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68 As time goes by Corporate governance This corporate governance report describes the In December 2010, the Board of Directors was awarded the «Best Board Practice» labels of the Swiss Association for Qual- Liechtensteinische Landesbank's corporate ity and Management Systems (SQS) as well as of the Liechten- governance principles in accordance with the stein Association for Quality Assurance Certiﬁcates (LQS). In directives concerning information about corpo- the corresponding assessment it was stated that the activity and organisation of the Board of Directors of the Liechtenstei- rate governance required by the SIX Swiss Ex- nische Landesbank exhibited a high level of quality. The gover- change and Liechtenstein legal provisions (in nance and management system of the Board of Directors fulﬁl particular the law concerning the control and the standards set down in the best board practice speciﬁca- supervision of public companies as well as the tions. Accordingly, the Board of Directors was awarded the SQS and LQS labels for a period of three years. This positive assess- law concerning the Liechtensteinische Landes- ment underlines the Board's constant efforts to improve corpo- bank). If information required by the direc- rate governance. tives is disclosed in the Notes to the ﬁnancial Basis statement, a corresponding reference is shown. On 1 January 2010, the law concerning the control and super- vision of public companies and the law concerning the Liechten- steinische Landesbank came into force. On account of the new legal corporate governance regulations changes to the bank's statutes and business regulations were necessary. The modi- ﬁcations to the statutes were approved by the General Meeting of Shareholders on 7 May 2010 and can be seen by clicking on the following link: www.llb.li/statutes. The principles and directives deﬁning corporate governance are laid down in the law of 19 November 2009 concerning the control and supervision of public companies and in the law of 21 October 1992 concerning the Liechtensteinische Landes- bank, as well as in the statutes, the regulations governing the conduct of business and the charters of the Board of Directors Committees. They are regularly reviewed and, if necessary, modiﬁed. They are based on the directives and recommenda- tions contained in the Swiss Code of Best Practice for Corpo- rate Governance issued by the Swiss Business Federation (economiesuisse). Corporate governance 69 1 Group structure and shareholders Members of the Board of Management of Liechtensteinische Landesbank are represented on the Boards of Directors of the 1.1 Group structure consolidated companies. Either the Chairman (CEO) or a mem- ber of the Board of Management of Liechtensteinische Landes- 1.1.1 Description of the operative Group structure bank serves as the Chairman of the Board of Directors of the The Liechtensteinische Landesbank is structured as an «Aktien- subsidiary companies. gesellschaft» according to Liechtenstein law. It is the parent The following companies are exceptions to this rule: Bank company of the LLB Group. The LLB Group is therefore based on Linth LLB AG, LLB Fund Services AG, LLB Fondsleitung AG, swiss- a parent company structure. partners Investment Network AG and Jura Trust AG. At these The Group regulations, «Management and organisation of companies – with the exception of swisspartners Investment the LLB Group companies», approved by the Liechtensteinische Network AG – a member of the Board of Management of Landesbank's Board of Directors, ensure a proper conduct of Liechtensteinische Landesbank serves as the Vice Chairman. business, a practical organisational structure, and a centralised The organisational structure of the LLB Group on 1 January management of the LLB Group. This is provided by the Group 2011 is shown on pages 16 to 17. The detailed segment reports Board of Directors and Group Internal Audit, the Group Execu- are shown on pages 34 to 51. tive Management Board, the Board of Directors committees of the LLB Group companies and the Group Service Centre. 1.1.2 Listed companies included in the scope of consolidation The Group Board of Directors and Group Executive Manage- The Liechtensteinische Landesbank, with its registered office in ment Board are composed of the same persons who comprise Vaduz, is listed on the SIX Swiss Exchange. As at 31 December the LLB parent company's Board of Directors and Board of 2010, its market capitalisation stood at CHF 2.2 billion Management. Within the scope of the powers and duties (30'800'000 bearer shares having a nominal value of CHF 5.– vested in them by the Group regulations, the LLB Group func- at a year-end price of CHF 73.–). tions can, for example, make decisions and give instructions Bank Linth LLB AG, Uznach, in which the Liechtenstei- which are binding not just for the parent company but also nische Landesbank holds a majority equity stake of 74.2 per- for the LLB Group companies – but taking into consideration cent, is also listed on the SIX Swiss Exchange, Segment «Local the provisions of local law applicable to the individual Group Caps». As at 31 December 2010, its market capitalisation companies. stood at CHF 374.5 million (805'403 registered shares having a nominal value of CHF 20.– at a year-end price of CHF 465.–). Listed companies included in the scope of consolidation Market- capitalisation Security Company Reg. office Listed on (in CHF thousands) Stake (in %) number ISIN number Liechtensteinische Landesbank AG Vaduz SIX Swiss Exchange 2'248'400 3019524 LI0030195247 Bank Linth LLB AG Uznach SIX Swiss Exchange 374'512 74.2 130775 CH0001307757 1.1.3 Unlisted companies included development of the Principality of Liechtenstein's equity stake in the scope of consolidation in the Liechtensteinische Landesbank can be obtained at Details of the unlisted companies included in the scope of www.llb.li/capital+structure. As per 31 December 2010, Thorn- consolidation (company, activity, registered office, share capi- burg Investment Management Inc. held a total of 1'272'656 tal and equity interest) can be seen in the Notes to the ﬁnan- LLB shares, this corresponds to an equity stake of 4.13 percent. cial statement of the LLB Group in the table «Scope of consoli- 0.1 percent of the shares were held by the Board of Directors dation» (pages 156 to 157). and the Board of Management, while the LLB Group held 7.5 percent of its own shares. This share proportion serves to 1.2 Major shareholders secure the convertible bond that is due on 12 April 2011. All The Principality of Liechtenstein is the majority shareholder of remaining shares were in free ﬂoat by the end of 2010, where- the Liechtensteinische Landesbank. In accordance with the Law by none of the other shareholders holds more than three concerning the Liechtensteinische Landesbank, in terms of percent of the share capital. There are no binding shareholder capital and voting rights, the Principality of Liechtenstein must agreements. hold at least 51 percent of the shares. These may not be sold. At the end of 2010, the Principality's participation remained 1.3 Cross participations unchanged at 57.5 percent. Detailed information about the There are no cross participations between the Liechtensteinis- che Landesbank and its subsidiaries or other companies. 70 As time goes by 2 Capital structure share, one vote). However, on account of the regulations concerning the purchase of own shares (Art. 306a ff. PGR), 2.1 Capital the shares held by the Liechtensteinische Landesbank and its At the end of 2010, the share capital of the Liechtensteinische subsidiaries are not eligible for voting. There are no priority Landesbank amounted to CHF 154 million (30'800'000 bearer rights or similar entitlements. Shareholders have a subscrip- shares having a nominal value of CHF 5.–). tion right with the issue of new shares, which entitles them to subscribe to new shares in proportion to the number of 2.2 Conditional and approved capital shares they already hold. On the balance sheet date, the Liechtensteinische Landesbank The Liechtensteinische Landesbank has not issued parti- had no conditional capital or approved capital. cipation certiﬁcates. 2.3 Changes to capital 2.5 Proﬁt-sharing certiﬁcates Details regarding changes to capital during the last three The Liechtensteinische Landesbank has not issued proﬁt- report years are shown in the table «Consolidated statement sharing certiﬁcates. of changes in equity» (page 97). 2.6 Transfer limitations and nominee registrations 2.4 Shares and participation certiﬁcates The Liechtensteinische Landesbank has issued only bearer As at 31 December 2010, the share capital amounted to shares; these are fully transferable. 30'800'000 fully paid up shares made out to the bearer with a par value of CHF 5.