Annual Report56T H Year of Activity

PKB Privatbank sa

2013

Governing bodies of PKB SA 4 Report of the Board of Directors 8 Highlights 9

Consolidated Financial Statements Comments on the consolidated balance sheet 12

Comments on the consolidated income statement 13 Consolidated balance sheet 14 Consolidated income statement 16 Consolidated cash flow statement 17 Annex to the consolidated annual financial statements 18 Auditors' report 33

Parent Company's Financial Statements

Comments on the balance sheet 39

Comments on the income statement 41 Balance sheet 42 Income statement 44 Annex to the annual financial statements 46 Auditors' report 55

C o n t e n t s

Board of Directors Henry Peter 1) 3) Lugano (TI) Chairman

Maurizio Jesi Ferrari1) 2)4) Lugano (TI) Vice-Chairman Fernando Zari Malacrida1) 3) Gentilino (TI) Vice-Chairman

Edio Delcò Taverne - Torricella (TI)

Claudio Ferrari1) 3) Zug (ZG) Dieter Hauser2) 3) Zumikon (ZH) Jean-Philippe Rochat2) 3) Épalinges (VD) Massimo Trabaldo Togna Milan (I)

Secretary Elena Trabaldo Togna Conches (GE)

Internal Audit Mirko Angelini First Internal Auditor Diego Pecorone Internal Auditor

Statutory Auditors Ernst & Young SA Group Auditors

Executive Board Umberto Trabaldo Togna Chief Executive Officer Ferdinando Coda Nunziante Managing Director Luca Soncini Managing Director Lorenzo Tavola Executive Vice President Enrico Tonella Executive Vice President

4

1) Members of the Executive Committee 2) Members of the Audit Committee 3) Independent directors under FINMA circular 08/24 4) Up to the General Meeting on 17/04/2014

G o v e r n i n g b o d i e s o f p k b s a

Senior Roberto AlgisiVice Presidents Paolo Anastasi Fiorenzo Andreoletti Roberto Berti Paolo Bonacina Luca Bravin Gino Cardone Pierluigi Croce Oberto della Torre di Lavagna Francesco Dolfi Flavio Facchin Massimo Falletta Anthony Graves Raffaella Jaquet Nicolas Martin Stefano Nocchi Luca Parmeggiani Luciano Pasqualini Carlo Penati Antonino Pisciotta Francesco Promutico Matteo Saladino Sandro Treichler Libero Valsangiacomo

Vice Presidents Francesco Alberio Sabine Amann Felix Arnold Christoph Benz Gianluca Bolla Paolo Calastri Eros Calligher Lucio Ceribelli Nicolò Dosi Delfini Heitor Duarte Villela René Grassi Sascha Kever Catherine Kuhn Gabriele Larghi Andrea Luchetti

Alessandro Lusso Stefano Maltese Roberto Pedrotti Pierluigi Petrucci Nicholas Porter Giovanni Rickenbach Mario Sala Antonio Sanchez Michele Scarmignan Olivier Selig Rolf Spannagel Marco Talleri

First Marco Bertagna Vice Presidents Cristina Chendi Gianfranco Cimetti Giorgio Compagnoni Fabio Conti Fiorenzo Indi Stefano Jermini Hans Kundert Alessandro Lanzara Matteo Lurati Daniele Mallozzi Mauro Marchesi Stefano Marcotullio Massimo Mattioli Filippo Moor Edy Muscionico Antonella Pelizzari Luca Radaelli Emilio Re Carlo Reichlin Renzo Ricci Patrizia Rivera Mariotti Mattia Suira Tiziana Torri Marcello Tronconi Sergio Vincentelli Andrea Zuccheri

PKB Geneva Director Gennaro Caracciolo di Vietri

PKB ZurichDirector René Kaufmann

PKB Bellinzona Director Dario Simoni

PKB Privatbank Ltd AntiguaVice President Michele Delcò

PKB Banca Privada (Panamá) SADirector Francesco Catanzaro

Members of the Management (Situation as at 1 April 2014)

The artistic work of Amy Sillman emphasises the materiality of painting and its formal, psychological and conceptual dimension. The artist constructs her work in a physical manner (through gesture, colour, and development based on the drawing) and permeates it with themes dear to feminism and performance, all characterised by a certain vein of humour. Sillman is known for her intense and evocative paintings and for her works on paper produced with mixed techniques, pastels and collages. Like the majority of contemporary American painters, she maintains a dialogue with Abstract Expressionism, the art movement that in the post-World War II period of the last century made the United States the centre of world art scene. The boundary between abstraction and representationalism is very labile in her work: to the question of whether she identifies as an abstract or representational painter, she has responded that she feels an attraction for both genres, which are both «friends and antagonists» at the same time. Since the 1990s, Amy Sillman's work has been regularly exhibited in the United States and Europe.

Her works are part of prestigious public and private collections, including the MoMA in New York, the Art Institute of Chicago, the San Francisco Museum of Modern Art (SFMoMA), the Whitney Museum of American Art, the Saatchi Gallery and the MART of Rovereto.

In October 2013, a major retrospective was inaugurated at the Institute of Contemporary Art in Boston, and this year, the same show will be exhibited in other major American institutions.

Amy Sillman was born in Detroit, Michigan, in 1955. She lives and works in Brooklyn, New York.

Amy Sillman

Two Backs oil on canvas, 230 x 215 cm, 2009

p k b c o l l e c t i o n

R e p o r t o f t h e b o a r d o f d i r e c t o r s

Dear Shareholders,2013 was marked by a trend which contrasted with the main world economies. Whereas the United States of America, Canada, Japan, Switzerland and the main emerging countries continued their path towards economic growth, the eurozone countries as a whole witnessed yet another year of recession, although less severe than in 2012.In terms of the financial markets, 2013 was a positive year overall. The main world stock markets recorded positive performance, with two-figure increases in value. The bond markets were marked by an increase in the yields of the ten-year maturities and a narrowing of spreads between the yields of AAA-rated bonds and bonds with lower ratings. In contrast, the markets, both equity and debt, of emerging countries adversely affected by anticipation of the approaching end of the Fed's quantitative easing policy and the consequent shift of capital to American markets.As regards the trend of currencies, the exchange rates between chf, chf and usd remained broadly stable, despite the slight upward trend of the eur and the downward trend of the usd. However, there was a downward trend for the Japanese yen, affected by the ultra-expansionist policy of the Abe government, and for the currencies of the emerging economies.In 2013, our bank experienced further development. In fact, an agreement was reached this summer for the resumption of the important Ticino activities of the LLB Liechstensteinische Landesbank AG (Switzerland), which is effective 1 January 2014. After the acquisition of Banca Gesfid in 2010, and that of CMB–Compagnie Monegasque de Banque (Switzerland) in 2012, this new operation confirms the investment and development strategy PKB activities in Ticino.In terms of current activities, 2013 was a year of consolidation and was the first full year of activity for our subsidiary PKB Banca Privada (Panama), which ended positively.In 2013, the consolidated gross profit of the PKB group decreased slightly, compared to the results for 2012, to chf 36.4 M (–chf 1.7 M, equal to –4.41%). After allowing for depreciation, provisions and value adjustments totalling chf 17.5 M, consolidated net profit was chf 19.5 M, in line with the previous year, while that of PKB Privatbank SA, Lugano was chf 16.5 M (–chf 0.6 M, i.e., – 3.31% compared to 2012).The Board of Directors has expressed its satisfaction with the results obtained during the 2013 fiscal year and thanks its clientele for the trust placed in the Bank, and the General Management and entire body of staff for its devoted service and lively spirit of collaboration.

For the Board of Directors the Chairman

Henry Peter

Having taken note of the wishes of Mr Maurizio Jesi Ferrari, a member of the Board of Directors of the bank for more than 30 years, and still Vice-Chairman of the Board of Directors and the Executive Committee, not to be re-elected for a new term of office, the General Meeting of Shareholders expressed its warmest thanks for his important contribution to the management and development of the PKB. The Shareholders' Meeting renewed the mandate of all the other directors.

PKB Group a mo u n t i n c h f / 0 0 0

PKB Group a mo u n t i n c h f / 0 0 0

2012

2012

1998

1998

2013

2013

H I G H L I G H T S

Income statement

Operating income 100,313 95,291

Expenses –63,915 –57,214

Gross profit 36,398 38,077

Group profit 19,458 19,419

Balance sheet

Balance sheet total 2,605,727 2,271,137

Gross shareholders' equity 325,286 324,191

Customers' credits

Total net of credits recorded in double-entry 9,058,021 7,986,044

Capital indicators

Tier 1 ratio 26.65% 24.07%

Solvency ratio 27.12% 20.21%

Headcount (expressed as full-time employees)

Headcount 236.7 221.2 of whom Switzerland 212.4 203.9

of whom abroad 24.3 17.3

Income statement

Operating income 93,939 90,595

Expenses –60,385 –55,024

Gross profit 33,554 35,571

Net profit for the year 16,512 17,077

Balance sheet

Balance sheet total 2,205,008 2,060,709

Gross shareholders' equity 315,867 312,545

Capital indicators

Tier 1 ratio 26.48% 27.92%

Solvency ratio 26.86% 19.99%

Consolidation principles

PKB Privatbank SA, Lugano Parent company

PKB Privatbank Limited, St. John’s, Antigua (W.I.) Subsidiary company (100%)

PKB Banca Privada (Panamá) SA, Panama Subsidiary company (100%)

C o n s o l i d at e d f i n a n c i a l s tat e m e n t s

Contents Comments on the consolidated balance sheet 12

Comments on the consolidated income statement 13 Consolidated balance sheet 14 Consolidated income statement 16 Consolidated cash flow statement 17 Annex to the consolidated annual financial statements 18 Auditors' report 33

At 31.12.2013 the total assets amounted to chf 2,605.7 million against liabilities of chf 2,321.2 million. Shareholders' equity, including net profit for the year, therefore totalled chf 284.5 million. The increase in the balance sheet total with respect to the previous year was chf 334.6 million, or 14.7%.

Assets Liquid assets This item includes cash plus clearing and postal account balances. The total of chf 386.1

million is well above the legal requirement for primary liquidity.

Due from banks Up by chf 526.0 million (+68.3%), amounts held with banks went from chf 769.1 million to chf 1,295.1 million.

