EFTA01177276.pdf

A direct investment opportunity into Kleinwort Benson Group Investor presentation October 2011 Kleinwort Benson EFTA01177276  Disclaimer This presentation (the "Presentation') is strictly confidential to the recipient and has been prepared by Kleinwort Benson Group Limited and its affiliates (the "Company"). By accepting to receive such Presentation, you agree to be bound by the following terms. This Presentation may not be reproduced, retransmitted or further distributed to the press or any other person or published. in whole or in part. for any purpose. Failure to comply with this restriction may constitute a violation of applicable securities laws. This Presentation does not constitute or form part of and should not be construed as. an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Kleinwort Benson Group Limits or of RHJ International SA in any jurisdiction or an inducement to enter into investment activity. No pan of this Presentation. nor the fact of its destitution. should form the basis of. or be relied on in connection with, any contract or commitment or investment decision whatsoever. This Company has retained J.P. Morgan Limited ("J.P. Morgan") to act as its financial adviser in connection with the investment opportunity contained herein (the "Opportunity"). This Presentation is being made available by J.P. Morgan on behalf of the Company for the sole purpose of providing information to assist the recipient in deciding whether they wish to proceed with a further analysis of the Opportunity. The information contained in this Presentation has not been independently verified. Neither the Company nor J.P. Morgan is under any obligation to update or keep current the information contained herein. Accordingly. no representation or warranty or undertaking. express or implied. is given by or on behalf of the Company. J.P. Morgan or any of their respective members. directors, officers, agents or employees or any other person as to. and no reliance should be placed on. the accuracy. completeness or fairness of the information or opinions contained herein. None of the Company. J.P. Morgan or any of their respective members. directors. officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this Presentation or its contents or otherwise arising in connection with the Presentation and no responsibility or liability or duty of care is or will be accepted by the Company or J.P. Morgan or their respective affiliates. advisers. directors or employees as to the accuracy. completeness. reliability or reasonableness of the information or opinions contained in this Presentation or supplied herewith. 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Morgan accepts liability to any person in relation thereto. The Company has not registered and does not intend to register any portion of any offering under the applicable securities laws of any country. This Presentation is made to and is directed only at persons in the United Kingdom having professional experience in matters relating to investments who fall within the definition of "investment professionals' in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the "Order"), and to those persons to whom it can otherwise lawfully be distributed (such persons being referred to as "relevant persons"). J.P. Morgan is acting for the Company and no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Opportunity or any transaction or arrangement referred to in this Presentation. This Presentation includes forvard•looking statements. These forward•looking statements include statements concerning plans. objectives. goals, strategies, future events or performance. and underlying assumptions and other statements. which are other than statements of historical facts. The words 'believe." "expect: "anticipate' "intends." "estimate," "forecast." 'project' 'Wile "may.' "should" and similar expressions identify forward-looking statements. Forward•looking statements include statements regarding: strategies, outlook and growth prospects: future plans and potential for future growth; liquidity, capital resources and capital expenditures: growth in demand for products: economic outlook and industry trends; developments of markets: the impact of regulatory initiatives; and the strength of competitors. The forward•looking statements in this Presentation are based upon various assumptions, many of which are based. In turn, upon further assumptions. including. without limitation. managements examination of historical operating trends, data contained in the Company's