Building relationships

Annual Report & Accounts 2016

supporting our Clients’ aspirations B&C has further strengthened its foundation for the future and is well positioned to develop its strategy through consolidation and growth Contents

Overview 2 Strategy 2 Annual report Operational and Financial highlights 2 2016 Strategic Report 4 CEO’s review 4 Business model 6 Risk management and principal risks 7 Corporate responsibility 10

Governance Report 12 Chairman’s letter 12 Board of Directors 13

Corporate Governance Framework 16 Capital and Recovery Committee (CRCo) 18 Audit, Risk and Compliance Committee (ARCCo) 18 Nominations and Remuneration Committee (RemCo) 19 Executive Committee (ExCo) 20 Assets and Liabilities Committee (ALCo) 20 Legal, Risk and Compliance Committee (LRC) 20 Credit Committee (CC) 20 Relations with shareholders 20 Directors’ Report 21

Financial Statements 24 Independent Auditor’s Report 24 Statement of Profit or Loss and Statement of Other Comprehensive Income 26 Statement of Financial Position 27 Statement of Changes in Equity 28 Statement of Cash Flows 29 Notes to the Financial Statements 30

Company Information 56

Annual Report 2016 1 Overview

Strategy Deposits by account type B&C will grow by increasing its deposit taking, mortgage, and corporate lending activities in the UK, Europe and Canada. Notice accounts 17% NoticeFixed account terms B&C has three core businesses: 17% 12% Instant access i) Deposits – Savings and deposit accounts for retail 52% Fixed term and business clients covered by the Financial Services 12% Cash ISAs 52% 19% Instant access Compensation Scheme (FSCS) Notice accounts Cash ISAs ii) Mortgages – For clients whose requirements are not 19% Fixed term Notice accounts always met by the larger retail banks Instant access

Fixed term iii) Corporate loans – For medium and large enterprises to Cash ISAs Mortgages by type assist in their growth and development. Instant access

Cash ISAs Operational and Financial highlights 14% Commercial CommercialBuy to let • Tier 1 Capital of £8.9m and Tier 1 Capital Ratio of 49% 14% 16% (2015: £10.0m and 161%) Buy to let Commercial buy to let 69% • Net banking income of £2.0m (2015: loss of £0.3m) 16% 1% CommercialOwner buy occupieto let r

69% Commercial • Net loss after tax of £7.0m (2015: £5.3m) 1% Owner occupier Buy to let • Total assets of £105.0m (2015: £61.8m) Commercial Commercial buy to let • Total deposits of £94.0m (2015: £50.0m) Buy to let Owner occupier • Mortgage volume underwritten of £10.3m (2015: £0.1m) Corporate loans by country Commercial buy to let • Mortgage loans portfolio of £15.6m (2015: £6.2m) OwnerCanada occupier Canada • Corporate loans portfolio of £8.8m (2015: nil) United Kingdom United Kingdom

57% 43%

Canada Canada United Kingdom United Kingdom

57% 43%

2 Bank and Clients PLC Strategic Notice accounts 17% Fixed term 12% 52% Instant access Report Cash ISAs 19% Notice accounts

Fixed term

Instant access

Cash ISAs

14% Commercial Buy to let

16% Commercial buy to let 69% 1% Owner occupier

Commercial

Buy to let

Commercial buy to let

Owner occupier

Canada Canada United Kingdom United Kingdom

57% 43% Strategic Report

CEO’s review Embedding a distinct culture and sound governance throughout the Bank Growth by supporting clients during an uncertain B&C’s culture recognises the importance of clarity. During the year year, we chose to invest significant resources in the development Although economic discussion during the year has been of lasting structures and processes that will promote and sustain dominated by the UK’s EU referendum vote and the our culture and ambitions. The Chairman’s letter (on page 12) associated uncertainty for many businesses, 2016 has proven highlights these initiatives including our decision to adopt the to be a year of significant positive change for B&C. principles of the Financial Reporting Council’s UK Corporate Governance Code in our Annual Report where applicable In keeping with our strategy to support and finance our and relevant and a commitment to reviewing the expertise clients’ aspirations, we re-activated our deposit book, expanded and effectiveness of the Board as the business develops. Since our mortgage business and supported a number of clients with becoming Chairman in April 2016, Lord Strathclyde has corporate loans. B&C has further strengthened its foundation made a significant, positive contribution and I look forward to for the future and is well positioned to develop its strategy working with him in the future. through consolidation and growth.

By continuing to focus on market segments where we believe Business performance B&C has a competitive advantage and by maintaining our Deposits - The deposits team based in Yeovil responded to conservative approach to business development, we have renewed retail client activity following the re-launch of the focussed on ways to improve each of our three lines of Bank’s savings products in mid-2016. As a result, the Bank business: opened 1,036 new deposit accounts, raising in excess of £40m. This highlighted a number of areas for further operating Deposits – Savings and deposit accounts for retail and improvements in order to streamline our working processes business clients covered by the FSCS and accommodate technical developments. These will benefit our clients and our colleagues as we scale the business in Mortgages – For clients whose requirements are not always future. We also launched two Euro deposit accounts for met by the larger retail banks business clients in the first quarter of 2017. Corporate loans – For medium and large enterprises to assist Mortgages - As part of our lean operating structure, our in their growth and development. specialist, dedicated team worked closely with mortgage Strengthening the Bank’s operating capabilities brokers to develop tailored mortgage offers which meet the specific needs of clients such as those with complex income B&C has taken a number of steps to further embed its streams. In addition, the mortgage team has been expanded commitment to client service in order to promote long term to support future growth. The mortgage lending business, partnerships. This has been achieved by using our collective relaunched in mid-2015, began to gain real traction during and individual experience to deliver a range of financing 2016 with mortgages increasing from £6.2m to £15.6m. solutions for clients as well as from various improvements in our operating procedures. Corporate loans - Our team had a busy year developing new relationships in the UK, Western Europe and Canada during Having now completed a thorough review of back office 2016. B&C has considerable experience and a strong track operational efficiencies, the Bank will invest in a range of record in the corporate loan marketplace and therefore much resources, new systems and training to better serve our of our time was spent in building awareness of the Bank’s growing number of clients. The successful delivery of these expertise particularly amongst intermediaries advising mid-to- ongoing improvements will help to secure sustainable growth large enterprises. The Bank completed four loans with a value over the long term and to maintain a lean operating structure. of £8.8m during the year. In addition, fee income from the provision of advisory services of £1.6m was recognised.

One loan has not performed as expected due to materially adverse changes since the year end which have impacted its potential recoverability. In keeping with the Bank’s accounting policies, an impairment provision of £2.2m has been recognised.

4 Bank and Clients PLC Our progress in 2016 required particular dedication and professionalism from everyone at our offices and, on behalf of B&C has the Board, I would like to thank our colleagues for their hard work during the year. seen positive Outlook The focus of our priorities for the year ahead is to further consolidate the position of each of our business divisions and thereby capture greater value from our expertise and momentum in resources. Many of the operating challenges, expected when any businesses combine, are now behind us. We have a strong culture; our colleagues across the Bank are clear about the potential within the Bank and their role in its success. This our mortgage perspective leads to greater confidence in our ability to capture fully the opportunities of the future.

The macro-economic and political environment is likely to and corporate present continuing challenges and uncertainties both for our retail and corporate clients. This is an opportunity for B&C to strengthen relationships amongst a client base whose often loans businesses complex needs are increasingly difficult for many of the larger banks to accommodate. during the first

Pedro Errazuriz quarter of 2017 Chief Executive & Director 26 April 2017

The net banking income for the year ended 31 December 2016 was £2.0m (2015: loss of £0.3m). The increase in net banking income year on year was principally due to corporate advisory fee income of £1.6m. Operating expenditure for the year ended 31 December 2016 was £6.7m (2015: £5.0m). The increase in the Bank’s cost base is primarily attributable to the continued investment in staff in both business and support functions. Employment related costs increased by £1m year on year.

The net loss before taxation for the year ended 31 December 2016 was £7.0m (2015: £5.3m). The increase in loss year-on- year reflects an impairment provision of £2.2m as noted above.

The Bank continues to be well capitalised with an additional capital investment of £5.75m from existing shareholders in the year, bringing total CET1 capital to £8.9m (2015: £10.0m). A further investment of £3.25m was received in January 2017, bringing the total CET1 to £12.1m.

Annual Report 2016 5 Business model Deposit Book Savings and deposit accounts for retail and business clients

Client Benefits Bank Benefits • Competitive rates • Source of liquidity of interest • Deploys customer • Safe place to store service skills capital • FSCS Deposit protections apply

PRA FCA Deposits Interest authorises B&C monitors conduct received paid to accept deposits and governs provision by bank by bank and supervises of financial services to business execution retail and business customers

Payments Payments made by made by corporate mortgage borrowers borrowers Corporate Lending Portfolio Re-invested in Mortgage Book Portfolio people, systems Corporate and business Mortgages Loans development for Broker led over £1m stability and origination growth

Client Benefits Bank Benefits Client Benefits Bank Benefits • Allows businesses • Stable client • Funding received • Risk diversification, to grow and flourish relationships, large based on stable and loans and attractive personalised predictable returns returns, diversification Return on Capital underwriting profile, long life, loan from real estate backed by asset market

Capital Dividends Injections

Shareholders

6 Bank and Clients PLC Risk management and principal risks The Board sets the overall policies and procedures for the Bank, including the Bank’s overarching Risk Management The Bank’s Framework and Risk Appetite Statement, as well as policies and procedures related to funding, financial control, liquidity, lending, compliance (including the protection of deposits and fundamental client assets), culture and conduct.

The Board’s Audit, Risk and Compliance Committee (ARCCo) reviews the effectiveness of the Bank’s internal operating controls, sets out the internal audit programme and examines completed internal and external audit reports (for more details, please see the ARCCo report on page 18). principle is The Bank’s fundamental operating principle is to protect depositors’ assets to ensure they are repaid in accordance with their agreed terms while generating an acceptable return for its shareholders. The Bank is authorised by the to protect Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority and the PRA. Client deposits are eligible for the protection afforded by the Financial Services Compensation Scheme. depositors’ assets

The general principles which underpin B&C’s Risk Appetite Statement can be summarised as: • Balance Sheet Strength: B&C will maintain a high- The Bank has adopted a top-down and bottom-up approach quality capital base, targeting capital adequacy and liquidity to defining how the Business Plan and Risk Appetite requirements significantly in excess of PRA regulatory Framework interface with the business objectives and other minima. B&C’s sterling liquid assets are held directly with factors. In order to define the Risk Appetite Statement in the Bank of England qualitative and quantitative terms, B&C has identified three business objectives and 12 elements which are set out below: • Control Environment: B&C will ensure that the Bank’s control environment is fit for purpose, supporting the Business Compliance & business as it grows in terms of people, processes and Performance Infrastructure Conduct systems. B&C’s robust control environment provides the Profitability Systems & change Know Your Client discipline and structure to support our business objectives management and Anti Money • Minimise Unrewarded Risk: B&C’s remuneration policies Laundering do not incentivise staff to take unwarranted or undue risks. Capital People Clients The Bank’s Risk Appetite Statement is set annually by Liquidity Processes Regulators the Board and forms the basis for the Risk Management Growth & Outsourcing Culture Framework from which the Business Plan is implemented. Concentration While taking credit and interest rate risk, B&C does not engage in speculative trading and uses derivatives to manage financial risks such as currency and interest rate risks.

