annual report 2010 def · 5 annu a l repo r t i 2010 ìììììì last year was a successful year...

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AnnuAl RepoRt 2010

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list of contents

ManageMent report 9

audit report 12

Balance sheet 16

off Balance sheet iteMs 18

profit and loss account 20

notes to the annual accounts 22

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Last year was a successful year for the bank. The restructuring of the bank’s internal

operations means that we are able to meet the requirements of our business

strategy. I have been particularly proud of the response of management and staff

to the changes. Indeed, performance has exceeded my expectations and we are

well positioned to drive the business forward.

I am pleased to note that we have ended the year in a strong financial position.

Our unique banking model and belief in certain core principles has allowed us to

prosper, despite the prevailing market conditions. Perhaps the most important of

our core principles is a prudent approach to the management of the balance sheet.

This approach will remain at the heart of our business plan going forward.

This year will be an exciting year of growth and opportunity for our bank. We

are ready to go global and the world is ready for a new approach to banking.

Regions such as Asia are developing rapidly and I am particularly keen for the

bank to take advantage of the wealth and entrepreneurial spirit emerging there.

We must remain open-minded and ready to innovate. We will reach out and seize

every opportunity to grow our business.

I firmly believe that with the family involvement in the bank we have a unique

proposition. We look forward to working closely with existing clients and

welcoming new ones into our network.

David Rowland

Honorary President, Banque Havilland S.A.

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Banque havilland delivered a strong

performance this year with a net profit after

tax of eur 9.95m. the Bank has maintained

a very liquid and low risk balance sheet (total

assets of eur 753.5m) mainly composed

of cash and high graded bonds. We have

continued to reduce our balance sheet

through the selling off of the bond portfolio

primarily in reaction to the changing bond

market environment in the euro zone.

on december 31, 2010 the total accumulated

profit of the Bank is eur 9 952 937 and a

dividend payment of eur 15 000 000 will be

proposed to the shareholders for approval.

Bu il d in g a s ta Bl e p l at f o r m

2010 has been an eventful year during

which we have focused on building a solid

platform on which to establish the new

bank.

a strict cost management programme

commenced when the Bank opened in

2009 and has continued throughout the

last year. this initiative required each

department to review their own costs and

Management report 2010

recommend measures to reduce or manage

them more efficiently. through this the

Bank has successfully renegotiated key

supplier contracts and made a significant

reduction in the largest cost – the people.

early in the year the Board of directors

initiated the second phase of the social

plan and later we offered staff a voluntary

redundancy programme resulting in a

reduced overall headcount of approximately

30% by year end.

an important part of preparing the

Bank for the new year has also been to

clean up much of the legacy business,

which is not in line with the strategy for

Banque havilland and to focus on those

areas where the Bank and the family

can add the most value. the domiciliation

business, for example, is being transferred

out of the Bank.

concerning the development of the client

base the focus has been to retain

those clients who meet the strategic

requirements, and to start to tailor our

portfolio of investment products and

services to meet their needs. towards

the end of the year the family started to

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introduce members of its network to

the Bank and we are working on the

development of co-investment products

whereby clients have the opportunity to

invest alongside the family.

in terms of developing the business the

mandate from the family has been to focus

on core competences and to ensure the

‘basics’ are in place before really driving

forward, and this has been successfully

achieved.

the first representative office for the Bank

was opened in london in May.

Changes to the executive management

in May 2010 the ceo Jonathan rowland was

joined on the executive Management team

by Venetia lean, coo and Jean-françois

Willems, cfo.

Capital and risk management

the Bank continues to maintain a robust

approach to risk management with the

independent risk and control department

reporting directly to the Board of directors

and the executive Management.

the Bank imposes a strict lending policy

evidenced by the fact that loans to

customers are less that the total equity of

the Bank, which implies a high solvency

ratio 38.33% and liquidity ratio 38.23%.

the Bank has no direct or indirect exposure

towards sub-prime credit or structured

credit obligations (such as cdos, siVs and

clos) in its loan or bond portfolios.

additional information on risk management

is available on request in accordance with

pillar iii of the cssf circular 06/273. for

further information on the Bank’s exposure

to risks, we refer you to the notes 6.3 and

6.4 of these annual accounts.

post Balance sheet events

in the first quarter of 2011 the Bank agreed

to increase the share capital held in its ful-

ly-owned subsidiary, Kaytwo s.à.r.l. by eur

8 million.

on 25th March 2011 the Bank entered

as purchaser into a share purchase

agreement with dexia Banque internationale

à luxembourg s.a. as seller in respect of

the acquisition of 100 % of the shares in dexia

private Bank Monaco s.a.M. this acquisition

is still subject to regulatory approvals and

non-objections of all concerned regulatory

authorities.

our priorities for 2011

over the last 18 months the private

banking sector has experienced events that

have fundamentally altered the landscape

for all concerned. on this basis, the family

and the Bank views 2011 as a year of

opportunity and will adapt the business

accordingly. firstly the global economic

crisis has signalled a move away from

complex high risk products as clients

demand safety, transparency and liquidity.