records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control. and the Company may not achieve or accomplish these expectations. beliefs or projections. Neither the Company, nor any of its members, directors, officers. agents, employees or advisers intend or have any duty or obligation to supplement. amend. update or revise any of the laward•looking statements contained in this Presentation. The information and opinions contained herein are provided as at the date of the Presentation and are subject to change without notice. IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion. marketing or recommendation by anyone not affiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax•related penalties. J.P. Morgan or JPMorgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries worldwide. Securities. syndicated loan arranging. financial advisory and other investment banking activities are performed by a combination of J.P. Morgan Securities Inc., J.P. Morgan Limited. J.P. Morgan Securities Ltd. and the appropriately licensed subsidiaries of JPMorgan Chase & Co. in Asia.Pacific, and lending, derivatives and other commercial banking activities are performed by JPMorgan Chase Bank. NA. JPMorgan deal team members may be employees of any of the foregoing entities. • Kleinwort Benson EFTA01177277 Investment summary • Kleinwort Benson EFTA01177278  Investment opportunity and rationale RHJ International is offering the opportunity • Investors will gain direct exposure to an Anglo-German Private and Merchant to invest directly into its Banking Group on attractive terms strategic financial A unique direct • The banking franchise comprises the existing Kleinwort Benson Group investment services group: companies based in the UK, Channel Islands and Ireland opportunity Kleinwort Benson • and it will include the proposed exclusive acquisition of BHF-BANK in Germany Group from Deutsche Bank • Kleinwort Benson and BHF-BANK both have their roots in trade-finance, private and merchant banking Two banks with • Their strong franchises are based on their ties to the wealth creators in their exceptional heritage respective domestic markets and brands • Investors participate in the growing European and international market for wealth-management The investment gives access to a banking group domiciled Connecting • in one of the world's financial hubs: London international capital with Germany's • and in the world's second largest export nation, financing Germany's industrial `Mittelstand' engine: the successful small and mid cap client segment known as the 'Mittelstand' Investors will own a stake in • a well capitalized and secure banking platform with a totally cleaned up balance Stable platform sheet and low leverage and management • domiciled in two of the most stable countries in Europe experience • run by a top team of bankers with particular operational experience in managing banking franchises, risk and strategic change J' Kleinwort Benson 3 EFTA01177279  Combined Kleinwort Benson Group post acquisition of BHF-BANK A unique business model with a focused offering of products and Kleinwort Benson Group services to long- standing and new clients in targeted regions • Wealth structuring and fund • Germany, Switzerland, Wealth • Ultra and High Net Worth solutions Austria, Luxembourg, UK Management Individuals and Channel Islands • Independent advice • Institutions • International clients • Investment ideas Asset • Funds Mutual funds • Germany, Luxembourg, UK, Management • Distributors Institutional solutions Ireland, globally • • Entrepreneurs and German Financing Merchant 'Mittelstand' Corporate finance • Germany, UK and Banking • Corporate & government clients Risk management and capital international raising solutions • Sovereign wealth funds • Investment ideas • Generate operational cost synergies and economies of scale after IT Operational excellence harmonisation and migration to a new system • Kleinwort Benson EFTA01177280  Building blocks of Kleinwort Benson Group KIe nwo enson Bank (incl. Kleinwort Benson Investors Channel Islands Holdings) Kleinwort Benson and BHF-BANK, combined • Kleinwort Benson Bank is a UK based • Klemwort Benson Investors. based in • BHF-BANK is the largest German to form the Kleinwort private bank with services including Dublin. London and New York. has been independent Private Banking franchise with investment management. tax and banking. offering investment management services its roots dating back to 1854 and a Benson Group, will trust and fiduciary services. additionally, the for over 30 years and is a leading provider particular focus on the German