Annual Report 2016 7 B&C has also adopted the ‘three lines of defence’ model which is common across the industry and is set out in the diagram below:

Board

Audit, Risk and Executive Committee Compliance Committee External A udit

Ist Line of Defence 2nd Line of Defence 3rd Line of Defence

Business Units and Support Risk Oversight and Internal Audit Functions Compliance • Independent testing and • Management Controls • Risk Management Framework verification

• Internal Controls • Risk Monitoring • Independent assurance as • Compliance to the functioning of the Risk Management Framework

Principal risks Operational risk Operational Risk can arise from factors such as inadequate or In developing all elements of the Bank’s risk management failed internal processes or systems, human error or external processes, the Board has considered the following set of events. As a growing business, there is a risk that the Bank principal risks that have the potential to threaten B&C’s might not be able to recruit or retain an adequate number of Business Plan, future performance, solvency or liquidity. In skilled staff to meet its needs. general, the Board considers the risks the Bank will face over a five year time horizon. However, the Board chose to focus its Management and the Board regularly review a range of challenges on and review most closely the projections for 2016 operational indicators to ensure operations are conducted in and 2017, given the Bank’s rapid development. line with requirements. All key business processes are subject to periodic reviews by the Bank’s risk team and the internal Credit risk arising from loans and banking audit function to ensure that appropriate controls are in place counterparties and operating effectively. B&C has implemented a number Credit Risk can arise when a borrower or counterparty fails of measures to mitigate risks of business disruption or system to pay the interest or capital on a loan or other financial failures by working with backup, outsourced service providers. instrument. Macro-Economic risk The Board approves the Bank’s statement of Credit Risk Changes in macro-economic and market conditions could Appetite which sets out the level of risk exposure that the affect the Bank’s ability to acquire sufficient assets and Board considers acceptable and in line with B&C’s strategy. liabilities at an economic price. They could also lead to B&C further mitigates credit risk by ensuring that all a greater than expected level of loan book impairments, lending is carefully underwritten and secured and by closely negatively impacting the value of the loan book. monitoring the performance of individual loans on an ongoing basis. This process is overseen by executive management and regularly reported to the Board.

8 Bank and Clients PLC The Bank seeks to address these risks by building a diversified Regulatory risk portfolio of loans and maintaining a high-quality capital base. There is a risk that the Bank fails to comply with its regulatory The Bank has a capital adequacy ratio and liquidity levels requirements and amongst other matters: significantly in excess of PRA regulatory minima. • Treats clients unfairly, potentially exposing them to financial Interest rate risk or other detriment Interest rate changes can impact the value of or the net • Is subject to legal or regulatory sanction, including fines income, the Bank earns from its assets and liabilities. A prolonged period of low interest rates could reduce B&C’s net • Suffers reputational damage that limits its ability to attract interest margin, negatively impacting profitability. or retain clients • Is used for the purposes of financial crime Interest rate risk is monitored on an ongoing basis against the Risk Appetite Statement and policy approved by the Board. • Is unable to maintain sufficient capital to cover its regulatory B&C does not have any material exposure to interest rate or requirements. basis risk. Senior management has developed a range of policies and Liquidity risk guidelines to ensure compliance with regulation and a comprehensive training programme has been developed and Liquidity risk arises in the event that the Bank is unable to implemented. The Bank’s internal audit, compliance and risk meet its obligations as they fall due. teams regularly monitor performance to ensure compliance The Bank’s policy is to maintain a robust liquidity with all regulatory requirements. The Bank has had no management framework with a liquidity Risk Appetite material historic losses from any claims. Statement based on maintaining sufficient liquidity resources Legal risk in a variety of stress events. We proactively manage our liquidity position and this process is closely overseen by the The Bank could be subject to legal sanction or suffer material Assets and Liabilities Committee which reports to the Board financial and reputational damage as a result of legal risks. via ExCo. These risks could arise from issues such as the Bank’s failure to comply with the law, litigation risk, inadequately documented Capital risk contractual arrangements or a failure to assess and implement As a rapidly growing business, the Bank will have to raise changes required by new legislation or emerging case law. additional capital to meet its planned growth targets. We B&C manages and monitors these risks through the Legal, successfully raised £5.75m of capital in 2016 and a further Risk and Compliance Committee (LRC). £3.25m in January 2017.

We proactively manage our capital position and this process is closely overseen by the Capital and Recovery Committee (CRCo) which reports to the Board. B&C also maintains capital buffers significantly in excess of regulatory requirements. Foreign exchange rate risk Foreign exchange movements can impact the value of, or the net income the Bank earns from, its assets and liabilities.

In 2016, the Bank had a foreign currency exposure of £1.8m at the year end. The Bank plans to take foreign currency deposits in order to mitigate this risk and facilitate non- sterling lending.

Annual Report 2016 9 Corporate responsibility B&C considers its responsibility as a business in terms of The Bank’s serving specific groups: its clients, employees and the broader community. The economic environment in which the Bank operates affects both its operating strategy and its actions with regard to corporate responsibility. However, regardless focus is on areas of external factors, the Bank’s focus is on areas which align the aims of its business with its responsibilities as a corporate citizen. which align B&C considers the stakeholder issues stated below and implements a pragmatic programme of activities to address them, recognising that its actions need to be appropriate to the the aims of its size of the Bank today:

• Clients Customer service, access to responsible banking services, business with its financial security • Employees Diversity inclusion and workplace training responsibilities • Community We recognise that our contribution can extend beyond merely providing finance and a number of initiatives (charities, education projects) are actively being considered as a corporate in 2017. citizen

10 Bank and Clients PLC Governance Report Governance Report

Chairman’s letter Following a process managed by the Nominations and Remuneration Committee, I am delighted that Claire Bridel Dear Shareholder, agreed to become the Bank’s Chief Operating Officer (COO). Claire Bridel has significant experience as a COO in a number First of all, on behalf of the Board, I would like to thank of financial institutions and has been a Non-Executive Sandy Flockhart, my predecessor as Chairman, and Graham Director of the Board for two years. The Bank will benefit Hughes for their efforts in helping to establish B&C since significantly from her hands-on involvement. change in control and to wish them well in the future. This year also marks the first time that B&C has sought to During 2016, we continued to develop the Bank’s corporate adopt the principles of the Financial Reporting Council’s governance processes and are building a robust culture to UK Corporate Governance Code in its Annual Report where support B&C’s development in the years ahead. The Bank applicable and relevant. The Code provides an important has ambitious growth plans and their successful delivery will but flexible guide for establishing a robust and high quality depend on ensuring the implementation of an effective and system of corporate governance and we are committed to appropriate framework for scrutiny and review. communicating our performance in this area. During the year, the Board oversaw the implementation of The Board’s overall aim is to ensure that the Bank is managed the Bank’s Business Plan and worked with the executive team for the long term benefit of stakeholders and clients.T he to ensure that risks and operations were managed in line Board will continue to work closely with the Bank’s executive with agreed standards. In addition, the Board worked on two team to ensure that we deliver on our objectives in the important projects: developing the Bank’s culture across the year ahead. 2017 will be an important year for B&C as business; and reviewing the effectiveness and expertise of the we continue to develop the business and deliver a positive Board. financial performance. B&C was created in December 2014 from the combination of Finally, I would like to thank the Board for all their continued two businesses with strengths in retail and corporate banking. involvement and commitment. Ensuring the Bank’s culture supports the combination of these two different skill sets, whilst encouraging ethical behaviour and appropriate risk taking, will be vital to delivering long- term value. The Board therefore oversaw the development of a new initiative to define and communicate the key elements of the Bank’s culture to all staff. This includes the revised code Lord Strathclyde of conduct which will be rolled out across the business during Non-Executive Chairman 2017. 26 April 2017 It is important to ensure that B&C has access to the appropriate range of skills and experience to support its expansion whilst maintaining effective oversight. In April, Roger Barlow joined the Board in a non-executive capacity and in June became Chairman of the Audit, Risk and Compliance Committee. Roger is a former Audit Partner at KPMG and is the Chairman of Marsden Building Society. As such, he brings significant skills to the Board that will contribute to the future success of the Bank.

In order to ensure that the Board provides appropriate support and oversight of the business, it commissioned an independent review of its own effectiveness. The report’s conclusions were positive and found that the Bank’s systems of oversight were strong. To further improve scrutiny of the Bank’s development, we have arranged additional technical training for members of the Board. A board effectiveness review will be carried out annually.

12 Bank and Clients PLC Board of Directors Andrew Stevens Independent Non-Executive Directors Andrew is the co-founder and Chief Executive Officer of Fulcrum Asset Management, a London based, independently Lord Strathclyde owned, investment management company. Andrew’s career Independent Chairman began in the mergers & acquisitions department at Burns Fry, Lord Strathclyde became Chairman of B&C in June 2016. New York. Following this, he completed an MBA at Harvard He has a long and distinguished career in public service, and Business School and was appointed an Executive Director of was latterly Leader of the House of Lords and Chancellor of Investment Management at Goldman Sachs. the Duchy of Lancaster. He has served on the boards of several financial services companies including Scottish Mortgage William Charnley Investment Trust Plc, Marketform Plc, Hampden Agencies Chair of Nominations and Remuneration Committee and Ltd and Trafigura BV. Currently Lord Strathclyde is a senior Company Secretary adviser to international businesses and is Chairman of the William is a London based Partner and the Head of the Battersea Power Station Advisory Board. Corporate Practice at King & Spalding International LLP, a large global law firm. Roger Barlow Independent Chair of Audit, Risk and Compliance Committee He has broad corporate experience advising on IPOs and Roger has more than 40 years’ business and corporate securities offerings, takeovers, private equity transactions, experience and is a Chartered Accountant having been an mergers & acquisitions and joint ventures. William has Audit Partner at KPMG until 2000. Subsequently he was also advised bank boards on regulatory and policy changes, a CFO for an AIM listed corporate finance company and corporate governance and risk issues. is currently Non-Executive Chairman of Marsden Building Society, Non-Executive Director and Chair of Audit at UHSM NHS Foundation Trust, and the independent member of the Audit Committee at the Information Commissioner’s Office.

Richard Jeffrey Senior Independent Director Richard is the Chief Economist of Cazenove Capital Management which provides investment management services and wealth planning to private clients, family trusts and charities. He is an experienced professional economist and strategist, having held senior positions at companies including Hoare Govett, Charterhouse Securities, and Bridgewell. Richard is a member of the Finance Committee of Bristol University and has been involved with a number of policy and economic research organisations.

Peter Franklin Independent Peter has many years’ experience in financial services, more recently with GE Capital, the financing arm of General Electric, where he held senior positions in finance and corporate treasury. Peter began his career with HSBC and has also worked for Chase Manhattan and ANZ Bank. Most recently, Peter has acted for the EBRD as a Non-Executive Director of banks and finance companies in Poland, Romania and Turkey. Peter has held memberships of audit, risk and remuneration committees.

Annual Report 2016 13 Executive Directors Pedro Errazuriz Chief Executive & Director Pedro has been based in London for almost 20 years where he gained significant experience in the banking industry. After 8 years working within large investment banks, Pedro co- founded Ocean Capital Associates in 2002 to focus on lending money to medium to large companies in Europe and North America.

Claire Bridel Chief Operating Officer & Director Claire has more than 20 years’ experience in finance. Claire began her career at Coopers & Lybrand and has held a number of senior roles including EMEA Chief Operating Officer of Natixis CIB and Chief Operating Officer Europe and Middle East for FIMAT and Newedge. Claire also holds a Certificate in Quantitative Finance. Between 2011 and 2016 she worked as a consultant to support operational improvement programmes by advising COOs and CEOs of rapidly growing companies.

Nicole Coll Chief of Finance and Operations & Director Nicole joined B&C from the Bank of England where she held the position of Chief Financial Accountant. Nicole also served as the Head of Financial Control and CFO at Societe Generale Newedge in London for seven years and previously held senior finance positions at broker-dealers in New York and London. Nicole is a qualified chartered accountant having worked at Deloitte in South Africa and in the USA.

Edouard Bridel Head of Business Development & Director Edouard has been based in London for 25 years where he developed his expertise in the banking industry. After a career in large investment banks and mergers and acquisitions, Edouard co-founded Ocean Capital Associates in 2002 to focus on lending money to medium to large companies in Europe and North America.

