Annual Report 2004 AESCH ALLSCHWIL ARLESHEIM ...

Annual Report 2004

AESCH ALLSCHWIL ARLESHEIM AUGST BASEL BINNINGEN BIRSFELDEN BREITENBACH BRUDERHOLZSPITAL BUBENDORF ETTINGEN FÜLLINSDORF GELTERKINDEN HÖLSTEIN LAUFENLAUSEN LÄUFELFINGEN LIESTAL MUTTENZ MÜNCHENSTEIN OBERDORF OBERWIL PRATTELNREIGOLDSWIL REINACH RÜNENBERG SISSACHTHERWIL WENSLINGEN

First address to turn to for customers

in the canton

Basellandschaftliche Kantonalbank is committed to

providing excellent services in order to continue its

140-year success story and to retain its independence

and autonomy.

In terms of bank services we are the first address to

turn to for private customers and companies, the

canton and the municipalities. We wish to strengthen

our significant market position in the Canton of

Basel-Landschaft and in the northwestern part of

Switzerland even further. In cooperation with Atag

Asset Management, our subsidiary with activities in

the whole of Switzerland, we are emphasising private

banking for high-net-worth individuals.

Our processes are run in a very stable IT environ-

ment by Real Time Center AG operated by BLKB

and two partner banks. Another two very important

partners are Sourcag AG for payment and securities

transactions and Swisscanto for first-class, diversified

funds and pension plan products. Swisscanto is a

joint operation of Swiss cantonal banks.

Private banking successful

Geographically seen, Basellandschaftliche Kantonal-

bank extends its business area across the economic

area of Basle. There are 30 branches in the Canton of

Basel-Landschaft, one branch in Breitenbach (Canton

of Solothurn) and another one for private banking

only in the city of Basle. Atag Asset Management AG

is active in Basle, Berne, Zurich, Lausanne, and

Geneva, and has a subsidiary in Luxembourg.

Company profile

Basellandschaftliche Kantonalbank is the lead-

ing bank in Baselland and one of the leading

banks in the northwestern part of Switzer-

land. Standard & Poor’s awarded a Triple-A, its

highest rating, to BLKB.

The Canton of Basel-Landschaft holds three-

quarters of the capital stock, one-quarter is

widely spread in private ownership in the

form of 600 000 BLKB certificates.

The Canton of Basel-Landschaft holds all vot-

ing rights and according to the law guarantees

for the bank’s liabilities.

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Highlights 2004 – healthy growth in all lines of business

Group

Balance

Balance

Income

Net ope

Gross pr

Year’s pr

Key figu

Number

Number

Number

Assets u

Cost-inc

Parent c

Balance

Balance

Mortgag

Dues to

Income

Net ope

Gross pr

Year’s ne

Dividend

Profit di

Other

Number

Number

Number

Assets u

Average

Return o

Cost-inc

Kantona

End-of-y

Nomina

Dividend

Market

* As of 2** Certifi

In the 2004 business year BLKB improved substan-

tially in all its operative business lines. The parent

company again exceeded last year’s figures of net op-

erating income, gross profit and net profit. This

year’s motto of “healthy growth” has therefore been

taken up again in the pictorial theme of our annual

report.

Leading position in mortgage market

strengthened

In face of the precarious situation of financial mar-

kets a lot of our customers decided to amortise their

mortgages. In spite of this tendency and in the midst

of tough competition BLKB as undisputed number 1

was able to increase the volume of mortgages.

Savings inflow continues

The savings business in the year under review con-

tinued its encouraging course thanks to a positive

savings inflow. And thanks to the Triple-A rating

BLKB is the preferred savings bank for all types of

saving.

Price BLKB certificate SPI

KBC in CHF

950

900

850

800

750

700

650

600

550

500

SPI

6 000

5 500

5 000

4 500

4 000

3 500

3 000

2 500

2 000

1 500

Sharp price increase of BLKB certificates

Dec

‘98

Jun

‘99

Dec

‘99

Jun

‘00

Dec

‘00

Jun

‘01

Dec

‘01

Jun

‘02

Dec

‘02

Jun

‘03

Dec

‘03

Jun

‘04

Dec

‘04

In the last years, the bearer certificates of BLKB (KBC)developed exceptionally well contrary to the generaltrend at stock exchanges. For private investors thecertificate combines the advantages of a fixed ratesecurity and a share.

Executive Board under new leadership

After 15 successful years at the helm of BLKB, Paul

Nyffeler retired at the end of 2004. One year ago

Bankrat appointed Dr. iur. Beat Oberlin successor to

Paul Nyffeler.

Record number of visitors

at general meeting

At the 18th general meeting of BLKB in St. Jakobs-

halle, Münchenstein, Werner Degen, chairman of the

Board of Directors, received a record 7,400 share-

holders, 500 more than in the previous year.

New Cantonal Law on Kantonalbank

In the year under review, Landrat (the legislative

body of the canton) decided on a revision of the

Cantonal Law on Kantonalbank. Under the amend-

ed law Basellandschaftliche Kantonalbank remains a

public law company with its own legal personality.

The canton continues to guarantee for the bank’s

liabilities.

Triple-A confirmed

Standard & Poor’s, the internationally active rating

agency, reconfirmed the Triple-A rating for BLKB in

the reporting year and again judged the outlook as

“stable”.

Group 2004 2003 2002 2001 2000

CHF m CHF m CHF m CHF m CHF m

Balance sheet

Balance sheet total 14 409.1 14 107.4 14 214.7 13 908.1 13 141.1

Income statement

Net operating income 363.5 356.5 334.2 336.2 362.0

Gross profit 178.4 171.1 144.3 144.9 191.3

Year’s profit before tax 80.3 72.7 64.3 69.9 95.6

Key figures

Number of employees (head count) 816 843 849 848 799

Number of employees (full-time equivalent) 735 767 773 777 739

Number of branches 40 42 45 45 49

Assets under management 14 289 14 211* 14 107 17 051 20 188

Cost-income ratio 50.93% 52.01% 56.81% 56.89% 47.15%

Parent company

Balance sheet

Balance sheet total 14 322.1 14 038.1 14 148.3 13 541.1 12 777.8

Mortgage loans 11 497.8 11 157.3 10 595.2 10 010.7 9 449.3

Dues to customers in savings and deposits 6 099.2 5 877.9 5 281.8 4 841.1 4 717.1

Income statement

Net operating income 319.8 316.1 298.2 294.9 303.8

Gross profit 173.6 170.5 150.0 142.0 166.5

Year’s net profit 78.1 75.4 72.5 71.8 73.9

Dividend on certificate capital 13.8 13.2 12.6 12.6 12.6

Profit distribution to the canton 28.0 27.0 25.0 25.0 25.0

Other

Number of employes (head count) 654 664 661 662 656

Number of employees (full-time equivalent) 591 603 600 605 601

Number of branches 32 34 34 34 41

Assets under management* 9 943 9 702 9 584 10 916 12 437

Average rate margin 1.601% 1.610% 1.577% 1.451% 1.371%

Return on equity 13.80% 14.68% 13.04% 13.10% 14.15%

Cost-income ratio 45.73% 46.10% 49.70% 51.80% 45.20%

Kantonalbank certificate

End-of-year rate (in CHF) 910.00 817.00 666.00 611.00 591.00

Nominal value (in CHF) 100.00 100.00 100.00 100.00 100.00

Dividend per certificate (in CHF) 23.00 22.00 21.00 21.00 21.00

Market capitalisation** 2 184.0 1 960.8 1 598.4 1 466.4 1 418.4

* As of 2003 data collection according to RRV-SFBC II** Certificates and endowment capital, calculation see p.49


Forewords 6

Werner Degen 6

Paul Nyffeler 8

Beat Oberlin 10

Value-oriented management 12

Business development 14

Interest-related business: saving 18

Interest-related business: loans 20

Private banking 23

Commitment to sustainability 26

BLKB economic survey 2004 30

Customer needs 32

Employees 34

Environment, ethical values and health 38

Efficient services 40

Information technology 42

Corporate planning and monitoring 44

Corporate governance 46

Annual financial statements 63

Governing bodies, foundations,

group companies 106

Content

work, behaviour, food, life!People think differently, a veryrewarding experience on apersonal and professional level.The impossible suddenly seemspossible, obstacles are just2

Regional identity requires acosmopolitan mind. FranzRickenbacher sets out on abusiness trip to the Far East. Hewants to visit Ronda subsidiariesin Hong Kong and Thailand. In

spite of the long flight he islooking forward, as he is everytime he travels there, to lettinghimself be seduced by the cul-ture which is so different fromhis own. Everything’s different;

Basellandschaftliche Kantonalbank enjoys healthy growth


3

swept away, solutions withinreach. Even the familiar thingsof everyday life at home sud-denly have a new sparkle tothem. Franz Rickenbacher isalso looking forward to getting

home again – and at homethere’s a surprise waiting forhim. His boys made a cherry piefor him, a genuine, old-fash-ioned, tasty cherry pie as it istraditionally done in “Baselbiet”.

We are the leading bank in Basel-land and have firm roots in thewhole region. Our customers profitfrom top-quality products andexpert advice at fair prices. This iswhat our healthy growth is basedon. In the reporting year we wereable to continue our growth in allbusiness lines from savings to loansto asset management.

4

Procedures in banking are gettingever more complex and need con-stant developing and updating. RTC, the IT service company forbanks, is a strong partner in thatrespect. Our subsidiary Sourcag AGspecialises in payment and securitiestransactions. As a result, we canfocus our attention on the cus-tomers and their individual needs. A successful approach which thetrust placed in our bank gives ampleproof of: savings, mortgage loans,and assets under management haveagain increased.


5

Supply of the necessities of life is a question of trust. FrediMischler cultivates the fieldsand gathers the crop. ElisabethMischler’s domain is the bakery.

Every year, she uses about fourand a half tons of wheat tomake bread. The quality isexcellent and the reputationgoes far beyond the own

village. Quite a number ofpeople take the trouble to goto “Mischler Hof” to buy breadfresh from the oven. It’s a goodthing to be able to buy food

directly from the producer. You know what you get, whoyou get it from, and the taste issimply delicious.

The beginning of 2004 saw economic optimism on the rise:

Switzerland was seen as up-and-coming.

On an international level three tendencies prevailed throughout

the year: the economic upswing of the People’s Republic of

China, and, quite contrarily, the ever widening gap between per-

formance and consumption in the United States of America,

and the development of the oil price. Looking back at how these

different trends unfolded, we might say that Swiss business

activities fell short of expectations. In my opinion this assess-

ment lacks a sound basis. The Swiss economy developed along

astonishingly stable lines in 2004. So, the initial optimism was

not completely wrong.

Another positive year for BLKB

The business year 2004 took again a positive course for BLKB.

We reached our goals and in some cases even surpassed

them, not only in the parent company, but also in Atag Asset

Management (AAM), our subsidiary.

And again, the more-than-average development of the area of

northwestern Switzerland contributed largely to the success of

the parent company. The bank’s success, however, is also based

on its specific strengths which are all the more prominent now,

that competition has become increasingly severe: BLKB is close

to the market and close to its customers, BLKB knows the re-

gional economy and is rewarded with satisfaction and trust from

its customers.

Apart from the economic environment there were two changes

of major importance in the year under review: the amendment

of the Cantonal Law on Kantonalbank and the change at the

highest operative level of the bank.

Continuing modernisation

The new streamlined Cantonal Law on Kantonalbank entered

into force on January 1st 2005. No changes were made in the le-

gal form of BLKB which remains a public law institution. The

State’s guarantee remains unchanged as well, but from now on

the bank will pay a yearly compensation.

The amended law does not aim at a radical change of course, but

rather at a continuous development of Basellandschaftliche

Kantonalbank, and we very much appreciate this political sup-

port. The harmonious relationship between the canton and the

bank based on common determination and mutual respect has

always been the backbone of our success.

Change in the operative leadership

After 15 years of presiding over the Executive Board, Paul

Nyffeler retired with effect of the end of the reporting year and

handed over chairmanship to Dr. Beat Oberlin, his successor.

Baet Oberlin joined the Executive Board of BLKB in mid-2004,

directed corporate planning for 2005 and was therefore well pre-

pared to take up his managerial duties on January 1st 2005.

Paul Nyffeler wrote history; a history of success for BLKB. His

thorough knowledge of the canton and his intuitive compre-

hension of economic development enabled him to guide the

bank safely through an era of intense changes and to steel it for

the challenges to come.

In the name of Bankrat I would like to extend my thanks to Paul

Nyffeler for 15 years at the helm of BLKB, marked by intensive

personal commitment, uncompromising decisions when neces-

sary, but also a willingness for compromise when possible, and

by creativity where conflicting interests had to be settled by

arbitration.

Targets reached with ease – successful change of leadership

6www.global-reports.com

Taking leave of Paul Nyffeler is not easily done. There are, how-

ever, two aspects which make us open a new chapter in the his-

tory of BLKB with a confident mind. One is Paul Nyffeler’s suc-

cessor. With Dr. Beat Oberlin, Bankrat appointed a personality

who has all the skills for a successful continuation of BLKB’s de-

velopment. The other aspect lies with Paul Nyffeler himself. Last

summer, the Association of Swiss Cantonal Banks elected him

president of their association. In this way he will undoubtedly

continue to be involved in the idea of cantonal banks.

At the end of a business year, it is an honourable duty of a

bank’s president to thank the staff, the middle management and

the Executive Board for their work. Doing this is a pleasure for

me, and in the name of Bankrat and the entire staff I say good-

bye to Paul Nyffeler with our warmest thanks. And just as

warmly and sincerely I welcome Beat Oberlin.

Werner Degen

Head of Bankrat

Basellandschaftliche Kantonalbank has all the necessary pre-

requisites to stand up to the challenges of competition in the

future. It also has the necessary size: total assets, savings, lend-

ing, and commission business, number of employees, and prof-

its range in categories far above critical levels. BLKB is one of

the leading banks and in some respects the leading bank.

Smooth cooperation

BLKB’s favourable position in the market is being enhanced by

well-oiled cooperation mechanisms in the area of service per-

formance, particularly the partnership in the RTC-IT cooper-

ation and the centre for the handling of securities and payment

transactions in Münchenstein, which is jointly operated by

BLKB and Basler Kantonalbank. Both these partnerships assure

an even distribution of burdens in two very cost-intensive areas.

In retrospect, joining RTC in 1998 was probably the most im-

portant step of the last decades. Going it alone, we would not

have been able to adapt our banking IT to the changes in market

conditions, let alone to the requirements of supervisory bodies.

It was the right decision at the right moment to turn to a stable

system equipped with the right resources for development.

BLKB: a bank of repu-tation and long stand-ing, expertly equippedfor the future


Competition, concentration, regulation

During the 15 years I have been at the helm of BLKB, consider-

able changes in banking have taken place. Namely three devel-

opments had a lasting effect on existing structures.

The first one can be subsumed under the term “competition”.

The fast development and expansion of IT by means of new

electronic media thoroughly changed the behaviour of supply

and demand in banking. Money matters are still considered

questions of trust, but cost-effectiveness is something that is

examined very closely nowadays. Customer loyalty has to be

acquired and maintained by a holistic quality of services.

The second development is the process of concentration that

has taken place in the course of the past 10 years. This process

has got to do with the many changes in the environment of

competition, but also with the rather roundabout structural

ways that namely big banks have taken by temporarily signalling

disinterest in the domestic retail business in favour of global

banking.

The third development concerns the new regulation of the bank

business. Like all the other banks BLKB increased the expenses

for properly fulfilling regulatory requirements during the past

years, the most prominent being the processes set in motion for

the prevention of money laundering. These are most easily no-

ticed by the customers, whereas others, such as those dealing

with risk management or accounting standards, go widely

unnoticed by the public. Expenses for personnel or material are

not lower for that matter. However, the fact that supervision of

banking has become so overbearing is not just a burden, but

quite on the contrary an asset for the survival of Switzerland as a

financial centre and therefore an asset for any bank.

Competition, mergers, regulation! These aspects have two things

in common: there is a mounting significance of unified, well-

structured processes on the level of handling as well as the con-

centration of responsibilities as an organisational and executive

duty. In this respect the RTC association offers a potential for

development and provides security for the future, an aspect

which is not to be underestimated.

BLKB developed in a highly satisfactory way, given the fickle-

ness of the economic environment and the structural changes

of the past years. I appreciate the work done by our employees at

all levels and positions and their unwavering support. I wish all

of them a healthy, successful development in and for Baselland-

schaftliche Kantonalbank.

Paul Nyffeler

Chairman of the Executive Board

up to December 31st 2004

9

The retirement of Paul Nyffeler marks the end of anera. Looking at the figures we can see that businessvolume has multiplied. In the past 15 years, mortgageloans, for example, grew by 170 percent and at thesame time our customers entrust us with 160 percentmore of their savings. Private banking did not exist 15 years ago. Gross profit has risen from 103 to 174 mSwiss francs. The profit delivered to the canton by thebank has risen from 8 m Swiss francs in 1990 to 28 mSwiss francs today.

10

I feel quite privileged to be called to the helm of Baselland-

schaftliche Kantonalbank, a leading bank, healthy, exceptionally

well positioned and firmly rooted in the market. My thanks go

to Paul Nyffeler, my predecessor, from whom I took over an or-

ganisation in excellent shape. I look forward to guiding BLKB

through the coming years, knowing well that I have employees

at my side who are highly motivated professionals, financial ex-

perts as well as socially competent members of a staff that iden-

tifies fully with BLKB. In this way, we will undoubtedly be able

to keep building on the existing values.

Efficient processes – responsible behaviour

Today, we are facing a multitude of challenges. Organisational

and technical routines are what we act upon every day and they

are becoming ever more complex. We have, however, a number

of instruments at our disposal for dealing with and coordinating

these matters which will become more numerous and more re-

fined. Success in business practices depends greatly on the way a

company plans its processes, uses its tools and especially on

whether it is capable of attaining an optimum in the benefit for

the customers.

However, the world of processes is only one side of the coin.

As modern information technology is able to speed up the

processes to an ever greater degree, thereby allowing for almost

any variation, the question of responsibility becomes more and

more prominent. “Compliance”, meaning the permanent and

continuing check on conformity with legal and regulatory rules

as well as conformity with the behaviour imposed by our own

strategy, is just as important as technical matters and probably

the more difficult part of the deal. Technology may be bought,

processes may be subcontracted, but responsibility for their

application stops right here in our midst.

Four main lines of direction

The relationship with our customers is determined by their ever

changing needs. These changes may be more or less significant,

but they always rotate about values such as quality, service reli-

ability, handling security and price fairness. Our customers are

used to these services and conceive them as being characteristic

of BLKB. We therefore devote serious effort and energy to of-

fering them on an individual basis and in the expected quality.

Let’s reflect for a moment on the future course of BLKB and its

significance for these expectations, and we can make out four

main lines of direction that will guide us through the future. It is

imperative, however, that we position ourselves correctly on

these lines and develop along them.

The first line is the actual activity of BLKB as a bank. Private

customers and companies alike appreciate BLKB and consider it

their most important bank.

The second line runs along our image. BLKB is widely and

popularly known and puts great emphasis on being close to the

customer. It is deeply rooted in the region and regarded by the

public as being competent, reliable, and innovative. BLKB is

synonymous with quality and as the bank of the canton it enjoys

the respect and loyalty of the public.

The third line is based on our sales organisation and quality

advice. Our organisation orientates itself to sale and advice. We

seek the exchange of ideas and opinions with our customers, and

they have a fair comprehension of what they are entitled to.

The fourth and final line has got to do with our role as

employer. Our aim is to be the most attractive employer in

the region, and we try to achieve this goal by systematically

promoting talented and dynamic employees, by furthering a

corporate identity, and by lending practical support to husbands

or wives in their work or in child education.

There are chances for growth – let’s seize them for the benefit of our stakeholders


11

The area of our activity is a canton blessed with chances for

more-than-average growth. We have to recognise these chances

quickly and make good use of them. In this way we can grow

together with our customers, and we must not forget that they,

or the population of the Canton Basel-Landschaft, are the co-

owners of Basellandschaftliche Kantonalbank since the canton

will continue to hold the dominant part of the capital. We are

well aware of the responsibility constituted by this fact and we

will do our utmost to promote our common prosperity.

Dr. Beat Oberlin


since January 1st 2005

12

BLKB creates added value for itscustomers, for the company itself,for the entire staff, and last but notleast for the canton and the privateco-owners of Kantonalbank. Thisgoal is increasingly reached by theability of proposing individual solu-tions to our customers, of antici-pating changing needs in their livesand of giving them expert adviceeven before new situations arise.

Value-oriented managementmeans recognising market needs early on


13

Create added value by honour-ing existing values. The successof Ricola, Laufen’s enterprise oflong standing, is based on thir-teen medicinal herbs. Ricola,one the one hand, profits from

the favourable economic condi-tions prevailing in “Baselbiet”and on the other hand takes onresponsibility. The company iscommitted to preserving bio-diversity, supports Swiss artists

with a generous art collection,and readily opens the com-pany’s doors for interested per-sons. Whether they are guidedthrough the garden of indige-nous herbs or through one

14

The past business year of Basellandschaftliche Kantonalbank was

marked by a continuous, healthy growth. Healthy, because it did

not follow a breathless pace for quarterly achievements, but also

healthy because all the business lines contributed positively:

interest-related business, asset management, and trading. Healthy

finally, because cost discipline led to a further improvement of

the relation between expenditure and profitability.

The development of equity is also indicative of continuous

growth: free and legal reserves were increased by 98 m Swiss

francs, a fact that creates security. Equity exceeds the legally re-

quired reserves by one billion Swiss francs or 70%.

Finally, the continuous growth can be seen in dividend pay-

ments. 28 m Swiss francs, one million more than in the previous

year, go to the canton. 13.8 m Swiss francs, 600 000 more than

in the previous year, are paid to the holders of BLKB certificates.

Added to this are another 7.8 m Swiss francs in the form of

interest paid on endowment capital.

Continuity and keeping up with the activities

of the market

Continuity and the dynamic pattern expressed by this perform-

ance is not self-generated. In order to make these things happen

and work, a bank has to be flexible and keep up with the activi-

ties of the market and, even more important, it has to rely on

an absolutely stable IT environment.

For us, keeping up with the market means using our position of

strength in order to put ourselves in line with the individual

needs of our customers and offer them a range of top-quality

products and expert services at a fair price.

IT is a highly sensitive area for any bank, and BLKB decided ear-

ly on to cooperate with specialists. So, in 1998 it joined the RTC

group of banks. Together with Basler Kantonalbank we estab-

lished Sourcag AG, a processing company. In retrospect, these

decisions were of invaluable strategic use. In the environment of

RTC and Sourcag AG, operational stability of the systems, a fac-

tor which is often underestimated outside the bank, is flawless

and guarantees high safety in our complex processes. Costs are

calculable, controlled and comparatively favourable at that.

Successful control of non-personnel costs are important for our

employees as well. A job at BLKB is not a matter dealt with

lightly or subject to considerations of return. It is an integral part

of our corporate culture which appreciates work and never

doubts the economic and social significance of secure jobs.

Dynamics means to face the market and to anticipate develop-

ments early enough and correctly. Innovation and stability are

prerequisites to long-term success.

of the sophisticated companybuildings designed by Herzog &de Meuron – visitors learnabout how the soothingproperties of medicinal herbsare extracted and processed to

the famous Swiss herbal dropswith the unmistakable flavour.

Business development – continuous growth for all lines of business


15

Excellent figures for 2004

In the parent company gross profit rose by 1.8% to 173.6 m

Swiss francs (previous year 170.5) and net profit by 3.6% to 78.1

m Swiss francs (previous year 75.4). This is again the best result

in the bank’s 140-year history. At group level gross profit in-

creased by 4.3% to 178.4 m Swiss francs (previous year 171.1).

Group net profit before taxes went up by 10.5% to 80.3 m Swiss

francs (previous year 72.7).

In the year under review, operational performance of all the

business lines of the parent company led to higher results than

in the previous year. Net operating income therefore increased

by 3.7 m Swiss francs or 1.2% to 319.8 m Swiss francs.

Interest-related business: further gain

of market shares

In the interest-related business results could be improved again

compared to the previous year by 2.7 m Swiss francs or 1.1% to

241.5 m Swiss francs. The result reflects the bank’s efficiency and

the customers’ confidence in BLKB services and products. As a

market leader with competitive services BLKB was able not only

to keep its market position, but to win even more market shares.

Balance structure, which was optimised unconditionally in the

area of maturity risks, had a favourable influence on the inter-

est result.

Value-oriented management Business development

Kaspar Schweizer: Head of Corporate Services; Willy Winkler: Head of Private Customers; Beat Oberlin: Chairman of the Executive Board;Lukas Spiess: Head of Credit and Corporate Customers; Meinrad Geering: Head of Investment Customers (from left)

(January 1st 2005)

The Executive Board of Basellandschaftliche Kantonalbank

16

Investment and trading business on the upturn

Commission and services business went very well, too and sent

its results up by 6.9 m Swiss francs or 14% to 56.3 m Swiss

francs. Compared to the previous year, the number of asset

management mandates grew considerably. Income from trading

business rose by 0.8 m Swiss francs or 6.7%.

Cost cutting

Improvement of gross profit is not only due to higher income

but also to an efficient control of costs. Operating expenses, for

example, went down by 5.3% to 59.5 m Swiss francs. Personnel

expenses rose by 4.7% to 86.8 m Swiss francs which is owed to

a non-recurring contribution to the pension scheme.

The number of employees of the parent company per year-end

was decreased in comparison with the previous year by 12 jobs

to 591 full-time jobs. At a gross profit of 173.6 m Swiss francs

BLKB created added value of 290 000 Swiss francs per full-time

job – the highest in its history.

Compared to the previous year, cost-income ratio declined to

45.7%.

Balance: growth in mortgages and savings

In comparison to the previous year, the volume of mortgages

grew again by 3.1% to 11.5 m Swiss francs. On the liabilities side

savings increased by 3.8% to 6.1 billion Swiss francs. Balance

sheet total per December 31st 2004 at 14.3 billion Swiss francs is

2.0% higher than in the previous year.

Equity higher than one billion

Equity of the bank in the year under review was endowed with

a total of 98 m Swiss francs. The sum is made up of an allotment

of 70 m Swiss francs (previous year 68) debited to the income

statement and 28 m Swiss francs (previous year 27) from profit

distribution. Thus, equity at year-end amounted to 1 122.9 m

Swiss francs (previous year 1 024.3). In relation to the legally re-

quired sum this covers 172% (previous year 161%).

‘00 ‘01 ‘02 ‘03 ‘04

Gross profit of the group

CHF m

200

175

150

125

100

75

50


Value-oriented management Business development

17

Higher dividend

Dividend paid to the Canton Basel-Landschaft increased by 1 m

Swiss francs to 28 m Swiss francs. Additionally, 7.8 m Swiss

francs (previous year 8.0) were paid in interest on the endow-

ment capital. Dividend paid on the unchanged certificate capital

of 60 m Swiss francs increased from 22 Swiss francs to 23 Swiss

francs per certificate of 100 Swiss francs nominal value which to-

tals 13.8 m Swiss francs.

28 m Swiss francs (27) are allocated to legal reserves. Reserves for

general bank risks were endowed with 70 m Swiss francs (68).

