Statement by the Chairman of the Board
VP Bank Group
Strategy report
Stakeholders' report
Segments
Corporate governance and compensation report
Financial report 2012 of VP Bank Group
Financial report 2012 of Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz

Notes to the consolidated income statement and consolidated balance sheet

1 Interest income

in CHF 1,000	2012	2011	Variance absolute	Variance in %
Interest and discount income	62	860	–798	–92.8
Interest income from banks	26,807	54,904	–28,097	–51.2
Interest income from customers	74,163	74,824	–661	–0.9
Interest income from financial instruments measured at amortised cost	13,143	10,963	2,180	19.9
Interest-rate instruments	–5,738	–23,550	17,812	–75.6
Loan commissions with the character of interest	1,062	840	222	26.4
Total interest income	109,499	118,841	–9,342	–7.9
Interest expenses on liabilities due to banks	864	14,942	–14,078	–94.2
Interest expenses on liabilities due to customers	14,661	21,475	–6,814	–31.7
Interest expenses on medium-term bonds	3,687	3,010	677	22.5
Interest expenses on debenture bonds	6,821	12,815	–5,994	–46.8
Total interest expense	26,033	52,242	–26,209	–50.2
Total interest income	83,466	66,599	16,867	25.3

2 Income from commission business and services

in CHF 1,000	2012	2011	Variance absolute	Variance in %
Commission income from credit business	1,053	987	66	6.7
Asset management and investment business 1	37,365	37,340	25	0.1
Brokerage fees	32,194	34,217	–2,023	–5.9
Securities account fees	15,399	15,815	–416	–2.6
Fund management fees	51,799	56,091	–4,292	–7.7
Fiduciary commissions	1,187	1,439	–252	–17.5
Miscellaneous commission and service expense 2	20,288	20,074	214	1.1
Total income from commission business and services	159,285	165,963	–6,678	–4.0
Brokerage expenses	4,010	6,665	–2,655	–39.8
Other commission and services-related expenses 2	40,181	37,373	2,808	7.5
Total expenses from commission business and services	44,191	44,038	153	0.3
Total income from commission business and services	115,094	121,925	–6,831	–5.6

Corporate actions, asset management commissions, investment-advisory services, all-in fees, securities lending and borrowing, retrocessions.
Including income and expense from Group companies with commission character.

3 Income from trading activities

in CHF 1,000	2012	2011	Variance absolute	Variance in %
Securities trading 1	–1,595	4,979	–6,574	–132.0
Interest income from trading portfolios	0	48	–48	–100.0
Dividend income from trading portfolios	0	2	–2	–100.0
Foreign currency	20,662	22,427	–1,765	–7.9
Banknotes, precious metals and other	2,080	1,911	169	8.8
Total income from trading activities	21,147	29,367	–8,220	–28.0

The results from trading derivatives are included in this item.

4 Income from financial investments

in CHF 1,000	2012	2011	Variance absolute	Variance in %
Income from financial instruments at fair value	23,835	21,078	2,757	13.1
Income from financial instruments at amortised cost	–4,364	–15,166	10,802	n.a.
Total income from financial investments	19,471	5,912	13,559	229.3

Income from financial instruments at fair value
Income from financial instruments at fair value	10,761	7,589	3,172	41.8
Interest income from financial instruments at fair value	5,717	7,923	–2,206	–27.8
Dividend income from financial instruments at fair value	5,372	4,761	611	12.8
Dividend income from financial instruments FVTOCI	1,985	805	1,180	146.6
thereof from FVTOCI financial instruments sold	0	0	0	n.a.
Income from liabilities at fair value	0	0	0	n.a.
Total	23,835	21,078	2,757	13.1

Income from financial instruments at amortised cost
Revaluation gains/losses on financial instruments at amortised cost	–4,624	–13,282	8,658	n.a.
Realised gains/losses on financial instruments at amortised cost	260	–1,884	2,144	n.a.
Total	–4,364	–15,166	10,802	n.a.

5 Other income

in CHF 1,000	2012	2011	Variance absolute	Variance in %
Income from real estate	258	302	–44	–14.6
Loss of associated companies	19	–9	28	n.a.
Miscellaneous other income	2,945	362	2,583	713.5
Total other income	3,222	655	2,567	391.9

6 Personnel expenses

in CHF 1,000	2012	2011	Variance absolute	Variance in %
Salaries and wages	98,608	97,112	1,496	1.5
Social contributions required by law	7,497	8,531	–1,034	–12.1
Contributions to pension plans/defined-benefit plans 1	–9,000	12,171	–21,171	–173.9
Contributions to pension plans/defined-contribution plans	1,022	1,219	–197	–16.2
Other personnel expenses	6,257	6,914	–657	–9.5
Total personnel expenses	104,384	125,947	–21,563	–17.1

Details can be found in note 41 and in Article 2 of the “Principles underlying financial statement reporting”: “Changes to the principles of financial statement reporting and comparability”.

7 General and administrative expenses

in CHF 1,000	2012	2011	Variance absolute	Variance in %
Occupancy expenses	8,417	8,038	379	4.7
Insurance	970	1,061	–91	–8.6
Professional fees	6,859	5,779	1,080	18.7
Financial information procurement	6,155	6,042	113	1.9
Telecommunication and postage	1,174	1,265	–91	–7.2
IT systems	12,870	17,685	–4,815	–27.2
Marketing and public relations	4,263	5,023	–760	–15.1
Capital taxes	108	184	–76	–41.3
Other general and administrative expenses	7,600	7,794	–194	–2.5
Total general and administrative expenses	48,416	52,871	–4,455	–8.4

8 Depreciation and amortisation

in CHF 1,000	Note	2012	2011	Variance absolute	Variance in %
Depreciation and amortisation of property and equipment	22	10,813	10,961	–148	–1.4
Amortisation of intangible assets	23	18,632	22,675	–4,043	–17.8
Total depreciation and amortisation		29,445	33,636	–4,191	–12.5

9 Valuation allowances, provisions and losses

in CHF 1,000	Note	2012	2011	Variance absolute	Variance in %
Credit risks 1	16	13,871	8,750	5,121	58.5
Legal and litigation risks		0	0	0	0
Other		5,278	4,199	1,079	25.7
Release of valuation allowances and provisions no longer required		–8,090	–7,180	–910	12.7
Total valuation allowances, provisions and losses		11,059	5,769	5,290	91.7

Additions including currency effects.

10a Taxes on income

in CHF 1,000	2012	2011
Domestic
Current taxes	386	613
Deferred taxes	–123	–1,512

Foreign
Current taxes	2,124	1,688
Deferred taxes	–492	184

Total current taxes	2,510	2,301
Total deferred taxes	–615	–1,328
Total taxes on income	1,895	973

Actual payments for domestic and foreign taxes made by the Group in 2012 totalled CHF 0.3 million (2011: CHF 3.3 million).

Proof – taxes on income

All anticipated liabilities arising in connection with taxes on income earned during the reporting period are reflected in the financial statements. They are computed in accordance with the laws governing taxation in the respective countries. Deferred tax liabilities arising from differences between the values in the financial statements drawn up for legal and/or tax purposes and those in the consolidation are computed using the following tax rates:

	2012	2011
Liechtenstein	12.5%	12.5 %
Switzerland	20.0%	20.0%
Luxembourg	28.8%	29.0%
British Virgin Islands	0.0%	0.0%
Singapore	10.0%	10.0%
Hong Kong	16.5%	16.5%

Pre-tax results, as well as differences between the tax charge in the income statement and the tax charge arrived at on the basis of a standard assumed average rate of 10 per cent, may be analysed as follows:

in CHF 1,000	2012	2011
Income before income tax
Domestic	36,295	–3,376
Foreign	12,801	9,611
Taxes on income using an assumed average charge	7,364	624

Reasons for increased/decreased taxable income
Difference between actual and assumed tax rates	–4,854	2,128
Change in deferred tax assets and liabilities	–615	–1,328
Utilisation of tax loss carry-forwards	0	–450
Total income taxes	1,895	973

10b Deferred tax assets and liabilities

in CHF 1,000	2012	2011
Deferred tax assets
Real estate and property and equipment	8,318	7,698
Tax loss carry-forwards 1	0	0
Securities	3,585	0
Others	0	10,236
Total deferred tax assets	11,903	17,934

Deferred tax liabilities
Real estate and property and equipment	1,875	2,018
Financial instruments	2,141	2,879
Financial instruments directly offset within shareholders’ equity	637	864
Valuation allowances for credit risks	732	224
Other provisions	3,016	2,886
Other liabilities	0	121
Total deferred tax liabilities	8,401	8,992

Deferred tax assets
Balance at the beginning of the financial year	17,934	12,396
Tax loss carry-forwards 1	–6,651	4,178
Charged to income statement	0	–450
Released to income statement	620	1,810
Impact of deferred tax rate changes	0	0
Total deferred tax assets	0	0
Total deferred tax assets	11,903	17,934

Deferred tax liabilities
Balance at the beginning of the financial year	8,992	8,244
Reclassifications	–596	716
Charged to income statement	1,510	872
Released to income statement	–1,505	–840
Impact of deferred tax rate changes	0	0
Total deferred tax liabilities	8,401	8,992

Providing that the realisation of future tax benefits is considered probable, these must be treated as an asset. The offset of deferred tax assets and liabilities is only possible if they are due to/from the same taxing authority.

