Explanatory Statement

Explanatory statement setting out the terms of the proposed approved by the PRA and it is intended that they will scheme for the transfer of the entirety of the business of be published in the , Edinburgh and Belfast Kleinwort Benson Bank Limited to SG Gazettes, and in The Times, The Telegraph and, for Bank Limited. the benefit of international clients and third parties, the international edition of The Financial Times; 1 Overview (b) the PRA and the FCA must be provided with copies 1.1 Kleinwort Benson Bank Limited (KBBL) proposes to of the Application and this Explanatory Statement; transfer the entirety of its business as described in and paragraph 4 to SG Kleinwort Limited, (c) Kleinwort Hambros must obtain from the PRA a formerly known as SG Hambros Bank Limited, certificate of adequate financial resources, and must (Kleinwort Hambros) (the Transfer) by means of a have the requisite regulatory authorisations to carry banking business transfer scheme (the Scheme) under on the transferred business. Part VII of the Financial Services and Markets Act 2000 (FSMA). 2.4 Any person (including any client or employee of either KBBL or Kleinwort Hambros) who claims that they will be 1.2 The terms of the Transfer are set out in full in the banking adversely affected by the carrying out of the Scheme is business transfer scheme document (the Scheme entitled to be heard by the Court or make representations Document) which has been submitted to the High Court in writing to it, as are the PRA and the FCA. of England and Wales (the Court) for approval under Part VII of FSMA. 2.5 Any such person who wishes to attend the Final Hearing or wishes to instruct a barrister or solicitor advocate, at 1.3 This Explanatory Statement provides a summary of the their own cost, to attend the Final Hearing and make terms of the Scheme, as required by regulation 5(4) of representations on their behalf or who wishes to make a the Financial Services and Markets Act 2000 (Control written representation to the Court is requested to give of Business Transfers) (Requirements on Applicants) notice in writing of their intentions and their objections, Regulations 2001. as soon as possible and preferably before 25 October 1.4 Further information about the Scheme and the other 2017, by email to [email protected] or key Scheme documents can be obtained from https:// by post to: www.kleinwortbenson.com/en/bank-transfer/ or from the If writing from within the UK: address and telephone numbers set out at the end of this Explanatory Statement. Freepost KLEINWORT BENSON BANK TRANSFER If writing from overseas: 2 Process Kleinwort Benson Bank Transfer 2.1 To become effective, the Scheme requires the sanction 8 St James’s Square of the Court. It is anticipated that the final Court hearing London SW1Y 4JU to sanction the Scheme (the Final Hearing) will be held on 30 October 2017. The Court process has been initiated by an application to the Court dated 17 July This will enable KBBL and Kleinwort Hambros to provide 2017 (the Application) and involved an initial Court notification of any changes to the hearing and, where possible, hearing at which the Court made provision for various to address any concerns raised in advance of the hearing. In procedural matters. At the Final Hearing the Court will addition, KBBL and Kleinwort Hambros will provide the PRA consider and, if thought fit, sanction the Scheme. and the FCA with copies of any such representations received, regardless of whether the person making such representations 2.2 Both KBBL and Kleinwort Hambros are authorised and has indicated they intend to attend the hearing or not. regulated by the Bank of England’s Prudential Regulation Authority (the PRA) and regulated by the Financial A failure to give written notice in advance does not prevent any Conduct Authority (the FCA). The PRA and the FCA are person who wishes to do so from attending the Final Hearing. entitled to appear at the Final Hearing and both KBBL and Kleinwort Hambros have been liaising closely with 3 Effective Date of the Scheme the PRA and FCA as part of the Scheme process. It is intended that the Scheme will become effective in 2.3 Other procedural requirements, which must be met accordance with the order of the Court on such date as KBBL between the date of the Application and the Final and Kleinwort Hambros may agree (the Effective Date). Such Hearing, are as follows: date is expected to be 6 November 2017 and if this date changes we will place a notice confirming the Effective Date (a) certain notices must be published stating that the on our website at www.kleinwortbenson.com. Unless the Application has been made. These notices have been 2 Explanatory Statement 4.2 4.1 4 will lapse. allow ontheapplicationofKBBLorKleinwortHambros, it 2017; or(ii)suchothertimeand/ordateastheCourtmay Scheme becomeseffective bythelaterof(i)29December

