Reporting date: 31 December 2017 · Transaction Manager and Head of Strategic Marketing for Center Solutions at Zurich Financial Services in Zurich. Olivier de Perregaux is a Swiss

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Reporting date: 31 December 2017

Reporting date: 31 December 2017

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Content

Group structure and ownership 4

Board of Directors 4

Executive Board 7

Basis and components of compensation for the members of the Board of Directors and the Executive Board 7

Components of the remuneration 8

Risk management framework and process 9

Auditing body 11

Cover image: Detail of the inlaid parquet floor in the South passage adjacent to the Ballroom on the second floor piano nobile of the Liechtenstein City Palace,

executed by Michael Thonet © LIECHTENSTEIN. The Princely Collections, Vaduz–Vienna

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Corporate Governance

The binding principles of corporate governance are set out in the company’s articles of incorporation, the organizational and

governance regulations, as well as in the regulations of the Board of Directors Committees and are defined in detail in corresponding

directives. As a bank domiciled in Switzerland, we are subject to supervision by FINMA and are therefore required to implement all

applicable regulations. The following information on corporate governance is in accordance with FINMA Circular 16/1 (Annex 4).

Group structure and ownership

LGT Bank (Switzerland) Ltd. is ultimately owned by LGT Group Holding Ltd. LGT Group Holding Ltd. is 100 percent controlled by LGT

Group Foundation. LGT Group Foundation is 100 percent controlled by the Prince of Liechtenstein Foundation (POLF), the beneficiary

of which is H.S.H. Reigning Prince Hans-Adam II von und zu Liechtenstein.

The participations of LGT Bank (Switzerland) Ltd. are not relevant to the overall assessment of the company, and no consolidated

financial statements are therefore prepared. Participations are listed on page 25 of the annual report.

Board of Directors

The composition of the Board of Directors as at 31 December 2019 can be found in the table below. No member of the Board of

Directors has an executive function at the bank. Three of six board members (H.S.H. Prince Hubertus von und zu Liechtenstein, Hans

Roth and Gabrielle Nater-Bass) fulfill the requirements as regards independence in accordance with FINMA Circular 17/1. The other

three members represent the shareholder.

Board of Directors

Board member Since Committee membership

Thomas Piske, Chairman 2006 Compensation Committee, Nomination Committee

Olivier de Perregaux, Vice Chairman 2003 Audit and Risk Committee

H.S.H. Prince Max von und zu Liechtenstein 2006 Compensation Committee, Nomination Committee

H.S.H. Prince Hubertus Alois von und zu Liechtenstein 2017 Audit and Risk Committee

Gabrielle Nater-Bass 2017 Audit and Risk Committee

Hans Roth 2013 Audit and Risk Committee

Thomas Piske

(1958) has been CEO LGT Private Banking since 2009. After completing his studies in economics at the University of Innsbruck, he

joined LGT Bank in Liechtenstein Ltd. in Vaduz in 1986. In 1998 he became a member of the general management and in 2001 was

appointed president of the general management of LGT Bank in Liechtenstein as well as CEO Private Banking Europe. Thomas Piske

is an Austrian national. He was Chairman of the Liechtenstein Bankers Association between 2004 and 2006.

Olivier de Perregaux

(1965) has been CFO of LGT since 1999. After completing a Master of Economics at the University of St.Gallen, he worked as a

consultant for McKinsey & Company in Zurich and New York between 1988 and 1996. From 1997 to 1999 he was Senior

Transaction Manager and Head of Strategic Marketing for Center Solutions at Zurich Financial Services in Zurich. Olivier de Perregaux

is a Swiss national.

H.S.H. Prince Max von und zu Liechtenstein

(1969) has been CEO of LGT since 2006. He began his career in 1993 as an Investment Analyst and Associate at J.P. Morgan

Partners in New York. In 1998, he returned to Europe to work for the private equity group Industri Kapital (today IK Investment

Partners). In 2000, he re-joined J.P. Morgan Partners, first as a director in London, and from 2003 onwards as head of the company’s

German office. He holds a degree in business studies from the European Business School and completed an MBA at Harvard

Business School. H.S.H. Prince Max von und zu Liechtenstein is a Liechtenstein national.