–. With the exception of the LLB shares 2.7 Convertible bonds and options held by the Liechtensteinische Landesbank and its subsidiaries On 12 April 2006, the Liechtensteinische Landesbank made a (2'300'000 shares on 31 December 2010), all the shares are convertible bond issue to the value of 270 million Swiss Francs eligible for dividend. As at 31 December 2010, therefore, share with a term up to 12 April 2011. The coupon amounts to 1.65 capital eligible for dividend amounted to CHF thousands percent per year, payable for the ﬁrst time on 12 April 2007. 142'500. In principle, all LLB shares are eligible for voting (one Convertible bond Validity Conversion ratio Conversion price Reason for adjustment Up to 9 May 2007 0.848572 CHF 1'178.45 – 10 – 17 May 2007 8.485362 CHF 117.85 Split of bearer shares in ratio 1:10 From 18 May 2007 8.492569 CHF 117.75 Dividend of CHF 32.– gross per bearer share for the 2006 business year From 18 May 2007 to 7 April 2011, or up to the early redemp- The convertible bond of Liechtensteinische Landesbank is tion date of the bond issue, each bond with a denomination listed on the SIX Swiss Exchange (security number 2481854, of CHF 1'000.– can be converted free of charge into 8.492569 ISIN number LI0024818549). bearer shares of the Liechtensteinische Landesbank having More details regarding the convertible bond issue can be a par value of CHF 5.– (share capital concerned: CHF 11.5 mil- seen in the Notes to the consolidated ﬁnancial statement of lion). The conversion price therefore amounts to CHF 117.75. the LLB Group in the table «Debt issued» (page 141). Fractions having a value in excess of CHF 1.– will be reim- As per 31 December 2010, the Liechtensteinische Landes- bursed in cash. bank had no options on its own shares outstanding. The Liechtensteinische Landesbank may – while observing a period of notice of 30 days – redeem the convertible bonds under the following conditions at par plus accrued interest: ◆ at any time, provided that less than 15 percent of the original bond issue amount is outstanding; ◆ from 27 April 2009, provided the closing price of the LLB bearer share exceeds 130 percent of the applicable con- version price on 20 days during a period of 30 consecutive trading days. Corporate governance 71 3 Board of Directors 3.1 Members a) Name, nationality, education and professional career Name Year of birth Profession Nationality Hans-Werner Gassner * 1958 Business consultant and certiﬁed public accountant FL Markus Foser 1969 Business consultant FL Markus Büchel 1953 Human resources manager FL Ingrid Hassler-Gerner 1947 Asset manager FL Siegbert Lampert 1965 Attorney-at-law and ﬁduciary FL Roland Oehri 1968 Fiduciary FL Konrad Schnyder 1956 Entrepreneur CH * Chairman. Hans-Werner Gassner ◆ Member of the Executive Board of Banque Pasche (Liechten- stein) SA, Vaduz, responsible for Fund & Investment Services Education: (Asset Management), 2008 – 2009 ◆ Licentiate in economics at the University of St. Gallen, 1983 ◆ Proprietor of MAFOS Consult Anstalt, since 2009 ◆ Swiss federal diploma in accountancy, 1988 ◆ Dr. oec. HSG, 1989 Markus Büchel ◆ Swiss Banking School, 1996 Education: Professional career: ◆ Apprenticeship as a draughtsman, 1969 – 1973 ◆ Accountant at Neutra Treuhand Group, 1984 – 1989 ◆ Commercial college Buchs, 1973 – 1974 ◆ Head Internal Audit at the Liechtensteinische Landesbank, ◆ Mechanical engineer (Dipl. Ing. FH), Vaduz, 1974 – 1978 1990 – 1998 ◆ Head Finances at the Liechtensteinische Landesbank, Professional career: 1998 – 2000 ◆ Hilti AG, Schaan, (various technical functions), 1973 – 1981 ◆ Partner at Gassner & Partner Wirtschaftsprüfung und ◆ ThyssenKrupp Presta AG, Eschen, development / engineering Beratung AG, Balzers, since April 2000 (various functions), 1981 – 1991 ◆ Proprietor of Adcom Treuunternehmen reg., Balzers, ◆ ThyssenKrupp Presta AG, Eschen, Head Technical Services, since April 2000 1991 – 1995 ◆ ThyssenKrupp Presta AG, Eschen, Head Human Resources Markus Foser Presta Group, since 1995 Education: Ingrid Hassler-Gerner ◆ Licentiate in economics at the University of Zurich, major in business IT, 1996 Education: ◆ Swiss federal diploma in ﬁnancial analysis and ◆ Commercial diploma, 1964 asset management, CEFA 2000 ◆ Liechtenstein University of Applied Sciences, legal studies in accordance with Art. 180a of person and company law, Professional career: 2005 – 2006 ◆ Equity research and fund management at the Liechtensteinische Landesbank, 1997 – 2002 Professional career: ◆ Advisor to mainly institutional clients with derivatives and ◆ Head Asset Management and Research, A.M.I.S., Schaan, structured products at Bank Vontobel (Liechtenstein) AG, 1976 – 1989 Vaduz, 2002 – 2003 ◆ Managing Director, Pan Portfolio AG, Schaanwald, ◆ Head of Fund & Investment Services (Asset Management) since 1989 at swissﬁrst Bank (Liechtenstein) AG, Vaduz, 2004 – 2007 ◆ Managing Director, PanFinanzPartner AG, Schaanwald, since 2005 72 As time goes by Siegbert Lampert b) Executive / non-executive members Pursuant to Art. 22 of the Liechtenstein banking law in con- Education: nection with Art. 10 of the law concerning the Liechtenstei- ◆ Licentiate in law at the University of St. Gallen, 1991 nische Landesbank, special bodies must be constituted for ◆ Attorney-at-law, 1994 the direction, supervision and control of a bank. A member of ◆ L.L.M., University of Miami, 1995 the Board of Directors may not at the same time be a member of the Board of Management. All members of the Board of Professional career: Directors of Liechtensteinische Landesbank are therefore non- ◆ Partner in the law ﬁrm Lampert & Schächle Attorneys- executive members. at-Law, Vaduz, since 1996 ◆ Managing Director of EUROYAL Treuhand Anstalt, Vaduz, c) Independence since 1996 All members of the Board of Directors are independent within the context of the SIX directives concerning corporate gover- Roland Oehri nance information. In the three years prior to the period under report, no member of the Board of Directors was a member Education: of the Board of Management of the Liechtensteinische Landes- ◆ Commercial apprenticeship, 1987 bank or a Group company. No member of the Board of Direc- ◆ Licentiate in economics (HWV), 1993 tors has a signiﬁcant business relationship with the Liechten- ◆ Liechtenstein trustee and ﬁduciary examinations, 1998 steinische Landesbank or with another Group company. In ac- cordance with Art. 12 of the law concerning the control and Professional career: supervision of public companies, all contracts with members ◆ Investment advisor, Foreign Private Clients Department of the Board of Directors must be in writing and they must of VP Bank AG, Vaduz, 1993 – 1999 be approved by the Board of Directors. The same conditions ◆ Head Foreign Private Clients Department of VP Bank AG, must apply as to contracts concluded with third parties. Vaduz, 1999 ◆ Client advisor, Private Trust Banking, VP Bank AG, Vaduz, 3.2 Other activities and commitments 2000 Since 1 January 2010, Ingrid Hassler-Gerner has been Chair- ◆ Client advisor and Head Intermediaries Department of woman of the Foundation Board of the Liechtenstein Civil Ser- Bank Wegelin (Liechtenstein) AG, Vaduz, subsequently vice Pension Fund. swissﬁrst Bank (Liechtenstein) AG, Vaduz, 2000 – 2003 Siegbert Lampert has served as a judge at the State Court ◆ Vice President of LOPAG Louis Oehri & Partner Trust reg., of the Principality of Liechtenstein since the end of 2004. Ruggell, 2004 – 2009 Konrad Schnyder has been Chairman of the Board of Direc- ◆ Partner and Managing Director of Sequoia Treuhand tors of Raility AG, Biel, since 2006, Delegate of the Board of Trust reg., Ruggell, since 2006 Directors of Euroswitch AG, Pfäffikon / SZ since 2004, a mem- ◆ Partner and Managing Director of Sequoia Capital ber of the Board of Directors of Sustra Tiefbau + Strassen AG, Management AG, Ruggell, since 2007 Sursee, since 1998, a member of the Board of Directors of Dedalus Holding AG, Sursee, since 2005, Vice Chairman of the Konrad Schnyder Association of Swiss Railway Trackwork Contractors (VSG), Zurich, since 2000, a member of the Supervisory Board of the Education: Federation of Swiss Rail Engineering Companies (VSBTU), ◆ Training as mechanical engineer, 1977 Baden, since 2001, and Delegate of the VSBTU to the European ◆ Technical businessman, 1979 Federation of Railway Trackwork Contractors (EFRTC), Paris, ◆ SKU Swiss Management Course, 1992 since 2007. Otherwise, the members of the Board of Directors are Professional career: not involved in the management or supervisory boards of im- ◆ Proprietor, Vice Chairman and Delegate of the Board of portant Liechtenstein, Swiss or foreign private or public law Directors of the Sersa Group of companies, since 1985 corporations, establishments or foundations, nor do they ex- ◆ Member of the Board of Directors of Bank Linth LLB