Annual Report • Jun 30, 2017
Annual Report
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Annual Report 2016/2017
| Message from the Chairman of the Supervisory Board | |
|---|---|
| Message from the Chairman | 7 |
| Message from the Management Board | 8 |
| Overview of businesses | 12 |
|---|---|
| World presence | 14 |
| Corporate governance | 16 |
| Organisation chart | 19 |
| Corporate Social Responsibility | 20 |
| Shareholder information | 21 |
| Rothschild Global Advisory | 26 |
|---|---|
| Rothschild Private Wealth & Asset Management | 32 |
| Rothschild Merchant Banking | 38 |
| Results for the 2016/2017 financial year | |
|---|---|
| Information on the Company and share capital | 59 |
| Corporate governance | 73 |
| Internal control and risk management procedures | 96 |
| Corporate Social Responsibility | 104 |
| Consolidated financial statements | 122 |
|---|---|
| Parent company financial statements | 187 |
Revenues €1,767m +11% Operating income €429m +34% Net profit – Group share(1) €193m +43% EPS(1) (Earnings Per Share) €2.74 +41%
Shareholders' equity – Group share
€1,829m +20%
Rothschild & Co provides independent advice on M&A, strategy and financing, as well as investment and private wealth and asset management solutions to large institutions, families, individuals and governments, worldwide.
With approximately 3,400 talented employees on the ground in over 40 countries around the world, we deliver a unique global perspective.
As a family-controlled business that has been at the centre of the world's financial markets for over 200 years, we can rely on an unrivalled network of experts and are known for our track-record of outstanding execution in financial services.
Our integrated global network of trusted professionals and decision-makers provide in-depth market intelligence, meaning we can be closer to current issues than any other global financial institution in our core markets.
Informed by experience yet not limited by convention, we are able to separate insight from information and access opportunities for our clients from a unique angle.
It is this scale, local knowledge and intellectual capital that allow us to provide a distinct perspective and effective long-term solutions for our partners.
I would like to take this opportunity to thank the Board, the management team and the employees for all their hard work this last year allowing us to announce excellent full year financial results. The Managing Partner, represented by its Chairman, David de Rothschild, its Executive Deputy Chairman, Alexandre de Rothschild and the four Managing Partners, Nigel Higgins, Marc-Olivier Laurent, Robert Leitão and Olivier Pécoux, lead the Group with energy and a clear vision. Together, they successfully ensure that the unique culture found within Rothschild & Co is upheld, thereby guaranteeing the exceptional high standard of work we offer our clients, and producing such good results.
At the Shareholders' General Meeting held on 29 September 2016, the merger by absorption of the company Compagnie Financière Martin Maurel was widely approved. This merger, completed on 2 January 2017, will create a leading independent private bank in France, Rothschild Martin Maurel. It builds upon the relationship that has existed between the Rothschild and Maurel families for three generations.
As Chairman of the Supervisory Board, my role is to ensure that the Company maintains a high level of corporate governance. The composition of the Supervisory Board has changed over the past 12 months, two members have left the Board and a new member has been nominated. It was with great sadness that we informed you of the passing away of Lord Leach of Fairford on 12 June 2016. Adam Keswick was appointed his successor at the Shareholders' General Meeting held on 29 September 2016. Martin Bouygues, after many years as a Board member, resigned on 27 September 2016 for personal reasons.
Among the 14 members of the Supervisory Board, two-thirds are independent. During the last Shareholders' General Meeting, five members' terms of office were renewed as follows: Angelika Gifford, Luisa Todini, Carole Piwnica, Arielle Malard de Rothschild and Dr. Daniel Daeniker. François Henrot was also appointed as a non-voting member (censeur) of the Supervisory Board at the same General Meeting.
It is also my responsibility to ensure that the Supervisory Board discharges its responsibilities regarding internal control and risk management matters. I would particularly like to thank the chairmen of our Risk and Audit Committees for the time that we regularly spend together, prior to each Board meeting to discuss the different subjects under debate by the respective committees.
At our next Shareholders' General Meeting, which will take place on 28 September 2017, Jacques Richier, appointed for the first time to the Board in 2010, will end his term of office. He would like to devote his time to his new mandate within the Group, a Board member of Rothschild Martin Maurel. We are particularly pleased that Jacques Richier wishes to dedicate his time to this new entity for which we thank him profusely.
In our Shareholders' General Meeting document to be published soon, you will find more detailed information on the Board's composition and in particular regarding those members whose re-election will be on the agenda of the Shareholders' General Meeting this year. Shareholders will also be asked to approve an increase of 8% in the dividend to €0.68 per share at the same meeting.
As always, I would like to thank you for your continued support for Rothschild & Co.
Chairman of the Supervisory Board of Rothschild & Co
This year's financial results are extremely encouraging and confirm that the combination of our heritage, independent model and focus on hiring the best talent are key to the Company's success. We are witnessing the true partnership that exists between our three businesses as each goes from strength to strength.
Our Global Advisory business had a record breaking year, with revenues and profits progressing 14% thanks to an increase in our market share of global M&A, and our growing activity in financing advisory. Private Wealth & Asset Management improved revenue by 7% in difficult market conditions and our Merchant Banking business saw revenue jump 32%.
Thanks to these strong results, shareholders will be rewarded with a dividend of €0.68 per share, an increase of 8% in line with our announced progressive dividend policy, subject to approval at the Shareholders' General Meeting to be held on 28 September 2017.
The global economy has again continued to grow, and the consensus recently has been less pessimistic than usual: even the International Monetary Fund has reviewed its outlook positively. The new US administration is so far having less of an impact on the global economy than many had suggested, and a much-hyped populist backlash against the EU has faltered in France and also in the Netherlands and Germany. Meanwhile, a year after the vote for Brexit, the full impact of this decision on the relationship between the UK and the EU is far from clear. Nevertheless, we believe that it will not be a significant challenge for our business. Against this backdrop, capital markets have delivered healthy returns recently, with unusually low volatility. It would be foolhardy to expect such benign trends to continue indefinitely, but we think that the business climate can continue to offer opportunities for far-sighted managements and investors.
Following our announcement last June of the merger between the Compagnie Financière Martin Maurel and Rothschild & Co, we announced on 2 January 2017 its successful completion. The operational integration of the two banks Rothschild & Cie Banque and Banque Martin Maurel should be finalised in the next quarter to create Rothschild Martin Maurel. The combination of two family owned businesses that share a similar history, culture and vision of their industry creates an outstanding combination and will build upon the strong relationship that has existed between the Rothschild and Maurel families for three generations.
We are continuing our focus on the North American market where we believe there are good opportunities for us to grow, particularly in Global Advisory. Over the past 12 months we have announced the opening of two new offices, in Chicago and San Francisco, and we have strengthened our core M&A sector coverage and professional talent by recruiting six new Managing Directors. We now have a total of 170 advisory bankers based in our seven offices in the United States, Canada and Mexico.
We have also announced this year that we will be changing our financial year end from 31 March to 31 December. The next accounting period will therefore be for the nine months to 31 December 2017 with the results for this period being published in March 2018.
It has been a full and rewarding year and I would like to take this opportunity to thank our shareholders and our clients for their continuous support. We remain focused on delivering our strategy and returns for our shareholders.
Chairman of Rothschild & Co Gestion Managing Partner of Rothschild & Co
Rothschild & Co produced a record year with overall revenue increasing 11% to €1,767 million.
The economic context over the last 12 months was unpredictable and challenging, with periods of sustained volatility largely influenced by political events. The long-term impact of the UK's decision to exit the European Union (Brexit) is yet to be determined. Nevertheless, we have seen reasonably strong markets, and the global economy has continued to grow.
Against this backdrop, Rothschild & Co produced a record year with overall revenue increasing 11% to €1,767 million and net income – Group share excluding exceptionals – rising 43% to €193 million. Since the reorganisation of the Group in 2012, there has been consistent progress across all three divisions. We are also seeing an increasing degree of client referrals between businesses, underscoring our strategy to improve synergies across the Group. Our independent model allows us a distinct perspective enabling us to offer the highest quality advice and service to our clients and to continue developing long-term relationships.
Rothschild Global Advisory performed well, increasing market share overall with revenue increasing by 14% to a record level of €1,190 million. Operating income rose to €203 million, from €167 million for the previous period, an increase of 22%. Our operating margin stood at 17%. This figure includes investment in the development of our US M&A franchise and excluding this investment the margin would be at 19%. We now rank 5th globally by financial advisory revenue for the year, improving our position from 6th in the prior year.
We continue to outperform compared to the overall M&A market, ranking 1st globally by number of completed transactions in the 12 months to March 2017 as well as extending our leadership position in Europe. As a result, and within the context of a 7% fall in global completed M&A deal values for year to March 2017, M&A advisory revenue increased by 15% to €875 million year on year.
Financing advisory revenue increased by 14% to €315 million. During the year, we continued to be highly active in large and complex debt advisory and restructuring situations, providing independent advice to clients on over 230 debt and restructuring transactions with a total value close to US\$190 billion. For restructuring assignments completed during the financial year, we improved our competitive position compared to the previous year, ranking 1st by number of transactions in Europe and 2nd by number of transactions globally. We provided equity advisory services during the financial year with a total value close to US\$40 billion, and we continue to advise on more European equity assignments than any other independent adviser.
The quality of our people is our principal competitive advantage and we continue to add to and strengthen our senior team. During the year, we recruited new Managing Directors into our offices in the United States, UK, Spain and Germany. In the United States, new joiners included a new Head of North America and a new Head of M&A in North America. We also opened a new office in Chicago and more recently announced the launch of a new office in the San Francisco Bay area.
Rothschild Private Wealth & Asset Management revenue for the year to March 2017 was €405 million, up 7% when compared to the previous year. The increase is mainly due to the merger with Compagnie Financière Martin Maurel (CFMM) which was finalised at the beginning of the year and contributed €24 million of revenue for the fourth quarter. Rothschild Wealth Management & Trust in Switzerland and in the UK have performed well, despite challenging markets.
Assets under Management increased by 33% to €66.6 billion in the 12 months to March 2017, thanks to the merger with CFMM of €10 billion, net inflows of €1.2 billion and market appreciation and exchange rate effects of €5.2 billion. Net new assets were driven by inflows of €0.3 billion in Rothschild Private Wealth and of €0.9 billion in Rothschild Asset Management, especially in the US.
The merger between Rothschild & Co and CFMM to combine their French activities in private banking and asset management was completed on 2 January 2017. This transaction will allow us to accelerate our growth of Rothschild Private Wealth in France thanks to the extended geographical footprint offered by the Martin Maurel group, and diversify our revenues away from our global advisory work. The combined group will operate under the name of Rothschild Martin Maurel. It will be a leading independent family controlled private banking group operating in France, Belgium and Monaco with a distinct market positioning targeted notably at entrepreneurs. Rothschild Martin Maurel will have combined Assets under Management of €34 billion.
Rothschild Merchant Banking continued to perform strongly during 2016/2017 generating revenue of €141 million, an increase of 32%. This significant improvement was driven by the performance of the funds forming part of the Five Arrows business line producing both investment gains for the Group and carried interest recognition. Revenue from Rothschild Merchant Banking comprises recurring revenue of €51 million and investment performance related revenue of €90 million.
The alignment of interests between the Group and third-party investors remains a key differentiator. During the year the Group's share of the investment made by the division amounted to €78 million, of which €64 million was the Group's own investments in funds managed by Merchant Banking, and €14 million in proprietary investments (including those made as part of the Rothschild Private Opportunities co-investment programme). Disposals generated proceeds of €126 million.
Rothschild Merchant Banking's Assets under Management were €6.2 billion as at 31 March 2017 compared to €4.8 billion as at 31 March 2016.
The outlook for the current financial year of nine months remains favourable. In Rothschild Global Advisory, despite lower M&A market activity in the first quarter of 2017, the conditions continue to be positive. We therefore expect the M&A market overall to be active for the rest of 2017, although the Group remains alert to the risk of volatility in the market. We continue to recruit senior bankers in the US market where we foresee strong potential for growth for our franchise over the next few years. This recruitment will marginally dilute our Global Advisory operating income during the investment phase.
Rothschild Private Wealth & Asset Management is well positioned to deliver net asset inflows. The Martin Maurel integration will clearly contribute to growth in our market share in France.
In Rothschild Merchant Banking, whilst the environment is very competitive, private equity markets remain healthy for valuation accretion and disposals. We remain confident that assets under management will continue to grow due to the successful launch of debt and equity funds and the ability of our teams to develop new opportunities in line with their disciplined investment process.
As always at Rothschild & Co, we focus on long-term performance rather than short-term profit, while keeping tight control over our costs and this strategy is on track. We continue to grow our three businesses, improving the synergies between them and making targeted acquisitions which help to diversify our earnings. It has been a full and demanding 12 months, but we are delighted with the performance of the Group and all that has been achieved. We would like to take this opportunity to thank our colleagues for their hard work and dedication. The focus on building shareholder value remains a priority for us all and we thank the shareholders for their constant support.
Executive Deputy Chairman of Rothschild & Co Gestion
Nigel Higgins Marc-Olivier Laurent Robert Leitão and Olivier Pécoux Managing Partners of Rothschild & Co Gestion
| Overview of businesses | 12 |
|---|---|
| World presence | 14 |
| Corporate governance | 16 |
| Organisation chart | 19 |
| Corporate Social Responsibility | 20 |
| Shareholder information | 21 |
| Rothschild Global Advisory |
• M&A and strategic advisory • Financing advisory – Debt and restructuring advisory Equity advisory – • Worldwide platform with a presence in over 40 countries • c.1,000 bankers, of which 205 are Managing Directors • Adviser on c.660 transactions with a total value of US\$540 billion (1) Source: Thomson Reuters, completed transactions, ranked by number of deals. Excludes accountancy firms., as at 31 March 2017. |
1st globally and 1st in Europe by number of completed M&A transactions(1) 5th globally by revenue (as at 31 March 2017) |
|---|---|---|
| Rothschild Private Wealth & Asset Management |
• Private Wealth • Trust • Asset Management • Strong European presence with targeted extensions in Asia and the United States • c.200 relationship managers for Private Wealth • c.70 investment managers for Asset Management |
€66.6bn(1) of Assets under management (as at 31 March 2017) |
| Rothschild Merchant Banking |
• Corporate private equity • Secondaries, multi-managers' funds and co-investments • Direct lending • Credit management • Solid position in France and the United Kingdom • Proprietary investments in emerging countries • 70 investment professionals |
€6.2bn of Assets under management (as at 31 March 2017) |
| Revenue (in millions of euros, as at 31 March) |
||||
|---|---|---|---|---|
| 2013 | 71% | 29% | 741 | |
| 2014 | 64% | 36% | 689 | |
| 2015 | 67% | 33% | 880 | |
| 2016 | 73% | 27% | 1,040 | |
| 2017 | 74% | 26% | 1,190 | |
| Financing Advisory M&A |
(1) Including Martin Maurel Group.
An unrivalled network of specialists at the centre of the world's financial markets, combining scale with deep local knowledge
Rothschild & Co Gestion is the Managing Partner (Gérant) of Rothschild & Co, responsible for the overall management of the Company, the Group's lead holding company.
This includes, among other things, establishing the strategic direction of the business, supervising the accounting and financial information, and directing the internal control framework for Rothschild & Co and the Group entities on a consolidated basis.
The Management Board comprises:
David de Rothschild Chairman
Alexandre de Rothschild Executive Deputy Chairman
Nigel Higgins Managing Partner – Co-Chairman of the GEC
Marc-Olivier Laurent Managing Partner
Robert Leitão Managing Partner
Olivier Pécoux Managing Partner – Co-Chairman of the GEC
The Group Executive Committee (GEC), whose members are the most senior corporate officers of the Group business and support divisions, is the senior Executive Committee at Rothschild & Co. In its role, the GEC participates in the overall management and defining the strategy of the Group by Rothschild & Co, represented by the Managing Partners and Executive Deputy Chairman, so that Rothschild & Co ensures its proper implementation across the Group.
Chaired by Nigel Higgins and Olivier Pécoux, the GEC comprises:
Paul Barry Group Human Resources Director
Mark Crump Group Chief Financial Officer
Richard Martin Chief Operating Officer of Rothschild Wealth Management & Trust
Alain Massiera Head of France Private Wealth
Bruno Pfister Chairman of Rothschild Wealth Management & Trust
Gary Powell Head of Group Strategy and Corporate Development
Jonathan Westcott Group Head of Legal and Compliance
Rothschild & Co | Annual Report | 2016/2017 17
The Supervisory Board exercises permanent oversight of the management of the Company, including in particular the Company's financial accounting reporting system and its internal control mechanism.
The Supervisory Board relies on four specialised committees: the Audit Committee; the Strategy Committee; the Remuneration and Nomination Committee and the Risk Committee.
14 Board members
| Specialised committees | ||||||
|---|---|---|---|---|---|---|
| Members | Supervisory Board |
Audit Committee |
Strategy Committee |
Remuneration and Nomination Committee |
Risk Committee |
9 independent |
| Éric de Rothschild – French | ■ ■ |
■ | members | |||
| André Lévy-Lang – French | ■ ■ | ■ | ■ | ■ | ||
| Dr. Daniel Daeniker – Swiss | ■ | ■ | ■ | |||
| Angelika Gifford – German | ■ | |||||
| Sylvain Héfès – French | ■ | ■ | ■ ■ |
7 | ||
| Adam Keswick – British | ■ | nationalities | ||||
| Arielle Malard de Rothschild – French | ■ | ■ | ||||
| Lucie Maurel-Aubert – French | ■ | ■ | ||||
| Carole Piwnica – Belgian | ■ | ■ | ■ | |||
| Jacques Richier – French | ■ | |||||
| Anthony de Rothschild – British | ■ | |||||
| Sipko Schat – Dutch | ■ | ■ ■ | ||||
| Peter Smith – British | ■ | ■ ■ | ■ | ■ | ||
| Luisa Todini – Italian | ■ | ■ | ||||
| François Henrot – French | ■ |
■ Chairman
■ Vice-Chairman
■ Independent member
■ Non-independent member
■ Non-voting member (Censeur)
(1) See details on page 67.
(3) Controlled by the Rothschild family. (4) Minority interests held by the Rothschild family.
Overview
Rothschild & Co's approach to business is a deeply held sense of responsibility to its people, to the environment and to the communities in which it operates.
| People | We are committed to the development and retention of a world-class team |
• 3,410 employees across the world of whom 40% are female • An inclusive culture in which diversity is valued • Recruitment and promotion based on merit • A wide range of training and development opportunities • A focus on well-being and a healthy and safe working environment |
|---|---|---|
| Environment | We are committed to managing and taking action to reduce our negative environmental impact |
• 7% increase in reporting scope to cover 95% of total headcount(1) • 15 offices reporting environmental data, up from 10 in 2015/2016 • Initiated a global environment health & safety compliance programme to cover 100% of our offices • Established a Global Environment, Health & Safety Committee |
| Community | We are committed to | • Community investment programmes in 10 cities |
| investment | creating change in the lives of disadvantaged young people |
• Over 40% of London employees volunteering each year • A focus on enhancing the prospects of disadvantaged young people |
(1) The Martin Maurel Group entities are not taken into account.
| 2013 | 2014 | 2015 | 2016 | 2017 | |
|---|---|---|---|---|---|
| Market capitalisation (in millions of euro) | 1,262 | 1,280 | 1,403 | 1,546 | 2,077 |
| Share price (in euro) | |||||
| At the end of the financial year | 17.8 | 18.0 | 19.7 | 21.7 | 26.9 |
| Maximum | 17.9 | 20.7 | 19.7 | 30.1 | 28.0 |
| Minimum | 16.2 | 16.8 | 16.4 | 19.1 | 20.2 |
| Yearly average | 16.9 | 18.1 | 17.6 | 24.5 | 23.3 |
| Number of shares and investment certificates | |||||
| Issued | 70,903,029 | 71,104,108 | 71,137,036 | 71,137,036 | 77,290,012 |
| Of which treasury shares | 693,504 | 644,197 | 442,701 | 551,434 | 1,054,574 |
| Per share (in euro) | |||||
| Dividend | 0.50 | 0.50 | 0.60 | 0.63 | 0.68(1) |
| Earnings per share (EPS) | 0.68 | 0.11 | 2.08 | 3.37 | 2.64 |
| EPS excluding exceptional items | 0.90 | 0.74 | 2.31 | 1.95 | 2.74 |
| Market data | |||||
| Total value traded(2) (in euro) | 64,681,721 | 65,696,798 | 63,844,931 | 307,038,467 | 151,186,389 |
| Total trading volume | 3,808,255 | 3,741,749 | 3,463,602 | 12,636,659 | 6,369,137 |
| Average daily traded volume | 15,112 | 14,616 | 13,583 | 49,556 | 24,497 |
| Excluding exceptional block trades(3) over the period | |||||
| Total value traded (in euro) | 28,608,201 | 37,153,977 | 63,844,931 | 213,446,000 | 117,295,704 |
| Total trading volume | 1,708,255 | 2,141,749 | 3,463,602 | 8,846,659 | 4,942,137 |
| Average daily traded volume | 6,779 | 8,366 | 13,583 | 34,693 | 19,008 |
(1) Dividend proposed at the General Assembly Meeting to be held on 28 September 2017.
(2) On Euronext, electronic and OTC platforms.
(3) Exceptional block trades over 100,000 shares.
(1) More details are provided on page 67.
(2) The controlling shares held by NM Rothschild & Sons are not included as they are part of the enlarged family concert.
A dividend of €0.68 per share will be proposed by the Managing Partner, Rothschild & Co Gestion SAS, at the Rothschild & Co Annual General Meeting on 28 September 2017, called to approve the financial statements for the year ended 31 March 2017.
2 October 2017 Ex-dividend date
3 October 2017
Record date
4 October 2017
Payment date
Since January 2008, Rothschild & Co has awarded a liquidity contract to Rothschild & Compagnie Banque, a subsidiary, in order to improve the share's liquidity, regulate the share price and avoid unjustified differences between market price and fair value. When this contract was put in place, 150,000 shares were made available to the liquidity manager.
As at 31 March 2017 24,237 shares and €4.5 million cash were booked to the liquidity contract(1).
The Company releases half-yearly reports on the liquidity contract. All reports are posted on the corporate website under the 'Investor Relations – Regulated information' section.
Rothschild & Co provides its shareholders with information throughout the year in English and in French, through releases on the publication of the annual and half-yearly results, quarterly revenues or any other major event concerning the Group in accordance with regulations and practices for publication.
Rothschild & Co's website (www.rothschildandco.com) allows visitors to browse the latest updates, share prices and its own publications. The annual report may be reviewed and downloaded from the website.
Visitors can also join Rothschild & Co's mailing list to receive the latest news about the Company. At any time, visitors can also request information from the Investor Relations Department.
For more information about our businesses, career opportunities or our Corporate Social Responsibility initiatives, please visit our corporate website at www.rothschild.com.
First quarter information to 30 June 2017
28 September 2017 (10:30am CET) Annual General Meeting
28 November 2017 Half-year results to 30 September 2017
Nine months results to 31 December 2017
[email protected] Phone: +33 (0)1 40 74 65 26 23 bis avenue de Messine 75008 Paris France
[email protected] Phone: +33 (0)1 40 74 43 44 23 bis avenue de Messine 75008 Paris France
www.rothschildandco.com www.rothschild.com
ISIN code: FR0000031684 Ticker: ROTH Market: Euronext Compartment A (France) Listing place: Paris
| Rothschild Global Advisory | 26 |
|---|---|
| Rothschild Private Wealth & Asset Management | 32 |
| Rothschild Merchant Banking | 38 |
Rothschild Global Advisory offers an informed and impartial perspective, shaped by outstanding market knowledge, to help our clients formulate and achieve their strategic goals through the design and execution of M&A, strategy and financing solutions. We provide impartial, expert advisory and execution services to large and mid-sized corporations, and private equity, family and government investors.
For the year to March 2017, Rothschild Global Advisory delivered record annual revenue of €1,190 million, 14% higher than last financial year. Operating income rose to €203 million (2015/2016: €167 million), an increase of 22% with a 17% operating income margin. Consistent with expectations outlined in the Group's full year 2015/2016 results announcement, the operating income margin includes investment in the development of our US M&A franchise; excluding this investment, the operating income margin was 19%. The compensation ratio for this division, which shows staff costs as a percentage of revenues, was 64.6% as at 31 March 2017 (31 March 2016: 64.8%) after adjusting for the effects of leaver costs and senior hiring in the US.
Global Advisory ranked 5th globally by financial advisory revenue for the year to March 2017, improving its position from 6th in the prior year. We continue to outperform compared to the overall M&A market, ranking 1st globally by number of completed transactions in the 12 months to March 2017 (2015/2016: 3rd globally), as well as extending our leadership position in Europe(1). As a result, and within the context of a 7% fall in global completed M&A deal value for the year to March 2017, M&A advisory revenue increased by 15% to €875 million year-on-year (2015/2016: €763 million).
Financing Advisory revenue increased by 14% to €315 million (2015/2016: €277 million). During the year, we continued to be highly active in large and complex Debt Advisory and Restructuring situations, providing independent advice to clients on over 230 transactions with a total value close to US\$190 billion(2). For Restructuring assignments completed during the financial year, we improved our rankings compared to 2015/2016, ranking 1st by number of transactions in Europe (2015/2016: 2nd) and 2nd by number of transactions globally (2015/2016: 4th) (3). We also provided Equity Advisory services during the financial year with a total value close to US\$40 billion, and we continue to advise on more European equity assignments than any other independent adviser(2).
The quality of our people is our principal competitive advantage and we continue to add to and strengthen our senior team. During the year, we recruited new Managing Directors into our offices in the US, the UK, Spain and Germany. In the US, new joiners included a new Head of North America and a new Head of M&A in North America. We also opened a new office in Chicago and more recently announced the launch of a new office in the San Francisco Bay area. In total, we have recruited six Managing Directors into our M&A team in the US during the financial year.
We acquired two new teams: a new M&A advisory team in Belgium, significantly enhancing our market position in the country; and in the UK, Scott Harris, an independent specialist equity marketing consultancy. We opened a new wholly-owned subsidiary in Tokyo with a view to increasing our Japanese business flow and acknowledging the structural importance of Japanese outbound M&A activity. This office will employ the full team from our alliance partner Global Advisory Japan, with whom we have had a successful relationship for the past eight years.
1st globally and 1st in Europe
by number of completed M&A transactions(1)
5th globally by revenue(4)
(in millions of euros, as at 31 March)
(1) Source: Thomson Reuters, completed transactions, ranked by number of deals. Excludes accountancy firms.
(2) Source: Internal data. (3) Source: Thomson Reuters, completed transactions, ranked by number of deals.
(4) Source: Company filings.
| 2015/2016 | 2016/2017 | % change | |
|---|---|---|---|
| Value of M&A transactions (in billions of US\$) | 325 | 313 | -4% |
| Value of Financing Advisory transactions (in billions of US\$) | 170 | 230 | +35% |
| Total value (in billions of US\$) | 495 | 543 | +10% |
| Number of M&A transactions | 297 | 357 | +20% |
| Number of Financing Advisory transactions | 248 | 305 | +23% |
| Total transactions | 545 | 662 | +21% |
(1) Source: Thomson Reuters, Rothschild & Co analysis. Completed transactions during the 12 months to March.
Real Deals Private Equity Awards, 2017
The Banker Investment Banking Awards, 2016 • Most Innovative Independent
20 Years
Financial News 20th Anniversary Awards, 2016 • Independent Adviser of the Last
Global Capital Loan Awards,
• Best Corporate Finance Adviser for Loans and Private Placements
2016
Global Capital Equity Awards,
• Best Equity Capital Markets
• Equity Capital Markets Deal of the Year, IPO of the Year and DACH ECM Deal of the Year – €4.6bn IPO of innogy • Equity-Linked Bond Deal of the Year – Bayer's €4bn convertible bond • Privatisation of the Year and Nordic ECM Deal of the Year – €2.6bn privatisation IPO of DONG Energy
2016
Adviser
Our teams provide expert advice and execution services across all aspects of mergers and acquisitions, as well as strategic advice in areas such as joint ventures, corporate governance, sovereign advisory and US special committee and fiduciary matters.
For the 12 months to March 2017, we ranked 1st among M&A advisers globally by number of completed transactions(1), having improved from a position of 3rd for the same period last year. In Europe, we further extended our clear market leading position, advising on more deals than any of our competitors – a position we have held for more than a decade(1).
We advised on approximately US\$310 billion of completed M&A transactions in the 12 months to March 2017(2), including seven out of the top 50 global M&A transactions by value and six out of the top 20 European M&A transactions by value(1).
Our global scale and network of relationships with key decision-makers continue to support our position as adviser in large, complex cross-border situations. We continued to improve our market share with cross-border transactions representing over 50% of our total activity(1).
For the financial year, we held top five positions(1) in the majority of industry sectors globally and in Europe, being particularly active in business services, consumer and industrials.
We are also the most active adviser on deals with financial sponsor involvement globally and in Europe(1).
A list of notable completed M&A transactions on which we advised during the financial year is shown on the following page.
c.350 M&A transactions advised in 2016/2017 for a value of c.US\$310bn
more than 50% of deals crossborder
| By value | By number | ||||
|---|---|---|---|---|---|
| Region | 2015/2016 | 2016/2017 | 2015/2016 | 2016/2017 | |
| Global | 10 | 13 | 3 | 1 | |
| Global cross-border | 6 | 12 | 1 | 1 | |
| Europe | 6 | 8 | 1 | 1 | |
| Asia (incl. Japan) | 12 | 16 | 14 | 10 | |
| North America | 15 | 18 | 15 | 14 | |
| Rest of the world | 9 | 14 | 3 | 5 |
(1) Source: Thomson Reuters based on completed deals by number. Excludes accountancy firms.
(2) Source: Internal data.
Rothschild & Co advised the following clients on a number of significant M&A transactions during the year:
AccorHotels (France, Canada, various Middle East)
Our Financing Advisory teams, encompassing Debt Advisory and Restructuring and Equity Advisory, provide advice to clients on financing strategy and solutions. On many occasions they work alongside our M&A experts to deliver integrated, comprehensive advice to clients.
Our Debt Advisory and Restructuring teams provide strategic capital structure advice to deliver the best possible refinancing and restructuring solutions. During the financial year, we continued to be highly active in large and complex debt advisory and restructuring situations, providing independent advice to clients on over 230 transactions with a total value of close to US\$190 billion(1).
Our Debt Advisory capabilities include advice on capital raisings and refinancings across all markets, and expertise across banks, bonds, ratings, derivatives and hedging. We are one of the world leaders in this field. Our track record in successfully helping clients to optimise both the sources of debt and terms of debt finance continues to drive our debt advisory business generation.
Our Restructuring capabilities include lender negotiations, recapitalisations, exchange offers, distressed M&A, in-court and out-of-court transactions and creditor representation. Our independence and the significant volume of deals we advise on across M&A and financing advisory place us in a unique position in terms of market knowledge, and enable us to deliver client-focused advice without the conflicts of interests often faced by bulge bracket banks.
Clients continue to engage us on large and highly complex restructuring assignments. For restructuring assignments completed during the financial year, we improved our market position year on year ranking 2nd by number of deals globally and 1st in Europe(2).
Our Equity Advisory teams provide independent advice to clients on Equity Capital Markets, including a wide range of capital raising transactions such as initial public offerings (IPOs), secondary offerings, block trades, spin-offs and convertible instruments. The teams work in collaboration with our industry sector specialists to deliver integrated advice to our clients, including simultaneous dual-track disposal/IPO advisory.
We have an unparalleled global footprint and deeper resources than any other independent equity adviser, with specialist teams in key equity markets around the world including New York, Hong Kong, Singapore, Sydney, Moscow and throughout Europe.
During the financial year ended March 2017, we advised on close to 65 equity capital market transactions worldwide with a total value of US\$40 billion(1) and, for the 4th successive year, we advised on more European IPOs than any other independent adviser(1).
A list of notable completed financing transactions on which we advised during the financial year is shown on the page opposite.
restructuring transactions with a total value of US\$190bn
Advised more European IPOs than any other independent advisor in Europe(1)
| By value | By number | ||||
|---|---|---|---|---|---|
| Region | 2015/2016 | 2016/2017 | 2015/2016 | 2016/2017 | |
| Global | 5 | 5 | 4 | 2 | |
| Europe | 5 | 3 | 2 | 1 |
(1) Source: Internal data.
(2) Source: Thomson Reuters, completed deals, ranked by number of transactions.
Rothschild & Co advised the following clients on a number of significant financing advisory assignments during the year:
China Resources Beer (Hong Kong)
L&Q and East Thames (United Kingdom)
• Debt and derivatives advice on
• Adviser on rights issue in relation to its acquisition of a minority stake in China Resources Snow Breweries (US\$1.2bn) • Expert analysis of impacts of Brexit vote (two weeks prior) and the dynamic development of the AB Inbev/SABMiller merger
Alpha Natural Resources (United States)
innogy and RWE (Germany)
(€4.6bn)
since 2011
(Brazil)
• Adviser on IPO of innogy on the Frankfurt Stock Exchange
• Largest IPO in Germany since 2000 and largest European IPO
Odebrecht Agroindustrial
• Successful restructuring of debt facilities (US\$3.3bn) • One of the most complex restructurings in Brazil, undertaken in an extremely difficult environment
Arqiva (United Kingdom)
• The largest ever refinancing in the UK Social Housing sector
Solocal (France)
• Completion of debt restructuring, including rights issue (€1.2bn and €398m, respectively) • Long-standing relationship and repeat financing advisory
services since 2012
Rothschild Private Wealth offers an objective long-term perspective on investing, structuring and safeguarding assets, to preserve and grow our clients' wealth.
Rothschild Asset Management offers an independent perspective in innovative investment solutions, designed around the needs of each and every client.
This is demonstrated by our ability to attract clients, win new assets and generate solid investment performance. We continue to develop our activities in line with our stated strategy of diversifying our sources of income.
We serve this diverse client based from our offices in Brussels, Frankfurt, Geneva, Guernsey, Hong Kong, London, Manchester, Milan, Monaco, New York, Paris, Reno, Singapore and Zurich.
For much of the financial year the most visible clouds in the investment sky were political rather than economic in nature. However, these political clouds were not stormy enough to unsettle markets for long, and in marked contrast to early 2016, most stock and bond markets performed respectably amidst relatively low volatility.
(in billions of euros, as at 31 March)
The global economy was a source of relative stability. Growth in the major economies was healthy, even in the eurozone, and increasingly so, while inflation risk remained muted, even in the fully-employed US and UK economies. Fears of a hard landing in China again failed to materialise. The Federal Reserve continued slowly to normalise policy rates, but monetary policy elsewhere remained accommodative.
Against this broadly supportive economic backdrop, corporate profits stabilised. Considerable uncertainty remains regarding the practical impact of UK secession from the EU, the policies of the US president and the prospects for EU reform and integration.
Meanwhile, the business cycle is now mature, and the major central banks – including the Federal Reserve – have yet to decide how best eventually to reverse the recent growth in their balance sheets through QE, all of which may create a drag on performance. Nonetheless, the investment climate overall remains broadly benign as the next financial year begins.
€1.2bn of net new assets in 2016/2017
Private Wealth Asset Management
(1) 2012/13 includes €0.8 billion inflow related to the merger with HDF Finance in France.
(2) 2014/15 excludes €1.9 billion outflow related to the transfer of accounts from Sélection R in France.
Rothschild Private Wealth provides a comprehensive range of services to some of the world's wealthiest and most successful families, entrepreneurs, foundations and charities. In an environment where short-term thinking often dominates, our long-term perspective sets us apart: we believe preservation-first is the right approach to managing wealth.
We understand the issues wealth owners must address and can help them protect their assets. We advise our clients in relation to all their financial and non-financial wealth. When helping our clients invest, we aim to deliver inflation-beating returns and dampen volatility.
We have the scale, intellectual capital and resources to deliver, whilst still being able to provide a truly personal service. Our distinct perspective makes us a secure and enduring home for our clients' assets, safeguarding their legacy for generations.
We also provide loan facilities to our private clients (total book of €2.3 billion as at 31 March 2017) such as Lombard Lending, secured on portfolios in our custody, mortgages secured on residential real estate: overdraft facilities and other facilities for private clients. Lending is complementary to our investment management, wealth planning and administration services, and enables us to meet the wider private banking requirements of our clients.
Looking ahead, we believe our Private Wealth division is well placed to meet the challenges our industry faces. The demand for our advice-based, unconflicted business model, with stable and multi-generational family ownership makes us truly distinctive in a crowded market. We continue to invest in our infrastructure and high-calibre people who work with clients to become trusted advisers. Over the next few years, we expect to see continued growth with a sustainable improvement in our profitability as we gain scale.
During the last financial year we won several prestigious industry awards, which we would like to think is an endorsement of everything we have achieved in our business over the last 12 months. Below is a selection:
Overview
Winner, Foreign Private Bank, 2017 • Best Foreign Private Bank for the
3rd consecutive year
Best Private Bank in Switzerland 2017
• Winner, Client Service Quality – Ultra High Net Worth, 2017
• Trophée d'or 2017
Rothschild Wealth Management & Trust is the private banking arm of Rothschild & Co in Frankfurt, Geneva, Guernsey, Hong Kong, London, Manchester, Milan, Reno, Singapore and Zurich.
We advise clients in relation to all their financial and non-financial wealth. Our goal is to preserve and grow the real value of our clients' wealth, with a focus on generating the best investment returns. This involves investing in assets that increase in value over time, beating inflation, and avoiding large losses along the way. This investment management approach, coupled with the stability that comes from our 7th generation of family-controlled ownership, continues to resonate with an increasing number of clients around the world, especially in the current economic environment.
The business continues its strong performance and both client referrals and acquisition levels are positive. The market remains highly competitive but our discretionary services and investment approach are well placed to meet our clients' requirements. At the end of March 2017, assets under management totalled €21.5 billion, an increase from €19.8 billion last year.
Within our Trust business, our focus on helping clients to safeguard their assets and create a legacy has continued to attract entrepreneurs and wealth-owning families globally. Our typical clients are highly international with businesses, family members and assets that span more than one jurisdiction; these clients require wealth planning, family governance and business succession planning on an international basis, across many countries and jurisdictions. We have seen particular interest in our Trust offering in those parts of the world where new wealth generation is strong. More broadly, our distinctive proposition and unique positioning in the market mean we are very well placed to benefit from the major trends that will continue to re-shape the international wealth management landscape in the years ahead.
At the end of March 2017, assets under management in France and Belgium totalled €11.3 billion, compared to €10.2 billion the previous year, including net inflows and a positive market effect.
We continue to focus our efforts on the development of our business in two specific strategic areas. The first is exploiting synergies across the Rothschild & Co Group and wider network. The second is identifying business development opportunities to advise entrepreneurs prior to the sale of their business, with a view to establishing long-term relationships.
Rothschild Patrimoine was recognised by its peers and won the Gold Trophy Leaders in the Specialised Private Banking category for the 3rd year in a row.
The merger between Rothschild & Co and Compagnie Financière Martin Maurel to create one of the largest private banks in France, announced in June 2016, was completed on 2 January 2017 by the merger of the two holding companies, bringing total assets under management to €21.6 billion.
The operational merger of the private banking activities of the two groups in France continues and is expected to be complete in the second half of 2017. The new group that will operate in France under the name of Rothschild Martin Maurel, offers a full range of services including private banking, asset management, financing and commercial banking. The merger will establish a more significant presence in France and in particular three key regions: Ile de France, Rhône-Alpes and Provence Alpes Côte d'Azur.
Rothschild Asset Management is a global specialist asset manager delivering bespoke investment management and advisory services to institutional clients, financial intermediaries and third party distributors.
With a strong track record across our core markets, we are proud to count some of the most reputable institutional investors among our clients.
Our development relies on two core and complementary expertise in active and fundamental management and open architecture investment solutions, both in traditional asset classes and alternative assets:
In addition, our teams also developed innovative risk-based investment solutions using state-of-the-art technology and the latest sophisticated risk management models to offer clients tailor-made portfolios.
We have recognised expertise in active fundamental management, in Europe as well as in the US.
In Paris, our offer is built around a few areas of expertise with the goal of becoming a leading conviction management player in Europe. Our experienced management teams are stable and have recognised know-how in the asset classes they deal with: European equities with or without any style bias ("growth", "value"), credit and convertible bonds and flexible diversified management.
In New York, we offer investments covering a range of US securities including large-cap, small/mid-cap, small-cap and balanced strategies. We seek to provide superior performance while controlling risk. Our seasoned teams of investment professionals use a disciplined investment philosophy and an integrated process focused on fundamentals. We manage assets for a broad range of clients including: corporations, endowments, foundations, healthcare organisations, high net-worth investors, public pension funds, sub-advisory and Taft-Hartley plans. We are guided by a clear and strongly held investment philosophy that seeks to add value through stock selection while controlling benchmark risk.
Data from consulting firm FUSE Research Network shows that Rothschild Asset Management was the second-fastest growing asset manager for the one-year period with assets increasing from by 63%. We added 44 new institutional accounts, including four new subadvisory relationships, taking our assets from US\$6 billion on 31 March 2016 to US\$9.5 billion on 31 March 2017.
€15.9bn of assets managed in Paris
US\$9.5bn of assets managed in New York
(€8.9bn)
+63% US AuM growth over 1 year
We are among the French and European leaders in Open Architecture with more than €5 billion of assets managed or advised. Our offering consists of a range of open-ended funds invested in traditional asset classes or alternative assets, segregated mandates and advisory solutions.
Our Investment Solutions teams comprise experienced professionals who help our clients, whether large private or institutional investors, to manage their assets in compliance with our Company values: advice, family values, personal commitment and intellectual rigour.
On 'traditional' asset classes, we can offer equity, diversified or thematics portfolios managed in open architecture according to an effective and rigorous process.
In the area of alternative investment, our platform of managed accounts (InRIS) provides access to talented managers selected on a worldwide basis by our research teams. InRIS stand out from its competitors by providing innovative investment solutions designed to meet the needs of investors 'with an offer very selective, deliberately limited and a very strict selection process.
The US Alternatives team successfully launched the R Alternative Income Fund with seed capital from a US pension asset manager. The Fund utilises a combination of niche, capacity constrained income generating strategies to create a portfolio with a target net return of 8%.
The team also saw significant asset growth in the Rothschild Special Opportunities Fund, a customised mandate for a large US insurance and financial services company.
We propose advisory services based on risk management models to a broad range of French and international institutional investors that complement the other, already widely recognised asset management activities.
Based in New York, Rothschild Risk Based Investments PLC (RBIS) takes a new approach to portfolio construction, offering bespoke solutions based on risk.
These solutions are designed and adapted in accordance with the specific requirements of each client: reduction of volatility, improvement of the Sharpe ratio or reduction of the maximum drawdown.
Our relationship with National Bank Investments in Canada, where we subadvise a Canadian-equity and a global equity fund, continues to thrive. Assets increased from US\$172 million as of 31 March 2016 to US\$365 million as of 31 March 2017. In addition, our business has grown with the addition of two subadvised mandates on behalf of a large US-based insurance company.
We have a range of funds covering all focused expertise on which we have acknowledged expertise.
These funds are registered for sale in 10 European countries and in different legal forms are available to facilitate the cross-border marketing: fund under French law, Luxembourg SICAV, SICAV under Irish law, and in UCITS format.
• Fund Awards (Germany) • Best convertible bond fund over three years (Germany)
10 YEARS OF PERFORMANCE
These funds are regularly rewarded for the quality of their management.
Rothschild Merchant Banking is the investment arm of the Rothschild & Co Group with global commitments in excess of €6.2 billion across Corporate Private Equity, Secondaries, Multi-Managers funds and Co-Investments, Direct Lending and Credit Management. Our business is founded on a passion for investing, respect for risk and culture of partnership – all of which define our perspective as a business.
Since its foundation in 2009, Rothschild Merchant Banking has grown its assets under management from c.€1.1 billion to €6.2 billion currently through the launch of a series of funds in private equity and private debt. Our cohesive platform now provides a comprehensive offering in Europe.
Our business culture is shaped by the Rothschild family's investing tradition of consistently generating long-term value through an equal emphasis on both risk and return. This is driven by three intertwined principles which define who we are today:
investors, our managers, our people, our advisers and financiers, and the broad the environment in which we work. We invest significant amounts of capital alongside our investors in each of our funds. Our aspiration is to have a culture of partnership with a shared sense of collective purpose in every important decision we make.
As at 31 March 2017, our assets under management amounted to €6.2 billion split between €2.6 billion in private equity and €3.6 billion in private debt across four strategies:
Overall, the business employs 70 investment professionals across four offices (London, Paris, Los Angeles and Luxembourg).
We are committed to Environmental, Social and Governance (ESG) matters and are signatory to the UN PRI (United Nations Principles for Responsible Investment). In 2016, Rothschild Merchant Banking has supported four NGOs and social enterprises focusing on enhancing the prospects of disadvantaged young people globally through a partnership with Epic Foundation. Our partnership is based on individual commitments from our staff with a matching scheme from Rothschild & Co.
€6.2bn of Assets under Management
70 investment professionals
4 strategies
(in billions of euros, as at 31 March)
Note: Assets under management comprise committed capital where a managed fund is still in its investment period, and includes net asset value after the investment period has expired.
| Private equity | Private debt | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Corporate Private Equity |
Secondaries | Multi Managers Funds |
Co Investments |
Direct Lending | Credit Management | ||||
| Name | FAPI | FASO | Arolla | RPI(1)/RPO | FACS | FADL | Oberon & Managed Accounts |
Elsinore | CLOs |
| Geography | Europe | Europe | Global | Global | Europe | Europe | Europe | Europe/US | Europe/US |
| Assets under management (current) |
€1.4bn | €680m | €158m(2) | €364m(3) | €415m | €160m(2) | €1.1bn | €96m(2) | €1.8bn |
(1) RPI, formerly known as Paris Orléans Proprietary Investments.
(2) Fundraising in progress as of 31 March 2017.
(3) Including RPO invested share.
In the future, we plan to continue to grow our assets under management by raising the successor funds to our main strategies and continuing to broaden our product range in investment themes where we see a market opportunity. We will do so through the launch of new funds and managed accounts.
Overall, Rothschild & Co's share of the investments we managed was valued at €467 million as at 31 March 2017. Over the period, the business generated €126 million of cash flows thanks to the disposal of assets and invested €78 million in new investments.
Rothschild Merchant Banking continued to perform strongly during 2016/2017 generating revenue of €141 million (2015/2016: €107 million), an increase of 32%. This significant improvement was driven by the performance of the funds forming part of the Five Arrows business line (corporate private equity, secondaries and private debt) driving both investment gains for the Group and carried interest recognition.
Our revenues comprise management fees calculated with reference to assets under management, investment profits (from direct investments and partnership interests in the funds we manage) and carried interest.
2014/15 145 44 51 117 2013/14 35 41 76 2012/13 31 38 69 63 90 2015/16 2016/17
– Management fees
Recurring revenue: Investment Performance-related revenue:
Revenue from Merchant Banking comprises two main sources:
107 141
– less €2 million of provisions (2015/2016: €12 million).
| in millions of euro | 2017 | 2016 |
|---|---|---|
| Managed funds | 286 | 244 |
| Private Equity | 174 | 155 |
| FAPI (Equity) | 136 | 130 |
| FASO/Arolla (Equity) | 38 | 25 |
| Private debt | 112 | 89 |
| Oberon/CLOs | 84 | 60 |
| FACS/FADL (junior credit) | 28 | 29 |
| Rothschild Proprietary Investments (RPI) | 181 | 194 |
| Growth capital | 75 | 73 |
| Strategic holdings | 44 | 44 |
| External private equity funds | 29 | 33 |
| LBO/Equity | 23 | 33 |
| LBO/Mezzanine | 8 | 8 |
| Other | 2 | 3 |
| TOTAL GROSS ASSETS | 467 | 438 |
As of March 2017, the Group held private equity and private debt assets valued at €467 million.
Disposals generated proceeds of €126 million driven by successful exits in the FAPI I portfolio and continued strong performance of the RPI portfolio.
During the year the Group's share of the investments made by the division amounted to €78 million, of which €64 million was the Group's own investments in funds managed by Merchant Banking, and €14 million was in proprietary investments (including those made as part of the RPO co-investment programme).
In private equity, we manage €2.6 billion with a team of 40 investment professionals. We have developed two different business lines:
FAPI is an initiative launched in 2010 as a roll-out of Rothschild & Co's successful European mid-market strategy. FAPI concentrates on expansion and buyout deals in the mid-market segment across Europe. It currently manages two funds: FAPI I, raised in 2010 for €583 million, and its successor FAPI II for €783 million, raised in 2015.
FAPI I is invested in 15 mid-cap companies in six different European countries. Thanks to its affiliation to Rothschild & Co, the fund has developed a rare pan-European reach and distinctive sector plays in selected segments of the economy which it believes enjoy positive tailwinds: healthcare, data, software and technologyenabled services and business services.
In 2016, FAPI's portfolio had a robust performance, achieving aggregate sales and EBITDA growth in excess of 22% and 19%, respectively. In the 12 month to March 2017, FAPI I completed two exits: full exit of Autodata for a gross MOIC of 2.6x (GBP) and gross IRR of 43% and partial exit of Grand Frais (Prosol) for a gross MOIC of 3.1x. The remaining interest in Grand Frais was disposed post-reporting period, together with the partial exit of April 2016, the transaction resulted in a final gross MOIC of 3.3x and gross IRR of 27%.
Its successor fund, FAPI II, builds on the same strategy and is managed by the same team. During the reporting period, FAPI II completed three investments: I@D, a fast-growing digital platform, White Clarke Group, a leading software vendor to the automotive and asset finance sectors and Lafayette Conseil, a French disruptive pharmacy retail concept. In total, FAPI II has four companies in its portfolio.
As at 31 March 2017, the net asset value of the Group's investment in FAPI I and II represented €136 million.
In January 2017, FAPI announced the exit of Autodata, generating local currency (GBP) gross returns of 2.6x MOIC and 43% IRR. FAPI sold its shares to Solera Holdings, a global leader in data and software for the automotive, home ownership and digital identity management ecosystems. Founded in 1975, UK-based Autodata has evolved from publishing iconic do-it-yourself manuals for car enthusiasts and garages, to delivering fully digital cloud-based diagnostics and repair intelligence for professional mechanics. FAPI invested in Autodata in May 2014, following the decision by the co-founders to sell the business after 40 years of ownership. FAPI's investment thesis was predicated on the potential to re-shape the company's strategic focus areas and transform Autodata into a leading technologyenabled data business. During FAPI's holding period, Autodata grew sales organically by 11% per annum, thanks to significant investment in the sales team, full migration to a scalable online platform and development of new products. FAPI provided active support in respect of the implementation of new commercial initiatives and supported management with the execution of three strategic add-on acquisitions of distributors in France, Finland and Sweden.
In September 2016, FAPI II invested in White Clarke Group, a leading software vendor to the automotive finance sector based in the UK, with offices in the US, Canada, China, Australia, Germany, Austria and India. The company provides a software platform through which leasing businesses manage their vehicle purchases from OEMs and set lease terms with the ultimate vehicle end users. The software platform is used as a comprehensive administrative tool, offering middle and back-end functionality that underpins the entire leasing value chain. FAPI had been tracking the company as part of the Technology Services initiative for several years. The transaction followed the decision of the founder, Ed White, to sell the business after almost 25 years of ownership. The management team who had owned a significant portion of the company pre-transaction is staying with the business and has re-invested a large portion of their proceeds alongside FAPI into the new deal. The company is performing per plan and the team is working on several value enhancement and growth initiatives.
FASO focuses on European small and mid-cap secondary transactions. FASO purchases assets, whether portfolios of companies or fund shares, from sellers seeking liquidity, divesting non-core assets, or affected by regulatory constraints as well as from fund managers rebalancing portfolios. It currently manages two funds: FASO III, raised in 2012 (€259 million) and FASO IV, raised in 2016/2017 (€459 million).
With c.80% of secondary direct and manager-led transactions, the FASO team's specific expertise on European secondary direct in the mid-market segment is a distinctive advantage and provides transactions, away from large auctions, where value creation can be brought to portfolio companies to enhance returns.
FASO III completed 18 transactions, of which two were during the reporting year, offering exposure to more than 13 different business sectors across Europe. The fund is developing very well, with a significant part of the capital already having been paid back to investors.
Its successor fund, FASO IV, completed four investments only a few months after its fundraising. In all four cases, these transactions were proprietary with no auction process and are the fruits of strong relationships developed over time with the incumbent managers. This portfolio is already well-spread across Europe.
As at 31 March 2017, the net asset value of the Group's investment in FASO III and IV represented €37 million.
Arolla is Rothschild Merchant Banking's global multimanagers private equity platform. Arolla capitalises on the Group's private equity expertise and over-the-cycle performance to invest globally across the private equity asset class: primary fund investments, secondary and co-investments. This combination of our flexibility and experience in multiple private equity strategies gives us a truly distinct perspective.
Arolla's focus is to give access to a carefully selected pool of top-tier managers, while enabling access to the wide array of Rothschild & Co's private equity initiatives. We pursue mid-cap investment opportunities generating appropriate risk-adjusted returns across various situations and geographies.
Arolla successfully closed over €158 million of commitments (final closing post-reporting period at €195 million), and is now 33% committed in 14 transactions across Europe, the US and Emerging Markets offering exposure to more than 85 companies.
As at 31 March 2017, the net asset value of the Group's investment in Arolla represented €1 million.
Rothschild Private Opportunities (RPO) In conjunction with RPI balance sheet investment activity, the RPI team also manages the Rothschild Private Opportunities (RPO) co-investment programme, an investment club launched in 2013 as a joint initiative between Rothschild Merchant Banking and Rothschild Private Wealth divisions for the exclusive benefit of key relationships of the Group. Since its inception, RPO has invested in nine companies on a global basis. The team is currently deploying RPO II (€240 million including Rothschild & Co's commitment).
Rothschild Proprietary Investments (RPI) Rothschild Proprietary Investments, formerly Paris Orléans Proprietary Investments, has been the historical investment arm of the Rothschild & Co Group, investing on an opportunistic basis since the 1990s.
From 2005 onwards, the RPI team has developed a strong co-investment expertise, investing alongside a proprietary network of international fund managers. It deployed over €500 million of capital in more than 80 transactions, mainly in growth capital and buy-out situations on a global basis, with a focus on North America, Europe and Emerging Markets.
RAC is the second largest provider of breakdown assistance services in the UK. The company is headquartered in Birmingham and has approximately 3,500 employees. In December 2011, RPI co-invested in RAC alongside Carlyle, as part of the acquisition of the company by Carlyle from Aviva Plc. Following a strong performance in the first two years of investment, the business delivered ahead of plan and two successful refinancing operations were completed in 2012 and 2013, returning RPI investment cost. In December 2014, a strategic stake in RAC was sold to GIC, which returned an additional 1.4x net multiple on initial investment. In April 2016, Carlyle and RPI sold their residual stake to CVC Capital Partners. Overall, total cash proceeds to RPI represented a realised MOIC of 3.5x and a IRR of 60% on a euro basis.
Rothschild Merchant Banking is active in the leveraged credit market through two different business lines:
Our private debt activities account for over €3.6 billion of assets under management and our team comprises 30 investment professionals.
As for all Merchant Banking initiatives, the affiliation with Rothschild & Co's other business activities provides significant market insight and sector knowledge which we believe materially enhance our credit selection processes.
Through our private debt activities, we are able to offer our investors access to both the European mid-size corporate credit market and the larger, broadly syndicated European and US LBO credit markets. This asset class is currently generating increased investor demand, as investors look to diversify away from lower yielding products and traditional fixed-income products.
FACS, the Group's junior debt fund, closed with €415 million of commitments in 2014 and is focused on the growing European direct lending market, originating and structuring customised junior/subordinated financing solutions for middle-market companies. The fund supports private equity sponsor, entrepreneur and family-owned businesses in transactions including leveraged buyouts, expansion and acquisition financings, as well as recapitalisations and refinancings. The fund has continued to demonstrate strong deployment momentum during the year and is, as of March 2017, c.80% deployed into 12 high-quality middle-market companies with attractive risk-reward propositions in line with the fund's investment mandate. The fund has also now achieved three successful exits from its portfolio, each delivering attractive returns in excess of the fund's target.
As at 31 March 2017, the value of the Group's investment in FACS represented €25 million.
In May 2015, FACS closed a sponsor-less acquisition financing for IT Lab. Owned by its founding entrepreneur, IT Lab is a leading provider of IT managed services and cloud-based IT services to small and medium-sized enterprises across the UK. FACS provided the financing to enable the company to complete two transformational and highly synergistic acquisitions, significantly enhancing the scale of the group and broadening its product offering. Following the successful integration of these acquisitions, the business was sold to a leading UK mid-market private equity sponsor in June 2016. The FACS loan was repaid in full on the sale of the business, generating a highly attractive 28.3% gross IRR for the fund.
In July 2016, FACS provided junior debt financing to support the buyout of Exemplar Healthcare by Agilitas Private Equity. Exemplar is a leading UK provider of residential nursing care for individuals with complex physical, mental and learning disabilities. The company focuses on the high acuity segment of the market, principally treating individuals with long-term and often degenerative conditions including Huntington's disease, early onset dementia and acquired brain injuries. With attractive opening leverage compared to other similar healthcare transactions, the FACS junior loan benefits from an attractive risk-reward profile, given the stability and recurrence of the customer base and the significant degree of freehold property backing.
Given the strong growth seen in the European direct lending market, driven by the regulatory and capital constraints faced by traditional bank lenders and evidenced by the high volume of relevant deal-flow already being sourced by the FACS team, Rothschild Merchant Banking has launched a new investment vehicle, Five Arrows Direct Lending, to address this opportunity. This fund focuses on providing senior-ranking unitranche financings to middle-market European borrowers, in contrast to the junior debt financing provided by FACS. We believe that the combination of high contractual gross returns, regular income distributions and strong downside protection represents a highly attractive value proposition for investors at a time when yields on conventional fixed income products are at historical lows.
In December 2016, FADL completed its first closing at €160 million and has, in April 2017, completed a second closing bringing total commitments to €345 million, with a final closing expected to be above the fund's original €400 million target. The fund's investment programme is now underway, with two investments having been signed. These transactions are expected to close in the second quarter of 2017 on receipt of regulatory approvals.
Rothschild Credit Management (RCM) is active in both the European and US leveraged loan markets. It has €3 billion of assets under management across CLO funds, senior credit funds, multi-strategy credit and managed accounts. RCM's investment strategy is to actively manage a diversified portfolio of secured loans and bonds across the corporate leveraged loan market in Europe and the US.
All the funds are characterised by a highly selective, conservative investment strategy designed to deliver consistent returns from performing credits. The funds will typically invest in senior secured loans in mid to large-cap borrowers with EBITDA in excess of €75 million.
During the year to 31 March 2017, the RCM team raised €275 million for its third Oberon fund with a target in excess of €350 million for the final close expected in the third quarter of 2017. Oberon III is a closed-end credit fund invested across a portfolio of secured, fully performing credits.
Over €1.2 billion has been raised in the Oberon strategy since inception, with the launch of Oberon IV planned for the fourth quarter 2017. The Oberon strategy continues to deliver predictable quarterly cash yields to its investors and demonstrates strong levels of return when compared to the benchmark Credit Suisse Western European Leveraged Loan Index.
Launched in 2016, Elsinore I Multi Strategy Credit Fund focuses on a range of credit strategies, including senior and junior debt, high-yield bonds and structured products. €96 million has been raised to date for this strategy.
The combined European and US teams consist of 20 investment professionals who currently actively manage five CLO funds:
• three Ocean Trails CLOs invested in US assets; and • two Contego CLOs invested in European assets.
All our CLO funds exhibited strong performance during the year, with both the European and US teams continuing to maintain performance levels above their respective benchmark indices.
During 2016/17, RCM launched two CLOs, Contego III CLO B.V., a €300 million European CLO and Ocean Trails VI LLC, a US\$300 million CLO on the back of strong investor demand for this type of product and RCM's solid track record.
Contego IV CLO B.V. is currently fundraising with a final target of c.€400 million planned for the second quarter of 2017.
As at 31 March 2017, the Group's investment in the Oberon Strategy and Contego CLOs represented €84 million.
Dell International LLC
vendor.
