Proposed placing of new ordinary and sale shares

THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND SHALL NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY NEW ORDINARY SHARES OF SECURE TRUST BANK PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

This announcement should be read in its entirety. In particular, you should read and understand the information provided in the 'Important Notices' section.

                                                                                                                                                                19 June 2014

Secure Trust Bank PLC ("Secure Trust Bank" or the "Company")

Proposed placing of 2,083,333new Ordinary Shares and 1,041,667 existing Sale Shares of 40p each at £24.00  per share

Secure Trust Bank announces today a proposed non pre-emptive placing to institutional investors of 3,125,000 Ordinary Shares in aggregate, comprising 2,083,333 new Ordinary Shares to be issued by the Company (the "Placing Shares") and 1,041,667 existing Ordinary Shares (the "Sale Shares"), to be sold by Arbuthnot Banking Group PLC, the largest Shareholder in the Company, in each case on the terms of a Placing Agreement expected to be entered into following the release of this Announcement. It is anticipated that both the Placing Shares and the Sale Shares will be placed at a price of £24.00 per share, which represents a 3.81 per cent. discount to Secure Trust Bank's closing price as of 19 June 2014.

The placing of the Placing Shares, which will be based on the terms and conditions set out in Appendix 1 to this Announcement, will raise approximately £48.76 million, net of estimated expenses, for the Company. The Company intends to use the proceeds of the Placing Shares to provide capital to support various organic and inorganic growth opportunities. The placing of the Sale Shares will also be based on the terms and conditions set out in Appendix 1 to this Announcement.

Following completion of the placing of the Placing Shares and the Sale Shares, Arbuthnot's aggregate shareholding in the Company will reduce from 67.0 per cent. of the existing issued share capital to approximately 53.26  per cent. of the Enlarged Issued Share Capital.

The Admission of Placing Shares and the sale of Sale Shares are interconditional. The placing of the Placing Shares requires resolutions to be passed by Secure Trust Bank's shareholders at the Secure Trust Bank General Meeting to be held on 8 July 2014.

It is intended that the Placing Shares and Sale Shares will be placed with new and existing institutional investors. Dealings in the Placing Shares are expected to commence on AIM at 8.00 a.m. on 9 July 2014. The Placing Shares represent approximately 13.3 per cent. of the Company's existing issued share capital and will, when issued, represent approximately 11.7 per cent. of the Enlarged Issued Share Capital.

Further details of the Placing and the other matters referred to above are set out below.

Use of proceeds from the Placing

The net proceeds of the Placing Shares will be used to finance the Group's organic and inorganic growth opportunities, both within its existing offering as well as into new market sectors which meet its target sustainable return objectives.

Capital will be selectively allocated to those opportunities that are expected to generate the highest sustainable returns for the Group.

Outlook and future opportunities

Secure Trust Bank is working on a diverse pipeline of business development opportunities as it progresses its growth strategy. The Directors believe that the Company is well positioned to make further positive progress during the year including the following strategic initiatives:

·        Opportunities to compete in the invoice finance market have been identified, and Secure Trust Bank Invoice Finance will look to exploit these; and

·        Further expansion into SME lending activities, predominantly through real estate finance.

 

Notice of General Meeting

The Secure Trust Bank General Meeting to approve the necessary Resolutions for the issue and allotment of the Placing Shares pursuant to the Placing is to be convened for 11.00 a.m. on 8 July 2014 at Arbuthnot House, 20 Ropemaker Street, London, EC2Y 9AR.

The Directors consider the proposed placing of the Placing Shares to be in the best interests of the Company and its Shareholders as a whole. The Directors also support the proposed Sale. Accordingly, the Directors recommend that Shareholders vote in favour of the Resolutions to be proposed at the Secure Trust Bank General Meeting, as they intend to do in respect of their own holdings of Ordinary Shares, totalling 29,650 Ordinary Shares, representing approximately 0.19 per cent. of the Existing Shares.

 

Definitions

The capitalised terms used in this Announcement have the meaning set out in Appendix 2 to this Announcement.

Expected timetable

Entry into the Placing Agreement by the Company                                                                                    19 June 2014

Publication of Secure Trust Bank Circular                                                                                                      20 June 2014

Latest time and date of receipt of Forms of Proxy                                                                 11.00 a.m. on 4 July 2014

Secure Trust Bank General Meeting                                                                                         11.00 a.m. on 8 July 2014

Admission and dealings in Placing Shares expected to commence on AIM                        8.00 a.m. on 9 July 2014

Expected date for CREST stock accounts to be credited for Placing Shares

and Sale Shares in uncertificated form                                                                                                              9 July 2014

Expected date for posting of share certificates for Placing Shares                               On, or as soon as practicable

and Sale Shares to be held in certificated form                                                                                    after, 9 July 2014

 

Note: Each of the times and dates above is subject to change. References to time and day are to time in London, United Kingdom, unless otherwise stated.

 

Paul Lynam, Chief Executive of Secure Trust Bank, said:

"We announced at our AGM in May record levels of new business lending in motor finance and retail point of sale in the first part of 2014 and strong demand for our new SME offering. This placing almost doubles the capital resources of the bank and will enable us to accelerate our plans for SME lending and support further product development in consumer finance. I am grateful for the on-going support of our existing shareholders and am delighted to welcome a number of significant new strategic shareholders to the register who understand and share our ambition to build a more diversified challenger bank."

Enquiries:

Secure Trust Bank PLC                                                                                                                              0121 693 9100   

Paul Lynam

Neeraj Kapur                                                                                                                                                                      

Oriel Securities Limited (Joint Broker, Placing Agent and Joint Bookrunner)                               0207 710 7600

Robin Mann

Gareth Hunt

Stewart Wallace

Keefe, Bruyette & Woods Limited (Joint Bookrunner)                                                                       0207 663 3161

Charles Lucas

Canaccord Genuity Limited (NOMAD and Joint Broker)                                      0207 523 8000 / 0207 665 4500

Lawrence Guthrie

Sunil Duggal

Bell Pottinger

Ben Woodford

Dan de Belder

IMPORTANT NOTICES

This Announcement has been issued by, and is the sole responsibility of, the Company.

Appendix 1 to this Announcement sets out the terms and conditions of the Placing.

By participating in the Placing, each person who is invited to and who chooses to participate in the Placing (a "Placee") by making an oral and legally binding offer to acquire Placing Shares or Sale Shares will be deemed to have read and understood this Announcement in its entirety and to be making such offer on the terms and subject to the conditions herein, and to be providing the representations, warranties and acknowledgements contained in Appendix 1.

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET OUT HEREIN ARE FOR INFORMATIONAL PURPOSES ONLY AND ARE DIRECTED ONLY AT PERSONS WHO ARE: (A) (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER"), OR (II) PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER, OR (III) PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED; AND (B) (I) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE QUALIFIED INVESTORS (AS DEFINED IN ARTICLE 2(1)(E) OF EU DIRECTIVE 2003/71/EC, AS AMENDED (THE "PROSPECTUS DIRECTIVE")) (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET OUT IN THIS ANNOUNCEMENT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET OUT IN THIS ANNOUNCEMENT RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY.

This Announcement provides information about the Placing, but does not invite participation in the Placing. This Announcement does not constitute, and the Company is not making, an offer to the public of transferable securities within the meaning of sections 85 and 102B of the Financial Services and Markets Act 2000 ("FSMA"). This Announcement is therefore not an approved prospectus for the purposes of section 85 of FSMA, and has not been prepared in accordance with the prospectus rules of the Financial Conduct Authority ("FCA") and as such neither its contents nor its issue have been approved by the FCA or by any authority which would be a competent authority for the purposes of any legislation that implements the Prospectus Directive.