Group: net profit increased

At group level AAM’s performance led to a distinct increase of

commission and services business and trading. Thus, group in-

come statement, compared to the previous year, shows an in-

crease of commission and services income of 9.3% to 92.4 m

Swiss francs, and trading income grew by 15.4% to 18,0 m Swiss

francs. So, private banking, constituting one-third of the group

income, contributes more than in the previous year and gives us

a firm leg to stand on. Gross profit, compared to the previous

year, grew by 4.26% to 178.4 m Swiss francs, and group net

profit for the year increased by 9.1% to 79.0 m Swiss francs.

‘00 ‘01 ‘02 ‘03 ‘04

Continuity in paying dividends

CHF m

Profit share of the cantonDividend paid on capital of KBC

60

50

40

30

20

10

0‘00 ‘01 ‘02 ‘03 ‘04

Cost-income ratio

% CHF m

54

52

50

48

46

44

42

180

170

160

150

140

130

120

Return on equity

% CHF m

Dividends are paid regularly and reliably to both, the canton as the principal share-holder with an endowment capital of180 m Swiss francs, and the private bearersof BLKB certificates with a total nominalvalue of 60 m Swiss francs.

Cost-income ratio measures a bank’s costsas a proportion of its total income. In 2004,the ratio was 45.7% which puts BLKB in anexcellent position as was the case in theprevious years.

Return on equity on the one hand dependson dividend paid, and on the other hand on the development of equity. Even withequity being distinctly higher, return onequity remains at a very good level.

Equity in m CHFCost-income ratio in %

Average equity in m CHFReturn on equity in %

‘00 ‘01 ‘02 ‘03 ‘04

16

15

14

13

12

11

10

1 100

1 000

900

800

700

600

500

18

Nobody can deny that economic development in the past year

was positive. However, the badly waited-for recovery, which

would have given an impetus to the ailing labour market, did

not materialise. Caution and reluctance are still prevailing.

High demand for “Sparen 3”

Caution and protection are closely linked, but in this case pro-

tection has a very specific context. It is about the private, so-

called “third” pillar of the Swiss old-age pension concept, where

our product “Sparen 3” fits in perfectly, as it entitles the holder

to favourable interest rates and tax savings.

The number of “Sparen 3” accounts has again increased by

about 10%. The average sum per account is 30 000 Swiss francs

each individual holder can supply his/her pension scheme with.

Approx. 4% of these accounts are closed in the course of one

year in order to finance residential property, an independent

business of one’s own, early retirement, or bodily disability.

Some account holders simply reach retiring age or take up resi-

dency abroad.

“Sparen 3” is possible with a classical savings account or in com-

bination with four selected funds, meeting the very strict feder-

al requirements for pension plan saving. One Swiss franc out of

six is invested in this way by our customers.

Saving – competent advice, a satisfactory experience forboth sides

160

150

140

130

120

110

100

90

“Sparen 3” gains momentumIndex: date 2000 = 100%

%

‘00 ‘01 ‘02 ‘03 ‘04

70

60

50

40

30

20

10

0

Home-building savings plans on hold

CHF m

‘00 ‘01 ‘02 ‘03 ‘04

12 000

10 000

8 000

6 000

4 000

2 000

0

Steady inflow of money

CHF m

‘00 ‘01 ‘02 ‘03 ‘04

Cash bonds Other customer depositsSavings Saving for a pension plan with BLKB’s

“Sparen 3” account is becoming more andmore important. As it entitles the holder to favourable conditions and tax reductionsit is increasingly seen as an additional safe-guard to the State’s (AHV) and the compa-ny’s pension scheme. Since 2000 the volumeof “Sparen 3” has increased by 50%.

The inflow of savings continued in the yearunder review. Economic development,perceived as rather shaky, and the never-ending discussions about pension planscontributed to the public’s hesitancy inspending. Customers appreciate Baselland-schaftliche Kantonalbank and consider it asafe bank for their savings.

Baselbiet’s home-building savings plans,unfortunately, could not fight their waythrough the fiscal harmonisation process.However, the final decision has not beentaken yet, so BLKB continues to offer theproduct at the known conditions.


Value-oriented management Interest-related business: saving

19

Saving for residential property: we keep going

Saving for protective reasons does not only mean pension plans.

Saving for residential property comes under the same heading

and the figures give ample proof of that. In the Canton of Basel-

Landschaft there are 1 700 active savings accounts for residential

property with a total of about 60 million Swiss francs.

Unfortunately, it is not clear at all, how subsidised home build-

ing in the Canton of Basel-Landschaft will be handled in the fu-

ture. Basellandschaftliche Kantonalbank trusts that a political

solution will be found which allows for the autonomy of the

canton to pursue savings plans for residential building. For the

time being, we do not see any reason why we should stop sav-

ings plans for home building. We hope the authorities will see

the need to come up with a viable solution soon.

Expert advice becomes more and more important

Our main focus in the retail business, too, is to give our cus-

tomers quality advice and assistance. A growing number of cus-

tomers actively use these services. The abundance of informa-

tion, recipes, and strategies offered by the print media or by

consumer programmes of public and private radio or TV sta-

tions definitely persuade people to seek better and more com-

prehensive advice. BLKB, as a firmly anchored bank and an

undisputed market leader, profits from the loyalty of its cus-

tomers. We are doing our very best to deserve this loyalty and to

remain the first bank people turn to in the region.

One aspect of our efforts is the permanent education and train-

ing of the employees. The work of different centralised services

is a very important feature as well, since they put essential ele-

ments and structures at the disposal of those employees who

deal with the customers directly. Administrative burdens are

kept to a minimum, so our staff can devote more time to the

customer.

In the reporting year we achieved quite a lot in this respect. In

2005, in the course of checking our processes, we will continue

separating customer-related activities from behind-the-scenes ac-

tivities. There is a tendency to centralise repetitive, industrialised

processes, but decisions will still be taken “at the front”. Thus,

our employees’ professional and social kills will be further

strengthened.

Close customer relations

Saving has been a recurring theme throughout thebusiness year 2004. The average private budget stillassigns major importance to saving. Talking to ourcustomers we found out that there are several rea-sons for saving. One of them is saving for a specificpurpose such as the more expensive acquisitions fora household, for holidays or some other project. Themain reasons, though, for the persisting interest inclassical, low-risk savings forms are caution and pro-tection.

Nine out of ten credit or investment operations areconcluded in our branches in personal contact withour customers. We encourage our employees to takeresponsibility for the individual customer the mo-ment he/she enters a BLKB branch until his/her re-quests are met or an employee with specialised skillshas taken over. Giving expert advice is a satisfyingjob, and we want our customers to see and feel it.

20

“StartFix” mortgage – a start-up for young families

Basellandschaftliche Kantonalbank tries to facilitatethe acquisition of residential property for young fam-ilies not just by giving logistical or advisory supportbefore the purchase or during the building phase,but also by offering financial incentives. One of themis a home-building savings plan which was developedin cooperation with the canton, another incentive is a reduction of interest rates during the first fewyears, usually the most difficult period in terms of finance.

In September 2004 we added another product to therange of home-owner mortgages whose most suc-cessful model is “Starthypothek”. The new, very sim-ilar product is called “StartFix” mortgage and is afixed rate mortgage. In this scheme customers profitfrom an interest rate reduction of half a percentagepoint for the first two years and a quarter percentagepoint for the following two years, at the conclusionof a five-year, fixed rate mortgage. “StartFix” mort-gage can be combined with an adjustable portion atthe same favourable rates.

When we started promoting “StartFix” mortgage weput our expectations on personal contact to the cus-tomers and other interested parties. In the first threemonths already, the product was surprisingly success-ful and was favourably accepted by customers andemployees alike.

Loans – competition strengthensyour determination

The year 2003 would go down in history as the year of the all-

time low in interest rates: this is what we wrote one year ago.

Now, we have to add another page to this history book, for the

year 2004 did not see any changes to speak of. With the excep-

tion of a brief pleasure trip interest rates played a waiting game

on the lowest rungs of the ladder.

Our customers profited from the situation, and the trend to-

wards fixed rate mortgages continued. At present, the share of

variable rate mortgages is so low (19) that the variable rate lost its

former political significance. At present, it is not relevant for the

activities of the mortgage or the rent market.

Another statement of one year ago has unfortunately kept its va-

lidity, too. The favourable interest rates have not acted as a stim-

ulant for the building activity in the region. This corresponds

largely with the assessment of the building industry in the year-

ly economic survey Basellandschaftliche Kantonalbank carried

out. Only 25% of the building companies judged 2004 better

than the previous year and only 20% expect an actual improve-

ment for 2005. The cautious recovery of the economy and the

fact that more and more people brace themselves for a contin-

uing period of mediocre growth restrain the demand for the cur-

rently low interest rates.

From the lender’s point of view there is an important fact which

must not be ignored: residential property is usually acquired for

a longer period of time. Both parties, the buyer and the lending

bank, have to be aware of the probability that today’s low rates

increase. A bank offering reliable advice will certainly not neg-

lect this aspect, particularly since long-term planning has be-

come more difficult as a result of the changes our society has un-

dergone in the last 15 to 20 years.


21

Value-oriented management Interest-related business: loans

Tough competition for market shares

By observing the markets you become aware of a toughening

competition verging in some instances on a merciless fight for

market shares. As a market leader we are particularly exposed to

this kind of threat.

BLKB’s conditions are very competitive, but banking is not al-

ways about money only. A mortgage is not a commodity or a

mass product as some people are saying. A mortgage is part of

a package we call “financing of residential property” which

includes accompanying services from planning to realising to

moving in and even further.

Offering complete, holistic systems instead of dissected parts is

but one of our strong points in this competition. Our bank

organisation has successfully existed for 140 years, is firmly

rooted in the canton and has a lot of confidence placed in our

work. All this taken together gives us the strength to face the

competition and assert our position in the market. In spite of

unfavourable conditions, we managed to increase the volume of

mortgage loans again. Net new production of 3.05% was approx.

2% lower than in the previous year, but given the circumstances

still represents a good result.

The strategy is clearly outlined: With its high-quality advice and

its product offers at favourable conditions, BLKB wants to retain

and expand its number 1 position. Nevertheless, this will not be

done at any price; certainly not at the price of watering down

BLKB’s principles of risk policy.

Further growth of mortgages

Variable rate Fixed rate

CHF billion

12

10

8

6

4

2

0‘00 ‘01 ‘02 ‘03 ‘04

BLKB’s offer of complete, holistic systemsand the firm roots in the region are thebank’s strong points in this competition. A distinctly recognisable trend goestowards fixed rate mortgages. Under thesecircumstances the variable rate has lostsome of its shine.

22

First address for SME

BLKB still considers SME financing a core task which must be

continued in a responsible way. Compared to other parts of the

country, the economy in our region is more than sound, a fact

that clearly benefits the financial needs of SME, because they

can put their business planning on solid economic feet.

Financing start-up businesses is one of the specific needs of to-

day’s economy. We lend active support with our involvement in

“Erfindungsverwertungs AG” (EVA) which is a private enter-

prise, established in 1996, with a lot of experience in the area of

Life Sciences. EVA supports and assists fledgling companies in

their initial phase (www.eva-basel.ch).

Moreover, for four years now, young, innovative enterprises

have had the possibility to use a special credit limit which is

granted after close scrutiny of the business idea and business

plans, usually in cooperation with EVA.

Basel II

The Basel Committee on Banking Supervision is apanel of bank supervisory authorities which was established by the central bank governors of theGroup of Ten (G-10) countries in 1975. It consists ofthe heads of bank supervisory authorities and thecentral bank governors of Belgium, Canada, France,Germany, Italy, Japan, Luxembourg, the Netherlands,Spain, Sweden, Switzerland, the United Kingdom,and the United States of America. The committeeusually convenes at the Bank for International Settle-ments in Basel where its secretariat is seated.

The goal of reviewing the Capital Accord of 1982 is to have a framework at one’s disposal for furtherstrengthening solidity and stability of the interna-tional banking system. The concept is based on threepillars: minimum capital requirements, supervision,and market discipline. The result is a new capital ad-equacy framework which replaces the first capitalframework of ten years ago – hence the nameBasel II. The new accord sets out rules and standardsfor the capital requirements of banking organisa-tions.

In the past years, the public repeatedly expressedfears of negative implications by Basel II, particularlyfor small and medium enterprises.

Thanks to our well-established credit policy BLKB hasa sound and balanced credit portfolio. As we men-tioned in earlier publications, we do not expect anymajor consequences. Our SME customers need notanticipate any negative effects. Occasionally, thereare rumours of excessive rate increases or a creditstop in context with Basel II, a notion we consider ab-solutely uncalled-for and devoid of any substance.


23

Private banking – a transparent conceptfor integrated financial advice

BLKB’s business of investment advice took a very satisfactory

turn in 2004. Compared to the previous year, securities income

of the parent company increased by 6.6 m Swiss francs to 45.5 m

Swiss francs. The target budget was more than reached. Together

with the securities income of our subsidiary Atag Asset Manage-

ment (AAM) of 42.5 m Swiss francs, this amounts to an income

at group level of 88.0 m Swiss francs from the securities and in-

vestment business – 7.4 m Swiss francs more than in the previ-

ous year.

BLKB successfully acquired new asset management mandates,

too. At 150 m Swiss francs net new money and stock in hand of

1 982 m Swiss francs as per December 31st 2004 target in this area

was exceeded by far.

A rising number of customers benefits from our services in tax

advice, financial and retirement planning. This development is

perfectly in line with our strategy of offering solutions instead of

products.

Concept of individually tailored advice

and support

“BLKB Private Banking” is the trademark of our advisory con-

cept which aims at giving comprehensive, sustainable invest-

ment advice based on life goals and personal situation of each

customer. It is designed to meet the needs of individuals having

assets of upwards of 250 000 Swiss francs at their disposal. Thus,

high-net-worth private persons will profit from a level of services

not easily found in this order of assets.

Professional advice and support designed to accompany an in-

dividual customer’s life starts with a careful analysis of the needs

and goals. This first step includes investment advice and asset

management, but also other aspects which may carry signifi-

cance depending on the individual customer’s circumstances.

They include financial planning and taxes, frequently an analy-

sis of pension plans and sometimes early planning of estate ad-

ministration. Younger persons more often need financing of res-

idential property. By linking all these questions of financing we

can create a clearer picture of current and future needs and build

the basis for further action.

In investment advice and asset management as the core compe-

tencies of private banking we offer our customers a detailed and

systematic investor profile and from there work out an invest-

ment strategy. It does not matter whether the customer decides

to manage the portfolio him-/herself or to have it managed by

the bank, the preliminary in-depth process creates the basis for

all the future decisions.

If our customers decide to leave care and management to us,

they can be absolutely sure that it is done at the highest degree

of professional integrity and that their portfolio is monitored by

specialists. Even if they decide to take management into their

own hands, they are not left alone, they are integrated into our

systematic process of advice.

The advisory services “BLKB Private Banking” established for its

customers are periodically supplemented or updated when need

Investment world with Swisscanto

As of January 1st 2005, Swisscanto is the trademarkwhich unites Swissca, Prevista, and Servisa, the threejoint companies of cantonal banks under one um-brella. The cantonal banks support the position ofSwisscanto as a leading supplier of investment andpension services.

Swisscanto is the third-largest seller of funds inSwitzerland. Thus, with Swisscanto funds our cus-tomers have the whole investment world at their disposal.

Value-oriented management Interest-related business: loans

Private banking

24

arises and they offer follow-ups for and keep track of other

needs. Unlike taxes, which is always a topic, financing of resi-

dential property may one day be a subject of interest. Financial

and retirement planning will certainly come up, as will planning

of estate administration. So, we offer a wide range of products

and services designed to meet all these potential needs. The

BLKB tax mandate, for example, relieves the customer of an an-

noying concern, financial and retirement planning ease worries

about the future, comprehensive support in matters of estate ad-

ministration lessens the pressure of a disturbing aspect of life.

BLKB Private Banking and

Atag Asset Management

Atag Asset Management AG has been active in asset manage-

ment since 1917 and became part of Basellandschaftliche Kan-

tonalbank in 2000. Atag Asset Management AG includes the fol-

lowing subsidiaries: Atag Asset Management (Luxembourg)

S.A., Gräff Capital Management AG, Zurich, and Atag Private

Client Services AG, Basle. AAM employs 180 staff at eight lo-

cations in Switzerland and abroad.

Core competencies of AAM are in asset management and inte-

grated finance and investment advice for private customers and

institutional investors. BLKB Private Banking and AAM coop-

erate very closely in working out principles of asset management

or in dealing with the manifold aspects of financial planning. In

their function as specialised centres they exchange knowledge

and experience.

0 10 20 30 40 50 60 70 80 90 100%

Assets under management

%

Institutional assets Private assets

29

32

30 70

CHF m

BLKB 9 943

AAM 4 346

Total 14 289

71

68

Locations of Private Banking (BLKB and AAM)

1

3

5

4

2

1 Arlesheim: BLKBBasle: BLKB, AAMBinningen: BLKBLaufen: BLKBLiestal: BLKBMuttenz: BLKBSissach: BLKB

2 Zurich: AAM3 Berne: AAM4 Lausanne: AAM5 Geneva: AAM

Additionally, AAM has asubsidiary in Luxembourg.


25

Individually tailored products

for private customers

Modern wealth management requires diverse and complex cap-

abilities. Adaptations have to be made as the customers’ needs

evolve. In a rapidly changing environment of the stock market,

solutions have to be found which meet the requirements. It is

not sufficient anymore to rely on standard strategies. AAM

therefore offers a wide range of products from standard to

highly elaborate and well-structured ones, including Family

Office (Atag PCS).

Both AAM and BLKB offer an extensive range of advisory ser-

vices in the area of financial planning which customers may

make use of according to their current needs and circumstances.

Competent partners for institutional customers

Customers from institutions ask for investment strategies which

reach a higher performance in relation to the market but fulfil all

the legal and regulatory requirements. A high degree of disci-

pline and specialised knowledge on the bank’s part is absolute-

ly imperative. BLKB and AAM achieve this goal on the basis of

a decision-taking process developed for this particular purpose.

Our goal: top of the class

Basellandschaftliche Kantonalbank and its subsidiary AAM have

built specialised centres for private and institutional customers

in the northwest of Switzerland and the entire Swiss market. Our

goal is to be “top of the class” with our products. BLKB and

AAM have their respective ways of presenting themselves in the

market, but it is only in the combination of both, cantonal bank

and independent asset management company, that we can offer

the variety of solutions and strategies our customers can choose

from.

Value-oriented management Private banking

Total return: Income and investor protection

The novel scheme, favourably accepted by the mar-ket, ist the answer to the growing insecurity in thecapital markets: unlike the classical investment con-cept the new scheme consists of two separate cate-gories of assets, “growth” and “substance”. For thetwo categories we use both traditional investmenttools and alternative investments.

26

Sustainability – thinking in terms of generations

the “Greenline” environmentalseal of approval. Productionprocesses are based on energy-saving and emission-reducingprinciples. Their buildings areequipped with solar cells which

produce about 60% of theenergy needed for electricityand heating; a feature ownerand staff are extremely proudof. This is exactly where sustain-ability begins, in small matters

It’s a moral obligation to con-form your actions to sustain-ability. This is the view adoptedby Aerni Fenster (window man-ufacturer) in Arisdorf. Theirproducts have been awarded

as well as in larger ones. It’simportant to think in holisticdimensions, to take on respon-sibilities, to conform ouractions to sustainability. Timesare changing and we have to


27

Sustainability, nowadays, is a catchword and definitions abound.For us it means following an environmentally friendly and sustain-able business practice such as investing in ecologically sounderoperational facilities, energy-saving buildings, or storage systemsfor rainwater. It also means social commitment as an employer,investment products strictly in accordance with the principle ofsustainability, and adherence to ethical values laid down in ourcorporate guidelines. We consider it very important, though, thatthe public, too, perceives these aspects as being part of our corporate culture. Sustainability means thinking in dimensionsthat reach beyond our generation.

make sure our grandchildreninherit a world worth living in.

29

growth and the correct care.Rebmann, whose name impliesthat he is a man of vines,studied viniculture. The grape-vines are passed within thefamily from one generation to

Easy come – easy go: this is usuallysaid of quick money. We recom-mend a more cautious approach:the experience of very young customers with their first pocket-money account should lay the foun-dation for a sustainable customer-bank relationship. Not just out ofhabit, but as a process of healthygrowth which accommodateschanging needs, desires, perspec-tives and possibilities. We are readyfor it.

the next, and the pleasure ofmaking wine and the love ofgood wine is something hisadoptive father Urs Rebmannstarted to encourage early on.When Mona, a Bengali boy,

Things that shall grow need tobe cultivated. As a wine-growerMona Rebmann from Prattelnknows that it takes time to do athing well. However, it alsotakes optimum conditions for

30

BLKB survey 2004 of“Baselbiet” companies

was four years old, he became amember of the Rebmann familyand the relationship betweenadoptive son and father hasalways been held dear andcarefully nurtured. There is no

question, of course, that inMona Rebmann’s winery a newwine, before going to the shopfor sale, is tasted and appreci-ated by father and son.

Success and optimism

For more than 30 years BLKB has carried out its yearly eco-

nomic survey with the companies’ undiminished interest. In

fact, there were 382 small and medium-sized enterprises that re-

sponded to the survey carried out in October/November 2004;

more than ever before.

Compared with the last two years, the situation, according to

“Baselbiet” companies, has distinctly improved. The companies

focusing on export and those in the chemical-pharmaceutical

sector were the ones profiting most from the economic recovery.

2004 was a difficult year, though, for the car dealers, the spe-

cialised and retail trade.

Better marks for 2004

38% of companies surveyed consider 2004 a good year, 8% even

a very good year. For 42% the year was satisfactory, and 12%

judge it to have been bad. The cumulated number of “good” and

“very good” judgements are four percentage points higher than

in 2003 and seven percentage points higher than in 2002.

The more a company focuses on export the more satisfied it is:

35% only of non-exporting SMEs thought the year 2004 was

good or very good, whereas 73% or double the amount of com-

panies with an export share higher than 50% judged 2004 good

or very good.

Higher turnover – more profit

43% of all companies were able to increase their turnover and

27% managed to keep up their level. 30% suffered a decline in

turnover. However, the upward trend of turnover did not auto-

matically step up profit. Yet, 32% increased their profit, but an-

other 32% had to sustain a profit reduction. In comparison with

the two previous years, however, there is a distinct trend towards

improvement.

Comparison of trades. 2004 was ...

%

very good good satisfactory bad

10 44 36 10

8 33 49 10

10 52 28 10

5 29 48 18

20 68 12

9 42 37 12

8 38 42 12

Industry and production

Primary and secondarybuilding and construction

Chemicals, pharma-ceuticals, biotechnology

Specialised and retail trade

Motor vehicle trade

Trade and other services

Total (including allcompanies surveyed)

Comparison of trades: investment 2004

%

Increase No change Decrease

40 44 16

22 58 20

25 60 15

26

21

45 29

62 17

34 51 15

30 52 18

Industry and production

Primary and secondarybuilding and construction

Chemicals, pharma-ceuticals, biotechnology

Specialised and retail trade

Motor vehicle trade

Trade and other services

Total (including allcompanies surveyed)

0 10 20 30 40 50 60 70 80 90 100

0 10 20 30 40 50 60 70 80 90 100


31

More investment – fewer jobs

In 2004 there were clearly more companies which increased their

investment (30%) than reduced it (18%). Unfilled orders took

a very positive turn as well. Compared with the two previous

years, the situation has definitely improved: 50% judge their cur-

rent orders on hand as good or very good, 37% as satisfactory

and 13% as unsatisfactory. The development of the number of

employees looks less encouraging, though. In 2004 more com-

panies reduced their staff (27%) than added personnel (20%).

Price pressure and over capacity

68% of “Baselbiet” companies define price pressure in the outlet

market and 52% insufficient demand or the economic situation

as particularly negative for their business activities. Last year

economic situation and demand ranged topmost on businesses’

complaint list. One out of four companies considers time and

energy spent on dealing with authorities and administrative bod-

ies a considerable problem.

Generally optimistic outlook for 2005

For the year 2005 optimistic views prevail. A distinct majority of

companies expect an improvement (28%) as opposed to 11%

which prepare for a deterioration. 61% do not expect any signif-

icant changes.

As far as turnover, costs and profit go, more companies count on

an increase than on a decrease. The same goes for investment

whereas the number of employees is rather seen as declining.

A detailed analysis can be ordered via Internet or downloaded as pdf-file atwww.blkb.ch, menu: Ihre BLKB – Publikationen

Commitment to sustainabilityBLKB economic survey 2004

0 10 20 30 40 50 60 70 80 90 100

2004 was ...

%

very good good satisfactory bad

8 38 42

6 36 45

7 32 46 15

11 40 41 7

‘04

‘03

‘02

‘01

12

13

0 10 20 30 40 50 60 70 80 90 100

Compared to the previous year 2004 was ...

%

better same worse

34 43

24 42

27 32

32 40

‘04

‘03

‘02

‘01

23

34

41

28

0 10 20 30 40 50 60 70 80 90 100

The coming year will be ...

%

better same worse

28 61

32 57

20 58

25 52

‘04

‘03

‘02

‘01

11

11

22

23

0 10 20 30 40 50 60 70 80 90 100

Backlog on orders is ...

%

very good good satisfactory unsatisfactory

6 44 37

7 33 44

3 28 54 15

6 38 46 10

‘04

‘03

‘02

‘01

13

16

32

Recognising customer needs – ambition and obligation

BLKB has always been deeply rooted in the canton and the

minds of the population. The tightly woven network of sales and

distribution in combination with a very stable course of affairs

has cemented the trust placed in BLKB.

Thus, the Canton of Basel-Landschaft, holder of the majority

stake, emphasises this trust by observing a law that gives prior-

ity to the building of reserves and a moderate profit distribution.

The amended Cantonal Law on Kantonalbank, in force since

January 1st 2005, still contains the rule that the same amount of

money the bank pays to the canton in dividends has to go to the

bank’s reserves. At first sight this rule may seem insignificant,

but it goes to prove that the canton supports the bank’s endeav-

our for a financially strong and independent growth.

This opinion seems to be shared by the canton’s population and

our customers who give us constant proof of their loyalty.

We are very happy about this, however, there is no reason to

relax. From our daily work we are well aware of the fact that

customer loyalty does not spring up like that. It is something

that has to be nourished and well tended by offering quality of

service, first-class products and skills, and a fair price; things that

actually go without saying in a partnership.

Assist customers and keep the future in sight

Everybody knows that the needs of customers change repeatedly

in the course of their lives. The individual agenda of values may

change at different points of life such as the beginning of a ca-

reer, the start of a family, home-building, setting up of a business

of one’s own, or the vicissitudes of getting older. We would like

to accompany our customers through the different stages of life,

help them to sharpen their senses for actual or potential devel-

opments and discuss options in time so they can take the right

decisions.

www.blkb.ch – your own private entrance to the bank

1.6 million guests! That’s the amazing number of per-sons who accessed our web site www.blkb.ch in 2004.1.6 million guests translate into 135 000 guests amonth or 4 500 a day, 20% more than in the previousyear. The pages which roused the most interest weremarketing and stock exchange, real estate and onlinebanking.