5.1 5 4.3 (a) The Transferring Businessincludes,inparticular: Business) willbetransferred toKleinwortHambros. Assets andTransferring Liabilities(theTransferring clients, andtogetherconsistingoftheTransferring management andadvisorybusinessforprivatebanking loans andanyancillaryactivitiesincludingitsinvestment operation ofcurrent accounts,savingsdepositsand of KBBL,includingthemarketing,originationand Under theScheme,entirety ofthebusiness mortgages) andadvisingonarranginginvestments. taking andlending(includingintheformofregulated investment servicestoclientsincludingdeposit which provides arangeofprivatebankingand Limited) on6June2016.KBBLisalicensedbank Hambros Limited(formerlyknownasSGHambros regulated bytheFCA.Itwasacquired bySGKleinwort KBBL isauthorisedandregulated bythePRAand The Transferring Business (b) (c) (d) (e) a reference toKBBL. to KleinwortHambros shallbesubstitutedinplaceof falling tobedoneaftertheEffective Date,areference Hambros insteadofKBBLandinrespect ofanything Date asifthecontracthadbeen madewithKleinwort Contracts) shallhaveeffect onandfrom theEffective Client Agreements andtheTransferring Third Party the Transferring Business(includingtheTransferring paragraph 10below),everycontractinrespect of Except asprovided intheSchemeDocument(and Effect oftheTransfer oncontracts of England. Kleinwort Hambros’ equivalentaccountwiththeBank in thisaccountattheEffective Datewilltransferto held withtheBankofEnglandbutanyamounts contractual arrangementsrelating toKBBL’s account The Transferring Businessdoesnotincludethe all depositsacceptedbyKBBL; Business; and KBBL, ineachcase,respect oftheTransferring together withthebenefitofallsecuritygrantedto all loanandmortgagefacilitiesgrantedbyKBBL, KBBL; all investmentmanagementactivitycarriedonby KBBL; and all investmentadvisoryservicescarriedonby all contractsoragreements: (ii) (i) Transferring Third PartyContracts). than theTransferring ClientAgreements (the which relate totheTransferring Businessother to whichKBBLisapartyorbeneficiaryand (the and formingapartoftheTransferring Business advisory orotherservicesprovided byKBBL any accountsorinvestmentmanagement, between KBBLanditsclientsinrelation to Transferring ClientAgreements); and 5.2

5.6 Instructions andauthorities 5.5 Security 5.4 5.3 Agreements, accountsand mortgages (a) Scheme willnot: Subject assetoutbelow, theTransfer underthe (b) (c) (d) (e) (f) (g) (h) may be,byKleinwortHambros. from theEffective Date asifgivento,orthecase of theTransferring Businessshallhaveeffect onand undertaking orconsentgiventobyKBBLinrespect direction, mandate,powerofattorney, authority, Any existingdirect debitinstruction,standingorder, payment ordischargeofanysuchliability. be availabletoKleinwortHambros assecurityforthe nominee, agentortrusteeforKleinwortHambros, and by KleinwortHambros orasthecasemaybebya any liabilityshallonandfrom theTransfer beheld KBBL, assecurityforthepaymentordischargeof held byKBBLoranominee,agenttrusteefor Any securityinrespect ofthe Transferring Business to anyotherlendersthatmortgageclientasKBBL. have allrights,powers,remedies andpriorityinrelation and thatmortgageclient,KleinwortHambros will shall becomeloansmadebetweenKleinwortHambros client byKBBLinrespect ofthe Transferring Business Similarly, any mortgageloansmadetoany conditions exceptasdescribedinparagraph5.7below. and thatclientsubjecttothesameterms an agreement oraccount betweenKleinwortHambros in respect oftheTransferring Businessshallbecome Any agreement oraccount betweenKBBLandaclient with aclientorthird party); other arrangementhavingasimilareffect (whether invalidate ordischargeanycontract,security registration orfilingin respect ofanysecurity; filing or re-filing oramendmenttoanyexisting require furtherregistration orre-registration or able toterminateit; contract whenitwouldotherwisenothavebeen Kleinwort Hambros are apartytoterminatethe allow anypartytoacontractwhichKBBLor otherwise havebeenabletomodifythoseterms; terms ofthecontractwhenthatpartywouldnot entitle anypartytocontractmodifythe or remedy itwouldotherwisenothavebeenableto; entitle anypersontoexercise anycontractualright otherwise havebeenimposed; when thatgreater orlesserobligationwouldnot any partytoacontractwhichKBBLis or imposeanygreater orlesserobligationson confer anygreater orlesserrightsbenefits effect; or security orotherarrangementhavingasimilar affect theenforceability, priorityorrankingofany Transferring Asset orTransferring Liability. enable anypersontobringaclaiminrelation toany A 6.2 Set-off rights 6.1 6 5.7 Client termsofbusiness 6.3