Deferred taxes arise because of timing differences between the IFRS financial statements and the statutory accounts as a result of differing valuation policies.

Loss carry-forwards not reflected in the balance sheet expire as follows:
Within 1 year	0	0
Within 2 to 4 years	366	366
After 4 years	589	426
Total	955	792

10c Tax assets and liabilities

in CHF 1,000	31/12/2012	31/12/2011
Tax assets
Amounts receivable arising on current taxes on income	58	368
Deferred tax assets (note 10b)	11,903	17,934
Total tax assets	11,961	18,302

Tax liabilities
Liabilities arising on current taxes on income	3,689	3,230
Deferred tax liabilities (note 10b)	8,401	8,992
Total tax liabilities	12,090	12,222

11 Earnings per share

	2012	2011
Consolidated earnings per share of Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz
Net income (in CHF 1,000) 1	47,147	3,204
Weighted average of bearer shares	5,174,812	5,163,336
Weighted average of registered shares	5,963,174	5,967,975
Total weighted average number of bearer shares	5,771,129	5,760,134
Undiluted consolidated earnings per bearer share	8.17	0.56
Undiluted consolidated earnings per registered share	0.82	0.06

Fully diluted consolidated earnings per share of Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz
Net income (in CHF 1,000) 1	47,147	3,204
Adjusted consolidated net income (in CHF 1,000)	47,147	3,204
Number of shares used to compute the fully diluted consolidated net income	5,771,129	5,760,134
Fully diluted consolidated earnings per bearer share	8.17	0.56
Fully diluted consolidated earnings per registered share	0.82	0.06

On the basis of Group profits attributable to the shareholders of Verwaltungs- und Privat-Bank AG, Vaduz.

12 Dividend

	2012	2011
Approved and paid dividend of Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz
Dividend (in CHF 1,000) for the financial year 2011 (2010)	8,872	20,702
Dividend per bearer share	1.50	3.50
Dividend per registered share	0.15	0.35
Payout ratio (in %)	269.7	133.7

Proposed dividend to be approved by the annual general meeting of Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz (not reflected as liability as of 31 December)
Dividend (in CHF 1,000) for the financial year 2012	14,787
Dividend per bearer share	2.50
Dividend per registered share	0.25
Payout ratio (in %)	30.6

13 Cash and cash equivalents

in CHF 1,000	31/12/2012	31/12/2011
Cash on hand	15,480	16,442
At-sight balances on postal checking accounts	6,933	2,899
At-sight balances with national and central banks	904,548	226,040
Total cash and cash equivalents	926,961	245,381

14 Receivables arising from money-market paper

in CHF 1,000	31/12/2012	31/12/2011
Money-market paper (qualifying for refinancing purposes)	0	124,938
Other money-market paper	0	0
Total receivables arising from money-market paper	0	124,938

15 Due from banks and customers

in CHF 1,000	31/12/2012	31/12/2011
By type of exposures
Due from banks – at-sight balances	975,436	797,832
Due from banks – term balances	3,816,634	4,349,042
Valuation allowances for credit risks (note 16)	–3,016	–2,964
Due from banks	4,789,054	5,143,910

Mortgage receivables	2,635,546	2,366,946
Other receivables	1,129,147	1,536,483
Valuation allowances for credit risks (note 16)	–51,403	–52,379
Due from customers	3,713,290	3,851,050
Total due from banks and customers	8,502,344	8,994,960

in CHF 1,000	31/12/2012	31/12/2011
Due from customers by type of collateral
Mortgage collateral	2,577,427	2,321,124
Other collateral	969,531	1,159,697
Without collateral	217,735	422,608
Subtotal	3,764,693	3,903,429
Valuation allowances for credit risks	–51,403	–52,379
Total due from customers	3,713,290	3,851,050

16 Valuation allowances for credit risks

in CHF 1,000			2012	2011
Balance at the beginning of the financial year			55,343	54,013
Amounts written off on loans / utilisation in accordance with purpose			–7,017	–209
Creation of valuation allowances and provisions for credit risks			13,939	8,713
Release of valuation allowances and provisions for credit risks			–7,778	–7,211
Foreign-currency translation differences and other adjustments			–68	37
Balance at the end of the financial year			54,419	55,343
As valuation adjustment for due from banks			3,016	2,964
As valuation adjustment for due from customers			51,403	52,379
Total valuation allowances for credit risks			54,419	55,343

in CHF 1,000	Banks	Mortgage receivables	Other receivables 1	Total
By type of exposure 2012
Balance at the beginning of the financial year	2,964	10,395	41,984	55,343
Amounts written off on loans / utilisation in accordance with purpose	0	0	–7,017	–7,017
Creation of valuation allowances and provisions for credit risks	197	2,314	11,428	13,939
Release of valuation allowances and provisions for credit risks	–144	–89	–7,545	–7,778
Foreign-currency translation differences and other adjustments	–1	–10	–57	–68
Balance at the end of the financial year 2012	3,016	12,610	38,793	54,419

of which
Individual valuation allowances	0	7,491	25,213	32,704
Lump-sum valuation allowances	3,016	5,119	13,580	21,715
Total	3,016	12,610	38,793	54,419

By type of exposure 2011
Balance at the beginning of the financial year	7,404	10,031	36,578	54,013
Amounts written off on loans / utilisation in accordance with purpose	0	0	–209	–209
Creation of valuation allowances and provisions for credit risks	60	1,112	7,541	8,713
Release of valuation allowances and provisions for credit risks	–4,500	–748	–1,963	–7,211
Foreign-currency translation differences and other adjustments	0	0	37	37
Balance at the end of the financial year 2011	2,964	10,395	41,984	55,343

of which
Individual valuation allowances	0	5,778	24,085	29,863
Lump-sum valuation allowances	2,964	4,617	17,899	25,480
Total	2,964	10,395	41,984	55,343

Other receivables primarily compromise lombard loans, debit balances on accounts and unsecured loans.

in CHF 1,000	Individual 2012	Lump-sum 2012	Individual 2011	Lump-sum 2011
By type of valuation allowances
Balance at the beginning of the financial year	29,863	25,480	27,449	26,564
Amounts written off on loans / utilisation in accordance with purpose	–7,017	0	–209	0
Creation of valuation allowances and provisions for credit risks	13,073	866	5,174	3,539
Release of valuation allowances and provisions for credit risks	–3,163	–4,615	–2,551	–4,660
Foreign-currency translation differences and other adjustments	–52	–16	0	37
Balance at the end of the financial year	32,704	21,715	29,863	25,480

Individual valuation allowances relate to loans that are not covered by the liquidation proceeds of collateral, or unsecured loans.

Value-impaired loans

Value-impaired loans are amounts outstanding from customers and banks where it is improbable that the debtor can meet its obligations.

in CHF 1,000	2012	2011
Value-impaired loans 1	56,758	61,445
Amount of valuation allowances for credit losses from non-performing loans	32,704	29,863
Net amounts due	24,054	31,582
Estimated realisable value of value-impaired loans	24,054	31,582
Average amount of value-impaired loans	59,102	65,334

Recoveries from loans already written off (other income)	110	37

Interest receivable on non-performing loans in 2012 was CHF 0.724 million (2011: CHF 0.727 million).