Multiplan, Inc.
| Results for the 2016/2017 financial year | |||||
|---|---|---|---|---|---|
| Information of the Company and share capital | 59 | ||||
| Corporate governance | 73 | ||||
| Internal control and risk management procedures | 96 | ||||
| Corporate Social Responsibility | 104 |
| In millions of euro | 2016/2017 | 2015/2016 | Var % |
|---|---|---|---|
| INCOME STATEMENT | |||
| Revenues | 1,767 | 1,589 | 11% |
| Staff costs | (1,016) | (954) | 6% |
| Administrative expenses | (279) | (267) | 4% |
| Depreciation and amortisation | (32) | (37) | (14)% |
| Impairments | (11) | (12) | (8)% |
| Operating income | 429 | 319 | 34% |
| Other income/(expense) (net) | 7 | 103 | (93)% |
| Profit before tax | 436 | 422 | 3% |
| Consolidated net income | 366 | 357 | 3% |
| Net Income – Group share | 186 | 232 | (20)% |
| Exceptionals(1) | 7 | (97) | (108)% |
| Net Income – Group share excl. exceptionals | 193 | 135 | 43% |
| EPS(2) | €2.64 | €3.37 | (22)% |
| EPS excl. exceptionals | €2.74 | €1.95 | 41% |
| ROTE | 14.0% | 19.4% | |
| ROTE excl. exceptionals | 14.6% | 11.3% | |
| BALANCE SHEET | |||
| Total assets | 12,177 | 9,022 | 35% |
| Cash and amounts due from central banks | 3,907 | 3,500 | 12% |
| Loans and advances to customers | 2,867 | 1,488 | 93% |
Due to customers 8,063 5,468 47% Non-controlling interests 472 516 (9)% Shareholders' equity – Group share 1,829 1,529 20%
(1) Exceptional items for 2016/2017 comprise €11 million of integration costs in respect of the merger with CFMM, at Net income – Group Share level it was €7 million. Exceptional items for 2015/2016 comprise €99 million following the sale of the UK asset finance business, FALG, at Net Income – Group Share level it was €97 million. (2) Diluted EPS is €2.60 for FY 2016/2017 (2015/2016: €3.32).
The consolidated accounts for the 2016/2017 financial year are set out on pages 122 onwards of this report.
For the 2016/2017 financial year, revenue was €1,767 million (2015/2016: €1,589 million), representing an increase of €178 million or +11%. The uplift was largely due to a record year in Global Advisory whose revenues increased by €150 million and Merchant Banking by €34 million. Private Wealth and Asset Management revenues were up €26 million of which €24 million was due to the merger with Compagnie Financière Martin Maurel. When comparing these revenues with the previous year, it should be noted that it includes FALG, the Rothschild & Co's UK asset finance business sold in November 2015, for seven months in 2015/2016 amounting to €23 million. The translation impact of exchange rate fluctuations resulted in a decrease in revenues of €77 million.
For the 2016/2017 financial year, staff costs were €1,016 million (2015/2016: €954 million), representing an increase of €62 million, largely due to higher variable staff compensation in connection with record revenues in Global Advisory. The translation impact of exchange rate fluctuations resulted in a decrease in staff costs of €54 million. The Group's compensation ratio, which shows staff costs as a percentage of revenues, was 64.6% as at 31 March 2017 (31 March 2016: 64.8%). When adjusting for the effects of senior hiring in the US for the Global Advisory business, and exchange rates, the ratio decreased from 63.7% to 63.4%.
Overall Group headcount increased from 2,829 to 3,410 as at 31 March 2017, largely due to the merger with Compagnie Financière Martin Maurel (+463), new junior staff recruitment and hires in the US.
For the 2016/2017 financial year, administrative expenses were €279 million (2015/2016: €267 million), a net increase of €12 million, of which €11 million relates to integration costs in respect of the merger with Compagnie Financière Martin Maurel. The translation impact of exchange rate fluctuations resulted in a decrease in administrative expenses of €8 million.
For the 2016/2017 financial year, impairment charges and loan provisions were €11 million compared to €12 million the previous year. Of this amount, €3 million is related to the legacy banking book, and the remainder mainly relates to Global Advisory receivables.
For the 2016/2017 financial year, other income and expenses, which include results from equity accounted companies, was a net income of €7 million (2015/2016: €103 million). Last year's figure included €99 million of exceptional profit following the sale of the Rothschild & Co's UK asset finance business, FALG.
For the 2016/2017 financial year, the income tax charge was €70 million (2015/2016: €65 million) comprising a current tax charge of €64 million and a deferred tax charge of €6 million, giving a reported tax rate of 16.1% (2015/2016: 15.4%).
For the 2016/2017 financial year, the charge for Non-controlling interests was €180 million (2015/2016: €125 million). This mainly comprises interest on perpetual subordinated debt and preferred dividends payable to French partners that increased over the period in line with the strong performance of the French Global Advisory business.
Moreover, the review of the Group's activities by businesses during the 2016/2017 financial year is presented on pages 12 onwards of this report.
| Alternative Performance Measures |
Definition | Reason for use | in this chapter | Reference to the data | |
|---|---|---|---|---|---|
| Net income – Group share excluding exceptionals |
Net income attributable to equity holders excluding exceptional items. | in a financial year. | To measure Net result Group share of Rothschild & Co excluding non-recurring items of a significant amount, such as exceptional gains or losses |
||
| EPS excluding exceptionals |
EPS excluding exceptional items. | To measure Earnings per share of Rothschild & Co excluding non-recurring items of a significant amount. |
Please refer to Section 1.1 above. |
||
| Adjusted compensation ratio |
Ratio between adjusted staff costs (€1,120m for 2016/2017 and €1,012m for 2015/2016) divided by consolidated Net Banking Income of Rothschild & Co (€1,767m for 2016/2017 and €1,589m for 2015/2016). Adjusted staff costs represent: • staff costs accounted in the income statement (which include the effects of accounting for deferred bonuses over the period in which they are earned as opposed to the "awarded" basis); • to which must be added the amount of profit share paid to the French partners; • from which must be deducted redundancy costs, revaluation of share-based employee liabilities and acquisition costs treated as employee compensation under IFRS; – which gives Total staff costs (€1,142m for 2016/2017 and €1,030m for 2015/2016) in calculating the basic compensation ratio; • from which the investment costs related to the recruitment of senior bankers in the United States must be deducted; • the amount of adjusted staff costs is restated by the exchange rate effect to offset the exchange rate fluctuations from one year to the next; – which gives the adjusted staff costs (€1,120m for 2016/2017 and €1,012m for 2015/2016) for the compensation ratio. |
To measure the proportion of Net Banking Income granted to all employees. Key indicator for competitors listed investment banks Rothschild & Co calculates this ratio with adjustments to give the fairest and closest calculation to that used by other comparable listed companies. |
table below. | Please refer to the | |
| Return on Tangible Equity (ROTE) excluding exceptional items |
Ratio between Net income – Group share excluding exceptional items (€193m for 2016/2017 and €135m for 2015/2016) and average tangible equity Group share over the period (€1,325m for 2016/2017 and €1,195m for 2015/2016). Tangible equity corresponds to total equity Group share less intangible assets and goodwill. |
To measure the overall profitability of Rothschild & Co excluding exceptional items on the equity capital in the business. |
Please refer to Section 1.1 above. |
||
| Rothschild Global Advisory (RGA) Operating margin |
RGA Operating income (€203m for 2016/2017 and €167m for 2015/2016) divided by RGA revenue (€1,190m for 2016/2017 and €1,040m for 2015/2016). |
To measure RGA business profitability. |
table below. | Please refer to the | |
| RGA Compensation ratio |
RGA adjusted staff costs (€769m for 2016/2017 and €674m for 2015/2016) divided byRGA revenue (€1,190m for 2016/2017 and €1,040m for 2015/2016). Adjusted staff costs represent: • staff costs accounted in the management accounts for this division on an awarded basis (so not reflecting deferral accounting); and • from which the redundancy costs and the investment costs related to the recruitment of senior bankers in the United States must be deducted. |
To measure the portion of Please refer to the revenue granted to RGA's table below. employees. |
|||
| 2016/2017 | 2015/2016 | ||||
| Adjusted compensation ratio | 63.4% | 63.7% | |||
| RGA Operating margin | 17.1% | 16.1% | |||
| RGA Compensation ratio | 64.6% | 64.8% |
| In millions of euro | 2016/2017 | 2015/2016 |
|---|---|---|
| INCOME STATEMENT | ||
| Current income before tax | 59 | 42 |
| Income from capital transactions | (2) | 22 |
| Net income | 61 | 62 |
| BALANCE SHEET | ||
| Balance sheet total | 1,845 | 1,572 |
| Non-current financial assets | 1,700 | 1,479 |
| Current assets | 136 | 89 |
| Borrowings and other financial liabilities | 95 | 29 |
| Shareholders' equity | 1,595 | 1,441 |
The solo accounts of the Company for the 2016/2017 financial year are set out on pages 187 onwards of this report.
| In euro | 31/03/17 | 31/03/16 | 31/03/15 | 31/03/14 | 31/03/13 |
|---|---|---|---|---|---|
| I – Financial position at the end of the financial year | |||||
| a) Share capital | 154,580,024 | 142,274,072 | 142,274,072 | 142,208,216 | 141,806,058 |
| b) Number of shares and investment certificates issued | 77,290,012 | 71,137,036 | 71,137,036 | 71,104,108 | 70,903,029 |
| c) Maximum number of future shares to be created | – | – | – | – | – |
| II – Overall result of effective operations | |||||
| a) Revenues exclusive of tax (financial and operating income) | 88,134,524 | 68,170,967 | 26,542,974 | 25,238,744 | 132,789,534 |
| b) Income before tax, amortisation and provisions | 52,866,266 | 63,837,937 | 8,507,693 | 6,478,796 | (746,339) |
| c) Corporate income tax(1) | (3,885,460) | 2,580,799 | (3,832,636) | (2,029,187) | 1,829,465 |
| d) Income after tax, amortisation and provisions | 60,712,772 | 61,498,968 | 11,764,158 | 9,985,781 | 119,878,114 |
| e) Distributed income, excluding treasury shares | 52,557,208(2) | 44,562,497 | 42,423,795 | 35,233,340 | 35,161,483 |
| III – Earnings per share data | |||||
| a) Income after tax, but before amortisation and provisions | 0.63 | 0.93 | 0.07 | 0.06 | (0.04) |
| b) Income after tax, amortisation and provisions | 0.79 | 0.86 | 0.17 | 0.14 | 1.69 |
| c) Dividend per share | 0.68(2) | 0.63 | 0.60 | 0.50 | 0.50 |
| IV – Employees | |||||
| a) Average employee headcount | 19 | 23 | 25 | 29 | 27 |
| b) Total of the payroll | 3,036,180 | 3,164,335 | 3,451,711 | 5,230,484 | 3,411,558 |
| c) Total employee benefits (social security, welfare, etc.) | 1,764,709 | 1,816,360 | 1,595,239 | 2,887,383 | 2,012,034 |
(1) Negative amounts correspond to tax benefits.
(2) Dividend proposed to General Meeting of shareholders of 28 September 2017.
The Managing Partner will propose to the General Meeting of shareholders that the income for the 2016/2017 financial year be appropriated as follows:
| In euro | ||||
|---|---|---|---|---|
| Net profit for the financial year | ||||
| Appropriation to the legal reserve | (1,221,595) | |||
| Credit retained earnings | 103,240,418 | |||
| Distributable profit | 162,731,595 | |||
| Profit share allocated to the General Partners | ||||
| Appropriation | ||||
| • to the payment of a gross dividend of €0.68 per share(1) to shareholders |
52,557,208 | |||
| • to retained earnings |
109,360,729 |
(1) Out of a total of 77,144,972 shares and 145,040 investment certificates eligible for a dividend.
The Company's net profit amounts to €60,712,772 (€61,498,967 for the previous year).
This net profit, less the amount of €1,221,595 assigned to create the legal reserve and in addition to retained earnings of €103,240,418 makes a distributable net profit of €162,731,595 (€148,545,645 for the previous year).
In accordance with the provisions of article 14.1 of the Company's articles of association, an amount of €813,658 (€742,728 for the previous year) equal to 0.5% of this net profit, will be automatically allocated for payment to the two General Partners, Rothschild & Co Gestion SAS and Rothschild & Co Commandité SAS.
The payment of a dividend of €0.68 per share to shareholders will be submitted for approval to the General Meeting to be held on 28 September 2017. The ex-dividend date shall be 2 October 2017 and the dividend shall be payable on 4 October 2017.
In accordance with applicable statutory provisions, the dividends distributed by the Company to the shareholders in respect of the last three financial years were as follows:
| 31/03/16 | 31/03/15 | 31/03/14 | |
|---|---|---|---|
| Number of shares and investments certificates which could qualify for a dividend payment(1) | 70,137,036 | 70,706,325 | 70,466,680 |
| Gross dividend per share (in euro) | 0.63 | 0.60 | 0.50 |
| Total amount distributed (in euro) | 44,562,497(2) | 42,423,795 | 35,233,340 |
(1) Number of shares and investment certificates that could qualify for a dividend, held on the detachment date and excluding treasury shares and investment certificates held by the Company. (2) As authorised by the General Meeting of 29 September 2016 in its 2nd resolution, the Managing Partner revised the final amount of the actual distribution as the Company did not receive a dividend in respect of the shares it held on the payment date; the amount of the dividend corresponding to these shares was automatically added to retained earnings.
The Company's settlement periods for its accounts payable comply with Article L. 441-6 of the French Commercial Code. Accounts payable are settled within 30 days of receiving the invoice, unless otherwise arranged as part of a sales agreement or otherwise agreed between the parties.
| In thousands of euro | As at 31/03/17 | As at 31/03/16 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amounts not yet due | Amounts not yet due | |||||||||
| Gross | Amounts due |
Due within 30 days |
Due in 31 to 60 days |
Due in more than 60 days |
Gross | Amounts due |
Due within 30 days |
Due in 31 to 60 days |
Due in more than 60 days |
|
| Accounts payable | 643.1 | – | 643.1 | – | – | 183.9 | – | 183.9 | – | – |
| Accounts payable – invoices not yet received |
3,707.3 | – | – | – | – | 518.3 | – | – | – | – |
| Total accounts payable | 4,350.4 | – | 643.1 | – | – | 702.2 | – | – | – | – |
During the 2016/2017 financial year, as announced to the market in a joint press release of both companies dated 6 June 2016(1), Rothschild & Co merged with Compagnie Financière Martin Maurel(2).
From a strategic and operational perspective, the merger aimed to allow the Group to:
The Martin Maurel Group, of which Compagnie Financière Martin Maurel was the parent company, has been providing private banking, wealth management, asset management and financial advisory services to individuals, companies, foundations and associations since 1825. The Martin Maurel Group remains true to its ethical vision and believes that the bankers' role is to build a close relationship based on the experience and expertise of their employees and the collaborations that the Martin Maurel Group has had with the client. The vision is reflected by its determination to serve its clients, which has enabled the bank to achieve continuous and steady growth, resulting in almost €10 billion of assets under management, of which €7 billion was for private banking at the end of 2015.
The Private Wealth and Asset Management activities are one of the three arms of Rothschild & Co, which represents since the completion of the merger €66.6 billion of assets under management on a worldwide basis as at 31 March 2017. This activity has adopted a Trusted Advisor model and offers its clients long-term global advice based on two pillars: wealth structuring and discretionary portfolio management.
Integrating the two businesses would rely on the quality of the teams already in place and the unique complementarity that exists between the two groups. The new combined group will operate under the name Rothschild Martin Maurel in France, reflecting the desire to preserve the well-established partnership of the founding families and the values that they wish to perpetuate (please refer to Section 6 on page 57).
The merger between Rothschild & Co and Compagnie Financière Martin Maurel was completed on 2 January 2017, with a retroactive effect from an accounting and tax perspective on 1 January 2017.
Prior to this transaction, Rothschild & Co held 2.3% of Compagnie Financière Martin Maurel while the latter held 0.90% in Rothschild & Co. In accordance with the terms of the protocol signed in May 2016, the majority of the transaction was in the form of an exchange of shares on the basis of a parity of 126 Rothschild & Co shares per Compagnie Financière Martin Maurel share. The Bernard Maurel family received shares and reinforced its presence in the extended family concert of Rothschild & Co, of which it was already a member. The transaction was financed 62% by the issuance of new shares and 38% by external bank facilities of €88.3 million. The significant non-family shareholders of Compagnie Financière Martin Maurel had already agreed to tender their shares to the cash offer in accordance with the terms of the initial protocol.
In the context of the merger with Compagnie Financière Martin Maurel, and pursuant to a delegation of authority granted by General Meeting of the shareholders held on 29 September 2016, the Managing Partner of Rothschild & Co decided on 2 January 2017 to issue of 6,107,976 new shares with a nominal value of €2 each, representing a share capital increase of €12,215,952. This amount was accompanied by a merger premium amounting to €128,747,168.
The main legal steps of the process which concluded with the merger were:
Moreover, it has been specified that all shares issued on 2 January 2017 bear rights to current dividend and notably are eligible to receive any new distributed dividends, advances on dividends as well as any reserves created after the issue of the shares. Nevertheless these shares did not give rights to regular distributed dividends for the year ended 31 March 2016, which was approved during the Rothschild & Co General Meeting that took place on 29 September 2016 and which approved the merger.
(2) The main terms of the merger were set out in a press release dated 24 August 2016 drafted in accordance with Article 12 of the AMF instruction 2005-11 of 13 December 2005 as amended. This press release is available on Rothschild & Co's website (http://www.rothschildandco-documents-sur-la-fusion-2016.com/10\Rothschild\_and\_Co\_press\_release\_prepared\_in\ accordance_with_article_12_of_AMF_instruction_2005-11(English_translation).pdf).
(1) This press release is available on Rothschild & Co's website (https://www.rothschildandco.com/WorkArea/DownloadAsset.aspx?id=3363&LangType=2057).
A joint press release of the Company and Compagnie Financière Martin Maurel dated on 2 January 2017(3) announced to the market the successful implementation of the merger.
As a result of the merger between Rothschild & Co and Compagnie Financière Martin Maurel, the Company acquired the following Martin Maurel entities identified in the structure chart below as at 31 March 2017:
ACPR Regulated entities
AMF Regulated entities
Real estate entities
(3) This press release is available on Rothschild & Co's website (https://www.rothschildandco.com/en/newsroom/completion-merger-rco-and-cfmm/).
During the 2016/2017 financial year, Rothschild & Co acquired, directly or indirectly, the shareholdings in or controlling interests in the following companies, whose registered offices are located in France, as defined under Article L. 233-6, paragraph 1 of the French Commercial Code, notably due to the merger with Compagnie Financière Martin Maurel.
| Company name | Company form | % Group ownership indirect as at 31/03/17 |
|---|---|---|
| Banque Martin Maurel (BMM) | Limited company | 96.5% owned by Rothschild & Co |
| Martin Maurel Sella – Monaco (MMS) | Limited company | 55.0% owned by BMM |
| BBR Rogier | Limited company | 100.0% owned by BMM |
| HOGEP | Limited company | 35.0% owned by BMM |
| International Capital Gestion | Limited company | 100.0% owned by BMM |
| Martin Maurel Gestion (MMG) | Limited company | 99.9% owned by BMM |
| Optigestion | Limited company | 34.0% owned by BMM |
| Optigestion Courtages | Limited liability company | 95.0% owned by Optigestion |
| Courtage Etoile | General partnership | 99.0% owned by BBR Rogier |
| Martin Maurel Sella Gestion – Monaco | Limited company | 99.2% owned by MMS |
| CMFI | Limited company | 99.8% owned by BMM |
| Grignan Participations | Simplify joined stock company | 99.9% owned by Rothschild & Co |
| Hoche Paris | Limited company | 99.7% owned by BMM |
| Immobiliere Saint Albin | Simplify joined stock company | 100.0% owned by BMM |
| SCI du 20 rue Grignan | Real estate company | 99.9% owned by BMM |
| SCI du 6 rue de la Bourse | Real estate company | 99.9% owned by BMM |
| SCI Prado Marveyre | Real estate company | 99.9% owned by BMM |
| SCI VDP 1 | Real estate company | 36.0% owned by BMM and 35.0% by MMS |
| SCI VDP 2 | Real estate company | 99.0% owned by SCI VDP 1 |
| Rothschild Asset Management | Limited partnership | 100.0% indirectly owned by Rothschild & Co |
| Funds Selection | Limited partnership | 20.0% owned by Rothschild & Co |
Following the merger between Rothschild & Co and Compagnie Financière Martin Maurel, the two groups have been carrying out an internal reorganisation through an operational and legal combination of their banking and collective and institutional management businesses with the aim of:
At the date of this report, this proposed legal and economic reorganisation has not been implemented. It consists of the following transactions, all occurring on 1 July 2017:
Moreover, the Rothschild & Compagnie Banque's corporate name will be changed into Rothschild Martin Maurel.
The completion of the internal reorganisation is subject to the fulfilment of the following conditions precedent:
As a result of this reorganisation, the Rothschild & Co Group will be will be a leading independent family controlled private banking group operating in France, Belgium and Monaco, with a distinctive market positioning targeted notably at entrepreneurs. The Group will have combined AUM of c.€36 billion, will offer a particularly broad wealth management, asset management, financing and corporate finance advisory service and enjoy a greater geographic footprint in France.
On 21 March 2017, the Company announced(4) that it will change its financial year end from 31 March to 31 December. This will allow its subsidiaries to be aligned with the financial year end required for its regulated banking entities in France.
This change of year end will be submitted for approval to shareholders at their General Meeting to be held on 28 September 2017. More detailed information will be presented on this proposed change of the financial year end in the General Meeting Document.
The outlook for the current financial year, which will be following the change of financial year end of nine months, remains reasonable.
In Global Advisory, despite lower M&A market activity in the first quarter of 2017, the conditions for M&A continue to be positive. Rothschild & Co therefore expects the M&A market overall to be active for the rest of 2017, although the Group remains alert to the potential risk of volatility in the market. Rothschild & Co continues to recruit senior bankers in the US market where Rothschild & Co foresees strong potential for growth for its franchise over the next few years, given its current modest market share. This recruitment will marginally dilute Rothschild & Co's Global Advisory operating income during the investment phase.
Private Wealth & Asset Management is well positioned to deliver net assets inflows. The Martin Maurel integration will clearly contribute to growth in our market share in France.
In Merchant Banking, whilst the environment is very competitive, private equity markets remain healthy for value accretion and disposals. Rothschild & Co remains confident that assets under management will continue to grow due to the successful launch of debt and equity funds and the ability of its teams to develop new opportunities in line with their disciplined investment process.
A year after the vote for Brexit, the full impact of this decision on the relationship between the UK and the EU is far from clear, and it is unlikely to become so in 2017. Indeed, it is possible, given the complexity of the issues at stake, that some transitional arrangement will be required before the final negotiated position is reached and therefore we face an extended period of uncertainty.
As a firm which has operations in all the major economies of Europe the implications for our business model are relatively modest. Our multiple location model is resilient and very few changes to our legal and operating structure will be required as a consequence of Brexit. The biggest risk for our business is the impact on the UK economic environment.
We continue to monitor these issues closely. Nevertheless, as previously stated, we believe that, overall, Brexit will not be a significant challenge for our business.
The low interest rate environment of recent years impacts our business directly through the returns we make on our cash holdings, although there is variation between different currencies. Rothschild & Co's strategy has been to maintain a low risk profile for such holdings, which are predominantly with central banks but also investment grade bonds, systemically important banks and, more recently, money funds with the highest ratings and very strong liquidity profiles. Rothschild & Co has also deployed funds to support its strategy of growing private client lending in response to clients' increased demand for credit. This growth is in segments with strong collateral backing, such as Lombard lending and residential mortgages, based on conservative loan to value ratios.
From a client investment perspective, Rothschild & Co has not passed on negative interest rates to clients but the low interest rate environment makes it expensive to hold cash on their behalf, particularly Swiss francs and euros, and we are vigilant to ensure that any enhanced yields, where available, do not come at the expense of significantly higher risk. More generally, low yields, even on longer-dated fixed income securities, can affect both advised and discretionary portfolio construction processes. However, we interpret low rates as primarily the result of central bank policy and long-term liability management by institutions rather than as a sign that wider business conditions have taken a turn for the worse. Corporate profitability, outside the volatile energy and banking sectors, has been historically respectable and the corporates held in our portfolios in general have not responded to low rates by recklessly gearing their balance sheets.
Details on the other main risks identified by the Company for the 2016/2017 financial year are set out on pages 98 onwards of this report.
Rothschild & Co (formerly named Paris Orléans) was converted into a French partnership limited by shares (société en commandite par actions or SCA) by decisions of the General Meeting of shareholders on 8 June 2012 which approved a reorganisation of the Group(5) that constituted a major step forward in its ongoing international expansion and in the simplification of its structure.
One of these reorganisation stages consisted of converting the Company's form of incorporation into a partnership limited by shares to ensure the commitment and control of the Rothschild family over the long-term, leading to changes in the Company's structure and governance.
Under this legal form, the Company's share capital is divided into shares and the Company's structure as a partnership limited by shares is based on two categories of partners: the General Partners, with the status of "commerçant", who have an active role in the Company's business and are jointly and severally liable for the Company's debts, and the Limited Partners (also called shareholders), who are not actively engaged in the Company's business and whose liability is limited to the amount of their investment.
The Company's General Partners were designated in the articles of association when the Company was converted into a partnership limited by shares on 8 June 2012, for an unlimited period, and are controlled by members of the French and English branches of the Rothschild family:
The General Partners shall have unlimited joint and severally liability for the Company's debts. However, they shall be held liable only if the creditors have already issued the Company with a formal demand by extrajudicial instrument to settle its debts.
Losses shall be supported between the General Partners in equal shares (50% for Rothschild & Co Commandité and 50% for Rothschild & Co Gestion).
However, in the event of an annual distributable profit, a profit share (dividende préciputaire) equal to 0.5% of said annual distributable profit is allocated automatically to the General Partners who held such position during the year in question, and is distributed between them in the same proportions as the distribution of losses specified above. However, it is hereby specified that in the event that the status of General Partner was lost during the course of the year, the remuneration of the Partner in question in respect of the year will be calculated on a pro rata basis and the remainder shall be distributed between the other General Partners.
The General Partners have the power to appoint or revoke the Company's Managing Partner at any time, except for Managing Partners appointed under the Company's articles of association for which an approval from the Extraordinary General Meeting of shareholders is required in addition.
In the event of a cessation of duties of the Company's Managing Partner, the General Partners shall manage the Company pending the appointment of one or more new Managing Partners under the terms and conditions of the articles of association.
Under the provisions of the law, no decision is valid unless adopted by both categories of partners. As a result, the General Partners vote on all resolutions proposed to the General Meeting of shareholders, except the appointment of members of the Supervisory Board, the appointment and dismissal of the Statutory Auditors, the distribution of dividends for the year and the approval of regulated agreements and commitments, for which legal provisions expressly exclude General Partners' votes. Also, pursuant to Article 11.3 of the Company's articles of association, any transaction whose purpose or effect could fundamentally call into question the Group's independence, tradition of excellence, links to the Rothschild family or the role played by the Rothschild family, its use of the Rothschild name or the fact that the Group's main activities are financial activities must be approved by the General Partners, including when such transactions do not require authorisation from a General Meeting of shareholders.
The General Partners take decisions at the Managing Partner's discretion at a General Meeting or by written consultation. Whenever a decision requires the approval of the General Partners and the General Meeting of shareholders, pursuant to the law or the Memorandum and articles of association, the Managing Partner collects the General Partners' votes, in principle, before the General Meeting of shareholders and, in any event, no later than the close thereof.
Decisions or proposals that fall within the remit of the General Partners shall be adopted unanimously, except if the Company is converted to a French limited company (société anonyme) or a French limited liability company (société à responsabilité limitée) which only requires a majority of the General Partners.
The Limited Partners contribute capital and have therefore the status of "shareholders".
They do not take an active part in the Company's business but take decisions including, but not limited to the:
Decisions are adopted by Limited Partners during General Meetings of shareholders by a simple majority of the votes for ordinary decisions, and by a majority of two thirds of the votes for extraordinary decisions.
General Meetings are convened by the Managing Partner or by the Supervisory Board and decisions are made, in the conditions provided for by law, by a simple majority of the votes of shareholders attending or represented at the meeting in the case of Ordinary General Meetings, and by a two thirds majority of the votes of shareholders attending or represented at the meeting in the case of Extraordinary General Meetings.
(5) Detailed information on the Company's reorganisation is provided in the Document E filed with the AMF on 16 May 2012 under registration No E12-019 and attached to the Executive Board's report presented to the General Meeting of shareholders on 8 June 2012. These documents are available on Rothschild & Co's website.
General Meetings are held at the registered office or any other place indicated in the notice of meeting. General Meetings are chaired by the Company's Managing Partner or, with the agreement of the Company's Managing Partner, by the Chairman of the Supervisory Board; failing this, the General Meeting elects its chairman.
In application of Article 11 of the Company's articles of association, any shareholder or holder of voting rights certificates is entitled to attend General Meetings in accordance with the conditions provided for by law and by the articles of association. These persons may send their proxy forms or mail voting forms concerning any General Meeting in paper format or electronically. The Managing Partner has the power to accept any proxy form, voting form or shareholding certificate received or presented to the General Meeting. By decision of the Company's Managing Partner to use such telecommunication methods, indicated as such in the notice of meeting or invitation to attend, shareholders and holders of voting rights certificates who attend and vote at General Meetings of shareholders by videoconference or any other telecommunication enables that their identity to be verified are deemed to be present at the meeting for the purposes of quorum and majority.
In case of division of ownership of shares or voting rights certificates, the voting rights attached to the shares or the voting rights certificates belong to the bare owner (nus-propriétaires), except for decisions on the allocation of income, which belongs to the beneficial owners (usufruitiers).
More details on the terms and conditions of shareholders' attendance of Rothschild & Co's General Meetings are provided to shareholders in the notice of meeting to be published on the Company's website prior to the General Meeting in accordance with the law.
As at 31 March 2017, the Company's share capital is divided into 77,144,972 ordinary shares and 145,040 investment certificates. Moreover, 145,040 voting right certificates, not included in the share capital, are also circulating. A whole share is automatically consolidated by combining an investment certificate with a voting right certificate.
During the 2016/2017 financial year, two share capital increases were authorised and realised:
As at 31 March 2017, the total number of voting rights was as follows:
| Total number of voting rights | 31/03/17 |
|---|---|
| Exercisable | 120,641,809 |
| Theoretical(1) | 123,290,662 |
(1) The total number of theoretical voting rights includes voting rights attached to shares without the capacity to exercise the voting rights attached to them pursuant to applicable legal or regulatory provisions. The shares concerned are treasury shares and controlling shares. Pursuant to applicable legal and regulatory provisions, the crossing upwards of voting rights thresholds provided for by law or by the articles of association must be calculated based on the total number of theoretical voting rights, as made public by Rothschild & Co every month.
Each month, the Company issues a report on the total number of shares and voting rights comprised in the share capital available on its website (www.rothschildandco.com under section "Regulated Information").
Each share and voting right certificate is entitled to one voting right at the General Meetings. However, Article 11.1 of the Company's articles of association provides that, as from the General Meeting of shareholders of 8 June 2012, the holder of any fully paid share, held in the form of registered shares for at least two years in the name of a single holder, shall be entitled to two voting rights per share, without any limitation.
In case of capital increase, by incorporation of reserves, benefits or issue premiums, the double voting right is, as from the issuance date, attributed to the registered shares allocated to a shareholder as a consequence of former shares for which he benefits from a double voting right.
In the event of any transfer following inheritance, liquidation of marital property between spouses or donation inter vivos in favour of a spouse or relative entitled to inherit, the right remains acquired and the period hereinabove referred to is not interrupted. The double voting right is cancelled ipso jure of any share transferred for any other cause.
In case of division of shares and voting right certificates' ownership, the voting right attached to the share or to the voting right certificate is exercised by the bare owner (nus-propriétaires), except on decisions relating to the appropriation of income, where it is exercised by the beneficial owner (usufruitiers).
2.3.1 Background and legal framework
The shareholders' General Meetings of 26 September 2013 authorised the Managing Partner to grant stock options for the benefit of the senior employees and executive corporate officers of the Company and its subsidiaries.
Beyond the mere use of the legal authority to implement stock-options plans, the Company also wanted to promote the convergence of interests of the stock-options beneficiaries with the controlling family shareholder as well as other shareholders.
The schemes implemented (the "Equity Schemes") also include a characteristic specific to the Company, insofar as the intended beneficiaries of options are required to buy Rothschild & Co shares beforehand in order to be granted options. According to the rules and regulations of each Equity Scheme:
It was also agreed that beneficiaries of these options can only exercise their options if they remain in their management or executive role within the Group until the exercise date of the options, subject to some specific exceptions stipulated in the Equity Scheme rules and regulations.
Within the framework of this delegation of authority and characteristics specific to the Company, two Equity Schemes have been implemented and remained in force as at 31 March 2017.
The Equity Scheme implemented on 11 October 2013 (the "2013 Equity Scheme") was intended for some Global Advisory partners, as well as the members of the Group Executive Committee (formerly named the Group Management Committee), representing a total of 57 people operating in 10 different countries around the world.
In accordance with the aforementioned rules and regulations for the 2013 Equity Scheme, participants have been required to invest in a total of 780,000 Rothschild & Co shares, representing 1.10% of the Company's share capital at the grant date.
For each Rothschild & Co share invested, four stock options were awarded.
In accordance with the authorisation granted by the General Meeting of shareholders on 26 September 2013, the Company's Managing Partner decided, on 11 October 2013, to grant a total of 3,120,000 stock options. The options granted under the 2013 Equity Scheme are classified into four distinct categories, the Options 2013-1, the Options 2013-2, the Options 2013-3 and the Options 2013-4, respectively vesting on the 3rd, 4th, 5th and 6th anniversaries of the 2013 Equity Scheme, and exercisable on the vesting dates at a price of €17.50, €18, €19 and €20 per option, either by share subscription or by share purchase (the exercise option being decided by the Company's Managing Partner before the start of the exercise period).
By decisions on 23 September 2016, the Company's Managing Partner decided that all participants wanting to exercise the Options 2013-1 could exercise their options by subscription of newly issued Rothschild & Co's shares only.
During the 2016/2017 financial year, 55,000 Options 2013-1 were exercised.
Following on from the 2013 Equity Scheme, on 10 December 2015, Rothschild & Co implemented a second incentive scheme (the "2015 Equity Scheme"), for which participation was extended to some Wealth Management and Merchant Banking partners, representing a total of 10 participants.
In accordance with the aforementioned terms and conditions, 115,000 Rothschild & Co shares, representing 0.16% of share capital on the date of the 2015 Equity Scheme, were invested in this way.
As with the 2013 Equity Scheme, for each Rothschild & Co share invested, four stock options were awarded.
As a result, the Company's Managing Partner granted a total of 460,000 stock options.
The options granted under the 2015 Equity Scheme are classified into four separate categories, the Options 2015-1, the Options 2015-2, the Options 2015-3 and the Options 2015-4, acquired respectively on the 3rd, 4th, 5th and 6th anniversaries of the 2015 Equity Scheme, and exercisable on the vesting dates at a price of €23.62, €24.12, €25.12 and €26.12 per option, either by share subscription or by share purchase (the exercise option being decided by the Company's Managing Partner before the start of the exercise period).
(6) Within the framework of restricted share units under the Equity Scheme, a number of Rothschild & Co shares were acquired by Group entities in which Equity Scheme participants hold management or executive roles. These shares, intended to be awarded to holders of restricted share units after the vesting date and subject to certain conditions, are currently – and until the vesting date – treasury shares and therefore do not bear any voting rights.
| Options 2013 | Options 2015 | 31/03/17 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Options 2013-1 |
Options 2013-2 |
Options 2013-3 |
Options 2013-4 |
Options 2015-1 |
Options 2015-2 |
Options 2015-3 |
Options 2015-4 |
Total | |
| Date of authorisation by the General Meeting | 26 Sept. 2013 |
26 Sept. 2013 |
26 Sept. 2013 |
26 Sept. 2013 |
26 Sept. 2013 |
26 Sept. 2013 |
26 Sept. 2013 |
26 Sept. 2013 |
– |
| Grant date by the Managing Partner | 11 Oct. 2013 |
11 Oct. 2013 |
11 Oct. 2013 |
11 Oct. 2013 |
10 Dec. 2013 |
10 Dec. 2013 |
10 Dec. 2013 |
10 Dec. 2013 |
– |
| Total of options granted | 780,000 | 780,000 | 780,000 | 780,000 | 115,000 | 115,000 | 115,000 | 115,000 | 3,580,000 |
| Number of beneficiaries | 57 | 57 | 57 | 57 | 10 | 10 | 10 | 10 | – |
| Share capital % at the grant date | 1.10% | 1.10% | 1.10% | 1.10% | 0.16% | 0.16% | 0.16% | 0.16% | 5.03% |
| Performance requirement achievement rate | None | None | None | None | None | None | None | None | – |
| Exercise period start date | 30 Nov. 2016(1) |
11 Oct. 2017 |
11 Oct. 2018 |
11 Oct. 2019 |
10 Dec. 2018 |
10 Dec. 2019 |
10 Dec. 2020 |
10 Dec. 2021 |
– |
| Expiration date | 11 Oct. 2023 |
11 Oct. 2023 |
11 Oct. 2023 |
11 Oct. 2023 |
10 Dec. 2025 |
10 Dec. 2025 |
10 Dec. 2025 |
10 Dec. 2025 |
– |
| Subscription or purchase price (in euro) | 17.50 | 18.00 | 19.00 | 20.00 | 23.62 | 24.12 | 25.12 | 26.12 | – |
| Total options exercised | 55,000 | – | – | – | – | – | – | – | – |
| Total options cancelled | – | – | – | – | – | – | – | – | – |
| Total options remaining | 725,000 | 780,000 | 780,000 | 780,000 | 115,000 | 115,000 | 115,000 | 115,000 | 3,525,000 |
(1) The Options 2013-1 were due to vest on 11 October 2016. As a result of changes that were introduced in 2016 with the Market Abuse Directive, by decisions on 23 September 2016, the Company's Managing Partner decided that Options 2013-1 vested on 30 November 2016 immediately after the blackout period opened by the Company.
As at 31 March 2017, 3,525,000 options were still outstanding and exercisable in accordance with the terms and conditions of the 2013 and 2015 Equity Schemes.
The following table summarises the outstanding delegations granted to the Company's Managing Partner remain in force and in use during the financial year ended 31 March 2017.
| Purpose | Resolution number |
Individual limit | Period of validity |
Use during the 2016/2017 financial year |
|---|---|---|---|---|
| Combined General Meeting of 29 September 2016 | ||||
| To decrease, in one or several transactions, the share capital by cancelling treasury shares |
15 | Limited to 10% of the share capital per 24-month periods |
26 months | None |
| To increase, in one or several transactions, the share capital by incorporation of all or part of reserves, income or issue, merger or contribution premiums, by granting bonus shares, by increasing the par value of existing shares or by using such two methods jointly |
16 | Limited to a nominal amount of €50 million |
26 months | None |
| To issue, in one or several transactions, transferable securities with preferential subscription rights, giving access to the Company's share capital |
17 | Limited to a nominal amount of €70 million (share capital securities)(1) or €300 million (debt instrument)(2) |
26 months | None |
| To issue, in one or several transactions, transferable securities with waiver of preferential subscription rights, giving access to the Company's share capital by public offer |
18 | Limited to a nominal amount of €15 million(1)(3) (capital share securities) or €200 million (debt instrument)(2) |
26 months | None |
| To issue, in one or several transactions, transferable securities with waiver of preferential subscription rights and free fixing of issue price, giving access to the Company's share capital |
19 | Limited to 10% of the share capital per year(1)(3) (capital share securities) or €200 million (debt instrument)(2) |
26 months | None |
| To increase the number of securities to be issued when increasing the share capital with waiver or not of preferential subscription rights |
20 | To be deducted from the individual limit as stipulated in the resolution in respect of the initial issuance(1)(2) |
26 months | None |
| To grant options to subscribe for or purchase the Company's shares to employees and corporate officers of the Company and/or associated companies |
21 | Limited to 10% of the share capital as of the date of the General Meeting of shareholders of 29 September 2016(1) (with a specific limit of 0.72% for the Company's executive officers) |
26 months | Share capital increase of 45,000 shares following the exercise of 45,000 options by decisions of the Managing Partner on 7 December 2016(4) |
| To issue securities granting immediate or deferred access to the share capital reserved to the benefit of members of employee savings schemes |
22 | Limited to a nominal amount of €1 million(1)(2) |
26 months | None |
| To issue of ordinary shares in order to remunerate contributions in kind granted to the Company consisting of equities or securities giving access to the share capital |
25 | Limited to 10% of the share capital(3) | 26 months | None |
| Combined General Meeting of 24 September 2015 | ||||
| To grant bonus shares to employees and corporate officers of the Company and/or associated companies |
14 | 5% of the share capital as of the date of the decision to grant bonus shares |
38 months | None |
(1) To be deducted from the aggregate limit fixed by resolution No. 23 adopted by the General Meeting of shareholders of 29 September 2016 to €70 million for the share capital
securities. (2) To be deducted from the aggregate limit fixed by resolution No. 23 adopted by the General Meeting of shareholders of 29 September 2016 to €300 million for the debt instruments.
(3) It is specified that the increases of share capital with waiver of preferential subscription rights resulting from the implementation of the 18th, 19th and 25th authorisations to the Managing Partner are capped at a common ceiling of €15 millions.
(4) See details on page 60.
Moreover, the Company's Managing Partner, decided during its meeting held on 2 June 2017 to submit for approval to the General Meeting of shareholders on 28 September 2017, the following new delegation to be granted to the Company's Managing Partner:
• Delegation of authority granted to the Managing Partner to issue securities granting immediate or deferred access to the share capital, without preferential subscription rights, reserved for employees and executive officers.
More detailed information will be presented on this proposed delegation in the General Meeting Document.
2.5.1 Share buyback programme during the 2016/2017 financial year
In accordance with the provisions of Article L. 225-209 of the French Commercial Code, the share buyback programme approved by the shareholders at the General Meeting held on 29 September 2016 and in force during the 2016/2017 financial year, is as follows:
| Period of validity: Resolution approving the programme: Maximum number of shares: |
From 29 September 2016 to 29 November 2018 13 10% of the share capital at the date on which the purchases are made, however, the total number of the Company's own shares held, directly or indirectly, by it following such purchases shall not exceed 10% of those outstanding |
|---|---|
| Maximum purchase price per share: | €50 |
| Maximum amount: | €355,685,150 |
Under the current programme, the shares could be purchased, sold or otherwise transferred for the purposes set out in the European regulations and in accordance with the market prices accepted by the French Financial Markets Authority (Autorité des marchés financiers or AMF), namely to:
As required under Article L. 225-211 of the French Commercial Code, the table below summarises the transactions carried out by the Company this authorisation during the 2016/2017 financial year.
| Liquidity contract(1) |
Stock options coverage |
Other purposes |
Not covered by share buyback programmes(1)(2) |
TOTAL | |
|---|---|---|---|---|---|
| Number of shares as at 31 March 2016 | 54,000 | 238,095(4) | – | 114,299 | 406,394 |
| Shares purchased | 292,241 | – | – | 639,352 | 931,593 |
| Shares sold | (322,004) | – | – | (106,459) | (428,463) |
| Shares loaned to members of the Supervisory Board | – | – | 10 | – | 10 |
| Number of shares cancelled | – | – | – | – | – |
| Average price of purchases and sales(3) | |||||
| – Purchases (in €) | 23.57 | – | – | – | n/a |
| – Sales (in €) | 23.23 | – | – | 21.71 | n/a |
| Number of shares as at 31 March 2017 | 24,237 | 238,095 | 10 | 647,192 | 909,534 |
(1) The transactions are recorded after settlement-delivery.
(2) These treasury shares are not shares previously purchased by the Company under a share buyback programme but shares automatically consolidated by combining investment certificates historically held by the Company with purchased voting right certificates. These treasury shares are therefore not subject to the allocation obligations provided for by Article L. 225-209 of the French Commercial Code.
(3) Weighted averages of the share market prices for transactions settled from 1 April 2016 to 31 March 2017.
(4) Transactions disclosed to the AMF and published on the website of Rothschild & Co (press release of 22 October 2015).
In accordance with Article L. 225-212 of the French Commercial Code, Rothschild & Co provides the AMF with a monthly report on the shares acquired, sold, cancelled or transferred by the Company in application of Article L. 225-209 of said Code.
The General Meeting of shareholders of 28 September 2017 will be invited to adopt a new share buyback programme, in accordance with the provisions of Article L. 225-209 of the French Commercial Code, whose main characteristics are the following:
In accordance with legal and statutory requirements, the table below lists the shareholders of Rothschild & Co holding, as at 31 March 2017 and 31 March 2016, a percentage of the share capital or of the voting rights that exceeds the thresholds for disclosure as required under Article L. 233-9 of the French Commercial Code:
| 31/03/17 | 31/03/16 | |||||
|---|---|---|---|---|---|---|
| Shareholders | Total capital |
% of share capital |
% of exercisable voting rights |
Total capital |
% of share capital |
% of exercisable voting rights |
| • Rothschild Concordia SAS(1) | 24,806,341 | 32.10% | 41.12% | 24,806,341 | 34.87% | 39.93% |
| • David de Rothschild Family | 113,635 | 0.15% | 0.10% | 111,115 | 0.16% | 0.11% |
| • Éric and Robert de Rothschild Family | 437,763 | 0.57% | 0.58% | 437,763 | 0.62% | 0.69% |
| • Holding Financier Jean Goujon SAS(2) | 4,057,079 | 5.25% | 6.15% | 3,657,079 | 5.14% | 6.91% |
| • The Eranda Rothschild Foundation | 566,197 | 0.73% | 0.94% | 1,183,480 | 1,66% | 2.33% |
| • N M Rothschild & Sons Ltd(3) | 1,465,645 | 1.90% | 0.00% | 1,822,283 | 2.56% | – |
| • Bernard Maurel Family | 4,121,838 | 5.33% | 6.62% | – | – | – |
| • Other members of the Enlarged Family Concert(4) |
2,676,511 | 3.46% | 2.89% | 3,308,152 | 4,65% | 4.69% |
| Total Enlarged Family Concert(4) | 38,245,009 | 49.48% | 58.41% | 35,326,213 | 49.66% | 54.66% |
| Treasury shares | 1,054,574 | 1.36% | – | 551,434 | 0.78% | – |
| Other controlling shares(3) | 273,674 | 0.35% | – | 252,671 | 0.33% | – |
| Edmond de Rothschild Group(5) | 5,573,586 | 7.21% | 8.50% | 5,573,586 | 7.83% | 10.58% |
| Jardine Matheson Group | 4,217,310 | 5.46% | 6.99% | 4,217,310 | 5.93% | 8.31% |
| Float | 27,925,859 | 36.13% | 26.10% | 25,215,822 | 35.45% | 26.46% |
| TOTAL | 77,290,012 | 100.00% | 100.00% | 71,137,036 | 100.00% | 100.00% |
(1) For details on the control of Rothschild Concordia SAS, see details in Section 3.1.1.
(2) Controlled by Edouard de Rothschild.
(3) Group entities controlled by Rothschild & Co. According to applicable legal provisions, controlling shares cannot have voting rights.
(4) For the composition of the Enlarged Family Concert, see details in page 67.
(5) Entities of the Edmond de Rothschild Group acting in concert as disclosed to the AMF (AMF Decision & Information No. 214C2351 of 7 November 2014 – AMF Decision & Information No. 216C2637 of 23 November 2016).
To the Company's knowledge, no other shareholder holds as at 31 March 2017, directly or indirectly, alone or acting in concert, above 5% of the Company's share capital or voting rights.
The Company is controlled, since 2008, by a concert of members of the Rothschild Family (the "Initial Family Concert"), which extended to new members as from the Group Reorganisation of 2012 (the "Enlarged Family Concert"). The relations between concert members in relation to their shareholding in the Company are ruled by shareholders agreements whose main provisions are presented on pages 69 onwards.
The Group reorganisation in January 2008 resulted in the establishment of two shareholders agreements still effective at the date of this report.
The first shareholders' agreement was entered into on 25 January 2008 between shareholders of Rothschild Concordia SAS (the "Rothschild Concordia Shareholders' Agreement"), all members of the Rothschild family. The main provisions of this Rothschild Concordia Shareholders Agreement are summarised on page 69 of this report and set up an action in concert between the shareholders of Rothschild Concordia SAS in respect with the Rothschild & Co shares Rothschild Concordia SAS holds.
As at 31 March 2017, the shareholders of Rothschild Concordia SAS were as followed:
| Shareholders | Shares | % of share capital |
% of voting rights |
|---|---|---|---|
| David de Rothschild subtotal(1) |
269,551,815 | 33.02% | 33.02% |
| Éric and Robert de Rothschild subtotal(2) |
374,927,451 | 45.94% | 45.94% |
| Integritas subtotal(3) | 171,728,995 | 21.04% | 21.04% |
| Total Rothschild Concordia SAS |
816,208,261 | 100.00% | 100.00% |
(1) David de Rothschild, his family and holding companies controlled by his family.
(2) Éric de Rothschild and holding companies controlled by his family.
(3) Controlled by the English branch of the Rothschild family.
The second agreement concerns relations between Rothschild & Co and the Eranda Rothschild Foundation, covering in particular the terms and conditions of sale by the Eranda Rothschild Foundation of its shares in Rothschild & Co.
Pursuant to the provisions of Article L. 233-11 of the French Commercial Code, those two agreements were published by the AMF on 25 January 2008 (AMF Decision & Information No. 208CO180 of 25 January 2008).
Following the Group reorganisation in June 2012, the AMF was informed on 12 June 2012 of the new composition of the family concert extended to new members: Rothschild Concordia SAS, the David, Éric and Edouard de Rothschild family branches, certain members of the management bodies and Compagnie Financière Martin Maurel. On this occasion, the AMF was informed of the existence of a new shareholders' agreement (defined as the "Shareholders' Agreement" in Section 4.2) which main dispositions were published by the AMF (AMF Decision & Information No. 212C0752 of 13 June 2012 and Decision & Information No. 212C0783 of 19 June 2012), summarised on page 70 of this report.
In December 2014, the AMF was informed of the addition of four new members to the Enlarged Family Concert: Messrs. Nicolas Bonnault, Laurent Baril, Philippe Le Bourgeois and Christophe Desprez, four of the Group's Senior Managers. On this occasion, the AMF was informed of the execution of an amendment to the Shareholders' Agreement of June 2012 whose main provisions were published by the AMF (AMF Decision & Information No. 215C0073 of 14 January 2015).
During the financial year ended 31 March 2016, certain members of the Enlarged Family Concert (the David, Edouard, Éric and Robert family branches and Olivier Pécoux) acquired 404,142 additional Rothschild & Co shares on 19 October 2015, representing 0.39% of the Company's share capital. On this occasion, declarations were made to the AMF (AMF Decisions & Information No. 215DD396509, 215DD396510 and 2015DD396511 of 23 October 2015).
On 4 January 2016, the AMF was informed of the addition to the Enlarged Family Concert of a new member, Mr. Nigel Higgins, Managing Partner (formerly Chief Executive Officer) of Rothschild & Co Gestion SAS, after the acquisition of 4,362 shares (AMF Decision & Information No. 2016C0119 of 12 January 2016).
Moreover, the AMF was informed of a series of share reclassifications by certain members of the Enlarged Family Concert. On this occasion, six individuals within the concert contributed their shares to their holding companies, which are also members the concert. This series of share reclassifications, which was completed on 31 March 2016, resulted in the loss of double voting rights for members who had held their shares in registered form for more than two years, representing a gross loss of 434,000 voting rights for the Enlarged Family Concert.
On 2 January 2017, following the merger with Compagnie Financière Martin Maurel, Compagnie Financière Martin Maurel was replaced in the Enlarged Family Concert by its main three shareholders, Bernard Maurel, Lucie Maurel-Aubert and BD Maurel. An amendment agreement to the Shareholders' Agreement dated on 8 June 2012 has been entered into on the same date, to reflect their adherence to this agreement. On this occasion, the AMF was informed of the change in the shareholding structure of Rothschild & Co following the merger with Compagnie Financière Martin Maurel (AMF Decision & Information No. 217C0092 of 9 January 2017).
On 20 March 2017, the AMF was informed of the sale of shares held by the Eranda Rothschild Foundation (AMF Decision & Information No. 217C0678 of 20 March 2017).
As at 31 March 2017, the composition of the Enlarged Family Concert is as follows:
| Enlarged Family Concert members | Shares | % of share capital |
Voting rights | % of exercisable voting rights |
|---|---|---|---|---|
| Rothschild Concordia SAS | 24,806,341 | 32.10% | 49,612,682 | 41.12% |
| David de Rothschild Family(1) | 113,635 | 0.15% | 116,155 | 0.10% |
| Éric and Robert de Rothschild Family(1) | 437,763 | 0.57% | 704,893 | 0.58% |
| Holding Financier Jean Goujon SAS(2) | 4,057,079 | 5.25% | 7,417,764 | 6.15% |
| The Eranda Rothschild Foundation | 566,197 | 0.73% | 1,132,394 | 0.94% |
| N M Rothschild & Sons Ltd(3) | 1,465,645 | 1.90% | – | – |
| Philippe de Nicolay – Rothschild | 102 | 0.00% | 202 | 0.00% |
| Alexandre de Rothschild | 7,538 | 0.01% | 15,038 | 0.01% |
| François Henrot(1) | 762,470 | 0.99% | 1,238,730 | 1.03% |
| Olivier Pécoux Family(1) | 484,339 | 0.63% | 783,668 | 0.65% |
| Nigel Higgins | 11,971 | 0.02% | 11,971 | 0.01% |
| Rothschild & Co Gestion SAS | 1 | 0.00% | 2 | 0.00% |
| Bernard Maurel Family(1) | 4,121,838 | 5.33% | 7,992,180 | 6.62% |
| Nicolas Bonnault(1) | 328,260 | 0.42% | 338,260 | 0.28% |
| Laurent Baril(1) | 404,570 | 0.52% | 414,570 | 0.34% |
| Philippe Le Bourgeois(1) | 293,260 | 0.38% | 303,260 | 0.25% |
| Christophe Desprez(1) | 384,000 | 0.50% | 384,000 | 0.32% |
| Total Enlarged Family Concert | 38,245,009 | 49.48% | 70,465,769 | 58.41% |
(1) Including their family holding company.
(2) Controlled by Edouard de Rothschild. (3) Group entity controlled by Rothschild & Co without voting rights, in accordance with applicable legal provisions.
Pursuant to Article L. 233-7 of the French Commercial Code, any individual or legal entity, acting alone or in concert with others, that comes into possession of more than 5%, 10%, 15%, 20%, 25%, 30%, 33.33%, 50%, 66.66%, 90% or 95% of Rothschild & Co's share capital or voting rights, must inform the Company and the AMF no later than the close of business on the 4th trading day following attainment of the threshold, and disclose the total number of shares, investment certificates or voting rights held. This disclosure obligation shall apply under the same conditions when the portion of the share capital or voting rights held drops below these thresholds.
In addition to thresholds crossings subject to legal provisions, Article 7.3 of Rothschild & Co's articles of association establishes disclosure obligations for shareholders who come into possession of a number of shares or voting rights equal to or greater than 1% of the Company's share capital or voting rights, or any multiple of this threshold. This disclosure obligation shall apply under the same conditions when the portion of the share capital or voting rights held drops below these thresholds. The shareholders must inform the Company within the timeframe provided for by law, by registered letter with acknowledgement of receipt, stating whether the number of shares, investment certificates or voting rights are or are not held on behalf of, under the control of, or in concert with, other individuals or legal entities. Subject to the specific provisions stated above, this statutory obligation is governed by the same rules that apply to the legal obligation, including in particular the cases of assimilation of securities held provided for by law.
| Thresholds (%) | Disclosure to the Company |
Disclosure to the AMF |
Related obligations |
|---|---|---|---|
| 1.00% and any multiple | Yes | No | |
| 5.00% | Yes | Yes | |
| 10.00% | Yes | Yes | Statement of intent |
| 15.00% | Yes | Yes | Statement of intent |
| 20.00% | Yes | Yes | Statement of intent |
| 25.00% | Yes | Yes | Statement of intent |
| 30.00% | Yes | Yes | Public takeover bid or offer of exchange(1) |
| 33.33% | Yes | Yes | |
| 50.00% | Yes | Yes | |
| 66.66% | Yes | Yes | |
| 90.00% | Yes | Yes | |
| 95.00% | Yes | Yes |
(1) Requirement also applicable in the event of an increase of more than 1% of the share capital or voting rights within a period of 12 consecutive months for persons holding between 30% and 50% of the Company's share capital or voting rights.
In the event of failure to comply with the disclosure requirements provided for above, the securities that exceed the fraction that should have been declared may be deprived of voting rights at all General Meetings held for a period of two years.
Each month, the Company publishes a report on its website disclosing the total number of shares and voting rights comprising the share capital on the last day of the previous month (www.rothschildandco.com under the section "Regulated Information"). Shareholders are invited to refer to these monthly publications to determine whether they are subject to the threshold disclosure requirements described above.
On 24 October 2016, Rothschild Concordia SAS acquired 9,068,341 additional voting rights, corresponding to the acquisition of double voting rights attached to 9,068,341 shares transferred or contributed to Rothschild Concordia SAS on 24 October 2014 by Messrs. Éric de Rothschild and David de Rothschild and three entities related to them, Financière de Tournon SAS, Béro SCA and Ponthieu Rabelais SAS. As a result, the Enlarged Family Concert, holding between 30% and 50% of the Company's share capital and voting rights, increased its shareholding of more than 1% of voting rights within a period of 12 consecutive months. An exemption to the obligation to launch an offer was granted by the AMF (AMF Decision & Information No. 216C2684).
By notification received by the AMF on 23 November 2016, Edmond de Rothschild SA, acting in concert with the Edmond de Rothschild group companies, shareholders of the Company, declared that it had crossed downward, directly and indirectly, the threshold of 10% of Rothschild & Co's voting rights and that it held directly and indirectly 5,573,586 shares representing 7.83% of the Company's share capital and 9.50% the voting rights (AMF Decision & Information No. 216C2637). This passive threshold crossing resulted from the above increase of double voting held by Rothschild Concordia within the Company.
By notification received by the AMF on 30 December 2016, Carter Company Limited, acting in concert with Edmond de Rothschild Holding SA and other
shareholders of Rothschild & Co, declared that it had crossed downward, the threshold of 5% of Rothschild & Co's share capital and voting rights. It declared that it held no shares in Rothschild & Co anymore, having transferred all its Rothschild & Co's shares to Edmond de Rothschild (Suisse) SA, resulting in a loss of double voting rights. As the result of this internal reorganisation, Carter Company Limited is no more acting in concert with Edmond de Rothschild Holding SA and the latter did not cross any threshold (AMF Decision & Information No. 217C0004).
By notification received by the AMF on 6 January 2017, the Enlarged Family Concert and Bernard Maurel family declared that they had crossed upwards the threshold of 50% of Rothschild & Co's share capital and the threshold of 5% of Rothschild & Co's share capital and voting rights, respectively. The enlarged family declared that they held directly and indirectly 38,862,703 shares representing 50.28% of the Company's share capital and 71,700,335 voting rights, representing 57.87% of the Company's voting rights. The Bernard Maurel family declared that they held 4,121,838 shares representing 5.33% of the Company's share capital and 7,992,180 voting rights representing 6.45% of the Company's voting rights (AMF Decision & Information No. 217C0092). This threshold crossing resulted from the merger between the Company and Compagnie Financière Martin Maurel, being specified that the Bernard Maurel family held control of Compagnie Financière Martin Maurel before the merger.
By notification received by the AMF on 20 March 2017, the Enlarged Family Concert declared that they had crossed downwards the thresholds of 50% of Rothschild & Co's share capital and that they held, directly and indirectly, 38,245,420 shares representing 49.48% of the Company's share capital and 57.15% of the voting rights (AMF Decision & Information No. 217C0678). This threshold crossing resulted from the sale of shares by the Eranda Rothschild Foundation.