H.S.H. Prince Hubertus Alois von und zu Liechtenstein

(1971) is Chairman of Triagonal, a company specializing in e-learning. Prior to this, he was Co-founder and CEO of the company. He

studied law and business administration at the University of Zurich and holds a master’s degree in e-business development from the

Universitat Politècnica de Catalunya in Barcelona. He has been working in the educational industry for numerous years, including an

international role with Laureate International Universities and Sommet Education as Marketing and Sales Director DACH,

Netherlands and Scandinavia. H.S.H. Prince Hubertus Alois von und zu Liechtenstein is a Liechtenstein national.

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Gabrielle Nater-Bass

(1968) has been a partner at the law firm Homburger in Zurich since 2006 and is a member of the firm’s Board of Directors. She

studied law at the University of Zurich and was admitted to the bar in 1996. In 1997, she joined Homburger as an associate.

Between 1998 and 2000, she completed her LL.M. at the University of Virginia School of Law (USA) and worked as a foreign

associate at the international law firm WilmerHale in Washington D.C. and London. In 2000, she returned to Homburger in

Switzerland. Gabrielle Nater-Bass is a Swiss national.

Hans Roth

(1953) was CEO of LGT Bank (Switzerland) Ltd. from 2004 until 2013. He studied economics at the University of Zurich. From 1978

until 1990, he worked at Schweizerische Kreditanstalt in Zurich. Following this, he joined Schweizerischer Bankverein in Basel, where

he was Head of Institutional Services, and from 1995 until 1998, was Head of Corporate Finance Services for Swiss companies. In

1998 Hans Roth joined Swiss Trust Company, where he was CEO of STG Asset Management Ltd. until it was sold to LGT Group in

2003. Hans Roth is a Swiss national.

Other activities and functions

The non-independent members of the Board of Directors hold further mandates within LGT Group. Outside LGT Group, Olivier de

Perregaux has been a member of the Board of Directors of VZ Holding Ltd. since 2014. Hans Roth is on the Board of Trustees of the

following foundations: GEMINI Collective Foundation, Pensimo investment foundation, Fondation Schlumberger pour l’Education

et la Recherche and Fondation Schlumberger pour la Musique et Culture. H.S.H. Prince Hubertus von und zu Liechtenstein is on the

Board of Directors of LGT Bank Ltd., Vaduz, and Chairman of Triagonal AG in Liechtenstein. Gabrielle Nater-Bass is on the Board of

Directors of LGT Bank Ltd., Vaduz, and of Swiss Prime Site AG, Olten. She is also a member of Swiss Prime Site AG’s Nomination and

Compensation Committee. Further-more, Ms. Nater-Bass is President of the Arbitration Court of the Swiss Chambers’ Arbitration

Institution and Board Member of the Swiss Arbitration Association. She is listed on the panel of arbitrators of the International

Chamber of Commerce (ICC) in Paris, the Hong Kong International Arbitration Centre (HKIAC) and the Singapore International

Arbitration Centre (SIAC).

Internal organization

The Board of Directors consists of a minimum of three members. It is responsible for the overall direction of the bank as well as

the supervision and control over the operational management of the business. It is the ultimate decision-making authority and

determines the strategy and organization of the bank. The Board of Directors has delegated the management of the day-to-day

business to the Executive Board. The Board of Directors constitutes itself. The presence of a majority of members is necessary for

resolutions to be passed. Resolutions are passed by a majority of votes; in the case of a tied vote, the Chairman has the casting vote.

In urgent cases, resolutions can be precipitated by means of circular letter. There is no division of responsibilities within the Board of

Directors; all resolutions are passed by the full Board of Directors. The Board of Directors currently consists of six non-executive

members. It forms the following standing committees. The committees organize themselves and each consist of a minimum of two

members of the Board of Directors.

Audit and Risk Committee

The Audit and Risk Committee consists of four members of the Board of Directors. It is chaired by Olivier de Perregaux. The other

members are H.S.H. Prince Hubertus von und zu Liechtenstein, Hans Roth and Gabrielle Nater-Bass.

