue increase for the service provider and as a cost

increase for the service beneficiary. Depreciation and pro-

visions are stated at effective costs.

Information about the revenues from external customers for

each product and service, or group of similar products and

services, is not available and the cost to develop it would

be excessive.

1 Revenue from transactions with other segments at market prices.2 The Group does not allocate tax expense (tax income) to reportable segments.3 Management primarily relies on net interest income, not the gross income and expense, in managing the segments.4 Assets under administration include double-counted assets and LGT’s Princely Portfolio.5 Corporate Center includes the net result of the Princely Portfolio, net Group financing cost, the cost of all Group functions and consolidation adjustments.



Wealth Traditional Asset Alternative Asset Operations & Corporate GroupManagement Management Management Technology Center5

693 749 15 193 92 484 5 499 75 940 882 865

13 705 42 522 21 634 126 025 -203 886 0

707 454 57 715 114 118 131 524 -127 946 882 865

-502 581 -58 543 -79 698 -125 965 28 860 -737 927

204 873 -828 34 420 5 559 -99 086 144 938

8 262

-5 544

147 656

217 259 -126 -44 2 771 -124 087 95 773

353 683 55 399 110 272 128 414 -133 441 514 327

132 440 1 970 1 599 449 62 387 198 845

-14 178 -37 -2 147 -22 437 -3 817 -42 616

-2 760 0 0 372 0 -2 388

-7 152 0 0 0 -2 504 -9 656

0 0 0 0 81 995 81 995

1 156 131 159 282 161 1 889

57 396 13 660 13 453 0 1 570 86 079

23 252 276 70 575 85 421 330 404 649 728 24 388 404

19 934 708 47 484 53 490 234 913 1 034 096 21 304 691

0 0 0 0 2 531 615 2 531 615

159 795 0 9 456 133 492 0 302 743

4 968 0 467 6 017 0 11 452

Wealth Traditional Asset Alternative Asset Operations & Corporate GroupManagement Management Management Technology Center5

688 229 15 112 73 576 9 347 -7 231 779 033

17 352 40 075 20 690 120 912 -199 029 0

705 581 55 187 94 266 130 259 -206 260 779 033

-506 275 -57 652 -74 619 -121 391 136 604 -623 333

199 306 -2 465 19 647 8 868 -69 656 155 700

-45 192

-4 974

105 534

182 323 -60 -24 3 905 -19 759 166 385

362 732 55 724 92 301 122 526 -193 679 439 604

151 103 -666 -160 1 281 19 797 171 355

-6 572 -24 -2 212 -18 564 -8 329 -35 701

-2 776 0 0 0 6 466 3 690

-11 925 0 0 0 -1 735 -13 660

0 0 0 0 301 595 301 595

1 277 125 152 280 151 1 985

60 526 13 424 13 214 0 1 859 89 023

30 479 248 72 431 108 284 395 854 -6 262 346 24 793 471

26 599 727 45 611 77 338 292 374 -5 179 956 21 835 094

0 0 0 0 2 419 334 2 419 334

164 125 0 21 360 145 418 0 330 903

24 750 0 562 7 114 0 32 426

52

Geographical information at 31 December 2010 (TCHF)

Liechtenstein

Switzerland

Other Europe

Americas2

Asia

Group

Geographical information at 31 December 2009 (TCHF)

Liechtenstein

Switzerland

Other Europe

Americas2

Asia

Group

1 Revenues are attributed to countries/regions on the basis of the LGT Group companies domicile.2 Revenues: mainly fee income from Class Funds.


Revenues1 Capital expenditure

384 144 7 264

291 597 3 573

19 639 318

120 487 70

66 998 227

882 865 11 452

373 672 23 460

67 250 6 316

36 095 917

286 094 30

15 922 1 703

779 033 32 426

53

34 Client assets under administration (CHF m)

Client assets under administration (excluding Princely Portfolio) which are stated according to the provisions of the Liechtenstein

banking law are as follows:

Client assets in own-managed funds

Client assets under management

Other client assets under administration

Total client assets under administration (including double counting)

thereof double counting

Net asset inflow

thereof net new money

thereof through acquisition

Client assets in own-managed funds

This item covers the assets of all the actively marketed investment funds of LGT Group.

Client assets under management

The calculation of assets with management mandate takes into account client deposits as well as the market value of securities,

loan-stock rights, precious metals and fiduciary investments placed with third-party institutions. The information covers both assets

deposited with Group companies and assets deposited at third-party institutions for which Group companies hold a discretionary

mandate.

Other client assets under administration

The calculation of other client assets under administration takes into account client deposits as well as the market value of securities,

loan-stock rights, precious metals and fiduciary investments placed with third-party institutions. The information covers assets for

which an administrative or advisory mandate is exercised.

Double counting

This item covers investment fund units from own-managed funds as well as certain assets that are included in client assets under

management.

Custodian assets

Custodian assets are excluded.


2010 2009

19 925 20 332

21 316 22 161

42 306 44 111

83 547 86 604

13 011 13 563

3 102 4 550

3 102 -3 651

0 8 201

54

35 Pensions

Principal actuarial assumptions

Discount rate

Expected net return on plan assets

Average future salary increases

Future pension increases

Mortality tables used

Average retirement age

Employees covered by the major plans1

Retirees covered by the major plans

The average life expectancy in years of a pensioner retiring at age 60 is as follows:

Male

Female

Balance sheet (end of year)

Fair value of plan assets

Defined benefit obligation

Funded status

Unrecognized asset due to IAS 19.58

Unrecognized past service cost

Unrecognized actuarial (gain)/loss

Net asset/(liability)

Income statement

Service cost

Past service cost

Interest cost

Expected return on plan assets

Net actuarial gain/(loss) recognized in year

Curtailment

Employees’ contributions

Net pension expenses

Actual return on plan assets

Movement in the asset/(liability) recognized in the balance sheet

At 1 January

Change in consolidation scope

Net pension expenses

Employer’s contributions

At 31 December

Prepaid/(accrued) pension cost 2

1 Apprentices, trainees and certain part-time employees are not covered by the plans.2 i.e. the net of employer’s contributions and net pension expenses.


2010 2009

3.00% 3.50%

5.00% 5.00%

1.00% 1.00%

0.50% 0.50%

BVG 2000 BVG 2000

60/60 60/60

1 509 1 528

399 372

21.8 21.8

25.5 25.5

811 631 719 063

-917 694 -813 508

-106 063 -94 445

0 0

0 13 402

137 374 100 298

31 311 19 255

-41 714 -37 318

0 -113

-28 819 -25 796

35 610 26 348

-7 803 -11 842

3 344 -1 274

16 495 15 990

-22 887 -34 005

53 498 105 250

19 255 28 091

0 -1 744

-22 887 -34 005

34 943 26 913

31 311 19 255

12 056 -7 092

55

Movement in the defined benefit obligation

At 1 January


Current service cost

Past service cost

Interest cost

Curtailment

Actuarial gains/(losses)

Benefits paid

At 31 December

Movement in the fair value of plan assets

At 1 January


Expected return on plan assets

Actuarial gains/(losses)

Employer’s contributions

Employees’ contributions

Benefits paid

At 31 December

Major categories of plan assets as a percentage of the fair value of total plan assets

Equity instruments

Debt instruments

Property

Alternative investments

Cash

Other

The plan assets include property occupied by the Group with a fair value of 16 822 (2009: 16 822).

The expected return on plan assets is determined by considering the expected returns available on the assets underlying the current

investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the balance sheet date.

Expected returns on equity and property investments reflect long-term real rates of return experienced in the respective markets.

The history of the plans for the currentand prior periods is as follows:

Present value of defined benefit obligation

Fair value of plan assets

Surplus/(deficit) in the plan

Experience adjustments on plan liabilities

Experience adjustments on plan assets

The Group expects to contribute 26 135 to its defined benefit pension plans in 2011 (2010: 26 786).

The measurement date for the Group’s defined benefit plans is 31 December.


