Brooks Macdonald
Annual Report 2015

Plain-text annual report

Brooks Macdonald Group plc | Annual Report and Accounts 2015 | i Annual Report & Accounts for the year ended 30 June 2015 Contents Business performance 01 Financial highlights . . . . . . . . . . . . . . . . . . . . . . . Chairman’s statement . . . . . . . . . . . . . . . . . . . . . 02 Chief Executive’s review . . . . . . . . . . . . . . . . . . . 03-04 Strategic report . . . . . . . . . . . . . . . . . . . . . . . . . . 05-17 Corporate governance Report of the directors . . . . . . . . . . . . . . . . . . . . 18-19 20 Statement of directors’ responsibilities . . . . . . . . Consolidated financial statements Independent auditors’ report to the members of Brooks Macdonald Group plc . . . . . 22-23 Consolidated statement of comprehensive income . . . . . . . . . . . . . . . . . . . . Consolidated statement of financial position . . . Consolidated statement of changes in equity . . . 24 25 26 Consolidated statement of cash flows . . . . . . . . 27 Notes to the consolidated financial statements . . 28-60 Company financial statements Independent auditors’ report to the members of Brooks Macdonald Group plc . . . . . 61 Company balance sheet . . . . . . . . . . . . . . . . . . . 62 Notes to the company financial statements . . . . 63-68 Shareholders’ information Explanatory notes to the Annual General Meeting resolutions . . . . . . . . . . . . . . . . . . . . . . 69-70 Notice of Annual General Meeting . . . . . . . . . . 71-73 Form of Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Other information Directors and advisers . . . . . . . . . . . . . . . . . . . . IBC Financial highlights Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 01 Funds under management (£m) Earnings per share (p) Dividend per share (p) 7,410 6,550 57.43 51.92 69.01 68.30 65.88 30.5 26.0 22.5 18.5 15.0 5,110 3,520 2,969 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 +8% Pre-tax profit for the year was £11 .420 million compared to £10 .568 million in 2014 . +13% Discretionary funds under management increased from £6 .55 billion to £7 .41 billion during the year . +6% Underlying basic earnings per share* increased from 86 .24p to 91 .33p +13% Underlying pre-tax profit* for the year was £15 .078 million compared to £13 .316 million in 2014 . +17% Total dividend per share has increased from 26 .0p to 30 .5p, including a proposed final dividend of 20 .5p per share . * Excludes acquisition costs, finance costs of deferred consideration and amortisation of intangible assets . 02 | Brooks Macdonald Group | Annual Report and Accounts 2015 Chairman’s statement We have grown the business organically over the last year and with the continued changes to the regulatory landscape we are pleased with the progress we have made. Christopher Knight Chairman This has been a year of significant progress in which we have continued to invest in the Group’s future, increased our profits and grown our funds under management. Underlying pre-tax profits for the year were £15 .1m (2014: £13 .3m), a rise of 13 .5%, and underlying earnings per share have risen to 91 .33p (2014: 86 .24p) . These appointments broaden the senior management team and will provide Chris Macdonald with more time to focus on delivering the Group’s growth ambitions . The Group has continued to change and develop over the last year . We are undertaking a complete IT upgrade for all our investment businesses, we continue to invest in regulatory oversight, our investment performance remains strong and we remain focused on delivering high The board is recommending a final dividend performance and service standards for of 20 .5p per share which, if approved by our clients . We have grown the business shareholders, will result in total dividends organically over the last year and with for the year of 30 .5p . This represents an the continued changes to the regulatory increase of 17% over the total dividends landscape we are pleased with the progress paid the previous year of 26 .0p per share . we have made . The final dividend will be paid on 28 October 2015 to shareholders who are on the register at the close of business on 25 September 2015 . We remain cash generative as a Christopher Knight Chairman business and your board will continue 16 September 2015 its progressive dividend policy . Our discretionary funds under management grew strongly over the year and as at 30 June 2015 totalled £7 .41bn (2014: £6 .55bn), a rise of 13 .13% . This compares favourably to the growth of the WMA index of 3 .75% . In August we were pleased to announce the appointment of Andrew Shepherd as the Group’s Deputy Chief Executive . Andrew joined Brooks Macdonald in 2002 and for the last seven years has been joint managing director of Brooks Macdonald Asset Management (‘BMAM’) . At the same time Nick Holmes was appointed the sole Managing Director of BMAM . Chief Executive’s review Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 03 Introduction I would like to start by thanking all our staff for their hard work for the Group over the last 12 months . In an industry that is highly dynamic, from a regulatory, distribution and market perspective, the Group has made significant progress and this is only possible with their commitment . Over the year we achieved double digit growth in underlying pre-tax profits, continued to increase our discretionary funds under management, improved our distribution both on and offshore and continued to invest in infrastructure, governance and IT, as well as remaining one of the Sunday Times Best 100 companies to work for . We also successfully moved our London head office in May to new West End premises; this will facilitate further expansion and underlines our growth ambitions for the future . We have also broadened the senior management team and, coupled with our continued investment programme, these developments have the objective of ensuring we continue to grow in a highly disciplined manner . Funds under management Our discretionary funds under management rose to over £7 .4bn, an increase of over £860m over the year . This represents an increase of 13 .1% supported by investment markets; investment performance across the Group accounted for £218m and net new business for £645m . Across the business we have three avenues for growth in our discretionary funds; our Bespoke Portfolio Service (‘BPS’), Managed Portfolio Services (‘MPS’) and Funds . In all cases we work closely with institutions and professional intermediaries to introduce business and I am delighted that we now work with over 770 firms both in the UK and offshore . We remain firmly committed to working closely with these firms and are grateful for their ongoing and growing support . Our core offering, BPS, which targets individuals with £200,000 or more to invest, continues to attract funds and our service is split between the management of pension funds (largely Self Invested Personal Pensions –‘SIPPs’) private portfolios and charities and trusts . The dynamics behind all three areas constantly evolve . Pension legislation changes continue to make SIPPs more attractive but at the same time ‘lifetime caps’ now restrict the size of individual pension funds . Private portfolios remain a significant area of growth, which is supported by the backdrop of a low interest rate environment, and we are also seeing growth in our trust remits, most notably offshore . MPS, which is a discretionary service targeted at those with £20,000 or more to invest, has three areas of growth . The first two relate to smaller investment clients, firstly those portfolios that we administer and secondly, portfolios that are held on external administrative platforms . In both cases there have been pricing pressures over the last few years that have now plateaued . Chris Macdonald Chief ExecutiveThis has been a year of substantive progress for the group. We have continued to grow funds under management and increase profits whilst making considerable progress on our IT development, our distribution, improving our governance, completing two strategic alliances, broadening the senior management team and moving our head office.04 | Brooks Macdonald Group | Annual Report and Accounts 2015 Chief Executive’s review continued Funds under management continued The third area of growth for MPS is the Industry background The amount of change in the sector and industry does not slow down . In the sector multi-asset funds which sit within our we continue to see consolidation and Funds business . The growth of our Funds I believe this trend will continue largely business, which now has £663m under due to the growth of wealth management management (2014: £518m), stems from our specialist funds as well as the multi-asset funds within MPS . as an industry and the high cost base required to be able to manage and administer client assets . In our Channel Islands business there Regulatory costs have been high over have been some management changes the past two years with the required as well as increased collaboration with repapering of all clients, the Retail professional intermediaries overseas . The Distribution Review (‘RDR’), FATCA and business is now more integrated into the the like, but we believe these have now Group . Funds under management have stabilised . However, MiFID II, which will We continue to grow the number of firms where we have strategic relationships and I am pleased that this has grown to 17 during the past financial year . In addition to organic opportunities we always look to recruit quality experienced staff across the Group and we will continue with our successful trainee programme . Summary and outlook This has been a year of substantive progress for the business . We have continued to grow funds under management and increase profits whilst making considerable progress on our IT development, our distribution, improving our governance, completing two strategic alliances, broadening the senior management team and moving our head office . now grown to £1 .16bn . In all cases we manage money on a team and risk based approach, working off a centralised investment process . This continues to deliver strong risk adjusted returns for our clients and allows the business to publish its performance data, ensuring a robust and scalable investment management proposition . Braemar Estates, our specialist property manager, had a tough year . Whilst assets under administration are broadly unchanged, new business in the first half was slower than we had hoped for . This has been addressed in the second half impact in January 2017 will bring further business requirements and additional costs . We are sheltered to some degree as we are undertaking a full IT system upgrade, which is due to be completed Over the coming year we will look to in the final calendar quarter of 2016 . continue with the progress made and We have built in as many of the known look to drive performance, service and requirements of MiFID II as possible into new business . Investment markets remain the system specifications to enable us to volatile and this is clearly a headwind for comply with this new European legislation . the industry as a whole, but encouragingly Strategies for growth We continue to focus on our core strategies for growth: organic, service and performance development and on-going investment in the business . our new business has been strong for the first quarter of the new financial year . Chris Macdonald Chief Executive 16 September 2015 with mandate wins that will benefit the Our main strategic focus remains working second half of the new financial year . with quality professional advisers . We have Financial planning has had a mixed year; our consulting business was ahead of expectations but employee benefits proved more challenging than we had hoped, not assisted by the substantive changes required to deliver an auto enrol solution to businesses in a profitable manner . This is an area where we are looking to dovetail more work with our Asset Management business and I expect progress here over the next six months and beyond . seen this sector grow in the UK over the last 12 months and the opportunities to work with more firms across all of our regional offices is greater today than before the implementation of RDR in 2012 . Offshore, we are focussing on three principal areas: South Africa, where we have recently obtained regulatory permissions to market our services to intermediaries and clients alike; the Far East (mainly MPS funds); and the Middle East working with intermediaries . Strategic report Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 05 Principal activities The Group is an integrated wealth management group offering a range of fee based bespoke advice and services principally to private high net-worth individuals, charities and trusts . The Group offers the services through six principal companies and operates out of ten UK based offices giving broad geographic coverage and two offshore offices in Jersey and Guernsey . Company Location Services Clients Brooks Macdonald Asset Management Limited (‘BMAM’) Brooks Macdonald Financial Consulting Limited (‘BMFC’) London, Hampshire, Manchester, Tunbridge Wells, Edinburgh, Taunton, York and Leamington Spa London and York Discretionary investment management, custody, nominee and dealing Private individuals, charities and trusts Independent financial advice, personal tax and mortgage services Private individuals and families Employee benefits consultancy Businesses and their employees Brooks Macdonald Funds Limited (‘BMF’) Hale and London Manager to a range of regulated OEICs and specialist property and structured return funds Private individuals, charities and trusts Braemar Estates (Residential) Limited Brooks Macdonald Asset Management (International) Limited (‘BMI’) Brooks Macdonald Retirement Services (International) Limited (‘BMRSI’) Hale Estate and block property management Institutions, property fund managers and private individuals Jersey and Guernsey Discretionary investment management, custody, nominee, dealing, advisory and stockbroking Jersey and Guernsey Independent financial advice Private individuals, charities and trusts Private individuals, families, trusts and businesses 06 | Brooks Macdonald Group | Annual Report and Accounts 2015 Strategic report continued Performance for the year The financial year 2015 has seen some uncertainty and volatility in the financial markets and yet despite this the Group has increased revenue by 12% to £77 .69m (2014: £69 .13m) . Underlying profits before tax have increased by 13% to £15 .08m (2014: £13 .31m) and profit before tax has increased by 8% to £11 .42m (2014: £10 .57m) . Extracts from the Consolidated Statement of Comprehensive Income Operating revenue Underlying operating expenses Net finance income and losses on investments Underlying profit before tax1 Underlying operating margin2 Profit before tax Effective tax rate Taxation Profit after tax Underlying earnings per share Earnings per share Dividend per share3 2015 £m 77.7 (62.5) (0.1) 15.1 19.4% 11.4 20.9% (2.3) 9.1 2014 £m 69 .1 (55 .8) – 13 .3 19 .2% 10 .6 14 .3% (1 .5) 9 .0 91.33p 68.30p 86 .24p 69 .01p 30.5p 26 .0p 1 Profit before tax excluding charges in relation to amortisation of client relationships, finance costs and adjustments to deferred consideration and acquisition costs . 2 Underlying profit before tax as a % of operating revenue . 3 The total interim dividend and final proposed for the financial year . Underlying operating expenses The major part of the underlying operating expenses of the Group are staff costs comprising 66% (2014: 65%) and of the total staff costs, 37% (2014: 38%) were variable costs . During the year the Group continued to invest into enhanced IT systems in order to improve the services we offer clients and to realise operational efficiencies across the business as a whole . In May 2015, on the expiry of the leases on our offices, we moved into new head office premises in the West End giving the Group further room for expansion and the benefits of locating all staff on one floor . The additional costs of this new property are estimated at £0 .7m in a full year . In line with the increasing regulatory requirements of the financial services industry generally we are also investing further in our corporate governance, risk and compliance departments and we have incurred an increase in the levies from the FSCS to £0 .5m (2014: £0 .3m) . Underlying profit before tax Underlying profit before tax and underlying earnings per share are non GAAP alternative performance measures, considered by the board to be a better reflection of true business performance than looking at the Group’s results on a statutory basis only . These measures are widely used by research analysts covering the company . Underlying results exclude expenditure falling into the categories explained below and a full reconciliation between underlying profit and the profit attributable to shareholders is provided in the following table . Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 07 Strategic report continued Reconciliation of underlying profit before tax to profit before tax Underlying profit before tax Amortisation of client relationships and software Finance costs on deferred consideration Changes in fair value of deferred consideration Acquisition costs Profit before tax 2015 £m 15.1 (2.7) (0.8) (0.1) (0.1) 11.4 2014 £m 13 .3 (2 .2) (0 .3) – (0 .2) 10 .6 Amortisation of client relationships and software (note 14) As explained in notes 2(d) and 2(m), client relationship intangible assets are created in the course of acquiring funds under management . The amortisation charge associated with these assets and software represents a significant non-cash item and it has therefore been excluded from underlying profit, which represents largely cash-based earnings . Finance costs and changes in fair value of deferred consideration When the Group makes acquisitions of both corporate entities and teams of fund managers in the course of acquiring funds under management the typical structure of the acquisition, in order to continue to incentivise and motivate the vendors, is to make deferred payments over a period of time based on the retention and growth in funds under management . The initial estimated fair value of the deferred payments will be based on future projections of funds under management and where the actual payment is different from the original estimates then charges or credits will be made in arriving at the profit before tax . The directors consider that the effect of these changes to the original projected payments can distort the results of a particular period and have therefore excluded them from underlying profit . Initial estimates of the deferred cash payments are recognised in the financial statements at their present value based on an inherent rate of implied interest . The difference between the discounted present value of deferred consideration and the estimated future cash payment is recognised as a charge over the duration of the deferral period in arriving at profit before tax . The directors consider that this charge, which is a non-cash item can distort the results of a particular period and have therefore excluded the charge from underlying profit . Acquisition costs The acquisition cost in the year were incurred in relation to the purchase of Levitas Investment Management Services Limited . Cash resources and regulatory capital The Group is cash generative and cash flow from operating activities as detailed in note 26 increased to £20 .1m (2014: £13 .7m) . During the year, as detailed in the Consolidated Statement of Cash Flows on page 27, deferred consideration payments in respect of acquisitions increased by £6 .6m over the previous year which, together with increased payments for intangible assets and dividends paid to shareholders, resulted in an increase in cash resources at the year end of £1 .2m to £19 .3m (2014: £18 .1m) . The Group had no borrowings at 30 June 2015 (2014: £nil) . As required under Financial Conduct Authority (FCA) rules and both Jersey and Guernsey Financial Services Commissions we perform a regular Internal Capital Adequacy Assessment Process (ICAAP) and Adjusted Net Liquid Asset (ANLA) calculation which includes performing a range of stress tests to determine the appropriate level of regulatory capital and liquidity that the Group needs to hold . Surplus levels of capital are forecast taking into account investment requirements and proposed dividends to ensure that appropriate buffers are maintained . The Group’s Pillar 3 disclosures are published annually on our website (www .brooksmacdonald .com) . Segmental review The Group reports its results in four key operating segments; Investment management, Financial planning Fund and property management and Channel Islands . The principal activities of the Group are described in detail above on page 5 . 08 | Brooks Macdonald Group | Annual Report and Accounts 2015 Strategic report continued Segmental review continued One of the key performance indicators is the growth in discretionary funds under management in total across all parts of the Group which are reported on a quarterly basis throughout the year . The increase in the year is analysed in the table below . At 1 July 2014 Inflows – net new discretionary business* – acquisitions – investment growth At 30 June 2015 Organic growth net of markets Total net growth Funds under management (£m) 6,550 645 – 218 7,413 9 .8% 13 .2% * Includes clients leaving and capital or income withdrawals of larger than £50,000 for Bespoke Portfolio Service (‘BPS’) and larger than £20,000 for Managed Portfolio Service (‘MPS’) . A large proportion of the net new discretionary business comes from professional intermediaries with whom we have worked over a number of years . As well as introducing discretionary management funds they also introduce to other parts of the Group and the number of introducing firms has increased to 770 (2014: 670) at 30 June 2015 . Investment management The investment management service is the core part of the Group contributing 70% (2014: 71%) of the Group turnover and delivering 96% (2014: 85%) of the Group profit on a segmental basis as detailed in note 3 to the consolidated financial statements . Investment management principally provides discretionary investment management to private investors, charities and trusts through BPS and MPS . Despite considerable changes within the industry and volatility within the financial markets we have continued to grow funds under management (‘FUM’) as shown in the table above . Financial planning The financial planning business delivers both fee based financial planning to high net-worth individuals and employee benefits consultancy to small and medium sized employers throughout the UK and remains a major introducer of new investment management to the Group . During the year there was further revenue growth to £4 .2m (2014: £4 .0m) as the business continued to invest in additional staff and systems, particularly as part of the employment benefits consultancy resulting in a small loss for the year of £0 .1m (loss 2014: £0 .1m) . The Board believes that the business is now positioned to return to profitability in the next financial year . Fund and property management It has been another year of considerable growth for Brooks Macdonald Funds, as part of the increase in the table shown above, with total FUM increasing by 28% to £663m (2014: £518m) at 30 June 2015 . This growth was achieved both organically through the net new investment in the existing seven funds, as well as by the investment in North Row Capital LLP, which manages the Liquid Property Fund that was launched in February 2014 and has contributed £30m to the year end total of FUM . The Group exercised its option to acquire Levitas on 31 July 2014 with FUM of £89m and at 30 June 2015 this had increased to £114m . Brooks Macdonald Funds has broken even for this financial year and given the current level of FUM and projected growth it is expected to make a net contribution to the Group in the year ending 30 June 2016 . Braemar Estates has had particularly difficult year with assets under administration broadly unchanged at £1 .14bn (2014: £1 .13bn) against an increased cost base and the loss of a number of mandates . New business instructions were slower in the first half of the financial year than anticipated although this has improved and the benefits of this will be seen in the second half of the new financial year . Since the year end a strategic review of the business had been undertaken resulting in a number of changes to the board of Braemar Estates which the directors believe will result in an improved performance in the forthcoming year . Strategic report continued Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 09 Channel Islands Our Channel Islands business as detailed above comprises BMI and BMRSI both operating in Jersey and Guernsey and results from the acquisition of Spearpoint Limited in November 2012 and DPZ Capital Limited (‘DPZ’) in April 2014 . During the year both businesses have undergone significant