This Announcement and the information contained herein is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, Japan, the Republic of South Africa or any other state or jurisdiction into which the same would be unlawful. This Announcement is for information purposes only and shall not constitute an offer to buy, sell, issue, or acquire, or the solicitation of an offer to buy, sell, issue, or acquire any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions.

This Announcement does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States, Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction in which such offer, solicitation or sale would be unlawful. In particular, the Placing Shares and the Sale Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act") and may not be offered, sold or transferred, directly or indirectly, within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and the securities laws of any state or other jurisdiction of the United States. No public offering of the Placing Shares or the Sale Shares is being made in the United States, Australia, Canada, Japan or the Republic of South Africa.

Oriel Securities Limited, which is authorised and regulated in the United Kingdom by the FCA, is acting as joint broker, placing agent and joint bookrunner to the Company in connection with the Placing and is acting exclusively for the Company and for no one else (other than Arbuthnot) in relation to the Placing and will not be responsible to any person other than the Company and Arbuthnot for providing the protections afforded to its clients or for advising any other person in relation to the Placing, Admission or any matter referred to in this Announcement.

Keefe, Bruyette & Woods Limited, which is authorised and regulated in the United Kingdom by the FCA, is acting as joint bookrunner to the Company in connection with the Placing and is acting exclusively for the Company and for no one else (other than Arbuthnot) in relation to the Placing and will not be responsible to any person other than the Company and Arbuthnot for providing the protections afforded to its clients or for advising any other person in relation to the Placing, Admission or any matter referred to in this Announcement.

Canaccord Genuity Limited, which is authorised and regulated in the United Kingdom by the FCA, is the Company's Nominated Adviser. The responsibilities of Canaccord Genuity Limited, as Nominated Adviser under the AIM Rules and the AIM Rules for Nominated Advisers, are owed solely to the London Stock Exchange and are not owed to the Company, any Shareholder or any Director of the Company or to any other person in respect of his or her decision to acquire Placing Shares or Sale Shares. Canaccord Genuity Limited is acting exclusively for the Company and for no one else (other than Arbuthnot) in relation to the Placing and Admission and will not be responsible to any person other than the Company and Arbuthnot for providing the protections afforded to its clients or for providing advice in relation to the Placing, Admission or otherwise.

The price of shares and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of the shares. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

No representation or warranty, express or implied, is or will be made by or on behalf of any of Canaccord Genuity Limited, Oriel Securities Limited or Keefe, Bruyette & Woods Limited and no responsibility or liability is or will be accepted by any of Canaccord Genuity Limited, Oriel Securities Limited or Keefe, Bruyette & Woods Limited or any of their respective affiliates, as to the accuracy, completeness or verification of the information set out in this Announcement, and nothing contained in this Announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. Canaccord Genuity Limited, Oriel Securities Limited and Keefe, Bruyette & Woods Limited and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by law, all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this Announcement or any such statement.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.

This Announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events. These statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Statements contained in this Announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this Announcement is subject to change without notice and, except as required by applicable law, the Company does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Announcement. No statement in this Announcement is or is intended to be a profit forecast or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company.

FURTHER DETAILS ON THE TRANSACTION

Background to the Company

Secure Trust Bank is a longstanding established UK bank, having been incorporated in 1954. Its core business is to provide banking services including a range of lending solutions and savings products. The Group's diversified lending portfolio currently focuses on unsecured personal loans, motor and retail finance whilst its lending is entirely funded by customer deposits, with no exposure to wholesale funding.

The Group also provides current accounts to UK customers who may not be adequately served by other banks.

The Group operates from its head office in Solihull, West Midlands and had 550 full-time equivalent employees as at 31 December 2013. It has been a subsidiary of Arbuthnot since 1985. The Group was admitted to trading on the AIM market of the London Stock Exchange in November 2011. The Company is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

The Group's on-going fundamental strategic priority is to protect the Group's reputation and sustainability via prudent balance sheet management, investment for growth and robust risk and operational controls. It plans to grow its core lending portfolio and to develop into new markets by exploiting current market opportunities, whilst identifying further opportunities for investment that have the potential to meet the Company's internal hurdle rates for return on equity.

The Group has increased its lending portfolio in recent years, both organically and through acquiring the Everyday Loans Group and the V12 Finance Group Limited ("V12 Retail Finance") in June 2012 and January 2013 respectively and the trade and certain assets of Debt Managers Holdings Ltd in January 2013 which is now operated by its subsidiary Debt Managers (Services) Limited.

On 20 November 2012 Secure Trust Bank raised £20 million, through the issue of new Ordinary Shares, to finance the capital requirements of future potential acquisitions and new distribution agreements as well as organic growth of the loan book, together with repayment of subordinated debt. All of these goals have been achieved with loan book growth of 31 per cent. from 2012 to 2013, the acquisition of V12 Finance Group and Debt Managers ("Debt Managers"), a new distribution agreement with Sainsbury's Bank and repayment of £5 million of subordinated debt. From July 2013, the Group was permitted to draw down facilities under the Funding for Lending Scheme ("FLS"). FLS monies are maintained as a liquidity buffer, above that required to support lending, reflecting the Group's cautious approach to risk. At 31 December 2013 the Company had pre-positioned £43.9 million of loans and advances to customers and £9.9 million of loans and advances to banks with the FLS.

Key strengths

Since its admission to trading on AIM, Secure Trust Bank has demonstrated an ability to grow both organically and by acquisition, whilst maintaining strong operational controls. Some of the key strengths of the business are noted below:

·        Profit growth - generated £25.2 million in underlying profit before tax for 2013, representing an increase of 52 per cent. on the prior year and over 162 per cent. from £9.6 million in 2011;

·        Lending and customer growth - increased customer lending balances by 2.5x and has grown customer numbers from 145,174 to 350,861, a rise of 142 per cent., in the period 2011 to 2013;

·        Cost and credit discipline - stable cost income ratio maintained between 50-55 per cent. with a controlled loan loss rate of 4.5 per cent. or under during the period 2010 to 2013, despite significant growth;

·        Economic returns - delivered over 30 per cent. adjusted ROE every year since 2007;

·        Strong regulatory position - maintained Core Tier 1 ratio of c.20 per cent., gross leverage ratio of c.11 per cent., for the period 2011 to 2013, and loan to deposit ratio of c.90 per cent. in 2013, with minimal usage of the FLS, demonstrating strong funding, capital and liquidity positions;

·        Conduct risk prudence - limited exposure to payment protection insurance ("PPI") business and no exposure to other recent financial services sector failings (CPP, LIBOR, IRD);

·        Diversification - as at 31 December 2013, the majority of loans are unsecured personal loans with an average size at inception of £5,000, with the portfolio not having a significant concentration to any individuals or sectors, 41 per cent. of loans on the balance sheet are due to mature within one year and the Company's new distribution channels and expansion into SME lending are expected to further diversify the business;

·        Experienced management - the executive team have an average of 25 years of UK banking experience each; and

·        Future growth potential - an increasingly diversified lending book of £391 million as at 31 December 2013 compares with a c.£1.58 trillion UK credit market.

The Company's organic growth in lending has been achieved through a number of successful partnerships across a range of retail markets, including agreements with DFS, Evans Cycles, PC World and Halfords. In addition to in-store growth, the Company expanded its eFinance operations through acquisition, with the purchase of V12 Retail Finance which provides unsecured retail loans, typically for 12 months to prime borrowers. The V12 Retail Finance subsidiary operates an online eFinance service to retailers, providing finance related services to customers through an online and in store processing system. This serves retailers across a number of sectors including furniture, jewellery, dental and sports season tickets.