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the Bank will continue to operate a low

risk approach to the management of the

balance sheet, and the business generally

and will ensure that the products and

services are aligned with these clients

needs.

secondly, research has shown that the

ultra high net Worth group has significantly

increased its wealth in 2009 and 2010

and as such we remain fixed on our target

client base and will continue to provide a

superior, specialised service that will be

attractive to this specific group. By providing

access to the family network and the exclusive

co-investment deals we will differentiate

ourselves from our competitors who also

are seeking to capture a valuable slice of

this market.

finally there has been a marked shift in

wealth distribution away from the us and

Western europe to the rapidly growing

emerging markets such as russia and

china. the Bank is actively working to

position itself to capture market share in

these exciting new areas, and at the end

of 2010 we can already see a marked shift

towards a more varied and global

composition of the client base.

2010 has been a transitional year for the

Bank with many challenges that have

been met with boundless energy and

professionalism by our entire team.

We firmly believe that we have the best

foundation on which to drive the Bank

forward to a successful future and for this,

both on behalf of the management and the

family we extend our deepest gratitude to

the staff and clients of Banque havilland.

Venetia lean Jean-françois Willems

coo cfo

luxembourg, 5 april 2011

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report on the annual aCCounts

We have audited the accompanying

annual accounts of Banque havilland s.a.,

which comprise the balance sheet as at 31

december 2010, the profit and loss account

for the year then ended and a summary of

significant accounting policies and other

explanatory information.

Board of direCtors’ responsiBility

for the annual aCCounts

the Board of directors is responsible for

the preparation and fair presentation of

these annual accounts in accordance with

luxembourg legal and regulatory requirements

relating to the preparation of the annual

accounts, and for such internal control as the

Board of directors determines is necessary

to enable the preparation of annual accounts

that are free from material misstatement,

whether due to fraud or error.

Audit reportTo the Board of Banque Havilland S.A.

r e sp o n siBil i t y o f t he “r é v i seu r

d’en t r ep r i se s agr éé ”

our responsibility is to express an opinion

on these annual accounts based on our

audit. We conducted our audit in

accordance with international standards

on auditing as adopted for luxembourg

by the “commission de surveillance du

secteur financier”. those standards

require that we comply with ethical

requirements and plan and perform the

audit to obtain reasonable assurance

whether the annual accounts are free from

material misstatement.

an audit involves performing procedures

to obtain audit evidence about the amounts

and disclosures in the annual accounts.

the procedures selected depend on the

judgment of the “réviseur d’entreprises

agréé”, including the assessment of the

risks of material misstatement of the

annual accounts, whether due to fraud or

error. in making those risk assessments,

the “réviseur d’entreprises agréé” considers

internal control relevant to the entity’s

preparation and fair presentation of the

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PricewaterhouseCoopers Société à responsabilité limitée Réviseur d’Entreprises

400, Route d’EschB.P. 1443L-1014 LuxembourgTelephone +352 494848-1Facsimile +352 494848-2900www.pwc.com/[email protected]

R.C.S. Luxembourg B 65 477 TVA LU17564447

annual accounts in order to design audit

procedures that are appropriate in the

circumstances, but not for the purpose of

expressing an opinion on the effectiveness

of the entity’s internal control. an audit

also includes evaluating the appropriate-

ness of accounting policies used and the

reasonableness of accounting estimates

made by the Board of directors, as well as

evaluating the overall presentation of the

annual accounts.

We believe that the audit evidence we have

obtained is sufficient and appropriate to

provide a basis for our audit opinion.

o p ini o n

in our opinion, the annual accounts

give a true and fair view of the financial

position of Banque havilland s.a. as of 31

december 2010, and of the results of its

operations for the year then ended in

accordance with luxembourg legal and

regulatory requirements relating to the

preparation of the annual accounts.

r ep o r t o n o t her l ega l a nd

r eg u l at o ry r eq u ir e me n t s

the management report, which is the

responsibility of the Board of directors, is

consistent with the annual accounts.

luxembourg, 6 april 2011

pricewaterhousecoopers s.à r.l.

represented by

paul neyens

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Banque HAVILLAND S.A.BALANCE SHEET AS AT DECEMBER 31, 2010 (EXPRESSED IN EURO)

assets notes 31/12 /2010 31/12/2009

cash in hand, balances with central banks and post office banks 6.1 42 924 613 62 424 144

loans and advances to credit institutions

repayable on demand

other loans and advances

3.1, 6.1, 6.381 746 13826 335 986

108 082 124

174 502 23227 948 199

202 450 431

loans and advances to customers 2.2.3, 6.1, 6.3, 3.2 70 327 305 84 330 456

Bonds and other fixed-income transferable securities

issued by public bodies

issued by other borrowers

2.2.1, 3.3, 6.1, 6.317 030 275

487 801 675504 831 950

-710 275 145710 275 145

shares and other variable-yield transferable securities 2.2.2, 3.4, 6.1, 6.3 12 575 511 11 213 945

shares in affiliated undertakings 2.1.3, 3.5, 3.6 7 948 301 12 166 096

intangible assets 2.1.1, 3.6 586 847 1 260 247

tangible assets 2.1.2, 3.6 663 323 1 950 716

other assets 3.7 2 888 411 7 589 370

prepayments and accrued income 2 658 512 1 362 944

TOTAL ASSETS 753 486 897 1 095 023 494

the accompanying notes form an integral part of these annual accounts.