A 6.4 Cross-default rights described inparagraphs6.2to6.10below. impose specific restrictions againstthishappeningas Scheme provides otherwise.TheSchemewilltherefore Client Agreements maybewidened,unlessthe immediately priortotheEffective DateorTransferring that KleinwortHambros isapartytoandare inforce Hambros toexercise certainrightsunderagreements As aresult oftheScheme,scopeforKleinwort Widening ofrights Kleinwort Hambros’ existingclients. of businessintolinewiththetermsfor This changeintermsisnecessarytobringyour your existingtermsofbusinessandthenewterms. along withasummaryofthekeydifferences between business isenclosedwiththisExplanatoryStatement is relevant toyouthenacopyofthenewterms terms ofbusinesswithnewbusiness.Ifthis The Schemewillalsosubstituteexistingclientgeneral (a) Kleinwort Hambros andamortgage orloanwithKBBL: paragraph 6.3(a)(ii),acurrent orsavingsaccountwith or loanwithKleinwortHambros; and(2)inthecaseof current orsavingsaccount withKBBLandamortgage someone has(1)inthecaseofparagraph6.3(a)(i),a The SchemewillstatethataftertheTransfer, where be usedtorepay thearrears onthemortgage. payments, thenmoneyinthesavingsaccountcould and mortgage,fellbehindwiththemortgage example, ifaclienthadbothKBBLsavingsaccount a loanormortgage)thatbecomesrepayable. For against adebtthesameclienthaswithit(suchas (such asinacurrent account orsavingsaccount) circumstances, tousemoneydepositedwithit (b) terms andconditionsifinbreach ofcertainother client willautomaticallybeinbreach oftheaccount set-off rightistheofabank,incertain cross-default (ii) (i) Kleinwort Hambros willnot beableto: during theperiodsetoutinparagraph6.3(b)below, the endofthatfixedtermorpromotional period. case therestrictions willlastuntilthree monthsafter deposit ismaintainedforacertainperiod,inwhich or whichare subjecttoapromotional rateifthe except inrelation todepositsmadeforafixedterm Transfer Date(asdefinedatparagraph10below), months aftertheRelevantDateorSubsequent these restrictions willlastuntilthedatethree

Transfer; and to itfrom KBBLasaconsequenceofthe pay debtsonmortgagesorloanstransferred or current accountswithKleinwortHambros to use moneydepositedinsuchexistingsavings Kleinwort Hambros; or on anysuchexistingmortgagesorloanswith as aconsequenceoftheTransfer topaydebts current accountstransferred toitfrom KBBL use moneydepositedinsuchsavingsor clause is one which means that a clause isonewhichmeansthat a 6.5