Compensation Committee

The members of the Compensation Committee are H.S.H. Prince Max von und zu Liechtenstein and Thomas Piske.

Nomination Committee

The members of the Nomination Committee are H.S.H. Prince Max von und zu Liechtenstein and Thomas Piske.

The Executive Board is composed of the CEO, the heads of the business areas and the COO. The members of the Executive Board

report directly to the CEO. The members of the Executive Board deputize for each other.

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Assignment of competencies

The Board of Directors is responsible for the company’s overall direction, supervision and control. In addition to the duties and powers

prescribed in the articles of incorporation and by law, the Board of Directors in particular has the following non-transferrable duties:

Approval of the mission statement, strategy and the organizational structure up to the level of the Executive Board’s direct

reports; approval of strategic partnerships with other banks/institutions

Approval of medium-term planning, the annual budget including staff ceiling and the financial statement

Decision-making regarding the founding, purchase, sale or dissolution of subsidiaries

Establishing credit authority and decision-making regarding large exposures (including concentration risk)

Approval of capital planning and issuing investment restrictions for own securities

Establishing expenditure authority and decision-making regarding investments that exceed the scope of the Executive Board

Determining the security policy and the principles for risk management and control

Appointing or removing members of the Executive Board, management and the Head of Internal Audit as well as responsibility

for succession planning for the Board of Directors, the Executive Board and Internal Audit

Establishing a list of reports that are to be presented to the Board of Directors periodically

Defining the compensation policy as well as determining the compensation of the Board of Directors and members of the

Executive Board, determining the compensation of the statutory auditor and the Head of Internal Audit

The Audit and Risk Committee has no decision-making authority, but is entitled to make recommendations. Resolutions are passed

by the full Board of Directors. The duties and powers of the Audit and Risk Committee are set out in a regulation approved by the

Board of Directors. Within the framework of its specified purpose, the Audit and Risk Committee monitors and assesses the

following areas:

Financial statements

Internal control system (ICS)

Effectiveness of the statutory auditors as well as their interaction with Internal Audit

Capital and liquidity plan

Risk management

Compliance matters

The Compensation Committee is responsible for preparing the decisions of the Board of Directors regarding the compensation policy

and compensation of the members of the Board of Directors and the Executive Board. The duties and powers of the Compensation

Committee are set out in a regulation approved by the Board of Directors.

The Nomination Committee is responsible for preparing the decisions of the Board of Directors with regard to the appointment

of the members of the Board of Directors, the Executive Board incl. the CEO,CRO and Head of Internal Audit. The duties and powers

of the Nomination Committee are set out in a regulation approved by the Board of Directors.

The Executive Board carries out all tasks of the executive body that are not delegated by law, the articles of incorporation or

internal guidelines to other bodies. It is responsible for the implementation of the strategy and the results thereof, as well as for

the execution of the resolutions of the Board of Directors. All members of the Executive Board report directly to the CEO, manage

their business area in accordance with the objectives of the bank and have overall responsibility for their areas. The Executive

Board informs the Board of Directors regularly and in a timely manner of business developments as well as of extraordinary events.

Information and control instruments pertaining to the Executive Board

A list of reports has been set out by the Board of Directors to ensure the flow of information between the Executive Board and the

Board of Directors. It contains the reports to be presented periodically to the Audit and Risk Committee as well as the Board of

Directors. At the ordinary meetings of the Board of Directors, the members of the Executive Board provide information regarding all

important business and submit proposals for business activities that are under the remit of the Board of Directors. Reports containing

information on audit, accounting, risk, compliance and legal matters are presented to the Audit and Risk Committee. The financial

reporting produced for submission to the Board of Directors comprises an income statement for the period with comparisons to

budgeted and prior-year amounts, the balance sheet developments compared to the previous year-end as well as explanations and

comments regarding the performance of the business. The risk report provides comprehensive information about the overall risk

situation of the bank. In addition to the status of the utilization of limits per risk type set out by the Board of Directors, the report