“Stock Exchange and Markets” gives access to analy-ses, commentaries and reports, rate lists, model port-folios, custom-made portfolios, to peak price or low-est rate, to charts and statistics: anything a stockmarket enthusiast might wish for.

The real estate pages offer more than 12 000 flatsand houses either for rent or for sale. In our closervicinity there are about 1 900 objects for sale androughly 900 for rent. The real estate page offers a direct link to financing. There is a growing number ofcustomers who conclude a contract in this way.

An up-and-coming feature is BLKB Internet-banking.More than 30 000 customers are managing their ac-counts and securities portfolios themselves and havedone more than three million payment transactionsby means of e-banking. October was a peak month,when electronic payments amounted to 50% of totalpayment transactions.

Both, the strong upward trend of Kantonalbank cer-tificates and the Triple-A-rating of Basellandschaft-liche Kantonalbank, have contributed to the fact thatthe public is increasingly interested in information forinvestors. The section “Ihre Bank” provides a wealthof background information: the annual report in Ger-man and English, the sustainability report, detailedinformation on the price movement of Kantonalbankcertificates, and charts showing daily and yearly de-velopments.


33

Commitment to sustainabilityCustomer needs

0 10 20 30 40 50 60 70 80 90 100

Customer satisfaction

%

very satisfactory satisfactory remaining customers

55 40 5 ‘04

This is what we are working on. One way of doing so is the

continuous education of our staff in order to improve their

specialised skills and social competence. We would like our

customers to know that there aren’t any stupid wishes. Every

request or problem which is brought before us will be seen as a

unique and personal matter and treated accordingly.

Systematic surveys since 1998

Customer satisfaction and customer loyalty have always been at

the centre of our attention, and we are assigning them more and

more significance.

Our observations are not restricted to the personal contact with

our customers. Since 1998 we have been making systematic sur-

veys of our customers on a yearly basis.

In 2004, the survey was carried out from June 17th to August 2nd.

15 000 customers were sent forms, and one third returned them.

As a thank you to those customers who took the trouble to

answer we donated five Swiss francs per form to the charity ini-

tiative “Aktion Denk an mich”.

Customer satisfaction stable

Results of the 2004 survey prove that customer satisfaction in

general has remained stable, as was the case in the previous

years. 54.6% of the customers surveyed were very satisfied and

39% satisfied which translates into a positive 94%.

94% is a very high reading which reflects a general view without

any distinction. Digging a bit deeper we found there were devi-

ations both upwards and downwards. Work organisation was

one item that was seen as improved. Specialised knowledge and

sales competence remained stable, and social competence con-

tinues to be judged highly. The diagram shows the development

of the satisfaction index, social skills, specialised skills, sales

competence, appearance, work organisation, and motivation.

Four out of these seven items changed in a positive way.

Willingness for loyalty declining

The index of customer loyalty has declined and is now at the

lower margin of the previous years’ fluctuation rate, but this in-

dex has always shown a much higher tendency to fluctuation

than for example the satisfaction index.

The slight decline does not come as a surprise, though. Increas-

ing competition automatically leads to a reluctant behaviour

concerning loyalty, and besides, society’s trends have followed

a course towards independence and flexibility for quite a while.

Corporate planning for 2005 has taken into account the results

of the 2004 survey and has focused its attention accordingly.

Among other things, internal emphasis is now on further sys-

tematising advice and assistance processes.

‘00 ‘01 ‘02 ‘03 ‘04

Customer satisfaction index

900

880

860

840

820

800

34

Attractive employer for a talented and motivated staff

the training of the middle management. Basic management

training is still done together with other cantonal banks. In the

past year we started to supplement the training with so-called

“reflexion days” for junior managers so that they may give

enough thought to BLKB management guidelines and to how

they secure their personal management comprehension within

these guidelines.

There were 23 employees who finished further education on a

federal level. Apart from courses in banking and financial plan-

ning, BLKB also supported more general commercial courses

whose completion give access to a university of applied sciences

or to other higher education in economy.

Nineteen employees completed specialised banking courses

offered by the Association of Swiss Cantonal Banks.

A career in banking

After completion of the requisite education youthshave several options for an organised education incommercial professions. The classical way of becom-ing a commercial employee is to use an apprentice-ship system which in turn offers three different pro-files. However, besides the conventional system thereis another concept requiring more than standardqualifications for entry and involving higher-level sec-ondary schools with an emphasis on commerce. Mit-telschulstufe, Handelsmittelschule, and Wirtschafts-gymnasium (up to A levels) meet these criteria, andstudents having finished these schools may undergoan accelerated educational programme of 18 monthsinvolving bank- and finance-specific on-the-job train-ing. The law (Art. 41 law on professional educationand training) provides for the case of a late or an ad-ditional apprenticeship which may be accelerated aswell. In our bank this has rarely been the case.

After the successful health days of 2003, we continued our

efforts for the health and well-being of our employees. Offers

of afternoon or evening classes to further physical or mental

well-being were readily accepted by the staff. The campaign for a

smoke-free bank has contributed to the fact that a number of

employees stopped smoking. For further details see p. 38 of this

annual report.

More part-time jobs

At the end of 2004 Basellandschaftliche Kantonalbank employed

654 persons (previous year 664), 308 (312) women and 346 (352)

men. This figure includes 134 (126) part-time jobs, 31 (34) ap-

prentices and 9 (8) trainees equalling 591 (603) full-time jobs.

Low fluctuation

Fluctuation rate (including retirement and pregnancies) in-

creased slightly to 7.5% (7.3%). The adjusted fluctuation rate

(registers resignations by employees, does not include maternity

resignations or retirement) was 3.9% (4.7%). All told, there were

49 (47) entries opposed to 59 (44) exits.

Further education more often from resources

of our own

Expenses for the development of our staff in the reporting year

amounted to approx. 1 m Swiss francs. BLKB tried to concen-

trate more on the internal resources at hand and the internal

standards of value.

About 65 employees devoted time and effort to teaching their

colleagues in various banking matters. Apart from specialised

classes and sales training we also used our own employees for


35

Commitment to sustainabilityEmployees

Number of employees in 2004

Total number of employees 654

women men

346308

full-time part-time

134520

women men

42

Successful completion of apprenticeship

All our eleven apprentices passed their final exams successfully,

six among them passed the examination for the university of ap-

plied sciences.

On October 18th 2004 banking education was the first profes-

sional training programme of Switzerland to gain the European

certification EFCB (European Foundation Certificate in Bank-

ing). This European certificate is relevant for both the basic edu-

cation (apprenticeship) and the banking and financial training

for advanced school leavers.

Students are awarded the certificate after successful completion

of all four bank-specific examination units.

Fewer apprentices

In the last year, the number of youths starting an ap-prenticeship with Basellandschaftliche Kantonalbankdeclined. The reason is the trend towards “Fachmit-telschulen” (secondary schools with an emphasis onspecific professions) which is perceived by students andparents alike as a more comfortable way to a career,with less pressure for a decision on which profession,more options, and distinctly more leisure time. BLKB’sapprenticeship system has a very good reputation inthe canton, and it would be a mistake not to maintainthe high standard of entry just because the numbers ofapprentices is currently declining.

Sustainable effect. In 1993, 18 youths started their ap-prenticeship with BLKB. Since 1995 the number of ap-prentices has been going down and since 1999 it has

remained at a level of 11 apprentices per year. Thenumber of trainees from Mittelschulstufe has remainedat a constant three to five per year.

Out of a total of 70 young persons having completedtheir apprenticeship from 1995 to 1999 23 are still em-ployed at BLKB. Actually, the benefit we reap by train-ing apprentices has a sustainable effect, as employeeseducated at BLKB often come back to us from otherjobs in Switzerland or abroad with very specific profes-sional experiences.

26 000 Swiss francs. Calculated according to full costsat a number of 33 apprentices, 11 per year, training costsamount to approx. 26 000 Swiss francs per apprentice,per year. Roughly half of their annual working time isspent on-the-job in our offices.

142

Total middle management 184

36

Employee satisfaction remains at high level

For a few years now, BLKB has surveyed job satisfaction of its

staff. In June 2004 the survey was conducted by Navicom, Ober-

wil, and subsequently evaluated. The questionnaires remain with

the surveying company. The evaluation disclosed to BLKB is

completely anonymised.

64% of the questionnaires were answered and returned. Com-

pared to the previous year, this is one percentage point more.

Return has grown every year. The first survey in 2001 yielded a

mere 48%.

The summary of the survey boils down to three main points.

Overall satisfaction. The index is established on the basis of the

question: “How well are you satisfied with BLKB as an employer

on the whole?” The answers to this simple question provide a

valuable and comparable measure of satisfaction across a peri-

od of several years. On a scale of 1 000 points overall satisfaction

ranges at 798. This is 5 points lower than in the previous year,

but 30 points higher than two years ago.

Willingness to recommend. The index shows to which degree

an employee is willing to put his name at stake for BLKB and

to recommend the bank as an employer. This is an indication of

the extent to which the employee identifies with the company.

In 2004 the index remained at the same level of 835 marks.

Mixed index satisfaction. Satisfaction is measured in a mixed

index whose reading consists of four main factors of employee

satisfaction: salary, career chances, work climate in the team,

type of work. In relation to the total index, the mixed index, at

722 points, has slightly declined.

On the whole, women are somewhat more satisfied than men,

and older employees are more satisfied than young ones. There

is hardly any difference, though, between the various work lo-

cations, and separating the employees into those with and those

without any management responsibility does not bring forth any

differences to speak of.

Promotions

With effect from January 1st 2004, the following employees were

made members of the senior management:

René Glaser, Head Office, Real Estate/Buildings

Hanspeter Läubli, Head Office, Credit and Corporate

Customers

Daniel Sturm, Head Office, Area of Responsibility of Executive

Board

Fredy Werder, Binningen, Private Customers

With effect from February 1st 2004, Peter Meyer, member of the

senior management, took over the area of Investment Cus-

tomers of our Liestal Branch.

With effect from January 1st 2005, Alban Wyss, Head Office,

Corporate Services, was promoted to member of the senior

management.

With effect from January 1st 2005, new entry Daniel Neuen-

schwander, Head Office, Responsibility of Executive Board, was

admitted to the senior management.


37

Commitment to sustainabilityEmployees

‘00 ‘01 ‘02 ‘03 ‘04

Overall satisfaction of employees

820

800

780

760

740

720

‘00 ‘01 ‘02 ‘03 ‘04

Mixed satisfaction index of employees

740

720

700

680

660

640

After the fourth opinion survey we can say that the statements,

lying within the margins of normal statistical fluctuation, are re-

liable indicators of the mood of our employees. All these factors

taken into consideration, we are pleased to say that the results of

the survey are very positive.

The management takes the outcome of the survey as a stable ba-

sis for further improvement and changes.

Peer review

Additionally to the survey, employees have the opportunity to

speak out about the quality of performance of different depart-

ments or units they often are in touch with. Contrary to the sur-

vey, which is absolutely anonymous, the technique of mutual

evaluation within the bank includes criticism; real, personal and

tangible. Making use of it means meeting those criticised face-

to-face and producing coherent, well-grounded, and factual ar-

guments.

This is a very demanding procedure in terms of social compe-

tence. Everybody concerned has to be willing to hear and con-

sider, to accept and deal with the problems. However, this form

of argument yields results which would not be possible in an

anonymous evaluation. Emotional stress may occur, as might be

expected, but in open and sensitive reasoning the different ways

of perception can be reconciled.

38

Sustainability – evolving in a healthy way

For years now, we have given deep thought to the many aspects

of our corporate management which is based on economic, eco-

logical and ethical principles. This fact has gradually developed

into a strategic factor of distinction for BLKB. In face of the

tough competition Swiss banks, in the medium-term, will need

additional distinguishing features that set them apart from other

banks, particularly since the discussion about bank secrecy in

the European Economic Area has flared up. In the past year,

BLKB further strengthened its solid foundation of sustainable

management.

In the public eye

BLKB’s second report on sustainability published in April 2004

contained considerably more information in a wider range of

topics. We kept the general make-up of the 2002 report since it

was well accepted, but structured it more along the lines of our

annual report. The statements on our activities regarding sus-

tainability in 2002/2003 were again well received by the media

and those persons having a particular interest in them. For the

second time, Fachhochschule Nordwestschweiz (University of

Applied Sciences), Aargau, conducted a survey on the quality of

sustainability reporting of Swiss companies, and again BLKB

ranks among the first ten, although competition has increased.

Environmental data of BLKB has so far been captured and eval-

uated according to VfU 1996 (association for environmental

management in banks, savings banks, and insurance companies)

which is an internationally recognised and comparable standard.

In order to facilitate comparison with other banks in the future

too, sustainability reporting will be adapted to the new VfU

2003 standard. With the introduction of the new standard start-

ing from the 2004 report we are also examining the current

processes for data capture and evaluation.

Health, well-being and traffic ecology

Compared with other banks, our sustainability-related activities

in the last few years have reached a very high level. In 2004 we

pursued our efforts with the objective of securing even more

firmly the notion of sustainability in everyday business and

management. Organising two fitness weeks for our employees in

October 2004 was but one highlight on the sustainability agen-

da. There was a wide range of informational events, introducto-

ry courses, and training units which sensitised our staff for the

necessity of a regular and balanced care for their physical and

mental fitness. Apart from sports activities such as jogging,

nordic walking, and mountain biking there were items like yoga,

relaxation programmes, introduction into the game of chess or a

well-known author reading from his works. Some of our em-

ployees became so enthusiastic about certain offers that they de-

cided to carry on privately.

Smoke-free bank

Since summer 2004 all offices, meeting- and otherrooms at Basellandschaftliche Kantonalbank have become non-smoking areas. Smoking is only allowedin specific areas. Some of our smoking employees de-cided to profit from the new rules and quit smokingaltogether. We assisted them by offering a specificsmoking cessation programme. About half of the par-ticipants effectively managed to quit.


39

Commitment to sustainabilityEnvironment, ethical values and health

BLKB opened another chapter of traffic ecology by taking over

a transport vehicle driven by natural gas. By successively chang-

ing over to more efficient concepts of driving BLKB contributes

heavily to the reduction of CO2 emissions, and of the ozone-

forming hydrocarbons. At the same time, a petrol-driven courier

vehicle was replaced by a diesel-powered vehicle equipped with

a particulate filter. At a mileage of 170 000 km in 5 years we

saved an impressive 6 630 litres of fuel and reduced harmful

CO2 substantially by 13 090 kg.

‘00 ‘01 ‘02 ‘03 ‘04

Total energy consumption

kWh m

oilgasdistrict heatingelectricity

7

6

5

4

3

2

1

0

Sustainable building

In the year under review, there were again a numberof rebuilding and renovation projects whose conclu-sion achieved distinct improvements as far as buildingand operational ecology are concerned.

Renovation of Gelterkinden branch was finished inlate autumn and involved heating and air condition-ing technology. In the course of windows renovationthe shading system was also renewed.

Current building projects and plans involve the Binningen and Arlesheim branches. Binningen is nowbeing renovated. The flat roof tops will be extensive-ly covered by greenery, and renovation of the air con-ditioning system will enable us to use non-cooledspring water to cool down the rooms. Whenever pos-sible, we will make use of collected rain water.

Renovation and partial reconstruction of Arlesheimbranch will begin in spring 2005 and will includegreenery on flat roof tops, renovation of air condi-tioning and windows.

There are plans for state-of-the-art lighting controlsystems for both projects, as they are already in use inGelterkinden. This system features occupancy sensorsand constant adjustment of changing levels of day-light.

40

Efficient and reliable background services leave more time for customer care


41

Open up future prospects bytop performance. MartineWalch and her children followin the footsteps of the oldRomans and their architecturaland cultural achievements of

Every BLKB employee has an intri-cately woven network of servicesand processes at his/her disposal.Customers don’t get to see it, but it works on the most diverse levelsand contributes greatly to thesuccess of any transaction. All per-sons concerned do their best, andtheir skill, reliability and readinessfor development builds the produc-tive atmosphere that keeps the so-called core business thriving.

Augusta Raurica. The tradition-al “Romans’ Day” is the motiva-tion for a travel in time, 2000years back. Full of admirationthey stand in front of a show-case displaying the silver

42

A strong bank with a strong IT partner: cooperation with RTC since 1998

Basellandschaftliche Kantonalbank has not run a bank IT of its

own since 1998. Outsourcing it to a strong cooperation was

done at the right moment and was well worth the effort in terms

of operation, finance, comfort for the customer, and safety of

customer data.

IT partner of BLKB is RTC, Real Time Center AG, Berne. As a

leading IT service company for banks RTC develops IBIS, an in-

tegrated software platform for banking which is widely used by

Swiss banks. This IT platform, stable, state-of-the-art, and open

to future requirements, creates safety and an optimum environ-

ment for expert advice and assistance to our customers.

External IT – internal planning and control

In the year under review RTC again developed and put into ser-

vice new applications, among them an up-to-date solution for

archiving. This is an excellent example of the processes running

in the background without ever being noticed by customers,

although their proper functioning is vital for the bank. In the

future, BLKB will use this solution.

Developments such as these can only be brought about in close

cooperation of bank specialists with IT specialists and include

aspects such as business analysis, software engineering, or oper-

ational services. The work focuses on the safety of customer data

and the availability of the systems for our customers as well as

our employees, not forgetting the omnipresent question of

costs.

IBISmove is a programme aimed at modernising and improving

which was initiated in 2001 and is designed to bring the bank-

ing platform IBIS into line with the standards of the future. IT

architecture follows a new concept and has already been intro-

duced. The numerous programme modules which are used dai-

ly by our employees have also been renewed and are being in-

troduced gradually. The year under review saw the introduction

of a finance information system, the first product of the new

IBIS desktop, a user interface suitable for all purposes. The first

few elements of a new conduct of account were also introduced.

Processes subcontracted

Changing over to RTC in 1998 enabled us to establish Sourcag

AG in Münchenstein, a processing centre jointly owned by

Basellandschaftliche Kantonalbank and Basler Kantonalbank.

In today’s competitive environment a company has to under-

stand the necessity of outsourcing. It is simply not possible to

defeat the entire competition in all areas of the value chain. Be-

sides, vertical integration for banks is still much higher than for

the industry. The answer to that problem is “Business Process

Outsourcing” or BPO. Outsourcing of IT applications as well as

outsourcing of certain processes facilitates the bank’s concentra-

tion on their core activities such as giving expert advice to the

customers in all financial matters according to the customers’

current need and circumstances which are nevertheless subject

to constant change.

Sourcag AG’s core competence is the handling of payment and

securities transactions, the latter initiated by the customers.

In both cases high volumes are at stake requiring specific know-

ledge of procedures. High quantities can be dealt with at much

more favourable costs than would be possible for an individual

company. In its function of operating the office communication

of Basellandschaftliche Kantonalbank Sourcag AG developed

a further core competence: in close cooperation with RTC it

serves and caters for our approx. 600 workplaces.

treasure. Martine Walch, whoworks in a very innovative envi-ronment with Knoll in Liestal,appreciates the creative forcebehind these precious objects.“The Romans were a highly

developed people”, she explainsto her children, “and in someprofessions and areas ofresearch we learnt more fromthem than we are aware of.”


43

Efficient services Information technology

Well thought-out business concept – put responsi-

bility in the most competent hands

The business concept of BKLB, RTC, and Sourcag AG is simple

and makes sense.

BLKB retains five key functions of IT

– strategy and planning

– coordination

– safety

– controlling

– data management

Sourcag AG operates

– processing of securities transactions

– processing of payment transactions

– decentralised IT infrastructure with help desk

RTC is responsible for

– operating of the computer centre

– bank software and applications

– development of applications

– support

– printing and delivery

Business Process Outsourcing

In a changing business world, banks too have to becomemore resourceful and adaptable, and in the environ-ment of an ever growing competition they have to refocus on their core strengths and competencies. Reg-ulatory constraints require an increasing amount of re-sources and specific knowledge, and the irreversiblecomplexity of finance takes its toll.

Some years ago, outsourcing involved infrastructureonly, and concerned mainly the activities of computercentres. Gradually, people recognised that applicationscan be subcontracted as well.

It is a general practice today to use a three-phase model to describe the different levels of outsourcing.

The first phase, posing the least problems, is outsourc-ing of IT infrastructure. As it is not bank-specific it maytherefore be operated, developed or substituted exter-nally.

The second phase is outsourcing of applications or theirdevelopment and maintenance. In our case this includesthe total of bank applications. Thus, certain processes,

whose quality can be assessed by the customers, are being controlled by a third party. Outsourcing on thislevel requires a high degree of reliability, specific skillsand experience from the service provider.

The third and final phase is Business Process Outsourc-ing. For BLKB these are the payment and securitiestransactions. BPO is the most difficult and complexphase, because it exerts a direct effect on the customer.Outsourcing of these processes implies the highest pos-sible obligation between the partners and is usuallyseen as a long-term commitment. Consequently, Busi-ness Process Outsourcing is the most extensive way ofoutsourcing to an external provider.

Seen within the logic of outsourcing, however, BusinessProcess Outsourcing is but the next inevitable step. Pay-ment transactions, for example, follow a precisely de-fined master process and improvements do not changethe process itself, they just enhance efficiency. Individ-uality is hardly required anymore and does not consti-tute a distinguishing feature, but it does satisfy theneeds of the customer.

44

Corporate planning and monitoring – pillars of value-oriented management

Planning process: defining targets and activities

In the reporting year, corporate planning focused even more

on value-oriented corporate management. Thus, resources of

finance, personnel, and infrastructure can be used to a much

larger extent for the creation of sustainable added value. The ba-

sis for the new approach lies in a future-oriented strategy con-

firmed and made concrete by BLKB at the beginning of 2005.

Executives from different business areas participate in the an-

nual corporate planning. An analysis of the bank and its envi-

ronment summarises relevant parameters. The course of our

activities and their respective goals are established on the basis

of the analysis and the corporate strategy.

Project controlling

As a result of corporate planning, goals are expressed in terms

of quantity and quality. Qualitative goals are taken up into the

project portfolio and are implemented. Successful implementa-

tion of the projects requires careful planning.

Planning consists of a description of the project, the goals,

scheduling, planning of resources and calculation of profitabil-

ity. In conformity with planning the project portfolio is clearly

structured according to defined criteria. Profitability of the in-

dividual projects is one of the decisive factors, the others are the

respective contributions to strategy implementation and to cor-

porate development. Thus, we ensure that financial and person-

nel resources are used in a sustainable way. Later deviations from

the goals, from planning, costs and action will be identified at

an early stage by project controlling.

Concise rules and strict application for

the prevention of money laundering

In the year under review, compliance, a division of the bank’s

legal service, was primarily engaged in introducing and imple-

menting the Money Laundering Ordinance imposed by the

Swiss Federal Banking Commission (SFBC). Introductory work

is completed, IT monitoring systems are operating, and internal

processes are put into effect. Our employees are to be trained

and sensitised continually for the regulatory requirements of

the prevention of money laundering by means of a web-based

instruction instrument.

Balanced scorecard

A balanced scorecard is a management system whichis capable of organising the entire planning and con-trolling processes of a company in the best possibleway. This tool can systematically increase BLKB’s cre-ation of value by summarising in a balanced wayquantitative and qualitative goals as well as short- orlong-term corporate goals.

In order to achieve this, four perspectives are taken into consideration: finance, customers, internalprocesses, and learning and development. For thesefour perspectives concrete goals and measures for implementation are defined. Whether goals arereached is then measured and evaluated by suitablekey figures.

In the area of Corporate Services BLKB has success-fully used a balanced scorecard since 2003 and estab-lished it as an important management tool. The nextlogical step will be to use this promising tool in thewhole of banking activities.


45

Efficient services Corporate planning and monitoring

The introduction of the new EU withholding tax, applicable

to EU depositors, is a major challenge and will claim con-

siderable resources in the current year. In addition, the SFBC

Money Laundering Ordinance entered into force and induced

the bank to adaptations and the introduction of new monitoring

measures.

In the area of funds we expect this year the amended Investment

Funds Act to be passed (federal law on collective capital invest-

ment) which will include far-reaching and relevant changes for

compliance.

Internal Control Unit

In their daily operational processes Swiss banks are obliged to

consider and adhere to numerous laws, rules and regulations. In

order to be able to act in accordance with these laws, internal

control supports the employees by putting continually updated

tools and measures at their disposal.

A reliable internal control unit should, among other things,

offer the staff the necessary and relevant instructions in a user-

friendly way, thus supporting their correct and unified imple-

mentation. For the same reason BLKB has a system of explicit

directions which is constantly brought to date.

With its tasks of management and process control the internal

control unit also represents a link to the internal auditing.

Internal Auditing

Internal auditing is under direct control of the chairman of

Bankrat. It carries out important controlling and supervising

tasks and keeps up close cooperation with the external auditing.

Internal auditing exercises unlimited inspection, auditing and

application rights within the bank. It assesses independently

whether the bank handled its business activities according to the

intentions and provisions of the regulatory and legal require-

ments. It also judges whether bank activities are appropriately

carried out, comply with the law and whether they are system-

atic, safe and economical within an adequately organised frame-

work.

Planning for the execution of the auditing is done according to a

risk-oriented approach. In 2004, emphasis was on the areas of

lending, investment, private customer business, corporate ser-

vices and in the audit of the annual financial statement. Within

this task internal auditing checked the most important processes

of the bank’s activities for their compliance with the rules, their

security and their appropriateness.

Details on the entire internal auditing staff are disclosed in the

financial part on page 198 of this report.

Corporate governance 46

Annual financial statements 63


group companies 106

Content

46

Corporate governance – management and decision-making become transparent

47

schaftliche Zeitung (daily news-paper), and her colleagues aredoing. Every day, they supplytheir readers with news, thetopics of the day, reports andbackground information to

How is a company managed? Whotakes which decisions and where,and who checks on whom? In recentyears, these questions of checks andbalances – interacting powers ofdecision and control – have increas-ingly moved to the centre of publicinterest. Shareholders and, in thecase of Basellandschaftliche Kantonalbank, the public haveevery right to ask for openness andtransparency in the area of manage-ment structures and decision policy.

keep them up-to-date so thatthey are always capable oftaking decisions or action.

Transparency is a democraticvirtue. The capacity to takedecisions is based on free accessto information. This is exactlywhat Nicole Zimmer, editor andphotographer of Baselland-

48

General remarks

Basellandschaftliche Kantonalbank is an independent company under publiclaw and is not subject to State administration.

The legal basis is formed by the following cantonal ordinances:

1. Cantonal Law on Kantonalbank (Systematische Gesetzessammlung SGS371); the following is quoted from the amended version entering into forceon January 1st 2005. Legal form and State guarantee remain unchanged;further amendments will be commented on according to their relevancefor the report on Corporate Governance.

2. Ordinance on the determination of certificate capital and increase of basiccapital of Basellandschaftliche Kantonalbank (SGS 372.1);

3. Ordinance on the Cantonal Law on Kantonalbank (SGS 371.11) for Basellandschaftliche Kantonalbank (SGS 371.111);

4. Rules of procedure and organisation for Basellandschaftliche Kantonal-bank (SGS 371.111);

5. Rules on the issuance of Kantonalbank certificates (SGS 371.112).

(www.baselland.ch; menu: Gesetzessammlung-Finanzen-Banken)

Purpose, legal form and State guarantee are governed by statutory law.