2010 2009

-813 508 -736 398

0 -68 970

-41 714 -37 318

16 746 0

-28 819 -25 796

0 -1 274

-62 767 16 009

12 368 40 239

-917 694 -813 508

719 063 557 438

0 53 711

35 610 26 348

17 888 78 902

34 943 26 913

16 495 15 990

-12 368 -40 239

811 631 719 063

29% 29%

33% 29%

18% 19%

18% 19%

1% 2%

1% 1%

2010 2009 2008 2007 2006

-917 694 -813 508 -736 398 -650 498 -559 896

811 631 719 063 557 438 652 336 567 662

-106 063 -94 445 -178 960 1 838 7 766

6 754 16 009 -20 201 -43 355 -7 507

17 888 78 902 -181 951 17 029 10 765

56

36 Long-term incentive scheme

Movements in the number of options outstanding

Number of seriesYear of issueDuration fromDuration to

At 1 January 2010

Granted

Exercised

Lapsed

At 31 December 2010

Number of seriesYear of issueDuration fromDuration to

At 1 January 2009

Granted

Exercised

Lapsed

At 31 December 2009

Options outstanding at the end of the year were as follows:

Number of series Year of issue Expiry date Exercise price (CHF)

5 2003 1.4.2010 22 779 0

6 2004 1.4.2011 22 541 8

7 2005 1.4.2012 25 769 41

8 2006 1.4.2013 28 194 365

9 2007 1.4.2014 32 634 2 462

10 2008 1.4.2015 37 061 2 848

11 2009 1.4.2016 32 859 2 944

12 2010 1.4.2017 34 760 3 176

11 844

In 2010, the fair value changes of the options of 15 073 were charged to personnel expenses (2009: 12 743).

Significant inputs to determine the fair value of the options are the economic value added as described in the Group accounting

principles under employee medium-term benefits and the exercise price shown above.


5 6 7 8 9 10 11 12 Total2003 2004 2005 2006 2007 2008 2009 20101.4.03 1.4.04 1.4.05 1.4.06 1.4.07 1.4.08 1.4.09 1.4.101.4.10 1.4.11 1.4.12 1.4.13 1.4.14 1.4.15 1.4.16 1.4.17

14 26 96 670 2 906 2 942 3 033 0 9 687

0 0 0 0 0 0 0 3 244 3 244

-14 -18 -55 -302 -404 0 0 0 -793

0 0 0 -3 -40 -94 -89 -68 -294

0 8 41 365 2 462 2 848 2 944 3 176 11 844

5 6 7 8 9 10 11 Total2003 2004 2005 2006 2007 2008 20091.4.03 1.4.04 1.4.05 1.4.06 1.4.07 1.4.08 1.4.091.4.10 1.4.11 1.4.12 1.4.13 1.4.14 1.4.15 1.4.16

298 680 1 332 2 876 3 049 3 103 0 11 338

0 0 0 0 0 0 3 070 3 070

-284 -654 -1 236 -2 196 0 0 0 -4 370

0 0 0 -10 -143 -161 -37 -351

14 26 96 670 2 906 2 942 3 033 9 687

2010 2009

14

26

96

670

2 906

2 942

3 033

0

9 687

57

37 Related-party transactions (TCHF)

The following emoluments were made by the Group to the members of the Foundation Board

and to Group and business unit executives during the year.

Total emoluments of Foundation Board members

Salaries and bonuses


Total emoluments of Group and business unit executives

The following loans, advances and commitments made by the Group to and on behalf

of the above-mentioned related parties were outstanding at year-end

Advances

Mortgages and other loans

Total

Hedge fund and private equity coinvestment plan of senior LGT managers

Each year the employees of LGT Capital Partners Ltd., which acts as investment manager for LGT’s alternative assets investment

vehicles, and members of LGT Group’s management are invited to invest in the same private equity and hedge fund investments

as LGT’s customers. At 31 December 2010, LGT’s employees had committed a total of USD 47.4 million (2009: USD 38.4 million)

to the alternative investment coinvestment plans.

Transactions with the Prince of Liechtenstein Foundation

A number of Group transactions were concluded with the Prince of Liechtenstein Foundation (POLF), the beneficiary of the

LGT Group Foundation, in the normal course of business, including loans, deposits and other transactions. The transactions were

carried out at commercial terms and market rates and were reported as follows:

Deposits 1 438

Transactions with post-employment benefit plans

A number of Group transactions were concluded with post-employment benefit plans in the normal course of business, including

loans, deposits and other transactions. The transactions were carried out at commercial terms and market rates and were reported

as follows:

Deposits

Advances to and due to investments in associates

A number of Group transactions were concluded with investments in associates in the normal course of business, including loans,

deposits and other transactions. The transactions were carried out at commercial terms and market rates and were reported as

follows:

Loans

Financial assets at fair value and investment securities

Deposits


2010 2009

3 045 2 997

13 083 15 128

985 6 471

14 068 21 599

4 517 6 749

3 050 2 040

7 567 8 789

2010 2009

3 173

2010 2009

14 250 11 774

2010 2009

21 296 155 758

2 531 615 2 419 334

259 601 222 486

58

Risk management framework and process

Risk is defined by the adverse impact on profitability of several distinct sources of uncertainty. Taking risk is inherent to the financial

business and an inevitable consequence of being in business. This note presents information about the Group’s risk exposure and the

objectives, policies and processes for measuring and managing the different risk categories.

The risk policy of LGT Group comprises two key elements. The risk strategy, which details the overall approach to risk-taking desired by

the Board, and risk principles, which translate the risk strategy into operating standards for both the risk organization and required risk

processes. The Group is exposed to various risks.

The aim is to achieve an appropriate balance between risk and return and minimize potentially adverse effects on the financial per-

formance of the Group. Based on this general guideline several risk management policies are designed to identify and analyze the

different risk categories, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of

reliable and up-to-date information systems.

The Foundation Board is responsible for the Group’s risk policy and its regular review. On a daily basis risk management is conducted

by the line management. The overall responsibility lies within the executive management teams of each business unit. The risk control-

ling unit oversees the risk-taking activities of the Group.

The five equivalent key elements of the LGT Group risk process are:

The control of risk is conducted outside of and independently of line management. LGT Group has one risk controlling team which

is responsible for risk supervising and risk reporting for the whole Group.

The most important types of risk LGT Group is exposed to are market risk, liquidity risk, credit risk and operational risk. Market risk

includes currency risk, interest rate and other price risk.

Additional information in the context of Basel II is shown under www.lgt.com.

Risk management


Risk identification Risk guidelines Risk management Risk control Risk review

Risk control/containment

Operational Market risk/ Credit Corporate Investment Wealth Mgt. risk Personnelrisk financing risk structure risk product risk client policies risk

Fraud Equity Counterparty Legal structure Performance Client acceptance Key people retention

Business practices Interest rates Concentration Tax Structures policy Incentives

Physical damage Foreign exchange Collateral Formal requirements Commitments Education

Execution, processes ALM Credit structures Asset management Succession

Employment practices Dividends Compliance Contracts

Workplace safety Equity capital Product concentration

Business disruption Liquidity Liquidity

Refinancing

Financing structure

Strategy/reputation/regulatory risk


Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market

prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and

specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign

exchange rates and equity prices. The Group separates exposures to market risk into either trading or non-trading portfolios.

The market risk arising from trading and non-trading activities is monitored by Group Risk Controlling and for the trading portfolios by

the Risk Management of the Trading Department. Regular reports are submitted to Group Management and the heads of the business

units.

Trading portfolios also include those positions arising from market-making transactions where the Group acts as principal in the market.

Non-trading portfolios primarily arise from the interest rate management of the Group’s banking assets and liabilities. Non-trading

portfolios also consist of foreign exchange and equity risks arising from the Group’s held-to-maturity and available-for-sale investments.

Market risk measurement

As part of the management of market risk, the most important measurement category for the Group is the sensitivity analysis of its

trading and non-trading portfolios, to estimate the market risk of positions held, based on assumptions for changes in interest rates,

foreign exchange rates, equity prices and volatility. The Board sets limits on the total market value change that may be accepted for the

Group, trading and non-trading separately. These limits are monitored by Group Risk Controlling for the trading portfolios on a daily

basis, and for the non-trading portfolios on a monthly basis. On the basis of the sensitivity analysis the Group undertakes various

hedging strategies and also enters into interest rate swaps to match the interest rate risk associated with the fixed-rate debt securities

and loans to which the fair value option has been applied.

In addition, market risks on the trading portfolios are managed by limiting the volume and maximum loss accepted overall and by

position.

LGT Group performs stress tests to get an indication of the potential size of losses that could arise in extreme conditions. The stress

testing applies stress movements of each risk category and ad hoc stress testing, which includes applying possible stress events to

specific positions or regions. The stress testing is tailored to the business and typically uses scenario analysis.

Market risk organization and reporting

Responsibility for risk control lies with the AL Committee which defines basic principles for the refinancing activity of the LGT Group

(focussing on medium to long-term money) and advises the Group CEO on capital market transactions.

The control of the ALM risks is primarily applied by way of an active management of the repricing gaps in the different time bands.

Transactions carried out in the ALM area must be notified to the AL Committee by a representative of Group Risk Controlling at the

next meeting.


Summary sensitivity analysis

Negative fair value change at 31 December 2010 (TCHF)

Trading portfolio/designated at fair value

Non-trading portfolios

Total

Negative fair value change at 31 December 2009 (TCHF)

Trading portfolio/designated at fair value

Non-trading portfolios

Total

Foreign exchange risk

The Group takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position

and cash flows. The Board sets limits on the level of exposure by currency and in aggregate for both overnight and intraday positions,

which are monitored daily.