6.7 An 6.6 All moniesrights

6.9 A 6.8 Consolidation rights

6.10 Entire agreement clauses (a) Scheme toaccelerateoralteranyrightsobligations: exercisable byKleinwortHambros asaresult ofthe any cross-default rightswhichmightotherwisebe Kleinwort Hambros willnotbeentitledtoapply the RelevantDateandforthree monthsthereafter, The Schemewillstatethat,onandwitheffect from any sumduetothebank. termination orarighttodemandearlyrepayment of agreements. Thismaygiverisetoarightofearly (b) (a) monies clauses: the RelevantDateandforthree months thereafter, all The Schemewillstatethat,onandwitheffect from the lender, notjustthemortgageloan. or chargetobeusedassecurityforalldebtsowed (b) (a) consolidation rights: the RelevantDateandforthree months thereafter, The Schemewillstatethat,onandwitheffect from mortgage loanhasbeenrepaid. owed tothelenderhavebeenrepaid, evenifthe mortgage lendertoretain thesecurity untilalldebts (b) that, onandwitheffect from theRelevantDateandfor KBBL orKleinwortHambros. TheSchemewillprovide accounts ofacertaintypethat a clientholdswitheither Some clientagreements statethattheyapplytoall clause is one which permits a consolidation clauseisonewhichpermitsa clause is one which allows a mortgage all moniesclauseisonewhichallowsamortgage mortgages) originallyentered intowithKBBL;or of anyTransferring ClientAgreement (including and KleinwortHambros, asaresult ofthebreach under anyexistingagreement betweentheclient between theclientandKleinwortHambros. a result ofthebreach ofanyexistingagreement mortgages) originallyentered intowithKBBL,as under anyTransferring ClientAgreement (including the Scheme;and transferred from KBBLtoKleinwortHambros under Kleinwort Hambros willnot applytodebts in existingagreements between theclientand Kleinwort Hambros. Scheme willnotapplytoexistingdebtsowed and transferred toKleinwort Hambros underthe mortgages) originallyentered intowithKBBL in Transferring ClientAgreements (including to KleinwortHambros undertheScheme;or satisfied underanylendingtransferred from KBBL release ofthesecurityuntilallobligationshavebeen Kleinwort Hambros willnotapplytoprevent the in existingagreements between theclientand Hambros. under anyexistinglendingprovided byKleinwort the securityuntilallobligationshavebeensatisfied Scheme willnotapplytoprevent therelease of and transferred toKleinwortHambros underthe mortgages) originallyentered intowithKBBL in Transferring ClientAgreements (including

