Notes to the Consolidated interim Financial Statements

1 Segment information

The Group Executive Board is the Group’s chief operating decision maker and reviews the results from a product-related as well as a geographical perspective. Bellevue Group focuses exclusively on the Asset Management business unit and reports one reportable segment. The segment consists of the operating business units Bellevue Asset Management, StarCapital and Bellevue Private Markets. The offering includes a broad-based range of investment funds as well as investment solutions for institutional, intermediary and private clients. The segment’s investment philosophy is characterized by a purely active management approach. Bellevue Asset Management has a clear focus on managing equity portfolios for selected sector and regional strategies, based on a fundamental and research-driven stock picking approach («bottom up»). In contrast, StarCapital AG pursues a holistic asset management approach based on quantitative and experience-driven investment approaches with pronounced anti-cyclicality. Its well-diversified product offering in the areas of asset-managed strategies, global bond and equity strategies, and multi-asset class solutions thus exhibits a high degree of complementarity. Bellevue Private Markets specializes in developing exclusive investment opportunities in unlisted companies for its investor group. In addition, it acts as investment advisor for private equity funds. This represents a further diversification of the investment universe with low correlation to the capital markets. All three business units operate in similar regions. Group Management monitors the results of the three business units both on a consolidated basis and separately.

The geographical breakdown of operating income is as follows:

All income from discontinued operations was managed in Switzerland in the previous period.

Total non-current assets (including goodwill and excluding other financial assets at fair value) are as follows:

2 Details on the consolidated income statement

2.1 Revenues from asset management services

Management fees are generated from asset management mandates with listed investment companies, regulated funds in various countries, private equity funds or institutional counterparties. The fees are mostly collected on a monthly basis.

Various mandates include performance fees. These are only taken into account when the performance period has been completed. For regulated funds, this is the calendar year. In some cases, mandates are invoiced on a quarterly basis. In the case of private equity funds, depending on the partnership agreement, this takes place when the fund is redeemed or dissolved.

Other commission income includes transaction-related fees.

2.2 Net other income

2.3 Personnel expenses

2.4 Other operating expenses

2.5 Depreciation and amortization

2.6 Valuation adjustments and provisions

For further details, please refer to the comments under section 3.5.

2.7 Taxes

3 Details on the consolidated balance sheet

3.1 Financial assets and financial liabilities

3.1.1 Fair value of financial instruments

The fair value of other financial instruments measured at amortised cost does not differ significantly from their book value.

3.1.2 Valuation methods of financial instruments

No transfer between levels of the fair value hierarchy took place in the first half of 2021 or in the comparable period of the previous year.

Level 1 instruments

If a financial instrument is traded in an active market, its fair value is based on listed market prices. In the fair value hierarchy prescribed in IFRS 13, this type of financial instrument is classified as a level 1 instrument. The fair value of these positions corresponds to the current price (e.g. settlement price or closing price) multiplied by the number of units of the financial instruments held.

Level 2 instruments

If there is no active market, the fair value is determined on the basis of valuation models or other generally accepted valuation methods (primarily option pricing and discounted cash flow models). If all the significant inputs can be observed directly or indirectly in the market, the instrument is classified as a level 2 instrument. The valuation models take account of the relevant parameters such as contract specifications, the market price of the underlying asset, foreign exchange rates, yield curves, default risks and volatility.

Level 3 instruments

If at least one significant input cannot be observed directly or indirectly in the market, the instrument is classified as a level 3 instrument. These instruments include private-equity funds and unlisted equity instruments, as well as the contingent purchase price liability. The fair value of private equity funds is determined based on the last available net asset values, less necessary value adjustments according to own assessment. The fair value of unlisted equity instruments is determined primarily based on available transaction prices. Secondarily, depending on the equity security, different multiples based on currently available financial information are used to verify the valuation. If no multiples are applicable, the net asset value is used. The valuation of the contingent purchase price liability is mainly based on the underlying contractual share purchase terms and conditions.

3.1.3 Level 3 financial instruments

Key assumptions for the valuation of level 3 financial instruments vary from investment to investment. The following table shows the effect on the valuation when these assumptions are changed:

The contingent purchase price payment from the acquisition of REALWERK AG in 2020 is included in the balance sheet item «Other financial liabilities» and represents the remaining purchase price liability owed. The valuation is mainly based on the underlying share purchase agreement provisions. In the first half-year 2021 a payment of TCHF 45 has taken place.