changes in personnel and integration costs following the acquisition of DPZ and during the year the both the chief executives of BMI and BMRSI left the Group resulting in some one-off costs . Darren Zaman has been appointed as CEO and has led a reorganisation of the structure of the businesses and the services offered, including the initiation of an international MPS and the development of links with professional intermediaries overseas focussing on three principal areas: South Africa, where we have recently obtained regulatory permissions to market our services to intermediaries and clients alike; the Far East; and the Middle East . The profits from the Channel Islands as shown in the segmental analysis on page 35 have reduced in the year to £1 .3m (2014: £2 .4m) as a result of the increased costs and a reduction in some of the higher margin but more transactional revenues . With a number of opportunities that we are pursuing internationally, the directors believe there will be an improvement in profitability in year to 30 June 2016 . Corporate governance The principal board committees are the Audit, Remuneration and Risk and Compliance committees, all of which have specific terms of reference which are periodically reviewed and approved by the Board . These terms of reference are available on the Group website . Audit Committee The members of the Audit Committee are three of the non-executive directors: Richard Price (Chairman), Christopher Knight and Colin Harris . Richard Price became a member of the committee from the date of his appointment to the board, 1 August 2014, and was appointed Chairman on 8 September 2014 in succession to Christopher Knight . The board is satisfied that all members of the committee have recent and relevant financial experience . The committee met four times during the year ended 30 June 2015 . As well as being responsible for reviewing the external audit arrangements with regard to compensation, scope and period of office, the committee also considers the accounting policies of the Group and the significant issues and judgements in connection with statutory financial reporting . The committee reviews the audit control memorandum and the audit engagement letters and has discussions with the auditor without management present . Risk and Compliance Committee The Group’s risk management framework is designed to ensure risks are identified, reported and managed at every level of the corporate structure . Individual business units follow documented processes and procedures and their activities are monitored on an ongoing basis . Monitoring output is reported to business managers and identified risks are reported to business-level risk committees . Each risk committee is responsible for reviewing identified risks and implementing procedure reviews and mitigating action as necessary . Identified risks are ranked according to potential impact and reported up through the risk management framework according to the Group’s escalation policy . Business-level risk committees report to a Group Risk Committee and, ultimately, to the Risk and Compliance Committee of the Group Board . The membership of the Risk and Compliance Committee is made up of the Group’s four non-executive directors and is chaired by Colin Harris . Business managers and representatives from the legal, risk and compliance functions attend committee meetings as necessary to report on identified risks and mitigating action . During the year ended 30 June 2015 the committee met on seven occasions . Its principal responsibilities include monitoring identified risks and the effectiveness of mitigating action, keeping risk assessment processes under review, assessing material breaches of risk limits and reviewing client complaints . The Group’s risk management framework is subject to ongoing review . The principal risks identified as having a potential material impact on the Group are detailed below, together with the principal means of mitigation . Financial risks The Group’s principal financial risks relate to credit risk, liquidity risk and market risk and the measures and policies for the management of those risks are set out in note 32 to the consolidated financial statements . Further details on capital management processes can be found in note 33 . 10 | Brooks Macdonald Group | Annual Report and Accounts 2015 Strategic report continued Non-financial risks The significant non-financial risks faced by Group have been reviewed by the committee, which believes they remain broadly the same as in previous years and are as follows: Reputational risk Impact The Group has a growing reputation as a provider of high quality investment and wealth management services . There is a risk that significant damage to reputation could lead to the loss of existing clients as well as impacting on the ability to gain new clients, which would lead to a fall in financial income . Such risk could arise from events such as poor investment performance, poor client service or regulatory censure . Mitigation This risk is minimised by ensuring the Group maintains a culture of high ethical and professional standards whilst focussing on delivering a first class service to all of our clients . The Group maintains separate, independent risk and compliance departments, which ensures conformity with the regulations of the Financial Conduct Authority, as well as relevant statutes, in all of our dealings with our clients . Regulatory risk Impact The sector in which the Group operates is heavily regulated and any breach of regulations could lead to fines or disciplinary action against the Group or its staff . People risk Impact Our business is dependent on client relationships with our staff . Operating in a competitive market there is a risk of loss of existing clients due to poor performance or service, a failure to respond to changes in the market place, or the loss of key investment professionals . Technology risk Impact A key part of the high quality service delivered to clients is facilitated by a flexible and robust internal ICT infrastructure . Mitigation The Group monitors compliance with existing law and regulations and keeps abreast of future changes to assess likely business impact and to ensure that the Group has sufficient resources to implement any necessary changes . Mitigation To minimise this risk, the Group continues to invest in its employees and monitors developments in the marketplace in which it operates to ensure that the Group continues to offer a wide range of services . Recruitment policies are designed to attract high quality staff and the Group regularly reviews and benchmarks its remuneration packages and contractual arrangements and motivation is measured through a sentiment index . Structured training is provided by the Group’s Learning & Development team . Mitigation New ICT projects are regularly reviewed and appraised at board meetings in order to ensure that the Group continues to develop and maintain its ICT capabilities . Business continuity is assured through our network of offices and our remote working capabilities . Strategic report continued Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 11 Non-financial risks continued Operational risk Impact Operational risk is the risk that the Group suffers a loss of business resulting from inadequate or failed internal processes, people and systems or from the failure of outsourcing partners or external suppliers . Investment performance risk Impact There is a risk that portfolios will not meet their investment objectives which could result in the Group suffering loss of business . There is a risk on the suitability of portfolios for clients and where the suitability responsibility lies between a professional introducing the client and the group company . Mitigation Due diligence takes place prior to the commencement of any outsourcing or supply, to maintain a robust procurement process and good contract governance . We keep our key outsourcing partners under review and have in place procedures to regularly assess the performance of such suppliers as well as identifying suitable and viable alternatives . Mitigation Portfolio performance, valuations and risk profiles are monitored by management, allowing issues to be identified and mitigated as they arise . The Group has in place BITA Monitor portfolio risk oversight tools to assist with supervising portfolio management . The Group keeps its client documentation under review and updates it regularly to ensure clients are properly informed about investment policy and risks . Remuneration Committee The Remuneration Committee comprises Diane Seymour-Williams (Chair), Christopher Knight and Colin Harris . The committee (in consultation with the Chief Executive) determines the specific remuneration packages for each executive director and certain senior executives including base salary, annual bonus, long-term incentives, benefits and terms of employment . The committee is also responsible for setting the broad parameters for the annual base salary review for all staff across the Group and reviews all awards made under various long-term incentive schemes operated by the Group . Remuneration policy Brooks Macdonald recognises the importance of its employees to the success of the Group and consequently the remuneration policy is designed to be market competitive in order to attract, retain and motivate high-calibre individuals . External third party data is used to validate rather than to benchmark the total reward . The remuneration policy, which applies to directors and employees of the Group, is based on the following key principles: • designed to encourage the retention of staff through deferred variable compensation, where appropriate; • the need to provide a market competitive balanced package of benefits; • inclusion of both annual and long term elements; • differentiation by merit and performance; • an emphasis on variable, performance driven remuneration bonus payments funded from retained profits; • compliant with financial services rules and regulations; • alignment with shareholders’ interests with significant long term equity participation; and • clarity, transparency and fairness of process . The current remuneration package for an executive director has four main elements: basic salary and benefits, profit related bonus, long-term equity based incentives and pension . The total reward is designed to include a balance of fixed and variable pay with an element of deferral . 12 | Brooks Macdonald Group | Annual Report and Accounts 2015 Strategic report continued Remuneration Committee continued Single total figure of remuneration for each director The remuneration of directors in 2015 and 2014 is set out in the table below . Salary and fees 2015 £’000 2014 £’000 Taxable benefits 2014 £’000 2015 £’000 Annual bonus1 2015 £’000 2014 £’000 Long term incentive schemes 20152 £’000 20143 £’000 Pension related benefits 2015 £’000 2014 £’000 Total 2015 £’000 2014 £’000 Executives C A J Macdonald N I Holmes S J Jackson A W Shepherd R H Spencer S P Wombwell 253 166 188 188 188 194 247 162 167 167 183 189 3 2 4 2 3 3 3 2 3 2 3 3 272 192 140 176 148 104 1,177 1,115 17 16 1,032 Non-executives C J Knight (Chairman) C R Harris (Senior independent director) D Seymour-Williams R Price (appointed 1 August 2014) 86 45 40 37 75 40 36 – – – – – – – – – – – – – 256 160 120 160 132 132 960 – – – – 88 133 48 132 42 159 602 – – – – 58 29 38 29 34 – – 25 – – – – – 24 18 18 – – 616 518 380 498 381 460 564 377 346 376 352 324 188 25 60 2,853 2,339 – – – – – – – – – – – – 86 45 40 37 75 40 36 – Total 1,385 1,266 17 16 1,032 960 602 188 25 60 3,061 2,490 Notes 1 The annual bonus represents the cash amount receivable for the relevant financial year . An additional amount of 20% for each executive director is deferred and awarded by way of ordinary shares under the terms of the LTIS as disclosed below in table 2 . 2 The amounts represent the value vested in the year from three year long term incentive plans awards arising from the deferred element of the 2011 annual bonus together with any additional awards made on similar terms . The awards satisfied the performance conditions requiring an increase in the diluted earnings per share of the Company of at least 2% per annum more than the increase in the RPI over the period of three financial years starting with the financial year in which the date of the grant falls and ending with the financial year in which the third anniversary of the date of the grant falls . The vesting date was 20 October 2014 and the market price on that date was £13 .42 . 3 The amounts represent the value vested in the year from three-year Long Term Incentive Scheme awards arising from the deferred element of the 2010 annual bonus together with any additional awards made on similar terms . The awards satisfied the performance conditions requiring an increase in the diluted earnings per share of the Company of at least 2% per annum more than the increase in the RPI over the period of three financial years starting with the financial year in which the date of the grant falls and ending with the financial year in which the third anniversary of the date of the grant falls . The vesting date was 27 October 2013 and the market price on that date was £14 .02 . Notes to the single total figure of remuneration for each director table Basic salary Basic salary is paid monthly in cash through payroll determined by the committee and any changes are implemented from 1 July each year or when an individual changes position or responsibility . In deciding appropriate levels the committee considers salaries throughout the group and information on comparable companies of a similar size and complexity, provided by advisers to the committee . The views of the Chief Executive are taken into consideration when setting the salary of other directors . The base salaries of executive directors were increased on 1 July 2014 by a total of 2 .6% compared to an overall average increase for all employees of 3 .7% . Strategic report continued Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 13 Remuneration Committee continued Notes to the single total figure of remuneration for each director table continued Non-executive directors’ fees The non-executive directors’ salaries were similarly reviewed and increased on average by 9 .3% with the approval of the board to reflect their additional responsibilities and commitments as the Group grows . The Chairman’s fee was increased from £75,000 to £90,000 on 1 September 2014 and the basic non-executive director’s fee was increased from £36,000 to £40,000 on 1 July 2014 . Taxable benefits Taxable benefits are the provision of private medical insurance for the executive directors and their dependents and the provision of interest- free season ticket loans as disclosed in note 35 to the consolidated financial statements . Annual bonus Awards to executive directors and some other senior employees of the Group of profit related bonuses are made from a pool of profits in the region of 10-20% of the Group pre-tax profit after the payment of all bonuses to all other staff . The committee determines the overall size of the pool based on the performance of the Group against a number of key performance indicators including the growth in profits, the movement in funds under management, various internal client service metrics and the performance against budget of each of the operating divisions . The total payment to executive directors, including the amounts deferred into shares, represented 10 .0% (2013: 10 .9%) of Group pre-tax profit . The total bonus payment to all senior employees who participate in this scheme was 11 .9% (2014: 12 .1%) . Awards to individual executive directors are determined by the committee following recommendations from the Chief Executive, taking into account a number of financial and non-financial factors . These are intended to give a broad assessment of the annual performance objectives of each director, including the results of the business, investment performance, net new business, management of risks facing the Group and cost control within each individual’s area of responsibility . The Remuneration Committee has decided that 20% of the bonus awarded will be made in shares deferred for a period of three years under a Long Term Incentive Scheme (‘LTIS’) . In addition, directors may choose to defer a further amount of any bonus awarded, up to a maximum of 20%, making 40% in total, into shares under the LTIS . Long Term Incentive Scheme (‘LTIS’) and Employee Benefit Trust (‘EBT’) The Group established an EBT on 3 December 2010 . The Trust was established to acquire ordinary shares in the Company in connection with the deferred share element of the profit related bonus under the LTIS as detailed above . The EBT is also used for other long-term awards to members of the Board and to other senior employees . The Remuneration Committee has made additional awards under the LTIS to certain executive directors and other senior employees . The conditional awards are subject to the same performance and other conditions as those applying to the deferred profit related bonus share options . The LTIS awards reported are the historic awards vesting at the end of the three year cycle valued using the share price on the date of the vesting . In addition to the deferred element of the annual bonus described above the executive directors are awarded rights to acquire ordinary shares . The scheme has performance conditions attached to the deferred award, requiring a minimum growth in the diluted earnings per share of the Group of 2% per annum above the increase in the Retail Price Index (RPI) over the three year period . Pensions Executive directors may participate in the pension arrangements of the Group or receive cash in lieu of pension on the same basis as other employees . The Group’s contributions are currently 15% of base salary . 14 | Brooks Macdonald Group | Annual Report and Accounts 2015 Strategic report continued Remuneration Committee continued Directors’ interests in shares At 30 June 2015, directors’ shareholdings were as set out in table 1 . Table 1: Directors’ shareholdings and interest in shares at 30 June 2015 Number of shares or options Executives C A J Macdonald N I Holmes S J Jackson A W Shepherd R H Spencer S P Wombwell Non-executives C J Knight (Chairman) C R Harris (Senior independent director) D Seymour-Williams R Price (appointed 1 August 2014) Beneficially owned shares LTIS2 Sharesave Interest in shares EMI schemes CSOP Total 835,410 54,895 79,534 47,915 776,743 89,189 71,585 6,086 5,000 – 18,371 12,210 10,991 13,316 10,306 10,416 – – – – 649 1,298 1,298 1,494 1,455 1,298 – – – – – 10,500 – – – – – – – – – 2,067 2,067 2,067 1,0871 2,067 – – – – 19,020 26,075 14,356 16,877 12,848 13,781 – – – – Total 1,966,357 75,610 7,492 10,500 9,355 102,957 Notes 1 In the year ended 30 June 2015, a new award with an aggregate market value of £15,000 was made under the CSOP to R H Spencer . The number of options to be granted and the option price for this award will be determined based on the share price at the grant date in October 2015 . 2 In the year ended 30 June 2015 further awards were made to the executive directors under the LTIS scheme together with the deferred element of the annual bonus award . The monetary values of the awards are shown below and the actual number of shares awarded will be determined based on the share price at the grant date in October 2015 . Table 2: Monetary value of awards made under LTIS Executives C A J Macdonald N I Holmes S J Jackson A W Shepherd R H Spencer S P Wombwell Total Deferred bonus £’000 Additional awards £’000 Total £’000 68 48 35 44 37 26 – 30 25 40 – 25 68 78 60 84 37 51 258 120 378 Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 15 Strategic report continued Remuneration Committee continued Directors’ interests in shares continued Table 3: LTIS Plan cycle Performance period end date Vesting date At 1 July 2014 Granted in the year Exercised in the year At 30 June 2015 C A J Macdonald 2010-13 30 .06 .2013 27 .10 .2013 2011-14 30 .06 .2014 20 .10 .2014 2012-15 30 .06 .2015 25 .10 .2015 2013-16 30 .06 .2016 01 .11 .2016 2014-17 30 .06 .2017 14 .10 .2017 N I Holmes 2010-13 30 .06 .2013 27 .10 .2013 2011-14 30 .06 .2014 20 .10 .2014 2012-15 30 .06 .2015 25 .10 .2015 2013-16 30 .06 .2016 01 .11 .2016 2014-17 30 .06 .2017 14 .10 .2017 S J Jackson 2010-13 30 .06 .2013 27 .10 .2013 2011-14 30 .06 .2014 20 .10 .2014 2012-15 30 .06 .2015 25 .10 .2015 2013-16 30 .06 .2016 01 .11 .2016 2014-17 30 .06 .2017 14 .10 .2017 A W Shepherd 2010-13 30 .06 .2013 27 .10 .2013 2011-14 30 .06 .2014 20 .10 .2014 2012-15 30 .06 .2015 25 .10 .2015 2013-16 30 .06 .2016 01 .11 .2016 2014-17 30 .06 .2017 14 .10 .2017 R H Spencer 2010-13 30 .06 .2013 27 .10 .2013 2011-14 30 .06 .2014 20 .10 .2014 2012-15 30 .06 .2015 25 .10 .2015 2013-16 30 .06 .2016 01 .11 .2016 2014-17 30 .06 .2017 14 .10 .2017 S P Wombwell 2011-14 30 .06 .2014 20 .10 .2014 2012-15 30 .06 .2015 25 .10 .2015 2013-16 30 .06 .2016 01 .11 .2016 2014-17 30 .06 .2017 14 .10 .2017 4,112 6,536 5,354 4,372 – 2,095 9,886 4,724 2,528 – 2,715 3,595 4,567 2,528 – 2,095 9,804 4,567 3,791 – 2,405 3,105 2,677 2,186 – 11,847 3,780 2,528 – – – – – 4,533 – – – – 4,958 – – – – 3,896 – – – – 4,958 – – – – 2,338 – – – 4,108 – (6,536) – – – (2,095) (9,886) – – – (2,715) (3,595) – – – (2,095) (9,804) – – – (2,405) – – – – (11,847) – – – 4,112 – 5,354 4,372 4,533 – – 4,724 2,528 4,958 – – 4,567 2,528 3,896 – – 4,567 3,791 4,958 – 3,105 2,677 2,186 2,338 – 3,780 2,528 4,108 Total 101,797 24,791 (50,978) 75,610 16 | Brooks Macdonald Group | Annual Report and Accounts 2015 Strategic report continued Remuneration Committee continued Directors’ interests in shares continued Table 4: Sharesave Number of options Grant date At 1 July 2014 Granted in the year Exercised in the year Lapsed in the year At 30 June 2014 Earliest exercise date Latest exercise date C A J Macdonald 21 .05 .14 649 N I Holmes S J Jackson A W Shepherd R H Spencer 21 .05 .14 1,298 21 .05 .14 1,298 14 .05 .13 22 .05 .15 21 .05 .14 22 .05 .15 767 – 1,298 – – – – 727 – S P Wombwell 21 .05 .14 1,298 – Total 6,608 2,182 Sharesave Scheme (‘Sharesave’) – – – – – – – – – – – – – – 649 01 .06 .17 01 .12 .17 1,298 01 .06 .17 01 .12 .17 1,298 01 .06 .17 01 .12 .17 767 727 01 .06 .16 01 .12 .16 01 .06 .18 01 .12 .18 (1,298) – 01 .06 .17 01 .12 .17 – – (1,298) 7,492 (£) Market value of shares at grant date (£) Exercise price 17 .32 17 .32 17 .32 14 .65 15 .46 17 .32 15 .46 13 .86 13 .86 13 .86 11 .72 12 .37 13 .86 12 .37 – 1,455 1,455 01 .06 .18 01 .12 .18 1,298 01 .06 .17 01 .12 .17 17 .32 13 .86 All directors are entitled to take part in the HMRC approved Brooks Macdonald Group Sharesave Scheme (‘Sharesave’) on the same terms as all other employees . Annual invitations to participate in the scheme, which commences each year on 1 June, are sent to directors and option grants are made at 80% of the closing mid-market price on the day of the offer . Enterprise Management Incentive Scheme (‘EMI’) The Brooks Macdonald Group Enterprise Management Incentive Scheme (‘EMI’) was adopted by the shareholders of the Company on 11 February 2005 . Options granted can be exercised if there has been an increase in the diluted earnings per share of the Company of at least 2% per annum more than the increase in the RPI over the period of three financial years starting with the financial year in which the date of grant falls and ending with the financial year in which the third anniversary of the date of grant falls . Options may not normally be exercised before the third anniversary of the date of the grant and expire on the tenth anniversary of the grant . Due to the increase in the size of the Company it is no longer eligible under HMRC rules to grant options under this EMI scheme and the last options were awarded to directors under this scheme on 17 October 2007 . Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 17 Strategic report continued Remuneration Committee continued Company Share Option Plan (‘CSOP’) Following discussions regarding remuneration structures and incentives schemes for senior employees and directors the Company decided to set up a CSOP which was approved by shareholders at the annual general meeting on 17 October 2013 and by HMRC on 21 November 2013 . The scheme is a discretionary scheme whereby employees or directors are granted an option to purchase the Company’s shares in the future at a price set on the date of the grant . The maximum award under the terms of the scheme for an individual is a total market value of £30,000 . There are performance conditions attaching to the scheme similar to those in place for the EMI Scheme above whereby there must be an increase in the diluted earnings per share of the Company of 2% more than the increase in the RPI over the three years starting with the financial year in which the option is granted . Dilution Not more than 15% of the issued ordinary share capital of the Company (adjusted for bonus and rights issues) will be issued for all EMI and share incentive schemes operated by the Company in any ten year rolling period . The Company satisfies the various equity-based schemes it operates using a combination of market purchased, newly issued and treasury shares . Service contracts for executive directors The Company has service contracts with its executive directors with a notice period of 12 months and it is company policy that such contracts should not normally contain periods of more than 12 months . External appointments Prior approval of any new appointment is required by the Board with any fees in excess of £15,000 per annum paid to the Company . Non-executive directors Non-executive directors do not have contracts of employment but as with other directors are now required to stand for re-election . The executive directors are responsible for determining the fees of the non-executive directors who do not receive pension or other benefits from the Group and do not participate in any Group incentive schemes . 