14 Bank and Clients PLC Corporate Governance Framework Corporate Governance Framework

B&C has taken into account the provisions of the UK Corporate Governance Code (the Code) in so far as they are considered appropriate to the Bank’s size and circumstances. As a regulated institution, B&C also complies with the Prudential Regulatory Authority’s and Financial Conduct Authority’s rules, such as the Senior Managers Regime, Certification Regime and Fitness and Propriety Rules.

B&C Board of Directors

Nominations and Capital and Recovery Audit, Risk and Remuneration Committee Compliance Committee Committee Executive Committee

Purpose: Purpose: Purpose: Purpose: CRCo is responsible for ARCCo reviews the RemCo is responsible for ExCo oversees the day to reviewing the capital and effectiveness of internal deciding the remuneration of day running of the Bank, liquidity position of the Bank. controls, sets out the internal senior management and Board ensuring that operations are See page 18 for further details. audit programme and examines members, and for carrying implemented in a compliant completed internal and external out succession planning. It is manner. ExCo is responsible Membership: audit reports. also responsible for matters for implementing and Lord Strathclyde (Chair) It establishes and monitors the regarding the Board itself, maintaining the policies, Richard Jeffrey Bank’s compliance framework. including for reviewing the size, procedures, systems and Roger Barlow Significant financial reporting structure and composition of controls of the Bank and, Pedro Errazuriz judgements or estimates are the Board and appointing and as directed by the Board, Edouard Bridel reviewed and challenged by dismissing Board members. implementing the strategy and Nicole Coll the Committee. See page 19 for further details. Business Plan of the Bank. See page 20 for further details. The Bank’s risk profile is Membership: reviewed and monitored William Charnley (Chair) Membership: through the ongoing process Lord Strathclyde Pedro Errazuriz (Chair) of the identification, evaluation Richard Jeffrey Nicole Coll and management of all material Edouard Bridel risks including longer term Claire Bridel strategic threats to the Bank. See page 18 for further details. Membership: Roger Barlow (Chair) Peter Franklin Richard Jeffrey

16 Bank and Clients PLC Role of the Board Key Board roles The Chairman The Board of Directors includes the Independent Non- Executive Chairman, four Independent Non-Executive As well as coordinating the activities of the Board, Lord Directors, one Non-Independent Non-Executive Director and Strathclyde oversees the performance of the Board in four Executive Directors, as listed on pages 13 to 14. setting the Bank’s strategy and Risk Appetite Statement. The Chairman plays a key role in leading the Board’s work The Board was chaired by Sandy Flockhart until April in developing the Bank’s culture and in developing and 2016, when he stepped down. Following approval by the overseeing B&C’s policies and procedures for the recruitment, PRA, Sandy Flockhart was succeeded by Lord Strathclyde induction, training and development of all Directors. The in June 2016. In compliance with the Code, Non-Executive Chairman also plays an important role in maintaining Directors are appointed for a three year term, which can be dialogue with the Bank’s shareholders. extended following shareholder approval. B&C was created in December 2014 following the acquisition of Church The Chief Executive House Trust Ltd and all of the Non-Executive Directors were Pedro Errazuriz oversees the activities of the Bank on a day to appointed to the Board at that time. Therefore, a number day basis. The Chief Executive is accountable to the Board for of Non-Executive Directors will be subject to re-election by B&C’s operational and financial performance. shareholders in 2018. The Senior Independent Director The Board meets at least six times during the year based on Richard Jeffrey supports the Chairman in managing and a defined timetable and additionally when required. During coordinating the activities of the Board. In addition he acts, 2016, the Board met seven times. where necessary, as an intermediary for shareholders and is the whistleblowing champion. The Board is responsible for establishing the Bank’s business model, strategy and Risk Appetite Statement and approving Meeting Attendance related policy statements as well as appropriate challenge and oversight of the Executive Committee. These policy statements Board CRCo ARCCo RemCo establish the Bank’s overall approach to risk and set out the Sandy Flockhart1 2/2 1/1 control environment in which it operates. Implementation of these policies is the responsibility of the executive management Lord Strathclyde2 5/5 5/5 1/1 which reports to the Board. Pedro Errazuriz 7/7 5/5 7/73 B&C updated its Recovery and Resolution plans in June 2016 Richard Jeffrey 7/7 5/5 7/7 4/4 and established the Capital and Recovery Committee (CRCo) Andrew Stevens 5/7 as a sub-committee of the Board. This Committee meets 4 monthly to review the key metrics set out in the Recovery Claire Bridel 7/7 7/7 2/3 Plan. Roger Barlow² 4/5 5/5 4/4 The Board is also responsible for developing the culture of William Charnley 7/7 4/4 the Bank and ensuring that its activities are carried out in Peter Franklin 7/7 7/7 compliance with regulatory requirements. Edouard Bridel² 5/5 5/5 Nicole Coll 7/7 5/5 7/73 .1234.

1 Stepped down in April 2016 2 Appointed to the Board in April 2016 3 Invitee 4 Stepped down as Non-Executive Director in December 2016 following appointment as COO

Annual Report 2016 17 Training and Induction Audit, Risk and Compliance Committee To ensure effective oversight, B&C maintains a Board with (ARCCo) a mix of appropriate skills and current experience relevant to the Bank’s major business areas. B&C has developed and ARCCo is chaired by Non-Executive Director, Roger implemented a process to ensure the ongoing training of Barlow, who replaced Peter Franklin as chair in June 2016 existing Board members and to provide a thorough business following his appointment to the Board in April 2016. The induction for new Board appointees. The process, which is other Committee members are Peter Franklin and Richard overseen by the Chairman, is regularly updated and supported Jeffrey. Claire Bridel stepped down from the Committee by external, expert advisers as required. B&C operates a with immediate effect following her appointment as COO in new joiner induction programme and an on-going training December 2016. The Committee meets at least four times a programme for all employees which includes technical skills year and in 2016 met seven times. and regulatory updates. Pedro Errazuriz and Nicole Coll as well as senior members of Board Evaluation the internal audit and risk management teams attend ARCCo meetings as required. Evaluation of corporate governance is important to support the ongoing success of the Bank and the Board recognises ARCCo is responsible for: that the inclusion of Executive Directors who are also principal shareholders of the Bank is a particular feature of • Monitoring the integrity of the Bank’s financial statements its membership. As such the Board is subject to independent and the effectiveness of the Bank’s internal controls. Any review every two years and to its own formal and rigorous significant judgements or estimates in relation to financial performance review every year. reporting are reviewed and challenged by the Committee • Setting out the internal audit programme and examining The latest independent review was conducted in 2016. The completed internal and external audit reports. It considers review confirmed the overall effectiveness of the Board but the major findings and ensures that recommendations are identified several opportunities for improvement, in particular: implemented via the Executive Committee where necessary the provision of additional training for Non-Executive Directors. A supplemental training programme for NEDs has • Reviewing and monitoring the risk profile of the Bank therefore been developed and will be delivered in 2017. through the ongoing process of the identification, evaluation and management of all material risks including longer term The Board effectiveness review was shortly followed by a strategic threats to the Bank. The Committee also reviews, two day Board planning session to review B&C’s business challenges and recommends to the Board for approval, the strategy as well as initiatives to support the development and Risk Appetite Statement, risk measures, risk tolerance and maintenance of a culture that supports the achievement of the risk limits, taking into account the Bank’s capital adequacy Bank’s business objectives. requirements and the external financial environment. A risk monitoring dashboard with qualitative and quantitative metrics is reviewed quarterly by ARCCo Capital and Recovery Committee (CRCo) • Considering, overseeing and advising the Board on, and B&C proactively manages its capital position and this process testing the Bank’s exposure to, all significant risks to the is closely overseen by the Capital and Recovery Committee business to ensure that current and forward looking aspects which reports to the Board. B&C also maintains capital of risk exposure are examined, particularly for risks that buffers significantly in excess of regulatory requirements. could impact the strategy, reputation or long term viability of the Bank • Reviewing the performance of the external auditor, selecting and recommending their appointment and reappointment as well as approving their terms of reference and fees • ARCCo established the Bank’s compliance framework and is responsible for monitoring its ongoing implementation. ARCCo is also responsible for reviewing arrangements for employee whistleblowing in relation to confidential financial or other forms of impropriety.

18 Bank and Clients PLC Activities in 2016 The Committee is responsible for determining the appropriate During 2016, ARCCo’s work focussed on: composition of the Board by assessing a number of interrelated factors including: • Areas of judgement and estimate relevant to the Bank’s financial reporting. No significant issues arose in relation to • The time required from each Non-Executive Director in the financial statements in the current year order to fulfil his or her duties • Assessing the effectiveness of the external audit process by • The results of an annual review of the structure, size reviewing the plan for the external audit, considering the and composition (including the skills, knowledge and reports from the external auditor on accounting and control experience) of the Board matters, and engaging with them on key areas of judgement • Remuneration including recommendations to the Board • Monitoring the level of non-audit services provided by the with regard to any changes external auditors, the Committee did not consider the level • Identifying and nominating, for the approval of the Board, of such work to have impacted external auditor objectivity candidates to fill Board vacancies as and when they arise and nor independence during the year. Mazars were appointed making recommendations concerning their remuneration as the Bank’s external auditor in 2014; their appointment is assessed annually and subject to shareholder approval. • Consideration of succession planning, taking into account the challenges and opportunities facing the Bank as well as B&C has an outsourced internal audit function. ARCCo the skills and expertise needed on the Board in the future reviewed and approved the internal audit charter and planned in order to sustain the ability of the Bank to compete any internal audit reports. effectively in the marketplace During 2016, ARCCo reviewed and was satisfied by the • Preparing a description of the role and capabilities required adequacy and effectiveness of the compliance function and for a particular appointment, to be approved by the Board risk management systems. • Considering candidates from a wide range of backgrounds. Activities in 2016 Nominations and Remuneration The main areas considered by the Committee in 2016 were: Committee (RemCo) • The process of identifying and appointing a new Chairman RemCo is chaired by William Charnley and the other (Lord Strathclyde) member is Richard Jeffrey, Senior Independent Non-Executive • The appointment in April 2016 of a new Non-Executive Director. The Committee meets at least twice a year and in Director (Roger Barlow) with significant relevant audit and 2016 met four times. Claire Bridel was also a member of the financial services experience Committee during the year, having replaced Sandy Flockhart following his departure in April 2016, but stepped down • The appointment of Edouard Bridel as an Executive upon her appointment as COO in December 2016 and was Director responsible for Business Development in April replaced by Lord Strathclyde. 2016. Edouard Bridel had previously held the position of Chief of Strategy and Marketing at B&C No external search consultancies were used in 2016. The • Remuneration for the Non-Executive Directors and for Committee believes that it, and the Board collectively, has members of the Executive Committee and sufficient experience and contacts to identify the highly skilled and experienced individuals necessary to meet the • The appointment of Claire Bridel as COO. requirements of the Bank and the PRA without the need for Remuneration policy external support at this stage. B&C’s remuneration policies are designed to promote the long-term success of the company and do not encourage staff to take risks to enhance their personal remuneration.

B&C further considers the PRA’s Remuneration Code to the extent relevant. In addition, the Bank undertakes remuneration benchmarking reviews from time to time to ensure its remuneration policy is in line with market norms.

Annual Report 2016 19 Diversity Relations with Shareholders B&C does not currently have a formal diversity policy, but The Board considers maintaining good relations with its the Board recognises the ethical and commercial benefits shareholders very seriously and provides regular updates as of a diverse workforce when making recruitment decisions. to the performance of the Bank through a range of channels Currently 48% of the Bank’s employees are women and including face to face meetings and financial reporting.T he women make up a significant portion of the client base. Bank is privately owned and the Board is responsible for ensuring As B&C develops and expands, the Board is committed to that a positive dialogue with shareholders takes place under the adopting a formal diversity policy to ensure the Bank benefits stewardship of the Chairman and the Senior Independent Non- from a wide range of skills and expertise. Executive Director, Richard Jeffrey.