As required under Article L. 225-102 of the French Commercial Code, employee share ownership in the share capital of the Company as at 31 March 2017 amounted to 0.06% of the share capital, held by a company mutual fund (Fonds Commun de Placement d'Entreprise) within an employee share ownership scheme (Plan d'Épargne d'Entreprise).
As at 31 March 2017, Rothschild & Co held 1,054,564 of its own shares and certificates, without voting rights, as follows:
| Total number of shares held by Rothschild & Co | 909,534 |
|---|---|
| • Allocated to the liquidity contract | 24,237 |
| • Allocated to the stock-options coverage(1) | 238,095 |
| • Other treasury shares(2) | 647,202 |
| Number of investment certificates held by Rothschild & Co | 145,040 |
| Total of shares and investment certificates held by Rothschild & Co | 1,054,574 |
| % of the share capital | 1.36% |
| Book value | €21,566,340.40 |
(1) Transactions disclosed to the AMF and published on the website of Rothschild & Co (Press release of 22 October 2015).
(2) Including 639,250 shares formerly held by Compagnie Financière Martin Maurel, transferred to Rothschild & Co in the framework of the merger with Compagnie Financière Martin Maurel.
As at 31 March 2017, a total of 1,739,319 shares are held by entities controlled by Rothschild & Co, representing 2.25% of the share capital. These shares are by nature without voting rights.
4.1.1 Rothschild Concordia Shareholders' Agreement The AMF has published the main provisions of this agreement, entered into on 25 January 2008 between shareholders of Rothschild Concordia SAS (Decision & Information No. 208C0180). The main provisions, in particular with respect to Rothschild & Co or the Group, are as follows:
any action involving the sale, alienation or licensing to a third party of the "Rothschild" name or of any associated intellectual property rights;
All decisions of the Board of Directors of Rothschild Concordia SAS other than with respect to a Reserved Matter shall be voted on by a simple majority of the votes cast at the meeting of the Board of Directors. It includes Rothschild Concordia SAS's votes in Rothschild & Co's Ordinary General Meetings (in particular decisions relating to the appointment of the members of the Supervisory Board of Rothschild & Co);
The provisions of the Rothschild Concordia Shareholders' Agreement coexist with the provisions of the Share Disposal Agreement signed on 22 January 2008 between the Eranda Rothschild Foundation and Rothschild & Co. The main provisions of this agreement were notified to the AMF by letter dated 23 January 2008 and duly published by the AMF (Decision & Information No. 208C0180 of 25 January 2008). This Share Disposal Agreement, which covers the terms and conditions of sale by the Eranda Rothschild Foundation of its shares in Rothschild & Co, provides in particular for a right of first refusal for Rothschild & Co, or any person it shall designate, which shall apply, with some exceptions, in the event of transfer of the shares held by the Eranda Rothschild Foundation.
The AMF has published the main provisions of this agreement (the "Shareholders' Agreement") (AMF Decision & Information No. 212C0752 dated 13 June 2012 and Decision & Information No. 212C0783 dated 19 June 2012). These are summarised below.
It is hereby specified that the Shareholders' Agreement of 8 June 2012 also provided that the parties to the Agreement have a right to give their shares to their family members and that such shares, while held in the names of the family members, will still be subject to the terms of the Shareholders' Agreement (including the agreement to act in concert with respect to those shares).
In this respect, the AMF was informed that Éric de Rothschild and Olivier Pécoux, both members of the Enlarged Family Concert, donated, in July 2012, a part of their Rothschild & Co shares to members of their families, who also became members of the Enlarged Family Concert upon the AMF having received notification of the donations. Their adherence to the Shareholders' Agreement of 8 June 2012 was formalised by the execution of an amendment to the Shareholders' Agreement, without modification to its main terms and conditions.
On 7 January 2015, the AMF was informed of the adherence of Messrs. Nicolas Bonnault, Laurent Baril, Philippe Le Bourgeois and CD GFA SARL to the Shareholders' Agreement of 8 June 2012. On this occasion, the AMF was informed of the execution of a second amendment to the Shareholders' Agreement of 8 June 2012 whose main provisions were published by the AMF and made available on its website (AMF Decision & Information No. 215C0073 of 14 January 2015).
On 6 January 2017, the AMF was informed of the substitution of Compagnie Financière Martin Maurel by Bernard Maurel, Lucie Maurel-Aubert and BD Maurel within the Enlarged Family Concert following the merger with Compagnie Financière Martin Maurel (AMF Decision & Information No. 217C0092 of 9 January 2017). On this occasion, a 3rd amendment to the Shareholders' Agreement of 8 June 2012 has been executed in order to reflect such change and to acknowledge the adherence to the Shareholders' Agreement by the family holding companies of some signatories.
The following agreements, falling within the scope of the Dutreil Act and concluded or still in force in 2016/2017, were communicated to the Company:
| Governed by | Date of signature |
Collective commitment to retain shares |
% of share capital and voting rights covered by agreement |
Signatories who hold the quality of corporate officer within the meaning of Article 621-18-2 of the French Monetary and Financial Code(1) |
|
|---|---|---|---|---|---|
| Agreement 2012.9 |
CGI Art. 885 I bis (ISF) |
20 December 2012 |
Six years from registration date (i.e., 27 December 2018) |
Over 20% of share capital and voting rights |
• Rothschild & Co Gestion SAS, Managing Partner • David de Rothschild, Chairman of Rothschild & Co Gestion SAS, Managing Partner |
| Agreement 2012.11 |
CGI Art. 885 I bis (ISF) |
27 December 2012 |
Six years from registration date (i.e., until 28 December 2018) |
Over 20% of share capital and voting rights |
• Rothschild & Co Gestion SAS, Managing Partner • David de Rothschild, Chairman of Rothschild & Co Gestion SAS, Managing Partner • Éric de Rothschild, Chairman of the Supervisory Board • François Henrot, non-voting member of the Supervisory Board |
| Agreement 2014.1 |
CGI Art. 885 I bis (ISF) |
12 December 2014 |
Two years from registration date (i.e., until 18 December 2016) |
Over 20% of share capital and voting rights |
• Rothschild & Co Gestion SAS, Managing Partner |
(1) As of this report.
Within the context of the Group's reorganisation in June 2012, lock-up agreements were concluded. In this context, shareholders' agreements were signed with the contributor shareholders, not members of the Enlarged Family Concert, which contributed their interests in Rothschild & Compagnie Banque SCS and their shares in Financière Rabelais SAS.
The contributors, not members of the Enlarged Family Concert, of interests in Rothschild & Compagnie Banque SCS and shares in Financière Rabelais SAS are under an obligation to hold all the Rothschild & Co shares received in exchange for their contributions for lock-up periods ranging from one to 18 years and also have an obligation to notify Rothschild & Co and Rothschild Concordia SAS before any sale of said shares. Some of these agreements, which concern natural persons occupying functions within the Group, grant Rothschild & Co a call option on the shares in the event the shareholder ceases to occupy his/her functions before the end of the applicable lock-up period.
Rothschild & Co is a French partnership limited by shares (société en commandite par actions), and it therefore benefits from such legal form, which includes specific legal and statutory provisions that may have an impact in the event of a takeover bid.
The share ownership structure is described on page 65 of this report. Following Rothschild & Co's conversion into a French partnership limited by shares, this structure has a particularity linked to the existence of two categories of partners: General Partners and Limited Partners.
A change of control therefore implies a change in the composition of these two categories of partners. Subject to the other elements described below that could have an impact in the event of a takeover bid on the Company's shares, a third party could, through a takeover bid, acquire control of the capital and the related voting rights. It could not, however, take control of the General Partners. In these conditions, a third party that acquired control of Rothschild & Co would, in particular, be unable to modify the articles of association or dismiss the Managing Partners as such decisions can only be made with the unanimous agreement of the General Partners. Also, General Partners may not transfer the shares they hold without the unanimous agreement of all the General Partners. These provisions are such as to prevent a change of control of Rothschild & Co without the unanimous agreement of the General Partners.
Rothschild & Co's articles of association do not put any direct restrictions on the exercise of voting rights and share transfers.
However, in addition to threshold crossings, subject to legal provisions, Article 7.3 of Rothschild & Co's articles of association establishes statutory disclosure obligations as described on pages 67 onwards of this report.
As at the date of this report, there were no securities granting special rights of control. However, Rothschild & Co's General Partners, Rothschild & Co Gestion SAS and Rothschild & Co Commandité SAS, have some rights that could be assimilated to special rights of control, as described on pages 59 onwards of this report.
Pursuant to the articles of association, the Managing Partners of the Company are appointed by unanimous decisions of Rothschild & Co's General Partners, with approval from the Extraordinary General Meeting of Limited Partners (the shareholders) acting by a qualified majority of two thirds when the Managing Partner has been designated by the Company's articles of association (as is the case at the date of this report). The same rule applies to dismissals, solely on fair grounds. Managing Partners are free to resign subject to giving nine months' notice. If the position of Managing Partner is unoccupied, it shall be filled by the General Partners until a new Managing Partner has been appointed.
The rules that apply to the appointment and replacement of members of the Supervisory Board are set out in the articles of association. Supervisory Board members are appointed and dismissed by the Ordinary General Meeting of Limited Partners based on deliberations in which the General Partners may not take part.
It is nonetheless specified that Rothschild Concordia SAS, following on from the contribution of shares in Rothschilds Continuation Holdings AG made by Jardine Strategic Investment Holdings Sàrl, a company of the Jardine Matheson Group, and approved by the General Meeting of shareholders of 8 June 2012, has given an undertaking to vote in favour of the appointment to the Supervisory Board of a representative of Jardine Matheson for as long as Jardine Matheson holds at least 5% of the share capital of Rothschild & Co.
Some of the loan agreements entered into by the Group with third parties contain covenants in the event of a change of control, which are usual in this type of loan agreement. They could be triggered by a takeover bid for the Company's shares.
Following the Group reorganisation implemented in June 2012, the Company's corporate governance structure is based on the Managing Partner and the Supervisory Board, which relies on four specialised committees: the Audit Committee, the Strategy Committee, the Risk Committee and the Remuneration and Nomination Committee.
The Corporate Governance Code referred to by the Company on a voluntary basis in this report is the Corporate Governance Code for Listed Companies (revised in November 2016) published by the French employers' organisation Association Française des Entreprises Privées (Afep) and Mouvement des Entreprises de France (Medef) (the "Afep-Medef Code"). The Afep-Medef Code can be viewed on the Afep website (http://www.afep. com) and the Medef website (http://www.Medef.com). Rothschild & Co does not comply – or does not comply in full – with certain recommendations of the Afep-Medef Code as set out in the table on page 91 of this report.
Rothschild & Co Gestion SAS, the sole Company's Managing Partner (Gérant) and legal representative of Rothschild & Co, was appointed by Rothschild & Co's articles of association, as the first statutory Managing Partner, for the duration of the Company. Rothschild & Co Gestion SAS, as Managing Partner of Rothschild & Co, is responsible for the overall management of Rothschild & Co, the Group's lead holding company.
The Company's Managing Partner has full power to act in all circumstances in the Company's name and on its behalf, in order to, among other things to:
David de Rothschild, in his capacity as Chairman of the Company's Managing Partner represents Rothschild & Co vis-à-vis third parties. Subject to the powers granted by Rothschild & Co Gestion SAS's shareholders, the Chairman is vested with the broadest powers to act on in the name and on its behalf of Rothschild & Co Gestion SAS, acting itself the Company's Managing Partner, in any circumstances.
The list of positions held by David de Rothschild is presented on 74 page.
The decision-making process of the Managing Partner relies on its Management Board (Conseil de gérance), a collective body which aims to assist the Chairman of the Company's Managing Partner to fulfil the commitments of Rothschild & Co Gestion SAS acting in its capacity as the Managing Partner of Rothschild & Co.
During the 4th quarter of the 2016/2017 financial year, the governance arrangements surrounding the functioning and composition of the Management Board evolved, enhancing the quality and strength of the Managing Partner and also reinforcing the management and control of the Group for the benefit of the Supervisory Board and the shareholders of the Company, as follows:
In addition, David de Rothschild and Olivier Pécoux perform the functions referred to in Article L. 511-13 of the French Monetary and Financial Code (Code monétaire et financier) in the context of the Company as a financial holding company supervised on a consolidated basis by the French Prudential Control Authority (Autorité de contrôle prudentiel et de résolution).
The Management Board is consultative, with the final decisions resting with its Chairman.
With regard to the oversight management and supervision of the Group, the following areas are reserved to the Management Board, without prejudice to, and consistent with, other significant Group companies' local requirements:
The Management Board meets at least four times a year ahead of the meetings of the Supervisory Board and the Supervisory Board's specialised committees, in particular so as to enable an adequate preparation and review ahead of reports to the Supervisory Board and its committees.
In addition to those quarterly meetings, in order to maintain the proper and consistent functioning of the Group's management and supervision and to streamline the process of information to the Management Board, the Management Board meets more frequently if so required by the Chairman.
Furthermore, Messrs. Nigel Higgins and Olivier Pécoux represent the Company's Managing Partner at the Group Executive Committee (formerly named the Group Management Committee), the senior executive committee at Rothschild & Co. They co-chair the Group Executive Committee and are jointly responsible for the oversight and co-ordination of the support functions of the Group. The Group Executive Committee meets monthly to ensure, among other things, that the Company and the Company's Group entities implement effectively the decisions taken by the Company's Managing Partner on the behalf of the Company.
End of term of office: for the duration of the Company
• Managing Partner
Outside the Group
None
Date of first appointment: 8 June 2012
General information
French simplified joint stock company (société par actions simplifiée) Number of Rothschild & Co shares held as at 31 March 2017: 1
Within the Group
In France: Managing Partner of RCB Gestion SNC
In other countries: None
Positions no longer held (but held within the last five years)
None
• Chairman of Rothschild & Co Gestion SAS in its capacity as Managing Partner
Date of last renewal: n/a (appointed in the Company's articles of association Managing Partner)
French Born in 1942 Number of shares held as at 31 March 2017: 2,520 Date of first appointment: 8 June 2012 Date of last renewal: n/a End of term of office: term defined in accordance with the provisions of the articles of association of Rothschild & Co Gestion
Within the Group In France: Chairman of Rothschild Concordia SAS Member of the Supervisory Board of Banque Martin-Maurel SA Managing Partner of Rothschild & Cie SCS Manager of Rothschild & Compagnie Banque SCS Chairman of SCS Holding SAS Chairman of Rothschild & Co Commandité SAS Chairman of RCG Partenaires SAS Chairman of RCI Partenaires SAS Chairman of Cavour SAS Chairman of Verdi SAS Chairman of Aida SAS Chairman of Financière Rabelais SAS Chairman of Paris Orléans Holding Bancaire (POHB) SAS Chairman of Financière de Reux SAS Chairman of Financière de Tournon SAS Managing Partner of RCB Partenaires SAS Manager of Bero SCA Permanent representative of Rothschild & Co Gestion SAS as Managing Partner of RCB Gestion SNC Sole Director of GIE Sagitas Outside the Group In France: Managing Partner of Rothschild Ferrières SC Managing Partner of SCI 2 Square tour Maubourg SC Managing Partner of Société Civile du Haras de Reux SC Member of the Supervisory Board of Euris SAS Member of the Board of Directors of Casino SA(1) Sole Director of GIE Five Arrows Messieurs de Rothschild Frères In other countries: None
Chairman of Rothschild Europe BV (The Netherlands) Member of the Board of Directors of Continuation Investments NV (The Netherlands)
| In France: | In other countries: |
|---|---|
| Member of the Board of Directors of La Compagnie Financière Martin-Maurel SA | Member of the Board of Directors of Rothschild Employee Trustees Limited (United Kingdom) (2016) |
| until its merger with the Company (2017) | Vice-Chairman of Rothschild Bank AG (Switzerland) (2016) |
| Member of the Board of Directors of Edmond de Rothschild SA (2015) (Outside | Member of the Board of Directors of Rothschilds Continuation Holdings AG (Switzerland) (2016) |
| the Group) | Member of the Board of Directors of Rothschild Holding AG (Switzerland) (2016) |
| Chairman of RCG Gestion SAS (2013) | Member of the Board of Directors of Rothschild Concordia AG (Switzerland) (2016) |
| Chairman of RCB Gestion SNC (2013) | Chairman of Rothschild North America Inc. (United States of America) (2015) |
| Chairman of RCBP Gestion SAS (2013) | Chairman of Rothschilds Continuation Holdings AG (Switzerland) (2014) |
| Chairman of RCI Gestion SAS (2013) | Member of the Board of Directors of Rothschild Asia Holding Limited (China) (2014) |
| Chairman of Norma SAS (2013) | Chairman and Director of N M Rothschild & Sons Ltd (United Kingdom) (2014) |
| Member of the Remuneration and Nomination Committee of Rothschilds Continuation Holdings AG | |
| (Switzerland) (2013) | |
| Member of the Board of Directors of De Beers SA(1) (Luxemburg) (2013) (outside the Group) |
(1) Listed company.
(Report of the Chairman of the Supervisory Board on corporate governance)
This report, established pursuant to paragraphs 7 to 9 of Article L. 225-68 of the French Commercial Code with reference to Article L. 226-10-1 of that code, sets forth the principles of the corporate governance of Rothschild & Co.
This report describes the Supervisory Board's powers and duties, the duties of its members, and the status, powers and duties of the Supervisory Board's specialised committees. These arise from the provisions of the Company's articles of association and the Supervisory Board's terms of reference and internal rules of procedure of the specialised committees.
All of the work that went into the preparation of this report was presented to the Supervisory Board, which approved its terms at its meeting of 14 June 2017.
In accordance with the articles of association, the Supervisory Board is composed of a maximum of 18 members, all of whom are shareholders in the Company. The Supervisory Board members are appointed by the ordinary General Meeting of shareholders, which in accordance with the articles of association, sets the duration of their term of office. The number of members of the Supervisory Board over the age of 75 years may not exceed one third of the members in office; if this proportion is exceeded, the members who are required to leave the Supervisory Board in order to restore compliance with this proportion will be considered to have resigned, starting with the oldest.
Following the death of Lord Leach of Fairford on 12 June 2016(1), the resignation of Martin Bouygues on 27 September 2016 and the appointment of Adam Keswick as a new member at the shareholders' General Meeting held on 29 September 2016, the Supervisory Board was composed of 14 members as at 31 March 2017:
Dr. Daniel Daeniker Lucie Maurel-Aubert Peter Smith
Sylvain Héfès Jacques Richier
Non-independent Members Independent Members as this term is defined in the Afep-Medef Code
Among the 14 members of the Supervisory Board, nine members are independent: Dr. Daniel Daeniker (also member of the Strategy Committee and Risk Committee), Angelika Gifford, Adam Keswick, André Lévy-Lang (also member of the Audit Committee, Strategy Committee and Remuneration and Nomination Committee), Carole Piwnica (also member of the Strategy Committee and Audit Committee), Jacques Richier, Sipko Schat (also Chairman of the Risk Committee), Peter Smith (also Chairman of the Audit Committee and member of the Strategy Committee and Remuneration and Nomination Committee) and Luisa Todini (also member of the Remuneration and Nomination Committee).
During the 2016/2017 financial year, five members' terms of office were renewed at the shareholders' General Meeting held on 29 September 2016, as follows: Angelika Gifford, Luisa Todini, Carole Piwnica, Arielle Malard de Rothschild and Dr. Daniel Daeniker. And Adam Keswick was appointed as a new member of the Supervisory Board at the same shareholders' General Meeting.
Mr François Henrot was also appointed as non-voting member (censeur) of the Supervisory Board at the shareholders' General Meeting held on 29 September 2016.
The Group Company Secretary (and General Counsel of the Company) also acts as Secretary to the Supervisory Board under the supervision of the Chairman of the Supervisory Board.
A summary profile for each of the members of the Supervisory Board and the list of their directorships and positions held as at 31 March 2017, within and outside the Group, in France and in other countries, are presented below.
More information, including a short biography for each of the members, is available on the Company's website at www.rothschildandco.com.
Date of first appointment: 29 October 2004 Date of last renewal: 25 September 2014 End of term of office: AGM to be held in 2017
General information
Number of shares held as at 31 March 2017: 10
French
In France: Member of the Board of Directors and General Manager of Rothschild Concordia SAS Partner of RCB Partenaires SNC General Partner and Manager of Béro SCA
Permanent representative of Béro SCA as Chairman of Ponthieu Rabelais SAS
Chairman of Rothschild Holding AG (Switzerland)
Member of the Board of Directors of Continuation Investments NV (The Netherlands) Member of the Board of Directors of The Rothschild Archive Ltd (United Kingdom)
Permanent representative of Béro SCA as:
Chairman of Fondation nationale des Arts graphiques et plastiques Member of the Supervisory Board of Milestone SAS Member of the Supervisory Board of SIACI Saint-Honoré SA Member of the Board of Directors of Baronnes et Barons Associés SAS Member of the Board of Directors of Christie's France SA Member of the Board of Directors of Société des Amis du Louvre Member of the Board of Directors of Centre national de la Photographie
Chairman and Director of DBR USA Inc. (United States of America) Member of the Board of Directors of Los Vascos SA (Chile)
In France:
Member of the Board of Directors of Rothschild Employee Trustees Ltd (United Kingdom) (2016)
Chairman of Rothschild Bank AG (Switzerland) (2014) Member of the Board of Directors of N M Rothschild & Sons Ltd (United Kingdom) (2014) Member of the Remuneration and Nomination Committee of Rothschilds Continuation
Holdings AG (Switzerland) (2013)
Member of the Board of Directors of Rothschild North America Inc (United States of America) (2013)
Date of first appointment: 29 October 2004 Date of last renewal: 25 September 2014 End of term of office: AGM to be held in 2017
Member of the Board of Directors of Institut Français des Relations Internationales
Member of the Board of Directors of Institut des Hautes Études Scientifiques (association)
Member of the Board of Directors of Hôpital Américain de Paris (association)
Member of the Board of Directors of Paris Sciences et Lettres (association)
French Born on 1937 Number of shares held as at 31 March 2017: 4,305
Within the Group None
Outside the Group In France: Chairman of the Supervisory Board of Les Échos SAS Chairman of La Fondation du Risque (association) Chairman of Institut Louis Bachelier (association)
In other countries: None
In other countries:
(association)
In France:
Positions no longer held (but held within the last five years)
Chairman of Institut Français des Relations Internationales (association) (2015) (outside the Group) None
Chairman of the Audit Committee of Paris Orléans SCA(1) (2013) Vice-Chairman of Institut Europlace de Finance (association) (2013) (outside the Group) Member of the Board of Directors of Groupe des Ecoles Nationales d'Economie et Statistique (2013) (outside the Group)
In other countries:
• Managing Partner of Homburger AG (Switzerland)
Member of the Board of Directors of dormakaba Holding AG(1) (Switzerland) Member of the Board of Directors of Homburger AG (Switzerland)
Swiss Born in 1963 Number of shares held as at 31 March 2017: 2,010 Date of first appointment: 25 September 2014 Date of last renewal: 29 September 2016 End of term of office: AGM to be held in 2019
Within the Group None
None
Positions no longer held (but held within the last five years)
In other countries:
Member of the Board of Directors of GAM Holding AG(1) (Switzerland) (2015) (outside the Group) Independent member of the Board of Directors of Rothschilds Continuation Holdings AG (Switzerland) (2014)
(1) Listed company.
| Angelika GIFFORD | Positions held within Rothschild & Co SCA: • Independent member of the Supervisory Board Main position: • Executive Director and Vice-President of Software business of Hewlett-Packard GmbH (Germany) |
|---|---|
| General information | |
| German Born in 1965 Number of shares held as at 31 March 2017: 10 |
Date of first appointment: 25 September 2014 Date of last renewal: 29 September 2016 End of term of office: AGM to be held in 2019 |
| Other directorships and positions held | |
| Within the Group None Outside the Group In France: None |
In other countries: Executive Director and Vice-President of Hewlett-Packard GmbH (Germany) Member of the Executive Board of Atlantik-Brücke e.V. (Germany) Member of Board of Directors of ProSieben Sat.1 Media SE(1) (Germany) Member of the Supervisory Board of TUI AG(1) (Germany) |
| Positions no longer held (but held within the last five years) | |
| In France: None |
In other countries: None |
| Sylvain HÉFÈS | Positions held within Rothschild & Co SCA: • Member of the Supervisory Board • Chairman of the Remuneration and Nomination Committee • Member of the Audit Committee Main position: • European Chairman of Rhône-Capital |
| General information | |
| French Born in 1952 Number of shares held as at 31 March 2017: 10 |
Date of first appointment: 29 March 2012 Date of last renewal: 24 September 2015 End of term of office: AGM to be held in 2018 |
| Other directorships and positions held | |
| Within the Group In France: Member of the Board of Directors of Rothschild Concordia SAS Member of the Advisory Committee of Five Arrows Managers SAS In other countries: Senior Advisor of N M Rothschild & Sons Ltd (United Kingdom) Member of the Investment Committee of Five Arrows Principal Investments SCA SICAR (Luxemburg) Member of the Board of Directors of Five Arrows Capital Ltd (British Virgin Islands) Chairman of Francarep, Inc. (United States of America) |
Outside the Group In France: None In other countries: Member of the Board of Directors of Rhone Capital LLC (United States of America) |
| Positions no longer held (but held within the last five years) | |
| In France: Chairman of the Executive Board of Paris Orléans SA(1) (Until 29 March 2012) Member of the Rothschild Group Risk Committee (2014) |
Member of the Audit Committee of Rothschild Bank AG (Switzerland) (2013) Member of the Board of Directors of Rothschild Bank AG (Switzerland) (2013) Non-executive member of the Board of Directors of Rothschilds Continuation Holdings AG (Switzerland) (2013) |
| In other countries: Member of the Board of Directors of IntercontinentalExchange Group, Inc(1) (United States of America) (2015) (outside the Group) Director of NYSE Euronext Inc. (United States of America) (2013) (outside the Group) Member of the Advisory Committee of General Atlantic LLC (United States of America) (2013) (outside the Group) |
• Independent member of the Supervisory Board Main position:
• Chairman of Matheson & Co Limited (United Kingdom)
| General information | |
|---|---|
| British Born in 1973 Number of shares held as at 31 March 2017: 10 |
Date of first appointment: 29 September 2016 Date of last renewal: n/a End of term of office: AGM to be held in 2019 |
| Other directorships and positions held | |
| Within the Group None Outside the Group In France: None In other countries: Chairman of Jardine Pacific Limited (Bermuda) Chairman of Jardine Schindler Holdings Limited (British Virgin Islands) Chairman of Matheson & Co limited (United Kingdom) Member of the Board of Directors of Jardine Matheson Holdings Limited(1) (Bermuda) Member of the Board of Directors of Jardine Motors Group UK Limited (United Kingdom) Member of the Board of Directors of Dairy Farm International Holdings Limited(1) (Bermuda) |
Member of the Board of Directors of Hongkong Land Holdings Limited(1) (Bermuda) Member of the Board of Directors of Mandarin Oriental International Limited(1) (Bermuda) Member of the Board of Directors of Jardine Strategic Holdings Limited(1) (Bermuda) Member of the Board of Directors of JMH Finance Holdings Limited (British Virgin Islands) Member of the Board of Directors of JMH Investments Limited (British Virgin Islands) Member of the Board of Directors of JMH Management Holdings Limited (British Virgin Islands) Member of the Board of Directors of JMH treasury Limited (British Virgin Islands) Member of the Board of Directors of JSH Treasury Limited (British Virgin Islands) Non-executive Member of the Board of Directors of Jardine Lloyd Thompson Group plc(1) (United Kingdom) Non-executive Member of the Board of Directors of Ferrari NV(1) (The Netherlands) Member of the Board of Directors of Yabuli China Entrepreneurs Forum (China) |
| Positions no longer held (but held within the last five years) | |
| Within the Group Member of the Board of Directors of Rothschilds Continuation Holdings AG (Switzerland) (2012) |
Member of the Board of Directors of OHTL Public Company Limited (Thailand) (2016) Member of the Board of Directors of JRE Asia Capital Limited (Cayman Islands) (2013) Member of the Board of Directors of Jardine Motors (China) Limited (Hong Kong) (2013) |
| Outside the Group Chairman & Managing Director of Jardine Motors Group Holdings Limited (Bermuda) (2016) |
Member of the Board of Directors of Pandora Asset One Limited (Hong Kong) (2013) Chairman of Gammon Capital Management Limited (Hong Kong) (2012) Chairman of HACTL Investment Holdings Limited (British Virgin Islands) (2012) Chairman of Jardine OneSolution Holdings Limited (Bermuda) (2012) |
Kong) (2012)
(2016) Chairman & Managing Director & Chief Executive of Jardine Motors Group Limited (Bermuda) (2016)
Chairman of Jardine Pacific Limited (Bermuda) (2016)
Chairman of Jardine, Matheson & Co., Limited (Hong Kong) (2016)
Chairman of Zung Fu Company Limited (Hong Kong) (2016)
Chairman of Fu Tung Holdings Limited (Hong Kong) (2016)
Chairman & Non-executive Member of the Board of Directors of Gammon China Limited (Hong Kong) (2016)
Deputy Chairman & Deputy Managing Director of Jardine Matheson Limited (Bermuda) (2016)
Member of the Board of Directors of Zhongsheng Group Holdings Limited(1) (Cayman Islands) (2016)
Member of the Board of Directors of JRE Asia Capital Management Limited (Cayman Islands) (2016)
Member of the Board of Directors of Mandarin Oriental Hotel Group International Limited (Bermuda) (2016)
Member of the Board of Directors of Mandarin Oriental Hotel Group Limited (Hong Kong) (2016)
Member of the Board of Directors of Dairy Farm Management Services Limited (Bermuda) (2016)
Member of the Board of Directors of Yonghui Superstores Co., Limited(1) (China) (2016)
Member of the Board of Directors of Hongkong Land Limited (Bermuda) (2016) Member of the Board of Directors of Jardine Matheson (China) Limited (Hong Kong) (2016)
Member of the Board of Directors of The Hongkong Land Co., Limited (Hong Kong) (2016) Member of the Board of Directors of Hongkong Land China Holdings Limited (Bermuda) (2016)
Member of the Board of Directors of Maxim's Caterers Limited (Hong Kong) (2016) Member of the Board of Directors of Mindset Limited (Hong Kong) (2016)
| nuda) 1) (Bermuda) |
|---|
| muda) |
| rgin Islands) Islands) |
| ish Virgin |
| Chairman of Hong Kong Air Cargo Terminals Limited (Hong Kong) (2012) |
|---|
| Member of the Board of Directors of Jardine Matheson & Co. (Macau) Limited (Macau) |
| (2012) |
| Member of the Board of Directors of Jardine OneSolution Holdings (C.I.) Limited (Cayman |
| Islands) (2012) |
| Member of the Board of Directors of Jardine Properties Investments Limited (Hong Kong) |
Member of the Board of Directors of Hong Kong Air Cargo Industry Services Limited (Hong
(2012) Member of the Board of Directors of JEC (HK) Holdings Limited (Hong Kong) (2012)
Member of the Board of Directors of KFC Vietnam Joint Venture Company Limited (Vietnam) (2012)
Member of the Board of Directors of Pandora Asset Holdings Limited (Hong Kong) (2012) Member of the Board of Directors of Pizza Hut Hong Kong Management Limited (Hong Kong) (2012)
Member of the Board of Directors of Pizza Vietnam Holdings Limited (British Virgin Islands) (2012)
Member of the Board of Directors of TYS Limited (Hong Kong) (2012)
Chairman of Jardine OneSolution Limited (Bermuda) (2012) Chairman of Pizza Vietnam Limited (Vietnam) (2012) Chairman of Jardine Restaurants Victoria S.A. (Panama) (2012) Chairman of Strawberry Hill Development Limited (Hong Kong) (2012) Chairman of The Jardine Engineering Corporation, Limited (China) (2012)
Member of the Board of Directors of Fleet Trans International Co. Limited (Hong Kong) (2012)
| Arielle MALARD de ROTHSCHILD | Positions held within Rothschild & Co SCA: • Member of the Supervisory Board • Member of the Risk Committee Main position: • Managing Director of Rothschild & Cie SCS |
|---|---|
| General information | |
| French Born in 1963 Number of shares held as at 31 March 2017: 10 |
Date of first appointment: 25 September 2014 Date of last renewal: 29 September 2016 End of term of office: AGM to be held in 2019 |
| Other directorships and positions held within the Group | |
| Within the Group In France: Managing Director of Rothschild & Cie SCS In other countries: None |
Member of the Board of Directors of Imerys SA(1) Member of the Nomination and Remuneration Committee of Imerys SA(1) Member of the Board of Directors, Fondation de Rothschild (a charity) Member of the Board of Directors, Traditions pour demain (a charity) In other countries: |
| Outside the Group In France: Chairwoman of CARE France Member of the Board of Directors of Groupe Lucien Barrière SAS |
Treasurer of CARE International (Switzerland) Member of the Board of Directors of Electrica SA(1) (Romania & United Kingdom) Member of the Nomination and Remuneration Committee of Electrica SA(1) (Romania & United Kingdom) Member of the Audit and Risk Committee of Electrica SA(1) (Romania & United Kingdom) |
| Positions no longer held (but held within the last five years) | |
| Within the Group None |
Outside the Group Vice-Chairwoman of CARE International (Switzerland) (2016) |
| Lucie MAUREL-AUBERT | • Member of the Supervisory Board • Member of the Strategy Committee Main position: • Chairwoman of the Supervisory Board of Banque Martin Maurel SA |
| General information | |
| French Born in 1962 Number of shares held as at 31 March 2017: 12,610 |
Date of first appointment: 8 June 2012 Date of last renewal: 24 September 2015 End of term of office: AGM to be held in 2018 |
| Other directorships and positions held | |
| Within the Group In France: Chairwoman of the Supervisory Board of Banque Martin Maurel SA Chairwoman of the Supervisory Board of International Capital Gestion SA Chairwoman of the Supervisory Board of Martin Maurel Gestion SA Member of the Supervisory Board of BBR Rogier SA Chairwoman of Grignan Participations SAS Chairwoman of Hoche Paris SAS Chairwoman of Immobilière Saint Albin SAS In other countries: Manager (Type A) of Mobilim International Sàrl (Luxemburg) |
Outside the Group In France: Chairwoman of the Supervisory Board of Hoche Gestion Privée SA Chairwoman of the Supervisory Board of Optigestion SA Member of the Supervisory Board of Fonds de garantie des depots et de resolution Vice-Chairwoman of the Association Française des Banques Member of the Board of Directors of Compagnie Plastic Omnium SA(1) Member of the Board of Directors of Théâtre du Châtelet Member of the Board of Directors of Fondation Hôpital Saint-Joseph Manager of SC BD Maurel Manager of SC Paloma |
| In other countries: None |
|
| Positions no longer held (but held within the last five years) | |
| In France: Member of the Executive Board and CEO of Banque Martin Maurel SA (2017) Vice-Chairwoman, Deputy Chief Executive Officer and Director of Compagnie Financière Martin Maurel SA (2017) Member of the Supervisory Board of Martin Maurel Gestion SA (2017) Permanent representative of Banque Martin Maurel as member of the Supervisory Board of Optigestion SA (2017) |
Member of the Board of Directors of Montupet SA(1) (2016) (outside the Group) Member of the Supervisory Board of Aéroport Marseille Provence (2015) (outside the Group) Chairwoman of Groupement Européen de Banques (2015) (outside the Group) Member of the Supervisory Board of Foncière INEA SA (2014) (outside the Group) Vice-Chairwoman of the Supervisory Board of Optigestion SA (2013) (outside the Group) In other countries: None |
(1) Listed company.
Carole PIWNICA Positions held within Rothschild & Co SCA:
• Independent member of the Supervisory Board
• Member of the Audit Committee • Member of the Strategy Committee
(1) Listed company.
Member of the Supervisory Board of Oddo & Cie SCA (2012) (outside the Group)
| Anthony de ROTHSCHILD | Positions held within Rothschild & Co SCA: | |
|---|---|---|
| General information | |
|---|---|
| British Born in 1977 Number of shares held as at 31 March 2017: 10 |
Date of first appointment: 8 June 2012 Date of last renewal: 24 September 2015 End of term of office: AGM to be held in 2018 |
| Other directorships and positions held | |
| Within the Group In France: Member of the Board of Directors of Rothschild Concordia SAS |
Outside the Group In France: None |
| In other countries: None |
In other countries: Member of the Board of Directors of Ascott Farms Ltd (United Kingdom) Member of the Board of Directors of Ascott Nominees Ltd (United Kingdom) Member of the Board of Directors of Southcourt Stud Company Ltd (United Kingdom) Member of the Board of Directors of Sculpt the future Company Ltd (United Kingdom) |
| Positions no longer held (but held within the last five years) | |
| In France: None |
Member of the Board of Directors of William and Suzue Curley Ltd (United Kingdom) (2014) (outside the Group) |
| In other countries: Member of the Board of Directors of Ascott Properties Ltd (United Kingdom) (2015) |
Member of the Board of Directors of A7 Music Ltd (United Kingdom) (2013) (outside the Group) Member of the Board of Directors of Rothschilds Continuation Holdings AG (Switzerland) |
(2012)
(1) Listed company.
Netherlands) (2013) (outside the Group)
(outside the Group)
| Peter SMITH | Positions held within Rothschild & Co SCA: • Independent member of the Supervisory Board, • Chairman of the Audit Committee • Member of the Remuneration and Nomination Committee • Member of the Strategy Committee Main position: • Non-executive Chairman and Member of the Board of Directors of N M Rothschild & Sons Ltd (United-Kingdom) |
|---|---|
| General information | |
| British Born in 1946 Number of shares held as at 31 March 2017: 10 |
Date of first appointment: 27 September 2012 Date of last renewal: 24 September 2015 End of term of office: AGM to be held in 2018 |
| Other directorships and positions held | |
| Within the Group In France: None |
Outside the Group In France: None |
| In other countries: Non-executive Chairman and member of the Board of Directors of N M Rothschild & Sons Ltd (United Kingdom) Member of the Board of Directors of Rothschild Bank AG (Switzerland) Member of the Audit and Risk Committee of Rothschild Bank AG (Switzerland) |
In other countries: Chairman of the Board of Directors of Land Restoration Trust (a charity) (United Kingdom) Member of the Board of Directors of Casa San Damian Limited (United Kingdom) |
| Positions no longer held (but held within the last five years) | |
| In France: None |
Non-executive member of the Board of Directors of Rothschilds Continuation Holdings AG (Switzerland) (2014) Chairman of the Audit Committee of Rothschilds Continuation Holdings AG (Switzerland) |
| In other countries: Non-executive Chairman of the Board of Directors of Savills Plc(1) (United Kingdom) (2016) Member of the Board of Directors of Associated British Foods Plc(1) (United Kingdom) (2016) Non-executive Chairman of the Board of Directors of Templeton Emerging Markets |
(2013) Member of the Remuneration Committee of Rothschilds Continuation Holdings AG (Switzerland) (2013) |
(1) Listed company.
Investment Trust Plc(1) (United Kingdom) (2015) (outside the Group)
| Luisa TODINI | Positions held within Rothschild & Co SCA: • Independent member of the Supervisory Board • Member of the Remuneration and Nomination Committee Main position: • Chairwoman of Todini Costruzioni Generali SpA (Italy) |
|---|---|
| General information | |
| Italian Born in 1966 Number of shares held as at 31 March 2016: 10 |
Date of first appointment: 25 September 2014 Date of last renewal: 29 September 2016 End of term of office: AGM to be held in 2019 |
| Other directorships and positions held | |
| Within the Group None Outside the Group In France: None In other countries: Chairwoman of Todini Costruzioni Generali SpA (Italy) Chairwoman of Todini Finanziaria SpA, Ecos Energia Srl (Italy) Chairwoman of Comitato Leonardo – Italian Quality Committee (Italy) Chairwoman of Fondazione Poste Insieme (Italy) |
Co-Chairwoman of the Italian and Russian Civil Society Dialogue Forum (Italy) Chairwoman of Association Agronetwork Chair of the Steering Committee, Project Grow Generating Real Opportunities for Women (LUISS Guido Carli) Member of the Board of Directors of Salini Costruttori SpA (Italy) Member of the Board of Directors of LUISS Guido Carli University Member of the Board of Directors of Confindustria (Italian employers' federation) General Council Member of the Board of Directors of Italy China Foundation Member of European Council on Foreign Relations Member of the Steering Committee Member of the cultural association Civita Member of the Board of Directors of Foundation Child for Study and Research into Childhood and Adolescence (Italy) Member of the Steering Committee of Assonime (Italy) |
| Positions no longer held (but held within the last five years) | |
| In France: None In other countries: Chairwoman of Poste Italiane(1) (Italy) (2017) (outside the Group) Chairwoman of Uni-Esco Srl (Italy) (2016) (outside the Group) Sole Managing Director of Proxima Srl (Italy) (2016) (outside the Group) Member of the Board of Directors of RAI SpA(1) (Italy) (2014) (outside the Group) Member of the Board of Directors of Cediv SpA (Italy) (2014) (outside the Group) |
Chairwoman of FIEC (European Construction Industry Federation) (Italy) (2012) (outside the Group) Chairwoman of Cantina Todini Srl (Italy) (2013) (outside the Group) Member of the Board of Directors of Salini SpA (Italy) (2013) (outside the Group) Member of the Board of Directors of Tiesse Holding Srl (Italy) (2013) (outside the Group) |
(1) Listed company.
It is hereby confirmed that the terms of offices held by Messrs. Éric de Rothschild, André Levy-Lang and Jacques Richier will come to an end at the shareholders' General Meeting to be held on 28 September 2017. The re-election of Messrs Éric de Rothschild and André Levy-Lang for another term of office will be submitted for approval by shareholders. More detailed information will be presented on these proposed renewals and appointment of few members in the General Meeting Document, grouping all information to be presented to the shareholders, pursuant to the applicable regulations.
A summary profile for François Henrot, who has been appointed as a non-voting member of the Supervisory Board and the list of his directorships and positions held as at 31 March 2017, within and outside the Group, in France and in other countries, is presented below.
| General information | |
|---|---|
| French Born in 1949 Number of shares held as at 31 March 2017: 476,260 |
Date of first appointment: 29 September 2016 Date of last renewal: n/a End of term of office: AGM to be held in 2019 |
| Other directorships and positions held | |
| Within the Group In France: Manager of FH GFA SARL, General Partner and Manager of Rothschild & Cie SCS Manager of FH GFA SARL, Managing Partner of de RCB Partenaires SNC Managing Director of Rothschild & Compagnie Banque SCS Chief Executive Officer of Paris Orléans Holding Bancaire (POHB) SAS In other countries: None |
Outside the Group In France: Member of the Supervisory Board of Rexel SA(1) In other countries: Chairman of the Board of Directors of Copeba (Belgium) Member of the Board of Directors of Yam Invest NV (The Netherlands) Non-Executive member of the Board of Directors of BMCE Bank SA(1) (Morocco) |
| Positions no longer held (but held within the last five years) | |
| In France: Non-voting member (censeur) of the Supervisory Board of Vallourec SA(1) (2015) (outside the Group) General Partner and Manager of Rothschild & Cie SCS (2014) Managing Partner of de RCB Partenaires SNC (2014) Member of the Supervisory Board of 3 Suisses SA (2013) (outside the Group) |
In other countries: Member of the Board of Directors of Rothschilds Continuation Holdings AG (Switzerland) (2013) |
(1) Listed company.
The Supervisory Board continually monitors the way in which the Company is managed by the Managing Partner, including in particular the Company's financial and accounting reporting system and its internal control mechanisms applicable to risk, compliance and internal audit, in accordance with the laws and regulations applicable to the Company.
The Supervisory Board may call a General Meeting of shareholders.
In order to exercise its authority in the area of permanent oversight:
In addition to the powers granted to it by law, using the methods set forth in Article 10.2.3 of the Company's articles of association, the Supervisory Board issues:
Moreover, the Supervisory Board presents a report to the shareholders and a reasoned opinion on any resolution submitted to the shareholders at their General Meeting and on any matter that is the subject of a report by the Company's Statutory Auditors.
The Supervisory Board may be assisted by experts of its choosing, whose expenses shall be paid by the Company. It has the broadest powers of investigation and may submit written questions to, or seek the opinion of the Managing Partner at any time.
Before assuming a seat on the Supervisory Board, each member must be aware of the general and special obligations incumbent on them. In particular, they must familiarise themselves with the laws and regulations governing the duties of Supervisory Board members.
The Company provides new members with its articles of association and the Supervisory Board's internal rules of procedure before they take office. By accepting a seat on the Supervisory Board, members agree to abide by its internal rules of procedure.
When taking part in Supervisory Board meetings and casting a vote, Supervisory Board members are representing all of the Company's shareholders and acting in the interests of the Company.
Supervisory Board members must allocate the required time to preparing for Board meetings and meetings of any committees on which they sit (as the case may be) by carefully reading the documentation provided to them. They may ask the Chairman for any further information that they require.
Supervisory Board members must attend all Supervisory Board meetings and meetings of any committees of which they are members (as the case may be), as well as General Meetings of shareholders, unless subject to an impediment and provided that they notify the Chairman and/or the Secretary accordingly beforehand.
Documentation for Supervisory Board meetings as well as information collected before or during Supervisory Board meetings is confidential. In accordance with applicable regulations, Supervisory Board members and all other persons invited to attend the meetings may not pass on such information to a third person, other than within the ordinary scope of their work or occupation, for any purpose or activity other than those for which the information was provided to them. They are required to take appropriate measures to protect the confidentiality of such information. Such information ceases to be personal and confidential when published externally by the Company, particularly in the form of a press release.
Supervisory Board members are not permitted to use their position and/or duties to procure any kind of benefit, whether financial or otherwise, either for themselves or for a third party.
Members must notify the Supervisory Board of any actual or potential conflict of interest with the Rothschild & Co Group. They must abstain from voting on the corresponding decision and from taking part in the discussion held prior to the vote.
The direct or indirect involvement of any Supervisory Board member in an operation or a transaction in which the Rothschild & Co Group has a direct interest, or of which he is aware as a result of his membership of the Supervisory Board, must be disclosed to the Supervisory Board prior to the conclusion of such operation or transaction.
Supervisory Board members are not permitted to assume personal responsibilities in undertakings or affairs that compete directly or indirectly with those of the Rothschild & Co Group without notifying the Supervisory Board in advance.
Supervisory Board members and all other persons who are invited to attend Supervisory Board meetings must not engage (either in person or via an intermediary) in transactions involving financial instruments of the Company and/or any other issuer for as long as they possess (as a result of their duties or presence at a Supervisory Board meeting) confidential information that might have a material effect on the price of the said financial instruments or on the price of related financial instruments. This duty applies without the Company being required to stipulate that the relevant information is confidential or privileged. Similarly, Supervisory Board members must refrain from disclosing such information to any other person outside the ordinary scope of their functions or for any purpose other than those for which the information was provided to them. Lastly, members must refrain from advising any other person to purchase or sell the financial instruments to which such information relates.
To this end, the following measures in particular must be taken:
Following a proposal by its Chairman, the Supervisory Board prepares a schedule of meetings each year, for the following year.
The Supervisory Board meets as often as required in the interests of the Company and at least four times a year, further to a notice of meeting issued by any means by the Chairman, at least one half of the Supervisory Board members, the Company's Managing Partner, or a General Partner, subject to reasonable notice unless circumstances require a meeting to be called at very short notice.
The person(s) who call(s) a Supervisory Board meeting prepares the agenda of the meeting and informs the Supervisory Board members in a timely manner and by any appropriate means.
All Supervisory Board members may consult the Secretary and benefit from the latter's services. The Secretary is responsible for all procedures relating to the Supervisory Board practices and for the organisation of the meetings.
Documents are provided to Supervisory Board members to enable them to express an opinion in full knowledge of the facts on items included on the agenda at least 48 hours prior to Supervisory Board meetings, except in an emergency or if there is a requirement to keep such documents strictly confidential.
Members of the Management Board of the Company's Managing Partner attend the meeting of the Supervisory Board in an advisory capacity and to discharge the Managing Partner's reporting duty vis-à-vis the Supervisory Board. Any other person outside the Supervisory Board may be invited to attend the whole or part of a Supervisory Board meeting by the Chairman of the Supervisory Board or upon the recommendation of the Company's Managing Partner as given to the Chairman of the Supervisory Board.
Under any circumstances, at any of its meetings, in the event of an emergency and on a proposal by the chairman of the meeting, the Supervisory Board may discuss matters referred to its members that are not included on the agenda.
At each Supervisory Board meeting, the Chairman informs Supervisory Board members of the main facts and significant events concerning the Group's operations that have occurred since the date of the previous Supervisory Board meeting.
Supervisory Board meetings may be held at the registered office or at any other location indicated in the notice of meeting, as well as by videoconferencing or teleconferencing facilities that identify members of the Supervisory Board and guarantee their effective involvement through the use of technical resources that continually and simultaneously transmit discussions. Meetings shall be chaired by the Chairman or, in the latter's absence, by the longest-standing Vice-Chairman present or, in the absence of a Vice-Chairman, by the member appointed for that purpose by the Supervisory Board.
The Supervisory Board members are entitled to be represented at any meeting by another member, pursuant to specific authorisation set out in a letter, a fax, an email or any other method of communication deemed reasonable and acceptable by both parties.
The Supervisory Board members who take part in a Supervisory Board meeting via the technical resource methods referred to above are deemed present, except where the Supervisory Board is meeting to verify and check the annual report and the statutory and consolidated financial statements.
Decisions are taken by an ordinary majority of members who are present or represented and authorised to vote. In the event of a tie, the chairman of the meeting shall have a casting vote.
The Supervisory Board meets at least four times a year in March, June, September and November. The Supervisory Board met eight times during the 2016/2017 financial year, with an average attendance rate of 76.5% for all meetings. Before each meeting, every member receives a file containing all the documentation, notes and reports relating to each item on the agenda.
Each meeting of the Supervisory Board is preceded by a meeting of the Audit and Risk Committees and as necessary, by meetings of the Remuneration and Nomination Committee.
At its meeting on 18 May 2016, the Supervisory Board, in particular:
At its meeting on 22 June 2016, the Supervisory Board, in particular:
At its meeting on 29 July 2016, the Supervisory Board, in particular:
At its meeting on 8 September 2016, the Supervisory Board:
At its meeting on 29 September 2016, the Supervisory Board, in particular:
At its meeting on 29 November 2016, the Supervisory Board, in particular:
At its meeting on 23 February 2017, the Supervisory Board, in particular:
• considered the governance changes at the Company's Managing Partner level and, in accordance with the recommendations of its Remuneration and Nomination Committee, opined in favour of these changes.
At its meeting on 30 March 2017, the Supervisory Board, in particular: • considered the Rothschild & Co Group Performance, the outlook for 12
In accordance with the Afep-Medef Code to which Rothschild & Co has chosen to comply, the Group Company Secretary, in liaison with the Remuneration and Nomination Committee, conducted an assessment of the Supervisory Board's organisation and working methods as regards the 2016/2017 financial year in its meeting on 14 June 2017.
The Group Company Secretary conducted more specifically an assessment of the effectiveness of the Supervisory Board. The objective was to check that important issues are properly prepared and discussed.
The Supervisory Board's self-assessment is based on a questionnaire with a grading system with scores ranging from 1 (excellent) to 5 (poor), with the ability to provide further comments. 13 general topics were covered in the questionnaire: Terms of Reference of the Supervisory Board, its composition, training and resources provided, organisation of meetings, financial reporting, internal control and financial risk management, internal audit process, external audit, reliance of the work of subsidiaries' audit committees, whistleblowing and relationships with the Supervisory Board, the Risk Committee and the shareholders.
Answers received in response to the questionnaire showed the Supervisory Board's members had a favourable opinion on the majority of the statements. The Supervisory Board approved an action plan for those areas identified as requiring further attention.
In accordance with legal and regulatory provisions, the Supervisory Board set up an Audit Committee, a Remuneration and Nomination Committee and a Risk Committee, and defined the composition of those committees as well as their tasks and practices.
In addition, according to the articles of association which provide the creation of any additional committee to assist the Supervisory Board, the Supervisory Board set up a Strategy Committee.
Only members of the Supervisory Board may sit on these committees and only for their term of office on the Supervisory Board. The composition of each committee is decided by the Supervisory Board.
Members of the Management Board of the Company's Managing Partner may attend a meeting of a Supervisory Board's committee if so requested or at the invitation of the committee's chairman.
member)(2).
Specifically the Audit Committee is responsible for:
(2) Peter Smith, Carole Piwnica and André Lévy-Lang are independent members, as this term is defined in the Afep-Medef Code.
The Audit Committee can draw on the help of Company employees as necessary. It is empowered to obtain any information it considers necessary to fulfil its task from the Company's executive body, its staff and the Company's or its subsidiaries' Statutory Auditors. Audit Committee members have the opportunity, if necessary, to seek the opinion of the senior executives of the Group as well as that of the Statutory Auditors.
The Audit Committee meets at least four times a year in March, June, September and November, or more frequently if so required. The Audit Committee met six(3) times during the 2016/2017 financial year, with an average attendance rate of 83.3% for all meetings. Before each meeting, every member receives a file containing all the documentation, notes and reports relating to each item on the agenda.
The Group Chief Financial Officer, the Group External Reporting Director, the Group Head of Internal Audit, the Group Head of Legal & Compliance, the Group Chief Risk Officer, the Group Company Secretary and the Statutory Auditors are permanent attendees at the meetings of the Audit Committee.
The June and November meetings are mainly focused, respectively, on the review of annual and half year accounts and the presentation by the Statutory Auditors of its report after its review of such accounts. In addition, at the June meeting, the Audit Committee reviews the section of the Chairman's report issued in accordance with the provisions of article L. 225-37 of the French Commercial Code, on risk management procedures implemented by the Company on pages 96 onwards of this report. The June meeting includes, in addition, a focus on the Banking book and the November meeting includes a review of the Merchant Banking Division.
The March and September meetings mainly focus on internal control matters. In March, the Audit Committee receives for consideration, the Group internal control report to be submitted to the French Prudential and Control Authority (Autorité de contrôle prudentiel et de resolution). In advance of each meeting, the Audit Committee members receive the Internal Audit activity report and the status of Statutory Auditors recommendations. The activities of the Group subsidiary audit committees are also presented to the Audit Committee during those two meetings. This year, the Audit Committee also reviewed the list of non-audit fees and took note of the new auditor partner's rotations and audit governance requirements under the revised Statutory Audit Directive.
At the end of each meeting, the Audit Committee usually meets with the Group Head of Internal Audit and the Statutory Auditors without the presence of any representative of senior management.
After each meeting of the Audit Committee, the Chairman of the Audit Committee submits a report on the work of the Audit Committee to the Supervisory Board members.
In addition, the Audit Committee receives, in advance of each meeting, the Group Risk and Compliance quarterly report addressed also to the Group Risk Committee.
Furthermore, every year, at the request of the Chairman of the Audit Committee, the Group Company Secretary coordinates a review of the annual work programme of the Audit Committee with the committee members, to ensure that the Audit Committee discharges its responsibilities in accordance with its Terms of Reference. In addition, this review considers the Afep-Medef recommendations to which the Company expressly refers to.
The conclusions of the 2016/2017 financial year's review were discussed and debated at the meeting of the Audit Committee held on 22 November 2016.
(3) One of these meetings was a joint meeting with the Risk Committee.
As at 31 March 2017, the Remuneration and Nomination Committee was composed of four members: Sylvain Héfès (Chairman), André Lévy-Lang (independent member), Peter Smith (independent member) and Luisa Todini (independent member).
The role of the Remuneration and Nomination Committee is to assist the Supervisory Board with its remuneration-related duties and in particular with the preparation of its decisions in correction with the Group's remuneration policy principles. It also makes recommendations to the Supervisory Board on all matters relating to the composition of the Supervisory Board, such as appointments or renewals of terms of office, or the compliance with Afep-Medef recommendations.
Specifically the Remuneration and Nomination Committee is responsible for:
The Remuneration and Nomination Committee met twice during the 2016/2017 financial year, with an average attendance rate of 100% for all meetings. Before each meeting, every member receives a file containing all the documentation, notes and reports relating to each item on the agenda.
The meetings of the Remuneration and Nomination Committee were mainly convened to set and to periodically review the principles and parameters of its remuneration policies and their adequacy and effectiveness, review developments in remuneration regulations and ensure that Rothschild & Co Gestion SAS and business divisions are in compliance.
In addition, the Remuneration and Nomination Committee reviews the proposals submitted by business divisions regarding fixed and variable compensation with absolute discretion to adjust fixed compensation proposals, bonus pools and individual payments, and to supervise and review the broad policy framework for the remuneration of senior employees, including the Regulated Persons across the Rothschild & Co Group.
No Group employee is permitted to participate in discussions or decisions relating to his or her remuneration.
The Chairman of the Supervisory Board, the Chairman, the Executive Deputy Chairman and the Managing Partners of the Company's Managing Partner, the Group Human Resources Director and the Group Chief Financial Officer are permanent attendees at the meetings of the Remuneration and Nomination Committee.
In addition, with regards to the meetings of the Remuneration and Nomination Committee to review the proposals submitted by business divisions regarding fixed and variable compensation, the Heads of Group business divisions attend the meetings for part of the meeting to present their own business division.
As at 31 March 2017, the Risk Committee was composed of three members: Sipko Schat (Chairman and independent member), Arielle Malard de Rothschild and Dr. Daniel Daeniker (independent member).
Specifically the Risk Committee is responsible for:
The Risk Committee meets at least four times a year in March, June, September and November, or more frequently if so required. The Risk Committee met five(5) times during the 2016/2017 financial year, with an average attendance rate of 93.3%. Before each meeting, every member receives a file containing all the documentation, notes and reports relating to each item on the agenda.
The Chairman of the Audit Committee, the Group Chief Risk Officer, the Group Head of Legal & Compliance, the Group Head of Internal Audit, the Group Chief Financial Officer, the Group External Reporting Director and the Group Company Secretary are permanent attendees to the meetings of the Risk Committee.
During those meetings, the Risk Committee reviewed the four quarterly Group Legal, Compliance and Risk reports and examined the Group strategic and operational risk assessments. In addition, the Risk Committee reviewed various Group polices, and checked the implementation of crisis management plans across the Group.
The Chairmen of the Audit Committee and the Risk Committee consult each other, whenever they deem it necessary and at least once a year, on various subjects, including but not limited to, subjects of common interest and/or cross-committee topics falling within the missions assigned to them, related to the internal control and risk management system.
As at 31 March 2017, the Strategy Committee was composed of six members: Éric de Rothschild, Dr. Daniel Daeniker (independent member), André Lévy-Lang (independent member), Lucie Maurel-Aubert, Peter Smith (independent member) and Carole Piwnica (independent member).
The main role of this committee is to support the Supervisory Board in advising the Company's Managing Partner, on strategy matters.
Meetings of the Strategy Committee are prepared beforehand by the Company's Managing Partner and the Group Executive Committee.
The Strategy Committee meets at least once a year, or more frequently if so required. The Strategy Committee did not meet during the 2016/2017 financial year as the most significant strategy issues were covered by the full Supervisory Board during the year.
The Company has decided voluntarily to adhere to the Afep-Medef Code.
The Company is very committed to the principles of good governance and to the recommendations of the Afep-Medef Code. It should, however, be stressed that the very principle of partnerships limited by shares, the Company's form of incorporation, gives a unique structure to governance providing a clear separation of powers between the Company's Managing Partner, and the Supervisory Board, which cannot comply with the Afep-Medef recommendations without adaptation. In this situation, the Board takes into account the specific characteristics of this form of incorporation, and the Board is organised in a way that is adapted to the nature of the functions conferred upon it by law and the articles of association as well as by the recommendations of the Afep‑Medef Code.
(5) One of these meetings was a joint meeting with the Audit Committee.