AG, ercise any permanent management or consultancy functions Uznach, 1998 – 2008 for important Liechtenstein, Swiss or foreign interest groups, ◆ Delegate of the Board of Directors of Euroswitch AG, nor do they perform official functions or hold political office. Pfäffikon / SZ, since 2004 ◆ CEO Sersa Group Management AG, Pfäffikon / SZ, since 2001 Corporate governance 73 3.3 Election and term of office New members elected as substitutes shall be elected for a full term of office of three years. The General Meeting can dismiss 3.3.1 Principles governing election procedure members of the Board of Directors on important grounds. Per- The Board of Directors of the Landesbank is composed of sons aged 70 or over may not be members of the Board of Di- from ﬁve to seven members, who are appointed individually by rectors. Prior to the coming into force of the new statutes, the the General Meeting. The members of the Board of Directors Board of Directors of the Liechtensteinische Landesbank was are elected for a term of office of three years, whereby a year composed of seven members, four of whom were appointed corresponds to the period from one General Meeting to the by the Landtag of the Principality of Liechtenstein, and three next. Re-election is possible for a further two terms. The Chair- elected by the General Meeting. man of the Board of Directors can be re-elected again in justi- Dr. Hans-Werner Gassner is the Chairman of the Board of ﬁed cases for an extraordinary term of office of at most two Directors. Markus Foser is the Vice Chairman. The Secretary years upon expiry of three terms of office. The Chairman of the (recorder of the minutes) is Patrick Helg (Head Group Internal Board of Directors is elected by the General Meeting. The Board Audit). of Directors elects a Vice Chairman from among its members. 3.3.2 First-time election and remaining term of office Name Elected by First-time appointment Elected until Hans-Werner Gassner Landtag 2006 2012 Markus Foser Landtag 2009 2012 Markus Büchel Landtag 2009 2012 Ingrid Hassler-Gerner General Meeting 2005 2011 Siegbert Lampert General Meeting 2002 2011 Roland Oehri Landtag 2009 2012 Konrad Schnyder General Meeting 2008 2011 3.4 Internal organisation 3.4.1 Separation of tasks of the Board of Directors Name Function Committee memberships Hans-Werner Gassner Chairman Appointments and Compensation Committee * Strategy Committee * Markus Foser Vice Chairman Group Audit & Risk Committee Appointments and Compensation Committee Strategy Committee Markus Büchel Member Ingrid Hassler-Gerner Member Group Audit & Risk Committee Siegbert Lampert Member Appointments and Compensation Committee Roland Oehri Member Group Audit & Risk Committee* Konrad Schnyder Member Strategy Committee * Chairman. 74 As time goes by 3.4.2 Composition of all Board of Directors committees, Dr. Hans-Werner Gassner (Chairman), Markus Foser and their tasks and terms of reference Siegbert Lampert. This Committee has the following duties The Board of Directors may delegate a portion of its duties to and responsibilities: speciﬁc committees. To support the Board of Directors in per- ◆ development of criteria for proposals concerning the selec- forming its tasks, the following standing committees exist: the tion and assessment of the members of the Board of Direc- Group Audit & Risk Committee, as well as the Appointments tors to be elected at the General Meeting, as well as the and Compensation Committee. In addition, there is a Strategy submission of election proposals to the Board of Directors Committee formed on an ad hoc basis. The Board of Directors for the attention of the General Meeting; appoints the committee members and the Chairman from ◆ formulation of successor plans and their periodic review among its members. The committees must be composed of both in the event of the age related and the ad hoc stepping at least three members. As preparatory bodies, these commit- down of members of the Board of Directors; tees deal in detail with the tasks assigned to them, submit the ◆ development of criteria for proposals concerning the selec- results of their activities to the Board of Directors, and make tion and appointment of members of the Board of Manage- proposals if decisions are required. The Board of Directors is ment for the attention of the Board of Directors; entitled to transfer decision-making authority to the commit- ◆ formulation and annual review of the principles and regula- tees. However, so far this has not occurred. Accordingly, the tions for the compensation of the members of the Board committees act solely in an advisory capacity. of Directors, the members of the Board of Management and The committee members must have the knowledge neces- the employees of the Liechtensteinische Landesbank for sary for the scope of duties and tasks. All committee members submission to the Board of Directors; must be independent. The Board of Directors has issued sepa- ◆ formulation of proposals for the compensation of members rate regulations for the standing committees, whose terms of the Board of Directors, the members of the Board of of reference and competences are described in the following. Management and the staff of the Internal Audit Department for submission to the Board of Directors in accordance with Group Audit & Risk Committee existing principles and regulations; The Group Audit & Risk Committee supports the Board of Di- ◆ annual review of the compensation of the members of the rectors in fulﬁlling the duties and responsibilities vested in it by Board of Directors and the members of the Board of Manage- banking law with respect to the direction, supervision and ment for submission to the Board of Directors in accordance control of the company. The regulations concerning the «Group with existing principles and regulations. Audit & Risk Committee of the LLB Group», specify the organi- sation, the working methods, the terms of reference and the Representation in staff welfare foundations tasks of the Group Audit & Risk Committee, insofar as these are Markus Büchel is Chairman of the Board of the Staff Welfare not stipulated by the law, statutes or business regulations. The Foundation and a member of the Supplementary Pension Group Audit & Risk Committee is composed of Roland Oehri Foundation and the Employer Foundation of Liechtenstei- (Chairman), Markus Foser and Ingrid Hassler-Gerner. nische Landesbank AG. Ingrid Hassler-Gerner is a member of the Board of the Staff Welfare Foundation, and Chairwoman The Group Audit & Risk Committee has the following tasks of the Board of the Supplementary Pension Foundation and of in particular: the Employer Foundation of Liechtensteinische Landesbank AG. ◆ monitors and evaluates the integrity of the ﬁnancial reporting including the structure of the accounting systems, 3.4.3 Working methods of the Board of Directors the ﬁnancial controls and ﬁnancial planning; and its committees ◆ monitors and evaluates the internal controls in relation In general, the Board of Directors convenes an ordinary meet- to ﬁnancial reporting; ing each month (with the exception of July). A meeting must ◆ monitors and evaluates the effectiveness of the external last at least half a day. During the 2010 business year, the auditors and their cooperation with Group Internal Audit; Board held twelve meetings, whereby one extraordinary meet- ◆ evaluates the internal controls extending beyond the ing was convened to discuss the cooperation with the VP Bank ﬁnancial reporting system and Group Internal Audit; in the ﬁelds of logistics and information technology. Six meet- ◆ monitors and evaluates the risk proﬁle and the risk situation ings lasted a day, ﬁve meetings lasted half a day and a two- of the LLB Group. day seminar was held. In June 2010, the Board of Directors, fol- lowing the ordinary meeting, held a seminar together with the Appointments and Compensation Committee Board of Management to discuss and decide on, among other The organisation, the working methods, the terms of reference things, the Group's organisation, and in particular, further pro- and the tasks of the Appointments and Compensation Com- cedure regarding shared services as well as the results of the mittee are speciﬁed in the regulations concerning the «Appoint- staff survey. ments and Compensation Committee», insofar as these are All board members were present at all the meetings. The not stipulated by the law, statutes or business regulations. The Board is convened by invitation of its Chairman and is presided Appointments and Compensation Committee consists of over by him, or if he is absent, by its Vice Chairman. Together Corporate governance 75 with the written invitation, the members of the Board of Direc- international private banking. During the 2010 business year, tors also receive the agenda for the meeting, the minutes of no external