Non-performing loans

A loan is classified as non-performing as soon as the capital repayments and/or interest payments stipulated by contract are outstanding for 90 days or more. Such loans are not to be classified as value-impaired if it can be assumed that they are still covered by existing collateral.

in CHF 1,000	2012	2011
Non-performing loans	33,827	25,038
Amount of valuation allowances for credit losses from non-performing loans	19,728	19,815
Net amounts due	14,099	5,223
Average amount of non-performing loans	29,433	21,968

Valuation allowances on non-performing loans at the beginning of the financial year	19,815	7,655
Net increase	3,300	12,267
Amounts written off and disposals / utilisation in conformity with purpose	–3,387	–107
Valuation allowances on non-performing loans at the end of the financial year	19,728	19,815

in CHF 1,000	31/12/2012	31/12/2011
According to type of exposure
Banks	0	0
Mortgage receivables	20,749	8,251
Other receivables	13,078	16,787
Customers	33,827	25,038
Total non-performing loans	33,827	25,038

in CHF 1,000	31/12/2012	31/12/2011
According to region (domicile of debtor)
Liechtenstein and Switzerland	18,843	9,623
Rest of Europe	108	1,405
North and South America	235	429
Other countries	14,641	13,581
Total non-performing loans	33,827	25,038

17 Trading portfolios

in CHF 1,000	31/12/2012	31/12/2011
Debt securities valued at fair value
exchange listed	112	0
Total	112	0

Equity securities / investment-fund units valued at fair value
exchange listed	0	–57
non-exchange listed	0	0
Total	0	–57
Other	103	13
Total trading portfolios	215	–44

18 Derivative financial instruments

31/12/2012 in CHF 1,000	Positive replacement values	Negative replacement values	Contract volumes
Interest-rate instruments
Forward contracts
Swaps	26	30,254	312,267
Futures			12,443
Options (OTC)
Options (exchange traded)
Total interest-rate instruments 31/12/2012	26	30,254	324,710

Foreign currencies
Forward contracts	1,416	3,266	329,309
Combined interest-rate/currency swaps	48,156	46,819	3,589,350
Futures
Options (OTC)	412	287	85,146
Options (exchange traded)
Total foreign currencies 31/12/2012	49,984	50,372	4,003,805

Equity securities/indices
Forward contracts
Futures			8,701
Options (OTC)
Options (exchange traded)		1,100	17,687
Total equity securities/indices 31/12/2012	0	1,100	26,388

Precious metals
Forward contracts
Futures
Options (OTC)	741	741	40,049
Options (exchange traded)
Total precious metals 31/12/2012	741	741	40,049

Total derivative financial instruments 31/12/2012	50,751	82,467	4,394,952

The fair value of derivative financial instruments without market value is arrived at by recognised valuation models. These models take account of the relevant parameters such as contract specifications, the market price of the underlying security, the yield curve and volatility.

31/12/2011 in CHF 1,000	Positive replacement values	Negative replacement values	Contract volumes
Interest-rate instruments
Forward contracts
Swaps	1	26,641	381,455
Futures
Options (OTC)
Options (exchange traded)
Total interest-rate instruments 31/12/2011	1	26,641	381,455

Foreign currencies
Forward contracts	52,579	41,569	1,430,704
Combined interest-rate/currency swaps	47,382	57,505	2,815,582
Futures
Options (OTC)	49	49	5,560
Options (exchange traded)
Total foreign currencies 31/12/2011	100,010	99,123	4,251,846

Equity securities/indices
Forward contracts
Futures
Options (OTC)	2,525	2,525	22,727
Options (exchange traded)
Total equity securities/indices 31/12/2011	2,525	2,525	22,727


31/12/2011 in CHF 1,000	Positive replacement values	Negative replacement values	Contract volumes
Precious metals
Forward contracts
Futures
Options (OTC)	1,154	1,154	39,002
Options (exchange traded)
Total precious metals 31/12/2011	1,154	1,154	39,002

Total derivative financial instruments 31/12/2011	103,690	129,443	4,695,030

19 Financial instruments at fair value

in CHF 1,000	31/12/2012	31/12/2011
Debt instruments
public-law institutions outside Liechtenstein and Switzerland	67,731	54,567
exchange listed	255,526	250,474
non-exchange listed	25,484	61,217
Total	348,741	366,258

Equity shares / investment fund units
exchange listed	11,889	12,039
non-exchange listed	62,136	69,154
Total	74,025	81,193

Structured products
exchange listed	0	0
non-exchange listed 1	6,522	13,874
Total	6,522	13,874

Total financial instruments at fair value	429,288	461,325

Principally structured credit notes (credit-linked notes and credit-default notes).

The fair value of non-exchange listed financial instruments is determined exclusively on the basis of traders’ quotations or external pricing models based upon prices and interest rates of a supervised, active and liquid market. Management is convinced that the prices arrived at by these techniques constitute the most appropriate value for the balance sheet as of the date of the transactions, as well as for the related revaluation entries in the income statement.

20 Financial instruments at amortised cost

in CHF 1,000	31/12/2012	31/12/2011
Debt instruments
public-law institutions outside Liechtenstein and Switzerland	75,466	68,328
exchange listed	416,440	337,723
non-exchange listed	10,660	152,246
Total	502,566	558,297

Total financial instruments at amortised cost	502,566	558,297
of which, securities lent or delivered as collateral	0	33,786

21 Associated companies

in CHF 1,000	31/12/2012	31/12/2011
Balance at the beginning of the financial year	25	34
Additions	19	30
Value impairments	0	–39
Balance as of balance-sheet date	44	25

Details of material companies reflected in the consolidation using the equity method

Name	Registered office	Activity	Share capital	% of capital held
				31/12/2012	31/12/2011
VAM Corporate Holdings Ltd.	Mauritius	Fund Promoter Company	GBP 50,000	20	20
Data Info Services AG	Vaduz	Procurement, trading and brokerage of goods and services	CHF 50,000	50	50

22 Property and equipment

in CHF 1,000	Bank buildings	Other real estate	Furniture and equipment	IT systems	Total
Acquisition cost 2012
Balance on 01/01/2012	195,537	21,733	20,574	29,015	266,859
Additions	1,161	95	254	2,583	4,093
Disposals/derecognitions 1			–416	–454	–870
Reclassifications	–25		25		0
Foreign-currency translation	–3	–7	–10	–29	–49
Balance on 31/12/2012	196,670	21,821	20,427	31,115	270,033

Accumulated depreciation and amortisation
Balance on 01/01/2012	–95,219	–4,316	–15,062	–23,105	–137,702
Depreciation and amortisation	–6,035	–281	–1,558	–2,939	–10,813
Valuation allowances					0
Disposals/derecognitions 1			416	399	815
Reclassification	2		–2		0
Foreign-currency translation	2	1	6	17	26
Balance on 31/12/2012	–101,250	–4,596	–16,200	–25,628	–147,674

Net book values on 31/12/2012	95,420	17,225	4,227	5,487	122,359

Acquisition cost 2011
Balance on 01/01/2011	195,042	22,036	20,097	28,941	266,116
Additions	502	136	579	3,134	4,351
Disposals/derecognitions 1		–435	–91	–3,049	–3,575
Reclassifications					0
Foreign-currency translation	–7	–4	–11	–11	–33
Balance on 31/12/2011	195,537	21,733	20,574	29,015	266,859

Accumulated depreciation and amortisation
Balance on 01/01/2011	–89,319	–4,464	–13,684	–22,858	–130,325
Depreciation and amortisation	–5,904	–288	–1,471	–3,298	–10,961
Valuation allowances					0
Disposals/derecognitions 1		435	90	3,049	3,574
Foreign-currency translation	4	1	3	2	10
Balance on 31/12/2011	–95,219	–4,316	–15,062	–23,105	–137,702

Net book values on 31/12/2011	100,318	17,417	5,512	5,910	129,157

Includes the derecognitions of completely depreciated and amortised assets.

Additional information regarding property and equipment	2012	2011
Fire insurance value of real estate	171,147	171,160
Fire insurance value of other property and equipment	39,355	39,343
Fair value of other real estate	17,225	17,417

There is no property and equipment arising from financing leasing contracts.

23 Goodwill and other intangible assets

in CHF 1,000	Software	Other intangible assets capitalised	Goodwill	Total
Acquisition cost 2012
Balance on 01/01/2012	139,004	3,041	46,112	188,157
Additions	3,687			3,687
Disposals/derecognitions	–1,977			–1,977
Foreign-currency translation	–80			–80
Balance on 31/12/2012	140,634	3,041	46,112	189,787

Accumulated amortisation 2012
Balance on 01/01/2012	–79,002	–3,041	–35,302	–117,345
Amortisation	–18,632			–18,632
Valuation allowances				0
Disposals/derecognitions	1,977			1,977
Foreign-currency translation	45			45
Balance on 31/12/2012	–95,612	–3,041	–35,302	–133,955

Net book values on 31/12/2012	45,022	0	10,810	55,832

Acquisition cost 2011
Balance on 01/01/2011	134,506	3,041	46,112	183,659
Additions	7,889			7,889
Disposals/derecognitions	–3,352			–3,352
Foreign-currency translation	–39			–39
Balance on 31/12/2011	139,004	3,041	46,112	188,157

Accumulated amortisation 2011
Balance on 01/01/2011	–60,287	–2,434	–35,302	–98,023
Amortisation	–22,068	–607		–22,675
Valuation allowances				0
Disposals/derecognitions	3,352			3,352
Foreign-currency translation	1			1
Balance on 31/12/2011	–79,002	–3,041	–35,302	–117,345

Net book values on 31/12/2011	60,002	0	10,810	70,812

There are no other capitalised intangible assets on the consolidated balance sheet of VP Bank Group with an unlimited estimated useful life.