Art. 1 Company and head office

1 The name of “Basellandschaftliche Kantonalbank” in the following called“the bank” is a bank with head office in Liestal.

2 The bank may set up branches, establish subsidiaries or participate in oth-er companies.

Art. 2 Purpose

1 The bank offers all the services of a universal bank.

2 The bank serves the purpose, within the framework of competition and itsown means, of contributing to a balanced development of the canton andthe region of northwestern Switzerland.

Art. 3 Legal form

The bank is an independent public-law company with its own legal per-sonality.

Art. 4 State guarantee

1 The canton guarantees for the liabilities of the bank, in the case of theirown means not being sufficient.

2 The bank compensates the canton for the State guarantee. Payment is calculated according to the amount of risk and the probability of non-pay-ment. Details are set down in the ordinance.

Below, the terms “Regierungsrat” and “Landrat” are being used repeatedly.

– Regierungsrat is the executive body of the Canton of Basel-Landschaft,elected by the people.

– Landrat is the legislative body of the Canton of Basel-Landschaft, electedby the people.

The following notes are structured along the “Directive on Information Relating to Corporate Governance” (DCG), issued by the Swiss Stock Exchange SWX. For reasons of clarity subtitles may be summarised with a relevant remark added. In cases where facts are not applicable or not relevantfor Basellandschaftliche Kantonalbank this will be indicated explicitly.

As of closing date of December 31st 2003 there were no significant changeswith the exception of the amendment of the Cantonal Law on Kantonal-bank.

Corporate governance

49

1 Group structure and shareholders

1.1 Group structure

1.1.1 Description of the operational group structure

Management: the parent company is managed by Bankrat (Board of Direc-tors) as its supreme supervisory and strategic managing body and the Execu-tive Board.

Group: the operational group of Basellandschaftliche Kantonalbank (BLKB)consists of the parent company and its subsidiary Atag Asset ManagementAG (AAM), 100% owned by BLKB, and AAM’s subsidiaries. The followingorganisation chart of the group simultaneously serves as the consolidationscheme for the accounting.

The executive boards of the parent company and AAM operate separately.The parent company conducts business in the region of Basel focusing there-by on the Canton of Basel-Landschaft where it operates its traditional retailbanking, credit business for private and corporate customers (mainly SMEs)at 34 locations and investment advice and asset management business at sev-en locations. Financial Planning is offered at the head office in Liestal only.

AAM operates investment advice and asset management services at five locations in Switzerland and Luxembourg.

1.1.2 Listed companies belonging to the group:

Company: Basellandschaftliche Kantonalbank (BLKB)

Registered office: Liestal

Listed in: Zurich, SWX

Market capitalisation

– Market capitalisation of Kantonalbank certificates (600 000 at a nominalvalue of CHF 100) at year-end rate of CHF 910.00: CHF 546.0 m

– Market capitalisation of endowment capital of CHF 180 m assuming ananalogous valuation: CHF 1 638.0 m

– Total market capitalisation (Kantonalbank certificates and endowmentcapital): CHF 2 184.0 m

Percentage of shares of group companies: none

Securities Identification Number: 147.355.9

BLKB group does not include any other listed companies.

1.1.3 Non-listed companies belonging to the group

Name: Atag Asset Management AG (AAM)

Registered office: Basle

Share capital: CHF 5 m

Percentage of shares held by BLKB: 100%

1.2 Significant shareholders

Due to its legal form BLKB has non-voting share capital only, and conse-quently shareholders have no voting rights. All voting rights are exclusivelyheld by the Canton of Basel-Landschaft.

1.3 Cross-shareholdings

There are no cross-shareholdings.


BLKB Parent Company

Atag Asset Management AGGroup

BLKBGroup

Consolidation scheme

Atag Private ClientServices AG

Gräff Capital Management AG

Atag Asset ManagementLuxembourg

Atag Asset ManagementParent Company

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BLKB parent company

Area of Responsibility of the Executive BoardDr. Beat Oberlin

StaffJean-Daniel Neuenschwander

Chief of Staff

Jean-Daniel Neuenschwander

Strategy and Distribution ManagementRobert Straehl

Internal ControlRuedi Gubler

Chief Financial Officer

Jürg Hatz

Investment Advice/Asset ManagementRolf Rudin

Legal Service/ComplianceDr. Erich Maeder

TreasuryBruno Imsand

Risk ControllingJürg Hatz

Group Finance and ControllingThomas Börlin

Marketing/Quality ManagementBruno Bürli

Financial Planning

Sabine Männle

General Secretariat/Corporate CommunicationsRudolf Messerli

Trade

Roland Wenger

Capital Market/Handling, Financial ProductsRoland Hofstetter

Private Banking Basle

Hans-Rudolf Tschudin

External Auditing

Ernst & Young

Business Area Investment CustomersMeinrad Geering

ArlesheimLukas Fiechter

LiestalAdrian Gutzwiller

MuttenzStefan Fischler

BinningenMartin Waibel

OberdorfKurt Tschopp

GelterkindenEsther Freivogel

SissachJacques Handschin

LaufenFredi Mendelin


Dr. Beat Oberlin

Chairman of the Board of Directors

Werner Degen

Board of Directors/Bank Committee

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Business AreaCredit and Corporate CustomersDr. Lukas Spiess

Business Area Private Customers Willy Winkler

Business Area Corporate Services Kaspar Schweizer

Credit Department

Hans-Peter Handschin

Product and DistributionManagementPaul Schmid

Strategy and Corporate PlanningKaspar Schweizer

Risk Management /Recovery

Thomas Oehler

Personnel

Urs Hofmann

IT Security

Jörg Seeholzer

SME Financing with Higher RisksHanspeter Läubli

Business Engineering andInformation ManagementBeat Gass

Product Management

Roman Hügli

Real Estate/Buildings

René Glaser

Central Services/Security

Felix Chrétien

Internal Auditing

Roger Kübler


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2 Capital structure

2.1 Capital

Basic capital of the bank consists of the endowment capital of the canton andthe certificate capital (the “certificate” corresponds to participation certificateand “certificate capital” to non-voting share capital in other companies).

Endowment capital amounts to 180 m Swiss francs. The amount may be increased or decreased by Landrat.

Certificate capital amounts to 60 m Swiss francs and is divided into 600 000certificates of CHF 100 nominal value each. Landrat decides on the amountof the certificate capital; it may, however, be 50% of the endowment capitalat the most (Cantonal Law on Kantonalbank, Art. 5) (www.baselland.ch;menu: Gesetzessammlung-Finanzen-Banken).

2.2 Conditional and authorised capital in particular

Landrat may create authorised capital, if requested by Regierungsrat. Withinthis framework Bankrat may raise certificate capital and Regierungsrat mayraise endowment capital. As per December 31st 2004 there is neither condi-tional nor authorised capital.

2002 was the last year a capital increase by means of 10 m Swiss francs ofconditional capital was carried out. In the last three years there have been nochanges.

2.3 Changes in capital

In the last three years there have been no changes in the capital structure.

2.4 Shares and participation certificates

Due to its legal form BLKB has non-voting share capital only, and conse-quently shareholders have no voting rights.

Certificate capital amounts to 60 m Swiss francs and is divided into 600 000certificates of 100 Swiss francs nominal value (see item 2.1 above).

Certificates entitle the holder to dividend payments, subscription rights andto a proportional share of possible liquidation proceeds.

Certificates do not entitle the holder to exercise any participation rights suchas the right to vote, object or challenge. Bankrat and Executive Board may invite holders of certificates to meetings in order to inform them about thecourse of the bank’s business. These meetings are exclusively meant for information; resolutions cannot be passed (Cantonal Law on KantonalbankArt. 5, section 3; rules on the issuance of Kantonalbank certificates, Arts. 8and 9 (www.baselland.ch; menu: Gesetzessammlung-Finanzen-Banken).

2.5 Profit-sharing certificates

There are no profit-sharing certificates.

2.6 Limitations on transferability and nominee registrations

There is non-voting share capital only (see item 2.4); consequently nomineeregistrations are not possible. There are no limitations on the transferabilityof certificates.

2.6.1 Limitations on transferability for each share category, alongwith an indication of statutory group clauses, if any, and rules forgranting exceptions

Not applicable (see item 2.6).

2.6.2 Reasons for granting exceptions in the year under review


2.6.3 Admissibility of nominee registrations along with an indica-tion of per cent clauses, if any, and registration conditions


Procedure and conditions for cancelling statutory privileges and limitationson transferability.


2.7 Convertible bonds and warrants/options

There are no outstanding convertible bonds and warrants/options.

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3 Board of Directors

The Cantonal Law on Kantonalbank (www.baselland.ch menu: Gesetzes-sammlung-Finanzen-Banken) uses the term “Bankrat”. The following expla-nations on item 3 “Board of Directors” refer to the Bankrat of Baselland-schaftliche Kantonalbank.

3.1 and 3.2 combined: personal data (3.1), further activities and vested interests (3.2)

All members of Bankrat are Swiss citizens.

All members of Bankrat are non-executive; they do not exercise any operativeduties in BLKB or BLKB group companies.

No member of Bankrat is employed by BLKB for advisory or other services.

The following list of members of Bankrat contains information about firstelection and remaining time in office. Members are presented once more inan overview in item 3.4.2.

Werner Degen

Born in 1941Chairman of BankratChairman of the Bank and Personnel CommitteesFirst elected in 1993, by RegierungsratLatest re-election in 2003 Current term of office: 1/7/2003 to 30/6/2007

Engineering degree from ETH. Owner of an industrial consulting companysince 1989. Previously management consultant and managing positions onboards of directors and management level in the chemicals’ industry (Plüss-Staufer AG, Ems-Chemie).Member of the board of directors of Atag Asset Management AG, Basel(group company); up to general assembly 2005.Member of the following boards of directors: GABA Holding AG, Basel(chairman), up to 31-5-2004; Dolder AG, Basel (chairman); Agie-CharmillesHolding AG, Zug; Vetropack Holding AG, Bülach; Schützenstube AG, Liestal (chairman).Business connections with BLKB.

Adrian Ballmer

Born in 1947Vice chairman of BankratFirst elected in 1995 by Landrat; member of Re-gierungsrat since 2000Latest re-election in 2003 Current term of office: 1/7/2003 to 30/6/2007

University degree in law, lawyer; 1978 to 2000 member of the managementboards of Elektra Birseck; member of Regierungsrat of the Canton of Basel-Landschaft since 1/7/2000. Head of Finance and Churches.Member of the following supervisory boards of cantonal institutions:Gebäudeversicherung (house insurance), Basellandschaftliche Pensionskasse(pension fund), Sozialversicherungsanstalt (social insurance), (chairman).Member of the following boards of directors: EuroAirport Basel-Mulhouse-Freiburg, Kraftwerk Birsfelden AG (power station), Vereinigte SchweizerischeRheinsalinen (Swiss salt-works), (also member of the committee of the boardof directors).Business connections of the canton with BLKB.

Claude Janiak

Born in 1948Member of the Bank Committee since 1998 (vicechairman since July 1st 2003); member of the Personnel CommitteeFirst elected in 1991 by Landrat Latest re-election in 2003 Current term of office 1/7/2003 to 30/6/2007

PhD in law, independent lawyer since 1978 (Janiak, Freivogel, Schweighauser,von Wartburg; Binningen).Member of the board of directors of Paradies-Apotheke and Drogerie AG,Allschwil, and of Medgate AG, Basel.Vice chairman of the Cultural Foundation of Basellandschaftliche Kantonal-bank. Member of the National Council. Business connections with BLKB.

Paul Hug

Born in 1946First elected in 1987 by RegierungsratMember of the Bank Committee since July 1st

2003Latest re-election in 2003 Current term of office 1/7/2003 to 30/6/2007

Training on several levels of building and construction; Eidg. Dipl. Baumeis-ter (master builder with a federal diploma).CEO of Verband der Bauunternehmer der Region Basel (Association ofbuilding contractors of Basel region) since 1986. Secretary of ParitätischeBerufskommission Bauhauptgewerbe der Region Basel (organisation to im-prove training, work conditions and chances in the building industry of theregion).Business connections with BLKB.

Rita Kohlermann-Jörg

Born in 1940First elected in 1994 by LandratLatest re-election in 2003 Current term of office 1/7/2003 to 30/6/2007

Diplomas in commerce and translating; jobs in merchant banking in Paris,London, and Frankfurt. Up to June 30th 2004 head of life sciences, energy, environment with Handelskammer beider Basel (Chamber of Commerce ofBasel-Stadt and Basel-Landschaft). Member of Landrat of the Canton ofBasel-Landschaft (FDP) up to 30th June 2003. Chairwoman of Spitalrat desUniversitätskinderspitals beider Basel, UKBB (hospital board of the univer-sity children’s clinic of the Cantons of Basel-Stadt and Basel-Landschaft).Chairwoman of Cultural Foundation of BLKB. Member of Gleichstellungs-gruppe (Gender Mainstreaming) of BLKB. Board member of Marionetten-theater, Basel; board menber of Business Parc, Reinach.Business connections with BLKB.


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Günther Schaub

Born in 1950First elected in 1995 by RegierungsratLatest re-election in 2003 Current term of office 1/7/2003 to 30/6/2007

Secondary school teacher, (humanities). Member of Gemeindekommission(municipal commission) Muttenz.

Hans Ulrich Schudel

Born in 1951Member of the Personnel CommitteeFirst elected in 1998 by LandratLatest re-election in 2003 Current term of office 1/7/2003 to 30/6/2007

University degree in law; lawyer and mediator of SAV (Swiss Bar Association);independent lawyer since 1981, offices in Basel and Bottmingen.Board of Vorsorgestiftung (pension foundation) der Ditzler Aktiengesell-schaft, Aesch (chairman). President of Schulrat (school board), Bottmingen;member of Stiftungsrat der SST, Schweiz. Stiftung für Solidarität im Touris-mus (Board of Swiss Foundation for Solidarity in Tourism).Business connections with BLKB.

Elisabeth Schirmer-Mosset


University degree in economics, co-owner of Ronda AG, Lausen (clock-works); member of the board of directors and the management board. Board member of Handelskammer beider Basel (Chamber of Commerce ofBasel-Stadt and Basel-Landschaft).Business connections with BLKB.

Daniel Schenk


University degree in economics, managing positions in international indus-trial group. Senior partner and CEO of van Baerle & Cie. AG, München-stein, since 1997. Member of the boards of directors of: Van Baerle & Cie. AG, Münchenstein;Sichem Holding AG, Zug; Häring & Cie. AG, Pratteln; EBM, Münchenstein.Board member of Handelskammer beider Basel (Chamber of Commerce ofBasel-Stadt and Basel-Landschaft).Business connections with BLKB.

Doris Greiner

Born in 1977First elected in 2002 by Landrat Latest re-election in 2003 Current term of office 1/7/2003 to 30/6/2007.

University degree in psychology (principal subject) and economics, businessadministration and state and private law (subsidiary subjects).Member of Einwohnerrat (council of inhabitants) of Liestal.

Ernst Weber


Wirtschaftsmatur (A levels with emphasis on economics); training of generalmanagement at the Centre of Business and Economic Studies at Basel Uni-versity, administrative manager and CFO (now retired) of KV Basellandschools. Board member of KV Baselland (Association of Commercial Employees).Vice-president of Angestelltenvereinigung der Region Basel (Association ofEmployees of Basel region).Business connections with BLKB.

Urs Baumann


Business education (KV, HWV Basel). 1985 to 2000 CEO of BTG-Treuhand,Basel. Trust and advisory services to SME with Urs Baumann Treuhand,Reinach; Urs Baumann + Partner AG, Reinach (owner). Member of several boards of directors: Arcoplan Generalplaner AG, Basel(chairman); Basler-Hypothekar-Bürgschaftsgenossenschaft (cooperative soci-ety for mortgages and guarantees) in liquidation; Exportis AG, Basel; HaslerFenster AG, Therwil (chairman); Insightful AG, Reinach; Recchiuto GipserAG, Basel (chairman); Schneider Gartengestaltung AG, Oberwil (chairman);Vogt Bautenschutz AG, Basel (chairman); Vorsorgestiftung der Basler-Hypo-thekar-Bürgschaftsgenossenschaft, Stiftungsrat (board member of the foun-dation for mortgages and guarantees). Take One GmbH, Reinach; and Bodima GmbH, Therwil; shareholder and CEO respectively. Member of Landrat (up to June 30th 2003), member of Gemeinderat (munic-ipal council) (up to June 30th 2004) Reinach.Business connections with BLKB.

René Rudin

Born in 1953First elected in 2003 by Landrat Current term of office 1/7/2003 to 30/6/2007

Training as Haustechnikplaner (house technology), Commercial School.Owner of a planning office for gastronomy facilities.Member of Landrat (up to June 30th 2003); president of municipal council ofNenzlingen (finances, up to December 31st 1996).

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3.3 Cross-involvement

There is no indication of cross-involvement.

3.4 Elections and terms of office

3.4.1 Principles of election procedure

The Cantonal Law on Kantonalbank SGS 371 stipulates the following on theelection of the members of Bankrat:

“Bankrat consists of nine to eleven members. One of them is a member ofRegierungsrat. Bankrat is elected by Landrat according to the proposals ofRegierungsrat. Landrat is bound to the election proposals.” The thirteenmembers elected according to the old law remain in office until June 30th

2007, the end of the current term of office. Nine of these members were elect-ed by Landrat, four by Regierungsrat.

Furthermore, the law stipulates material criteria for the election of Bankratwhich were detailed by Regierungsrat in the ordinance on the Cantonal Lawon Kantonalbank (www.baselland.ch; menu: Gesetzessammlung-Finanzen-Banken).

Bankrat constitutes itself. Membership in Bankrat ends at age 70 (Art. 10,Cantonal Law on Kantonalbank).

The current term of office for all members of Bankrat started on July 1st 2003and will end June 30th 2007.

3.4.2 First election and remaining term of office of each member(see items 3.1 and 3.2)

Name First Remaining

election term

Werner Degen, chairman* 1993 up to June 30th 2007

Adrian Ballmer, vice chairman 1995 up to June 30th 2007

Claude Janiak* 1991 up to June 30th 2007

Paul Hug* 1987 up to June 30th 2007

Rita Kohlermann-Jörg 1994 up to June 30th 2007

Günther Schaub 1995 up to June 30th 2007

Hans Ulrich Schudel 1998 up to June 30th 2007

Elisabeth Schirmer-Mosset 2000 up to June 30th 2007

Daniel Schenk 2000 up to June 30th 2007

Doris Greiner 2002 up to June 30th 2007

Ernst Weber 2002 up to June 30th 2007

Urs Baumann 2003 up to June 30th 2007

René Rudin 2003 up to June 30th 2007

* Members of the Bank Committee

3.5 Internal organisational structure

3.5.1 Allocation of tasks in Bankrat

Chairman Werner Degen

Vice chairman Adrian Ballmer

3.5.2 Members list of Bankrat committees, tasks and areas of responsibility

The amended Cantonal Law on Kantonalbank in Art. 11 decides the follow-ing on the setting up of committees: “Bankrat elects from its members, forthe duration of the same term of office, permanent committees with specificduties and determines their organisation. The committees report to Bankraton their activity.” Committees are set up and their duties defined in thecourse of 2005. The following explanations on items 3.5.2 to 3.6 relate to therules of procedure still being in force on January 1st 2005.

Bank Committee

The Bank Committee consists of three members of Bankrat who elects them from their own ranks. The other members of Bankrat are substitutemembers who take turns at replacing regular members who are not able totake part in a meeting (Cantonal Law on Kantonalbank Art. 16, section 1;www.baselland.ch; menu: Gesetzessammlung-Finanzen-Banken).


Vice chairman Claude Janiak

Third member Paul Hug

Tasks and areas of responsibility

Tasks and areas of responsibility of the Bank Committee are governed by law(Cantonal Law on Kantonalbank Art. 16, section 2).

The Bank Committee shall supervise adherence to the decisions and instruc-tions of Bankrat and prepare and assess business which is subject to the decision of the latter.

In particular, the rules of procedure (www.baselland.ch; menu: Gesetzes-sammlung-Finanzen-Banken) stipulate that the Bank Committee:

a) determines the general bank strategy on behalf of Bankrat;

b) generally monitors the management duties of the whole bank, in particu-lar those

– dealing with the annual, mid-year and cash-flow statements on behalf ofBankrat;

– adherence to rules on equity and liquidity;

– supervision of the income and risk situation of the bank;

– adherence to laws, regulations and instructions;

c) determines the auditing programme of the internal auditing (inspectorate);

d) deals with the reports on the results of the internal auditing (inspectorate);


56

e) approves of governing bodies’ business, in particular loans to members ofBankrat and Executive Board;

f) determines the compensation of the Executive Board;

g) decides on business which, by law or rules of procedure, have not been assigned to another/other person(s) in charge. Moreover, the Bank Com-mittee decides on the business assigned to it by the power of the rules ofresponsibilities.

According to the rules of responsibilities of April 1st 2003 Bankrat assignedthe following tasks to the Bank Committee:

– Organisation: the committee structures the branch areas (branches andtheir sub-branches in a geographical sense).

– Personnel: it elects, employs, promotes, dismisses, gives signing authorityto members of the senior management.

– Personnel: it compensates the Executive Board and the head of internalauditing.

– Personnel: it authorises mandates for the board of directors and auditorsfor all employees, authorises assumption of public mandates for membersof the Executive Board.

– Personnel: it determines personnel conditions.

– Bank operation: the committee determines the General Business Con-ditions.

– Bank business: it fixes interest rates for variable mortgages, basic interestrates for savings.

– Loans: the Bank Committee possesses the highest level of credit-signingauthority, with the different credit categories, credit prolongation, waive of debt, valuation adjustments being listed individually in the rules of responsibilities. The Committee reports to Bankrat on a monthly basis.

– Maximum signing authority in the area of Corporate Services: new andreconstruction of buildings of up to 10 m Swiss francs.

Personnel Committee

The Personnel Committee was created in 2002 by resolution of Bankrat.


Vice chairman Claude Janiak

Further members Elisabeth Schirmer

Daniel Schenk

Hans Ulrich Schudel

Tasks and areas of responsibility

The Personnel Committee was created in view of the evaluation of a succes-sor to the Chairman of the Executive Board who went into retirement at theend of 2004. In December 2003 the election was carried out by Bankratwhich brought this task to a close. The Personnel Committee shall continueto exist and shall mainly deal with personnel tasks which were assigned to theBank Committee.

On January 1st 2005, there are no further committees of Bankrat.

3.5.3 Work methods of the board of directors and its committees

Bankrat convenes upon invitation of the chairman as often as is deemed necessary. As a general rule it does so once a month. Bankrat meetings maybe requested by three members of Bankrat, by the Executive Board or the auditors. An official record of the meetings is drawn up (rules of procedureArt. 10 and further regulations on votes and elections; www.baselland.ch;menu: Gesetzessammlung-Finanzen-Banken).

The Executive Board usually takes part in full in the meetings of Bankrat.Meetings dealing with the balance of accounts and the report of the externalauditing are always attended by the inspectorate and a representative of theexternal auditing. For specific topics internal and external experts are invitedto the meetings.

Extraordinary meetings are held, according to need, two or three times a year.These meetings are dedicated to in-depth discussions or updates of topicswith special emphasis such as strategy, risk policy, balance management, IT, etc.

Duration of an ordinary meeting is three to four hours. Meetings concern-ing topics with special emphasis usually take up half a day.

In general, Bankrat makes its decisions on the basis of a written petition pre-pared by the Executive Board and preliminarily discussed by the Bank Committee.

The Bank Committee convenes upon invitation of the chairman or the Executive Board as often as is deemed necessary. As a general rule it does soonce a week. Credit business is recorded in a “decision book” whereas theremaining business is noted in the minutes of the meeting (rules of procedureArt. 22). At the beginning of the meeting the members of the Bank Com-mittee convene on their own, afterwards, credit business is discussed in thepresence of the chairman of the Executive Board and the head of the businessarea Credit and Corporate Customers. The meeting is then continued withusually all the members of the Executive Board present.

The rules of procedure provide for matters which cannot be delayed: if thebusiness does not involve any extraordinary aspects with regard to type, risk,condition or maturity, and if one can safely assume that the responsible bodywould agree, the Bank Committee in cooperation with the Executive Boardmay decide on such a business which would normally come under theresponsibility of the Bankrat. On a lower level, the chairman of the ExecutiveBoard in cooperation with the Executive Board may decide on a businesswhich would normally come under the responsibility of the Bank Commit-tee. This kind of decisions have to be brought to the attention of the nor-mally relevant panel in the following meeting (rules of procedure Art. 12, section 5, and Art. 13).

The Personnel Committee convenes upon invitation of the chairman. Bind-ing rules have not been laid down yet; usually the chairman of the ExecutiveBoard attends these meetings. One member of the Personnel Committeetakes down the minutes.

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3.6 Definition of areas of responsibility

According to Art. 9 of the rules of procedure (www.baselland.ch; menu:Gesetzessammlung-Finanzen-Banken) Bankrat as the supreme governing andsupervising body assumes the following compulsory and non-transferabletasks:

Bankrat:

a) elects the chairman and the vice chairman of Bankrat, designates the keeper of the minutes;

b) elects and constitutes the Bank Committee;

c) determines organisation and rules of responsibilities;

d) nominates and dismisses members of the Executive Board and gives themsigning authority;

e) supervises the Executive Board;

f) sets up the annual report and approves interim accounts;

g) applies to Regierungsrat for the election of the auditor stipulated by banklaw;

h) deals with the reports of the auditors stipulated by bank law;

i) elects the head of internal auditing (inspectorate) and deals with reportsof the internal auditing;

j) determines the compensation of the members of Bankrat.

Apart from these compulsory and non-transferable tasks Bankrat decides onbusiness which has been assigned to it by the rules of responsibility.

These rules of responsibility set out by Bankrat April 1st 2003 define the areas of responsibility on the levels of Bankrat, Bank Committee, ExecutiveBoard, and business area; in the case of credit-signing authority the level ofthe Executive Board is represented by the Credit Committee (chairman of theExecutive Board, head of business area Credit and Corporate Customers andhis/her assistant).

Responsibilities assigned to the Bank Committee are described in item 3.5.2.

Responsibilities assigned to the Executive Board are the following:

– Risk policy: the Executive Board implements risk policy, forms the RiskManagement Committee, forms the Security Committee for OperationalRisks, sets up a list of authorised instruments, fixes the replication rates oroption models for products with embedded withdrawal options.

– Organisation: it structures business areas and branch areas (branches withsub-branches).

– Personnel: it implements general employment conditions, plans needs onthe corporate level; elects, employs, promotes, dismisses, and gives signingauthority to all employees up to middle management level (hierarchic lev-els: employees, middle management, senior management, ExecutiveBoard); the Executive Board implements salary regulation; approves boardand auditing mandates (private mandates only up to senior managementlevel) and assumption of public offices (up to senior management level); itimplements personnel development and training.

– Bank operation: it defines the range of services along the group strategy;signs conventions and treaties, decrees the remaining rules and regulations.

– Bank business: it plans the annual strategies of the parent company; suchas borrowing in the form of bonds and securitised assets; mortgage-backedsecurities and bank facilities or money market; investments in the bankbook in form of shares and bonds; it fixes interest rates for the remainingsavings products and cash bonds, fixes interest rates for the remainingmortgages (in particular fixed rate mortgages) and overdraft facilities.