3 Explanatory Statement 4 Explanatory Statement

7.4 7.3 7.2 7.1 7 6.11 Savings torights

(a) prior totheTransfer sothat: continue toapplythesameaccountsasimmediately three monthsthereafter, thoseclientagreements will (b) (c) Relevant Date. Relevant Dateuntiltheexpiryof three monthsafterthe or charge(includinglossofaccrued interest) from the an eligibleclientwillbefree from penalty, fee,notice security forborrowings. Anyamountswithdrawnby as securityforservicesthatare beingprovided oras than amountsthataneligibleclient hasdeposited expiry ofthree monthsfrom theRelevantDateother with eitherKleinwortHambros orKBBLuntilthe Date willbepermittedtowithdrawtheirfundsheld KBBL andKleinwortHambros priortotheRelevant All eligibleclientswhohavedepositaccountswithboth separately undertheFSCS. held inKBBLaccount(s)willnolongerbecovered as theycurrently enjoyundertheFSCSasamounts Hambros, willnotreceive thesamelevelofprotection who haveaccountswithbothKBBLandKleinwort Following theimplementationofScheme,clients not toeachseparateaccount. bank, includingtheirshare of anyjointaccount,and amount inalltheeligibledepositor'saccountswith £170,000). The£85,000limitrelates tothecombined the FSCSwouldbe£85,000each(makingatotalof the maximumamountthatcouldbeclaimedunder so, forajointaccountheldbytwoeligibledepositors, having aclaimundertheFSCSinrespect oftheirshare For jointaccountseachaccountholderistreated as up to£50,000perfirm. from protection inrespect ofinvestmentbusinessfor deposited withit.Someeligibleclientsalsobenefit protected ifthebankbecomes unabletorepay money deposited withanauthoriseddeposittakerwillbe 2006) withassurancethatupto£85,000ofmoney criteria setoutintherelevant Companies Act companies, aslongtheymeetthe"smallcompany" individuals andsmallbusinesses(whichincludes FSCS provides eligibledepositors, includingprivate Services CompensationScheme(theFSCS).The Clients ofKBBLare covered bytheUKFinancial Financial ServicesCompensationScheme acquire otherthanasaresult oftheScheme. or powerwhichKleinwortHambros oraclientmay above willnotapplysoastoreduce anyright,benefit The provisions summarisedinparagraphs6.2to6.10 agreement originallyentered intowithKBBL; bythetermsofrelevant to begoverned client Kleinwort Hambros undertheSchemewillcontinue accounts thathavetransferred from KBBLto Kleinwort Hambros; and relevant clientagreement originallyentered intowith bythetermsof continue tobegoverned existing accountswithKleinwortHambros will if explicitlyagreed insuchnewclientagreement. have transferred toKleinwortHambros from KBBL after theTransfer willonlyapplytoaccountsthat into bytheclientwithKleinwortHambros onor the termsofnewclientagreements thatare entered Transfer Date). Liabilities, withsuchlatertransferdatebeing aSubsequent Hambros subsequently(ResidualAssetsand be retained byKBBLbutmaybetransferred toKleinwort the Courtdoesnothavejurisdiction toorder itstransfer)will not transferred ontheEffective Date(forexample,because Any partoftheTransferring Businessthatforanyreason is 10 available toKBBLinanysuchproceedings. counterclaims andrightsofset-off thatwouldhavebeen Hambros willalsobeentitledtoalldefences,claims, be continuedbyoragainstKleinwortHambros. Kleinwort against KBBLinrelation totheTransferring Businesswill implemented, pending,threatened orotherwise)by Service)) fortheresolution ofadispute orclaim(whether any ombudsman(includingtheFinancialOmbudsman other proceedings (includingany complaintorclaimto Any judicial,quasi-judicial,administrativeproceedings or 9 8.4 8.3 Subject accessrequests 8.2 Marketing preferences 8.1 8 7.5 Effective Date Business whichmaybetransferred afterthe Continuity ofproceedings information heldbyKBBLbefore theTransfer. Transfer, KleinwortHambros willnotneedtoprovide Transfer, whichhasnotbeenactionedbefore the access request toKleinwort Hambros before the Conversely, where anindividualhasmadeasubject before theTransfer. as limitedtoarequest forinformation heldbyKBBL Kleinwort Hambros willbe able totreat therequest which hasnotbeenactionedbefore theTransfer, Protection Act1998)toKBBL before theTransfer, made asubjectaccessrequest (undertheData Where aclientwhoisincluded intheTransfer has preference givenbytheclienttoKBBL. Transfer whether ornotitisthesameasanymarketing shall bedeemedtoapplyonandwitheffect from the Hambros’s record oftheclient'smarketingpreferences to bothKBBLandKleinwortHambros, Kleinwort in theTransfer hasprovided marketingpreferences Where, priortotheTransfer, aclientwhoisincluded Hambros. KBBL shouldbeconstruedasreferences toKleinwort relevant dataprotection statementsorconsentsto in theTransferring Businessandreferences inanyof to administertheclientaccountsthatare included data. KleinwortHambros willusethisdatainorder who willbecomethedatacontroller inrespect ofthat Business willbedisclosedtoKleinwortHambros KBBL from itsclientsinrespect oftheTransferring As partoftheTransfer, all personal dataobtainedby Data Protection to theminrelation tothischangeinprotection. to talktheclientthrough thedifferent optionsavailable numbers