Review of impairment in value of goodwill

The existing goodwill of CHF 10.810 million arises from the acquisition of VP Bank (Luxembourg) S.A. in 2001 and is allocated to the cash-generating unit Private Banking International. Since 1 January 2005, this goodwill amount has no longer been subject to amortisation, but rather to an annual impairment test.

For the purposes of the impairment test carried out in 2012, the realisable amount was based upon the fair value, less selling costs. The level of the implicit premium for client assets was computed on the basis of stock exchange quotes for enterprises which focus on the business of asset management, as well as acquisition prices paid on the occasion of corporate mergers, and was used to determine the recoverable amount. The recoverable amount exceeded the book value to such an extent that a decline in the value of the goodwill could be viewed as improbable. For this reason, a supplementary computation of the recoverable amount based upon the value in use was dispensed with.

24 Other assets

in CHF 1,000	31/12/2012	31/12/2011
Value-added taxes and other tax receivables
Prepaid retirement pension contributions	0	0
Miscellaneous other assets 1	14,028	12,139
Total other assets	14,028	12,957

Compensation accounts, settlement accounts, miscellaneous other assets.

25 Medium-term notes

Maturity in CHF 1,000	Interest rate 0–0.9999%	Interest rate 1–1.9999%	Interest rate 2–2.9999%	Interest rate 3–3.9999%	Total
2013	8,151	59,161	3,775	2,130	73,217
2014	15,697	81,240	2,071	434	99,442
2015	14,594	21,470	2,108	872	39,044
2016	5,758	38,786	835	620	45,999
2017	165	12,155	5,133	263	17,716
2018		2,139	2,019	111	4,269
2019		431	1,556		1,987
Longer		563	2,133		2,696
Total 31/12/2012	44,365	215,945	19,630	4,430	284,370
Total 31/12/2011	39,774	182,911	21,826	7,202	251,713

The average interest rate as of 31 December 2012 was 1.52 per cent (prior year: 1.84 per cent).

26 Debentures, Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz

Year of issue in CHF 1,000	ISIN	Interest rate in %	Currency	Maturity	Nominal amount		Total 31/12/2012	Total 31/12/2011
2007	CH0030896697	2.875	CHF	04/06/2012	160,000	1	0	126,562
2010	CH0112734469	2.500	CHF	27/05/2016	200,000		198,513	198,102
					360,000		198,513	324,664

In 2011, in accordance with the debenture issuance conditions, Verwaltungs- und Privat-Bank AG, Vaduz, repurchased debentures on the market for a nominal value of CHF 90 million. These repurchased debentures were cancelled. Accordingly, there were still debentures totalling CHF 160 million from this issue in circulation as of 31 December 2011.

Debt securities issued are recorded at fair value plus transaction costs upon initial recognition. Fair value corresponds to the consideration received. Subsequently, they are re-measured at amortised cost. The difference between issue price and redemption price of the security is amortised over the duration of the debt security using the effective interest method (3.14 per cent debenture issue 2012, 2.73 per cent debenture issue 2016).

27 Other liabilities

in CHF 1,000	31/12/2012	31/12/2011
Value-added taxes and other tax receivables	10,187	8,348
Accrued retirement pension contributions	26,587	81,363
Miscellaneous other liabilities 1	31,981	25,401
Total other liabilities	68,755	115,112

Compensation accounts, settlement accounts and miscellaneous other liabilities.

28 Provisions

in CHF 1,000	Default risks	Legal and litigation risks	Other provisions	Total 31/12/2012	Total 31/12/2011
Carrying value at the beginning of the financial year	227	502	5,633	6,362	3,214
Utilisation in accordance with purpose		–120	–5,639	–5,759	–363
New provisions charged to income statement	13		5,201	5,214	4,602
Provisions releases to income statement	–29		–592	–621	–1,101
Foreign-currency translation differences and other adjustments			1,950	1,950	0
Carrying value at the end of the financial year			–48	–48	10
Carrying value at the end of the financial year	211	382	6,505	7,098	6,362

Maturity of provisions
• within one year				7,098	6,362
• over one year				0	0

29 Minority interests

in CHF 1,000	2012	2011
Balance at the beginning of the financial year	18,986	17,843
Reductions and dividend payments	–1,045	–884
Foreign-currency translation differences	–254	–31
Share of minorities in net income	54	2,058
Balance at the end of the financial year	17,741	18,986

30 Share capital

	Number of shares 31/12/2012	Nominal CHF 31/12/2012	Number of shares 31/12/2011	Nominal CHF 31/12/2011
Registered shares of CHF 1.00 nominal value	6,004,167	6,004,167	6,004,167	6,004,167
Bearer shares of CHF 10.00 nominal value	5,314,347	53,143,470	5,314,347	53,143,470
Total share capital		59,147,637		59,147,637

All shares are fully paid up.

31 Treasury shares

	No. of shares 2012	in CHF 1,000 2012	No. of shares 2011	in CHF 1,000 2011
Registered shares at the beginning of the financial year	40,748	587	28,515	459
Purchases	9,336	56	12,233	128
Sales	–5,000	–71	0	0
Balance of registered shares as of balance-sheet date	45,084	572	40,748	587

Bearer shares at the beginning of the financial year	150,970	38,045	150,538	38,006
Purchases	47,764	3,528	25,815	2,643
Sales	–68,527	–8,652	–25,383	–2,604
Balance of bearer shares as of balance-sheet date	130,207	32,921	150,970	38,045

32 Assets pledged or assigned to secure own liabilities and assets subject to reservation of title

in CHF 1,000	Market value 31/12/2012	Actual liability 31/12/2012	Market value 31/12/2011	Actual liability 31/12/2011
Securities	603,971	0	790,807	33,786
Money-market paper	0	0	0	0
Other	0	0	0	0
Total pledged assets	603,971	0	790,807	33,786

The assets are pledged to limits for the repo business with national and central banks, for stock exchange deposits and to secure the business activities of overseas organisations pursuant to local legal provisions. Pledged or assigned assets within the framework of securities lending transactions or of repurchase and reverse repurchase transactions are not reflected in the above analysis. They are shown in the table “Securities lending and repurchase and reverse repurchase transactions with securities”.

33 Future commitments under operating leases

At the end of the year, there were several operating lease contracts for real estate and other property and equipment, which are principally used for the conduct of business activities of the Bank. The equipment leasing contracts contain renewal options as well as escape clauses.

in CHF 1,000	31/12/2012	31/12/2011
Remaining duration of up to 1 year	7,746	5,393
Remaining duration of 1 to 5 years	15,412	8,668
Remaining duration of over 5 years	6,000	6,900
Total minimum commitments under operating leases	29,158	20,961

As of 31 December 2012, general and administrative expenses include CHF 6.472 million of operating lease costs (31 December 2011: CHF 8.368 million).

34 Litigation

Within the normal course of business, VP Bank Group is involved in various legal proceedings. It raises provisions for ongoing and threatened litigation whenever, in the opinion of management, payments or losses by Group companies are probable and their amount can be estimated. If no outflow of resources is probable or the amount of the liabilities cannot be reliably estimated, a contingent liability is to be disclosed. All provisions are recorded in the item “Other provisions” in the consolidated balance sheet (note 28).