– Credit-signing authority is defined by amounts for total commitment,loans to the canton, the communities, to banks, overdrafts, prolongationof loan positions, waive of claims, waive of interest and losses from tradingand customer business.

– Maximum signing authority in the business area Corporate Services: sumsare defined for building, furniture, administration, physical safety, ma-chinery, office equipment, vehicles, IT and office material.

Besides that, rules of responsibilities stipulate lending limits on mortgages,bonds, receivables, shares and investment funds, precious metals and life insurances.

3.7 Information and control instruments vis-à-vis the senior management

Internal auditing: internal auditing acts independently of the ExecutiveBoard and follows the instructions of the chairman of Bankrat. The head ofinternal auditing (inspectorate) reports directly to the chairman of Bankrat.Internal auditing is conducted by the inspectorate and their qualified auditorsin accordance with recognised auditing standards. The Bank Committee dis-cusses in detail auditing reports and management letters.

Periodic visits by delegations of Bankrat: Every year, on behalf of the chair-man of the Executive Board internal auditing sets up a schedule for calls onthe branches and the central departments. Accordingly, two members ofBankrat or the complete Bank Committee follow this schedule. The findingsof these visits are put down in reports, dealt with by the Bank Committee andforwarded for the attention of Bankrat.

Reporting: For every ordinary monthly meeting Bankrat receives the monthlyreport with the financial results (monthly balance and monthly income state-ment with comparisons of the previous year and the budget), the risk report(general risk evaluation, interest sensitivity, system of limits), loans approvedby the Bank Committee and further information. Once in three months thereport is supplemented by information on the development of bank productsand changes in the real estate portfolio. The requirements for the reports onrisk management are clearly laid down in the rules defined by Bankrat for riskpolicy.

External auditing: the representative of the auditors attends meetings of theBank Committee and Bankrat dealing with the annual financial statements,the annual report and the auditing report. He/she is also present at the year-ly meeting with the Financial Commission of the Landrat dealing with thefinancial statement. The auditor communicates regularly with the chairmanof Bankrat, the inspectorate (internal auditing) and the head of risk manage-ment. External auditing takes note of the reporting of the internal auditingand, if necessary, comments on it.


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4 Executive Board

4.1 Members of the Executive Board and 4.2 other activities and vested interests

The Executive Board of Basellandschaftliche Kantonalbank consists of fivemembers. They are all Swiss citizens.

Paul Nyffeler

Born in 1939Chairman of the Executive Board since 1990 Resignation per December 31st 2004

First training: printer; second education: Matura at night school, studies ofnational economics, graduating from Basel University; studies at the LondonSchool of Economics, and the Wharton School, University of Pennsylvania,USA.Independent management consultant; elected to Regierungsrat in 1975; headof Building and Agriculture and from 1983 head of Finance and Churches.Chairman of the Executive Board of Basellandschaftliche Kantonalbanksince 1990.Member of the following boards of directors: Swissca AG, Zurich; Swiss Canto Finanz AG in liquidation (companies of the Association of Swiss Cantonal Banks); Atag Asset Management AG, Basel; Publisuisse SA, Bern;Ultra Brag AG, Basel; Erfindungsverwertungs AG, Basel.Chairman of the Association of Swiss Cantonal Banks as of June 18th 2004.

Beat Oberlin

Born in 1955Joined BLKB June 1st 2004; chairman of the Executive Board since January 1st 2005

Doctorate in law, counsel and notary. Management training at Stanford Uni-versity, USA.More than 20 years of experience in a big bank, amongst other things as headof Retail and head of Corporate Customers of the region of Basel, chief ofstaff and head of Market and Sales Management of Business Banking Switzer-land, board member of leasing and factoring companies.

Lukas Spiess

Born in 1946Member of the Executive Board; head of Creditand Corporate Business since 1991

Studies of national economics, PhD from Basel University. Head of Planningof the Canton of Basel-Landschaft, head of Finance of the Canton of Basel-Landschaft.1981 entry into BLKB, head of Arlesheim branch, 1991 head of business areaCredit and Corporate Customers.Member of the following boards of directors: Caleas AG, Zurich, Bürg-schaftsgenossenschaft Baselland (BGB) (cooperative society for guarantees),Münchenstein; BTG-Bürgschaftsgenossenschaft beider Basel, Basel. Memberof Revisonsstelle (auditors) of Elektra Birseck (EBM), Münchenstein.

Meinrad Geering

Born in 1947Member of the Executive Board; head of Invest-ment Customers since 1994

Education in banking (apprenticeship; commercial management school; Insead Executive Programme). Jobs in investment advice, asset management in Switzerland, Frankfurt, andNew York. Managing positions at Bank Sarasin and Swiss Bank Corporation.Creation and management of the business area Investment Customers uponentry into BLKB in 1994.Member of the following boards of directors: Pfandbriefzentrale der schwei-zerischen Kantonalbanken (central office of mortgage-backed bonds, com-pany of the Association of Swiss Cantonal Banks), Zurich, chairman; BLTBaselland Transport AG (public transport), Oberwil; BLPK, Basellandschaft-liche Pensionskasse (pension fund), Liestal; Atag Asset Management AG,Basel; Atag PCS AG, Basel.

Willy Winkler

Born in 1945Member of the Executive Board; head of Corpo-rate Services since 2001

Education in banking (apprenticeship; eidg. Bankfachdiplom (federal diplo-ma in banking, commercial management school). Jobs in Retail, Securities,Foreign Currencies at BLKB, Bank Sarasin, and CS, and UBS.BLKB: inspectorate; agency head; head of Arlesheim branch; position ofchief of staff before taking over Private Customers.Member of the following boards of directors: Banque Cantonale du Jura, Por-rentruy; Sourcag AG, Münchenstein (joint processing company of BaslerKantonalbank and Basellandschaftliche Kantonalbank).

Kaspar Schweizer

Born in 1964Member of the Executive Board; head of Corpo-rate Services since 2001

Degree from HSG; Executive Master of Business Administration in BusinessEngineering (E MBA in BE HSG).Jobs with BLKB since 1992: assistant to the senior management; head of IT project “Migration” (changeover of bank IT to RTC), head of Strategy,Planning, Bank Logistics.Member of the following boards of directors: Sourcag AG, Münchenstein(joint processing company of Basler Kantonalbank and BasellandschaftlicheKantonalbank) (chairman); RTC AG, Bern (IT centre of Kantonalbanken);Cosco AG, Basel.

4.3 Management contracts

The members of the Executive Board do not have any permanent managingor advising functions. They do not hold any official functions or politicalposts.

There are no management contracts.

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5 Compensation, shareholdings and loans

5.1 Content and method of determining compensation and shareholding programmes

Compensation of Bankrat: Bankrat determines, as described in item 3.6, thecompensation of the members of Bankrat. Compensation is done accordingto a system which is decided on at the beginning of each year by the membersof Bankrat. Compensation is divided into two parts. There is a fixed compen-sation, graded according to the member’s involvement and responsibility,and an attendance fee per meeting being the same for all members and inde-pendent of whether it is a plenary meeting or a committee meeting. The per-son chairing the meeting is remunerated the double fee. Furthermore, mem-bers across the board are paid a lump sum for expenses plus travellingexpenses per day of session. System and rates have remained unchanged since1994.

Apart from the above mentioned compensation, members of the Bankrat arepaid a bonus depending on results. Bonus calculation is done in the sameway as the bonus calculation of the Executive Board which will be describedin the following paragraph.

Compensation of the Executive Board: compensation paid by BLKB to themembers of the Executive Board consists of a fixed annual salary and fixedexpenses, agreed upon in the contract, and a variable bonus depending onthe results.

Bankrat sets up or changes contracts; it also decides on the amount of thebonus for the Executive Board according to a system proposed by the BankCommittee (definition of relevant annual business proceeds, definition of total sum of bonus, definition of percentage allocated to employees, middlemanagement, senior management, Executive Board, and Bankrat).

5.2 Compensation of acting members of governing bodies

5.2.1 Total of all compensation

Compensation total is CHF 4.66 m. For details see item 5.2.2 a) and b).

5.2.2 The amounts are to be disclosed for individuals or categories

a) Total of executive members of Bankrat and members of the ExecutiveBoard:

all thirteen members are non-executive.

Compensation for the six members of the Executive Board for the finan-cial year 2004 (calculated according to the principle of accrual) amountedto CHF 3.63 m, before tax. Apart from the compensation described initem 5.1 this sum includes payments (exceeding the compulsory contribu-tions) of BLKB to pension schemes as well as the fees from managementmandates. Bonus payment is settled in cash. There are no option pro-grammes. Share allotments are disclosed in item 5.4 and, according to thecomments of the office for the admission of securities to quotation of theSWX on item 5.2, are not included in the above mentioned sum.

b) total of non-executive members of Bankrat:

Compensation for the thirteen members of Bankrat for the financial year2004 (calculated according to the principle of accrual) amounts to CHF1.03 m, before tax. The sum includes compensation as described in item5.1. Payment is settled in cash. There are no option programmes. Share allotments are disclosed in item 5.4 and, according to the comments of theoffice for the admission of securities to quotation of the SWX on item 5.2,are not included in the above mentioned sum.

5.2.3 Additional severance payments

Members of Bankrat who resigned will be paid their regular compensationpro rata up to the time of their leaving. There is no further compensation.

5.3 Compensation for former members of governing bodies

5.3.1 Total of all compensation

There is no compensation being paid to former members of governing bod-ies. Consequently, any further differentiating according to items 5.3.1 and5.3.2 DCG is unnecessary.

5.4 Share allotment in the year under review

In the year under review members of Bankrat were allotted 540 BLKB certificates and members of the Executive Board 450 BLKB certificates at 100 Swiss francs nominal value each. Allotment was done at a rate 30% lower than their market value of 803 Swiss francs. The certificates are blockedfor a period of five years. Further allotments to members of Bankrat or theExecutive Board or closely linked natural or legal persons were not made.

5.5 Share ownership

As per December 31st 2004, 1 416 BLKB certificates were held by the entireBankrat (all members non-executive) and 1 653 by members of the ExecutiveBoard.

5.6 Options

There are no options.

5.7 Additional fees and remuneration

There were no additional fees or remuneration paid to members of Bankrat orthe Executive Board or persons closely linked to them.


60

5.8 Loans granted to the members of governing bodies

Loans granted to members of Bankrat total CHF 35.0 m. The sum includesall the outstanding loans of members of Bankrat, companies they representand persons closely linked to them as per 31st December 2004. They aregrouped as follows:

– Mortgage-secured loans (CHF 31.9 m)

– Loans secured by other assets (CHF 0.4 m)

– Unsecured loans (CHF 0.1 m)

– Contingent liability (CHF 2.6 m)

Members of Bankrat are not entitled to reduced rates; loans are granted atcustomer conditions. They are fixed rate loans or variable rate loans with amaturity of 1 to 7 years. Rates lie within a margin of 1.5% to 10.0%. The num-ber of benefiting natural or legal persons is 23.

Loans granted to members of the Executive Board total CHF 29.7 m. Thesum includes all the outstanding loans of members of the Executive Board,companies they represent and closely linked persons as per 31st December2004. They are grouped as follows:

– Mortgage-secured loans (CHF 19.0 m)

– Loans secured by other assets (CHF 0.0 m)

– Unsecured loans (CHF 9.2 m)

– Contingent liability (CHF 1.5 m)

More than 81% of the total amount are loans granted to closely linked parties.According to regulations members of the Executive Board are granted reducedrates for personal loans up to 800 000 Swiss francs. Loans exceeding this sumare granted at normal customer conditions. They are fixed rate loans or vari-able rate loans with a maturity of 1 to 10 years. Rates lie within a margin of2.25% to 4.375%. The number of benefiting natural or legal persons is eleven.

5.9 The highest total compensation

The highest total compensation for an individual is CHF 241 380. The mem-ber of Bankrat with the highest individual compensation has been allotted 40 BLKB certificates at a nominal value of CHF 100 each in the year underreview. Allotment was done at a rate 30% lower than their market value of803 Swiss francs.

There are no options or option programmes.

6 Shareholder participation rights

6.1 Voting rights and participation restrictions

Due to its legal form BLKB has non-voting share capital only, and conse-quently shareholders have no voting rights. All voting rights are exclusivelyheld by the Canton of Basel-Landschaft. Questions of voting rights restric-tions, methods and conditions for revoking statutory voting rights restric-tions according to items 6.1.1 and 6.1.2 are not applicable.

6.1.4 Statutory rules on participation in the general meeting ofshareholders, if they differ from applicable legal provisions

Due to its legal form BLKB is not in a position to hold a general meeting ofshareholders. Bankrat and Executive Board may invite holders of certificatesto meetings and inform them of the bank’s course of affairs. These meetingsare only meant for information; resolutions cannot be passed. Certificates do not entitle their holders to any participation rights such as the right to vote, object or challenge (Cantonal Law on Kantonalbank, Art. 3 section3, rules on the issuance of Kantonalbank certificates, Arts. 8 and 9;www.baselland.ch; menu: Gesetzessammlung-Finanzen-Banken). The ques-tion of statutory rules for the participation in general meetings is thereforenot applicable.

6.2 Statutory quorums

See explanations on items 6.1 and 6.1.4. The question of statutory quorums isnot applicable.

6.3 Convocation of the general meeting of shareholders

BLKB makes use of the possibility described in item 6.1.4 of holding an in-formative meeting. Notice is given by mail to the addresses of the share-holders entered in the share register. Additionally, the invitation is publishedin the official gazettes, in regional and transregional daily papers.

6.4 Agenda; rules for adding items to the agenda of the generalmeeting of shareholders

See 6.1.4. The question of rules for adding items to the agenda of the generalmeeting of shareholders is not applicable.

6.5 Entry into the share register; rules pertaining to the entrydeadline of registered shareholders into the share register

Due to its legal form BLKB has non-voting share capital only, and conse-quently shareholders have no voting rights. All voting rights are exclusivelyheld by the Canton of Basel-Landschaft. The question of entries into theshare register, rules on the deadline of registering shareholders are thereforenot applicable.

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7 Changes of control and defence measures

7.1 Duty to make an offer

Due to the legal form of BLKB (see 6.1) a change of ownership by means ofbuying certificates may not take place under no circumstances whatsoever.The question of duty to make an offer is therefore not applicable.

7.2 Clauses on changes of control

See 7.1. The question of clauses on changes of control is not applicable.

8 Auditors

8.1 Duration of the mandate and term of office of the head auditor

Bankrat files an application for the auditor who is then set in by Regierungs-rat. Auditing for the parent company and the group is performed by Ernst & Young, auditing for Atag Asset management is performed by PriceWater-houseCoopers.

8.1.1 Date of assumption of the existing auditing mandate

Ernst & Young, auditing of parent company: assumption of mandate in 1997.

Ernst & Young, auditing of group: assumption of mandate in 2000.

8.1.2 Assumption of head auditor’s post, responsible for the existing mandate

The head auditor from Ernst & Young who is responsible for the existing auditing mandate took up his post in 2004 and in this function performedthe auditing of the annual account of 2004 for the parent company and thegroup for the first time.

8.2 Auditing fees

The total auditing fees charged in the year under review by the auditors forthe fulfilment of legally required duties for the parent company and thegroup were CHF 643 740.

Calculation of the above mentioned auditing expenses was done according tothe principle of accrual.

8.3 Additional fees

Fees for additional duties such as regular audits of IT and data securityamounted to CHF 10 818.

Calculation of the above mentioned auditing expenses was done according tothe principle of accrual.

8.4 Supervisory and control instruments pertaining to the audit

The external audit and its independence are assessed by the Bank Committee.The basis for the assessment are the meetings of the Bank Committee andBankrat (dealing with the annual accounts, the annual report and the audit-ing report) and the meetings of the Financial Commission of Landrat whichthe representative of the auditors regularly attends. Extent and planning ofthe auditing are also evaluated as well as the discussions of the auditing results.

9 Information policy

Basellandschaftliche Kantonalbank publishes the group’s consolidated bal-ance sheet at the media conference on balances in February and the mid-yearresult in July.

In April the annual report is available in printed form and online, in Germanand English, and every other year, BLKB publishes a separate report on sus-tainability in German which is also accessible online (with the current reportpublished in 2004).

Further press releases concern the economic survey (January/February) andthe general meeting of registered shareholders (April). Ad hoc releases followaccording to relevance and need. The complete press releases are available onthe Internet (www.blkb.ch; menu info). It is part of BLKB’s information pol-icy to communicate information to the employees before or at the same timeas to the public. For this purpose Intranet has proved to be a valuable infor-mation platform. (The information page opens automatically with bootup ofthe computer at the individual workplace.)

Contact for Investor Relations: lic. rer. pol. Rudolf Messerli, phone +41 (0)61 925 92 31, [email protected].


63

Annual financialstatements

Consolidated financial statements 64

Consolidated balance sheet

on December 31st 2004 64

Consolidated income statement 66

Consolidated statement on cash flows 67

Notes 68

Report of the group auditors 93

Financial statements of the parent company 94

Balance sheet on December 31st 2004 94

Income statement 96

Notes 97

Report of the statutory auditors 105


group companies 106

Cultural Foundation of

Basellandschaftliche Kantonalbank 106

Bank authorities and monitoring bodies 108

Bank management 109

Group companies and foundations 112

This is how to reach us 114

64

Assets 2004 2003 Change Change

CHF 1 000 CHF 1 000 CHF 1 000 %

Liquid funds 97 571 105 038 - 7 467 - 7.11

Money market instruments 24 568 70 532 - 45 964 - 65.17

Due from banks 934 760 1 263 597 - 328 837 - 26.02

Due from customers 681 241 843 514 - 162 273 - 19.24

Mortgage loans 11 497 780 11 157 331 340 449 3.05

Securities and precious metal trading portfolios 4 167 1 266 2 901 229.15

Financial investments 754 129 248 772 505 357 203.14

Non-consolidated participations 19 476 21 166 - 1 690 - 7.98

Tangible fixed assets 180 145 179 113 1 032 0.58

Intangible assets 10 424 7 851 2 573 32.77

Accrued income and prepaid expenses 94 808 90 350 4 458 4.93

Other assets 109 992 118 905 - 8 913 - 7.50

Total assets 14 409 061 14 107 435 301 626 2.14

Total subordinated claims 548 548 0 0.00

Total due from non-consolidated participations 0 0 0

Total due from the Canton of Basel-Landschaft 6 859 51 792 - 44 933 - 86.76

Consolidated financial statementsBalance sheet on December 31st 2004(before profit appropriation)

65

Consolidated financial statements

Liabilities 2004 2003 Change Change

CHF 1 000 CHF 1 000 CHF 1 000 %

Money market instruments 0 0 0

Due to banks 645 688 661 167 - 15 479 - 2.34

Due to customers in savings and deposits 6 099 208 5 877 942 221 266 3.76

Due to customers, other 2 900 056 2 567 688 332 368 12.94

Cash bonds 561 921 656 120 - 94 199 - 14.36

Bonds and mortgage-backed bonds 2 385 769 2 689 820 - 304 051 - 11.30

Accrued expenses and deferred income 142 158 152 985 - 10 827 - 7.08

Other liabilities 229 648 157 485 72 163 45.82

Valuation adjustments and provisions 289 006 293 287 - 4 281 - 1.46

Reserves for general bank risks 370 598 300 598 70 000 23.29

Endowment capital 240 000 240 000 0 0.00

Capital reserves 88 178 89 108 - 930 - 1.04

Retained earnings 381 966 355 773 26 193 7.36

Own equity - 4 546 - 9 005 4 459 - 49.52

Minority interests in equity 437 2 066 - 1 629 - 78.85

Group net profit 78 974 72 401 6 573 9.08

of which minority interests 176 181 - 5 - 2.76

Total liabilities and equity 14 409 061 14 107 435 301 626 2.14

Total subordinated liabilities 0 0 0

Total due to non-consolidated participations 1 309 1 116 193 17.29

Total due to the Canton of Basel-Landschaft 54 153 80 433 - 26 280 - 32.67

Off-balance-sheet transactions

Contingent liabilities 79 539 83 476 - 3 937 - 4.72

Irrevocable commitments 340 750 296 155 44 595 15.06

Liabilities for calls on shares and other equities 36 514 37 868 - 1 354 - 3.57

Confirmed credits 0 0 0

Derivative instruments

positive replacement value 61 850 67 026 - 5 176 - 7.72

negative replacement value 17 037 13 277 3 760 28.32

contract volume 4 775 469 5 327 565 - 552 096 - 10.36

Fiduciary transactions 285 233 311 037 - 25 804 - 8.30

66

Income and expenses from ordinary bank business 2004 2003 Change Change

CHF 1 000 CHF 1 000 CHF 1 000 %

Net interest income 242 963 240 019 2 944 1.23

Interest and discount income 464 770 482 812 - 18 042 - 3.74

Interest and discount income on trading portfolio 0 0 0

Interest and discount income on financial investments 12 590 16 975 - 4 385 - 25.83

Interest expenses - 234 396 - 259 768 25 372 - 9.77

Net fee and commission income 92 357 84 510 7 847 9.29

Commission income from lending activities 1 517 1 341 176 13.11

Commission income from securities and investment transactions 87 994 80 625 7 369 9.14

Commission income from other services 14 511 13 975 536 3.84

Commission expenses - 11 665 - 11 431 - 234 2.04

Net trading income 17 969 15 573 2 396 15.39

Net other income 10 213 16 418 - 6 205 - 37.79

Results from the sale of financial investments 999 9 708 - 8 709 - 89.71

Income from non-consolidated participations 1 267 1 406 - 139 - 9.90

Income from participations recorded at equity 0 0 0

Income from other non-consolidated participations 1 267 1 406 - 139 - 9.90

Real estate income 5 687 6 100 - 413 - 6.77

Other ordinary income 4 552 3 598 954 26.52

Other ordinary expenses - 2 291 - 4 394 2 103 - 47.85

Net operating income 363 503 356 520 6 983 1.96

Operating expenses - 185 137 - 185 435 298 - 0.16

Personnel expenses - 114 678 - 110 761 - 3 917 3.54

Other operating expenses - 70 460 - 74 674 4 214 - 5.64

Gross profit 178 366 171 085 7 281 4.26

Consolidated profit

Gross profit 178 366 171 085 7 281 4.26

Depreciation and write-offs of non-current assets - 22 673 - 20 210 - 2 463 12.18

Value adjustments, provisions and losses - 5 448 - 8 671 3 223 - 37.17

Interim result 150 245 142 204 8 041 5.65

Extraordinary income 130 193 - 63 - 32.65

Extraordinary expenses - 70 051 - 69 713 - 338 0.48

Taxes - 1 349 - 283 - 1 066 376.68

Group net profit 78 974 72 401 6 573 9.08

of which minority interest 176 181 - 5 - 2.76

Consolidated income statement

67

Consolidated financial statementsConsolidated statement of cash flows

2004 2004 2003 2003

Source Use Source Useof funds of funds of funds of funds

CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Cash flow from operations (internal financing) 103 643 137 287

Group net profit 78 974 72 401

Depreciation and write-offs of non-current assets 22 673 20 210

Valuation adjustments and provisions 4 281 14 205

Allocation to the reserves for general bank risks 70 000 68 000

Accrued income and prepaid expenses 4 458 17 890

Accrued expenses and deferred income 10 827 20 552

Profit distributions previous year 48 438 47 416

Other 0 145

Cash flow from capital transactions 4 230 6 897

Endowment capital

Certificate capital

Own equity 5 811 2 108

First recording of own equity as per December 31st 2003 9 005

Takeover of minority interest of AAM Luxembourg 1 581

Cash flow from transactions with fixed assets 24 589 15 742

Non-consolidated participations 2 767

Tangible fixed assets 13 938 11 511

Intangible assets 10 651 6 998

Cash flow from banking operations 451 195 74 063

Operations with banks 1 123 226 000

Due from banks (over 90 days) 50 087 7

Due to banks (over 90 days) 3 000 240 000

Money market instruments (assets) 45 964 14 007

Money market instruments (liabilities)

Operations with clients 281 259 84 994

Due to customers in savings and deposits 221 266 596 183

Cash bonds 94 199 164 679

Due to customers, other 332 368 111 230

Mortgage loans 340 449 562 127

Due to customers 162 273 104 387

Operations in the capital market 812 384 251 588

Bonds and mortgage-backed bonds 304 126 124 180

Trading securities 2 901 2 404

Financial investments 505 357 373 364

Other balance sheet items 81 053 36 519

Other assets 8 913 70 437

Other liabilities 72 140 106 956

Liquidity 367 911 188 711

Liquid funds 7 467 15 089

Due from banks up to 90 days 378 924 67 330

Due to banks up to 90 days 18 480 271 130

Total source of funds 838 096 473 869

Total use of funds 838 096 473 869

68

1 General

Basellandschaftliche Kantonalbank, incorporated in Liestal, is the leadingbank in Baselland and one of the leading banks in the northwestern part ofSwitzerland. Legitimised by cantonal law, the Bank operates independentlyfrom State administration as an independent public law institution.

The Canton of Basel-Landschaft holds three-quarters of the capital stock, one-quarter is widely spread in private ownership. The Canton of Basel-Land-schaft holds all voting rights and according to the law guarantees for thebank’s liabilities.

Basellandschaftliche Kantonalbank is committed to providing excellent ser-vices and to retaining its independence and autonomy. The guiding princi-ples of the bank state:

“We are the first address for private customers and companies, the canton andthe municipalities for bank services. We wish to strengthen our significantmarket position in the Canton of Basel-Landschaft and in the northwesternpart of Switzerland even further. We are emphasising private banking forhigh-net-worth individuals in cooperation with Atag Asset Management.”

Basellandschaftliche Kantonalbank holds 100% of the shares of the fully con-solidated Atag Asset Management AG which, in turn, holds:

– 100% of Atag Asset Management AG, Luxembourg;

– 75% of Atag Private Client Services AG, Basle;

– 100% of Gräff Capital Management AG, Zurich.

The financial statement of Atag Asset Management subgroup is consolidatedin the financial statement of Basellandschaftliche Kantonalbank. The assetmanagement business is the core competence of Atag Asset Management AG.They serve their highly demanding Swiss and international customersthrough their branches in Basle, Berne, Zurich, Lausanne, and Geneva as wellas through the aforementioned participation. Atag Asset Management AGconsequently does not engage in retail and commercial banking.

Geographically seen, the bank operates in the economic region of Basle pro-viding an extensive range of bank services for the private sector, corporateclients and the public sector through its 32 branches in the Canton of Basel-Landschaft and one in Breitenbach SO. The only branch in the city of Baslefocuses on private banking.

The core business divisions of Basellandschaftliche Kantonalbank are de-scribed below:

2 Retail and commercial banking

Basellandschaftliche Kantonalbank decided to reduce its dependence fromretail and commercial banking by emphasising the private banking businessin the mid-1990s. Group net interest income contributes 66.8% to group netoperating income. The percentage of the parent company is 75.5%. Mortgageloans dominate the assets of the balance sheet. Residential real estate is dominant here. Customer deposits comprise 66.2% of the balance sheet total(parent company). The capital market is gaining importance as a financingsource.

3 Fee and commission income

Group fee and commission income contributes 25.4% to the group’s net operating income. The percentage of fee and commission income from netoperating income of the parent company amounts to 17.6%. The principalsource of this income originates from brokerage and asset management forcustomers.