Executive Committee (ExCo) The Executive Committee oversees the day to day running of the Bank, ensuring that operations are implemented in a The Executive compliant manner and in-line with the agreed Business Plan. The Executive Committee is responsible for implementing and maintaining the policies, procedures, systems and controls of the Bank and, as directed by the Board, implementing the Committee strategy and Business Plan of the Bank. To aid it in its work, the Executive Committee oversees three further committees, each responsible for a different area of oversight: oversees the day to

Assets and Liabilities Committee (ALCo) Chaired by the Chief of Finance and Operations, the Assets day running of the & Liabilities Committee ensures that assets and liabilities are appropriately managed, and that the impact on capital of ExCo decisions is understood and monitored. The Committee Bank, ensuring manages interest rate, market and liquidity risks, and oversees and manages balance sheet risk. that operations are Legal, Risk and Compliance Committee (LRC) Chaired by the Chief of Technology and Programs implemented in a (Operational Risk Oversight), the Legal, Risk and Compliance Committee ensures appropriate policies, procedures and controls are in place, monitors risk related issues and ensures compliant manner regulatory obligations are met, and ensures business continuity plans are in place and tested. and in-line Credit Committee (CC) Chaired by the Chief of Credit Risk Oversight, the Credit Committee provides credit approval, reviews and implements with the agreed credit policy and monitors aggregate exposures and asset performance. Business Plan

20 Bank and Clients PLC Directors’ Report Going concern The going concern of the Bank is dependent on successfully The Directors present their Annual Report and the audited funding the financial position and maintaining adequate levels financial statements for the year ended 31 December 2016. of capital. In order to satisfy themselves that the Bank has Directors adequate resources to continue to operate for the foreseeable future, the Directors have considered a number of principal A full list of the Directors for the year ended 31 December risks and uncertainties which are set out in the Strategic 2016 can be found on pages 13-14. Report and additionally have considered projections for the As indicated in the 2015 Annual Report, the following Bank’s capital and funding position. changes to the Board of Directors were approved on 7 April Having considered these and made appropriate enquiries, 2016: the Directors consider that the Bank has adequate reserves, Lord Strathclyde was appointed as a Non-Executive Director including taking into account capital raising plans for 2017, to and Chairman continue in business for the foreseeable future. It is therefore appropriate to continue to adopt the going concern basis in Roger Barlow was appointed as a Non-Executive Director preparing the accounts. Edouard Bridel was appointed as an Executive Director Pensions Sandy Flockhart resigned as a Non-Executive Director and The Bank does not operate any defined benefit pension Chairman schemes. There is a defined contribution pension scheme in place for those ex-Church House Trust staff employed by In addition, Graham Hughes resigned as an Executive B&C. As of August 2017, B&C will auto-enrol all staff in Director on 27 May 2016. Claire Bridel, a Non-Executive the defined contribution pension scheme as is required by Director, was appointed as an Executive Director in December legislation. 2016 and as a result she stepped down from the ARCCo and Nominations and Remuneration Committee. Anti-bribery and corruption B&C reviewed and updated its anti-bribery and corruption Directors’ powers and indemnities programme including a review of all relevant policies and Specific indemnities are in force under which the Bank procedures pertaining to areas of financial crime, bribery agrees to indemnify each Director individually, to the extent and corruption, whistleblowing, expenses including gifts & permitted by law and the Bank’s articles of association, in entertainment, potential conflicts of interests, procurement respect of all losses arising out of, or in connection with, as well as charitable and political giving. B&C has a zero the execution of their powers, duties and responsibilities, as tolerance approach to bribery and corruption and senior Directors of the Bank. management is actively involved in monitoring the Bank’s programmes and in educating staff. The Chair of the The Bank has also arranged Directors’ and Officers’ Insurance ARCCo is ultimately responsible for overseeing the effective on behalf of the Directors in accordance with the provisions of implementation of the Bank’s programme. the Companies Act 2006. Dividends and share issuance During the year, 5.75m shares in the Bank were issued. No dividends were paid in 2016. A further 3.25m shares were issued in January 2017.

Annual Report 2016 21

StNotesAtEMEN fort the OF FINANCIAL fiNaNcial POSI statemetIONNts (coNtiNued) forAS At the 31 D yearECEMBER eNded 2016 31 december 2016

2016 2015 Assets Note £’000 £’000 Corporate governance statement In preparing these financial statements, the Directors are The Bank’s Corporate Governance Report is set out on pages Cashrequired and balances to: with central banks 13 77,535 51,520 12 to 14. • Select suitable accounting policies and then apply them Loans and advances to banks 12 4,466 2,906 consistently B&C has adopted the provisions of the Code where relevant and applicable in 2016 with the exception of the following: Loans• Make and judgementsadvances to customersand accounting estimates that are 14 22,068 6,225 reasonable and prudent • B.2.1. regarding the composition of RemCo – A majority Investment securities 15 77 198 of members are independent however the Chairman, • State whether IFRS as adopted by the European Union have William Charnley, does not meet the Code’s definition Property,been plantfollowed and subjectequipment to any material departures disclosed 17 452 604 of independent. Notwithstanding this fact, the Board and explained in the financial statements is confident that William Charnley’s experience and Prepayments• Provide additionaland accrued disclosures income when compliance with 431 363 knowledge outweigh his lack of independence specific requirements in IFRS is insufficient to enable users Other debtors 1 17 • B.7.1. relating to the election of Directors by shareholders – to understand the impact of particular transactions, other 9 The Board believes that it would be valuable to comply with events and conditions on the entity’s financial position and Total assets 105,048 61,833 this provision and will review its position on this matter financial performance; and during 2017 and • Prepare the financial statements on the going concern basis • E2 to E2.4. relating to the conduct of general meetings – Liabilitiesunless it is inappropriate to presume that the Bank will The absolute number of shareholders and the number of continue in business. Customer accounts 19 94,012 50,340 shares held by each shareholder respectively does not, in The Directors are responsible for keeping adequate accounting the Board’s view, justify the cost and complexity required Otherrecords liabilities that are sufficient to show and explain the Bank’s 20 898 462 to meet the many administrative requirements of these transactions and disclose with reasonable accuracy at any time provisions. With respect to shareholder communication Accrualsthe financial and deferred position income of the Bank and enable them to ensure 21 1,153 804 provision, the Annual General Meeting (AGM) is not a that the financial statements comply with the Companies Act valuable forum given that shareholders are represented Total2006. liabilities They are also responsible for safeguarding the assets 96,063 51,606 comprehensively on the Board. of the Bank and hence for taking reasonable steps for the Subsequent events prevention and detection of fraud and other irregularities. Equity In January 2017, a further capital injection of £3.25m was Auditor and disclosure of information to the auditor received from Ocean Industries S.A. CalledSo far up as share every capital Director is aware at the date of this report, 22 21,152 15,402 there is no relevant audit information needed in preparation Matters considered in the Strategic Report Retained earnings (12,167) (5,175) In accordance with s414C(11) of the Companies Act, the of the auditor’s report of which the auditor is not aware. The Directors have taken the steps they need to have taken Directors have included in the Strategic Report such matters Total equity 8,985 10,227 otherwise required by regulations made under s416(4) to be as Directors to make themselves aware of any relevant audit disclosed in the Director’s Report, as the Directors consider Totalinformation liabilities and and to equity establish that the auditor is also aware of 105,048 61,833 them to be of strategic importance to the Bank. These that information. include setting out the future developments, financial risk Mazars LLP is the appointed external auditor in accordance management objectives and policies. thewith notes Section on pages 489 30of theto 55 Companies form an integral Act 2006. part Mazars of these LLP financial statements. will be proposed for reappointment at the Annual General Directors’ statement of responsibilities the financial statements were approved and authorised for issue by the Board and were signed on its Meeting of the Bank at which the Bank’s annual accounts and behalf o 2017. The Directors are responsible for preparing the Strategic reportsn 26for Aprilthe previous financial year are laid. Report, Directors’ Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance Pedro Errazuriz with International Financial Reporting Standards (IFRS) as PedroChief Errazuriz Executive & Director adopted by the European Union and applicable law. Under Chief26 AprilExecutive 2017 Officer company law the directors must not approve the financial Company Registeration Number: 00980698 statements unless they are satisfied that they give a true and fair view of the state of affairs of the Bank and of the profit or loss of the Bank for that period. ANNuAL REPORt 2016 27

22 Bank and Clients PLC

Financial Statements For the year ended 31 December 2016 INDEPENDENNotes for theT A FUiDInaTnOR’Scial REPOR StatemeT nts (Continued) TforO T theHE MEMBERS year ended OF BANK 31 December AND CLIEN 2016TS PLC

We have audited the financial statements of Bank & Clients Opinion Plc for the year ended 31 December 2016 which comprise the statement of profit or loss and statement of other In our opinion the financial statements: comprehensive income, statement of financial position, • Give a true and fair view of the state of the Bank’s affairs statement of changes in equity, statement of cash flows and as at 31 December 2016 and of the loss for the year then the related notes. The Financial Reporting Framework that ended has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as • Have been properly prepared in accordance with IFRSs as adopted by the European Union. adopted by the European Union and • Have been prepared in accordance with the requirements of the Companies Act 2006. Respective responsibilities of Directors and auditor Opinion on other matters prescribed by As explained more fully in the Directors’ Responsibilities the Companies Act 2006 Statement (set out on page 22), the Directors are responsible for the preparation of the financial statements and for being In our opinion, based on the work undertaken in the course of satisfied that they give a true and fair view. the audit:

Our responsibility is to audit and express an opinion on • The information given in the Strategic Report and the financial statements in accordance with applicable law Directors’ Report for the financial year for which the and International Standards on Auditing (UK and Ireland). financial statements are prepared is consistent with the Those standards require us to comply with the Auditing financial statements and Practices Board’s Ethical Standards for Auditors. This report • The Strategic Report and the Directors’ Report have been is made solely to the parent company’s members, as a body in prepared in accordance with applicable legal requirements. accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company’s members as a body for our audit work, for this report, or for the opinions we have formed.

Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s web-site www.frc.org.uk/auditscopeukprivate

24 Bank and Clients PLC Matters on which we are required to report by exception In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • The parent company financial statements are not in agreement with the accounting records and returns; or • Certain disclosures of Directors’ remuneration specified by law are not made; or • We have not received all the information and explanations we require for our audit.

Greg Simpson Senior Statutory Auditor for and on behalf of Mazars LLP Chartered Accountants and Statutory Auditor Tower Bridge House St Katharine’s Way London E1W 1DD

26 April 2017

Annual Report 2016 25 StNotesatemen fort the of P Frofiinantcial or L Sosstateme nts (Continued) forand the Stat yearemen etn ofded Ot 31her December Comprehensive 2016 Income For the year ended 31 December 2016

2016 2015 Statement of Profit or Loss Note £’000 £’000

Interest income 2 1,232 768

Interest expense 3 (952) (1,015)

Net interest income/(expense) 280 (247)

Fee and commission income 4 1,749 24 Fee and commission expense 5 (55) (63)

Net fee and commission income/(expense) 1,694 (39)

Net banking income/(expense) 1,974 (286)

Operating expenses 6 (6,726) (4,890) Impairments 9 (2,240) (76)

Total expenditure (8,966) (4,966)

Loss for the year before taxation (6,992) (5,252)

Taxation 10 - -

Loss for the year attributable to owners (6,992) (5,252)

2016 2015 Statement of Other Comprehensive Income £’000 £’000

Other comprehensive income - -

Total comprehensive loss for the year attributable to owners (6,992) (5,252)

The notes on pages 30 to 55 form an integral part of these financial statements.

