EFTA00610789.pdf

RHJ INTERNATIONAL PRESS RELEASE Regulated Information RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013 RHJ International announces completion of BHF acquisition — A strategically important and transformational development for the Group Brussels, 27 March 2014 — RHJ International (the "Company" or "RHJI") today issued its results for the year ended 31 December 2013. Key hiRhli2hts 1. BHF acquisition successfully completed on 26 March 2014 • 100% of BHF acquired for a preliminary purchase price of €340 million, which is subject to post-closing adjustments — 91% stake acquired by Kleinwort Benson Group ("KBG") for a cash consideration of €309.4 million. 9% acquired directly by RHJI for €30.6 million equity consideration issued at par. • RHJI has contributed €143.6 million of cash and retains a 65.78% stake in KBG, based on a preliminary valuation of KBG pre-capital increase of €194 million. Including the 9% stake acquired directly, RHJI has an effective interest of 68.9% in BHF. • Acquisition transformational — Pro forma KPIs at 31 December 2013: €51 billion Assets under Management ("AuM"); financial services revenues of approximately €300 million; IFRS net asset value of €774 million2 and a combined Basel III Tier 1 ratio of 16.3%. • Initial analysis indicates potential cost synergy opportunities estimated to be in excess of €20 million through the combination of wealth management back office and IT functions, with additional revenue synergy opportunities currently being validated. • Coupled with the attractive valuation at which the transaction has been executed, these synergies underline the earnings and value accretion of this combination. 2. Results for the year to 31 December 2013 • Kleinwort Benson Wealth Management ("Wealth Management")3 - 14% growth in AuM to £5.9 billion (€7.1 billion). Segment loss of £11.7 million (€13.8 million). Balance sheet strong with a tier 1 capital ratio of 19.8%. • Kleinwort Benson Investors ("KBP) — AuM 49% higher at €5.4 billion. Segment profit of €2.5 million over eight times higher than 2012. • Holding Company costs across Rail and Kleinwort Benson Holdings reduced by 40% to €30.6 million (2012: €51.0 million). • Strategic transformation into a focused financial services company complete — divestments in 2013 include Shaklee, SigmaXYZ and the spin-off of the merchant banking business. • Consolidated loss across the Group reduced by 21% to €66.4 million (2012: €84.4 million). Within this, losses related to non-core and discontinued operations reduced from €41.0 million to €26.3 million, with the core operating segment loss across the Financial Services and Holding segments 8% lower at €40.1 million (2012: €43.4 million). i Par value of €5.56 per share calculated as issued, paid up capital of €475.9 million. divided by 85.5 million shams in issue. 2 Based on 100% of BHF net asset value (€494m) and pre-capital increase net asset value of KBG of 1280m at 28 February 2014. KJeinwoct Benson Wealth Management refers to KBB/KBC1H: the aggregation of Kleinwon Benson Bank Limited and Kleinwort Benson Channel Islands Holdings. EFTA00610789 Leonhard Fischer, Chief Executive Officer of RHJ International, commented: "I am delighted that we have been able to complete the transformational acquisition ofBHF and would like to thank our staff clients, shareholders and other stakeholdersfor their patience and support during the long drawn out process since we first announced this strategically important transaction. In 2013 the performance across our financial services businesses was mixed, with our asset management operations at Kleinwort Benson Investors posting significant growth in assets under management and profits, while our wealth management operations continued to generate losses due to the challenging economic environment and investments that have been made in growth initiatives. Delays associated with the BHF process also had a knock-on effect on our ability to achieve our targeted run rate ofholding costs. The combination of Kleinwort Benson and BHF, with its robust capital position and low risk balance sheet, provides us with a solid foundation to capture the strong growth that is expected in the German and UK wealth management markets, with the combination of our highly-complementaq asset management operations also providing opportunities for revenue growth. Combined with the ongoing management of our cost base and the synergy savings that we expect to achieve