18 | Brooks Macdonald Group | Annual Report and Accounts 2015 Report of the directors The directors present herewith their annual report, together with the audited financial statements of the Group for the year Retirement and re-appointment of directors Andrew Shepherd, Nick Holmes and Simon ended 30 June 2015 . Results and dividends The profit before taxation for the year ended 30 June 2015 was £11,420,000 (2014: £10,568,000) and the profit after taxation was £9,151,000 (2014: £9,056,000) . The Company paid an interim dividend during the year of 10 .0p (2014: 7 .0p) per share . The directors recommend a final dividend of 20 .5p (2014: 19 .0p) per share . This results in total dividends for the year of 30 .5p (2014: 26 .0p) per ordinary share . These dividends amount to a total distribution to shareholders of £4,102,000 (2014: £3,453,000) in the year . Wombwell will retire by rotation at the annual general meeting and are eligible to nominate themselves for re-election . Directors’ indemnities The Company has made qualifying third party indemnity provisions for the benefit of its directors and these remain in force at the date of the report . Employment policies Employees are encouraged to identify and become involved with the financial performance of the Group and are rewarded by involvement in profit sharing arrangements . Employees also have the opportunity to participate in the Group’s share incentive plans . Directors and their interests The directors of the company, who were in office during the year and up to the date of signing the financial statements, are listed below together with their beneficial interests in the share capital of the Company . At 30 June 2015 Number of shares At 30 June 2014 Number of shares The Group considers that communication with our employees is very important and indeed vital for the success of the Group . Employees are informed of important issues by electronic mail and seminars . The Group considers that regular training is extremely important . This is achieved by the provision of in-house and external training courses and the training team provide a number of continuing professional development activities . All staff are encouraged to report their specific training needs to their line managers, which are then co-ordinated through the central Learning and Development department . The Group operates a graduate training scheme in respect of its trainee investment fund managers and financial planning consultants . The Group is an equal opportunities employer . All job applicants and employees are treated fairly and on merit, regardless of their race, gender, marital status, age, disability, religious belief or sexual orientation . Applications from disabled persons are always considered and where employees become disabled efforts are made to continue their employment within the group by providing training and the supply of equipment if necessary so that Chairman C J Knight Executives CA J Macdonald N I Holmes S J Jackson A W Shepherd R H Spencer S P Wombwell Non-executives C R Harris R Price D Seymour-Williams 71,585 71,585 they are able to continue their role . 835,410 828,874 54,895 79,534 47,915 776,743 89,189 6,086 – 5,000 41,495 79,534 48,915 774,338 89,189 6,086 – 5,000 All staff have the option to take an interest free annual season ticket loan . To retain the Group’s employees and to improve staff morale, the Group recognises the need for employees to have an appropriate work-life balance . Long serving employees are entitled to additional annual leave dependent on their length of service . Under the terms of the Pensions Act 2008, on commencing employment all eligible employees are ‘auto-enrolled’ into the Group pension scheme . Details of share options held by the directors at the beginning and the end of the year can be found within the Remuneration Committee report on pages 11 to 17 . Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 19 Report of the directors continued Employment policies continued As at 1 September 2015, the Company had received notification of substantial interests in its shares of 3% or more as follows: Substantial shareholdings Liontrust Asset Management Octopus Investments Artemis Fund Managers Hargreave Hale C A J Macdonald R H Spencer Standard Life Investments J M Gumpel Invesco Asset Management Number of shares Percentage holding 2,423,872 17 .74% 1,025,713 972,843 932,426 835,410 776,743 749,082 661,265 467,211 7 .51% 7 .12% 6 .83% 6 .12% 5 .69% 5 .48% 4 .84% 3 .42% Events since the end of the year Details of events after the reporting date Annual general meeting The 2015 annual general meeting will be are set out in note 37 to the consolidated held on 27 October 2015 at 72 Welbeck Street, London, W1G 0AY . The notice of the meeting is on pages 71 to 73 with details of the resolutions proposed and explanatory notes on pages 69 to 70 . On behalf of the Board of Directors . S Broomfield Company Secretary 16 September 2015 financial statements . Independent auditors The Audit Committee has recommended to the Board of Directors that the incumbent auditor, PricewaterhouseCoopers LLP, be reappointed . PricewaterhouseCoopers LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint them as auditor will be proposed at the forthcoming annual general meeting . Each of the directors in office at the date of signing this report confirms that, so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware . Each director has taken all reasonable steps that he or she ought to have taken as a director in order to make him or herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information . 20 | Brooks Macdonald Group | Annual Report and Accounts 2015 Statement of directors’ responsibilities The directors are responsible for preparing The directors are responsible for keeping the Annual Report and the financial adequate accounting records that are statements in accordance with applicable sufficient to show and explain the law and regulations . Company law requires the directors to prepare financial statements for each financial year . Under that law the directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 . They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities . Accepted Accounting Practice (United The directors are responsible for the Kingdom Accounting Standards and maintenance and integrity of the Group’s applicable law) . Under company law the website . Legislation in the United directors must not approve the financial Kingdom governing the preparation and statements unless they are satisfied that dissemination of financial statements may they give a true and fair view of the state differ from legislation in other jurisdictions . of affairs of the Group and the Company and of the profit or loss of the Group for that period . In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent company financial statements respectively; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business . Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 21 Financial statements Consolidated financial statements Independent auditors’ report to the members of Brooks Macdonald Group plc . . . . . 22-23 Consolidated statement of 24 comprehensive income . . . . . . . . . . . . . . . . . . . . 25 Consolidated statement of financial position . . . 26 Consolidated statement of changes in equity . . . Consolidated statement of cash flows . . . . . . . . 27 Notes to the consolidated financial statements . . 28-60 Company financial statements Independent auditors’ report to the members of Brooks Macdonald Group plc . . . . . 61 62 Company balance sheet . . . . . . . . . . . . . . . . . . . Notes to the company financial statements . . . . 63-68 Shareholders’ information Explanatory notes to the Annual General Meeting resolutions . . . . . . . . . . . . . . . . . . . . . . 69-70 Notice of Annual General Meeting . . . . . . . . . . 71-73 75 Form of Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . Other information Directors and advisers . . . . . . . . . . . . . . . . . . . . IBC Notes to the consolidated financial statements for the year ended 30 June 2015 | continued22 | Brooks Macdonald Group | Annual Report and Accounts 2015 Independent auditors’ report to the members of Brooks Macdonald Group plc Report on the group financial statements Our opinion In our opinion, Brooks Macdonald Group The financial reporting framework that has remuneration specified by law are not been applied in the preparation of the made . We have no exceptions to report financial statements is applicable law and arising from this responsibility . IFRSs as adopted by the European Union . plc’s group financial statements (the In applying the financial reporting ‘financial statements’): • give a true and fair view of the state of the Group’s affairs as at 30 June 2015 and of its profit and cash flows for the year then ended; • have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006 . What we have audited The financial statements comprise: • the Consolidated Statement of Financial Position as at 30 June 2015; framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates . In making such estimates, they have made assumptions and considered future events . Opinion on other matter prescribed by the Companies Act 2006 In our opinion, the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements . Other matters on which we are required to report by exception • the Consolidated Statement of Adequacy of information and Comprehensive Income for the year explanations received then ended; • the Consolidated Statement of Cash Flows for the year then ended; Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit . • the Consolidated Statement of Changes We have no exceptions to report arising in Equity for the year then ended; and from this responsibility . • the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information . Directors’ remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the Statement of Directors’ Responsibilities set out on page 20, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view . Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’) . Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors . This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose . We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing . Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 23 Independent auditors’ report to the members of Brooks Macdonald Group plc | continued What an audit of financial In addition, we read all the financial and statements involves non-financial information in the Annual We conducted our audit in accordance Report and Accounts to identify material with ISAs (UK & Ireland) . An audit involves inconsistencies with the audited financial obtaining evidence about the amounts statements and to identify any information and disclosures in the financial statements that is apparently materially incorrect sufficient to give reasonable assurance based on, or materially inconsistent with, that the financial statements are free from the knowledge acquired by us in the material misstatement, whether caused course of performing the audit . If we by fraud or error . This includes an become aware of any apparent material assessment of: • whether the accounting policies are misstatements or inconsistencies we consider the implications for our report . appropriate to the Group’s circumstances and have been consistently applied and Other matter We have reported separately on the parent company financial statements of Brooks Macdonald Group plc for the year ended 30 June 2015 . Marcus Hine (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 16 September 2015 adequately disclosed; • the reasonableness of significant accounting estimates made by the directors; and • the overall presentation of the financial statements . We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements . We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions . We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both . 24 | Brooks Macdonald Group | Annual Report and Accounts 2015 Consolidated statement of comprehensive income for the year ended 30 June 2015 Revenue Administrative costs Realised gain on investment Other gains and losses Operating profit Finance income Finance costs Share of results of joint venture Profit before tax Taxation Profit for the year attributable to equity holders of the Company Other comprehensive income: Items that may be reclassified subsequently to profit or loss Revaluation of available for sale financial assets Revaluation reserve recycled to profit or loss Total comprehensive income for the year Earnings per share Basic Diluted Note 4 5 6 7 9 9 17 10 10 16 11 11 2015 £’000 77,686 (65,371) 540 (754) 12,101 86 (763) (4) 11,420 (2,269) 9,151 – 68 9,219 68.30p 68.14p 2014 £’000 69,133 (58,207) – – 10,926 119 (349) (128) 10,568 (1,512) 9,056 (131) – 8,925 69 .01p 68 .67p The accompanying notes on pages 28 to 60 form an integral part of the consolidated financial statements . Consolidated statement of financial position as at 30 June 2015 Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 25 Note 2015 £’000 2014 £’000 Assets Non-current assets Intangible assets Property, plant and equipment Available for sale financial assets Investment in joint venture Deferred tax assets Total non-current assets Current assets Trade and other receivables Financial assets at fair value through profit or loss Cash and cash equivalents Total current assets Total assets Liabilities Non-current liabilities Deferred consideration Deferred tax liabilities Other non-current liabilities Total non-current liabilities Current liabilities Trade and other payables Current tax liabilities Deferred tax liabilities Provisions Total current liabilities Net assets Equity Share capital Share premium account Other reserves Retained earnings Total equity 14 15 16 17 18 19 20 21 22 18 23 24 18 25 27 27 28 28 65,258 3,539 1,532 628 709 71,666 21,402 3 19,274 40,679 54,874 2,971 2,182 232 809 61,068 21,432 478 18,056 39,966 112,345 101,034 (9,442) (4,694) (95) (14,231) (16,894) (1,463) (119) (5,474) (23,950) 74,164 136 35,600 5,101 33,327 74,164 (2,943) (5,117) (115) (8,175) (15,178) (1,076) – (9,147) (25,401) 67,458 135 35,147 4,720 27,456 67,458 The consolidated financial statements were approved by the Board of Directors and authorised for issue on 16 September 2015, signed on their behalf by: C A J Macdonald Chief Executive S J Jackson Finance Director Company Registration Number 4402058 . The accompanying notes on pages 28 to 60 form an integral part of the consolidated financial statements . 26 | Brooks Macdonald Group | Annual Report and Accounts 2015 Consolidated statement of changes in equity for the year ended 30 June 2015 Balance at 1 July 2013 133 31,868 3,952 21,607 57,560 Share capital £’000 Share premium account £’000 Other reserves £’000 Retained earnings £’000 Total £’000 Comprehensive income Profit for the year Other comprehensive income: Revaluation of available for sale financial asset Total comprehensive income Transactions with owners Issue of ordinary shares Share-based payments Share-based payments transfer Purchase of own shares by employee benefit trust Tax on share options Dividends paid (note 12) Total transactions with owners Balance at 30 June 2014 Comprehensive income Profit for the year Other comprehensive income: Revaluation of available for sale financial asset Revaluation reserve recycled Total comprehensive income Transactions with owners Issue of ordinary shares Share-based payments Share-based payments transfer Purchase of own shares by employee benefit trust Tax on share options Dividends paid (note 12) Total transactions with owners Balance at 30 June 2015 – – – 2 – – – – – 2 135 – – – – 1 – – – – – 1 – – – 3,279 – – – – – 3,279 35,147 – – – – 453 – – – – – 453 – 9,056 9,056 (131) (131) – 1,288 (545) – 156 – 899 – 9,056 – – 545 (732) – (3,020) (3,207) (131) 8,925 3,281 1,288 – (732) 156 (3,020) 973 4,720 27,456 67,458 – – 68 68 – 1,315 (1,334) – 332 – 313 9,151 9,151 – – – 68 9,151 9,219 – – 1,334 (742) – 454 1,315 – (742) 332 (3,872) (3,872) (3,280) (2,513) 136 35,600 5,101 33,327 74,164 The accompanying notes on pages 28 to 60 form an integral part of the consolidated financial statements . Consolidated statement of cash flows for the year ended 30 June 2015 Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 27 Cash flow from operating activities Cash generated from operations Taxation paid Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Purchase of available for sale financial assets Acquisition of subsidiary companies, net of cash acquired Deferred consideration paid Interest received Purchase of financial assets at fair value through profit or loss Proceeds of sale of financial assets at fair value through profit or loss Investment in joint venture Net cash used in investing activities Cash flows from financing activities Proceeds of issue of shares Purchase of own shares by employee benefit trust Dividends paid to shareholders Net cash used in financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Note 26 15 14 16 13 22 9 20 20 17 27 28 12 21 2015 £’000 20,094 (1,756) 18,338 (1,558) (1,879) (250) 37 (9,218) 86 (40) 263 (400) 2014 £’000 13,671 (2,318) 11,353 (1,342) (552) (750) (3,340) (1,866) 119 (478) – (360) (12,959) (8,569) 454 (742) (3,873) (4,161) 1,218 18,056 19,274 584 (732) (3,020) (3,168) (384) 18,440 18,056 The accompanying notes on pages 28 to 60 form an integral part of the consolidated financial statements . 28 | Brooks Macdonald Group | Annual Report and Accounts 2015 Notes to the consolidated financial statements for the year ended 30 June 2015 1. General information Brooks Macdonald Group plc (‘the Company’) is the parent company of a group of companies (‘the Group’), which offers a range of investment management services and related professional advice to private high net worth individuals, charities and trusts . The Group also provides financial planning as well as offshore fund management and administration services and acts as fund manager to regulated OEICs, providing specialist funds in the property and structured return sectors and managing property assets on behalf of these funds and other clients . The Company is a public limited company, incorporated and domiciled in the United Kingdom under the Companies Act 2006 and listed on AIM . The address of its registered office is 72 Welbeck Street, London, W1G 0AY . 2. Principal accounting policies The general accounting policies applied in the preparation of these financial statements are set out below . These policies have been applied consistently to all years presented, unless otherwise stated . a) Basis of preparation The Group’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations, as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS . The financial statements have been prepared on the historical cost basis, except for the revaluation of available for sale financial assets such that they are measured at their fair value . At the time of approving the financial statements, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future . Accordingly, they continue to adopt the going concern basis in preparing the financial statements . b) Basis of consolidation The Group’s financial statements are a consolidation of the financial statements of the Company and its subsidiaries . The underlying financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies . Subsidiaries (including structured entities) are all entities controlled by the Company, deemed to exist where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity . The financial statements of the subsidiaries are included from the date on which control is transferred to the Group to the date that control ceases . All intercompany transactions and balances between Group companies are eliminated on consolidation . The Group has disclosed all of its subsidiary undertakings in note 41 in the parent company’s financial statements . c) Changes in accounting policies The Group’s accounting policies applied to these financial statements are consistent with those disclosed within the financial statements for the year ended 30 June 2014 . New accounting standards, amendments and interpretations adopted in the year In the year ended 30 June 2015 the Group did not adopt any new standards or amendments issued by the IASB or interpretations issued by the IFRS Interpretations Committee (IFRS IC) that have had a material impact on the consolidated financial statements . Other new standards, amendments and interpretations adopted, that have not had a material impact on the amounts reported in these financial statements but may impact the accounting for future transactions and arrangements, were: Standard, amendment or interpretation Consolidation of investment entities (amendments to IFRS 10, 12 and IAS 27) Recoverable amount disclosures for non-financial assets (amendments to IAS 36) Offsetting financial assets and financial liabilities (amendments to IAS 32) IFRIC 21 ‘Levies’ Contributions to defined benefit plans (amendments to IAS 19) IFRS3 clarifications relating to business combinations IFRS 13 amendment of the treatment of short term receivables and payables Effective date 1 January 2014 1 January 2014 1 January 2014 17 June 2014 1 July 2014 1 July 2014 1 July 2014 Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 29 2. Principal accounting policies continued c) Changes in accounting policies continued New accounting standards, amendments and interpretations not yet adopted c) Changes in accounting policies A number of new standards, amendments and interpretations, which have not been applied in preparing these financial statements, have been issued and are effective for annual and interim periods beginning after 1 July 2015: d) Critical accounting estimates and judgements Standard, amendment or interpretation Revenue from Contracts with Customers (IFRS15) Financial Instruments (amendments to IFRS 9) IFRS 11 amendments for accounting for acquisitions of interests in joint operations IAS16 and IAS38 clarification of acceptable methods of depreciation and amortisation Effective date 1 January 2017 1 January 2018 1 January 2016 1 January 2016 These changes are currently being assessed but none are expected to have a significant impact on the Group’s future consolidated financial statements . d) Critical accounting estimates and judgements The preparation of financial information requires the use of assumptions, estimates and judgements about future conditions . Use of currently available information and application of judgement are inherent in the formation of estimates . Actual results in the future may differ from those reported . In this regard, the directors believe that the accounting policies where judgement is necessarily applied are those that relate to the measurement of intangible assets, deferred consideration, the estimation of the fair value of share-based payments and client compensation provisions . The underlying assumptions made are reviewed on an ongoing basis . Revisions to accounting estimates are recognised in the period in which the estimate is revised only if the revision affects both current and future periods . Further information about key assumptions and sources of estimation uncertainty are set out below . Intangible assets The Group has acquired client relationships and the associated investment management contracts as part of business combinations (as described in note 13), through separate purchase and purchased with newly employed teams of fund managers (as described in note 14) . In assessing the fair value of these assets the Group has estimated their finite life based on information about the typical length of existing client relationships . Contracts acquired with fund managers and acquired client relationship contracts are amortised on a straight line basis over their estimated useful lives, ranging from 5 to 20 years . Goodwill recognised as part of a business combination is reviewed annually for impairment, or when a change in circumstances indicates that it might be impaired . The recoverable amounts of cash generating units are determined by value in use calculations, which require the use of estimates to derive the projected future cash flows attributable to each unit . Details of the more significant assumptions are given in note 14 . Deferred consideration As described in note 22, the Group has a deferred consideration balance in respect of the acquisition of JPAM Limited in July 2012; DPZ in April 2014; and Levitas Investment Management Services Limited in July 2015 . Deferred consideration is recognised at its fair value, being an estimate of the amount that will ultimately be payable in future periods . This has been calculated allowing for estimated growth in the acquired funds, discounted by the estimated cost of capital . The Group considers that reasonably possible changes to these assumptions would not result in a material change in the fair value of the deferred consideration . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued30 | Brooks Macdonald Group | Annual Report and Accounts 2015 d) Critical accounting estimates and judgements Share-based payments 2. Principal accounting policies continued d) Critical accounting estimates and judgements continued The Group operates various share-based payment schemes in respect of services received from certain employees . Estimating the fair value of these share-based payments requires the Group to apply an appropriate valuation model and determine the inputs to that model (notes 24 and 29) . The charge to the Consolidated Statement of Comprehensive Income in respect of share-based payments is calculated using assumptions about the number of eligible employees that will leave the Group and the number of employees that will satisfy the relevant performance conditions . These estimates are reviewed regularly . Provisions In the ordinary course of business, the Group may receive complaints from clients in relation to the services provided . Complaints are assessed on a case-by-case basis and provisions are made where it is judged to be likely that compensation will be paid . e) Exceptional items Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the underlying financial performance of the Group . These include material items of income or expense that are shown separately due to the significance of their nature or amount . f) Business combinations Business combinations are accounted for using the acquisition method . The cost of an acquisition is measured at the fair value of the aggregate amount of the consideration transferred at the acquisition date, irrespective of the extent of any minority interest . Acquisition costs are charged to the Consolidated Statement of Comprehensive Income in the year of acquisition . When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date . If the business combination is achieved in stages, the fair value of the Group’s previously held equity interest is re-measured at the acquisition date and the difference is credited or charged to the Consolidated Statement of Comprehensive Income . Identifiable assets and liabilities assumed on acquisition are recognised in the Consolidated Statement of Financial Position at their fair value at the date of acquisition . Any contingent consideration to be paid by the Group to the vendor is recognised at its fair value at the acquisition date . Subsequent changes to the fair value of contingent consideration are recognised in accordance with IAS 39 in the Consolidated Statement of Comprehensive Income . Goodwill is initially measured at cost, being the excess of the consideration transferred over the acquired company’s net identifiable assets acquired and liabilities assumed . If the consideration is lower than the fair value of the net assets acquired, the difference is recognised as a gain on a bargain purchase in the Consolidated Statement of Comprehensive Income . Impairment Goodwill and other intangible assets with an indefinite life are tested annually for impairment . For the purposes of impairment testing, goodwill acquired in a business combination is allocated to each of the Group’s cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquisition are assigned to those units . The carrying amount of each cash generating unit is compared to its recoverable amount, which is determined using a discounted future cash flow model . Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation . Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained . g) Fees, commissions and interest Portfolio management and other advisory and custody services are billed in arrears but are recognised over the period the service is provided . Fees are calculated on the basis of a percentage of the value of the portfolio over the period . Dealing charges are levied at the time a deal is placed for a client . Fees are only recognised when the fee amount can be estimated reliably and it is probable that the fee will be receivable . Amounts are shown net of rebates paid to significant investors . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 31 2. Principal accounting policies continued g) Fees, commissions and interest continued Performance fees are earned from some clients when contractually agreed performance levels are exceeded within specified performance g) Fees, measurement periods . They are only recognised, at the end of these performance periods, when a reliable estimate of the fee can be made commissions and and it is almost certain that it will be received . interest Financial consulting fees are charged to clients using an hourly rate or by a fixed fee arrangement and are recognised over the period the service is provided . Commissions receivable and payable are accounted for in the period in which they are earned . Where amounts due are conditional on the successful completion of fund raising for investment vehicles, revenue is recognised where, in the opinion of the directors, there is reasonable certainty that sufficient funds have been raised to enable the successful operation of that investment vehicle . Amounts due on an annual basis for the management of third party investment vehicles are recognised on a time apportioned basis . Interest receivable is recognised on an accruals basis . h) Cash and cash equivalents Cash comprises cash in hand and call deposits held with banks . Cash equivalents comprise short-term, highly liquid investments, with a maturity of less than three months from the date of acquisition . i) Share-based payments Equity-settled schemes The Group engages in equity-settled share-based payment transactions in respect of services received from certain employees . The fair value of the services received is measured by reference to the fair value of the shares or share options on the grant date . This cost is then recognised in the Consolidated Statement of Comprehensive Income over the vesting period, with a corresponding credit to equity . The fair value of the options granted is determined using option pricing models, which take into account the exercise price of the option, the current share price, the risk free rate of interest, the expected volatility of the Company’s share price over the life of the award and other relevant factors . Cash settled schemes The Group engages in cash settled share-based payment transactions in respect of services received from certain employees . On the grant date, the liability is measured at its fair value . The liability is subsequently re-measured at the end of each reporting period and on the date of settlement, with any changes in fair value recognised in the Consolidated Statement of Comprehensive Income . The cost of the services received from employees in respect of this scheme is recognised in the Consolidated Statement of Comprehensive Income with a corresponding credit to accruals . j) Segmental reporting The Group determines and presents operating segments based on the information that is provided internally to the Group Board of Directors, which is the Group’s chief operating decision maker . k) Fiduciary activities The Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions . These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group . The Group holds money on behalf of some clients in accordance with the client money rules of the Financial Conduct Authority . Such monies and the corresponding liability to clients are not included within the Consolidated Statement of Financial Position as the Group is not beneficially entitled thereto . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued32 | Brooks Macdonald Group | Annual Report and Accounts 2015 2. Principal accounting policies continued l) Property, plant and equipment All property, plant and equipment is included in the Consolidated Statement of Financial Position at historical cost less accumulated depreciation and impairment . Costs include the original purchase cost of the asset and the costs attributable to bringing the asset into a working condition for its intended use . Provision is made for depreciation to write off the cost less estimated residual value of each asset, using a straight line method, over its expected useful life as follows: Fixtures and fittings Equipment Leasehold improvements Motor vehicles 3 to 6 .67 years 5 years over the term of the lease 4 years The assets’ residual values and useful economic lives are reviewed, and adjusted if appropriate, at the end of each reporting period . Gains and losses arising on disposal are determined by comparing the proceeds with the carrying amount . These are included in the Consolidated Statement of Comprehensive Income . m) Intangible assets Amortisation of intangible assets is charged to administrative expenses in the Consolidated Statement of Comprehensive Income on a straight line basis over the estimated useful lives of the assets (4 to 20 years) . Acquired client relationship contracts and contracts acquired with fund managers Intangible assets are recognised where client relationship contracts are either separately acquired or acquired with investment managers who are employed by the Group . These are initially recognised at cost and are subsequently amortised on a straight line basis over their estimated useful economic life . Separately acquired client relationship contracts are amortised over 15 to 20 years and those acquired with investment managers over 5 years . Both types of intangible asset are reviewed annually to determine whether there exists an indicator of impairment or an indicator that the assumed useful economic life has changed . Computer software Computer software costs are amortised on a straight line basis over an estimated useful life of four years . Goodwill Goodwill arising as part of a business combination is initially measured at cost, being the excess of the fair value of the consideration transferred over the Group’s interest in the net fair value of the separately identifiable assets, liabilities and contingent liabilities of the subsidiary at date of acquisition . In accordance with IFRS 3 ‘Business Combinations’, goodwill is not amortised but is reviewed annually for impairment and is therefore stated at cost less any provision for impairment of value . Any impairment is recognised immediately in the Consolidated Statement of Comprehensive Income and is not subsequently reversed . Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold . On acquisition, any goodwill acquired is allocated to cash generating units for the purposes of impairment testing . If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Consolidated Statement of Comprehensive Income . n) Investments in joint ventures A joint venture is an entity in which the Group holds a long-term interest and is jointly controlled by the Group and one or more third parties under a contractual agreement . Under the equity method of accounting, interests in joint ventures are initially recognised at cost in the Consolidated Statement of Financial Position and subsequently adjusted to reflect changes in the Group’s share of the net assets of the entities . The Group’s share of the results of joint ventures is included in the Consolidated Statement of Comprehensive Income . If the Group’s share of the losses of a joint venture equals or exceeds its investment, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 33 2. Principal accounting policies continued o) Financial investments The Group classifies financial assets in the following categories: fair value through profit or loss; available for sale; loans and receivables; and held-to-maturity . The classification is determined by management on initial recognition of the financial asset, which depends on the purpose for which it was acquired . Fair value through profit or loss Financial instruments are classified as fair value through profit or loss if they are either held for trading or specifically designated in this category on initial recognition . Assets in this category are initially recognised at fair value and subsequently re-measured, with gains or losses arising from changes in fair value being recognised in the Consolidated Statement of Comprehensive Income . Available for sale Available for sale financial assets are non-derivatives that are either specifically designated in this category or are not classified in any of the other categories . They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period . Available for sale financial assets are initially recognised at fair value and are subsequently revalued based on the current bid prices of the assets as quoted in active markets . Changes in fair value are recognised directly in equity, through the Consolidated Statement of Changes in Equity, with the exception of impairment losses which are recognised in the Consolidated Statement of Comprehensive Income . The cumulative gain or loss recognised in equity is recycled to the Consolidated Statement of Comprehensive Income when an available for sale financial asset is derecognised or impaired . Loans and receivables Loans and receivables are non-derivative assets with fixed or determinable payments that are not quoted in an active market . They are included in current assets except where they have maturities of more than 12 months after the end of the reporting period, in which case they are classified as non-current assets . The Group’s loans and receivables are recognised within ‘trade and other receivables’ . Held-to-maturity Held-to-maturity financial assets are non-derivative financial assets with fixed or determinate payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity . Held-to-maturity financial assets are measured at amortised cost . p) Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, where it is probable that it will result in an outflow of economic benefits and can be reliably estimated . Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation . Client compensation Complaints are assessed on a case-by-case basis and provisions for compensation are made where it is judged necessary . q) Foreign currency translation The Group’s functional and presentational currency is the Pound Sterling . Foreign currency transactions are translated using the exchange rate prevailing at the transaction date . At the reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the prevailing rates on that date . Foreign exchange gains and losses resulting from settlement of such transactions and from the translation of period-end monetary assets and liabilities are recognised in the Consolidated Statement of Comprehensive Income . r) Retirement benefit costs Contributions in respect of the Group’s defined contribution pension scheme are charged to the Consolidated Statement of Comprehensive Income as they fall due . s) Taxation Tax on the profit for the year comprises current and deferred tax . Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years . Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group’s financial statements . Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled based on tax rates (and laws) that have been enacted or substantively enacted at the reporting date . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued34 | Brooks Macdonald Group | Annual Report and Accounts 2015 s) Taxation 2. Principal accounting policies continued s) Taxation continued Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised . t) Trade receivables Trade receivables are initially recognised and subsequently measured at the original invoice amount less an allowance for any amounts that are expected to be uncollectable . Doubtful debts are provided for when the collection of the full amount is no longer probable, whilst bad debts are immediately written off when identified . u) Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers . These are classified as current liabilities if payment is due within 12 months or less (or in the normal operating cycle of the business if longer) . Otherwise, they are presented as non-current liabilities in the Consolidated Statement of Financial Position . Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method . v) Operating lease payments Rent payments due under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight line basis over the term of the lease . Where leases include lease incentives such as rent-free periods, the benefit of these incentives is recognised over the lease term as a reduction in the rental expense . w) Financial instruments The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement . Financial instruments are recognised in the Consolidated Statement of Financial Position at fair value when the Group becomes a party to the contractual provisions of the instrument . x) Carried interest receivable The Group earns a performance fee, carried interest receivable, on some of the funds it manages on behalf of its investors . Carried interest receivable is recognised where, at the reporting date, the performance criteria have been met based on the valuations of the funds . Carried interest that has been earned but is not yet due for payment is discounted to its present value . This is included within current liabilities in the Consolidated Statement of Financial Position . y) Employee Benefit Trust (‘EBT’) The Company provides finance to an EBT to purchase the Company’s shares on the open market in order to meet its obligation to provide shares when an employee exercises certain options or awards made under the Group’s share-based payment schemes . The administration and finance costs connected with the EBT are charged to the Consolidated Statement of Comprehensive Income . The cost of the shares held by the EBT is deducted from equity . A transfer is made between other reserves and retained earnings over the vesting periods of the related share options or awards to reflect the ultimate proceeds receivable from employees on exercise . The trustees have waived their rights to receive dividends on the shares . The EBT is considered to be a Structured Entity, as defined in note 36 . In substance, the activities of the trust are being conducted on behalf of the Group according to its specific business needs, in order to obtain benefits from its operation . On this basis, the assets held by the trust are consolidated into the Group’s financial statements . z) Share capital Ordinary share capital is classified as equity . Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds . Where the Company purchases its own equity share capital (treasury shares) the consideration paid, including any directly incremental costs (i .e . net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are cancelled or reissued . Where such ordinary shares are subsequently reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax effects) is included within equity attributable to the Company’s equity holders . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 35 2. Principal accounting policies continued aa) Dividend distribution The dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividend is authorised and no longer at the discretion of the Company . Final dividends are recognised when approved by the Company’s shareholders at the annual general meeting and interim dividends are recognised when paid . 3. Segmental information For management purposes the Group’s activities are organised into four operating divisions: investment management, financial planning, fund and property management and the Channel Islands . The Group’s other activity, offering nominee and custody services to clients, is included within investment management . These divisions are the basis on which the Group reports its primary segmental information . In accordance with IFRS 8 ‘Operating Segments’, disclosures are required to reflect the information which the Board uses internally for evaluating the performance of its operating segments and allocating resources to those segments . The information presented in this note follows the presentation for internal reporting to the Group Board of Directors . Revenues and expenses are allocated to the business segment that originated the transaction . Revenues and expenses that are not directly originated by a particular business segment are reported as unallocated . Sales between segments are carried out at arm’s length . Centrally incurred expenses are allocated to business segments on an appropriate pro-rata basis . Segmental assets and liabilities comprise operating assets and liabilities, those being the majority of the balance sheet . 2. Principal accounting policies Year ended 30 June 2015 Total segment revenues Inter segment revenues External revenues Segment result Unallocated items Profit before tax Taxation Profit for the year Year ended 30 June 2014 Total segment revenues Inter segment revenues External revenues Segment result Unallocated items Profit before tax Taxation Profit for the year Investment management £’000 Financial planning £’000 Fund and property management £’000 54,464 (101) 54,363 15,774 4,191 (69) 4,122 (68) 6,044 (43) 6,001 (564) Channel Islands £’000 13,200 – 13,200 1,315 Investment management £’000 Financial planning £’000 Fund and property management £’000 48,988 (156) 48,832 12,324 4,034 (223) 3,811 (109) 5,061 (127) 4,934 (102) Channel Islands £’000 11,556 – 11,556 2,376 Total £’000 77,899 (213) 77,686 16,457 (5,037) 11,420 2,269 9,151 Total £’000 69,639 (506) 69,133 14,489 (3,921) 10,568 (1,512) 9,056 Notes to the consolidated financial statements for the year ended 30 June 2015 | continued36 | Brooks Macdonald Group | Annual Report and Accounts 2015 3. Segmental information 3. Segmental information continued a) Geographic analysis The Group’s operations are located in the United Kingdom and the Channel Islands . The following table presents underlying operating income analysed by the geographical location of the Group entity providing the service . United Kingdom Channel Islands Total operating income b) Major clients The Group is not reliant on any one client or group of connected clients for the generation of revenues . 4. Revenue Fee income Financial services commission Advisory and other income Total revenue 2015 £’000 64,486 13,200 77,686 2015 £’000 66,443 235 11,008 77,686 2014 £’000 57,577 11,556 69,133 2014 £’000 59,197 291 9,645 69,133 5. Realised gain on investment During the year, the Group realised a gain of £540,000 on disposal of its investment in Sancus Holdings Limited (‘SHL’) (note 16) . 6. Other gains and losses Other gains and losses represent the net changes in the fair value of the Group’s financial instruments recognised in the Consolidated Statement of Comprehensive Income . Impairment of available for sale financial assets (note 16) Loss from changes in fair value of financial assets at fair value through profit or loss (note 20) Gain from changes in fair value of deferred consideration (note 22) Other gains and losses 2015 £’000 (718) (252) 216 (754) 2014 £’000 – – – – Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 37 7. Operating profit Operating profit is stated after charging: Staff costs (note 8) Acquisition costs (see below) Auditors’ remuneration (see below) Financial Services Compensation Scheme Levy (see below) Depreciation (note 15) Amortisation (note 14) A more detailed analysis of auditors’ remuneration is provided below: Fees payable to the Company’s auditor for the audit of the consolidated group and parent company financial statements Fees payable to the Company’s auditor and its associates for other services: – Audit of the Company’s subsidiaries pursuant to legislation – Audit-related assurance services – Other advisory services Total auditors’ remuneration Acquisition costs 2015 £’000 38,558 120 280 510 990 2014 £’000 33,872 187 220 351 981 2,708 2,212 2015 £’000 61 185 34 – 280 2014 £’000 37 145 29 9 220 Administrative costs for the year ended 30 June 2015 include £120,000 (2014: £187,000) of directly attributable business acquisition costs in relation to the exercise of the Group’s option to purchase Levitas Investment Management Services Limited (note 13) . Financial Services Compensation Scheme levies Administrative costs for the year ended 30 June 2015 include a charge of £510,000 (2014: £351,000) in respect of the Financial Services Compensation Scheme (‘FSCS’) levy . This includes the Group’s levy for the 2015/16 scheme year of £502,000 . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued38 | Brooks Macdonald Group | Annual Report and Accounts 2015 8. Employee information a) Staff costs Wages and salaries Social security costs Other pension costs Share-based payments Total staff costs Pension costs relate entirely to a defined contribution scheme . b) Number of employees The average monthly number of employees during the year, including directors, was as follows: Professional staff Administrative staff Total staff c) Key management compensation 2015 £’000 32,670 3,129 1,331 1,428 38,558 2015 183 284 467 2014 £’000 28,867 2,863 1,012 1,130 33,872 2014 169 253 422 The compensation of the key management personnel of the Group, defined as the Group Board of Directors including both the executives and non-executives, is set out below . Short-term employee benefits Post-employment benefits Share-based payments Total compensation 2015 £’000 2,434 25 346 2,805 2014 £’000 2,242 60 398 2,700 Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 39 8. Employee information continued d) Directors’ emoluments Further details of directors’ emoluments are included within the Remuneration Committee Report on pages 11 to 17 . 8. Employee information Salaries and bonuses Non-executive directors’ fees Benefits in kind Pension contributions Amounts receivable under long term incentive schemes Total directors’ remuneration 2015 £’000 2,209 208 17 2,434 25 378 2,837 The aggregate amount of gains made by directors on the exercise of share options during the year was £913,000 (2014: £458,000) . Retirement benefits are accruing to one directors (2014: three) under a defined contribution pension scheme . The remuneration of the highest paid director during the year was as follows: Remuneration and benefits in kind Amounts receivable under long term incentive schemes Total remuneration 2015 £’000 528 68 596 2014 £’000 2,075 151 16 2,242 60 240 2,542 2014 £’000 506 64 570 The amount of gains made by the highest paid director on the exercise of share options during the year was £90,000 (2014: £6,000) . 9. Finance income and finance costs Finance income Bank interest on deposits Tax repayment supplement Total finance income Finance costs Bank interest paid Finance cost of deferred consideration Total finance costs 2015 £’000 2014 £’000 86 – 86 3 760 763 109 10 119 – 349 349 Notes to the consolidated financial statements for the year ended 30 June 2015 | continued40 | Brooks Macdonald Group | Annual Report and Accounts 2015 10. Taxation The tax charge on profit on ordinary activities for the year was as follows: UK Corporation Tax at 20 .75% (2014: 22 .5%) Over provision in prior years Total current tax Deferred tax credits Effect of change in tax rate on deferred tax Income tax expense 2015 £’000 2,776 (231) 2,545 (276) – 2,269 2014 £’000 2,477 (17) 2,460 (473) (475) 1,512 Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions . The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the time apportioned tax rate applicable to profits of the consolidated entities in the UK as follows: Profit on ordinary activities before tax Profit on ordinary activities multiplied by the standard rate of tax in the UK of 20 .75% (2014: 22 .5%) Tax effect of: – Lower tax rates in other countries in which the Group operates – Disallowable expenses – Non-taxable income – Tax losses unutilised on which no deferred tax is provided – Change in rate of Corporation Tax applicable to deferred tax – Over provision in prior years Tax charge for the year 2015 £’000 11,420 2014 £’000 10,568 2,370 2,378 (255) 385 – – – (231) 2,269 (618) 77 (1) 168 (475) (17) 1,512 The deferred tax credits totalling £276,000 (2014: £473,000) represent a charge of £28,000 (2014: £122,000 credit) arising from the share option reserve at the balance sheet date, a charge of £117,000 (2014: £10,000 credit) relating to accelerated capital allowances and a credit of £421,000 (2014: £341,000) arising from the amortisation of acquired client relationship contracts . On 1 April 2015, the standard rate of Corporation Tax in the UK was reduced from 21% to 20% . As a result the effective rate of Corporation Tax applied to the taxable profit for the year ended 30 June 2015 is 20 .75% (2014: 22 .5%) . In addition to the change in the rate of UK Corporation Tax disclosed above, the Finance Bill 2015 (which has yet to be substantively enacted) will further reduce the main rate of UK Corporation Tax to 19% in 2017 and 18% in 2020 . Deferred tax assets and liabilities are calculated at the rate that is expected to be in force when the temporary differences unwind, but limited to the extent that such rates have been substantively enacted . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 41 10. Taxation continued Consequently the tax rate used to determine the deferred tax assets and liabilities remains at 20% (2014: 20%) and will be reviewed when 10. Taxation the aforementioned legislation has passed through Parliament . The tax charge relating to components of other comprehensive income is as follows: Revaluation of available for sale financial assets Tax credit on revaluation of available for sale financial assets Total other comprehensive income 2015 £’000 – – – 2014 £’000 (150) 19 (131) 11. Earnings per share The directors believe that underlying earnings per share provide a truer reflection of the Group’s performance in the year . Underlying earnings per share are calculated based on ‘underlying earnings’, which is defined as earnings before acquisition costs, finance costs and changes in the fair value of deferred consideration and amortisation of intangible non-current assets . The tax effect of these adjustments has also been considered . Earnings for the year used to calculate earnings per share as reported in these consolidated financial statements were as follows: Earnings attributable to ordinary shareholders Acquisition costs (note 7) Finance cost of deferred consideration (note 9) Changes in fair value of deferred consideration Amortisation (note 14) Tax impact of adjustments 2015 £’000 9,151 120 760 70 2,708 (571) 2014 £’000 9,056 187 349 – 2,212 (486) Underlying earnings attributable to ordinary shareholders 12,238 11,318 Basic earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of shares in issue throughout the year . Diluted earnings per share represents the basic earnings per share adjusted for the effect of dilutive potential shares issuable on exercise of employee share options under the Group’s share-based payment schemes, weighted for the relevant period . The weighted average number of shares in issue during the year was as follows: Weighted average number of shares in issue Effect of dilutive potential shares issuable on exercise of employee share options 2015 Number of shares 13,399,031 30,996 2014 Number of shares 13,123,634 64,289 Diluted weighted average number of shares in issue 13,430,027 13,187,923 Notes to the consolidated financial statements for the year ended 30 June 2015 | continued42 | Brooks Macdonald Group | Annual Report and Accounts 2015 11. Earnings per share 11. Earnings per share continued Earnings per share for the year attributable to equity holders of the Company were: Based on reported earnings: Basic earnings per share Diluted earnings per share Based on underlying earnings: Basic earnings per share Diluted earnings per share 12. Dividends Amounts recognised as distributions to equity holders of the Company in the year were as follows: Final dividend paid for the year ended 30 June 2014 of 19 .0p (2014: 16 .0p) per share Interim dividend paid for the year ended 30 June 2015 of 10 .0p (2014: 7 .0p) per share Total dividends Final dividend proposed for the year ended 30 June 2015 of 20 .5p (2014: 19 .0p) per share The interim dividend of 10 .0p (2014: 7 .0p) per share was paid on 21 April 2015 . 2015 (p) 68.30 68.14 91.33 91.12 2015 £’000 2,535 1,338 3,873 2,757 2014 (p) 69 .01 68 .67 86 .24 85 .82 2014 £’000 2,102 918 3,020 2,535 A final dividend for the year ended 30 June 2015 of 20 .5p (2014: 19 .0p) per share was declared by the Board of Directors on 16 September 2015 and is subject to approval by the shareholders at the Company’s annual general meeting . It will be paid on 28 October 2015 to shareholders who are on the register at the close of business on 25 September 2015 . In accordance with IAS 10 ‘Events After the Reporting Period’, this dividend has not been included as a liability in these financial statements . 13. Business combinations On 31 July 2014, the Group exercised its option to acquire the entire share capital of Levitas Investment Management Services Limited (‘Levitas’) . Levitas is the sponsor of two funds known as TM Levitas A and TM Levitas B, to which Brooks Macdonald Asset Management Limited acts as the investment adviser . The funds were launched in July 2012 and aggregate assets under management on exercise of the option were £89m . The Levitas investment proposition uses a blend of the two funds to match investments to a client’s specific risk rating, thus simplifying the investment and rebalancing processes while keeping down costs . The consideration payable by the Group is dependent on the future assets under management in the Levitas funds, calculated at agreed milestones up to 1 November 2018 and payable in a series of instalments, with the final payment date being on or around 8 November 2020 . Under the terms of the option agreement, the maximum consideration payable will be £24,000,000 . The fair value of the liability at the acquisition date was measured at £11,264,000, based on the Levitas business plan and forecasts . This included an initial payment of £724,000, which was made to the vendors following the exercise of the option . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 43 13. Business combinations continued Directly attributable acquisition costs of £120,000 were incurred during the year as a result of the acquisition and have been charged to the Consolidated Statement of Comprehensive Income . Goodwill of £11,213,000 was recognised on acquisition in respect of the expected future growth of the Levitas funds and the resulting economic benefit to the Group in the form of sponsorship income earned by Levitas . The fair values of the assets acquired are the gross contractual amounts and all are considered to be fully recoverable . The fair value of the identifiable assets and liabilities acquired, at the date of acquisition, are detailed in (a) below . The value of finite lived intangible assets is considered immaterial . In the financial year ended 30 June 2014, the Group acquired the entire share capital of DPZ Capital Limited (‘DPZ’) . Details of the acquisition are disclosed in note 9 of the 2014 Annual Report and Accounts . There have been no adjustments to the goodwill recognised in relation to the acquisition of DPZ . a) Net assets acquired through business combinations Trade and other receivables Cash and cash equivalents Other current liabilities Total net assets recognised by acquired company Net identifiable assets Goodwill Total purchase consideration b) Results from date of acquisition Levitas Investment Management Services Limited £’000 37 37 (23) 51 51 11,213 11,264 Revenues from external customers £’000 Profit for the year £’000 382 118 Had Levitas Investment Management Services Limited been consolidated from 1 July 2014, the Consolidated Statement of Comprehensive Income would show pro-forma revenue of £77,778,000 and post-tax profit for the year of £9,182,000 . c) Net cash outflow resulting from business combinations Total purchase consideration (note 13a) Less: deferred cash consideration Cash paid to acquire subsidiary Less: cash held by subsidiary acquired Cash paid to acquire subsidiary net of cash acquired £’000 11,264 (10,540) 724 (37) 687 Notes to the consolidated financial statements for the year ended 30 June 2015 | continued44 | Brooks Macdonald Group | Annual Report and Accounts 2015 14. Intangible assets Cost At 1 July 2013 Additions Disposals At 30 June 2014 Additions Additions on acquisition of subsidiaries at fair value At 30 June 2015 Accumulated amortisation At 1 July 2013 Amortisation charge At 30 June 2014 Amortisation charge At 30 June 2015 Net book value At 1 July 2013 At 30 June 2014 At 30 June 2015 a) Goodwill Goodwill £’000 Computer software £’000 Acquired client relationship contracts £’000 Contracts acquired with fund managers £’000 20,758 4,035 – 24,793 – 11,213 36,006 – – – – – 20,758 24,793 36,006 333 78 – 411 1,405 – 1,816 159 110 269 129 398 174 142 1,418 24,872 7,875 – 32,747 – – 32,747 2,013 1,758 3,771 2,167 5,938 22,859 28,976 26,809 2,574 474 – 3,048 474 – 3,522 1,741 344 2,085 412 2,497 833 963 1,025 Total £’000 48,537 12,462 – 60,999 1,879 11,213 74,091 3,913 2,212 6,125 2,708 8,833 44,624 54,874 65,258 Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (‘CGUs’) that are expected to benefit from that business combination . The carrying amount of goodwill at 30 June 2015 comprises £3,550,000 in respect of the Braemar Group Limited (‘Braemar’) CGU, £21,243,000 in respect of the Brooks Macdonald Asset Management (International) Limited, Brooks Macdonald Retirement Services (International) Limited and DPZ (collectively ‘Brooks Macdonald International’) CGU and £11,213,000 in respect of the Levitas Investment Management Services Limited (‘Levitas’) CGU . Goodwill is reviewed annually for impairment and its recoverability has been assessed at 30 June 2015 by comparing the carrying amount of the CGUs to their expected recoverable amount, estimated on a value-in-use basis . The value-in-use of each CGU has been calculated using pre-tax discounted cash flow projections based on the most recent budgets approved by the relevant subsidiary boards of directors, covering a period of up to five years . Cash flows are then extrapolated beyond the forecast period using an expected long-term growth rate . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 45 14. Intangible assets continued a) Goodwill continued Based on the value-in-use calculation, at 30 June 2015 the calculated recoverable amount of the Brooks Macdonald International CGU was £35,120,000, indicating that there is no impairment . The key underlying assumptions of the calculation are the discount rate, the short-term growth in earnings and the long-term growth rate of the business . A pre-tax discount rate of 9 .25% has been used, based on the Group’s assessment of the risk-free rate of interest and specific risks relating to Brooks Macdonald International . Annual earnings growth rates of between 13% and 32% are forecast over the next five financial years, the period covered by the most recent forecasts, which reflect historic actual growth and planned management actions and are considered to be achievable given current market and industry trends . The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds, investment management and financial planning industries in which the CGU operates . In relation to the Levitas CGU, based on the value-in-use calculation the calculated recoverable amount at 30 June 2015 was £22,195,000, indicating that there is no impairment . The key underlying assumptions of the calculation are the discount rate, the growth in funds under management of the Levitas funds and the long-term growth rate of the business . A pre-tax discount rate of 9 .25% has been used, based on the Group’s assessment of the risk-free rate of interest and specific risks relating to Levitas . Annual funds under management growth rates of between 16% and 91% are forecast in the next five financial years, the period covered by the most recent forecasts, which reflect historic actual growth and planned management activities and are considered to be achievable given current market and industry trends . The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds industry in which the CGU operates . The key assumptions inherent in the value-in-use calculations for the Braemar CGU were similarly a pre-tax discount rate of 9 .25%, annual revenue growth rates ranging from 13% to 28% and a long-term growth rate of 2% . Significant headroom exists in the calculations of the respective recoverable amounts of these CGUs over the carrying amounts of the goodwill allocated to them . On this basis, the directors have concluded that there is no impairment . The directors consider that no reasonably foreseeable change in any of the key assumptions would result in an impairment of goodwill, given the margin by which the estimated recoverable amounts of the CGUs exceed the carrying amounts of the goodwill allocated to each . b) Computer software Software costs are amortised over an estimated useful life of four years on a straight line basis . c) Acquired client relationship contracts This asset represents the fair value of future benefits accruing to the Group from acquired client relationship contracts . The amortisation of client relationships is charged to the Consolidated Statement of Comprehensive Income on a straight line basis over their estimated useful lives (15 to 20 years) . During the year ended 30 June 2015, the Group acquired client relationship contracts of £nil (2014: £7,875,000) as part of business combinations (note 13), which were recognised as separately identifiable intangible assets in the Consolidated Statement of Financial Position . d) Contracts acquired with fund managers This asset represents the fair value of the future benefits accruing to the Group from contracts acquired with fund managers . Payments made to acquire such contracts are stated at cost and amortised on a straight line basis over an estimated useful life of five years . a) Goodwill 14. Intangible assets Notes to the consolidated financial statements for the year ended 30 June 2015 | continued 46 | Brooks Macdonald Group | Annual Report and Accounts 2015 15. Property, plant and equipment Cost At 1 July 2013 Additions Additions on acquisition of subsidiaries At 30 June 2014 Additions Disposals At 30 June 2015 Accumulated depreciation At 1 July 2013 Depreciation charge At 30 June 2014 Depreciation charge At 30 June 2015 Net book value At 1 July 2013 At 30 June 2014 At 30 June 2015 16. Available for sale financial assets At beginning of year Additions Disposals Loss from changes in fair value Accumulated loss on revaluation reserve recycled Impairment loss At end of year Motor vehicles £’000 Fixtures and fittings £’000 Equipment and leasehold improvements £’000 35 – – 35 25 – 60 4 9 13 15 28 31 22 32 1,622 276 189 2,087 69 (64) 2,092 668 291 959 307 1,266 954 1,128 826 4,748 1,066 – 5,814 1,528 – 7,342 3,312 681 3,993 668 4,661 1,436 1,821 2,681 2015 £’000 2,182 250 (250) – 68 (718) 1,532 Total £’000 6,405 1,342 189 7,936 1,622 (64) 9,494 3,984 981 4,965 990 5,955 2,421 2,971 3,539 2014 £’000 1,582 750 – (150) – – 2,182 The Group holds investments of 1,426,793 .64 class B ordinary shares, representing an interest of 10 .88% in Braemar Group PCC Limited Student Accommodation Cell (‘Student Accommodation fund’) and 750,000 zero dividend preference shares in GLI Finance Limited (‘GLIF’), an AIM-listed company incorporated in the Channel Islands . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued16. Available for sale financial assets Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 47 16. Available for sale financial assets continued The Student Accommodation fund is promoted by Brooks Macdonald Funds Limited, a subsidiary of the Group . Although trading is currently suspended on this fund, the fund manager continues to publish a price based on the fair value of the underlying assets of the fund . At 30 June 2015, based on the most recent valuation, the fair value of the investment was £782,000 (2014: £1,432,000) . An impairment loss of £718,000 was recognised on this investment in the Consolidated Statement of Comprehensive Income during the year, reflecting the perceived permanent diminution of value of the underlying assets of the fund . This included the recycling of the accumulated loss on the revaluation reserve of £68,000 as at 30 June 2014 and an additional £650,000 loss from changes in fair value in the current year . In the year ended 30 June 2014, a revaluation loss of £150,000 was recognised in other comprehensive income in the Consolidated Statement of Comprehensive Income . At 1 July 2014, the Group had an investment of £250,000 in the ordinary shares of SHL, an unlisted company incorporated in the Channel Islands . In December 2014 SHL sold its subsidiary company, Sancus Limited, to GLIF for consideration of £17 .75m, settled through the issue of new ordinary GLIF shares . SHL subsequently sold its shareholding in GLIF and distributed the proceeds to its ordinary shareholders, prior to being voluntarily liquidated . Through this transaction, the Group realised a gain of £540,000 on its original investment of £250,000 in SHL ordinary shares, which is recognised as a realised gain on investment in the Consolidated Statement of Comprehensive Income . Prior to the sale of Sancus Limited, the Group made an additional investment of £250,000 in SHL zero dividend preference shares increasing the Group’s total investment to £750,000 . As part of the transaction, the Group’s entire holding of SHL zero dividend preference shares was exchanged for newly issued £1 GLIF zero dividend preference shares . In the opinion of the directors, the market value of the GLIF zero dividend preference shares at 30 June 2015 remains £750,000 as the conditions attached to these shares are similar to those of the equivalent SHL zero dividend preference shares for which they were exchanged . The table below provides an analysis of the financial instruments that, subsequent to initial recognition, are measured at fair value . These are grouped into the following levels within the fair value hierarchy, based on the degree to which the inputs used to determine the fair value are observable: • • • Level 1 – derived from quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 – derived from inputs other than quoted prices included within level 1 that are observable, either directly or indirectly; and Level 3 – derived from inputs that are not based on observable market data . Braemar Group PCC Limited Student Accommodation Cell Sancus Holdings Limited GLI Finance Limited Total There were no movements between any of the levels during the year . Level 1 £’000 Level 2 £’000 Level 3 £’000 – – – – 782 – – 782 – – 750 750 Total £’000 782 – 750 1,532 17. Investment in joint venture In the year ended 30 June 2014, Brooks Macdonald Funds Limited, a Group company, entered into a new partnership, North Row Capital LLP, in which it holds a 60% interest and has joint control . The balance is owned by two individual partners who developed the investment approach behind the IFSL North Row Liquid Property Fund, which was launched in February 2014 . The fund offers investors liquid exposure to global real estate markets by investing predominantly in property derivatives, as well as property equity and debt, to gain exposure to the direct property markets . The establishment of the partnership and the fund required an initial investment of £135,000 by Brooks Macdonald Funds Limited and additional working capital of £400,000 (2014: £225,000) in the year ended 30 June 2015 . The Group’s share of the loss for the year reported by North Row Capital LLP was £4,000 (2014: £128,000 loss), which has been recognised in the Consolidated Statement of Comprehensive Income with a corresponding reduction in the investment in joint venture recognised in the Consolidated Statement of Financial Position . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued48 | Brooks Macdonald Group | Annual Report and Accounts 2015 18. Deferred income tax Deferred income tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised . An analysis of the Group’s deferred assets and deferred tax liabilities is shown below . Deferred tax assets Deferred tax assets to be settled after more than 12 months Deferred tax assets to be settled within 12 months Total deferred tax assets Deferred tax liabilities Deferred tax liabilities to be settled after more than 12 months Deferred tax liabilities to be settled within 12 months Total deferred tax liabilities The gross movement on the deferred income tax account during the year was as follows: At 1 July Credit to the Statement of Comprehensive Income (note 10) Credit recognised in other comprehensive income Charge recognised in equity Additions on acquisition of subsidiaries At 30 June The change in deferred income tax assets and liabilities during the year was as follows: Deferred tax assets At 1 July 2013 Credit to the Statement of Comprehensive Income Charge to equity At 30 June 2014 Charge to the Statement of Comprehensive Income Charge to equity At 30 June 2015 2015 £’000 207 502 709 (4,694) (119) (4,813) 2015 £’000 (4,308) 276 – (72) – (4,104) 2014 £’000 204 605 809 (5,115) (2) (5,117) 2014 £’000 (3,640) 948 19 (60) (1,575) (4,308) Share-based payments £’000 858 11 (60) 809 (28) (72) 709 Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 49 18. Deferred income tax continued The carrying amount of the deferred tax asset is reviewed at each reporting date and is only recognised to the extent that it is probable that future taxable profits of the Group will allow the asset to be recovered . 