4 Trading income

Trading income sums up income from proprietary trading (foreign exchange,foreign currencies, precious metals, securities). The contribution of Atag Asset Management is again material.

5 Other income

Financial investment consists primarily of debt securities as a liquidity re-serve. Financial investment also includes equity and similar securities held bythe bank for a medium-to long-term horizon.

Notes on the consolidated financial statements

1 Business activities and number of employees

69


6 Risk management

The various risks have been split into the following three risk categories in order to harmonise and simplify implementation of BLKB risk policy. Thisclassification corresponds to current literature and teaching:

1. Credit and default risk

2. Market, price and liquidity risk

3. Operational and legal risk

The individual risk types will be explained below including the measures taken by BLKB. Details are laid down in the relevant internal procedures.

Risk management will continue to pose a challenge for the entire bankingworld as new products are continuously being created in the financing in-dustry and insurers and banks are closing ranks.

6.1 Default and credit risk

Credit or counterparty risk is the risk of non-compliance with an obligation acounterparty has incurred with BLKB.

Due to its strong lending business and the concentration of risks in the north-western part of Switzerland, a geographically restricted economic area, man-aging credit risk has become top of the agenda for the risk management ofBLKB. Default risks are limited by quality requirements and covering margins.

Regulation on the appraisal of real estate is binding. Residential property andsimple income property with a value lower than 3 million Swiss francs maybe appraised internally by credit clerks. Appraisal of other real estate itemsis done by internal or external qualified third party depending on the risk in-volved. Every five years the property is reappraised. Lending is based on themarket value which is determined as follows:

– property inhabited by owner: real value;

– income property: earnings value;

– commercial or industrial property used by owner: current market value oruse value;

– building estate: market value in view of future use.

The highest possible financing depends on the one hand on internally de-fined collateral value and on the other hand on its supportability. Secondmortgages must be amortised.

Depending on the amount and complexity of the loan decisions are made atdifferent hierarchical levels and branches. BLKB is confident that branchmanagers know their customers best and are therefore in a good position toassess credit risk. Creditworthiness and possible collateral are important fac-tors in assessing the probability of default risk. Default risk of exposures ismeasured and managed by means of a rating system comprising ten cate-gories. This system is extremely helpful in assessing the credit risk of expo-sures and in determining valuation adjustments. Periodical meetings and con-tinued training help reduce losses and ensure a consistent lending policy ofBLKB. A team of specialists at head office takes care of exceptional cases anddeals with non-performing loans.

The Loan Committee as the supreme body issues relevant rules and proce-dures, assures a consistent credit policy, a competitive pricing policy andmonitors compliance with the rules.

Changes in the credit rating of counterparties as well as compliance with theregulations aimed at avoiding large risks in the case of large counterparts orcustomers are part of the same risk category. Unilateral decisions of govern-ments restricting currency transfers and payments or moratoria are referred toas country risks.

BLKB, in close cooperation with Zürcher Kantonalbank (Zurich CantonalBank), adopts their country rating in order to minimise country risk as muchas possible.

Money market business and over-the-counter derivatives may only be con-cluded with approved counterparties and within the scope of the rules of responsibilities.

6.2 Market, price and liquidity risk

The term market risk is defined as the possibility of losses arising as the result of price movements on the stock, interest, foreign exchange, and com-modity markets. Price movements are constantly being monitored.

6.2.1 Interest rate risk in the banking book

Interest rate risk is controlled by the income and price effect. Income effectmeasures the impact of interest rate changes on the performance of a certainperiod of time (e. g. 12 months). In this case interest changes influence thoseitems on the balance sheet which will expire within 12 months and will berenewed or whose reset date recurs within the next twelve months. Price effectanalyses changes of equity under different assumed rate scenarios (e. g. par-allel shift of the rate curve by 1 basis point).

Balance sheet items which grant the customer the right to give notice (vari-able rate mortgages and savings) will be simulated by benchmark portfolios,in a way that variance of the margin between the customer rate and yield ofthe replicating portfolio is minimised taking into account the fluctuation ofvolumes on these balance sheet items. Historical products and market ratesserve as a basis for the simulation. Replication keys determined in this waywill be checked on their relevance on a yearly basis.

There are limits for the different scenarios of income and asset effect.

6.2.2 Market, price and liquidity risks in the trading book

In order to assess market risks in the trading book the value at risk (VaR) ismeasured daily. Basellandschaftliche Kantonalbank calculates the degree ofrisk on the basis of one trading day and a quantile of 99% by using the past100 historical market scenarios. Value at risk indicates that for the duration ofone trading day a certain loss will not be exceeded by a probability of 99%.

A “List of Instruments” ensures that BLKB only uses products which can becorrectly assessed and entered.

Market liquidity risks are generated by the failure of the markets to have fairbuying and selling prices at all times. Market liquidity risks are restricted bylimitations of the delta equivalents per issuer. Central Risk Management usesintegrated systems to monitor these limits. Trading is centralised at head office in Liestal. The dealers are qualified and experienced.

70

6.3 Operational and legal risks

Operational risks are defined “as the dangers of direct or indirect losses re-sulting from inappropriateness or the failure of internal processes, people andsystems or external events”. They are limited by means of internally definedrules and directions as to organisation and control. The Security Committeecoordinates the individual areas and sets priorities. Internal auditing regularlychecks the internal control system and reports his findings.

An internal control unit monitors compliance with the procedures and au-thorises IT access rights of the staff in order to minimise operational risks.

Internal operational procedures, processes and systems are reviewed on anongoing basis and are prioritised with respect to their importance for the operation of the bank. Constant updating and adaptation to new systems,processes and operational procedures is thereby assured.

Scope and frequency of management controls are defined in an internal con-trol manual. A disaster plan defines backup procedures in case of failure ofindividual systems or system groups.

System risks (failure of IT platform) are analysed in cooperation with theRTC partner banks and Sourcag AG on an ongoing basis, and appropriatemeasures are in place to minimise these risks.

Continued training for all employees, the transparent organisation of thebank and open communication does, however, represent the most efficientmethod of minimising operational risks.

Legal risks include:

– The lack of authorisation or lack of competence and expertise required forconcluding a contract (risk of concluding unwanted commitments).

– Conclusion of incorrect or incomplete contracts (the risk of a counterpartynot being able to meet its obligations, risk associated with claims for dam-ages or negligence).

To minimise these risks, the bank uses standardised contracts and individualtransaction confirmations.

Moreover, certain transactions may only be carried out by authorised mem-bers of the staff at head office. Mandatory procedures ensure that due careis exercised when signing contracts.

Legal risks also include the possibility of changes in the regulations issuedby national (SFBC, SBA, SWX, etc.) or by international institutions (BIS,SEC, etc.).

Compliance officer and legal service assure the compliance of BLKB’s busi-ness activities with the current regulatory provisions and BLKB’s exercise ofdue diligence as a financial intermediary. These bodies are responsible for implementing requirements and developments on behalf of the supervisoryauthority, the legislator or other organisations. Moreover, they see to it thatrules and regulations are adapted to the regulatory development and are com-plied with.

6.4 Outsourcing of business areas

Basellandschaftliche Kantonalbank delegated a number of functions belong-ing to the business areas of securities back-office, payment transactions, andIT to Sourcag AG, Münchenstein. RTC AG, Liebefeld, was entrusted with theoperation of the computer centre and the development of bank applications.Both outsourcings were regulated in detail in service level agreements as stip-ulated by the Federal Banking Commission. Confidentiality is assured by thefact that the entire staff of both providers are subject to bank secrecy.

7 Employees

In line with the Federal Banking Commission’s counting method the numberof employees (full-time equivalents) was established as:

2004 2003

Parent Company 591 603

Atag Asset Management 144 164

Group 735 767

The number of employees (head count) was:

Parent Company 654 664

Atag Asset Management 162 179

Group 816 843

thereof

apprentices 31 34

trainees 9 8

71


General accounting policies

The consolidated financial statements are prepared according to the relevantSwiss accounting principles for banks. It provides a true and fair view of thegroup’s financial position and results. It complies with Swiss corporation lawand the accounting rules for listed companies of the Swiss stock exchange aswell as the directives of the Swiss Federal Banking Commission. The group fi-nancial statements are based on the audited individual financial statements ofthe group companies established in accordance with group-wide standardisedaccounting principles.

Consolidated entities

Group companies in which BLKB owns a majority of the votes or companiesover whom BLKB exercises a dominating influence are fully consolidated.

The consolidated financial statements consist of the accounts of the parentcompany, Basellandschaftliche Kantonalbank, Liestal, and the subgroup,Atag Asset Management AG.

Various smaller participations, which are immaterial, are not included in theconsolidated financial statements.

Consolidation policies

Assets and liabilities, off-balance-sheet positions as well as income and ex-pense of all group companies in the financial services industry BLKB holdsa majority stake in are fully recorded.

Capital consolidation is performed upon acquisition, according to the pur-chase method; ie. the purchase price is set off against the re-valued share-holders’ equity of the acquired entity.

The resulting goodwill is stated and written off linearly over a carefully esti-mated time of use. Group internal claims and liabilities as well as group in-ternal transactions are eliminated.

Closing date

The consolidation period consists of the current calendar year. All groupcompanies close their financial year on December 31st .

Reporting of transactions

All transactions (on-balance-sheet and off-balance-sheet) are recorded as ofthe closing date and valued according to the accounting and valuation prin-ciples.

Internal services

Intra-group services are rendered at market values. No inter-company prof-its arise on service transactions.

Foreign currency

Foreign currency transactions are entered at the respective day’s rate. Mone-tary assets are translated into Swiss francs at rates valid on balance-sheet dateand entered affecting net income. Exchange rate difference between the dayof conclusion and the day of fulfilment of the transaction is entered in the in-come statement.

Assets and liabilities of group companies are translated into Swiss francs atthe rates valid on balance-sheet date, expenses, income and items of the cashflow statement are translated into Swiss francs at an average rate for the year.

Translation differences do not affect net income and are assigned directly toretained earnings or set off against them.

Average exchange rate for the year EUR/CHF 1.5452

Year-end rate EUR/CHF 1.5456

Year-end rate USD/CHF 1.1325

Accounting policies and valuation principles

Uniform valuation principles for the individual balance sheet items are ap-plied in the group.

Liquid funds, deposits

Valuation is done at par value.

Repurchase and reverse-purchase transactions

Reverse repurchase transactions are securities purchased under the conditionof resale and repurchase transactions are securities sold under the conditionof repurchase. Reverse repurchase transactions are recorded in the balancesheet as advances against collateral and repurchase transactions are recordedas secured payables.

2 Accounting and consolidation principles

72

Market value of obtained or supplied securities are monitored daily in orderto make available or claim additional securities, if need be.

Interest income from reverse repurchase transactions and interest expenses onrepurchase transactions are accrued by maturity.

Dues from bills of exchange and money market receivables

Bills of exchange and cheques: accounting is done at nominal value. Bills ofexchange are accrued by a discount.

Money market receivables: accounting is done at cost value.

Dues from banks and customers, mortgage loans

Dues from banks and customers as well as mortgage loans are entered at parvalue with the exception of claims and liabilities from non-monetary valuessuch as precious metal accounts and securities lending and borrowing whichare entered at market value.

Specific provisions are built for doubtful dues, which means dues from cus-tomers who have failed to meet their capital and interest liabilities for 90 daysor longer. The same applies to the probability of a customer not being able inthe future to meet his liabilities in full or in part. Valuation adjustment is determined by the difference between the book value of the claim and thelikely income, taking into account the risk of the counterparty and the net income from selling off collateral. When determining net income of the col-lateral cost of carry such as interest, maintenance and sales costs, etc. up tothe estimated time of sale are deducted as well as possible taxes and fees.

Securities and precious metal trading portfolios

Trading portfolios are always valued and recorded at fair value on balancesheet date. Fair value is the price determined on the basis of a price-efficientand liquid market or a price determined on the basis of a valuation model. Inthe exceptional case of fair value not being available recording and valuationis done according to the principle of minimum value.

Valuation income is reflected in the income statement as “net trading in-come”. Interest and dividend income is also entered as “net trading income”.

Funding expenditure for trading of securities is debited to “net trading income” and credited to “net interest income”.

Financial investment

Equities and precious metals are valued according to the principle of mini-mum value. On purchase of fixed-interest debt securities, they are dividedinto two categories and valued as follows:

Held to maturity: valuation at cost, premiums and discounts are accruedover the remaining term of the financial investment. Capital gains and losses, realised on premature sale of the financial investment, are accrued over theremaining term.

Available for sale: valuation at lower of cost or market.

Real estate and participations taken over from the credit business and avail-able for sale are recorded in financial investments and valued lower of cost ormarket.

Non-consolidated participations

These participations are not consolidated for materiality reasons.

Non-consolidated participations are valued at acquisition cost less econom-ically necessary depreciation.

Tangible fixed assets

Tangible fixed assets are recorded at cost value on the basis of the estimatedtime of use determined in the following way:

Bank buildings 50 years

Renovations 10 years

Other real estate 80 years

Other tangible assets 3–5 years

Recoverability of tangible fixed assets is checked yearly. If there is a change inthe period of use or a depreciation, an extraordinary write-off is done. Ordi-nary and extraordinary write-offs, if any, are recorded in item “depreciationand write-offs of non-current assets” of the income statement.

Maintenance costs are debited to the income statement.

Intangible assets: goodwill

Recorded goodwill results from capital consolidation upon acquisition (dif-ference between purchase price and net assets valued according to group pol-icy) and is written off linearly according to a carefully estimated time of use(5 years maximum).

Other intangible assets

Purchased intangible assets are recorded, if there is a measurable use for thecompany for a period of a several consecutive years. Worked-for intangibleassets are not recorded. Recording is done at cost value of the estimated timeof use of the assets.

Software 3 years

Other intangible assets 3 years

Recoverability of intangible assets is checked yearly. If there is a change of useor a depreciation, an extraordinary write-off is done. Ordinary and extraor-dinary write-offs, if any, are recorded in item “depreciation and write-offs ofnon-current assets” of the income statement.

Accrued income and expenses, prepaid expenses, deferred income

Accruals are established according to the matching principle.

73


Taxes

BLKB as a public law institution is tax-exempt from direct federal tax andcantonal tax in the Canton of Basel-Landschaft. It is, however, not exemptfrom taxes for branches outside the canton. Atag Asset Management AG andits subsidiaries are subject to full taxation. Direct tax due for ongoing assess-ment is recorded in accrued expenses and deferred income.

According to Swiss GAAP FER 11 current and future fiscal effects in the annual statement are considered as provisions.

Contingent liabilities, irrevocable commitments, liabilities for calls on shares and other equities, confirmed credits and fiduciarytransactions

Off-balance-sheet transactions are recorded at par value. Appropriate provi-sions are made for all risks recognisable.

Forward transactions, derivative instruments

The group records positive and negative replacement costs vis-à-vis the samecounterparty in line with concluded netting agreements.

Trading transactions

Valuation of all derivative instruments concluded as trading transactions aredone at fair value. They are recorded as positive or negative replacement costsin “other assets” or “other receivables”. Fair value is based on market rates orcalculation models. For transactions with derivative instruments concludedfor trading reasons realised and non-realised income is recorded in “incomefrom trading transactions”.

Hedging transactions

Furthermore, the group uses derivative instruments within the framework ofasset and liability management in order to control changes of interest raterisk. Hedging transactions are valued in line with the secured basic transac-tions. Income from hedging transactions is allocated to the same balancesheet item as income from secured transactions.

In order to secure changes of interest rate risk macrohedges are used. Man-agement of balance sheet uses derivatives for managing interest rate risk. In-come and expenses thereof are accrued. Positive and negative replacementcosts are recorded in “other assets” or “other receivables”. Accrued interest onthe hedging item is recorded in the compensation account of “other assets” or“other receivables”.

Hedge relations, aims and strategies of hedging transactions are documentedby the group upon conclusion of derivative hedging transactions. Efficiencyof hedge relations is checked at regular intervals. Hedging transactions wherehedge relations have partly or fully become ineffective are treated as tradingtransactions as far as the non-effective part is concerned.

Other assets and liabilities

The balance sheet items “other assets and liabilities” contain, among others,the positive and negative replacement values of the derivative instruments,valued at market value as of balance sheet date.

Valuation adjustments and provisions

Appropriate specific provisions are made for all risks recognisable as of bal-ance sheet date. Provisions represent gross values. Interest and commissionincome from customers overdue 90 days and more are adjusted. Provisionsfrom one accounting period, which from an economic point of view are notneeded any more, are liquidated and recorded in the income statement.

Experience has shown that specific provisions sufficiently cover latent risks.Therefore, general provisions were not made.

Pension schemes: Within the group there are different pension schemes. Defined benefit pension plans have been established for the employees of theparent company of BLKB. Calculation of employer’s commitment to thesedefined benefit plans are evaluated according to a retrospective, dynamicmethod by an independent qualified actuary at least every three years. Basedon the actuarial evaluation, eventual under-funding is recorded as pensionliabilities in the financial statements according to the directives of SwissGAAP FER 16. Any surplus is disclosed in the notes on the financial statement.

In the case of defined contribution pension plans of the remaining groupcompanies the employer’s commitment to the pension plan is debited to theincome statement in the corresponding financial year. No actuarial calcula-tion of pension costs is required in this case. The balance sheet is not affected.

Own debt and participation securities

Positions in own debenture and cash bonds are offset with the relevant liability item.

Positions in own participation securities are deducted from equity in a sepa-rate section “own participation securities” at cost value.

Reserves for general bank risks

These reserves are added to the core capital in line with Art. 11a paragraph 1lit. B of the Bank Ordinance.

Capital reserves

Capital reserves result from surplus gains from issues since the introductionof certificate capital in the parent company.

Dividends and income from resale from own participation securities are di-rectly allocated to capital reserves.

Retained earnings

Retained earnings comprise the group’s earnings, in particular reinvestedearnings.

74

Changes compared to the previous year

In the reporting year Atag Asset Management AG took over the remaining45% of Atag Asset Management AG (Luxembourg). The difference betweenthe purchase price and the proportionate value of net assets is linearly deb-ited to ordinary depreciation.

Basellandschaftliche Kantonalbank purchases real estate on behalf of the can-ton and the communities in trust. Up to the present, BLKB reported receiv-ables from this kind of business in its balance sheet. As from now on, BLKBwill enter the fiduciary ownership of such real estate in the receivables sideand the fiduciary obligation in the liabilities side of its balance sheet.

Events after the balance sheet date

There are no events to report that had an influence on the balance sheet orthe income statement for the past financial year of BLKB.

75


3.1 Summary of collaterals Mortgage cover Other cover Without cover Total

CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Receivables

Due from customers 681 241

public bodies 531 141 369 141 900

others 169 151 130 676 239 514 539 341

Mortgage loans 11 497 780

residential real estate 9 286 219 9 286 219

office and business buildings 744 370 744 370

trade and industry 995 302 995 302

others 471 890 471 890

Total due from customers 31/12/2004 11 667 462 130 676 380 883 12 179 021

31/12/2003 11 353 007 140 511 507 327 12 000 845

Off-balance-sheet

Contingent liabilities 12 829 10 575 56 136 79 539

Irrevocable commitments 331 791 8 959 340 750

Liabilities for calls on shares and other equities 36 514 36 514

Confirmed credits 0

Total off-balance-sheet 31/12/2004 344 620 10 575 101 609 456 803

31/12/2003 309 001 9 658 98 840 417 499

Total debt Estimated Net debt Specificrealisation of provisions

securities

Doubtful receivables as per 31/12/2004 541 402 351 726 189 676 198 859

31/12/2003 559 972 363 500 196 472 198 806

3 Information on the consolidated balance sheet

76

3.2 Securities and precious metal trading portfolios, financial investments and non-consolidated participations

3.2.1 Securities and precious metal trading portfolios 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000

Debt securities 3 176 632

listed on an exchange 2 380 445

not listed 796 187

Equities 991 634

Precious metals

Total trading portfolios in securities and precious metals 4 167 1 266

3.2.2 Financial investments Book value Book value Fair value Fair value

31/12/2004 31/12/2003 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Debt securities 633 654 161 788 645 538 165 472

of which valued according to the amortised cost method 631 176 157 806 642 633 160 921

of which valued according to the lower of cost or market method 2 478 3 982 2 905 4 551

Equity securities 19 981 23 438 21 000 24 903

of which qualified participations 1 238 1 101 1 238 1 142

Precious metals 1 513 1 452 1 763 1 662

Real estate 98 980 62 094 98 980 62 094

Total financial investments 754 129 248 772 767 281 254 131

3.2.3 Non-consolidated participations Book value Book value

2004 2003

With quoted value 0 0

Without quoted value 19 476 21 166

Total non-consolidated holdings 19 476 21 166

77


3.3 Participations

Company Business activities Share capital Interest Interestshare share

2004 2003CHF 1 000 % %

3.3.1 Fully consolidated participations

Atag Asset Management AG, Basle Securities dealer 5 000 100.00 100.00

Gräff Capital Management AG, Zurich Investment management 100 100.00 100.00

Atag Private Client Services AG, Basle Tax and legal consultants 750 75.00 75.00

Atag Asset Management AG (Luxembourg) Securities dealer 1 500 * 100.00 55.00

* EUR

3.3.2 Proportionally consolidated participations

None.

3.3.3 Participations recorded at equity

None.

3.3.4 Non-consolidated participations

Disclosed in financial investments

Capital Growth Portfolio, George Town, Cayman Islands Investment funds 1 850 ** 32.50 25.00

Landwirtschaftliche Trocknungsanlage, Pratteln Drying plant 900 16.28 16.28

AEB Alternativ-Energie Bf AG, Birsfelden Energy generation 3 300 12.12 12.12

Ultra-Brag AG, Muttenz Shipping/warehousing/trade 3 000 11.67 11.67

Rehabilitationszentrum Basel AG, Basle Clinic 1 000 10.00 10.00

Disclosed in non-consolidated participations

Sourcag AG, Münchenstein Services for banks 3 000 50.00 50.00

EVA Erfindungs Verwertungs AG, Basle Knowledge transfer 630 41.02 41.02

RTC Real-Time Center AG, Berne Information technology 30 000 11.73 11.73

Caleas Holding AG, Zurich Financing company 80 000 11.19 11.19

Swiss Canto Finanz, Baar (in liquidation) Banking business 120 000 9.17 9.17

FINSERVE AG, Zurich Securitisations 100 7.50 7.50

Pfandbriefzentrale der Schweiz. Kantonalbanken, Zurich Bank financing 825 000 5.18 5.18

Swissca Holding AG, Berne Financial services 24 204 4.77 4.77

VISECA Card Services SA, Zurich Credit cards 20 000 3.09 3.09

Telekurs Holding AG, Zurich Financial information 45 000 0.85 0.85

SIS Swiss Financial Service Group AG, Zurich Financial participations 26 000 0.84 0.84

S.W.I.F.T., La Hulpe, Belgium Bank telecommunications 10 844 * 0.02 0.02

* EUR** USD

None of the balanced equities have voting right shares, therefore capital quotas correspond to voting right quotas.

78

3.4 Analysis of capital assets Historical Write-offs/ Book value Transfers Additions Disposals Write-offs/ Book valuecost depreciation depreciation

2003 2004 2004 2004 2004 2004

CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Total non-consolidated participations 34 709 - 13 543 21 166 0 0 0 - 1 690 19 476

of which recorded at equity 0 0 0 0 0 0 0 0

of which other non-consolidated

participations 34 709 - 13 543 21 166 0 0 0 - 1 690 19 476

Total real estate 220 874 - 57 695 163 179 - 1 274 542 0 - 3 427 159 020

of which bank buildings 186 073 - 50 585 135 488 - 26 860 542 0 - 2 831 106 339

of which other real estate 34 801 - 7 110 27 691 25 586 0 0 - 596 52 681

Other tangible fixed assets 44 680 - 28 746 15 933 1 274 13 461 - 65 - 9 478 21 125

Assets arising from finance leases 0 0 0 0 0 0 0

Others 0 0 0 0 0 0 0

Total intangible assets 31 780 - 23 929 7 851 0 10 651 0 - 8 078 10 424

of which remaining intangible assets 31 780 - 23 929 7 851 0 10 651 0 - 8 078 10 424

Fire insurance value of real estate 246 441 246 741

Fire insurance value of other tangible

fixed assets 53 576 53 903

Liabilities: future commitments under

operational lease agreements 541 65

79


3.5 Other assets and other liabilities 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000

Other Other Other Otherassets liabilities assets liabilities

Replacement values from derivative instruments 61 850 17 037 67 026 13 277

Principal transactions 61 850 17 037 67 026 13 277

of which held for trading 17 286 17 037 13 807 13 277

of which held for hedging 44 563 0 53 219 0

Agency transactions 0 0 0 0

Compensation account 0 44 563 0 53 219

Capitalised organisational costs 0 0 0 0

Interest on endowment capital 7 800 0 8 032 0

Value-added tax and other taxes 2 599 15 961 177 19 618

Other receivables / payables 37 743 152 087 43 670 71 371

Total 109 992 229 648 118 905 157 485

3.6 Assets pledged or ceded to secure own commitments, 31/12/2004 31/12/2003

and assets subject to retention of title CHF 1 000 CHF 1 000

Book value Effective Book value Effectivecommitment commitment

Not freely available assets on balance sheet date:

Due from banks 19 274 1 180 18 822 728

Ceded mortgage loans 1 857 082 1 137 000 1 874 557 1 340 000

Financial investments 72 684 0 82 805 0

Fiduciary real estate 41 767 41 767 0 0

Total 1 990 807 1 179 947 1 976 184 1 340 728

Loan business and repurchase agreement with securities 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000

Book value of claims from cash deposits in securities borrowing and repurchase business 420 037 405 000

Book value of liabilities from cash deposits in securities borrowing and repurchase business 0 0

Book value of own securities lent in securities lending or deposited as collateral in securities

borrowing or transferred in repurchase business 0 0

of which securities with unlimited right of disposal or pledge 0 0

Fair value of securities deposited as collateral in securities lending or borrowed

in securities borrowing or received in reverse-repurchase business for which unlimited right of disposal

or pledge has been granted 419 719 404 872

fair value of those securities which were resold or pledged 0 0

80

3.7 Commitment to own pension scheme

With the exception of part-time employees with an income lower than the threshold stipulated by the law on company pension plans and with the excep-tion of apprentices all employees of BLKB group companies are insured in different defined benefit and defined contribution pension plans.

BLKB employees are insured in different defined benefit plans of Basellandschaftliche Pensionskasse (pension fund of the Canton of Basel-Landschaft).

As a matter of principle retiring age is reached at 64. The insured employees, however, have the possibility to go into early retirement at age 62 or to retire atage 60 with the drawback of suffering pension cuts. Calculation of the defined benefit pension commitment is done at least every three years according tothe Dynamic Projected Unit Credit method by an independent actuary. Following a fixed order, the next calculation will be carried out in 2005 taking intoaccount the new BLPK decree (pension fund of the Canton of Basel-Landschaft) which entered into force on January 1st 2005. The last assessment was per-formed as per December 31st 2002. The then made actuarial assumptions were to a large extent updated and applied to the year 2004.

The other group companies have defined contribution plans. No actuarial calculation of the pension costs is required therefor.