across our wealth management operations, we are well-placed to drive long-tern: profitable growth and shareholder value creation. An analyst and investor call will be held today at 10:00 am (New York) / 2:00 pm (London) / 3:00 pm (Brussels, Frankfurt). To take part in the call, please use one of the dial-in numbers provided below, or log on to RILTPs corporate website to listen to the live audio webcast Conference Call Details Date : Thursday 27 March 2014 Time : 10:00 am (New York) / 2:00 pm (London) / 3:00 pm (Brussels, Frankfurt) Conference ID for dial-in numbers below National free phone — United Kingdom National free phone — USA National free phone — Japan National free phone — Belgium National free phone — Switzerland National free phone — Germany National free phone — France Local - International Please connect 5 to 10 minutes before the scheduled start time to register. The call will be held in English. After the conference, you will be able to listen to an archived audio file by visiting RHJI's corporate website, For further information, please contact: Duncan Heath Investor Relations Director RHJ International Tel: E-mail: 2 EFTA00610790 1. BHF transaction and strategic update Overview and strategic rationale We are pleased to announce that the transaction to acquire BHF-BANK closed on 26 March 2014. This attractively-priced and transformational acquisition, which is aligned to our strategic objective of developing our financial services businesses, marks the culmination of a long drawn-out process, which began in 2011. BHF represents a strong cultural and strategic fit with Kleinwort Benson Group's existing wealth management and asset management operations, with the combination of these highly complementary and client-centric businesses providing a solid foundation to drive profitable growth in these core markets. In Private Banking the acquisition will give us substantial scale, with a high-quality franchise and strengthened value proposition to our high net worth and entrepreneurial client bases cementing our strong positions in the two fastest growing wealth management markets in Western Europe. The combination of our Private Banking businesses also provides significant opportunities to drive both revenue synergies and scale- related cost savings across back office functions and IT. In Asset Management the acquisition will provide a compelling opportunity for Kleinwort Benson Investors and Frankfurt Trust (BHF's asset management business) to leverage each other's distribution strategies and selected products. The upside profit opportunity from combining the highly-complementary skill sets of these highly-rated and award-winning franchises will be driven by the strengthening of the revenue potential of the individual businesses. Given the very specific nature of the markets served by the individual businesses, there is no intention to formally combine Kleinwort Benson Investors and Frankfurt Trust to capture cost synergies. In Financial Markets and Corporates the acquisition provides significant potential to leverage BHF's strong track record and propositions to Kleinwort Benson's sophisticated client base. BHF has a well- established and leading position in the fast-growing German "Mittelstand" (SME) market segment — one of the key drivers of Germany's export economy. In addition to its strong market position in export trade finance, BHF is a quality leader of individual, customised advisory services within Corporate Banking, with its distinct Financial Markets offering spanning German equity markets, interest rate and currency-related investments as well as treasury and financial markets research. Impact of the BHF acquisition on key performance indicators (lbw onc14/ 131Diternber20,3 AdIvaresin EURmilionsunlessolhewis &alai) 6880'19%EG El* Combined %Increase ALM (OM Private Banking 7.1 19.2 263 270% Asset Management 5 16.6 220 307% Financial Markets and Corporates® 2.7 2.7 N/A Told 12.5 385 51.0 30EPA Fbvenuos Private Banking® 65.8 82.1 147.9 125% Asset Management 15.6 31.8 47.4 204% Financial Markets and Corporates® 15.2 85.2 1W.4 561% Tot® 9&6 199.1 295.7 206% Tier 1 capital049 219 445 664 N/A Risk Weighted Assets ("RWAs")00 1,106 2,976 4,082 N/A Tier 1 ratio (Basel III)040 19.8% 15.0% 16.3% N/A FTEs 714 1,072 1 788 150% ®Assets under Management in BHF comprise Institutional client deposits within the Corporates business. OZIKBG Private Banking figure excludes 616.2m of income from Corporate Advisory and Treasury activities. These are included within the Financial Markets and Corporates line to align to the segmentation used by BHF. BHF Financial Markets revenues include income from Treasury business. ®Total revenue figure for BHF does not include (20.8m of 'Other/consolidation" revenues. Total income reported by BHF prior to US/UK tax and restructuring amounted to C21.9.9m in 2013. ©Figures for Kleinwort Benson Group relate to the Wealth Management operations only. ®Combined figures for Tier 1 capital, RWAs and Tier 1 ratio represent a simple pro forma aggregation and are not intended to reflect a true consolidated figure. 