The Group has received numerous awards in recognition of the Group's success. Most recently, in March 2014, it achieved silver status from Investors in People which puts it in the top 5.7 per cent. of accredited companies. The Company was the first bank in the UK to receive a Four Star Fairbanking Mark in respect of its current account. So far as Directors are aware it is currently the only bank to have received the Customer Service Excellence Award from the Cabinet Office. The Company utilises FEEFO which is an independent online review system in order to obtain customer feedback and scores of 92 per cent. (current and deposit accounts) and 95 per cent. (lending products) were achieved in 2013.

Financial track record

Consolidated Income Statement (£m)	31 Dec 2011	31 Dec 2012	31 Dec 20131
Operating income	28.5	47.0	79.0
Underlying2 profit before tax	9.6	16.6	25.2
Underlying2 attributable profit	7.4	12.7	18.5

 

Consolidated Balance Sheet (£m)	31 Dec 2011	31 Dec 2012	31 Dec 20131
Personal lending	43.6	142.0	159.2
Motor finance	63.4	89.6	114.7
Retail finance	42.6	64.2	114.4
Other	5.0	1.8	2.7
Loans and advances to customers	154.6	297.6	391.0
Placements with banks included in cash and cash equivalents	119.5	94.0	90.0
Other loans and advances to banks	20.0	61.3	20.0
Loans and advances to banks	139.5	155.3	110.0
Other assets	13.8	21.7	24,9
Total assets	307.8	474.6	525.9

 

Consolidated Adjusted3 Key Performance Indicators (%)
	31 Dec 2011	31 Dec 2012	31 Dec 20131
Net interest margin	14.0	15.0	16.9
Cost income ratio	48.2	53.7	52.4
Loan loss rate	3.8	4.0	4.5
Loan to deposit ratio	56.8	74.6	89.6
Return on average equity	37.2	31.9	31.5
Return on average assets	3.0	3.2	3.7
CT1 capital ratio	20.5	23.3	19.7
Dividend per share4 (p)	4.2	57.0	62.0

Notes:
1) 2013 includes the impact of V12 Retail Finance and Debt Managers acquisitions; 2011 and 2012 do not.
2) Underlying profit is stated before exceptional items, including acquisition related costs.
3) Adjusted metrics are calculated using underlying financials.
4) Only dividends declared post IPO have been included in the dividend per share calculation.

Growth has been achieved whilst maintaining credit control, profitability and a prudent funding, capital and liquidity position. The Company has also continued to enjoy favourable funding conditions as evidenced by its continued ability to increase customer deposits whilst growing its net interest margin.

The market

The main high street banks have over the last few years come under increasing regulatory pressures to hold more capital and greater liquidity buffers, with the Bank of England announcing in April 2014 an additional stress test framework for the eight Major UK Lenders, alongside those set out by the European Banking Authority. This regulatory shift to require greater capital buffers has driven a significant deleveraging of financial institutions' balance sheets since 2007. The financial services sector has also been impacted by notable conduct failings such as LIBOR fixing and the mis-selling of PPI and interest rate derivatives. This has put further pressure on the main high street banks' profits and restricted their ability to grow. In contrast, Secure Trust Bank has limited exposure to single premium PPI and no exposure to other recent market conduct failings.

As at December 2013, the UK credit market stood at c.£1.58 trillion of which Secure Trust Bank's share is less than 0.03 per cent. based on its customer loans and advances outstanding as at 31 December 2013. Secure Trust Bank has a current market share of under 2 per cent. in its core markets of unsecured lending (£22.8 billion total market size), retail point of sale (£7.5 billion) and motor finance (£6.7 billion). Secure Trust Bank's targeted markets of UK retail mortgage (£1.28 trillion), SME (£33.1 billion), invoice finance (£18.2 billion) and asset finance (£8.2 billion) all represent additional sizeable opportunities.

The Directors consider that the legacy issues and major challenges being faced by many of the large established UK banks together with the reforms being implemented by the UK Government create a significant opportunity for Secure Trust Bank to increase its market share across all business lines notwithstanding the entry into the market of new competitors.

Strategy

The Group's on-going fundamental strategic priority is to protect the Group's reputation and sustainability via prudent balance sheet management, investment for growth and robust risk and operational controls. In addition, the Company seeks to maximise shareholder value through organic lending growth, promotion of existing and development of new commission based income streams and very selective acquisitions.

The Group has made progress with the development of its plans for the SME lending market. The Group will seek to invest to develop this business line initially in two areas; asset based lending (specifically the invoice finance market) and real estate finance.

Opportunities to compete effectively in the invoice finance market have been identified. The larger banks, seeking to improve their capital efficiency, may encourage borrowers who are currently using overdrafts to use alternative funding products, increasing demand for asset based lending products in the wider market. The Directors believe that the new opportunities for investment that have been identified have the potential to meet the Company's internal hurdle rates for ROE.

The Directors believe that the property market continues to be underserved as some of the larger banks deal with their legacy real estate portfolios.

Outlook and future opportunities

Secure Trust Bank is working on a diverse pipeline of business development opportunities as it progresses its growth strategy. The Directors believe that the Company is well positioned to make further positive progress during the year. The Group's 2014 outlook and examples of the aforementioned opportunities are set out below.

·        Benefits of V12 Retail Finance acquisition to be realised in 2014:

−        Halfords partnership already secured;

−        A number of Premier League football clubs have agreed to use V12 to provide their season ticket services for next season;

·        Building on the new five-year deal with the Association of Cycle Traders and the renewal of a term contract with Evans Cycles will provide the foundation for further expected growth within the cycle market;

·        Build on new partnership with Sainsbury's Bank;

·        Demand for deposit products remains strong and continues to attract new fixed rate deposits with two, three and seven year maturities;

·        Opportunities to compete in the invoice finance market have been identified, and Secure Trust Bank Invoice Finance will look to exploit these; and

·        Further expansion into SME lending activities, predominantly through real estate finance.

In terms of recent regulatory developments, changes relating to the commencement of the implementation of CRD IV in 2014 are not expected to have a material impact on the capital resources of the Group. The Group is also addressing the changes required to comply with the consumer regulatory regime introduced on 1 April 2014.

Use of proceeds from the Placing Shares

The net proceeds of the Placing Shares will be used to finance the Group's organic and inorganic growth opportunities, both within its existing offering as well as into new market sectors which meet its target sustainable return objectives.

Capital will be selectively allocated to those opportunities that are expected to generate the highest sustainable returns for the Group.

Current trading and prospects

On 7 May 2014, Secure Trust Bank released an update on trading in the first quarter, the full text of which can be located on its website www.SecureTrustBank.com. The Company's trading statement included the following commentary in relation to the Company's trading and prospects:

"Secure Trust Bank continued to trade well during the first few months of the year with strong growth in overall new lending volumes. The Motor and Retail Finance businesses continue to make good progress.

Motor Finance had first quarter lending growth 15 per cent. higher than the same period in 2013, with March achieving a record volume of new lending. Retail Finance also achieved record levels of new business with the first quarter lending growth some 37 per cent. higher than the same period in 2013. This reflects the heavy investment in this business last year.

In the SME lending market we are seeing strong demand for our current offering and continue to see considerable potential in this market. Secure Trust Bank Real Estate Finance is now operational with a significant pipeline. We are increasing the pace of staff recruitment in light of the potential here to ensure that we capitalise upon this opportunity in a well-controlled manner. The development of the operational platform for the new Invoice Finance business is progressing satisfactorily and Secure Trust Bank Commercial Finance expects to begin writing business later this year.

Secure Trust Bank continues to work on a diverse pipeline of business development opportunities and we believe we are well positioned to make further positive progress during the year."

There has been no material change in the business since 7 May 2014.