Foreign exchange risk strategy and measurement

Exchange rate risk control is implemented within the framework of LGT Group’s overall appetite for risk. The aim of an appropriate

AL risk management system is to manage the exchange rate risk of LGT Group and the Group companies to optimum effect.

The limits must be applied using appropriate limit types to reflect the risk. In this context gap limits for limiting matching maturities

within specific maturity segments are used.

The following table summarizes the Group’s exposure to foreign currency exchange rate risk at 31 December. Included in the table are

the Group’s financial instruments at carrying amounts, categorized by currency.

Interest rate Foreign exchange Equity price+100 bp –20% –10%

9 433 268 279 1 574

27 301 280 164 19 612

36 734 548 443 21 186

Interest rate Foreign exchange Equity price+100 bp –20% –10%

4 133 186 785 4 815

31 326 334 921 22 443

35 459 521 706 27 258


Foreign exchange exposureat 31 December 2010 (TCHF)

Cash in hand, balances with central banks








Remaining assets

Total assets




Certificated debt

Remaining liabilities

Total liabilities

Net foreign exchange exposureof balance sheet


Total net foreign exchange exposure










Remaining assets

Total assets




Certificated debt


Total liabilities

Net foreign exchange exposureof balance sheet


Total net foreign exchange exposure

Swiss Francs Euros US Dollars Other Total

257 665 30 507 1 702 1 621 291 495

1 775 777 1 458 006 1 218 781 864 019 5 316 583

3 278 956 647 343 814 738 642 563 5 383 600

12 122 17 3 205 0 15 344

1 066 682 1 063 380 304 072 794 003 3 228 137

3 516 962 200 995 360 734 839 090 4 917 781

0 0 0 0 0

2 531 615 0 0 0 2 531 615

2 305 398 45 858 16 318 336 275 2 703 849

14 745 177 3 446 106 2 719 550 3 477 571 24 388 404

317 360 453 416 909 407 191 733 1 871 916

3 827 409 3 892 711 4 478 301 2 041 052 14 239 473

0 728 500 77 291 0 805 791

1 570 416 0 0 0 1 570 416

2 784 302 17 621 9 241 5 931 2 817 095

8 499 487 5 092 248 5 474 240 2 238 716 21 304 691

6 245 690 -1 646 142 -2 754 690 1 238 855 3 083 713

-3 460 220 1 762 959 2 678 309 -1 217 068 -236 020

2 785 470 116 817 -76 381 21 787 2 847 693

Swiss Francs Euros US Dollars Other Total

704 608 38 033 2 026 2 107 746 774

1 188 063 3 720 449 2 461 514 846 685 8 216 711

3 205 367 582 743 1 400 964 501 888 5 690 962

16 542 29 57 047 0 73 618

995 755 1 259 493 340 806 409 387 3 005 441

1 113 670 486 375 448 192 738 339 2 786 576

1 998 0 0 0 1 998

2 419 334 0 0 0 2 419 334

1 428 413 64 687 79 372 279 585 1 852 057

11 073 750 6 151 809 4 789 921 2 777 991 24 793 471

695 081 428 115 103 388 227 996 1 454 580

4 134 320 5 227 997 5 038 828 1 808 906 16 210 051

0 957 986 162 214 0 1 120 200

1 672 317 0 0 0 1 672 317

1 338 850 24 826 11 332 2 938 1 377 946

7 840 568 6 638 924 5 315 762 2 039 840 21 835 094

3 233 182 -487 115 -525 841 738 151 2 958 377

-551 440 789 455 502 097 -716 595 23 517

2 681 742 302 340 -23 744 21 556 2 981 894


Interest rate risk

Interest rate risk associated with non-trading financial instruments (loans and advances, fixed-income securities, term deposits, certificated

debt, and derivative financial instruments) is part of the Group's asset and liability management process. Interest rate risk is measured

by the use of gap analysis and interest rate sensitivities. The Asset and Liability Committee decides on any appropriate use of derivative

financial instruments. The principal interest-related derivatives used are interest rate swaps and forward rate agreements.

Interest rate risk strategy and measurement

Interest rate risk control is implemented within the framework of LGT Group’s overall appetite for risk. The aim of an appropriate AL risk

management system is to manage the interest rate risk of LGT Group and the Group companies to optimum effect. The limits must be

applied using appropriate limit types to reflect the risk. The following limit types are used in this context:

Gap limits for limiting matching maturities within specific maturity segments.

Interest rate sensitivity limits for limiting the maximum potential loss on the market value of shareholders’ equity resulting from

detrimental market movements in interest rates.

The analysis shows the absolute changes in market values given a change of the respective key rate by +100 basis points.

Interest rate sensitivity analysis (CHF m)

All currencies 2010

All currencies 2009

CHF 2010

CHF 2009

USD 2010

USD 2009

EUR 2010

EUR 2009

The table below summarizes the average interest rate by major currencies for monetary financial instruments not carried at fair value

through profit or loss:

Assets





Liabilities



Certificated debt

Within More than More than More than Total6 months 6 and 1 and 5 years

less than less than12 months 5 years

-5,8 -0,9 -15,8 22,3 -0,2

2,4 -6,9 -23,6 16,4 -11,7

1,8 7,5 -11,8 22,3 19,8

2,6 -3,5 -21,1 16,6 -5,4

-5,0 -3,6 -0,6 -0,1 -9,3

1,8 -1,7 -0,4 0,0 -0,3

-1,9 -1,3 -3,1 0,0 -6,3

-0,2 -0,1 -1,4 -0,1 -1,8

31 December 2010 31 December 2009CHF in % EUR in % USD in % CHF in % EUR in % USD in %

0.16 0.67 0.60 0.29 0.50 0.33

1.81 1.97 1.65 2.07 2.11 1.87

0.76 1.26 1.77 2.76 0.56 1.04

– – – 4.50 – –

0.35 0.70 0.12 0.39 0.27 0.91

0.26 0.23 0.11 0.25 0.23 0.12

2.47 – – 2.50 – –


Liquidity risk

Liquidity risk is the risk that an entity will be unable to meet a financial commitment to a customer, creditor or investor in whatever

location or currency. The management of liquidity is primarily directed toward ensuring that local funding requirements can be met.

The distribution of sources and maturities of deposits is managed actively in order to ensure access to funds and to avoid a concen-

tration of funding demand at any one time or from any one source. Sources of liquidity are regularly reviewed by a separate team in

Group Treasury to maintain a wide diversification by currency, geography, provider, product and term.

Liquidity management is subject to the overall monitoring and control of Group Treasury, which also manages excess liquidity for

individual entities. LGT Bank in Liechtenstein Ltd., Vaduz, which attracts the majority of customers’ cash deposits within the Group,

also performs the Group Treasury function.

The Group’s liquidity management process includes:

day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. The Group maintains an

active presence in global money markets to enable this to happen;

maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption

to cash flow;

monitoring balance sheet liquidity ratios against internal and regulatory requirements; and

managing the concentration and profile of debt maturities.

Group Treasury also monitors unmatched medium-term assets, the level and type of undrawn lending commitments, the usage of

overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees. The assumptions regarding

gross loan commitments are based on expert opinions and also differentiated by the type of limit and the client type.

In the following table, assets and liabilities are structured according to contractual terms. It summarizes the overall funding and

investment structure of the Group.