experts were called in. the last meeting and other important documentation required Resolutions at the meetings are passed with a simple for the meeting. If there are important grounds, two members majority of the members present. Only the members of the rel- of the Board can demand an immediate meeting. A quorum evant committee are eligible to vote. In the case of a tie, the of the Board of Directors is constituted when a majority of its Chairman has the casting vote. The subjects dealt with and members is present. The Board of Directors passes its resolu- resolutions passed are recorded in the corresponding minutes. tions by a simple majority of the votes present. In the event of The minutes are circulated to the meeting participants and a tie, the Chairman has the casting vote. Resolutions may the Board of Directors. The Chairmen of the committees in- be passed by circular in urgent cases. Unanimity is required for form the full Board of Directors about the agenda dealt with at resolutions to be dealt with by circular. Resolutions shall be the last committee meeting, and submit proposals for those passed by a simple majority of votes. In the case of a tie, the points requiring decisions. Furthermore, they submit an activ- Chairman shall have the casting vote. Members of the Board of ity report to the full Board of Directors once a year on the work Directors are obliged to inform the Chairman in cases of pos- of the committees. sible conﬂicts of interest. The Board of Directors shall decide whether there are grounds for the member concerned to ab- 3.5 Deﬁnition of areas of responsibility stain from voting. In such a case, the member concerned may The Board of Directors is responsible for the direction, super- neither participate in the discussion of the matter concerned vision and control of the company. It is responsible for all duties nor vote on it. In general, the Chairman of the Board of Man- and is vested with all powers not reserved to other corporate agement attends the meetings of the Board of Directors. The bodies by the law, the statutes or other internal regulations. In other members of the Board of Management attend meetings addition to the duties and responsibilities speciﬁed in the sta- of the Board of Directors when matters involving them are tutes, the Board of Directors has the following non-transfer- dealt with. No external experts were called in during the 2010 able duties and responsibilities: business year. ◆ the formulation and periodic review of medium and long- The members of the Group Audit & Risk Committee meet term corporate strategy and the allocation of resources to at least four times a year. These ordinary meetings are con- attain the objectives speciﬁed in the corporate strategy; vened by the Chairman. An agenda is compiled prior to each ◆ the approval of the annual budget; meeting which is sent together with the necessary information ◆ the deﬁnition of management policy; to the meeting participants. The members of the Group Audit ◆ the appointment of & Risk Committee, the external auditors, the head of Group ◆ the members of the committees from among its Internal Audit and the Chairman of the Group Risk Committee members; can request the Chairman of the Group Audit & Risk Commit- ◆ the Chairman and other members of the Board of tee to convene an extraordinary meeting. In 2010, six ordinary Management; meetings were held. The meetings lasted between four and ◆ the staff of the Internal Audit Department; eight hours. All committee members were present at all the ◆ the discussion of the reports submitted by Internal meetings. To deal with speciﬁc issues, the Group Audit & Risk Audit and the external auditors as well as the approval Committee can invite other persons such as members of the of measures implemented on the basis of audit reports; Group Executive Management, the Chairman of the Group ◆ the duty to keep itself regularly informed about the Risk Committee, other staff of the LLB Group companies, rep- course of business and special occurrences, in particular by: resentatives of the external auditors or external consultants. ◆ discussing and approving the quarterly reports with com- Generally, the Chairman of the Board of Management and the ments on the development of business, earnings situation, Head of Internal Audit participate in the meetings in an advi- balance sheet development, liquidity, equity requirements sory capacity. No external experts were called in during the and risk situation; 2010 business year. ◆ ensuring prompt information in the event of imminent risk The Appointments and Compensation Committee meets threats; as often as business requires, but at least once a year. In 2010, ◆ the issuing of guidelines and regulations concerning the four meetings were held. The meetings lasted between one principles of risk management as well as the accountabilities and three and a half hours. All committee members were pres- and the processes for the approval of risk-related transac- ent at all the meetings. The Chairman of the Board of Manage- tions, whereby in particular market, credit, default, process, ment did not participate. During the 2010 business year, no liquidity and reputation risks as well as operational and external experts were called in. legal risks are to be identiﬁed, limited and monitored; The Strategy Committee convened twice in 2010 for meet- ◆ the decision regarding the acquisition or sale of participa- ings, at which all committee members were present. One meet- tions in other companies as well as the establishment ing lasted half a day and the other a whole day. The members or liquidation of subsidiaries and the appointment of board of the Board of Management also participated in the meetings. members, who are employees of the Liechtensteinische The subject of the meetings was the updating of strategy in Landesbank; 76 As time goes by ◆ the decision regarding the setting up and closure of bank ◆ regular reporting to the Board of Directors, the responsible offices, branches and representative offices; committees and above all to the Chairman regarding the ◆ the decision regarding the initiation of legal actions as well development of business, extraordinary occurrences, as well as judicial and extrajudicial settlements involving amounts as the presentation of the draft annual report; of over CHF 10 million; ◆ issuing of the rulings and directives necessary for the ◆ the stipulation of credit competences and decisions regard- conduct of business by the Liechtensteinische Landesbank, ing large commitments (including cluster risks) and loans its branches and representative offices; to corporate bodies, as well as the issuing of regulations ◆ deciding on cross-business unit transactions or business regarding transactions for the account of corporate bodies transactions which exceed the joint authority vested in the and employees; head of a business unit and the Chairman of the Board of ◆ the stipulation, at least once a year, of overall commitment Management; and individual limits; ◆ coordinating the management and administration of ◆ the approval of the annual report and decisions regarding subsidiaries and participations; all other proposals to the General Meeting; ◆ stipulating take up limits for securities and value rights ◆ the formulation of the principles governing the compen- within the scope of primary market transactions; sation system including stipulation of the salaries of the ◆ coordinating the product offer of Liechtensteinische Landes- members of the Board of Management and the staff of bank and specifying the pricing policy as well as conditions the Internal Audit Department; for the offered products and services; ◆ the stipulation of competence to authorise expenditure ◆ deciding on or issuing rulings governing the exercise of and decisions concerning business dealings that exceed external mandates and activities by employees, where this speciﬁed limits; is not reserved to the authority of the Board of Directors; ◆ the decision regarding the exercising of external mandates ◆ performing representation duties as a full corporate body and activities by members of the Board of Management and / or as individual members of the Board of Management; and the Internal Audit Department. ◆ signing of cooperation and partnership agreements as well as membership of professional bodies and associations; The Board of Management is the supreme governing body of ◆ deciding on the acquisition and sale of properties within the the company and it represents the company vis à vis external scope of the general power to authorise expenditure. parties, provided the Board of Directors does not appoint a special delegation for speciﬁc cases. In addition to the duties 3.6 Information and control instruments and responsibilities speciﬁed in the statutes, the Board of vis à vis the