DELENDELENINVESTMENTSINVESTMENTS

Analyst day AvHDecember 2013December 2013

IntroductionIntroduction

Group Delen history ‐ A broad partnership 

IncorporationAcquisition of Banque de

Acquisition of stock broker De

Acquisition of stock broker Havaux 

(Brussels) and HGL

Acquisition of Banque BI&A –Luxembourg (ex

Merger with Capfi

Acquisition of 

73 49% of JM Finn &

1936 1975 1989 1992 1994 1995 1996

Incorporation by André Delen

IPO and Capital Raising

Banque de Schaetzen (Liège) ~(€75m AuM)

stock broker De Ferm (Antwerp) ~(€100m AuM)

1997 2000 2004 2005 2006 2007

(Brussels) and HGL (Luxembourg) ~(€650m AuM)

Luxembourg (ex Axa) ~(€800m 

AuM)

Capfi ~(€2.750m 

AuM)

2011

73,49% of JM Finn & 

Co ~(€6.600m AuM)

2010

Sale of Equity to the sons Jacques, Paul and Jean‐Pierre 

Delen

Merger with Ackermans & van Haaren

Acquisition of stock broker Goffin‐Lannoy (Brussels) 

~(€75m AuM)

AvH acquires control position in Banque J. Van Breda (60%)

Buy out of minority holders in Banque J. Van Breda by AvH –J. Delen Family (75% ‐ 25%)

Acquisition of stock broker 

Rampelbergs and subsidiaries in Luxembourg 

~(€125m AuM)

Additions to the Management 

Committee

( ) ( )

DELEN Robust external growth: 9 acquisitions and 3 partnerships  &Continued internal growth through word of mouth from satisfied clientsDELEN Continued internal growth through word of mouth from satisfied clients

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Assets under Management

4At the 30th of September 2013, the AuM of JM Finn amounted to 7,44 billion £ (8,90 billion €) of which 63% under discretionary assetmanagement mandate (4,67 billion £).

Key figures

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The recipe continues to work77 year old values• Follow at all times important basic principles of wealth management

A steady inflow of new capital• Broaden spectrum to clients to whom we can deliver a top notch service

• Continuously improve that service so that satisfied clients are compelled to tell their friends about us• Continuously improve that service so that satisfied clients are compelled to tell their friends about us

Market leading cost income ratio• Our DNA: simple organization with ever present obsession to improve efficiency while still delivering top• Our DNA: simple organization with ever present obsession to improve efficiency while still delivering topquality service

• Transmitting the genes to JM Finn

Ambition to acquire and transform• Finding teams that fit into our culture and strategy

• Hands‐on transformation of model of acquired entity with long term focus

Invest in the future and activate investments• Successful re‐opening of two offices in Belgium and further plans to renovate other offices

• Continue to attract top quality staff

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Part 1

77 year old values

Follow at all times basic rules of wealth management

1. Conservative investment approach :

• Capital preservationCapital preservation

• No unnecessary risk taking

• Diversified portfolio

• Seek return in line with growth of the economy not over‐performanceSeek return in line with growth of the economy, not over performance.

2. Revenues must be generated from good service to clients through commissions not by doing anyother business. The cash of the clients on the balance sheet is not there to generate income forother business. The cash of the clients on the balance sheet is not there to generate income forthe bank but to be safe for the client.

3. Don’t do what you do not understand (structured products) and understand in detail what youy ( p ) yare doing. Permanent risk control and vertical integration to control the complete chain frompatrimonial service all the way to custody.

4. Welcome regulatory oversight as a source of improvement of risk management.

5. Keep majority of net result in the business and don’t use leverage to grow.

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Balance sheet Group Delen ‐ Strong, Always

• You cannot have a solid balance sheet‘just in time’ for the crisis.

• ‘Ceci n’est pas une banque’: Only 117million € of credits with securities incollateralcollateral.

• Cash at banks is placed overnight anddeposited at the central bank in crisissituations, currencies are deposited atlarge banks or settlement organizationssuch as Euroclear.

• After the decrease in 2011 as aconsequence to the acquisition of JMFinn, the Core Tier One ratio has fullyrecovered.

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Low (no) risk investment approach for AFS portfolio

• On June 30th 2013 theinvestment portfolio (excl.limited credit portfolio)amounted to 1,5 billion €.

• Investments are very shortterm: overnight and one weekdeposits for Central Banks andi t b ki d l th thinterbanking and less than threemonths duration for centralgovernment and CPs.

• The margin generated by thebalance sheet is minimal andnot a point of focus of DelenPrivate Bank. The liquidity andq ysolidity of the balance sheet isthe priority.