26 Bank and Clients PLC StNotesStNotesAattEMENemen for fort tthe OFthe ofFINANCIAL ffinancial FiNinaaNncialcial POSI sposi StatemetatemettIONionNntsts ( c(CooNntitiNnued)ued) AforAforSsA at thet the31 31 D yearD ECEMBERyearecember e eNndedded 2016 2016 31 31 d Decemberecember 2016 2016

2016 2016 20152015 AssetsAssets NoteNote £’000£’000 £’000£’000

CashCash and and balances balances with with central central banks banks 1313 77,53577,535 51,52051,520

LoansLoans and and advances advances to to banks banks 1212 4,4664,466 2,9062,906

LoansLoans and and advances advances to to customers customers 1414 2222,068,068 6,2256,225

InvestmentInvestment securities securities 1515 7777 198198

Property,Property, plant plant and and equipment equipment 1717 452452 604604

PrepaymentsPrepayments and and accrued accrued income income 431431 363363

OtherOther debtors debtors 1919 1717

TotalTotal assets assets 10105,0485,048 61,83361,833

LiabilitiesLiabilities

CustomerCustomer accounts accounts 1919 94,01294,012 50,34050,340

OtherOther liabilities liabilities 2020 898988 462462

AccrualsAccruals and and deferred deferred income income 2121 1,1531,153 804804

TotalTotal liabilities liabilities 96,96,063063 51,60651,606

EquityEquity

CalledCalled up up share share capital capital 2222 21,15221,152 15,40215,402

RetainedRetained earnings earnings ((12,167)12,167) (5,175)(5,175)

TotalTotal equity equity 8,9858,985 10,22710,227

TotalTotal liabilities liabilities and and equity equity 10105,0485,048 61,83361,833 theThe notes notes on on pages pages 30 30 to to 55 55 form form an an integral integral part part of ofthese these financial financial statements. statements. theThe financial financial statements statements were were approved approved and and authorised authorised for for issue issue by bythe the Board Board and and were were signed signed on on its its behalf behalfon 26 o nApril 26 April 2017. 2017.

Pedro Errazuriz PedroChief Errazuriz Executive Officer ChiefCompany Executive Registeration Officer Number: 00980698 Company Registeration Number: 00980698

ANNuAL REPORt 2016 27 Annual Report 2016 27 STATEMENT OF CHANGES IN EQUITY AS AT 31 December 2016

Share Retained Total capital earnings equity £’000 £’000 £’000

As at 1 January 2016 15,402 (5,175) 10,227

Loss for the year - (6,992) (6,992)

Total comprehensive income for the year - (6,992) (6,992)

Transactions with equity holders recognised in equity: Issue of share capital 5,750 - 5,750

As at 31 December 2016 21,152 (12,167) 8,985

As at 1 January 2015 7,252 77 7,329

Loss for the year - (5,252) (5,252)

Total comprehensive income for the year - (5,252) (5,252)

Transactions with equity holders recognised in equity: Issue of share capital 8,150 - 8,150

As at 31 December 2015 15,402 (5,175) 10,227

The notes on pages 30 to 55 form an integral part of these financial statements.

28 Bank and Clients PLC Statement of cash flows AS AT 31 December 2016

2016 2015 Note £’000 £’000 Net cash flows from operating activities Loss before taxation (6,992) (5,252) Adjusted for: Depreciation 6 & 17 197 197 Profit on disposal of assets 16 (8) - Net impairment losses 9 2,240 75 Other non-cash movements - 35 (4,563) (4,945) Changes in Net (increase)/decrease in loans and advances to customers 14 (18,101) 1,514 Net (increase)/decrease in other debtors (2) 26 Net (increase) in prepayments and accrued income (68) (236) Net increase/(decrease) in customer accounts 18 43,672 (21,211) Net decrease on other creditors 20 436 215 Net increase/(decrease) in accruals and deferred income 21 349 (228) Net cash inflow/(outflow) from operating activities 21,723 (24,865)

Net cash flows from investing activities Purchase of available for sale investment securities - (152,872) Proceeds from sale and redemption of available for sale investment securities - 214,767 Purchase of other available for sale investments - (453) Receipts from other available for sale investments 139 181 Purchase of property, plant and equipment 17 (82) (462) Proceeds from the sale and property, plant and equipment 16 45 - Net cash flows from investing activities 102 61,161

Net cash flows from financing activities Issuance of share capital 21 5,750 8,150 Net cash used in financing activities 5,750 8,150

Net increase in cash and cash equivalents 27,575 44,446 Cash and cash equivalents at 1 January 54,426 9,980 Cash and cash equivalents at 31 December 2016 13 82,001 54,426

The notes on pages 30 to 55 form an integral part of these financial statements.

Annual Report 2016 29 Notes for the Financial Statements for the year ended 31 December 2016

1. Accounting Policies A summary of the material accounting policies is set out below.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements. 1.1 Reporting entity Bank and Clients Plc is a bank incorporated and registered in England and Wales. The Bank’s core business lines are deposits, mortgages and corporate loans. 1.2 Basis of accounting The Bank financial statements, which should be read in conjunction with the Strategic Report and the Directors’ Report, have been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU). The financial statements are drawn up in accordance with the Companies Act 2006. 1.3 Going concern The Business Plan of the Bank shows that the Bank will be loss making in 2017, returning to profitability in 2018.T he aim is to organically grow the mortgage book and corporate lending in order to increase income generation. The parent company contributed share capital of £5.75m in 2016 and has contributed a further £3.25m in 2017.

Having considered the Business Plan and made appropriate enquiries, the Directors consider that the Bank has adequate reserves, including taking into account capital raising plans for 2017, to continue in business. It is appropriate to continue to adopt the going concern basis in preparing the financial statements. 1.4 Basis of measurement The financial statements have been prepared under the historical cost convention except for the following items in the statement of financial position which have been measured at fair value: • Available-for-sale financial assets 1.5 Functional and presentation currency The Bank’s financial statements are presented in Pounds Sterling, which is the Bank’s functional currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Monetary items denominated in foreign currency are translated at the prevailing exchange rate at the reporting date. Foreign exchange gains and losses resulting from restatement and settlement of such transactions are recognised in the statement of profit or loss. 1.6 Interest income and expense Interest income and expense are recognised in the statement of profit or loss for all instruments measured at amortised cost using the effective interest rate method.

The effective interest rate method calculates the amortised cost of a financial asset or a financial liability, and allocates the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all amounts received or paid by the Bank that are an integral part of the overall return, direct incremental transaction costs related to the acquisition or issue of a financial instrument and all other premiums and discounts.

Once a financial asset or group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the original effective interest rate used to discount the future cash flows for the purpose of measuring the impairment loss.

30 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

1. Accounting Policies (Continued) 1.7 Fees and commissions Where they are not included in the effective interest rate calculation, fees and commissions are recognised on an accruals basis when the service has been provided or received. Loan commitment fees for loans that are likely to be drawn down are deferred (together with related incremental direct costs) and recognised as an adjustment to the effective interest rate on the loan. Insurance commissions are recognised in the period in which they are earned. Corporate advisory fees are recognised when the related performance obligations have been met. 1.8 Financial instruments Financial assets can be classified in the following categories: • Loans and receivables; and • Available for sale Management determines the classification of its financial instruments at initial recognition.T he Bank measures all of its financial liabilities at amortised cost. Purchases and sales of financial assets available-for-sale are recognised on the trade date – the date on which the Bank commits to purchase or sell the asset.

Loans and receivables at amortised cost The Bank’s loans and advances to banks and customers are classified as loans and receivables. Loans and receivables are non- derivative financial assets with fixed or determinable payments that are not quoted in an active market, whose recoverability is based on the credit risk of the customer and collateral and where the Bank has no intention of trading the loan. Both loans and receivables and financial liabilities are initially recognised at fair value including direct and incremental transaction costs. Subsequent recognition is at amortised cost using the effective interest rate method less any provision for impairment.

Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a currently legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

Available-for-sale financial assets Available-for-sale financial assets are non-derivative assets that are either designated as available-for-sale or are assets that do not meet the definition of loans and receivables and are not derivatives or assets held at fair value through profit or loss.T hese can comprise of investment securities intended to be held for an indefinite period of time which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. They are initially measured at fair value including direct and incremental transaction costs. Fair values are obtained from quoted market prices in active markets or for unquoted investments using modelling techniques. Subsequent measurement is at fair value, with changes in fair value being recognised in other comprehensive income except for impairment losses and translation differences, which are recognised in the statement of profit or loss. Upon derecognition of the asset, or where there is objective evidence that the investment security is impaired, the cumulative gains and losses recognised in other comprehensive income are removed from other comprehensive income and recycled to the statement of profit or loss.

Financial liabilities Borrowings, including deposits and debt securities in issue are recognised initially at fair value, being the issue proceeds net of premiums, discounts and transaction costs incurred. All borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is adjusted for the amortisation of premiums, discounts and transaction costs. The amortisation is recognised in interest expense using the effective interest rate method. The Bank does not hold any financial liabilities classified as held for trading (2015: none).

Annual Report 2016 31 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

1. Accounting Policies (Continued) 1.9 Impairment losses The Bank assesses its financial assets or groups of financial assets for objective evidence of impairment at each reporting date. An impairment loss is recognised if, and only if, there is a loss event (or events) has occurred after initial recognition and on or before the reporting date, that has a reliably measurable impact on the estimated future cash flows of the financial assets or groups of financial assets. Losses that are incurred as a result of events occurring after the reporting date are not recognised in these financial statements.

Assets held at amortised cost The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. Objective evidence that a financial asset is impaired includes observable data that comes to the attention of the Bank about the following loss events:

• Significant financial difficulty of the issuer or obligor • A breach of contract, such as a default or delinquency in interest or principal repayments • The lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider • It becomes probable that the borrower will enter bankruptcy or other financial reorganisation • The disappearance of an active market for that financial asset because of financial difficulties • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of assets since the initial recognition of those assets, although the decrease cannot yet be identified within the individual financial assets in the portfolio, including: i) Adverse changes in the payment status of borrowers in the portfolio ii) Economic conditions that correlate with defaults on the assets in the portfolio. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. In assessing collective impairment the Bank uses statistical modelling of historic trends to assess the probability of a group of financial assets going into default and the subsequent loss incurred. Regular model monitoring is performed to ensure model assumptions remain appropriate.

Assets that are individually assessed and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an impairment allowance and the amount of the loss is recognised in the income statement. In future periods the unwind of the discount is recognised within interest income.

When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are recognised directly in the income statement. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the customer’s credit rating), the previously recognised impairment loss is reversed by adjusting the impairment allowance. The amount of the reversal is recognised in the income statement.

An individual provision is also made in the case of accounts, which may not currently be in arrears, where the Bank has exercised forbearance in the conduct of the account. The provision is based on the propensity of the account to realise a loss, had forbearance not been shown. Normal impairment procedures are followed.

32 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

1. Accounting Policies (Continued) 1.9 Impairment losses (Continued) Available-for-sale financial assets For available-for-sale financial assets, the Bank assesses at each reporting date whether there is objective evidence that a financial asset, or group of financial assets are impaired.T he amount of the loss is measured as the difference between the asset’s acquisition cost less principal repayments and amortisation and the current fair value. The amount of the impairment loss is recognised in the income statement. This includes cumulative gains and losses previously recognised in other comprehensive income which are recycled from other comprehensive income to the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the income statement. 1.10 Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise balances repayable on demand, including cash and non-restricted balances with central banks. 1.11 Taxation Taxation comprises current tax and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that they are items that are recognised directly in equity or other comprehensive income.