Board of Management Management is responsible, in particular, for the following: The Chairman of the Board of Directors participates once a ◆ ensuring that the resolutions of the Board of Directors and month in the meetings of the Board of Management in an its committees are implemented; advisory capacity. ◆ submitting suggestions concerning the organisation of busi- In general, the Board of Directors is kept informed by the ness operations in general, and proposals for speciﬁc busi- Chairman of the Board of Management. The Chairman of the ness matters, to the Board of Directors and the responsible Board of Management generally attends the meetings of committees, provided these matters exceed the scope of the Board of Directors in an advisory capacity. He informs the authority of the Board of Management, in particular with Board of Directors about the development of business, about respect to: extraordinary occurrences and answers any questions the ◆ the formulation and periodic review of medium and long- members of the Board of Directors have. The other members term corporate strategy and the allocation of resources of the Board of Management attend meetings of the Board to attain the corporate objectives; of Directors when matters involving them are dealt with. The ◆ participations, subsidiaries, business offices, branches Chairman of the Board of Management usually also partici- and representative offices; pates in the meetings of the Group Audit & Risk Committee. ◆ annual income and expenditure budget; Every member of the Board of Directors can request in- ◆ preparation of the annual report; formation about all matters relating to the Liechtensteinische ◆ implementing of efficient processes and procedures as well Landesbank at the meetings. Outside board meetings, every as an effective internal control system to avoid and limit member of the Board of Directors can request to see the risks of all kind; minutes of the Board of Management meetings, information ◆ appointing persons (excluding staff of the Internal Audit about the development of business from members of the Department) to sign on behalf of the Liechtensteinische Board of Management and, with the approval of the Chairman Landesbank as authorised signatories, bank officers, assis- of the Board of Directors, also about individual business trans- tant directors, deputy directors and directors in accordance actions. with legal provisions; Corporate governance 77 The Chairman of the Board of Management informs the Chair- and procedure for approval of business transactions involving man of the Board of Directors – if necessary, outside board various levels of risk. The risk management specialists strive to meetings – about the development of business and extraordi- create and maintain a uniform risk culture and risk approach. nary occurrences. The Chairman of the Board of Directors is This establishes the fundamentals for an appropriate risk / responsible for informing the full Board of Directors about ex- return proﬁle and an optimum allocation of capital. The Group traordinary occurrences. Audit & Risk Committee invites the Chairmen of the following Monthly reports concerning the course of business are Group Risk Committees to a quarterly discussion of the status submitted to the Board of Directors. The management infor- reports: the Group Risk Management Committee, the Group mation system (MIS) used for this purpose supplies both quan- Credit Risk Committee and the Group Operational Committee. titative and qualitative historical and future-related data. It Their reports are summarised every six months in an overall enables the Board of Directors to be kept informed in concen- risk report of the LLB Group, which is dealt with by the Board of trated form about the most important business developments, Directors. Further details concerning risk management can earnings situation, balance sheet structure, liquidity and risk be seen in Notes to the consolidated ﬁnancial statement of the situations. LLB Group on pages 105 to 123. In exercising its supervision and control functions, the All employees of the LLB Group are obliged to comply with Board of Directors is also assisted by the Group Internal Audit all legal, regulatory and internal regulations. In doing so, they Department, which is subordinate directly to the Board. As are supported by the Group Compliance Staff Department, an independent body, it examines in particular the risk manage- whose tasks and principles are speciﬁed in a set of internal reg- ment, as well as the effectiveness of the internal control and ulations. Its responsibilities include the systematic training steering system and the management processes. The powers of LLB staff and the issuing of detailed compliance directives, as and duties of the Internal Audit are stipulated in a special well as the management of effective control and monitoring set of regulations (terms of reference). The annual auditing instruments. The Board of Directors, with the assistance of the activity is deﬁned in accordance with the risk and controlling Group Audit & Risk Committee, is responsible for the super- criteria and is guided by a long-term auditing plan. To avoid vision and control of the compliance function. At least once a duplication of work and to optimise controls, the auditing year, the Board of Directors reviews whether the compliance plans are coordinated with the statutory auditors. The short- standards applicable to it and the company are sufficiently well term auditing plan and the personnel requirement plan are known and whether they are permanently observed. reviewed by the Group Audit & Risk Committee and submitted to the Board of Directors for approval. In addition, Group 4 Board of Management Internal Audit regularly monitors whether the deﬁciencies found have been rectiﬁed and whether its recommenda- 4.1 Members tions have been implemented, and submits reports about this The Board of Management of the parent bank, which also forms to the Group Audit & Risk Committee. the Group Executive Board, comprises four members: Dr. Josef At the LLB Group great importance is attached to proactive, Fehr is Chairman, Elfried Hasler is responsible for the Interna- comprehensive opportunity / risk management. The Board of tional Market, Roland Matt is responsible for the Domestic and Directors has issued guidelines and regulations concerning the Institutional Markets and Dr. Kurt Mäder for the Corporate principles of risk management, as well as the responsibilities Service Center. Members of the Board of Management Name Year of birth Nationality Function / Area of responsibility Member of Board since Josef Fehr 1957 FL Chairman 1992, since 2000 Chairman Elfried Hasler 1965 FL Member Board of Management 2000 International Market Kurt Mäder 1962 CH Member Board of Management 2009 Corporate Service Center Roland Matt 1970 FL Member Board of Management 2009 Domestic and Institutional Markets 78 As time goes by Josef Fehr ◆ Head of Private Banking Products Division, Liechtenstei- nische Landesbank, 2000 – 2006 Education: ◆ Member of the Board of Management, Liechtensteinische ◆ Licentiate in law at the University of Fribourg, 1981 Landesbank, 2000 – 2006 ◆ Dr. iur., University of Fribourg, 1984 ◆ Member of the Board of Management and Group Executive ◆ Swiss Banking School, 1995 Board, Liechtensteinische Landesbank, since 2007 Professional career: Board of Directors mandates in the Liechtensteinische ◆ Legal counsel at the Liechtensteinische Landesbank, Landesbank Group companies: 1986 – 1992 ◆ Liechtensteinische Landesbank (Switzerland) Ltd. (Chairman) ◆ Head of Trading Division, Liechtensteinische Landesbank, ◆ Liechtensteinische Landesbank (Österreich) AG (Chairman 1992 – 1998 of the Supervisory Board) ◆ Head of Private Clients Division, Liechtensteinische ◆ LLB Asset Management AG (Vice Chairman) Landesbank, 1998 – 2000 ◆ LLB Fund Services AG (Member) ◆ Member of the Board of Management, Liechtensteinische ◆ LLB Fondsleitung AG (Member) Landesbank, 1992 – 2000 ◆ LLB Treuhand AG (Vice Chairman) ◆ Chairman of the Board of Management, Liechtensteinische ◆ Jura Trust AG (Vice Chairman) Landesbank, 2000 – 2006 ◆ swisspartners Investment Network AG (Member) ◆ Chairman of the Board of Management and Group Executive Board, Liechtensteinische Landesbank, since 2007 Board of Directors mandates in the following participations of the Liechtensteinische Landesbank: Board of Directors mandates in the Liechtensteinische ◆ Elips Life AG (Member) Landesbank Group companies: ◆ FIO Partners AG (Vice Chairman) ◆ Liechtensteinische Landesbank (Switzerland) Ltd. (Member) ◆ Liechtensteinische Landesbank (Österreich) AG (Vice Other functions: Chairman of the Supervisory Board) ◆ Member of the Board of the Employer Foundation of ◆ Bank Linth LLB AG (Member) Liechtensteinische Landesbank AG ◆ LLB