3 EFTA00610791 The closing of the BHF acquisition is transformational for RHJI's existing financial services businesses, both in terms of Assets under Management (AuM) and revenue generation, even before the synergistic benefit of this business combination on the future growth potential of the respective businesses is taken into consideration. At a business line level, using reported figures for the year ended 31 December 2013, the effect on key metrics is as follows: In Private Banking the business combination will lead to a 270% increase in AuM from €7.1 billion to €26.3 billion, with total income across these business lines increasing by 125% from €65.8 million° to €147.9 million. Similarly, in Asset Management the acquisition will have a profound impact on key indicators, with AuM quadrupling from €5.4 billion to €22.0 billion and revenues tripling from €15.6 million to over €47.0 million. Once BHF's Financial Markets and Corporate business is taken into consideration, total AuM and revenues across BHF and KBG's financial services businesses amount to €51.0 billion and approximately €300 million respectively, based on reported figures for 2013. BHF has a highly liquid and low risk balance sheet. Consequently, the enlarged KBG entity post-acquisition has a robust capital position, with a Basel III tier 1 ratio of 16.3% and an IFRS net asset value of €774 millions. Headcount across the financial services business is close to 1,800 FTEs. Synergy potential from the combination In addition to the headline scale benefits that the BHF acquisition brings to KBG's existing financial services businesses, the combination offers significant potential to drive cost synergies across the Private Banking / Wealth Management franchises as well as revenue opportunities, which have been identified and are currently being validated. Given the highly-complementary nature of BHF and Kleinwort Benson's Private Banking / Wealth Management businesses, combined with RHJI and BHF Management's extensive experience in integrating and turning around financial services businesses, we are confident that we will achieve synergy cost savings in excess of C20 million. To achieve these synergies and lead the integration process, RHJI Executive Management will take on a more execution-based and operational role than they have been able to do while the BHF transaction and approval process were in progress. We will provide more detail on these synergies at the time of our first trading update for 2014, which is scheduled for 15 May 2014. Valuation parameters for the BHF acquisition (based on 100% of BHF)6 (In EURmillions) NAV Intangibles 1NAV Purchase PP' NAV PP 1NAV Price BHF 494 35 459 340 0.69 0.74 KBG 280 39 241 194 0.69 0.81 Total 774 74 700 534 0.69 036 RHJI and Kleinwort Benson Group have acquired 100% of BHF for a total consideration of €340 million', representing an attractive multiple of 0.69x the €494 million' net asset value ("NAV") reported in its closing accounts and 0.74x its tangible net asset value ("TNAV") of €459 million'. The pro-forma purchase price of the BHF transaction has reduced to €340 million' from the approximate figure of €354 million that was reported in October 2013. This reflects non-operating adjustments to BHF's NAV in the intervening period that have had a direct effect on the purchase price. 4 Kleinwort Benson figure excludes f15.2 million of income from Corporate Advisory and Treasury activities. s 1FRS net asset value comprises 1005E of BHFs preliminary net asset value of C494m and 100% of KBG's preliminary net asset value pre-capital increase of f280 million. 6 Preliminary valuations, subject to post-closing adjustments. 