Pursuant to the AMF recommendations, the recommendations of the Afep-Medef Code not applied by the Company are described in the table below, with an explanation for each of them:
| Afep-Medef recommendations | Explanations by the Company | ||||
|---|---|---|---|---|---|
| Independence criterion for members of the Supervisory Board related to the length of office (§8.5 of the Afep-Medef Code): |
Given the Company's ownership structure, which is controlled by an enlarged Rothschild Family Concert acting in concert with companies owned by members of the Rothschild family and by other shareholders with long-standing ties to the Rothschild family, and given the legal and statutory characteristics of a French partnership limited by shares, the Supervisory Board has expressly decided to waive the criterion relating to the duration of Supervisory Board members' terms of office. |
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| Criterion providing that in order to be considered as independent a Director must not "have been a Director for more than twelve years". |
This particular criterion was therefore expressly waived in the Supervisory Board's Internal rules of procedure as follow: |
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| "The independence criteria that apply are those referred to in Article 9.4 of the Afep-Medef Corporate Governance code of December 2008, amended in June 2013, excluding the criteria relating to terms of office, which is expressly set aside." |
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| The Supervisory Board considers that length of service is a key element for assessing and understanding the Rothschild & Co Group's activities and that the effectiveness of the Supervisory Board is ensured by a wide ranging composition in terms of diversity, professional experience and expertise of its members. |
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| Independence criterion for members of the Supervisory Board related to directorship in a company the corporation consolidates (§8.5 of the Afep-Medef Code): Criterion providing that in order to be |
Peter Smith is non-executive Chairman of the Board of Directors of N M Rothschild & Sons Ltd (NMR) and non-executive Director of the Board of Directors of Rothschild Bank AG, two Group's entities. However the Supervisory Board considered that as a result of Peter Smith performing duties in important international groups, this gives him a good perspective and a strong vision which contributes to the effectiveness of the Supervisory Board. Moreover, his experience and Group knowledge gives him a freedom of speech and opinion which is a guarantee of independence. He is therefore able to challenge the Supervisory Board and make an extremely valuable contribution to the discussions at the Supervisory Board. |
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| considered as independent a Director must not "be an employee or executive director of the corporation, or an employee or director of its parent or a company that the latter |
Sipko Schat is a senior advisor at NMR. However the Supervisory Board considered that he performed management duties in an important banking group and it gives him expertise and capacity of judgement which contributes to the effectiveness of the Supervisory Board. |
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| consolidates, and not having been in such a position for the previous five years". |
Accordingly, the Supervisory Board considers their situations do not affect their independence and they can be deemed as independent members. |
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| Assessment of the actual contribution of each director of the Supervisory Board (Recommendation §9.2 of the |
The self-assessment questionnaire of the Supervisory Board does not expressly measure the actual contribution of each member. |
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| Afep-Medef Code): The evaluation should measure "the actual contribution of each director to the Board's work through his or her competence and involvement in discussions". |
All members of the Supervisory Board expressed a positive assessment on the collective functioning of the Supervisory Board which implies that the individual contribution is also positive. Measuring the actual contribution of each member creates a risk to the general climate of confidence within the Supervisory Board. However, the current evaluation process allows the member to express their personal opinion on other individuals' contributions in the general remarks section. |
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| Status of the Chairman of the Remuneration and Nomination Committee (§ 16.1-17.1 of the |
Mr Sylvain Héfès is the Chairman of the Remuneration and Nomination Committee despite his status of non independent member. |
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| Afep-Medef Code): "The committee (in charge of compensation) should not include any executive directors, and should have a majority of independent directors. It should be chaired by an independent |
The Supervisory Board decided, during its meeting on 14 June 2017, to entrust the Chairmanship to Mr. Héfès due to his extensive knowledge of the Group's business operations. He served notably for several years as head of Europe wealth management in one of the top leading global investment banking, securities and investment management firm and thanks to his various positions within this firm, he has developed an excellent appreciation of all matters related to the remuneration policies within the banking sector for the benefit of the Company and the Group. |
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| director. It is advised that an employee director be a member of this committee." |
In addition, after having considered the moral authority that he enjoys within the Company and within the family company Rothschild Concordia as statutory independent director, his important knowledge of the specificities of the remuneration systems in France, the United Kingdom and other major locations where the Group operates, the Supervisory Board decided his appointment is justified to support the Group's economic and financial challenges. Therefore, the Supervisory Board considers his situation as not jeopardising his ability to be the Chairman of the |
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Remuneration and Nomination Committee and act in the best interest of the Company and the Group.
The composition of the Supervisory Board complies with the provisions of Law No. 2011-103 of 27 January 2011, which requires representation of both genders on the Supervisory Board.
It is also noted that this representation is reflected in the membership of the Audit Committee (25%), the Risk Committee (33.3%), the Remuneration and Nomination Committee (25%) and the Strategy Committee (33.3%).
3.1.1 Rothschild & Co Gestion SAS
In application of Rothschild & Co's articles of association, no compensation is paid to Rothschild & Co Gestion SAS in respect of its position of the Company's Managing Partner. Accordingly, the summary tables relating to compensation and other benefits granted to the Managing Partner required in accordance with AMF recommendations are not relevant.
It is, however, hereby specified that the Company's articles of association provide that Rothschild & Co Gestion SAS is entitled to reimbursement of its operating expenses. In this respect, a total amount of €1,173,540 has been due to Rothschild & Co Gestion SAS as reimbursement of its operating expenses for the financial year ended 31 March 2017.
In accordance with the provisions of Article 14.1 of the articles of association, an amount of €813,658, equal to 0.5% of the distributable profit of the 2016/2017 financial year, will be automatically allocated for payment to the two General Partners, Rothschild & Co Gestion SAS and Rothschild & Co Commandité SAS. This does not constitute compensation for their services as General Partners.
Pursuant to the AMF recommendations, the table below presents an overview of compensation due or paid to David de Rothschild, Chairman of Rothschild & Co Gestion.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Fixed compensation | 500 | 500 |
| Variable compensation | – | – |
| Extraordinary compensation | – | – |
| Directors fees | – | – |
| Benefits in kind | – | – |
| TOTAL | 500 | 500 |
Moreover, David de Rothschild has not benefitted from employment contracts, supplementary pension schemes and compensation or benefits due in the event of termination of office or change in function and non-compensation clauses during the financial year ended 31 March 2017.
Rothschild & Co's articles of association provide that the Supervisory Board shall freely distribute all or some of any remuneration that the Ordinary General Meeting of shareholders grants to its members.
The General Meeting of shareholders on 25 September 2014 set at €500,000 the maximum amount of fees available for allocation to members of the Supervisory Board of Rothschild & Co, until a new decision is taken.
During its meeting on 30 March 2016, the Supervisory Board approved, for the financial year 2015/2016 and for the years thereafter until a new decision is taken, a compensation policy based on a fixed fee structure for Supervisory Board and committee memberships, as follows:
| Fees in euro (per member each year) |
|
|---|---|
| Supervisory Board membership | 20,000 |
| Committee membership (per committee) | 5,000 |
| Position as Chairman of Board/committee | 10,000 |
Distribution of fees is subject to the following.
The Supervisory Board decided that, due to their operational and/or advisory functions within the Rothschild Group, Mr Éric de Rothschild, Mrs Arielle Malard de Rothschild and Mr François Henrot, as non-voting member (censeur), shall not receive any attendance fees in respect of their positions on the Supervisory Board and its specialised committees.
Overview
The table below shows the gross compensation allocated by the Company to the members of the Supervisory Board, in respect of their positions held at Rothschild & Co's Supervisory Board and its committees, during the 2016/2017 financial year.
| Supervisory Board |
Audit Committee |
Strategy Committee |
Remuneration and Nomination Committee |
Risk Committee |
2016/2017 Total |
|
|---|---|---|---|---|---|---|
| Éric de Rothschild | – | |||||
| André Lévy-Lang | 30,000 | |||||
| Martin Bouygues(1) | 9,808 | |||||
| Dr. Daniel Daeniker | 25,000 | |||||
| Angelika Gifford | 20,000 | |||||
| Sylvain Héfès | 40,000 | |||||
| Lord Leach(2) | 3,946 | |||||
| Adam Keswick(3) | 10,028 | |||||
| Arielle Malard de Rothschild | – | |||||
| Lucie Maurel-Aubert | 20,000 | |||||
| Carole Piwnica | 25,000 | |||||
| Jacques Richier | 20,000 | |||||
| Anthony de Rothschild | 20,000 | |||||
| Sipko Schat | 35,000 | |||||
| Peter Smith | 40,000 | |||||
| Luisa Todini | 25,000 | |||||
| François Henrot | – | |||||
| TOTAL | 323,782 |
Vice-Chairman
Independent member
Non-independent member
Non-voting member
(1) A pro rata basis of 179/365 days, corresponding to the period from 1 April 2016 to 27 September 2016 the date of the resignation as member of the Supervisory Board.
(2) A pro rata basis of 72/365 days, corresponding to the period from 1 April 2016 to 12 June 2016 the date of his death.
(3) A pro rata basis of 183/365 days, corresponding to the period from 29 September 2016, the date of the nomination as member of the Supervisory Board.
The table below provides the breakdown of compensation received by the members of the Supervisory Board (in position during the financial year) in respect of their positions held at Rothschild & Co and at any other Group company during the 2016/2017 financial year.
| In thousands of euro | 31/03/17 | 31/03/16 | ||||
|---|---|---|---|---|---|---|
| Members of the Supervisory Board | Rothschild & Co(1) | Other compensation(2) Rothschild & Co(1) | Other compensation(2) | |||
| Éric de Rothschild | – Benefits in kind | – | Benefits in kind | 6 | ||
| André Lévy-Lang | 30 | – | 35 | – | ||
| Martin Bouygues(3) | 9.8 | – | 20 | – | ||
| Dr. Daniel Daeniker | 25 | – | 30 | – | ||
| Angelika Gifford | 20 | – | 20 | – | ||
| Sylvain Héfès | 40 | Directors fees Benefits in kind |
173 2 |
40 | Directors fees Benefits in kind |
205 2 |
| Lord Leach(4) | 3.9 | – | 25 | – | ||
| Adam Keswick(5) | 10 | – | – | – | ||
| Arielle Malard de Rothschild | – – |
Fixed Variable – Benefits in kind |
242 273 25 |
– – |
Fixed Variable – Benefits in kind |
242 222 20 |
| Lucie Maurel-Aubert | 20 – |
Fixed Consultancy |
5 68 |
25 – |
– – |
|
| Carole Piwnica | 25 | – | 30 | – | ||
| Jacques Richier | 20 | – | 20 | – | ||
| Anthony de Rothschild | 20 | – | 20 | – | ||
| Sipko Schat | 35 | – | 35 | – | ||
| Peter Smith | 40 | Fixed | 144 | 45 | Fixed | 171 |
| Luisa Todini | 25 | – | 25 | – |
(1) Includes compensation received from Rothschild & Co in respect of the role of member of the Supervisory Board and, if applicable, its committees.
(2) Received from controlled companies.
(3) Member of the Supervisory Board until 27 September 2016.
(4) Member of the Supervisory Board until 12 June 2016 (the date of his death).
(5) Member of the Supervisory Board from 29 September 2016.
In accordance with the recommendations of the Afep-Medef Code (article 26.1), to which Rothschild & Co refers to, compensation paid or due for the financial year ended 31 March 2017 to Rothschild & Co Gestion SAS, as Managing Partner of Rothschild & Co, and David de Rothschild, as the Chairman and sole legal representative of Rothschild & Co Gestion SAS, and the Chairman of the Supervisory Board will be submitted to the shareholders' advisory vote at the next General Meeting of shareholders on 28 September 2017.
Pursuant to the provisions of Article 223-26 of the AMF General Regulations, the transactions involving the Company's securities during the 2016/2017 financial year executed by persons mentioned in Article L. 621-18-2 of the French Monetary and Financial Code, disclosed to the Company and the AMF, are summarised in the table below.
| Name | Quality | Transaction date |
Nature of the transaction |
Unit price (in euro) |
Total amount (in euro) |
AMF decisions(1) |
|---|---|---|---|---|---|---|
| Nigel Higgins | Managing Partner of Rothschild & Co Gestion SAS |
02/01/2017 | Acquisition(2) | 28.195 | 404,795.62 | 2017DD461179 |
| Nigel Higgins | Managing Partner of Rothschild & Co Gestion SAS |
02/01/2017 | Sale | 25.79 | 174,030.92 | 2017DD461179 |
(1) These decisions are available on the AMF website (www.amf-france.org).
(2) Shares granted in accordance with the provisions of the third iteration of the Capital Requirements Directive (CRD III) regulating notably market operators' compensation.
The General Meeting of shareholders of 27 September 2011:
In the continuity of Rothschild & Co's conversion into a French partnership limited by shares approved by the General Meeting of shareholders of 8 June 2012, the Statutory Auditors and Alternate Auditors' appointments were confirmed.
It is hereby specified that the terms of offices held by the Statutory Auditors and the Alternate Statutory Auditors will come to an end at the General Meeting of shareholders to be held on 28 September 2017. Shareholders will be asked to deliberate on the renewal of the offices of the main Statutory Auditors. More detailed information will be presented on these proposed renewals in the General Meeting Document, grouping all information to be presented to the shareholders, pursuant to the applicable regulations.
The information relating to the fees paid to the Statutory Auditors in respect of the financial year ended 31 March 2017 is presented on page 175 of this report.
In accordance with applicable legal and regulatory provisions, the Statutory Auditors have been informed of all the regulated agreements and undertakings entered into during the 2016/2017 financial year, and of agreements and undertakings entered into during previous financial years but still into effect during the 2016/2017 financial year.
During the 2016/2017 financial year, the following two agreements were approved by the Supervisory Board as regulated agreements:
These two regulated agreements will be submitted for approval to the shareholders at the General Meeting to be held on 28 September 2017.
More detailed information on these regulated agreement and the report of the Statutory Auditors related thereto will be presented in the General Meeting Document.
The Chairman's report on internal control procedures is drawn up in accordance with Article L. 226-10-1 of the French Commercial Code. Its purpose is to provide a summary presentation of Rothschild & Co's internal control system as applied to its different business activities. It also reports on the financial risks relating to the effects of climate change and the Rothschild & Co's objective to implement measures to reduce these effects through a low-carbon strategy in all aspects of its business.
Rothschild & Co is on the list of the financial holding companies supervised by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) on a consolidated basis. The rules which impact upon the Group arrangements for risk management systems and controls are set out in the French Monetary and Financial code (Code monétaire et financier) and the Order dated on 3 November 2014, which defines the conditions for implementing and monitoring internal control systems in banks and investment firms. The Order dated on 3 November 2014 lays down the principles relating to control systems for transactions and internal procedures, accounting systems and information processing, risk and performance measurement systems, risk supervision and control systems, and internal control documentation and reporting systems.
As required by the Order dated on 3 November 2014, the Group internal control system established by Rothschild & Co operates a distinction between organisations and managers in charge of permanent controls (including Compliance, anti-money laundering and risk management) and periodic controls (i.e. internal audit).
The internal control system of Rothschild & Co must also take into account, as appropriate, Autorité des marchés's General Regulations (the "AMF Regulations"), local regulations applicable to branches and subsidiaries outside France and to specialised operations such as portfolio management, the most widely accepted industry practices in this area and the recommendations of international bodies dealing with the capital adequacy framework of international banks, foremost among which are the Basel Committee, the Financial Stability Board and the European authorities (European Banking Authority, European Securities and Markets Authority).
The internal control system refers to Rothschild & Co's own internal control system and the Group's internal control system on a consolidated basis. The internal control system seeks to provide directors, officers and shareholders with reasonable assurance that the following objectives are achieved:
It also fulfils the internal control objectives specific to financial companies supervised by the ACPR on a consolidated basis.
The Group's internal control framework is based on the "three lines of defence" model. The first line comprises front-line management of the business itself. The second line includes independent Risk, Compliance (including AML/CFT) and Legal functions and, to a lesser extent, Finance and Human Resources to monitor on a continuous basis the activity of the front line management. The third line comprises Internal Audit who exercises periodic surveillance of the Group's activities. and support functions.
The Three Lines of Defence for identifying, evaluating and managing risks
| First Line of Defence | Second Line of Defence | Third Line of Defence |
|---|---|---|
| It is the responsibility of senior management in each of the Group's business lines to establish and maintain effective risk management systems and to support risk |
Comprises specialist Group support functions including: Risk, Compliance, Legal, Finance and Human Resources. |
Provides independent objective assurance on the effectiveness of the control procedures including those relating to the management of risks across the entire Group. |
| management best practice. | These functions provide: • operational and technical guidance; • advice to management at Group level and operating entity level; • independent challenge to the businesses; and • assistance in the identification, assessment, management, measurement, monitoring and reporting of financial and non-financial risks. |
This is provided by the Group's Internal Audit function. |
The chart below shows the internal control governance structure through which the Group seeks to comply with these obligations:
The Supervisory Board, through the workings and reporting of the Risk Committee, the Audit Committee and the Remuneration and Nomination Committee for matters which have an impact on risk management, ensures the implementation by Executive Management as defined below in Section 3.2 of reliable procedures and processes for monitoring the internal control systems of the Group in order to identify, assess and manage risk.
The Heads of the Compliance, Risk and Internal Audit functions report on the performance of their duties to the Managing Partner and, whenever it is necessary in accordance with legal and regulatory provisions, to the Supervisory Board.
The Managing Partner is responsible for the overall management of Rothschild & Co, the Group's holding company. This includes, among other things, establishing the strategic direction of the business, supervising the accounting and financial information, and directing the internal control framework for Rothschild & Co and the Group's entities on a consolidated basis. The Managing Partner exercises its management and supervising responsibilities through its Chairman, M. David de Rothschild, assisted by the Management Board (Conseil de gérance).
In addition, a senior committee at Rothschild & Co, the Group Executive Committee (GEC), assists the Managing Partner in the overall management, the definition of the strategy of the Group and the direction of the Group internal control framework, so that Rothschild & Co ensures its proper implementation across the Group.
The Managing Partner, its Management Board and the GEC are referred to as "Executive Management" but for the avoidance of doubt, the final decision-making authority rests with the Managing Partner, represented by its Chairman.
Executive Management, reporting to the Supervisory Board, is responsible for the Group's overall internal control system. The Managing Partner defines the general guidelines of the internal control and risk management systems and monitors the actions implemented within the Group and the local management committees of each business unit.
The Group Executive Committee (GEC) plays an active role in internal control matters by assisting the Managing Partner in defining the general guidelines of the internal control and risk management systems and monitoring the actions implemented within the Group and the local management committees of each business unit, enabling the Managing Partner on behalf of Rothschild & Co to formulate:
– the Group's risk management and control framework. The Managing Partner is represented at the GEC by two members of the Management Board of the Managing Partner, Nigel Higgins and Olivier Pécoux, who co-chair the GEC.
Internal control at Rothschild & Co consists of permanent and periodic controls. While they are complementary, they are distinct and independent of one another:
periodic control is the overall process for ex post verification of the operations of the Group, based on investigations that are conducted by the Group Internal Audit function, which performs periodic checks on an independent basis on the design and the effectiveness of the two first lines of defence.
Overview
3.4.1 Group compliance function (including AML/CFT)
Group Legal and Compliance ensures that the Group conforms to legal and regulatory provisions, professional standards and codes of conduct, as well as the overall strategy and direction of Executive Management. The responsibilities of Group Legal & Compliance mainly include: development and maintenance of compliance policies and procedures (including those dealing with anti-money laundering and combatting the financing of terrorism), operation of monitoring programmes, or the supervision of monitoring programmes, identification of any failure to follow compliance policies and procedures, monitoring and review of legislation and regulatory developments which might affect the Group's business and reporting results of monitoring programmes to Senior Management and agreeing any remedial action or changes to relevant procedures with Senior Management. This independent internal control function reports to the Group Head of Legal, Compliance and Risk, who is a member of the Group Executive Committee. The Group Head of Legal, Compliance and Risk reports to the Managing Partner, the Supervisory Board's committees (Audit and Risk Committees) and boards around the Group.
Group Risk is responsible for ensuring that suitable risk management processes are in place across the Group and for reporting a consolidated view of risk exposures across the Group. As part of its role, Group Risk assesses the risks run in each business and how they are managed, aims to establish a forward-looking view over emerging risks within the businesses or the external environment and delivers an independent and objective perspective on the risks in the business and whether they are consistent with approved strategy and risk appetite. The Group Chief Risk Officer reports to one of the two dirigeants responsables within the meaning of the provisions of French Monetary and Financial Code applicable to Rothschild & Co, as financial holding company. Group Risk reports to Executive Management on significant incidents in accordance with the provisions of the Group Operational Risk Policy. This policy sets out the criteria and thresholds for identifying significant operational risk incidents and the process for escalating them and ensuring that any remedial actions are appropriately monitored.
In addition to the activities highlighted above, Group Risk presents a report on the risk management to the Risk Committee on a quarterly basis. This report covers capital reporting for R&Co, analysis of credit, liquidity, market and operational risk, regulatory and legal issues, any new products and highlights any material limit breaches or issues identified by Group risk in its day-to-day activities.
Other functions are important and participate in the internal control system in their specific areas of responsibilities such as Group Finance and Human Resources.
Periodic control is independently exercised by Group Internal Audit. The Group Head of Internal Audit meets formally every three to four months with the concerned Managing Partners of the Managing Partner and, whenever necessary, to present the activity of the Internal Audit function and discuss any material findings raised during the period. The Group Head of Internal Audit presents the activity of Internal Audit to the Audit Committee which meets four times a year. In March, the Audit Committee approves the audit plan for the coming year and during its meetings in March and September it reviews in detail the activity of the internal audit function as described below. The Group Head of Internal Audit meets regularly, usually every quarter, with the heads of the main lines of business to discuss the evolution of the activity and the evolution of risks for their respective area of responsibility. This forms part of the regular information of the internal audit function on the evolution of the Group's risk profile.
Each of the Internal Audit Officers is responsible for the audit coverage of some specific lines of business: Global Advisory, Private Wealth, Asset Management, Merchant Banking, Banking and Treasury and Information Technology, in parallel to their local geographical coverage. The other members of the Audit function are not specialised by business and are assigned to the different audits according to the scheduling of the annual audit plan. The Group Head of Internal Audit reports to the Officers of RCOG and to the Audit Committee which receives every audit report drawn up by the Internal Audit function.
The guiding philosophy of risk management in the Group is for the management to adopt a prudent and conservative approach to the taking and management of risk. The maintenance of reputation is a fundamental driver of risk appetite and of risk management. The protection of reputation guides the type of clients and businesses with which the Group will involve itself.
The nature and method of monitoring and reporting varies according to the risk type. Most risks are monitored daily with management information being provided to relevant committees on a weekly, monthly or quarterly basis. Where appropriate to the risk type, the level of risk faced by the Group is also managed through a series of sensitivity and stress tests.
The identification, measurement and control of risk are integral to the management of Rothschild & Co's businesses. Risk policies and procedures are regularly updated to meet changing business requirements and to comply with best practice.
The Group's credit risk exposure primarily arises from its private client lending activity (through RBI, RBZ, RCB and BMM), and from corporate lending through BMM together with a small amount of mezzanine debt financing in Merchant Banking. In addition, the legacy Banking activities undertaken in NMR (commercial loans to corporates) results in some credit risk.
All credit exposures are closely monitored on a regular basis and a quarterly review of bad and doubtful debts is produced.
All material credit exposures are subjected to an intensive process of credit analysis by expert teams and to review and approval by formal credit committees. A high proportion of the credit exposures are secured.
The Group Credit Committee oversees all lending in the Group through three sub-committees. The Private Client Credit Committee (PCCC), the Group Credit Committee – France (GCCF) and the Corporate Credit Committee (CCC). The PCCC is responsible for the management of private client lending exposures (including credit risk and pricing) in Group entities and reviews Private Client Lending which is written on the balance sheets of the banking entities within the Group (excluding RCB and BMM).
The Private Client Lending exposures assumed and the credit policies followed within the Group are subject to the oversight of the Risk Committee. The PCCC reviews the level of risk assumed in respect of Private Client Lending to ensure it is consistent with the risk appetite of the Group and in accordance with the Group Credit Risk Policy. Any material changes to the Private Client Lending policies will be reviewed by the GEC and the Group ALCO, approved by the co-chairmen of the GEC and will be reported to the GRC.
The GCCF is responsible for the management of private client lending exposures and corporate lending exposures in BMM and RCB (together the "French Banking Entities"). The GCCF is also responsible for the management of corporate lending exposures (including credit risk and the pricing of loans) in the French Banking Entities.
The CCC is responsible for the management of corporate lending exposures (including credit risk and the pricing of loans) in Group entities including lending to Group companies/investments in Group funds. The GCC is also responsible for reviewing staff loans and any co-investment in the funds which appear on the balance sheets of any Banking Entity.
The Private Client Lending policies and associated delegated authorities are confirmed by the relevant Board (or Board Committee as appropriate) of each of the banking entities on an annual basis. Any material changes to the Private Client Lending policies are approved by the Managing Partner.
The Group has Credit Risk and Large Exposure policies which are reviewed by the Managing Partner and the Risk Committee. In conjunction with the Group's Risk Appetite Statement, the policies set out the credit risk appetite of the Group, the limits that have been set and establishes reporting protocols.
All exposure to credit risk is managed by detailed analysis of client and counterparty creditworthiness prior to entering into an exposure, and by continued monitoring thereafter. A significant proportion of the Group's lending exposures are secured on property or assets; the Group monitors the value of any collateral obtained. The Group also uses netting agreements to restrict credit exposure to counterparties. For internal monitoring purposes, credit exposure on loans and debt securities is measured as the principal amount outstanding plus accrued interest.
Stress testing is an important risk management tool used to evaluate, gain an understanding of the impact of unexpected or extreme events and to validate the firm's risk appetite. Each Banking Entity is required to set out in its credit risk policy its approach to stress testing and whether it is considered appropriate to the entity's risk management.
Settlement risk arises in circumstances where a counterparty does not deliver a security or its value in cash as agreed when the security was traded after the other counterparty has already delivered a security or cash value. Within the Group, settlement risk can arise when conducting derivatives transactions and through the sale and purchase of securities. There are a number of mitigants available to ensure that such risks are minimised and managed appropriately.
The Group has defined operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
The Group has an established operational risk framework with the key objectives of mitigating operational risks by means of policies, processes, systems and procedures; communicating the Group's risk appetite; protecting the Group's assets; defining roles, responsibilities and accountabilities across the Group; and establishing a consistent approach for identifying, monitoring, measuring and reporting operational risk throughout the Group.
The Group Operational Risk policy, pursuant to the Group Risk Framework the Group, is reviewed annually and formalises the operational risk framework and is designed to ensure compliance with regulatory requirements in relation to operational risk. Oversight of operational risk matters is undertaken by the GEC, the Managing Partner and the Risk Committee.
Each of the key operating entities have established processes and appointed staff to identify and assess the operational risks they are exposed to in the context of their own market conditions, and have appropriate controls or risk mitigation processes in place. The management's assessment of operational risk is supported by the risk assessments which are undertaken at least annually.
All incidents with a loss amount greater than €30k are reported in the quarterly Legal, Compliance and Risk report which is presented to the GEC, Risk Committee and the Audit Committee.
Regular and targeted compliance training ensures that Group employees are clear on their regulatory responsibilities and understand the regulatory environment in which they conduct business.
Group Compliance identifies employee training needs based upon a number of factors, including regular monitoring of permanent control, compliance reviews, regulatory developments, annual compliance risk assessments, breaches of compliance policy, practice or procedure, and the results of the annual employee performance appraisals. Group Compliance works in conjunction with the Learning and Development (L&D) team in Group HR to identify and implement compliance training requirements across the Group. In addition, bespoke training is organised at the business line and legal entity level. Ad hoc training is given to ensure prompt dissemination to staff of on best practice and business-related market, legal, compliance and regulatory developments.
Protection of the Rothschild brand is of fundamental importance to the Group. The Rothschild name and its reputation are the Group's key asset and a number of controls are in place to ensure the culture of professionalism and protection of the firm's reputation is maintained.
Procedures relating to guarding against reputational risk are set out in each of the business Compliance manuals. These include extensive procedures relating to new clients taken on/acceptance for all business divisions.
On a monthly basis, each Compliance function in all the major business lines is required to complete a report of Compliance management information. This information comprises quantitative data reporting and qualitative assessments made by local Compliance officers. This gives a Group-wide picture of Compliance risk and also allows to collect the requested information by business line or topic.
The Group Legal, Compliance and Risk function oversees and coordinates the prevention of money laundering and terrorist financing for all Group entities. The Group Head of Legal, Compliance and Risk oversees the Group's AML risk framework and strategy and reports into the Managing Partner. He is assisted by subject matter experts in the Group Financial Crime Team and with execution of operational processes by Legal, Compliance and Risk staff on a global basis.
A Group Financial Crime Committee (Chaired by the Group Head of Financial Crime) examines the design and effectiveness of the Group's financial crime policies, procedures and monitoring programmes as well as developing a strategic approach to money laundering prevention for the Group. The Committee convenes on a quarterly basis and its members include all Regional Heads of Financial Crime.
The Group Financial Crime team review all Group Financial Crime-relatedpolicies on an annual basis.
Market risk arises as a result of the Group's activities in interest rate, currency, equity and debt markets and comprises interest rate, foreign exchange, equity and debt position risk. Exposure to market risk on trading activities is small in relation to capital, as trading activity is focused on servicing client requirements rather than on proprietary risk-taking. Foreign exchange and interest rate derivative contracts are predominantly used for hedging purposes. Trading activities in the Group are confined to 'vanilla' products – the Group does not trade in complex derivatives or other exotic instruments.
Each of the Group's regulated banking entities is required to manage market risk on a stand-alone basis in accordance with its individual risk appetite and limits approved by Group ALCO.
The Group measures interest rate risk in the banking book by measuring its effect on the fair value of interest-bearing assets and liabilities (and of interest rate derivatives). This is done by showing the impact of a uniform 200 basis point shock upwards or downwards over one year. These are calculated at the entity level.
Exposure to interest rate risk in the banking book is small in relation to capital and there has been no material change to the profile of interest rate risk in the banking book in the last 12 months report on the internal report to the ACPR.
Liquidity risk is defined as the risk that Group is not able to maintain or generate sufficient cash resources to meet its payment obligations as they fall due. Managing liquidity risk is therefore a crucial element in ensuring the future viability and prosperity of the Group.
The Group adopts a conservative approach to liquidity risk and its management and has designed its approach in the overall context of the Banking and Wealth Management strategy.
The Group Risk Appetite Statement establishes limits to ensure that the Group will maintain sufficient liquid resources to meet cash flow obligations and maintain a buffer over regulatory and internal assessment of liquidity requirements. The Group Liquidity Risk Policy is reviewed annually. Each banking entity must have in place a liquidity risk policy approved by the Group ALCO and which defines its liquidity risk limits and how liquidity risk is measured, monitored and controlled.
In line with the directions given by the Managing Partner, the Group ALCO is responsible for the development and oversight of the implementation of liquidity strategy, the approval of local Liquidity Risk Policies and limits, and the implementation of reasonable steps to ensure these are consistent with the Group's risk appetite. The Group ALCO establishes and maintains a structure for the management of liquidity risk including allocations of authority and responsibility to senior managers and ensures that all reasonable steps are taken to measure, monitor and control liquidity risk and identify material changes to the liquidity profile. Group ALCO evaluates the results of stress testing on the liquidity profile and is responsible for the invocation of any Contingency Funding Plan (CFP) measures if necessary. Group ALCO ensures that the appropriate liquidity impact and liquidity cost of transactions is taken into account in the credit processes and approves the benchmark rate for the cost of liquidity used by banking teams as a key element of their pricing and risk-reward assessment in respect of existing and new business.
The Risk Committee has responsibility for reviewing the Group's liquidity risk identification, measurement, monitoring and control policies and procedures.
The liquidity positions for RBI, RBZ, RCB and BMM are reviewed and reported in depth to the Group ALCO and summarised for the Risk Committee in accordance with the Risk Committee's terms of reference. In addition, the Group is required to have a contingency funding plan in place which requires a periodic review of the relevance and degree of severity of the assumptions used, the level and sustainability of the funding commitments received and the amount and quality of the liquid assets held. The Group also requires a Recovery Plan for liquidity, which sets out adequate strategies and measures to address any possible shortfalls. These will complement existing plans for individual Group entities.
The Heads of Treasury are responsible for: day-to-day management of liquidity, operating the business within liquidity limits set under their local policy and as approved by the Group ALCO, and for reporting to its meetings. Group Finance is responsible for monitoring adherence to the liquidity risk limits and for reporting any limits or target breaches as soon as practicable. Additionally the team is responsible for preparing and submitting regulatory liquidity returns, performing stress tests on the liquidity profile, verifying the appropriateness of such stress tests in consultation with Group Risk and reporting stress test results to Group ALCO.
Group Risk is responsible for monitoring the Group's liquidity risk and preparing periodic reports on it for the Risk Committee, and verifying the appropriateness of stress testing in consultation with Finance.
Group Finance has the necessary people to produce the financial, accounting and regulatory information of the Group on a consolidated and regulatory basis. The Finance Department consists of three sections: management accounting, financial accounting (including consolidations) and regulatory reporting.
5.1 Overview of statutory accounting arrangements The local accounting departments are responsible for local statutory accounts. Group Finance produces the consolidated Rothschild & Co accounts only.
5.2 Process for establishing consolidated accounts The consolidation department of Rothschild & Co manages the chart of accounts and the associated databases, performs the Group consolidation, controls the consistency and completeness of data and draws up the consolidated accounts and related notes.
In BFC, the consolidation tool of Group Finance, all subsidiaries report their individual accounting information using a chart of accounts and a format that are common to the whole Group.
Accounting data are reported directly under IFRS in BFC. The Group defines in its data dictionary how to record specific transactions and defines how the notes to the accounts should be prepared. The data dictionary, as well as other accounting guidance, is available for all offices on Rothschild & Co's Intranet. There are also quarterly reporting instructions and a quarterly Group Finance Newsletter/Circular.
Once data has been input into BFC, "blocking" controls defined by the Group are applied in order to validate the consistency of the accounting data, the correctness of the flows and the completeness of the analyses. In addition to these controls, the procedure for preparing the consolidated accounts includes:
The accounting control process at Group level complements the control systems implemented at each level of the Group's organisation.
Group Finance relies on a decentralised system where the primary control functions are assigned to the persons responsible locally for producing the financial statements.
Accounting data is collected using BFC, the Group's consolidation tool. The local finance departments are responsible for validating the accounting data entered in BFC through three levels of control:
Local entities' accounting information is input on an IFRS basis into BFC templates. Once data has been input, "blocking" system controls are applied.
In addition to the control procedures described above, the consolidation process is accompanied by additional checks on the integrity of the consolidated accounting information. These checks are carried out by:
The Group Regulatory Reporting Division draws up the relevant Group procedures and ensures the quality and reliability of calculations of the solvency ratio, credit risk, market risk, operational risk and regulatory capital.
At Group level, the regulatory reports prepared for the Autorité de Contrôle Prudentiel et de Résolution are those related to:
Following CRD4 implementation, current procedures are currently still under revision to take into account the new CRD4 rules and changes coming from EBA detailed interpretations of rules that are still ongoing in the Q&A process.
There are currently four main procedures related to regulatory reporting process:
Furthermore, each quarter the regulatory reporting team circulates quarterly regulatory reporting instructions and a quarterly group regulatory finance newsletter to all relevant finance staff in the Group.
Pursuant to Article 173 of the energy transition act, as of the 2016/2017 financial year, Rothschild & Co is required to report on the risks linked to climate change and on its low-carbon strategy.
As an independent financial advisory group, Rothschild & Co is exposed to climate change-related risks in the running of its operations and activities.
During the 2016/2017 financial year, Rothschild & Co has been taking steps to understand and, where appropriate, address those risks. A specific example of this is the embedding of the Group Environment, Health & Safety Committee firmly within the Group. The purpose of this committee is to actively lead the successful development and delivery of Rothschild & Co's Environment and Health & Safety (EH&S) Strategies, compliance and regulatory requirements, whilst adding value to the business. The committee will ensure alignment between EH&S and business objectives and will inform the Group Executive Committee of EH&S concerns affecting the Group and Rothschild & Co as well as communicating these to stakeholders, both internal and external.
Moreover, as set out in its Group Environmental Policy, Rothschild & Co's aim is through its operations, products and services to add value to its businesses and those of its clients in a sustainable, environmentallyresponsible way, to conserve and protect the world's natural resources.
In recognition of the effects of climate change and its potential impact on societies and ecosystems, resource security and the stability of economic markets, Rothschild & Co gives consideration to climate change issues and their effect on business.
In recognition of the 2 Degree Celsius Target set globally by 197 parties at the 21st session of the Conference of the Parties in Paris in December 2015, Rothschild & Co has adopted a Group Environmental Policy and works to reduce the negative impact of its operations.
Rothschild & Co has already put in place some measures to limit its own impact on the climate, namely rolling out office energy assessments that are aimed at identifying energy efficiency improvements and optimisation of existing office space.
This is a free translation into English of the statutory auditors' report prepared in accordance with Article L.226-10-1 of the French Commercial Code, on the report of the Chairman of the Supervisory Board issued in French. It is provided solely for the convenience of English-speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
For the year ended 31 March 2017
In our capacity as Statutory Auditors of Rothschild & Co S.C.A. and in accordance with Article L.226-10-1 of the French Commercial Code (Code de commerce), we hereby report to you on the report prepared by the Chairman of the Supervisory Board of your company in accordance with Article L.226-10-1 of the French Commercial Code (Code de commerce) for the year ended 31 March 2017.
It is the Chairman's responsibility to prepare, and submit to the Supervisory Board for approval, a report on the internal control and risk management procedures implemented by the company and containing the other disclosures required by Article L.226-10-1 particularly in terms of the corporate governance measures.
It is our responsibility:
We conducted our work in accordance with professional standards applicable in France.
These standards require that we perform the necessary procedures to assess the fairness of the information provided in the Chairman's report in respect of the internal control and risk management procedures relating to the preparation and processing of the accounting and financial information. These procedures consisted mainly in:
On the basis of our work, we have nothing to report on the information in respect of the company's internal control and risk management procedures relating to the preparation and processing of accounting and financial information contained in the report prepared by the Chairman of the Supervisory Board in accordance with Article L.226-10-1 of the French Commercial Code (Code de commerce).
We hereby attest that the Chairman's report includes the other disclosures required by Article L.226-10-1 of the French Commercial Code (Code de commerce).
Paris La Défense, 14 June 2017 KPMG S.A. Pascal Brouard Partner
Paris, 14 June 2017 Cailliau Dedouit et Associés Jean-Jacques Dedouit Partner
In this report, Rothschild & Co or the Group refers equally to Rothschild & Co and the Rothschild & Co group.
Over the years, Rothschild & Co has been gradually developing and implementing policies designed to take environmental and social issues into greater account in its businesses, and circulating these among its employees. Given the Group's structure, the initiatives are usually locally taken. However, they are informed by a common set of values on which Rothschild & Co's internal operations, relations with stakeholders and investment decisions are based.
Social and environmental information has become an integral part of the Group's reporting practice.
These issues are governed by a number of committees including a Group Environment, Health & Safety Committee, which was established during the 2016/2017 financial year, a Community Investment Committee in the United Kingdom and a Diversity Committee in the United Kingdom.
Rothschild & Co monitors the policies and activities of these committees, on a consolidated basis.
Rothschild & Co is strongly committed to taking into account the impact of its activities on society and the environment. However, as Rothschild & Co is the parent company of a group carrying out banking and financial activities, the disclosure of some of the information listed in article R. 225-105-1 of the French Commercial code is not relevant. Explanations are provided where information has been excluded.
In accordance with the provisions of article L. 225-102-1 of the French Commercial code which provides that Corporate Social Responsibility (CSR) information disclosed in this report must be verified by an independent certification body, Rothschild & Co's Managing Partner has appointed KPMG as independent certification body. The report from KPMG on this report is presented on pages 118 onwards.
Coordination of the CSR reporting procedure is conducted at Rothschild & Co by members of the Group's functions in charge of Human Resources, Environment and Community Investment, External Reporting, Property and Corporate Services, Legal and Company Secretariat (the "CSR Working Group").
The CSR Working Group has met on a periodic basis to set up the scope of the reporting, to organise the collection of the relevant information for the 2016/2017 financial year and consolidate the indicators included in the reporting campaign.
In the absence of recognised reporting standards on corporate social responsibility that are relevant to its activities, Rothschild & Co has defined for the Group its own reporting procedures based on best practice and on information required by the legal provisions, consolidated in the Rothschild & Co CSR Reporting Guidelines.
These guidelines are updated on an annual basis taking into consideration the CSR objectives fixed for the financial year and set out a formal framework by covering the human resources, environmental and community components, and provides a methodology for all those involved in preparing the CSR information to be included in this report. These guidelines have been updated by the CSR Working Group for the 2016/2017 financial year then reviewed and validated by Rothschild & Co to incorporate changes affecting the Group or the performance indicators from last year.
Given the Group's organisation, for the 2016/2017 financial year, the scope of the reporting does not include all of its entities for some of the required information.
In addition, the Martin Maurel group entities acquired in the framework of the recent merger between Rothschild & Co and Compagnie Financière Martin Maurel are not taken into account in the CSR Report for the financial year 2016/2017(1).
In addition, for the financial year 2016/2017, Rothschild & Co provided the Corporate Social Responsibility information, with the overall objective of a better qualitative approach and an improved verification process based on the following:
In consideration of the above, the reporting scope has been defined as follows:
The information collected covers the period from 1 April 2016 to 31 March 2017, except for data relating to human resources information collected for the Group entities in Paris which covers the period from 1 January 2016 to 31 December 2016. Data is also provided for the 2015/2016 financial year in order to allow a comparison between those two financial years.
(1) It is being specified that Martin Maurel headcount represents 14% of the total Group headcount as at 31 March 2017.
| By geography | 31/03/17 | 31/03/16 |
|---|---|---|
| United Kingdom and the Channel Islands | 946 | 924 |
| France and Monaco(1) | 1,166 | 684 |
| Switzerland | 363 | 359 |
| Other Continental Europe | 368 | 307 |
| North America | 282 | 267 |
| Rest of the world | 285 | 288 |
| Total Group | 3,410 | 2,829 |
| By business | 31/03/17 | 31/03/16 |
| Global Advisory | 1,271 | 1,203 |
| Private Wealth & Asset Management | 1,332 | 839 |
| Merchant Banking | 106 | 91 |
| Specialist Finance | 40 | 54 |
| Central & Support | 661 | 642 |
| Total Group | 3,410 | 2,829 |
Rothschild & Co attracts, develops and retains some of the industry's brightest minds. We strive to create an inclusive culture that encourages the highest standards of quality, professionalism and ethics.
Rothschild & Co has over 3,400 employees across the world, of whom 39.3% are female. The team is truly global; Rothschild & Co draw on local talent from each of the 42 countries in which it is based and beyond, hiring and developing the best each region has to offer.
Rothschild & Co offers structured Graduate and Internship programmes in its Global Advisory, Private Wealth, Merchant Banking and Asset Management businesses, for both students in their final year of university (or French grande école) and those who have already graduated. 110 students were hired and placed onto the Global Graduate Training Programme. A large number of the graduates had completed an internship with a Group business entity prior to joining the full-time programme and the remainder were hired via our online and campus recruitment campaigns. We have a keen focus on diversity for all our Internship and Graduate programmes.
Rothschild & Co also recruits experienced professionals to help grow its business and in order to fill critical gaps in our succession planning. However, our key focus is always to offer growth potential and progression to our employees internally, and as such we keenly promote internal mobility as a first priority. When human resources do recruit externally, candidates are sourced in partnership with our Business Unit Heads and Departmental Managers. Human resources also work with specialised recruitment agencies/head hunters to identify candidates, again considering the broader diversity of the candidates we select.
During the 2016/2017 financial year, the number of redundancies represented 1% of the total headcount, and the amount of new joiners was 488 including the graduates mentioned above.
| Employee age profile(2) | 31/03/17 | 31/03/16 |
|---|---|---|
| < 30 years | 22.8% | 22.3% |
| 30 to 39 years | 32.9% | 33.1% |
| 40 to 49 years | 25.6% | 25.8% |
| > 50 years | 18.8% | 18.7% |
| Total Group | 100.0% | 100.0% |
| Total Group | 100.0% | 100.0% |
|---|---|---|
| Female | 39.3% | 39.2% |
| Male | 60.7% | 60.8% |
(1) Except as indicated in Section 2.2, the data set out in this table and in the second paragraph below this table include Martin Maurel employees following the merger between Rothschild & Co and Compagnie Financière Martin Maurel. For the avoidance of doubt, the other HR data in Section 3 do not include the employees from the Martin Maurel group.
(2) Age distribution based on 97% of data.
The Group's remuneration policies, procedures and practices are in line with Rothschild & Co's business strategy, objectives, values and long-term interests and are designed to promote sound and effective risk management. The Remuneration and Nomination Committee, a specialised committee of the Supervisory Board of Rothschild & Co, is responsible for overseeing remuneration related matters in accordance with principles defined in the Group's remuneration policy.
We reward our people at a total compensation level, paying fixed and variable compensation. We ensure that fixed and variable components of total compensation are balanced appropriately.
Fixed compensation is driven by the local market for the role taking into account responsibilities, skills and experience, and annual variable compensation is awarded on a discretionary basis, driven by a combination of the consolidated results of Rothschild & Co and the financial performance of the business division in which an individual works as well as local market competitiveness and is then truly differentiated based on individual performance against financial and non-financial metrics.
In some cases we operate deferral arrangements to defer a proportion of variable compensation over three years. For our regulated population, part of this deferral is awarded in non-cash instruments.
Detailed information is presented in the consolidated financial statements, on page 170, under Note 28 "Operating expenses".
Working hours vary from country to country depending on national legislation and are therefore managed and monitored by local management and human resources teams.
Absenteeism is actively monitored and managed by local offices. Currently we do not have a uniform system for reporting this, but are embarking on a global systems project to renew our software by the end of 2017 to support this and other reporting initiatives.
Communication and feedback to employees form a key aspect of Rothschild & Co's values. In particular, two of these values (long-term focus and teamwork) underpin our commitment to our workforce. Attracting, developing and rewarding people are at the heart of what we do. Therefore providing regular and thorough feedback is critical to this. This is done most formally through the performance review, under which employees receive an end of year review. Managers are encouraged to meet with their direct reports on a regular basis to ensure dialogue on progress and two-way feedback is promoted. More generally Group and division-wide communication is regularly promoted through e-mail updates, the internal intranet R-connect, and the various businesses have their own form of face-to-face divisional gatherings.
Regarding Rothschild & Co's largest office locations, France is the only country having collective agreements based on applicable French legal provisions. During the 2016/2017 financial year, 12 collective agreements were executed. These collective agreements address mainly gender equality (actions on recruitment, compensation and work-life balance) and more seasoned employees (actions to enhance their professional development and knowledge transmission within Rothschild & Co).
Moreover, in France, a Health & Safety Committee pays great attention to health, hygiene, safety and the working conditions of employees. Rothschild & Co evaluates and anticipates risks, offers information and implements training on these subjects and we regularly review our procedures and systems at least once a year through the "Document d'évaluation des risques" (report identifying the risk on health, safety and working conditions) and the "Document de prévention des risques" (report identifying the action plan implemented to control risk). These two documents are regularly reviewed with the social representatives.
In Germany, specific measures are also conducted with the same objective (through, for instance, the "Gefährdungsbeurteilung" report which is similar to "Document d'évaluation des risques").
Rothschild & Co further strengthened and improved its Health & Safety compliance requirements and established a continuous improvement programme that will include reviewing of compliance on a regular basis. In addition, Rothschild & Co has defined its minimum conformance standard and will maintain this standard across all of the Group office locations.
The Group Environment, Health & Safety Committee directs the relevant Health & Safety activities of the Group. At the date of this report, a Global Health & Safety Policy has been adopted by Rothschild & Co for the Group. This Policy states the intention to minimise the risk of injury and ill health by providing and maintaining, so far as reasonably practicable, a safe and healthy working environment for all employees, clients, visitors and contractors, and to enlist the support of employees towards achieving these ends.
The Global Health & Safety Manager enables direct communication and consults with employees on Health & Safety matters in all the Group office locations.
Health & Safety management includes, but is not limited to:
In France, collective agreements put in place also cover Health & Safety. There are no other collective agreements in place with regard to Health & Safety matters.
For the 2016/2017 financial year, reportable workplace accidents resulting in lost working days are listed below(2).
| Country | Office location | Workplace accidents 2016/2017(1) |
Days Lost |
|---|---|---|---|
| Australia | Sydney | – | – |
| Belgium | Brussels | 1 | 1 |
| France | Paris | 5 | 5 |
| Germany | Frankfurt | 1 | 1 |
| Greater China | Hong Kong | – | – |
| Guernsey | Guernsey | – | – |
| India | Mumbai | – | – |
| Italy | Milan | – | – |
| Singapore | Singapore | – | – |
| Spain | Madrid | – | – |
| Switzerland | Geneva | – | – |
| Switzerland | Zurich | – | – |
| United Kingdom | London (New Court) | – | – |
| USA | New York | – | – |
(1) Based on reportable accidents resulting in absence.
The Group offers training and development opportunities, enabling employees to improve their professional competencies. There are local and international training programmes, face-to-face, or virtually.
A Learning and Development team is dedicated to assisting the Group's aim to build and provide solutions to satisfy all aspects of an employee's development through services in training, mentoring, coaching and team development.
(2) For the 2015/2016 financial year, reportable workplace accidents were only disclosed for the UK and France: the UK offices had not any reportable workplace accidents resulting in lost working days and the Paris office reported five workplace accidents resulting in lost working days.
Some examples of our key programmes:
Global Advisory' Development Programme: the Global Advisory' Development Programme is a comprehensive technical training curriculum comprised of mandatory, recommended and available courses for employees at all levels in Global Advisory. Organised by grade, the courses are designed to further develop employees' skills as they progress through the firm. As well as offering face to face instructor led training, WEBEX training is also offered for global offices. New technical programmes introduced this year were Debt Specific Modelling which was offered to all junior bankers.
In Global Advisory, a number of new programmes have been introduced. Following the success of the Private Wealth & Asset Management development programme, two pilots have been run in Global Advisory for 22 team leaders within the UK. Building on the management offering, two courses "Supporting Employee Mental Health" and "Managing within the Law" have also been introduced.
Each area of Private Wealth has its own bespoke Career Development Framework and Curriculum which provides guidance to employees on the learning available to them and their specific roles. This year, we have continued offering the course "Driving Performance – Getting the Best out of Yourself and Others". 41 delegates attended from London, Zurich, Geneva and Guernsey. The plan is to roll out to all staff with people responsibilities. In addition, we have developed a structured development programme for Analysts and Associates which provides technical and client skills training alongside on the job training.
Global Graduate Training Programme: is run on an annual basis for Global Advisory and Private Wealth graduates consisting of four weeks of intensive technical training followed by business specific training for Global Advisory and Private Wealth. The programme is held in the UK for Global Graduates and the US for US Analysts. In addition to the technical training, the programme includes a Corporate Induction (presentations from the business) as well as a two-day residential programme.
Compliance Training: is provided through e-learning and face-to-face training workshops to all employees globally, depending on their role and local regulatory requirements.
Performance Review: line managers are offered training prior to the Performance Review Process each year to enhance their skills in managing performance and giving feedback, In Private Wealth one workshop was held in London and Zurich and a number of individual coaching sessions for line managers were organised. In Global Advisory, three workshops were held in London, New York and via WEBEX for overseas employees.
Within Global Advisory, a number of bespoke training programmes have been organised – Trade Finance training was organised for the Mining team, and subsequently offered to all staff and the Financial Institutions team attended Banking and Insurance Valuation training. Managing Directors within UK Global Advisory continue to attend communication skills training.
This year has seen an introduction of self-management programmes supported by our Balance@Rothschild initiative (please refer to section 3.7 below for more details). Further courses: "Optimise your Mindset", "Personal Resilience", "Great influence and Impact" and "Mindfulness" have been offered to Support, Global Advisory and Private Wealth and Trust.
Rothschild & Co does not record the number of training hours for office locations other than Paris; however, in the UK 235 training events took place with 2,562 employees from the UK office locations and from other office locations attending. In France, a large budget is allocated to the individual training of employees, well above the legal obligation. In this context, 254 training events were provided, representing 7.707 training hours.
In addition to these global training programmes each office location has its own training policy and programmes.
Rothschild & Co hires the most talented individuals, from a diverse range of backgrounds, cultures and experiences and is committed to provide equal opportunities in employment. In addition, Rothschild & Co aims to ensure that it, and each office location, will not unlawfully discriminate in employment because of race, colour, religion or belief, gender, national or ethnic origin, disability, age, nationality, marriage or civil partnership, pregnancy or maternity, sexual orientation or gender-reassignment. It is therefore Rothschild & Co's policy to make every effort to provide a working environment free from harassment, intimidation and discrimination, behaviours which it considers to be unacceptable behaviour.
The policy applies to all areas of employment including recruitment, the terms and conditions of employment, training, career development, replacement, promotion, transfer, redundancy, rehiring, benefits, compensation, retirement and termination.
As an equal opportunity employer, the Group seeks to recruit on the basis of experience and ability ensuring that the best candidate for the position is recruited. Only those qualifications and skills which are important to the role will be the criteria for selection for recruitment and promotion.
Respect for diversity and an inclusive culture are both central to our success. As such, we support various personal development initiatives, including mentoring and membership of networking organisations and forums to connect our professionals and promote inclusivity across the firm. Rothschild & Co has been participating in the "Charte de la Diversité" since 2005. In this regard, we aim at having objective criteria in our recruitment, appraisal and compensation processes and we inform and train our managers on this important subject.
The Network for Knowledge (NFK) Committee is a City-wide, cross-firm organisation in London for women founded by Goldman Sachs International in 2007. This committee comprises senior women from law firms and banks including representation from Rothschild. It aims to connect female professionals from across these fields and to address the issues that affect their career development. The NFK organises regular networking events, training sessions and seminars including an annual flagship event. There is a cross-firm mentoring programme in which a number of professionals from Rothschild & Co participate.
David de Rothschild is one of the 54 Chairmen of the 30% Club which aims to increase female representation on UK corporate boards from the current industry average of 12% to 30%. This initiative was launched to support and encourage women's career development and to garner support from chairmen and companies to recognise and cultivate talented women up to board level.
In the UK, Rothschild & Co formed a Diversity Committee which is chaired by a senior investment banker in cooperation with a number of senior representatives from each major business of the Group. Alongside this, our female professionals have formed a Rothschild Women's Network (RWN) to further assist in the attraction and retention of women in our various businesses. The RWN has now organised several events targeted at different levels of employees and sends out a regular newsletter to its membership. Last year, an LGBT Network was formed in the United Kingdom and Rothschild & Co has become a member of Stonewall's Diversity Champions Programme which is Britain's good practice forum on sexual orientation in the workplace. We also have a focus on our junior professionals in particular and have launched initiatives to help them manage their work-life balance. This approach very much involves the assistance of our senior colleagues to help champion this. To support all of the above efforts, we have also launched in the United Kingdom Balance@ Rothschild, which is a series of workshops and seminars on health and well-being.
In France, measures have been put in place to promote gender equality in three key areas: recruitment, compensation and work-life balance. Action plans are presented and reviewed every year with our social representatives. We also have a plan in favour of more seasoned employees and measures to enhance their professional development and knowledge transmission within the Group.
Rothschild & Co ensures that in each location where it operates, no discriminatory criterion is applied for recruitment, career development and compensation decisions. Where an employee has a disability, we work closely with them and our Occupational Health advisers to provide the appropriate adjustments and support to ensure they can be successful and fulfilled in the workplace. In its UK environment, the Group also collaborates with specific organisations and charities, for example Blind, in Business, to ensure that we are providing the best possible care and support to our employees.
In France, the Group contribution to the employment of disabled persons is conducted by financing specialised companies or by choosing suppliers who employ disabled people and by investing in educational projects for disabled people.
The policies implemented by Rothschild & Co adhere and are in line with the main provisions of the ILO Convention, for example the elimination of all forms of forced labour, abolition of child labour, elimination of all forms of discrimination in respect of employment and occupation examples of which we have detailed above under Equal Opportunities, but also in respect of freedom of association and collective bargaining.
Rothschild & Co recognises its environmental responsibilities and the importance of being actively engaged with environmental issues. Rothschild & Co also recognises that environmental challenges present additional business risks that vary in type, severity and frequency. In addition, Rothschild & Co believes climate change adds further complexity to these risks, creating potential uncertainties for its business.
In recognition of the effects of climate change and its potential impact on societies and ecosystems, resource security and the stability of economic markets, Rothschild & Co gives consideration to climate change issues and their effect on business.
In recognition of the 2 Degree Celsius Target set globally by 197 parties at the 21st session of the Conference of the Parties in Paris in December 2015, Rothschild & Co has adopted a Group Environmental Policy and works to reduce the negative impact of its operations, guided by its environmental vision:
"Through our operations, products and services we will aim to add value to our and our clients' businesses in a sustainable, environmentallyresponsible way, to conserve and protect the world's natural resources."
This vision is underpinned by selected United Nations' Sustainable Development Goals (SDGs) and, in line with the Group's strategy, is aimed at reducing, the negative environmental impact of its actions and minimise business risk.
Whilst the Group recognises the importance of all the SDGs, it has specifically aligned itself with those it feels most relevant to the business, which is:
Goal 6 – Clean water and sanitation
To maintain a consistent, focused approach on the most material environmental impact areas of the Group's locations, Rothschild & Co is rolling out an Environmental Management Action Plan (EMAP). This EMAP is aimed at reducing the negative environmental impact of the Groups operations. The implementation of this plan will in many cases further support local environmental initiatives run by of building landlords where Rothschild & Co and its affiliates are tenants.
Rothschild & Co further strengthened and improved environmental compliance requirements and has established a continuous improvement programme that includes reviewing compliance on a regular basis. In addition, Rothschild & Co has defined its minimum conformance standard and will maintain this standard across all of the Group's offices.
In 2015/2016, Rothschild & Co reported environmental data from 10 office locations: Frankfurt, Guernsey, Hong Kong, Johannesburg, London, Milan, New York, Paris, Sydney and Zurich. The 2016/2017 report expands this scope to include Brussels, Geneva, Madrid, Mumbai and Singapore. This represents a total FTE coverage of approximately 95% of the total coverage by FTE headcount in 2016/2017(3).
Rothschild & Co has again normalised its total environmental impact against full-time equivalents (FTE), enabling a better understanding of its impact at an employee level. As such, and due to the FTE count increasing at a greater rate than the total impact, Rothschild & Co has seen a decrease in impact/FTE.
Total waste decreased despite an increase in the number of offices measured this year. This decrease has, in part, been due to improved and more accurate data collection, the piloting of waste reduction programmes, more efficient waste separation and staff training. Food waste measurement has been introduced this year and is sent to compost or anaerobic digestion. The Group piloted a successful food waste separation programme in the London office, which will now be rolled out more widely over time.
Mainly due to the inclusion of five additional offices, total material use and total water use have increased over the reporting year.
Despite the inclusion of five additional offices, total energy consumption saw a very slight decrease. This was partly due to energy efficiency gains from optimisation of existing plant equipment and the introduction of energy saving equipment, namely low energy, LED lighting.
Total Greenhouse Gas (GHG) emissions have remained broadly the same despite an increase in scope. Again, this was partly due to energy efficiency gains from optimisation of existing plant equipment and the introduction of energy saving equipment, namely low energy, LED lighting.
In line with best practice, the Group has elected to produce a "dual report" for Scope 2 (predominately electricity consumption) GHG emission. This "dual reporting" uses both location and market-based reporting methods.
The locations-based methodology is the historical way Rothschild & Co has reported GHG emissions. This method uses energy grid average emission factors in location specific geographies and over specific timeframes and allows Rothschild & Co to compare GHG emissions year-on-year.
The market-based reporting methodology enables the recognition of conscious choices in electricity purchases from 100% renewable energy.
4.1.1 Company policy addressing environmental issues and steps taken to evaluate performance or obtain environmental certification
Rothschild & Co has approved the inaugural Group Environment Policy which defines the Group's direction and approach to responsible environmental management.
The Policy outlines the Group's operational environmental commitments, and covers all areas of operational environmental management, including reporting and legal compliance and conformance with regard to how we conduct business.
Rothschild & Co is committed to the conservation and protection of the world's natural resources. The Policy will apply to and be adopted by all Group entities, branches, divisions and employees and, where deemed appropriate, third parties operating within Rothschild & Co's control.
Rothschild & Co raises employee awareness of environmental challenges affecting the Group primarily through its Intranet R-connect, email communications, notice boards and face-to-face meetings.