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Part 2Generate steady inflow

A few figures on inflow

• 4,5 billion € net new money over the last 5, yyears

Ab th d li t• Above one thousand new clients per year

• Inflow per Investment Manager in Belgium• Inflow per Investment Manager in Belgiumaround 10 million € (top quartile in oursector)

• Van Breda introductions represent 25% ofthe gross inflowthe gross inflow

• Today the inflow is well spread around our

Paul De WinterArchitect of Discretionary AMLeads commercial team

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Reasons for strong inflow – Our explanation

• Focus on discretionary asset management since the early nineties

• Introduction of patrimonial services in the early nineties• Introduction of patrimonial services in the early nineties

• Maintain conservative investment philosophy with focus on capital preservation

• Continuity of relationshipwith customers (no rotation of investment managers)

S l i diffi l i k i i h• Stay close to customers even in difficult times: make sure investment managers are seeing eachclient. Also contact through client oriented events (BRAFA)

• Rewarded with Euromoney and Financial Times award

• Happy customers who tell their friends to go to Bank Delen

• Increased name recognition in the different regions of Belgium

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Local footprint to support growth

09/20132007 2010 09/20132007 2010

AuM

Inflow

Antwerp Brussels Other offices BEAntwerp Brussels Other offices BE

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Part 3Market leading cost incomecost ‐ income

A few figures on costs• Headcount of 256 at Delen and 305 at JM Finn.

B k D l h b bl t k it t i ti i th 40% ( tit• Bank Delen has been able to keep its cost income ratio in the 40% range (competitorstypically between 60% and 80%). JM Finn cost income of around 85% is typical of theindustry and we work with them to put in place initiatives that will bring it down, closerto the low end of the industry averageto the low end of the industry average.

• We have our own IT system and proprietary software package in Belgium. The cost ofh d ( l d h d l ) d ll l dthe IT department (including in‐house developers) and all IT costs includingamortization is around 5 million €. At JM Finn they have introduced a new IT system in2013.

• Disciplined Commercial Model: We focus on one thing, discretionary assetmanagement and therefore can focus our entire organization.

• Vertical integration : Control quality by doing it ourselves, constantly improve efficiencyby simplifying work processes and automating.y p y g p g

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Evolution of operating expenses as % of AuM

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Efficiency, our favorite hobby • Execution only transactions on the Delen online platform, processed straight through

(including settlements and reconciliation) without weighing on the organization.

• Discretionary asset management represents 75% of the assets under management andis organized efficiently. At JM Finn, discretionary asset management is 63% which is a

d b i t t t i i ffi igood basis to start improving efficiency.

• New services must also be approved by IT and Back Office to ensure they can bedelivered efficiently.

• Constantly think of ways to improve the internal processes with maximum use of ITy y p psystems.

• In house IT including developers and talented business process analysts who work• In‐house IT including developers and talented business process analysts who workclosely with the teams on the ground. Development of business analysis team at JMFinn.

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How did we get there? H d k d h d i iHard work and tough decisions

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Use of patrimonial fund services

Since 2006 we have been using SICAV structures to provide highquality asset management services in an efficient mannerquality asset management services in an efficient manner.We use state of the art asset management technology andalso employ top notch Investment Management Talent.

The amount of assets managed through funds has grown since2006 driven by

a) the acquisition of Capfi in 2007 (2 7 billion € AuMa) the acquisition of Capfi in 2007 (2,7 billion € AuMmainly managed through funds) and

b) the decision by the Bank to also transition some of itsdiscretionary mandates to ‘patrimonial’ fund structures.

This model is now well proven in Belgium and we are exploringthe possibility to use it in the UK with the creation ofthe possibility to use it in the UK with the creation ofColeman Street Investment Services.

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Part 4Ambition to acquire and 

transform Part 4transform

A few facts on acquisitions• Close to 4,5 billion € of acquired AuM in Belgium and Luxembourg.

• We acquire teams we like, paying fair market multiples:

• Havaux in 2000,

• Capital & Finance in 2007, andp ,

• JM Finn in 2011.

W t ti l fit• We ensure strong operational fit:

• 4 Management Committee members come from acquired entities.

• 100% integration of acquired businesses in Belgium and Luxembourg.

• After initial years of integration, the acquired entities increase both inflow (benefit ofbeing under the Delen umbrella) and profitability (benefit of Delen central services andg ) p y (business model)

• De Ferm: 200 million € AuM in 1994, 2,9 billion € today

• Havaux: 610 million € AuM in 2000 2 3 billion € today• Havaux: 610 million € AuM in 2000, 2,3 billion € today

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JM Finn ‐ Reminder of footprint

• 305 headcount of which 190 Front Office, 45 Central 

• 90 investment

Services and 70 Back Office.

managersmaking eachindependentinvestmentinvestmentdecisions fortheir clients.