4 EFTA00610792 As can be seen in the table above, RHJI's 100% stake in the Kleinwort Benson Group ("KBG") that existed prior to the BHF acquisition, comprising Kleinwort Benson's Wealth Management operations, Kleinwort Benson Investors, and Kleinwort Benson Holdings, was valued at €194 million6 for the purpose of the transaction. This is in line with the equivalent multiple of 0.69x NAV that was used to value BHF, with the alternative multiple of 0.80x applied to KBG's €241million° TNAV higher than the corresponding multiple of 0.74x that has been applied to BHF. Structure of the transaction6 RHJ International Co-Investors Total purchase price for 100% BHF: C340m (RHJI effective interest in BHF of 68.9%) J I KB G oup Ltd (Preliminary NAV: C730m) • Kleinwort Benson Bank Ltd BHF-BANK AG • Kleinwort Benson Channel Islands Holdings Ltd (Preliminary NAV: C494m) • Kleinwort Benson Investors Dublin Ltd (Preliminary NAV: £280m) Under the transaction terms RHJI and Kleinwort Benson Group have acquired 100% of BHF for a total consideration of €340 million°. Kleinwort Benson Group has acquired a 91% interest in BHF for a total cash consideration of €309.4 million°, with RHJI acquiring the remaining 9% of BHF directly for equity-based consideration of €30.6 million6 issued at par. As a consequence of the structure of the transaction, RHJI has a 68.9% effective interest in BHF. Post-transaction, the enlarged Kleinwort Benson Group will have an adjusted net asset value of €730 million', representing its 91% interest in the €494 million' NAV of BHF (i.e. €450 million) plus 100% of the combined NAVs of €280 million° across Kleinwort Benson Bank Ltd and Kleinwort Benson Channel Islands Holdings Ltd (collectively the "Wealth Management" business) and Kleinwort Benson Investors. 5 EFTA00610793 Breakdown of the valuation and ownership of Kleinwort Benson Group post transaction' Uses (valuation in Cm) BHT-BANK KB BHT Group Transaction KB f BHF Group Costs (Intl. trans. Casts) 91% stake E309.4m E503.7m C10.0m C513.7m Transaction Total Investor Investment (pre transaction costs) costs investment RHJ f331.3m investment (ohv KBG valued at €6.6m f337.9m 65.78% International f 194.3m and fl37.0m in cash) Windmere and E513.7m f 13.3m cash investment into KBG €0.3rn f 13.6m 2.65% Colts Trust 3 Fosun f96.6m cash investment into KBG fl.9m C98.5m 19.18% AOTON f 62.4m cash investment into KBG O.2m f63.7m 12.40% Total f503.7m C10.0m C513.7m 100.0% 1) Strategic Westmont vehicle of German entrepreneur Stelan Ouandt As highlighted above, Kleinwort Benson Group has acquired a 91% stake in BHF for total cash consideration of €309.4 million'. Post-transaction, the newly enlarged Kleinwort Benson Group now comprises this 91% stake in BHF plus the 100% interests in Kleinwort Benson's wealth management operations and Kleinwort Benson Investors. Combined with deal-related expenses of approximately €10.0 million, the enlarged Kleinwort Benson Group has a transaction-based valuation of €513.7 million& The ownership split of the new Kleinwort Benson Group is based on the respective value of the investments that have been made by RHJI and each of the three co-investors (as summarised in the table above). RHJI's 65.78% stake reflects a total investment of €337.9 million', comprising €143.6 million' of cash and a pre-money valuation of €194.3 million' for its 100% interest in the Kleinwort Benson Group that existed prior to the closure of the acquisition. The entities affiliated with Timothy Collins, comprising Windmere and Collins Trust, hold a 2.65% stake in KBG, reflecting total cash investment of €13.6 million'. Fosun, the strategic, long-term Chinese investor, is the second largest holder of KBG post transaction, with a stake of 19.18% for its total cash contribution of €98.5 million'. AQTON SE, the 100% owned strategic investment vehicle of German entrepreneur Stefan Quandt, has a 12.40% stake in KBG for a cash contribution of €63.7 million". RHJI equity consideration for the 9% direct stake in BHF The RHJI shares that have been issued for the 9% direct interest in BHF had a par value of €5.56 per share. This has been calculated as the issued, paid up capital of the Company of €475.9 million, as reflected in our Articles of Association dated 18 June 2013, divided by the 85.5 million shares that were in issue prior to this transaction. To satisfy the €30.6 million equity consideration for the 9% stake, RHJI has issued 5.5 million additional shares. This has resulted in a revised total share count of 91.0 million shams and Deutsche Bank (the seller) becoming a significant shareholder with an approximate 6.0% stake in RHJI that is subject to customary