18. Deferred income tax Accelerated capital allowances £’000 Available for sale financial assets £’000 Intangible asset amortisation £’000 12 – (10) – 2 – 117 – 119 19 – - (19) – – – – Deferred tax liabilities At 1 July 2013 Additions on acquisition of subsidiaries Credit to the Statement of Comprehensive Income Charge to other comprehensive income At 30 June 2014 Additions on acquisition of subsidiaries Debit/(credit) to the Statement of Comprehensive Income Charge to other comprehensive income At 30 June 2015 19. Trade and other receivables Trade receivables Other receivables Prepayments and accrued income Total trade and other receivables 20. Financial assets at fair value through profit or loss At beginning of year Additions Disposals Loss from change in fair value At end of year These investments are classified as Level 1 as defined in note 16 . 21. Cash and cash equivalents Cash at bank Cash held in employee benefit trust Total cash and cash equivalents Total £’000 4,498 1,575 (937) (19) 5,117 (304) 4,467 1,575 (927) – 5,115 (421) – 4,694 4,813 2015 £’000 5,854 3,426 12,122 21,402 2015 £’000 478 40 (263) (252) 3 2015 £’000 19,240 34 19,274 2014 £’000 9,653 1,299 10,480 21,432 2014 £’000 – 478 – – 478 2014 £’000 17,994 62 18,056 Cash and cash equivalents are distributed across a range of financial institutions with high credit ratings in accordance with the Group’s treasury policy . Cash at bank comprises current accounts and immediately accessible deposit accounts . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued50 | Brooks Macdonald Group | Annual Report and Accounts 2015 22. Deferred consideration Deferred consideration, which is also included within provisions in current liabilities to the extent that it is due to be paid within one year of the reporting date (note 25), relates to the directors’ best estimate of amounts payable in the future in respect of certain client relationships and subsidiary undertakings that were acquired by the Group . Deferred consideration is measured at its fair value based on the discounted expected future cash flows . The movements in the deferred consideration balance during the year were as follows: At 1 July Added on acquisitions during the year Finance cost of deferred consideration Fair value adjustments Payments made during the year At 30 June Analysed as: Amounts falling due within one year Amounts falling due after more than one year Total deferred consideration 2015 £’000 11,236 11,264 760 (216) (9,218) 13,826 4,384 9,442 13,826 2014 £’000 7,927 4,826 349 – (1,866) 11,236 8,293 2,943 11,236 Deferred consideration of £11,264,000 (2014: £4,826,000) was recognised during the year (note 13), relating to the acquisition of Levitas Investment Management Services Limited . Payments of £9,218,000 (2014: £1,866,000) were made during the year, representing £1,010,000 to the vendors of JPAM Limited and £5,093,000 to vendors of Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald Retirement Services (International) Limited, £2,391,000 to vendors of DPZ and £724,000 to vendors of Levitas Investment Management Services Limited . Deferred consideration is classified as Level 3 as described in note 16 . Amounts falling due after more than one year from the reporting date are presented in non-current liabilities as shown below: At 1 July Added on acquisitions during the year Finance cost on acquisitions during the year Transfer to current liabilities At 30 June 2015 £’000 2,943 11,264 482 (5,247) 9,442 2014 £’000 5,804 2,435 26 (5,322) 2,943 The amount payable in respect of acquisitions during the year of £11,264,000 (2014: £2,435,000) is the deferred consideration relating to the acquisition of Levitas Investment Management Services Limited (note 13) . An amount of £5,247,000 (2014: £5,322,000), representing the deferred consideration of £2,304,000 payable in respect of the acquisition of Levitas Investment Management Services Limited, £482,000 relating to the acquisition of JPAM Limited and £2,461,000 relating to the acquisition of DPZ, was transferred to provisions within current liabilities . A range of final outcomes for the expected total deferred consideration payable cannot be estimated as the future value of the funds under management is dependent on several unpredictable variables, including client retention and market movements . 23. Other non-current liabilities Other non-current liabilities relate to employer’s National Insurance contributions arising from share option awards under the LTIS scheme . An additional liability of £74,000 (2014: £82,000) was recognised during the year in respect of existing awards, granted in previous years, which are expected to vest in the future . During the year, an amount of £94,000 (2014: £92,000) was transferred to current liabilities, reflecting awards that will vest within the next 12 months . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 51 24. Trade and other payables Trade payables Other taxes and social security Other payables Accruals and deferred income Total trade and other payables 2015 £’000 2,854 2,580 1,429 10,031 16,894 2014 £’000 2,134 1,712 1,319 10,013 15,178 Included within accruals and deferred income in 2015 is an accrual of £282,000 in respect of employer’s National Insurance contributions arising from share option awards under the LTIS (note 29b) . In 2014 £310,000 was accrued which was also included in the Phantom Share Option Schemes granted in October 2008 and October 2009 . The schemes are cash settled and payments are made to participants in respect of their awards by the Group’s subsidiary undertakings . The options are awarded at no cost to the participants . The amount that is ultimately payable to participants of the scheme is equal to the increase in market value of the Company’s ordinary shares over a three year vesting period . The award will vest after three years to the extent that the performance conditions are satisfied and will be forfeited in total if performance fails to meet the minimum criteria . The options have been valued using a Black Scholes model based on the market price of the Company’s shares at the grant date (note 29) . The total charge to the Consolidated Statement of Comprehensive Income for the year for all Phantom Share Option Schemes and employer’s National Insurance contributions arising from share option awards under the LTIS (note 29b) was £114,000 (2014: £150,000) . No Phantom Share Options were outstanding at 30 June 2015 (at 30 June 2014: nil) . 25. Provisions At 1 July 2013 Charge to the Statement of Comprehensive Income Added on acquisitions during the year Finance cost of deferred consideration Transfer from non-current liabilities Utilised during the year At 30 June 2014 Charge to the Statement of Comprehensive Income Added on acquisitions during the year Finance cost of deferred consideration Fair value adjustments Transfer from non-current liabilities Utilised during the year At 30 June 2015 a) Client compensation Client compensation £’000 Deferred consideration £’000 FSCS levy £’000 420 233 – – – (150) 503 400 – – – – (202) 701 2,123 – 2,367 321 5,348 (1,866) 8,293 – 2,304 278 (216) 2,943 (9,218) 4,384 Total £’000 2,783 584 2,367 321 5,348 240 351 – – – (240) (2,256) 351 510 – – – – (472) 389 9,147 910 2,304 278 (216) 2,943 (9,892) 5,474 Client compensation provisions relate to the potential liability arising from client complaints against the Group . Complaints are assessed on a case by case basis and provisions for compensation are made where judged necessary . b) Deferred consideration Deferred consideration has been included within provisions as a current liability to the extent that it is due to be paid within one year of the reporting date . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued52 | Brooks Macdonald Group | Annual Report and Accounts 2015 25. Provisions 25. Provisions continued b) Deferred consideration continued Deferred consideration payable within one year of £2,304,000 (2014: £2,367,000) was recognised during the year . An amount of £2,943,000 (2014: £5,348,000) was transferred from non-current liabilities, representing a payment to the vendor of JPAM Limited and a payment of deferred consideration paid to vendors of DPZ Capital Limited . Provisions of £9,218,000 (2014: £1,866,000) were utilised during the year on payment of £1,010,000 to the vendors of JPAM Limited, £2,391,000 paid to the vendors of DPZ, £5,093,000 to vendors of b) Deferred consideration Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald Retirement Services (International) Limited and £724,000 paid to vendors of Levitas Investment Management Services Limited . c) FSCS levy Following confirmation by the FSCS in April 2015 of its final industry levy for 2015/16, the Group initially made a provision of £502,000 (2014: £351,000) for its estimated share . At 30 June 2015, an amount of £389,000 is included within provisions for this levy, £113,000 having been transferred to trade and other payables on receipt of invoices prior to the end of the year . 26. Reconciliation of operating profit to net cash inflow from operating activities Operating profit Adjustments for: Depreciation of property, plant and equipment Amortisation of intangible assets Other gains and losses Decrease / (increase) in receivables Increase in payables Increase in provisions Decrease in non-current liabilities Share-based payments Net cash inflow from operating activities 2015 £’000 12,101 990 2,708 1,004 67 1,693 236 (20) 1,315 20,094 2014 £’000 10,926 981 2,212 – (2,910) 990 194 (10) 1,288 13,671 In the year ended 30 June 2015, the Group obtained control of Levitas Investment Management Services Limited . The net cash outflow resulting from this business combination is presented in note 13c . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 53 27. Share capital and share premium account The movements in share capital and share premium during the year were as follows: At 1 July 2013 Shares issued: – as consideration – on exercise of options – to Sharesave Scheme At 30 June 2014 Shares issued: – on exercise of options – to Sharesave Scheme At 30 June 2015 Number of shares 13,347,974 Exercise price (p) Share capital £’000 Share premium account £’000 Total £’000 133 31,868 32,001 158,032 1,706 .4 29,500 215 .0-290 .5 56,669 578 .0-916 .0 2 – – 2,696 2,698 72 511 72 511 13,592,175 135 35,147 35,282 29,500 155 .5-290 .5 38,545 916 .0-1,054 .0 – 1 50 403 50 404 13,660,220 136 35,600 35,736 The total number of ordinary shares, issued and fully paid at 30 June 2015 was 13,660,220 (2014: 13,592,175) with a par value of 1p per share . On 12 April 2014, the Company issued 158,032 ordinary shares with a market value of £2,696,658 as part consideration for the acquisition of DPZ by Brooks Macdonald Asset Management (International) Limited . Shares issued on exercise of options and to Sharesave Scheme members resulted in a £1,000 increase in share capital in the year ended 30 June 2015 (2014: shown as £nil due to rounding) . Employee Benefit Trust The Group established an Employee Benefit Trust (‘EBT’) on 3 December 2010 to acquire ordinary shares in the Company to satisfy awards under the Group’s Long Term Incentive Scheme (‘LTIS’) and other share-based payment schemes (note 29) . At 30 June 2015, the EBT held 207,532 (2014: 249,696) 1p ordinary shares in the Company, acquired for a total consideration of £2,803,000 (2014: £3,168,000) with a market value of £3,668,000 (2014: £3,906,000) . They are classified as treasury shares in the consolidated financial statements and their cost has been deducted from retained earnings within shareholders’ equity . 28. Other reserves and retained earnings Other reserves are comprised of the following balances: Share option reserve Merger reserve Available for sale reserve Total other reserves 2015 £’000 4,909 192 – 5,101 2014 £’000 4,596 192 (68) 4,720 Notes to the consolidated financial statements for the year ended 30 June 2015 | continued54 | Brooks Macdonald Group | Annual Report and Accounts 2015 28. Other reserves and retained earnings continued The movements in other reserves during the year were as follows: 28. Other reserves and retained earnings Share option reserve At beginning of the year Share-based payments Transfer to retained earnings Tax on share-based payments At end of the year Available for sale reserve At beginning of the year Recycling of reserve due to impairment At end of the year The movements in retained earnings during the year were as follows: At beginning of the year Profit for the financial year Purchase of own shares by Employee Benefit Trust Transfer from share option reserve Dividends paid At end of the year 2015 £’000 4,596 1,315 (1,334) 332 4,909 (68) 68 – 2015 £’000 27,456 9,151 (742) 1,334 (3,872) 33,327 2014 £’000 3,697 1,288 (545) 156 4,596 63 (131) (68) 2014 £’000 21,607 9,056 (732) 545 (3,020) 27,456 29. Equity-settled share-based payments All share options granted to employees under the Group’s equity-settled share-based payment schemes are valued using a Black Scholes model, based on the market price of the Company’s shares at the grant date and annualised volatility of up to 50%, covering the period to the end of the contractual life . Volatility has been estimated on the basis of the Company’s historical share price subsequent to flotation . The risk-free annual rate of interest is deemed to be the yield on a gilt edged security with a maturity term of 3 years, ranging from 0 .30% to 2 .00% . For options granted during the year, the Black Scholes model was based on the market price of the Company’s shares at each respective grant date and volatility of 27% to 28% with a dividend yield of 1 .8%, an expected vesting period of three years and a risk-free annual rate of interest of between 0 .9% and 1 .0% . The share options issued under the various equity-settled share-based payment schemes have been valued at prices ranging from £0 .58 to £14 .64 per share . The charge to the Consolidated Statement of Comprehensive Income for the year in respect of these was £1,315,000 (2014: £1,288,000) . The weighted average remaining contractual life of all equity-settled share-based payment schemes at 30 June 2015 was 1 .62 years (2014: 2 .08 years) . The weighted average share price of all options exercised during the year was £14 .84 (2014: £15 .79) . The total charge to the Consolidated Statement of Comprehensive Income for the year for all share-based payment schemes was £1,428,000 (2014: £1,130,000) . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 55 29. Equity-settled share-based payments continued The exercise price and fair value of share options granted during the year was as follows: Company Share Option Plan Long Term Incentive Scheme Employee Sharesave Scheme 29. Equity-settled share-based payments Exercise price (p) Fair value (p) 13,805 nil 1,237 231 1,335 471 a) Enterprise Management Incentive Scheme (‘EMI’) Under the approved EMI Scheme, certain employees hold options to subscribe for shares in the Company at prices ranging from 155 .5p to 775p . Options are conditional on the employee completing three years’ service (the vesting period) and are exercisable three years from the grant date . The options have a contractual option term of seven years from the date they become exercisable . The Group has no legal or constructive obligation to repurchase or settle the options in cash . At 1 July Forfeited in the year Exercised in the year At 30 June The number of share options outstanding at the reporting date was as follows: Scheme year (grant date) 2005 2006 2007 2010 All years 2015 2014 Number of options 69,253 – (29,500) 39,753 Weighted average exercise price (£) 2.90 – 1.71 3.81 Number of options 98,753 – (29,500) 69,253 Weighted average exercise price (£) 2 .77 – 2 .47 2 .90 Exercise price (p) Vesting period 2015 Number of options 2014 Number of options 155 .5 2008 – 2015 215 .0 2009 – 2016 290 .5 2010 – 2017 775 .0 2013 – 2020 – 4,500 27,150 8,103 25,000 6,500 29,650 8,103 39,753 69,253 b) Long Term Incentive Scheme (‘LTIS’) The Company has made annual awards under the LTIS to executive directors and other senior executives . The conditional awards, which vest three years after the grant date, are subject to the satisfaction of specified performance criteria, measured over a three year performance period . All such conditional awards are made at the discretion of the Remuneration Committee . At 1 July Granted in the year Exercised in the year Forfeited in the year At 30 June 2015 Number of options 2014 Number of options 233,496 70,624 (95,215) (10,614) 205,613 45,068 (11,376) (5,809) 198,291 233,496 Notes to the consolidated financial statements for the year ended 30 June 2015 | continued56 | Brooks Macdonald Group | Annual Report and Accounts 2015 29. Equity-settled share-based payments continued b) Long Term Incentive Scheme (‘LTIS’) (continued) The number of share options outstanding at the reporting date was as follows: Scheme year (grant date) 2010 2011 2012 2013 2014 All years Exercise price (p) Vesting period nil nil nil nil nil 2013 2014 2015 2016 2017 2015 Number of options 10,550 10,622 68,320 42,163 66,636 2014 Number of options 22,962 91,554 74,937 44,043 – 198,291 233,496 c) Employee Benefit Trust (‘EBT’) Brooks Macdonald Group plc established an Employee Benefit Trust (‘the Trust’) on 3 December 2010 . The Trust was established to acquire ordinary shares in the Company to satisfy rights to purchase shares on the exercise of options awarded under the LTIS . All finance costs and administration expenses connected with the Trust are charged to Consolidated Statement of Comprehensive Income as they accrue . The Trust has waived its rights to dividends . The following table shows the number of shares held by the Trust that have not yet vested unconditionally . At 1 July Acquired in the year Exercised in the year At 30 June 2015 Number of shares 249,696 53,051 (95,215) 207,532 2014 Number of shares 212,172 48,900 (11,376) 249,696 d) Company Share Option Plan (‘CSOP’) The Company has established a Company Share Option Plan (‘CSOP’), which was approved by HMRC in November 2013 . The CSOP is a discretionary scheme whereby employees or directors are granted an option to purchase the Company’s shares in the future at a price set on the date of the grant . The maximum award under the terms of the scheme is a total market value of £30,000 per recipient . The performance conditions attached to the scheme require an increase in the diluted earnings per share of the Company of 2% more than the increase in the RPI over the three years starting with the financial year in which the option is granted . 2015 2014 At 1 July Granted in the year Lapsed in the year At 30 June Number of options 21,016 22,110 (3,199) 39,927 Weighted average exercise price (£) 14.52 13.81 14.07 14.16 The number of share options outstanding at the reporting date was as follows: Scheme year (grant date) 2013 2014 All years Exercise price (p) 14 .52 13 .81 Vesting period 2016 2017 Number of options – 21,361 (345) 21,016 Weighted average exercise price (£) – 14 .52 14 .52 14 .52 2015 Number of options 2014 Number of options 19,810 20,117 39,927 21,016 – 21,016 Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedBrooks Macdonald Group plc | Annual Report and Accounts 2015 | 57 29. Equity-settled share-based payments continued e) Employee Sharesave Scheme Under the scheme, employees can contribute up to £500 a month over a three year period to acquire shares in the Company . At the end of the savings period, employees can elect to receive shares or receive their savings in cash . 29. Equity-settled share-based payments At 1 July Granted in the year Forfeited in the year Exercised in the year At 30 June The number of share options outstanding at 30 June 2015 was as follows: Scheme year (grant date) 2011 2012 2013 2014 2015 All years 2015 2014 Number of options 231,472 96,466 (67,673) (36,601) 223,664 Weighted average exercise price (£) 12.85 12.37 13.39 10.48 12.86 Number of options 147,323 149,083 (8,265) (56,669) 231,472 Weighted average exercise price (£) 10 .23 13 .86 10 .52 9 .04 12 .85 Exercise price (p) Vesting period 2015 Number of options 2014 Number of options 916 .0 1,054 .0 1,172 .0 1,386 .0 1,237 .0 2014 2015 2016 2017 2018 – 3,922 30,656 92,620 96,466 1,654 44,512 36,612 148,694 – 223,664 231,472 30. Lease commitments The Group leases various office premises under non-cancellable operating lease arrangements . The future aggregate minimum lease payments under these leases are as follows: Within one year Second to fifth years inclusive After five years 2015 £’000 1,234 5,892 1 2014 £’000 1,373 1,882 46 31. Discretionary funds under management The Group holds client money and assets on behalf of clients in accordance with the client money rules of the Financial Conduct Authority . Such money and the corresponding liabilities to clients are not shown in the Consolidated Statement of Financial Position as the Group is not beneficially entitled thereto . The total market value of client money and assets held is shown below: Client money bank accounts Client assets under management Total client funds under management 2015 £’000 544,855 6,868,145 7,413,000 2014 £’000 573,204 5,976,796 6,550,000 Notes to the consolidated financial statements for the year ended 30 June 2015 | continued58 | Brooks Macdonald Group | Annual Report and Accounts 2015 32. Financial risk management The Group has identified the financial risks arising from its activities and has established policies and procedures as part of a formal structure for managing risk, including establishing risk lines, reporting lines, mandates and other control procedures . The structure is reviewed regularly . The Group does not use derivative financial instruments for risk management purposes . a) Liquidity risk Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due . The primary objective of the Group’s treasury policy is to manage short-term liquidity requirements and to ensure that the Group maintains a surplus of immediately realisable assets over its liabilities, such that all known and potential cash obligations can be met . The table below shows the cash inflows and outflows from the Group under non-derivative financial assets and liabilities, together with cash and bank balances available on demand . Not more than 3 months £’000 After 3 months but not more than 1 year £’000 After 1 year but not more than 6 years £’000 Financial assets with no fixed repayment date £’000 Total £’000 At 30 June 2015 Cash flows from financial assets Available for sale financial assets Financial assets at fair value through profit or loss Cash and balances at bank Trade receivables Other receivables Cash flows from financial liabilities Trade payables Other financial liabilities On demand £’000 – – 19,274 – – – – – 5,854 9,936 19,274 15,790 – – – 2,854 12,331 15,185 – – – – 122 122 – 4,602 4,602 – – – – – – – 9,537 9,537 At 30 June 2014 Cash flows from financial assets Available for sale financial assets Financial assets at fair value through profit or loss Cash and balances at bank Trade receivables Other receivables Cash flows from financial liabilities Trade payables Other financial liabilities – – 18,056 – – 18,056 – – – – – – 9,653 – 9,653 2,134 12,588 14,722 – – – – 132 132 – 7,891 7,891 – – – – – – – 3,058 3,058 Net liquidity gap 19,274 605 (4,480) (9,537) 1,535 1,532 1,532 3 – – – 3 19,274 5,854 10,058 1,535 36,721 – – – – – – 2,854 26,470 29,324 7,397 2,134 23,537 25,671 4,830 2,182 2,182 478 – – – 478 18,056 9,653 132 2,660 30,501 Net liquidity gap 18,056 (5,069) (7,759) (3,058) 2,660 Notes to the consolidated financial statements for the year ended 30 June 2015 | continued32. Financial risk management Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 59 32. Financial risk management continued b) Market risk Interest rate risk The Group may elect to invest surplus cash balances in short-term cash deposits with maturity dates not exceeding three months . Consequently, the Group has a limited exposure to interest rate risk due to fluctuations in the prevailing level of market interest rates . A 1% fall in the average monthly interest rate receivable on the Group’s cash and cash equivalents would have the impact of reducing interest receivable and therefore profit before taxation by £190,000 (2014: £180,000) . An increase of 1% would have an equal and opposite effect . Foreign exchange risk The Group does not have any material exposure to transactional foreign currency risk and therefore no analysis of foreign exchange risk is provided . Price risk Price risk is the risk that the fair value of the future cash flows from financial instruments will fluctuate due to changes in market prices (other than those arising from interest rate risk or currency risk) . The Group is exposed to price risk through its holdings of equity securities and other financial assets, which are measured at fair value in the Consolidated Statement of Financial Position (notes 16 and 20) . A 1% fall in the value of these financial instruments would have the impact of reducing total comprehensive income by £15,000 (2014: £22,000) and profit before tax by £nil (2014: £5,000) . An increase of 1% would have an equal and opposite effect . c) Credit risk The Group may elect to invest surplus cash balances in highly liquid money market instruments with maturity dates not exceeding three months . The difference between the fair value and the net book value of these instruments is not material . To reduce the risk of a counterparty default, the Group deposits the rest of its funds in approved, high quality banks . At 30 June 2015 there was no significant concentration of credit risk in any particular counterparty (2014: none) . Assets exposed to credit risk recognised on the Consolidated Statement of Financial Position total £19,274,000 (2014: £18,056,000), being the Group’s total cash and cash equivalents . Trade receivables with a carrying amount of £5,854,000 (2014: £9,653,000) are neither past due nor impaired . Trade receivables have no external credit rating as they relate to individual clients, although the value of investments held in each individual client’s portfolio is always in excess of the total value of the receivable . All trade receivables fall due within three months (2014: all) . 