35 Balance sheet per currency

in CHF 1,000	CHF	USD	EUR	Other	Total
Assets 2012
Cash and cash equivalents	905,347	506	20,688	420	926,961
Receivables arising from money-market paper					0
Due from banks	188,792	2,025,239	1,913,340	661,683	4,789,054
Due from customers	2,778,056	390,612	416,679	127,943	3,713,290
Trading portfolios	112			103	215
Derivative financial instruments	49,569	1,041	0	141	50,751
Financial instruments at fair value	251,327	56,595	84,089	37,277	429,288
Financial instruments at amortised cost	219,566	144,743	138,257		502,566
Associated companies	44				44
Property and equipment	121,649	602	72	36	122,359
Intangible assets	54,346	1,486			55,832
Tax receivables	57		1		58
Deferred tax assets	11,874		29		11,903
Accrued receivables and prepaid expenses	14,309	3,483	6,418	870	25,080
Other assets	11,639	1,194	1,175	20	14,028
Total assets 31/12/2012	4,606,687	2,625,501	2,580,748	828,493	10,641,429

Liabilities and shareholders’ equity 2012
Due to banks	156,261	111,071	31,554	75,841	374,727
Due to customers – savings and deposits	966,705	1	163	1	966,870
Due to customers – other liabilities	2,031,120	2,473,152	2,514,543	716,350	7,735,165
Derivative financial instruments	74,113	2,920	5,252	182	82,467
Medium-term notes	262,120	1,645	20,605		284,370
Debenture issues	198,513				198,513
Tax liabilities	1,884		1,805		3,689
Deferred tax liabilities	8,401				8,401
Accrued liabilities and deferred items	17,691	958	3,576	322	22,547
Other liabilities	50,803	4,102	11,790	2,060	68,755
Provisions	6,855	243			7,098
Total liabilities	3,774,466	2,594,092	2,589,288	794,756	9,752,602
Total shareholders’ equity	805,979	82,234	–98	712	888,827
Total liabilities and shareholders’ equity 31/12/2012	4,580,445	2,676,326	2,589,190	795,468	10,641,429

in CHF 1,000	CHF	USD	EUR	Other	Total
Assets 2011
Cash and cash equivalents	213,186	677	31,093	425	245,381
Receivables arising from money-market paper	124,938				124,938
Due from banks	585,408	1,785,011	2,058,397	715,094	5,143,910
Due from customers	2,635,998	575,052	437,458	202,542	3,851,050
Trading portfolios	–40	–6	–11	13	–44
Derivative financial instruments	102,499	1,180		11	103,690
Financial instruments at fair value	243,663	77,223	120,058	20,381	461,325
Financial instruments at amortised cost	257,610	142,302	158,385		558,297
Associated companies	25				25
Property and equipment	128,262	742	146	7	129,157
Intangible assets	68,788	2,024			70,812
Tax receivables	27		341		368
Deferred tax assets	17,934				17,934
Accrued receivables and prepaid expenses	19,214	3,694	7,820	646	31,374
Other assets	10,191	1,702	1,043	21	12,957
Total assets 31/12/2011	4,407,703	2,589,601	2,814,730	939,140	10,751,174

in CHF 1,000	CHF	USD	EUR	Other	Total
Liabilities and shareholders’ equity 2011
Due to banks	25,709	240,479	84,416	1,877	352,481
Due to customers – savings and deposits	931,568	1	162	2	931,733
Due to customers – other liabilities	1,997,643	2,398,503	2,621,426	743,201	7,760,773
Derivative financial instruments	120,875	5,122	3,435	11	129,443
Medium-term notes	240,317		11,396		251,713
Debenture issues	324,664				324,664
Tax liabilities	1,167		2,062	1	3,230
Deferred tax liabilities	8,992				8,992
Accrued liabilities and deferred items	18,641	680	5,197	1,273	25,791
Other liabilities	98,334	6,949	9,486	343	115,112
Provisions	6,175	187			6,362
Total liabilities	3,774,085	2,651,921	2,737,580	746,708	9,910,294
Total shareholders’ equity	759,581	80,698	851	–250	840,880
Total liabilities and shareholders’ equity 31/12/2011	4,533,666	2,732,619	2,738,431	746,458	10,751,174

36 Maturity structure of assets and liabilities

in CHF 1,000	At sight	Callable	1 year	1 to 5 years	Over 5 years	Total
Assets 2012
Cash and cash equivalents	926,961					926,961
Receivables arising from money-market paper						0
Due from banks	975,436		3,813,618			4,789,054
Due from customers	19,896	390,790	1,656,138	1,197,011	449,455	3,713,290
Trading portfolios	103				112	215
Derivative financial instruments	50,751					50,751
Financial instruments at fair value	406,926				22,362	429,288
Financial instruments at amortised cost			79,536	400,282	22,748	502,566
Associated companies	44					44
Property and equipment 1					122,359	122,359
Intangible assets					55,832	55,832
Tax receivables	57		1			58
Deferred tax assets				11,903		11,903
Accrued receivables and prepaid expenses	22,777		1,945	358		25,080
Other assets	13,601	219	208			14,028
Total assets 31/12/2012	2,416,552	391,009	5,551,446	1,609,554	672,868	10,641,429

Liabilities and shareholders’ equity 2012
Due to banks	174,357	316	200,054	0	0	374,727
Due to customers – savings and deposits		966,870				966,870
Due to customers – other liabilities	6,943,926	229,088	556,290	5,861		7,735,165
Derivative financial instruments	82,467					82,467
Medium-term notes			73,217	202,201	8,952	284,370
Debenture issues				198,513		198,513
Tax liabilities	3,689					3,689
Deferred tax liabilities	2,792			5,609		8,401
Accrued liabilities and deferred items	20,610		1,849	88		22,547
Other liabilities	66,380		2,375			68,755
Provisions	7,098					7,098
Total liabilities 31/12/2012	7,301,319	1,196,274	833,785	412,272	8,952	9,752,602

without maturity

in CHF 1,000	At sight	Callable	1 year	1 to 5 years	Over 5 years	Total
Assets 2011
Cash and cash equivalents	245,381					245,381
Receivables arising from money-market paper	124,938					124,938
Due from banks	797,832		4,343,977	2,101		5,143,910
Due from customers	25,960	769,642	1,546,511	1,291,337	217,600	3,851,050
Trading portfolios	–44					–44
Derivative financial instruments	103,690					103,690
Financial instruments at fair value	432,316				29,009	461,325
Financial instruments at amortised cost			71,204	477,329	9,764	558,297
Associated companies	25					25
Property and equipment 1					129,157	129,157
Intangible assets					70,812	70,812
Tax receivables	367		1			368
Deferred tax assets				17,934		17,934
Accrued receivables and prepaid expenses	31,318		56			31,374
Other assets	11,155	325	1,477			12,957
Total assets 31/12/2011	1,772,938	769,967	5,963,226	1,788,701	456,342	10,751,174

Liabilities and shareholders’ equity 2011
Due to banks	281,798	7,413	63,270			352,481
Due to customers – savings and deposits		931,733				931,733
Due to customers – other liabilities	5,728,782	763,935	1,237,142	30,914		7,760,773
Derivative financial instruments	129,443					129,443
Medium-term notes			83,294	158,734	9,685	251,713
Debenture issues			126,562	198,102		324,664
Tax liabilities	3,230					3,230
Deferred tax liabilities				8,992		8,992
Accrued liabilities and deferred items	25,426		342	23		25,791
Other liabilities	114,442		670			115,112
Provisions	6,362					6,362
Total liabilities 31/12/2011	6,289,483	1,703,081	1,511,280	396,765	9,685	9,910,294

without maturity

37 Classification of assets by country or groups of countries

	in CHF 1,000 31/12/2012	Proportion in % 31/12/2012	in CHF 1,000 31/12/2011	Proportion in % 31/12/2011
Liechtenstein and Switzerland	5,945,559	55.9	5,665,640	52.7
Rest of Europe	3,661,658	34.4	4,089,619	38.0
North America	365,048	3.4	305,340	2.8
Other countries	669,164	6.3	690,575	6.4
Total assets	10,641,429	100.0	10,751,174	100.0

The classification is made according to the principle of domicile of the counterparties. Diversified collateral existing in the area of lombard loans is not taken into consideration in this respect.

38 Financial instruments

Fair value of financial instruments

The following table shows the fair values of financial instruments based on the valuation methods and assumptions set out below. This table is presented because not all financial instruments are disclosed at their fair values in the consolidated financial statements. Fair value means the price at which assets could be freely exchanged or liabilities could be fulfilled by parties who are willing to conduct transactions between one another and who are knowledgeable and independent of each other. Insofar as an active market exists (e.g. a recognised stock exchange), VP Bank Group uses the market price as it is the best indicator of the fair value of financial instruments.

in CHF million	Carrying value 31/12/2012	Fair value 31/12/2012	Variance	Carrying value 31/12/2011	Fair value 31/12/2011	Variance
Assets
Cash and cash equivalents	927	927	0	245	245	0
Receivables arising from money-market paper	0	0	0	125	125	0
Due from banks	4,789	4,790	1	5,144	5,151	7
Due from customers	3,713	3,818	105	3,851	3,956	105
Trading portfolios	0	0	0	0	0	0
Derivative financial instruments	51	51	0	104	104	0
Financial instruments at fair value	429	429	0	461	461	0
Financial instruments at amortised cost	503	522	19	558	568	10
Subtotal			125			122

Liabilities
Due to banks	375	375	0	352	352	0
Due to customers	8,702	8,701	1	8,693	8,689	4
Derivative financial instruments	82	82	0	129	129	0
Medium-term notes	284	291	–7	252	258	–6
Debenture issue	199	216	–17	325	351	–26
Subtotal			–23			–28

Total variance			102			94

The following valuation methods are used to determine the fair value of on-balance-sheet financial instruments:

Cash and cash equivalents, money-market paper

For the balance-sheet-items “Cash and cash equivalents” and “Receivables arising from money-market paper”, which do not have a published market value on a recognised stock exchange or on a representative market, the fair value corresponds to the amount payable at the balance-sheet date.