lock-up conditions. The issue of RHJI shares at par as consideration for the 9% stake in BHF has given rise to an additional discount benefit to the RHJI Group on the transaction. Calculated using the difference between the par value and market value of €3.80 per share applied to the 5.5 million shares that were issued as consideration, this additional source of discount on the transaction amounted to €9.7 million in total. This discount will be allocated across RHJI and its co-investors on a pro rata basis post-closing and is estimated to result in RHJI's 6 EFTA00610794 ownership in KBG reducing to 65.13%, with the offsetting increases being reflected in the individual co- investors' stakes. Simplification of RHJI corporate structure Our short-term priority, which has been backed by our major shareholders, is the integration of BHF and subsequent restructuring of the business. This makes both commercial and economic sense as we look to drive both cost and revenue synergies across the combined operating businesses. Following the completion of the BHF acquisition, we are also now actively engaged with our co-investors to discuss the future conversion of their interests in Kleinwort Benson Group into RHJI shares. In this process, our priority will be to agree terms and a conversion price that are mutually acceptable to the co-investors and our current shareholder base rather than to adhere to a rigid timetable. Summary of BHF transaction The completion of the BHF acquisition marks a pivotal point in RHJI's strategy of developing a focused financial services business, with the combined business well-placed to benefit from its strong positions in the fast growing UK and German wealth management markets as well as from the highly-complementary and award-winning asset management operations of Kleinwort Benson Investors and Frankfurt Trust. The transaction has been executed at an attractive valuation, with significant revenue synergies and scale- related efficiency savings underlining the earnings and value accretion of this combination. 2. Consolidated income statement (InEURmillongl H 2013 FY 2012 Total Before Exceptional Total exceptional items()) items Interest income 51.6 38.5 38.5 Interest expense (353) (160) (160) Net interest income 15.9 22.5 215 Commission and fee income 1014 101.3 1013 Commission and fee expense (66) (3.9) (19) Net commission and fee income 95.8 97.4 97.4 Other income and expense 2.8 15.4 11.3 267 Total operatingIncome 1145 135.3 11.3 1445 Selling, general and administrative expenses (1567) (190.9) (190.9) Net loss on disposal of available for sale assets() (3.0) Impairment of goodwill (86) (8.6) Operatingprofit (lose) (452) (KZ 11.3 (5W5 Finance income 2.4 5.5 5.5 Finance costs (8.4) (7.5) (7.5) Share of profit of equityaccounted investees (net of income tax) OS 1.2 1.2 ROM (lose) bermIncome tax Ma (85.0) 11.3 (547) Income tax benefit (expense) (0.3) 0.4 0.4 Loss from discontinued operations (net of income tax)O (15.4) (31.1) (311) Pollt (Wei fats period (55.7) 11.3 (8441 tp In 2011 and 2012, fair value movements on 2011 bonds were treated as eneptiona I Items. From 2013 onwards, these movements are no longer dossed as exept onal. .0iscantinued operations in 2013comprise Shaklee, sigmaxa and the merchant banking business condoned by Ripplewood. In 2012 they composed ASaht Tec, Phoenix Seagate Resort, Shaklee and the merchant banking business. tl Represents accounting losses with respect to avail a ble.fonsale assets, which have not yet crystalized. 7 EFTA00610795 3. Segment results (InEURmaTiond FY 2013 Financial Holding Services® Segment® Sib-total Reclassifications 0 Told Net interest income 15.7 15.7 0.2 15.9 Net fee and commission income 95.8 - 95.8 0.0 95.8 Other operating income 0.9 1.9 2.8 (0.0) 2.8 OperatingIncome 112.4 1.9 114.3 02 114.5 Operating expenses (123.8) (306) (154.4) (2.3) (1583) Coro °bondingregnerilmail (11.4) (217) (Cl) (2.1) (422) Other non-recurring items® (2.3) (2.3) 2.3 Operatinglossbefao tax aid disposal of available for ale assets (117) (2aT) (42.4) 0.2 02.4 Net loss on disposal of available for sale assets laoi Net finance expense Share of profit of equity accounted Investees (net of income taxi 0.5 bombe.ore hoe lax ( 5a7) Income tax expense (0.3) Loss from discontinued operations (net of income tax) (15.4) lceslas the pedod (66.4) (In EURmilkons) f v2012 Financial Holding Services® Segment® Sib-total Redassificationse Tc4al Net interest income 23.0 no (0.5) 225 Net