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liaBilities notes 31/12/2010 31/12/2009

amounts owed to credit institutions

repayable on demand

with agreed maturity dates or periods of notice

4.1, 6.11 640 409

393 600 000395 240 409

2 124 780636 526 944638 651 724

amounts owed to customers

other debts

repayable on demand

with agreed maturity dates or periods of notice

4.2, 6.1

107 014 38377 614 637

184 629 020

193 128 89796 778 869

289 907 766

other liabilities 4.3 18 098 511 20 533 060

accruals and deferred income 1 146 158 2 938 903

provisions

provisions for taxation

other provisions

22 697 8315 426 768

28 124 599

24 680 6087 016 170

31 696 778

fund for general banking risk 2.3 7 000 000 2 000 000

subscribed capital 4.4 100 000 000 100 000 000

share premium account 4.4 1 260 709 1 260 709

reserves 4.5 401 728 -

profit brought forward 4.6 7 632 826 -

profit for the financial year/period 9 952 937 8 034 554

TOTAL LIABILITIES 753 486 897 1 095 023 494


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off BalanCe sheet items notes 31/12/2010 31/12/2009

contingent liabilities

of which:

Guarantees and assets pledged as collateral security

5.1, 5.2 16 075 335

16 075 335

19 054 425

19 054 425

fiduciary operations 262 572 235 118


Banque HAVILLAND S.A.OFF BALANCE SHEET AS AT DECEMBER 31, 2010 (EXPRESSED IN EURO)

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notes 2010 period from 01/06

to 31/12/2009

interest receivable and similar income

of which: arising from debt securities and other

fixed-income securities

interest payable and similar charges

Net interest income

7.1 15 883 5518 811 177

(9 129 222)6 754 329

13 295 7055 588 576

(11 516 316)1 779 388

Income from transferable securities

income from shares and other variable-yield securities - 88 528

commission receivable

commission payable

Net commission income

7.1 6 645 457(4 795 999)

1 849 458

3 848 106(588 830)

3 259 276

Net profit on financial operations 7.1 31 686 345 21 262 667

Other operating income 7.2 5 542 195 4 879 112

Total operating income 45 832 327 31 268 971

General administrative expenses

staff costs

of which:

- wages and salaries

- social security costs

of which: social security costs relating to pensions

other administrative expenses

(9 725 333)

(8 157 794)(777 893)(464 795)

(8 824 463)(18 549 796)

(7 531 481)

(5 882 340)(921 770)(411 926)

(6 172 261)(13 703 742)

Value adjustments in respect of tangible and

intangible assets

(1 870 051) (1 931 813)

Other operating charges 7.3 (10 122 161) (3 730 510)

Value adjustments in respect of loans and advances and

provisions for contingent liabilities and for commitments

7.4 (6 603 006) (14 378 198)

Banque HAVILLAND S.A.PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED December 31, 2010 (EXPRESSED IN EURO)


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notes 2010 period from 01/06

to 31/12/2009

Value re-adjustments in respect of loans and

advances and provisions for contingent liabilities and

for commitments

7.4 13 888 022 14 684 031

Value adjustment in respect of securities held as finan-

cial fixed assets, participating interests and shares in

affiliated undertakings

3.5, 3.6 (6 907 865) (2 119 600)

Transfer to the Fund for general banking risks (5 000 000) (2 000 000)

Profit before tax 10 667 470 8 089 139

tax on profit on ordinary activities - -

Profit after tax 10 667 470 8 089 139

other taxes not shown under the preceding items (714 533) (54 585)

Profit for the financial year/period 9 952 937 8 034 554


Banque HAVILLAND S.A.PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED December 31, 2010 (EXPRESSED IN EURO)

(continued)

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1. GENERAL

Banque havilland s.a. (“the Bank”) was incorporated in the grand-duchy of

luxembourg on July 10, 2009 as a limited liability company (“société anonyme”). the

Ministry of finance granted the company a banking licence on June 25, 2009.

on July 10, 2009, the Bank issued 50 031 new shares of a nominal value of eur

1 000 and a demerger premium of eur 4 786 457, in consideration for the non-cash

contribution of assets and liabilities contributed from the former Kaupthing Bank

luxembourg s.a. (the “former Bank”). this non cash contribution in the exchange

for the shares and demerger premium issued took place with an effective accounting

date of June 1, 2009.

on July 10, 2009, an extraordinary general meeting has voted a capital increase by

issuing 49 969 new shares with a nominal value of eur 1 000. as at december 31, 2010,

the subscribed and fully paid share capital of the Bank is eur 100 000 000 made up of

100 000 shares with a nominal value of eur 1 000 each.

the non cash contribution has been calculated as the lower of net book value

or fair value as at the date of the demerger. as a consequence, the Bank is

now carrying all former assets and liabilities and reflects the historical cost,

accumulated depreciation, and adjustments derived from the past as other

income/expense or exceptional charges in its 2009 annual accounts.

the Bank is permitted to carry out all banking activities. its principal activity is private

banking.