Due from/to banks and customers, medium-term notes, debenture issues

In determining the fair value of amounts due from/to banks, due from/to customers (including mortgage receivables and due to customers in the form of savings and deposits), as well as of medium-term notes and debenture issues with a fixed maturity or a refinancing profile, the net present value method is applied (discounting of monetary flows with swap rates corresponding to the respective term). For products whose interest or payment flows cannot be determined in advance, replicating portfolios are used.

Trading portfolios, trading portfolios pledged as security, financial instruments at fair value

Fair value corresponds to market value for the majority of these financial instruments. The fair value of non-exchange listed financial instruments (in particular for structured credit loans) is determined only on the basis of external traders’ prices or pricing models which are based on prices and interest rates in an observable, active and liquid market.

Derivative financial instruments

For the majority of the positive and negative replacement values (see note 18), the fair value equates to the market value. The fair value for derivative instruments without market value is determined using uniform models. These valuation models take account of the relevant parameters such as contract specifications, the market price of the underlying security, the yield curve and volatility.

Valuation methods for financial instruments

The fair value of listed securities held for trading purposes or as financial instruments, as well as that of listed derivatives and other financial instruments with a price established in an active market, is determined on the basis of current market value (Level 1). Valuation methods or pricing models are used to determine the fair value of financial instruments if no direct market prices are available. If possible, the underlying assumptions are based on observed market prices or other market indicators as at the balance-sheet date (Level 2). For most of the derivatives traded over the counter, as well as for other financial instruments that are not traded in an active market, fair value is determined by means of valuation methods or pricing models. Among the most frequently applied of those methods and models are cash-value-based forward pricing and swap models, as well as options pricing models such as the Black-Scholes model or derivations thereof. The fair values arrived at on the basis of these methods and models are influenced to a significant degree by the choice of the specific valuation model and the underlying assumptions applied, for example the amounts and time sequence of future cash flows, discount rates, volatilities and/or credit risks. If neither current market prices nor valuation methods/models based on observable market data can be drawn on for the purpose of determining fair value, then valuation methods or pricing models supported by realistic assumptions derived from actual market data are used (Level 3).

Valuation methods for financial instruments

in CHF million	Quote market prices Level 1	Valuation methods, based on market data Level 2	Valuation methods, not based on market data Level 3	Total
Assets 2012
Receivables arising from money-market paper	0	0	0	0
Trading portfolios	0	0	0	0
Derivative financial instruments	0	51	0	51
Financial instruments at fair value	383	40	6	429
Financial instruments at amortised cost	522	0	0	522

Liabilities 2012
Derivative financial instruments	0	82	0	82

Assets 2011
Receivables arising from money-market paper	125	0	0	125
Trading portfolios	0	0	0	0
Derivative financial instruments	0	104	0	104
Financial instruments at fair value	399	44	18	461
Financial instruments at amortised cost	568	0	0	568

Liabilities 2011
Derivative financial instruments	0	129	0	129

In the financial year 2012, positions with a fair value of CHF 0.0 million (2011: CHF 0.5 million) were reclassified from Level 1 (quoted market prices) to Level 2 (valuation methods based on market data) and positions with a fair value of CHF 0.0 million (2011: CHF 8.1 million) were reclassified from Level 2 to Level 3 (valuation methods not based on market data).

Level 3 financial instruments in CHF million	31/12/2012	31/12/2011
Balance sheet
Holdings at the beginning of the year	18.2	0.0
Investments	0.0	9.2
Disposals	–0.1	–0.2
Issues	0.0	0.0
Redemptions	–4.7	0.0
Losses recognised in the income statement	–5.3	–1.3
Losses recognised as other comprehensive income	–2.2	0.0
Gains recognised in the income statement	0.0	0.0
Gains recognised as other comprehensive income	0.0	2.4
Reclassification to level 3	0.0	8.1
Reclassification from level 3	0.0	0.0
Translation differences	–0.1	0.0
Total book value at balance-sheet date	5.8	18.2

Income on holdings on balance-sheet date
Unrealised losses recognised in the income statement	–0.4	–1.2
Unrealised losses recognised as other comprehensive income	–2.2	0.0
Unrealised gains recognised in the income statement	0.0	0.0
Unrealised gains recognised as other comprehensive income	0.0	2.4

No deferred day 1 profit or loss (difference between the transaction price and the fair value calculated on the transaction day) was reported for level 3 positions as of 31 December 2012 or 31 December 2011.

39 Scope of consolidation

Company	Registered office	Base currency	Capital	Group share of equity
Verwaltungs- und Privat-Bank Aktiengesellschaft	Vaduz	CHF	59,147,637	100%
FIB Finanz- und Beteiligungs-AG	Vaduz	CHF	50,000	100%
IGT Intergestions Trust reg.	Vaduz	CHF	100,000	100%
IFOS Internationale Fonds Service Aktiengesellschaft	Vaduz	CHF	1,000,000	100%
VP Verwaltung GmbH	Munich	EUR	500,000	100%
VP Bank (Singapore) Ltd.	Singapore	SGD	54,500,000	100%
VP Wealth Management (Hong Kong) Ltd.	Hong Kong	HKD	5,000,000	100%
Proventus Treuhand und Verwaltung AG	Vaduz	CHF	250,000	100%
VP Bank (Luxembourg) S.A.	Luxembourg	CHF	20,000,000	100%
which holds the following sub-participation:
VPB Finance S.A.	Luxembourg	CHF	5,000,000	100%
VPB Finanz Holding AG	Zurich	CHF	20,000,000	100%
which holds the following sub-participation:
VP Bank (Schweiz) AG	Zurich	CHF	20,000,000	100%
VP Bank and Trust Company (BVI) Limited	Tortola	USD	11,000,000	60%
which holds the following sub-participation:
VP Bank (BVI) Limited	Tortola	USD	10,000,000	100%
ATU General Trust (BVI) Limited	Tortola	USD	250,000	100%

Shareholdings excluded from the scope of consolidation	none
Associated companies	VAM Corporate Holdings Ltd., Mauritius
	Data Info Services AG, Vaduz
Companies consolidated for the first time	none
Shareholdings accounted for the first time in accordance with the equity method	none
Name changes during the financial year	VP Vermögensverwaltung GmbH changed its name to VP Verwaltung GmbH. During 2012, VP Vermögensverwaltung GmbH ceased operations. The impact on diluted and undiluted earnings was CHF –0.22 per bearer share and CHF –0.02 per registered share.

40 Transactions with related companies and individuals

Members of the Board of Directors and Group Management as well as their next of kin, and companies which are controlled by these individuals either by virtue of a majority shareholding or as a result of their role as Chairman of the Board and/or Chief Executive Officer in these companies, are considered to be related companies and individuals.

in CHF 1,000	2012	2011
Remuneration of the members of the Board of Directors
Remuneration due in the short term 1 ,2	977	702
Post-employment benefits	0	0
Other long-term remuneration due	0	0
Remuneration due upon termination of contract of employment	0	0
Share-based payment 1 ,2 ,3	326	231

Remuneration of the members of Group Management
Remuneration due in the short term	1,913	2,295
Post-employment benefits	0	0
Other long-term remuneration due	0	0
Remuneration due upon termination of contract of employment	0	0
Share-based payments 3	799	0

The social-security costs and any applicable value-added taxes on the emoluments paid to Board members are not included.
Compensation for out-of-pocket expenses is not included.
The shares are not subject to any minimum holding period (see notes 43 and 44).

VP Bank Group also makes payments to related persons within the framework of brokerage services and bought-in advisory services. These correspond to customary market conditions. The aggregate amount of such payments and fees in 2012 totalled CHF 0.253 million (previous year: CHF 0.257 million).

The Board of Directors and the Group Management as well as parties related thereto (excluding qualifying shareholders) and retirement pension plans as of 31 December 2012, held 77,577 bearer shares and 163,100 registered shares of Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz (previous year: 74,102 bearer shares and 169,600 registered shares).