also contains detailed information regarding risk-mitigating measures that have been introduced or are planned, as well as an

assessment of potential future risks. A detailed description of the risks identified and how these risks are addressed can be found on

page 8 ff. When necessary, the Executive Board informs the Chairman of the Board of Directors, also outside of the ordinary

meetings, in a timely manner of all important business transactions. The information and control instruments also include the annual

reports of the statutory auditors required by banking and stock exchange legislation. In addition, the independent Internal Audit

department reports periodically to the Audit and Risk Committee. The duties and rights of Internal Audit are set out in a separate

regulation. Further to this, annual reports assessing compliance risks, the activities of the compliance department and risk control, as

well as the bank’s risk situation are submitted to the Audit and Risk Committee.

Internal Audit has an unlimited right to information and to inspect documents from all areas of the bank. The Head of Internal Audit

reports directly to the Chairman of the Board of Directors. The division of activities between the external auditors and Internal Audit

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is coordinated on an annual basis with the Chairman of the Board of Directors. The external auditor prepares an annual plan for the

auditing of the financial statements as well as the regulatory audits, which it submits to FINMA and presents to the Audit and Risk

Committee. In addition, the Chairman of the Board of Directors as well as the CEO, in consultation with the Chairman of the Board

of Directors, may mandate Internal Audit to conduct special reviews outside of the planned auditing activities.

Executive Board

Executive Board

Board member Function

Heinrich Henckel CEO

Rémy L.M. de Bruyn Head Private Banking International

Florian Dürselen Head Private Banking Europe

Bruno Piller Head Private Banking Switzerland

Wolfgang Tracht COO

Dr. Heinrich Henckel

(1961) has been CEO of LGT Bank (Switzerland) Ltd. since 2013. After completing his studies and receiving his PhD in law at the

University of Freiburg (Switzerland) and being admitted to the bar in Zurich, he worked for the Swiss Stock Exchange and later for

Credit Suisse Group in Zurich. From 1995 until 1998 he was a lawyer with Baker & McKenzie in Hong Kong and Indonesia. In 1998

he joined the Swiss Stock Exchange (SIX Group from 2007 onward) in Zurich, where he was a member of the Executive Board until

2008, and CEO from 2000 until 2007. In 2009 he joined LGT Bank (Switzerland) Ltd. as a member of the Executive Board. Heinrich

Henckel is a Swiss national.

Rémy L.M. de Bruyn

(1962) has been Deputy CEO and Head Private Banking International at LGT Bank (Switzerland) Ltd. since 2013. After completing

his Honors Business Administration degree at the University of Western Ontario (Canada), he began his career in 1985 at Clariden

Bank in Zurich and Clariden Asset Management in New York. In 1990 he joined Credit Suisse Holding in Zurich and in 1992 returned to

Clariden Bank in Zurich, where he was appointed to the Executive Board in 2000. In 2008 he joined LGT Bank (Switzerland) Ltd. as a

member of the Executive Board. Rémy L.M. de Bruyn is a dual Swiss and Canadian national.

Dr. Florian Dürselen

(1969) has been a member of the Executive Board and Head Private Banking Europe at LGT Bank (Switzerland) Ltd. since 2013.

He studied law at Ruprecht Karls University in Heidelberg (Germany) and at Johann Wolfgang Goethe University in Frankfurt am

Main (Germany), where, in addition to working as an attorney, he also received his PhD in law. In 2002, he started his banking

career in Switzerland during which time he completed his Executive MBA at the University of St.Gallen (HSG). In 2007, he joined LGT

Bank Ltd. in Vaduz, where he was a member of the Executive Board from 2010 until 2013. Florian Dürselen is a Swiss national.

Bruno Piller

(1963) has been a member of the Executive Board and Head Private Banking Switzerland at LGT Bank (Switzerland) Ltd. since 2014.

He received his diploma from the Swiss Banking School in 1998 and completed the INSEAD International Executive Program and

the Advanced Management Program in Fontainebleau (France) and Singapore in 2000 and 2014. From 2001 until 2003, he was a

member of the Executive Board of STG Asset Management Ltd. in Basel. After the acquisition of the company by LGT in 2004, Bruno

Piller was Regional Head Central Switzerland until 2014. Bruno Piller is a Swiss national.