Due from customers Amounts due from customers rose by 19.4%, from chf 444.3 million to chf 530.6 million.

Mortgage loans Mortgage loans increased by 3.0%, from chf 135.1 million to chf 139.1 million.

Securities and precious metals The book value rose from chf 0.1 million to chf 0.4 million. trading portfolios

Financial investments As at 31.12.2013, financial investments totalled chf 101.3 million against chf 96.8 million the previous year (+4.6%). Fund investments were chf 16.9 million (chf 17.9 million as at 31.12.2012), while fixed-yield securities increased to chf 84.4 million (chf 78.9 million as at 31.12.2012).

Main non fully-consolidated participations The bank holds the entire share capital of Valuevalor AG, Lugano. This entry also includes minority shareholdings in Cassa Lombarda Spa, Milan (33.9%), Anthilia Capital Partner Spa, Milan (36.6%), Aduno SA, Zurich (0.28%), Queluz Gestao de Ativos, San Paolo (10%) and EIH Endurance Investments Holding SA, Lugano (25%).

Fixed assets This item rose from chf 59.2 million to chf 62.1 million. This represents tangible fixed assets that include the bank’s buildings along with fixtures and furniture, any capitalised renovation works and computer equipment.

Intangible assets Intangible assets relate to the goodwill paid for the acquisition of Bank Gesfid SA.

Other assets Other assets increased to chf 22.6 million as at 31.12.2013, from chf 10.9 million as at the end of the preceding year. This item consists mainly in positive replacement values that amount to chf 20.6 million. Positive replacement values relate to derivative financial instruments, taken out for the bank’s own account or for account of clients, and represent the claims on counterparties.

Liabilities Due to banks Amounts due to banks increased from chf 65.2 million to chf 140.1 million (+114.8%).

Due to customers This item increased by chf 231.5 million, or 13.0% (chf 2,013.0 million as at 31.12.2013, chf 1,781.5 million as at 31.12.2012). The very low level of interest rates of the main currencies, which emerged particularly during the second half of the year, generated a build-up of cash in customers’ current accounts, pending better investment opportunities.

Other liabilities This item amounted to chf 26.9 million as at 31.12.2013 (+ chf 9.0 million, or 50.4% com-pared to the previous year). It comprises predominantly the Bank’s liability for indirect taxes (chf 4.9 million) as well as negative replacement values on derivative instruments (chf 20.1 million), representing its liability to counterparties.

Reserves for general banking risks The decline in reserves is mainly due to an elimination intended to compensate, on the consolidated results, the annual cost of the amortization of Gesfid goodwill (already fully amortized in the accounts of the Parent Company).

c o m m e n t s o n t h e c o n s o l i d at e d b a l a n c e s h e e tBalance sheet total

The result from interest operations was chf 13.3 million, down from the previous year (–15.2%).

Commissions and service provision increased to chf 72.6 million (+15.8%), broken down into credit operations (–12.3%), securities trading and investment operations (+20.8%); pro-vision of other services (30.5%), expenses for commissions (+49.8%).

The result from trading operations increased to chf 13.1 million against chf 14.4 million as at 31.12.2012 (–8.9%).

Other ordinary income came in at chf 1.3 million, compared to chf 2.5 million the previous year (–48.9%).

Expenses Personnel costs increased from chf 44.5 million as at 31.12.2012, to chf 48.9 million at

31.12.2013 (+ chf 4.4 million, or 9.9%). Other operating expenses increased over the pre-vious year, which as at 31.12.2013 were chf 14.9 million (+18.1%).

Gross profit The gross profit for the year amounts to chf 36.4 million, a decrease of chf 1.7 million (–4.4%) compared to the 2012 financial year.

Amortisation of fixed assets The total amount of depreciation stands at chf 10.8 million, slightly higher than for the previous period (+6.6%).

Out of the total, chf 5.1 million were used to depreciate the goodwill of Banca Gesfid.

Valuation adjustments, provisions This item decreased from chf 7.4 million to chf 6.7 million. In 2013, losses totalling and losses chf 0.2 million were posted to the accounts, while provisions of chf 6.5 million were made.

Extraordinary income Out of the total of chf 5.9 million, chf 5.1 million result from the elimination of reserves for general banking risks.

Extraordinary expenses The whole of the amount of chf 0.5 million relates, for chf 0.3 million to the increase in the general del credere and, for chf 0.2, to sundry losses.

Net profit for the year The net profit for the year amounts to chf 19.5 million; in line with the profit of the previous year (+0.20).

c o m m e n t s o n t h e c o n s o l i d at e d i n c o m e s tat e m e n tRevenues

C O N S O L I D AT E D B A L A N C E S H E E TAssets a mo u n t i n c h f 20122013

Liquid assets 386,125,993.66 686,560,403.61

Receivables arising from money market securities 291.62 2,925,982.95

Due from banks 1,295,056,479.71 769,105,444.59

Due from customers 530,610,810.84 444,333,698.20

Mortgage loans 139,119,506.24 135,044,966.77

Securities and precious metals trading portfolios 384,946.62 121,504.93

Financial investments 101,281,150.81 96,813,118.46

Non fully-consolidated participations 38,195,914.70 38,595,914.70

Fixed assets 62,149,365.25 59,246,123.77

Intangible assets 8,424,400.00 13,479,600.00

Prepayments and accrued income 21,751,261.48 13,989,459.74

Other assets 22,626,741.87 10,920,500.50

Total assets 2,605,726,862.80 2,271,136,718.22

Total deferred credits 0.00 0.00

Total receivables from non-consolidated companies and holders of qualifying participations 0.00 0.00

Liabilities a mo u n t i n c h f

Due to banks 140,143,648.88 65,233,156.94 Commitments to customers in savings and investments 2,369,033.56 2,265,132.80 Other commitments to customers 2,010,607,361.01 1,779,202,580.14 Medium-term notes 0.00 285,000.00 Accrued expenses and deferred income 31,071,536.32 19,582,338.66 Other liabilities 26,879,896.93 17,874,432.94 Value adjustments and provisions 55,369,575.18 47,503,256.22 Reserves for general banking risks 54,794,013.00 59,518,600.00 Share capital 16,000,000.00 16,000,000.00 Reserves generated from profits 249,033,607.70 244,253,462.35 Group profit 19,458,190.22 19,418,758.17

Total liabilities 2,605,726,862.80 2,271,136,718.22

Total deferred commitments 0.00 0.00

Total commitments to non-consolidated companies and holders of qualifying participations 26,436,134.00 30,362,679.84

201219982013

c o n s o l i d at e d o f f - b a l a n c e s h e e t o p e r at i o n s a mo u n t i n c h f 20122013

Contingent liabilities 45,590,520.03 60,894,348.41

Irrevocable commitments 6,976,916.18 2,976,955.48

Payment and additional funding commitments 2,806,702.15 4,092,397.59 Credit commitments Derivative financial instruments: Positive replacement value 20,558,652.85 8,970,311.41

Negative replacement value 20,079,032.15 12,800,597.13

Contract volumes 1,662,830,698.37 1,132,061,005.58

Fiduciary operations 73,819,727.42 199,018,870.54

c o n s o l i d at e d i n c o m e s tat e m e n t a mo u n t i n c h f 20122013

From interest operations

Interest and discount income 14,590,884.16 16,461,248.91 Interest and dividend income of the portfolio held for trading 117,850.15 151,192.34 Interest and dividend income from financial investments 1,684,517.94 1,976,708.62 Interest expense –3,090,608.17 –2,899,262.14

Subtotal: from interest operations 13,302,644.08 15,689,887.73

From commission and services

From commissions on credit operations 1,145,423.04 1,306,553.77 From commissions on securities trading and investment operations 69,726,578.18 57,722,866.63 From commissions on the provision of services 25,288,733.47 19,374,783.21 Commission expenses –23,595,023.59 –15,753,619.92

Subtotal: from commission and services 72,565,711.10 62,650,583.69

Revenues from trading activities 13,165,541.11 14,447,043.92

Other ordinary income

From sale of financial investments 65,572.46 99,594.89 From non-consolidated participations 201,945.03 1,210,042.49 From real estate 790,262.57 819,184.00 Other ordinary income 324,251.19 531,528.55 Other ordinary expenses –102,550.41 –156,976.77

Subtotal: from other ordinary income 1,279,480.84 2,503,373.16

Net revenues 100,313,377.13 95,290,888.50

Expenses

Personnel expenses –48,950,444.02 –44,543,372.88 Expenses for material –14,964,847.75 –12,670,683.56

Subtotal: Operating expenses –63,915,291.77 –57,214,056.44

Gross profit 36,398,085.36 38,076,832.06

Amortisation of fixed assets –10,763,774.65 –10,095,535.57 Valuation adjustments, provisions and losses –6,706,933.55 –7,403,715.40

Intermediate result 18,927,377.16 20,577,581.09

Extraordinary income 5,861,041.90 6,003,776.89 Extraordinary expenses –533,651.68 –3,656,319.65

Taxes –4,796,577.16 –3,506,280.16

Group profit 19,458,190.22 19,418,758.17

c o n s o l i d at e d c a s h f l o w s tat e m e n t a mo u n t i n c h f ⁄ 0 0 0

Origin Use

2013

Origin Use

2012

Flow of funds based on the operating result (internal financing)

Group profit 19,458 19,419 Amortisation of fixed assets 10,764 10,095 Value adjustments and provisions 6,550 6,915 Prepayments and accrued income 7,762 5,910 Accrued expenses and deferred income 11,489 9,140 Other items 4,031 1,027 Dividend previous year 14,500 11,000

Balance 21,968 27,632

Flow of fund from changes in intangible assets and participations

Non fully-consolidated participations 130 1,540 Real Estate 1,405 2,787 Other fixed assets 6,677 512 Intangible assets 1,125

Balance 8,212 5,964

Cash flow from banking

Medium and long-term (> 1 year)

Due to banks Due to customers Medium-term notes 285 Due from banks Due from customers 177 24,839 Mortgage loans 1,244 13,564 Financial investments 5,736 259

Short-term assets

Due to banks 74,910 42,413 Due to customers 231,508 248,446 Receivables arising from money market securities 2,926 2,734 Due from banks 525,951 293,099 Due from customers 86,100 77,244 Mortgage loans 5,318 22,676 Securities and precious metals trading portfolios 263 292 Other assets 11,706 2,036 Other liabilities 9,005 373 Other items 1,468 5,761

Liquid assets

Cash and cash equivalents 300,434 499,615

Balance 13,756 21,668

1. Operations and staff The PKB Group is present in Switzerland in Lugano, Bellinzona, Geneva and Zurich, and in

Antigua, W.I. and Panama through its subsidiaries PKB Privatbank Limited (West Indies) and PKB Banca Privada (Panama) SA. The principal activities of the Group are private banking and commercial and financial operations. The headcount, expressed as full-time employees, as at 31.12.2013 was 236.70 (2012: 221.20).