Banque HAVILLAND S.A.Notes to the annual accounts as at December 31, 2010

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

the Bank’s accounting policies are in accordance with regulations in force in the

grand-duchy of luxembourg and, in particular, the modified law of June 17, 1992,

relating to the annual accounts of credit institutions. the accounting policies and the

valuation principles are determined and applied by the Board of directors, except

those which are defined by law and by the commission de surveillance du secteur

financier.

2.1 fixed assets

2.1.1 intangible assets

intangible assets are included at purchase price less accumulated depreciation.

intangible assets consist of software amortised over 4 years on a linear basis.

formation expenses and costs in relation to capital increases are directly expensed

when incurred.

2.1.2 tangible assets

tangible assets are included at purchase price less accumulated depreciation.

tangible assets are depreciated over their expected useful life.

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2.1.2 tangible assets (continued)

the rates and methods of depreciation are as follows:

rates method

office equipment fixtures & fittings 25 % linear

company cars 25 % linear

fixtures and fittings costing less than eur 867 or whose expected useful life does

not exceed one year are charged directly to profit and loss account for the year.

2.1.3 shares in affiliated undertakings

shares in affiliated undertakings are recorded at purchase price. if the valuation

is lower than the purchase price, value adjustments are booked to account for the

unrealised loss. this adjustment is made when the Board of directors considers the

depreciation as durable.

2.2 Current assets

2.2.1 debt securities and other fixed-income securities

debt securities and other fixed-income securities are recorded at purchase price.

Value adjustments are made for securities in the structural portfolio for which the

valuation is lower than the purchase price. the valuation is the market value on the

balance sheet date or the estimated realisable value or the quotation which best

represents the inherent value of the securities held. all banks securities are held in

a structural portfolio.

Banque HAVILLAND S.A.Notes to the annual accounts as at December 31, 2010 (CONTINUED)

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2.2.2 shares and other variable-yield securities

shares and other variable-yield securities are recorded at purchase price. if the

valuation is lower than the purchase price, value adjustments are booked to account

for the unrealised loss.

2.2.3 loans and advances

loans and advances are disclosed at their nominal value. accrued interests are

recorded under the heading “prepayments and accrued income” on the asset side

of the balance sheet.

2.2.4 value adjustments in respect of current assets

the policy of the Bank is to establish specific provisions to cover the risk of loss and

of the non-recovery of debtors.

Value adjustments are deducted from the relevant current assets.

2.2.5 provision for assets at risk

a tax free lump-sum provision is accounted for based on the Bank’s assets at

risk. these assets are determined in accordance with the regulatory provisions

governing the computation of the capital adequacy ratio. the lump-sum

provision is split between the relevant assets at risk in accordance with

the provisions of the luxembourg Monetary institute circular letter dated

december 16, 1997. the portion related to the assets at risk is deducted from these

assets.

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2.3 fund for general Banking risks

the Bank has established a fund for general banking risks to cover the particular risks

associated with banking. transfers to this fund are booked from income after tax, but

before determination of net income. this fund is not subject to any quantitative limit.

2.4 purChase priCe of fungiBle assets

the Bank values fungible assets by the weighted average price method.

2.5 valuation of foreign CurrenCy BalanCes and transaCtions

2.5.1 foreign currency translation

the share capital of the Bank is expressed in euro (“eur”) and the accounting

records are maintained in that currency.

shares in affiliated undertakings included in fixed assets as well as intangible

and tangible assets are converted at the historic rate. all other assets and

liabilities denominated in a currency other than eur are converted into eur at the

rate of exchange ruling at the balance sheet date.

income and charges in foreign currencies are converted into eur at the rate of

exchange ruling on the date of the transaction.

foreign currency differences arising from these valuation principles are taken to

profit and loss account.


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2.5.2 valuation of transactions not subject to currency risk

Swap transactions not linked to balance sheet items

the spot result realised in cash terms is offset by the result arising from the

revaluation of the forward leg. the premium/discount is spread prorata temporis.

Over-the-counter closed forward transactions

future profits that are certain to arise are deducted from future losses that are

certain to arise in the same currency.

a provision is created for any excess losses; any excess profits are deferred.

2.5.3 valuation of transactions not subject to currency risk

Over-the-counter speculative forward transactions

provision is made for unrealised losses on forward transactions, which do not

represent the hedging of a spot position. unrealised gains are not accounted for.

the Bank only enters into financial instruments for hedging purposes.

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3. Detailed disclosures relating to asset headings

3.1 loans and advanCes to Credit institutions

the Bank has no affiliated credit institutions.

3.2 loans and advanCes to Customers

loans and advances to affiliated undertakings amount to eur 10 616 337. a loan of eur

10 500 000 to the fully owned subsidiary Kaytwo s.à r.l. is granted without interests.