Asset Management AG (Member) ◆ LLB Treuhand AG (Member) Kurt Mäder ◆ Jura Trust AG (Member) ◆ swisspartners Investment Network AG (Member) Education: ◆ Federally qualiﬁed physicist, ETH Zurich, 1987 Other functions: ◆ Dr. sc. nat., ETH Zurich, 1992 ◆ Member of the Executive Board of the Liechtenstein Chamber of Industry and Commerce (since 2002) Professional career: ◆ Member of the Executive Board of the Liechtenstein ◆ Scientist, National Renewable Energy Laboratory, Bankers Association Golden, Colorado, 1992 – 1994 ◆ Member of the Board of the Staff Welfare Foundation ◆ Senior Scientist, Centre Européen de Calcul Atomique of Liechtensteinische Landesbank AG et Moléculaire, Lyon, 1994 – 1996 ◆ Member of the Board of the Supplementary Welfare ◆ Head of Operations, ELCA Informatik AG, Zurich, Foundation of Liechtensteinische Landesbank AG 1996 – 2004 ◆ Member of the Board of the Employer Foundation of ◆ Member of the Board of Management, Bank Linth LLB AG, Liechtensteinische Landesbank AG Uznach, 2005 – 2008 ◆ Member of the Board of Management and Group Executive Elfried Hasler Board, Liechtensteinische Landesbank, since 2009 Education: Board of Directors mandates in the Liechtensteinische ◆ Graduate in business administration, HWV, 1989 Landesbank Group companies: ◆ Federally qualiﬁed ﬁnancial analyst and asset manager, 1993 ◆ Liechtensteinische Landesbank (Switzerland) Ltd. (Vice ◆ Federally qualiﬁed ﬁnance and investment expert, 1998 Chairman) ◆ Bank Linth LLB AG (Member) Professional career: ◆ Head of Research at VP Bank AG, Vaduz, 1989 – 1997 Other Board of Directors mandate: ◆ Head of Asset Management Division, Liechtensteinische ◆ Chairman of the Board of Directors of Scout & Sport AG, Bern Landesbank, 1997 – 2000 Corporate governance 79 Roland Matt compensation for the members of the Board of Directors and the Board of Management. The Board of Directors in corpore Education: approves the principles and regulations governing the com- ◆ Federally qualiﬁed business economist FH, 1995 pensation of the members of the Board of Directors and speci- ◆ Federally qualiﬁed ﬁnancial analyst and asset manager, 1999 ﬁes the amount of the compensation for the members of the ◆ Federally qualiﬁed ﬁnance and investment expert, 2002 Board of Management. No advisor is called in for the formulation of the compen- Professional career: sation structure. Once a year, the Board of Directors prepares ◆ Head of Research at VP Bank AG, Vaduz, 1999 a summary of the compensation of board members, board ◆ Head of Asset Management Division at VP Bank AG, Vaduz, chairman and management executives derived from publicly 2000 – 2001 available sources and taking into consideration comparable ◆ Family Office Project Head at VP Bank AG, Vaduz, 2002 banks (exchange-listed private banks and cantonal banks with ◆ Head of Investment Services, Liechtensteinische Landes- signiﬁcant private banking business) in Liechtenstein and bank, 2002 – 2006 Switzerland. This summary serves as a guide to the market sit- ◆ Head of Domestic Clients Business Unit, Liechtensteinische uation for the Board of Directors. The decision regarding the Landesbank, 2007 – 2008 amount of the compensation of the members of the Board of ◆ Member of the Board of Management and Group Executive Directors and the Board of Management is made at the discre- Board, Liechtensteinische Landesbank, since 2009 tion of the Board of Directors. The members of the Board of Management are not present at the discussion and decision Board of Directors mandates in the Liechtensteinische concerning the amount of the compensation for them. In ac- Landesbank Group companies: cordance with Art. 12, Para 2 of the law concerning the Liecht- ◆ Liechtensteinische Landesbank (Switzerland) Ltd. (Member) ensteinische Landesbank, the Board of Directors must inform ◆ Bank Linth LLB AG (Vice Chairman) the government about the compensation ruling speciﬁed for ◆ LLB Asset Management AG (Chairman) the Board. ◆ LLB Fund Services AG (Vice Chairman) ◆ LLB Fondsleitung AG (Vice Chairman) 5.1.2 Fundamentals ◆ swisspartners Investment Network AG (Member) The principles and regulations governing the compensation of the members of the Board of Directors and the Board of Man- Board of Directors mandate in the following participation agement are reviewed periodically. The amount of the com- of the Liechtensteinische Landesbank: pensation for the members of the Board of Directors and the ◆ Elips Life AG (Member) Board of Management is stipulated each year. The compensation for members of the Board of Directors Other functions: comprises a ﬁxed compensation fee, meeting allowance (for ◆ Member of the Board of the LLB Liechtenstein Pension meetings of committees and foundation boards) and a variable Fund Foundation compensation component. The latter amounts (not including employer contributions) to 0.175 percent of the Group net pro- 4.2 Other activities and commitments ﬁt for the respective year and may not exceed the amount of Apart from the mandates speciﬁed in Point 4.1, no other im- the ﬁxed compensation component. The variable component is portant commitments exist. paid in cash. On account of legal provisions, no severance pay- ment may be made in the event of the ending of a mandate 4.3 Management contracts (Art. 21, para.2 of the law concerning the control and super- The Liechtensteinische Landesbank has not concluded any vision of public companies). management contracts. The compensation for members of the Board of Manage- ment is composed of a fee or basic salary plus a performance or 5 Compensation, participations and loans proﬁt-related remuneration component. The ﬁxed compensa- tion is paid in cash. The variable component of compensation is 5.1 Contents and stipulation procedure contingent upon the attainment of quantitative targets. The variable component amounts (not including employer contribu- 5.1.1 Responsibility and stipulation procedure tions) to a maximum of 0.8 percent of the Group net proﬁt for The Appointments and Compensation Committee (see Point the respective calendar year. Individual performance is taken 3.4.2 «Composition of all Board of Directors committees, their into consideration in allocating the variable component to the tasks and terms of reference» on page 74), which is composed members of the Board of Management. The variable compo- solely of independent members of the Board of Directors, nent is limited to the amount of the fee or basic salary. Payment prepares the principles and regulations governing the compen- is made in cash and through the allocation of LLB shares. The sation for the members of the Board of Directors and the Board cash / shares allocation is deﬁned in internal regulations as fol- of Management, as well as the proposed amount of the lows: three quarters LLB shares and one quarter cash payment. 80 As time goes by The members of the Board of Management do not have the 5.2 Transparency of compensation, participation and right to specify the cash / share ratio. The price per share for the loans of issuers domiciled abroad share-based remuneration component is calculated on the The Liechtensteinische Landesbank has its registered office in basis of the average share price in the last quarter of the ﬁnan- Vaduz, Liechtenstein. In principle, therefore, it is not subject to cial year. The issued shares are subject to a blocked period of Art. 663 of the Swiss Code of Obligations. However, to enable three years. If the shareholder leaves the bank's employ, the investors nevertheless to obtain the corresponding informa- blocked period is removed. Apart from the allocation of shares tion, the SIX Swiss Exchange obliges issuers, whose registered as a proﬁt-related component of compensation, there are no office is not in Switzerland, to apply the provisions of Art. 663 other share plans. Code of Obligations in the same manner within the scope of The employment relationship of members of the Board of corporate governance reporting. Management is stipulated in individual employment contracts. Details of the compensation and participations of mem- The period of notice is either three or four months. The con- bers of the Board of Directors and the Board of Management, tracts of employment do not contain any special clauses in re- as well as loans to them can be found in the Notes to the lation to a termination of employment in the event of a change ﬁnancial statement of the LLB Group in «Related party trans- in control of the company. actions» on pages 151 to 154. The Liechtensteinische Landesbank extends the preferen- tial conditions customary in the banking industry to all its 6 Shareholders' participation rights staff (including management) on bank products. This generally takes the form of limited preferential interest rates on mort- 6.1 Voting right limitation and representation gage loans and credit