All of the essential bank's activities are followed internally, without recourse to outsourcing.

2. Accounting and valuation principles used

Consolidation principles The accounting principles of the Group comply with the provisions of the Swiss Federal Law on Banks and Savings Banks, and the accounting regulations of the Swiss Financial Markets Supervisory Authority (FINMA). The consolidation is prepared using the purchase method.

Fully-consolidated participations The consolidated financial statements include the annual accounts of PKB Privatbank AG, Lugano, PKB Privatbank Ltd, St. John's and PKB Banca Privada (Panama) SA, Panama.

Accounting and valuation principles The accounts are presented in accordance with the entry date principle. The accounting principles set out below have been used.

Foreign funds and currencies Valuation at year-end rates. Exchange differences have been booked in the income statement under «Results from trading operations».

Exchange rates used for the main currencies were as follows: eur 1.2272 (2012: 1.2073); usd 0.8915 (2012: 0.9133).

Credits and general liabilities Valuation at nominal value.

Securities and precious metals trading Valuation at market price. portfolios

Financial investments Shares: at market value at the end of the financial year, however not exceeding the acqui-sition price. Fixed-yield securities: the difference between the acquisition price and the re-demption value is distributed over the number of years between the acquisition date and the maturity date.

Non fully consolidated participations Participation Valuation at acquisition price, after deduction not exceeding 20%. of any economically necessary depreciation.

Participation between Valuation at equity value. 20% and 50%:

Irrespective of the size of participation, companies irrelevant for a correct valuation of the net worth and income of the group, are valued at the purchase price, after deducting the economically necessary depreciation.

Fixed assets Stated at acquisition cost after necessary deductions for ordinary depreciation. Works of art are not depreciated. All other fixed assets are shown on the balance sheet at the lower of purchase cost and market value. Depreciation is charged using the straight-line method. The depreciation periods are as follows:

Property used by the bank maximum 50 years Renovations maximum 20 years Plant maximum 10 years Furniture maximum 10 years Machines and vehicles maximum 5 years Hardware/Software maximum 3 years Intangible assets maximum 5 years

a n n e x t o t h e c o n s o l i d at e d a n n u a l f i n a n c i a l s tat e m e n t s

Reserves for general banking risks The reserves for general banking risks include a taxed amount of chf 8,424,400.00.

Intangible assets Intangible assets shown on the balance sheet relate to the goodwill paid for the acquisition of Banca Gesfid SA.

Solvency risks Where necessary, the bank makes appropriate provisions, which are booked under «Value adjustments and provisions».

Doubtful interest Interest and commissions overdue by 90 days are not recognized as revenues but are booked under provisions. The concerned loans are considered as non-performing.

Revenues from trading activities These revenues are recorded in the income statement before deduction of refinancing expenses.

Contingent liabilities, irrevocable commitments These are reported as off-balance sheet items at nominal value. Provisions for known risks payment commitments and credit commitments are reported under «Value adjustments and provisions».

Derivative financial instruments Valuation is effected at market value (marked-to-market). The use of derivative financial instruments for the bank’s own account is mainly for hedging purposes and only marginally for trading operations within the limits established by internal regulations.

Principles applied in the identification Credits are assessed regularly, at least once a year. Where the risk warrants it, the assessment is of risk of loss and calculation carried out more frequently and in a timely manner, particularly for non-performing loans. of value adjustments Where a need is identified to raise provisions for the unsecured portion, these are booked immediately.

Collateral assets for loans The realizable value is calculated on the basis of the market price or sale value, from which the costs of disposal and refinancing are deducted.

Risk assessment and management Risk assessment and management form an integral part of the internal control system as stated in FINMA circular 08/24. Responsibility for the Group's internal control system is entrusted to the Board of Directors, who establishes the guidelines and periodically checks their suitability and effectiveness.

In accordance with current law, the Group has Regulations for the Consolidated Supervi-sion of the COFI1 Group (Banking & Finance) and a Risk Policy that define, in an inte-grated vision, the guidelines for risk assessment and management which all the companies of the Group must comply with. The risk assessment and management policy, examined every year by the Board of Directors, forms the basis of the Group's risk management process. This is combined with a limits structure, defined for every identified risk category, which is checked constantly with particular regard to the risks indicated below.

The Board of Directors is supported in its duties by an Audit Board, which advises and makes proposals, while the operational management of the Consolidated Supervision is pro-vided by the Executive Board, in its turn supported by the Risk Committee (RICO) and the Compliance Committee (COCO) whose duties are to define the processes for measuring, managing and controlling risks for the PKB Group and COFI Group (Banking & Finance). The RICO and COCO meet at least every quarter and benefit from an integrated Group risk reporting system. Internal Audit checks and evaluates the internal control system, and helps in constantly fine-tuning it.

1) The scope of consolidation of the COFI Group (Banking & Finance) includes the participations of the PKB Group and Cassa Lombarda SpA and the group accounts are prepared according to the «Combined Financial Statements» model

Credit risk The credit risk is managed by the Board of Directors through the Credit Policy of the COFI

(Banking & Finance) Group and the Credit Regulation of the PKB Group. The General Man-agement conducts credit risk management through the Credit Committee (COCR) which supervises the application of company strategies and analyses, in terms of quality and quantity, the solvency of the counterparties and their guarantees. Credit risk control is implemented by a system of risk and exposure limits for the PKB Group and COFI Group (Banking & Finance) and of concentration for groups of counterparties (large risks and 10 major debtors) and per country. There are special provisions for del credere and country risk. Capital requirements for credit risk are calculated using the international method with a complete approach to the handling of guarantees.

Market risk (balance sheet) Management of the market risk resulting from balance sheet activity is governed by Regula-

tions approved by the Board of Directors. The General Management supervises the market risk through the Asset&Liability Committee (ALCO). The rate risk is controlled by indi-cators of income effect and value effect calculated on the basis of stress scenarios, while the counterparty and exchange risks are controlled by a system of exposure limits. Interest rate swaps are mainly used to cover the rate risk, while the exchange risk is mainly covered by forward exchange and currency options.

The rate risk is calculated using the modified duration method in accordance with the su-pervisory authorities.

Market risk (trading portfolio) Management of the trading portfolio is governed by Regulations approved by the Board of

Directors and Guidelines approved by the General Management. PKB Switzerland is active on the primary market for bond issues in Swiss francs as Market Maker, and it is also active on the currency, bond and share market. The market risk associated with the trading portfolio is controlled using a system of exposure and risk limits, the results of which are reported to the General Management.

Capital requirements for market risk are calculated using the standard method with the delta-plus approach for options.

Liquidity risk Liquidity management is governed by the Board of Administration via the Liquidity Policy

of the COFI Group (Banking & Finance). The General Management supervises and man-ages the liquidity risk through ALCO.

The liquidity risk is supervised in accordance with legal provisions and the results of checks are reported via ALCO.

Operational risk The management and control of operational risk, which includes legal and compliance risks,

are governed by the Board of Directors through a set of Regulations and by the management through Directives. Operational risk is managed as follows:

• processes: the Group governs its own activities, in particular those that are likely to affect external activities, in accordance with current legal and ethical standards on banking and insurance matters, ensuring understanding and transparency of operating and contractual provisions with clients, with particular reference to contracts on derivative financial instru-ments for which the Bank has signed specific ISDA and CSA contracts. The principle of separation of functions is ensured, allowing mitigation of operational risks;

• human resources: the Bank's aim is to recruit qualified personnel capable of implementing its strategy and identifying with the Bank’s culture. The latter is reflected by management and staff as well as by the approach of the COFI (Banking & Finance) Group to risk management. As regards compliance risk and its impact on the bank’s reputation risk mitigation is achieved through the constant training and awareness raising of staff, at all levels, a clear definition of its work processes and responsibilities, as well as the dissemination of a corporate culture founded, among others, on the pillars of total integrity and uncompromising ethical and pro-fessional standards. For the PKB Group, a PKB Charter of Values was also introduced. This was presented and discussed at all levels throughout the Bank. The PKB Group has a Legal and Compliance department that covers all aspects of compliance;

• internal systems: the Group has the internal and external expertise to ensure the in-house development and maintenance of its IT system;

• exogenous events: the Group has implemented security measures designed specifically to prevent unauthorised persons from accessing areas where «sensitive» documents are stored. The manage-ment has prepared a General Continuity Plan with a detailed analysis, to ensure the continuity of its activities and cope with the different scenarios outlined therein, and has identified the mini-mum resources necessary for the continuity plan.

The operational risk is monitored by means of a system of measuring losses the results of which are reported in the RICO. Vigilance capital requirements for operating risks are calculated according to the base method.

Legal risk To prevent risks, the bank ensures that its activity, particularly that involving any external

impact, is governed by legal and ethical standards applicable in the banking sector, and by en-suring knowledge and transparency in its operational and contractual relations with clients.

To adequately cover the various legal risks (including those relating to the outcome of the checks being carried out as part of the US Program), the bank made the necessary provisions.

Reputational and compliance risks Mitigation of reputational risk is achieved through constant training and actions to increase

awareness of staff at all levels, through a clear definition of operational processes and respon-sibilities, and by disseminating a corporate culture based on an irreproachable activity and the highest standards of professional ethics.

A PKB Charter of Values was also introduced. This was presented and discussed at all levels throughout the Bank.

Reputational and compliance risks are also mitigated by a vast and coherent set of inter-nal regulations that govern company processes to ensure that they comply with legislation, standards and regulations in Switzerland and in the countries where the Bank operates (Cross Border Activity) and in particular with regulations on financial markets and invest-ment consulting restrictions.