Current tax is based on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 1.12 Property, plant and equipment and depreciation Property, plant and equipment are stated at cost less accumulated depreciation and provision for impairment as appropriate. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Additions and subsequent expenditure are included in the asset’s carrying value or are recognised as a separate asset only when they improve the expected future economic benefits to be derived from the asset. All other repairs and maintenance are charged to the income statement in the period in which they are incurred.

Depreciation is provided using the straight line method to allocate costs less residual values over estimated useful lives, as follows: Freehold property – Buildings 50 years Office equipment 3-10 years

Assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. 1.13 Impairment of property, plant and equipment Property, plant and equipment assets are assessed for indications of impairment at each reporting date, or more frequently where required by events or changes in circumstances. If indications of impairment are found, these assets are subject to an impairment review.

Annual Report 2016 33 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

1. Accounting Policies (Continued) 1.14 Provisions Provisions are recognised for present obligations arising from past events where it is more likely than not that outflows of resources will be required to settle the obligations and they can be reliably estimated.

Contingent liabilities are possible obligations whose existence depends upon the outcome of uncertain future events or are present obligations where the outflows of resources are uncertain or cannot be reliably measured. Contingent liabilities are not recognised in the financial statements but are disclosed unless they are remote. 1.15 Pension and employee benefits The Bank operates a defined contribution pension scheme for those ex Church HouseT rust staff employed by the Bank. The pension charge represents the amounts payable by the Bank to the fund in respect of the year. 1.16 Accounting estimates and judgements The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, actual results ultimately may differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below:

Impairment losses on loans and advances Individual impairment losses on loans and advances are calculated based on an individual valuation of the underlying asset. Collective impairment losses on loans and advances are calculated using a statistical model. The key assumptions used in the model are the probability of any balance entering into default in the next 24 months as a result of an event that had occurred prior to the reporting date, the probability of this default resulting in possession or write off and the subsequent loss incurred. These key assumptions are based on observed data trends and are updated within an agreed methodology to ensure the impairment allowance is entirely reflective of the current portfolio.T he accuracy of the impairment calculation would therefore be affected by changes to the economic situation and assumptions which differ from actual outcomes.

In respect of the retail lending portfolio, to the extent that the loss given default differs by +/- 10%, the impairment allowance would be an estimated less than £1,000 higher (2015: £1,000) or less than £1,000 lower (2015: £1,000) respectively.

In respect of the corporate loan portfolio, the Bank has recognised an impairment provision on one of its loans. The Bank is seeking to enforce its security which may lead to some subsequent recoveries.

Fair value calculations Management must use judgement and estimates calculating fair value where not all necessary inputs are observable or where factors specific to the Bank’s holdings need to be considered.T he accuracy of the fair value calculations would therefore be affected by unexpected market movements, inaccuracies within the models used compared to actual outcomes and incorrect assumptions.

Deferred Tax The recognition of a deferred tax asset relies on an assessment of the profitability and sufficiency of future taxable profits. As a result of prior and current year trading losses, the Bank has carried forward tax losses for which no deferred tax asset has been recognised in the financial statements for the year ended 31 December 2016.

1.17 Accounting developments There were no new standards, amendments to standards or interpretations applied during the year ended 31 December 2016, that had a material impact on the financial statements.

The International Accounting Standards Board (IASB) has published a number of minor amendments to IFRS through the Annual Improvements IFRS 2012-2014 cycle and in a series of standalone amendments, one of which has not yet been endorsed for use in the EU. The Bank has not early adopted any of the amendments effective after 31 December 2016 and expects that they will have an insignificant effect, when applied, on the financial statements.

34 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

1. Accounting Policies (Continued) 1.18 Standards, interpretation and amendments to published standards that are not yet effective and the early adoption of standards The Bank has not early adopted any standards or interpretations during 2016.

At the date of authorisation of these financial statements the following standards, amendments and interpretations are in issue but not yet effective. These standards, amendments, and interpretations have not been adopted early and have not been applied to these financial statements.

Pronouncement Nature of change Effective date IFRS 9 Financial In July 2014, the IASB published IFRS 9 ‘Financial Instruments’ which is the Annual reporting Instruments comprehensive standard to replace IAS 39 ‘Financial Instruments: Recognition and periods beginning Measurement’, and includes requirements for classification and measurement of on or after 1 financial assets and liabilities, impairment of financial assets and hedge accounting. January 2018 Given the nature of the Bank’s operations, IFRS 9 is expected to have an impact on its financial statements.T he Bank has begun to consider the implications of IFRS 9, credit risk methodologies are currently being defined and financial reporting systems and reporting requirements are being developed. The impact of IFRS 9 on the mortgage loan portfolio is not expected to be significant.T he Bank is currently assessing the potential impact on the corporate loan portfolio. IFRS 15 Revenue IFRS 15 provides a principle-based approach for revenue recognition, and Annual reporting from Contracts with introduces the concept of recognising revenue for obligations as they are satisfied. periods beginning Customers The standard should be applied retrospectively, with certain practical expedients on or after 1 available. The Bank has assessed the impact of IFRS 15 and it is expected that January 2018 the standard will not have a significant effect, when applied, on the financial statements. IFRS 16 Leases IFRS 16 results in lessees accounting for most leases within scope of the standard Annual reporting in a manner similar to the way in which finance leases are currently accounted periods beginning for under IAS 17 ‘Leases’. Lessees will recognise a ‘right of use’ asset and a on or after 1 corresponding financial liability on the statement of financial position.T he asset January 2019 will be amortised over the length of the lease and the financial liability measured at amortised cost. Lessor accounting remains substantially the same as in IAS 17. The Bank has begun to consider the implications of IFRS 16 but has not at this stage fully evaluated its effect on its financial statements.

Annual Report 2016 35 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

2. Interest income 2016 2015 £’000 £’000 Cash and balances with central banks 208 36 Loans and advances to banks - 8 Loans and advances to customers 991 460 Investment securities 33 264

Total interest income 1,232 768

Included in the above is £45,000 (2015: nil) related to an impaired corporate loan.

3. Interest expense 2016 2015 £’000 £’000 Customers’ accounts 952 1,015 Total interest expense 952 1,015

4. Fee and commission income 2016 2015 £’000 £’000

Corporate advisory fees 1,645 - Banking fees and commission 102 20 Insurance commission - 3 Other fees 2 1 Total fee and commission income 1,749 24

5. Fee and commission expense 2016 2015 £’000 £’000 Mortgage start up fees 55 10 Custodian and similar fees - 53 Total fee and commission expense 55 63

36 Bank and Clients PLC 1.19 Standards, interpretation and amendments to published standards that are not yet effective and the early adoption of standards (Continued)

Notes for the Financial Statements (Continued) for the year ended 31 December 2016

6. Operating expenses 2016 2015 £’000 £’000 Administrative expenses 6,537 4,693 Depreciation 197 197 Profit on sale of land and buildings (8) - Total operating expense 6,726 4,890

Administrative expenses Wages and salaries 2,551 1,693 Social security costs 311 182 Pension costs 41 36 Total employee costs 2,903 1,911 FSCS levies 16 39 Other administrative costs 3,618 2,743 Total administrative costs 6,537 4,693

2016 2015 Number Number Office staff 39 26

Auditors remuneration included in administrative costs

2016 2015 £’000 £’000 Audit fee 75 75 Non audit fee – other services 19 8 Total Auditors’ remuneration 94 83

Annual Report 2016 37 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

7. Directors’ remuneration 2016 2015 £’000 £’000 Remuneration 657 474 Defined contribution pension contributions 19 15 Total Directors’ remuneration 676 489

2016 2015 Number Number Directors accruing pension benefits 1 1

The above amounts include £250,000 (2015: £187,500) in respect of the highest paid Director.

8. Retirement benefit obligations The Bank contributes to individual defined contributions plans for the benefit of certain employees.T he Bank made contributions of £40,524 during the year (2015: £36,133). There were no unpaid contributions outstanding at the year-end (2015: nil).

9. Impairments 2016 2015 £’000 £’000 Impairment on loans and advances to customers 2,258 2 Impairment of available-for-sale financial assets (18) (78) As at 31 December 2,240 (76)

An impairment provision has been recognised in respect of a corporate loan provided as a working capital bridge to a private capital fund raise. Events have led to the loan being assessed as potentially irrecoverable and it has been fully provided for.

10. Taxation Tax reconciliation The tax on the Bank’s profit before tax differs from the theoretical amount that would arise using the standard weighted average rate of UK corporation tax of 20.00% (2015: 20.25%) as follows:

2016 2015 £’000 £’000 Current tax Loss for the year (6,992) (5,252) Tax using the effective corporation tax rate of 20.0% (2015: 20.25%) (1,398) (1,063)

Effects of Expenses not deductible for tax purposes 61 44 Short term temporary differences (20) (26) Losses carried forward – where no deferred tax recognised 1,357 1,045 Total Tax charge - -

38 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

10. Taxation (Continued) The Finance (No.2) Act 2015 (the Act) was substantively enacted on 26 October 2015. The Act reduced the main rate of corporation tax to 19% from 1 April 2017 and 18% from 1 April 2020. A further reduction to 17% from 1 April 2020. However from 1 January 2016 banking profits will be subject to an additional surcharge of 8% on profits above £25m.T he enactment of these rate reductions has been reflected in the computation of the net deferred tax asset determined by the Bank with account taken of the tax rates that will apply when the various timing differences are expected to reverse.

11. Analysis of financial assets and financial liabilities by measurement basis Financial liabilities at Available- amortised Loans and for-sale cost receivables securities Total 31 December 2016 £'000 £'000 £'000 £'000 Financial assets Loans with central bank and advances to banks - 82,001 - 82,001 Loans and advances to customers - 22,068 - 22,068 Investment securities - - 77 77 Accrued interest income - 9 - 9 Total financial assets - 104,078 77 104,155 Non financial assets 893 Total assets 105,048 Financial liabilities Customer accounts 94,012 - - 94,012 Accrued customer interest payable 610 - - 610 Other financial liabilities 1,256 - - 1,256 Total financial liabilities 95,878 - - 95,878 Non-financial liabilities 185 Total liabilities 96,063 Equity 8,985 Total equity and liabilities 105,048

Annual Report 2016 39 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

11. Analysis of financial assets and financial liabilities by measurement basis (Continued) Financial liabilities at Available- amortised Loans and for-sale cost receivables securities Total 31 December 2015 £'000 £'000 £'000 £'000 Financial assets Cash and balances with central banks and loans and advances to banks - 54,426 - 54,426 Loans and advances to customers - 6,225 - 6,225 Investment securities - - 198 198 Accrued interest income - 17 - 17 Total financial assets - 60,668 198 60,866 Non financial assets 967 Total assets 61,833 Financial liabilities Customer accounts 50,340 - - 50,340 Accrued customer interest payable 494 - - 494 Total financial liabilities 50,834 - - 50,834 Non financial liabilities 772 Total liabilities 51,606 Equity 10,227 Total equity and liabilities 61,833

12. Loans and advances to banks

2016 2015 £’000 £’000 Variable rate – repayable on demand 4,466 2,906 Total loans and advances to banks 4,466 2,906

13. Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise loans and advances to credit institutions and central banks repayable on demand.

2016 2015 £’000 £’000 Cash and balances with central banks 77,535 51,520 Loans and advances to banks 4,466 2,906 Total cash and cash equivalents 82,001 54,426

40 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

14. Loans and advances to customers 2016 2015 £’000 £’000 Advances secured on residential property 13,809 5,953 Advances secured on non-residential property 1,764 279 Corporate loans 8,761 - Unsecured loans 6 7 Gross loans and advances to customers 24,340 6,239

Impairment allowance (2,272) (14) Net loans and advances to customers 22,068 6,225

15. Investment securities

2016 2015 Available-for-sale securities £’000 £’000 At fair value Unlisted variable rate 77 198 As at 31 December 77 198

16. Allowance for impairment losses on loans and advances

2016 2015 Loans and Loans and advances to Investment advances to Investment customers Securities Total customers securities Total £’000 £’000 £’000 £’000 £’000 £’000 At 1 January 14 - 14 16 - 16 Recoveries of advances written off in previous years - 18 18 - (78) (78) Charge / (release) to the income statement (note 9) 2,258 (18) 2,240 (2) 78 76 At 31 December 2,272 - 2,272 14 - 14

Of the total allowance in respect of loans and advances to customers, £22k (2015: £9k) was assessed on a collective basis.