fee and commission income 1014 100.4 (3.0) 97.4 Other operating income 5,1 3.2 8.3 18.4 Si OperatingIntorno 123.5 32 131.7 149 146.6 Operating expenses (127.9) (175.1) (24.4) (1915) Controperaling tared read 0.8 fael (43.4) (9S) (52.9) Investment in new business lines (4.3) (4.3) 4.3 Exceptional items - fair value movements® 11.3 11.3 (11.3) Other non-recurring items® (14.5) (3.9) (18.4) 18.4 Operallngprofit (loss) before lax (19) (54.8) 1.9 Net finance expense (2.0) Share of profit of equity accounted investees (net of income tax) 1.2 lembefore Inroad tax (517) Income tax benefit 0.4 Loss from discontinued operations (net of income tax) (31.1) Ionia' the period (84.4) 1(0 nelnwon Benson Holdings has been removed front the Finanoal Services segment and is now reflected in the Holding Segment for both 2012 and 2013 See Financial Services tale on pap 9 and HoldingSegment table on page 14 for further details. CP Includes reclassification of exceptional and other non.recurn ng items. e NOII.rocurri ng te ms in 2011principallyrelate to restru aunng provisions connected with the outsourcing of Back Office functions in the Wealth Management business. ti me 81.3 milli on of exceptional fair value movements reflected in the table above relate tome reversal of fair value losses recognised in 2011. (Dasher non.reoaring items relate to restructuring costs (cum), asset impairments (C9.5m) and integration and sales related costs of (Clan). In the year to 31 December 2013, RHJI reduced its consolidated loss across the Group by 21% to €66.4 million (2012: €84.4 million). Within this figure, the core operating segment loss across the Financial Services and Holding segments was 8% lower at €40.1 million (2012: €43.4 million). This principally reflects holding company costs of €30.6 million (2012: €51.0 million), which were 40% lower than the prior year as a consequence of our completed strategic transformation and our ongoing efficiency programmes. This reduction was partly offset by losses generated by our Wealth Management operations, in turn reflecting the adverse impact of the low interest rate and tight credit spread environment on operating income as well as our programme of investment in growth initiatives. Our core segments were also affected by the 8 EFTA00610796 uncertainty connected with the BHF transaction, with the recent regulatory approval and completion of this acquisition providing strategic clarity and significant potential to drive profitable growth in our core markets. The balancing figure in the consolidated loss across the Group, representing losses related to non-core items and discontinued operations, was also lower at €26.3 million (2012: €41.0 million). In 2013 these non-core losses included two main items: losses from our discontinued businesses and losses on the disposal of available for sale assets. Net losses from our discontinued businesses amounted to €15.4 million in the year and comprised losses from Shaklee and the merchant banking operations previously conducted by Ripplewood, offset by gains made on the disposal of SigmaXYZ. Accounting losses with respect to available for sale assets, which have not yet crystallised, amounted to €3.0 million and reflect the difference between the carrying value of our General Partner Interest in the Ripplewood Fund of €15.3 million and the €12.3 million market value of the GoGo shares that we received in full satisfaction of all obligations under the partnership agreement. 4. Financial services segment The table below details the results of the businesses that make up the Financial Services segment: EVAIM:OnS) FY 2013 Kleinwort Kleinwort Other Financial Tots Benson Wealth Benson Services® Management Investors Net interest income 15.5 0.2 15.7 Net fee and commission income 79.6 15.1 1.1 95.8 Other o eratin income 0.4 0.3 0.2 0.9 OperatIngIneare 95.5 168 1.3 112.4 Operating expenses 1109.3) (13.1) (1.4) (1218) Ofie cperatIngregnant mull (13.8) 25 (0.1) (11.4) Other non-recurring items CD (2.3) (23) OpentIngprofit (loaf) before tax (161) 25 (0.1) (117) Share of profit of equity accounted investees (net of income tax) 0.5 0.5 Profit (los) before income tax (161) 25 0.4 (112) Income tax expense (0.7) (0.51 - (1.fi Profit (los) St the pedal (168) 20 0.4 (14.4) (In BIRmi(ons) FY2012 Kleinwort Kleinwort OtherFinandal Tots Benson Wealth Benson Services® Management Investors Net interest income 22.8 0.2 210 Net fee and commission income 86.7 116 2.2 1(0.4 Other operating income 4.3 