Loans to related companies and individuals (as of balance-sheet dates):

in CHF 1,000	2012	2011
Mortgages and loans at the beginning of the financial year	7,643	7,734
Additions	4,234	300
Repayments	–2,396	–391
Mortgages and loans at the end of the financial year	9,481	7,643

With regard to members of the Board of Directors and Group Executive Management, basically the same conditions apply as for all other employees. They correspond to customary market conditions excluding a credit margin. Loans to related individuals and companies were granted under normal market conditions.

41 Retirement pension plans

Benefits after termination of employment

The Group maintains a number of pension plans in the Principality of Liechtenstein and abroad for employees meeting the criteria for admission to the pension plans. Amongst these are both defined-benefit and defined-contribution plans which insure most employees against the effects of death, invalidity and retirement.

Defined-contribution pension plans

The Group offers defined-contribution pension plans to those employees meeting the appropriate admission criteria. The company is obligated to transfer a predetermined percentage of the annual salary to the pension plans. In certain of these plans, the employees are also obligated to make contributions. These contributions are deducted by the employer from the salary typically each month and also passed on to the pension plans. Apart from the payment of contributions and the transfer of employee contributions, there are presently no further obligations incumbent on the employer.

The employer’s contribution in 2012 to defined-contribution pension plans amounted to CHF 1.022 million (prior year: CHF 1.219 million). The prior-year amount was restated as certain of the plans which until now were dealt with as defined-contribution plans on grounds of materiality, under IAS (revised 2011), were transferred to the category of defined-benefit plans. The impact of the transfers to defined-benefit plans were reported under additions as of 01.01. Pension obligations as of 1 January 2011 increased as a result by CHF 0.644 million.

Defined-benefit pension plans

The Group finances defined-benefit pension plans for employees meeting the admission criteria. The most significant of such plans are located in the Principality of Liechtenstein and Switzerland.

For employees in the Principality of Liechtenstein and Switzerland, the Group operates several pension plans with fixed, predefined admission criteria. The largest of the plans are operated using an autonomous foundation, the remaining plans are handled using collective foundations of insurance companies. In these foundations, the assets available to meet the pension obligations are segregated out.

For the pension plans which are operated using collective foundations, there exist pension commissions which comprise an equal number of representatives.

The Council of the Foundation of the autonomous pension plan is also made up of an equal number of employer and employee representatives. On the basis of the Law and the Rules of the Pension Fund, the Foundation Council is obligated to act solely in the interests of the Foundation and of the beneficiaries (current actively insured employees and pensioners). Thus, in this plan, the employer cannot himself determine pension benefits and their financing, but resolutions are taken on an equal representation basis. The Council of the Foundation is responsible for setting the investment strategy, for changes to the Rules of the Pension Fund and in particular also for determining how pension benefits are to be financed.

Until 31 December 2011, the pension plan was organised as a final salary plan, i.e. all pension benefits were computed as a percentage of the insured salary. As from 1 January 2012, the plan was remodelled and a capital savings account is now maintained for each employee to which is added each year an annual savings credit and interest (no negative interest is allowed). On the date of retirement, the insured person has the choice between a life-time pension which includes a reversionary spouse’s pension, or the payment of a capital sum. In addition to retirement pension benefits, employee benefits also include an invalidity pension and partner pension. These are computed as a percentage of the insured annual salary. The insured person can purchase additional benefits in order to improve his/her situation up to the maximum allowed under the pension rules. Upon termination of employment, the accumulated savings capital is transferred to the pension plan of the new employer or to a vested benefits scheme. This form of employment benefit can lead to a situation where pension payments may vary significantly between the various years.

The minimum provisions of the Law on Occupational Pension Plans and its Implementing Provisions (BPVG) are to be observed in determining employee benefits. The minimum insurable salary and the minimum savings credits are laid down in the BPVG.

As a result of the form of the pension plan and the legal provisions of the BPVG, the employer is exposed to actuarial risks, the most significant of which are the investment risk, interest-rate risk, invalidity risk and longevity risk. The employee and employer contributions are laid down by the Councils of the Foundations. In this connection, the employer must bear, at a minimum, half of all contributions. In the event of a funding deficit, restructuring contributions to eliminate the funding deficit may be demanded both from the employer and employees.

The conversion of the pension plan undertaken as of 1 January 2012 led to a reduction of retirement-benefit liabilities of CHF 19.6 million, which, in accordance with IAS 19 (revised 2011), is to be recognised immediately in personnel expense.

During 2012, a restructuring was undertaken which led to a plan settlement. As a consequence, pension liabilities and plan assets were transferred in an amount of CHF 7.4 million and CHF 4.2 million, respectively, thus resulting in a gain from plan settlement of CHF 3.2 million.

The latest actuarial valuation of the present value of the defined-benefit obligations and service costs was carried out as of 31 December 2012 by independent actuaries using the Projected Unit Credit Method. The fair value of plan assets as of 31 December 2012 was determined based upon information available at the time of preparation of the annual financial statements.

The most significant assumptions underlying the actuarial computations may be summarised as follows:

	31/12/2012	31/12/2011
Discount rate	2.0%	2.5%
Rate of future salary increases	1.5%	2.0%
Rate of future pension increases	0.0%	0.5%
Life expectancy at the age of 65, in years
Year of birth 1947
• men	21	19
• women	24	21
Year of birth 1967
• men	23	19
• women	25	21

The amounts recognised in the income statement and in shareholders’ equity may be summarised as follows:

Pension costs

in CHF 1,000	2012	2011
Pension expense recognised in income statement
Service cost
•current service cost	11,669	10,638
•past service cost	–19,554	0
•plan settlements	–3,180	0
Net interest expense	1,828	1,193
Administrative costs	237	340
Total pension cost expense of the period	–9,000	12,171

Revaluation components recognised in comprehensive income
Actuarial (gains) / losses
Result of changes to demographic assumptions	7,046	–6,218
Result of changes to economic assumptions	–22,269	21,206
Experience adjustments	–4,342	5,596
Return on plan assets (excluding amounts in net interest expense)	–14,751	8,619
Total expense recognised in comprehensive income	–34,316	29,203
Total pension cost	–43,316	41,374

The movement in pension obligations and plan assets may be summarised as follows:

Movement in present value of defined-benefit obligations

in CHF 1,000	2012	2011
Present value of defined-benefit obligations at beginning of financial year	252,840	214,743
Additions as of 01/01	0	10,257
Current service cost	11,669	10,638
Employee contributions	5,086	5,339
Interest expense on present value of pension obligations	6,072	6,349
Actuarial (gains) / losses	–19,565	20,584
Past service cost	–19,554	0
Plan settlements	–7,407	0
Pension payments financed by plan assets	–13,004	–15,070
Balance at end of financial year	216,137	252,840

Movements in plan assets

in CHF 1,000	2012	2011
Plan assets at beginning of financial year	172,969	168,569
Additions as of 01/01	0	9,613
Employee contributions	5,086	5,339
Employer contributions	7,968	8,321
Third-party contributions	2,000	0
Interest income on plan assets	4,244	5,156
Return on plan assets (excl. amounts under interest income)	14,751	–8,619
Transfers of assets through plan settlements	–4,227	0
Pension payments financed by plan assets	–13,004	–15,070
Administrative costs	–237	–340
Balance at end of financial year	189,550	172,969

The net position of pension obligations recognised in the balance sheet may be summarised as follows:

Net position of pension obligations recognised in balance sheet

in CHF 1,000	2012	2011
Present value of pension obligations financed over fund at beginning of financial year	216,137	252,840
Market value of plan assets	–189,550	–172,969
Under-/(Excess of) funding	26,587	79,871
Present value of pension obligations not financed over fund	0	0
Unrecognised assets	0	1,492
Recognised pension obligations at end of financial year	26,587	81,363

In the case of the autonomous pension plan, the Foundation Council issues investment guidelines for the investment of the plan’s assets which contain the tactical asset allocation and the benchmarks for comparing the results with those of the general investment universe. The plan assets are well diversified and, in addition, the legal provisions of the BPVG are to be observed.

The plan assets of collective pension foundations are invested in insurance policies with insurance companies.

The Council of the Foundation reviews on an ongoing basis whether the investment strategy chosen is appropriate to cover the pension benefits and whether the risk budget corresponds to the demographic structure. Compliance with investment guidelines and the investment performance of investment advisors is also subject to ongoing review.