Management incentivisation arrangements

It is proposed that a new management incentive scheme will be put in place following the Placing in order to help recruit and retain skilled personnel to target growth into new areas and to fully align the existing management team with Shareholders. The following metrics are under consideration in relation to the structure of rewards under the new scheme:

·        Dividend payout ratio of between 40 per cent. and 60 per cent.;

·        Maintaining a minimum CET1 capital ratio of 13 per cent. under the Basel III/CRD IV framework;

·        Top quartile total shareholder return relative to an applicable peer group; and

·        Will seek to adopt ABI Guidelines in so far as they are appropriate to high growth financial companies.

It is expected that the new scheme will allow vesting of shares awarded after a minimum of three years.

Implementation and the exact terms of any new scheme will be subject to a consultation process with Shareholders, approval by the Company's Remuneration Committee and consultation with the Company's regulators.

Details of the Placing

The Company proposes to raise £48.76 million (net of estimated expenses) through the issue of the Placing Shares at the Placing Price. The Placing Price represents a discount of 3.81 per cent. to the closing middle market price of £24.95 per Ordinary Share on 19 June 2014, being the last practicable date prior to the publication of this announcement. The Placing Shares will represent approximately 11.7 per cent. of the Company's Enlarged Issued Share Capital immediately following Admission.

As a result of the Chairman's family interest in Arbuthnot of 55.08 per cent., the proposed share sale by Arbuthnot will be treated as a dealing by a director, as well as a dealing by a significant shareholder.  The Chairman and Arbuthnot have notified the Company today that Arbuthnot is proposing the sale of 1,041,667 ordinary shares in Secure Trust Bank at a price of £24.00 per share.  When completed, this will reduce Arbuthnot's interest in Secure Trust Bank to 53.26 per cent. of Secure Trust Bank's Enlarged Issued Share Capital.  Arbuthnot has undertaken to vote in favour of the resolutions to be proposed at the Secure Trust Bank General Meeting.

The Board believes that the flexibility provided by a non-pre-emptive institutional placing makes it the most appropriate fundraising structure for the Company at this time. It allows a number of both existing institutional holders and new institutional investors to participate in the Placing and avoids the need for a prospectus which is a costly and time consuming process.

Arbuthnot has confirmed that, following completion of the Placing, it does not intend to sell any further Ordinary Shares in Secure Trust Bank before 19 December 2014, other than with the agreement of the Bookrunners.

The Placing is not being underwritten.

The Placing Agreement

Pursuant to the terms of the Placing Agreement between the Company, Arbuthnot and Oriel Securities, which is intended to be entered into following the release of this Announcement, Oriel Securities agrees, as placing agent for each of the Company and Arbuthnot, to use its reasonable endeavours to procure placees for the Placing Shares and the Sale Shares at the Placing Price. Indicative commitments have been received from institutional investors for all of the Placing Shares and Sale Shares at the Placing Price.

Oriel Securities will receive a commission from the Company in respect of the Placing Shares and is entitled to reimbursement of expenses incurred by it.

The Placing Agreement will be conditional upon, inter alia, the Resolutions being duly passed at the Secure Trust Bank General Meeting granting the Board the additional authority required to allot the Placing Shares and to dis-apply pre-emption rights which would otherwise apply to the allotment of the Placing Shares and Admission becoming effective on or before 8.00 a.m. on 9 July 2014 (or such later time and/or date as the Company, Arbuthnot and Oriel Securities may agree, but in any event by no later than 8.00 a.m. on 31 July 2014). The sale of the Sale Shares and Admission of the Placing Shares are interconditional.

The Placing Agreement will contain warranties from the Company in favour of Oriel Securities in relation to, inter alia, the accuracy of the information contained in the Circular and announcements made in respect of the Placing and certain other matters relating to the Group and its business. In addition, the Company will agree to indemnify the Bookrunners and certain other parties related to the Bookrunners in relation to certain liabilities they may incur in respect of the Placing.

The Placing Agreement will also contain warranties from Arbuthnot in favour of Oriel Securities in relation to, inter alia, the accuracy of the information about Arbuthnot contained in the Circular and the announcements made in respect of the Placing and in relation to the Sale Shares. In addition, Arbuthnot will agree to indemnify the Bookrunners and certain other parties related to the Bookrunners in relation to certain liabilities they may incur in respect of the sale of the Sale Shares. Arbuthnot's liability under the indemnity is capped as to time and amount.

Oriel Securities will have the right to terminate the Placing Agreement in certain circumstances prior to Admission, including for changes in certain market and economic conditions or in the event of a breach of the warranties set out in the Placing Agreement.

Application will be made for the Placing Shares to be admitted to trading on AIM. It is expected that such admission will become effective and that dealings in the Placing Shares will commence on AIM at 8.00 a.m. on 9 July 2014. The Sale Shares are already admitted to trading on AIM.

The Placing Shares will, when issued and fully paid up, rank pari passu in all respects with the Existing Shares, including the right to receive all dividends or other distributions declared, made or paid after the date of their issue.

 

General meeting and action to be taken

A general meeting of the Company to approve the necessary Resolutions for the issue and allotment of the Placing Shares pursuant to the Placing will be convened for 11.00a.m. on 8 July 2014 at Arbuthnot House, 20 Ropemaker Street, London, EC2Y 9AR.

 

Please note that the summary and explanation set out below is not the full text of the Resolutions and Shareholders should review the full text of the Resolutions before returning their Forms of Proxy. The business to be considered at the Secure Trust Bank General Meeting is set out in the notice of General Meeting together with the explanatory notes to each Resolution below. The Company is proposing that Shareholders, in addition to all existing unexercised authorities and powers, which will be used for the purposes of the placing of the Placing Shares together with the new authorities (if granted), pass the Resolutions in order:

a)         to authorise the Directors, pursuant to section 551 of the Act, to allot Ordinary Shares or grant rights to subscribe for or to convert any security into Ordinary Shares in the Company up to a maximum nominal value of £889,666, being, when taken together with the existing unexercised authorities, the amount required for the purposes of placing the Placing Shares together with sufficient head room to allow the Company to satisfy its obligations to allot shares pursuant to the Company's existing employee Share Option Scheme; and

 

b)         to dis-apply the pre-emption rights conferred by the Act in connection with the allotment of such Ordinary Shares up to a maximum nominal value of £521,334, being, when taken together with the existing unexercised authorities, the amount required for the purposes of placing the Placing Shares.

 

Shareholders will receive a Form of Proxy enclosed with the Circular for use at the Secure Trust Bank General Meeting and are requested to complete and return the Form of Proxy in accordance with the instructions printed thereon as soon as possible. To be valid, completed Forms of Proxy must be received by Capita Asset Services no later than 11.00 a.m. on 4 July 2014. Completion of a Form of Proxy will not preclude Shareholders from attending the meeting or voting in person if they so wish.

Recommendation

The Directors consider the placing of the Placing Shares to be in the best interests of the Company and its Shareholders as a whole and support the sale of the Sale Shares by Arbuthnot. Accordingly, the Directors recommend that Shareholders vote in favour of the Resolutions to be proposed at the Secure Trust Bank General Meeting, as they intend to do in respect of their own holdings of Ordinary Shares, totalling 29,650 Ordinary Shares, representing approximately 0.19 per cent. of the Existing Shares.

 

APPENDIX 1

TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION REGARDING THE PLACING FOR PLACEES ONLY

EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISORS AS TO LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF A PURCHASE OF THE PLACING SHARES AND/OR THE SALE SHARES.

Details of the Placing and the Placing Shares and Sale Shares

Terms used in this Appendix have the same meaning ascribed to them in the Announcement of the Company to which this is appended dated 19 June 2014 or in Appendix 2 to the Announcement.