The PKB Group has a Legal and Compliance department that covers all aspects of compli-ance.

Bank policy in the use of derivative Positions taken in derivative instruments are, in general, held on behalf of clients. financial instruments For the structural management of the balance sheet, the PKB Group hedges interest rate

risk via the use of Interest Rate Swaps and Forward Rate Agreements.

Other information On 31.12.2013, an agreement was signed for the acquisition of the Lugano branch of LLB Liechstensteinische Landesbank AG (Switzerland). The migration to PKB occurred on 01.01.2014. With this transaction, the PKB Group has added volumes of business of about chf 1.8 billion in client assets (deposits and securities) and receivables.

PKB has acquired customer receivables of approximately chf 0.6 billion and customer cash deposits of approximately chf 0.4 billion and customer securities of chf 0.8 billion were also transferred.

3. Information on the consolidated balance sheet

3.1 Coverage of loans and off-balance sheet operations a mo u n t i n c h f ⁄ 0 0 0 TOTALTYPE OF COVERAGE

Mortgage Other Without coverage coverage

Loans

Due from customers 54,859 433,231 42,521 530,611

Mortgage loans 139,120 139,120 residential properties 124,604 commercial properties 14,231 craft and industry 285

Total Loans 193,979 433,231 42,521 669,731

Previous year 189,578 353,469 36,332 579,379

Off-balance sheet operations

Contingent liabilities 1,849 35,125 8,616 45,590

Irrevocable commitments 2,161 4,816 6,977

Payment and additional funding commitments 2,807 2,807

Total off-balance sheet transactions 1,849 40,093 13,432 55,374

Previous year 2,030 53,460 12,474 67,964

Doubtful loans

Gross Estimated Net Provisions amount realizable amount value of collateral

Current year 10,806 3,931 6,875 6,905

Previous year 11,171 4,346 6,825 6,859

3.2 Securities and precious metals trading portfolios, financial investments a mo u n t i n c h f ⁄ 0 0 0 and participations

20122013

Securities and precious metals trading portfolios

Debt instruments

listed on the stock exchange 374 105

not listed

Equity securities

Precious metals 11 17

Total securities and precious metals trading portfolios 385 122

of which securities eligible for pensions under the provisions on liquidity

a mo u n t i n c h f ⁄ 0 0 0 2013 2012 2013 2012

Book value Book value Market MarketFinancial investments value value

Debt instruments

of which are intended to be held to maturity 84,384 78,919 86,057 82,117

of which valued according to the principle of the lowest value

Equity securities 16,897 17,894 18,799 18,826

of which qualified participations

Precious metals

Real Estate

Total financial investments 101,281 96,813 104,856 100,943

of which securities eligible for pensions under the provisions on liquidity 16,066 28,201

3.3 Information on participations

Main non fully-consolidated participations Valuation Headquarters Activity Currency Share Share of participation method capital 2013 2012

Cassa Lombarda SpA Equity Milan Credit EUR 18,000 33.94% 33.94% Institute

Anthilia Capital Partners SpA Equity Milan Finance EUR 5,371 36.60% 36.60% company

EIH Endurance Investments Holding SA Equity Lugano Financial CHF 100 25.00% 25.00% holding company

Aduno Holding SA Cost Zurich Credit CHF 25,000 0.28% 0.28% Institute

Valuevalor SA Cost Lugano Trust CHF 1,000 100.00% 100.00% company

Queluz Gestao de Ativos Ltda Cost San Paolo Finance BRL 1,248 10.00% 10.00% company

a mo u n t i n ⁄ 0 0 0

a mo u n t i n c h f ⁄ 0 0 0 20122013

Non fully-consolidated participations Participations

with stock market value

without stock market value 38,196 38,596

Total participations 38,196 38,596

3.4 Presentation of fixed assets

a mo u n t i n c h f ⁄ 0 0 0 2013

Purchase value

Deprecia-tion and

value adjustments made so far

Book value as at

31.12.2012Reclassifica-

tionInvestments Divest-

mentsDeprecia-

tion

Value adjustments

per valuation

equity

Book valueat end of

year

Participations

Valued with equity method 42,972 –7,787 35,185 130 35,315

Other 17,285 –13,874 3,411 530 2,881

Total participations 60,257 –21,661 38,596 530 130 38,196

Fixed assets

Property bank use Lugano 50,305 –21,400 28,905 164 1,384 27,685

Property bank use Zurich 9,321 –7,253 2,068 157 61 2,164

Property bank use Geneva 13,131 –7,944 5,187 23 435 4,775

Property bank use Panama 2,315 2,315 1,060 25 3,350

Other real estate 9,954 –3,492 6,462 6,462

Other fixed assets 49,940 –35,631 14,309 6,673 3,269 17,713

Total tangiblefixed assets 134,966 –75,720 59,246 8,077 5,174 62,149

Leased objects

Other

Intangible assets

Goodwill 67,797 –54,317 13,480 5,055 8,425

Total intangible assets 67,797 –54,317 13,480 5,055 8,425

3.6 Assets not freely available and assets with retention of title a mo u n t i n c h f ⁄ 0 0 0 2013 2012

Securities as collateral (actual commitments 2013 chf 0, 2012 chf 0) 16,682 18,669

Due from banks (actual commitments 2013 chf 2012, 252,000 chf 0) 252,000 0

Value of fire insurance

Real Estate 62,720

Other fixed assets 35,840

3.5 Breakdown other assets and other liabilities a mo u n t i n c h f ⁄ 0 0 0 2012

Other assets Other liabilities Other assets Other liabilities Replacement values 20,559 20,079 8,970 12,801 Indirect taxes 209 4,887 211 5,053

Other receivables and payables 1,859 1,914 1,740 21

Total 22,627 26,880 10,921 17,875

2013

a mo u n t i n c h f ⁄ 0 0 0

Nominal Renunciation Reserves for Financial value of use as at employer Statements as at 31.12.2013 contributions as atReserves for employer contributions 31.12.2013 31.12.2013 31.12.2013

Employer's pension institution 1,300 1,300 Pension institution

Total 1,300 1,300

a mo u n t i n c h f ⁄ 0 0 0

Excess Economic Contributions Contributions paid during coverage/ advantage/ compensated the period, recorded as under commitment during 2013 personnel expenses coverage as at of the entity 31.12.2013 as at Economic advantages/commitments and pension costs 31.12.2013 2013 2012

Employer's pension institution with excess coverage 143

Pension institution with excess coverage 1,368 3,435 3,207

Total 3,435 3,207

The Bank must determine for each pension plan whether the degree of coverage and the pension institution’s particular situation will give rise to a financial advan-tage or commitment. The appraisal is based on the financial position as at 31 December 2012 and the development of the financial position of 2013. On the basis of the estimates received from the employer's pension institution and the pension institution, the level of cover in accordance with Art. 44 OPP2 (Ordinanza sulla previdenza professionale [Occupational welfare order]) is 582% (2012: 525.30%) respectively 101.4% (2012: 97.50%).

The Bank’s employees are affiliated to an autonomous and independent social welfare institution, in accordance with legal requirements governing occupational pension schemes in Switzerland (LPP). The rules of the fund are based on those of a defined contributions scheme. Pension liabilities are calculated each year by an actuary. The Bank accounts for its contributions to the employees’ occupational pension scheme as expenses for the financial year concerned.To complete the occupational pension arrangements under the terms of federal law, a social i.e. employer's foundation has been set up, which is autonomous and independent. This foundation may provide assistance to employees.

3.7 Commitments towards own social welfare institutions a mo u n t i n c h f ⁄ 0 0 0 2013 2012

Total 9,315 7,692

3.9 Changes in own capital a mo u n t i n c h f ⁄ 0 0 0

Own capital as at 1.1.2013

Share capital 16,000

deducting share capital not paid-in

Share capital paid-in 16,000

Reserves generated from profits 244,253

Reserves for general banking risks 59,519

Group profit 19,419

Total own capital as at 1.1.2013 (before use of profit) 339,191

+ Reserves generated from profits 2,400

+ Capital increase

+ Agio

– Conversion differences –139

– Decrease of reserves for general banking risks –4,724

– Dividends and other distributions of the previous year's result –16,900

+ Profit for the year in review 19,458

Total own capital as at 31.12.2013 (before use of profit) 339,286

of which:

Share capital paid-in 16,000

Reserves generated from profits 249,034

Reserves for general banking risks 54,794

Group profit 19,458

3.8 Value adjustments and provisions/Reserves for general banking risks a mo u n t i n c h f ⁄ 0 0 0

Situation as at31.12.2012

Use and eliminationconformingto the purpose

Change of purpose(reclassifica-tions)

Recoveries, doubtful inte-rest, exchange differences

New provisions charged to the income statement

Elimination in favour of the income statement

Situation as at 31.12.2013

Provisions for deferred taxes 14,508 276 14,784

Value adjustments and provisionsfor risk of loss(del credere and country risks) 12,033 104 1,329 –114 13,352

Value adjustments and provisions for other operating risks 3,400 3,400

Provisions for renovations

Other provisions 17,562 –1,449 –1 7,722 23,834

Total value adjustments and provisions 47,503 –1,449 103 9,327 –114 55,370

deducted: value adjustmentsdirectly compensated with assets

Total value adjustments and provisions according to the financial statements 47,503 55,370

Reserves for general banking risks 59,519 330 –5,055 54,794

3.11 Receivables and commitments against associated companies a mo u n t i n c h f ⁄ 0 0 0

and loans to bodies20122013

Receivables from associated companies 23,379 20,341

Commitments to associated companies 789 925

Loans to bodies of the bank 5,302 9,090

Loans granted to the management are awarded under the same conditions applied to Bank staff.Transactions with affiliated companies were carried out at arm’s length and concern securities transactions, payments and treasury activities.