Actuarial assumption for defined benefit pension plans 31/12/2004 31/12/2002

Technical interest rate 4.00% 4.00%

Expected return on assets 5.00% 6.15%

Expected salary development 2.00% 2.00%

Expected index-linking of pension plans 1.50% 1.50%

Average period of adherence (in years) 12 12

Pension schemes with defined benefit pension plans 31/12/2004* 31/12/2002

CHF m CHF m

Net assets of pension scheme at market value 190.1 185.4

Cash value of expected claims 315.2 306.5

Financial underfunding - 125.1 - 121.1

Provisions 87.6 91.0

Unrecorded difference resulting from revaluation - 37.5 - 30.1

Provisions for the unrecorded difference as per record date were not made. As of 1/1/2005, the difference from revaluation exceeding the margin will be distributed over the average period of adherence.

Contributary reserves of employer 0.0 0.0

Net pension cost 31/12/2004* 31/12/2002

CHF m CHF m

Service cost 7.5 8.0

Interest cost on projected benefit obligation 12.2 12.0

Expected return on fund assets - 9.0 - 12.0

Contributions of the employees - 3.6 - 4.0

Total pension scheme expenses 7.1 4.0

Regulatory contributions of the employer 7.1 6.0

* Updating for the year 2004 (estimate)

81


Balance Usage Recoveries, Write-offs Recoveries Balance31/12/2003 interest (debit to (credit to 31/12/2004

overdue, income incometranslation statement) statement)differences

CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Provisions for latent taxes* 504 27 531


for default risks and other risks:


for default risks (including country risks) 198 806 - 3 678 - 1 573 18 106 - 12 802 198 859


for other business risks 2 302 - 914 - 32 1 356

Provision for pension plans (Swiss GAAP FER 16) 91 000 - 3 443 87 557

Other provisions 675 28 703

Subtotal 292 783 - 8 035 - 1 573 18 134 - 12 834 288 475

Total valuation adjustments and provisions 293 287 - 8 035 - 1 573 18 161 - 12 834 289 006

minus: valuation adjustments offset against receivables 0 0

Total valuation adjustments and provisions

according to the balance sheet 293 287 - 8 035 - 1 573 18 161 - 12 834 289 006

Fluctuation reserves for credit risks 0 0

Reserves for general bank risks 300 598 70 000 370 598

* Basellandschaftliche Kantonalbank is exempt from tax on profit and capital. Building of latent tax on the reserve for general bank risks is not necessary.

3.9 Valuation adjustments and provisions /

Fluctuation reserves for credit risks /


3.8 Bonds and mortgage-backed securities Year of issue Interest rate Due date Balance Balance

31/12/2004 31/12/2003

% CHF 1 000 CHF 1 000

1995 4.500 30/11/2004 0 100 000

1998 3.500 15/10/2006 149 940 150 000

1999 2.750 17/05/2007 299 669 299 820

2000 4.000 10/03/2010 299 920 300 000

2001 3.750 29/05/2009 199 250 200 000

2002 4.000 27/02/2012 299 990 300 000

Total bonds BLKB 3.600 1 248 769 1 349 820

Total mortgage-backed securities 3.655 1 137 000 1 340 000

Total bonds and mortgage-backed securities 3.735 2 385 769 2 689 820

82

3.10 Company capital, owners with voting rights exceeding 5%

3.10.1 Company capital Total Capital entitled Total Capital entitlednominal to dividend nominal to dividend

value value

31/12/2004 31/12/2004 31/12/2004 31/12/2003 31/12/2003 31/12/2003

CHF 1 000 Quantity CHF 1 000 CHF 1 000 Quantity CHF 1 000

Endowment capital 180 000 – 180 000 180 000 – 180 000

Certificate capital 60 000 600 000 60 000 60 000 600 000 60 000

Company capital 240 000 600 000 240 000 240 000 600 000 240 000

3.10.2 Significant equity owners 31/12/2004 31/12/2003

Nominal value Share Nominal value ShareCHF 1 000 % CHF 1 000 %

Canton of Basel-Landschaft 180 000 75 180 000 75

Owners of certificates 60 000 25 60 000 25

83


3.11 Statement of equity CHF 1 000

Equity at the beginning of the year

Company capital paid-in (subtotal) 240 000

Capital reserve 89 108

Retained earnings 355 773

Own equity - 9 005

Minority interests in equity 2 066

Reserves for general bank risks 300 598

Group net profit 72 401

Total equity at the beginning of the year (before appropriation of retained earnings) 1 050 941

of which minority interests in the group net profit 181

+ Capital increase 0

+ Capital reserve 0

+ Allocations 68 393

- Releases 0

- Dividend and other distribution from the previous year’s result - 48 438

+ Group net profit of the year under review 78 974

- Balance of own equity in trading portfolio and financial investment 4 459

+/- profits/losses from disposal of own equity 1 278

Total equity at the end of the year (before appropriation of retained earnings) 1 155 607

of which minority interests in the group net profit 176

of which:

Company capital 240 000

less not yet paid-in capital 0


Capital reserve 88 178


Own equity - 4 546

Minority interests in equity 437


Group net profit 78 974

of which minority interests 176

Own equities (KB certificates) Number

Own equities on January 1st 13 110

+ Purchases 29 126

- Disposals - 35 828

Balance on 31/12/2004 6 408

84

3.12 Maturity structure of current assets

and borrowed funds

Due Due Due within Due Immo-within within 3 to 12 months after bilised

On demand Callable 3 months 12 months to 5 years 5 years TotalCHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Current assets

Liquid funds 97 571 0 0 0 0 0 0 97 571

Money market instruments 24 568 0 0 0 0 0 0 24 568

Due from banks 184 129 8 038 692 422 50 171 0 0 0 934 760

Due from customers 324 805 19 738 79 657 139 772 111 899 5 370 0 681 241

Mortgage loans 10 680 1 778 167 583 872 2 048 188 7 001 988 74 885 0 11 497 780

Securities and precious

metal trading portfolios 4 167 0 0 0 0 0 0 4 167

Financial investments 20 460 0 8 022 51 106 86 274 489 287 98 980 754 129

Total current assets 31/12/2004 666 380 1 805 944 1 363 973 2 289 237 7 200 161 569 542 98 980 13 994 217

31/12/2003 809 989 2 590 715 1 456 208 2 361 785 6 290 898 118 361 62 094 13 690 050

Liabilities

Money market instruments 0 0 0 0 0 0 0 0

Due to banks 21 544 59 411 116 732 268 000 180 000 0 0 645 688

Due to customers in savings

and deposits 0 6 028 206 71 002 0 0 0 0 6 099 208

Due to customers, other 1 835 352 12 192 459 653 238 352 296 507 58 000 0 2 900 056

Cash bonds 0 0 33 848 187 176 311 207 29 690 0 561 921

Bonds and mortgage-backed bonds 0 0 24 000 107 000 1 157 859 1 096 910 0 2 385 769

Total liabilities 31/12/2004 1 856 896 6 099 809 705 236 800 528 1 945 573 1 184 600 0 12 592 642

31/12/2003 1 982 514 5 825 506 387 912 461 005 2 226 119 1 569 681 0 12 452 737

3.13 Payables and receivables towards affiliated companies as well as loans and exposures 31/12/2004 31/12/2003

to members of the bank’s governing bodies CHF 1 000 CHF 1 000

Due from affiliated companies 16 000 19 000

Due to affiliated companies 2 801 4 536

Due from members of the bank’s governing bodies 65 508 63 628

Transactions with related parties

Transactions with related parties (securities business, payment, credit accommodation, compensation on deposits) are done at conditions valid for third par-ties. The bank’s employees enjoy the conditions valid for personnel. The bank’s employees enjoy the conditions valid for personnel.

85


3.14 Assets and liabilities by domestic and foreign origin 31/12/2004 31/12/2003

Domestic Foreign Domestic ForeignCHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Assets

Liquid funds 97 568 3 105 035 3

Money market instruments 24 568 0 70 532 0

Due from banks 569 598 365 162 496 993 766 604

Due from customers 668 580 12 661 823 146 20 368

Mortgage loans 11 497 780 0 11 157 331 0

Securities and precious metal trading portfolios 1 227 2 940 755 511

Financial investments 498 005 256 124 232 835 15 937

Non-consolidated participations 19 476 0 21 166 0

Tangible fixed assets 180 000 145 178 819 294

Intangible assets 10 424 0 7 851 0

Accrued income and prepaid expenses 90 302 4 506 87 239 3 111

Other assets 109 875 117 118 815 90

Total assets 13 767 403 641 658 13 300 517 806 918

Liabilities

Money market instruments 0 0 0 0

Due to banks 590 988 54 700 613 134 48 033

Due to customers in savings and deposits 5 852 512 246 696 5 642 852 235 090

Due to customers, other 2 840 852 59 204 2 500 090 67 598

Cash bonds 561 921 0 656 120 0

Bonds and mortgage-backed bonds 2 385 769 0 2 689 820 0

Accrued expenses and deferred income 140 595 1 563 152 537 448

Other liabilities 229 648 0 157 433 52

Valuation adjustments and provisions 288 873 133 293 210 77

Reserves for general bank risks 370 598 0 300 598 0

Endowment capital 240 000 0 240 000 0

Capital reserves 88 178 0 89 108 0

Retained earnings 381 966 0 355 773 0

Own equity - 4 546 0 - 9 005 0

Minority interests in equity 437 0 319 1 747

Group net profit 78 799 175 72 720 - 319

of which minority interests 136 39 324 - 143

Total liabilities and equity 14 046 590 362 471 13 754 709 352 726

3.15 Assets by country groups 31/12/2004 31/12/2003

CHF 1 000 Share % CHF 1 000 Share %

Assets

Switzerland 13 767 403 95.54 13 300 517 94.28

Europe 603 128 4.19 770 466 5.46

North America 26 919 0.19 24 894 0.18

Asia/Australasia 3 553 0.02 2 646 0.02

Other 8 058 0.06 8 912 0.06

Total assets 14 409 061 100.00 14 107 435 100.00

86

3.16 Assets and liabilities by currencies CHF USD EUR Other Total

CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Assets

Liquid funds 86 482 548 10 141 400 97 571

Money market instruments 24 380 0 188 0 24 568

Due from banks 804 387 36 493 72 554 21 326 934 760

Due from customers 656 178 18 799 5 377 887 681 241

Mortgage loans 11 497 780 0 0 0 11 497 780

Securities and precious metal trading portfolios 821 127 544 2 675 4 167

Financial investments 619 830 6 428 127 440 431 754 129

Non-consolidated participations 19 476 0 0 0 19 476

Tangible fixed assets 180 000 0 145 0 180 145

Intangible assets 8 269 0 2 155 0 10 424

Accrued income and prepaid expenses 92 407 251 2 144 6 94 808

Other assets 109 824 25 135 8 109 992

Total un-balance-sheet asset 14 099 834 62 671 220 823 25 733 14 409 061

Delivery claims from spot exchange dealings,

forward exchange deals and foreign exchange options 221 762 170 824 58 692 27 268 478 546

Total assets 31/12/2004 14 321 596 233 495 279 515 53 002 14 887 607

Liabilities

Money market instruments 0 0 0 0 0

Due to banks 628 082 7 980 3 847 5 779 645 688

Due to customers in savings and deposits 6 024 301 0 74 907 0 6 099 208

Due to customers, other 2 728 738 45 550 110 040 15 728 2 900 056

Cash bonds 561 921 0 0 0 561 921

Bonds and mortgage-backed bonds 2 385 769 0 0 0 2 385 769

Accrued expenses and deferred income 140 637 2 1 519 0 142 158

Other liabilities 229 648 0 0 0 229 648

Valuation adjustments and provisions 289 006 0 0 0 289 006

Reserves for general bank risks 370 598 0 0 0 370 598

Endowment capital 240 000 0 0 0 240 000

Capital reserves 85 860 0 2 318 0 88 178

Retained earnings 380 751 0 1 215 0 381 966

Own equity - 4 546 0 0 0 - 4 546

Minority interests in equity 437 0 0 0 437

Group net profit 78 799 0 175 0 78 974

of which minority interests 136 0 39 0 176

Total un-balance-sheet liabilities and equity 14 140 001 53 532 194 021 21 507 14 409 061

Delivery liabilities from spot exchange dealings,

forward exchange deals and foreign exchange options 199 900 179 066 72 106 27 474 478 546

Total liabilities 31/12/2004 14 339 901 232 598 266 127 48 981 14 887 607

Net position per currency - 18 305 897 13 388 4 020

Delivery claims or delivery liabilities from spot exchange dealings, forward exchange deals and foreign exchange options = contract value

87


4.1 Contingent liabilities 2004 2003

CHF 1 000 CHF 1 000

Guarantee for collateralisation of loans and similar 17 943 23 409

Guarantee for warranty and similar 60 347 59 009

Irrevocable commitments 1 248 1 058

Other contingent liabilities 0 0

Total contingent liabilities 79 539 83 476

4.2 Confirmed credits

Liabilities from deferred payments 0 0

Acceptance liabilities 0 0

Other confirmed credits 0 0

Total confirmed credits 0 0

4 Information on off-balance-sheet transactions

88

4.3 Derivative financial instruments Trading instruments Hedging instruments

Positive Negative Contract Positive Negative Contractreplacement replacement volume replacement replacement volume

value value value value

31/12/2004 31/12/2004 31/12/2004 31/12/2004 31/12/2004 31/12/2004CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Interest rate contracts

Futures contracts incl. FRAs 0 0 0 0 0 0

Swaps 6 877 6 737 140 000 108 083 29 120 4 150 000

Futures 34 0 6 031 0 0 0

Options (OTC) 0 0 0 0 0 0

Options (exchange-traded) 0 0 0 0 0 0

Foreign exchange contracts

Futures contracts 10 079 10 004 468 753 0 0 0

Combined interest and currency swaps 0 0 0 0 0 0

Futures 0 0 0 0 0 0

Options (OTC) 284 284 10 540 0 0 0


Precious metal contracts

Futures contracts 0 0 0 0 0 0

Futures 0 0 0 0 0 0



Equities/index contracts


Futures 0 0 0 0 0 0

Options (OTC) 12 12 145 0 0 0


Other contracts


Futures 0 0 0 0 0 0



Total before inclusion of netting contracts 17 286 17 037 625 469 108 083 29 120 4 150 000

Previous year 13 807 13 277 677 565 91 220 38 001 4 650 000

Positive replacement Negative replacementvalue (cumulated) value (cumulated)

Total after inclusion of netting contracts 61 850 17 037

Previous year 67 026 13 277

89


4.4 Fiduciary transactions 31/12/2004 31/12/2003CHF 1 000 CHF 1 000

Fiduciary deposits with third-party banks 257 975 279 959

Fiduciary deposits with group banks and associated banks 0 0

Fiduciary credits 0 0

Other fiduciary transactions 27 258 31 078

Total fiduciary transactions 285 233 311 037

90

5.1 Refinancing income included in interest and discount income 2004 2003

CHF 1 000 CHF 1 000

Refinancing income from trading positions 61 33

5.2 Net trading income

Foreign exchange and precious metals 17 449 14 924

Securities 520 649

Interest rate contracts 0 0

Total net trading income 17 969 15 573

5.3 Personnel expensens

Salaries and bonuses incl. attendance fees and compensation paid to bank authorities - 90 326 - 91 189

AHV, IV, ALV (pension, disability, and unemployment) and other legal benefits - 6 807 - 6 940

Contributions to personnel and welfare facilities and pension fund for senior management - 13 790 - 9 009

Other personnel expenses - 3 755 - 3 623

Total personnel expenses - 114 678 - 110 761

5.4 Other operating expenses

Premises expense - 8 704 - 8 982

Expense for IT, machinery, furniture, vehicles and other equipment - 5 878 - 6 901

Other - 55 878 - 58 791

Total operating expenses - 70 460 - 74 674

5.5 Explanation to extraordinary income and expenses

Extraordinary income 130 193

Profits from disposal of tangible fixed assets 72 57

Other extraordinary income 58 136

Extraordinary expenses - 70 051 - 69 713

Deposits for reserves for general bank risks - 70 000 - 68 000

Other extraordinary expenses - 51 - 1 713

5.6 Revaluation of tangible fixed assets to the acquisition value including reasons (Art. 665 and 665 a OR)

None.

5 Information on the consolidated income statement

91


5.7 Income and expenses by domestic and foreign origin 2004 2003

Domestic Foreign Domestic ForeignCHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Income and expenses from ordinary bank business

Net interest income 242 865 99 239 915 104

Interest and discount income 464 742 28 482 768 44

Interest and discount income on trading portfolio 0 0 0 0

Interest and discount income on financial investments 12 519 71 16 915 60

Interest expenses - 234 396 0 - 259 768 0

Net fee and commission income 88 868 3 489 81 060 3 450

Commission income on lending activities 1 517 0 1 341 0

Commission income on securities and investment transactions 84 253 3 741 76 905 3 720

Commission income on other services 14 326 185 13 947 28

Commission expenses - 11 227 - 438 - 11 133 - 298

Net trading income 17 948 21 15 563 10

Net other income 10 120 94 16 384 34

Results from the sale of financial investments 905 94 9 723 - 15

Income from non-consolidated participations 1 267 0 1 406 0

Real estate income 5 687 0 6 100 0

Other ordinary income 4 552 0 3 549 49

Other ordinary expenses - 2 291 0 - 4 394 0

Net operating income 359 800 3 704 352 922 3 598

Operating expenses - 181 755 - 3 383 - 181 828 - 3 607

Personnel expenses - 112 489 - 2 189 - 108 360 - 2 401

Other operating expenses - 69 266 - 1 194 - 73 468 - 1 206

Gross profit 178 045 321 171 094 - 9

Depreciation and write-offs of non-current assets - 22 490 - 183 - 19 935 - 275

Value adjustments, provisions and losses - 5 448 0 - 8 671 0

Interim result 150 107 138 142 488 - 284

Extraordinary income 72 58 193 0

Extraordinary expenses - 70 050 - 1 - 69 706 - 7

Taxes - 1 329 - 20 - 263 - 20

Group net profit 78 799 175 72 712 - 311

of which minority interests 137 39 324 - 143

92

5.8 Tax expenses 2004 2003

CHF 1 000 CHF 1 000

Total tax expenses - 1 349 - 283

Provisions for latent taxes (tax rate: 25%) -27 - 243

Dissolution of provisions for latent taxes 0 0

Expenses for current profit tax - 1 322 - 40

Non-included tax reductions on losses brought forward and non-activated tax credit

(for reasons of caution) 0 0

Hypothetical deferred income tax (calculated on theoretical tax rates)

on non-tax-relevant revaluation of fixed assets 0 0

93

Consolidated financial statementsReport of the group auditors

94

Assets 2004 2003 Change Change

CHF 1 000 CHF 1 000 CHF 1 000 %

Liquid funds 96 365 103 990 - 7 625 - 7.33

Money market instruments 24 568 70 532 - 45 964 - 65.17

Due from banks 848 275 1 183 840 - 335 565 - 28.35

Due from customers 655 713 822 171 - 166 458 - 20.25

Mortgage loans 11 497 780 11 157 331 340 449 3.05

Securities and precious metal trading portfolios 6 947 6 032 915 15.17

Financial investments 747 282 239 854 507 428 211.56

Participations 68 236 69 926 - 1 690 - 2.42

Tangible fixed assets 185 521 183 548 1 973 1.07

Accrued income and prepaid expenses 85 514 82 914 2 600 3.14

Other assets 105 946 117 936 - 11 990 -10.17

Not paid-in company capital 0 0 0

Total assets 14 322 147 14 038 074 284 073 2.02

Total subordinated claims 10 548 10 549 - 1 - 0.01

Total due from non-consolidated participations 12 306 10 002 2 304 23.04

Total due from the Canton of Basel-Landschaft 6 859 51 792 - 44 933 - 86.76

Financial statements of the parent companyBalance sheet on December 31st 2004(before profit appropriation)

95

Financial statements of the parent company

Liabilities 2004 2003 Change Change

CHF 1 000 CHF 1 000 CHF 1 000 %

Money market instruments 0 0 0

Due to banks 635 280 637 930 - 2 650 - 0.42

Due to customers in savings and deposits 6 099 208 5 877 942 221 266 3.76

Due to customers, other 2 821 354 2 513 179 308 175 12.26

Cash bonds 561 921 656 120 - 94 199 - 14.36

Bonds and mortgage-backed bonds 2 387 000 2 690 000 - 303 000 - 11.26

Accrued expenses and deferred income 132 444 146 080 - 13 636 - 9.33

Other liabilities 225 522 153 916 71 606 46.52

Valuation adjustments and provisions 286 926 290 326 - 3 400 - 1.17

Reserves for general bank risks 380 000 308 286 71 714 23.26

Endowment capital 240 000 240 000 0 0.00

Legal reserve 461 600 434 600 27 000 6.21

Reserves for own shares 2 000 3 714 - 1 714 - 46.15

Revaluation reserves 0 0 0

Other reserves 0 0 0

Retained earnings brought forward 10 749 10 554 195 1.85

Net profit for the year 78 143 75 427 2 716 3.60

Total liabilities and equity 14 322 147 14 038 074 284 073 2.02

Total subordinated liabilities 0 0 0

Total due to non-consolidated participations 75 153 112 380 - 37 227 - 33.13

Total due to the Canton of Basel-Landschaft 54 153 80 433 - 26 280 - 32.67

Off-balance-sheet transactions

Contingent liabilities 77 490 80 824 - 3 334 - 4.12

Irrevocable commitments 340 750 296 155 44 595 15.06

Liabilities for calls on shares and other equities 36 514 37 868 - 1 353 - 3.57

Confirmed credits 0 0 0

Derivative instruments

positive replacement value 58 261 66 501 - 8 240 - 12.39

negative replacement value 13 548 13 120 428 3.26

contract volume 4 718 522 5 288 756 - 570 234 - 10.78

Fiduciary transactions 30 398 36 632 - 6 234 - 17.02

96

Income and expenses from ordinary bank business 2004 2003 Change Change

CHF 1 000 CHF 1 000 CHF 1 000 %

Net interest income 241 477 238 795 2 682 1.12

Interest and discount income 463 500 481 644 - 18 144 - 3.77

Interest and discount income on trading portfolio 0 0 0

Interest and discount income on financial investments 12 463 16 990 - 4 527 - 26.65

Interest expenses - 234 486 - 259 839 25 353 - 9.76

Net fee and commission income 56 291 49 378 6 913 14.00

Commission income from lending activities 1 517 1 341 176 13.12

Commission income from securities and investment transactions 45 458 38 874 6 584 16.94

Commission income from other services 15 679 15 301 378 2.47

Commission expenses - 6 363 - 6 138 - 225 3.67

Net trading income 13 249 12 417 832 6.70

Net other income 8 769 15 511 - 6 742 - 43.47

Results from the sale of financial investments 1 157 10 316 - 9 159 - 88.78

Income from participations 2 267 3 406 - 1 139 - 33.44

Real estate income 5 687 6 100 - 413 - 6.77

Other ordinary income 1 468 0 1 468

Other ordinary expenses - 1 810 - 4 311 2 501 - 58.01

Net operating income 319 785 316 101 3 685 1.17

Operating expenses - 146 222 - 145 651 - 571 0.39

Personnel expenses - 86 750 - 82 867 - 3 883 4.69

Other operating expenses - 59 472 - 62 784 3 312 - 5.28

Gross profit 173 563 170 450 3 113 1.83

Annual profit

Gross profit 173 563 170 450 3 113 1.83

Depreciation and write-offs of non-current assets - 20 161 - 17 833 - 2 328 13.05

Valuation adjustments, provisions and losses - 5 294 - 7 514 2 220 - 29.54

Interim result 148 107 145 102 3 005 2.07

Extraordinary income 65 57 8 14.04

Extraordinary expenses - 70 000 - 69 691 - 309 0.44

Taxes - 30 - 40 10 - 25.00


Appropriation of retained earnings


Retained earnings brought forward 10 749 10 554 195 1.85

Retained earnings 88 892 85 981 2 911 3.39

Interest on endowment capital - 7 800 - 8 032 232 - 2.89

Dividend on certificate capital - 13 800 - 13 200 - 600 4.55

Profit distribution to the Canton of Basel-Landschaft - 28 000 - 27 000 - 1 000 3.70

Allocation to legal reserve - 28 000 - 27 000 - 1 000 3.70

Retained earnings 11 292 10 749 543 5.05

Income statement

97

Financial statements of the parent companyNotes on the financial statements of the parent company

1 Notes on business activities and

number of employees

Notes made on the financial statement of the parent company are concor-dant with the consolidated financial statement. We refer to pages 68ff.

2 Accounting policies and valuation principles

General principles

Accounting and valuation principles of the parent company are concordantwith the group’s principles (see p. 71) with the exception of the following twoitems:

Participations

Fully consolidated participations are valued at acquisition cost minus eco-nomically necessary depreciation.

Own debt and participation securities

Own debt and participation securities are dealt with according to statutoryprinciples. They are not entered and income from resale of participation securities as well as from dividends affect net income.

Changes compared to the previous year

Basellandschaftliche Kantonalbank purchases real estate on behalf of the can-ton and the communities in trust. Up to the present, BLKB reported receiv-ables from this kind of business in its balance sheet. As from now on, BLKBwill enter the fiduciary ownership of such real estate in the receivables sideand the fiduciary obligation in the liabilities side of its balance sheet.

3 Information on the balance sheet

Bank issuing consolidated financial statements are dispensed from certain dis-closures in the financial statements of the parent company according to Art.25k Bank Ordinance. The notes on the financial statements of the parentcompany are structured in the same way as the consolidated financial state-ments for ease of reference.

3.5 Capitalized organisational costs

None.

98

3.5 Other assets and other liabilities 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000

Other Other Other Otherassets liabilities assets liabilities

Replacement values from derivative instruments 58 261 13 548 66 501 13 120

Principal transactions 58 261 13 548 66 501 13 120

of which held for trading 13 697 13 548 13 282 13 120

of which held for hedging 44 563 0 53 219 0

Agency transactions 0 0 0 0

Compensation account 0 44 563 0 53 219

Capitalised organisational costs 0 0 0 0

Interest on endowment capital 7 800 0 8 032 0

Value-added tax and other taxes 2 448 15 621 0 19 078

Other receivables / payables 37 437 151 790 43 403 68 499

Total 105 946 225 522 117 936 153 916

3.6 Assets pledged or ceded to secure own commitments, 31/12/2004 31/12/2003

and assets subject to retention of title CHF 1 000 CHF 1 000

Book value Effective Book value Effectivecommitment commitment

Not freely available assets on balance sheet date:

Pledged or ceded mortgage loans for mortgage backed securities 1 857 082 1 137 000 1 874 557 1 340 000

Financial investments 72 684 0 82 805 0

Fiduciary real estate 41 767 41 767

Total 1 971 533 1 178 767 1 957 362 1 340 000

Loan business and repurchase agreement with securities 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000

Book value of claims from cash deposits in securities borrowing and repurchase business 420 037 405 000

Book value of liabilities from cash deposits in securities borrowing and repurchase business 0 0

Book value of own securities lent in securities lending or deposited as collateral in securities

borrowing or transferred in repurchase business 0 0

of which securities with unlimited right of disposal or pledge 0 0

Fair value of securities deposited as collateral in securities lending or borrowed in securities

borrowing or received in reverse-repurchase business for which unlimited right of disposal

or pledge has been granted 419 719 404 872

fair value of those securities which were disposed of or pledged 0 0

99


3.7 Commitment to own pension scheme

With the exception of part-time employees and apprentices all BLKB employees are insured in different defined benefit and defined contribution pension plansof BLPK (pension fund of the Canton of Basel-Landschaft).