Wolfgang Tracht

(1973) has been COO and a member of the Executive Board of LGT Bank (Switzerland) Ltd. since July 2017. He studied mathematics

at TU Dortmund University (Germany) and began his career as a project manager at Dresdner Bank Ltd. in Frankfurt. In 2004 he

moved to Dresdner Bank (Switzerland) Ltd. as Business Unit Head Organization and in 2009, oversaw its integration into LGT as

Head of Projects and Development. Wolfgang Tracht has been working at LGT Bank (Switzerland) Ltd. since 2010, initially as Head

of Product & Process Management, and from 2013 until 2017 as Head of Business & Sales Development. Wolfgang Tracht is a Swiss

national.

Other activities and functions of the members of the Executive Board

Heinrich Henckel is Chairman of the Association of Foreign Banks in Switzerland, Member of the Board of Directors of

the Swiss Bankers Association and a member of the Board of economiesuisse.

No other significant functions are held.

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Basis and components of compensation for the members of the Board of Directors and the Executive Board

LGT is a family-run company built on the values of long-term commitment, stability and independence. LGT relies on the

achievements, ideas and dedication of its employees to meet the needs of its clients and implement its business strategy.

An appropriate, sustainable and market-based remuneration model forms a central part of the attractive and inspirational

working environment that LGT offers.

The remuneration model of LGT and LGT Bank (Switzerland) Ltd. is based on the following principles:

The compensation model supports the implementation of LGT’s corporate values and objectives and takes the risk elements

into consideration.

Excellent performance, outstanding dedication and successes achieved with integrity will be rewarded.

The compensation model is focused on long-term business success.

Success is evaluated on a long-term basis. Failure on the part of employees in key positions can also result in salary deductions.

LGT’s fundamental salary policy guidelines are developed and monitored by the “HR Compensation Committee (HRCC)” of the

Foundation Board. At the LGT Bank (Switzerland) Ltd. level, the implementation of the guidelines is monitored by the

“Compensation Committee of the Bank (CCB)".

The CCB evaluates the implementation of the guidelines and the growth, suitability and composition of the overall compensation.

It also determines whether the remuneration is based on the remuneration principles. In addition, it ensures that the current national

regulatory requirements are met. It reports annually to the Board of Directors and submits changes to the Board of Directors for

approval.

The total amount of remuneration paid by the bank is approved by the Board of Directors on the basis of a recommendation from

the CCB. The remuneration of the Executive Board is decided in accordance with the following process:

Decision process

Beneficiary Recommended by Approved by

CEO of the bank CCB Board of Directors of the bank

Members of the Executive Board CEO of the bank Board of Directors of the bank

Components of the remuneration

The compensation model of the bank consists of a fixed basic salary, a variable remuneration component and benefits.

Basic salary

The fixed monthly basic salary is paid in cash in 13 installments to compensate for performing the tasks relating to their position,

for their personal abilities and skills, as well as leadership responsibilities. LGT regularly checks the basic salaries against market

benchmarking studies to ensure that they are compatible with the market and makes any necessary changes. LGT does not grant

any automatic salary increases.

Variable remuneration

As a basic principle, the total variable remuneration is based on the business success of LGT and the bank and reflects the bank’s risk

profile. In order to take account of exceptional developments, the final decision about the total amount is made during the approval

process at the discretion of the HRCC.

The variable remuneration can be paid directly as an annual cash bonus or can take the form of options as part of the Long Term

Incentive Scheme (LTIS). The relationship between the direct and the deferred remuneration (LTIS and cash incentive) for members

of the Executive Board is in accordance with the regulatory requirements.

Parts of the variable remuneration can be subject to a forfeiture clause. Where appropriate, claims to variable remuneration (the cash

bonus) may be forfeited, for example, in the case of extraordinary dismissal, serious breaches of the law and significant financial

losses made by the Group.