Cash flow of assets and liabilitiesat 31 December 2010 (TCHF)










Remaining assets

Total assets





Certificated debt


Total liabilities

Commited credit lines

Cash flow of assets and liabilitiesat 31 December 2009 (TCHF)










Total assets





Certificated debt

Total liabilities

Commited credit lines

Within More than More than More than More than Total1 month 1 and 3 and 1 and 5 years

less than less than less than3 months 12 months 5 years

291 495 0 0 0 0 291 495

2 904 283 1 796 596 625 080 0 0 5 325 959

2 287 103 773 627 831 762 1 402 281 242 285 5 537 058

0 10 544 0 2 171 2 674 15 389

33 788 052 38 579 340 13 186 241 99 001 6 276 85 658 910

37 121 1 070 745 522 402 1 702 000 22 903 3 355 171

1 671 114 1 501 021 961 096 826 941 13 125 4 973 297

0 0 0 0 0 0

0 2 531 615 0 0 0 2 531 615

0 416 816 0 0 0 416 816

40 979 168 46 680 304 16 126 581 4 032 394 287 263 108 105 710

1 313 272 235 483 326 078 0 0 1 874 833

12 814 883 464 412 640 158 332 811 0 14 252 264

33 817 660 38 618 915 13 352 034 102 080 6 575 85 897 264

0 805 791 0 0 0 805 791

4 146 227 287 50 524 874 388 566 912 1 723 257

0 150 770 0 0 0 150 770

47 949 961 40 502 658 14 368 794 1 309 279 573 487 104 704 179

54 504 92 738 65 307 136 963 2 302 351 814



746 774 0 0 0 0 746 774

6 119 447 1 314 681 449 999 0 0 7 884 127

2 471 510 787 840 925 064 1 480 173 171 368 5 835 955

0 73 630 0 0 0 73 630

52 194 982 9 549 385 8 378 703 253 942 6 345 70 383 357

155 058 1 534 076 542 738 807 563 43 073 3 082 508

365 417 1 021 618 571 338 836 141 32 175 2 826 689

0 0 2 088 0 0 2 088

0 2 419 334 0 0 0 2 419 334

62 053 188 16 700 564 10 869 930 3 377 819 252 961 93 254 462

1 019 086 239 115 170 747 0 0 1 428 948

13 928 038 546 752 908 175 297 161 0 15 680 126

52 176 387 9 515 267 8 402 608 238 097 6 212 70 338 571

0 1 120 200 0 0 0 1 120 200

11 453 25 941 353 972 1 117 790 313 563 1 822 719

67 134 964 11 447 275 9 835 502 1 653 048 319 775 90 390 564

17 058 19 528 30 092 140 861 11 278 218 817


Derivative cash flowsat 31 December 2010 (TCHF)

Derivatives held for trading/hedging

Foreign exchange derivatives

Outflow

Inflow

Interest rate derivatives

Outflow

Inflow

Other derivatives

Outflow

Inflow

Total outflow

Total inflow

Derivative cash flowsat 31 December 2009 (TCHF)

Derivatives held for trading/hedging

Foreign exchange derivatives

Outflow

Inflow

Interest rate derivatives

Outflow

Inflow

Other derivatives

Outflow

Inflow

Total outflow

Total inflow



33 816 899 38 616 547 13 339 844 61 337 0 85 834 627

33 787 992 38 575 959 13 173 344 61 313 0 85 598 608

761 2 368 12 189 40 743 6 576 62 637

59 3 381 12 897 37 688 6 277 60 302

0 0 0 0 0 0

0 0 0 0 0 0

33 817 660 38 618 915 13 352 033 102 080 6 576 85 897 264

33 788 051 38 579 340 13 186 241 99 001 6 277 85 658 910



52 176 219 9 512 328 8 388 500 184 748 0 70 261 795

52 194 563 9 543 500 8 359 726 187 522 0 70 285 311

168 2 939 14 108 53 349 6 212 76 776

420 5 885 18 977 66 420 6 345 98 047

0 0 0 0 0 0

0 0 0 0 0 0

52 176 387 9 515 267 8 402 608 238 097 6 212 70 338 571

52 194 983 9 549 385 8 378 703 253 942 6 345 70 383 358


Credit risk

Credit risk is the risk that a counterparty of a financial instrument fails to meet its contractual obligation and causes LGT Group to incur

a financial loss. Credit risk exposures arise principally in lending activities that lead to loans and advances, and investment activities that

bring debt securities and other bills into the Group’s asset portfolio. Further there is also credit risk in derivative financial instruments

and off-balance sheet financial instruments, such as loan commitments and financial guarantee contracts.

Within LGT Group credit risk is primarily incurred by LGT Bank in Liechtenstein Ltd., Vaduz. Therefore the credit risk management and

control are centralized in this unit. The conservative lending policy is established by internal directives, guidelines and written policy

papers. These guidelines include: (i) limits on total commercial, mortgage and syndicated loan volume, (ii) limits on unsecured lending

exposures to any one customer or customer group, (iii) percentage limits on borrower concentration within the Group’s credit portfolio

and (iv) strict credit handling procedures and internal controls.

Credit risk strategy

Lending is an integrated part of the business philosophy of LGT Group and thus complementary to the wealth management services

offered. Any transaction must be viewed in the context of the whole client relationship. It is not the policy of LGT Group to extend

credit facilities on a stand alone basis, but only in conjunction with assets deposited or to be deposited with LGT Group. The risk

appetite of LGT is low to moderate. The center for lending business within LGT Group is the credit function at LGT Bank Vaduz.

As part of its comprehensive system for monitoring lending exposures, regular reports are provided at a Group level to the Foundation

Board on (i) credit risk ratings, (ii) allowances, (iii) country exposures and (iv) bank limits. Stress Testing on securities and property

collateral is executed regularly and on an ad hoc basis if requested by management. In addition, ad hoc reports of special events, as

well as daily reports of global exposures to specific customers, are also provided on request.

Credit risk measurement

Loans and advances

In measuring credit risk of loans and advances to customers and to banks at a counterparty level, the Group assesses the probability of

default of individual counterparties using internal rating tools. They have been developed internally and combine statistical analysis with

credit officer judgement and are validated, where appropriate, by comparison with externally available rating data. The Group regularly

validates the performance of the rating tools and their predictive power with regard to default events.

Debt securities and other bills

For debt securities and other bills, external ratings such as Standard & Poor’s or Moody’s are used for managing the credit risk exposures.

The credit function at LGT Bank Vaduz is responsible for extending counterparty limits, while Treasury is managing the individual positions

within these limits. The investments in those securities and bills are viewed as a way to gain a better credit quality mapping and maintain

a readily available source to meet the funding requirement at the same time.

Assets by countries

In addition to the limitation of credit exposures of customers or customer groups, LGT Group has restricted the group of countries in

which credit risks may be incurred. Limits are established for these countries which are reviewed by the Foundation Board at least

annually. The table below shows the allocation of assets by countries:

Assets by countries/country groups (TCHF)1

Liechtenstein and Switzerland

Europe

Americas 2

Asia

Other countries

Total

1 Based on risk domicile of the assets.2 Mainly Class Funds

2010 in % 2009 in %

9 616 816 39.4 6 217 621 25.1

7 432 771 30.5 10 227 070 41.2

4 381 021 18.0 5 646 702 22.8

1 316 979 5.4 1 202 053 4.8

1 640 817 6.7 1 500 025 6.1

24 388 404 100.0 24 793 471 100.0



The Group maintains strict control limits on net open derivative positions. At any one time, the amount subject to credit risk is limited

to the current fair value of instruments that are favorable to the Group, which in relation to derivatives is only a small fraction of the

contract, or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the

overall lending limits with customers, together with potential exposures from market movements (an add-on factor is calculated

depending on underlying risks and time to maturity of the contract).

Settlement risk arises in any situation where a payment in cash, securities or equities is made in the expectation of a corresponding

receipt in cash, securities or equities. Daily settlement limits are established for each counterparty to cover the aggregate of all settlement

risk arising from the Group’s market transactions on any single day. As member of the CLS (Continuous Linked Settlement) network

LGT is able to mitigate major parts of its daily settlement risk via forex netting.

Off-balance sheet financial instruments

The primary purpose of off-balance sheet financial instruments is to ensure that funds are available to a customer as required. LGT Group

has credit commitments in the form of guarantees and standby letters. These credit commitments carry the same credit risk as loans,

and therefore the same lending criteria and identical limitation processes are applied.

Risk limit control and mitigation policies

LGT Group systematically manages, limits and controls concentrations of credit risk. As part of the credit risk management policy,

exposures are structured by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to

geographical segments. The risks and their changes are closely monitored on a revolving basis and subject to an annual or more

frequent review, when considered necessary. Centralized loan approval procedures ensure a consistent lending process.

In line with the conservative credit policy a major part of the Group’s credit exposure is mitigated. The principal collaterals used within

LGT Group are mortgages over residential properties and charges over financial instruments such as debt securities, equities and funds.

Upon initial recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the

corresponding assets. In subsequent periods, the fair value is updated by reference to market prices or indexes of similar assets.

Because of the fact that mortgages are granted primarily within Liechtenstein and Switzerland, LGT Group is exposed to the market

trends of the real estate sector in these countries.

Collateral accepted as security for assets (TCHF)

Fair value of financial assets accepted as collateral that the Group

is permitted to sell or repledge in the absence of default

2010 2009

293 777 4 061 446


Impairment and provisioning policies

The Group’s policy requires the review of individual financial assets that are above materiality thresholds at least annually or more

regularly when individual circumstances require it. Impairment allowances on individually assessed accounts are determined by an

evaluation of the incurred loss at balance-sheet date on a case-by-case basis, and are applied to all individually significant accounts.

The assessment normally encompasses collateral held (including reconfirmation of its enforceability) and the anticipated receipts for

that individual account.

Assets are summarized separately if contractual interest or principal payments are past due but the Group believes that impairment

is not appropriate yet.