balances. Standard market conditions The Liechtensteinische Landesbank has issued bearer shares. apply to all transactions made by the Board of Directors with At the Landesbank's General Meeting of Shareholders, each the bank. share carries one vote. In accordance with Art. 306a ff. of per- son and company law, the LLB shares held by the Liechtenstei- 5.1.3 Elements nische Landesbank itself and its subsidiaries (2'300'000 shares For the 2010 business year, the members of the Board of Direc- per 31 December 2010) are not eligible to vote. tors received a ﬁxed compensation of CHF thousands 769 and At the General Meeting, each shareholder can vote his / her a variable remuneration of CHF thousands 204. These were own shares or authorise a third party to vote them by proxy. paid out in cash. Contributions to welfare and pension schemes amounted to CHF thousands 41. For the members of the Board 6.2 Statutory quorum of Directors, the variable remuneration in the year under re- At the General Meeting, a quorum is present if half of the port amounted to between 16.3 and 41.4 percent of the ﬁxed share capital is represented. Provided that legal provisions do compensation and between 12.5 and 29.3 percent of the total not stipulate to the contrary, the General Meeting passes its compensation. resolutions and decides its elections by an absolute majority For the 2010 business year, the members of the Board of of the votes cast. Management received a ﬁxed compensation of CHF thousands 2'212 and a variable remuneration of CHF thousands 743. Con- 6.3 Convening of the General Meeting tributions to welfare and pension schemes amounted to CHF The Board of Directors convenes an ordinary General Meeting thousands 354. The ﬁxed compensation component was paid by invitation with a period of notice of three weeks. The meet- in cash. The payment of the variable component was made in ing must be held within six months following the end of a cash (¼) and through the allocation of LLB shares (¾). The price business year. The invitation to the General Meeting is to be per share for the share-based remuneration component is cal- publicised in the official gazettes. The invitation must list the culated on the basis of the average share price in the last quar- agenda to be dealt with at the meeting, the proposals of the ter of the 2010 ﬁnancial year (CHF 69.30). For the members Board of Directors and, in the event of elections, the names of the Board of Management, the variable remuneration in the of the proposed candidates. year under report amounted to 33.6 percent of the ﬁxed com- An extraordinary General Meeting may be convened by the pensation and 22.5 percent of the total compensation. Board of Directors if this is in the urgent interest of the Liechten- In comparison with the previous year, the total compen- steinische Landesbank, or at the request of one or more share- sation of the members of the Board of Directors and the holders representing ten percent of the share capital. members of the Board of Management decreased by 14.4 and 2.3 percent respectively. This was attributable in particular 6.4 Agenda to the decline in variable compensation of 39.5 and 19.7 per- The Board of Directors speciﬁes the agenda for the General cent respectively. Meeting in accordance with the Liechtensteinische Landes- The entire remuneration of the members of the Board of bank's statutes. The statutes can be read at www.llb.li/statutes. Directors and the members of the Board of Management in the Liechtenstein equities law contains no regulations comparable 2010 business year is reported on an accrual basis. The variable in nature to the Swiss legal provisions (Art. 699, para. 3, Code component is debited to the 2010 proﬁt and loss account. Pay- of Obligations), which stipulate the rights of shareholders in ment is made, however, only in the following year. setting the agenda for General Meetings. However, legally Corporate governance 81 stipulated minority rights do exist which ensure that signed 8.3 Additional fees and detailed items that are submitted to the Board of Directors For other services, PricewaterhouseCoopers AG invoiced the may be placed on the agenda for discussion and resolution. companies of the LLB Group for CHF thousands 615 in 2010 At the present time, it is not possible to amend the statutes in (previous year: CHF thousands 360). favour of improving shareholders' rights in setting the agenda on account of the applicable regulations of Liechtenstein company law. Auditing fees and additional fees 6.5 Registration in the company's share register in CHF thousands 2010 2009 The Liechtensteinische Landesbank has issued only bearer Auditing fee 2'381 2'422 shares. Additional fees 615 360 International accounting 59 27 7 Change of control and defensive measures Taxation advice 95 112 The Liechtensteinische Landesbank is a banking institute li- Legal advice 59 56 censed under Liechtenstein law with its registered office in the Regulatory issues and questions 129 38 Principality of Liechtenstein. The regulations of the Swiss stock Project consulting IT platform 273 127 exchange law concerning public purchase offers are not there- fore applicable to the Liechtensteinische Landesbank as a pos- sible target company. The Landesbank's statutes contain no regulations comparable with the Swiss provisions regarding 8.4 Information instruments of the external auditors opting out or opting up. Likewise, there are no change of con- The Group Audit & Risk Committee fulﬁls a supervisory, control trol clauses in favour of the Board of Management, the Board and monitoring function, which extends to the external audi- of Directors or other senior executives. tors. It is responsible, among other tasks, for: Pursuant to the law on the Liechtensteinische Landesbank, ◆ taking note and discussing the risk analysis made by the the Principality of Liechtenstein must hold at least 51 percent external auditors, the auditing strategy derived from it of the capital and votes. and the respective risk-oriented auditing plan; ◆ the critical analysis of the audit reports submitted by the 8 Independent auditors external audit and the Group Internal Audit functions to the Group Board of Directors; 8.1 Duration of mandate and term of office ◆ discussing serious problems identiﬁed during the auditing of the auditor in charge process with the external auditors; ◆ the monitoring and implementation of recommendations 8.1.1 Date of acceptance of existing auditing mandate put forward by the external auditors and Group Internal PricewaterhouseCoopers AG, St. Gallen has served as the in- Audit to eliminate weak points and deﬁciencies; dependent auditors of the Liechtensteinische Landesbank ac- ◆ assessing the quality of the external and internal audit cording to company and banking law since 1998. The auditing functions (external and internal auditors according to bank- mandate was taken over in 1998 from Revisuisse Price Water- ing law and person and company law), as well as their house AG, St. Gallen and its predecessor Revisa Treuhand AG, cooperation; St. Gallen. Pursuant to person and company law and banking ◆ discussing the annual activity report and the annual audit law, the independent auditors are appointed by the General plan of Group Internal Audit including the evaluation of Meeting at the proposal of the Board of Directors for the period whether this function has sufficient resources and compe- of one year. tences, as well as approving proposals to the Group Board of Directors; 8.1.2 Term of office of the auditor in charge of the ◆ assessing the qualiﬁcation, independence, objectivity and current auditing mandate performance of the external auditors and Group Internal Hans Wey has been the responsible auditor in charge since the Audit; General Meeting 2007. The auditor in charge changes every ◆ checking the reconcilability of external auditors' auditing seven years. activities with possible consulting mandates, as well as evaluating and discussing their professional fees; 8.2 Auditing fee ◆ submitting a proposal to the Group Board of Directors for In the 2010 business year, PricewaterhouseCoopers AG in- the attention of the General Meeting regarding the appoint- voiced the companies of the LLB Group for CHF thousands 2'381 ment or dismissal of the external auditors (appointed accord- (previous year: CHF thousands 2'422) in respect of auditing ing to banking law and person and company law). The Group fees. These fees include the work carried out by the auditors as Audit & Risk Committee is responsible for deﬁning the proce- required by the regulatory authorities. The Group Audit & dure to appoint new external auditors. Risk Committee oversees the fees paid to Pricewaterhouse- Coopers AG for their services. 