Cash Incentive (bonus)

All bank employees can benefit from the cash incentive. The individual bonus amount is linked to performance based on quantitative

and qualitative criteria. The quantitative criteria relate to performance at Group, bank, business sector and individual level, which

is measured against predefined target values. The qualitative criteria include risk behavior, compliance with the code of conduct,

specialist expertise, social skills, personality and management ability. These are assessed on the basis of the skills in the employee

qualification system (BSC). This approach allows the bank to reward excellent performance, outstanding dedication and successes

achieved with integrity.

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Deferred incentive (LTIS – Long Term Incentive Scheme)

In order to enable employees who have specifically promoted the growth of the company by means of their position, their

knowledge or their abilities to participate in the company’s long-term success, LGT has set up an internal Long Term Incentive

Scheme (LTIS) based on options. This reinforces the links between the interests of the employees and those of the owners, which

is an important aspect of LGT’s philosophy.

The long-term structure of the LTIS rewards loyalty to the company and, at the same time, encourages a conscious and cautious

approach to opportunities and risks for the benefit of the entire company and the cohesion of the Group. The LTIS allows plan

participants to take part in the development of the economic value added, which is measured using a predefined formula. The

calculation is based on the operating profit, the performance of the Princely Portfolio and the Group’s capital costs.

The LTIS options are granted annually and can be exercised after a three-year blocked period up to and including the seventh year.

Benefits/Fringe benefits

Benefits are another component of the LGT compensation model. These can take the form, for example, of a pension, insurance,

discounts on bank products and the right to a sabbatical. LGT works with different pension companies that make payments into

insurance products or funds under trusteeship.

Remuneration of the Executive Board

The remuneration paid to the Executive Board is checked regularly by the CCB to ensure that it is appropriate. In order to reinforce

the links between the interests of the management and the owners and to ensure that the management focuses on long-term

added value, the members of the Executive Board receive variable remuneration, which is made up of the cash incentive and the

LTIS. The conditions governing the cash incentive and the LTIS apply, while the bonus amount can be adjusted on a discretionary

basis.

Risk management framework and process

LGT’s Corporate Governance framework is incorporated along three lines of defense. The first line of defense, business

management, is required to maintain effective processes and systems to manage its risks, including comprehensive internal controls.

Business management has appropriate supervisory controls in place designed to identify control weaknesses and inadequate

processes. The second line of defense are independent from the business and report directly to the CEO. These control departments

provide independent risk monitoring, including setting risk limits and protecting against non-compliance with applicable laws and

regulations. The third line of defense, Internal Audit, reports to the Audit and Risk Committee of the Board of Directors and

evaluates the overall effectiveness of governance, risk management and the control environment, including the assessment of how

the first and second lines of defense meet their objectives.

The Enterprise Risk Management Framework (ERM) of LGT comprises three key elements. The risk strategy, which details the overall

approach to risk-taking desired by the Board, and the risk appetite and risk governance, which translate the risk strategy into

operating standards for both the risk organization and the required risk processes.

Consistent with the overall business strategy, the aim of risk management is to achieve an appropriate balance between risk and

return and minimize potentially adverse effects on the financial performance of LGT.

Several risk management policies are designed to identify, assess and analyze the different risk categories, to set guidelines,

appropriate risk limits and controls (risk mitigation) and to monitor the risks and adherence to limits with reliable and up-to-date

information systems. The risk policy, risk process and risk organization is reviewed regularly.

The Board of Directors is responsible for LGT’s ERM and its regular review. On a timely basis risk monitoring is conducted by the line

management. The overall responsibility in this regard lies within the Executive Board.

Risk Controlling & Security as an independent control function is part of the second line of defense. It monitors the risk profile

adopted by the bank. In accordance with the statutory and regulatory provisions as well as requirements applicable internally and

on a Group-wide basis, it provides the risk information required to carry out risk monitoring, and establishes the basis of the

company’s risk policy, risk appetite and risk limits for approval by the Board of Directors. The responsibilities of Risk Controlling &

Security include, in particular, designing and implementing adequate risk monitoring systems, as well as stipulating and applying

the basis and methods for measuring risk (e.g. assessment and aggregate methods, validation of models). The remuneration

scheme of Risk Controlling & Security does not support incentives which could lead to conflicts of interests.