Distribution of loans and advancesby credit quality (TCHF)

Neither past due nor impaired

Past due but not impaired

Impaired

Total loans and advances (gross)

Less allowance for impairment

Total loans and advances (net)

Distribution of loans and advanceswhich where past duebut not impaired (TCHF)

Past due up to 30 days

Past due 31–60 days

Past due more than 60 days

Total

Collectively assessed impairment allowances are provided for: (i) portfolios of homogenous assets that are individually below materiality

thresholds; and (ii) losses that have been incurred but have not yet been identified, by using the available historical experience, experi-

enced judgement and statistical techniques.

Impaired loans and advances (TCHF)

Specific allowance for impairment

Portfolio allowance for impairment

Total

LGT Group obtained assets by taking possession of collateral held as security. Repossessed properties are sold as soon as practicable,

with the proceeds used to reduce the outstanding indebtedness.

Carrying amount of collateral and other credit enhancements obtained (TCHF)

Residential, commercial and industrial property

2010 2009Loans and Loans and Loans and Loans andadvances advances advances advances

to customers to banks to customers to banks

4 979 627 5 316 583 5 424 181 8 216 711

381 059 0 245 324 0

40 889 0 42 303 0

5 401 575 5 316 583 5 711 808 8 216 711

17 975 0 20 846 0

5 383 600 5 316 583 5 690 962 8 216 711



312 980 0 180 642 0

20 150 0 9 372 0

47 929 0 55 310 0

381 059 0 245 324 0



12 875 0 15 226 0

5 100 0 5 620 0

17 975 0 20 846 0

2010 2009

481 481


Operational risk

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from exter-

nal events. By their nature, operational risks are difficult to identify, measure and manage. They can be caused deliberately or acciden-

tally or be of natural origin and encompass all elements of the organization. Operational risks are inherent in all types of products,

activities, processes and systems.

LGT Group has established a group-wide Operational Risk Committee which provides the Group CEO with support in the early identifi-

cation of these risks and in implementing appropriate measures. These tasks are based on the principles stipulated in the ‘Sound

Practices for the Management and Supervision of Operational Risk’ issued by the Basel Committee on Banking Supervision. The set

guidelines ensure that risk management takes care of all defined risk categories:

Internal and external fraud

Employment practices and workplace safety

Customers, products and business practices

Damage to physical assets

Business disruption and system failures

Execution, delivery and process management.

Operational risk measurement

The operational risk measurement approach is based on the one hand on appropriate measures adapted for business units, such as an

internal monitoring system and on the other hand on three dimensions in which the above risk categories are assessed.

Risk self-assessment

The risk self-assessment represents a qualitative judgement of the risk situation. On a regular basis the group functions identify and

measure operational risk through estimates based on the consensus opinion of members of the management and/or the staff. The

main objective of this process is the identification, assessment and mitigation of operational risk.

Key risk indicators

Key risk indicators evaluated on a quantitative basis give insight into the extent of stress of an activity. These indicators are used to

monitor and foresee trends and serve as an early warning system. For monitoring operational efficiency and demonstrating the

effectiveness of controls, every business unit has built up a selection of business data considered useful for the purpose of risk tracking.

Error event data base

Every business unit captures and accumulates individual error events across risk types. Such a data base is a tool to measure, quantify

and provide financial operational risk data.

Exception procedure

The business units and group functions immediately inform Group Risk Controlling about essential operational risk events (e.g. essential

error events, essential near-losses).


Operational risk organization and reporting

The preparation, processing and analysis of relevant data are centralized, as in other risk categories, in Group Risk Controlling.

Definition of the roles within the operational risk organization

The Foundation Board has the overall responsibility for the management of operational risks and the constitution of the operational

risk policy.

The Group CEO/Senior Management Board are responsible for the establishment and maintenance of an appropriate risk organiza-

tion to manage operational risks for LGT Group.

The Operational Risk Committee identifies and evaluates the operational risks and submits recommendations to Group Risk

Controlling.

Line management is responsible for the identification and assessment of operational risk in their business unit. This includes

(i) management of operational risk according to the operational risk principles, (ii) definition of appropriate standards for the manage-

ment of operational risks, (iii) ensuring operational risk processes are efficiently documented, followed and reviewed, (iv) measuring

and reporting operational risks on a timely basis to Risk Controlling, (v) determining and updating process and system requirements

to maintain adequate risk management tools, (vi) identification and review of risk profiles, (vii) definition and implementation of

actions.

Group Risk Controlling is responsible for operational risk control. This includes (i) group-wide coordination of operational risk

management issues and efforts, (ii) ensuring compliance of risk management with the operational risk principles, (iii) collecting and

analyzing error events, assessments and risk indicators, (iv) regular reporting to the Audit Committee, the Group CEO and the Senior

Management Board and (v) monitoring of actions taken.


Fair value of financial instruments not carried at fair value

Fair value information is used for business purposes in determining an enterprise’s overall financial position. Fair value information

permits comparisons of financial instruments having substantially the same economic characteristics.

Financial assets (TCHF)




Financial liabilities (TCHF)



Certificated debt


The estimated fair value of loans and advances to banks is based on discounted cash flows using prevailing market interest rates

for debts with similar credit risk and remaining maturity.


Loans and advances are stated net of impairments. The estimated fair value of loans and advances to customers represents the

discounted amount of estimated future cash flows expected to be received.


Held-to-maturity securities include fixed-income securities. Their fair value is estimated on the basis of the discounted cash flows.

Amounts due to banks or to customers

The calculation of the fair values of the amounts due to banks or customers is based on the discounted cash flow method using

interest rates for new debts with similar remaining maturity.

Certificated debt

The aggregated fair values are calculated under the discounted cash flow method. The model is based on a current yield curve

appropriate for the remaining term to maturity.

2010 2009Carrying amount Fair value Carrying amount Fair value

5 316 583 5 321 963 8 216 711 8 228 223

5 383 600 5 465 646 5 690 962 5 818 991

0 0 1 998 2 078

1 871 916 1 873 412 1 454 580 1 455 619

14 239 473 14 240 735 16 210 051 16 210 872

1 570 416 1 652 739 1 672 317 1 740 881


Pillar III disclosures according to Basel II

This section contains our Basel II Pillar III disclosures as of 31 December 2010 and consists only of quantitative disclosures. Qualitative

disclosures related to our risk management and control can be found in section risk management of this report.

Geographical credit risk Switzerland Oceania North America Liechtenstein Latin Americaat 31 December 2010 (TCHF)

Loans and advances

Liquid assets



Mortgages

Securities

Other assets

Replacement value after netting

Total

Off-balance sheet


Commitments

Deposit and reserve liabilities

Add-ons

Securities

General allowance

Total reporting period

Total 2009

Impaired loans

Impaired loans

Specific allowance

Europe Caribbean Asia Africa Total

Loans and advances

Liquid assets



Mortgages

Securities

Other assets


Total

Off-balance sheet


Commitments


Add-ons

Securities

General allowance


Total 2009

Impaired loans

Impaired loans

Specific allowance

257 603 53 1 750 61 0

1 334 506 26 107 88 154 107 040 91

269 971 68 822 119 678 541 718 37 477

1 147 534 4 501 0 1 213 387 0

2 414 400 457 581 711 701 222 868 29 094

28 877 3 078 5 412 58 501 342

1 091 802 1 216 79 473 35 763 2 291

6 544 693 561 358 1 006 168 2 179 338 69 295

25 175 1 532 9 094 71 998 3 349

16 039 0 50 7 074 0

0 0 0 6 178 0

277 716 981 13 210 18 040 3 376

0 0 0 0 0

-1 311 0 0 -5 954 0

6 862 312 563 871 1 028 522 2 276 674 76 020

3 588 618 319 145 1 376 137 2 082 778 29 666

10 069 11 151 23 069 6

2 587 0 258 1 073 0

31 964 0 57 7 291 495

3 606 950 329 148 215 5 190 5 316 582

825 092 782 274 303 080 61 930 3 010 042

43 618 0 26 466 0 2 435 506

2 610 062 2 470 317 752 731 0 9 668 754

77 388 6 670 6 231 16 186 515

444 450 31 241 3 669 947 1 690 852

7 639 524 3 290 831 1 240 449 68 090 22 599 746

116 950 31 583 10 638 3 547 273 866

39 572 0 0 0 62 735

0 22 612 0 0 28 790

132 810 15 938 958 206 463 235

0 16 672 41 729

-4 955 -96 -2 0 -12 318

7 923 901 3 360 884 1 252 715 71 884 23 416 783

10 806 794 4 037 112 1 109 486 82 430 23 432 166

11 456 984 1 163 8 46 917

6 093 0 0 0 10 011


Segmentation of credit risk 0% 10% 20% 35% 50%at 31 December 2010 (TCHF)