3.1.4 Derivative financial instruments

Derivatives are used exclusively for economic hedging purposes and not as speculative investments. However, if derivatives do not meet the criteria for hedge accounting, they are classified as «Financial investments» and recognized at fair value through profit or loss for financial reporting purposes.

3.2 Trade and other receivables

3.3 Financial investments

3.4 Other assets

3.5 Goodwill and other intangible assets

Bellevue Group basically examines the recoverable value of the goodwill annually, based on the estimated recoverable amount that can be obtained per each single cash-generating unit, or group of such units (depending on allocation). If events or a change of circumstances indicate a possible impairment, the test is carried out more frequently. Detailed explanations of the methods used in calculating the recoverable amount are given in the note in the annexe, item 3.6, of the 2020 annual report.

An impairment test was carried out at the end of June 2021. The discount rate used in these calculations was 10.6% (31.12.2020: 10.6%) and the assumed growth rate was 2% (31.12.2020: 2%). A projected reduction in the assets under management of StarCapital AG in the second half of 2021 due to customer streamlining in the low margin mandate business and the resulting expected cash flow surpluses compared to the business plan have led to an adjustment of the estimate for the future earnings achievable by StarCapital AG. As a result, the goodwill for StarCapital AG had to be impaired by CHF 2.0 million as of June 30, 2021. This amount corresponds to the amount by which the carrying amount exceeds the recoverable amount. Assuming that the used growth rates of expected cash inflows (which depend primarily on the return on average assets under management and expected investment returns) would be assumed to be 20% lower or the used discount rate 10% higher, this could lead to an additional goodwill impairment of CHF 1.7 million or CHF 2.0 million, respectively. The goodwill allocated to the cash-generating unit StarCapital AG amounts to CHF 12.6 million as of December 31, 2020. The remaining goodwill (CHF 29.6 million) is attributable to the cash-generating units Bellevue Asset Management AG and adbodmer AG.

As of June 30, 2021, the review of the residual values of the StarCapital AG client base resulted in an impairment of CHF 0.9 million. The discount rate used for this purpose was 12.1% (December 31, 2020: 12.1%) and the applied growth rate 2% (December 31, 2020: 2%).

3.6 Trade and other payables

3.7 Treasury shares

4 Significant estimates,  judgments and errors

4.1 Estimates, assumptions and the exercising of discretion by management

The preparation of the consolidated interim financial statements requires management to make assumptions and estimates that have an impact on the balance sheet values and items of the income statement in the current financial period. In certain circumstances, the actual values may diverge from these estimates. The main assumptions and estimates made in drawing up the condensed consolidated interim financial statements conformed to Group-wide accounting principles and were based on the assumptions applied on 31 December 2020. The current COVID-19 pandemic has no direct influence on management’s assumptions and estimates, which have an impact on balance sheet values and income statement items.

5 Risk management and risk control

Bellevue Group’s activity is subject to multiple financial risks including market, credit, forex, liquidity and refinancing risks. The condensed consolidated interim financial statements do not include the full information on the above mentioned risks, which the consolidated financial statements are required to present. These interim financial statements should therefore be read in conjunction with the consolidated financial statements in the 2020 Annual Report.

6 Pledged assets, guarantees and contingent liabilities

7 Events after the balance sheet date

No events have occurred since the balance sheet date 30 June 2021 that would have a material impact on the information provided in the interim consolidated financial statements and would therefore need to be disclosed.

8 Earnings per share

9 Approval of the condensed consolidated interim financial statements

The Board of Directors has approved the condensed consolidated interim financial statements at the meeting of July 27, 2021.

10 Accounting principles

10.1 Basis of presentation

The condensed consolidated interim financial statements of Bellevue Group AG, Küsnacht, have been prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting”. As they do not contain all of the information and disclosures required in the consolidated annual report these interim financial statements should be read in conjunction with the consolidated annual financial statement for the year ended 31 December 2020. The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies set out in the consolidated annual financial statements.

10.2 New standards and interpretations

The following new or revised standards and interpretations did not have any material effects on Bellevue Group when first applied on 1 January, 2021 or were of no relevance to Bellevue Group:

10.3 International Financial Reporting Standards and interpretations which will be introduced in 2021 or later and other amendments

Based on early stage analyses, the following new or revised standards and interpretations will not have a significant effect on Bellevue Group’s financial statements:

10.4 Foreign currency translation

The following exchange rates apply to the translation of significant currencies:

11 Alternative Performance Indicators (unaudited)