82 As time goes by The external auditors perform their work in accordance with The Group Audit & Risk Committee reports to the full Board of the legal provisions, and according to the principles of the Directors once a year concerning the activities of the external profession in the respective country of domicile of the Group auditors and the assessment of their performance. company, as well as according to the international standards The external auditors have direct access to the Board of on auditing. The independent auditors regularly report to the Directors at all times. They hold regular discussions with the Board of Directors, the Group Audit & Risk Committee and Chairman of the Board of Directors and the Chairman of the the Board of Management about their ﬁndings and submit sug- Group Audit & Risk Committee. gestions for improvements to them. The most important re- port is the audit report on the LLB Group required by banking 9 Information policy law. This summarised report is submitted in writing once a The Liechtensteinische Landesbank is committed to providing year to the Board of Directors. In addition, the responsible au- its shareholders, clients, staff and the general public with com- ditor in charge of the external auditors presents a report at one prehensive and regular information. This ensures that all stake- meeting of the Group Audit & Risk Committee. All reports from holders are treated equally and fairly. By institutionalising and the internal and external auditors concerning all Group com- nurturing these ties, by building up and preserving relation- panies are submitted to the Group Audit & Risk Committee. ships based on trust with the ﬁnancial community on the one Important ﬁndings in the reports of the internal and exter- hand, and with the media and all other interested parties on nal auditors since the last meeting and all reports concerning the other, equality of opportunity and transparency are con- the Group companies are addressed at the next meeting of the sistently ensured. Group Audit & Risk Committee. The head of Internal Audit is The most important information media of Liechtenstei- responsible for providing the relevant information. This person nische Landesbank are its internet website www.llb.li, as well reports directly to the Group Audit & Risk Committee. The head as its annual and semi-annual reports, media communiqués, of Internal Audit is appointed by the Board of Directors and is its ﬁnancial result presentation and the conference call for subordinate to the Board's Chairman. media and analysts, and its General Meeting of Shareholders. Representatives of the external auditors participated The Liechtensteinische Landesbank has not compiled a com- in two meetings of the Group Audit & Risk Committee but no pensation report for the 2010 business year in line with Point 8 meeting of the full Board of Directors during the report period. of Appendix 1 (Recommendations concerning the compen- The head of Internal Audit attended all the meetings of the sation of the board of directors and management board) of the Group Audit & Risk Committee and those of the full Board of «Swiss Code of Best Practice for Corporate Governance» of Directors. The external auditors submit periodic reports deal- economiesuisse. Details of the compensation and participa- ing with the audit planning based on risk analysis, the current tions of members of the Board of Directors and the Board of audit reporting, the annual activity report, as well as a com- Management, as well as loans to them can be found in the parison of actual to budgeted fees. Notes to the ﬁnancial statement of the LLB Group in «Related The Group Audit & Risk Committee evaluates the perform- party transactions» on pages 151 to 154. In line with the ance of the external and internal auditors in their absence «Swiss Code of Best Practice for Corporate Governance», spe- annually. The following criteria are applied in assessing the per- cial attention will be paid to the subject of compensation at formance of the external auditors and their professional fees the General Meeting on 6 May 2011 during the discussion (auditing and additional fees): comparison of fees and budgeted of the agenda point «Approval of the annual report and the fees as well as the previous year's fees, feedback from the de- consolidated annual report». partments audited, quality of the auditors' ﬁndings, structured As a listed company, the Liechtensteinische Landesbank assessment of the auditors' expertise. The independence of the is obliged to publish price-relevant information (ad hoc public- external auditors is evaluated on the basis of the information ity, Art. 72 of the exchange listing regulations). To receive ad concerning independence provided in the annual report of Price- hoc announcements in accordance with the directives for ad waterhouseCoopers AG, and an assessment of their conduct. hoc publicity automatically, an interested party can register at The cost planning and its observance are also reviewed and dis- www.llb.li/registration. Ad hoc announcements are published cussed annually. Moreover, the Group Audit & Risk Committee under the link www.llb.li/mediacommuniques. annually reviews alternatives, and submits a proposal to the full Board of Directors for the attention of the General Meet- ing regarding the appointment of the external Group auditors. Additional orders are placed on the basis of offers from competitors taking into consideration the level of expertise. The Group Audit & Risk Committee bases its assessment regard- ing the placing of orders for additional services on the periodic reports it receives from Group Internal Audit regarding the reli- ability, scope and relationship to audit fees. Corporate governance 83 Agenda 2011 Date Time Event 24 March 2011 7.00 a. m. Publishing of 2010 business result, release of online annual report 2010 at www.llb.li 10.30 a. m. Financial reporting and analyst media conference 25 March 2011 2010 business result advertisement in the «Liechtensteiner Vaterland», the «Liechtensteiner Volksblatt» and in the «NZZ» 26 March 2011 2010 business result advertisement in the «Finanz und Wirtschaft» 15 April 2011 Publishing of printed annual report 2010 6 May 2011 6.00 p. m. General Meeting of Shareholders 10 May 2011 Payment of dividend 25 August 2011 7.00 a. m. Publication of interim ﬁnancial statement 2011, publishing of printed interim ﬁnancial statement 2011 and release of online interim ﬁnancial statement 2011 at www.llb.li 10.30 a. m. Conference call 26 August 2011 2011 interim ﬁnancial result advertisement in the «Liechtensteiner Vaterland», the «Liechtensteiner Volksblatt» and in the «NZZ» 27 August 2011 2011 interim ﬁnancial result advertisement in the «Finanz und Wirtschaft» If you have any questions, please contact the following At the beginning of 2011, the new EU compensation regula- person who is responsible for investor relations: tions come into force. As a member of the EEA, Liechtenstein will incorporate this directive in national law. In January 2011, Dr. Cyrill Sele the Liechtenstein Financial Market Authority will commence Head Group Corporate Communications the consultancy phase by sending a draft implementing order Telephone +423 236 82 09 for the new EU compensation regulations to interested parties Fax +423 236 87 71 for their views and opinions. The goal is for this to come into E-mail email@example.com force on 1 July 2011. The Board of Directors and the Appoint- ments and Compensation Committee have initiated a project 10 Important changes since the balance sheet date with the aim of implementing a group directive concerning The Board of Directors of the Liechtensteinische Landesbank compensation and remuneration during the year. AG will propose to the General Meeting of Shareholders on 6 May 2011 that Dr. Felix R. Ehrat be elected as a new member of the Board of Directors, and that Ingrid Hassler-Gerner and Konrad Schnyder be re-elected. On account of the period of office limitation statute, Siegbert Lampert is stepping down from the Board after nine years. For personal reasons and at his own request, Elfried Hasler will step down from the Group Executive Board and the Board of Management of Liechtensteinische Landesbank on 30 June 2011. Urs Müller, formerly head of the Institutional Clients Busi- ness Unit, has been appointed by the Board of Directors as a new member of the Group Executive Board and the Board of Management. From 1 April 2011, he will take over the function of Roland Matt as head of the Domestic and Institutional Mar- kets. Roland Matt will take over responsibility for the Interna- tional Market Business Unit, which was previously headed by Elfried Hasler. Dr. Kurt Mäder continues in his function as head of the Corporate Service Center and Dr. Josef Fehr continues as Chairman of the Group Executive Board and the Board of Management.
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