inparagraph15below. Ourteamwillbeable then theyare requested tocallusonthetelephone on theprotection availabletohim/herbytheFSCS abouttheimpactofTransferIf aclientisconcerned 15.1 15 byEnglishlaw.The Schemeisgoverned 14 costs. implementing theSchemeandclientswillnotbearanysuch Kleinwort Hambros willbe responsible forallcostsof 13 Costs 12.2 12.1 12 11.2 11.1 11 Indemnity the addresses ortelephonenumbersshownbelow: questions bycontactingus phone, postoremailat copies ofanytherelevant documentsoraskfurther en/bank-transfer/. Alternatively, youmayrequest free following website:https://www.kleinwortbenson.com/ the otherrelevant documentsare availablefrom the the SchemeDocumentitselftogetherwithcopiesof Document containimportantinformation.Acopyof This ExplanatoryStatementandtheScheme Further information law Governing PRA ortheFCAwithin14daysofsuchnotification. is received byKBBLorKleinwort Hambros from the notified oftheproposed amendment andnoobjection Court provided thattheFCA andthePRAhavebeen amendment maybemadewithouttheconsentof case ofminoramendmentsormanifesterror, the At anytimeafterthesanctionofScheme,in is considered. at, anyhearingoftheCourtatwhichsuchapplication FCA shallbenotifiedof,andhavetherighttoheard after thesanctionofScheme,bothPRAand the Schemeprovided that, ifsuchapplicationismade any amendment,variation,modificationoradditionto time before oraftertheEffective DatetotheCourtfor KBBL andKleinwortHambros canapplyjointlyatany Amendments totheScheme failure todischargesuchliabilities. all costsincurred byanyofthemasaresult ofany for anyfailure todischargesuchliabilitiesandany Asset; and(ii)indemnifyKBBLeachofitsaffiliates Subsequent Transfer DateapplicabletothatResidual which relate toaResidualAssetandarisebefore the liabilities whichwouldbeTransferring Liabilitiesbut Hambros shall:(i)assumeanddischargethose From eachSubsequentTransfer Date,Kleinwort to dischargesuchliabilities. costs incurred byanyofthemasaresult ofanyfailure transferred aftertheEffective Date,andanyall Date, orthetermsofSchemeprovide, shouldbe and KleinwortHambros agree priortotheEffective further stepsbefore itshalltransfer);or(iii)whichKBBL decides nottotransfer(orrequire thefulfilmentof transfer; (ii)which,despitetheCourthavingjurisdiction, but: (i)whichtheCourtdoesnothavejurisdictionto of allliabilitieswhichwouldbeTransferring Liabilities indemnify KBBLandeachofitsaffiliates in respect From theEffective Date,KleinwortHambros shall other professional adviserimmediately. recommended toseekadvicefrom yourownsolicitoror Document, orifyourequire furtheradvice,youare contents ofthisExplanatoryStatementortheScheme If youare inanydoubtastothemeaningorimportof hearing. any personwhowishestodosofrom attendingtheCourt A failure togivewrittennotice inadvancedoesnotprevent attend theCourthearingornot. making suchrepresentations hasindicatedtheyintendto representations received, regardless ofwhethertheperson will provide thePRAand FCAwithcopiesofanysuch Court hearing.Inaddition,KBBLandKleinwortHambros possible, toaddress raisedinadvanceofthe anyconcerns notification ofanychangestotheCourthearingand,where This willenableKBBLandKleinwortHambros toprovide reasons andpreferably before 25October2017. to theaddress oremailaddress shownabovestatingyour to attendorberepresented attheCourthearinginwriting and yourwrittenrepresentation ordetailsofyourintention Transfer, pleaseprovide uswithdetailsofyourobjection If youwishtonotifyusofyourintentionobjectthe overseas. your serviceprovider forthe costofcallingthisnumberfrom may vary. Ifyou are callingfrom abroad, pleasecheckwith from UKlandlinesare free. Thecostsfrom mobilephones Calls maybemonitored orrecorded. Callsto0800numbers designated privatebankerontheirusualdetails. In addition,clientsofKBBLcan,iftheyprefer, contactthe [email protected] By email: United Kingdom London SW1Y4JU 8 StJames’s Square Kleinwort BensonBankTransfer If writingfrom overseas: Freepost BENSONBANKTRANSFER KLEINWORT If writingfrom withintheUK: By post: (excluding bankholidays). The lineswillbeopenfrom 09:00to17:00MondayFriday 7045. Clients callingfrom overseas:pleasecalluson+44203207 UK clients:pleasecalluson08000857138. By phone:

5 Explanatory Statement +44 2032077045(overseasclients). 0800 0857138(UKclients)or on audiotaperequest by calling Transfer, are availableinlargeprintor and allthedocumentsrelating tothe Copies ofthisExplanatoryStatement, and Wales under number 2056420 and its registered address is 14 St. George Street, London W1S 1FE. Telephone calls may be recorded. be may W1S calls 1FE. London Telephone Street, 14 is George St. address England in registered its and incorporated 2056420 is 119269. is number company The number under Wales and reference firm The Authority. Regulation and Prudential Authority the and Regulation Authority Prudential Conduct the by Financial authorised the by is which regulated Limited, Bank Benson Kleinwort of names brand the are Hambros Kleinwort and Benson Kleinwort information Important

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