Plan assets consist primarily of the following categories of securities:

in CHF 1,000	31/12/2012	31/12/2011
Equity shares	17,075	17,194
Bonds	96,039	68,648
Alternative financial investments	4,993	5,430
Real estate	8,867	8,662
Qualifying insurance paper	40,232	41,306
Cash equivalents	19,842	30,178
Other financial investments	2,502	1,551
Total	189,550	172,969

The pension plans hold shares in Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz, of a market value totalling CHF 0.9 million (previous year: CHF 1.1 million). In 2012, the return on plan assets was TCHF 18,995 and in 2011, a loss of TCHF 3,463 was incurred.

The defined-benefit pension obligations may be allocated as follows to the currently active insured employees, those who have left the Group with vested rights and pensioners as well as the duration of the pension obligations:

in CHF 1,000	31/12/2012	31/12/2011
Current actively insured employees	162,366	202,414
Pensioners	53,771	50,426
Total	216,137	252,840

The duration of pension obligations is approx. 14 years.

Presented in the following table are the sensitivities for the most important factors in the computation of the present value of pension obligations.

Changes in present value of defined-benefit obligations

in CHF 1,000 31/12/2012	Variance 0.25%	Variance –0.25%
Discount rate	–5,988	6,313
Interest on pension capital accounts	1,099	–1,033
Development of salaries	361	–369

42 Significant foreign exchange rates

The following exchange rates were used for the most important currencies:

	Year-end rates 31/12/2012	Year-end rates 31/12/2011	Annual average rates 2012	Annual average rates 2011
USD/CHF	0.9154	0.9351	0.93828	0.88617
EUR/CHF	1.2068	1.2139	1.20520	1.23246
SGD/CHF	0.7494	0.7212	0.75104	0.70446
HKD/CHF	0.1181	0.1204	0.12095	0.11384
GBP/CHF	1.4879	1.4532	1.48661	1.42046

43 Employee stock-ownership plan

The stock-ownership plan enables employees to subscribe annually to a defined number of bearer shares of Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz, at a preferential price subject to a four-year restriction on selling. Upon expiration of the sales restriction period, or at the time of resignation from VP Bank Group, the related shares become freely available. As the employees are therefore ultimately able to take up the shares at any time and in full, the expense arising from the employee participation plans is recorded in full at the time of their respective allocation. The number of bearer shares that can be subscribed to depends upon the years of service, rank and management level.

The purchase price is determined annually in relation to the market value of the bearer shares on the Swiss Exchange (ex-dividend).

The shares issued in this manner derive either from shareholdings of VP Bank Group or must be purchased for this purpose over the exchange. The expense thereby incurred is charged directly to personnel costs. During 2012, 9,396 shares were issued at a preferential price (2011: 7,183 shares). Share issue expenses in 2012 were CHF 0.7 million (2011: CHF 0.7 million).

There is no profit-sharing plan for the Board of Directors. Its members receive, however, a part of their remuneration/bonuses in the form of equity shares which are not subject to any lock-up period (note 40). A profit-sharing plan exists for Group Management and other management members (note 44). VP Bank has defined waiting periods for the Board of Directors, Group Management and selected executives and employees, during which it is forbidden to trade in the shares of VP Bank.

44 Management profit-sharing plan

A long-term, value-oriented compensation model applies to the GEM and second-level management members of VP Bank. Under this model, the compensation paid to members of senior management consists of the following:

A fixed base salary that is contractually agreed between the Committee of the Board of Directors (in its function as Nomination & Compensation Committee) and the members of Group Executive Management. In addition to the base salary, VP Bank will pay proportionate contributions to management insurance and the pension fund.
A variable performance-related portion (Short-Term Incentive Plan, STI) which depends on the annual value creation of VP Bank Group. It is allocated on the basis of qualitative individual criteria and financial Group targets. The financial Group targets are weighted by some two-thirds. The STI is paid annually in cash.
A long-term variable management equity-share plan (Long-Term Incentive Plan, LTI) settled in the form of bearer shares of VP Bank. The basic principles thereof are the focus on value creation (economic profit) and the long-term commitment of management to a variable salary component in the form of shares. The number of shares which are vested after a period of three years is directly dependent on the trend of the economic profit of VP Bank Group. This latter takes account of capital- and risk-related costs. The target setting is done on the basis of an external perspective. The starting point in this connection is the target yield on the market value. Thus, depending on the financial trend, a greater or lesser number of shares are allocated. The factor ranges from a minimum of 0.5 and a maximum of 2.0. The basis for calculating expenses for management stock participation consists of the number of shares, the goal-achievement factor, and the current price of the stock at the time the goals were set. The share price is determined by reference to the average closing price of the three preceding months of the bearer shares quoted on the SWX for the respective grant date. The monetary benefit settled in shares at the end of the plan is also dependent on the stock price of the VP Bank bearer shares. The bearer shares required to service the LTI equity-share plan are either taken from the portfolio of treasury shares of VP Bank Group or are purchased on the stock exchange.

The Board of Directors lays down each year the planning parameters of the LTI for the following three years as well as the level of the STI. In the 2012–2014 programme, a target bonus (LTI and STI) of between 70 and 85 per cent of the fix base salary was calculated provided that the annual and three-year goals are attained.

Management equity-sharing plan (LTI)

Number	2012	2011	Variance in %
Balance of entitlements at the beginning of the year	47,436	38,260	24.0
New entitlements	26,944	21,333	26.3
Reduction in entitlements as a result of expiry or allocation	–37,964	–9,501	299.6
Changes in entitlements as a result of changes in factors	0	–2,656	–100.0
Balance of calculated entitlements at the end of the year	36,416	47,436	–23.2

in CHF 1,000	2012	2011	Variance in %
Accrual for management equity-sharing plan (LTI) in equity at the beginning of the year	8,415.6	7,102.4	18.5
Personnel expense for management equity-sharing plan (LTI)	1,142.3	1,947.2	–41.3
Effect of allocation, forfeiture and change in factors	–4,543.9	–634.0	616.7
Accrual for management equity-sharing plan (LTI) in equity at the end of the year	5,014.0	8,415.6	–40.4

Fair value of bearer shares allocated	2,048.0	658.6	211.0

Client assets

in CHF million	2012	2011	Variance in %
Analysis of client assets under management
Assets in self-administered investment funds	3,123.4	2,916.4	7.1
Assets in discretionary asset-management accounts	2,855.5	2,512.6	13.6
Other client assets under management	22,511.6	21,999.8	2.3
Total client assets under management (including amounts counted twice)	28,490.5	27,428.8	3.9
of which: amounts counted twice	2,013.3	2,487.5	–19.1

Net new money	–192.0	994.5	n.a.

Custody assets	8,826.1	11,537.7	–23.5

Total client assets
Total client assets under management (including amounts counted twice)	28,490.5	27,428.8	3.9
Custody assets	8,826.1	11,537.7	–23.5
Total client assets	37,316.6	38,966.5	–4.2

Classification of client assets under management

in %	2012	2011
Analysis by asset class
Liquidity	31	33
Bonds	25	25
Equities	18	18
Investment funds	23	21
Other	3	3
Total	100	100

Analysis by currency
CHF	28	29
EUR	36	36
USD	22	23
Other	14	12
Total	100	100

Calculation method

All client assets that are managed or held for investment purposes for which investment-advisory and asset-management services are provided are considered as client assets under management. In principle all amounts owed to clients, fiduciary deposits and all assets in security deposits with a value are included therein. The calculation is made on the basis of the provisions of the Liechtenstein Banking Ordinance (Note 3, Point 88a, FL-BankV) and the internal guidelines of VP Bank Group.

Assets in self-administered investment funds

This item contains the assets of all investment funds of VP Bank Group.

Assets in discretionary asset-management accounts

The assets in discretionary asset-management accounts encompass securities, uncertificated securities, precious metals, fiduciary deposits placed with third parties valued at market value and client deposits. The data include both assets deposited with Group companies and with third parties which are the object of a discretionary asset-management agreement with a Group company.

Other client assets under management

Other client assets under management encompass securities, uncertificated securities, precious metals, fiduciary deposits placed with third parties valued at market value and client deposits. The data encompass assets which are the object of an administration or advisory mandate.

Amounts counted twice

This item encompasses unit shares in self-administered investment funds which are in client portfolios subject to a discretionary asset-management agreement and other security deposits of clients.

Net new money

This item comprises the acquisition of new clients, lost clients and inflows or outflows from existing clients. Performance-related changes in assets such as share price movements, interest and dividend payments, as well as interest charged to clients, are not considered as inflows and outflows. Acquisition-related changes in assets are also not taken into account.

Custody assets

Assets held exclusively for the purposes of trading and custody for which the involvement of VP Bank Group is limited to custodian and collection activities.

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Notes to the consolidated income statement and consolidated balance sheet