3.10 Maturity structure of current assets and borrowed capital a mo u n t i n c h f ⁄ 0 0 0

Sight Rescindable within between between over fixed assets Total 3 months 3 and 1 to 5 years 5 years 12 months

Current assets

Liquid assets 386,126 386,126

Receivables arising from money market securities

Due from banks 496,689 296,735 297,752 203,851 29 1,295,057

Due from customers 288 178,417 237,732 60,487 45,696 7,991 530,611

Mortgage loans 3,371 13,442 73,152 25,097 24,058 139,120

Securities and precious metals trading portfolios 385 385

Financial investments 22,115 6,225 72,941 101,281

Total current assets 883,489 478,523 571,041 343,715 143,763 32,049 2,452,580

Previous year 908,574 329,172 519,261 207,236 141,316 29,346 2,134,905

Borrowed capital

Commitments arising from money market securities

Due to banks 136,554 3,590 140,144

Due to customersas savings and investment 2,369 2,369

Other due to customers 1,867,429 115,190 3,726 24,262 2,010,607

Medium-term notes

Total borrowed capital 2,003,983 117,559 7,316 24,262 2,153,120

Previous year 1,665,912 119,662 22,164 39,248 1,846,986

Maturity

3.13 Assets broken down by countries a mo u n t i n c h f ⁄ 0 0 0 or groups of countries

20122013

Assets % %

Italy 152,870 5.87 132,557 5.84

Remaining OECD countries 987,824 37.91 804,122 35.41

Remaining American countries (non-OECD) 137,416 5.27 72,800 3.21

Other countries 355,153 13.63 71,775 3.16

Total foreign loans 1,633,263 62.68 1,081,254 47.62

Switzerland 972,464 37.32 1,189,883 52.38

Total assets 2,605,727 100.00 2,271,137 100.00

3.12 Financial statements broken down according a mo u n t i n c h f ⁄ 0 0 0 to Swiss of foreign domicile

20122013

Switzerland Foreign Switzerland Foreign

Assets

Liquid assets 386,126 686,559 1

Receivables arising from money market securities 2,707 219

Due from banks 236,053 1,059,004 134,079 635,026

Due from customers 98,238 432,373 125,662 318,672 Mortgage loans 139,120 135,045

Securities and precious metals trading portfolios 235 150 122

Financial investments 34,544 66,737 30,142 66,671

Non fully-consolidated participations 2,256 35,940 2,256 36,340

Fixed assets 57,817 4,332 56,753 2,493

Intangible assets 8,424 13,480

Accrued expenses and deferred income 21,751 13,989

Other assets 9,650 12,977 3,200 7,721

Total assets 972,463 1,633,264 1,189,883 1,081,254

Liabilities

Due to banks 132,987 7,157 60,130 5,103

Commitments to customers in savings and investments 2,348 21 2,242 23

Other due to customers 365,754 1,644,853 292,963 1,486,240

Medium-term notes 285

Accrued expenses and deferred income 1,962 29,109 1,136 18,446

Other liabilities 10,435 16,445 9,485 8,390

Value adjustments and provisions 55,370 47,503

Reserves for general banking risks 54,794 59,519

Share capital 16,000 16,000

Reserves generated from profits 249,034 244,253

Group profit 19,458 19,419

Total liabilities 908,142 1,697,585 752,935 1,518,202

3.14 Financial statements broken down by currencies

CHF USD EUR Other Total

Assets

Liquid assets 383,787 146 2,113 80 386,126

Receivables arising from money market securities Due from banks 301,451 588,117 324,521 80,968 1,295,057 Due from customers 75,034 129,650 314,215 11,712 530,611 Mortgage loans 139,120 139,120 Securities and precious metals trading portfolios 224 47 103 11 385 Financial investments 57,112 6,106 38,063 101,281 Non fully-consolidated participations 2,256 34,940 1,000 38,196 Fixed assets 57,951 4,198 62,149 Intangible assets 8,424 8,424 Accrued expenses and deferred income 13,176 1,891 6,657 27 21,751 Other assets 9,472 4,490 6,676 1,989 22,627

Total assets 1,048,007 734,645 727,288 95,787 2,605,727 Forward exchange 35,467 492,099 576,590 140,882 1,245,038 Long position 1,083,474 1,226,744 1,303,878 236,669 3,850,765

Long position previous year 1,131,486 657,553 1,065,225 163,397 3,017,661

Liabilities

Due to banks 67,995 54,448 5,842 11,859 140,144 Commitments to customers in savings and investments 2,369 2,369 Other due to customers 290,451 702,628 941,258 76,270 2,010,607 Medium-term notes Accrued expenses and deferred income 23,038 1,622 6,400 11 31,071 Other liabilities 14,935 4,588 6,469 888 26,880 Value adjustments and provisions 44,468 4,591 6,311 55,370 Reserves for general banking risks 54,774 20 54,794 Share capital 16,000 16,000 Reserves generated from profits 249,034 249,034 Group profit 19,458 19,458

Total liabilities 782,522 767,897 966,280 89,028 2,605,727 Forward exchange 281,237 458,221 359,329 145,046 1,243,833 Short position 1,063,759 1,226,118 1,325,609 234,074 3,849,560

Short position previous year 1,083,761 650,527 1,124,089 160,165 3,018,542 Net position long (short) 19,715 626 –21,731 2,595 1,205 Net position long (short) previous year 47,725 7,026 –58,864 3,232 –881

CURRENCIES (EQUIVALENT IN CHF/000)

4. Information on consolidated off-balance sheet transactions

Credit guarantees and similar 38,302 56,028 –17,726 Performance guarantees and similar 3,871 738 +3,133 Irrevocable commitments resulting from documentary credits 3,418 4,128 –710 Other contingent liabilities

Total 45,591 60,894 –15,303

4.1 Breakdown of contingent liabilities a mo u n t i n c h f ⁄ 0 0 0 2012 CHANGE2013

4.3 Breakdown of fiduciary transactions a mo u n t i n c h f ⁄ 0 0 0 2012 CHANGE2013

Fiduciary investments with other banks 72,750 178,938 –106,188

Fiduciary loans and other fiduciary financial transactions 1,070 20,081 –19,011

Total 73,820 199,019 –125,199

4.2 Open derivative financial a mo u n t i n c h f ⁄ 0 0 0

instrumentsHedging instruments

Instruments held for trading

Positive Negative Contract Positive Negative Contract replacement replacement volumes replacement replacement volumes value value value value

Instruments on interest rates

Futures, FRAs and IRSs 6,450 7,233 439,417

Options (OTC) 8,212 8,153 360,135 Foreign currencies

Forward contracts 5,619 4,416 860,995

Options (OTC) 239 239 524 Precious metals

Options (OTC) 12 12 1,048 Equity securities/indexes

Options 5,788 5,788 94,584 Other

Options

Total 11,419 10,216 956,627 14,901 15,625 800,076

Previous year 5,345 6,248 745,452 5,072 8,000 404,804

Total after impact of «netting» contracts Positive replacement value (cumulated) Negative replacement value (cumulated) Current year 26,320 25,841 Previous year 10,417 14,248

5. Information on the consolidated income statement

Operations in foreign exchange and foreign currency 9,228 9,265 –37

Operations with precious metals 170 176 –6

Trading in securities 3,931 5,100 –1,169

Other trading operations –163 –94 –69

Total from trading operations 13,166 14,447 –1,281

5.1 Breakdown of results from trading operations a mo u n t i n c h f ⁄ 0 0 0 2012 CHANGE2013

Salaries 39,575 36,062 +3,513

Social benefits 7,385 6,822 +563

Other personnel expenses 1,990 1,659 +331

Total personnel expenses 48,950 44,543 +4,407

5.2 Breakdown of personnel expenses a mo u n t i n c h f ⁄ 0 0 0 2012 CHANGE2013

Expenses for premises 1,872 1,710 +162

Expenses for EDP, machines, furniture, vehicles and other equipment 1,381 997 +384

Other operating expenses 11,712 9,964 +1,748

Total materials expenses 14,965 12,671 +2,294

5.3 Breakdown of materials expenses a mo u n t i n c h f ⁄ 0 0 0 2012 CHANGE2013

5.4 Extraordinary revenues and expensesOut of the total of chf 5.9 million extraordinary revenues, chf 5.1 result from the elimination of taxed reserves, chf 0.1 million from the elimination of provisions that are no longer necessary, and chf 0.7 million are represented by sundry revenues. Extraordinary costs mainly consist of the creation of reserves for general banking risks.

5.5 Amortisation of fixed assets

The total amount of depreciation stands at chf 10.8 million, compared with chf 10.1 million in the previous period. This amount comprises depreciation of buildings for chf 5.2 million, goodwill for chf 5.1 million and devaluations on participations for chf 0.5 million.

5.6 Value adjustments, provisions and losses

The figure of chf 6.7 million mainly relates to the establishment of provisions.

Assets held purely for custody purposes are not included in this table.Managed assets include all equity for which the Bank receives commission and/or fees in addition to custody fees and other expenses for holding accounts.Assets under management mandate are clients' assets managed in accordance with a management profile chosen by the client.The net contributions/withdrawals comprise actual input/output movements of clients' funds and assets excluding the performance of securities and currencies, interest, charges, commission and dividends. Credits to clients are not deducted from the total assets managed.