This year Rothschild & Co supported Earth Hour by participating in the one-hour power-down of lighting and non-essential office equipment. This support of Earth Hour will be repeated in future years in addition to developing more Group initiatives aimed at increasing the environmental awareness of our employees.
Environmental Advocates have been identified in each office location to ensure alignment of understanding and sharing of best practice to address environmental challenges across the Group.
Rothschild & Co has identified a global environmental training platform to develop and implement employee training to all offices.
During 2015 and 2016, Rothschild & Co undertook a global legal compliance assessment to understand the legal environmental responsibilities in each jurisdiction where Rothschild & Co has an office. This assessment led to the development of the Group environmental conformance standard in offices worldwide.
To date, no particular provisions or guarantees have been identified or are required for environmental risk.
(3) For the avoidance of doubt, this does not include the FTE headcount of the Martin Maurel group entities. The economic and legal reorganisation of the two groups following the merger between the two holdings Rothschild & Co and Compagnie Financière is described in the Management Report on page 57. In due course Rothschild & Co will aim report on 100% of the Rothschild Martin Maurel subgroup office locations.
4.2.1 Measures for preventing, reducing or offsetting discharges into the air, water and soil, with a severe impact on the environment
As an office-based business, Rothschild & Co does not consider its discharges into air, water and soil to be material environmental risks.
As an office-based business, Rothschild & Co does not consider sound pollution to be a material environmental risk, nor does the Group contribute to any other business-specific forms of pollution.
During the 2016/2017 financial year, and as part of the wider EMAP, Rothschild & Co piloted initiatives to further prevent, reduce, recycle and promote circular economy activities. In line with the EMAP, Rothschild & Co has started and will continue to implement improved Group waste management. This includes the separation of biodegradable waste, predominately food, and ongoing training to catering staff and employees to help ensure separation is effectively and efficiently managed.
In addition, this year Rothschild & Co has further improved its waste reporting by defining the waste disposal route of food waste more accurately either through composting or anaerobic digestion, which is reported separately for the first time this year.
Overall and despite an increase in the number of offices measured this year, a slight decrease in total waste has been recorded. This decrease has, in part, been due to improved and more accurate data collection, changes in business activity, the piloting of waste reduction programmes, more efficient waste separation and staff training.
Waste disposal data(4)
| Waste disposal in tonnes | 31/03/17 | 31/03/16 |
|---|---|---|
| Re-use | 1.3 | 1.9 |
| Recycling | 253.1 | 399.5 |
| Anaerobic digestion | 28.7 | – |
| Composting(1) | 3.7 | 24.5 |
| Incineration | 215.9 | 121.8 |
| Landfill | 42.7 | 46.2 |
| Total Waste Disposal | 545.4 | 593.8 |
| Tonnes/FTE | 0.19 | 0.23 |
(1) Anaerobic digestion and composting are the two food waste disposal methods used by the Group.
| Food waste in tonnes | 31/03/17 | 31/03/16 |
|---|---|---|
| Food Waste | 33.1 | 24.5 |
| Tonnes/FTE | 0.01 | 0.01 |
Rothschild & Co has piloted separate biodegradable, predominately food, waste collection to reduce general waste and increase the amount of biodegradable material that it sends to an anaerobic digester or industrial compost facility. The collection of biodegradable waste includes, amongst other things coffee and tea waste, unwanted or uneaten food and compostable packaging.
Rothschild & Co and the Group entities recognise the challenges for managing waste, particularly where a lack of local infrastructure limits effective waste management. However, it will continue to work towards finding solutions to overcome these challenges by working with local Environmental Advocates and third party contractors.
As Rothschild & Co increases the geographical reporting scope, it will have a better understanding of water stresses in the local areas. In due course Rothschild & Co will assess and define what "water stress" means for the Group and address it accordingly.
The increase in total water consumption is a direct consequence of introducing five new offices. It should also be noted that a faulty meter in one of the Groups larger office locations has resulted in the water reading for that office location being estimated.
Water use data(5)
| Water consumption in m3 | 31/03/17 | 31/03/16 |
|---|---|---|
| Water Consumption | 39,837.3 | 37,626.3 |
| m3/FTE | 14.07 | 14.69 |
Raw materials are interpreted predominately to mean paper. However, an increased reporting scope over the years has resulted in more materials being added.
Broadly speaking, materials use in total has seen a very slight increase. This is mainly due to the addition of five new offices in the reporting scope. Reduced business demand in larger offices for paper has been counteracted by increases in paper and other materials from the additional five office locations.
(4) For more information on waste disposal data, please refer below to the additional data notes.
(5) For more information on water use data, please refer below to the additional data notes.
| Materials use in tonnes | 31/03/17 | 31/03/16 |
|---|---|---|
| Paper Consumption (Recycled content) | 30.0 | 29.5 |
| Paper consumption (virgin content) | 164.7 | 173.7 |
| Paper towels (recycled content) | 1.7 | 5.4 |
| Paper towels (virgin content) | 8.2 | 2.3 |
| Paper cups (recycled content) | 0.0 | 0.5 |
| Paper cups (virgin content) | 1.7 | 0.5 |
| Plastics | 10.6 | 0.02 |
| Total Paper Consumption | 216.9 | 211.8 |
| Tonnes/FTE | 0.08 | 0.08 |
Despite the inclusion of five additional offices, energy consumption decreased moderately. This reduction was driven mainly through optimising existing office plant equipment and implementing energy efficient solutions, such as replacing low efficiency lighting with high efficiency LED lighting.
Energy use data(7)
| Total energy use in MWh | 31/03/17 | 31/03/16 |
|---|---|---|
| Natural Gas + Biogas Combustion | 2,931.5 | 3,484.8 |
| Gasoil/Diesel Combustion | 235.7 | 69.0 |
| Electricity Consumption | 13,939.7 | 13,932.1 |
| Heat Consumption | 490.2 | 386.8 |
| Total Energy Consumed | 17,597.0 | 17,872.7 |
| MWh/FTE | 6.22 | 6.98 |
No sites are located in or adjacent to areas of high biodiversity value. However, whilst the Group does not consider its land use to be of material environmental risk, it remains mindful of the impacts of land use and will protect, where practicable, biodiversity, as far as practicable, that is directly or indirectly affected by the Group's operations.
4.4.1 Adaptation to the consequences of climate change
During the 2016/2017 financial year, Rothschild & Co has established its position on climate change in its Climate Change Positional Statement (please refer to page 108).
4.4.2 Significant greenhouse gas emissions items generated as a result of the Group's activity, particularly by the use of goods and services they provide Rothschild & Co's Greenhouse Gas (GHG) emissions are calculated as tonnes of carbon dioxide equivalent (tCO2 e), a universal unit of measurement expressing the impact of each of the Kyoto GHGs in terms of the amount of CO2 that would create the same amount of warming.
Rothschild & Co calculates tCO2 e by multiplying its activity data, for example waste incineration, landfill and miles travelled by air, by the UK DEFRA-approved conversion factors.
The Group's emissions reporting is in respect of its operational activities and includes Scope 1 and 2 emissions, and Scope 3 emissions in respect of business travel, water supply and wastewater treatment, materials, waste disposal, and electricity transmission and distribution losses.
The GHG emissions data table below does not include emissions associated with investments from Asset Management and Merchant Banking divisions. Rothschild & Co recognises that, although not quantified, Scope 3 emissions from Asset Management and Merchant Banking divisions are a significant source of impact(8).
Moving forward and in line with best practice, Rothschild & Co has elected to produce a "dual report" for Scope 2 GHG emission. This "dual reporting" uses both location and market-based reporting methods.
The location-based method is the historical way Rothschild & Co reports GHG emissions. This method uses energy grid average emission factors in location specific geographies and over specific timeframes.
Using guidance from the GHG Protocol, Rothschild & Co now also reports GHG emissions using market-based methodology.
The Scope 2 market-based figure reflects emissions from electricity purchasing decisions that Rothschild & Co makes. When quantifying emissions using the market-based approach, and where possible, a tariff-specific emissions factor is used (for example, some office locations choose to purchase electricity generated from 100% renewable sources, and can therefore account emissions associated with electricity consumption at these sites as zero). Where tariff specific emission factors are unavailable, a supplier specific emissions factor is used, failing the availability of tariff-specific emission factors a residual mix emissions factor is used. As a final option, whereby the two previous emission factors are not available, the location-based grid emissions factor is used. This approach is in line with the GHG Protocol Scope 2 Data Hierarchy.
Despite the inclusion of five additional offices, Scope 2 location-based GHG emissions from electricity use have remained the same. This is due to implementing energy efficiency measures including the optimisation of existing plant equipment in some offices. This is the first year the Group reported on Scope 2 market-based GHG emissions; this figure has been heavily influenced by purchasing a 100% renewable electricity contract in one of the office locations.
The reduction in Scope 2 emissions has been slightly negated by an increase in Scope 1 and 3 emissions, namely from business travel, hence total Group GHG emissions remained the same.
(6) For more information on materials use data, please refer below to the additional data notes.
| Greenhouse gas emissions in tCO2e (except electricity for non-UK offices which is tCO2) | 31/03/17 | 31/03/16 | ||
|---|---|---|---|---|
| Natural Gas + Biogas | 481.1 | 608.8 | ||
| Gasoil | 65.1 | 18.7 | ||
| Direct Emissions (Scope 1) | Distance | 26.2 | 42.3 | |
| Owned Vehicles | Petrol | 102.7 | 86.0 | |
| Diesel | 127.0 | 68.7 | ||
| Total Scope 1 | 802.1 | 824.6 | ||
| Electricity Consumption (Location-based) | 3,706.8 | 3,933.5 | ||
| Indirect Emissions (Scope 2) | Electricity Consumption (Market-based) | 1,635.6 | – | |
| Heat Consumption | 100.1 | 86.5 | ||
| Total Scope 2 (Location-based) | 3,807.0 | 4,020.0 | ||
| Total Scope 2 (Market-based) | 1,735.8 | – | ||
| Domestic All Classes (Av Passenger) | 49.3 | 54.1 | ||
| Short-Haul Economy Class | 337.1 | 396.6 | ||
| Short-Haul Business Class | 1,074.0 | 928.0 | ||
| Long-Haul Average Passenger | 360.5 | 0.0 | ||
| Long-Haul Economy Class | 105.7 | 60.2 | ||
| Long-Haul Premium Economy Class | 134.2 | 12.9 | ||
| Indirect Emissions from Flights (Scope 3) | Business Travel – Flights | Long-Haul Business Class | 3,823.6 | 3,111.9 |
| Long-Haul First Class | 438.0 | 421.4 | ||
| International (Av Passenger) | 271.7 | 292.1 | ||
| International Economy Class | 1,166.9 | 1,109.1 | ||
| International Premium Economy | 12.7 | 8.6 | ||
| International Business Class | 5,025.9 | 6,246.4 | ||
| International First Class | 1,163.3 | 1,139.4 | ||
| Total Emissions – Flights | 13,962.3 | 13,780.6 | ||
| National | 62.1 | 40.5 | ||
| Other Travel Emissions (Scope 3) | Business Travel – Rail | International | 24.1 | 24.5 |
| Business Travel – Taxis | 190.8 | 169.6 | ||
| Total Emissions – Other Travel | 277.0 | 234.6 | ||
| Water Supply | 13.7 | 12.9 | ||
| Water | Water Treatment | 28.2 | 26.6 | |
| Paper | 185.6 | 189.8 | ||
| Materials | Plastics | 35.4 | 0.1 | |
| Re-use | 0.0 | 0.0 | ||
| Recycling | 5.3 | 8.4 | ||
| Other Emissions (Scope 3) | Anaerobic | 0.6 | – | |
| Waste | Composting | 0.0 | 0.1 | |
| Incineration | 4.5 | 2.6 | ||
| Landfill | 8.5 | 4.3 | ||
| Company Leased Vehicles | 188.2 | 103.4 | ||
| Electricity Transmission and Distribution Losses | 368.9 | 329.8 | ||
| Total Emissions – Other | 839.0 | 678.2 | ||
| Total Scope 3 | 15,078.3 | 14,693.5 | ||
| Total Scope 1, 2 and 3 (Location-based) | 19,687.3 | 19,538.1 | ||
| Total Scope 1, 2 and 3 (Market-based) | 17,616.2 | n/a(1) |
(1) Please refer below to the additional data notes.
| Location-based approach | Market-based approach | ||||
|---|---|---|---|---|---|
| Emissions tCO2e/FTE | 31/03/17 | 31/03/16 | 31/03/17 | 31/03/16 | |
| FTE Headcount | 2,831.0 | 2,561.4 | 2,831.0 | – | |
| Scope 1 and 2 | 1.6 | 1.9 | 0.9 | – | |
| Scope 3 (All) | 5.3 | 5.7 | 5.3 | – | |
| Scope 1, 2 and 3 (All) | 7.0 | 7.6 | 6.2 | – | |
provided by the Group on climate change As mentioned in the introduction of this section, Rothschild & Co will continuously improve its environmental management practices, limiting and reducing our negative environmental impact as far as practicable.
Over the next 12 to 18 months, Rothschild & Co will look in more detail at the consequences of the impact that its goods and services have on climate change, above and beyond those related to its operations, in order to put in place the appropriate measures.
4.4.4 Information on how investment decision-making process takes social, environmental and governance (ESG) criteria into consideration
Rothschild & Co will continue to adapt its operational activities with the aim of reducing business risk and environmental impact.
Historically, ESG approaches to investment decision-making have remained the responsibility of the individual business entity or area.
Rothschild & Compagnie Gestion and Five Arrows Managers, two of Rothschild & Co's asset management and/or private banking entities are signatories of the UN PRI. Rothschild Private Wealth in the UK has developed its own ESG Policy.
Over the next 12 to 18 months, Rothschild & Co will evaluate the requirements and define the means needed to contribute towards financing the energy and ecological transition.
No specific measures have been taken thus far to preserve or develop biodiversity at Group level, although the Group does support the Life on Land SDG. This support, coupled to the Rothschild family's historical links to species discovery and protection, Rothschild & Co commits to protecting biodiversity, as far as practicable, that is directly or indirectly affected by the Group's operations.
The reporting period is the financial year 1 April 2016 to 31 March 2017.
The total Group FTE headcount used to calculate the environmental impact per FTE uses HR finance headcount data provided by the Global HR team. This figure is added to the headcount manually reported by the site Environmental Advocates, of third party, service provider or contractor headcount. The result of adding the two headcount numbers is used to calculate the impact per FTE (Impact/FTE).
Impact per FTE is used to normalise the total impact against headcount.
Our full-time equivalent headcount (FTE) is taken from the human resources (HR) system as a "snapshot in time" on 31 March 2017. Third party, service provider or contractor employee headcount is not captured by the HR system; instead, this headcount is manually captured and added to the HR FTE figure provided by HR.
In order of largest headcount, the 2015/2016 offices that provided environmental data include: London, Paris, Zurich, New York, Frankfurt, Guernsey, Milan, Sydney, Hong Kong and Johannesburg.
In order of largest headcount, the 2016/2017 offices that provided environmental data include: London, Paris, Zurich, New York, Frankfurt, Guernsey, Milan, Sydney, Hong Kong, Brussels, Geneva, Singapore, Madrid, Mumbai and Johannesburg.
The total electricity figure is reported as CO2e, however, non-UK electricity emissions are in tCO2. DEFRA national electricity factors for non-UK offices are no longer available. Only for tCO2, is accessible from the International Energy Agency.
Where assumptions, estimates or changes have been made, this is explained in the following notes for each section.
Total waste from the Frankfurt office is estimated on the basis of information provided by the city authorities. The waste produced by the city is divided by its population. This figure is multiplied by the number of employees at the Frankfurt office to establish the total.
Due to insufficient data from the Mumbai, actual waste data is not included in this report.
It is assumed that in an office environment all waste that is composted is food. In previous years all separated food waste has been reported as Composting by default. Anaerobic Digestion has been included as a separate category this year explaining the drop in Composting figures in 2016/2017.
Raw materials are interpreted to predominately mean office paper; however, the increased reporting scope has resulted in more materials being measured, including paper towels, cups and plastic, where the data has been provided.
It is assumed that one sheet of A4 paper weighs 5 grams, except in the US where an A4 sheet weighs 4.5 grams.
Greenhouse Gas Emissions have been calculated using most recent DEFRA emissions factors.
The factor for CO2 equivalent (CO2e) has been used, with the exception of electricity in non-UK offices which uses the factor for tCO2.
This year electricity consumption was corrected for 2015/2016 from 0 MWh to 2, 083 MWh. This accounts for not including common area electricity consumption.
This year water variances were corrected for 2015/2016 from 246.9 m3 to 56 m3.
A meter fault also resulted in one office needing to provide an estimated consumption using the agreed estimation methodology:
Estimation = 49 litres * employee headcount * working days/1,000
In 2015/2016 Diesel consumption associated with vehicles in one office was misclassified into the 'Company Leased Vehicles' category rather than 'Company Owned Vehicles'. This has been reclassified which has decreased the figure for 'Company Leased Vehicles' (Scope 3) and increased the figure for 'Company Owned Vehicles' (Scope 1) by 68.7 tCO2e.
In 2015/2016 the electricity emissions factor associated with one office was missing. This has been updated in 2016/2017 and therefore 165.4 tCO2e has been added to the electricity emissions.
An updated Energy Factor for one office/country has resulted in a decrease of 12.8 tCO2e.
The figure for one offices electricity use in 2015/2016 and 2016/2017 has been updated after audit from KPMG. Overall this equates to an increase of 274.7 tCO2e.
2016/2017 is the first year that Anaerobic Digestion has been reported as a standalone category.
Emissions from Waste – Reuse category in 2015/2016 were 0.0 tCO2e to 1 decimal place, the chosen rounding method Rothschild reports to. However, there were not 'No emissions' as the figure is actually 0.0393519 to 7 decimal places, which rounds to 0.0 (1 d.p.).
In 2015/2016 there was also associated consumption which was not reported in the data tables.
In 2016/2017 reporting water variance was queried with one office who indicated that figure provided for 2015/2016 was 56 m3. This update created a variance equating to a decrease of 0.1 tCO2e Water Supply emissions and a decrease of 0.2 tCO2e Water Treatment emissions.
Where electricity consumption figures were updated in 2016/2017 for the 2015/2016 consumption this has also affected emissions from electricity T&D losses, please see above points for an explanation of these updates.
Short haul flight categories from 2015/2016 have been combined to more closely align to the DEFRA guidance, as a result there is no longer a 'Short haul – Premium Economy' category, this is included in 'Short haul – Economy' category. The same has been done for the 'Short haul – First class' flights which are now included in the 'Short-haul – Business' category.
Regarding the "Total other travels", Mumbai and Singapore offices are omitted from the reporting scope for 2016/17, due to an absence of reported data.
During the 2016/2017 financial year, flights have been allocated into the following categories:
Domestic (within the UK)
Flights to/from the UK (short haul and long haul by class)
International flights (between and within non-UK countries) (by class)
As a leading financial services business, Rothschild & Co carries out financial advisory, specialist finance and investment activities. As a consequence, it participates actively in the financing of the economy of the countries where it operates, through its 62 offices implemented in 42 countries.
A Community Investment programme focused on raising and realising the aspirations of young people from disadvantaged backgrounds. It does this through a combination of employee volunteering and charitable giving.
5.2.1 Conditions of the dialogue with stakeholders In accordance with the definition provided by the GRI Guidelines, the Rothschild & Co's stakeholders are all entities or individuals that can reasonably be expected to be significantly affected by the Group's activities, products and/or services, and whose actions can reasonably be expected to affect the ability of the organisation to successfully implement its strategies and achieve its objectives.
Rothschild & Co has identified as its key stakeholders its shareholders, potential investors and financial analysts. Rothschild & Co seeks to maintain a dialogue with those stakeholders to be in the position to take their interests into account and to promote its own values, essentially through the Investor Relations Department.
During the 2016/2017 financial year, several meetings have been organised between the Rothschild & Co's Head of Investor Relations and those stakeholders. Members of Rothschild & Co's Senior Management have also attended these meetings. In addition, the Rothschild & Co's Head of Investor Relations participated in broker conferences dedicated to facilitate relations between listed companies and investors.
As a listed company, Rothschild & Co attaches great importance to comply with applicable listing rules regarding transparency. In accordance with these rules, it discloses in both French and English, the information that is necessary to investors and shareholders to assess its situation and outlook. This financial and extra-financial information is available on Rothschild & Co's internet website (www.rothschildandco.com) in a section entitled "Investor Relations". Information is also disclosed in a subsection named "Shareholders", including all information relating to General Meetings and the exercise of the voting rights, or explanations about the different ways to hold securities issued by Rothschild & Co.
Rothschild & Co's Community Investment ambition is to raise and realise the aspirations of young people from disadvantaged backgrounds. Rothschild & Co believes that how much you are able to achieve in life should not depend on your individual family circumstances or background.
Offering a combination of skills-based employee volunteering and strategic financial contributions the Group pursues long-term partnerships with charities, educational establishments and social enterprises which share our goals.
Rothschild & Co focuses on helping disadvantaged young people to develop the skills that will help them to succeed at school and in the workplace, and on instilling them the confidence to become more ambitious. In addition, Rothschild & Co uses its advisory skills to help social enterprises whose aims are aligned with Rothschild & Co's to develop and transform their business models.
Rothschild & Co offers its employees unlimited leave to volunteer for a wide range of skills-based programmes which aim to create long-term change in the lives of their beneficiaries. These include mentoring and academic tutoring programmes as well as work experience and careers insight events. During the 2016/2017 financial year, 42% of Rothschild & Co's staff in the United Kingdom volunteered once or more.
The Group has a long history of charitable giving, continuing the philanthropic traditions of the Rothschild family dating from the 1800s. Today, the Group's charitable giving is directed to causes aligned to our strategy of supporting young people from disadvantaged backgrounds. In addition, the Group supports employee charitable giving and matches staff contributions to the charities of their choice.
Whilst our offices have traditionally acted independently from one another in respect of Community Investment, the Group is now working towards the implementation of a global and coordinated approach starting with our four largest offices in Germany, France, Switzerland and North America, in order to maximise business and societal impact. A newly-established Global Community Investment Committee will oversee the harmonisation of existing initiatives into a single Global programme.
In the past year, the London and Paris offices have continued to support entrepreneurs via Ashoka, and in 2017 will work with new entrepreneurs aligned with our strategy.
Our Frankfurt office focuses on local schools and children's centres. In New York, through a partnership with the educational charity Pencil, staff have partnered with a school in a deprived area of the city and established a mentoring programme.
In London and Johannesburg bursary programmes help disadvantaged young people to continue their studies when the cost of doing so would otherwise be prohibitive.
5.3.1 Integration of social and environmental issues into the Company procurement policy
In due course, Rothschild & Co plans to establish a clearer position on the environmental consequences of our choice of suppliers and the services they provide.
5.3.2 Importance of subcontracting and consideration, in the relationship with subcontractors and suppliers of their social and environmental responsibility Given the Group's activities, subcontracting is not significant.
The Group Environment, Health & Safety Committee aims during the second 2017 semester to provide Rothschild & Co and Group entities with a supplier engagement tool which will help them to consider the social and environmental responsibility policies of prospective significant suppliers.
The Group conducts its activities with a high level of professional ethics with the clients' interests as its priority. This is done by implementing a rigorous internal control system and risk control adapted to the Group's size and covered activities. More details on the Group's internal control and risk control structure are presented in the report of the Chairman of the internal control on pages 96 onwards, of this report.
As the Group's parent company and financial holding company, Rothschild & Co is in charge of the consolidated prudential supervision of its consolidated entities and of the implementation and the monitoring of the efficiency of the internal control system at the Group's scale. This involves the elaboration of procedures and policies implemented homogeneously.
Policies were implemented through different recent initiatives sharing and harmonising best practices. Approximately 20 different policies are currently implemented in the Group throughout all five main regions of the world. Employees' awareness regarding those matters is ensured by dedicated training sessions and the disclosures of guides on the Group's intranet.
Regarding the fight against corruption, the Group requires from its employees to act with honesty and integrity and has a zero-tolerance approach. Involvement in any form of corruption has serious consequences, including dismissal or termination of employment. A Group policy on anti-corruption has been established, in order to comply with the applicable regulations such as the UK Bribery Act which aims at preventing such crimes.
It deals for instance with the acceptation or the offering of gifts and entertainment by employees within the framework of their jobs since this can lead to suspicious or reprehensible situation. In order to avoid such situation, each entity must determine proportionate limits for the acceptance or the offering of gifts that do not require approval. Any gift or entertainment that exceeds these limits must be approved by the relevant head and the local compliance function. In addition to this, persons to whom this policy applies must not accept gifts such as cash or any other gift convertible into cash such as shares, share options or bonds.
Recent developments in France with the so called "Loi Sapin 2" will complete and reinforce the Group's anti-corruption framework.
Given the Group's activities, there is no specific need to implement measures to promote clients Health & Safety.
Paris Office has to report directly to the CNIL all new private data treatments (clients and staff private data) in concordance with its procedures.
The safety of servers and records systems (and therefore sensitive and confidential data) is ensured by groups of security driven by the Active Directory (AD). Depending on the rights attributed to AD groups, the user may or may not have access to files in read-only or in read/write. All new joiners are made aware of the best practises regarding the security of information by the Head of the security information system. R&Co has established a working party at Group level covering all business lines and relevant support divisions to address the implementation of the General Data Protection Regulation, which comes into force on 25 May 2018. This regulation will standardise data protection across the European Union, including the UK, and R&Co's approach is to prioritise those high impact areas in the firm which process personal and sensitive data to ensure that it will comply with this regulation.
Rothschild & Co does not carry out other activities to promote human rights, than those mentioned in the previous sections of this report.
This is a free English translation of the Independent Third Party's report issued in French and is provided solely for the convenience of English-speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.
For the year ended 31 March 2017
In our capacity as independent third party of Rothschild & Co S.C.A. company, (hereinafter named the "Company"), certified by COFRAC under number 3-1049(1), we hereby report to you on the consolidated human resources, environmental and social information for the year ended 31 March 2017, included in the management report (hereinafter named "CSR Information"), pursuant to article L.225-102-1 of the French Commercial Code (Code de commerce).
The Managing Director is responsible for preparing a company's management report including the CSR Information required by article R.225-105-1 of the French Commercial Code in accordance with the guideline used by the Company (hereinafter the "Guidelines"), summarised in the management report and available on request from the company's head office.
Our independence is defined by regulatory texts, the French Code of ethics (Code de déontologie) of our profession and the requirements of article L.822-11-3 of the French Commercial Code. In addition, we have implemented a system of quality control including documented policies and procedures regarding compliance with the ethical requirements and applicable legal and regulatory requirements.
Our work involved five persons and was conducted between March and June 2017 during a four week period.
We performed our work in accordance with the order dated 13 May 2013 defining the conditions under which the independent third party performs its engagement and with the professional guidance issued by the French Institute of statutory auditors (Compagnie nationale des commissaires aux comptes) relating to this engagement and with ISAE 3000(2) concerning our conclusion on the fairness of CSR Information.
On the basis of interviews with the individuals in charge of the relevant departments, we obtained an understanding of the Company's sustainability strategy regarding human resources and environmental impacts of its activities and its social commitments and, where applicable, any actions or programmes arising from them.
We compared the CSR Information presented in the management report with the list provided in article R.225-105-1 of the French Commercial Code.
For any consolidated information that is not disclosed, we verified that explanations were provided in accordance with article R.225-105, paragraph 3 of the French Commercial Code.
We verified that the CSR Information covers the scope of consolidation, i.e., the Company, its subsidiaries as defined by article L.233-1 and the controlled entities as defined by article L.233-3 of the French Commercial Code within the limitations set out in the methodological note, presented in the chapter "Methodology" section of the management report.
Based on the work performed and given the limitations mentioned above, we attest that the required CSR Information has been disclosed in the management report.
We conducted six interviews with the persons responsible for preparing the CSR Information in the departments in charge of collecting the information and, where appropriate, responsible for internal control and risk management procedures, in order to:
We determined the nature and scope of our tests and procedures based on the nature and importance of the CSR Information with respect to the characteristics of the Company, the human resources and environmental challenges of its activities, its sustainability strategy and industry best practices.
(1) whose scope is available at www.cofrac.fr.
(2) ISAE 3000 – Assurance engagements other than audits or reviews of historical financial information.
Regarding the CSR Information that we considered to be the most important(3):
For the remaining consolidated CSR Information, we assessed its consistency based on our understanding of the company.
We also assessed the relevance of explanations provided for any information that was not disclosed, either in whole or in part.
We believe that the sampling methods and sample sizes we have used, based on our professional judgement, are sufficient to provide a basis for our limited assurance conclusion; a higher level of assurance would have required us to carry out more extensive procedures. Due to the use of sampling techniques and other limitations inherent to information and internal control systems, the risk of not detecting a material misstatement in the CSR information cannot be totally eliminated.
Based on the work performed, no material misstatement has come to our attention that causes us to believe that the CSR Information, taken as a whole, is not presented fairly in accordance with the Guidelines.
Paris La Défense, 14 June 2017 KPMG S.A.
Anne Garans Partner Sustainability Services Pascal Brouard Partner
(3) Human resources indicators: Total headcount (breakdown of employees by gender, age and geographical area), Number of hires, Numbers of redundancies, Number of training sessions.
Environmental indicators: Water consumption, Energy consumption (electricity, gas, heat and fuel), Paper consumption, Waste produced, CO2 emissions related to business travels. Qualitative information: Occupational health and safety conditions, Measures implemented to promote gender equality, Conditions of the dialogue with stakeholders, Action implemented against corruption, Actions of partnership and sponsorship.
(4) New-York office (United States of America), Paris offices (France), London office (United Kingdom).
(5) See the list of environmental indicators disclosed in footnote 3 of this report.
| Consolidated financial statements | 122 |
|---|---|
| Parent company financial statements | 187 |
| In thousands of euro | Notes | 31/03/17 | 31/03/16 |
|---|---|---|---|
| Cash and amounts due from central banks | 3,907,432 | 3,500,132 | |
| Financial assets at fair value through profit or loss | 1 | 432,441 | 452,867 |
| Hedging derivatives | 2 | – | 2,798 |
| Available-for-sale financial assets | 3 | 1,616,427 | 1,096,009 |
| Loans and advances to banks | 4 | 1,918,060 | 1,242,947 |
| Loans and advances to customers | 5 | 2,867,275 | 1,488,372 |
| Current tax assets | 12,643 | 8,431 | |
| Deferred tax assets | 16 | 67,966 | 72,278 |
| Other assets | 6 | 667,335 | 528,751 |
| Investments accounted for by the equity method | 7 | 33,783 | 42,442 |
| Tangible fixed assets | 8 | 359,982 | 307,068 |
| Intangible fixed assets | 9 | 170,084 | 168,397 |
| Goodwill | 10 | 123,843 | 111,853 |
| TOTAL ASSETS | 12,177,271 | 9,022,345 |
| In thousands of euro | Notes | 31/03/17 | 31/03/16 |
|---|---|---|---|
| Due to central banks | – | 1,158 | |
| Financial liabilities at fair value through profit or loss | 1 | 33,329 | 76,733 |
| Hedging derivatives | 2 | 8,626 | – |
| Due to banks and other financial institutions | 11 | 460,958 | 281,952 |
| Customer deposits | 12 | 8,063,283 | 5,468,388 |
| Debt securities in issue | 139,634 | 124,168 | |
| Current tax liabilities | 34,588 | 38,011 | |
| Deferred tax liabilities | 16 | 66,329 | 43,369 |
| Other liabilities, accruals and deferred income | 13 | 956,450 | 788,162 |
| Provisions | 14 | 113,544 | 155,385 |
| TOTAL LIABILITIES | 9,876,741 | 6,977,326 | |
| Shareholders' equity | 2,300,530 | 2,045,019 | |
| Shareholders' equity – Group share | 1,828,955 | 1,529,169 | |
| Share capital | 154,581 | 142,274 | |
| Share premium | 1,138,886 | 981,692 | |
| Unrealised or deferred capital gains and losses | 40,299 | 61,533 | |
| Consolidated reserves | 309,231 | 111,750 | |
| Net income – Group share | 185,958 | 231,920 | |
| Non-controlling interests | 18 | 471,575 | 515,850 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 12,177,271 | 9,022,345 |
| 1. O | |
|---|---|
| ver | |
| vie | |
| w | |
| In thousands of euro | Notes | 31/03/17 | 31/03/16 | |
|---|---|---|---|---|
| + | Interest income | 23 | 94,275 | 97,268 |
| - | Interest expense | 23 | (45,176) | (48,144) |
| + | Fee income | 24 | 1,633,632 | 1,474,825 |
| - | Fee expense | 24 | (58,361) | (52,739) |
| +/- | Net gains/(losses) on financial instruments at fair value through profit or loss | 25 | 98,337 | 58,315 |
| +/- | Net gains/(losses) on available-for-sale financial assets | 26 | 38,339 | 51,080 |
| + | Other operating income | 27 | 6,720 | 13,106 |
| - | Other operating expenses | 27 | (635) | (4,798) |
| Net banking income | 1,767,131 | 1,588,913 | ||
| - | Staff costs | 28 | (1,016,576) | (953,509) |
| - | Administrative expenses | 28 | (278,512) | (267,297) |
| - | Amortisation, depreciation and impairment of tangible and intangible fixed assets | 29 | (32,116) | (36,769) |
| Gross operating income | 439,927 | 331,338 | ||
| +/- | Cost of risk | 30 | (11,265) | (11,939) |
| Operating income | 428,662 | 319,399 | ||
| +/- | Net income from companies accounted for by the equity method | 7 | 424 | 267 |
| + | Income from negative goodwill | 10 | 1,381 | – |
| +/- | Net income/(expense) from other assets | 31 | 6,273 | 102,638 |
| Profit before tax | 436,740 | 422,304 | ||
| - | Income tax expense | 32 | (70,391) | (65,079) |
| CONSOLIDATED NET INCOME | 366,349 | 357,225 | ||
| Non-controlling interests | 18 | 180,391 | 125,305 | |
| NET INCOME – GROUP SHARE | 185,958 | 231,920 | ||
| Earnings per share in euro – Group share (basic) | 36 | 2.64 | 3.37 | |
| Earnings per share in euro – continuing operations (basic) | 36 | 2.64 | 3.37 | |
| Earnings per share in euro – Group share (diluted) | 36 | 2.60 | 3.32 | |
| Earnings per share in euro – continuing operations (diluted) | 36 | 2.60 | 3.32 |
Rothschild & Co | Annual Report | 2016/2017 123
| 31/03/17 | 31/03/16 |
|---|---|
| 366,349 | 357,225 |
| (35,372) | (85,626) |
| – | (703) |
| 23,760 | (2,434) |
| (31,682) | (43,289) |
| – | 8,065 |
| – | (7) |
| (523) | 1,659 |
| 250 | 6,843 |
| (43,567) | (115,492) |
| 4,918 | 6,436 |
| (3,321) | (5,381) |
| (543) | (198) |
| 1,054 | 857 |
| (42,513) | (114,635) |
| 323,836 | 242,590 |
| 153,015 | 153,649 |
| 170,821 | 88,941 |
The amount of consolidated net income and other comprehensive income for CFMM included in the statement above for the year ended 31 March 2017 is €4.7 million and €0.1 million respectively.
| Unrealised or deferred capital gains and losses (net of tax) |
||||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of euro | Capital and associated reserves(1) |
Consolidated reserves(3) |
Related to translation differences |
Available for-sale reserves |
Hedging reserves |
Share holders' equity, Group share |
Share holders' equity, NCI |
Total shareholders' equity |
| SHAREHOLDERS' EQUITY AT 31 MARCH 2015 |
1,123,966 | 160,621 | 53,717 | 86,813 | (5,671) 1,419,446 | 556,034 | 1,975,480 | |
| Impact of elimination of treasury shares | – | (3,810) | – | – | – | (3,810) | – | (3,810) |
| Dividends | – | (41,846) | – | – | – | (41,846) | (99,581) | (141,427) |
| Charge related to share-based payments | – | 1,026 | – | – | – | 1,026 | 12 | 1,038 |
| Interest on perpetual subordinated debt | – | – | – | – | – | – | (14,775) | (14,775) |
| Effect of a change in shareholding without a change of control |
– | (9,955) | 69 | 10,411 | (9) | 516 | (14,705) | (14,189) |
| Sub-total of changes linked to transactions with shareholders |
– | (54,585) | 69 | 10,411 | (9) | (44,114) (129,049) | (173,163) | |
| 2015/2016 net income for the year | – | 231,920 | – | – | – | 231,920 | 125,305 | 357,225 |
| Net gains/(losses) from changes in fair value | – | – | – | 1,938 | (5) | 1,933 | 2,449 | 4,382 |
| Net (gains)/losses transferred to income on disposal and impairment |
– | – | – | (37,753) | 6,358 | (31,395) | (13) | (31,408) |
| Remeasurement gains/(losses) on defined benefit funds |
– | 5,439 | – | – | – | 5,439 | (4,470) | 969 |
| Translation differences and other movements | – | 275 | (53,602) | (60) | (673) | (54,060) | (34,406) | (88,466) |
| SHAREHOLDERS' EQUITY AT 31 MARCH 2016 |
1,123,966 | 343,670 | 184 | 61,349 | – 1,529,169 | 515,850 | 2,045,019 | |
| Impact of elimination of treasury shares | – | (5,598) | – | – | – | (5,598) | – | (5,598) |
| Dividends(2) | – | (44,184) | – | – | – | (44,184) (131,984) | (176,168) | |
| Issue of shares | 154,490 | – | – | – | – | 154,490 | – | 154,490 |
| Charge related to share-based payments | – | 909 | – | – | – | 909 | 13 | 922 |
| Interest on perpetual subordinated debt | – | – | – | – | – | – | (13,748) | (13,748) |
| Effect of a change in shareholding without a change of control |
– | 15,506 | 7,902 | 2,618 | – | 26,026 | (69,005) | (42,979) |
| Other movements(4) | 15,011 | – | – | – | – | 15,011 | – | 15,011 |
| Sub-total of changes linked to transactions with shareholders |
169,501 | (33,367) | 7,902 | 2,618 | – | 146,654 | (214,724) | (68,070) |
| 2016/2017 net income for the year | – | 185,958 | – | – | – | 185,958 | 180,391 | 366,349 |
| Net gains/(losses) from changes in fair value | – | – | – | 20,537 | – | 20,537 | 581 | 21,118 |
| Net (gains)/losses transferred to income on disposal and impairment |
– | – | – | (28,797) | – | (28,797) | (56) | (28,853) |
| Remeasurement gains/(losses) on defined benefit funds |
– | (427) | – | – | – | (427) | 2,024 | 1,597 |
| Translation differences and other movements | – | (645) | (26,254) | 2,760 | – | (24,139) | (12,491) | (36,630) |
| SHAREHOLDERS' EQUITY AT 31 MARCH 2017 |
1,293,467 | 495,189 | (18,168) | 58,467 | – 1,828,955 | 471,575 | 2,300,530 |
(1) Capital and associated reserves at the period end consist of share capital of €154.6 million and share premium of €1,138.9 million. Share premium, under IFRS measurement, includes costs incurred in the issuance of share capital.
(2) Dividends include €43.5 million of dividends to R&Co shareholders and a total of €0.7 million of dividends to R&Co Gestion and Rothschild & Co Commandité SAS. Distributions to non-controlling interests are analysed in note 18.
(3) Consolidated reserves consist of retained earnings of €328.1 million less treasury shares of €18.9 million plus the Group share of net income.
(4) Other movements are described in note 33.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Consolidated profit before tax (I) | 436,740 | 422,304 |
| Depreciation and amortisation expense on tangible fixed assets and intangible fixed assets | 32,116 | 38,371 |
| Impairments and net charge for provisions | 13,422 | 14,625 |
| Remove (income)/loss from associates and long-standing shareholding | (4,197) | (6,931) |
| Remove (profit)/loss from disposal of a subsidiary | (3,904) | (98,748) |
| Remove (profit)/loss from investing activities | (111,374) | (88,500) |
| Non-cash items included in pre-tax profit and other adjustments (II) | (73,937) | (141,183) |
| Net (advance)/repayment of loans to customers | (140,068) | (259,296) |
| Cash (placed)/received through interbank transactions | (354,925) | (15,942) |
| Increase/(decrease) in due to customers | 425,503 | 19,274 |
| Net inflow/(outflow) related to derivatives and trading items | (5,481) | 3,027 |
| Issuance/(redemption) of debt securities in issue | 4,067 | 110,668 |
| Net (purchases)/disposals of AFS assets held for liquidity purposes | 153,533 | (586,250) |
| Other movements in assets and liabilities related to treasury activities | (41,311) | 2,099 |
| Total treasury-related activities | 181,386 | (467,124) |
| (Increase)/decrease in working capital | (15,753) | (63,805) |
| Tax paid | (71,371) | (48,073) |
| Other operating activities | (87,124) | (111,878) |
| Net (decrease)/increase in cash related to operating assets and liabilities (III) | (45,806) | (838,298) |
| Net cash inflow/(outflow) related to operating and treasury activities (A) = (I) + (II) + (III) | 316,997 | (557,177) |
| Purchase of investments | (154,437) | (84,484) |
| Purchase of subsidiaries and associates | (99,255) | (4,343) |
| Cash and cash equivalents acquired in new subsidiaries | 442,753 | – |
| Purchase of property, plant and equipment and intangible fixed assets | (13,149) | (19,568) |
| Total cash invested | 175,912 | (108,395) |
| Cash received from investments (disposals and dividends) | 248,269 | 179,138 |
| Cash received from subsidiaries, associates and long-standing shareholding (disposals and dividends) | 15,940 | 174,080 |
| Loan made to FALG repaid following its sale | – | 267,126 |
| Cash from disposal of property, plant and equipment and intangible fixed assets | 546 | 570 |
| Total cash received from investments | 264,755 | 620,914 |
| Net cash inflow/(outflow) related to investing activities (B) | 440,667 | 512,519 |
| Dividends paid to shareholders of parent company | (44,184) | (41,846) |
| Dividends paid to non-controlling interests (note 18) | (131,984) | (99,581) |
| Interest paid on perpetual subordinated debt (note 18) | (13,748) | (14,775) |
| (Acquisition)/disposal of own shares and additional interests in subsidiaries | (58,864) | (7,764) |
| Net cash inflow/(outflow) related to financing activities (C) | (248,780) | (163,966) |
| Impact of exchange rate changes on cash and cash equivalents (D) | 31,457 | (245,165) |
| NET INFLOW/(OUTFLOW) OF CASH (A) + (B) + (C) + (D) | 540,341 | (453,789) |
| Net opening cash and cash equivalents (note 20) | 4,321,980 | 4,775,769 |
| Net closing cash and cash equivalents (note 20) | 4,862,321 | 4,321,980 |
| NET INFLOW/(OUTFLOW) OF CASH | 540,341 | (453,789) |
On 6 June 2016, Rothschild & Co and Compagnie Financière Martin Maurel (CFMM) announced a plan to merge, with a view to combining their French activities in private banking and asset management to create one of France's leading independent private banks.
The merger agreement was signed on 29 July 2016, and the merger notice was published on the Company's website www.RothschildandCo-documentssur-la-fusion-2016.com on 24 August 2016, in accordance with the provisions of Articles R. 236-2 and R. 236-2-1 of the French commercial code.
Shareholders in CFMM were offered either 126 R&Co shares per existing share or, prior to the completion of the merger, the opportunity to sell their CFMM shares for cash. The Maurel family received R&Co shares and, as a result of the merger, replaced CFMM in the extended family concert. The transaction was financed by a mixture of newly issued R&Co shares, R&Co's own cash resources and external credit facilities.
Following consultation processes with work councils from both groups, the merger proposals were approved by general meetings of CFMM and R&Co in September 2016. Once it had received the approval of the French anti-trust authority, the ACPR and the European Central Bank, as well as meeting other conditions precedent, the transaction was completed on 2 January 2017.
On 3 October 2016, the Group's two banks in Guernsey, Rothschild Bank International Limited and Rothschild Bank (CI) Limited, were amalgamated to form a single entity. Rothschild Bank International Limited now holds the Group's only banking licence in Guernsey. This change has no significant impact on the Group's accounts.
In the prior year, on 3 November 2015, the Group sold its UK asset finance business, FALG, to Paragon Bank. The transaction resulted in an exceptional accounting gain after tax of €98.7 million, which was accounted for in 'Net income/(expense) from other assets'. FALG's contribution to the revenue and profit before tax for the seven months of 2015/2016 prior to disposal was €23 million and €6 million respectively. Following the disposal, NMR, a UK subsidiary of R&Co, no longer required a UK deposit taking licence. The UK regulatory body, the Prudential Regulation Authority (PRA), accepted to remove this licence, effective from 19 September 2016.
On 21 March 2017, the Company announced that it will change its financial year end from 31 March to 31 December. This change will allow its subsidiaries to be aligned with the financial year end required for its banking regulated entities in France. The next accounting period will be for the nine months to 31 December 2017 with the results for this nine-month period being published in March 2018. The half year results for the six months to 30 September 2017 will be published in November 2017.
The consolidated financial statements of Rothschild & Co (the Group) for the year ended 31 March 2017 are presented in accordance with IFRS in force at the reporting date, as adopted in the European Union by EC Regulation No. 1606/2002. The format used for the summary financial statements is a banking format. It is consistent with Recommendation No. 2013-04 of 7 November 2013 of the French Accounting Standards Authority (Autorité des normes comptables). The statements cover the period from 1 April 2016 to 31 March 2017.
The consolidated accounts were approved by R&Co Gestion SAS, the Managing Partner of R&Co, on 2 June 2017 and considered for verification and control purposes by the Supervisory Board on 14 June 2017.
At 31 March 2017, the Group's holding company was R&Co, a French partnership limited by shares (société en commandite par actions), headquartered at 23 bis, avenue de Messine, 75008 Paris (Paris Trade and Companies Registry Number 302 519 228). The Company is listed on the Eurolist market of Euronext Paris (Compartment A).
The notes to the accounts have been prepared taking into account the understanding, relevance, reliability, comparability and materiality of the information provided.
The standards and interpretations used in preparation of the financial statements to 31 March 2016 were supplemented by the IFRS as adopted by the European Union at 31 March 2017 whose first-time application is mandatory in the 2016/2017 financial year.
New amendments and interpretations of accounting standards, which are mandatory for the Group's financial statements for the year ended 31 March 2017, are considered to have no material effect on the Group. The Group did not choose to apply any new standards, amendments and interpretations adopted by the European Union for which the application in the year ended March 2017 was optional.
A number of significant changes to the Group's financial reporting for future accounting periods are expected as a result of amended or new accounting standards and interpretations from the IASB. The most significant of these are as follows:
IFRS 9 Financial Instruments will replace IAS 39 Financial Instruments: Recognition and Measurement. It sets new principles governing the classification and measurement of financial instruments, impairment of credit risk and hedge accounting. IFRS 9 is effective for periods beginning on or after 1 January 2018.
In preparation for applying this standard, the Group's finance function has worked with the business lines and support functions which will be most affected by the changes, and reported its progress to the R&Co Audit Committee and to the GEC. For R&Co, the main challenges set by IFRS 9 are expected to relate to two main changes:
Financial assets are required to be classified in one of three categories according to the measurement methods applied (amortised cost; fair value through profit or loss; and fair value through other comprehensive income). Classification will depend on the contractual cash flow characteristics of the instruments and the entity's business model for managing its financial instruments.
By default, financial assets will be classified as measured at fair value through profit or loss.
Debt instruments (loans, receivables and bonds) will be measured at amortised cost only if the contractual cash flows consist solely of payments of principal and interest ('the SPPI test'), and the business model is to collect the contractual cash flows.
Debt instruments which meet the SPPI test, but for which the business model is either to collect the contractual cash flows or to sell the instruments, will be measured at fair value through other comprehensive income (with cumulative gains or losses reclassified in profit or loss when the instruments are derecognised).
Non-trading equity instruments will be measured at fair value through profit or loss, except where an irrevocable election is made at initial recognition to measure them at fair value through other comprehensive income without subsequent reclassification to income.
Accounting for financial liabilities is largely unchanged and is not expected to have an impact on R&Co.
IFRS 9 changes the credit risk impairment model, moving from one in which provisions are set aside for incurred credit losses to one in which provisions can be set aside for expected credit losses. The aim of the new approach is to allow credit losses to be recognised at the earliest possible time, removing the need to wait for an objective incurred loss event. A wide range of information can be used to estimate expected credit losses, including historical data on observed losses, cyclical and structural adjustments, and loss projections based on reasonable scenarios.
Where it has a choice, the Group has tentatively decided, based on existing business models, to classify its assets under IFRS 9 based on the following principles:
The highly-secured nature of our lending means that credit losses on our Private Wealth loans have historically been negligible. Therefore, based on models prepared by each business during the implementation phase, we expect the new impairment rules to result in only a small additional provision for loans made by the Private Wealth business. A small additional provision is also expected to be booked against client receivables for the Global Advisory business.
The focus of the project during 2017 will be on preparation for initial application in 2018. Although we will apply IFRS 9 retrospectively, we do not expect to restate comparatives; instead, adjustments which arise from classification and measurement changes will be recognised in opening equity.
IFRS 15 Revenue from Contracts with Customers will replace the current standards and interpretations on revenue recognition. It will be applicable retrospectively as of 1 January 2018.
R&Co has performed an assessment of the impact of IFRS 15. In this assessment R&Co has assumed Global Advisory to be the line of business most affected by IFRS 15. Our assessment reviewed all material Global Advisory fees to see whether any would have been recognised differently under IFRS 15. The differences identified between revenue recognition under IAS 18 and IFRS 15 were immaterial.
In the event of any accounting difference on adopting IFRS 15, R&Co plans to apply the cumulative effect method, which means that any changes prior to adoption on 1 January 2018 are made in opening equity, and comparatives are not restated.
We will continue to monitor the impact of IFRS 15 and provide further updates in the 30 September 2017 half year report and the 31 December 2017 annual report.
In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. Under the new requirements, lessees must recognise a right-of-use asset, representing its right to use the underlying leased asset, and a lease liability, representing its obligation to make lease payments. In its income statement, the lessee shall separately recognise the depreciation of the right-of-use assets and the interest expense on lease liabilities.
The Group has identified its property leases as the main contracts affected by new standard. These leases are disclosed in note 21.
The effective date is 1 January 2019 and the Group continues to consider the financial impacts of this new standard.
The financial statements of the Group are drawn up to 31 March 2017 and consolidate the financial statements of the Company and its subsidiary undertakings. At each closing date, the Group draws conclusions from past experience and all relevant factors relating to its business.
R&Co and the majority of its subsidiaries are consolidated on the basis of a financial year end of 31 March 2017. A few entities report on the basis of a 31 December 2016 year end. If a material subsequent event occurs between the closing date of these subsidiaries and 31 March 2017, this event is accounted for in the consolidated financial statements of the Group as at 31 March 2017.
As explained in section I. Highlights, above, the Company's next accounting period will be nine months to 31 December 2017 following the change announced on 21 March 2017.
Subsidiaries are all entities which are controlled by the Group. The Group controls an entity if it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. Subsidiaries are fully consolidated from the date on which the Group acquires control and cease to be consolidated from the date that control ceases.
Associates are companies over whose financial and operational decisions the Group exercises significant influence but not control (this is generally demonstrated when the percentage of voting rights is equal to or greater than 20% but less than or equal to 50%).
Joint arrangements are where two or more parties, through a contractual arrangement, have joint control over the assets and liabilities of an arrangement. Depending on what those rights and obligations are, the joint arrangement will either be a joint operation (where the parties subject to the arrangement have rights to the assets and obligations for the liabilities of the arrangement) or a joint venture (where the parties subject to the arrangement have rights to the net assets of the arrangement).
The Group's investments in associated undertakings are initially recorded at cost. Subsequently they are increased or decreased by the Group's share of the post-acquisition profit or loss, or by other movements reflected directly in the equity of the associated undertaking. Positive goodwill arising on the acquisition of an associated undertaking is included in the cost of the investment (net of any accumulated impairment loss).
Business combinations are accounted for using the acquisition method stipulated by IFRS 3 Business Combinations. Thus, upon initial consolidation of a newly acquired company, the identifiable assets acquired, liabilities assumed and any contingent liabilities of the acquired entity are measured at fair value in accordance with the provisions of IFRS. The costs directly attributable to business combinations are recognised in the income statement for the period.
Contingent cash consideration is normally included in the acquisition cost at its fair value on the acquisition date, even if its payment is not certain. It is recognised as a liability in the balance sheet; any subsequent adjustments to its value are booked in the income statement in accordance with IAS 39. However, sometimes arrangements are made in which contingent payments to acquire a company are made to a vendor who is an employee, and these can be forfeited if the employee leaves voluntarily. In this case, these contingent payments are not considered as part of the acquisition cost. Instead, these payments are accounted for as a post-purchase staff expense.
Goodwill in an associate or subsidiary represents the excess, at the date of acquisition, of an acquisition's cost over the fair value of the Group's share of net identifiable assets acquired. Identifiable intangible assets are those which can be sold separately or which arise from legal rights, regardless of whether those rights are separate. If the fair value exceeds the cost, the difference ('negative goodwill') is immediately recognised in the income statement. All necessary valuations of assets and liabilities must be carried out within twelve months from the date of acquisition, as must any corrections to the value based on new information.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised, but is tested annually for impairment, or more frequently when circumstances indicate that its carrying amount is too high. Goodwill is allocated to cash-generating units for the purposes of impairment testing. If the value of each of the cash-generating units is insufficient to support its carrying value, then the goodwill is impaired. Impairment losses on goodwill are recognised in the income statement and are not reversed.
Income from subsidiaries acquired or sold during the financial year is included in the consolidated income statement respectively from their acquisition date and up to their disposal date.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
For all business combinations, the Group assesses non-controlling interests as either:
On the date of acquisition of an entity, any stake in this entity already held by the Group is revalued at fair value through profit or loss. In such a case, taking control is accounted for as a sale of the shares previously held and the purchase of all shares held after control is obtained.
In the event of an increase in the Group's stake in entities over which it already exercises control, the difference between the price paid for the additional stake and the fair value of the share of net assets acquired at this date is booked in the Group's reserves as a reallocation from non-controlling interests to other equity. In the same way, any reduction in the Group's stake in an entity which it continues to control is accounted for as an equity transaction between shareholders. At the date when the Group loses control of a consolidated subsidiary, any investment retained in the former subsidiary is revalued at fair value through the income statement.
Where non-controlling shareholders have a contract to sell their equity interests in a subsidiary to the Group, the Group applies the anticipated-acquisition method of accounting for the unowned interests. This means that the contract is accounted for as if the non-controlling shareholders had sold their shares to the Group, even though legally they are still NCI. This happens regardless of how the exercise price is determined (e.g. fixed or variable) and how likely it is that the contract will be exercised.
The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the accounting policies. The key areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the accounts, include:
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value used to measure a financial instrument is, where available, the listed price when the financial instrument is listed on an active market. In the absence of an active market, fair value is determined using measurement techniques.
A description of the valuation techniques used, analysis of assets and liabilities carried at fair value by valuation hierarchy, and a sensitivity analysis of valuations not primarily based on observable market data is provided in the notes to the financial statements.
Assets are assessed at each balance sheet date to determine whether there is objective evidence that a financial asset or group of financial assets is impaired as a result of one or more events occurring after initial recognition of the asset (a 'loss event'). If there is such objective evidence, and this has a negative effect on the estimated future cashflows from the asset, then an impairment loss is incurred. Management determines the size of the impairment allowance required using a range of factors such as the realisable value of any collateral, the likely recovery on liquidation or bankruptcy, the viability of the customer's business model and their capacity to trade successfully out of financial difficulties and generate sufficient cash flow to service debt obligations.
Portfolios of financial assets with similar economic characteristics where there is objective evidence to suggest that they contain impaired assets, but the individually impaired items cannot yet be identified, are collectively assessed for impairment. The collectively assessed impairment allowance is calculated on the basis of future cashflows that are estimated based on historical loss experience.
The accuracy of the allowances made depends on how accurately the Group estimates future cashflows for specific counterparties, in particular the fair value of any collateral, and the model assumptions and parameters used in determining collective allowances. While this necessarily involves judgement, the Group believes that its allowances are reasonable and supportable.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method and the principal assumptions used are set out in note 19. The assumptions that have the greatest impact on the measurement of the pension fund liability, along with their sensitivities, are also set out in note 19.
Deferred tax assets, including those in relation to tax losses carried forward, are only recognised where it is probable that future taxable profits will be available against which the temporary differences can be utilised. Further details are provided in note 16.
Goodwill and intangible assets with indefinite lives are assessed at each balance sheet date to determine whether they are impaired. The assessment includes management assumptions on future income flows and judgements on appropriate discount rates. Management performs sensitivity analysis of these assumptions as part of this assessment. Further details of management's assessment are contained in notes 9 and 10.
From time to time the Group is involved in legal proceedings or receives claims arising from the conduct of its business. Based upon available information and, where appropriate, legal advice, provisions are made where it is probable that an outflow of resources will be required and the amount can be reliably estimated.
The Group manages some structured entities in the form of funds in which the Group's own money is also invested. In these situations, a judgement must be made whether there is a need to consolidate these funds or not. The judgement is explained in note 17.
The consolidated financial statements are presented in euro, which is the Company's functional currency and the Group's reporting currency. Items included in the financial statements of each of the Group's subsidiaries and associates are measured using their functional currency. The functional currency is the currency of the primary economic environment in which the entity operates.
Income statements and cash flows of foreign entities are translated into the Group's reporting currency at average exchange rates for each month, where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Their balance sheets are translated at the exchange rate at the end of the period. Exchange differences arising from the translation of the net investment in foreign entities are taken to shareholders' equity. On disposal of a foreign entity, these translation differences are recognised in the income statement as part of the gain or loss on sale.
Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transaction. Gains and losses resulting from the settlement of such transactions, and from the translation at period end exchange rates of monetary items that are denominated in foreign currencies, are recognised in the income statement (except when deferred in equity as qualifying cash flow hedges). Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at their recognition.
Translation differences on equities classified as at FVTPL are reported as part of the fair value gain or loss in the income statement. In the absence of hedge accounting, translation differences on equities classified as available for sale are included in the available-for-sale reserve in equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate.
The table below shows at each quarter end the main exchange rates against the euro that were used to prepare the consolidated accounts.
| Currency | Closing rate | Average rate | Average rate | Average rate | Average rate | Opening rate |
|---|---|---|---|---|---|---|
| 31/03/17 | 31/03/17 | 31/12/16 | 30/09/16 | 30/06/16 | 31/03/16 | |
| GBP | 0.8553 | 0.8659 | 0.8442 | 0.8522 | 0.7900 | 0.7916 |
| CHF | 1.0706 | 1.0708 | 1.0749 | 1.0919 | 1.0895 | 1.0931 |
| USD | 1.0695 | 1.0693 | 1.0547 | 1.1212 | 1.1231 | 1.1385 |
| Currency | Closing rate | Average rate | Average rate | Average rate | Average rate | Opening rate |
| 31/03/16 | 31/03/16 | 31/12/15 | 30/09/15 | 30/06/15 | 31/03/15 | |
| GBP | 0.7916 | 0.7695 | 0.7220 | 0.7177 | 0.7224 | 0.7273 |
| CHF | 1.0931 | 1.0955 | 1.0846 | 1.0720 | 1.0413 | 1.0463 |
| USD | 1.1385 | 1.1026 | 1.0957 | 1.1124 | 1.1060 | 1.0759 |
Derivatives are entered into for trading or risk management purposes. Derivatives used for risk management are recognised as hedging instruments when they qualify as such under IAS 39.
Derivatives are initially recognised at fair value and are subsequently measured at fair value with changes in fair value recognised in the income statement. If there is a designated hedging relationship between a hedging instrument and a hedged item, the recognition of the profit or loss on the hedging instrument and the hedged instrument must comply with the conditions of IAS 39, depending on the hedging relationship.
The Group may apply hedge accounting when transactions meet the criteria set out in IAS 39. At the inception of the hedge, the Group assesses whether the hedging derivatives meet the effectiveness criteria of IAS 39 in offsetting changes in the fair value or cash flows of the hedged items. The Group then documents the relationship between the hedging instrument and the hedged item. It also records its risk management objectives, its strategy for undertaking the hedge transaction and the methods used to assess the effectiveness of the hedging relationship.