The Compliance department (Compliance) as an independent control function is part of the second line of defense. It identifies

and oversees compliance risks and initiates risk mitigating or risk reducing measures. It releases compliance relevant guidelines and

conducts check on their adherence. Compliance trains and supports front employees in their area of responsibility. It reports to the

Executive Board and the Board of Directors. Compliance supports/advises the Executive Board in the handling of business cases and

the decision regarding guidelines settings and measures to be taken. Compliance is responsible for the monitoring of requirements

and developments on the part of the supervisory authorities, the legislature and other organizations. It also ensures that directives

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and regulations are updated in line with regulatory developments. The remuneration scheme of Compliance does not support

incentives which could lead to conflicts of interests.

The Head Finance & Accounting ensures that disclosure of LGT’s financial performance meets regulatory requirements and corporate

governance standards. Finance & Accounting manages the financial control functions, including financial accounting, controlling,

forecasting, planning and reporting processes as well as LGT’s tax affairs and treasury and capital management.

Internal Audit independently assesses the adherence to LGT’s strategy, the effectiveness of governance, risk management and

control processes at LGT, including compliance with legal, regulatory and statutory requirements, as well as with internal guidelines

and contracts.

Risk assessment

Within the context of its annual risk analysis, the Board of Directors considers the risks to which LGT is currently exposed. In addition,

the assessment also included the provisions for risk-reduction measures and internal controls. These include ensuring the continuous

monitoring and assessment, as well as the correct reporting of the effects of these risks in the financial accounts. Details of the risk

management system are provided in the following.

Risk management

The Board of Directors has defined its approach to risk in a corporate risk policy. The individual types of risk are clearly defined and

limits are stipulated for them. Adherence to these limits is continually monitored. Value adjustments and provisions are reviewed

and modified on an annual basis. The Board of Directors and the Executive Board are regularly informed in level appropriate reports

about the Bank’s asset, financial, liquidity and earnings positions, as well as the risks associated with them.

While the tasks involved with risk management are delegated to the operating units, the overall risk direction is the responsibility

of the Executive Board. The Risk Controlling & Security and Compliance monitor compliance with the limits specified by the Board

of Directors. Risk controlling for client credit risk is outsourced to the Financing department of LGT Bank Ltd., Vaduz.

Strategic and business risk

Strategic risk is the danger of losses arising from strategic decisions, changes in the economic and competitive environment,

inadequate or insufficient implementation of strategic objectives, or lack of capability to adjust to changing economic needs.

Moreover, it comprises the danger of losses resulting from the dependency on highly qualified staff.

Business risk arises from unexpected changes in market conditions having a negative impact on profitability.

Market risk

The Bank’s operating activities make it primarily exposed to interest rate movement and foreign currency risk. The risks arising from

on-balance-sheet and off-balance sheet business are centrally monitored by the Bank’s Asset and Liability Management Committee,

and are managed by the Treasury Department of LGT Bank Ltd., Vaduz. Foreign currency holdings derive principally from the

processing of securities transactions and foreign currency transactions, as well as the payment of commissions in foreign currencies.

While gap and sensitivity limits are employed in the interest rate sector to limit risk, currency management is carried out based on

volume and sensitivity limits. Further market risks, such as position risks contained in debt issues or ordinary shares, are subject to

limits. Money market paper and investment securities are monitored continually.

Positions in derivative financial instruments are mainly taken for clients and are covered by corresponding mirror positions with LGT

Bank Ltd., Vaduz. In addition, derivatives are used for hedging interest rate risks of financial instruments. Forward foreign exchange

contracts are taken out to cover currency positions from balance sheet operations.

Credit risk

Lending is carried out primarily on a covered basis for private client business. The Bank has a conservative lending policy for which

the same guidelines apply to both monetary and banking products. The risks arising from interbank business are limited by largely

restricting such transactions to within the LGT Group. Conservative limits are imposed for external banks. Country risk is limited in

accordance with the regulatory provisions. All limits are continually monitored.