4.4 Managed assets a mo u n t i n c h f ⁄ 0 0 0 2012 CHANGE2013

Held by self-managed collective investment schemes 903,209 814,140 89,069 With management mandate 3,104,826 2,696,141 408,685 Other assets 5,618,396 4,995,328 623,068

Total managed assets (including assets recorded in double-entry) 9,626,431 8,505,609 1,120,822 Of which considered in double-entry 568,410 519,565 48,845 Net contributions (withdrawals) 907,033 1,107,870 –200,837

5.7 Gross profit broken down by domicile a mo u n t i n c h f ⁄ 0 0 0 20122013

Switzerland Foreign Switzerland Foreign

From interest operations 11,792 1,511 14,136 1,554

From commission and services 64,649 7,917 59,430 3,221

Revenues from trading activities 11,967 1,197 13,892 555

Other ordinary income 1,279 2,503

Net profit for the year 89,687 10,625 89,961 5,330

Personnel expenses –47,126 –1,824 –43,537 –1,006

Expenses for material –13,259 –1,705 –11,604 –1,067

Expenses –60,385 –3,529 –55,141 –2,073 Gross profit 29,302 7,096 34,820 3,257

6.2 Capital requirements a mo u n t i n c h f ⁄ 0 0 0 31.12.201231.12.2013

Credit risk (complete BIS method) 61,820 73,055 of which valuation risk related to equity securities in the portfolio of the bank 3,146 3,504

No counterparty risk (complete BIS method) 4,972 15,540

Market risk (standard) 2,539 6,475

of which interest rate instruments 416 552

of which on equity securities 203

of which on foreign exchange and precious metals 1,661 5,888

of which on raw materials 259 35

Operational risks (basic indicator) 14,195 12,832

Capital requirements 83,526 107,902

Ratio of eligible capital and capital requirements required under Swiss law 344% 253%

CET 1 ratio 26.65% 24.07%

Tier 1 ratio 26.65% 24.07%

6.1 Eligible capital a mo u n t i n c h f ⁄ 0 0 0 31.12.201231.12.2013

Gross shareholders' equity 325,286 324,691 of which minority interests

of which «innovative» instruments of which paid-in share capital 16,000 16,000

of which reserves generated from profits 249,034 244,253 of which reserves for general banking risks 54,794 59,519

– regulatory deductions –46,620 –52,076

of which intangible values –8,424 –13,480

– Other items to decrease basic capital

Eligible capital 278,666 272,615

+ complementary and supplementary capital 8,969

– Other deductions attributable to capital

Eligible capital 287,635 272,615

6. Eligible capital and capital requirements

As statutory auditor, we have audited the consolidated financial statements of PKB Privat-bank SA, consisting of balance sheet, income statement, statement of cash flows andnotes (pages 14 to 32), for the year ended 31 December 2013.

Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the consolidated financial sta-tements in accordance with the requirements of Swiss banking regulations and law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Stan-dards. Those standards require that we plan and perform the audit to obtain reasonable as-surance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. It is up to the auditor's professional judgement to choose the verification procedures. These include the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor takes into account the internal control system, in so far as it is relevant to the preparation of the consolidated financial statements, 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 internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating 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.

OpinionIn our opinion, the consolidated financial statements for the year ended December 31, 2013 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with Swiss banking law and comply with Swiss law.

Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Over-sight Act (AOA) and independence (article 728 Code of Obligations (CO) and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

Lugano, 26 March 2014 Ernst & Young SA

Erico Bertoli Bruno PatusiQualified Expert Auditor Qualified Expert Auditor(Auditor in charge)

auditors' report on the consolidated annual financial statements

To the general meeting of shareholders of PKB Privatbank SA, Lugano

Comments on the balance sheet 39 Comments on the income statement 41 Balance sheet 42 Income statement 44 Annex to the annual financial statements 46 Auditors' report 55

Contents

p a r e n t c o m p a n y ' s f i n a n c i a l s tat e m e n t s

At 31.12.2013 the total assets amounted to chf 2,205.0 million against liabilities of chf 1,921.5 million. Shareholders' equity, including net profit for the year, therefore totalled chf 283.5 million. The increase in the balance sheet total with respect to the previous year was chf 144.3 million, or 7.0%.

Assets Liquid assets This item includes cash plus clearing and postal account balances. The total of chf 386.1

million is well above the legal requirement for primary liquidity.

Due from banks Up by chf 339.7 million (+59.1%), amounts held with banks went fromchf 574.7 million to chf 914.4 million.

These funds are for chf 660.6 million placed with major banks in OECD countries. Time deposits accounted for chf 418.5 million, chf 344.3 million of them due within 90 days, while sight deposits amounted to chf 495.9 million.

Due from customers Amounts due from customers rose by 14.3%, from chf 563.3 million to chf 644.0 million.

Securities and precious metals The book value rose from chf 0.1 million to chf 0.4 million. trading portfolios

Financial investments As at 31.12.2013, financial investments totalled chf 95.6 million against chf 91.1 million the previous year (+5.0%). Investments in funds totalled chf 16.9 million (chf 17.9 million as at 31.12.2012), whereas fixed income securities increased, reaching chf 78.7 million (chf 73.2 million as at 31.12.2012), of which chf 16.7 million pledged in favour of correspondent banks (chf 18.7 million as at 31.12.2012).

Main shareholdings The bank holds the entire share capital of PKB Privatbank Ltd, St. John’s, Antigua, PKB Banca Privada (Panama) SA, Valuevalor AG, Lugano and Planetarium PKB Consultoria SA, Montevideo. This entry also includes minority shareholdings in Cassa Lombarda Spa, Milan (33.9%), Anthilia Capital Partner Spa, Milan (36.6%), Aduno SA, Zurich (0.28%), Queluz Gestao de Ativos, San Paolo (10%) and EIH Endurance Investments Holding SA, Lugano (25%).

Fixed assets Increased from chf 30.0 million to chf 31.6 million (+chf 1.6 million, or 5.3%). This repre-sents tangible fixed assets that include the bank’s buildings along with fixtures and furniture, any capitalised renovation works and computer equipment.

Other assets Other assets increased to chf 22.2 million at 31.12.2013, from chf 9.3 million at the end of the preceding year. This item consists mainly in positive replacement values that amount to chf 20.8 million. Positive replacement values relate to derivative financial instruments, taken out for the bank’s own account or for account of clients, and represent the claims on counterparties.

c o m m e n t s o n t h e b a l a n c e s h e e tBalance sheet total

Due to banks Amounts due to banks increased from chf 280.5 million to chf 356.9 million (+27.2%).

Due to customers This item increased by chf 39.2 million, or 2.8% (chf 1,421.8 million at 31.12.2013, chf 1,382.6 million at 31.12.2012). The very low level of interest rates of the main currencies, which emer-ged particularly during the second half of the year, generated a build-up of cash in customers’ current accounts, pending better investment opportunities.

Other liabilities This item amounted to chf 26.0 million as at 31.12.2013 (+chf 8.2 million, or 46.3% com-pared to the previous year). It comprises predominantly the Bank’s liability for indirect taxes (chf 4.7 million) as well as negative replacement values on derivative instruments (chf 21.3 million), representing its liability to counterparties.

Shareholders' equity Shareholders' equity as per balance sheet totals chf 267.0 million, (excluding reserves for general banking risks and the year’s net profit). After approval by the Shareholders’ Meeting of the Board of Directors’ proposal for the allocation of profits, shareholders’ equity on the balance sheet will amount to chf 269.5 million.

c o m m e n t s o n t h e b a l a n c e s h e e tLiabilities

An examination of the various totals in the Income Statement shows net interest income of chf 11.8 million, slightly down from the previous year (–16.6%). Commission and ser-vices income items rose (+10.6%): for credit transactions (–11.9%), securities trading and investment operations (+7.9%); provision of other services (+32.5%), expenses for commis-sions (+30.5%).

The result from trading operations increased to chf 11.9 million against chf 13.9 million as at 31.12.2012 (–13.8%).

Other ordinary income came in at chf 3.6 million, compared to chf 2.4 million the previous year (–51.9%).

Total revenues can be broken down as follows: 12.6% from interest operations 70.8% from commission and services 12.7% revenues from trading activities 3.9% from other ordinary income.

Expenses Personnel costs increased from chf 43.4 million as at 31.12.2012, to chf 47.1 million at

31.12.2013 (+ chf 3.7 million, or 8.5%). Overheads increased by 14.3%, and on 31.12.2013 were chf 13.2 million compared to chf 11.6 million as at 31.12.2012.

Gross profit The gross profit for the year amounts to chf 33.5 million, a decrease of chf 2.0 million (–5.7%) compared to the 2012 financial year.

Amortisation of intangible assets The total amount of depreciation stands at chf 6.5 million, increasing compared to the previous period (+ chf 0.5 million).

Valuation adjustments, provisions This item decreased from chf 7.4 million to chf 6.3 million. In 2013, losses totalling and losses chf 0.2 million were posted to the accounts, while provisions of chf 6.1 million were made.

Extraordinary income This item totalled chf 0.8 million, of which chf 0.1 million was due to the elimination of provisions that were no longer necessary and chf 0.7 for miscellaneous income.

Extraordinary expenses The whole of the amount of chf 0.5 million relates, for chf 0.3 million to the increase in the general Delcredere and, for chf 0.2, to sundry losses.

Net profit for the year The net profit for the year amounts to chf 16.5 million; Compared with the net profit of the previous year, chf 17.1 million, it shows a decrease of chf 0.6 million or 3.3%.

Revenues

c o m m e n t s o n t h e i n c o m e s tat e m e n t

b a l a n c e s h e e tAssets a mo u n t i n c h f 20122013

Liquid assets 386,125,698.70 686,559,909.23 Receivables arising from money market securities 291.62 2,925,982.95 Due from banks 914,436,584.81 574,705,820.86 Due from customers 504,934,338.44 428,245,970.47 Mortgage loans 139,119,506.24 135,044,966.77 Securities and precious metals trading portfolios 384,946.62 121,504.93 Financial investments 95,624,671.20 91,101,039.44 Participations 89,259,804.70 88,967,304.69 Fixed assets 31,556,928.89 29,970,319.75 Accrued expenses and deferred income 21,387,575.34 13,744,345.00 Other assets 22,177,866.69 9,321,989.94

Total assets 2,205,008,213.25 2,060,709,154.03

Total deferred credits 0.00 0.00

Total receivables from companies of the Group and holders of qualifying participations 1,544,389.72 24,274,259.65

Liabilities a mo u n t i n c h f

Due to banks 356,894,466.08 280,525,800.64 Commitments to customers in savings and investments 2,369,033.56 2,265,132.80 Other due to customers 1,419,475,338.73 1,380,325,507.86 Medium-term notes 0.00 285,000.00 Accrued expenses and deferred income 30,324,302.38 19,138,966.80 Other liabilities 26,025,067.85 17,791,037.58 Value adjustments and provisions 40,052,350.80 32,833,054.50 Reserves for general banking risks 46,350,000.00 46,039,000.00 Share capital 16,000,000.00 16,000,000.00 General legal reserve 40,900,000.00 39,500,000.00 Other reserves 209,500,000.00 208,500,000.00 Retained earnings 605,653.85 428,653.85 Net profit for the year 16,512,000.00 17,077,000.00 Total liabilities 2,205,008,213.25 2,060,709,154.03

Total deferred commitments 0.00 0.00

Total receivables from companies of the Group and holders of qualifying participations 241,940,839.86 242,666,239.23