33. Capital management Capital is defined as the total of share capital, share premium, retained earnings and other reserves of the Company . Total capital at 30 June 2015 was £74,164,000 (2014: £67,458,000) . Regulatory capital is derived from the Group Internal Capital Adequacy Assessment Process (ICAAP), which is a requirement of the Capital Requirements Directive . The ICAAP draws on the Group’s risk management process which is embedded within the individual businesses, function heads and executive committees within the Group . The Group’s objectives when managing capital are to comply with the capital requirements set by the Financial Conduct Authority, to safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the business . Capital adequacy and the use of regulatory capital are monitored daily by the Group’s management . The Group’s 2015 ICAAP was approved in August 2015 . There have been no capital requirement breaches during the year . Brooks Macdonald Group plc’s Pillar III disclosure is presented on our website at www .brooksmacdonald .com . 34. Guarantees and contingent liabilities The Company has an agreement with the Royal Bank of Scotland plc to guarantee settlement for trading with CREST stock on behalf of clients . The Group holds client assets to fund such trading activity . Additional levies by the Financial Services Compensation Scheme may give rise to further obligations based on the Group’s income in the current or previous years . Nevertheless, the ultimate cost to the Group of these levies remains uncertain and is dependent upon future claims resulting from institutional failures . Notes to the consolidated financial statements for the year ended 30 June 2015 | continued60 | Brooks Macdonald Group | Annual Report and Accounts 2015 35. Related party transactions Certain directors have taken advantage of the Group’s interest-free season ticket loan facility which is available to all employees . The directors who have such loans are as follows: S J Jackson Loan balance Maximum amount 2015 £’000 5 2014 £’000 5 2015 £’000 10 2014 £’000 10 Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation . The Company’s individual financial statements include the amounts attributable to subsidiaries . These amounts have been disclosed in aggregate in the relevant company financial statements and in detail in the following table: Brooks Macdonald Funds Limited Braemar Facilities Management Limited Braemar Estates (Residential) Limited North Row Capital LLP Braemar Group Limited Brooks Macdonald Financial Consulting Limited Brooks Macdonald Asset Management Limited Brooks Macdonald Nominees Limited Amounts owed by related parties Amounts owed to related parties 2015 £’000 1,126 2 42 2 655 259 – – 2014 £’000 2015 £’000 2014 £’000 – – – – 2,150 311 – – – – – – – – – – – – – – 7,553 2,583 14,724 2,583 All of the above amounts are interest-free and, with the exception of the subordinated loan to Braemar Group Limited, are repayable on demand . The Group manages a number of collective investment funds that are considered related parties . Available for sale financial assets include an investment of 1,426,793 .64 class B ordinary shares in Braemar Group PCC Limited Student Accommodation Cell (note 16) . This transaction was conducted on an arms length basis at market value . The Group has an interest in a joint venture details of which are given in note 17 of these financial statements . 36. Interest in unconsolidated structured entities Structured entities are those entities that have been designed so that voting or similar rights are not the dominant factor in deciding who has control, such as when any voting rights relate to administrative tasks only, or when the relevant activities are directed by means of contractual arrangements . The Group’s interests in consolidated and unconsolidated structured entities are described below . The only consolidated structured entity is the Employee Benefit Trust (‘EBT’), details of which are given in note 27 . The Group has interests in structured entities as a result of contractual arrangements arising from the management of assets on behalf of its clients . Assets under management within the Fund and Property management segment, include those managed within structured entities . These structured entities consist of unitised vehicles such as Open Ended Investment Companies (OEICs) which entitle investors to a percentage of the vehicle’s net asset value . The structured entities are financed by the purchase of units or shares by investors . As fund manager, the Group does not guarantee returns on its funds or commit to financially support its funds . Where external finance is raised, the Group does not provide a guarantee for the repayment of any borrowings . The business activity of all structured entities, in which the Group has an interest, is the management of assets in order to maximise investment returns for investors from capital appreciation and/or investment income . The Group earns a management fee from its structured entities, based on a percentage of the entity’s net asset value . The main risk the Group faces from its interest in FUM managed on behalf of external investors is the loss of fee income as a result of the withdrawal of funds by clients . Outflows from funds are dependent on market sentiment, asset performance and investor considerations . The assets under management for unconsolidated structured entities is £398m (2014: £232m) . Included in revenue on the consolidated statement of comprehensive income is management fee income of £1,980,000 (2014: £1,324,000) from unconsolidated structured entities managed by the Group . 37. Events since the end of the year There have been no significant events since the end of the financial year . Notes to the consolidated financial statements for the year ended 30 June 2015 | continuedIndependent auditors’ report to the members of Brooks Macdonald Group plc Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 61 Report on the parent company financial statements • we have not received all the information and explanations we require for our audit; or Our opinion In our opinion, Brooks Macdonald Group plc’s parent company financial statements (the ‘financial statements’): • give a true and fair view of the state of the parent company’s affairs as at 30 June 2015; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006 . What we have audited The financial statements comprise: • the Company Balance Sheet as at 30 June 2015; and • the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information . The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) . In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates . In making such estimates, they have made assumptions and considered future events . Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements . Other matters on which we are required to report by exception Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the financial statements are not in agreement with the accounting records and returns . We have no exceptions to report arising from this responsibility . Directors’ remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made . We have no exceptions to report arising from this responsibility . Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the Statement of Directors’ Responsibilities set out on page 20, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view . Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’) . Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors . This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose . We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing . What an audit of financial statements involves We conducted our audit in accordance with ISAs (UK & Ireland) . An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error . This includes an assessment of: • whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; • the reasonableness of significant accounting estimates made by the directors; and • the overall presentation of the financial statements . We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements . We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions . We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both . In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit . If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report . Other matter We have reported separately on the Group financial statements of Brooks Macdonald Group plc for the year ended 30 June 2014 . Marcus Hine (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 16 September 2015 62 | Brooks Macdonald Group | Annual Report and Accounts 2015 Company balance sheet as at 30 June 2015 Fixed assets Investments Current assets Debtors Cash at bank and in hand Total current assets Note £’000 41 42 1,846 526 2,372 Creditors: amounts falling due within one year 43 (13,051) 2015 £’000 65,244 £’000 2014 £’000 53,315 6,730 5,254 11,984 (27,750) Net current liabilities Total assets less current liabilities Creditors: amounts falling due after more than one year Net assets Financed by: Capital and reserves Called up share capital Share premium account Share option reserve Revaluation reserve Profit and loss account Total shareholders’ funds 44 45 45 46 46 46 47 (10,679) 54,565 (9,442) 45,123 136 35,600 4,404 – 4,983 45,123 (15,766) 37,549 – 37,549 135 35,148 4,202 (68) (1,868) 37,549 The company financial statements were approved by the Board of Directors and authorised for issue on 16 September 2015, signed on their behalf by: C A J Macdonald Chief Executive S J Jackson Finance Director Company Registration Number: 4402058 . The accompanying notes on pages 63 to 68 form an integral part of the consolidated financial statements . Notes to the company financial statements Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 63 38. Principal accounting policies The general accounting policies applied in the preparation of these financial statements are set out below . These policies have been applied consistently to all years presented, unless otherwise stated . a) Basis of preparation The Company’s financial statements are prepared in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom . The financial statements have been prepared on the historical cost basis, except for the revaluation of investments such that they are measured at their fair value . At the time of approving the financial statements, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future . Accordingly, they continue to adopt the going concern basis in preparing the financial statements . As permitted by Section 408 of the Companies Act 2006, the company has elected not to present its own Profit and Loss Account and Cash Flows Statement for the financial year . b) Investments in subsidiary companies Investments in subsidiaries are recognised at cost less provisions for impairment . c) Share-based payments The Company has applied the requirements of FRS 20 ‘Share-based Payment’ and has adopted the requirements of UITF 44 . Equity-settled share-based payments are measured at fair value at the grant date and the charge to the Profit and Loss Account is recognised on a straight line basis over the period in which the related services are provided, based on the number of shares that are expected to vest . d) Operating lease payments Rent payments due under operating leases are charged to the Profit and Loss Account on a straight line basis over the term of the lease . The Company benefited from a rent-free period under the terms of its current property lease . In accordance with UITF 28 ‘Operating Lease Incentives’, the benefit is allocated over the shorter of the lease term and the date of the market rent review specified in the lease . During the rent-free period a rental charge has been recognised in the Profit and Loss Account and accrued as a liability in the Balance Sheet . e) Retirement benefit costs Contributions in respect of the Group’s defined contribution pension scheme are charged to the Profit and Loss Account as they fall due . f) Employee Benefit Trust Where the Company holds its own equity shares through an Employee Benefit Trust these shares are shown as a reduction in shareholders’ equity . Any consideration paid or received for the purchase or sale of these shares is shown as a reduction in the reconciliation of movements in shareholders’ funds . No gain or loss is recognised in the Profit and Loss Account or the Statement of Total Recognised Gains or Losses on the purchase, sale, issue or cancellation of these shares . g) Other investments Other quoted investments are designated as available for sale and re-valued each reporting period to their fair value according to the most recently available market information . 39. Profit for the year Brooks Macdonald Group plc reported profit after tax for year ended 30 June 2015 of £10,352,000 (2014: £2,602,000) . Auditors’ remuneration is disclosed in note 7 of the consolidated financial statements . The average monthly number of employees during the year was ten (2014: nine) . Directors’ emoluments are set out in note 8 of the consolidated financial statements . 40. Dividends Details of the Company’s dividends and proposed, subject to approval at the annual general meeting are set out in note 12 of the consolidated financial statements . 64 | Brooks Macdonald Group | Annual Report and Accounts 2015 Notes to the company financial statements continued 41. Investments Net book value At 1 July 2013 Additions: – Share options – Acquisition of subsidiary Revaluation At 30 June 2014 Additions: – Share options – Acquisition of subsidiary Transfer to profit and loss account on impairment Impairment At 30 June 2015 Group undertakings £’000 Quoted investments £’000 Total £’000 45,049 1,582 46,631 1,288 5,546 – – – (150) 1,288 5,546 (150) 51,883 1,432 53,315 1,315 11,264 – – 64,462 – – 68 (718) 782 1,315 11,264 68 (718) 65,244 Quoted investments represent the Company’s holding of 1,426,793 .64 B shares in Braemar Group PCC Limited Student Accommodation Cell . Although trading is currently suspended on this fund, the fund manager continues to publish a price based on the fair value of the underlying assets of the fund . At 30 June 2015, based on the most recent valuation, the fair value of the investment was £782,000 (2014: £1,432,000) . An impairment loss of £718,000 was recognised on this investment in the Profit and Loss account during the year, reflecting the perceived permanent diminution of value of the underlying assets of the fund . This included the recycling of the accumulated loss on the revaluation reserve of £68,000 as at 30 June 2014 and an additional £650,000 loss from changes in fair value in the current year . In the year ended 30 June 2014, a revaluation loss of £150,000 was recognised in the Profit and Loss account . Notes to the company financial statements continued Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 65 41. Investments continued Investments in group undertakings are recorded at cost, which is the fair value of the consideration paid to acquire the Company’s subsidiaries . Additions to group undertakings of £1,315,000 (2014: £1,288,000) represent the cost of share options issued during the year in accordance with FRS 20 . In respect of the year ended 30 June 2015, additions on acquisition of subsidiary of £11,264,000 represent 100% of the share capital of Levitas Investment Management Services Limited acquired 31 July 2014 . Details of the Company’s subsidiary undertakings as at 30 June 2015, all of which were wholly owned and included in the consolidated financial statements, are shown below . Company Braemar Estates (Mortgages & Finance) Limited Braemar Estates (Residential) Limited Braemar Facilities Management Limited Braemar Group Limited Brooks Macdonald Asset Management Limited Type of shares and par value Country of incorporation Ordinary £1 Ordinary £1 Ordinary £1 Ordinary 1p Ordinary £1 UK UK UK UK UK Nature of business Dormant Property management Property management Investment management Investment management Brooks Macdonald Asset Management (International) Limited Ordinary 1p & Preference £1 Channel Islands Investment management Brooks Macdonald Asset Management (Tunbridge Wells) Limited Brooks Macdonald Financial Consulting Limited Brooks Macdonald Funds Limited Brooks Macdonald Investment Services Limited Brooks Macdonald Nominees Limited Ordinary £1 Ordinary 5p Ordinary £1 Ordinary £1 Ordinary £1 UK UK UK UK UK Non-trading Financial consulting Fund management Dormant Non-trading Brooks Macdonald Retirement Services (International) Limited Ordinary £1 Channel Islands Retirement planning Brooks Macdonald Tax Services Limited Ordinary £1 UK Dormant Ordinary £1 Channel Islands Investment management DPZ Capital Limited DPZ Nominees Limited JGHP Limited JPAM Limited Levitas Investment Management Services Limited Ordinary £1 Channel Islands Ordinary £1 Ordinary £1 Ordinary £1 UK UK UK Non-trading Non-trading Non-trading Fund Sponsor Non-trading Secure Nominees Limited Ordinary £1 Channel Islands UK Farming plc 42. Debtors Amounts owed by subsidiary undertakings Other debtors Total debtors Ordinary 50p UK Agricultural land investment 2015 £’000 1,729 117 1,846 2014 £’000 6,461 269 6,730 Amounts owed by subsidiary companies are unsecured, interest-free and, with the exception of the subordinated loan to Braemar Group Limited, repayable on demand . 66 | Brooks Macdonald Group | Annual Report and Accounts 2015 Notes to the company financial statements continued 43. Creditors: amounts falling due within one year Trade creditors Amounts owed to subsidiary undertakings Accruals Other creditors Total creditors due within one year 2015 £’000 36 9,779 1,656 1,580 13,051 2014 £’000 27 21,307 1,711 4,705 27,750 Amounts owed to subsidiary companies are unsecured, interest-free and are repayable on demand . Included in other creditors is £1,580,000, which is the directors’ best estimate of the deferred consideration payable in respect of the client relationships and subsidiary undertakings that were acquired by the company . 44. Creditors: amounts falling due after more than one year As at 30 June 2015 the creditors balance of £9,442,000, falling due after more than one year, related to the directors’ best estimate of the deferred consideration payable in respect of the subsidiary undertaking that was acquired by the Company in the year . Deferred consideration is measured at its fair value based on the discounted expected future cash flows . As at 30 June 2014, there were no creditors falling due after more than one year . 45. Called up share capital and share premium account The movements in share capital and share premium during the year were as follows: At 1 July 2013 Shares issued At 30 June 2014 Shares issued At 30 June 2015 Number of shares 13,347,974 244,201 13,592,175 68,045 13,660,220 Share capital £’000 133 2 135 1 136 Share premium account £’000 31,868 3,280 35,148 452 Total £’000 32,001 3,282 35,283 453 35,600 35,736 The total number of ordinary shares, issued and fully paid at 30 June 2015, was 13,660,220 (2014: 13,592,175) with a par value of 1p per share . Excluding 207,532 (2014: 249,696) treasury shares held by the EBT, the Company had 13,452,688 (2014: 13,342,479) ordinary 1p shares in issue as at 30 June 2015 . Long Term Incentive Scheme The Group established an Employee Benefit Trust (‘EBT’) on 3 December 2010 to acquire ordinary shares in the Company to satisfy awards under the Group’s Long Term Incentive Scheme (‘LTIS’) and other share-based payment schemes (note 29) . All finance and administration expenses connected with the Trust are charged to the Consolidated Statement of Comprehensive Income as and when they accrue . The Trust has waived its rights to dividends . During the year, in respect of the scheme granted in October 2010, the Trust received instructions to exercise 95,215 (2014: 11,376) options . The cost of the shares released on exercise of these options amounted to £1,113,000 (2014: £109,000) . At 30 June 2015, the number of shares held by the Trust was 207,532 (2014: 249,696) with a market value of £3,668,000 (2014: £3,906,000), acquired for a total consideration of £2,803,000 (2014: £3,168,000) . These shares are presented as treasury shares in the Group financial statements and their cost is deducted from retained earnings within shareholders’ equity . The Company has made annual awards under the LTIS to executive directors and other senior executives . The conditional awards, which vest three years after the grant date, are subject to the satisfaction of specified performance criteria, measured over a three year performance period . All such conditional awards are made at the discretion of the Remuneration Committee . Notes to the company financial statements Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 67 continued 46. Reserves Share option reserve At beginning of the year Share-based payments Share-based payment transfer At end of the year Revaluation reserve At beginning of the year Loss from changes in fair value Transfer to Profit and Loss account on impairment At end of the year Profit and loss account At beginning of the year Profit for the financial year Dividends paid Share-based payment transfer Purchase of own shares At end of the year Analysis of movement in profit and loss account Profit and loss account At beginning of the year Profit for the financial year Share-based payment transfer Employee Benefit Trust shares exercised Dividends paid At end of the year Employee Benefit Trust At beginning of the year Purchase of own shares Employee Benefit Trust shares exercised At end of the year Total profit and loss account at end of the year 2015 £’000 4,202 1,315 (1,113) 4,404 (68) – 68 – (1,868) 10,352 (3,872) 1,113 (742) 4,983 1,299 10,352 1,113 (1,113) (3,872) 7,779 (3,167) (742) 1,113 (2,796) 4,983 2014 £’000 3,023 1,288 (109) 4,202 63 (131) – (68) (827) 2,602 (3,020) 109 (732) (1,868) 1,717 2,602 109 (109) (3,020) 1,299 (2,544) (732) 109 (3,167) (1,868) 68 | Brooks Macdonald Group | Annual Report and Accounts 2015 Notes to the company financial statements continued 47. Reconciliation of movements in total shareholders’ funds Profit for the financial year Changes in fair value Total recognised gains and losses for the financial year Dividends paid Share-based payments Issue of new shares Purchase of own shares by EBT Net additions to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 2015 £’000 10,352 68 10,420 (3,872) 1,315 453 (742) 7,574 37,549 45,123 2014 £’000 2,602 (131) 2,471 (3,020) 1,288 3,282 (732) 3,289 34,260 37,549 48. Lease commitments The Company leases office premises under non-cancellable operating lease arrangements . The future aggregate minimum lease payments under these leases are as follows: Within one year Second to fifth years inclusive After five years 2015 £’000 1,012 5,315 – 2014 £’000 959 1,241 46 49. Related party transactions The Company has applied the exemption available under FRS 8 in electing not to disclose transactions and balances with its wholly owned subsidiary companies . Details of related party transactions with directors are provided in note 35 of the consolidated financial statements . Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 69 Explanatory notes to the Annual General Meeting resolutions Enclosed with this document is a notice Information on each of the directors Resolution 8 – Authority to allot shares convening the Annual General Meeting standing for re-election is set out below . The Companies Act 2006 prevents of the Company for 27 October 2015 . This The Board confirms that each of the directors from allotting unissued shares explanatory note gives further information directors offering themselves for re-election without the authority of shareholders in on the resolutions set out in the notice has extensive relevant experience of the general meeting . In certain circumstances of annual general meeting . group and its business . The Board is this could be unduly restrictive . The directors’ Resolution 1 – Approval of the Report and Accounts therefore of the opinion that all such existing authority to allot shares, which persons should be re-elected to the Board . was granted at the annual general meeting The directors propose that the Company’s Andrew Shepherd (42) is Deputy Chief annual accounts and reports of the directors Executive Officer for Brooks Macdonald held in 2014, will expire at the end of this year’s annual general meeting . and the auditors for the year ended 30 June Group . Andrew joined Brooks Macdonald Resolution 8 in the notice of annual general 2015 be received and considered . Asset Management in 2002 as an meeting will be proposed, as an ordinary Resolution 2 – Approval of the Directors’ Remuneration Report While it is not a strict requirement for the Company, as a matter of good corporate governance the directors have decided to investment manager . Since then he has resolution, to authorise the directors to been promoted to the role of Investment allot ordinary shares of 1 pence each in the Director and then to joint Managing capital of the Company up to a maximum Director, before moving to his current nominal amount of £45,079 (i .e . up to role in August 2015 . propose an ordinary resolution to approve Nick Holmes (44) is Managing Director the directors’ remuneration report for the of Brooks Macdonald Asset Management year ended 30 June 2015 . The directors’ and is responsible for day-to-day remuneration report can be found on pages management . 11 to 17 of the Annual Report and Accounts . Simon Wombwell (54) is Chief Executive Resolution 3 – To declare a final dividend Officer of Brooks Macdonald Funds which The directors recommend a final dividend was launched in July 2011 . Simon has of 20 .5 pence per ordinary share . Subject spent his entire career in the financial 4,507,900 ordinary shares) representing approximately 33% of the ordinary shares in issue on 16 September 2015 . The Company does not currently hold any shares in treasury . The authority conferred by this resolution will expire on the date which is fifteen months after the passing of this resolution or, if sooner, at the end of next year’s annual general meeting . to approval by shareholders, the final services industry, primarily involved in Resolution 9 – To disapply dividend will be paid on 28 October the development, sales and marketing pre-emption rights 2015 to shareholders on the register of investment products and was a Unless they are given an appropriate on 25 September 2015 . non-executive director of the Brooks authority by shareholders, if the directors Resolutions 4 to 6 – To re-elect certain of the directors The Company’s articles of association Macdonald Group from 2002 until he wish to allot any of the unissued shares was appointed as an executive director for cash or grant rights over shares or sell in a full time capacity in February 2011 . treasury shares for cash (other than pursuant state that one third of the directors (or the A copy of each service contract is available nearest whole number closest to one third) for inspection at the registered office of must retire from office at each annual the Company and will be available for general meeting and offer themselves for inspection at the annual general meeting . re-election . In addition, any director who has been in office for more than three years since their last appointment or re-appointment should also retire and offer themselves for re-election . Andrew Shepherd, Nick Holmes and Simon Wombwell are therefore offering themselves for re-election on this basis . Resolution 7 – To re-appoint PricewaterhouseCoopers LLP as auditors This Resolution proposes that PricewaterhouseCoopers LLP should be re-appointed as the Company’s auditors and authorises the directors to determine their remuneration . to an employee share scheme) they must first offer them to existing shareholders in proportion to their existing holdings . This is known as pre-emption rights . The existing disapplication of these statutory pre-emption rights, which was granted at the annual general meeting held in 2014, will expire at the end of this year’s annual general meeting . Accordingly, Resolution 9 in the notice of annual general meeting will be proposed, as a special resolution, to give the directors power to allot shares without the application 70 | Brooks Macdonald Group | Annual Report and Accounts 2015 Explanatory notes to the Annual General Meeting resolutions | continued of these statutory pre-emption rights: first, of an ordinary share (i .e . 1 pence), and in relation to offers of equity securities by the maximum price shall not exceed 5% way of rights issue, open offer or similar above the average of the middle market arrangements; and second, in relation to quotations for an ordinary share for the the allotment of equity securities for cash five business days before each purchase up to a maximum aggregate nominal is made (exclusive of expenses) . amount of £13,660 (i .e . up to 1,366,000 ordinary shares) representing approximately 10% of the ordinary shares in issue on 16 September 2015 . The authority conferred by this resolution will expire on the date which falls fifteen months after the passing of this resolution or, if sooner, at the end of next year’s The authority sought and limits set by this annual general meeting . resolution will also apply to a sale by the Company of any shares it holds as treasury shares . The Companies Act 2006 allows shares purchased by the Company out of distributable profits to be held as treasury shares, which may then be cancelled, sold for cash or used to meet the Company’s obligations under its employee share based incentive schemes . Any subsequent transfers of treasury shares by the Company to satisfy The directors are committed to managing the Company’s capital effectively . Although the directors have no plans to make such purchases, buying back the Company’s ordinary shares is one of the options they keep under review . Purchases would only be made after considering the effect on earnings per share, and the benefits for shareholders generally . the requirements of employee share-based The Company may hold in treasury any of incentive schemes will be counted towards its own shares that it purchases pursuant the anti-dilution limits for such share issues to the Companies Act 2006 and the to the extent required by the Association authority conferred by this resolution . This of British Insurers guidelines . would give the Company the ability to re-issue treasury shares quickly and cost effectively and would provide the Company with greater flexibility in the management of its capital base . The power conferred by this resolution will expire on the date which falls fifteen months after the passing of this resolution or, if sooner, at the end of next year’s annual general meeting . Resolution 10 – Company’s authority to purchase its own shares Resolution 10 in the notice of annual general meeting, which will be proposed as a special resolution, will authorise the Company to make market purchases of up to 1,366,000 ordinary shares . The existing authority to make market purchases of ordinary shares, which was granted at the annual general meeting held in 2014, will expire at the end of this year’s annual general meeting . The number of ordinary shares stated in this resolution equals approximately 10% of the Company’s ordinary shares in issue on 16 September 2015 . The minimum price that may be paid is the nominal value Notice of Annual General Meeting Company Registration number: 4402058 Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 71 Notice is given that the annual general before such expiry, make an offer meeting of Brooks Macdonald Group plc or agreement which would or might (the “Company”) will be held at 72 Welbeck require Relevant Securities to be allotted Street, London, W1G 0AY on Tuesday after this authority expires and the 27 October 2015 at 9 .00 am for the directors may allot Relevant Securities following purposes . Ordinary business To resolve as ordinary resolutions: 1 . To receive and consider the accounts and reports of the directors and the auditors for the year ended 30 June 2015 . in pursuance of such offer or agreement as if this authority had not expired . All previous unutilised authorities given to the directors pursuant to section 551 of the Act shall cease to have effect at the conclusion of the annual general 2 . To approve the directors’ remuneration meeting, save to the extent that those report for the year ended 30 June 2015 . authorities are exercisable pursuant to 3 . To declare a final dividend of 20 .5 pence per ordinary share for the year ended 30 June 2015 . 4 . To re-elect Andrew Shepherd as a director . section 551(7) of the Act by reason of any offer or agreement made prior to the date of this resolution which would or might require shares to be allotted or rights to be granted on or after that date . 5 . To re-elect Nick Holmes as a director . Disapplication of pre-emption rights 6 . To re-elect Simon Wombwell as a director . 7 . To re-appoint PricewaterhouseCoopers LLP as the Company’s auditors and to authorise the directors to determine their remuneration . Special business Directors’ authority to allot shares To resolve as an ordinary resolution: 8 . That the directors be generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 (the “Act”) to exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for, or to convert any security into, shares in the Company (“Relevant Securities”), up to a maximum aggregate nominal amount of £45,079, for a period expiring (unless previously revoked, varied or renewed) on the date which is fifteen months after the passing of this resolution or, if sooner, the end of the next annual general meeting of the Company . However, in each case the Company may, To resolve as a special resolution: 9 . That, subject to the passing of resolution 8 above, the directors be generally empowered pursuant to sections 570 and 573 of the Act to allot equity securities (within the meaning of section 560 of the Act) for cash, pursuant to the authority conferred by resolution 8, as if section 561 of the Act did not apply to such allotment, provided that this power shall expire on the date which is fifteen months after the passing of this resolution or, if sooner, the end of the next annual general meeting of the Company . This power shall be limited to the allotment of equity securities: 9 .1 in connection with an offer of equity securities (including, without limitation, under a rights issue, open offer or similar arrangement) in favour of holders of ordinary shares in the capital of the Company in proportion (as nearly as may be practicable) to their existing holdings of ordinary shares 72 | Brooks Macdonald Group | Annual Report and Accounts 2015 Notice of Annual General Meeting continued but subject to such exclusions Company’s authority to purchase or other arrangements as its own shares the directors deem necessary To resolve as a special resolution: or expedient in relation to fractional entitlements or any legal, regulatory or practical problems under the laws of any territory, or the requirements of any regulatory body or stock exchange; and 10 . That the Company be generally authorised pursuant to section 701 of the Act to make market purchases (within the meaning of section 693(4) of the Act) of its ordinary shares of £0 .01 each on such terms and in such manner as the directors shall 9 .2 otherwise than pursuant to determine, provided that: paragraph 9 .1 up to an aggregate nominal amount of £13,660; but the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after this power expires and the directors may allot equity securities in pursuance of such offer or agreement as if this power had not expired . This power applies in relation to a sale of shares which is an allotment of equity securities by virtue of section 560(2) (b) of the Act as if in the first paragraph of this resolution the words “pursuant to the authority conferred by resolution 8” were 10 .1 the maximum number of ordinary shares hereby authorised to be purchased is 1,366,000; 10 .2 the maximum price which may be paid for each ordinary share shall be 5% above the average of the middle market quotations for an ordinary share (as derived from The Stock Exchange Daily Official List) for the five business days immediately before the day on which the purchase is made (in each case exclusive of expenses); 10 .3 the minimum price which may be paid for each ordinary share shall be £0 .01; and omitted . 10 .4 this authority (unless previously All previous unutilised powers given to the directors pursuant to sections 570 and 573 of the Act shall cease to have effect at the conclusion of this annual general meeting . revoked, varied or renewed) shall expire on the date which is fifteen months after the passing of this resolution or, if sooner, the end of the next annual general meeting of the Company, except in relation to the purchase of ordinary shares the contract for which was concluded before such date and which will or may be executed wholly or partly after such date . By order of the Board Simon Broomfield Company Secretary 25 September 2015 Registered office: 72 Welbeck Street, London W1G 0AY Notice of Annual General Meeting continued Brooks Macdonald Group plc | Annual Report and Accounts 2015 | 73 Notes: Record date Documents available for inspection Rights to appoint a proxy 5 . To be entitled to attend and vote at 8 . There will be available for inspection at 1 . Members of the Company are entitled the annual general meeting (and for the registered office of the Company to appoint a proxy to exercise all or any the purpose of the determination by during normal business hours on any of their rights to attend and to speak the Company of the votes they may weekday (excluding Saturdays and and vote at a meeting of the Company . cast), members must be registered in public holidays) and at the place of the A proxy does not need to be a member the register of members of the Company meeting for at least 15 minutes prior to of the Company . A member may at 6 .00 pm on Sunday 25 October 2015 and during the annual general meeting appoint more than one proxy in relation (or, in the event of any adjournment, copies of: • the service contract of each executive director; and • the letter of appointment of each non-executive director . to a meeting provided that each proxy 48 hours before the time of the is appointed to exercise the rights adjourned meeting) . Changes to the attached to a different share or shares register of members after the relevant held by that member . 2 . A proxy form which may be used to make such appointment and give proxy deadline will be disregarded in determining the right of any person to attend and vote at the meeting . directions accompanies this notice . If Corporate representatives you do not receive a proxy form and 6 . Any corporation which is a member believe that you should have one, or if can appoint one or more corporate you require additional proxy forms in representatives who may exercise on order to appoint more than one proxy, its behalf all of its powers as a member please contact Capita Asset Services on provided that they do not do so in 0871 664 0300 (overseas callers should relation to the same shares . use +44 (0) 208 639 3399, calls to this number cost 12 pence per minute from a BT landline; other providers’ costs may vary, lines open 9 .00 am to 5 .30 pm, Monday to Friday) . Other rights of members 7 . Any member attending the meeting has the right to ask questions . The Company must cause to be answered any such question relating to the Procedure for appointing a proxy business being dealt with at the 3 . To be valid, the proxy form must be meeting but no such answer need be received by post or (during normal given if (a) to do so would interfere business hours only) by hand at Capita unduly with the preparation for the Asset Services, PXS, 34 Beckenham meeting or involve the disclosure of Road, Beckenham, Kent BR3 4TU confidential information, (b) the answer no later than 9 .00 am on Sunday has already been given on a website in 25 October 2015 . It should be the form of an answer to a question, accompanied by the power of attorney or (c) it is undesirable in the interests of or other authority (if any) under which the Company or the good order of the it is signed or a notarially certified (or meeting that the question be answered . certified by a solicitor with a current practising certificate) copy of such power or authority . 4 . The return of a completed proxy form will not preclude a member from attending the annual general meeting and voting in person if he or she wishes to do so . Brooks Macdonald Group plc Annual Report & Accounts 2014 Form of proxy Brooks Macdonald Group plc Annual General Meeting on 27 October 2015 at 9.00 am Please read the notice of meeting and the explanatory notes below before completing this form. I/We (see note 5) Name Address being a member/members of the above-named Company hereby appoint the chairman of the meeting (see note 6) OR Name Address as my/our proxy to attend, speak and vote in my/our name and on my/our behalf at the Annual General Meeting of the Company to be held on 27 October 2015 at 9.00 am and at any adjournment thereof. Please tick this box if this proxy appointment is one of multiple appointments being made by the same member (see note 2). D L O F The above proxy is appointed to exercise the rights attached to [all] OR Number shares held by me. (see notes 1 and 2) of the ordinary shares I/we direct my/our proxy to vote on the resolutions set out in the notice of Annual General Meeting as I/we have indicated by placing a mark in the appropriate box below (see notes 7 and 8). D L O F Ordinary business FOR AGAINST VOTE WITHHELD Resolution 1: To receive and consider the Annual Report and Accounts for the year ended 30 June 2015 Resolution 2: To approve the directors’ remuneration report for the year ended 30 June 2015 Resolution 3: To declare a final dividend of 20.5 pence per ordinary share Resolution 4: To re-elect Andrew Shepherd as a director Resolution 5: To re-elect Nick Holmes as a director Resolution 6: To re-elect Simon Wombwell as a director Resolution 7: To re-appoint PricewaterhouseCoopers LLP as the Company’s auditors and to authorise the directors to determine their remuneration Special business FOR AGAINST VOTE WITHHELD Resolution 8: Ordinary resolution to give the directors authority to allot shares Resolution 9: Special resolution to give the directors power to disapply pre-emption rights in relation to the allotment of shares Resolution 10: Special resolution to give the Company a general authority to purchase its own shares Signature: (To be valid, this proxy form must be signed) (see note 11) Notes: Date: / /2015 Your rights to appoint a proxy 1. As a member of the Company you are entitled to appoint a proxy to exercise all or any of your rights to attend and to speak and vote at a meeting of the Company. A proxy does not need to be a member of the Company. You may appoint more than one proxy in relation to a meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by you. You may appoint a proxy in respect of all or some only of the shares held by you. If you do not want to appoint a proxy in respect of all of the shares held by you, delete the word “all” in square brackets and insert the number of shares in respect of which you wish to appoint your proxy in the box provided. If you sign and return this proxy form with no number inserted, you will be deemed to have appointed your proxy in respect of all of the shares held by you. If you require additional proxy forms in order to appoint more than one proxy, please contact the Company’s registrar, Capita Asset Services on 0871 664 0300 (overseas callers should use +44 (0) 208 639 3399, calls to this number cost 12 pence per minute from a BT landline; other providers’ costs may vary, lines open 9.00 am to 5.30 pm, Monday to Friday), or you may copy this form. Please indicate by ticking the box provided if the proxy appointment is one of multiple appointments being made. You must also indicate in the separate box the number of shares in relation to which the proxy holder is authorised to act as your proxy. All proxy forms must be signed and should, wherever possible, be returned together in one envelope. If you appoint a proxy, this does not preclude you from attending the meeting and voting in person. 2. 3. Procedure for appointing a proxy 4. Please insert your full name and address in block capitals in the box. 5. To appoint as your proxy a person other than the chairman of the meeting, delete the words in square brackets and insert the full name and address of your chosen proxy in block capitals in the box. If you sign and return this proxy form with no name inserted in the box, the chairman of the meeting will be deemed to be your proxy. Where you appoint as your proxy someone other than the chairman of the meeting, it is your responsibility to ensure that that person attends the meeting and is aware of your voting intentions. If you wish your proxy to make any comments on your behalf, you will need to appoint someone other than the chairman of the meeting and give that person your directions. Directing your proxy how to vote 6. To direct your proxy how to vote on the resolutions mark the appropriate box with a “”or an “”. If no voting direction is given, your proxy can vote or abstain from voting as he or she chooses. Your proxy has the right to vote (or abstain from voting) as he or she chooses in relation to any other business (including a resolution to adjourn the meeting or to amend a resolution) which may properly come before the meeting. The “vote withheld” option is provided to enable you to abstain on any particular resolution. However, it should be noted that a “vote withheld” is not a vote in law and will not be counted in the calculation of the proportion of the votes “for” and “against” a resolution. 7. Other 8. To be valid, this proxy form must be received by post or (during normal business hours only) by hand at Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU no later than 9.00 am on Sunday 25 October 2015. 9. In the case of joint holders of any share, where more than one of the joint holders purports to appoint a proxy in respect of the same share, only the appointment submitted by the person whose name stands first in the register as one of the joint holders will be accepted. 10. This proxy form must be signed and dated by the member or his or her attorney duly authorised in writing. In the case of a member which is a company, this proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or other authority under which this proxy form is signed, or a copy of such power or authority, must be included with the proxy form. 11. In accordance with Regulation 41 of the Uncertificated Securities Regulations Act only those shareholders entered on the register of members at 6.00 pm on Sunday 25 October 2015 are entitled to attend and vote at the Annual General Meeting to be held at 9.00 am on 27 October 2015. Directors and advisers Directors C J Knight C A J Macdonald C R Harris N I Holmes S J Jackson R S Price D Seymour-Williams A W Shepherd R H Spencer S P Wombwell Chairman Chief Executive Senior Independent Director Group Finance Director Non-executive Director Non-executive Director Deputy Chief Executive Offices Edinburgh Guernsey Hale Hampshire Jersey London 10 Melville Crescent, Edinburgh, EH3 7LU Yorkshire House, Le Truchot, St . Peter Port, Guernsey, GY1 1WD Richmond House, Heath Road, Hale, Cheshire, WA14 2XP The Long Barn, Dean Estate, Wickham Road, Fareham, Hampshire, PO17 5BN Liberation House, Castle Street, St . Helier, Jersey, JE2 3AT 72 Welbeck Street, London, W1G 0AY John Stow House, 18 Bevis Marks, London, EC3A 7JB Leamington Spa 36 Hamilton Terrace, Holly Walk, Leamington Spa, Warwickshire, CV32 4LY Manchester 1 Marsden Street, Manchester, M2 1HW Taunton Ground Floor, Blackbrook Gate, Blackbrook Park Avenue, Taunton, Somerset, TA1 2PX Tunbridge Wells 2 Mount Ephraim Road, Tunbridge Wells, Kent, TN1 1EE York Howard House, 3 St . Mary’s Court, Blossom Street, York, YO24 1AH Company information Company Secretary S Broomfield Company Registration Number 4402058 Registered Office Website 72 Welbeck Street, London, W1G 0AY www .brooksmacdonald .com Independent auditors PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT Registrars Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Solicitors Macfarlanes LLP 20 Cursitor Street London EC4A 1LT Nominated adviser and broker Peel Hunt LLP Moor House 120 London Wall London EC2Y 5ET Principal bankers The Royal Bank of Scotland plc 280 Bishopsgate London EC2M 4RB Public relations MHP Communications Limited 6-11 Agar Street London WC2N 4HN www.brooksmacdonald.com 

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