S f

Bury St Edmonds

• Source of netnew money ismainly throughattracting new

Cardiff

ginvestmentmanagers.

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JM Finn – A sound business

• After two years of ownership we can confirm key hypotheses made upon transaction:

• Strong relationship with top quality private client base

b i l i li l h id i i• Focus on one business only, private client wealth management, no side operation in corporate banking or proprietary trading

• Sound investment approach and performance; no complex structured products 

• Stable financial results and growth of the equity

• Ability to attract new investment managers 

• Desire to grow a leading investment management firm in the UK

• JM Finn ‘as is’ is thus a sound business.  ... with upside potential if we manage to implement over time business model improvements as we have done with acquisitions in the past.

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JM Finn ‐ Evolution of AuMAuM Evolution (in £m) AuM Evolution (in £m)

• Continued AuM growth sinceacquisition of majority stakeacquisition of majority stake

• After bumpy 2011, benefitedfrom positive marketenvironment and quality ofenvironment and quality ofinvestment managementperformance

C ti d t tt t

A M b T pe (in £m)

• Continued to attract newteams of investmentmanagers in 2011/2012

O i hif f AuM by Type (in £m) • Ongoing shift to focusorganization towards organicinflow generation December 2011 September 2013

• Clear preference given todiscretionary assetmanagement as the wayforward

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JM Finn key figures

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JM Finn ‐ Ongoing initiatives

• Current Cost ‐ Income ratio is 85%, in line with the sector but higher than BankDelen.

• Together with local management, we continue the ongoing development of thebusiness model :business model :

⁻ Already moved to 63% discretionary (56% at the time of acquisition)

⁻ Increased level of fixed fees vs. variable commissions.

⁻ Introducing management structure and analysis to help each investmentb tt d t d hi t ib ti t th fi d t ti l tmanager better understand his contribution to the firm and potential to

improve it

⁻ Introduce over time best practices in Front Office and Back Office throughuse of newly installed software

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JM Finn ‐ Opportunities in the future

• The market trends in the UK are positive and there is a growing need for investmentmanagement. Improving JM Finn’s name recognition and generating organic inflowsas we have done in Belgium, would allow to participate in the growth of the sector in a

dsecond stage.

• Consolidation of small teams of investment managers is a potential route of growth inthe UK.

• The pace of change is dictated by JM Finn’s investment managers’ buy‐in intoThe pace of change is dictated by JM Finn s investment managers buy in intoproposed changes.

• We are pleased with the projects put forward for 2014 and look forward to their• We are pleased with the projects put forward for 2014 and look forward to theirexecution. They will lay the basis for a more efficient organization oriented towardsthe future.

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Part 5Invest and activate 

investments Part 5investments

What can we do in Belgium?Trend Opportunity / Action

• The volatility of the markets and the complexityof taxation system is not decreasing and the

• Convert clients to discretionary service (27% ofclient base is still execution only).o ta at o syste s ot dec eas g a d t e

need for wealth management services is as highas ever.

c e t base s st e ecut o o y)

• Continue to roll out patrimonial support serviceto our client base.

• Total asset pool continues to grow due to agingpopulation and retirement of baby boomerswho cash in pension or sell company

• Improve presence in geographies where Delenis not present (recruitment, office buildings upto Delen standard)who cash in pension or sell company.

• Large amount of assets still held in depositaccounts.

to Delen standard).

• Continue to leverage collaboration with sistercompany Bank J. Van Breda.

• Stronger relative position for independentwealth managers vs. large institutions to attractnew clientsnew clients.

• Recent difficult markets have decreasedfi bili f i h ki

• Maintain focus on efficiency to keep costl di i i

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profitability of competitors who are working toimprove cost structure.

leading position.

The business case to invest in offices

• The decision to (re‐) invest in our offices in Gentand Brussels took place in 2009. The completionof renovation works was in 2013.

• Now that the investments are completed, we areworking on activating them:

• 1.367 client visits to our offices, 44 eventsand a record inflow for our office in Gentsince opening in Q1 2013

• 2.272 client visits to our offices, 10 eventsand a record inflow for our office in Brussels(Capfi and Delen teams are now united)(Capfi and Delen teams are now united)

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Continue to invest

• Renovate office building in Hasselt and Liège in2014/2015.

• Maintain effort to recruit investment managersto accompany the growth.

• Strengthen central functions where needed• Strengthen central functions where needed.

• Look opportunistically at acquisition

I i d f JM Fi• Invest time and energy to transform JM Finn

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