After inception, effectiveness is tested on an ongoing basis. Hedge accounting is discontinued when it is determined that a derivative has ceased to be highly effective, or when the derivative or the hedged item is derecognised, or when the forecast transaction is no longer expected to occur.
Changes in value of fair value hedge derivatives are recorded in the income statement, together with fair value changes to the underlying hedged item in respect of the risk being hedged.
If the hedge no longer meets the criteria for hedge accounting, the difference between the carrying value of the hedged item on termination of the hedging relationship and the value at which it would have been carried had the hedge never existed is amortised to the income statement over the residual period to maturity based on a recalculated effective interest rate. Where the hedged item is an available-for-sale equity security, the adjustment remains in equity until the disposal of the equity security.
Changes in the fair value of the effective portion of derivatives designated as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised in the income statement.
Amounts accumulated in equity are recycled to the income statement when the item being hedged impacts profit or loss.
When hedge accounting is discontinued, any cumulative gain or loss in equity remains in equity and is only recognised in the income statement when the forecast transaction is recognised in the income statement. When the forecast transaction is no longer expected to occur, the cumulative balance in equity is immediately transferred to the income statement.
Hedges of net investments in foreign operations are accounted for in a way similar to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating to the ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in equity are transferred to the income statement when the foreign operation is disposed of.
The net gains or losses on financial instruments at fair value through profit or loss result from changes in the fair value of the financial assets held for trading and financial assets designated as being at fair value through profit or loss.
The Group earns fee and commission income from services provided to clients. Fee income from advisory and other services can be divided into two broad categories: fees earned from services that are provided over a period of time, which are recognised over the period in which the service is provided; and fees that are earned on completion of a significant act or on the occurrence of an event, such as the completion of a transaction, which are recognised when the act is completed or the event occurs.
The Group recognises revenue from providing services when the following criteria are met: there is persuasive evidence of an arrangement with a client; the agreed-upon services have been provided; the amount of fees has been determined; and collection is probable.
Fees and commissions that are an integral part of a loan, and loan commitment fees for loans that are likely to be drawn down, are deferred (together with related direct costs) and recognised over the life of the loan as an adjustment to the effective interest rate.
Portfolio and other management fees are recognised based on the applicable service contracts. Asset management fees related to investment funds are recognised over the period the service is provided. The same principle is applied to the recognition of income from wealth management, financial planning and custody services that are continuously provided over an extended period of time.
Interest receivable and payable represent all interest arising out of banking activities, including lending and deposit-taking business, interest on related hedging transactions and interest on debt securities. Interest on all financial instruments, excluding those classified as held for trading or designated at fair value through profit or loss, is recognised in the income statement using the effective interest rate method.
Where negative interest arises from financial assets, the negative interest income is disclosed within interest expense.
The effective interest rate is the rate that exactly discounts the estimated future cash flows of a financial instrument to its net carrying amount. It is used to calculate the amortised cost of a financial asset or a financial liability and to allocate the interest over the relevant period (usually the expected life of the instrument). When calculating the effective interest rate, the Group considers all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes any premiums or discounts, as well as all fees and transaction costs that are an integral part of the loan.
The Group initially recognises loans and advances and deposits on the date on which they have been originated. All other financial assets and liabilities are recognised on trade date.
On initial recognition, IAS 39 requires that financial assets be classified into the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments or available for sale. The Group does not hold any assets that are classified as held-to-maturity investments.
This category comprises financial assets held for trading (i.e. primarily acquired for the purpose of selling in the short term), assets that are designated as at fair value through profit or loss and derivatives that are not designated as hedges.
These financial assets are recognised at fair value, with transaction costs recorded immediately in the income statement, and they are subsequently measured at fair value. Gains and losses arising from changes in fair value, or on derecognition, are recognised in the income statement as net gains or losses on financial assets at fair value through profit or loss. Interest and dividend income from financial assets at fair value through profit or loss is recognised in net gains or losses on financial assets at fair value through profit or loss.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans which are intended to be sold in the short term are classified as held for trading and are recorded at fair value through profit or loss.
Loans and receivables are initially recorded at fair value, including any transaction costs, and are subsequently measured at amortised cost using the effective interest rate method. Gains and losses on loans and receivables that are derecognised are booked as Income from other activities.
Available-for-sale investments comprise non-derivative financial assets that are either designated as available for sale on initial recognition or are not classified into the categories described above. Available-for-sale investments include some loans and debt securities that do not meet the criteria for classification as loans and receivables as they are quoted in an active market. They are initially recognised at fair value, including direct and incremental transaction costs, and are subsequently measured at fair value.
Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in equity until the financial asset is sold or impaired, at which time the cumulative gain or loss is transferred to the income statement. Interest (determined using the effective interest rate method), impairment losses and translation differences on monetary items are recognised in the income statement as they arise. Dividends on available-for-sale equity instruments are recognised in the income statement when the Group's right to receive payment is established.
Financial liabilities are carried at amortised cost using the effective interest rate method, except for derivatives that are classified as at fair value through profit or loss on initial recognition (unless designated as cash flow hedges).
The Group derecognises a financial asset when:
When a sale is followed by an immediate buyback and the Group considers that it has substantially retained the risks and rewards of ownership, it would not derecognise the asset.
The Group may enter into funding arrangements with lenders in order to finance specific financial assets.
In general, the assets from these transactions are held on the Group's balance sheet on origination. However, to the extent that substantially all the risks and returns associated with the assets have been transferred to a third party, the assets and liabilities are derecognised in whole or in part.
Interests in securitised financial assets may be taken in the form of senior or subordinated tranches of debt securities, or other residual interests. Such interests are primarily recorded as available-for-sale assets.
Objective evidence that a financial asset or group of assets is impaired includes observable data about the following loss events:
The Group first assesses whether objective evidence of impairment exists: individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. Impairment losses are calculated on a collective basis for any losses on loans that are subject to individual assessment for impairment, where those losses have been incurred but not yet identified. Collective assessment is also used for homogeneous groups of loans that are not considered individually significant. If no objective evidence of impairment exists for an individually assessed financial asset, it is included in a collective assessment for impairment with other assets with similar risk characteristics.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of expected future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced using an allowance account. The amount of the loss is recognised in the income statement.
The calculation of the present value of the estimated future cash flows of a financial asset reflects the cash flows that may result from scheduled interest payments, principal repayments or other payments due, including liquidation of collateral where available. In estimating these cash flows, management makes judgements about a counterparty's financial situation and the value of any underlying collateral or guarantees in the Group's favour. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are reviewed by the relevant Credit Committee on a regular basis. The methodology and assumptions used for estimating both the amount and the timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
Collectively assessed credit risk allowances cover credit losses inherent in portfolios of financial assets with similar economic characteristics where there is objective evidence to suggest that they contain impaired assets but the individual impaired items cannot yet be identified. For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Future cash flows are estimated on the basis of historical loss experience. These estimates are subject to regular review and adjusted to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the original effective interest rate which was used to discount the future cash flows for the purpose of measuring the impairment loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related to an objective event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the previously recognised impairment loss is reversed by adjusting the allowance for loan impairment. The amount of the reversal is recognised in the income statement.
When a loan is deemed uncollectable, it is written off against the related allowance for loan impairment. Recoveries received in respect of loans previously written off are recorded as a decrease in the impairment losses on loans and advances recorded in the income statement in the year in which the recovery was made. Loans whose terms have been renegotiated and which would have been past due or impaired had they not been renegotiated, are reviewed to determine whether they are impaired or past due.
Available-for-sale assets are assessed at each balance sheet date to determine whether there is objective evidence that these are impaired.
For equity instruments, a significant or prolonged fall in their price below their acquisition cost is an objective indication of value impairment. The Group considers that this is the case, in particular, for equity instruments which at the reporting date show unrealised losses exceeding 40% of their acquisition cost and for those in a situation of an unrealised loss during a continuous five-year period. Even if the criteria mentioned above were not met, management may decide to examine the results for other criteria (financial position of the issuer, outlook for the issuer, multiple-criteria valuations, etc.) in order to determine whether the fall in value is of a permanent nature. Where there is an objective indication of value impairment, the cumulative loss is removed from equity and recognised in the income statement. If, in a subsequent period, the fair value on an impaired AFS equity increases, the impairment loss is not reversed through the income statement. However, any further decline in the fair value will be recognised as a further impairment charge.
Impairment of available-for-sale debt securities is based on the same criteria as for all other financial assets. If in a subsequent period the fair value of a debt instrument classified as available for sale increases, and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement.
The loss recognised in the income statement is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the income statement.
Under IFRS, the critical feature in differentiating a debt instrument from an equity instrument is the existence of a contractual obligation of the Group to deliver cash (or another financial asset) to another entity. Where there is no such contractual obligation, the Group will classify the financial instrument as equity; otherwise it will be classified as a liability and carried at amortised cost. The terms of the perpetual debt instruments issued by the Group permit interest payments to be waived unless discretionary dividends have been paid in the previous six months. These instruments are, therefore, considered to be equity. When they are classified as equity, securities issued by the Company are recorded within Capital and associated reserves. If they are issued by Group subsidiaries and held by parties outside the Group, these securities are recognised as non-controlling interests.
Intangible assets include software, intellectual property rights and assets acquired through business combinations such as brands, contracts to earn management fees and client relationships. These are carried at historical cost less amortisation, if any, and less any accumulated impairment losses.
For assets with a definite life, amortisation is charged over the useful economic life of the asset, which is determined case-by-case based on the asset or contract. Contracts to earn management fees are amortised in line with income earned from the contracts; otherwise a straight-line amortisation method is used. The intangible assets which have a definite useful life are reviewed at each reporting date to determine whether there is objective evidence of impairment. If such evidence exists, an impairment test is performed.
The acquired brands have been considered to have an indefinite life and are not amortised; instead they are subject to an annual impairment test.
Tangible assets comprise plant, property and equipment and are stated at cost or deemed cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The deemed cost refers to the situation in which, on transition to IFRS, the Group elected, as IFRS 1 First-time adoption of IFRS permits, to consider the fair value of a tangible asset at that time to be its deemed cost.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to write down the cost of assets to their residual values over their estimated useful lives, as follows:
| Computer equipment | 2–10 years |
|---|---|
| Cars | 3–5 years |
| Fixtures and fittings | 3–10 years |
| Leasehold improvements | 4–24 years |
| Buildings | 10–60 years |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These gains and losses are recognised in the income statement, in 'net income/(expense) from other assets'.
At each balance sheet date, or more frequently where events or changes in circumstances dictate, tangible assets are assessed for indications of impairment. If such indications are present, these assets are subject to an impairment review. If impaired, the carrying values of assets are written down by the amount of any impairment and the loss is recognised in the income statement in the period in which it occurs. A previously recognised impairment loss relating to a fixed asset may be reversed when a change in circumstances leads to a change in the estimates used to determine the fixed asset's recoverable amount. The carrying amount of the fixed asset is only increased up to the amount that it would have been had the original impairment not been recognised.
A finance lease is a lease that transfers substantially all of the risks and rewards incidental to ownership of an asset. An operating lease is a lease other than a finance lease.
When assets are held subject to a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised in interest receivable over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return.
Assets acquired for use by customers under operating lease agreements, including initial direct costs incurred by the lessor in negotiating an operating lease, are capitalised in the relevant category of fixed assets. Depreciation is charged on a straight-line basis to write down the value of the asset to the expected residual value over a period consistent with other assets of a similar type.
Operating lease income and the initial direct costs are then recognised in other operating income on a straight-line basis over the period of the lease.
The Group has not been the lessor of operating leases since November 2015, when it sold FALG, its asset leasing business.
The Group has entered into operating leases. The total payments made under those operating leases are charged to the income statement as operating expenses. Commitments arising from operating leases are separately disclosed.
The Group is entitled to receive carried interest in relation to certain of the private equity and private debt funds that it manages. Carried interest receivable is accrued if the performance conditions associated with earning it would be achieved, on the assumption that the remaining assets in the fund were realised at the balance sheet date at fair value. Fair value is determined using the valuation methodology applied by the Group in its role as manager to its funds and is measured at the balance sheet date. An accrual is made equal to the Group's share of profits in excess of the performance conditions, taking into account any cash already paid to the fund's investors and the fair value of assets remaining in the fund.
Certain employees may also hold classes of share capital which give them a right to receive carried interest from investments managed by the Group. Where such carry shares held by staff are in an investment vehicle which is not consolidated, the interests of the staff are reflected in a reduced investment return of the Group's own interests. Where the carry shares held by staff are in a vehicle which is consolidated, the interests of the staff are treated as non-controlling interests of the Group. The valuation of the interests held by staff is calculated at the balance sheet date using the same method as the valuation of the Group's interests, as described above.
The Group operates long-term profit share schemes for the benefit of employees. The costs of such schemes are recognised in the income statement over the period in which the services are rendered that give rise to the obligation. Where the payment of profit share is deferred until the end of a specified vesting period, the deferred amount is recognised in the income statement over the period up to the date of vesting.
The Group has issued share options which are treated as equity-settled share-based payments. These are valued at the date they are granted to employees and that value is recognised in staff costs over the vesting period, with a corresponding adjustment to shareholders' equity. The fair value is calculated on the basis of the overall plan value at the date of grant. In the absence of any market for stock options, models are used to value the share-based payments. The only assumptions revised after the initial measurement, and hence resulting in a revaluation of the expense, are those relating to the probability that employees will leave the Group.
The Group operates a number of pension and other post retirement benefit schemes, both funded and unfunded, and of the defined benefit and defined contribution types.
For defined contribution schemes, the contribution payable in respect of the accounting period is recognised in the income statement.
Remeasurement gains and losses for defined benefit schemes are recognised outside the income statement and are presented in the statement of comprehensive income.
The amount recognised in the balance sheet in respect of defined benefit schemes is the difference between the present value of the defined benefit obligation at the balance sheet date and the fair value of the plan's assets. Independent actuaries calculate the defined benefit obligation annually using the projected unit credit method. The obligations' present values are determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currencies in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.
Tax payable on profits and deferred tax are recognised in the income statement, except to the extent that they relate to gains and losses that are recognised in equity.
Deferred tax is provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred tax is determined using tax rates and laws that are expected to apply when a deferred tax asset is realised, or the deferred tax liability is settled.
Deferred tax assets, including the tax effects of income tax losses available for carry forward, are only recognised where it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax liabilities are provided on temporary differences arising from investments in subsidiaries and associates, unless the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future.
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company's shareholders at the Annual General Meeting or, in the case of interim dividends, when they are paid by the Company after decisions of the Managing Partner, R&Co Gestion.
The Group acts as custodian and in other fiduciary capacities that result in the holding or placing of assets on behalf of customers. These assets and the income arising therefrom are excluded from these financial statements, as they are not assets or income of the Group.
Provisions are recognised only when the Group has a present obligation (legal or constructive) as a result of past events. In addition, it must be probable that a transfer of economic benefits will be required to settle the obligation, and it must also be possible to make a reliable estimate of the amount of the obligation.
Contingent liabilities are possible obligations arising from past events whose existence will be confirmed by one or more uncertain future events not wholly within the Group's control, or present obligations that are not recognised either because it is not probable that an outflow of resources will be required to settle the obligation or the amount of the obligation cannot be reliably estimated. Contingent liabilities are disclosed unless the possibility of a transfer of economic benefits is remote.
The risks relating to financial instruments, and the way in which these are managed by the Group, are described below. A description of the Group's governance environment is provided in the Corporate Governance section of the annual report (page 73).
The Group reviews credit exposures on financial assets on a quarterly basis and for this purpose they are classified as follows:
| Category 1 | Exposures which are considered to be fully performing. |
|---|---|
| Category 2 | Exposures where the payment of interest or principal is not in doubt, but which require closer observation than usual due to some deterioration in the position of the client. Examples include: poor trading results; difficult conditions in the client's market sector; competitive or regulatory threats; or the potential impact from currency or other factors. |
| Category 3 | Exposures where there has been further deterioration in the position of the client. Although the exposure is not considered to be impaired, the relationship requires close monitoring by the front office team. |
| Past due but not impaired financial assets |
A financial asset is considered to be past due when the counterparty has failed to make a payment when contractually due (unless this is caused by short-term administrative delays). Financial assets that are past due but not impaired are exposures for which a provision is not considered necessary despite non-payment of the contractual obligations. |
| Category 4 | Exposures that are considered to be impaired and which carry a provision against part of the loan (unless collateral exists which exceeds the exposure's carrying value). At least some recovery is expected to be made. |
| Category 5 | Exposures that are considered to be impaired and which carry a full provision. No significant recovery of value is expected. |
All Group companies map their own credit monitoring to these categories for the purposes of Group reporting.
Credit risk management is explained in the Report of the Chairman on internal control and risk management procedures implemented within the Group for the financial year ended 31 March 2017 (page 96).
The tables below disclose the maximum exposure to credit risk at 31 March 2017 and at 31 March 2016 for financial assets with exposure to credit risk, without taking account of collateral held or other credit risk mitigation.
| In millions of euro | Category 1 | Category 2 | Category 3 | Past due but not impaired |
Category 4 | Category 5 | Impairment allowance |
31/03/17 |
|---|---|---|---|---|---|---|---|---|
| Financial assets at fair value through profit or loss(1) |
33.0 | – | – | – | – | – | – | 33.0 |
| Loans and advances to banks | 1,918.1 | – | – | – | – | – | – | 1,918.1 |
| Loans and advances to customers | 2,679.9 | 37.0 | 56.9 | 18.3 | 137.4 | 16.8 | (79.0) | 2,867.3 |
| Available-for-sale debt securities | 1,061.2 | – | 0.4 | – | 5.1 | 9.3 | (11.0) | 1,065.0 |
| Other financial assets | 420.1 | – | – | 38.1 | 14.1 | 14.5 | (20.6) | 466.2 |
| Subtotal assets | 6,112.3 | 37.0 | 57.3 | 56.4 | 156.6 | 40.6 | (110.6) | 6,349.6 |
| Commitments and guarantees | 391.8 | – | – | – | – | – | – | 391.8 |
| TOTAL | 6,504.1 | 37.0 | 57.3 | 56.4 | 156.6 | 40.6 | (110.6) | 6,741.4 |
(1) Excluding equity.
| In millions of euro | Category 1 | Category 2 | Category 3 | Past due but not impaired |
Category 4 | Category 5 | Impairment allowance |
31/03/16 |
|---|---|---|---|---|---|---|---|---|
| Financial assets at fair value through profit or loss(1) |
172.7 | – | – | – | – | – | – | 172.7 |
| Hedging derivatives | 2.8 | – | – | – | – | – | – | 2.8 |
| Loans and advances to banks | 1,242.9 | – | – | – | – | – | – | 1,242.9 |
| Loans and advances to customers | 1,345.7 | 5.1 | 93.6 | 10.9 | 85.6 | 22.1 | (74.6) | 1,488.4 |
| Available-for-sale debt securities | 797.8 | – | 5.6 | – | 15.8 | 10.5 | (18.2) | 811.5 |
| Other financial assets | 333.0 | – | – | 35.0 | 4.6 | 11.4 | (14.3) | 369.7 |
| Subtotal assets | 3,894.9 | 5.1 | 99.2 | 45.9 | 106.0 | 44.0 | (107.1) | 4,088.0 |
| Commitments and guarantees | 181.3 | – | 0.2 | – | 0.1 | – | – | 181.6 |
| TOTAL | 4,076.2 | 5.1 | 99.4 | 45.9 | 106.1 | 44.0 | (107.1) | 4,269.6 |
(1) Excluding equity.
The table below analyses amounts considered by the business as past due but not impaired by how far they are past their due date:
| In millions of euro | 31/03/17 | 31/03/16 | |||||
|---|---|---|---|---|---|---|---|
| Loans and advances to customers |
Other financial assets |
TOTAL | Loans and advances to customers |
Other financial assets |
TOTAL | ||
| Less than 90 days | 1.2 | – | 1.2 | 7.8 | 0.3 | 8.1 | |
| Between 90 and 180 days | 1.5 | 13.6 | 15.1 | 1.2 | 22.9 | 24.1 | |
| Between 180 days and one year | 15.0 | 13.8 | 28.8 | 0.3 | 6.1 | 6.4 | |
| More than one year | 0.6 | 10.7 | 11.3 | 1.6 | 5.7 | 7.3 | |
| TOTAL | 18.3 | 38.1 | 56.4 | 10.9 | 35.0 | 45.9 |
Where refinancing and sale options are difficult, it is generally in the lender's and borrower's interest to extend certain facilities at maturity and not to foreclose on the security. This assumes there are no underlying issues regarding the borrower's ability to continue to service the loan and the level of collateral is expected to be of sufficient quality to secure the principal.
Unimpaired loans extended in this manner are not categorised as either past due or as renegotiated. As at 31 March 2017 the cumulative value of all loans within this category was €20.1 million (March 2016: €42.2 million). All of these loans were property loans. There are also some loans which are overdue, but not impaired, pending an extension of maturity. As at 31 March 2017, these amounted to €18.3 million (March 2016: €10.9 million).
Some loans were renegotiated on substantially different terms than before. Typically these loans will include revised covenants and higher margins to reflect higher credit risk as well as having extended maturities. If these loans had not been renegotiated, they would have been deemed to have been impaired. As at 31 March 2017, the carrying value of all loans renegotiated was €2.1 million (March 2016: €29.6 million).
The Group holds collateral against loans to customers, as substantially all third party commercial lending is secured. The majority of collateral is in the form of charges over property assets, or over marketable securities (Lombard lending). There is a realistic possibility, if necessary, of both taking possession of, and realising, the collateral.
Unimpaired loans (categories 1 to 3) are usually covered by collateral. For category 1, 2 and 3 loans the level of collateral at exit is expected to be sufficient to cover the balance sheet exposure. Where a loan is deemed to be impaired (categories 4 and 5), the level of the impairment charge is primarily driven by any expected shortfall in the collateral value, though it is also influenced by the ability of the borrower to service the debt.
Collateral is valued independently at the time the loan is made and periodically thereafter on a rolling basis. Management is able to roll forward a valuation for reporting purposes via a combination of specific knowledge of the collateral and the application of general indices.
The table below gives an estimate of the fair value of collateral held by the Group as security against its loans to customers that are individually impaired and past due but not impaired.
| In millions of euro | 31/03/17 | 31/03/16 | |||
|---|---|---|---|---|---|
| Past due but not impaired |
Individually impaired |
Past due but not impaired |
Individually impaired |
||
| Tangible assets collateral | 18.5 | 84.1 | 7.5 | 50.7 | |
| Financial assets collateral | 2.1 | 20.4 | 4.9 | 6.7 | |
| Other collateral | – | 38.5 | – | – | |
| TOTAL | 20.6 | 143.0 | 12.4 | 57.4 | |
| Gross value of loans | 18.3 | 154.2 | 10.9 | 107.7 | |
| Impairment | – | (55.3) | – | (48.9) | |
| Net value of loans | 18.3 | 98.9 | 10.9 | 58.8 |
The tables below show an analysis of credit risk by location and by sector as at 31 March 2017 and 31 March 2016.
Location for loans and advances is measured by reference to the location of the borrower. Debt securities are recorded based on the location of the issuer of the security.
| In millions of euro | France | UK and Channel Islands |
Rest of Europe |
Americas | Switzerland | Australia and Asia |
Other | 31/03/17 |
|---|---|---|---|---|---|---|---|---|
| Financial assets at fair value through profit or loss(1) |
9.8 | 8.2 | 5.3 | 0.9 | 7.5 | 1.2 | 0.1 | 33.0 |
| Loans and advances to banks | 1,088.7 | 297.5 | 233.1 | 177.7 | 74.6 | 29.7 | 16.8 | 1,918.1 |
| Loans and advances to customers | 1,500.9 | 697.7 | 310.3 | 127.9 | 99.1 | 68.9 | 62.5 | 2,867.3 |
| Available-for-sale debt securities | 658.6 | 93.0 | 203.8 | 93.0 | 2.8 | 4.5 | 9.3 | 1,065.0 |
| Other financial assets | 156.7 | 68.2 | 78.9 | 50.6 | 39.4 | 38.0 | 34.4 | 466.2 |
| Subtotal assets | 3,414.7 | 1,164.6 | 831.4 | 450.1 | 223.4 | 142.3 | 123.1 | 6,349.6 |
| Commitments and guarantees | 275.6 | 22.4 | 53.4 | 0.9 | 8.2 | 0.1 | 31.2 | 391.8 |
| TOTAL | 3,690.3 | 1,187.0 | 884.8 | 451.0 | 231.6 | 142.4 | 154.3 | 6,741.4 |
(1) Excluding equity.
| In millions of euro | France | UK and Channel Islands |
Rest of Europe |
Americas | Switzerland | Australia and Asia |
Other | 31/03/16 |
|---|---|---|---|---|---|---|---|---|
| Financial assets at fair value through profit or loss(1) |
33.7 | 71.0 | 16.2 | 12.6 | 35.2 | 3.8 | 0.2 | 172.7 |
| Hedging derivatives | – | 2.8 | – | – | – | – | – | 2.8 |
| Loans and advances to banks | 573.9 | 234.1 | 145.5 | 182.6 | 30.7 | 48.5 | 27.6 | 1,242.9 |
| Loans and advances to customers | 279.4 | 705.0 | 215.0 | 72.0 | 116.9 | 91.0 | 9.1 | 1,488.4 |
| Available-for-sale debt securities | 220.5 | 527.8 | 35.3 | 20.3 | – | 7.6 | – | 811.5 |
| Other financial assets | 107.9 | 69.7 | 79.1 | 53.9 | 17.9 | 33.0 | 8.2 | 369.7 |
| Subtotal assets | 1,215.4 | 1,610.4 | 491.1 | 341.4 | 200.7 | 183.9 | 45.1 | 4,088.0 |
| Commitments and guarantees | 70.9 | 27.5 | 44.9 | 6.4 | 24.9 | 2.0 | 5.0 | 181.6 |
| TOTAL | 1,286.3 | 1,637.9 | 536.0 | 347.8 | 225.6 | 185.9 | 50.1 | 4,269.6 |
(1) Excluding equity.
The sector is based on Global Industry Classification Standards (GICS).
| In millions of euro | 31/03/17 | % | 31/03/16 | % |
|---|---|---|---|---|
| Financial | 3,162.2 | 47% | 1,895.7 | 44% |
| Private clients | 1,746.0 | 26% | 1,190.2 | 28% |
| Real estate | 683.7 | 10% | 226.1 | 5% |
| Industrials | 501.9 | 8% | 192.6 | 5% |
| Government | 196.3 | 3% | 516.6 | 12% |
| Consumer discretionary | 190.3 | 3% | 40.7 | 1% |
| Consumer staples | 38.8 | 1% | 23.2 | 1% |
| Utilities | 28.3 | 0% | 20.7 | 0% |
| Materials | 25.4 | 0% | 21.2 | 1% |
| Healthcare | 24.0 | 0% | 42.8 | 1% |
| IT and telecoms | 23.2 | 0% | 27.3 | 1% |
| Energy | 20.3 | 0% | 17.5 | 0% |
| Other | 101.0 | 2% | 55.0 | 1% |
| TOTAL | 6,741.4 | 100% | 4,269.6 | 100% |
The 'Government' exposure above predominantly consists of high quality government securities.
The balances above do not include cash and amounts due from central banks, which are not considered to have a significant credit risk. These amounted to €3,907 million at 31 March 2017 (31 March 2016: €3,500 million).
| In millions of euro | 31/03/17 | % | 31/03/16 | % |
|---|---|---|---|---|
| Short-term interbank exposures | 1,915.3 | 60% | 1,323.6 | 69% |
| Treasury marketable securities – investment grade | 610.4 | 19% | 223.4 | 12% |
| Finance companies | 239.6 | 8% | 14.5 | 1% |
| Cash/investment-backed lending | 119.4 | 4% | 108.7 | 6% |
| Other | 277.5 | 9% | 225.5 | 12% |
| TOTAL FINANCIAL SECTOR | 3,162.2 | 100% | 1,895.7 | 100% |
Short-term interbank lending and marketable securities are held for liquidity management purposes.
Market risks associated with treasury and equity positions are described below with a description of the levels of risk. Market risk management is covered in the report on internal control and risk management procedures (page 96).
The Group has exposure to equity price risk through holdings of equity investments. Each of these positions is individually approved by management and is monitored on an individual basis.
If the price of these equities were to fall by 5%, then there would be a post-tax charge to the income statement of €17.9 million (March 2016: €12.3 million) and a charge to equity of €22.4 million (March 2016: €12.3 million).
Moreover, the Group is exposed through its investments to the risks affecting the companies in which it invests.
The table below shows the Group's equity price risk in relation to these instruments, by location.
| In millions of euro | 31/03/17 | % | 31/03/16 | % |
|---|---|---|---|---|
| United Kingdom and Channel Islands | 315.3 | 33% | 103.0 | 18% |
| France | 227.7 | 24% | 126.8 | 22% |
| Rest of Europe | 134.7 | 14% | 88.0 | 16% |
| Switzerland | 114.5 | 12% | 114.0 | 20% |
| Americas | 92.6 | 10% | 78.4 | 14% |
| Australia and Asia | 35.9 | 4% | 31.1 | 6% |
| Other | 30.1 | 3% | 23.6 | 4% |
| TOTAL | 950.8 | 100% | 564.9 | 100% |
The Group has exposure to the effects of fluctuations in foreign currency exchange rates on its financial position and cash flows. The table below summarises exposure to foreign currency exchange rate risk. The net positions in the table are measured by reference to the net carrying amounts of monetary assets and liabilities other than those in a subsidiary's functional currency, and are shown after taking account of positions in derivatives.
| In millions of euro | 31/03/17 Long/(short) |
31/03/16 Long/(short) |
|---|---|---|
| USD | 40.9 | 11.0 |
| EUR | 12.4 | (2.9) |
| GBP | 3.9 | (1.7) |
| CHF | 3.8 | 1.4 |
| Other | 1.9 | 9.6 |
Excluded from the table is a long euro exposure of €97 million, which is not representative of the currency risk during the year. This arose from a large intercompany exposure on 31 March 2017, which was hedged shortly after the year end. With this exposure excluded, if the euro strengthened against these currencies by 5 per cent, then the effect on the Group would be a loss to the income statement of €0.3 million.
Because of the nature of its business, only a few entities in the Group are exposed to significant interest rate risk, and these entities manage it primarily through the use of derivatives. Each December, the Group reports its combined interest rate risk to its regulator in the form of a table which collates the impact at an entity level on the fair value of interest-bearing assets and liabilities and of interest rate derivatives of a uniform 200 basis point rise over one year. The combined impact of such a shock at 31 December 2016 would have been a fall in fair values of €7.6 million (December 2015: €2.6 million).
Banque Martin Maurel (BMM) joined the Group after the numbers above were calculated. BMM is primarily exposed to the risk of changes in short-term interest rates, because the assets and liabilities of its balance sheet are mainly at variable rates indexed to short-term interest rates (Eonia, Euribor, interbank market rate). Given that variable rate assets (loans and cash) exceed variable rate liabilities (deposits received), BMM's profitability would be adversely impacted by a fall in short-term interest rates.
BMM tries to limit its exposure to long-term fixed-rate loans and, where these exist, they are partly hedged by derivatives in order to limit exposure to the rising long-term rates.
Liquidity risk arises from the mismatch between the legal maturity of assets and liabilities. Management of liquidity risk is covered in the report on internal control and risk management procedures (page 96).
The Group's four main banking groups each manage their own liquidity independently of each other. An illustration of how they manage their short-term liquidity is summarised below. NMR, since it relinquished its banking licence during the period, no longer reports its liquidity to its regulator.
RBZ's liquidity policy includes a behavioural adjustment applied across different client types, which allows for approximately one third of client deposits to be withdrawn over 30 days. Although the regulatory framework would permit significant mismatches within the 30-day time bucket, RBZ maintains a more conservative approach to liquidity.
Internal limits provide for RBZ to be cumulatively cash positive in all periods (after behavioural adjustments). The behavioural adjustments are complemented by an additional requirement that 20% of all client call deposits are held in cash and assets realisable within 48 hours.
RBZ's liquidity coverage ratio (LCR) at 31 March 2017 was 169%, as measured for regulatory purposes (31 March 2016: 222%). The regulatory limit is 80%.
RCB's liquidity management process involves the maintenance of a high-quality buffer of liquid assets; typically cash, money held with the central bank and reverse bond repos against its client deposit balances. Its treasury committee, which meets monthly, authorises the counterparties for these liquidity investments within overall bank counterparty group limits set by Group ALCO.
RCB's LCR corresponds to the ratio of high-quality liquid assets to total net cash outflows over the next 30 days. It is calculated on a monthly basis, with the minimum threshold set at 80% in 2017 and planned to reach 100% in 2019.
At 31 March 2017, RCB's LCR was 202% (31 March 2016: 345%).
RBI complies with the liquidity regime of the GFSC which prescribes cumulative cash flow deficit limits for periods up to the one-month time horizon using standard behavioural adjustments (i.e. not institution specific).
At 31 March 2017, the RBI regulatory liquidity ratio for the eight-day to one-month period as a percentage of total deposits was 18.1% (31 March 2016: 17.6%), well in excess of the limit set by the GFSC of -5%.
The GFSC is amending the minimum regulatory liquidity requirements that apply to licensed deposit takers incorporated in Guernsey with effect from 31 July 2017. RBI will comply with the new requirements, which are consistent with the Basel III LCR and Net Stable Funding Ratio standards.
BMM maintains a stable and diverse pool of customer deposits with a low customer loan to deposit ratio of 56%. Treasury manages liquidity to ensure that a conservative position is maintained at all times by holding a significant amount of short-term liquidity with the Central Bank and inter-bank alongside a portfolio of highly rated securities. Exposure to liquidity risk is considered to be very low and is monitored on a daily basis independently of the front office.
At 31 March 2017, BMM's LCR was 333%.
The following table shows the Group's financial assets and liabilities, analysed by remaining contractual maturity at the balance sheet date.
| In millions of euro | Demand– 1m |
1m–3m | 3m–1yr | 1yr–2yr | 2yr–5yr | >5yr | No contractual maturity |
31/03/17 |
|---|---|---|---|---|---|---|---|---|
| Cash and balances at central banks | 3,907.4 | – | – | – | – | – | – | 3,907.4 |
| Financial assets at FVTPL | 13.2 | 3.9 | 3.4 | 1.4 | 178.7 | 46.9 | 184.9 | 432.4 |
| AFS financial assets | 77.7 | 188.7 | 213.7 | 319.9 | 196.7 | 68.4 | 551.3 | 1,616.4 |
| Loans and advances to banks | 1,215.4 | 532.8 | 133.5 | 10.0 | 0.5 | 25.9 | – | 1,918.1 |
| Loans and advances to customers | 880.5 | 301.7 | 567.7 | 328.7 | 584.9 | 203.8 | – | 2,867.3 |
| Other financial assets | 412.5 | 35.8 | 17.6 | 0.3 | – | – | – | 466.2 |
| TOTAL | 6,506.7 | 1,062.9 | 935.9 | 660.3 | 960.8 | 345.0 | 736.2 | 11,207.8 |
| Financial liabilities at FVTPL | 28.5 | 4.0 | 0.5 | 0.1 | 0.2 | – | – | 33.3 |
| Hedging derivatives | – | – | – | – | 8.6 | – | – | 8.6 |
| Due to banks and other financial institutions | 113.4 | 19.2 | 1.3 | 22.5 | 124.8 | 179.8 | – | 461.0 |
| Due to customers | 7,787.8 | 61.7 | 85.3 | 61.8 | 66.6 | 0.1 | – | 8,063.3 |
| Debt securities in issue | 35.4 | 22.7 | 80.0 | – | 1.5 | – | – | 139.6 |
| Other financial liabilities | 104.7 | 18.2 | 1.1 | 3.4 | 1.9 | 1.3 | – | 130.6 |
| TOTAL | 8,069.8 | 125.8 | 168.2 | 87.8 | 203.6 | 181.2 | – | 8,836.4 |
| Loan and guarantee commitments given | 240.6 | 26.2 | 39.5 | 33.0 | 44.0 | 8.5 | – | 391.8 |
Loan and guarantee commitments given are disclosed in the period in which they could first be drawn down.
The undiscounted cash flows of liabilities and commitments are not materially different from the amounts disclosed in the contractual maturity table above.
For financial reporting purposes, IFRS 13 requires fair value measurements applied to financial instruments to be allocated to one of three levels, reflecting the extent to which the valuation is based on observable data.
Level 1 comprises instruments whose fair value is determined based on directly usable prices quoted on active markets. This mainly includes listed securities and derivatives traded on organised markets (futures, options, etc.) whose liquidity can be demonstrated, and shares of funds where the value is determined and reported on a daily basis.
Level 2: instruments measured based on recognised valuation models using observable inputs other than quoted prices Level 2 comprises instruments not directly quoted on an active market, measured using a valuation technique which incorporates parameters that are either directly observable or indirectly observable through to maturity.
Derivatives are classified in Level 2 in the following circumstances:
Level 2 debt securities are less liquid than Level 1 securities. They are predominantly government bonds, corporate debt securities, mortgage backed securities, and certificates of deposit. They can be classified in Level 2 when external prices for the same security can be regularly observed from a reasonable number of market makers that are active in this security, but these prices do not represent directly tradable prices (when supplied, for example, by consensus pricing services with a reasonable number of contributors that are active market makers as well as indicative runs from active brokers and/ or dealers). Where prices are not directly observable in the market, a DCF valuation is used. The discount rate is adjusted for the applicable credit margin determined by similar instruments listed on an active market for comparable counterparties.
In the absence of a price available on an active market, fair value of Level 2 equity securities is determined using parameters derived from market conditions, based on data from comparable companies at the closing date.
The measurement techniques of Level 2 equity securities are:
The preferred measurement technique is based on transaction multiples. This technique uses recent transactions in the sector under consideration. Multiples are established based on the enterprise value of comparable transactions and accounting measures such as EBITDA, EBIT or profit, which are applied to the asset to be measured.
This consists of applying a multiple to the earnings of the company to be valued. It is based on multiples from a sample of listed companies, which are in the peer group of the company to be valued. The earnings multiples used are the price/earnings ratio (PER), enterprise value/earnings before interest and tax (EV/EBIT) and enterprise value/earnings before interest, tax, depreciation and amortisation (EV/EBITDA). These are historical multiples of the company to be valued and of the peer-group companies. They are restated to exclude all non-recurring and exceptional amounts, as well as the amortisation of goodwill.
Companies in the selected peer group must operate in a similar sector to that of the target company. They are of a relatively comparable size and have similar growth prospects. Specific factors may also be taken into account in the selection: country, regulatory aspects specific to each market, and the presence or otherwise of related business activities.
The value of the peer group companies is obtained by adding together the market capitalisation, net financial debt and non-controlling interests, based on the most recently available financial data.
Stock exchange multiples are calculated excluding any control premium. The valuation is made from the point of view of a non-controlling shareholder. However, if the investment to be valued is not listed, the lack of liquidity relative to listed companies in the peer group may be reflected through an illiquidity discount.
Securities providing access to the capital, which generally take the form of share subscription warrants, are regularly assessed to determine the probability of exercise and the possible impact thereof on the value of the investment. At each closing date, the probability of exercise of the warrants is determined by comparing the cost of exercise with the expected benefit derived from exercise.
When the Group has recently made an investment in an unquoted instrument, the transaction price (i.e. an entry price) is often considered as a reasonable starting point for measuring the fair value of this unquoted equity instrument at the measurement date.
Net asset value is, for a company, the amount a shareholder would receive if the company sold all its assets at their current market value, paid off any outstanding debts with the proceeds, and then distributed the remainder to the stockholders. For funds, the net asset value is based on the value of securities and working capital held in a fund's portfolio.
Level 3: instruments measured using models that are not commonly used and/or that draw on non-observable inputs Level 3 comprises instruments which are measured, at least in part, on the basis of non-observable market data which is liable to materially impact the valuation. This could include:
The fair value of financial instruments is determined at the reporting date in accordance with the accounting principles and methods described in this report.
| In millions of euro | 31/03/17 | ||||
|---|---|---|---|---|---|
| Carrying value |
Fair value | Level 1 | Level 2 | Level 3 | |
| Financial assets | |||||
| Cash and amounts due from central banks | 3,907.4 | 3,907.4 | – | 3,907.4 | – |
| Loans and advances to banks | 1,918.1 | 1,918.1 | – | 1,918.1 | – |
| Loans and advances to customers | 2,867.3 | 2,858.5 | – | 2,801.3 | 57.2 |
| TOTAL | 8,692.8 | 8,684.0 | – | 8,626.8 | 57.2 |
| Financial liabilities | |||||
| Due to banks and other financial institutions | 461.0 | 463.0 | – | 463.0 | – |
| Due to customers | 8,063.3 | 8,063.3 | – | 8,063.3 | – |
| Debt securities in issue | 139.6 | 139.6 | – | 139.6 | – |
| TOTAL | 8,663.9 | 8,665.9 | – | 8,665.9 | – |
| In millions of euro | 31/03/16 | ||||
|---|---|---|---|---|---|
| Carrying value |
Fair value | Level 1 | Level 2 | Level 3 | |
| Financial assets | |||||
| Cash and amounts due from central banks | 3,500.1 | 3,500.1 | – | 3,500.1 | – |
| Loans and advances to banks | 1,242.9 | 1,242.9 | – | 1,242.9 | – |
| Loans and advances to customers | 1,488.4 | 1,505.9 | – | 1,459.1 | 46.8 |
| TOTAL | 6,231.4 | 6,248.9 | – | 6,202.1 | 46.8 |
| Financial liabilities | |||||
| Due to banks and other financial institutions | 283.1 | 285.4 | – | 285.4 | – |
| Due to customers | 5,468.4 | 5,469.4 | – | 5,469.4 | – |
| Debt securities in issue | 124.2 | 124.2 | – | 124.2 | – |
| TOTAL | 5,875.7 | 5,879.0 | – | 5,879.0 | – |
• Loans to customers and their associated interest rates: these are compared, by maturity, with similar recent transactions. In the event of a material difference in interest rates or any other factor indicating that an asset's fair value is materially different from the net carrying amount, the fair value is adjusted accordingly. To determine the assets' fair value, the Group estimates counterparties' default risk and calculates the sum of future cash flows, taking into account the debtors' financial standing. An impaired loan where the carrying value of the loan is decided by a DCF, using best estimates of recoverable cash flows, is classified in Level 3.
• Repurchase agreements and amounts due to banks and customers: the fair value of these instruments is determined using a DCF technique, the discount rate of which is adjusted for the appropriate credit margin.
• Debt securities in issue: the fair value of these instruments is determined using external prices which can be regularly observed from a reasonable number of market makers. However, these prices do not represent a directly tradable price.
| In millions of euro | 31/03/17 | |||||
|---|---|---|---|---|---|---|
| Measured using | ||||||
| TOTAL | Level 1 | Level 2 | Level 3 | |||
| Financial assets | ||||||
| Trading securities – short term | 17.1 | 17.1 | – | – | ||
| Financial assets designated at FVTPL – long term | 393.8 | 40.2 | 353.6 | – | ||
| Derivative financial instruments | 21.5 | – | 21.5 | – | ||
| AFS public bills and similar securities | 173.1 | 173.1 | – | – | ||
| AFS bonds, other fixed income securities and accrued interest | 891.9 | 822.9 | 65.5 | 3.5 | ||
| AFS equity securities | 551.4 | 472.6 | 11.7 | 67.1 | ||
| TOTAL FINANCIAL ASSETS | 2,048.8 | 1,525.9 | 452.3 | 70.6 | ||
| Financial liabilities | ||||||
| Derivative financial instruments | 42.0 | – | 42.0 | – | ||
| TOTAL FINANCIAL LIABILITIES | 42.0 | – | 42.0 | – | ||
| In millions of euro | 31/03/16 | |||||
| TOTAL | Measured using | |||||
| Level 1 | Level 2 | Level 3 | ||||
| Financial assets | ||||||
| Trading securities – short term | 7.3 | 7.3 | – | – | ||
| Financial assets designated at FVTPL – long term | 374.8 | 32.1 | 342.7 | – | ||
| Derivative financial instruments | 73.6 | – | 73.6 | – | ||
| AFS public bills and similar securities | 505.9 | 505.9 | – | – | ||
| AFS bonds, other fixed income securities and accrued interest | 305.6 | 248.8 | 54.1 | 2.7 | ||
| AFS equity securities | 284.5 | 155.1 | 50.6 | 78.8 | ||
| TOTAL FINANCIAL ASSETS | 1,551.7 | 949.2 | 521.0 | 81.5 | ||
| Financial liabilities | ||||||
| Derivative financial instruments | 76.7 | – | 76.7 | – |
TOTAL FINANCIAL LIABILITIES 76.7 – 76.7 –
Valuation technique by class of Level 3 financial assets
| Description | Fair value at 31 March 2017 (in millions of euro) |
Valuation technique |
Unobservable input |
Range (weighted average) |
|---|---|---|---|---|
| Securities portfolios (CDOs, CLOs, etc.) |
1.5 | Discounted cash flow, based on expected cash flows of securitised assets and expectation of how these will be distributed to different noteholders. |
Default and recovery data according to the various asset classes. |
n/a |
| Mezzanine debt securities | 2.0 | Carrying value is based on original investment plus accrued interest less any impairment provisions. |
Impairment provisions based on expected repayment cashflows. |
n/a |
| AFS debt | 3.5 | |||
| Private equity fund investments | 30.9 | External valuation based on net asset value. |
n/a | n/a |
| Other equities | 20.5 | Adjusted observable market value. |
Non-observable valuation discounts; e.g. for non-controlling interests, lack of liquidity, or adjustments to the multiple to reflect a specific sector or activity. |
4-20 for EBITDA multiple; 20%–40% illiquidity discount. |
| 14.6 | External valuation. | n/a | n/a | |
| 1.1 | Valued at cost. | n/a | n/a | |
| AFS equity | 67.1 |
Out of €67.1 million of AFS equity securities classified in Level 3 as of 31 March 2017, €45.5 million were subject to a third-party valuation. To quantify the fair value sensitivity of these instruments, measured using unobservable inputs, the Group has determined the impact on net income and on equity in the event of a fall of 5% in the carrying value. In such an event, there would be a post-tax charge to the income statement of €0.2 million and a charge to equity of €1.6 million.
The following table presents the movement in assets valued using Level 3 valuation methods in the period:
| In millions of euro | Bonds and other fixed income securities |
Funds | Other equities |
TOTAL | |
|---|---|---|---|---|---|
| As at 1 April 2016 | 2.7 | 38.2 | 40.6 | 81.5 | |
| Transfer into/(out of) Level 3 | 1.4 | 1.4 | 7.6 | 10.4 | |
| Total gains or losses for the period | Included in income statement | – | – | (0.2) | (0.2) |
| Gains/(losses) through equity | – | 2.1 | 13.8 | 15.9 | |
| Purchases, issues, sales and settlements | Additions | – | 1.5 | 0.5 | 2.0 |
| Disposals | (0.6) | (12.3) | (26.2) | (39.1) | |
| Exchange | – | 0.1 | – | 0.1 | |
| AS AT 31 MARCH 2017 | 3.5 | 31.0 | 36.1 | 70.6 |
The calculation of fair value is subject to control procedures aimed at verifying that fair values are determined or validated by an independent function. Fair values determined by reference to external quoted prices or market parameters are validated by the relevant fund's valuation committee.
These committees review, twice a year, the valuation of the investments made by Merchant Banking.
The parameters of valuation that are reviewed in committee include the following:
Merchant banking funds are valued by their management companies in accordance with the international private equity and venture capital valuation (IPEV) guidelines developed by the Association Française des Investisseurs en Capital (AFIC), the British Venture Capital Association (BVCA) and the European Private Equity and Venture Capital Association (EVCA). Dedicated advisory committees exists to approve half-yearly investment valuations, which are sent to investors in the Group's merchant banking funds. As such, these committees act as the valuation committees under the Alternative Investment Fund Managers Directive (AIFMD) requirements.
The Group's OTC (i.e. non-exchange traded) derivatives are valued using external valuation models. These models calculate the present value of expected future cash flows. The Group's derivative products are of a 'vanilla' nature, such as interest rate swaps and cross-currency swaps; for these, the modelling techniques used are standard across the industry. Inputs to the valuation models are determined from observable market data, including prices available from exchanges, dealers, brokers or providers of consensus pricing.
Exchange traded derivatives are valued by the exchange on which they are traded, which asks for margin calls depending on the value.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Equities | 382,327 | 275,825 |
| Loans to customers | 11,513 | 98,925 |
| Financial assets designated at fair value through profit or loss | 393,840 | 374,750 |
| Public bills and similar securities | – | 3,003 |
| Equities | 17,077 | 4,323 |
| Trading instruments | 17,077 | 7,326 |
| Trading derivative assets (see note 2) | 21,524 | 70,791 |
| TOTAL | 432,441 | 452,867 |
| of which listed | 57,287 | 39,382 |
| of which unlisted | 375,154 | 413,485 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Trading derivative liabilities (see note 2) | 33,329 | 76,733 |
| TOTAL | 33,329 | 76,733 |
A derivative is a financial instrument, the value of which is derived from another financial instrument, an index or some other variable (the 'underlying'). Typically the underlying is an interest rate, a currency exchange rate or the price of a debt or equity security. Derivatives require little or no net investment or a lower investment than a non-derivative financial instrument to obtain the same sensitivity to changes in the underlying.
Derivative instruments are carried at fair value, shown in the balance sheet as separate totals of positive fair values (assets) and negative fair values (liabilities). Positive fair values represent the cost to the Group of replacing all transactions with a fair value in the Group's favour if the counterparties default. Negative fair values represent the cost to the Group's counterparties of replacing all their transactions with the Group with a fair value in the counterparties' favour if the Group were to default. Positive and negative fair values on different transactions are only netted if there is legal right of set-off, the transactions are with the same counterparty and the cash flows will be settled on a net basis. Changes in fair values of derivative instruments are recognised in trading income unless they qualify as cash flow hedges for accounting purposes.
Derivatives may be transacted for trading or hedging purposes. The accounting treatment of hedge transactions depends on the nature of the hedging relationship and whether the hedge qualifies as such for accounting purposes. Most of the Group's transactions that do not qualify as hedges for accounting purposes are nonetheless for the purpose of reducing market risk, by hedging exposures in the trading or non-trading books.
| In thousands of euro | 31/03/17 | 31/03/16 | ||||
|---|---|---|---|---|---|---|
| Notional principal |
Of which: asset |
Of which: liability |
Notional principal |
Of which: asset |
Of which: liability |
|
| Firm interest rate contracts | 143,424 | 2,998 | 169 | 61,721 | 2,671 | 349 |
| Conditional interest rate contracts | 15,090 | 305 | 34 | – | – | – |
| Firm foreign exchange contracts | 6,517,560 | 17,253 | 32,690 | 9,743,925 | 63,482 | 75,670 |
| Conditional foreign exchange contracts | 193,494 | 485 | 234 | 205,128 | 693 | 487 |
| Commodity options | 54,039 | 135 | 65 | 65,120 | 3,717 | 200 |
| Equity related options | 103,518 | 348 | 137 | 272 | 228 | 27 |
| TOTAL | 7,027,125 | 21,524 | 33,329 | 10,076,166 | 70,791 | 76,733 |
| In thousands of euro | 31/03/17 | 31/03/16 | ||||
|---|---|---|---|---|---|---|
| Notional principal |
Of which: asset |
Of which: liability |
Notional principal |
Of which: asset |
Of which: liability |
|
| Firm interest rate contracts | 136,000 | – | 8,626 | 190,434 | 2,798 | – |
| TOTAL | 136,000 | – | 8,626 | 190,434 | 2,798 | – |
The Group's hedging derivatives consist of fair value hedges only. These are interest rate swaps that are used to protect against changes in the fair value of fixed rate lending. There is no charge or credit in the income statement due to ineffectiveness of these hedges.
The Group does not apply cash flow hedge accounting any more following the repayment of a floating rate loan in April 2015 (see note 25).
The following table shows the impact on the consolidated balance sheet of offsetting assets and liabilities with the same counterparties. The hypothetical financial impact of netting instruments subject to an enforceable master netting arrangement, or similar agreements, with available cash and financial instrument collateral would not be material.
| In thousands of euro | 31/03/17 | ||
|---|---|---|---|
| Gross assets | Amounts set off | Net amounts as per balance sheet |
|
| Trading derivative assets | 53,274 | (31,750) | 21,524 |
| Loans and receivables with banks | 1,922,298 | (4,238) | 1,918,060 |
| Other assets not subject to netting | 10,237,687 | – | 10,237,687 |
| Total assets | 12,213,259 | (35,988) | 12,177,271 |
| Due to banks | 479,899 | (18,941) | 460,958 |
| Trading derivative liabilities | 50,376 | (17,047) | 33,329 |
| Other liabilities not subject to netting | 9,382,454 | – | 9,382,454 |
| Total liabilities | 9,912,729 | (35,988) | 9,876,741 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Public bills and similar securities | 173,092 | 505,921 |
| Other fixed income securities | 885,997 | 305,087 |
| Accrued interest | 5,908 | 540 |
| Total AFS debt securities | 1,064,997 | 811,548 |
| of which impairment losses | (10,996) | (20,013) |
| Total AFS equity securities | 551,430 | 284,461 |
| of which impairment losses | (132,082) | (133,424) |
| TOTAL | 1,616,427 | 1,096,009 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| As at 1 April | 1,096,009 | 669,437 |
| Additions | 1,274,272 | 1,355,346 |
| Acquisition of a subsidiary (note 22) | 737,970 | – |
| Disposals | (1,470,454) | (895,012) |
| Gains/(losses) from changes in fair value, recognised directly in equity | 23,760 | 583 |
| Impairment losses recognised in income statement | (1,177) | (5,562) |
| Exchange differences | (23,927) | (30,035) |
| Changes in scope and other movements | (20,026) | 1,252 |
| AT THE END OF THE PERIOD | 1,616,427 | 1,096,009 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Interbank demand deposits and overnight loans | 987,911 | 779,584 |
| Interbank term deposits and loans | 119,069 | 74,197 |
| Reverse repos and loans secured by bills | 810,445 | 388,965 |
| Accrued interest | 635 | 201 |
| Loans and advances to banks – gross amount | 1,918,060 | 1,242,947 |
| Allowance for credit losses | – | – |
| TOTAL | 1,918,060 | 1,242,947 |
The merger with CFMM contributed €187 million of loans and advances to banks (note 22).
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Debit balances on current accounts | 287,974 | 25,438 |
| Other loans to customers | 2,638,880 | 1,530,196 |
| Accrued interest | 19,442 | 7,299 |
| Loans and advances to customers – gross amount | 2,946,296 | 1,562,933 |
| Specific provisions | (55,346) | (48,876) |
| Collective provisions | (23,675) | (25,685) |
| Allowance for credit losses | (79,021) | (74,561) |
| TOTAL | 2,867,275 | 1,488,372 |
The merger with CFMM contributed €1,241 million of loans to customers (note 22).
At 31 March 2017, loans and advances to customers include finance lease receivables, as shown below:
| In thousands of euro | Total future receipts |
Less unrecognised interest income |
Present value of net finance lease assets |
|---|---|---|---|
| Up to one year | 7,813 | (387) | 7,426 |
| Between one and five years | 12,532 | (400) | 12,132 |
| Over five years | 522 | (9) | 513 |
| TOTAL | 20,867 | (796) | 20,071 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Accounts receivable(1) | 229,473 | 218,506 |
| Guarantee deposits paid(1) | 18,039 | 11,838 |
| Settlement accounts for transactions of securities(1) | 83,196 | 54,257 |
| Defined benefit pension scheme assets (note 19) | 17,823 | 11,701 |
| Other sundry assets(2) | 166,703 | 129,163 |
| Other assets | 515,234 | 425,465 |
| Prepaid expenses | 20,349 | 23,594 |
| Accrued income(1) | 131,752 | 79,692 |
| Prepayments and accruals | 152,101 | 103,286 |
| TOTAL | 667,335 | 528,751 |
(1) These balances represent financial assets.
(2) Of this balance, €3.7 million relates to financial assets.
The amounts in the balance sheet and income statement for associates are shown below:
| In thousands of euro | 31/03/17 | 31/03/16 | ||
|---|---|---|---|---|
| Equity accounted value |
Share of profit after tax |
Equity accounted value |
Share of profit after tax |
|
| JRAC Proprietary Investments LP Incorporated | 20,267 | 22 | 20,244 | 27 |
| Réponse Invest(1) | 982 | – | – | – |
| Quintus fund | – | – | – | (178) |
| Merchant Banking Investments | 21,249 | 22 | 20,244 | (151) |
| Sélection 1818(1) | – | – | 12,160 | 99 |
| St Julian's Properties Limited(1) | 7,757 | 296 | 8,318 | 276 |
| Others | 4,777 | 106 | 1,720 | 43 |
| Other investments | 12,534 | 402 | 22,198 | 418 |
| TOTAL | 33,783 | 424 | 42,442 | 267 |
(1) Financial year ended 31 December.
Information about the underlying accounts of the associates are as follows:
| In thousands of euro | 31/03/17 | ||||||
|---|---|---|---|---|---|---|---|
| Réponse Invest(1) |
JRAC Proprietary Investments LP Incorporated |
St Julian's Properties Limited(1) |
Others | ||||
| Loans and receivables with bank, net | 3,726 | 575 | 194 | 5,000 | |||
| Available–for–sale financial assets | – | 40,200 | – | 5,256 | |||
| Other assets | 48,401 | 62 | 15,481 | 2,167 | |||
| Total assets | 52,127 | 40,837 | 15,675 | 12,423 | |||
| Total creditors | 55,846 | 303 | 160 | 2,429 | |||
| Net banking revenue | 73,561 | 156 | – | 2,065 | |||
| Profit before tax | (2,669) | 65 | 748 | 687 | |||
| Net income | (3,167) | 43 | 592 | 436 | |||
| Other comprehensive income | (3,223) | 4 | (1,252) | – | |||
| Total comprehensive income | (6,390) | 47 | (660) | 436 | |||
| Dividends received | – | – | 231 | 183 |
(1) Financial year ended 31 December.
All associates are accounted for using the equity method. Information about business activities, Group voting rights and ownership interest is disclosed in note 37.
| In thousands of euro | 01/04/16 | Additions | Disposals/ write-offs |
Acquisition of subsidiar ies |
Deprecia tion charge |
Exchange rate movement |
Other movements |
31/03/17 |
|---|---|---|---|---|---|---|---|---|
| Gross tangible fixed assets | ||||||||
| Operating land and buildings | 323,788 | 2,366 | (1,948) | 96,405 | (16,677) | 13,408 | 417,342 | |
| Other tangible fixed assets | 118,245 | 10,455 | (4,904) | 13,028 | 558 | (9,371) | 128,011 | |
| Total tangible fixed assets – gross amount | 442,033 | 12,821 | (6,852) | 109,433 | (16,119) | 4,037 | 545,353 | |
| Depreciation and allowances | ||||||||
| Operating land and buildings | (70,489) | 1,937 | (26,137) | (10,848) | 2,714 | (7,787) | (110,610) | |
| Other tangible fixed assets | (64,476) | 4,226 | (5,797) | (12,144) | (300) | 3,730 | (74,761) | |
| Total depreciation and allowances | (134,965) | 6,163 | (31,934) | (22,992) | 2,414 | (4,057) | (185,371) | |
| TOTAL | 307,068 | 12,821 | (689) | 77,499 | (22,992) | (13,705) | (20) | 359,982 |
| In thousands of euro | 01/04/16 | Additions | Disposals/ write-offs |
Acquisition of a subsidiary (note 22) |
Amortisation and impairment (note 29) |
Exchange rate movement |
Other movements |
31/03/17 |
|---|---|---|---|---|---|---|---|---|
| Gross intangible fixed assets | ||||||||
| Brand names | 151,000 | – | – | 6,500 | – | – | 157,500 | |
| Other intangible assets | 44,687 | 497 | (7,476) | 11,049 | (312) | (54) | 48,391 | |
| Total intangible assets – gross amount | 195,687 | 497 | (7,476) | 17,549 | (312) | (54) | 205,891 | |
| Depreciation and allowances | ||||||||
| Brand names | – | – | – | – | – | – | – | |
| Other intangible assets | (27,290) | 7,476 | (6,966) | (9,124) | 109 | (12) | (35,807) | |
| Total depreciation and allowances | (27,290) | 7,476 | (6,966) | (9,124) | 109 | (12) | (35,807) | |
| TOTAL | 168,397 | 497 | – | 10,583 | (9,124) | (203) | (66) | 170,084 |
The Brand names contain mainly the use of the 'Rothschild' name, which was recognised following the acquisition of a subsidiary in 2007. The asset was considered as having an indefinite useful life and is, therefore, not amortised, but is instead subject to an annual impairment test.