3.3 deBt seCurities and other fixed-inCome seCurities

this heading includes debt securities, whether quoted on a recognised market or

not, issued by public bodies, credit institutions or other issuers and which are not

included under another balance sheet heading.

Quoted and non-quoted securities are analysed as follows:

2010 eur

2009 eur

securities quoted on a recognised market 492 837 839 710 275 145

securities not quoted on a recognised market 11 994 111 -

504 831 950 710 275 145


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3.3 deBt seCurities and other fixed-inCome seCurities (Continued)

all the debt securities and other fixed-income securities held are included in the

structural portfolio. the Bank uses the european central bank Monetary policy

operations to finance its eligible securities portfolio.

3.4 shares and other variaBle-yield seCurities

this heading includes shares, holdings in investment funds and other variable-yield

securities whether quoted on a recognised market or not which are not included in

fixed asset investments.

Quoted and non-quoted shares and other variable-yield securities are analysed as

follows:

2010 eur

2009 eur

securities quoted on recognised market 12 567 801 11 196 183

securities not quoted on recognised market 7 710 17 762

12 575 511 11 213 945

all shares and other variable-yield securities held are included in the structural

portfolio.

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3.5 shares in affiliated undertakings

as at december 31, 2010, the Bank holds at least 20% of the capital of the following

non-quoted undertakings:

% held net Book value eur

Capital and reserves

31/12/2010 (*) eur

result for the year

2010 eur

Kaupthing Life & Pension S.A. (**)35a, avenue J.f. Kennedyl-1855 luxembourg

100 % 2 985 905 4 893 090 33 926

Blackfish Capital Holdings Limitedthe old stablesrue à l’or, st peter portguernsey, gY1 1Qgchannel islands

100 % 1 (295 808) (46 973)

Blackfish Capital Management Limited5 savile row, londonW1s 3pd, united Kingdom

100 % 1 388 762 1 717 520 (1 055 652)

Kaytwo S.à r.l. (**)35a, avenue J.f. Kennedyl-1855 luxembourg

100 % 3 573 633 5 002 639 481 606

7 948 301

(*) including result of the year. (**) audited figures

at december 31, 2010, a cumulated value adjustment of eur 7 717 593 has been

accounted for in relation to Kaytwo s.à r.l. to reflect the estimated decrease in

value of its investments. another value adjustment of eur 1 309 872 has been

accounted for in relation to Blackfish capital Management ltd to reflect the

estimated decrease in value of its investments.


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3.6 movements on fixed assets

fixed assets (in eur)

gross value at the

Beginning of the finanCial

year

additions disposals gross value at the

end of the finanCial

year

Cumulative value

adjustment(*)

net Book value as at

31/12/2010

net Book value as at

31/12/2009

1. shares in affiliated undertakings

14 308 245 2 674 420 - 16 982 665 (9 034 364) 7 948 301 12 166 096

2. intangible assets

Software5 550 71125 550 7112

38 79838 798

--

5 589 510 5 589 510

(5 002 663) (5 002 663)

586 847586 847

1 260 247 1 260 247

3. tangible assetsof which:

a) Office equipment fixtures and fittings

b) Company cars

13 016 411

11 142 728

1 873 683

54 541

54 541

-

(722 941)

-

(722 419)

12 348 011

11 197 269

1 150 742

(11 684 688)

(10 626 651)

(1 058 037)

663 323

570 618

92 705

1 950 7161 386 613

564 103

TOTAL 32 875 368 2 767 759 (722 941) 34 920 186 (25 721 715) 9 198 471 15 377 059

(*) including lump sum provision

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3.7 other assets

this heading consists of the following:

2010 (*) eur

2009 eur

Vat receivable 269 626 3 387 404

guarantee called 2 540 706 2 802 369

other receivable 78 079 1 399 597

2 888 411 7 589 370

(*) these figures are disclosed including lump sum provision.

3.8 assets denominated in foreign CurrenCies

assets denominated in currencies other than eur have a total value of eur

121 688 772 as at december 31, 2010. the majority of the gap between non eur

denominated assets and non eur denominated liabilities is covered by

off-balance sheet instruments.


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4. Detailed disclosures relating to liability headings

4.1 amounts owed to Credit institutions

the Bank has no affiliated credit institutions.

4.2 amounts owed to Customers

amounts owed to affiliated undertakings amount to eur 15 472 172.

4.3 other liaBilities

this heading consists of the following:

2010 eur

2009 eur

payable on sales of securities 11 422 375 11 569 179

invoices payable - 3 000 000

guarantee payable 2 562 728 2 807 564

preferential creditors 727 285 525 372

other payables 3 386 123 2 630 945

18 098 511 20 533 060

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4.4 suBsCriBed Capital and share premium

on July 10, 2009, an extraordinary general meeting has voted a capital increase by

issuing 49 969 new shares with a nominal value of eur 1 000.

as at december 31, 2010, the subscribed and fully paid share capital of the Bank is

eur 100 000 000 made up of 100 000 shares with a nominal value of eur 1 000 each.

the Bank reduced the share premium for an amount of eur 3 525 748 to account for

valuation differences of its assets and liabilities at the date of its constitution. as at

december 31, 2010, the share premium amounts to eur 1 260 709.