Oriel Securities and Keefe, Bruyette & Woods Limited as joint bookrunners (the "Bookrunners"), as agents of the Company and Arbuthnot, are offering the Placing Shares and Sale Shares to existing institutional shareholders and other potential institutional investors via the Placing at the Placing Price. Oriel Securities, the Company  and Arbuthnot will determine in their absolute discretion the extent of each Placee's participation in the Placing, which will not necessarily be the same for each Placee. No commissions will be paid to or by Placees in respect of their agreement to acquire any Placing Shares or Sale Shares.

Participation in the Placing is only available to persons who may lawfully be, and are, invited to participate in it by the Bookrunners.

No element of the Placing is underwritten. Oriel Securities has agreed to use reasonable endeavours to introduce the Company and Arbuthnot to subscribers for the Placing Shares and to purchasers of Sale Shares.

A Placee's obligation to acquire its allocation of the Placing Shares and/or Sale Shares is subject only to:

(a)        the Placing Agreement becoming unconditional on the basis referred to below under "Conditions of the Placing" and not being terminated on the basis referred to below under "Right to terminate Placing"; and

(b)        Admission becoming effective not later than 8.00 a.m. on 9 July 2014.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the Existing Shares, including the right to receive all dividends and other distributions declared, made or paid on or in respect of the Ordinary Shares after the date of issue of the Placing Shares. The Placing Shares are issued subject to the Memorandum and Articles of Association of the Company.

The Sale Shares are fully paid and are not subject to any lien, encumbrance, equity, charge or third party right or restriction on transfer either imposed by the Company or Arbuthnot.

This announcement does not constitute an offering of the securities described herein in those jurisdictions and to those persons where and to whom the securities may not be lawfully offered for sale, and to the extent such offering can be lawfully made, it will only be made by persons permitted to sell such securities.

The Placing Shares and Sale Shares have not, been and will not be, registered under the Securities Act and may not be offered or sold in the United States except in transactions exempt from, or not subject to, the registration requirements of the Securities Act. The Placing Shares and Sale Shares are being offered outside the United States in offshore transactions within the meaning of and pursuant to Regulation S under the Securities Act.

In this Appendix, unless the context otherwise requires, "Placee" means a person (including individuals, funds or others) on whose behalf a commitment to subscribe for or acquire Placing Shares and/or Sale Shares has been given.

Application for Admission to Trading

Application will be made for Admission in respect of the Placing Shares. It is expected that Admission will become effective on 9 July 2014 and that dealings in the Placing Shares will commence at that time. The Sale Shares have already been admitted to trading on AIM.

Participation

A Placee's commitment to subscribe for or acquire a fixed number of Placing Shares and/or Sale Shares under the Placing will be agreed orally with the Bookrunners. Such agreement will constitute a legally binding commitment on such Placee's part to subscribe for or acquire that number of Placing Shares and/or Sale Shares at the Placing Price on the terms and conditions set out or referred to in this Appendix and subject to the Company's Memorandum and Articles of Association.

Each Placee will be required to pay to the Bookrunners, on the Company's behalf in respect of the Placing Shares and on Arbuthnot's behalf in respect of the Sale Shares, the Placing Price for each Placing Share and/or Sale Share allocated to it by the Bookrunners and agreed to be acquired by it under the Placing in accordance with the terms set out in this Appendix. Each Placee's obligation to acquire and pay for Placing Shares and/or Sale Shares under the Placing will be owed to the Bookrunners, the Company and Arbuthnot. Each Placee has an immediate, separate, irrevocable and binding obligation, owed to the Bookrunners or to the Company or to Arbuthnot as the case may be, to pay to it (or as it may direct) in cleared funds an amount equal to the product of the Placing Price and the number of Placing Shares and/or Sale Shares allocated to such Placee and which it has agreed to subscribe for or acquire.

Each Placee will be deemed to have read and understood this Appendix in its entirety, to be participating in the Placing upon the terms and conditions contained in this Appendix, and to be providing the representations, warranties, agreements, acknowledgements and undertakings, in each case as contained in this Appendix.

Irrespective of the time at which a Placee's allocation pursuant to the Placing is confirmed, settlement for all Placing Shares and/or Sale Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

All obligations under the Placing will be subject to the fulfilment of the conditions as referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Right to terminate Placing".

To the fullest extent permissible by law and applicable rules of the FCA, neither Oriel Securities, Keefe, Bruyette & Woods Limited nor any of their affiliates shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise, whether or not a recipient of these terms and conditions) in respect of the Placing. Each Placee acknowledges and agrees that (i) the Company is responsible for the issue and allotment of the Placing Shares to the Placees and (ii) Arbuthnot is responsible for the transfer of the Sale Shares to the Placees (as applicable) and the Bookrunners shall have no liability to the Placees for any failure by the Company and/or Arbuthnot to fulfil their obligations. Neither Oriel Securities, Keefe, Bruyette & Woods Limited nor any of their affiliates shall have any liability (including, to the extent permissible by law, any fiduciary duties) in respect of the Bookrunners' conduct of the Placing.

Conditions of the Placing

The obligations of Oriel Securities under the agreement with the Company and Arbuthnot are conditional on, amongst other things:

1.         the warranties given by the Company contained in the Placing Agreement being true and accurate and not misleading at the date of such agreement and at Admission;

2.         the warranties given by Arbuthnot contained in the Placing Agreement being true and accurate and not misleading at the date of such agreement and at Admission;

3.         the due passing at the Secure Trust Bank General Meeting of the Resolutions (without material amendment) and such Resolutions remaining in force;

4.         the Company and Arbuthnot complying, in all material respects with their respective obligations under the Placing Agreement to the extent the same fall to be performed or satisfied prior to Admission; and

5.         Admission taking place by no later than 8.00 a.m. (London time) on 9 July 2014.

If any of the conditions contained in the Placing Agreement are not fulfilled or, if applicable, waived by Oriel Securities, by the respective time or date where specified (or such later time and/or date as the Company, Arbuthnot and Oriel Securities may agree), the Placing will not proceed and the Placee's rights and obligations hereunder in relation to the Placing Shares and/or Sale Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof.

Oriel Securities may, at its discretion and upon such terms as it thinks fit, waive compliance by the Company and/or Arbuthnot with the whole or any part of any of the Company's and/or Arbuthnot's obligations (as applicable) in relation to the conditions in the Placing Agreement save for, amongst other things, Admission taking place. Any such extension or waiver will not affect Placees' commitments as set out in this Announcement.

None of Oriel Securities, the Company, Arbuthnot or any other person shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision they may make as to whether or not to waive or to extend the time and/or the date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally, and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of Oriel Securities.

Right to terminate Placing

Oriel Securities is entitled, at any time before Admission to terminate the Placing Agreement by giving notice to the Company and Arbuthnot in certain circumstances, including (a) where any statement contained in this Announcement has been discovered to be untrue, incorrect or misleading in any material respect by reference to the facts and circumstances then existing (b) where there has been a breach of the warranties given to Oriel Securities or a breach of any other obligations on the part of either the Company or Arbuthnot or (c) the occurrence of certain defined force majeure events.

If the obligations of Oriel Securities with respect to the Placing are terminated in the manner contemplated above, the rights and obligations of each Placee, who has been issued a Trade Confirmation (as defined below) by the Bookrunners in respect of the Placing, shall cease and terminate at such time and no claim can be made by any Placee in respect thereof.

The rights and obligations of the Placees will terminate only in the circumstances described in these terms and conditions and will not be subject to termination by the Placee or any prospective Placee at any time or in any circumstances.

By participating in the Placing, Placees agree that the exercise by Oriel Securities of any right of termination shall be within Oriel Securities' absolute discretion and that the Bookrunners are not required make any reference to Placees and that neither Oriel Securities nor the Company nor Arbuthnot shall have any liability to Placees whatsoever in connection with any such exercise or failure so to exercise by Oriel Securities.