Annual Report 2016 41 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

17. Property, plant and equipment Land and Office buildings equipment Total 31 December 2016 £’000 £’000 £’000 Cost As at 1 January 391 543 934 Disposals (44) - (44) Additions - 82 82 As at 31 December 347 625 972

Depreciation and impairment losses As at 1 January (87) (243) (330) Disposals 7 - 7 Charged in the year (8) (189) (197) As at 31 December (88) (432) (520) Carrying amounts as at 31 December 259 193 452

Land and Office buildings equipment Total 31 December 2015 £’000 £’000 £’000 Cost As at 1 January 391 81 472 Additions - 462 462 As at 31 December 391 543 934

Depreciation and impairment losses As at 1 January (78) (55) (133) Charged in the year (9) (188) (197) As at 31 December (87) (243) (330) Carrying amounts as at 31 December 304 300 604

The Bank acquired £462k of office equipment following the transfer of assets from Ocean Capital Associates LLP on 1 January 2015.

42 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

18. Deferred taxation The deferred tax assets not determined in the financial statements, in accordance with the Bank’s accounting policy, are as follows: 2016 2015 £’000 £’000 Capital allowances (77) (16) Short term temporary differences 11 13 Tax losses 2,736 1,388 Unrecognised deferred tax asset 2,670 1,385

The amount of tax losses for which no deferred tax is recognised is £13,678k (2015: £6,938k).

19. Customer accounts 2016 2015 £’000 £’000 Retail funds and deposits 94,012 50,340 Total customer accounts 94,012 50,340

20. Other liabilities

2016 2015 £’000 £’000 Social Security and other taxes 185 172 Other creditors 713 290 Total other liabilities 898 462

The Bank’s exposure to liquidity risk related to trade and other payables is disclosed in note 23.4

21. Accruals and deferred income 2016 2015 £’000 £’000 Accrued interest 610 494 Other accruals 543 310 Total accruals and deferred income 1,153 804

Annual Report 2016 43 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

22. Share capital 2016 2015 £1 ordinary shares £’000 £’000 As at 1 January 15,402 7,252 Issued and settled at par – 22 April 2016 4,000 - Issued and settled at par – 6 December 2016 1,750 - Issued and settled at par – 25 June 2015 - 1,200 Issued and settled at par – 4 September 2015 - 1,950 Issued and settled at par – 24 November 2015 - 5,000 As at 31 December 21,152 15,402

In January 2017 a further capital injection of £3.25m was received from Ocean Industries S.A.

23. Risk management and monitoring Through its normal operations the Bank is exposed to a variety of risks. The Board of Directors is responsible for determining strategies and risk management policies for the Bank. The Bank maintains a risk governance structure that strengthens risk evaluation and management, in addition to positioning the Bank to manage the changing regulatory environment in an efficient and effective manner.

The principal financial risks that the Bank manages are listed below and explained further in the following sections: • Credit risk • Market risk – interest rate and currency risk • Liquidity risk 23.1 Credit risk Credit risk comprises both mortgage and corporate lending credit risk within the Bank, collectively referred to as Borrower Credit Risk. 23.1.1 Credit risk The following sections outline our approach to management of credit risk through the setting of Risk Appetite Statement and policy, and an overview of the measurement of credit risk in the Bank. 23.1.2 Credit Risk Appetite Credit Risk Appetite is an expression of boundaries that provide clear guidance on the level of risk exposure that the Board considers acceptable and in line with the corporate strategy. The Board approves the Bank’s Risk Appetite Statement. 23.1.3 Lending policy criteria The lending policy has key control components for the existing portfolio, including: • Monitoring and performance. The credit portfolios are monitored regularly, with a range of prescribed reports distributed to key stakeholders • Collections and recoveries. The Bank’s monitors collections and recoveries. The Mortgage Director leads a team covering all aspects of collections and recoveries for the mortgage portfolio with the aim of helping customers who encounter financial difficulties to achieve a positive outcome for the customer and the Bank • Stress testing and scenario analysis, to simulate a range of outcomes and calculate the risk impact of adverse macroeconomic conditions.

44 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

23. Risk management and monitoring (Continued) 23.1 Credit risk (Continued) 23.1.4 Credit risk measurement The credit risk of lending to customers is a factor of three components: • The probability of default by the customer on contractual obligations • The exposure at default by the customer on contractual obligations • The likely recovery of defaulted obligations. Internal models are being developed to assess customer probability of default, exposure at default and loss given default. These credit risk models are used throughout the Bank to support the analytical elements of the credit Risk Management Framework, in particular the quantitative risk assessment as part of the ongoing credit monitoring as well as portfolio level analysis and reporting. 23.1.5 Breakdown of credit risk exposure Maximum credit risk exposure at 31 December 2016 before provisions for impairment and before collateral and other credit enhancements is set out in the table below:

Cash Secured on and cash Investment Residential commercial Corporate equivalents* securities lending property Unsecured loan Total 2016 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Neither past due nor impaired 82,001 77 13,466 1,764 - 6,516 103,824 Past due but not impaired - - 138 - - - 138 Impaired - no provision required ------provision held - - 205 - 6 2,245 2,456 Gross balance 82,001 77 13,809 1,764 6 8,761 106,418 Allowance for impairment losses - - (19) (3) (5) (2,245) (2,272) Net balance sheet carrying value 82,001 77 13,790 1,761 1 6,516 104,146

*external credit assessment greater than BBB

Annual Report 2016 45 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

23. Risk management and monitoring (Continued) 23.1 Credit risk (Continued) 23.1.5 Breakdown of credit risk exposure (Continued)

Cash Secured on and cash Investment Residential commercial Corporate equivalents* securities lending property Unsecured loan Total 2015 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Neither past due nor impaired 54,426 198 5,690 279 - - 60,593 Past due but not impaired - - 246 - - - 246 Impaired - no provision required - - 17 - - - 17 - provision held - - - - 7 - 7 Gross balance 54,426 198 5,953 279 7 - 60,863 Allowance for impairment losses - - (9) - (5) - (14) Net balance sheet carrying value 54,426 198 5,944 279 2 - 60,849

* external credit assessment greater than BBB

The credit quality of loans neither past due nor impaired may be assessed by reference to probability of default bandings allocated to loans by the Bank’s internal credit assessment models as set out in the tables below:

Cash Secured on and cash Investment Residential commercial Corporate equivalents* securities lending property Unsecured loan Total 2016 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Good quality 82,001 77 9,422 1,756 - 6,516 99,772 Satisfactory quality - - 3,300 8 - - 3,308 Lower quality - - 744 - - - 744 Below standard but not impaired ------Total 82,001 77 13,466 1,764 - 6,516 103,824

* external credit assessment greater than BBB

46 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

23. Risk management and monitoring (Continued) 23.1 Credit risk (Continued) 23.1.5 Breakdown of credit risk exposure (Continued)

Cash Secured on and cash Investment Residential commercial Corporate equivalents* securities lending property Unsecured loan Total 2015 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Good quality 54,426 198 4,077 268 - - 58,969 Satisfactory quality - - 880 10 - - 890 Lower quality - - 596 - - - 596 Below standard but not impaired - - 137 1 - - 138 Total 54,426 198 5,690 279 - - 60,593

* external credit assessment greater than BBB

The arrears status of past due not impaired loans is summarised as follows:

Cash Secured on and cash Investment Residential commercial Corporate equivalents* securities lending property Unsecured loan Total 2016 £’000 £’000 £’000 £’000 £’000 £’000 £’000 0-1 month ------1-2 months - - 84 - - - 84 2-3 months - - 54 - - - 54 3-6 months ------Over 6 months Total - - 138 - - 138

* external credit assessment greater than BBB

Cash Secured on and cash Investment Residential commercial Corporate equivalents* securities lending property Unsecured loan Total 2015 £’000 £’000 £’000 £’000 £’000 £’000 £’000 0-1 month ------1-2 months ------2-3 months - - 246 - - - 246 3-6 months ------Over 6 months Total - - 246 - - 246

* external credit assessment greater than BBB

Annual Report 2016 47 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

23. Risk management and monitoring (Continued) 23.1 Credit risk (Continued) 23.1.6 Credit impairment The credit portfolios are regularly reviewed to determine whether there is any observable data indicating that there has been a measurable decrease in the estimated future value of cash flows or their timing. Loan and advances to customers are categorised as impaired where: • There is evidence of the customer experiencing significant financial difficulty • There is default or delinquency in interest or principal repayments • The borrower enters bankruptcy or other financial reorganisation • There are adverse changes in the payment status of borrowers For the mortgage lending portfolio neither past due nor impaired assets are those that are not in arrears and which do not meet the Bank’s definition of impairment. Past due but not impaired assets are those mortgage loans that are in arrears but which do not meet the Bank’s definition of impairment. Impaired assets are those that meet the Bank’s definition of default for mortgage assets, which include assets that are 6 months past due or which are deemed to be “unlikely to pay” their credit obligations.

Individual impairments occur where the assets are past due for more than six months or the Bank has taken possession of a borrower’s property or where specific circumstances indicate that a loss is likely to be incurred, for example, fraud cases. Collective impairment allowances are calculated on a portfolio basis using formulae which consider the Probability of Default, the roll rate from default to possession and write off and the value of collateral held. These parameters are regularly reviewed to ensure that they reflect current economic circumstances and the portfolio’s risk profile.

The Bank will only permit capitalisation of arrears after discussion and agreement with the borrower. There have been no such restructurings done in 2016 in respect of the retail lending portfolio (2015: none).

An impairment provision has been recognised in respect of a corporate loan provided as a working capital bridge to a private capital fund raise. Events have led to the loan being assessed as potentially irrecoverable and it has been fully provided for.

48 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

23. Risk management and monitoring (Continued) 23.1 Credit risk (Continued) 23.1.7 Credit concentration risk The Bank has large exposures for regulatory purposes to individual counterparties as shown in the table below:

Net Gross Syndicated Impairment 2016 2015 Non-financial institution large exposures £’000 £’000 £’000 £’000 £’000 Secured corporate loans 9,866 (1,105) (2,245) 6,516 - Secured on freehold property 3,923 - 3,923 Total 13,789 (1,105) (2,245) 10,439 -

The loans within the retail lending portfolio are analysed by latest indexed loan-to-value (LTV) in the following table: 2016 2015 Gross LTV% £’000 £’000 0%-30% 1,744 1,690 30%-50% 3,321 1,778 50%-60% 4,459 890 60%-70% 2,588 1,224 70%-80% 3,460 650 80%-100% 6 7 Total 15,578 6,239

The loans within the lending portfolio is analysed by balance in the following table.

Gross mortgage loan size by out- 2016 2015 standing balances £’000 £’000 £0 - £50K 2,420 3,286 £50K – 100K 2,048 2,092 £100K – £150K 690 341 £150K-£500K 3,917 520 £500K-£1m 2,118 - >£1m 4,385 - 15,578 6,239 Gross corporate loans >£1m 8,761 - Total gross lending 24,339 6,239

The general creditworthiness of a corporate loan tends to be the most relevant indicator of a loan extended to it. However, collateral provides additional security and the Bank generally requests that corporates borrowers provide it.