4.5 legal reserve

in accordance with article 72 of the luxembourg company law, an amount of 5% of

net profits should be allocated to a non distributable legal reserve, until this reserve

reaches 10% of the subscribed capital. as a result, the annual general Meeting of

the Bank held on april 19, 2010 has allocated an amount of eur 401 728 to the legal

reserve, in respect of the 2009 financial year.


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4.6 Changes in shareholders’ equity

the movements of shareholders’ equity of Banque havilland s.a. may be

summarised as follows:

suBsCriBed Capital

eur

share premium

eur

legalreserve

eur

profit Brought forward

eur

Current year profit

eur

total own funds

eur

Balance at december 31, 2009

100 000 000 1 260 709 - - 8 034 554 109 295 263

transfer to legal reserve

- - 401 728 - (401 728) -

profit brought forward

- - - 7 632 826 (7 632 826) -

current year profit

- - - - 9 952 937 9 952 937

Balance at december 31, 2010

100 000 000 1 260 709 401 728 7 632 826 9 952 937 119 248 200

the appropriation of the 2009 result was approved by the annual Meeting of

shareholders on april 19, 2010.

4.7 liaBilities denominated in foreign CurrenCies

liabilities denominated in currencies other than eur have a total value of eur

107 066 599 as at december 31, 2010. the majority of the gap between non eur

denominated assets and non eur denominated liabilities is covered by

off-balance sheet instruments.

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5. Information relating to off-balance sheet items

5.1 Contingent liaBilities

contingent liabilities consist of guarantees and other direct substitutes for loans.

as at december 31, 2010, the Bank has granted a guarantee of eur 13 800 000

to its subsidiary Kaytwo s.à r.l.. those guarantees are required as a security for

certain interest and scheduled capital repayments which shall be paid by Kaytwo

s.à r.l. to its lenders (borrowing of eur 115 000 000).

5.2 Commitments

the Bank is member of the “association pour la garantie des dépôts,

luxembourg” (“a.g.d.l.”). the a.g.d.l. has for its exclusive object the

establishment of a system of mutual guarantee for cash deposits and

receivables from investment operations made by individuals and small

companies with members of the agdl without distinction of nationality or

residence.

the agdl reimburses to the deposit holder the amount of his guaranteed

cash deposits and to the investor the amount of his guaranteed receivable up to

eur 100 000 per guaranteed cash deposit and up to eur 20 000 per guaranteed

receivable arising from investment operations other than that relating to a cash

deposit.

as at december 31 2010, no provision has been made in respect of specific

liabilities arising under this scheme.


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5.3 open forward agreements at the BalanCe sheet date

the Bank is engaged in forward foreign exchange transactions (swaps,

outrights) in the normal course of its banking business. a significant portion of these

transactions has been contracted to hedge the effects of fluctuations in exchange

rates.

5.4 management and representative serviCes supplied By the Bank

the Bank’s services to third parties consist of:

• Management and advice on asset management;

• safekeeping and administration of marketable securities;

• credit activities;

• fund administration.

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6. Information relating to financial instruments

6.1 disClosures relating to primary finanCial instruments in

relation to non trading aCtivities

the following tables provide an analysis of the carrying amount of primary financial

assets and financial liabilities of the Bank into relevant maturity groupings based

on the remaining periods to repayment.

as at december 31, 2010, primary financial assets and liabilities are analysed as

follows (in eur):

finanCial assets

less than three

months

Bet ween three

months and one year

Bet ween one year and five

years

more than five years

no maturit y

total

cash, balances with central banks and post office banks

42 924 613 - - - - 42 924 613


108 082 124 - - - - 108 082 124

loans and advances to customers

36 273 622 8 963 34 044 720 - - 70 327 305

debt securities and other fixed-income securities

16 797 786 183 346 702 272 625 058 32 062 404 - 504 831 950

shares and other variable-yield securities

- - - - 12 575 511 12 575 511

TOTAL 204 078 145 183 355 665 306 669 778 32 062 404 12 575 511 738 741 503


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relation to non trading aCtivities (Continued)

finanCialliaBilities

less than three

months

Bet ween three months and one

year


years


total

amounts owed to central banks

393 600 000 - - - 393 600 000


1 640 409 - - - 1 640 409


151 252 023 33 376 997 - - 184 629 020


16 075 335 - - - 16 075 335

TOTAL 562 567 767 33 376 997 - - 595 944 764

the maturity mismatch between the assets and the liabilities of the Bank are mainly

related to the Bank’s bond portfolio. this portfolio is mainly made of floating rate notes

indexed on the 3 or 6 months libor (Mark to Market eur 459Mio). a small part (Mark

to Market eur 62 Mio equiv.) is made of fixed-coupon bonds and structured-coupon

bonds, which are interest sensitive. the duration of this fixed and structured-coupon

portfolio is 2.87 years. the funding of the portfolio is in big part made through the

ecB Monetary policy operations via Mro’s and ltro’s (medium and long term

refinancing operations). so a negative shift of 200 bps of the interest rate curve

would mean a decrease of about eur 1Mio of the present value of our assets and

liabilities. the portfolio is therefore well-balanced and slightly sensitive to the

fluctuation of short term rates. these bonds are sufficiently liquid should we

decrease our ecB funding.