No Prospectus

No offering document, prospectus or admission document has been or will be submitted to be approved by the FCA or submitted to the London Stock Exchange plc in relation to the Placing and Placees' commitments will be made solely on the basis of the information contained in this Announcement (including this Appendix) and the Exchange Information (as defined below) and subject to the further terms set out in the Trade Confirmation.

Each Placee, by participating in the Placing, agrees that the content of this Announcement (including this Appendix) is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of the Bookrunners or the Company or Arbuthnot and that none of the Bookrunners, the Company, Arbuthnot or any other person will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placees may have obtained or received. Each Placee acknowledges, agrees and warrants that it has relied on its own investigation of the business, financial or other position of the Company in participating in the Placing and with respect to the Placing Shares and/or the Sale Shares. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

Registration and Settlement

Settlement of transactions in the Placing Shares and/or Sale Shares (ISIN: GB00B6TKHP66) following Admission will take place within the CREST system, subject to certain exceptions. The Bookrunners, the Company and Arbuthnot reserve the right to require settlement for, and delivery of, the Placing Shares and/or Sale Shares (or a portion of them) to Placees by such other means that they deem necessary if delivery or settlement is not possible or practicable within the CREST system within the timetable set out in this Announcement or would not be consistent with the regulatory requirements in any Placee's jurisdiction.

Each Placee allocated Placing Shares and/or Sale Shares in the Placing will be sent confirmation of their allocation by the Bookrunners by email (a "Trade Confirmation"). The terms of this Appendix will be deemed incorporated by reference in such Trade Confirmation.

Settlement is expected to take place on 9 July 2014 and will be on a T+3 basis (where T is the "Trade Date"). Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with either the standing CREST or certificated settlement instructions that it has in place with the Bookrunners.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above the prevailing three month sterling LIBOR rate as determined by the Bookrunners.

Each Placee is deemed to agree that if it does not comply with these obligations, the Bookrunners may at their sole discretion place any or all of the Placing Shares and/or Sale Shares allocated to that Placee to other acquirers or sell any or all of such Placing Shares and/or Sale Shares on such Placee's behalf and retain from the proceeds, for the Bookrunners' account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall between the net proceeds of such placing or sale and the placing proceeds of such Placing Shares and/or Sale Shares and may be required to bear any stamp duty or stamp duty reserve tax (if any) (together with any interest or penalties due pursuant to the terms set out or referred to in this Announcement) which may arise upon the sale of such Placee's Placing Shares and/or Sale Shares on such Placee's behalf.

If Placing Shares and/or Sale Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the Trade Confirmation is copied and delivered immediately to the relevant person within that organisation. Insofar as Placing Shares and/or Sale Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares and/or Sale Shares should, subject as provided below, be so registered free from any liability to United Kingdom stamp duty or stamp duty reserve tax. Placees will not be entitled to receive any fee or commission in connection with the Placing.

Placees should consult their own tax, accounting, financial and legal advisers regarding the suitability to themselves of the tax, accounting, financial and/or legal consequences of investment in any Placing Shares and/or Sale Shares.

Representations and Warranties

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) irrevocably represents, warrants, undertakes, acknowledges and agrees (for itself and for any such Placee) to the Company, Arbuthnot and the Bookrunners that:

1.         it has read and understood this Announcement (including its Appendices) in its entirety and that its subscription for Placing Shares and/or purchase of Sale Shares is subject to and based upon all the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings and other information contained in it;

2.         no listing particulars, prospectus, admission document or other offering document has been or will be prepared in connection with the Placing and that it has not received listing particulars, a prospectus, admission document or other offering document in connection with the Placing or the Placing Shares or the Sale Shares;

3.         the Ordinary Shares are admitted to trading on AIM, and the Company is therefore required to publish certain business and financial information in accordance with the AIM Rules, which includes a description of the nature of the Company's business and the Company's most recent AIM admission document and financial statements (such business and financial information, the "Exchange Information"), and that it is able to obtain or access such information without undue difficulty, and is able to obtain access to the Exchange Information or comparable information concerning any other publicly traded company without undue difficulty;

4.         the only information on which it is entitled to rely and on which such Placee has relied in committing itself to subscribe for or acquire the Placing Shares or Sale Shares is contained in this Announcement and any Exchange Information, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares or Sale Shares and that it has neither received nor relied on any other information given or investigations, representations, warranties or statements made by the Bookrunners, the Company or Arbuthnot and none of the Bookrunners, the Company nor Arbuthnot will be liable for any Placee's decision to accept an invitation to participate in the Placing based on any other information, representation, warranty or statement. Each Placee further acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in deciding to participate in the Placing;

5.         none of the Bookrunners, the Company, Arbuthnot nor any of their respective affiliates or any person acting on behalf of any of them has provided it, and will not provide it, with any material regarding the Placing, Placing Shares and/or Sale Shares, the Company or Arbuthnot; or any other person; nor has it requested any of Oriel Securities, the Company, Arbuthnot or any of their respective affiliates or any person acting on behalf of any of them to provide it with such information;

6.         the content of this Announcement is exclusively the responsibility of the Company and neither Oriel Securities, Keefe, Bruyette & Woods Limited nor any of their respective affiliates nor any person acting on behalf of them or any of their respective affiliates have, or shall have, any liability for any information, representation or statement contained in this Announcement or any information previously published by or on behalf of the Company and/or Arbuthnot and will not be liable for any Placee's decision to participate in the Placing based on any information, representation or statement contained in this Announcement or otherwise;

7.         in making its decision to subscribe for Placing Shares and/or acquire Sale Shares, the Placee: (a) has not relied on any investigation that the Bookrunners or any person acting on their behalf may have conducted with respect to the Placing Shares or the Company or the Sale Shares or Arbuthnot; (b) has made its own investment decision regarding the Placing Shares and/or Sale Shares based on its own knowledge (and information it may have or which is publicly available) with respect to the Placing Shares, the Sale Shares, the Company or Arbuthnot; (c) has had access to such information as it deems necessary or appropriate in connection with its subscription or acquisition of any Placing Shares and/or Sale Shares; and (d) has sufficient knowledge and experience in financial and business matters and expertise in assessing credit, market and all other relevant risk and is capable of evaluating, and has evaluated, independently the merits, risks and suitability of subscribing for or purchasing the Placing Shares and/or Sale Shares;

8.         it understands that by its acquisition or holding of any Placing Shares and/or Sale Shares the Placee is assuming and is capable of bearing the risk of loss that may occur with respect to the Placing Shares and/or Sale Shares, including the possibility that the Placee may lose all or a substantial portion of its investment in any Placing Shares and/or Sale Shares, and the Placee will not look to the Bookrunners or any of their affiliates or any person acting on behalf of the Bookrunners or any of their affiliates for all or part of any such loss or losses it may suffer;

9.         it has neither received nor relied on any confidential price sensitive information concerning the Company or Arbuthnot in accepting this invitation to participate in the Placing;

10.        it has not relied on any information relating to the Company or Arbuthnot contained in any documents prepared by either the Bookrunners or any of their respective affiliates or any person acting on behalf of either the Bookrunners or any of their respective affiliates and understands that neither the Bookrunners nor any of their respective affiliates nor any person acting on behalf of the Bookrunners or any of their respective affiliates: (a) has, or shall have, any liability for public or filed information or any representation; (b) has, or shall have, any liability for any additional information that has otherwise been made available to such Placee, whether at the date of publication, the date of the Announcement or otherwise; or (c) makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of such information, whether at the date of publication, the date of the announcement or otherwise, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;