201219982013

o f f - b a l a n c e s h e e t o p e r at i o n sa mo u n t i n c h f 20122013

Contingent liabilities 45,590,520.03 60,894,348.41 Irrevocable commitments 6,976,916.18 2,976,955.48 Payment and additional funding commitments 2,806,702.15 4,092,397.59 Derivative financial instruments:

Positive replacement value 20,848,683.03 8,970,311.41 Negative replacement value 21,292,754.65 12,800,597.13 Contract volumes 1,662,830,698.37 1,132,061,005.58

Fiduciary operations 176,485,313.92 246,754,594.97

i n c o m e s tat e m e n t a mo u n t i n c h f 20122013

From interest operations

Interest and discount income 13,174,983.67 14,801,359.88 Interest and dividend income of the portfolio held for trading 117,850.15 151,192.34 Interest and dividend income from financial investments 1,603,975.53 1,895,612.48 Interest expense –3,105,039.21 –2,714,728.31

Subtotal: from interest operations 11,791,770.14 14,133,436.39

From commission and services

From commissions on credit operations 1,132,949.86 1,285,971.01 From commissions on securities trading and investment operations 56,608,797.21 52,460,716.30 From commissions on the provision of services 26,173,712.68 19,751,138.57 Commission expenses –17,384,806.68 –13,322,236.44

Subtotal: from commission and services 66,530,653.07 60,175,589.44

Revenues from trading activities 11,967,406.18 13,882,348.85

Other ordinary income

From sale of financial investments 65,572.46 99,585.43 From participations 2,571,945.03 1,110,042.49 From real estate 790,262.57 819,184.00 Other ordinary income 324,251.19 531,428.55 Other ordinary expenses –102,550.41 –156,976.77

Subtotal: from other ordinary income 3,649,480.84 2,403,263.70

Net revenues 93,939,310.23 90,594,638.38

Expenses

Personnel expenses –47,126,352.90 –43,419,587.44 Expenses for material –13,258,569.95 –11,604,115.84

Subtotal: Operating expenses –60,384,922.85 –55,023,703.28

Gross profit 33,554,387.38 35,570,935.10

Amortisation of intangible assets –6,553,926.46 –6,025,278.74 Valuation adjustments, provisions and losses –6,342,125.19 –7,403,715.40

Intermediate result 20,658,335.73 22,141,940.96

Extraordinary income 805,841.90 935,150.89 Extraordinary expenses –502,177.63 –3,646,246.65 Taxes –4,450'000.00 –2,353,845.20

Net profit for the year 16,512,000.00 17,077,000.00

Proposal of the Board of Directors a mo u n t i n c h f 20122013

i n c o m e s tat e m e n t

Net profit for the year 16,512,000.00 17,077,000.00 Retained earnings 605,653.85 428,653.85

Retained earnings 17,117,653.85 17,505,653.85

Distribution of profits

– General legal reserve 100,000.00 1,400,000.00

– Other reserves 2,500,000.00 1,000,000.00

– Distribution of a dividend of 14,000,000.00 14,500,000.00 Retained earnings 517,653.85 605,653.85

1. Operations and staff

PKB Privatbank AG is present in Lugano (registered office), where it operates as a full-ser-

vice bank and in Bellinzona, Geneva and Zurich where it primarily provides private banking services. The bank's principal activities include assets management and all related services, «market making» on the primary Swiss franc bond market, foreign exchange trading and commercial operations. The headcount, expressed as full-time employees, was 212.40 at 31.12.2013 (2012: 203.90).

All of the essential bank's activities are followed internally, without recourse to outsourcing.

2. Accounting and valuation principles used

Accounting and valuation principles The accounts are established by transaction date principle, in accordance with the directives of the federal financial market supervision authority (FINMA).

The accounting principles set out below have been used.

Foreign funds and currencies Valuation at year-end rates. Exchange differences have been booked in the income statement under «Results from trading operations».

Exchange rates used for the main currencies were as follows: eur 1.2272 (2012: 1.2073) usd 0.8915 (2012: 0.9133).

Credits and general liabilities Valuation at nominal value.

Securities and precious metals trading Valuation at market price. portfolios

Financial investments Shares: at market value at the end of the financial year, however not exceeding the acqui-sition price. Fixed-yield securities: the difference between the acquisition price and the re-demption value is distributed over the number of years between the acquisition date and the maturity date.

Participations Valuation at acquisition price, after charging any economically necessary depreciation.

Fixed assets Stated at acquisition cost after necessary deductions for necessary ordinary and extraor-dinary depreciation. Depreciation is charged using the straight-line method. Works of art valued at less than chf 30,000.00 are fully depreciated in the year of purchase, while those valued at over chf 30,000.00 are depreciated using a rate of 10% –50% of the purchase cost. All other fixed assets are shown on the balance sheet at the lower of purchase cost and market value.

The periods for ordinary depreciation are as follows:

Buildings used by the bank maximum 50 years Renovation expenses maximum 3 years Equipment maximum 3 years Furniture maximum 3 years Business equipment and vehicles maximum 3 years Hardware/Software maximum 3 years Intangible assets maximum 5 years

Solvency risks Where necessary, the bank makes appropriate provisions, which are booked under «Value adjustments and provisions».

a n n e x t o t h e a n n u a l f i n a n c i a l s tat e m e n t s

Doubtful interest Interest and commissions overdue by 90 days are not recognized as revenues but are booked under provisions. The concerned loans are considered as non-performing.

Revenues from trading activities These revenues are recorded in the income statement before deduction of refinancing ex-penses.

Contingent liabilities, irrevocable These are reported as off-balance sheet items at nominal value. Provisions for known commitments payment commitments and risks are reported under «Value adjustments and provisions». credit commitments

Derivative financial instruments Valuation is effected at market value (marked-to-market). The use of derivative financial instruments for the bank’s own account is mainly for hedging purposes and only marginally for trading operations within limits established by internal regulations.

Principles applied in the identification of Credits are assessed regularly, at least once a year. Where the risk warrants it, the assessment risk of loss and calculation of value is carried out more frequently and in a timely manner, particularly for non-performing loans. adjustments Where a need is identified to raise provisions for the unsecured portion, these are booked

immediately.

Collateral assets for loans The realizable value is calculated on the basis of the market price or sale value, from which the costs of disposal and refinancing are deducted.

Risk assessment and management Risk assessment and management form an integral part of the internal control system as stated in the FINMA circular 08/24. Responsibility for the Bank's internal control systems is entrusted to the Board of Directors, which establishes the guidelines and periodically checks its suitability and effectiveness.

In accordance with the laws in force, the Bank has established a set of Regulations for con-solidated Supervision of the COFI (Banking & Finance) Group1 and a Risk Policy. These set out – in an integrated framework – the risk assessment and management guidelines to be followed by all the companies of the Group. The risk management policy, examined every year by the Board of Directors, constitutes the basis of the PKB Group’s risk management process. This is combined with a limits structure, defined for every identified risk category, which is checked constantly with particular regard to the risks indicated below.

The Board of Directors is supported in its duties by an Audit Board, which advises and makes proposals, while the operational management of the Consolidated Supervision is pro-vided by the Executive Board, in its turn supported by the Risk Committee (RICO) and the Compliance Committee (COCO) whose duties are to define the processes for measuring, managing and controlling risks for the PKB Group and COFI Group (Banking & Finance). The RICO and COCO meet at least every quarter and benefit from an integrated Group risk reporting system. Internal Audit checks and evaluates the internal control system, and helps in constantly fine-tuning it.

Credit risk The credit risk is managed by the Board of Directors through the Credit Policy of the COFI

(Banking & Finance) Group and the Credit Regulation of the PKB Group. The General Management conducts credit risk management through the Credit Committee (COCR) which supervises the application of company strategies and analyses, in terms of quality and quantity, the solvency of the counterparties and their guarantees.

Credit risk control is conducted via a system of risk and exposure limits in the PKB Group and COFI (Banking & Finance) Group, and of concentration according to groups of counterparties (large risks and 10 major debtors) and country.

There are special provisions for del credere and country risk. Capital requirements for credit risk are calculated using the international method with a

complete approach to the handling of guarantees.

1) The scope of consolidation of the COFI Group (Banking & Finance) includes the participations of the PKB Group and Cassa Lombarda SpA and the group accounts are prepared according to the «Combined Financial Statements» model

Market risk (balance sheet) Management of the market risk resulting from balance sheet activity is governed by

Regulations approved by the Board of Directors. The General Management supervises the market risk through the Asset&Liability Committee (ALCO).

The rate risk is controlled using indicators of income effect and value effect calculated in accordance with stress scenarios, while the counterparty and exchange risks are controlled by an exposure limits system. Interest rate swaps are mainly used to cover the rate risk, while the exchange risk is mainly covered by forward exchange and currency options.

The rate risk is calculated using the modified duration method in accordance with the supervisory authorities.

Market risk (trading portfolio) Management of the trading portfolio is governed by Regulations approved by the Board of

Directors and Guidelines approved by the General Management. The Bank is active on the primary market of Swiss franc bond issues as Market Maker, and is also active on the currency, bond and share market.

The market risk associated with the trading portfolio is controlled using a system of exposure and risk limits, the results of which are reported to the General Management.

Capital requirements for market risk are calculated using the standard method with the del-ta-plus approach for options.

Liquidity risk Liquidity management is governed by the Board of Directors via the Liquidity Policy of the

COFI (Banking & Finance) Group The General Management supervises and manages the liquidity risk through ALCO.

The liquidity risk is supervised in accordance with legal provisions and the results of checks are reported via ALCO.