Loans and advances

Liquid assets



Mortgages

Securities

Other assets


Total

Off-balance sheet


Commitments


Add-ons

Securities

General allowance


Total 2009

Impaired loans

Impaired loans

Specific allowance

75% 100% 150% ≥200% Total

Loans and advances

Liquid assets



Mortgages

Securities

Other assets


Total

Off-balance sheet


Commitments


Add-ons

Securities

General allowance


Total 2009

Impaired loans

Impaired loans

Specific allowance

291 495 0 0 0 0

0 0 3 945 316 0 1 364 231

1 774 965 0 141 544 10 144 32 081

87 973 0 0 1 694 844 124 289

3 179 289 0 1 562 331 0 2 077 359

92 0 16 605 0 2 610

11 648 0 895 340 0 706 766

5 345 462 0 6 561 136 1 704 988 4 307 336

210 155 0 11 539 409 110

638 0 1 739 2 355 78

0 0 0 0 0

8 432 0 238 230 0 178 643

0 0 0 0 0

-12 318 0 0 0 0

5 552 369 0 6 812 644 1 707 752 4 486 167

4 297 709 0 10 715 461 1 588 345 1 507 836

5 970 0 3 937 0

615 0 3 1 112 0

0 0 0 0 291 495

0 7 030 5 0 5 316 582

110 852 921 035 19 421 0 3 010 042

0 521 175 7 225 0 2 435 506

0 720 862 2 128 913 0 9 668 754

0 167 206 2 0 186 515

0 77 093 5 0 1 690 852

110 852 2 414 401 2 155 571 0 22 599 746

0 48 913 2 740 0 273 866

0 57 925 0 0 62 735

0 28 790 0 0 28 790

0 37 924 6 0 463 235

0 0 729 0 729

0 0 0 0 -12 318

110 852 2 587 953 2 159 046 0 23 416 783

110 519 3 275 182 1 937 114 0 23 432 166

63 28 127 11 817 0 46 917

77 8 132 72 0 10 011


Credit risk/credit risk reduction Covered by Covered by Mortgage- Other Totalat 31 December 2010 (TCHF) financial guarantees and backed collateral

collateral credit derivatives

Loans and advances

Liquid assets



Mortgages

Securities

Other assets


Total

Off-balance sheet


Commitments


Add-ons

Securities

General allowance


Total 2009

Impaired loans

Impaired loans

Specific allowance

0 0 0 0 0

291 833 0 0 0 291 833

1 704 000 136 583 32 474 70 908 1 943 965

8 239 0 2 393 589 19 561 2 421 389

0 0 0 0 0

91 0 0 1 92

11 562 41 0 85 11 688

2 015 725 136 624 2 426 063 90 555 4 668 967

207 153 1 052 841 2 876 211 922

437 0 18 799 0 19 236

0 0 0 0 0

8 356 28 0 76 8 460

0 0 0 0 0

0 0 0 0 0

2 231 671 137 704 2 445 703 93 507 4 908 585

7 169 668 77 489 2 240 097 48 187 9 535 441

5 462 0 24 214 509 30 185

514 0 2 542 101 3 157


Credit risk/distribution according counter- States and Public Administrative Multilateral de-party or sector at 31 December 2010 (TCHF) central banks authorities facilities velopment banks

Loans and advances

Liquid assets



Mortgages

Securities

Other assets


Total

Off-balance sheet


Commitments


Add-ons

Securities

General allowance


Total 2009

Impaired loans

Impaired loans

Specific allowance

International Banks Corporates Retailorganizations

Loans and advances

Liquid assets



Mortgages

Securities

Other assets


Total

Off-balance sheet


Commitments


Add-ons

Securities

General allowance


Total 2009

Impaired loans

Impaired loans

Specific allowance

291 495 0 0 0

0 0 0 0

50 915 3 566 10 939 13 072

3 635 0 0 0

3 209 044 10 916 158 694 47 865

317 0 207 1

1 794 0 636 2 187

3 557 200 14 482 170 476 63 125

12 413 325 805 1 523

136 19 1 739 2

0 0 0 0

3 063 0 762 367

0 0 0 0

0 0 0 0

3 572 812 14 826 173 782 65 017

1 962 203 85 847 112 754 40 734

0 0 3 0

134 0 3 0

0 0 0 0

0 3 571 292 1 0

0 423 725 1 547 352 902 204

0 243 14 229 21 497

0 2 556 409 1 509 922 14 781

0 12 667 10 739 162 551

0 1 012 844 66 549 15 526

0 7 577 180 3 148 792 1 116 559

0 60 852 117 921 78 778

0 125 19 187 22 728

0 0 28 790 0

0 253 248 34 780 7 207

0 0 0 0

0 -2 -1 298 -11 018

0 7 891 403 3 348 172 1 214 254

0 11 124 854 4 049 570 1 116 267

0 0 30 6 796

0 0 5 5 491


Credit risk/distribution according counter- Mortgage- Overdue Investment Covered notesparty or sector at 31 December 2010 (TCHF) backed in associates

Loans and advances

Liquid assets



Mortgages

Securities

Other assets


Total

Off-balance sheet


Commitments


Add-ons

Securities

General allowance


Total 2009

Impaired loans

Impaired loans

Specific allowance

Short-term Investment Other Totalfund shares

Loans and advances

Liquid assets



Mortgages

Securities

Other assets


Total

Off-balance sheet


Commitments


Add-ons

Securities

General allowance


Total 2009

Impaired loans

Impaired loans

Specific allowance

In certain cases, our Pillar III disclosures can differ from the way we manage our risks and how these risks are disclosed in other sections

of this annual report.

0 0 0 0

0 0 0 0

30 705 27 564 0 0

2 365 109 30 793 0 0

0 0 220 0

0 0 0 0

0 0 0 0

2 395 814 58 357 220 0

841 0 0 0

18 799 0 0 0

0 0 0 0

0 0 0 0

0 0 729 0

0 0 0 0

2 415 454 58 357 949 0

2 186 805 80 951 2 548 3 002

1 805 38 283 0 0

1 547 2 831 0 0

0 0 0 291 495

1 745 289 0 0 5 316 582

0 0 0 3 010 042

0 0 0 2 435 506

0 2 160 903 0 9 668 754

33 0 0 186 515

591 316 0 0 1 690 852

2 336 638 2 160 903 0 22 599 746

408 0 0 273 866

0 0 0 62 735

0 0 0 28 790

163 808 0 0 463 235

0 0 0 729

0 0 0 -12 318

2 500 854 2 160 903 0 23 416 783

645 075 2 021 590 -35 23 432 166

0 0 0 46 917

0 0 0 10 011

77

LGT Group Foundation

78 LGT Group Foundation – report of the statutory auditors

Report of the statutory auditors

79

Income statement (TCHF) Note

Interest and dividend income

Interest earned

Interest paid and similar charges

Net interest

Current income from participations

Total interest and dividend income

Income from commission and service fee activities

Commission expenses

Income from financial transactions (all from trading activities)

Other operating income 1

Total operating income

Administrative expenses

Personnel expenses 2

Business and office expenses 3

Total administrative expenses

Other operating expenses

Allowances for impaired loans and increase of provisions for

contingent liabilities and credit risk

Release of allowances for impaired loans and for provisions for

contingent liabilities and credit risk

Depreciation, allowances and provision on subsidiary undertakings,

affiliated companies and securities treated as current assets

Profit for the period

Appropriation of available Foundation earnings

Balance at the beginning of the period


The Foundation Board proposes to the Foundation Meeting of 28 April 2011:

Payment to the Prince of Liechtenstein Foundation

Balance to be carried forward

The accounting principles and the notes on pages 81 to 90 form part of these accounts.

The accounts on pages 81 to 90 were approved by the Foundation Board on 28 April 2011 and are signed

on its behalf by H.S.H. Prince Philipp von und zu Liechtenstein, Chairman, and Olivier de Perregaux, CFO.

Income statement

LGT Group Foundation – income statement

2010 2009

6 2 228

-4 351 -8 456

-4 345 -6 228

160 230 160 161

155 885 153 933

-211 -6

2 080 2 780

49 281 64 073

207 035 220 780

-10 452 -13 046

-80 182 -15 027

-90 634 -28 073

-1 -10 827

0 -5 955

0 19 425

-3 352 -8 243

113 048 187 107

245 207 133 100

113 048 187 107

358 255 320 207

-75 000 -75 000

283 255 245 207

80

Balance sheet (TCHF) Note

Assets

Loans and advances to banks (subsidiary undertakings) 4

of which on demand

Other loans and advances to customers (subsidiary undertakings) 5

Participations (shares in associated companies) 6

Other assets 7


Total assets

Liabilities

Amounts due to banks 8

of which due daily

of which other loans

Other liabilities 9

Accrued expenses and deferred income

Provisions 10

Foundation capital

Profit/loss to be carried forward

Profit for the period 11

Total liabilities

Off-balance sheet items (TCHF)

Collateralization guarantees and similar instruments

Guarantees and similar instruments

of which for affiliated companies

Put options 1

Contract volume

The guarantees and similar instruments are valued with the carrying amount except 3 (2009: except 3) guarantees without specified amount, which are valued with their

pro memoria value.