Mittelstand create a leading wealth company is a leading provider of fund of innovative niche investment strategies to • BHF-BANK is organised along its four management and administration services clients in the US. UK. Europe and Asia business lines: Private Banking. Asset merchant banking One of the first major banks to have • 3 core areas of expertise: environmental Management. Corporates and Financial platform in Europe established in the Channel Islands nearly equity. dividend-oriented equity and multi- Markets 50 years ago, where it is consistently asset strategies • BHF-BANK currently manages EUR 40.6.bn ranked as one of the tap ten providers of AuM• (EUR 22.0bn in PB. EUR 16.4bn in administration and custodian services AM and EUR 2.3bn in Corporates) €m 2008 2009 2010 €m 2008 2009 2010 €m 2008 2009 2010 Operating income 125 95 80 Operating income 15.3 11.9 13.3 I Operating income 314 325 245 Operating profit 33 7 (10) Operating profit 0.7 (1.1) (0.3) I Operating profit 31 22 (31) AuM (€an) 6.3 5.8 5.5 AuM 3.2 3.8 3.7 AuM (€bn) 35.9 40.4 40.6 Total assets (an) 4.1 2.7 1.8 Total assets 21.3 20.2 21.2 Total assets (€On) 21.8 18.7 12.7 RWA (fbn) 1.1 0.8 0.7 RWA 6.4 6.2 6.4 I RWA (On) 5.8 4.8 4.5 Tier 1 Capital 300 286 241 Tier 1 Capital 16.8 15.7 16.7 Tier 1 Capital, 574 594 577 FTE 686 630 587 FTE 92 64 59 FTE 2,126 1,895 1,521 Operational issues have already been • A focus on costs and the effect of efficiency programmes initiated in June 2010 have already • addressed by management of BHF-BANK begun to show results in the 2010 figures with first tangible signs of improvements • In 201lytd. Klenwort Benson has continued to see the effects of improving operating • Envisaged transaction takes deleveraging efficiency and refocusing its business and should progressively lead to strengthening finance] E and restructuring measures into consideration performance E BHF-BANK will be significantly restructured O • Kleinwort Benson Investors (KBI) has been focusing on expanding its distribution capability in prior to closing of the transaction and certain Europe and Asia and investment performance in 201lytd is satisfactory business parts will not form pan of the scope BHF figures are for SHF as it is before downsidng/ de-risking / restructuring 2 Incl. deposits. excl. loans: Corporates AuM are exclusively deposits Kleinwort Benson sOn an IFRS pro-forma basis 5 EFTA01177281  BHF-BANK: the German merchant and private bank for leading entrepreneurial families BHF-BANK is a fully independently run bank • Largest independent private banking franchise in Germany ranked No. 1 Private domiciled in Frankfurt Bank for 5 times in succession with branches in 13 Private Banking awards • Strong growth of AuM of UHNWI (+250% in past 5 years) and significant increase German cities in discretionary portfolio mandates (+165% in past 5 years) The bank's core • BHF-BANK carries 'Merchant Banking' in its name and DNA and has developed a franchise is with Focus on German long standing tradition with Germany's export industry since 1854 entrepreneurs, the German 'Mittelstand' 'Mittelstand' • BHF-BANK today has a unique niche expertise in structured commodity trade companies and their finance owner families The obvious • Germany's corporate, institutional and private clients want an alternative service BHF-BANK has alternative provider to the large German universal banks Deutsche Bank and discontinued all Commerzbank... proprietary trading and investment activities and is characterised by Future employer • ... as do German bankers and young talents looking to work in a dynamic "centre its clean balance sheet of choice of excellence" environment First feedback • Media, financial industry representatives and BHF-BANK's workforce have reacted favourably to announced intention to integrate BHF-BANK into an Anglo- very positive German banking group • Kleinwort Benson 6 EFTA01177282  BHF-BANK: gateway to Germany's `Mittelstand' Germany's 'Mittelstand' is the backbone of the German economy • Germany's `Mittelstand' (SMEs) represent the backbone of the German economy: They contribute more than 40% of Germany's GDP BHF-BANK holds the • More than 400,000 medium-sized companies exist, employing 61% of all key to attractive Germany's employees in Germany business opportunities `Mittelstand' • Over 1,000 "hidden champions" — highly specialized world market leaders with from export finance to impressive global market shares equity participations • Only around 5% of Germany's 'Mittelstand' is listed • # 2 export nation after China • Export volume of consistently above €800bn p.a. Germany: • >30% of export volume is outside EU/OECD Export champion • 80% of 'Mittelstand'-companies have export businesses, and demand related services • Importance of commodities in world trade • Outstanding client basis of entrepreneurial UHNWIs in Private Banking. Future growth in leveraging existing client network and use of cross selling potential BHF-BANK with other business divisions, especially with the focus on export finance strategy • Clear focus on trade-related business with risk-minimizing structures • Strict quality control and diversification regarding counterparty risks Source:www.destatisale HS Kleinwort Benson 7 EFTA01177283  BHF-BANK will be acquired following a comprehensive restructuring as well as de-risking and downsizing of the business The necessary restructuring progress of BHF-BANK has BHF-BANK at 2010 YE BHF-BANK at closing, already been started by the Total assets E12,741m Total assets €7,357m management team of Equity E601m Equity E554m BHF-BANK RWA E4,487m RWA E3,162m For RHJI and the co- Tier 1 capital E577m Tier 1 capital €511mm investors this results in the Tier 1 ratio 12.9% Tier 1 ratio 16.1% acquisition of a restructured balance sheet and a leaner FTE 1,521 FTE 1,164 cost base • Disposal/discontinuation of non-core businesses • Disposal/transfer of non-core investment portfolio (NCIP) including all PUGS securities • Transfer/novation of proprietary derivatives portfolio • Transfer of exchange traded derivatives (ETD) business • Comprehensive restructuring initiated across businesses with particular focus on back office and central functions • Implementation of IT efficiencies with the change of the security provider to dwp bank and several outsourcing projects already kicked off BHF-BANK at dosing: Assumes closing at year-end 2011 Kleinwort Benson 8 EFTA01177284  Pre-closing restructuring of BHF-BANK significantly reduces size and risks of the acquisition... RWA (€m) Tier 1 ratio The restructuring measures will lead to a reduction in RWAs of ca. €800m until 2011E. already taking into BHF-BANK 20104 4,487 (12.95a) •-• account the increase caused by the new Basel 2.5/CRD Ill Measures implemented H1 2011A -466.1 rules BHF-BANK H1 20114 4,022 The Tier 1 capital ratio of BHF-BANK is expected to Sale of NCIP -328a increase to 16.1% until closing (YE 2011) Sale of ETD book -293 RWA reduction of Corporates book -200 II Sale of CDS -781 Sale of BHF owned properties -641 Other credit risk adjustments -781 Basel 2.5/CRDIII increase in market risk' 181 BHF-BANK 2011E 3,162 Kleinwort Benson 1. Net of other changes in market ask 2. Tier capital of E577m (pro-fonna FAS) 1 Tier Icapita? of E511m (pro-forma 1FRS) 9 EFTA01177285  ...while the ongoing downsizing of BHF-BANK's cost base will be rigorously continued... Impact of restructuring measures Total savings of P&L Impact Total EUR74m are expected 2010A 2011E 2012E 2013E 2014E 2015E (in EURm) 2011E-2015E in the period 2012 to 2015, representing P&L Cost Items 275.2 265.3 234.3 239.1 237.1 232.3 114°/0 of assumed Personnel expenses 157.8 150.2 123.6 124.7 125.1 128.5 restructuring costs Admin costs 117.4 115.1 104.8 108.5 106.0 97.9 Rental lease 5.9 5.9 5.9 5.9 1 1Savingsfrom restructuring YoY (9.9) I (45.7) (5.0) (10.7) (12.9) (74.3) Personnel cost swings (7.6) (33.7) (6.8) (6.1) (2.5) (49.0) thereof lTrelated (Huxley) (1.7) (3.0) (3.3) (7.5) (4.1) (Ia5)3 Admin cost sasAngs (2.3) (12.1) 1.8 (4.6) (10.4) (25.3) thereof lTrelated (Huxley) (2.1) 5.5 (4.1) (10.2) (10.9)3- r 1 I Additional yearly costs YoY 14.7 9.8 8.6 8.1 41.2 I Rental lease I 5.9 5.9 2 New senior hires 5.5 5.3 4.3 3.5 18.5 Inflation 1.7 1.9 2.2 2.3 8.1 Other personnel expenses (incl. salary increases) 1.6 2.6 2.2 2.4 8.7 1 Non-recurring restructuring costs 65.0 Cumulative IT related savings Total savings 2011E-2015E as of restructuring costs 114% per annum of €30.4m I) Sate & lease back of Bockenheimer Landstralle with estimated rent of f 5.9m pa. 2) Dependent on business development 3) Total 1T-related savings off 30.4m between 2011E and 2075E • Kleinwort Benson Source: BHF Management 10 EFTA01177286  ...with a simplified IT architecture Overview of key parts of the project Expected savings per annum (steady state) IT restructuring yields significant steady-state Em savings potential 35 - 30.4 Change of V 30 - Part of the outsourcing security 6.1 as well as internal 25 - provider to optimization is under dwpbank 20 - 6.8 way and will yield 15- savings already in 2012 Implemen- 10- Internal IT 17.6 tation of core Host and storage optimization 5- banking Project outsourcing will be (Quick Wins) atform Huxley 0 