Operational risk The management and control of operational risk, which includes legal and compliance risks,

are governed by the Board of Directors through a set of Regulations and by the General Management through Directives. Operational risk is managed as follows:

• processes: the Group governs its own activities, in particular those that are likely to affect external activities, in accordance with current legal and ethical standards on banking and insurance matters, ensuring understanding and transparency of operating and contractual provisions with clients, with particular reference to contracts on derivative financial instru-ments for which the Bank has signed specific ISDA and CSA contracts. The principle of separation of functions is ensured, allowing mitigation of operational risks;

• human resources: the Bank's aim is to recruit qualified personnel capable of implementing its strategy and identifying with the Bank’s culture. The latter is reflected by management and staff as well as by the approach of the COFI (Banking & Finance) Group to risk man-agement. As regards compliance risk and its impact on the bank’s reputation risk mitigation is achieved through the constant training and awareness raising of staff, at all levels, a clear definition of its work processes and responsibilities, as well as the dissemination of a corpo-rate culture founded, among others, on the pillars of total integrity and uncompromising ethical and professional standards. A PKB Charter of Values was also introduced. This was presented and discussed at all levels throughout the Bank. The Bank has a Legal and Com-pliance department that covers all aspects of compliance;

• internal systems: the Group has the internal and external expertise to ensure the in-house development and maintenance of its IT system;

• exogenous events: the Group has implemented security measures designed specifically to prevent unauthorised persons from accessing areas where «sensitive» documents are stored. The manage-ment has prepared a General Continuity Plan with a detailed analysis, to en-sure the continuity of its activities and cope with the different scenarios outlined therein, and has identified the min-imum resources necessary for the continuity plan.

The operational risk is monitored by means of a system of measuring losses the results of which are reported in the RICO. Vigilance capital requirements for operating risks are cal-culated according to the base method.

Legal risk To prevent risks, the bank ensures that its activity particularly that involving any external

impact, is governed by legal and ethical standards applicable in the banking sector, and by en-suring knowledge and transparency in its operational and contractual relations with clients.

To adequately cover the various legal risks (including those relating to the outcome of the checks being carried out as part of the US Program), the bank made the necessary provisions.

Reputational and compliance risks Mitigation of reputational risk is achieved through constant training and actions to increase

awareness of staff at all levels, through a clear definition of operational processes and respon-sibilities, and by disseminating a corporate culture based on an irreproachable activity and the highest standards of professional ethics.

A PKB Charter of Values was also introduced. This was presented and discussed at all levels throughout the Bank.

Reputational and compliance risks are also mitigated by a vast and coherent set of inter-nal regulations that govern company processes to ensure that they comply with legislation, standards and regulations in Switzerland and in the countries where the Bank operates (Cross Border Activity), and in particular with regulations on financial markets and invest-ment consulting restrictions.

The Bank has a Legal and Compliance department that covers all aspects of compliance.

Bank policy in the use of derivative financial Positions taken in derivative instruments are, in general, held on behalf of clients. instruments For the structural management of the balance sheet, the bank hedges interest rate risk via the

use of Interest Rate Swaps and Forward Rate Agreements.

Other information On 31.12.2013, an agreement was signed for the acquisition of the Lugano branch of LLB Liechstensteinische Landesbank AG (Switzerland). The migration to PKB occurred on 1 January 2014. With this transaction, the PKB Group has added volumes of business of about chf 1.8 billion in client assets (deposits and securities) and receivables.

PKB has acquired customer receivables of approximately chf 0.6 billion and customer cash deposits of approximately chf 0.4 billion and customer securities of chf 0.8 billion were also transferred.

Securities as collateral 16,682 18,669 Due from banks 252,000 0

3.1 Assets not freely available and assets with retention of title a mo u n t i n c h f ⁄ 0 0 0 20122013

3. Information on the balance sheet

3.2 Commitments towards own social welfare institutions a mo u n t i n c h f ⁄ 0 0 0 20122013

Total 9,313 7,692 The Bank’s employees are affiliated to an autonomous and independent social welfare institution, in accordance with legal requirements governing occupational pension schemes in Switzerland (LPP). The rules of the fund are based on those of a defined contributions scheme. Pension liabilities are calculated each year by an actuary. The Bank accounts for its contributions to the employees’ occupational pension scheme as expenses for the financial year concerned.To complete the occupational pension arrangements under the terms of federal law, a social i.e. employer's foundation has been set up, which is autonomous and independent. This foundation may provide assistance to employees.

3,3 Value adjustments and provisions/Reserves for general banking risks a mo u n t i n c h f ⁄ 0 0 0

Situation as at 31.12.2012

Use and elimination conforming to the purpose

Change of purpose (reclas-sifications)

Recoveries, doubtful interest, exchange differences

New provisions charged to the income statement

Elimination in favour of the income statement

Situation as at 31.12.201

Value adjustments and provisions for risks of loss (del credere risks and country risks) 12,033 104 985 –114 13,008

Value adjustments and provisions for other operating risks 3,400 3,400

Provisions for renovations

Other provisions 17,400 –1,400 –2 7,646 23,644

Total value adjustments and provisions 32,833 –1,400 0 102 8,631 –114 40,052

Deducted: value adjustments directly compensated with assets

Total value adjustments and provisions according to the financial statements 32,833 40,052

Reserves for general banking risks (not-taxed) 46,039 311 46,350

3.4 Breakdown other assets and other liabilities a mo u n t i n c h f ⁄ 0 0 0 20122013

Other assets Other Other assets Other liabilities liabilities Replacement values 20,849 21,293 8,970 12,800 Indirect taxes 209 4,732 211 4,970 Other receivables and payables 1,120 141 21

Total 22,178 26,025 9,322 17,791

3.5 Changes in own capital a mo u n t i n c h f ⁄ 0 0 0

Own capital as at 1.1.2013

CShare capital paid-in 16,000 General legal reserve 39,500 Other reserves 208,500 Reserves for general banking risks 46,039 Retained earnings 17,506

Total own capital as at 1.1.2013 (before use of profit) 327,545

+ General legal reserve 1,400

+ Other reserves 1,000

+ Capital increase

+ Agio

+ Increase of reserves for general banking risks 311

– Dividends and other distributions of the previous year's result –16,900

+ Profit for the year in review 16,512

Total own capital as at 31.12.2013 (before use of profit) 329,868

Of which:

Share capital paid-in 16,000

General legal reserve 40,900

Other reserves 209,500

Reserves for general banking risks 46,350

Retained earnings 17,118

3.6 Receivables and commitments against associated companies a mo u n t i n c h f ⁄ 0 0 0 and loans to bodies

20122013

Receivables from associated companies 23,379 20,341

Commitments to associated companies 788 925

Loans to bodies of the bank 5,302 9,090

Loans granted to the management are awarded under the same conditions applied to Bank staff.Transactions with affiliated companies were carried out at arm’s length and concern securities transactions, payments and treasury activities.

3.7 Share capital a mo u n t i n c h f ⁄ 0 0 0 20122013

Aggregate Number of Capital with Aggregate Number of Capital with principal shares the right to principal shares the right to amount the dividend amount the dividend

Share capital 16,000 16 16,000 16,000 16 16,000

Total share capital 16,000 16 16,000 16,000 16 16,000

20122013

Nominal Share in % Nominal Share in %

With voting rights: COFI SA., Luxembourg 16,000 100.00 16,000 100.00

There are neither conditional share capital nor significant non-voting shareholders.

The Compagnie de l’Occident pour la Finance et l’Industrie SA (COFI) is a Luxembourg company listed on the stock exchange. The family of the late Serafino Trabaldo Togna, Minusio (TI), indirectly controls 51.844% of the voting rights.

3.8 Significant shareholders a mo u n t i n c h f ⁄ 0 0 0

4. Information on off-balance sheet transactions

Fiduciary investments with other banks 72,750 106,057 –33,307

Fiduciary investments with banks in the group and associated banks 102,665 120,617 –17,952

Fiduciary loans and other fiduciary financial transactions 1,070 20,081 –19,011

Total 176,485 246,755 –70,270

4.1 Breakdown of fiduciary transactions a mo u n t i n c h f ⁄ 0 0 0 2012 CHANGE2013

5. Information on the income statement

5.1 Breakdown of results from trading operations a mo u n t i n c h f ⁄ 0 0 0 2012 CHANGE2013

Operations in foreign exchange and foreign currency 8,044 8,709 –665

Operations with precious metals 155 176 –21

Trading in securities 3,931 5,091 –1,160

Other trading operations –163 –94 –69

Total 11,967 13,882 –1,915

Extraordinary revenues mainly consist of the elimination of provisions no longer considered financially necessary for chf 0.7 Extraordinary costs mainly consist of the creation of reserves for general banking risks for chf 0.3 million.

The total of chf 6.55 million mainly consists of chf 4.52 million relating to ordinary amortisation on fixed assets and of chf 2.03 million of participations.

5.2 Extraordinary revenues and expenses

5.3 Amortisation of fixed assets

As statutory auditor, we have audited the accompanying consolidated financial statements of PKB Privatbank SA, which comprise the balance sheet, income statement, cash flow statement and notes (pages 42 to 54) for the year ended 31 December 2013.

Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the financial statements in accordance with the law and the articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the pre-paration of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our au-dit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. It is up to the auditor's professional judgement to choose the verification procedures. This includes an assessment of the risks that the conso-lidated financial statements may contain significant misstatements due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements 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 system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating 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.

OpinionIn our opinion, the financial statements for the year ended December 31, 2013 comply with Swiss law and the company’s articles of incorporation.

Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Over-sight Act (AOA) and independence (article 728 Code of Obligations (CO) and ar-ticle 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.

We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

Lugano, 26 March 2014Ernst & Young SA

Erico Bertoli Bruno PatusiQualified Expert Auditor Qualified Expert Auditor(Auditor in charge)

r e p o r t o f t h e s tat u t o r y au d i t o r o n t h e f i n a n c i a l s tat e m e n t

To the general meeting of shareholders of PKB Privatbank SA, Lugano

56

Lugano Via S. Balestra Registered Office / General Management CH- Lugano Telephone +41-91 913 35 35

Fax +- (Bank) +- (Corporate sector) +- (Stock Exchange) +- (Foreign Exchange) Internet www.pkb.ch

Geneva , Rue Charles-Galland Branch CH- Geneva Telephone +- Fax +-

Zurich Tödistrasse Branch CH- Zurich Telephone +- Fax +-

Bellinzona Viale Stazione Branch CH-6500 Bellinzona Telephone +-91 874 33 33

Fax +-91 874 33 44

PKB Privatbank Limited , Redcliffe Quay Subsidiary St. John’s Antigua & Barbuda (West Indies) Telephone +- - Fax +1 268 481 12 13

PKB Banca Privada (Panamá) SA Tower Financial Center, Piso 49 Subsidiary Calle 50 Ciudad de Panamá Republic of Panama Telephone +507 294 07 00 Fax +507 294 07 70

a d d r e s s e s