1 Put option in favor of a Group company.

The accounting principles and the notes on pages 81 to 90 form part of these accounts.

Balance sheet

LGT Group Foundation – balance sheet

2010 2009

672 792

672 792

554 508 521 508

1 067 862 1 067 895

148 578 142 114

0 339

1 771 620 1 732 648

1 022 000 1 017 500

0 0

1 022 000 1 017 500

8 504 8 691

2 146 3 879

41 671 43 327

339 044 339 044

245 207 133 100

113 048 187 107

1 771 620 1 732 648

5 139 6 067

1 487 422 1 765 176

1 487 422 1 765 176

14 481 16 334

81

Introduction

The accounting principles are in accordance with the

Liechtenstein Law on Persons and Companies (PGR)

and the Liechtenstein Banking Law and its directives.

A summary of the most important accounting prin-

ciples, which have been applied consistently, is set

out below.

Basis of accounting

The accounts are prepared using the historical cost

convention. All transactions are recorded on a trade

date basis.

Foreign currencies

Revenue items denominated in foreign currencies are

translated at the exchange rates ruling on the dates of

the transactions. Assets and liabilities denominated in

foreign currencies are translated at the exchange rates

ruling on the balance sheet date, except financial fixed

assets, which are translated at historical rates. Exchange

differences are entered in the income statement.

Participations

Participations represent investments in subsidiary

undertakings and are stated at cost, less any provision

for permanent diminution in value.

Debt instruments and shares

Realized gains or losses arising from the disposal of

securities are entered in the income statement.

Securities held as current assets (short-term assets) are

shown at market value. Other securities are stated at

the lower of cost or market value.

Dividends

Proposed dividends from subsidiary undertakings are

accrued as receivables in the accounts.

Loans and advances

These items are calculated at nominal values. Value

adjustments for identifiable individual risks are set off

against the corresponding asset positions.

Financial liabilities and provisions

These items are shown at nominal values. Provisions

have been created for operational and other risks.


Derivative financial instruments that are held for trad-

ing purposes are valued at their fair market value with

changes in fair market value recognized in income from

trading activities. The related positive and negative

replacement values are stated at gross values. Income

and expense arising on derivatives used in the context

of asset and liability management, primarily interest

rate swaps and forward rate agreements, are recog-

nized on an accrual basis, as this reflects the Group’s

risk management.

Risk management

Risks are defined by the adverse impact on profitability

of several distinct sources of uncertainty. LGT Group

Foundation is exposed to market risks, credit risks,

liquidity risks, operational and business event risks.

The Foundation Board is responsible for the risk policy

and its regular review. The risk policy comprises two

key elements:

� risk strategy, which details the overall approach to

risk-taking desired by the Board; and

� risk principles, which translate the risk strategy into

operating standards for both the risk organization

and required risk processes.

Risk management on a daily basis is conducted by the

line management. The overall responsibility lies within

the executive management teams of each business

unit. The risk controlling unit oversees the risk-taking

activities of LGT Group Foundation and reports directly

to the Board.

Notes to the financial statementsAccounting principles

LGT Group Foundation – notes to the financial statements

82

Overview

LGT Group Foundation was established on 20 July 2001 and is the top holding company of LGT Group. Its purpose is the holding of

the majority of the subsidiaries of LGT Group. For a complete list of subsidiary undertakings see note 6 below.

The profit for the business year 2010 amounts to 113 048. The balance sheet total increased by 38 972 or 2.25% to 1 771 620.

1 Other operating income (TCHF)

Income from subsidiary undertakings (licence fees, income from

service level agreements and service charge for comfort letters)

Realized net result from investment securities

Others

Total other operating income

2 Personnel expenses (TCHF)

Personnel expenses, including Foundation Board members, consisting of

salaries

bonuses

pension costs

social security costs

other personnel expenses

Personnel expenses before long-term incentive scheme


Total personnel expenses

3 Business and office expenses (TCHF)

Business and office expenses, consisting of

information and communication expenses

travel and entertainment expenses

legal and professional expenses 1

advertising expenses

other expenses

Total business and office expenses

1 In 2010 legal and professional expenses include EUR 50 million payment under agreement with the Bochum public prosecuter following the data theft case.

Details on the income statement and balance sheet


2010 2009

45 061 45 725

-178 10 778

4 398 7 570

49 281 64 073

2010 2009

3 883 3 192

3 771 5 272

420 627

486 745

723 1 579

9 283 11 415

1 169 1 631

10 452 13 046

2010 2009

42 46

775 607

74 513 11 383

4 729 2 991

123 0

80 182 15 027

83

4 Loans and advances to banks (subsidiary undertakings) on demand

The loans and advances to banks are bank accounts with LGT Bank in Liechtenstein Ltd., Vaduz.

5 Other loans and advances to customers

The loans and advances are due from subsidiaries and are not secured by collateral.

6 Participations (TCHF)

Acquisition cost


Opening balance

Investments

Depreciation

Disposals

Liquidation

Closing balance

All participations of LGT Group Foundation are unlisted.


2010 2009

1 177 727 1 136 926

-109 832 -107 311

1 067 895 1 029 615

559 51 937

-352 -8 243

-200 -5 414

-40 0

1 067 862 1 067 895

84


LGT Bank in Liechtenstein Ltd. Banking and investment management

LGT Swiss Life Non Traditional Advisers Ltd. Investment advisers

LGT Private Equity Advisers Ltd. Investment advisers

LGT Capital Management Ltd. Investment management

LGT Funds Ltd.1 Investment advisers

LGT Funds II Ltd.1 Investment advisers

LGT Investments Ltd.1 Investment advisers

LGT Premium Strategy Ltd.1 Investment advisers

LGT Fondsleitung Ltd. Investment advisers

LGT Capital Partners Advisers Ltd. Investment advisers

LGT Financial Services Ltd. Services company

LGT Audit Revisions AG Audit services

LGT Bank (Singapore) Ltd. Banking and investment management

LGT Investment Management (Asia) Ltd. Consulting and advisers

LGT Holding (Malaysia) Ltd. Holding company

LGT Bank in Liechtenstein (Cayman) Ltd. Banking and investment management

LGT Finance Ltd. Financing

LGT Global Invest Ltd. Investment management

LGT Participations Ltd. Investment management

LGT Certificates Ltd.5 Investment management

LGT (Uruguay) S.A.6 Bank representation

1 Companies with variable share capital structure, only part of fund manager held by LGT Group Foundation.2 Partly held via LGT Global Invest Ltd., Grand Cayman.3 Voting rights held via LGT Bank in Liechtenstein Ltd., Vaduz.4 Partly held via LGT Bank in Liechtenstein Ltd., Vaduz.5 Company with variable share capital structure, only founder’s shares held by LGT Group Foundation.6 Acquired as per 13 August 2010.

LGT Trust (Singapore) Ltd., LGT Management Services (Singapore) Pte. Ltd. and LGT Management Services (HK) Ltd. were sold in 2010.

Castle Holdco Ltd. was liquidated as per 16 December 2010.

The subsidiary undertakings

of LGT Group Foundation

at 31 December 2010 were:


85LGT Group Foundation – notes to the financial statements

Registered office

Vaduz – Liechtenstein












Singapore

Hong Kong – China

Labuan – Malaysia

Grand Cayman – Cayman Islands





Montevideo – Uruguay

The book value of the participations in banks and finance companies is CHF 808 351 526.