Annual Report 2016 49 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

23. Risk management and monitoring (Continued) 23.2 Interest rate risk Interest rate sensitivity arises from the relationship between interest rates and net interest income resulting from the periodic repricing of assets and liabilities. Prior to opening of the Bank of England reserve account, the Bank invested in debt securities and time deposits with institutions on which the interest rate paid is fixed for an agreed period of time at the start of the contract. Balances with the Bank of England are remunerated at Bank of England base rate.

Interest rate risk consists of: • Exposure to the timing of repricing of asset and liabilities or • To a sudden spike in a key underlying base reference measure Management monitors interest rate risks on a monthly basis by performing a sensitivity analysis on the Bank’s financial assets and financial liabilities. A rise or fall in the market interest rates of 100 basis points would have a +/- impact of £140k for the results for the year (2015: £13k).

The Bank uses a number of measures to monitor interest rate risk and sensitivity. One such measure evaluates the difference in principal value between assets and liabilities repricing in various gap periods. The following table gives an analysis of the repricing periods of assets and liabilities on the statement of financial position at 31 December.

Items are allocated to time bands in the table below by reference to the earlier of the next contractual interest rate repricing date and the residual maturity date.

Assets and liabilities by next contractual interest rate reset: Within 3 3-12 Non interest months months 1-5 years bearing Total 2016 £’000 £’000 £’000 £’000 £’000 Assets Cash and cash at central banks 77,535 - - - 77,535 Loans and advances to banks 4,466 - - - 4,466 Loans and advances to customers 14,987 1,487 5,594 - 22,068 Investment securities 77 - - - 77 Other assets - - - 902 902 Total assets 97,065 1,487 5,594 902 105,048

Liabilities Customer accounts (94,012) - - - (94,012) Other liabilities - - - (2,051) (2,051) Total liabilities (94,012) - - (2,051) (96,063) Total interest rate sensitivity gap 3,053 1,487 5,594 (1,149) 8,985 Sensitivity gap 3,053 4,540 10,134 8,985

50 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

23. Risk management and monitoring (Continued) 23.2 Interest rate risk (Continued)

Within 3 3-12 Non interest months months 1-5 years bearing Total 2015 £’000 £’000 £’000 £’000 £’000 Assets Investment securities 14 137 47 - 198 Cash and cash at central banks 51,520 - - - 51,520 Loans and advances to banks 2,906 - - - 2,906 Gross loans and advances to customers 6,239 - - (14) 6,225 Other assets - - 984 984 Total assets 60,679 137 47 970 61,833

Liabilities Customer accounts (50,340) - - - (50,340) Other liabilities - - - (1,266) (1,266) Total liabilities (50,340) - - (1,266) (51,606) Total interest rate sensitivity gap 10,339 137 47 (296) 10,227 Sensitivity gap 10,339 10,476 10,523 10,227

22.3 Currency Risk The Bank holds a portion of its liquid funds in Euros and Canadian Dollars to meet operational requirements. The Bank is exposed to foreign currency market risk in respect of these balances which are a GBP equivalent of approximately £1.8m. 23.4 Liquidity risk Liquidity risk represents the risk of being unable to pay liabilities as they fall due and arises from the mismatch in cash flows generated from current and expected assets, liabilities and derivatives. The Bank’s policy is to maintain a robust liquidity management framework with a liquidity Risk Appetite Statement based on maintaining sufficient liquidity resources to survive a variety of stress events.

Under the framework: • The Bank ensures that there is adequate liquidity by operating within a clear and well defined Risk Appetite Statement.T he Risk Appetite Statement directly reflects the overall liquidity adequacy rule to “at all times maintain liquidity resources which are adequate, both in amount and quality, to ensure there is no significant risk that its liabilities cannot be met as they fall due”. The Bank assesses the amount of liquidity that needs to be held by running potential stress scenarios and measuring these outcomes against the quality and quantity of the Bank’s liquidity portfolios. • The absolute minimum level of liquidity held in liquid assets is defined by the Bank’s Individual Liquidity Adequacy Assessment Process as agreed with the Prudential Regulation Authority. The liquidity framework governance structure operates within the Board’s delegated authorities and reports into the Executive Committee and the Board. The Treasury and Finance functions monitor liquidity using cash flow liquidity reports together with movement reports, liquidity performance indicators, portfolio analyses and maturity profiles.T he Asset and Liability Committee (ALCo) are required to review on a weekly basis proposed daily cash flows to ensure key liquidity performance indicators are met. Any changes in legislation, regulation and other guidance which may affect the Bank’s liquidity position are reported directly to the Chief Financial Officer. ALCo are required to receive and review monthly liquidity analysis and profiles and report directly to the Executive Committee, which makes recommendations to the Board for its approval.

Annual Report 2016 51 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

23. Risk management and monitoring (Continued) 23.4 Liquidity risk (Continued) The table below analyses the Bank’s assets and liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date.

Assets and liabilities – maturity groupings After 3 months 12 months 1-5 years 5 years Total 2016 £’000 £’000 £’000 £’000 £’000 Assets Cash and balances with central banks 77,535 - - - 77,535 Loans and advances to banks 4,466 - - - 4,466 Gross loans and advances to customers 3,089 5,799 13,138 10,522 32,548 Investment securities 77 - - - 77 Financial assets 85,167 5,799 13,138 10,522 114,626

Liabilities Customer accounts (57,244) (25,820) (12,786) - (95,850) Other liabilities (1,256) - - - (1,256) Financial liabilities (58,500) (25,820) (12,786) - (97,106) Net liquidity gap 26,667 (20,021) 352 10,522 17,520

Assets and liabilities – maturity groupings Within 3-12 After 3 months months 1-5 years 5 years Total 2015 £’000 £’000 £’000 £’000 £’000 Assets Cash and cash at central banks 51,520 - - - 51,520 Loans and advances to banks 2,906 - - - 2,906 Gross loans and advances to customers 206 887 3,585 4,836 9,514 Investment securities 14 137 47 - 198 Financial assets 54,646 1,024 3,632 4,836 64,138

Liabilities Customer accounts (36,797) (12,640) (2,200) - (51,638) Other liabilities (600) - - - (600) Financial liabilities (37,397) (12,640) (2,200) - (52,238) Net liquidity gap 17,249 (11,616) 1,432 4,836 11,900

52 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

24. Capital resources It is the Bank’s policy to develop a stronger capital base to optimise shareholder returns whilst maintaining capital adequacy and satisfying key stakeholders. The Bank manages its capital to meet the regulatory requirements established by the regulator; the Prudential Regulation Authority, and support growth. The following table analyses the regulatory capital resources of the Bank:

2016 2015 £’000 £’000 Core Tier 1 Ordinary share capital 21,152 15,402 Retained (loss) including current year (loss) (12,167) (5,175) Deductions from Tier 1 capital – available for sale investment securities (77) (198) Total Tier 1 capital and total capital resource 8,908 10,029

In January 2017, a further capital injection of £3.25m was received from the parent company.

25. Fair value of financial assets and liabilities Determination of fair value The table below summarises the fair value measurement basis used for assets and liabilities held on the reporting date at fair value. There are three levels to the hierarchy as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, whether directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table summarises the fair values of those financial assets and liabilities not presented on the Bank’s statement of financial position at their fair value, by the level in the fair value hierarchy into which each fair value measurement is categorised. The accounting policy in note 1.8 sets out the key principles for estimating the fair values of financial instruments.

2016 2015 Total Total Total fair carrying Total fair carrying Level 1 Level 2 Level 3 value value value value Financial assets £’000 £’000 £’000 £’000 £’000 £’000 £’000 Cash and cash at central banks 77,535 - - 77,535 77,535 51,520 51,520 Loans and advances to banks - 4,466 - 4,466 4,466 2,906 2,906 Loans and advances to customers - - 22,068 22,068 22,068 6,225 6,225

Liabilities Customer accounts - - 94,012 94,012 94,012 50,340 50,340

Valuation methods for the calculation of fair values are set out below.

Cash and balances with central banks Fair value approximates to carrying value because they have minimal credit losses and are either short term in nature or reprice frequently.

Annual Report 2016 53 Notes for the Financial Statements (Continued) for the year ended 31 December 2016

25. Fair value of financial assets and liabilities (Continued) Loans and advances to banks The fair value of floating rate placements, fixed rate placements with less than six months to maturity and overnight deposits is considered to approximate to their carrying amount.

Loans and advances to customers The Bank provides loans of varying rates and maturities to customers. All loans were loans with variable interest rates where the fair value is considered to approximate to carrying value. The fair value of impaired loans is not considered to be significantly different to the carrying value.

Customer accounts Fair values of deposit liabilities repayable on demand or with variable interest rates are considered to approximate to carrying value.

Financial assets and liabilities The following table summarises the fair values of financial assets and liabilities, held at fair value, by the level in the fair value hierarchy into which the fair value measurement is categorised.

Total Total fair carrying Level 1 Level 2 Level 3 value value 2016 £’000 £’000 £’000 £’000 £’000 Financial assets Investment securities - - 77 77 77

2015 Financial assets Investment securities - - 198 198 198

There have not been any transfers between levels of the fair value hierarchy during the year.

The Bank acquired the right to the terminal cash flow in an available for sale investment from Ocean Capital Associates LLP on 1 January 2015 for £453k. The investment generated returns on capital of £121k (2015: £177k) and recognised a capital gain of £18k for the period (2015: loss for the period of £78k) (refer to note 9). There were no gains or losses for the period recognised in other comprehensive income.

A Discounted Cash Flow model is used to allocate cash flows against the investment and returns on the investment. All assumptions used in the model to calculate the fair value are reassessed at each valuation period (when cash flows arise) including exchange rates and discount rates applied.

54 Bank and Clients PLC Notes for the Financial Statements (Continued) for the year ended 31 December 2016

26. Financial Commitments a) Operating lease commitments The Bank acquired a lease from Ocean Capital Associates LLP as at 1 January 2015.

At 31 December 2016, the Bank is committed to making the following total lease payments under non-cancellable leases:

2016 2015 £’000 £’000 Not more than one year 242 242 Over one year but not more than five years 302 544 544 786 b) Undrawn mortgage loan facilities 2016 2015 £’000 £’000 Over 5 years 7,448 1,452

Undrawn loan facilities are approved loan applications which have not yet been exercised. They are payable on mortgage completion and are usually drawn down or expire within three months.

27. Related party transactions Capital contributions from related parties As detailed in note 21 the Bank received share capital contributions of £5,750k (2015: £8,150k) from its parent company.

Services from related parties Legal fees: King & Spalding International LLP is the Bank’s appointed legal advisor. William Charnley is a Non–Executive Director of the Bank and a partner of King & Spalding International LLP. Fees of £375k (2015: £295k) were received from King & Spalding International LLP in respect of legal services of which £26k was unpaid at year end.

Other related party relationships Claire Bridel, one of the Non-Executive Directors, is the wife of Edouard Bridel one of the controlling shareholders in Ocean Industries S.A. Remuneration paid to Mrs Bridel is included in note 7. As of January 2017, Mrs Bridel became an Executive Director rather than a Non-Executive Director.

The Bank acquired £462k of office equipment following the transfer of assets from Ocean Capital Associates LLP on 1 January 2015.Ocean Capital Associates LLP is a wholly owned subsidiary of Ocean Industries S.A.

28. Parent undertaking The Bank’s direct and ultimate controlling party is Ocean Industries S.A.

29. Subsequent events In January 2017, a further capital injection of £3.25m was received from Ocean Industries S.A.

Annual Report 2016 55 Bankers RBS Natwest Lloyds Auditor Mazars LLP Legal Advisors King & Spalding International LLP Company Secretary William Charnley Registered Office 30 King Street London EC2V 8EH Registered Number 00980698 Pillar 3 Disclosures A request for a copy of the Bank’s Pillar 3 Disclosure should be made to the Bank’s registered office. Website www.bankandclients.com

56 Bank and Clients PLC