11.        it, or the beneficial owner, as applicable, is entitled to subscribe for Placing Shares and/or acquire Sale Shares under the laws of all relevant jurisdictions which apply to it, or the beneficial owner, as applicable, and that it has fully observed such laws and obtained all such governmental and other guarantees and other consents in either case which may be required under such laws and complied with all necessary formalities;

12.        it has the power and authority to carry on the activities in which it is engaged, to subscribe for or acquire the Placing Shares and/or Sale Shares and to execute and deliver all documents necessary for such acquisition;

13.        it, and, if different, the beneficial owner of the Placing Shares and/or Sale Shares, is not and at the time the Placing Shares and/or Sale Shares are acquired will not be residents of Australia, Canada, Japan or the Republic of South Africa;

14.        unless otherwise agreed in writing with the Bookrunners it is acquiring Placing Shares and/or Sale Shares in an offshore transaction within the meaning of and pursuant to Regulation S under the Securities Act;

15.        it understands and acknowledges that the Placing Shares and/or Sale Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and are being offered and sold to the Placee in a transaction that is exempt from, or not subject to, the registration requirements of the Securities Act;

16.        it understands and acknowledges that the Placing Shares and/or Sale Shares have not been and will not be registered under the securities legislation of Australia, Canada, Japan or the Republic of South Africa and, subject to certain exceptions, may not be offered, sold, taken up, renounced or delivered or transferred, directly or indirectly, within those jurisdictions;

17.        if it is a pension fund or investment company, its subscription for or acquisition of Placing Shares and/or Sale Shares is in full compliance with applicable laws and regulations;

18.        the allocation, allotment, issue and delivery to it, or the person specified by it for registration as holder, of any Placing Shares and/or Sale Shares will not give rise to a liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipts and clearance services) and that the Placing Shares and/or Sale Shares are not being subscribed for by it in connection with arrangements to issue depositary receipts or to transfer Placing Shares and/or Sale Shares into a clearance system;

19.        it has complied with its obligations in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002, the Terrorism Act 2003 and the Money Laundering Regulations 2007 and any related or similar rules, regulations or guidelines, issued, administered or enforced by any government agency having jurisdiction in respect thereof (the "Regulations") and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations and has obtained all governmental and other consents (if any) which may be required for the purpose of, or as a consequence of, such purchase, and it will provide promptly to the Bookrunners such evidence, if any, as to the identity or location or legal status of any person which the Bookrunners may request from it in connection with the Placing (for the purpose of complying with such regulations or ascertaining the nationality of any person or the jurisdiction(s) to which any person is subject or otherwise) in the form and manner requested by the Bookrunners on the basis that any failure by it to do so may result in the number of Placing Shares and/or Sale Shares that are to be purchased by it or at its direction pursuant to the Placing being reduced to such number, or to nil, the Bookrunners may decide at their sole discretion;

20.        it is acting as principal only in respect of the Placing or, if it is acting for any other person: (i) it is duly authorised to do so; and (ii) it is and will remain liable to the Company, Arbuthnot and the Bookrunners for the performance of all of its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person);

21.        it is a "qualified investor" as defined in within the meaning of Article 2(1)(e) of the EU Prospectus Directive (which means Directive 2003/71/EC and includes any relevant implementing directive measure in any member state) (the "Prospectus Directive");

22.        if a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive (including any relevant implementing measure in any member state), that the Placing Shares and/or Sale Shares subscribed for or acquired by it in the Placing will not be subscribed for or acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a Member State of the European Economic Area which has implemented the Prospectus Directive other than "qualified investors" (as defined in Article 2.1(e) of the Prospectus Directive), or in circumstances in which the prior consent of the Bookrunners have been given to the offer or resale;

23.        it and any person acting on its behalf is a person falling within Article 19(5) and/or 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or is a person to whom any communication in connection with the Placing may lawfully be made and undertakes that it will acquire, hold, manage or dispose of any Placing Shares and/or Sale Shares that are allocated to it for the purposes of its business;

24.        it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) relating to the Placing Shares and/or Sale Shares in circumstances in which section 21(1) of the FSMA does not require approval of the communication by an authorised person;

25.        it has not offered or sold and, before the expiry of a period of six months from Admission, will not offer or sell any Placing Shares and/or Sale Shares to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom within the meaning of section 85(1) of the FSMA;

26.        it has not offered or sold and will not offer or sell any Placing Shares and/or Sale Shares to persons in the European Economic Area before Admission, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in any member state of the European Economic Area within the meaning of the Prospectus Directive (including any relevant implementing measure in any member state);

27.        it will not deal or cause or permit any other person to deal in all or any of the Placing Shares and/or Sale Shares until Admission becomes effective;

28.        it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Placing Shares and/or Sale Shares in, from or otherwise involving, the United Kingdom;

29.        it and any person acting on its behalf is entitled to subscribe for the Placing Shares and/or Sale Shares under the laws of all relevant jurisdictions which would apply to it, and that it and any person acting on its behalf is in compliance with applicable laws in its jurisdiction of residence, the residence of the Company, or otherwise and that it has all necessary capacity and authority and has obtained all necessary consents and authorisations which may be required in connection with the subscription by it for Placing Shares and/or the acquisition by it of Sale Shares;

30.        no action has been or will be taken by any of the Company, Arbuthnot, Oriel Securities, Keefe, Bruyette & Woods Limited or any person acting on behalf of the Company, Arbuthnot or the Bookrunners that would, or is intended to, permit a public offer of the Placing Shares and/or Sale Shares in any country or jurisdiction where any such action for that purpose is required;

31.        it and any person acting on its behalf will make payment for the Placing Shares and/or Sale Shares allocated to it in accordance with this Announcement on the due time and date set out in this Announcement, failing which the relevant Placing Shares and/or Sale Shares may be placed with other acquirers or sold as the Bookrunners may in their joint discretion determine and it will remain liable for any shortfall below the net proceeds of such sale and the placing proceeds of such Placing Shares and/or Sale Shares and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties due pursuant to the terms set out or referred to in this Announcement) which may arise upon the placing or sale of such Placee's Placing Shares and/or Sale Shares on its behalf;

32.        it will do all things necessary on its part to ensure that payment for the Placing Shares and/or Sale Shares and their delivery to it or at its discretion is completed in accordance with the standing CREST instruction that it has in place with the Bookrunners, or will put in place with the Bookrunners;

33.        it understands and acknowledges that neither the Bookrunners nor any of their respective affiliates nor any person acting on behalf of the Bookrunners or any of their respective affiliates is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing nor providing advice in relation to the Placing;

34.        it understands and acknowledges that participation in the Placing is on the basis that it is not and will not be a client or customer of the Bookrunners in relation to the Placing and that the Bookrunners do not have any duties or responsibilities to it for providing the protections afforded to its clients or for providing advice in relation to the Placing;

35.        the person who it specifies for registration as holder of the Placing Shares and/or Sale Shares will be: (a) itself; or (b) its nominee, as the case may be. Neither the Bookrunners nor the Company nor Arbuthnot will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement. Each Placee and any person acting on behalf of such Placee agrees to participate in the Placing and it agrees to indemnify the Company, Arbuthnot and the Bookrunners in respect of the same on the basis that the Placing Shares and/or Sale Shares will be credited to the CREST stock account of Oriel Securities Limited (CREST ID BAQAQ, account designation 2011031) or the CREST stock account of Keefe, Bruyette & Woods Limited (CREST ID 601, account designation KECLT)  who will hold them as nominee for the Placees of such shares until settlement in accordance with its standing settlement instructions;

36.        it understands and acknowledges that the Bookrunners may (at their absolute discretion) agree to become a Placee in respect of some or all of the Placing Shares and/or Sale Shares or by nominating any connected or associated person to do so;

37.        the Company, Arbuthnot, the Bookrunners and others will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and undertakings which are given to the Bookrunners on their own behalf and on behalf of the Company and Arbuthnot, and are irrevocable;

38.        its commitment to acquire Placing Shares and/or Sale Shares on the terms set out in this Announcement and in the Trade Confirmation will continue notwithstanding any amendment that may in future be made to the terms of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company or Arbuthnot's conduct of the Placing. The foregoing representations, warranties and confirmations are given for the benefit of the Company and Arbuthnot, as well as the Bookrunners; and

39.        any agreements entered into by it pursuant to these terms and conditions, and any non‑contractual obligations arising out of or in relation to these terms and conditions or such agreements, shall be governed by and construed in all respects in accordance with the laws of England and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the courts of England as regards any claim, dispute or matter arising out of any such contract or any such non-contractual obligation, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares and/or Sale Shares (together with any interest chargeable thereon) may be taken by the Company or Arbuthnot or the Bookrunners in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange.