% of voting rights % of capital Share capital (paid in) Net profit of theheld held subsidiary in business

year 2010 (‘000)

100.0 100.0 CHF 291 200 800 CHF 257 283

57.9 57.9 CHF 1 000 000 CHF 4 329

60.0 60.0 CHF 1 000 000 CHF 8 682

100.0 100.0 CHF 1 000 000 CHF 5 260

100.0 100.0 CHF 50 000 CHF 0

100.0 100.0 CHF 50 000 CHF 0

100.0 100.0 CHF 50 000 CHF 14

100.0 100.0 CHF 50 000 CHF 0

100.0 100.0 CHF 1 000 000 CHF 0

100.0 100.0 CHF 250 000 CHF 5 173

100.0 100.0 CHF 1 000 000 CHF 2 713

100.0 100.0 CHF 100 000 CHF -4

100.0 100.0 SGD 370 000 000 CHF 2 812

100.0 2 100.0 2 HKD 24 000 000 HKD 9 294

100.0 100.0 CHF 100 000 CHF -832

100.0 3 100.0 4 USD 600 000 CHF 16 154

100.0 100.0 USD 50 001 CHF 1 051

100.0 100.0 CHF 4 CHF 54 725

100.0 100.0 CHF 7 CHF -640

100.0 100.0 CHF 1 CHF 0

100.0 100.0 UYU 2 823 500 USD 2

86

7 Other assets (TCHF)

Dividend proposed from LGT Bank in Liechtenstein Ltd., Vaduz

Receivables from subsidiary undertakings

Receivables from others

Total

8 Amounts due to banks (TCHF)

Amounts due to LGT Bank in Liechtenstein Ltd., Vaduz

Total

9 Other liabilities (TCHF)

Bonuses 4 296

Salaries 987

Long-term incentive scheme 2 698

Social security costs 14

Others 509

Total 8 504

10 Provisions (TCHF)

Opening balance

Current year expenses

Provisions released

Closing balance

11 Statement of changes in equity (TCHF)

Equity at the beginning of the business year

Payment to the Prince of Liechtenstein Foundation


Total equity at the end of the business year

12 Headcount



2010 2009

128 128 119 392

5 330 6 632

15 120 16 090

148 578 142 114

2010 2009

1 022 000 1 017 500

1 022 000 1 017 500

2010 2009

5 246

540

2 186

621

98

8 691

2010 2009

43 327 56 925

0 10 827

-1 656 -24 425

41 671 43 327

2010 2009

659 251 547 144

-75 000 -75 000

113 048 187 107

697 299 659 251

2010 2009

7 7

87

13 Analysis of balance sheet by originat 31 December 2010 (TCHF)

Assets


Other loans and advances

Participations

Other assets


Total assets

Liabilities


Other liabilities


Provisions

Foundation capital

Total liabilities

Analysis of balance sheet by originat 31 December 2009 (TCHF)

Assets



Participations

Other assets


Total assets

Liabilities


Other liabilities


Provisions

Foundation capital

Total liabilities


Foreign % Domestic % Total %

0 0.00 672 100.00 672 100.00

554 508 100.00 0 0.00 554 508 100.00

545 925 51.12 521 937 48.88 1 067 862 100.00

2 312 1.56 146 266 98.44 148 578 100.00

0 0.00 0 0.00 0 0.00

1 102 745 62.25 668 875 37.75 1 771 620 100.00

0 0.00 1 022 000 100.00 1 022 000 100.00

52 0.61 8 452 99.39 8 504 100.00

1 243 57.92 903 42.08 2 146 100.00

0 0.00 41 671 100.00 41 671 100.00

0 0.00 697 299 100.00 697 299 100.00

1 295 0.07 1 770 325 99.93 1 771 620 100.00

Foreign % Domestic % Total %

0 0.00 792 100.00 792 100.00

521 508 100.00 0 0.00 521 508 100.00

545 926 51.12 521 969 48.88 1 067 895 100.00

0 0.00 142 114 100.00 142 114 100.00

339 100.00 0 0.00 339 100.00

1 067 773 61.63 664 875 38.37 1 732 648 100.00

0 0.00 1 017 500 100.00 1 017 500 100.00

0 0.00 8 691 100.00 8 691 100.00

2 834 73.06 1 045 26.94 3 879 100.00

0 0.00 43 327 100.00 43 327 100.00

0 0.00 659 251 100.00 659 251 100.00

2 834 0.16 1 729 814 99.84 1 732 648 100.00

88

14 Breakdown of assets according tocountry/country group (TCHF)

Liechtenstein

Europe excl. Liechtenstein

Americas

Asia

Total assets


2010 % 2009 %

668 875 37.75 664 875 38.37

2 165 0.12 339 0.02

255 224 14.41 255 224 14.73

845 356 47.72 812 210 46.88

1 771 620 100.00 1 732 648 100.00

89

15 Foreign exchange exposureat 31 December 2010 (TCHF)

Assets



Participations

Other assets


Total assets

Liabilities


Other liabilities


Provisions

Foundation capital

Total liabilities


Assets



Participations

Other assets


Total assets

Liabilities


Other liabilities


Provisions

Foundation capital

Total liabilities


Swiss Francs US Dollars Euros Other Total

672 0 0 0 672

554 508 0 0 0 554 508

777 036 224 0 290 602 1 067 862

148 578 0 0 0 148 578

0 0 0 0 0

1 480 794 224 0 290 602 1 771 620

1 022 000 0 0 0 1 022 000

8 504 0 0 0 8 504

2 146 0 0 0 2 146

41 671 0 0 0 41 671

697 299 0 0 0 697 299

1 771 620 0 0 0 1 771 620

Swiss Francs US Dollars Euros Other Total

792 0 0 0 792

521 508 0 0 0 521 508

777 069 224 0 290 602 1 067 895

142 114 0 0 0 142 114

339 0 0 0 339

1 441 822 224 0 290 602 1 732 648

1 017 500 0 0 0 1 017 500

8 691 0 0 0 8 691

3 879 0 0 0 3 879

43 327 0 0 0 43 327

659 251 0 0 0 659 251

1 732 648 0 0 0 1 732 648

90

16 Analysis of current assetsand liabilities by maturityat 31 December 2010 (TCHF)

Current assets



Other assets


Total current assets

Current liabilities


Other liabilities


Total current liabilities

Analysis of current assetsand liabilities by maturityat 31 December 2009 (TCHF)

Current assets



Other assets


Total current assets

Current liabilities


Other liabilities


Total current liabilities

17 Emoluments to members of the management

The emoluments to the members of the Foundation Board and to the Group and business unit executives employed by the

Foundation are disclosed under note 37 in the consolidated financial statements of LGT Group Foundation.


On demand Within More than 3 More than Total3 months and less than 12 months

12 months

672 0 0 0 672

554 508 0 0 0 554 508

0 10 450 128 128 10 000 148 578

0 0 0 0 0

555 180 10 450 128 128 10 000 703 758

0 720 000 302 000 0 1 022 000

0 523 7 981 0 8 504

0 2 044 102 0 2 146

0 722 567 310 083 0 1 032 650

On demand Within More than 3 More than Total3 months and less than 12 months

12 months

792 0 0 0 792

521 508 0 0 0 521 508

0 7 722 119 392 15 000 142 114

0 339 0 0 339

522 300 8 061 119 392 15 000 664 753

0 1 017 500 0 0 1 017 500

719 7 972 0 0 8 691

0 3 879 0 0 3 879

719 1 029 351 0 0 1 030 070

International presence and imprint

Austria Vienna

Bahrain Manama

Germany Berlin

Cologne

Frankfurt am Main

Hamburg

Mannheim

Munich

Stuttgart

Hong Kong Hong Kong

Ireland Dublin

Japan Tokyo

Liechtenstein Vaduz

Singapore Singapore

Spain Madrid

Switzerland Basel

Berne

Chur

Davos

Geneva

Lausanne

Lucerne

Lugano

Pfäffikon

Zurich

United Kingdom London

United States of America New York

Uruguay Montevideo

Media relations Christof Buri

Phone +423 235 23 03

[email protected]

Dispatch Iris Dreier

Phone +423 235 20 51

[email protected]

International presence and imprint92

Portrait of Prince Johann Nepomuk Karl of LiechtensteinJohann Nepomuk Karl (born 1724, died 1748), who was only eightyears old when his father died, grew up under the guardianship of hisuncle, Prince Josef Wenzel. In accordance with the noble rank of hisfamily, his uncle prepared him for the assumption of governmentduties by means of a thorough education. Probably as part of this pre-paration, Johann Nepomuk Karl accompanied his uncle on his missionto Paris. In 1745, Johann Nepomuk then assumed the regency. Heproved himself to be eccentric, however, and lacked economic talent.

Three years later, shortly after his appointment as royal Hungarianand royal Bohemian treasurer, the Prince died at the age of only 24.

© Collections of the Prince of Liechtenstein, Vaduz–ViennaLIECHTENSTEIN MUSEUM, Vienna. www.liechtensteinmuseum.at

The illustrations in this brochure are details fromEtienne Chevalier, “Portrait of Prince Johann Nepomuk Karlof Liechtenstein (1724–1748)”

50027en0511

1.3T

BVD

LGT Group FoundationHerrengasse 12FL-9490 VaduzPhone +423 235 11 22Fax +423 235 16 [email protected]

www.lgt.com

LGT Group is represented in 29 locations in Europe, Asia and the Middle East.A complete address list can be seen at www.lgt.com

annual report 2010 - lgt group

Documents

administration chf mof

percent overallto chf

acquisition chf mtotal

lgt group foundation

ceo lgt financial servicesdr

new money chf mof

und zu liechtenstein

income declined42 percent