0.8 - 5.1 OpentInglneare 113.8 125 2.2 128.5 Operating expenses (113.5) 111_2) (2.2) (127.9) Core meritingregnant reset 0.3 01 0.0 0.6 Investment in new business lines® (4.3) (43) Exceptional items- fair value movements 11.3 - 11.3 Other non-recurring items® (5.7) (0.1) (8.7) (145) OperatIrsprofit (los) before tier 1.8 02 (67) (62) Share of loss of equity accounted investees (net of income tax) - (0.3) (0.3) Profit (lot before Scone tax 1.8 02 Ma (7.2) Income tax expense (OS) - Eta Profit (loss) lathe penal 1.1 02 Ma mother financial see cos comprise our stakes in Quinn Bank AG and Arecon AG. In 2013, other nonrecurring items principallyrelate to restructuring prousions connected with the outsDurango, the Back Office funcuons in the wealth Management business. elnvestment in new business lines relates to Fixed Income business. ®Other non.reo.imng items include restructuring costs (C3.2m). asset impairments (0.Sml, and NUIntegration and sales related costs of loam). 9 EFTA00610797 4.1. Klein wort Benson Wealth Management Condensed consolidated income statement FY2013 FY 2012 FY 2013 af 692m Bifim Net interest income 132 18.5 15.5 Net fee and commission income 67.6 70.3 794 Fair value movements 0.1 0.7 0.1 Other operating income Q2 2.8 0.3 OperatingIntone 81.1 923 95.5 Operating expenses (928) (92.0) (1013) Dore operating segment resit (11.7) 0.3 (118) Exceptional items - fair value movements 0.0 9.2 0.0 Other non-recurring items® (2.0) (8.1) (2.3) Operating groat belay tax (13.7) 1.4 (161) Client assets (InCaomMions? Dec. 313313 Dec 31, 2012 Assets under Management® 5.895 5.175 mm 2013. other non.recurringitems principally MI a to :0 restructunng prow s ions connected with the planned outsourcing of cenain Bad Office functions. CbCertain investment portfolio accounts in December 2012 have been reclassified from Deposits to Ads:oryand Discretionaryassets to enable a like for like comparison with December 2013. Immaten al impact on overall AuM of E3 million. 2013 has been a mixed year for Kleinwort Benson Wealth Management ("Wealth Management"). We have seen good growth in our asset base and loan portfolio, with growing momentum in the business reflected in the new business flows being generated by our senior banker hires, recent mandate wins and the quality of our pipeline. Against this, the business generated a segment loss of £11.7 million (€13.8 million), which was principally attributable to the challenging low interest rate and tight credit spread environment, our cautious approach to balance sheet management, as well as our programme of investment in banker hires and systems infrastructure enhancements. Continued good investment performance across our investment strategies Robust investment processes and performance are at the core of our value proposition to our clients. As part of this, we aim to achieve sustainable long-term returns across a range of investment strategies. We have been successful in achieving these aims, with our "balanced", and "steady growth" strategies all outperforming the peer group over the last four years, despite a slight underperformance within the "steady growth" category in 2013. 14% increase in Assets under Management (AuM) Total AuM across our deposit, discretionary investment and advisory investment offerings increased by 14% in 2013, ending the year at £5.9 billion (€7.1 billion) (31 December 2012: £5.2 billion (€6.4 billion)). Encouragingly, over half of this growth was due to £399 million of positive net inflows across both investing assets and deposits that were achieved despite the industry-wide challenges of the continued low-yield environment. Positive market movements accounted for a further £321 million of AuM growth compared with the 2012 year-end position. In the year, AuM within our discretionary and advisory investment offerings increased by 13% from £3.8 billion to £4.4 billion, with strong gross inflows generated by our new banker hires as they gained traction in the market. We had a number of notable mandate wins, including an advisory mandate for over £260 million secured by the Family Office that funded in the third quarter. The positive impact of these 10 EFTA00610798 trends was, however, partly offset by elevated levels of gross outflows. Similar to the trends previously reported, this was principally driven by the continued low-yield environment, which remains challenging for the wealth management industry as a whole, with 81% of gross outflows relating to retain