No United Kingdom stamp duty or stamp duty reserve tax should be payable on the issue or transfer of (or in respect of) the Placing Shares and/or Sale Shares provided that the Placing Shares and/or Sale Shares are admitted to trading on AIM and AIM remains a designated 'recognised growth market' by H.M. Revenue and Customs for stamp duty and stamp duty reserve tax purposes.

Please note that none of the Company, Arbuthnot or the Bookrunners will be responsible for any stamp duty and/or stamp duty reserve tax on the issue and/or transfer of (or in respect of) the Placing Shares and/or Sale Shares and the Placee to whom (or on behalf of whom, or in respect of the person for whom it is participating in the Placing as an agent or nominee) the allocation, allotment, issue, transfer or delivery of (or in respect of) the Placing Shares and/or Sale Shares has given rise to such United Kingdom stamp duty or stamp duty reserve tax undertakes to pay such United Kingdom stamp duty or stamp duty reserve tax forthwith and to indemnify on an after-tax basis and to hold harmless the Company, Arbuthnot, Oriel Securities and Keefe, Bruyette & Woods Limited in the event that any of the Company and/or Arbuthnot and/or Oriel Securities and/or Keefe, Bruyette & Woods Limited has incurred any such liability to United Kingdom stamp duty or stamp duty reserve tax.

In addition, Placees should note that they will be liable to pay stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the United Kingdom by them or any other person on the acquisition by them of any Placing Shares and/or Sale Shares or the agreement by them to acquire any Placing Shares and/or Sale Shares.

In view of the number of different jurisdictions where tax laws may apply to a Placee, this Appendix does not discuss the tax consequences for Placees arising from the purchase, holding, or disposition of Placing Shares and/or Sale Shares. Placees are urged to consult their own professional advisers regarding these possible tax consequences.

When a Placee or person acting on behalf of the Placee is dealing with the Bookrunners, any money held in an account with the Bookrunners on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the rules and regulations of the FCA made under the FSMA. The Placee acknowledges that the money will not be subject to the protections conferred by the client money rules; as a consequence, this money will not be segregated from the Bookrunners' money in accordance with the client money rules and will be used by the Bookrunners in the course of their own business; and the Placee will rank only as a general creditor of the Bookrunners.

All times and dates in this Announcement may be subject to amendment. Oriel Securities shall notify the Placees and any person acting on behalf of the Placees of any changes.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Each Placee and each person acting on behalf of the Placee acknowledges that neither the Bookrunners nor any of their respective affiliates, is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing nor providing advice in relation to the Placing.

 

APPENDIX 2

DEFINITIONS

The following definitions and technical terms apply throughout this document, unless the context otherwise requires:

"ABI Guidelines"	the guidelines issued by the Association of British Insurers;
"Act" or the "2006 Act"	the Companies Act 2006, as amended;
"Admission"	admission of the Placing Shares to trading on AIM, becoming effective in accordance with Rule 6 of the AIM Rules;
"AIM Rules"	the rules published by London Stock Exchange from time to time entitled "AIM Rules for Companies";
"AIM"	the market of that name operated by London Stock Exchange;
"Arbuthnot"	Arbuthnot Banking Group PLC;
"Basel III"	a global, voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity risk;
"Board" or "Directors"	the directors of the Company;
"Bookrunners"	Oriel Securities and Keefe, Bruyette & Woods Limited;
"CET1"	Core Equity Tier 1 capital;
"Circular"	the circular to be sent to Shareholders to approve the Resolutions;
"Company" or "Secure Trust Bank"	Secure Trust Bank PLC;
"CRD IV"	the Capital Requirements Directive IV. This directive is an EU legislative package covering the prudential rules for banks, building societies and investment firms, which is intended to implement the Basel III agreement in the EU. The bulk of the rules contained in this directive are applicable from 1 January 2014;
"CT1"	Core Tier 1 capital;
"CPP"	card protection policies;
"Enlarged Issued Share Capital"	the Existing Shares and the Placing Shares;
"Everyday Loans Group"	Everyday Loans Holdings Limited and its wholly-owned subsidiaries Everyday Loans Limited and Everyday Loans Lending Limited;
"Existing Shares"	the 15,648,149 Ordinary Shares in issue prior to the Placing with an aggregate nominal value of approximately £6.3 million;
"FEEFO"	independent online review system used to collect customer feedback;
"Form of Proxy"	the form of proxy to be sent to Shareholders accompanying the Circular for use by Shareholders in relation to the Secure Trust Bank General Meeting;
"Funding for Lending Scheme"	the FLS scheme launched by the Bank of England and HM Treasury on 13 July 2012 which allows banks and building societies to borrow from the Bank of England for up to four years;
"Group"	the Company and its subsidiaries and subsidiary undertakings;
"IPO"	initial public offering;
"IRD"	interest rate derivative;
"LIBOR"	the London Interbank Offered Rate;
"London Stock Exchange"	London Stock Exchange PLC;
"Major UK Lenders"	the eight banks tested under the additional stress test framework, being; Barclays, Co-operative Bank, HSBC, Lloyds Banking Group, Nationwide, Royal Bank of Scotland, Santander UK and Standard Chartered;
"Oriel Securities"	Oriel Securities Limited;
"Ordinary Shares"	ordinary shares of 40 pence each in the capital of the Company;
"Placing"	the placing of 2,083,333 Placing Shares and 1,041,667 Sale Shares at the Placing Price on the terms and subject to the conditions set out in the Placing Agreement;
"Placing Agent"	Oriel Securities;
"Placing Agreement"	the placing agreement to be entered into between the Company, Arbuthnot and Oriel Securities and expected to be dated 19 June 2014;
"Placing Price"	£24.00 per Ordinary Share under the Placing;
"Placing Shares"	2,083,333 new Ordinary Shares to be issued by the Company fully paid for cash pursuant to the Placing;
"PPI"	payment protection insurance;
"Prospectus Directive"	Directive 2003/71/EC of the European Parliament and of the Council of the European Union, as amended;
"Resolutions"	the ordinary and the special resolutions to be proposed at the Secure Trust Bank General Meeting;
"Sale"	Arbuthnot's sale of 1,041,667 ordinary shares in Secure Trust Bank, reducing its current 67.0 per cent.  holding of existing issued share capital in Secure Trust Bank to approximately 53.26 per cent.  of the Enlarged Issued Share Capital;
"Sale Shares"	1,041,667 existing Ordinary Shares being sold by Arbuthnot pursuant to the Placing;
"Shareholder"	a holder of Ordinary Shares;
"SME"	small and medium sized enterprises;
"UK" or "United Kingdom"	the United Kingdom of Great Britain and Northern Ireland;
"United States"	the United States of America, its territories and possessions, any state of the United States and the District of Columbia;
"£", "pence" or "p"	pounds sterling, the lawful currency of the United Kingdom.