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as at december 31, 2009, primary financial assets and liabilities are analysed as

follows (in eur):

finanCial assets

less than three

months

Bet ween three

months and one year


years


no maturit y

total

cash, balances with central banks and post office banks

62 424 144 - - - - 62 424 144


190 472 631 11 977 800 - - - 202 450 431

loans and advances to customers

41 279 494 - 30 387 596 12 663 366 - 84 330 456

debt securities and other fixed-in-come securities

66 028 329 131 748 540 500 395 323 12 102 954 - 710 275 145

shares and other variable-yield securities

- - - - 11 213 945 11 213 945

TOTAL 360 204 598 143 726 340 530 782 919 24 766 320 11 213 945 1 070 694 121


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finanCialliaBilities

less than three

months

Bet ween three months and one year


years


total

amounts owed to central banks

100 000 000 520 000 000 - - 620 000 000


2 124 780 - 3 912 752 12 614 192 18 651 724


222 375 940 170 737 67 361 089 - 289 907 766


19 054 425 - - - 19 054 425

TOTAL 343 555 145 520 170 737 71 273 841 12 614 192 947 613 915

the maturity mismatch between the assets and the liabilities of the Bank

are mainly related to the Bank’s bond portfolio. this portfolio has a 2.5 years

duration and is made of floating rate notes indexed on the 3 or 6 months

libor. the funding of the portfolio is made through the ecB Monetary policy

operations via Mro’s and ltro’s (medium and long term refinancing

operations) and matches therefore the interest rate risks of the assets. the portfolio

is therefore not sensitive to the fluctuation of short term rates. these bonds are

sufficiently liquid should we decrease our ecB funding.

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6.2 disClosures relating to derivative finanCial instruments

the following tables provide an analysis of the derivative financial assets and

liabilities of the Bank into relevant maturity groupings based on the remaining

periods to repayment. as at december 31, 2010, over-the-counter derivative

financial assets and liabilities are analysed as follows (in eur):

finanCialassets(notional amounts)

less than three

months

Bet ween three

months and one year


years

total positive fair value

Instruments linked to exchange rates

- forward currency transactions- currency swap contracts

374 280

62 531 977

-

-

-

-

374 280

62 531 977

9 465

425 586

TOTAL 62 906 257 - - 62 906 257 435 051

finanCialliaBilities(notional amounts)

less than three

months

Bet ween three

months and one

year


years

total positive fair

value


- forward currency transactions

- currency swap contracts

383 485

64 679 275

-

-

-

-383 485

64 679 275

9 281

425 500

TOTAL 65 062 760 - - 65 062 760 434 781


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as at december 31, 2009, over-the-counter derivative financial liabilities are

analysed as follows (in eur):

finanCialliaBilities(notional amounts)

less than three

months

Bet ween three

months and one year


years

total negative fair

value


- currency swap contracts 2 505 466 - - 2 505 466 114 043

as of december 31, 2009, the Bank has no derivative financial assets and the net fair

value of derivative is a loss of eur 114,043.

6.3 disClosures relating to Credit risk

the Bank is exposed to credit risk mainly through its lending, investing and hedging

activities and in cases where the Bank acts as an intermediary on behalf of customers

and issues guarantees.

the Bank’s primary exposure to credit risk arises from its loans and advances and

debt securities. the credit exposure in this regard is represented by the carrying

amounts of the assets in the balance sheet.

the Bank is also exposed to off-balance sheet credit risk through guarantees issued and

instruments linked to exchange, interest and other market rates (forward transactions,

swap and option contracts). the credit exposure in respect of instruments linked to

exchange, interest and other market rates are equal to the equivalent at risk according

to the initial risk approach.

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6.3 disClosures relating to Credit risk (Continued)

the credit risk exposure as at december 31, 2010 can be analysed as follows (in eur):

2010 gross risk exposure

2009 gross risk exposure

loans and advances to credit institutions 108 082 124 202 450 431

loans and advances to customers 70 327 305 84 330 455

debt securities and other fixed-income securities 504 831 950 710 275 145

shares and other variable-yield securities 12 575 511 11 213 945

contingent liabilities 16 075 335 19 054 425

derivativesinstruments linked to exchange rates 2 559 380 50 261

714 451 605 1 027 374 662

loans and advances to customers are usually secured by cash, listed investments,

third party guarantees and mortgage on real estate property.


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6.3 disClosures relating to Credit risk (Continued)

credit risk concentrations on total on and off-balance sheet are analysed as

follows:

2010 eur

2009 eur

corporates 68 493 676 105 994 537

credit institutions 592 047 609 912 880 293

individuals 9 961 385 8 499 832

public sector 43 948 935 -

714 451 605 1 027 374 662

credit institutions, corporates, individuals and public sector are almost all from

oecd countries.