implemented by the end of 2012 -5 - -10 - Implementation of the core banking platform is Outsourcing V -15 - decentralized Fixed Outsourcing Imple- Advanced a multi-year project with cost host and mentation cost significant additional IT to ATOS savings storage of core savings savings potential banking platform The total annualized savings of EUR30.4m 31.03.2012 30.06.2014" 2015 include EUR19.5m personnel savings which are allocated to all business segments I. Full cost impact after phase II (2015)- Measures are indicative and to be validated with bottom-up approach ' Kleinwort Benson Scvrce:BHF Management EFTA01177287  Combined Kleinwort Benson Group's financial attractions Kleinwort Benson • Well capitalized with expected amount of Core Tier 1 capital of €728m Group will be well resulting in a Core Tier 1 ratio of around 16.6% for 2012E capitalized, have a Capital • Capitalization based on IFRS and already fully conform with new Basel HI liquid balance sheet requirements with no significant credit or market risk • No significant credit or market risk and very low leverage Balance sheet • Conservative loan book with no legacy loans • Very limited reliance on wholesale funding; the business model supports and finances banking activities with a solid and stable deposit base from the Liquidity private and institutional franchise • Very conservative loan-to-deposit ratio of 33% (2011E) • Clear business focus on interest and commission based income sources with Profitability no proprietary trading activities reduces the business inherent risk • Target cost income ratio for 2015 of below 75% and a target RoE of 12 - 15% BS Kleinwort Benson 12 EFTA01177288  The Kleinwort Benson Group 2012: Key performance indicators ' !Klelnwnrt Ben 4011 BHF It BANK M0M1tuort8en Operating Entities , • , Group The combination of the i two banks gives the P'War group critical mass in Banking €7.3bn 0 E34.1bn capital, assets under AuMs management and revenues Asset Management 43.0bn 0 €23.9bn AuMs Lending €0.7bn €3.2bn 0 13.9bn volumes Shareholders' €267m €565m €833m equity (IFRS) Tier 1 ratio 20.2% (47 ) 16.1% 16.6% FTE's 849.0 0 1,114.0 G.) 1,963.0 Revenues €160.3m 0 €25.5.1m 0 €415.4m Kleinwort Benson 13 EFTA01177289  Financial overview of Kleinwort Benson Group' Key metrics (in €m) Significant step change FYE December 2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E in performance over the plan period Revenues 492.7 463.1 369.8 380.7 415.4 464.6 527.7 578.0 Clear actions taken in Operating cost base2 (420.8) (431.6) (422.2) (418.7) (402.5) (416.5) (425.3) (426.0) 2010 and 2011 to address the cost base o/w Loan loss provisions 6.0 (18.9) (0.5) (0.6) (6.6) (6.6) (6.6) (6.6) AuM levels show a Operating profit before 71.9 31.5 (52.4) (38.0) 12.9 48.1 102.4 152.0 steady increase as a tax3 result of growth Profit after tax 209.4 -43.1 -90.5 -177.0 5.6 36.0 79.5 117.8 initiatives initiated in 2011 CIR (operating) 86.6% 89.1% 114.0% 109.8% 95.3% 88.2% 79.3% 72.6% Group Tier 1 ratio° 12.5% 15.5% 15.1% 17.2% 16.6% 15.1% 16.3% 18.2% Group RWAs 7,118 5,784 5,462 4,320 4,378 4,919 5,094 5,273 Tier 1 capitals 887.6 894.1 827.5 741.4 727.6 745.0 831.5 962.2 Loans 4,999 4,380 4,204 3,743 3,939 4,052 4,194 4,358 AuM 46,687 51,202 51,086 54,163 60,204 66,387 73,221 77,833 FTEs 2,849 2,617 2,516 2,143 1,963 1,931 1,903 1,917 I. Kleinwort Benson Group includes wealth management and fiduciary KB Investors and 40177 2012 onwards the impact of the BHF acquisition 2. Includes loan loss provisions 3. Operating profit excludes restructuring expenses. integration costs and other non-recurring items. post deduction of loan loss provisions 0.,5. Based on FRS Kleinwort Benson Source: Kleinwort Benson management accounts (unaudYted): expected figures as calculatedin the business model 14 EFTA01177290  The combined balance sheet of Kleinwort Benson Group will be streamlined with limited wholesale funding Reduction of BHF-BANK balance sheet (€bn) The restructuring and derisking of 12.7 BHF-BANK prior to closing will result Loans and in a strongly reduced balance sheet advances to customers 7.4 The combined balance sheet of 0 Lending to market Kleinwort Benson Group will amount Other assets to €9.9bn as of YE 2011 5.4 Stable funding sources with a very 0.4 0.3 conservative loan-to-deposit ratio of r 33°/0 as YE 2011E Total Assets Total Assets 2010A 2011E Kleinwort Benson Group combined balance sheet 2011E (€bn) 9.9 9.9 100% 80% Loans and advances to 6.9 customers 60% ❑ Lending to market I I Funding from clients (deposits) 40% 7.2 0 Other assets Whdesale Funding 1.4 NI Other liabilities 20%