As at 31 March 2017, the Group performed its annual impairment test for the Rothschild brand name. It valued the brand using the 'royalty relief' method, whereby the value of the brand is based on the theoretical amount that would be paid if the brand were licensed from a third party, and not owned. The key assumptions used for the test were:
Results of sensitivity tests on the Rothschild brand name show that:
Such decreases would not result in an impairment.
| In thousands of euro | RCB | Concordia Holding |
Other | TOTAL |
|---|---|---|---|---|
| As at 1 April 2016 | 47,718 | 59,346 | 4,789 | 111,853 |
| Additions | – | – | 12,101 | 12,101 |
| Translation difference | – | – | (111) | (111) |
| AS AT 31 MARCH 2017 | 47,718 | 59,346 | 16,779 | 123,843 |
On 2 January 2017, R&Co merged with CFMM. The accounting consequences of this are explained in note 22.
On 1 April 2016, the Group's Global Advisory business acquired a 100% interest in Scott Harris Ltd, a specialist equity marketing consultancy, and a 100% interest in a Belgian advisory business. A significant proportion of both acquisition prices was due in the form of deferred consideration to the former owners. Where these owners have also become employees of the Group, and where the payments are conditional on them remaining as employees, the Group is obliged under IFRS to treat the acquisition costs as a remuneration charge to be spread over the vesting period, even though the deferred consideration reflects the fair value of the business at the time of acquisition.
As a result of these acquisitions, and the accounting policy described above, the Group recorded goodwill of €6.9 million from merging with CFMM, €5.1 million from acquiring Scott Harris Ltd and negative goodwill of €1.4 million from acquiring the Belgian subsidiary. The negative goodwill has been recognised at the date of acquisition in the income statement. Additionally, €5.1 million of deferred consideration has been charged to 'compensation and other staff costs' in the year.
As at 31 March 2017, the Group performed an annual impairment test for each of the Cash Generating Units (CGU) to which goodwill has been allocated. The recoverable amount of the CGU was calculated using the most appropriate method.
For Concordia Holding, the value-in-use has been calculated using a discounted future cash flow method (DCF). The following assumptions were used:
Results of sensitivity tests on the Concordia Holding DCF show that a 50 bp increase in discount rates combined with a 50 bp reduction in perpetual growth rates would reduce the value of the CGU by €127 million. Similarly, a 10% decrease in the normalised cash flow in the future business plan cash flows would reduce the value by €108 million. Such decreases would not result in an impairment.
For RCB, which represents the Global Advisory and Asset Management activities in France, the fair value less cost of disposal has been calculated using trading multiples which have been applied to the normalised profit after tax. The value was determined using parameters derived from market conditions and based on data from comparable companies. The valuation technique would be classified in Level 2 of the fair value hierarchy. There was no change in the valuation technique used compared to last year's valuation.
The following assumptions were used:
Results of sensitivity tests on RCB show that a 10% decrease in either the trading multiples or in the normalised profit after tax would reduce the value of the CGU by €40 million and would not result in an impairment.
At 31 March 2017, the recoverable amount of each CGU was higher than its carrying amount. The Group did not, therefore, record any goodwill impairment in the year.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Interbank demand deposits and overnight | 108,022 | 59,579 |
| Interbank term deposits and borrowings | 347,567 | 220,559 |
| Accrued interest | 5,369 | 1,814 |
| TOTAL | 460,958 | 281,952 |
The merger with CFMM contributed €67 million of amounts due to banks and other financial institutions (note 22).
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Demand deposits | 7,416,913 | 4,494,422 |
| Term deposits | 576,180 | 865,996 |
| Borrowings secured by bills | 68,403 | 99,915 |
| Accrued interest | 1,787 | 8,055 |
| TOTAL | 8,063,283 | 5,468,388 |
The merger with CFMM contributed €2,168 million of customer deposits (note 22).
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Due to employees | 528,232 | 454,096 |
| Other accrued expenses and deferred income | 158,410 | 134,938 |
| Accrued expenses | 686,642 | 589,034 |
| Settlement accounts for transactions of securities(1) | 99,983 | 76,870 |
| Accounts payable(1) | 30,628 | 32,510 |
| Sundry creditors | 139,197 | 89,748 |
| Other liabilities | 269,808 | 199,128 |
| TOTAL | 956,450 | 788,162 |
(1) These balances represent financial liabilities.
| In thousands of euro | 01/04/16 | Charge/ (release) |
Utilised | Exchange movement |
Acquisition of a subsidiary (note 22) |
Other movements |
31/03/17 |
|---|---|---|---|---|---|---|---|
| Provision for counterparty risk | 32 | 325 | (430) | – | 1,099 | 45 | 1,071 |
| Provision for claims and litigation | 18,980 | 2,466 | (13) | 116 | 5,585 | 96 | 27,230 |
| Provisions for restructuring | 642 | (642) | – | – | – | – | – |
| Provisions for property | 1,027 | – | (659) | 18 | – | (20) | 366 |
| Other provisions | 152 | (50) | (38) | – | 887 | (22) | 929 |
| Subtotal | 20,833 | 2,099 | (1,140) | 134 | 7,571 | 99 | 29,596 |
| Retirement benefit liabilities (note 19) | 134,552 | n/a | n/a | n/a | n/a | (50,604) | 83,948 |
| TOTAL | 155,385 | 2,099 | (1,140) | 134 | 7,571 | (50,505) | 113,544 |
From time to time the Group is involved in legal proceedings or receives claims arising from the conduct of its business. Based upon available information and, where appropriate, legal advice, provisions are made where it is probable that an outflow of resources will be required and the amount can be reliably estimated. 1. Overview
Also within provisions for claims and litigation are amounts set aside to cover estimated costs of other legal proceedings and claims arising from the conduct of business.
Management believes that the level of provisions made in these financial statements continues to be sufficient for any potential or actual proceedings or claims which are likely to have an impact on the Group's financial statements, based on information available at the reporting date.
| In thousands of euro | 01/04/16 | Income statement charge |
Income statement reversal |
Written off | Acquisition of a subsidiary |
Exchange rate and other movements |
31/03/17 |
|---|---|---|---|---|---|---|---|
| Loans and advances to customers | (74,561) | (17,235) | 14,746 | 27,291 | (31,107) | 1,845 | (79,021) |
| Available-for-sale financial assets | (153,437) | (1,194) | 17 | 11,626 | (70) | (20) | (143,078) |
| Other assets | (14,730) | (9,478) | 1,570 | 2,814 | - | (949) | (20,773) |
| TOTAL | (242,728) | (27,907) | 16,333 | 41,731 | (31,177) | 876 | (242,872) |
The movement on the deferred tax account is as follows:
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Net asset as at beginning of period | 28,909 | 37,707 |
| of which deferred tax assets | 72,278 | 92,760 |
| of which deferred tax liabilities | (43,369) | (55,053) |
| Recognised in income statement | ||
| Income statement (charge) | (6,548) | (4,030) |
| Recognised in equity | ||
| Defined benefit pension arrangements | (3,321) | (5,451) |
| Available-for-sale financial assets | (186) | 7,880 |
| Tax losses carried forward | 23 | 119 |
| Cash flow hedges | – | (1,611) |
| Reclassification to current tax | 4,164 | 5,214 |
| Payments/(refunds) | (253) | 121 |
| Exchange differences | (3,486) | (4,866) |
| Purchase/sale of a subsidiary | (19,913) | (5,733) |
| Other | 2,248 | (441) |
| NET ASSET AS AT END OF PERIOD | 1,637 | 28,909 |
| of which deferred tax assets | 67,966 | 72,278 |
| of which deferred tax liabilities | (66,329) | (43,369) |
Deferred tax net assets are attributable to the following items:
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Deferred profit share arrangements | 26,213 | 26,606 |
| Defined benefit pension liabilities | 18,074 | 22,893 |
| Losses carried forward | 13,954 | 12,982 |
| Accelerated depreciation | 3,971 | 6,015 |
| Provisions | 2,968 | 1,516 |
| Available-for-sale financial assets | (311) | 347 |
| Other temporary differences | 3,097 | 1,919 |
| TOTAL | 67,966 | 72,278 |
The majority of the Group's deferred tax assets are in NMR, a UK subsidiary. For these financial statements, NMR considers that there will be sufficient profits within eight years to utilise deferred tax assets that remain recognised on its balance sheet.
NMR derecognised €8.7 million of deferred tax assets during the year ended March 2015, after the UK government announced restrictions on the ability of banks to utilise historic tax losses. Elsewhere in the Group, in accordance with the Group's accounting policy, some deductible temporary differences have not given rise to the recognition of deferred tax assets, mainly in the United States, Canada and Asia. Unrecognised deferred tax assets amounted to €72.9 million at 31 March 2017 (€73.9 million at 31 March 2016).
Deferred tax net liabilities are attributable to the following items:
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Fair value adjustments to properties | 21,272 | 7,772 |
| Available-for-sale financial assets | 19,277 | 13,070 |
| Intangible assets recognised following acquisition of subsidiaries | 14,520 | 13,565 |
| Defined benefit pension assets | 3,946 | 1,829 |
| Accelerated capital allowances | 2,224 | 1,549 |
| Other temporary differences | 5,090 | 5,584 |
| TOTAL | 66,329 | 43,369 |
Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to set-off and the balance relates to income tax levied by the same tax authority on the same taxable entity or tax group. There must also be the intention and the will to settle on a net basis or to realise the assets and liabilities simultaneously.
The deferred tax expense/(income) in the income statement comprises the following temporary differences:
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Depreciation differences | 2,520 | 2,025 |
| Defined benefit pension liabilities | 5,540 | 1,345 |
| Allowances for loan losses | 344 | (1,359) |
| Tax losses carried forward | 1,004 | 3,337 |
| Deferred profit share arrangements | (1,118) | 2,504 |
| Available-for-sale financial assets | 743 | (522) |
| Other temporary differences | (2,485) | (3,300) |
| TOTAL | 6,548 | 4,030 |
A structured entity is one which has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. It will often have restricted activities and a narrow or well-defined objective and can include some investment funds.
In most cases it is clear under IFRS 10 that the Group need not consolidate its investments in structured entities. However, some structured entities are managed by the Group in the form of funds in which the Group's own money is also invested. In these situations, a judgement must be made whether there is a need to consolidate these funds or not. To do this, a combined assessment of two key indicators is made:
To assess economic interests it is considered, at a particular level of returns, how much of any further increase in the performance of a fund accrues to the manager ('the variability of the economic interest'). The level of returns at which this is measured is the level at which performance fees begin to accrue.
A high level of variability would support the conclusion that a manager might be a principal (and would probably consolidate the managed fund). Meanwhile, a low level of variability would indicate that a manager might be an agent for the other investors (and would probably not consolidate).
Additionally, negligible rights for the investors to remove the manager or transfer their funds might indicate that a manager is a principal (and would probably consolidate) while strong rights might suggest that a manager is an agent (and would probably not consolidate).
The Group's judgement is guided by both IFRS 10 and its understanding of market practice.
The following table shows the Group's interest in unconsolidated structured entities which it manages.
| 31/03/17 | |||
|---|---|---|---|
| In thousands of euro | Equity funds | Debt funds | TOTAL |
| Total assets within the underlying vehicles | 1,215,206 | 3,014,036 | 4,229,242 |
| Assets under management including third party commitments | 2,307,839 | 3,271,236 | 5,579,075 |
| Interest held in the Group's balance sheet: | |||
| Financial assets designated at FVTPL | 263,463 | 64,495 | 327,958 |
| Financial assets available for sale | – | 47,009 | 47,009 |
| Loans and receivables | 3,700 | 7,644 | 11,344 |
| Total assets in the Group's balance sheet | 267,163 | 119,148 | 386,311 |
| Off-balance sheet commitments made by the Group | 196,385 | 42,633 | 239,018 |
| Group's maximum exposure | 463,548 | 161,781 | 625,329 |
Non-controlling interests (NCI) represent the share of fully consolidated subsidiaries that is not directly or indirectly attributable to the Group. These interests comprise the equity instruments which have been issued by these subsidiaries and which are not held by the Group. The Group's income, net assets and distributions which are attributable to NCI arise from the following sources:
| 31/03/17 | 31/03/16 | |||||
|---|---|---|---|---|---|---|
| In thousands of euro | Net income | Amounts in the balance sheet |
Distributions | Net income | Amounts in the balance sheet |
Distributions |
| Preferred shares | 160,013 | 60,103 | 128,520 | 100,881 | 30,783 | 96,993 |
| Perpetual subordinated debt | 13,748 | 305,372 | 13,748 | 14,775 | 319,813 | 14,775 |
| Rothschild Holding AG group | 2,502 | 79,563 | 2,351 | 7,022 | 153,641 | 2,407 |
| Other | 4,128 | 26,537 | 1,113 | 2,627 | 11,613 | 181 |
| TOTAL | 180,391 | 471,575 | 145,732 | 125,305 | 515,850 | 114,356 |
Preferred shares within NCI mainly consist of amounts calculated in accordance with legal clauses applicable to French limited partnerships owned by Rothschild & Compagnie Banque SCS, the French holding company of our Private Wealth and Global Advisory businesses located in France. The preferred amounts are based on the partnerships' individual local earnings, and take into account the share that relates to workers' remuneration.
Subsidiaries inside the Group have issued perpetual subordinated debt instruments which have discretionary clauses relating to the payment of the interest. Under IFRS, these instruments are considered to be equity instruments and are shown as part of NCI because they were issued by subsidiaries and not held by the Group. The interest payable on these instruments is shown as a charge to NCI.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Perpetual fixed rate subordinated notes 9 per cent (£125 million) | 172,905 | 186,835 |
| Perpetual floating rate subordinated notes (€150 million) | 60,474 | 65,346 |
| Perpetual floating rate subordinated notes (US\$200 million) | 71,993 | 67,632 |
| TOTAL | 305,372 | 319,813 |
The Group holds a 86.80% (2016: 72.87%) economic interest in the equity of Rothschild Holding AG (RHAG), the Swiss holding company of part of our Private Wealth business. The non-controlling interest in the Group's income statement and balance sheet is calculated based on this economic interest.
The following table shows a summarised income statement and balance sheet of the RHAG group of companies.
| In thousands of euro | RHAG Group | |
|---|---|---|
| Income statement information | 31/03/17 | 31/03/16 |
| Net banking revenue | 214,432 | 216,253 |
| Net income | 16,784 | 30,686 |
| Total other comprehensive income for the year, after tax(1) | 16,591 | (19,472) |
| Total comprehensive income for the year | 33,375 | 11,214 |
| Balance sheet information | ||
| Cash and amounts due from central banks | 3,324,725 | 2,749,608 |
| Loans and advances to banks | 170,521 | 138,230 |
| Loans and advances to customers | 1,125,283 | 1,102,499 |
| Other assets | 460,739 | 467,256 |
| Total assets | 5,081,268 | 4,457,593 |
| Due to customers | 3,341,049 | 3,581,066 |
| Other liabilities | 1,093,806 | 265,937 |
| Total liabilities | 4,434,855 | 3,847,003 |
| Shareholders' equity | 646,413 | 610,590 |
(1) Other comprehensive income in RHAG comprises gains and losses from translation, actuarial movements and revaluation of long-standing shareholdings.
The Group supports various pension schemes for the employees of operating subsidiaries. Where material, these are described below.
The NMR Pension Fund (NMRP) is operated by NMR for the benefit of employees of certain Group companies in the United Kingdom. The Fund comprises a defined benefit section, which closed to new entrants in 2003, and a defined contribution section, established with effect from the same date.
The NMR Overseas Pension Fund (NMROP) is operated for the benefit of employees of certain Group companies outside the United Kingdom. The defined benefit section also closed to new entrants and a defined contribution section was opened in 2003.
Rothschild North America Inc maintains an unfunded qualified non-contributory defined benefit pension plan and other pension agreements for certain employees (RNAP). Neither the plan nor the pension agreements provide for health or other benefits for employees or retirees. The last time that new benefits were accrued was 2001.
RBZ also operates a funded pension scheme (RBZP). This scheme has been set up on the basis of the Swiss method of defined contributions but has characteristics of a defined benefit pension plan. Current employees and pensioners (former employees or their surviving partners) receive benefits upon retiring as well as in the event of death or invalidity. These benefits are financed through employer and employee contributions.
Additionally, certain companies in the Group have smaller unfunded obligations in respect of pensions and other post-employment benefits.
The latest formal actuarial valuations of the NMRP and the NMROP were carried out as at 31 March 2016. The value of the defined benefit obligation has been updated to 31 March 2017 by qualified independent actuaries. Valuations of RBZP are performed each September and March, also by qualified actuaries.
The defined benefit obligations expose the Group to a number of risks, including longevity, inflation, interest rate and investment performance. These risks are mitigated where possible by applying an investment strategy for the funded schemes which aims to minimise the long-term costs. This is achieved by investing in a diversified selection of asset classes, which aims to reduce the volatility of returns and also achieves a level of matching with the underlying liabilities. The matching assets, that the funded schemes invest in, include corporate bonds, government gilts and a specific liability-driven investment mandate, which provide a partial hedge of the funds' interest rate and inflation exposure.
Overall, the objective is to select assets which will generate income and capital growth to meet, together with new contributions, the cost of current and future benefits payable by the funds.
| In thousands of euro | NMRP and NMROP |
RBZP | RNAP | Other | 31/03/17 |
|---|---|---|---|---|---|
| Present value of funded obligations | 1,095,734 | 248,079 | – | – | 1,343,813 |
| Fair value of plan assets | (1,073,137) | (236,745) | – | – | (1,309,882) |
| Subtotal | 22,597 | 11,334 | – | – | 33,931 |
| Present value of unfunded obligations | – | – | 21,109 | 11,085 | 32,194 |
| TOTAL | 22,597 | 11,334 | 21,109 | 11,085 | 66,125 |
| of which schemes with net liabilities | 33,676 | 18,078 | 21,109 | 11,085 | 83,948 |
| of which schemes with net (assets) | (11,079) | (6,744) | – | – | (17,823) |
| In thousands of euro | NMRP and NMROP |
RBZP | RNAP | Other | 31/03/16 |
|---|---|---|---|---|---|
| Present value of funded obligations | 981,362 | 245,123 | – | – | 1,226,485 |
| Fair value of plan assets | (911,854) | (226,018) | – | – | (1,137,872) |
| Subtotal | 69,508 | 19,105 | – | – | 88,613 |
| Present value of unfunded obligations | – | – | 23,737 | 10,501 | 34,238 |
| TOTAL | 69,508 | 19,105 | 23,737 | 10,501 | 122,851 |
| of which schemes with net liabilities | 75,946 | 24,368 | 23,737 | 10,501 | 134,552 |
| of which schemes with net (assets) | (6,438) | (5,263) | – | – | (11,701) |
| In thousands of euro | Plan (assets) | Defined benefit obligations |
Net defined benefit liability |
|---|---|---|---|
| As at 1 April 2016 | (1,137,872) | 1,260,723 | 122,851 |
| Current service cost (net of contributions paid by other plan participants) | – | 15,824 | 15,824 |
| Contributions by the employees | (3,371) | 3,371 | – |
| Past service costs | – | (213) | (213) |
| Interest (income)/cost | (31,712) | 34,501 | 2,789 |
| Remeasurements due to: | |||
| – actual return less interest on plan assets | (200,623) | – | (200,623) |
| – changes in financial assumptions | – | 196,169 | 196,169 |
| – changes in demographic assumptions | – | 5,235 | 5,235 |
| – experience (gains)/losses | – | (5,699) | (5,699) |
| Benefits paid | 56,018 | (56,018) | – |
| (Contributions) by the Group | (68,347) | – | (68,347) |
| Administration expenses | 2,031 | – | 2,031 |
| Exchange and other differences | 73,994 | (77,886) | (3,892) |
| AS AT 31 MARCH 2017 | (1,309,882) | 1,376,007 | 66,125 |
Following the March 2016 triennial actuarial valuation of the NMRP, the trustees of the defined benefit pension fund have agreed a contribution plan with the Group to reduce the resulting deficit in accordance with pensions regulation. The aim is to eliminate the funding deficit by 2023 with €18.0 million of additional contributions per year. In addition, participating employers in the fund have agreed to pay 46.6% of in-service members' pensionable salaries.
It is estimated that total contributions of €28 million will be paid to the defined benefit pension schemes in the nine months ending 31 December 2017.
The Group has assessed that no further liability arises for the NMRP, the NMROP or the RBZP under IFRIC 14 – IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. This conclusion was reached because the trustees of the NMRP and NMROP funds do not have a unilateral power to wind up the fund and the fund's rules allow the Company an unconditional right to a refund assuming the gradual settlement of plan liabilities over time until all members have left the Fund. Meanwhile, the plan assets of the RBZP contain a repurchase value of CHF4.5 million, resulting from a reinsurance contract with Zurich Insurance Company Ltd, Zurich (Zurich Insurance). Zurich Insurance does not have a unilateral power to wind up the reinsurance contract.
The net pension asset in the RBZP is expected to become available to the Group because the statutory employer contributions do not fully cover the employer service cost according to IAS 19. According to IFRIC 14, the maximum economic benefit is the capitalised value of the difference between the employer service cost and the expected employer's contributions to the fund for the following financial year.
The weighted average projected maturity of the Fund's liabilities is 20 years for the NMRP and 17 years for the RBZP.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Current service cost (net of contributions paid by other plan participants) | 15,824 | 16,917 |
| Net interest cost | 2,789 | 4,579 |
| Negative past service cost | (213) | (10,433) |
| Administration costs | 2,031 | 1,978 |
| Other pension income | (34) | 106 |
| TOTAL (included in staff costs) | 20,397 | 13,147 |
As a result of changes implemented to the basis on which pensionable service accrues to in-service members, the 2017 income statement includes a credit of €0.2 million (2016: €10.4 million) in respect of past service costs.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Remeasurement gains/(losses) recognised in the year | 4,918 | 6,382 |
| Cumulative remeasurement losses recognised in the statement of comprehensive income | (211,890) | (216,808) |
Actuarial assumptions and sensitivities
The principal actuarial assumptions used as at the balance sheet date were as follows:
| 31/03/17 | 31/03/16 | ||||||
|---|---|---|---|---|---|---|---|
| NMRP and NMROP |
RBZP | RNAP | NMRP and NMROP |
RBZP | RNAP | ||
| Discount rate | 2.8% | 0.6% | 3.0% | 3.6% | 0.4% | 2.5% | |
| Retail price inflation | 3.2% | n/a | n/a | 2.9% | n/a | n/a | |
| Consumer price inflation | 2.1% | 0.3% | n/a | 1.9% | 0.5% | n/a | |
| Expected rate of salary increases | 2.0% | 0.5% | n/a | 2.0% | 0.5% | n/a | |
| Expected rate of increase of pensions in payment: | |||||||
| Uncapped increases | n/a | 0.0% | n/a | n/a | 0.0% | n/a | |
| Capped at 5.0% | 3.1% | n/a | n/a | 2.8% | n/a | n/a | |
| Capped at 2.5% | 2.1% | n/a | n/a | 2.0% | n/a | n/a | |
| Life expectancy in years of a: | |||||||
| Male pensioner aged 60 | 29.2 | 27.2 | 26.0 | 28.7 | 26.4 | 26.1 | |
| Female pensioner aged 60 | 30.4 | 29.5 | 29.0 | 29.5 | 29.0 | 28.6 | |
| Male pensioner aged 60 in 20 years' time | 31.1 | 29.1 | n/a | 30.7 | 28.1 | n/a | |
| Female pensioner aged 60 in 20 years' time | 32.3 | 31.3 | n/a | 30.7 | 30.7 | n/a |
The value placed on the defined benefit net liabilities and assets is sensitive to the actuarial assumptions used above. Those assumptions that have the most significant impact on the measurement of the liability, along with an illustration of the sensitivity to the assumption, are as follows:
| 31/03/17 | |||
|---|---|---|---|
| In thousands of euro | NMRP and NMROP |
RBZP | |
| 0.5% increase in discount rate | (102,000) | (18,000) | |
| 0.5% increase in inflation | 81,000 | 1,000 | |
| One year increase in life expectancy | 38,000 | n/a |
The sensitivities shown above reflect only an estimate of the change in the assessed defined benefit obligation for the funds. In practice, any movement leading to a change in the discount rate or price inflation is likely to be partially offset by a change in asset values, and the corresponding overall impact on the net liability is therefore likely to be lower than the amounts above.
| 31/03/17 | 31/03/16 | |||||
|---|---|---|---|---|---|---|
| NMRP | NMROP | RBZP | NMRP | NMROP | RBZP | |
| Equities – quoted | 33% | 44% | 30% | 35% | 43% | 26% |
| Bonds – quoted | 18% | 19% | 44% | 18% | 18% | 46% |
| Cash and gilts | 8% | 4% | 6% | 9% | 8% | 8% |
| Hedge funds and private equity | 17% | 10% | 11% | 20% | 13% | 12% |
| Liability hedges | 22% | 20% | 2% | 17% | 16% | 2% |
| Property and others | 2% | 3% | 7% | 1% | 2% | 6% |
| 100% | 100% | 100% | 100% | 100% | 100% |
Equities includes €0.8 million (2016: €0.9 million) of shares in companies that are related parties of the Company.
For the purposes of drawing up the cash flow statement, the 'cash and cash equivalents' items are analysed as follows:
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Cash and accounts with central banks | 3,907,432 | 3,500,132 |
| Interbank demand deposits and overnight loans (assets) | 987,911 | 779,584 |
| Other cash equivalents | 75,000 | 103,001 |
| Interbank demand deposits and overnight loans (liabilities) and due to central banks | (108,022) | (60,737) |
| TOTAL | 4,862,321 | 4,321,980 |
Cash includes cash on hand and demand deposits placed with banks. Other cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of value change. These comprise overnight interbank reverse repos and public bills which are held for trading.
Commitments given
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Given to banks | 1,500 | – |
| Given to customers | 103,368 | 83,588 |
| Loan commitments | 104,868 | 83,588 |
| Given to banks | 18,922 | 21,384 |
| Given to customers | 267,995 | 76,657 |
| Guarantee commitments | 286,917 | 98,041 |
| Investment commitments | 261,400 | 183,754 |
| Irrevocable nominee commitments | 187,975 | 179,096 |
| Pledged assets and other commitments given | 28,268 | 106,244 |
| Other commitments given | 477,643 | 469,094 |
Investment commitments relate to Merchant Banking funds and investments. Irrevocable nominee commitments represent commitments to funds where the Group acts as a nominee on behalf of its clients.
The merger with CFMM contributed €196 million of loan and guarantee commitments given to customers.
The commitment to employees in respect of deferred remuneration is set out in note 28.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Received from banks | 136,169 | 135,000 |
| Loan commitments | 136,169 | 135,000 |
| Received from banks | 123,239 | – |
| Received from customers | 55,625 | 9,900 |
| Guarantee commitments | 178,864 | 9,900 |
The merger with CFMM contributed €172 million of commitments received.
| In thousands of euro | 31/03/17 Land and Other buildings |
31/03/16 | ||
|---|---|---|---|---|
| Land and buildings |
Other | |||
| Up to one year | 33,877 | 2,032 | 32,708 | 2,332 |
| Between one and five years | 117,186 | 2,264 | 111,904 | 4,284 |
| Over five years | 136,261 | 3 | 132,015 | – |
| TOTAL | 287,324 | 4,299 | 276,627 | 6,616 |
The operating lease commitments above mainly relate to leases of rented offices around the world.
The planned merger between R&Co and CFMM was announced in June 2016. On 2 January 2017 the transaction completed when CFMM was merged into R&Co. This merger combined our French private banking and asset management activities with those of CFMM to strengthen our Wealth & Asset Management business.
R&Co has acquired 100% of the shares in CFMM in return for cash consideration of €88.3 million and 6,107,976 R&Co shares. For accounting purposes, R&Co has been determined in accordance with IFRS as the accounting acquirer and the acquisition method has been applied. The identifiable assets and liabilities of CFMM group have been fair valued as at the effective date of the merger, and are shown below.
| In thousands of euro | 02/01/17 |
|---|---|
| Cash and amounts due from central banks | 334,438 |
| Financial assets at fair value through profit or loss | 1,523 |
| Available-for-sale financial assets | 737,970 |
| Loans and advances to banks | 187,339 |
| Loans and advances to customers | 1,240,712 |
| Current tax assets | 1,922 |
| Deferred tax assets | 4,694 |
| Other assets | 35,975 |
| Investments accounted for by the equity method | 3,020 |
| Tangible fixed assets | 76,899 |
| Intangible fixed assets | 10,583 |
| Total assets | 2,635,075 |
| Financial liabilities at fair value through profit or loss | 201 |
| Hedging derivatives | 9,738 |
| Due to banks and other financial institutions | 67,320 |
| Customer deposits | 2,167,584 |
| Debt securities in issue | 11,399 |
| Deferred tax liabilities | 24,933 |
| Other liabilities, accruals and deferred income | 76,331 |
| Provisions | 7,571 |
| Total liabilities | 2,365,077 |
| Non-controlling interest | 16,007 |
| Fair value of net assets acquired | 253,991 |
| Calculation of goodwill | |
| Consideration transferred on acquisition of CFMM | 260,860 |
| Fair value of net assets acquired | 253,991 |
| Goodwill | 6,869 |
The goodwill arising from this transaction amounts to €6.9 million. The goodwill is attributable to the synergies that are expected from the two businesses coming together, as well as the quality of the merged teams. None of this goodwill is deductible for income tax purposes.
The gross amounts of loans to customers to be collected by the CFMM group at the point of the merger was €1,264 million. The contractual cash flows not expected to be collected were €31.1 million and the loans had a fair value of €7.9 million higher than their carrying value in CFMM group. The fair value of the receivables for CFMM group, therefore, was €1,241 million.
Included in the liabilities assumed following the merger with CFMM are contingent liabilities of €0.9 million.
The consideration calculated on the effective date of the merger amounted to €260.9 million, as detailed in the schedule below:
| 6,107,976 |
|---|
| 25.73 |
| 157,158 |
| 88,302 |
| 245,460 |
| 5,700 |
| 9,700 |
| 260,860 |
Prior to the merger, the Group had an interest of 2.27% in CFMM (€3.0 million). As a result of the merger, this interest was treated as if it had been sold and repurchased, generating a gain in the income statement of €2.7 million. This has been recorded in 'net income/(expense) from other assets'.
The pro forma information included below, which presents a pro forma condensed consolidated income statement, reflects the merger of R&Co and CFMM as if the merger had occurred on 1 April 2016. The purpose of the pro forma information is to allow readers to compare more easily the current year's results with those to be published for the next financial period. It reflects a hypothetical situation and has been prepared for illustrative purposes only. It does not reflect the Group's actual financial results, nor any forecast of future results.
The pro forma information has been derived from:
The pro forma information disclosed has been prepared in line with the Group's accounting policies. In addition, the following assumptions have been made:
| In thousands of euro | R&Co published summary income statement for the year ended 31 March 2017 |
Pro forma CFMM summary income statement for the period 1 April 2016–2 January 2017 |
Other restatements |
R&Co pro forma summary income statement as at 31 March 2017 |
|---|---|---|---|---|
| Net banking income | 1,767,131 | 80,531 | (1,327) | 1,846,335 |
| Staff costs | (1,016,576) | (37,832) | – | (1,054,408) |
| Administrative expenses | (278,512) | (16,407) | – | (294,919) |
| Depreciation and amortisation | (32,116) | (2,350) | (98) | (34,564) |
| Cost of risk | (11,265) | (735) | – | (12,000) |
| Operating Income | 428,662 | 23,207 | (1,425) | 450,444 |
| Other income/(expense) (net) | 8,078 | 442 | – | 8,520 |
| Profit before tax | 436,740 | 23,649 | (1,425) | 458,964 |
| Income tax expense | (70,391) | (7,137) | 491 | (77,037) |
| Consolidated net income | 366,349 | 16,512 | (934) | 381,927 |
| Non-controlling interests | 180,391 | 1,322 | – | 181,713 |
| Net income – Group share | 185,958 | 15,190 | (934) | 200,214 |
Certain non-recurring items have been adjusted from the pro forma figures above, in order to show an underlying result that is easier to compare to the next accounting period.
| In millions of euro | Profit before tax |
Net income – Group share |
|---|---|---|
| 31/03/17 | 31/03/17 | |
| Pro forma result | 459.0 | 200.2 |
| Less adjustments: | ||
| Revaluation of previously held interest in CFMM | 2.7 | 2.7 |
| Integration costs charged to income statement | (11.1) | (11.1) |
| Tax impact of one-offs | n/a | 3.7 |
| Non-controlling interest | n/a | 0.0 |
| Total adjustments | (8.4) | (4.7) |
| Total | 467.4 | 204.9 |
Following the merger, CFMM group companies contributed net banking income and net income – Group share of €24.8 million and €4.4 million respectively for the period from 2 January 2017 to 31 March 2017.
For the current year, integration costs of approximately €11.1 million have been recognised in 'administrative expense' (note 28). The transaction costs for the share issuance and share exchange, net of tax, are recorded in share premium, amounting to €3.5 million.
Interest income
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Interest income – loans to banks | 6,191 | 8,118 |
| Interest income – loans to customers | 36,868 | 47,283 |
| Interest income – available-for-sale instruments | 5,945 | 5,716 |
| Interest income – derivatives | 42,949 | 34,174 |
| Interest income – other financial assets | 2,322 | 1,977 |
| TOTAL | 94,275 | 97,268 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Interest expense – due to banks and other financial institutions | (8,613) | (10,208) |
| Negative interest income from loans to banks | (24,172) | (19,536) |
| Interest expense – due to customers | (7,095) | (15,765) |
| Interest expense – debt securities in issue | (350) | (216) |
| Interest expense – derivatives | (1,745) | (1,882) |
| Interest expense – other financial liabilities | (3,201) | (537) |
| TOTAL | (45,176) | (48,144) |
Fee and commission income
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Fees for advisory work and other services | 1,205,587 | 1,060,420 |
| Portfolio and other management fees | 409,580 | 400,434 |
| Banking and credit-related fees and commissions | 3,973 | 2,264 |
| Other fees | 14,492 | 11,707 |
| TOTAL | 1,633,632 | 1,474,825 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Fees for advisory work and other services | (11,270) | (8,699) |
| Portfolio and other management fees | (38,548) | (37,531) |
| Banking and credit-related fees and commissions | (353) | (75) |
| Other fees | (8,190) | (6,434) |
| TOTAL | (58,361) | (52,739) |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Net income – financial instruments designated at fair value through profit or loss | 36,954 | 34,484 |
| Net income – carried interest | 32,912 | 2,600 |
| Net income – foreign exchange operations | 28,266 | 28,015 |
| Net income – equity securities and related derivatives held for trading | (73) | 1,023 |
| Net income – other trading operations | 278 | (7,807) |
| TOTAL | 98,337 | 58,315 |
Net gains and losses on financial instruments at fair value through profit or loss include the changes in fair value of financial instruments designated at fair value through profit or loss by option, and financial instruments held in the trading portfolio, including derivatives.
Financial instruments designated at fair value through profit or loss by option include both ordinary equity and carried interest shares held by the Group in its Merchant Banking funds. It also includes loans made to its Merchant Banking funds.
In April 2015, the Group repaid a floating rate loan which had a swap attached to it to fix the interest rate. This swap, which was accounted for as a cash flow hedge, had a negative mark-to-market value of €7.9 million at the time of closure, which has been recycled in the line 'Net income – other trading operations'. The loan, which was refinanced on more favourable terms, relates to our London office property.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Gains or losses on disposal | 35,702 | 49,798 |
| Impairment losses on AFS equities | (634) | (3,095) |
| Dividend income | 3,271 | 4,377 |
| TOTAL | 38,339 | 51,080 |
Dividend income from the Group's interest in EdRS is included as dividend income within 'net income/(expense) from other assets' (note 31).
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Income from leasing | – | 9,821 |
| Other income | 6,720 | 3,285 |
| TOTAL OTHER OPERATING INCOME | 6,720 | 13,106 |
| Expenses relating to assets used to generate lease income | – | (4,522) |
| Other expenses | (635) | (276) |
| TOTAL OTHER OPERATING EXPENSES | (635) | (4,798) |
During the year, 'other income' benefited from a reduction of €3.6 million in a performance-based liability, which is explained further in note 29.
Other operating income and expenses at 31 March 2016 included leasing income from FALG, the Group's asset leasing business. FALG was sold on 3 November 2015.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Compensation and other staff costs | (984,318) | (928,321) |
| Defined benefit pension expenses (note 19) | (20,397) | (13,147) |
| Defined contribution pension expenses | (11,861) | (12,041) |
| Staff costs | (1,016,576) | (953,509) |
| Administrative expenses | (278,512) | (267,297) |
| TOTAL | (1,295,088) | (1,220,806) |
As part of its variable pay strategy, the Group pays bonuses to employees. In some cases, the cash payment is deferred to future years.
Deferred cash awards are paid one, two and three years after the year of the award, and the expense is recognised over the two, three and four-year periods from the start of the year of the award to the date of payment. These awards are paid on the condition that the recipient is still an employee of the Group. For certain employees, a portion of the deferred bonus will be settled in the form of R&Co shares rather than cash, in response to the Capital Requirements Directive 4 (CRD4). The R&Co shares are released to the employees six months after the vesting date of the award.
A commitment to employees exists in connection with this deferred remuneration. Some of this has not yet accrued because it relates to a future service period. The amount of potential future payments that have not yet accrued is €95.5 million (€85.7 million as at 31 March 2016).
The objective of the deferred share-based payment awards is to link the reward of certain key staff with the performance of the Group. In addition to the requirement to remain employed by the Group, these awards may also be cancelled under specific circumstances.
R&Co also operates an Equity Scheme for some of its senior staff. Equity Scheme participants are required to invest in R&Co shares and for each share owned they are granted four share options. The shares are subject to a four-year lock-up period and the share options granted are subject to a vesting period before exercise.
Movements in the number of share options outstanding are as follows:
| 31/03/17 | 31/03/16 | |||||
|---|---|---|---|---|---|---|
| Number 000s |
Weighted average exercise price, € |
Number 000s |
Weighted average exercise price, € |
|||
| As at 1 April | 3,580 | 19.4 | 3,120 | 18.6 | ||
| Issued | – | – | 460 | 24.7 | ||
| Exercised | (55) | 17.5 | – | – | ||
| AS AT 31 MARCH | 3,525 | 19.4 | 3,580 | 19.4 | ||
| Exercisable at the end of the year | 725 | 17.5 | – | – |
Share options outstanding at 31 March were as follows:
| Exercise price € | 31/03/17 | 31/03/16 | ||
|---|---|---|---|---|
| Number of outstanding options, 000s |
Weighted average contractual life (years) |
Number of outstanding options, 000s |
Weighted average contractual life (years) |
|
| €17.50–€18.00 | 1,505 | 6.5 | 1,560 | 7.5 |
| €18.01–€20.00 | 1,560 | 6.5 | 1,560 | 7.5 |
| €20.01–€22.00 | – | – | – | – |
| €22.01–€24.00 | 115 | 8.5 | 115 | 9.5 |
| Over €24.00 | 345 | 8.5 | 345 | 9.5 |
| 3,525 | 6.8 | 3,580 | 7.8 |
The fair value of the share options awarded in the year was €nil (31 March 2016: €0.9 million). Fair values are charged to the income statement over the period of employee service required under the vesting conditions. As the options are equity-settled, there is no liability booked in the balance sheet in respect of these options, and there is no periodic charge or credit in the income statement as the options change in value.
On issuance, options are valued by an independent valuer using a Black-Scholes option valuation model. The key inputs into this model are the price of the underlying R&Co shares, the expected volatility of the share price (for which the historic volatility has been the primary consideration), and the estimated exercise date of the options (which is assumed to be the mid-point between the dates of vesting and expiry). The valuation is based on the assumption that all recipients will remain with the Group.
The charge arising in the year that relates to share-based payments is included in the line 'Compensation and other staff costs', and amounts to €0.9 million (2016: €1.0 million).
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Depreciation of tangible assets | (22,992) | (27,075) |
| Amortisation of intangible assets | (5,573) | (9,694) |
| Impairment of intangible assets | (3,551) | – |
| TOTAL | (32,116) | (36,769) |
During the year, the value of certain software used in one of our businesses was reassessed and its value was written down by €3.6 million. The deferred terms of payment for this software were performance-based, and the amount accrued as payable has also been reduced by €3.6 million. The benefit of the reduced payment is booked in 'other operating income' (note 27).
| In thousands of euro | Impairment | Impairment reversal |
Recovered loans |
31/03/17 | 31/03/16 |
|---|---|---|---|---|---|
| Loans and receivables | (17,235) | 13,913 | 833 | (2,489) | (4,905) |
| Debt securities | (560) | 11 | 6 | (543) | (2,467) |
| Guarantee commitments given to customer | (755) | 430 | – | (325) | – |
| Other assets | (9,478) | 1,570 | – | (7,908) | (4,567) |
| TOTAL | (28,028) | 15,924 | 839 | (11,265) | (11,939) |
| TOTAL | 6,273 | 102,638 |
|---|---|---|
| Gains on acquisition, disposal and impairment of subsidiaries and associates | 2,678 | 98,031 |
| Gains/(losses) on sales of tangible or intangible assets | (183) | 45 |
| Dividend from long-standing shareholding | 3,778 | 4,562 |
| In thousands of euro | 31/03/17 | 31/03/16 |
The prior year includes a profit of €98.7 million from the sale of FALG, the UK asset finance subsidiary.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Current tax | (63,843) | (61,049) |
| Deferred tax | (6,548) | (4,030) |
| TOTAL | (70,391) | (65,079) |
The net tax charge can be analysed between a current tax charge and a deferred tax charge as follows:
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Tax charge for the year | (59,157) | (52,471) |
| Adjustments related to prior years | 2,698 | (974) |
| Irrecoverable dividend-related tax | (6,457) | (7,133) |
| Other | (927) | (471) |
| TOTAL | (63,843) | (61,049) |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Temporary differences | (8,457) | (5,926) |
| Changes in tax rates | 1,435 | (154) |
| Adjustments related to prior years | 474 | 2,050 |
| TOTAL | (6,548) | (4,030) |
Reconciliation of the tax charge between the French standard tax rate and the effective rate
| In thousands of euro | 31/03/17 | 31/03/16 | ||
|---|---|---|---|---|
| Profit before tax | 436,740 | 422,304 | ||
| Expected tax charge at standard French rate | 34.4% | 150,370 | 34.4% | 145,399 |
| Main reconciling items | ||||
| Sale of FALG with nil tax charge | – | – | (8.0%) | (33,999) |
| Partnership tax recognised outside the Group | (10.8%) | (46,941) | (7.1%) | (30,536) |
| Profits and losses in lower tax areas | (8.6%) | (37,441) | (5.8%) | (24,404) |
| Tax impacts relating to prior years | (0.7%) | (3,172) | (0.3%) | (1,076) |
| (Gains)/losses where no deferred tax recognised | +0.2% | 1,004 | +0.0% | 166 |
| Deferred tax rate change | (0.3%) | (1,435) | +0.1% | 556 |
| Local permanent differences | +0.3% | 1,147 | +0.2% | 883 |
| Irrecoverable dividend-related taxes | +1.5% | 6,469 | +1.7% | 7,133 |
| Other | +0.1% | 390 | +0.2% | 957 |
| Actual tax charge | 16.1% | 70,391 | 15.4% | 65,079 |
| EFFECTIVE TAX RATE | 16.1% | 15.4% |
The term 'Executive Directors', in the context of this note and the Group governance arrangements surrounding the decision-making process at R&Co level, refers to executive corporate officers (mandataires sociaux) of R&Co Gestion, the Managing Partner of R&Co. In accordance with the provisions of the R&Co Gestion's articles of association, its chairman is the sole executive corporate officer. The following remuneration was received by the executive corporate officer in 2016/2017, paid by R&Co Gestion but reimbursed by R&Co in accordance with the provisions of the R&Co's articles of association related to R&Co Gestion's operating expenses.
| In thousands of euro | 31/03/17 |
|---|---|
| Fixed remuneration | 500 |
| TOTAL | 500 |
The chairman of R&Co Gestion did not benefit from payments in shares in respect of 2016/2017 and no severance benefits were provided for termination of work contracts. No other long-term benefits were granted.
The transactions during the year and balances at the end of the year between Group companies which are fully consolidated are eliminated on consolidation. Transactions and balances with companies accounted for by the equity method are shown separately in the table below.
Other related parties are: the members of the Supervisory Board; people with active control of the Group; people with active control in the parent company of R&Co as Rothschild Concordia SAS directors; companies that are controlled by the principal officers; and any person directly or indirectly responsible for management or control of the activities of R&Co. They also include close family members of any person who controls, exercises joint control or significant influence on R&Co, and persons related to Executive Directors and members of the Supervisory Board or to board members of its parent company.
During the year the Group purchased, from a related party being a member of the concert party, a 13.07% interest in Rothschild Holding AG. The purchase price of CHF64 million (€60 million), which was settled in cash, was determined using an independent third party valuation. This purchase continues the Group's policy of reducing non-controlling interests in subsidiaries. At the same time, the same related party received a cash settlement of an amount due, disclosed in the table below in the prior year within 'due to customers', in respect of a similar share purchase transaction undertaken in a prior year. As the amount settled was CHF16 million (€15 million) lower than the carrying value of the liability, the resulting gain for the Group has been treated as a capital contribution from a shareholder and taken directly to equity. This accounting treatment is shown in the consolidated statement of changes in equity as 'other movements'.
| 31/03/17 | 31/03/16 | |||||
|---|---|---|---|---|---|---|
| In thousands of euro | Companies accounted for by the equity method |
Executive Directors |
Other related parties |
Companies accounted for by the equity method |
Executive Directors |
Other related parties |
| Assets | ||||||
| Loans and advances to customers | 4,700 | 1,293 | 9,225 | – | 877 | 7,796 |
| Equity instruments | – | – | – | – | – | 2,999 |
| Other assets | 93 | – | – | – | – | 3 |
| TOTAL ASSETS | 4,793 | 1,293 | 9,225 | – | 877 | 10,798 |
| Liabilities | ||||||
| Due to customers | 62 | 8,240 | 162,555 | 75 | 5,817 | 91,476 |
| Other liabilities | – | 305 | 1,634 | – | – | 489 |
| TOTAL LIABILITIES | 62 | 8,545 | 164,189 | 75 | 5,817 | 91,965 |
| Loan and guarantee commitments | ||||||
| Guarantees and commitments given | – | 1,114 | 59 | – | 1,545 | 73 |
| TOTAL COMMITMENTS | – | 1,114 | 59 | – | 1,545 | 73 |
| Income and expenses from transactions with related parties | ||||||
| Interest received | – | 7 | 503 | – | – | 10 |
| Interest paid | – | – | – | – | – | (332) |
| Commissions received | – | – | – | 164 | – | – |
| Other income | 1,277 | – | – | 1,827 | – | 3,531 |
| TOTAL INCOME | 1,277 | 7 | 503 | 1,991 | – | 3,209 |
| Other expenses | (744) | – | (3,105) | (911) | – | (3,000) |
| TOTAL EXPENSES | (744) | – | (3,105) | (911) | – | (3,000) |
| KPMG Audit | Cailliau Dedouit et Associés | |||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of euro | 31/03/17 | 31/03/16 | 31/03/17 | 31/03/16 | ||||
| % | % | % | % | |||||
| AUDIT | ||||||||
| Fees related to statutory audit, certification and examination of individual and consolidated accounts: | ||||||||
| R&Co (parent company) | 186 | 6% | 174 | 5% | 186 | 51% | 174 | 45% |
| Subsidiaries | 2,346 | 71% | 2,474 | 69% | 157 | 43% | 174 | 45% |
| Fees related to audit services and related assignments(1): | ||||||||
| R&Co (parent company) | 119 | 4% | 22 | 1% | – | – | 13 | 3% |
| Subsidiaries | 309 | 9% | 612 | 17% | 23 | 6% | 30 | 8% |
| Subtotal | 2,960 | 89% | 3,282 | 91% | 366 | 100% | 391 | 100% |
| OTHER SERVICES PROVIDED BY THE NETWORKS TO SUBSIDIARIES: | ||||||||
| Law, tax and social | 293 | 9% | 289 | 8% | – | – | – | – |
| Other | 74 | 2% | 23 | 1% | – | – | – | – |
| Subtotal | 367 | 11% | 312 | 9% | – | – | – | – |
| TOTAL | 3,327 | 100% | 3,594 | 100% | 366 | 100% | 391 | 100% |
(1) In order to maintain comparability between the two accounting periods, this table displays the fees according to the requirements existing before the implementation of the European regulation on audit reform on 17 June 2016. This regulation renders obsolete the distinction between 'Fees related to audit services and related assignments' and 'Other services provided by the networks to subsidiaries'.
The table below presents a segmental analysis by business line, which is used internally for assessing business performance and then adjusted to conform to the Group's statutory accounting policies. IFRS reconciliation mainly reflects: the treatment of profit share paid to French partners as non-controlling interests; accounting for deferred bonuses over the period that they are earned; the application of IAS 19 for defined benefit pension schemes; and reallocation of impairments and certain operating expenses.
| In thousands of euro | Global Advisory | Asset Management(1) |
Other business and corporate centre |
Total before IFRS reconciliation |
IFRS reconciliation |
31/03/17 |
|---|---|---|---|---|---|---|
| Net banking income | 1,189,503 | 545,729 | 28,936 | 1,764,168 | 2,963 | 1,767,131 |
| Operating expenses | (986,615) | (442,317) | (64,420) | (1,493,352) | 166,148 | (1,327,204) |
| Cost of risk | – | – | – | – | (11,265) | (11,265) |
| Operating income | 202,888 | 103,412 | (35,484) | 270,816 | 157,846 | 428,662 |
| Share of profits of associated entities | – | – | – | – | – | 424 |
| Non-operating income | – | – | – | – | – | 7,654 |
| Profit before tax | – | – | – | – | – | 436,740 |
(1) Asset Management comprises Private Wealth, Asset Management and Merchant Banking.
| In thousands of euro | Global Advisory | Asset Management(1) |
Other business and corporate centre |
Total before IFRS reconciliation |
IFRS reconciliation |
31/03/16 |
|---|---|---|---|---|---|---|
| Net banking income | 1,040,383 | 485,843 | 54,556 | 1,580,782 | 8,131 | 1,588,913 |
| Operating expenses | (873,031) | (404,250) | (101,379) | (1,378,660) | 121,085 | (1,257,575) |
| Cost of risk | – | – | – | – | (11,939) | (11,939) |
| Operating income | 167,352 | 81,593 | (46,823) | 202,122 | 117,277 | 319,399 |
| Share of profits of associated entities | – | – | – | – | – | 267 |
| Non-operating income | – | – | – | – | – | 102,638 |
| Profit before tax | – | – | – | – | – | 422,304 |
(1) Asset Management comprises Private Wealth, Asset Management and Merchant Banking.
Comparative figures have been restated to take into account minor changes in the presentation of the management accounts. The results by business have not changed.
As explained in note 25, the closure of an interest rate swap in the year ended 31 March 2016 resulted in a negative mark-to-market cost of €7.9 million. This cost is shown in the 'other business' segment as an expense, and then reclassified as an IFRS reconciling item to net banking income.
| In thousands of euro | 31/03/17 | % | 31/03/16 | % |
|---|---|---|---|---|
| United Kingdom and Channel Islands | 516,530 | 29% | 560,082 | 35% |
| France | 507,632 | 29% | 414,677 | 26% |
| Americas | 280,013 | 16% | 236,577 | 15% |
| Rest of Europe | 250,009 | 14% | 180,725 | 11% |
| Switzerland | 121,440 | 7% | 117,057 | 7% |
| Australia and Asia | 65,215 | 4% | 57,324 | 4% |
| Other | 26,292 | 1% | 22,471 | 2% |
| TOTAL | 1,767,131 | 100% | 1,588,913 | 100% |
The breakdown by geographic segment is based on the geographic location of the entity that records the income.
| In millions of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Net income – Group share | 186.0 | 231.9 |
| preferred dividends adjustment | (0.7) | (0.7) |
| Net income – Group share after preferred dividends adjustment | 185.3 | 231.2 |
| Basic average number of shares in issue – 000s | 70,181 | 68,586 |
| Earnings per share – basic (euro) | 2.64 | 3.37 |
| Diluted average number of shares in issue – 000s | 71,145 | 69,646 |
| Earnings per share – diluted (euro) | 2.60 | 3.32 |
Basic earnings per share are calculated by dividing Net income – Group share (after removing accrued preferred dividends, which are not part of the profit earned by ordinary shareholders) by the weighted average number of ordinary shares in issue during the period.
Diluted earnings per share are calculated using the treasury share method, whereby net income is divided by the weighted average number of ordinary shares outstanding plus the bonus number of ordinary shares that would be issued through dilutive option or share awards. Share options and awards which are dilutive are those which are in the money, based on the average share price during the period. The majority of potential ordinary shares which are not dilutive are connected to the R&Co Equity Scheme, which is described in note 28.
As there were no gains or losses on discontinued activities, the earnings per share on continuing activities are the same as earnings per share.
Article 7 of Law No. 2013-672 of 26 July 2013, amending Article L.511-45 of the French Monetary and Financial Code, requires credit institutions to publish information on their locations and activities in each country or territory.
The following table shows the material subsidiaries and associates which are included in the Group consolidated accounts, and the territory in which they are domiciled. The list below does not include dormant or nominee companies, on account of their immateriality.
The activities shown below are defined in note 35.
| Company name | Activity | 31/03/17 | 31/03/16 | Consolidation method(1) |
|||
|---|---|---|---|---|---|---|---|
| % Group voting interest |
% Group ownership interest |
% Group voting interest |
% Group ownership interest |
31/03/17 | 31/03/16 | ||
| Australia | |||||||
| Arrow Capital Pty Limited | Other | – | – | 100.00 | 98.53 | – | FC |
| Rothschild Australia Limited | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Belgium | |||||||
| Rothschild Belgique – Rothschild & Compagnie Banque SCS branch |
Asset Management | 100.00 | 99.63 | 100.00 | 99.30 | FC | FC |
| Rothschild Belgium SA | Global Advisory | 100.00 | 99.98 | – | – | FC | – |
| Transaction R Belgique – Transaction R SCS branch |
Global Advisory | 100.00 | 99.34 | 99.73 | 99.00 | FC | FC |
| Bermuda | |||||||
| Rothschild Trust (Bermuda) Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Brazil | |||||||
| N M Rothschild & Sons (Brasil) Limitada | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| British Virgin Islands | |||||||
| Five Arrows Capital Limited | Other | – | – | 100.00 | 98.53 | – | FC |
| Master Nominees Inc. | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Canada | |||||||
| Rothschild (Canada) Holdings Inc. | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild (Canada) Inc. | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild (Canada) Securities Inc. | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Trust Canada Inc. | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Trust Protectors Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Cayman Islands | |||||||
| JRE Asia Capital Management Ltd | Other | 50.00 | 49.80 | 50.00 | 49.61 | EM | EM |
| Rothschild Trust Cayman Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| China | |||||||
| Rothschild Asset Management Inc – Beijing representative office |
Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild China Holding AG – Beijing representative office |
Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Financial Advisory Services (Beijing) Co. Ltd |
Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Financial Advisory Services (Beijing) Co. Ltd – Shanghai branch |
Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Financial Advisory Services (Tianjin) Co. Ltd. |
Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Company name Activity |
31/03/17 | 31/03/16 | Consolidation method(1) |
||||
|---|---|---|---|---|---|---|---|
| % Group voting interest |
% Group ownership interest |
% Group voting interest |
% Group ownership interest |
31/03/17 | 31/03/16 | ||
| Curaçao | |||||||
| N M Rothschild & Sons (Asia) NV | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| NMR International NV | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Latin America NV | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Denmark | |||||||
| N M Rothschild & Sons – Danish Branch | Global Advisory | 100.00 | 99.22 | – | – | FC | – |
| France | |||||||
| Aida SAS | Other | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Aix-Rabelais | Other | 100.00 | 99.63 | 100.00 | 99.30 | FC | FC |
| Albinoni SAS | Other | 100.00 | 99.63 | – | – | FC | – |
| Banque Martin Maurel SA | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Bastia Rabelais | Asset Management | 99.99 | 99.63 | 99.99 | 99.30 | FC | FC |
| BBR Rogier SA | Asset Management | 99.99 | 99.96 | – | – | FC | – |
| Cavour SAS | Other | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Compagnie Meridionale Financère Immobilière SA Asset Management | 99.76 | 99.72 | – | – | FC | – | |
| Concordia Holding SARL | Other | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Courtage Etoile SNC | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Financière Rabelais SAS | Other | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Five Arrows Managers SAS | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
| Funds Selection SA | Asset Management | 20.00 | 20.00 | – | – | EM | – |
| GIE Rothschild & Cie | Other | 100.00 | 99.63 | 100.00 | 99.30 | FC | FC |
| Grignan Participations SAS | Asset Management | 100.00 | 99.98 | – | – | FC | – |
| Hoche Gestion Privée SA | Asset Management | 34.69 | 34.67 | – | – | EM | – |
| Hoche Paris SAS | Asset Management | 99.70 | 99.66 | – | – | FC | – |
| Immobilière Saint-Albin SAS | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| International Capital Gestion SA | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| K Développement SAS | Asset Management | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Martin Maurel Gestion SA | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Messine Manager Investissement SAS | Other | – | – | 100.00 | 99.95 | – | FC |
| Messine Participations SAS | Other | 100.00 | 99.54 | 100.00 | 99.22 | FC | FC |
| Monceau Rabelais SAS | Other | 100.00 | 99.62 | 100.00 | 99.29 | FC | FC |
| Montaigne Rabelais SAS | Other | 100.00 | 99.63 | 100.00 | 99.30 | FC | FC |
| Optigestion Courtage SARL | Other | 32.17 | 32.16 | – | – | EM | – |
| Optigestion SA | Asset Management | 33.86 | 33.85 | – | – | EM | – |
| Paris Orléans Holding Bancaire SAS | Other | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| PO Capinvest 1 SAS | Asset Management | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| PO Fonds SAS | Asset Management | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| PO Mezzanine SAS | Asset Management | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Puccini SAS | Other | 100.00 | 99.63 | – | – | FC | – |
| Réponse Invest | Other | 39.00 | 38.99 | – | – | EM | – |
| Rothschild & Cie SCS(2) | Global Advisory | 99.98 | 99.61 | 99.98 | 99.28 | FC | FC |
| Rothschild & Co SCA | Asset Management | 100.00 | 99.98 | 100.00 | 99.95 | Parent company |
Parent company |
(1) FC: full consolidation.
EM: equity method.