6.4 information on the management of other risks

Liquidity Risk

a cash management system enables the Bank to achieve a daily automatic

“vostro-nostro” reconciliation of its main correspondent accounts.

the Bank is able to identify possible cash flow errors, to determine adjusted

opening balances and generate an accurate liquidity gap to better channel

short-term liquidity needs.

the asset-liability committee (alco) receives a daily report on the overall liquidity

situation of the Bank, the upcoming liquidity risks and the cash buffer.

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6.4 information on the management of other risks (Continued)

Interest Rate Risk

the Bank monitors its interest rate risk by analysing the different maturity gaps in

the balance sheet.

the Bank is not exposed to interest rate risks due to the nature of its business. less

than 5% of the assets are fixed rate denominated.

stress tests are performed monthly by analysing parallel curve shifts.

Exchange Rate Risk

the Bank’s main exposure to foreign exchange risk arises from usd, JpY, chf, dKK,

gBp and isK.

a foreign exchange position system provides an overall view of the currency risk and

related profit or loss impact by business line, turnover and margins.

the implementation of a Var model gives a view of the potential loss of the

overnight position.

alco (asset-liability committee) members control the exchange rate risk through

the daily report received from the treasury department.

Market Risk

the Bank is subject to market risk through its portfolio of debt securities.

the new reporting includes the liquidity of the underlying, the geographical

diversification, the industry sector diversification and credit risk measures.

guidelines are reviewed and approved by the Board of directors on a yearly basis.


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7. Information ON THE PROFIT AND LOSS ACCOUNT

7.1 geographiCal analysis inCome

interest receivable and similar income, commission receivable and net profit on

financial operations mainly originate from Western europe.

7.2 other operating inCome

other operating income are analysed as follows:

2010 eur

2009 eur

guarantees called-recovered 2 396 187 2 807 564

provisions reversed 1 317 789 1 572 372

settled claims - 499 176

free re-invoicing 549 297 -

gain on sale of fixed assets 84 858 -

other 1 194 064 -

TOTAL 5 542 195 4 879 112

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7.3 other operating expenses

other operating charges are analysed as follows:

2010 eur

2009 eur

loss on fixed assets 17 164 -

guarantees paid-recovered 2 396 187 2 807 564

clients write offs 220 220 646 713

provision for restruction 6 652 000 -

other 836 590 276 233

10 122 161 3 730 510


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7.4 net value adjustments in respeCt of loans and advanCes and

provision for Contingent liaBilities and for Commitments

this heading is analysed as follows:

2010 eur

2009 eur

specific value adjustments on loans and advances to credit institutions

additions

reversals

-(499 216)

598 142(10 730 123)

specific value adjustments on loans to customers

additions

reversals

4 103 006(12 458 806)

11 780 056(3 953 908)

lump sum provision

additions

reversals

2 500 000(930 000)

2 000 000 -

(7 285 016) (305 833)

as at december 31, 2010, the lump sum provision amounts to eur 3 570 000.

7.5 tax information

the bank is liable to taxes on income and net assets in respect with the

luxembourg legislation.

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8. Other Information

8.1 personnel

the average number of persons employed during the financial year/period was as

follows:

2010 2009

Management 5 7

employees 69 98

74 105

8.2 administrative, managerial and supervisory Bodies

remuneration paid to the various bodies of the Bank during the financial year/period

was as follows:

2010 eur

2009 eur

Management 528 458 793 793

the amount of loans and advances granted to members of the Management and the

Board of directors and commitment entered into on their behalf by way of guarantees

of any kind amounted to eur 11 500 at december 31,2010. (2009: eur 377 916).


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8.2 administrative, managerial and supervisory Bodies (Continued)

three Board members received emoluments in respect of their duties totalling to a

gross amount of eur 292 500 related to exercise 2009 and 2010. it was decided by the

annual general Meeting held on april 19, 2010.

8.3 fees Billed By priCewaterhouseCoopers s.à r.l., luxemBourg and

other memBer firms

fees billed (excluding Vat) to the Bank by pricewaterhousecoopers s.à r.l.

luxembourg and other member firms of the pricewaterhousecoopers

network during the year/period are as follows:

2010 eur

2009 eur

audit fees 183 400 158 000

audit-related fees 197 093 256 000

tax fees 19 350 5 700

all other fees 22 300 6 000

422 143 425 700

such fees are presented under other administrative expenses in the profit and loss account.

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BanQue haVilland s.a.

35a, avenue J.f. Kennedy •l-1855 luxembourg •t. +352 463 131 •f. +352 463 132 •w. banquehavilland.comr.c.s. luxembourg B 147029 •t.V.a. lu23366742

BanQue haVilland s.a. - uK representatiVe office

5 savile row •london W1s 3pd •t. +44 (0) 20 7087 7999 •f. +44 (0) 20 7087 7995 •w. banquehavilland.com

08-1FI0511

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08-1FI0511

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annual report 2010 def · 5 annu a l repo r t i 2010 ìììììì last year was a successful year...

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