As a matter of principle retiring age is reached at 64. The insured employees, however, have the possibility to go into early retirement at age 62 or to retire atage 60 with the drawback of suffering pension cuts.

Calculation of the defined benefit pension commitment is done at least every three years according to the Dynamic Projected Unit Credit method by an in-dependent actuary. Following a fixed order, the next calculation will be carried out in 2005 taking into account the new BLPK decree (pension fund of the Can-ton of Basel-Landschaft) which entered into force on January 1st 2005. The last assessment was performed as per December 31st 2002. The then made actuar-ial assumptions were to a large extent updated and applied to the year 2004.

Actuarial assumption for defined benefit plans 31/12/2004 31/12/2002

Technical interest rate 4.00% 4.00%

Expected return on assets 5.00% 6.15%

Expected salary development 2.00% 2.00%

Expected index-linking of pension 1.50% 1.50%

Average period of adherence (in years) 12 12

Pension schemes with defined benefit plans 31/12/2004* 31/12/2002

CHF m CHF m

Net assets of pension scheme at market value 190.1 185.4

Cash value of expected claims 315.2 306.5

Financial underfunding - 125.1 - 121.1

Provisions 87.6 91.0

Unrecorded difference resulting from revaluation - 37.5 - 30.1

Provisions for the unrecorded difference as per record date were not made. As of 1/1/2005, the difference from revaluation exceeding the margin will be distributed over the average period of adherence.

Contributary reserves of employer 0.0 0.0

Net pension costs 31/12/2004* 31/12/2002

CHF m CHF m

Service costs 7.5 8.0

Interest cost on projected benefit obligation 12.2 12.0

Expected return on fund assets - 9.0 - 12.0

Contributions of the employees - 3.6 - 4.0

Total pension scheme expenses 7.1 4.0

Regulatory contributions of the employer 7.1 6.0

* Updating for the year 2004 (estimate)

100

Balance Usage Change of Recoveries, Write-offs Recoveries Balance31/12/2003 purpose interest (debit to (credit to 31/12/2004

(reclassi- overdue, income incomefication) translation statement) statement)

differences

CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000 CHF 1 000

Valuation adjustments and provisions for default risks

and other risks:

Valuation adjustments and

provisions for default risks

(including country risks) 198 651 - 3 663 - 1 573 18 002 - 12 751 198 666

Valuation adjustments and

provisions for other business risks 0 0

Provision for pension plans

(Swiss GAAP FER 16) 91 000 - 3 443 87 557

Other provisions 675 28 703

Total valuation adjustments and provisions 290 326 - 7 106 0 -1 573 18 030 - 12 751 286 926

minus: valuation adjustments offset

against receivables 0 0

Total valuation adjustments and provisions

according to the balance sheet 290 326 - 7 106 0 -1 573 18 030 - 12 751 286 926

Fluctuation reserves for credit risks 0 0

Reserves for general bank risks 308 286 1 714 70 000 380 000

Own shares 3 714 - 1 714 2 000

Basellandschaftliche Kantonalbank is exempt from tax on profit and capital. Building of latent tax on the reserve for general bank risks is not necessary.

3.9 Valuation adjustments and provisions /

Fluctuation reserves for credit risks /


101


3.10 Company capital Total Capital Total Capitalnominal entitled to nominal entitled to

value dividend value dividend

31/12/2004 31/12/2004 31/12/2004 31/12/2003 31/12/2003 31/12/2003

CHF 1 000 Quantity CHF 1 000 CHF 1 000 Quantity CHF 1 000

Endowment capital 180 000 – 180 000 180 000 – 180 000

Certificate capital 60 000 600 000 60 000 60 000 600 000 60 000

Company capital 240 000 600 000 240 000 240 000 600 000 240 000

Approved capital 0 0

Issued and paid-in capital 0 0

The Canton of Basel-Landschaft holds 100% of the endowment capital. Kantonalbank acts as an intermediary for the refinancing of the endowment capital.The interest on the endowment capital is paid by the bank.

Year of issue Interest rate Due date Balance Balance

31/12/2004 31/12/2003

% CHF 1 000 CHF 1 000

Bond 1994 5.500 30/09/2004 60 000

Bond 2000 4.000 17/02/2010 70 000 70 000

Loan 2004 2.845 30/09/2012 60 000 0

Bond 2002 3.250 30/09/2014 50 000 50 000

Total 180 000 180 000

Endowment capital is composed of:

102

3.11 Statement of equity CHF 1 000

Equity at the beginning of the year




Legal reserve 434 600


Own shares 3 714


Total equity at the beginning of the year (before appropriation of retained earnings) 1 072 581

+ Capital increase 0

+ Capital reserve 0

+ Allocation to reserve for general bank risks 70 000

- Re-qualification reserve for own participations - 1 714

+ Re-qualification reserve for own participations in reserve for general bank risks 1 714

- Release from reserves 0

- Dividend and other distributions from the annual result of the previous year - 48 232

+ Net profit for the year 78 143

Total equity at the end of the year (before appropriation of retained earnings) 1 172 492

of which:




Legal reserve 461 600


Own shares 2 000


3.13 Payables and receivables towards affiliated companies as well as loans 31/12/2004 31/12/2003

and exposures to members of the bank’s governing bodies CHF 1 000 CHF 1 000

Due from affiliated companies 16 000 19 000

Due to affiliated companies 2 801 4 536

Due from members of the bank’s governing bodies 65 508 63 628

Transactions with related parties

Transactions with related parties (securities business, payment, credit accommodation, compensation on deposits) are done at conditions valid for third par-ties. The bank’s employees enjoy the conditions valid for personnel.

103


4 Information on off-balance transactions

4.4 Fiduciary transactions 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000

Fiduciary deposits with third-party banks 30 398 36 632

Fiduciary deposits with group banks and associated banks 0 0

Fiduciary credits and other fiduciary transactions 0 0

Total fiduciary transactions 30 398 36 632

104

5 Income statement

5.2 Net trading income 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000

Foreign exchange and precious metals 12 259 11 397

Securities 989 1 020

Interest rate contracts 0 0

Total net trading income 13 249 12 417

5.5 Explanation to extraordinary income and expenses 31/12/2004 31/12/2003

CHF 1 000 CHF 1 000

Extraordinary income 65 57

Other extraordinary income 65 57

Extraordinary expenses - 70 000 - 69 691

Credit to reserves for general bank risks - 70 000 - 68 000

Other extraordinary expenses 0 - 1 691

105

Financial statements of the parent companyReport of the statutory auditors

106

Cultural Foundation of Basellandschaftliche Kantonalbank

687 000 Swiss francs for scholarships

and contributions

In 2004, the Cultural Foundation of Basellandschaftliche Kantonalbankgranted 687 320 Swiss francs in scholarships and contributions, includingCulture Award and Kantonalbank Award (previous year 781 775). For funds,the foundation draws on the yield on its capital and the yearly BLKBcontribution of 500 000 Swiss francs. Thus, the foundation is able to conferscholarships to the population of Kanton Basel-Landschaft for training andfurther education and to lend financial support to cultural projects in the region.

Contributions are divided into three classes:

Scholarships for training and

further education CHF 492 000.00

Support of cultural projects CHF 150 320.00

Kantonalbank Award CHF 45 000.00

In the year under review, 314 applications (previous year 308) were examinedand about 60% of them approved. The others did not meet the requirementsand had to be rejected.

The number of applications for the support of cultural projects went back to90 (previous year 102) which equals the number of applications of the year2002. All told, 41 cultural projects (previous year 36) were given support.

Since 1991, the Cultural Foundation of Basellandschaftliche Kantonalbankhas bestowed Kantonalbank Award on persons or institutions of the Cantonof Basel-Landschaft for their excellent performance in economy, culture, science or sport. At the 14th traditional award-giving ceremony in the hall ofAltes Zeughaus in Liestal, which was full to the last seat, the following award-winners received their prize money of 15 000 Swiss francs each:

Ronda AG, Lausen, electronic clockworks; the economy award for their un-relenting success in spite of heavy international competition.

Daniel Buser and Roland Suter; the prize for their outstanding artistic per-formance as actors, authors, musicians, speakers, and entertainers in theircabaret, music and theatre projects. For the past eight years they have per-formed under the name of “Touche ma bouche”.

Lisette Spinnler; Kantonalbank Award for her exceptional musical talent, herdazzling voice and her superior and intuitive comprehension of jazz whichshe convincingly exploited for her artistic development and recognition inSwitzerland and abroad.

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Governing bodies, foundations, group companies

Income statement 2004 2003

CHF CHF

Expenses

Contributions 687 320.00 781 775.00

Other expenses 4 342.40 3 633.10

Profit 80 615.20 4 704.00

772 277.60 790 112.10

Income

Interest 154 845.80 156 907.35

Refunded contributions and released provisions 67 750.00 81 750.00

Contributions of BLKB 500 000.00 500 000.00

Income from real estate 49 681.80 51 454.75

772 277.60 790 112.10

Balance sheet on December 31st

Assets

Receivable from Basellandschaftliche Kantonalbank

Current account 816 512.51 803 057.86

Rental interest account 37 510.05 57 879.55

Term deposit 3 000 000.00 3 000 000.00

Withholding tax 54 244.40 55 007.40

Accrued income and prepaid expenses 0.00 0.00

Property 2 400 000.00 2 400 000.00

6 308 266.96 6 315 944.81

Liabilities

Endowment capital 3 000 000.00 3 000 000.00

Operating capital 521 920.36 441 305.16

Provision for authorised contributions 448 470.00 543 125.00

Provisions for property maintenance 335 000.00 312 500.00

Accrued expenses and deferred income 2 876.60 19 014.65

Mortgage loan 2 000 000.00 2 000 000.00

6 308 266.96 6 315 944.81

108

Bank authorities and monitoring bodies on January 1st 2005

Bankrat (Board of Directors)

Werner Degen, dipl. Ing. ETH Liestal, Chairman

Adrian Ballmer Liestal, Vice Chairman

Dr. iur. Claude Janiak Binningen

Paul Hug Ziefen

Rita Kohlermann-Jörg Therwil

Günther Schaub Muttenz

Hans Ulrich Schudel, lic. iur. Bottmingen

Elisabeth Schirmer-Mosset, lic. rer. pol. Lausen

Daniel Schenk Therwil

Doris Greiner Liestal

Ernst Weber Therwil

Urs Baumann Reinach

René Rudin Nenzlingen

Bank Committee

Werner Degen, dipl. Ing. ETH Chairman

Dr. iur. Claude Janiak Vice Chairman

Paul Hug

Statutory Auditors

Ernst & Young AG, Basel

Internal Auditing

Roger Kübler Head of Internal Auditing

Markus Lander Ass. Head of Internal Auditing

Marcel Biedert Internal Auditor

Rolf Bolliger Internal Auditor

Christine Kohler Internal Auditor

Roland Neuhaus Internal Auditor

Urs Suter Internal Auditor

Stephan Wyss Internal Auditor

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Governing bodies, foundations, group companiesBank managementon January 1st 2005

Executive Board

Beat Oberlin, Dr. iur. Chairman

Meinrad Geering Business Area Investment Customers

Kaspar Schweizer, lic. oec. et E MBE HSG Business Area Corporate Services

Lukas Spiess, Dr. rer. pol. Business Area Credit and Corporate Customers

Willy Winkler Business Area Private Customers

Members of the Senior Management

Thomas Börlin Accounting/Controlling

Bruno Bürli, lic. rer. pol. Marketing/Quality Management

Werner Deck Credit and Corporate Customers, Binningen

Lukas Fiechter Head of Arlesheim Branch

Felix Finkbeiner Investment Customers, Liestal

Stefan Fischler Head of Muttenz Branch

Esther Freivogel Head of Gelterkinden Branch

Beat Gass Business Engineering & Information Management

René Glaser Real Estate/Buildings

Rudolf Gubler Internal Controlling

Adrian Gutzwiller, lic. oec. HSG Head of Liestal Branch

Hans-Peter Handschin Credit System

Jacques Handschin Head of Sissach Branch

Jürg Hatz, lic. rer. pol. Chief Financial Officer

Urs Hofmann, lic. iur. Human Resources/Education

Roland Hofstetter Capital Market/Handling of Financial Products

Peter Hug, lic. rer. pol. Personnel Business

Bruno Imsand, lic. iur. Treasury

Hanspeter Läubli SME Special Financing

Erich Maeder, Dr. iur. Legal Service /Compliance

Sabine Männle, lic. rer. pol. Financial Planning

Markus Meier Investment Customers, Arlesheim

Fredi Mendelin Head of Laufen Branch

Rudolf Messerli, lic. rer. pol. General Secretary, Corporate Communication

Peter Meyer Investment Customers, Liestal

Jean Daniel Neuenschwander Chief of Staff

Thomas Oehler, lic. iur. Risk Management/Recovery

Rolf Rudin, lic. rer. pol. Investment Advice/Asset Management

Peter Salathe Head of Credit and Corporate Customers , Liestal

Paul Schmid Product and Distribution Management Private Customers

Markus Schneider Credit and Corporate Customers, Sissach

Marius Stegmüller Credit and Corporate Customers, Laufen

Robert Straehl Strategy and Marketing Management Investment Customers

Daniel Sturm Product and Marketing Management Private Customers

Kurt Tschopp Head of Oberdorf Branch

Hans-Rudolf Tschudin Head of Private Banking Basel

Martin Waibel, lic. iur. Head of Binningen Branch

Fredy Werder Private Customers, Binningen

Alban Wyss Business Engineering

Rolf Zimmermann Investment Customers, Binningen

Jürg Zumbrunn Credit and Corporate Customers, Arlesheim

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Olga Antonini

Daniel Ballmer

Alfons Baumgartner

Markus Berger

Stephan Biedert

Philippe Bieri

Thomas Bieri

Andreas Bitterli

Sandra Bitterlin

Francesca Biuso

Viktor Blank

Dieter Blom

Rudolf Bolliger

Daniel Bosshard

Urs Brodmann

Simona Brunelli

Franziska Brunold

Ruth Bubendorf

Chantal Bühler

Stephan Burgunder

Freddy Bürgin

Stefan Bürgisser

Birgit Buser

Doris Buser

Monika Buser

Felix Chrétien

Michele Citino

Markus Comment

Roman Cueni

Michel Degen

Anton Dettwiler

Alessandra De Simone

Marco Di Pasquale

Markus Dobler

Cornelia Dürrenberger

Martin Dürrenberger

Dominik Duss

Walter Eglin

Stephan Egloff

Michael Eppler

Dominik Erny

Rosa Erny

Hans Peter Erny

Markus Fanchini

Alois Fischer

Peter Franz

Patrick Frei

Stephan Frei

Cyrill Füchter

Fabio Gallo

Gustav Gass

Marcel Gautschi

Peter Gemperli

André Gilliard

Cristelle Gonçalves

Daniel Grieder

Martin Grieder

Doris Gross

Hansjörg Grossmann

Felix Gschwind

Bruno Gürtler

Hanspeter Güthlin

Helena Hägler

Max Hägler

Adolf Häner

Martin Harr

Verena Häuselmann

Kurt Heiniger

Birgit Heinzelmann

Thomas Helfenfinger

Hans Rudolf Heller

Klaus Hemmig

Christoph Herzog

Werner Hofer

Claudia Holzer

Katharina Hönger

Anja Hubeli

Roman Hügli

Rolf Hunziker

Martin Huwyler

Jakob Imhof

Alexander Junge, lic. rer. pol.

Doris Käser

Yvonne Keller

Ines Kohler

Antoinette Kohler

Barbara Koller

Cornelia König

Thomas Krähenmann

Jürg Kramer

Silvia Krumm

Markus Kurz

Lukas Ladner

Christoph Langenegger

Martin Lehmann

Heinz Lerf

René Leuenberger

Thomas Lindner, Dipl.-Volkswirt

Barbara Loosli

Ruth Lüthi

Rudolf Madörin

Kurt Martin

Frantisek Masar, lic. rer. pol.

Daniel Maurer

Renato Meneghin

Rico Meyer

Christoph Misteli

Claudia Mohler

Chantal Molinari

Pierre Monnier

Heinz Moser

Paul Moser

Peter Muhmenthaler

Kurt Müller

Thomas Müller

Christoph Ness

Michael Obrecht

Peter Oppliger

Dominik Orler

Ernesto Pallotti

Luca Pertoldi, lic. rer. pol.

Roger Pfammatter

Alex Pfirter

Andreas Pinsker

Remo Ponti

Ernst Rauner

Werner Riesen

Markus Rohner

Markus Rohrbach

Martin Roth

Philipp Roth, lic. iur.

Hansueli Ruckstuhl

Adrian Rudin

Walter Rudin

Markus Ruesch

Daniel Rüdisühli

Philipp Saladin

Peter Salathé

André Salvini

Patrick Schaffner

Manfred Schaub

Peter Schaub

Patrick Scheuber

Walter Schibli

Members of the Middle Management

111


Remo Schmid

Jacqueline Schneeberger

Patrick Schneeberger

Dieter Schneider

Kathrin Schneider

Stefan Schnider

Renate Schürpf

Daniel Schweizer

Rolf Schweizer

Jörg Seeholzer

Roland Semplici

Stephan Semplici

Willi Spaar

Dora Spies

Martin Stalder

Daniel Steinhilber

Philipp Stöckli, lic. iur.

Paul Stöcklin

Patrick Sulzer

Felix Sutter

Tanja Sutter

Willy Thürkauf

Daniel Thurnherr

Claudia Trösch

Heidy Trösch

Peter Tschan

Paul Tschudin

Teresa Tschumi, lic. rer. pol.

Iwan Vizzardi

Petra von Grönheim

Beat von Wyl

Cornelia Waldner, lic. iur.

Beat Walmer

Monika Widmer

Stephan Widmer, lic. rer. pol.

Rolf Wiesner

Dieter Wilhelm

Anna Winzenried

Tobias Wulf

Marcel Wyser

Heads of BLKB branches

Gabriel Antonutti Augst

Ruth Bubendorf Birsfelden

Markus Comment Pratteln

Michael Eppler Schönthal

Lukas Fiechter Arlesheim

Stefan Fischler Muttenz

Alexander Junge, lic. rer. pol. Allschwil

Esther Freivogel Gelterkinden

Fabio Gallo Lutzert

Ruth Garcia Bruderholz

Hanspeter Güthlin Ettingen

Adrian Gutzwiller, lic. oec. HSG Liestal

Jacques Handschin Sissach

Emil Imhof Hölstein / Reigoldswil

Ruth Lüthi Lausen

Fredi Mendelin Laufen

Claudia Mohler Mühlematt, Oberwil

Chantal Molinari Gartenstadt

Emil Imhof Hölstein / Reigoldswil

Erika Müller Rünenberg / Wenslingen

Peter Oppliger Reinach

Ernst Rauner Aesch

Daniel Rüdisühli Therwil

Willi Spaar Breitenbach

Paul Stöcklin Oberwil

Tanja Sutter Bubendorf

Kurt Tschopp Oberdorf

Hans-Rudolf Tschudin Private Banking, Basle

Martin Waibel Binningen

Läufelfingen branch is managed by the higher-ranking branch of Sissach.

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As per January 1st 2005

Atag Asset Management AG (interest share 100%)

Board of Directors Conrad Meyer, Prof. Dr. oec. publ., Grüningen, chairman

Thomas Bachmann, Dr. oec. publ., Stettlen

Werner Degen, dipl. Ing. ETH, Liestal

Meinrad Geering, Biel-Benken

Paul Nyffeler, lic. rer. pol., Seltisberg (up to 31/12/2004)

Beat Oberlin, Dr. iur., Münchenstein (nominated for annual shareholder meeting 2005)

Executive Board Ralph P. Sauser, lic. rer. pol., chairman

Christoph Weber, eidg. dipl. Bankfachmann (federal diploma in banking), assistant to the chairman

Michael Jauner, lic. rer. pol.

Hans Lutz, dipl. Wirtschaftsing. (economic engineer, up to 30/9/2004)

Robert Klaus, dipl. Betriebsökonom (business administration, as of 1/10/2004)

Auditors PricewaterhouseCoopers AG, Zurich

Atag Asset Management (Luxembourg) S.A. (interest share Atag Asset Management AG 100%)

Board of Directors Thomas Bachmann, Dr. oec. publ., Stettlen,

member of the board of directors of Atag Asset Management AG, Switzerland, chairman

Henri Grisius, lic. ès sc. écon. appl., RSM Henri Grisius & Associés, Luxembourg

Ralph P. Sauser, lic. rer. pol., chairman of the executive board of Atag Asset Management AG, Switzerland

Bettina Collart, lic. iur., Atag Asset Management AG, Switzerland

Executive Board Lukas Zaugg

Patrick Useldinger, lic. ès sc. écon., soc. et pol.

Auditors Deloitte & Touche, Strassen (Luxembourg)

ATAG Private Client Services AG, Basel (interest share Atag Asset Management AG 75%)

Board of Directors Thomas Bachmann, Dr. oec. publ., Stettlen, chairman

Ralph P. Sauser, lic. rer. pol, Bäch, vice chairman

Karl A. Bissig, lic. rer. pol., MBA, Muri

Meinrad Geering, Biel-Benken

Daniel Gerber, Thun

Executive Board François Bueche

Igor Rusek


Group companies and foundations

113


Gräff Capital Management AG, Zurich (interest share Atag Asset Management AG 100%)

Board of Directors Thomas Bachmann, Dr. oec. publ., Stettlen, chairman

Ralph P. Sauser, lic. rer. pol, Bäch, vice chairman

Executive Board Stefan Unternährer

Markus W. Gräff


Sourcag AG, Münchenstein (interest share 50 %)

Board of Directors Kaspar Schweizer, lic.oec. et E MBE HSG, chairman

Thomas Greminger, vice chairman

Urs Rio Aellen

Willy Winkler

Manager Beat Lehmann


Pension Fund “Sparen 3”

Board Willy Winkler, chairman

Hans-Peter Handschin, vice chairman

Sabine Männle, lic. rer. pol.

Manageress Cornelia Dürrenberger

Auditor Roger Kübler, eidg. dipl. Wirtschaftsprüfer (certified auditor)

Vested Benefits Foundation

Board Urs Hofmann, lic. iur., chairman

Adrian Gutzwiller, lic. oec. HSG

Sabine Männle, lic. rer. pol.

Manageress Cornelia Dürrenberger

Auditor Roger Kübler, eidg. dipl. Wirtschaftsprüfer (certified auditor)

Cultural Foundation

Board Rita Kohlermann-Jörg, chairwoman

Dr. iur. Claude Janiak

Dr. Beatrice Kunovits

Dr. iur. Erich Maeder

Urs Wüthrich, member of Regierungsrat (executive body of the canton)

Manager Thomas Börlin

Auditors Roger Kübler, eidg. dipl. Wirtschaftsprüfer (certified auditor)

Thomas Schneider, eidg. dipl. Wirtschaftsprüfer (certified auditor)

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blkb serviceline for information, orders and all branches dial +41 61 925 94 94

blkb cantophone the direct line to your account +41 61 925 95 95

blkb.ch your online bank www.blkb.ch

BLKB branches

4147 Aesch Hauptstrasse 109

4123 Allschwil Baslerstrasse 172

4144 Arlesheim Hauptstrasse 25

4302 Augst/Pratteln Frenkendörferstrasse 35

4102 Binningen Baslerstrasse 33

4127 Birsfelden Hauptstrasse 77

4226 Breitenbach Laufenstrasse 2

4101 Bruderholzspital

4416 Bubendorf Gewerbestrasse 3

4107 Ettingen Hauptstrasse 23

4414 Füllinsdorf EKZ Schönthal, Mühlerainstrasse 17

4460 Gelterkinden Poststrasse 2

4434 Hölstein Hauptstrasse 73

4448 Läufelfingen Hauptstrasse 17

4242 Laufen EKZ Birs Center, Bahnhofstrasse 6

4415 Lausen Grammontstrasse 1

4410 Liestal Rheinstrasse 7

4142 Münchenstein EKZ Gartenstadt, Stöckackerstrasse 6

4132 Muttenz St. Jakobs-Strasse 2

4132 Muttenz EKZ Lutzert, Lutzertstrasse 36

4436 Oberdorf Uli Schadweg 1

4104 Oberwil Hauptstrasse 15

4104 Oberwil EKZ Mühlematt, Mühlemattstrasse 22

4133 Pratteln Bahnhofstrasse 16

4418 Reigoldswil Dorfplatz 2

4153 Reinach Hauptstrasse 3

4497 Rünenberg Hauptstrasse 11

4450 Sissach Hauptstrasse 44

4106 Therwil Bahnhofstrasse 9

4493 Wenslingen Gemeindezentrum

4020 Basel, Private Banking Gellertstrasse 18 +41 61 378 82 82

Further automatic teller machines (Bancomats):

4123 Allschwil Shell Tankstelle

4123 Allschwil/Neuallschwil Baslerstrasse 339

4144 Arlesheim EKZ Gschwindhof

4051 Basel Zoologischer Garten (Zoological Garden)

4402 Frenkendorf Dorfplatz

4414 Füllinsdorf TCS Tankstelle

4410 Liestal Bahnhof SBB (railway station)

Rathausstrasse 49

4464 Maisprach Hauptstrasse 17

4142 Münchenstein EKZ Zollweiden

St. Jakobs-Halle Basel (tramway station)

4132 Muttenz EKZ Coop Super Center

Valora AG

4437 Waldenburg Hauptstrasse 12 (Bahnhof WB)

ATAG Asset Management

Basel Centralbahnstrasse 7 +41 61 278 11 11

Bern Schauplatzgasse 21 +41 31 326 90 00

Zurich Tödistrasse 63 +41 1 209 99 00

Genf 15, rue de Rive +41 22 318 87 30

Lausanne 18, place Chauderon +41 21 331 23 40

Luxembourg 34A, boulevard Grande-Duchesse Charlotte +352 25 31 31 1

Internet www.aam.ch

Automatic teller machine Bancomat

This is how to reach us(2005)

Contact

Media/Investor Relation

Rudolf Messerli, phone +41 61 925 92 31

[email protected]

Basellandschaftliche Kantonalbank

Rheinstrasse 7

CH-4410 Liestal

Phone +41 61 925 94 94

www.blkb.ch

Overall responsibility and text

Unternehmenskommunikation Basellandschaftliche

Kantonalbank

Concept, editing, design

Ramstein Ehinger Associates AG, Basle/Zurich

Translation

Elisabeth Vogt, mag. phil.

Photography

Ideenfabrik, Basel

B. Batt & K. Huber, Bern (p. 15)

Lithography

Photolitho Sturm, Muttenz

Print

Lüdin AG, Liestal

Paper

Cover and report section: Fischer Superset Offset

Financial section: Ziegler Z-Offset Dominant

This annual report is published in English and German.

The German version is legally binding.

Basellandschaftliche KantonalbankRheinstrasse 7CH-4410 LiestalPhone +41 61 925 94 94www.blkb.ch PR

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