(2) Some subsidiaries are limited partnerships (sociétés en commandite simple). The percentage interest recorded in the consolidated accounts is calculated in accordance with the statutory regulations applicable to limited partnerships based on the individual results of each partnership, after taking into consideration the share attributable to workers' remuneration.
| Company name | Activity | 31/03/17 | 31/03/16 | Consolidation method(1) |
|||
|---|---|---|---|---|---|---|---|
| % Group voting interest |
% Group ownership interest |
% Group voting interest |
% Group ownership interest |
31/03/17 | 31/03/16 | ||
| Rothschild & Compagnie Banque SCS(2) | Asset Management and Other |
99.99 | 99.63 | 99.99 | 99.30 | FC | FC |
| Rothschild & Compagnie Gestion SCS(2) | Asset Management | 99.99 | 99.62 | 99.99 | 99.29 | FC | FC |
| Rothschild Assurance & Courtage SCS | Asset Management | 99.83 | 99.45 | 99.83 | 99.12 | FC | FC |
| Rothschild Europe SNC (French partnership) | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Rothschild HDF Investment Solutions SAS | Asset Management | 100.00 | 95.59 | 100.00 | 95.28 | FC | FC |
| RTI Partenaires SCS | Global Advisory | 100.00 | 98.41 | – | – | FC | – |
| SCI du 20 Rue Grignan | Asset Management | 99.99 | 99.95 | – | – | FC | – |
| SCI du 6 Rue De La Bourse | Asset Management | 99.99 | 99.96 | – | – | FC | – |
| SCI Prado Marveyre | Asset Management | 99.99 | 99.96 | – | – | FC | – |
| SCS Holding SAS | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Sélection 1818 SA | Asset Management | – | – | 25.00 | 24.80 | – | EM |
| Stravinski SCS | Other | 100.00 | 99.63 | – | – | FC | – |
| Transaction R SCS(2) | Global Advisory | 99.79 | 99.34 | 99.81 | 99.01 | FC | FC |
| TRR Partenaires | Global Advisory | 50.00 | 49.71 | 50.00 | 49.64 | FC | FC |
| Verdi SAS | Other | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Verseau SAS | Asset Management | 95.00 | 94.98 | 95.00 | 94.95 | FC | FC |
| Vivaldi SAS | Other | 100.00 | 99.63 | – | – | FC | – |
| Germany | |||||||
| Rothschild GmbH | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Rothschild Vermögensverwaltungs-GmbH | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Guernsey | |||||||
| Blackpoint Management Limited | Asset Management | 100.00 | 95.59 | 100.00 | 95.28 | FC | FC |
| Guernsey Global Trust Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Jofran Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Maison (CI) Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Asset Management Holdings (CI) Limited |
Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Bank (CI) Limited | Asset Management | – | – | 100.00 | 72.87 | – | FC |
| Rothschild Bank International Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Mexico (Guernsey) Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Switzerland (CI) Trustees Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Trust Canada Inc – Guernsey branch Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC | |
| Rothschild Trust Financial Services Limited | Other | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Trust Guernsey Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschilds Continuation Finance (CI) Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| S y C (International) Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Shield Holdings (Guernsey) Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Shield Securities Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| St. Julian's Properties Limited | Other | 50.00 | 49.61 | 50.00 | 49.27 | EM | EM |
| TM New Court Plan Trust | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
(1) FC: full consolidation.
EM: equity method. (2) Some subsidiaries are limited partnerships (sociétés en commandite simple). The percentage interest recorded in the consolidated accounts is calculated in accordance with the statutory regulations applicable to limited partnerships based on the individual results of each partnership, after taking into consideration the share attributable to workers' remuneration.
| Company name | Activity | 31/03/17 | 31/03/16 | Consolidation method(1) |
|||
|---|---|---|---|---|---|---|---|
| % Group voting interest |
% Group ownership interest |
% Group voting interest |
% Group ownership interest |
31/03/17 | 31/03/16 | ||
| Hong Kong | |||||||
| HongKong Win Go Fund Management Limited | Asset Management | 33.33 | 33.32 | 33.33 | 33.30 | EM | EM |
| JRE Asia Capital (Hong Kong) Ltd | Asset Management | 50.00 | 49.80 | 50.00 | 49.61 | EM | EM |
| RAIL Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild (Hong Kong) Limited | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Bank AG – Hong Kong representative office |
Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Wealth Management (Hong Kong) Limited |
Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| India | |||||||
| JRE Asia Capital Advisory Services (India) Private Limited |
Asset Management | 50.00 | 49.80 | 50.00 | 49.61 | EM | EM |
| Rothschild (India) Private Limited | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Indonesia | |||||||
| PT Rothschild Indonesia | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Israel | |||||||
| RCF (Israel) BV – Israel branch | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Italy | |||||||
| Rothschild & Cie Gestion – Milan branch | Asset Management | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Rothschild S.p.A. | Global Advisory | 100.00 | 99.42 | 100.00 | 98.91 | FC | FC |
| Rothschild Trust Italy Srl | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Wealth Management (UK) Limited – Milan branch |
Asset Management | 100.00 | 90.53 | 100.00 | 80.57 | FC | FC |
| Japan | |||||||
| Rothschild Japan Co., Ltd. | Global Advisory | 100.00 | 99.63 | – | – | FC | – |
| Jersey | |||||||
| FAC Carry LP | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Five Arrows Capital GP Limited | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Five Arrows Mezzanine Holder LP | Asset Management | 88.00 | 87.32 | 88.00 | 86.71 | FC | FC |
| Five Arrows Partners LP | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Five Arrows Proprietary Feeder LP | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Five Arrows Staff Co-investment LP | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Lanebridge (Arena Plaza) Jersey GP Limited | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Quintus European Mezzanine Fund Limited partnership |
Asset Management | – | – | 50.00 | 49.27 | – | EM |
| Luxembourg | |||||||
| Centrum Jonquille Sàrl | Asset Management | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Centrum Narcisse Sàrl | Asset Management | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| Elsinore I GP Sàrl | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Fin PO SA | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
| Five Arrows Co-Investments Feeder VSCA SICAR | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Five Arrows Co-Investments II Feeder SCSp | Asset Management | 91.59 | 91.56 | – | – | FC | – |
| Five Arrows Co-Investments II SCSp | Asset Management | 51.95 | 51.93 | – | – | FC | – |
| Five Arrows Credit Solutions C General Partner | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
| Five Arrows Credit Solutions General Partner | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
(1) FC: full consolidation.
| Company name | Activity | 31/03/17 31/03/16 |
Consolidation method(1) |
||||
|---|---|---|---|---|---|---|---|
| % Group voting interest |
% Group ownership interest |
% Group voting interest |
% Group ownership interest |
31/03/17 | 31/03/16 | ||
| Five Arrows Managers SA | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
| Five Arrows Mezzanine Investments Sàrl | Asset Management | 100.00 | 99.96 | 100.00 | 99.23 | FC | FC |
| Five Arrows Mircan Invest SCS | Asset Management | – | – | 100.00 | 99.40 | – | FC |
| Five Arrows Principal Investments II B SCSp | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
| Five Arrows Principal Investments International Feeder SCA SICAR |
Asset Management | 100.00 | 99.59 | 100.00 | 99.23 | FC | FC |
| HRA Investment SCSp | Asset Management | 90.87 | 90.84 | – | – | FC | – |
| Jardine Rothschild Asia Capital (Luxembourg) Sàrl |
Other | 50.00 | 49.80 | 50.00 | 49.61 | EM | EM |
| Messine Investissement SA | Asset Management | 100.00 | 99.98 | 100.00 | 99.22 | FC | FC |
| Mobilim International – Groupe Martin Maurel Sàrl |
Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Oberon GP Sàrl | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
| Oberon II GP Sàrl | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
| Oberon III GP Sàrl | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Parallel GP Sàrl | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| PO Co Invest GP Sàrl | Asset Management | 100.00 | 99.96 | 99.98 | 99.92 | FC | FC |
| PO Invest 2 SA SOPARFI | Asset Management | 93.85 | 93.83 | 93.85 | 93.80 | FC | FC |
| PO Participations SA | Asset Management | 100.00 | 99.96 | 99.98 | 99.92 | FC | FC |
| R Commodity Finance Fund General Partner | Asset Management | 100.00 | 95.59 | 100.00 | 95.28 | FC | FC |
| RPI Invest 2 SCS | Asset Management | 99.48 | 99.44 | – | – | FC | – |
| RPO GP Sàrl | Asset Management | 100.00 | 99.96 | 99.98 | 99.92 | FC | FC |
| RPO Invest 1 SCSp | Asset Management | 99.48 | 99.44 | 99.48 | 99.40 | FC | FC |
| Malaysia | |||||||
| Rothschild Malaysia Sendirian Berhad | Global Advisory | 70.00 | 99.22 | 70.00 | 98.53 | FC | FC |
| Mexico | |||||||
| Rothschild (Mexico) SA de CV | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Monaco | |||||||
| Banque Martin Maurel SA – Monaco branch | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Martin Maurel Sella – Banque Privée – SAM | Asset Management | 54.98 | 54.96 | – | – | FC | – |
| Martin Maurel Sella Gestion – SAM | Asset Management | 99.30 | 54.62 | – | – | FC | – |
| SCI VDP 2 | Asset Management | 100.00 | 55.22 | – | – | FC | – |
| SCPM VDP 1 | Asset Management | 71.00 | 55.22 | – | – | FC | – |
| Netherlands | |||||||
| Continuation Investments NV | Asset Management | 39.33 | 38.35 | 39.33 | 37.31 | EM | EM |
| RCF (Israel) BV | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| RCF (Russia) BV | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Rothschild Europe BV | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Rothschilds Continuation Finance BV | Other | 69.00 | 68.59 | 69.00 | 68.22 | FC | FC |
| New Zealand | |||||||
| Rothschild Trust New Zealand Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Poland |
(1) FC: full consolidation. EM: equity method.
| Company name | Activity | 31/03/17 31/03/16 |
Consolidation method(1) |
||||
|---|---|---|---|---|---|---|---|
| % Group voting interest |
% Group ownership interest |
% Group voting interest |
% Group ownership interest |
31/03/17 | 31/03/16 | ||
| Rothschild Polska Sp. z o.o. | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Portugal | |||||||
| Rothschild Portugal Limitada | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Qatar | |||||||
| Rothschild (Qatar) LLC | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Russia | |||||||
| RCF (Russia) BV – Moscow branch | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Singapore | |||||||
| Rothschild (Singapore) Limited | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Bank AG – Singapore representative office |
Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Trust (Singapore) Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Wealth Management (Singapore) Limited |
Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| South Africa | |||||||
| Rothschild (South Africa) Foundation | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild (South Africa) Proprietary Limited | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Southern Arrows Proprietary Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Spain | |||||||
| Rothschild S.A. | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Sweden | |||||||
| Rothschild Nordic AB | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC |
| Switzerland | |||||||
| Creafin AG | Other | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Equitas S.A. | Asset Management | 90.00 | 78.12 | 90.00 | 65.59 | FC | FC |
| ESOP Services AG | Other | – | – | 100.00 | 97.52 | – | FC |
| Five Arrows Capital AG | Asset Management | – | – | 100.00 | 98.53 | – | FC |
| RBZ Fiduciary Ltd. | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild & Cie Gestion – Zurich branch | Asset Management | 100.00 | 99.62 | 100.00 | 99.29 | FC | FC |
| Rothschild Asset Management Holdings AG | Other | – | – | 100.00 | 98.53 | – | FC |
| Rothschild Bank AG | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild China Holding AG | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Concordia AG | Other | 100.00 | 98.80 | 100.00 | 97.52 | FC | FC |
| Rothschild Holding AG | Other | 87.48 | 86.80 | 73.94 | 72.87 | FC | FC |
| Rothschild India Holding AG | Other | – | – | 100.00 | 98.53 | – | FC |
| Rothschild Private Trust Holdings AG | Other | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Trust (Switzerland) Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschild Trust Canada Inc – Swiss branch | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Rothschilds Continuation Holdings AG | Other | 99.87 | 99.22 | 99.87 | 98.53 | FC | FC |
| RTB Administrators AG | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| RTB Trustees AG | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| RTS Geneva SA | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| Turkey |
(1) FC: full consolidation.
| Company name | Activity | 31/03/17 | 31/03/16 | Consolidation method(1) |
|||||
|---|---|---|---|---|---|---|---|---|---|
| % Group voting interest |
% Group ownership interest |
% Group voting interest |
% Group ownership interest |
31/03/17 | 31/03/16 | ||||
| Rothschild – Kurumsal Finansman Hizetleri Limited Sirketi |
Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC | ||
| United Arab Emirates | |||||||||
| Rothschild (Middle East) Limited | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC | ||
| Rothschild Europe BV – Abu Dhabi representative office |
Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC | ||
| United Kingdom | |||||||||
| Continuation Computers Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Elgin Capital Services Limited | Other | – | – | 100.00 | 98.53 | – | FC | ||
| F.A. International Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Five Arrows (Scotland) General Partner Limited | Asset Management | 99.87 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Five Arrows Credit Solutions Co-Investments, L.P. Asset Management | 50.00 | 49.98 | – | – | EM | – | |||
| Five Arrows Finance Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Five Arrows Leasing Holdings Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Five Arrows Managers LLP | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| International Property Finance (Spain) Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Investor Perceptions Limited | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Lanebridge Holdings Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Lanebridge Investment Management Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Marplace (No 480) Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| N M Rothschild & Sons Limited | Global Advisory, Asset Management and Other |
100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| N M Rothschild Holdings Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| New Court Property Services | Other | – | – | 100.00 | 98.53 | – | FC | ||
| New Court Securities Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| NMR Europe (UK partnership) | Global Advisory | 100.00 | 99.41 | 100.00 | 98.91 | FC | FC | ||
| O C Investments Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Risk Based Investment Solutions Ltd | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Rothschild Australia Holdings Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Rothschild Credit Management Limited | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Rothschild Gold Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Rothschild HDF Investment Adviser Limited | Asset Management | 100.00 | 95.59 | 100.00 | 95.28 | FC | FC | ||
| Rothschild Holdings Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Rothschild Investments Limited | Other | – | – | 100.00 | 98.53 | – | FC | ||
| Rothschild Private Fund Management Limited | Asset Management | 100.00 | 90.53 | 100.00 | 80.57 | FC | FC | ||
| Rothschild Trust Corporation Limited | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC | ||
| Rothschild Wealth Management (UK) Limited | Asset Management | 100.00 | 90.53 | 100.00 | 80.57 | FC | FC | ||
| Rothschilds Continuation Finance Holdings Limited |
Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Rothschilds Continuation Finance PLC | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Rothschilds Continuation Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Scott Harris UK Limited | Global Advisory | 100.00 | 99.22 | – | – | FC | – | ||
| Second Continuation Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC | ||
| Shield MBCA Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
(1) FC: full consolidation.
| Company name | Activity | 31/03/17 | 31/03/16 | Consolidation method(1) |
|||
|---|---|---|---|---|---|---|---|
| % Group voting interest |
% Group ownership interest |
% Group voting interest |
% Group ownership interest |
31/03/17 | 31/03/16 | ||
| Shield Trust Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Third New Court Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Walbrook Assets Limited | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| United States of America | |||||||
| FACP General Partner LP | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| FACP GP-GP | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Five Arrows Friends & Family Feeder LP | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Five Arrows Managers (USA) LLC | Asset Management | 100.00 | 99.96 | – | – | FC | – |
| Five Arrows Managers North America LLC | Asset Management | 100.00 | 99.22 | – | – | FC | – |
| Francarep Inc | Asset Management | 100.00 | 99.98 | 100.00 | 99.95 | FC | FC |
| PO Elevation Rock Inc | Asset Management | 100.00 | 99.96 | 100.00 | 99.92 | FC | FC |
| PO Black LLC | Asset Management | 100.00 | 82.91 | 100.00 | 82.87 | FC | FC |
| Rothschild Asset Management (Canada) LLC | Asset Management | 100.00 | 99.22 | – | – | FC | – |
| Rothschild Asset Management Inc. | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Inc. | Global Advisory | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Larch Lane Management Company LLC |
Asset Management | – | – | 50.00 | 49.27 | – | EM |
| Rothschild North America Holdings Inc. | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild North America Inc. | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Realty Group Inc. | Other | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
| Rothschild Risk Based Investments LLC | Asset Management | 100.00 | 99.22 | – | – | FC | – |
| Rothschild Trust North America LLC | Asset Management | 100.00 | 86.80 | 100.00 | 72.87 | FC | FC |
| West Gate Horizon Advisors LLC | Asset Management | 100.00 | 99.22 | 100.00 | 98.53 | FC | FC |
(1) FC: full consolidation.
Pursuant to Article L511-45 II to V of the French Monetary and Financial code, referred to in note 37, the table below specifically provides information linked to net banking income, pre-tax profit, income tax and headcount as at 31 March 2017.
| Country/region of operation | Net banking income (in millions of euro) |
Profit before tax (in millions of euro) |
Current tax (in millions of euro) |
Deferred tax (in millions of euro) |
Headcount (full-time equivalent) |
|---|---|---|---|---|---|
| France | 508.5 | 205.4 | (29.6) | 3.1 | 1,166 |
| United Kingdom | 486.3 | 71.7 | (7.6) | (6.8) | 875 |
| North America | 242.2 | 15.6 | (6.5) | (0.7) | 282 |
| Other Europe | 186.5 | 50.5 | (15.3) | 0.3 | 354 |
| Switzerland | 121.5 | 4.9 | (1.0) | 0.4 | 363 |
| Asia-Pacific and Latin America | 103.3 | 5.8 | (1.0) | (3.4) | 235 |
| Luxembourg | 68.4 | 62.6 | (0.2) | 0.2 | 14 |
| Channel Islands | 31.0 | 13.7 | (0.9) | – | 71 |
| British Virgin Islands | 0.1 | 0.1 | – | – | – |
| Cayman Islands | 0.1 | 0.1 | – | – | – |
| Bermuda | – | (0.0) | – | – | – |
| Curaçao | (0.6) | (0.4) | (0.1) | – | – |
| Other | 26.7 | 6.7 | (1.6) | 0.4 | 50 |
| Total before intercompany elimination | 1,774.0 | 436.7 | (63.8) | (6.5) | 3,410 |
| Intercompany elimination | (6.9) | – | – | – | – |
| TOTAL | 1,767.1 | 436.7 | (63.8) | (6.5) | 3,410 |
Revenues and profits are measured before the elimination of intercompany fees and interest income and expense.
The Group has not received any public subsidies in the year.
For France, profit before tax is stated before amounts deducted as non-controlling interests, being profit share paid as preferred amounts to French partners who individually account for tax (see also note 32).
This is a free translation into English of the statutory auditors' report on the consolidated financial statements issued in French and it is provided solely for the convenience of English-speaking users.
The statutory auditors' report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the audit opinion on the consolidated financial statements and includes an explanatory paragraph discussing the auditors' assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions, or disclosures.
This report also includes information relating to the specific verification of information given in the Group's management report.
This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
In compliance with the assignment entrusted to us by your General Meeting, we hereby report to you, for the year ended 31 March 2017, on:
These consolidated financial statements have been approved by the Management. Our role is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at 31 March 2017 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
In accordance with the requirements of article L. 823-9 of the French Commercial Code ("Code de commerce") relating to the justification of our assessments, we bring to your attention the following matters:
• Your Group accounts for impairments in order to cover for credit risks inherent in its activities.
Our work consisted in assessing the appropriateness of the processes used by the management, in reviewing the control procedures implemented to identify and measure such exposures and their valuation, in examining data and available documentation used, in assessing the underlying assumptions and make sure appropriate disclosure is included in the notes to the financial statements, in particular in note 30.
• Your Group performs accounting estimates related to the assessment of the fair value of available-for-sale financial assets, intangible assets and goodwill.
Our work consisted in assessing the appropriateness of the processes used by the management, in reviewing, when applicable, independent valuation reports, in examining data and available documentation used, in assessing the underlying assumptions and make sure appropriate disclosure is included in the notes to the financial statements, in particular in notes 3, 9, 10 and 26.
• Your Group records some provisions to cover the risks and litigation generated by its activities (Note 14 of Part V).
We reviewed the methodology of determining these provisions as well as the main assumptions used.
• Your Group recognised deferred tax assets, some of which are relating to losses carried forward (Note 19 of Part III and Note 16 of Part V).
We examined the main estimates and assumptions that led to the recognition of these deferred taxes.
We also assessed whether these estimates were reasonable.
However, we point out that these estimates are based on forecasts that are therefore uncertain; realised outcomes could differ significantly from these forecasts.
These assessments were made as part of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report.
As required by law we have also verified, in accordance with professional standards applicable in France, the information related to the Group presented in the Management report.
We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.
Paris La Défense, 14 June 2017 Paris, 14 June 2017 KPMG S.A. CAILLIAU DEDOUIT ET ASSOCIÉS
Partner Partner
Pascal Brouard Jean-Jacques Dedouit
| In thousands of euro | 31/03/16 | ||||
|---|---|---|---|---|---|
| Gross value | Depreciation, amortisation and provisions |
Net carrying amount |
Net carrying amount |
||
| Non-current assets | |||||
| Intangible assets | |||||
| Concessions, patents, brand and software | 226 | 221 | 5 | 10 | |
| Total intangible assets | 226 | 221 | 5 | 10 | |
| Property, plant and equipment | 1 | ||||
| Land | 3,327 | – | 3,327 | – | |
| Buildings | 4,773 | 74 | 4 ,699 | – | |
| Other property, plant and equipment | 424 | 331 | 93 | 141 | |
| Total property, plant and equipment | 8,524 | 405 | 8,119 | 141 | |
| Non-current financial assets | |||||
| Investments in Group and other companies | 2 | 1,671,157 | 442 | 1,670,715 | 1,461,112 |
| Portfolio holdings | 3 | 37,063 | 7,313 | 29,750 | 18,199 |
| Receivables related to portfolio holdings | – | – | – | – | |
| Loans | 1 | – | 1 | 1 | |
| Other non-current financial assets | 6 | – | 6 | 6 | |
| Total non-current financial assets | 1,708,227 | 7,755 | 1,700,472 | 1,479,318 | |
| Total non-current assets | 1,716,977 | 8,381 | 1,708,596 | 1,479,469 | |
| Current assets | |||||
| Accounts receivable | 4 | 26,952 | – | 26,952 | 16,910 |
| Marketable securities | 5 | ||||
| Treasury stock | 587 | – | 587 | 1,127 | |
| Other securities | 3,862 | 2 | 3,860 | 3,272 | |
| Cash | 104,828 | – | 104,828 | 67,394 | |
| Prepaid expenses | – | – | – | 215 | |
| Total current assets | 136,229 | 2 | 136,227 | 88,918 | |
| Loan issue costs | 360 | 50 | 310 | – | |
| Unrealised translation losses | 6 | 20 | – | 20 | 3,574 |
| TOTAL ASSETS | 1,853,586 | 8,433 | 1,845,153 | 1,571,961 |
| In thousands of euro | Notes | 31/03/17 | 31/03/16 |
|---|---|---|---|
| Shareholders' equity | 7 | ||
| Share capital | 154,580 | 142,274 | |
| Share premium | 1,109,268 | 983,062 | |
| Reserves | |||
| Legal reserves | 14,227 | 13,556 | |
| Regulated reserves | – | – | |
| Other reserves | 153,044 | 153,044 | |
| Retained earnings | 103,241 | 87,718 | |
| Net income for the year | 60,713 | 61,499 | |
| Regulated provisions | 303 | 303 | |
| Total shareholders' equity | 1,595,376 | 1,441,456 | |
| Provisions for contingencies and charges | 8 | ||
| Provisions for contingencies | 396 | 3,466 | |
| Provisions for charges | 5,396 | – | |
| Total provisions for contingencies and charges | 5,792 | 3,466 | |
| Liabilities | |||
| Financial liabilities | |||
| Borrowings and other financial liabilities – banks | 9 | 95,209 | 29,084 |
| Borrowings and other financial liabilities – others | 29 | – | |
| Operating liabilities | 10 | 5,856 | 12,255 |
| Other liabilities | 11 | 142,887 | 85,592 |
| Total liabilities | 243,981 | 126,931 | |
| Unrealised translation gains | 4 | 108 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 1,845,153 | 1,571,961 |
| 1. O |
|---|
| ver |
| vie |
| w |
| In thousands of euro | Notes | 31/03/17 | 31/03/16 |
|---|---|---|---|
| Income transactions | |||
| Operating income transactions | |||
| Operating income | 12 | 3,899 | 745 |
| Operating expenses | 13 | (24,909) | (20,275) |
| Net operating income | (21,010) | (19,530) | |
| Other income transactions | |||
| Income from investments in Group and other companies and portfolio holdings | 14 | 80,032 | 62,434 |
| Other financial income | 15 | 934 | 915 |
| Capital gains/(losses) on disposals of marketable securities | 16 | 60 | (46) |
| (Charge)/Recovery of provisions on transactions affecting the income | 17 | 3,448 | 205 |
| Financial expenses | 18 | (4,597) | (1,693) |
| Income from other income transactions | 79,877 | 61,815 | |
| Income from joint ventures | |||
| Share of profit/(loss) | – | – | |
| Current income before tax | 58,867 | 42,285 | |
| Income from capital transactions | 19 | (2,039) | 21,795 |
| Income tax | 20 | 3,885 | (2,581) |
| NET INCOME | 60,713 | 61,499 |
Rothschild & Co | Annual Report | 2016/2017 189
Rothschild & Co SCA (R&Co) ended the 2016/2017 financial year with net income of €60.7 million, compared with €61.5 million the prior year. R&Co's earnings therefore remained stable between the two periods.
During the 2016/2017 financial year, the Company received dividends of €78.2 million from its French subsidiary Paris Orléans Holding Bancaire SAS (POHB), compared with €59.2 million the previous year.
The Company also recognised a merger deficit on the transfer of all of the assets of Messine Managers Investissements SAS (MMI) to R&Co SAS, representing a total of €6.4 million.
In accordance with the terms of the memorandum of understanding signed in May 2016, the merger took place primarily by means of an exchange of shares on the basis of an exchange ratio of 126 R&Co shares per CFMM share. The merger took place on 2 January 2017 with retroactive effect in terms of accounting and taxation as of 1 January 2017. The merger was 62% financed by the issuing of 6.1 million new shares, and 38% by external bank facilities representing a total of €88.3 million.
As mentioned in the press release of 2 January 2017, the merger follows:
Before the merger, R&Co owned 2.3% of CFMM, which itself owned 0.9% of R&Co.
The merger agreement was drawn up on the basis of the following financial information:
CFMM's financial statements to 31 December 2016 were prepared by the Managing Partner of R&Co, and were used to determine the definitive actual values of assets and liabilities, and thus the definitive value of net assets transferred at the effective date of the merger.
As this is a merger initiated by the absorbing company involving two companies said to be "under separate control", the transfer value of the assets and liabilities transferred by CFMM is based on their real value on the date the merger took place from an accounting and taxation viewpoint, i.e. 1 January 2017.
The definitive real values of the assets and liabilities transferred, as well as the resulting definitive net asset value transferred – which amounts to €233,329,499 – has been definitively determined on the basis of CFMM's individual financial statements to 31 December 2016 as approved by the Managing Partner.
On the basis of an exchange ratio of 126 R&Co shares for 1 CFMM share, and as dividends are not payable on the CFMM shares owned by R&Co, R&Co carried out a capital increase of a total nominal amount of €12,215,952 plus a merger premium of €128,747,168, by issuing 6,107,976 new shares with a par value of €2 by way of consideration for the merger.
All newly issued shares bear current dividend rights and entitle the holder to all payouts of dividends, interim dividends or reserves decided after they are issued, it being specified that they do not bestow the right to payment of the ordinary dividend in respect of the financial year ended 31 March 2016 as decided at the R&Co general shareholders' meeting of 29 September 2016 to approve the merger.
The definitive merger premium comes to €128,747,168, equal to the difference between (i) the share of definitive net assets transferred corresponding to CFMM shares not held by R&Co and paid for in the form of newly issued R&Co shares, and (ii) the nominal value of the capital increase relating to these newly issued R&Co shares.
This is the difference between the share of net assets transferred, corresponding to CFMM shares held by R&Co, and the carrying value of CFMM shares in R&Co's books.
At 31 March 2017, this difference represented a surplus of €1,065,284, of which €173,564 is recognised as financial income as it corresponds to the fraction of the surplus that is less than or equal to the share of earnings accumulated by CFMM since its shares were bought by R&Co, and not paid out. The residual amount of €891,720 has been recognised as a merger premium.
No significant adjusting events have occurred after 31 March 2017 closing date.
To ensure operating continuity and consistency of methods and to adhere to the principles of prudence and reliability, the financial statements are prepared in accordance with the provisions of French law and with the accounting principles generally accepted in France.
The financial statements have been approved in accordance with Financial Regulations 2014-03 modified by regulations 2015-06 and 2016-07 from the French Accounting Standards Authority (Autorité des normes comptables).
To provide relevant reporting on the Company's business, the income statement is presented in accordance with the so-called 'TIAP' model as recommended by the French Accounting Standards Authority for financial companies.
Income transactions are split in two: firstly, operating income transactions, followed by other income transactions (primarily financial transactions).
Current income corresponds to 'income from ordinary activities', i.e. all activities in which the company engages in the normal course of its business, and any related activities that it carries out on an add-on basis or as an extension of its ordinary activities.
Operating profit does, however, include non-recurring income and expenses from events which are clearly separate from the Company's ordinary activities and which are not, therefore, deemed to occur on a frequent or regular basis.
Capital transactions include transactions concerning holdings classified as non-current assets.
The main accounting policies applied are as follows.
Intangible assets and property, plant and equipment are valued at their acquisition cost and amortised and depreciated in the following manner:
| Estimated useful life |
Method |
|---|---|
| Start-up costs 3 years |
straight-line |
| Software 3 years |
straight-line |
| Buildings 20 to 30 years |
straight-line |
| Plant and general improvements 8 to 10 years |
straight-line |
| Vehicles 5 years |
straight-line |
| Office equipment 3 years |
reducing-balance |
| Office furniture 10 years |
straight-line |
Non-current financial assets are valued at their acquisition cost. The values of holdings denominated in foreign currencies are translated into euro at the exchange rate on the transaction date. All loans and receivables denominated in foreign currencies classified among non-current financial assets are translated at the closing rate for the financial year.
Investments in Group and other companies and portfolio holdings are recognised at their acquisition cost. An impairment loss is recognised when fair value is below acquisition cost.
The fair values of investments in Group and other companies and portfolio holdings are calculated in the following manner:
The value of the portfolio at 31 March 2017 was measured using the same methodology as applied in the preceding financial year.
Dividends are recorded in the month in which it is decided to distribute them.
Regarding FCPR-type venture capital funds, in accordance with market practice, only amounts actually called up are recorded, and the unfunded capital commitment is recorded as an off-balance sheet item.
Sales of shareholdings, long-term portfolio holdings or investment securities are recognised using the first-in, first-out (FIFO) method, i.e. the longest-held securities will be deemed to be the first sold.
Receivables are recognised at their nominal value. An impairment loss is recognised when the inventory value is lower than the carrying cost. Receivables denominated in foreign currencies are translated at the closing rate for the financial year.
Marketable securities are recognised at their acquisition cost. When their overall inventory value is lower than their acquisition cost, an impairment loss is recognised. The book value is equal to the closing price for the financial year.
Transactions denominated in foreign currencies are recognised at the rate on the transaction date. At the end of the financial year, all assets and liabilities are converted at the closing rate. For items covered by an exchange rate hedge, these are offset so that only the net balances are shown. A provision is recognised to take account of unrealised losses; where an exchange rate hedge has been set in place, only the uncovered portions of transactions are subject to provisions.
| In thousands of euro | 01/04/16 | Acquisitions | (Disposals) | 31/03/17 |
|---|---|---|---|---|
| Gross value | 510 | 8,127 | (113) | 8,524 |
| Amortisation/Impairment | (369) | (96) | 60 | (405) |
| TOTAL | 141 | 8,031 | (53) | 8,119 |
Acquisitions/increases of property, plant and equipment during the year concerned, firstly, the purchase of a vehicle for a value of €30,000 and, secondly, the recognition of CFMM's property, plant and equipment at the real value of assets in the amount of €8,097,000.
| In thousands of euro | 01/04/16 | Acquisitions | (Disposals) | 31/03/17 |
|---|---|---|---|---|
| Gross value | 1,461,895 | 225,656 | (16,394) | 1,671,157 |
| Impairment | (783) | (2) | 343 | (442) |
| TOTAL | 1,461,112 | 225,654 | (16,051) | 1,670,715 |
Acquisitions/increases of equity securities for the year concerned, firstly, the contribution of K Développement SAS shares following the transfer of all of the assets of MMI, for which R&Co owned all of its share capital in the amount of €9,459,000 and, secondly, the addition of new investments following the merger with CFMM in the amount of €216,197,000.
The reduction in gross values concerned almost entirely MMI, which – as mentioned above – had all of its assets transferred to R&Co SAS on 2 May 2016.
This heading includes all non-current strategic portfolio investments that cannot be classified as 'Investment in Group and other companies'.
| In thousands of euro | 01/04/16 | Acquisitions | (Disposals) | 31/03/17 |
|---|---|---|---|---|
| Gross value | 25,834 | 103,270 | (92,041) | 37,063 |
| Impairment | (7,635) | (13) | 335 | (7,313) |
|---|---|---|---|---|
| TOTAL | 18,199 | 103,257 | (91,706) | 29,750 |
Acquisitions/increases as well as disposals/exits for the year concerned, firstly, CFMM shares bought in cash at the time of the merger and then cancelled and, secondly, R&Co shares formerly held by CFMM transformed into R&Co treasury shares.
At 31 March 2017, the estimated value of the portfolio of participating interests and investments amounted to €38,099,000, of which €23,116,000 were in treasury shares and €3,219,000 were in investment certificates R&Co.
| In thousands of euro | Total | < 1 year | Between 1 and 5 years |
> 5 years |
|---|---|---|---|---|
| Group and associated companies' advances and current accounts (cash pooling) | 3,445 | 3,445 | – | – |
| Current accounts related to the tax consolidation group | 18,975 | 18,975 | – | – |
| Amounts receivable from the tax authorities | 3,515 | 3,515 | – | – |
| Other accounts receivable | 1,017 | 1,017 | – | – |
| TOTAL | 26,952 | 26,952 | – | – |
Marketable securities consist of:
Unrealised foreign exchange losses which corresponded to the difference between the equivalent value in euro at the closing price for portfolio investments and other long-term investments denominated in US dollars, and their historical value, were €20,000 as at 31 March 2017.
| In thousands of euro | Share capital |
Share premium |
Legal reserves |
Other reserves |
Retained earnings |
Regulated provisions |
Net income for the year |
Total shareholder's equity |
|---|---|---|---|---|---|---|---|---|
| Shareholders' equity as at 1 April 2016 | 142,274 | 983,062 | 13,556 | 153,044 | 87,718 | 303 | 61,499 | 1,441,456 |
| Capital increase | 12,306 | 126,206(2) | – | – | – | – | – | 138,512 |
| Appropriation of net income for 2015/2016 FY | – | – | 671 | – | 60,828 | – | (61,499) | – |
| Distribution of dividends(1) | – | – | – | – | (45,305) | – | – | (45,305) |
| Net income for 2016/2017 FY | – | – | – | – | – | – | 60,713 | 60,713 |
| Change in investment provision | – | – | – | – | – | – | – | – |
| SHAREHOLDERS' EQUITY AS AT 31 MARCH 2017 |
154,580 1,109,268 | 14,227 | 153,044 | 103,241 | 303 | 60,713 | 1,595,376 |
(1) The dividends distributed during 2016/2017 financial year in respect of the previous year were €254,000 lower than the amount approved in the second resolution proposed to the Combined General Meeting on 29 September 2016, as no dividends were paid on treasury stock and investment certificates.
(2) The merger premium of €129,639,000 was decreased by €4,130,000 of costs (net of tax) attributed directly to the merger.
At 31 March 2017, the Company's capital comprised 77,144,972 shares and 145,040 of its investment certificates, both with a nominal value of €2 each.
As at 31 March 2017, R&Co holds 145,040 of its own investment certificates (i.e. all the securities issued in this category) and 909,534 of its own shares, including 24,237 shares held as part of the liquidity contract, compared to 406,394 own shares including 54,000 shares held as part of the liquidity contract on 31 March 2016.
| In thousands of euro | 01/04/16 | Charge for the year |
Recovery for the year (provision used) |
Recovery for the year (provision unused) |
31/03/17 |
|---|---|---|---|---|---|
| Provisions for contingencies | 3,466 | 396 | – | (3,466) | 396 |
| – Insufficient hedging of foreign currency risk | 3,466 | 15 | – | (3,466) | 15 |
| – Legal dispute | – | 381 | – | – | 381 |
| Provisions for charges | – | 5,396 | – | – | 5,396 |
| TOTAL | 3,466 | 5,792 | – | (3,466) | 5,792 |
The provision for charges which amounts to €5,396,000, is substantiated by a provision for deferred tax transferred from CFMM merger. The accounting method for retirement commitments, recommended by French General Chart of Accounts, was not applied in these accounts and would not have had a material impact on the total assets or current income of the Company.
| In thousands of euro | Total | < 1 year | Between 1 and 5 years |
> 5 years |
|---|---|---|---|---|
| Medium-term loan | 92,052 | 2,500 | 73,525 | 16,027 |
| US-dollar overdrafts | 2,816 | 2,816 | – | – |
| Bank overdrafts | 1 | 1 | – | – |
| Accrued interest | 340 | 340 | – | – |
| TOTAL | 95,209 | 5,657 | 73,525 | 16,027 |
These loans have variable rates of interest.
Loan principal amortised or repaid over the financial year amounted to €55,833,000 and US\$5,166,000 respectively, whereas new loans taken out in the financial year amounted to €128,302,000 and US\$30,000.
| In thousands of euro | Total | < 1 year | Between 1 and 5 years |
> 5 years |
|---|---|---|---|---|
| Accounts payable | 4,350 | 4,350 | – | – |
| Tax and social liabilities | 1,506 | 1,506 | – | – |
| TOTAL | 5,856 | 5,856 | – | – |
| In thousands of euro | Total | < 1 year | Between 1 and 5 years |
> 5 years |
|---|---|---|---|---|
| Group advances and current accounts | 142,805 | 142,805 | – | – |
| Sundry liabilities | 82 | 82 | – | – |
| TOTAL | 142,887 | 142,887 | – | – |
R&Co ended the 2016/2017 financial year with net income of €60.7 million compared with €61.5 million the prior year.
The company reported a loss on share capital transactions of €2.0 million compared with a profit of €21.8 million the prior year. This sharp fall is due on one hand to the recognition the previous year of a capital gain on the sale of security and on the other hand to the merger deficit for MMI, which had all of its assets transferred to R&Co on 2 May 2016.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Expenses re-billed to related companies | 3,457 | 732 |
| Reversal on provisions for contingencies and charges | – | – |
| Other operating income | 442 | 13 |
| TOTAL | 3,899 | 745 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| General and administration costs | 16,826 | 12,311 |
| Taxes other than those on income | 2,797 | 2,495 |
| Salaries and payroll taxes | 4,801 | 4,981 |
| Depreciation and amortisation | 151 | 45 |
| Other expenses | 334 | 443 |
| TOTAL | 24,909 | 20,275 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Dividends from investments in Group and other companies | 78,173 | 59,238 |
| Dividends from portfolio holdings | 1,859 | 3,196 |
| Loan interest from investments in Group and other companies | – | – |
| TOTAL | 80,032 | 62,434 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Interest income on forward contracts and certificates of deposit | 93 | 359 |
| Interest income from advances granted to Group companies | 202 | 321 |
| Other | 639 | 235 |
| TOTAL | 934 | 915 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Capital gains on sales of marketable securities | 106 | 72 |
| Capital losses on sales of marketable securities | (46) | (118) |
| TOTAL | 60 | (46) |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Provisions on exchange rate risk | (18) | (3,466) |
| Other provisions on income transactions | – | – |
| Recoveries of provisions on other income transactions | 3,466 | 3,671 |
| TOTAL | 3,448 | 205 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Interest on medium-term borrowings | 502 | 482 |
| Other interest expense | 102 | 178 |
| Exchange losses | 3,993 | 1,033 |
| TOTAL | 4,597 | 1,693 |
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Capital gains on disposals of investments in Group and other companies and portfolio holdings | 6,644 | 21,810 |
| Recoveries of impairment of investments in Group and other companies and portfolio holdings | 678 | 415 |
| Capital losses on disposals of investments in Group and other companies and portfolio holdings | (9,346) | (96) |
| Charges for impairment of investments in Group and other companies and portfolio holdings | (15) | (334) |
| TOTAL | (2,039) | 21,795 |
For the fiscal year 2016/2017, R&Co recorded a net tax profit of €3.9 million, which is broken down into net tax income of €5.2 million received primarily from the subsidiaries under the tax consolidation scheme (composed by €18.6 million of tax income reduced by a tax expense of €13.4 million) and a tax expense of €1.3 million for the 3% tax on dividends paid during the year.
The average headcount of 19 people in 2016/2017 included 16 executives and three other employees compared to 23 people the previous year.
In respect of their functions as corporate officers of R&Co for 2016/2017, members of the Supervisory Board entitled to compensation under the terms fixed by Supervisory Board, received compensation of €324,000. In addition, the Supervisory Board members received €6,400 in benefits in kind.
R&Co is the head of a tax group that includes the following companies:
This tax grouping lasts for five years and expires on 31 March 2019.
As part of the tax consolidation process, each subsidiary in the tax consolidation group calculates its income tax as if it were taxed on a stand-alone basis.
As at 31 March 2017, the tax consolidation group headed by R&Co had no tax loss carry-forward at the standard income tax rate.
R&Co, the parent company of the R&Co Group, prepares consolidated financial statements as at 31 March 2017, which are in turn consolidated into the Rothschild Concordia SAS group, registered at 23 bis, avenue de Messine, 75008 Paris.
R&Co has no forward financial instruments as at 31 March 2017.
| In thousands of euro | 31/03/17 | 31/03/16 |
|---|---|---|
| Commitments given | ||
| Guarantees given and other commitments | 289 | 289 |
| Investment commitments in various funds | 26 | 26 |
| Earn-out amounts to be paid for shares purchased | 14,210 | 6,981 |
| TOTAL | 14,525 | 7,296 |
| Commitments received | ||
| Undrawn lines of credit | 85,000 | 85,000 |
| TOTAL | 85,000 | 85,000 |
In July 2015 and March 2016, R&Co acquired from minority shareholders all b1, b2, b3 and b4 preference shares not yet held by MMI. MMI intended to involve the Company's managers in potential capital gains that may be realised by the Company within the framework of its private equity activities on making divestments. Within the framework of agreements with these minority shareholders, the Company agreed to pay them earnouts on shares transferred, estimated at an amount of €4,510,000 as at 31 March 2017.
These purchases by R&Co of the remaining MMI shares that it did not hold contribute to the streamlining and simplification of its legal structure. Within the framework of this simplification, the Company – in its capacity as sole shareholder of MMI – decided on 2 May 2016, in accordance with article 1844-5 of the French Civil Code, to dissolve MMI ahead of term, with all of MMI's assets transferred to the Company without going into liquidation.
The definitive transfer of all assets was subject to the end of the 30-day period for the company's creditors to express objections, or, in the event of any objections, until such an objection is rejected, until the amounts for which creditors have raised an objection are repaid, or, as applicable, until guarantees are provided in accordance with the conditions set out in article 1844-5-3 of the French Civil Code.
The transfer of all of MMI's assets became definitive on 21 October 2016.
a. Legal authorisation allowing for the implementation of Equity Schemes
The combined general shareholders' meetings of 26 September 2013 delegated to the Managing Partner the authority to award stock options to certain senior managers or corporate officers of the R&Co Group.
By invoking the authority to award stock options to beneficiaries, the Company also wanted to promote the convergence of interests of beneficiaries of these options with the controlling family shareholder as well as shareholders.
The schemes implemented also include a characteristic specific to the Company, insofar as the intended beneficiaries of options are required to buy R&Co shares beforehand in order to be granted options. According to the regulations for each Equity Scheme:
It was also agreed that beneficiaries of these options can only exercise their options if they remain in their management or executive role within the Group until the exercise date of the options, subject to some specific exceptions stipulated in the Equity Scheme regulations.
Within the framework of this delegation of authority and characteristics specific to the Company, two Equity Schemes have been implemented and were still in force as at 31 March 2017.
The Equity Scheme of 11 October 2013 (2013 Equity Scheme) was intended for certain senior employees of the financial advisory business, as well as members of the Group's Executive Committee, representing a total of 57 people from ten different countries.
In accordance with the aforementioned regulations for the 2013 Equity Scheme, participants invested a total of 780,000 R&Co shares, representing 1.10% of the Company's share capital on the award date. For each R&Co share invested, four stock options could be awarded.
In accordance with the authorisations granted by the general shareholders' meeting of 26 September 2013, the Managing Partner decided on 11 October 2013 to grant a total of 3,120,000 stock options.
The options awarded within the framework of the 2013 Equity Scheme are classified into four separate categories, the 2013-1 Options, the 2013-2 Options, the 2013-3 Options and the 2013-4 Options, acquired respectively on the third, fourth, fifth and sixth anniversaries of the 2013 Equity Scheme, and exercisable on the vesting dates at a price of €17.50, €18, €19 and €20 per option, either by subscription or purchase of shares (the exercise option being decided by the Managing Partner before the start of the exercise period).
During the 2016/2017 financial year, 55,000 2013-1 Options were exercised. Furthermore, the options exercised during the year were exercised by subscription on the decision of the Managing Partner in accordance with the provisions of the 2013 Equity Scheme.
Following on from the 2013 Equity Scheme, on 10 December 2015, R&Co launched a second incentive scheme (2015 Equity Scheme), for which participation was extended to certain employees of the private banking, trust services, private equity and private debt businesses, representing a total of ten participants.
In accordance with the aforementioned terms and conditions, 115,000 R&Co shares, representing 0.16% of share capital on the date of the 2015 Equity Scheme, were invested in this way. As with the 2013 Equity Scheme, for each R&Co share invested, four stock options could be awarded. As a result, the Managing Partner granted a total of 460,000 stock options.
(1) Within the framework of restricted share units under the Equity Scheme, a number of R&Co shares were acquired by Group entities in which Equity Scheme participants hold management or executive roles. These shares, intended to be awarded to holders of restricted share units after the vesting date and subject to certain conditions, are currently – and until the vesting date – treasury shares and therefore do not bear any voting rights.
The options awarded within the framework of the 2015 Equity Scheme are classified into four separate categories, the 2015-1 Options, the 2015-2 Options, the 2015-3 Options and the 2015-4 Options, acquired respectively on the third, fourth, fifth and sixth anniversaries of the 2015 Equity Scheme, and exercisable on the vesting dates at a price of 23.62 euros, 24.12 euros, 25.12 euros and 26.12 euros per option, either by subscription or purchase of shares (the exercise option being decided by the Managing Partner before the start of the exercise period).
The table below summarises the information relating to Equity Schemes in force as at 31 March 2017.
| 2013-1 Options |
2013-2 Options |
2013-3 Options |
2013-4 Options |
2015-1 Options |
2015-2 Options |
2015-3 Options |
2015-4 Options |
Total | |
|---|---|---|---|---|---|---|---|---|---|
| Date authorised by the General Meeting |
26 Sep 2013 |
26 Sep 2013 |
26 Sep 2013 |
26 Sep 2013 |
26 Sep 2013 |
26 Sep 2013 |
26 Sep 2013 |
26 Sep 2013 |
– |
| Date awarded by the Managing Partner |
11 Oct 2013 |
11 Oct 2013 |
11 Oct 2013 |
11 Oct 2013 |
10 Dec 2015 |
10 Dec 2015 |
10 Dec 2015 |
10 Dec 2015 |
– |
| Total number of stock options awarded | 780,000 | 780,000 | 780,000 | 780,000 | 115,000 | 115,000 | 115,000 | 115,000 3,580,000 | |
| Number of beneficiaries | 57 | 57 | 57 | 57 | 10 | 10 | 10 | 10 | – |
| % of share capital on award date | 1.10% | 1.10% | 1.10% | 1.10% | 0.16% | 0.16% | 0.16% | 0.16% | 5.03% |
| Performance conditions | None | None | None | None | None | None | None | None | – |
| Start of exercise period | 30 Nov 2016 |
11 Oct 2017 |
11 Oct 2018 |
11 Oct 2019 |
10 Dec 2018 |
10 Dec 2019 |
10 Dec 2020 |
10 Dec 2021 |
– |
| Expiry date | 11 Oct 2023 |
11 Oct 2023 |
11 Oct 2023 |
11 Oct 2023 |
10 Dec 2025 |
10 Dec 2025 |
10 Dec 2025 |
10 Dec 2025 |
– |
| Subscription or purchase price (euros) | 17.50 | 18.00 | 19.00 | 20.00 | 23.62 | 24.12 | 25.12 | 26.12 | – |
| Total number of options exercised as at 31 March 2017 |
(55,000) | – | – | – | – | – | – | – | (55,000) |
| Total number of options cancelled as at 31 March 2017 |
– | – | – | – | – | – | – | – | – |
| Total number of options remaining as at 31 March 2017 |
725,000 | 780,000 | 780,000 | 780,000 | 115,000 | 115,000 | 115,000 | 115,000 3,525,000 |
As at 31 March 2017, 3,525,000 options were still outstanding and exercisable in accordance with the terms and conditions of the 2013 and 2015 schemes. The average value of the option used as a basis for the social security contribution of 30% paid by companies under French law concerned by the 2013 scheme is €1.33.
R&Co confirms that it has not omitted any material off-balance sheet commitments in accordance with applicable accounting standards.
On 1 June 2016, R&Co signed memoranda of understanding with a number of managers at BMM, including commitments to buy and sell BMM shares held by these managers and available as a result of the legal obligation to hold these shares until the fifth anniversary of their payment into the Martin Maurel group savings plan.
In accordance with the stipulations of these memoranda of understanding, R&Co is entitled to buy unavailable BMM shares in the month following the date this unavailability to various managers is lifted.
As the unavailable shares are paid into the Martin Maurel group savings plan staggered over several years, the shares will be available on a staggered basis between 12 March 2017 and 22 March 2021.
During the 2016/2017 financial year, R&Co informed managers, for whom the unavailability of shares was lifted on 12 March 2017, of the exercising of commitments to sell these shares. Within this framework and after the close of the financial year, on 13 April 2017, R&Co purchased 10,184 BMM shares, representing 0.81% of BMM's share capital, held by 21 BMM managers, for a total of €2,087,720. Following this exercise, there are still 29,233 unavailable BMM shares subject to commitments to buy and sell that R&Co is entitled to buy.
As at 31 March 2017, these commitments concerned a total of 39,417 BMM shares, for an estimated commitment of €9.7 million, which acquisition will be effective according to above mentioned memoranda of understanding.
| Companies or groups of companies In millions of euro |
Share capital |
APIC, reserves and retained earnings excluding net income for the period |
Share of capital held |
Carrying value of shares held |
Outstanding loans and |
Gross revenues |
Net income for the last |
Dividends received by |
|
|---|---|---|---|---|---|---|---|---|---|
| Gross | Net | advances from the company |
(excluding VAT) for the last financial year |
financial year |
the Company during the financial year |
||||
| A. Subsidiaries (Company holds at least 50% of capital) | |||||||||
| Paris Orléans Holding Bancaire SAS (Paris)(4) |
729.6 | 482.5 | 100% | 1,335.5 | 1,335.5 | 14.1 | – | 92.2 | 78.1 |
| K Développement SAS (Paris)(4) | 99 | 198.5 | 100% | 104.2 | 104.2 | 0.09 | – | 18.8 | – |
| Francarep Inc. (USA)(2)(4) | – | 1.9 | 100% | 2.6 | 2.3 | – | – | 0.4 | – |
| Cavour SASU (Paris)(2)(4) | 0.06 | – | 100% | 0.06 | 0.05 | – | – | – | – |
| Verdi SASU (Paris)(2)(4) | 0.06 | – | 100% | 0.06 | 0.05 | – | – | – | – |
| Aida SASU (Paris)(2)(4) | 0.3 | – | 100% | 0.3 | 0.2 | – | – | – | – |
| Banque Martin Maurel SA (Marseille)(2)(4) |
56.3 | 111.5 | 96.85% | 215 | 215 | – | 70.1 | 11.7 | – |
| Grignan Participations (Marseille)(2)(4) | 0.3 | – | 100% | 0.4 | 0.4 | – | – | – | – |
| B. Participating interests (Company holds 5 to 50% of capital) | |||||||||
| Funds Selection (Paris)(2)(4) | 0.1 | 2.6 | 20% | 0.5 | 0.5 | – | 1.4 | – | – |
| Finatis SA (Paris)(1)(2)(3)(4) | 85 | (2) | 5% | 12.3 | 12.3 | – | 36.788 | 622 | 0.6 |
(1) Consolidated figures.
(2) Financial year ended 31 December 2016 (used rate €1 = US\$1,069547).
(3) Reserves and Net income (Group share). (4) No guarantees were given by the Company to the above companies or groups of companies.
This is a free translation into English of the statutory auditors' report on the financial statements issued in French and it is provided solely for the convenience of English-speaking users.
The statutory auditors' report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the audit opinion on the financial statements and includes an explanatory paragraph discussing the auditors' assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions, or disclosures.
This report also includes information relating to the specific verification of information given in the Management report.
This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
In compliance with the assignment entrusted to us by your General Meeting, we hereby report to you, for the year ended 31 March 2017, on:
These financial statements have been approved by the Management. Our role is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the company as at 31 March 2017 and of the results of its operations for the year then ended in accordance with French accounting principles.
In accordance with the requirements of article L. 823-9 of the French Commercial Code ("Code de commerce") relating to the justification of our assessments, we bring to your attention the following matters:
As stated in paragraph III "Accounting principles and valuation methods" of the notes to the financial statements, your company accounts for impairments, when necessary, in order to cover for the risk of a decrease in fair value of participating interests and portfolio holdings.
In assessing the significant accounting estimates applied by your company for the year ended 31 March 2017, we have examined the methods used by management and described in the notes to the financial statements on the basis of the information available and we have performed tests of detail, on a sample, in order to verify the accurate application of these methods.
However, we point out that these estimates are based on forecasts that are therefore uncertain; realised outcomes could differ significantly from these forecasts.
These assessments were made as part of our audit of the financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report.
We have also performed, in accordance with professional standards applicable in France, the specific verifications required by French law.
We have no matters to report as to its fair presentation and its consistency with the financial statements of the information given in the Management report, and in the documents addressed to shareholders with respect to the financial position and the financial statements.
Concerning the information given in accordance with the requirements of article L.225-102-1 of the French Commercial Code ("Code de commerce") relating to remunerations and benefits received by the directors and any other commitments made in their favour, we have verified its consistency with the financial statements or with the underlying information used to prepare these financial statements and, where applicable, with the information obtained by your company from companies controlling your company controlled by it. Based on this work, we attest the accuracy and fair presentation of this information.
Paris La Défense, 14 June 2017 Paris, 14 June 2017 KPMG S.A. Cailliau Dedouit et Associés
Partner Partner
Pascal Brouard Jean-Jacques Dedouit
| Term | Definition | |||
|---|---|---|---|---|
| Order dated on 3 November 2014 | the 3 November 2014 Order on the internal control of banking sector companies | |||
| AAM | Advisors Asset Management | |||
| ACPR | Autorité de Contrôle Prudentiel et de Résolution (French Prudential and Resolution Authority) | |||
| AFS | Available for sale | |||
| AMF | Autorité des marchés financiers | |||
| Asset Management | For segmental information only, the Asset Management business segment comprises Rothschild Private Wealth & Asset Management and Rothschild Merchant Banking |
|||
| AuM | Assets under Management | |||
| Banking | Banking business line | |||
| BMM | Banque Martin Maurel | |||
| bp | Basis point | |||
| CCC | Corporate Credit Committee | |||
| CFMM | Compagnie Financière Martin Maurel | |||
| CGU | Cash Generating Unit | |||
| CLO | Collateralised Loan Obligation | |||
| Company | Rothschild & Co SCA | |||
| CRD4 | Capital Requirements Directive 4 | |||
| DCF | Discounted cash flow | |||
| EdRS | Edmond de Rothschild (Suisse) SA | |||
| EPS | Earnings per Share | |||
| ESG | Environment, Social and Governance | |||
| ETP | Exchange Traded Products | |||
| FACS | Five Arrows Credit Solutions | |||
| FADL | Five Arrows Direct Lending | |||
| FALG | Five Arrows Leasing Group | |||
| FAPI | Five Arrows Principal Investments | |||
| FASO | Five Arrows Secondary Opportunities | |||
| FVTPL | Fair value through profit or loss | |||
| Global Advisory | Rothschild Global Advisory business segment | |||
| GCC | Group Credit Committee | |||
| GEC | Group Executive Committee | |||
| GFSC | Guernsey Financial Services Commission | |||
| Group | Rothschild & Co SCA consolidated Group | |||
| Group ALCO | Group Assets and Liabilities Committee | |||
| IFRS | International Financial Reporting Standards | |||
| IPO | Initial Public Offering | |||
| LBO | Leveraged Buy-Out | |||
| LCR | Liquidity Coverage Ratio | |||
| Level 1/2/3 | IFRS 13 fair value classifications explained in IV.E.1 | |||
| M&A | Mergers and Acquisitions | |||
| Managing Partner | Rothschild & Co Gestion SAS (the gérant) | |||
| Merchant Banking | Rothschild Merchant Banking business line | |||
| MOIC | Multiple of invested capital | |||
| NCI | Non-controlling interest |
| Term | Definition |
|---|---|
| NMR | N M Rothschild & Sons Limited |
| NMROP | N M Rothschild & Sons Limited Overseas pension fund |
| NMRP | N M Rothschild & Sons Limited pension fund |
| PCCC | Private Client Credit Committee |
| PCL | Private Client Lending business line |
| Private Wealth | Rothschild Private Wealth business line |
| QE | Quantitative Easing |
| R&Co | Rothschild & Co SCA |
| R&Co Gestion | Rothschild & Co Gestion SAS (the gérant/Managing Partner) |
| RBCI | Rothschild Bank (CI) Limited |
| RBI | Rothschild Bank International Limited |
| RBIS | Risk Based Investment Solutions |
| RBZ | Rothschild Bank AG Zurich |
| RBZP | Rothschild Bank AG Zurich pension fund |
| RCB | Rothschild & Compagnie Banque SCS |
| RCM | Rothschild Credit Management |
| RHAG | Rothschild Holding AG |
| RMB | Rothschild Merchant Banking |
| ROTE | Return on tangible equity |
| RPI | Rothschild Proprietary Investments |
| RPO | Rothschild Private Opportunities |
| SICAV | Société d'Investissement à Capital Variable |
| SMA | Separately Managed Accounts |
| Supervisory Board | Rothschild & Co Supervisory Board |
| UCITS | Undertakings for Collective Investment in Transferable Securities |
Rothschild & Co Gestion SAS Mark Crump
Managing Partner Group Chief Financial Officer
We hereby certify that, to the best of our knowledge, the accounts are prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and all the undertakings included in the consolidation, and that the management report includes a fair review of the development and performance of the business, profit or loss and financial position of the Company and all the undertakings included in the consolidation, together with a description of the principal risks and uncertainties that they face.
Paris, 14 June 2017
Rothschild & Co Gestion SAS Managing Partner Represented by David de Rothschild, Chairman
Mark Crump Group Chief Financial Officer
Statutory Auditors Cailliau Dedouit et Associés SA Represented by Mr Jean-Jacques Dedouit 19 rue Clément-Marot 75008 Paris, France
Start date of first term: 24 June 2003 Date of last renewal: 27 September 2011 End date of term: General Meeting called to approve the financial statements for the financial year ending 31 March 2017
Alternate Auditors Didier Cardon 19 rue Clément-Marot 75008 Paris, France
Start date of first term: 29 September 2009 Date of last renewal: 27 September 2011 End date of term: General Meeting called to approve the financial statements for the financial year ending 31 March 2017
KPMG Audit FS II SAS Represented by Mr Pascal Brouard Tour Eqho 2 avenue Gambetta 92066 Paris la Défense Cedex
Start date of first term: 27 September 2011 Date of last renewal: n/a End date of term: General Meeting called to approve the financial statements for the financial year ending 31 March 2017
KPMG Audit FS I SAS Tour Eqho 2 avenue Gambetta 92066 Paris la Défense Cedex
Start date of first term: 27 September 2011 Date of last renewal: n/a End date of term: General Meeting called to approve the financial statements for the financial year ending 31 March 2017
With a team of c.3,400 talented financial services specialists on the ground in over 40 countries across the world, our integrated global network of trusted professionals provides in-depth market intelligence and effective long-term solutions for our clients in Global Advisory, Private Wealth, Asset Management, and Merchant Banking. Rothschild & Co is family-controlled and independent and has been at the centre of the world's financial markets for over 200 years.
Rothschild & Co is a French partnership limited by shares (société en commandite par actions) listed on Euronext in Paris, Compartment A with a share capital of €154,580,024. Paris trade and companies registry 302 519 228. Registered office: 23 bis avenue de Messine, 75008 Paris, France.
For further information:
Investor Relations Marie-Laure Becquart Tel.: +33 (0)1 40 74 65 26 [email protected] Media Relations Caroline Nico Tel.: +33 (0)1 40 74 43 44 [email protected]
For more information, please visit the Group's websites: www.rothschildandco.com, www.rothschild.com
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