The Bank also counteracts the creation of concentrated and country risk by strictly limiting default risk. It uses an internal rating

procedure as a tool for efficient risk management and for the risk-adjusted calculation of terms and conditions. The Executive Board

is kept regularly up-to-date with developments on the risk situation through detailed reports.

Liquidity and refinancing risk

Liquidity risk management pursues the goal of ensuring the ongoing and permanent ability to meet financial obligations, especially

at times of specific bank and/or market-wide stress, during which secured and unsecured financing facilities are sharply impaired.

Liquidity risk management is effectively integrated in the bank wide risk management processes. The ability and willingness to meet

obligations is monitored.

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Operational risk

Operational risk is the risk of losses caused by inappropriate or defective processes and systems, human behavior and negative

external influences. Rules and directives on organization and control are in place to minimize these risks. Managing operational

risk is the task of all employees. In doing so, they are supported by an ICS. The effectiveness of the ICS is checked regularly by the

Internal Audit Department, which informs the Board of Directors about the results of its work directly. The bank employs various

tools to identify, limit and monitor operational risks such as a database of losses, key risk indicators and an annual risk analysis.

The risk analysis serves to spot and assess material risks, evaluate the appropriateness of measures currently in place and identify

additional measures if required.

Regulatory risk

Regulatory risk is the overall risk that a change in laws and regulations or a non-compliance with them will materially impact a

security, business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase

the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape. Therefore the

regulatory risk management of LGT focuses on the early identification of new regulatory requirements, the effective adoption of

new regulatory requirements within LGT and the implementation of processes and procedures to ensure that all business lines within

LGT permanently meet the respective legal and regulatory requirements.

Reputational risk

Ultimately, if risks are not identified, adequately managed and monitored, this may lead – apart from financial losses – to reputation

being damaged. Reputational risk is defined as the risk of potential damage through deterioration of LGT’s reputation or due to

negative perception of its image among customers, counterparties, equity holders and/or regulatory authorities. LGT pursues a

holistic reputation risk management consisting of both preventive measures and a dedicated crisis management. Preventive measures

are defined within the code of conduct introduced by LGT. Within the context of crisis management LGT has established processes

and organizational structures to address crises and specifically trained all respective employees in order to ensure rapid and adequate

responses to potential crises.

Auditing body Duration of mandate and term of office of the auditor in charge

Since the 2004 financial year, PricewaterhouseCoopers Ltd., Zurich, has exercised its mandate as statutory auditor both according

to the Swiss Code of Obligations as well as banking and stock exchange legislation. The statutory auditor conducts its activities in

accordance with the provisions of Swiss law and Swiss auditing standards. The Board of Directors may mandate the statutory auditor

to undertake additional auditing work. The auditor responsible for the mandate and auditor in charge for the financial year was

Roman Berlinger of PricewaterhouseCoopers Ltd. This is his third year with us as the person responsible for the mandate. The holder

of this office changes at the latest after seven years.

Audit fees

The auditing fees billed by PricewaterhouseCoopers Ltd. amounted to CHF 412 000 for the 2019 financial year.

Additional fees

In the financial year, CHF 22 000 additional fees were paid to the audit firm PricewaterhouseCoopers Ltd.

Information instruments pertaining to the external auditors

The statutory auditor reports to the Audit and Risk Committee and the Board of Directors in writing about relevant auditing activities

and other important procedures relating to the company. Representatives of external and internal audit attend meetings of the Audit

and Risk Committee to discuss certain agenda items, explain their activities and answer questions. In the 2019 financial year, the

external auditor attended two meetings of the Audit and Risk Committee.

The Audit and Risk Committee of the Board of Directors annually assesses the performance, fees and independence of the statutory

auditor and supports the Board of Directors in the nomination of the statutory auditor submitted to the Annual General Meeting.

The Audit and Risk Committee on an annual basis determines the scope of the audit and the audit plan of Internal Audit,

coordinates this with that of the external auditors and discusses the results of the audit with the external and internal auditors.

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